[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
________________________________________________________________________
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\
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\35\ 62 FR 9308 (February 8, 1997).
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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\
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\36\ Id. at 9309.
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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).
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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.
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\38\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.28(b)(9)(i).
\39\ See 62 FR 9312 (February 28, 1997).
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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.
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\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).
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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\
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\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).
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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.
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\43\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.28(b)(11).
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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\
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\44\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.28(b)(12).
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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\
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\45\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.28(b)(13).
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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.
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\46\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.28(b)(14).
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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.
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\47\ 12 U.S.C. 1843(k)(4)(G); 12 CFR 225.86(b)(1).
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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\
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\48\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.86(a)(2)(i).
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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\
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\49\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.86(a)(2)(ii).
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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\
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\50\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.86(a)(2)(iii).
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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\
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\51\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.86(a)(2)(iv).
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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\
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\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\
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\53\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.86(a)(2)(vi).
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Real Estate Title Abstracting
Engaging in real estate title abstracting was determined to be
closely related to banking by the Board of Governors.\54\
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\54\ 12 U.S.C. 1843(k)(4)(F); 12 CFR 225.86(a)(2)(vii).
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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).
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[[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).
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\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\
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\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.
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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\
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\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.
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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\
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\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).
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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.
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\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).
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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\
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\64\ 12 U.S.C. 1843(k)(5).
\65\ See 66 FR 257 (January 3, 2001).
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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.
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\66\ 13 CFR 121.201.
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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.
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\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.
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(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\
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\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.
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(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\
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\4\ Feasibility studies do not include assisting management with
the planning or marketing for a given project or providing general
operational or management advice.
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(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\
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\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).
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(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;
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\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)).
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(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\
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\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.
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(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.
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\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.
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(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:
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\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.
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(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
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\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.
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(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