[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 10 Engrossed in House (EH)]


  2d Session

                                H. R. 10

_______________________________________________________________________

                                 AN ACT

To enhance competition in the financial services industry by providing 
a prudential framework for the affiliation of banks, securities firms, 
     and other financial service providers, and for other purposes.
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
105th CONGRESS
  2d Session
                                 H. R. 10

_______________________________________________________________________

                                 AN ACT


 
To enhance competition in the financial services industry by providing 
a prudential framework for the affiliation of banks, securities firms, 
     and other financial service providers, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; PURPOSES; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Financial Services 
Act of 1998''.
    (b) Purposes.--The purposes of this Act are as follows:
            (1) To enhance competition in the financial services 
        industry, in order to foster innovation and efficiency.
            (2) To ensure the continued safety and soundness of 
        depository institutions.
            (3) To provide necessary and appropriate protections for 
        investors and ensure fair and honest markets in the delivery of 
        financial services.
            (4) To provide for appropriate functional regulation of 
        insurance activities.
            (5) To reduce and, to the maximum extent practicable, to 
        eliminate the legal barriers preventing affiliation among 
        depository institutions, securities firms, insurance companies, 
        and other financial service providers and to provide a 
        prudential framework for achieving that result.
            (6) To enhance the availability of financial services to 
        citizens of all economic circumstances and in all geographic 
        areas.
            (7) To enhance the competitiveness of United States 
        financial service providers internationally.
            (8) To ensure compliance by depository institutions with 
        the provisions of the Community Reinvestment Act of 1977 and 
        enhance the ability of depository institutions to meet the 
        capital and credit needs of all citizens and communities, 
        including underserved communities and populations.
    (c) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; purposes; table of contents.
  TITLE I--FACILITATING AFFILIATION AMONG SECURITIES FIRMS, INSURANCE 
                 COMPANIES, AND DEPOSITORY INSTITUTIONS

                        Subtitle A--Affiliations

Sec. 101. Glass-Steagall Act reformed.
Sec. 102. Activity restrictions applicable to bank holding companies 
                            which are not financial holding companies.
Sec. 103. Financial holding companies.
Sec. 104. Certain State laws preempted.
Sec. 105. Mutual bank holding companies authorized.
Sec. 106. Prohibition on deposit production offices.
Sec. 107. Clarification of branch closure requirements.
Sec. 108. Amendments relating to limited purpose banks.
Sec. 109. Responsiveness to community needs for financial services.
Sec. 110. Reports on ongoing FTC study of consumer privacy issues.
Sec. 110A. GAO study of economic impact on community banks and other 
                            small financial institutions.
  Subtitle B--Streamlining Supervision of Financial Holding Companies

Sec. 111. Streamlining financial holding company supervision.
Sec. 112. Elimination of application requirement for financial holding 
                            companies.
Sec. 113. Authority of State insurance regulator and Securities and 
                            Exchange Commission.
Sec. 114. Prudential safeguards.
Sec. 115. Examination of investment companies.
Sec. 116. Limitation on rulemaking, prudential, supervisory, and 
                            enforcement authority of the Board.
Sec. 117. Interagency consultation.
               Subtitle C--Subsidiaries of National Banks

Sec. 121. Permissible activities for subsidiaries of national banks.
Sec. 122. Misrepresentations regarding depository institution liability 
                            for obligations of affiliates.
Sec. 123. Repeal of stock loan limit in Federal Reserve Act.
Subtitle D--Wholesale Financial Holding Companies; Wholesale Financial 
                              Institutions

            Chapter 1--Wholesale Financial Holding Companies

Sec. 131. Wholesale financial holding companies established.
Sec. 132. Authorization to release reports.
Sec. 133. Conforming amendments.
              Chapter 2--Wholesale Financial Institutions

Sec. 136. Wholesale financial institutions.
               Subtitle E--Preservation of FTC Authority

Sec. 141. Amendment to the Bank Holding Company Act of 1956 to modify 
                            notification and post-approval waiting 
                            period for section 3 transactions.
Sec. 142. Interagency data sharing.
Sec. 143. Clarification of status of subsidiaries and affiliates.
Sec. 144. Annual GAO report.
Subtitle F--Applying the Principles of National Treatment and Equality 
   of Competitive Opportunity to Foreign Banks and Foreign Financial 
                              Institutions

Sec. 151. Applying the principles of national treatment and equality of 
                            competitive opportunity to foreign banks 
                            that are financial holding companies.
Sec. 152. Applying the principles of national treatment and equality of 
                            competitive opportunity to foreign banks 
                            and foreign financial institutions that are 
                            wholesale financial institutions.
               Subtitle G--Federal Home Loan Bank System

Sec. 161. Federal home loan banks-
Sec. 162. Membership and collateral.
Sec. 163. The Office of Finance.
Sec. 164. Management of banks.
Sec. 165. Advances to nonmember borrowers.
Sec. 166. Powers and duties of banks.
Sec. 167. Mergers and consolidations of Federal home loan banks.
Sec. 168. Technical amendments.
Sec. 169. Definitions.
Sec. 170. Resolution funding corporation
Sec. 171. Capital structure of the Federal home loan banks.
Sec. 172. Investments.
Sec. 173. Federal Housing Finance Board.
                 Subtitle H--Direct Activities of Banks

Sec. 181. Authority of national banks to underwrite certain municipal 
                            bonds
                  Subtitle I--Deposit Insurance Funds

Sec. 186. Study of safety and soundness of funds.
                  Subtitle J--Effective Date of Title

Sec. 191. Effective date.
                    TITLE II--FUNCTIONAL REGULATION

                    Subtitle A--Brokers and Dealers

Sec. 201. Definition of broker.
Sec. 202. Definition of dealer.
Sec. 203. Registration for sales of private securities offerings.
Sec. 204. Sales practices and complaint procedures.
Sec. 205. Information sharing.
Sec. 206. Definition and treatment of banking products.
Sec. 207. Derivative instrument and qualified investor defined.
Sec. 208. Government securities defined.
Sec. 209. Effective date.
Sec. 210. Rule of construction.
             Subtitle B--Bank Investment Company Activities

Sec. 211. Custody of investment company assets by affiliated bank.
Sec. 212. Lending to an affiliated investment company.
Sec. 213. Independent directors.
Sec. 214. Additional SEC disclosure authority.
Sec. 215. Definition of broker under the Investment Company Act of 
                            1940.
Sec. 216. Definition of dealer under the Investment Company Act of 
                            1940.
Sec. 217. Removal of the exclusion from the definition of investment 
                            adviser for banks that advise investment 
                            companies.
Sec. 218. Definition of broker under the Investment Advisers Act of 
                            1940.
Sec. 219. Definition of dealer under the Investment Advisers Act of 
                            1940.
Sec. 220. Interagency consultation.
Sec. 221. Treatment of bank common trust funds.
Sec. 222. Investment advisers prohibited from having controlling 
                            interest in registered investment company.
Sec. 223. Conforming change in definition.
Sec. 224. Conforming amendment.
Sec. 225. Effective date.
     Subtitle C--Securities and Exchange Commission Supervision of 
                   Investment Bank Holding Companies

Sec. 231. Supervision of investment bank holding companies by the 
                            Securities and Exchange Commission.
                           Subtitle D--Study

Sec. 241. Study of methods to inform investors and consumers of 
                            uninsured products.
Sec. 242. Study of limitation on fees associated with acquiring 
                            financial products.
    Subtitle E--Disclosure of Customer Costs of Acquiring Financial 
                                Products

Sec. 251. Improved and consistent disclosure.
                          TITLE III--INSURANCE

               Subtitle A--State Regulation of Insurance

Sec. 301. State regulation of the business of insurance.
Sec. 302. Mandatory insurance licensing requirements.
Sec. 303. Functional regulation of insurance.
Sec. 304. Insurance underwriting in national banks.
Sec. 305. New bank agency activities only through acquisition of 
                            existing licensed agents.
Sec. 306. Title insurance activities of national banks and their 
                            affiliates.
Sec. 307. Expedited and equalized dispute resolution for financial 
                            regulators.
Sec. 308. Consumer protection regulations.
Sec. 309. Certain State affiliation laws preempted for insurance 
                            companies and affiliates.
             Subtitle B--Redomestication of Mutual Insurers

Sec. 311. General application.
Sec. 312. Redomestication of mutual insurers.
Sec. 313. Effect on State laws restricting redomestication.
Sec. 314. Other provisions.
Sec. 315. Definitions.
Sec. 316. Effective date.
   Subtitle C--National Association of Registered Agents and Brokers

Sec. 321. State flexibility in multistate licensing reforms.
Sec. 322. National Association of Registered Agents and Brokers.
Sec. 323. Purpose.
Sec. 324. Relationship to the Federal Government.
Sec. 325. Membership.
Sec. 326. Board of directors.
Sec. 327. Officers.
Sec. 328. Bylaws, rules, and disciplinary action.
Sec. 329. Assessments.
Sec. 330. Functions of the NAIC.
Sec. 331. Liability of the Association and the directors, officers, and 
                            employees of the Association.
Sec. 332. Elimination of NAIC oversight.
Sec. 333. Relationship to State law.
Sec. 334. Coordination with other regulators.
Sec. 335. Judicial review.
Sec. 336. Definitions.
          TITLE IV--UNITARY SAVINGS AND LOAN HOLDING COMPANIES

Sec. 401. Termination of expanded powers for new unitary S&L holding 
                            companies.
Sec. 402. Retention of ``Federal'' in name of converted Federal savings 
                            association.

  TITLE I--FACILITATING AFFILIATION AMONG SECURITIES FIRMS, INSURANCE 
                 COMPANIES, AND DEPOSITORY INSTITUTIONS

                        Subtitle A--Affiliations

SEC. 101. GLASS-STEAGALL ACT REFORMED.

    (a) Section 20 Repealed.--Section 20 (12 U.S.C. 377) of the Banking 
Act of 1933 (commonly referred to as the ``Glass-Steagall Act'') is 
repealed.
    (b) Section 32 Repealed.--Section 32 (12 U.S.C. 78) of the Banking 
Act of 1933 is repealed.

SEC. 102. ACTIVITY RESTRICTIONS APPLICABLE TO BANK HOLDING COMPANIES 
              WHICH ARE NOT FINANCIAL HOLDING COMPANIES.

    (a) In General.--Section 4(c)(8) of the Bank Holding Company Act of 
1956 (12 U.S.C. 1843(c)(8)) is amended to read as follows:
            ``(8) shares of any company the activities of which had 
        been determined by the Board by regulation under this paragraph 
        as of the day before the date of the enactment of the Financial 
        Services Act of 1998, to be so closely related to banking as to 
        be a proper incident thereto (subject to such terms and 
        conditions contained in such regulation, unless modified by the 
        Board);''.
    (b) Conforming Changes to Other Statutes.--
            (1) Amendment to the bank holding company act amendments of 
        1970.--Section 105 of the Bank Holding Company Act Amendments 
        of 1970 (12 U.S.C. 1850) is amended by striking ``, to engage 
        directly or indirectly in a nonbanking activity pursuant to 
        section 4 of such Act,''.
            (2) Amendment to the bank service company act.--Section 
        4(f) of the Bank Service Company Act (12 U.S.C. 1864(f)) is 
        amended by striking the period and adding at the end the 
        following: ``as of the day before the date of enactment of the 
        Financial Services Act of 1998.''.

SEC. 103. FINANCIAL HOLDING COMPANIES.

    (a) In General.--The Bank Holding Company Act of 1956 is amended by 
inserting after section 5 (12 U.S.C. 1844) the following new section:

``SEC. 6. FINANCIAL HOLDING COMPANIES.

    ``(a) Financial Holding Company Defined.--For purposes of this 
section, the term `financial holding company' means a bank holding 
company which meets the requirements of subsection (b).
    ``(b) Eligibility Requirements for Financial Holding Companies.--
            ``(1) In general.--No bank holding company may engage in 
        any activity or directly or indirectly acquire or retain shares 
        of any company under this section unless the bank holding 
        company meets the following requirements:
                    ``(A) All of the subsidiary depository institutions 
                of the bank holding company are well capitalized.
                    ``(B) All of the subsidiary depository institutions 
                of the bank holding company are well managed.
                    ``(C) All of the subsidiary depository institutions 
                of the bank holding company have achieved a rating of 
                `satisfactory record of meeting community credit 
                needs', or better, at the most recent examination of 
                each such institution under the Community Reinvestment 
                Act of 1977.
                    ``(D) All of the subsidiary insured depository 
                institutions of the bank holding company (other than 
                any such depository institution which does not, in the 
                ordinary course of the business of the depository 
                institution, offer consumer transaction accounts to the 
                general public) offer and maintain low-cost basic 
                banking accounts.
                    ``(E) The company has filed with the Board a 
                declaration that the company elects to be a financial 
                holding company and certifying that the company meets 
                the requirements of subparagraphs (A) through (D).
            ``(2) Foreign banks and companies.--For purposes of 
        paragraph (1), the Board shall establish and apply comparable 
        capital standards to a foreign bank that operates a branch or 
        agency or owns or controls a bank or commercial lending company 
        in the United States, and any company that owns or controls 
        such foreign bank, giving due regard to the principle of 
        national treatment and equality of competitive opportunity.
            ``(3) Limited exclusions from community needs requirements 
        for newly acquired depository institutions.--
                    ``(A) In general.--If the requirements of 
                subparagraph (B) are met, any depository institution 
                acquired by a bank holding company during the 24-month 
                period preceding the submission of a declaration under 
                paragraph (1)(E) and any depository institution 
                acquired after the submission of such declaration may 
                be excluded for purposes of paragraph (1)(C) until the 
                later of--
                            ``(i) the end of the 24-month period 
                        beginning on the date the acquisition of the 
                        depository institution by such company is 
                        consummated; or
                            ``(ii) the date of completion of the first 
                        examination of such depository institution 
                        under the Community Reinvestment Act of 1977 
                        which is conducted after the date of the 
                        acquisition of the depository institution.
                    ``(B) Requirements.--The requirements of this 
                subparagraph are met with respect to any bank holding 
                company referred to in subparagraph (A) if--
                            ``(i) the bank holding company has 
                        submitted an affirmative plan to the 
                        appropriate Federal banking agency to take such 
                        action as may be necessary in order for such 
                        institution to achieve a rating of 
                        `satisfactory record of meeting community 
                        credit needs', or better, at the next 
                        examination of the institution under the 
                        Community Reinvestment Act of 1977; and
                            ``(ii) the plan has been approved by such 
                        agency.
    ``(c) Engaging in Activities Financial in Nature.--
            ``(1) In general.--Notwithstanding section 4(a), a 
        financial holding company and a wholesale financial holding 
        company may engage in any activity, and acquire and retain the 
        shares of any company engaged in any activity, which the Board 
        has determined (by regulation or order) to be financial in 
        nature or incidental to such financial activities.
            ``(2) Factors to be considered.--In determining whether an 
        activity is financial in nature or incidental to financial 
        activities, the Board shall take into account--
                    ``(A) the purposes of this Act and the Financial 
                Services Act of 1998;
                    ``(B) changes or reasonably expected changes in the 
                marketplace in which bank holding companies compete;
                    ``(C) changes or reasonably expected changes in the 
                technology for delivering financial services; and
                    ``(D) whether such activity is necessary or 
                appropriate to allow a bank holding company and the 
                affiliates of a bank holding company to--
                            ``(i) compete effectively with any company 
                        seeking to provide financial services in the 
                        United States;
                            ``(ii) use any available or emerging 
                        technological means, including any application 
                        necessary to protect the security or efficacy 
                        of systems for the transmission of data or 
                        financial transactions, in providing financial 
                        services; and
                            ``(iii) offer customers any available or 
                        emerging technological means for using 
                        financial services.
            ``(3) Activities that are financial in nature.--The 
        following activities shall be considered to be financial in 
        nature:
                    ``(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.
                    ``(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, by order or regulation that is in effect on 
                the date of enactment of the Financial Services Act of 
                1998, to be so closely related to banking or managing 
                or controlling banks as to be a proper incident thereto 
                (subject to the same terms and conditions contained in 
                such order or regulation, unless modified by the 
                Board).
                    ``(G) Engaging, in the United States, in any 
                activity that--
                            ``(i) a bank holding company may engage in 
                        outside the United States; and
                            ``(ii) the Board has determined, under 
                        regulations issued pursuant to section 4(c)(13) 
                        of this Act (as in effect on the day before the 
                        date of enactment of the Financial Services Act 
                        of 1998) to be usual in connection with the 
                        transaction of banking or other financial 
                        operations abroad.
                    ``(H) Directly or indirectly acquiring or 
                controlling, whether as principal, on behalf of 1 or 
                more entities (including entities, other than a 
                depository institution or subsidiary of a depository 
                institution, that the bank holding company controls) or 
                otherwise, shares, assets, or ownership interests 
                (including without limitation 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 authorized pursuant to this section if--
                            ``(i) the shares, assets, or ownership 
                        interests are not acquired or held by a 
                        depository institution or subsidiary of a 
                        depository institution;
                            ``(ii) such shares, assets, or ownership 
                        interests are acquired and held by a securities 
                        affiliate or an affiliate thereof as part of a 
                        bona fide underwriting or merchant banking 
                        activity, including investment activities 
                        engaged in for the purpose of appreciation and 
                        ultimate resale or disposition of the 
                        investment;
                            ``(iii) such shares, assets, or ownership 
                        interests, are held only for such a period of 
                        time as will permit the sale or disposition 
                        thereof on a reasonable basis consistent with 
                        the nature of the activities described in 
                        clause (ii); and
                            ``(iv) during the period such shares, 
                        assets, or ownership interests are held, the 
                        bank holding company does not actively 
                        participate in the day to day management or 
                        operation of such company or entity, except 
                        insofar as necessary to achieve the objectives 
                        of clause (ii).
                    ``(I) Directly or indirectly acquiring or 
                controlling, whether as principal, on behalf of 1 or 
                more entities (including entities, other than a 
                depository institution or subsidiary of a depository 
                institution, that the bank holding company controls) or 
                otherwise, shares, assets, or ownership interests 
                (including without limitation 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 authorized pursuant to this section if--
                            ``(i) the shares, assets, or ownership 
                        interests are not acquired or held by a 
                        depository institution or a subsidiary of a 
                        depository institution;
                            ``(ii) 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);
                            ``(iii) 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
                            ``(iv) during the period such shares, 
                        assets, or ownership interests are held, the 
                        bank holding company does not directly or 
                        indirectly participate in the day-to-day 
                        management or operation of the company or 
                        entity except insofar as necessary to achieve 
                        the objectives of clauses (ii) and (iii).
            ``(4) Actions required.--The Board shall, by regulation or 
        order, define, consistent with the purposes of this Act, the 
        following activities as, and the extent to which such 
        activities are, financial in nature or incidental to activities 
        which are financial in nature:
                    ``(A) Lending, exchanging, transferring, investing 
                for others, or safeguarding financial assets other than 
                money or securities.
                    ``(B) Providing any device or other instrumentality 
                for transferring money or other financial assets;
                    ``(C) Arranging, effecting, or facilitating 
                financial transactions for the account of third 
                parties.
            ``(5) Post consummation notification.--
                    ``(A) In general.--A financial holding company and 
                a wholesale financial holding company that acquires any 
                company, or commences any activity, pursuant to this 
                subsection shall provide written notice to the Board 
                describing the activity commenced or conducted by the 
                company acquired no later than 30 calendar days after 
                commencing the activity or consummating the 
                acquisition.
                    ``(B) Approval not required for certain financial 
                activities.--Except as provided in section 4(j) with 
                regard to the acquisition of a savings association, a 
                financial holding company and a wholesale financial 
                holding company may commence any activity, or acquire 
                any company, pursuant to paragraph (3) or any 
                regulation prescribed or order issued under paragraph 
                (4), without prior approval of the Board.
    ``(d) Provisions Applicable to Financial Holding Companies That 
Fail To Meet Requirements.--
            ``(1) In general.--If the Board finds that a financial 
        holding company is not in compliance with the requirements of 
        subparagraph (A), (B), (C), or (D) of subsection (b)(1), the 
        Board shall give notice of such finding to the company.
            ``(2) Agreement to correct conditions required.--Within 45 
        days of receipt by a financial holding company of a notice 
        given under paragraph (1) (or such additional period as the 
        Board may permit), the company shall execute an agreement 
        acceptable to the Board to comply with the requirements 
        applicable to a financial holding company.
            ``(3) Board may impose limitations.--Until the conditions 
        described in a notice to a financial holding company under 
        paragraph (1) are corrected, the Board may impose such 
        limitations on the conduct or activities of the company or any 
        affiliate of the company as the Board determines to be 
        appropriate under the circumstances.
            ``(4) Failure to correct.--If, after receiving a notice 
        under paragraph (1), a financial holding company does not--
                    ``(A) execute and implement an agreement in 
                accordance with paragraph (2);
                    ``(B) comply with any limitations imposed under 
                paragraph (3);
                    ``(C) in the case of a notice of failure to comply 
                with subsection (b)(1)(A), restore each depository 
                institution subsidiary to well capitalized status 
                before the end of the 180-day period beginning on the 
                date such notice is received by the company (or such 
                other period permitted by the Board); or
                    ``(D) in the case of a notice of failure to comply 
                with subparagraph (B), (C), or (D) of subsection 
                (b)(1), restore compliance with any such subparagraph 
                by the date the next examination of the depository 
                institution subsidiary is completed or by the end of 
                such other period as the Board determines to be 
                appropriate,
        the Board may require such company, under such terms and 
        conditions as may be imposed by the Board and subject to such 
        extension of time as may be granted in the Board's discretion, 
        to divest control of any depository institution subsidiary or, 
        at the election of the financial holding company, instead to 
        cease to engage in any activity conducted by such company or 
        its subsidiaries pursuant to this section.
            ``(5) Consultation.--In taking any action under this 
        subsection, the Board shall consult with all relevant Federal 
        and State regulatory agencies.
    ``(e) Safeguards for Bank Subsidiaries.--A financial holding 
company shall assure that--
            ``(1) the procedures of the holding company for identifying 
        and managing financial and operational risks within the 
        company, and the subsidiaries of such company, adequately 
        protect the subsidiaries of such company which are insured 
        depository institutions from such risks;
            ``(2) the holding company has reasonable policies and 
        procedures to preserve the separate corporate identity and 
        limited liability of such company and the subsidiaries of such 
        company, for the protection of the company's subsidiary insured 
        depository institutions; and
            ``(3) the holding company complies with this section.
    ``(f) Authority To Retain Limited Nonfinancial Activities and 
Affiliations.--
            ``(1) In general.--Notwithstanding section 4(a), a company 
        that is not a bank holding company or a foreign bank (as 
        defined in section 1(b)(7) of the International Banking Act of 
        1978) and becomes a financial holding company after the date of 
        the enactment of the Financial Services Act of 1998 may 
        continue to engage in any activity and retain direct or 
        indirect ownership or control of shares of a company engaged in 
        any activity if--
                    ``(A) the holding company lawfully was engaged in 
                the activity or held the shares of such company on 
                September 30, 1997;
                    ``(B) the holding company is predominantly engaged 
                in financial activities as defined in paragraph (2); 
                and
                    ``(C) the company engaged in such activity 
                continues to engage only in the same activities that 
                such company conducted on September 30, 1997, and other 
                activities permissible under this Act.
            ``(2) Predominantly financial.--For purposes of this 
        subsection, a company is predominantly engaged in financial 
        activities if the annual gross revenues derived by the holding 
        company and all subsidiaries of the holding company (excluding 
        revenues derived from subsidiary depository institutions), on a 
        consolidated basis, from engaging in activities that are 
        financial in nature or are incidental to activities that are 
        financial in nature under subsection (c) represent at least 85 
        percent of the consolidated annual gross revenues of the 
        company.
            ``(3) No expansion of grandfathered commercial activities 
        through merger or consolidation.--A financial holding company 
        that engages in activities or holds shares pursuant to this 
        subsection, or a subsidiary of such financial holding company, 
        may not acquire, in any merger, consolidation, or other type of 
        business combination, assets of any other company which is 
        engaged in any activity which the Board has not determined to 
        be financial in nature or incidental to activities that are 
        financial in nature under subsection (c).
            ``(4) Continuing revenue limitation on grandfathered 
        commercial activities.--Notwithstanding any other provision of 
        this subsection, a financial holding company may continue to 
        engage in activities or hold shares in companies pursuant to 
        this subsection only to the extent that the aggregate annual 
        gross revenues derived from all such activities and all such 
        companies does not exceed 15 percent of the consolidated annual 
        gross revenues of the financial holding company (excluding 
        revenues derived from subsidiary depository institutions).
            ``(5) Cross marketing restrictions applicable to commercial 
        activities.--A depository institution controlled by a financial 
        holding company shall not--
                    ``(A) offer or market, directly or through any 
                arrangement, any product or service of a company whose 
                activities are conducted or whose shares are owned or 
                controlled by the financial holding company pursuant to 
                this subsection or subparagraph (H) or (I) of 
                subsection (c)(3); or
                    ``(B) permit any of its products or services to be 
                offered or marketed, directly or through any 
                arrangement, by or through any company described in 
                subparagraph (A).
            ``(6) Transactions with nonfinancial affiliates.--An 
        insured depository institution controlled by a financial 
        holding company may not engage in a covered transaction (as 
        defined by section 23A(b)(7) of the Federal Reserve Act) with 
        any affiliate controlled by the company pursuant to this 
        subsection or subparagraph (H) or (I) of subsection (c)(3).
            ``(7) Sunset of grandfather.--A financial holding company 
        engaged in any activity, or retaining direct or indirect 
        ownership or control of shares of a company, pursuant to this 
        subsection, shall terminate such activity and divest ownership 
        or control of the shares of such company before the end of the 
        10-year period beginning on the date of the enactment of the 
        Financial Services Act of 1998. The Board may, upon application 
        by a financial holding company, extend such 10-year period by 
        not to exceed an additional 5 years if such extension would not 
        be detrimental to the public interest.
    ``(g) Developing Activities.--A financial holding company and a 
wholesale financial holding company may engage directly or indirectly, 
or acquire shares of any company engaged, in any activity that the 
Board has not determined to be financial in nature or incidental to 
financial activities under subsection (c) if--
            ``(1) the holding company reasonably concludes that the 
        activity is financial in nature or incidental to financial 
        activities;
            ``(2) the gross revenues from all activities conducted 
        under this subsection represent less than 5 percent of the 
        consolidated gross revenues of the holding company;
            ``(3) the aggregate total assets of all companies the 
        shares of which are held under this subsection do not exceed 5 
        percent of the holding company's consolidated total assets;
            ``(4) the total capital invested in activities conducted 
        under this subsection represents less than 5 percent of the 
        consolidated total capital of the holding company;
            ``(5) the Board has not determined that the activity is not 
        financial in nature or incidental to financial activities under 
        subsection (c); and
            ``(6) the holding company provides written notification to 
        the Board describing the activity commenced or conducted by the 
        company acquired no later than 10 business days after 
        commencing the activity or consummating the acquisition.''.

SEC. 104. CERTAIN STATE LAWS PREEMPTED.

    (a) Affiliations.--No State may by statute, regulation, order, 
interpretation, or otherwise, prevent or significantly interfere with 
the ability of an insured depository institution or a wholesale 
financial institution to be affiliated with an entity (including an 
entity engaged in insurance activities) as authorized by this Act or 
any other provision of Federal law.
    (b) Activities.--
            (1) Except as provided in paragraphs (2), (3), and (4), no 
        State may by statute, regulation, order, interpretation, or 
        otherwise, prevent or significantly interfere with the ability 
        of an insured depository institution or a wholesale financial 
        institution to engage, directly or indirectly or in conjunction 
        with an affiliate, in any activity authorized under this Act or 
        any other provision of Federal law.
            (2) In accordance with the decision of the Supreme Court of 
        the United States in Barnett Bank of Marion County, N.A. v. 
        Nelson, 116 S.Ct. 1103 (1996), no State may, by statute, 
        regulation, order, interpretation, or otherwise, prevent or 
        significantly interfere with the ability of an insured 
        depository institution or wholesale financial institution to 
        engage, directly or indirectly, or in conjunction with an 
        affiliate, in any insurance sales or solicitation activity, 
        except that--
                    (A) State statutes and regulations governing 
                insurance sales and solicitations which are no more 
                restrictive than provisions in the Illinois ``Act 
                Authorizing and Regulating the Sale of Insurance by 
                Financial Institutions, Public Act 90-41'' (215 ILCS 5/
                1400-1416), as in effect on October 1, 1997, shall not 
                be deemed to prevent or significantly interfere with 
                the ability of an insured depository institution or 
                wholesale financial institution to engage, directly or 
                indirectly, or in conjunction with an affiliate, in any 
                insurance sales or solicitation activity; and
                    (B) subparagraph (A) shall not create any inference 
                regarding State statutes and regulations governing 
                insurance sales and solicitations other than State 
                statutes and regulations described in subparagraph (A).
            (3) State statutes, regulations, orders, and 
        interpretations or otherwise shall not be preempted under 
        paragraph (1) if they--
                    (A) relate to, or are enacted or issued for the 
                purpose of regulating, the business of insurance in 
                accordance with the McCarran-Ferguson Act;
                    (B) apply only to entities that are not insured 
                depository institutions or wholesale financial 
                institutions but which are engaged in the business of 
                insurance;
                    (C) do not relate to, and are not enacted or issued 
                for the purpose of regulating--
                            (i) cross-marketing; or
                            (ii) activities, including cross-marketing, 
                        which are subject to paragraph (2);
                    (D) are applicable to and are applied in the same 
                manner with respect to an affiliate of an insured 
                depository institution or a wholesale financial 
                institution as they are applicable to and are applied 
                to those entities that are not affiliated with an 
                insured depository institution or a wholesale financial 
                institution; and
                    (E) do not prevent or significantly interfere with 
                the ability of an insured depository institution or 
                wholesale financial institution to engage in activities 
                authorized for such institution under this Act or any 
                other provision of Federal law.
            (4) Paragraphs (1) and (2) shall not be construed as 
        affecting the jurisdiction of the securities commission (or any 
        agency or office performing like functions) of any State, under 
        the laws of such State, to investigate and bring enforcement 
        actions, consistent with section 18(c) of the Securities Act of 
        1933, with respect to fraud or deceit or unlawful conduct by 
        any person, in connection with securities or securities 
        transactions.

SEC. 105. MUTUAL BANK HOLDING COMPANIES AUTHORIZED.

    (a) In General.--Section 3(g)(2) of the Bank Holding Company Act of 
1956 (12 U.S.C. 1842(g)(2)) is amended to read as follows:
            ``(2) Regulations.--A bank holding company organized as a 
        mutual holding company shall be regulated on terms, and shall 
        be subject to limitations, comparable to those applicable to 
        any other bank holding company.''.

SEC. 106. PROHIBITION ON DEPOSIT PRODUCTION OFFICES.

    (a) In General.--Section 109(d) of the Riegle-Neal Interstate 
Banking and Branching Efficiency Act of 1994 (12 U.S.C. 1835a(d)) is 
amended--
            (1) by inserting ``, the Financial Services Act of 1998,'' 
        after ``pursuant to this title''; and
            (2) by inserting ``or such Act'' after ``made by this 
        title''.
    (b) Technical and Conforming Amendment.--Section 109(e)(4) of the 
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (12 
U.S.C. 1835a(e)(4)) is amended by inserting ``and any branch of a bank 
controlled by an out-of-State bank holding company (as defined in 
section 2(o)(7) of the Bank Holding Company Act of 1956)'' before the 
period.

SEC. 107. CLARIFICATION OF BRANCH CLOSURE REQUIREMENTS.

    Section 42(d)(4)(A) of the Federal Deposit Insurance Act (12 U.S.C. 
1831r-1(d)(4)(A)) is amended by inserting ``and any bank controlled by 
an out-of-State bank holding company (as defined in section 2(o)(7) of 
the Bank Holding Company Act of 1956)'' before the period.

SEC. 108. AMENDMENTS RELATING TO LIMITED PURPOSE BANKS.

    Section 4(f) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(f)) is amended--
            (1) in paragraph (2)(A)(ii)--
                    (A) by striking ``and'' at the end of subclause 
                (IX);
                    (B) by inserting ``and'' after the semicolon at the 
                end of subclause (X); and
                    (C) by inserting after subclause (X) the following 
                new subclause:
                                    ``(XI) assets that are derived 
                                from, or are incidental to, activities 
                                in which institutions described in 
                                section 2(c)(2)(F) are permitted to 
                                engage,'';
            (2) in paragraph (2), by striking subparagraph (B) and 
        inserting the following new subparagraphs:
                    ``(B) any bank subsidiary of such company engages 
                in any activity in which the bank was not lawfully 
                engaged as of March 5, 1987, unless the bank is well 
                managed and well capitalized;
                    ``(C) any bank subsidiary of such company both--
                            ``(i) accepts demand deposits or deposits 
                        that the depositor may withdraw by check or 
                        similar means for payment to third parties; and
                            ``(ii) engages in the business of making 
                        commercial loans (and, for purposes of this 
                        clause, loans made in the ordinary course of a 
                        credit card operation shall not be treated as 
                        commercial loans); or
                    ``(D) after the date of the enactment of the 
                Competitive Equality Amendments of 1987, any bank 
                subsidiary of such company permits any overdraft 
                (including any intraday overdraft), or incurs any such 
                overdraft in such bank's account at a Federal reserve 
                bank, on behalf of an affiliate, other than an 
                overdraft described in paragraph (3).''; and
            (3) by striking paragraphs (3) and (4) and inserting the 
        following new paragraphs:
            ``(3) Permissible overdrafts described.--For purposes of 
        paragraph (2)(D), an overdraft is described in this paragraph 
        if--
                    ``(A) such overdraft results from an inadvertent 
                computer or accounting error that is beyond the control 
                of both the bank and the affiliate; or
                    ``(B) such overdraft--
                            ``(i) is permitted or incurred on behalf of 
                        an affiliate which is monitored by, reports to, 
                        and is recognized as a primary dealer by the 
                        Federal Reserve Bank of New York; and
                            ``(ii) is fully secured, as required by the 
                        Board, by bonds, notes, or other obligations 
                        which are direct obligations of the United 
                        States or on which the principal and interest 
                        are fully guaranteed by the United States or by 
                        securities and obligations eligible for 
                        settlement on the Federal Reserve book entry 
                        system.
            ``(4) Divestiture in case of loss of exemption.--If any 
        company described in paragraph (1) fails to qualify for the 
        exemption provided under such paragraph by operation of 
        paragraph (2), such exemption shall cease to apply to such 
        company and such company shall divest control of each bank it 
        controls before the end of the 180-day period beginning on the 
        date that the company receives notice from the Board that the 
        company has failed to continue to qualify for such exemption, 
        unless before the end of such 180-day period, the company has--
                    ``(A) corrected the condition or ceased the 
                activity that caused the company to fail to continue to 
                qualify for the exemption; and
                    ``(B) implemented procedures that are reasonably 
                adapted to avoid the reoccurrence of such condition or 
                activity.''.

SEC. 109. RESPONSIVENESS TO COMMUNITY NEEDS FOR FINANCIAL SERVICES.

    (a) Study.--The Secretary of the Treasury, in consultation with the 
Federal banking agencies (as defined in section 3(z) of the Federal 
Deposit Insurance Act) and the Securities and Exchange Commission, 
shall conduct a study of the extent to which adequate services are 
being provided as intended by the Community Reinvestment Act of 1977, 
including services in low- and moderate-income neighborhoods and for 
persons of modest means, as a result of the enactment of this Act.
    (b) Report.--Before the end of the 2-year period beginning on the 
date of the enactment of this Act, the Secretary of the Treasury, in 
consultation with the Federal banking agencies and the Securities and 
Exchange Commission, shall submit a report to the Congress on the study 
conducted pursuant to subsection (a) and shall include such 
recommendations as the Secretary determines to be appropriate for 
administrative and legislative action with respect to institutions 
covered under the Community Reinvestment Act of 1977.

SEC. 110. REPORTS ON ONGOING FTC STUDY OF CONSUMER PRIVACY ISSUES.

    With respect to the ongoing multistage study being conducted by the 
Federal Trade Commission on consumer privacy issues, the Commission 
shall submit to the Congress an interim report on the findings and 
conclusions of the Commission, together with such recommendations for 
legislative and administrative action as the Commission determines to 
be appropriate, at the conclusion of each stage of such study and a 
final report at the conclusion of the study.

SEC. 110A. GAO STUDY OF ECONOMIC IMPACT ON COMMUNITY BANKS AND OTHER 
              SMALL FINANCIAL INSTITUTIONS.

    (a) Study Required.--The Comptroller General of the United States 
shall conduct a study of the projected economic impact that the 
enactment of this Act will have on financial institutions which have 
total assets of $100,000,000 or less.
    (b) Report to the Congress.--The Comptroller General of the United 
States shall submit a report to the Congress before the end of the 6-
month period beginning on the date of the date of the enactment of this 
Act containing the findings and conclusions of the Comptroller General 
with regard to the study required under subsection (a) and such 
recommendations for legislative or administrative action as the 
Comptroller General may determine to be appropriate.

  Subtitle B--Streamlining Supervision of Financial Holding Companies

SEC. 111. STREAMLINING FINANCIAL HOLDING COMPANY SUPERVISION.

    Section 5(c) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1844(c)) is amended to read as follows:
    ``(c) Reports and Examinations.--
            ``(1) Reports.--
                    ``(A) In general.--The Board from time to time may 
                require any bank holding company and any subsidiary of 
                such company to submit reports under oath to keep the 
                Board informed as to--
                            ``(i) its financial condition, systems for 
                        monitoring and controlling financial and 
                        operating risks, and transactions with 
                        depository institution subsidiaries of the 
                        holding company; and
                            ``(ii) compliance by the company or 
                        subsidiary with applicable provisions of this 
                        Act.
                    ``(B) Use of existing reports.--
                            ``(i) In general.--The Board shall, to the 
                        fullest extent possible, accept reports in 
                        fulfillment of the Board's reporting 
                        requirements under this paragraph that a bank 
                        holding company or any subsidiary of such 
                        company has provided or been required to 
                        provide to other Federal and State supervisors 
                        or to appropriate self-regulatory 
                        organizations.
                            ``(ii) Availability.--A bank holding 
                        company or a subsidiary of such company shall 
                        provide to the Board, at the request of the 
                        Board, a report referred to in clause (i).
                            ``(iii) Required use of publicly reported 
                        information.--The Board shall, to the fullest 
                        extent possible, accept in fulfillment of any 
                        reporting or recordkeeping requirements under 
                        this Act information that is otherwise required 
                        to be reported publicly and externally audited 
                        financial statements.
                            ``(iv) Reports filed with other agencies.--
                        In the event the Board requires a report from a 
                        functionally regulated nondepository 
                        institution subsidiary of a bank holding 
                        company of a kind that is not required by 
                        another Federal or State regulator or 
                        appropriate self-regulatory organization, the 
                        Board shall request that the appropriate 
                        regulator or self-regulatory organization 
                        obtain such report. If the report is not made 
                        available to the Board, and the report is 
                        necessary to assess a material risk to the bank 
                        holding company or its subsidiary depository 
                        institution or compliance with this Act, the 
                        Board may require such subsidiary to provide 
                        such a report to the Board.
                    ``(C) Definition.--For purposes of this subsection, 
                the term `functionally regulated nondepository 
                institution' means--
                            ``(i) a broker or dealer registered under 
                        the Securities Exchange Act of 1934;
                            ``(ii) an investment adviser registered 
                        under the Investment Advisers Act of 1940, with 
                        respect to the investment advisory activities 
                        of such investment adviser and activities 
                        incidental to such investment advisory 
                        activities;
                            ``(iii) an insurance company subject to 
                        supervision by a State insurance commission, 
                        agency, or similar authority; and
                            ``(iv) an entity subject to regulation by 
                        the Commodity Futures Trading Commission, with 
                        respect to the commodities activities of such 
                        entity and activities incidental to such 
                        commodities activities.
            ``(2) Examinations.--
                    ``(A) Examination authority.--
                            ``(i) In general.--The Board may make 
                        examinations of each bank holding company and 
                        each subsidiary of a bank holding company.
                            ``(ii) Functionally regulated nondepository 
                        institution subsidiaries.--Notwithstanding 
                        clause (i), the Board may make examinations of 
                        a functionally regulated nondepository 
                        institution subsidiary of a bank holding 
                        company only if--
                                    ``(I) the Board has reasonable 
                                cause to believe that such subsidiary 
                                is engaged in activities that pose a 
                                material risk to an affiliated 
                                depository institution, or
                                    ``(II) based on reports and other 
                                available information, the Board has 
                                reasonable cause to believe that a 
                                subsidiary is not in compliance with 
                                this Act or with provisions relating to 
                                transactions with an affiliated 
                                depository institution and the Board 
                                cannot make such determination through 
                                examination of the affiliated 
                                depository institution or bank holding 
                                company.
                    ``(B) Limitations on examination authority for bank 
                holding companies and subsidiaries.--Subject to 
                subparagraph (A)(ii), the Board may make examinations 
                under subparagraph (A)(i) of each bank holding company 
                and each subsidiary of such holding company in order 
                to--
                            ``(i) inform the Board of the nature of the 
                        operations and financial condition of the 
                        holding company and such subsidiaries;
                            ``(ii) inform the Board of--
                                    ``(I) the financial and operational 
                                risks within the holding company system 
                                that may pose a threat to the safety 
                                and soundness of any subsidiary 
                                depository institution of such holding 
                                company; and
                                    ``(II) the systems for monitoring 
                                and controlling such risks; and
                            ``(iii) monitor compliance with the 
                        provisions of this Act and those governing 
                        transactions and relationships between any 
                        subsidiary depository institution and its 
                        affiliates.
                    ``(C) Restricted focus of examinations.--The Board 
                shall, to the fullest extent possible, limit the focus 
                and scope of any examination of a bank holding company 
                to--
                            ``(i) the bank holding company; and
                            ``(ii) any subsidiary of the holding 
                        company that, because of--
                                    ``(I) the size, condition, or 
                                activities of the subsidiary;
                                    ``(II) the nature or size of 
                                transactions between such subsidiary 
                                and any depository institution which is 
                                also a subsidiary of such holding 
                                company; or
                                    ``(III) the centralization of 
                                functions within the holding company 
                                system,
                        could have a materially adverse effect on the 
                        safety and soundness of any depository 
                        institution affiliate of the holding company.
                    ``(D) Deference to bank examinations.--The Board 
                shall, to the fullest extent possible, use, for the 
                purposes of this paragraph, the reports of examinations 
                of depository institutions made by the appropriate 
                Federal and State depository institution supervisory 
                authority.
                    ``(E) Deference to other examinations.--The Board 
                shall, to the fullest extent possible, address the 
                circumstances which might otherwise permit or require 
                an examination by the Board by forgoing an examination 
                and instead reviewing the reports of examination made 
                of--
                            ``(i) any registered broker or dealer or 
                        registered investment adviser by or on behalf 
                        of the Securities and Exchange Commission;
                            ``(ii) any licensed insurance company by or 
                        on behalf of any state regulatory authority 
                        responsible for the supervision of insurance 
                        companies; and
                            ``(iii) any other subsidiary that the Board 
                        finds to be comprehensively supervised by a 
                        Federal or State authority.
            ``(3) Capital.--
                    ``(A) In general.--The Board shall not, by 
                regulation, guideline, order or otherwise, prescribe or 
                impose any capital or capital adequacy rules, 
                guidelines, standards, or requirements on any 
                subsidiary of a financial holding company that is not a 
                depository institution and--
                            ``(i) is in compliance with applicable 
                        capital requirements of another Federal 
                        regulatory authority (including the Securities 
                        and Exchange Commission) or State insurance 
                        authority; or
                            ``(ii) is registered as an investment 
                        adviser under the Investment Advisers Act of 
                        1940.
                    ``(B) Rule of construction.--Subparagraph (A) shall 
                not be construed as preventing the Board from imposing 
                capital or capital adequacy rules, guidelines, 
                standards, or requirements with respect to activities 
                of a registered investment adviser other than 
                investment advisory activities or activities incidental 
                to investment advisory activities.
            ``(4) Transfer of board authority to appropriate federal 
        banking agency.--
                    ``(A) In general.--In the case of any bank holding 
                company which is not significantly engaged in 
                nonbanking activities, the Board, in consultation with 
                the appropriate Federal banking agency, may designate 
                the appropriate Federal banking agency of the lead 
                insured depository institution subsidiary of such 
                holding company as the appropriate Federal banking 
                agency for the bank holding company.
                    ``(B) Authority transferred.--An agency designated 
                by the Board under subparagraph (A) shall have the same 
                authority as the Board under this Act to--
                            ``(i) examine and require reports from the 
                        bank holding company and any affiliate of such 
                        company (other than a depository institution) 
                        under section 5;
                            ``(ii) approve or disapprove applications 
                        or transactions under section 3;
                            ``(iii) take actions and impose penalties 
                        under subsections (e) and (f) of section 5 and 
                        section 8; and
                            ``(iv) take actions regarding the holding 
                        company, any affiliate of the holding company 
                        (other than a depository institution), or any 
                        institution-affiliated party of such company or 
                        affiliate under the Federal Deposit Insurance 
                        Act and any other statute which the Board may 
                        designate.
                    ``(C) Agency orders.--Section 9 (of this Act) and 
                section 105 of the Bank Holding Company Act Amendments 
                of 1970 shall apply to orders issued by an agency 
                designated under subparagraph (A) in the same manner 
                such sections apply to orders issued by the Board.
            ``(5) Functional regulation of securities and insurance 
        activities.--The Board shall defer to--
                    ``(A) the Securities and Exchange Commission with 
                regard to all interpretations of, and the enforcement 
                of, applicable Federal securities laws relating to the 
                activities, conduct, and operations of registered 
                brokers, dealers, investment advisers, and investment 
                companies; and
                    ``(B) the relevant State insurance authorities with 
                regard to all interpretations of, and the enforcement 
                of, applicable State insurance laws relating to the 
                activities, conduct, and operations of insurance 
                companies and insurance agents.''.

SEC. 112. ELIMINATION OF APPLICATION REQUIREMENT FOR FINANCIAL HOLDING 
              COMPANIES.

    (a) Prevention of Duplicative Filings.--Section 5(a) of the Bank 
Holding Company Act of 1956 (12 U.S.C. 1844(a)) is amended by adding 
the following new sentence at the end: ``A declaration filed in 
accordance with section 6(b)(1)(E) shall satisfy the requirements of 
this subsection with regard to the registration of a bank holding 
company but not any requirement to file an application to acquire a 
bank pursuant to section 3.''.
    (b) Divestiture Procedures.--Section 5(e)(1) of the Bank Holding 
Company Act of 1956 (12 U.S.C. 1844(e)(1)) is amended--
            (1) by striking ``Financial Institutions Supervisory Act of 
        1966, order'' and inserting ``Financial Institutions 
        Supervisory Act of 1966, at the election of the bank holding 
        company--
            ``(A) order''; and
            (2) by striking ``shareholders of the bank holding company. 
        Such distribution'' and inserting ``shareholders of the bank 
        holding company; or
            ``(B) order the bank holding company, after due notice and 
        opportunity for hearing, and after consultation with the bank's 
        primary supervisor, which shall be the Comptroller of the 
        Currency in the case of a national bank, and the Federal 
        Deposit Insurance Corporation and the appropriate State 
        supervisor in the case of an insured nonmember bank, to 
        terminate (within 120 days or such longer period as the Board 
        may direct) the ownership or control of any such bank by such 
        company.
``The distribution referred to in subparagraph (A)''.

SEC. 113. AUTHORITY OF STATE INSURANCE REGULATOR AND SECURITIES AND 
              EXCHANGE COMMISSION.

    Section 5 of the Bank Holding Company Act of 1956 (12 U.S.C. 1844) 
is amended by adding at the end the following new subsection:
    ``(g) Authority of State Insurance Regulator and the Securities and 
Exchange Commission.--
            ``(1) In general.--Notwithstanding any other provision of 
        law, any regulation, order, or other action of the Board which 
        requires a bank holding company to provide funds or other 
        assets to a subsidiary insured depository institution shall not 
        be effective nor enforceable if--
                    ``(A) such funds or assets are to be provided by--
                            ``(i) a bank holding company that is an 
                        insurance company or is a broker or dealer 
                        registered under the Securities Exchange Act of 
                        1934; or
                            ``(ii) an affiliate of the depository 
                        institution which is an insurance company or a 
                        broker or dealer registered under such Act; and
                    ``(B) the State insurance authority for the 
                insurance company or the Securities and Exchange 
                Commission for the registered broker or dealer, as the 
                case may be, determines in writing sent to the holding 
                company and the Board that the holding company shall 
                not provide such funds or assets because such action 
                would have a material adverse effect on the financial 
                condition of the insurance company or the broker or 
                dealer, as the case may be.
            ``(2) Notice to state insurance authority or sec 
        required.--If the Board requires a bank holding company, or an 
        affiliate of a bank holding company, which is an insurance 
        company or a broker or dealer described in paragraph (1)(A) to 
        provide funds or assets to an insured depository institution 
        subsidiary of the holding company pursuant to any regulation, 
        order, or other action of the Board referred to in paragraph 
        (1), the Board shall promptly notify the State insurance 
        authority for the insurance company or the Securities and 
        Exchange Commission, as the case may be, of such requirement.
            ``(3) Divestiture in lieu of other action.--If the Board 
        receives a notice described in paragraph (1)(B) from a State 
        insurance authority or the Securities and Exchange Commission 
        with regard to a bank holding company or affiliate referred to 
        in such paragraph, the Board may order the bank holding company 
        to divest the insured depository institution within 180 days of 
        receiving notice or such longer period as the Board determines 
        consistent with the safe and sound operation of the insured 
        depository institution.
            ``(4) Conditions before divestiture.--During the period 
        beginning on the date an order to divest is issued by the Board 
        under paragraph (3) to a bank holding company and ending on the 
        date the divestiture is completed, the Board may impose any 
        conditions or restrictions on the holding company's ownership 
        or operation of the insured depository institution, including 
        restricting or prohibiting transactions between the insured 
        depository institution and any affiliate of the institution, as 
        are appropriate under the circumstances.''.

SEC. 114. PRUDENTIAL SAFEGUARDS.

    Section 5 of the Bank Holding Company Act of 1956 (12 U.S.C. 1844) 
is amended by inserting after subsection (g) (as added by section 113 
of this subtitle) the following new subsection:
    ``(h) Prudential Safeguards.--
            ``(1) In general.--The Board may, by regulation or order, 
        impose restrictions or requirements on relationships or 
        transactions between a depository institution subsidiary of a 
        bank holding company and any affiliate of such depository 
        institution (other than a subsidiary of such institution) which 
        the Board finds is consistent with the public interest, the 
        purposes of this Act, the Financial Services Act of 1998, the 
        Federal Reserve Act, and other Federal law applicable to 
        depository institution subsidiaries of bank holding companies 
        and the standards in paragraph (2).
            ``(2) Standards.--The Board may exercise authority under 
        paragraph (1) if the Board finds that such action will have any 
        of the following effects:
                    ``(A) Avoid any significant risk to the safety and 
                soundness of depository institutions or any Federal 
                deposit insurance fund.
                    ``(B) Enhance the financial stability of bank 
                holding companies.
                    ``(C) Avoid conflicts of interest or other abuses.
                    ``(D) Enhance the privacy of customers of 
                depository institutions.
                    ``(E) Promote the application of national treatment 
                and equality of competitive opportunity between nonbank 
                affiliates owned or controlled by domestic bank holding 
                companies and nonbank affiliates owned or controlled by 
                foreign banks operating in the United States.
            ``(3) Review.--The Board shall regularly--
                    ``(A) review all restrictions or requirements 
                established pursuant to paragraph (1) to determine 
                whether there is a continuing need for any such 
                restriction or requirement to carry out the purposes of 
                the Act, including any purpose described in paragraph 
                (2); and
                    ``(B) modify or eliminate any restriction or 
                requirement the Board finds is no longer required for 
                such purposes.''.

SEC. 115. EXAMINATION OF INVESTMENT COMPANIES.

    (a) Exclusive Commission Authority.--
            (1) In general.--The Commission shall be the sole Federal 
        agency with authority to inspect and examine any registered 
        investment company that is not a bank holding company.
            (2) Prohibition on banking agencies.--A Federal banking 
        agency may not inspect or examine any registered investment 
        company that is not a bank holding company.
    (b) Examination Results and Other Information.--The Commission 
shall provide to any Federal banking agency, upon request, the results 
of any examination, reports, records, or other information with respect 
to any registered investment company to the extent necessary for the 
agency to carry out its statutory responsibilities.
    (c) Definitions.--For purposes of this section, the following 
definitions shall apply:
            (1) Bank holding company.--The term ``bank holding 
        company'' has the meaning given to such term in section 2 of 
        the Bank Holding Company Act of 1956.
            (2) Commission.--The term ``Commission'' means the 
        Securities and Exchange Commission.
            (3) Federal banking agency.--The term ``Federal banking 
        agency'' has the meaning given to such term in section 3(z) of 
        the Federal Deposit Insurance Act.
            (4) Registered investment company.--The term ``registered 
        investment company'' means an investment company which is 
        registered with the Commission under the Investment Company Act 
        of 1940.

SEC. 116. LIMITATION ON RULEMAKING, PRUDENTIAL, SUPERVISORY, AND 
              ENFORCEMENT AUTHORITY OF THE BOARD.

    The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is 
amended by inserting after section 10 the following new section:

``SEC. 10A. LIMITATION ON RULEMAKING, PRUDENTIAL, SUPERVISORY, AND 
              ENFORCEMENT AUTHORITY OF THE BOARD.

    ``(a) Limitation on Direct Action.--
            ``(1) In general.--The Board may not prescribe regulations, 
        issue or seek entry of orders, impose restraints, restrictions, 
        guidelines, requirements, safeguards, or standards, or 
        otherwise take any action under or pursuant to any provision of 
        this Act or section 8 of the Federal Deposit Insurance Act 
        against or with respect to a regulated subsidiary of a bank 
        holding company unless the action is necessary to prevent or 
        redress an unsafe or unsound practice or breach of fiduciary 
        duty by such subsidiary that poses a material risk to--
                    ``(A) the financial safety, soundness, or stability 
                of an affiliated depository institution; or
                    ``(B) the domestic or international payment system.
            ``(2) Criteria for board action.--The Board shall not take 
        action otherwise permitted under paragraph (1) unless the Board 
        finds that it is not reasonably possible to effectively protect 
        against the material risk at issue through action directed at 
        or against the affiliated depository institution or against 
        depository institutions generally.
    ``(b) Limitation on Indirect Action.--The Board may not prescribe 
regulations, issue or seek entry of orders, impose restraints, 
restrictions, guidelines, requirements, safeguards, or standards, or 
otherwise take any action under or pursuant to any provision of this 
Act or section 8 of the Federal Deposit Insurance Act against or with 
respect to a financial holding company or a wholesale financial holding 
company where the purpose or effect of doing so would be to take action 
indirectly against or with respect to a regulated subsidiary that may 
not be taken directly against or with respect to such subsidiary in 
accordance with subsection (a).
    ``(c) Actions Specifically Authorized.--Notwithstanding subsection 
(a), the Board may take action under this Act or section 8 of the 
Federal Deposit Insurance Act to enforce compliance by a regulated 
subsidiary with Federal law that the Board has specific jurisdiction to 
enforce against such subsidiary.
    ``(d) Regulated Subsidiary Defined.--For purposes of this section, 
the term `regulated subsidiary' means any company that is not a bank 
holding company and is--
            ``(1) a broker or dealer registered under the Securities 
        Exchange Act of 1934;
            ``(2) an investment adviser registered under the Investment 
        Advisers Act of 1940, with respect to the investment advisory 
        activities of such investment adviser and activities incidental 
        to such investment advisory activities;
            ``(3) an investment company registered under the Investment 
        Company Act of 1940;
            ``(4) an insurance company or an insurance agency subject 
        to supervision by a State insurance commission, agency, or 
        similar authority; or
            ``(5) an entity subject to regulation by the Commodity 
        Futures Trading Commission, with respect to the commodities 
        activities of such entity and activities incidental to such 
        commodities activities.''.

SEC. 117. INTERAGENCY CONSULTATION.

    (a) Purpose.--It is the intention of Congress that the Board of 
Governors of the Federal Reserve System, as the umbrella supervisor for 
financial holding companies, and the State insurance regulators, as the 
functional regulators of companies engaged in insurance activities, 
coordinate efforts to supervise companies that control both a 
depository institution and a company engaged in insurance activities 
regulated under State law. In particular, Congress believes that the 
Board and the State insurance regulators should share, on a 
confidential basis, information relevant to the supervision of 
companies that control both a depository institution and a company 
engaged in insurance activities, including information regarding the 
financial health of the consolidated organization and information 
regarding transactions and relationships between insurance companies 
and affiliated depository institutions. The appropriate Federal banking 
agencies for depository institutions should also share, on a 
confidential basis, information with the relevant State insurance 
regulators regarding transactions and relationships between depository 
institutions and affiliated companies engaged in insurance activities. 
The purpose of this section is to encourage this coordination and 
confidential sharing of information, and to thereby improve both the 
efficiency and the quality of the supervision of financial holding 
companies and their affiliated depository institutions and companies 
engaged in insurance activities.
    (b) Examination Results and Other Information.--
            (1) Information of the board.--Upon the request of the 
        appropriate insurance regulator of any State, the Board may 
        provide any information of the Board regarding the financial 
        condition, risk management policies, and operations of any 
        financial holding company that controls a company that is 
        engaged in insurance activities and is regulated by such State 
        insurance regulator, and regarding any transaction or 
        relationship between such an insurance company and any 
        affiliated depository institution. The Board may provide any 
        other information to the appropriate State insurance regulator 
        that the Board believes is necessary or appropriate to permit 
        the State insurance regulator to administer and enforce 
        applicable State insurance laws.
            (2) Banking agency information.--Upon the request of the 
        appropriate insurance regulator of any State, the appropriate 
        Federal banking agency may provide any information of the 
        agency regarding any transaction or relationship between a 
        depository institution supervised by such Federal banking 
        agency and any affiliated company that is engaged in insurance 
        activities regulated by such State insurance regulator. The 
        appropriate Federal banking agency may provide any other 
        information to the appropriate State insurance regulator that 
        the agency believes is necessary or appropriate to permit the 
        State insurance regulator to administer and enforce applicable 
        State insurance laws.
            (3) State insurance regulator information.--Upon the 
        request of the Board or the appropriate Federal banking agency, 
        a State insurance regulator may provide any examination or 
        other reports, records, or other information to which such 
        insurance regulator may have access with respect to a company 
        which--
                    (A) is engaged in insurance activities and 
                regulated by such insurance regulator; and
                    (B) is an affiliate of an insured depository 
                institution, wholesale financial institution, or 
                financial holding company.
    (c) Consultation.--Before making any determination relating to the 
initial affiliation of, or the continuing affiliation of, an insured 
depository institution, wholesale financial institution, or financial 
holding company with a company engaged in insurance activities, the 
appropriate Federal banking agency shall consult with the appropriate 
State insurance regulator of such company and take the views of such 
insurance regulator into account in making such determination.
    (d) Effect on other authority.--Nothing in this section shall limit 
in any respect the authority of the appropriate Federal banking agency 
with respect to an insured depository institution, wholesale financial 
institution, or bank holding company or any affiliate thereof under any 
provision of law.
    (e) Confidentiality and Privilege.--
            (1) Confidentiality.--The appropriate Federal banking 
        agency shall not provide any information or material that is 
        entitled to confidential treatment under applicable Federal 
        banking agency regulations, or other applicable law, to a State 
        insurance regulator unless such regulator agrees to maintain 
        the information or material in confidence and to take all 
        reasonable steps to oppose any effort to secure disclosure of 
        the information or material by the regulator. The appropriate 
        Federal banking agency shall treat as confidential any 
        information or material obtained from a State insurance 
        regulator that is entitled to confidential treatment under 
        applicable State regulations, or other applicable law, and take 
        all reasonable steps to oppose any effort to secure disclosure 
        of the information or material by the Federal banking agency.
            (2) Privilege.--The provision pursuant to this section of 
        information or material by a Federal banking agency or State 
        insurance regulator shall not constitute a waiver of, or 
        otherwise affect, any privilege to which the information or 
        material is otherwise subject.
    (f) Definitions.--For purposes of this section, the following 
definitions shall apply:
            (1) Appropriate Federal banking agency; insured depository 
        institution.--The terms ``appropriate Federal banking agency'' 
        and ``insured depository institution'' shall have the same 
        meanings as in section 3 of the Federal Deposit Insurance Act.
            (2) Board; financial holding company; and wholesale 
        financial institution.--The terms ``Board'', ``financial 
        holding company'', and ``wholesale financial institution'' 
        shall have the same meanings as in section 2 of the Bank 
        Holding Company Act of 1956.

               Subtitle C--Subsidiaries of National Banks

SEC. 121. PERMISSIBLE ACTIVITIES FOR SUBSIDIARIES OF NATIONAL BANKS.

    (a) Financial Subsidiaries of National Banks.--Chapter one of title 
LXII of the Revised Statutes of United States (12 U.S.C. 21 et seq.) is 
amended--
            (1) by redesignating section 5136A as section 5136C; and
            (2) by inserting after section 5136 (12 U.S.C. 24) the 
        following new section:

``SEC. 5136A. SUBSIDIARIES OF NATIONAL BANKS.

    ``(a) Subsidiaries of National Banks Authorized To Engage in 
Financial Activities.--
            ``(1) Exclusive authority.--No provision of section 5136 or 
        any other provision of this title LXII of the Revised Statutes 
        shall be construed as authorizing a subsidiary of a national 
        bank to engage in, or own any share of or any other interest in 
        any company engaged in, any activity that--
                    ``(A) is not permissible for a national bank to 
                engage in directly; or
                    ``(B) is conducted under terms or conditions other 
                than those that would govern the conduct of such 
                activity by a national bank,
        unless a national bank is specifically authorized by the 
        express terms of a Federal statute and not by implication or 
        interpretation to acquire shares of or an interest in, or to 
        control, such subsidiary, such as by paragraph (2) of this 
        subsection and section 25A of the Federal Reserve Act.
            ``(2) Specific authorization to conduct agency activities 
        which are financial in nature.--A national bank may control a 
        company that engages in agency activities that have been 
        determined to be financial in nature or incidental to such 
        financial activities pursuant to and in accordance with section 
        6(c) of the Bank Holding Company Act of 1956 if--
                    ``(A) the company engages in such activities solely 
                as agent and not directly or indirectly as principal;
                    ``(B) the national bank is well capitalized and 
                well managed, and has achieved a rating of satisfactory 
                or better at the most recent examination of the bank 
                under the Community Reinvestment Act of 1977;
                    ``(C) all depository institution affiliates of the 
                national bank are well capitalized and well managed, 
                and have achieved a rating of satisfactory or better at 
                the most recent examination of each such depository 
                institution under the Community Reinvestment Act of 
                1977; and
                    ``(D) the bank has received the approval of the 
                Comptroller of the Currency.
            ``(3) Definitions.--
                    ``(A) Company; control; subsidiary.--The terms 
                `company', `control', and `subsidiary' have the 
                meanings given to such terms in section 2 of the Bank 
                Holding Company Act of 1956.
                    ``(B) Well capitalized.--The term `well 
                capitalized' has the same meaning as in section 38 of 
                the Federal Deposit Insurance Act and, for purposes of 
                this section, the Comptroller shall have exclusive 
                jurisdiction to determine whether a national bank is 
                well capitalized.
                    ``(C) Well managed.--The term `well managed' 
                means--
                            ``(i) in the case of a bank that has been 
                        examined, unless otherwise determined in 
                        writing by the Comptroller--
                                    ``(I) the achievement of a 
                                composite rating of 1 or 2 under the 
                                Uniform Financial Institutions Rating 
                                System (or an equivalent rating under 
                                an equivalent rating system) in 
                                connection with the most recent 
                                examination or subsequent review of the 
                                bank; and
                                    ``(II) at least a rating of 2 for 
                                management, if that rating is given; or
                            ``(ii) in the case of any national bank 
                        that has not been examined, the existence and 
                        use of managerial resources that the 
                        Comptroller determines are satisfactory.
    ``(b) Limited Exclusions From Community Needs Requirements for 
Newly Acquired Depository Institutions.--Any depository institution 
which becomes affiliated with a national bank during the 24-month 
period preceding the submission of an application to acquire a 
subsidiary under subsection (a)(2), and any depository institution 
which becomes so affiliated after the approval of such application, may 
be excluded for purposes of subsection (a)(2)(B) during the 24-month 
period beginning on the date of such acquisition if--
            ``(1) the depository institution has submitted an 
        affirmative plan to the appropriate Federal banking agency (as 
        defined in section 3 of the Federal Deposit Insurance Act) to 
        take such action as may be necessary in order for such 
        institution to achieve a `satisfactory record of meeting 
        community credit needs', or better, at the next examination of 
        the institution under the Community Reinvestment Act of 1977; 
        and
            ``(2) the plan has been approved by the appropriate Federal 
        banking agency.''.
    (b) Limitation on Certain Activities in Subsidiaries.--Section 
21(a)(1) of the Banking Act of 1933 (12 U.S.C. 378(a)(1)) is amended--
            (1) by inserting ``, or to be a subsidiary of any person, 
        firm, corporation, association, business trust, or similar 
        organization engaged (unless such subsidiary (A) was engaged in 
        such securities activities as of September 15, 1997, or (B) is 
        a nondepository subsidiary of a foreign bank and is not also a 
        subsidiary of a domestic depository institution),'' after ``to 
        engage at the same time''; and
            (2) by inserting ``or any subsidiary of such bank, company, 
        or institution'' after ``or private bankers''.
    (c) Technical and Conforming Amendments.--
            (1) Antitying.--Section 106(a) of the Bank Holding Company 
        Act Amendments of 1970 is amended by adding at the end the 
        following new sentence: ``For purposes of this section, a 
        subsidiary of a national bank which engages in activities as an 
        agent pursuant to section 5136A(a)(2) shall be deemed to be a 
        subsidiary of a bank holding company, and not a subsidiary of a 
        bank.''.
            (2) Section 23b.--Section 23B(a) of the Federal Reserve Act 
        (12 U.S.C. 371c-1(a)) is amended by adding at the end the 
        following new paragraph:
            ``(4) Subsidiary of national bank.--For purposes of this 
        section, a subsidiary of a national bank which engages in 
        activities as an agent pursuant to section 5136A(a)(2) shall be 
        deemed to be an affiliate of the national bank and not a 
        subsidiary of the bank.''.
    (d) Clerical Amendment.--The table of sections for chapter one of 
title LXII of the Revised Statutes of the United States is amended--
             (1) by redesignating the item relating to section 5136A as 
        section 5136C; and
             (2) by inserting after the item relating to section 5136 
        the following new item:

``5136A. Financial subsidiaries of national banks.''.

SEC. 122. MISREPRESENTATIONS REGARDING DEPOSITORY INSTITUTION LIABILITY 
              FOR OBLIGATIONS OF AFFILIATES.

    (a) In General.--Chapter 47 of title 18, United States Code, is 
amended by inserting after section 1007 the following new section:
``Sec. 1008. Misrepresentations regarding financial institution 
              liability for obligations of affiliates
    ``(a) In General.--No institution-affiliated party of an insured 
depository institution or institution-affiliated party of a subsidiary 
or affiliate of an insured depository institution shall fraudulently 
represent that the institution is or will be liable for any obligation 
of a subsidiary or other affiliate of the institution.
    ``(b) Criminal Penalty.--Whoever violates subsection (a) shall be 
fined under this title, imprisoned for not more than 1 year, or both.
    ``(c) Institution-Affiliated Party Defined.--For purposes of this 
section, the term `institution-affiliated party' with respect to a 
subsidiary or affiliate has the same meaning as in section 3 except 
references to an insured depository institution shall be deemed to be 
references to a subsidiary or affiliate of an insured depository 
institution.
    ``(d) Other Definitions.--For purposes of this section, the terms 
`affiliate', `insured depository institution', and `subsidiary' have 
same meanings as in section 3 of the Federal Deposit Insurance Act.''.
    (b) Clerical Amendment.--The table of sections for chapter 47 of 
title 18, United States Code, is amended by inserting after the item 
relating to section 1007 the following new item:

``1008. Misrepresentations regarding financial institution liability 
                            for obligations of affiliates.''.

SEC. 123. REPEAL OF STOCK LOAN LIMIT IN FEDERAL RESERVE ACT.

    Section 11 of the Federal Reserve Act (12 U.S.C. 248) is amended by 
striking the paragraph designated as ``(m)'' and inserting ``(m) 
[Repealed]''.

Subtitle D--Wholesale Financial Holding Companies; Wholesale Financial 
                              Institutions

            CHAPTER 1--WHOLESALE FINANCIAL HOLDING COMPANIES

SEC. 131. WHOLESALE FINANCIAL HOLDING COMPANIES ESTABLISHED.

    (a) Definition and Supervision.--Section 10 of the Bank Holding 
Company Act of 1956 (12 U.S.C. 1841 et seq.) is amended to read as 
follows:

``SEC. 10. WHOLESALE FINANCIAL HOLDING COMPANIES.

    ``(a) Companies That Control Wholesale Financial Institutions.--
            ``(1) Wholesale financial holding company defined.--The 
        term `wholesale financial holding company' means any company 
        that--
                    ``(A) is registered as a bank holding company;
                    ``(B) is predominantly engaged in financial 
                activities as defined in section 6(g)(2);
                    ``(C) controls 1 or more wholesale financial 
                institutions;
                    ``(D) does not control--
                            ``(i) a bank other than a wholesale 
                        financial institution;
                            ``(ii) an insured bank other than an 
                        institution permitted under subparagraph (D), 
                        (F), or (G) of section 2(c)(2); or
                            ``(iii) a savings association; and
                    ``(E) is not a foreign bank (as defined in section 
                1(b)(7) of the International Banking Act of 1978).
            ``(2) Savings association transition period.--
        Notwithstanding paragraph (1)(C)(iii), the Board may permit a 
        company that controls a savings association and that otherwise 
        meets the requirements of paragraph (1) to become supervised 
        under paragraph (1), if the company divests control of any such 
        savings association within such period not to exceed 5 years 
        after becoming supervised under paragraph (1) as permitted by 
        the Board.
    ``(b) Supervision by the Board.--
            ``(1) In general.--The provisions of this section shall 
        govern the reporting, examination, and capital requirements of 
        wholesale financial holding companies.
            ``(2) Reports.--
                    ``(A) In general.--The Board from time to time may 
                require any wholesale financial holding company and any 
                subsidiary of such company to submit reports under oath 
                to keep the Board informed as to--
                            ``(i) the company's or subsidiary's 
                        activities, financial condition, policies, 
                        systems for monitoring and controlling 
                        financial and operational risks, and 
                        transactions with depository institution 
                        subsidiaries of the holding company; and
                            ``(ii) the extent to which the company or 
                        subsidiary has complied with the provisions of 
                        this Act and regulations prescribed and orders 
                        issued under this Act.
                    ``(B) Use of existing reports.--
                            ``(i) In general.--The Board shall, to the 
                        fullest extent possible, accept reports in 
                        fulfillment of the Board's reporting 
                        requirements under this paragraph that the 
                        wholesale financial holding company or any 
                        subsidiary of such company has provided or been 
                        required to provide to other Federal and State 
                        supervisors or to appropriate self-regulatory 
                        organizations.
                            ``(ii) Availability.--A wholesale financial 
                        holding company or a subsidiary of such company 
                        shall provide to the Board, at the request of 
                        the Board, a report referred to in clause (i).
                    ``(C) Exemptions from reporting requirements.--
                            ``(i) In general.--The Board may, by 
                        regulation or order, exempt any company or 
                        class of companies, under such terms and 
                        conditions and for such periods as the Board 
                        shall provide in such regulation or order, from 
                        the provisions of this paragraph and any 
                        regulation prescribed under this paragraph.
                            ``(ii) Criteria for consideration.--In 
                        making any determination under clause (i) with 
                        regard to any exemption under such clause, the 
                        Board shall consider, among such other factors 
                        as the Board may determine to be appropriate, 
                        the following factors:
                                    ``(I) Whether information of the 
                                type required under this paragraph is 
                                available from a supervisory agency (as 
                                defined in section 1101(7) of the Right 
                                to Financial Privacy Act of 1978) or a 
                                foreign regulatory authority of a 
                                similar type.
                                    ``(II) The primary business of the 
                                company.
                                    ``(III) The nature and extent of 
                                the domestic and foreign regulation of 
                                the activities of the company.
            ``(3) Examinations.--
                    ``(A) Limited use of examination authority.--The 
                Board may make examinations of each wholesale financial 
                holding company and each subsidiary of such company in 
                order to--
                            ``(i) inform the Board regarding the nature 
                        of the operations and financial condition of 
                        the wholesale financial holding company and its 
                        subsidiaries;
                            ``(ii) inform the Board regarding--
                                    ``(I) the financial and operational 
                                risks within the wholesale financial 
                                holding company system that may affect 
                                any depository institution owned by 
                                such holding company; and
                                    ``(II) the systems of the holding 
                                company and its subsidiaries for 
                                monitoring and controlling those risks; 
                                and
                            ``(iii) monitor compliance with the 
                        provisions of this Act and those governing 
                        transactions and relationships between any 
                        depository institution controlled by the 
                        wholesale financial holding company and any of 
                        the company's other subsidiaries.
                    ``(B) Restricted focus of examinations.--The Board 
                shall, to the fullest extent possible, limit the focus 
                and scope of any examination of a wholesale financial 
                holding company under this paragraph to--
                            ``(i) the holding company; and
                            ``(ii) any subsidiary (other than an 
                        insured depository institution subsidiary) of 
                        the holding company that, because of the size, 
                        condition, or activities of the subsidiary, the 
                        nature or size of transactions between such 
                        subsidiary and any affiliated depository 
                        institution, or the centralization of functions 
                        within the holding company system, could have a 
                        materially adverse effect on the safety and 
                        soundness of any depository institution 
                        affiliate of the holding company.
                    ``(C) Deference to bank examinations.--The Board 
                shall, to the fullest extent possible, use the reports 
                of examination of depository institutions made by the 
                Comptroller of the Currency, the Federal Deposit 
                Insurance Corporation, the Director of the Office of 
                Thrift Supervision or the appropriate State depository 
                institution supervisory authority for the purposes of 
                this section.
                    ``(D) Deference to other examinations.--The Board 
                shall, to the fullest extent possible, address the 
                circumstances which might otherwise permit or require 
                an examination by the Board by forgoing an examination 
                and by instead reviewing the reports of examination 
                made of--
                            ``(i) any registered broker or dealer or 
                        any registered investment adviser by or on 
                        behalf of the Commission; and
                            ``(ii) any licensed insurance company by or 
                        on behalf of any State government insurance 
                        agency responsible for the supervision of the 
                        insurance company.
                    ``(E) Confidentiality of reported information.--
                            ``(i) In general.--Notwithstanding any 
                        other provision of law, the Board shall not be 
                        compelled to disclose any nonpublic information 
                        required to be reported under this paragraph, 
                        or any information supplied to the Board by any 
                        domestic or foreign regulatory agency, that 
                        relates to the financial or operational 
                        condition of any wholesale financial holding 
                        company or any subsidiary of such company.
                            ``(ii) Compliance with requests for 
                        information.--No provision of this subparagraph 
                        shall be construed as authorizing the Board to 
                        withhold information from the Congress, or 
                        preventing the Board from complying with a 
                        request for information from any other Federal 
                        department or agency for purposes within the 
                        scope of such department's or agency's 
                        jurisdiction, or from complying with any order 
                        of a court of competent jurisdiction in an 
                        action brought by the United States or the 
                        Board.
                            ``(iii) Coordination with other law.--For 
                        purposes of section 552 of title 5, United 
                        States Code, this subparagraph shall be 
                        considered to be a statute described in 
                        subsection (b)(3)(B) of such section.
                            ``(iv) Designation of confidential 
                        information.--In prescribing regulations to 
                        carry out the requirements of this subsection, 
                        the Board shall designate information described 
                        in or obtained pursuant to this paragraph as 
                        confidential information.
                    ``(F) Costs.--The cost of any examination conducted 
                by the Board under this section may be assessed 
                against, and made payable by, the wholesale financial 
                holding company.
            ``(4) Capital adequacy guidelines.--
                    ``(A) Capital adequacy provisions.--Subject to the 
                requirements of, and solely in accordance with, the 
                terms of this paragraph, the Board may adopt capital 
                adequacy rules or guidelines for wholesale financial 
                holding companies.
                    ``(B) Method of calculation.--In developing rules 
                or guidelines under this paragraph, the following 
                provisions shall apply:
                            ``(i) Focus on double leverage.--The Board 
                        shall focus on the use by wholesale financial 
                        holding companies of debt and other liabilities 
                        to fund capital investments in subsidiaries.
                            ``(ii) No unweighted capital ratio.--The 
                        Board shall not, by regulation, guideline, 
                        order, or otherwise, impose under this section 
                        a capital ratio that is not based on 
                        appropriate risk-weighting considerations.
                            ``(iii) No capital requirement on regulated 
                        entities.--The Board shall not, by regulation, 
                        guideline, order or otherwise, prescribe or 
                        impose any capital or capital adequacy rules, 
                        standards, guidelines, or requirements upon any 
                        subsidiary that--
                                    ``(I) is not a depository 
                                institution; and
                                    ``(II) is in compliance with 
                                applicable capital requirements of 
                                another Federal regulatory authority 
                                (including the Securities and Exchange 
                                Commission) or State insurance 
                                authority.
                            ``(iv) Limitation.--The Board shall not, by 
                        regulation, guideline, order or otherwise, 
                        prescribe or impose any capital or capital 
                        adequacy rules, standards, guidelines, or 
                        requirements upon any subsidiary that is not a 
                        depository institution and that is registered 
                        as an investment adviser under the Investment 
                        Advisers Act of 1940, except that this clause 
                        shall not be construed as preventing the Board 
                        from imposing capital or capital adequacy 
                        rules, guidelines, standards, or requirements 
                        with respect to activities of a registered 
                        investment adviser other than investment 
                        advisory activities or activities incidental to 
                        investment advisory activities.
                            ``(v) Appropriate exclusions.--The Board 
                        shall take full account of--
                                    ``(I) the capital requirements made 
                                applicable to any subsidiary that is 
                                not a depository institution by another 
                                Federal regulatory authority or State 
                                insurance authority; and
                                    ``(II) industry norms for 
                                capitalization of a company's 
                                unregulated subsidiaries and 
                                activities.
                            ``(vi) Internal risk management models.--
                        The Board may incorporate internal risk 
                        management models of wholesale financial 
                        holding companies into its capital adequacy 
                        guidelines or rules and may take account of the 
                        extent to which resources of a subsidiary 
                        depository institution may be used to service 
                        the debt or other liabilities of the wholesale 
                        financial holding company.
    ``(c) Nonfinancial Activities and Investments.--
            ``(1) Grandfathered activities.--
                    ``(A) In general.--Notwithstanding section 4(a), a 
                company that becomes a wholesale financial holding 
                company may continue to engage, directly or indirectly, 
                in any activity and may retain ownership and control of 
                shares of a company engaged in any activity if--
                            ``(i) on the date of the enactment of the 
                        Financial Services Act of 1998, such wholesale 
                        financial holding company was lawfully engaged 
                        in that nonfinancial activity, held the shares 
                        of such company, or had entered into a contract 
                        to acquire shares of any company engaged in 
                        such activity; and
                            ``(ii) the company engaged in such activity 
                        continues to engage only in the same activities 
                        that such company conducted on the date of the 
                        enactment of the Financial Services Act of 
                        1998, and other activities permissible under 
                        this Act.
                    ``(B) No expansion of grandfathered commercial 
                activities through merger or consolidation.--A 
                wholesale financial holding company that engages in 
                activities or holds shares pursuant to this paragraph, 
                or a subsidiary of such wholesale financial holding 
                company, may not acquire, in any merger, consolidation, 
                or other type of business combination, assets of any 
                other company which is engaged in any activity which 
                the Board has not determined to be financial in nature 
                or incidental to activities that are financial in 
                nature under section 6(c).
                    ``(C) Limitation to single exemption.--No company 
                that engages in any activity or controls any shares 
                under subsection (f) of section 6 may engage in any 
                activity or own any shares pursuant to this paragraph 
                or paragraph (1).
            ``(2) Commodities.--
                    ``(A) In general.--Notwithstanding section 4(a), a 
                wholesale financial holding company which was 
                predominately engaged as of January 1, 1997, in 
                financial activities in the United States (or any 
                successor to any such company) may engage in, or 
                directly or indirectly own or control shares of a 
                company engaged in, activities related to the trading, 
                sale, or investment in commodities and underlying 
                physical properties that were not permissible for bank 
                holding companies to conduct in the United States as of 
                January 1, 1997, if such wholesale financial holding 
                company, or any subsidiary of such holding company, was 
                engaged directly, indirectly, or through any such 
                company in any of such activities as of January 1, 
                1997, in the United States.
                    ``(B) Limitation.--The attributed aggregate 
                consolidated assets of a wholesale financial holding 
                company held under the authority granted under this 
                paragraph and not otherwise permitted to be held by all 
                wholesale financial holding companies under this 
                section may not exceed 5 percent of the total 
                consolidated assets of the wholesale financial holding 
                company, except that the Board may increase such 
                percentage of total consolidated assets by such amounts 
                and under such circumstances as the Board considers 
                appropriate, consistent with the purposes of this Act.
            ``(3) Cross marketing restrictions.--A wholesale financial 
        holding company shall not permit--
                    ``(A) any company whose shares it owns or controls 
                pursuant to paragraph (1) or (2) to offer or market any 
                product or service of an affiliated wholesale financial 
                institution; or
                    ``(B) any affiliated wholesale financial 
                institution to offer or market any product or service 
                of any company whose shares are owned or controlled by 
                such wholesale financial holding company pursuant to 
                such paragraphs.
    ``(d) Qualification of Foreign Bank as Wholesale Financial Holding 
Company.--
            ``(1) In general.--Any foreign bank, or any company that 
        owns or controls a foreign bank, that--
                    ``(A) operates a branch, agency, or commercial 
                lending company in the United States, including a 
                foreign bank or company that owns or controls a 
                wholesale financial institution; and
                    ``(B) owns, controls, or is affiliated with a 
                security affiliate that engages in underwriting 
                corporate equity securities,
        may request a determination from the Board that such bank or 
        company be treated as a wholesale financial holding company for 
        purposes of subsection (c).
            ``(2) Conditions for treatment as a wholesale financial 
        holding company.--A foreign bank and a company that owns or 
        controls a foreign bank may not be treated as a wholesale 
        financial holding company unless the bank and company meet and 
        continue to meet the following criteria:
                    ``(A) No insured deposits.--No deposits held 
                directly by a foreign bank or through an affiliate 
                (other than an institution described in subparagraph 
                (D) or (F) of section 2(c)(2)) are insured under the 
                Federal Deposit Insurance Act.
                    ``(B) Capital standards.--The foreign bank meets 
                risk-based capital standards comparable to the capital 
                standards required for a wholesale financial 
                institution, giving due regard to the principle of 
                national treatment and equality of competitive 
                opportunity.
                    ``(C) Transaction with affiliates.--Transactions 
                between a branch, agency, or commercial lending company 
                subsidiary of the foreign bank in the United States, 
                and any securities affiliate or company in which the 
                foreign bank (or any company that owns or controls such 
                foreign bank) has invested pursuant to subsection (d) 
                comply with the provisions of sections 23A and 23B of 
                the Federal Reserve Act in the same manner and to the 
                same extent as such transactions would be required to 
                comply with such sections if the bank were a member 
                bank.
            ``(3) Treatment as a wholesale financial institution.--Any 
        foreign bank which is, or is affiliated with a company which 
        is, treated as a wholesale financial holding company under this 
        subsection shall be treated as a wholesale financial 
        institution for purposes of subsection (c)(4) of this section 
        and subsections (c)(1)(C) and (c)(3) of section 9B of the 
        Federal Reserve Act, and any such foreign bank or company shall 
        be subject to paragraphs (3), (4), and (5) of section 9B(d) of 
        the Federal Reserve Act, except that the Board may adopt such 
        modifications, conditions, or exemptions as the Board deems 
        appropriate, giving due regard to the principle of national 
        treatment and equality of competitive opportunity.
            ``(4) Nonapplicability of other exemption.--Any foreign 
        bank or company which is treated as a wholesale financial 
        holding company under this subsection shall not be eligible for 
        any exception described in section 2(h).
            ``(5) Supervision of foreign bank which maintains no 
        banking presence other than control of a wholesale financial 
        institution.--A foreign bank that owns or controls a wholesale 
        financial institution but does not operate a branch, agency, or 
        commercial lending company in the United States (and any 
        company that owns or controls such foreign bank) may request a 
        determination from the Board that such bank or company be 
        treated as a wholesale financial holding company for purposes 
        of subsection (c), except that such bank or company shall be 
        subject to the restrictions of paragraphs (2)(A), (3), and (4) 
        of this subsection.
            ``(6) No effect on other provisions.--This section shall 
        not be construed as limiting the authority of the Board under 
        the International Banking Act of 1978 with respect to the 
        regulation, supervision, or examination of foreign banks and 
        their offices and affiliates in the United States.
            ``(7) Applicability of community reinvestment act of 
        1977.--The branches in the United States of a foreign bank that 
        is, or is affiliated with a company that is, treated as a 
        wholesale financial holding company shall be subject to section 
        9B(b)(11) of the Federal Reserve Act as if the foreign bank 
        were a wholesale financial institution under such section. The 
        Board and the Comptroller of the Currency shall apply the 
        provisions of sections 803(2), 804, and 807(1) of the Community 
        Reinvestment Act of 1977 to branches of foreign banks which 
        receive only such deposits as are permissible for receipt by a 
        corporation organized under section 25A of the Federal Reserve 
        Act, in the same manner and to the same extent such sections 
        apply to such a corporation.''.
    (b) Uninsured State Banks.--Section 9 of the Federal Reserve Act 
(U.S.C. 321 et seq.) is amended by adding at the end the following new 
paragraph:
            ``(24) Enforcement authority over uninsured state member 
        banks.--Section 3(u) of the Federal Deposit Insurance Act, 
        subsections (j) and (k) of section 7 of such Act, and 
        subsections (b) through (n), (s), (u), and (v) of section 8 of 
        such Act shall apply to an uninsured State member bank in the 
        same manner and to the same extent such provisions apply to an 
        insured State member bank and any reference in any such 
        provision to `insured depository institution' shall be deemed 
        to be a reference to `uninsured State member bank' for purposes 
        of this paragraph.''.

SEC. 132. AUTHORIZATION TO RELEASE REPORTS.

    (a) Federal Reserve Act.--The last sentence of the eighth 
undesignated paragraph of section 9 of the Federal Reserve Act (12 
U.S.C. 326) is amended to read as follows: ``The Board of Governors of 
the Federal Reserve System, at its discretion, may furnish reports of 
examination or other confidential supervisory information concerning 
State member banks or any other entities examined under any other 
authority of the Board to any Federal or State authorities with 
supervisory or regulatory authority over the examined entity, to 
officers, directors, or receivers of the examined entity, and to any 
other person that the Board determines to be proper.''.
    (b) Commodity Futures Trading Commission.--
            (1) Section 1101(7) of the Right to Financial Privacy Act 
        of 1978 (12 U.S.C. 3401(7)) is amended--
                    (A) by redesignating subparagraphs (G) and (H) as 
                subparagraphs (H) and (I), respectively; and
                    (B) by inserting after subparagraph (F) the 
                following new subparagraph:
                    ``(G) the Commodity Futures Trading Commission; 
                or'' and
            (2) Section 1112(e) of the Right to Financial Privacy Act 
        (12 U.S.C. 3412(e)) is amended by striking ``and the Securities 
        and Exchange Commission'' and inserting ``, the Securities and 
        Exchange Commission, and the Commodity Futures Trading 
        Commission''.

SEC. 133. CONFORMING AMENDMENTS.

    (a) Bank Holding Company Act of 1956.--
            (1) Definitions.--Section 2 of the Bank Holding Company Act 
        of 1956 (12 U.S.C. 1842) is amended by adding at the end the 
        following new subsections:
    ``(p) Wholesale Financial Institution.--The term `wholesale 
financial institution' means a wholesale financial institution subject 
to section 9B of the Federal Reserve Act.
    ``(q) Commission.--The term `Commission' means the Securities and 
Exchange Commission.
    ``(r) Depository Institution.--The term `depository institution'--
            ``(1) has the meaning given to such term in section 3 of 
        the Federal Deposit Insurance Act; and
            ``(2) includes a wholesale financial institution.''.
            (2) Definition of bank includes wholesale financial 
        institution.--Section 2(c)(1) of the Bank Holding Company Act 
        of 1956 (12 U.S.C. 1841(c)(1)) is amended by adding at the end 
        the following new subparagraph:
                    ``(C) A wholesale financial institution.''.
            (3) Incorporated definitions.--Section 2(n) of the Bank 
        Holding Company Act of 1956 (12 U.S.C. 1841(n)) is amended by 
        inserting ```insured bank','' after ```in danger of 
        default',''.
            (4) Exception to deposit insurance requirement.--Section 
        3(e) of the Bank Holding Company Act of 1956 (12 U.S.C. 
        1842(e)) is amended by adding at the end the following: ``This 
        subsection shall not apply to a wholesale financial 
        institution.''.
    (b) Federal Deposit Insurance Act.--Section 3(q)(2)(A) of the 
Federal Deposit Insurance Act (12 U.S.C. 1813(q)(2)(A)) is amended to 
read as follows:
                    ``(A) any State member insured bank (except a 
                District bank) and any wholesale financial institution 
                as authorized pursuant to section 9B of the Federal 
                Reserve Act;''.

              CHAPTER 2--WHOLESALE FINANCIAL INSTITUTIONS

SEC. 136. WHOLESALE FINANCIAL INSTITUTIONS.

    (a) National Wholesale Financial Institutions.--
            (1) In general.--Chapter one of title LXII of the Revised 
        Statutes of the United States (12 U.S.C. 21 et seq.) is amended 
        by inserting after section 5136A (as added by section 121(a) of 
        this title) the following new section:

``SEC. 5136B. NATIONAL WHOLESALE FINANCIAL INSTITUTIONS.

    ``(a) Authorization of the Comptroller Required.--A national bank 
may apply to the Comptroller on such forms and in accordance with such 
regulations as the Comptroller may prescribe, for permission to operate 
as a national wholesale financial institution.
    ``(b) Regulation.--A national wholesale financial institution may 
exercise, in accordance with such institution's articles of 
incorporation and regulations issued by the Comptroller, all the powers 
and privileges of a national bank formed in accordance with section 
5133 of the Revised Statutes of the United States, subject to section 
9B of the Federal Reserve Act and the limitations and restrictions 
contained therein.
    ``(c) Community Reinvestment Act of 1977.--A national wholesale 
financial institution shall be subject to the Community Reinvestment 
Act of 1977.
    ``(d) Examination Reports.--The Comptroller of the Currency shall, 
to the fullest extent possible, use the report of examinations made by 
the Board of Governors of the Federal Reserve System of a wholesale 
financial institution.''.
            (2) Clerical amendment.--The table of sections for chapter 
        one of title LXII of the Revised Statutes of the United States 
        is amended by inserting after the item relating to section 
        5136A (as added by section 121(d) of this title) the following 
        new item:

``5136B. National wholesale financial institutions.''.
    (b) State Wholesale Financial Institutions.--The Federal Reserve 
Act (12 U.S.C. 221 et seq.) is amended by inserting after section 9A 
the following new section:

``SEC. 9B. WHOLESALE FINANCIAL INSTITUTIONS.

    ``(a) Application for Membership as Wholesale Financial 
Institution.--
            ``(1) Application required.--
                    ``(A) In general.--Any bank may apply to the Board 
                of Governors of the Federal Reserve System to become a 
                wholesale financial institution and, as a wholesale 
                financial institution, to subscribe to the stock of the 
                Federal reserve bank organized within the district 
                where the applying bank is located.
                    ``(B) Treatment as member bank.--Any application 
                under subparagraph (A) shall be treated as an 
                application under, and shall be subject to the 
                provisions of section 9.
            ``(2) Insurance termination.--No bank the deposits of which 
        are insured under the Federal Deposit Insurance Act may become 
        a wholesale financial institution unless it has met all 
        requirements under that Act for voluntary termination of 
        deposit insurance.
    ``(b) General Requirements Applicable to Wholesale Financial 
Institutions.--
            ``(1) Federal reserve act.--Except as otherwise provided in 
        this section, wholesale financial institutions shall be member 
        banks and shall be subject to the provisions of this Act that 
        apply to member banks to the same extent and in the same manner 
        as State member insured banks, except that a wholesale 
        financial institution may terminate membership under this Act 
        only with the prior written approval of the Board and on terms 
        and conditions that the Board determines are appropriate to 
        carry out the purposes of this Act.
            ``(2) Prompt corrective action.--A wholesale financial 
        institution shall be deemed to be an insured depository 
        institution for purposes of section 38 of the Federal Deposit 
        Insurance Act except that--
                    ``(A) the relevant capital levels and capital 
                measures for each capital category shall be the levels 
                specified by the Board for wholesale financial 
                institutions; and
                    ``(B) all references to the appropriate Federal 
                banking agency or to the Corporation in that section 
                shall be deemed to be references to the Board.
            ``(3) Enforcement authority.--Subsections (j) and (k) of 
        section 7, subsections (b) through (n), (s), and (v) of section 
        8, and section 19 of the Federal Deposit Insurance Act shall 
        apply to a wholesale financial institution in the same manner 
        and to the same extent as such provisions apply to State member 
        insured banks and any reference in such sections to an insured 
        depository institution shall be deemed to include a reference 
        to a wholesale financial institution.
            ``(4) Certain other statutes applicable.--A wholesale 
        financial institution shall be deemed to be a banking 
        institution, and the Board shall be the appropriate Federal 
        banking agency for such bank and all such bank's affiliates, 
        for purposes of the International Lending Supervision Act.
            ``(5) Bank merger act.--A wholesale financial institution 
        shall be subject to sections 18(c) and 44 of the Federal 
        Deposit Insurance Act in the same manner and to the same extent 
        the wholesale financial institution would be subject to such 
        sections if the institution were a State member insured bank.
            ``(6) Branching.--Notwithstanding any other provision of 
        law, a wholesale financial institution may establish and 
        operate a branch at any location on such terms and conditions 
        as established by the Board and, in the case of a State-
        chartered wholesale financial institution, with the approval of 
        the Board, and, in the case of a national bank wholesale 
        financial institution, with the approval of the Comptroller of 
        the Currency.
            ``(7) Activities of out-of-state branches of wholesale 
        financial institutions.--
                    ``(A) General.--A State-chartered wholesale 
                financial institution shall be deemed a State bank and 
                an insured State bank and a national wholesale 
                financial institution shall be deemed a national bank 
                for purposes of paragraphs (1), (2), and (3) of section 
                24(j) of the Federal Deposit Insurance Act.
                    ``(B) Definitions.--The following definitions shall 
                apply solely for purposes of applying paragraph (1):
                            ``(i) Home state.--The term `home State' 
                        means--
                                    ``(I) with respect to a national 
                                wholesale financial institution, the 
                                State in which the main office of the 
                                institution is located; and
                                    ``(II) with respect to a State-
                                chartered wholesale financial 
                                institution, the State by which the 
                                institution is chartered.
                            ``(ii) Host state.--The term `host State' 
                        means a State, other than the home State of the 
                        wholesale financial institution, in which the 
                        institution maintains, or seeks to establish 
                        and maintain, a branch.
                            ``(iii) Out-of-state bank.--The term `out-
                        of-State bank' means, with respect to any 
                        State, a wholesale financial institution whose 
                        home State is another State.
            ``(8) Discrimination regarding interest rates.--Section 27 
        of the Federal Deposit Insurance Act shall apply to State-
        chartered wholesale financial institutions in the same manner 
        and to the same extent as such provisions apply to State member 
        insured banks and any reference in such section to a State-
        chartered insured depository institution shall be deemed to 
        include a reference to a State-chartered wholesale financial 
        institution.
            ``(9) Preemption of state laws requiring deposit insurance 
        for wholesale financial institutions.--The appropriate State 
        banking authority may grant a charter to a wholesale financial 
        institution notwithstanding any State constitution or statute 
        requiring that the institution obtain insurance of its deposits 
        and any such State constitution or statute is hereby preempted 
        solely for purposes of this paragraph.
            ``(10) Parity for wholesale financial institutions.--A 
        State bank that is a wholesale financial institution under this 
        section shall have all of the rights, powers, privileges, and 
        immunities (including those derived from status as a federally 
        chartered institution) of and as if it were a national bank, 
        subject to such terms and conditions as established by the 
        Board.
            ``(11) Community reinvestment act of 1977.--A State 
        wholesale financial institution shall be subject to the 
        Community Reinvestment Act of 1977.
    ``(c) Specific Requirements Applicable to Wholesale Financial 
Institutions.--
            ``(1) Limitations on deposits.--
                    ``(A) Minimum amount.--
                            ``(i) In general.--No wholesale financial 
                        institution may receive initial deposits of 
                        $100,000 or less, other than on an incidental 
                        and occasional basis.
                            ``(ii) Limitation on deposits of less than 
                        $100,000.--No wholesale financial institution 
                        may receive initial deposits of $100,000 or 
                        less if such deposits constitute more than 5 
                        percent of the institution's total deposits.
                    ``(B) No deposit insurance.--No deposits held by a 
                wholesale financial institution shall be insured 
                deposits under the Federal Deposit Insurance Act.
                    ``(C) Advertising and disclosure.--The Board shall 
                prescribe regulations pertaining to advertising and 
                disclosure by wholesale financial institutions to 
                ensure that each depositor is notified that deposits at 
                the wholesale financial institution are not federally 
                insured or otherwise guaranteed by the United States 
                Government.
            ``(2) Minimum capital levels applicable to wholesale 
        financial institutions.--The Board shall, by regulation, adopt 
        capital requirements for wholesale financial institutions--
                    ``(A) to account for the status of wholesale 
                financial institutions as institutions that accept 
                deposits that are not insured under the Federal Deposit 
                Insurance Act; and
                    ``(B) to provide for the safe and sound operation 
                of the wholesale financial institution without undue 
                risk to creditors or other persons, including Federal 
                reserve banks, engaged in transactions with the bank.
            ``(3) Additional requirements applicable to wholesale 
        financial institutions.--In addition to any requirement 
        otherwise applicable to State member insured banks or 
        applicable, under this section, to wholesale financial 
        institutions, the Board may impose, by regulation or order, 
        upon wholesale financial institutions--
                    ``(A) limitations on transactions, direct or 
                indirect, with affiliates to prevent--
                            ``(i) the transfer of risk to the deposit 
                        insurance funds; or
                            ``(ii) an affiliate from gaining access to, 
                        or the benefits of, credit from a Federal 
                        reserve bank, including overdrafts at a Federal 
                        reserve bank;
                    ``(B) special clearing balance requirements; and
                    ``(C) any additional requirements that the Board 
                determines to be appropriate or necessary to--
                            ``(i) promote the safety and soundness of 
                        the wholesale financial institution or any 
                        insured depository institution affiliate of the 
                        wholesale financial institution;
                            ``(ii) prevent the transfer of risk to the 
                        deposit insurance funds; or
                            ``(iii) protect creditors and other 
                        persons, including Federal reserve banks, 
                        engaged in transactions with the wholesale 
                        financial institution.
            ``(4) Exemptions for wholesale financial institutions.--The 
        Board may, by regulation or order, exempt any wholesale 
        financial institution from any provision applicable to a member 
        bank that is not a wholesale financial institution, if the 
        Board finds that such exemption is not inconsistent with--
                    ``(A) the promotion of the safety and soundness of 
                the wholesale financial institution or any insured 
                depository institution affiliate of the wholesale 
                financial institution;
                    ``(B) the protection of the deposit insurance 
                funds; and
                    ``(C) the protection of creditors and other 
                persons, including Federal reserve banks, engaged in 
                transactions with the wholesale financial institution.
            ``(5) Limitation on transactions between a wholesale 
        financial institution and an insured bank.--For purposes of 
        section 23A(d)(1) of the Federal Reserve Act, a wholesale 
        financial institution that is affiliated with an insured bank 
        shall not be a bank.
            ``(6) No effect on other provisions.--This section shall 
        not be construed as limiting the Board's authority over member 
        banks under any other provision of law, or to create any 
        obligation for any Federal reserve bank to make, increase, 
        renew, or extend any advance or discount under this Act to any 
        member bank or other depository institution.
    ``(d) Capital and Managerial Requirements.--
            ``(1) In general.--A wholesale financial institution shall 
        be well capitalized and well managed.
            ``(2) Notice to company.--The Board shall promptly provide 
        notice to a company that controls a wholesale financial 
        institution whenever such wholesale financial institution is 
        not well capitalized or well managed.
            ``(3) Agreement to restore institution.--Within 45 days of 
        receipt of a notice under paragraph (2) (or such additional 
        period not to exceed 90 days as the Board may permit), the 
        company shall execute an agreement acceptable to the Board to 
        restore the wholesale financial institution to compliance with 
        all of the requirements of paragraph (1).
            ``(4) Limitations until institution restored.--Until the 
        wholesale financial institution is restored to compliance with 
        all of the requirements of paragraph (1), the Board may impose 
        such limitations on the conduct or activities of the company or 
        any affiliate of the company as the Board determines to be 
        appropriate under the circumstances.
            ``(5) Failure to restore.--If the company does not execute 
        and implement an agreement in accordance with paragraph (3), 
        comply with any limitation imposed under paragraph (4), restore 
        the wholesale financial institution to well capitalized status 
        within 180 days after receipt by the company of the notice 
        described in paragraph (2), or restore the wholesale financial 
        institution to well managed status within such period as the 
        Board may permit, the company shall, under such terms and 
        conditions as may be imposed by the Board and subject to such 
        extension of time as may be granted in the Board's discretion, 
        divest control of its subsidiary depository institutions.
            ``(6) Well managed defined.--For purposes of this 
        subsection, the term `well managed' has the same meaning as in 
        section 2 of the Bank Holding Company Act of 1956.
    ``(e) Conservatorship Authority.--
            ``(1) In general.--The Board may appoint a conservator to 
        take possession and control of a wholesale financial 
        institution to the same extent and in the same manner as the 
        Comptroller of the Currency may appoint a conservator for a 
        national bank under section 203 of the Bank Conservation Act, 
        and the conservator shall exercise the same powers, functions, 
        and duties, subject to the same limitations, as are provided 
        under such Act for conservators of national banks.
            ``(2) Board authority.--The Board shall have the same 
        authority with respect to any conservator appointed under 
        paragraph (1) and the wholesale financial institution for which 
        such conservator has been appointed as the Comptroller of the 
        Currency has under the Bank Conservation Act with respect to a 
        conservator appointed under such Act and a national bank for 
        which the conservator has been appointed.
    ``(f) Exclusive Jurisdiction.--Subsections (c) and (e) of section 
43 of the Federal Deposit Insurance Act shall not apply to any 
wholesale financial institution.''.
    (c) Voluntary Termination of Insured Status by Certain 
Institutions.--
            (1) Section 8 designations.--Section 8(a) of the Federal 
        Deposit Insurance Act (12 U.S.C. 1818(a)) is amended--
                    (A) by striking paragraph (1); and
                    (B) by redesignating paragraphs (2) through (10) as 
                paragraphs (1) through (9), respectively.
            (2) Voluntary termination of insured status.--The Federal 
        Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended by 
        inserting after section 8 the following new section:

``SEC. 8A. VOLUNTARY TERMINATION OF STATUS AS INSURED DEPOSITORY 
              INSTITUTION.

    ``(a) In General.--Except as provided in subsection (b), an insured 
State bank or a national bank may voluntarily terminate such bank's 
status as an insured depository institution in accordance with 
regulations of the Corporation if--
            ``(1) the bank provides written notice of the bank's intent 
        to terminate such insured status--
                    ``(A) to the Corporation and the Board of Governors 
                of the Federal Reserve System not less than 6 months 
                before the effective date of such termination; and
                    ``(B) to all depositors at such bank, not less than 
                6 months before the effective date of the termination 
                of such status; and
            ``(2) either--
                    ``(A) the deposit insurance fund of which such bank 
                is a member equals or exceeds the fund's designated 
                reserve ratio as of the date the bank provides a 
                written notice under paragraph (1) and the Corporation 
                determines that the fund will equal or exceed the 
                applicable designated reserve ratio for the 2 
                semiannual assessment periods immediately following 
                such date; or
                    ``(B) the Corporation and the Board of Governors of 
                the Federal Reserve System approved the termination of 
                the bank's insured status and the bank pays an exit fee 
                in accordance with subsection (e).
    ``(b) Exception.--Subsection (a) shall not apply with respect to--
            ``(1) an insured savings association; or
            ``(2) an insured branch that is required to be insured 
        under subsection (a) or (b) of section 6 of the International 
        Banking Act of 1978.
    ``(c) Eligibility for Insurance Terminated.--Any bank that 
voluntarily elects to terminate the bank's insured status under 
subsection (a) shall not be eligible for insurance on any deposits or 
any assistance authorized under this Act after the period specified in 
subsection (f)(1).
    ``(d) Institution Must Become Wholesale Financial Institution or 
Terminate Deposit-Taking Activities.--Any depository institution which 
voluntarily terminates such institution's status as an insured 
depository institution under this section may not, upon termination of 
insurance, accept any deposits unless the institution is a wholesale 
financial institution subject to section 9B of the Federal Reserve Act.
    ``(e) Exit Fees.--
            ``(1) In general.--Any bank that voluntarily terminates 
        such bank's status as an insured depository institution under 
        this section shall pay an exit fee in an amount that the 
        Corporation determines is sufficient to account for the 
        institution's pro rata share of the amount (if any) which would 
        be required to restore the relevant deposit insurance fund to 
        the fund's designated reserve ratio as of the date the bank 
        provides a written notice under subsection (a)(1).
            ``(2) Procedures.--The Corporation shall prescribe, by 
        regulation, procedures for assessing any exit fee under this 
        subsection.
    ``(f) Temporary Insurance of Deposits Insured as of Termination.--
            ``(1) Transition period.--The insured deposits of each 
        depositor in a State bank or a national bank on the effective 
        date of the voluntary termination of the bank's insured status, 
        less all subsequent withdrawals from any deposits of such 
        depositor, shall continue to be insured for a period of not 
        less than 6 months and not more than 2 years, as determined by 
        the Corporation. During such period, no additions to any such 
        deposits, and no new deposits in the depository institution 
        made after the effective date of such termination shall be 
        insured by the Corporation.
            ``(2) Temporary assessments; obligations and duties.--
        During the period specified in paragraph (1) with respect to 
        any bank, the bank shall continue to pay assessments under 
        section 7 as if the bank were an insured depository 
        institution. The bank shall, in all other respects, be subject 
        to the authority of the Corporation and the duties and 
        obligations of an insured depository institution under this Act 
        during such period, and in the event that the bank is closed 
        due to an inability to meet the demands of the bank's 
        depositors during such period, the Corporation shall have the 
        same powers and rights with respect to such bank as in the case 
        of an insured depository institution.
    ``(g) Advertisements.--
            ``(1) In general.--A bank that voluntarily terminates the 
        bank's insured status under this section shall not advertise or 
        hold itself out as having insured deposits, except that the 
        bank may advertise the temporary insurance of deposits under 
        subsection (f) if, in connection with any such advertisement, 
        the advertisement also states with equal prominence that 
        additions to deposits and new deposits made after the effective 
        date of the termination are not insured.
            ``(2) Certificates of deposit, obligations, and 
        securities.--Any certificate of deposit or other obligation or 
        security issued by a State bank or a national bank after the 
        effective date of the voluntary termination of the bank's 
        insured status under this section shall be accompanied by a 
        conspicuous, prominently displayed notice that such certificate 
        of deposit or other obligation or security is not insured under 
        this Act.
    ``(h) Notice Requirements.--
            ``(1) Notice to the corporation.--The notice required under 
        subsection (a)(1)(A) shall be in such form as the Corporation 
        may require.
            ``(2) Notice to depositors.--The notice required under 
        subsection (a)(1)(B) shall be--
                    ``(A) sent to each depositor's last address of 
                record with the bank; and
                    ``(B) in such manner and form as the Corporation 
                finds to be necessary and appropriate for the 
                protection of depositors.''.
            (3) Definition.--Section 19(b)(1)(A)(i) of the Federal 
        Reserve Act (12 U.S.C. 461(b)(1)(A)(i)) is amended by inserting 
        ``, or any wholesale financial institution subject to section 
        9B of this Act'' after ``such Act''.

               Subtitle E--Preservation of FTC Authority

SEC. 141. AMENDMENT TO THE BANK HOLDING COMPANY ACT OF 1956 TO MODIFY 
              NOTIFICATION AND POST-APPROVAL WAITING PERIOD FOR SECTION 
              3 TRANSACTIONS.

    Section 11(b)(1) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1849(b)(1)) is amended by inserting ``and, if the transaction also 
involves an acquisition under section 4 or section 6, the Board shall 
also notify the Federal Trade Commission of such approval'' before the 
period at the end of the first sentence.

SEC. 142. INTERAGENCY DATA SHARING.

    To the extent not prohibited by other law, the Comptroller of the 
Currency, the Director of the Office of Thrift Supervision, the Federal 
Deposit Insurance Corporation, and the Board of Governors of the 
Federal Reserve System shall make available to the Attorney General and 
the Federal Trade Commission any data in the possession of any such 
banking agency that the antitrust agency deems necessary for antitrust 
review of any transaction requiring notice to any such antitrust agency 
or the approval of such agency under section 3, 4, or 6 of the Bank 
Holding Company Act of 1956, section 18(c) of the Federal Deposit 
Insurance Act, the National Bank Consolidation and Merger Act, section 
10 of the Home Owners' Loan Act, or the antitrust laws.

SEC. 143. CLARIFICATION OF STATUS OF SUBSIDIARIES AND AFFILIATES.

    (a) Clarification of Federal Trade Commission Jurisdiction.--Any 
person which directly or indirectly controls, is controlled directly or 
indirectly by, or is directly or indirectly under common control with, 
any bank or savings association (as such terms are defined in section 3 
of the Federal Deposit Insurance Act) and is not itself a bank or 
savings association shall not be deemed to be a bank or savings 
association for purposes of the Federal Trade Commission Act or any 
other law enforced by the Federal Trade Commission.
    (b) Savings Provision.--No provision of this section shall be 
construed as restricting the authority of any Federal banking agency 
(as defined in section 3 of the Federal Deposit Insurance Act) under 
any Federal banking law, including section 8 of the Federal Deposit 
Insurance Act.
    (c) Hart-Scott-Rodino Amendment.--Section 7A(c)(7) of the Clayton 
Act (15 U.S.C. 18a(c)(7)) is amended by inserting before the semicolon 
at the end thereof the following: ``, except that a portion of a 
transaction is not exempt under this paragraph if such portion of the 
transaction (A) requires notice under section 6 of the Bank Holding 
Company Act of 1956; and (B) does not require approval under section 3 
or 4 of the Bank Holding Company Act of 1956''.

SEC. 144. ANNUAL GAO REPORT.

    (a) In General.--By the end of the 1-year period beginning on the 
date of the enactment of this Act and annually thereafter, the 
Comptroller General of the United States shall submit a report to the 
Congress on market concentration in the financial services industry and 
its impact on consumers.
    (b) Analysis.--Each report submitted under subsection (a) shall 
contain an analysis of--
            (1) the positive and negative effects of affiliations 
        between various types of financial companies, and of 
        acquisitions pursuant to this Act and the amendments made by 
        this Act to other provisions of law, including any positive or 
        negative effects on consumers, area markets, and submarkets 
        thereof or on registered securities brokers and dealers which 
        have been purchased by depository institutions or depository 
        institution holding companies;
            (2) the changes in business practices and the effects of 
        any such changes on the availability of venture capital, 
        consumer credit, and other financial services or products and 
        the availability of capital and credit for small businesses; 
        and
            (3) the acquisition patterns among depository institutions, 
        depository institution holding companies, securities firms, and 
        insurance companies including acquisitions among the largest 20 
        percent of firms and acquisitions within regions or other 
        limited geographical areas.

Subtitle F--Applying the Principles of National Treatment and Equality 
   of Competitive Opportunity to Foreign Banks and Foreign Financial 
                              Institutions

SEC. 151. APPLYING THE PRINCIPLES OF NATIONAL TREATMENT AND EQUALITY OF 
              COMPETITIVE OPPORTUNITY TO FOREIGN BANKS THAT ARE 
              FINANCIAL HOLDING COMPANIES.

    Section 8(c) of the International Banking Act of 1978 (12 U.S.C. 
3106(c)) is amended by adding at the end the following new paragraph:
            ``(3) Termination of grandfathered rights.--
                    ``(A) In general.--If any foreign bank or foreign 
                company files a declaration under section 6(b)(1)(E) or 
                which receives a determination under section 10(d)(1) 
                of the Bank Holding Company Act of 1956, any authority 
                conferred by this subsection on any foreign bank or 
                company to engage in any activity which the Board has 
                determined to be permissible for financial holding 
                companies under section 6 of such Act shall terminate 
                immediately.
                    ``(B) Restrictions and requirements authorized.--If 
                a foreign bank or company that engages, directly or 
                through an affiliate pursuant to paragraph (1), in an 
                activity which the Board has determined to be 
                permissible for financial holding companies under 
                section 6 of the Bank Holding Company Act of 1956 has 
                not filed a declaration with the Board of its status as 
                a financial holding company under such section or 
                received a determination under section 10(d)(1) by the 
                end of the 2-year period beginning on the date of 
                enactment of the Financial Services Act of 1998, the 
                Board, giving due regard to the principle of national 
                treatment and equality of competitive opportunity, may 
                impose such restrictions and requirements on the 
                conduct of such activities by such foreign bank or 
                company as are comparable to those imposed on a 
                financial holding company organized under the laws of 
                the United States, including a requirement to conduct 
                such activities in compliance with any prudential 
                safeguards established under section 5(h) of the Bank 
                Holding Company Act of 1956.''.

SEC. 152. APPLYING THE PRINCIPLES OF NATIONAL TREATMENT AND EQUALITY OF 
              COMPETITIVE OPPORTUNITY TO FOREIGN BANKS AND FOREIGN 
              FINANCIAL INSTITUTIONS THAT ARE WHOLESALE FINANCIAL 
              INSTITUTIONS.

    Section 8A of the Federal Deposit Insurance Act (as added by 
section 136(c)(2) of this Act) is amended by adding at the end the 
following new subsection:
    ``(i) Voluntary Termination of Deposit Insurance.--The provisions 
on voluntary termination of insurance in this section shall apply to an 
insured branch of a foreign bank (including a Federal branch) in the 
same manner and to the same extent as they apply to an insured State 
bank or a national bank.''.

               Subtitle G--Federal Home Loan Bank System

SEC. 161. FEDERAL HOME LOAN BANKS.

    The first sentence of section 3 of the Federal Home Loan Bank Act 
(12 U.S.C. 1423) is amended--
            (1) by striking ``the continental United States'' and all 
        that follows through the ``eight''; and
            (2) by inserting ``the States into not less than 1'' before 
        ``nor''.

SEC. 162. MEMBERSHIP AND COLLATERAL.

    (a) Subsection (f) of section 5 of the Home Owners' Loan Act (12 
U.S.C. 1464) is amended to read as follows:
    ``(f) Federal Home Loan Bank Membership.--A Federal savings 
association may become a member, of the Federal Home Loan Bank System, 
and shall qualify for such membership in the manner provided by the 
Federal Home Loan Bank Act, beginning January 1, 1999.''.
    (b) Section 10(a)(5) of the Federal Home Loan Bank Act (12 U.S.C. 
1430(a)(5)) is amended--
            (1) in the second sentence, by striking ``and the Board''; 
        and
            (2) in the third sentence, by striking ``Board'' and 
        inserting ``Bank''.
    (c) Section 10(a) of the Federal Home Loan Bank Act (12 U.S.C. 
1430(a)) is amended--
            (1) in the second sentence, by striking ``All long-term 
        advances'' and inserting ``Except as provided in the succeeding 
        sentence, all long-term advances'';
            (2) by inserting after the second sentence, the following 
        sentence: ``Notwithstanding the preceding sentence, long-term 
        advances may be made to members insured by the Federal Deposit 
        Insurance Corporation which have less than $500,000,000 in 
        total assets for the purpose of funding small businesses, 
        agriculture, rural development, or low-income community 
        development (as defined by the Board).''; and
            (3) by redesignating paragraph (5) as paragraph (6) and 
        inserting after paragraph (4) the following new paragraph:
            ``(5) In the case of any member insured by the Federal 
        Deposit Insurance Corporation which has total assets of less 
        than $500,000,000, secured loans for small business, 
        agriculture, rural development, or low-income community 
        development, or securities representing a whole interest in 
        such secured loans.''.
    (d) Section 4(a) of the Federal Home Loan Bank Act (12 U.S.C. 
1424(a)) is amended by adding at the end the following new paragraph:
            ``(3) Eligibility requirements for community financial 
        institutions.--The requirements of paragraph (2) (other than 
        subparagraph (B) of such paragraph) shall not apply to any 
        insured depository institution which has total assets of less 
        than $500,000,000.
    (e) Section 10 of the Federal Home Loan Bank Act (12 U.S.C. 1430) 
is amended by striking the first of the 2 subsections designated as 
subsection (e) (relating to qualified thrift lender status).

SEC. 163. THE OFFICE OF FINANCE.

    The Federal Home Loan Bank Act (12 U.S.C. 1421) is amended by 
inserting after section 4 the following new section:

``SEC. 5. THE OFFICE OF FINANCE.

    ``(a) Operation.--The Federal home loan banks shall operate jointly 
an office of finance (hereafter in this section referred to as the 
`Office') to issue the notes, bonds, and debentures of the Federal home 
loan banks in accordance with this Act.
    ``(b) Powers.--Subject to the other provisions of this Act and such 
safety and soundness regulations as the Finance Board may prescribe, 
the Office shall be authorized by the Federal home loan banks to act as 
the agent of such banks to issue Federal home loan bank notes, bonds 
and debentures pursuant to section 11 of this Act on behalf of the 
banks.
    ``(c) Central Board of Directors.--
            ``(1) Establishment.--The Federal home loan banks shall 
        establish a central board of directors of the Office to 
        administer the affairs of the Office in accordance with the 
        provisions of this Act.
            ``(2) Composition of Board.--Each Federal home loan bank 
        shall annually select one individual who, as of the time of the 
        election, is an officer or director of such bank to serve as a 
        member of the central board of directors of the Office.
    ``(d) Status.--Except to the extent expressly provided in this Act, 
the Office shall be treated as a Federal home loan bank for purposes of 
any law.''.

SEC. 164. MANAGEMENT OF BANKS.

    (a) Subsections (a) and (b) of section 7 of the Federal Home Loan 
Bank Act (12 U.S.C. 1427(a) and (b)) are amended to read as follows:
    ``(a) The management of each Federal home loan bank shall be vested 
in a board of 15 directors, nine of whom shall be elected by the 
members in accordance with this section, six of whom shall be appointed 
by the Board referred to in section 2A, and all of whom shall be 
citizens of the United States and bona fide residents of the district 
in which such bank is located. At least two of the Federal home loan 
bank directors who are appointed by the Board shall be representatives 
chosen from organizations with more than a 2-year history of 
representing consumer or community interests on banking services, 
credit needs, housing, or financial consumer protections. No Federal 
home loan bank director who is appointed pursuant to this subsection 
may, during such bank director's term of office, serve as an officer of 
any Federal home loan bank or a director or officer of any member of a 
bank, or hold shares, or any other financial interest in, any member of 
a bank.
    ``(b) The elective directors shall be divided into three classes, 
designated as classes A, B, and C, as nearly equal in number as 
possible. Each directorship shall be filled by a person who is an 
officer or director of a member located in that bank's district. Each 
class shall represent members of similar asset size, and the Board 
shall, to the maximum extent possible, seek to achieve geographic 
diversity. The Finance Board shall establish the minimum and maximum 
asset size for each class. Any member shall be entitled to nominate and 
elect eligible persons for its class of directorship; such offices 
shall be filled from such nominees by a plurality of the votes which 
members of each class may cast for nominees in their corresponding 
class of directors in an election held for the purpose of filling such 
offices. Each member shall be permitted to cast one vote for each share 
of Federal home loan bank stock owned by that member. No person who is 
an officer or director of a member that fails to meet any applicable 
capital requirement is eligible to hold the office of Federal Home Loan 
Bank director. As used in this subsection, the term ``member'' means a 
member of a Federal home loan bank which was a member of such Bank as 
of a record date established by the Bank.''.
    (b) Section 7 of the Federal Home Loan Bank Act (12 U.S.C. 1427) is 
amended--
            (1) by striking subsections (c) and (h); and
            (2) by redesignating subsections (d), (e), (f), (g), (i), 
        (j), and (k) as subsections (c), (d), (e), (f), (g), (h), and 
        (i), respectively.
    (c) Subsection (c) of section 7 of the Federal Home Loan Bank Act 
(12 U.S.C. 1427(d)) (as so redesignated by subsection (b) of this 
section) is amended by striking the first and second sentences and 
inserting the following two new sentences: ``The term of each position 
of director shall be 3 years. No director serving for three consecutive 
terms, nor any other officer, director or that member or any affiliated 
depository institution, shall be eligible for another term earlier than 
3 years after the expiration of the last expiring of said 3-year terms. 
Three elected directors of different classes as specified by the 
Finance Board shall be elected by ballot annually.''.
    (d) Subsection (d) of section 7 of the Federal Home Loan Bank Act 
(12 U.S.C. 1427(e)) (as so redesignated by subsection (b) of this 
section) is amended to read as follows:
    ``(d) Transition Provision.--In the first election after the date 
of the enactment of the Financial Services Act of 1998, three directors 
shall be elected in each of the 3 classes of elective directorship. The 
Finance Board may, in the first election after such date of enactment, 
designate the terms of each elected director in each class, not to 
exceed 3 years, to assure that, in each subsequent election, 3 
directors from different classes of elective directorships are elected 
each year.''.
    (e) Subsection (g) of section 7 of the Federal Home Loan Bank Act 
(12 U.S.C. 1427(i)) (as so redesignated by subsection (b) of this 
section) is amended by striking ``subject to the approval of the 
board''.

SEC. 165. ADVANCES TO NONMEMBER BORROWERS.

    Section 10b of the Federal Home Loan Bank Act (12 U.S.C. 1430b) is 
amended--
            (1) in subsection (a), by striking ``(a) In General.--'';
            (2) by striking the fourth sentence of subsection (a), and 
        inserting ``Notwithstanding the preceding sentence, if an 
        advance is made for the purpose of facilitating mortgage 
        lending that benefits individuals and families that meet the 
        income requirements set forth in section 142(d) or 143(f) of 
        the Internal Revenue Code of 1986, the advance may be 
        collateralized as provided in section 10(a) of this Act.''; and
            (3) by striking subsection (b).

SEC. 166. POWERS AND DUTIES OF BANKS.

    (a) Subsection (a) of section 11 of the Federal Home Loan Bank Act 
(12 U.S.C. 1431(a)) is amended--
            (1) by inserting ``through the Office of Finance'' after 
        ``to issue''; and
            (2) by striking ``Board'' after ``upon such terms and 
        conditions as the'' and inserting ``board of directors of the 
        bank''.
    (b) Subsection (b) of section 11 of the Federal Home Loan Bank Act 
(12 U.S.C. 1431(b)) is amended to read as follows:
    ``(b) Issuance of Federal Home Loan Bank Consolidated Bonds.--
            ``(1) In general.-- The Office of Finance may issue 
        consolidated Federal home loan bank bonds and other 
        consolidated obligations on behalf of the banks.
            ``(2) Joint and several obligation; terms and conditions.--
        Consolidated obligations issued by the Office of Finance under 
        paragraph (1) shall--
                    ``(A) be the joint and several obligations of all 
                the Federal home loan banks; and
                    ``(B) shall be issued upon such terms and 
                conditions as shall be established by the Office of 
                Finance subject to such rules and regulations as the 
                Finance Board may prescribe.''.
    (c) Section 11(f) of the Federal Home Loan Bank Act (12 U.S.C. 
1430(f) (as designated before the redesignation by subsection (e) of 
this section) is amended by striking both commas immediately following 
``permit'' and inserting ``or''.
    (d) Subsection (i) of section 11 of the Federal Home Loan Bank Act 
(12 U.S.C. 1431(i)) is amended by striking the second undesignated 
paragraph.
    (e) Section 11 of the Federal Home Loan Bank Act (12 U.S.C. 1431) 
is amended--
            (1) by striking subsection (c); and
            (2) by redesignating subsections (d) through (k) as 
        subsections (c) through (j), respectively.

SEC. 167. MERGERS AND CONSOLIDATIONS OF FEDERAL HOME LOAN BANKS.

    Section 26 of the Federal Home Loan Bank Act (12 U.S.C. 1446) is 
amended by designating the current paragraph as ``(a)'' and adding the 
following new sections:
    ``(b) Nothing in this section shall preclude voluntary mergers, 
combinations or consolidation by or among the Federal home loan banks 
pursuant to such regulations as the Finance Board may prescribe.
    ``(c) Number of Elected Directors of Resulting Bank.-- Subject to 
section 7 of this Act, any bank resulting from a merger, combination, 
or consolidation pursuant to this section may have a number of elected 
directors equal to or less than the total number of elected directors 
of all the banks which participated in such transaction (as determined 
immediately before such transaction).
    ``(d) Number of Appointed Directors of Resulting Bank.--The number 
of appointed directors of any bank resulting from a merger, 
combination, or consolidation pursuant to this section shall be a 
number that is three less than the number of elected directors.
    ``(e) Adjustment of District Boundaries.--After consummation of any 
merger, combination, or consolidation of two or more Federal home loan 
banks, the Finance Board shall adjust the districts established in 
section 3 of this Act to reflect such merger, combination, or 
consolidation.''.

SEC. 168. TECHNICAL AMENDMENTS.

    (a) Repeal of Sections 22A and 27.--The Federal Home Loan Bank Act 
(12 U.S.C. 1421 et seq.) is amended by striking sections 22A (12 U.S.C. 
1442a) and 27 (12 U.S.C. 1447).
    (b) Section 12.--
            (1) Section 12(a) of the Federal Home Loan Bank Act (12 
        U.S.C. 1432(a)) is amended--
                    (A) by striking ``subject to the approval of the 
                Board'' immediately following ``transaction of its 
                business''; and
                    (B) by striking ``and, by its Board of directors, 
                to prescribe, amend, and repeal by-laws, rules, and 
                regulations governing the manner in which its affairs 
                may be administered; and the powers granted to it by 
                law may be exercised and enjoyed subject to the 
                approval of the Board. The president of a Federal Home 
                Loan Bank may also be a member of the Board of 
                directors thereof, but no other officer, employee, 
                attorney, or agent of such bank,'' and inserting ``and, 
                by the board of directors of the bank, to prescribe, 
                amend, and repeal by-laws governing the manner in which 
                its affairs may be administered, consistent with 
                applicable statute and regulation, as administered by 
                the Finance Board. No officer, employee, attorney, or 
                agent of a Federal home loan bank''.
            (2) Section 12 of the Federal Home Loan Bank Act (12 U.S.C. 
        1432) is amended by inserting after subsection (b) the 
        following new subsection:
    ``(c) Prohibition on Excessive Compensation.--
            ``(1) In general.--The Finance Board shall prohibit the 
        Federal home loan banks from providing compensation to any 
        officer, director, or employee that is not reasonable and 
        comparable with the compensation for employment in other 
        similar businesses involving similar duties and 
        responsibilities. However, the Finance Board may not prescribe 
        or set a specific level or range of compensation for any 
        officer, director, or employee.
            ``(2) Regulations.--The Finance Board, by regulation, may 
        provide for the requirements of paragraph (1) to be phased-in 
        over a period not to exceed 3 years.
            ``(3) Exception for existing contracts.--Paragraph (1) 
        shall not apply to any contract entered into before June 1, 
        1997.''.
    (c) Powers and Duties of Federal Housing Finance Board.--
            (1) Subsection (a)(1) of section 2B of the Federal Home 
        Loan Bank Act (12 U.S.C. 1422b(a)(1)) is amended by striking 
        the period at the end of the sentence and inserting ``; and to 
        have the same powers, rights, and duties to enforce this Act 
        with respect to the Federal home loan banks and the senior 
        officers and directors of such banks as the Office of Federal 
        Housing Enterprise Oversight has over the Federal housing 
        enterprises and the senior officers and directors of such 
        enterprises under the Federal Housing Enterprises Financial 
        Safety and Soundness Act of 1992.''.
            (2) Subsection (b) of section 2B of the Federal Home Loan 
        Bank Act (12 U.S.C. 1422b(b)) is amended--
                    (A) by striking ``(1) Board staff.--'';
                    (B) by striking ``function to any employee, 
                administrative unit'' and inserting ``function to any 
                employee or administrative unit'';
                    (C) by striking the second sentence in paragraph 
                (1); and
                    (D) by striking paragraph (2).
            (3) Section 111 of Public Law 93-495 (12 U.S.C. 250) is 
        amended by striking ``Federal Home Loan Bank Board'' and 
        inserting ``Federal Housing Finance Board''.
    (d) Eligibility to Secure Advances.--
            (1) Section 9.--Section 9 of the Federal Home Loan Bank Act 
        (12 U.S.C. 1429) is amended--
                    (A) in the second sentence, by striking ``with the 
                approval of the Board''; and
                    (B) in the third sentence, by striking ``, subject 
                to the approval of the Board,''.
            (2) Section 10.--
                    (A) Subsection (a) of section 10 of the Federal 
                Home Loan Bank Act (12 U.S.C. 1430(a)) is amended in 
                paragraph (3), by striking ``Deposits'' and inserting 
                ``Cash or deposits''.
                    (B) Subsection (c) of section 10 of the Federal 
                Home Loan Bank Act (12 U.S.C. 1430(c)) is amended--
                            (i) in the first sentence by striking 
                        ``Board'' and inserting ``Federal home loan 
                        bank''; and
                            (ii) by striking the second sentence.
                    (C) Subsection (d) of section 10 of the Federal 
                Home Loan Bank Act (12 U.S.C. 1430(d)) is amended--
                            (i) in the first sentence, by striking 
                        ``and the approval of the Board''; and
                            (ii) in the last sentence, by striking 
                        ``Subject to the approval of the Board, any'' 
                        and inserting ``Any''.
                    (D) Section 10(j) of the Federal Home Loan Bank Act 
                (12 U.S.C. 1430(j)) is amended--
                            (i) in the first sentence of paragraph (1) 
                        by striking ``to subsidize the interest rate on 
                        advances'' and inserting ``to provide 
                        subsidies, including subsidized interest rates 
                        on advances'';
                            (ii) in paragraphs (2), (3), (4), (5), (9), 
                        (11), and (12) by striking ``advances'' and 
                        ``subsidized advances'' each place such terms 
                        appear and inserting ``subsidies, including 
                        subsidized advances'';
                            (iii) in paragraph (1), by inserting 
                        ``(A)'' before the first sentence, and 
                        inserting the following at the end of the 
                        paragraph:
                    ``(B) Subject to such regulations as the Finance 
                Board may prescribe, the board of directors of each 
                Federal home loan bank may approve or disapprove 
                requests from members for Affordable Housing Program 
                subsidies, and may not delegate such authority.'';
                            (iv) in paragraph (2), by striking 
                        subparagraph (B) and inserting the following 
                        new subparagraph:
                    ``(B) finance the purchase, construction or 
                rehabilitation of rental housing if, for a period of at 
                least 15 years, either 20 percent or more of the units 
                in such housing are occupied by and affordable for 
                households whose income is 50 percent or less of area 
                median income (as determined by the Secretary of 
                Housing and Urban Development, and as adjusted for 
                family size); or 40 percent or more of the units in 
                such housing are occupied by and affordable for 
                households whose income is 60 percent or less of area 
                median income (as determined by the Secretary of 
                Housing and Urban Development, and as adjusted for 
                family size).'';
                            (v) in paragraph (5)--
                                    (I) by striking the colon after 
                                ``Affordable Housing Program'';
                                    (II) by striking subparagraphs (A) 
                                and (B); and
                                    (III) by striking ``(C) In 1995, 
                                and subsequent years,'';
                            (vi) in paragraph (11)--
                                    (I) by inserting ``, pursuant to a 
                                nomination process that is as broad and 
                                as participatory as possible, and 
                                giving consideration to the size of the 
                                District and the diversity of low- and 
                                moderate-income housing needs and 
                                activities within the District,'' after 
                                ``Advisory Council of 7 to 15 
                                persons'';
                                    (II) by inserting ``a diverse range 
                                of'' before ``community and nonprofit 
                                organizations''; and
                                    (III) by inserting after the first 
                                sentence, the following new sentence: 
                                ``Representatives of no one group shall 
                                constitute an undue proportion of the 
                                membership of the Advisory Council.''; 
                                and
                            (vii) in paragraph (13), by striking 
                        subparagraph (D) and inserting the following 
                        new subparagraph:
                    ``(D) Affordable.--For purposes of paragraph 
                (2)(B), the term ``affordable'' means that the rent 
                with respect to a unit shall not exceed 30 percent of 
                the income limitation under paragraph (2)(B) applicable 
                to occupants of such unit.''.
    (e) Section 16.--Subsection (a) of section 16 of the Federal Home 
Loan Bank Act (12 U.S.C. 1436) is amended in the third sentence by 
striking ``net earnings'' and inserting ``previously retained earnings 
or current net earnings''; by striking ``, and then only with the 
approval of the Federal Housing Finance Board''; and by striking the 
fourth sentence.
    (f) Section 18.--Subsection (b) of section 18 of the Federal Home 
Loan Bank Act (12 U.S.C. 1438) is amended by striking paragraph (4).
    (g) Section 11.--Section 11 of the Federal Home Loan Bank Act (12 
U.S.C. 1431) is amended by inserting after subsection (j) (as so 
redesignated by section 166(e) of this subtitle) the following 
subsection:
    ``(k) Prohibition on Other Activities.--
            ``(1) A Federal home loan bank may not engage in any 
        activity other than the activities authorized under this Act 
        and activities incidental to such authorized activities.
            ``(2) All activities specified in paragraph (1) are subject 
        to Finance Board approval.''.

SEC. 169. DEFINITIONS.

    Paragraph (3) of section 2 of the Federal Home Loan Bank Act (12 
U.S.C. 1422(3)) is amended to read as follows:
            ``(3) The term ``State'' in addition to the states of the 
        United States, includes the District of Columbia, Guam, Puerto 
        Rico, the United States Virgin Islands, American Samoa, and the 
        Commonwealth of the Northern Mariana Islands.''.

SEC. 170. RESOLUTION FUNDING CORPORATION.

    (a) In General.--Section 21B(f)(2)(C) of the Federal Home Loan Bank 
Act (12 U.S.C. 1441b(f)(2)(C)) is amended to read as follows:
                    ``(C) Payments by federal home loan banks.--To the 
                extent the amounts available pursuant to subparagraphs 
                (A) and (B) are insufficient to cover the amount of 
                interest payments, each Federal home loan bank shall 
                pay to the Funding Corporation each calendar year 20.75 
                percent of the net earnings of such bank (after 
                deducting expenses relating to subsection (j) of 
                section 10 and operating expenses).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on January 1, 1999.

SEC. 171. CAPITAL STRUCTURE OF THE FEDERAL HOME LOAN BANKS.

    (a) In General.--Section 6 of the Federal Home Loan Bank Act (12 
U.S.C. 1426) is amended to read as follows:

``SEC. 6. CAPITAL STRUCTURE OF FEDERAL HOME LOAN BANKS.

    ``(a) Capital Structure Plan.--On or before January 1, 1999, the 
board of directors of each Federal home loan bank shall submit for 
Finance Board approval a plan establishing and implementing a capital 
structure for such bank which--
            ``(1) the board of directors determines is the best suited 
        for the condition and operation of the bank and the interests 
        of the shareholders of the bank;
            ``(2) meets the requirements of subsection (b); and
            ``(3) meets the minimum capital standards and requirements 
        established under subsection (c) and any regulations prescribed 
        by the Finance Board pursuant to such subsection.
    ``(b) Contents of Plan.--The capital structure plan of each Federal 
home loan bank shall meet the following requirements:
            ``(1) Stock purchase requirements.--
                    ``(A) In general.--Each capital structure plan of a 
                Federal home loan bank shall require the shareholders 
                of the bank to maintain an investment in the stock of 
                the bank in amount not less than--
                            ``(i) a minimum percentage of the total 
                        assets of the shareholder; and
                            ``(ii) a minimum percentage of the 
                        outstanding advances from the bank to the 
                        shareholder.
                    ``(B) Minimum percentage levels.--The minimum 
                percentages established pursuant to subparagraph (A) 
                shall be set at levels sufficient to meet the bank's 
                minimum capital requirements established by the Finance 
                Board under subsection (c).
                    ``(C) Maximum asset based capital requirement.--The 
                asset-based capital requirement applicable to any 
                shareholder of a Federal home loan bank in any year 
                shall not exceed the lesser of--
                            ``(i) 0.6 percent of a shareholder's total 
                        assets at the close of the preceding year; or
                            ``(ii) $300,000,000.
                    ``(D) Maximum advance-based requirement.--The 
                advance-based capital requirement applicable to any 
                shareholder of a Federal home loan bank shall not 
                exceed 6 percent of the total outstanding advances from 
                the bank to the shareholder.
                    ``(E) Minimum stock purchase requirement 
                authorized.--A capital structure plan may establish a 
                minimum dollar amount of stock of a Federal home loan 
                bank in which a shareholder shall be required to 
                invest.
            ``(2) Adjustments to stock purchase requirements.--The 
        capital structure plan adopted by each Federal home loan bank 
        shall impose a continuing obligation on the board of directors 
        of the bank to review and adjust as necessary member stock 
        purchase requirements in order to ensure that the bank remains 
        in compliance with applicable minimum capital levels 
        established by the Finance Board.
            ``(3) Transition rule for stock purchase requirements.--
                    ``(A) In general.--A capital structure plan may 
                allow shareholders who were members of a Federal home 
                loan bank on the date of the enactment of the Financial 
                Services Act of 1998 to come into compliance with the 
                asset-based stock purchase requirement established 
                under paragraph (1) during a transition period 
                established under the plan of not more than 3 years, if 
                such requirement exceeds the asset-based stock purchase 
                requirement in effect on such date of enactment.
                    ``(B) Interim purchase requirements.--A capital 
                structure plan may establish interim asset-based stock 
                purchase requirements applicable to members referred to 
                in subparagraph (A) during a transition period 
                established under subparagraph (A).
            ``(4) Classes of stock.--
                    ``(A) In general.--Each capital structure plan 
                shall afford each shareholder of a Federal home loan 
                bank the option of meeting the shareholder's stock 
                purchase requirements through the purchase of any 
                combination of Class A or Class B stock.
                    ``(B) Class a stock.--Class A stock shall be stock 
                of a Federal home loan bank that shall be redeemed in 
                cash and at par by the bank no later than 12 months 
                following submission of a written notice by a 
                shareholder of the shareholder's intention to divest 
                all shares of stock in the bank.
                    ``(C) Class b stock.--Class B stock shall be stock 
                of a Federal home loan bank that shall be redeemed in 
                cash and at par by the bank no later than 5 years 
                following submission of a written notice by a 
                shareholder of the shareholder's intention to divest 
                all shares of stock in the bank.
                    ``(D) Rights requirement.--The Class B stock of a 
                Federal home loan bank may receive a dividend premium 
                over that paid on Class A stock, and may have 
                preferential voting rights in the election of Federal 
                home loan bank directors.
                    ``(E) Lower stock purchase requirements for class b 
                stock.--A capital structure plan may provide for lower 
                stock purchase requirements with respect to those 
                shareholder's that elect to purchase Class B stock in a 
                manner that is consistent with meeting the bank's own 
                minimum capital requirements as established by the 
                Finance Board.
                    ``(F) No other classes of stock permitted.--No 
                class of stock other than the Class A and Class B stock 
                described in subparagraphs (B) and (C) may be issued by 
                a Federal home loan bank.
            ``(5) Limited transferability of stock.--Each capital 
        structure plan shall provide that any equity securities issued 
        by the bank shall be available only to, held only by, and 
        tradable only among shareholders of the bank.
    ``(c) Capital Standards.--
            ``(1) In general.--The Finance Board shall prescribe, by 
        regulation, uniform capital standards applicable to each 
        Federal home loan bank which shall include--
                    ``(A) a leverage limit in accordance with paragraph 
                (2); and
                    ``(B) a risk-based capital requirement in 
                accordance with paragraph (3).
            ``(2) Minimum leverage limit.--The leverage limit 
        established by the Finance Board shall require each Federal 
        home loan bank to maintain total capital in an amount not less 
        than 5 percent of the total assets of the bank. In determining 
        compliance with the minimum leverage ratio, the amount of 
        retained earnings and the paid-in value of Class B stock, if 
        any, shall be multiplied by 1.5 and such higher amount shall be 
        deemed to be capital for purposes of meeting the 5 percent 
        minimum leverage ratio.
            ``(3) Risk-based capital standard.--The risk-based capital 
        requirement shall be composed of the following components:
                    ``(A) Capital sufficient to meet the credit risk to 
                which a Federal home loan bank is subject, based on an 
                amount which is not less than the amount of tier 1, 
                risk-based capital required by regulations prescribed, 
                or guidelines issued under section 38 of the Federal 
                Deposit Insurance Act for a well capitalized insured 
                depository institution.
                    ``(B) Capital sufficient to meet the interest rate 
                risk to which a Federal home loan bank is subject, 
                based on an interest rate stress test applied by the 
                Finance Board that rigorously tests for changes in 
                interest rates, rate volatility, and changes in the 
                shape of the yield curve.
    ``(d) Redemption of Capital.--
            ``(1) In general.--Any shareholder of a Federal home loan 
        bank shall have the right to withdraw the shareholder's 
        membership from a Federal home loan bank and to redeem the 
        shareholder's stock in accordance with the redemption rights 
        associated with the class of stock the shareholder holds, if--
                    ``(A) such shareholder has filed a written notice 
                of an intention to redeem all such shares; and
                    ``(B) the shareholder has no outstanding advances 
                from any Federal home loan bank at the time of such 
                redemption.
            ``(2) Partial redemption.--A shareholder who files notice 
        of intention to redeem all shares of stock in a Federal home 
        loan bank may redeem not more than 1/2 of all such shares, in 
        cash and at par, 6 months before the date by which the bank is 
        required to redeem such stock pursuant to subparagraph (B) or 
        (C) of subsection (b)(4).
            ``(3) Divestiture.--The board of directors of any Federal 
        home loan bank may, after a hearing, order the divestiture by 
        any shareholder of all ownership interests of such shareholder 
        in the bank, if--
                    ``(A) in the opinion of the board of directors, 
                such shareholder has failed to comply with a provision 
                of this Act or any regulation prescribed under this 
                Act; or
                    ``(B) the shareholder has been determined to be 
                insolvent, or otherwise subject to the appointment of a 
                conservator, receiver, or other legal custodian, by a 
                State or Federal authority with regulatory and 
                supervisory responsibility for such shareholder.
            ``(4) Retirement of excess stock.--Any shareholder may--
                    ``(A) retire shares of Class A stock or, at the 
                option of the shareholder, shares of Class B stock, or 
                any combination of Class A and Class B stock, that are 
                excess to the minimum stock purchase requirements 
                applicable to the shareholder; and
                    ``(B) receive from the Federal home loan bank a 
                prompt payment in cash equal to the par value of such 
                stock.
            ``(5) Impairment of capital.--If the Finance Board or the 
        board of directors of a Federal home loan bank determines that 
        the paid-in capital of the bank is, or is likely to be, 
        impaired as a result of losses in or depreciation of the assets 
        of the bank, the Federal home loan bank shall withhold that 
        portion of the amount due any shareholder with respect to any 
        redemption or retirement of any class of stock which bears the 
        same ratio to the total of such amount as the amount of the 
        impaired capital bears to the total amount of capital allocable 
        to such class of stock.
            ``(6) Policies.--Subject to the requirements of this 
        section, the board of directors of each Federal home loan bank 
        shall promptly establish policies, consistent with this Act, 
        governing the capital stock of such bank and other provisions 
        of this section.''.

SEC. 172. INVESTMENTS.

    Subsection (j) of section 11 of the Federal Home Loan Bank Act (12 
U.S.C. 1431) (as so redesignated by section 166(e) of this subtitle) is 
amended to read as follows:
    ``(j) Investments.--Each bank shall reduce its investments to those 
necessary for liquidity purposes, for safe and sound operation of the 
banks, or for housing finance, as administered by the Finance Board.''.

SEC. 173. FEDERAL HOUSING FINANCE BOARD.

    Section 2A(b)(1) of the Federal Home Loan Bank Act (12 U.S.C. 
1422(b)(1)) is amended--
            (1) by redesignating subparagraphs (A) and (B) as 
        subparagraphs (B) and (C), respectively;
            (2) by inserting before subparagraph (B) (as so 
        redesignated by paragraph (1) of this section) the following 
        new subparagraph:
                    ``(A) The Secretary of the Treasury (or the 
                Secretary of the Treasury's designee), who shall serve 
                without additional compensation.''; and
            (3) in subparagraph (C) (as so redesignated by paragraph 
        (1) of this section) by striking ``Four'' and inserting ``3''.

                 Subtitle H--Direct Activities of Banks

SEC. 181. AUTHORITY OF NATIONAL BANKS TO UNDERWRITE CERTAIN MUNICIPAL 
              BONDS.

    The paragraph designated the Seventh of section 5136 of the Revised 
Statutes of the United States (12 U.S.C. 24(7)) is amended by adding at 
the end the following new sentence: ``In addition to the provisions in 
this paragraph for dealing in, underwriting or purchasing securities, 
the limitations and restrictions contained in this paragraph as to 
dealing in, underwriting, and purchasing investment securities for the 
national bank's own account shall not apply to obligations (including 
limited obligation bonds, revenue bonds, and obligations that satisfy 
the requirements of section 142(b)(1) of the Internal Revenue Code of 
1986) issued by or on behalf of any state or political subdivision of a 
state, including any municipal corporate instrumentality of 1 or more 
states, or any public agency or authority of any state or political 
subdivision of a state, if the national banking association is well 
capitalized (as defined in section 38 of the Federal Deposit Insurance 
Act).''.

                  Subtitle I--Deposit Insurance Funds

SEC. 186. STUDY OF SAFETY AND SOUNDNESS OF FUNDS.

    (a) Study Required.--The Board of Directors of the Federal Deposit 
Insurance Corporation shall conduct a study of the following issues 
with regard to the Bank Insurance Fund and the Savings Association 
Insurance Fund:
            (1) The safety and soundness of the funds and the adequacy 
        of the reserve requirements applicable to the funds in light 
        of--
                    (A) the size of the insured depository institutions 
                which are resulting from mergers and consolidations 
                since the effective date of the Riegle-Neal Interstate 
                Banking and Branching Efficiency Act of 1994; and
                    (B) the affiliation of insured depository 
                institutions with other financial institutions pursuant 
                to this Act and the amendments made by this Act.
            (2) The concentration levels of the funds, taking into 
        account the number of members of each fund and the geographic 
        distribution of such members, and the extent to which either 
        fund is exposed to higher risks due to a regional concentration 
        of members or an insufficient membership base relative to the 
        size of member institutions.
            (3) Issues relating to the planned merger of the funds, 
        including the cost of merging the funds and the manner in which 
        such costs will be distributed among the members of the 
        respective funds.
    (b) Report Required.--
            (1) In general.--Before the end of the 9-month period 
        beginning on the date of the enactment of this Act, the Board 
        of Directors of the Federal Deposit Insurance Corporation shall 
        submit a report to the Congress on the study conducted pursuant 
        to subsection (a).
            (2) Contents of report.--The report shall include--
                    (A) detailed findings of the Board of Directors 
                with regard to the issues described in subsection (a);
                    (B) a description of the plans developed by the 
                Board of Directors for merging the Bank Insurance Fund 
                and the Savings Association Insurance Fund, including 
                an estimate of the amount of the cost of such merger 
                which would be borne by Savings Association Insurance 
                Fund members; and
                    (C) such recommendations for legislative and 
                administrative action as the Board of Directors 
                determines to be necessary or appropriate to preserve 
                the safety and soundness of the deposit insurance 
                funds, reduce the risks to such funds, provide for an 
                efficient merger of such funds, and for other purposes.
    (c) Definitions.--For purposes of this section, the following 
definitions shall apply:
            (1) Insured depository institution.--The term ``insured 
        depository institution'' has the meaning given to such term in 
        section 3(c) of the Federal Deposit Insurance Act.
            (2) Bif and Saif members.--The terms ``Bank Insurance Fund 
        member'' and ``Savings Association Insurance Fund member'' have 
        the meaning given to such terms in section 7(l) of the Federal 
        Deposit Insurance Act.

                  Subtitle J--Effective Date of Title

SEC. 191. EFFECTIVE DATE.

    Except with regard to any subtitle or other provision of this title 
for which a specific effective date is provided, this title and the 
amendments made by this title shall take effect at the end of the 270-
day period beginning on the date of the enactment of this Act.

                    TITLE II--FUNCTIONAL REGULATION

                    Subtitle A--Brokers and Dealers

SEC. 201. DEFINITION OF BROKER.

    Section 3(a)(4) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)(4)) is amended to read as follows:
            ``(4) Broker.--
                    ``(A) In general.--The term `broker' means any 
                person engaged in the business of effecting 
                transactions in securities for the account of others.
                    ``(B) Exception for certain bank activities.--A 
                bank shall not be considered to be a broker because the 
                bank engages in any of the following activities under 
                the conditions described:
                            ``(i) Third party brokerage arrangements.--
                        The bank enters into a contractual or other 
                        arrangement with a broker or dealer registered 
                        under this title under which the broker or 
                        dealer offers brokerage services on or off the 
                        premises of the bank if--
                                    ``(I) such broker or dealer is 
                                clearly identified as the person 
                                performing the brokerage services;
                                    ``(II) the broker or dealer 
                                performs brokerage services in an area 
                                that is clearly marked and, to the 
                                extent practicable, physically separate 
                                from the routine deposit-taking 
                                activities of the bank;
                                    ``(III) any materials used by the 
                                bank to advertise or promote generally 
                                the availability of brokerage services 
                                under the contractual or other 
                                arrangement clearly indicate that the 
                                brokerage services are being provided 
                                by the broker or dealer and not by the 
                                bank;
                                    ``(IV) any materials used by the 
                                bank to advertise or promote generally 
                                the availability of brokerage services 
                                under the contractual or other 
                                arrangement are in compliance with the 
                                Federal securities laws before 
                                distribution;
                                    ``(V) bank employees (other than 
                                associated persons of a broker or 
                                dealer who are qualified pursuant to 
                                the rules of a self-regulatory 
                                organization) perform only clerical or 
                                ministerial functions in connection 
                                with brokerage transactions including 
                                scheduling appointments with the 
                                associated persons of a broker or 
                                dealer, except that bank employees may 
                                forward customer funds or securities 
                                and may describe in general terms the 
                                range of investment vehicles available 
                                from the bank and the broker or dealer 
                                under the contractual or other 
                                arrangement;
                                    ``(VI) bank employees do not 
                                directly receive incentive compensation 
                                for any brokerage transaction unless 
                                such employees are associated persons 
                                of a broker or dealer and are qualified 
                                pursuant to the rules of a self-
                                regulatory organization, except that 
                                the bank employees may receive 
                                compensation for the referral of any 
                                customer if the compensation is a 
                                nominal one-time cash fee of a fixed 
                                dollar amount and the payment of the 
                                fee is not contingent on whether the 
                                referral results in a transaction;
                                    ``(VII) such services are provided 
                                by the broker or dealer on a basis in 
                                which all customers which receive any 
                                services are fully disclosed to the 
                                broker or dealer;
                                    ``(VIII) the bank does not carry a 
                                securities account of the customer 
                                except in a customary custodian or 
                                trustee capacity; and
                                    ``(IX) the bank, broker, or dealer 
                                informs each customer that the 
                                brokerage services are provided by the 
                                broker or dealer and not by the bank 
                                and that the securities are not 
                                deposits or other obligations of the 
                                bank, are not guaranteed by the bank, 
                                and are not insured by the Federal 
                                Deposit Insurance Corporation.
                            ``(ii) Trust activities.--The bank effects 
                        transactions in a trustee capacity, or effects 
                        transactions in a fiduciary capacity in its 
                        trust department or other department that is 
                        regularly examined by bank examiners for 
                        compliance with fiduciary principles and 
                        standards, and (in either case)--
                                    ``(I) is primarily compensated on 
                                the basis of an administration or 
                                annual fee (payable on a monthly, 
                                quarterly, or other basis), a 
                                percentage of assets under management, 
                                or a flat or capped per order 
                                processing fee, or any combination of 
                                such fees, but does not otherwise 
                                receive brokerage commissions, or other 
                                similar remuneration based on effecting 
                                transactions in securities, that exceed 
                                the cost incurred by the bank in 
                                connection with executing securities 
                                transactions for trustee or fiduciary 
                                customers; and
                                    ``(II) does not publicly solicit 
                                brokerage business, other than by 
                                advertising that it effects 
                                transactions in securities in 
                                conjunction with advertising its other 
                                trust activities.
                            ``(iii) Permissible securities 
                        transactions.--The bank effects transactions 
                        in--
                                    ``(I) commercial paper, bankers 
                                acceptances, or commercial bills;
                                    ``(II) exempted securities;
                                    ``(III) qualified Canadian 
                                government obligations as defined in 
                                section 5136 of the Revised Statutes, 
                                in conformity with section 15C of this 
                                title and the rules and regulations 
                                thereunder, or obligations of the North 
                                American Development Bank; or
                                    ``(IV) any standardized, credit 
                                enhanced debt security issued by a 
                                foreign government pursuant to the 
                                March 1989 plan of then Secretary of 
                                the Treasury Brady, used by such 
                                foreign government to retire 
                                outstanding commercial bank loans.
                            ``(iv) Certain stock purchase plans.--
                                    ``(I) Employee benefit plans.--The 
                                bank effects transactions, as part of 
                                its transfer agency activities, in the 
                                securities of an issuer as part of any 
                                pension, retirement, profit-sharing, 
                                bonus, thrift, savings, incentive, or 
                                other similar benefit plan for the 
                                employees of that issuer or its 
                                subsidiaries, if--
                                            (aa) the bank does not 
                                        solicit transactions or provide 
                                        investment advice with respect 
                                        to the purchase or sale of 
                                        securities in connection with 
                                        the plan; and
                                            ``(bb) the bank's 
                                        compensation for such plan or 
                                        program consists of 
                                        administration fees, or flat or 
                                        capped per order processing 
                                        fees, or both, but the bank 
                                        does not otherwise receive 
                                        brokerage commissions, or other 
                                        similar remuneration based on 
                                        effecting transactions in 
                                        securities, that exceed the 
                                        cost incurred by the bank in 
                                        connection with executing 
                                        securities transactions under 
                                        this subclause (I).
                                    ``(II) Dividend reinvestment 
                                plans.--The bank effects transactions, 
                                as part of its transfer agency 
                                activities, in the securities of an 
                                issuer as part of that issuer's 
                                dividend reinvestment plan, if--
                                            ``(aa) the bank does not 
                                        solicit transactions or provide 
                                        investment advice with respect 
                                        to the purchase or sale of 
                                        securities in connection with 
                                        the plan;
                                            ``(bb) the bank does not 
                                        net shareholders' buy and sell 
                                        orders, other than for programs 
                                        for odd-lot holders or plans 
                                        registered with the Commission; 
                                        and
                                            ``(cc) the bank's 
                                        compensation for such plan or 
                                        program consists of 
                                        administration fees, or flat or 
                                        capped per order processing 
                                        fees, or both, but the bank 
                                        does not otherwise receive 
                                        brokerage commissions, or other 
                                        similar remuneration based on 
                                        effecting transactions in 
                                        securities, that exceed the 
                                        cost incurred by the bank in 
                                        connection with executing 
                                        securities transactions under 
                                        this subclause (II).
                                    ``(III) Issuer plans.--The bank 
                                effects transactions, as part of its 
                                transfer agency activities, in the 
                                securities of an issuer as part of a 
                                plan or program for the purchase or 
                                sale of that issuer's shares, if--
                                            ``(aa) the bank does not 
                                        solicit transactions or provide 
                                        investment advice with respect 
                                        to the purchase or sale of 
                                        securities in connection with 
                                        the plan or program;
                                            ``(bb) the bank does not 
                                        net shareholders' buy and sell 
                                        orders, other than for programs 
                                        for odd-lot holders or plans 
                                        registered with the Commission; 
                                        and
                                            ``(cc) the bank's 
                                        compensation for such plan or 
                                        program consists of 
                                        administration fees, or flat or 
                                        capped per order processing 
                                        fees, or both, but the bank 
                                        does not otherwise receive 
                                        brokerage commissions, or other 
                                        similar remuneration based on 
                                        effecting transactions in 
                                        securities, that exceed the 
                                        cost incurred by the bank in 
                                        connection with executing 
                                        securities transactions under 
                                        this subclause (III).
                                    ``(IV) Permissible delivery of 
                                materials.--The exception to being 
                                considered a broker for a bank engaged 
                                in activities described in subclauses 
                                (I), (II), and (III) will not be 
                                affected by a bank's delivery of 
                                written or electronic plan materials to 
                                employees of the issuer, shareholders 
                                of the issuer, or members of affinity 
                                groups of the issuer, so long as such 
                                materials are--
                                            ``(aa) comparable in scope 
                                        or nature to that permitted by 
                                        the Commission as of the date 
                                        of the enactment of the 
                                        Financial Services Act of 1998; 
                                        or
                                            ``(bb) otherwise permitted 
                                        by the Commission.
                            ``(v) Sweep accounts.--The bank effects 
                        transactions as part of a program for the 
                        investment or reinvestment of bank deposit 
                        funds into any no-load, open-end management 
                        investment company registered under the 
                        Investment Company Act of 1940 that holds 
                        itself out as a money market fund.
                            ``(vi) Affiliate transactions.--The bank 
                        effects transactions for the account of any 
                        affiliate of the bank (as defined in section 2 
                        of the Bank Holding Company Act of 1956) other 
                        than--
                                    ``(I) a registered broker or 
                                dealer; or
                                    ``(II) an affiliate that is engaged 
                                in merchant banking, as described in 
                                section 6(c)(3)(H) of the Bank Holding 
                                company Act of 1956.
                            ``(vii) Private securities offerings.--The 
                        bank--
                                    ``(I) effects sales as part of a 
                                primary offering of securities not 
                                involving a public offering, pursuant 
                                to section 3(b), 4(2), or 4(6) of the 
                                Securities Act of 1933 or the rules and 
                                regulations issued thereunder;
                                    ``(II) at any time after one year 
                                after the date of enactment of the 
                                Financial Services Act of 1998, is not 
                                affiliated with a broker or dealer that 
                                has been registered for more than one 
                                year; and
                                    ``(III) effects transactions 
                                exclusively with qualified investors.
                            ``(viii) Safekeeping and custody 
                        activities.--
                                    ``(I) In general.--The bank, as 
                                part of customary banking activities--
                                            ``(aa) provides safekeeping 
                                        or custody services with 
                                        respect to securities, 
                                        including the exercise of 
                                        warrants and other rights on 
                                        behalf of customers;
                                            ``(bb) facilitates the 
                                        transfer of funds or 
                                        securities, as a custodian or a 
                                        clearing agency, in connection 
                                        with the clearance and 
                                        settlement of its customers' 
                                        transactions in securities;
                                            ``(cc) effects securities 
                                        lending or borrowing 
                                        transactions with or on behalf 
                                        of customers as part of 
                                        services provided to customers 
                                        pursuant to division (aa) or 
                                        (bb) or invests cash collateral 
                                        pledged in connection with such 
                                        transactions; or
                                            ``(dd) holds securities 
                                        pledged by a customer to 
                                        another person or securities 
                                        subject to purchase or resale 
                                        agreements involving a 
                                        customer, or facilitates the 
                                        pledging or transfer of such 
                                        securities by book entry or as 
                                        otherwise provided under 
                                        applicable law.
                                    ``(II) Exception for carrying 
                                broker activities.--The exception to 
                                being considered a broker for a bank 
                                engaged in activities described in 
                                subclause (I) shall not apply if the 
                                bank, in connection with such 
                                activities, acts in the United States 
                                as a carrying broker (as such term, and 
                                different formulations thereof, are 
                                used in section 15(c)(3) and the rules 
                                and regulations thereunder) for any 
                                broker or dealer, unless such carrying 
                                broker activities are engaged in with 
                                respect to government securities (as 
                                defined in paragraph (42) of this 
                                subsection).
                            ``(ix) Banking products.--The bank effects 
                        transactions in traditional banking products, 
                        as defined in section 206(a) of the Financial 
                        Services Act of 1998.
                            ``(x) De minimis exception.--The bank 
                        effects, other than in transactions referred to 
                        in clauses (i) through (ix), not more than 500 
                        transactions in securities in any calendar 
                        year, and such transactions are not effected by 
                        an employee of the bank who is also an employee 
                        of a broker or dealer.
                    ``(C) Broker dealer execution.--The exception to 
                being considered a broker for a bank engaged in 
                activities described in clauses (ii), (iv), and (viii) 
                of subparagraph (B) shall not apply if the activities 
                described in such provisions result in the trade in the 
                United States of any security that is a publicly traded 
                security in the United States, unless--
                            ``(i) the bank directs such trade to a 
                        registered or broker dealer for execution;
                            ``(ii) the trade is a cross trade or other 
                        substantially similar trade of a security 
                        that--
                                    ``(I) is made by the bank or 
                                between the bank and an affiliated 
                                fiduciary; and
                                    ``(II) is not in contravention of 
                                fiduciary principles established under 
                                applicable Federal or State law; or
                            ``(iii) the trade is conducted in some 
                        other manner permitted under rules, 
                        regulations, or orders as the Commission may 
                        prescribe or issue.
                    ``(D) No effect of bank exemptions on other 
                commission authority.--The exception to being 
                considered a broker for a bank engaged in activities 
                described in subparagraphs (B) and (C) shall not affect 
                the commission's authority under any other provision of 
                this Act or any other securities law.
                    ``(E) Fiduciary capacity.--For purposes of 
                subparagraph (B)(ii), the term `fiduciary capacity' 
                means--
                            ``(i) in the capacity as trustee, executor, 
                        administrator, registrar of stocks and bonds, 
                        transfer agent, guardian, assignee, receiver, 
                        or custodian under a uniform gift to minor act, 
                        or as an investment adviser if the bank 
                        receives a fee for its investment advice;
                            ``(ii) in any capacity in which the bank 
                        possesses investment discretion on behalf of 
                        another; or
                            ``(iii) in any other similar capacity.
                    ``(F) Exception for entities subject to section 
                15(e).--The term `broker' does not include a bank 
                that--
                            ``(i) was, immediately prior to the 
                        enactment of the Financial Services Act of 
                        1998, subject to section 15(e); and
                            ``(ii) is subject to such restrictions and 
                        requirements as the Commission considers 
                        appropriate.''.

SEC. 202. DEFINITION OF DEALER.

    Section 3(a)(5) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)(5)) is amended to read as follows:
            ``(5) Dealer.--
                    ``(A) In general.--The term `dealer' means any 
                person engaged in the business of buying and selling 
                securities for such person's own account through a 
                broker or otherwise.
                    ``(B) Exception for person not engaged in the 
                business of dealing.--The term `dealer' does not 
                include a person that buys or sells securities for such 
                person's own account, either individually or in a 
                fiduciary capacity, but not as a part of a regular 
                business.
                    ``(C) Exception for certain bank activities.--A 
                bank shall not be considered to be a dealer because the 
                bank engages in any of the following activities under 
                the conditions described:
                            ``(i) Permissible securities 
                        transactions.--The bank buys or sells--
                                    ``(I) commercial paper, bankers 
                                acceptances, or commercial bills;
                                    ``(II) exempted securities;
                                    ``(III) qualified Canadian 
                                government obligations as defined in 
                                section 5136 of the Revised Statutes of 
                                the United States, in conformity with 
                                section 15C of this title and the rules 
                                and regulations thereunder, or 
                                obligations of the North American 
                                Development Bank; or
                                    ``(IV) any standardized, credit 
                                enhanced debt security issued by a 
                                foreign government pursuant to the 
                                March 1989 plan of then Secretary of 
                                the Treasury Brady, used by such 
                                foreign government to retire 
                                outstanding commercial bank loans.
                            ``(ii) Investment, trustee, and fiduciary 
                        transactions.--The bank buys or sells 
                        securities for investment purposes--
                                    ``(I) for the bank; or
                                    ``(II) for accounts for which the 
                                bank acts as a trustee or fiduciary.
                            ``(iii) Asset-backed transactions.--The 
                        bank engages in the issuance or sale to 
                        qualified investors, through a grantor trust or 
                        otherwise, of securities backed by or 
                        representing an interest in notes, drafts, 
                        acceptances, loans, leases, receivables, other 
                        obligations, or pools of any such obligations 
                        predominantly originated by the bank, or a 
                        syndicate of banks of which the bank is a 
                        member, or an affiliate of any such bank other 
                        than a broker or dealer.
                            ``(iv) Banking products.--The bank buys or 
                        sells traditional banking products, as defined 
                        in section 206(a) of the Financial Services Act 
                        of 1998.
                            ``(v) Derivative instruments.--The bank 
                        issues, buys, or sells any derivative 
                        instrument to which the bank is a party--
                                    ``(I) to or from a corporation, 
                                limited liability company, or 
                                partnership that owns and invests on a 
                                discretionary basis, not less than 
                                $10,000,000 in investments, or to or 
                                from a qualified investor, except that 
                                if the instrument provides for the 
                                delivery of one or more securities 
                                (other than a derivative instrument or 
                                government security), the transaction 
                                shall be effected with or through a 
                                registered broker or dealer; or
                                    ``(II) to or from other persons, 
                                except that if the derivative 
                                instrument provides for the delivery of 
                                one or more securities (other than a 
                                derivative instrument or government 
                                security), or is a security (other than 
                                a government security), the transaction 
                                shall be effected with or through a 
                                registered broker or dealer; or
                                    ``(III) to or from any person if 
                                the instrument is neither a security 
                                nor provides for the delivery of one or 
                                more securities (other than a 
                                derivative instrument).''.

SEC. 203. REGISTRATION FOR SALES OF PRIVATE SECURITIES OFFERINGS.

    Section 15A of the Securities Exchange Act of 1934 (15 U.S.C. 78o-
3) is amended by inserting after subsection (i) the following new 
subsection:
    ``(j) Registration for Sales of Private Securities Offerings.--A 
registered securities association shall create a limited qualification 
category for any associated person of a member who effects sales as 
part of a primary offering of securities not involving a public 
offering, pursuant to section 3(b), 4(2), or 4(6) of the Securities Act 
of 1933 and the rules and regulations thereunder, and shall deem 
qualified in such limited qualification category, without testing, any 
bank employee who, in the six month period preceding the date of 
enactment of this Act, engaged in effecting such sales.''.

SEC. 204. SALES PRACTICES AND COMPLAINT PROCEDURES.

    Section 18 of the Federal Deposit Insurance Act is amended by 
adding at the end the following new subsection:
    ``(s) Sales Practices and Complaint Procedures With Respect to Bank 
Securities Activities.--
            ``(1) Regulations Required.--Each Federal banking agency 
        shall prescribe and publish in final form, not later than 6 
        months after the date of enactment of the Financial Services 
        Act of 1998, regulations which apply to retail transactions, 
        solicitations, advertising, or offers of any security by any 
        insured depository institution or any affiliate thereof other 
        than a registered broker or dealer or an individual acting on 
        behalf of such a broker or dealer who is an associated person 
        of such broker or dealer. Such regulations shall include--
                    ``(A) requirements that sales practices comply with 
                just and equitable principles of trade that are 
                substantially similar to the Rules of Fair Practice of 
                the National Association of Securities Dealers; and
                    ``(B) requirements prohibiting (i) conditioning an 
                extension of credit on the purchase or sale of a 
                security; and (ii) any conduct leading a customer to 
                believe that an extension of credit is conditioned upon 
                the purchase or sale of a security.
            ``(2) Procedures required.--The appropriate Federal banking 
        agencies shall jointly establish procedures and facilities for 
        receiving and expeditiously processing complaints against any 
        bank or employee of a bank arising in connection with the 
        purchase or sale of a security by a customer, including a 
        complaint alleging a violation of the regulations prescribed 
        under paragraph (1), but excluding a complaint involving an 
        individual acting on behalf of such a broker or dealer who is 
        an associated person of such broker or dealer. The use of any 
        such procedures and facilities by such a customer shall be at 
        the election of the customer. Such procedures shall include 
        provisions to refer a complaint alleging fraud to the 
        Securities and Exchange Commission and appropriate State 
        securities commissions.
            ``(3) Required actions.--The actions required by the 
        Federal banking agencies under paragraph (2) shall include the 
        following:
                    ``(A) establishing a group, unit, or bureau within 
                each such agency to receive such complaints;
                    ``(B) developing and establishing procedures for 
                investigating, and permitting customers to investigate, 
                such complaints;
                    ``(C) developing and establishing procedures for 
                informing customers of the rights they may have in 
                connection with such complaints;
                    ``(D) developing and establishing procedures that 
                allow customers a period of at least 6 years to make 
                complaints and that do not require customers to pay the 
                costs of the proceeding; and
                    ``(E) developing and establishing procedures for 
                resolving such complaints, including procedures for the 
                recovery of losses to the extent appropriate.
            ``(4) Consultation and joint regulations.--The Federal 
        banking agencies shall consult with each other and prescribe 
        joint regulations pursuant to paragraphs (1) and (2), after 
        consultation with the Securities and Exchange Commission.
            ``(5) Procedures in addition to other remedies.--The 
        procedures and remedies provided under this subsection shall be 
        in addition to, and not in lieu of, any other remedies 
        available under law.
            ``(6) Definition.--As used in this subsection--
                    ``(A) the term `security' has the meaning provided 
                in section 3(a)(10) of the Securities Exchange Act of 
                1934;
                    ``(B) the term `registered broker or dealer' has 
                the meaning provided in section 3(a)(48) of such Act; 
                and
                    ``(C) the term `associated person' has the meaning 
                provided in section 3(a)(18) of such Act.''.

SEC. 205. INFORMATION SHARING.

    Section 18 of the Federal Deposit Insurance Act is amended by 
adding at the end the following new subsection:
    ``(t) Recordkeeping Requirements.--
            ``(1) Requirements.--Each appropriate Federal banking 
        agency, after consultation with and consideration of the views 
        of the Commission, shall establish recordkeeping requirements 
        for banks relying on exceptions contained in paragraphs (4) and 
        (5) of section 3(a) of the Securities Exchange Act of 1934. 
        Such recordkeeping requirements shall be sufficient to 
        demonstrate compliance with the terms of such exceptions and be 
        designed to facilitate compliance with such exceptions. Each 
        appropriate Federal banking agency shall make any such 
        information available to the Commission upon request.
            ``(2) Definitions.--As used in this subsection the term 
        `Commission' means the Securities and Exchange Commission.''.

SEC. 206. DEFINITION AND TREATMENT OF BANKING PRODUCTS.

    (a) Definition of Traditional Banking Product.--
            (1) In general.--For purposes of paragraphs (4) and (5) of 
        section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 
        78c(a)(4), (5)), the term `traditional banking product' means--
                    (A) a deposit account, savings account, certificate 
                of deposit, or other deposit instrument issued by a 
                bank;
                    (B) a banker's acceptance;
                    (C) a letter of credit issued or loan made by a 
                bank;
                    (D) a debit account at a bank arising from a credit 
                card or similar arrangement;
                    (E) a participation in a loan which the bank or an 
                affiliate of the bank (other than a broker or dealer) 
                funds, participates in, or owns that is sold--
                            (i) to qualified investors; or
                            (ii) to other persons that--
                                    ``(I) have the opportunity to 
                                review and assess any material 
                                information, including information 
                                regarding the borrower's 
                                creditworthiness; and
                                    ``(II) based on such factors as 
                                financial sophistication, net worth, 
                                and knowledge and experience in 
                                financial matters, have the capability 
                                to evaluate the information available, 
                                as determined under generally 
                                applicable banking standards or 
                                guidelines; or
                    (F) any derivative instrument, whether or not 
                individually negotiated, involving or relating to--
                            (i) foreign currencies, except options on 
                        foreign currencies that trade on a national 
                        securities exchange;
                            (ii) interest rates, except interest rate 
                        derivative instruments: (I) that are based on a 
                        security or a group or index of securities 
                        (other than government securities or a group or 
                        index of government securities); (II) that 
                        provide for the delivery of one or more 
                        securities (other than government securities); 
                        or (III) that trade on a national securities 
                        exchange; or
                            (iii) commodities, other rates, indices, or 
                        other assets, except derivative instruments: 
                        (I) that are securities or that are based on a 
                        group or index of securities (other than 
                        government securities or a group or index of 
                        government securities); (II) that provide for 
                        the delivery of one or more securities (other 
                        than government securities); or (III) that 
                        trade on a national securities exchange.
            (2) Classification limited.--Classification of a particular 
        product as a traditional banking product pursuant to this 
        subsection shall not be construed as finding or implying that 
        such product is or is not a security for any purpose under the 
        securities laws, or is or is not an account, agreement, 
        contract, or transaction for any purpose under the Commodity 
        Exchange Act.
            (3) Definitions.--For purposes of this subsection--
                    (A) the term ``bank'' has the meaning provided in 
                section 3(a)(6) of the Securities Exchange Act of 1934 
                (15 U.S.C. 78c(a)(6);
                    (B) the term ``qualified investor'' has the meaning 
                provided in section 3(a)(55) of such Act;
                    (C) the term ``government securities'' has the 
                meaning provided in section 3(a)(42) of such Act, and, 
                for purposes of this subsection, commercial paper, 
                bankers acceptances, and commercial bills shall be 
                treated in the same manner as government securities; 
                and
                    (D) the term ``Federal banking agency'' has the 
                meaning provided in section 3(z) of the Federal Deposit 
                Insurance Act (12 U.S.C. 1813(z)).
    (b) Treatment of New Banking Products for Purposes of Broker/Dealer 
Requirements.--Section 15 of the Securities Exchange Act of 1934 (15 
U.S.C. 78o) is amended by adding at the end the following new 
subsection:
    ``(i) Rulemaking to Extend Requirements to New Banking Products.--
            ``(1) Limitation.--The Commission shall not--
                    ``(A) require a bank to register as a broker or 
                dealer under this section because the bank engages in 
                any transaction in, or buys or sells, a new banking 
                product; or
                    ``(B) bring an action against a bank for a failure 
                to comply with a requirement described in subparagraph 
                (A);
        unless the Commission has imposed such requirement by rule or 
        regulation issued in accordance with this section.
            ``(2) Criteria for rulemaking.--The Commission shall not 
        impose a requirement under paragraph (1) of this subsection 
        with respect to any new banking product unless the Commission 
        determines that--
                    ``(A) the new banking product is a security; and
                    ``(B) imposing such requirement is necessary or 
                appropriate in the public interest and for the 
                protection of investors, consistent with the 
                requirements of section 3(f).
            ``(3) New banking product.--For purposes of this 
        subsection, the term `new banking product' means a product 
        that--
                    ``(A) was not subjected to regulation by the 
                Commission as a security prior to the date of enactment 
                of this subsection; and
                    ``(B) is not a traditional banking product, as such 
                term is defined in section 206(a) of the Financial 
                Services Act of 1998.
            ``(4) Consultation.--In promulgating rules under this 
        subsection, the Commission shall consult with and consider the 
        views of the appropriate regulatory agencies concerning the 
        proposed rule and the impact on the banking industry.''.

SEC. 207. DERIVATIVE INSTRUMENT AND QUALIFIED INVESTOR DEFINED.

    Section 3(a) of the Securities Exchange Act of 1934 is amended by 
adding at the end the following new paragraphs:
            ``(54) Derivative instrument.--
                    ``(A) Definition.--The term `derivative instrument' 
                means any individually negotiated contract, agreement, 
                warrant, note, or option that is based, in whole or in 
                part, on the value of, any interest in, or any 
                quantitative measure or the occurrence of any event 
                relating to, one or more commodities, securities, 
                currencies, interest or other rates, indices, or other 
                assets, but does not include a traditional banking 
                product, as defined in section 206(a) of the Financial 
                Services Act of 1998.
                    ``(B) Classification limited.-- Classification of a 
                particular contract as a derivative instrument pursuant 
                to this paragraph shall not be construed as finding or 
                implying that such instrument is or is not a security 
                for any purpose under the securities laws, or is or is 
                not an account, agreement, contract, or transaction for 
                any purpose under the Commodity Exchange Act.
            ``(55) Qualified investor.--
                    ``(A) Definition.--For purposes of this title and 
                section 206(a)(1)(E) of the Financial Services Act of 
                1998, the term `qualified investor' means--
                            ``(i) any investment company registered 
                        with the Commission under section 8 of the 
                        Investment Company Act of 1940;
                            ``(ii) any issuer eligible for an exclusion 
                        from the definition of investment company 
                        pursuant to section 3(c)(7) of the Investment 
                        Company Act of 1940;
                            ``(iii) any bank (as defined in paragraph 
                        (6) of this subsection), savings and loan 
                        association (as defined in section 3(b) of the 
                        Federal Deposit Insurance Act), broker, dealer, 
                        insurance company (as defined in section 
                        2(a)(13) of the Securities Act of 1933), or 
                        business development company (as defined in 
                        section 2(a)(48) of the Investment Company Act 
                        of 1940);
                            ``(iv) any small business investment 
                        company licensed by the United States Small 
                        Business Administration under section 301(c) or 
                        (d) of the Small Business Investment Act of 
                        1958;
                            ``(v) any State sponsored employee benefit 
                        plan, or any other employee benefit plan, 
                        within the meaning of the Employee Retirement 
                        Income Security Act of 1974, other than an 
                        individual retirement account, if the 
                        investment decisions are made by a plan 
                        fiduciary, as defined in section 3(21) of that 
                        Act, which is either a bank, savings and loan 
                        association, insurance company, or registered 
                        investment adviser;
                            ``(vi) any trust whose purchases of 
                        securities are directed by a person described 
                        in clauses (i) through (v) of this 
                        subparagraph;
                            ``(vii) any market intermediary exempt 
                        under section 3(c)(2) of the Investment Company 
                        Act of 1940;
                            ``(viii) any associated person of a broker 
                        or dealer other than a natural person;
                            ``(ix) any foreign bank (as defined in 
                        section 1(b)(7) of the International Banking 
                        Act of 1978); or
                            ``(x) the government of any foreign 
                        country.
                    ``(B) Additional qualifications defined.--For 
                purposes of paragraphs (4)(B)(vii) and (5)(C)(iii) of 
                this subsection, and section 206(a)(1)(E) of the 
                Financial Services Act of 1998, the term `qualified 
                investor' also means--
                            ``(i) any corporation, company, or 
                        partnership that owns and invests on a 
                        discretionary basis, not less than $10,000,000 
                        in investments;
                            ``(ii) any natural person who owns and 
                        invests on a discretionary basis, not less than 
                        $10,000,000 in investments;
                            ``(iii) any government or political 
                        subdivision, agency, or instrumentality of a 
                        government who owns and invests on a 
                        discretionary basis not less than $50,000,000 
                        in investments; or
                            ``(iv) any multinational or supranational 
                        entity or any agency or instrumentality 
                        thereof.
                    ``(C) Additional authority.--The Commission may, by 
                rule or order, define a `qualified investor' as any 
                other person, other than a natural person, taking into 
                consideration such factors as the person's financial 
                sophistication, net worth, and knowledge and experience 
                in financial matters.''.

SEC. 208. GOVERNMENT SECURITIES DEFINED.

    Section 3(a)(42) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)(42)) is amended--
            (1) by striking ``or'' at the end of subparagraph (C);
            (2) by striking the period at the end of subparagraph (D) 
        and inserting ``; or''; and
            (3) by adding at the end the following new subparagraph:
                    ``(E) for purposes of section 15C as applied to a 
                bank, a qualified Canadian government obligation as 
                defined in section 5136 of the Revised Statutes.''.

SEC. 209. EFFECTIVE DATE.

    This subtitle shall take effect at the end of the 270-day period 
beginning on the date of the enactment of this Act.

SEC. 210. RULE OF CONSTRUCTION.

    Nothing in this Act shall supersede, affect, or otherwise limit the 
scope and applicability of the Commodity Exchange Act (7 U.S.C. 1 et 
seq.).

             Subtitle B--Bank Investment Company Activities

SEC. 211. CUSTODY OF INVESTMENT COMPANY ASSETS BY AFFILIATED BANK.

    (a) Management Companies.--Section 17(f) of the Investment Company 
Act of 1940 (15 U.S.C. 80a-17(f)) is amended--
            (1) by redesignating paragraphs (1), (2), and (3) as 
        subparagraphs (A), (B), and (C), respectively;
            (2) by striking ``(f) Every registered'' and inserting the 
        following:
    ``(f) Custody of Securities.--
            ``(1) Every registered'';
            (3) by redesignating the second, third, fourth, and fifth 
        sentences of such subsection as paragraphs (2) through (5), 
        respectively, and indenting the left margin of such paragraphs 
        appropriately; and
            (4) by adding at the end the following new paragraph:
            ``(6) The Commission may adopt rules and regulations, and 
        issue orders, consistent with the protection of investors, 
        prescribing the conditions under which a bank, or an affiliated 
        person of a bank, either of which is an affiliated person, 
        promoter, organizer, or sponsor of, or principal underwriter 
        for, a registered management company may serve as custodian of 
        that registered management company.''.
    (b) Unit Investment Trusts.--Section 26 of the Investment Company 
Act of 1940 (15 U.S.C. 80a-26) is amended--
            (1) by redesignating subsections (b) through (e) as 
        subsections (c) through (f), respectively; and
            (2) by inserting after subsection (a) the following new 
        subsection:
    ``(b) The Commission may adopt rules and regulations, and issue 
orders, consistent with the protection of investors, prescribing the 
conditions under which a bank, or an affiliated person of a bank, 
either of which is an affiliated person of a principal underwriter for, 
or depositor of, a registered unit investment trust, may serve as 
trustee or custodian under subsection (a)(1).''.
    (c) Fiduciary Duty of Custodian.--Section 36(a) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-35(a)) is amended--
            (1) in paragraph (1), by striking ``or'' at the end;
            (2) in paragraph (2), by striking the period at the end and 
        inserting ``; or''; and
            (3) by inserting after paragraph (2) the following:
            ``(3) as custodian.''.

SEC. 212. LENDING TO AN AFFILIATED INVESTMENT COMPANY.

    Section 17(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-
17(a)) is amended--
            (1) by striking ``or'' at the end of paragraph (2);
            (2) by striking the period at the end of paragraph (3) and 
        inserting ``; or''; and
            (3) by adding at the end the following new paragraph:
            ``(4) to loan money or other property to such registered 
        company, or to any company controlled by such registered 
        company, in contravention of such rules, regulations, or orders 
        as the Commission may prescribe or issue consistent with the 
        protection of investors.''.

SEC. 213. INDEPENDENT DIRECTORS.

    (a) In General.--Section 2(a)(19)(A) of the Investment Company Act 
of 1940 (15 U.S.C. 80a-2(a)(19)(A)) is amended--
            (1) by striking clause (v) and inserting the following new 
        clause:
                            ``(v) any person or any affiliated person 
                        of a person (other than a registered investment 
                        company) that, at any time during the 6-month 
                        period preceding the date of the determination 
                        of whether that person or affiliated person is 
                        an interested person, has executed any 
                        portfolio transactions for, engaged in any 
                        principal transactions with, or distributed 
                        shares for--
                                    ``(I) the investment company;
                                    ``(II) any other investment company 
                                having the same investment adviser as 
                                such investment company or holding 
                                itself out to investors as a related 
                                company for purposes of investment or 
                                investor services; or
                                    ``(III) any account over which the 
                                investment company's investment adviser 
                                has brokerage placement discretion,'';
            (2) by redesignating clause (vi) as clause (vii); and
            (3) by inserting after clause (v) the following new clause:
                            ``(vi) any person or any affiliated person 
                        of a person (other than a registered investment 
                        company) that, at any time during the 6-month 
                        period preceding the date of the determination 
                        of whether that person or affiliated person is 
                        an interested person, has loaned money or other 
                        property to--
                                    ``(I) the investment company;
                                    ``(II) any other investment company 
                                having the same investment adviser as 
                                such investment company or holding 
                                itself out to investors as a related 
                                company for purposes of investment or 
                                investor services; or
                                    ``(III) any account for which the 
                                investment company's investment adviser 
                                has borrowing authority,''.
    (b) Conforming Amendment.--Section 2(a)(19)(B) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-2(a)(19)(B)) is amended--
            (1) by striking clause (v) and inserting the following new 
        clause:
                            ``(v) any person or any affiliated person 
                        of a person (other than a registered investment 
                        company) that, at any time during the 6-month 
                        period preceding the date of the determination 
                        of whether that person or affiliated person is 
                        an interested person, has executed any 
                        portfolio transactions for, engaged in any 
                        principal transactions with, or distributed 
                        shares for--
                                    ``(I) any investment company for 
                                which the investment adviser or 
                                principal underwriter serves as such;
                                    ``(II) any investment company 
                                holding itself out to investors, for 
                                purposes of investment or investor 
                                services, as a company related to any 
                                investment company for which the 
                                investment adviser or principal 
                                underwriter serves as such; or
                                    ``(III) any account over which the 
                                investment adviser has brokerage 
                                placement discretion,'';
            (2) by redesignating clause (vi) as clause (vii); and
            (3) by inserting after clause (v) the following new clause:
                            ``(vi) any person or any affiliated person 
                        of a person (other than a registered investment 
                        company) that, at any time during the 6-month 
                        period preceding the date of the determination 
                        of whether that person or affiliated person is 
                        an interested person, has loaned money or other 
                        property to--
                                    ``(I) any investment company for 
                                which the investment adviser or 
                                principal underwriter serves as such;
                                    ``(II) any investment company 
                                holding itself out to investors, for 
                                purposes of investment or investor 
                                services, as a company related to any 
                                investment company for which the 
                                investment adviser or principal 
                                underwriter serves as such; or
                                    ``(III) any account for which the 
                                investment adviser has borrowing 
                                authority,''.
    (c) Affiliation of Directors.--Section 10(c) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-10(c)) is amended by striking 
``bank, except'' and inserting ``bank (together with its affiliates and 
subsidiaries) or any one bank holding company (together with its 
affiliates and subsidiaries) (as such terms are defined in section 2 of 
the Bank Holding Company Act of 1956), except''.
    (d) Effective Date.--The amendments made by this section shall take 
effect at the end of the 1-year period beginning on the date of 
enactment of this subtitle.

SEC. 214. ADDITIONAL SEC DISCLOSURE AUTHORITY.

    Section 35(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-
34(a)) is amended to read as follows:
    ``(a) Misrepresentation of Guarantees.--
            ``(1) In general.--It shall be unlawful for any person, 
        issuing or selling any security of which a registered 
        investment company is the issuer, to represent or imply in any 
        manner whatsoever that such security or company--
                    ``(A) has been guaranteed, sponsored, recommended, 
                or approved by the United States, or any agency, 
                instrumentality or officer of the United States;
                    ``(B) has been insured by the Federal Deposit 
                Insurance Corporation; or
                    ``(C) is guaranteed by or is otherwise an 
                obligation of any bank or insured depository 
                institution.
            ``(2) Disclosures.--Any person issuing or selling the 
        securities of a registered investment company that is advised 
        by, or sold through, a bank shall prominently disclose that an 
        investment in the company is not insured by the Federal Deposit 
        Insurance Corporation or any other government agency. The 
        Commission may adopt rules and regulations, and issue orders, 
        consistent with the protection of investors, prescribing the 
        manner in which the disclosure under this paragraph shall be 
        provided.
            ``(3) Definitions.--The terms `insured depository 
        institution' and `appropriate Federal banking agency' have the 
        meaning given to such terms in section 3 of the Federal Deposit 
        Insurance Act.''.

SEC. 215. DEFINITION OF BROKER UNDER THE INVESTMENT COMPANY ACT OF 
              1940.

    Section 2(a)(6) of the Investment Company Act of 1940 (15 U.S.C. 
80a-2(a)(6)) is amended to read as follows:
            ``(6) The term `broker' has the same meaning as in the 
        Securities Exchange Act of 1934, except that such term does not 
        include any person solely by reason of the fact that such 
        person is an underwriter for one or more investment 
        companies.''.

SEC. 216. DEFINITION OF DEALER UNDER THE INVESTMENT COMPANY ACT OF 
              1940.

    Section 2(a)(11) of the Investment Company Act of 1940 (15 U.S.C. 
80a-2(a)(11)) is amended to read as follows:
            ``(11) The term `dealer' has the same meaning as in the 
        Securities Exchange Act of 1934, but does not include an 
        insurance company or investment company.''.

SEC. 217. REMOVAL OF THE EXCLUSION FROM THE DEFINITION OF INVESTMENT 
              ADVISER FOR BANKS THAT ADVISE INVESTMENT COMPANIES.

    (a) Investment Adviser.--Section 202(a)(11) of the Investment 
Advisers Act of 1940 (15 U.S.C. 80b-2(a)(11)) is amended in 
subparagraph (A), by striking ``investment company'' and inserting 
``investment company, except that the term `investment adviser' 
includes any bank or bank holding company to the extent that such bank 
or bank holding company serves or acts as an investment adviser to a 
registered investment company, but if, in the case of a bank, such 
services or actions are performed through a separately identifiable 
department or division, the department or division, and not the bank 
itself, shall be deemed to be the investment adviser''.
    (b) Separately Identifiable Department or Division.--Section 202(a) 
of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)) is amended 
by adding at the end the following:
            ``(26) The term `separately identifiable department or 
        division' of a bank means a unit--
                    ``(A) that is under the direct supervision of an 
                officer or officers designated by the board of 
                directors of the bank as responsible for the day-to-day 
                conduct of the bank's investment adviser activities for 
                one or more investment companies, including the 
                supervision of all bank employees engaged in the 
                performance of such activities; and
                    ``(B) for which all of the records relating to its 
                investment adviser activities are separately maintained 
                in or extractable from such unit's own facilities or 
                the facilities of the bank, and such records are so 
                maintained or otherwise accessible as to permit 
                independent examination and enforcement by the 
                Commission of this Act or the Investment Company Act of 
                1940 and rules and regulations promulgated under this 
                Act or the Investment Company Act of 1940.''.

SEC. 218. DEFINITION OF BROKER UNDER THE INVESTMENT ADVISERS ACT OF 
              1940.

    Section 202(a)(3) of the Investment Advisers Act of 1940 (15 U.S.C. 
80b-2(a)(3)) is amended to read as follows:
            ``(3) The term `broker' has the same meaning as in the 
        Securities Exchange Act of 1934.''.

SEC. 219. DEFINITION OF DEALER UNDER THE INVESTMENT ADVISERS ACT OF 
              1940.

    Section 202(a)(7) of the Investment Advisers Act of 1940 (15 U.S.C. 
80b-2(a)(7)) is amended to read as follows:
            ``(7) The term `dealer' has the same meaning as in the 
        Securities Exchange Act of 1934, but does not include an 
        insurance company or investment company.''.

SEC. 220. INTERAGENCY CONSULTATION.

    The Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.) is 
amended by inserting after section 210 the following new section:

``SEC. 210A. CONSULTATION.

    ``(a) Examination Results and Other Information.--
            ``(1) The appropriate Federal banking agency shall provide 
        the Commission upon request the results of any examination, 
        reports, records, or other information to which such agency may 
        have access with respect to the investment advisory 
        activities--
                    ``(A) of any--
                            ``(i) bank holding company;
                            ``(ii) bank; or
                            ``(iii) separately identifiable department 
                        or division of a bank,
                that is registered under section 203 of this title; and
                    ``(B) in the case of a bank holding company or bank 
                that has a subsidiary or a separately identifiable 
                department or division registered under that section, 
                of such bank or bank holding company.
            ``(2) The Commission shall provide to the appropriate 
        Federal banking agency upon request the results of any 
        examination, reports, records, or other information with 
        respect to the investment advisory activities of any bank 
        holding company, bank, or separately identifiable department or 
        division of a bank, any of which is registered under section 
        203 of this title.
    ``(b) Effect on Other Authority.--Nothing in this section shall 
limit in any respect the authority of the appropriate Federal banking 
agency with respect to such bank holding company, bank, or department 
or division under any provision of law.
    ``(c) Definition.--For purposes of this section, the term 
`appropriate Federal banking agency' shall have the same meaning as in 
section 3 of the Federal Deposit Insurance Act.''.

SEC. 221. TREATMENT OF BANK COMMON TRUST FUNDS.

    (a) Securities Act of 1933.--Section 3(a)(2) of the Securities Act 
of 1933 (15 U.S.C. 77c(a)(2)) is amended by striking ``or any interest 
or participation in any common trust fund or similar fund maintained by 
a bank exclusively for the collective investment and reinvestment of 
assets contributed thereto by such bank in its capacity as trustee, 
executor, administrator, or guardian'' and inserting ``or any interest 
or participation in any common trust fund or similar fund that is 
excluded from the definition of the term `investment company' under 
section 3(c)(3) of the Investment Company Act of 1940''.
    (b) Securities Exchange Act of 1934.--Section 3(a)(12)(A)(iii) of 
the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(12)(A)(iii)) is 
amended to read as follows:
                    ``(iii) any interest or participation in any common 
                trust fund or similar fund that is excluded from the 
                definition of the term `investment company' under 
                section 3(c)(3) of the Investment Company Act of 
                1940;''.
    (c) Investment Company Act of 1940.--Section 3(c)(3) of the 
Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(3)) is amended by 
inserting before the period the following: ``, if--
                    ``(A) such fund is employed by the bank solely as 
                an aid to the administration of trusts, estates, or 
                other accounts created and maintained for a fiduciary 
                purpose;
                    ``(B) except in connection with the ordinary 
                advertising of the bank's fiduciary services, interests 
                in such fund are not--
                            ``(i) advertised; or
                            ``(ii) offered for sale to the general 
                        public; and
                    ``(C) fees and expenses charged by such fund are 
                not in contravention of fiduciary principles 
                established under applicable Federal or State law''.

SEC. 222. INVESTMENT ADVISERS PROHIBITED FROM HAVING CONTROLLING 
              INTEREST IN REGISTERED INVESTMENT COMPANY.

    Section 15 of the Investment Company Act of 1940 (15 U.S.C. 80a-15) 
is amended by adding at the end the following new subsection:
    ``(g) Controlling Interest in Investment Company Prohibited.--
            ``(1) In general.--If an investment adviser to a registered 
        investment company, or an affiliated person of that investment 
        adviser, holds a controlling interest in that registered 
        investment company in a trustee or fiduciary capacity, such 
        person shall--
                    ``(A) if it holds the shares in a trustee or 
                fiduciary capacity with respect to any employee benefit 
                plan subject to the Employee Retirement Income Security 
                Act of 1974, transfer the power to vote the shares of 
                the investment company through to another person acting 
                in a fiduciary capacity with respect to the plan who is 
                not an affiliated person of that investment adviser or 
                any affiliated person thereof; or
                    ``(B) if it holds the shares in a trustee or 
                fiduciary capacity with respect to any person or entity 
                other than an employee benefit plan subject to the 
                Employee Retirement Income Security Act of 1974--
                            ``(i) transfer the power to vote the shares 
                        of the investment company through to--
                                    ``(I) the beneficial owners of the 
                                shares;
                                    ``(II) another person acting in a 
                                fiduciary capacity who is not an 
                                affiliated person of that investment 
                                adviser or any affiliated person 
                                thereof; or
                                    ``(III) any person authorized to 
                                receive statements and information with 
                                respect to the trust who is not an 
                                affiliated person of that investment 
                                adviser or any affiliated person 
                                thereof;
                            ``(ii) vote the shares of the investment 
                        company held by it in the same proportion as 
                        shares held by all other shareholders of the 
                        investment company; or
                            ``(iii) vote the shares of the investment 
                        company as otherwise permitted under such 
                        rules, regulations, or orders as the Commission 
                        may prescribe or issue consistent with the 
                        protection of investors.
            ``(2) Exemption.--Paragraph (1) shall not apply to any 
        investment adviser to a registered investment company, or any 
        affiliated person of that investment adviser, that holds shares 
        of the investment company in a trustee or fiduciary capacity if 
        that registered investment company consists solely of assets 
        held in such capacities.
            ``(3) Safe harbor.--No investment adviser to a registered 
        investment company or any affiliated person of such investment 
        adviser shall be deemed to have acted unlawfully or to have 
        breached a fiduciary duty under State or Federal law solely by 
        reason of acting in accordance with clause (i), (ii), or (iii) 
        of paragraph (1)(B).''.

SEC. 223. CONFORMING CHANGE IN DEFINITION.

    Section 2(a)(5) of the Investment Company Act of 1940 (15 U.S.C. 
80a-2(a)(5)) is amended by striking ``(A) a banking institution 
organized under the laws of the United States'' and inserting ``(A) a 
depository institution (as defined in section 3 of the Federal Deposit 
Insurance Act) or a branch or agency of a foreign bank (as such terms 
are defined in section 1(b) of the International Banking Act of 
1978)''.

SEC. 224. CONFORMING AMENDMENT.

    Section 202 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-
2) is amended by adding at the end the following new subsection:
    ``(c) Consideration of Promotion of Efficiency, Competition, and 
Capital Formation.--Whenever pursuant to this title the Commission is 
engaged in rulemaking and is required to consider or determine whether 
an action is necessary or appropriate in the public interest, the 
Commission shall also consider, in addition to the protection of 
investors, whether the action will promote efficiency, competition, and 
capital formation.''.

SEC. 225. EFFECTIVE DATE.

    This subtitle shall take effect 90 days after the date of the 
enactment of this Act.

     Subtitle C--Securities and Exchange Commission Supervision of 
                   Investment Bank Holding Companies

SEC. 231. SUPERVISION OF INVESTMENT BANK HOLDING COMPANIES BY THE 
              SECURITIES AND EXCHANGE COMMISSION.

    (a) Amendment.--Section 17 of the Securities Exchange Act of 1934 
(15 U.S.C. 78q) is amended--
            (1) by redesignating subsection (i) as subsection (l); and
            (2) by inserting after subsection (h) the following new 
        subsections:
    ``(i) Investment Bank Holding Companies.--
            ``(1) Elective supervision of an investment bank holding 
        company not having a bank or savings association affiliate.--
                    ``(A) In general.--An investment bank holding 
                company that is not--
                            ``(i) an affiliate of a wholesale financial 
                        institution, an insured bank (other than an 
                        institution described in subparagraph (D), (F), 
                        or (G) of section 2(c)(2), or held under 
                        section 4(f), of the Bank Holding Company Act 
                        of 1956), or a savings association;
                            ``(ii) a foreign bank, foreign company, or 
                        company that is described in section 8(a) of 
                        the International Banking Act of 1978; or
                            ``(iii) a foreign bank that controls, 
                        directly or indirectly, a corporation chartered 
                        under section 25A of the Federal Reserve Act,
                may elect to become supervised by filing with the 
                Commission a notice of intention to become supervised, 
                pursuant to subparagraph (B) of this paragraph. Any 
                investment bank holding company filing such a notice 
                shall be supervised in accordance with this section and 
                comply with the rules promulgated by the Commission 
                applicable to supervised investment bank holding 
                companies.
                    ``(B) Notification of status as a supervised 
                investment bank holding company.--An investment bank 
                holding company that elects under subparagraph (A) to 
                become supervised by the Commission shall file with the 
                Commission a written notice of intention to become 
                supervised by the Commission in such form and 
                containing such information and documents concerning 
                such investment bank holding company as the Commission, 
                by rule, may prescribe as necessary or appropriate in 
                furtherance of the purposes of this section. Unless the 
                Commission finds that such supervision is not necessary 
                or appropriate in furtherance of the purposes of this 
                section, such supervision shall become effective 45 
                days after receipt of such written notice by the 
                Commission or within such shorter time period as the 
                Commission, by rule or order, may determine.
            ``(2) Election not to be supervised by the commission as an 
        investment bank holding company.--
                    ``(A) Voluntary withdrawal.--A supervised 
                investment bank holding company that is supervised 
                pursuant to paragraph (1) may, upon such terms and 
                conditions as the Commission deems necessary or 
                appropriate, elect not to be supervised by the 
                Commission by filing a written notice of withdrawal 
                from Commission supervision. Such notice shall not 
                become effective until one year after receipt by the 
                Commission, or such shorter or longer period as the 
                Commission deems necessary or appropriate to ensure 
                effective supervision of the material risks to the 
                supervised investment bank holding company and to the 
                affiliated broker or dealer, or to prevent evasion of 
                the purposes of this section.
                    ``(B) Discontinuation of commission supervision.--
                If the Commission finds that any supervised investment 
                bank holding company that is supervised pursuant to 
                paragraph (1) is no longer in existence or has ceased 
                to be an investment bank holding company, or if the 
                Commission finds that continued supervision of such a 
                supervised investment bank holding company is not 
                consistent with the purposes of this section, the 
                Commission may discontinue the supervision pursuant to 
                a rule or order, if any, promulgated by the Commission 
                under this section.
            ``(3) Supervision of investment bank holding companies.--
                    ``(A) Recordkeeping and reporting.--
                            ``(i) In general.--Every supervised 
                        investment bank holding company and each 
                        affiliate thereof shall make and keep for 
                        prescribed periods such records, furnish copies 
                        thereof, and make such reports, as the 
                        Commission may require by rule, in order to 
                        keep the Commission informed as to--
                                    ``(I) the company's or affiliate's 
                                activities, financial condition, 
                                policies, systems for monitoring and 
                                controlling financial and operational 
                                risks, and transactions and 
                                relationships between any broker or 
                                dealer affiliate of the supervised 
                                investment bank holding company; and
                                    ``(II) the extent to which the 
                                company or affiliate has complied with 
                                the provisions of this Act and 
                                regulations prescribed and orders 
                                issued under this Act.
                            ``(ii) Form and contents.--Such records and 
                        reports shall be prepared in such form and 
                        according to such specifications (including 
                        certification by an independent public 
                        accountant), as the Commission may require and 
                        shall be provided promptly at any time upon 
                        request by the Commission. Such records and 
                        reports may include--
                                    ``(I) a balance sheet and income 
                                statement;
                                    ``(II) an assessment of the 
                                consolidated capital of the supervised 
                                investment bank holding company;
                                    ``(III) an independent auditor's 
                                report attesting to the supervised 
                                investment bank holding company's 
                                compliance with its internal risk 
                                management and internal control 
                                objectives; and
                                    ``(IV) reports concerning the 
                                extent to which the company or 
                                affiliate has complied with the 
                                provisions of this title and any 
                                regulations prescribed and orders 
                                issued under this title.
                    ``(B) Use of existing reports.--
                            ``(i) In general.--The Commission shall, to 
                        the fullest extent possible, accept reports in 
                        fulfillment of the requirements under this 
                        paragraph that the supervised investment bank 
                        holding company or its affiliates have been 
                        required to provide to another appropriate 
                        regulatory agency or self-regulatory 
                        organization.
                            ``(ii) Availability.--A supervised 
                        investment bank holding company or an affiliate 
                        of such company shall provide to the 
                        Commission, at the request of the Commission, 
                        any report referred to in clause (i).
                    ``(C) Examination authority.--
                            ``(i) Focus of examination authority.--The 
                        Commission may make examinations of any 
                        supervised investment bank holding company and 
                        any affiliate of such company in order to--
                                    ``(I) inform the Commission 
                                regarding--
                                            ``(aa) the nature of the 
                                        operations and financial 
                                        condition of the supervised 
                                        investment bank holding company 
                                        and its affiliates;
                                            ``(bb) the financial and 
                                        operational risks within the 
                                        supervised investment bank 
                                        holding company that may affect 
                                        any broker or dealer controlled 
                                        by such supervised investment 
                                        bank holding company; and
                                            ``(cc) the systems of the 
                                        supervised investment bank 
                                        holding company and its 
                                        affiliates for monitoring and 
                                        controlling those risks; and
                                    ``(II) monitor compliance with the 
                                provisions of this subsection, 
                                provisions governing transactions and 
                                relationships between any broker or 
                                dealer affiliated with the supervised 
                                investment bank holding company and any 
                                of the company's other affiliates, and 
                                applicable provisions of subchapter II 
                                of chapter 53, title 31, United States 
                                Code (commonly referred to as the `Bank 
                                Secrecy Act') and regulations 
                                thereunder.
                            ``(ii) Restricted focus of examinations.--
                        The Commission shall limit the focus and scope 
                        of any examination of a supervised investment 
                        bank holding company to--
                                    ``(I) the company; and
                                    ``(II) any affiliate of the company 
                                that, because of its size, condition, 
                                or activities, the nature or size of 
                                the transactions between such affiliate 
                                and any affiliated broker or dealer, or 
                                the centralization of functions within 
                                the holding company system, could, in 
                                the discretion of the Commission, have 
                                a materially adverse effect on the 
                                operational or financial condition of 
                                the broker or dealer.
                            ``(iii) Deference to other examinations.--
                        For purposes of this subparagraph, the 
                        Commission shall, to the fullest extent 
                        possible, use the reports of examination of an 
                        institution described in subparagraph (D), (F), 
                        or (G) of section 2(c)(2), or held under 
                        section 4(f), of the Bank Holding Company Act 
                        of 1956 made by the appropriate regulatory 
                        agency, or of a licensed insurance company made 
                        by the appropriate State insurance regulator.
            ``(4) Holding company capital.--
                    ``(A) Authority.--If the Commission finds that it 
                is necessary to adequately supervise investment bank 
                holding companies and their broker or dealer affiliates 
                consistent with the purposes of this subsection, the 
                Commission may adopt capital adequacy rules for 
                supervised investment bank holding companies.
                    ``(B) Method of calculation.--In developing rules 
                under this paragraph:
                            ``(i) Double leverage.--The Commission 
                        shall consider the use by the supervised 
                        investment bank holding company of debt and 
                        other liabilities to fund capital investments 
                        in affiliates.
                            ``(ii) No unweighted capital ratio.--The 
                        Commission shall not impose under this section 
                        a capital ratio that is not based on 
                        appropriate risk-weighting considerations.
                            ``(iii) No capital requirement on regulated 
                        entities.--The Commission shall not, by rule, 
                        regulation, guideline, order or otherwise, 
                        impose any capital adequacy provision on a 
                        nonbanking affiliate (other than a broker or 
                        dealer) that is in compliance with applicable 
                        capital requirements of another Federal 
                        regulatory authority or State insurance 
                        authority.
                            ``(iv) Appropriate exclusions.--The 
                        Commission shall take full account of the 
                        applicable capital requirements of another 
                        Federal regulatory authority or State insurance 
                        regulator.
                    ``(C) Internal risk management models.--The 
                Commission may incorporate internal risk management 
                models into its capital adequacy rules for supervised 
                investment bank holding companies.
            ``(5) Functional regulation of banking and insurance 
        activities of supervised investment bank holding companies.--
        The Commission shall defer to--
                    ``(A) the appropriate regulatory agency with regard 
                to all interpretations of, and the enforcement of, 
                applicable banking laws relating to the activities, 
                conduct, ownership, and operations of banks, and 
                institutions described in subparagraph (D), (F), and 
                (G) of section 2(c)(2), or held under section 4(f), of 
                the Bank Holding Company Act of 1956; and
                    ``(B) the appropriate State insurance regulators 
                with regard to all interpretations of, and the 
                enforcement of, applicable State insurance laws 
                relating to the activities, conduct, and operations of 
                insurance companies and insurance agents.
            ``(6) Definitions.--For purposes of this subsection and 
        subsection (j)--
                    ``(A) The term `investment bank holding company' 
                means--
                            ``(i) any person other than a natural 
                        person that owns or controls one or more 
                        brokers or dealers; and
                            ``(ii) the associated persons of the 
                        investment bank holding company.
                    ``(B) The term `supervised investment bank holding 
                company' means any investment bank holding company that 
                is supervised by the Commission pursuant to this 
                subsection.
                    ``(C) The terms `affiliate', `bank', `bank holding 
                company', `company', `control', and `savings 
                association' have the meanings given to those terms in 
                section 2 of the Bank Holding Company Act of 1956 (12 
                U.S.C. 1841).
                    ``(D) The term `insured bank' has the meaning given 
                to that term in section 3 of the Federal Deposit 
                Insurance Act.
                    ``(E) The term `foreign bank' has the meaning given 
                to that term in section 1(b)(7) of the International 
                Banking Act of 1978.
                    ``(F) The terms ``person associated with an 
                investment bank holding company' and ``associated 
                person of an investment bank holding company' means any 
                person directly or indirectly controlling, controlled 
                by, or under common control with, an investment bank 
                holding company.
    ``(j) Commission Backup Authority.--
            ``(1) Authority.--The Commission may make inspections of 
        any wholesale financial holding company that--
                    ``(A) controls a wholesale financial institution;
                    ``(B) is not a foreign bank; and
                    ``(C) does not control an insured bank (other than 
                an institution permitted under subparagraph (D), (F), 
                or (G) of section 2(c)(2), or held under section 4(f), 
                of the Bank Holding Company Act of 1956) or a savings 
                association,
        and any affiliate of such company, for the purpose of 
        monitoring and enforcing compliance by the wholesale financial 
        holding company with the Federal securities laws.
            ``(2) Limitation.--The Commission shall limit the focus and 
        scope of any inspection under paragraph (1) to those 
        transactions, policies, procedures, or records that are 
        reasonably necessary to monitor and enforce compliance by the 
        wholesale financial holding company or any affiliate with the 
        Federal securities laws.
            ``(3) Deference to examinations.--To the fullest extent 
        possible, the Commission shall use, for the purposes of this 
        subsection, the reports of examinations--
                    ``(A) made by the Board of Governors of the Federal 
                Reserve System of any wholesale financial holding 
                company that is supervised by the Board;
                    ``(B) made by or on behalf of any State regulatory 
                agency responsible for the supervision of an insurance 
                company of any licensed insurance company; and
                    ``(C) made by any Federal or State banking agency 
                of any bank or institution described in subparagraph 
                (D), (F), or (G) of section 2(c)(2), or held under 
                section 4(f), of the Bank Holding Company Act of 1956.
            ``(4) Notice.--To the fullest extent possible, the 
        Commission shall notify the appropriate regulatory agency prior 
        to conducting an inspection of a wholesale financial 
        institution or institution described in subparagraph (D), (F), 
        or (G) of section 2(c)(2), or held under section 4(f), of the 
        Bank Holding Company Act of 1956.
    ``(k) Authority To Limit Disclosure of Information.--
Notwithstanding any other provision of law, the Commission shall not be 
compelled to disclose any information required to be reported under 
subsection (h) or (i) or any information supplied to the Commission by 
any domestic or foreign regulatory agency that relates to the financial 
or operational condition of any associated person of a broker or 
dealer, investment bank holding company, or any affiliate of an 
investment bank holding company. Nothing in this subsection shall 
authorize the Commission to withhold information from Congress, or 
prevent the Commission from complying with a request for information 
from any other Federal department or agency or any self-regulatory 
organization requesting the information for purposes within the scope 
of its jurisdiction, or complying with an order of a court of the 
United States in an action brought by the United States or the 
Commission. For purposes of section 552 of title 5, United States Code, 
this subsection shall be considered a statute described in subsection 
(b)(3)(B) of such section 552. In prescribing regulations to carry out 
the requirements of this subsection, the Commission shall designate 
information described in or obtained pursuant to subparagraphs (A), 
(B), and (C) of subsection (i)(5) as confidential information for 
purposes of section 24(b)(2) of this title.''.
    (b) Conforming Amendments.--
            (1) Section 3(a)(34) of the Securities Exchange Act of 1934 
        (15 U.S.C. 78c(a)(34)) is amended by adding at the end the 
        following new subparagraphs:
                    ``(H) When used with respect to an institution 
                described in subparagraph (D), (F), or (G) of section 
                2(c)(2), or held under section 4(f), of the Bank 
                Holding Company Act of 1956--
                            ``(i) the Comptroller of the Currency, in 
                        the case of a national bank or a bank in the 
                        District of Columbia examined by the 
                        Comptroller of the Currency;
                            ``(ii) the Board of Governors of the 
                        Federal Reserve System, in the case of a State 
                        member bank of the Federal Reserve System or 
                        any corporation chartered under section 25A of 
                        the Federal Reserve Act;
                            ``(iii) the Federal Deposit Insurance 
                        Corporation, in the case of any other bank the 
                        deposits of which are insured in accordance 
                        with the Federal Deposit Insurance Act; or
                            ``(iv) the Commission in the case of all 
                        other such institutions.''.
            (2) Section 1112(e) of the Right to Financial Privacy Act 
        of 1978 (12 U.S.C. 3412(e)) is amended--
                    (A) by striking ``this title'' and inserting 
                ``law''; and
                    (B) by inserting ``, examination reports'' after 
                ``financial records''.

                           Subtitle D--Study

SEC. 241. STUDY OF METHODS TO INFORM INVESTORS AND CONSUMERS OF 
              UNINSURED PRODUCTS.

    Within one year after the date of enactment of this Act, the 
Comptroller General of the United States shall submit a report to the 
Congress regarding the efficacy, costs, and benefits of requiring that 
any depository institution that accepts federally insured deposits and 
that, directly or through a contractual or other arrangement with a 
broker, dealer, or agent, buys from, sells to, or effects transactions 
for retail investors in securities or consumers of insurance to inform 
such investors and consumers through the use of a logo or seal that the 
security or insurance is not insured by the Federal Deposit Insurance 
Corporation.

SEC. 242. STUDY OF LIMITATION ON FEES ASSOCIATED WITH ACQUIRING 
              FINANCIAL PRODUCTS.

    Before the end of the 1-year period beginning on the date of the 
enactment of this Act, the Comptroller General of the United States 
shall submit a report to the Congress regarding the efficacy and 
benefits of uniformly limiting any commissions, fees, markups, or other 
costs incurred by customers in the acquisition of financial products.

    Subtitle E--Disclosure of Customer Costs of Acquiring Financial 
                                Products

SEC. 251. IMPROVED AND CONSISTENT DISCLOSURE.

    (a) Revised Regulations Required.--Within one year after the date 
of enactment of this Act, each Federal financial regulatory authority 
shall prescribe rules, or revisions to its rules, to improve the 
accuracy, simplicity, and completeness, and to make more consistent, 
the disclosure of information by persons subject to the jurisdiction of 
such regulatory authority concerning any commissions, fees, markups, or 
other costs incurred by customers in the acquisition of financial 
products.
    (b) Consultation.--In prescribing rules and revisions under 
subsection (a), the Federal financial regulatory authorities shall 
consult with each other and with appropriate State financial regulatory 
authorities.
    (c) Consideration of Existing Disclosures.--In prescribing rules 
and revisions under subsection (a), the Federal financial regulatory 
authorities shall consider the sufficiency and appropriateness of then 
existing laws and rules applicable to persons subject to their 
jurisdiction, and may prescribe exemptions from the rules and revisions 
required by subsection (a) to the extent appropriate in light of the 
objective of this section to increase the consistency of disclosure 
practices.
    (d) Enforcement.--Any rule prescribed by a Federal financial 
regulatory authority pursuant to this section shall, for purposes of 
enforcement, be treated as a rule prescribed by such regulatory 
authority pursuant to the statute establishing such regulatory 
authority's jurisdiction over the persons to whom such rule applies.
    (e) Definition.--As used in this section, the term ``Federal 
financial regulatory authority'' means the Board of Governors of the 
Federal Reserve System, the Securities and Exchange Commission, the 
Comptroller of the Currency, the Federal Deposit Insurance Corporation, 
the Commodity Futures Trading Commission, and any self-regulatory 
organization under the supervision of any of the foregoing.

                          TITLE III--INSURANCE

               Subtitle A--State Regulation of Insurance

SEC. 301. STATE REGULATION OF THE BUSINESS OF INSURANCE.

    The Act entitled ``An Act to express the intent of the Congress 
with reference to the regulation of the business of insurance'' and 
approved March 9, 1945 (15 U.S.C. 1011 et seq.), commonly referred to 
as the ``McCarran-Ferguson Act'') remains the law of the United States.

SEC. 302. MANDATORY INSURANCE LICENSING REQUIREMENTS.

    No person or entity shall provide insurance in a State as principal 
or agent unless such person or entity is licensed as required by the 
appropriate insurance regulator of such State in accordance with the 
relevant State insurance law, subject to section 104 of this Act.

SEC. 303. FUNCTIONAL REGULATION OF INSURANCE.

    The insurance sales activity of any person or entity shall be 
functionally regulated by the States, subject to section 104 of this 
Act.

SEC. 304. INSURANCE UNDERWRITING IN NATIONAL BANKS.

    (a) In General.--Except as provided in section 306, a national bank 
and the subsidiaries of a national bank may not provide insurance in a 
State as principal except that this prohibition shall not apply to 
authorized products.
    (b) Authorized Products.--For the purposes of this section, a 
product is authorized if--
            (1) as of January 1, 1997, the Comptroller of the Currency 
        had determined in writing that national banks may provide such 
        product as principal, or national banks were in fact lawfully 
        providing such product as principal;
            (2) no court of relevant jurisdiction had, by final 
        judgment, overturned a determination of the Comptroller of the 
        Currency that national banks may provide such product as 
        principal; and
            (3) the product is not title insurance, or an annuity 
        contract the income of which is subject to tax treatment under 
        section 72 of the Internal Revenue Code of 1986.
    (c) Definition.--For purposes of this section, the term 
``insurance'' means--
            (1) any product regulated as insurance as of January 1, 
        1997, in accordance with the relevant State insurance law, in 
        the State in which the product is provided;
            (2) any product first offered after January 1, 1997, 
        which--
                    (A) a State insurance regulator determines shall be 
                regulated as insurance in the State in which the 
                product is provided because the product insures, 
                guarantees, or indemnifies against liability, loss of 
                life, loss of health, or loss through damage to or 
                destruction of property, including, but not limited to, 
                surety bonds, life insurance, health insurance, title 
                insurance, and property and casualty insurance (such as 
                private passenger or commercial automobile, homeowners, 
                mortgage, commercial multiperil, general liability, 
                professional liability, workers' compensation, fire and 
                allied lines, farm owners multiperil, aircraft, 
                fidelity, surety, medical malpractice, ocean marine, 
                inland marine, and boiler and machinery insurance); and
                    (B) is not a product or service of a bank that is--
                            (i) a deposit product;
                            (ii) a loan, discount, letter of credit, or 
                        other extension of credit;
                            (iii) a trust or other fiduciary service;
                            (iv) a qualified financial contract (as 
                        defined in or determined pursuant to section 
                        11(e)(8)(D)(i) of the Federal Deposit Insurance 
                        Act); or
                            (v) a financial guaranty, except that this 
                        subparagraph (B) shall not apply to a product 
                        that includes an insurance component such that 
                        if the product is offered or proposed to be 
                        offered by the bank as principal--
                                    (I) it would be treated as a life 
                                insurance contract under section 7702 
                                of the Internal Revenue Code of 1986, 
                                as amended; or
                                    (II) in the event that the product 
                                is not a letter of credit or other 
                                similar extension of credit, a 
                                qualified financial contract, or a 
                                financial guaranty, it would qualify 
                                for treatment for losses incurred with 
                                respect to such product under section 
                                832(b)(5) of the Internal Revenue Code 
                                of 1986, as amended, if the bank were 
                                subject to tax as an insurance company 
                                under section 831 of such Code; or
            (3) any annuity contract the income on which is subject to 
        tax treatment under section 72 of the Internal Revenue Code of 
        1986, as amended.

SEC. 305. NEW BANK AGENCY ACTIVITIES ONLY THROUGH ACQUISITION OF 
              EXISTING LICENSED AGENTS.

    If a national bank or a subsidiary of a national bank is not 
providing insurance as agent in a State as of the date of the enactment 
of this Act, the national bank and the subsidiary of the national bank 
may provide insurance (which such bank or subsidiary is otherwise 
authorized to provide) as agent in such State after such date only by 
acquiring a company which has been licensed by the appropriate State 
regulator to provide insurance as agent in such State for not less than 
2 years before such acquisition. This section shall cease to have 
effect 5 years after the date of the enactment of this Act.

SEC. 306. TITLE INSURANCE ACTIVITIES OF NATIONAL BANKS AND THEIR 
              AFFILIATES.

    (a) Authority.--
            (1) In general.--Notwithstanding any other provision of 
        this Act or any other law, no national bank, and no subsidiary 
        of a national bank, may engage in any activity involving the 
        underwriting or sale of title insurance other than title 
        insurance activities in which such national bank or subsidiary 
        was actively and lawfully engaged before the date of the 
        enactment of this Act.
            (2) Insurance affiliate.--In the case of a national bank 
        which has an affiliate which provides insurance as principal 
        and is not a subsidiary of the bank, the national bank and any 
        subsidiary of the national bank may not engage in any activity 
        involving the underwriting or sale of title insurance pursuant 
        to paragraph (1).
            (3) Insurance subsidiary.--In the case of a national bank 
        which has a subsidiary which provides insurance as principal 
        and has no affiliate which provides insurance as principal and 
        is not a subsidiary, the national bank may not engage in any 
        activity involving the underwriting or sale of title insurance 
        pursuant to paragraph (1).
            (4) Affiliate and subsidiary defined.--For purposes of this 
        section, the terms ``affiliate'' and ``subsidiary'' have the 
        meaning given such terms in section 2 of the Bank Holding 
        Company Act of 1956.
    (b) Parity Exception.--Notwithstanding subsection (a), in the case 
of any State in which banks organized under the laws of such State were 
authorized to sell title insurance as agent as of January 1, 1997, a 
national bank and a subsidiary of a national bank may sell title 
insurance as agent in such State in the same manner and to the same 
extent such State banks are authorized to sell title insurance as agent 
in such State.

SEC. 307. EXPEDITED AND EQUALIZED DISPUTE RESOLUTION FOR FINANCIAL 
              REGULATORS.

    (a) Filing in Court of Appeal.--In the case of a regulatory 
conflict between a State insurance regulator and a Federal regulator as 
to whether any product is or is not insurance as defined in section 
304(c) of this Act, or whether a State statute, regulation, order, or 
interpretation regarding any insurance sales or solicitation activity 
is properly treated as preempted under Federal law, either regulator 
may seek expedited judicial review of such determination by the United 
States Court of Appeals for the circuit in which the State is located 
or in the United States Court of Appeals for the District of Columbia 
Circuit by filing a petition for review in such court.
    (b) Expedited Review.--The United States court of appeals in which 
a petition for review is filed in accordance with paragraph (1) shall 
complete all action on such petition, including rendering a judgment, 
before the end of the 60-day period beginning on the date such petition 
is filed, unless all parties to such proceeding agree to any extension 
of such period.
    (c) Supreme Court Review.--Any request for certiori to the Supreme 
Court of the United States of any judgment of a United States court of 
appeals with respect to a petition for review under this section shall 
be filed with the United States Supreme Court as soon as practicable 
after such judgment is issued.
    (d) Statute of Limitation.--No action may be filed under this 
section challenging an order, ruling, determination, or other action of 
a Federal financial regulator or State insurance regulator after the 
later of--
            (1) the end of the 12-month period beginning on the date 
        the first public notice is made of such order, ruling, or 
        determination in its final form; or
            (2) the end of the 6-month period beginning on the date 
        such order, ruling, or determination takes effect.
    (e) Standard of Review.--The court shall decide an action filed 
under this section based on its review on the merits of all questions 
presented under State and Federal law, including the nature of the 
product or activity and the history and purpose of its regulation under 
State and Federal law, without unequal deference.

SEC. 308. CONSUMER PROTECTION REGULATIONS.

    (a) Regulations Required.--
            (1) In general.--The Federal Deposit Insurance Act (12 
        U.S.C. 1811 et seq.) is amended by adding at the end the 
        following new section:

``SEC. 45. CONSUMER PROTECTION REGULATIONS.

    ``(a) Regulations Required.--
            ``(1) In general.--The Federal banking agencies shall 
        prescribe and publish in final form, before the end of the 1-
        year period beginning on the date of the enactment of this Act, 
        consumer protection regulations (which the agencies jointly 
        determine to be appropriate) that--
                    ``(A) apply to retail sales practices, 
                solicitations, advertising, or offers of any insurance 
                product by any insured depository institution or 
                wholesale financial institution or any person who is 
                engaged in such activities at an office of the 
                institution or on behalf of the institution; and
                    ``(B) are consistent with the requirements of this 
                Act and provide such additional protections for 
                consumers to whom such sales, solicitations, 
                advertising, or offers are directed as the agency 
                determines to be appropriate.
            ``(2) Applicability to subsidiaries.--The regulations 
        prescribed pursuant to paragraph (1) shall extend such 
        protections to any subsidiaries of an insured depository 
        institution, as deemed appropriate by the regulators referred 
        to in paragraph (3), where such extension is determined to be 
        necessary to ensure the consumer protections provided by this 
        section.
            ``(3) Consultation and joint regulations.--The Federal 
        banking agencies shall consult with each other and prescribe 
        joint regulations pursuant to paragraph (1), after consultation 
        with the State insurance regulators, as appropriate.
    ``(b) Sales Practices.--The regulations prescribed pursuant to 
subsection (a) shall include anticoercion rules applicable to the sale 
of insurance products which prohibit an insured depository institution 
from engaging in any practice that would lead a consumer to believe an 
extension of credit, in violation of section 106(b) of the Bank Holding 
Company Act Amendments of 1970, is conditional upon--
            ``(1) the purchase of an insurance product from the 
        institution or any of its affiliates or subsidiaries; or
            ``(2) an agreement by the consumer not to obtain, or a 
        prohibition on the consumer from obtaining, an insurance 
        product from an unaffiliated entity.
    ``(c) Disclosures and Advertising.--The regulations prescribed 
pursuant to subsection (a) shall include the following provisions 
relating to disclosures and advertising in connection with the initial 
purchase of an insurance product:
            ``(1) Disclosures.--
                    ``(A) In general.--Requirements that the following 
                disclosures be made orally and in writing before the 
                completion of the initial sale and, in the case of 
                clause (iv), at the time of application for an 
                extension of credit:
                            ``(i) Uninsured status.--As appropriate, 
                        the product is not insured by the Federal 
                        Deposit Insurance Corporation, the United 
                        States Government, or the insured depository 
                        institution.
                            ``(ii) Investment risk.--In the case of a 
                        variable annuity or other insurance product 
                        which involves an investment risk, that there 
                        is an investment risk associated with the 
                        product, including possible loss of value.
                            ``(iv) Coercion.--The approval of an 
                        extension of credit may not be conditioned on--
                                    ``(I) the purchase of an insurance 
                                product from the institution in which 
                                the application for credit is pending 
                                or any of its affiliates or 
                                subsidiaries; or
                                    ``(II) an agreement by the consumer 
                                not to obtain, or a prohibition on the 
                                consumer from obtaining, an insurance 
                                product from an unaffiliated entity.
                    ``(B) Making disclosure readily understandable.--
                Regulations prescribed under subparagraph (A) shall 
                encourage the use of disclosure that is conspicuous, 
                simple, direct, and readily understandable, such as the 
                following:
                            ``(i) `NOT FDIC-INSURED'.
                            ``(ii) `NOT GUARANTEED BY THE BANK'.
                            ``(iii) `MAY GO DOWN IN VALUE'.
                    ``(C) Adjustments for alternative methods of 
                purchase.--In prescribing the requirements under 
                subparagraphs (A) and (D), necessary adjustments shall 
                be made for purchase in person, by telephone, or by 
                electronic media to provide for the most appropriate 
                and complete form of disclosure and acknowledgments.
                    ``(D) Consumer acknowledgment.--A requirement that 
                an insured depository institution shall require any 
                person selling an insurance product at any office of, 
                or on behalf of, the institution to obtain, at the time 
                a consumer receives the disclosures required under this 
                paragraph or at the time of the initial purchase by the 
                consumer of such product, an acknowledgment by such 
                consumer of the receipt of the disclosure required 
                under this subsection with respect to such product.
            ``(2) Prohibition on misrepresentations.--A prohibition on 
        any practice, or any advertising, at any office of, or on 
        behalf of, the insured depository institution, or any 
        subsidiary as appropriate, which could mislead any person or 
        otherwise cause a reasonable person to reach an erroneous 
        belief with respect to--
                    ``(A) the uninsured nature of any insurance product 
                sold, or offered for sale, by the institution or any 
                subsidiary of the institution; or
                    ``(B) in the case of a variable annuity or other 
                insurance product that involves an investment risk, the 
                investment risk associated with any such product.
    ``(d) Separation of Banking and Nonbanking Activities.--
            ``(1) Regulations required.--The regulations prescribed 
        pursuant to subsection (a) shall include such provisions as the 
        Federal banking agencies consider appropriate to ensure that 
        the routine acceptance of deposits and the making of loans is 
        kept, to the extent practicable, physically segregated from 
        insurance product activity.
            ``(2) Requirements.--Regulations prescribed pursuant to 
        paragraph (1) shall include the following requirements:
                    ``(A) Separate setting.--A clear delineation of the 
                setting in which, and the circumstances under which, 
                transactions involving insurance products should be 
                conducted in a location physically segregated from an 
                area where retail deposits are routinely accepted.
                    ``(B) Referrals.--Standards which permit any person 
                accepting deposits from, or making loans to, the public 
                in an area where such transactions are routinely 
                conducted in an insured depository institution to refer 
                a customer who seeks to purchase any insurance product 
                to a qualified person who sells such product, only if 
                the person making the referral receives no more than a 
                one-time nominal fee of a fixed dollar amount for each 
                referral that does not depend on whether the referral 
                results in a transaction.
                    ``(C) Qualification and licensing requirements.--
                Standards prohibiting any insured depository 
                institution from permitting any person to sell or offer 
                for sale any insurance product in any part of any 
                office of the institution, or on behalf of the 
                institution, unless such person is appropriately 
                qualified and licensed.
    ``(e) Domestic Violence Discrimination Prohibition.--
            ``(1) In general.--In the case of an applicant for, or an 
        insured under, any insurance product described in paragraph 
        (2), the status of the applicant or insured as a victim of 
        domestic violence, or as a provider of services to victims of 
        domestic violence, shall not be considered as a criterion in 
        any decision with regard to insurance underwriting, pricing, 
        renewal, or scope of coverage of insurance policies, or payment 
        of insurance claims, except as required or expressly permitted 
        under State law.
            ``(2) Scope of application.--The prohibition contained in 
        paragraph (1) shall apply to any insurance product which is 
        sold or offered for sale, as principal, agent, or broker, by 
        any insured depository institution or any person who is engaged 
        in such activities at an office of the institution or on behalf 
        of the institution.
            ``(3) Sense of the congress.--It is the sense of the 
        Congress that, by the end of the 30-month period beginning on 
        the date of the enactment of this Act, the States should enact 
        prohibitions against discrimination with respect to insurance 
        products that are at least as strict as the prohibitions 
        contained in paragraph (1).
            ``(4) Domestic violence defined.--For purposes of this 
        subsection, the term `domestic violence' means the occurrence 
        of 1 or more of the following acts by a current or former 
        family member, household member, intimate partner, or 
        caretaker:
                    ``(A) Attempting to cause or causing or threatening 
                another person physical harm, severe emotional 
                distress, psychological trauma, rape, or sexual 
                assault.
                    ``(B) Engaging in a course of conduct or repeatedly 
                committing acts toward another person, including 
                following the person without proper authority, under 
                circumstances that place the person in reasonable fear 
                of bodily injury or physical harm.
                    ``(C) Subjecting another person to false 
                imprisonment.
                    ``(D) Attempting to cause or cause damage to 
                property so as to intimidate or attempt to control the 
                behavior of another person.
    ``(f) Consumer Grievance Process.--The Federal banking agencies 
shall jointly establish a consumer complaint mechanism, for receiving 
and expeditiously addressing consumer complaints alleging a violation 
of regulations issued under the section, which shall--
            ``(1) establish a group within each regulatory agency to 
        receive such complaints;
            ``(2) develop procedures for investigating such complaints;
            ``(3) develop procedures for informing consumers of rights 
        they may have in connection with such complaints; and
            ``(4) develop procedures for addressing concerns raised by 
        such complaints, as appropriate, including procedures for the 
        recovery of losses to the extent appropriate.
    ``(g) Effect on Other Authority.--
            ``(1) In general.--No provision of this section shall be 
        construed as granting, limiting, or otherwise affecting--
                    ``(A) any authority of the Securities and Exchange 
                Commission, any self-regulatory organization, the 
                Municipal Securities Rulemaking Board, or the Secretary 
                of the Treasury under any Federal securities law; or
                    ``(B) except as provided in paragraph (2), any 
                authority of any State insurance commissioner or other 
                State authority under any State law.
            ``(2) Coordination with state law.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), regulations prescribed by a Federal 
                banking agency under this section shall not apply to 
                retail sales, solicitations, advertising, or offers of 
                any insurance product by any insured depository 
                institution or wholesale financial institution or to 
                any person who is engaged in such activities at an 
                office of such institution or on behalf of the 
                institution, in a State where the State has in effect 
                statutes, regulations, orders, or interpretations, that 
                are inconsistent with or contrary to the regulations 
                prescribed by the Federal banking agencies.
                    ``(B) Preemption.--If, with respect to any 
                provision of the regulations prescribed under this 
                section, the Board of Governors of the Federal Reserve 
                System, the Comptroller of the Currency, and the Board 
                of Directors of the Federal Deposit Insurance 
                Corporation determine jointly that the protection 
                afforded by such provision for consumers is greater 
                than the protection provided by a comparable provision 
                of the statutes, regulations, orders, or 
                interpretations referred to in subparagraph (A) of any 
                State, such provision of the regulations prescribed 
                under this section shall supersede the comparable 
                provision of such State statute, regulation, order, or 
                interpretation.
    ``(h) Insurance Product Defined.--For purposes of this section, the 
term `insurance product' includes an annuity contract the income of 
which is subject to tax treatment under section 72 of the Internal 
Revenue Code of 1986.''.

SEC. 309. CERTAIN STATE AFFILIATION LAWS PREEMPTED FOR INSURANCE 
              COMPANIES AND AFFILIATES.

    No State may, by law, regulation, order, interpretation, or 
otherwise--
            (1) prevent or significantly interfere with the ability of 
        any insurer, or any affiliate of an insurer (whether such 
        affiliate is organized as a stock company, mutual holding 
        company, or otherwise), to become a financial holding company 
        or to acquire control of an insured depository institution;
            (2) limit the amount of an insurer's assets that may be 
        invested in the voting securities of an insured depository 
        institution (or any company which controls such institution), 
        except that the laws of an insurer's State of domicile may 
        limit the amount of such investment to an amount that is not 
        less than 5 percent of the insurer's admitted assets; or
            (3) prevent, significantly interfere with, or have the 
        authority to review, approve, or disapprove a plan of 
        reorganization by which an insurer proposes to reorganize from 
        mutual form to become a stock insurer (whether as a direct or 
        indirect subsidiary of a mutual holding company or otherwise) 
        unless such State is the State of domicile of the insurer.

             Subtitle B--Redomestication of Mutual Insurers

SEC. 311. GENERAL APPLICATION.

    This subtitle shall only apply to a mutual insurance company in a 
State which has not enacted a law which expressly establishes 
reasonable terms and conditions for a mutual insurance company 
domiciled in such State to reorganize into a mutual holding company.

SEC. 312. REDOMESTICATION OF MUTUAL INSURERS.

    (a) Redomestication.--A mutual insurer organized under the laws of 
any State may transfer its domicile to a transferee domicile as a step 
in a reorganization in which, pursuant to the laws of the transferee 
domicile and consistent with the standards in subsection (f), the 
mutual insurer becomes a stock insurer that is a direct or indirect 
subsidiary of a mutual holding company.
    (b) Resulting Domicile.--Upon complying with the applicable law of 
the transferee domicile governing transfers of domicile and completion 
of a transfer pursuant to this section, the mutual insurer shall cease 
to be a domestic insurer in the transferor domicile and, as a 
continuation of its corporate existence, shall be a domestic insurer of 
the transferee domicile.
    (c) Licenses Preserved.--The certificate of authority, agents' 
appointments and licenses, rates, approvals and other items that a 
licensed State allows and that are in existence immediately prior to 
the date that a redomesticating insurer transfers its domicile pursuant 
to this subtitle shall continue in full force and effect upon transfer, 
if the insurer remains duly qualified to transact the business of 
insurance in such licensed State.
    (d) Effectiveness of Outstanding Policies and Contracts.--
            (1) In general.--All outstanding insurance policies and 
        annuities contracts of a redomesticating insurer shall remain 
        in full force and effect and need not be endorsed as to the new 
        domicile of the insurer, unless so ordered by the State 
        insurance regulator of a licensed State, and then only in the 
        case of outstanding policies and contracts whose owners reside 
        in such licensed State.
            (2) Forms.--
                    (A) Applicable State law may require a 
                redomesticating insurer to file new policy forms with 
                the State insurance regulator of a licensed State on or 
                before the effective date of the transfer.
                    (B) Notwithstanding subparagraph (A), a 
                redomesticating insurer may use existing policy forms 
                with appropriate endorsements to reflect the new 
                domicile of the redomesticating insurer until the new 
                policy forms are approved for use by the State 
                insurance regulator of such licensed State.
    (e) Notice.--A redomesticating insurer shall give notice of the 
proposed transfer to the State insurance regulator of each licensed 
State and shall file promptly any resulting amendments to corporate 
documents required to be filed by a foreign licensed mutual insurer 
with the insurance regulator of each such licensed State.
    (f) Procedural Requirements.--No mutual insurer may redomesticate 
to another State and reorganize into a mutual holding company pursuant 
to this section unless the State insurance regulator of the transferee 
domicile determines that the plan of reorganization of the insurer 
includes the following requirements:
            (1) Approval by board of directors and policyholders.--The 
        reorganization is approved by at least a majority of the board 
        of directors of the mutual insurer and at least a majority of 
        the policyholders who vote after notice, disclosure of the 
        reorganization and the effects of the transaction on 
        policyholder contractual rights, and reasonable opportunity to 
        vote, in accordance with such notice, disclosure, and voting 
        procedures as are approved by the State insurance regulator of 
        the transferee domicile.
            (2) Continued voting control by policyholders; review of 
        public stock offering.--After the consummation of a 
        reorganization, the policyholders of the reorganized insurer 
        shall have the same voting rights with respect to the mutual 
        holding company as they had before the reorganization with 
        respect to the mutual insurer. With respect to an initial 
        public offering of stock, the offering shall be conducted in 
        compliance with applicable securities laws and in a manner 
        approved by the State insurance regulator of the transferee 
        domicile.
            (3) Award of stock or grant of options to officers and 
        directors.--For a period of 6 months after completion of an 
        initial public offering, neither a stock holding company nor 
        the converted insurer shall award any stock options or stock 
        grants to persons who are elected officers or directors of the 
        mutual holding company, the stock holding company, or the 
        converted insurer, except with respect to any such awards or 
        options to which a person is entitled as a policyholder and as 
        approved by the State insurance regulator of the transferee 
        domicile.
            (4) Contractual rights.--Upon reorganization into a mutual 
        holding company, the contractual rights of the policyholders 
        are preserved.
            (5) Fair and equitable treatment of policyholders.--The 
        reorganization is approved as fair and equitable to the 
        policyholders by the insurance regulator of the transferee 
        domicile.

SEC. 313. EFFECT ON STATE LAWS RESTRICTING REDOMESTICATION.

    (a) In General.--Unless otherwise permitted by this subtitle, State 
laws of any transferor domicile that conflict with the purposes and 
intent of this subtitle are preempted, including but not limited to--
            (1) any law that has the purpose or effect of impeding the 
        activities of, taking any action against, or applying any 
        provision of law or regulation to, any insurer or an affiliate 
        of such insurer because that insurer or any affiliate plans to 
        redomesticate, or has redomesticated, pursuant to this 
        subtitle;
            (2) any law that has the purpose or effect of impeding the 
        activities of, taking action against, or applying any provision 
        of law or regulation to, any insured or any insurance licensee 
        or other intermediary because such person or entity has 
        procured insurance from or placed insurance with any insurer or 
        affiliate of such insurer that plans to redomesticate, or has 
        redomesticated, pursuant to this subtitle, but only to the 
        extent that such law would treat such insured licensee or other 
        intermediary differently than if the person or entity procured 
        insurance from, or placed insurance with, an insured licensee 
        or other intermediary which had not redomesticated;
            (3) any law that has the purpose or effect of terminating, 
        because of the redomestication of a mutual insurer pursuant to 
        this subtitle, any certificate of authority, agent appointment 
        or license, rate approval, or other approval, of any State 
        insurance regulator or other State authority in existence 
        immediately prior to the redomestication in any State other 
        than the transferee domicile.
    (b) Differential Treatment Prohibited.--No State law, regulation, 
interpretation, or functional equivalent thereof, of a State other than 
a transferee domicile may treat a redomesticating or redomesticated 
insurer or any affiliate thereof any differently than an insurer 
operating in that State that is not a redomesticating or redomesticated 
insurer.
    (c) Laws Prohibiting Operations.--If any licensed State fails to 
issue, delays the issuance of, or seeks to revoke an original or 
renewal certificate of authority of a redomesticated insurer 
immediately following redomestication, except on grounds and in a 
manner consistent with its past practices regarding the issuance of 
certificates of authority to foreign insurers that are not 
redomesticating, then the redomesticating insurer shall be exempt from 
any State law of the licensed State to the extent that such State law 
or the operation of such State law would make unlawful, or regulate, 
directly or indirectly, the operation of the redomesticated insurer, 
except that such licensed State may require the redomesticated insurer 
to--
            (1) comply with the unfair claim settlement practices law 
        of the licensed State;
            (2) pay, on a nondiscriminatory basis, applicable premium 
        and other taxes which are levied on licensed insurers or 
        policyholders under the laws of the licensed State;
            (3) register with and designate the State insurance 
        regulator as its agent solely for the purpose of receiving 
        service of legal documents or process;
            (4) submit to an examination by the State insurance 
        regulator in any licensed state in which the redomesticated 
        insurer is doing business to determine the insurer's financial 
        condition, if--
                    (A) the State insurance regulator of the transferee 
                domicile has not begun an examination of the 
                redomesticated insurer and has not scheduled such an 
                examination to begin before the end of the 1-year 
                period beginning on the date of the redomestication; 
                and
                    (B) any such examination is coordinated to avoid 
                unjustified duplication and repetition;
            (5) comply with a lawful order issued in--
                    (A) a delinquency proceeding commenced by the State 
                insurance regulator of any licensed State if there has 
                been a judicial finding of financial impairment under 
                paragraph (7); or
                    (B) a voluntary dissolution proceeding;
            (6) comply with any State law regarding deceptive, false, 
        or fraudulent acts or practices, except that if the licensed 
        State seeks an injunction regarding the conduct described in 
        this paragraph, such injunction must be obtained from a court 
        of competent jurisdiction as provided in section 314(a);
            (7) comply with an injunction issued by a court of 
        competent jurisdiction, upon a petition by the State insurance 
        regulator alleging that the redomesticating insurer is in 
        hazardous financial condition or is financially impaired;
            (8) participate in any insurance insolvency guaranty 
        association on the same basis as any other insurer licensed in 
        the licensed State; and
            (9) require a person acting, or offering to act, as an 
        insurance licensee for a redomesticated insurer in the licensed 
        State to obtain a license from that State, except that such 
        State may not impose any qualification or requirement that 
        discriminates against a nonresident insurance licensee.

SEC. 314. OTHER PROVISIONS.

    (a) Judicial Review.--The appropriate United States district court 
shall have exclusive jurisdiction over litigation arising under this 
section involving any redomesticating or redomesticated insurer.
    (b) Severability.--If any provision of this section, or the 
application thereof to any person or circumstances, is held invalid, 
the remainder of the section, and the application of such provision to 
other persons or circumstances, shall not be affected thereby.

SEC. 315. DEFINITIONS.

    For purposes of this subtitle, the following definitions shall 
apply:
            (1) Court of competent jurisdiction.--The term ``court of 
        competent jurisdiction'' means a court authorized pursuant to 
        section 314(a) to adjudicate litigation arising under this 
        subtitle.
            (2) Domicile.--The term ``domicile'' means the State in 
        which an insurer is incorporated, chartered, or organized.
            (3) Insurance licensee.--The term ``insurance licensee'' 
        means any person holding a license under State law to act as 
        insurance agent, subagent, broker, or consultant.
            (4) Institution.--The term ``institution'' means a 
        corporation, joint stock company, limited liability company, 
        limited liability partnership, association, trust, partnership, 
        or any similar entity.
            (5) Licensed state.--The term ``licensed State'' means any 
        State, the District of Columbia, American Samoa, Guam, Puerto 
        Rico, or the United States Virgin Islands in which the 
        redomesticating insurer has a certificate of authority in 
        effect immediately prior to the redomestication.
            (6) Mutual insurer.--The term ``mutual insurer'' means a 
        mutual insurer organized under the laws of any State.
            (7) Person.--The term ``person'' means an individual, 
        institution, government or governmental agency, State or 
        political subdivision of a State, public corporation, board, 
        association, estate, trustee, or fiduciary, or other similar 
        entity.
            (8) Policyholder.--The term ``policyholder'' means the 
        owner of a policy issued by a mutual insurer, except that, with 
        respect to voting rights, the term means a member of a mutual 
        insurer or mutual holding company granted the right to vote, as 
        determined under applicable State law.
            (9) Redomesticated insurer.--The term ``redomesticated 
        insurer'' means a mutual insurer that has redomesticated 
        pursuant to this subtitle.
            (10) Redomesticating insurer.--The term ``redomesticating 
        insurer'' means a mutual insurer that is redomesticating 
        pursuant to this subtitle.
            (11) Redomestication or transfer.--The terms 
        ``redomestication'' and ``transfer'' mean the transfer of the 
        domicile of a mutual insurer from one State to another State 
        pursuant to this subtitle.
            (12) State insurance regulator.--The term ``State insurance 
        regulator'' means the principal insurance regulatory authority 
        of a State, the District of Columbia, American Samoa, Guam, 
        Puerto Rico, or the United States Virgin Islands.
            (13) State law.--The term ``State law'' means the statutes 
        of any State, the District of Columbia, American Samoa, Guam, 
        Puerto Rico, or the United States Virgin Islands and any 
        regulation, order, or requirement prescribed pursuant to any 
        such statute.
            (14) Transferee domicile.--The term ``transferee domicile'' 
        means the State to which a mutual insurer is redomesticating 
        pursuant to this subtitle.
            (15) Transferor domicile.--The term ``transferor domicile'' 
        means the State from which a mutual insurer is redomesticating 
        pursuant to this subtitle.

SEC. 316. EFFECTIVE DATE.

    This subtitle shall take effect on the date of the enactment of 
this Act.

   Subtitle C--National Association of Registered Agents and Brokers

SEC. 321. STATE FLEXIBILITY IN MULTISTATE LICENSING REFORMS.

     (a) In General.--The provisions of this subtitle shall take effect 
unless by the end of the 3-year period beginning on the date of the 
enactment of this Act at least a majority of the States--
            (1) have enacted uniform laws and regulations governing the 
        licensure of individuals and entities authorized to sell and 
        solicit the purchase of insurance within the State; or
            (2) have enacted reciprocity laws and regulations governing 
        the licensure of nonresident individuals and entities 
        authorized to sell and solicit insurance within those States.
    (b) Uniformity Required.--States shall be deemed to have 
established the uniformity necessary to satisfy subsection (a)(1) if 
the States--
            (1) establish uniform criteria regarding the integrity, 
        personal qualifications, education, training, and experience of 
        licensed insurance producers, including the qualification and 
        training of sales personnel in ascertaining the appropriateness 
        of a particular insurance product for a prospective customer;
            (2) establish uniform continuing education requirements for 
        licensed insurance producers;
            (3) establish uniform ethics course requirements for 
        licensed insurance producers in conjunction with the continuing 
        education requirements under paragraph (2);
            (4) establish uniform criteria to ensure that an insurance 
        product, including any annuity contract, sold to a consumer is 
        suitable and appropriate for the consumer based on financial 
        information disclosed by the consumer; and
            (5) do not impose any requirement upon any insurance 
        producer to be licensed or otherwise qualified to do business 
        as a nonresident that has the effect of limiting or 
        conditioning that producer's activities because of its 
        residence or place of operations, except that counter-signature 
        requirements imposed on nonresident producers shall not be 
        deemed to have the effect of limiting or conditioning a 
        producer's activities because of its residence or place of 
        operations under this section.
    (c) Reciprocity Required.--States shall be deemed to have 
established the reciprocity required to satisfy subsection (a)(2) if 
the following conditions are met:
            (1) Administrative licensing procedures.--At least a 
        majority of the States permit a producer that has a resident 
        license for selling or soliciting the purchase of insurance in 
        its home State to receive a license to sell or solicit the 
        purchase of insurance in such majority of States as a 
        nonresident to the same extent such producer is permitted to 
        sell or solicit the purchase of insurance in its State, without 
        satisfying any additional requirements other than submitting--
                    (A) a request for licensure;
                    (B) the application for licensure that the producer 
                submitted to its home State;
                    (C) proof that the producer is licensed and in good 
                standing in its home State; and
                    (D) the payment of any requisite fee to the 
                appropriate authority,
        if the producer's home State also awards such licenses on such 
        a reciprocal basis.
            (2) Continuing education requirements.--A majority of the 
        States accept an insurance producer's satisfaction of its home 
        State's continuing education requirements for licensed 
        insurance producers to satisfy the States' own continuing 
        education requirements if the producer's home State also 
        recognizes the satisfaction of continuing education 
        requirements on such a reciprocal basis.
            (3) No limiting nonresident requirements.--A majority of 
        the States do not impose any requirement upon any insurance 
        producer to be licensed or otherwise qualified to do business 
        as a nonresident that has the effect of limiting or 
        conditioning that producer's activities because of its 
        residence or place of operations, except that countersignature 
        requirements imposed on nonresident producers shall not be 
        deemed to have the effect of limiting or conditioning a 
        producer's activities because of its residence or place of 
        operations under this section.
            (4) Reciprocal reciprocity.--Each of the States that 
        satisfies paragraphs (1), (2), and (3) grants reciprocity to 
        residents of all of the other States that satisfy such 
        paragraphs.
    (d) Determination.--
            (1) NAIC determination.--At the end of the 3-year period 
        beginning on the date of the enactment of this Act, the 
        National Association of Insurance Commissioners shall 
        determine, in consultation with the insurance commissioners or 
        chief insurance regulatory officials of the States, whether the 
        uniformity or reciprocity required by subsections (b) and (c) 
        has been achieved.
            (2) Judicial review.--The appropriate United States 
        district court shall have exclusive jurisdiction over any 
        challenge to the National Association of Insurance 
        Commissioners' determination under this section and such court 
        shall apply the standards set forth in section 706 of title 5, 
        United States Code, when reviewing any such challenge.
    (e) Continued Application.--If, at any time, the uniformity or 
reciprocity required by subsections (b) and (c) no longer exists, the 
provisions of this subtitle shall take effect within 2 years, unless 
the uniformity or reciprocity required by those provisions is satisfied 
before the expiration of that 2-year period.
    (f) Savings Provision.--No provision of this section shall be 
construed as requiring that any law, regulation, provision, or action 
of any State which purports to regulate insurance producers, including 
any such law, regulation, provision, or action which purports to 
regulate unfair trade practices or establish consumer protections, 
including countersignature laws, be altered or amended in order to 
satisfy the uniformity or reciprocity required by subsections (b) and 
(c), unless any such law, regulation, provision, or action is 
inconsistent with a specific requirement of any such subsection and 
then only to the extent of such inconsistency.

SEC. 322. NATIONAL ASSOCIATION OF REGISTERED AGENTS AND BROKERS.

    (a) Establishment.--There is established the National Association 
of Registered Agents and Brokers (hereafter in this subtitle referred 
to as the ``Association'').
    (b) Status.--The Association shall--
            (1) be a nonprofit corporation;
            (2) have succession until dissolved by an Act of Congress;
            (3) not be an agency or establishment of the United States 
        Government; and
            (4) except as otherwise provided in this Act, be subject 
        to, and have all the powers conferred upon a nonprofit 
        corporation by the District of Columbia Nonprofit Corporation 
        Act (D.C. Code, sec. 29y-1001 et seq.).

SEC. 323. PURPOSE.

    The purpose of the Association shall be to provide a mechanism 
through which uniform licensing, appointment, continuing education, and 
other insurance producer sales qualification requirements and 
conditions can be adopted and applied on a multistate basis, while 
preserving the right of States to license, supervise, and discipline 
insurance producers and to prescribe and enforce laws and regulations 
with regard to insurance-related consumer protection and unfair trade 
practices.

SEC. 324. RELATIONSHIP TO THE FEDERAL GOVERNMENT.

    The Association shall be subject to the supervision and oversight 
of the National Association of Insurance Commissioners (hereafter in 
this subtitle referred to as the ``NAIC'') and shall not be an agency 
or an instrumentality of the United States Government.

SEC. 325. MEMBERSHIP.

    (a) Eligibility.--
            (1) In general.--Any State-licensed insurance producer 
        shall be eligible to become a member in the Association.
            (2) Ineligibility for suspension or revocation of 
        license.--Notwithstanding paragraph (1), a State-licensed 
        insurance producer shall not be eligible to become a member if 
        a State insurance regulator has suspended or revoked such 
        producer's license in that State during the 3-year preceding 
        the date such producer applies for membership.
            (3) Resumption of eligibility.--Paragraph (2) shall cease 
        to apply to any insurance producer if--
                    (A) the State insurance regulator renews the 
                license of such producer in the State in which the 
                license was suspended or revoked; or
                    (B) the suspension or revocation is subsequently 
                overturned.
    (b) Authority To Establish Membership Criteria.--The Association 
shall have the authority to establish membership criteria that--
            (1) bear a reasonable relationship to the purposes for 
        which the Association was established; and
            (2) do not unfairly limit the access of smaller agencies to 
        the Association membership.
    (c) Establishment of Classes and Categories.--
            (1) Classes of membership.--The Association may establish 
        separate classes of membership, with separate criteria, if the 
        Association reasonably determines that performance of different 
        duties requires different levels of education, training, or 
        experience.
            (2) Categories.--The Association may establish separate 
        categories of membership for individuals and for other persons. 
        The establishment of any such categories of membership shall be 
        based either on the types of licensing categories that exist 
        under State laws or on the aggregate amount of business handled 
        by an insurance producer. No special categories of membership, 
        and no distinct membership criteria, shall be established for 
        members which are insured depository institutions or wholesale 
        financial institutions or for their employees, agents, or 
        affiliates.
    (d) Membership Criteria.--
            (1) In general.--The Association may establish criteria for 
        membership which shall include standards for integrity, 
        personal qualifications, education, training, and experience.
            (2) Minimum standard.--In establishing criteria under 
        paragraph (1), the Association shall consider the highest 
        levels of insurance producer qualifications established under 
        the licensing laws of the States.
    (e) Effect of Membership.--Membership in the Association shall 
entitle the member to licensure in each State for which the member pays 
the requisite fees, including licensing fees and, where applicable, 
bonding requirements, set by such State.
    (f) Annual Renewal.--Membership in the Association shall be renewed 
on an annual basis.
    (g) Continuing Education.--The Association shall establish, as a 
condition of membership, continuing education requirements which shall 
be comparable to or greater than the continuing education requirements 
under the licensing laws of a majority of the States.
    (h) Suspension and Revocation.--The Association may--
            (1) inspect and examine the records and offices of the 
        members of the Association to determine compliance with the 
        criteria for membership established by the Association; and
            (2) suspend or revoke the membership of an insurance 
        producer if--
                    (A) the producer fails to meet the applicable 
                membership criteria of the Association; or
                    (B) the producer has been subject to disciplinary 
                action pursuant to a final adjudicatory proceeding 
                under the jurisdiction of a State insurance regulator, 
                and the Association concludes that retention of 
                membership in the Association would not be in the 
                public interest.
    (i) Office of Consumer Complaints.--
            (1) In general.--The Association shall establish an office 
        of consumer complaints that shall--
                    (A) receive and investigate complaints from both 
                consumers and State insurance regulators related to 
                members of the Association; and
                    (B) recommend to the Association any disciplinary 
                actions that the office considers appropriate, to the 
                extent that any such recommendation is not inconsistent 
                with State law.
            (2) Records and referrals.--The office of consumer 
        complaints of the Association shall--
                    (A) maintain records of all complaints received in 
                accordance with paragraph (1) and make such records 
                available to the NAIC and to each State insurance 
                regulator for the State of residence of the consumer 
                who filed the complaint; and
                    (B) refer, when appropriate, any such complaint to 
                any appropriate State insurance regulator.
            (3) Telephone and other access.--The office of consumer 
        complaints shall maintain a toll-free telephone number for the 
        purpose of this subsection and, as practicable, other 
        alternative means of communication with consumers, such as an 
        Internet home page.

SEC. 326. BOARD OF DIRECTORS.

    (a) Establishment.--There is established the board of directors of 
the Association (hereafter in this subtitle referred to as the 
``Board'') for the purpose of governing and supervising the activities 
of the Association and the members of the Association.
    (b) Powers.--The Board shall have such powers and authority as may 
be specified in the bylaws of the Association.
    (c) Composition.--
            (1) Members.--The Board shall be composed of 7 members 
        appointed by the NAIC.
            (2) Requirement.--At least 4 of the members of the Board 
        shall have significant experience with the regulation of 
        commercial lines of insurance in at least 1 of the 20 States in 
        which the greatest total dollar amount of commercial-lines 
        insurance is placed in the United States.
            (3) Initial board membership.--
                    (A) In general.--If, by the end of the 2-year 
                period beginning on the date of the enactment of this 
                Act, the NAIC has not appointed the initial 7 members 
                of the Board of the Association, the initial Board 
                shall consist of the 7 State insurance regulators of 
                the 7 States with the greatest total dollar amount of 
                commercial-lines insurance in place as of the end of 
                such period.
                    (B) Alternate composition.--If any of the State 
                insurance regulators described in subparagraph (A) 
                declines to serve on the Board, the State insurance 
                regulator with the next greatest total dollar amount of 
                commercial-lines insurance in place, as determined by 
                the NAIC as of the end of such period, shall serve as a 
                member of the Board.
                    (C) Inoperability.--If fewer than 7 State insurance 
                regulators accept appointment to the Board, the 
                Association shall be established without NAIC oversight 
                pursuant to section 332.
    (d) Terms.--The term of each director shall, after the initial 
appointment of the members of the Board, be for 3 years, with \1/3\ of 
the directors to be appointed each year.
    (e) Board Vacancies.--A vacancy on the Board shall be filled in the 
same manner as the original appointment of the initial Board for the 
remainder of the term of the vacating member.
    (f) Meetings.--The Board shall meet at the call of the chairperson, 
or as otherwise provided by the bylaws of the Association.

SEC. 327. OFFICERS.

    (a) In General.--
            (1) Positions.--The officers of the Association shall 
        consist of a chairperson and a vice chairperson of the Board, a 
        president, secretary, and treasurer of the Association, and 
        such other officers and assistant officers as may be deemed 
        necessary.
            (2) Manner of selection.--Each officer of the Board and the 
        Association shall be elected or appointed at such time and in 
        such manner and for such terms not exceeding 3 years as may be 
        prescribed in the bylaws of the Association.
    (b) Criteria for Chairperson.-- Only individuals who are members of 
the National Association of Insurance Commissioners shall be eligible 
to serve as the chairperson of the board of directors.

SEC. 328. BYLAWS, RULES, AND DISCIPLINARY ACTION.

    (a) Adoption and Amendment of Bylaws.--
            (1) Copy required to be filed with the naic.--The board of 
        directors of the Association shall file with the NAIC a copy of 
        the proposed bylaws or any proposed amendment to the bylaws, 
        accompanied by a concise general statement of the basis and 
        purpose of such proposal.
            (2) Effective date.--Except as provided in paragraph (3), 
        any proposed bylaw or proposed amendment shall take effect--
                    (A) 30 days after the date of the filing of a copy 
                with the NAIC;
                    (B) upon such later date as the Association may 
                designate; or
                    (C) such earlier date as the NAIC may determine.
            (3) Disapproval by the naic.--Notwithstanding paragraph 
        (2), a proposed bylaw or amendment shall not take effect if, 
        after public notice and opportunity to participate in a public 
        hearing--
                    (A) the NAIC disapproves such proposal as being 
                contrary to the public interest or contrary to the 
                purposes of this subtitle and provides notice to the 
                Association setting forth the reasons for such 
                disapproval; or
                    (B) the NAIC finds that such proposal involves a 
                matter of such significant public interest that public 
                comment should be obtained, in which case it may, after 
                notifying the Association in writing of such finding, 
                require that the procedures set forth in subsection (b) 
                be followed with respect to such proposal, in the same 
                manner as if such proposed bylaw change were a proposed 
                rule change within the meaning of such paragraph.
    (b) Adoption and Amendment of Rules.--
            (1) Filing proposed regulations with the naic.--
                    (A) In general.--The board of directors of the 
                Association shall file with the NAIC a copy of any 
                proposed rule or any proposed amendment to a rule of 
                the Association which shall be accompanied by a concise 
                general statement of the basis and purpose of such 
                proposal.
                    (B) Other rules and amendments ineffective.--No 
                proposed rule or amendment shall take effect unless 
                approved by the NAIC or otherwise permitted in 
                accordance with this paragraph.
            (2) Initial consideration by the naic.--Within 35 days 
        after the date of publication of notice of filing of a 
        proposal, or before the end of such longer period not to exceed 
        90 days as the NAIC may designate after such date if the NAIC 
        finds such longer period to be appropriate and sets forth its 
        reasons for so finding, or as to which the Association 
        consents, the NAIC shall--
                    (A) by order approve such proposed rule or 
                amendment; or
                    (B) institute proceedings to determine whether such 
                proposed rule or amendment should be modified or 
                disapproved.
            (3) NAIC proceedings.--
                    (A) In general.--Proceedings instituted by the NAIC 
                with respect to a proposed rule or amendment pursuant 
                to paragraph (2) shall--
                            (i) include notice of the grounds for 
                        disapproval under consideration;
                            (ii) provide opportunity for hearing; and
                            (iii) be concluded within 180 days after 
                        the date of the Association's filing of such 
                        proposed rule or amendment.
                    (B) Disposition of proposal.--At the conclusion of 
                any proceeding under subparagraph (A), the NAIC shall, 
                by order, approve or disapprove the proposed rule or 
                amendment.
                    (C) Extension of time for consideration.--The NAIC 
                may extend the time for concluding any proceeding under 
                subparagraph (A) for--
                            (i) not more than 60 days if the NAIC finds 
                        good cause for such extension and sets forth 
                        its reasons for so finding; or
                            (ii) for such longer period as to which the 
                        Association consents.
            (4) Standards for review.--
                    (A) Grounds for approval.--The NAIC shall approve a 
                proposed rule or amendment if the NAIC finds that the 
                rule or amendment is in the public interest and is 
                consistent with the purposes of this Act.
                    (B) Approval before end of notice period.--The NAIC 
                shall not approve any proposed rule before the end of 
                the 30-day period beginning on the date the Association 
                files proposed rules or amendments in accordance with 
                paragraph (1) unless the NAIC finds good cause for so 
                doing and sets forth the reasons for so finding.
            (5) Alternate procedure.--
                    (A) In general.--Notwithstanding any provision of 
                this subsection other than subparagraph (B), a proposed 
                rule or amendment relating to the administration or 
                organization of the Association may take effect--
                            (i) upon the date of filing with the NAIC, 
                        if such proposed rule or amendment is 
                        designated by the Association as relating 
                        solely to matters which the NAIC, consistent 
                        with the public interest and the purposes of 
                        this subsection, determines by rule do not 
                        require the procedures set forth in this 
                        paragraph; or
                            (ii) upon such date as the NAIC shall for 
                        good cause determine.
                    (B) Abrogation by the naic.--
                            (i) In general.--At any time within 60 days 
                        after the date of filing of any proposed rule 
                        or amendment under subparagraph (A)(i) or 
                        (B)(ii), the NAIC may repeal such rule or 
                        amendment and require that the rule or 
                        amendment be refiled and reviewed in accordance 
                        with this paragraph, if the NAIC finds that 
                        such action is necessary or appropriate in the 
                        public interest, for the protection of 
                        insurance producers or policyholders, or 
                        otherwise in furtherance of the purposes of 
                        this subtitle.
                            (ii) Effect of reconsideration by the 
                        naic.--Any action of the NAIC pursuant to 
                        clause (i) shall--
                                    (I) not affect the validity or 
                                force of a rule change during the 
                                period such rule or amendment was in 
                                effect; and
                                    (II) not be considered to be final 
                                action.
    (c) Action Required by the NAIC.--The NAIC may, in accordance with 
such rules as the NAIC determines to be necessary or appropriate to the 
public interest or to carry out the purposes of this subtitle, require 
the Association to adopt, amend, or repeal any bylaw, rule or amendment 
of the Association, whenever adopted.
    (d) Disciplinary Action by the Association.--
            (1) Specification of charges.--In any proceeding to 
        determine whether membership shall be denied, suspended, 
        revoked, and not renewed (hereafter in this section referred to 
        as a ``disciplinary action''), the Association shall bring 
        specific charges, notify such member of such charges and give 
        the member an opportunity to defend against the charges, and 
        keep a record.
            (2) Supporting statement.--A determination to take 
        disciplinary action shall be supported by a statement setting 
        forth--
                    (A) any act or practice in which such member has 
                been found to have been engaged;
                    (B) the specific provision of this subtitle, the 
                rules or regulations under this subtitle, or the rules 
                of the Association which any such act or practice is 
                deemed to violate; and
                    (C) the sanction imposed and the reason for such 
                sanction.
    (e) NAIC Review of Disciplinary Action.--
            (1) Notice to the naic.--If the Association orders any 
        disciplinary action, the Association shall promptly notify the 
        NAIC of such action.
            (2) Review by the naic.--Any disciplinary action taken by 
        the Association shall be subject to review by the NAIC--
                    (A) on the NAIC's own motion; or
                    (B) upon application by any person aggrieved by 
                such action if such application is filed with the NAIC 
                not more than 30 days after the later of--
                            (i) the date the notice was filed with the 
                        NAIC pursuant to paragraph (1); or
                            (ii) the date the notice of the 
                        disciplinary action was received by such 
                        aggrieved person.
    (f) Effect of Review.--The filing of an application to the NAIC for 
review of a disciplinary action, or the institution of review by the 
NAIC on the NAIC's own motion, shall not operate as a stay of 
disciplinary action unless the NAIC otherwise orders.
    (g) Scope of Review.--
                    (A) In general.--In any proceeding to review such 
                action, after notice and the opportunity for hearing, 
                the NAIC shall--
                            (i) determine whether the action should be 
                        taken;
                            (ii) affirm, modify, or rescind the 
                        disciplinary sanction; or
                            (iii) remand to the Association for further 
                        proceedings.
                    (B) Dismissal of review.--The NAIC may dismiss a 
                proceeding to review disciplinary action if the NAIC 
                finds that--
                            (i) the specific grounds on which the 
                        action is based exist in fact;
                            (ii) the action is in accordance with 
                        applicable rules and regulations; and
                            (iii) such rules and regulations are, and 
                        were, applied in a manner consistent with the 
                        purposes of this Act.

SEC. 329. ASSESSMENTS.

    (a) Insurance Producers Subject to Assessment.--The Association may 
establish such application and membership fees as the Association finds 
necessary to cover the costs of its operations, including fees made 
reimbursable to the NAIC under subsection (b), except that, in setting 
such fees, the Association may not discriminate against smaller 
insurance producers.
    (b) NAIC Assessments.--The NAIC may assess the Association for any 
costs it incurs under this subtitle.

SEC. 330. FUNCTIONS OF THE NAIC.

    (a) Administrative Procedure.--Determinations of the NAIC, for 
purposes of making rules pursuant to section 328, shall be made after 
appropriate notice and opportunity for a hearing and for submission of 
views of interested persons.
    (b) Examinations and Reports.--
            (1) The NAIC may make such examinations and inspections of 
        the Association and require the Association to furnish it with 
        such reports and records or copies thereof as the NAIC may 
        consider necessary or appropriate in the public interest or to 
        effectuate the purposes of this subtitle.
            (2) As soon as practicable after the close of each fiscal 
        year, the Association shall submit to the NAIC a written report 
        regarding the conduct of its business, and the exercise of the 
        other rights and powers granted by this subtitle, during such 
        fiscal year. Such report shall include financial statements 
        setting forth the financial position of the Association at the 
        end of such fiscal year and the results of its operations 
        (including the source and application of its funds) for such 
        fiscal year. The NAIC shall transmit such report to the 
        President and the Congress with such comment thereon as the 
        NAIC determines to be appropriate.

SEC. 331. LIABILITY OF THE ASSOCIATION AND THE DIRECTORS, OFFICERS, AND 
              EMPLOYEES OF THE ASSOCIATION.

    (a) In General.--The Association shall not be deemed to be an 
insurer or insurance producer within the meaning of any State law, 
rule, regulation, or order regulating or taxing insurers, insurance 
producers, or other entities engaged in the business of insurance, 
including provisions imposing premium taxes, regulating insurer 
solvency or financial condition, establishing guaranty funds and 
levying assessments, or requiring claims settlement practices.
    (b) Liability of the Association, Its Directors, Officers, and 
Employees.--Neither the Association nor any of its directors, officers, 
or employees shall have any liability to any person for any action 
taken or omitted in good faith under or in connection with any matter 
subject to this subtitle.

SEC. 332. ELIMINATION OF NAIC OVERSIGHT.

    (a) In General.--The Association shall be established without NAIC 
oversight and the provisions set forth in section 324, subsections (a), 
(b), (c), and (e) of section 328, and sections 329(b) and 330 of this 
subtitle shall cease to be effective if, at the end of the 2-year 
period after the date on which the provisions of this subtitle take 
effect pursuant to section 321--
            (1) at least a majority of the States representing at least 
        50 percent of the total United States commercial-lines 
        insurance premiums have not satisfied the uniformity or 
        reciprocity requirements of subsections (a) and (b) of section 
        321; and
            (2) the NAIC has not approved the Association's bylaws as 
        required by section 328, the NAIC is unable to operate or 
        supervise the Association, or the Association is not conducting 
        its activities as required under this Act.
    (b) Board Appointments.--If the repeals required by subsection (a) 
are implemented--
            (1) General appointment power.--The President, with the 
        advice and consent of the United States Senate, shall appoint 
        the members of the Association's Board established under 
        section 326 from lists of candidates recommended to the 
        President by the National Association of Insurance 
        Commissioners.
            (2) Procedures for obtaining national association of 
        insurance commissioners appointment recommendations.--
                    (A) Initial determination and recommendations.--
                After the date on which the provisions of part a of 
                this section take effect, then the National Association 
                of Insurance Commissioners shall have 60 days to 
                provide a list of recommended candidates to the 
                President. If the National Association of Insurance 
                Commissioners fails to provide a list by that date, or 
                if any list that is provided does not include at least 
                14 recommended candidates or comply with the 
                requirements of section 326(c), the President shall, 
                with the advice and consent of the United States 
                Senate, make the requisite appointments without 
                considering the views of the NAIC.
                    (B) Subsequent appointments.--After the initial 
                appointments, the National Association of Insurance 
                Commissioners shall provide a list of at least 6 
                recommended candidates for the Board to the President 
                by January 15 of each subsequent year. If the National 
                Association of Insurance Commissioners fails to provide 
                a list by that date, or if any list that is provided 
                does not include at least 6 recommended candidates or 
                comply with the requirements of section 326(c), the 
                President, with the advice and consent of the Senate, 
                shall make the requisite appointments without 
                considering the views of the NAIC.
                    (C) Presidential oversight.--
                            (i) Removal.--If the President determines 
                        that the Association is not acting in the 
                        interests of the public, the President may 
                        remove the entire existing Board for the 
                        remainder of the term to which the members of 
                        the Board were appointed and appoint, with the 
                        advice and consent of the Senate, new members 
                        to fill the vacancies on the Board for the 
                        remainder of such terms.
                            (ii) Suspension of rules or actions.--The 
                        President, or a person designated by the 
                        President for such purpose, may suspend the 
                        effectiveness of any rule, or prohibit any 
                        action, of the Association which the President 
                        or the designee determines is contrary to the 
                        public interest.
    (d) Annual Report.--As soon as practicable after the close of each 
fiscal year, the Association shall submit to the President and to 
Congress a written report relative to the conduct of its business, and 
the exercise of the other rights and powers granted by this subtitle, 
during such fiscal year. Such report shall include financial statements 
setting forth the financial position of the Association at the end of 
such fiscal year and the results of its operations (including the 
source and application of its funds) for such fiscal year.

SEC. 333. RELATIONSHIP TO STATE LAW.

    (a) Preemption of State Laws.--State laws, regulations, provisions, 
or actions purporting to regulate insurance producers shall be 
preempted in the following instances:
            (1) No State shall impede the activities of, take any 
        action against, or apply any provision of law or regulation to, 
        any insurance producer because that insurance producer or any 
        affiliate plans to become, has applied to become, or is a 
        member of the Association.
            (2) No State shall impose any requirement upon a member of 
        the Association that it pay different fees to be licensed or 
        otherwise qualified to do business in that State, including 
        bonding requirements, based on its residency.
            (3) No State shall impose any licensing, appointment, 
        integrity, personal or corporate qualifications, education, 
        training, experience, residency, or continuing education 
        requirement upon a member of the Association that is different 
        than the criteria for membership in the Association or renewal 
        of such membership, except that counter-signature requirements 
        imposed on nonresident producers shall not be deemed to have 
        the effect of limiting or conditioning a producer's activities 
        because of its residence or place of operations under this 
        section.
            (4) No State shall implement the procedures of such State's 
        system of licensing or renewing the licenses of insurance 
        producers in a manner different from the authority of the 
        Association under section 325.
    (b) Savings Provision.--Except as provided in subsection (a), no 
provision of this section shall be construed as altering or affecting 
the continuing effectiveness of any law, regulation, provision, or 
action of any State which purports to regulate insurance producers, 
including any such law, regulation, provision, or action which purports 
to regulate unfair trade practices or establish consumer protections, 
including, but not limited to, countersignature laws.

SEC. 334. COORDINATION WITH OTHER REGULATORS.

    (a) Coordination With State Insurance Regulators.--The Association 
shall have the authority to--
            (1) issue uniform insurance producer applications and 
        renewal applications that may be used to apply for the issuance 
        or removal of State licenses, while preserving the ability of 
        each State to impose such conditions on the issuance or renewal 
        of a license as are consistent with section 333;
            (2) establish a central clearinghouse through which members 
        of the Association may apply for the issuance or renewal of 
        licenses in multiple States; and
            (3) establish or utilize a national database for the 
        collection of regulatory information concerning the activities 
        of insurance producers.
    (b) Coordination With the National Association of Securities 
Dealers.--The Association shall coordinate with the National 
Association of Securities Dealers in order to ease any administrative 
burdens that fall on persons that are members of both associations, 
consistent with the purposes of this subtitle and the Federal 
securities laws.

SEC. 335. JUDICIAL REVIEW.

    (a) Jurisdiction.--The appropriate United States district court 
shall have exclusive jurisdiction over litigation involving the 
Association, including disputes between the Association and its members 
that arise under this subtitle. Suits brought in State court involving 
the Association shall be deemed to have arisen under Federal law and 
therefore be subject to jurisdiction in the appropriate United States 
district court.
    (b) Exhaustion of Remedies.--An aggrieved person must exhaust all 
available administrative remedies before the Association and the NAIC 
before it may seek judicial review of an Association decision.
    (c) Standards of Review.--The standards set forth in section 553 of 
title 5, United States Code, shall be applied whenever a rule or bylaw 
of the Association is under judicial review, and the standards set 
forth in section 554 of title 5, United States Code, shall be applied 
whenever a disciplinary action of the Association is judicially 
reviewed.

SEC. 336. DEFINITIONS.

    For purposes of this subtitle, the following definitions shall 
apply:
            (1) Insurance.--The term ``insurance'' means any product 
        defined or regulated as insurance by the appropriate State 
        insurance regulatory authority.
            (2) Insurance producer.--The term ``insurance producer'' 
        means any insurance agent or broker, surplus lines broker, 
        insurance consultant, limited insurance representative, and any 
        other person that solicits, negotiates, effects, procures, 
        delivers, renews, continues or binds policies of insurance or 
        offers advice, counsel, opinions or services related to 
        insurance.
            (3) State law.--The term ``State law'' includes all laws, 
        decisions, rules, regulations, or other State action having the 
        effect of law, of any State. A law of the United States 
        applicable only to the District of Columbia shall be treated as 
        a State law rather than a law of the United States.
            (4) State.--The term ``State'' includes any State, the 
        District of Columbia, American Samoa, Guam, Puerto Rico, and 
        the United States Virgin Islands.
            (5) Home state.--The term ``home State'' means the State in 
        which the insurance producer maintains its principal place of 
        residence and is licensed to act as an insurance producer.

          TITLE IV--UNITARY SAVINGS AND LOAN HOLDING COMPANIES

SEC. 401. TERMINATION OF EXPANDED POWERS FOR NEW UNITARY S&L HOLDING 
              COMPANIES.

    (a) In General.--Section 10(c) of the Home Owners' Loan Act (12 
U.S.C. 1467a(c)) is amended by adding at the end the following new 
paragraph:
            ``(9) Termination of expanded powers for new unitary s&l 
        holding company.--
                    ``(A) In general.--Subject to subparagraph (B), 
                paragraph (3) shall not apply with respect to any 
                company that becomes a savings and loan holding company 
                pursuant to an application filed after March 31, 1998.
                    ``(B) Existing unitary s&l holding companies and 
                the successors to such companies.--Subparagraph (A) 
                shall not apply, and paragraph (3) shall continue to 
                apply, to a company (or any subsidiary of such company) 
                that--
                            ``(i) either--
                                    ``(I) acquired 1 or more savings 
                                associations described in paragraph (3) 
                                pursuant to applications at least 1 of 
                                which was filed before April 1, 1998; 
                                or
                                    ``(II) became a savings and loan 
                                holding company by acquiring ownership 
                                or control of the company described in 
                                subclause (I); and
                            ``(ii) continues to control the savings 
                        associations referred to in clause (i)(I) or 
                        the successor to any such savings 
                        association.''.
    (b) Technical and Conforming Amendment.--Section 10(c)(3) of the 
Home Owners' Loan Act (12 U.S.C. 1467a(c)(3)) is amended by striking 
``Notwithstanding'' and inserting ``Except as provided in paragraph (9) 
and notwithstanding''.

SEC. 402. RETENTION OF ``FEDERAL'' IN NAME OF CONVERTED FEDERAL SAVINGS 
              ASSOCIATION.

    Section 2 of the Act entitled ``An Act to enable national banking 
associations to increase their capital stock and to change their names 
or locations.'' and approved May 1, 1886 (12 U.S.C. 30) is amended by 
adding at the end the following new subsection:
    ``(d) Retention of `Federal' in Name of Converted Federal Savings 
Association.--
            ``(1) In general.--Notwithstanding subsection (a) or any 
        other provision of law, any depository institution the charter 
        of which is converted from that of a Federal savings 
        association to a national bank or a State bank after the date 
        of the enactment of the Financial Services Act of 1998 may 
        retain the term `Federal' in the name of such institution so 
        long as such depository institution remains an insured 
        depository institution.
            ``(2) Definitions.--For purposes of this subsection, the 
        terms `depository institution', `insured depository 
        institution', `national bank', and `State bank' have the same 
        meanings given to such terms in section 3 of the Federal 
        Deposit Insurance Act.''.

            Passed the House of Representatives May 13, 1998.

            Attest:

                                                                 Clerk.