Since 1999, when Congress repealed the Glass-
Steagall Act,
which prohibited commercial banks that
engaged in investment banking, financial services
companies began to spread their activities into all
areas of banking, insurance, and securities operations.
A ) which
prohibited commercial banks that engaged in investment banking, financial
services companies began
WRONG: PROHIBITED/THAT (should be from)... BEGAN (since --> have begun)
B)
forbidding commercial banks
from engaging in
investment banking, financial services
companies have begun
WRONG: FORBIDDING/FROM (should be TO)
C) which forbid commercial banks to engage in
investment banking, financial services
companies
beganWRONG: BEGAN (Should be 'have begun')
D)
that prohibited commercial banks from engaging
in investment banking, financial services
companies
beganWRONG: THAT (Should be 'which', THAT is not used after a comma and is something that is essential to the sentence. The modifier is non-essential; therefore, 'which' is used) ... BEGAN ( should be 'have begun', because "Since" was used at beginning. The companies have been spreading their activities... it was done in the past and is continuing in the present. So has/have is needed.
E) which prohibited commercial banks from
engaging in investment banking, financial
services companies have begun
RIGHT Which is used properly as non-essential modifier, prohibited/from is correct idiom, Have Begun is used properly with the sentence beginning "Since..."