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SEC. 213. LENDING TO AN AFFILIATED INVESTMENT COM-
PANY.
Section 18 of the Investment Company Act of 1940 (15
U.S.C. 80a–18) is amended by adding at the end the follow-
ing:
‘‘(l) Notwithstanding any provision of this section, it
shall be unlawful for any affiliated person of a registered
investment company or any affiliated person of such a per-
son to loan money to such investment company in con-
travention of such rules, regulations, or orders as the Com-
mission may prescribe in the public interest and consistent
with the protection of investors.’’.
SEC. 214. INDEPENDENT DIRECTORS.
(a) IN GENERAL.—Section 2(a)(19)(A) of the Invest-
ment Company Act of 1940 (15 U.S.C. 80a–2(a)(19)(A))
is amended—
(1) by striking clause (v) and inserting the fol-
lowing new clause:
‘‘(v) any person (other than a reg-
istered investment company) that, at any
time during the preceding 6 months, has ex-
ecuted any portfolio transactions for, en-
gaged in any principal transactions with,
or distributed shares for—
‘‘(I) the investment company,
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‘‘(II) any other investment com-
pany having the same investment ad-
viser as such investment company or
holding itself out to investors as a re-
lated company for purposes of invest-
ment or investor services, or
‘‘(III) any account over which the
investment company’s investment ad-
viser has brokerage placement discre-
tion,
or any affiliated person of such a person,’’;
(2) by redesignating clause (vi) as clause (vii);
and
(3) by inserting after clause (v) the following
new clause:
‘‘(vi) any person (other than a reg-
istered investment company) that, at any
time during the preceding 6 months, has
loaned money to—
‘‘(I) the investment company,
‘‘(II) any other investment com-
pany having the same investment ad-
viser as such investment company or
holding itself out to investors as a re-
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lated company for purposes of invest-
ment or investor services, or
‘‘(III) any account for which the
investment company’s investment ad-
viser has borrowing authority,
or any affiliated person of such a person,
or’’.
(b) AFFILIATION OF DIRECTORS.—Section 10(c) of the
Investment Company Act of 1940 (15 U.S.C. 80a–10(c)) is
amended by striking ‘‘bank, except’’ and inserting ‘‘bank
(and its subsidiaries) or any single financial services hold-
ing company (and its affiliates and subsidiaries), as those
terms are defined in the Financial Services Holding Com-
pany Act of 1995, except’’.
(c) EFFECTIVE DATE.—The provisions of subsection
(a) of this section shall become effective 1 year after the
date of enactment of this subtitle.
SEC. 215. ADDITIONAL SEC DISCLOSURE AUTHORITY.
(a) MISREPRESENTATION.—Section 35(a) of the In-
vestment Company Act of 1940 (15 U.S.C. 80a–34(a)) is
amended to read as follows:
‘‘(a) MISREPRESENTATION OF GUARANTEES.—
‘‘(1) IN GENERAL.—It shall be unlawful for any
person, issuing or selling any security of which a reg-
istered investment company is the issuer, to represent
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or imply in any manner whatsoever that such secu-
rity or company—
‘‘(A) has been guaranteed, sponsored, rec-
ommended, or approved by the United States, or
any agency, instrumentality or officer of the
United States;
‘‘(B) has been insured by the Federal De-
posit Insurance Corporation; or
‘‘(C) is guaranteed by or is otherwise an ob-
ligation of any bank or insured depository insti-
tution.
‘‘(2) DISCLOSURES.—Any person issuing or sell-
ing the securities of a registered investment company
shall prominently disclose that the investment com-
pany or any security issued by the investment com-
pany—
‘‘(A) is not insured by the Federal Deposit
Insurance Corporation;
‘‘(B) is not guaranteed by an affiliated in-
sured depository institution; and
‘‘(C) is not otherwise an obligation of any
bank or insured depository institution,
in accordance with such rules, regulations, or orders
as the Commission may prescribe as reasonably nec-
essary or appropriate in the public interest for the
201
protection of investors, after consulting in writing
with the appropriate Federal banking agencies.
‘‘(3) DEFINITIONS.—The terms ‘insured deposi-
tory institution’ and ‘appropriate Federal banking
agency’ have the meanings given to such terms in sec-
tion 3 of the Federal Deposit Insurance Act.’’.
(b) DECEPTIVE USE OF NAMES.—Section 35(d) of the
Investment Company Act of 1940 (15 U.S.C. 80a–34(d))
is amended to read as follows:
‘‘(d)(1) It shall be unlawful for any registered invest-
ment company to adopt as part of the name or title of such
company, or of any securities of which it is the issuer, any
word or words that the Commission finds are materially
deceptive or misleading. The Commission may adopt such
rules or regulations or issue such orders as are necessary
or appropriate to prevent the use of deceptive or misleading
names or titles by investment companies.
‘‘(2) It shall be deceptive and misleading for any reg-
istered investment company (A) that is an affiliated person
of a bank or an affiliated person of such a person, or (B)
for which a bank or an affiliated person of a bank acts
as investment adviser, sponsor, promoter, or principal un-
derwriter, to adopt, as part of the name or title of such
company, or of any security of which it is an issuer, any
word that is the same or similar to, or a variation of, the
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name or title of such bank or affiliated person thereof, in
contravention of such rules, regulations, or orders as the
Commission may prescribe as necessary or appropriate in
the public interest or for the protection of investors.’’.
SEC. 216. DEFINITION OF BROKER UNDER THE INVEST-
MENT COMPANY ACT OF 1940.
Section 2(a)(6) of the Investment Company Act of
1940 (15 U.S.C. 80a–2(a)(6)) is amended to read as follows:
‘‘(6) ‘Broker’ has the same meaning as in the Se-
curities Exchange Act of 1934, except that it does not
include any person solely by reason of the fact that
such person is an underwriter for 1 or more invest-
ment companies.’’.
SEC. 217. DEFINITION OF DEALER UNDER THE INVESTMENT
COMPANY ACT OF 1940.
Section 2(a)(11) of the Investment Company Act of
1940 (15 U.S.C. 80a–2(a)(11)) is amended to read as fol-
lows:
‘‘(11) The term ‘dealer’ has the same meaning as
in the Securities Exchange Act of 1934, but does not
include an insurance company or investment com-
pany.’’.
203
SEC. 218. REMOVAL OF THE EXCLUSION FROM THE DEFINI-
TION OF INVESTMENT ADVISER FOR BANKS
THAT ADVISE INVESTMENT COMPANIES.
(a) INVESTMENT ADVISER.—Section 202(a)(11) of the
Investment Advisers Act of 1940 (15 U.S.C. 80b–2(a)(11))
is amended in subparagraph (A), by striking ‘‘investment
company’’ and inserting ‘‘investment company, except that
the term ‘investment adviser’ includes any bank or finan-
cial services holding company to the extent that such bank
or financial services holding company acts as an investment
adviser to a registered investment company, or if, in the
case of a bank, such services are performed through a sepa-
rately identifiable department or division, the department
or division, and not the bank itself, shall be deemed to be
the investment adviser’’.
(b) SEPARATELY IDENTIFIABLE DEPARTMENT OR DI-
VISION.—Section 202(a) of the Investment Advisers Act of
1940 (15 U.S.C. 80b–2(a)) is amended by adding at the
end the following:
‘‘(25) The term ‘separately identifiable depart-
ment or division’ of a bank means a unit—
‘‘(A) that is under the direct supervision of
an officer or officers designated by the board of
directors of the bank as responsible for the day-
to-day conduct of the bank’s investment adviser
activities for 1 or more investment companies,
204
including the supervision of all bank employees
engaged in the performance of such activities;
and
‘‘(B) for which all of the records relating to
its investment adviser activities are separately
maintained in or extractable from such unit’s
own facilities or the facilities of the bank, and
such records are so maintained or otherwise ac-
cessible as to permit independent examination
and enforcement of this Act or the Investment
Company Act of 1940 and rules and regulations
promulgated under this Act or the Investment
Company Act of 1940.’’.
SEC. 219. DEFINITION OF BROKER UNDER THE INVEST-
MENT ADVISERS ACT OF 1940.
Section 202(a)(3) of the Investment Advisers Act of
1940 (15 U.S.C. 80b–2(a)(3)) is amended to read as follows:
‘‘(3) The term ‘broker’ has the same meaning as
in the Securities Exchange Act of 1934.’’.
SEC. 220. DEFINITION OF DEALER UNDER THE INVESTMENT
ADVISERS ACT OF 1940.
Section 202(a)(7) of the Investment Advisers Act of
1940 (15 U.S.C. 80b–2(a)(7)) is amended to read as follows:
‘‘(7) The term ‘dealer’ has the same meaning as
in the Securities Exchange Act of 1934, but does not
205
include an insurance company or investment com-
pany.’’.
SEC. 221. INTERAGENCY CONSULTATION.
The Investment Advisers Act of 1940 (15 U.S.C. 80b–
1 et seq.) is amended by inserting after section 210 the fol-
lowing new section:
‘‘SEC. 210A. CONSULTATION.
‘‘(a) EXAMINATION RESULTS AND OTHER INFORMA-
TION.—
‘‘(1) The appropriate Federal banking agency
shall provide the Commission upon request the results
of any examination, reports, records, or other infor-
mation as each may have access to with respect to the
investment advisory activities of any financial serv-
ices holding company, bank, or separately identifiable
department or division of a bank, that is registered
under section 203 of this title, or, in the case of a fi-
nancial services holding company or bank, that has
a subsidiary or a separately identifiable department
or division registered under that section, to the extent
necessary for the Commission to carry out its statu-
tory responsibilities.
‘‘(2) The Commission shall provide to the appro-
priate Federal banking agency upon request the re-
sults of any examination, reports, records, or other
206
information with respect to the investment advisory
activities of any financial services holding company,
bank, or separately identifiable department or divi-
sion of a bank, any of which is registered under sec-
tion 203 of this title, to the extent necessary for the
agency to carry out its statutory responsibilities.
‘‘(b) EFFECT ON OTHER AUTHORITY.—Nothing herein
shall limit in any respect the authority of the appropriate
Federal banking agency with respect to such financial serv-
ices holding company, bank, or department or division
under any provision of law.
‘‘(c) DEFINITION.—For purposes of this section, the
term ‘appropriate Federal banking agency’ shall have the
same meaning as in section 3 of the Federal Deposit Insur-
ance Act.’’.
SEC. 222. TREATMENT OF BANK COMMON TRUST FUNDS.
(a) SECURITIES ACT OF 1933.—Section 3(a)(2) of the
Securities Act of 1933 (15 U.S.C. 77c(a)(2)) is amended
by striking ‘‘or any interest or participation in any com-
mon trust fund or similar fund maintained by a bank ex-
clusively for the collective investment and reinvestment of
assets contributed thereto by such bank in its capacity as
trustee, executor, administrator, or guardian’’ and insert-
ing ‘‘or any interest or participation in any common trust
fund or similar fund that is excluded from the definition
207
of the term ‘investment company’ under section 3(c)(3) of
the Investment Company Act of 1940’’.
(b) SECURITIES EXCHANGE ACT OF 1934.—Section
3(a)(l2)(A)(iii) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)(l2)(A)(iii)) is amended to read as follows:
‘‘(iii) any interest or participation in any
common trust fund or similar fund that is ex-
cluded from the definition of the term ‘invest-
ment company’ under section 3(c)(3) of the In-
vestment Company Act of 1940;’’.
(c) INVESTMENT COMPANY ACT
OF 1940.—Section
3(c)(3) of the Investment Company Act of 1940 (15 U.S.C.
80a–3(c)(3)) is amended by inserting before the period the
following: ‘‘, if—
‘‘(A) such fund is employed by the bank
solely as an aid to the administration of trusts,
estates, or other accounts created and main-
tained for a fiduciary purpose;
‘‘(B) except in connection with the ordinary
advertising of the bank’s fiduciary services, in-
terests in such fund are not—
‘‘(i) advertised; or
‘‘(ii) offered for sale to the general pub-
lic; and
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‘‘(C) fees and expenses charged by such fund
are not in contravention of fiduciary principles
established under applicable Federal or State
law’’.
(d) TAX EFFECT.—It is the sense of the Congress that
the public interest would be furthered by enacting legisla-
tion to amend section 584 of the Internal Revenue Code of
1986 by inserting after subsection (h) the following new sub-
section:
‘‘(i) CONVERSION, MERGERS, OR REORGANIZATION OF
COMMON TRUST FUNDS.—Notwithstanding any other pro-
vision of the Internal Revenue Code, any transfer of all or
substantially all of the assets of a common trust fund tax-
able under this section to a registered investment company
taxable under subchapter M shall not result in a gain or
loss to the participants in such common trust fund where
the transfer is a result of a merger, conversion, reorganiza-
tion, transfer, or other similar transaction or series of
transactions.’’.
SEC. 223. INVESTMENT ADVISERS PROHIBITED FROM HAV-
ING 
CONTROLLING 
INTEREST 
IN 
REG-
ISTERED INVESTMENT COMPANY.
Section 15 of the Investment Company Act of 1940 (15
U.S.C. 80a–15) is amended by adding at the end the follow-
ing new subsection:
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‘‘(g) CONTROLLING INTEREST IN INVESTMENT COM-
PANY PROHIBITED.—
‘‘(1) IN GENERAL.—If any investment adviser to
a registered investment company, or an affiliated per-
son of that investment adviser, holds a controlling in-
terest in that registered investment company in a
trustee or fiduciary capacity, such person shall—
‘‘(A) if it holds the shares in a trustee or fi-
duciary capacity with respect to any employee
benefit plan subject to the Employee Retirement
Income Security Act of 1974, transfer the power
to vote the shares of the investment company
through to another person acting in a fiduciary
capacity with respect to the plan who is not an
affiliated person of that investment adviser or
any affiliated person thereof; or
‘‘(B) if it holds the shares in a trustee or fi-
duciary capacity with respect to any other per-
son or entity other than an employee benefit
plan subject to the Employee Retirement Income
Security Act of 1974—
‘‘(i) transfer the power to vote the
shares of the investment company through
to—
210
‘‘(I) the beneficial owners of the
shares;
‘‘(II) another person acting in a
fiduciary capacity who is not an affili-
ated person of that investment adviser
or any affiliated person thereof; or
‘‘(III) any person authorized to
receive statements and information
with respect to the trust who is not an
affiliated person of that investment ad-
viser or any affiliated person thereof;
‘‘(ii) vote the shares of the investment
company held by it in the same proportion
as shares held by all other shareholders of
the investment company; or
‘‘(iii) vote the shares of the investment
company as otherwise permitted under such
rules, regulations, or orders as the Commis-
sion may prescribe for the protection of in-
vestors.
‘‘(2) EXEMPTION.—Paragraph (1) shall not
apply to any investment adviser to a registered in-
vestment company, or an affiliated person of that in-
vestment adviser, holding shares of the investment
company in a trustee or fiduciary capacity if that
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registered investment company consists solely of assets
held in such capacities.
‘‘(3) SAFE HARBOR.—No investment adviser to a
registered investment company or any affiliated per-
son of such investment adviser shall be deemed to have
acted unlawfully or to have breached a fiduciary duty
under State or Federal law solely by reason of acting
in accordance with clause (i), (ii), or (iii) of para-
graph (1)(B).
‘‘(4) CHURCH PLAN EXEMPTION.—Paragraph (1)
shall not apply to any investment adviser to a reg-
istered investment company, or an affiliated person of
that investment adviser, holding shares in such a ca-
pacity, if such investment adviser or such affiliated
person is an organization described in section
414(e)(3)(A) of the Internal Revenue Code of 1986.’’.
SEC. 224. CONFORMING CHANGE IN DEFINITION.
Section 2(a)(5) of the Investment Company Act of
1940 (15 U.S.C. 80a–2(a)(5)) is amended by striking ‘‘(A)
a banking institution organized under the laws of the Unit-
ed States’’ and inserting ‘‘(A) a depository institution (as
defined in section 3 of the Federal Deposit Insurance Act)
or a branch or agency of a foreign bank (as such terms
are defined in section 101(b) of the International Banking
Act of 1978)’’.
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SEC. 225. EFFECTIVE DATE.
This subtitle shall take effect 270 days after the date
of the enactment of this Act.
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