Appendix A to Part 242 - Financial Activities for Purposes of Title I of the Dodd-Frank Act
12:4.0.1.1.12.0.1.5.9 : Appendix A
Appendix A to Part 242 - Financial Activities for Purposes of Title
I of the Dodd-Frank Act
(a) Lending, exchanging, transferring, investing for others, or
safeguarding money or securities.
(b) Insuring, guaranteeing, or indemnifying against loss, harm,
damage, illness, disability, or death, or providing and issuing
annuities, and acting as principal, agent, or broker for purposes
of the foregoing, in any state.
(c) Providing financial, investment, or economic advisory
services, including advising an investment company (as defined in
section 3 of the Investment Company Act of 1940).
(d) Issuing or selling instruments representing interests in
pools of assets permissible for a bank to hold directly.
(e) Underwriting, dealing in, or making a market in
securities.
(f) Engaging in any activity that the Board has determined to be
so closely related to banking or managing or controlling banks as
to be a proper incident thereto, which include -
(1) Extending credit and servicing loans. Making,
acquiring, brokering, or servicing loans or other extensions of
credit (including factoring, issuing letters of credit and
accepting drafts) for the company's account or for the account of
others.
(2) Activities related to extending credit. Any activity
usual in connection with making, acquiring, brokering or servicing
loans or other extensions of credit, including the following
activities:
(i) Real estate and personal property appraising.
Performing appraisals of real estate and tangible and intangible
personal property, including securities.
(ii) Arranging commercial real estate equity financing.
Acting as intermediary for the financing of commercial or
industrial income-producing real estate by arranging for the
transfer of the title, control, and risk of such a real estate
project to one or more investors.
(iii) Check-guaranty services. Authorizing a subscribing
merchant to accept personal checks tendered by the merchant's
customers in payment for goods and services, and purchasing from
the merchant validly authorized checks that are subsequently
dishonored.
(iv) Collection agency services. Collecting overdue
accounts receivable, either retail or commercial.
(v) Credit bureau services. Maintaining information
related to the credit history of consumers and providing the
information to a credit grantor who is considering a borrower's
application for credit or who has extended credit to the
borrower.
(vi) Asset management, servicing, and collection
activities. Engaging under contract with a third party in asset
management, servicing, and collection 1 of assets of a type that an
insured depository institution may originate and own.
1 Asset management services include acting as agent in the
liquidation or sale of loans and collateral for loans, including
real estate and other assets acquired through foreclosure or in
satisfaction of debts previously contracted.
(vii) Acquiring debt in default. Acquiring debt that is
in default at the time of acquisition.
(viii) Real estate settlement servicing. Providing real
estate settlement services. 2
2 For purposes of this section, real estate settlement services
do not include providing title insurance as principal, agent, or
broker.
(3) Leasing personal or real property. Leasing personal
or real property or acting as agent, broker, or adviser in leasing
such property if:
(i) The lease is on a nonoperating basis; 3
3 The requirement that the lease is on a nonoperating basis
means that the company does not, directly or indirectly, engage in
operating, servicing, maintaining, or repairing leased property
during the lease term. For purposes of the leasing of automobiles,
the requirement that the lease is on a nonoperating basis means
that the company does not, directly or indirectly: (1) Provide
servicing, repair, or maintenance of the leased vehicle during the
lease term; (2) purchase parts and accessories in bulk or for an
individual vehicle after the lessee has taken delivery of the
vehicle; (3) provide the loan of an automobile during servicing of
the leased vehicle; (4) purchase insurance for the lessee; or (5)
provide for the renewal of the vehicle's license merely as a
service to the lessee where the lessee could renew the license
without authorization from the lessor.
(ii) The initial term of the lease is at least 90 days; and
(iii) In the case of leases involving real property:
(A) At the inception of the initial lease, the effect of the
transaction will yield a return that will compensate the lessor for
not less than the lessor's full investment in the property plus the
estimated total cost of financing the property over the term of the
lease from rental payments, estimated tax benefits, and the
estimated residual value of the property at the expiration of the
initial lease; and
(B) The estimated residual value of property for purposes of
paragraph (f)(3)(iii)(A) of this section shall not exceed 25
percent of the acquisition cost of the property to the lessor.
(4) Operating nonbank depository institutions.
(i) Industrial banking. Owning, controlling, or operating
an industrial bank, Morris Plan bank, or industrial loan company
that is not a bank for purposes of the BHC Act.
(ii) Operating savings associations. Owning, controlling,
or operating a savings association.
(5) Trust company functions. Performing functions or
activities that may be performed by a trust company (including
activities of a fiduciary, agency, or custodial nature), in the
manner authorized by federal or state law that is not a bank for
purposes of section 2(c) of the Bank Holding Company Act.
(6) Financial and investment advisory activities. Acting
as investment or financial advisor to any person, including
(without, in any way, limiting the foregoing):
(i) Serving as investment adviser (as defined in section
2(a)(20) of the Investment Company Act of 1940, 15 U.S.C.
80a-2(a)(20)), to an investment company registered under that act,
including sponsoring, organizing, and managing a closed-end
investment company;
(ii) Furnishing general economic information and advice, general
economic statistical forecasting services, and industry
studies;
(iii) Providing advice in connection with mergers, acquisitions,
divestitures, investments, joint ventures, leveraged buyouts,
recapitalizations, capital structurings, financing transactions and
similar transactions, and conducting financial feasibility studies;
4
4 Feasibility studies do not include assisting management with
the planning or marketing for a given project or providing general
operational or management advice.
(iv) Providing information, statistical forecasting, and advice
with respect to any transaction in foreign exchange, swaps, and
similar transactions, commodities, and any forward contract,
option, future, option on a future, and similar instruments;
(v) Providing educational courses, and instructional materials
to consumers on individual financial management matters; and
(vi) Providing tax-planning and tax-preparation services to any
person.
(7) Agency transactional services for customer
investments.
(i) Securities brokerage. Providing securities brokerage
services (including securities clearing and/or securities execution
services on an exchange), whether alone or in combination with
investment advisory services, and incidental activities (including
related securities credit activities and custodial services).
(ii) Riskless principal transactions. Buying and selling
in the secondary market all types of securities on the order of
customers as a “riskless principal” to the extent of engaging in a
transaction in which the company, after receiving an order to buy
(or sell) a security from a customer, purchases (or sells) the
security for its own account to offset a contemporaneous sale to
(or purchase from) the customer.
(iii) Private placement services. Acting as agent for the
private placement of securities in accordance with the requirements
of the Securities Act of 1933 (1933 Act) and the rules of the
Securities and Exchange Commission.
(iv) Futures commission merchant. Acting as a futures
commission merchant for unaffiliated persons in the execution,
clearance, or execution and clearance of any futures contract and
option on a futures contract.
(v) Other transactional services. Providing to customers
as agent transactional services with respect to swaps and similar
transactions, any transaction described in paragraph (f)(8) of this
appendix, any transaction that is permissible for a state member
bank, and any other transaction involving a forward contract,
option, futures, option on a futures or similar contract (whether
traded on an exchange or not) relating to a commodity that is
traded on an exchange.
(8) Investment transactions as principal.
(i) Underwriting and dealing in government obligations and
money market instruments. Underwriting and dealing in
obligations of the United States, general obligations of states and
their political subdivisions, and other obligations that state
member banks of the Federal Reserve System may be authorized to
underwrite and deal in under 12 U.S.C. 24 and 335, including
banker's acceptances and certificates of deposit.
(ii) Investing and trading activities. Engaging as
principal in:
(A) Foreign exchange;
(B) Forward contracts, options, futures, options on futures,
swaps, and similar contracts, whether traded on exchanges or not,
based on any rate, price, financial asset (including gold, silver,
platinum, palladium, copper, or any other metal), nonfinancial
asset, or group of assets, other than a bank-ineligible security, 5
if -
5 A bank-ineligible security is any security that a state member
bank is not permitted to underwrite or deal in under 12 U.S.C. 24
and 335.
(1) A state member bank is authorized to invest in the
asset underlying the contract;
(2) The contract requires cash settlement;
(3) The contract allows for assignment, termination, or
offset prior to delivery or expiration, and the company -
(i) Makes every reasonable effort to avoid taking or
making delivery of the asset underlying the contract; or
(ii) Receives and instantaneously transfers title to the
underlying asset, by operation of contract and without taking or
making physical delivery of the asset; or
(4) The contract does not allow for assignment,
termination, or offset prior to delivery or expiration and is based
on an asset for which futures contracts or options on futures
contracts have been approved for trading on a U.S. contract market
by the Commodity Futures Trading Commission, and the company -
(i) Makes every reasonable effort to avoid taking or
making delivery of the asset underlying the contract; or
(ii) Receives and instantaneously transfers title to the
underlying asset, by operation of contract and without taking or
making physical delivery of the asset.
(C) Forward contracts, options, 6 futures, options on futures,
swaps, and similar contracts, whether traded on exchanges or not,
based on an index of a rate, a price, or the value of any financial
asset, nonfinancial asset, or group of assets, if the contract
requires cash settlement.
6 This reference does not include acting as a dealer in options
based on indices of bank-ineligible securities when the options are
traded on securities exchanges. These options are securities for
purposes of the federal securities laws and bank-ineligible
securities for purposes of section 20 of the Glass-Steagall Act, 12
U.S.C. 337. Similarly, this reference does not include acting as a
dealer in any other instrument that is a bank-ineligible security
for purposes of section 20. Bank holding companies that deal in
these instruments must do so in accordance with the Board's orders
on dealing in bank-ineligible securities.
(iii) Buying and selling bullion, and related activities.
Buying, selling and storing bars, rounds, bullion, and coins of
gold, silver, platinum, palladium, copper, and any other metal for
the company's own account and the account of others, and providing
incidental services such as arranging for storage, safe custody,
assaying, and shipment.
(9) Management consulting and counseling activities.
(i) Management consulting. (A) Providing management
consulting advice: 7
7 In performing this activity, companies are not authorized to
perform tasks or operations or provide services to client
institutions either on a daily or continuing basis, except as
necessary to instruct the client institution on how to perform such
services for itself. See also the Board's interpretation of
bank management consulting advice (12 CFR 225.131).
(1) On any matter to unaffiliated depository
institutions, including commercial banks, savings and loan
associations, savings banks, credit unions, industrial banks,
Morris Plan banks, cooperative banks, industrial loan companies,
trust companies, and branches or agencies of foreign banks;
(2) On any financial, economic, accounting, or audit
matter to any other company.
(B) Revenues derived from, or assets related to, a company's
management consulting activities under this subparagraph will not
be considered to be financial if the company:
(1) Owns or controls, directly or indirectly, more than 5
percent of the voting securities of the client institution; or
(2) Allows a management official, as defined in 12 CFR
212.2(h), of the company or any of its affiliates to serve as a
management official of the client institution, except where such
interlocking relationship is permitted pursuant to an exemption
permitted by the Board.
(C) Up to 30 percent of a nonbank company's assets or revenues
related to management consulting services provided to customers not
described in paragraph (f)(9)(i)(A)(1) or regarding matters
not described in paragraph (f)(9)(i)(A)(2) of this appendix
will be included in the company's financial assets or revenues.
(ii) Employee benefits consulting services. Providing
consulting services to employee benefit, compensation and insurance
plans, including designing plans, assisting in the implementation
of plans, providing administrative services to plans, and
developing employee communication programs for plans.
(iii) Career counseling services. Providing career
counseling services to:
(A) A financial organization 8 and individuals currently
employed by, or recently displaced from, a financial
organization;
8 Financial organization refers to insured depository
institution holding companies and their subsidiaries, other than
nonbanking affiliates of diversified savings and loan holding
companies that engage in activities not permissible under section
4(c)(8) of the Bank Holding Company Act (12 U.S.C. 1842(c)(8)).
(B) Individuals who are seeking employment at a financial
organization; and
(C) Individuals who are currently employed in or who seek
positions in the finance, accounting, and audit departments of any
company.
(10) Support services.
(i) Courier services. Providing courier services for:
(A) Checks, commercial papers, documents, and written
instruments (excluding currency or bearer-type negotiable
instruments) that are exchanged among banks and financial
institutions; and
(B) Audit and accounting media of a banking or financial nature
and other business records and documents used in processing such
media. 9
9 See also the Board's interpretation on courier activities (12
CFR 225.129), which sets forth conditions for company entry into
the activity.
(ii) Printing and selling MICR-encoded items. Printing
and selling checks and related documents, including corporate image
checks, cash tickets, voucher checks, deposit slips, savings
withdrawal packages, and other forms that require Magnetic Ink
Character Recognition (MICR) encoding.
(11) Insurance agency and underwriting.
(i) Credit insurance. Acting as principal, agent, or
broker for insurance (including home mortgage redemption insurance)
that is:
(A) Directly related to an extension of credit by the company or
any of its subsidiaries; and
(B) Limited to ensuring the repayment of the outstanding balance
due on the extension of credit 10 in the event of the death,
disability, or involuntary unemployment of the debtor.
10 Extension of credit includes direct loans to borrowers, loans
purchased from other lenders, and leases of real or personal
property so long as the leases are nonoperating and full-payout
leases that meet the requirements of paragraph (f)(3) of this
appendix.
(ii) Finance company subsidiary. Acting as agent or
broker for insurance directly related to an extension of credit by
a finance company 11 that is a subsidiary of a company, if:
11 Finance company includes all non-deposit-taking financial
institutions that engage in a significant degree of consumer
lending (excluding lending secured by first mortgages) and all
financial institutions specifically defined by individual states as
finance companies and that engage in a significant degree of
consumer lending.
(A) The insurance is limited to ensuring repayment of the
outstanding balance on such extension of credit in the event of
loss or damage to any property used as collateral for the extension
of credit; and
(B) The extension of credit is not more than $10,000, or $25,000
if it is to finance the purchase of a residential manufactured home
12 and the credit is secured by the home; and
12 These limitations increase at the end of each calendar year,
beginning with 1982, by the percentage increase in the Consumer
Price Index for Urban Wage Earners and Clerical Workers published
by the Bureau of Labor Statistics.
(C) The applicant commits to notify borrowers in writing
that:
(1) They are not required to purchase such insurance from
the applicant;
(2) Such insurance does not insure any interest of the
borrower in the collateral; and
(3) The applicant will accept more comprehensive property
insurance in place of such single-interest insurance.
(iii) Insurance in small towns. Engaging in any insurance
agency activity in a place where the company or a subsidiary has a
lending office and that:
(A) Has a population not exceeding 5,000 (as shown in the
preceding decennial census); or
(B) Has inadequate insurance agency facilities, as determined by
the Board, after notice and opportunity for hearing.
(iv) Insurance-agency activities conducted on May 1,
1982. Engaging in any specific insurance-agency activity 13 if
the company, or subsidiary conducting the specific activity,
conducted such activity on May 1, 1982, or received Board approval
to conduct such activity on or before May 1, 1982. 14 Revenues
derived from, or assets related to, a company's specific insurance
agency activity under this clause will be considered financial only
if the company:
13 Nothing contained in this provision precludes a subsidiary
that is authorized to engage in a specific insurance-agency
activity under this clause from continuing to engage in the
particular activity after merger with an affiliate, if the merger
is for legitimate business purposes.
14 For the purposes of this paragraph, activities engaged in on
May 1, 1982, include activities carried on subsequently as the
result of an application to engage in such activities pending
before the Board on May 1, 1982, and approved subsequently by the
Board or as the result of the acquisition by such company pursuant
to a binding written contract entered into on or before May 1,
1982, of another company engaged in such activities at the time of
the acquisition.
(A) Engages in such specific insurance agency activity only at
locations:
(1) In the state in which the company has its principal
place of business (as defined in 12 U.S.C. 1842(d));
(2) In any state or states immediately adjacent to such
state; and
(3) In any state in which the specific insurance-agency
activity was conducted (or was approved to be conducted) by such
company or subsidiary thereof or by any other subsidiary of such
company on May 1, 1982; and
(B) Provides other insurance coverages that may become available
after May 1, 1982, so long as those coverages insure against the
types of risks as (or are otherwise functionally equivalent to)
coverages sold or approved to be sold on May 1, 1982, by the
company or subsidiary.
(v) Supervision of retail insurance agents. Supervising
on behalf of insurance underwriters the activities of retail
insurance agents who sell:
(A) Fidelity insurance and property and casualty insurance on
the real and personal property used in the operations of the
company or its subsidiaries; and
(B) Group insurance that protects the employees of the company
or its subsidiaries.
(vi) Small companies. Engaging in any insurance-agency
activity if the company has total consolidated assets of $50
million or less. Revenues derived from, or assets related to, a
company's insurance-agency activities under this paragraph will be
considered financial only if the company does not engage in the
sale of life insurance or annuities except as provided in
paragraphs (f)(11) (i) and (iii) of this appendix, and does not
continue to engage in insurance-agency activities pursuant to this
provision more than 90 days after the end of the quarterly
reporting period in which total assets of the company and its
subsidiaries exceed $50 million.
(vii) Insurance-agency activities conducted before 1971.
Engaging in any insurance-agency activity performed at any location
in the United States directly or indirectly by a company that was
engaged in insurance-agency activities prior to January 1, 1971, as
a consequence of approval by the Board prior to January 1,
1971.
(12) Community development activities.
(i) Financing and investment activities. Making equity
and debt investments in corporations or projects designed primarily
to promote community welfare, such as the economic rehabilitation
and development of low-income areas by providing housing, services,
or jobs for residents.
(ii) Advisory activities. Providing advisory and related
services for programs designed primarily to promote community
welfare.
(13) Money orders, savings bonds, and traveler's checks.
The issuance and sale at retail of money orders and similar
consumer-type payment instruments; the sale of U.S. savings bonds;
and the issuance and sale of traveler's checks.
(14) Data processing.
(i) Providing data processing, data storage and data
transmission services, facilities (including data processing, data
storage and data transmission hardware, software, documentation, or
operating personnel), databases, advice, and access to such
services, facilities, or data-bases by any technological means, if
the data to be processed, stored or furnished are financial,
banking or economic.
(ii) Up to 30 percent of a nonbank company's assets or revenues
related to providing general purpose hardware in connection with
providing data processing products or services described in
paragraph (f)(14)(i) of this appendix will be included in the
company's financial assets or revenues.
(15) Administrative services. Providing administrative
and other services to mutual funds.
(16) Securities exchange. Owning shares of a securities
exchange.
(17) Certification authority. Acting as a certification
authority for digital signatures and authenticating the identity of
persons conducting financial and nonfinancial transactions.
(18) Employment histories. Providing employment histories
to third parties for use in making credit decisions and to
depository institutions and their affiliates for use in the
ordinary course of business.
(19) Check cashing and wire transmission. Check cashing
and wire transmission services.
(20) Services offered in connection with banking
services. In connection with offering banking services,
providing notary public services, selling postage stamps and
postage-paid envelopes, providing vehicle registration services,
and selling public transportation tickets and tokens.
(21) Real estate title abstracting.
(g) Engaging, in the United States, in any activity that a bank
holding company may engage in outside of the United States; and the
Board has determined, under regulations prescribed or
interpretations issued pursuant to section 4(c)(13) of the BHC Act
(12 U.S.C. 1843(c)(13)) to be usual in connection with the
transaction of banking or other financial operations abroad. Those
activities include -
(1) Providing management consulting services, including to any
person with respect to nonfinancial matters, so long as the
management consulting services are advisory and do not allow the
company to control the person to which the services are
provided.
(2) Operating a travel agency in connection with financial
services.
(3) Organizing, sponsoring, and managing a mutual fund.
(4) Commercial banking and other banking activities.
(h) Directly, or indirectly acquiring or controlling, whether as
principal, on behalf of 1 or more entities, or otherwise, shares,
assets, or ownership interests (including debt or equity
securities, partnership interests, trust certificates, or other
instruments representing ownership) of a company or other entity,
whether or not constituting control of such company or entity,
engaged in any activity not financial in nature as defined in this
appendix if:
(1) Such shares, assets, or ownership interests are acquired and
held as part of a bona fide underwriting or merchant or investment
banking activity, including investment activities engaged in for
the purpose of appreciation and ultimate resale or disposition of
the investment;
(2) Such shares, assets, or ownership interests are held for a
period of time to enable the sale or disposition thereof on a
reasonable basis consistent with the financial viability of the
activities described in paragraph (h)(1) of this appendix; and
(3) During the period such shares, assets, or ownership
interests are held, the company does not routinely manage or
operate such company or entity except as may be necessary or
required to obtain a reasonable return on investment upon resale or
disposition.
(i) Directly or indirectly acquiring or controlling, whether as
principal, on behalf of 1 or more entities, or otherwise, shares,
assets, or ownership interests (including debt or equity
securities, partnership interests, trust certificates or other
instruments representing ownership) of a company or other entity,
whether or not constituting control of such company or entity,
engaged in any activity not financial in nature as defined in this
appendix if -
(1) Such shares, assets, or ownership interests are acquired and
held by an insurance company that is predominantly engaged in
underwriting life, accident and health, or property and casualty
insurance (other than credit-related insurance) or providing and
issuing annuities;
(2) Such shares, assets, or ownership interests represent an
investment made in the ordinary course of business of such
insurance company in accordance with relevant state law governing
such investments; and
(3) During the period such shares, assets, or ownership
interests are held, the company does not routinely manage or
operate such company except as may be necessary or required to
obtain a reasonable return on investment.
(j) Lending, exchanging, transferring, investing for others, or
safeguarding financial assets other than money or securities.
(k) Providing any device or other instrumentality for
transferring money or other financial assets.
(l) Arranging, effecting, or facilitating financial transactions
for the account of third parties.