S.Amdt. 4083

SA 4083. Mr. BROWN of Massachusetts submitted an amendment intended
to be proposed to amendment SA 3739 proposed by Mr. Reid (for Mr. Dodd
(for himself and Mrs. Lincoln)) to the bill S. 3217, to promote the
financial stability of the United States by improving accountability
and transparency in the financial system, to end ``too big to fail'',
to protect the American taxpayer by ending bailouts, to protect
consumers from abusive financial services practices, and for other
purposes; which was ordered to lie on the table; as follows:

On page 485, strike line 1 and all that follows through
page 489, line 13, and insert the following:
(2) the term ``insured depository institution'' does not
include an institution described in section 2(c)(2)(D) of the
Bank Holding Company Act of 1956 (12 U.S.C. 1841(c)(2)(D));
(3) the term ``proprietary trading''--
(A) means purchasing or selling, or otherwise acquiring or
disposing of, stocks, bonds, options, commodities,
derivatives, or other financial instruments by an insured
depository institution, a company that controls, directly or
indirectly, an insured depository institution or is treated
as a bank holding company for purposes of the Bank Holding
Company Act of 1956 (12 U.S.C. 1841 et seq.), and any
subsidiary of such institution or company, for the trading
book (or such other portfolio as the Federal banking agencies
may determine) of such institution, company, or subsidiary;
(B) subject to such restrictions as the Federal banking
agencies may determine, does not include purchasing or
selling, or otherwise acquiring or disposing of, stocks,
bonds, options, commodities, derivatives, or other financial
instruments on behalf of a customer, as part of market making
activities, or otherwise in connection with or in
facilitation of customer relationships, including risk-
mitigating hedging activities related to such a purchase,
sale, acquisition, or disposal; and
(C) does not include the investments by or on behalf of a
regulated insurance company, or a regulated insurance
affiliate or regulated insurance subsidiary thereof, if--
(i) such investments are in compliance with, and subject
to, the insurance company investment laws, regulations, and
written guidance of the State or jurisdiction in which each
such insurance company is domiciled; and
(ii) the Federal banking agencies, after consultation with
the Council and the relevant insurance commissioners of the
States and territories of the United States, have not jointly
determined, after notice and comment, that a law, a
regulation, or written guidance described in clause (i) is
insufficient to accomplish the purposes of this section; and
(4) the term ``sponsoring'', when used with respect to a
hedge fund or private equity fund, means--
(A) serving as a general partner, managing member, or
trustee of the fund;
(B) in any manner selecting or controlling (or having
employees, officers, directors, or agents who constitute) a
majority of the directors, trustees, or management of the
fund; or
(C) sharing with the fund, for corporate, marketing,
promotional, or other purposes, the same name or a variation
of the same name.
(b) Prohibition on Proprietary Trading.--
(1) In general.--Subject to the recommendations and
modifications of the Council under subsection (g), and except
as provided in paragraph (2) or (3), the appropriate Federal
banking agencies shall, through a rulemaking under subsection
(g), jointly prohibit proprietary trading by an insured
depository institution, a company that controls, directly or
indirectly, an insured depository institution or is treated
as a bank holding company for purposes of the Bank Holding
Company Act of 1956 (12 U.S.C. 1841 et seq.), and any
subsidiary of such institution or company.
(2) Excepted obligations.--
(A) In general.--The prohibition under this subsection
shall not apply with respect to an investment that is
otherwise authorized by Federal law in--
(i) obligations of the United States or any agency of the
United States, including obligations fully guaranteed as to
principal and interest by the United States or an agency of
the United States;
(ii) obligations, participations, or other instruments of,
or issued by, the Government National Mortgage Association,
the Federal National Mortgage Association, or the Federal
Home Loan Mortgage Corporation, including obligations fully
guaranteed as to principal and interest by such entities; and
(iii) obligations of any State or any political subdivision
of a State.
(B) Conditions.--The appropriate Federal banking agencies
may impose conditions on the conduct of investments described
in subparagraph (A).
(C) Rule of construction.--Nothing in subparagraph (A) may
be construed to grant any authority to any person that is not
otherwise provided in Federal law.
(3) Foreign activities.--An investment or activity
conducted by a company pursuant to paragraph (9) or (13) of
section 4(c) of the Bank Holding Company Act of 1956 (12
U.S.C. 1843(c)) solely outside of the United States shall not
be subject to the prohibition under paragraph (1), provided
that the company is not directly or indirectly controlled by
a company that is organized under the laws of the United
States or of a State.
(c) Prohibition on Sponsoring and Investing in Hedge Funds
and Private Equity Funds.--
(1) In general.--Except as provided in paragraph (2), and
subject to the recommendations and modifications of the
Council under subsection (g), the appropriate Federal banking
agencies shall, through a rulemaking under subsection (g),
jointly prohibit an insured depository institution, a company
that controls, directly or indirectly, an insured depository
institution or is treated as a bank holding company for
purposes of the Bank Holding Company Act of 1956 (12 U.S.C.
1841 et seq.), or any subsidiary of such institution or
company, from sponsoring or investing in a hedge fund or a
private equity fund.
(2) Application to foreign activities of foreign firms.--An
investment or activity conducted by a company pursuant to
paragraph (9) or (13) of section 4(c) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1843(c)) solely outside of the
United States shall not be subject to the prohibitions and
restrictions under paragraph (1), provided that the company
is not directly or indirectly controlled by a company that is
organized under the laws of the United States or of a State.
(3) Exception.--Notwithstanding paragraph (1), an insured
depository institution, a company that controls, directly or
indirectly, an insured depository institution or is treated
as a bank holding company for purposes of the Bank Holding
Company Act of 1956 (12 U.S.C. 1841 et seq.), or any
subsidiary of such institution or company may sponsor or
invest in a hedge fund or a private equity fund, if--
(A) such institution, company, or subsidiary provides
trust, fiduciary, or advisory services to the fund;
(B) the fund is sponsored and offered in connection with
the provision of trust, fiduciary, or advisory services by
such institution, company, or subsidiary to persons who are,
or may be, customers or clients of such institution, company,
or subsidiary;
(C) such institution, company, or subsidiary--
(i) does not acquire or retain an equity, partnership, or
ownership interest in the fund; or
(ii) acquires or retains an equity, partnership, or
ownership interest, if--

(I) on the date that is 12 months after the date on which
the fund is established, the equity, partnership, or
ownership interest is not greater than 10 percent of the
total equity of the fund; and
(II) the aggregate equity investments by such institution,
company, or subsidiary in the fund do not exceed 5 percent of
Tier 1 capital of such institution, company, or subsidiary;

[[Page S3923]]

(D) such institution, company, or subsidiary does not enter
into or otherwise engage in any transaction with the fund
that is a covered transaction, as defined in section 23A of
the Federal Reserve Act (12 U.S.C. 371c), except on terms and
under circumstances specified in section 23B of the Federal
Reserve Act (12 U.S.C. 371c-1);
(E) the obligations of the fund are not guaranteed,
directly or indirectly, by such institution, company, or
subsidiary any affiliate of such institution, company, or
subsidiary; and
(F) such institution, company, or subsidiary does not share
with the fund, for corporate, marketing, promotional, or
other purposes, the same name or a variation of the same
name.
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