[Congressional Record Volume 144, Number 36 (Thursday, March 26, 1998)]
[House]
[Pages H1644-H1647]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                               AMENDMENTS

  Under clause 6 of rule XXIII, proposed amendments were submitted as 
follows:

                                H.R. 10

                         Offered By: Mr. Dreier

               (Amendment in the Nature of a Substitute)

       Amendment No. 2: Strike everything after the enacting 
     clause and insert the following new text:

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Financial Services 
     Competitive Enhancement Act''.

          TITLE I--FINANCIAL SERVICES COMPETITIVE ENHANCEMENT

     SEC. 101. ANTI-AFFILIATION PROVISIONS OF ``GLASS-STEAGALL 
                   ACT'' REPEALED.

       (a) Section 20 Repealed.--Section 20 of the Banking Act of 
     1933 (12 U.S.C. 377) is repealed.
       (b) Section 32 Repealed.--Section 32 of the Banking Act of 
     1933 (12 U.S.C. 78) is repealed.

     SEC. 102. FINANCIAL ACTIVITIES.

       Section 4(c)(8) of the Bank Holding Company Act of 1956 (12 
     U.S.C. 1843(c)(8)) is amended to read as follows:
       ``(8) shares of any company the activities of which the 
     Board, in accordance with subsection (l), has determined (by 
     regulation or order) to be financial in nature or incidental 
     to such financial activities and--
       ``(A) effective 90 days after the date of the enactment of 
     the Financial Services Competitive Equality Act, it shall be 
     financial in nature to provide insurance as principal, agent, 
     or broker in any State, in full compliance with the laws and 
     regulations of such State that uniformly apply to each type 
     of insurance license or authorization in such State, except 
     that in no event shall the company, the bank holding company, 
     or any affiliate of the company or bank holding company be 
     subject to any State law or regulation that restricts a bank 
     from having an affiliate, agent, or employee in such State 
     licensed to provide insurance as principal, agent, or broker; 
     and
       ``(B) the Board shall prescribe regulations concerning 
     insurance affiliations that provide equivalent treatment for 
     all stock and mutual insurance companies that control or are 
     otherwise affiliated with a bank and fully accommodate and 
     are consistent with State law;''.

     SEC. 103. INSURANCE COMPANY INVESTMENTS.

       Section 4 of the Bank Holding Company Act of 1956 (12 
     U.S.C. 1843) is amended by adding at the end the following 
     new subsection:
       ``(k) Insurance Company Investments.--Notwithstanding 
     subsection (a), a bank holding company may directly or 
     indirectly acquire or control, whether as principal, on 
     behalf of 1 or more entities (including any subsidiary of the 
     holding company which is not a depository institution or 
     subsidiary of a depository institution) or otherwise, shares, 
     assets, or ownership interests (including without limitation 
     debt or equity securities, partnership interests, trust 
     certificates or other instruments representing ownership) of 
     a company or other entity, whether or not constituting 
     control of such company or entity, engaged in any activity 
     not authorized pursuant to this section if--
       ``(1) the shares, assets, or ownership interests are not 
     acquired or held by a depository institution or a subsidiary 
     of a depository institution;
       ``(2) such shares, assets, or ownership interests are 
     acquired and held by an insurance company that is 
     predominantly engaged in underwriting life, accident and 
     health, or property and casualty insurance (other than 
     credit-related insurance);
       ``(3) such shares, assets, or ownership interests represent 
     an investment made in the ordinary course of business of such 
     insurance company in accordance with relevant State law 
     governing such investments; and
       ``(4) during the period such shares, assets, or ownership 
     interests are held, the bank holding company does not 
     directly or indirectly participate in the day-to-day 
     management or operation of the company or entity except 
     insofar as necessary to achieve the objectives of paragraph 
     (3).''.

     SEC. 104. FINANCIAL IN NATURE.

       Section 4 of the Bank Holding Company Act of 1956 (12 
     U.S.C. 1843) is amended by inserting after subsection (k) (as 
     added by section 4 of this Act) the following new subsection:
       ``(l) Engaging in Activities Financial in Nature.--
       ``(1) In general.--Notwithstanding section 4(a), a bank 
     holding company may engage in any activity which the Board 
     has determined (by regulation or order) to be financial in 
     nature or incidental to such financial activities.
       ``(2) Factors to be considered.--In determining whether an 
     activity is financial in nature or incidental to financial 
     activities, the Board shall take into account--
       ``(A) the purposes of this Act and the Financial Services 
     Competitive Enhancement Act;
       ``(B) changes or reasonably expected changes in the 
     marketplace in which bank holding companies compete;
       ``(C) changes or reasonably expected changes in the 
     technology for delivering financial services; and
       ``(D) whether such activity is necessary or appropriate to 
     allow a bank holding company and the affiliates of a bank 
     holding company to--
       ``(i) compete effectively with any company seeking to 
     provide financial services in the United States;
       ``(ii) use any available or emerging technological means, 
     including any application necessary to protect the security 
     or efficacy of systems for the transmission of data or 
     financial transactions, in providing financial services; and
       ``(iii) offer customers any available or emerging 
     technological means for using financial services.
       ``(3) Activities that are financial in nature.--The 
     following activities shall be considered to be financial in 
     nature:
       ``(A) Lending, exchanging, transferring, investing for 
     others, or safeguarding money or securities.
       ``(B) Insuring, guaranteeing, or indemnifying against loss, 
     harm, damage, illness, disability, or death, or providing and 
     issuing annuities, and acting as principal, agent, or broker 
     for purposes of the foregoing.
       ``(C) Providing financial, investment, or economic advisory 
     services, including advising an investment company (as 
     defined in section 3 of the Investment Company Act of 1940).
       ``(D) Issuing or selling instruments representing interests 
     in pools of assets permissible for a bank to hold directly.
       ``(E) Underwriting, dealing in, or making a market in 
     securities.
       ``(F) Engaging in any activity that the Board has 
     determined, by order or regulation that is in effect on the 
     date of enactment of the Financial Services Competitive 
     Enhancement Act, to be so closely related to banking or 
     managing or controlling banks as to be a proper incident 
     thereto (subject to the same terms and conditions contained 
     in such order or regulation, unless modified by the Board).
       ``(G) Engaging, in the United States, in any activity 
     that--
       ``(i) a bank holding company may engage in outside the 
     United States; and
       ``(ii) the Board has determined, under regulations issued 
     pursuant to section 4(c)(13) of this Act (as in effect on the 
     day before the date of enactment of the Financial Services 
     Competitive Enhancement Act) to be usual in connection with 
     the transaction of banking or other financial operations 
     abroad.
       ``(H) Directly or indirectly acquiring or controlling, 
     whether as principal, on behalf of 1 or more entities 
     (including entities, other than a depository institution or 
     subsidiary of a depository institution, that the bank holding 
     company controls) or otherwise, shares, assets, or ownership 
     interests (including without limitation debt or equity 
     securities, partnership interests, trust certificates or 
     other instruments representing ownership) of a company or 
     other entity, whether or not constituting control of such 
     company or entity, engaged in any activity not authorized 
     pursuant to this section if--
       ``(i) the shares, assets, or ownership interests are not 
     acquired or held by a depository institution or subsidiary of 
     a depository institution;
       ``(ii) such shares, assets, or ownership interests are 
     acquired and held by a securities affiliate or an affiliate 
     thereof as part of a bona fide underwriting or merchant 
     banking activity, including investment activities engaged in 
     for the purpose of appreciation and ultimate resale or 
     disposition of the investment;
       ``(iii) such shares, assets, or ownership interests, are 
     held for such a period of time as will permit the sale or 
     disposition thereof on a reasonable basis consistent with the 
     nature of the activities described in clause (ii); and
       ``(iv) during the period such shares, assets, or ownership 
     interests are held, the bank holding company does not 
     actively participate in the day to day management or 
     operation of such company or entity, except insofar as 
     necessary to achieve the objectives of clause (ii).
       ``(4) Actions required.--The Board shall, by regulation or 
     order, define, consistent with the purposes of this Act, the 
     following activities as, and the extent to which such 
     activities are, financial in nature or incidental to 
     activities which are financial in nature:
       ``(A) Lending, exchanging, transferring, investing for 
     others, or safeguarding financial assets other than money or 
     securities.
       ``(B) Providing any device or other instrumentality for 
     transferring money or other financial assets;
       ``(C) Arranging, effecting, or facilitating financial 
     transactions for the account of third parties.
       ``(5) Post consummation notification.--

[[Page H1645]]

       ``(A) In general.--A bank holding company that acquires any 
     company, or commences any activity, pursuant to this 
     subsection shall provide written notice to the Board 
     describing the activity commenced or conducted by the company 
     acquired no later than 30 calendar days after commencing the 
     activity or consummating the acquisition.
       ``(B) Approval not required for certain financial 
     activities.--Except as provided in section 4(j) with regard 
     to the acquisition of a savings association, a bank holding 
     company may commence any activity, or acquire any company, 
     pursuant to paragraph (3) or any regulation prescribed or 
     order issued under paragraph (4), without prior approval of 
     the Board.

     SEC. 105. STREAMLINING BANK HOLDING COMPANY SUPERVISION.

       Section 5(c) of the Bank Holding Company Act of 1956 (12 
     U.S.C. 1844(c)) is amended to read as follows:
       ``(c) Reports and Examinations.--
       ``(1) Reports.--
       ``(A) In general.--The Board from time to time may require 
     any bank holding company and any subsidiary of such company 
     to submit reports under oath to keep the Board informed as 
     to--
       ``(i) its financial condition, systems for monitoring and 
     controlling financial and operating risks, and transactions 
     with depository institution subsidiaries of the holding 
     company; and
       ``(ii) compliance by the company or subsidiary with 
     applicable provisions of this Act.
       ``(B) Use of existing reports.--
       ``(i) In general.--The Board shall, to the fullest extent 
     possible, accept reports in fulfillment of the Board's 
     reporting requirements under this paragraph that a bank 
     holding company or any subsidiary of such company has 
     provided or been required to provide to other Federal and 
     State supervisors or to appropriate self-regulatory 
     organizations.
       ``(ii) Availability.--A bank holding company or a 
     subsidiary of such company shall provide to the Board, at the 
     request of the Board, a report referred to in clause (i).
       ``(iii) Required use of publicly reported information.--The 
     Board shall, to the fullest extent possible, accept in 
     fulfillment of any reporting or recordkeeping requirements 
     under this Act information that is otherwise required to be 
     reported publicly and externally audited financial 
     statements.
       ``(iv) Reports filed with other agencies.--In the event the 
     Board requires a report from a functionally regulated 
     nondepository institution subsidiary of a bank holding 
     company of a kind that is not required by another Federal or 
     State regulator or appropriate self-regulatory organization, 
     the Board shall request that the appropriate regulator or 
     self-regulatory organization obtain such report. If the 
     report is not made available to the Board, and the report is 
     necessary to assess a material risk to the bank holding 
     company or its subsidiary depository institution or 
     compliance with this Act, the Board may require such 
     subsidiary to provide such a report to the Board.
       ``(C) Definition.--For purposes of this subsection, the 
     term `functionally regulated nondepository institution' 
     means--
       ``(i) a broker or dealer registered under the Securities 
     Exchange Act of 1934;
       ``(ii) an investment adviser registered under the 
     Investment Advisers Act of 1940, with respect to the 
     investment advisory activities of such investment adviser and 
     activities incidental to such investment advisory activities;
       ``(iii) an insurance company subject to supervision by a 
     State insurance commission, agency, or similar authority; and
       ``(iv) an entity subject to regulation by the Commodity 
     Futures Trading Commission, with respect to the commodities 
     activities of such entity and activities incidental to such 
     commodities activities.
       ``(2) Examinations.--
       ``(A) Examination authority.--
       ``(i) In general.--The Board may make examinations of each 
     bank holding company and each subsidiary of a bank holding 
     company.
       ``(ii) Functionally regulated nondepository institution 
     subsidiaries.--Notwithstanding clause (i), the Board may make 
     examinations of a functionally regulated nondepository 
     institution subsidiary of a bank holding company only if--

       ``(I) the Board has reasonable cause to believe that such 
     subsidiary is engaged in activities that pose a material risk 
     to an affiliated depository institution, or
       ``(II) based on reports and other available information, 
     the Board has reasonable cause to believe that a subsidiary 
     is not in compliance with this Act or with provisions 
     relating to transactions with an affiliated depository 
     institution and the Board cannot make such determination 
     through examination of the affiliated depository institution 
     or bank holding company.

       ``(B) Limitations on examination authority for bank holding 
     companies and subsidiaries.--Subject to subparagraph (A)(ii), 
     the Board may make examinations under subparagraph (A)(i) of 
     each bank holding company and each subsidiary of such holding 
     company in order to--
       ``(i) inform the Board of the nature of the operations and 
     financial condition of the holding company and such 
     subsidiaries;
       ``(ii) inform the Board of--

       ``(I) the financial and operational risks within the 
     holding company system that may pose a threat to the safety 
     and soundness of any subsidiary depository institution of 
     such holding company; and
       ``(II) the systems for monitoring and controlling such 
     risks; and

       ``(iii) monitor compliance with the provisions of this Act 
     and those governing transactions and relationships between 
     any subsidiary depository institution and its affiliates.
       ``(C) Restricted focus of examinations.--The Board shall, 
     to the fullest extent possible, limit the focus and scope of 
     any examination of a bank holding company to--
       ``(i) the bank holding company; and
       ``(ii) any subsidiary of the holding company that, because 
     of--

       ``(I) the size, condition, or activities of the subsidiary; 
     or
       ``(II) the nature or size of transactions between such 
     subsidiary and any depository institution which is also a 
     subsidiary of such holding company,

     could have a materially adverse effect on the safety and 
     soundness of any depository institution affiliate of the 
     holding company.
       ``(D) Deference to bank examinations.--The Board shall, to 
     the fullest extent possible, use, for the purposes of this 
     paragraph, the reports of examinations of depository 
     institutions made by the appropriate Federal and State 
     depository institution supervisory authority.
       ``(E) Deference to other examinations.--The Board shall, to 
     the fullest extent possible, address the circumstances which 
     might otherwise permit or require an examination by the Board 
     by forgoing an examination and instead reviewing the reports 
     of examination made of--
       ``(i) any registered broker or dealer or registered 
     investment adviser by or on behalf of the Securities and 
     Exchange Commission;
       ``(ii) any licensed insurance company by or on behalf of 
     any state regulatory authority responsible for the 
     supervision of insurance companies; and
       ``(iii) any other subsidiary that the Board finds to be 
     comprehensively supervised by a Federal or State authority.
       ``(3) Capital.--
       ``(A) In general.--The Board shall not, by regulation, 
     guideline, order or otherwise, prescribe or impose any 
     capital or capital adequacy rules, guidelines, standards, or 
     requirements on any subsidiary of a bank holding company that 
     is not a depository institution and--
       ``(i) is in compliance with applicable capital requirements 
     of another Federal regulatory authority (including the 
     Securities and Exchange Commission) or State insurance 
     authority; or
       ``(ii) is registered as an investment adviser under the 
     Investment Advisers Act of 1940.
       ``(B) Rule of construction.--Subparagraph (A) shall not be 
     construed as preventing the Board from imposing capital or 
     capital adequacy rules, guidelines, standards, or 
     requirements with respect to activities of a registered 
     investment adviser other than investment advisory activities 
     or activities incidental to investment advisory activities.
       ``(4) Transfer of board authority to appropriate federal 
     banking agency.--
       ``(A) In general.--In the case of any bank holding company 
     which is not significantly engaged in nonbanking activities, 
     the Board, in consultation with the appropriate Federal 
     banking agency, may designate the appropriate Federal banking 
     agency of the lead insured depository institution subsidiary 
     of such holding company as the appropriate Federal banking 
     agency for the bank holding company.
       ``(B) Authority transferred.--An agency designated by the 
     Board under subparagraph (A) shall have the same authority as 
     the Board under this Act to--
       ``(i) examine and require reports from the bank holding 
     company and any affiliate of such company (other than a 
     depository institution) under section 5;
       ``(ii) approve or disapprove applications or transactions 
     under section 3;
       ``(iii) take actions and impose penalties under subsections 
     (e) and (f) of section 5 and section 8; and
       ``(iv) take actions regarding the holding company, any 
     affiliate of the holding company (other than a depository 
     institution), or any institution-affiliated party of such 
     company or affiliate under the Federal Deposit Insurance Act 
     and any other statute which the Board may designate.
       ``(C) Agency orders.--Section 9 (of this Act) and section 
     105 of the Bank Holding Company Act Amendments of 1970 shall 
     apply to orders issued by an agency designated under 
     subparagraph (A) in the same manner such sections apply to 
     orders issued by the Board.
       ``(5) Functional regulation of securities and insurance 
     activities.--The Board shall defer to--
       ``(A) the Securities and Exchange Commission with regard to 
     all interpretations of, and the enforcement of, applicable 
     Federal securities laws relating to the activities, conduct, 
     and operations of registered brokers, dealers, investment 
     advisers, and investment companies; and
       ``(B) the relevant State insurance authorities with regard 
     to all interpretations of, and the enforcement of, applicable 
     State insurance laws relating to the activities, conduct, and 
     operations of insurance companies and insurance agents.''.

     SEC. 106. AMENDMENT TO DIVESTITURE PROCEDURES.

       Section 5(e)(1) of the Bank Holding Company Act of 1956 (12 
     U.S.C. 1844(e)(1)) is amended--

[[Page H1646]]

       (1) by striking ``Financial Institutions Supervisory Act of 
     1966, order'' and inserting ``Financial Institutions 
     Supervisory Act of 1966, at the election of the bank holding 
     company--
       ``(A) order''; and
       (2) by striking ``shareholders of the bank holding company. 
     Such distribution'' and inserting ``shareholders of the bank 
     holding company; or
       ``(B) order the bank holding company, after due notice and 
     opportunity for hearing, and after consultation with the 
     bank's primary supervisor, which shall be the Comptroller of 
     the Currency in the case of a national bank, and the Federal 
     Deposit Insurance Corporation and the appropriate State 
     supervisor in the case of an insured nonmember bank, to 
     terminate (within 120 days or such longer period as the Board 
     may direct) the ownership or control of any such bank by such 
     company.

     ``The distribution referred to in subparagraph (A)''.

     SEC. 107. AUTHORITY OF STATE INSURANCE REGULATOR AND 
                   SECURITIES AND EXCHANGE COMMISSION.

       Section 5 of the Bank Holding Company Act of 1956 (12 
     U.S.C. 1844) is amended by adding at the end the following 
     new subsection:
       ``(g) Authority of State Insurance Regulator and the 
     Securities and Exchange Commission.--
       ``(1) In general.--Notwithstanding any other provision of 
     law, any regulation, order, or other action of the Board 
     which requires a bank holding company to provide funds or 
     other assets to a subsidiary insured depository institution 
     shall not be effective nor enforceable if--
       ``(A) such funds or assets are to be provided by--
       ``(i) a bank holding company that is an insurance company 
     or is a broker or dealer registered under the Securities 
     Exchange Act of 1934; or
       ``(ii) an affiliate of the depository institution which is 
     an insurance company or a broker or dealer registered under 
     such Act; and
       ``(B) the State insurance authority for the insurance 
     company or the Securities and Exchange Commission for the 
     registered broker or dealer, as the case may be, determines 
     in writing sent to the holding company and the Board that the 
     holding company shall not provide such funds or assets 
     because such action would have a material adverse effect on 
     the financial condition of the insurance company or the 
     broker or dealer, as the case may be.
       ``(2) Notice to state insurance authority or sec 
     required.--If the Board requires a bank holding company, or 
     an affiliate of a bank holding company, which is an insurance 
     company or a broker or dealer described in paragraph (1)(A) 
     to provide funds or assets to an insured depository 
     institution subsidiary of the holding company pursuant to any 
     regulation, order, or other action of the Board referred to 
     in paragraph (1), the Board shall promptly notify the State 
     insurance authority for the insurance company or the 
     Securities and Exchange Commission, as the case may be, of 
     such requirement.
       ``(3) Divestiture in lieu of other action.--If the Board 
     receives a notice described in paragraph (1)(B) from a State 
     insurance authority or the Securities and Exchange Commission 
     with regard to a bank holding company or affiliate referred 
     to in such paragraph, the Board may order the bank holding 
     company to divest the insured depository institution within 
     180 days of receiving notice or such longer period as the 
     Board determines consistent with the safe and sound operation 
     of the insured depository institution.
       ``(4) Conditions before divestiture.--During the period 
     beginning on the date an order to divest is issued by the 
     Board under paragraph (3) to a bank holding company and 
     ending on the date the divestiture is completed, the Board 
     may impose any conditions or restrictions on the holding 
     company's ownership or operation of the insured depository 
     institution, including restricting or prohibiting 
     transactions between the insured depository institution and 
     any affiliate of the institution, as are appropriate under 
     the circumstances.''.

     SEC. 108. PRUDENTIAL SAFEGUARDS.

       Section 5 of the Bank Holding Company Act of 1956 (12 
     U.S.C. 1844) is amended by inserting after subsection (g) (as 
     added by section 8 of this Act) the following new subsection:
       ``(h) Prudential Safeguards.--
       ``(1) In general.--The Board may, by regulation or order, 
     impose restrictions or requirements on relationships or 
     transactions between a depository institution subsidiary of a 
     bank holding company and any affiliate of such depository 
     institution (other than a subsidiary of such institution) 
     which the Board finds is consistent with the public interest, 
     the purposes of this Act, the Financial Services Competitive 
     Enhancement Act, the Federal Reserve Act, and other Federal 
     law applicable to depository institution subsidiaries of bank 
     holding companies and the standards in paragraph (2).
       ``(2) Standards.--The Board may exercise authority under 
     paragraph (1) if the Board finds that such action will have 
     any of the following effects:
       ``(A) Avoid any significant risk to the safety and 
     soundness of depository institutions or any Federal deposit 
     insurance fund.
       ``(B) Enhance the financial stability of bank holding 
     companies.
       ``(C) Avoid conflicts of interest or other abuses.
       ``(D) Enhance the privacy of customers of depository 
     institutions.
       ``(E) Promote the application of national treatment and 
     equality of competitive opportunity between nonbank 
     affiliates owned or controlled by domestic bank holding 
     companies and nonbank affiliates owned or controlled by 
     foreign banks operating in the United States.
       ``(3) Review.--The Board shall regularly--
       ``(A) review all restrictions or requirements established 
     pursuant to paragraph (1) to determine whether there is a 
     continuing need for any such restriction or requirement to 
     carry out the purposes of the Act, including any purpose 
     described in paragraph (2); and
       ``(B) modify or eliminate any restriction or requirement 
     the Board finds is no longer required for such purposes.''.

     SEC. 109. EXAMINATION OF INVESTMENT COMPANIES.

       (a) Exclusive Commission Authority.--
       (1) In general.--The Commission shall be the sole Federal 
     agency with authority to inspect and examine any registered 
     investment company that is not a bank holding company.
       (2) Prohibition on banking agencies.--A Federal banking 
     agency may not inspect or examine any registered investment 
     company that is not a bank holding company.
       (b) Examination Results and Other Information.--The 
     Commission shall provide to any Federal banking agency, upon 
     request, the results of any examination, reports, records, or 
     other information with respect to any registered investment 
     company to the extent necessary for the agency to carry out 
     its statutory responsibilities.
       (c) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       (1) Bank holding company.--The term ``bank holding 
     company'' has the meaning given to such term in section 2 of 
     the Bank Holding Company Act of 1956.
       (2) Commission.--The term ``Commission'' means the 
     Securities and Exchange Commission.
       (3) Federal banking agency.--The term ``Federal banking 
     agency'' has the meaning given to such term in section 3(z) 
     of the Federal Deposit Insurance Act.
       (4) Registered investment company.--The term ``registered 
     investment company'' means an investment company which is 
     registered with the Commission under the Investment Company 
     Act of 1940.

     SEC. 110. LIMITATION ON RULEMAKING, PRUDENTIAL, SUPERVISORY, 
                   AND ENFORCEMENT AUTHORITY OF THE BOARD.

       The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et 
     seq.) is amended by inserting after section 10 the following 
     new section:

     ``SEC. 10A. LIMITATION ON RULEMAKING, PRUDENTIAL, 
                   SUPERVISORY, AND ENFORCEMENT AUTHORITY OF THE 
                   BOARD.

       ``(a) Limitation on Direct Action.--
       ``(1) In general.--The Board may not prescribe regulations, 
     issue or seek entry of orders, impose restraints, 
     restrictions, guidelines, requirements, safeguards, or 
     standards, or otherwise take any action under or pursuant to 
     any provision of this Act or section 8 of the Federal Deposit 
     Insurance Act against or with respect to a regulated 
     subsidiary of a bank holding company unless the action is 
     necessary to prevent or redress an unsafe or unsound practice 
     or breach of fiduciary duty by such subsidiary that poses a 
     material risk to--
       ``(A) the financial safety, soundness, or stability of an 
     affiliated depository institution; or
       ``(B) the domestic or international payment system.
       ``(2) Criteria for board action.--The Board shall not take 
     action otherwise permitted under paragraph (1) unless the 
     Board finds that it is not reasonably possible to effectively 
     protect against the material risk at issue through action 
     directed at or against the affiliated depository institution 
     or against depository institutions generally.
       ``(b) Limitation on Indirect Action.--The Board may not 
     prescribe regulations, issue or seek entry of orders, impose 
     restraints, restrictions, guidelines, requirements, 
     safeguards, or standards, or otherwise take any action under 
     or pursuant to any provision of this Act or section 8 of the 
     Federal Deposit Insurance Act against or with respect to a 
     bank holding company where the purpose or effect of doing so 
     would be to take action indirectly against or with respect to 
     a regulated subsidiary that may not be taken directly against 
     or with respect to such subsidiary in accordance with 
     subsection (a).
       ``(c) Actions Specifically Authorized.--Notwithstanding 
     subsection (a), the Board may take action under this Act or 
     section 8 of the Federal Deposit Insurance Act to enforce 
     compliance by a regulated subsidiary with Federal law that 
     the Board has specific jurisdiction to enforce against such 
     subsidiary.
       ``(d) Regulated Subsidiary Defined.--For purposes of this 
     section, the term `regulated subsidiary' means any company 
     that is not a bank holding company and is--
       ``(1) a broker or dealer registered under the Securities 
     Exchange Act of 1934;
       ``(2) an investment adviser registered under the Investment 
     Advisers Act of 1940, with respect to the investment advisory 
     activities of such investment adviser and activities 
     incidental to such investment advisory activities;
       ``(3) an investment company registered under the Investment 
     Company Act of 1940;

[[Page H1647]]

       ``(4) an insurance company or an insurance agency subject 
     to supervision by a State insurance commission, agency, or 
     similar authority; or
       ``(5) an entity subject to regulation by the Commodity 
     Futures Trading Commission, with respect to the commodities 
     activities of such entity and activities incidental to such 
     commodities activities.''.