of paying the principal of those securities or interest
or dividends on those securities.
‘‘(2) EXCEPTIONS
FOR
CERTAIN
EXTENSIONS
OF CREDIT.—Paragraph (1) shall not apply to an
extension of credit for a documented purpose (other
than paying principal, interest, or dividends) if the
timing, maturity, and other terms of the credit,
taken as a whole, are substantially different from
those of the underwritten securities.
‘‘(3) EXCEPTIONS FOR BANK ELIGIBLE SECURI-
TIES.—Paragraph (1) shall not apply with respect to
any security expressly authorized by section 5136 of
the Revised Statutes of the United States as permis-
sible for a national bank to underwrite or deal in.
‘‘(4) APPLICATION TO WELL CAPITALIZED DE-
POSITORY INSTITUTIONS.—
‘‘(A) IN
GENERAL.—Paragraph (1) shall
not apply with respect to well capitalized depos-
itory institutions if—
‘‘(i) the depository institution has
adopted appropriate limits on exposure on
a consolidated basis to any single customer
whose securities are underwritten by the
securities affiliate; and
‘‘(ii) the depository institution has
adopted appropriate procedures, including
maintenance of necessary documentary
records, to assure that any extension of
credit by the depository institution to an
issuer for the purpose of paying the prin-
cipal, interest or dividends on securities
underwritten by the securities affiliate is
on an arm’s length basis.
‘‘(B) ARM’S
LENGTH
TRANSACTION
DE-
SCRIBED.—An extension of credit may be con-
sidered to have been made on an arm’s length
basis if the terms and conditions are substan-
tially the same as those prevailing at the time
for comparable transactions with issuers whose
securities are not underwritten by the securities
affiliate.
‘‘(C) COMPLIANCE
WITH
SUBPARAGRAPH
(A).—The Board may require, by regulation or
order, compliance with paragraph (1) by well
capitalized depository institutions exempt under
this paragraph in order to achieve any purpose
specified in subsection (l).
‘‘(e) COMMON DIRECTORS AND SENIOR EXECUTIVE
OFFICERS.—
‘‘(1) IN GENERAL.—The Board shall, by regula-
tion or order, prescribe the circumstances under
which directors and senior executive officers of a se-
curities affiliate may serve at the same time as di-
rectors or senior executive officers of any affiliated
depository institutions.
‘‘(2) STANDARDS.—The Board, in issuing any
regulation or order pursuant to paragraph (1), shall
consider appropriate factors including—
‘‘(A) any burdens imposed by restrictions
on director and senior executive officer inter-
locks;
‘‘(B) the safety and soundness of deposi-
tory institutions and securities affiliates;
‘‘(C) unfair competition in securities activi-
ties;
‘‘(D) improper exchange of customer infor-
mation; or
‘‘(E) harm to customers of securities affili-
ates or depository institutions that could rea-
sonably result from director and senior officer
interlocks.
‘‘(3) EXCEPTION FOR SMALL FINANCIAL SERV-
ICES HOLDING COMPANIES.—
‘‘(A) IN GENERAL.—Notwithstanding para-
graph (1), a director or senior executive officer
of a securities affiliate may serve at the same
time as a director or senior executive officer of
an affiliated depository institution if that insti-
tution and all affiliated depository institutions
have, in the aggregate, total assets of not more
than $500,000,000.
‘‘(B) INFLATION ADJUSTMENT.—The dol-
lar limitation contained in subparagraph (A)
shall be adjusted annually after December 31,
1995, by the annual percentage increase in the
Consumer Price Index for Urban Wage Earners
and Clerical Workers published by the Bureau
of Labor Statistics.
‘‘(4) EXCEPTION FOR CERTAIN REGULATION K
AFFILIATES.—Paragraph (1) shall not prohibit a di-
rector or senior executive officer of a securities affili-
ate from serving at the same time as a director or
senior executive officer of a depository institution
which—
‘‘(A) is organized under section 25 or 25A
of the Federal Reserve Act;
‘‘(B) is an affiliate of such securities affili-
ate; and
‘‘(C) principally engages in business out-
side the United States.
‘‘(f) DISCLOSURE REQUIRED BY SECURITIES AFFILI-
ATE.—
‘‘(1) IN GENERAL.—At the time a securities ac-
count is opened, a securities affiliate shall conspicu-
ously disclose in writing to each of its customers
that—
‘‘(A) securities sold, offered, or rec-
ommended by the securities affiliate—
‘‘(i) are not deposits;
‘‘(ii) are not insured by the Federal
Deposit Insurance Corporation;
‘‘(iii) are not guaranteed by an affili-
ated insured depository institution;
‘‘(iv) are not otherwise an obligation
of an insured depository institution (unless
such is the case); and
‘‘(v) with regard to any product that
includes any investment component, are
subject to investment risks including pos-
sible loss of principal invested;
‘‘(B) the securities affiliate is not an in-
sured depository institution, and is a corpora-
tion separate from any insured depository insti-
tution; and
‘‘(C) the securities affiliate may be under-
writing or dealing in the securities being sold,
offered or recommended, and if so, would have
a financial interest in the transaction.
‘‘(2) FORM OF DISCLOSURE.—The disclosures
required by paragraph (1) shall be made in clear
and concise language that—
‘‘(A) is readily comprehensible to cus-
tomers of the securities affiliate, and
‘‘(B) is designed to promote customer un-
derstanding that uninsured investment products
are not deposits insured by the Federal Deposit
Insurance Corporation.
‘‘(3) BOARD
AUTHORITY.—Subject to para-
graph (2), the Board may, in the Board’s discretion,
prescribe disclosures in addition to the disclosures
prescribed by paragraph (1).
‘‘(g) DISCLOSURE REQUIRED BY INSURED DEPOSI-
TORY INSTITUTIONS.—
‘‘(1) IN GENERAL.—No insured depository in-
stitution shall knowingly express any opinion on the
value of, or the advisability of purchasing or selling,
nonbanking products (as defined by the Board) sold
by the insured depository institution or any affiliate
of an insured depository institution unless the in-
sured depository institution conspicuously discloses
in writing to the customer that—
‘‘(A) the insured depository institution or
affiliate (whichever is applicable) is selling the
nonbanking product and has a financial interest
in the transaction (if such is the case);
‘‘(B) the nonbanking products—
‘‘(i) are not deposits;
‘‘(ii) are not insured by the Federal
Deposit Insurance Corporation;
‘‘(iii) are not guaranteed by the insti-
tution or any other affiliated insured de-
pository institution;
‘‘(iv) are not otherwise an obligation
of an insured depository institution (unless
such is the case); and
‘‘(v) with regard to any nonbanking
product that includes any investment com-
ponent, are subject to investment risks in-
cluding possible loss of principal invested;
and
‘‘(C) an affiliate, if involved, is not an in-
sured depository institution (unless such is the
case), and is a corporation separate from any
insured depository institution (unless such is
not the case).
‘‘(2) FORM OF DISCLOSURE.—The disclosures
required by paragraph (1) shall be made in clear
and concise language that—
‘‘(A) is readily comprehensible to cus-
tomers of the insured depository institution,
and
‘‘(B) is designed to promote customer un-
derstanding that nonbanking products are not
deposits insured by the Federal Deposit Insur-
ance Corporation.
‘‘(3) CUSTOMER ACKNOWLEDGEMENT OF DIS-
CLOSURE.—
‘‘(A) IN GENERAL.—Whenever any insured
depository institution or securities affiliate
opens an account for the purpose of selling a
nondeposit investment product or products to a
customer, such insured depository institution or
securities affiliate as the case may be, shall ob-
tain a 1-time acknowledgment of receipt by the
customer of such disclosures, including the date
of receipt with the customer’s name, address,
and the account number.
‘‘(B) SPECIAL RULE FOR ACCREDITED IN-
VESTORS.—In the case of any customer who is,
or meets the requirements for, an accredited in-
vestor (as defined in section 2(15) of the Secu-
rities Act of 1933), the acknowledgment of the
receipt of any disclosure described in subpara-
graph (A) may be obtained by the insured de-
pository institution or securities affiliate at the
time any account is opened by such customer.
‘‘(4) BOARD
AUTHORITY.—Subject to para-
graph (2), the Board, after consultation with the
other appropriate Federal banking agencies, may
prescribe disclosures in addition to the disclosures
required by paragraph (1).
‘‘(h) IMPROPER
DISCLOSURE
OF
CONFIDENTIAL
CUSTOMER INFORMATION PROHIBITED.—
‘‘(1) IN
GENERAL.—No depository institution
subsidiary of a financial services holding company
shall disclose to any affiliate of such institution
which is not a depository institution, and no affiliate
of such company which is not a depository institu-
tion shall disclose to any other affiliate which is a
depository institution or a subsidiary of such an in-
stitution, any nonpublic customer information (in-
cluding an evaluation of the creditworthiness of an
issuer or other customer of that institution or secu-
rities affiliate), unless it is clearly and conspicuously
disclosed that such information may be commu-
nicated among such persons and the customer is
given the opportunity, before the time that the infor-
mation is initially communicated, to direct that such
information not be communicated among such per-
sons.
‘‘(2) DEFINITION.—For purposes of paragraph
(1), the term ‘nonpublic customer information’ does
not include—
‘‘(A) customers’ names and addresses (un-
less a customer has specified otherwise);
‘‘(B) information that could be obtained
from unaffiliated credit bureaus or similar com-
panies in the ordinary course of business; or
‘‘(C) information that is customarily pro-
vided to unaffiliated credit bureaus or similar
companies in the ordinary course of business
by—
‘‘(i) depository institutions not affili-
ated with securities affiliates; or
‘‘(ii) brokers and dealers not affiliated
with depository institutions.
‘‘(i) UNDERWRITING
SECURITIES
REPRESENTING
OBLIGATIONS
ORIGINATED
BY
AFFILIATE
RE-
STRICTED.—A securities affiliate shall not underwrite se-
curities secured by or representing an interest in mort-
gages or other obligations originated or purchased by an
affiliated depository institution or subsidiary of such an
institution—
‘‘(1) unless those securities—
‘‘(A) are rated by at least 1 unaffiliated,
nationally recognized statistical rating organiza-
tion;
‘‘(B) are issued or guaranteed by the Fed-
eral Home Loan Mortgage Corporation, the
Federal National Mortgage Association, or the
Government National Mortgage Association; or
‘‘(C) represent interests in securities de-
scribed in subparagraph (B); or
‘‘(2) except as permitted by the Board.
‘‘(j) RECIPROCAL ARRANGEMENTS PROHIBITED.—
No financial services holding company and no subsidiary
of a financial services holding company may enter into any
agreement, understanding, or other arrangement under
which—
‘‘(1) 1 financial services holding company (or
subsidiary of that financial services holding com-
pany) agrees to engage in a transaction with, or on
behalf of, another financial services holding company
(or subsidiary of that financial services holding com-
pany), in exchange for
‘‘(2) the agreement of the second financial serv-
ices holding company referred to in paragraph (1)
(or a subsidiary of that financial services holding
company) to engage in any transaction with, or on
behalf of, the first financial services holding com-
pany referred to in such paragraph (or any subsidi-
ary of that financial services holding company), for
the purpose of evading any requirement or restric-
tion of Federal law on transactions between, or for
the benefit of, affiliates of financial services holding
companies.
‘‘(k) SAFEGUARDS APPLY
TO CERTAIN SUBSIDI-
ARIES.—Except as provided in this section—
‘‘(1) SECURITIES AFFILIATE.—No subsidiary of
a securities affiliate may do anything that this sec-
tion prohibits the securities affiliate from doing.
‘‘(2) DEPOSITORY
INSTITUTION.—No subsidi-
ary of a depository institution may do anything that
this subsection prohibits the institution from doing.
‘‘(l) AUTHORITY TO MODIFY
AND IMPOSE ADDI-
TIONAL SAFEGUARDS; INTERPRETIVE AUTHORITY.—
‘‘(1) IN GENERAL.—The Board may, by regula-
tion or order—
‘‘(A) adopt additional limitations, restric-
tions or conditions on relationships or trans-
actions among depository institutions, their af-
filiates, and their customers; and
‘‘(B) make any modification to any limita-
tion, restriction, or condition imposed under
this section on relationships or transactions
among depository institutions, the affiliates of
insured depository institutions, and the cus-
tomers of such institutions or affiliates, includ-
ing modifications in addition to those expressly
provided for in this section.
‘‘(2) STANDARDS.—The Board may not exercise
authority under paragraph (1) unless the Board
finds that such action is consistent with the pur-
poses of this Act, including—
‘‘(A) the avoidance of any significant risk
to the safety and soundness of depository insti-
tutions or the Federal deposit insurance funds;
‘‘(B) the enhancement of the financial sta-
bility of financial services holding companies;
‘‘(C) the prevention of the subsidization of
securities affiliates by depository institutions;
‘‘(D) the avoidance of conflicts of interest
or other abuses; and
‘‘(E) the application of the principle of na-
tional treatment and equality of competitive op-
portunity between securities affiliates owned or
controlled by domestic financial services holding
companies and securities affiliates owned or
controlled by foreign banks operating in the
United States.
‘‘(3) BIENNIAL
REVIEW.—Beginning 2 years
after the date of enactment of the Financial Services
Competitiveness and Regulatory Relief Act of 1995,
the Board shall, on a biennial basis—
‘‘(A) review all restrictions established pur-
suant to paragraph (1) to determine whether
any such restrictions are required any longer to
carry out the purposes of this Act; and
‘‘(B) modify or eliminate any such restric-
tion that the Board determines is no longer re-
quired to carry out the purposes of this Act.
‘‘(m) COMPLIANCE PROGRAMS REQUIRED.—
‘‘(1) IN GENERAL.—Each appropriate Federal
banking agency and the Securities and Exchange
Commission shall establish a program for—
‘‘(A) sharing information, including reports
of examinations, concerning compliance with
subtitle A of title I or subtitle A or B of title
II of the Financial Services Competitiveness
and Regulatory Relief Act of 1995, and the
amendments made by such subtitles, by—
‘‘(i) brokers, dealers, investment ad-
visers, or investment companies that are
registered with the Securities and Ex-
change Commission that are affiliated with
depository institutions, or are separately
identifiable departments or divisions of de-
pository institutions registered as brokers,
dealers, or investment advisers; and
‘‘(ii) depository institutions and their
affiliates;
‘‘(B) enforcing compliance with subtitle A
of title I of the Financial Services Competitive-
ness and Regulatory Relief Act of 1995, and
the amendments made by such subtitle and
paragraphs (4) and (5) of section 3(a) of the
Securities Exchange Act of 1934 by entities
under its supervision; and
‘‘(C) responding to any complaints from
customers about inappropriate cross-marketing
of securities products or inadequate disclosure.
‘‘(2) DATA COLLECTION.—
‘‘(A) IN GENERAL.—The appropriate Fed-
eral banking agencies, after consultation with
and consideration of the views of the Securities
and Exchange Commission, shall (except as oth-
erwise provided by the appropriate Federal
banking agency after such consultation) require
any depository institution that has effected se-
curities transactions pursuant to any exception
enumerated in paragraphs (4) and (5) of sec-
tion 3(a) of the Securities Exchange Act of
1934 to identify the exceptions relied upon and
to submit such information necessary to mon-
itor compliance under such paragraphs.
‘‘(B) COMMISSION
ACCESS.—The appro-
priate Federal banking agency shall make any
information referred to in subparagraph (A)
available to the Securities and Exchange Com-
mission, upon the request of the Commission.
‘‘(C) COMPLIANCE.—In implementing the
provisions of this paragraph, the appropriate
Federal banking agencies shall ensure that any
information requests to depository institutions
take into account the size and activities of the
institutions and do not cause undue reporting
burdens.
‘‘(3) COMMISSION’S
ENFORCEMENT
AUTHOR-
ITY.—Without limiting in any way the authority of
the appropriate Federal banking agencies under this
section, the Securities and Exchange Commission
shall have the authority to enforce any subsection of
this section against a securities affiliate as if such
subsection were a provision of the Securities Ex-
change Act of 1934 to the extent that the subsection
applies with respect to the conduct or activities of
the securities affiliate.
‘‘(4) EXAMINATION REPORTS.—
‘‘(A) IN GENERAL.—The appropriate Fed-
eral banking agencies shall, to the fullest extent
possible, use the reports of examination of any
broker, dealer, investment adviser, or invest-
ment company made by or on behalf of the Se-
curities and Exchange Commission and reports
made by or on behalf of a registered securities
association or national securities exchange, and
shall defer to such examinations for compliance
with the Federal securities laws.
‘‘(B) COMPLIANCE WITH SECTION 11 SAFE-
GUARDS.—The appropriate Federal banking
agencies shall—
‘‘(i) to the fullest extent possible, use
the reports of examination of any securi-
ties affiliate made by the appropriate Fed-
eral banking agency for such affiliate; and
‘‘(ii) defer to such examinations for
compliance with the provisions of this sec-
tion.
‘‘(5) INTERPRETATIONS OF THE FEDERAL SE-
CURITIES LAWS.—The appropriate Federal banking
agencies shall defer to the Securities and Exchange
Commission regarding all interpretations and en-
forcement of the Federal securities laws relating to
the application of the Federal securities laws to the
activities and conduct of brokers, dealers, investment
advisers, and investment companies.
‘‘(6) NOTICE OF CERTAIN ACTIONS BY SEC.—
The Securities and Exchange Commission shall give
notice to the appropriate Federal banking agency
upon the commencement of any disciplinary or law
enforcement proceedings by the Commission and a
copy of any order entered by the Commission
against—
‘‘(A) any broker, dealer, or investment ad-
viser that—
‘‘(i) is registered with the Securities
and Exchange Commission; and
‘‘(ii) is affiliated with, or is a sepa-
rately identifiable department or division
of, a depository institution;
‘‘(B) any investment company registered
with the Securities and Exchange Commission
that is an affiliate of or is advised by an invest-
ment adviser affiliated with a depository institu-
tion or by a separately identifiable department
or division of a depository institution that is a
registered investment adviser; or
‘‘(C) any financial services holding com-
pany, depository institution, or subsidiary of
such company or institution, if the proposed ac-
tion relates to subtitle A of title I or subtitle A
or B of title II of the Financial Services Com-
petitiveness and Regulatory Relief Act of 1995.
‘‘(7) NOTICE OF CERTAIN ACTIONS BY APPRO-
PRIATE
FEDERAL
BANKING
AGENCIES.—Upon the
commencement of any disciplinary or law enforce-
ment proceedings to enforce the provisions of sub-
title A of title I of the Financial Services Competi-
tiveness and Regulatory Relief Act of 1995, or any
amendment made by such subtitle, by an appro-
priate Federal banking agency against any broker,
dealer, investment adviser, or investment company
that is registered under the Federal securities laws
and is affiliated with a depository institution or is a
separately identifiable department or division of a
depository institution, the appropriate Federal bank-
ing agency shall give notice to the Securities and
Exchange Commission of the proposed action.
‘‘(8) IMMEDIATE
ACTION
ALLOWED
BEFORE
NOTICE.—The notice required under paragraph (6)
or (7) may be provided promptly after action by the
Securities and Exchange Commission or the appro-
priate Federal banking agency, if—
‘‘(A) the Commission determines that the
protection of investors requires immediate ac-
tion by the Commission and prior notice under
paragraph (6) is not practical under the cir-
cumstances; or
‘‘(B) the appropriate Federal banking
agency determines that concerns for the safety
and soundness of a depository institution or its
affiliate require immediate action by the agency
and prior notice under paragraph (7) is not
practical under the circumstances.
‘‘(9) COORDINATED ENFORCEMENT ACTIONS.—
The Securities and Exchange Commission and the
appropriate Federal banking agencies shall, to the
extent practicable, coordinate supervisory actions
based on applicable law where the actions are based
on the same or related events or practices.
‘‘(10) INVESTMENT
COMPANIES
NOT
AFFILI-
ATED WITH A DEPOSITORY INSTITUTION.—The ap-
propriate Federal banking agency shall not have au-
thority under this Act or any other provision of law
to inspect or examine any investment company reg-
istered under the Federal securities laws that is
not—
‘‘(A) affiliated with a depository institu-
tion; or
‘‘(B) advised by an investment adviser af-
filiated with a depository institution or by a
separately identifiable department or division of
a depository institution that is a registered in-
vestment adviser.
‘‘(11) USE
OF
EXAMINATION
REPORTS.—The
appropriate Federal banking agencies shall—
‘‘(A) to the fullest extent possible, use the
reports of examination of any investment ad-
viser or investment company made by or on be-
half of the Securities and Exchange Commis-
sion; and
‘‘(B) defer to such examinations for com-
pliance with the Federal securities laws.
‘‘(12) DEFINITION.—For purposes of this sub-
section, the term ‘Federal securities laws’ means the
provisions of Federal law governing securities activi-
ties that are within the jurisdiction of the Securities
and Exchange Commission under the Securities Act
of 1933, the Securities Exchange Act of 1934, the
Investment Company Act of 1940, the Investment
Advisers Act of 1940, and the Trust Indenture Act
of 1939.
‘‘(n) FOREIGN BANK FIREWALLS.—
‘‘(1) IN GENERAL.—A foreign bank that oper-
ates a branch, agency, or commercial lending com-
pany in the United States and accepts no deposits
in the United States, either directly or through an
affiliate, that are insured under the Federal Deposit
Insurance Act, and any affiliate of such foreign
bank, shall not be subject to the restrictions of any
subsection of this section, other than subsections (l)
and (m), if the conditions described in paragraph (2)
are met.
‘‘(2) CONDITIONS FOR APPLICABILITY OF EX-
CEPTION.—The conditions of this paragraph have
been met with respect to any foreign bank referred
to in paragraph (1) if—
‘‘(A) transactions between a securities af-
filiate of such foreign bank and any branch,
agency or commercial lending company oper-
ated in the United States by such foreign bank
comply with the provisions of sections 23A and
23B of the Federal Reserve Act as if the for-
eign bank were a member bank; and
‘‘(B) such foreign bank has received a de-
termination from the Board that the bank
meets capital standards comparable to those es-
tablished by the Board for well capitalized fi-
nancial services holding companies, giving due
regard to the principle of national treatment
and equality of competitive opportunity, subject
to any changes the Board may adopt with re-
spect to such standards.
‘‘(3) APPLICABILITY
OF
SUBSECTION (l) TO
FOREIGN BANKS.—Any limitation, restriction, condi-
tion, or modification adopted by the Board under
subsection (l) may be applied by the Board to—
‘‘(A) a foreign bank described in para-
graph (1) (and any company that owns or con-
trols such foreign bank);
‘‘(B) any branch, agency or commercial
lending company operated by such foreign bank
in the United States; or
‘‘(C) any other affiliate of such foreign
bank in the United States,
if such limitation, restriction, condition, or modifica-
tion is applied by regulation or order of general ap-
plicability under section 12(a)(2)(B)(ii) to wholesale
financial institutions and securities affiliates con-
trolled by investment bank holding companies, sub-
ject to such modifications, conditions, or exemptions
as the Board deems appropriate, giving due regard
to the principle of national treatment and equality of
competitive opportunity.’’.
(b) AMENDMENT TO THE FEDERAL RESERVE ACT.—
Section 23B(b)(1)(B) of the Federal Reserve Act (12
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’’.
(c) EXEMPTION FROM SECTION 305(b) OF THE FED-
ERAL POWER ACT.—Section 305(b) of the Federal Power
Act shall not apply to any person now holding, or propos-
ing to hold, at the same time the position of officer or
director of a public utility and the position of officer or
director of a bank, trust company, banking association,
or firm permitted by section 10 of the Financial Services
Holding Company Act of 1995 (as amended by section
103(a) of this Act) to underwrite or participate in the
marketing of securities (including commercial paper) of a
public utility, if that bank, trust company, banking asso-
ciation, or firm does not underwrite or participate in the
marketing of securities of the public utility for which the
person serves, or proposes to serve, as an officer or direc-
tor.
(d) 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—
(1) by striking ‘‘this title’’ and inserting ‘‘law’’;
and
(2) by inserting ‘‘, examination reports,’’ after
‘‘financial records’’.
(e) REGULATIONS TO PRESERVE SEPARATION OF
BANKING AND COMMERCE.—Section 5(b) of the Bank
Holding Company Act of 1956 (12 U.S.C. 1844(b)) is
amended by inserting ‘‘, including the protection of deposi-
tory institutions and the separation of banking and com-
merce,’’ after ‘‘purposes of this Act’’.
SEC. 105. OWNERSHIP OF SHARES OF CERTAIN COMPANIES
BY FINANCIAL SERVICES HOLDING COMPA-
NIES.
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:
‘‘(k) OWNERSHIP OF SHARES OF CERTAIN COMPA-
NIES BY FINANCIAL SERVICES HOLDING COMPANIES.—
‘‘(1) 
NONCONFORMING
FINANCIAL
COMPA-
NIES.—Notwithstanding section 4(a), a financial
services holding company may retain direct or indi-
rect ownership or control of voting shares of any
company that—
‘‘(A) engages solely in activities that the
Board finds to be financial but which the Board
has not authorized under section 4(c)(8) (and
such other financial activities that the Board
has authorized) if—
‘‘(i) the financial services holding
company acquired the shares of a company
engaged in such activities or of each com-
pany to which the company engaged in
such activities is a successor more than 2
years before the date that such financial
services holding company becomes a finan-
cial services holding company;
‘‘(ii) the aggregate investment by the
financial services holding company in
shares of all such companies does not ex-
ceed 10 percent of the total consolidated
capital and surplus of the financial services
holding company as of the date that the
holding company becomes a financial serv-
ices holding company or as of the date of
any additional investment by the financial
services holding company in such shares;
‘‘(iii) more than 50 percent of the ag-
gregate gross revenues of the financial
services holding company and the subsidi-
aries of such holding company for each of
the 2 calendar years before the date the
holding company becomes a financial serv-
ices holding company were attributable to
securities activities described in subpara-
graphs (A) and (B) of section 10(a)(1), as
determined without taking into account
any activities (other than securities activi-
ties) in which financial services holding
companies were permitted to engage before
the date of the enactment of the Financial
Services Competitiveness and Regulatory
Relief Act of 1995; and
‘‘(iv) the company engaged in such ac-
tivities continues to engage only in activi-
ties that such company conducted as of the
date that such financial services holding
company becomes a financial services hold-
ing company (or other activities permitted
under section 4(c)(8) or section 10); or
‘‘(B) engages in activities not authorized
under section 4 if—
‘‘(i) the financial services holding
company held the shares of any company
engaged in such activities as of the date of
the enactment of the Financial Services
Competitiveness and Regulatory Relief Act
of 1995 and the financial services holding
company was then exempt from the provi-
sions of section 4 pursuant to section 4(d)
as of such date;
‘‘(ii) the company engaged in such ac-
tivities continues to engage only in the
same general lines of business and related
activities that such company conducted as
of the date of the enactment of the Finan-
cial Services Competitiveness and Regu-
latory Relief Act of 1995 (or other activi-
ties permitted under section 4(c) or section
10); and
‘‘(iii) 80 percent of the aggregate
gross revenues of the financial services
holding company and the subsidiaries of
such holding company as of the date of the
enactment of the Financial Services Com-
petitiveness and Regulatory Relief Act of
1995 was attributable to—
‘‘(I) ownership and operation of
depository institutions;
‘‘(II) activities that are financial
in nature as determined by the Board
pursuant to section 4(c)(8);
‘‘(III) activities permissible under
section 10; and
‘‘(IV) such other activities that
would be permissible generally for the
holding company as a financial serv-
ices holding company (other than as
an investment bank holding company).
‘‘(2) NONFINANCIAL COMPANIES.—
‘‘(A) IN GENERAL.—Notwithstanding sec-
tion 4(a), a financial services holding company
described in paragraph (1)(A)(iii) may, during
the 5-year period beginning on the date that
the company becomes a financial services hold-
ing company, retain direct or indirect ownership
or control of voting shares of any company that
the financial services holding company owns or
controls on the date such holding company be-
comes 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—
‘‘(i) determines that such extension is
necessary to avert substantial loss to the
financial services holding company; and
‘‘(ii) finds that the financial services
holding company has made good faith ef-
forts to divest such shares.
‘‘(C) NO
EXPANSION
OF
NONFINANCIAL
COMPANIES
PRIOR
TO
DIVESTITURE.—Unless
an acquisition or activity is permitted in accord-
ance with section 3 or 4(c)—
‘‘(i) no financial services holding com-
pany, and no company whose shares are
owned or controlled by a financial services
holding company in accordance with this
paragraph, may acquire any interest in or
assets of any other company, and
‘‘(ii) no company whose shares are
owned or controlled by a financial services
holding company pursuant to this para-
graph may engage directly or indirectly in
any activity that the company did not con-
duct on the day before the financial serv-
ices holding company registered as a finan-
cial services holding company.
‘‘(3) RESTRICTIONS ON JOINT MARKETING.—
No 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 such depository institu-
tion’s or subsidiary’s 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, in a case involving an affiliate held under
this subsection, the product or service is permissible
for financial services holding companies to provide
under section 4(c)(8) or 10.
‘‘(4) DEPOSITORY INSTITUTION DEFINED.—For
purposes of paragraph (3), the term ‘depository in-
stitution’ includes a foreign bank.’’.
SEC. 106. PROVISIONS APPLICABLE TO LIMITED PURPOSE
BANKS.
(a) EXCEPTION TO RESTRICTION ON ASSET GROWTH
OF NONBANK BANKS.—
(1) IN GENERAL.—Section 4(f)(3) of the Bank
Holding 
Company 
Act 
of 
1956 
(12 
U.S.C.
1843(f)(3)) is amended by adding at the end the fol-
lowing new subparagraph:
‘‘(D) EXCEPTION
TO
RESTRICTION
ON
ASSET
GROWTH, 
ACTIVITIES, 
AND
CERTAIN
CROSS-MARKETING RESTRICTIONS.—
‘‘(i) QUALIFICATION FOR EXCEPTION
FROM
GROWTH
RESTRICTION.—A bank
controlled by a company described in para-
graph (1) shall not be subject to the limi-
tation contained in subparagraph (B)(iv) if
the company meets the requirements of
this subparagraph and the requirements of
paragraph (14).
‘‘(ii) QUALIFICATION FOR EXCEPTION
FROM ACTIVITIES RESTRICTION.—Notwith-
standing subparagraph (B)(i), a bank con-
trolled by a company described in para-
graph (1) that meets the requirements of
clause (i) may engage in an activity au-
thorized under applicable law (other than
an activity that would have resulted in the
institution being a bank for purposes of
this Act, as in effect on the day before the
date of the enactment of the Competitive
Equality Banking Act of 1987, based on
the activities each bank conducted on
March 5, 1987, as reported to the Board)
if such bank, at least 60 days before com-
mencing such activity, has notified the
Board of the bank’s intention to commence
such activity and either—
‘‘(I) the Board has notified such
bank that the Board will not dis-
approve the proposed activity as un-
safe or unsound; or
‘‘(II) the Board has not, within
60 days after receiving such notice,
disapproved the proposal on the basis
of such criteria.
‘‘(iii) QUALIFICATION FOR EXCEPTION
FROM
CROSS-MARKETING
RESTRICTION.—
Notwithstanding subparagraph (B)(ii), a
bank controlled by a company described in
paragraph (1) that meets the requirements
of clause (i) may offer or market products
or services of an affiliate or permit the
bank’s products or services to be offered or
marketed in connection with products or
services of an affiliate if such products or
services are offered or marketed only to
the extent permissible for banks or finan-
cial services holding companies to provide
by law, regulation, or order under para-
graph (8) or (15) of subsection (c).
‘‘(iv) EXCEPTION FROM DIVESTITURE
REQUIREMENT FOR BANKS RESTORED TO
WELL CAPITALIZED LEVEL.—If any bank
controlled by a company that meets the re-
quirements of clause (i) ceases to be well
capitalized, the company shall divest con-
trol of such bank in accordance with para-
graph (4) unless—
‘‘(I) within 12 months after the
date the bank ceases to be well cap-
italized, the capital of the bank is re-
stored to the well capitalized level;
and
‘‘(II) after the end of such 12-
month period, the bank remains well
capitalized, subject to the capital res-
toration requirements in subclause (I).
‘‘(v) ACTION
REQUIRED
IF
BANK
CEASES
TO
BE
ADEQUATELY
CAPITAL-
IZED.—If any bank controlled by a com-
pany that meets the requirements of clause
(i) ceases to be adequately capitalized, the
company shall, within 30 days after the
date as of which the bank ceases to be ade-
quately capitalized—
‘‘(I) execute an agreement with
the Board to divest control of such
bank in accordance with paragraph
(4); or
‘‘(II) restore the capital of the
bank to at least the adequately cap-
italized level.’’.
(2) QUALIFICATIONS
FOR
COMPANIES
UNDER
PARAGRAPH (3)(D).—Section 4(f) of the Bank Hold-
ing Company Act of 1956 (12 U.S.C. 1843(f)) is
amended by adding at the end the following new
paragraph:
‘‘(14) QUALIFICATIONS FOR COMPANIES UNDER
PARAGRAPH (3)(D).—A company meets the require-
ments of paragraph (3)(D)(i) if—
‘‘(A) the company (based on consolidated
revenues) engages in activities that are financial
(including activities not authorized under sub-
section (c)(8)) and predominantly in—
‘‘(i) banking;
‘‘(ii) activities that the Board has de-
termined under subsection (c)(8) to be fi-
nancial in nature or incidental to such fi-
nancial activities;