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A BILL To provide for control and regulation of bank holding companies, and for other purposes. Be Bit enacted by the Senate and House of Representatives of the United States of America in Congress assembled• That this Act may be cited as the Bank Holding Company Act of 194$. SEC. 2. DECLARATION OF POLICY,—It is hereby declared to be the policy of Congress, in accordance with which policy all of the provisions of this Act shall be interpreted, to control the creation and expansion of bank holding companies; to separate their business of managing and controlling banks from unrelated businesses; and generally to maintain competition among banks and to minimize the danger inherent in concentration of economic power through centralized control of banks; to subject the business and affairs of bank holding companies to the same type of examination and regulation as the banks which they control; and otherwise to provide for more effective regulation and supervision of bank holding companies to the end that their influence and control shall be directed toward the continued pursuit of sound policies and the continued maintenance of sound financial conditions by their subsidiary banjcs. Before the expiration of five years following the passage of this Act the Board of Governors of the Federal Reserve System shall report to Congress the results of the administration of this Act, stating what, if any, substantial difficulties have been encountered in carrying out -2the purposes of this Act, and any recommendations as to changes in the law which in the.opinion of the Board would be desirable• SEC. 3. DEFINITIONS.—(a) "Bank holding company" means (l) any company which directly or indirectly owns, controls or holds with power to vote 15 per centum or' more of the voting shares of each of two or more banks or of a company which is a bank holding company by virtue of this sectiont or any company which is a bank and which directly or indirectly owns, controls, or holds with power to vote 15 per centum or more of the voting shares of one or more other banks, or any company which directly or indirectly owns, controls, or holds with power to vote 15 per centum or more of the voting shares of one bank provided such bank operates one or more branches, unless the Board as hereinafter provided by order declares such company not to be a bank holding company; (2) any company which the Board determines, after notice and opportunity for hearing, directly or indirectly exercises (either alone or pursuant to an arrangement or understanding with one or more other persons) such a controlling influence over the management or policies of two or more banks or of only one bank if such bank operates one or more branches as to make it necessary or appropriate in the public interest or for the protection of investors or depositors that such company be subject to the obligations, duties and liabilities imposed in this Act upon bank holding companies; and (3) cm company which is a bank and which the Board determines, after notice and opportunity for hearing» directly or indirectly exercises (either alone or pursuant to an arrangement or understanding with one or more other persona) such a controlling influence over the management or policies of one or more other banks as to make it necessary or appropriate in the public interest or for the protection of investors or depositors that such company be subject to the obligations, duties and liabilities imposed in this Act upon bank holding companies . The Board, upon application, shall by order declare that a company is not a bank holding company under clause (l) above if the Board finds that the applicant does not, either alone or pursuant to an arrangement or understanding with one or more other persons, exercise such a controlling influence over the management or policies of the stated number of banks as to make it necessary or appropriate in the public interest or for the protection of investors or depositors that such company be subject to the obligations, duties, and liabilities imposed in this Act upon bank holding companies. (b) "Bank" means any national bank, or any State bank, banking association, savings bank, or trust company but shall not include any organization which does not receive deposits oor conducts a trust business within the United States, "State member bank" means any State bank which is a member Gf the Federal Reserve System. "District bank" means any State bank organized or operating under the Code of Law for the District of Columbia. (c) "Company" means any bank, corporation, partnership, joint-stock company, business trust, voting trust, association, or an organized group of persons, whether incorporated or not, or any receiver, trustee, or other liquidating agent of any of the foregoing in his capacity as suchj excluding, however, any such company which is owned by the United States* (d) "Board" means the Board of Governors of the Federal Reserve System. (e) "Subsidiary", with respect to a specified bank holding company, means (1) ai$r company 15 per centiwa or more of whose outstanding voting shares (excluding shares owned by the United States or by any company wholly owned by the United States) is owned or controlled ty such bank holding company, unless the Board as hereinafter provided by order declares such company not to be a subsidiary of such bank holding company; or (2) any company the management and policies of which the Board determines, after notice and opportunity for hearing, are subject to a controlling influence by the specified bank holding company. The Board, upon application, shall by order declare that a company is not a subsidiary company of a specified bank holding company under clause (1) above if the Board finds that the management or policies of the applicant are not subject to a controlling influence} directly or indirectly, by such bank holding company (either alone or pursuant to an arrangement or understanding with one or more other persons)• (f) For the purposes of this section there shall be excluded from consideration all voting shares of banks acquired or held by mutual savings banks; also, there shal^ be excluded from consideration all voting shares of banks or other companies acquired or held by a bank in a fiduciary capacity, except where such voting shares are acquired or held for the benefit of all or a majority of the persons beneficially -5interested in such bank or except where the Board, after notice and opportunity for hearing^ finds that such acquisition or holding is being employed as a device for avoiding the provisions of this Act. SEC. 4. REGISTRATION, REPORTS AND EXAMINATIONS.—(a) Within ninety days after the effective date of this Act, or vithin ninety days after becoming a bank holding company, whichever is later, every bank holding company shall register with the Board on forms prescribed by the Board, which shall include, with such other information as the Board may require, statements showing (l) its financial condition at the end of its fiscal year last preceding the date of registration, including therein the amount of its accumulated net income at such time; (2) name and address of each of the bank holding company's subsidiary banks and address of each branph of each such bank; (3) name and address of each other bank of which the bank holding company owns shares; (A) number of shares of each class of stock of each bank owned by the bank holding company; (5) information concerning the manner in which such shares are owned; (6) name, address, and nature of business of each of the bank holding company's subsidiaries, other than banks, and the manner in which the relationship arises; and (7) such information as the Board may deem necessary or appropriate. The Board may, in its discretion, extend the time within which a bank holding company shall register and file the reouisite statement. (b) Each bank holding company shall furnish to the Board from time to time such reports as may be required ly the Board and in such form and <fetail as the Board may prescribe. Such reports shall contain such -6information concerning the bank holding company and its subsidiaries as the Board shall deem necessary to disclose fully the relations among such companies, the effect of such relations upon the affairs of the subsidiary banks, and whether the provisions of this Act have been complied with, (c) Each bank holding company and each subsidiary thereof shall be subject to such examinations by examiners selected or approved by the Board as shall be necessary to disclose fully the relations between such bank holding company and its subsidiaries, the effect of such relations upon the affairs of the subsidiary banks, and whether the provisions of this Act or of the Board*s orders, rules, or regulations have been complied with; and the examiner making such an examination shall have power to administer oaths and to examine any of the officers, directors, employees, and agents of such bank holding company or subsidiary under oath. The expenses of any such examination may, in the discretion of the Board, be assessed against the bank holding company and, when so assessed, shall be paid by such bank holding company. SEC, 5. INTERESTS IN NONBANKING ORGANIZATIONS.--(a) Except as otherwise provided in this Act it shall be unlawful for any bank holding company, after two years after the effective date hereof, to own any voting shares or other securities or obligations of any company other than a bank or to engage in any business other than that of banking or managing or controlling subsidiary banks. The Board is authorized to extend t-his period from time to time for not more than one year at a time if, in -7its judgment, such an extension would not be detrimental to the public interest, (b) The prohibitions in this section shall not apply to voting shares or other securities or obligations owned or acquired fcy a bank holding company in any company engaged solely in holding and operating property in which thq bank premises are located, or engaged solely in conducting a safe-^deposit business, or engage engaged in the business of furnishing managerial, auditing, supervisory, purchasing, and other similar services solely to such bank holding company and its subsidiaries, or in the business of procuring and servicing solely for such bank holding compai^r and its subsidiaries investments and paper eligible for bank investment, or in the business of liquidating assets acquired from such bank holding company and its subsidiaries, or in any other company the activities of which the Board has determined are so closely related to the business of managing, operating, or controlling banks as to be a proper incident thereto, (c) Nor shall the prohibitions in this section apply to voting shares or securities or obligations acquired by a bank holding company from any of its subsidiaries which have been requested to dispose of such voting shares, securities or obligations ty any Federal or State authority having statutory power to examine such subsidiaries or which have been acquired from such subsidiaries with the prior approval of the Board; but such bank holding company shall dispose of such shares, se^ curities, or obligations within a reasonable time* If, while suofc bank holding company owns or controls such shares, securities, or obligations, -8the Board, after notice and opportunity*for hearing, determines that the ownership or control of such shares, securities, or obligations is resulting in the violation or evasion of any of the provisions of this Act, it may by order require such bank holding company to dispose of all or any part thereof forthwith, (d) Nor shall the prohibitions of this section apply to voting shares or other securities or obligations which are held or acquired by a bank, which is a bank holding company, in a fiduciary capacity or which ai*e otherwise lawfully owned by such bank or any of its wholly owned subsidiaries on the effective date of this Actj nor shall the prohibitions in this section apply to investment securities of the kinds and amounts eligible for investment by national banks under the provisions of section 5136 of the Revised Statutes. If, while such bank or bank holding company owns or controls such shares, securities or other obligations, the Board, after notice and opportunity for hearing, determines that the ownership or control of such shares, securities or obligations is being employed as a device for avoiding the provisions of this Act ; it may by order require such bank or bank holding company to dispose of all or any part thereof forthwith. SEC, 6. ACQUISITIONS OF BANK SHARES OR BANK ASSETS.—(a) No plan, undertaking, or agreement by or on behalf of any company which would result in that company 8wiiiBgj-ei%heF-d4yeetly-e3?-iHdiFeetly7-l§-peF--0e^wH eap^mere-ef-the-vexing-shades-e£-eaeh-e£-%we~e?-aere-banksy becoming a bank holding company, as defined in section 3(a)(1) of this Actf and no undertaking, or agreement by or on behalf of s^ny bank holding -9company to acquire either directly or indirectly any voting shares of a bank, shall be consummated, effectuated* and completed except with the prior approval of the Board: Provided, however, That nothing herein contained shall be construed to apply to the acquisition by a bank holding company of any additional voting shares of a bank in any qase where such bank holding company, prior to such acquisition, owned a majority of the voting shares thereof, (b) No plan, undertaking, or agreement by or on behalf of any bank holding company or any of its nonbanking subsidiaries to acquire all or substantially all of the assets of any bank shall be consummated, effectuated, or completed except with the prior approval of the Board. (c) No plan, undertaking, or agreement by or on behalf of a banking subsidiary of a bank holding company to acquire all or substantially all of the assets gf any bank shall be consummated, effectuated, or completed except with the prior approval of (1) the Comptroller of the Currency if the acquiring bank is a national bank or district bank; or (2) the Board if the acquiring bank is a State member bank; or (3) the Federal Deposit Insurance Corporation in the case of any other acquiring bank* (d) In determining whether to approve any acquisition subject to paragraphs (a), (b), or (c) of this section consideration shall be given to the financial history and condition of the applicant and the banks concerned; their prospects; the character of their management, the convenience, needs, and welfare of the communities and the area concerned; and the national policy against restraint of trade and undue concentration of economic power p.nd in favor of the maintenance of competition in -10the field of banking: Provided, however, That nothing herein contained shall be construed to authorize the approval of any acquisition subject to paragraphs (a), (b), or (c) of this section where, regardless of its competitive or other aspects, the effect of such acquisition may be to expand the size and extent of a bank holding company system beyond limits consistent with adequate and sound banking and the public interest. The factors stated in this section shall likewise be considered by the Board, the Comptroller of the Currency or the Federal Deposit Insurance Corporation in determining whether to approve an application of any bank, which is a part of a bank holding company system, to establish a branch or branches of such bank. SEC. 7. BORROWING By BANK HOLDING COMPANY OR ITS SUBSIDIARIES.— (a) No bank shall invest any of its funds in the capital stock of (1) a bank holding company of which it is a subsidiary, or (2) a subsidiary of such bank holding company, (b) No bank shall accept the capital stpck of (l) a bank holding company of which it is a subsidiary, or (2) a subsidiary of such bank holding company as collateral security for advances made to any person, partnership, association, or corporation: Provided, however, That any bank may, with the prior approval of the Board, accept such capital stock as a security for debts previously contracted. (c) No bank shall (l) make any loan or argr extension of credit to, or purchase securities under repurchase agreement from, (a) a bank holding company of which it is a subsidiary, or (b) a subsidiary of such bank holding company} or (2) invest any of its funds in the bonds, debentures, or other such Fegula^ieae obligations of any such bank holding company or subsidiaiy; or (3) accept the bonds, debentures, or other such obligations of any such bank holding company or subsidiary as collateral security for loans or advances made to any person, partnership, association, or corporation, if the aggregate amount of such loans, extensions of credit, repurchase agreements, investments, and advances against such collateral security will exceed 20 per centum of the capital stock and surplus of such bank. Non-interest-bearing deposits to the credit of a bank shall not be deemed to be a loan or advance tp the bank of deposit, nor shall the giving of immediate credit to a bank upon uncollected items received in the ordinary course of business be deemed to be a loan or advance to the depositing bank* Within the foregoing limitations, each loan or extension of credit of any kind or character to such bank holding company or subsidiary shall be secured by collateral in the form of stocks, bonds, debentures, or other such obligations having a market value at the time of making the loan or extension of credit of at least 20 per centum more than the amount of the loan or extension of credit? or of at least 10 per centum more than the amount of the loan or extension of credit if it is secured by obligations of any State or of any political subdivision or agency thereof: Provided, That no margin of collateral shall be required when such loan or extension of credit is secured by obligations of the United States Government, the Federal Intermediate Credit banks, the Federal land banks, the Federal home loan banks, or the Home Owners1 Loan Corporation, or by such notes, drafts, bills of exchange, or bankers1 acceptances as are eligible for rediscount or for purchase hy Federal Reserve banks. -12(d) The provisions of this section shall not apply to (l) any company of the types described in section 5(b) of this Act, or (Z) any company whose subsidiary status has arisen out of a bona fide debt to the bank contracted prior to the date of the creation of such status, or (3) any company whose subsidiary status exists ty reason of the ownership or control of voting shares thereof by the bank as executor, administrator, trustee, receiver, agent, or depositary, or in any other fiduciary capacity, except where such shares are held for the benefit of all or a majority of the stockholders of such bank. SEC. 8. SERVICE FEES OR BENEFITS.—The Board is authorized, if in its opinion such action is necessary or appropriate for the protection of depositors or investors and after appropriate notice and opportunity for hearing, to determine the reasonableness of ar*y service, management or similar charge or fee or benefit obtained by a bank holding company or any of its subsidiaries from a subsidiary bank of such bank holding company, and to order that all or any part of such charges or fees or benefits which it finds to be unreasonable shall be discontinued. It shall be unlawful for such bank holding company or any pf its subsidi-* aries thereafter to assess or obtain any such charge or fee or benefit in contravention of the Board's order. SEC. 9. RESERVE FUND.—After the effective date of this Act, eveiy corporate bank holding company shall use all its net earnings over and above 6 per centum per annum of the book value of its own shares to accumulate a fund, and every noncorporate bank holding company shall accumulate a fund in accordance with the terms prescribed by the Board, in an -13amount equal to at least 12 per centum of the aggregate par value of all bank shares owned by it* Such fund shall consist of readily marketable assets and shall be identified in an appropriate manner and kept free and clear of any lien, pledge, or hypothecation of any kind or nature. Such assets may be used by the bank holding company to replace capital of its subsidiaxy banks and to eliminate losses and depreciation from the assets of such banks, and, with the prior approval of the Board, to increase the capital or surplus of its subsidiary banks, but, except as permitted by the Board, shall not be used by the bank holding company for any other purpose, and any deficiency in such assets resulting from such use shall be replaced in the same manner as above provided. SEC. 10. REGULATIONS.—The Board shall have the authority to make and issue such rules, regulations, and orders, not inconsistent with the provisions of this Act, as may be necessary to enable it to administer and carry out the purposes of this Act and prevent evasions thereof and it shall likewise have authority to amend, modify, or rescind any such rules, regulations, or orders so made or issued. All powers and functions of the Board prescribed by this Act, other than the issuance, amendment, modification, or rescission of rules, regulations, and orders and the determination of matters of general policy, may be performed through such members of the Board or such officers and employees thereof or such Federal Reserve banks or officers or employees thereof as the Board may deem advisable in order to facilitate the administration of this Act. SEC. 11. HEARINGS, INVESTIGATIONS, AND COURT REVIEW OF ORDERS.~ (a) In addition to the hearings authorized in this Act, the Board -ualso shall have authority to make such investigations as may be necessary to determine whether any proceeding under this Act should be instituted against a particular person or persons, or with respect to a particular transaction or transactions; and the Board shall keep appropriate records of all hearings an4 investigations• (b) For the purpose of any hearing or investigation under this Act, any member of the Board, or &ny officer thereof designated by it, is empowered to administer oaths and affirmations, subpena witnesses, compel their attendance, take evidence, and require the production of any books, records, or other papers which are relevant or material to the inquiiy. Such attendance of witnesses and the production of any such papers may be require^ from any place in any State or in any Territoiy or other place subject to the jurisdiction of the United States at any designated place where such a hearing is being held or investigation is being made. (c) In case of refusal to obey a subpena issued to, or contumacy by, any person, the Board may invoke the aid of any court of the United States within the jurisdiction of which such hearing or investigation is carried on, or where such person resides or carries on business, in requiring the attendance and testimony of witnesses and the production of books, records, or other papers. And such court may issue an order requiring such person to appear before the Board or member or officer designated by the Board, there to produce records, if so ordered, or to give testimony touching the matter under investigation or in question; and any failure to obey such order of the court may be punished by such -15court as a contempt thereof. All process in any such case may be served in the judicial district whereof such person is an inhabitant or wherever he may be found. No person shall be excused from attending and testifying or from producing books, records, or other papers in obedience to a subpena issued under the authority of this Act on the ground that the testimony or evidence, documentary or otherwise, required of him may tend to incriminate him or subject him to a penalty or forfeiture? but no individual shall be prosecuted or subject to any penalty or forfeiture for or on account of any transaction, matter, or thing concerning which he is compelled to testify or produce evidence, documentary or otherwise, after having claimed his privilege against selfincrimination, except that such individual so testifying shall not be exempt from prosecution and punishment for perjury committed in so testifying. Any person who without just cause shall fail or refuse to attend and testify or to answer any lawful inquiry or to produce books, records, or other papers in obedience to the subpena of the Board, if in his or its power so to do, shall be guilty of a misdemeanor and upon conviction shall be subject to & fine of not more than $1,000 or to imprisonment for a terra of not more than one year, or both. (d) Any person or party aggrieved by &B-ea?deF-is$ued-fey any final action of the Board under this Act may obtain a review of such order in the circuit court of appeals of the United States within any circuit wherein such person resides or has his principal place of business, or in the United States Court of Appeals for the District of Columbia, by filing in such court, within sixty days kfter the entry of such order, a -16written petition praying that the order of the Borrd be modified or set aside in whole or in part. A copy of such petition shall be forthwith served upon any member of the Board or upon the Board's secretary at its offices in the city of Washington, and thereupon the Board shall certify and file in the court a transcript of the record upon which the order complained of was entered. Upon the filing of such transcript such court shall have exclusive jurisdiction to affirm, modify, or set aside such order in whole or in part* No objection to the order of the Board shall be considered by the court unless such objection shall have been urged before the Board or unless there were reasonable grounds for failure so to do. The finding of the Board as to the facts, if supported ty substantial evidence, shall be conclusive. If application is made to the court for leave to adduce additional evidence, and it is shown to the satisfaction of the court that such additional evidence is material and that there were reasonable grounds for failure to adduce such evidence in the proceeding before the Board, the court may order such additional evidence to be taken before the Board and to be adduced upon the hearing in such manner and upon such terms and conditions as to the court may seem proper. The Board may modify its findings as to the facts by reason of the additional evidence 30 taken, and it shall file with the court such modified or new findings, which, if supported Insubstantial evidence, shall be conclusive, and its recommendation, if any, for the modification or setting aside of the original order. The judgment and decree of the court affirming, modifying, or setting aside, in whole or in part, any such order of the Board shall be final, subject -17to review \y the Supreme Court of the United States upon certiorari or certification as provided in sections 239 and 24-0 of the Judicial Code, as amended. The commencement of proceedings to review an order of the Board issued under this Act shall not operate as a stay of the Board's order unless the court otherwise orders. SEC. 12. PENALTIES.--(a) If, after notice and opportunity for hearing, the Board finds thct a bank holding company has willfully violated any of the provisions of this Act, or of any rules, regulations, or orders of the Board issued pursuant thereto, or has knowingly permitted or assented to or participated in any such violation by any subsidiary, the Board may issue an order, effective for such period as may be fixed by the order and containing any one or more of the following prohibitions: (i) That such bank holding company stedl not pay &ny salary or other remuneration to any officer or director of the company found ty the Board to have willfully participated in such violation or violations and who was made a party to such hearing by the Board; (ii) th^t no subsidiary bank of such bank holding company shall pay dividends on shares owned by such bank holding company or pay or become liable to pay to such bank holding company or any of i,ts subsidiaries any service, management, or similar charges or fees, or render any specified benefit; and (iii) that such bank holding company shall not directly or indirectly vote the shares owned by it or otherwise participate in the management or control of any subsidiary bank. (b) Any pers<?n who willfully violates any provision of this Act or any rule, regulation, or order issued by the Board pursuant thereto -18shall upon conviction be fined not more than $10,000 or imprisoned not more than two years, pt botfcu Every officer, director, agent, and employee of a bank holding company shall be subject to the sme penalties for false entries in any book, report, or statement of such bank holding company as are applicable to officers, directors, agents, and employees of member banks for false entries in any books, reports, or statements of member banks under section 5209 of the Revised Statutes, as amended. SEC, 13. TECHNICAL AMENDMENTS* — ( a ) The last sentence of the sixteenth paragraph of section 4 of the Federal Reserve Act, as emended, is amended by striking out all of the language therein vhich follows the colon and by inserting in lieu thereof the following: "Provided, That whenever $ny member banks within the same Federal Reserve district are subsidiaries of the seme bank holding company within the meaning of the Bank Holding Company Act of 1948, participation in any such nomination or election by such member banks, including such bank holding company if it is also a member4 bank, shall be confined to one of such banks, which may be designated for the purpose by such bank holding company.fl (b)(l) The eighteenth paragraph of section 9 of the Federal Reserve Act is amended by striking out the last sentence of such paragraph. (2) The twenty-first paragraph of section 9 of the Federal Reserve Act is repealed. (c) Subsection (c) of section 2 of the Banking Act of 1933, as amended, is repealed. (d) Section 5144 of the Revised Statutes, as amended, is amended to read as follows; -191 1 SEC* 5LW.. In all elections of directors, each shareholder shall have the right to vote the number of shares owned ty him for as many persons as there are directors to be elected, or to cumulate such shares and give one candidate as many votes es the number of directors multiplied by the number of his shares shall equal, or to distribute them on the same principle among as many candidates as he shall think fit; and in deciding all other questions at meetings of shareholders, each shareholder shall be entitled to one vote on each share of stock held by him; except that (l) this shall not be construed as limiting the voting rights of holders of preferred stock under the terms and provisions of articles of association, or amendments thereto, adopted pursuant to the provisions of section 302 (a) of the Emergency Banking and Bank Conservation Act, approved March 9, 1933* &s amended, (2) in the election of directors, shares of its own stock held by a national bank as sole trustee, whether registered in its own name as such trustee or in the name of its nominee, shall not be voted tgr the registered owner unless under the terms of the trust the manner in which such shares shall be voted may be determined by a donor or beneficiary of the trust and unless suqh donor or beneficiary actually directs how such shares shall be voted, and (3) shares of its own stock held by a national bank and one or more persons as trustees may be voted by such other person or persons, as trustees, in the same manner as if he or they were the sole trustee. Shareholders may vote by proxies duly authorized in writing; but no officer, clerk, teller, or bookkeeper of such bank shall act as proxy; and no shareholder whose liability is past due and unpaid shall be -20allovred to vote. Whenever shares of stock cannot be voted by reason of being held by the bank as sole trustee, such shares shall be excluded in determining whether matters voted upon by the shareholders were adopted by the requisite percentage of shares." (e) The second paragraph of section 5211 of the Revised Statutes is amended by striking out the second sentence of such paragraph. (f)(l) Subsection (d) of section 26 of the Internal Revenue Code, as amended, is amended to read as follows: "(d) BANK HOLDING COMPANIES.—In the case of a bank holding company (as defined in the Bank Holding Company Act of 194$), the amount of the earnings or profits which the Board of Governors of the Federal Reserve System certifies to the Commissioner has been devoted ty such company during the taxable year to the acquisition of readily marketable assets in compliance with section 9 of the Bank Holding Company Act of 194-8. The aggregate of the credits allowable under this subsection for all taxable years shall not exceed the amount required to be devoted under such section 9 to such purposes, and the amount of the credit for any taxable year shall not exceed the adjusted net income for such year." (2) Subdivision (3) of subsection (b) of section 27 of the Internal Revenue Code, as amended, is amended to read as follows: "(3) The bank holding company credit provided in section 26 (d).ff - e£-gain- er- ies6~upeH~ eertaia- exefcaages-) - is- amended-fey£ag-at- -21- ether- ofeligatAoa«-fee!4-fcy-a~fca&k-feol4i&g-^Gs$p&*§r~ o&~ ttoe- d&to- o#- tfeo eaaotsieat- o£~ tfee- Bft&k~ lfoi.44.ag- C^mpaay- Ac*- -oflawfully- - of ^ 194-S7 - to- &4B- a- se^pey&tiea- wfei^b- 4«- a- b&sk- holding- €€>H^)aay- a«- dofiaod- i n Ae%7 - wijfefew%- tke^ -©H^^eadeap-fey-su^fe- ^HarefeeldeF- el1- s toek- ©yt i e s - ia~ -suefe- €6^ps^atiea^ - ae- gaia- to- the- di -st^ifeutee- "Steall- fee - we*e~ a^quA^d- ia- a- diet^ifeutiea* ^ute^ eot- to- tfeo- ^ovii?ioBS £- «e-e%iea-112- •(fe^)- i 11-) ^ - tfe^a* the-teasie-ia- *fee- -ea^e- of- tfee- -stook- i - e£~whiefe- the- di€ tyifeutiea-we -s-made- -shall- app^eval-ef-the-Seepeta3?yj - between-sueh^ steek-aad-the - steekf-seeu- (3) Section 1X2 (b) of the Internal Revenue Code is amended by inserting at the end thereof the following; "(11) DISTPIBUTIOMS AND EXCHANGES FURSP&NT TO BANK HOLDIMG COMPANT ACT OF 19^8.-^ -22"(A) Distributions* — I n the case of a distribution of property not permitted to be owned byf a bank holding company under the, provisions of section $ of the Bank Holding Company Act of 194&» held lay a bank holding company pn the date of enactment of such Act or thereafter legally acquired pursuant to such Act, made pursuant i^o an order of the Board of Governors of the Federal Reserve System authorizing, approving or directing such distribution as effectuating the policy of the Bank Holding Company Act of 19481 to a shareholdGr in such bank holding compary e.s defined in such Act ? vithout the surrender Jay such shareholder of stock or securities in such company, no gain to the distribixtee shall be recognized, "(B) Exchanges,—No gain or loss shall be recognized if a bank holding companyy pursuant to an order of the Board of Governors of the Federal Reserve System authorizing, approving or directing such exchange as effectuating the policy of the Bank Holding Company Act of 19^8 , transfers property not permitted to be owfted by a bank holding company under the provisions of section 5 of such Act, to a corporation organized to receive such property solely in exchange for all of the stock of such transferee corporation and such stock is distributed forthvith in g distribution subt ject to the provisions of subparagraph (A), iy (C) Application of Subparagraphs (A) and (B)>--The provi- sions of subparagraphs (A)Mand, (B) of this paragraph shall not apply unless the Board of Governors of the Federal Reserve System -23shall certify that such distribution or exchange was of property not permitted to be owned under the provisions of section 5 of the Bank Holding Company Act of 194ft. and y a s necessary or appropriate to effectuate the provisions ofsuch Acfr» In guch certifications the BOPrd of Governors of the Federal Reserve System shall specify and itemize the stock? securities or other property so distributed or exchanged*lf (A) Section 11^ (a) of the Internal, Revenue Code is amended by inserting at the end thereof the following: "(23) PROPERTY ACQJIFBD IN DISTRIBUTION PURSUANT TO BAMK HOLDING COMPANY ACT OF 19A8-— "(a) If property other than stock or securities is acquired iia a distribution sub.ject to the provisions of section 112 (b)(ll)i then the basis of such property shall be the same as it would be in the hands of the company distributing such property; and an amount equal to the adjusted basis which such property had in the hands of such distributing company at the time of such distribution shall be applied against and reduce the adjusted basis of the stock in respect of which the distribution was made, and if in excess of such basis? such excess shell be taxable In the same manner a-s & gain from the sale or exchrnge of property, "(b) If stock or securities is acquired in a distribution subject to the provisions of section 112 (b)(ll)y then the basis fo the case of the 3tock in respect of which the distribution was made shall be apportionedj under regulations prescribed fry the Commissioner -24vith the approval of the Secretary, between such stock and the stock or securities acquired in such distribution, "(c) Where stock or securities and property other than stock or securities are acquired in a distribution subject to the provisions of section 112 (b)(ll)> subparagraph (a) of this paragraph shall be applied before subparagraph (b)» t! (d) If stock is acquired by a bank holding company in an exchange subject to the provisions of section 112 (b)(ll)(B), then the basis of su9h stock shall be the same as in the case, of the property exchanged; and when, in a distribution subject to the provisions of section 112 (b)(ll)(A), suph stock is acquired ty a distributee of such company, then the basis shall be determined as though the stock were property other than stock or securities# "(e) If property is acquired by a corporation in a transfer from a bank holding company subject to the provisions of section 112 (b)(l3T)(B)^ then the basis of such property shall be the same as it would be in the hands of such bank holding company»" (g)(l) Paragraph 4 of subsection (c) of section 3 of the Investment Company Act of 1940 is amended to read as follows: "(4) Any bank holding company vhich is registered with the Board of Governors of the Federal Reserve System pursuant to the Bank Holding Company Act of 1948, or any subsidiary thereof as defined in said Act." (2) Paragraph (11) of subsection (a) of section 202 of the Investment Advisers Act of 1940 is amended by changing the words "or any holding company affiliate> as defined in the Banking Act of 1933" to read "or any -•25bank holding company, as defined in the Bank Holding Company Act of 1943, or any subsidiary thereof as defined in said Act n . (h) Subsection (b) of section 2 of the Banking Act of 1933, as amended, is amended by adding the following paragraphs: 1 1 (4.) which owns or controls, directly or indirectly, either a majority of the shares of capital stock of a member bank or more than 50 per centum of the number of shares voted for the election of directors of any one bank at the preceding election> or controls in any manner the election of a majority of the directors of ariy one bank; or t! (5) for the benefit of whose shareholders or members all or substantially all of the capital stock of a member bank is held by trustees." SEC, U . SEPARABILITY OF PROVISIONS.—If any provision of this Act, or the application of such provision to any person or circumstance, shall be held invalid, the remainder of the Act, and the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby.
