12 CFR 242.3 – Nonbank companies “predominantly engaged” in financial activities
(a) In general. A company is “predominantly engaged in financial activities” for purposes of this section if—
Terms Used In 12 CFR 242.3
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Evidence: Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case for one side or the other.
- Fiscal year: The fiscal year is the accounting period for the government. For the federal government, this begins on October 1 and ends on September 30. The fiscal year is designated by the calendar year in which it ends; for example, fiscal year 2006 begins on October 1, 2005 and ends on September 30, 2006.
(1) The consolidated annual gross financial revenues of the company in either of its two most recently completed fiscal years represent 85 percent or more of the company’s consolidated annual gross revenues (as determined in accordance with applicable accounting standards) in that fiscal year;
(2) The consolidated total financial assets of the company as of the end of either of its two most recently completed fiscal years represent 85 percent or more of the company’s consolidated total assets (as determined in accordance with applicable accounting standards) as of the end of that fiscal year; or
(3) The Council, with respect to the definition of a nonbank financial company for purposes of Title I of the Dodd-Frank Act (other than with respect to the definition of a significant nonbank financial company), or the Board, with respect to the definition of a significant nonbank financial company, determines, based on all the facts and circumstances, that—
(i) The consolidated annual gross financial revenues of the company represent 85 percent or more of the company’s consolidated annual gross revenues; or
(ii) The consolidated total financial assets of the company represent 85 percent or more of the company’s consolidated total assets.
(b) Consolidated annual gross financial revenues. For purposes of this section, the “consolidated annual gross financial revenues” of a company means that portion of the consolidated annual gross revenues of the company (as determined in accordance with applicable accounting standards) that are derived, directly or indirectly, by the company or any of its subsidiaries from—
(1) Activities that are financial in nature; or
(2) The ownership, control, or activities of an insured depository institution or any subsidiary of an insured depository institution.
(c) Consolidated total financial assets. For purposes of this section, the “consolidated total financial assets” of a company means that portion of the consolidated total assets of the company (as determined in accordance with applicable accounting standards) that are related to—
(1) Activities that are financial in nature; or
(2) The ownership, control, or activities of an insured depository institution or any subsidiary of an insured depository institution.
(d) Activities that are financial in nature—(1) In general. For purposes of determining whether a company is predominantly engaged in financial activities under this section, activities that are financial in nature are set forth in the appendix to this part. Nothing in this part limits the authority of the Board under any other provision of law or regulation to modify the activities determined to be financial in nature for purposes of this section or for purposes of the BHC Act or to provide interpretations of section 4(k) of the BHC Act.
(2) Effect of other authority. Any activity described in the appendix is financial in nature for purposes of this part regardless of whether—
(i) A bank holding company (including a financial holding company or a company that is, or is treated in the United States as, a bank holding company) may be authorized to engage in the activity, or own or control shares of a company engaged in such activity, under any other provisions of the BHC Act or other Federal law including, but not limited to, section 4(a)(2), section 4(c)(5), section 4(c)(6), section 4(c)(7), section 4(c)(9), or section 4(c)(13) of the BHC Act (12 U.S.C. § 1843(a)(2), (c)(5), (c)(6), (c)(7), (c)(9), or (c)(13)) and the Board’s implementing regulations; or
(ii) Other provisions of Federal or state law or regulations prohibit, restrict, or otherwise place conditions on the conduct of the activity by a bank holding company (including a financial holding company or a company that is, or is treated in the United States, as a bank holding company) or bank holding companies generally.
(e) Rules of construction. For purposes of determining whether a company is predominantly engaged in financial activities under this section—
(1) Unconsolidated investments. (i) Unless otherwise determined by the Council or the Board in accordance with paragraph (e)(1)(ii) of this section, revenues derived from, and assets related to, an investment by the company in an entity whose financial statements are not consolidated with those of the company are presumed to be financial in nature.
(ii) A company may seek to rebut the presumption described in paragraph (e)(1)(i) of this section by providing evidence to the Council, with respect to the definition of a nonbank financial company for purposes of Title I of the Dodd-Frank Act (other than with respect to the definition of a significant nonbank financial company), or the Board, with respect to the definition of a significant nonbank financial company, that the shares or ownership interests are not held in connection with a bona fide merchant or investment banking activity, are not held in connection with the activity of investing for others, do not represent an investment in an entity engaged in activities that are financial in nature as defined in the appendix, or are not otherwise related to a financial activity.
(2) Accounts receivable. (i) Unless otherwise determined by the Council or the Board in accordance with paragraph (e)(2)(ii) of this section, an account receivable is presumed to be an asset related to the financial activity of extending credit.
(ii) A company may seek to rebut the presumption described in paragraph (e)(2)(i) of this section by providing evidence to the Council, with respect to the definition of a nonbank financial company for purposes of Title I of the Dodd-Frank Act (other than with respect to the definition of a significant nonbank financial company), or the Board, with respect to the definition of a significant nonbank financial company, that the account receivable is not related to a financial activity.
(3) Goodwill. Goodwill is excluded from a company’s consolidated total assets and consolidated total financial assets.
(4) Cash and cash equivalents. (i) Cash is excluded from a company’s consolidated total assets and consolidated total financial assets.
(ii) Cash equivalents are assets related to a financial activity.
(5) Intangible assets. Intangible assets are treated in the same manner as the transaction or asset that gives rise to the intangible asset.