Glass-Steagall Reform bill

TABLE OF CONTENTS:

Title I: Bank Securities Activities and Affiliations with

Securities Firms and Other Financial Companies

Subtitle A: Securities Activities

Subtitle B: Investment Bank Holding Companies

Subtitle C: Financial Activities

Subtitle D: Interagency Banking and Financial

Services

Advisory Committee

Title II: Functional Regulation Dealers

Subtitle A: Brokers and Dealers

Subtitle B: Bank Investment Company Activities

Financial Services Competitiveness Act of 1995 - Title I: Bank Securities Activities and Affiliations with Securities Firms and Other Financial Companies - Subtitle A: Securities Activities - Amends the Banking Act of 1933 (Glass-Steagall Act) to repeal the proscription against affiliation of any member bank of the Federal Reserve System with an entity engaged principally in securities activities (securities affiliate).

(Sec. 102) Amends the Bank Holding Company Act of 1956 (BHCA) to authorize financial services holding companies (FSHCs) to own shares of a securities affiliate.

(Sec. 103) Delineates activities permissible for securities affiliates. Instructs the Board of Governors of the Federal Reserve System (the Board) to consider the need for securities firms affiliated with banks to be innovative and competitive when it makes determinations of "permissible activities."

Cites circumstances under which the Board may permit an FSHC to: (1) acquire more than five percent of, or all or substantially all of, the voting shares or assets of a securities affiliate; (2) make additional investments that are considered capital for purposes of statutory capital requirements in a securities affiliate under its control; and (3) permit its securities affiliate to underwrite or deal in any security for a maximum aggregate period of two years.

Excludes a securities affiliate's assets and liabilities (except those related to nonsecurities activities) from the determination of whether an FSHC is adequately capitalized.

Prohibits a FSHC that acquires control of a securities affiliate from permitting any depository institution (or its subsidiary) from engaging in underwriting securities backed by or representing interests in obligations or pools of obligations originated or purchased by the institution or its affiliates. Cites exceptions.

Requires the Board to deny any notice or application by an FSHC to engage in, or acquire shares of a company engaged in, underwriting or dealing in securities in the United States, unless such activity is permissible for a national bank.

Treats certain participants in a bankers' bank holding company as subsidiaries.

Cites circumstances under which an FSHC may acquire shares and ownership interests in connection with underwriting and investment banking activities without prior Board approval.

(Sec. 104) Delineates conditions under which: (1) a well capitalized insured depository institution may extend credit to acquire or sell securities, or enhance the marketability of securities underwritten by a securities affiliate; and (2) an FSHC or its subsidiary may extend credit or make payments to finance the purchase of a security underwritten by one of its securities affiliates.

Directs the Board to promulgate regulations under which directors and senior executive officers of a securities affiliate may serve simultaneously in the same capacity at an affiliated depository institution (management interlocks).

Sets forth disclosure requirements for securities affiliates and insured depository institutions.

Sets restrictions upon the underwriting by an securities affiliate of securities representing obligations originated by an affiliated depository institution.

Prescribes guidelines under which each appropriate Federal banking agency and the Securities and Exchange Commission (SEC) shall establish information sharing and compliance programs and coordinate their activities to enforce this Act.

Identifies conditions under which the uninsured wholesale operations of foreign banks are exempt from the restrictions relating to securities affiliates.

Amends the Federal Reserve Act to extend the time period during which a member bank is prohibited from acquiring a security if a principal underwriter in the selling syndicate is a bank affiliate.

Amends the Federal Power Act to exempt from its prohibition against interlocking directorates certain persons currently serving or proposing to serve as directors or officers of a public utility and a banking firm permitted to underwrite or participate in the marketing of public utility securities, if that banking firm does not underwrite or participate in the marketing of securities of the same public utility.

Amends the Right to Financial Privacy Act to permit the supervisory agencies of the Federal Financial Institutions Examination Council and the SEC to exchange examination reports.

Amends the BHCA of 1956 to authorize the Board to promulgate regulations for the protection of depository institutions and for the separation of banking and commerce.

(Sec. 105) Amends the Bank Holding Company Act to set forth circumstances under which securities companies that become FSHCs may retain ownership of financial and nonfinancial companies.

Restricts joint marketing of products or services between an insured depository institution and an affiliate owned by an FSHC.

(Sec. 106) Identifies circumstances under which qualified limited purpose banks are exempt from: (1) asset growth restrictions; (2) new activities' restrictions; (3) cross-marketing restrictions; and (4) divestiture requirements. Prescribes guidelines for the conversion of certain nonbank holding companies to FSHC status.

(Sec. (107) Amends the Federal Deposit Insurance Act (FDIA) to set forth parameters within which certain insured depository institutions may be affiliates of a securities underwriter or dealer.

Requires the Federal Deposit Insurance Corporation (FDIC) to: (1) study and report to the Congress on the risks posed to the deposit insurance funds by the affiliation of insured depository institutions with securities affiliates; and (2) factor into semiannual assessments any increased risk to the funds that it finds are caused by such affiliations.

(Sec. 108) Amends the International Banking Act of 1978 to authorize the Board to set a termination date for any grandfathered authority conferred upon a foreign bank or company following Board approval of its application under this Act to control a securities affiliate.

(Sec. 109) Amends the BHCA of 1956 to preclude the States from prohibiting or limiting: (1) bank or FSHC affiliation with a securities affiliate solely because such affiliate is engaged in specified securities activities; or (2) activities of an FSHC subsidiary solely because the FSHC is no longer exempt under the BHCA.

(Sec. 110) Amends the Revised Statutes to permit well capitalized national banks engaged in the business of banking to conduct municipal securities transactions.

(Sec. 111) Amends the FDIA to direct the appropriate Federal banking agencies to jointly prescribe standards applicable to certain insured depository institutions that conduct transactions in securities issued by an investment company or annuities.

Subtitle B: Investment Bank Holding Companies - Amends the BHCA of 1956 to: (1) establish a new category known as "investment bank holding company" (IBHC); and (2) delineate permissible affiliations for investment bank holding companies. Prohibits the use of Federal deposit insurance funds for a wholesale financial institution (certain uninsured State member banks), or an IBHC.

Prescribes guidelines under which foreign banks may be treated as IBHCs and for reciprocal national treatment and coordination with the North American Free Trade Agreement (NAFTA).

(Sec. 117) Amends the Federal Reserve Act to prescribe procedural guidelines for membership as a wholesale financial institution in the Federal Reserve System.

Amends the FDIA to prescribe a procedure by which an insured State-chartered bank or a national bank may voluntarily terminate its status as an insured depository institution. Requires any such terminated bank to become a wholesale financial institution in order to accept any deposits.

Subtitle C: Financial Activities - Amends the BHCA of 1956 to exempt from its proscription against interests in nonbanking organizations any activity that the Board determines to be financial in nature or incidental to financial activities.

Repeals the mandate that the Board consider, when determining whether a particular activity is a proper incident to banking, if its performance by a bank holding company affiliate is such that the public interest benefit outweighs any possible adverse effects (such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices).

Permits Board regulations to differentiate between activities commenced by affiliates of different classes of banks.

(Sec. 122) Sets forth criteria for statutory approval, without prior notice to the Board, of proposals by well capitalized and well managed FSHCs to engage in specified transactions and acquisitions. Sets forth expedited procedures for FSHCs to acquire companies engaged in new activities.

(Sec. 123) Revises FSHC examination and reporting requirements.

(Sec. 124) Sets forth a statutory scheme for reduced supervision of FSHCs controlling principally nondepository institutions.

(Sec. 125) Sets forth a procedure for the conversion of unitary savings and loan holding companies to FSHC status without prior Board approval.

(Sec. 126) Establishes the Financial Services Advisory Committee to confer with regulators regarding the impact of this Act upon the financial services industry and to report semi-annually to certain congressional committees concerning its activities and recommendations.

(Sec. 128) Renames the BHCA of 1956 as the Financial Services Holding Company Act of 1995.

(Sec. 130) States that corporate credit cards are not commercial loans (thus permitting credit card banks to issue corporate credit cards, a practice currently proscribed).

Subtitle D: Interagency Banking and Financial Services Advisory Committee - Establishes the Interagency Banking and Financial Services Advisory Committee to improve the supervision, efficiency, and competitiveness of the financial services industry and make related recommendations to Federal agencies and the Congress.

Title II: Functional Regulation - Subtitle A: Brokers and Dealers - Amends the Securities Exchange Act of 1934 to define specified banks as "brokers" and "dealers" (current law excludes banks from such definition).

Defines for purposes of such new definitions "separately identifiable department or division of a bank" (SIDD) as a unit whose daily activities and employees are directly supervised by officers designated by the bank's board of directors and whose records are separately maintained or extractable from either unit or bank facilities, so as to be accessible for independent regulatory and enforcement purposes. Authorizes the SEC to prescribe regulations as it finds necessary. Declares that if a bank which has an SIDD is adequately capitalized, then the SIDD that is a broker or dealer shall be deemed to be in compliance with specified net capital rules.

Authorizes the SEC to exempt any person from the definition of "broker" or "dealer" if it finds such exemption is consistent with the purposes of this Act.

(Sec. 204) Exempts loans made by a member bank to a broker or dealer from Board-prescribed margin requirements if the loan proceeds are to be used in the ordinary course of business (other than for the purpose of funding securities purchases for the account of such broker or dealer).

Permits a broker-dealer to borrow from any person that agrees to comply with Federal Reserve Act strictures governing the use of credit to finance securities transactions.

Subtitle B: Bank Investment Company Activities - Amends the Investment Company Act of 1940 to permit: (1) custody of investment company assets by an affiliated bank; and (2) a unit investment trust to designate an affiliated bank as trustee (currently a prohibited practice).

Permits the SEC to bring a civil action for breach of fiduciary duty involving personal misconduct against a custodian for a registered investment company.

(Sec. 212) Prohibits an investment company from knowingly acquiring a security during an underwriting or selling syndicate if the issuer has a material relationship with the investment company's adviser.

(Sec. 213) States that an affiliate of an investment company for a bank must comply with SEC rules when lending money to an investment company.

(Sec. 214) Modifies the definition of "interested person" to identify transactions, services, and loans taking place during the preceding six months which would make a person an affiliated person of a broker or dealer.

Prohibits a registered investment company from having a majority of its board of directors consisting of personnel or senior officers of the subsidiaries of any one bank, or of any single financial services holding company (and its affiliates and subsidiaries).

(Sec. 215) Modifies the guidelines pertaining to unlawful misrepresentation of guarantees and the deceptive use of names.

(Sec. 216) Modifies the definition of "broker" to state that it does not include any person solely by reason of the fact that such person is an underwriter for one or more investment companies.

(Sec. 217) Modifies the definition of "dealer" to exclude an insurance or an investment company.

(Sec. 218) Amends the Investment Advisers Act of 1940 to modify the definitions of investment adviser to remove the exclusion from such definition of an investment adviser for banks that advise investment companies. Revises the definitions of broker and dealer.

(Sec. 221) Mandates interagency consultation between the appropriate Federal banking agency and the SEC regarding examination results and other information pertaining to the investment advisory activities of any registered bank holding company and its departments or divisions.

(Sec. 222) Amends the Securities Act of 1933 and the Securities Exchange Act of 1934 to revise the exclusion from their purview of certain bank common trust funds to specify the exclusion of any interest or participation in any common trust fund or similar fund that is excluded from the definition of "investment company" under the Investment Company Act of 1940. Amends the Investment Company Act of 1940 to revise such exclusion guidelines for certain bank common trust funds.

Expresses the sense of the Congress that the public interest would be furthered by amending the Internal Revenue Code to provide that conversion, mergers, or reorganization of certain taxable common trust funds shall not result in a gain or loss to the fund participants.

(Sec. 223) Amends the Investment Company Act of 1940 to prescribe circumstances under which an investment adviser holding shares of an investment company in a fiduciary capacity must transfer the power to vote such shares to the beneficial owners or to another fiduciary who is not an affiliate of such adviser.