I
105TH CONGRESS
1ST SESSION
H. R. 268
To enhance competition in the financial services sector and merge the
commercial bank and savings association charters.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 7, 1997
Mrs. ROUKEMA (for herself and Mr. VENTO) introduced the following bill;
which was referred to the Committee on Banking and Financial Services,
and in addition to the Committee on Commerce, for a period to be subse-
quently determined by the Speaker, in each case for consideration of such
provisions as fall within the jurisdiction of the committee concerned
A BILL
To enhance competition in the financial services sector and
merge the commercial bank and savings association charters.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Depository Institution Affiliation and Thrift Charter
Conversion Act’’.
(b) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Findings and purposes.
TITLE I—FINANCIAL SERVICES HOLDING COMPANY ACT
Sec. 101. Short title.
Subtitle A—General Provisions
Sec. 102. Definitions.
Sec. 103. Changes in control of depository institutions.
Sec. 104. Affiliate transactions.
Sec. 105. Capital requirements.
Sec. 106. Interstate acquisitions of insured banks.
Sec. 107. Differential treatment prohibition; laws inconsistent with this Act.
Sec. 108. Insider lending provisions.
Sec. 109. Reports, examination and enforcement.
Sec. 110. Divestiture.
Sec. 111. Criminal penalties.
Sec. 112. Civil enforcement, cease-and-desist orders, civil money penalties, re-
moval, and prohibition authority.
Sec. 113. Judicial review.
Sec. 114. National Financial Services Committee.
Subtitle B—Securities Activities of Financial Services Holding Companies
Sec. 121. Limitation on securities activities of depository institutions affiliated
with securities affiliates.
Sec. 122. Safeguards relating to securities affiliates.
Sec. 123. Joint standards relating to retail sales of certain nondeposit invest-
ment products.
Subtitle C—Insurance and Real Estate Development Activities of Financial
Services Holding Companies
Sec. 131. Limitation on insurance underwriting and real estate development ac-
tivities of depository institutions.
Sec. 132. Acquisition of preexisting insurance agency by bank holding compa-
nies.
Sec. 133. Existing contracts.
Subtitle D—Redomestication of Mutual Life Insurers
Sec. 141. Redomestication of mutual life insurers.
TITLE II—CONFORMING AMENDMENTS TO OTHER LAWS FOR
FINANCIAL SERVICES HOLDING COMPANIES
Sec. 201. Exemption of financial services holding companies from the Bank
Holding Company Act of 1956.
Sec. 202. Amendment to the Federal Reserve Act.
Sec. 203. Amendments to the Banking Act of 1933.
Sec. 204. Amendments to the Federal Deposit Insurance Act.
Sec. 205. Amendment to the Community Reinvestment Act.
Sec. 206. Amendment to the Federal Power Act.
Sec. 207. Amendment to the Right to Financial Privacy Act.
Sec. 208. Amendments to the International Banking Act.
Sec. 209. Amendment concerning national banks.
TITLE III—FUNCTIONAL REGULATION AMENDMENTS TO SECURI-
TIES LAWS FOR FINANCIAL SERVICES HOLDING COMPANIES
Subtitle A—Broker Dealer Provisions
Sec. 301. Definition of broker.
Sec. 302. Definition of dealer.
Sec. 303. Power to exempt from the definitions of broker and dealer.
Sec. 304. Margin requirements.
Subtitle B—Investment Company Provisions
Sec. 311. Custody of investment company assets by affiliated bank.
Sec. 312. Lending to an affiliated investment company.
Sec. 313. Independent directors.
Sec. 314. Additional SEC disclosure authority.
Sec. 315. Definition of broker under the Investment Company Act of 1940.
Sec. 316. Definition of dealer under the Investment Company Act of 1940.
Sec. 317. Removal of the exclusion from the definition of investment adviser for
banks that advise investment companies.
Sec. 318. Definition of broker under the Investment Advisors Act of 1940.
Sec. 319. Definition of dealer under the Investment Advisors Act of 1940.
Sec. 320. Interagency consultation.
Sec. 321. Treatment of bank common trust funds.
Sec. 322. Investment advisers prohibited from having controlling interest in
registered investment company.
Sec. 323. Conforming change in definition.
Sec. 324. Effective date.
TITLE IV—WHOLESALE FINANCIAL INSTITUTIONS OWNED BY
FINANCIAL SERVICES HOLDING COMPANIES
Sec. 401. National wholesale financial institutions.
Sec. 402. State member wholesale financial institutions.
Sec. 403. Amendments to the Federal Deposit Insurance Act.
TITLE V—MERGER OF BANK AND THRIFT CHARTERS,
REGULATORS, AND INSURANCE FUNDS
Subtitle A—Conversion of Thrift Charters
Sec. 501. Short title.
Sec. 502. Termination of Federal savings associations; treatment of State sav-
ings associations as banks for purposes of Federal banking law.
Sec. 503. Treatment of certain activities and affiliations of bank holding com-
panies resulting from this Act.
Sec. 504. Transition provisions for activities of savings associations which con-
vert into or become treated as banks.
Sec. 505. Registration of bank holding companies resulting from conversions of
savings associations to banks or treatment of savings associa-
tions as banks.
Sec. 506. Additional transition provisions and special rules.
Sec. 507. Technical and conforming amendments.
Sec. 508. References to savings associations and state banks in federal law.
Sec. 509. Repeal of Home Owners’ Loan Act.
Sec. 510. Definitions.
Subtitle B—Elimination of Office of Thrift Supervision
Sec. 511. Office of Thrift Supervision abolished.
Sec. 512. Determination of transferred functions and employees.
Sec. 513. Savings provisions.
Sec. 514. Cost of funds indexes.
Sec. 515. References in federal law to director of the Office of Thrift Super-
vision.
Sec. 516. Reconfiguration of board of directors of FDIC as a result of removal
of director of the Office of Thrift Supervision.
Subtitle C—Merger of BIF and SAIF
Sec. 521. Amendment to Economic Growth and Paperwork Reduction Act of
1996.
TITLE VI—NATIONAL MARKET FUNDED LENDING INSTITUTIONS
Sec. 601. National market funded lending institutions.
TITLE VII—EFFECTIVE DATE
Sec. 701. Effective date.
SEC. 2. FINDINGS AND PURPOSES.
(a) FINDINGS.—The Congress finds that—
(1) current laws and regulations restrain effi-
ciency, competition, and innovation in the design
and delivery of financial services to the disadvantage
of consumers;
(2) restrictions on ownership of depository insti-
tutions and affiliations with other business organiza-
tions and restrictions and burdens on ownership of
other financial institutions by insurance companies
interfere with their ability to attract and retain cap-
ital and managerial resources;
(3) the vulnerability of the financial system and
its discrete components is increased and effective
monitoring, supervision, and coordination of actions
during periods of stress is impeded by fragmented
and disparate regulation;
(4) the thrift charter has become obsolete;
(5) market demand and safety and soundness
considerations warrant the creation of a new charter
for uninsured wholesale financial institutions; and
(6) current laws inhibit the ability of domestic
financial markets and intermediaries to respond to
the serious competitive challenges presented by for-
eign intermediaries and the globalization of markets.
(b) PURPOSES.—The purposes of this Act are to pro-
mote the safety and soundness of the Nation’s financial
system, enhance the quality of regulation and supervision
of financial intermediaries, and achieve a more efficient
market and effective regulatory structure by—
(1) establishing an alternative and comprehen-
sive legislative framework for the creation and regu-
lation of financial services holding companies;
(2) enhancing the capital adequacy of commer-
cial banks, brokers and dealers, insurance compa-
nies, and other financial companies by eliminating
prohibitions on common ownership and affiliation
within a financial services holding company;
(3) permitting affiliates to engage in regulated
activities subject to functional and equal regulation
by the appropriate Federal or State regulator;
(4) insulating and protecting insured depository
institutions through enhanced capital requirements,
expanded restrictions on relationships with affiliates,
broader examination and enforcement authority, and
increased civil and criminal penalties;
(5) permitting the efficient marketing and dis-
tribution of financial services to consumers subject
to safeguards against coercive tie-ins and other un-
fair and abusive practices;
(6) establishing the National Financial Services
Committee to oversee the evolution and supervision
of the financial services industry and to report to the
Congress;
(7) eliminating the thrift charter and requiring
thrifts to convert to banks, subject to appropriate
transition provisions;
(8) merging the bank and thrift insurance
funds; and
(9) creating new State and Federal charters for
uninsured wholesale financial institutions.
TITLE I—FINANCIAL SERVICES HOLDING
COMPANY ACT
SEC. 101. SHORT TITLE.
This title may be cited as the ‘‘Financial Services
Holding Company Act’’.
Subtitle A—General Provisions
SEC. 102. DEFINITIONS.
For purposes of this Act, the following definitions
apply.
(a) FINANCIAL SERVICES HOLDING COMPANY.—The
term ‘‘financial services holding company’’ means a com-
pany that—
(1) has filed with the National Financial Serv-
ices Committee a notice stating such company’s in-
tent to comply with the requirements of this Act and
has not withdrawn such notice;
(2) controls, acquires control of, or operates a
depository institution; and
(3) is predominantly a financial company.
(b) COMPANY.—The term ‘‘company’’ means any cor-
poration, partnership, business, trust, association, or simi-
lar organization, or any other trust unless by its terms
it must terminate within 25 years or not later than 21
years and 10 months after the death of individuals living
on the effective date of the trust, but shall not include
any corporation the majority of the shares of which are
owned by the United States or by any State.
(c) BANK HOLDING COMPANY.—The term ‘‘bank
holding company’’ has the same meaning as in section
2(a) of the Bank Holding Company Act of 1956.
(d) CONTROL.—Except as provided in section
107(e)(2), the term ‘‘control’’ means, directly or indi-
rectly, owns or has the power to vote 25 percent or more
of any class of voting securities of a company, or has the
power to elect a majority of the directors of a company,
except that—
(1) no company shall be deemed to control or
to have acquired control of any other company by
virtue of its ownership of the voting securities of
such other company—
(A) acquired or held in an agency, trust, or
other fiduciary capacity, unless the company
has sole discretionary authority to exercise vot-
ing rights with respect thereto;
(B) acquired or held in connection with or
incidental to the underwriting of securities if
such securities are held only for such period of
time as will permit the sale thereof on a reason-
able basis; or
(C) acquired in securing or collecting a
debt previously contracted in good faith, until 2
years after the date of acquisition or for such
additional period of time as the appropriate
Federal banking agency may permit; and
(2) no company formed for the sole purpose of
participating in a proxy solicitation shall be deemed
to be in control of a company by virtue of its acqui-
sition of voting rights with respect to shares of such
company acquired in the course of such solicitation.
(e) AFFILIATE.—Except as provided in section
107(e)(1), the term ‘‘affiliate’’ of a company means any
other company which controls, is controlled by, or is under
common control with such company.
(f) SUBSIDIARY.—The term ‘‘subsidiary’’ has the
same meaning as in section 2(d) of the Bank Holding
Company Act of 1956.
(g) DEPOSITORY INSTITUTION AND INSURED DEPOS-
ITORY INSTITUTION.—
(1) IN GENERAL.—The terms ‘‘depository insti-
tution’’ and ‘‘insured depository institution’’ have
the same meanings as in section 3 of the Federal
Deposit Insurance Act, except that the term ‘‘depos-
itory institution’’ also means—
(A) any wholesale financial institution; and
(B) any branch, agency, or commercial
lending company operated in the United States
by a foreign bank.
(2) 
EXCEPTION
RELATED
TO
FOREIGN
BANKS.—Notwithstanding paragraph (1)(B), the
National Financial Services Committee may, for
purposes of any section or provision of this Act, ex-
empt from the definition of ‘‘depository institution’’
any branch, agency, or commercial lending company
operated in the United States by a foreign bank as
the Committee deems appropriate, provided that
such exemption is—
(A) issued by regulation, and
(B) consistent with the principles of na-
tional treatment and equality of competitive op-
portunity.
(h) LEAD DEPOSITORY INSTITUTION.—The term
‘‘lead depository institution’’ means the largest depository
institution controlled by the financial services holding
company, based on a comparison of the average total as-
sets controlled by each depository institution during the
previous 12-month period.
(i) WHOLESALE
FINANCIAL
INSTITUTION.—The
term ‘‘wholesale financial institution’’ means a national
wholesale financial institution described in section 5136B
of the Revised Statutes of the United States or a State
member wholesale financial institution described in section
9B of the Federal Reserve Act.
(j) FOREIGN BANK TERMS.—
(1) 
IN
GENERAL.—The 
terms 
‘‘agency’’,
‘‘branch’’, ‘‘foreign bank’’, and ‘‘commercial lending
company’’ have the same meaning as in section 1(b)
of the International Banking Act.
(2) COMMERCIAL
LENDING
COMPANY
OPER-
ATED BY A FOREIGN BANK.—The term ‘‘commercial
lending company operated by a foreign bank’’ means
a commercial lending company controlled by a for-
eign bank.
(3) BRANCH OR AGENCY OPERATED BY A FOR-
EIGN BANK.—A branch or agency operated by a for-
eign bank shall be deemed to be controlled by that
foreign bank.
(k) DOMESTIC
BRANCH.—The term ‘‘domestic
branch’’ has the same meaning as in section 3(o) of the
Federal Deposit Insurance Act;
(l) PREDOMINANTLY A FINANCIAL COMPANY.
(1) IN GENERAL.—The term ‘‘predominantly a
financial company’’ with respect to any company
means a company at least 75 percent of the business
(in the United States) of which is derived from—
(A) financial service institutions controlled
by such company; or
(B) financial activities engaged in by such
company or any of its affiliates.
(2) QUALIFIED BANK HOLDING COMPANY AL-
TERNATIVE.—As an alternative to paragraph (1),
the term ‘‘predominantly a financial company’’
means any company which would satisfy all the re-
quirements of section 4(k) of the Bank Holding
Company Act of 1956 if such company had elected
to be a bank holding company rather than a finan-
cial services holding company.
(3) FOREIGN BANK ALTERNATIVE.—As an al-
ternative to paragraph (1), a foreign bank, and any
company of which a foreign bank is a subsidiary, is
‘‘predominantly a financial company’’ if—
(A) all of the business of such foreign bank
and any such company (including the business
of direct and indirect subsidiaries of the foreign
bank) in the United States is derived from—
(i) financial services institutions con-
trolled or operated by such foreign bank;
(ii) financial activities engaged in by
such foreign bank or any of its affiliates;
(iii) companies that, with respect to
that foreign bank, would meet the stand-
ard for investment under sections 2(h)(2)
or 4(c)(9) of the Bank Holding Company
Act of 1956 as if that foreign bank were
subject to that Act; or
(iv) activities that, with respect to
that foreign bank, would be permissible
under section 4(c)(9) of the Bank Holding
Company Act of 1956 if that foreign bank
were subject to that Act; and
(B) the amount of banking business con-
ducted outside the United States by such for-
eign bank and such company of which that for-
eign bank is a subsidiary satisfies the standard
described in section 2(h)(2) of the Bank Hold-
ing Company Act of 1956.
(4) RECIPROCAL NATIONAL TREATMENT.—
(A) IN GENERAL.—A foreign bank that op-
erates a branch, agency or commercial lending
company in the United States, and any com-
pany that owns or controls such a foreign bank,
shall be eligible for the treatment afforded
under paragraph (1) and section 122(m) only if
the home country of such foreign bank or com-
pany accords to the United States banks the
same competitive opportunities in banking as
such country accords to domestic banks of such
country.
(B) COORDINATION
WITH
NAFTA.—Sub-
paragraph (A) shall not apply in derogation of
any obligation under the North American Free
Trade Agreement.
(C) HOME COUNTRY DEFINED.—For pur-
poses of subparagraph (A), the term ‘‘home
country’’ means, with respect to any foreign
bank or company referred to in subparagraph
(A), the country under the laws of which the
foreign bank or company is organized.
(5) INTERPRETIVE AUTHORITY.—The National
Financial Services Committee shall issue regulations
describing the method for calculating compliance
with the standard described in paragraphs (1) and
(2), taking into account such factors as revenues
and assets, including assets under management.
(6) IMPLEMENTATION
AND
AUTHORITY.—The
appropriate Federal banking agency of the lead de-
pository institution of a financial services holding
company shall implement and enforce the regula-
tions prescribed pursuant to paragraph (4) with re-
spect to such holding company.
(m) FINANCIAL SERVICES INSTITUTION.—The term
‘‘financial services institution’’ means—
(1) A depository institution;
(2) A broker or dealer (as defined in section 3
of the Securities Exchange Act of 1934);
(3) A futures commission merchant (as defined
in section 1(a)(12) of the Commodity Exchange
Act);
(4) An investment company (as defined in sec-
tion 3 of the Investment Company Act of 1940);
(5) An investment adviser (as defined in section
202(a)(11) of the Investment Act of 1940);
(6) An insurance company organized or licensed
under the law of any State, including a company
that only incurs liabilities under annuity contracts,
the income on which is tax deferred under Section
72 of the Internal Revenue Code of 1986;
(7) A trust company organized under the laws
of the United States or the laws of any State; or
(8) A national market funded lending institu-
tion organized pursuant to section 5158 of the Re-
vised Statutes of the United States, as added by sec-
tion 601 of the Depository Institution Affiliation and
Thrift Charter Conversion Act;
(9) Any other type of company that is ‘‘engaged
in the business of providing financial services’’, as
determined by the National Financial Services Com-
mittee by rule, regulation, or order.
(n) FINANCIAL ACTIVITIES.—The term ‘‘financial ac-
tivities’’ means any of the following—
(1) receiving money subject to a deposit or
other repayment obligation;
(2) lending, exchanging, transferring or safe-
guarding money or other financial assets;
(3) providing any device or other instrumental-
ity for the transfer of money or other financial as-
sets;
(4) insuring, guaranteeing or indemnifying
against loss, harm, damage, illness, disability or
death;
(5) providing financial, investment or economic
advisory or information services, including advising
an investment company (as defined in section 3 of
the Investment Company Act of 1940);
(6) directly or indirectly acquiring or control-
ling, whether as principal, on behalf of 1 or more en-
tities (including entities, other than a depository in-
stitution or subsidiary of a depository institution,
that the financial services holding company con-
trols), or otherwise, shares, assets, or ownership in-
terests (including without limitation debt or equity
securities, partnership interests, trust certificates, or
other instruments representing ownership) of a com-
pany or other entity, whether or not constituting
control of such company or entity, engaged in any
activity 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 in-
terests are acquired and held as part of a bona
fide underwriting, investment banking, or insur-
ance company investment activity, which in-
cludes investment activities engaged in for the
purpose of appreciation and ultimate resale or
other disposition of the investment, and such
shares, assets, or ownership interest are held
for such a period of time as will permit the sale
or disposition thereof on a reasonable basis con-
sistent 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
subparagraph (B);
(7) arranging, effecting or facilitating financial
transactions for the account of third parties;
(8) underwriting, dealing in or making a mar-
ket in securities;
(9) engaging in any activity that is permissible
for a bank holding company pursuant to section
4(c)(8) of the Bank Holding Company Act of 1956
by rule, order or regulation;
(10) engaging in any activity (in the United
States) that is—
(A) permissible for a bank holding com-
pany to engage in outside the United States,
and
(B) considered a financial activity or bank-
ing or financial operation, pursuant to section
4(c)(13) of the Bank Holding Company Act of
1956 or any rule, order, or regulation issued
thereunder;
(11) owning shares of any company that would
be permissible for a bank holding company to own
pursuant to sections 4(c)(6) and 4(c)(7) of the Bank
Holding Company Act of 1956;
(12) engaging in the functional equivalent of
any of the foregoing; or
(13) engaging in any activity that the National
Financial Services Committee determines by rule,
order, or regulation to be financial in nature or inci-
dental to such financial activities, taking into ac-
count—
(A) 
changes 
or 
reasonably 
expected
changes in the marketplace in which financial
services holding company compete;
(B) 
changes 
or 
reasonably 
expected
changes in the technology by which financial
services are delivered; or
(C) whether such activity is necessary or
appropriate to—
(i) allow a financial services holding
company and its affiliates to compete effec-
tively against any company seeking to pro-
vide financial services in the United States;
(ii) use any available or emerging
technological means to provide financial
services; or
(iii) offer customers any available or
emerging technological means for using fi-
nancial services.
(o) APPROPRIATE FEDERAL BANKING AGENCY.—
The term ‘‘appropriate Federal banking agency’’ has the
same meaning as in section 3 of the Federal Deposit In-
surance Act.
(p) STATE.—The term ‘‘State’’ has the same mean-
ing as in section 3 of the Federal Deposit Insurance Act.
(q) CAPITAL TERMS.—
(1) IN GENERAL.—The terms ‘‘adequately cap-
italized’’ and ‘‘well capitalized’’ have the same mean-
ings as in—
(A) section 38(b)(1) of the Federal Deposit
Insurance Act with respect to an insured depos-
itory institution;
(B) section 9B(c)(2)(B) of the Federal Re-
serve Act with respect to a State member
wholesale financial institution; and
(C) section 5136(B)(e) of the Revised
Statutes of the United States with respect to a
national wholesale financial institution.
(2) FOREIGN BANK CAPITAL.—With respect to
a branch, agency, or commercial lending company
operated in the United States by a foreign bank, the
terms ‘‘adequately capitalized’’ and ‘‘well capital-
ized’’ shall be defined and established by the Na-
tional Financial Services Committee for purposes of
this Act, provided that such capital standards—
(A) are comparable to the capital stand-
ards that apply to other depository institutions
for purposes of this Act; and
(B) give due regard to the principle of na-
tional treatment and equality of competitive op-
portunity.
(r) SECURITIES AFFILIATE.—The term ‘‘securities
affiliate’’ means a company that—
(1) is an affiliate of a financial services holding
company, other than a depository institution; and
(2) underwrites or deals in any security; and
(3) is (or is required to be) registered under the
Securities Exchange Act of 1934 as a broker or
dealer,
but does not include a company that underwrites or deals
exclusively in securities that are expressly authorized by
section 5136 of the Revised Statutes of the United States
as permissible for a national bank to underwrite or deal
in.
SEC. 103. CHANGES IN CONTROL OF DEPOSITORY INSTITU-
TIONS.
No financial services holding company acting directly
or indirectly, or through or in concert with one or more
other persons, all acquire control of a depository institu-
tion, bank holding company, or financial services holding
company not controlled by such company on the date it
became a financial services holding company, if such ac-
quisition and control occurs through a purchase, assign-
ment, transfer, pledge, or other deposition of voting stock
of such depository institution, bank holding company, or
financial services holding company, unless the financial
services holding company has complied with the require-
ments of section 7(j) of the Federal Deposit Insurance
Act. Any failure to comply with the preceding require-
ments shall subject the relevant financial services holding
company to the penalties and other procedures provided
in sections 109 through 112, in addition to otherwise ap-
plicable penalties.
SEC. 104. AFFILIATE TRANSACTIONS.
(a) APPLICABILITY OF SECTIONS 23A AND 23B OF
THE FEDERAL RESERVE ACT.—
(1) IN GENERAL.—The provisions of sections
23A and 23B of the Federal Reserve Act shall be
applicable to every depository institution controlled
by a financial services holding company in the same
manner and to the same extent as if such depository
institution were a member bank; and for this pur-
pose, any company which would be an affiliate of a
depository institution for purposes of such sections
23A and 23B if such depository institution were a
1956 that would apply if the foreign bank were
subject to that Act.
(b) ADDITIONAL LIMITATIONS ON AFFILIATE TRANS-
ACTIONS.—
(1) IN
GENERAL.—The appropriate Federal
banking agency may, upon a finding of probable
harm that cannot adequately be prevented by less
burdensome rules and regulations, adopt such rules
and regulations, consistent with the purposes of this
Act, as may be necessary in order to prevent a de-
pository institution that is controlled or operated by
a financial services holding company from engaging
in unsafe or unsound practices that involve the fi-
nancial services holding company or any of its affili-
ates including, without limitation, unsafe or unsound
practices that involve covered transactions, as de-
fined in section 23A of the Federal Reserve Act, and
any transactions described in section 23B(a)(2) of
the Federal Reserve Act.
(2) REGULATORY ACTIVITY.—Any rule or regu-
lation adopted pursuant to paragraph (1) shall be
adopted in accordance with section 553 of title 5,
United States Code, except that the appropriate
Federal banking agency shall give interested persons
an opportunity for oral presentations of data, views,
and arguments, in addition to written submissions.
(3) APPLICATION TO PRIOR APPROVED TRANS-
ACTIONS.—Any transaction that was approved by an
appropriate Federal banking agency before the date
of enactment of this Act shall be exempt from any
rules or regulations adopted pursuant to paragraph
(1).
(c) EXCEPTIONS.—With the concurrence of the Na-
tional Financial Services Committee, the appropriate Fed-
eral banking agency may, by rule, regulation or order, ex-
empt any depository institution that is controlled by a fi-
nancial services holding company or class of such institu-
tions, or any transaction or class of transactions (includ-
ing transactions with affiliates that are neither located nor
doing business in the United States) from any require-
ment under subsection (b)(1) or section 23A or 23B of
the Federal Reserve Act, notwithstanding the provisions
of any other law, rule, regulation or order, if the appro-
priate Federal banking agency deems such an exemption
to be reasonable and not inconsistent with the purposes
of this Act and in the public interest.
(d) SAFEGUARDS RELATING TO NONFINANCIAL AF-
FILIATES.—
(1) IN GENERAL.—Except as permitted pursu-
ant to regulations issued by the National Financial
Services Committee, no depository institution con-
trolled by a financial services holding company shall
directly or indirectly extend credit, or issue or enter
into a standby letter of credit, indemnity, guarantee,
insurance, or other similar facility to or for the ben-
efit of any affiliate that is neither a financial serv-
ices institution nor primarily engaged in financial
activities.
(2) 
EXCEPTION
FOR
CERTAIN
FOREIGN
BANKS.—A depository institution that is a branch,
agency, or commercial lending company operated or
controlled by a foreign bank that—
(A) is a financial services holding com-
pany; and
(B) qualifies as ‘‘predominantly a financial
company’’ under section 102(l)(2) rather than
section 102(l)(1);
shall not be subject to the limitation described in
paragraph (1) with respect to transactions with af-
filiates that, with respect to that foreign bank, are
held and operated in compliance with the standard
for investment under section 2(h)(2) of the Bank
Holding Company Act of 1956 that would apply if
that foreign bank were subject to that Act.
(e) PRIMARILY ENGAGED
IN FINANCIAL ACTIVI-
TIES.—For purposes of subsections (a)(2)(B) and (d)(1),
the term ‘‘primarily engaged in financial activities’’ shall
be defined by regulation by the National Financial Serv-
ices Committee.
SEC. 105. CAPITAL REQUIREMENTS.
(a) 
WELL-CAPITALIZED
DEPOSITORY
INSTITU-
TIONS.—Each depository institution that is controlled by
a financial services holding company shall be well capital-
ized.
(b) ACTIONS BY APPROPRIATE FEDERAL BANKING
AGENCY.—In the event of a finding by the appropriate
Federal banking agency that a depository institution con-
trolled by a financial services holding company is not well
capitalized, the financial services holding company shall—
(1) execute an agreement with the appropriate
Federal banking agency within 30 days to return the
depository institution within a reasonable period of
time to being well capitalized; or
(2) divest control of the depository institution
in an orderly manner within 180 days, or such addi-
tional period of time as the appropriate Federal
banking agency may determine is reasonably re-
quired in order to effect such divestiture.
(c) NO HOLDING COMPANY CAPITAL REQUIRE-
MENTS.—An appropriate Federal banking agency may not
impose by regulation, order, agreement, or any other
means, any requirement pertaining to the capital of a fi-
nancial services holding company.
SEC. 106. INTERSTATE ACQUISITIONS OF INSURED BANKS.
(a) INSURED BANKS.—Except as otherwise author-
ized pursuant to section 13(f) of the Federal Deposit In-
surance Act, no financial services holding company may
acquire control of an additional insured bank (as such
term is defined in section 2(c) of the Bank Holding Com-
pany Act of 1956) if the acquisition could not be approved
by the Board of Governors of the Federal Reserve System
under any provision of section 3(d) of the Bank Holding
Company Act of 1956, other than subsection (d)(1)(A),
if such acquisition were made by a bank holding company.
(b) TREATMENT OF FINANCIAL SERVICES HOLDING
COMPANIES AND SUBSIDIARIES.—For purposes of section
18(r) of the Federal Deposit Insurance Act, a financial
services holding company shall be treated as a bank hold-
ing company, and any depository institution affiliate of a
financial services holding company shall be treated as a
bank subsidiary.
SEC. 107. DIFFERENTIAL TREATMENT PROHIBITION; LAWS
INCONSISTENT WITH THIS ACT.
(a) IN GENERAL.—Notwithstanding any other Fed-
eral law, no State, and no Federal or State regulatory
agency, including the appropriate Federal banking agency,
may act by law, rule, regulation, order, or otherwise if the
effect of such action would be to differentiate depository
institutions controlled by financial services holding compa-
nies from any other depository institutions in a manner
adverse to depository institutions controlled by financial
services holding companies, or to differentiate financial
services holding companies or their affiliates from bank
holding companies and their affiliates in a manner adverse
to financial services holding companies or their affiliates,
except to the extent that the appropriate Federal banking
agency may act to implement this Act.
(b) APPLICATION OF STATE LAWS.—
(1) FINDINGS.—The Congress finds that:
(A) Certain State laws and regulations
have the purpose or effect of preventing deposi-
tory institutions from being or becoming affili-
ated with companies or persons engaged in non-
banking activities.
(B) Such laws restrain legitimate competi-
tion in interstate commerce and deny consum-
ers freedom of choice in selecting financial serv-
ices.
(C) Such restrictions also threaten the
long-term safety and soundness of depository
institutions by denying them access to capital.
(D) Given the preponderant Federal inter-
est in ensuring competition in national markets
for financial services and in ensuring the safety
and soundness of depository institutions, it is
necessary to preempt such anticompetitive State
laws and regulations to the extent necessary to
permit the formation and efficient operation of
financial services holding companies.
(E) There is, however, a legitimate and
traditional State interest in ensuring that State
depository institutions and other State-char-
tered or licensed companies are operated in a
safe and sound manner to serve the interests of
the public and consumers.
(F) The preemption provided in paragraph
(2) shall not be construed as preempting State
laws that—
(i) concern the regulation, supervision,
and examination of State depository insti-
tutions (as defined in section 3 of the Fed-
eral Deposit Insurance Act); and
(ii) are not inconsistent with the pur-
poses of this Act.
(2) PREEMPTIONS.—
(A) CROSS-MARKETING.—Any provision of
Federal or State law, rule, regulation, or order
that is expressly or impliedly inconsistent with
the provisions and purposes of this Act is here-
by preempted, including, without limitation,
State banking, savings and loan, insurance, real
estate, securities, finance company, retail, or
other laws which have the purpose or effect
of—
(i) preventing or impeding depository
institutions or affiliates, agents, principals,
brokers, directors, officers, employees, or
other representatives of such institutions
or affiliates thereof, as a result of the
types of nonbanking activities (including
an insurance business) engaged in directly
or indirectly by such company or any affili-
ate thereof or by any agent, principal, so-
licitor, broker, director, officer, employee,
or other representative of such company or
affiliate thereof, from being owned or con-
trolled by or from being affiliated in any
way with a financial services holding com-
pany or any affiliate of a financial services
holding company;
(ii) preventing or impeding depository
institutions or affiliates, agents, principals,
brokers, directors, officers, employees or
other representatives of such institutions
or affiliates thereof from offering or mar-
keting products or services of their affili-
ated financial services holding company or
any affiliate thereof or from having their
products or services offered or marketed by
their affiliated financial services holding
company or any affiliate thereof, or by any
agent, principal, broker, director, officer,
employee, or other representative of such
company or any affiliate of such company;
or
(iii) preventing, impeding, or burden-
ing any insurance company, or any affiliate
of an insurance company (whether such af-
filiate is organized as a stock company,
mutual holding company or otherwise),
from becoming a financial services holding
company under this Act or acquiring con-
trol of a depository institution or limiting
the amount of an insurance company’s as-
sets that may be invested in the voting se-
curities of a depository institution the par-
ent company of a depository institution
(except that the laws of an insurance com-
pany’s State of domicile may limit the
amount of an insurance company’s assets
that may be invested in a depository insti-
tution to an amount that is not less than
5 percent of the insurance company’s ad-
mitted assets), or authorizing the insur-
ance regulatory or other authorities of
States other than the State in which an in-
surance company is domiciled to prevent,
impede or burden or review a plan of reor-
ganization by which the insurance company
proposes to reorganize from mutual form
to become a stock insurance company con-
trolled by a mutual holding company.
(B) INFORMATION SHARING.—
(i) IN
GENERAL.—Notwithstanding
any other provision of law, any depository
institution, or any affiliate or subsidiary of
any depository institution, may share or
exchange information or otherwise transfer
information between or among themselves
without any restriction or limitation if it
is clearly and conspicuously disclosed that
the information may be communicated
among such persons and the consumer is
given the opportunity, before the time that
the information is initially communicated,
to direct that such information not be com-
municated among such persons.
(ii) DEFINITION.—For purposes of
this subsection, the term ‘‘information’’
means any and all data, records, or other
information and material obtained or
maintained by any depository institution or
any affiliate or subsidiary thereof in the
ordinary course of its business that relates
in any way to a person who applies for,
maintains, or has maintained an account
or credit relationship with or applied for,
purchased or obtained other products or
services from any depository institution or
any affiliate or subsidiary of any deposi-
tory institution, regardless of the source or
manner in which the information is ob-
tained or furnished.
(c) LAWS AFFECTING COURT ACTIONS.—
(1) IN GENERAL.—No State or State regulatory
agency may act by law, rule, regulation, or order if
the effect of such action would be to impede or pre-
vent a depository institution that is located in an-
other State from qualifying to maintain or defend in
court any action which could be maintained or de-
fended under similar circumstances by a company
that is located in such other State and that is not
a depository institution, if the depository institution
does not establish or operate in that State a domes-
tic branch.
(2) EXCEPTION.—Where the maintenance or
defense of a court action referred to in paragraph
(1) by a company that is located in such other State
and that is not a depository institution is subject to
certain conditions, the maintenance or defense of
such an action by a depository institution located in
such other State may be subject to those same con-
ditions, if such conditions are applied in a non-
discriminatory manner to fulfill legitimate State ob-
jectives and do not have the effect, directly or indi-
rectly, of denying depository institutions located in
other States the opportunity to maintain or defend
such actions.
(d) OTHER RESTRICTIONS.—Except for licensing,
marketing, compensation, employment, or other require-
ments applied in a nondiscriminatory manner to fulfill le-
gitimate State regulatory objectives which are not incon-
sistent with the purposes of this Act, no State may,
through legislative, administrative, executive, or judicial
action, impede or prevent a financial services holding com-
pany or affiliate thereof from utilizing or compensating
any agent (including an affiliated depository institution
acting in accordance with section 18(r) of the Federal De-
posit Insurance Act), solicitor, broker, employee, or other
person located in that State and representing in any lawful
capacity any depository institution or any such financial
services holding company or such affiliate thereof, pro-
vided that if any such person is being utilized or com-
pensated for the performance of activities on behalf of a
depository institution, such activities do not result in the
establishment or operation by the depository institution of
a domestic branch at any location other than the main
or branch offices of such depository institution.
(e) DEFINITIONS.—As used in subsections (b)
through (d) only—
(1) the term ‘‘affiliate’’ means a person that di-
rectly or indirectly controls or is controlled by, or is
under common control with the person specified; and
(2) the term ‘‘control,’’ including the terms
‘‘controlled by’’ and ‘‘under common control with,’’
means the power, directly or indirectly, to direct the
management or policies of a person and shall be pre-
sumed to exist if any person, directly or indirectly,
owns, controls, or holds with power to vote 10 per-
cent or more of the voting securities of any other
person.
SEC. 108. INSIDER LENDING PROVISIONS.
(a) IN GENERAL.—A financial services holding com-
pany shall be treated as a bank holding company, and any
depository institution controlled by such financial services
holding company shall be treated as a bank, for purposes
of section 22(h) of the Federal Reserve Act and any regu-
lation prescribed under such section.
(b) REGULATORY AUTHORITY.—For purposes of this
subsection, the appropriate Federal banking agency shall
exercise the authority provided to the Board of Governors
of the Federal Reserve System under section 22(h) of the
Federal Reserve Act.
SEC. 109. REPORTS, EXAMINATION AND ENFORCEMENT.
(a) NOTICE.—
(1) TIMING.—Within 90 days after filing the
notice referred to in section 102(a)(1), each financial
services holding company shall file a separate notice
with the appropriate Federal banking agency for the
lead depository institution of such company.
(2) FORM AND CONTENT.—The notice required
by paragraph (1) shall be on forms prescribed by the
National Financial Services Committee, and shall in-
clude such information under oath or otherwise, with
respect to the financial condition, ownership, oper-
ation and management of such financial services
company and its subsidiaries, and related matters,
as the Committee may deem necessary or appro-
priate for the appropriate Federal banking agency to
ascertain and monitor the impact that such financial
services holding company and its subsidiaries may
have on the safety and soundness of any depository
institution affiliated with such financial services
holding company or to otherwise carry out the pur-
poses of this Act.
(b) REPORTING AND RECORDKEEPING.—
(1) DEFINITIONS.—
(A) DEPOSITORY INSTITUTION.—For pur-
poses of this subsection, the term ‘‘depository
institution’’, in addition to its meaning under
section 102(g), means a depository institution
affiliated with a financial services holding com-
pany.
(B) 
APPROPRIATE
FEDERAL
BANKING
AGENCY.—For purposes of this subsection, the
appropriate Federal banking agency of a depos-
itory institution (which is affiliated with a fi-
nancial services holding company) shall be the
appropriate Federal banking agency of the lead
depository institution of that financial services
holding company.
(2) OBLIGATIONS TO OBTAIN, MAINTAIN, AND
REPORT INFORMATION.—
(A) IN GENERAL.—Every depository insti-
tution shall obtain such information and make
and keep such records as its appropriate Fed-
eral banking agency by rule prescribes concern-
ing the depository institution’s policies, proce-
dures, or systems for—
(i) monitoring and controlling finan-
cial and operational risks to it resulting
from the activities of any of its affiliates
whose business activities are reasonably
likely to have a material impact on the fi-
nancial or operational condition of such de-
pository institution, including its level of
capitalization and its ability to conduct or
finance its operations; and
(ii) monitoring the extent to which the
depository institution or its affiliates have
complied with the provisions of this Act.
(B) 
CONTENTS
OF
RECORDS.—Such
records shall describe, in the aggregate, each of
the financial activities conducted by, and the
customary sources of capital and funding of,
these affiliates.
(C) REPORTS.—The appropriate Federal
banking agency, by rule, may require summary
reports of such information to be filed no more
frequently than quarterly.
(3) AUTHORITY TO REQUIRE ADDITIONAL IN-
FORMATION.—If, as a result of adverse market con-
ditions or based on reports provided to the appro-
priate Federal banking agency pursuant to para-
graph (2) or other available information, the appro-
priate Federal banking agency reasonably concludes
that the agency has concerns regarding the financial
or operational condition of any depository institution
for which such agency is the appropriate Federal
banking agency, such agency may require the deposi-
tory institution to make reports concerning the fi-
nancial activities of any of such depository institu-
tion’s affiliates engaged in financial activities whose
business activities are reasonably likely to have a
material impact on the financial or operational con-
dition of such depository institution. The appro-
priate Federal banking agency, in requiring reports
pursuant to this paragraph, shall specify the infor-
mation required, the period for which it is required,
and the time and date on which the information
must be furnished.
(4) SPECIAL PROVISIONS WITH RESPECT TO AF-
FILIATES SUBJECT TO SECURITIES AND EXCHANGE
COMMISSION OR STATE INSURANCE REGULATION.—
(A) COOPERATION IN IMPLEMENTATION.—
In developing and implementing reporting re-
quirements pursuant to paragraph (2) of this
subsection with respect to the activities of affili-
ates subject to examination by, or reporting re-
quirements of, the Securities and Exchange
Commission, the appropriate Federal banking
agency shall consult with and consider the views
of the Securities and Exchange Commission. If
the Securities and Exchange Commission com-
ments in writing on a proposed rule of the ap-
propriate Federal banking agency under this
subsection that has been published for com-
ment, the appropriate Federal banking agency
shall respond in writing to such written com-
ment before adopting the proposed rule. The
appropriate Federal banking agency shall, at
the request of the Securities and Exchange
Commission, publish such comment and re-
sponse in the Federal Register at the time of
publishing the adopted rule.
(B) USE OF SECURITIES AND EXCHANGE
COMMISSION
OR
STATE
INSURANCE
RECORDS
AND REPORTS.—A depository institution shall
be in compliance with any recordkeeping or re-
porting requirement adopted pursuant to para-
graph (2) of this subsection concerning an affil-
iate if (i) with respect to an affiliate that is
subject to examination by or reporting require-
ments of the Securities and Exchange Commis-
sion, such depository institution utilizes for
such recordkeeping or reporting requirement
copies of reports filed by the affiliate with the
Securities and Exchange Commission pursuant
to section 204 of the Investment Advisers Act
of 1940, sections 30 and 31 of the Investment
Company Act of 1940, or section 17 of the Se-
curities Exchange Act of 1934; and (ii) with re-
spect to an affiliate that is subject to examina-
tion by or reporting requirements of a State in-
surance regulator, such depository institution
utilizes for such recordkeeping or reporting re-
quirement copies of reports filed by the affiliate
with the State insurance regulator. The appro-
priate Federal banking agency of a depository
institution may, however, by rule adopted pur-
suant to paragraph (2), require any such depos-
itory institution filing such reports with the ap-
propriate Federal banking agency to obtain,
maintain, or report supplemental information if
the appropriate Federal banking agency makes
an explicit finding that such supplemental infor-
mation is necessary to inform the appropriate
Federal banking agency regarding potential
risks to such depository institution. Prior to re-
quiring any such supplemental information, the
appropriate Federal banking agency shall first
request the Securities and Exchange Commis-
sion or the State insurance regulator, as appro-
priate, to expand its reporting requirements to
include such information.
(C) PROCEDURE
FOR
REQUIRING
ADDI-
TIONAL INFORMATION.—Prior to making a re-
quest pursuant to paragraph (3) of this sub-
section for information with respect to an affili-
ate that is subject to examination by or report-
ing requirements of the Securities and Ex-
change Commission or a State insurance regu-
lator, the appropriate Federal banking agency
shall—
(i) notify the Securities and Exchange
Commission or the State insurance regu-
lator, as appropriate, of the information
required with respect to such affiliate; and
(ii) consult with the Securities and
Exchange Commission or the State insur-
ance regulator, as appropriate, to deter-
mine whether the information required is
available from the Securities and Exchange
Commission or the State insurance regu-
lator, unless the appropriate Federal bank-
ing agency determines that any delay re-
sulting from such consultation would be in-
consistent with ensuring the safety and
soundness of the depository institution or
the stability or integrity of the banking
system.
(D) CONFIDENTIALITY
OF
INFORMATION
PROVIDED.—No information provided to or ob-
tained by the appropriate Federal banking
agency from the Securities and Exchange Com-
mission or a State insurance regulator pursuant
to a request by the appropriate Federal banking
agency under subparagraph (C) of this para-
graph may be disclosed to any other person,
without the prior written approval of the Secu-
rities and Exchange Commission or the State
insurance regulator, as appropriate. Nothing in
this subsection shall authorize the appropriate
Federal banking agency to withhold information
from Congress, or prevent the appropriate Fed-
eral banking agency from complying with a re-
quest for information from any other Federal
department or agency requesting the informa-
tion for purposes within the scope of its juris-
diction, or complying with an order of a court
of the United States in an action brought by
the United States or the appropriate Federal
banking agency.
(E) NOTICE TO BANKING AGENCIES CON-
CERNING FINANCIAL AND OPERATIONAL CONDI-
TION
CONCERNS.—The Securities and Ex-
change Commission shall notify the appropriate
Federal banking agency of any concerns it has
regarding significant financial or operational
risks to any depository institution resulting
from the activities of any affiliate of the deposi-
tory institution for which the Securities and Ex-
change Commission is the appropriate regu-
latory agency. Any State insurance regulator
shall notify the appropriate Federal banking
agency of any concerns it has regarding signifi-
cant financial or operational risks to any depos-
itory institution resulting from the activities of
any affiliate of the depository institution for
which the State insurance regulator is the ap-
propriate regulatory agency.
(5) UNIFORM REGULATIONS.—The National Fi-
nancial Services Committee shall prescribe by regu-
lation uniform standards for the rules required by
this subsection.
(6) EXEMPTIONS.—The National Financial
Services Committee by rule or order may exempt
any person or class of persons, under such terms
and conditions and for such periods as the Commit-
tee shall provide in such rule or order, from the pro-
visions of this subsection, and the rules thereunder.
In granting such exemptions, the Committee shall
consider, among other factors—
(A) whether information of the type re-
quired under this subsection is available for a
supervisory agency (as defined in section
1101(6) of the Right to Financial Privacy Act
of 1978 (12 U.S.C. 3401(6)), a State insurance
commission or similar State agency, the Com-
modity Futures Trading Commission, or a for-
eign regulatory body of a similar type;
(B) the primary business of any affiliate;
(C) the nature and extent of domestic or
foreign regulation of the affiliate’s activities;
(D) the nature and extent of the deposi-
tory institution’s banking activities;
(E) with respect to the depository institu-
tion and its affiliates, on a consolidated basis,
the amount and proportion of assets devoted to,
and revenues derived from, banking activities in
the United States; and
(F) whether the affiliate’s activities could
pose a significant risk to the safety and sound-
ness of any depository institution subsidiary of
the financial services holding company.
(7) AUTHORITY TO LIMIT DISCLOSURE OF IN-
FORMATION.—Notwithstanding any other provision
of law, the appropriate Federal banking agency shall
not be compelled to disclose any information re-
quired to be reported pursuant to this subsection, or
any information supplied to the appropriate Federal
banking agency by any domestic or foreign regu-
latory agency that relates to the financial or oper-
ational condition of any affiliate of a depository in-
stitution. Nothing in this subsection shall authorize
the appropriate Federal banking agency to withhold
information from Congress, or prevent the appro-
priate Federal banking agency from complying with
a request for information from any other Federal de-
partment or agency requesting the information for
purposes within the scope of its jurisdiction, or com-
plying with an order of a court of the United States
in an action brought by the United States or the ap-
propriate Federal banking agency. For purposes of
section 552 of title 5, United States Code, this sub-
section shall be considered a statute described in
subsection (b)(3)(B) of such section 552.
(8) APPLICABILITY TO FOREIGN BANKS.—For
purposes of this subsection, with respect to a foreign
bank that is a financial services holding company,
the appropriate Federal banking agency shall give
due regard to the primary authority and responsibil-
ity of the foreign bank’s home country regulator for
supervision and examination of the bank outside the
United States and shall seek to minimize additional
examination or regulatory burdens on the foreign
bank outside of the United States, by coordinating
with and relying on examinations of and information
from the home country regulator to the fullest extent
possible.
(c) TERMINATION.— The National Financial Services
Committee may at any time, upon its own motion or upon
application, terminate the status of a company as a finan-
cial services holding company, if it is determined that such
company no longer controls or operates any depository in-
stitutions or otherwise fails to qualify as a financial serv-
ices holding company as defined in this Act.
(d) NO EXTENSION OF INSURANCE COVERAGE.—In
no instance shall the benefits of Federal deposit insurance
coverage applicable to an insured depository institution
that is controlled by a financial services holding company
be extended or interpreted to extend to either such finan-
cial services holding company or to any other company
controlled by such financial services holding company that
is not an insured depository institution.
(e) ENFORCEMENT
OF VIOLATIONS.—Whenever it
appears to the appropriate Federal banking agency of the
lead depository institution of a financial services holding
company that such holding company is violating, has vio-
lated, or is about to violate any provision of this Act or
any regulation prescribed under this Act, such agency
may, in its discretion, apply to the appropriate district
court of the United States or the United States court of
any territory for—
(1) a temporary or permanent injunction or re-
straining order enjoining such financial services
holding company from violating this Act or any reg-
ulation prescribed under this Act; or
(2) such other equitable relief, including divesti-
ture, as may be necessary to prevent such violation.
(f) COURT JURISDICTION.—The district courts of the
United States and the United States court in any territory
shall have jurisdiction and power to issue any injunction
or restraining order or grant any other relief described in
subsection (f). When appropriate, any injunction, order,
or other equitable relief granted under this subparagraph
shall be granted without requiring the posting of any
bond.
(g) NOTICE OF VIOLATIONS.—Whenever it appears
to a Federal or State official or agency with supervisory
or examination authority over any affiliate of a financial
services holding company that such affiliate or such finan-
cial services holding company is violating, has violated, or
is about to violate any provision of this Act or any regula-
tion prescribed under this Act, such official or agency shall
promptly notify the appropriate Federal banking agency
of the lead depository institution of such holding company
in order that such banking agency, in consultation with
the notifying agency, may determine whether action under
this section is appropriate.
SEC. 110. DIVESTITURE.
(a) IN GENERAL.—In addition to all of its other reg-
ulatory and supervisory powers, if the appropriate Federal
banking agency determines that a depository institution
under its supervision has engaged in a continuing course
of conduct involving its financial services holding company
or any affiliate of such holding company which has had,
or has a significant probability of having, the effect of
causing such depository institution to be in an unsafe or
unsound condition, it may make an initial finding that the
financial services holding company should be required to
terminate its control or operation of the depository institu-
tion. If the appropriate Federal banking agency makes
such an initial finding, it shall within 3 days so notify the
financial services holding company controlling or operating
the depository institution and the National Financial Serv-
ices Committee. Such notice shall provide a statement for
the basis of the appropriate Federal banking agency’s ac-
tion.
(b) HEARING PROCEDURES.—Not later than 30 days
after receipt of the notice described in subsection (a), the
financial services holding company receiving such notice
may request an agency hearing before the appropriate
Federal banking agency. In such hearing, all issues shall
be determined pursuant to section 554 of title 5, United
States Code. The length of the hearing shall be determined
by the appropriate Federal banking agency, and such
hearing may be before a hearing examiner appointed by
such agency. At the conclusion thereof, the appropriate
Federal banking agency shall issue a final order, on the
basis of the record made at such hearing, affirming or re-
versing the initial finding of the appropriate Federal bank-
ing agency. A company that fails to request an agency
hearing under this paragraph shall be deemed to have con-
sented to the issuance of a final order affirming the initial
finding without the necessity of the hearing provided for
in this paragraph.
(c) TERMINATION OF CONTROL.—If such final order
affirms the initial finding, the financial services holding
company shall, upon completion of the judicial review, if
any, of the appropriate Federal banking agency’s final
order as provided for in section 113, terminate its control
or operation of the depository institution involved within
1 year or such longer period as the appropriate Federal
banking deems necessary and appropriate to protect the
safety and soundness of the depository institution or pre-
vent financial disruption.
(d) NO ‘‘SOURCE OF STRENGTH’’ DOCTRINE.—No
appropriate Federal banking agency may require, by regu-
lation, order, agreement, or any other means, any financial
services holding company to serve as a ‘‘source of
strength’’ to any depository institution affiliate of such
holding company.
SEC. 111. CRIMINAL PENALTIES.
(a) WILLFUL VIOLATIONS.—Any company or insured
depository institution which knowingly and willfully par-
ticipates in a material violation of any provision of this
Act, or any rule, regulation, or order issued by an appro-
priate Federal banking agency pursuant thereto, shall,
upon conviction, be fined for each violation not more than
the greater of $250,000 or an amount equal to 0.01 per-
cent of the minimum required capital of the lead deposi-
tory institution of the financial services holding company
for each day during which the violation continues, except
that in no case shall any such amount for any violation
or related series of violations exceed 1 percent of the mini-
mum required capital of the lead depository institution.
(b) ENFORCEMENT
AGAINST
INDIVIDUALS.—Any
natural person who knowingly and willfully participates in
a material violation of any provision of this Act or any
rule, regulation, or order issued pursuant thereto, shall
upon conviction be imprisoned not more than 5 years and
fined for each violation not more than the greater of
$250,000 or double the individual’s annual compensation
at the time the violation occurred.
(c) ENFORCEABILITY AGAINST OFFICERS AND EM-
PLOYEES.—Every officer, director, employee, and agent of
a financial services holding company or depository institu-
tion also shall be subject to the same penalties for false
entries in any book, report, or statement of such company
or depository institution as are applicable to officers, di-
rectors, employees, and agents of member banks for false
entries in any books, reports, or statements of member
banks under section 1005 of title 18, United States Code.
(d) ENFORCEABILITY AGAINST HOLDING COMPA-
NIES.—A financial services holding company and its affili-
ates shall be subject to the provisions of title 18, United
States Code, to the same extent as a registered bank hold-
ing company or any affiliate of such a company.
SEC. 112. CIVIL ENFORCEMENT, CEASE-AND-DESIST OR-
DERS, CIVIL MONEY PENALTIES, REMOVAL,
AND PROHIBITION AUTHORITY.
Subsections (b) through (s) and subsection (u) of sec-
tion 8 of the Federal Deposit Insurance Act shall apply
to any financial services holding company in the same
manner as they apply to an insured depository institution.
Nothing in subsection (b) or (c) of that section 8 shall
authorize any Federal banking agency, other than the ap-
propriate Federal banking agency, to issue a notice of
charges or cease-and-desist order against a financial serv-
ices holding company.
SEC. 113. JUDICIAL REVIEW.
Any party aggrieved by an appropriate Federal bank-
ing agency’s findings or other actions under this Act may
obtain review by the United States court of appeals of the
circuit wherein such party has its principal place of busi-
ness or the United States Court of Appeals for the District
of Columbia Circuit, by filing a Notice of Appeal in such
court within 30 days from the date of such action, and
simultaneously sending a copy of such notice by registered
or certified mail to the appropriate Federal banking agen-
cy. The appropriate Federal banking agency shall prompt-
ly certify and file in such court the record upon which
such action or finding was based. The actions or findings
of the appropriate Federal banking agency shall be set
aside if not supported by substantial evidence or if found
to violate procedures established by this Act. An initial
finding by the appropriate Federal banking agency under
section 110 shall be subject to judicial review only in the
context of review of a final order under section 110(b).
SEC. 114. NATIONAL FINANCIAL SERVICES COMMITTEE.
(a) ESTABLISHMENT.—There is established a Na-
tional Financial Services Committee which shall consist of
the following members:
(1) The Secretary of the Treasury.
(2) The Chairman of the Board of Governors of
the Federal Reserve System.
(3) The Chairman of the Board of Directors of
the Federal Deposit Insurance Corporation.
(4) The Comptroller of the Currency.
(5) The Chairman of the Securities and Ex-
change Commission.
(6) An insurance commissioner (or similar offi-
cial) of a State, as designated by the National Asso-
ciation of Insurance Commissioners.
(b) MEMBER AGENCIES.—For purposes of this Act,
the term ‘‘member agencies means—
(1) the agencies or departments headed by
members of the committee described in paragraphs
(1), (2), (3), (4), and (5) of subsection (a); and
(2) in the case of a member of the committee
appointed in accordance with paragraph (6) of such
subsection, the National Association of Insurance
Commissioners.
(c) CHAIR.—The Chair of the Committee shall be the
Secretary of the Treasury.
(d) COMPENSATION.—Each member of the Commit-
tee shall serve without additional compensation, but shall
be entitled to reasonable expenses incurred in carrying out
the official duties as such a member.
(e) PUBLIC MEETINGS.—The Committee shall hold
public meetings at least annually. All meetings of the
Committee shall be conducted in conformity with the pro-
visions of section 3(a) of the Government in the Sunshine
Act (5 U.S.C. 552b). The Committee may not take any
action unless such action is approved by a majority vote
of the members of the Committee.
(f) SECRETARIAT.—The Department of the Treasury
shall provide the Secretariat for the Committee and shall
assume any expenses arising from execution of the respon-
sibilities of the Committee, except for expenses incurred
by employees of any Member of the Committee.
(g) ACCESS TO RECORDS.—For the purpose of carry-
ing out this section, the Committee shall have access to
all books, accounts, records, reports, files, memoranda, pa-
pers, things, and property belonging to or in use by any
appropriate Federal banking agency.
(h) FUNCTIONS OF THE COMMITTEE.—
(1) UNIFORM PRINCIPLES AND STANDARDS.—
The Committee shall, insofar as is practicable, es-
tablish uniform principles and standards applicable
to the notices, reports, examinations and supervision
of financial services institutions regulated by the
member agencies, and to the extent permitted by
this Act, financial services holding companies, which
principles and standards shall be applied by the
member agencies.
(2) RECOMMENDATIONS.—The Committee shall
make recommendations for uniformity in other su-
pervisory matters, such as, but not limited to, identi-
fying financial services institutions and other provid-
ers of financial services in need of special super-
visory attention, the adequacy of supervisory tools
for determining the impact of affiliate operations on
insured depository institutions, and the ability of the
member agencies to discover possible fraud or ques-
tionable practices.
(3) RECOMMENDATIONS
TO
CONGRESS.—The
Committee shall, from time to time, recommend to
the Congress additional measures to strengthen the
separation between insured depository institutions
controlled by depository institutions holding compa-
nies from the activities of any of their affiliates, in-
cluding the imposition of additional restrictions on
interaffiliate transactions and the strict application
of Federal deposit insurance coverage only for the
benefit of depositors of insured depository institu-
tions.
(i) CONSULTATION WITH STATE REGULATORS.—The
Committee shall consult with the appropriate organiza-
tions representing the State regulators of banks, savings
and loan associations, savings banks, securities firms, and
other providers of financial services, and as deemed appro-
priate, meet with such State regulators. The Committee,
when appropriate, shall invite to each public meeting of
the Committee representatives of such organizations.
(j) STUDIES AND RECOMMENDATIONS.—The Com-
mittee may conduct or authorize studies to carry out the
purposes of this Act. On the basis of such studies, the
Committee may make recommendations to the Congress
and member agencies concerning the implementation of
this Act and changes in statutes and regulations necessary
to promote the strength and stability of the Nation’s fi-
nancial system and financial institutions, the competitive-
ness of providers of financial services in domestic and
international markets, and the purposes of this Act. Not
later than 1 year after the date of the enactment of this
Act, the Committee shall report to the Congress on pro-
posals for legislative or regulatory actions that will im-
prove the examination process to permit better oversight
of all insured depository institutions. In particular, the
Committee shall consider whether the number of, or com-
pensation for, examiners employed by the appropriate
Federal regulatory agencies should be increased.
(k) NOTICE PROCEDURES FOR DETERMINING NEW
FINANCIAL SERVICES INSTITUTIONS AND NEW FINAN-
CIAL ACTIVITIES.—
(1) NOTICE REQUIREMENT.—A financial serv-
ices holding company may request the Committee to
determine that—
(A) an activity not described in section
102(n) (1)–(12) constitutes a financial activity
pursuant to section 102(n)(13); or
(B) a company not described in section
102(m) (1)–(8) is a financial services institu-
tion pursuant to section 102(m)(9),
by providing the Committee with written notice de-
scribing the proposed activity or institution.
(2) CONTENTS OF NOTICE.—The notice submit-
ted to the Committee shall contain such information
as the Committee shall prescribe by regulation or by
specific request in connection with a particular no-
tice.
(3) PROCEDURE FOR COMMITTEE ACTION.—
(a) NOTICE OF DISAPPROVAL.—Any notice
filed under this subsection shall be deemed to
be approved by the Committee unless before the
end of the 60-day period beginning on the date
the Committee receives a complete notice under
subparagraph (1), the Committee issues an
order determining the activity does not con-
stitute a financial activity or the institution is
not a financial services institution and setting
forth the reasons for disapproval.
(B) EXTENSION
OF
PERIOD.—The Com-
mittee may extend the 60-day period referred to
in subparagraph (A) for an additional 30 days.
The Committee may further extend the period
with the agreement of the financial services
holding company submitting the notice pursu-
ant to this subsection.
(4) SHORTER PERIODS.—The Committee may
prescribe regulations which provide for a shorter no-
tice period than the periods described in subpara-
graphs (A) and (B).
(5) INCOMPLETE INFORMATION.—The Commit-
tee may determine that an activity or an institution
for which notice has been submitted pursuant to this
subsection, does not constitute a financial activity or
is not a financial services institution, if the financial
services holding company submitting such notice ne-
glects, fails, or refuses to furnish the Committee all
the information required by the Committee.
Subtitle B—Securities Activities of Financial
Services Holding Companies
SEC. 121. LIMITATION ON SECURITIES ACTIVITIES OF DE-
POSITORY INSTITUTIONS AFFILIATED WITH
SECURITIES AFFILIATES.
(a) IN GENERAL.—A financial services holding com-
pany that is affiliated with a securities affiliate shall not
permit any depository institution, or any subsidiary of any
depository institution, which is controlled by such holding
company to engage, directly or indirectly in the United
States—
(1) in underwriting securities backed by or rep-
resenting interests in notes, drafts, acceptances,
loans, leases, receivables, other obligations, or pools
of any such obligations originated or purchased by
the institution or its affiliates; or
(2) in underwriting or dealing in any other se-
curities,
except 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.
(b) RULE OF CONSTRUCTION.—No provision of this
section shall be construed as permitting a securities affili-
ate to accept deposits in contravention of section 21 of
the Banking Act of 1933.
(c) DEFINITION OF SECURITY.—
(1) IN GENERAL.—For purposes of this section,
the term ‘‘security’’ has the meaning given to such
term in section 3(a)(10) of the Securities Exchange
Act of 1934.
(2) EXCEPTIONS.—Notwithstanding any other
provision of law, the term ‘‘security’’ does not in-
clude any of the following for purposes of this sec-
tion:
(A) A contract of insurance.
(B) A deposit account, savings account,
certificate of deposit, or other deposit instru-
ment issued by a depository institution.
(C) A share account issued by a savings
association if the account is insured by the Fed-
eral Deposit Insurance Corporation.
(D) A banker’s acceptance.
(E) A letter of credit issued by a deposi-
tory institution.
(F) A debit account at a depository insti-
tution arising from a credit card or similar ar-
rangement.
(G) A loan or loan participation (as deter-
mined by the appropriate Federal banking
agency), including any debt security issued in
connection with sovereign debt restructuring
which a bank purchases and sells pursuant to
such bank’s lending authority.
(H) A qualified financial contract (as de-
fined in section 11(e)(8)(D)(i) of the Federal
Deposit Insurance Act), as determined by the
appropriate Federal Banking agency, after con-
sultation with and consideration of the views of
the Securities and Exchange Commission, ex-
cept that, for purposes of this section such term
does not include—
(i) any securities contract (as defined
in section 11(e)(8)(D)(ii) of such Act) that
is based on or directly relates to a security
that is not expressly authorized by section
5136 of the Revised Statutes of the United
States as permissible for a national bank
to underwrite or deal in unless the appro-
priate Federal banking agency determines,
after consultation with and consideration
of the views of the Securities and Ex-
change Commission, that such securities
contract is appropriate for a bank to un-
derwrite or deal in, taking into account
other qualified financial contracts which a
bank is permitted to underwrite or deal in;
and
(ii) any agreement, contract, or trans-
action which is determined by the Federal
Deposit Insurance Corporation in a regula-
tion prescribed after the date of the enact-
ment of this Act to be a qualified financial
contract unless the appropriate Federal
banking agency determines, after consulta-
tion with and consideration of the views of
the Securities and Exchange Commission,
that such agreement, contract, or trans-
action shall be treated as a qualified finan-
cial contract for purposes of this section.
(3) AUTHORITY
TO
EXEMPT
BANKING
PROD-
UCTS.—Notwithstanding any other provision of law,
the appropriate Federal banking agency may, by
regulation or order, exempt a banking product from
the definition of security if the appropriate Federal
banking agency finds that—
(i) the product is available in the
course of a banking business and is more
appropriately regulated as a banking prod-
uct; and
(ii) the exemption is otherwise consist-
ent with the purposes of this section, the
maintenance of fair and orderly markets,
and the protection of investors.
(4) DEFINITION FOR LIMITED PURPOSE.—The
fact that a particular instrument is excluded pursu-
ant to paragraph (2) or (3) from the definition of
security for purposes of this section shall not be con-
strued as finding or implying that such instrument
is or is not a security for purposes of—
(A) Federal securities law;
(B) section 5136 of the Revised Statutes
of the United States; or
(C) section 20, 21, or 32 of the Banking
Act of 1933 (12 U.S.C. 377, 378, and 78).
(5) RESERVATION OF AUTHORITY TO CHARTER-
ING
AUTHORITY.—A determination by the appro-
priate Federal banking agency under this subsection
shall not be construed in any way as authorizing a
bank to provide any product or service that the bank
is not otherwise authorized to provide under relevant
law governing the activities and powers of the bank.
(6) CONSULTATION WITH COMMISSION.—
(A) NOTICE
AND
CONSULTATION
RE-
QUIRED.—In determining whether to exempt a
banking product pursuant to paragraph (3), the
appropriate Federal banking agency shall pro-
vide written notice to, consult with, and con-
sider the views of the Securities and Exchange
Commission.
(B) RESPONSE AND PUBLICATION.—If the
Securities and Exchange Commission comments
in writing on a proposed determination of the
appropriate Federal banking agency, such agen-
cy shall—
(i) respond in writing to such written
comment; and
(ii) at the request of such Commis-
sion, publish such comment and response
in the Federal Register at the time the de-
termination becomes effective.
(7) APPROVAL OF NATIONAL FINANCIAL SERV-
ICES COMMITTEE.—
(A) IN GENERAL.—An appropriate Federal
banking agency may not issue a regulation or
order pursuant to paragraph (3) without the
approval of the National Financial Services
Committee.
(B) UNIFORM
STANDARDS.—Any regula-
tion or order subject to the approval of the Na-
tional Financial Services Committee under
paragraph (1) shall be identical for each appro-
priate Federal banking agency, except as other-
wise permitted by such Committee.
SEC. 122. 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 se-
curities affiliate.
(B) Issue a guarantee, acceptance, or let-
ter of credit, including an endorsement or a
standby letter of credit, for the benefit of the
securities affiliate.
(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
institution to acquire or sell securities if the follow-
ing conditions are met:
(A) The extension of credit is incidental to
clearing transactions in those securities through
the 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 secu-
rities affiliates do not exceed 10 per-
cent of the institution’s capital stock
and surplus.
(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 appropriate Federal banking
agency for the depository institution per-
mits transactions under this paragraph in
securities not described in clause (i) and
the securities affiliate provides the deposi-
tory institution with such additional secu-
rity or other assurance of performance, if
any, as such agency shall require to pre-
vent such transactions from posing any ap-
preciable risk to the institution.
(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, including those readily available on elec-
tronic quotation systems) 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 one nationally recognized statistically
rating organization.
(4) OTHER
EXCEPTIONS.—The appropriate
Federal banking agency may make exceptions to
paragraph (1) for well capitalized depository institu-
tions it regulates 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
transactions between the institution and all se-
curities affiliates of the financial services hold-
ing company, excluding transactions permitted
under paragraph (2)(C)(i) or (3)(A), does not
exceed 10 percent of the institution’s capital
stock and surplus.
(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 securi-
ties issue underwritten by the securities affiliate.
(2) DEFINITION OF TERM BY BOARD.—The ap-
propriate Federal banking agency shall prescribe a
definition for the term ‘‘for the purpose of enhanc-
ing the marketability of a securities issue’’ for pur-
pose 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 permis-
sible 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
securities 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 indem-
nity, guarantee, insurance or other facility,
is on arm’s length basis.
(B) ARM’S
LENGTH
TRANSACTION
DE-
SCRIBED.—An extension of credit may be con-
sidered to be on 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
underwritten by the securities affiliate.
(C) COMPLIANCE WITH PARAGRAPH (1).—
The appropriate Federal banking agency may
require, by regulation or order, compliance with
paragraph (1) by well capitalized depository in-
stitutions exempt under this paragraph in order
to achieve any purpose specified in subsection
(k).
(c) PROHIBITION OF FINANCING PURCHASE OF SE-
CURITY 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
credit, 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 distribu-
tion in which a securities affiliate of that financial
services holding company participates as an under-
writer 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 purchasing a security described in this subpara-
graph.
(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
national bank to underwrite or deal in.
(4) APPLICATION TO WELL CAPITALIZED DE-
POSITORY INSTITUTIONS.—The appropriate Federal
banking agency may make exceptions, 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.
(5) CONSISTENCY WITH THE FEDERAL SECURI-
TIES LAWS.—No provision of this subsection shall be
construed as permitting a securities affiliate to ex-
tend 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 un-
derwritten by such 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 depository
institutions if—
(i) the depository institution has
adopted appropriate limits on exposure on
a consolidated basis to any single customer
whose securities are underwritten by the
securities affiliate; and
(ii) the depository institution has
adopted appropriate procedures, including
maintenance of necessary documentary
records, to assure that any extension of
credit by the depository institution to an
issuer for the purpose of paying the prin-
cipal, interest or dividends on securities
underwritten by the securities affiliate is
on an arm’s length basis.
(B) ARM’S
LENGTH
TRANSACTION
DE-
SCRIBED.—An extension of credit may be con-
sidered to have been made on an arm’s length
basis if the terms and conditions are substan-
tially the same as those prevailing at the time
for comparable transactions with issuers whose
securities are not underwritten by the securities
affiliate.
(C) COMPLIANCE
WITH
SUBPARAGRAPH
(A).—The appropriate Federal banking agency
may require by regulation or order, compliance
with paragraph (1) by well capitalized deposi-
tory institutions exempt under this paragraph
in order to achieve any purpose specified in
subsection (k).
(e) COMMON DIRECTORS AND SENIOR EXECUTIVE
OFFICERS.—
(1) IN
GENERAL.—The appropriate Federal
banking agency shall, by regulation or order, pre-
scribe the circumstances under which directors and
senior executive officers of a securities affiliate may
serve at the same time as directors or senior execu-
tive officers of any affiliated depository institutions.
(2) STANDARDS.—The appropriate Federal
banking agency, in issuing any regulation or order
pursuant to paragraph (1), shall consider appro-
priate factors including—
(A) any burdens imposed by restrictions on
director and senior executive officer interlocks;
(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 rea-
sonably result from director and senior officer
interlocks.
(3) EXCEPTION FOR SMALL FINANCIAL SERV-
ICES HOLDING COMPANIES.—
(A) IN GENERAL.—Notwithstanding para-
graph (1), a director or senior executive officer
of a securities affiliate may serve at the same
time as a director or senior executive officer of
an affiliated depository institution if that insti-
tution and all affiliated depository institutions
have, in the aggregate, total assets of not more
than $500,000,000.
(B) INFLATION ADJUSTMENT.—The 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 FOREIGN AFFILI-
ATES.—Paragraph (1) shall not prohibit a director
or senior executive officer of a securities affiliate
from serving at the same time as a director or senior
executive officer of an entity 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.—Pursuant to rules adopted
by the Securities and Exchange Commission in con-
sultation with the appropriate Federal banking agen-
cies, a securities affiliate shall conspicuously disclose
in writing to each of its customers at the time a se-
curities account is opened, or within a reasonable
time thereafter if it is not practicable to provide
such notice at that time, that—
(A) 
securities 
sold, 
offered, 
or 
rec-
ommended by the securities affiliate—
(i) are not deposits;
(ii) are not insured by the Federal
Deposit Insurance Corporation;
(iii) are not guaranteed by an affili-
ated insured depository institution;
(iv) are not otherwise an obligation of
an insured depository institution (unless
such is the case); and
(v) with regard to any product that
includes any investment component, are
subject to investment risks including pos-
sible loss of principal invested;
(B) the securities affiliate is not an in-
sured depository institution, and is a corpora-
tion separate from any insured depository insti-
tution; and
(C) the securities affiliate may be under-
writing or dealing in the securities being sold,
offered or recommended, and if so, would have
a financial interest in the transaction.
(2) FORM OF DISCLOSURE.—The disclosures 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) DISCLOSURE AUTHORITY.—Subject to para-
graph (2), the Securities and Exchange Commission,
after consultation with the appropriate Federal
banking agencies may, in its discretion, prescribe
disclosures in addition to the disclosures prescribed
by paragraph (1).
(g) DISCLOSURE REQUIRED BY DEPOSITORY INSTI-
TUTIONS.—
(1) IN GENERAL.—Pursuant to rules adopted
jointly by the appropriate Federal banking agencies
in consultation with the Securities and Exchange
Commission, no insured depository institution shall
knowingly express any opinion on the value of, or
the advisability of purchasing or selling, nonbanking
products (as defined by the appropriate Federal
banking agency) sold by the insured depository insti-
tution or any affiliate of an insured depository insti-
tution unless the insured depository institution con-
spicuously 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 institu-
tion or any other affiliated insured deposi-
tory 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 ACKNOWLEDGMENT 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 one-time acknowledgment of receipt by
the customer of such disclosures, including the
date of receipt with the customer’s name, ad-
dress, and the account number.
(B) ONE-TIME
ACKNOWLEDGMENT.—The
one-time written acknowledgment required by
subparagraph (A) and obtained with respect to
one account from a customer shall satisfy the
requirement with respect to all other investment
accounts opened by that customer at that de-
pository institution or securities affiliate.
(C) TIMING OF ACKNOWLEDGMENT.—The
one-time acknowledgment required by subpara-
graph (A) must be obtained within a reasonable
time after the account is opened.
(D) SPECIAL RULE FOR ACCREDITED IN-
VESTORS.—This paragraph shall not apply to
any customer who is, or meets the requirements
for, an accredited investor (as defined in section
2(15) of the Securities Act of 1933).
(4) DISCLOSURE AUTHORITY.—Subject to para-
graph (2), the appropriate Federal banking agencies
may jointly prescribe, after consultation with the Se-
curities and Exchange Commission, disclosures in
addition to the disclosures required by paragraph
(1).
(h) UNDERWRITING SECURITIES REPRESENTING OB-
LIGATIONS ORIGINATED BY AFFILIATE RESTRICTED.—A
securities affiliate shall not underwrite securities secured
by or representing an interest in mortgages or other obli-
gations originated or purchased by an affiliated depository
institution or subsidiary of such an institution—
(1) unless those securities—
(A) are rated by at least one unaffiliated,
nationally recognized statistical rating organiza-
tion;
(B) are issued or guaranteed by the Fed-
eral Home Loan Mortgage Corporation, the
Federal National Mortgage Association, or the
Government National Mortgage Association; or
(C) represent interests in securities de-
scribed in subparagraph (B); or
(2) except as permitted by the appropriate Fed-
eral banking agency.
(i) 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) One financial services holding company (or
subsidiary of that financial services holding com-
pany) agrees to engage in a transaction with, or on
behalf of, another financial services holding company
(or subsidiary of that financial services holding com-
pany), in exchange for
(2) the agreement of the second financial serv-
ices holding company referred to in paragraph (1)
(or a subsidiary of that financial services holding
company) to engage in any transaction with, or on
behalf of, the first financial services holding com-
pany referred to in such paragraph (or any subsidi-
ary of that financial services holding company), for
the purpose of evading any requirement or restric-
tion of Federal law on transactions between, or for
the benefit of, affiliates of financial services holding
companies.
(j) 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 depository institution from
doing.
(k) AUTHORITY TO MODIFY
AND IMPOSE ADDI-
TIONAL SAFEGUARDS; INTERPRETIVE AUTHORITY.—
(1) IN
GENERAL.—The appropriate Federal
banking agency may, by regulation 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
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 appropriate Federal
banking agency may not exercise authority under
paragraph (1) unless such agency finds that such
action is consistent with the purposes of this act, in-
cluding—
(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
controlled by foreign banks operating in the
United States.
(3) BIENNIAL
REVIEW.—Beginning 2 years
after the effective date of the Depository Institution
Affiliation Act, the appropriate Federal banking
agency shall, on a biennial basis—
(A) review all restrictions established pur-
suant to paragraph (1) to determine whether
any such restrictions are required any longer to
carry out the purposes of this Act; and
(B) modify or eliminate any such restric-
tion that such agency determines is no longer
required to carry out the purposes of this Act.
(l) COMPLIANCE PROGRAMS REQUIRED.—
(1) IN
GENERAL.—Each appropriate Federal
banking agency and the Securities and Exchange
Commission shall establish a program for—
(A) sharing information, including reports
of examinations, concerning compliance with
this section or the amendments made by title
III of the Depository Institution Affiliation and
Thrift Charter Conversion Act, by—
(i) brokers, dealers, investment advis-
ers, or investment companies that are reg-
istered with the Securities and Exchange
Commission and that are affiliated with
depository institutions, or are separately
identifiable departments or divisions of de-
pository institutions registered as invest-
ment advisers; and
(ii) depository institutions and their
affiliates;
(B) enforcing compliance with this section
and the amendments made by this subtitle and
paragraphs (4) and (5) of section 3(a) of the
Securities Exchange Act of 1934 by entities
under its supervision; and
(C) responding to any complaints from
customers about inappropriate cross-marketing
of securities products or inadequate disclosure.
(2) DATA COLLECTION.—
(A) IN GENERAL.—The appropriate Fed-
eral banking agencies, after consultation with
and consideration of the views of the Securities
and Exchange Commission, shall (except as oth-
erwise provided by the appropriate Federal
banking agency after such consultation) require
any depository institution that has effected se-
curities transactions pursuant to any exception
enumerated in paragraphs (4)(C) and (5)(D) of
section 3(a) of the Securities Exchange Act of
1934 to identify the exceptions relied upon and
to submit such information necessary to mon-
itor compliance under such paragraphs.
(B) COMMISSION
ACCESS.—The appro-
priate Federal banking agency shall make any
information referred to in subparagraph (A)
available to the Securities and Exchange Com-
mission, upon the request of the Commission.
(C) COMPLIANCE.—In implementing the
provisions of this paragraph, the appropriate
Federal banking agencies shall ensure that any
information requests to depository institutions
take into account the size and activities of the
institutions and do not cause undue reporting
burdens.
(3) COMMISSION’S
ENFORCEMENT
AUTHOR-
ITY.—Without limiting in any way the authority of
the appropriate Federal banking agencies under this
section, the Securities and Exchange Commission
shall have the authority to enforce provision of this
section against a securities affiliate as if such provi-
sion were a provision of the Securities Exchange Act
of 1934 to the extent that the provision applies with
respect to the conduct or activities of the securities
affiliate.
(4) EXAMINATION REPORTS.—
(A) IN GENERAL.—The appropriate Fed-
eral banking agencies shall, to the fullest extent
possible, use the reports of examination of any
broker, dealer, investment adviser, or invest-
ment company made by or on behalf of the Se-
curities and Exchange Commission and reports
made by or on behalf of a registered securities
association or national securities exchange, and
shall defer to such examinations for compliance
with the Federal securities laws.
(B) COMPLIANCE WITH SECTION 122 SAFE-
GUARDS.—The appropriate Federal banking
agencies shall—
(i) to the fullest extent possible, use
the reports of examination of any securi-
ties affiliate made by the appropriate Fed-
eral banking agency for such affiliate; and
(ii) defer to such examinations for
compliance with the provisions of this sec-
tion.
(5) INTERPRETATIONS OF THE FEDERAL 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
activities and conduct of brokers, dealers, investment
advisers, and investment companies.
(6) NOTICE OF CERTAIN ACTIONS BY SEC.—
The Securities and Exchange Commission shall give
notice to the appropriate Federal banking agency
upon the commencement of any disciplinary or law
enforcement proceedings by the Commission and a
copy of any order entered by the Commission
against—
(A) any broker, dealer, or investment ad-
viser that—
(i) is registered with the Securities
and Exchange Commission; and
(ii) is affiliated with, or is a sepa-
rately identifiable department or division
of, a depository institution;
(B) any investment company registered
with the Securities and Exchange Commission
that is an affiliate of or is advised by an invest-
ment adviser affiliated with a depository institu-
tion or by a separately identifiable department
or division of a depository institution that is a
registered investment adviser; or
(C) any financial services holding company,
depository institution, or subsidiary of such
company or institution, if the proposed action
relates to this section or the amendments made
by title III of the Depository Institution Affili-
ation and Thrift Charter Conversion Act.
(7) NOTICE OF CERTAIN ACTIONS BY APPRO-
PRIATE
FEDERAL
BANKING
AGENCIES.—Upon the
commencement of any disciplinary or law enforce-
ment proceedings to enforce the provisions of this
section by an appropriate Federal banking agency
against any broker, dealer, investment adviser, or in-
vestment company that is registered under the Fed-
eral securities laws and is affiliated with a deposi-
tory institution or is a separately identifiable depart-
ment or division of a depository institution, the ap-
propriate Federal banking agency shall give notice to
the Securities and Exchange Commission of the pro-
posed action.
(8) IMMEDIATE ACTION ALLOWED BEFORE NO-
TICE.—The notice required under paragraph (6) or
(7) may be provided promptly after action by the Se-
curities and Exchange Commission or the appro-
priate Federal banking agency, if—
(A) the Commission determines that the
protection of investors requires immediate ac-
tion by the Commission and prior notice under
paragraph (6) is not practical under the cir-
cumstances; or
(B) the appropriate Federal banking agen-
cy determines that concerns for the safety and
soundness of a depository institution or its affil-
iate require immediate action by the agency and
prior notice under (7) is not practical under the
circumstances.
(9) COORDINATED
ENFORCEMENT
ACTION.—
The Securities and Exchange Commission and the
appropriate Federal banking agencies shall, to the
extent practicable, coordinate supervisory actions
based on applicable law where the actions are based
on the same or related events or practices.
(10) INVESTMENT COMPANIES NOT AFFILIATED
WITH
A
DEPOSITORY
INSTITUTION.—The appro-
priate Federal banking agency shall not have au-
thority under this section or any other provision of
law to inspect or examine any investment company
registered under the Federal securities laws that is
not—
(A) affiliated with a depository institution;
or
(B) advised by an investment adviser affili-
ated with a depository institution or by a sepa-
rately identifiable department or division of a
depository institution that is a registered invest-
ment adviser.
(11) DEFINITION.—For purposes of this sub-
section, the term ‘‘Federal securities laws’’ means
the provisions of Federal law governing securities ac-
tivities that are within the jurisdiction of the Securi-
ties and Exchange Commission under the Securities
Act of 1933, the Securities Exchange Act of 1934,
the Investment Company Act of 1940, the Invest-
ment Advisers Act of 1940, and the Trust Indenture
Act of 1939.
(m) FOREIGN BANK FIREWALLS.—
(1) IN GENERAL.—A branch, agency, or com-
mercial lending company that is operated by a for-
eign bank that is a financial services holding com-
pany shall not be subject to the restrictions of any
subsection of this section, other than subsections (k)
and (l), if—
(A) such branch, agency, or commercial
lending company accepts no deposits in the
United States that are insured under the Fed-
eral Deposit Insurance Act;
(B) such foreign bank meets risk-based
capital standards comparable to the capital
standards required for a wholesale financial in-
stitution, giving due regard to the principle of
national treatment and equality of competitive
opportunity; and
(C) the home country of such foreign bank
satisfies the national treatment standard de-
scribed in section 102(l)(3).
(2) APPLICABILITY OF SUBSECTION (K) TO FOR-
EIGN BANKS.—Any limitation, restriction, condition,
or modification adopted under subsection (k) may be
applied by the appropriate Federal banking agency
to—
(A) a foreign bank that operates a branch,
agency, or commercial lending company de-
scribed 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, restric-
tion, condition, or modification is applied by
regulation or order of general applicability
under subsection (n)(1) to wholesale financial
institutions and their securities affiliates, sub-
ject to such modifications, conditions, or exemp-
tions as the appropriate Federal banking agen-
cy of such wholesale financial institution deems
appropriate, giving due regard to the principle
of national treatment and equality of competi-
tive opportunity.
(n) FIREWALLS APPLICABLE
TO WHOLESALE FI-
NANCIAL INSTITUTIONS AND NATIONAL MARKET LEND-
ING INSTITUTIONS.—
(1) IN GENERAL.—A wholesale financial institu-
tion, and transactions between a wholesale financial
institution and its securities affiliate, shall not be