230 
persons for the personal, household, or 
business purposes of such unaffiliated per-
sons, unless the Board makes a finding 
that such exemption— 
‘‘(I) is not consistent with the 
purposes of section 23A and section 
23B of the Federal Reserve Act; 
‘‘(II) would threaten the safety 
and soundness of the section 6 hold-
ing company, or any insured deposi-
tory institution or other subsidiary of 
the section 6 holding company; 
‘‘(III) would increase systemic 
risk or threaten the stability of the 
overall financial system; 
‘‘(IV) would not, as applied to 
the activities that are the subject of 
the rule, order or request result in 
substantially lessening competition, or 
to tend to create a monopoly, or which 
in any other manner would be in re-
straint of trade, unless the Board 
finds that the anticompetitive effects 
are outweighed in the public interest 
by the probable effect of the exemp-
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231 
tion in meeting the convenience and 
needs of the community to be served; 
or 
‘‘(V) would permit an unfair, de-
ceptive, abusive, or unsafe-and-un-
sound act or practice. 
‘‘(B) PARENT
COMPANY
REPORTS.—The 
Board may, from time to time, require reports 
under oath from a company that controls a sec-
tion 6 holding company, and appropriate offi-
cers or directors of such company, solely for 
purposes of ensuring compliance with the provi-
sions of this section (including assessing the 
company’s ability to serve as a source of finan-
cial strength pursuant to subsection (g)) and 
enforcing such compliance. 
‘‘(C) LIMITED
PARENT
COMPANY
EN-
FORCEMENT.— 
‘‘(i) IN GENERAL.—In addition to any 
other power of the Board, the Board may 
enforce compliance with the provisions of 
this subsection which are applicable to any 
company described in paragraph (1), and 
any bank controlled by such company, 
under section 8 of the Federal Deposit In-
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232 
surance Act and such company or bank 
shall be subject to such section (for such 
purposes) in the same manner and to the 
same extent as if such company were a 
bank holding company. 
‘‘(ii) APPLICATION OF OTHER ACT.— 
Any violation of this subsection by any 
company that controls a section 6 holding 
company or any bank controlled by such a 
company, may also be treated as a viola-
tion of the Federal Deposit Insurance Act 
for purposes of clause (i). 
‘‘(iii) NO EFFECT ON OTHER AUTHOR-
ITY.—No provision of this subparagraph 
shall be construed as limiting any author-
ity of the Board or any other Federal 
agency under any other provision of law. 
‘‘(b) 
RESTRICTIONS
ON
AFFILIATE
TRANS-
ACTIONS.— 
‘‘(1) SECTION 23A AND 23B APPLICABILITY.— 
‘‘(A) IN GENERAL.—Transactions between 
a section 6 holding company (or any nonbank 
subsidiary thereof) and any affiliate not con-
trolled by the section 6 holding company shall 
be subject to the restrictions and limitations 
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233 
contained in section 23A and section 23B of the 
Federal Reserve Act as if the section 6 holding 
company were a member bank, provided, that a 
transaction that otherwise would be a covered 
transaction shall not be a covered transaction if 
the transaction is in connection with the bona 
fide acquisition or lease by an unaffiliated per-
son of assets, goods or services but shall be sub-
ject to review under section 23A(f)(1) of such 
Act. 
‘‘(B) COVERED TRANSACTIONS.—A deposi-
tory institution controlled by a section 6 holding 
company may not engage in a covered trans-
action (as defined in section 23A(b)(7) of the 
Federal Reserve Act) with any affiliate that is 
not the section 6 holding company or a sub-
sidiary of the section 6 holding company; pro-
vided that, for purposes of the prohibition, a 
transaction that otherwise would be a covered 
transaction shall not be a covered transaction if 
the transaction is in connection with the bona 
fide acquisition or lease by an unaffiliated per-
son of assets, goods or services, but shall be 
subject to review under section 23A(f)(1) of the 
Federal Reserve Act. 
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234 
‘‘(2) RULE OF CONSTRUCTION.—No provision 
of this subsection shall be construed as exempting 
any subsidiary insured depository institution of a 
section 6 holding company from compliance with sec-
tion 23A or 23B of the Federal Reserve Act with re-
spect to each affiliate of such institution (as defined 
in section 23A or 23B of the Federal Reserve Act), 
including any affiliate that is the section 6 holding 
company or subsidiary of the section 6 holding com-
pany. 
‘‘(c) TYING PROVISIONS.—A company that directly or 
indirectly controls a section 6 holding company shall be— 
‘‘(1) treated as a bank holding company for 
purposes of section 106 of the Bank Holding Com-
pany Act Amendments of 1970 and section 22(h) of 
the Federal Reserve Act and any regulation pre-
scribed under any such section; and 
‘‘(2) subject to the restrictions of section 106 of 
the Bank Holding Company Act Amendments of 
1970, in connection with any transaction involving 
the products or services of such company or affiliate 
and those of a bank affiliate, as if such company or 
affiliate were a bank and such bank were a sub-
sidiary of a bank holding company. 
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235 
‘‘(d) FINANCIAL
HOLDING
COMPANY
REQUIRE-
MENTS.—A section 6 holding company shall be subject 
to— 
‘‘(1) the conditions for engaging in expanded fi-
nancial activities in section 4(l); and 
‘‘(2) the provisions applicable to financial hold-
ing companies that fail to meet certain requirements 
in section 4(m). 
‘‘(e) INDEPENDENCE OF SECTION 6 HOLDING COM-
PANY.— 
‘‘(1) No less than 25 percent of the members 
of the board of directors of a section 6 holding com-
pany, and each subsidiary of a section 6 holding 
company, shall be independent of the parent com-
pany of the section 6 holding company and any sub-
sidiary of such parent company. For purposes of this 
subsection, a director shall be independent of the 
parent company if such person is not currently serv-
ing, and has not within the previous two-year period 
served, as a director, officer, or employee of any af-
filiate of the section 6 holding company that is not 
a subsidiary of the section 6 holding company. 
‘‘(2) No executive officer of a section 6 holding 
company or any subsidiary of a section 6 holding 
company may serve as a director, officer, or em-
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hsrobinson on DSK69SOYB1PROD with BILLS
236 
ployee of an affiliate of the section 6 holding com-
pany that is not a subsidiary of the section 6 holding 
company. 
‘‘(3) The Board shall issue regulations that re-
quire effective legal and operational separation of 
the functions of a section 6 holding company from 
its affiliates that are not subsidiaries of such section 
6 holding company, provided, however that such 
rules shall not require operational separation of in-
ternal functions including, but not limited to, human 
resources management, employee benefit plans, and 
information technology. 
‘‘(f) SOURCE OF STRENGTH.—A company that di-
rectly or indirectly controls a section 6 holding company 
shall serve as a source of financial strength to its sub-
sidiary section 6 holding company.’’. 
(d) CONFORMING CHANGES.—Section 4(h) of the 
Bank Holding Company Act of 1956 (12 U.S.C. 1843(h)), 
is amended— 
(1) in paragraph (1), by striking ‘‘subpara-
graph (D), (F), (G), or (H)’’ and inserting ‘‘sub-
paragraph (C) or (D)’’; and 
(2) in paragraph (2), by striking ‘‘subpara-
graph (D), (F), (G), or (H)’’ and inserting ‘‘sub-
paragraph (C) or (D)’’. 
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237 
SEC. 1302. REGISTRATION OF CERTAIN COMPANIES AS 
BANK HOLDING COMPANIES. 
Section 5 of the Bank Holding Company Act of 1956 
(12 U.S.C. 1844) is amended by inserting at the end the 
following new subsection: 
‘‘(h) CONVERSION TO BANK HOLDING COMPANY BY 
OPERATION OF LAW.— 
‘‘(1) CONVERSION BY OPERATION OF LAW.—A 
company that, on the day before the date of enact-
ment of the Financial Stability Improvement Act of 
2009, was not a bank holding company but which, 
by reason of sections 4(p) and 6 becomes a bank 
holding company by operation of law, shall register 
as a bank holding company with the Board in ac-
cordance with section 5(a) within 90 days of the 
date of enactment of that Act. 
‘‘(2) COMPLIANCE WITH BANK HOLDING COM-
PANY ACT.—With respect to any company described 
in paragraph (1), the Board may grant temporary 
exemptions or provide other appropriate temporary 
relief to permit such company to implement meas-
ures necessary to comply with the requirements 
under the Bank Holding Company Act.’’. 
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238 
SEC. 1303. REPORTS AND EXAMINATIONS OF BANK HOLD-
ING COMPANIES; REGULATION OF FUNCTION-
ALLY REGULATED SUBSIDIARIES. 
(a) REPORTS OF BANK HOLDING COMPANIES.—Sec-
tions 5(c)(1)(A) and (B) of the Bank Holding Company 
Act of 1956 (12 U.S.C. 1844(c)(1)(A) and (B)) are 
amended to read as follows: 
‘‘(A) IN GENERAL.—The Board, from time 
to time, may require a bank holding company 
and any subsidiary of such company to submit 
reports under oath that the Board determines 
are necessary or appropriate for the Board to 
carry out the purposes of this chapter, prevent 
evasions thereof, and monitor compliance by the 
company or subsidiary with the applicable pro-
visions of law. 
‘‘(B) USE OF EXISTING REPORTS.— 
‘‘(i) IN GENERAL.—The Board shall, 
to the fullest extent possible, use: 
‘‘(I) reports that a bank holding 
company or any subsidiary of such 
company has been required to provide 
to other Federal or State regulatory 
agencies; 
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239 
‘‘(II) information that is other-
wise required to be reported publicly; 
and 
‘‘(III) externally audited financial 
statements. 
‘‘(ii) AVAILABILITY.—A bank holding 
company or a subsidiary of such company 
shall promptly provide to the Board, at the 
request of the Board, a report referred to 
in clause (i)(I).’’. 
(b) FUNCTIONALLY REGULATED SUBSIDIARY.—Sec-
tion 5(c)(1) of the Bank Holding Company Act of 1956 
(12 U.S.C. 1844(c)(1)) is amended by inserting at the end 
the following new subparagraph: 
‘‘(C) DEFINITION.—For purposes of this 
subsection and section 6, the term ‘functionally 
regulated subsidiary’ means any subsidiary 
(other than a depository institution) of a bank 
holding company that is— 
‘‘(i) a broker or dealer registered with 
the Securities and Exchange Commission 
under the Securities Exchange Act of 
1934, for which the Securities and Ex-
change Commission is the Federal regu-
latory agency; 
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240 
‘‘(ii) an investment company reg-
istered with the Securities and Exchange 
Commission under the Investment Com-
pany Act of 1940, for which the Securities 
and Exchange Commission is the Federal 
regulatory agency; 
‘‘(iii) an investment adviser registered 
with the Securities and Exchange Commis-
sion under the Investment Advisers Act of 
1940, for which the Securities and Ex-
change Commission is the Federal regu-
latory agency, with respect to the invest-
ment advisory activities of such investment 
adviser and activities incidental to such in-
vestment advisory activities; and 
‘‘(iv) a futures commission merchant, 
commodity trading advisor, and commodity 
pool operator registered with the Com-
modity 
Futures 
Trading 
Commission 
under the Commodity Exchange Act, for 
which the Commodity Futures Trading 
Commission is the Federal regulatory 
agency, with respect to the commodities 
activities of such entity and activities inci-
dental to such commodities activities.’’. 
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241 
(c) EXAMINATIONS
OF BANK HOLDING COMPA-
NIES.—Sections 5(c)(2)(A) and (B) of the Bank Holding 
Company Act of 1956 (12 U.S.C. 1844(c)(2)(A) and (B)) 
are amended to read as follows: 
‘‘(A) IN GENERAL.—The Board may make 
examinations of a bank holding company and 
any subsidiary of such a company to carry out 
the purposes of this chapter, prevent evasions 
thereof, and monitor compliance by the com-
pany or subsidiary with applicable provisions of 
law. 
‘‘(B) FUNCTIONALLY REGULATED AND DE-
POSITORY
INSTITUTION
SUBSIDIARIES.—The 
Board shall, to the fullest extent possible, use 
reports of examination of functionally regulated 
subsidiaries and subsidiary depository institu-
tions made by other Federal or State regulatory 
authorities.’’. 
(d) REGULATION OF FINANCIAL HOLDING COMPA-
NIES.—Section 5(c)(2) of the Bank Holding Company Act 
of 1956 (12 U.S.C. 1844(c)) is amended by striking sub-
paragraphs (C), (D), and (E). 
(e) AUTHORITY TO REGULATE FUNCTIONALLY REG-
ULATED
SUBSIDIARIES
OF
BANK
HOLDING
COMPA-
NIES.—The Bank Holding Company Act of 1956 (12 
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242 
U.S.C. 1841, et seq.) is amended by striking section 10A 
(12 U.S.C. 1848a). 
SEC. 1304. REQUIREMENTS FOR FINANCIAL HOLDING COM-
PANIES TO REMAIN WELL CAPITALIZED AND 
WELL MANAGED. 
Section 4(l)(1) of the Bank Holding Company Act of 
1956 (12 U.S.C. 1843(l)(1)) is amended— 
(1) in subparagraph (B), by striking ‘‘and’’; 
(2) by redesignating subparagraph (C) as sub-
paragraph (D); 
(3) by inserting after subparagraph (B) the fol-
lowing new subparagraph: 
‘‘(C) the bank holding company is well 
capitalized and well managed; and’’; and 
(4) in subparagraph (D) (as so redesignated) 
by amending clause (ii) to read as follows: 
‘‘(ii) a certification that the company 
meets the requirements of subparagraphs 
(A) through (C).’’. 
SEC. 1305. STANDARDS FOR INTERSTATE ACQUISITIONS. 
(a) BANK HOLDING COMPANY ACT OF 1956 AMEND-
MENT.—Section 3(d)(1)(A) of the Bank Holding Company 
Act of 1956 (12 U.S.C. 1842(d)(1)(A)) is amended— 
(1) by striking ‘‘adequately capitalized’’ and in-
serting ‘‘well capitalized’’; and 
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