pressly authorized by section 5136 of the
Revised Statutes of the United States as
permissible for a national bank to under-
write or deal in; or
‘‘(B) to make an equity investment in any
securities affiliate.
‘‘(2) EXCEPTION FOR CERTAIN EDGE ACT AND
AGREEMENT
CORPORATIONS.—The limitations in
paragraph (1)(A) shall not apply with respect to ac-
tivities conducted by a subsidiary of a financial serv-
ices holding company which is held pursuant to sec-
tion 25 or 25A of the Federal Reserve Act or section
4(c)(13) of this Act.
‘‘(3) RULE OF CONSTRUCTION.—No provision of
this subsection shall be construed as permitting a se-
curities affiliate to accept deposits in contravention of
section 21 of the Banking Act of 1933.
‘‘(h) APPROVAL OF SECURITIES ACTIVITIES UNDER
SECTION 4(c)(8) RESTRICTED.—The Board shall deny any
notice or application by a financial services holding com-
pany under authority of section 4(c)(8) to engage in, or
acquire the shares of a company engaged in, underwriting
or dealing in securities in the United States, other than
securities expressly authorized by section 5136 of the Re-
vised Statutes of the United States as permissible for a na-
tional bank to underwrite or deal in.
‘‘(i) BANKERS’ BANKS.—
‘‘(1) IN GENERAL.—For purposes of this section,
each shareholder of or participant in a company that
controls a depository institution described in section
5169(b)(1) of the Revised Statutes of the United
States or in a similar statute of any State, and each
subsidiary of such a shareholder or participant, shall
be treated as if such shareholder, participant, or sub-
sidiary were a subsidiary of that company.
‘‘(2) EXCEPTION.—This subsection shall not
apply with respect to a shareholder or participant in
a company described in subparagraph (A) (or any
subsidiary of such shareholder or participant) if the
shareholder or participant, and the affiliates of any
such shareholder or participant, do not, in the aggre-
gate, control more than 5 percent of any class of vot-
ing shares of such company.
‘‘(j) SHARES ACQUIRED IN CONNECTION WITH UN-
DERWRITING AND INVESTMENT BANKING ACTIVITIES.—
‘‘(1) IN
GENERAL.—Notwithstanding section
4(a), a financial services holding company may di-
rectly or indirectly acquire or control, whether as
principal, on behalf of 1 or more entities (including
entities, other than a depository institution or sub-
sidiary of a depository institution, that the financial
services holding company controls), or otherwise,
shares, assets, or ownership interests (including with-
out limitation debt or equity securities, partnership
interests, trust certificates, or other instruments rep-
resenting ownership) of a company or other entity,
whether or not constituting control of such company
or entity, engaged in activities not authorized pursu-
ant to section 4 if—
‘‘(A) the shares, assets, or ownership inter-
ests are not acquired or held by a depository in-
stitution or a subsidiary of a depository institu-
tion;
‘‘(B) such shares, assets, or ownership inter-
ests are acquired and held by a securities affili-
ate or an affiliate of a securities affiliate as part
of a bona fide underwriting or investment bank-
ing activity, which includes investment activities
engaged in for the purpose of appreciation and
ultimate resale or other disposition of the invest-
ment, and such shares, assets, or ownership in-
terests are held for such a period of time as will
permit the sale or disposition thereof on a rea-
sonable basis consistent with the nature of such
activities; and
‘‘(C) during the period such shares, assets,
or ownership interests are held, the financial
services holding company does not actively man-
age or operate the company or entity except in-
sofar as necessary to achieve the objectives of sub-
paragraph (B).
‘‘(2) NO EXPANSION OF UNDERWRITING ACTIVI-
TIES.—No provision of this subsection shall be con-
strued as authorizing any financial services holding
company, or any subsidiary of any such company, to
underwrite or deal in any security.
‘‘(k) DEFINITIONS.—For purposes of this section and
sections 11 and 12, the following definitions shall apply:
‘‘(1) CAPITAL STOCK AND SURPLUS.—The term
‘capital stock and surplus’ has the same meaning as
in section 23A of the Federal Reserve Act.
‘‘(2) COVERED TRANSACTION.—The term ‘covered
transaction’ has the same meaning as in section 23A
of the Federal Reserve Act.
‘‘(3) SECURITY.—
‘‘(A) IN GENERAL.—The term ‘security’ has
the meaning given to such term in section
3(a)(10) of the Securities Exchange Act of 1934.
‘‘(B) EXCEPTIONS.—For purposes of this
section, other than subsection (a), the term ‘secu-
rity’ does not include any of the following:
‘‘(i) A contract of insurance.
‘‘(ii) A deposit account, savings ac-
count, certificate of deposit, or other deposit
instrument issued by a depository institu-
tion.
‘‘(iii) A share account issued by a sav-
ings association if the account is insured by
the Federal Deposit Insurance Corporation.
‘‘(iv) A banker’s acceptance.
‘‘(v) A letter of credit issued by a de-
pository institution.
‘‘(vi) A debit account at a depository
institution arising from a credit card or
similar arrangement.
‘‘(vii) A loan or loan participation (as
determined by the Board).
‘‘(C) BOARD’S AUTHORITY TO EXEMPT TRA-
DITIONAL BANKING PRODUCTS.—The Board may,
by regulation or order and after consultation
with and consideration of the views of the Secu-
rities and Exchange Commission, exempt a
banking product from the definition of security
if the Board determines that—
‘‘(i) the product is more appropriately
regulated as a banking product; and
‘‘(ii) the exemption is otherwise con-
sistent with the purposes of this section.
‘‘(D) DEFINITION FOR LIMITED PURPOSE.—
The fact that a particular instrument is excluded
pursuant to subparagraph (B) or (C) from the
definition of security for purposes of this section
shall not be construed as finding or implying
that such instrument is or is not a security for
purposes of Federal securities laws.’’.
(b) TRANSITION RULE FOR SECURITIES AFFILIATES
APPROVED UNDER SECTION 4(c)(8).—
(1) CONVERSION TO (4)(c)(15) SUBSIDIARY.—
(A) IN GENERAL.—Except as provided in
subparagraph (B) and paragraphs (3) and (4),
effective 18 months after the date of enactment of
this Act, no financial services holding company
may engage in, or retain the shares of any com-
pany engaged in, underwriting or dealing in se-
curities based on the approval of an application
under section 4(c)(8) of the Bank Holding Com-
pany Act of 1956 (as in effect before the date of
the enactment of the Financial Services Competi-
tiveness Act of 1995) unless the financial services
holding company has obtained the Board’s ap-
proval to retain the shares of that company
under section 10.
(B) EXCEPTION FOR BANK ELIGIBLE SECU-
RITIES.—Subparagraph (A) shall not apply with
respect to underwriting or dealing in securities
expressly authorized by section 5136 of the Re-
vised Statutes of the United States 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 serv-
ices holding company has filed a notice under
section 10(b) of the Bank Holding Company 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.
(3) CONVERSION PROCEDURES FOR COMPANIES
PREVIOUSLY AUTHORIZED TO CONDUCT SECURITIES
ACTIVITIES.—Any financial services holding company
that controls a company engaged in underwriting
and dealing in corporate debt and equity securities
pursuant to an order issued by the Board under sec-
tion 4(c)(8) of the Bank Holding Company Act of
1956 before the date of enactment of the Financial
Services Competitiveness Act of 1995 shall be treated
as follows:
(A) REVENUE TEST AND CERTAIN OTHER
RESTRICTIONS.—Upon filing the notice required
under section 10(b) of the Financial Services
Holding Company Act of 1995, the financial
services holding company shall be relieved
from—
(i) the limitation contained in such
order on the amount of revenue that may be
derived from securities underwriting and
dealing activities; and
(ii) any other restriction contained in
such order that would not be required under
section 11 of such Act, as permitted by the
Board.
(B) 
EXAMINATION
OF
INTERNAL
CON-
TROLS.—The financial services holding company
shall not, in connection with action on the notice
submitted under section 10(b)(1) of the Finan-
cial Services Holding Company Act of 1995, be
subject to an examination of internal controls
under section 10(b)(2)(D) of such Act.
(4) RETENTION OF COMPANIES CONDUCTING LIM-
ITED
SECURITIES
ACTIVITIES.—Notwithstanding
paragraph (1), any financial services holding com-
pany that controls a company engaged in underwrit-
ing and dealing in securities (other than corporate
debt or equity securities) pursuant to an order issued
by the Board under section 4(c)(8) of the Bank Hold-
ing Company Act of 1956 before the date of enactment
of the Financial Services Competitiveness Act of 1995
may retain control of such company, so long as such
company complies with all of the limitations, restric-
tions and conditions, including the limitation on the
revenue that may be derived from such underwriting
or dealing activities, contained in such order.
SEC. 104. SAFEGUARDS RELATING TO SECURITIES AFFILI-
ATES.
(a) IN GENERAL.—The Bank Holding Company Act
of 1956 (12 U.S.C. 1841 et seq.) is amended—
(1) by redesignating sections 11 and 12 as sec-
tions 13 and 14, respectively; and
(2) by inserting after section 10 (as added by
section 103 of this Act) the following new section:
‘‘SEC. 11. SAFEGUARDS RELATING TO SECURITIES AFFILI-
ATES.
‘‘(a) EXTENSIONS OF CREDIT AND ASSET PURCHASES
RESTRICTED.—
‘‘(1) IN GENERAL.—No depository institution af-
filiated with a securities affiliate shall, directly or in-
directly, do any of the following:
‘‘(A) Extend credit in any manner to the
securities affiliate.
‘‘(B) Issue a guarantee, acceptance, or letter
of credit, including an endorsement or a standby
letter of credit, for the benefit of the securities af-
filiate.
‘‘(C) Except as provided in paragraph (3),
purchase for its own account, or for the account
of any subsidiary of such institution, financial
assets of the securities affiliate.
‘‘(2) EXCEPTION FOR CLEARING SECURITIES.—
Paragraph (1)(A) shall not apply with respect to an
extension of credit by a well capitalized depository in-
stitution to acquire or sell securities if the following
conditions are met:
‘‘(A) The extension of credit is incidental to
clearing transactions in those securities through
that depository institution.
‘‘(B) Both the principal of and the interest
on the extension of credit are fully secured by
those securities.
‘‘(C) Either—
‘‘(i) the extension of credit is to be re-
paid before the close of business on the same
business day; or
‘‘(ii) all of the following conditions are
satisfied:
‘‘(I) The securities cannot, in the
ordinary course of business, be cleared
on that business day.
‘‘(II) The extension of credit is to
be repaid before the close of business on
the next business day.
‘‘(III) Extensions of credit subject
to this clause, when aggregated with all
other covered transactions between the
institution and all affiliated securities
affiliates do not exceed 10 percent of
the institution’s capital stock and sur-
plus.
‘‘(D) Either—
‘‘(i) the securities are securities ex-
pressly authorized by section 5136 of the
Revised Statutes of the United States as
permissible for a national bank to under-
write or deal in; or
‘‘(ii) the Board permits transactions
under this paragraph in securities not de-
scribed in clause (i) and the securities affil-
iate provides the depository institution with
such additional security or other assurance
of performance, if any, as the Board shall
require to prevent such transactions from
posing any appreciable risk to the institu-
tion.
‘‘(3) EXCEPTIONS
FOR
CERTAIN
SECURITIES
PURCHASED FOR A DEPOSITORY INSTITUTION’S OWN
ACCOUNT.—Paragraph (1)(C) shall not apply with
respect to purchases at the current market value
(based on reliable and regularly available price
quotations) of—
‘‘(A) securities expressly authorized by sec-
tion 5136 of the Revised Statutes of the United
States as permissible for a national bank to un-
derwrite or deal in; or
‘‘(B) securities that—
‘‘(i) the securities affiliate has been
marking to market daily; and
‘‘(ii) are rated investment grade by at
least 1 nationally recognized statistical rat-
ing organization.
‘‘(4) OTHER
EXCEPTIONS.—The Board may
make exceptions to paragraph (1) for well capitalized
depository institutions if—
‘‘(A) the transaction is fully secured in ac-
cordance with section 23A(c) of the Federal Re-
serve Act; and
‘‘(B) the aggregate amount of covered trans-
actions between the institution and all securities
affiliates of the financial services holding com-
pany, excluding transactions permitted under
paragraph (2)(C)(i) or (3)(A), does not exceed 10
percent of the institution’s capital stock and sur-
plus.
‘‘(b) CREDIT ENHANCEMENT RESTRICTED.—
‘‘(1) IN GENERAL.—No depository institution af-
filiated with a securities affiliate shall, directly or in-
directly, extend credit, or issue or enter into a stand-
by letter of credit, asset purchase agreement, indem-
nity, guarantee, insurance, or other facility, for the
purpose of enhancing the marketability of a securities
issue underwritten by the securities affiliate.
‘‘(2) DEFINITION
OF
TERM
BY
BOARD.—The
Board shall prescribe a definition for the term ‘for the
purpose of enhancing the marketability of a securities
issue’ for purposes of paragraph (1).
‘‘(3) EXCEPTION FOR BANK ELIGIBLE SECURI-
TIES.—Paragraph (1) shall not apply with regard to
securities expressly authorized by section 5136 of the
Revised Statutes of the United States as permissible
for a national bank to underwrite or deal in.
‘‘(4) APPLICATION TO WELL CAPITALIZED DE-
POSITORY INSTITUTIONS.—
‘‘(A) IN GENERAL.—A well capitalized de-
pository institution may engage in a transaction
described in paragraph (1) 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 se-
curities affiliate; and
‘‘(ii) the institution and its securities
affiliate have adopted appropriate proce-
dures, including maintenance of necessary
documentary records, to assure that any
such extension of credit, standby letter of
credit, asset purchase agreement, indemnity,
guarantee, insurance or other facility, is on
an arm’s length basis.
‘‘(B) ARM’S
LENGTH
TRANSACTION
DE-
SCRIBED.—An extension of credit may be consid-
ered to be on an arm’s length basis if the terms
and conditions are substantially the same as
those prevailing at the time for comparable
transactions involving securities that are not un-
derwritten by the securities affiliate.
‘‘(C) COMPLIANCE WITH PARAGRAPH (1).—
The Board may require, by regulation or order,
compliance with paragraph (1) by well capital-
ized depository institutions exempt under this
paragraph in order to achieve any purpose spec-
ified in subsection (l).
‘‘(c) PROHIBITION ON FINANCING PURCHASE OF SECU-
RITY BEING UNDERWRITTEN.—
‘‘(1) IN GENERAL.—No financial services holding
company or subsidiary of a financial services holding
company (other than a securities affiliate) shall
knowingly extend or arrange for the extension of cred-
it, directly or indirectly, secured by or for the purpose
of purchasing any security while, or for 30 days after,
that security is the subject of a distribution in which
a securities affiliate of that financial services holding
company participates as an underwriter or a member
of a selling group.
‘‘(2) RELIANCE
ON
ACKNOWLEDGEMENT.—For
purposes of paragraph (1), a financial services hold-
ing company or subsidiary may rely on an express
written acknowledgement signed by the borrower that
the credit is not secured by or for the purpose of pur-
chasing a security described in this subparagraph.
‘‘(3) APPLICATION TO BANK ELIGIBLE SECURI-
TIES.—Paragraph (1) shall not apply with regard to
extensions of credit if the securities are securities ex-
pressly authorized by section 5136 of the Revised
Statutes of the United States as permissible for a na-
tional bank to underwrite or deal in.
‘‘(4) APPLICATION TO WELL CAPITALIZED DE-
POSITORY INSTITUTIONS.—The Board may make ex-
ceptions, by regulation or order, to paragraph (1) for
an extension of credit, after consultation with and
considering the views of the Securities and Exchange
Commission, if—
‘‘(A) the financial services holding company
is adequately capitalized;
‘‘(B) the financial services holding compa-
ny’s lead depository institution is well capital-
ized;
‘‘(C) well capitalized depository institutions
control at least 80 percent of the assets of deposi-
tory institutions controlled by the financial serv-
ices holding company; and
‘‘(D) all depository institutions controlled
by the financial services holding company are
well capitalized or adequately capitalized.
‘‘(5) CONSISTENCY WITH THE FEDERAL SECURI-
TIES LAWS.—No provision of this subsection shall be
construed as permitting a securities affiliate to extend
or maintain credit, or arrange for an extension of
credit, except in compliance with applicable provi-
sions of the Securities Exchange Act of 1934 and the
regulations prescribed and interpretations issued
under such Act.
‘‘(d) RESTRICTION ON EXTENDING CREDIT TO MAKE
PAYMENTS ON SECURITIES.—
‘‘(1) IN GENERAL.—No depository institution af-
filiated with a securities affiliate shall, directly or in-
directly, extend credit to an issuer of securities under-
written by the securities affiliate for the purpose 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 exten-
sion of credit for a documented purpose (other than
paying principal, interest, or dividends) if the tim-
ing, 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 deposi-
tory 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 se-
curities 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 is-
suer for the purpose of paying the prin-
cipal, interest or dividends on securities un-
derwritten by the securities affiliate is on
an arm’s length basis.
‘‘(B) ARM’S
LENGTH
TRANSACTION
DE-
SCRIBED.—An extension of credit may be consid-
ered to have been made on an arm’s length basis
if the terms and conditions are substantially the
same as those prevailing at the time for com-
parable transactions with issuers whose securi-
ties are not underwritten by the securities affili-
ate.
‘‘(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 secu-
rities affiliate may serve at the same time as directors
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 depository
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 reason-
ably result from director and senior officer inter-
locks.
‘‘(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 dollar
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 outside
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 recommended
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 re-
quired by paragraph (1) shall be made in clear and
concise language that—
‘‘(A) is readily comprehensible to customers
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 paragraph
(2), the Board may, in the Board’s discretion, pre-
scribe disclosures in addition to the disclosures pre-
scribed by paragraph (1).
‘‘(g) DISCLOSURE REQUIRED BY INSURED DEPOSI-
TORY INSTITUTIONS.—
‘‘(1) IN GENERAL.—No insured depository insti-
tution 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 depos-
itory 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 re-
quired by paragraph (1) shall be made in clear and
concise language that—
‘‘(A) is readily comprehensible to customers
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 DISCLO-
SURE.—
‘‘(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 Securi-
ties Act of 1933), the acknowledgment of the re-
ceipt of any disclosure described in subpara-
graph (A) may be obtained by the insured depos-
itory institution or securities affiliate at the
time any account is opened by such customer.
‘‘(4) BOARD AUTHORITY.—Subject to paragraph
(2), the Board, after consultation with the other ap-
propriate Federal banking agencies, may prescribe
disclosures in addition to the disclosures required by
paragraph (1).
‘‘(h) IMPROPER DISCLOSURE OF CONFIDENTIAL CUS-
TOMER 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 institution
shall disclose to any other affiliate which is a deposi-
tory institution or a subsidiary of such an institu-
tion, any nonpublic customer information (including
an evaluation of the creditworthiness of an issuer or
other customer of that institution or securities affili-
ate), unless it is clearly and conspicuously disclosed
that such information may be communicated among
such persons and the customer is given the oppor-
tunity, before the time that the information is ini-
tially communicated, to direct that such information
not be communicated among such persons.
‘‘(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 OB-
LIGATIONS ORIGINATED BY AFFILIATE RESTRICTED.—A se-
curities affiliate shall not underwrite securities secured by
or representing an interest in mortgages or other obligations
originated or purchased by an affiliated depository institu-
tion 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 Fed-
eral National Mortgage Association, or the Gov-
ernment 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 com-
pany) to engage in any transaction with, or on behalf
of, the first financial services holding company re-
ferred to in such paragraph (or any subsidiary of
that financial services holding company), for the pur-
pose of evading any requirement or restriction of Fed-
eral 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 subsidiary
of a depository institution may do anything that this
subsection prohibits the institution from doing.
‘‘(l) AUTHORITY TO MODIFY AND IMPOSE ADDITIONAL
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 customers of
such institutions or affiliates, including modi-
fications 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 purposes of this
Act, including—
‘‘(A) the avoidance of any significant risk
to the safety and soundness of depository institu-
tions 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 con-
trolled by foreign banks operating in the United
States.
‘‘(3) BIENNIAL
REVIEW.—Beginning 2 years
after the date of enactment of the Financial Services
Competitiveness Act of 1995, the Board shall, on a bi-
ennial 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 and agency the Securities and Exchange
Commission shall establish a program for—
‘‘(A) sharing information concerning com-
pliance with subtitle A of title I or subtitle A or
B of title II of the Financial Services Competi-
tiveness Act of 1995, and the amendments made
by such subtitles, by—
‘‘(i) brokers, dealers, investment advis-
ers, or investment companies that are reg-
istered with the Securities and Exchange
Commission that are affiliated with deposi-
tory institutions, or are separately identifi-
able departments or divisions of depository
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 Act of 1995, and the amendments made by
such subtitle and paragraphs (4) and (5) of sec-
tion 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, may require any de-
pository institution that has effected securities
transactions pursuant to any exception enumer-
ated in paragraphs (4) and (5) of section 3(a)
of the Securities Exchange Act of 1934 to iden-
tify the exceptions relied upon and to submit
such information necessary to monitor compli-
ance 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.—The appropriate
Federal banking agencies shall, to the extent prac-
ticable, use the reports of examination of any broker,
dealer, investment adviser, or investment company
made by or on behalf of the Securities 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.
‘‘(5) INTERPRETATIONS OF THE FEDERAL SECU-
RITIES
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 ac-
tivities 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 enforce-
ment 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;
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 con-
ditions described in paragraph (2) are met.
‘‘(2) CONDITIONS FOR APPLICABILITY OF EXCEP-
TION.—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 affili-
ate of such foreign bank and any branch, agency
or commercial lending company operated 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 foreign bank were
a member bank; and
‘‘(B) such foreign bank has received a deter-
mination from the Board that the bank meets
capital standards comparable to those established
by the Board for well capitalized financial serv-
ices 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 respect to such stand-
ards.
‘‘(3) APPLICABILITY OF SUBSECTION (l) TO FOR-
EIGN BANKS.—Any limitation, restriction, condition,
or modification adopted by the Board under sub-
section (l) may be applied by the Board to—
‘‘(A) a foreign bank described in paragraph
(1) (and any company that owns or controls
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, subject
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 underwriting
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 direc-
tor of a public utility and the position of officer or director
of a bank, trust company, banking association, or firm per-
mitted 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 secu-
rities (including commercial paper) of a public utility, if
that bank, trust company, banking association, 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 director.
(d) AMENDMENT TO THE RIGHT TO FINANCIAL PRI-
VACY ACT.—Section 1112(e) of the Right to Financial Pri-
vacy 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 Hold-
ing Company Act of 1956 (12 U.S.C. 1844(b)) is amended
by inserting ‘‘, including the protection of depository insti-
tutions and the separation of banking and commerce,’’ 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 fol-
lowing new subsection:
‘‘(k) OWNERSHIP OF SHARES OF CERTAIN COMPANIES
BY FINANCIAL SERVICES HOLDING COMPANIES.—
‘‘(1) NONCONFORMING FINANCIAL COMPANIES.—
Notwithstanding section 4(a), a financial services
holding company may retain direct or indirect own-
ership 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 com-
pany acquired the shares of a company en-
gaged in such activities or of each company
to which the company engaged in such ac-
tivities is a successor more than 2 years be-
fore the date that such financial services
holding company becomes a financial serv-
ices holding company;
‘‘(ii) the aggregate investment by the
financial 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 as of the date that the holding
company becomes a financial services hold-
ing company or as of the date of any addi-
tional investment by the financial services
holding company in such shares;
‘‘(iii) more than 50 percent of the ag-
gregate gross revenues of the financial serv-
ices holding company and the subsidiaries
of such holding company for each of the 2
calendar years before the date the holding
company becomes a financial services hold-
ing company were attributable to securities
activities described in subparagraphs (A)
and (B) of section 10(a)(1), as determined
without taking into account any activities
(other than securities activities) in which fi-
nancial services holding companies were
permitted to engage before the date of the
enactment of the Financial Services Com-
petitiveness 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 com-
pany held the shares of any company en-
gaged in such activities as of the date of the
enactment of the Financial Services Com-
petitiveness Act of 1995 and the financial
services holding company was then exempt
from the provisions 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 activi-
ties that such company conducted as of the
date of the enactment of the Financial Serv-
ices Competitiveness Act of 1995 (or other
activities 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 hold-
ing company as of the date of the enactment
of the Financial Services Competitiveness
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 holding
company, retain direct or indirect ownership or
control of voting shares of any company that the
financial services holding company owns or con-
trols on the date such holding company 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—
‘‘(i) determines that such extension is
necessary to avert substantial loss to the fi-
nancial 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 COM-
PANIES PRIOR TO DIVESTITURE.—Unless an ac-
quisition or activity is permitted in accordance
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 services
holding company registered as a financial
services holding company.
‘‘(3) RESTRICTIONS ON JOINT MARKETING.—No
depository institution (and no subsidiary of such in-
stitution) shall—
‘‘(A) offer or market, directly or indirectly
through any arrangement, any product or service
of any affiliate whose shares are owned or con-
trolled by the financial services holding company
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 af-
filiate whose shares are owned or controlled by
the financial services holding company pursuant
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 fi-
nancial services holding companies to provide under
section 4(c)(8) or 10.
‘‘(4) DEPOSITORY
INSTITUTION
DEFINED.—For
purposes of paragraph (3), the term ‘depository insti-
tution’ 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 following new
subparagraph:
‘‘(D) EXCEPTION
TO
RESTRICTION
ON
ASSET
GROWTH, 
ACTIVITIES, 
AND
CERTAIN
CROSS-MARKETING RESTRICTIONS.—
‘‘(i) QUALIFICATION
FOR
EXCEPTION
FROM GROWTH RESTRICTION.—A bank con-
trolled by a company described in para-
graph (1) shall not be subject to the limita-
tion contained in subparagraph (B)(iv) if
the company meets the requirements of this
subparagraph and the requirements of para-
graph (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 Equal-
ity Banking Act of 1987, based on the ac-
tivities each bank conducted on March 5,
1987, as reported to the Board) if such
bank, at least 60 days before commencing
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 financial
services holding companies to provide by
law, regulation, or order under paragraph
(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 control
of such bank in accordance with paragraph
(4) unless—
‘‘(I) within 12 months after the
date the bank ceases to be well capital-
ized, the capital of the bank is restored
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 capital-
ized level.’’.
(2) QUALIFICATIONS
FOR
COMPANIES
UNDER
PARAGRAPH (3)(D).—Section 4(f) of the Bank Holding
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;
‘‘(iii) activities permitted under sub-
paragraph (A) or (B) of section 10(a)(1);
and
‘‘(iv) other activities that would be per-
missible for such company as a financial
services holding company (other than as an
investment bank holding company);
‘‘(B) all insured depository institutions con-
trolled by such company are well capitalized and
well managed;
‘‘(C) the bank and any affiliate of the bank
that is engaged in securities activities described
in section 10(a) comply with the safeguards con-
tained in section 11 as if that affiliate were a
securities affiliate; and
‘‘(D) the company has provided at least 60
days prior written notice to the Board and, dur-
ing that period, the Board has not disapproved
the proposal.’’.
(b) AMENDED DIVESTITURE PROCEDURE FOR CER-
TAIN COMPANIES.—Section 4(f)(4) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1843(f)(4)) is amended
by adding at the end the following: ‘‘If any company de-
scribed in paragraph (1) which meets the requirements of
paragraph (3)(D)(i) fails to qualify for the exemption pro-
vided under paragraph (2), such company shall divest, in
accordance with this paragraph, control of each bank the
company controls unless, within 12 months after the date
that the company fails to comply with the provisions of
paragraph (2), the company has corrected the condition or
ceased the activity that led to the failure to comply.’’.
(c) CONVERSION
OF CERTAIN NONBANK HOLDING
COMPANIES
TO FINANCIAL SERVICES HOLDING COMPA-
NIES.—Section 4(f) of the Bank Holding Company Act of
1956 (12 U.S.C. 1843(f)) is amended by inserting after
paragraph (14) (as added by subsection (a)(2)) the follow-
ing new paragraph:
‘‘(15) CONVERSION OF CERTAIN COMPANIES TO
FINANCIAL SERVICES HOLDING COMPANIES.—
‘‘(A) IN GENERAL.—During the 18-month
period beginning on the date of the enactment of
the Financial Services Competitiveness Act of
1995, any company described in paragraph (1)
may become a financial services holding com-
pany if—
‘‘(i) the company (on a consolidated
basis) engages in activities that are finan-
cial (including activities not authorized
under subsection (c)(8)) and predominantly
in—
‘‘(I) banking;
‘‘(II) activities that the Board has
determined under subsection (c)(8) to
be financial in nature or incidental to
such financial activities;
‘‘(III) activities permitted under
subparagraph (A) or (B) of section
10(a)(1); and
‘‘(IV) other activities that would
be permissible for such company as a
financial services holding company
(other than an investment bank hold-
ing company);
‘‘(ii) all insured depository institutions
controlled by such company are well cap-
italized and well managed;
‘‘(iii) the company provides written
notice to the Board under sections 4 and 10
at least 60 days before the company becomes
a financial services holding company; and
‘‘(iv) the Board does not object to such
transaction before the end of such 60-day
period.
‘‘(B) RETENTION
OF
FINANCIAL
COMPA-
NIES.—
‘‘(i) IN
GENERAL.—Notwithstanding
subsection (a), a company that becomes a
financial services holding company pursu-
ant to subparagraph (A) may retain direct
or indirect ownership or control of voting
shares of any company that engages solely
in activities that the Board finds to be fi-
nancial but which the Board has not au-
thorized under subsection (c)(8) (and such
other financial activities that the Board has
authorized) if the financial services holding
company acquired the shares of such com-
pany, or of each company to which such
company is a successor, before January 1,
1995.
‘‘(ii) LIMITS ON EXPANSION FOLLOW-
ING
REGISTRATION.—A company that be-
comes a financial services holding company
pursuant to this paragraph, and any com-
pany whose shares are owned or controlled
by a financial services holding company
pursuant to this paragraph, shall be subject
to the limitations contained in paragraphs
(2)(C) and (3) of section 4(k) as if the ac-
tivities or shares of such company were con-
ducted or held pursuant to section 4(k)(2).
‘‘(iii) PERIOD TO CONFORM OTHER AC-
TIVITIES.—Notwithstanding subsection (a),
a company that becomes a financial services
holding company pursuant to subparagraph
(A) may retain direct or indirect ownership
or control of voting shares of any company
not otherwise permitted under this section
for the period provided in, and subject to
the conditions contained in, paragraphs (2)
and (3) of section 4(k).
‘‘(C) ELECTION
FOR
REDUCED
SUPER-
VISION.—Any company that becomes a financial
services holding company pursuant to subpara-
graph (A) may elect to be governed by the provi-
sions of paragraphs (3), (4), (5), and (6) of sec-
tion 5(g), subject to the requirements of such sec-
tion, if—
‘‘(i) the company, and any insured de-
pository institution controlled by such com-
pany, meet the requirements of section 5(g)
(other than the requirements of paragraph
(2)(A) of such section);
‘‘(ii) the company does not acquire
more than 5 percent of the shares of any ad-
ditional depository institution after the date
that such company becomes a financial
services holding company; and
‘‘(iii) no depository institution con-
trolled by such company acquires, estab-
lishes, or operates an additional branch of-
fice after the date that the company becomes
a financial services holding company.’’.
SEC. 107. SECURITIES COMPANY AFFILIATIONS OF FDIC—
INSURED BANKS.
(a) IN GENERAL.—Section 18 of the Federal Deposit
Insurance Act (12 U.S.C. 1828) is amended by adding at
the end the following new subsections:
‘‘(s) SECURITIES AFFILIATIONS OF BANKS.—
‘‘(1) IN GENERAL.—A bank shall not be an affili-
ate of any company that, directly or indirectly, acts
as an underwriter or dealer of any security, other
than—
‘‘(A) a securities affiliate in accordance
with section 10 of the Financial Services Hold-
ing Company Act of 1995; or
‘‘(B) a company that underwrites or deals
only in securities described in section 10(g) of
the Financial Services Holding Company Act of
1995.
‘‘(2) EXCEPTIONS.—
‘‘(A) CERTAIN BANKS NOT INCLUDED.—For
purposes of this subsection, the term ‘bank’ does
not include—
‘‘(i) an insured bank described in sub-
paragraph (D), (F), or (H) of section
2(c)(2) of the Financial Services Holding
Company Act of 1995; and
‘‘(ii) a Federal branch or an insured
branch (as defined in section 3 of the Fed-
eral Deposit Insurance Act).
‘‘(B) AFFILIATIONS
WITH
EDGE
ACT
AND
AGREEMENT
CORPORATIONS.—Paragraph 
(1)
shall not apply with respect to the affiliation of
a bank with a company held pursuant to section
25 or 25A of the Federal Reserve Act or section
4(c)(13) of the Financial Services Holding Com-
pany Act of 1995.
‘‘(3) GRANDFATHER PROVISION.—This subsection
shall not apply with respect to—
‘‘(A) 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 sub-
paragraph (A).
‘‘(4) DEFINITIONS.—For purposes of this sub-
section, the following definitions shall apply:
‘‘(A) BROKER.—The term ‘broker’ has the
meaning given to such term in section 3(a)(4) of
the Securities Exchange Act of 1934.
‘‘(B) DEALER.—The term ‘dealer’ has the
meaning given to such term in section 3(a)(5) of
the Securities Exchange Act of 1934.
‘‘(C) SECURITY.—The term ‘security’ has
the meaning given to such term in section 10(k)
of the Financial Services Holding Company Act
of 1995.
‘‘(D) UNDERWRITER.—The term ‘under-
writer’ has the meaning given to such term in
section 2(11) of the Securities Act of 1933.
‘‘(5) AFFILIATE.—For purposes of this sub-
section, a separately identifiable department or divi-
sion (as defined in section 3(a) of the Securities Ex-
change Act of 1934) of a bank shall be deemed to be
a company which is an affiliate of the bank.
‘‘(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 Ex-
change Act of 1934—
‘‘(1) except to the extent permitted under the cir-
cumstances described in paragraph (4) or (5) of sec-
tion 3(a) of such Act; or
‘‘(2) unless otherwise exempt from registrations
as a broker or dealer pursuant to regulations pre-
scribed by the Securities and Commission.
‘‘(u) EXAMINATION REPORTS.—The Federal banking
agencies shall, to the maximum extent practicable, use the
reports of examination of any broker, dealer, investment ad-
viser, or investment company made by or on behalf of the
Securities and Exchange Commission and reports made by
or on behalf of a registered securities association or national
securities exchange and shall defer to such examination for
compliance with Federal securities laws.’’.
(b) STUDY OF RISKS TO DEPOSIT INSURANCE SYS-
TEM.—
(1) STUDY REQUIRED.—During the 6-month pe-
riod beginning 18 months after the date of the enact-
ment of the Financial Services Competitiveness Act of
1995, the Federal Deposit Insurance Corporation
shall conduct a study of the risks posed to the deposit
insurance funds by—
(A) the affiliation of insured depository in-
stitutions with securities affiliates and other in-
stitutions described in subsection (s)(1) of section
18 of the Federal Deposit Insurance Act (as
added by subsection (a) of this section); or
(B) any activity described in section 10(a)
(as added by section 103(a) of this Act) of the
Financial Services Holding Company Act of
1995 (as so redesignated by section 128(a) of this
Act) in which insured depository institutions
may engage in accordance with any provision of
Federal or State law.
(2) REPORT TO CONGRESS AND GAO.—
(A) IN GENERAL.—Before the end of the 6-
month period described in paragraph (1), the
Federal Deposit Insurance Corporation shall
submit a report to the Congress on the findings
and conclusions of the Corporation with respect
to the study conducted under such paragraph, to-
gether with such conclusions for administrative
or legislative action as the Corporation may de-
termine to be appropriate.
(B) DETAILS OF SPECIFIC RISKS.—If the
Federal Deposit Insurance Corporation concludes
that certain kinds of activities not specifically
authorized by statute for insured depository in-
stitutions before the date of the enactment of this
Act, or the affiliation of insured depository insti-
tutions with securities affiliates engaged in cer-
tain kinds of securities activities, pose a greater
risk to the deposit insurance funds than activi-
ties specifically authorized by statute for na-
tional banks before January 1, 1995, the report
submitted under subparagraph (A) shall contain
a detailed explanation of the basis for such con-
clusion.
(C) TRANSMITTAL
TO
GAO.—The Federal
Deposit Insurance Corporation shall transmit a
copy of the report referred to in paragraph (1)
to the Comptroller General.
(3) ACTION BY FDIC.—If the Federal Deposit In-
surance Corporation concludes that any activity or
affiliation with respect to insured depository institu-
tions poses a greater risk to any deposit insurance
fund than the risk posed by activities specifically au-
thorized by statute for national banks before January
1, 1995, the Federal Deposit Insurance Corporation
shall treat such conclusion as a factor to be considered
in setting semiannual assessments under section
7(b)(2)(A) of the Federal Deposit Insurance Act.
(4) EVALUATION
OF
REPORT
BY
GAO.—The
Comptroller General shall—
(A) evaluate the report transmitted by the
Federal Deposit Insurance Corporation to the
Comptroller General under paragraph (2); and
(B) submit a report to the Congress on such
evaluation, including a discussion on the meth-
odology used by the Corporation to assess risks
posed by nonbanking activities to the deposit in-
surance funds.
SEC. 
108. 
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 SECU-
RITIES ACTIVITIES.—
‘‘(A) IN
GENERAL.—Notwithstanding the
provisions of paragraph (1) or any other provi-
sion of law, any authority conferred under this
subsection on any foreign bank or company with
respect to securities activities authorized for fi-
nancial services holding companies in the United
States shall terminate 30 days following ap-
proval by the Board of an application by such
foreign bank or company under section 10 of the
Financial Services Holding Company Act of
1995.
‘‘(B) AUTHORITY TO IMPOSE CONDITIONS.—
If a foreign bank or company that engages di-
rectly or through an affiliate in any securities
activity pursuant to paragraph (1) has not re-
ceived approval by the Board under section 10 of
the Financial Services Holding Company Act of
1995 to control a securities affiliate by the end
of the 3-year period beginning on the effective
date of such Act, the Board may impose such
limitations and restrictions, including the termi-
nation of any activities conducted under para-
graph (1) or a requirement that such activities
be conducted in compliance with the safeguards
of section 11 of such Act, as the Board considers
appropriate consistent with the purposes of this
Act and the Financial Services Holding Com-
pany Act of 1995.’’.
SEC. 109. EFFECT ON STATE LAWS PROHIBITING THE AF-
FILIATION OF BANKS AND SECURITIES COM-
PANIES.
(a) IN GENERAL.—Section 7 of the Bank Holding
Company Act of 1956 (12 U.S.C. 1846) is amended by add-
ing at the end the following new subsection:
‘‘(c) AFFILIATIONS AND ACTIVITIES.—No State may
prohibit or limit—
‘‘(1) the affiliation of a bank or financial serv-
ices holding company with a securities affiliate solely
because the securities affiliate is engaged in activities
described in subparagraph (A) or (B) of section
10(a)(1); or
‘‘(2) the insurance or other activities of a sub-
sidiary of a financial services holding company solely
because the financial services holding company is no
longer exempt under this Act pursuant to section
4(d).’’.
(b) BANK ACTIVITIES.—No provision of this Act, and
no amendment made by this Act to any other provision of
law (other than section 10 or 11 of the Financial Services
Holding Company Act of 1995 (as added by sections 103
and 104 of this Act), section 18(s) of the Federal Deposit
Insurance Act (as added by section 107 of this Act), or any
amendments made by title II of this Act), may be construed
as affecting the authority of any bank to engage in any
‘‘(II) with the consent of the
Board, for an additional period not to
exceed 5 years after the 5-year period
referred to in subclause (I),
unless the Board determines that the reten-
tion of such investment would jeopardize the
safety and soundness of any insured deposi-
tory institution affiliate of such successor.
‘‘(iii) CROSS
MARKETING
RESTRIC-
TIONS.—A wholesale financial institution
shall not—
‘‘(I) offer or market, directly or
through any arrangement, any product
or service of an affiliate whose shares
are owned or controlled by the invest-
ment bank holding company pursuant
to this subparagraph or subparagraph
(C); or
‘‘(II) permit any of such wholesale
financial institution’s or subsidiary’s
products or services to be offered or
marketed, directly or through any ar-
rangement, by or through any such af-
filiate.