[Congressional Record Volume 156, Number 76 (Wednesday, May 19, 2010)]
[Senate]
[Pages S3987-S4018]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           TEXT OF AMENDMENTS

  SA 4115. Mr. MERKLEY (for himself and Mr. Levin) proposed an 
amendment to amendment SA 3789 proposed by Mr. Brownback (for himself, 
Mr. Bond, and Mr. Inhofe) to the amendment SA 3739 proposed by Mr. Reid 
(for Mr. Dodd (for himself and Mrs. Lincoln)) to the bill S. 3217, to 
promote the financial stability of the United States by improving 
accountability and transparency in the financial system, to end ``too 
big to fail,'' to protect the American taxpayer by ending bailouts, to 
protect consumers from abusive financial services practices, and for 
other purposes; as follows:

       At the appropriate place, insert the following:

     SEC. __. PROHIBITIONS ON PROPRIETARY TRADING AND CERTAIN 
                   RELATIONSHIPS WITH HEDGE FUNDS AND PRIVATE 
                   EQUITY FUNDS.

       Notwithstanding any other provision of this Act, section 
     619 of this act shall have no force or effect, and the Bank 
     Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is 
     amended by adding at the end the following:

     ``SEC. 13. PROHIBITIONS ON PROPRIETARY TRADING AND CERTAIN 
                   RELATIONSHIPS WITH HEDGE FUNDS AND PRIVATE 
                   EQUITY FUNDS.

       ``(a) In General.--
       ``(1) Prohibition.--Unless otherwise provided in this 
     section, a banking entity shall not--
       ``(A) engage in proprietary trading; or
       ``(B) acquire or retain any equity, partnership, or other 
     ownership interest in or sponsor a hedge fund or a private 
     equity fund.
       ``(2) Nonbank financial companies supervised by the 
     board.--Any nonbank financial company supervised by the Board 
     that engages in proprietary trading or takes or retains any 
     equity, partnership, or other ownership interest in or 
     sponsors a hedge fund or a private equity fund shall be 
     subject by the Board to additional capital requirements for 
     and additional quantitative limits with regards to such 
     proprietary trading and taking or retaining any equity, 
     partnership, or other ownership interest in or sponsorship of 
     a hedge fund or a private equity fund, except that permitted 
     activities as described in subsection (d) shall be subject to 
     additional capital and additional quantitative limits as 
     prescribed pursuant to subsection (d)(3).
       ``(b) Study and Rulemaking.--
       ``(1) Study.--Not later than 6 months after the date of 
     enactment of this section, the Financial Stability Oversight 
     Council shall study and make recommendations on implementing 
     the provisions of this section so as to--
       ``(A) promote and enhance the safety and soundness of 
     banking entities;
       ``(B) protect taxpayers and enhance financial stability by 
     minimizing the risk that insured depository institutions and 
     the affiliates of insured depository institutions will engage 
     in unsafe and unsound activities;
       ``(C) limit the inappropriate transfer of Federal subsidies 
     from institutions that benefit from deposit insurance and 
     liquidity facilities of the Federal Government to unregulated 
     entities;
       ``(D) reduce conflicts of interest between the self-
     interest of banking entities and nonbank financial companies 
     supervised by the Board, and the interests of the customers 
     of such entities and companies;
       ``(E) limit activities that have caused undue risk or loss 
     in banking entities and nonbank financial companies 
     supervised by the Board, or that might reasonably be expected 
     to create undue risk or loss in such banking entities and 
     nonbank financial companies supervised by the Board;
       ``(F) appropriately accommodate the business of insurance 
     within an insurance company subject to regulation in 
     accordance with the relevant insurance company investment 
     laws while protecting the safety and soundness of any banking 
     entity with which such insurance company is affiliated, and 
     of the United States financial system; and
       ``(G) appropriately time the divestiture of illiquid assets 
     that are affected by the implementation of the prohibitions 
     under subsection (a).
       ``(2) Rulemaking.--
       ``(A) In general.--Not later than 9 months after the 
     completion of the study under paragraph (1), the appropriate 
     Federal banking agencies, the Securities and Exchange 
     Commission, and the Commodity Futures Trading Commission, 
     (unless otherwise provided in this section) shall consider 
     the findings of the study under paragraph (1) and adopt rules 
     to carry out this section, as provided in subparagraph (B).
       ``(B) Coordinated rulemaking.--
       ``(i) Regulatory authority.--The regulations issued under 
     this paragraph and subsections (d) and (e) shall be issued 
     by--

       ``(I) the appropriate Federal banking agencies, jointly, 
     with respect to insured depository institutions;
       ``(II) the Board, with respect to any company that controls 
     an insured depository institution, or that is treated as a 
     bank holding company for purposes of section 8 of the 
     International Banking Act, any subsidiary of such a company 
     (other than a subsidiary described in subparagraph (A) or 
     (C)), and any nonbank financial company supervised by the 
     Board;
       ``(III) the Commodity Futures Trading Commission, with 
     respect to any entity for which the Commodity Futures Trading 
     Commission is the primary financial regulatory agency, as 
     defined in section 2 of the Restoring American Financial 
     Stability Act of 2010; and
       ``(IV) the Securities and Exchange Commission, with respect 
     to any entity for which the Securities and Exchange 
     Commission is the primary financial regulatory agency, as 
     defined in section 2 of the Restoring American Financial 
     Stability Act of 2010.

       ``(ii) Coordination, consistency, and comparability.--In 
     developing and issuing regulations pursuant to this section, 
     the appropriate Federal banking agencies, the Securities and 
     Exchange Commission, and the Commodity Futures Trading 
     Commission shall consult and coordinate with each other, as 
     appropriate, for the purposes of assuring, to the extent 
     possible, that such regulations are comparable and provide 
     for consistent application and implementation of the 
     applicable provisions of this section to avoid providing 
     advantages or imposing disadvantages to the companies 
     affected by this subsection and to protect the safety and 
     soundness of banking entities and nonbank financial companies 
     supervised by the Board.
       ``(iii) Council role.--The Chairperson of the Council shall 
     be responsible for coordination of the regulations issued 
     under this section.
       ``(c) Effective Date.--
       ``(1) In general.--Except as provided in paragraphs (2) and 
     (3), this section shall take effect on the earlier of--
       ``(A) 12 months after the issuance of final rules under 
     subsection (b); or
       ``(B) 2 years after the date of enactment of this section.
       ``(2) Transition period for divestiture of hedge funds or 
     private equity funds by banking entities.--
       ``(A) No new investments.--
       ``(i) No new funds.--On and after the date of enactment of 
     this section, a banking entity may not sponsor or invest in a 
     hedge fund or private equity fund that the banking entity did 
     not sponsor or in which the banking entity was not invested 
     on May 1, 2010.
       ``(ii) No additional capital or assets.--On and after the 
     date of enactment of this section, a banking entity may not 
     sell, transfer, loan, or otherwise provide any additional 
     capital or assets to a hedge fund or private equity fund 
     sponsored by the banking entity or in which the banking 
     entity invests, except to the extent necessary to fulfill a 
     contractual obligation that was in effect on May 1, 2010.
       ``(B) Reduction of existing investments.--Except as 
     provided in paragraph (3), on and after the date that is 2 
     years after the effective date of this section, the aggregate 
     amount of equity, partnership, or other ownership interests 
     in all hedge funds and private equity funds held by a banking 
     entity shall not exceed 2 percent of the Tier I capital of 
     the banking entity.
       ``(C) Total divestiture.--On and after the date that is 5 
     years after the effective date of this section, no banking 
     entity may engage in any activity prohibited under subsection 
     (a)(1)(B), except as provided in paragraph (3).
       ``(3) Transition period for illiquid funds.--
       ``(A) Definition.--In this paragraph, the term `illiquid 
     fund' means a hedge fund or private equity fund that, as of 
     May 1, 2010, was principally invested in or is invested in 
     illiquid assets, and committed to principally invest in 
     illiquid assets, such as portfolio companies, real estate 
     investments, and venture capital investments, and that 
     maintains the investment strategy of the fund that was in 
     place as of May 1, 2010, regarding principally investing in 
     illiquid assets. In issuing rules under this subparagraph, 
     the Board

[[Page S3988]]

     shall take into consideration the terms of investment for the 
     hedge fund or private equity fund, including contractual 
     obligations, the ability of the fund to divest of assets held 
     by the fund, and any other factors that the Board determines 
     are appropriate.
       ``(B) Transition.--
       ``(i) In general.--During the 4-year period beginning on 
     the date of enactment of this section, a banking entity may 
     only take an equity, partnership, or ownership interest in, 
     or otherwise provide additional capital to, an illiquid fund 
     to the extent necessary to fulfill a contractual obligation 
     of the banking entity to the illiquid fund that was in effect 
     on May 1, 2010.
       ``(ii) Limitations.--A banking entity may not exercise an 
     option to renew, or otherwise extend the duration of, any 
     contractual obligation described in clause (i) and shall 
     exercise any contractual option permitting the banking entity 
     to exit the illiquid fund if and when such option becomes 
     available. A banking entity may elect not to exercise an 
     option described in the preceding sentence, to the extent 
     that the maintenance of an investment would be permitted 
     under paragraph (2).
       ``(iii) Extension.--

       ``(I) Approval required.--If a contractual obligation of a 
     banking entity described in clause (i) extends beyond the 4-
     year period beginning on the date of enactment of this 
     section, the banking entity may not continue to make the 
     investment required under the contractual obligation without 
     the prior written approval of the Board. In determining 
     whether to grant an extension under this clause, the Board 
     shall evaluate whether the proposed investment meets the 
     requirements of this subparagraph.
       ``(II) Time limit on approval.--The Board may approve an 
     investment described in subclause (I) for a period of not 
     longer than 2 years for each extension.
       ``(III) Limit on number of approvals.--The Board may not 
     approve an investment described in subclause (I) more than 3 
     times.

       ``(iv) Divestiture required.--Except as otherwise permitted 
     under subsection (d), no banking entity may engage in any 
     activity prohibited under subsection (a)(1)(B) after the 
     earlier of --

       ``(I) the date on which the contractual obligation to 
     invest in the illiquid fund terminates; and
       ``(II) the date on which the approval by the Board under 
     clause (iii) expires.

       ``(4) Additional capital.--Notwithstanding paragraph (2) or 
     (3), on and after the effective date under paragraph (1), the 
     Board may impose additional capital requirements, and any 
     other restrictions, as the Board determines appropriate, on 
     any equity, partnership, or ownership interest in or 
     sponsorship of a hedge fund or private equity fund by a 
     banking entity or nonbank financial company supervised by the 
     Board, including on a case-by-case basis, as the Board 
     determines appropriate.
       ``(5) Rulemaking.--Not later than 6 months after the date 
     of enactment of this section, the Board shall issues rules to 
     implement paragraphs (2), (3), and (4).
       ``(d) Permitted Activities.--
       ``(1) In general.--Notwithstanding the restrictions in 
     subsection (a), to the extent permitted by any other 
     provision of Federal or State law, and subject to the 
     limitations under paragraph (2) and any restrictions or 
     limitations that the appropriate Federal banking agencies, 
     the Securities and Exchange Commission, and the Commodity 
     Futures Trading Commission, may determine, the following 
     activities (in this section referred to as `permitted 
     activities') are permitted:
       ``(A) The purchase, sale, acquisition, or disposition of 
     obligations of the United States or any agency thereof; 
     obligations, participations, or other instruments of or 
     issued by the Government National Mortgage Association, the 
     Federal National Mortgage Association, the Federal Home Loan 
     Mortgage Corporation, a Federal Home Loan Bank, the Federal 
     Agricultural Mortgage Corporation, or a Farm Credit System 
     institution chartered under and subject to the provisions of 
     the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.), and 
     obligations of any State or of any political subdivision 
     thereof.
       ``(B) The purchase, sale, acquisition, or disposition of 
     securities and other instruments described in subsection 
     (h)(4) in connection with underwriting, market-making, or in 
     facilitation of customer relationships, to the extent that 
     any such activities permitted by this subparagraph are 
     designed to not exceed the reasonably expected near term 
     demands of clients, customers, or counterparties.
       ``(C) Risk-mitigating hedging activities designed to reduce 
     the specific risks to a banking entity or nonbank financial 
     company supervised by the Board.
       ``(D) The purchase, sale, acquisition, or disposition of 
     securities and other instruments described in subsection 
     (h)(4) on behalf of customers.
       ``(E) Investments in one or more small business investment 
     companies, as defined in section 102 of the Small Business 
     Investment Act of 1958 (15 U.S.C. 662), or investments 
     designed primarily to promote the public welfare, as provided 
     in paragraph (11) of section 5136 of the Revised Statutes of 
     the United States (12 U.S.C. 24).
       ``(F) The purchase, sale, acquisition, or disposition of 
     securities and other instruments described in subsection 
     (h)(4) by a regulated insurance company directly engaged in 
     the business of insurance for the general account of the 
     company and by any affiliate of such regulated insurance 
     company, provided that such activities by any affiliate are 
     solely for the general account of the regulated insurance 
     company, if--
       ``(i) the purchase, sale, acquisition, or disposition is 
     conducted in compliance with, and subject to, the insurance 
     company investment laws, regulations, and written guidance of 
     the State or jurisdiction in which each such insurance 
     company is domiciled; and
       ``(ii) the appropriate Federal banking agencies, after 
     consultation with the Financial Stability Oversight Council 
     and the relevant insurance commissioners of the States and 
     territories of the United States, have not jointly 
     determined, after notice and comment, that a particular law, 
     regulation, or written guidance described in clause (i) is 
     insufficient to protect the safety and soundness of the 
     banking entity or nonbank financial company supervised by the 
     Board, or of the financial stability of the United States.
       ``(G) Organizing and offering a private equity or hedge 
     fund, including serving as a general partner, managing 
     member, or trustee of the fund and in any manner selecting or 
     controlling (or having employees, officers, directors, or 
     agents who constitute) a majority of the directors, trustees, 
     or management of the fund, including any necessary expenses 
     for the foregoing, only if--
       ``(i) the banking entity provides bona fide trust, 
     fiduciary, or investment advisory services;
       ``(ii) the fund is organized and offered only in connection 
     with the provision of bona fide trust, fiduciary, or 
     investment advisory services and only to persons that are 
     customers of such services of the banking entity;
       ``(iii) the banking entity does not acquire or retain an 
     equity interest, partnership interest, or other ownership 
     interest in the funds;
       ``(iv) the banking entity does not enter into or otherwise 
     engage in any transaction with the hedge fund or private 
     equity fund that is a covered transaction, as defined in 
     section 23A of the Federal Reserve Act (12 U.S.C. 371c);
       ``(v) the obligations or performance of the hedge fund or 
     private equity fund are not guaranteed, assumed, or otherwise 
     covered, directly or indirectly, by the banking entity or any 
     subsidiary or affiliate of the banking entity;
       ``(vi) the banking entity does not share with the hedge 
     fund or private equity fund, for corporate, marketing, 
     promotional, or other purposes, the same name or a variation 
     of the same name;
       ``(vii) no director or employee of the banking entity takes 
     or retains an equity interest, partnership interest, or other 
     ownership interest in, except for any director or employee of 
     the banking entity who is directly engaged in providing 
     investment advisory or other services to the hedge fund or 
     private equity fund; and
       ``(viii) the banking entity complies with any rules of the 
     appropriate Federal banking agencies, the Securities and 
     Exchange Commission, or the Commodity Futures Trading 
     Commission designed to ensure that losses in such hedge fund 
     or private equity fund are borne solely by investors in the 
     fund and not by the banking entity.
       ``(H) Proprietary trading conducted by a company pursuant 
     to paragraph (9) or (13) of section 4(c), provided that the 
     trading occurs solely outside of the United States and that 
     the banking entity or nonbank financial company supervised by 
     the Board is not directly or indirectly controlled by a 
     United States person.
       ``(I) The acquisition or retention of any equity, 
     partnership, or other ownership interest in, or the 
     sponsorship of, a hedge fund or a private equity fund by a 
     banking entity or nonbank financial company supervised by the 
     Board pursuant to paragraph (9) or (13) of section 4(c) 
     solely outside of the United States, provided that no 
     ownership interest in such hedge fund or private equity fund 
     is offered for sale or sold to a resident of the United 
     States and that the banking entity or nonbank financial 
     company supervised by the Board is not directly or indirectly 
     controlled by a company that is organized in the United 
     States.
       ``(J) Such other activity as the appropriate Federal 
     banking agencies, the Securities and Exchange Commission, and 
     the Commodity Futures Trading Commission determine through 
     regulation, as provided in subsection (b)(2)(B), would 
     promote and protect the safety and soundness of the banking 
     entity or nonbank financial company supervised by the Board 
     and the financial stability of the United States.
       ``(2) Limitation on permitted activities.--
       ``(A) In general.--No transaction, class of transactions, 
     or activity may be deemed a permitted activity under 
     paragraph (1) if it--
       ``(i) would involve or result in a material conflict of 
     interest (as such term shall be defined jointly by rule) 
     between the banking entity or the nonbank financial company 
     supervised by the Board and its clients, customers, or 
     counterparties;
       ``(ii) would result, directly or indirectly, in an unsafe 
     and unsound exposure by the banking entity or nonbank 
     financial company supervised by the Board to high-risk assets 
     or high-risk trading strategies (as such terms shall be 
     defined jointly by rule);
       ``(iii) would pose a threat to the safety and soundness of 
     such banking entity or nonbank financial company supervised 
     by the Board; or

[[Page S3989]]

       ``(iv) would pose a threat to the financial stability of 
     the United States.
       ``(B) Rulemaking.--The appropriate Federal banking 
     agencies, the Securities and Exchange Commission, and the 
     Commodity Futures Trading Commission shall issue regulations 
     to implement subparagraph (A), as part of the regulations 
     issued under subsection (b)(2).
       ``(3) Capital and quantitative limitations.--The Board 
     shall adopt rules, as provided under subsection (b)(2), 
     imposing additional capital requirements and quantitative 
     limitations regarding the activities permitted under this 
     section if the Board determines that additional capital and 
     quantitative limitations are appropriate to protect the 
     safety and soundness of the banking entities and nonbank 
     financial companies supervised by the Board engaged in such 
     activities.
       ``(e) Anti-evasion.--
       ``(1) Rulemaking.--The appropriate Federal banking 
     agencies, the Securities and Exchange Commission, and the 
     Commodity Futures Trading Commission shall issue regulations 
     as part of the rulemaking provided for in subsection (b)(2) 
     regarding internal controls and recordkeeping in order to 
     insure compliance with this section.
       ``(2) Termination of activities or investment.--Whenever an 
     appropriate Federal banking agency, the Securities and 
     Exchange Commission, or the Commodity Futures Trading 
     Commission, as appropriate, has reasonable cause to believe 
     that a banking entity or nonbank financial company supervised 
     by the Board under the respective agency's jurisdiction has 
     made an investment or engaged in an activity in a manner that 
     functions as an evasion of the requirements of this section 
     (including through an abuse of any permitted activity) or 
     otherwise violates the restrictions under this section, the 
     appropriate Federal banking agency, the Securities and 
     Exchange Commission, or the Commodity Futures Trading 
     Commission, as appropriate, shall order, after due notice and 
     opportunity for hearing, the banking entity or nonbank 
     financial company supervised by the Board to terminate the 
     activity and, as relevant, dispose of the investment. Nothing 
     in this subparagraph shall be construed to limit the inherent 
     authority of any Federal agency or State regulatory authority 
     to further restrict any investments or activities under 
     otherwise applicable provisions of law.
       ``(f) Limitations on Relationships With Hedge Funds and 
     Private Equity Funds.--
       ``(1) In general.--No banking entity that serves, directly 
     or indirectly, as the investment manager or investment 
     adviser to a hedge fund or private equity fund may enter into 
     a covered transaction, as defined in section 23A of the 
     Federal Reserve Act (12 U.S.C. 371c) with the hedge fund or 
     private equity fund.
       ``(2) Treatment as member bank.--A banking entity that 
     serves, directly or indirectly, as the investment manager or 
     investment adviser to a hedge fund or private equity fund 
     shall be subject to section 23A and 23B of the Federal 
     Reserve Act (12 U.S.C. 371c-1), as if such person were a 
     member bank and such hedge fund or private equity fund were 
     an affiliate thereof.
       ``(3) Covered transactions with unaffiliated hedge funds 
     and private equity funds.--No banking entity may enter into a 
     covered transaction, as defined in section 23A of the Federal 
     Reserve Act (12 U.S.C. 371c), with any hedge fund or private 
     equity fund organized and offered by the banking entity or 
     with any hedge fund or private equity fund in which such 
     hedge fund or private equity fund has taken any equity, 
     partnership, or other ownership interest.
       ``(g) Rules of Construction.--
       ``(1) Limitation on contrary authority.--Any prohibitions 
     or restrictions under this section shall apply even though 
     such activities may be authorized for a banking entity or a 
     nonbank financial company supervised by the Board under any 
     other provision of law.
       ``(2) Sale or securitization of loans.--Nothing in this 
     section shall be construed to limit or restrict the ability 
     of a banking entity or nonbank financial company supervised 
     by the Board to sell or securitize loans in a manner 
     otherwise permitted by law.
       ``(3) Authority of federal agencies and state regulatory 
     authorities.--Nothing in this section shall be construed to 
     limit the inherent authority of any Federal agency or State 
     regulatory authority under otherwise applicable provisions of 
     law.
       ``(h) Definitions.--In this section, the following 
     definitions shall apply:
       ``(1) Banking entity.--The term `banking entity' means any 
     insured depository institution (as defined in section 3 of 
     the Federal Deposit Insurance Act (12 U.S.C. 1813)), any 
     company that controls an insured depository institution, or 
     that is treated as a bank holding company for purposes of 
     section 8 of the International Banking Act, and any affiliate 
     or subsidiary of any such entity. For purposes of this 
     paragraph, the term `insured depository institution' does not 
     include an institution that functions solely in a trust or 
     fiduciary capacity, if--
       ``(A) all or substantially all of the deposits of such 
     institution are in trust funds and are received in a bona 
     fide fiduciary capacity;
       ``(B) no deposits of such institution which are insured by 
     the Federal Deposit Insurance Corporation are offered or 
     marketed by or through an affiliate of such institution;
       ``(C) such institution does not accept demand deposits or 
     deposits that the depositor may withdraw by check or similar 
     means for payment to third parties or others or make 
     commercial loans; and
       ``(D) such institution does not--
       ``(i) obtain payment or payment related services from any 
     Federal Reserve bank, including any service referred to in 
     section 11(a) of the Federal Reserve Act (12 U.S.C. 248a); or
       ``(ii) exercise discount or borrowing privileges pursuant 
     to section 19(b)(7) of the Federal Reserve Act (12 U.S.C. 
     461(b)(7)).
       ``(2) Hedge fund; private equity fund.--The terms `hedge 
     fund' and `private equity fund' mean a company or other 
     entity that is exempt from registration as an investment 
     company pursuant to section 3(c)(1) or 3(c)(7) of the 
     Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(1) or 80a-
     3(c)(7)), or such similar funds as jointly determined 
     appropriate by the appropriate Federal banking agencies, the 
     Securities and Exchange Commission, and the Commodity Futures 
     Trading Commission.
       ``(3) Nonbank financial company supervised by the board.--
     The term `nonbank financial company supervised by the Board' 
     means a nonbank financial company supervised by the Board of 
     Governors, as defined in section 102 of the Financial 
     Stability Act of 2010.
       ``(4) Proprietary trading.--The term `proprietary trading' 
     means engaging as a principal for its own trading account in 
     any transaction to purchase or sell, or otherwise acquire or 
     dispose of, any security, any derivative, any contract of 
     sale of a commodity for future delivery, any option on any 
     such security, derivative, or contract, or any other security 
     or financial instrument that the appropriate Federal banking 
     agencies, the Securities and Exchange Commission, and the 
     Commodity Futures Trading Commission may jointly, by rule, 
     determine.
       ``(5) Sponsor.--The term to `sponsor' a fund means--
       ``(A) to serve as a general partner, managing member, or 
     trustee of a fund;
       ``(B) in any manner to select or to control (or to have 
     employees, officers, or directors, or agents who constitute) 
     a majority of the directors, trustees, or management of a 
     fund; or
       ``(C) to share with a fund, for corporate, marketing, 
     promotional, or other purposes, the same name or a variation 
     of the same name.
       ``(6) Trading account.--The term `trading account' means 
     any account used for acquiring or taking positions in the 
     securities and instruments described in paragraph (4) 
     principally for the purpose of selling in the near term (or 
     otherwise with the intent to resell in order to profit from 
     short-term price movements), and any such other accounts as 
     the appropriate Federal banking agencies, the Securities and 
     Exchange Commission, and the Commodity Futures Trading 
     Commission may jointly, by rule, determine.''.

     SEC. __. CONFLICTS OF INTEREST.

       The Securities Act of 1933 (15 U.S.C. 77a et seq.) is 
     amended by inserting after section 27A the following:

     ``SEC. 27B. CONFLICTS OF INTEREST RELATING TO CERTAIN 
                   SECURITIZATIONS.

       ``(a) In General.--An underwriter, placement agent, initial 
     purchaser, or sponsor, or any affiliate or subsidiary of any 
     such entity, of an asset-backed security (as such term is 
     defined in section 3 of the Securities and Exchange Act of 
     1934 (15 U.S.C. 78c), which for the purposes of this section 
     shall include a synthetic asset-backed security), shall not, 
     during such period as the asset-backed security is 
     outstanding or such lesser period as the Commission 
     determines is appropriate, engage in any transaction that 
     would involve or result in any material conflict of interest 
     with respect to any investor in a transaction arising out of 
     such activity.
       ``(b) Rulemaking.--Not later than 180 days after the date 
     of enactment of this section, the Commission shall issue 
     rules for the purpose of implementing subsection (a) 
     including any appropriate disclosures or other measures.
       ``(c) Exception.--The prohibitions of subsection (a) shall 
     not apply to risk-mitigating hedging activities in connection 
     with positions or holdings arising out of the underwriting, 
     placement, initial purchase, or sponsorship of an asset-
     backed security, provided that such activities are designed 
     to reduce the specific risks to the underwriter, placement 
     agent, initial purchaser, or sponsor associated with 
     positions or holdings arising out of such underwriting, 
     placement, initial purchase, or sponsorship. This subsection 
     shall not otherwise limit the application of section 15G of 
     the Securities Exchange Act of 1934.''.
                                 ______
                                 
  SA 4116. Mr. GRASSLEY submitted an amendment intended to be proposed 
to amendment SA 3789 proposed by Mr. Brownback (for himself, Mr. Bond, 
and Mr. Inhofe) to the amendment SA 3739 proposed by Mr. Reid (for Mr. 
Dodd (for himself and Mrs. Lincoln)) to the bill S. 3217, to promote 
the financial stability of the United States by improving 
accountability and transparency in the financial system, to end ``too 
big to fail'', to protect the American taxpayer by ending bailouts, to 
protect consumers from abusive financial services practices, and for 
other purposes; which was ordered to lie on the table; as follows:


[[Page S3990]]


       At the end of the amendment, insert the following:
       (g) Federal Reserve Maximum Reserve Ratios.--Effective 90 
     days after the date of enactment of this Act, the authority 
     of the Federal Reserve to vary the maximum reserve ratios for 
     depository institutions shall be--
       (1) 0 to 25 (with respect to transaction deposits); and
       (2) 0 to 25 (with respect to time) deposits.
                                 ______
                                 
  SA 4117. Mr. LEAHY submitted an amendment intended to be proposed to 
amendment SA 3794 submitted by Mr. Leahy (for himself, Mr. Grassley, 
and Mr. Specter, and Mr. Kaufman) and intended to be proposed to the 
bill S. 3217, to promote the financial stability of the United States 
by improving accountability and transparency in the financial system, 
to end ``too big to fail'', to protect the American taxpayer by ending 
bailouts, to protect consumers from abusive financial services 
practices, and for other purposes; which was ordered to lie on the 
table; as follows:

       On page 6, strike line 24 and all that follows through page 
     11, line 8, and insert the following:
       (c) Amendments to the False Claims Act Relating to 
     Limitations on Actions.--Section 3730(h) of title 31, United 
     States Code, is amended--
       (1) in paragraph (1), by striking ``or agent on behalf of 
     the employee, contractor, or agent or associated others in 
     furtherance of other efforts to stop 1 or more violations of 
     this subchapter'' and inserting ``agent or associated others 
     in furtherance of an action under this section or other 
     efforts to stop 1 or more violations of this subchapter''; 
     and
       (2) by adding at the end the following:
       ``(3) Limitation on bringing civil action.--A civil action 
     under this subsection may not be brought more than 3 years 
     after the date when the retaliation occurred.''.
       (d) Promoting Criminal Accountability.--
       (1) Definitions.--In this subsection, the terms ``Bureau'', 
     ``consumer financial product or service'', ``designated 
     transfer date'', and ``Federal consumer financial law'' have 
     the meanings given those terms in section 1002.
       (2) Notice and coordination.--
       (A) Notice of other actions.--In addition to any notice 
     required under section 1054(d), the Bureau shall notify the 
     Attorney General concerning any action, suit, or proceeding 
     to which the Bureau is a party, except an action, suit, or 
     proceeding that involves the offering or provision of 
     consumer financial products or services.
       (B) Coordination.--In order to avoid conflicts and promote 
     consistency regarding litigation of matters under Federal 
     law, the Attorney General and the Bureau shall consult 
     regarding the coordination of investigations and proceedings, 
     including by negotiating an agreement for coordination by not 
     later than 180 days after the designated transfer date. The 
     agreement under this subparagraph shall include provisions to 
     ensure that parallel investigations and proceedings involving 
     the Federal consumer financial laws are conducted in a manner 
     that avoids conflicts and does not impede the ability of the 
     Attorney General to prosecute violations of Federal criminal 
     laws.
       (C) Rule of construction.--Nothing in this paragraph shall 
     be construed to limit the authority of the Bureau under title 
     X, including the authority to interpret Federal consumer 
     financial law.
                                 ______
                                 
  SA 4118. Mr. McCONNELL submitted an amendment intended to be proposed 
by him to the bill S. 3217, to promote the financial stability of the 
United States by improving accountability and transparency in the 
financial system, to end ``too big to fail'', to protect the American 
taxpayer by ending bailouts, to protect consumers from abusive 
financial services practices, and for other purposes; which was ordered 
to lie on the table; as follows:

       Strike all after (a), add the following:

     EXCLUSION FOR AUTO DEALERS.

       (a) In General.--The Director and the Bureau may not 
     exercise any rulemaking, supervisory, enforcement, or any 
     other authority, including authority to order assessments 
     over a motor vehicle dealer that is predominantly engaged in 
     the sale and servicing of motor vehicles, the leasing and 
     servicing of motor vehicles, or both.
       (b) Certain Functions Excepted.--The provisions of 
     subsection (a) shall not apply to any person, to the extent 
     that such person--
       (1) provides consumers with any services related to 
     residential or commercial mortgages and self-financing 
     transactions involving real property;
       (2) operates a line of business that involves the extension 
     of retail credit or retail leases involving motor vehicles, 
     and in which--
       (A) the extension of retail credit or retail leases are 
     provided directly to consumers; and
       (B) the contract governing such extension of retail credit 
     or retail leases is not predominantly assigned to a third-
     party finance or leasing source; or
       (3) offers or provides a consumer financial product or 
     service not involving or related to the sale, financing, 
     leasing, rental, repair, refurbishment, maintenance, or other 
     servicing of motor vehicles, motor vehicle parts, or any 
     related or ancillary product or service.
       (c) No Impact on Prior Authority.--Nothing in this section 
     shall be construed to modify, limit, or supersede the 
     rulemaking or enforcement authority over motor vehicle 
     dealers that could be exercised by any Federal department or 
     agency on the day before the date of enactment of this Act.
       (d) No Transfer of Certain Authority.--Notwithstanding any 
     other provision of this Act, the consumer financial 
     protection functions of the Board of Governors and the 
     Federal Trade Commission shall not be transferred to the 
     Director or the Bureau to the extent such functions are with 
     respect to a person described under subsection (a).
       (e) Coordination With Office of Service Member Affairs.--
     The Board of Governors and the Federal Trade Commission shall 
     coordinate with the Office of Service Member Affairs, to 
     ensure that--
       (1) service members and their families are educated and 
     empowered to make better informed decisions regarding 
     consumer financial products and services offered by motor 
     vehicle dealers, with a focus on motor vehicle dealers in the 
     proximity of military installations; and
       (2) complaints by service members and their families 
     concerning such motor vehicle dealers are effectively 
     monitored and responded to, and where appropriate, 
     enforcement action is pursued by the authorized agencies.
       (f) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       (1) Motor vehicle.--The term ``motor vehicle'' means--
       (A) any self-propelled vehicle designed for transporting 
     persons or property on a street, highway, or other road;
       (B) recreational boats and marine equipment;
       (C) motorcycles;
       (D) motor homes, recreational vehicle trailers, and slide-
     in campers, as those terms are defined in sections 571.3 and 
     575.103 (d) of title 49, Code of Federal Regulations, or any 
     successor thereto; and
       (E) other vehicles that are titled and sold through 
     dealers.
       (2) Motor vehicle dealer.--The term ``motor vehicle 
     dealer'' means any person or resident in the United States, 
     or any territory of the United States, who is licensed by a 
     State, a territory of the United States, or the District of 
     Columbia to engage in the sale of motor vehicles.
                                 ______
                                 
  SA 4119. Mr. ENSIGN submitted an amendment intended to be proposed to 
amendment SA 3789 proposed by Mr. Brownback (for himself, Mr. Bond, and 
Mr. Inhofe) to the amendment SA 3739 proposed by Mr. Reid (for Mr. Dodd 
(for himself and Mrs. Lincoln)) to the bill S. 3217, to promote the 
financial stability of the United States by improving accountability 
and transparency in the financial system, to end ``too big to fail'', 
to protect the American taxpayer by ending bailouts, to protect 
consumers from abusive financial services practices, and for other 
purposes; which was ordered to lie on the table; as follows:

       On page 1032, strike lines 7 through 11 and insert the 
     following:
       (7) Credit.-- The term ``credit'' means--
       (A) the right granted by a person to a consumer to defer 
     payment of a debt, incur debt and defer its payment, or 
     purchase property or services and defer payment for such 
     purchase; and
       (B) such right is subject to a finance charge.
                                 ______
                                 
  SA 4120. Mr. ENSIGN submitted an amendment intended to be proposed to 
amendment SA 3883 proposed by Ms. Snowe (for herself and Mr. Pryor) to 
the amendment SA 3739 proposed by Mr. Reid (for Mr. Dodd (for himself 
and Mrs. Lincoln)) to the bill S. 3217, to promote the financial 
stability of the United States by improving accountability and 
transparency in the financial system, to end ``too big to fail'', to 
protect the American taxpayer by ending bailouts, to protect consumers 
from abusive financial services practices, and for other purposes; 
which was ordered to lie on the table; as follows:

       On page 1032, strike lines 7 through 11 and insert the 
     following:
       (7) Credit.--The term ``credit'' means--
       (A) the right granted by a person to a consumer to defer 
     payment of a debt, incur debt and defer its payment, or 
     purchase property or services and defer payment for such 
     purchase; and
       (B) such right is subject to a finance charge.
                                 ______
                                 
  SA 4121. Mr. ENSIGN submitted an amendment intended to be proposed to 
amendment SA 3746 proposed by Mr. Whitehouse (for himself, Mr. Merkley, 
Mr. Durbin, Mr. Sanders, Mr. Levin, and Mr. Burris) to the amendment SA 
3739 proposed by Mr. Reid (for Mr. Dodd (for himself and Mrs. Lincoln))

[[Page S3991]]

to the bill S. 3217, to promote the financial stability of the United 
States by improving accountability and transparency in the financial 
system, to end ``too big to fail'', to protect the American taxpayer by 
ending bailouts, to protect consumers from abusive financial services 
practices, and for other purposes; which was ordered to lie on the 
table; as follows:

       On page 1032, strike lines 7 through 11 and insert the 
     following:
       (7) Credit-- The term ``credit'' means--
       (A) the right granted by a person to a consumer to defer 
     payment of a debt, incur debt and defer its payment, or 
     purchase property or services and defer payment for such 
     purchase; and
       (B) such right is subject to a finance charge.
                                 ______
                                 
  SA 4122. Mr. MERKLEY (for himself and Mr. Levin) submitted an 
amendment intended to be proposed to amendment SA 4055 submitted by 
Mrs. Hutchison (for herself, Mrs. Hagan, and Mr. Cornyn) and intended 
to be proposed to the amendment SA 3739 proposed by Mr. Reid (for Mr. 
Dodd (for himself and Mrs. Lincoln)) to the bill S. 3217, to promote 
the financial stability of the United States by improving 
accountability and transparency in the financial system, to end ``too 
big to fail'', to protect the American taxpayer by ending bailouts, to 
protect consumers from abusive financial services practices, and for 
other purposes; which was ordered to lie on the table; as follows:

       On page __, line __, of the amendment insert the following:
       (c) Conflicts of Interest.--The Securities Act of 1933 (15 
     U.S.C. 77a et seq.) is amended by inserting after section 27A 
     the following:

     ``SEC. 27B. CONFLICTS OF INTEREST RELATING TO CERTAIN 
                   SECURITIZATIONS.

       ``(a) In General.--An underwriter, placement agent, initial 
     purchaser, or sponsor, or any affiliate or subsidiary of any 
     such entity, of an asset-backed security (as such term is 
     defined in section 3 of the Securities and Exchange Act of 
     1934 (15 U.S.C. 78c), which for the purposes of this section 
     shall include a synthetic asset-backed security), shall not, 
     during such period as the asset-backed security is 
     outstanding or such lesser period as the Commission 
     determines is appropriate, engage in any transaction that 
     would involve or result in any material conflict of interest 
     with respect to any investor in a transaction arising out of 
     such activity.
       ``(b) Rulemaking.--Not later than 180 days after the date 
     of enactment of this section, the Commission shall issue 
     rules for the purpose of implementing subsection (a) 
     including any appropriate disclosures or other measures. The 
     disclosure by a person of a material conflict of interest 
     with respect to a transaction prohibited under subsection (a) 
     may not be construed to permit any person to engage in the 
     transaction.
       ``(c) Exception.--The prohibitions of subsection (a) shall 
     not apply to risk-mitigating hedging activities in connection 
     with positions or holdings arising out of the underwriting, 
     placement, initial purchase, or sponsorship of an asset-
     backed security, provided that such activities are designed 
     to reduce the specific risks to the underwriter, placement 
     agent, initial purchaser, or sponsor associated with 
     positions or holdings arising out of such underwriting, 
     placement, initial purchase, or sponsorship. This subsection 
     shall not otherwise limit the application of section 15G of 
     the Securities Exchange Act of 1934.''.
                                 ______
                                 
  SA 4123. Mr. MERKLEY (for himself and Mr. Levin) submitted an 
amendment intended to be proposed to amendment SA 3944 submitted by Mr. 
Corker and intended to be proposed to the amendment SA 3739 proposed by 
Mr. Reid (for Mr. Dodd (for himself and Mrs. Lincoln)) to the bill S. 
3217, to promote the financial stability of the United States by 
improving accountability and transparency in the financial system, to 
end ``too big to fail'', to protect the American taxpayer by ending 
bailouts, to protect consumers from abusive financial services 
practices, and for other purposes; which was ordered to lie on the 
table; as follows:

       On page __, line __, of the amendment insert the following:
       (c) Conflicts of Interest.--The Securities Act of 1933 (15 
     U.S.C. 77a et seq.) is amended by inserting after section 27A 
     the following:

     ``SEC. 27B. CONFLICTS OF INTEREST RELATING TO CERTAIN 
                   SECURITIZATIONS.

       ``(a) In General.--An underwriter, placement agent, initial 
     purchaser, or sponsor, or any affiliate or subsidiary of any 
     such entity, of an asset-backed security (as such term is 
     defined in section 3 of the Securities and Exchange Act of 
     1934 (15 U.S.C. 78c), which for the purposes of this section 
     shall include a synthetic asset-backed security), shall not, 
     during such period as the asset-backed security is 
     outstanding or such lesser period as the Commission 
     determines is appropriate, engage in any transaction that 
     would involve or result in any material conflict of interest 
     with respect to any investor in a transaction arising out of 
     such activity.
       ``(b) Rulemaking.--Not later than 180 days after the date 
     of enactment of this section, the Commission shall issue 
     rules for the purpose of implementing subsection (a) 
     including any appropriate disclosures or other measures. The 
     disclosure by a person of a material conflict of interest 
     with respect to a transaction prohibited under subsection (a) 
     may not be construed to permit any person to engage in the 
     transaction.
       ``(c) Exception.--The prohibitions of subsection (a) shall 
     not apply to risk-mitigating hedging activities in connection 
     with positions or holdings arising out of the underwriting, 
     placement, initial purchase, or sponsorship of an asset-
     backed security, provided that such activities are designed 
     to reduce the specific risks to the underwriter, placement 
     agent, initial purchaser, or sponsor associated with 
     positions or holdings arising out of such underwriting, 
     placement, initial purchase, or sponsorship. This subsection 
     shall not otherwise limit the application of section 15G of 
     the Securities Exchange Act of 1934.''.
                                 ______
                                 
  SA 4124. Mr. MERKLEY (for himself and Mr. Levin) submitted an 
amendment intended to be proposed to amendment SA 4081 submitted by Mr. 
Hatch and intended to be proposed to the amendment SA 3739 proposed by 
Mr. Reid (for Mr. Dodd (for himself and Mrs. Lincoln)) to the bill S. 
3217, to promote the financial stability of the United States by 
improving accountability and transparency in the financial system, to 
end ``too big to fail'', to protect the American taxpayer by ending 
bailouts, to protect consumers from abusive financial services 
practices, and for other purposes; which was ordered to lie on the 
table; as follows:

       On page __, line __, of the amendment insert the following:
       (c) Conflicts of Interest.--The Securities Act of 1933 (15 
     U.S.C. 77a et seq.) is amended by inserting after section 27A 
     the following:

     ``SEC. 27B. CONFLICTS OF INTEREST RELATING TO CERTAIN 
                   SECURITIZATIONS.

       ``(a) In General.--An underwriter, placement agent, initial 
     purchaser, or sponsor, or any affiliate or subsidiary of any 
     such entity, of an asset-backed security (as such term is 
     defined in section 3 of the Securities and Exchange Act of 
     1934 (15 U.S.C. 78c), which for the purposes of this section 
     shall include a synthetic asset-backed security), shall not, 
     during such period as the asset-backed security is 
     outstanding or such lesser period as the Commission 
     determines is appropriate, engage in any transaction that 
     would involve or result in any material conflict of interest 
     with respect to any investor in a transaction arising out of 
     such activity.
       ``(b) Rulemaking.--Not later than 180 days after the date 
     of enactment of this section, the Commission shall issue 
     rules for the purpose of implementing subsection (a) 
     including any appropriate disclosures or other measures. The 
     disclosure by a person of a material conflict of interest 
     with respect to a transaction prohibited under subsection (a) 
     may not be construed to permit any person to engage in the 
     transaction.
       ``(c) Exception.--The prohibitions of subsection (a) shall 
     not apply to risk-mitigating hedging activities in connection 
     with positions or holdings arising out of the underwriting, 
     placement, initial purchase, or sponsorship of an asset-
     backed security, provided that such activities are designed 
     to reduce the specific risks to the underwriter, placement 
     agent, initial purchaser, or sponsor associated with 
     positions or holdings arising out of such underwriting, 
     placement, initial purchase, or sponsorship. This subsection 
     shall not otherwise limit the application of section 15G of 
     the Securities Exchange Act of 1934.''.
                                 ______
                                 
  SA 4125. Mr. MERKLEY (for himself and Mr. Levin) submitted an 
amendment intended to be proposed to amendment SA 4083 submitted by Mr. 
Brown of Massachusetts and intended to be proposed to the amendment SA 
3739 proposed by Mr. Reid (for Mr. Dodd (for himself and Mrs. Lincoln)) 
to the bill S. 3217, to promote the financial stability of the United 
States by improving accountability and transparency in the financial 
system, to end ``too big to fail'', to protect the American taxpayer by 
ending bailouts, to protect consumers from abusive financial services 
practices, and for other purposes; which was ordered to lie on the 
table; as follows:

       On page __, line __, of the amendment insert the following:
       (c) Conflicts of Interest.--The Securities Act of 1933 (15 
     U.S.C. 77a et seq.) is amended by inserting after section 27A 
     the following:

     ``SEC. 27B. CONFLICTS OF INTEREST RELATING TO CERTAIN 
                   SECURITIZATIONS.

       ``(a) In General.--An underwriter, placement agent, initial 
     purchaser, or sponsor, or any affiliate or subsidiary of any 
     such entity, of an asset-backed security (as such term is 
     defined in section 3 of the Securities and Exchange Act of 
     1934 (15 U.S.C. 78c), which for the purposes of this section 
     shall include

[[Page S3992]]

     a synthetic asset-backed security), shall not, during such 
     period as the asset-backed security is outstanding or such 
     lesser period as the Commission determines is appropriate, 
     engage in any transaction that would involve or result in any 
     material conflict of interest with respect to any investor in 
     a transaction arising out of such activity.
       ``(b) Rulemaking.--Not later than 180 days after the date 
     of enactment of this section, the Commission shall issue 
     rules for the purpose of implementing subsection (a) 
     including any appropriate disclosures or other measures. The 
     disclosure by a person of a material conflict of interest 
     with respect to a transaction prohibited under subsection (a) 
     may not be construed to permit any person to engage in the 
     transaction.
       ``(c) Exception.--The prohibitions of subsection (a) shall 
     not apply to risk-mitigating hedging activities in connection 
     with positions or holdings arising out of the underwriting, 
     placement, initial purchase, or sponsorship of an asset-
     backed security, provided that such activities are designed 
     to reduce the specific risks to the underwriter, placement 
     agent, initial purchaser, or sponsor associated with 
     positions or holdings arising out of such underwriting, 
     placement, initial purchase, or sponsorship. This subsection 
     shall not otherwise limit the application of section 15G of 
     the Securities Exchange Act of 1934.''.
                                 ______
                                 
  SA 4126. Mr. MERKLEY (for himself and Mr. Levin) submitted an 
amendment intended to be proposed to amendment SA 4083 submitted by Mr. 
Brown of Massachusetts and intended to be proposed to the amendment SA 
3739 proposed by Mr. Reid (for Mr. Dodd (for himself and Mrs. Lincoln)) 
to the bill S. 3217, to promote the financial stability of the United 
States by improving accountability and transparency in the financial 
system, to end ``too big to fail'', to protect the American taxpayer by 
ending bailouts, to protect consumers from abusive financial services 
practices, and for other purposes; which was ordered to lie on the 
table; as follows:

       At the appropriate place, insert the following:

     SEC. _. PROHIBITIONS ON PROPRIETARY TRADING AND CERTAIN 
                   RELATIONSHIPS WITH HEDGE FUNDS AND PRIVATE 
                   EQUITY FUNDS.

       Notwithstanding any other provision of this Act, section 
     619 of this act shall have no force or effect, and the Bank 
     Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is 
     amended by adding at the end the following:

     ``SEC. 13. PROHIBITIONS ON PROPRIETARY TRADING AND CERTAIN 
                   RELATIONSHIPS WITH HEDGE FUNDS AND PRIVATE 
                   EQUITY FUNDS.

       ``(a) In General.--
       ``(1) Prohibition.--Unless otherwise provided in this 
     section, a banking entity shall not--
       ``(A) engage in proprietary trading; or
       ``(B) acquire or retain any equity, partnership, or other 
     ownership interest in or sponsor a hedge fund or a private 
     equity fund.
       ``(2) Nonbank financial companies supervised by the 
     board.--Any nonbank financial company supervised by the Board 
     that engages in proprietary trading or takes or retains any 
     equity, partnership, or other ownership interest in or 
     sponsors a hedge fund or a private equity fund shall be 
     subject by the Board to additional capital requirements for 
     and additional quantitative limits with regards to such 
     proprietary trading and taking or retaining any equity, 
     partnership, or other ownership interest in or sponsorship of 
     a hedge fund or a private equity fund, except that permitted 
     activities as described in subsection (d) shall be subject to 
     additional capital and additional quantitative limits as 
     prescribed pursuant to subsection (d)(3).
       ``(b) Study and Rulemaking.--
       ``(1) Study.--Not later than 6 months after the date of 
     enactment of this section, the Financial Stability Oversight 
     Council shall study and make recommendations on implementing 
     the provisions of this section so as to--
       ``(A) promote and enhance the safety and soundness of 
     banking entities;
       ``(B) protect taxpayers and enhance financial stability by 
     minimizing the risk that insured depository institutions and 
     the affiliates of insured depository institutions will engage 
     in unsafe and unsound activities;
       ``(C) limit the inappropriate transfer of Federal subsidies 
     from institutions that benefit from deposit insurance and 
     liquidity facilities of the Federal Government to unregulated 
     entities;
       ``(D) reduce conflicts of interest between the self-
     interest of banking entities and nonbank financial companies 
     supervised by the Board, and the interests of the customers 
     of such entities and companies;
       ``(E) limit activities that have caused undue risk or loss 
     in banking entities and nonbank financial companies 
     supervised by the Board, or that might reasonably be expected 
     to create undue risk or loss in such banking entities and 
     nonbank financial companies supervised by the Board;
       ``(F) appropriately accommodate the business of insurance 
     within an insurance company subject to regulation in 
     accordance with the relevant insurance company investment 
     laws while protecting the safety and soundness of any banking 
     entity with which such insurance company is affiliated, and 
     of the United States financial system; and
       ``(G) appropriately time the divestiture of illiquid assets 
     that are affected by the implementation of the prohibitions 
     under subsection (a).
       ``(2) Rulemaking.--
       ``(A) In general.--Not later than 9 months after the 
     completion of the study under paragraph (1), the appropriate 
     Federal banking agencies, the Securities and Exchange 
     Commission, and the Commodity Futures Trading Commission, 
     (unless otherwise provided in this section) shall consider 
     the findings of the study under paragraph (1) and adopt rules 
     to carry out this section, as provided in subparagraph (B).
       ``(B) Coordinated rulemaking.--
       ``(i) Regulatory authority.--The regulations issued under 
     this paragraph and subsections (d) and (e) shall be issued 
     by--

       ``(I) the appropriate Federal banking agencies, jointly, 
     with respect to insured depository institutions;
       ``(II) the Board, with respect to any company that controls 
     an insured depository institution, or that is treated as a 
     bank holding company for purposes of section 8 of the 
     International Banking Act, any subsidiary of such a company 
     (other than a subsidiary described in subparagraph (A) or 
     (C)), and any nonbank financial company supervised by the 
     Board;
       ``(III) the Commodity Futures Trading Commission, with 
     respect to any entity for which the Commodity Futures Trading 
     Commission is the primary financial regulatory agency, as 
     defined in section 2 of the Restoring American Financial 
     Stability Act of 2010; and
       ``(IV) the Securities and Exchange Commission, with respect 
     to any entity for which the Securities and Exchange 
     Commission is the primary financial regulatory agency, as 
     defined in section 2 of the Restoring American Financial 
     Stability Act of 2010.

       ``(ii) Coordination, consistency, and comparability.--In 
     developing and issuing regulations pursuant to this section, 
     the appropriate Federal banking agencies, the Securities and 
     Exchange Commission, and the Commodity Futures Trading 
     Commission shall consult and coordinate with each other, as 
     appropriate, for the purposes of assuring, to the extent 
     possible, that such regulations are comparable and provide 
     for consistent application and implementation of the 
     applicable provisions of this section to avoid providing 
     advantages or imposing disadvantages to the companies 
     affected by this subsection and to protect the safety and 
     soundness of banking entities and nonbank financial companies 
     supervised by the Board.
       ``(iii) Council role.--The Chairperson of the Council shall 
     be responsible for coordination of the regulations issued 
     under this section.
       ``(c) Effective Date.--
       ``(1) In general.--Except as provided in paragraphs (2) and 
     (3), this section shall take effect on the earlier of--
       ``(A) 12 months after the issuance of final rules under 
     subsection (b); or
       ``(B) 2 years after the date of enactment of this section.
       ``(2) Transition period for divestiture of hedge funds or 
     private equity funds by banking entities.--
       ``(A) No new investments.--
       ``(i) No new funds.--On and after the date of enactment of 
     this section, a banking entity may not sponsor or invest in a 
     hedge fund or private equity fund that the banking entity did 
     not sponsor or in which the banking entity was not invested 
     on May 1, 2010.
       ``(ii) No additional capital or assets.--On and after the 
     date of enactment of this section, a banking entity may not 
     sell, transfer, loan, or otherwise provide any additional 
     capital or assets to a hedge fund or private equity fund 
     sponsored by the banking entity or in which the banking 
     entity invests, except to the extent necessary to fulfill a 
     contractual obligation that was in effect on May 1, 2010.
       ``(B) Reduction of existing investments.--Except as 
     provided in paragraph (3), on and after the date that is 2 
     years after the effective date of this section, the aggregate 
     amount of equity, partnership, or other ownership interests 
     in all hedge funds and private equity funds held by a banking 
     entity shall not exceed 2 percent of the Tier I capital of 
     the banking entity.
       ``(C) Total divestiture.--On and after the date that is 5 
     years after the effective date of this section, no banking 
     entity may engage in any activity prohibited under subsection 
     (a)(1)(B), except as provided in paragraph (3).
       ``(3) Transition period for illiquid funds.--
       ``(A) Definition.--In this paragraph, the term `illiquid 
     fund' means a hedge fund or private equity fund that, as of 
     May 1, 2010, was principally invested in or is invested in 
     illiquid assets, and committed to principally invest in 
     illiquid assets, such as portfolio companies, real estate 
     investments, and venture capital investments, and that 
     maintains the investment strategy of the fund that was in 
     place as of May 1, 2010, regarding principally investing in 
     illiquid assets. In issuing rules under this subparagraph, 
     the Board shall take into consideration the terms of 
     investment for the hedge fund or private equity fund, 
     including contractual obligations, the ability of the fund to 
     divest of assets held by the fund, and any other factors that 
     the Board determines are appropriate.
       ``(B) Transition.--
       ``(i) In general.--During the 4-year period beginning on 
     the date of enactment of this

[[Page S3993]]

     section, a banking entity may only take an equity, 
     partnership, or ownership interest in, or otherwise provide 
     additional capital to, an illiquid fund to the extent 
     necessary to fulfill a contractual obligation of the banking 
     entity to the illiquid fund that was in effect on May 1, 
     2010.
       ``(ii) Limitations.--A banking entity may not exercise an 
     option to renew, or otherwise extend the duration of, any 
     contractual obligation described in clause (i) and shall 
     exercise any contractual option permitting the banking entity 
     to exit the illiquid fund if and when such option becomes 
     available. A banking entity may elect not to exercise an 
     option described in the preceding sentence, to the extent 
     that the maintenance of an investment would be permitted 
     under paragraph (2).
       ``(iii) Extension.--

       ``(I) Approval required.--If a contractual obligation of a 
     banking entity described in clause (i) extends beyond the 4-
     year period beginning on the date of enactment of this 
     section, the banking entity may not continue to make the 
     investment required under the contractual obligation without 
     the prior written approval of the Board. In determining 
     whether to grant an extension under this clause, the Board 
     shall evaluate whether the proposed investment meets the 
     requirements of this subparagraph.
       ``(II) Time limit on approval.--The Board may approve an 
     investment described in subclause (I) for a period of not 
     longer than 2 years for each extension.
       ``(III) Limit on number of approvals.--The Board may not 
     approve an investment described in subclause (I) more than 3 
     times.

       ``(iv) Divestiture required.--Except as otherwise permitted 
     under subsection (d), no banking entity may engage in any 
     activity prohibited under subsection (a)(1)(B) after the 
     earlier of --

       ``(I) the date on which the contractual obligation to 
     invest in the illiquid fund terminates; and
       ``(II) the date on which the approval by the Board under 
     clause (iii) expires.

       ``(4) Additional capital.--Notwithstanding paragraph (2) or 
     (3), on and after the effective date under paragraph (1), the 
     Board may impose additional capital requirements, and any 
     other restrictions, as the Board determines appropriate, on 
     any equity, partnership, or ownership interest in or 
     sponsorship of a hedge fund or private equity fund by a 
     banking entity or nonbank financial company supervised by the 
     Board, including on a case-by-case basis, as the Board 
     determines appropriate.
       ``(5) Rulemaking.--Not later than 6 months after the date 
     of enactment of this section, the Board shall issues rules to 
     implement paragraphs (2), (3), and (4).
       ``(d) Permitted Activities.--
       ``(1) In general.--Notwithstanding the restrictions in 
     subsection (a), to the extent permitted by any other 
     provision of Federal or State law, and subject to the 
     limitations under paragraph (2) and any restrictions or 
     limitations that the appropriate Federal banking agencies, 
     the Securities and Exchange Commission, and the Commodity 
     Futures Trading Commission, may determine, the following 
     activities (in this section referred to as `permitted 
     activities') are permitted:
       ``(A) The purchase, sale, acquisition, or disposition of 
     obligations of the United States or any agency thereof; 
     obligations, participations, or other instruments of or 
     issued by the Government National Mortgage Association, the 
     Federal National Mortgage Association, the Federal Home Loan 
     Mortgage Corporation, a Federal Home Loan Bank, the Federal 
     Agricultural Mortgage Corporation, or a Farm Credit System 
     institution chartered under and subject to the provisions of 
     the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.), and 
     obligations of any State or of any political subdivision 
     thereof.
       ``(B) The purchase, sale, acquisition, or disposition of 
     securities and other instruments described in subsection 
     (h)(4) in connection with underwriting, market-making, or in 
     facilitation of customer relationships, to the extent that 
     any such activities permitted by this subparagraph are 
     designed to not exceed the reasonably expected near term 
     demands of clients, customers, or counterparties.
       ``(C) Risk-mitigating hedging activities designed to reduce 
     the specific risks to a banking entity or nonbank financial 
     company supervised by the Board.
       ``(D) The purchase, sale, acquisition, or disposition of 
     securities and other instruments described in subsection 
     (h)(4) on behalf of customers.
       ``(E) Investments in one or more small business investment 
     companies, as defined in section 102 of the Small Business 
     Investment Act of 1958 (15 U.S.C. 662), or investments 
     designed primarily to promote the public welfare, as provided 
     in paragraph (11) of section 5136 of the Revised Statutes of 
     the United States (12 U.S.C. 24).
       ``(F) The purchase, sale, acquisition, or disposition of 
     securities and other instruments described in subsection 
     (h)(4) by a regulated insurance company directly engaged in 
     the business of insurance for the general account of the 
     company and by any affiliate of such regulated insurance 
     company, provided that such activities by any affiliate are 
     solely for the general account of the regulated insurance 
     company, if--
       ``(i) the purchase, sale, acquisition, or disposition is 
     conducted in compliance with, and subject to, the insurance 
     company investment laws, regulations, and written guidance of 
     the State or jurisdiction in which each such insurance 
     company is domiciled; and
       ``(ii) the appropriate Federal banking agencies, after 
     consultation with the Financial Stability Oversight Council 
     and the relevant insurance commissioners of the States and 
     territories of the United States, have not jointly 
     determined, after notice and comment, that a particular law, 
     regulation, or written guidance described in clause (i) is 
     insufficient to protect the safety and soundness of the 
     banking entity or nonbank financial company supervised by the 
     Board, or of the financial stability of the United States.
       ``(G) Organizing and offering a private equity or hedge 
     fund, including serving as a general partner, managing 
     member, or trustee of the fund and in any manner selecting or 
     controlling (or having employees, officers, directors, or 
     agents who constitute) a majority of the directors, trustees, 
     or management of the fund, including any necessary expenses 
     for the foregoing, only if--
       ``(i) the banking entity provides bona fide trust, 
     fiduciary, or investment advisory services;
       ``(ii) the fund is organized and offered only in connection 
     with the provision of bona fide trust, fiduciary, or 
     investment advisory services and only to persons that are 
     customers of such services of the banking entity;
       ``(iii) the banking entity does not acquire or retain an 
     equity interest, partnership interest, or other ownership 
     interest in the funds;
       ``(iv) the banking entity does not enter into or otherwise 
     engage in any transaction with the hedge fund or private 
     equity fund that is a covered transaction, as defined in 
     section 23A of the Federal Reserve Act (12 U.S.C. 371c);
       ``(v) the obligations or performance of the hedge fund or 
     private equity fund are not guaranteed, assumed, or otherwise 
     covered, directly or indirectly, by the banking entity or any 
     subsidiary or affiliate of the banking entity;
       ``(vi) the banking entity does not share with the hedge 
     fund or private equity fund, for corporate, marketing, 
     promotional, or other purposes, the same name or a variation 
     of the same name;
       ``(vii) no director or employee of the banking entity takes 
     or retains an equity interest, partnership interest, or other 
     ownership interest in, except for any director or employee of 
     the banking entity who is directly engaged in providing 
     investment advisory or other services to the hedge fund or 
     private equity fund; and
       ``(viii) the banking entity complies with any rules of the 
     appropriate Federal banking agencies, the Securities and 
     Exchange Commission, or the Commodity Futures Trading 
     Commission designed to ensure that losses in such hedge fund 
     or private equity fund are borne solely by investors in the 
     fund and not by the banking entity.
       ``(H) Proprietary trading conducted by a company pursuant 
     to paragraph (9) or (13) of section 4(c), provided that the 
     trading occurs solely outside of the United States and that 
     the banking entity or nonbank financial company supervised by 
     the Board is not directly or indirectly controlled by a 
     United States person.
       ``(I) The acquisition or retention of any equity, 
     partnership, or other ownership interest in, or the 
     sponsorship of, a hedge fund or a private equity fund by a 
     banking entity or nonbank financial company supervised by the 
     Board pursuant to paragraph (9) or (13) of section 4(c) 
     solely outside of the United States, provided that no 
     ownership interest in such hedge fund or private equity fund 
     is offered for sale or sold to a resident of the United 
     States and that the banking entity or nonbank financial 
     company supervised by the Board is not directly or indirectly 
     controlled by a company that is organized in the United 
     States.
       ``(J) Such other activity as the appropriate Federal 
     banking agencies, the Securities and Exchange Commission, and 
     the Commodity Futures Trading Commission determine through 
     regulation, as provided in subsection (b)(2)(B), would 
     promote and protect the safety and soundness of the banking 
     entity or nonbank financial company supervised by the Board 
     and the financial stability of the United States.
       ``(2) Limitation on permitted activities.--
       ``(A) In general.--No transaction, class of transactions, 
     or activity may be deemed a permitted activity under 
     paragraph (1) if it--
       ``(i) would involve or result in a material conflict of 
     interest (as such term shall be defined jointly by rule) 
     between the banking entity or the nonbank financial company 
     supervised by the Board and its clients, customers, or 
     counterparties;
       ``(ii) would result, directly or indirectly, in an unsafe 
     and unsound exposure by the banking entity or nonbank 
     financial company supervised by the Board to high-risk assets 
     or high-risk trading strategies (as such terms shall be 
     defined jointly by rule);
       ``(iii) would pose a threat to the safety and soundness of 
     such banking entity or nonbank financial company supervised 
     by the Board; or
       ``(iv) would pose a threat to the financial stability of 
     the United States.
       ``(B) Rulemaking.--The appropriate Federal banking 
     agencies, the Securities and Exchange Commission, and the 
     Commodity Futures Trading Commission shall issue regulations 
     to implement subparagraph (A), as part of the regulations 
     issued under subsection (b)(2).

[[Page S3994]]

       ``(3) Capital and quantitative limitations.--The Board 
     shall adopt rules, as provided under subsection (b)(2), 
     imposing additional capital requirements and quantitative 
     limitations regarding the activities permitted under this 
     section if the Board determines that additional capital and 
     quantitative limitations are appropriate to protect the 
     safety and soundness of the banking entities and nonbank 
     financial companies supervised by the Board engaged in such 
     activities.
       ``(e) Anti-evasion.--
       ``(1) Rulemaking.--The appropriate Federal banking 
     agencies, the Securities and Exchange Commission, and the 
     Commodity Futures Trading Commission shall issue regulations 
     as part of the rulemaking provided for in subsection (b)(2) 
     regarding internal controls and recordkeeping in order to 
     insure compliance with this section.
       ``(2) Termination of activities or investment.--Whenever an 
     appropriate Federal banking agency, the Securities and 
     Exchange Commission, or the Commodity Futures Trading 
     Commission, as appropriate, has reasonable cause to believe 
     that a banking entity or nonbank financial company supervised 
     by the Board under the respective agency's jurisdiction has 
     made an investment or engaged in an activity in a manner that 
     functions as an evasion of the requirements of this section 
     (including through an abuse of any permitted activity) or 
     otherwise violates the restrictions under this section, the 
     appropriate Federal banking agency, the Securities and 
     Exchange Commission, or the Commodity Futures Trading 
     Commission, as appropriate, shall order, after due notice and 
     opportunity for hearing, the banking entity or nonbank 
     financial company supervised by the Board to terminate the 
     activity and, as relevant, dispose of the investment. Nothing 
     in this subparagraph shall be construed to limit the inherent 
     authority of any Federal agency or State regulatory authority 
     to further restrict any investments or activities under 
     otherwise applicable provisions of law.
       ``(f) Limitations on Relationships With Hedge Funds and 
     Private Equity Funds.--
       ``(1) In general.--No banking entity that serves, directly 
     or indirectly, as the investment manager or investment 
     adviser to a hedge fund or private equity fund may enter into 
     a covered transaction, as defined in section 23A of the 
     Federal Reserve Act (12 U.S.C. 371c) with the hedge fund or 
     private equity fund.
       ``(2) Treatment as member bank.--A banking entity that 
     serves, directly or indirectly, as the investment manager or 
     investment adviser to a hedge fund or private equity fund 
     shall be subject to section 23A and 23B of the Federal 
     Reserve Act (12 U.S.C. 371c-1), as if such person were a 
     member bank and such hedge fund or private equity fund were 
     an affiliate thereof.
       ``(3) Covered transactions with unaffiliated hedge funds 
     and private equity funds.--No banking entity may enter into a 
     covered transaction, as defined in section 23A of the Federal 
     Reserve Act (12 U.S.C. 371c), with any hedge fund or private 
     equity fund organized and offered by the banking entity or 
     with any hedge fund or private equity fund in which such 
     hedge fund or private equity fund has taken any equity, 
     partnership, or other ownership interest.
       ``(g) Rules of Construction.--
       ``(1) Limitation on contrary authority.--Any prohibitions 
     or restrictions under this section shall apply even though 
     such activities may be authorized for a banking entity or a 
     nonbank financial company supervised by the Board under any 
     other provision of law.
       ``(2) Sale or securitization of loans.--Nothing in this 
     section shall be construed to limit or restrict the ability 
     of a banking entity or nonbank financial company supervised 
     by the Board to sell or securitize loans in a manner 
     otherwise permitted by law.
       ``(3) Authority of federal agencies and state regulatory 
     authorities.--Nothing in this section shall be construed to 
     limit the inherent authority of any Federal agency or State 
     regulatory authority under otherwise applicable provisions of 
     law.
       ``(h) Definitions.--In this section, the following 
     definitions shall apply:
       ``(1) Banking entity.--The term `banking entity' means any 
     insured depository institution (as defined in section 3 of 
     the Federal Deposit Insurance Act (12 U.S.C. 1813)), any 
     company that controls an insured depository institution, or 
     that is treated as a bank holding company for purposes of 
     section 8 of the International Banking Act, and any affiliate 
     or subsidiary of any such entity. For purposes of this 
     paragraph, the term `insured depository institution' does not 
     include an institution that functions solely in a trust or 
     fiduciary capacity, if--
       ``(A) all or substantially all of the deposits of such 
     institution are in trust funds and are received in a bona 
     fide fiduciary capacity;
       ``(B) no deposits of such institution which are insured by 
     the Federal Deposit Insurance Corporation are offered or 
     marketed by or through an affiliate of such institution;
       ``(C) such institution does not accept demand deposits or 
     deposits that the depositor may withdraw by check or similar 
     means for payment to third parties or others or make 
     commercial loans; and
       ``(D) such institution does not--
       ``(i) obtain payment or payment related services from any 
     Federal Reserve bank, including any service referred to in 
     section 11(a) of the Federal Reserve Act (12 U.S.C. 248a); or
       ``(ii) exercise discount or borrowing privileges pursuant 
     to section 19(b)(7) of the Federal Reserve Act (12 U.S.C. 
     461(b)(7)).
       ``(2) Hedge fund; private equity fund.--The terms `hedge 
     fund' and `private equity fund' mean a company or other 
     entity that is exempt from registration as an investment 
     company pursuant to section 3(c)(1) or 3(c)(7) of the 
     Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(1) or 80a-
     3(c)(7)), or such similar funds as jointly determined 
     appropriate by the appropriate Federal banking agencies, the 
     Securities and Exchange Commission, and the Commodity Futures 
     Trading Commission.
       ``(3) Nonbank financial company supervised by the board.--
     The term `nonbank financial company supervised by the Board' 
     means a nonbank financial company supervised by the Board of 
     Governors, as defined in section 102 of the Financial 
     Stability Act of 2010.
       ``(4) Proprietary trading.--The term `proprietary trading' 
     means engaging as a principal for its own trading account in 
     any transaction to purchase or sell, or otherwise acquire or 
     dispose of, any security, any derivative, any contract of 
     sale of a commodity for future delivery, any option on any 
     such security, derivative, or contract, or any other security 
     or financial instrument that the appropriate Federal banking 
     agencies, the Securities and Exchange Commission, and the 
     Commodity Futures Trading Commission may jointly, by rule, 
     determine.
       ``(5) Sponsor.--The term to `sponsor' a fund means--
       ``(A) to serve as a general partner, managing member, or 
     trustee of a fund;
       ``(B) in any manner to select or to control (or to have 
     employees, officers, or directors, or agents who constitute) 
     a majority of the directors, trustees, or management of a 
     fund; or
       ``(C) to share with a fund, for corporate, marketing, 
     promotional, or other purposes, the same name or a variation 
     of the same name.
       ``(6) Trading account.--The term `trading account' means 
     any account used for acquiring or taking positions in the 
     securities and instruments described in paragraph (4) 
     principally for the purpose of selling in the near term (or 
     otherwise with the intent to resell in order to profit from 
     short-term price movements), and any such other accounts as 
     the appropriate Federal banking agencies, the Securities and 
     Exchange Commission, and the Commodity Futures Trading 
     Commission may jointly, by rule, determine.''.

     SEC. _. CONFLICTS OF INTEREST.

       The Securities Act of 1933 (15 U.S.C. 77a et seq.) is 
     amended by inserting after section 27A the following:

     ``SEC. 27B. CONFLICTS OF INTEREST RELATING TO CERTAIN 
                   SECURITIZATIONS.

       ``(a) In General.--An underwriter, placement agent, initial 
     purchaser, or sponsor, or any affiliate or subsidiary of any 
     such entity, of an asset-backed security (as such term is 
     defined in section 3 of the Securities and Exchange Act of 
     1934 (15 U.S.C. 78c), which for the purposes of this section 
     shall include a synthetic asset-backed security), shall not, 
     during such period as the asset-backed security is 
     outstanding or such lesser period as the Commission 
     determines is appropriate, engage in any transaction that 
     would involve or result in any material conflict of interest 
     with respect to any investor in a transaction arising out of 
     such activity.
       ``(b) Rulemaking.--Not later than 180 days after the date 
     of enactment of this section, the Commission shall issue 
     rules for the purpose of implementing subsection (a) 
     including any appropriate disclosures or other measures.
       ``(c) Exception.--The prohibitions of subsection (a) shall 
     not apply to risk-mitigating hedging activities in connection 
     with positions or holdings arising out of the underwriting, 
     placement, initial purchase, or sponsorship of an asset-
     backed security, provided that such activities are designed 
     to reduce the specific risks to the underwriter, placement 
     agent, initial purchaser, or sponsor associated with 
     positions or holdings arising out of such underwriting, 
     placement, initial purchase, or sponsorship. This subsection 
     shall not otherwise limit the application of section 15G of 
     the Securities Exchange Act of 1934.''.
                                 ______
                                 
  SA 4127. Mr. MERKLEY (for himself and Mr. Levin) submitted an 
amendment intended to be proposed to amendment SA 4081 submitted by Mr. 
Hatch and intended to be proposed to the amendment SA 3739 proposed by 
Mr. Reid (for Mr. Dodd (for himself and Mrs. Lincoln)) to the bill S. 
3217, to promote the financial stability of the United States by 
improving accountability and transparency in the financial system, to 
end ``too big to fail'', to protect the American taxpayer by ending 
bailouts, to protect consumers from abusive financial services 
practices, and for other purposes; which was ordered to lie on the 
table; as follows:

       At the appropriate place, insert the following:

     SEC. _. PROHIBITIONS ON PROPRIETARY TRADING AND CERTAIN 
                   RELATIONSHIPS WITH HEDGE FUNDS AND PRIVATE 
                   EQUITY FUNDS.

       Notwithstanding any other provision of this Act, section 
     619 of this act shall have no

[[Page S3995]]

     force or effect, and the Bank Holding Company Act of 1956 (12 
     U.S.C. 1841 et seq.) is amended by adding at the end the 
     following:

     ``SEC. 13. PROHIBITIONS ON PROPRIETARY TRADING AND CERTAIN 
                   RELATIONSHIPS WITH HEDGE FUNDS AND PRIVATE 
                   EQUITY FUNDS.

       ``(a) In General.--
       ``(1) Prohibition.--Unless otherwise provided in this 
     section, a banking entity shall not--
       ``(A) engage in proprietary trading; or
       ``(B) acquire or retain any equity, partnership, or other 
     ownership interest in or sponsor a hedge fund or a private 
     equity fund.
       ``(2) Nonbank financial companies supervised by the 
     board.--Any nonbank financial company supervised by the Board 
     that engages in proprietary trading or takes or retains any 
     equity, partnership, or other ownership interest in or 
     sponsors a hedge fund or a private equity fund shall be 
     subject by the Board to additional capital requirements for 
     and additional quantitative limits with regards to such 
     proprietary trading and taking or retaining any equity, 
     partnership, or other ownership interest in or sponsorship of 
     a hedge fund or a private equity fund, except that permitted 
     activities as described in subsection (d) shall be subject to 
     additional capital and additional quantitative limits as 
     prescribed pursuant to subsection (d)(3).
       ``(b) Study and Rulemaking.--
       ``(1) Study.--Not later than 6 months after the date of 
     enactment of this section, the Financial Stability Oversight 
     Council shall study and make recommendations on implementing 
     the provisions of this section so as to--
       ``(A) promote and enhance the safety and soundness of 
     banking entities;
       ``(B) protect taxpayers and enhance financial stability by 
     minimizing the risk that insured depository institutions and 
     the affiliates of insured depository institutions will engage 
     in unsafe and unsound activities;
       ``(C) limit the inappropriate transfer of Federal subsidies 
     from institutions that benefit from deposit insurance and 
     liquidity facilities of the Federal Government to unregulated 
     entities;
       ``(D) reduce conflicts of interest between the self-
     interest of banking entities and nonbank financial companies 
     supervised by the Board, and the interests of the customers 
     of such entities and companies;
       ``(E) limit activities that have caused undue risk or loss 
     in banking entities and nonbank financial companies 
     supervised by the Board, or that might reasonably be expected 
     to create undue risk or loss in such banking entities and 
     nonbank financial companies supervised by the Board;
       ``(F) appropriately accommodate the business of insurance 
     within an insurance company subject to regulation in 
     accordance with the relevant insurance company investment 
     laws while protecting the safety and soundness of any banking 
     entity with which such insurance company is affiliated, and 
     of the United States financial system; and
       ``(G) appropriately time the divestiture of illiquid assets 
     that are affected by the implementation of the prohibitions 
     under subsection (a).
       ``(2) Rulemaking.--
       ``(A) In general.--Not later than 9 months after the 
     completion of the study under paragraph (1), the appropriate 
     Federal banking agencies, the Securities and Exchange 
     Commission, and the Commodity Futures Trading Commission, 
     (unless otherwise provided in this section) shall consider 
     the findings of the study under paragraph (1) and adopt rules 
     to carry out this section, as provided in subparagraph (B).
       ``(B) Coordinated rulemaking.--
       ``(i) Regulatory authority.--The regulations issued under 
     this paragraph and subsections (d) and (e) shall be issued 
     by--

       ``(I) the appropriate Federal banking agencies, jointly, 
     with respect to insured depository institutions;
       ``(II) the Board, with respect to any company that controls 
     an insured depository institution, or that is treated as a 
     bank holding company for purposes of section 8 of the 
     International Banking Act, any subsidiary of such a company 
     (other than a subsidiary described in subparagraph (A) or 
     (C)), and any nonbank financial company supervised by the 
     Board;
       ``(III) the Commodity Futures Trading Commission, with 
     respect to any entity for which the Commodity Futures Trading 
     Commission is the primary financial regulatory agency, as 
     defined in section 2 of the Restoring American Financial 
     Stability Act of 2010; and
       ``(IV) the Securities and Exchange Commission, with respect 
     to any entity for which the Securities and Exchange 
     Commission is the primary financial regulatory agency, as 
     defined in section 2 of the Restoring American Financial 
     Stability Act of 2010.

       ``(ii) Coordination, consistency, and comparability.--In 
     developing and issuing regulations pursuant to this section, 
     the appropriate Federal banking agencies, the Securities and 
     Exchange Commission, and the Commodity Futures Trading 
     Commission shall consult and coordinate with each other, as 
     appropriate, for the purposes of assuring, to the extent 
     possible, that such regulations are comparable and provide 
     for consistent application and implementation of the 
     applicable provisions of this section to avoid providing 
     advantages or imposing disadvantages to the companies 
     affected by this subsection and to protect the safety and 
     soundness of banking entities and nonbank financial companies 
     supervised by the Board.
       ``(iii) Council role.--The Chairperson of the Council shall 
     be responsible for coordination of the regulations issued 
     under this section.
       ``(c) Effective Date.--
       ``(1) In general.--Except as provided in paragraphs (2) and 
     (3), this section shall take effect on the earlier of--
       ``(A) 12 months after the issuance of final rules under 
     subsection (b); or
       ``(B) 2 years after the date of enactment of this section.
       ``(2) Transition period for divestiture of hedge funds or 
     private equity funds by banking entities.--
       ``(A) No new investments.--
       ``(i) No new funds.--On and after the date of enactment of 
     this section, a banking entity may not sponsor or invest in a 
     hedge fund or private equity fund that the banking entity did 
     not sponsor or in which the banking entity was not invested 
     on May 1, 2010.
       ``(ii) No additional capital or assets.--On and after the 
     date of enactment of this section, a banking entity may not 
     sell, transfer, loan, or otherwise provide any additional 
     capital or assets to a hedge fund or private equity fund 
     sponsored by the banking entity or in which the banking 
     entity invests, except to the extent necessary to fulfill a 
     contractual obligation that was in effect on May 1, 2010.
       ``(B) Reduction of existing investments.--Except as 
     provided in paragraph (3), on and after the date that is 2 
     years after the effective date of this section, the aggregate 
     amount of equity, partnership, or other ownership interests 
     in all hedge funds and private equity funds held by a banking 
     entity shall not exceed 2 percent of the Tier I capital of 
     the banking entity.
       ``(C) Total divestiture.--On and after the date that is 5 
     years after the effective date of this section, no banking 
     entity may engage in any activity prohibited under subsection 
     (a)(1)(B), except as provided in paragraph (3).
       ``(3) Transition period for illiquid funds.--
       ``(A) Definition.--In this paragraph, the term `illiquid 
     fund' means a hedge fund or private equity fund that, as of 
     May 1, 2010, was principally invested in or is invested in 
     illiquid assets, and committed to principally invest in 
     illiquid assets, such as portfolio companies, real estate 
     investments, and venture capital investments, and that 
     maintains the investment strategy of the fund that was in 
     place as of May 1, 2010, regarding principally investing in 
     illiquid assets. In issuing rules under this subparagraph, 
     the Board shall take into consideration the terms of 
     investment for the hedge fund or private equity fund, 
     including contractual obligations, the ability of the fund to 
     divest of assets held by the fund, and any other factors that 
     the Board determines are appropriate.
       ``(B) Transition.--
       ``(i) In general.--During the 4-year period beginning on 
     the date of enactment of this section, a banking entity may 
     only take an equity, partnership, or ownership interest in, 
     or otherwise provide additional capital to, an illiquid fund 
     to the extent necessary to fulfill a contractual obligation 
     of the banking entity to the illiquid fund that was in effect 
     on May 1, 2010.
       ``(ii) Limitations.--A banking entity may not exercise an 
     option to renew, or otherwise extend the duration of, any 
     contractual obligation described in clause (i) and shall 
     exercise any contractual option permitting the banking entity 
     to exit the illiquid fund if and when such option becomes 
     available. A banking entity may elect not to exercise an 
     option described in the preceding sentence, to the extent 
     that the maintenance of an investment would be permitted 
     under paragraph (2).
       ``(iii) Extension.--

       ``(I) Approval required.--If a contractual obligation of a 
     banking entity described in clause (i) extends beyond the 4-
     year period beginning on the date of enactment of this 
     section, the banking entity may not continue to make the 
     investment required under the contractual obligation without 
     the prior written approval of the Board. In determining 
     whether to grant an extension under this clause, the Board 
     shall evaluate whether the proposed investment meets the 
     requirements of this subparagraph.
       ``(II) Time limit on approval.--The Board may approve an 
     investment described in subclause (I) for a period of not 
     longer than 2 years for each extension.
       ``(III) Limit on number of approvals.--The Board may not 
     approve an investment described in subclause (I) more than 3 
     times.

       ``(iv) Divestiture required.--Except as otherwise permitted 
     under subsection (d), no banking entity may engage in any 
     activity prohibited under subsection (a)(1)(B) after the 
     earlier of --

       ``(I) the date on which the contractual obligation to 
     invest in the illiquid fund terminates; and
       ``(II) the date on which the approval by the Board under 
     clause (iii) expires.

       ``(4) Additional capital.--Notwithstanding paragraph (2) or 
     (3), on and after the effective date under paragraph (1), the 
     Board may impose additional capital requirements, and any 
     other restrictions, as the Board determines appropriate, on 
     any equity, partnership, or ownership interest in or 
     sponsorship of a hedge fund or private equity fund by a 
     banking entity or nonbank financial company supervised by the 
     Board, including on a case-by-case basis, as the Board 
     determines appropriate.

[[Page S3996]]

       ``(5) Rulemaking.--Not later than 6 months after the date 
     of enactment of this section, the Board shall issues rules to 
     implement paragraphs (2), (3), and (4).
       ``(d) Permitted Activities.--
       ``(1) In general.--Notwithstanding the restrictions in 
     subsection (a), to the extent permitted by any other 
     provision of Federal or State law, and subject to the 
     limitations under paragraph (2) and any restrictions or 
     limitations that the appropriate Federal banking agencies, 
     the Securities and Exchange Commission, and the Commodity 
     Futures Trading Commission, may determine, the following 
     activities (in this section referred to as `permitted 
     activities') are permitted:
       ``(A) The purchase, sale, acquisition, or disposition of 
     obligations of the United States or any agency thereof; 
     obligations, participations, or other instruments of or 
     issued by the Government National Mortgage Association, the 
     Federal National Mortgage Association, the Federal Home Loan 
     Mortgage Corporation, a Federal Home Loan Bank, the Federal 
     Agricultural Mortgage Corporation, or a Farm Credit System 
     institution chartered under and subject to the provisions of 
     the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.), and 
     obligations of any State or of any political subdivision 
     thereof.
       ``(B) The purchase, sale, acquisition, or disposition of 
     securities and other instruments described in subsection 
     (h)(4) in connection with underwriting, market-making, or in 
     facilitation of customer relationships, to the extent that 
     any such activities permitted by this subparagraph are 
     designed to not exceed the reasonably expected near term 
     demands of clients, customers, or counterparties.
       ``(C) Risk-mitigating hedging activities designed to reduce 
     the specific risks to a banking entity or nonbank financial 
     company supervised by the Board.
       ``(D) The purchase, sale, acquisition, or disposition of 
     securities and other instruments described in subsection 
     (h)(4) on behalf of customers.
       ``(E) Investments in one or more small business investment 
     companies, as defined in section 102 of the Small Business 
     Investment Act of 1958 (15 U.S.C. 662), or investments 
     designed primarily to promote the public welfare, as provided 
     in paragraph (11) of section 5136 of the Revised Statutes of 
     the United States (12 U.S.C. 24).
       ``(F) The purchase, sale, acquisition, or disposition of 
     securities and other instruments described in subsection 
     (h)(4) by a regulated insurance company directly engaged in 
     the business of insurance for the general account of the 
     company and by any affiliate of such regulated insurance 
     company, provided that such activities by any affiliate are 
     solely for the general account of the regulated insurance 
     company, if--
       ``(i) the purchase, sale, acquisition, or disposition is 
     conducted in compliance with, and subject to, the insurance 
     company investment laws, regulations, and written guidance of 
     the State or jurisdiction in which each such insurance 
     company is domiciled; and
       ``(ii) the appropriate Federal banking agencies, after 
     consultation with the Financial Stability Oversight Council 
     and the relevant insurance commissioners of the States and 
     territories of the United States, have not jointly 
     determined, after notice and comment, that a particular law, 
     regulation, or written guidance described in clause (i) is 
     insufficient to protect the safety and soundness of the 
     banking entity or nonbank financial company supervised by the 
     Board, or of the financial stability of the United States.
       ``(G) Organizing and offering a private equity or hedge 
     fund, including serving as a general partner, managing 
     member, or trustee of the fund and in any manner selecting or 
     controlling (or having employees, officers, directors, or 
     agents who constitute) a majority of the directors, trustees, 
     or management of the fund, including any necessary expenses 
     for the foregoing, only if--
       ``(i) the banking entity provides bona fide trust, 
     fiduciary, or investment advisory services;
       ``(ii) the fund is organized and offered only in connection 
     with the provision of bona fide trust, fiduciary, or 
     investment advisory services and only to persons that are 
     customers of such services of the banking entity;
       ``(iii) the banking entity does not acquire or retain an 
     equity interest, partnership interest, or other ownership 
     interest in the funds;
       ``(iv) the banking entity does not enter into or otherwise 
     engage in any transaction with the hedge fund or private 
     equity fund that is a covered transaction, as defined in 
     section 23A of the Federal Reserve Act (12 U.S.C. 371c);
       ``(v) the obligations or performance of the hedge fund or 
     private equity fund are not guaranteed, assumed, or otherwise 
     covered, directly or indirectly, by the banking entity or any 
     subsidiary or affiliate of the banking entity;
       ``(vi) the banking entity does not share with the hedge 
     fund or private equity fund, for corporate, marketing, 
     promotional, or other purposes, the same name or a variation 
     of the same name;
       ``(vii) no director or employee of the banking entity takes 
     or retains an equity interest, partnership interest, or other 
     ownership interest in, except for any director or employee of 
     the banking entity who is directly engaged in providing 
     investment advisory or other services to the hedge fund or 
     private equity fund; and
       ``(viii) the banking entity complies with any rules of the 
     appropriate Federal banking agencies, the Securities and 
     Exchange Commission, or the Commodity Futures Trading 
     Commission designed to ensure that losses in such hedge fund 
     or private equity fund are borne solely by investors in the 
     fund and not by the banking entity.
       ``(H) Proprietary trading conducted by a company pursuant 
     to paragraph (9) or (13) of section 4(c), provided that the 
     trading occurs solely outside of the United States and that 
     the banking entity or nonbank financial company supervised by 
     the Board is not directly or indirectly controlled by a 
     United States person.
       ``(I) The acquisition or retention of any equity, 
     partnership, or other ownership interest in, or the 
     sponsorship of, a hedge fund or a private equity fund by a 
     banking entity or nonbank financial company supervised by the 
     Board pursuant to paragraph (9) or (13) of section 4(c) 
     solely outside of the United States, provided that no 
     ownership interest in such hedge fund or private equity fund 
     is offered for sale or sold to a resident of the United 
     States and that the banking entity or nonbank financial 
     company supervised by the Board is not directly or indirectly 
     controlled by a company that is organized in the United 
     States.
       ``(J) Such other activity as the appropriate Federal 
     banking agencies, the Securities and Exchange Commission, and 
     the Commodity Futures Trading Commission determine through 
     regulation, as provided in subsection (b)(2)(B), would 
     promote and protect the safety and soundness of the banking 
     entity or nonbank financial company supervised by the Board 
     and the financial stability of the United States.
       ``(2) Limitation on permitted activities.--
       ``(A) In general.--No transaction, class of transactions, 
     or activity may be deemed a permitted activity under 
     paragraph (1) if it--
       ``(i) would involve or result in a material conflict of 
     interest (as such term shall be defined jointly by rule) 
     between the banking entity or the nonbank financial company 
     supervised by the Board and its clients, customers, or 
     counterparties;
       ``(ii) would result, directly or indirectly, in an unsafe 
     and unsound exposure by the banking entity or nonbank 
     financial company supervised by the Board to high-risk assets 
     or high-risk trading strategies (as such terms shall be 
     defined jointly by rule);
       ``(iii) would pose a threat to the safety and soundness of 
     such banking entity or nonbank financial company supervised 
     by the Board; or
       ``(iv) would pose a threat to the financial stability of 
     the United States.
       ``(B) Rulemaking.--The appropriate Federal banking 
     agencies, the Securities and Exchange Commission, and the 
     Commodity Futures Trading Commission shall issue regulations 
     to implement subparagraph (A), as part of the regulations 
     issued under subsection (b)(2).
       ``(3) Capital and quantitative limitations.--The Board 
     shall adopt rules, as provided under subsection (b)(2), 
     imposing additional capital requirements and quantitative 
     limitations regarding the activities permitted under this 
     section if the Board determines that additional capital and 
     quantitative limitations are appropriate to protect the 
     safety and soundness of the banking entities and nonbank 
     financial companies supervised by the Board engaged in such 
     activities.
       ``(e) Anti-evasion.--
       ``(1) Rulemaking.--The appropriate Federal banking 
     agencies, the Securities and Exchange Commission, and the 
     Commodity Futures Trading Commission shall issue regulations 
     as part of the rulemaking provided for in subsection (b)(2) 
     regarding internal controls and recordkeeping in order to 
     insure compliance with this section.
       ``(2) Termination of activities or investment.--Whenever an 
     appropriate Federal banking agency, the Securities and 
     Exchange Commission, or the Commodity Futures Trading 
     Commission, as appropriate, has reasonable cause to believe 
     that a banking entity or nonbank financial company supervised 
     by the Board under the respective agency's jurisdiction has 
     made an investment or engaged in an activity in a manner that 
     functions as an evasion of the requirements of this section 
     (including through an abuse of any permitted activity) or 
     otherwise violates the restrictions under this section, the 
     appropriate Federal banking agency, the Securities and 
     Exchange Commission, or the Commodity Futures Trading 
     Commission, as appropriate, shall order, after due notice and 
     opportunity for hearing, the banking entity or nonbank 
     financial company supervised by the Board to terminate the 
     activity and, as relevant, dispose of the investment. Nothing 
     in this subparagraph shall be construed to limit the inherent 
     authority of any Federal agency or State regulatory authority 
     to further restrict any investments or activities under 
     otherwise applicable provisions of law.
       ``(f) Limitations on Relationships With Hedge Funds and 
     Private Equity Funds.--
       ``(1) In general.--No banking entity that serves, directly 
     or indirectly, as the investment manager or investment 
     adviser to a hedge fund or private equity fund may enter into 
     a covered transaction, as defined in section 23A of the 
     Federal Reserve Act (12 U.S.C. 371c) with the hedge fund or 
     private equity fund.
       ``(2) Treatment as member bank.--A banking entity that 
     serves, directly or indirectly, as the investment manager or 
     investment adviser to a hedge fund or private equity

[[Page S3997]]

     fund shall be subject to section 23A and 23B of the Federal 
     Reserve Act (12 U.S.C. 371c-1), as if such person were a 
     member bank and such hedge fund or private equity fund were 
     an affiliate thereof.
       ``(3) Covered transactions with unaffiliated hedge funds 
     and private equity funds.--No banking entity may enter into a 
     covered transaction, as defined in section 23A of the Federal 
     Reserve Act (12 U.S.C. 371c), with any hedge fund or private 
     equity fund organized and offered by the banking entity or 
     with any hedge fund or private equity fund in which such 
     hedge fund or private equity fund has taken any equity, 
     partnership, or other ownership interest.
       ``(g) Rules of Construction.--
       ``(1) Limitation on contrary authority.--Any prohibitions 
     or restrictions under this section shall apply even though 
     such activities may be authorized for a banking entity or a 
     nonbank financial company supervised by the Board under any 
     other provision of law.
       ``(2) Sale or securitization of loans.--Nothing in this 
     section shall be construed to limit or restrict the ability 
     of a banking entity or nonbank financial company supervised 
     by the Board to sell or securitize loans in a manner 
     otherwise permitted by law.
       ``(3) Authority of federal agencies and state regulatory 
     authorities.--Nothing in this section shall be construed to 
     limit the inherent authority of any Federal agency or State 
     regulatory authority under otherwise applicable provisions of 
     law.
       ``(h) Definitions.--In this section, the following 
     definitions shall apply:
       ``(1) Banking entity.--The term `banking entity' means any 
     insured depository institution (as defined in section 3 of 
     the Federal Deposit Insurance Act (12 U.S.C. 1813)), any 
     company that controls an insured depository institution, or 
     that is treated as a bank holding company for purposes of 
     section 8 of the International Banking Act, and any affiliate 
     or subsidiary of any such entity. For purposes of this 
     paragraph, the term `insured depository institution' does not 
     include an institution that functions solely in a trust or 
     fiduciary capacity, if--
       ``(A) all or substantially all of the deposits of such 
     institution are in trust funds and are received in a bona 
     fide fiduciary capacity;
       ``(B) no deposits of such institution which are insured by 
     the Federal Deposit Insurance Corporation are offered or 
     marketed by or through an affiliate of such institution;
       ``(C) such institution does not accept demand deposits or 
     deposits that the depositor may withdraw by check or similar 
     means for payment to third parties or others or make 
     commercial loans; and
       ``(D) such institution does not--
       ``(i) obtain payment or payment related services from any 
     Federal Reserve bank, including any service referred to in 
     section 11(a) of the Federal Reserve Act (12 U.S.C. 248a); or
       ``(ii) exercise discount or borrowing privileges pursuant 
     to section 19(b)(7) of the Federal Reserve Act (12 U.S.C. 
     461(b)(7)).
       ``(2) Hedge fund; private equity fund.--The terms `hedge 
     fund' and `private equity fund' mean a company or other 
     entity that is exempt from registration as an investment 
     company pursuant to section 3(c)(1) or 3(c)(7) of the 
     Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(1) or 80a-
     3(c)(7)), or such similar funds as jointly determined 
     appropriate by the appropriate Federal banking agencies, the 
     Securities and Exchange Commission, and the Commodity Futures 
     Trading Commission.
       ``(3) Nonbank financial company supervised by the board.--
     The term `nonbank financial company supervised by the Board' 
     means a nonbank financial company supervised by the Board of 
     Governors, as defined in section 102 of the Financial 
     Stability Act of 2010.
       ``(4) Proprietary trading.--The term `proprietary trading' 
     means engaging as a principal for its own trading account in 
     any transaction to purchase or sell, or otherwise acquire or 
     dispose of, any security, any derivative, any contract of 
     sale of a commodity for future delivery, any option on any 
     such security, derivative, or contract, or any other security 
     or financial instrument that the appropriate Federal banking 
     agencies, the Securities and Exchange Commission, and the 
     Commodity Futures Trading Commission may jointly, by rule, 
     determine.
       ``(5) Sponsor.--The term to `sponsor' a fund means--
       ``(A) to serve as a general partner, managing member, or 
     trustee of a fund;
       ``(B) in any manner to select or to control (or to have 
     employees, officers, or directors, or agents who constitute) 
     a majority of the directors, trustees, or management of a 
     fund; or
       ``(C) to share with a fund, for corporate, marketing, 
     promotional, or other purposes, the same name or a variation 
     of the same name.
       ``(6) Trading account.--The term `trading account' means 
     any account used for acquiring or taking positions in the 
     securities and instruments described in paragraph (4) 
     principally for the purpose of selling in the near term (or 
     otherwise with the intent to resell in order to profit from 
     short-term price movements), and any such other accounts as 
     the appropriate Federal banking agencies, the Securities and 
     Exchange Commission, and the Commodity Futures Trading 
     Commission may jointly, by rule, determine.''.

     SEC. (I). CONFLICTS OF INTEREST.

       The Securities Act of 1933 (15 U.S.C. 77a et seq.) is 
     amended by inserting after section 27A the following:

     ``SEC. 27B. CONFLICTS OF INTEREST RELATING TO CERTAIN 
                   SECURITIZATIONS.

       ``(a) In General.--An underwriter, placement agent, initial 
     purchaser, or sponsor, or any affiliate or subsidiary of any 
     such entity, of an asset-backed security (as such term is 
     defined in section 3 of the Securities and Exchange Act of 
     1934 (15 U.S.C. 78c), which for the purposes of this section 
     shall include a synthetic asset-backed security), shall not, 
     during such period as the asset-backed security is 
     outstanding or such lesser period as the Commission 
     determines is appropriate, engage in any transaction that 
     would involve or result in any material conflict of interest 
     with respect to any investor in a transaction arising out of 
     such activity.
       ``(b) Rulemaking.--Not later than 180 days after the date 
     of enactment of this section, the Commission shall issue 
     rules for the purpose of implementing subsection (a) 
     including any appropriate disclosures or other measures.
       ``(c) Exception.--The prohibitions of subsection (a) shall 
     not apply to risk-mitigating hedging activities in connection 
     with positions or holdings arising out of the underwriting, 
     placement, initial purchase, or sponsorship of an asset-
     backed security, provided that such activities are designed 
     to reduce the specific risks to the underwriter, placement 
     agent, initial purchaser, or sponsor associated with 
     positions or holdings arising out of such underwriting, 
     placement, initial purchase, or sponsorship. This subsection 
     shall not otherwise limit the application of section 15G of 
     the Securities Exchange Act of 1934.''.
                                 ______
                                 
  SA 4128. Mr. MERKLEY (for himself and Mr. Levin) submitted an 
amendment intended to be proposed to amendment SA 4055 submitted by 
Mrs. Hutchison (for herself, Mrs. Hagan, and Mr. Cornyn) and intended 
to be proposed to the amendment SA 3739 proposed by Mr. Reid (for Mr. 
Dodd (for himself and Mrs. Lincoln)) to the bill S. 3217, to promote 
the financial stability of the United States by improving 
accountability and transparency in the financial system, to end ``too 
big to fail'', to protect the American taxpayer by ending bailouts, to 
protect consumers from abusive financial services practices, and for 
other purposes; which was ordered to lie on the table; as follows:

       At the appropriate place, insert the following:

     SEC. _. PROHIBITIONS ON PROPRIETARY TRADING AND CERTAIN 
                   RELATIONSHIPS WITH HEDGE FUNDS AND PRIVATE 
                   EQUITY FUNDS.

       Notwithstanding any other provision of this Act, section 
     619 of this act shall have no force or effect, and the Bank 
     Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is 
     amended by adding at the end the following:

     ``SEC. 13. PROHIBITIONS ON PROPRIETARY TRADING AND CERTAIN 
                   RELATIONSHIPS WITH HEDGE FUNDS AND PRIVATE 
                   EQUITY FUNDS.

       ``(a) In General.--
       ``(1) Prohibition.--Unless otherwise provided in this 
     section, a banking entity shall not--
       ``(A) engage in proprietary trading; or
       ``(B) acquire or retain any equity, partnership, or other 
     ownership interest in or sponsor a hedge fund or a private 
     equity fund.
       ``(2) Nonbank financial companies supervised by the 
     board.--Any nonbank financial company supervised by the Board 
     that engages in proprietary trading or takes or retains any 
     equity, partnership, or other ownership interest in or 
     sponsors a hedge fund or a private equity fund shall be 
     subject by the Board to additional capital requirements for 
     and additional quantitative limits with regards to such 
     proprietary trading and taking or retaining any equity, 
     partnership, or other ownership interest in or sponsorship of 
     a hedge fund or a private equity fund, except that permitted 
     activities as described in subsection (d) shall be subject to 
     additional capital and additional quantitative limits as 
     prescribed pursuant to subsection (d)(3).
       ``(b) Study and Rulemaking.--
       ``(1) Study.--Not later than 6 months after the date of 
     enactment of this section, the Financial Stability Oversight 
     Council shall study and make recommendations on implementing 
     the provisions of this section so as to--
       ``(A) promote and enhance the safety and soundness of 
     banking entities;
       ``(B) protect taxpayers and enhance financial stability by 
     minimizing the risk that insured depository institutions and 
     the affiliates of insured depository institutions will engage 
     in unsafe and unsound activities;
       ``(C) limit the inappropriate transfer of Federal subsidies 
     from institutions that benefit from deposit insurance and 
     liquidity facilities of the Federal Government to unregulated 
     entities;
       ``(D) reduce conflicts of interest between the self-
     interest of banking entities and nonbank financial companies 
     supervised by the Board, and the interests of the customers 
     of such entities and companies;
       ``(E) limit activities that have caused undue risk or loss 
     in banking entities and nonbank financial companies 
     supervised by the Board, or that might reasonably be expected 
     to create undue risk or loss in such banking entities and 
     nonbank financial companies supervised by the Board;

[[Page S3998]]

       ``(F) appropriately accommodate the business of insurance 
     within an insurance company subject to regulation in 
     accordance with the relevant insurance company investment 
     laws while protecting the safety and soundness of any banking 
     entity with which such insurance company is affiliated, and 
     of the United States financial system; and
       ``(G) appropriately time the divestiture of illiquid assets 
     that are affected by the implementation of the prohibitions 
     under subsection (a).
       ``(2) Rulemaking.--
       ``(A) In general.--Not later than 9 months after the 
     completion of the study under paragraph (1), the appropriate 
     Federal banking agencies, the Securities and Exchange 
     Commission, and the Commodity Futures Trading Commission, 
     (unless otherwise provided in this section) shall consider 
     the findings of the study under paragraph (1) and adopt rules 
     to carry out this section, as provided in subparagraph (B).
       ``(B) Coordinated rulemaking.--
       ``(i) Regulatory authority.--The regulations issued under 
     this paragraph and subsections (d) and (e) shall be issued 
     by--

       ``(I) the appropriate Federal banking agencies, jointly, 
     with respect to insured depository institutions;
       ``(II) the Board, with respect to any company that controls 
     an insured depository institution, or that is treated as a 
     bank holding company for purposes of section 8 of the 
     International Banking Act, any subsidiary of such a company 
     (other than a subsidiary described in subparagraph (A) or 
     (C)), and any nonbank financial company supervised by the 
     Board;
       ``(III) the Commodity Futures Trading Commission, with 
     respect to any entity for which the Commodity Futures Trading 
     Commission is the primary financial regulatory agency, as 
     defined in section 2 of the Restoring American Financial 
     Stability Act of 2010; and
       ``(IV) the Securities and Exchange Commission, with respect 
     to any entity for which the Securities and Exchange 
     Commission is the primary financial regulatory agency, as 
     defined in section 2 of the Restoring American Financial 
     Stability Act of 2010.

       ``(ii) Coordination, consistency, and comparability.--In 
     developing and issuing regulations pursuant to this section, 
     the appropriate Federal banking agencies, the Securities and 
     Exchange Commission, and the Commodity Futures Trading 
     Commission shall consult and coordinate with each other, as 
     appropriate, for the purposes of assuring, to the extent 
     possible, that such regulations are comparable and provide 
     for consistent application and implementation of the 
     applicable provisions of this section to avoid providing 
     advantages or imposing disadvantages to the companies 
     affected by this subsection and to protect the safety and 
     soundness of banking entities and nonbank financial companies 
     supervised by the Board.
       ``(iii) Council role.--The Chairperson of the Council shall 
     be responsible for coordination of the regulations issued 
     under this section.
       ``(c) Effective Date.--
       ``(1) In general.--Except as provided in paragraphs (2) and 
     (3), this section shall take effect on the earlier of--
       ``(A) 12 months after the issuance of final rules under 
     subsection (b); or
       ``(B) 2 years after the date of enactment of this section.
       ``(2) Transition period for divestiture of hedge funds or 
     private equity funds by banking entities.--
       ``(A) No new investments.--
       ``(i) No new funds.--On and after the date of enactment of 
     this section, a banking entity may not sponsor or invest in a 
     hedge fund or private equity fund that the banking entity did 
     not sponsor or in which the banking entity was not invested 
     on May 1, 2010.
       ``(ii) No additional capital or assets.--On and after the 
     date of enactment of this section, a banking entity may not 
     sell, transfer, loan, or otherwise provide any additional 
     capital or assets to a hedge fund or private equity fund 
     sponsored by the banking entity or in which the banking 
     entity invests, except to the extent necessary to fulfill a 
     contractual obligation that was in effect on May 1, 2010.
       ``(B) Reduction of existing investments.--Except as 
     provided in paragraph (3), on and after the date that is 2 
     years after the effective date of this section, the aggregate 
     amount of equity, partnership, or other ownership interests 
     in all hedge funds and private equity funds held by a banking 
     entity shall not exceed 2 percent of the Tier I capital of 
     the banking entity.
       ``(C) Total divestiture.--On and after the date that is 5 
     years after the effective date of this section, no banking 
     entity may engage in any activity prohibited under subsection 
     (a)(1)(B), except as provided in paragraph (3).
       ``(3) Transition period for illiquid funds.--
       ``(A) Definition.--In this paragraph, the term `illiquid 
     fund' means a hedge fund or private equity fund that, as of 
     May 1, 2010, was principally invested in or is invested in 
     illiquid assets, and committed to principally invest in 
     illiquid assets, such as portfolio companies, real estate 
     investments, and venture capital investments, and that 
     maintains the investment strategy of the fund that was in 
     place as of May 1, 2010, regarding principally investing in 
     illiquid assets. In issuing rules under this subparagraph, 
     the Board shall take into consideration the terms of 
     investment for the hedge fund or private equity fund, 
     including contractual obligations, the ability of the fund to 
     divest of assets held by the fund, and any other factors that 
     the Board determines are appropriate.
       ``(B) Transition.--
       ``(i) In general.--During the 4-year period beginning on 
     the date of enactment of this section, a banking entity may 
     only take an equity, partnership, or ownership interest in, 
     or otherwise provide additional capital to, an illiquid fund 
     to the extent necessary to fulfill a contractual obligation 
     of the banking entity to the illiquid fund that was in effect 
     on May 1, 2010.
       ``(ii) Limitations.--A banking entity may not exercise an 
     option to renew, or otherwise extend the duration of, any 
     contractual obligation described in clause (i) and shall 
     exercise any contractual option permitting the banking entity 
     to exit the illiquid fund if and when such option becomes 
     available. A banking entity may elect not to exercise an 
     option described in the preceding sentence, to the extent 
     that the maintenance of an investment would be permitted 
     under paragraph (2).
       ``(iii) Extension.--

       ``(I) Approval required.--If a contractual obligation of a 
     banking entity described in clause (i) extends beyond the 4-
     year period beginning on the date of enactment of this 
     section, the banking entity may not continue to make the 
     investment required under the contractual obligation without 
     the prior written approval of the Board. In determining 
     whether to grant an extension under this clause, the Board 
     shall evaluate whether the proposed investment meets the 
     requirements of this subparagraph.
       ``(II) Time limit on approval.--The Board may approve an 
     investment described in subclause (I) for a period of not 
     longer than 2 years for each extension.
       ``(III) Limit on number of approvals.--The Board may not 
     approve an investment described in subclause (I) more than 3 
     times.

       ``(iv) Divestiture required.--Except as otherwise permitted 
     under subsection (d), no banking entity may engage in any 
     activity prohibited under subsection (a)(1)(B) after the 
     earlier of --

       ``(I) the date on which the contractual obligation to 
     invest in the illiquid fund terminates; and
       ``(II) the date on which the approval by the Board under 
     clause (iii) expires.

       ``(4) Additional capital.--Notwithstanding paragraph (2) or 
     (3), on and after the effective date under paragraph (1), the 
     Board may impose additional capital requirements, and any 
     other restrictions, as the Board determines appropriate, on 
     any equity, partnership, or ownership interest in or 
     sponsorship of a hedge fund or private equity fund by a 
     banking entity or nonbank financial company supervised by the 
     Board, including on a case-by-case basis, as the Board 
     determines appropriate.
       ``(5) Rulemaking.--Not later than 6 months after the date 
     of enactment of this section, the Board shall issues rules to 
     implement paragraphs (2), (3), and (4).
       ``(d) Permitted Activities.--
       ``(1) In general.--Notwithstanding the restrictions in 
     subsection (a), to the extent permitted by any other 
     provision of Federal or State law, and subject to the 
     limitations under paragraph (2) and any restrictions or 
     limitations that the appropriate Federal banking agencies, 
     the Securities and Exchange Commission, and the Commodity 
     Futures Trading Commission, may determine, the following 
     activities (in this section referred to as `permitted 
     activities') are permitted:
       ``(A) The purchase, sale, acquisition, or disposition of 
     obligations of the United States or any agency thereof; 
     obligations, participations, or other instruments of or 
     issued by the Government National Mortgage Association, the 
     Federal National Mortgage Association, the Federal Home Loan 
     Mortgage Corporation, a Federal Home Loan Bank, the Federal 
     Agricultural Mortgage Corporation, or a Farm Credit System 
     institution chartered under and subject to the provisions of 
     the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.), and 
     obligations of any State or of any political subdivision 
     thereof.
       ``(B) The purchase, sale, acquisition, or disposition of 
     securities and other instruments described in subsection 
     (h)(4) in connection with underwriting, market-making, or in 
     facilitation of customer relationships, to the extent that 
     any such activities permitted by this subparagraph are 
     designed to not exceed the reasonably expected near term 
     demands of clients, customers, or counterparties.
       ``(C) Risk-mitigating hedging activities designed to reduce 
     the specific risks to a banking entity or nonbank financial 
     company supervised by the Board.
       ``(D) The purchase, sale, acquisition, or disposition of 
     securities and other instruments described in subsection 
     (h)(4) on behalf of customers.
       ``(E) Investments in one or more small business investment 
     companies, as defined in section 102 of the Small Business 
     Investment Act of 1958 (15 U.S.C. 662), or investments 
     designed primarily to promote the public welfare, as provided 
     in paragraph (11) of section 5136 of the Revised Statutes of 
     the United States (12 U.S.C. 24).
       ``(F) The purchase, sale, acquisition, or disposition of 
     securities and other instruments described in subsection 
     (h)(4) by a regulated insurance company directly engaged in 
     the business of insurance for the general account of the 
     company and by any affiliate of such regulated insurance 
     company, provided that

[[Page S3999]]

     such activities by any affiliate are solely for the general 
     account of the regulated insurance company, if--
       ``(i) the purchase, sale, acquisition, or disposition is 
     conducted in compliance with, and subject to, the insurance 
     company investment laws, regulations, and written guidance of 
     the State or jurisdiction in which each such insurance 
     company is domiciled; and
       ``(ii) the appropriate Federal banking agencies, after 
     consultation with the Financial Stability Oversight Council 
     and the relevant insurance commissioners of the States and 
     territories of the United States, have not jointly 
     determined, after notice and comment, that a particular law, 
     regulation, or written guidance described in clause (i) is 
     insufficient to protect the safety and soundness of the 
     banking entity or nonbank financial company supervised by the 
     Board, or of the financial stability of the United States.
       ``(G) Organizing and offering a private equity or hedge 
     fund, including serving as a general partner, managing 
     member, or trustee of the fund and in any manner selecting or 
     controlling (or having employees, officers, directors, or 
     agents who constitute) a majority of the directors, trustees, 
     or management of the fund, including any necessary expenses 
     for the foregoing, only if--
       ``(i) the banking entity provides bona fide trust, 
     fiduciary, or investment advisory services;
       ``(ii) the fund is organized and offered only in connection 
     with the provision of bona fide trust, fiduciary, or 
     investment advisory services and only to persons that are 
     customers of such services of the banking entity;
       ``(iii) the banking entity does not acquire or retain an 
     equity interest, partnership interest, or other ownership 
     interest in the funds;
       ``(iv) the banking entity does not enter into or otherwise 
     engage in any transaction with the hedge fund or private 
     equity fund that is a covered transaction, as defined in 
     section 23A of the Federal Reserve Act (12 U.S.C. 371c);
       ``(v) the obligations or performance of the hedge fund or 
     private equity fund are not guaranteed, assumed, or otherwise 
     covered, directly or indirectly, by the banking entity or any 
     subsidiary or affiliate of the banking entity;
       ``(vi) the banking entity does not share with the hedge 
     fund or private equity fund, for corporate, marketing, 
     promotional, or other purposes, the same name or a variation 
     of the same name;
       ``(vii) no director or employee of the banking entity takes 
     or retains an equity interest, partnership interest, or other 
     ownership interest in, except for any director or employee of 
     the banking entity who is directly engaged in providing 
     investment advisory or other services to the hedge fund or 
     private equity fund; and
       ``(viii) the banking entity complies with any rules of the 
     appropriate Federal banking agencies, the Securities and 
     Exchange Commission, or the Commodity Futures Trading 
     Commission designed to ensure that losses in such hedge fund 
     or private equity fund are borne solely by investors in the 
     fund and not by the banking entity.
       ``(H) Proprietary trading conducted by a company pursuant 
     to paragraph (9) or (13) of section 4(c), provided that the 
     trading occurs solely outside of the United States and that 
     the banking entity or nonbank financial company supervised by 
     the Board is not directly or indirectly controlled by a 
     United States person.
       ``(I) The acquisition or retention of any equity, 
     partnership, or other ownership interest in, or the 
     sponsorship of, a hedge fund or a private equity fund by a 
     banking entity or nonbank financial company supervised by the 
     Board pursuant to paragraph (9) or (13) of section 4(c) 
     solely outside of the United States, provided that no 
     ownership interest in such hedge fund or private equity fund 
     is offered for sale or sold to a resident of the United 
     States and that the banking entity or nonbank financial 
     company supervised by the Board is not directly or indirectly 
     controlled by a company that is organized in the United 
     States.
       ``(J) Such other activity as the appropriate Federal 
     banking agencies, the Securities and Exchange Commission, and 
     the Commodity Futures Trading Commission determine through 
     regulation, as provided in subsection (b)(2)(B), would 
     promote and protect the safety and soundness of the banking 
     entity or nonbank financial company supervised by the Board 
     and the financial stability of the United States.
       ``(2) Limitation on permitted activities.--
       ``(A) In general.--No transaction, class of transactions, 
     or activity may be deemed a permitted activity under 
     paragraph (1) if it--
       ``(i) would involve or result in a material conflict of 
     interest (as such term shall be defined jointly by rule) 
     between the banking entity or the nonbank financial company 
     supervised by the Board and its clients, customers, or 
     counterparties;
       ``(ii) would result, directly or indirectly, in an unsafe 
     and unsound exposure by the banking entity or nonbank 
     financial company supervised by the Board to high-risk assets 
     or high-risk trading strategies (as such terms shall be 
     defined jointly by rule);
       ``(iii) would pose a threat to the safety and soundness of 
     such banking entity or nonbank financial company supervised 
     by the Board; or
       ``(iv) would pose a threat to the financial stability of 
     the United States.
       ``(B) Rulemaking.--The appropriate Federal banking 
     agencies, the Securities and Exchange Commission, and the 
     Commodity Futures Trading Commission shall issue regulations 
     to implement subparagraph (A), as part of the regulations 
     issued under subsection (b)(2).
       ``(3) Capital and quantitative limitations.--The Board 
     shall adopt rules, as provided under subsection (b)(2), 
     imposing additional capital requirements and quantitative 
     limitations regarding the activities permitted under this 
     section if the Board determines that additional capital and 
     quantitative limitations are appropriate to protect the 
     safety and soundness of the banking entities and nonbank 
     financial companies supervised by the Board engaged in such 
     activities.
       ``(e) Anti-evasion.--
       ``(1) Rulemaking.--The appropriate Federal banking 
     agencies, the Securities and Exchange Commission, and the 
     Commodity Futures Trading Commission shall issue regulations 
     as part of the rulemaking provided for in subsection (b)(2) 
     regarding internal controls and recordkeeping in order to 
     insure compliance with this section.
       ``(2) Termination of activities or investment.--Whenever an 
     appropriate Federal banking agency, the Securities and 
     Exchange Commission, or the Commodity Futures Trading 
     Commission, as appropriate, has reasonable cause to believe 
     that a banking entity or nonbank financial company supervised 
     by the Board under the respective agency's jurisdiction has 
     made an investment or engaged in an activity in a manner that 
     functions as an evasion of the requirements of this section 
     (including through an abuse of any permitted activity) or 
     otherwise violates the restrictions under this section, the 
     appropriate Federal banking agency, the Securities and 
     Exchange Commission, or the Commodity Futures Trading 
     Commission, as appropriate, shall order, after due notice and 
     opportunity for hearing, the banking entity or nonbank 
     financial company supervised by the Board to terminate the 
     activity and, as relevant, dispose of the investment. Nothing 
     in this subparagraph shall be construed to limit the inherent 
     authority of any Federal agency or State regulatory authority 
     to further restrict any investments or activities under 
     otherwise applicable provisions of law.
       ``(f) Limitations on Relationships With Hedge Funds and 
     Private Equity Funds.--
       ``(1) In general.--No banking entity that serves, directly 
     or indirectly, as the investment manager or investment 
     adviser to a hedge fund or private equity fund may enter into 
     a covered transaction, as defined in section 23A of the 
     Federal Reserve Act (12 U.S.C. 371c) with the hedge fund or 
     private equity fund.
       ``(2) Treatment as member bank.--A banking entity that 
     serves, directly or indirectly, as the investment manager or 
     investment adviser to a hedge fund or private equity fund 
     shall be subject to sections 23A and 23B of the Federal 
     Reserve Act (12 U.S.C. 371c-1), as if such person were a 
     member bank and such hedge fund or private equity fund were 
     an affiliate thereof.
       ``(3) Covered transactions with unaffiliated hedge funds 
     and private equity funds.--No banking entity may enter into a 
     covered transaction, as defined in section 23A of the Federal 
     Reserve Act (12 U.S.C. 371c), with any hedge fund or private 
     equity fund organized and offered by the banking entity or 
     with any hedge fund or private equity fund in which such 
     hedge fund or private equity fund has taken any equity, 
     partnership, or other ownership interest.
       ``(g) Rules of Construction.--
       ``(1) Limitation on contrary authority.--Any prohibitions 
     or restrictions under this section shall apply even though 
     such activities may be authorized for a banking entity or a 
     nonbank financial company supervised by the Board under any 
     other provision of law.
       ``(2) Sale or securitization of loans.--Nothing in this 
     section shall be construed to limit or restrict the ability 
     of a banking entity or nonbank financial company supervised 
     by the Board to sell or securitize loans in a manner 
     otherwise permitted by law.
       ``(3) Authority of federal agencies and state regulatory 
     authorities.--Nothing in this section shall be construed to 
     limit the inherent authority of any Federal agency or State 
     regulatory authority under otherwise applicable provisions of 
     law.
       ``(h) Definitions.--In this section, the following 
     definitions shall apply:
       ``(1) Banking entity.--The term `banking entity' means any 
     insured depository institution (as defined in section 3 of 
     the Federal Deposit Insurance Act (12 U.S.C. 1813)), any 
     company that controls an insured depository institution, or 
     that is treated as a bank holding company for purposes of 
     section 8 of the International Banking Act, and any affiliate 
     or subsidiary of any such entity. For purposes of this 
     paragraph, the term `insured depository institution' does not 
     include an institution that functions solely in a trust or 
     fiduciary capacity, if--
       ``(A) all or substantially all of the deposits of such 
     institution are in trust funds and are received in a bona 
     fide fiduciary capacity;
       ``(B) no deposits of such institution which are insured by 
     the Federal Deposit Insurance Corporation are offered or 
     marketed by or through an affiliate of such institution;
       ``(C) such institution does not accept demand deposits or 
     deposits that the depositor may withdraw by check or similar 
     means for payment to third parties or others or make 
     commercial loans; and

[[Page S4000]]

       ``(D) such institution does not--
       ``(i) obtain payment or payment related services from any 
     Federal Reserve bank, including any service referred to in 
     section 11(a) of the Federal Reserve Act (12 U.S.C. 248a); or
       ``(ii) exercise discount or borrowing privileges pursuant 
     to section 19(b)(7) of the Federal Reserve Act (12 U.S.C. 
     461(b)(7)).
       ``(2) Hedge fund; private equity fund.--The terms `hedge 
     fund' and `private equity fund' mean a company or other 
     entity that is exempt from registration as an investment 
     company pursuant to section 3(c)(1) or 3(c)(7) of the 
     Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(1) or 80a-
     3(c)(7)), or such similar funds as jointly determined 
     appropriate by the appropriate Federal banking agencies, the 
     Securities and Exchange Commission, and the Commodity Futures 
     Trading Commission.
       ``(3) Nonbank financial company supervised by the board.--
     The term `nonbank financial company supervised by the Board' 
     means a nonbank financial company supervised by the Board of 
     Governors, as defined in section 102 of the Financial 
     Stability Act of 2010.
       ``(4) Proprietary trading.--The term `proprietary trading' 
     means engaging as a principal for its own trading account in 
     any transaction to purchase or sell, or otherwise acquire or 
     dispose of, any security, any derivative, any contract of 
     sale of a commodity for future delivery, any option on any 
     such security, derivative, or contract, or any other security 
     or financial instrument that the appropriate Federal banking 
     agencies, the Securities and Exchange Commission, and the 
     Commodity Futures Trading Commission may jointly, by rule, 
     determine.
       ``(5) Sponsor.--The term to `sponsor' a fund means--
       ``(A) to serve as a general partner, managing member, or 
     trustee of a fund;
       ``(B) in any manner to select or to control (or to have 
     employees, officers, or directors, or agents who constitute) 
     a majority of the directors, trustees, or management of a 
     fund; or
       ``(C) to share with a fund, for corporate, marketing, 
     promotional, or other purposes, the same name or a variation 
     of the same name.
       ``(6) Trading account.--The term `trading account' means 
     any account used for acquiring or taking positions in the 
     securities and instruments described in paragraph (4) 
     principally for the purpose of selling in the near term (or 
     otherwise with the intent to resell in order to profit from 
     short-term price movements), and any such other accounts as 
     the appropriate Federal banking agencies, the Securities and 
     Exchange Commission, and the Commodity Futures Trading 
     Commission may jointly, by rule, determine.''.

     SEC. _. CONFLICTS OF INTEREST.

       The Securities Act of 1933 (15 U.S.C. 77a et seq.) is 
     amended by inserting after section 27A the following:

     ``SEC. 27B. CONFLICTS OF INTEREST RELATING TO CERTAIN 
                   SECURITIZATIONS.

       ``(a) In General.--An underwriter, placement agent, initial 
     purchaser, or sponsor, or any affiliate or subsidiary of any 
     such entity, of an asset-backed security (as such term is 
     defined in section 3 of the Securities and Exchange Act of 
     1934 (15 U.S.C. 78c), which for the purposes of this section 
     shall include a synthetic asset-backed security), shall not, 
     during such period as the asset-backed security is 
     outstanding or such lesser period as the Commission 
     determines is appropriate, engage in any transaction that 
     would involve or result in any material conflict of interest 
     with respect to any investor in a transaction arising out of 
     such activity.
       ``(b) Rulemaking.--Not later than 180 days after the date 
     of enactment of this section, the Commission shall issue 
     rules for the purpose of implementing subsection (a) 
     including any appropriate disclosures or other measures.
       ``(c) Exception.--The prohibitions of subsection (a) shall 
     not apply to risk-mitigating hedging activities in connection 
     with positions or holdings arising out of the underwriting, 
     placement, initial purchase, or sponsorship of an asset-
     backed security, provided that such activities are designed 
     to reduce the specific risks to the underwriter, placement 
     agent, initial purchaser, or sponsor associated with 
     positions or holdings arising out of such underwriting, 
     placement, initial purchase, or sponsorship. This subsection 
     shall not otherwise limit the application of section 15G of 
     the Securities Exchange Act of 1934.''.
                                 ______
                                 
  SA 4129. Mr. MERKLEY (for himself and Mr. Levin) submitted an 
amendment intended to be proposed to amendment SA 4052 submitted by Mr. 
Corker and intended to be proposed to the amendment SA 3739 proposed by 
Mr. Reid (for Mr. Dodd (for himself and Mrs. Lincoln)) to the bill S. 
3217, to promote the financial stability of the United States by 
improving accountability and transparency in the financial system, to 
end ``too big to fail'', to protect the American taxpayer by ending 
bailouts, to protect consumers from abusive financial services 
practices, and for other purposes; which was ordered to lie on the 
table; as follows:

       At the appropriate place, insert the following:

     SEC. _. PROHIBITIONS ON PROPRIETARY TRADING AND CERTAIN 
                   RELATIONSHIPS WITH HEDGE FUNDS AND PRIVATE 
                   EQUITY FUNDS.

       Notwithstanding any other provision of this Act, section 
     619 of this act shall have no force or effect, and the Bank 
     Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is 
     amended by adding at the end the following:

     ``SEC. 13. PROHIBITIONS ON PROPRIETARY TRADING AND CERTAIN 
                   RELATIONSHIPS WITH HEDGE FUNDS AND PRIVATE 
                   EQUITY FUNDS.

       ``(a) In General.--
       ``(1) Prohibition.--Unless otherwise provided in this 
     section, a banking entity shall not--
       ``(A) engage in proprietary trading; or
       ``(B) acquire or retain any equity, partnership, or other 
     ownership interest in or sponsor a hedge fund or a private 
     equity fund.
       ``(2) Nonbank financial companies supervised by the 
     board.--Any nonbank financial company supervised by the Board 
     that engages in proprietary trading or takes or retains any 
     equity, partnership, or other ownership interest in or 
     sponsors a hedge fund or a private equity fund shall be 
     subject by the Board to additional capital requirements for 
     and additional quantitative limits with regards to such 
     proprietary trading and taking or retaining any equity, 
     partnership, or other ownership interest in or sponsorship of 
     a hedge fund or a private equity fund, except that permitted 
     activities as described in subsection (d) shall be subject to 
     additional capital and additional quantitative limits as 
     prescribed pursuant to subsection (d)(3).
       ``(b) Study and Rulemaking.--
       ``(1) Study.--Not later than 6 months after the date of 
     enactment of this section, the Financial Stability Oversight 
     Council shall study and make recommendations on implementing 
     the provisions of this section so as to--
       ``(A) promote and enhance the safety and soundness of 
     banking entities;
       ``(B) protect taxpayers and enhance financial stability by 
     minimizing the risk that insured depository institutions and 
     the affiliates of insured depository institutions will engage 
     in unsafe and unsound activities;
       ``(C) limit the inappropriate transfer of Federal subsidies 
     from institutions that benefit from deposit insurance and 
     liquidity facilities of the Federal Government to unregulated 
     entities;
       ``(D) reduce conflicts of interest between the self-
     interest of banking entities and nonbank financial companies 
     supervised by the Board, and the interests of the customers 
     of such entities and companies;
       ``(E) limit activities that have caused undue risk or loss 
     in banking entities and nonbank financial companies 
     supervised by the Board, or that might reasonably be expected 
     to create undue risk or loss in such banking entities and 
     nonbank financial companies supervised by the Board;
       ``(F) appropriately accommodate the business of insurance 
     within an insurance company subject to regulation in 
     accordance with the relevant insurance company investment 
     laws while protecting the safety and soundness of any banking 
     entity with which such insurance company is affiliated, and 
     of the United States financial system; and
       ``(G) appropriately time the divestiture of illiquid assets 
     that are affected by the implementation of the prohibitions 
     under subsection (a).
       ``(2) Rulemaking.--
       ``(A) In general.--Not later than 9 months after the 
     completion of the study under paragraph (1), the appropriate 
     Federal banking agencies, the Securities and Exchange 
     Commission, and the Commodity Futures Trading Commission, 
     (unless otherwise provided in this section) shall consider 
     the findings of the study under paragraph (1) and adopt rules 
     to carry out this section, as provided in subparagraph (B).
       ``(B) Coordinated rulemaking.--
       ``(i) Regulatory authority.--The regulations issued under 
     this paragraph and subsections (d) and (e) shall be issued 
     by--

       ``(I) the appropriate Federal banking agencies, jointly, 
     with respect to insured depository institutions;
       ``(II) the Board, with respect to any company that controls 
     an insured depository institution, or that is treated as a 
     bank holding company for purposes of section 8 of the 
     International Banking Act, any subsidiary of such a company 
     (other than a subsidiary described in subparagraph (A) or 
     (C)), and any nonbank financial company supervised by the 
     Board;
       ``(III) the Commodity Futures Trading Commission, with 
     respect to any entity for which the Commodity Futures Trading 
     Commission is the primary financial regulatory agency, as 
     defined in section 2 of the Restoring American Financial 
     Stability Act of 2010; and
       ``(IV) the Securities and Exchange Commission, with respect 
     to any entity for which the Securities and Exchange 
     Commission is the primary financial regulatory agency, as 
     defined in section 2 of the Restoring American Financial 
     Stability Act of 2010.

       ``(ii) Coordination, consistency, and comparability.--In 
     developing and issuing regulations pursuant to this section, 
     the appropriate Federal banking agencies, the Securities and 
     Exchange Commission, and the Commodity Futures Trading 
     Commission shall consult and coordinate with each other, as 
     appropriate, for the purposes of assuring, to the extent 
     possible, that such regulations are comparable and provide 
     for consistent

[[Page S4001]]

     application and implementation of the applicable provisions 
     of this section to avoid providing advantages or imposing 
     disadvantages to the companies affected by this subsection 
     and to protect the safety and soundness of banking entities 
     and nonbank financial companies supervised by the Board.
       ``(iii) Council role.--The Chairperson of the Council shall 
     be responsible for coordination of the regulations issued 
     under this section.
       ``(c) Effective Date.--
       ``(1) In general.--Except as provided in paragraphs (2) and 
     (3), this section shall take effect on the earlier of--
       ``(A) 12 months after the issuance of final rules under 
     subsection (b); or
       ``(B) 2 years after the date of enactment of this section.
       ``(2) Transition period for divestiture of hedge funds or 
     private equity funds by banking entities.--
       ``(A) No new investments.--
       ``(i) No new funds.--On and after the date of enactment of 
     this section, a banking entity may not sponsor or invest in a 
     hedge fund or private equity fund that the banking entity did 
     not sponsor or in which the banking entity was not invested 
     on May 1, 2010.
       ``(ii) No additional capital or assets.--On and after the 
     date of enactment of this section, a banking entity may not 
     sell, transfer, loan, or otherwise provide any additional 
     capital or assets to a hedge fund or private equity fund 
     sponsored by the banking entity or in which the banking 
     entity invests, except to the extent necessary to fulfill a 
     contractual obligation that was in effect on May 1, 2010.
       ``(B) Reduction of existing investments.--Except as 
     provided in paragraph (3), on and after the date that is 2 
     years after the effective date of this section, the aggregate 
     amount of equity, partnership, or other ownership interests 
     in all hedge funds and private equity funds held by a banking 
     entity shall not exceed 2 percent of the Tier I capital of 
     the banking entity.
       ``(C) Total divestiture.--On and after the date that is 5 
     years after the effective date of this section, no banking 
     entity may engage in any activity prohibited under subsection 
     (a)(1)(B), except as provided in paragraph (3).
       ``(3) Transition period for illiquid funds.--
       ``(A) Definition.--In this paragraph, the term `illiquid 
     fund' means a hedge fund or private equity fund that, as of 
     May 1, 2010, was principally invested in or is invested in 
     illiquid assets, and commited to principally invest in 
     illiquid assets, such as portfolio companies, real estate 
     investments, and venture capital investments, and that 
     maintains the investment strategy of the fund that was in 
     place as of May 1, 2010, regarding principally investing in 
     illiquid assets. In issuing rules under this subparagraph, 
     the Board shall take into consideration the terms of 
     investment for the hedge fund or private equity fund, 
     including contractual obligations, the ability of the fund to 
     divest of assets held by the fund, and any other factors that 
     the Board determines are appropriate.
       ``(B) Transition.--
       ``(i) In general.--During the 4-year period beginning on 
     the date of enactment of this section, a banking entity may 
     only take an equity, partnership, or ownership interest in, 
     or otherwise provide additional capital to, an illiquid fund 
     to the extent necessary to fulfill a contractual obligation 
     of the banking entity to the illiquid fund that was in effect 
     on May 1, 2010.
       ``(ii) Limitations.--A banking entity may not exercise an 
     option to renew, or otherwise extend the duration of, any 
     contractual obligation described in clause (i) and shall 
     exercise any contractual option permitting the banking entity 
     to exit the illiquid fund if and when such option becomes 
     available. A banking entity may elect not to exercise an 
     option described in the preceding sentence, to the extent 
     that the maintenance of an investment would be permitted 
     under paragraph (2).
       ``(iii) Extension.--

       ``(I) Approval required.--If a contractual obligation of a 
     banking entity described in clause (i) extends beyond the 4-
     year period beginning on the date of enactment of this 
     section, the banking entity may not continue to make the 
     investment required under the contractual obligation without 
     the prior written approval of the Board. In determining 
     whether to grant an extension under this clause, the Board 
     shall evaluate whether the proposed investment meets the 
     requirements of this subparagraph.
       ``(II) Time limit on approval.--The Board may approve an 
     investment described in subclause (I) for a period of not 
     longer than 2 years for each extension.
       ``(III) Limit on number of approvals.--The Board may not 
     approve an investment described in subclause (I) more than 3 
     times.

       ``(iv) Divestiture required.--Except as otherwise permitted 
     under subsection (d), no banking entity may engage in any 
     activity prohibited under subsection (a)(1)(B) after the 
     earlier of --

       ``(I) the date on which the contractual obligation to 
     invest in the illiquid fund terminates; and
       ``(II) the date on which the approval by the Board under 
     clause (iii) expires.

       ``(4) Additional capital.--Notwithstanding paragraph (2) or 
     (3), on and after the effective date under paragraph (1), the 
     Board may impose additional capital requirements, and any 
     other restrictions, as the Board determines appropriate, on 
     any equity, partnership, or ownership interest in or 
     sponsorship of a hedge fund or private equity fund by a 
     banking entity or nonbank financial company supervised by the 
     Board, including on a case-by-case basis, as the Board 
     determines appropriate.
       ``(5) Rulemaking.--Not later than 6 months after the date 
     of enactment of this section, the Board shall issues rules to 
     implement paragraphs (2), (3), and (4).
       ``(d) Permitted Activities.--
       ``(1) In general.--Notwithstanding the restrictions in 
     subsection (a), to the extent permitted by any other 
     provision of Federal or State law, and subject to the 
     limitations under paragraph (2) and any restrictions or 
     limitations that the appropriate Federal banking agencies, 
     the Securities and Exchange Commission, and the Commodity 
     Futures Trading Commission, may determine, the following 
     activities (in this section referred to as `permitted 
     activities') are permitted:
       ``(A) The purchase, sale, acquisition, or disposition of 
     obligations of the United States or any agency thereof; 
     obligations, participations, or other instruments of or 
     issued by the Government National Mortgage Association, the 
     Federal National Mortgage Association, the Federal Home Loan 
     Mortgage Corporation, a Federal Home Loan Bank, the Federal 
     Agricultural Mortgage Corporation, or a Farm Credit System 
     institution chartered under and subject to the provisions of 
     the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.), and 
     obligations of any State or of any political subdivision 
     thereof.
       ``(B) The purchase, sale, acquisition, or disposition of 
     securities and other instruments described in subsection 
     (h)(4) in connection with underwriting, market-making, or in 
     facilitation of customer relationships, to the extent that 
     any such activities permitted by this subparagraph are 
     designed to not exceed the reasonably expected near term 
     demands of clients, customers, or counterparties.
       ``(C) Risk-mitigating hedging activities designed to reduce 
     the specific risks to a banking entity or nonbank financial 
     company supervised by the Board.
       ``(D) The purchase, sale, acquisition, or disposition of 
     securities and other instruments described in subsection 
     (h)(4) on behalf of customers.
       ``(E) Investments in one or more small business investment 
     companies, as defined in section 102 of the Small Business 
     Investment Act of 1958 (15 U.S.C. 662), or investments 
     designed primarily to promote the public welfare, as provided 
     in paragraph (11) of section 5136 of the Revised Statutes of 
     the United States (12 U.S.C. 24).
       ``(F) The purchase, sale, acquisition, or disposition of 
     securities and other instruments described in subsection 
     (h)(4) by a regulated insurance company directly engaged in 
     the business of insurance for the general account of the 
     company and by any affiliate of such regulated insurance 
     company, provided that such activities by any affiliate are 
     solely for the general account of the regulated insurance 
     company, if--
       ``(i) the purchase, sale, acquisition, or disposition is 
     conducted in compliance with, and subject to, the insurance 
     company investment laws, regulations, and written guidance of 
     the State or jurisdiction in which each such insurance 
     company is domiciled; and
       ``(ii) the appropriate Federal banking agencies, after 
     consultation with the Financial Stability Oversight Council 
     and the relevant insurance commissioners of the States and 
     territories of the United States, have not jointly 
     determined, after notice and comment, that a particular law, 
     regulation, or written guidance described in clause (i) is 
     insufficient to protect the safety and soundness of the 
     banking entity or nonbank financial company supervised by the 
     Board, or of the financial stability of the United States.
       ``(G) Organizing and offering a private equity or hedge 
     fund, including serving as a general partner, managing 
     member, or trustee of the fund and in any manner selecting or 
     controlling (or having employees, officers, directors, or 
     agents who constitute) a majority of the directors, trustees, 
     or management of the fund, including any necessary expenses 
     for the foregoing, only if--
       ``(i) the banking entity provides bona fide trust, 
     fiduciary, or investment advisory services;
       ``(ii) the fund is organized and offered only in connection 
     with the provision of bona fide trust, fiduciary, or 
     investment advisory services and only to persons that are 
     customers of such services of the banking entity;
       ``(iii) the banking entity does not acquire or retain an 
     equity interest, partnership interest, or other ownership 
     interest in the funds;
       ``(iv) the banking entity does not enter into or otherwise 
     engage in any transaction with the hedge fund or private 
     equity fund that is a covered transaction, as defined in 
     section 23A of the Federal Reserve Act (12 U.S.C. 371c);
       ``(v) the obligations or performance of the hedge fund or 
     private equity fund are not guaranteed, assumed, or otherwise 
     covered, directly or indirectly, by the banking entity or any 
     subsidiary or affiliate of the banking entity;
       ``(vi) the banking entity does not share with the hedge 
     fund or private equity fund, for corporate, marketing, 
     promotional, or other purposes, the same name or a variation 
     of the same name;
       ``(vii) no director or employee of the banking entity takes 
     or retains an equity interest, partnership interest, or other 
     ownership

[[Page S4002]]

     interest in, except for any director or employee of the 
     banking entity who is directly engaged in providing 
     investment advisory or other services to the hedge fund or 
     private equity fund; and
       ``(viii) the banking entity complies with any rules of the 
     appropriate Federal banking agencies, the Securities and 
     Exchange Commission, or the Commodity Futures Trading 
     Commission designed to ensure that losses in such hedge fund 
     or private equity fund are borne solely by investors in the 
     fund and not by the banking entity.
       ``(H) Proprietary trading conducted by a company pursuant 
     to paragraph (9) or (13) of section 4(c), provided that the 
     trading occurs solely outside of the United States and that 
     the banking entity or nonbank financial company supervised by 
     the Board is not directly or indirectly controlled by a 
     United States person.
       ``(I) The acquisition or retention of any equity, 
     partnership, or other ownership interest in, or the 
     sponsorship of, a hedge fund or a private equity fund by a 
     banking entity or nonbank financial company supervised by the 
     Board pursuant to paragraph (9) or (13) of section 4(c) 
     solely outside of the United States, provided that no 
     ownership interest in such hedge fund or private equity fund 
     is offered for sale or sold to a resident of the United 
     States and that the banking entity or nonbank financial 
     company supervised by the Board is not directly or indirectly 
     controlled by a company that is organized in the United 
     States.
       ``(J) Such other activity as the appropriate Federal 
     banking agencies, the Securities and Exchange Commission, and 
     the Commodity Futures Trading Commission determine through 
     regulation, as provided in subsection (b)(2)(B), would 
     promote and protect the safety and soundness of the banking 
     entity or nonbank financial company supervised by the Board 
     and the financial stability of the United States.
       ``(2) Limitation on permitted activities.--
       ``(A) In general.--No transaction, class of transactions, 
     or activity may be deemed a permitted activity under 
     paragraph (1) if it--
       ``(i) would involve or result in a material conflict of 
     interest (as such term shall be defined jointly by rule) 
     between the banking entity or the nonbank financial company 
     supervised by the Board and its clients, customers, or 
     counterparties;
       ``(ii) would result, directly or indirectly, in an unsafe 
     and unsound exposure by the banking entity or nonbank 
     financial company supervised by the Board to high-risk assets 
     or high-risk trading strategies (as such terms shall be 
     defined jointly by rule);
       ``(iii) would pose a threat to the safety and soundness of 
     such banking entity or nonbank financial company supervised 
     by the Board; or
       ``(iv) would pose a threat to the financial stability of 
     the United States.
       ``(B) Rulemaking.--The appropriate Federal banking 
     agencies, the Securities and Exchange Commission, and the 
     Commodity Futures Trading Commission shall issue regulations 
     to implement subparagraph (A), as part of the regulations 
     issued under subsection (b)(2).
       ``(3) Capital and quantitative limitations.--The Board 
     shall adopt rules, as provided under subsection (b)(2), 
     imposing additional capital requirements and quantitative 
     limitations regarding the activities permitted under this 
     section if the Board determines that additional capital and 
     quantitative limitations are appropriate to protect the 
     safety and soundness of the banking entities and nonbank 
     financial companies supervised by the Board engaged in such 
     activities.
       ``(e) Anti-evasion.--
       ``(1) Rulemaking.--The appropriate Federal banking 
     agencies, the Securities and Exchange Commission, and the 
     Commodity Futures Trading Commission shall issue regulations 
     as part of the rulemaking provided for in subsection (b)(2) 
     regarding internal controls and recordkeeping in order to 
     insure compliance with this section.
       ``(2) Termination of activities or investment.--Whenever an 
     appropriate Federal banking agency, the Securities and 
     Exchange Commission, or the Commodity Futures Trading 
     Commission, as appropriate, has reasonable cause to believe 
     that a banking entity or nonbank financial company supervised 
     by the Board under the respective agency's jurisdiction has 
     made an investment or engaged in an activity in a manner that 
     functions as an evasion of the requirements of this section 
     (including through an abuse of any permitted activity) or 
     otherwise violates the restrictions under this section, the 
     appropriate Federal banking agency, the Securities and 
     Exchange Commission, or the Commodity Futures Trading 
     Commission, as appropriate, shall order, after due notice and 
     opportunity for hearing, the banking entity or nonbank 
     financial company supervised by the Board to terminate the 
     activity and, as relevant, dispose of the investment. Nothing 
     in this subparagraph shall be construed to limit the inherent 
     authority of any Federal agency or State regulatory authority 
     to further restrict any investments or activities under 
     otherwise applicable provisions of law.
       ``(f) Limitations on Relationships With Hedge Funds and 
     Private Equity Funds.--
       ``(1) In general.--No banking entity that serves, directly 
     or indirectly, as the investment manager or investment 
     adviser to a hedge fund or private equity fund may enter into 
     a covered transaction, as defined in section 23A of the 
     Federal Reserve Act (12 U.S.C. 371c) with the hedge fund or 
     private equity fund.
       ``(2) Treatment as member bank.--A banking entity that 
     serves, directly or indirectly, as the investment manager or 
     investment adviser to a hedge fund or private equity fund 
     shall be subject to section 23A and 23B of the Federal 
     Reserve Act (12 U.S.C. 371c-1), as if such person were a 
     member bank and such hedge fund or private equity fund were 
     an affiliate thereof.
       ``(3) Covered transactions with unaffiliated hedge funds 
     and private equity funds.--No banking entity may enter into a 
     covered transaction, as defined in section 23A of the Federal 
     Reserve Act (12 U.S.C. 371c), with any hedge fund or private 
     equity fund organized and offered by the banking entity or 
     with any hedge fund or private equity fund in which such 
     hedge fund or private equity fund has taken any equity, 
     partnership, or other ownership interest.
       ``(g) Rules of Construction.--
       ``(1) Limitation on contrary authority.--Any prohibitions 
     or restrictions under this section shall apply even though 
     such activities may be authorized for a banking entity or a 
     nonbank financial company supervised by the Board under any 
     other provision of law.
       ``(2) Sale or securitization of loans.--Nothing in this 
     section shall be construed to limit or restrict the ability 
     of a banking entity or nonbank financial company supervised 
     by the Board to sell or securitize loans in a manner 
     otherwise permitted by law.
       ``(3) Authority of federal agencies and state regulatory 
     authorities.--Nothing in this section shall be construed to 
     limit the inherent authority of any Federal agency or State 
     regulatory authority under otherwise applicable provisions of 
     law.
       ``(h) Definitions.--In this section, the following 
     definitions shall apply:
       ``(1) Banking entity.--The term `banking entity' means any 
     insured depository institution (as defined in section 3 of 
     the Federal Deposit Insurance Act (12 U.S.C. 1813)), any 
     company that controls an insured depository institution, or 
     that is treated as a bank holding company for purposes of 
     section 8 of the International Banking Act, and any affiliate 
     or subsidiary of any such entity. For purposes of this 
     paragraph, the term `insured depository institution' does not 
     include an institution that functions solely in a trust or 
     fiduciary capacity, if--
       ``(A) all or substantially all of the deposits of such 
     institution are in trust funds and are received in a bona 
     fide fiduciary capacity;
       ``(B) no deposits of such institution which are insured by 
     the Federal Deposit Insurance Corporation are offered or 
     marketed by or through an affiliate of such institution;
       ``(C) such institution does not accept demand deposits or 
     deposits that the depositor may withdraw by check or similar 
     means for payment to third parties or others or make 
     commercial loans; and
       ``(D) such institution does not--
       ``(i) obtain payment or payment related services from any 
     Federal Reserve bank, including any service referred to in 
     section 11(a) of the Federal Reserve Act (12 U.S.C. 248a); or
       ``(ii) exercise discount or borrowing privileges pursuant 
     to section 19(b)(7) of the Federal Reserve Act (12 U.S.C. 
     461(b)(7)).
       ``(2) Hedge fund; private equity fund.--The terms `hedge 
     fund' and `private equity fund' mean a company or other 
     entity that is exempt from registration as an investment 
     company pursuant to section 3(c)(1) or 3(c)(7) of the 
     Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(1) or 80a-
     3(c)(7)), or such similar funds as jointly determined 
     appropriate by the appropriate Federal banking agencies, the 
     Securities and Exchange Commission, and the Commodity Futures 
     Trading Commission.
       ``(3) Nonbank financial company supervised by the board.--
     The term `nonbank financial company supervised by the Board' 
     means a nonbank financial company supervised by the Board of 
     Governors, as defined in section 102 of the Financial 
     Stability Act of 2010.
       ``(4) Proprietary trading.--The term `proprietary trading' 
     means engaging as a principal for its own trading account in 
     any transaction to purchase or sell, or otherwise acquire or 
     dispose of, any security, any derivative, any contract of 
     sale of a commodity for future delivery, any option on any 
     such security, derivative, or contract, or any other security 
     or financial instrument that the appropriate Federal banking 
     agencies, the Securities and Exchange Commission, and the 
     Commodity Futures Trading Commission may jointly, by rule, 
     determine.
       ``(5) Sponsor.--The term to `sponsor' a fund means--
       ``(A) to serve as a general partner, managing member, or 
     trustee of a fund;
       ``(B) in any manner to select or to control (or to have 
     employees, officers, or directors, or agents who constitute) 
     a majority of the directors, trustees, or management of a 
     fund; or
       ``(C) to share with a fund, for corporate, marketing, 
     promotional, or other purposes, the same name or a variation 
     of the same name.
       ``(6) Trading account.--The term `trading account' means 
     any account used for acquiring or taking positions in the 
     securities and instruments described in paragraph (4) 
     principally for the purpose of selling in the near term (or 
     otherwise with the intent to resell in order to profit from 
     short-term price movements), and any such other accounts as 
     the appropriate Federal banking agencies,

[[Page S4003]]

     the Securities and Exchange Commission, and the Commodity 
     Futures Trading Commission may jointly, by rule, 
     determine.''.

     SEC. _. CONFLICTS OF INTEREST.

       The Securities Act of 1933 (15 U.S.C. 77a et seq.) is 
     amended by inserting after section 27A the following:

     ``SEC. 27B. CONFLICTS OF INTEREST RELATING TO CERTAIN 
                   SECURITIZATIONS.

       ``(a) In General.--An underwriter, placement agent, initial 
     purchaser, or sponsor, or any affiliate or subsidiary of any 
     such entity, of an asset-backed security (as such term is 
     defined in section 3 of the Securities and Exchange Act of 
     1934 (15 U.S.C. 78c), which for the purposes of this section 
     shall include a synthetic asset-backed security), shall not, 
     during such period as the asset-backed security is 
     outstanding or such lesser period as the Commission 
     determines is appropriate, engage in any transaction that 
     would involve or result in any material conflict of interest 
     with respect to any investor in a transaction arising out of 
     such activity.
       ``(b) Rulemaking.--Not later than 180 days after the date 
     of enactment of this section, the Commission shall issue 
     rules for the purpose of implementing subsection (a) 
     including any appropriate disclosures or other measures.
       ``(c) Exception.--The prohibitions of subsection (a) shall 
     not apply to risk-mitigating hedging activities in connection 
     with positions or holdings arising out of the underwriting, 
     placement, initial purchase, or sponsorship of an asset-
     backed security, provided that such activities are designed 
     to reduce the specific risks to the underwriter, placement 
     agent, initial purchaser, or sponsor associated with 
     positions or holdings arising out of such underwriting, 
     placement, initial purchase, or sponsorship. This subsection 
     shall not otherwise limit the application of section 15G of 
     the Securities Exchange Act of 1934.''.
                                 ______
                                 
  SA 4130. Mr. MERKLEY (for himself and Mr. Levin) submitted an 
amendment intended to be proposed to amendment SA 4086 submitted by Ms. 
Cantwell (for herself and Mrs. Lincoln) and intended to be proposed to 
the amendment SA 3739 proposed by Mr. Reid (for Mr. Dodd (for himself 
and Mrs. Lincoln)) to the bill S. 3217, to promote the financial 
stability of the United States by improving accountability and 
transparency in the financial system, to end ``too big to fail'', to 
protect the American taxpayer by ending bailouts, to protect consumers 
from abusive financial services practices, and for other purposes; 
which was ordered to lie on the table; as follows:

       On page __, line __, of the amendment insert the following:
       (c) Conflicts of Interest.--The Securities Act of 1933 (15 
     U.S.C. 77a et seq.) is amended by inserting after section 27A 
     the following:

     ``SEC. 27B. CONFLICTS OF INTEREST RELATING TO CERTAIN 
                   SECURITIZATIONS.

       ``(a) In General.--An underwriter, placement agent, initial 
     purchaser, or sponsor, or any affiliate or subsidiary of any 
     such entity, of an asset-backed security (as such term is 
     defined in section 3 of the Securities and Exchange Act of 
     1934 (15 U.S.C. 78c), which for the purposes of this section 
     shall include a synthetic asset-backed security), shall not, 
     during such period as the asset-backed security is 
     outstanding or such lesser period as the Commission 
     determines is appropriate, engage in any transaction that 
     would involve or result in any material conflict of interest 
     with respect to any investor in a transaction arising out of 
     such activity.
       ``(b) Rulemaking.--Not later than 180 days after the date 
     of enactment of this section, the Commission shall issue 
     rules for the purpose of implementing subsection (a) 
     including any appropriate disclosures or other measures. The 
     disclosure by a person of a material conflict of interest 
     with respect to a transaction prohibited under subsection (a) 
     may not be construed to permit any person to engage in the 
     transaction.
       ``(c) Exception.--The prohibitions of subsection (a) shall 
     not apply to risk-mitigating hedging activities in connection 
     with positions or holdings arising out of the underwriting, 
     placement, initial purchase, or sponsorship of an asset-
     backed security, provided that such activities are designed 
     to reduce the specific risks to the underwriter, placement 
     agent, initial purchaser, or sponsor associated with 
     positions or holdings arising out of such underwriting, 
     placement, initial purchase, or sponsorship. This subsection 
     shall not otherwise limit the application of section 15G of 
     the Securities Exchange Act of 1934.''.
                                 ______
                                 
  SA 4131. Mr. MERKLEY (for himself and Mr. Levin) submitted an 
amendment intended to be proposed to amendment SA 4052 submitted by Mr. 
Corker and intended to be proposed to the amendment SA 3739 proposed by 
Mr. Reid (for Mr. Dodd (for himself and Mrs. Lincoln)) to the bill S. 
3217, to promote the financial stability of the United States by 
improving accountability and transparency in the financial system, to 
end ``too big to fail'', to protect the American taxpayer by ending 
bailouts, to protect consumers from abusive financial services 
practices, and for other purposes; which was ordered to lie on the 
table; as follows:

       On page __, line __, of the amendment insert the following:
       (c) Conflicts of Interest.--The Securities Act of 1933 (15 
     U.S.C. 77a et seq.) is amended by inserting after section 27A 
     the following:

     ``SEC. 27B. CONFLICTS OF INTEREST RELATING TO CERTAIN 
                   SECURITIZATIONS.

       ``(a) In General.--An underwriter, placement agent, initial 
     purchaser, or sponsor, or any affiliate or subsidiary of any 
     such entity, of an asset-backed security (as such term is 
     defined in section 3 of the Securities and Exchange Act of 
     1934 (15 U.S.C. 78c), which for the purposes of this section 
     shall include a synthetic asset-backed security), shall not, 
     during such period as the asset-backed security is 
     outstanding or such lesser period as the Commission 
     determines is appropriate, engage in any transaction that 
     would involve or result in any material conflict of interest 
     with respect to any investor in a transaction arising out of 
     such activity.
       ``(b) Rulemaking.--Not later than 180 days after the date 
     of enactment of this section, the Commission shall issue 
     rules for the purpose of implementing subsection (a) 
     including any appropriate disclosures or other measures. The 
     disclosure by a person of a material conflict of interest 
     with respect to a transaction prohibited under subsection (a) 
     may not be construed to permit any person to engage in the 
     transaction.
       ``(c) Exception.--The prohibitions of subsection (a) shall 
     not apply to risk-mitigating hedging activities in connection 
     with positions or holdings arising out of the underwriting, 
     placement, initial purchase, or sponsorship of an asset-
     backed security, provided that such activities are designed 
     to reduce the specific risks to the underwriter, placement 
     agent, initial purchaser, or sponsor associated with 
     positions or holdings arising out of such underwriting, 
     placement, initial purchase, or sponsorship. This subsection 
     shall not otherwise limit the application of section 15G of 
     the Securities Exchange Act of 1934.''.
                                 ______
                                 
  SA 4132. Mr. MERKLEY (for himself and Mr. Levin) submitted an 
amendment intended to be proposed to amendment SA 4086 submitted by Ms. 
Cantwell (for herself and Mrs. Lincoln) and intended to be proposed to 
the amendment SA 3739 proposed by Mr. Reid (for Mr. Dodd (for himself 
and Mrs. Lincoln)) to the bill S. 3217, to promote the financial 
stability of the United States by improving accountability and 
transparency in the financial system, to end ``too big to fail'', to 
protect the American taxpayer by ending bailouts, to protect consumers 
from abusive financial services practices, and for other purposes; 
which was ordered to lie on the table; as follows:

       At the appropriate place, insert the following:

     SEC. _. PROHIBITIONS ON PROPRIETARY TRADING AND CERTAIN 
                   RELATIONSHIPS WITH HEDGE FUNDS AND PRIVATE 
                   EQUITY FUNDS.

       Notwithstanding any other provision of this Act, section 
     619 of this act shall have no force or effect, and the Bank 
     Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is 
     amended by adding at the end the following:

     ``SEC. 13. PROHIBITIONS ON PROPRIETARY TRADING AND CERTAIN 
                   RELATIONSHIPS WITH HEDGE FUNDS AND PRIVATE 
                   EQUITY FUNDS.

       ``(a) In General.--
       ``(1) Prohibition.--Unless otherwise provided in this 
     section, a banking entity shall not--
       ``(A) engage in proprietary trading; or
       ``(B) acquire or retain any equity, partnership, or other 
     ownership interest in or sponsor a hedge fund or a private 
     equity fund.
       ``(2) Nonbank financial companies supervised by the 
     board.--Any nonbank financial company supervised by the Board 
     that engages in proprietary trading or takes or retains any 
     equity, partnership, or other ownership interest in or 
     sponsors a hedge fund or a private equity fund shall be 
     subject by the Board to additional capital requirements for 
     and additional quantitative limits with regards to such 
     proprietary trading and taking or retaining any equity, 
     partnership, or other ownership interest in or sponsorship of 
     a hedge fund or a private equity fund, except that permitted 
     activities as described in subsection (d) shall be subject to 
     additional capital and additional quantitative limits as 
     prescribed pursuant to subsection (d)(3).
       ``(b) Study and Rulemaking.--
       ``(1) Study.--Not later than 6 months after the date of 
     enactment of this section, the Financial Stability Oversight 
     Council shall study and make recommendations on implementing 
     the provisions of this section so as to--
       ``(A) promote and enhance the safety and soundness of 
     banking entities;
       ``(B) protect taxpayers and enhance financial stability by 
     minimizing the risk that insured depository institutions and 
     the affiliates of insured depository institutions will engage 
     in unsafe and unsound activities;
       ``(C) limit the inappropriate transfer of Federal subsidies 
     from institutions that benefit from deposit insurance and 
     liquidity facilities of the Federal Government to unregulated 
     entities;

[[Page S4004]]

       ``(D) reduce conflicts of interest between the self-
     interest of banking entities and nonbank financial companies 
     supervised by the Board, and the interests of the customers 
     of such entities and companies;
       ``(E) limit activities that have caused undue risk or loss 
     in banking entities and nonbank financial companies 
     supervised by the Board, or that might reasonably be expected 
     to create undue risk or loss in such banking entities and 
     nonbank financial companies supervised by the Board;
       ``(F) appropriately accommodate the business of insurance 
     within an insurance company subject to regulation in 
     accordance with the relevant insurance company investment 
     laws while protecting the safety and soundness of any banking 
     entity with which such insurance company is affiliated, and 
     of the United States financial system; and
       ``(G) appropriately time the divestiture of illiquid assets 
     that are affected by the implementation of the prohibitions 
     under subsection (a).
       ``(2) Rulemaking.--
       ``(A) In general.--Not later than 9 months after the 
     completion of the study under paragraph (1), the appropriate 
     Federal banking agencies, the Securities and Exchange 
     Commission, and the Commodity Futures Trading Commission, 
     (unless otherwise provided in this section) shall consider 
     the findings of the study under paragraph (1) and adopt rules 
     to carry out this section, as provided in subparagraph (B).
       ``(B) Coordinated rulemaking.--
       ``(i) Regulatory authority.--The regulations issued under 
     this paragraph and subsections (d) and (e) shall be issued 
     by--

       ``(I) the appropriate Federal banking agencies, jointly, 
     with respect to insured depository institutions;
       ``(II) the Board, with respect to any company that controls 
     an insured depository institution, or that is treated as a 
     bank holding company for purposes of section 8 of the 
     International Banking Act, any subsidiary of such a company 
     (other than a subsidiary described in subparagraph (A) or 
     (C)), and any nonbank financial company supervised by the 
     Board;
       ``(III) the Commodity Futures Trading Commission, with 
     respect to any entity for which the Commodity Futures Trading 
     Commission is the primary financial regulatory agency, as 
     defined in section 2 of the Restoring American Financial 
     Stability Act of 2010; and
       ``(IV) the Securities and Exchange Commission, with respect 
     to any entity for which the Securities and Exchange 
     Commission is the primary financial regulatory agency, as 
     defined in section 2 of the Restoring American Financial 
     Stability Act of 2010.

       ``(ii) Coordination, consistency, and comparability.--In 
     developing and issuing regulations pursuant to this section, 
     the appropriate Federal banking agencies, the Securities and 
     Exchange Commission, and the Commodity Futures Trading 
     Commission shall consult and coordinate with each other, as 
     appropriate, for the purposes of assuring, to the extent 
     possible, that such regulations are comparable and provide 
     for consistent application and implementation of the 
     applicable provisions of this section to avoid providing 
     advantages or imposing disadvantages to the companies 
     affected by this subsection and to protect the safety and 
     soundness of banking entities and nonbank financial companies 
     supervised by the Board.
       ``(iii) Council role.--The Chairperson of the Council shall 
     be responsible for coordination of the regulations issued 
     under this section.
       ``(c) Effective Date.--
       ``(1) In general.--Except as provided in paragraphs (2) and 
     (3), this section shall take effect on the earlier of--
       ``(A) 12 months after the issuance of final rules under 
     subsection (b); or
       ``(B) 2 years after the date of enactment of this section.
       ``(2) Transition period for divestiture of hedge funds or 
     private equity funds by banking entities.--
       ``(A) No new investments.--
       ``(i) No new funds.--On and after the date of enactment of 
     this section, a banking entity may not sponsor or invest in a 
     hedge fund or private equity fund that the banking entity did 
     not sponsor or in which the banking entity was not invested 
     on May 1, 2010.
       ``(ii) No additional capital or assets.--On and after the 
     date of enactment of this section, a banking entity may not 
     sell, transfer, loan, or otherwise provide any additional 
     capital or assets to a hedge fund or private equity fund 
     sponsored by the banking entity or in which the banking 
     entity invests, except to the extent necessary to fulfill a 
     contractual obligation that was in effect on May 1, 2010.
       ``(B) Reduction of existing investments.--Except as 
     provided in paragraph (3), on and after the date that is 2 
     years after the effective date of this section, the aggregate 
     amount of equity, partnership, or other ownership interests 
     in all hedge funds and private equity funds held by a banking 
     entity shall not exceed 2 percent of the Tier I capital of 
     the banking entity.
       ``(C) Total divestiture.--On and after the date that is 5 
     years after the effective date of this section, no banking 
     entity may engage in any activity prohibited under subsection 
     (a)(1)(B), except as provided in paragraph (3).
       ``(3) Transition period for illiquid funds.--
       ``(A) Definition.--In this paragraph, the term `illiquid 
     fund' means a hedge fund or private equity fund that, as of 
     May 1, 2010, was principally invested in or is invested in 
     illiquid assets, and committed to principally invest in 
     illiquid assets, such as portfolio companies, real estate 
     investments, and venture capital investments, and that 
     maintains the investment strategy of the fund that was in 
     place as of May 1, 2010, regarding principally investing in 
     illiquid assets. In issuing rules under this subparagraph, 
     the Board shall take into consideration the terms of 
     investment for the hedge fund or private equity fund, 
     including contractual obligations, the ability of the fund to 
     divest of assets held by the fund, and any other factors that 
     the Board determines are appropriate.
       ``(B) Transition.--
       ``(i) In general.--During the 4-year period beginning on 
     the date of enactment of this section, a banking entity may 
     only take an equity, partnership, or ownership interest in, 
     or otherwise provide additional capital to, an illiquid fund 
     to the extent necessary to fulfill a contractual obligation 
     of the banking entity to the illiquid fund that was in effect 
     on May 1, 2010.
       ``(ii) Limitations.--A banking entity may not exercise an 
     option to renew, or otherwise extend the duration of, any 
     contractual obligation described in clause (i) and shall 
     exercise any contractual option permitting the banking entity 
     to exit the illiquid fund if and when such option becomes 
     available. A banking entity may elect not to exercise an 
     option described in the preceding sentence, to the extent 
     that the maintenance of an investment would be permitted 
     under paragraph (2).
       ``(iii) Extension.--

       ``(I) Approval required.--If a contractual obligation of a 
     banking entity described in clause (i) extends beyond the 4-
     year period beginning on the date of enactment of this 
     section, the banking entity may not continue to make the 
     investment required under the contractual obligation without 
     the prior written approval of the Board. In determining 
     whether to grant an extension under this clause, the Board 
     shall evaluate whether the proposed investment meets the 
     requirements of this subparagraph.
       ``(II) Time limit on approval.--The Board may approve an 
     investment described in subclause (I) for a period of not 
     longer than 2 years for each extension.
       ``(III) Limit on number of approvals.--The Board may not 
     approve an investment described in subclause (I) more than 3 
     times.

       ``(iv) Divestiture required.--Except as otherwise permitted 
     under subsection (d), no banking entity may engage in any 
     activity prohibited under subsection (a)(1)(B) after the 
     earlier of--

       ``(I) the date on which the contractual obligation to 
     invest in the illiquid fund terminates; and
       ``(II) the date on which the approval by the Board under 
     clause (iii) expires.

       ``(4) Additional capital.--Notwithstanding paragraph (2) or 
     (3), on and after the effective date under paragraph (1), the 
     Board may impose additional capital requirements, and any 
     other restrictions, as the Board determines appropriate, on 
     any equity, partnership, or ownership interest in or 
     sponsorship of a hedge fund or private equity fund by a 
     banking entity or nonbank financial company supervised by the 
     Board, including on a case-by-case basis, as the Board 
     determines appropriate.
       ``(5) Rulemaking.--Not later than 6 months after the date 
     of enactment of this section, the Board shall issues rules to 
     implement paragraphs (2), (3), and (4).
       ``(d) Permitted Activities.--
       ``(1) In general.--Notwithstanding the restrictions in 
     subsection (a), to the extent permitted by any other 
     provision of Federal or State law, and subject to the 
     limitations under paragraph (2) and any restrictions or 
     limitations that the appropriate Federal banking agencies, 
     the Securities and Exchange Commission, and the Commodity 
     Futures Trading Commission, may determine, the following 
     activities (in this section referred to as `permitted 
     activities') are permitted:
       ``(A) The purchase, sale, acquisition, or disposition of 
     obligations of the United States or any agency thereof; 
     obligations, participations, or other instruments of or 
     issued by the Government National Mortgage Association, the 
     Federal National Mortgage Association, the Federal Home Loan 
     Mortgage Corporation, a Federal Home Loan Bank, the Federal 
     Agricultural Mortgage Corporation, or a Farm Credit System 
     institution chartered under and subject to the provisions of 
     the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.), and 
     obligations of any State or of any political subdivision 
     thereof.
       ``(B) The purchase, sale, acquisition, or disposition of 
     securities and other instruments described in subsection 
     (h)(4) in connection with underwriting, market-making, or in 
     facilitation of customer relationships, to the extent that 
     any such activities permitted by this subparagraph are 
     designed to not exceed the reasonably expected near term 
     demands of clients, customers, or counterparties.
       ``(C) Risk-mitigating hedging activities designed to reduce 
     the specific risks to a banking entity or nonbank financial 
     company supervised by the Board.
       ``(D) The purchase, sale, acquisition, or disposition of 
     securities and other instruments described in subsection 
     (h)(4) on behalf of customers.
       ``(E) Investments in one or more small business investment 
     companies, as defined in section 102 of the Small Business 
     Investment

[[Page S4005]]

     Act of 1958 (15 U.S.C. 662), or investments designed 
     primarily to promote the public welfare, as provided in 
     paragraph (11) of section 5136 of the Revised Statutes of the 
     United States (12 U.S.C. 24).
       ``(F) The purchase, sale, acquisition, or disposition of 
     securities and other instruments described in subsection 
     (h)(4) by a regulated insurance company directly engaged in 
     the business of insurance for the general account of the 
     company and by any affiliate of such regulated insurance 
     company, provided that such activities by any affiliate are 
     solely for the general account of the regulated insurance 
     company, if--
       ``(i) the purchase, sale, acquisition, or disposition is 
     conducted in compliance with, and subject to, the insurance 
     company investment laws, regulations, and written guidance of 
     the State or jurisdiction in which each such insurance 
     company is domiciled; and
       ``(ii) the appropriate Federal banking agencies, after 
     consultation with the Financial Stability Oversight Council 
     and the relevant insurance commissioners of the States and 
     territories of the United States, have not jointly 
     determined, after notice and comment, that a particular law, 
     regulation, or written guidance described in clause (i) is 
     insufficient to protect the safety and soundness of the 
     banking entity or nonbank financial company supervised by the 
     Board, or of the financial stability of the United States.
       ``(G) Organizing and offering a private equity or hedge 
     fund, including serving as a general partner, managing 
     member, or trustee of the fund and in any manner selecting or 
     controlling (or having employees, officers, directors, or 
     agents who constitute) a majority of the directors, trustees, 
     or management of the fund, including any necessary expenses 
     for the foregoing, only if--
       ``(i) the banking entity provides bona fide trust, 
     fiduciary, or investment advisory services;
       ``(ii) the fund is organized and offered only in connection 
     with the provision of bona fide trust, fiduciary, or 
     investment advisory services and only to persons that are 
     customers of such services of the banking entity;
       ``(iii) the banking entity does not acquire or retain an 
     equity interest, partnership interest, or other ownership 
     interest in the funds;
       ``(iv) the banking entity does not enter into or otherwise 
     engage in any transaction with the hedge fund or private 
     equity fund that is a covered transaction, as defined in 
     section 23A of the Federal Reserve Act (12 U.S.C. 371c);
       ``(v) the obligations or performance of the hedge fund or 
     private equity fund are not guaranteed, assumed, or otherwise 
     covered, directly or indirectly, by the banking entity or any 
     subsidiary or affiliate of the banking entity;
       ``(vi) the banking entity does not share with the hedge 
     fund or private equity fund, for corporate, marketing, 
     promotional, or other purposes, the same name or a variation 
     of the same name;
       ``(vii) no director or employee of the banking entity takes 
     or retains an equity interest, partnership interest, or other 
     ownership interest in, except for any director or employee of 
     the banking entity who is directly engaged in providing 
     investment advisory or other services to the hedge fund or 
     private equity fund; and
       ``(viii) the banking entity complies with any rules of the 
     appropriate Federal banking agencies, the Securities and 
     Exchange Commission, or the Commodity Futures Trading 
     Commission designed to ensure that losses in such hedge fund 
     or private equity fund are borne solely by investors in the 
     fund and not by the banking entity.
       ``(H) Proprietary trading conducted by a company pursuant 
     to paragraph (9) or (13) of section 4(c), provided that the 
     trading occurs solely outside of the United States and that 
     the banking entity or nonbank financial company supervised by 
     the Board is not directly or indirectly controlled by a 
     United States person.
       ``(I) The acquisition or retention of any equity, 
     partnership, or other ownership interest in, or the 
     sponsorship of, a hedge fund or a private equity fund by a 
     banking entity or nonbank financial company supervised by the 
     Board pursuant to paragraph (9) or (13) of section 4(c) 
     solely outside of the United States, provided that no 
     ownership interest in such hedge fund or private equity fund 
     is offered for sale or sold to a resident of the United 
     States and that the banking entity or nonbank financial 
     company supervised by the Board is not directly or indirectly 
     controlled by a company that is organized in the United 
     States.
       ``(J) Such other activity as the appropriate Federal 
     banking agencies, the Securities and Exchange Commission, and 
     the Commodity Futures Trading Commission determine through 
     regulation, as provided in subsection (b)(2)(B), would 
     promote and protect the safety and soundness of the banking 
     entity or nonbank financial company supervised by the Board 
     and the financial stability of the United States.
       ``(2) Limitation on permitted activities.--
       ``(A) In general.--No transaction, class of transactions, 
     or activity may be deemed a permitted activity under 
     paragraph (1) if it--
       ``(i) would involve or result in a material conflict of 
     interest (as such term shall be defined jointly by rule) 
     between the banking entity or the nonbank financial company 
     supervised by the Board and its clients, customers, or 
     counterparties;
       ``(ii) would result, directly or indirectly, in an unsafe 
     and unsound exposure by the banking entity or nonbank 
     financial company supervised by the Board to high-risk assets 
     or high-risk trading strategies (as such terms shall be 
     defined jointly by rule);
       ``(iii) would pose a threat to the safety and soundness of 
     such banking entity or nonbank financial company supervised 
     by the Board; or
       ``(iv) would pose a threat to the financial stability of 
     the United States.
       ``(B) Rulemaking.--The appropriate Federal banking 
     agencies, the Securities and Exchange Commission, and the 
     Commodity Futures Trading Commission shall issue regulations 
     to implement subparagraph (A), as part of the regulations 
     issued under subsection (b)(2).
       ``(3) Capital and quantitative limitations.--The Board 
     shall adopt rules, as provided under subsection (b)(2), 
     imposing additional capital requirements and quantitative 
     limitations regarding the activities permitted under this 
     section if the Board determines that additional capital and 
     quantitative limitations are appropriate to protect the 
     safety and soundness of the banking entities and nonbank 
     financial companies supervised by the Board engaged in such 
     activities.
       ``(e) Anti-evasion.--
       ``(1) Rulemaking.--The appropriate Federal banking 
     agencies, the Securities and Exchange Commission, and the 
     Commodity Futures Trading Commission shall issue regulations 
     as part of the rulemaking provided for in subsection (b)(2) 
     regarding internal controls and recordkeeping in order to 
     insure compliance with this section.
       ``(2) Termination of activities or investment.--Whenever an 
     appropriate Federal banking agency, the Securities and 
     Exchange Commission, or the Commodity Futures Trading 
     Commission, as appropriate, has reasonable cause to believe 
     that a banking entity or nonbank financial company supervised 
     by the Board under the respective agency's jurisdiction has 
     made an investment or engaged in an activity in a manner that 
     functions as an evasion of the requirements of this section 
     (including through an abuse of any permitted activity) or 
     otherwise violates the restrictions under this section, the 
     appropriate Federal banking agency, the Securities and 
     Exchange Commission, or the Commodity Futures Trading 
     Commission, as appropriate, shall order, after due notice and 
     opportunity for hearing, the banking entity or nonbank 
     financial company supervised by the Board to terminate the 
     activity and, as relevant, dispose of the investment. Nothing 
     in this subparagraph shall be construed to limit the inherent 
     authority of any Federal agency or State regulatory authority 
     to further restrict any investments or activities under 
     otherwise applicable provisions of law.
       ``(f) Limitations on Relationships With Hedge Funds and 
     Private Equity Funds.--
       ``(1) In general.--No banking entity that serves, directly 
     or indirectly, as the investment manager or investment 
     adviser to a hedge fund or private equity fund may enter into 
     a covered transaction, as defined in section 23A of the 
     Federal Reserve Act (12 U.S.C. 371c) with the hedge fund or 
     private equity fund.
       ``(2) Treatment as member bank.--A banking entity that 
     serves, directly or indirectly, as the investment manager or 
     investment adviser to a hedge fund or private equity fund 
     shall be subject to section 23A and 23B of the Federal 
     Reserve Act (12 U.S.C. 371c-1), as if such person were a 
     member bank and such hedge fund or private equity fund were 
     an affiliate thereof.
       ``(3) Covered transactions with unaffiliated hedge funds 
     and private equity funds.--No banking entity may enter into a 
     covered transaction, as defined in section 23A of the Federal 
     Reserve Act (12 U.S.C. 371c), with any hedge fund or private 
     equity fund organized and offered by the banking entity or 
     with any hedge fund or private equity fund in which such 
     hedge fund or private equity fund has taken any equity, 
     partnership, or other ownership interest.
       ``(g) Rules of Construction.--
       ``(1) Limitation on contrary authority.--Any prohibitions 
     or restrictions under this section shall apply even though 
     such activities may be authorized for a banking entity or a 
     nonbank financial company supervised by the Board under any 
     other provision of law.
       ``(2) Sale or securitization of loans.--Nothing in this 
     section shall be construed to limit or restrict the ability 
     of a banking entity or nonbank financial company supervised 
     by the Board to sell or securitize loans in a manner 
     otherwise permitted by law.
       ``(3) Authority of federal agencies and state regulatory 
     authorities.--Nothing in this section shall be construed to 
     limit the inherent authority of any Federal agency or State 
     regulatory authority under otherwise applicable provisions of 
     law.
       ``(h) Definitions.--In this section, the following 
     definitions shall apply:
       ``(1) Banking entity.--The term `banking entity' means any 
     insured depository institution (as defined in section 3 of 
     the Federal Deposit Insurance Act (12 U.S.C. 1813)), any 
     company that controls an insured depository institution, or 
     that is treated as a bank holding company for purposes of 
     section 8 of the International Banking Act, and any affiliate 
     or subsidiary of any such entity. For purposes of this 
     paragraph, the term `insured depository institution' does not 
     include an institution that functions solely in a trust or 
     fiduciary capacity, if--

[[Page S4006]]

       ``(A) all or substantially all of the deposits of such 
     institution are in trust funds and are received in a bona 
     fide fiduciary capacity;
       ``(B) no deposits of such institution which are insured by 
     the Federal Deposit Insurance Corporation are offered or 
     marketed by or through an affiliate of such institution;
       ``(C) such institution does not accept demand deposits or 
     deposits that the depositor may withdraw by check or similar 
     means for payment to third parties or others or make 
     commercial loans; and
       ``(D) such institution does not--
       ``(i) obtain payment or payment related services from any 
     Federal Reserve bank, including any service referred to in 
     section 11(a) of the Federal Reserve Act (12 U.S.C. 248a); or
       ``(ii) exercise discount or borrowing privileges pursuant 
     to section 19(b)(7) of the Federal Reserve Act (12 U.S.C. 
     461(b)(7)).
       ``(2) Hedge fund; private equity fund.--The terms `hedge 
     fund' and `private equity fund' mean a company or other 
     entity that is exempt from registration as an investment 
     company pursuant to section 3(c)(1) or 3(c)(7) of the 
     Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(1) or 80a-
     3(c)(7)), or such similar funds as jointly determined 
     appropriate by the appropriate Federal banking agencies, the 
     Securities and Exchange Commission, and the Commodity Futures 
     Trading Commission.
       ``(3) Nonbank financial company supervised by the board.--
     The term `nonbank financial company supervised by the Board' 
     means a nonbank financial company supervised by the Board of 
     Governors, as defined in section 102 of the Financial 
     Stability Act of 2010.
       ``(4) Proprietary trading.--The term `proprietary trading' 
     means engaging as a principal for its own trading account in 
     any transaction to purchase or sell, or otherwise acquire or 
     dispose of, any security, any derivative, any contract of 
     sale of a commodity for future delivery, any option on any 
     such security, derivative, or contract, or any other security 
     or financial instrument that the appropriate Federal banking 
     agencies, the Securities and Exchange Commission, and the 
     Commodity Futures Trading Commission may jointly, by rule, 
     determine.
       ``(5) Sponsor.--The term to `sponsor' a fund means--
       ``(A) to serve as a general partner, managing member, or 
     trustee of a fund;
       ``(B) in any manner to select or to control (or to have 
     employees, officers, or directors, or agents who constitute) 
     a majority of the directors, trustees, or management of a 
     fund; or
       ``(C) to share with a fund, for corporate, marketing, 
     promotional, or other purposes, the same name or a variation 
     of the same name.
       ``(6) Trading account.--The term `trading account' means 
     any account used for acquiring or taking positions in the 
     securities and instruments described in paragraph (4) 
     principally for the purpose of selling in the near term (or 
     otherwise with the intent to resell in order to profit from 
     short-term price movements), and any such other accounts as 
     the appropriate Federal banking agencies, the Securities and 
     Exchange Commission, and the Commodity Futures Trading 
     Commission may jointly, by rule, determine.''.

     SEC.__--.(I) CONFLICTS OF INTEREST.

       The Securities Act of 1933 (15 U.S.C. 77a et seq.) is 
     amended by inserting after section 27A the following:

     ``SEC. 27B. CONFLICTS OF INTEREST RELATING TO CERTAIN 
                   SECURITIZATIONS.

       ``(a) In General.--An underwriter, placement agent, initial 
     purchaser, or sponsor, or any affiliate or subsidiary of any 
     such entity, of an asset-backed security (as such term is 
     defined in section 3 of the Securities and Exchange Act of 
     1934 (15 U.S.C. 78c), which for the purposes of this section 
     shall include a synthetic asset-backed security), shall not, 
     during such period as the asset-backed security is 
     outstanding or such lesser period as the Commission 
     determines is appropriate, engage in any transaction that 
     would involve or result in any material conflict of interest 
     with respect to any investor in a transaction arising out of 
     such activity.
       ``(b) Rulemaking.--Not later than 180 days after the date 
     of enactment of this section, the Commission shall issue 
     rules for the purpose of implementing subsection (a) 
     including any appropriate disclosures or other measures.
       ``(c) Exception.--The prohibitions of subsection (a) shall 
     not apply to risk-mitigating hedging activities in connection 
     with positions or holdings arising out of the underwriting, 
     placement, initial purchase, or sponsorship of an asset-
     backed security, provided that such activities are designed 
     to reduce the specific risks to the underwriter, placement 
     agent, initial purchaser, or sponsor associated with 
     positions or holdings arising out of such underwriting, 
     placement, initial purchase, or sponsorship. This subsection 
     shall not otherwise limit the application of section 15G of 
     the Securities Exchange Act of 1934.''.
                                 ______
                                 
  SA 4133. Mr. MERKLEY (for himself and Mr. Levin) submitted an 
amendment intended to be proposed to amendment SA 3944 submitted by Mr. 
Corker and intended to be proposed to the amendment SA 3739 proposed by 
Mr. Reid (for Mr. Dodd (for himself and Mrs. Lincoln)) to the bill S. 
3217, to promote the financial stability of the United States by 
improving accountability and transparency in the financial system, to 
end ``too big to fail'', to protect the American taxpayer by ending 
bailouts, to protect consumers from abusive financial services 
practices, and for other purposes; which was ordered to lie on the 
table; as follows:

       At the appropriate place, insert the following:

     SEC. _. PROHIBITIONS ON PROPRIETARY TRADING AND CERTAIN 
                   RELATIONSHIPS WITH HEDGE FUNDS AND PRIVATE 
                   EQUITY FUNDS.

       Notwithstanding any other provision of this Act, section 
     619 of this act shall have no force or effect, and the Bank 
     Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is 
     amended by adding at the end the following:

     ``SEC. 13. PROHIBITIONS ON PROPRIETARY TRADING AND CERTAIN 
                   RELATIONSHIPS WITH HEDGE FUNDS AND PRIVATE 
                   EQUITY FUNDS.

       ``(a) In General.--
       ``(1) Prohibition.--Unless otherwise provided in this 
     section, a banking entity shall not--
       ``(A) engage in proprietary trading; or
       ``(B) acquire or retain any equity, partnership, or other 
     ownership interest in or sponsor a hedge fund or a private 
     equity fund.
       ``(2) Nonbank financial companies supervised by the 
     board.--Any nonbank financial company supervised by the Board 
     that engages in proprietary trading or takes or retains any 
     equity, partnership, or other ownership interest in or 
     sponsors a hedge fund or a private equity fund shall be 
     subject by the Board to additional capital requirements for 
     and additional quantitative limits with regards to such 
     proprietary trading and taking or retaining any equity, 
     partnership, or other ownership interest in or sponsorship of 
     a hedge fund or a private equity fund, except that permitted 
     activities as described in subsection (d) shall be subject to 
     additional capital and additional quantitative limits as 
     prescribed pursuant to subsection (d)(3).
       ``(b) Study and Rulemaking.--
       ``(1) Study.--Not later than 6 months after the date of 
     enactment of this section, the Financial Stability Oversight 
     Council shall study and make recommendations on implementing 
     the provisions of this section so as to--
       ``(A) promote and enhance the safety and soundness of 
     banking entities;
       ``(B) protect taxpayers and enhance financial stability by 
     minimizing the risk that insured depository institutions and 
     the affiliates of insured depository institutions will engage 
     in unsafe and unsound activities;
       ``(C) limit the inappropriate transfer of Federal subsidies 
     from institutions that benefit from deposit insurance and 
     liquidity facilities of the Federal Government to unregulated 
     entities;
       ``(D) reduce conflicts of interest between the self-
     interest of banking entities and nonbank financial companies 
     supervised by the Board, and the interests of the customers 
     of such entities and companies;
       ``(E) limit activities that have caused undue risk or loss 
     in banking entities and nonbank financial companies 
     supervised by the Board, or that might reasonably be expected 
     to create undue risk or loss in such banking entities and 
     nonbank financial companies supervised by the Board;
       ``(F) appropriately accommodate the business of insurance 
     within an insurance company subject to regulation in 
     accordance with the relevant insurance company investment 
     laws while protecting the safety and soundness of any banking 
     entity with which such insurance company is affiliated, and 
     of the United States financial system; and
       ``(G) appropriately time the divestiture of illiquid assets 
     that are affected by the implementation of the prohibitions 
     under subsection (a).
       ``(2) Rulemaking.--
       ``(A) In general.--Not later than 9 months after the 
     completion of the study under paragraph (1), the appropriate 
     Federal banking agencies, the Securities and Exchange 
     Commission, and the Commodity Futures Trading Commission, 
     (unless otherwise provided in this section) shall consider 
     the findings of the study under paragraph (1) and adopt rules 
     to carry out this section, as provided in subparagraph (B).
       ``(B) Coordinated rulemaking.--
       ``(i) Regulatory authority.--The regulations issued under 
     this paragraph and subsections (d) and (e) shall be issued 
     by--

       ``(I) the appropriate Federal banking agencies, jointly, 
     with respect to insured depository institutions;
       ``(II) the Board, with respect to any company that controls 
     an insured depository institution, or that is treated as a 
     bank holding company for purposes of section 8 of the 
     International Banking Act, any subsidiary of such a company 
     (other than a subsidiary described in subparagraph (A) or 
     (C)), and any nonbank financial company supervised by the 
     Board;
       ``(III) the Commodity Futures Trading Commission, with 
     respect to any entity for which the Commodity Futures Trading 
     Commission is the primary financial regulatory agency, as 
     defined in section 2 of the Restoring American Financial 
     Stability Act of 2010; and
       ``(IV) the Securities and Exchange Commission, with respect 
     to any entity for which the Securities and Exchange 
     Commission is the primary financial regulatory agency, as

[[Page S4007]]

     defined in section 2 of the Restoring American Financial 
     Stability Act of 2010.

       ``(ii) Coordination, consistency, and comparability.--In 
     developing and issuing regulations pursuant to this section, 
     the appropriate Federal banking agencies, the Securities and 
     Exchange Commission, and the Commodity Futures Trading 
     Commission shall consult and coordinate with each other, as 
     appropriate, for the purposes of assuring, to the extent 
     possible, that such regulations are comparable and provide 
     for consistent application and implementation of the 
     applicable provisions of this section to avoid providing 
     advantages or imposing disadvantages to the companies 
     affected by this subsection and to protect the safety and 
     soundness of banking entities and nonbank financial companies 
     supervised by the Board.
       ``(iii) Council role.--The Chairperson of the Council shall 
     be responsible for coordination of the regulations issued 
     under this section.
       ``(c) Effective Date.--
       ``(1) In general.--Except as provided in paragraphs (2) and 
     (3), this section shall take effect on the earlier of--
       ``(A) 12 months after the issuance of final rules under 
     subsection (b); or
       ``(B) 2 years after the date of enactment of this section.
       ``(2) Transition period for divestiture of hedge funds or 
     private equity funds by banking entities.--
       ``(A) No new investments.--
       ``(i) No new funds.--On and after the date of enactment of 
     this section, a banking entity may not sponsor or invest in a 
     hedge fund or private equity fund that the banking entity did 
     not sponsor or in which the banking entity was not invested 
     on May 1, 2010.
       ``(ii) No additional capital or assets.--On and after the 
     date of enactment of this section, a banking entity may not 
     sell, transfer, loan, or otherwise provide any additional 
     capital or assets to a hedge fund or private equity fund 
     sponsored by the banking entity or in which the banking 
     entity invests, except to the extent necessary to fulfill a 
     contractual obligation that was in effect on May 1, 2010.
       ``(B) Reduction of existing investments.--Except as 
     provided in paragraph (3), on and after the date that is 2 
     years after the effective date of this section, the aggregate 
     amount of equity, partnership, or other ownership interests 
     in all hedge funds and private equity funds held by a banking 
     entity shall not exceed 2 percent of the Tier I capital of 
     the banking entity.
       ``(C) Total divestiture.--On and after the date that is 5 
     years after the effective date of this section, no banking 
     entity may engage in any activity prohibited under subsection 
     (a)(1)(B), except as provided in paragraph (3).
       ``(3) Transition period for illiquid funds.--
       ``(A) Definition.--In this paragraph, the term `illiquid 
     fund' means a hedge fund or private equity fund that, as of 
     May 1, 2010, was principally invested in or is invested in 
     illiquid assets, and committed to principally invest in 
     illiquid assets, such as portfolio companies, real estate 
     investments, and venture capital investments, and that 
     maintains the investment strategy of the fund that was in 
     place as of May 1, 2010, regarding principally investing in 
     illiquid assets. In issuing rules under this subparagraph, 
     the Board shall take into consideration the terms of 
     investment for the hedge fund or private equity fund, 
     including contractual obligations, the ability of the fund to 
     divest of assets held by the fund, and any other factors that 
     the Board determines are appropriate.
       ``(B) Transition.--
       ``(i) In general.--During the 4-year period beginning on 
     the date of enactment of this section, a banking entity may 
     only take an equity, partnership, or ownership interest in, 
     or otherwise provide additional capital to, an illiquid fund 
     to the extent necessary to fulfill a contractual obligation 
     of the banking entity to the illiquid fund that was in effect 
     on May 1, 2010.
       ``(ii) Limitations.--A banking entity may not exercise an 
     option to renew, or otherwise extend the duration of, any 
     contractual obligation described in clause (i) and shall 
     exercise any contractual option permitting the banking entity 
     to exit the illiquid fund if and when such option becomes 
     available. A banking entity may elect not to exercise an 
     option described in the preceding sentence, to the extent 
     that the maintenance of an investment would be permitted 
     under paragraph (2).
       ``(iii) Extension.--

       ``(I) Approval required.--If a contractual obligation of a 
     banking entity described in clause (i) extends beyond the 4-
     year period beginning on the date of enactment of this 
     section, the banking entity may not continue to make the 
     investment required under the contractual obligation without 
     the prior written approval of the Board. In determining 
     whether to grant an extension under this clause, the Board 
     shall evaluate whether the proposed investment meets the 
     requirements of this subparagraph.
       ``(II) Time limit on approval.--The Board may approve an 
     investment described in subclause (I) for a period of not 
     longer than 2 years for each extension.
       ``(III) Limit on number of approvals.--The Board may not 
     approve an investment described in subclause (I) more than 3 
     times.

       ``(iv) Divestiture required.--Except as otherwise permitted 
     under subsection (d), no banking entity may engage in any 
     activity prohibited under subsection (a)(1)(B) after the 
     earlier of--

       ``(I) the date on which the contractual obligation to 
     invest in the illiquid fund terminates; and
       ``(II) the date on which the approval by the Board under 
     clause (iii) expires.

       ``(4) Additional capital.--Notwithstanding paragraph (2) or 
     (3), on and after the effective date under paragraph (1), the 
     Board may impose additional capital requirements, and any 
     other restrictions, as the Board determines appropriate, on 
     any equity, partnership, or ownership interest in or 
     sponsorship of a hedge fund or private equity fund by a 
     banking entity or nonbank financial company supervised by the 
     Board, including on a case-by-case basis, as the Board 
     determines appropriate.
       ``(5) Rulemaking.--Not later than 6 months after the date 
     of enactment of this section, the Board shall issues rules to 
     implement paragraphs (2), (3), and (4).
       ``(d) Permitted Activities.--
       ``(1) In general.--Notwithstanding the restrictions in 
     subsection (a), to the extent permitted by any other 
     provision of Federal or State law, and subject to the 
     limitations under paragraph (2) and any restrictions or 
     limitations that the appropriate Federal banking agencies, 
     the Securities and Exchange Commission, and the Commodity 
     Futures Trading Commission, may determine, the following 
     activities (in this section referred to as `permitted 
     activities') are permitted:
       ``(A) The purchase, sale, acquisition, or disposition of 
     obligations of the United States or any agency thereof; 
     obligations, participations, or other instruments of or 
     issued by the Government National Mortgage Association, the 
     Federal National Mortgage Association, the Federal Home Loan 
     Mortgage Corporation, a Federal Home Loan Bank, the Federal 
     Agricultural Mortgage Corporation, or a Farm Credit System 
     institution chartered under and subject to the provisions of 
     the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.), and 
     obligations of any State or of any political subdivision 
     thereof.
       ``(B) The purchase, sale, acquisition, or disposition of 
     securities and other instruments described in subsection 
     (h)(4) in connection with underwriting, market-making, or in 
     facilitation of customer relationships, to the extent that 
     any such activities permitted by this subparagraph are 
     designed to not exceed the reasonably expected near term 
     demands of clients, customers, or counterparties.
       ``(C) Risk-mitigating hedging activities designed to reduce 
     the specific risks to a banking entity or nonbank financial 
     company supervised by the Board.
       ``(D) The purchase, sale, acquisition, or disposition of 
     securities and other instruments described in subsection 
     (h)(4) on behalf of customers.
       ``(E) Investments in one or more small business investment 
     companies, as defined in section 102 of the Small Business 
     Investment Act of 1958 (15 U.S.C. 662), or investments 
     designed primarily to promote the public welfare, as provided 
     in paragraph (11) of section 5136 of the Revised Statutes of 
     the United States (12 U.S.C. 24).
       ``(F) The purchase, sale, acquisition, or disposition of 
     securities and other instruments described in subsection 
     (h)(4) by a regulated insurance company directly engaged in 
     the business of insurance for the general account of the 
     company and by any affiliate of such regulated insurance 
     company, provided that such activities by any affiliate are 
     solely for the general account of the regulated insurance 
     company, if--
       ``(i) the purchase, sale, acquisition, or disposition is 
     conducted in compliance with, and subject to, the insurance 
     company investment laws, regulations, and written guidance of 
     the State or jurisdiction in which each such insurance 
     company is domiciled; and
       ``(ii) the appropriate Federal banking agencies, after 
     consultation with the Financial Stability Oversight Council 
     and the relevant insurance commissioners of the States and 
     territories of the United States, have not jointly 
     determined, after notice and comment, that a particular law, 
     regulation, or written guidance described in clause (i) is 
     insufficient to protect the safety and soundness of the 
     banking entity or nonbank financial company supervised by the 
     Board, or of the financial stability of the United States.
       ``(G) Organizing and offering a private equity or hedge 
     fund, including serving as a general partner, managing 
     member, or trustee of the fund and in any manner selecting or 
     controlling (or having employees, officers, directors, or 
     agents who constitute) a majority of the directors, trustees, 
     or management of the fund, including any necessary expenses 
     for the foregoing, only if--
       ``(i) the banking entity provides bona fide trust, 
     fiduciary, or investment advisory services;
       ``(ii) the fund is organized and offered only in connection 
     with the provision of bona fide trust, fiduciary, or 
     investment advisory services and only to persons that are 
     customers of such services of the banking entity;
       ``(iii) the banking entity does not acquire or retain an 
     equity interest, partnership interest, or other ownership 
     interest in the funds;
       ``(iv) the banking entity does not enter into or otherwise 
     engage in any transaction with the hedge fund or private 
     equity fund that is a covered transaction, as defined in 
     section 23A of the Federal Reserve Act (12 U.S.C. 371c);
       ``(v) the obligations or performance of the hedge fund or 
     private equity fund are not guaranteed, assumed, or otherwise 
     covered,

[[Page S4008]]

     directly or indirectly, by the banking entity or any 
     subsidiary or affiliate of the banking entity;
       ``(vi) the banking entity does not share with the hedge 
     fund or private equity fund, for corporate, marketing, 
     promotional, or other purposes, the same name or a variation 
     of the same name;
       ``(vii) no director or employee of the banking entity takes 
     or retains an equity interest, partnership interest, or other 
     ownership interest in, except for any director or employee of 
     the banking entity who is directly engaged in providing 
     investment advisory or other services to the hedge fund or 
     private equity fund; and
       ``(viii) the banking entity complies with any rules of the 
     appropriate Federal banking agencies, the Securities and 
     Exchange Commission, or the Commodity Futures Trading 
     Commission designed to ensure that losses in such hedge fund 
     or private equity fund are borne solely by investors in the 
     fund and not by the banking entity.
       ``(H) Proprietary trading conducted by a company pursuant 
     to paragraph (9) or (13) of section 4(c), provided that the 
     trading occurs solely outside of the United States and that 
     the banking entity or nonbank financial company supervised by 
     the Board is not directly or indirectly controlled by a 
     United States person.
       ``(I) The acquisition or retention of any equity, 
     partnership, or other ownership interest in, or the 
     sponsorship of, a hedge fund or a private equity fund by a 
     banking entity or nonbank financial company supervised by the 
     Board pursuant to paragraph (9) or (13) of section 4(c) 
     solely outside of the United States, provided that no 
     ownership interest in such hedge fund or private equity fund 
     is offered for sale or sold to a resident of the United 
     States and that the banking entity or nonbank financial 
     company supervised by the Board is not directly or indirectly 
     controlled by a company that is organized in the United 
     States.
       ``(J) Such other activity as the appropriate Federal 
     banking agencies, the Securities and Exchange Commission, and 
     the Commodity Futures Trading Commission determine through 
     regulation, as provided in subsection (b)(2)(B), would 
     promote and protect the safety and soundness of the banking 
     entity or nonbank financial company supervised by the Board 
     and the financial stability of the United States.
       ``(2) Limitation on permitted activities.--
       ``(A) In general.--No transaction, class of transactions, 
     or activity may be deemed a permitted activity under 
     paragraph (1) if it--
       ``(i) would involve or result in a material conflict of 
     interest (as such term shall be defined jointly by rule) 
     between the banking entity or the nonbank financial company 
     supervised by the Board and its clients, customers, or 
     counterparties;
       ``(ii) would result, directly or indirectly, in an unsafe 
     and unsound exposure by the banking entity or nonbank 
     financial company supervised by the Board to high-risk assets 
     or high-risk trading strategies (as such terms shall be 
     defined jointly by rule);
       ``(iii) would pose a threat to the safety and soundness of 
     such banking entity or nonbank financial company supervised 
     by the Board; or
       ``(iv) would pose a threat to the financial stability of 
     the United States.
       ``(B) Rulemaking.--The appropriate Federal banking 
     agencies, the Securities and Exchange Commission, and the 
     Commodity Futures Trading Commission shall issue regulations 
     to implement subparagraph (A), as part of the regulations 
     issued under subsection (b)(2).
       ``(3) Capital and quantitative limitations.--The Board 
     shall adopt rules, as provided under subsection (b)(2), 
     imposing additional capital requirements and quantitative 
     limitations regarding the activities permitted under this 
     section if the Board determines that additional capital and 
     quantitative limitations are appropriate to protect the 
     safety and soundness of the banking entities and nonbank 
     financial companies supervised by the Board engaged in such 
     activities.
       ``(e) Anti-evasion.--
       ``(1) Rulemaking.--The appropriate Federal banking 
     agencies, the Securities and Exchange Commission, and the 
     Commodity Futures Trading Commission shall issue regulations 
     as part of the rulemaking provided for in subsection (b)(2) 
     regarding internal controls and recordkeeping in order to 
     insure compliance with this section.
       ``(2) Termination of activities or investment.--Whenever an 
     appropriate Federal banking agency, the Securities and 
     Exchange Commission, or the Commodity Futures Trading 
     Commission, as appropriate, has reasonable cause to believe 
     that a banking entity or nonbank financial company supervised 
     by the Board under the respective agency's jurisdiction has 
     made an investment or engaged in an activity in a manner that 
     functions as an evasion of the requirements of this section 
     (including through an abuse of any permitted activity) or 
     otherwise violates the restrictions under this section, the 
     appropriate Federal banking agency, the Securities and 
     Exchange Commission, or the Commodity Futures Trading 
     Commission, as appropriate, shall order, after due notice and 
     opportunity for hearing, the banking entity or nonbank 
     financial company supervised by the Board to terminate the 
     activity and, as relevant, dispose of the investment. Nothing 
     in this subparagraph shall be construed to limit the inherent 
     authority of any Federal agency or State regulatory authority 
     to further restrict any investments or activities under 
     otherwise applicable provisions of law.
       ``(f) Limitations on Relationships With Hedge Funds and 
     Private Equity Funds.--
       ``(1) In general.--No banking entity that serves, directly 
     or indirectly, as the investment manager or investment 
     adviser to a hedge fund or private equity fund may enter into 
     a covered transaction, as defined in section 23A of the 
     Federal Reserve Act (12 U.S.C. 371c) with the hedge fund or 
     private equity fund.
       ``(2) Treatment as member bank.--A banking entity that 
     serves, directly or indirectly, as the investment manager or 
     investment adviser to a hedge fund or private equity fund 
     shall be subject to section 23A and 23B of the Federal 
     Reserve Act (12 U.S.C. 371c-1), as if such person were a 
     member bank and such hedge fund or private equity fund were 
     an affiliate thereof.
       ``(3) Covered transactions with unaffiliated hedge funds 
     and private equity funds.--No banking entity may enter into a 
     covered transaction, as defined in section 23A of the Federal 
     Reserve Act (12 U.S.C. 371c), with any hedge fund or private 
     equity fund organized and offered by the banking entity or 
     with any hedge fund or private equity fund in which such 
     hedge fund or private equity fund has taken any equity, 
     partnership, or other ownership interest.
       ``(g) Rules of Construction.--
       ``(1) Limitation on contrary authority.--Any prohibitions 
     or restrictions under this section shall apply even though 
     such activities may be authorized for a banking entity or a 
     nonbank financial company supervised by the Board under any 
     other provision of law.
       ``(2) Sale or securitization of loans.--Nothing in this 
     section shall be construed to limit or restrict the ability 
     of a banking entity or nonbank financial company supervised 
     by the Board to sell or securitize loans in a manner 
     otherwise permitted by law.
       ``(3) Authority of federal agencies and state regulatory 
     authorities.--Nothing in this section shall be construed to 
     limit the inherent authority of any Federal agency or State 
     regulatory authority under otherwise applicable provisions of 
     law.
       ``(h) Definitions.--In this section, the following 
     definitions shall apply:
       ``(1) Banking entity.--The term `banking entity' means any 
     insured depository institution (as defined in section 3 of 
     the Federal Deposit Insurance Act (12 U.S.C. 1813)), any 
     company that controls an insured depository institution, or 
     that is treated as a bank holding company for purposes of 
     section 8 of the International Banking Act, and any affiliate 
     or subsidiary of any such entity. For purposes of this 
     paragraph, the term `insured depository institution' does not 
     include an institution that functions solely in a trust or 
     fiduciary capacity, if--
       ``(A) all or substantially all of the deposits of such 
     institution are in trust funds and are received in a bona 
     fide fiduciary capacity;
       ``(B) no deposits of such institution which are insured by 
     the Federal Deposit Insurance Corporation are offered or 
     marketed by or through an affiliate of such institution;
       ``(C) such institution does not accept demand deposits or 
     deposits that the depositor may withdraw by check or similar 
     means for payment to third parties or others or make 
     commercial loans; and
       ``(D) such institution does not--
       ``(i) obtain payment or payment related services from any 
     Federal Reserve bank, including any service referred to in 
     section 11(a) of the Federal Reserve Act (12 U.S.C. 248a); or
       ``(ii) exercise discount or borrowing privileges pursuant 
     to section 19(b)(7) of the Federal Reserve Act (12 U.S.C. 
     461(b)(7)).
       ``(2) Hedge fund; private equity fund.--The terms `hedge 
     fund' and `private equity fund' mean a company or other 
     entity that is exempt from registration as an investment 
     company pursuant to section 3(c)(1) or 3(c)(7) of the 
     Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(1) or 80a-
     3(c)(7)), or such similar funds as jointly determined 
     appropriate by the appropriate Federal banking agencies, the 
     Securities and Exchange Commission, and the Commodity Futures 
     Trading Commission.
       ``(3) Nonbank financial company supervised by the board.--
     The term `nonbank financial company supervised by the Board' 
     means a nonbank financial company supervised by the Board of 
     Governors, as defined in section 102 of the Financial 
     Stability Act of 2010.
       ``(4) Proprietary trading.--The term `proprietary trading' 
     means engaging as a principal for its own trading account in 
     any transaction to purchase or sell, or otherwise acquire or 
     dispose of, any security, any derivative, any contract of 
     sale of a commodity for future delivery, any option on any 
     such security, derivative, or contract, or any other security 
     or financial instrument that the appropriate Federal banking 
     agencies, the Securities and Exchange Commission, and the 
     Commodity Futures Trading Commission may jointly, by rule, 
     determine.
       ``(5) Sponsor.--The term to `sponsor' a fund means--
       ``(A) to serve as a general partner, managing member, or 
     trustee of a fund;
       ``(B) in any manner to select or to control (or to have 
     employees, officers, or directors, or agents who constitute) 
     a majority of the directors, trustees, or management of a 
     fund; or
       ``(C) to share with a fund, for corporate, marketing, 
     promotional, or other purposes,

[[Page S4009]]

     the same name or a variation of the same name.
       ``(6) Trading account.--The term `trading account' means 
     any account used for acquiring or taking positions in the 
     securities and instruments described in paragraph (4) 
     principally for the purpose of selling in the near term (or 
     otherwise with the intent to resell in order to profit from 
     short-term price movements), and any such other accounts as 
     the appropriate Federal banking agencies, the Securities and 
     Exchange Commission, and the Commodity Futures Trading 
     Commission may jointly, by rule, determine.''.

     SEC. _. CONFLICTS OF INTEREST.

       The Securities Act of 1933 (15 U.S.C. 77a et seq.) is 
     amended by inserting after section 27A the following:

     ``SEC. 27B. CONFLICTS OF INTEREST RELATING TO CERTAIN 
                   SECURITIZATIONS.

       ``(a) In General.--An underwriter, placement agent, initial 
     purchaser, or sponsor, or any affiliate or subsidiary of any 
     such entity, of an asset-backed security (as such term is 
     defined in section 3 of the Securities and Exchange Act of 
     1934 (15 U.S.C. 78c), which for the purposes of this section 
     shall include a synthetic asset-backed security), shall not, 
     during such period as the asset-backed security is 
     outstanding or such lesser period as the Commission 
     determines is appropriate, engage in any transaction that 
     would involve or result in any material conflict of interest 
     with respect to any investor in a transaction arising out of 
     such activity.
       ``(b) Rulemaking.--Not later than 180 days after the date 
     of enactment of this section, the Commission shall issue 
     rules for the purpose of implementing subsection (a) 
     including any appropriate disclosures or other measures.
       ``(c) Exception.--The prohibitions of subsection (a) shall 
     not apply to risk-mitigating hedging activities in connection 
     with positions or holdings arising out of the underwriting, 
     placement, initial purchase, or sponsorship of an asset-
     backed security, provided that such activities are designed 
     to reduce the specific risks to the underwriter, placement 
     agent, initial purchaser, or sponsor associated with 
     positions or holdings arising out of such underwriting, 
     placement, initial purchase, or sponsorship. This subsection 
     shall not otherwise limit the application of section 15G of 
     the Securities Exchange Act of 1934.''.
                                 ______
                                 
  SA 4134. Mr. REED submitted an amendment intended to be proposed to 
amendment SA 3789 proposed by Mr. Brownback (for himself, Mr. Bond, and 
Mr. Inhofe) to the amendment SA 3739 proposed by Mr. Reid (for Mr. Dodd 
(for himself and Mrs. Lincoln)) to the bill S. 3217, to promote the 
financial stability of the United States by improving accountability 
and transparency in the financial system, to end ``too big to fail'', 
to protect the American taxpayer by ending bailouts, to protect 
consumers from abusive financial services practices, and for other 
purposes; which was ordered to lie on the table; as follows:

       At the end, add the following:
       (g) Exclusion Not Applicable to Military Lending.--
       (1) In general.--Subsection (a) shall not apply to any 
     person that extends credit or arranges for the extension of 
     retail credit or retail leases--
       (A) subject to paragraph (2), to a consumer who is a 
     covered member of the Armed Forces or a dependent of a 
     covered member of the Armed Forces, as such terms are defined 
     in section 670(a) of the John Warner National Defense 
     Authorization Act for Fiscal Year 2007 (10 U.S.C. 987(i)(1) 
     and 10 U.S.C. 987(i)(2)); or
       (B) for the purchase or lease of motor vehicles if such 
     person sells, leases, or otherwise delivers motor vehicles to 
     consumers from a physical location that is within 50 miles of 
     a United States military installation.
       (2) Rule of construction.--A person shall be deemed to 
     comply with the exclusion under subparagraph (1)(A) if such 
     person uses reasonable and appropriate procedures, in 
     accordance with rules prescribed by the Bureau, to determine 
     that all applicants are not consumers described in 
     subparagraph (1)(A).
                                 ______
                                 
  SA 4135. Mr. LEVIN (for himself, Mr. Kaufman, and Mr. Reed) submitted 
an amendment intended to be proposed to amendment SA 3789 proposed by 
Mr. Brownback (for himself, Mr. Bond, and Mr. Inhofe) to the amendment 
SA 3739 proposed by Mr. Reid (for Mr. Dodd (for himself and Mrs. 
Lincoln)) to the bill S. 3217, to promote the financial stability of 
the United States by improving accountability and transparency in the 
financial system, to end ``too big to fail'', to protect the American 
taxpayer by ending bailouts, to protect consumers from abusive 
financial services practices, and for other purposes; which was ordered 
to lie on the table; as follows:

       At the end of the amendment, add the following:

     SEC. ____. PROHIBITION ON NEGATIVELY AMORTIZING MORTGAGES.

       (a) Prohibition on Negatively Amortizing Mortgages.--
     Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is 
     amended by adding at the end following:
       ``(n) Prohibition on Negatively Amortizing Mortgages.--
       ``(1) In general.--Any person who sells, transfers, or 
     plans to sell or transfer at least 1,000 mortgages, mortgage-
     backed securities, or similar financial instruments within a 
     calendar year shall not include or reference in any of such 
     financial instruments any mortgage in which the loan balance 
     may negatively amortize.
       ``(2) Applicability.--This subsection does not apply to 
     home equity conversion mortgages, as defined under section 
     255 of the National Housing Act (commonly referred to as 
     `reverse mortgages') that are otherwise regulated by a 
     Federal or State agency.
       ``(3) Rule of construction.--As used in this section, the 
     term `mortgage' shall not be construed to be restricted or 
     limited only to mortgages referred to in section 103(aa).''.
       (b) Effective Date.--The requirements under subsection 
     (n)(1) of section 129 of the Truth in Lending Act (as added 
     by subsection (b)) shall take effect not later than 180 days 
     after the date of the enactment of this Act.
                                 ______
                                 
  SA 4136. Mr. LEVIN (for himself, Mr. Kaufman, and Mr. Franken) 
submitted an amendment intended to be proposed to amendment SA 3789 
proposed by Mr. Brownback (for himself, Mr. Bond, and Mr. Inhofe) to 
the amendment SA 3739 proposed by Mr. Reid (for Mr. Dodd (for himself 
and Mrs. Lincoln)) to the bill S. 3217, to promote the financial 
stability of the United States by improving accountability and 
transparency in the financial system, to end ``too big to fail'', to 
protect the American taxpayer by ending bailouts, to protect consumers 
from abusive financial services practices, and for other purposes; 
which was ordered to lie on the table; as follows:

       At the end of the amendment, add the following:

     SEC. __. RELIANCE ON REPORTS.

       Notwithstanding section 932, section 15E(s)(4) of the 
     Securities Exchange Act (15 U.S.C. 78o-7), as amended by 
     section 932, is amended by adding at the end the following:
       ``(E) No reliance on inadequate report.--A nationally 
     recognized statistical rating organization may not rely on a 
     third-party due diligence report if the nationally recognized 
     statistical rating organization has reason to believe that 
     the report is inadequate.''.
                                 ______
                                 
  SA 4137. Mr. LEVIN (for himself, Mr. Kaufman, and Mr. Franken) 
submitted an amendment intended to be proposed to amendment SA 3789 
proposed by Mr. Brownback (for himself, Mr. Bond, and Mr. Inhofe) to 
the amendment SA 3739 proposed by Mr. Reid (for Mr. Dodd (for himself 
and Mrs. Lincoln)) to the bill S. 3217, to promote the financial 
stability of the United States by improving accountability and 
transparency in the financial system, to end ``too big to fail'', to 
protect the American taxpayer by ending bailouts, to protect consumers 
from abusive financial services practices, and for other purposes; 
which was ordered to lie on the table; as follows:

       At the end of the amendment, add the following:

     SEC. __. STANDARDS AND OVERSIGHT.

       Notwithstanding section 932, section 15E(c)(2) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78o-7(c)(2)) is 
     amended to read as follows:
       ``(2) Standards and oversight.--The Commission shall set 
     standards and exercise oversight of the procedures and 
     methodologies, including qualitative and quantitative data 
     and models, used by nationally recognized statistical rating 
     organizations, to ensure that the credit ratings issued by 
     the nationally recognized statistical rating organizations 
     have a reasonable foundation.''.
                                 ______
                                 
  SA 4138. Mr. LEVIN (for himself, Mr. Kaufman, Mr. Reed, and Mrs. 
McCaskill) submitted an amendment intended to be proposed to amendment 
SA 3789 proposed by Mr. Brownback (for himself, Mr. Bond, and Mr. 
Inhofe) to the amendment SA 3739 proposed by Mr. Reid (for Mr. Dodd 
(for himself and Mrs. Lincoln)) to the bill S. 3217, to promote the 
financial stability of the United States by improving accountability 
and transparency in the financial system, to end ``too big to fail'', 
to protect the American taxpayer by ending bailouts, to protect 
consumers from abusive financial services practices, and for other 
purposes; which was ordered to lie on the table; as follows:

       At the end of the amendment, add the following:

     SEC. __. RESTRICTION ON SYNTHETIC ASSET-BACKED SECURITIES.

       The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) 
     is amended by inserting after section 15G, as added by this 
     Act, the following new section:

[[Page S4010]]

     ``SEC. 15H. RESTRICTION ON SYNTHETIC ASSET-BACKED SECURITIES.

       ``(a) Definition.--For purposes of this section, the term 
     `synthetic asset-backed security' means an asset-backed 
     security with respect to which, by design, the self-
     liquidating financial assets referenced in the synthetic 
     securitization do not provide any direct payment or cash flow 
     to the holder of the security.
       ``(b) Restriction.--No issuer, underwriter, placement 
     agent, sponsor, or initial purchaser may offer, sell, or 
     transfer a synthetic asset-backed security that has no 
     substantial or material economic purpose apart from 
     speculation on a possible future gain or loss associated with 
     the value or condition of the referenced assets. The 
     Commission may determine whether a synthetic asset-backed 
     security meets the requirements of this section. A 
     determination by the Commission under the preceding sentence 
     is not subject to judicial review.''.
                                 ______
                                 
  SA 4139. Mr. LEVIN (for himself, Mr. Kaufman, and Mr. Reed) submitted 
an amendment intended to be proposed to amendment SA 3789 proposed by 
Mr. Brownback (for himself, Mr. Bond, and Mr. Inhofe) to the amendment 
SA 3739 proposed by Mr. Reid (for Mr. Dodd (for himself and Mrs. 
Lincoln)) to the bill S. 3217, to promote the financial stability of 
the United States by improving accountability and transparency in the 
financial system, to end ``too big to fail'', to protect the American 
taxpayer by ending bailouts, to protect consumers from abusive 
financial services practices, and for other purposes; which was ordered 
to lie on the table; as follows:

       At the end of the amendment, add the following:

     SEC. __. FDIC EXAMINATION AUTHORITY.

       (a) Examination Authority for Insurance and Orderly 
     Liquidation Purposes.--Section 10(b)(3) of the Federal 
     Deposit Insurance Act (12 U.S.C. 1820(b)(3)) is amended by 
     striking ``whenever the Board'' and all that follows through 
     the period at the end and inserting the following: ``or 
     depository institution holding company whenever the 
     Chairperson or the Board of Directors determines that a 
     special examination of any such depository institution or 
     depository institution holding company is necessary to 
     determine the condition of such depository institution or 
     depository institution holding company for insurance purposes 
     or for purposes of title II of the Restoring American 
     Financial Stability Act of 2010.''.
       (b) Enforcement Authority.--Section 8(t) of the Federal 
     Deposit Insurance Act (12 U.S.C. 1818(t)) is amended--
       (1) in paragraph (1)--
       (A) by striking ``based on an examination of an insured 
     depository institution'' and inserting ``based on an 
     examination of an insured depository institution or 
     depository institution holding company''; and
       (B) by striking ``with respect to any insured depository 
     institution or'' and inserting ``with respect to any insured 
     depository institution, depository institution holding 
     company, or'';
       (2) in paragraph (2)--
       (A) by striking ``Board of Directors determines, upon a 
     vote of its members,'' and inserting ``Board of Directors, 
     upon a vote of its members, or the Chairperson determines'';
       (B) in subparagraph (B), by striking ``or'' at the end;
       (C) in subparagraph (C), by striking the period at the end 
     and inserting ``; or''; and
       (D) by adding at the end the following:
       ``(D) the conduct or threatened conduct (including any acts 
     or omissions) of the depository institution holding company 
     poses a risk to the Deposit Insurance Fund or of the exercise 
     of authority under title II of the Restoring American 
     Financial Stability Act of 2010, or may prejudice the 
     interests of the depositors of an affiliated institution.'';
       (3) in paragraph (3)(A), by striking ``upon a vote of the 
     Board of Directors'' and inserting ``upon a determination by 
     the Chairperson or upon a vote of the Board of Directors'';
       (4) in paragraph (4)(A)--
       (A) by striking ``any insured depository institution'' and 
     inserting ``any insured depository institution, depository 
     institution holding company,''; and
       (B) by striking ``the institution'' and inserting ``the 
     institution, holding company,'';
       (5) in paragraph (4)(B), by striking ``the institution'' 
     each place that term appears and inserting ``the institution, 
     holding company,''; and
       (6) in paragraph (5)(A), by striking ``an insured 
     depository institution'' and inserting ``an insured 
     depository institution, depository institution holding 
     company,''.
       (c) Back-up Examination Authority for Orderly Liquidation 
     Purposes.--The Federal Deposit Insurance Act (12 U.S.C. 1811 
     et seq.) is amended by adding at the end the following:

     ``SEC. 51. BACK-UP EXAMINATION AUTHORITY FOR ORDERLY 
                   LIQUIDATION PURPOSES.

       ``The Corporation may conduct a special examination of a 
     nonbank financial company supervised by the Board of 
     Governors of the Federal Reserve System under section 113 of 
     the Restoring American Financial Stability Act of 2010, if 
     the Chairperson or the Board of Directors determines an 
     examination is necessary to determine the condition of the 
     company for purposes of title II of that Act.''.
       (d) Access to Information for Insurance and Orderly 
     Liquidation Purposes.--The Federal Deposit Insurance Act is 
     amended by adding at the end the following:

     ``SEC. 52. ACCESS TO INFORMATION FOR INSURANCE AND ORDERLY 
                   LIQUIDATION PURPOSES.

       ``(a) Access to Information.--The Corporation may, if the 
     Corporation determines that such action is necessary to carry 
     out its responsibilities relating to deposit insurance or 
     orderly liquidation under this Act, title II of the Restoring 
     American Financial Stability Act of 2010, or otherwise 
     applicable Federal law--
       ``(1) obtain information from an insured depository 
     institution, depository institution holding company, or 
     nonbank financial company supervised by the Board of 
     Governors of the Federal Reserve System under section 113 of 
     the Restoring American Financial Stability Act of 2010;
       ``(2) obtain information from the appropriate Federal 
     banking agency, or any regulator of a nonbank financial 
     company supervised by the Board of Governors of the Federal 
     Reserve System under section 113 of the Restoring American 
     Financial Stability Act of 2010, including examination 
     reports; and
       ``(3) participate in any examination, visitation, or risk-
     scoping activity of an insured depository institution, 
     depository institution holding company, or nonbank financial 
     company supervised by the Board of Governors of the Federal 
     Reserve System under section 113 of the Restoring American 
     Financial Stability Act of 2010.
       ``(b) Enforcement.--The Corporation shall have the 
     authority to take any enforcement action under section 8 
     against any institution or company described in paragraph (1) 
     of subsection (a) that fails to provide any information 
     requested under that paragraph.
       ``(c) Use of Available Information.--The Corporation shall 
     use, in lieu of a request for information under subsection 
     (a), information provided to another Federal or State 
     regulatory agency, publicly available information, or 
     externally audited financial statements to the extent that 
     the Corporation determines such information is adequate to 
     the needs of the Corporation.''.
                                 ______
                                 
  SA 4140. Mr. BROWN of Massachusetts submitted an amendment intended 
to be proposed to amendment SA 3883 proposed by Ms. Snowe (for herself 
and Mr. Pryor) to the amendment SA 3739 proposed by Mr. Reid (for Mr. 
Dodd (for himself and Mrs. Lincoln)) to the bill S. 3217, to promote 
the financial stability of the United States by improving 
accountability and transparency in the financial system, to end ``too 
big to fail'', to protect the American taxpayer by ending bailouts, to 
protect consumers from abusive financial services practices, and for 
other purposes; which was ordered to lie on the table; as follows:

       At the end of the amendment, add the following:

     SEC. __. PROPRIETARY TRADING.

       (a) Definition.--Notwithstanding section 619(a), for 
     purposes of section 619, the term ``insured depository 
     institution'' does not include an institution described in 
     section 2(c)(2)(D) of the Bank Holding Company Act of 1956 
     (12 U.S.C. 1841(c)(2)(D)).
       (b) Exceptions.--Notwithstanding section 619(c), for 
     purposes of section 619, an insured depository institution, a 
     company that controls, directly or indirectly, an insured 
     depository institution or is treated as a bank holding 
     company for purposes of the Bank Holding Company Act of 1956 
     (12 U.S.C. 1841 et seq.), or any subsidiary of such 
     institution or company may sponsor or invest in a hedge fund 
     or a private equity fund, if--
       (1) such institution, company, or subsidiary provides 
     trust, fiduciary, or advisory services to the fund;
       (2) the fund is sponsored and offered in connection with 
     the provision of trust, fiduciary, or advisory services by 
     such institution, company, or subsidiary to persons who are, 
     or may be, customers or clients of such institution, company, 
     or subsidiary;
       (3) such institution, company, or subsidiary--
       (A) does not acquire or retain an equity, partnership, or 
     ownership interest in the fund; or
       (B) acquires or retains an equity, partnership, or 
     ownership interest, if--
       (i) on the date that is 12 months after the date on which 
     the fund is established, the equity, partnership, or 
     ownership interest is not greater than 10 percent of the 
     total equity of the fund; and
       (ii) the aggregate equity investments by such institution, 
     company, or subsidiary in the fund do not exceed 5 percent of 
     Tier 1 capital of such institution, company, or subsidiary;
       (4) such institution, company, or subsidiary does not enter 
     into or otherwise engage in any transaction with the fund 
     that is a covered transaction, as defined in section 23A of 
     the Federal Reserve Act (12 U.S.C. 371c), except on terms and 
     under circumstances specified in section 23B of the Federal 
     Reserve Act (12 U.S.C. 371c-1);
       (5) the obligations of the fund are not guaranteed, 
     directly or indirectly, by such institution, company, or 
     subsidiary any affiliate of such institution, company, or 
     subsidiary; and

[[Page S4011]]

       (6) such institution, company, or subsidiary does not share 
     with the fund, for corporate, marketing, promotional, or 
     other purposes, the same name or a variation of the same 
     name.
                                 ______
                                 
  SA 4141. Mr. CARDIN submitted an amendment intended to be proposed to 
amendment SA 3789 proposed by Mr. Brownback (for himself, Mr. Bond, and 
Mr. Inhofe) to the amendment SA 3739 proposed by Mr. Reid (for Mr. Dodd 
(for himself and Mrs. Lincoln)) to the bill S. 3217, to promote the 
financial stability of the United States by improving accountability 
and transparency in the financial system, to end ``too big to fail'', 
to protect the American taxpayer by ending bailouts, to protect 
consumers from abusive financial services practices, and for other 
purposes; which was ordered to lie on the table; as follows:

       In lieu of the matter proposed to be inserted, insert the 
     following:

     SEC. 1030. ENERGY AND ENVIRONMENTAL MARKETS ADVISORY 
                   COMMITTEE.

       (a) Repeal.--Notwithstanding any other provision of this 
     Act, section 911 of this Act is repealed, effective on the 
     date of enactment of this Act, and shall have no force or 
     effect on or after that date of enactment.
       (b) Investor Advisory Committee Established.--Title I of 
     the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) 
     is amended by adding at the end the following:

     ``SEC. 39. INVESTOR ADVISORY COMMITTEE.

       ``(a) Establishment and Purpose.--
       ``(1) Establishment.--There is established within the 
     Commission the Investor Advisory Committee (referred to in 
     this section as the `Committee').
       ``(2) Purpose.--The Committee shall--
       ``(A) advise and consult with the Commission on--
       ``(i) regulatory priorities of the Commission;
       ``(ii) issues relating to the regulation of securities 
     products, trading strategies, and fee structures, and the 
     effectiveness of disclosure;
       ``(iii) initiatives to protect investor interests, 
     including initiatives to protect investors against the 
     material risks to investors associated with companies in the 
     extractive industries sector, including--

       ``(I) unique tax and reputational risks, in the form of 
     country-specific taxes and regulations;
       ``(II) the substantial capital employed in the extractive 
     industries, and the often opaque and unaccountable management 
     of natural resource revenues by foreign governments; and
       ``(III) the potential for unstable and high-cost operating 
     environments for multinational companies operating in foreign 
     countries; and

       ``(iv) initiatives to promote investor confidence and the 
     integrity of the securities marketplace; and
       ``(B) submit to the Commission such findings and 
     recommendations as the Committee determines are appropriate, 
     including recommendations for proposed legislative changes.
       ``(b) Membership.--
       ``(1) In general.--The members of the Committee shall be--
       ``(A) the Investor Advocate;
       ``(B) a representative of State securities commissions;
       ``(C) a representative of the interests of senior citizens; 
     and
       ``(D) not fewer than 10, and not more than 20, members 
     appointed by the Commission, from among individuals who--
       ``(i) represent the interests of individual equity and debt 
     investors, including investors in mutual funds;
       ``(ii) represent the interests of institutional investors, 
     including the interests of pension funds and registered 
     investment companies;
       ``(iii) are knowledgeable about investment issues and 
     decisions; and
       ``(iv) have reputations of integrity.
       ``(2) Term.--Each member of the Committee appointed under 
     paragraph (1)(B) shall serve for a term of 4 years.
       ``(3) Members not commission employees.--Members appointed 
     under paragraph (1)(B) shall not be deemed to be employees or 
     agents of the Commission solely because of membership on the 
     Committee.
       ``(c) Chairman; Vice Chairman; Secretary; Assistant 
     Secretary.--
       ``(1) In general.--The members of the Committee shall 
     elect, from among the members of the Committee--
       ``(A) a chairman, who may not be employed by an issuer;
       ``(B) a vice chairman, who may not be employed by an 
     issuer;
       ``(C) a secretary; and
       ``(D) an assistant secretary.
       ``(2) Term.--Each member elected under paragraph (1) shall 
     serve for a term of 3 years in the capacity for which the 
     member was elected under paragraph (1).
       ``(d) Meetings.--
       ``(1) Frequency of meetings.--The Committee shall meet--
       ``(A) not less frequently than twice annually, at the call 
     of the chairman of the Committee; and
       ``(B) from time to time, at the call of the Commission.
       ``(2) Notice.--The chairman of the Committee shall give the 
     members of the Committee written notice of each meeting, not 
     later than 2 weeks before the date of the meeting.
       ``(e) Compensation and Travel Expenses.--Each member of the 
     Committee who is not a full-time employee of the United 
     States shall--
       ``(1) be compensated at a rate not to exceed the daily 
     equivalent of the annual rate of basic pay in effect for a 
     position at level V of the Executive Schedule under section 
     5316 of title 5, United States Code, for each day during 
     which the member is engaged in the actual performance of the 
     duties of the Committee; and
       ``(2) while away from the home or regular place of business 
     of the member in the performance of services for the 
     Committee, be allowed travel expenses, including per diem in 
     lieu of subsistence, in the same manner as persons employed 
     intermittently in the Government service are allowed expenses 
     under section 5703(b) of title 5, United States Code.
       ``(f) Staff.--The Commission shall make available to the 
     Committee such staff as the chairman of the Committee 
     determines are necessary to carry out this section.
       ``(g) Review by Commission.--The Commission shall--
       ``(1) review the findings and recommendations of the 
     Committee
       ``(2) make recommendations to the Commission on the 
     advisability of making public the information required to be 
     disclosed under section 13(p)(2); and
       ``(3) each time the Committee submits a finding or 
     recommendation to the Commission under paragraph (1), issue a 
     public statement--
       ``(A) assessing the finding or recommendation of the 
     Committee; and
       ``(B) disclosing the action, if any, the Commission intends 
     to take with respect to the finding or recommendation.
       ``(h) Committee Findings.--Nothing in this section shall 
     require the Commission to agree to or act upon any finding or 
     recommendation of the Committee.
       ``(i) Federal Advisory Committee Act.--The Federal Advisory 
     Committee Act (5 U.S.C. App.) shall not apply with respect to 
     the Committee and its activities.
       ``(j) Authorization of Appropriations.--There is authorized 
     to be appropriated to the Commission such sums as are 
     necessary to carry out this section.''.
       (c) Disclosure of Payments by Resource Extraction 
     Issuers.--Section 13 of the Securities Exchange Act of 1934 
     (15 U.S.C. 78m), as amended by this Act, is amended by adding 
     at the end the following:
       ``(p) Disclosure of Payments by Resource Extraction 
     Issuers.--
       ``(1) Definitions.--In this subsection--
       ``(A) the term `commercial development of oil, natural gas, 
     or minerals' includes exploration, extraction, processing, 
     export, and other significant actions relating to oil, 
     natural gas, or minerals, or the acquisition of a license for 
     any such activity, as determined by the Commission;
       ``(B) the term `foreign government' means a foreign 
     government, a department, agency, or instrumentality of a 
     foreign government, or a company owned by a foreign 
     government, as determined by the Commission;
       ``(C) the term `payment'--
       ``(i) means a payment that is--

       ``(I) made to further the commercial development of oil, 
     natural gas, or minerals; and
       ``(II) not de minimis; and

       ``(ii) includes taxes, royalties, fees (including license 
     fees), production entitlements, bonuses, and other material 
     benefits, that the Commission, consistent with the guidelines 
     of the Extractive Industries Transparency Initiative (to the 
     extent practicable), determines are part of the commonly 
     recognized revenue stream for the commercial development of 
     oil, natural gas, or minerals;
       ``(D) the term `resource extraction issuer' means an issuer 
     that--
       ``(i) is required to file an annual report with the 
     Commission; and
       ``(ii) engages in the commercial development of oil, 
     natural gas, or minerals;
       ``(E) the term `interactive data format' means an 
     electronic data format in which pieces of information are 
     identified using an interactive data standard; and
       ``(F) the term `interactive data standard' means 
     standardized list of electronic tags that mark information 
     included in the annual report of a resource extraction 
     issuer.
       ``(2) Disclosure.--
       ``(A) Information required.--Not later than 270 days after 
     the date of enactment of the Restoring American Financial 
     Stability Act of 2010, the Commission shall issue final rules 
     that require each resource extraction issuer to include in an 
     annual report of the resource extraction issuer information 
     relating to any payment made by the resource extraction 
     issuer, a subsidiary of the resource extraction issuer, or an 
     entity under the control of the resource extraction issuer to 
     a foreign government or the Federal Government for the 
     purpose of the commercial development of oil, natural gas, or 
     minerals, including--
       ``(i) the type and total amount of such payments made for 
     each project of the resource extraction issuer relating to 
     the commercial development of oil, natural gas, or minerals; 
     and
       ``(ii) the type and total amount of such payments made to 
     each government.

[[Page S4012]]

       ``(B) Consultation in rulemaking.--In issuing rules under 
     subparagraph (A), the Commission may consult with any agency 
     or entity that the Commission determines is relevant.
       ``(C) Interactive data format.--The rules issued under 
     subparagraph (A) shall require that the information included 
     in the annual report of a resource extraction issuer be 
     submitted in an interactive data format.
       ``(D) Interactive data standard.--
       ``(i) In general.--The rules issued under subparagraph (A) 
     shall establish an interactive data standard for the 
     information included in the annual report of a resource 
     extraction issuer.
       ``(ii) Electronic tags.--The interactive data standard 
     shall include electronic tags that identify, for any payments 
     made by a resource extraction issuer to a foreign government 
     or the Federal Government--

       ``(I) the total amounts of the payments, by category;
       ``(II) the currency used to make the payments;
       ``(III) the financial period in which the payments were 
     made;
       ``(IV) the business segment of the resource extraction 
     issuer that made the payments;
       ``(V) the government that received the payments, and the 
     country in which the government is located;
       ``(VI) the project of the resource extraction issuer to 
     which the payments relate; and
       ``(VII) such other information as the Commission may 
     determine is necessary or appropriate in the public interest 
     or for the protection of investors.

       ``(E) International transparency efforts.--To the extent 
     practicable, the rules issued under subparagraph (A) shall 
     support the commitment of the Federal Government to 
     international transparency promotion efforts relating to the 
     commercial development of oil, natural gas, or minerals.
       ``(F) Effective date.--With respect to each resource 
     extraction issuer, the final rules issued under subparagraph 
     (A) shall take effect on the date on which the resource 
     extraction issuer is required to submit an annual report 
     relating to the fiscal year of the resource extraction issuer 
     that ends not earlier than 1 year after the date on which the 
     Commission issues final rules under subparagraph (A).
       ``(3) Availability of information.--
       ``(A) Public availability of information.--To the extent 
     practicable, the Commission shall make available online, to 
     the public, a compilation of the information required to be 
     submitted under the rules issued under paragraph (2)(A).
       ``(B) Other information.--Nothing in this paragraph shall 
     require the Commission to make available online information 
     other than the information required to be submitted under the 
     rules issued under paragraph (2)(A).''.
                                 ______
                                 
  SA 4142. Mr. SCHUMER submitted an amendment intended to be proposed 
to amendment SA 4050 submitted by Mr. Cardin (for himself, Mr. Lugar, 
Mr. Durbin, Mr. Schumer, Mr. Feingold, Mr. Merkley, Mr. Johnson, and 
Mr. Whitehouse) to the amendment SA 3739 proposed by Mr. Reid (for Mr. 
Dodd (for himself and Mrs. Lincoln)) to the bill S. 3217, to promote 
the financial stability of the United States by improving 
accountability and transparency in the financial system, to end ``too 
big to fail'', to protect the American taxpayer by ending bailouts, to 
protect consumers from abusive financial services practices, and for 
other purposes; which was ordered to lie on the table; as follows:

       In lieu of the matter proposed to be inserted, insert the 
     following: ``effective.

     SEC. 995. ENERGY AND ENVIRONMENTAL MARKETS ADVISORY 
                   COMMITTEE.

       (a) Repeal.--Notwithstanding any other provision of this 
     Act, section 911 of this Act is repealed, effective on the 
     date of enactment of this Act, and shall have no force or 
     effect on or after that date of enactment.
       (b) Investor Advisory Committee Established.--Title I of 
     the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) 
     is amended by adding at the end the following:

     ``SEC. 39. INVESTOR ADVISORY COMMITTEE.

       ``(a) Establishment and Purpose.--
       ``(1) Establishment.--There is established within the 
     Commission the Investor Advisory Committee (referred to in 
     this section as the `Committee').
       ``(2) Purpose.--The Committee shall--
       ``(A) advise and consult with the Commission on--
       ``(i) regulatory priorities of the Commission;
       ``(ii) issues relating to the regulation of securities 
     products, trading strategies, and fee structures, and the 
     effectiveness of disclosure;
       ``(iii) initiatives to protect investor interests, 
     including initiatives to protect investors against the 
     material risks to investors associated with companies in the 
     extractive industries sector, including--

       ``(I) unique tax and reputational risks, in the form of 
     country-specific taxes and regulations;
       ``(II) the substantial capital employed in the extractive 
     industries, and the often opaque and unaccountable management 
     of natural resource revenues by foreign governments; and
       ``(III) the potential for unstable and high-cost operating 
     environments for multinational companies operating in foreign 
     countries; and

       ``(iv) initiatives to promote investor confidence and the 
     integrity of the securities marketplace; and
       ``(B) submit to the Commission such findings and 
     recommendations as the Committee determines are appropriate, 
     including recommendations for proposed legislative changes.
       ``(b) Membership.--
       ``(1) In general.--The members of the Committee shall be--
       ``(A) the Investor Advocate;
       ``(B) a representative of State securities commissions;
       ``(C) a representative of the interests of senior citizens; 
     and
       ``(D) not fewer than 10, and not more than 20, members 
     appointed by the Commission, from among individuals who--
       ``(i) represent the interests of individual equity and debt 
     investors, including investors in mutual funds;
       ``(ii) represent the interests of institutional investors, 
     including the interests of pension funds and registered 
     investment companies;
       ``(iii) are knowledgeable about investment issues and 
     decisions; and
       ``(iv) have reputations of integrity.
       ``(2) Term.--Each member of the Committee appointed under 
     paragraph (1)(B) shall serve for a term of 4 years.
       ``(3) Members not commission employees.--Members appointed 
     under paragraph (1)(B) shall not be deemed to be employees or 
     agents of the Commission solely because of membership on the 
     Committee.
       ``(c) Chairman; Vice Chairman; Secretary; Assistant 
     Secretary.--
       ``(1) In general.--The members of the Committee shall 
     elect, from among the members of the Committee--
       ``(A) a chairman, who may not be employed by an issuer;
       ``(B) a vice chairman, who may not be employed by an 
     issuer;
       ``(C) a secretary; and
       ``(D) an assistant secretary.
       ``(2) Term.--Each member elected under paragraph (1) shall 
     serve for a term of 3 years in the capacity for which the 
     member was elected under paragraph (1).
       ``(d) Meetings.--
       ``(1) Frequency of meetings.--The Committee shall meet--
       ``(A) not less frequently than twice annually, at the call 
     of the chairman of the Committee; and
       ``(B) from time to time, at the call of the Commission.
       ``(2) Notice.--The chairman of the Committee shall give the 
     members of the Committee written notice of each meeting, not 
     later than 2 weeks before the date of the meeting.
       ``(e) Compensation and Travel Expenses.--Each member of the 
     Committee who is not a full-time employee of the United 
     States shall--
       ``(1) be compensated at a rate not to exceed the daily 
     equivalent of the annual rate of basic pay in effect for a 
     position at level V of the Executive Schedule under section 
     5316 of title 5, United States Code, for each day during 
     which the member is engaged in the actual performance of the 
     duties of the Committee; and
       ``(2) while away from the home or regular place of business 
     of the member in the performance of services for the 
     Committee, be allowed travel expenses, including per diem in 
     lieu of subsistence, in the same manner as persons employed 
     intermittently in the Government service are allowed expenses 
     under section 5703(b) of title 5, United States Code.
       ``(f) Staff.--The Commission shall make available to the 
     Committee such staff as the chairman of the Committee 
     determines are necessary to carry out this section.
       ``(g) Review by Commission.--The Commission shall--
       ``(1) review the findings and recommendations of the 
     Committee
       ``(2) make recommendations to the Commission on the 
     advisability of making public the information required to be 
     disclosed under section 13(p)(2); and
       ``(3) each time the Committee submits a finding or 
     recommendation to the Commission under paragraph (1), issue a 
     public statement--
       ``(A) assessing the finding or recommendation of the 
     Committee; and
       ``(B) disclosing the action, if any, the Commission intends 
     to take with respect to the finding or recommendation.
       ``(h) Committee Findings.--Nothing in this section shall 
     require the Commission to agree to or act upon any finding or 
     recommendation of the Committee.
       ``(i) Federal Advisory Committee Act.--The Federal Advisory 
     Committee Act (5 U.S.C. App.) shall not apply with respect to 
     the Committee and its activities.
       ``(j) Authorization of Appropriations.--There is authorized 
     to be appropriated to the Commission such sums as are 
     necessary to carry out this section.''.
       (c) Disclosure of Payments by Resource Extraction 
     Issuers.--Section 13 of the Securities Exchange Act of 1934 
     (15 U.S.C. 78m), as amended by this Act, is amended by adding 
     at the end the following:
       ``(p) Disclosure of Payments by Resource Extraction 
     Issuers.--
       ``(1) Definitions.--In this subsection--

[[Page S4013]]

       ``(A) the term `commercial development of oil, natural gas, 
     or minerals' includes exploration, extraction, processing, 
     export, and other significant actions relating to oil, 
     natural gas, or minerals, or the acquisition of a license for 
     any such activity, as determined by the Commission;
       ``(B) the term `foreign government' means a foreign 
     government, a department, agency, or instrumentality of a 
     foreign government, or a company owned by a foreign 
     government, as determined by the Commission;
       ``(C) the term `payment'--
       ``(i) means a payment that is--

       ``(I) made to further the commercial development of oil, 
     natural gas, or minerals; and
       ``(II) not de minimis; and

       ``(ii) includes taxes, royalties, fees (including license 
     fees), production entitlements, bonuses, and other material 
     benefits, that the Commission, consistent with the guidelines 
     of the Extractive Industries Transparency Initiative (to the 
     extent practicable), determines are part of the commonly 
     recognized revenue stream for the commercial development of 
     oil, natural gas, or minerals;
       ``(D) the term `resource extraction issuer' means an issuer 
     that--
       ``(i) is required to file an annual report with the 
     Commission; and
       ``(ii) engages in the commercial development of oil, 
     natural gas, or minerals;
       ``(E) the term `interactive data format' means an 
     electronic data format in which pieces of information are 
     identified using an interactive data standard; and
       ``(F) the term `interactive data standard' means 
     standardized list of electronic tags that mark information 
     included in the annual report of a resource extraction 
     issuer.
       ``(2) Disclosure.--
       ``(A) Information required.--Not later than 270 days after 
     the date of enactment of the Restoring American Financial 
     Stability Act of 2010, the Commission shall issue final rules 
     that require each resource extraction issuer to include in an 
     annual report of the resource extraction issuer information 
     relating to any payment made by the resource extraction 
     issuer, a subsidiary of the resource extraction issuer, or an 
     entity under the control of the resource extraction issuer to 
     a foreign government or the Federal Government for the 
     purpose of the commercial development of oil, natural gas, or 
     minerals, including--
       ``(i) the type and total amount of such payments made for 
     each project of the resource extraction issuer relating to 
     the commercial development of oil, natural gas, or minerals; 
     and
       ``(ii) the type and total amount of such payments made to 
     each government.
       ``(B) Consultation in rulemaking.--In issuing rules under 
     subparagraph (A), the Commission may consult with any agency 
     or entity that the Commission determines is relevant.
       ``(C) Interactive data format.--The rules issued under 
     subparagraph (A) shall require that the information included 
     in the annual report of a resource extraction issuer be 
     submitted in an interactive data format.
       ``(D) Interactive data standard.--
       ``(i) In general.--The rules issued under subparagraph (A) 
     shall establish an interactive data standard for the 
     information included in the annual report of a resource 
     extraction issuer.
       ``(ii) Electronic tags.--The interactive data standard 
     shall include electronic tags that identify, for any payments 
     made by a resource extraction issuer to a foreign government 
     or the Federal Government--

       ``(I) the total amounts of the payments, by category;
       ``(II) the currency used to make the payments;
       ``(III) the financial period in which the payments were 
     made;
       ``(IV) the business segment of the resource extraction 
     issuer that made the payments;
       ``(V) the government that received the payments, and the 
     country in which the government is located;
       ``(VI) the project of the resource extraction issuer to 
     which the payments relate; and
       ``(VII) such other information as the Commission may 
     determine is necessary or appropriate in the public interest 
     or for the protection of investors.

       ``(E) International transparency efforts.--To the extent 
     practicable, the rules issued under subparagraph (A) shall 
     support the commitment of the Federal Government to 
     international transparency promotion efforts relating to the 
     commercial development of oil, natural gas, or minerals.
       ``(F) Effective date.--With respect to each resource 
     extraction issuer, the final rules issued under subparagraph 
     (A) shall take effect on the date on which the resource 
     extraction issuer is required to submit an annual report 
     relating to the fiscal year of the resource extraction issuer 
     that ends not earlier than 1 year after the date on which the 
     Commission issues final rules under subparagraph (A).
       ``(3) Availability of information.--
       ``(A) Public availability of information.--To the extent 
     practicable, the Commission shall make available online, to 
     the public, a compilation of the information required to be 
     submitted under the rules issued under paragraph (2)(A).
       ``(B) Other information.--Nothing in this paragraph shall 
     require the Commission to make available online information 
     other than the information required to be submitted under the 
     rules issued under paragraph (2)(A).''.
                                 ______
                                 
  SA 4143. Mr. DODD submitted an amendment intended to be proposed to 
amendment SA 4081 submitted by Mr. Hatch and intended to be proposed to 
the amendment SA 3739 proposed by Mr. Reid (for Mr. Dodd (for himself 
and Mrs. Lincoln) to the bill S. 3217, to promote the financial 
stability of the United States by improving accountability and 
transparency in the financial system, to end ``too big to fail'', to 
protect the American taxpayer by ending bailouts, to protect consumers 
from abusive financial services practices, and for other purposes; 
which was ordered to lie on the table; as follows:

       On page 1, after ``page 1235,'' strike ``line 10'' and all 
     that follows through line 3, and insert: ``on line 6, strike 
     ``the Bureau'' and all that follows through line 10 and 
     insert: ``the Bureau shall consider the potential benefits 
     and costs to covered persons and to consumers, including 
     costs arising from the potential reduction of access by 
     consumers to consumer financial products or service resulting 
     from such rule and, when promulgating a final rule, shall set 
     forth in the adopting release such consideration of the 
     potential benefits and costs of the rule;''.''
                                 ______
                                 
  SA 4144. Mr. WYDEN submitted an amendment intended to be proposed by 
him to the bill S. 3217, to promote the financial stability of the 
United States by improving accountability and transparency in the 
financial system, to end ``too big to fail'', to protect the American 
taxpayer by ending bailouts, to protect consumers from abusive 
financial services practices, and for other purposes; which was ordered 
to lie on the table; as follows:

       At the end of subtitle A of title I, add the following:

     SEC. 122. DISCLOSURE OF CONFLICTS OF INTERESTS.

       (a) Recommendation by Council.--The Council shall issue 
     recommendations to the primary financial regulatory agencies 
     to require, as applicable, bank holding companies or nonbank 
     financial companies under their respective jurisdictions to 
     make appropriate disclosures to any purchaser or prospective 
     purchaser of financial products from such companies, if such 
     companies have a direct financial interest that is in 
     material conflict with the interests of the purchaser or 
     prospective purchaser with respect to the transaction 
     involving such financial products.
       (b) Procedures and Implementation.--The procedural and 
     implementation provisions of subsection (b) and (c) of 
     section 120 shall apply to recommendations of the Council 
     under this section. In issuing such recommendations, the 
     Council shall take into account the existence of, and 
     firewalls between, separate business units of such companies.
                                 ______
                                 
  SA 4145. Mr. CORNYN submitted an amendment intended to be proposed to 
amendment SA 3776 proposed by Mr. Specter (for himself, Mr. Reed, Mr. 
Kaufman, Mr. Durbin, Mr. Harkin, Mr. Leahy, Mr. Levin, Mr. Menendez, 
Mr. Whitehouse, Mr. Franken, Mr. Feingold, and Mr. Merkley) to the 
amendment SA 3739 proposed by Mr. Reid (for Mr. Dodd (for himself and 
Mrs. Lincoln)) to the bill S. 3217, to promote the financial stability 
of the United States by improving accountability and transparency in 
the financial system, to end ``too big to fail'', to protect the 
American taxpayer by ending bailouts, to protect consumers from abusive 
financial services practices, and for other purposes; which was ordered 
to lie on the table; as follows:

       In lieu of the matter proposed to be inserted, insert the 
     following:

     SEC. 929D. AUTHORITY TO IMPOSE CIVIL PENALTIES IN CEASE-AND-
                   DESIST PROCEEDINGS.

       (a) Under the Securities Act of 1933.--Section 8A of the 
     Securities Act of 1933 (15 U.S.C. 77h-1) is amended by adding 
     at the end the following:
       ``(g) Authority to Impose Money Penalties.--
       ``(1) Grounds.--In any cease-and-desist proceeding under 
     subsection (a), the Commission may impose a civil penalty on 
     a person, if the Commission finds, on the record, after 
     notice and opportunity for hearing, that--
       ``(A) the person--
       ``(i) is violating or has violated any provision of this 
     title, or any rule or regulation issued under this title; or
       ``(ii) is or was a cause of the violation of any provision 
     of this title, or any rule or regulation thereunder; and
       ``(B) the imposition of the penalty is in the public 
     interest.
       ``(2) Maximum amount of penalty.--
       ``(A) First tier.--The maximum amount of a penalty for each 
     act or omission described in paragraph (1) shall be $7,500 
     for a natural person or $75,000 for any other person.
       ``(B) Second tier.--Notwithstanding subparagraph (A), if 
     the act or omission described in paragraph (1) involved 
     fraud, deceit, manipulation, or deliberate or reckless

[[Page S4014]]

     disregard of a regulatory requirement, the maximum amount of 
     penalty for each act or omission shall be $75,000 for a 
     natural person or $375,000 for any other person.
       ``(C) Third tier.--Notwithstanding subparagraphs (A) and 
     (B), the maximum amount of penalty for each act or omission 
     described in paragraph (1) shall be $150,000 for a natural 
     person or $725,000 for any other person, if--
       ``(i) the act or omission involved fraud, deceit, 
     manipulation, or deliberate or reckless disregard of a 
     regulatory requirement; and
       ``(ii) the act or omission directly or indirectly resulted 
     in--

       ``(I) substantial losses or created a significant risk of 
     substantial losses to other persons; or
       ``(II) substantial pecuniary gain to the person who 
     committed the act or omission.

       ``(3) Evidence concerning ability to pay.--In any 
     proceeding in which the Commission may impose a penalty under 
     this section, a respondent may present evidence of the 
     ability of the respondent to pay such penalty. The Commission 
     may, in its discretion, consider such evidence in determining 
     whether such penalty is in the public interest. Such evidence 
     may relate to the extent of the ability of the respondent to 
     continue in business and the collectability of a penalty, 
     taking into account any other claims of the United States or 
     third parties upon the assets of the respondent and the 
     amount of the assets of the respondent.''.
       (b) Under the Securities Exchange Act of 1934.--Section 
     21B(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78u-
     2(a)) is amended--
       (1) by striking the undesignated matter immediately 
     following paragraph (4);
       (2) in the matter preceding paragraph (1), by inserting 
     after ``opportunity for hearing,'' the following: ``that such 
     penalty is in the public interest and'';
       (3) by redesignating paragraphs (1) through (4) as 
     subparagraphs (A) through (D), respectively, and adjusting 
     the subparagraph margins accordingly;
       (4) by striking ``In any proceeding'' and inserting the 
     following:
       ``(1) In general.--In any proceeding''; and
       (5) by adding at the end the following:
       ``(2) Cease-and-desist proceedings.--In any proceeding 
     instituted under section 21C against any person, the 
     Commission may impose a civil penalty, if the Commission 
     finds, on the record after notice and opportunity for 
     hearing, that such person--
       ``(A) is violating or has violated any provision of this 
     title, or any rule or regulation issued under this title; or
       ``(B) is or was a cause of the violation of any provision 
     of this title, or any rule or regulation issued under this 
     title.''.
       (c) Under the Investment Company Act of 1940.--Section 
     9(d)(1) of the Investment Company Act of 1940 (15 U.S.C. 80a-
     9(d)(1)) is amended--
       (1) by striking the matter immediately following 
     subparagraph (C);
       (2) in the matter preceding subparagraph (A), by inserting 
     after ``opportunity for hearing,'' the following: ``that such 
     penalty is in the public interest, and'';
       (3) by redesignating subparagraphs (A) through (C) as 
     clauses (i) through (iii), respectively, and adjusting the 
     clause margins accordingly;
       (4) by striking ``In any proceeding'' and inserting the 
     following:
       ``(A) In general.--In any proceeding''; and
       (5) by adding at the end the following:
       ``(B) Cease-and-desist proceedings.--In any proceeding 
     instituted pursuant to subsection (f) against any person, the 
     Commission may impose a civil penalty if the Commission 
     finds, on the record, after notice and opportunity for 
     hearing, that such person--
       ``(i) is violating or has violated any provision of this 
     title, or any rule or regulation issued under this title; or
       ``(ii) is or was a cause of the violation of any provision 
     of this title, or any rule or regulation issued under this 
     title.''.
       (d) Under the Investment Advisers Act of 1940.--Section 
     203(i)(1) of the Investment Advisers Act of 1940 (15 U.S.C. 
     80b-3(i)(1)) is amended--
       (1) by striking the undesignated matter immediately 
     following subparagraph (D);
       (2) in the matter preceding subparagraph (A), by inserting 
     after ``opportunity for hearing,'' the following: ``that such 
     penalty is in the public interest and'';
       (3) by redesignating subparagraphs (A) through (D) as 
     clauses (i) through (iv), respectively, and adjusting the 
     clause margins accordingly;
       (4) by striking ``In any proceeding'' and inserting the 
     following:
       ``(A) In general.--In any proceeding''; and
       (5) by adding at the end the following:
       ``(B) Cease-and-desist proceedings.--In any proceeding 
     instituted pursuant to subsection (k) against any person, the 
     Commission may impose a civil penalty if the Commission 
     finds, on the record, after notice and opportunity for 
     hearing, that such person--
       ``(i) is violating or has violated any provision of this 
     title, or any rule or regulation issued under this title; or
       ``(ii) is or was a cause of the violation of any provision 
     of this title, or any rule or regulation issued under this 
     title.''.
                                 ______
                                 
  SA 4146. Mr. ENSIGN proposed an amendment to amendment SA 3739 
proposed by Mr. Reid (for Mr. Dodd (for himself and Mrs. Lincoln)) to 
the bill S. 3217, to promote the financial stability of the United 
States by improving accountability and transparency in the financial 
system, to end ``too big to fail'', to protect the American taxpayer by 
ending bailouts, to protect consumers from abusive financial services 
practices, and for other purposes; as follows:

       On page 1273, delete lines 17-18.
                                 ______
                                 
  SA 4147. Mr. DODD (for Mr. Carper (for himself, Ms. Collins, Mr. 
Lieberman, and Mr. Voinovich)) proposed an amendment to the bill S. 
920, to amend section 11317 of title 40, United States Code, to improve 
the transparency of the status of information technology investments, 
to require greater accountability for cost overruns on Federal 
information technology investment projects, to improve the processes 
agencies implement to manage information technology investments, to 
reward excellence in information technology acquisition, and for other 
purposes; as follows:

       In lieu of the matter proposed to be inserted, insert the 
     following:

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Information Technology (IT) 
     Investment Oversight Enhancement and Waste Prevention Act of 
     2009''.

     SEC. 2. FINDINGS.

       Congress finds the following:
       (1) The effective deployment of information technology can 
     make the Federal Government more efficient, effective, and 
     transparent.
       (2) Historically, the Federal Government has struggled to 
     properly plan, manage, and deliver information technology 
     investments on time, on budget, and performing as planned.
       (3) The Office of Management and Budget has made 
     significant progress overseeing information technology 
     investments made by Federal agencies, but continues to 
     struggle to ensure that such investments meet cost, schedule, 
     and performance expectations.
       (4) Congress has limited knowledge of the actual cost, 
     schedule, and performance of agency information technology 
     investments and has difficulty providing the necessary 
     oversight.
       (5) In July 2008, an official of the Government 
     Accountability Office testified before the Subcommittee on 
     Federal Financial Management, Government Information, Federal 
     Services, and International Security of the Committee on 
     Homeland Security and Governmental Affairs of the Senate, 
     stating that--
       (A) agencies self-report inaccurate and unreliable project 
     management data to the Office of Management and Budget and 
     Congress; and
       (B) the Office of Management and Budget should establish a 
     mechanism that would provide real-time project management 
     information and force agencies to improve the accuracy and 
     reliability of the information provided.

     SEC. 3. REAL-TIME TRANSPARENCY OF IT INVESTMENT PROJECTS.

       Section 11302(c)(1) of title 40, United States Code, is 
     amended by striking the period at the end and inserting the 
     following: ``, including ensuring the effective operation of 
     a Web site, updating the Web site, at a minimum, on a 
     quarterly basis, and including on the Web site, not later 
     than 90 days after the date of the enactment of the 
     Information Technology (IT) Investment Oversight Enhancement 
     and Waste Prevention Act of 2009--
       ``(1) the accurate cost, schedule, and performance 
     information since the commencement of the project of all 
     major information technology investments reported in a manner 
     consistent with policy established by the Office of 
     Management and Budget on the use of earned-value management 
     data, which should be based on the ANSI-EIA-748-B standard or 
     another objective performance-based management system 
     approved by the E-Government Administrator;
       ``(2) a graphical depiction of trend information, to the 
     extent practicable, since the commencement of the major IT 
     investment;
       ``(3) a clear delineation of major IT investments that have 
     experienced cost, schedule, or performance variance greater 
     than 10 percent over the life cycle of the investment, and 
     the extent of the variation;
       ``(4) an explanation of the reasons the investment deviated 
     from the benchmark established at the commencement of the 
     project; and
       ``(5) the number of times investments were rebaselined and 
     the dates on which such rebaselines occurred.''.

     SEC. 4. IT INVESTMENT PROJECTS.

       (a) Significant and Gross Deviations.--Section 11317 of 
     title 40, United States Code, is amended to read as follows:

     ``SEC. 11317. SIGNIFICANT AND GROSS DEVIATIONS.

       ``(a) Definitions.--In this subchapter:
       ``(1) Agency head.--The term `Agency Head' means the head 
     of the Federal agency that is primarily responsible for the 
     IT investment project under review.
       ``(2) ANSI eia-748-b standard.--The term `ANSI EIA-748-B 
     Standard' means the measurement tool jointly developed by the 
     American National Standards Institute and the

[[Page S4015]]

     Electronic Industries Alliance to analyze Earned Value 
     Management systems.
       ``(3) Appropriate congressional committees.--The term 
     `appropriate congressional committees' means--
       ``(A) the Committee on Homeland Security and Governmental 
     Affairs of the Senate;
       ``(B) the Committee on Oversight and Government Reform of 
     the House of Representatives;
       ``(C) the Committee on Appropriations of the Senate;
       ``(D) the Committee on Appropriations of the House of 
     Representatives; and
       ``(E) any other relevant congressional committee with 
     jurisdiction over an agency required to take action under 
     this section.
       ``(4) Chief information officer.--The term `Chief 
     Information Officer' means the Chief Information Officer 
     designated under section 3506(a)(2) of title 44 of the 
     Executive department (as defined in section 101 of title 5) 
     that is primarily responsible for the IT investment project 
     under review.
       ``(5) Core it investment project.--The terms `core IT 
     investment project' and `core project' mean a mission 
     critical IT investment project designated as such by the 
     Chief Information Officer, with approval by the Agency Head 
     under subsection (b).
       ``(6) Director.--The term `Director' means the Director of 
     the Office of Management and Budget.
       ``(7) Earned value management.--The term `Earned Value 
     Management' means the cost, schedule, and performance data 
     used to determine project status and developed in accordance 
     with the ANSI EIA-748-B Standard.
       ``(8) Grossly deviated.--The term `grossly deviated' means 
     cost, schedule, or performance variance that is at least 40 
     percent from the Original Baseline.
       ``(9) Independent cost estimate.--The term `independent 
     cost estimate' means a pragmatic and neutral analysis, 
     assessment, and quantification of all costs and risks 
     associated with acquisitions related to an IT investment 
     project, which--
       ``(A) is based on programmatic and technical specifications 
     provided by the office within the agency with primary 
     responsibility for the development, procurement, and delivery 
     of the project;
       ``(B) is formulated and provided by an entity other than 
     the office within the agency with primary responsibility for 
     the development, procurement, and delivery of the project;
       ``(C) contains sufficient detail to inform the selection of 
     an Earned Value Management baseline benchmark measure under 
     the ANSI EIA-748-B standard; and
       ``(D) accounts for the full life cycle cost plus associated 
     operations and maintenance expenses over the usable life of 
     the project's deliverables.
       ``(10) Life cycle cost.--The term `life cycle cost' means 
     the total cost of an IT investment project for planning, 
     research and development, modernization, enhancement, 
     operation, and maintenance.
       ``(11) Major it investment project.--The terms `major IT 
     investment project' and `project' mean an information 
     technology system or information technology acquisition 
     that--
       ``(A) requires special management attention because of its 
     importance to the mission or function of the agency, a 
     component of the agency, or another organization;
       ``(B) is for financial management and obligates more than 
     $500,000 annually;
       ``(C) has significant program or policy implications;
       ``(D) has high executive visibility;
       ``(E) has high development, operating, or maintenance 
     costs;
       ``(F) is funded through other than direct appropriations; 
     or
       ``(G) is defined as major by the agency's capital planning 
     and investment control process.
       ``(12) Original baseline.--
       ``(A) In general.--Except as provided under subparagraph 
     (B), the term `Original Baseline' means the ANSI EIA-748-B 
     Standard-compliant Earned Value Management benchmark or an 
     equivalent benchmark approved by the Office of Management and 
     Budget and established at the commencement of an IT 
     investment project.
       ``(B) Grossly deviated project.--If an IT investment 
     project grossly deviates from its Original Baseline (as 
     defined in subparagraph (A)), the term `Original Baseline' 
     means the ANSI EIA-748-B Standard-compliant Earned Value 
     Management benchmark or an equivalent benchmark approved by 
     the Office of Management and Budget and established under 
     subsection (e)(3)(C).
       ``(13) Significantly deviated.--The term `significantly 
     deviated' means cost, schedule, or performance variance that 
     is at least 20 percent from the Original Baseline.
       ``(b) Core IT Investment Projects Designation.--Each Chief 
     Information Officer, with approval by the Agency Head, 
     shall--
       ``(1) identify the major IT investments that are the most 
     critical to the agency; and
       ``(2) designate any project as a `core IT investment 
     project' or a `core project', upon determining that the 
     project is a mission critical IT investment project that--
       ``(A) represents a significant high dollar value relative 
     to the average IT investment project in the agency's 
     portfolio;
       ``(B) delivers a capability critical to the successful 
     completion of the agency mission, or a portion of such 
     mission;
       ``(C) incorporates unproven or previously undeveloped 
     technology to meet primary project technical requirements; or
       ``(D) would have a significant negative impact on the 
     successful completion of the agency mission if the project 
     experienced significant cost, schedule, or performance 
     deviations.
       ``(c) Cost, Schedule, and Performance Reports.--
       ``(1) Quarterly reports.--Not later than 14 days after the 
     end of each fiscal quarter, the project manager designated by 
     the Agency Head for an IT investment project shall submit 
     information to the Chief Information Officer that includes, 
     as of the last day of the applicable quarter--
       ``(A) a description of the cost, schedule, and performance 
     of all projects under the project manager's supervision;
       ``(B) the original and current project cost, schedule, and 
     performance benchmarks for each project under the project 
     manager's supervision;
       ``(C) the quarterly and cumulative cost, schedule, and 
     performance variance related to each IT investment project 
     under the project manager's supervision since the 
     commencement of the project;
       ``(D) for each project under the project manager's 
     supervision, any known, expected, or anticipated changes to 
     project schedule milestones or project performance benchmarks 
     included as part of the original or current baseline 
     description;
       ``(E) the current cost, schedule, and performance status of 
     all projects under supervision that were previously 
     identified as significantly deviated or grossly deviated; and
       ``(F) any corrective actions taken to address problems 
     discovered under subparagraphs (C) through (E).
       ``(2) Interim reports.--If the project manager for an IT 
     investment project determines that there is reasonable cause 
     to believe that an IT investment project has significantly 
     deviated or grossly deviated since the issuance of the latest 
     quarterly report, the project manager shall submit to the 
     Chief Information Officer, not later than 21 days after such 
     determination, information on the project that includes, as 
     of the date of the report--
       ``(A) a description of the original and current program 
     cost, schedule, and performance benchmarks;
       ``(B) the cost, schedule, or performance variance related 
     to the IT investment project since the commencement of the 
     project;
       ``(C) any known, expected, or anticipated changes to the 
     project schedule milestones or project performance benchmarks 
     included as part of the original or current baseline 
     description;
       ``(D) the major reasons underlying the significant or gross 
     deviation of the project; and
       ``(E) a corrective action plan to correct such deviations.
       ``(d) Determination of Significant Deviation.--
       ``(1) Chief information officer.--Upon receiving 
     information under subsection (c), the Chief Information 
     Officer shall--
       ``(A) determine if any IT investment project has 
     significantly deviated; and
       ``(B) report such determination to the Agency Head.
       ``(2) Congressional notification.--If the Chief Information 
     Officer determines under paragraph (1) that an IT investment 
     project has significantly deviated and the Agency Head has 
     not submitted information to the appropriate congressional 
     committees of a significant deviation for that project under 
     this section since the project was last required to be 
     rebaselined under this section, the Agency Head shall submit 
     information to the appropriate congressional committees, the 
     Director, and the Government Accountability Office that 
     includes--
       ``(A) notification of such determination;
       ``(B) the date on which such determination was made;
       ``(C) the amount of the cost increases and the extent of 
     the schedule delays with respect to such project;
       ``(D) any requirements that--
       ``(i) were added subsequent to the original baseline; or
       ``(ii) were originally contracted for, but were changed by 
     deferment or deletion from the original baseline, or were 
     otherwise no longer included in the requirements contracted 
     for;
       ``(E) an explanation of the differences between--
       ``(i) the estimate at completion between the project 
     manager, any contractor, and any independent analysis; and
       ``(ii) the original budget at completion;
       ``(F) a statement of the reasons underlying the project's 
     significant deviation; and
       ``(G) a summary of the plan of action to remedy the 
     significant deviation.
       ``(3) Deadline.--
       ``(A) Notification based on quarterly report.--If the 
     determination of significant deviation is based on 
     information submitted under subsection (c)(1), the Agency 
     Head shall notify Congress and the Director in accordance 
     with paragraph (2) not later than 21 days after the end of 
     the quarter upon which such information is based.
       ``(B) Notification based on interim report.--If the 
     determination of significant deviation is based on 
     information submitted under subsection (c)(2), the Agency 
     Head shall notify Congress and the Director in accordance 
     with paragraph (2) not later than 21 days after the 
     submission of such information.
       ``(e) Determination of Gross Deviation.--

[[Page S4016]]

       ``(1) Chief information officer.--Upon receiving 
     information under subsection (c), the Chief Information 
     Officer shall--
       ``(A) determine if any IT investment project has grossly 
     deviated; and
       ``(B) report any such determination to the Agency Head.
       ``(2) Congressional notification.--If the Chief Information 
     Officer determines under paragraph (1) that an IT investment 
     project has grossly deviated and the Agency Head has not 
     submitted information to the appropriate congressional 
     committees of a gross deviation for that project under this 
     section since the project was last required to be rebaselined 
     under this section, the Agency Head shall submit information 
     to the appropriate congressional committees, the Director, 
     and the Government Accountability Office that includes--
       ``(A) notification of such determination, which--
       ``(i) identifies the date on which such determination was 
     made; and
       ``(ii) indicates whether or not the project has been 
     previously reported as a significant or gross deviation by 
     the Chief Information Officer, and the date of any such 
     report;
       ``(B) incorporations by reference of all prior reports to 
     Congress on the project required under this section;
       ``(C) updated accounts of the items described in 
     subparagraphs (C) through (G) of subsection (d)(2);
       ``(D) the original estimate at completion for the project 
     manager, any contractor, and any independent analysis;
       ``(E) a graphical depiction that shows monthly planned 
     expenditures against actual expenditures since the 
     commencement of the project;
       ``(F) the amount, if any, of incentive or award fees any 
     contractor has received since the commencement of the 
     contract and the reasons for receiving such incentive or 
     award fees;
       ``(G) the project manager's estimated cost at completion 
     and estimated completion date for the project if current 
     requirements are not modified;
       ``(H) the project manager's estimated cost at completion 
     and estimated completion date for the project based on 
     reasonable modification of such requirements;
       ``(I) an explanation of the most significant occurrence 
     contributing to the variance identified, including cost, 
     schedule, and performance variances, and the effect such 
     occurrence will have on future project costs and program 
     schedule;
       ``(J) a statement regarding previous or anticipated 
     rebaselining or replanning of the project and the names of 
     the individuals responsible for approval;
       ``(K) the original life cycle cost of the investment and 
     the expected life cycle cost of the investment expressed in 
     constant base year dollars and in current dollars; and
       ``(L) a comprehensive plan of action to remedy the gross 
     deviation, and milestones established to control future cost, 
     schedule, and performance deviations in the future.
       ``(3) Remedial action.--
       ``(A) In general.--If the Chief Information Officer 
     determines under paragraph (1)(A) that an IT investment 
     project has grossly deviated, the Agency Head, in 
     consultation with the Chief Information Officer and the 
     appropriate project manager, shall develop and implement a 
     remedial action plan that includes--
       ``(i) a report that--

       ``(I) describes the primary business case and key 
     functional requirements for the project;
       ``(II) describes any portions of the project that have 
     technical requirements of sufficient clarity that such 
     portions may be feasibly procured under fixed-price 
     contracts;
       ``(III) includes a certification by the Agency Head, after 
     consultation with the Chief Information Officer, that all 
     technical and business requirements have been reviewed and 
     validated to ensure alignment with the reported business 
     case;
       ``(IV) describes any changes to the primary business case 
     or key functional requirements which have occurred since 
     project inception; and
       ``(V) includes an independent government cost estimate for 
     the project conducted by an entity approved by the Director;

       ``(ii) an analysis that--

       ``(I) describes agency business goals that the project was 
     originally designed to address;
       ``(II) includes a gap analysis of what project deliverables 
     remain in order for the agency to accomplish the business 
     goals referred to in subclause (I);
       ``(III) identifies the 3 most cost-effective alternative 
     approaches to the project which would achieve the business 
     goals referred to in subclause (I); and
       ``(IV) includes a cost-benefit analysis, which compares--

       ``(aa) the completion of the project with the completion of 
     each alternative approach, after factoring in future costs 
     associated with the termination of the project; and
       ``(bb) the termination of the project without pursuit of 
     alternatives, after factoring in foregone benefits; and
       ``(iii) a new baseline of the project is established that 
     is consistent with the independent government cost estimate 
     required under clause (i)(V); and
       ``(iv) the project is designated as a core IT investment 
     project and subjected to the requirements under subsection 
     (f).
       ``(B) Submission to congress.--The remedial action plan and 
     all corresponding reports, analyses, and actions under this 
     paragraph shall be submitted to the appropriate congressional 
     committees and the Director.
       ``(C) Reporting and analysis exemptions.--
       ``(i) In general.--The Chief Information Officer, in 
     coordination with the Agency Head and the Director, may 
     forego the completion of any element of a report or analysis 
     under clause (i) or (ii) of subparagraph (A) if the Chief 
     Information Officer determines that such element is not 
     relevant to the understanding of the challenges facing the 
     project or that such element does not further the remedial 
     steps necessary to ensure that the project is completed in a 
     timely and cost-efficient manner.
       ``(ii) Identification of reasons.--The Chief Information 
     Officer shall include the reasons for not including any 
     element referred to in clause (i) in the report submitted to 
     Congress under subparagraph (B).
       ``(4) Deadline and funding contingency.--
       ``(A) Notification and remedial action based on quarterly 
     report.--
       ``(i) In general.--If the determination of gross deviation 
     is based on a report submitted under subsection (c)(1), the 
     Agency Head shall--

       ``(I) not later than 45 days after the end of the quarter 
     upon which such report is based, notify the appropriate 
     congressional committees and the Director in accordance with 
     paragraph (2); and
       ``(II) not later than 180 days after the end of the quarter 
     upon which such report is based, ensure the completion of 
     remedial action under paragraph (3).

       ``(ii) Failure to meet deadlines.--If the Agency Head fails 
     to meet the deadline described in clause (i)(II), additional 
     funds may not be obligated to support expenditures associated 
     with the project until the requirements of this subsection 
     have been fulfilled, except for expenditures to address 
     reporting notifications, remedial actions, and other 
     requirements under this Act.
       ``(B) Notification and remedial action based on interim 
     report.--
       ``(i) In general.--If the determination of gross deviation 
     is based on a report submitted under subsection (c)(2), the 
     Agency Head shall--

       ``(I) not later than 45 days after the submission of such 
     report, notify the appropriate congressional committees in 
     accordance with paragraph (2); and
       ``(II) not later than 180 days after the submission of such 
     report, ensure the completion of remedial action in 
     accordance with paragraph (3).

       ``(ii) Failure to meet deadlines.--If the Agency Head fails 
     to meet the deadline described in clause (i)(II), additional 
     funds may not be obligated to support expenditures associated 
     with the project until the requirements of this subsection 
     have been fulfilled, except for expenditures to address 
     reporting notifications, remedial actions, and other 
     requirements under this Act.
       ``(f) Additional Requirements for Core IT Investment 
     Project Reports.--
       ``(1) Initial report.--If a remedial action plan described 
     in subsection (e)(3)(A) has not been submitted for a core IT 
     investment project, the Agency Head, in coordination with the 
     Chief Information Officer and responsible program managers, 
     shall prepare an initial report for inclusion in the first 
     budget submitted to Congress under section 1105(a) of title 
     31, United States Code, after the designation of a project as 
     a core IT investment project, which includes--
       ``(A) a description of the primary business case and key 
     functional requirements for the project;
       ``(B) an identification and description of any portions of 
     the project that have technical requirements of sufficient 
     clarity that such portions may be feasibly procured under 
     fixed-price contracts;
       ``(C) an independent cost estimate for the project;
       ``(D) certification by the Chief Information Officer that 
     all technical and business requirements have been reviewed 
     and validated to ensure alignment with the reported business 
     case; and
       ``(E) any changes to the primary business case or key 
     functional requirements which have occurred since project 
     inception.
       ``(2) Quarterly review of business case.--The Agency Head, 
     in coordination with the Chief Information Officer and 
     responsible program managers, shall--
       ``(A) monitor the primary business case and core 
     functionality requirements reported to Congress and the 
     Director for designated core IT investment projects; and
       ``(B) if changes to the primary business case or key 
     functional requirements for a core IT investment project 
     occur in any fiscal quarter, submit a report to Congress and 
     the Director not later than 14 days after the end of such 
     quarter that details the changes and describes the impact the 
     changes will have on the cost and ultimate effectiveness of 
     the project.
       ``(3) Alternative significant deviation determination.--If 
     the Chief Information Officer determines, subsequent to a 
     change in the primary business case or key functional 
     requirements, that without such change the project would have 
     significantly deviated--
       ``(A) the Chief Information Officer shall notify the Agency 
     Head of the significant deviation; and
       ``(B) the Agency Head shall fulfill the requirements under 
     subsection (d)(2) in accordance with the deadlines under 
     subsection (d)(3).

[[Page S4017]]

       ``(4) Alternative gross deviation determination.--If the 
     Chief Information Officer determines, subsequent to a change 
     in the primary business case or key functional requirements, 
     that without such change the project would have grossly 
     deviated--
       ``(A) the Chief Information Officer shall notify the Agency 
     Head of the gross deviation; and
       ``(B) the Agency Head shall fulfill the requirements under 
     subsections (e)(2) and (e)(3) in accordance with subsection 
     (e)(4).
       ``(g) Method of Delivery.--Reports and other information 
     required under this section may be submitted through the Web 
     site established under section 11302(c)(1) in a manner 
     consistent with guidance from the Office of Management and 
     Budget to satisfy reporting requirements and to reduce 
     paperwork.
       ``(h) Department of Defense Acquisitions.--The requirements 
     of section 2445a of title 10, United States Code, shall apply 
     to the information technology investment projects of the 
     Department of Defense instead of the requirements under this 
     section.''.
       (b) Inclusion in the Budget Submitted to Congress.--Section 
     1105(a) of title 31, United States Code, is amended--
       (1) in the matter preceding paragraph (1), by striking 
     ``include in each budget the following:'' and inserting 
     ``include in each budget--'';
       (2) by redesignating the second paragraph (33) (as added by 
     section 889(a) of Public Law 107-296) as paragraph (35);
       (3) in each of paragraphs (1) through (34), by striking the 
     period at the end and inserting a semicolon;
       (4) in paragraph (35), as redesignated by paragraph (2), by 
     striking the period at the end and inserting ``; and''; and
       (5) by adding at the end the following:
       ``(36) the reports prepared under section 11317(f) of title 
     40, United States Code, relating to the core IT investment 
     projects of the agency.''.
       (c) Improvement of Information Technology Acquisition and 
     Development.--Subchapter II of chapter 113 of title 40, 
     United States Code, is amended by adding at the end the 
     following:

     ``SEC. 11319. ACQUISITION AND DEVELOPMENT.

       ``(a) Purpose.--The objective of this section is to 
     significantly reduce--
       ``(1) cost overruns and schedule slippage from the 
     estimates established at the time the program is initially 
     approved;
       ``(2) the number of requirements and business objectives at 
     the time the program is approved that are not met by the 
     delivered products; and
       ``(3) the number of critical defects and serious defects in 
     delivered information technology.
       ``(b) OMB Guidance.--The Director of the Office of 
     Management and Budget shall--
       ``(1) not later than 180 days after the date of the 
     enactment of this section, prescribe uniformly applicable 
     guidance for agencies to implement the requirements of this 
     section, which shall not include any exemptions to such 
     requirements not specifically authorized under this section; 
     and
       ``(2) take any actions that are necessary to ensure that 
     Federal agencies are in compliance with the guidance 
     prescribed pursuant to paragraph (1) not later than 1 year 
     after the date of the enactment of this section.
       ``(c) Establishment of Program.--Not later than 180 days 
     after the date of the enactment of this section, each Agency 
     Head (as defined in section 11317(a) of title 40, United 
     States Code) shall establish a program to improve the 
     information technology (referred to in this section as `IT') 
     processes overseen by the Chief Information Officer.
       ``(d) Program Requirements.--Each program established 
     pursuant to this section shall include--
       ``(1) a documented process for IT acquisition planning, 
     requirements development and management, project management 
     and oversight, earned-value management, and risk management;
       ``(2) the development of appropriate metrics that can be 
     implemented and monitored on a real-time dashboard for 
     performance measurement of--
       ``(A) processes and development status of investments;
       ``(B) continuous process improvement of the program; and
       ``(C) achievement of program and investment outcomes;
       ``(3) a process to ensure that key program personnel have 
     an appropriate level of experience, training, and education, 
     at an institution or institutions approved by the Director, 
     in the planning, acquisition, execution, management, and 
     oversight of IT;
       ``(4) a process to ensure that the agency implements and 
     adheres to established processes and requirements relating to 
     the planning, acquisition, execution, management, and 
     oversight of IT programs and developments; and
       ``(5) a process for the Chief Information Officer to 
     intervene or stop the funding of an IT investment if it is at 
     risk of not achieving major project milestones.
       ``(e) Annual Report to OMB.--Not later than the last day of 
     February of each year, the Agency Head shall submit a report 
     to the Office of Management and Budget that includes--
       ``(1) a detailed summary of the accomplishments of the 
     program established by the Agency Head pursuant to this 
     section;
       ``(2) the status of completeness of implementation of each 
     of the program requirements, and the date each such 
     requirement was deemed to be completed;
       ``(3) the percentage of Federal IT projects covered under 
     the program compared to all of the IT projects of the agency, 
     listed by number of programs and by annual dollars expended;
       ``(4) a detailed breakdown of the sources and uses of the 
     amounts spent by the agency during the previous fiscal year 
     to support the activities of the program;
       ``(5) a copy of any guidance issued under the program and a 
     statement regarding whether each such guidance is mandatory;
       ``(6) the identification of the metrics developed in 
     accordance with subsection (b)(2);
       ``(7) a description of how paragraphs (3) and (4) of 
     subsection (b) have been implemented and any related agency 
     guidance; and
       ``(8) a description of how agencies will continue to review 
     and update the implementation and objectives of such 
     guidance.
       ``(f) Annual Report to Congress.--The Director of the 
     Office of Management and Budget shall provide an annual 
     report to Congress on the status and implementation of the 
     program established pursuant to this section.
       ``(g) Department of Defense Acquisitions.--The requirements 
     of section 2223a of title 10, United States Code, shall apply 
     to the information technology investment projects of the 
     Department of Defense instead of the requirements under this 
     section.''.
       (d) Clerical Amendments.--The table of sections for chapter 
     113 of title 40, United States Code, is amended--
       (1) by striking the item relating to section 11317 and 
     inserting the following:

``11317. Significant and gross deviations.''; and

       (2) by inserting after the item relating to section 11318 
     the following:

``11319. Acquisition and development.''.

     SEC. 5. MAJOR AUTOMATED INFORMATION SYSTEM PROGRAMS OF THE 
                   DEPARTMENT OF DEFENSE.

       (a) Program to Improve Information Technology Processes.--
     Chapter 131 of title 10, United States Code, is amended by 
     adding after section 2223 the following:

     ``Sec. 2223a. Information technology acquisition planning and 
       oversight requirements

       ``(a) Establishment of Program.--The Secretary of Defense 
     shall establish a program to improve the planning and 
     oversight processes for the acquisition of major automated 
     information systems by the Department of Defense.
       ``(b) Program Components.--The program established under 
     subsection (a) shall include--
       ``(1) a documented process for information technology 
     acquisition planning, requirements development and 
     management, project management and oversight, earned value 
     management, and risk management;
       ``(2) the development of appropriate metrics that can be 
     implemented and monitored on a real-time basis for 
     performance measurement of--
       ``(A) processes and development status of investments in 
     major automated information system programs;
       ``(B) continuous process improvement of the program; and
       ``(C) achievement of program and investment outcomes;
       ``(3) a process to ensure that key program personnel have 
     an appropriate level of experience, training, and education 
     in the planning, acquisition, execution, management, and 
     oversight of information technology systems;
       ``(4) a process to ensure that military departments and 
     defense agencies adhere to established processes and 
     requirements relating to the planning, acquisition, 
     execution, management, and oversight of information 
     technology programs and developments; and
       ``(5) a process under which an appropriate Department of 
     Defense official may intervene or terminate the funding of an 
     information technology investment if the investment is at 
     risk of not achieving major project milestones.''.
       (b) Annual Report to Congress.--Section 2445b(b) of title 
     10, United States Code is amended by adding at the end the 
     following:
       ``(5) For each major automated information system program 
     for which such information has not been provided in a 
     previous annual report--
       ``(A) a description of the primary business case and key 
     functional requirements for the program;
       ``(B) a description of the analysis of alternatives 
     conducted with regard to the program;
       ``(C) an assessment of the extent to which the program, or 
     portions of the program, have technical requirements of 
     sufficient clarity that the program, or portions of the 
     program, may be feasibly procured under firm, fixed-price 
     contracts;
       ``(D) the most recent independent cost estimate or cost 
     analysis for the program provided by the Director of Cost 
     Assessment and Program Evaluation in accordance with section 
     2334(a)(6);
       ``(E) a certification by a Department of Defense 
     acquisition official with responsibility for the program that 
     all technical and business requirements have been reviewed 
     and validated to ensure alignment with the business case; and
       ``(F) an explanation of the basis for the certification 
     described in subparagraph (E).

[[Page S4018]]

       ``(6) For each major automated information system program 
     for which the information required under paragraph (5) has 
     been provided in a previous annual report, a summary of any 
     significant changes to the information previously 
     provided.''.

     SEC. 6. IT SWAT TEAM.

       (a) Purpose.--The Director of the Office of Management of 
     Budget (referred to in this section as the ``Director''), in 
     consultation with the Administrator of the Office of 
     Electronic Government and Information and Technology at the 
     Office of Management and Budget (referred to in this section 
     as the ``E-Gov Administrator''), shall assist agencies in 
     avoiding significant and gross deviations in the cost, 
     schedule, and performance of IT investment projects (as such 
     terms are defined in section 11317(a) of title 40, United 
     States Code).
       (b) IT SWAT Team.--
       (1) Establishment.--Not later than 180 days after the date 
     of the enactment of this Act, the Director shall promulgate 
     policy and guidance for the head of each Federal agency that 
     establishes procedures for the creation of a small group of 
     individuals (referred to in this section as the ``IT SWAT 
     Team'') to carry out the purpose described in subsection (a).
       (2) Qualifications.--Individuals selected for the IT SWAT 
     Team--
       (A) shall be certified at the Senior/Expert level according 
     to the Federal Acquisition Certification for Program and 
     Project Managers (FAC-P/PM);
       (B) shall have comparable education, certification, 
     training, and experience to successfully manage high-risk IT 
     investment projects; or
       (C) shall have expertise in the successful management or 
     oversight of planning, architecture, process, integration, or 
     other technical and management aspects using proven process 
     best practices on high-risk IT investment projects.
       (3) Number.--The Director, in consultation with the E-Gov 
     Administrator and the head of the agency primarily 
     responsible for the IT investment, shall determine the number 
     of individuals who will be selected for the IT SWAT Team.
       (c) Outside Consultants.--
       (1) Identification.--The E-Gov Administrator and 
     representatives of the Chief Information Officers Council 
     shall identify consultants in the private sector who have 
     expert knowledge in IT program management and program 
     management review teams. Not more than 20 percent of such 
     consultants may be formally associated with any 1 of the 
     following types of entities:
       (A) Commercial firms.
       (B) Nonprofit entities.
       (C) Federally funded research and development centers.
       (2) Use of consultants.--
       (A) In general.--Consultants identified under paragraph (1) 
     may be used to assist the IT SWAT Team in assessing and 
     improving IT investment projects.
       (B) Limitation.--Consultants with a formally established 
     relationship with an organization may not participate in any 
     assessment involving an IT investment project for which such 
     organization is under contract to provide technical support.
       (C) Exception.--The limitation described in subparagraph 
     (B) may not be construed as precluding access to anyone 
     having relevant information helpful to the conduct of the 
     assessment.
       (3) Contracts.--The E-Gov Administrator, in conjunction 
     with the Administrator of the General Services Administration 
     (GSA), may establish competitively bid contracts with 1 or 
     more qualified consultants, independent of any GSA schedule.
       (d) Initial Response to Anticipated Significant or Gross 
     Deviation.--If the head of the Federal agency primarily 
     responsible for the major IT investment or the E-Gov 
     Administrator determines that there is reasonable cause to 
     believe that a major IT investment project is likely to 
     significantly or grossly deviate (as defined in section 
     11317(a) of title 40, United States Code), including the 
     receipt of inconsistent or missing data, or if such agency 
     head or the E-Gov Administrator determines that the 
     assignment of 1 or more members of the IT SWAT Team could 
     meaningfully reduce the possibility of significant or gross 
     deviation, such agency head or the E-Gov Administrator shall 
     carry out the following activities:
       (1) Recommend the assignment of 1 or more members of the IT 
     SWAT Team to assess the project in accordance with the scope 
     and time period described in section 11317(c)(1) of title 40, 
     United States Code, beginning not later than 14 days after 
     such recommendation. No member of the SWAT Team who is 
     associated with the department or agency whose IT investment 
     project is the subject of the assessment may be assigned to 
     participate in this assessment. Such limitation may not be 
     construed as precluding access to anyone having relevant 
     information helpful to the conduct of the assessment.
       (2) If such agency head or the E-Gov Administrator 
     determines that 1 or more qualified consultants are needed to 
     support the efforts of the IT SWAT Team under paragraph (1), 
     negotiate a contract with the consultant to provide such 
     support during the period in which the IT SWAT Team is 
     conducting the assessment described in paragraph (1).
       (3) Ensure that the costs of an assessment under paragraph 
     (1) and the support services of 1 or more consultants under 
     paragraph (2) are paid for by the agency being assessed.
       (4) Monitor the progress made by the IT SWAT Team in 
     assessing the project.
       (e) Reduction of Significant or Gross Deviation.--If the 
     agency head described in subsection (d) or the E-Gov 
     Administrator determines that the assessment conducted under 
     subsection (d) confirms that a major IT investment project is 
     likely to significantly or grossly deviate, such agency head 
     or the E-Gov Administrator shall take steps to reduce the 
     deviation, which may include--
       (1) providing training, education, or mentoring to improve 
     the qualifications of the program manager;
       (2) replacing the program manager or other staff;
       (3) supplementing the program management team with Federal 
     Government employees or independent contractors;
       (4) terminating the project; or
       (5) hiring an independent contractor to report directly to 
     senior management and the E-Gov Administrator.
       (f) Enforcement of Accountability.--The Director may use 
     the actions directed under section 11303(b)(5) of title 5, 
     United States Code, to enforce accountability of the head of 
     the agency and for the investments made by the agency in 
     information technology.
       (g) Report to Congress.--The Director shall include in the 
     annual Report to Congress on the Benefits of E-Government 
     Initiatives a detailed summary of the composition and 
     activities of the IT SWAT Team, including--
       (1) the number and qualifications of individuals on the IT 
     SWAT Team;
       (2) a description of the IT investment projects that the IT 
     SWAT Team has worked during the previous fiscal year;
       (3) the major issues that necessitated the involvement of 
     the IT SWAT Team to assist agencies with assessing and 
     managing IT investment projects and whether such issues were 
     satisfactorily resolved;
       (4) if the issues referred to in paragraph (3) were not 
     satisfactorily resolved, the issues still needed to be 
     resolved and the Agency Head's plan for resolving such 
     issues;
       (5) a detailed breakdown of the sources and uses of the 
     amounts spent by the Office of Management and Budget and 
     other Federal agencies during the previous fiscal year to 
     support the activities of the IT SWAT Team; and
       (6) a determination of whether the IT SWAT Team has been 
     effective in--
       (A) preventing projects from deviating from the original 
     baseline; and
       (B) assisting agencies in conducting appropriate analysis 
     and planning before a project is funded.

     SEC. 7. AWARDS FOR PERSONNEL FOR EXCELLENCE IN THE 
                   ACQUISITION OF INFORMATION SYSTEMS AND 
                   INFORMATION TECHNOLOGY.

       (a) In General.--Not later than 180 days after the 
     enactment of this Act, the Director of the Office of 
     Personnel Management shall develop policy and guidance for 
     agencies to develop a program to recognize excellent 
     performance by Federal Government employees and teams of such 
     employees in the acquisition of information systems and 
     information technology for the agency.
       (b) Elements.--The program referred to in subsection (a) 
     shall, to the extent practicable--
       (1) obtain objective outcome measures; and
       (2) include procedures for--
       (A) the nomination of Federal Government employees and 
     teams of such employees for eligibility for recognition under 
     the program; and
       (B) the evaluation of nominations for recognition under the 
     program by 1 or more agency panels of individuals from 
     government, academia, and the private sector who have such 
     expertise, and are appointed in such a manner, as the 
     Director of the Office of Personal Management shall establish 
     for purposes of the program.
       (c) Award of Cash Bonuses and Other Incentives.--As part of 
     the program referred to in subsection (a), the Director of 
     the Office of Personnel Management, in consultation with the 
     Director of the Office of Management and Budget, shall 
     establish policies and guidance for agencies to reward any 
     Federal Government employee or teams of such employees 
     recognized pursuant to the program--
       (1) by awarding a cash bonus authorized by any other 
     provision of law to the extent that the performance of such 
     individual so recognized warrants the award of such bonus 
     under such provision of law;
       (2) through promotions and other nonmonetary awards;
       (3) by publicizing acquisition accomplishments by 
     individual employees and, as appropriate, the tangible end 
     benefits that resulted from such accomplishments; and
       (4) through other awards, incentives, or bonuses that the 
     head of the agency considers appropriate.

                          ____________________