HR 1062 IH
retain the shares of that company under section
10; or
(B) except underwriting or dealing in secu-
rities expressly specified by section 5136 of the
Revised Statutes as permissible for a national
bank to underwrite or deal in.
(2) EXTENDING TIME.—
(A) IN
GENERAL.—The Board may, for
good cause shown, extend the time provided
under paragraph (1) for not more than 18
months.
(B) PENDING
NOTICES.—If a financial
services holding company has filed a notice
under section 10(b) of the Bank Holding Com-
pany Act of 1956 not later than 180 days after
the date of enactment of this Act, paragraph
(1) shall not apply with respect to the company
engaged in such underwriting or dealing until
180 days after the Board has acted on the
notice.
(c) CONFORMING AMENDMENTS.—
(1) DEFINITIONS.—Section 2 of the Bank
Holding Company Act of 1956 (12 U.S.C. 1841) is
amended by adding at the end the following new
subsections:
HR 1062 IH
‘‘(n) SECURITIES AFFILIATE.—The term ‘securities
affiliate’ means any company—
‘‘(1) that is (or is required to be) registered
under the Securities Exchange Act of 1934 as a
broker or dealer; and
‘‘(2) the acquisition or retention of the shares
or assets of which the Board has approved under
section 10.
‘‘(o) INSURED
DEPOSITORY
INSTITUTION.—The
term ‘insured depository institution’ has the meaning
given to that term in section 3 of the Federal Deposit In-
surance Act.
‘‘(p) LEAD INSURED DEPOSITORY INSTITUTION.—
The term ‘lead insured depository institution’ shall mean
the largest insured depository institution controlled by the
financial services holding company, based on a comparison
of the average total assets controlled by each insured de-
pository institution during the previous 12-month period.
‘‘(q) APPROPRIATE FEDERAL BANKING AGENCY.—
The term ‘appropriate Federal banking agency’ has the
same meaning as in section 3(q) of the Federal Deposit
Insurance Act.
‘‘(r) CAPITAL TERMS.—
‘‘(1) INSURED
DEPOSITORY
INSTITUTIONS.—
With respect to insured depository institutions, the
HR 1062 IH
terms ‘well-capitalized,’ ‘adequately capitalized’ and
‘undercapitalized’ have the meaning given those
terms in section 38(b) of the Federal Deposit Insur-
ance Act.
‘‘(2) FINANCIAL
SERVICES
HOLDING
COM-
PANY.—
‘‘(A) ADEQUATELY
CAPITALIZED.—A fi-
nancial services holding company is ‘adequately
capitalized’ if it meets the required minimum
level for each relevant capital measure estab-
lished by the Board for financial services hold-
ing companies;
‘‘(B) WELL
CAPITALIZED.—A financial
services holding company is ‘well capitalized’ if
it meets the required capital levels for well cap-
italized financial services holding companies es-
tablished by the Board.
‘‘(3) OTHER CAPITAL TERMS.—The terms ‘Tier
1’ and ‘risk-weighted assets’ have the meaning given
those terms in the capital guidelines or regulations
established by the Board for financial services hold-
ing companies.
‘‘(s) INSURED DEPOSITORY INSTITUTION FOR CER-
TAIN SECTIONS.—For purposes of section 2(p), section
4(j)(4), and section 10, the term ‘insured depository insti-
HR 1062 IH
tution’ includes any branch, agency or commercial lending
company operated in the United States by a foreign bank
(as the terms ‘agency’, ‘branch’, ‘commercial lending com-
pany’, and ‘foreign bank’ are defined in section 1 of the
International Banking Act of 1978).
‘‘(t) WELL MANAGED.—A company or depository in-
stitution is ‘well managed’ if—
‘‘(1) at its most recent examination or subse-
quent review, the company or institution received—
‘‘(A) one of the highest two composite rat-
ings; and
‘‘(B) at least a satisfactory rating for man-
agement, if such rating is given; or
‘‘(2) in the case of a company or depository in-
stitution that has not received an examination rat-
ing, the Board determines that the managerial re-
sources of the company or depository institution are
satisfactory.’’.
(2) AMENDMENT REGARDING CONDITIONAL AP-
PROVAL OF NOTICES.—Section 4(a)(2) of the Bank
Holding 
Company 
Act 
of 
1956 
(12 
U.S.C.
1843(a)(2)) is amended by striking ‘‘paragraph (8)’’
and all that follows through ‘‘issued by the Board
under such paragraph’’ and inserting ‘‘section 10,
subsection (l) or subsection (c)(8), subject to all the
HR 1062 IH
conditions specified in those provisions or in any
order or regulation issued by the Board under those
provisions’’.
(3) AMENDMENT
TO
NOTICE
PROCEDURES.—
Section 4(j) of the Bank Holding Company Act of
1956 (12 U.S.C. 1843(j)) is amended—
(A) in paragraph (1)(A) by striking ‘‘sub-
section (c)(8) or (a)(2)’’ and inserting in its
place ‘‘subsection (c)(8), (c)(15), (l), or (a)(2)’’;
(B) in paragraph (1)(E) by striking ‘‘sub-
section (c)(8) or (a)(2)’’ and inserting in its
place ‘‘subsection (c)(8), (c)(15), (l), or (a)(2)’’;
(C) by redesignating paragraphs (2)(B)
and (2)(C) as paragraphs (2)(C) and (2)(D) re-
spectively, and inserting a new paragraph
(2)(B) as follows:
‘‘(B) CRITERIA FOR NOTICES INVOLVING
SECURITIES
AFFILIATES.—In considering any
notice that involves the acquisition of shares of
a securities affiliate pursuant to section
4(c)(15), the Board shall apply the criteria and
safeguards contained in this paragraph and in
section 10.’’
(d) AMENDMENT TO THE FEDERAL RESERVE ACT.—
Section 23B(b)(1)(B) of the Federal Reserve Act (12
HR 1062 IH
U.S.C. 371c–l(b)(1)(B)) is amended by inserting ‘‘and for
30 days thereafter’’ after ‘‘during the existence of any un-
derwriting or selling syndicate’’.
(e) EXEMPTION FROM SECTION 305(b) OF THE FED-
ERAL POWER ACT.—Section 305(b) of the Federal Power
Act (16 U.S.C. 825d(b)) shall not apply to any person
now holding or proposing to hold the position of officer
or director of a public utility and officer or director of
a bank, trust company, banking association, or firm per-
mitted by section 10 of the Bank Holding Company Act
of 1956 (as amended by subsection (a)) to underwrite or
participate in the marketing of securities (including com-
mercial paper) of a public utility, if that bank, trust com-
pany, banking association, or firm does not underwrite or
participate in the marketing of securities of the public util-
ity for which the person serves or proposes to serve as
an officer or director.
(f) RETENTION OF CERTAIN INVESTMENTS BY SECU-
RITIES COMPANIES AFFILIATING WITH INSURED DEPOSI-
TORY INSTITUTIONS.—Section 4 of the Bank Holding
Company Act (12 U.S.C. 1843) is amended by adding at
the end the following new subsection:
‘‘(k) OWNERSHIP OF SHARES OF CERTAIN COMPA-
NIES BY SECURITIES COMPANIES THAT BECOME FINAN-
CIAL SERVICES HOLDING COMPANIES.—
HR 1062 IH
‘‘(1) 
NONCONFORMING
FINANCIAL
COMPA-
NIES.—Notwithstanding subsection (a), a financial
services holding company may retain direct or indi-
rect ownership or control of voting shares of any
company that engages solely in financial activities
that the Board has not authorized under this section
(and such other financial activities that the Board
has authorized) if—
‘‘(A) the financial services holding com-
pany acquired the shares of such company or of
each company to which it is a successor more
than two years prior to the date that such fi-
nancial services holding company becomes a fi-
nancial services holding company;
‘‘(B) the aggregate investment by the fi-
nancial services holding company in shares of
all such companies does not exceed 10 percent
of the total consolidated capital and surplus of
the financial services holding company on the
date that it becomes a financial services holding
company or on the date of any additional in-
vestment by the financial services holding com-
pany in such shares;
‘‘(C) more than 50 percent of the business
of the financial services holding company for
HR 1062 IH
each of the two calendar years prior to the date
it becomes a financial services holding company
involved securities activities described in sec-
tions 10(a)(1) and (2), excluding from such cal-
culation activities (other than securities activi-
ties) in which financial services holding compa-
nies were permitted to engage prior to the en-
actment of the Financial Services Competitive-
ness Act of 1995; and
‘‘(D) such company continues to engage
only in activities that it conducted on the date
that such financial services holding company be-
comes a financial services holding company (or
other activities permitted under subsection
(c)(8) or section (10)).
‘‘(2) NONFINANCIAL COMPANIES.—
‘‘(A) IN GENERAL.—Notwithstanding sub-
section (a), a financial services holding company
that is described in paragraph (1)(C) may, for
a period of 5 years from the date that the com-
pany becomes a financial services holding com-
pany, retain direct or indirect ownership or con-
trol of voting shares of any company that the
financial services holding company owns or con-
HR 1062 IH
trols on the date it becomes a financial services
holding company.
‘‘(B) EXTENSION
OF
DIVESTITURE
PE-
RIOD.—The Board may extend the period de-
scribed in subparagraph (A) for an additional
period not to exceed 5 years if the Board deter-
mines that such extension is necessary to avert
substantial loss to the financial services holding
company and finds that the financial services
holding company has made good faith efforts to
divest such shares.
‘‘(C) NO
EXPANSION
OF
NONFINANCIAL
COMPANIES
PRIOR
TO
DIVESTITURE.—Unless
such acquisition or activity is permitted in ac-
cordance with section 4(c)—
‘‘(i) no financial services holding com-
pany or company whose shares are owned
or controlled by a financial services holding
company pursuant to this paragraph (2)
may acquire any interest in or assets of
any company, and
‘‘(ii) no company whose shares are
owned or controlled by a financial services
holding company pursuant to this para-
graph (2) may engage directly or indirectly
HR 1062 IH
in any activity that the company did not
conduct on the day before the financial
services holding company registered as a
financial services holding company.
‘‘(3) RESTRICTIONS ON JOINT MARKETING.—
No insured depository institution (and no subsidiary
of such institution) shall—
‘‘(A) offer or market, directly or indirectly
through any arrangement, any product or serv-
ice of any affiliate whose shares are owned or
controlled by the financial services holding com-
pany pursuant to this subsection or section
10(j), or
‘‘(B) permit any of its products or services
to be offered or marketed, directly or indirectly
through any arrangement, by or through any
affiliate whose shares are owned or controlled
by the financial services holding company pur-
suant to this subsection or section 10(j),
unless the product or service is permissible for finan-
cial services holding companies to provide under sec-
tion 10 or section 4(c)(8).’’.
(g) AMENDMENT TO THE RIGHT TO FINANCIAL PRI-
VACY ACT.—Section 1112(e) of the Right to Financial
Privacy Act (12 U.S.C. 3412(e)) is amended as follows—
HR 1062 IH
(1) by deleting ‘‘this chapter’’ and inserting in
its place ‘‘law’’; and
(2) by adding ‘‘, examination reports’’ after ‘‘fi-
nancial records’’.
(h) EXCEPTION TO RESTRICTION ON ASSET GROWTH
OF NONBANK BANKS.—Section 4(f)(3) of the Bank Hold-
ing Company Act of 1956 (12 U.S.C. 1843(f)(3)) is
amended—
(1) in subparagraph (B)(iv), by inserting ‘‘ex-
cept as provided in subparagraph (D),’’ before ‘‘in-
crease its assets’’; and
(2) by adding at the end the following new sub-
paragraph:
‘‘(D) EXCEPTION
TO
RESTRICTION
ON
ASSET GROWTH.—
‘‘(i) 
QUALIFICATION
FOR
EXCEP-
TION.—A bank controlled by a company
described in paragraph (1) shall not be
subject to the limitation contained in sub-
paragraph (B)(iv) if—
‘‘(I) each insured depository in-
stitution controlled by such company
is and remains well-capitalized; and
‘‘(II) such company engages, di-
rectly or indirectly, only in activities—
HR 1062 IH
‘‘(aa) permitted pursuant to
subsections 4(c)(8) or (15); and
‘‘(bb) insurance activities,
subject to the limitations con-
tained in subsections (k) (1) and
(3) as if the company were a fi-
nancial services holding company;
and
‘‘(III) the company has provided
at least 60 days prior written notice
to the Board and, during that period,
the Board has not disapproved the
proposal after applying the standards
provided in subsection (j)(2);
‘‘(ii) EXCEPTION FROM DIVESTITURE
REQUIREMENT.—If any bank controlled by
a company that qualifies under clause (i)
ceases to be well capitalized, the company
shall divest control of such bank it controls
in accordance with paragraph (4) unless—
‘‘(I) within 12 months after the
date that the bank first ceases to be
well capitalized, the capital of the
bank is restored to the well capitalized
level; and
HR 1062 IH
‘‘(II) thereafter the bank remains
well capitalized.’’.
(i) APPLICATION
OF SECURITIES FIREWALLS
TO
NONBANK BANKS.—Section 4(f)(3)(B)(ii) of the Bank
Holding 
Company 
Act 
of 
1956 
(12 
U.S.C.
1843(f)(3)(B)(ii)) is amended—
(1) in subclause (II), by striking ‘‘or’’ as it ap-
pears after the semicolon;
(2) in subclause (III), by inserting ‘‘or’’ after
the semicolon; and
(3) by adding at the end the following new
subclause:
‘‘(IV) each of the following cri-
teria are met:
‘‘(aa) the bank is well cap-
italized;
‘‘(bb) more than 50 percent
of the consolidated business of
the company described in para-
graph (1) involved securities ac-
tivities 
described 
in 
sections
10(a) (1) and (2) for the preced-
ing two calendar years;
‘‘(cc) such products or serv-
ices are offered or marketed only
HR 1062 IH
to the extent permissible for
banks and securities affiliates
under section 10; and
‘‘(dd) the bank and any af-
filiate of the bank that is en-
gaged in securities activities de-
scribed in section 10(a) comply
with the safeguards contained in
section 10(f) as if that affiliate
were a securities affiliate.’’.
SEC. 104. UNITARY THRIFT HOLDING COMPANIES.
Section 10(c)(3) of the Home Owners’ Loan Act (12
U.S.C. 1467a(c)(3)) is amended—
(1) by inserting immediately before the first
sentence the following:
‘‘(A) UNITARY THRIFT HOLDING COMPA-
NIES.—’’;
(2) by redesignating subparagraphs (A) and
(B) as clauses (i) and (ii) and redesignating other
provisions of such subparagraphs accordingly; and
(3) by adding the following new subparagraph
(B):
‘‘(B) STATUS
AS
A
UNITARY
THRIFT
HOLDING
COMPANY.—The provisions of sub-
paragraph (A) shall only be applicable to sav-
HR 1062 IH
ings and loan holding companies that controlled
savings associations pursuant to subparagraph
(A) as of January 4, 1995 and that continue to
control such savings associations.’’.
SEC. 105. SECURITIES COMPANY AFFILIATIONS OF FDIC-
INSURED BANKS.
Section 18 of the Federal Deposit Insurance Act (12
U.S.C. 1828) is amended by adding at the end the follow-
ing new subsections:
‘‘(s) SECURITIES AFFILIATIONS OF BANKS.—
‘‘(1) IN GENERAL.—A bank shall not be an af-
filiate of any company that, directly or indirectly,
acts as an underwriter or dealer of any security, ex-
cept—
‘‘(A) as provided in section 10 of the Bank
Holding Company Act of 1956; or
‘‘(B) A company that underwrites or deal
only in securities expressly specified by section
5136 of the Revised Statutes as permissible for
a national bank to underwrite or deal in.
‘‘(2) EXCEPTION.—This subsection does not
apply to—
‘‘(A) an insured bank described in sub-
paragraph (D), (F), or (H) of section 2(c)(2) of
HR 1062 IH
the Financial Services Holding Company Act of
1995;
‘‘(B) a company held pursuant to section
25 or 25A of the Federal Reserve Act or section
4(c) (13) of the Financial Services Holding
Company Act; or
‘‘(C) to a Federal branch or an insured
branch, as defined in section 3 of the Federal
Deposit Insurance Act.
‘‘(3) GRANDFATHER
PROVISION.—This sub-
section does not prohibit—
‘‘(A) the continuation of an affiliation that
existed on January 1, 1995; or
‘‘(B) any new affiliation by an insured
bank that has an affiliation that would be pro-
hibited if the affiliation were not covered by
subparagraph (A).
‘‘(4) DEFINITIONS.—For purposes of this sub-
section:
‘‘(A) AFFILIATE.—The term ‘affiliate’ has
the meaning given to that term in section 2(k)
of the Bank Holding Company Act of 1956.
‘‘(B) COMPANY.—The term ‘company’ has
the meaning given to that term in section 2(b)
of the Bank Holding Company Act of 1956.
HR 1062 IH
‘‘(C) BROKER.—The term ‘broker’ has the
meaning given to that term in section 3(a)(4)
of the Securities Exchange Act of 1934.
‘‘(D) DEALER.—The term ‘dealer’ has the
meaning given to that term in section 3(a)(5)
of the Securities Exchange Act of 1934.
‘‘(E) SECURITY.—
‘‘(i) IN
GENERAL.—The term ‘secu-
rity’ has the meaning given to that term in
section 3(a)(10) of the Securities Ex-
change Act of 1934.
‘‘(ii) EXCEPTIONS.—For purposes of
this subsection, the term ‘security’ does
not include any of the following:
‘‘(I) A contract of insurance.
‘‘(II) A deposit account, savings
account, certificate of deposit, or
other deposit instrument issued by a
depository institution.
‘‘(III) A share account issued by
a savings association if the account is
insured under the Federal Deposit In-
surance Act.
‘‘(IV) A banker’s acceptance.
HR 1062 IH
‘‘(V) A letter of Credit issued by
a depository institution.
‘‘(VI) A debit account at a depos-
itory institution arising from a credit
card or similar arrangement.
‘‘(VII) A traditional loan or loan
participation (as determined by the
Board).
‘‘(iii) FEDERAL
RESERVE
BOARD’S
AUTHORITY
TO
EXEMPT
TRADITIONAL
BANKING PRODUCTS.—The Board of Gov-
ernors of the Federal Reserve System may,
after consultation with and considering the
views of the Securities and Exchange Com-
mission, by regulation exempt from the
definition of ‘security’ a banking product
that national banks have traditionally and
customarily originated or handled (such as
mortgage notes) if the exemption is con-
sistent with the purposes of this sub-
section.
‘‘(iv) DEFINITION FOR LIMITED PUR-
POSE.—The fact that a particular instru-
ment is excluded pursuant to clauses (ii) or
(iii) from the definition of ‘security’ for
HR 1062 IH
purposes of this subsection shall not be
construed as finding or implying that such
instrument is or is not a ‘security’ for pur-
poses of section 3(a)(10) of the Securities
Exchange Act of 1934.
‘‘(E) UNDERWRITER.—The term ‘under-
writer’ has the meaning given to that term in
section 2(11) of the Securities Act of 1933.
‘‘(t) BROKER/DEALER REGISTRATION.—An insured
bank may not use the United States mails or any means
or instrumentality of interstate commerce to act as a
broker or dealer without registration under the Securities
Exchange Act of 1934, except to the extent permitted
under section 3(a)(4) or 3(a)(5), or unless otherwise ex-
empt pursuant to rules promulgated by the Securities and
Commission.’’.
SEC. 106. AUTHORITY 
TO 
TERMINATE 
GRANDFATHER
RIGHTS UNDER THE INTERNATIONAL BANK-
ING ACT OF 1978.
Section 8(c) of the International Banking Act of
1978 (12 U.S.C. 3106(c)) is amended by adding at the
end the following new paragraph:
‘‘(3) PARITY IN CONDUCT OF AUTHORIZED SE-
CURITIES ACTIVITIES.—
HR 1062 IH
‘‘(A) IN GENERAL.—Notwithstanding any
provision of paragraph (l) or any other provi-
sion of law, any authority conferred under this
subsection on any foreign bank or company
with respect to an activity of an affiliate en-
gaged in securities activities shall terminate 18
months after the Board determines that such
activity is authorized for financial services hold-
ing companies in the United States, except
that—
‘‘(i) the foreign bank or company may
retain the shares of an affiliate engaged in
securities activities if, prior to the expira-
tion of such 18 month period, the foreign
bank or company has obtained the Board’s
approval under section 10 or section
4(c)(8) of the Bank Holding Company Act
to retain such shares, and
‘‘(ii) the Board, for good cause shown,
may extend the termination period for an
additional period not to exceed 18 months.
‘‘(B) EXTENSION
TO
OBTAIN
REQUIRED
APPROVAL.—If the foreign bank or company
has filed a notice under section 10(b) of the
Bank Holding Company Act not later than 180
HR 1062 IH
days after the Board has made a determination
under subparagraph (A), the effective date of
any termination of authority for that foreign
bank or company under subparagraph (A) shall
be 24 months after the Board has acted on the
notice.’’.
SEC. 107. EFFECT ON STATE LAWS PROHIBITING THE AF-
FILIATION OF BANKS AND SECURITIES COM-
PANIES.
Section 7 of the Bank Holding Company Act of 1956
(12 U.S.C. 1846) is amended by inserting before the final
period the following: ‘‘, except that no State may prohibit
or limit the affiliation of a bank or financial services hold-
ing company with a securities affiliate solely because the
securities affiliate is engaged in activities described in
paragraph (1) or (2) of section 10(a) of this Act.’’.
SEC. 108. MUNICIPAL SECURITIES.
At the end of section 5136 of the Revised Statutes
(12 U.S.C. 24(Seventh)), add the following new sentences:
‘‘Notwithstanding any other provision of this paragraph,
a national banking association may deal in, underwrite,
and purchase for such association’s own account any obli-
gation of, or obligation guaranteed as to principal or inter-
est by, a State or of any political subdivision thereof, or
HR 1062 IH
any agency or instrumentality of a State or any political
subdivision thereof, if the association—
‘‘(1) is well capitalized (as defined in section
38(b) of the Federal Deposit Insurance Act),
‘‘(2) engages in the business of banking,
‘‘(3) has not been affiliated with a securities af-
filiate under section 10 of the Bank Holding Com-
pany Act of 1956 for more than 1 year, and
‘‘(4) maintains its main office or any branch in
such State or political subdivision, or within 100
miles of such State or political subdivision.’’.
SEC. 109. INVESTMENT BANK HOLDING COMPANIES.
(a) DEFINITIONS.—Section 2 of the Bank Holding
Company Act of 1956 (12 U.S.C. 1842) is amended by
adding at the end the following new subsections:
‘‘(r) WHOLESALE FINANCIAL INSTITUTION.—The
term ‘wholesale financial institution’ means any institution
that is an uninsured state member bank authorized pursu-
ant to section 9B of the Federal Reserve Act.
‘‘(s) INVESTMENT BANK HOLDING COMPANY.—The
term ‘investment bank holding company’ means any finan-
cial services holding company that controls or seeks to
control—
‘‘(1) a wholesale financial institution, and
HR 1062 IH
‘‘(2) a company engaged in securities activities
pursuant to section 10.’’.
(b) EXEMPTION.—Section 4 of the Bank Holding
Company Act of 1956 (12 U.S.C. 1843) is amended by
adding at the end the following new subsection:
‘‘(l) PERMISSIBLE AFFILIATIONS FOR INVESTMENT
BANK HOLDING COMPANIES.—
‘‘(1) FINANCIAL ACTIVITIES.—
‘‘(A) ACTIVITIES
AUTHORIZED.—An in-
vestment bank holding company may directly or
indirectly own or control shares of any company
the activities of which the Board has deter-
mined to be financial in nature (other than ac-
tivities expressly limited under subsection
(c)(8)), incidental to financial activity, or any
activity in compliance with subparagraph (B).
‘‘(B) INCIDENTAL ACTIVITIES.—
‘‘(i) IN
GENERAL.—Notwithstanding
subparagraph (A), the aggregate invest-
ment by an investment bank holding com-
pany in shares of any companies that en-
gage in nonfinancial activities and financial
activities (other than those otherwise per-
mitted under this section) shall not exceed
10 percent of the total consolidated capital
HR 1062 IH
and surplus of the investment bank holding
company.
‘‘(ii) CROSS
MARKETING
RESTRIC-
TIONS.—A wholesale financial institution
shall not offer or market products or serv-
ices of an affiliate that are part of any
nonfinancial activities conducted pursuant
to subparagraph (B) or permit its products
or services to be offered or marketed in
connection with products and services of
an affiliate that are part of any non-
financial activities conducted pursuant to
subparagraph (B).
‘‘(iii) USE OF COMMON NAME.—An in-
vestment bank holding company shall not
permit a wholesale financial institution to
adopt a name which is the same as or
similar to, or a variation of, the name or
title of an affiliate engaged in nonfinancial
activities pursuant to subparagraph (B).
‘‘(C) SPECIAL RULE.—An investment bank
holding company that owns and controls shares
of a company pursuant to subparagraph (B)
may not also own or control shares of a com-
pany pursuant to subsection (k).
HR 1062 IH
‘‘(2) SECURITIES ACTIVITIES.—
‘‘(A) INSTITUTIONS MUST BE WELL-CAP-
ITALIZED.—The Board shall disapprove a no-
tice under section 10 by an investment bank
holding company to acquire a securities affiliate
if any wholesale financial institution controlled
by the investment bank holding company is not
well capitalized or would not be well capitalized
following the transaction.
‘‘(B) TRANSACTIONS WITH AFFILIATES.—
‘‘(i) IN GENERAL.—A wholesale finan-
cial institution controlled by an investment
bank holding company shall be a ‘bank’ for
purposes of the provisions of sections 23A
and 23B of the Federal Reserve Act.
‘‘(ii) OTHER RESTRICTIONS REGARD-
ING SECURITIES AFFILIATES DETERMINED
BY THE BOARD.—A securities affiliate and
a wholesale financial institution controlled
by an investment bank holding company
shall not be subject to the provisions of
section 10(f), except that the securities af-
filiate and wholesale financial institution
shall be subject to paragraphs (12) and
(13) of that section as if the wholesale fi-
HR 1062 IH
nancial institution were an insured deposi-
tory institution.
‘‘(3) LIMITATION
ON
AFFILIATION
WITH
IN-
SURED DEPOSITORY INSTITUTIONS.—An investment
bank holding company may not directly or indirectly
own or control—
‘‘(A) any bank, other than a wholesale fi-
nancial institution;
‘‘(B) any savings association;
‘‘(C) any institution described in section
2(c)(2); or
‘‘(D) any institution that accepts—
‘‘(i) initial deposits of $100,000 or
less, other than on an incidental or occa-
sional basis, or
‘‘(ii) deposits that are insured under
the Federal Deposit Insurance Act.’’.
(c) CONFORMING AMENDMENTS.—
(1) INSURANCE REQUIREMENT IN THE BANK
HOLDING COMPANY ACT.—Section 3(e) of the Bank
Holding Company Act of 1956 (12 U.S.C. 1842(e))
is amended by adding at the end the following:
‘‘This subsection does not apply to a wholesale fi-
nancial institution that is controlled by an invest-
HR 1062 IH
ment bank holding company that controls no banks
other than wholesale financial institutions.’’
(2) APPROPRIATE
FEDERAL
BANKING
AGEN-
CY.—Section 3(q)(2)(A) of the Federal Deposit In-
surance Act (12 U.S.C. 1813(q)(2)(A)) is amended
to read as follows:
‘‘(A) any State member insured bank (ex-
cept a District bank) and wholesale financial in-
stitution as authorized pursuant to section 9B
of the Federal Reserve Act,’’.
SEC. 110. CONFORMING AMENDMENTS FOR INVESTMENT
BANK HOLDING COMPANIES.
(a) WHOLESALE FINANCIAL INSTITUTIONS.—The
Federal Reserve Act (12 U.S.C. 221 et seq.) is amended
by inserting after section 9A the following new section:
‘‘SEC. 9B. WHOLESALE FINANCIAL INSTITUTIONS.
‘‘(a) APPLICATION FOR MEMBERSHIP AS WHOLESALE
FINANCIAL INSTITUTION.—
‘‘(1) APPLICATION REQUIRED.—Any bank in-
corporated by special law of any State, or organized
under the general laws of any State, may apply to
the Board of Governors of the Federal Reserve Sys-
tem to subscribe to the stock of the Federal Reserve
bank organized within the district where the apply-
ing bank is located as a wholesale financial institu-
HR 1062 IH
tion. Such application shall be treated as an applica-
tion under, and shall be subject to the provisions of,
section 9.
‘‘(2) APPROVAL
OF
MEMBERSHIP.—No bank
may become a wholesale financial institution un-
less—
‘‘(A) the Board has approved an applica-
tion by the bank, under such rules and regula-
tions and subject to such conditions and re-
quirements as the Board may prescribe, to be
a wholesale financial institution; and
‘‘(B) in the case of a bank that is insured
under the Federal Deposit Insurance Act, the
bank has met all requirements under that Act
for voluntary termination of deposit insurance.
‘‘(b) GENERAL
REQUIREMENTS
APPLICABLE
TO
WHOLESALE FINANCIAL INSTITUTIONS.—
‘‘(1) FEDERAL RESERVE ACT.—Except as oth-
erwise provided in this section, wholesale financial
institutions shall be member banks and shall be sub-
ject to the provisions of this Act that apply to mem-
ber banks to the same extent and in the same man-
ner as State member insured banks, except that a
wholesale financial institution may only terminate
membership under this Act with the prior written
HR 1062 IH
approval of the Board and on terms and conditions
that the Board determines are appropriate to carry
out the purposes of this Act.
‘‘(2) PROMPT CORRECTIVE ACTION.—A whole-
sale financial institution shall be deemed to be an in-
sured depository institution for purposes of section
38 of the Federal Deposit Insurance Act except
that—
‘‘(A) the relevant capital levels and capital
measures for each capital category shall be the
levels specified by the Board for wholesale fi-
nancial institutions in accordance with sub-
section (c);
‘‘(B) the provisions applicable to well cap-
italized insured depository institutions shall be
inapplicable to wholesale financial institutions;
‘‘(C) the provisions authorizing or requir-
ing an institution to be placed into receivership
shall not apply to a wholesale financial institu-
tion, and, in its place, the Board is authorized
or required, as the case may be, to terminate
the wholesale financial institution’s membership
in the Federal Reserve System or, where pro-
vided in section 38 of the Federal Deposit In-
surance 
Act, 
place 
the 
bank 
into
HR 1062 IH
conservatorship and, in the Board’s discretion,
terminate the bank’s membership; and
‘‘(D) for purposes of applying the provi-
sions of section 38 of the Federal Deposit In-
surance Act to wholesale financial institutions,
all references to the appropriate Federal bank-
ing agency or to the Corporation in that section
shall be deemed to be references to the Board.
‘‘(3) ENFORCEMENT
AUTHORITY.—Sections 7
(j) and (k), subsections (b) through (n), (s), (u), and
(v) of section 8, and section 19 of the Federal De-
posit Insurance Act shall apply to a wholesale finan-
cial institution in the same manner and to the same
extent as they apply to State member insured banks
and any reference in such sections to an insured de-
pository institution shall also be deemed to be a ref-
erence to a wholesale financial institution.
‘‘(4) CERTAIN
OTHER
STATUTES
APPLICA-
BLE.—A wholesale financial institution shall be
deemed to be a banking institution and the Board
shall be the appropriate Federal banking agency for
such bank and all of its affiliates for purposes of the
International Lending Supervision Act.
‘‘(5) BANK MERGER ACT.—A wholesale finan-
cial institution shall be subject to the provisions of
HR 1062 IH
the Bank Merger Act in the same manner as if the
wholesale financial institution were a State member
insured bank for purposes of that Act.
‘‘(c) SPECIFIC
REQUIREMENTS
APPLICABLE
TO
WHOLESALE FINANCIAL INSTITUTIONS.—
‘‘(1) LIMITATIONS ON DEPOSITS.—
‘‘(A) MINIMUM
AMOUNT.—Pursuant to
regulations of the Board, no wholesale financial
institution shall receive initial deposits of
$100,000 or less, other than on an incidental
and occasional basis and where such deposits in
no event represent more than 5 percent of the
institution’s total deposits.
‘‘(B) NO DEPOSIT INSURANCE.—No depos-
its held by a wholesale financial institution shall
be insured deposits under the Federal Deposit
Insurance Act.
‘‘(C) ADVERTISING
AND
DISCLOSURE.—
The Board shall prescribe regulations pertain-
ing to advertising and disclosure by wholesale
financial institutions to ensure that each deposi-
tor is notified that deposits at the wholesale fi-
nancial institution are not federally insured or
otherwise guaranteed by the United States Gov-
ernment.
HR 1062 IH
‘‘(2) SPECIAL CAPITAL REQUIREMENTS APPLI-
CABLE TO WHOLESALE FINANCIAL INSTITUTIONS.—
‘‘(A) MINIMUM CAPITAL LEVELS.—
‘‘(i) IN GENERAL.—The Board shall,
by regulation, adopt capital requirements
for wholesale financial institutions—
‘‘(I) to account for the status of
wholesale financial institutions as in-
stitutions that accept deposits that
are not insured under the Federal De-
posit Insurance Act; and
‘‘(II) to provide for the safe and
sound operation of the wholesale fi-
nancial institution without undue risk
to creditors or other persons, includ-
ing Federal Reserve banks, engaged
in transactions with the bank.
‘‘(ii) MINIMUM
LEVERAGE
RATIO.—
The minimum leverage ratio of tier one
capital to total assets of wholesale financial
institutions shall be not less than the level
required for a State member insured bank
to be well capitalized.
‘‘(B) CAPITAL CATEGORIES FOR PROMPT
CORRECTIVE ACTION.—For purposes of apply-
HR 1062 IH
ing the provisions of section 38 of Federal De-
posit Insurance Act, the Board shall, by regula-
tion, establish, for each relevant capital meas-
ure specified by the Board under subparagraph
(A), the levels at which a wholesale financial
institution 
is 
adequately 
capitalized,
undercapitalized, significantly undercapitalized,
and critically undercapitalized.
‘‘(3) ADDITIONAL REQUIREMENTS APPLICABLE
TO WHOLESALE FINANCIAL INSTITUTIONS.—In addi-
tion to any requirements otherwise applicable to
State member banks or otherwise applicable under
this section, the Board may prescribe, by rule or
order, for wholesale financial institutions—
‘‘(A) limitations on transactions with affili-
ates to prevent an affiliate from gaining access
to, or the benefits of, credit from a Federal Re-
serve bank, including overdrafts at a Federal
Reserve bank;
‘‘(B) special clearing balance requirements;
and
‘‘(C) any additional requirements that the
Board determines to be appropriate or nec-
essary to—
HR 1062 IH
‘‘(i) promote the safety and soundness
of the wholesale financial institution, or
‘‘(ii) protect creditors and other per-
sons, including Federal Reserve banks, en-
gaged in transactions with the wholesale fi-
nancial institution.
‘‘(4) EXEMPTIONS FOR WHOLESALE FINANCIAL
INSTITUTIONS.—The Board may, by rule or order,
exempt any wholesale financial institution from any
provision applicable to a State member bank that is
not a wholesale financial institution, provided that
the Board finds that such exemption is not incon-
sistent with—
‘‘(A) the promotion of the safety and
soundness of the wholesale financial institution;
and
‘‘(B) the protection of creditors and other
persons, including Federal Reserve banks, en-
gaged in transactions with the wholesale finan-
cial institution.
‘‘(5) NO EFFECT ON OTHER PROVISIONS.—This
section shall not be construed to limit the Board’s
authority over member banks under any other provi-
sion of law, or to create any obligation for any Fed-
eral Reserve bank to make, increase, renew, or ex-
HR 1062 IH
tend any advances or discount under this Act to any
member bank or other depository institution.
‘‘(d) CONSERVATORSHIP AUTHORITY.—The Board is
authorized to appoint a conservator to take possession and
control of a wholesale financial institution to the same ex-
tent and in the same manner as the Comptroller of the
Currency is authorized to appoint a conservator for a na-
tional bank under section 203 of the Bank Conservation
Act.
‘‘(e) DEFINITIONS.—For purposes of this section—
‘‘(1) the term ‘wholesale financial institution’
means a bank whose application to become an unin-
sured State member bank has been approved by the
Board of Governors of the Federal Reserve System
under this section;
‘‘(2) the term ‘deposit’ has the meaning given
to such term by the Board under the Federal Re-
serve Act; and
‘‘(3) the term ‘State member insured bank’
means a State member bank, the deposits of which
are insured under the Federal Deposit Insurance
Act.
‘‘(f) EXCLUSIVE JURISDICTION.—Section 43 (c) and
(e) of the Federal Deposit Insurance Act (12 U.S.C.
1831t) shall not apply to wholesale financial institutions.’’.
HR 1062 IH
(b) VOLUNTARY TERMINATION OF INSURED STATUS
BY CERTAIN INSTITUTIONS.—
(1) SECTION 8 DESIGNATIONS.—Section 8 of
the Federal Deposit Insurance Act (12 U.S.C. 1818)
is amended—
(A) in the section heading, by inserting
‘‘INVOLUNTARY’’ after ‘‘SEC. 8’’; and
(B) in subsection (a)—
(i) by striking paragraph (1); and
(ii) by redesignating paragraphs (2)
through (9) as paragraphs (1) through (8),
respectively.
(2) VOLUNTARY
TERMINATION
OF
INSURED
STATUS.—The Federal Deposit Insurance Act (12
U.S.C. 1811 et seq.) is amended by inserting after
section 8 the following new section:
‘‘SEC. 8A. VOLUNTARY TERMINATION OF STATUS AS IN-
SURED DEPOSITORY INSTITUTION.
‘‘(a) IN GENERAL.—Except as provided in subsection
(b), an insured State-chartered bank or a national bank
may voluntarily terminate its status as an insured deposi-
tory institution in accordance with regulations of the Cor-
poration if—
‘‘(1) such institution provides written notice of
its intent to terminate its insured status—
HR 1062 IH
‘‘(A) to the Corporation and to the Board
of Governors of the Federal Reserve System,
not less than 6 months before the effective date
of such termination; and
‘‘(B) to its depositors, not less than 6
months before the effective date of such termi-
nation; and
‘‘(2) either—
‘‘(A) the deposit insurance fund of which
such bank is a member equals or exceeds the
fund’s designated reserve ratio as set forth in
section 7(b)(2)(A)(iv) of the Federal Deposit
Insurance Act (12 U.S.C. 1817(b)(2)(A)(iv)) as
of the date the bank provides a written notice
of its intent to terminate its insured status and
the Corporation determines that the fund will
equal or exceed its designated reserve ratio for
the two semiannual assessment periods imme-
diately following such date; or
‘‘(B) the Corporation and the Board of
Governors of the Federal Reserve System ap-
prove termination of the bank’s insured status
and such bank pays the exit fee prescribed by
paragraph (e) of this section.
HR 1062 IH
‘‘(b) EXCEPTION.—The option to terminate insured
status under subsection (a) shall not be available to—
‘‘(1) an insured savings association;
‘‘(2) an insured branch that is required to be
insured under subsection (a) or (b) of section 6 of
the International Banking Act of 1978; or
‘‘(3) any institution described in section 2(c)(2)
of the Bank Holding Company Act of 1956.
‘‘(c) ELIGIBILITY FOR INSURANCE TERMINATED.—
A depository institution that voluntarily elects to termi-
nate its insured status under subsection (a) shall not re-
ceive insurance of any of its deposits or any other assist-
ance authorized under this Act after the period specified
in subsection (f)(1).
‘‘(d) INSTITUTION MUST BECOME WHOLESALE FI-
NANCIAL INSTITUTION OR TERMINATE DEPOSIT-TAKING
ACTIVITIES.—Any institution that voluntarily terminates
its status as an insured depository institution under this
section may not, upon termination of insurance, accept
any deposits unless the institution is a wholesale financial
institution under section 9B of the Federal Reserve Act.
‘‘(e) EXIT FEES.—
‘‘(1) IN GENERAL.—Any institution that volun-
tarily terminates its status as an insured depository
institution under this section shall pay an exit fee in
HR 1062 IH
an amount that the Corporation determines is suffi-
cient to account for the institution’s pro rata share
of the amount (if any) which would be required to
restore the relevant deposit insurance fund to the
fund’s designated reserve ratio as set forth in sec-
tion 7(b)(2)(A)(iv) of the Federal Deposit Insurance
Act as of the date the bank provides a written notice
of its intent to terminate its insured status.
‘‘(2) PROCEDURES.—The Corporation shall pre-
scribe, by regulation, procedures for assessing any
exit fee under this subsection.
‘‘(f) TEMPORARY INSURANCE OF DEPOSITS INSURED
AS OF TERMINATION.—
‘‘(1) TRANSITION PERIOD.—The insured depos-
its of each depositor in a State-chartered bank or a
national bank on the effective date of the voluntary
termination of the institution’s insured status, less
all subsequent withdrawals from any deposits of
such depositor, shall continue to be insured for a pe-
riod of not less than 6 months nor more than 2
years, within the discretion of the Corporation. Dur-
ing such period, no additions to any such deposits,
and no new deposits in the depository institution
made after the effective date of such termination
shall be insured by the Corporation.
HR 1062 IH
‘‘(2) TEMPORARY ASSESSMENTS; OBLIGATIONS
AND DUTIES.—During the period specified in para-
graph (1), a depository institution shall continue to
pay assessments required under this Act as if it
were an insured depository institution. Such deposi-
tory institution shall, in all other respects, be subject
to the authority of the Corporation and the duties
and obligations of an insured depository institution
during such period as provided in this Act, and in
the event that the depository institution is closed
due to an inability to meet the demands of its de-
positors during such period, the Corporation shall
have the same powers and rights with respect to
such depository institution as in the case of an in-
sured depository institution.
‘‘(g) ADVERTISEMENTS.—
‘‘(1) IN
GENERAL.—A depository institution
that voluntarily terminates its insured status under
this section shall not advertise or hold itself out as
having insured deposits, except that it may advertise
the temporary insurance of deposits under sub-
section (f) if, in connection with any such advertise-
ment, it shall also state with equal prominence that
additions to deposits and new deposits made after
the effective date of the termination are not insured.
HR 1062 IH
‘‘(2) CERTIFICATES OF DEPOSIT, OBLIGATIONS,
AND
SECURITIES.—Any certificate of deposit or
other obligation or security issued by a State-char-
tered bank or a national bank after the effective
date of the voluntary termination of its insured sta-
tus under this section shall be accompanied by a
conspicuous, prominently displayed notice that such
certificate of deposit or other obligation or security
is not insured under this Act.
‘‘(h) NOTICE REQUIREMENTS.—
‘‘(1) NOTICE TO THE CORPORATION.—The no-
tice to the Corporation of an institution’s intent to
terminate its insured status required under sub-
section (a) shall be in such form as the Corporation
may require.
‘‘(2) NOTICE TO DEPOSITORS.—The notice to
depositors of an institution’s intent to terminate its
insured status required under subsection (a) shall
be—
‘‘(A) at such depositor’s last address of
record with the institution; and
‘‘(B) in such manner and form as the Cor-
poration finds to be necessary and appropriate
for the protection of depositors.’’.
HR 1062 IH
SEC. 111. EFFECTIVE DATE.
The amendments made by this subtitle shall become
effective 90 days after the date of enactment of this Act.
Subtitle B—Brokers and Dealers
SEC. 120. DEFINITION OF BROKER.
Section 3(a)(4) of the Securities Exchange Act of
1934 (15 U.S.C. 78c(a)(4)) is amended to read as follows:
‘‘(4) ‘BROKER’.—
‘‘(A) IN
GENERAL.—The term ‘broker’
means any person engaged in the business of
effecting transactions in securities for the ac-
count of others.
‘‘(B) EXCLUSION
OF
BANKS.—The term
‘broker’ does not include a bank unless such
bank publicly solicits the business of effecting
securities transactions for the account of others
or is compensated for such business by the pay-
ment of commissions or similar remuneration
based on effecting transactions in securities
(other than fees calculated as a percentage of
assets under management) in excess of the
bank’s incremental costs directly attributable to
effecting such transactions (hereafter referred
to as ‘incentive compensation’).
‘‘(C) EXEMPTION FOR CERTAIN BANK AC-
TIVITIES.—A bank shall not be deemed to be a
HR 1062 IH
‘broker’ because it engages in any of the follow-
ing activities:
‘‘(i) THIRD
PARTY
BROKERAGE
AR-
RANGEMENTS.—The bank enters into a
contractual or other arrangement with a
broker or dealer registered under this title
under which the broker or dealer offers
brokerage services on or off the premises
of the bank if—
‘‘(I) such broker or dealer is
clearly identified as the person per-
forming the brokerage services;
‘‘(II) such broker or dealer per-
forms brokerage services in an area
that is clearly marked and physically
separate from the retail deposit-taking
activities of the bank;
‘‘(III) any materials used to ad-
vertise or promote the availability of
brokerage services under the contrac-
tual or other arrangement are ap-
proved by the broker or dealer for
compliance with the Federal securities
laws prior to distribution and are
HR 1062 IH
deemed to be the materials of the
broker or dealer;
‘‘(IV) bank employees perform
only clerical or ministerial functions in
connection 
with 
brokerage 
trans-
actions, unless such employees are as-
sociated persons of a broker or dealer
and are qualified pursuant to the re-
quirements of a self-regulatory organi-
zation;
‘‘(V) bank employees do not re-
ceive incentive compensation for any
brokerage activities unless such em-
ployees are associated persons of a
broker or dealer and are qualified
pursuant to the requirements of a
self-regulatory organization;
‘‘(VI) such services are provided
by the broker or dealer on a basis in
which all customers that receive such
services are fully disclosed to that
broker or dealer; and
‘‘(VII) the broker or dealer in-
forms each customer that the broker-
age services are provided by the
HR 1062 IH
‘‘(II) 
receives 
incentive 
com-
pensation for such brokerage activi-
ties.
‘‘(iii) 
PERMISSIBLE
SECURITIES
TRANSACTIONS.—The bank effects trans-
actions in exempted securities, other than
municipal securities, or in commercial
paper, bankers acceptances, commercial
bills, qualified Canadian Government obli-
gations as defined in section 5136 of the
Revised Statutes, obligations of the Wash-
ington Metropolitan Area Transit Author-
ity which are guaranteed by the Secretary
of Transportation under section 9 of the
National Capital Transportation Act of
1969, obligations of the North American
Development Bank, and obligations of any
local public agency (as defined in section
110(h) of the Housing Act of 1949) or any
public housing agency (as defined in the
United States Housing Act of 1937) that
are expressly specified by section 5136 of
the Revised Statutes as permissible for a
national bank to underwrite or deal in.
HR 1062 IH
‘‘(iv) MUNICIPAL
SECURITIES.—The
bank effects transactions in municipal se-
curities, and has not been affiliated with a
securities affiliate under section 10 of the
Financial Services Holding Company Act
of 1995 for more than 1 year.
‘‘(v) EMPLOYEE
AND
SHAREHOLDER
BENEFIT PLANS.—The bank effects trans-
actions as part of any bonus, profit-shar-
ing, pension, retirement, thrift, savings, in-
centive, stock purchase, stock ownership,
stock appreciation, stock option, dividend
reinvestment, or similar plan for employees
or shareholders of an issuer or its subsidi-
aries.
‘‘(vi) SWEEP
ACCOUNTS.—The bank
effects transactions as part of a program
for the investment or reinvestment of bank
deposit funds into any no-load, open-end
management investment company reg-
istered under the Investment Company Act
of 1940 that holds itself out as a money
market fund.
‘‘(vii) AFFILIATE
TRANSACTIONS.—
The bank effects transactions for the ac-
HR 1062 IH
count of any affiliate of the bank, as de-
fined in section 2 of the Financial Services
Holding Company Act of 1995.
‘‘(viii) PRIVATE
SECURITIES
OFFER-
INGS.—The bank—
‘‘(I) effects sales as part of a pri-
mary offering of securities by an is-
suer, not involving a public offering,
pursuant to section 3(b), 4(2), or 4(6)
of the Securities Act of 1933 and the
rules and regulations issued there-
under, other than securities backed by
or representing an interest in obliga-
tions originated or purchased by the
bank, its affiliates, or its subsidiaries
unless those securities are described
in section 3(a)(5)(B)(ii)(IV) (aa) or
(bb);
‘‘(II) effects such sales exclu-
sively to an accredited investor, as de-
fined in section 3 of the Securities Act
of 1933; and
‘‘(III) if affiliated with a securi-
ties affiliate, as provided under sec-
tion 10 of the Financial Services
HR 1062 IH
Holding Company Act of 1995, has
not been so affiliated for more than 1
year.
‘‘(ix) DE MINIMIS EXEMPTION.—If the
bank does not have a subsidiary or affiliate
registered as a broker or dealer under sec-
tion 15, the bank effects, other than in
transactions referenced in clauses (i)
through (viii), not more than—
‘‘(I) 800 transactions in any cal-
endar year in securities for which a
ready market exists, and
‘‘(II) 200 other transactions in
securities in any calendar year.
‘‘(x) SAFEKEEPING
AND
CUSTODY
SERVICES.—The 
bank 
acts 
as 
an
intermediary in the safekeeping of securi-
ties or the provision of custody services in
respect of securities, including the exercise
of warrants or other rights.
‘‘(ix) 
CLEARANCE
AND
SETTLE-
MENT.—The bank acts as an intermediary
in the clearance and settlement of trans-
actions in securities.
HR 1062 IH
‘‘(xii) 
SECURITIES
LENDING.—The
bank acts as an intermediary in the lend-
ing and borrowing of securities or in the
investment of cash collateral pledged in
connection with any securities borrowing.
‘‘(xiii) COLLATERAL
AGENCY
SERV-
ICES.—The bank acts as an intermediary
in the pledging, sale subject to a resale
agreement of securities.
‘‘(D) EXEMPTION FOR ENTITIES SUBJECT
TO SECTION 15(e).—The term ‘broker’ does not
include a bank that is subject to—
‘‘(i) section 15(e); and
‘‘(ii) such restrictions and require-
ments as the Commission deems appro-
priate.’’.
SEC. 121. DEFINITION OF DEALER.
Section 3(a)(5) of the Securities Exchange Act of
1934 (15 U.S.C. 78c(a)(5)) is amended to read as follows:
‘‘(5) ‘DEALER’.—
‘‘(A) IN
GENERAL.—The term ‘dealer’
means any person engaged in the business of
buying and selling securities for his own ac-
count through a broker or otherwise.
HR 1062 IH
‘‘(B) EXCEPTIONS.—Such term does not
include—
‘‘(i) a person that buys or sells securi-
ties for his or her own account, either indi-
vidually or in a fiduciary capacity, but not
as a part of a regular business; or
‘‘(ii) a bank, to the extent that the
bank—
‘‘(I) buys and sells commercial
paper, bankers acceptances, exempted
securities (other than municipal secu-
rities), qualified Canadian Govern-
ment obligations as defined in section
5136 of the Revised Statues, obliga-
tions of the Washington Metropolitan
Area Transit Authority which are
guaranteed by the Secretary of Trans-
portation under section 9 of the Na-
tional Capital Transportation Act of
1969, obligations of the North Amer-
ican Development Bank, and obliga-
tions of any local public agency (as
defined in section 110(h) of the Hous-
ing Act of 1949) or any public hous-
ing agency (as defined in the United
100
HR 1062 IH
States Housing Act of 1937) that are
expressly specified by section 5136 of
the Revised Statutes as permissible
for a national bank to underwrite or
deal in;
‘‘(II) buys and sells municipal se-
curities and has not been affiliated
with a securities affiliate, as provided
under section 10 of the Financial
Services Holding Company Act of
1995 for more than 1 year;
‘‘(III) buys and sells securities
for investment purposes for the bank
or for accounts for which the bank
acts as a trustee or fiduciary; or
‘‘(IV) has not been affiliated with
a securities affiliate under section 10
of the Financial Services Holding
Company Act of 1995 for more than
1 year and engages in the issuance or
sale through a grantor trust or other-
wise of—
‘‘(aa) securities backed by or
representing an interest in 1–4
family 
residential 
mortgages
101
HR 1062 IH
originated or purchased by the
bank, its affiliates, or its subsidi-
aries; or
‘‘(bb) securities backed by or
representing 
an 
interest 
in
consumer 
receivables 
or
consumer leases originated or
purchased by the bank, its affili-
ates, or its subsidiaries.’’.
SEC. 122. POWER TO EXEMPT FROM THE DEFINITIONS OF
BROKER AND DEALER.
Section 3 of the Securities Exchange Act of 1934 (15
U.S.C. 78c) is amended by adding at the end the follow-
ing:
‘‘(e) EXEMPTION FROM DEFINITION OF BROKER OR
DEALER.—The Commission, by regulation or order, upon
its own motion or upon application, may conditionally or
unconditionally exclude any person or class of persons
from the definitions of ‘broker’ or ‘dealer’, if the Commis-
sion finds that such exclusion is consistent with the public
interest, the protection of investors, and the purposes of
this title.’’.
SEC. 123. MARGIN REQUIREMENTS.
(a) Section 7(d) of the Securities Exchange Act of
1934 (15 U.S.C. 15g(d)) is amended by—
102
HR 1062 IH
(1) deleting the word ‘‘or’’ after clause (D);
(2) redesignating clause (E) as clause (F); and
(3) inserting a new clause (E) as follows:
‘‘(E) to a loan to a broker or dealer by a
member bank or any other person that has en-
tered into an agreement pursuant to section
8(a) hereof if the proceeds of the loan are to be
used in the ordinary course of the broker’s or
dealer’s business other than for the purpose of
funding the purchase of securities for the ac-
count of such broker or dealer, or’’.
(b) Section 8(a) of the Securities and Exchange Act
of 1934 is amended:
(1) by deleting the phrase ‘‘nonmember bank’’
in clause (2) and replacing it with the phrase ‘‘per-
son other than a member bank’’; and
(2) by deleting the phrase ‘‘such bank’’ in the
second sentence and replacing it with the phrase
‘‘such person’’.
SEC. 124. EFFECTIVE DATE.
This subtitle shall become effective 270 days after the
date of enactment of this Act.
103
HR 1062 IH
Subtitle C—Bank Investment Company
Activities
SEC. 130. CUSTODY OF INVESTMENT COMPANY ASSETS BY
AFFILIATED BANK.
(a) MANAGEMENT COMPANIES.—Section 17(f) of the
Investment Company Act of 1940 (15 U.S.C. 80a–17(f))
is amended—
(1) by redesignating paragraphs (1), (2), and
(3) as subparagraphs (A), (B), and (C), respectively;
(2) by designating the five sentences of such
subsection as paragraphs (1) through (5), respec-
tively, and by indenting those paragraphs appro-
priately; and
(3) by adding at the end the following new
paragraph:
‘‘(6) Notwithstanding paragraph (l)(A), if a
bank described in paragraph (1) or an affiliated per-
son of such bank is an affiliated person, promoter,
organizer, or sponsor of, or principal underwriter for
the registered company, such bank may serve as cus-
todian under this subsection in accordance with such
rules, regulations, or orders as the Commission may
prescribe, consistent with the protection of investors,
after consulting in writing with the appropriate Fed-
104
HR 1062 IH
eral banking agency, as defined in section 3 of Fed-
eral Deposit Insurance Act.’’.
(b) UNIT INVESTMENT TRUSTS.—Section 26(a)(l) of
the Investment Company Act of 1940 (15 U.S.C. 80a–
26(a)(l)) is amended by inserting after ‘‘bank’’ the follow-
ing: ‘‘not affiliated with such underwriter or depositor, or
if such bank is so affiliated, only in accordance with such
regulations or orders as the Commission may prescribe,
consistent with the protection of investors, after consulting
in writing with the appropriate Federal banking agency,
as defined in section 3 of the Federal Deposit Insurance
Act’’.
(c) FIDUCIARY DUTY OF CUSTODIAN.—Section 36(a)
of the Investment Company Act of 1940 (15 U.S.C. 80a–
35(a)) is amended—
(1) in paragraph (1), by striking ‘‘or’’ at the
end;
(2) in paragraph (2), by striking the period at
the end and inserting ‘‘; or’’; and
(3) by inserting after paragraph (2) the follow-
ing:
‘‘(3) as custodian.’’.
105
HR 1062 IH
SEC. 131. AFFILIATED TRANSACTIONS.
(a) INDEBTEDNESS TO AFFILIATED PERSON.—Sec-
tion 10(f) of the Investment Company Act of 1940 (15
U.S.C. 80a–10(f) is amended in the first sentence—
(1) by inserting ‘‘(1)’’ before ‘‘a principal un-
derwriter’’; and
(2) by inserting before the period ‘‘, or (2) the
proceeds of which will be used to retire an indebted-
ness owed to an affiliated person of such registered
company’’.
(b) AFFILIATED PERSON
OF INVESTMENT COM-
PANY.—Section 10(f) of the Investment Company Act of
1940 is amended by adding at the end the following: ‘‘For
purposes of this subsection, a person that is under com-
mon control with an investment adviser shall be deemed
to be an affiliated person of the registered investment
company advised by such investment adviser.’’.
SEC. 132. BORROWING FROM AN AFFILIATED BANK.
Section 18(f) of the Investment Company Act of
1940 (15 U.S.C. 80a–18(f)) is amended by adding at the
end the following:
‘‘(3) Notwithstanding the provisions of paragraph
(1), it shall be unlawful for any registered investment com-
pany to borrow from any bank if such bank or any affili-
ated person thereof is an affiliated person, promotor, orga-
nizer, or sponsor of, or principal underwriter for, such
107
HR 1062 IH
(c) EFFECTIVE DATE.—The provisions of subsection
(a) of this section shall become effective 1 year after the
date of enactment of this subtitle.
SEC. 134. ADDITIONAL SEC DISCLOSURE AUTHORITY.
(a) MISREPRESENTATION.—Section 35(a) of the In-
vestment Company Act of 1940 (15 U.S.C. 80a–34(a)) is
amended to read as follows:
‘‘SEC. 35. MISREPRESENTATIONS.
‘‘(a) MISREPRESENTATION OF GUARANTEES.—
‘‘(1) IN GENERAL.—It shall be unlawful for any
person, in issuing or selling any security of which a
registered company is the issuer, to represent or
imply in any manner whatsoever that such security
or company—
‘‘(A) has been guaranteed, sponsored, rec-
ommended, or approved by the United States,
or any agency, instrumentality or officer there-
of,
‘‘(B) has been insured by the Federal De-
posit Insurance Corporation; or
‘‘(C) is guaranteed by or is otherwise an
obligation of any bank or insured institution.
‘‘(2) DISCLOSURES.—The Commission shall re-
quire the person issuing or selling the securities of
a registered investment company to prominently dis-
108
HR 1062 IH
close, in writing or orally, as appropriate, that the
investment company or any security issued by it is
not insured by the Federal Deposit Insurance Cor-
poration and is not guaranteed by an affiliated de-
pository institution, and is not otherwise an obliga-
tion of such a bank or insured institution, in any
case where—
‘‘(A) a financial services holding company,
bank, or separately identifiable division or de-
partment of a bank, or any affiliate or subsidi-
ary thereof is an investment adviser, organizer,
sponsor, promoter, principal underwriter, or an
affiliated person of the investment company; or
‘‘(B) a bank or an affiliated person of a
bank is offering or selling securities of the in-
vestment company.
‘‘The requirement of any disclosures referred to
above shall be subject to regulations adopted by the
Commission, after consultation with the appropriate
Federal banking agencies (as defined in section 3 of
the Federal Deposit Insurance Act).’’.
(b) DECEPTIVE USE OF NAMES.—Section 35(d) of
the Investment Company Act of 1940 (15 U.S.C. 80a–
34(d)) is amended by inserting after the first sentence the
following: ‘‘It shall be deceptive and misleading for any
109
HR 1062 IH
registered investment company which has an insured de-
pository institution (as defined in section 3 of the Federal
Deposit Insurance Act) or any affiliated person thereof as
an affiliated person, promoter, or principal underwriter,
to adopt, as part of the name or title of such company,
or of any security of which it is the issuer, any word which
is the same as or similar to, or a variation of, the name
or title of such insured depository institution or affiliate
thereof. The Commission, by rules or regulations upon its
own motion or by order upon application, may condi-
tionally or unconditionally exempt an investment company
from the preceding sentence if the Commission finds that
such exemption is consistent with the public interest, the
protection of investors, and the purposes of this title.’’.
SEC. 135. DEFINITION OF BROKER UNDER THE INVEST-
MENT COMPANY ACT OF 1940.
Section 2(a)(6) of the Investment Company Act of
1940 (15 U.S.C. 80a–2(a)(6)) is amended to read as fol-
lows:
‘‘(6) ‘Broker’ has the same meaning as in the
Securities Exchange Act of 1934, except that it does
not include any person solely by reason of the fact
that such person is an underwriter for 1 or more in-
vestment companies.’’.
110
HR 1062 IH
SEC. 136. DEFINITION OF DEALER UNDER THE INVEST-
MENT COMPANY ACT OF 1940.
Section 2(a)(11) of the Investment Company Act of
1940 (15 U.S.C. 80a–2(a)(11)) is amended to read as
follows:
‘‘(11) ‘Dealer’ has the same meaning as in the
Securities Exchange Act of 1934, but does not in-
clude an insurance company or investment com-
pany.’’.
SEC. 137. REMOVAL OF THE EXCLUSION FROM THE DEFINI-
TION OF INVESTMENT ADVISER FOR BANKS
THAT ADVISE INVESTMENT COMPANIES.
(a) INVESTMENT ADVISER.—Section 202(a)(11) of
the Investment Advisers Act of 1940 (15 U.S.C. 80b–
2(a)(11)) is amended in subparagraph (A), by striking
‘‘investment company’’ and inserting ‘‘investment com-
pany, except that the term ‘investment adviser’ includes
any bank or financial services holding company to the ex-
tent that such bank or financial services holding company
acts as an investment adviser to a registered investment
company, or if, in the case of a bank, such services are
performed through a separately identifiable department or
division, the department or division, and not the bank it-
self shall be deemed to be the ‘investment adviser’ ’’; and
(b) SEPARATELY IDENTIFIABLE DEPARTMENT
OR
DIVISION.—Section 202(a) of the Investment Advisers Act
111
HR 1062 IH
of 1940 (15 U.S.C. 80b–2(a)) is amended by adding at
the end the following:
‘‘(25) ‘Separately identifiable department or di-
vision’ of a bank means a unit—
‘‘(A) that is under the direct supervision of
an officer or officers designated by the board of
directors of the bank as responsible for the day-
to-day conduct of the bank’s investment adviser
activities for 1 or more investment companies,
including the supervision of all bank employees
engaged in the performance of such activities;
and
‘‘(B) for which all of the records relating
to its investment adviser activities, are sepa-
rately maintained in or extractable from such
unit’s own facilities or the facilities of the bank,
and such records are so maintained or other-
wise accessible as to permit independent exam-
ination and enforcement of this Act and rules
and regulations promulgated under this Act.’’.
SEC. 138. DEFINITION OF BROKER UNDER THE INVEST-
MENT ADVISERS ACT OF 1940.
Section 202(a)(3) of the Investment Advisers Act of
1940 (15 U.S.C. 80b–2(a)(3)) is amended to read as fol-
lows:
112
HR 1062 IH
‘‘(3) ‘Broker’ has the same meaning as in the
Securities Exchange Act of 1934.’’.
SEC. 139. DEFINITION OF DEALER UNDER THE INVEST-
MENT ADVISERS ACT OF 1940.
Section 202(a)(7) of the Investment Advisers Act of
1940 (15 U.S.C. 80b–2(a)(7)) is amended to read as
follows:
‘‘(7) ‘Dealer’ has the same meaning as in the
Securities Exchange Act of 1934, but does not in-
clude an insurance company or investment com-
pany.’’.
SEC. 140. INTERAGENCY CONSULTATION.
The Investment Advisers Act of 1940 (15 U.S.C.
80b–1 et seq.) is amended by inserting after section 210
the following new section:
‘‘SEC. 210A. CONSULTATION.
‘‘(a) EXAMINATION RESULTS AND OTHER INFORMA-
TION.—
‘‘(1) The appropriate Federal banking agency
shall provide the Commission upon request the re-
sults of any examination, reports, records, or other
information as each may have with respect to the in-
vestment advisory activities of any financial services
holding company, bank, or department or division of
a bank, any of which is registered under section 203
113
HR 1062 IH
of this title, or, in the case of a financial services
holding company or bank, has a subsidiary, depart-
ment, or division registered under that section, to
the extent necessary for the Commission to carry out
its statutory responsibilities.
‘‘(2) The Commission shall provide to the ap-
propriate Federal banking agency upon request the
results of any examination, reports, records, or other
information with respect to the investment advisory
activities of any financial services holding company,
bank, or department or division of a bank, any of
which is registered under section 203 of this title, to
the extent necessary for the agency to carry out its
statutory responsibilities.
‘‘(b) EFFECT
ON
OTHER
AUTHORITY.—Nothing
herein shall limit in any respect the authority of the appro-
priate Federal banking agency with respect to such finan-
cial services holding company, bank, or department or di-
vision under any provision of law.
‘‘(c) DEFINITION.—For purposes of this section, the
term ‘appropriate Federal banking agency’ shall have the
same meaning as in section 3 of the Federal Deposit In-
surance Act.’’.
115
HR 1062 IH
‘‘(A) such fund is employed by the bank
solely as an aid to the administration of trusts,
estates, or other accounts created and main-
tained for a fidiciary purpose;
‘‘(B) except in connection with the ordi-
nary advertising of the bank’s fidiciary services,
interests in such fund are not—
‘‘(i) advertised; or
‘‘(ii) offered for sale to the general
public; and
‘‘(C) such fund is not charged any fees or
expenses that, when added to any other com-
pensation charged by the bank to a participant
account, would exceed the total amount of com-
pensation that would have been charged to such
participant account if no assets of the account
had been invested in interests in the fund, ex-
cept that any reasonable and necessary ex-
penses related to the prudent operation of the
fund, as determined by the appropriate Federal
banking agency (as defined in section 3(q) of
the Federal Deposit Insurance Act), shall be
permitted to be charged directly to the fund.’’
‘‘(d) TAX EFFECT.—It is the sense of the Congress
that the public interest would be furthered by enacting
116
HR 1062 IH
legislation to amend section 584 of the Internal Revenue
Code of 1986 by inserting after subsection (g) the follow-
ing new subsection:
‘‘(h) CONVERSION, MERGERS, OR REORGANIZATION
OF COMMON TRUST FUNDS.—Notwithstanding any other
provision of the Internal Revenue Code, any transfer of
all or substantially all of the assets of a common trust
fund taxable under this section to a registered investment
company taxable under subchapter M shall not result in
a gain or loss to the participants in such common trust
fund where the transfer is a result of a merger, conversion,
reorganization, transfer, or other similar transaction or se-
ries of transactions.’’.
SEC. 142. INVESTMENT ADVISERS PROHIBITED FROM HAV-
ING 
CONTROLLING 
INTEREST 
IN 
REG-
ISTERED INVESTMENT COMPANY.
Section 15 of the Investment Company Act of 1940
(15 U.S.C. 80a–15) is amended by adding at the end the
following new subsection:
‘‘(g) CONTROLLING INTEREST IN INVESTMENT COM-
PANY PROHIBITED.—
‘‘(1) IN GENERAL.—If any investment adviser
to a registered investment company, or an affiliated
person of that investment adviser, also holds shares
of the investment company in a trustee or fiduciary
117
HR 1062 IH
capacity, that investment adviser or affiliated person
may own, directly or indirectly, a controlling interest
in that registered investment company only—
‘‘(A) if it passes the power to vote the
shares of the investment company through to—
‘‘(i) the beneficial owners of the
shares;
‘‘(ii) any person acting in a fiduciary
capacity who is not an affiliated person of
that investment adviser or any affiliated
person thereof; or
‘‘(iii) any person authorized to receive
statements and information with respect to
the trust who is not an affiliated person of
that investment adviser or any affiliated
person thereof;
‘‘(B) if it votes the shares of the invest-
ment company held by it in the same proportion
as shares held by all other shareholders of the
investment company; or
‘‘(C) as otherwise permitted under such
rules, regulations, or orders as the Commission
may prescribe for the protection of investors.
‘‘(2) EXEMPTION.—Paragraph (1) shall not
apply to any investment adviser to a registered in-
118
HR 1062 IH
vestment company, or an affiliated person of that in-
vestment adviser, holding shares of the investment
company in a trustee or fiduciary capacity if that
registered investment company consists solely of as-
sets of—
‘‘(A) any common trust fund or similar
fund described in section 3(c)(3) of the Invest-
ment Company Act of 1940;
‘‘(B) any employees’ stock bonus, pension,
or profit-sharing trust that qualifies under sec-
tion 401 of the Internal Revenue Code of 1986;
‘‘(C) any governmental plan described in
section 3(a)(2)(C) of the Securities Act of
1933; or
‘‘(D) any collective trust fund maintained
by a bank and consisting solely of assets of
trusts or governmental plans described in sub-
paragraph (B) or (C).’’.
SEC. 143. PURCHASE OF INVESTMENT COMPANY SECURI-
TIES AS FIDUCIARY.
(a) IN GENERAL.—Section 17 of the Investment
Company Act of 1940 (15 U.S.C. 80a–17) is amended by
adding at the end the following:
‘‘(k) PURCHASE OF INVESTMENT COMPANY SECURI-
TIES AS FIDUCIARY.—
119
HR 1062 IH
‘‘(1) IN GENERAL.—An investment adviser to a
registered investment company, or an affiliated per-
son of the investment adviser, promoter, organizer,
or sponsor of the registered investment company, or
principal underwriter for the registered company
may purchase securities issued by such investment
company for the account of a beneficiary as fidu-
ciary, only if disclosure of such information as the
Commission shall prescribe under paragraph (2) has
been provided to the person (other than to the in-
vestment advisor to the registered investment com-
pany, or an affiliated person of the investment advi-
sor, promoter, organizer, or sponsor of the registered
investment company, or principal underwriter for the
registered company who may purchase securities of
the registered company as fiduciary for the account)
to whom periodic financial statements are customar-
ily provided.
‘‘(2) DISCLOSURE
RULES.—The Commission
shall prescribe, by rule, regulation, or order, the
manner, form, and content of the information re-
quired to be disclosed under paragraph (1), as the
Commission determines necessary or appropriate in
the public interest and for the protection of inves-
tors.
120
HR 1062 IH
‘‘(3) PROSPECTIVE
EFFECT.—This subsection
shall be effective for purchase for fiduciary accounts
made after the effective date of this subtitle.’’.
(b) EXAMINATION OF TRUST DEPARTMENT SECURI-
TIES PURCHASES.—Section 10(d) of the Federal Deposit
Insurance Act (12 U.S.C. 1820(d)) is amended by adding
at the end the following:
‘‘(6) TRUST
DEPARTMENT
EXAMINATION.—In
performing an examination under this subsection,
the appropriate Federal banking agency shall exam-
ine purchases by an insured depository institution’s
trust department or division of the securities of an
affiliated investment company, or an investment
company that is an affiliated person of an affiliated
person of the institution (as those terms are defined
in sections 2 and 3 of the Investment Company Act
of 1940), to assure compliance with applicable Fed-
eral and State trust laws.’’.
SEC. 144. CONFORMING CHANGE IN DEFINITION.
Section 2(a)(5) of the Investment Company Act of
1940 (15 U.S.C. 80a–2(a)(5)) is amended by striking
‘‘(A) a banking organization organized under the laws of
the United States’’ and inserting ‘‘(A) a depository insti-
tution, as that term is defined in section 3 of the Federal
121
HR 1062 IH
Deposit Insurance Act or a United States branch or agen-
cy of a foreign bank’’.
SEC. 145. EFFECTIVE DATE.
This subtitle shall become effective 270 days after the
date of enactment of this Act.
Subtitle D—Financial Activities
SEC. 150. FINANCIAL ACTIVITIES.
Section 4(c)(8) of the Bank Holding Company Act
(12 U.S.C. 1843(c)(8)) is amended—
(1) by striking the text beginning with ‘‘shares
of any company’’ through ‘‘for a bank holding com-
pany to provide’’ and inserting instead the following:
‘‘shares of any company the activities of which the
Board after due notice has determined (by order,
regulation, or advisory opinion) to be financial in na-
ture or incidental to such financial activities. Any
activity that the Board has determined, by order or
regulation that is in effect on the date of enactment
of the Financial Services Competitiveness Act of
1995, to be so closely related to banking or manag-
ing or controlling banks as to be a proper incident
thereto shall be deemed to be of a financial nature
for purposes of this paragraph without further ac-
tion by the Board (subject to the same terms and
conditions contained in such order or regulation, un-
122
HR 1062 IH
less modified by the Board), but for purposes of this
subsection it is not closely related to banking or
managing or controlling banks or financial in nature
or incidental to a financial activity for a financial
services holding company to provide’’;
(2) by inserting before the period at the end of
the third sentence thereof the following: ‘‘and be-
tween activities commenced by affiliates of different
classes of banks.’’; and
(3) by striking the second sentence.
SEC. 151. NO PRIOR APPROVAL REQUIRED FOR WELL CAP-
ITALIZED AND WELL MANAGED FINANCIAL
SERVICES HOLDING COMPANIES.
(a) PERMISSIBLE NONBANKING ACTIVITIES.—Sec-
tion 4(j) of the Bank Holding Company Act of 1956 (12
U.S.C. 1843(j)) is amended—
(1) in paragraph (1), by striking ‘‘No’’ and in-
serting in its place ‘‘Except as provided in para-
graph (3), no’’; and
(2) by adding at the end the following new
paragraphs:
‘‘(3) NO
NOTICE
REQUIRED
FOR
CERTAIN
TRANSACTIONS.—No notice under paragraph (1) or
subsections (c)(8) or (a)(2)(B) is required for a pro-
posal by a financial services holding company to en-
123
HR 1062 IH
gage in any activity or acquire the shares or assets
of any company if the proposal qualifies under para-
graph (4).
‘‘(4) CRITERIA FOR STATUTORY APPROVAL.—A
proposal qualifies under this paragraph if all of the
following criteria are met:
‘‘(A) FINANCIAL
CRITERIA.—Both before
and immediately after the proposed transaction:
‘‘(i) the acquiring financial services
holding company is well capitalized;
‘‘(ii) the lead insured depository insti-
tution of such holding company is well cap-
italized;
‘‘(iii) well capitalized insured deposi-
tory institutions control at least 80 percent
of the aggregate total risk-weighted assets
of insured depository institutions controlled
by such holding company; and
‘‘(iv) no insured depository institution
controlled by such holding company is
undercapitalized.
‘‘(B) MANAGERIAL CRITERIA.—
‘‘(i) WELL MANAGED.—At the time of
the transaction, the acquiring financial
services holding company, its lead insured
124
HR 1062 IH
depository institution, and insured deposi-
tory institutions that control at least 80
percent of the aggregate total risk-weight-
ed assets of insured depository institutions
controlled by such holding company are
well managed;
‘‘(ii) LIMITATION
ON
POORLY
MAN-
AGED INSTITUTIONS.—
‘‘(I) IN
GENERAL.—No insured
depository institution controlled by
the acquiring financial services hold-
ing company has received one of the
lowest two composite ratings at the
later of the institution’s most recent
examination or subsequent review;
‘‘(II) RECENTLY
ACQUIRED
IN-
STITUTIONS.—Insured depository in-
stitutions acquired by the financial
services holding company within the
previous 12 months may be excluded
for purposes of subclause (I) if—
‘‘(aa) the financial services
holding company has developed a
plan acceptable to the appro-
priate Federal banking agency
125
HR 1062 IH
(as defined in section 3 of the
Federal Deposit Insurance Act)
for the institution to restore the
capital and management of the
institution; and
‘‘(bb) all such insured depos-
itory institutions represent, in
the aggregate, less than 25 per-
cent of the aggregate total risk-
weighted assets of all insured de-
pository institutions controlled by
the financial services holding
company.
‘‘(C) ACTIVITIES PERMISSIBLE.—Following
consummation of the proposal, the financial
services holding company engages directly or
through a subsidiary solely in:
‘‘(i) activities that are permissible
under subsection (c)(8), as determined by
the Board by regulation, order, or advisory
opinion thereunder, subject to all of the re-
strictions, terms and conditions of such
subsection and such regulation, order, or
advisory opinion; and
126
HR 1062 IH
‘‘(ii) such other activities as are other-
wise permissible under another subsection
of this Act, subject to the restrictions,
terms and conditions, including any prior
notice or approval requirements, provided
in this Act.
‘‘(D) SIZE OF ACQUISITION.—
‘‘(i) ASSET SIZE.—The book value of
the total risk-weighted assets acquired does
not exceed 10 percent of the consolidated
total risk-weighted assets of the acquiring
financial services holding company.
‘‘(ii) 
CONSIDERATION.—The 
gross
consideration to be paid for the securities
or assets does not exceed 15 percent of the
consolidated Tier 1 capital of the acquiring
financial services holding company.
‘‘(E) NOTICE
NOT
OTHERWISE
WAR-
RANTED.—For proposals described in para-
graph (5)(B), the Board has not, prior to the
conclusion of the period provided in paragraph
(5)(B), advised the financial services holding
company that a notice under paragraph (1) is
required.
‘‘(5) NOTIFICATION.—
128
HR 1062 IH
‘‘(6) ADJUSTMENT OF AMOUNTS.—The Board
may by regulation adjust the amounts and the man-
ner in which the percentage of insured depository in-
stitutions is calculated under paragraph (4)(B)(i),
paragraph (4)(B)(ii)(II)(bb), and paragraph (4)(D)
if the Board determines that any such adjustment is
consistent with safety and soundness and the pur-
poses of this Act.
‘‘(7) EXPEDITED PROCEDURE FOR NEW ACTIVI-
TIES.—
‘‘(A) EXPEDITED
PRE-ACQUISITION
RE-
VIEW.—A financial services holding company
may, at the end of the period provided in para-
graph (5)(B) and subject to a final ruling as
provided in subparagraph (B), acquire a com-
pany engaged in activities that the Board has
not previously determined to be financial in na-
ture if—
‘‘(i) the proposal qualifies under all of
the criteria in paragraph (4) except para-
graph (4)(C);
‘‘(ii) the financial services holding
company provides the notification required
under paragraph (5)(B), and includes in
that notification an explanation of the
129
HR 1062 IH
facts and circumstances that provide a rea-
sonable basis for concluding that the pro-
posed activities are financial in nature or
incidental to such financial activities; and
‘‘(iii) prior to the end of the notifica-
tion period in paragraph (5)(B), the Board
has not required a notice under paragraph
(1) or advised the financial services hold-
ing company that the company has failed
to provide a reasonable basis for conclud-
ing that the proposed activities are finan-
cial in nature or incidental to such finan-
cial activities. A decision by the Board not
to require a notice under paragraph (1)
during this period does not prejudice the
Board’s decision under subparagraphs (B)
and (C).
‘‘(B) POST-ACQUISITION REVIEW.—
‘‘(i) NOTICE
PROCEDURE.—A finan-
cial services holding company that is per-
mitted to make an acquisition under this
paragraph must, within 30 days following
consummation of the acquisition, file a no-
tice with the Board in accordance with
paragraph (1).
130
HR 1062 IH
‘‘(ii) LIMITED REVIEW.—The Board’s
review of a post-consummation notice re-
quired under this subparagraph shall be
limited to determining whether the pro-
posed activities are permissible under sub-
section (c)(8).
‘‘(C) CONDITIONAL
ACTION.—Nothing in
this paragraph shall limit in any way the au-
thority of the Board under this section to im-
pose conditions on the conduct of any activity
or the ownership of any company.
‘‘(D) DIVESTITURE OF IMPERMISSIBLE AC-
TIVITIES.—If the Board finds that any activity
proposed is not permissible under subsection
(c)(8), the financial services holding company
must, within two years of the date of such de-
termination, terminate the activity or divest the
company acquired in reliance on this para-
graph.’’.
SEC. 152. CONFORMING AMENDMENTS TO THE BANK HOLD-
ING COMPANY ACT.
(a) ELIMINATION OF OBSOLETE PROVISIONS.—The
Bank Holding Company Act of 1956 (12 U.S.C. 1841
through 1849) is amended:
(1) in section 4(a)(2)—
131
HR 1062 IH
(A) by striking the phrase beginning ‘‘or in
the case of a company’’ and ending ‘‘after De-
cember 31, 1980,’’; and
(B) by striking the sentence beginning
‘‘Notwithstanding any other provision’’;
(2) in section 4(b), by striking ‘‘After two years
from May 9, 1956, no’’ and inserting in its place
‘‘No’’; and
(3) in section 5—
(A) by striking ‘‘Within one hundred and
eighty days after May 9, 1956, or within’’ and
inserting in its place ‘‘Within’’; and
(B) by striking ‘‘whichever is later,’’.
(b) CONFORMING AMENDMENTS.—The Bank Hold-
ing Company Act of 1956 (12 U.S.C. 1841 through 1849)
is amended:
(1) in section 3(c)(4), by striking ‘‘one-bank
holding company’’ each place it appears and insert-
ing in its place ‘‘one-bank financial services holding
company’’;
(2) in section 3(f)(5), by striking ‘‘bank holding
company’’ the first and second time it appears and
inserting in each place ‘‘financial services holding
company’’;
132
HR 1062 IH
(3) in section 4(i)(3)(A), by striking ‘‘is ac-
quired’’ and inserting in its place ‘‘was acquired’’;
(4) by striking ‘‘bank holding companies’’ each
place it appears in the following sections and insert-
ing in each place ‘‘financial services holding compa-
nies’’—
(A) Section 3(d);
(B) Section 3(f);
(C) Section 4(f); and
(D) Section 7(a);
(5) by striking ‘‘bank holding company’s’’ each
place it appears in the following sections and insert-
ing in each place ‘‘financial services holding compa-
ny’s’’—
(A) Section 2(d); and
(B) Section 4(c)(14);
(6) by striking ‘‘bank holding company’’ each
place it appears in the following sections and insert-
ing in each place ‘‘financial services holding com-
pany’’—
(A) Section 2(a);
(B) Section 2(d);
(C) Section 2(e);
(D) Section 2(g);
(E) Section 2(h);
133
HR 1062 IH
(F) Section 2(o);
(G) Section 3(a);
(H) Section 3(b);
(I) Section 3(d);
(J) Section 3(f)(1);
(K) Section 3(f)(2);
(L) Section 3(f)(3);
(M) Section 4(a);
(N) Section 4(c)(ii);
(O) Section 4(c)(1);
(P) Section 4(c)(2);
(Q) Section 4(c)(3);
(R) Section 4(c)(7);
(S) Section 4(c)(8);
(T) Section 4(c)(10);
(U) Section 4(c)(11);
(V) Section 4(c)(12)(A);
(W) Section 4(c)(14);
(X) Section 4(d);
(Y) Section 4(e);
(Z) Section 4(f)(4);
(AA) Section 4(f)(5);
(BB) Section 4(f)(9);
(CC) Section 4(g);
(DD) Section 4(h);
134
HR 1062 IH
(EE) Section 4(i)(1);
(FF) Section 4(i)(2);
(GG) Section 4(j);
(HH) Section 5;
(II) Section 7(b);
(JJ) Section 8; and
(KK) Section 11;
(7) in section 4(f)(1), by striking ‘‘bank holding
company’’ the second place it appears and inserting
in its place ‘‘financial services holding company’’;
and
(8) in section 4(i)(3), by striking ‘‘is acquired’’
and inserting in its place ‘‘was acquired’’.
(c) TREATMENT OF EXISTING BANK HOLDING COM-
PANIES.—Section 2(a)(6) of the Bank Holding Company
Act of 1956 (12 U.S.C. 1841(a)(6)) is amended by insert-
ing at the end the following: ‘‘Any company that was a
bank holding company on the day before the date of enact-
ment of the Financial Services Competitiveness Act of
1995 shall, for purposes of this chapter, be deemed to have
been a financial services holding company from the date
on which the company became a bank holding company.’’
(d) SHORT TITLE.—Section 1 of the Bank Holding
Company Act of 1956 shall be amended to read as follows:
135
HR 1062 IH
‘‘This Act may be cited as the ‘Financial Services
Holding Company Act of 1995’, and any reference in any
Federal or State law to a provision of the Bank Holding
Company Act of 1956 shall be deemed to be a reference
to the corresponding provision of the Financial Services
Holding Company Act of 1995.’’.
(e) OTHER REFERENCES.—Any reference in Federal
law to ‘‘bank holding company’’ or ‘‘bank holding compa-
nies’’ as those terms were defined under the Bank Holding
Company Act of 1956 prior to the enactment of this Act
shall be deemed to include a reference to ‘‘financial serv-
ices holding company’’ and ‘‘financial services holding
companies’’, respectively, as those terms are defined under
the Financial Services Holding Company Act of 1995.
SEC. 153. CONFORMING AMENDMENTS TO THE BANK HOLD-
ING COMPANY ACT AMENDMENTS OF 1970.
Section 106 of the Bank Holding Company Act
Amendments of 1970 (12 U.S.C. 1971 through 1978) is
amended by striking ‘‘bank holding company’’ each place
it appears and inserting in its place ‘‘financial services
holding company’’.
SEC. 154. ELIMINATION OF DUPLICATIVE APPLICATIONS.
Section 18(c) of the Federal Deposit Insurance Act
(12 U.S.C. 1828(c)) is amended by adding at the end the
following new paragraph:
136
HR 1062 IH
‘‘(12) The provisions of this subsection do not
apply to any merger, consolidation, acquisition of as-
sets or assumption of liabilities involving only in-
sured depository institutions that are subsidiaries of
the same depository institution holding company if—
‘‘(A) the responsible agency would not be
prohibited from approving the transaction
under section 44 of this Act;
‘‘(B) the acquiring, assuming, or resulting
institution complies with all applicable provi-
sions of section 44 as if the merger, consolida-
tion or acquisition was approved under this sub-
section; and
‘‘(C) the acquiring, assuming, or resulting
institution provides written notification of the
transaction to the appropriate Federal banking
agency for the institution at least 10 days prior
to consummation of the transaction.’’.
Æ
HR 1062 IH——2
HR 1062 IH——3
HR 1062 IH——4
HR 1062 IH——5
HR 1062 IH——6
HR 1062 IH——7