A. PLACING BANK COMMON TRUST FUNDS AND COLLECTIVE INVESTMENT FUNDS UNDER THE FEDERAL SECURITIES LAWS Amendments to the Securities Act of 1933 Sec. 26. Section 3(a)(2) of the Securities Act of 1933, as amended (15 U.S.C. 77c (a)(2)), is hereby amended by deleting, after the words "a Federal Reserve Bank", the words: "or any interest or participation in any common trust fund or similar fund maintained by a bank exclusively for the collective investment and reinvestment of assets contributed thereto by such bank in its capacity as trustee, executor, administrator, or guardian"; and by deleting, after the words "a single trust fund", the words "or in a collective trust fund maintained by a bank"; by deleting from the last sentence thereof the words: "a security issued or guaranteed by a bank shall not include any interest or participation in any collective trust fund maintained by a bank"; and by deleting from the last sentence thereof the words: "except that in the case of a common trust fund or similar fund or a collective trust fund, the term 'bank 1 has the same meaning as in the Investment Company Act of 1940." Amendments to the Securities Exchange Act of 1934 Sec. 27. Section 3 (a) (12) of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78c (a)(12)), is hereby amended by deleting the words: "any interest or participation in any common trust fund or similar fund maintained by a bank exclusively for the collective investment and reinvestment of assets contributed thereto by such bank in its capacity as trustee, executor, administrator, or guardian"; and by deleting the words: "or a collective trust fund maintained by a bank."
- 2 - Amendments to the Investment Company Act of 1940 Sec. 28. Section 3(c)(3) of the Investment Company Act of 1940, as amended (15 U.S.C. 80a-3 (c) (3 )), is hereby amended by deleting the words: "any common trust fund or similar fund maintained by a bank exclusively for the collective investment and reinvestment of assets contributed thereto by the bank in its capacity as a trustee, executor, administrator, or guardian. H Sec. 29. Section 3 (c) (11) of the Investment Company Act of 1940, as amended (15 U.S.C. 80a-3(c)(11 ) ), is hereby amended by deleting the words: "or any collective trust fund maintained by a bank consisting solely of assets of such trusts."
- 3 - B. PLACING BANK INVESTMENT ADVISORY ACTI VITIES UNDER THE FEDERAL SECURITIES LAWS Amendments to the Investment Advisers Act of 1940 Sec. 30. Section 202(a)(ll) of the Investment Advisers Act of 1940, as amended (15 U.S.C. 80b-2(a)(11)), is hereby amended by deleting the words "(A) any bank, or any bank holding company as defined in the Bank Holding Company Act of 1956, which is not an investment company," and by renumbering subparagraphs M (B)", "(C)", "(D)", "(E) w, and "(F)" of Section 202(a)(ll) as "(A)", "(B) M, M (CP, "(D)", and "(E) M, respectively. Amendments to the Bank Holding Company Act [Additions to the Administration's Proposal are Underlined; Deletions from the Administration Proposal are in Brackets] Sec. 11. Subsection 4(c) of the Bank Holding Company Act of 1956, as amended (12 U.S.C. 1843(c}), is hereby amended by deleting the penultimate sentence thereof and by adding a new paragraph (15) as follows: "(15) shares of any depository institution securities affiliate engaged in activities in accordance with the limitations contained in this paragraph: 11 ( i) No depository institution holding company that establishes or acquires any depository institution securities affiliate pursuant to this paragraph shall, after one year from the date on which any such depository institution securities affiliate first engages in any of the activities authorized under subparagraph (iii) of this paragraph, permit any depository institution controlled by such depository institution holding company to engage, directly or through a subsidiary, in the United States in any of the activities authorized under such subparagraph (iii) of this paragraph or any of the following activities, which are authorized pursuant to paragraph Seventh of Section 5136 of the
- 4 - Revised Statutes of the United States, as amended (12 U.S.C. 24): dealing in and underwriting obligations of the United States, general obligations of any state of the United States or any political subdivision thereof and other obligations listed in paragraph Seventh of such Section 5136^ [and] purchasing and selling securities and stock as agent[.], and acting as an investment adviser as defined in Section 202(a)(ll) of the Investment Advisers Act of 1940, as amended. For purposes of this paragraph the Board may, by regulation or order, determine other securities or securities-related activities in which depository institutions may not engage. No rule, regulation or order of the Board, however, shall prohibit a depository institution from engaging in those securities or securities-related activities that are necessary or incidental to the financing of such depository institution or the investment of its funds. In the event that a depository institution holding company terminates all of the activities specified in subparagraph (iii) of this paragraph of its depository institution securities affiliate, any depository institution subsidiary of such holding company may conduct, directly or through a subsidiary, any securities or securitiesrelated activities that it is authorized by law to conduct. * * * "(iii) In addition to the activities referred to in subparagraphs (i) and (ii) of this paragraph, such depository institution securities affiliate may "(A) deal in and underwrite all obligations issued or guaranteed by or on behalf of a state or any political subdivision thereof or any agency or instrumentality of either of the foregoing, except industrial development bonds as defined in section 103(b)(2) of the Internal Revenue Code of 1954, as amended; provided, however, that depository institution securities affiliates may deal in and underwrite such industrial development bonds, the interest on which is exempt from Federal income tax under
- 5 - section 103(a) of the Internal Revenue Code of 1954, as amended, if: (1) a state, territory, possession of the United States, or any political subdivision of the -foregoing, or the District of Columbia pledges its full faith and credit for the payment of all principal and interest on such bonds or (ii) the issuer, or the state or local governmental unit on behalf of which the industrial development bonds were issued, is considered the sole owner, for Federal income tax purposes, of the facility with respect to which financing is to be provided from the proceeds of such industrial development bonds; M (B) organize, sponsor, operate, and control an investment company, as such term is defined in Section 3 of the investment Company Act of 1940, as amended; 11 (C) [render investment advice] act as investment adviser to[: (1) an investment company as described in subparagraph (B) above; and (2) any investment company other than a closed-end investment company] any investment company, as such terms are defined in Section 202(a)(11) of the Investment Advisers Act of 1940, as amended, and Section 3 of the Investment Company Act, as amended; "(D) underwrite, distribute, and sell securities of any investment company, as such terms are defined in Section 3 of the Investment Company Act of 1940, as amended. * * *
- 6 - C. REPEAL OF EXISTING FEDERAL SECURITIES LAWS EXEMPTIONS FOR BANK SECURITIES AND BANK BROKER-DEALER ACTIVITIES Amendments to the Securities Act of 1933 Sec. 31. Section 3 (a) (2) of the Securities Act of 1933, as amended (15 U.S.C. 77c(a)(2)), is hereby amended by deleting after the words "or any certificate of deposit for any of the foregoing" the following: "or any security issued or guaranteed by a bank". Sec. 32. Section 3 (a) of the Securities Act of 1933, as amended (15 U.S.C. lie (a)), is hereby amended by deleting subsection (5t in its entirety. Amendments to the Securities Exchange Act of 1934 Sec. 33. Section 12 of the Securities Exchange Act of 1934, as amended (15 U.S.C. 781^, is hereby amended by deletting subsection (i) in its entirety. Sec. 34. Section 3(a)(4) and Section 3(a)(5) of the Securities Exchange Act of 1934, as amended (15 U.S.C. SS78c(a)(4), 78c (a)(5)), are hereby amended by deleting therefrom the phrase "but does not include a bank. n
- 7 - D. PROHIBITION AGAIN3T USE OF A BANK'S NAME BY ITS SECURITIES AFFILIATE AND AFFILIATED MUTUAL FUND Amendments to the Investment Company Act of 1940 Sec. 35. Section 35 (d) of the Investment Company Act of 1940, as amended (15 U.S.C. 80a-34(d)), is hereby amended by adding the following language after the first sentence: "It is hereby declared to be deceptive and misleading for any depository institution securities affiliate or any regitered investment company which is organized, sponsored, operated or controlled by, or which receives investment advice from, a depository institution securities affiliate, as defined in the Bank Holding Company Act of 1956, as amended, or the Savings and Loan Holding ComCompany Amendments of 1967, as amended, of to adopt, as a part of the name or title of such company, or of any security of which it is the issuer, any words or words which are the same as, similar to, or a variation of, the name of any depository institution holding company, any depository institution or any other subsidiary of a depository institution holding company which is affiliated with such depository institution securities affiliate." Amendments to the Federal Reserve Act x [Additions to the Administration Proposal are Underlined; Deletions From the Administration Proposal are in Brackets] Sec. 15. (a) The Federal Reserve Act is amended by adding new Section 23B immediately following Section 23A (12 U.S.C. 371c) thereof to read as follows: 11 (b) A member bank and the affiliates of such bank shall not publish any advertisement or enter into any agreement stating or suggesting that the bank shall in any way be responsible for the obligations of its affiliates!; however, a member bank and its affiliates may use similar names].
- 8 - E. LESSENING OF PUBLIC CONFUSION BETWEEN BANKING FUNCTIONS AND AFFILIATED MUTUAL FUND ACTIVITIES Amendments to the Investment Company Act of 1940 Sec. 36. Section 35 of the Investment Company Act of 1940, as amended (15 U.S.C. 80a-34), is hereby amended by adding the following new paragraph: "(e) It shall be unlawful for any depository institution which is affiliated with a depository institution securities affiliate, as defined in the Bank Holding Company Act of 1956, as amended, or as defined in the Savings and Loan Holding Company Amendments of 1967, as amended, or for any affiliated person of such depository institution other than such a depository institution securities affiliate, to engage, directly or indirectly, in the offer or sale of any securities issued by any investment company which is organized, sponsored, operated or controlled by, or which receives investment advice from, such depository institution securities affiliate. For purposes of this section, the term 'engage, directly or indirectly, in the offerer sale of securities of an investment company 1 shall include promoting or advertising such investment company or the securities issued by such investment company; distributing or making available prospectuses or sales literature relating to securities issued by such investment company; referring any custotomers or business to such investment company or such depository institution securities affiliate; rendering investment advice with respect to the advisability of investing in securities issued by such investment company; furnishing the names of depositors in such depository institution to such investment company or such depository institution securities affiliate; and the maintenance of offices by such investment company in any building which is likely to be identified with such depository institution or any affiliated person of such depository institution other than such depository institution securities affiliate."
- 9 - F. PROHIBITION AGAINST OVERLAPPING PERSONNEL Amendments to the Banking Act of 1933 [Additions to the Existing Statutory Language Are Underlined; Deletions From the Existing Statutory Language Are In Brackets.] Sec. 37. Section 32 of the Banking Act of 1933, as amended (12 U.S.C. 78), is hereby amended to read as follows: No officer, director, or employee of any corporation or unincorporated association, no partner or employee of any partnership, and no individual, primarily engaged in the issue, flotation, underwriting, public sale, or distribution, at wholesale or retail, or through syndicate participation, of stocks, bonds, or other similar securities, shall serve at the same time as an officer, director, of employee of any [member bank] depository institution. [except in limited classes of cases in which the Board of Governors of the Federal Reserve System may allow such service by general regulations when in the judgment of the said Board it would not unduly influence the investment policies of such member bank or the advice it gives its customers regarding investments.] The term 'depository institution* as used in this section has the meaning ascribed to it by Section 1841(k)(2) of this Title (12 U.S.C. 1841(k)(2)) and Section 1730a(a)(l) (K)(ii) of this Title (12 U.S.C. 1730a(a) (l)(k)(ii)), and includes an uninsured institution as defined in Section 1730a(a)(l) (B) of this Title (12 U.S.C. 1730a(a)(1)(B)).
- 10 - G. STRENGTHENED ANTI-TYING PROVISIONS Amendments to the Bank Holding Company Act Amendments of 1970 [Additions to the Existing Statutory Language or the Administration's Proposal are Underlined? Deletions are in Brackets] Sec. 38. Subsection 106(b) of the Bank Holding Company Act Amendments of 1970 (12 U.S.C. 1972(i)) is hereby amended to read as follows; (1) A bank or its depository institution securities affiliate shall not in any manner extend credit, lease or sell property of any kind, or furnish any service, or fix or vacy the consideration for any of the foregoing, on the condition or requirement (A) that the customer shall obtain some additional credit, property, or service from such bank or from such depository institution securities affiliate other than a loan, discount, or deposit[, or trust service]; (B) that the customer shall obtain some additional credit, property, or service from a bank holding company of such bank or from any other subsidiary of such bank holding company, including a depository institution securities affiliate; (C) that the customer provide some additional credit, property, or service to such bank or such depository institution securities affiliate, other than those related to and usually provided in connection with a loan, discount, or deposit!, or trust service]; (D) that the customer provide some additional credit, property, or service to a bank holding company of such bank or to any other subsidiary of such bank holding company, including a depository institution securities affiliate;
- 11 - (E) that the customer shall not obtain some other credit, property, or service from a competitor of such bank, a bank holding company of such bank, or any subsidiary of such bank holding company, including a depository institution securities affiliate, other than a condition or» requirement that such bank shall reasonably impose in a credit transaction to assure the soundness of the credit. [The Board may by regulation or order permit such exceptions to the foregoing prohibition as it considers will not be contrary to the purposes of this chapter.] If a significant number of customers of any bank receive trust services from such bank and at the same time receive other credit, property, or services from such bank, from a holding company of such bank or from any other subsidiary of such holding company, including a depository institution securities affiliate, it shall be presumed that such bank obtained the trust business of all such customers in violation of this section. In addition, if a significant number of customers of any depository institution securities affiliate own securities of any registered investment company organized, sponsored, operated, controlled, or advised by such depository institution securities affiliate, and at the same time receive other credit, property, or services from such depository institution securities affiliate, from a holding company of such depository institution securities affiliate, or from any other subsidiary of such holding company, including a depository institution, it shall be presumed that the securities owned by all such customers were sold to such customers in violation of this section. Sec. 17. Section 106 of the Bank Holding Company Act Amendments of 1970 (12 U.S.C. 1972, et seq.) is hereby amended by adding new subsection (i) at the end thereof to read as follows:
- 12 - "ACTIONS AUTHORIZED TO BE COMMENCED BY TRADE ASSOCIATIONS "Any action for injunctive relief that may be commenced by any person pursuant to Section 1976 of this title, may be commenced on the behalf of such person by any trade association of which such person is a member, provided that any such action commenced by a trade association shall be subject to the same requirements, limitations, and conditions as would be applicable had such action been commenced by any such person pursuant to section 1976 of this title.". Amendments to the Home Owners 1 Loan Act of 1933 [Additions to the Existing Statutory Language or the Administration's Proposal are Underlined; Deletions are in Brackets] Sec. 24. Subsection 5(q) of the Home Owners' Loan Act of 1933 (12 U.S.C. 1464 (q)) is amended (1) by amending subsection 5(q)(l) to read as follows: (q)(l) An association or its depository institution securities affiliate shall not in any manner extend credit, lease or sell property of any kind, or or furnish any service, or fix or vary the consideration for any of the foregoing, on the condition or requirement (A) that the customer shall obtain additional credit, property, or service from such association or from any service corporation or affiliate of such association, including a depository institution securities affiliate*,otherthanaloan,discount, or deposit[, or trust service]; (B) that the customer provide additional credit, property, or service to such association, or to any service
- 13 - corporation or affiliate of such association, including a depository institution securities affiliate, other than those related to and usually provided in connection with a similar loan, discount, or deposit I, or trust service]; and (C) that the customer shall not obtain some other credit, property, or service from a competitor of such association, or from a competitor of any service corporation or affiliate of such association, including a depository institution securities affiliate, other than a condition or requirement that such association shall reasonably impose in connection with credit transactions to assure the soundess of credit. If a significant number of customers of any association receive trust services from such association and at the same time receive other credit, property or services from such association, from a holding company of such association, or from any other subsidiary of such holding company, including a depository institution securities affiliate, it shall be presumed that such association obtained the trust business of all such customers in violation of this section. In addition, if a significant number of customers of any depository institution securities affiliate own securities of any registered investment company organized, sponsored, operated, controlled, or advised by such depository institution securities affiliate, and at the same time receive other credit, property, or services from such depository institution securities affiliate, from a holding company of such depository institution securities affiliate, or from any other subsidary of such holding company, including an association, it shall be presumed that the securities owned by all such customers were sold to such customers in violation of this section.
- 14 - (2) by adding a new paragraph (6) to read as follows: "(6) Any action for injunctive relief that may be commenced by any person pursuant to paragraph (2) of this provision, may be commenced on the behalf of such person by any trade association of which such person is a member, provided that any such action commenced by a trade association shall be subject to the same requirements, limitations and conditions as would be applicable had such action been commenced by any such person pursuant to paragraph (2) of this provision.".
- 15 - H. PROHIBITION AGAINST DUMPING OF AFFILIATED MUTUAL FUND SECURITIES INTO BANK FIDUCIARY ACCOUNTS Amendments to the Investment Company Act of 1940 Sec. 39. Section 17 of the Investment Company Act of 1940, as amended (15 U.S.C. 80a-17), is hereby amended by adding the following new paragraph: M (k) It shall be unlawful for any affiliated person of any depository institution securities affiliate, as defined in Section 1841(j) and Section 1730a(a)(1)(K) of Title 12 of the United States Code, to purchase as fiduciary any securities issued by any registered investment company which is organized, sponsored, operated, or controlled by such depositary institution securities affiliate, or which receives investment advice from such depository institution securities affiliate,, unless such purchases are required by court order. The Commission may, by rules, and regulations or order permit such purchases which the Commission deems to be in the public interest and consistent with the protection of investors, and the terms of which the Commission determines to be reasonable and fair and not to involve overreaching on the part of any person concerned."
- 16 - I. PROHIBITION AGAINST MANIPULATION OF AFFILIATED MUTUAL FUND TO FACILITATE LOAN REPAYMENTS TO BANKS OR TO ASSIST CORRESPONDENT BANKS Amendments to the Investment Company Act of 1940 Sec. 40. Section 17 of the Investment Company Act of 1940, as amended (15 U.S.C. 80a-17), is hereby amended by adding the following new paragraph: "(1) It shall be unlawful for any depository institution securities affiliate, as defined in Section 1841(j) and Section 1730a(a)(1)(K) of Title 12 of the United States Code, to cause any registered investment company which is sponsored, organized, operated or controlled by, or which receives investment advice from, such depository institution securities affiliate (1) to purchase any security issued by any issuer who was indebted at any time during such issuer's last fiscal year to any depository institution holding company company, any depository institution, or any other subsidiary of a depository institution holding company which is affiliated with such depository institution securities affiliate; and (2) to purchase any security or other property issued or sold as principal, by any depository institution which regularly receives correspondent services from any depository institution holding company, any depository institution or any other subsidiary of a depository institution holding company which is affiliated with such depository institution securities affiliate. For the purposes of this section, the term 'correspondent services' includes the acceptance of deposits and the performing of other banking or depository services. The Commission may, by rules and regulations or order, permit such purchases which the Commission deems to be in the public interest and consistent with the protection of investors, and the terms which the Commission determines to be fair and reasonable and not to involve overreaching on the part of any person concerned."
- 17 - J. PROHIBITION AGAINST BANK LOANS TO SECURITIES ISSUERS TO SUPPORT AFFILIATED MUTUAL FUNDS Amendments to the Investment Company Act of 1940 Sec. 41. Section 17 of the Investment Company Act of 1940, as amended (15 U.S.C. 80a-17), is hereby amended by adding the following new paragraph: "(m) It shall be unlawful for any affiliated person of any depository institution securities affiliate, as defined in Sections 1841(j) and 1730a(a)(l)(K) of Title 12 of the United States Code, to lend any money, securities, or other property to any issuer any of whose outstanding securities are owned by any registered investment company organized, sponsored, operated, controlled or advised by such depository institution securities affiliate. The Commission may, by rules and regulations or order, permit such loans which the Commission deems to be in the public interest and consistent with the protection of investors, and the terms of which the Commission determines to be fair and reasonable and not to involve overreaching on the part of any person concerned,,"
- 18 - K. PROHIBITION AGAINST LOANS BY BANKS TO ENABLE CUSTOMERS TO PURCHASE SECURITIES OF AFFILIATED MUTUAL FUNDS Amendments to the Investment Company Act of 1940 Sec. 42. Section 17 of the Investment Company Act of 1940, as amended (15 U.S.C. 80a-17), is hereby amended by adding the following new paragraph: "(n) it shall be unlawful for any affiliated person of any depository institution securities affiliate, as defined in Sections 1841(j) and 1730a(a)(1)(K) of Title 12 of the United States Code, to lend any money to any person to enable such person to purchase securities issued by a registered investment company organized, sponsored, operated or controlled by such depository institution securities affiliate, or which receives investment advice from such depository institution securities affiliate. The Commission may, by rules and regulations or order, permit such loans which the Commission deems to be in the public interest and consistent with the protection of investors, and the terms of which the Commission determines to be fair and reasonable and not to involve overreaching on the part of any person concerned."
- 19 - L. BANKING POWERS FOR SECURITIES FIRMS, SECURITIES POWERS FOR BANKS, AND REPEAL OF INTERSTATE BANKING RESTRICTIONS Amendments to the Bank Holding Company Act [Additions to the Administration Proposal are Underlined; Deletions from the Administration Proposal are in Brackets] Sec. 11. Subsection 4(c) of the Bank Holding Company Act of 1956, as amended (12 U.S.C. 1843(c)), is hereby amended by deleting the penultimate sentence thereof and by adding a new paragraph (15) as follows: "(15) shares of any depository institution securities affiliate engaged in activities in accordance with the limitations contained in this paragraph: * * * "(iii) In addition to the activities referred to in subparagraphs (i) and (ii) of this paragraph, such depository institution securities affiliate may * * "(E) sell, distribute, and underwrite stocks, bonds, debentures, notes and other securities. * * * Sec. 42. Section 3 of the Bank Holding Company Act, as amended (12 U.S.C. 1842), is amended by deleting subsection (d), known as the Douglas Amendment, in its entirety.
- 20 - Amendments to the McFadden Act Section 43. The McFadden Act, as amended (12 U.S.C. 36), is amended by repealing it in its entirety.
- 21 - M. TRUST POWERS FOR THE MEMBERS OF THE MUTUAL FUND INDUSTRY Amendments to the Investment Advisers Act of 1940 and Related Acts Sec. 44. (a) The Investment Advisers Act of 1940, as amended (15 U.S.C. 80b-l et seq.) is hereby amended by adding a new section 80b-3A following section 80b-3: "Notwithstanding paragraph 'Seventh 1 of Section 5136 of the Revised Statutes of the United States (12 U.S.C. 24), Sections 20, 21, or 32 of the Banking Act of 1933 (12 U.S.C. 377, 378 or 78) the Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.), or the Saavings and Loan Holding Company Act Amendments of 1967 (12 U.S.C. 1730a), an investment adviser registered pursuant to 15 U.S.C. 80b-3 which on July 1, 1983, organized, sponsored, operated or rendered investment advice to an open-end investment company, or such adviser's parent, affiliate, or subsidiary, upon filing a certificate of election with the Comptroller of the Currency, may exercise all the trust powers of a national banking association as specified in 12 U.S.C. 92a(a); provided, however, that such adviser, or such adviser's parent, affiliate or subsidiary shall not be deemed a 'national banking association' for the purposes of the McFadden Act (12 U.S.C. 36) nor be deemed a 'bank' or 'bank holding company or subsidiary thereof for the purposes of the Douglas Amendment to the Bank Holding Company Act (12 U.S.C. 1842(d))." (b) Paragraph "Seventh" of Section 5136 of the Revised Statutes of the United States (12 U.S.C. 24), is hereby amended by adding the words: "Except as provided in section 80b-3A of the Investment Advisers Act," before the words: "the business of dealing in securities and stock." (c) Section 32 of the Banking Act of 1933 (12 U.S.C. 78), is hereby amended by adding the words: "Except as provided in section 80b-3A of the Investment Advisers Act," at the beginning of such section.
- 22 - (d) Section 20 of the Banking Act of 1933 (12 U.S.C. 377), is hereby amended by adding the words: "except as provided in section 80b-3A of the Investment Advisers Act," before the words: "no member bank shall be affiliated in any manner." (e) Section 21 of the Banking Act of 1933 (12 U.S.C. 278), is hereby amended by adding the words: "except as provided in section 80b-3A of the Investment Advisers Act," before the words: "to engage at the same time to any extent whatever."
- 23 - N. STRENGTHENED PROHIBITIONS AGAINST BANK SUPPORT OF SECURITIES AFFILIATES Amendments to the Federal Reserve Act [Additions to the Administration Proposal are Underlined; Deletions from the Administration Proposal are in Brackets] Sec. 15. (a) The Federal Reserve Act is amended by adding new Section 23B immediately following Section 23A (12 U.S.C. 371c) thereof to read as follows: "Sec. 23B. RESTRICTIONS ON TRANSACTIONS WITH AFFILIATES. (a) A [member bank] depository institution and its subsidiaries may not engage in any of the following transactions, unless the Board first has determined that the [only on]terms and[under]circumstances, including credit standards, of the transaction [that] are substantially the same as, or at least as favorable to, such [bank] depository institution or its subsidiary as those prevailing at the time for comparable transactions with or involving other non-affiliated companies or, in the absence of comparable transactions, those terms and circumstances that in good faith would be offered to, or would apply to nonaffiliated companies, so that no unfair benefit, whether such benefit may be in the form of financial, business, or any other support, inures to an affiliate by virtue of its association with the depository institution and its subsidiaries: M (1) any covered transaction, as defined in section 23A, with an affiliate; "(2) the purchase or sale of securities or other assets, including assets subject to an agreement to repurchase, to or from an affiliate; "(3) the payment of money or the furnishing of services to an affiliate, under contract, a lease, or otherwise; "(4) any transaction in which an affiliate acts as an agent or broker or receives a fee for its services to the [bank] depository institution or any other person; or
- 24 - "(5) any transaction or series of transactions with a third party, (A) if an affiliate has a financial interest in the third party, or (B) if an affiliate is a participant in such transaction or series of transactions. For the purposes of this subsection, any transaction by a [member bank] depository institution with any person shall be deemed to be a transaction with an affiliate of such [bank] depository institution to the extent that the proceeds of the transaction are used for the benefit of, or transferred to, such affiliate. H (b) A [member bank] depository institution and the affiliates of such [bank] depos"^ itory institution shall not publish any advertisment or enter into any agreement stating or suggesting that the [bank] depository institution shall in any way be responsible for the obligations of its affiliates[; however, a member bank and its affiliates may use similar names]. 11 (c) A [member bank] depository institution and any subsidiary of such [bank] depository institution "(1) shall not purchase as fiduciary any securities or other assets from any affiliate unless such purchases are required [permitted under the instrument creating the fiduciary relationship,] by court order[, or by law of the jurisdiction under which the trust is administered]; and n (2) [whether] acting as principal [or fiduciary], shall not knowingly or otherwise acquire, during the existence of any underwriting or selling syndicate, any security a principal underwriter of which is an affiliate of such [bank] depository institution; except that this prohibition shall not apply where the Board in advance has approved the purchase of such securities as consistent with the public interest and as not involving overreaching on the part of any personal has been approved, prior to the time at which such securities are initially offered for sale to the public, by a majority of the
- 25 - directors of the bank who are not officers or employees of the bank or any affiliate thereof.] For the purpose of this paragraph, the term 'security' means a 'security 1 as defined in section 3(a)(10) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)[(12)](10))f and the term 'principal underwriter 1 means any underwriter who, in connection with a primary distribution of securities, (A) is in privity of contract with the issuer or an affiliated person of the issuer; (8) acting alone or in concert with one or more persons, initiates or directs the formation of an underwriting syndicate; or (C) is allowed a rate of gross commission, spread, or other profit greater than the rate allowed another underwriter participating in the distribution. 11 (d) For the purpose of the section "(1) the term 'affiliate' means an 'affiliate' as defined in Section 23A of the Federal Reserve Act (12 U.S.C. 371c) excluding a bank; and "(2) the terms ['bank,] 'subsidiary', 'person 1, and 'security' (other than security as used in subsection (c)) have the same meanings given to them in Section 23A of the Federal Reserve Act (12 U.S.C. 371c)." "(3) the term 'depository institution' has the meaning ascribed to it by Section 1814(k)(2) of this Title (12 U.S.C. 1841(k)(2)) and Section 1730a(a)(1)(K) (ii) of this Title (12 U.S.C. 1730a(a) (l)(k)(ii)), and includes an uninsured institution as that term is defined in Section 1730a(a)(1)(B) of this Title (12 U.S.C. 1730a(a)(l)(B)). tl "(e)[the Board may prescribe rules and regulations to administer and carry out the purposes of this section, including rules or regulations to (1) further define terms used in this section; (2) exempt transactions or relationships from the requirements of this section; or (3) exclude from the definition of 'affiliate' in this section any subsidiary of a bank holding company, if the Board finds
- 26 - such exemptions or exclusions to be in the public interest and consistent with the purpose of this section.] Nothing in this title shall be deemed to authorize the Board to exempt any person, transaction or relationship from the requirements of the federal securities laws, as that term is defined in Section 21(g) of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78u(g)). Furthermore, nothing in this title shall be deemed to alter, affect, amend, invalidate, or repeal any provision of the Investment Company Act of 1940.
- 27 - O. EXPRESS GLASS-STEAGALL ACT PRIVATE RIGHT OF ACTION Amendments to the Banking Act of 1933 Sec. 45. Section 21 of the Banking Act of 1933, as amended (12 U.S.C. 5378), is hereby amended to add the following new subparagraph (c): (c)(l) Any person injured by reason of any conduct forbidden in sections 24 (Seventh), 78, 377, and 378 of this title ittay bring suit in any United States district court where the defendant resides, or is found, or transacts business, or has an agent, * to recover the damages sustained by him, or to obtain injunctive or other equitable relief. (c)(2) Any action to enforce any cause of action under subsection (c)(l) shall be forever barred unless commenced within six years after the cause of action accrued. (c)(3) Any action for injunctive or other equitable relief that may be commenced by any person pursuant to subsection (c)(l) may be commenced on behalf of such person by any trade association of which such person is a member, provided that any such action commenced by a trade association shall be subject to the same requirements, limitations, and conditions as would be applicable had such action been commenced by any person pursuant to subsection (c)(l).
- 28 - P. EXPEDITED CONVERSION PROCEDURES Amendments to the Securities Act of 1933 [Additions to the Administration's Proposal are Underlined; Deletions from the Administration's Proposal are in Brackets.] Sec. 4. Section 4 of the Securities Act of 1933, as amended (15 U.S.C. 77d), is hereby amended by adding [a] new paragraph^ (7) and (8) at the end thereof: H (7) transactions involving offers or sales of equity securities, in connection with the acquisition of a bank by a company under the Bank Holding Company Act of 1956, as amended (12 U.S.C. 1841 et seq.), or in connection with the acquisition of an insured institution by a company under the Savings and Loan Holding Company Amendments of 1967, as amended (12 U.S.C. 1730a), if such acquisition occurs solely as part of a reorganization in which a person or group of persons exchange their shares of a bank or insured institution for shares of a newly formed bank holding company or savings and loan holding company and receive, after such reorganization, substantially the same proportional share interest in the holding company as they held in the bank or insured institution, except for changes in shareholder interests resulting from the exercise of dissenting shareholder rights under state law. "(8) transactions involving offers or sales of equity securities, undertaken in order to form a company to acquire a bank under the Bank Holding Company Act of 1956, as amended (12 U.S.C. 1841 et seq.), or in order to form a company to acquire an insured institution under the Savings and Loan Holding Company Act Amendments of 1967, as amended (12 U.S.C. 1730a), if the formation of such company occurs solely as a reorganization in which a person or group of persons exchange their shares of an existing company for shares of the newly formed company and receive, after such reorganization, substan-
- 29 - tially the same proportional share interest in the newly formed company as they held in the existing company, except for changes in shareholder interests resulting from the exercise of dissenting shareholder rights under state law. Amendments to the Bank Holding Company Act [Additions to the Administration's Proposal are Underlined; Deletions from the Administration's Proposal are in Brackets.] Sec. 8. Subsection 3(a) of the Bank Holding Company Act of 1956, as amended (12 U.S.C. 1842(a)), is hereby amended by adding the following immediately preceding the period at the end of the second sentence of such subsection: 11 ; [or] (C) with 30 days prior notification to the Board, the acquisition by a company of control of a bank in a reorganization in which a person or group of persons exchange their shares of the bank for shares of a newly formed bank holding company and receive, after such reorganization substantially the same proportional share interest in the holding company as they held in the bank except for changes in shareholder interests resulting from the exercise of dissenting shareholder rights under state law, provided that, immediately following such acquisition, the bank holding company meets the capital and other financial standards prescribed by the Board by regulation for such a bank holding company and the holding company does not engage in any activities other than those of banking or managing and controlling banks. In promulgating regulations pursuant to this subsection, the Board shall not require more capital for the subsidiary bank immediately following the reorganization than is required for a similarly sized bank that is not a subsidiary of a bank holding company [ ".] M j_ or, with 30 days prior notification to the Board, the formation of a company to acquire control of a bank in a reorganization in which a person or group of persons exchange their shares in an existing company for
- 30 - shares of a newly formed company and receive, after such reorganization, substantially the same proportional share interest in the newly formed company as they held in the existing company except for changes in shareholder interests resulting from the exercise of dissenting shareholder rights under state law, provided that, immediately following the acquisition of a bank by the newly formed company, the resulting bank holding company meets the capital and other financial standards prescribed by the Board by regulation for such a bank holding company and the holding company does not engage in any activities other than those of banking or managing or controlling banks. In promulgating regulations pursuant to this subsection, the Board shall not require more capital for the subsidiary bank immediately following its acquisition than is required for a similarly sized bank that is not a subsidiary of a bank holding company.". Amendments to the Savings and Loan Holding Company Act Amendments of 1967 [Additions to the Administration's Proposal are Underlined; Deletions from the Administration's Proposal are in Brackets.] Sec. 21. Subsection (e) of the Savings and Loan Holding Company Amendments of 1967 (12 U.S.C. 1730a(e)) is hereby amended by amending clause (ii) of subparagraph (1)(B) to read as follows, and by adding the following clause (iii ); " (ii) acquired in connection with a reorganization in which a person or group of persons exchange their shares of an insured institution for shares of a newly formed holding company and receive, after such reorganization, substantially the same proportional share interest in the holding company as they held in the insured institution, except for changes in shareholder interests resulting from the exercise of dissenting shareholder rights under state law[.], or (iii) acquired subsequent to a reorganization in which a person or group of persons exchanged their shares of an existing company
- 31 - for shares of a newly formed company and received, after such reorganization, substantially the same proportional share interest in the newly formed company as they held in the existing company, except for changes in shareholder interest resulting from the exercise of dissenting shareholder rights under state law.".
- 32-0. IMPROVED GRANDFATHER RIGHTS FOR COMPANIES OWNING NON-BANK BANKS AND SINGLE THRIFTS Amendments to the Bank Holding Company Act [Additions to the Administration's Proposal are Underlined; Deletions from the Administration's Proposal are in Brackets.] Sec. 9. Section 4(a)(2) of the Bank Holding Company Act of 1956, as amended (12 U.S.C. 1843(a)(2), is hereby amended to read as follows "Provided further r (I) That the two-year period referred to in this paragraph shall not apply to a company that becomes a bank holding company as a result of enactment of the Financial Institutions Deregulation Act and that acquired a bank between July 1, 1983, and the effective date of such Act; and (II) That a company that becomes a bank holding company as a result of the enactment of the Financial Institutions Deregulation Act, and that controlled an insured bank on July 1, 1983, may engage in any activity in which it was lawfuly engaged, directly or through a subsidiary, on July 1, 1983, and in which it has been engaged continuously since July 1, 1983, provided that any activities authorized for bank holding companies may not be expanded and any additional activities may not be commenced except in accordance with the requirements, conditions and limitations applicable to bank holding companies. The authority conferred by the preceding clause (II): (a) shall terminate at such time as (1) any covered bank holding company acquires control of an additional bank or an insured institution, or (2) its existing subsidiary bank commences accepting deposits that the depositor has a legal right to withdraw on demand and engages in the business of making commercial loans[, or (3) any covered bank holding company commences,
- 33 - directly or through a subsidiary, after July 1, 1983, any additional activities, other than those activities authorized pursuant to this Act (except for the acquisition of an insured institution), in which it was not engaged on July 1, 1983]; and (b) may be terminated by the Board by order, after opportunity for hearing, if it determines, having due regard to the purposes of this chapter, that such action is necessary to prevent conflicts of interest or unsound banking practices or is in the public interest!.".3; Provided, however, That the Board may, upon application by any such covered bank holding company, extend the authority conferred by this subsection for an appropriate period of time in the poblic interest, but in no event shall such period of time exceed one year,- M Amendments to the Savings and Loan Holding Company Act Amendments of 1967 [Additions to the Administration's Proposal are Underlined; Deletions from the Administration's Proposal are in Brackets.] Section 19. Subsection (c) of the Savings and Loan Holding Company Amendments of 1967 (12 U.S.C. 1730a(c)) is hereby amended to read as follows: "(c)(l) Except as otherwise provided in this subsection, no savings and loan holding company (except a unitary savings and loan holding company that acquires an insured institution pursuant to subsection (m) of this section) or subsidiary thereof which is not an insured institution shall "(B) commence or continue, after two years from the date as of which it becomes a savings and loan holding company, any business activity other than those specified in paragraph (2) of this subsection except that such two period shall not apply to any company that acquires an insured institution between July 1, 1983, and the effective date of
- 34 - the Financial Institutions Deregulation Act. Provided, That any company that becomes subject, as a result of the Financial Institutions Deregulation Act, to the prohibitions of this subparagraph and that controlled an insured institution prior to July 1, 1983, may engage in any activity in which it was lawfully engaged, directly or through a subsidiary, on July 1, 1983, and in which it has been engaged continuously since July 1, 1983, provided that any activities authorized for savings and loan holding companies may not be expanded and any additional activities may not be commenced except in accordance with the requirements, conditions and limitations applicable to savings and loan holding companies. The authority conferred by the preceding proviso, (A) shall terminate at such time as any covered savings and loan holding company (i) acquires a bank, or its subsidiary insured institution fails to qualify as a domestic building and loan association under section 7701(a)(19) of the Internal Revenue Code of 1954[, or (ii) commences, directly or through a subsidiary, after July 1, 1983, any additional activities, other than those authorized pursuant to this Act to be permissible for savings and loan holding companies (except for the acquisition of a bank), in which it was not engaged on July 1, 1983,] or (B) may be terminated by the Corporation, after opportunity for hearing, if it determines, having due regard to prevent conflicts of interests, unsound practices, or in the public interest!.]; Provided, however, that the Board may, upon application by any such covered savings and loan holding company, extend the authority conferred by this subsection for an appropriate period of time in the public interest, but in no event shall such period of time exceed one year.
- 35 - R. DUE PROCESS PROTECTIONS FOR MEMBERS OF THE SECURITIES INDUSTRY Amendments to the Bank Holding Company Act [Additions to the Administration's Proposal are Underlined; Deletions from the Administration's Proposal are in Brackets.] Sec. 10- Paragraph 8 of subsection 4(c) of the Bank Holding Company Act of 1956, as amended <12 U.S.C. 1843(c)(8)) r is hereby amended to read as follows: n (v) The Board shall by order set forth the reasons for any disapproval under this par?- graph. Inaction on any notice or a Board order determining not to disapprove a proposal [to engage ic an activity that has previously been authorised by regulation under this paragraph shall be final and shall not be subject to judicial review under this Act or in any other manner; provided, however, that] is reviewable pursuant to Section 9 of this Act upon petition by any interested person (or a trade association acting on behalf of such a person), and any bank holding company may obtain judicial review pursuant to section 9 of this Act of any Board order not to disapprove a notice under this paragraph if such order contains restrictions or conditions. "(vi) The Board shall, within one hundred and eighty days of enactment of the Financial Institutions Deregulation Act and from time to time thereafter, promulgate regulations under this paragraph designating particular activities that are closely related to banking or of a financial nature. A bank holding company may petition the Board to determine by regulation that a particular activity is closely related to banking or of a financial nature[.], and any interested person (or a trade association acting on behalf of such a person) may oppose such petition. The Board may by regulation prescribe limitations on the conduct of any activity or activities