[Federal Register Volume 77, Number 117 (Monday, June 18, 2012)]
[Proposed Rules]
[Pages 36194-36206]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-14701]


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 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
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  Federal Register / Vol. 77, No. 117 / Monday, June 18, 2012 / 
Proposed Rules  

[[Page 36194]]



FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 380

RIN 3064-AD73


Definition of ``Predominantly Engaged in Activities That Are 
Financial in Nature or Incidental Thereto''

AGENCY: Federal Deposit Insurance Corporation.

ACTION: Supplemental notice of proposed rulemaking and request for 
comment.

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SUMMARY: The Federal Deposit Insurance Corporation (``FDIC'') is 
amending the definition of ``financial activities'' set forth in 
section 380.8 of the FDIC's notice of proposed rulemaking published in 
the Federal Register on March 23, 2011 titled ``Orderly Liquidation 
Authority'' (``March 2011 NPR'').\1\ The March 2011 NPR proposed 
standards for determining if a company is predominantly engaged in 
financial activities for purposes of Title II of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act (``Dodd-Frank Act'' or 
``Act'').\2\ A company that is predominantly engaged in such activities 
is a ``financial company'' for purposes of Title II of the Act (unless 
it is one of the few entities specifically excepted). Provisions of the 
March 2011 NPR other than section 380.8 already have been finalized. 
Based on a number of factors described within this notice of proposed 
rulemaking (``NPR''), the FDIC believes that it is necessary to clarify 
the scope of the activities that would be considered to be financial 
activities. Accordingly, this NPR amends section 380.8 of the March 
2011 NPR to clarify the activities that would be considered to be 
financial activities for purposes of determining if a company is 
predominantly engaged in such activities under Title II of the Act.
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    \1\ 76 FR 16324 (March 23, 2011).
    \2\ Dodd-Frank Wall Street Reform and Consumer Protection Act, 
Public Law 111-203, 124 Stat. 1376 (2010).

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DATES: Comments should be received on or before August 17, 2012.

ADDRESSES: You may submit comments by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Agency Web site: http://www.FDIC.gov/regulations/laws/federal/propose.html
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments/Legal ESS, Federal Deposit Insurance Corporation, 550 17th 
Street NW., Washington, DC 20429.
     Hand Delivered/Courier: The guard station at the rear of 
the 550 17th Street Building (located on F Street), on business days 
between 7:00 a.m. and 5:00 p.m.
     Email: [email protected].
    Instructions: Comments submitted must include ``FDIC'' and ``RIN 
3064-AD73.'' Comments received will be posted without change to http://www.FDIC.gov/regulations/laws/federal/propose.html, including any 
personal information provided.

FOR FURTHER INFORMATION CONTACT: Ryan K. Clougherty, Senior Attorney, 
(202) 898-3843; or Robert C. Fick, Supervisory Counsel, (202) 898-8962, 
Legal Division, Federal Deposit Insurance Corporation, 550 17th Street 
NW., Washington, DC 20429.

SUPPLEMENTARY INFORMATION:

I. Background

    Title II of the Dodd-Frank Act (``Title II'') provides for the 
appointment of the FDIC as receiver of a covered financial company 
following the prescribed recommendation, determination, and, if 
applicable, judicial review process set forth in the Act. Title II 
outlines the process for the orderly liquidation of such a covered 
financial company following the FDIC's appointment as receiver. The 
March 2011 NPR was intended to provide clarity and certainty with 
respect to how key components of the orderly liquidation authority will 
be implemented and to ensure that the liquidation process under Title 
II reflects the Act's mandate of transparency in the liquidation of 
covered financial companies. Provisions of the March 2011 NPR other 
than section 380.8 were adopted in a Final Rule published in the 
Federal Register on July 15, 2011.\3\
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    \3\ 76 FR 41626 (July 15, 2011).
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    Section 201(a)(11) of the Act defines ``financial company,'' for 
purposes of Title II, as any company incorporated or organized under 
any provision of Federal law or the laws of any State that is: (a) a 
bank holding company, as defined in section 2(a) of the Bank Holding 
Company Act of 1956 (``BHC Act''); \4\ (b) a nonbank financial company 
supervised by the Board of Governors of the Federal Reserve System 
(``Board of Governors''); (c) any company that is predominantly engaged 
in activities that the Board of Governors has determined are financial 
in nature or incidental thereto for purposes of section 4(k) of the BHC 
Act; \5\ or (d) any subsidiary of any of the aforementioned companies 
that is predominantly engaged in activities that the Board of Governors 
has determined are financial in nature or incidental thereto for 
purposes of section 4(k) of the BHC Act, other than a subsidiary that 
is an insured depository institution or insurance company.\6\
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    \4\ 12 U.S.C. 1841(a).
    \5\ 12 U.S.C. 1843(k).
    \6\ Section 201(a)(11) also provides that ``financial company'' 
does not include Farm Credit System institutions chartered under and 
subject to the provisions of the Farm Credit Act of 1971, as amended 
(12 U.S.C. 2001 et seq.), or governmental or regulated entities as 
defined under section 1303(20) of the Federal Housing Enterprises 
Financial Safety and Soundness Act of 1992 (12 U.S.C. 4502(20)).
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    Section 201(b) of the Act provides that, for the purposes of 
defining the term ``financial company'' under section 201(a)(11), 
``[n]o company shall be deemed to be predominantly engaged in 
activities that the Board of Governors has determined are financial in 
nature or incidental thereto for purposes of section 4(k) of the [BHC 
Act], if the consolidated revenues of such company from such activities 
constitute less than 85 percent of the total consolidated revenues of 
such company, as the Corporation, in consultation with the Secretary 
[of the Treasury], shall establish by regulation. In determining 
whether a company is a financial company under [Title II], the 
consolidated revenues derived from the ownership or control of a 
depository institution shall be included.'' A company that is 
predominantly engaged in such activities is a ``financial

[[Page 36195]]

company'' under Title II (unless it is one of the few entities 
specifically excepted).
    Section 380.8 as proposed in the March 2011 NPR (``section 380.8'') 
set forth the criteria for determining if a company is predominantly 
engaged in financial activities for the purposes of Title II. 
Specifically, proposed section 380.8 provided that a company is 
predominantly engaged in financial activities if: (a) at least 85 
percent of the total consolidated revenues of the company for either of 
its two most recent fiscal years were derived, directly or indirectly, 
from financial activities, or (b) based upon all the relevant facts and 
circumstances, the FDIC determines that the consolidated revenues of 
the company from financial activities constitute 85 percent or more of 
the total consolidated revenues of the company. The public comment 
period on the March 2011 NPR closed on May 23, 2011.
    Just prior to the FDIC's publication of the March 2011 NPR, the 
Board of Governors published a notice of proposed rulemaking titled 
``Definitions of `Predominantly Engaged in Financial Activities' and 
`Significant' Nonbank Financial Company and Bank Holding Company'' 
(``Board of Governors' NPR'').\7\ The Board of Governors' NPR proposed 
criteria for determining whether a company is ``predominantly engaged 
in financial activities'' for purposes of determining if the company is 
a nonbank financial company under Title I of the Act.\8\
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    \7\ 76 FR 7731 (February 11, 2011).
    \8\ Under section 113 of the Act, the Financial Stability 
Oversight Council (``FSOC'') may designate a nonbank financial 
company for supervision by the Board of Governors if the FSOC 
determines that material financial distress of the company, or the 
nature, scope, size, scale, concentration, interconnectedness, or 
mix of the company's activities, could pose a threat to the 
financial stability of the United States.
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    The Title I definition of ``predominantly engaged in financial 
activities'' is based upon activities that are ``financial in nature'' 
as defined in section 4(k) of the BHC Act. Similarly, the criteria for 
determining under Title II whether a company (other than a bank holding 
company or a nonbank financial company supervised by the Board of 
Governors) is predominantly engaged in financial activities is 
primarily based upon activities that the Board of Governors has 
determined are ``financial in nature'' under section 4(k) of the BHC 
Act. As a result of these commonalities, the FDIC coordinated closely 
with the Board of Governors on the proposed criteria set forth in 
section 380.8 in the March 2011 NPR.\9\
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    \9\ On July 15, 2011, the FDIC issued a final rule that 
implemented the provisions of the March 2011 NPR except section 
380.8. Due to the ongoing coordination efforts between the FDIC and 
the Board of Governors, the final rule reserved section 380.8. See 
76 FR 41626 (July 15, 2011).
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    Thereafter, the Board of Governors published a supplemental notice 
of proposed rulemaking that would amend the definition of financial 
activities set forth in the Board of Governors' NPR (``Board of 
Governors' Amended NPR'').\10\ The Board of Governors' Amended NPR was 
published in response to a number of comments the Board of Governors 
received that raised questions as to whether the conduct of certain 
financial activities in a manner that did not comply with the 
conditions applicable to the conduct of such activities by bank holding 
companies should be considered to be financial activities under Title I 
of the Dodd-Frank Act.
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    \10\ 77 FR 21494 (April 10, 2012).
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    As discussed in the Board of Governors' Amended NPR, section 4(k) 
of the BHC Act (``section 4(k)'') and the Board of Governors' 
Regulation Y (``Regulation Y'') \11\ contain a broad list of financial 
activities and impose conditions on bank holding companies conducting 
those activities. Many of the conditions contained within section 4(k) 
and Regulation Y are intended to permit bank holding companies to 
engage in certain financial activities without threatening the safety 
and soundness of subsidiary depository institutions. Similarly, other 
conditions are intended to prevent financial holding companies from 
controlling commercial firms or relate to other provisions of law. Such 
conditions regulate the conduct of bank holding companies or financial 
holding companies engaged in such activities, but do not define the 
essential nature of the activity itself. Defining financial activities 
for purpose of Title I to include all of those conditions likely would 
enable some companies to be predominantly engaged in financial 
activities and yet avoid eligibility for supervision by the Board of 
Governors simply by choosing not to abide by conditions, including 
those imposed for safety and soundness purposes. For example, one 
commenter to both the Board of Governors' NPR and the FDIC's March 2011 
NPR suggested that a firm that organizes, sponsors, and manages an 
open-end investment company (including a mutual fund or money market 
mutual fund) should not be considered to be engaged in a financial 
activity if the firm owns or controls more than a given percentage of 
the fund because a financial holding company may not own or control 
more than that amount of the fund. As a result the Board of Governors' 
Amended NPR proposes to clarify that any activity described as 
financial in nature in section 4(k) would be considered to be a 
financial activity for purposes of Title I of the Act without regard to 
the conditions and limitations imposed by section 4(k) and Regulation Y 
on bank holding companies that do not define the activity itself.
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    \11\ 12 CFR Part 225.
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    Accordingly, the Board of Governors' Amended NPR proposes an 
appendix, as a supplement to the Board of Governors' NPR, that contains 
a list of the activities, including conditions that the Board of 
Governors has determined are necessary to define the activity as 
financial. The financial activities defined in the Board of Governors' 
Amended NPR appendix are substantively identical to those in section 
4(k), but do not include the conditions and limitations imposed on the 
conduct of the activity by a bank holding company for reasons such as 
safety and soundness. The FDIC consulted with the Board of Governors 
during the development of this NPR. The FDIC also consulted with the 
U.S. Department of Treasury, as required by section 201(b) of the Act.

II. Overview of Comments

    The FDIC received 6 comments relating to section 380.8 in response 
to the March 2011 NPR. One comment, discussed above, addressed the 
definition of ``financial activities'' for purposes of Title II. The 
FDIC intends to provide a complete discussion of the comments submitted 
regarding section 380.8 after considering the comments received on this 
NPR. The FDIC invites comments on all aspects of the proposed amendment 
contained within this NPR.

III. Proposed Rule

    As noted above, the Board of Governors' Amended NPR provides a list 
of the activities that would be considered in determining whether a 
company is predominantly engaged in financial activities for purposes 
of Title I. The description of each of the financial activities does 
not include any conditions or limitations that are imposed on bank 
holding companies that do not define the essence of the financial 
activity.
    The FDIC agrees with the exclusion of those conditions and 
limitations that the Board of Governors has excluded and proposes to 
adopt the same approach in determining which activities are financial 
activities for purposes of Title

[[Page 36196]]

II. The FDIC believes that it is important for several reasons that 
``financial in nature'' for purposes of Title II mean the same as it 
does for purposes of Title I. First, section 4(k) is in the BHC Act, 
and the Board of Governors is the Federal agency charged with 
interpreting and implementing the BHC Act. Any interpretation of 
``financial in nature'' under section 4(k) that is inconsistent with 
the Board of Governors' interpretation could frustrate Congressional 
intent regarding Title II. Section 204 of the Dodd Frank Act generally 
states that the intent of Title II is to provide for the liquidation of 
failing financial companies that pose a significant risk to the 
financial stability of the United States in a manner that mitigates 
such risk and minimizes moral hazard. Based upon this expression of 
Congressional intent regarding Title II, and given that one of the 
goals of Title I is to provide the authority to require the supervision 
of certain nonbank financial companies that could pose a threat to the 
financial stability of the United States, the FDIC believes that both 
of these goals can be achieved in a manner consistent with 
Congressional goals if such a key term as ``financial in nature'' is 
given the same meaning in both Titles I and II. Second, utilizing in 
Title II an interpretation of ``financial in nature'' that is 
inconsistent with the Title I interpretation could result in confusion 
on the part of companies that may be subject to either or both of 
Titles I and II. For example, if the interpretations are different, a 
company may rely on the Title I interpretation of ``financial in 
nature'' to incorrectly conclude that it is not subject to Title II's 
orderly liquidation authority. Conversely, a company may use the Title 
II interpretation of ``financial in nature'' to incorrectly conclude 
that it is not eligible under the Financial Stability Oversight 
Council's Title I authority to be supervised by the Board of Governors 
and subject to enhanced prudential standards. Third, as noted above, 
the FDIC believes that it is important that Titles I and II work 
together in a manner that provides a coherent framework for monitoring 
and controlling financial companies that could have a serious adverse 
effect on the financial stability of the United States, as they 
operate, and for liquidating those companies, should it be necessary, 
with the least disruption to the U.S. financial stability, if any 
should fail.
    While both Title I and Title II rely on section 4(k) to determine 
whether a company is predominantly engaged in financial activities, 
there are two important differences between the two titles in how 
section 4(k) is utilized. One of those differences \12\ is that, for 
purposes of Title I, only those activities that are ``financial in 
nature'' as defined in section 4(k) are included in determining whether 
a company is predominantly engaged in financial activities.\13\ In 
contrast, Title II contemplates the inclusion of activities that the 
Board of Governors has determined are either ``financial in nature'' or 
``incidental thereto'' under section 4(k).\14\ Consequently, the FDIC 
is proposing to amend the March 2011 NPR to clarify that, consistent 
with the Board of Governors' Amended NPR and the purposes of Title II, 
the term ``financial activity'' includes each activity referenced in 
section 4(k) that the Board of Governors has determined are either 
financial in nature or incidental thereto without regard to conditions 
or limitations that are imposed on bank holding companies engaged in 
such activities that do not define the essential nature of the activity 
itself.\15\
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    \12\ Under section 102(a)(6) of the Act, a company is 
predominantly engaged in financial activities for purposes of Title 
I if (i) the company's annual gross revenues derived from such 
activities constitute 85 percent or more of the company's annual 
gross consolidated revenues, or (ii) the company's consolidated 
assets related to such activities represent 85 percent or more of 
the consolidated assets of the company. Conversely, under Title II, 
a company is predominantly engaged in financial activities only if 
the company's consolidated revenues derived from financial 
activities constitute 85 percent or more of the company's total 
consolidated revenues.
    \13\ Section 102(a)(6) of the Dodd Frank Act.
    \14\ The only effect of this difference is that this NPR 
includes finder activities as ``financial activities'' in addition 
to the activities that are listed as financial-in-nature.
    \15\ As noted in the Board of Governors' Amended NPR, conditions 
that do not define the activity itself include those conditions that 
were imposed to ensure that the activity is conducted in a safe and 
sound manner, to prevent a financial holding company from 
controlling a commercial firm, or to comply with another provision 
of law. See 77 FR 21494 (April 10, 2012).
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    The FDIC consulted with the Board of Governors during the 
development of this NPR. The FDIC also consulted with the U.S. 
Department of Treasury, as required by section 201(b) of the Act.

Definition of Financial Activity

    Section 380.8 of the March 2011 NPR proposed a definition of 
``financial activity'' that includes: (a) Any activity, wherever 
conducted, described in 12 CFR 225.86 or any successor regulation; (b) 
ownership or control of one or more depository institutions; and (c) 
any other activity, wherever conducted, determined by the Board of 
Governors in consultation with the Secretary of the Treasury, under 
section 4(k)(1)(A) of the BHC Act \16\ to be financial in nature or 
incidental to a financial activity.\17\
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    \16\ See, 12 U.S.C. 1843(k)(1)(A).
    \17\ See, 76 FR 16324 (March 23, 2011).
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    As amended by this NPR, the activities that would be considered 
financial activities are those described in section 4(k) that the Board 
of Governors has determined are financial in nature or incidental 
thereto, but without the conditions and limitations imposed for safety 
and soundness reasons or to ensure compliance with other applicable law 
on the conduct of those activities by a bank holding company. Similar 
to the conclusion cited in the Board of Governors' Amended NPR, the 
FDIC believes that defining financial activities for purpose of Title 
II to include all of those conditions likely would enable some 
companies to be predominantly engaged in financial activities and yet 
avoid the orderly liquidation process simply by choosing not to abide 
by the conditions imposed on bank holding companies, including those 
imposed for safety and soundness. The FDIC believes that excluding 
those conditions that regulate the conduct of an activity by a bank 
holding company is consistent with the purposes of both Title II and 
Title I.
    Additionally, because section 4(k) references financial activities 
that were authorized by the Board of Governors under various 
authorities at different points in time, certain of these financial 
activities overlap with, or are wholly subsumed by, other financial 
activities that are permissible for financial holding companies.\18\ 
The FDIC has attempted to identify and request comment on these 
potential areas of overlap throughout this NPR. The following 
discussion describes the categories of the activities that are 
financial activities for purposes of this NPR and identifies the 
conditions of section 4(k) and Regulation Y that are not reflected in 
the NPR due to the fact that they do not define the essential nature of 
the activity.
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    \18\ For example, activities permitted as ``closely related to 
banking'' and ``usual in connection with banking abroad'' were 
authorized by the Board of Governors over many years of interpreting 
the BHC Act and the International Banking Act, respectively. Because 
the Gramm-Leach-Bliley Act incorporated all such activities by 
reference in section 4(k) and authorized additional financial 
activities, overlapping financial activities are authorized 
separately in section 4(k), and in some cases, subject to different 
limitations and conditions.
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 Lending, Exchanging, Transferring, Investing for Others, or 
Safeguarding Money and Securities
    The activities of lending, exchanging, transferring, investing for 
others, or safeguarding money and securities were

[[Page 36197]]

authorized as permissible for financial holding companies by the Gramm-
Leach-Bliley Act (``GLB Act'').\19\
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    \19\ 12 U.S.C. 1843(k)(4)(A).
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 Insurance Activities
    A broad range of insurance activities, including insuring, 
guaranteeing, or indemnifying against loss, harm, damage, illness, 
disability, or death, or providing and issuing annuities, and acting as 
principal, agent, or broker for purposes of the foregoing, in any 
State, were authorized as permissible for financial holding companies 
by the GLB Act.\20\
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    \20\ 12 U.S.C. 1843(k)(4)(B).
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 Financial, Investment, and Economic Advisory Services
    The activities of providing investment, financial, or economic 
advisory services were authorized as permissible for financial holding 
companies by the GLB Act.\21\
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    \21\ 12 U.S.C. 1843(k)(4)(C).
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 Securitizing
    The activity of issuing or selling instruments representing 
interests in pools of assets was authorized as permissible for 
financial holding companies by the GLB Act.\22\ The GLB Act also 
imposed the condition that the assets being securitized must be 
permissible for a bank to hold directly. This condition appears to 
address both safety and soundness matters and restrictions imposed by 
other provisions of law unrelated to the financial nature of the 
activity, and consequently, is excluded from the definition of this 
activity.
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    \22\ 12 U.S.C. 1843(k)(4)(D).
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 Underwriting, Dealing, and Market Making
    The activities of underwriting, dealing in, and making a market in 
securities were authorized as permissible for financial holding 
companies by the GLB Act.\23\
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    \23\ 12 U.S.C. 1843(k)(4)(E).
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 Extending Credit and Servicing Loans
    The activities of making, acquiring, brokering, or servicing loans 
or other extensions of credit (including factoring, issuing letters of 
credit and accepting drafts) for the company's account or for the 
account of others were authorized by the Board of Governors as 
activities that are closely related to banking and thus permissible for 
bank holding companies.\24\ The FDIC requests comment on whether these 
lending activities are included in the broad authorization of lending 
under section 4(k)(4)(A) of the BHC Act and need not be separately 
reflected in this NPR.
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    \24\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.28(b)(1).
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 Activities Related to Extending Credit
    Activities usual in connection with making, acquiring, brokering, 
or servicing loans or other extensions of credit were determined to be 
permissible by the Board of Governors for bank holding companies as 
activities that are closely related to banking.\25\ These activities 
include performing appraisals of real estate and personal property 
(including securities), acting as an intermediary for commercial or 
industrial real estate financing, providing check guarantee services, 
providing collection agency services, providing credit bureau services, 
engaging in asset management, servicing, and collection activities, 
acquiring debt in default, and providing real estate settlement 
services.\26\ This NPR reflects these activities without the conditions 
imposed on the conduct of these activities by a bank holding company 
that do not describe the financial activities themselves.
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    \25\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.28(b)(2).
    \26\ Id.
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    For example, under the Board of Governors' Regulation Y, a bank 
holding company may not have an interest in, participate in managing or 
developing, or promote or sponsor the development of the property for 
which it is arranging commercial real estate equity financing. This NPR 
does not reflect these conditions because they are not essential to the 
activity of arranging commercial real estate equity financing.\27\ 
Similarly, under the regulations issued by the Board of Governors, bank 
holding companies conducting asset management activities may engage in 
these activities only if the company does not also engage in real 
property management or real estate brokerage.\28\ This NPR does not 
reflect that condition because, for purposes of determining whether a 
company is predominantly engaged in financial activities, the 
restriction could be read to exclude any asset management activity from 
being treated as financial if the company also engaged in any real 
estate brokerage or property management activities. Neither real estate 
brokerage nor real estate management is a permissible financial 
activity for financial holding companies, and neither activity is 
considered to be financial for purposes of Title II. As a result, a 
company may engage in these activities and still be predominantly 
engaged in financial activities so long as the revenues from its 
financial activities comprise at least 85 percent of the company's 
total consolidated revenues.
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    \27\ Neither real estate brokerage nor real estate management is 
an activity that is financial in nature. See 12 U.S.C. Sec.  1843 
note; Public Law 111-8, sec. 624 (March 11, 2009).
    \28\ See, 12 CFR 225.28(b)(2)(vi).
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    The Board of Governors' regulations require a bank holding company 
acquiring debt in default to divest impermissible assets securing debt 
in default within a certain time period, stand only in the position of 
a creditor, not purchase equity of obligors of debt in default, and not 
acquire debt in default secured by shares of a bank or bank holding 
company. This NPR does not reflect these conditions because they do not 
appear to be part of the essential nature of the activity of acquiring 
debt in default. The conditions requiring the bank holding company to 
divest impermissible assets, stand only in the position of a creditor, 
and not purchase equity of obligors are intended to prevent a bank 
holding company from owning assets prohibited by the BHC Act or other 
provisions of law and do not define the essential nature of the 
activity of acquiring debt in default. Similarly, the condition 
requiring that the debt not be secured by shares of a bank or bank 
holding company was imposed to prevent the bank holding company from 
circumventing the BHC Act's requirement that a bank holding company 
obtain approval from the Board of Governors before acquiring control of 
another bank or bank holding company.
 Leasing
    Leasing personal or real property, and acting as an agent, broker, 
or adviser for personal or real property was determined to be closely 
related to banking by the Board of Governors.\29\
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    \29\ 12 U.S.C. 1834(k)(4)(F); 12 CFR 225.28(b)(3).
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 Operating Nonbank Depository Institutions
    The activities of owning, controlling, and operating depository 
institutions that are not ``banks'' under the BHC Act, including 
industrial banks, Morris Plan banks, industrial loan companies and 
savings associations, were determined to be closely related to banking 
by the Board of Governors.\30\ While regulations issued by the Board of 
Governors require that a target savings association be engaged only in 
deposit-taking activities and activities permissible for bank holding 
companies, this NPR does not include these conditions because they are 
not essential elements of the activity of owning a nonbank depository 
institution.
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    \30\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.28(b)(4).

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[[Page 36198]]

 Trust Company Functions
    The activities performed by a trust company were determined to be 
closely related to banking by the Board of Governors.\31\ The FDIC 
requests comment on whether trust company functions are incorporated in 
the broad authorization provided under section 4(k)(4)(A) to engage in 
lending, exchanging, transferring, investing for others, and 
safeguarding financial assets and need not be separately reflected in 
the NPR.
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    \31\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.28(b)(5).
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 Financial and Investment Advisory Activities
    The activities of acting as an investment or financial advisor to 
any person were determined to be closely related to banking by the 
Board of Governors.\32\ These activities have been defined to include, 
without limitation, serving as a registered investment advisor to a 
registered investment company, including sponsoring, organizing, and 
managing a closed-end investment company; furnishing general economic 
information and advice, general economic statistical forecasting 
services, and industry studies; providing advice in connection with 
mergers, acquisitions, divestitures, investments, joint ventures, 
leveraged buyouts, recapitalizations, capital structurings, financing 
transactions and similar transactions; conducting financial feasibility 
studies; providing information, statistical forecasting, and advice 
with respect to any transaction in foreign exchange, swaps, and similar 
transactions, commodities, and any forward contract, option, future, 
option on a future, and similar instruments; providing educational 
courses and instructional materials to consumers on individual 
financial management matters; and providing tax-planning and tax-
preparation services to any person.\33\ The FDIC requests comment on 
whether these financial and investment advisory activities are 
incorporated in the broad authorization provided by section 4(k)(4)(C) 
of the BHC Act to provide financial, investment, and economic advisory 
services and need not be separately reflected in this NPR.
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    \32\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.28(b)(6).
    \33\ Id.
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 Agency Transactional Services
    Agency transactional services, including providing securities 
brokerage services, acting as a riskless principal, providing private 
placement services, and acting as a futures commission merchant, were 
determined to be closely related to banking by the Board of 
Governors.\34\ Conditions that were imposed on bank holding companies 
conducting these activities in order to prevent circumvention of the 
Glass-Steagall Act or for safety and soundness reasons are not 
reflected in this NPR.
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    \34\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.28(b)(7).
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    These conditions include, for instance, that bank holding companies 
providing securities brokerage services under this authority are 
limited to buying and selling securities solely as agent for the 
account of customers and not conducting securities underwriting or 
dealing activities; those providing private placement services under 
this authority cannot purchase or repurchase for their own account the 
securities being placed or hold in inventory unsold portions of issues 
of those securities; and those acting as riskless principal under this 
authority are subject to conditions with respect to bank-ineligible 
securities. These conditions were intended to prevent a bank holding 
company from using securities brokerage or riskless principal authority 
to engage in activities that were impermissible under the Glass-
Steagall Act.\35\
---------------------------------------------------------------------------

    \35\ 62 FR 9308 (February 8, 1997).
---------------------------------------------------------------------------

    In order to act as a futures commission merchant, a bank holding 
company must conduct the activity through a separately incorporated 
subsidiary, the contract must be traded on an exchange, and the parent 
bank holding company cannot guarantee that subsidiary's liabilities. 
The NPR does not reflect these conditions, as they were imposed for 
safety and soundness reasons to limit the bank holding company's 
exposure to contingent obligations under the loss sharing rules of 
exchange clearinghouses in order to preserve the holding company's 
ability to serve as a source of strength to its insured depository 
institutions.\36\
---------------------------------------------------------------------------

    \36\ Id. at 9309.
---------------------------------------------------------------------------

    In order to provide agent transactional services to customers on 
certain commodity derivatives transactions, the derivative must relate 
to a commodity that is traded on an exchange (regardless of whether the 
contract being traded is traded on an exchange). The NPR does not 
reflect this limitation because it appears to have been imposed for 
safety and soundness reasons and does not describe the underlying 
activity of providing transactional services on derivatives 
transactions. The FDIC requests comment on whether the agency 
transactional services discussed above are included in the broad 
authorization provided under section 4(k)(5) to engage in arranging, 
effecting, or facilitating financial transactions for the account of 
third parties and need not be separately reflected in this NPR.
 Investment Transactions as Principal
    Engaging in investment transactions as principal, including 
underwriting and dealing in government obligations and money market 
instruments and investing and trading as principal in foreign exchange 
and derivatives, and buying and selling bullion, are activities that 
were determined to be closely related to banking by the Board of 
Governors.\37\ Under regulations issued by the Board of Governors, bank 
holding companies engaged in underwriting and dealing in government 
obligations and money market instruments are subject to the same 
conditions imposed on member banks engaged in these activities. The NPR 
does not reflect these conditions because they were intended to prevent 
circumvention of the Glass-Steagall Act. In addition, under the Board 
of Governors' applicable regulations, bank holding companies engaged in 
derivatives transactions are subject to certain conditions, including 
that the derivative contract itself cannot be a bank-ineligible 
security and either the asset underlying the contract be a bank 
permissible asset or that the contract contain protections against 
physical settlement. This NPR does not include these conditions imposed 
on derivatives activities because these conditions appear to have been 
imposed to prevent circumvention of the Glass-Steagall Act's 
limitations on underwriting and dealing activities and for safety and 
soundness reasons.
---------------------------------------------------------------------------

    \37\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.28(b)(8).
---------------------------------------------------------------------------

    The FDIC requests comment on whether the activity of underwriting 
and dealing in government obligations and money market instruments is 
included in the broad authorization provided under section 4(k)(4)(E) 
of the BHC Act to engage in underwriting, dealing in, or making a 
market in securities and need not be separately reflected in this NPR 
for purposes of Title II.
 Management Consulting and Counseling Activities
    Providing management consulting services on any matter to 
unaffiliated depository institutions and on any financial, economic, 
accounting, or audit matter to any other company was determined to be 
closely related to banking by the Board of Governors.\38\ Under 
regulations issued by the Board of Governors, bank holding companies 
engaged in management consulting

[[Page 36199]]

activities may not own more than five (5) percent of the client 
institution or have a management interlock. This NPR does not reflect 
this condition because it was intended to ensure that a bank holding 
company does not exercise control over a client company through a 
management consulting contract and to prevent conflicts of 
interest.\39\ The FDIC requests comment on whether the activity of 
management consulting is subsumed by the broader authority to engage in 
management consulting services that was determined to be usual in 
connection with banking abroad and need not be separately reflected in 
this NPR for purposes of Title II.
---------------------------------------------------------------------------

    \38\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.28(b)(9)(i).
    \39\ See 62 FR 9312 (February 28, 1997).
---------------------------------------------------------------------------

    Providing employee benefits consulting services was determined to 
be closely related to banking by the Board of Governors \40\ and is 
included in this NPR. Providing career counseling services also was 
determined to be closely related to banking by the Board of Governors, 
subject to the conditions that the services are provided to a financial 
organization, to individuals who are seeking employment at a financial 
institution, or to individuals currently employed in or who are seeking 
positions in the finance, accounting, and audit departments of any 
company.\41\ These conditions appear to be essential to this activity's 
being considered financial and thus are included in the definition of 
this financial activity for purposes of Title II in this NPR.
---------------------------------------------------------------------------

    \40\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.28(b)(9)(ii).
    \41\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.28(b)(9)(iii).
---------------------------------------------------------------------------

 Courier Services and Printing and Selling MICR-Encoded Items
    Providing courier services for certain instruments and audit and 
accounting media, and printing and selling MICR-encoded items were 
determined to be closely related to banking by the Board of 
Governors.\42\
---------------------------------------------------------------------------

    \42\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.28(b)(10)(i); 12 U.S.C. 
1843(k)(4)(F); 12 CFR 225.28(b)(10)(ii).
---------------------------------------------------------------------------

 Insurance Agency and Underwriting
    Activities related to the provision of credit insurance and 
insurance in small towns were determined by the Board of Governors to 
be closely related to banking.\43\ The FDIC requests comment on whether 
these insurance activities are included in the broad authorization of 
insurance activities provided under section 4(k)(4)(B) of the BHC Act 
and thus need not be separately reflected in this NPR for purposes of 
Title II.
---------------------------------------------------------------------------

    \43\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.28(b)(11).
---------------------------------------------------------------------------

 Community Development Activities
    Making debt and equity investments in corporations or projects that 
are designed primarily to promote community welfare, and providing 
advisory and related services for such programs, was determined to be 
closely related to banking by the Board of Governors.\44\
---------------------------------------------------------------------------

    \44\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.28(b)(12).
---------------------------------------------------------------------------

 Money Orders, Savings Bonds, and Traveler's Checks
    The issuance and sale of money orders and traveler's checks, and 
the issuance of savings bonds, were determined to be closely related to 
banking by the Board of Governors.\45\
---------------------------------------------------------------------------

    \45\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.28(b)(13).
---------------------------------------------------------------------------

 Data Processing
    Providing data processing services and related activities with 
respect to financial, banking, or economic data was determined to be 
closely related to banking by the Board of Governors.\46\ Under 
regulations issued by the Board of Governors, a bank holding company's 
data processing activities must comply with the condition that the 
hardware provided in connection with these services is offered only in 
conjunction with software related to the processing, storage, and 
transmission of financial, banking, or economic data, and where the 
general purpose hardware does not constitute more than thirty (30) 
percent of the cost of any packaged offering. This NPR does not include 
these conditions because they do not define the essential nature of the 
activity of data processing.
---------------------------------------------------------------------------

    \46\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.28(b)(14).
---------------------------------------------------------------------------

 Management Consulting Services
    Providing management consulting services was determined to be usual 
in connection with the transaction of banking or other financial 
operations abroad.\47\ Under regulations issued by the Board of 
Governors, bank holding companies are prohibited from controlling the 
person to which the services are provided. This NPR does not reflect 
this condition because it appears to have been intended to ensure that 
a bank holding company does not exercise control over a client company 
through a management consulting contract and to prevent conflicts of 
interest.
---------------------------------------------------------------------------

    \47\ 12 U.S.C. 1843(k)(4)(G); 12 CFR 225.86(b)(1).
---------------------------------------------------------------------------

 Mutual Fund Advisory Services
    Providing administrative and other services to mutual funds was 
determined to be closely related to banking by the Board of 
Governors.\48\
---------------------------------------------------------------------------

    \48\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.86(a)(2)(i).
---------------------------------------------------------------------------

 Owning Shares of a Securities Exchange
    Owning shares of a securities exchange was determined to be closely 
related to banking by the Board of Governors.\49\
---------------------------------------------------------------------------

    \49\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.86(a)(2)(ii).
---------------------------------------------------------------------------

 Certification Services
    Acting as a certification authority for digital signatures and 
authenticating the identity of persons conducting financial and 
nonfinancial transactions was determined to be closely related to 
banking by the Board of Governors.\50\
---------------------------------------------------------------------------

    \50\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.86(a)(2)(iii).
---------------------------------------------------------------------------

 Providing Employment Histories
    Providing employment histories to third parties for use in making 
credit decisions and to depository institutions and their affiliates 
for use in the ordinary course of business was determined to be closely 
related to banking by the Board of Governors.\51\
---------------------------------------------------------------------------

    \51\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.86(a)(2)(iv).
---------------------------------------------------------------------------

 Check-Cashing and Wire-Transmission Services
    Providing check-cashing and wire-transmission services was 
determined to be closely related to banking by the Board of 
Governors.\52\
---------------------------------------------------------------------------

    \52\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.86(a)(2)(v).
---------------------------------------------------------------------------

 Postage, Vehicle Registration, Public Transportation Services
    Providing notary-public services, selling postage stamps and 
postage-paid envelopes, providing vehicle registration services, and 
selling public-transportation tickets and tokens in connection with 
offering banking services were determined to be closely related to 
banking by the Board of Governors.\53\
---------------------------------------------------------------------------

    \53\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.86(a)(2)(vi).
---------------------------------------------------------------------------

 Real Estate Title Abstracting
    Engaging in real estate title abstracting was determined to be 
closely related to banking by the Board of Governors.\54\
---------------------------------------------------------------------------

    \54\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.86(a)(2)(vii).
---------------------------------------------------------------------------

 Travel Agency
    Operating a travel agency in connection with financial services was 
determined to be usual in connection with the transaction of banking or 
other financial operations abroad.\55\
---------------------------------------------------------------------------

    \55\ 12 U.S.C. 1843(k)(4)(G); 12 CFR 225.86(b)(2).

---------------------------------------------------------------------------

[[Page 36200]]

 Mutual Fund Activities
    Organizing, sponsoring, and managing a mutual fund was determined 
to be usual in connection with the transaction of banking or other 
financial operations abroad.\56\ Under regulations issued by the Board 
of Governors, bank holding companies are prohibited from exerting 
managerial control over the companies in which the fund invests and 
must reduce their ownership to less than twenty-five (25) percent of 
the equity of the fund within one year of sponsoring the fund. This NPR 
does not reflect these conditions because they were imposed to prevent 
circumvention of the investment restrictions in the BHC Act.
---------------------------------------------------------------------------

    \56\ 12 U.S.C. 1843(k)(4)(G); 12 CFR 225.86(b)(3).
---------------------------------------------------------------------------

 Finder Activities
    Acting as a finder in bringing together one or more buyers and 
sellers of any product or service for transactions that the parties 
themselves negotiate and consummate has been deemed to be an activity 
that is financial in nature or incidental thereto by the Board of 
Governors under section 4(k)(5) of the BHC Act.\57\ Under regulations 
issued by the Board of Governors, acting as a finder includes providing 
any or all of the following services through any means: (a) Adentifying 
potential parties, making inquiries as to interest, introducing and 
referring potential parties to each other, and arranging contacts 
between and meetings of interested parties; (b) conveying between 
interested parties expressions of interest, bids, offers, orders and 
confirmations relating to a transaction; and (c) transmitting 
information concerning products and services to potential parties in 
connection with the activities listed in (a) and (b).
---------------------------------------------------------------------------

    \57\ 12 U.S.C. 1843(k)(5)(B); 12 CFR 225.86(d)(1).
---------------------------------------------------------------------------

    Under the Board of Governors' Regulation Y, certain limitations are 
applicable to financial holding companies that engage in finder 
activities. These limitations include acting only as an intermediary 
between a buyer and a seller; not binding any buyer or seller to the 
terms of a specific transaction or negotiating the terms of a specific 
transaction on behalf of a buyer or seller, except that (1) a finder 
may arrange for buyers to receive preferred terms from sellers so long 
as the terms are not negotiated as part of any individual transaction, 
are provided generally to customers or broad categories of customers, 
and are made available by the seller (and not by the company), and (2) 
a finder may establish rules of general applicability governing the use 
and operation of the finder service, including rules that govern the 
submission of bids and offers by buyers and sellers, the circumstances 
under which the finder service will match bids and offers, and the 
manner in which buyers and sellers may bind themselves to the terms of 
a specific transaction. These conditions appear to be essential to the 
essence of the activity, and thus are reflected in this NPR.
    Regulation Y also prohibits financial holding companies engaged in 
finder activities from (a) taking title to or acquiring or holding an 
ownership interest in any product or service offered or sold through 
the finder service; (b) providing distribution services for physical 
products or services offered or sold through the finder service; (c) 
owning or operating any real or personal property that is used for the 
purpose of manufacturing, storing, transporting, or assembling physical 
products offered or sold by third parties; (d) owning or operating any 
real or personal property that serves as a physical location for the 
physical purchase, sale or distribution of products or services offered 
or sold by third parties; or (e) engaging in any activity that would 
require the company to register or obtain a license as a real estate 
agent or broker under applicable law. Each of these conditions, with 
the exception of the prohibition on engaging in any activity that would 
require the company to register or obtain a license as a real estate 
agent or broker, appear to be essential to the nature of acting as a 
finder and are reflected accordingly in this NPR.
    The prohibition on engaging in any activity that would require the 
company to register or obtain a license as a real estate agent or 
broker was imposed to prevent bank holding companies from engaging in 
any real estate brokerage or property management activities. If 
reflected in this NPR, this prohibition could be read to exclude any 
finder activity from being considered a financial activity if the 
company engaged in the activity were also engaged in any real estate 
brokerage or property management activity. The FDIC believes that this 
condition does not define the essential nature of the activity of 
acting as a finder itself. Therefore, because neither real estate 
brokerage nor real estate management is an activity that is financial 
in nature, a company may engage in such activities and still be 
predominantly engaged in financial activities so long as the revenues 
derived from financial activities comprise at least eighty-five percent 
of the company's total consolidated revenues.
 Merchant Banking
    Section 4(k)(4)(H) of the BHC Act authorizes financial holding 
companies to acquire ``shares, assets or ownership interests,'' 
including debt or equity securities, in a company engaged in any 
activity not authorized under section 4 ``as part of a bona fide 
underwriting or merchant or investment banking activity, including 
investment activities engaged in for the purpose of appreciation and 
ultimate resale or disposition of the investment,'' subject to the 
following conditions: (a) The shares may not be acquired or held by a 
depository institution; (b) the shares must be acquired and held by a 
securities affiliate or an affiliate thereof, or in the case of a 
financial holding company that has an insurance company affiliate, the 
shares must be acquired and held by an affiliate that provides 
investment advice to an insurance company and is registered pursuant to 
the Investment Advisers Act of 1940, or an affiliate thereof, as part 
of a bona fide underwriting or merchant or investment banking activity, 
including investment activities engaged in for the purpose of 
appreciation and ultimate resale or disposition of the investment; (c) 
the shares must be held for a period of time to enable the sale or 
disposition on a reasonable basis consistent with the financial 
viability of the company's underwriting, merchant, or investment 
banking activities; and (d) during the period the shares are held, the 
bank holding company may not routinely manage or operate the company 
except as may be necessary to obtain a reasonable return on investment 
upon resale or disposition.\58\ The NPR includes the last two of those 
conditions because they appear to define the essential nature of the 
activities of underwriting, merchant, or investment banking activities, 
and omits the first two conditions.
---------------------------------------------------------------------------

    \58\ 12 U.S.C. 1843(k)(4)(H).
---------------------------------------------------------------------------

    First, the condition requiring that the shares be held for a period 
of time to enable their sale or disposition on a reasonable basis 
consistent with the financial viability of the company's underwriting, 
merchant, or investment banking activities appears to be an essential 
element of a bona fide underwriting, merchant, or investment banking 
activity. Thus, this condition is reflected in the NPR. Companies 
engaging in bona fide underwriting, merchant, or investment banking 
activities do not invest in investee companies for the purpose of 
engaging in the activity in which the investee company is engaged, but 
instead invest

[[Page 36201]]

with the intent to sell the instruments at some later point in time at 
which a profit is expected to be realized. The length of time that the 
shares are held will vary by investment.\59\
---------------------------------------------------------------------------

    \59\ The Board of Governors and the Secretary of Treasury 
jointly promulgated regulations interpreting the holding period for 
merchant banking investments by financial holding companies under 
section 4(k)(7) of the BHC Act. This regulatory interpretation is 
separate from the activity of merchant banking set forth in section 
4(k)(4)(H) of the BHC Act and would not apply for determining 
whether an activity is a financial activity for purposes of Title 
II. See 12 CFR 225.172 and 12 CFR 1500.3, respectively.
---------------------------------------------------------------------------

    For example, certain companies, such as private equity firms, that 
are engaged in bona fide underwriting, merchant, or investment banking 
activities typically invest in firms that the private equity firm 
believes will increase in value over time and can be resold at a 
profit. The holding period for an investment will vary based on the 
investee company, and in some cases the private equity firm may hold 
the shares for several years. A firm such as a hedge fund or a mutual 
fund invests in firms with the expectation to sell those instruments at 
a future date in order to realize profits consistent with its 
particular investment strategy. The holding period for an investment by 
a hedge fund or a mutual fund will depend on the length of time 
necessary to recognize gains consistent with the fund's investment 
strategy.
    The prohibition on routinely managing an investee company in which 
it has purchased shares, other than for purposes of recognizing a 
reasonable return, appears to be an essential element of bona fide 
underwriting, merchant, or investment banking activities. Thus, this 
prohibition is reflected in this NPR. As previously discussed, 
companies engaging in these activities purchase shares of investee 
companies to recognize an ultimate profit, rather than to engage in the 
underlying activity in which the investee company engages as its 
primary business activity. Routinely managing the companies, other than 
for the goal of recognizing a reasonable return, would be inconsistent 
with the underlying nature of the activities. Therefore, in order for 
an activity to qualify as a bona fide underwriting, merchant, or 
investment banking activity, a financial company must comply with this 
restriction.\60\
---------------------------------------------------------------------------

    \60\ The Board of Governors and the Secretary of the Treasury 
jointly promulgated regulations interpreting the limitation on 
routine management or operation for merchant banking investments by 
financial holding companies under section 4(k)(7) of the BHC Act. 
This regulatory interpretation is separate from the activity of 
merchant banking set forth in section 4(k)(4)(H) of the BHC Act and 
would not apply for determining whether an activity is a financial 
activity for purposes of Title II. See 12 CFR 225.171 and 12 CFR 
1500.2, respectively.
---------------------------------------------------------------------------

    By contrast, the condition requiring that shares acquired as part 
of a bona fide underwriting or merchant or investment banking activity 
not be acquired or held by a depository institution is not an essential 
element of such activities, and thus is not reflected in this NPR. This 
restriction was imposed because banks are restricted from investing in 
certain types of companies by statute and regulation.\61\ Similarly, 
the condition in section 4(k) requiring a financial holding company 
engaging in underwriting or merchant or investment banking activities 
to either have (a) a securities affiliate, or (b) in the case of a 
financial holding company that has an insurance company affiliate, an 
affiliate that provides investment advice to an insurance company and 
is registered pursuant to the Investment Advisors Act of 1940, does not 
appear to be an essential element of these activities because the 
condition does not require that the activity be conducted through the 
securities affiliate or investment advisor affiliate of the financial 
holding company. The condition was designed to ensure that only those 
financial holding companies with experience engaging in underwriting, 
merchant, or investment banking activities conducted such activities. 
This NPR proposes to define the activities of underwriting, merchant, 
and investment banking for purposes of Title II to include only the 
conditions that appear to be essential elements of the activities 
themselves, as discussed above.\62\
---------------------------------------------------------------------------

    \61\ See e.g. 12 U.S.C. 24, (Seventh); 12 U.S.C. 24 (Eleventh); 
and 12 CFR Part 1 (for national banks); and 12 U.S.C. 1831a; and 12 
CFR Part 362 (for state banks).
    \62\ Similarly, the FSOC has indicated its belief that nonbank 
financial companies such as hedge funds, private equity firms, and 
asset management companies, will be eligible for designation under 
section 113 of the Act. See 77 FR 21637, 21643 (April 11, 2012); see 
also 77 FR 21494 (April 10, 2012).
---------------------------------------------------------------------------

    In addition, this NPR does not reflect the provisions of section 
4(k)(4)(H) that the investment be in a company engaged in any activity 
not authorized under section 4 of the BHC Act because this provision 
does not affect the scope of activities that are financial activities 
for purposes of Title II. An investment in a company solely engaged in 
activities permissible under section 4 of the BHC Act would otherwise 
be treated as a financial activity.
    Section 4(k)(4)(I) of the BHC Act similarly authorizes financial 
holding companies to acquire ``shares, assets or ownership interests,'' 
including debt or equity securities, of a company or other entity 
engaged in any activity not authorized by section 4(k) if (a) the 
shares, assets, or ownership interests are not acquired or held by a 
depository institution or a subsidiary of a depository institution; (b) 
such shares, assets, or ownership interests are acquired and held by an 
insurance company that is predominantly engaged in underwriting life, 
accident, and health, or property and casualty insurance (other than 
credit-related insurance) or providing and issuing annuities; (c) such 
shares, assets, or ownership interest represent an investment made in 
the ordinary course of business of such insurance company in accordance 
with relevant State law governing such investments; and (d) during the 
period such shares, assets, or ownership interests are held, the bank 
holding company does not routinely manage or operate such company 
except as may be necessary or required to obtain a reasonable return on 
investment.
    The condition requiring that shares, assets, or ownership interests 
not be acquired or held by a depository institution does not appear to 
be an essential element of the investment activities authorized by 
section 4(k)(4)(I) of the BHC Act, and thus is not reflected in this 
NPR. This restriction was imposed because banks are restricted from 
investing in certain types of companies by statute and regulation.\63\ 
Each of the other conditions imposed on the conduct of the activity by 
a bank holding company appears to be an essential element of the 
activity of investing in connection with engaging in insurance 
activities. This NPR proposes to define the investment activities 
authorized by section 4(k)(4)(I) for purposes of Title II to include 
only the last three conditions because they appear to be essential 
elements of these activities, as discussed above.
---------------------------------------------------------------------------

    \63\ See e.g. 12 U.S.C. 24, (Seventh); 12 U.S.C. 24 (Eleventh); 
and 12 CFR part 1 (for national banks); and 12 U.S.C. 1831a; and 12 
CFR part 362 (for state banks).
---------------------------------------------------------------------------

 Lending, Safeguarding, Exchanging, and Investing for Others 
With Respect to Financial Assets Other Than Money and Securities
    The GLB Act authorizes the activities of lending, exchanging, 
transferring, investing for others, safeguarding assets other than 
money or securities; providing any device or other instrumentality for 
transferring money or other financial assets; and arranging, effecting, 
or facilitating financial transactions for the account of third

[[Page 36202]]

parties for financial holding companies.\64\ The GLB Act requires the 
Board of Governors to define these activities as financial in nature 
and the extent to which such activities are financial in nature or 
incidental thereto. The Board of Governors and the Secretary of the 
Treasury issued a joint interim rule authorizing such activities as 
permissible for financial holding companies.\65\
---------------------------------------------------------------------------

    \64\ 12 U.S.C. 1843(k)(5).
    \65\ See 66 FR 257 (January 3, 2001).
---------------------------------------------------------------------------

 Owning or Controlling One or More Depository Institutions
    Section 201(b) of the Dodd-Frank Act requires that revenues derived 
from the ownership or control of one or more depository institutions be 
included in determining whether a company is a financial company.

IV. Solicitation of Comments on Use of Plain Language

    Section 722 of the Gramm-Leach-Bliley Act, Public Law 106-102, sec. 
722, 113 Stat. 1338, 1471 (Nov. 12, 1999), requires the FDIC to use 
plain language in all proposed and final rules published after January 
1, 2000. The FDIC invites comments on how to make this proposal easier 
to understand. For example:
     Have we organized the material to suit your needs? If not, 
how could this material be better organized?
     Are the requirements in the proposed regulation clearly 
stated? If not, how could the regulation be more clearly stated?
     Does the proposed regulation contain language or jargon 
that is not clear? If so, which language requires clarification?
     Would a different format (grouping and order of sections, 
use of headings, paragraphing) make the regulation easier to 
understand? If so, what changes to the format would make the regulation 
easier to understand?
     What else could we do to make the regulation easier to 
understand?

V. Administrative Law Matters

A. Paperwork Reduction Act

    The amendment to the March 2011 NPR contained in this NPR would not 
involve any new collections of information pursuant to the Paperwork 
Reduction Act (44 U.S.C. Sec.  3501 et seq.). Consequently, no 
information has been submitted to the Office of Management and Budget 
for review.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601 et seq., 
requires an agency to consider whether the rules it proposes will have 
a significant economic impact on a substantial number of small 
entities. If so, the agency must prepare an initial and final 
regulatory flexibility analysis respecting the significant economic 
impact. Pursuant to section 605(b) of the RFA, the regulatory 
flexibility analysis otherwise required under sections 603 and 604 of 
the RFA is not required if an agency certifies that the rule will not 
have a significant economic impact on a substantial number of small 
entities. The FDIC has considered the potential impact of the amendment 
proposed in this NPR on small entities in accordance with the RFA. The 
amendment contained in this NPR does not appear to have a significant 
economic impact on small entities for several reasons.
    First, proposed section 380.8, as amended by this NPR, would 
establish criteria for calculating revenues to determine whether a 
company is ``predominantly engaged in activities that the Board of 
Governors has determined are financial in nature or incidental 
thereto'' for purposes of determining whether a company is a 
``financial company'' under Title II of the Dodd-Frank Act. In order to 
be eligible for the orderly liquidation provisions of Title II, a 
company would have to satisfy the definition of ``financial company.'' 
However, a company that is a ``financial company'' is not automatically 
subject to the orderly liquidation authority provisions of Title II. 
Only a financial company for which the Secretary of Treasury has made a 
determination in accordance with sections 203 of Title II is a 
``covered financial company'' subject to Title II. The amendment 
contained in this NPR is limited to clarifying the definition of 
financial activities for purposes of the definition of ``financial 
company'' under section 201(a)(11) of the Act.
    Second, a determination by the Secretary of the U.S. Treasury under 
section 203(b) of the Act requires, among other things, a determination 
that the failure of the financial company and its resolution under 
otherwise applicable Federal or State law would have serious adverse 
effects on financial stability in the United States. Under the 
regulations of the Small Business Administration (SBA), firms within 
the ``Finance and Insurance'' sector are considered ``small'' if their 
annual receipts do not exceed $7 million or their total assets do not 
exceed $174 million.\66\ The FDIC does not expect that Title II of the 
Act will be used to resolve financial companies that qualify as small 
entities, because the failure of such companies would be unlikely to 
have serious adverse effects on financial stability in the United 
States. Therefore, the FDIC does not believe that proposed section 
380.8, as amended, would have a significant economic impact on a 
substantial number of small entities.
---------------------------------------------------------------------------

    \66\ 13 CFR 121.201.
---------------------------------------------------------------------------

    For the reasons stated above and pursuant to section 605(b) of the 
Regulatory Flexibility Act, the FDIC certifies that the proposed rule, 
as amended by this NPR, will not have a significant economic impact on 
a substantial number of small entities.

Text of the Proposed Rule

Federal Deposit Insurance Corporation

12 CFR Chapter III

List of Subjects

12 CFR Part 380

    Holding companies, Insurance companies.

Authority and Issuance

    For the reasons set forth in the Supplementary Information, the 
FDIC proposes to amend title 12 part 380 of the Code of Federal 
Regulations as follows:

PART 380--ORDERLY LIQUIDATION AUTHORITY

    1. The authority for part 380 continues to read as follows:

    Authority:  12 U.S.C. 5301 et seq.

    2. Section 380.8, which was proposed as part of the notice of 
proposed rulemaking titled ``Orderly Liquidation Authority'' 76 FR 
16324 (March 23, 2011) is amended by revising paragraph (b)(2) to read 
as follows:


Sec.  380.8  Predominantly engaged in activities that are financial or 
incidental thereto.

* * * * *
    (b) For purposes of paragraph (a) of this section, the following 
definitions apply:
    (1) * * *
    (2) The term ``financial activity'' means:
    (i) Lending, exchanging, transferring, investing for others, or 
safeguarding money and securities.
    (ii) Insuring, guaranteeing, or indemnifying against loss, harm, 
damage, illness, disability, or death, or providing and issuing 
annuities, and acting as principal, agent, or broker for purposes of 
the foregoing, in any state.
    (iii) Providing financial, investment, or economic advisory 
services, including advising an investment

[[Page 36203]]

company (as defined in section 3 of the Investment Company Act of 
1940).
    (iv) Issuing or selling instruments representing interests in pools 
of assets.
    (v) Underwriting, dealing in, or making a market in securities.
    (vi) Extending credit and servicing loans. Making, acquiring, 
brokering, or servicing loans or other extensions of credit (including 
factoring, issuing letters of credit and accepting drafts) for the 
company's account or for the account of others.
    (vii) Activities related to extending credit. Any activity usual in 
connection with making, acquiring, brokering or servicing loans or 
other extensions of credit, including the following activities.
    (A) Real estate and personal property appraising. Performing 
appraisals of real estate and tangible and intangible personal 
property, including securities.
    (B) Arranging commercial real estate equity financing. Acting as 
intermediary for the financing of commercial or industrial income-
producing real estate by arranging for the transfer of the title, 
control, and risk of such a real estate project to one or more 
investors.
    (C) Check-guaranty services. Authorizing a subscribing merchant to 
accept personal checks tendered by the merchant's customers in payment 
for goods and services, and purchasing from the merchant validly 
authorized checks that are subsequently dishonored.
    (D) Collection agency services. Collecting overdue accounts 
receivable, either retail or commercial.
    (E) Credit bureau services. Maintaining information related to the 
credit history of consumers and providing the information to a credit 
grantor who is considering a borrower's application for credit or who 
has extended credit to the borrower.
    (F) Asset management, servicing, and collection activities. 
Engaging under contract with a third party in asset management, 
servicing, and collection \1\ of assets of a type that an insured 
depository institution may originate and own.
---------------------------------------------------------------------------

    \1\ Asset management services include acting as agent in the 
liquidation or sale of loans and collateral for loans, including 
real estate and other assets acquired through foreclosure or in 
satisfaction of debts previously contracted.
---------------------------------------------------------------------------

    (G) Acquiring debt in default. Acquiring debt that is in default at 
the time of acquisition.
    (H) Providing real estate settlement services.\2\
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    \2\ For purposes of this section, real estate settlement 
services do not include providing title insurance as principal, 
agent, or broker.
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    (viii) Leasing personal or real property. Leasing personal or real 
property or acting as agent, broker, or adviser in leasing such 
property if--
    (A) The lease is on a nonoperating basis; \3\
---------------------------------------------------------------------------

    \3\ The requirement that the lease be on a nonoperating basis 
means that the company may not, directly or indirectly, engage in 
operating, servicing, maintaining, or repairing leased property 
during the lease term. For purposes of the leasing of automobiles, 
the requirement that the lease be on a nonoperating basis means that 
the company may not, directly or indirectly: (1) Provide servicing, 
repair, or maintenance of the leased vehicle during the lease term; 
(2) purchase parts or accessories in bulk or for an individual 
vehicle after the lessee has taken delivery of the vehicle; (3) 
provide the loan of an automobile during the servicing of the leased 
vehicle; (4) purchase insurance for the lessee; or (5) provide for 
the renewal of the vehicle's license merely as a service to the 
lessee where the lessee could renew the license without 
authorization from the lessor. The company may arrange for a third 
party to provide these services or products.
---------------------------------------------------------------------------

    (B) The initial term of the lease is at least 90 days; and
    (C) In the case of leases involving real property:
    (1) At the inception of the initial lease, the effect of the 
transaction will yield a return that will compensate the lessor for not 
less than the lessor's full investment in the property plus the 
estimated total cost of financing the property over the term of the 
lease from rental payments, estimated tax benefits, and the estimated 
residual value of the property at the expiration of the initial lease; 
and
    (2) The estimated residual value of property for purposes of 
paragraph (b)(2)(viii)(C)(1) of this section shall not exceed 25 
percent of the acquisition cost of the property to the lessor.
    (ix) Operating nonbank depository institutions--(A) Industrial 
banking. Owning, controlling, or operating an industrial bank, Morris 
Plan bank, or industrial loan company that is not a bank for purposes 
of the BHC Act.
    (B) Operating savings association. Owning, controlling, or 
operating a savings association.
    (x) Trust company functions. Performing functions or activities 
that may be performed by a trust company (including activities of a 
fiduciary, agency, or custodial nature), in the manner authorized by 
federal or state law that is not a bank for purposes of section 2(c) of 
the Bank Holding Company Act.
    (xi) Financial and investment advisory activities. Acting as 
investment or financial advisor to any person, including (without, in 
any way, limiting the foregoing):
    (A) Serving as investment adviser (as defined in section 2(a)(20) 
of the Investment Company Act of 1940, 15 U.S.C. 80a-2(a)(20)), to an 
investment company registered under that act, including sponsoring, 
organizing, and managing a closed-end investment company;
    (B) Furnishing general economic information and advice, general 
economic statistical forecasting services, and industry studies;
    (C) Providing advice in connection with mergers, acquisitions, 
divestitures, investments, joint ventures, leveraged buyouts, 
recapitalizations, capital structurings, financing transactions and 
similar transactions, and conducting financial feasibility studies; \4\
---------------------------------------------------------------------------

    \4\ Feasibility studies do not include assisting management with 
the planning or marketing for a given project or providing general 
operational or management advice.
---------------------------------------------------------------------------

    (D) Providing information, statistical forecasting, and advice with 
respect to any transaction in foreign exchange, swaps, and similar 
transactions, commodities, and any forward contract, option, future, 
option on a future, and similar instruments;
    (E) Providing educational courses, and instructional materials to 
consumers on individual financial management matters; and
    (F) Providing tax-planning and tax-preparation services to any 
person.
    (xii) Agency transactional services for customer investments--(A) 
Securities brokerage. Providing securities brokerage services 
(including securities clearing and/or securities execution services on 
an exchange), whether alone or in combination with investment advisory 
services, and incidental activities (including related securities 
credit activities and custodial services).
    (B) Riskless principal transactions. Buying and selling in the 
secondary market all types of securities on the order of customers as a 
``riskless principal'' to the extent of engaging in a transaction in 
which the company, after receiving an order to buy (or sell) a security 
from a customer, purchases (or sells) the security for its own account 
to offset a contemporaneous sale to (or purchase from) the customer.
    (C) Private placement services. Acting as agent for the private 
placement of securities in accordance with the requirements of the 
Securities Act of 1933 (1933 Act) and the rules of the Securities and 
Exchange Commission.
    (D) Futures commission merchant. Acting as a futures commission 
merchant (FCM) for unaffiliated persons in the execution, clearance, or 
execution and clearance of any futures contract and option on a futures 
contract.
    (E) Other transactional services. Providing to customers as agent 
transactional services with respect to swaps and similar transactions, 
any

[[Page 36204]]

transaction described in paragraph (b)(2)(xiii) of this section, any 
transaction that is permissible for a state member bank, and any other 
transaction involving a forward contract, option, futures, option on a 
futures or similar contract (whether traded on an exchange or not).
    (xiii) Investment transactions as principal--(A) Underwriting and 
dealing in government obligations and money market instruments. 
Underwriting and dealing in obligations of the United States, general 
obligations of states and their political subdivisions, and other 
obligations that state member banks of the Federal Reserve System may 
be authorized to underwrite and deal in under 12 U.S.C. 24 and 335, 
including banker's acceptances and certificates of deposit,
    (B) Investing and trading activities. Engaging as principal in:
    (1) Foreign exchange;
    (2) Forward contracts, options, futures, options on futures, swaps, 
and similar contracts, whether traded on exchanges or not, based on any 
rate, price, financial asset (including gold, silver, platinum, 
palladium, copper, or any other metal), nonfinancial asset, or group of 
assets;
    (3) Forward contracts, options, futures, options on futures, swaps, 
and similar contracts, whether traded on exchanges or not, based on an 
index of a rate, a price, or the value of any financial asset, 
nonfinancial asset, or group of assets.
    (C) Buying and selling bullion, and related activities. Buying, 
selling and storing bars, rounds, bullion, and coins of gold, silver, 
platinum, palladium, copper, and any other metal for the company's own 
account and the account of others, and providing incidental services 
such as arranging for storage, safe custody, assaying, and shipment.
    (xiv) Management consulting and counseling activities--(A) 
Management consulting. Providing management consulting advice: \5\
---------------------------------------------------------------------------

    \5\ In performing this activity, companies are not authorized to 
perform tasks or operations or provide services to client 
institutions either on a daily or continuing basis, except as 
necessary to instruct the client institution on how to perform such 
services for itself. See also the Board of Governors' interpretation 
of bank management consulting advice (12 CFR 225.131).
---------------------------------------------------------------------------

    (1) On any matter to unaffiliated depository institutions, 
including commercial banks, savings and loan associations, savings 
banks, credit unions, industrial banks, Morris Plan banks, cooperative 
banks, industrial loan companies, trust companies, and branches or 
agencies of foreign banks;
    (2) On any financial, economic, accounting, or audit matter to any 
other company.
    (B) Employee benefits consulting services. Providing consulting 
services to employee benefit, compensation and insurance plans, 
including designing plans, assisting in the implementation of plans, 
providing administrative services to plans, and developing employee 
communication programs for plans.
    (C) Career counseling services. Providing career counseling 
services to:
    (1) A financial organization \6\ and individuals currently employed 
by, or recently displaced from, a financial organization;
---------------------------------------------------------------------------

    \6\ Financial organization refers to insured depository 
institution holding companies and their subsidiaries, other than 
nonbanking affiliates of diversified savings and loan holding 
companies that engage in activities not permissible under section 
4(c)(8) of the Bank Holding Company Act (12 U.S.C. 1842(c)(8)).
---------------------------------------------------------------------------

    (2) Individuals who are seeking employment at a financial 
organization; and
    (3) Individuals who are currently employed in or who seek positions 
in the finance, accounting, and audit departments of any company.
    (xv) Support services--(A) Courier services. Providing courier 
services for:
    (1) Checks, commercial papers, documents, and written instruments 
(excluding currency or bearer-type negotiable instruments) that are 
exchanged among banks and financial institutions; and
    (2) Audit and accounting media of a banking or financial nature and 
other business records and documents used in processing such media.\7\
---------------------------------------------------------------------------

    \7\ See also the Board's of Governors' interpretation on courier 
activities (12 CFR 225.129), which sets forth conditions for company 
entry into the activity.
---------------------------------------------------------------------------

    (B) Printing and selling MICR-encoded items. Printing and selling 
checks and related documents, including corporate image checks, cash 
tickets, voucher checks, deposit slips, savings withdrawal packages, 
and other forms that require Magnetic Ink Character Recognition (MICR) 
encoding.
    (xvi) Insurance agency and underwriting--(A) Credit insurance. 
Acting as principal, agent, or broker for insurance (including home 
mortgage redemption insurance) that is:
    (1) Directly related to an extension of credit by the company or 
any of its subsidiaries; and
    (2) Limited to ensuring the repayment of the outstanding balance 
due on the extension of credit \8\ in the event of the death, 
disability, or involuntary unemployment of the debtor.
---------------------------------------------------------------------------

    \8\ Extension of credit includes direct loans to borrowers, 
loans purchased from other lenders, and leases of real or personal 
property so long as the leases are nonoperating and full-payout 
leases that meet the requirements of paragraph (b)(2)(viii) of this 
section.
---------------------------------------------------------------------------

    (B) Finance company subsidiary. Acting as agent or broker for 
insurance directly related to an extension of credit by a finance 
company \9\ that is a subsidiary of a company, if:
---------------------------------------------------------------------------

    \9\ Finance company includes all non-deposit-taking financial 
institutions that engage in a significant degree of consumer lending 
(excluding lending secured by first mortgages) and all financial 
institutions specifically defined by individual states as finance 
companies and that engage in a significant degree of consumer 
lending.
---------------------------------------------------------------------------

    (1) The insurance is limited to ensuring repayment of the 
outstanding balance on such extension of credit in the event of loss or 
damage to any property used as collateral for the extension of credit; 
and
    (2) The extension of credit is not more than $10,000, or $25,000 if 
it is to finance the purchase of a residential manufactured home \10\ 
and the credit is secured by the home; and
---------------------------------------------------------------------------

    \10\ These limitations increase at the end of each calendar 
year, beginning with 1982, by the percentage increase in the 
Consumer Price Index for Urban Wage Earners and Clerical Workers 
published by the Bureau of Labor Statistics.
---------------------------------------------------------------------------

    (3) The applicant commits to notify borrowers in writing that:
    (i) They are not required to purchase such insurance from the 
applicant;
    (ii) Such insurance does not insure any interest of the borrower in 
the collateral; and
    (iii) The applicant will accept more comprehensive property 
insurance in place of such single-interest insurance.
    (C) Insurance in small towns. Engaging in any insurance agency 
activity in a place where the company or a subsidiary of the company 
has a lending office and that:
    (1) Has a population not exceeding 5,000 (as shown in the preceding 
decennial census); or
    (2) Has inadequate insurance agency facilities, as determined by 
the Board of Governors, after notice and opportunity for hearing.
    (D) Insurance-agency activities conducted on May 1, 1982. Engaging 
in any specific insurance-agency activity \11\ if the company, or 
subsidiary conducting the specific activity, conducted such activity on 
May 1, 1982, or received approval from the Board of Governors to 
conduct such activity on or before May 1, 1982.\12\ A company or

[[Page 36205]]

subsidiary engaging in a specific insurance agency activity under this 
clause may:
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    \11\ Nothing contained in this provision shall preclude a bank 
holding company subsidiary that is authorized to engage in a 
specific insurance-agency activity under this clause from continuing 
to engage in the particular activity after merger with an affiliate, 
if the merger is for legitimate business purposes and prior notice 
has been provided to the Board of Governors.
    \12\ For the purposes of this paragraph, activities engaged in 
on May 1, 1982, include activities carried on subsequently as the 
result of an application to engage in such activities pending before 
the Board of Governors on May 1, 1982, and approved subsequently by 
the Board of Governors or as the result of the acquisition by such 
company pursuant to a binding written contract entered into on or 
before May 1, 1982, of another company engaged in such activities at 
the time of the acquisition.
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    (1) Engage in such specific insurance agency activity only at 
locations:
    (i) In the state in which the company has its principal place of 
business (as defined in 12 U.S.C. 1842(d));
    (ii) In any state or states immediately adjacent to such state; and
    (iii) In any state in which the specific insurance-agency activity 
was conducted (or was approved to be conducted) by such company or 
subsidiary thereof or by any other subsidiary of such company on May 1, 
1982; and
    (2) Provide other insurance coverages that may become available 
after May 1, 1982, so long as those coverages insure against the types 
of risks as (or are otherwise functionally equivalent to) coverages 
sold or approved to be sold on May 1, 1982, by the company or 
subsidiary.
    (E) Supervision of retail insurance agents. Supervising on behalf 
of insurance underwriters the activities of retail insurance agents who 
sell:
    (1) Fidelity insurance and property and casualty insurance on the 
real and personal property used in the operations of the company or its 
subsidiaries; and
    (2) Group insurance that protects the employees of the company or 
its subsidiaries.
    (F) Small companies. Engaging in any insurance-agency activity if 
the company has total consolidated assets of $50 million or less. A 
company performing insurance-agency activities under this paragraph may 
not engage in the sale of life insurance or annuities except as 
provided in paragraphs (b)(2)(xvi)(A) and (C) of this section, and it 
may not continue to engage in insurance-agency activities pursuant to 
this provision more than 90 days after the end of the quarterly 
reporting period in which total assets of the company and its 
subsidiaries exceed $50 million.
    (G) Insurance-agency activities conducted before 1971. Engaging in 
any insurance-agency activity performed at any location in the United 
States directly or indirectly by a company that was engaged in 
insurance-agency activities prior to January 1, 1971, as a consequence 
of approval by the Board of Governors prior to January 1, 1971.
    (xvii) Community development activities--(A) Financing and 
investment activities. Making equity and debt investments in 
corporations or projects designed primarily to promote community 
welfare, such as the economic rehabilitation and development of low-
income areas by providing housing, services, or jobs for residents.
    (B) Advisory activities. Providing advisory and related services 
for programs designed primarily to promote community welfare.
    (xviii) Money orders, savings bonds, and traveler's checks. The 
issuance and sale at retail of money orders and similar consumer-type 
payment instruments; the sale of U.S. savings bonds; and the issuance 
and sale of traveler's checks.
    (xix) Data processing. Providing data processing, data storage and 
data transmission services, facilities (including data processing, data 
storage and data transmission hardware, software, documentation, or 
operating personnel), databases, advice, and access to such services, 
facilities, or databases by any technological means, if the data to be 
processed, stored or furnished are financial, banking or economic.
    (xx) Providing management consulting services, including to any 
person with respect to nonfinancial matters, so long as the management 
consulting services are advisory.
    (xxi) Any activity that the Board had determined by an order that 
was in effect on November 12, 1999, to be so closely related to banking 
as to be a proper incident thereto. These activities are:
    (A) Providing administrative and other services to mutual funds;
    (B) Owning shares of a securities exchange;
    (C) Acting as a certification authority for digital signatures and 
authenticating the identity of persons conducting financial and 
nonfinancial transactions;
    (D) Providing employment histories to third parties for use in 
making credit decisions and to depository institutions and their 
affiliates for use in the ordinary course of business;
    (E) Check cashing and wire transmission services;
    (F) In connection with offering banking services, providing notary 
public services, selling postage stamps and postage-paid envelopes, 
providing vehicle registration services, and selling public 
transportation tickets and tokens; and
    (G) Real estate title abstracting.
    (xxii) Operating a travel agency in connection with financial 
services.
    (xxiii) Organizing, sponsoring, and managing a mutual fund.
    (xxiv) (A) Acting as a finder in bringing together one or more 
buyers and sellers of any product or service for transactions that the 
parties themselves negotiate and consummate, including providing any or 
all of the following services through any means--
    (1) Identifying potential parties, making inquiries as to interest, 
introducing, and referring potential parties to each other, and 
arranging contacts between and meetings of interested parties;
    (2) Conveying between interested parties expressions of interest, 
bids, offers, orders and confirmations relating to a transaction; and
    (3) Transmitting information conveying products and services to 
potential parties in connection with the activities described 
paragraphs (A) and (B) of this section.
    (B) The following are examples of the services that may be provided 
by a finder when done in accordance with paragraphs (b)(2)(xxiv)(A)(1)-
(3) of this section. These examples are not exclusive.
    (1) Hosting an electronic marketplace on the company's Internet web 
site by providing hypertext or similar links to the web sites of third 
party buyers or sellers.
    (2) Hosting on the company's servers the Internet web site of--
    (i) A buyer (or seller) that provides information concerning the 
buyer (or seller) and the products or services it seeks to buy (or 
sell) and allows sellers (or buyers) to submit expressions of interest, 
bids, offers, orders and confirmations relating to such products or 
services; or
    (ii) A government or government agency that provides information 
concerning the services or benefits made available by the government or 
government agency, assists persons in completing applications to 
receive such services or benefits from the government or agency, and 
allows persons to transmit their applications for services or benefits 
to the government or agency.
    (3) Operating an Internet web site that allows multiple buyers and 
sellers to exchange information concerning the products and services 
that they are willing to purchase or sell, locate potential 
counterparties for transactions, aggregate orders for goods or services 
with those made by other parties, and enter into transactions between 
themselves.
    (4) Operating a telephone call center that provides permissible 
finder services.

[[Page 36206]]

    (C) To be acting as a finder for purposes of this section, the 
finder must comply with the following limitations.
    (1) A finder may act only as an intermediary between a buyer and a 
seller.
    (2) A finder may not bind any buyer or seller to the terms of a 
specific transaction or negotiate the terms of a specific transaction 
on behalf of a buyer or seller, except that a finder may--
    (i) Arrange for buyers to receive preferred terms from sellers so 
long as the terms are not negotiated as part of any individual 
transaction, are provided generally to customers or broad categories of 
customers, and are made available by the seller (and not by the 
financial holding company); and
    (ii) Establish rules of general applicability governing the use and 
operation of the finder service, including rules that govern the 
submission of bids and offers by buyers and sellers that use the finder 
service and the circumstances under which the finder service will match 
bids and offers submitted by buyers and sellers, and govern the manner 
in which buyers and sellers may bind themselves to the terms of a 
specific transaction.
    (3) A finder may not--
    (i) Take title to or acquire or hold an ownership interest in any 
product or service offered or sold through the finder service;
    (ii) Provide distribution services for physical products or 
services offered or sold through the finder service;
    (iii) Own or operate any real or personal property that is used for 
the purpose of manufacturing, storing, transporting, or assembling 
physical products offered or sold by third parties; or
    (iv) Own or operate any real or personal property that serves as a 
physical location for the physical purchase, sale or distribution of 
products or services offered or sold by third parties.
    (D) A finder must distinguish the products and services offered by 
the company from those offered by a third party through the finder 
service.
    (xxv) Directly, or indirectly acquiring or controlling, whether as 
principal, on behalf of one or more entities, or otherwise, shares, 
assets, or ownership interests (including debt or equity securities, 
partnership interests, trust certificates, or other instruments 
representing ownership) of a company or other entity, whether or not 
constituting control of such company or entity if:
    (A) Such shares, assets, or ownership interests are acquired and 
held as part of a bona fide underwriting or merchant or investment 
banking activity, including investment activities engaged in for the 
purpose of appreciation and ultimate resale or disposition of the 
investment;
    (B) Such shares, assets, or ownership interests are held for a 
period of time to enable the sale or disposition thereof on a 
reasonable basis consistent with the financial viability of the 
activities described in clause (A) of this paragraph; and
    (C) During the period such shares, assets, or ownership interests 
are held, the company does not routinely manage or operate such company 
or entity except as may be necessary or required to obtain a reasonable 
return on investment upon resale or disposition.
    (xxvi) Directly or indirectly acquiring or controlling, whether as 
principal, on behalf of one or more entities, or otherwise, shares, 
assets, or ownership interests (including debt or equity securities, 
partnership interests, trust certificates or other instruments 
representing ownership) of a company or other entity, whether or not 
constituting control of such company or entity if--
    (A) Such shares, assets, or ownership interests are acquired and 
held by an insurance company that is predominantly engaged in 
underwriting life, accident and health, or property and casualty 
insurance (other than credit-related insurance) or providing and 
issuing annuities;
    (B) Such shares, assets, or ownership interests represent an 
investment made in the ordinary course of business of such insurance 
company in accordance with relevant State law governing such 
investments; and
    (C) During the period such shares, assets, or ownership interests 
are held, the company does not routinely manage or operate such company 
except as may be necessary or required to obtain a reasonable return on 
investment.
    (xxvii) Lending, exchanging, transferring, investing for others, or 
safeguarding financial assets other than money or securities.
    (xxviii) Providing any device or other instrumentality for 
transferring money or other financial assets.
    (xxix) Arranging, effecting, or facilitating financial transactions 
for the account of third parties.
    (xxx) Ownership or control of one or more depository institutions.
    (xxxi) Any other activity, wherever conducted, determined by the 
Board of Governors of the Federal Reserve System, in consultation with 
the Secretary of the Treasury, under section 4(k)(1)(A) of the Bank 
Holding Company Act (12 USC 1843(k)(1)(A)) to be financial in nature or 
incidental to a financial activity.

    By order of the Board of Directors.

    Dated at Washington, DC, this 12th day of June 2012.
Robert E. Feldman,
Executive Secretary, Federal Deposit Insurance Corporation.
[FR Doc. 2012-14701 Filed 6-15-12; 8:45 am]
BILLING CODE 6714-01-P