Financial Services Regulatory Overhaul Bill of 2009

8/14/2019 Financial Services Regulatory Overhaul Bill of 2009

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111TH CONGRESS1ST SESSION H. R. 4173

To provide for financial regulatory reform, to protect consumers and investors,

to enhance Federal understanding of insurance issues, to regulate the

over-the-counter derivatives markets, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

DECEMBER 2, 2009Mr. FRANK of Massachusetts introduced the following bill; which was referred

to the Committee on Financial Services, and in addition to the Commit-

tees on Agriculture, Energy and Commerce, the Judiciary, Rules, the

Budget, Oversight and Government Reform, and Ways and Means, for

a period to be subsequently determined by the Speaker, in each case for

consideration of such provisions as fall within the jurisdiction of the com-

mittee concerned

A BILL

To provide for financial regulatory reform, to protect con-

sumers and investors, to enhance Federal understanding

of insurance issues, to regulate the over-the-counter de-

rivatives markets, and for other purposes.

Be it enacted by the Senate and House of Representa-1

tives of the United States of America in Congress assembled,2

SECTION 1. SHORT TITLE.3

This Act may be cited as the The Wall Street Re-4

form and Consumer Protection Act of 2009.5

VerDate Nov 24 2008 22:04 Dec 02, 2009 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H4173.IH H4173


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SEC. 2. TABLE OF CONTENTS.1

The table of contents for this Act is as follows:2

Sec. 1. Short title.

Sec. 2. Table of contents.

TITLE IFINANCIAL STABILITY IMPROVEMENT ACT

Sec. 1000. Short title; definitions.

Sec. 1000A. Restrictions on the Federal Reserve System pending audit report.

Subtitle AThe Financial Services Oversight Council

Sec. 1001. Financial Services Oversight Council established.

Sec. 1002. Resolution of disputes among Federal financial regulatory agencies.

Sec. 1003. Technical and professional advisory committees.

Sec. 1004. Financial Services Oversight Council meetings and council govern-

ance.

Sec. 1005. Council staff and funding.

Sec. 1006. Reports to the Congress.Sec. 1007. Applicability of certain Federal laws.

Sec. 1008. Oversight by GAO.

Subtitle BPrudential Regulation of Companies and Activities for Financial

Stability Purposes

Sec. 1101. Council and Board authority to obtain information.

Sec. 1102. Council prudential regulation recommendations to Federal financial

regulatory agencies.

Sec. 1103. Subjecting financial companies to stricter prudential standards for

financial stability purposes.

Sec. 1104. Stricter prudential standards for certain financial holding companies

for financial stability purposes.Sec. 1105. Mitigation of systemic risk.

Sec. 1106. Subjecting activities or practices to stricter prudential standards for

financial stability purposes.

Sec. 1107. Stricter regulation of activities and practices for financial stability

purposes.

Sec. 1108. Effect of rescission of identification.

Sec. 1109. Emergency financial stabilization.

Sec. 1110. Corporation must receive warrants when paying or risking taxpayer

funds.

Sec. 1111. Examinations and enforcement actions for insurance and resolutions

purposes.

Sec. 1112. Study of the effects of size and complexity of financial institutions

on capital market efficiency and economic growth.Sec. 1113. Exercise of Federal Reserve authority.

Sec. 1114. Stress tests.

Sec. 1115. Contingent Capital.

Sec. 1116. Restriction on proprietary trading by designated financial holding

companies.

Sec. 1117. Rule of construction.

Subtitle CImprovements to Supervision and Regulation of Federal

Depository Institutions



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Sec. 1201. Definitions.

Sec. 1202. Amendments to the Home Owners Loan Act relating to transfer of

functions.

Sec. 1203. Amendments to the revised statutes.

Sec. 1204. Power and duties transferred.

Sec. 1205. Transfer date.

Sec. 1206. Expiration of term of comptroller.Sec. 1207. Office of Thrift Supervision abolished.

Sec. 1208. Savings provisions.

Sec. 1209. Regulations and orders.

Sec. 1210. Coordination of transition activities.

Sec. 1211. Interim responsibilities of office of the comptroller of the currency

and office of thrift supervision.

Sec. 1212. Employees transferred.

Sec. 1213. Property transferred.

Sec. 1214. Funds transferred.

Sec. 1215. Disposition of affairs.

Sec. 1216. Continuation of services.

Sec. 1217. Contracting and leasing authority.

Sec. 1218. Treatment of savings and loan holding companies.Sec. 1219. Practices of certain mutual thrift holding companies preserved.

Sec. 1220. Implementation plan and reports.

Sec. 1221. Composition of board of directors of the Federal Deposit Insurance

Corporation.

Sec. 1222. Amendments to section 3.







Sec. 1229. Amendments to the Alternative Mortgage Transaction Parity Act of

1982.

Sec. 1230. Amendments to the Bank Holding Company Act of 1956.

Sec. 1231. Amendments to the Bank Protection Act of 1968.

Sec. 1232. Amendments to the Bank Service Company Act.

Sec. 1233. Amendments to the Community Reinvestment Act of 1977.

Sec. 1234. Amendments to the Depository Institution Management Interlocks

Act.

Sec. 1235. Amendments to the Emergency Homeowners Relief Act.

Sec. 1236. Amendments to the Equal Credit Opportunity Act.

Sec. 1237. Amendments to the Federal Credit Union Act.

Sec. 1238. Amendments to the Federal Financial Institutions Examination

Council Act of 1978.

Sec. 1239. Amendments to the Federal Home Loan Bank Act.

Sec. 1240. Amendments to the Federal Reserve Act.

Sec. 1241. Amendments to the Financial Institutions Reform, Recovery, and

Enforcement Act of 1989.

Sec. 1242. Amendments to the Housing Act of 1948.

Sec. 1243. Amendments to the Housing and Community Development Act of

1992 and the Federal Housing Enterprises Financial Safety

and Soundness Act of 1992.

Sec. 1244. Amendment to the Housing and Urban-Rural Recovery Act of 1983.

Sec. 1245. Amendments to the National Housing Act.

Sec. 1246. Amendments to the Right to Financial Privacy Act of 1978.



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Sec. 1247. Amendments to the Balanced Budget and Emergency Deficit Con-

trol Act of 1985.

Sec. 1248. Amendments to the Crime Control Act of 1990.

Sec. 1249. Amendment to the Flood Disaster Protection Act of 1973.

Sec. 1250. Amendment to the Investment Company Act of 1940.

Sec. 1251. Amendment to the Neighborhood Reinvestment Corporation Act.

Sec. 1252. Amendments to the Securities Exchange Act of 1934.Sec. 1253. Amendments to title 18, United States Code.

Sec. 1254. Amendments to title 31, United States Code.

Sec. 1255. Requirement for Countercyclical Capital Requirements.

Sec. 1256. Transfer of authority to the Board with respect to savings and loan

holding companies.

Subtitle DFurther Improvements to the Regulation of Bank Holding

Companies and Depository Institutions

Sec. 1301. Treatment of industrial loan companies, savings associations, and

certain other companies under the bank holding company act.

Sec. 1302. Registration of certain companies as bank holding companies.

Sec. 1303. Reports and examinations of bank holding companies; regulation of

functionally regulated subsidiaries.

Sec. 1304. Requirements for financial holding companies to remain well capital-

ized and well managed.

Sec. 1305. Standards for interstate acquisitions.

Sec. 1306. Enhancing existing restrictions on bank transactions with affiliates.

Sec. 1307. Eliminating exceptions for transactions with financial subsidiaries.

Sec. 1308. Lending limits applicable to credit exposure on derivative trans-

actions, repurchase agreements, reverse repurchase agree-

ments, and securities lending and borrowing transactions.

Sec. 1309. Restriction on conversions of troubled banks and thrifts.

Sec. 1310. Lending limits to insiders.

Sec. 1311. Limitations on purchases of assets from insiders.

Sec. 1312. Rules regarding capital levels of bank holding companies.Sec. 1313. Enhancements to factors to be considered in certain acquisitions.

Sec. 1314. Elimination of elective investment bank holding company frame-

work.

Sec. 1315. Examination fees for large bank holding companies.

Subtitle EImprovements to the Federal Deposit Insurance Fund

Sec. 1401. Accounting for actual risk to the Deposit Insurance Fund.

Sec. 1402. Creating a risk-focused assessment base.

Sec. 1403. Elimination of procyclical assessments.

Sec. 1404. Enhanced access to information for deposit insurance purposes.

Sec. 1405. Transition reserve ratio requirements to reflect new assessment

base.

Subtitle FImprovements to the Asset-backed Securitization Process


Sec. 1502. Credit risk retention.

Sec. 1503. Periodic and other reporting under the Securities Exchange Act of

1934 for asset-backed securities.

Sec. 1504. Representations and warranties in asset-backed offerings.

Sec. 1505. Exempted transactions under the Securities Act of 1933.

Sec. 1506. Study on the macroeconomic effects of risk retention requirements.



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Subtitle GEnhanced Dissolution Authority



Sec. 1603. Systemic risk determination.

Sec. 1604. Resolution; stabilization.

Sec. 1605. Judicial review.

Sec. 1606. Directors not liable for acquiescing in appointment of receiver.

Sec. 1607. Termination and exclusion of other actions.

Sec. 1608. Rulemaking.

Sec. 1609. Powers and duties of corporation.

Sec. 1610. Clarification of prohibition regarding concealment of assets from re-

ceiver or liquidating agent.

Sec. 1611. Office of Resolution.

Sec. 1612. Miscellaneous provisions.

Sec. 1613. Amendment to Federal Deposit Insurance Act.

Sec. 1614. Application of executive compensation limitations.

Subtitle HAdditional Improvements for Financial Crisis Management

Sec. 1701. Additional improvements for financial crisis management.Sec. 1702. Certain restrictions related to foreign currency swap authority.

Sec. 1703. Additional oversight of financial regulatory system.

Subtitle IMiscellaneous

Sec. 1801. Inclusion of minorities and women; Diversity in agency workforce.

Subtitle JInternational Policy Coordination

Sec. 1901. International policy coordination.

Subtitle KInternational Financial Provisions

Sec. 1951. Access to United States financial market by foreign institutions.

TITLE IICORPORATE AND FINANCIAL INSTITUTION

COMPENSATION FAIRNESS ACT


Sec. 2002. Shareholder vote on executive compensation disclosures.

Sec. 2003. Compensation committee independence.

Sec. 2004. Enhanced compensation structure reporting to reduce perverse in-

centives.

TITLE IIIOVER-THE-COUNTER DERIVATIVES MARKETS ACT


Subtitle ARegulation of Swap Markets


Sec. 3102. Jurisdiction.

Sec. 3103. Clearing.

Sec. 3104. Public reporting of aggregate swap data.

Sec. 3105. Swap repositories.

Sec. 3106. Reporting and recordkeeping.

Sec. 3107. Registration and regulation of swap dealers and major swap partici-

pants.



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Sec. 3108. Segregation of assets held as collateral in swap transactions.

Sec. 3109. Conflicts of interest.

Sec. 3110. Swap execution facilities.

Sec. 3111. Derivatives transaction execution facilities and exempt boards of

trade.

Sec. 3112. Designated contract markets.

Sec. 3113. Position limits.Sec. 3114. Enhanced authority over registered entities.

Sec. 3115. Foreign boards of trade.

Sec. 3116. Legal certainty for swaps.

Sec. 3117. Multilateral clearing organizations.

Sec. 3118. Primary enforcement authority.

Sec. 3119. Enforcement.

Sec. 3120. Retail commodity transactions.

Sec. 3121. Large swap trader reporting.

Sec. 3122. Authority to ban abusive swaps.

Sec. 3123. International harmonization.

Sec. 3124. Authority to ban access to the United States Financial System.

Sec. 3125. Other authority.

Sec. 3126. Antitrust.Sec. 3127. Effective date.

Subtitle BRegulation of Security-Based Swap Markets

Sec. 3201. Definitions under the Securities Exchange Act of 1934.

Sec. 3202. Repeal of prohibition on regulation of security-based swaps.

Sec. 3203. Amendments to the Securities Exchange Act of 1934.

Sec. 3204. Registration and regulation of swap dealers and major swap partici-

pants.

Sec. 3205. National security exchange registration requirements.

Sec. 3206. Reporting and recordkeeping.

Sec. 3207. State gaming and bucket shop laws.

Sec. 3208. Amendments to the Securities Act of 1933; treatment of security-based swaps.

Sec. 3209. Other authority.

Sec. 3210. Jurisdiction.

Sec. 3211. Effective date.

Subtitle CMiscellaneous

Sec. 3301. Study on feasibility of requiring use of standardized algorithmic de-

scriptions for financial derivatives.

Sec. 3302. Study of desirability and feasibility of establishing single regulator

for all transactions involving financial derivatives.

Sec. 3303. Recommendations for changes to insolvency laws.

Sec. 3304. Prohibition against government assistance.

TITLE IVCONSUMER FINANCIAL PROTECTION AGENCY ACT



Subtitle AEstablishment of the Agency

Sec. 4101. Establishment of the Consumer Financial Protection Agency.

Sec. 4102. Director.

Sec. 4103. Consumer Financial Protection Oversight Board.



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Sec. 4104. Executive and administrative powers.

Sec. 4105. Administration.

Sec. 4106. Consumer Advisory Board.

Sec. 4107. Coordination.

Sec. 4108. Reports to the Congress.

Sec. 4109. Funding; fees and assessments; penalties and fines.

Sec. 4110. Amendments relating to other administrative provisions.Sec. 4111. Effective date.

Subtitle BGeneral Powers of the Director and Agency

Sec. 4201. Mandate and objectives.

Sec. 4202. Authorities.

Sec. 4203. Examination and enforcement for small banks, thrifts, and credit

unions.

Sec. 4204. Simultaneous and coordinated supervisory action.

Sec. 4205. Limitations on authority of agency and director.

Sec. 4206. Collection of information; confidentiality regulations.

Sec. 4207. Monitoring; assessments of significant regulations; reports.

Sec. 4208. Authority to restrict mandatory predispute arbitration.

Sec. 4209. Registration and supervision of nondepository covered persons.


Subtitle CSpecific Authorities

Sec. 4301. Prohibiting unfair, deceptive, or abusive acts or practices.

Sec. 4302. Disclosures.

Sec. 4303. Sales practices.

Sec. 4304. Pilot disclosures.

Sec. 4305. Adopting operational standards to deter unfair, deceptive, or abusive

practices.

Sec. 4306. Duties.

Sec. 4307. Consumer rights to access information.

Sec. 4308. Prohibited acts.

Sec. 4309. Treatment of remittance transfers.


Sec. 4311. No authority to require the offering of financial products or services.

Sec. 4312. Appraisal independence requirements.

Subtitle DPreservation of State Law

Sec. 4401. Relation to State law.

Sec. 4402. Preservation of enforcement powers of States.

Sec. 4403. Preservation of existing contracts.

Sec. 4404. State law preemption standards for national banks and subsidiaries

clarified.

Sec. 4405. Visitorial standards.Sec. 4406. Clarification of law applicable to nondepository institution subsidi-

aries.

Sec. 4407. State law preemption standards for Federal savings associations and

subsidiaries clarified.

Sec. 4408. Visitorial standards.

Sec. 4409. Clarification of law applicable to nondepository institution subsidi-

aries.


Subtitle EEnforcement Powers



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Sec. 4502. Investigations and administrative discovery.

Sec. 4503. Hearings and adjudication proceedings.

Sec. 4504. Litigation authority.

Sec. 4505. Relief available.

Sec. 4506. Referrals for criminal proceedings.

Sec. 4507. Employee protection.Sec. 4508. Effective date.

Subtitle FTransfer of Functions and Personnel; Transitional Provisions

Sec. 4601. Transfer of certain functions.

Sec. 4602. Designated transfer date.

Sec. 4603. Savings provisions.

Sec. 4604. Transfer of certain personnel.

Sec. 4605. Incidental transfers.

Sec. 4606. Interim authority of the Secretary.

Subtitle GRegulatory Improvements

Sec. 4701. Collection of deposit account data.Sec. 4702. Small business data collection.

Sec. 4703. Annual financial autopsy.

Subtitle HConforming Amendments

Sec. 4801. Amendments to the Inspector General Act of 1978.

Sec. 4802. Amendments to the Privacy Act of 1974.

Sec. 4803. Amendments to the Alternative Mortgage Transaction Parity Act of

1982.

Sec. 4804. Amendments to the Consumer Credit Protection Act.

Sec. 4805. Amendments to the Expedited Funds Availability Act.

Sec. 4806. Amendments to the Federal Deposit Insurance Act.

Sec. 4807. Amendments to the Gramm-Leach-Bliley Act.Sec. 4808. Amendments to the Home Mortgage Disclosure Act of 1975.

Sec. 4809. Amendments to division D of the Omnibus Appropriations Act,

2009.

Sec. 4810. Amendments to the Homeowners Protection Act of 1998.

Sec. 4811. Amendments to the Real Estate Settlement Procedures Act of 1974.

Sec. 4812. Amendments to the Right to Financial Privacy Act of 1978.

Sec. 4813. Amendments to the Secure and Fair Enforcement for Mortgage Li-

censing Act of 2008.

Sec. 4814. Amendments to the Truth in Savings Act.

Sec. 4815. Amendments to the Telemarketing and Consumer Fraud and Abuse

Prevention Act.

Sec. 4816. Membership in Financial Literacy and Education Commission.


Subtitle IImprovements to the Federal Trade Commission Act

Sec. 4901. Amendments to the Federal Trade Commission Act.

TITLE VCAPITAL MARKETS

Subtitle APrivate Fund Investment Advisers Registration Act





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Sec. 5003. Elimination of private adviser exemption; Limited exemption for for-

eign private fund advisers; Limited intrastate exemption.

Sec. 5004. Collection of systemic risk data.

Sec. 5005. Elimination of disclosure provision.

Sec. 5006. Exemption of and reporting by venture capital fund advisers.

Sec. 5007. Exemption of and reporting by certain private fund advisers.

Sec. 5008. Clarification of rulemaking authority.Sec. 5009. GAO study.

Sec. 5010. Effective date; Transition period.

Sec. 5011. Qualified client standard.

Subtitle BAccountability and Transparency in Rating Agencies Act


Sec. 6002. Enhanced regulation of nationally recognized statistical rating orga-

nizations.

Sec. 6003. Standards for private actions.

Sec. 6004. Issuer disclosure of preliminary ratings.

Sec. 6005. Change to designation.

Sec. 6006. Timeline for regulations.

Sec. 6007. Elimination of exemption from fair disclosure rule.

Sec. 6008. Advisory Board.

Sec. 6009. Removal of statutory references to credit ratings.

Sec. 6010. Review of reliance on ratings.

Sec. 6011. Publication of rating histories on the EDGAR system.

Sec. 6012. Effect of Rule 436(g).

Sec. 6013. Studies.

Subtitle CInvestor Protection Act


PART 1DISCLOSURE

Sec. 7101. Investor Advisory Committee established.

Sec. 7102. Clarification of the Commissions authority to engage in consumer

testing.

Sec. 7103. Establishment of a fiduciary duty for brokers, dealers, and invest-

ment advisers, and harmonization of regulation.

Sec. 7104. Commission study on disclosure to retail customers before purchase

of products or services.

Sec. 7105. Beneficial ownership and short-swing profit reporting.

Sec. 7106. Revision to recordkeeping rules.

Sec. 7107. Study on enhancing investment advisor examinations.

Sec. 7108. GAO study of financial planning.

PART 2ENFORCEMENT AND REMEDIES

Sec. 7201. Authority to restrict mandatory pre-dispute arbitration.

Sec. 7202. Comptroller General study to review securities arbitration system.

Sec. 7203. Whistleblower protection.

Sec. 7204. Conforming amendments for whistleblower protection.

Sec. 7205. Implementation and transition provisions for whistleblower protec-

tions.

Sec. 7206. Collateral bars.

Sec. 7207. Aiding and abetting authority under the Securities Act and the In-

vestment Company Act.



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Sec. 7208. Authority to impose penalties for aiding and abetting violations of

the Investment Advisers Act.

Sec. 7209. Deadline for completing examinations, inspections and enforcement

actions.

Sec. 7210. Nationwide service of subpoenas.

Sec. 7211. Authority to impose civil penalties in cease and desist proceedings.

Sec. 7212. Formerly associated persons.Sec. 7213. Sharing privileged information with other authorities.

Sec. 7214. Expanded access to grand jury material.

Sec. 7215. Aiding and abetting standard of knowledge satisfied by recklessness.

Sec. 7216. Extraterritorial jurisdiction of the antifraud provisions of the Fed-

eral securities laws.

Sec. 7217. Fidelity bonding.

Sec. 7218. Enhanced SEC authority to conduct surveillance and risk assess-

ment.

Sec. 7219. Investment company examinations.

Sec. 7220. Control person liability under the Securities Exchange Act.

Sec. 7221. Enhanced application of anti-fraud provisions.

Sec. 7222. SEC authority to issue rules on proxy access.

PART 3COMMISSION FUNDING AND ORGANIZATION

Sec. 7301. Authorization of appropriations.

Sec. 7302. Investment adviser regulation funding.

Sec. 7303. Amendments to section 31 of the Securities Exchange Act of 1934.

Sec. 7304. Commission organizational study and reform.

Sec. 7305. Capital Markets Safety Board.

Sec. 7306. Report on implementation of post-Madoff reforms.

Sec. 7307. Joint Advisory Committee.

PART 4ADDITIONAL COMMISSION REFORMS

Sec. 7401. Regulation of securities lending.

Sec. 7402. Lost and stolen securities.

Sec. 7403. Fingerprinting.

Sec. 7404. Equal treatment of self-regulatory organization rules.

Sec. 7405. Clarification that section 205 of the Investment Advisers Act of

1940 does not apply to State-registered advisers.

Sec. 7406. Conforming amendments for the repeal of the Public Utility Holding

Company Act of 1935.

Sec. 7407. Promoting transparency in financial reporting.

Sec. 7408. Unlawful margin lending.

Sec. 7409. Protecting confidentiality of materials submitted to the Commission.

Sec. 7410. Technical corrections.

Sec. 7411. Municipal securities.

Sec. 7412. Interested person definition.

Sec. 7413. Rulemaking authority to protect redeeming investors.

Sec. 7414. Study on SEC revolving door.

Sec. 7415. Study on internal control evaluation and reporting cost burdens on

smaller issuers.

Sec. 7416. Analysis of rule regarding smaller reporting companies.

Sec. 7417. Financial Reporting Forum.

Sec. 7418. Investment advisers subject to State authorities.

Sec. 7419. Custodial requirements.

Sec. 7420. Ombudsman.



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PART 5SECURITIES INVESTOR PROTECTION ACT AMENDMENTS

Sec. 7501. Increasing the minimum assessment paid by SIPC members.

Sec. 7502. Increasing the borrowing limit on treasury loans.

Sec. 7503. Increasing the cash limit of protection.

Sec. 7504. SIPC as trustee in SIPA liquidation proceedings.

Sec. 7505. Insiders ineligible for SIPC advances.

Sec. 7506. Eligibility for direct payment procedure.

Sec. 7507. Increasing the fine for prohibited acts under SIPA.

Sec. 7508. Penalty for misrepresentation of SIPC membership or protection.

Sec. 7509. Futures held in a portfolio margin securities account protection.

Sec. 7510. Study and report on the feasibility of risk-based assessments for

SIPC members.

Sec. 7511. Budgetary treatment of Commission loans to SIPC.

PART 6SARBANES-OXLEY ACT AMENDMENTS

Sec. 7601. Public Company Accounting Oversight Board oversight of auditors

of brokers and dealers.

Sec. 7602. Foreign regulatory information sharing.

Sec. 7603. Expansion of audit information to be produced and exchanged withforeign counterparts.

Sec. 7604. Conforming amendment related to registration.

Sec. 7605. Fair fund amendments.

Sec. 7606. Exemption for nonaccelerated filers.

Sec. 7607. Whistleblower protection against retaliation by a subsidiary of an

issuer.

Sec. 7608. Congressional access to information.

Sec. 7609. Creation of ombudsman for the PCAOB.

Sec. 7610. Auditing Oversight Board.

PART 7SENIOR INVESTMENT PROTECTION

Sec. 7701. Findings.Sec. 7702. Definitions.

Sec. 7703. Grants to States for enhanced protection of seniors from being mis-

lead by false designations.

Sec. 7704. Applications.

Sec. 7705. Length of participation.

Sec. 7706. Authorization of appropriations.

PART 8REGISTRATION OF MUNICIPAL FINANCIAL ADVISORS

Sec. 7801. Municipal financial adviser registration requirement.

Sec. 7802. Conforming amendments.

Sec. 7803. Effective dates.

TITLE VIFEDERAL INSURANCE OFFICE


Sec. 8002. Federal Insurance Office established.

Sec. 8003. Report on global reinsurance market.

Sec. 8004. Study on modernization and improvement of insurance regulation in

the United States.



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TITLE IFINANCIAL STABILITY1

IMPROVEMENT ACT2

SEC. 1000. SHORT TITLE; DEFINITIONS.3

(a) SHORT TITLE.This title may be cited as the4

Financial Stability Improvement Act of 2009.5

(b) DEFINITIONS.For purposes of this title, the fol-6

lowing definitions shall apply:7

(1) The term Board means the Board of8

Governors of the Federal Reserve System.9

(2) The term Council means the Financial10

Services Oversight Council established under section11

1001.12

(3) The term Federal financial regulatory13

agency means any agency that has a voting mem-14

ber of the Council as set forth in section 1001(b)(1).15

(4) The term financial company means a16

company or other entity17

(A) that is18

(i) incorporated or organized under19

the laws of the United States or any State,20

territory, or possession of the United21

States, the District of Columbia, Common-22

wealth of Puerto Rico, Commonwealth of23

Northern Mariana Islands, Guam, Amer-24



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ican Samoa, or the United States Virgin1

Islands; or2

(ii) a company incorporated in or or-3

ganized in a country other than the United4

States that has significant operations in5

the United States through6

(I) a Federal or State branch or7

agency of a foreign bank as such8

terms are defined in the International9

Banking Act of 1978 (12 U.S.C. 310110

et seq.); or11

(II) a United States affiliate or12

other United States operating entity13

of a company that is incorporated or14

organized in a country other than the15

United States; and16

(B) that is, in whole or in part, directly or17

indirectly, engaged in financial activities.18

(5) FINANCIAL HOLDING COMPANY SUBJECT TO19

STRICTER STANDARDS.The term financial holding20

company subject to stricter standards means21

(A) a financial company that has been sub-22

jected to stricter prudential standards under23

subtitle B; or24



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(B) in the case of a financial company de-1

scribed in subparagraph (A) that is required to2

establish an intermediate holding company3

under section 6 of the Bank Holding Company4

Act, the section 6 holding company through5

which the financial company is required to con-6

duct its financial activities.7

(6) The term primary financial regulatory8

agency means the following:9

(A) The Comptroller of the Currency, with10

respect to any national bank, any Federal11

branch or Federal agency of a foreign bank,12

and, after the date on which the functions of13

the Office of Thrift Supervision and the Direc-14

tor of the Office of Thrift Supervision are15

transferred under subtitle C, a Federal savings16

association.17

(B) The Board, with respect to18

(i) any State member bank;19

(ii) any bank holding company and20

any subsidiary of such company (as such21

terms are defined in the Bank Holding22

Company Act), other than a subsidiary23

that is described in any other subpara-24

graph of this paragraph to the extent that25



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the subsidiary is engaged in an activity de-1

scribed in such subparagraph;2

(iii) any financial holding company3

subject to stricter standards and any sub-4

sidiary (as such term is defined in the5

Bank Holding Company Act) of such com-6

pany, other than a subsidiary that is de-7

scribed in any other subparagraph of this8

paragraph to the extent that the subsidiary9

is engaged in an activity described in such10

subparagraph;11

(iv) any organization organized and12

operated under section 25 or 25A of the13

Federal Reserve Act (12 U.S.C. 601 et14

seq. or 611 et seq.); and15

(v) any foreign bank or company that16

is treated as a bank holding company17

under subsection (a) of section 8 of the18

International Banking Act of 1978 and19

any subsidiary (other than a bank or other20

subsidiary that is described in any other21

subparagraph of this paragraph) of any22

such foreign bank or company.23

(C) The Federal Deposit Insurance Cor-24

poration, with respect to a State nonmember25



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bank, any insured State branch of a foreign1

bank (as such terms are defined in section 3 of2

the Federal Deposit Insurance Act), and, after3

the date on which the functions of the Office of4

Thrift Supervision are transferred under sub-5

title C, any State savings association.6

(D) The National Credit Union Adminis-7

tration, with respect to any insured credit union8

under the Federal Credit Union Act (12 U.S.C.9

1751 et seq.).10

(E) The Securities and Exchange Commis-11

sion, with respect to12

(i) any broker or dealer registered13

with the Securities and Exchange Commis-14

sion under the Securities Exchange Act of15

1934 (15 U.S.C. 78a et seq.);16

(ii) any investment company reg-17

istered with the Securities and Exchange18

Commission under the Investment Com-19

pany Act of 1940 (15 U.S.C. 80a1 et20

seq.);21

(iii) any investment adviser registered22


sion under the Investment Advisers Act of24

1940 (15 U.S.C. 80b1 et seq.) with re-25



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spect to the investment advisory activities1

of such company and activities incidental2

to such advisory activities;3

(iv) any clearing agency (as defined in4

section 3(a)(23) of the Securities Ex-5

change Act of 1934;6

(v) any exchange registered as a na-7

tional securities exchange with the Securi-8

ties and Exchange Commission under the9

Securities Exchange Act of 1934 (1510

U.S.C. 78a et seq.);11

(vi) any credit rating agency reg-12

istered with the Securities and Exchange13

Commission under the Securities Exchange14

Act of 1934 (15 U.S.C. 78a et seq.);15

(vii) any securities information proc-16

essor registered with the Securities and17

Exchange Commission under the Securities18

Exchange Act of 1934 (15 U.S.C. 78a et19

seq.); and20

(viii) any transfer agent registered21


sion under the Securities Exchange Act of23

1934 (15 U.S.C. 78a et seq.).24



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(F) The Commodity Futures Trading1

Commission, with respect to2

(i) any futures commission merchant,3

any commodity trading adviser, and any4

commodity pool operator registered with5

the Commodity Futures Trading Commis-6

sion under the Commodity Exchange Act7

(7 U.S.C. 1 et seq.) with respect to the8

commodities activities of such entity and9

activities incidental to such commodities10

activities; and11

(ii) any derivatives clearing organiza-12

tion (as defined in the Commodity Ex-13

change Act).14

(G) The Federal Housing Finance Agency15

with respect to the Federal National Mortgage16

Association, the Federal Home Loan Mortgage17

Corporation, and the Federal home loan banks.18

(H) The State insurance authority of the19

State in which an insurance company is domi-20

ciled, with respect to the insurance activities21

and activities incidental to such insurance ac-22

tivities of an insurance company that is subject23

to supervision by the State insurance authority24

under State insurance law.25



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(I) The Office of Thrift Supervision, with1

respect to any Federal savings association,2

State savings association, or savings and loan3

holding company, until the date on which the4

functions of the Office of Thrift Supervision are5

transferred under subtitle C.6

(7) TERMS DEFINED IN OTHER LAWS.7

(A) AFFILIATE.The term affiliate has8

the meaning given such term in section 2(k) of9

the Bank Holding Company Act of 1956.10

(B) STATE MEMBER BANK, STATE NON-11

MEMBER BANK.The terms State member12

bank and State nonmember bank have the13

same meanings as in subsections (d)(2) and14

(e)(2), respectively, of section 3 of the Federal15

Deposit Insurance Act.16

SEC. 1000A. RESTRICTIONS ON THE FEDERAL RESERVE17

SYSTEM PENDING AUDIT REPORT.18

(a) IN GENERAL.Notwithstanding any other provi-19

sion of law, the Comptroller General of the United States20

shall perform an audit of all actions taken by the Board21

of Governors of the Federal Reserve System and the Fed-22

eral reserve banks during the current economic crisis pur-23

suant to the authority granted under section 13(c) of the24

Federal Reserve Act. Such audit shall be completed as ex-25



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peditiously as possible after the date of the enactment of1

the Financial Stability Improvement Act of 2009.2

(b) REPORT.3

(1) REQUIRED.Not later than the end of the4

90-day period beginning on the date the audit re-5

ferred to in subsection (a) is completed, the Comp-6

troller General of the United States shall submit a7

report to the Congress, and make such report avail-8

able to the public.9

(2) CONTENTS.The report under paragraph10

(1) shall include a detailed description of the find-11

ings and conclusion of the Comptroller General with12

respect to the audit that is the subject of the report,13

together with such recommendations for legislative14

or administrative action as the Comptroller General15

may determine to be appropriate.16

Subtitle AThe Financial Services17

Oversight Council18

SEC. 1001. FINANCIAL SERVICES OVERSIGHT COUNCIL ES-19

TABLISHED.20

(a) ESTABLISHMENT.Immediately upon enactment21

of this title, there is established a Financial Services Over-22

sight Council.23

(b) MEMBERSHIP.The Council shall consist of the24

following:25



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(1) VOTING MEMBERS.Voting members, who1

shall each have one vote on the Council, as follows:2

(A) The Secretary of the Treasury, who3

shall serve as the Chairman of the Council.4

(B) The Chairman of the Board of Gov-5

ernors of the Federal Reserve System.6

(C) The Comptroller of the Currency.7

(D) The Director of the Office of Thrift8

Supervision, until the functions of the Director9

of the Office of Thrift Supervision are trans-10

ferred to pursuant to subtitle C.11

(E) The Chairman of the Securities and12

Exchange Commission.13

(F) The Chairman of the Commodity Fu-14

tures Trading Commission.15

(G) The Chairperson of the Federal De-16

posit Insurance Corporation.17

(H) The Director of the Federal Housing18

Finance Agency.19

(I) The Chairman of the National Credit20

Union Administration.21

(2) NONVOTING MEMBERS.Nonvoting mem-22

bers, who shall serve in an advisory capacity:23

(A) A State insurance commissioner, to be24

designated by a selection process determined by25



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the State insurance commissioners, provided1

that the term for which a State insurance com-2

missioner may serve shall last no more than the3

2-year period beginning on the date that the4

commissioner is selected.5

(B) A State banking supervisor, to be des-6

ignated by a selection process determined by7

the State bank supervisors, provided that the8

term for which a State banking supervisor may9

serve shall last no more than the 2-year period10

beginning on the date that the supervisor is se-11

lected.12

(c) DUTIES.The Council shall have the following13

duties:14

(1) To advise the Congress on financial domes-15

tic and international regulatory developments, in-16

cluding insurance and accounting developments, and17

make recommendations that will enhance the integ-18

rity, efficiency, orderliness, competitiveness, and sta-19

bility of the United States financial markets.20

(2) To monitor the financial services market-21

place to identify potential threats to the stability of22

the United States financial system.23



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(3) To identify potential threats to the stability1

of the United States financial system that do not2

arise out of the financial services marketplace.3

(4) To develop plans (and conduct exercises in4

furtherance of those plans) to prepare for potential5

threats identified under paragraphs (2) and (3).6

(5) To subject financial companies and financial7

activities to stricter prudential standards in order to8

promote financial stability and mitigate systemic9

risk in accordance with subtitle B.10

(6) To issue formal recommendations that a11

Council member agency adopt stricter prudential12

standards for firms it regulates to mitigate systemic13

risk in accordance with subtitle B of this title.14

(7) To monitor international regulatory develop-15

ments, including both insurance and accounting de-16

velopments, and to identify those developments that17

may conflict with the policies of the United States18

or place United States financial services firms or19

United States financial markets at a competitive dis-20

advantage.21

(8) To facilitate information sharing and co-22

ordination among the members of the Council re-23

garding financial services policy development,24



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rulemakings, examinations, reporting requirements,1

and enforcement actions.2

(9) To provide a forum for discussion and anal-3

ysis of emerging market developments and financial4

regulatory issues among its members.5

(10) At the request of an agency that is a6

Council member, to resolve a jurisdictional dispute7

between that agency and another agency that is a8

Council member in accordance with section 1002.9

(11) To review and submit comments to the Se-10

curities and Exchange Commission and any stand-11

ards setting body with respect to an existing or pro-12

posed accounting principle, standard, or procedure.13

SEC. 1002. RESOLUTION OF DISPUTES AMONG FEDERAL FI-14

NANCIAL REGULATORY AGENCIES.15

(a) REQUEST FOR DISPUTE RESOLUTION.The16

Council shall resolve a dispute among 2 or more Federal17

financial regulatory agencies if18

(1) a Federal financial regulatory agency has a19

dispute with another Federal financial regulatory20

agency about the agencies respective jurisdiction21

over a particular financial company or financial ac-22

tivity or product (excluding matters for which an-23

other dispute mechanism specifically has been pro-24

vided under Federal law);25



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(2) the disputing agencies cannot, after a dem-1

onstrated good faith effort, resolve the dispute2

among themselves; and3

(3) any of the Federal financial regulatory4

agencies involved in the dispute5

(A) provides all other disputants prior no-6

tice of its intent to request dispute resolution7

by the Council; and8

(B) requests in writing, no earlier than 149

days after providing the notice described in10

paragraph (A), that the Council resolve the dis-11

pute.12

(b) COUNCIL DECISION.The Council shall decide13

the dispute14

(1) within a reasonable time after receiving the15

dispute resolution request;16

(2) after consideration of relevant information17

provided by each party to the dispute; and18

(3) by agreeing with 1 of the disputants regard-19

ing the entirety of the matter or by determining a20

compromise position.21

(c) FORM AND BINDING EFFECT.A Council deci-22

sion under this section shall be in writing and include an23

explanation and shall be binding on all Federal financial24

regulatory agencies that are parties to the dispute.25



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SEC. 1003. TECHNICAL AND PROFESSIONAL ADVISORY1

COMMITTEES.2

The Council is authorized to appoint3

(1) subsidiary working groups composed of4

Council members and their staff, Council staff, or a5

combination; and6

(2) such temporary special advisory, technical,7

or professional committees as may be useful in car-8

rying out its functions, which may be composed of9

Council members and their staff, other persons, or10

a combination.11

SEC. 1004. FINANCIAL SERVICES OVERSIGHT COUNCIL12

MEETINGS AND COUNCIL GOVERNANCE.13

(a) MEETINGS.The Council shall meet as fre-14

quently as the Chairman deems necessary, but not less15

than quarterly.16

(b) VOTING.Unless otherwise provided, the Council17

shall make all decisions the Council is required or author-18

ized to make by a majority of the total voting membership19

of the Council under section 1001(b)(1).20

SEC. 1005. COUNCIL STAFF AND FUNDING.21

(a) DEPARTMENT OF THE TREASURY.The Sec-22

retary of the Treasury shall23

(1) detail permanent staff from the Department24

of the Treasury to provide the Council (and any25

temporary special advisory, technical, or professional26



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committees appointed by the Council) with profes-1

sional and expert support; and2

(2) provide such other services and facilities3

necessary for the performance of the Councils func-4

tions and fulfillment of the duties and mission of the5

Council.6

(b) OTHER DEPARTMENTS ANDAGENCIES.In addi-7

tion to the assistance prescribed in subsection (a), depart-8

ments and agencies of the United States may, with the9

approval of the Secretary of the Treasury10

(1) detail department or agency staff on a tem-11

porary basis to provide additional support to the12

Council (and any special advisory, technical, or pro-13

fessional committees appointed by the Council); and14

(2) provide such services, and facilities as the15

other departments or agencies may determine advis-16

able.17

(c) STAFF STATUS; COUNCIL FUNDING.18

(1) STATUS.Staff detailed to the Council by19

the Secretary of the Treasury and other United20

States departments or agencies shall21

(A) report to and be subject to oversight22

by the Council during their assignment to the23

Council; and24



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(B) be compensated by the department of1

agency from which the staff was detailed.2

(2) FUNDING.The administrative expense of3

the Council shall be paid by the departments and4

agencies represented by voting members of the5

Council on an equal basis.6

SEC. 1006. REPORTS TO THE CONGRESS.7

(a) IN GENERAL.Semiannually the Council shall8

submit a report to the Committee on Financial Services9

of the House of Representatives, the Committee on Bank-10

ing, Housing, and Urban Affairs of the Senate, and the11

Comptroller General of the United States that12

(1) describes significant financial and regu-13

latory developments, including insurance and ac-14

counting regulations and standards, and assesses the15

impact of those developments on the stability of the16

financial system;17

(2) recommends actions that will improve finan-18

cial stability;19

(3) details the size, scale, scope, concentration,20

activities, and interconnectedness of the 50 largest21

financial institutions, by total assets, in the United22

States;23

(4) describes plans developed by the Council to24

respond to potential threats to the stability of the25



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United States financial system and the outcome of1

exercises conducted in furtherance of those plans;2

(5) describes the nature and scope of any com-3

pany or activities identified under subtitle B and4

steps taken to address them; and5

(6) describes any dispute resolutions under-6

taken under section 1002 and the result of such res-7

olutions.8

(b) E VALUATION OFANNUAL REPORT BY GAO.9

Not later than 120 days after receiving the report required10

by subsection (a), the Comptroller General of the United11

States shall submit an evaluation of such report to the12

Committee on Financial Services of the House of Rep-13

resentatives and the Committee on Banking, Housing, and14

Urban Affairs of the Senate.15

(c) STATEMENTS BY VOTING MEMBERS OF THE16

COUNCIL.At the time each report is submitted under17

subsection (a), each voting member of the Council shall18

(1) if such member believes that the Council,19

the Government, and the private sector are taking20

all reasonable steps to ensure financial stability and21

to prevent systemic risk that would negatively affect22

the economy, submit a signed statement to the Com-23

mittee on Financial Services of the House of Rep-24

resentatives and the Committee on Banking, Hous-25



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ing, and Urban Affairs of the Senate stating such1

belief; or2

(2) if such member does not believe that all rea-3

sonable steps described under paragraph (1) are4

being taken, submit a signed statement to the Com-5

mittee on Financial Services of the House of Rep-6

resentatives and the Committee on Banking, Hous-7

ing, and Urban Affairs of the Senate stating what8

actions such member believes need to be taken in9

order to ensure that all reasonable steps described10

under paragraph (1) are taken.11

(d) TESTIMONY BY THE CHAIRMAN.The Chairman12

of the Council shall appear before the Committee on Fi-13

nancial Services of the House of Representatives and the14

Committee on Banking, Housing, and Urban Affairs of15

the Senate at a semi-annual hearing, after the report is16

submitted under subsection (a)17

(1) to discuss the efforts, activities, objectives,18

and plans of the Council; and19

(2) to discuss and answer questions concerning20

such report.21

SEC. 1007. APPLICABILITY OF CERTAIN FEDERAL LAWS.22

(a) The Federal Advisory Committee Act shall not23

apply to the Financial Services Oversight Council, or any24

special advisory, technical, or professional committees ap-25



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pointed by the Council (except that, if an advisory, tech-1

nical, or professional committee has one or more members2

who are not employees of or affiliated with the United3

States government, the Council shall publish a list of the4

names of the members of such committee).5

(b) The Council shall not be deemed an agency for6

purposes of any State or Federal law.7

SEC. 1008. OVERSIGHT BY GAO.8

(a) AUTHORITY TO AUDIT.The Comptroller Gen-9

eral of the United States may audit the activities and fi-10

nancial transactions of11

(1) the Council; and12

(2) any person or entity acting on behalf of or13

under the authority of the Council, to the extent14

such activities and financial transactions relate to15

such persons or entitys work for the Council.16

(b) ACCESS TO INFORMATION.17

(1) IN GENERAL.Notwithstanding any other18

provision of law, the Comptroller General of the19

United States shall have access, upon request and at20

such reasonable time and in such reasonable form as21

the Comptroller General may request, to22

(A) any records or other information under23

the control of the Council; and24



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(B) any records or other information under1

the control of a person or entity acting on be-2

half of or under the authority of the Council, to3

the extent such records or other information is4

relevant to an audit under subsection (a).5

(2) CERTAIN INFORMATION SPECIFIED.Access6

under paragraph (1) includes access to7

(A) information provided to the Council by8

its voting and nonvoting members under section9

1101; and10

(B) the identity of each financial holding11

company subject to stricter standards.12

(c) PERIODIC EVALUATIONS.The Comptroller Gen-13

eral of the United States shall periodically evaluate the14

processes and activities of the Council and the extent to15

which the Council is fulfilling its duties under this title.16

The Comptroller General shall submit to the Committee17

on Financial Services of the House of Representatives and18

the Committee on Banking, Housing, and Urban Affairs19

of the Senate a report on the results of each such evalua-20

tion.21

(d) CONFIDENTIALITY.Any committees or Mem-22

bers of Congress receiving reports or other information23

from the Comptroller General of the United States shall24



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maintain the confidentiality of any such information relat-1

ing to2

(1) dispute resolutions undertaken under sec-3

tion 1002, including the result of such dispute reso-4

lutions; and5

(2) financial holding companies subject to6

stricter standards.7

Subtitle BPrudential Regulation8

of Companies and Activities for9

Financial Stability Purposes10

SEC. 1101. COUNCIL AND BOARD AUTHORITY TO OBTAIN11

INFORMATION.12

(a) IN GENERAL.The Council and the Board are13

authorized to receive, and may request the production of,14

any data or information from members of the Council, as15

necessary16

(1) to monitor the financial services market-17

place to identify potential threats to the stability of18

the United States financial system;19

(2) to identify global trends and developments20

that could pose systemic risks to the stability of the21

economy of the United States or other economies; or22

(3) to otherwise carry out any of the provisions23

of this title, including to ascertain a primary finan-24



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cial regulatory agencys implementation of rec-1

ommended prudential standards under this subtitle.2

(b) SUBMISSION BY COUNCIL MEMBERS.Notwith-3

standing any provision of law, any voting or nonvoting4

member of the Council is authorized to provide informa-5

tion to the Council, and the members of the Council shall6

maintain the confidentiality of such information.7

(c) FINANCIAL COMPANY DATA COLLECTION.8

(1) IN GENERAL.The Council or the Board9

may require the submission of periodic and other re-10

ports from any financial company solely for the pur-11

pose of assessing the extent to which a financial ac-12

tivity or financial market in which the financial com-13

pany participates, or the company itself, poses a14

threat to financial stability.15

(2) MITIGATION OF REPORT BURDEN.Before16

requiring the submission of reports from financial17

companies that are regulated by the primary finan-18

cial regulatory agencies, the Council or the Board19

shall coordinate with such agencies and shall, when-20

ever possible, rely on information already being col-21

lected by such agencies.22

(d) CONSULTATION WITH AGENCIES AND ENTI-23

TIES.The Council or the Board, as appropriate, may24



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consult with Federal and State agencies and other entities1

to carry out any of the provisions of this subtitle.2

(e) ADDITIONAL PROVISIONS.3

(1) D ATA AND INFORMATION SHARING.The4

Chairman of the Council, in consultation with the5

other members of the Council may6

(A) establish procedures to share data and7

information collected by the Council under this8

section with the members of the Council;9

(B) develop an electronic process for shar-10

ing all information collected by the Council with11

the Chairman of the Board on a real-time basis;12

and13

(C) issue any regulations necessary to14

carry out this subsection; and15

(D) designate the format in which re-16

quested data and information must be sub-17

mitted to the Council, including any electronic,18

digital, or other format that facilitates the use19

of such data by the Council in its analysis.20

(2) APPLICABLE PRIVILEGES NOT WAIVED.A21

Federal financial regulator, State financial regu-22

lator, United States financial company, foreign fi-23

nancial company operating in the United States, fi-24

nancial market utility, or other person shall not be25



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deemed to have waived any privilege otherwise appli-1

cable to any data or information by transferring the2

data or information to, or permitting that data or3

information to be used by4

(A) the Council;5

(B) any Federal financial regulator or6

State financial regulator, in any capacity; or7

(C) any other agency of the Federal Gov-8

ernment (as defined in section 6 of title 18,9

United States Code).10

(3) DISCLOSURE EXEMPTION.Any informa-11

tion obtained by the Council under this section shall12

be exempt from the disclosure requirements under13

section 552 of title 5, United States Code.14

(4) CONSULTATION WITH FOREIGN GOVERN-15

MENTS.Under the supervision of the President,16

and in a manner consistent with section 207 of the17

Foreign Service Act of 1980 (22 U.S.C. 3927), the18

Chairman of the Council, in consultation with the19

other members of the Council, shall regularly consult20

with the financial regulatory entities and other ap-21

propriate organizations of foreign governments or22

international organizations on matters relating to23

systemic risk to the international financial system.24



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(5) REPORT.Not later than 6 months after1

the date of the enactment of this title, the Chairman2

of the Council shall report to the Financial Services3

Committee of the House of Representatives and the4

Banking, Housing, and Urban Affairs Committee of5

the Senate the opinion of the Council as to whether6

setting up an electronic database as described in7

paragraph (1)(B) would aid the Council in carrying8

out this section.9

SEC. 1102. COUNCIL PRUDENTIAL REGULATION REC-10

OMMENDATIONS TO FEDERAL FINANCIAL11

REGULATORY AGENCIES.12

(a) IN GENERAL.The Council is authorized to issue13

formal recommendations, publicly or privately, that a Fed-14

eral financial regulatory agency adopt stricter prudential15

standards for firms it regulates to mitigate systemic risk.16

(b) AGENCY AUTHORITY TO IMPLEMENT STAND-17

ARDS.A Federal financial regulatory agency specifically18

is authorized to impose, require reports regarding, exam-19

ine for compliance with, and enforce stricter prudential20

standards and safeguards for the firms it regulates to21

mitigate systemic risk. This authority is in addition to and22

does not limit any other authority of the Federal financial23

regulatory agencies. Compliance by an entity with actions24

taken by a Federal financial regulatory agency under this25



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section shall be enforceable in accordance with the statutes1

governing the respective Federal financial regulatory2

agencys jurisdiction over the entity as if the agency action3

were taken under those statutes.4

(c) AGENCY NOTICE TO COUNCIL.A Federal finan-5

cial regulatory agency shall, within 60 days of receiving6

a Council recommendation under this section, notify the7

Council in writing regarding8

(1) the actions the Federal financial regulatory9

agency has taken in response to the Councils rec-10

ommendation, additional actions contemplated, and11

timetables therefore; or12

(2) the reason the Federal financial regulatory13

agency has failed to respond to the Councils re-14

quest.15

SEC. 1103. SUBJECTING FINANCIAL COMPANIES TO STRICT-16

ER PRUDENTIAL STANDARDS FOR FINANCIAL17

STABILITY PURPOSES.18

(a) IN GENERAL.The Council shall, in consultation19

with the Board and any other primary financial regulatory20

agency that regulates the financial company or a sub-21

sidiary of such company, subject a financial company to22

stricter prudential standards under this subtitle if the23

Council determines that24



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(1) material financial distress at the company1

could pose a threat to financial stability or the econ-2

omy; or3

(2) the nature, scope, size, scale, concentration,4

and interconnectedness, or mix of the companys ac-5

tivities could pose a threat to financial stability or6

the economy.7

(b) CRITERIA.In making a determination under8

subsection (a), the Council shall consider the following cri-9

teria:10

(1) The amount and nature of the companys fi-11

nancial assets.12

(2) The amount and nature of the companys li-13

abilities, including the degree of reliance on short-14

term funding.15

(3) The extent of the companys leverage.16

(4) The extent and nature of the companys off-17

balance sheet exposures.18

(5) The extent and nature of the companys19

transactions and relationships with other financial20

companies.21

(6) The companys importance as a source of22

credit for households, businesses, and State and23

local governments and as a source of liquidity for24

the financial system.25



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(7) The nature, scope, and mix of the com-1

panys activities.2

(8) The degree to which the company is already3

regulated by one or more Federal financial regu-4

latory agencies.5

(9) Any other factors that the Council deems6

appropriate.7

(c) NOTIFICATION OF DECISION.The Board, in an8

executive capacity on behalf of the Council, shall imme-9

diately upon the Councils decision notify the financial10

company by order, which shall be public, that the financial11

company is subject to stricter prudential standards, as12

prescribed by the Board in accordance with section 1104.13

(d) PERIODIC REVIEW AND RESCISSION OF FIND-14

INGS.15

(1) SUBMISSION OF ASSESSMENT.The Board16

shall periodically submit a report to the Council con-17

taining an assessment of whether each company sub-18

jected to stricter prudential standards should con-19

tinue to be subject to such standards.20

(2) REVIEW AND RESCISSION.The Council21

shall22

(A) review the assessment submitted pur-23

suant to paragraph (1) and any information or24

recommendation submitted by members of the25



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Council regarding whether a financial holding1

company subject to stricter standards continues2

to merit stricter prudential standards; and3

(B) rescind the action subjecting a com-4

pany to stricter prudential standards if the5

Council determines that the company no longer6

meets the conditions for being subjected to7

stricter prudential standards in subsections (a)8

and (b).9

(e) EMERGENCY E XCEPTION TO MAJORITYVOTE OF10

COUNCIL REQUIREMENT.If each of the Secretary of the11

Treasury, the Board, and the Federal Deposit Insurance12

Corporation determines that a financial company must be13

subjected to stricter prudential standards in accordance14

with this section immediately to prevent destabilization of15

the financial system or economy, the Secretary, the Board,16

and the Corporation may, upon approval by the President,17

subject such company to stricter prudential standards18

under this section.19

(f) APPEAL.20

(1) ADMINISTRATIVE.The Council and the21

Board, in an executive capacity on behalf of the22

Council, shall establish a procedure through which a23

financial company that has been subjected to stricter24

prudential standards in accordance with this section25



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may appeal being subjected to stricter prudential1

standards.2

(2) JUDICIAL REVIEW.Any financial company3

which has been subjected to stricter prudential4

standards may seek judicial review by filing a peti-5

tion for such review in the United States Court of6

Appeals for the District of Columbia.7

(g) EFFECT OF COUNCIL DECISION.8

(1) APPLICATION OF THE BANK HOLDING COM-9

PANY ACT.A financial company that is not a bank10

holding company as defined in the Bank Holding11

Company Act at the time the financial company is12

subjected to stricter prudential standards in accord-13

ance with this section, shall14

(A) if such company conducts at the time15

such company is subjected to stricter prudential16

standards in accordance with this section only17

activities that are determined to be financial in18

nature or incidental thereto under section 4(k)19

of the Bank Holding Company Act of 1956, be20

treated as a bank holding company that has21

elected to be a financial holding company for22

purposes of the Bank Holding Company Act of23

1956, the Federal Deposit Insurance Act, and24

all other Federal laws and regulations gov-25



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erning bank holding companies and financial1

holding companies and be the financial holding2

company subject to stricter standards for pur-3

poses of this subtitle; or4

(B) if such company conducts at the time5

that such company is subjected to stricter pru-6

dential standards in accordance with this sec-7

tion activities other than those that are deter-8

mined to be financial in nature or incidental9

thereto under section 4(k) of the Bank Holding10

Company Act, be required to establish and con-11

duct all its activities that are determined to be12

financial in nature or incidental thereto under13

section 4(k) of the Bank Holding Company Act14

of 1956 in an intermediate holding company es-15

tablished under section 6 of the Bank Holding16

Company Act of 1956, which intermediate hold-17

ing company shall be treated as a bank holding18

company that has elected to be a financial hold-19

ing company for purposes of the Bank Holding20

Company Act of 1956, the Federal Deposit In-21

surance Act, and all other Federal laws and22

regulations governing bank holding companies23

and financial holding companies, and such sec-24

tion 6 holding company shall be a financial25



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holding company subject to stricter standards1

for purposes of this title.2

(2) E XEMPTIVE AUTHORITY.Notwithstanding3

any provision of the Bank Holding Company Act of4

1956, the Board may, if it determines such action5

is necessary to ensure appropriate stricter prudential6

supervision, issue such exemptions from that Act as7

may be necessary with regard to financial holding8

companies subject to stricter standards that do not9

control an insured depository institution.10

(3) LEVERAGE LIMITATION.The Board shall11

require each financial holding company subject to12

stricter standards to maintain a debt to equity ratio13

of no more than 15 to 1, and the Board shall issue14

regulations containing procedures and timelines for15

how a financial holding company subject to stricter16

standards with a debt to equity ratio of more than17

15 to 1 at the time such company becomes a finan-18

cial holding company subject to stricter standards19

shall reduce such ratio.20

SEC. 1104. STRICTER PRUDENTIAL STANDARDS FOR CER-21

TAIN FINANCIAL HOLDING COMPANIES FOR22

FINANCIAL STABILITY PURPOSES.23

(a) STRICTER PRUDENTIAL STANDARDS.24



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(1) IN GENERAL.To mitigate risks to finan-1

cial stability and the economy posed by a financial2

holding company that has been subjected to stricter3

prudential standards in accordance with section4

1103, the Board shall impose stricter prudential5

standards on such company. Such standards shall be6

designed to maximize financial stability taking costs7

to long-term financial and economic growth into ac-8

count, be heightened when compared to the stand-9

ards that otherwise would apply to financial holding10

companies that are not subjected to stricter pruden-11

tial standards pursuant to this subtitle (including by12

addressing additional or different types of risks than13

otherwise applicable standards), and reflect the po-14

tential risk posed to financial stability by the finan-15

cial holding company subject to stricter standards.16

(2) STANDARDS.17

(A) REQUIRED STANDARDS.The height-18

ened standards imposed by the Board under19

this section shall include20

(i) risk-based capital requirements;21

(ii) leverage limits;22

(iii) liquidity requirements;23

(iv) concentration requirements (as24

specified in subsection (c));25



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(v) prompt corrective action require-1

ments (as specified in subsection (e));2

(vi) resolution plan requirements (as3

specified in subsection (f));4

(vii) overall risk management require-5

ments; and6

(viii) and may establish short-term7

debt limits in accordance with subsection8

(d).9

(B) ADDITIONAL STANDARDS.The10

heightened standards imposed by the Board11

under this section also may include any other12

prudential standards that the Board deems ad-13

visable, including taking actions to mitigate sys-14

temic risk.15

(C) CONSULTATION WITH FEDERAL FI-16

NANCIAL REGULATORY AGENCIES.The Board,17

in developing stricter prudential standards18

under this subsection, shall consult with other19

Federal financial regulatory agencies with re-20

spect to any standard that is likely to have a21

significant impact on a functionally regulated22

subsidiary, or a subsidiary depository institu-23

tion, of a financial holding company that is sub-24



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ject to stricter prudential standards under this1

title.2

(3) APPLICATION OF REQUIRED STANDARDS.3

In imposing prudential standards under this sub-4

section, the Board may differentiate among financial5

holding companies subject to stricter standards on6

an individual basis or by category, taking into con-7

sideration their capital structure, risk, complexity,8

financial activities, the financial activities of their9

subsidiaries, and any other factors that the Board10

deems appropriate.11

(4) WELL CAPITALIZED AND WELL MAN-12

AGED.A financial holding company subject to13

stricter standards shall at all times after it is subject14

to such standards be well capitalized and well man-15

aged as defined by the Board.16

(5) APPLICATION TO FOREIGN FINANCIAL COM-17

PANIES.The Board shall prescribe regulations re-18

garding the application of stricter prudential stand-19

ards to financial companies that are organized or in-20

corporated in a country other than the United21

States, and that own or control a Federal or State22

branch, subsidiary, or operating entity that is a fi-23

nancial holding company subject to stricter stand-24

ards, giving due regard to the principle of national25



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treatment and equality of competitive opportunity1

and taking into account the extent to which such2

companies are subject to home country standards3

comparable to those applied to financial holding4

companies in the United States.5

(6) INCLUSION OF OFF BALANCE SHEET AC-6

TIVITIES IN COMPUTING CAPITAL REQUIREMENTS.7

(A) IN GENERAL.In the case of any fi-8

nancial holding company subject to stricter9

standards, the computation of capital require-10

ments shall take into account off balance sheet11

activities for such a company.12

(B) EXEMPTION.If the Board determines13

that an exemption from the requirements under14

subparagraph (A) is appropriate, the Board15

may exempt a financial holding company sub-16

ject to stricter standards from the requirements17

under subparagraph (A) or any transaction or18

transactions engaged in by such a company.19

(C) OFF BALANCE SHEET ACTIVITIES DE-20

FINED.For purposes of this paragraph, the21

term off balance sheet activities means a li-22

ability that is not currently a balance sheet li-23

ability but may become one upon the happening24

of some future event, including the following25



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transactions, to the extent they may create a li-1

ability:2

(i) Direct credit substitutes in which a3

bank substitutes its own credit for a third4

party, including standby letters of credit.5

(ii) Irrevocable letters of credit that6

guarantee repayment of commercial paper7

or tax-exempt securities.8

(iii) Risk participation in bankers ac-9

ceptances.10

(iv) Sale and repurchase agreements.11

(v) Asset sales with recourse against12

the seller.13

(vi) Interest rate swaps.14

(vii) Credit swaps.15

(viii) Commodity contracts.16

(ix) Forward contracts.17

(x) Securities contracts.18

(xi) Such other activities or trans-19

actions as the Board may, by rule, define.20

(b) PRUDENTIAL STANDARDS AT FUNCTIONALLY21

REGULATED SUBSIDIARIES AND SUBSIDIARY DEPOSI-22

TORY INSTITUTIONS.23

(1) BOARD AUTHORITY TO RECOMMEND STAND-24

ARDS.With respect to a functionally regulated sub-25



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sidiary (as such term is defined in section 5 of the1

Bank Holding Company Act) or a subsidiary deposi-2

tory institution of a financial holding company sub-3

ject to stricter standards, the Board may rec-4

ommend that the relevant Federal financial regu-5

latory agency for such functionally regulated sub-6

sidiary or subsidiary depository institution prescribe7

stricter prudential standards on such functionally8

regulated subsidiary or subsidiary depository institu-9

tion. Any standards recommended by the Board10

under this section shall be of the same type as those11

described in subsection (a)(2) that the Board is re-12

quired or authorized to impose directly on the finan-13

cial holding company subject to stricter standards.14

(2) AGENCY AUTHORITY TO IMPLEMENT15

HEIGHTENED STANDARDS AND SAFEGUARDS.Each16

Federal financial regulatory agency that receives a17

Board recommendation under paragraph (1) is au-18

thorized to impose, require reports regarding, exam-19

ine for compliance with, and enforce standards20

under this subsection with respect to the entities21

such agency regulates, as such entities are described22

in section 1006(b)(6). This authority is in addition23

to and does not limit any other authority of the Fed-24

eral financial regulatory agencies. Compliance by an25



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entity with actions taken by a Federal financial reg-1

ulatory agency under this section shall be enforce-2

able in accordance with the statutes governing the3

respective agencys jurisdiction over the entity as if4

the agency action were taken under those statutes.5

(3) IMPOSITION OF STANDARDS.Standards6

imposed by a Federal financial regulatory agency7

under this subsection shall be the standards rec-8

ommended by the Board in accordance with para-9

graph (1) or any other similar standards that the10

Board deems acceptable after consultation between11

the Board and the primary financial regulatory12

agency.13

(4) FEDERAL FINANCIAL REGULATORY AGENCY14

RESPONSE; NOTICE TO COUNCIL AND BOARD.A15

Federal financial regulatory agency shall notify the16

Council and the Board in writing on whether and to17

what extent the agency has imposed the stricter pru-18

dential standards described in paragraph (3) within19

60 days of the Boards recommendation under para-20

graph (1). A Federal financial regulatory agency21

that fails to impose such standards shall provide22

specific justification for such failure to act in the23

written notice from the agency to the Council and24

Board.25



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(c) CONCENTRATION LIMITS FOR FINANCIAL HOLD-1

ING COMPANIES SUBJECT TO STRICTER STANDARDS.2

(1) STANDARDS.In order to limit the risks3

that the failure of any company could pose to a fi-4

nancial holding company subject to stricter stand-5

ards and to the stability of the United States finan-6

cial system, the Board, by regulation, shall prescribe7

standards that limit the risks posed by the exposure8

of a financial holding company subject to stricter9

standards to any other company.10

(2) LIMITATION ON CREDIT EXPOSURE.The11

regulations prescribed by the Board shall prohibit12

each financial holding company subject to stricter13

standards from having credit exposure to any unaf-14

filiated company that exceeds 25 percent of capital15

stock and surplus of the financial holding company16

subject to stricter

Financial Services Regulatory Overhaul Bill of 2009

Documents

Transcript of Financial Services Regulatory Overhaul Bill of 2009