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7500 - FRB Regulations


TYING ARRANGEMENTS

AN ACT


To amend the Bank Holding Company of 1956, and for other purposes.

Be it 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 Amendments of 1970".

SEC. 106  (a)  DEFINITIONS.--As used in this section, the terms "bank", "bank holding company", "subsidiary", and "Board" have the meaning ascribed to such terms in section 2 of the Bank Holding Company Act of 1956. For purposes of this section only, the term "company", as used in section 2 of the Bank Holding Company Act of 1956, means any person, estate, trust, partnership, corporation, association, or similar organization, but does not include any corporation the majority of the shares of which are owned by the United States or by any State. The term "trust service" means any service customarily performed by a bank trust department.

[Codified to 12 U.S.C. 1971]

[Source:  Section 106(a) of title I of the Act of December 31, 1970 (Pub. L. No. 91--607; 84 Stat. 1766), effective December 31, 1970]

(b)  CERTAIN TYING ARRANGEMENTS PROHIBITED; CORRESPONDENT ACCOUNTS.--(1)  A bank shall not in any manner extend credit, lease or sell property of any kind, or furnish any service, or fix or vary the consideration for any of the foregoing, on the condition or requirement--

(A)  that the customer shall obtain some additional credit, property, or service from such bank other than a loan, discount, deposit, or trust service;

(B)  that the customer shall obtain some additional credit, property, or service from a bank holding company of such bank, or from any other subsidiary of such bank holding company;

(C)  that the customer provide some additional credit, property, or service to such bank, other than those related to and usually provided in connection with a loan, discount, deposit, or trust service;

(D)  that the customer provide some additional credit, property, or service to a bank holding company of such bank, or to any other subsidiary of such bank holding company; or

(E)  that the customer shall not obtain some other credit, property, or service from a competitor of such bank, a bank holding company of such bank, or any subsidiary of such bank holding company, other than a condition or requirement that such bank shall reasonably impose in a credit transaction to assure the soundness of the credit.

The Board may issue such regulations as are necessary to carry out this section, and, in consultation with the Comptroller of the Currency and the Federal Deposit Insurance Company, may by regulation or order permit such exceptions to the foregoing prohibition and the prohibitions of section 4(f)(9) and 4(h)(2) of the Bank Holding Company Act of 1956 as it considers will not be contrary to the purposes of this section.

(2)(A)  No bank which maintains a correspondent account in the name of another bank shall make an extension of credit to an executive officer or director of, or to any person who directly or indirectly or acting through or in concert with one or more persons owns, controls, or has the power to vote more than 10 per centum of any class of voting securities of, such other bank or to any related interest of such person unless such extension of credit is made on substantially the same terms, including interest rates and collateral as those prevailing at the time for comparable transactions with other persons and does not involve more than the normal risk of repayment or present other unfavorable features.

(B)  No bank shall open a correspondent account at another bank while such bank has outstanding an extension of credit to an executive officer or director of, or other person who directly or indirectly or acting through or in concert with one or more persons owns, controls, or has the power to vote more than 10 per centum of any class of voting securities of, the bank desiring to open the account or to any related interest of such person, unless such extension of credit was made on substantially the same terms, including interest rates and collateral as those prevailing at the time for comparable transactions with other persons and does not involve more than the normal risk of repayment or present other unfavorable features.

(C)  No bank which maintains a correspondent account at another bank shall make an extension of credit to an executive officer or director of, or to any person who directly or indirectly acting through or in concert with one or more persons owns, controls, or has the power to vote more than 10 per centum of any class of voting securities of, such other bank or to any related interest of such person, unless such extension of credit is made on substantially the same terms, including interest rates and collateral as those prevailing at the time for comparable transactions with other persons and does not involve more than the normal risk of repayment or present other unfavorable features.

(D)  No bank which has outstanding an extension of credit to an executive officer or director of, or to any person who directly or indirectly or acting through or in concert with one or more persons owns, controls, or has the power to vote more than 10 per centum of any class of voting securities of, another bank or to any related interest of such person shall open a correspondent account at such other bank, unless such extension of credit was made on substantially the same terms, including interest rates and collateral as those prevailing at the time for comparable transactions with other persons and does not involve more than the normal risk of repayment or present other unfavorable features.

(E)  For purposes of this paragraph, the term "extension of credit" shall have the meaning prescribed by the Board pursuant to section 22(h) of the Federal Reserve Act (12 U.S.C. 375b), and the term "executive officer" shall have the same meaning given it under section 22(g) of the Federal Reserve Act.

(F)  CIVIL MONEY PENALTY.--

(i)  FIRST TIER.--Any bank which, and any institution-affiliated party (within the meaning of section 3(u) of the Federal Deposit Insurance Act) with respect to such bank who, violates any provision of this paragraph shall forfeit and pay a civil penalty of not more than $5,000 for each day during which such violation continues.

(ii)  SECOND TIER.--Notwithstanding clause (i), any bank which, and any institution-affiliated party (within the meaning of section 3(u) of the Federal Deposit Insurance Act) with respect to such bank who--

(I)(aa)  commits any violation described in clause (i);

(bb)  recklessly engages in an unsafe or unsound practice in conducting the affairs of such bank; or

(cc)  breaches any fiduciary duty;

(II)  which violation, practice, or breach--

(aa)  is part of a pattern of misconduct;

(bb)  causes or is likely to cause more than a minimal loss to such bank; or

(cc)  results in pecuniary gain or other benefit to such party,

shall forfeit and pay a civil penalty of not more than $25,000 for each day during which such violation, practice, or breach continues.

(iii)  THIRD TIER.--Notwithstanding clauses (i) and (ii), any bank which, and any institution-affiliated party (within the meaning of section 3(u) of the Federal Deposit Insurance Act) with respect to such bank who--

(I)  knowingly--

(aa)  commits any violation described in clause (i);

(bb)  engages in any unsafe or unsound practice in conducting the affairs of such bank; or

(cc)  breaches any fiduciary duty; and

(II)  knowingly or recklessly causes a substantial loss to such bank or a substantial pecuniary gain or other benefit to such party by reason of such violation, practice, or breach, shall forfeit and pay a civil penalty in an amount not to exceed the applicable maximum amount determined under clause (iv) for each day during which such violation, practice, or breach continues.

(iv)  MAXIMUM AMOUNTS OF PENALTIES FOR ANY VIOLATION DESCRIBED IN CLAUSE (iii).--The maximum daily amount of any civil penalty which may be assessed pursuant to clause (iii) for any violation, practice, or breach described in such clause is--

(I)  in the case of any person other than a bank, an amount to not exceed $1,000,000; and

(II)  in the case of a bank, an amount not to exceed the lesser of--

(aa)  $1,000,000; or

(bb)  1 percent of the total assets of such bank.

(v)  ASSESSMENT; ETC.--Any penalty imposed under clause (i), (ii), or (iii) may be assessed and collected--

(I)  in the case of a national bank, by the Comptroller of the Currency;

(II)  in the case of a State member bank, by the Board; and

(III)  in the case of an insured nonmember State bank, by the Federal Deposit Insurance Corporation,

in the manner provided in subparagraphs (E), (F), (G), and (I) of section 8(i)(2) of the Federal Deposit Insurance Act for penalties imposed (under such section) and any such assessment shall be subject to the provisions of such section.

(vi)  HEARING.--The bank or other person against whom any penalty is assessed under this subparagraph shall be afforded an agency hearing if such bank or person submits a request for such hearing within 20 days after the issuance of the notice of assessment. Section 8(h) of the Federal Deposit Insurance Act shall apply to any proceeding under this subparagraph.

(vii)  DISBURSEMENT.--All penalties collected under authority of this subsection shall be deposited into the Treasury.

(viii)  VIOLATE DEFINED.--For purposes of this paragraph, the term "violate" includes any action (alone or with another or others) for or toward causing, bringing about, participating in, counseling, or aiding or abetting a violation.

(ix)  REGULATIONS.--The Comptroller of the Currency, the Board, and the Federal Deposit Insurance Corporation shall prescribe regulations establishing such procedures as may be necessary to carry out this subparagraph.

(G)  For the purpose of this paragraph--

(i)  the term "bank" includes a mutual savings bank, a savings bank, and a savings association (as those terms are defined in section 3 of the Federal Deposit Insurance Act);

(ii)  the term "related interests of such persons" includes any company controlled by such executive officer, director, or person, or any political or campaign committee the funds or services of which will benefit such executive officer, director, or person or which is controlled by such executive officer, director, or person; and

(iii)  the terms "control of a company" and "company" have the same meaning as under section 22(h) of the Federal Reserve Act (12 U.S.C. 375b).

(H)  NOTICE UNDER THIS SECTION AFTER SEPARATION FROM SERVICE.--The resignation, termination of employment or participation, or separation of an institution-affiliated party (within the meaning of section 3(u) of the Federal Deposit Insurance Act) with respect to such a bank (including a separation caused by the closing of such a bank) shall not affect the jurisdiction and authority of the appropriate Federal banking agency to issue any notice and proceed under this section against any such party, if such notice is served before the end of the 6-year period beginning on the date such party ceased to be such a party with respect to such bank (whether such date occurs before, on, or after the date of the enactment of this subparagraph).

[Codified to 12 U.S.C. 1972]

[Source:  Section 106(b) of title I of the Act of December 31, 1970 (Pub. L. No. 91--607; 84 Stat. 1766), effective December 31, 1970, as amended by section 801 of title VIII of the Act of November 10, 1978 (Pub. L. No. 95--630; 92 Stat. 3690), effective March 10, 1979; sections 410(f), 424(c), (d)(11), (e), and 428 of title IV of the Act of October 15, 1982 (Pub. L. No. 97--320; 96 Stat. 1520, 1523 and 1526), effective October 15, 1982; sections 905(h) and 907(i) of title IX of the Act of August 9, 1989 (Pub. L. No. 101--73; 103 Stat. 461 and 473, respectively), effective August 9, 1989; section 306(j) of title III of the Act of December 19, 1991 (Pub. L. No. 102--242; 105 Stat. 2359), effective December 19, 1991; section 2216(a) of title II of the Act of September 30, 1996 (Pub. L. No. 104--208; 110 Stat. 3009--413), effective September 30, 1996; section 601(b) of title VI of the Act of October 13, 2006 (Pub. L. No. 109--351; 120 Stat. 1978), effective October 13, 2006; section 355 of title III of the Act of July 21, 2010 (Pub. L. No. 111--203; 124 Stat. 1547), effective July 21, 2010]

(c)  JURISDICTION OF COURTS; DUTY OF UNITED STATES ATTORNEYS; EQUITABLE PROCEEDINGS; PETITION; EXPIDITION OF CASES; TEMPORARY RESTRAINING ORDERS; BRINGING IN ADDITIONAL PARTIES; SUBPENA.--The district courts of the United States have jurisdiction to prevent and restrain violations of subsection (b) of this section and it is the duty of the United States attorneys, under the direction of the Attorney General, to institute proceedings in equity to prevent and restrain such violations. The proceedings may be by way of a petition setting forth the case and praying that the violation be enjoined or otherwise prohibited. When the parties complained of have been duly notified of the petition, the court shall proceed, as soon as possible, to the hearing and determination of the case. While the petition is pending, and before final decree, the court may at any time make such temporary restraining order or prohibition as it deems just. Whenever it appears to the court that the ends of justice require that other parties be brought before it, the court may cause them to be summoned whether or not they reside in the district in which the court is held, and subpenas to that end may be served in any district by the marshal thereof.

[Codified to 12 U.S.C. 1973]

[Source:  Section 106(c) of title I of the Act of December 31, 1970 (Pub. L. No. 91--607; 84 Stat. 1767), effective December 31, 1970]

(d)  ACTIONS BY UNITED STATES; SUBPENAS FOR WITNESSES.--In any action brought by or on behalf of the United States under subsection (b), subpenas for witnesses may run into any district, but no writ of subpena may issue for witnesses living out of the district in which the court is held at a greater distance than one hundred miles from the place of holding the same without the prior permission of the trial court upon proper application and cause shown.

[Codified to 12 U.S.C. 1974]

[Source:  Section 106(d) of title I of the Act of December 31, 1970 (Pub. L. No. 91--607; 84 Stat. 1767), effective December 31, 1970]

(e)  CIVIL ACTIONS BY PERSONS INJURED; JURISDICTION AND VENUE; AMOUNT OF RECOVERY.--Any person who is injured in his business or property by reason of anything forbidden in subsection (b) may sue therefor in any district court of the United States in which the defendant resides or is found or has an agent, without regard to the amount in controversy, and shall be entitled to recover three times the amount of the damages sustained by him, and the cost of suit, including a reasonable attorney's fee.

[Codified to 12 U.S.C. 1975]

[Source:  Section 106(e) of title I of the Act of December 31, 1970 (Pub. L. No. 91--607; 84 Stat. 1767), effective December 31, 1970]

(f)  INJUNCTIVE RELIEF FOR PERSONS AGAINST THREATENED LOSS OR DAMAGES; EQUITABLE PROCEEDINGS; PRELIMINARY INJUNCTIONS.--Any person may sue for and have injunctive relief, in any court of the United States having jurisdiction over the parties, against threatened loss or damage by reason of a violation of subsection (b), under the same conditions and principles as injunctive relief against threatened conduct that will cause loss or damage is granted by courts of equity and under the rules governing such proceedings. Upon the execution of proper bond against damages for an injunction improvidently granted and a showing that the danger of irreparable loss or damage is immediate a preliminary injunction may issue.

[Codified to 12 U.S.C. 1976]


[Source:  Section 106(f) of title I of the Act of December 31, 1970 (Pub. L. No. 91--607; 84 Stat. 1767), effective December 31, 1970]

(g)  LIMITATION OF ACTIONS; SUSPENSION OF LIMITATIONS.--(1)  Subject to paragraph (2), any action to enforce any cause of action under this section shall be forever barred unless commenced within four years after the cause of action accrued.

(2)  Whenever any enforcement action is instituted by or on behalf of the United States with respect to any matter which is or could be the subject of a private right of action under this section, the running of the statute of limitations in respect of every private right of action arising under this section and based in whole or in part on such matter shall be suspended during the pendency of the enforcement action so instituted and for one year thereafter: Provided, That whenever the running of the statute of limitations in respect of a cause of action arising under this section is suspended under this paragraph, any action to enforce such cause of action shall be forever barred unless commenced either within the period of suspension or within the four-year period referred to in paragraph (1).

[Codified to 12 U.S.C. 1977]

[Source:  Section 106(g) of title I of the Act of December 31, 1970 (Pub. L. No. 91-607; 84 Stat. 1768), effective December 31, 1970]

(h)  ACTIONS UNDER OTHER FEDERAL OR STATE LAWS UNAFFECTED; REGULATIONS OR ORDERS BARRED AS A DEFENSE.--Nothing contained in this section shall be construed as affecting in any manner the right of the United States or any other party to bring an action under any other law of the United States or of any State, including any right which may exist in addition to specific statutory authority, challenging the legality of any act or practice which may be proscribed by this section. No regulation or order issued by the Board under this section shall in any manner constitute a defense to such action.

[Codified to 12 U.S.C. 1978]

[Source:  Section 106(h) of title I of the Act of December 31, 1970 (Pub. L. No. 91-607; 84 Stat. 1768), effective December 31, 1970]


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