[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 10 Placed on Calendar Senate (PCS)]
Calendar No. 204
106th CONGRESS
1st 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.
July 12, 1999
Received; read twice and placed on the calendar
Calendar No. 204
106th CONGRESS
1st Session
H. R. 10
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
July 12, 1999
Received; read twice and placed on the Calendar
_______________________________________________________________________
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 1999''.
(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 avoid duplicative, potentially conflicting, and
overly burdensome regulatory requirements through the creation
of a regulatory framework for financial holding companies that
respects the divergent requirements of each of the component
businesses of the holding company, and that is based upon
principles of strong functional regulation and enhanced
regulatory coordination.
(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. Operation of State law.
Sec. 105. Mutual bank holding companies authorized.
Sec. 105A. Public meetings for large bank acquisitions and mergers.
Sec. 106. Prohibition on deposit production offices.
Sec. 107. Clarification of branch closure requirements.
Sec. 108. Amendments relating to limited purpose banks.
Sec. 109. GAO study of economic impact on community banks, other small
financial institutions, insurance agents,
and consumers.
Sec. 110. Responsiveness to community needs for financial services.
Sec. 110A. Study of financial modernization's affect on the
accessibility of small business and farm
loans.
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. Equivalent regulation and supervision.
Sec. 118. Prohibition on FDIC assistance to affiliates and
subsidiaries.
Sec. 119. Repeal of savings bank provisions in the Bank Holding Company
Act of 1956.
Sec. 120. Technical amendment.
Subtitle C--Subsidiaries of National Banks
Sec. 121. Permissible activities for subsidiaries of national banks.
Sec. 122. Safety and soundness firewalls between banks and their
financial subsidiaries.
Sec. 123. Misrepresentations regarding depository institution liability
for obligations of affiliates.
Sec. 124. 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--National Treatment
Sec. 151. Foreign banks that are financial holding companies.
Sec. 152. Foreign banks and foreign financial institutions that are
wholesale financial institutions.
Sec. 153. Representative offices.
Sec. 154. Reciprocity.
Subtitle G--Federal Home Loan Bank System Modernization
Sec. 161. Short title.
Sec. 162. Definitions.
Sec. 163. Savings association membership.
Sec. 164. Advances to members; collateral.
Sec. 165. Eligibility criteria.
Sec. 166. Management of banks.
Sec. 167. Resolution Funding Corporation.
Sec. 168. Capital structure of Federal home loan banks.
Subtitle H--ATM Fee Reform
Sec. 171. Short title.
Sec. 172. Electronic fund transfer fee disclosures at any host ATM.
Sec. 173. Disclosure of possible fees to consumers when ATM card is
issued.
Sec. 174. Feasibility study.
Sec. 175. No liability if posted notices are damaged.
Subtitle I--Direct Activities of Banks
Sec. 181. Authority of national banks to underwrite certain municipal
bonds.
Subtitle J--Deposit Insurance Funds
Sec. 186. Study of safety and soundness of funds.
Sec. 187. Elimination of SAIF and DIF special reserves.
Subtitle K--Miscellaneous Provisions
Sec. 191. Termination of ``know your customer'' regulations.
Sec. 192. Study and report on Federal electronic fund transfers.
Sec. 193. General Accounting Office study of conflicts of interest.
Sec. 194. Study of cost of all Federal banking regulations.
Sec. 195. Study and report on adapting existing legislative
requirements to online banking and lending.
Sec. 196. Regulation of uninsured State member banks.
Sec. 197. Clarification of source of strength doctrine.
Sec. 198. Interest rates and other charges at interstate branches.
Sec. 198A. Interstate branches and agencies of foreign banks.
Sec. 198B. Fair treatment of women by financial advisers.
Subtitle L--Effective Date of Title
Sec. 199. 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. Information sharing.
Sec. 205. Treatment of new hybrid products.
Sec. 206. Definition of excepted banking product.
Sec. 207. Additional definitions.
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. Statutory disqualification for bank wrongdoing.
Sec. 224. Conforming change in definition.
Sec. 225. Conforming amendment.
Sec. 226. Church plan exclusion.
Sec. 227. 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--Disclosure of Customer Costs of Acquiring Financial
Products
Sec. 241. Improved and consistent disclosure.
Subtitle E--Banks and Bank Holding Companies
Sec. 251. Consultation.
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. Title insurance activities of national banks and their
affiliates.
Sec. 306. Expedited and equalized dispute resolution for Federal
regulators.
Sec. 307. Consumer protection regulations.
Sec. 308. Certain State affiliation laws preempted for insurance
companies and affiliates.
Sec. 309. Interagency consultation.
Sec. 310. Definition of State.
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.
Subtitle D--Rental Car Agency Insurance Activities
Sec. 341. Standard of regulation for motor vehicle rentals.
Subtitle E--Confidentiality
Sec. 351. Confidentiality of health and medical information.
TITLE IV--UNITARY SAVINGS AND LOAN HOLDING COMPANIES
Sec. 401. Prohibition on new unitary savings and loan holding
companies.
Sec. 402. Retention of ``Federal'' in name of converted Federal savings
association.
TITLE V--PRIVACY
Subtitle A--Disclosure of Nonpublic Personal Information
Sec. 501. Protection of nonpublic personal information.
Sec. 502. Obligations with respect to disclosures of personal
information.
Sec. 503. Disclosure of institution privacy policy.
Sec. 504. Rulemaking.
Sec. 505. Enforcement.
Sec. 506. Fair Credit Reporting Act amendment.
Sec. 507. Relation to other provisions.
Sec. 508. Study of information sharing among financial affiliates.
Sec. 509. Definitions.
Sec. 510. Effective date.
Subtitle B--Fraudulent Access to Financial Information
Sec. 521. Privacy protection for customer information of financial
institutions.
Sec. 522. Administrative enforcement.
Sec. 523. Criminal penalty.
Sec. 524. Relation to State laws.
Sec. 525. Agency guidance.
Sec. 526. Reports.
Sec. 527. Definitions.
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 of the Banking Act of 1933 (12
U.S.C. 377) (commonly referred to as the ``Glass-Steagall Act'') is
repealed.
(b) Section 32 Repealed.--Section 32 of the Banking Act of 1933 (12
U.S.C. 78) 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 or order under this
paragraph as of the day before the date of the enactment of the
Financial Services Act of 1999, to be so closely related to
banking as to be a proper incident thereto (subject to such
terms and conditions contained in such regulation or order,
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 the enactment of
the Financial Services Act of 1999.''.
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.
``(D) 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), (B), and (C).
``(2) Foreign banks and companies.--For purposes of
paragraph (1), the Board shall establish and apply comparable
capital and other operating 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.--Any depository
institution acquired by a bank holding company during the 12-
month period preceding the submission of a notice under
paragraph (1)(D) and any depository institution acquired after
the submission of such notice may be excluded for purposes of
paragraph (1)(C) during the 12-month period beginning on the
date of such acquisition if--
``(A) 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; and
``(B) the plan has been accepted by such agency.
``(c) Engaging in Activities That Are Financial in Nature.--
``(1) Financial activities.--
``(A) In general.--Notwithstanding section 4(a), a
financial holding company may engage in any activity,
and acquire and retain the shares of any company
engaged in any activity, that the Board has determined
(by regulation or order and in accordance with
subparagraph (B)) to be--
``(i) financial in nature or incidental to
such financial activities; or
``(ii) complementary to activities
authorized under this subsection to the extent
that the amount of such complementary
activities remains small.
``(B) Coordination between the board and the
secretary of the treasury.--
``(i) Proposals raised before the board.--
``(I) Consultation.--The Board
shall notify the Secretary of the
Treasury of, and consult with the
Secretary of the Treasury concerning,
any request, proposal, or application
under this subsection, including a
regulation or order proposed under
paragraph (4), for a determination of
whether an activity is financial in
nature or incidental to such a
financial activity.
``(II) Treasury view.--The Board
shall not determine that any activity
is financial in nature or incidental to
a financial activity under this
subsection if the Secretary of the
Treasury notifies the Board in writing,
not later than 30 days after the date
of receipt of the notice described in
subclause (I) (or such longer period as
the Board determines to be appropriate
in light of the circumstances) that the
Secretary of the Treasury believes that
the activity is not financial in nature
or incidental to a financial activity.
``(ii) Proposals raised by the treasury.--
``(I) Treasury recommendation.--The
Secretary of the Treasury may, at any
time, recommend in writing that the
Board find an activity to be financial
in nature or incidental to a financial
activity.
``(II) Time period for board
action.--Not later than 30 days after
the date of receipt of a written
recommendation from the Secretary of
the Treasury under subclause (I) (or
such longer period as the Secretary of
the Treasury and the Board determine to
be appropriate in light of the
circumstances), the Board shall
determine whether to initiate a public
rulemaking proposing that the subject
recommended activity be found to be
financial in nature or incidental to a
financial activity under this
subsection, and shall notify the
Secretary of the Treasury in writing of
the determination of the Board and, in
the event that the Board determines not
to seek public comment on the proposal,
the reasons for that determination.
``(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 1999;
``(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 the enactment of the Financial Services Act
of 1999, 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 the enactment of the Financial Services
Act of 1999) 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 one or
more entities (including entities, other than 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;
``(ii) such shares, assets, or ownership
interests are acquired and held by an affiliate
of the bank holding company that is a
registered broker or dealer that is engaged in
securities underwriting activities, or an
affiliate of such broker or dealer, as part of
a bona fide underwriting or investment 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 one 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) or providing and
issuing annuities;
``(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) Authorization of new financial activities.--The Board
shall, by regulation or order and in accordance with paragraph
(1)(B), 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 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 or
in paragraph (6) of this subsection, a 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.
``(6) Notice required for large combinations.--
``(A) In general.--No financial holding company
shall directly or indirectly acquire, and no company
that becomes a financial holding company shall directly
or indirectly acquire control of, any company in the
United States, including through merger, consolidation,
or other type of business combination, that--
``(i) is engaged in activities permitted
under this subsection or subsection (g); and
``(ii) has consolidated total assets in
excess of $40,000,000,000,
unless such holding company has provided notice to the
Board, not later than 60 days prior to such proposed
acquisition or prior to becoming a financial holding
company, and during that time period, or such longer
time period not exceeding an additional 60 days, as
established by the Board, the Board has not issued a
notice disapproving the proposed acquisition or
retention.
``(B) Factors for consideration.--In reviewing any
prior notice filed under this paragraph, the Board
shall take into consideration--
``(i) whether the company is in compliance
with all applicable criteria set forth in
subsection (b) and the provisions of subsection
(d);
``(ii) whether the proposed combination
represents an undue aggregation of resources;
``(iii) whether the proposed combination
poses a risk to the deposit insurance system;
``(iv) whether the proposed combination
poses a risk to State insurance guaranty funds;
``(v) whether the proposed combination can
reasonably be expected to be in the best
interests of depositors or policyholders of the
respective entities;
``(vi) whether the proposed transaction can
reasonably be expected to further the purposes
of this Act and produce benefits to the public;
and
``(vii) whether, and the extent to which,
the proposed combination poses an undue risk to
the stability of the financial system in the
United States.
``(C) Required information.--The Board may
disapprove any prior notice filed under this paragraph
if the company submitting such notice neglects, fails,
or refuses to furnish to the Board all relevant
information required by the Board.
``(D) Solicitation of views of other supervisory
agencies.--
``(i) In general.--Upon receiving a prior
notice under this paragraph, in order to
provide for the submission of their views and
recommendations, the Board shall give notice of
the proposal to--
``(I) the appropriate Federal
banking agency of any bank involved;
``(II) the appropriate functional
regulator of any functionally regulated
nondepository institution (as defined
in section 5(c)(1)(C)) involved; and
``(III) the Secretary of the
Treasury, the Attorney General, and the
Federal Trade Commission.
``(ii) Timing.--The views and
recommendations of any agency provided notice
under this paragraph shall be submitted to the
Board not later than 30 calendar days after the
date on which notice to the agency was given,
unless the Board determines that another
shorter time period is appropriate.
``(d) Provisions Applicable to Financial Holding Companies That
Fail To Meet Requirements.--
``(1) In general.--If the Board finds, after notice from or
consultation with the appropriate Federal banking agency, that
a financial holding company is not in compliance with the
requirements of subparagraph (A), (B), or (C) 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) Authority to impose limitations.--Until the
conditions described in a notice to a financial holding company
under paragraph (1) are corrected--
``(A) 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; and
``(B) the appropriate Federal banking agency may
impose such limitations on the conduct or activities of
an affiliated depository institution or subsidiary of a
depository institution as the appropriate Federal
banking agency 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) or (C) 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 or wholesale financial institution 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 wholesale financial 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 1999 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), except this paragraph
shall not apply with respect to a company that owns a
broadcasting station licensed under title III of the
Communications Act of 1934 and the shares of which have been
controlled by an insurance company since January 1, 1998.
``(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.--A
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 section 10(c),
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 1999. The Board may, upon application
by a financial holding company, extend such 10-year period by a
period 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 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) neither the Board nor the Secretary of the Treasury
has determined that the activity is not financial in nature or
incidental to financial activities under subsection (c);
``(6) the holding company is not required to provide prior
written notice of the transaction to the Board under subsection
(c)(6); and
``(7) 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.''.
(b) Factors For Consideration in Reviewing Application by Financial
Holding Company to Acquire Bank.--Section 3(c) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1842(c)) is amended by adding at the end
the following new paragraph:
``(6) `Too big to fail' factor.--In considering an
acquisition, merger, or consolidation under this section
involving a financial holding company or a company that would
be any such holding company upon the consummation of the
transaction, the Board shall consider whether, and the extent
to which, the proposed acquisition, merger, or consolidation
poses an undue risk to the stability of the financial system of
the United States.''.
(c) Technical and Conforming Amendments.--
(1) Section 2 of the Bank Holding Company Act of 1956 (12
U.S.C. 1841) is amended by adding at the end the following new
subsection:
``(p) Insurance Company.--For purposes of sections 5, 6, and 10,
the term `insurance company' includes any person engaged in the
business of insurance to the extent of such activities.''.
(2) Section 4(j) of the Bank Holding Company Act of 1956
(12 U.S.C. 1843(j)) is amended--
(A) in paragraph (1)(A), by inserting ``or in any
complementary activity under section 6(c)(1)(B)'' after
``subsection (c)(8) or (a)(2)''; and
(B) in paragraph (3)--
(i) by inserting ``, other than any
complementary activity under section
6(c)(1)(B),'' after ``to engage in any
activity''; and
(ii) by inserting ``or a company engaged in
any complementary activity under section
6(c)(1)(B)'' after ``insured depository
institution''.
(d) Report.--
(1) In general.--By the end of the 4-year period beginning
on the date of the enactment of this Act and every 4 years
thereafter, the Board of Governors of the Federal Reserve
System and the Secretary of the Treasury shall submit a joint
report to the Congress containing a summary of new activities
which are financial in nature, including grandfathered
commercial activities, in which any financial holding company
is engaged pursuant to subsection (c)(1) or (f) of section 6 of
the Bank Holding Company Act of 1956 (as added by subsection
(a)).
(2) Other contents.--Each report submitted to the Congress
pursuant to paragraph (1) shall also contain the following:
(A) A discussion of actions by the Board of
Governors of the Federal Reserve System and the
Secretary of the Treasury, whether by regulation,
order, interpretation, or guideline or by approval or
disapproval of an application, with regard to
activities of financial holding companies which are
incidental to activities financial in nature or
complementary to such financial activities.
(B) An analysis and discussion of the risks posed
by commercial activities of financial holding companies
to the safety and soundness of affiliate depository
institutions.
(C) An analysis and discussion of the effect of
mergers and acquisitions under section 6 of the Bank
Holding Company Act of 1956 on market concentration in
the financial services industry.
(D) An analysis and discussion, by the Board and
the Secretary in consultation with the other Federal
banking agencies (as defined in section 3(z) of the
Federal Deposit Insurance Act), of the impact of the
implementation of this Act, and the amendments made by
this Act, on the extent of meeting community credit
needs and capital availability under the Community
Reinvestment Act of 1977.
SEC. 104. OPERATION OF STATE LAW.
(a) Affiliations.--
(1) In general.--Except as provided in paragraph (2), no
State may, by statute, regulation, order, interpretation, or
other action, prevent or restrict an insured depository
institution or wholesale financial institution, or a subsidiary
or affiliate thereof, from being affiliated directly or
indirectly or associated with any person or entity, as
authorized or permitted by this Act or any other provision of
Federal law.
(2) Insurance.--With respect to affiliations between
insured depository institutions or wholesale financial
institutions, or any subsidiary or affiliate thereof, and
persons or entities engaged in the business of insurance,
paragraph (1) does not prohibit--
(A) any State from requiring any person or entity
that proposes to acquire control of an entity that is
engaged in the business of insurance and domiciled in
that State (hereafter in this subparagraph referred to
as the ``insurer'') to furnish to the insurance
regulatory authority of that State, not later than 60
days before the effective date of the proposed
acquisition--
(i) the name and address of each person by
whom, or on whose behalf, the affiliation
referred to in this subparagraph is to be
effected (hereafter in this subparagraph
referred to as the ``acquiring party'');
(ii) if the acquiring party is an
individual, his or her principal occupation and
all offices and positions held during the 5
years preceding the date of notification, and
any conviction of crimes other than minor
traffic violations during the 10 years
preceding the date of notification;
(iii) if the acquiring party is not an
individual--
(I) a report of the nature of its
business operations during the 5 years
preceding the date of notification, or
for such shorter period as such person
and any predecessors thereof shall have
been in existence;
(II) an informative description of
the business intended to be done by the
acquiring party and any subsidiary
thereof; and
(III) a list of all individuals who
are, or who have been selected to
become, directors or executive officers
of the acquiring party or who perform,
or will perform, functions appropriate
to such positions, including, for each
such individual, the information
required by clause (ii);
(iv) the source, nature, and amount of the
consideration used, or to be used, in effecting
the merger or other acquisition of control, a
description of any transaction wherein funds
were, or are to be, obtained for any such
purpose, and the identity of persons furnishing
such consideration, except that, if a source of
such consideration is a loan made in the
lender's ordinary course of business, the
identity of the lender shall remain
confidential if the person filing such
statement so requests;
(v) fully audited financial information as
to the earnings and financial condition of each
acquiring party for the 5 fiscal years
preceding the date of notification of each such
acquiring party, or for such lesser period as
such acquiring party and any predecessors
thereof shall have been in existence, and
similar unaudited information as of a date not
earlier than 90 days before the date of
notification, except that, in the case of an
acquiring party that is an insurer actively
engaged in the business of insurance, the
financial statements of such insurer need not
be audited, but such audit may be required if
the need therefor is determined by the
insurance regulatory authority of the State;
(vi) any plans or proposals that each
acquiring party may have to liquidate such
insurer, to sell its assets, or to merge or
consolidate it with any person or to make any
other material change in its business or
corporate structure or management;
(vii) the number of shares of any security
of the insurer that each acquiring party
proposes to acquire, the terms of any offer,
request, invitation, agreement, or acquisition,
and a statement as to the method by which the
fairness of the proposal was arrived at;
(viii) the amount of each class of any
security of the insurer that is beneficially
owned or concerning which there is a right to
acquire beneficial ownership by each acquiring
party;
(ix) a full description of any contracts,
arrangements, or understandings with respect to
any security of the insurer in which any
acquiring party is involved, including transfer
of any of the securities, joint ventures, loan
or option arrangements, puts or calls,
guarantees of loans, guarantees against loss or
guarantees of profits, division of losses or
profits, or the giving or withholding of
proxies, and identification of the persons with
whom such contracts, arrangements, or
understandings have been entered into;
(x) a description of the purchase of any
security of the insurer during the 12-month
period preceding the date of notification by
any acquiring party, including the dates of
purchase, names of the purchasers, and
consideration paid, or agreed to be paid,
therefor;
(xi) a description of any recommendations
to purchase any security of the insurer made
during the 12-month period preceding the date
of notification by any acquiring party or by
any person based upon interviews or at the
suggestion of such acquiring party;
(xii) copies of all tender offers for,
requests or invitations for tenders of,
exchange offers for and agreements to acquire
or exchange any securities of the insurer and,
if distributed, of additional soliciting
material relating thereto; and
(xiii) the terms of any agreement,
contract, or understanding made with any
broker-dealer as to solicitation of securities
of the insurer for tender and the amount of any
fees, commissions, or other compensation to be
paid to broker-dealers with regard thereto;
(B) in the case of a person engaged in the business
of insurance which is the subject of an acquisition or
change or continuation in control, the State of
domicile of such person from reviewing or taking action
(including approval or disapproval) with regard to the
acquisition or change or continuation in control, as
long as the State reviews and actions--
(i) are completed by the end of the 60-day
period beginning on the later of the date the
State received notice of the proposed action or
the date the State received the information
required under State law regarding such
acquisition or change or continuation in
control;
(ii) do not have the effect of
discriminating, intentionally or
unintentionally, against an insured depository
institution or affiliate thereof or against any
other person based upon affiliation with an
insured depository institution; and
(iii) are based on standards or
requirements relating to solvency or managerial
fitness;
(C) any State from requiring an entity that is
acquiring control of an entity that is engaged in the
business of insurance and domiciled in that State to
maintain or restore the capital requirements of that
insurance entity to the level required under the
capital regulations of general applicability in that
State to avoid the requirement of preparing and filing
with the insurance regulatory authority of that State a
plan to increase the capital of the entity, except that
any determination by the State insurance regulatory
authority with respect to such requirement shall be
made not later than 60 days after the date of
notification under subparagraph (A);
(D) any State from taking actions with respect to
the receivership or conservatorship of any insurance
company;
(E) any State from restricting a change in the
ownership of stock in an insurance company, or a
company formed for the purpose of controlling such
insurance company, for a period of not more than 3
years beginning on the date of the conversion of such
company from mutual to stock form; or
(F) any State from requiring an organization which
has been eligible at any time since January 1, 1987, to
claim the special deduction provided by section 833 of
the Internal Revenue Code of 1986 to meet certain
conditions in order to undergo, as determined by the
State, a reorganization, recapitalization, conversion,
merger, consolidation, sale or other disposition of
substantial operating assets, demutualization,
dissolution, or to undertake other similar actions and
which is governed under a State statute enacted on May
22, 1998, relating to hospital, medical, and dental
service corporation conversions.
(3) Preservation of state antitrust and general corporate
laws.--
(A) In general.--Subject to subsection (c) and the
nondiscrimination provisions contained in such
subsection, no provision in paragraph (1) shall be
construed as affecting State laws, regulations, orders,
interpretations, or other actions of general
applicability relating to the governance of
corporations, partnerships, limited liability companies
or other business associations incorporated or formed
under the laws of that State or domiciled in that
State, or the applicability of the antitrust laws of
any State or any State law that is similar to the
antitrust laws.
(B) Definition.--The term ``antitrust laws'' has
the same meaning as in subsection (a) of the first
section of the Clayton Act, and includes section 5 of
the Federal Trade Commission Act to the extent that
such section 5 relates to unfair methods of
competition.
(b) Activities.--
(1) In general.--Except as provided in paragraph (3), and
except with respect to insurance sales, solicitation, and cross
marketing activities, which shall be governed by paragraph (2),
no State may, by statute, regulation, order, interpretation, or
other action, prevent or restrict an insured depository
institution, wholesale financial institution, or subsidiary or
affiliate thereof from engaging directly or indirectly, either
by itself or in conjunction with a subsidiary, affiliate, or
any other entity or person, in any activity authorized or
permitted under this Act.
(2) Insurance sales.--
(A) In general.--In accordance with the legal
standards for preemption set forth in the decision of
the Supreme Court of the United States in Barnett Bank
of Marion County N.A. v. Nelson, 517 U.S. 25 (1996), no
State may, by statute, regulation, order,
interpretation, or other action, prevent or
significantly interfere with the ability of an insured
depository institution or wholesale financial
institution, or a subsidiary or affiliate thereof, to
engage, directly or indirectly, either by itself or in
conjunction with a subsidiary, affiliate, or any other
party, in any insurance sales, solicitation, or cross-
marketing activity.
(B) Certain state laws preserved.--Notwithstanding
subparagraph (A), a State may impose any of the
following restrictions, or restrictions which are
substantially the same as but no more burdensome or
restrictive than those in each of the following
clauses:
(i) Restrictions prohibiting the rejection
of an insurance policy by an insured depository
institution, wholesale financial institution,
or any subsidiary or affiliate thereof, solely
because the policy has been issued or
underwritten by any person who is not
associated with such insured depository
institution or wholesale financial institution,
or any subsidiary or affiliate thereof, when
such insurance is required in connection with a
loan or extension of credit.
(ii) Restrictions prohibiting a requirement
for any debtor, insurer, or insurance agent or
broker to pay a separate charge in connection
with the handling of insurance that is required
in connection with a loan or other extension of
credit or the provision of another traditional
banking product by an insured depository
institution, wholesale financial institution,
or any subsidiary or affiliate thereof, unless
such charge would be required when the insured
depository institution or wholesale financial
institution, or any subsidiary or affiliate
thereof, is the licensed insurance agent or
broker providing the insurance.
(iii) Restrictions prohibiting the use of
any advertisement or other insurance
promotional material by an insured depository
institution or wholesale financial institution,
or any subsidiary or affiliate thereof, that
would cause a reasonable person to believe
mistakenly that--
(I) a State or the Federal
Government is responsible for the
insurance sales activities of, or
stands behind the credit of, the
institution, affiliate, or subsidiary;
or
(II) a State, or the Federal
Government guarantees any returns on
insurance products, or is a source of
payment on any insurance obligation of
or sold by the institution, affiliate,
or subsidiary;
(iv) Restrictions prohibiting the payment
or receipt of any commission or brokerage fee
or other valuable consideration for services as
an insurance agent or broker to or by any
person, unless such person holds a valid State
license regarding the applicable class of
insurance at the time at which the services are
performed, except that, in this clause, the
term ``services as an insurance agent or
broker'' does not include a referral by an
unlicensed person of a customer or potential
customer to a licensed insurance agent or
broker that does not include a discussion of
specific insurance policy terms and conditions.
(v) Restrictions prohibiting any
compensation paid to or received by any
individual who is not licensed to sell
insurance, for the referral of a customer that
seeks to purchase, or seeks an opinion or
advice on, any insurance product to a person
that sells or provides opinions or advice on
such product, based on the purchase of
insurance by the customer.
(vi) Restrictions prohibiting the release
of the insurance information of a customer
(defined as information concerning the
premiums, terms, and conditions of insurance
coverage, including expiration dates and rates,
and insurance claims of a customer contained in
the records of the insured depository
institution or wholesale financial institution,
or a subsidiary or affiliate thereof) to any
person or entity other than an officer,
director, employee, agent, subsidiary, or
affiliate of an insured depository institution
or a wholesale financial institution, for the
purpose of soliciting or selling insurance,
without the express consent of the customer,
other than a provision that prohibits--
(I) a transfer of insurance
information to an unaffiliated
insurance company, agent, or broker in
connection with transferring insurance
in force on existing insureds of the
insured depository institution or
wholesale financial institution, or
subsidiary or affiliate thereof, or in
connection with a merger with or
acquisition of an unaffiliated
insurance company, agent, or broker; or
(II) the release of information as
otherwise authorized by State or
Federal law.
(vii) Restrictions prohibiting the use of
health information obtained from the insurance
records of a customer for any purpose, other
than for its activities as a licensed agent or
broker, without the express consent of the
customer.
(viii) Restrictions prohibiting the
extension of credit or any product or service
that is equivalent to an extension of credit,
lease or sale of property of any kind, or
furnishing of any services or fixing or varying
the consideration for any of the foregoing, on
the condition or requirement that the customer
obtain insurance from an insured depository
institution, wholesale financial institution, a
subsidiary or affiliate thereof, or a
particular insurer, agent, or broker, other
than a prohibition that would prevent any
insured depository institution or wholesale
financial institution, or any subsidiary or
affiliate thereof--
(I) from engaging in any activity
described in this clause that would not
violate section 106 of the Bank Holding
Company Act Amendments of 1970, as
interpreted by the Board of Governors
of the Federal Reserve System; or
(II) from informing a customer or
prospective customer that insurance is
required in order to obtain a loan or
credit, that loan or credit approval is
contingent upon the procurement by the
customer of acceptable insurance, or
that insurance is available from the
insured depository institution or
wholesale financial institution, or any
subsidiary or affiliate thereof.
(ix) Restrictions requiring, when an
application by a consumer for a loan or other
extension of credit from an insured depository
institution or wholesale financial institution
is pending, and insurance is offered or sold to
the consumer or is required in connection with
the loan or extension of credit by the insured
depository institution or wholesale financial
institution or any affiliate or subsidiary
thereof, that a written disclosure be provided
to the consumer or prospective customer
indicating that his or her choice of an
insurance provider will not affect the credit
decision or credit terms in any way, except
that the insured depository institution or
wholesale financial institution may impose
reasonable requirements concerning the
creditworthiness of the insurance provider and
scope of coverage chosen.
(x) Restrictions requiring clear and
conspicuous disclosure, in writing, where
practicable, to the customer prior to the sale
of any insurance policy that such policy--
(I) is not a deposit;
(II) is not insured by the Federal
Deposit Insurance Corporation;
(III) is not guaranteed by the
insured depository institution or
wholesale financial institution or, if
appropriate, its subsidiaries or
affiliates or any person soliciting the
purchase of or selling insurance on the
premises thereof; and
(IV) where appropriate, involves
investment risk, including potential
loss of principal.
(xi) Restrictions requiring that, when a
customer obtains insurance (other than credit
insurance or flood insurance) and credit from
an insured depository institution or wholesale
financial institution, or its subsidiaries or
affiliates, or any person soliciting the
purchase of or selling insurance on the
premises thereof, the credit and insurance
transactions be completed through separate
documents.
(xii) Restrictions prohibiting, when a
customer obtains insurance (other than credit
insurance or flood insurance) and credit from
an insured depository institution or wholesale
financial institution or its subsidiaries or
affiliates, or any person soliciting the
purchase of or selling insurance on the
premises thereof, inclusion of the expense of
insurance premiums in the primary credit
transaction without the express written consent
of the customer.
(xiii) Restrictions requiring maintenance
of separate and distinct books and records
relating to insurance transactions, including
all files relating to and reflecting consumer
complaints, and requiring that such insurance
books and records be made available to the
appropriate State insurance regulator for
inspection upon reasonable notice.
(C) Limitations.--
(i) OCC deference.--Section 306(e) does not
apply with respect to any State statute,
regulation, order, interpretation, or other
action regarding insurance sales, solicitation,
or cross marketing activities described in
subparagraph (A) that was issued, adopted, or
enacted before September 3, 1998, and that is
not described in subparagraph (B).
(ii) Nondiscrimination.--Subsection (c)
does not apply with respect to any State
statute, regulation, order, interpretation, or
other action regarding insurance sales,
solicitation, or cross marketing activities
described in subparagraph (A) that was issued,
adopted, or enacted before September 3, 1998,
and that is not described in subparagraph (B).
(iii) Construction.--Nothing in this
paragraph shall be construed to limit the
applicability of the decision of the Supreme
Court in Barnett Bank of Marion County N.A. v.
Nelson, 116 S. Ct. 1103 (1996) with respect to
a State statute, regulation, order,
interpretation, or other action that is not
described in subparagraph (B).
(iv) Limitation on inferences.--Nothing in
this paragraph shall be construed to create any
inference with respect to any State statute,
regulation, order, interpretation, or other
action that is not referred to or described in
this paragraph.
(3) Insurance activities other than sales.--State statutes,
regulations, interpretations, orders, and other actions shall
not be preempted under subsection (b)(1) to the extent that
they--
(A) relate to, or are issued, adopted, or enacted
for the purpose of regulating the business of insurance
in accordance with the Act of March 9, 1945 (commonly
known as the ``McCarran-Ferguson Act'');
(B) apply only to persons or entities that are not
insured depository institutions or wholesale financial
institutions, but that are directly engaged in the
business of insurance (except that they may apply to
depository institutions engaged in providing savings
bank life insurance as principal to the extent of
regulating such insurance);
(C) do not relate to or directly or indirectly
regulate insurance sales, solicitations, or cross-
marketing activities; and
(D) are not prohibited under subsection (c).
(4) Financial activities other than insurance.--No State
statute, regulation, interpretation, order, or other action
shall be preempted under subsection (b)(1) to the extent that--
(A) it does not relate to, and is not issued and
adopted, or enacted for the purpose of regulating,
directly or indirectly, insurance sales, solicitations,
or cross marketing activities covered under paragraph
(2);
(B) it does not relate to, and is not issued and
adopted, or enacted for the purpose of regulating,
directly or indirectly, the business of insurance
activities other than sales, solicitations, or cross
marketing activities, covered under paragraph (3);
(C) it does not relate to securities investigations
or enforcement actions referred to in subsection (d);
and
(D) it--
(i) does not distinguish by its terms
between insured depository institutions,
wholesale financial institutions, and
subsidiaries and affiliates thereof engaged in
the activity at issue and other persons or
entities engaged in the same activity in a
manner that is in any way adverse with respect
to the conduct of the activity by any such
insured depository institution, wholesale
financial institution, or subsidiary or
affiliate thereof engaged in the activity at
issue;
(ii) as interpreted or applied, does not
have, and will not have, an impact on
depository institutions, wholesale financial
institutions, or subsidiaries or affiliates
thereof engaged in the activity at issue, or
any person or entity affiliated therewith, that
is substantially more adverse than its impact
on other persons or entities engaged in the
same activity that are not insured depository
institutions, wholesale financial institutions,
or subsidiaries or affiliates thereof, or
persons or entities affiliated therewith;
(iii) does not effectively prevent a
depository institution, wholesale financial
institution, or subsidiary or affiliate thereof
from engaging in activities authorized or
permitted by this Act or any other provision of
Federal law; and
(iv) does not conflict with the intent of
this Act generally to permit affiliations that
are authorized or permitted by Federal law.
(c) Nondiscrimination.--Except as provided in any restrictions
described in subsection (b)(2)(B), no State may, by statute,
regulation, order, interpretation, or other action, regulate the
insurance activities authorized or permitted under this Act or any
other provision of Federal law of an insured depository institution or
wholesale financial institution, or subsidiary or affiliate thereof, to
the extent that such statute, regulation, order, interpretation, or
other action--
(1) distinguishes by its terms between insured depository
institutions or wholesale financial institutions, or
subsidiaries or affiliates thereof, and other persons or
entities engaged in such activities, in a manner that is in any
way adverse to any such insured depository institution or
wholesale financial institution, or subsidiary or affiliate
thereof;
(2) as interpreted or applied, has or will have an impact
on depository institutions or wholesale financial institutions,
or subsidiaries or affiliates thereof, that is substantially
more adverse than its impact on other persons or entities
providing the same products or services or engaged in the same
activities that are not insured depository institutions,
wholesale financial institutions, or subsidiaries or affiliates
thereof, or persons or entities affiliated therewith;
(3) effectively prevents a depository institution or
wholesale financial institution, or subsidiary or affiliate
thereof, from engaging in insurance activities authorized or
permitted by this Act or any other provision of Federal law; or
(4) conflicts with the intent of this Act generally to
permit affiliations that are authorized or permitted by Federal
law between insured depository institutions or wholesale
financial institutions, or subsidiaries or affiliates thereof,
and persons and entities engaged in the business of insurance.
(d) Limitation.--Subsections (a) and (b) shall not be construed to
affect the jurisdiction of the securities commission (or any agency or
office performing like functions) of any State, under the laws of such
State--
(1) 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; or
(2) to require the registration of securities or the
licensure or registration of brokers, dealers, or investment
advisers (consistent with section 203A of the Investment
Advisers Act of 1940), or the associated persons of a broker,
dealer, or investment adviser (consistent with such section
203A).
(e) Definitions.--For purposes of this section, the following
definitions shall apply:
(1) Insured depository institution.--The term ``insured
depository institution'' includes any foreign bank that
maintains a branch, agency, or commercial lending company in
the United States.
(2) State.--The term ``State'' means any State of the
United States, the District of Columbia, any territory of the
United States, Puerto Rico, Guam, American Samoa, the Trust
Territory of the Pacific Islands, the Virgin Islands, and the
Northern Mariana Islands.
SEC. 105. MUTUAL BANK HOLDING COMPANIES AUTHORIZED.
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. 105A. PUBLIC MEETINGS FOR LARGE BANK ACQUISITIONS AND MERGERS.
(a) Bank Holding Company Act of 1956.--Section 3(c)(2) of the Bank
Holding Company Act of 1956 (12 U.S.C. 1842(c)(2)) is amended--
(1) by striking ``factors.--In every case'' and inserting
``factors.--
``(A) In general.--In every case''; and
(2) by adding at the end the following new subparagraph:
``(B) Public meetings.--In each case involving one
or more insured depository institutions each of which
has total assets of $1,000,000,000 or more, the Board
shall, as necessary and on a timely basis, conduct
public meetings in one or more areas where the Board
believes, in the sole discretion of the Board, there
will be a substantial public impact.''.
(b) Federal Deposit Insurance Act.--Section 18(c) of the Federal
Deposit Insurance Act (12 U.S.C. 1828(c)) is amended by adding at the
end the following new paragraph:
``(12) Public Meetings.--In each merger transaction involving one
or more insured depository institutions each of which has total assets
of $1,000,000,000 or more, the responsible agency shall, as necessary
and on a timely basis, conduct public meetings in one or more areas
where the agency believes, in the sole discretion of the agency, there
will be a substantial public impact.''.
(c) National Bank Consolidation and Merger Act.--The National Bank
Consolidation and Merger Act (12 U.S.C. 215 et seq.) is amended by
adding at the end the following new section:
``SEC. 6. PUBLIC MEETINGS FOR LARGE BANK CONSOLIDATIONS AND MERGERS.
``In each case of a consolidation or merger under this Act
involving one or more banks each of which has total assets of
$1,000,000,000 or more, the Comptroller shall, as necessary and on a
timely basis, conduct public meetings in one or more areas where the
Comptroller believes, in the sole discretion of the Comptroller, there
will be a substantial public impact.''.
(d) Home Owners' Loan Act.--Section 10(e) of the Home Owners' Loan
Act (12 U.S.C. 1463) is amended by adding at the end the following new
paragraph:
``(7) Public meetings for large depository institution
acquisitions and mergers.--In each case involving one or more
insured depository institutions each of which has total assets
of $1,000,000,000 or more, the Director shall, as necessary and
on a timely basis, conduct public meetings in one or more areas
where the Director believes, in the sole discretion of the
Director, there will be a substantial public impact.''.
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 1999,''
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.
(a) In General.--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, consumer
lending activities in which
institutions described in subparagraph
(F) or (H) of section 2(c)(2) 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;
``(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; or
``(C) such overdraft--
``(i) is incurred on behalf of an affiliate
solely in connection with an activity that is
so closely related to banking, or managing or
controlling banks, as to be a proper incident
thereto, to the extent the bank incurring the
overdraft and the affiliate on whose behalf the
overdraft is incurred each document that the
overdraft is incurred for such purpose; and
``(ii) does not cause the bank to violate
any provision of section 23A or 23B of the
Federal Reserve Act, either directly, in the
case of a member bank, or by virtue of section
18(j) of the Federal Deposit Insurance Act, in
the case of a nonmember bank.
``(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.
The issuance of any notice under this paragraph that relates to
the activities of a bank shall not be construed as affecting
the authority of the bank to continue to engage in such
activities until the expiration of such 180-day period.''.
(b) Industrial Loan Companies Affiliate Overdrafts.--Section
2(c)(2)(H) of the Bank Holding Company Act of 1956 (12 U.S.C.
1841(c)(2)(H)) is amended by inserting before the period at the end ``,
or that is otherwise permissible for a bank controlled by a company
described in section 4(f)(1)''.
SEC. 109. GAO STUDY OF ECONOMIC IMPACT ON COMMUNITY BANKS, OTHER SMALL
FINANCIAL INSTITUTIONS, INSURANCE AGENTS, AND CONSUMERS.
(a) Study Required.--The Comptroller General of the United States
shall conduct a study of the projected economic impact and the actual
economic impact that the enactment of this Act will have on financial
institutions, including community banks, registered brokers and dealers
and insurance companies, which have total assets of $100,000,000 or
less, insurance agents, and consumers.
(b) Reports to the Congress.--
(1) In general.--The Comptroller General of the United
States shall submit reports to the Congress, at the times
required under paragraph (2), 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.
(2) Timing of reports.--The Comptroller General shall
submit--
(A) an interim report before the end of the 6-month
period beginning after the date of the enactment of
this Act;
(B) another interim report before the end of the
next 6-month period; and
(C) a final report before the end of the 1-year
period after such second 6-month period,''.
SEC. 110. 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), 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, 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. 110A. STUDY OF FINANCIAL MODERNIZATION'S AFFECT ON THE
ACCESSIBILITY OF SMALL BUSINESS AND FARM LOANS.
(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), shall conduct a study of the extent to which
credit is being provided to and for small business and farms, as a
result of this Act.
(b) Report.--Before the end of the 5-year period beginning on the
date of the enactment of this Act, the Secretary, in consultation with
the Federal banking agencies, 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.
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 any of its subsidiary
depository institutions 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, or
with any State, 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; or
``(II) the nature or size of
transactions between such subsidiary
and any depository institution which is
also a subsidiary of such holding
company,
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 by or
on behalf of the Securities and Exchange
Commission;
``(ii) any investment adviser registered by
or on behalf of either the Securities and
Exchange Commission or any State, whichever is
required by law;
``(iii) any licensed insurance company by
or on behalf of any State regulatory authority
responsible for the supervision of insurance
companies; and
``(iv) 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;
``(ii) is registered as an investment
adviser under the Investment Advisers Act of
1940, or with any State, whichever is required
by law; or
``(iii) is licensed as an insurance agent
with the appropriate State insurance authority.
``(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--
``(i) activities of a registered investment
adviser other than investment advisory
activities or activities incidental to
investment advisory activities; or
``(ii) activities of a licensed insurance
agent other than insurance agency activities or
activities incidental to insurance agency
activities.
``(C) Limitations on indirect action.--In
developing, establishing, or assessing holding company
capital or capital adequacy rules, guidelines,
standards, or requirements for purposes of this
paragraph, the Board shall not take into account the
activities, operations, or investments of an affiliated
investment company registered under the Investment
Company Act of 1940, unless the investment company is--
``(i) a bank holding company; or
``(ii) controlled by a bank holding company
by reason of ownership by the bank holding
company (including through all of its
affiliates) of 25 percent or more of the shares
of the investment company, and the shares owned
by the bank holding company have a market value
equal to more than $1,000,000.
``(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 (and rules,
regulations, orders, and other directives issued
thereunder) relating to the activities, conduct, and
operations of registered brokers, dealers, investment
advisers, and investment companies;
``(B) the relevant State securities authorities
with regard to all interpretations of, and the
enforcement of, applicable State securities laws (and
rules, regulations, orders, and other directives issued
thereunder) relating to the activities, conduct, and
operations of brokers, dealers, and investment advisers
required to be registered under State law; and
``(C) the relevant State insurance authorities with
regard to all interpretations of, and the enforcement
of, applicable State insurance laws (and rules,
regulations, orders, and other directives issued
thereunder) 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)(D) 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
primary supervisor for the bank, 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.
(a) Bank Holding Companies.--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 with respect to an entity
described in subparagraph (A) if--
``(A) such funds or assets are to be provided by--
``(i) a bank holding company that is an
insurance company, a broker or dealer
registered under the Securities Exchange Act of
1934, an investment company registered under
the Investment Company Act of 1940, or an
investment adviser registered by or on behalf
of either the Securities and Exchange
Commission or any State; or
``(ii) an affiliate of the depository
institution which is an insurance company or a
broker or dealer registered under the
Securities Exchange Act of 1934, an investment
company registered under the Investment Company
Act of 1940, or an investment adviser
registered by or on behalf of either the
Securities and Exchange Commission or any
State; and
``(B) the State insurance authority for the
insurance company or the Securities and Exchange
Commission for the registered broker, dealer,
investment adviser (solely with respect to investment
advisory activities or activities incidental thereto),
or investment company, 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, dealer, investment
company, or investment adviser, 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, dealer, investment company, or investment
adviser 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, the Securities and Exchange Commission, or
State securities regulator, 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 that paragraph, the Board may order the bank holding company
to divest the insured depository institution not later than 180
days after receiving the 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.''.
(b) Subsidiaries of Depository Institutions.--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. AUTHORITY OF STATE INSURANCE REGULATOR AND SECURITIES AND
EXCHANGE COMMISSION.
``(a) In General.--Notwithstanding any other provision of law, any
regulation, order, or other action of the appropriate Federal banking
agency which requires a subsidiary to provide funds or other assets to
an insured depository institution shall not be effective nor
enforceable with respect to an entity described in paragraph (1) if--
``(1) such funds or assets are to be provided by a
subsidiary which is an insurance company, a broker or dealer
registered under the Securities Exchange Act of 1934, an
investment company registered under the Investment Company Act
of 1940, or an investment adviser registered by or on behalf of
either the Securities and Exchange Commission or any State; and
``(2) the State insurance authority for the insurance
company or the Securities and Exchange Commission for the
registered broker or dealer, the investment company, or the
investment adviser, as the case may be, determines in writing
sent to the insured depository institution and the appropriate
Federal banking agency that the subsidiary 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, dealer, investment company, or
investment adviser, as the case may be.
``(b) Notice to State Insurance Authority or SEC Required.--If the
appropriate Federal banking agency requires a subsidiary, which is an
insurance company, a broker or dealer, an investment company, or an
investment adviser (solely with respect to investment advisory
activities or activities incidental thereto) described in subsection
(a)(1) to provide funds or assets to an insured depository institution
pursuant to any regulation, order, or other action of the appropriate
Federal banking agency referred to in subsection (a), the appropriate
Federal banking agency shall promptly notify the State insurance
authority for the insurance company, the Securities and Exchange
Commission, or State securities regulator, as the case may be, of such
requirement.
``(c) Divestiture in Lieu of Other Action.--If the appropriate
Federal banking agency receives a notice described in subsection (a)(2)
from a State insurance authority or the Securities and Exchange
Commission with regard to a subsidiary referred to in that subsection,
the appropriate Federal banking agency may order the insured depository
institution to divest the subsidiary not later than 180 days after
receiving the notice, or such longer period as the appropriate Federal
banking agency determines consistent with the safe and sound operation
of the insured depository institution.
``(d) Conditions Before Divestiture.--During the period beginning
on the date an order to divest is issued by the appropriate Federal
banking agency under subsection (c) to an insured depository
institution and ending on the date the divestiture is complete, the
appropriate Federal banking agency may impose any conditions or
restrictions on the insured depository institution's ownership of the
subsidiary including restricting or prohibiting transactions between
the insured depository institution and the subsidiary, as are
appropriate under the circumstances.''.
SEC. 114. PRUDENTIAL SAFEGUARDS.
(a) Comptroller of the Currency.--
(1) In general.--The Comptroller of the Currency may, by
regulation or order, impose restrictions or requirements on
relationships or transactions between a national bank and a
subsidiary of the national bank which the Comptroller finds are
consistent with the public interest, the purposes of this Act,
title LXII of the Revised Statutes of the United States, and
other Federal law applicable to national banks, and the
standards in paragraph (2).
(2) Standards.--The Comptroller of the Currency may
exercise authority under paragraph (1) if the Comptroller 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 banks.
(C) Avoid conflicts of interest or other abuses.
(D) Enhance the privacy of customers of the
national bank or any subsidiary of the bank.
(E) Promote the application of national treatment
and equality of competitive opportunity between
subsidiaries owned or controlled by domestic banks and
subsidiaries owned or controlled by foreign banks
operating in the United States.
(3) Review.--The Comptroller of the Currency 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 Comptroller finds is no longer required
for such purposes.
(b) Board of Governors of the Federal Reserve System.--
(1) In general.--The Board of Governors of the Federal
Reserve System may, by regulation or order, impose restrictions
or requirements on relationships or transactions--
(A) between a depository institution subsidiary of
a bank holding company and any affiliate of such
depository institution (other than a subsidiary of such
institution); or
(B) between a State member bank and a subsidiary of
such bank,
which the Board finds are consistent with the public interest,
the purposes of this Act, the Bank Holding Company Act of 1956,
the Federal Reserve Act, and other Federal law applicable to
depository institution subsidiaries of bank holding companies
or State banks (as the case may be), and the standards in
paragraph (2).
(2) Standards.--The Board of Governors of the Federal
Reserve System 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 the State
member bank or any subsidiary of the bank.
(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 of Governors of the Federal Reserve
System 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.
(4) Foreign banks.--
(A) In general.--The Board may, by regulation or
order, impose restrictions or requirements on
relationships or transactions between a branch, agency,
or commercial lending company of a foreign bank in the
United States and any affiliate in the United States of
such foreign bank that the Board finds are consistent
with the public interest, the purposes of this Act, the
Bank Holding Company Act of 1956, the Federal Reserve
Act, and other Federal law applicable to foreign banks
and their affiliates in the United States, and the
standards in paragraphs (2) and (3).
(B) Evasion.--In the event that the Board
determines that there may be circumstances that would
result in an evasion of this paragraph, the Board may
also impose restrictions or requirements on
relationships or transactions between a foreign bank
outside the United States and any affiliate in the
United States of such foreign bank that are consistent
with national treatment and equality of competitive
opportunity.
(c) Federal Deposit Insurance Corporation.--
(1) In general.--The Federal Deposit Insurance Corporation
may, by regulation or order, impose restrictions or
requirements on relationships or transactions between a State
nonmember bank (as defined in section 3 of the Federal Deposit
Insurance Act) and a subsidiary of the State nonmember bank
which the Corporation finds are consistent with the public
interest, the purposes of this Act, the Federal Deposit
Insurance Act, or other Federal law applicable to State
nonmember banks and the standards in paragraph (2).
(2) Standards.--The Federal Deposit Insurance Corporation
may exercise authority under paragraph (1) if the Corporation
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 banks.
(C) Avoid conflicts of interest or other abuses.
(D) Enhance the privacy of customers of the State
nonmember bank or any subsidiary of the bank.
(E) Promote the application of national treatment
and equality of competitive opportunity between
subsidiaries owned or controlled by domestic banks and
subsidiaries owned or controlled by foreign banks
operating in the United States.
(3) Review.--The Federal Deposit Insurance Corporation
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 Corporation finds is no longer required
for such purposes.
SEC. 115. EXAMINATION OF INVESTMENT COMPANIES.
(a) Exclusive Commission Authority.--
(1) In general.--Except as provided in paragraph (3), 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 or a savings and loan holding
company.
(2) Prohibition on banking agencies.--Except as provided in
paragraph (3), a Federal banking agency may not inspect or
examine any registered investment company that is not a bank
holding company or a savings and loan holding company.
(3) Certain examinations authorized.-- Nothing in this
subsection prevents the Federal Deposit Insurance Corporation,
if the Corporation finds it necessary to determine the
condition of an insured depository institution for insurance
purposes, from examining an affiliate of any insured depository
institution, pursuant to its authority under section 10(b)(4)
of the Federal Deposit Insurance Act, as may be necessary to
disclose fully the relationship between the depository
institution and the affiliate, and the effect of such
relationship on the depository institution.
(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 same meaning as 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 same meaning as 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.
(5) Savings and loan holding company.--The term ``savings
and loan holding company'' has the same meaning as in section
10(a)(1)(D) of the Home Owners' Loan Act.
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 by or on behalf of
either the Securities and Exchange Commission or any State,
whichever is required by law, 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, with
respect to the insurance activities and activities incidental
to such insurance activities, 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. EQUIVALENT REGULATION AND SUPERVISION.
(a) In General.--Notwithstanding any other provision of law, the
provisions of--
(1) section 5(c) of the Bank Holding Company Act of 1956
(as amended by this Act) that limit the authority of the Board
of Governors of the Federal Reserve System to require reports
from, to make examinations of, or to impose capital
requirements on bank holding companies and their nonbank
subsidiaries or that require deference to other regulators; and
(2) section 10A of the Bank Holding Company Act of 1956 (as
added by this Act) that limit whatever authority the Board
might otherwise have to take direct or indirect action with
respect to bank holding companies and their nonbank
subsidiaries,
shall also limit whatever authority that a Federal banking agency (as
defined in section 3(z) of the Federal Deposit Insurance Act) might
otherwise have under any statute to require reports, make examinations,
impose capital requirements or take any other direct or indirect action
with respect to bank holding companies and their nonbank subsidiaries
(including nonbank subsidiaries of depository institutions), subject to
the same standards and requirements as are applicable to the Board
under such provisions.
(b) Certain Examinations Authorized.--No provision of this section
shall be construed as preventing the Federal Deposit Insurance
Corporation, if the Corporation finds it necessary to determine the
condition of an insured depository institution for insurance purposes,
from examining an affiliate of any insured depository institution,
pursuant to its authority under section 10(b)(4) of the Federal Deposit
Insurance Act, as may be necessary to disclose fully the relationship
between the depository institution and the affiliate, and the effect of
such relationship on the depository institution.
SEC. 118. PROHIBITION ON FDIC ASSISTANCE TO AFFILIATES AND
SUBSIDIARIES.
Section 11(a)(4)(B) of the Federal Deposit Insurance Act (12 U.S.C.
1821(a)(4)(B)) is amended by striking ``to benefit any shareholder of''
and inserting ``to benefit any shareholder, affiliate (other than an
insured depository institution that receives assistance in accordance
with the provisions of this Act), or subsidiary of''.
SEC. 119. REPEAL OF SAVINGS BANK PROVISIONS IN THE BANK HOLDING COMPANY
ACT OF 1956.
Section 3(f) of the Bank Holding Company Act of 1956 (12 U.S.C.
1842(f)) is amended to read as follows:
``(f) [Repealed].''.
SEC. 120. TECHNICAL AMENDMENT.
Section 2(o)(1)(A) of the Bank Holding Company Act of 1956 (12
U.S.C. 1841(o)(1)(A)) is amended by striking ``section 38(b)'' and
inserting ``section 38''.
Subtitle C--Subsidiaries of National Banks
SEC. 121. PERMISSIBLE ACTIVITIES FOR SUBSIDIARIES OF NATIONAL BANKS.
(a) Financial Subsidiaries of National Banks.--Chapter 1 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
of the United States 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 activities which
are financial in nature.--Subject to paragraphs (3) and (4), a
national bank may control a financial subsidiary, or hold an
interest in a financial subsidiary, that is controlled by
insured depository institutions or subsidiaries thereof.
``(3) Eligibility requirements.--A national bank may
control or hold an interest in a company pursuant to paragraph
(2) only if--
``(A) the national bank and all depository
institution affiliates of the national bank are well
capitalized;
``(B) the national bank and all depository
institution affiliates of the national bank are well
managed;
``(C) the national bank and all depository
institution affiliates of such national bank have
achieved a rating of `satisfactory record of meeting
community credit needs', or better, at the most recent
examination of each such bank or institution; and
``(D) the bank has received the approval of the
Comptroller of the Currency.
``(4) Activity limitations.--In addition to any other
limitation imposed on the activity of subsidiaries of national
banks, a subsidiary of a national bank may not, pursuant to
paragraph (2)--
``(A) engage as principal in insuring,
guaranteeing, or indemnifying against loss, harm,
damage, illness, disability, or death (other than in
connection with credit-related insurance) or in
providing or issuing annuities;
``(B) engage in real estate investment or
development activities; or
``(C) engage in any activity permissible for a
financial holding company under paragraph (3)(I) of
section 6(c) of the Bank Holding Company Act of 1956
(relating to insurance company investments).
``(5) Size factor with regard to free-standing national
banks.--Notwithstanding paragraph (2), a national bank which
has total assets of $10,000,000,000 or more may not control a
subsidiary engaged in financial activities pursuant to such
paragraph unless such national bank is a subsidiary of a bank
holding company.
``(6) Limited exclusions from community needs requirements
for newly affiliated depository institutions.--Any depository
institution which becomes an affiliate of a national bank
during the 12-month period preceding the date of an approval by
the Comptroller of the Currency under paragraph (3)(D) for such
bank, and any depository institution which becomes an affiliate
of the national bank after such date, may be excluded for
purposes of paragraph (3)(C) during the 12-month period
beginning on the date of such affiliation if--
``(A) the national bank or such depository
institution 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; and
``(B) the plan has been accepted by such agency.
``(7) Definitions.--For purposes of this section, the
following definitions shall apply:
``(A) Company; control; affiliate; subsidiary.--The
terms `company', `control', `affiliate', and
`subsidiary' have the same meanings as in section 2 of
the Bank Holding Company Act of 1956.
``(B) Financial subsidiary.--The term `financial
subsidiary' means a company which is a subsidiary of an
insured bank and is engaged in financial activities
that have been determined to be financial in nature or
incidental to such financial activities in accordance
with subsection (b) or permitted in accordance with
subsection (b)(4), other than activities that are
permissible for a national bank to engage in directly
or that are authorized under the Bank Service Company
Act, section 25 or 25A of the Federal Reserve Act, or
any other Federal statute (other than this section)
that specifically authorizes the conduct of such
activities by its express terms and not by implication
or interpretation.
``(C) 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.
``(D) Well managed.--The term `well managed'
means--
``(i) in the case of a depository
institution that has been examined, unless
otherwise determined in writing by the
appropriate Federal banking agency--
``(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
depository institution; and
``(II) at least a rating of 2 for
management, if that rating is given; or
``(ii) in the case of any depository
institution that has not been examined, the
existence and use of managerial resources that
the appropriate Federal banking agency
determines are satisfactory.
``(E) Incorporated definitions.--The terms
`appropriate Federal banking agency' and `depository
institution' have the same meanings as in section 3 of
the Federal Deposit Insurance Act.
``(b) Activities That Are Financial in Nature.--
``(1) Financial activities.--
``(A) In general.--For purposes of subsection
(a)(7)(B), an activity shall be considered to have been
determined to be financial in nature or incidental to
such financial activities only if--
``(i) such activity is permitted for a
financial holding company pursuant to section
6(c)(3) of the Bank Holding Company Act of 1956
(to the extent such activity is not otherwise
prohibited under this section or any other
provision of law for a subsidiary of a national
bank engaged in activities pursuant to
subsection (a)(2)); or
``(ii) the Secretary of the Treasury
determines the activity to be financial in
nature or incidental to such financial
activities in accordance with subparagraph (B)
or paragraph (3).
``(B) Coordination between the board and the
secretary of the treasury.--
``(i) Proposals raised before the secretary
of the treasury.--
``(I) Consultation.--The Secretary
of the Treasury shall notify the Board
of, and consult with the Board
concerning, any request, proposal, or
application under this subsection,
including any regulation or order
proposed under paragraph (3), for a
determination of whether an activity is
financial in nature or incidental to
such a financial activity.
``(II) Board view.--The Secretary
of the Treasury shall not determine
that any activity is financial in
nature or incidental to a financial
activity under this subsection if the
Board notifies the Secretary in
writing, not later than 30 days after
the date of receipt of the notice
described in subclause (I) (or such
longer period as the Secretary
determines to be appropriate in light
of the circumstances) that the Board
believes that the activity is not
financial in nature or incidental to a
financial activity.
``(ii) Proposals raised by the board.--
``(I) Board recommendation.--The
Board may, at any time, recommend in
writing that the Secretary of the
Treasury find an activity to be
financial in nature or incidental to a
financial activity (other than an
activity which the Board has sole
authority to regulate under
subparagraph (C)).
``(II) Time period for secretarial
action.--Not later than 30 days after
the date of receipt of a written
recommendation from the Board under
subclause (I) (or such longer period as
the Secretary of the Treasury and the
Board determine to be appropriate in
light of the circumstances), the
Secretary shall determine whether to
initiate a public rulemaking proposing
that the subject recommended activity
be found to be financial in nature or
incidental to a financial activity
under this subsection, and shall notify
the Board in writing of the
determination of the Secretary and, in
the event that the Secretary determines
not to seek public comment on the
proposal, the reasons for that
determination.
``(C) Authority over merchant banking.--The Board
shall have sole authority to prescribe regulations and
issue interpretations to implement this paragraph with
respect to activities described in section 6(c)(3)(H)
of the Bank Holding Company Act of 1956.
``(2) Factors to be considered.--In determining whether an
activity is financial in nature or incidental to financial
activities, the Secretary shall take into account--
``(A) the purposes of this Act and the Financial
Services Act of 1999;
``(B) changes or reasonably expected changes in the
marketplace in which banks 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 and the subsidiaries of a
bank 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) Authorization of new financial activities.--The
Secretary of the Treasury shall, by regulation or order and in
accordance with paragraph (1)(B), 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.
``(4) Developing activities.--Subject to subsection (a)(2),
a financial subsidiary of a national bank may engage directly
or indirectly, or acquire shares of any company engaged, in any
activity that the Secretary has not determined to be financial
in nature or incidental to financial activities under this
subsection if--
``(A) the subsidiary reasonably concludes that the
activity is financial in nature or incidental to
financial activities;
``(B) the gross revenues from all activities
conducted under this paragraph represent less than 5
percent of the consolidated gross revenues of the
national bank;
``(C) the aggregate total assets of all companies
the shares of which are held under this paragraph do
not exceed 5 percent of the national bank's
consolidated total assets;
``(D) the total capital invested in activities
conducted under this paragraph represents less than 5
percent of the consolidated total capital of the
national bank;
``(E) neither the Secretary of the Treasury nor the
Board has determined that the activity is not financial
in nature or incidental to financial activities under
this subsection; and
``(F) the national bank provides written notice to
the Secretary of the Treasury describing the activity
commenced by the subsidiary or conducted by the company
acquired no later than 10 business days after
commencing the activity or consummating the
acquisition.
``(c) Provisions Applicable to National Banks That Fail To Meet
Requirements.--
``(1) In general.--If a national bank or depository
institution affiliate is not in compliance with the
requirements of subparagraph (A), (B), or (C) of subsection
(a)(3), the appropriate Federal banking agency shall notify the
Comptroller of the Currency, who shall give notice of such
finding to the national bank.
``(2) Agreement to correct conditions required.--Not later
than 45 days after receipt by a national bank of a notice given
under paragraph (1) (or such additional period as the
Comptroller of the Currency may permit), the national bank and
any relevant affiliated depository institution shall execute an
agreement acceptable to the Comptroller of the Currency and the
other appropriate Federal banking agencies, if any, to comply
with the requirements applicable under subsection (a)(3).
``(3) Comptroller of the currency may impose limitations.--
Until the conditions described in a notice to a national bank
under paragraph (1) are corrected--
``(A) the Comptroller of the Currency may impose
such limitations on the conduct or activities of the
national bank or any subsidiary of the bank as the
Comptroller of the Currency determines to be
appropriate under the circumstances; and
``(B) the appropriate Federal banking agency may
impose such limitations on the conduct or activities of
an affiliated depository institution or any subsidiary
of the depository institution as such agency determines
to be appropriate under the circumstances.
``(4) Failure to correct.--If, after receiving a notice
under paragraph (1), a national bank and other affiliated
depository institutions do 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 (a)(3)(A), restore the national bank or
any depository institution affiliate of the bank to
well capitalized status before the end of the 180-day
period beginning on the date such notice is received by
the national bank (or such other period permitted by
the Comptroller of the Currency); or
``(D) in the case of a notice of failure to comply
with subparagraph (B) or (C) of subsection (a)(3),
restore compliance with any such subparagraph on or
before the date on which the next examination of the
depository institution subsidiary is completed or by
the end of such other period as the Comptroller of the
Currency determines to be appropriate,
the Comptroller of the Currency may require such national bank,
under such terms and conditions as may be imposed by the
Comptroller of the Currency and subject to such extension of
time as may be granted in the Comptroller of the Currency's
discretion, to divest control of any subsidiary engaged in
activities pursuant to subsection (a)(2) or, at the election of
the national bank, instead to cease to engage in any activity
conducted by a subsidiary of the national bank pursuant to
subsection (a)(2).
``(5) Consultation.--In taking any action under this
subsection, the Comptroller of the Currency shall consult with
all relevant Federal and State regulatory agencies.''.
(b) Clerical Amendment.--The table of sections for chapter 1 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. Subsidiaries of national banks.''.
SEC. 122. SAFETY AND SOUNDNESS FIREWALLS BETWEEN BANKS AND THEIR
FINANCIAL SUBSIDIARIES.
(a) Purposes.--The purposes of this section are--
(1) to protect the safety and soundness of any insured bank
that has a financial subsidiary;
(2) to apply to any transaction between the bank and the
financial subsidiary (including a loan, extension of credit,
guarantee, or purchase of assets), other than an equity
investment, the same restrictions and requirements as would
apply if the financial subsidiary were a subsidiary of a bank
holding company having control of the bank; and
(3) to apply to any equity investment of the bank in the
financial subsidiary restrictions and requirements equivalent
to those that would apply if--
(A) the bank paid a dividend in the same dollar
amount to a bank holding company having control of the
bank; and
(B) the bank holding company used the proceeds of
the dividend to make an equity investment in a
subsidiary that was engaged in the same activities as
the financial subsidiary of the bank.
(b) Safety and Soundness Firewalls Applicable to Subsidiaries of
Banks.--The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is
amended by inserting after section 45 (as added by section 113(b) of
this title) the following new section:
``SEC. 46. SAFETY AND SOUNDNESS FIREWALLS APPLICABLE TO SUBSIDIARIES OF
BANKS.
``(a) Limiting the Equity Investment of a Bank in a Subsidiary.--
``(1) Capital deduction.--In determining whether an insured
bank complies with applicable regulatory capital standards--
``(A) the appropriate Federal banking agency shall
deduct from the assets and tangible equity of the bank
the aggregate amount of the outstanding equity
investments of the bank in financial subsidiaries of
the bank; and
``(B) the assets and liabilities of such financial
subsidiaries shall not be consolidated with those of
the bank.
``(2) Investment limitation.--An insured bank shall not,
without the prior approval of the appropriate Federal banking
agency, make any equity investment in a financial subsidiary of
the bank if that investment would, when made, exceed the amount
that the bank could pay as a dividend without obtaining prior
regulatory approval.
``(3) Treatment of retained earnings.--The amount of any
net earnings retained by a financial subsidiary of an insured
depository institution shall be treated as an outstanding
equity investment of the bank in the subsidiary for purposes of
paragraph (1).
``(b) Operational and Financial Safeguards for the Bank.--An
insured bank that has a financial subsidiary shall maintain procedures
for identifying and managing any financial and operational risks posed
by the financial subsidiary.
``(c) Maintenance of Separate Corporate Identity and Separate Legal
Status.--
``(1) In general.--Each insured bank shall ensure that the
bank maintains and complies with reasonable policies and
procedures to preserve the separate corporate identity and
legal status of the bank and any financial subsidiary or
affiliate of the bank.
``(2) Examinations.--The appropriate Federal banking
agency, as part of each examination, shall review whether an
insured bank is observing the separate corporate identity and
separate legal status of any subsidiaries and affiliates of the
bank.
``(d) Financial Subsidiary Defined.--For purposes of this section,
the term `financial subsidiary' has the meaning given to such term in
section 5136A(a)(7)(B) of the Revised Statutes of the United States.
``(e) Regulations.--The appropriate Federal banking agencies shall
jointly prescribe regulations implementing this section.''.
(c) Transactions Between Financial Subsidiaries and Other
Affiliates.--Section 23A of the Federal Reserve Act (12 U.S.C. 371c) is
amended--
(1) by redesignating subsection (e) as subsection (f); and
(2) by inserting after subsection (d), the following new
subsection:
``(e) Rules Relating to Banks With Financial Subsidiaries.--
``(1) Financial subsidiary defined.--For purposes of this
section and section 23B, the term `financial subsidiary' means
a company which is a subsidiary of a bank and is engaged in
activities that are financial in nature or incidental to such
financial activities pursuant to subsection (a)(2) or (b)(4) of
section 5136A of the Revised Statutes of the United States.
``(2) Application to transactions between a financial
subsidiary of a bank and the bank.--For purposes of applying
this section and section 23B to a transaction between a
financial subsidiary of a bank and the bank (or between such
financial subsidiary and any other subsidiary of the bank which
is not a financial subsidiary) and notwithstanding subsection
(b)(2) and section 23B(d)(1), the financial subsidiary of the
bank--
``(A) shall be an affiliate of the bank and any
other subsidiary of the bank which is not a financial
subsidiary; and
``(B) shall not be treated as a subsidiary of the
bank.
``(3) Application to transactions between financial
subsidiary and nonbank affiliates.--
``(A) In general.--A transaction between a
financial subsidiary and an affiliate of the financial
subsidiary shall not be deemed to be a transaction
between a subsidiary of a national bank and an
affiliate of the bank for purposes of section 23A or
section 23B of the Federal Reserve Act.
``(B) Certain affiliates excluded.--For purposes of
subparagraph (A) and notwithstanding paragraph (4), the
term `affiliate' shall not include a bank, or a
subsidiary of a bank, which is engaged exclusively in
activities permissible for a national bank to engage in
directly or which are authorized by any Federal law
other than section 5136A of the Revised Statutes of the
United States.
``(4) Equity investments excluded subject to the approval
of the banking agency.--Subsection (a)(1) shall not apply so as
to limit the equity investment of a bank in a financial
subsidiary of such bank, except that any investment that
exceeds the amount of a dividend that the bank could pay at the
time of the investment without obtaining prior approval of the
appropriate Federal banking agency and is in excess of the
limitation which would apply under subsection (a)(1), but for
this paragraph, may be made only with the approval of the
appropriate Federal banking agency (as defined in section 3(q)
of the Federal Deposit Insurance Act) with respect to such
bank.''.
(d) 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 pursuant to subsection (a)(2) or
(b)(4) of section 5136A of the Revised Statutes of the United States
shall be deemed to be a subsidiary of a bank holding company, and not a
subsidiary of a bank.''.
SEC. 123. 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 5 years, or both.
``(c) Institution-Affiliated Party Defined.--For purposes of this
section, the term `institution-affiliated party' has the same meaning
as in section 3 of the Federal Deposit Insurance Act and any reference
in that section shall also be deemed to refer 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. 124. 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.
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(f)(2);
``(C) controls one 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)(D)(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) Limitations on indirect action.--In
developing, establishing, or assessing holding
company capital or capital adequacy rules,
guidelines, standards, or requirements for
purposes of this paragraph, the Board shall not
take into account the activities, operations,
or investments of an affiliated investment
company registered under the Investment Company
Act of 1940, unless the investment company is--
``(I) a bank holding company; or
``(II) controlled by a bank holding
company by reason of ownership by the
bank holding company (including through
all of its affiliates) of 25 percent or
more of the shares of the investment
company, and the shares owned by the
bank holding company have a market
value equal to more than $1,000,000.
``(vi) 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.
``(vii) 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 1999, 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
1999, 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.
``(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 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, may request a determination
from the Board that such bank or company be treated as a
wholesale financial holding company other than for purposes of
subsection (c), subject to such conditions as the Board
considers appropriate, giving due regard to the principle of
national treatment and equality of competitive opportunity and
the requirements imposed on domestic banks and companies.
``(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, directly or indirectly, and
which engages in any activity pursuant to subsection
(c) or (g) of section 6, 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 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) 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, except that
such bank or company shall be subject to the restrictions of
paragraphs (2)(A) and (3) of this subsection.
``(5) 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.
``(6) 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.''.
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.--The Right to Financial
Privacy Act of 1978 (12 U.S.C. 3401 et seq.) is amended--
(1) in section 1101(7) of the (12 U.S.C. 3401(7))--
(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) in section 1112(e), 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. 1841) is amended by inserting after
subsection (p) (as added by section 103(b)(1)) the following
new subsections:
``(q) Wholesale Financial Institution.--The term `wholesale
financial institution' means a wholesale financial institution subject
to section 9B of the Federal Reserve Act.
``(r) Commission.--The term `Commission' means the Securities and
Exchange Commission.
``(s) 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
subject 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 1 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.
(2) Clerical amendment.--The table of sections for chapter
1 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) 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
State wholesale financial institution, or to the
Comptroller of the Currency to become a national
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 or national 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;
``(B) subject to subparagraph (A), all references
to the appropriate Federal banking agency or to the
Corporation in that section shall be deemed to be
references to the Comptroller of the Currency, in the
case of a national wholesale financial institution, and
to the Board, in the case of all other wholesale
financial institutions; and
``(C) in the case of wholesale financial
institutions, the purpose of prompt corrective action
shall be to protect taxpayers and the financial system
from the risks associated with the operation and
activities of wholesale financial institutions.
``(3) Enforcement authority.--Section 3(u), subsections (j)
and (k) of section 7, subsections (b) through (n), (s), (u),
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 or national banks, as the
case may be, 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 or
a national 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, and with the approval of--
``(A) the Board, in the case of a State-chartered
wholesale financial institution; and
``(B) the Comptroller of the Currency, in the case
of a national bank wholesale financial institution.
``(7) Activities of out-of-state branches of wholesale
financial institutions.--A State-chartered wholesale financial
institution shall be deemed to be a State bank and an insured
State bank for purposes of paragraphs (1), (2), and (3) of
section 24(j) of the Federal Deposit Insurance Act.
``(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.--Except as otherwise
provided in section 8A(f) of the Federal Deposit
Insurance Act, no deposits held by a wholesale
financial institution shall be insured deposits under
the Federal Deposit Insurance Act.
``(C) Advertising and disclosure.--The Board and
the Comptroller of the Currency shall prescribe jointly
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 consistent 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 or the authority of the Comptroller of the Currency over
national 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.--Not later than 45
days after the date 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
not later than 180 days after the date of 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
subject to such extension of time as may be granted in the
discretion of the Board, 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) Resolution of Wholesale Financial Institutions.--
``(1) Conservatorship or receivership.--
``(A) Appointment.--The Board may appoint a
conservator or receiver 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 or receiver for a
national bank.
``(B) Powers.--The conservator or receiver for a
wholesale financial institution shall exercise the same
powers, functions, and duties, subject to the same
limitations, as a conservator or receiver for a
national bank.
``(2) Board authority.--The Board shall have the same
authority with respect to any conservator or receiver appointed
under paragraph (1), and the wholesale financial institution
for which it has been appointed, as the Comptroller of the
Currency has with respect to a conservator or receiver for a
national bank and the national bank for which the conservator
or receiver has been appointed.
``(3) Bankruptcy proceedings.--The Comptroller of the
Currency (in the case of a national wholesale financial
institution) or the Board may direct the conservator or
receiver of a wholesale financial institution to file a
petition pursuant to title 11, United States Code, in which
case, title 11, United States Code, shall apply to the
wholesale financial institution in lieu of otherwise applicable
Federal or State insolvency law.
``(f) Board Backup Authority.--
``(1) Notice to the comptroller.--Before taking any action
under section 8 of the Federal Deposit Insurance Act involving
a wholesale financial institution that is chartered as a
national bank, the Board shall notify the Comptroller and
recommend that the Comptroller take appropriate action. If the
Comptroller fails to take the recommended action or to provide
an acceptable plan for addressing the concerns of the Board
before the close of the 30-day period beginning on the date of
receipt of the formal recommendation from the Board, the Board
may take such action.
``(2) Exigent circumstances.--Notwithstanding paragraph
(1), the Board may exercise its authority without regard to the
time period set forth in paragraph (1) where the Board finds
that exigent circumstances exist and the Board notifies the
Comptroller of the Board's action and of the exigent
circumstances.
``(g) 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, in the case of an
insured State bank, or to the Corporation and the
Comptroller of the Currency, in the case of an insured
national bank authorized to operate as a wholesale
financial institution, 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, in the case of an insured
State bank, or the Corporation and the Comptroller of
the Currency, in the case of an insured national bank
authorized to operate as a wholesale financial
institution, has 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''.
(d) Technical and Conforming Amendments to the Bankruptcy Code.--
(1) Bankruptcy code debtors.--Section 109(b)(2) of title
11, United States Code, is amended by striking ``; or'' and
inserting the following: ``, except that--
``(A) a wholesale financial institution established
under section 5136B of the Revised Statutes of the
United States or section 9B of the Federal Reserve Act
may be a debtor if a petition is filed at the direction
of the Comptroller of the Currency (in the case of a
wholesale financial institution established under
section 5136B of the Revised Statutes of the United
States) or the Board of Governors of the Federal
Reserve System (in the case of any wholesale financial
institution); and
``(B) a corporation organized under section 25A of
the Federal Reserve Act may be a debtor if a petition
is filed at the direction of the Board of Governors of
the Federal Reserve System; or''.
(2) Chapter 7 debtors.--Section 109(d) of title 11, United
States Code, is amended to read as follows:
``(d) Only a railroad and a person that may be a debtor under
chapter 7 of this title, except that a stockbroker, a wholesale
financial institution established under section 5136B of the Revised
Statutes of the United States or section 9B of the Federal Reserve Act,
a corporation organized under section 25A of the Federal Reserve Act,
or a commodity broker, may be a debtor under chapter 11 of this
title.''.
(3) Definition of financial institution.--Section 101(22)
of title 11, United States Code, is amended to read as follows:
``(22) `financial institution' means a person that is a
commercial or savings bank, industrial savings bank, savings
and loan association, trust company, wholesale financial
institution established under section 5136B of the Revised
Statutes of the United States or section 9B of the Federal
Reserve Act, or corporation organized under section 25A of the
Federal Reserve Act and, when any such person is acting as
agent or custodian for a customer in connection with a
securities contract, as defined in section 741 of this title,
such customer,''.
(4) Subchapter v of chapter 7.--
(A) In general.--Section 103 of title 11, United
States Code, is amended--
(i) by redesignating subsections (e)
through (i) as subsections (f) through (j),
respectively; and
(ii) by inserting after subsection (d) the
following:
``(e) Subchapter V of chapter 7 of this title applies only in a
case under such chapter concerning the liquidation of a wholesale
financial institution established under section 5136B of the Revised
Statutes of the United States or section 9B of the Federal Reserve Act,
or a corporation organized under section 25A of the Federal Reserve
Act.''.
(B) Wholesale bank liquidation.--Chapter 7 of title
11, United States Code, is amended by adding at the end
the following:
``SUBCHAPTER V--WHOLESALE BANK LIQUIDATION
``Sec. 781. Definitions for subchapter
``In this subchapter--
``(1) the term `Board' means the Board of Governors of the
Federal Reserve System;
``(2) the term `depository institution' has the same
meaning as in section 3 of the Federal Deposit Insurance Act,
and includes any wholesale bank;
``(3) the term `national wholesale financial institution'
means a wholesale financial institution established under
section 5136B of the Revised Statutes of the United States; and
``(4) the term `wholesale bank' means a national wholesale
financial institution, a wholesale financial institution
established under section 9B of the Federal Reserve Act, or a
corporation organized under section 25A of the Federal Reserve
Act.
``Sec. 782. Selection of trustee
``(a) Notwithstanding any other provision of this title, the
conservator or receiver who files the petition shall be the trustee
under this chapter, unless the Comptroller of the Currency (in the case
of a national wholesale financial institution for which it appointed
the conservator or receiver) or the Board (in the case of any wholesale
bank for which it appointed the conservator or receiver) designates an
alternative trustee. The Comptroller of the Currency or the Board (as
applicable) may designate a successor trustee, if required.
``(b) Whenever the Comptroller of the Currency or the Board
appoints or designates a trustee, chapter 3 and sections 704 and 705 of
this title shall apply to the Comptroller or the Board, as applicable,
in the same way and to the same extent that they apply to a United
States trustee.
``Sec. 783. Additional powers of trustee
``(a) The trustee under this subchapter has power to distribute
property not of the estate, including distributions to customers that
are mandated by subchapters III and Iv of this chapter.
``(b) The trustee under this subchapter may, after notice and a
hearing--
``(1) sell the wholesale bank to a depository institution
or consortium of depository institutions (which consortium may
agree on the allocation of the wholesale bank among the
consortium);
``(2) merge the wholesale bank with a depository
institution;
``(3) transfer contracts to the same extent as could a
receiver for a depository institution under paragraphs (9) and
(10) of section 11(e) of the Federal Deposit Insurance Act;
``(4) transfer assets or liabilities to a depository
institution;
``(5) transfer assets and liabilities to a bridge bank as
provided in paragraphs (1), (3)(A), (5), (6), and (9) through
(13), and subparagraphs (A) through (H) and (K) of paragraph
(4) of section 11(n) of the Federal Deposit Insurance Act,
except that--
``(A) the bridge bank shall be treated as a
wholesale bank for the purpose of this subsection; and
``(B) any references in any such provision of law
to the Federal Deposit Insurance Corporation shall be
construed to be references to the appointing agency and
that references to deposit insurance shall be omitted.
``(c) Any reference in this section to transfers of liabilities
includes a ratable transfer of liabilities within a priority class.
``Sec. 784. Right to be heard
``The Comptroller of the Currency (in the case of a national
wholesale financial institution), the Board (in the case of any
wholesale bank), or a Federal Reserve bank (in the case of a wholesale
bank that is a member of that bank) may raise and may appear and be
heard on any issue in a case under this subchapter.
(C) Conforming amendment.--The table of sections
for chapter 7 of title 11, United States Code, is
amended by adding at the end the following:
``SUBCHAPTER V--WHOLESALE BANK LIQUIDATION
``781. Definitions for subchapter.
``782. Selection of trustee.
``783. Additional powers of trustee.
``784. Right to be heard.''.
(e) Resolution of Edge Corporations.--The sixteenth undesignated
paragraph of section 25A of the Federal Reserve Act (12 U.S.C. 624) is
amended to read as follows:
``(16) Appointment of receiver or conservator.--
``(A) In general.--The Board may appoint a
conservator or receiver for a corporation organized
under the provisions of this section to the same extent
and in the same manner as the Comptroller of the
Currency may appoint a conservator or receiver for a
national bank, and the conservator or receiver for such
corporation shall exercise the same powers, functions,
and duties, subject to the same limitations, as a
conservator or receiver for a national bank.
``(B) Equivalent authority.--The Board shall have
the same authority with respect to any conservator or
receiver appointed for a corporation organized under
the provisions of this section under this paragraph and
any such corporation as the Comptroller of the Currency
has with respect to a conservator or receiver of a
national bank and the national bank for which a
conservator or receiver has been appointed.
``(C) Title 11 petitions.--The Board may direct the
conservator or receiver of a corporation organized
under the provisions of this section to file a petition
pursuant to title 11, United States Code, in which
case, title 11, United States Code, shall apply to the
corporation in lieu of otherwise applicable Federal or
State insolvency law.''.
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 Amendments.--
(1) Banks.--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 the following: ``, except that a portion of a transaction
is not exempt under this paragraph if such portion of the
transaction (A) is subject to section 6 of the Bank Holding
Company Act of 1956; and (B) does not require agency approval
under section 3 of the Bank Holding Company Act of 1956''.
(2) Bank holding companies.--Section 7A(c)(8) of the
Clayton Act (15 U.S.C. 18a(c)(8)) is amended by inserting
before the semicolon at the end the following: ``, except that
a portion of a transaction is not exempt under this paragraph
if such portion of the transaction (A) is subject to section 6
of the Bank Holding Company Act of 1956; and (B) does not
require agency approval under section 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.
(c) Sunset.--This section shall not apply after the end of the 5-
year period beginning on the date of the enactment of this Act.
Subtitle F--National Treatment
SEC. 151. 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)(D) or
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 the
enactment of the Financial Services Act of 1999, 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 114 of the
Financial Services Act.''.
SEC. 152. 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.''.
SEC. 153. REPRESENTATIVE OFFICES.
(a) Definition of ``Representative Office''.--Section 1(b)(15) of
the International Banking Act of 1978 (12 U.S.C. 3101(15)) is amended
by striking ``State agency, or subsidiary of a foreign bank'' and
inserting ``or State agency''.
(b) Examinations.--Section 10(c) of the International Banking Act
of 1978 (12 U.S.C. 3107(c)) is amended by adding at the end the
following: ``The Board may also make examinations of any affiliate of a
foreign bank conducting business in any State if the Board deems it
necessary to determine and enforce compliance with this Act, the Bank
Holding Company Act of 1956 (12 U.S.C. 1841 et seq.), or other
applicable Federal banking law.''.
SEC. 154. RECIPROCITY.
(a) National Treatment Reports.--
(1) Report required in the event of certain acquisitions.--
(A) In general.--Whenever a person from a foreign
country announces its intention to acquire or acquires
a bank, a securities underwriter, broker, or dealer, an
investment adviser, or insurance company that ranks
within the top 50 firms in that line of business in the
United States, the Secretary of Commerce, in the case
of an insurance company, or the Secretary of the
Treasury, in the case of a bank, a securities
underwriter, broker, or dealer, or an investment
adviser, shall, within the earlier of 6 months of such
announcement or such acquisition and in consultation
with other appropriate Federal and State agencies,
prepare and submit to the Congress a report on whether
a United States person would be able, de facto or de
jure, to acquire an equivalent sized firm in the
country in which such person from a foreign country is
located.
(B) Analysis and recommendations.--If a report
submitted under subparagraph (A) states that the
equivalent treatment referred to in such subparagraph,
de facto and de jure, is not provided in the country
which is the subject of the report, the Secretary of
Commerce or the Secretary of the Treasury, as the case
may be and in consultation with other appropriate
Federal and State agencies, shall include in the report
analysis and recommendations as to how that country's
laws and regulations would need to be changed so that
reciprocal treatment would exist.
(2) Report required before financial services negotiations
commence.--The Secretary of Commerce, with respect to insurance
companies, and the Secretary of the Treasury, with respect to
banks, securities underwriters, brokers, dealers, and
investment advisers, shall, not less than 6 months before the
commencement of the financial services negotiations of the
World Trade Organization and in consultation with other
appropriate Federal and State agencies, prepare and submit to
the Congress a report containing--
(A) an assessment of the 30 largest financial
services markets with regard to whether reciprocal
access is available in such markets to United States
financial services providers; and
(B) with respect to any such financial services
markets in which reciprocal access is not available to
United States financial services providers, an analysis
and recommendations as to what legislative, regulatory,
or enforcement changes would be required to ensure full
reciprocity for such providers.
(3) Person of a foreign country defined.--For purposes of
this subsection, the term ``person of a foreign country'' means
a person, or a person which directly or indirectly owns or
controls that person, that is a resident of that country, is
organized under the laws of that country, or has its principal
place of business in that country.
(b) Provisions Applicable to Submissions.--
(1) Notice.--Before preparing any report required under
subsection (a), the Secretary of Commerce or the Secretary of
the Treasury, as the case may be, shall publish notice that a
report is in preparation and seek comment from United States
persons.
(2) Privileged submissions.--Upon the request of the
submitting person, any comments or related communications
received by the Secretary of Commerce or the Secretary of the
Treasury, as the case may be, with regard to the report shall,
for the purposes of section 552 of title 5, of the United
States Code, be treated as commercial information obtained from
a person that is privileged or confidential, regardless of the
medium in which the information is obtained. This confidential
information shall be the property of the Secretary and shall be
privileged from disclosure to any other person. However, this
privilege shall not be construed as preventing access to that
confidential information by the Congress.
(3) Prohibition of unauthorized disclosures.--No person in
possession of confidential information, provided under this
section may disclose that information, in whole or in part,
except for disclosure made in published statistical material
that does not disclose, either directly or when used in
conjunction with publicly available information, the
confidential information of any person.
Subtitle G--Federal Home Loan Bank System Modernization
SEC. 161. SHORT TITLE.
This subtitle may be cited as the ``Federal Home Loan Bank System
Modernization Act of 1999''.
SEC. 162. DEFINITIONS.
Section 2 of the Federal Home Loan Bank Act (12 U.S.C. 1422) is
amended--
(1) in paragraph (1), by striking ``term `Board' means''
and inserting ``terms `Finance Board' and `Board' mean'';
(2) by striking paragraph (3) and inserting the following:
``(3) State.--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.''; and
(3) by adding at the end the following new paragraph:
``(13) Community financial institution.--
``(A) In general.--The term `community financial
institution' means a member--
``(i) the deposits of which are insured
under the Federal Deposit Insurance Act; and
``(ii) that has, as of the date of the
transaction at issue, less than $500,000,000 in
average total assets, based on an average of
total assets over the 3 years preceding that
date.
``(B) Adjustments.--The $500,000,000 limit referred
to in subparagraph (A)(ii) shall be adjusted annually
by the Finance Board, based on the annual percentage
increase, if any, in the Consumer Price Index for all
urban consumers, as published by the Department of
Labor.''.
SEC. 163. SAVINGS ASSOCIATION MEMBERSHIP.
Section 5(f) of the Home Owners' Loan Act (12 U.S.C. 1464(f)) is
amended to read as follows:
``(f) Federal Home Loan Bank Membership.--On and after January 1,
1999, 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.''.
SEC. 164. ADVANCES TO MEMBERS; COLLATERAL.
(a) In General.--Section 10(a) of the Federal Home Loan Bank Act
(12 U.S.C. 1430(a)) is amended--
(1) by redesignating paragraphs (1) through (4) as
subparagraphs (A) through (D), respectively, and indenting
appropriately;
(2) by striking ``(a) Each'' and inserting the following:
``(a) In General.--
``(1) All advances.--Each'';
(3) by striking the second sentence and inserting the
following:
``(2) Purposes of advances.--A long-term advance may only
be made for the purposes of--
``(A) providing funds to any member for residential
housing finance; and
``(B) providing funds to any community financial
institution for small business, agricultural, rural
development, or low-income community development
lending.'';
(4) by striking ``A Bank'' and inserting the following:
``(3) Collateral.--A Bank'';
(5) in paragraph (3) (as so designated by paragraph (4) of
this subsection)--
(A) in subparagraph (C) (as so redesignated by
paragraph (1) of this subsection) by striking
``Deposits'' and inserting ``Cash or deposits'';
(B) in subparagraph (D) (as so redesignated by
paragraph (1) of this subsection), by striking the
second sentence; and
(C) by inserting after subparagraph (D) (as so
redesignated by paragraph (1) of this subsection) the
following new subparagraph:
``(E) Secured loans for small business,
agriculture, rural development, or low-income community
development, or securities representing a whole
interest in such secured loans, in the case of any
community financial institution.'';
(6) in paragraph (5)--
(A) in the second sentence, by striking ``and the
Board'';
(B) in the third sentence, by striking ``Board''
and inserting ``Federal home loan bank''; and
(C) by striking ``(5) Paragraphs (1) through (4)''
and inserting the following:
``(4) Additional bank authority.--Subparagraphs (A) through
(E) of paragraph (3)''; and
(7) by adding at the end the following:
``(5) Review of certain collateral standards.--The Board
may review the collateral standards applicable to each Federal
home loan bank for the classes of collateral described in
subparagraphs (D) and (E) of paragraph (3), and may, if
necessary for safety and soundness purposes, require an
increase in the collateral standards for any or all of those
classes of collateral.
``(6) Definitions.--For purposes of this subsection, the
terms `small business', `agriculture', `rural development', and
`low-income community development' shall have the meanings
given those terms by rule or regulation of the Finance
Board.''.
(b) Clerical Amendment.--The section heading for section 10 of the
Federal Home Loan Bank Act (12 U.S.C. 1430) is amended to read as
follows:
``SEC. 10. ADVANCES TO MEMBERS.''.
(c) Conforming Amendments Relating to Members Which Are Not
Qualified Thrift Lenders--The first of the 2 subsections designated as
subsection (e) of section 10 of the Federal Home Loan Bank Act (12
U.S.C. 1430(e)(1)) is amended--
(1) in the last sentence of paragraph (1), by inserting
``or, in the case of any community financial institution, for
the purposes described in subsection (a)(2)'' before the
period; and
(2) in paragraph (5)(C), by inserting ``except that, in
determining the actual thrift investment percentage of any
community financial institution for purposes of this
subsection, the total investment of such member in loans for
small business, agriculture, rural development, or low-income
community development, or securities representing a whole
interest in such loans, shall be treated as a qualified thrift
investment (as defined in such section 10(m))'' before the
period.
SEC. 165. ELIGIBILITY CRITERIA.
Section 4(a) of the Federal Home Loan Bank Act (12 U.S.C. 1424(a))
is amended--
(1) in paragraph (2)(A), by inserting, ``(other than a
community financial institution)'' after ``institution''; and
(2) by adding at the end the following new paragraph:
``(3) Limited exemption for community financial
institutions.--A community financial institution that otherwise
meets the requirements of paragraph (2) may become a member
without regard to the percentage of its total assets that is
represented by residential mortgage loans, as described in
subparagraph (A) of paragraph (2).''.
SEC. 166. MANAGEMENT OF BANKS.
(a) Board of Directors.--Section 7(d) of the Federal Home Loan Bank
Act (12 U.S.C. 1427(d)) is amended--
(1) by striking ``(d) The term'' and inserting the
following:
``(d) Terms of Office.--The term''; and
(2) by striking ``shall be two years''.
(b) Compensation.--Section 7(i) of the Federal Home Loan Bank Act
(12 U.S.C. 1427(i)) is amended by striking ``, subject to the approval
of the board''.
(c) 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).
(d) Section 12.--Section 12 of the Federal Home Loan Bank Act (12
U.S.C. 1432) is amended--
(1) in subsection (a)--
(A) by striking ``, but, except'' and all that
follows through ``ten years'';
(B) by striking ``subject to the approval of the
Board'' the first place that term appears;
(C) by striking ``and, by its Board of directors,''
and all that follows through ``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 laws and regulations, as
administered by the Finance Board. No officer,
employee, attorney, or agent of a Federal home loan
bank''; and
(D) by striking ``Board of directors'' where such
term appears in the penultimate sentence and inserting
``board of directors''; and
(2) in subsection (b), by striking ``loans banks'' and
inserting ``loan banks''.
(e) Powers and Duties of Federal Housing Finance Board.--
(1) Issuance of notices of violations.--Section 2B(a) of
the Federal Home Loan Bank Act (12 U.S.C. 1422b(a)) is amended
by adding at the end the following new paragraphs:
``(5) To issue and serve a notice of charges upon a Federal
home loan bank or upon any executive officer or director of a
Federal home loan bank if, in the determination of the Finance
Board, the bank, executive officer, or director is engaging or
has engaged in, or the Finance Board has reasonable cause to
believe that the bank, executive officer, or director is about
to engage in, any conduct that violates any provision of this
Act or any law, order, rule, or regulation or any condition
imposed in writing by the Finance Board in connection with the
granting of any application or other request by the bank, or
any written agreement entered into by the bank with the agency,
in accordance with the procedures provided in section 1371(c)
of the Federal Housing Enterprises Financial Safety and
Soundness Act of 1992. Such authority includes the same
authority to take affirmative action to correct conditions
resulting from violations or practices or to limit activities
of a bank or any executive officer or director of a bank as
appropriate Federal banking agencies have to take with respect
to insured depository institutions under paragraphs (6) and (7)
of section 8(b) of the Federal Deposit Insurance Act, and to
have all other powers, rights, and duties to enforce this Act
with respect to the Federal home loan banks and their executive
officers and directors as the Office of Federal Housing
Enterprise Oversight has to enforce the Federal Housing
Enterprises Financial Safety and Soundness Act of 1992, the
Federal National Mortgage Association Charter Act, or the
Federal Home Loan Mortgage Corporation Act with respect to the
Federal housing enterprises under the Federal Housing
Enterprises Financial Safety and Soundness Act of 1992.
``(6) To address any insufficiencies in capital levels
resulting from the application of section 5(f) of the Home
Owners' Loan Act.
``(7) To sue and be sued, by and through its own
attorneys.''.
(2) Technical amendment.--Section 111 of Public Law 93-495
(12 U.S.C. 250) is amended by striking ``Federal Home Loan Bank
Board,'' and inserting ``Director of the Office of Thrift
Supervision, ``the Federal Housing Finance Board,''.
(f) 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.--Section 10 of the Federal Home Loan Bank
Act (12 U.S.C. 1430) is amended--
(A) in subsection (c)--
(i) in the first sentence, by striking
``Board'' and inserting ``Federal home loan
bank''; and
(ii) by striking the second sentence;
(B) in subsection (d)--
(i) in the first sentence, by striking
``and the approval of the Board''; and
(ii) by striking ``Subject to the approval
of the Board, any'' and inserting ``Any''; and
(C) in subsection (j)(1)--
(i) by striking ``to subsidize the interest
rate on advances'' and inserting ``to provide
subsidies, including subsidized interest rates
on advances'';
(ii) by striking ``Pursuant'' and inserting
the following:
``(A) Establishment.--Pursuant''; and
(iii) by adding at the end the following
new subparagraph:
``(B) Nondelegation of approval authority.--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.''.
(g) Section 16.--Section 16(a) of the Federal Home Loan Bank Act
(12 U.S.C. 1436(a)) is amended--
(1) in the third sentence--
(A) by striking ``net earnings'' and inserting
``previously retained earnings or current net
earnings''; and
(B) by striking ``, and then only with the approval
of the Federal Housing Finance Board''; and
(2) by striking the fourth sentence.
(h) Section 18.--Section 18(b) of the Federal Home Loan Bank Act
(12 U.S.C. 1438(b)) is amended by striking paragraph (4).
SEC. 167. 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.--
``(i) In general.--To the extent that 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 in each
calendar year, 20.75 percent of the net
earnings of that bank (after deducting expenses
relating to section 10(j) and operating
expenses).
``(ii) Annual determination.--The Board
annually shall determine the extent to which
the value of the aggregate amounts paid by the
Federal home loan banks exceeds or falls short
of the value of an annuity of $300,000,000 per
year that commences on the issuance date and
ends on the final scheduled maturity date of
the obligations, and shall select appropriate
present value factors for making such
determinations.
``(iii) Payment term alterations.--The
Board shall extend or shorten the term of the
payment obligations of a Federal home loan bank
under this subparagraph as necessary to ensure
that the value of all payments made by the
banks is equivalent to the value of an annuity
referred to in clause (ii).
``(iv) Term beyond maturity.--If the Board
extends the term of payments beyond the final
scheduled maturity date for the obligations,
each Federal home loan bank shall continue to
pay 20.75 percent of its net earnings (after
deducting expenses relating to section 10(j)
and operating expenses) to the Treasury of the
United States until the value of all such
payments by the Federal home loan banks is
equivalent to the value of an annuity referred
to in clause (ii). In the final year in which
the Federal home loan banks are required to
make any payment to the Treasury under this
subparagraph, if the dollar amount represented
by 20.75 percent of the net earnings of the
Federal home loan banks exceeds the remaining
obligation of the banks to the Treasury, the
Finance Board shall reduce the percentage pro
rata to a level sufficient to pay the remaining
obligation.''.
(b) Effective Date.--The amendment made by subsection (a) shall
become effective on January 1, 1999. Payments made by a Federal home
loan bank before that effective date shall be counted toward the total
obligation of that bank under section 21B(f)(2)(C) of the Federal Home
Loan Bank Act, as amended by this section.
SEC. 168. CAPITAL STRUCTURE OF FEDERAL HOME LOAN BANKS.
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) Regulations.--
``(1) Capital standards.--Not later than 1 year after the
date of the enactment of the Financial Services Act of 1999,
the Finance Board shall issue regulations prescribing uniform
capital standards applicable to each Federal home loan bank,
which shall require each such bank to meet--
``(A) the leverage requirement specified in
paragraph (2); and
``(B) the risk-based capital requirements, in
accordance with paragraph (3).
``(2) Leverage requirement.--
``(A) In general.--The leverage requirement shall
require each Federal home loan bank to maintain a
minimum amount of total capital based on the aggregate
on-balance sheet assets of the bank and shall be 5
percent.
``(B) Treatment of stock and retained earnings.--In
determining compliance with the minimum leverage ratio
established under subparagraph (A), the paid-in value
of the outstanding Class B stock shall be multiplied by
1.5, the paid-in value of the outstanding Class C stock
and the amount of retained earnings shall be multiplied
by 2.0, and such higher amounts shall be deemed to be
capital for purposes of meeting the 5 percent minimum
leverage ratio.
``(3) Risk-based capital standards.--
``(A) In general.--Each Federal home loan bank
shall maintain permanent capital in an amount that is
sufficient, as determined in accordance with the
regulations of the Finance Board, to meet--
``(i) the credit risk to which the Federal
home loan bank is subject; and
``(ii) the market risk, including interest
rate risk, to which the Federal home loan bank
is subject, based on a stress test established
by the Finance Board that rigorously tests for
changes in market variables, including changes
in interest rates, rate volatility, and changes
in the shape of the yield curve.
``(B) Consideration of other risk-based
standards.--In establishing the risk-based standard
under subparagraph (A)(ii), the Finance Board shall
take due consideration of any risk-based capital test
established pursuant to section 1361 of the Federal
Housing Enterprises Financial Safety and Soundness Act
of 1992 (12 U.S.C. 4611) for the enterprises (as
defined in that Act), with such modifications as the
Finance Board determines to be appropriate to reflect
differences in operations between the Federal home loan
banks and those enterprises.
``(4) Other regulatory requirements.--The regulations
issued by the Finance Board under paragraph (1) shall--
``(A) permit each Federal home loan bank to issue,
with such rights, terms, and preferences, not
inconsistent with this Act and the regulations issued
hereunder, as the board of directors of that bank may
approve, any one or more of--
``(i) Class A stock, which shall be
redeemable in cash and at par 6 months
following submission by a member of a written
notice of its intent to redeem such shares;
``(ii) Class B stock, which shall be
redeemable in cash and at par 5 years following
submission by a member of a written notice of
its intent to redeem such shares; and
``(iii) Class C stock, which shall be
nonredeemable;
``(B) provide that the stock of a Federal home loan
bank may be issued to and held by only members of the
bank, and that a bank may not issue any stock other
than as provided in this section;
``(C) prescribe the manner in which stock of a
Federal home loan bank may be sold, transferred,
redeemed, or repurchased; and
``(D) provide the manner of disposition of
outstanding stock held by, and the liquidation of any
claims of the Federal home loan bank against, an
institution that ceases to be a member of the bank,
through merger or otherwise, or that provides notice of
intention to withdraw from membership in the bank.
``(5) Definitions of capital.--For purposes of determining
compliance with the capital standards established under this
subsection--
``(A) permanent capital of a Federal home loan bank
shall include (as determined in accordance with
generally accepted accounting principles)--
``(i) the amounts paid for the Class C
stock and any other nonredeemable stock
approved by the Finance Board;
``(ii) the amounts paid for the Class B
stock, in an amount not to exceed 1 percent of
the total assets of the bank; and
``(iii) the retained earnings of the bank;
and
``(B) total capital of a Federal home loan bank
shall include--
``(i) permanent capital;
``(ii) the amounts paid for the Class A
stock, Class B stock (excluding any amount
treated as permanent capital under subparagraph
(5)(A)(ii)), or any other class of redeemable
stock approved by the Finance Board;
``(iii) consistent with generally accepted
accounting principles, and subject to the
regulation of the Finance Board, a general
allowance for losses, which may not include any
reserves or allowances made or held against
specific assets; and
``(iv) any other amounts from sources
available to absorb losses incurred by the bank
that the Finance Board determines by regulation
to be appropriate to include in determining
total capital.
``(6) Transition period.--Notwithstanding any other
provisions of this Act, the requirements relating to purchase
and retention of capital stock of a Federal home loan bank by
any member thereof in effect on the day before the date of the
enactment of the Federal Home Loan Bank System Modernization
Act of 1999, shall continue in effect with respect to each
Federal home loan bank until the regulations required by this
subsection have taken effect and the capital structure plan
required by subsection (b) has been approved by the Finance
Board and implemented by such bank.
``(b) Capital Structure Plan.--
``(1) Approval of plans.--Not later than 270 days after the
date of publication by the Finance Board of final regulations
in accordance with subsection (a), 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 that--
``(A) the board of directors determines is best
suited for the condition and operation of the bank and
the interests of the members of the bank;
``(B) meets the requirements of subsection (c); and
``(C) meets the minimum capital standards and
requirements established under subsection (a) and other
regulations prescribed by the Finance Board.
``(2) Approval of modifications.--The board of directors of
a Federal home loan bank shall submit to the Finance Board for
approval any modifications that the bank proposes to make to an
approved capital structure plan.
``(c) Contents of Plan.--The capital structure plan of each Federal
home loan bank shall contain provisions addressing each of the
following:
``(1) Minimum investment.--
``(A) In general.--Each capital structure plan of a
Federal home loan bank shall require each member of the
bank to maintain a minimum investment in the stock of
the bank, the amount of which shall be determined in a
manner to be prescribed by the board of directors of
each bank and to be included as part of the plan.
``(B) Investment alternatives.--
``(i) In general.--In establishing the
minimum investment required for each member
under subparagraph (A), a Federal home loan
bank may, in its discretion, include any one or
more of the requirements referred to in clause
(ii), or any other provisions approved by the
Finance Board.
``(ii) Authorized requirements.--A
requirement is referred to in this clause if it
is a requirement for--
``(I) a stock purchase based on a
percentage of the total assets of a
member; or
``(II) a stock purchase based on a
percentage of the outstanding advances
from the bank to the member.
``(C) Minimum amount.--Each capital structure plan
of a Federal home loan bank shall require that the
minimum stock investment established for members shall
be set at a level that is sufficient for the bank to
meet the minimum capital requirements established by
the Finance Board under subsection (a).
``(D) Adjustments to minimum required investment.--
The capital structure plan of each Federal home loan
bank shall impose a continuing obligation on the board
of directors of the bank to review and adjust the
minimum investment required of each member of that
bank, as necessary to ensure that the bank remains in
compliance with applicable minimum capital levels
established by the Finance Board, and shall require
each member to comply promptly with any adjustments to
the required minimum investment.
``(2) Transition rule.--
``(A) In general.--The capital structure plan of
each Federal home loan bank shall specify the date on
which it shall take effect, and may provide for a
transition period of not longer than 3 years to allow
the bank to come into compliance with the capital
requirements prescribed under subsection (a), and to
allow any institution that was a member of the bank on
the date of the enactment of the Financial Services Act
of 1999, to come into compliance with the minimum
investment required pursuant to the plan.
``(B) Interim purchase requirements.--The capital
structure plan of a Federal home loan bank may allow
any member referred to in subparagraph (A) that would
be required by the terms of the capital structure plan
to increase its investment in the stock of the bank to
do so in periodic installments during the transition
period.
``(3) Disposition of shares.--The capital structure plan of
a Federal home loan bank shall provide for the manner of
disposition of any stock held by a member of that bank that
terminates its membership or that provides notice of its
intention to withdraw from membership in that bank.
``(4) Classes of stock.--
``(A) In general.--The capital structure plan of a
Federal home loan bank shall afford each member of that
bank the option of maintaining its required investment
in the bank through the purchase of any combination of
classes of stock authorized by the board of directors
of the bank and approved by the Finance Board in
accordance with its regulations.
``(B) Rights requirement.--A Federal home loan bank
shall include in its capital structure plan provisions
establishing terms, rights, and preferences, including
minimum investment, dividends, voting, and liquidation
preferences of each class of stock issued by the bank,
consistent with Finance Board regulations and market
requirements.
``(C) Reduced minimum investment.--The capital
structure plan of a Federal home loan bank may provide
for a reduced minimum stock investment for any member
of that bank that elects to purchase Class B, Class C,
or any other class of nonredeemable stock, in a manner
that is consistent with meeting the minimum capital
requirements of the bank, as established by the Finance
Board.
``(D) Liquidation of claims.--The capital structure
plan of a Federal home loan bank shall provide for the
liquidation in an orderly manner, as determined by the
bank, of any claim of that bank against a member,
including claims for any applicable prepayment fees or
penalties resulting from prepayment of advances prior
to stated maturity.
``(5) Limited transferability of stock.--The capital
structure plan of a Federal home loan bank shall--
``(A) provide that--
``(i) any stock issued by that bank shall
be available only to, held only by, and
tradable only among members of that bank and
between that bank and its members; and
``(ii) a bank has no obligation to
repurchase its outstanding Class C stock but
may do so, provided it is consistent with
Finance Board regulations and is at a price
that is mutually agreeable to the bank and the
member; and
``(B) establish standards, criteria, and
requirements for the issuance, purchase, transfer,
retirement, and redemption of stock issued by that
bank.
``(6) Bank review of plan.--Before filing a capital
structure plan with the Finance Board, each Federal home loan
bank shall conduct a review of the plan by--
``(A) an independent certified public accountant,
to ensure, to the extent possible, that implementation
of the plan would not result in any write-down of the
redeemable bank stock investment of its members; and
``(B) at least one major credit rating agency, to
determine, to the extent possible, whether
implementation of the plan would have any material
effect on the credit ratings of the bank.
``(d) Termination of Membership.--
``(1) Voluntary withdrawal.--Any member may withdraw from a
Federal home loan bank by providing written notice to the bank
of its intent to do so. The applicable stock redemption notice
periods shall commence upon receipt of the notice by the bank.
Upon the expiration of the applicable notice period for each
class of redeemable stock, the member may surrender such stock
to the bank, and shall be entitled to receive in cash the par
value of the stock. During the applicable notice periods, the
member shall be entitled to dividends and other membership
rights commensurate with continuing stock ownership.
``(2) Involuntary withdrawal.--
``(A) In general.--The board of directors of a
Federal home loan bank may terminate the membership of
any institution if, subject to Finance Board
regulations, it determines that--
``(i) the member has failed to comply with
a provision of this Act or any regulation
prescribed under this Act; or
``(ii) the member 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 the member.
``(B) Stock disposition.--An institution, the
membership of which is terminated in accordance with
subparagraph (A)--
``(i) shall surrender redeemable stock to
the Federal home loan bank, and shall receive
in cash the par value of the stock, upon the
expiration of the applicable notice period
under subsection (a)(4)(A);
``(ii) shall receive any dividends declared
on its redeemable stock, during the applicable
notice period under subsection (a)(4)(A); and
``(iii) shall not be entitled to any other
rights or privileges accorded to members after
the date of the termination.
``(C) Commencement of notice period.--With respect
to an institution, the membership of which is
terminated in accordance with subparagraph (A), the
applicable notice period under subsection (a)(4) for
each class of redeemable stock shall commence on the
earlier of--
``(i) the date of such termination; or
``(ii) the date on which the member has
provided notice of its intent to redeem such
stock.
``(3) Liquidation of indebtedness.--Upon the termination of
the membership of an institution for any reason, the
outstanding indebtedness of the member to the bank shall be
liquidated in an orderly manner, as determined by the bank and,
upon the extinguishment of all such indebtedness, the bank
shall return to the member all collateral pledged to secure the
indebtedness.
``(e) Redemption of Excess Stock.--
``(1) In general.--A Federal home loan bank, in its sole
discretion, may redeem or repurchase, as appropriate, any
shares of Class A or Class B stock issued by the bank and held
by a member that are in excess of the minimum stock investment
required of that member.
``(2) Excess stock.--Shares of stock held by a member shall
not be deemed to be `excess stock' for purposes of this
subsection by virtue of a member's submission of a notice of
intent to withdraw from membership or termination of its
membership in any other manner.
``(3) Priority.--A Federal home loan bank may not redeem
any excess Class B stock prior to the end of the 5-year notice
period, unless the member has no Class A stock outstanding that
could be redeemed as excess.
``(f) Impairment of Capital.--If the Finance Board or the board of
directors of a Federal home loan bank determines that the bank has
incurred or is likely to incur losses that result in or are expected to
result in charges against the capital of the bank, the bank shall not
redeem or repurchase any stock of the bank without the prior approval
of the Finance Board while such charges are continuing or are expected
to continue. In no case may a bank redeem or repurchase any applicable
capital stock if, following the redemption, the bank would fail to
satisfy any minimum capital requirement.
``(g) Rejoining After Divestiture of All Shares.--
``(1) In general.--Except as provided in paragraph (2), and
notwithstanding any other provision of this Act, an institution
that divests all shares of stock in a Federal home loan bank
may not, after such divestiture, acquire shares of any Federal
home loan bank before the end of the 5-year period beginning on
the date of the completion of such divestiture, unless the
divestiture is a consequence of a transfer of membership on an
uninterrupted basis between banks.
``(2) Exception for withdrawals from membership before
1998.--Any institution that withdrew from membership in any
Federal home loan bank before December 31, 1997, may acquire
shares of a Federal home loan bank at any time after that date,
subject to the approval of the Finance Board and the
requirements of this Act.
``(h) Treatment of Retained Earnings.--
``(1) In general.--The holders of the Class C stock of a
Federal home loan bank, and any other classes of nonredeemable
stock approved by the Finance Board (to the extent provided in
the terms thereof), shall own the retained earnings, surplus,
undivided profits, and equity reserves, if any, of the bank.
``(2) No nonredeemable classes of stock.--If a Federal home
loan bank has no outstanding Class C or other such
nonredeemable stock, then the holders of any other classes of
stock of the bank then outstanding shall have ownership in, and
a private property right in, the retained earnings, surplus,
undivided profits, and equity reserves, if any, of the bank.
``(3) Exception.--Except as specifically provided in this
section or through the declaration of a dividend or a capital
distribution by a Federal home loan bank, or in the event of
liquidation of the bank, a member shall have no right to
withdraw or otherwise receive distribution of any portion of
the retained earnings of the bank.
``(4) Limitation.--A Federal home loan bank may not make
any distribution of its retained earnings unless, following
such distribution, the bank would continue to meet all
applicable capital requirements.''.
Subtitle H--ATM Fee Reform
SEC. 171. SHORT TITLE.
This subtitle may be cited as the ``ATM Fee Reform Act of 1999''.
SEC. 172. ELECTRONIC FUND TRANSFER FEE DISCLOSURES AT ANY HOST ATM.
Section 904(d) of the Electronic Fund Transfer Act (15 U.S.C.
1693b(d)) is amended by adding at the end the following new paragraph:
``(3) Fee disclosures at automated teller machines.--
``(A) In general.--The regulations prescribed under
paragraph (1) shall require any automated teller
machine operator who imposes a fee on any consumer for
providing host transfer services to such consumer to
provide notice in accordance with subparagraph (B) to
the consumer (at the time the service is provided) of--
``(i) the fact that a fee is imposed by
such operator for providing the service; and
``(ii) the amount of any such fee.
``(B) Notice requirements.--
``(i) On the machine.--The notice required
under clause (i) of subparagraph (A) with
respect to any fee described in such
subparagraph shall be posted in a prominent and
conspicuous location on or at the automated
teller machine at which the electronic fund
transfer is initiated by the consumer; and
``(ii) On the screen.--The notice required
under clauses (i) and (ii) of subparagraph (A)
with respect to any fee described in such
subparagraph shall appear on the screen of the
automated teller machine, or on a paper notice
issued from such machine, after the transaction
is initiated and before the consumer is
irrevocably committed to completing the
transaction.
``(C) Prohibition on fees not properly disclosed
and explicitly assumed by consumer.--No fee may be
imposed by any automated teller machine operator in
connection with any electronic fund transfer initiated
by a consumer for which a notice is required under
subparagraph (A), unless--
``(i) the consumer receives such notice in
accordance with subparagraph (B); and
``(ii) the consumer elects to continue in
the manner necessary to effect the transaction
after receiving such notice.
``(D) Definitions.--For purposes of this paragraph,
the following definitions shall apply:
``(i) Electronic fund transfer.--The term
`electronic fund transfer' includes a
transaction which involves a balance inquiry
initiated by a consumer in the same manner as
an electronic fund transfer, whether or not the
consumer initiates a transfer of funds in the
course of the transaction.
``(ii) Automated teller machine operator.--
The term `automated teller machine operator'
means any person who--
``(I) operates an automated teller
machine at which consumers initiate
electronic fund transfers; and
``(II) is not the financial
institution which holds the account of
such consumer from which the transfer
is made.
``(iii) Host transfer services.--The term
`host transfer services' means any electronic
fund transfer made by an automated teller
machine operator in connection with a
transaction initiated by a consumer at an
automated teller machine operated by such
operator.''.
SEC. 173. DISCLOSURE OF POSSIBLE FEES TO CONSUMERS WHEN ATM CARD IS
ISSUED.
Section 905(a) of the Electronic Fund Transfer Act (15 U.S.C.
1693c(a)) is amended--
(1) by striking ``and'' at the end of paragraph (8);
(2) by striking the period at the end of paragraph (9) and
inserting ``; and''; and
(3) by inserting after paragraph (9) the following new
paragraph:
``(10) a notice to the consumer that a fee may be imposed
by--
``(A) an automated teller machine operator (as
defined in section 904(d)(3)(D)(ii)) if the consumer
initiates a transfer from an automated teller machine
which is not operated by the person issuing the card or
other means of access; and
``(B) any national, regional, or local network
utilized to effect the transaction.''.
SEC. 174. FEASIBILITY STUDY.
(a) In General.--The Comptroller General of the United States shall
conduct a study of the feasibility of requiring, in connection with any
electronic fund transfer initiated by a consumer through the use of an
automated teller machine--
(1) a notice to be provided to the consumer before the
consumer is irrevocably committed to completing the
transaction, which clearly states the amount of any fee which
will be imposed upon the consummation of the transaction by--
(A) any automated teller machine operator (as
defined in section 904(d)(3)(D)(ii) of the Electronic
Fund Transfer Act) involved in the transaction;
(B) the financial institution holding the account
of the consumer;
(C) any national, regional, or local network
utilized to effect the transaction; and
(D) any other party involved in the transfer; and
(2) the consumer to elect to consummate the transaction
after receiving the notice described in paragraph (1).
(b) Factors To Be Considered.--In conducting the study required
under subsection (a) with regard to the notice requirement described in
such subsection, the Comptroller General shall consider the following
factors:
(1) The availability of appropriate technology.
(2) Implementation and operating costs.
(3) The competitive impact any such notice requirement
would have on various sizes and types of institutions, if
implemented.
(4) The period of time which would be reasonable for
implementing any such notice requirement.
(5) The extent to which consumers would benefit from any
such notice requirement.
(6) Any other factor the Comptroller General determines to
be appropriate in analyzing the feasibility of imposing any
such notice requirement.
(c) Report to the Congress.--Before the end of the 6-month period
beginning on the date of the enactment of this Act, the Comptroller
General shall submit a report to the Congress containing--
(1) the findings and conclusions of the Comptroller General
in connection with the study required under subsection (a); and
(2) the recommendation of the Comptroller General with
regard to the question of whether a notice requirement
described in subsection (a) should be implemented and, if so,
how such requirement should be implemented.
SEC. 175. NO LIABILITY IF POSTED NOTICES ARE DAMAGED.
Section 910 of the Electronic Fund Transfer Act (15 U.S.C 1693h) is
amended by adding at the end the following new subsection:
``(d) Exception for Damaged Notices.--If the notice required to be
posted pursuant to section 904(d)(3)(B)(i) by an automated teller
machine operator has been posted by such operator in compliance with
such section and the notice is subsequently removed, damaged, or
altered by any person other than the operator of the automated teller
machine, the operator shall have no liability under this section for
failure to comply with section 904(d)(3)(B)(i).''.
Subtitle I--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 one or more
States, or any public agency or authority of any State or political
subdivision of a State, if the national bank is well capitalized (as
defined in section 38 of the Federal Deposit Insurance Act).''.
Subtitle J--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) Safety and soundness.--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) Concentration levels.--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) Merger issues.--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 same meaning as 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 same meanings as in section 7(l) of the Federal Deposit
Insurance Act.
SEC. 187. ELIMINATION OF SAIF AND DIF SPECIAL RESERVES.
(a) SAIF Special Reserves.--Section 11(a)(6) of the Federal Deposit
Insurance Act (12 U.S.C. 1821(a)(6)) is amended by striking
subparagraph (L).
(b) DIF Special Reserves.--Section 2704 of the Deposit Insurance
Funds Act of 1996 (12 U.S.C. 1821 note) is amended--
(1) by striking subsection (b); and
(2) in subsection (d)--
(A) by striking paragraph (4);
(B) in paragraph (6)(C)(i), by striking ``(6) and
(7)'' and inserting ``(5), (6), and (7)''; and
(C) in paragraph (6)(C), by striking clause (ii)
and inserting the following:
``(ii) by redesignating paragraph (8) as
paragraph (5).''.
Subtitle K--Miscellaneous Provisions
SEC. 191. TERMINATION OF ``KNOW YOUR CUSTOMER'' REGULATIONS.
(a) In General.--None of the proposed regulations described in
subsection (b) may be published in final form and, to the extent any
such regulation has become effective before the date of the enactment
of this Act, such regulation shall cease to be effective as of such
date.
(b) Proposed Regulations Described.--The proposed regulations
referred to in subsection (a) are as follows:
(1) The regulation proposed by the Comptroller of the
Currency to amend part 21 of title 12 of the Code of Federal
Regulations, as published in the Federal Register on December
7, 1998.
(2) The regulation proposed by the Director of the Office
of Thrift Supervision to amend part 563 of title 12 of the Code
of Federal Regulations, as published in the Federal Register on
December 7, 1998.
(3) The regulation proposed by the Board of Governors of
the Federal Reserve System to amend parts 208, 211, and 225 of
title 12 of the Code of Federal Regulations, as published in
the Federal Register on December 7, 1998.
(4) The regulation proposed by the Federal Deposit
Insurance Corporation to amend part 326 of title 12 of the Code
of Federal Regulations, as published in the Federal Register on
December 7, 1998.
SEC. 192. STUDY AND REPORT ON FEDERAL ELECTRONIC FUND TRANSFERS.
(a) Study.--The Secretary of the Treasury shall conduct a
feasibility study to determine--
(1) whether all electronic payments issued by Federal
agencies could be routed through the Regional Finance Centers
of the Department of the Treasury for verification and
reconciliation;
(2) whether all electronic payments made by the Federal
Government could be subjected to the same level of
reconciliation as United States Treasury checks, including
matching each payment issued with each corresponding deposit at
financial institutions;
(3) whether the appropriate computer security controls are
in place in order to ensure the integrity of electronic
payments;
(4) the estimated costs of implementing, if so recommended,
the processes and controls described in paragraphs (1), (2),
and (3); and
(5) a possible timetable for implementing those processes
if so recommended.
(b) Report to Congress.--Not later than October 1, 2000, the
Secretary of the Treasury shall submit a report to Congress containing
the results of the study required by subsection (a).
(c) Definition.--For purposes of this section, the term
``electronic payment'' means any transfer of funds, other than a
transaction originated by check, draft, or similar paper instrument,
which is initiated through an electronic terminal, telephonic
instrument, or computer or magnetic tapes so as to order, instruct, or
authorize a debit or credit to a financial account.
SEC. 193. GENERAL ACCOUNTING OFFICE STUDY OF CONFLICTS OF INTEREST
(a) Study Required.--The Comptroller General of the United States
shall conduct a study analyzing the conflict of interest faced by the
Board of Governors of the Federal Reserve System between its role as a
primary regulator of the banking industry and its role as a vendor of
services to the banking and financial services industry.
(b) Specific Conflict Required to Be Addressed.--In the course of
the study required under subsection (a), the Comptroller General shall
address the conflict of interest faced by the Board of Governors of the
Federal Reserve System between the role of the Board as a regulator of
the payment system, generally, and its participation in the payment
system as a competitor with private entities who are providing payment
services.
(c) Report to Congress.--Before the end of the 1-year period
beginning on the date of the enactment of this Act, the Comptroller
General shall submit a report to the Congress containing the findings
and conclusions of the Comptroller General in connection with the study
required under this section, together with such recommendations for
such legislative or administrative actions as the Comptroller General
may determine to be appropriate, including recommendations for
resolving any such conflict of interest.
SEC. 194. STUDY OF COST OF ALL FEDERAL BANKING REGULATIONS.
(a) In General.--In accordance with the finding in the Board of
Governors of the Federal Reserve System Staff Study Numbered 171
(April, 1998) that ``Further research covering more and different types
of regulations and regulatory requirements is clearly needed to make
informed decisions about regulations'', the Board of Governors of the
Federal Reserve System, in consultation with the other Federal banking
agencies (as defined in section 3 of the Federal Deposit Insurance Act)
shall conduct a comprehensive study of the total annual costs and
benefits of all Federal financial regulations and regulatory
requirements applicable to banks.
(b) Report Required.--Before the end of the 2-year period beginning
on the date of the enactment of this Act, the Board of Governors of the
Federal Reserve System shall submit a comprehensive report to the
Congress containing the findings and conclusions of the Board in
connection with the study required under subsection (a) and such
recommendations for legislative and administrative action as the Board
may determine to be appropriate.
SEC. 195. STUDY AND REPORT ON ADAPTING EXISTING LEGISLATIVE
REQUIREMENTS TO ONLINE BANKING AND LENDING.
(a) Study Required.--The Federal banking agencies shall conduct a
study of banking regulations regarding the delivery of financial
services, including those regulations that may assume that there will
be person-to-person contact during the course of a financial services
transaction, and report their recommendations on adapting those
existing requirements to online banking and lending.
(b) Report Required.--Within 1 year of the date of the enactment of
this Act, the Federal banking agencies shall submit a report to the
Congress on the findings and conclusions of the agencies with respect
to the study required under subsection (a), together with such
recommendations for legislative or regulatory action as the agencies
may determine to be appropriate.
(c) Definition.--For purposes of this section, the term ``Federal
banking agencies'' means each Federal banking agency (as defined in
section 3(z) of the Federal Deposit Insurance Act).
SEC. 196. REGULATION OF UNINSURED STATE MEMBER BANKS.
Section 9 of the Federal Reserve Act (12 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. 197. CLARIFICATION OF SOURCE OF STRENGTH DOCTRINE.
Section 18 of the Federal Deposit Insurance Act (21 U.S.C. 1828) is
amended by adding at the end the following new subsection:
``(t) Limitation on Claims.--
``(1) In general.--Notwithstanding any other provision of
law other than paragraph (2), no person shall have any claim
for monetary damages or return of assets or other property
against any Federal banking agency (including in its capacity
as conservator or receiver) relating to the transfer of money,
assets, or other property to increase the capital of an insured
depository institution by any depository institution holding
company or controlling shareholder for such depository
institution, or any affiliate or subsidiary of such depository
institution, if at the time of the transfer--
``(A) the insured depository institution is subject
to any direction issued in writing by a Federal banking
agency to increase its capital;
``(B) the depository institution is
undercapitalized, significantly undercapitalized, or
critically undercapitalized (as defined in section 38
of this Act); and
``(C) for that portion of the transfer that is made
by an entity covered by section 5(g) of the Bank
Holding Company Act of 1956 or section 45 of this Act,
the Federal banking agency has followed the procedure
set forth in such section.
``(2) Exception.--No provision of this subsection shall be
construed as limiting--
``(A) the right of an insured depository
institution, a depository institution holding company,
or any other agency or person to seek direct review of
an order or directive issued by a Federal banking
agency under this Act, the Bank Holding Company Act of
1956, the National Bank Receivership Act, the Bank
Conservation Act, or the Home Owners' Loan Act;
``(B) the rights of any party to a contract
pursuant to section 11(e) of this Act; or
``(C) the rights of any party to a contract with a
depository institution holding company or a subsidiary
of a depository institution holding company (other than
an insured depository institution).''.
SEC. 198. INTEREST RATES AND OTHER CHARGES AT INTERSTATE BRANCHES.
Section 44 of the Federal Deposit Insurance Act (12 U.S.C. 1831u)
is amended--
(1) by redesignating subsection (f) as subsection (g); and
(2) by inserting after subsection (e) the following:
``(f) Applicable Rate and Other Charge Limitations.--
``(1) In general.--Except as provided for in paragraph (3),
upon the establishment of a branch of any insured depository
institution in a host State under this section, the maximum
interest rate or amount of interest, discount points, finance
charges, or other similar charges that may be charged, taken,
received, or reserved from time to time in any loan or discount
made or upon any note, bill of exchange, financing transaction,
or other evidence of debt by any insured depository institution
in such State shall be equal to not more than the greater of--
``(A) the maximum interest rate or amount of
interest, discount points, finance charges, or other
similar charges that may be charged, taken, received,
or reserved in a similar transaction under the
constitution, statutory, or other lows of the home
State of the insured depository institution
establishing any such branch, without reference to this
section, as such maximum interest rate or amount of
interest may change from time to time; or
``(B) the maximum rate or amount of interest,
discount points, finance charges, or other similar
charges that may be charged, taken, received, or
reserved in a similar transaction by an insured
depository institution under the constitution,
statutory, or other laws of the host State, without
reference to this section.
``(2) Preemption.--The limitations established under
paragraph (1) shall apply only in any State that has a
constitutional provision that sets a maximum lawful rate of
interest on any contract at not more than 5 percent per annum
above the Federal Reserve Discount Rate or 90-day commercial
paper in effect in the Federal Reserve Bank in the Federal
Reserve District in which the State is located.
``(3) Rule of construction.--No provision of this
subsection shall be construed as superseding section 501 of the
Depository Institutions Deregulation and Monetary Control Act
of 1980.
SEC. 198A. INTERSTATE BRANCHES AND AGENCIES OF FOREIGN BANKS.
Section 5(a)(7) of the International Banking Act of 1978 (12 U.S.C.
3103(a)(7)), is amended to read as follows:
``(7) Additional authority for interstate branches and
agencies of foreign banks, upgrades of certain foreign bank
agencies and branches.--Notwithstanding paragraphs (1) and (2),
a foreign bank may--
``(A) with the approval of the Board and the
Comptroller of the Currency, establish and operate a
Federal branch or Federal agency or, with the approval
of the Board and the appropriate State bank supervisor,
a State branch or State agency in any State outside the
foreign bank's home State if--
``(i) the establishment and operation of
such branch or agency is permitted by the State
in which the branch or agency is to be
established; and
``(ii) in the case of a Federal or State
branch, the branch receives only such deposits
as would be permitted for a corporation
organized under section 25A of the Federal
Reserve Act (12 U.S.C. 611 et seq.); or
``(B) with the approval of the Board and the
relevant licensing authority (the Comptroller in the
case of a Federal branch or the appropriate State
supervisor in the case of a State branch), upgrade an
agency, or a branch of the type referred to in
subparagraph (A)(ii), located in a State outside the
foreign bank's home State, into a Federal or State
branch if--
``(i) the establishment and operation of
such branch is permitted by such State; and
``(ii) such agency or branch--
``(I) was in operation in such
State on the day before September 29,
1994; or
``(II) has been in operation in
such State for a period of time that
meets the State's minimum age
requirement permitted under section
44(a)(5) of the Federal Deposit
Insurance Act.''.
SEC. 198B. FAIR TREATMENT OF WOMEN BY FINANCIAL ADVISERS.
(a) Findings.--The Congress finds as follows:
(1) Women's stature in society has risen considerably, as
they are now able to vote, own property, and pursue independent
careers, and are granted equal protection under the law.
(2) Women are at least as fiscally responsible as men, and
more than half of all women have sole responsibility for
balancing the family checkbook and paying the bills.
(3) Estate planners, trust officers, investment advisers,
and other financial planners and advisers still encourage the
unjust and outdated practice of leaving assets in trust for the
category of wives and daughters, along with senile parents,
minors, and mentally incompetent children.
(4) Estate planners, trust officers, investment advisers,
and other financial planners and advisers still use sales
themes and tactics detrimental to women by stereotyping women
as uncomfortable handling money and needing protection from
their own possible errors of judgment and ``fortune hunters''.
(b) Sense of the Congress.--It is the sense of the Congress that
estate planners, trust officers, investment advisers, and other
financial planners and advisers should--
(1) eliminate examples in their training materials which
portray women as incapable and foolish; and
(2) develop fairer and more balanced presentations that
eliminate outmoded and stereotypical examples which lead
clients to take actions that are financially detrimental to
their wives and daughters.
Subtitle L--Effective Date of Title
SEC. 199. 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 180-
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 one or more of the following
activities under the conditions described:
``(i) Third party brokerage arrangements.--
The bank enters into a contractual or other
written 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 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 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
types of investment vehicles available
from the bank and the broker or dealer
under the arrangement;
``(VI) bank employees do not
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 as permitted under clause (ii)
or (viii) of this subparagraph; 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 or fiduciary capacity
in its trust department, or another department
where the trust or fiduciary activity is
regularly examined by bank examiners under the
same standards and in the same way as such
activities are examined in the trust
department, and--
``(I) is chiefly compensated for
such transactions, consistent with
fiduciary principles and standards, 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 equal to not more than
the cost incurred by the bank in
connection with executing securities
transactions for trustee and fiduciary
customers, or any combination of such
fees; and
``(II) does not 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 a
registered transfer agent (including as
a registrar of stocks), 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
affiliates (as defined in section 2 of
the Bank Holding Company Act of 1956),
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 chiefly of
administration fees, or flat or
capped per order processing
fees, or both.
``(II) Dividend reinvestment
plans.--The bank effects transactions,
as a registered transfer agent
(including as a registrar of stocks),
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 chiefly of
administration fees, or flat or
capped per order processing
fees, or both.
``(III) Issuer plans.--The bank
effects transactions, as a registered
transfer agent (including as a
registrar of stocks), in the securities
of an issuer as part of that issuer's
plan 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 chiefly of
administration fees, or flat or
capped per order processing
fees, or both.
``(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 1999;
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 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 (as defined in section 2 of the Bank
Holding Company Act of 1956) of the bank 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 the date
that is 1 year after the date of the
enactment of the Financial Services Act
of 1999, is not affiliated with a
broker or dealer that has been
registered for more than 1 year in
accordance with this Act, and engages
in dealing, market making, or
underwriting activities, other than
with respect to exempted securities;
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, if the bank
maintains records separately
identifying the securities and
the customer.
``(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) of this title
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) Excepted banking products.--The bank
effects transactions in excepted banking
products, as defined in section 206 of the
Financial Services Act of 1999.
``(x) Municipal securities.--The bank
effects transactions in municipal securities.
``(xi) De minimis exception.--The bank
effects, other than in transactions referred to
in clauses (i) through (x), 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 broker or 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) 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
1999, subject to section 15(e) of this title;
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
other separate entity, of securities backed by
or representing an interest in notes, drafts,
acceptances, loans, leases, receivables, other
obligations (other than securities of which the
bank is not the issuer), or pools of any such
obligations predominantly originated by--
``(I) the bank;
``(II) an affiliate of any such
bank other than a broker or dealer; or
``(III) a syndicate of banks of
which the bank is a member, if the
obligations or pool of obligations
consists of mortgage obligations or
consumer-related receivables.
``(iv) Excepted banking products.--The bank
buys or sells excepted banking products, as
defined in section 206 of the Financial
Services Act of 1999.
``(v) Derivative instruments.--The bank
issues, buys, or sells any derivative
instrument to which the bank is a party--
``(I) 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 the
enactment of this Act, engaged in effecting such sales.''.
SEC. 204. 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. 205. TREATMENT OF NEW HYBRID PRODUCTS.
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 Hybrid 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 hybrid
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 hybrid product unless the Commission
determines that--
``(A) the new hybrid 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) Considerations.--In making a determination under
paragraph (2), the Commission shall consider--
``(A) the nature of the new hybrid product; and
``(B) the history, purpose, extent, and
appropriateness of the regulation of the new hybrid
product under the Federal securities laws and under the
Federal banking laws.
``(4) Consultation.--In promulgating rules under this
subsection, the Commission shall consult with and consider the
views of the Board of Governors of the Federal Reserve System
regarding the nature of the new hybrid product, the history,
purpose, extent, and appropriateness of the regulation of the
new product under the Federal banking laws, and the impact of
the proposed rule on the banking industry.
``(5) New hybrid product.--For purposes of this subsection,
the term `new hybrid product' means a product that--
``(A) was not subjected to regulation by the
Commission as a security prior to the date of the
enactment of this subsection; and
``(B) is not an excepted banking product, as such
term is defined in section 206 of the Financial
Services Act of 1999.''.
SEC. 206. DEFINITION OF EXCEPTED BANKING PRODUCT.
(a) Definition of Excepted Banking Product.--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 ``excepted banking
product'' means--
(1) a deposit account, savings account, certificate of
deposit, or other deposit instrument issued by a bank;
(2) a banker's acceptance;
(3) a letter of credit issued or loan made by a bank;
(4) a debit account at a bank arising from a credit card or
similar arrangement;
(5) 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--
(A) to qualified investors; or
(B) 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
(6) a derivative instrument that involves or relates to--
(A) currencies, except options on currencies that
trade on a national securities exchange;
(B) interest rates, except interest rate derivative
instruments that--
(i) 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) provide for the delivery of one or
more securities (other than government
securities); or
(iii) trade on a national securities
exchange; or
(C) commodities, other rates, indices, or other
assets, except derivative instruments that--
(i) 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) provide for the delivery of one or
more securities (other than government
securities); or
(iii) trade on a national securities
exchange.
(b) Classification Limited.--Classification of a particular product
as an excepted banking product pursuant to this section 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.
(c) Incorporated Definitions.--For purposes of this section--
(1) the terms ``bank'', ``qualified investor'', and
``securities laws'' have the same meanings given in section
3(a) of the Securities Exchange Act of 1934, as amended by this
Act; and
(2) the term ``government securities'' has the meaning
given in section 3(a)(42) of such Act (as amended by this Act),
and, for purposes of this section, commercial paper, bankers
acceptances, and commercial bills shall be treated in the same
manner as government securities.
SEC. 207. ADDITIONAL DEFINITIONS.
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 an excepted banking
product, as defined in paragraphs (1) through (5) of
section 206(a) of the Financial Services Act of 1999.
``(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, 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 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);
``(x) the government of any foreign
country;
``(xi) any corporation, company, or
partnership that owns and invests on a
discretionary basis, not less than $10,000,000
in investments;
``(xii) any natural person who owns and
invests on a discretionary basis, not less than
$10,000,000 in investments;
``(xiii) 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
``(xiv) any multinational or supranational
entity or any agency or instrumentality
thereof.
``(B) Additional authority.--The Commission may, by
rule or order, define a `qualified investor' as any
other person, taking into consideration such factors as
the financial sophistication of the person, 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 sections 15, 15C, and 17A as
applied to a bank, a qualified Canadian government
obligation as defined in section 5136 of the Revised
Statutes of the United States.''.
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 the
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
same meanings given 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 given in
section 3 of 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 given 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)(A) of the Investment
Advisers Act of 1940 (15 U.S.C. 80b-2(a)(11)(A)) is amended 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 given in
section 3 of 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 given in
section 3 of 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, 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 other provision of law.
``(c) Definition.--For purposes of this section, the term
`appropriate Federal banking agency' shall have the same meaning given
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. STATUTORY DISQUALIFICATION FOR BANK WRONGDOING.
Section 9(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-
9(a)) is amended in paragraphs (1) and (2) by striking ``securities
dealer, transfer agent,'' and inserting ``securities dealer, bank,
transfer agent,''.
SEC. 224. 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. 225. 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. 226. CHURCH PLAN EXCLUSION.
Section 3(c)(14) of the Investment Company Act of 1940 (15 U.S.C.
80a-3(c)(14)) is amended--
(1) by redesignating clauses (i) and (ii) of subparagraph
(B) as subclauses (I) and (II), respectively;
(2) by redesignating subparagraphs (A) and (B) as clauses
(i) and (ii), respectively;
(3) by inserting ``(A)'' after ``(14)''; and
(4) by adding at the end the following new subparagraph:
``(B) If a registered investment company would be excluded
from the definition of investment company under this subsection
but for the fact that some of the company's assets do not
satisfy the condition of subparagraph (A)(ii) of this
paragraph, then any investment adviser to the company or
affiliated person of such investment adviser shall not be
subject to the requirements of section 15(g)(1)(B) with respect
to shares of the investment company.''.
SEC. 227. 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 (k); and
(2) by inserting after subsection (h) the following new
subsection:
``(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 the date of 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 1 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:
``(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', `savings association',
and `wholesale financial institution' have the same
meanings given in section 2 of the Bank Holding Company
Act of 1956 (12 U.S.C. 1841).
``(D) The term `insured bank' has the same meaning
given in section 3 of the Federal Deposit Insurance
Act.
``(E) The term `foreign bank' has the same meaning
given 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' mean any person
directly or indirectly controlling, controlled by, or
under common control with, an investment bank holding
company.''.
``(j) 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 subparagraph:
``(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--Disclosure of Customer Costs of Acquiring Financial
Products
SEC. 241. IMPROVED AND CONSISTENT DISCLOSURE.
(a) Revised Regulations Required.--Within 1 year after the date of
the 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, 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.
Subtitle E--Banks and Bank Holding Companies
SEC. 251. CONSULTATION.
(a) In General.--The Securities and Exchange Commission shall
consult and coordinate comments with the appropriate Federal banking
agency before taking any action or rendering any opinion with respect
to the manner in which any insured depository institution or depository
institution holding company reports loan loss reserves in its financial
statement, including the amount of any such loan loss reserve.
(b) Definitions.--For purposes of subsection (a), the terms
``insured depository institution'', ``depository institution holding
company'', and ``appropriate Federal banking agency'' have the same
meaning as in section 3 of the Federal Deposit Insurance Act.
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 shall engage in the business of insurance in a State as
principal or agent unless such person is licensed as required by the
appropriate insurance regulator of such State in accordance with the
relevant State insurance law, subject to section 104.
SEC. 303. FUNCTIONAL REGULATION OF INSURANCE.
The insurance activities of any person (including a national bank
exercising its power to act as agent under the eleventh undesignated
paragraph of section 13 of the Federal Reserve Act) shall be
functionally regulated by the States, subject to section 104.
SEC. 304. INSURANCE UNDERWRITING IN NATIONAL BANKS.
(a) In General.--Except as provided in section 305, 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, 1999, 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,
1999, 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, 1999,
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;
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, if the bank were subject to
tax as an insurance company under
section 831 of that 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.
SEC. 305. TITLE INSURANCE ACTIVITIES OF NATIONAL BANKS AND THEIR
AFFILIATES.
(a) General Prohibition.--No national bank, and no subsidiary of a
national bank, may engage in any activity involving the underwriting or
sale of title insurance.
(b) Nondiscrimination Parity Exception.--
(1) In general.--Notwithstanding any other provision of law
(including section 104 of this Act), in the case of any State
in which banks organized under the laws of such State are
authorized to sell title insurance as agency, a national bank
and a subsidiary of a national bank may sell title insurance as
agent in such State, but only in the same manner, to the same
extent, and under the same restrictions as such State banks are
authorized to sell title insurance as agent in such State.
(2) Coordination with ``wildcard'' provision.--A State law
which authorizes State banks to engage in any activities in
such State in which a national bank may engage shall not be
treated as a statute which authorizes State banks to sell title
insurance as agent, for purposes of paragraph (1).
(c) Grandfathering With Consistent Regulation.--
(1) In general.--Except as provided in paragraphs (2) and
(3) and notwithstanding subsections (a) and (b), a national
bank, and a subsidiary of a national bank, may conduct title
insurance activities which such national bank or subsidiary was
actively and lawfully conducting 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 the
underwriting 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 other than a subsidiary which provides
insurance as principal, the national bank may not directly
engage in any activity involving the underwriting of title
insurance.
(d) ``Affiliate'' and ``Subsidiary'' Defined.--For purposes of this
section, the terms ``affiliate'' and ``subsidiary'' have the same
meanings as in section 2 of the Bank Holding Company Act of 1956.
(e) Rule of Construction.--No provision of this Act or any other
Federal law shall be construed as superseding or affecting a State law
which was in effect before the date of the enactment of this Act and
which prohibits title insurance from being offered, provided, or sold
in such State, or from being underwritten with respect to real property
in such State, by any person whatsoever.
SEC. 306. EXPEDITED AND EQUALIZED DISPUTE RESOLUTION FOR FEDERAL
REGULATORS.
(a) Filing in Court of Appeals.--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 subsection (a) shall
complete all action on such petition, including rendering a judgment,
before the end of the 60-day period beginning on the date on which such
petition is filed, unless all parties to such proceeding agree to any
extension of such period.
(c) Supreme Court Review.--Any request for certiorari 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 Supreme Court of the United States as
soon as practicable after such judgment is issued.
(d) Statute of Limitation.--No petition may be filed under this
section challenging an order, ruling, determination, or other action of
a Federal regulator or State insurance regulator after the later of--
(1) the end of the 12-month period beginning on the date on
which the first public notice is made of such order, ruling,
determination or other action in its final form; or
(2) the end of the 6-month period beginning on the date on
which such order, ruling, determination, or other action takes
effect.
(e) Standard of Review.--The court shall decide a petition 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. 307. CONSUMER PROTECTION REGULATIONS.
The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is
amended by inserting after section 46 (as added by section 122(b) of
this Act) the following new section:
``SEC. 47. 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 the
Financial Services Act of 1999, 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
``(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 (iii), 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.
``(iii) 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'.
``(iv) `NOT INSURED BY ANY GOVERNMENT
AGENCY'.
``(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;
``(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; or
``(C) in the case of an institution or subsidiary
at which insurance products are sold or offered for
sale, the fact that--
``(i) the approval of an extension of
credit to a customer by the institution or
subsidiary may not be conditioned on the
purchase of an insurance product by such
customer from the institution or subsidiary;
and
``(ii) the customer is free to purchase the
insurance product from another source.''.
``(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 is kept, to the extent
practicable, physically segregated from insurance product
activity.
``(2) Requirements.--Regulations prescribed pursuant to
paragraph (1) shall include the following:
``(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 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 wholesale financial
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 one 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. 308. CERTAIN STATE AFFILIATION LAWS PREEMPTED FOR INSURANCE
COMPANIES AND AFFILIATES.
Except as provided in section 104(a)(2), 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.
SEC. 309. INTERAGENCY CONSULTATION.
(a) Purpose.--It is the intention of the 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'' 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'' have
the same meanings as in section 2 of the Bank Holding Company
Act of 1956.
SEC. 310. DEFINITION OF STATE.
For purposes of this subtitle, the term ``State'' means any State
of the United States, the District of Columbia, any territory of the
United States, Puerto Rico, Guam, American Samoa, the Trust Territory
of the Pacific Islands, the Virgin Islands, and the Northern Mariana
Islands.
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 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 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, not later than 3 years after 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 that such producer is permitted
to sell or solicit the purchase of insurance in its State, if
the producer's home State also awards such licenses on such a
reciprocal basis, 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.
(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 2 years after the date on
which such uniformity or reciprocity ceases to exist, 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.
(g) Uniform Licensing.--Nothing in this section shall be construed
to require any State to adopt new or additional licensing requirements
to achieve the uniformity necessary to satisfy subsection (a)(1).
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 agent or instrumentality 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'').
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 period
preceding the date on which 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 seven members
appointed by the NAIC.
(2) Requirement.--At least four 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 seven
members of the Board of the Association, the initial
Board shall consist of the seven State insurance
regulators of the seven 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 seven 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 one-third
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 NAIC 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) thirty 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) upon 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 subsection.
(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.--Not later than 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 not later than 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 on which 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 shall 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
clause (ii) of this subparagraph, 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 a
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, or not renewed (hereafter in this section referred to
as a ``disciplinary action''), the Association shall bring
specific charges, notify such member of such charges, 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.--
(1) In general.--In any proceeding to review such action,
after notice and the opportunity for hearing, the NAIC shall--
(A) determine whether the action should be taken;
(B) affirm, modify, or rescind the disciplinary
sanction; or
(C) remand to the Association for further
proceedings.
(2) Dismissal of review.--The NAIC may dismiss a proceeding
to review disciplinary action if the NAIC finds that--
(A) the specific grounds on which the action is
based exist in fact;
(B) the action is in accordance with applicable
rules and regulations; and
(C) such rules and regulations are, and were,
applied in a manner consistent with the purposes of
this subtitle.
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 that the NAIC 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) Examinations.--The NAIC may make such examinations and
inspections of the Association and require the Association to
furnish to the NAIC 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) Report by association.--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 beginning on 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), (b), and (c) of
section 321; and
(2) the NAIC has not approved the Association's bylaws as
required by section 328 or 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, the following shall apply:
(1) General appointment power.--The President, with the
advice and consent of the 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 subsection
(a) take effect, the NAIC shall, not later than 60 days
thereafter, provide a list of recommended candidates to
the President. If the NAIC 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 Senate, make
the requisite appointments without considering the
views of the NAIC.
(B) Subsequent appointments.--After the initial
appointments, the NAIC shall provide a list of at least
six recommended candidates for the Board to the
President by January 15 of each subsequent year. If the
NAIC fails to provide a list by that date, or if any
list that is provided does not include at least six
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.
(c) Annual Report.--As soon as practicable after the close of each
fiscal year, the Association shall submit to the President and to the
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 other actions purporting to regulate insurance producers shall be
preempted as provided in subsection (b).
(b) Prohibited Actions.--No State shall--
(1) 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) 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) 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 from 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; or
(4) 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.
(c) Savings Provision.--Except as provided in subsections (a) and
(b), no provision of this section shall be construed as altering or
affecting the continuing effectiveness of any law, regulation,
provision, or other 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.
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 shall be required
to 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) 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.
(2) Insurance.--The term ``insurance'' means any product,
other than title insurance, defined or regulated as insurance
by the appropriate State insurance regulatory authority.
(3) 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.
(4) State.--The term ``State'' includes any State, the
District of Columbia, American Samoa, Guam, Puerto Rico, and
the United States Virgin Islands.
(5) 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.
Subtitle D--Rental Car Agency Insurance Activities
SEC. 341. STANDARD OF REGULATION FOR MOTOR VEHICLE RENTALS.
(a) Protection Against Retroactive Application of Regulatory and
Legal Action.--Except as provided in subsection (b), during the 3-year
period beginning on the date of the enactment of this Act, it shall be
a presumption that no State law imposes any licensing, appointment, or
education requirements on any person who solicits the purchase of or
sells insurance connected with, and incidental to, the lease or rental
of a motor vehicle.
(b) Preeminence of State Insurance Law.--No provision of this
section shall be construed as altering the validity, interpretation,
construction, or effect of--
(1) any State statute;
(2) the prospective application of any court judgment
interpreting or applying any State statute; or
(3) the prospective application of any final State
regulation, order, bulletin, or other statutorily authorized
interpretation or action,
which, by its specific terms, expressly regulates or exempts from
regulation any person who solicits the purchase of or sells insurance
connected with, and incidental to, the short-term lease or rental of a
motor vehicle.
(c) Scope of Application.--This section shall apply with respect
to--
(1) the lease or rental of a motor vehicle for a total
period of 90 consecutive days or less; and
(2) insurance which is provided in connection with, and
incidentally to, such lease or rental for a period of
consecutive days not exceeding the lease or rental period.
(d) Motor Vehicle Defined.--For purposes of this section, the term
``motor vehicle'' has the meaning given to such term in section 13102
of title 49, United States Code.
Subtitle E--Confidentiality
SEC. 351. CONFIDENTIALITY OF HEALTH AND MEDICAL INFORMATION.
(a) In General.--A company which underwrites or sells annuities
contracts or contracts insuring, guaranteeing, or indemnifying against
loss, harm, damage, illness, disability, or death (other than credit-
related insurance) and any subsidiary or affiliate thereof shall
maintain a practice of protecting the confidentiality of individually
identifiable customer health and medical and genetic information and
may disclose such information only--
(1) with the consent, or at the direction, of the customer;
(2) for insurance underwriting and reinsuring policies,
account administration, reporting, investigating, or preventing
fraud or material misrepresentation, processing premium
payments, processing insurance claims, administering insurance
benefits (including utilization review activities), providing
information to the customer's physician or other health care
provider, participating in research projects, enabling the
purchase, transfer, merger, or sale of any insurance-related
business, or as otherwise required or specifically permitted by
Federal or State law; or
(3) in connection with--
(A) the authorization, settlement, billing,
processing, clearing, transferring, reconciling, or
collection of amounts charged, debited, or otherwise
paid using a debit, credit, or other payment card or
account number, or by other payment means;
(B) the transfer of receivables, accounts, or
interest therein;
(C) the audit of the debit, credit, or other
payment information;
(D) compliance with Federal, State, or local law;
(E) compliance with a properly authorized civil,
criminal, or regulatory investigation by Federal,
State, or local authorities as governed by the
requirements of this section; or
(F) fraud protection, risk control, resolving
customer disputes or inquiries, communicating with the
person to whom the information relates, or reporting to
consumer reporting agencies.
(b) State Actions for Violations.--In addition to such other
remedies as are provided under State law, if the chief law enforcement
officer of a State, State insurance regulator, or an official or agency
designated by a State, has reason to believe that any person has
violated or is violating this title, the State may bring an action to
enjoin such violation in any appropriate United States district court
or in any other court of competent jurisdiction.
(c) Effective Date; Sunset.--
(1) Effective date.--Except as provided in paragraph (2),
subsection (a) shall take effect on February 1, 2000.
(2) Sunset.--Subsection (a) shall not take effect if, or
shall cease to be effective on and after the date on which,
legislation is enacted that satisfies the requirements in
section 264(c)(1) of the Health Insurance Portability and
Accountability Act of 1996 (Public Law 104-191; 110 Stat.
2033).
(d) Consultation.--While subsection (a) is in effect, State
insurance regulatory authorities, through the National Association of
Insurance Commissioners, shall consult with the Secretary of Health and
Human Services in connection with the administration of such
subsection.
TITLE IV--UNITARY SAVINGS AND LOAN HOLDING COMPANIES
SEC. 401. PROHIBITION ON NEW UNITARY SAVINGS AND LOAN 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
holding company.--
``(A) In general.--Subject to subparagraph (B) and
notwithstanding paragraph (3), no company may directly
or indirectly, including through any merger,
consolidation, or other type of business combination,
acquire control of a savings association after March 4,
1999, unless the company is engaged, directly or
indirectly (including through a subsidiary other than a
savings association), only in activities that are
permitted--
``(i) under paragraph (1)(C) or (2); or
``(ii) for financial holding companies
under section 6(c) of the Bank Holding Company
Act of 1956.
``(B) Existing unitary 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 one or more savings
associations described in paragraph (3)
pursuant to applications at least one
of which was filed on or before March
4, 1999; or
``(II) subject to subparagraph (C),
became a savings and loan holding
company by acquiring control of the
company described in subclause (I); and
``(ii) continues to control the savings
association referred to in clause (i)(II) or
the successor to any such savings association.
``(C) Notice process for nonfinancial activities by
a successor unitary holding company.--
``(i) Notice required.--Subparagraph (B)
shall not apply to any company described in
subparagraph (B)(i)(II) which engages, directly
or indirectly, in any activity other than
activities described in clauses (i) and (ii) of
subparagraph (A), unless--
``(I) in addition to an application
to the Director under this section to
become a savings and loan holding
company, the company submits a notice
to the Board of Governors of the
Federal Reserve System of such
nonfinancial activities in the same
manner as a notice of nonbanking
activities is filed with the Board
under section 4(j) of the Bank Holding
Company Act of 1956; and
``(II) before the end of the
applicable period under such section
4(j), the Board either approves or does
not disapprove of the continuation of
such activities by such company,
directly or indirectly, after becoming
a savings and loan holding company.
``(ii) Procedure.--Section 4(j) of the Bank
Holding Company Act of 1956, including the
standards for review, shall apply to any notice
filed with the Board under this subparagraph in
the same manner as it applies to notices filed
under such section.''.
(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''.
(c) Conforming Amendment.--Section 10(o)(5) of the Home Owners'
Loan Act (12 U.S.C. 1467a(o)(5)) is amended--
(1) in subparagraph (E), by striking ``, except
subparagraph (B)''; and
(2) by adding at the end the following new subparagraph:
``(F) In the case of a mutual holding company which
is a savings and loan holding company described in
subsection (c)(3), engaging in the activities permitted
for financial holding companies under section 6(c) of
the Bank Holding Company Act of 1956.''.
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'', 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 1999 may
retain the term `Federal' in the name of such institution if
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 as in section 3 of the Federal Deposit Insurance
Act.''.
TITLE V--PRIVACY
Subtitle A--Disclosure of Nonpublic Personal Information
SEC. 501. PROTECTION OF NONPUBLIC PERSONAL INFORMATION.
(a) Privacy Obligation Policy.--It is the policy of the Congress
that each financial institution has an affirmative and continuing
obligation to respect the privacy of its customers and to protect the
security and confidentiality of those customers' nonpublic personal
information.
(b) Financial Institutions Safeguards.--In furtherance of the
policy in subsection (a), each agency or authority described in section
505(a) shall establish appropriate standards for the financial
institutions subject to their jurisdiction relating to administrative,
technical, and physical safeguards--
(1) to insure the security and confidentiality of customer
records and information;
(2) to protect against any anticipated threats or hazards
to the security or integrity of such records; and
(3) to protect against unauthorized access to or use of
such records or information which could result in substantial
harm or inconvenience to any customer.
SEC. 502. OBLIGATIONS WITH RESPECT TO DISCLOSURES OF PERSONAL
INFORMATION.
(a) Notice Requirements.--Except as otherwise provided in this
subtitle, a financial institution may not, directly or through any
affiliate, disclose to a nonaffiliated third party any nonpublic
personal information, unless such financial institution provides or has
provided to the consumer a notice that complies with section 503(b).
(b) Opt Out.--
(1) In general.--A financial institution may not disclose
nonpublic personal information to nonaffiliated third parties
unless--
(A) such financial institution clearly and
conspicuously discloses to the consumer, in writing or
in electronic form (or other form permitted by the
regulations prescribed under section 504), that such
information may be disclosed to such third parties;
(B) the consumer is given the opportunity, before
the time that such information is initially disclosed,
to direct that such information not be disclosed to
such third parties; and
(C) the consumer is given an explanation of how the
consumer can exercise that nondisclosure option.
(2) Exception.--This subsection shall not prevent a
financial institution from providing nonpublic personal
information to a nonaffiliated third party to perform services
or functions on behalf of the financial institution, including
marketing of the financial institution's own products or
services or financial products or services offered pursuant to
joint agreements between two or more financial institutions
that comply with the requirements imposed by the regulations
prescribed under section 504, if the financial institution
fully discloses the providing of such information and enters
into a contractual agreement with the third party that requires
the third party to maintain the confidentiality of such
information.
(c) Limits on Reuse of Information.--Except as otherwise provided
in this subtitle, a nonaffiliated third party that receives from a
financial institution nonpublic personal information under this section
shall not, directly or through an affiliate of such receiving third
party, disclose such information to any other person that is a
nonaffiliated third party of both the financial institution and such
receiving third party, unless such disclosure would be lawful if made
directly to such other person by the financial institution.
(d) Limitations on the Sharing of Account Number Information for
Marketing Purposes.--A financial institution shall not disclose an
account number or similar form of access number or access code for a
credit card account, deposit account, or transaction account of a
consumer to any nonaffiliated third party for use in telemarketing,
direct mail marketing, or other marketing through electronic mail to
the consumer.
(e) General Exceptions.--Subsections (a) and (b) shall not prohibit
the disclosure of nonpublic personal information--
(1) as necessary to effect, administer, or enforce a
transaction requested or authorized by the consumer, or in
connection with--
(A) servicing or processing a financial product or
service requested or authorized by the consumer;
(B) maintaining or servicing the consumer's account
with the financial institution; or
(C) a proposed or actual securitization, secondary
market sale (including sales of servicing rights), or
similar transaction related to a transaction of the
consumer;
(2) with the consent or at the direction of the consumer;
(3) to protect the confidentiality or security of its
records pertaining to the consumer, the service or product, or
the transaction therein, or to protect against or prevent
actual or potential fraud, unauthorized transactions, claims,
or other liability, for required institutional risk control, or
for resolving customer disputes or inquiries, or to persons
holding a beneficial interest relating to the consumer, or to
persons acting in a fiduciary capacity on behalf of the
consumer;
(4) to provide information to insurance rate advisory
organizations, guaranty funds or agencies, applicable rating
agencies of the financial institution, persons assessing the
institution's compliance with industry standards, and the
institution's attorneys, accountants, and auditors;
(5) to the extent specifically permitted or required under
other provisions of law and in accordance with the Right to
Financial Privacy Act of 1978, to law enforcement agencies
(including a Federal functional regulator, a State insurance
authority, or the Federal Trade Commission), self-regulatory
organizations, or for an investigation on a matter related to
public safety;
(6) to a consumer reporting agency in accordance with the
Fair Credit Reporting Act, or in accordance with
interpretations of such Act by the Board of Governors of the
Federal Reserve System or the Federal Trade Commission,
including interpretations published as commentary (16 CFR 601-
622);
(7) in connection with a proposed or actual sale, merger,
transfer, or exchange of all or a portion of a business or
operating unit if the disclosure of nonpublic personal
information concerns solely consumers of such business or unit;
or
(8) to comply with Federal, State, or local laws, rules,
and other applicable legal requirements; to comply with a
properly authorized civil, criminal, or regulatory
investigation or subpoena by Federal, State, or local
authorities; or to respond to judicial process or government
regulatory authorities having jurisdiction over the financial
institution for examination, compliance, or other purposes as
authorized by law.
SEC. 503. DISCLOSURE OF INSTITUTION PRIVACY POLICY.
(a) Disclosure Required.--A financial institution shall clearly and
conspicuously disclose to each consumer, at the time of establishing
the customer relationship with the consumer and not less than annually,
in writing or in electronic form (or other form permitted by the
regulations prescribed under section 504), its policies and practices
with respect to protecting the nonpublic personal information of
consumers in accordance with the rules prescribed under section 504.
(b) Information to be Included.--The disclosure required by
subsection (a) shall include--
(1) the policy and practices of the institution with
respect to disclosing nonpublic personal information to
nonaffiliated third parties, other than agents of the
institution, consistent with section 502 of this subtitle, and
including--
(A) the categories of persons to whom the
information is or may be disclosed, other than the
persons to whom the information may be provided
pursuant to section 502(e); and
(B) the practices and policies of the institution
with respect to disclosing of nonpublic personal
information of persons who have ceased to be customers
of the financial institution;
(2) the categories of nonpublic personal information that
are collected by the financial institution;
(3) the policies that the institution maintains to protect
the confidentiality and security of nonpublic personal
information in accordance with section 501; and
(4) the disclosures required, if any, under section
603(d)(2)(A)(iii) of the Fair Credit Reporting Act.
SEC. 504. RULEMAKING.
(a) Regulatory Authority.--The Federal banking agencies, the
National Credit Union Association, the Secretary of the Treasury, and
the Securities and Exchange Commission, shall jointly prescribe, after
consultation with the Federal Trade Commission, and representatives of
State insurance authorities designated by the National Association of
Insurance Commissioners, such regulations as may be necessary to carry
out the purposes of this subtitle. Such regulations shall be prescribed
in accordance with applicable requirements of the title 5, United
States Code, and shall be issued in final form within 6 months after
the date of enactment of this Act.
(b) Authority to Grant Exceptions.--The regulations prescribed
under subsection (a) may include such additional exceptions to
subsections (a) and (b) of section 502 as are deemed consistent with
the purposes of this subtitle.
SEC. 505. ENFORCEMENT.
(a) In General.--This subtitle and the rules prescribed thereunder
shall be enforced by the Federal functional regulators, the State
insurance authorities, and the Federal Trade Commission with respect to
financial institutions subject to their jurisdiction under applicable
law, as follows:
(1) Under section 8 of the Federal Deposit Insurance Act,
in the case of--
(A) national banks, Federal branches and Federal
agencies of foreign banks, and any subsidiaries of such
entities, by the Office of the Comptroller of the
Currency;
(B) member banks of the Federal Reserve System
(other than national banks), branches and agencies of
foreign banks (other than Federal branches, Federal
agencies, and insured State branches of foreign banks),
commercial lending companies owned or controlled by
foreign banks, organizations operating under section 25
or 25A of the Federal Reserve Act, bank holding
companies and their nonbank subsidiaries or affiliates
(except broker-dealers, affiliates providing insurance,
investment companies, and investment advisers), by the
Board of Governors of the Federal Reserve System;
(C) banks insured by the Federal Deposit Insurance
Corporation (other than members of the Federal Reserve
System), insured State branches of foreign banks, and
any subsidiaries of such entities, by the Board of
Directors of the Federal Deposit Insurance Corporation;
and
(D) savings association the deposits of which are
insured by the Federal Deposit Insurance Corporation,
and any subsidiaries of such a savings association, by
the Director of the Office of Thrift Supervision.
(2) Under the Federal Credit Union Act, by the
Administrator of the National Credit Union Administration with
respect to any Federal or state chartered credit union, and any
subsidiaries of such an entity.
(3) Under the Farm Credit Act of 1971, by the Farm Credit
Administration with respect to the Federal Agricultural
Mortgage Corporation, any Federal land bank, Federal land bank
association, Federal intermediate credit bank, or production
credit association.
(4) Under the Securities Exchange Act of 1934, by the
Securities and Exchange Commission with respect to any broker-
dealer.
(5) Under the Investment Company Act of 1940, by the
Securities and Exchange Commission with respect to investment
companies.
(6) Under the Investment Advisers Act of 1940, by the
Securities and Exchange Commission with respect to investment
advisers registered with the Commission under such Act.
(7) Under Federal Housing Enterprises Financial Safety and
Soundness Act of 1992 (12 U. S. C. 4501 et seq.), by the Office
of Federal Housing Enterprise Oversight with respect to the
Federal National Mortgage Association and the Federal Home Loan
Mortgage Corporation.
(8) Under the Federal Home Loan Bank Act, by the Federal
Housing Finance Board with respect to Federal home loan banks.
(9) Under State insurance law, in the case of any person
engaged in providing insurance, by the State insurance
authority of the State in which the person is domiciled,
subject to section 104 of this Act.
(10) Under the Federal Trade Commission Act, by the Federal
Trade Commission for any other financial institution that is
not subject to the jurisdiction of any agency or authority
under paragraphs (1) through (9) of this subsection.
(b) Enforcement of Section 501.--
(1) In general.--Except as provided in paragraph (2), the
agencies and authorities described in subsection (a) shall
implement the standards prescribed under section 501(b) in the
same manner, to the extent practicable, as standards prescribed
pursuant to subsection (a) of section 39 of the Federal Deposit
Insurance Act are implemented pursuant to such section.
(2) Exception.--The agencies and authorities described in
paragraphs (4), (5), (6), (9), and (10) of subsection (a) shall
implement the standards prescribed under section 501(b) by rule
with respect to the financial institutions subject to their
respective jurisdictions under subsection (a).
(c) Definitions.--The terms used in subsection (a)(1) that are not
defined in this subtitle or otherwise defined in section 3(s) of the
Federal Deposit Insurance Act shall have the meaning given to them in
section 1(b) of the International Banking Act of 1978.
SEC. 506. FAIR CREDIT REPORTING ACT AMENDMENT.
(a) Amendment.--Section 621 of the Fair Credit Reporting Act (15
U.S.C. 1681s) is amended--
(1) in subsection (d), by striking everything following the
end of the second sentence; and
(2) by striking subsection ``(e)'' and inserting in lieu
thereof the following:
``(e) Regulatory Authority.--
``(1) The Federal banking agencies referred to in
paragraphs (1) and (2) of subsection (b) shall jointly
prescribe such regulations as necessary to carry out the
purposes of this Act with respect to any persons identified
under paragraphs (1) and (2) of subsection (b), or to the
holding companies and affiliates of such persons.
``(2) The Administrator of the National Credit Union
Administration shall prescribe such regulations as necessary to
carry out the purposes of this Act with respect to any persons
identified under paragraph (3) of subsection (b).''.
(b) Conforming Amendment.--Section 621(a) of the Fair Credit
Reporting Act (15 U.S.C. 1681s(a)) is amended by striking paragraph
(4).
SEC. 507. RELATION TO OTHER PROVISIONS.
This subtitle shall not apply to any information to which subtitle
D of title III applies.
SEC. 508. STUDY OF INFORMATION SHARING AMONG FINANCIAL AFFILIATES.
(a) In General.--The Secretary of the Treasury, in conjunction with
the Federal functional regulators and the Federal Trade Commission,
shall conduct a study of information sharing practices among financial
institutions and their affiliates. Such study shall include--
(1) the purposes for the sharing of confidential customer
information with affiliates or with nonaffiliated third
parties;
(2) the extent and adequacy of security protections for
such information;
(3) the potential risks for customer privacy of such
sharing of information;
(4) the potential benefits for financial institutions and
affiliates of such sharing of information;
(5) the potential benefits for customers of such sharing of
information;
(6) the adequacy of existing laws to protect customer
privacy;
(7) the adequacy of financial institution privacy policy
and privacy rights disclosure under existing law;
(8) the feasibility of different approaches, including opt-
out and opt-in, to permit customers to direct that confidential
information not be shared with affiliates and nonaffiliated
third parties; and
(9) the feasibility of restricting sharing of information
for specific uses or of permitting customers to direct the uses
for which information may be shared.
(b) Consultation.--The Secretary shall consult with representatives
of State insurance authorities designated by the National Association
of Insurance Commissioners, and also with financial services industry,
consumer organizations and privacy groups, and other representatives of
the general public, in formulating and conducting the study required by
subsection (a).
(c) Report.--Before the end of the 6-month period beginning on the
date of the enactment of this Act, the Secretary shall submit a report
to the Congress containing the findings and conclusions of the study
required under subsection (a), together with such recommendations for
legislative or administrative action as may be appropriate.
SEC. 509. DEFINITIONS.
As used in this subtitle:
(1) Federal banking agency.--The term ``Federal banking
agency'' has the meanings given to such terms in section 3 of
the Federal Deposit Insurance Act.
(2) Federal functional regulator.--The term ``Federal
functional regulator'' means--
(A) the Board of Governors of the Federal Reserve
System;
(B) the Office of the Comptroller of the Currency;
(C) the Board of Directors of the Federal Deposit
Insurance Corporation;
(D) the Director of the Office of Thrift
Supervision;
(E) the National Credit Union Administration Board;
(F) the Farm Credit Administration; and
(G) the Securities and Exchange Commission.
(3) Financial institution.--The term ``financial
institution'' means any institution the business of which is
engaging in financial activities or activities that are
incidental to financial activities, as described in section
6(c) of the Bank Holding Company Act of 1956.
(4) Nonpublic personal information.--
(A) The term ``nonpublic personal information''
means personally identifiable financial information--
(i) provided by a consumer to a financial
institution;
(ii) resulting from any transaction with
the consumer or the service performed for the
consumer; or
(iii) otherwise obtained by the financial
institution.
(B) Such term does not include publicly available
information, as such term is defined by the regulations
prescribed under section 504.
(C) Notwithstanding subparagraph (B), such term
shall include any list, description, or other grouping
of consumers (and publicly available information
pertaining to them) that is derived using any
personally identifiable information other than publicly
available information.
(5) Nonaffiliated third parties.--The term ``nonaffiliated
third parties'' means any entity that is not an affiliate of,
or related by common ownership or affiliated by corporate
control with, the financial institution, but does not include a
joint employee of such institution.
(6) Affiliate.--The term ``affiliate'' means any company
that controls, is controlled by, or is under common control
with another company.
(7) Necessary to effect, administer, or enforce.--The term
``as necessary to effect, administer or enforce the
transaction'' means--
(A) the disclosure is required, or is a usual,
appropriate or acceptable method, to carry out the
transaction or the product or service business of which
the transaction is a part, and record or service or
maintain the consumer's account in the ordinary course
of providing the financial service or financial
product, or to administer or service benefits or claims
relating to the transaction or the product or service
business of which it is a part, and includes--
(i) providing the consumer or the
consumer's agent or broker with a confirmation,
statement, or other record of the transaction,
or information on the status or value of the
financial service or financial product; and
(ii) the accrual or recognition of
incentives or bonuses associated with the
transaction that are provided by the financial
institution or any other party;
(B) the disclosure is required, or is one of the
lawful or appropriate methods, to enforce the rights of
the financial institution or of other persons engaged
in carrying out the financial transaction, or providing
the product or service;
(C) the disclosure is required, or is a usual,
appropriate, or acceptable method, for insurance
underwriting at the consumer's request or for
reinsurance purposes, or for any of the following
purposes as they relate to a consumer's insurance:
account administration, reporting, investigating, or
preventing fraud or material misrepresentation,
processing premium payments, processing insurance
claims, administering insurance benefits (including
utilization review activities), participating in
research projects, or as otherwise required or
specifically permitted by Federal or State law; or
(D) the disclosure is required, or is a usual,
appropriate or acceptable method, in connection with--
(i) the authorization, settlement, billing,
processing, clearing, transferring,
reconciling, or collection of amounts charged,
debited, or otherwise paid using a debit,
credit or other payment card, check, or account
number, or by other payment means;
(ii) the transfer of receivables, accounts
or interests therein; or
(iii) the audit of debit, credit or other
payment information.
(8) State insurance authority.--The term ``State insurance
authority'' means, in the case of any person engaged in
providing insurance, the State insurance authority of the State
in which the person is domiciled.
(9) Consumer.--The term ``consumer'' means an individual
who obtains, from a financial institution, financial products
or services which are to be used primarily for personal,
family, or household purposes, and also means the legal
representative of such an individual.
(10) Joint agreement.--The term ``joint agreement'' means a
formal written contract pursuant to which two or more financial
institutions jointly offer, endorse, or sponsor a financial
product or service, and any payments between the parties are
based on business or profit generated.
SEC. 510. EFFECTIVE DATE.
This subtitle shall take effect 6 months after the date on which
the rules under section 503 are promulgated, except--
(1) to the extent that a later date is specified in such
rules; and
(2) that section 506 shall be effective upon enactment.
Subtitle B--Fraudulent Access to Financial Information
SEC. 521. PRIVACY PROTECTION FOR CUSTOMER INFORMATION OF FINANCIAL
INSTITUTIONS.
(a) Prohibition on Obtaining Customer Information by False
Pretenses.--It shall be a violation of this subtitle for any person to
obtain or attempt to obtain, or cause to be disclosed or attempt to
cause to be disclosed to any person, customer information of a
financial institution relating to another person--
(1) by making a false, fictitious, or fraudulent statement
or representation to an officer, employee, or agent of a
financial institution;
(2) by making a false, fictitious, or fraudulent statement
or representation to a customer of a financial institution; or
(3) by providing any document to an officer, employee, or
agent of a financial institution, knowing that the document is
forged, counterfeit, lost, or stolen, was fraudulently
obtained, or contains a false, fictitious, or fraudulent
statement or representation.
(b) Prohibition on Solicitation of a Person To Obtain Customer
Information From Financial Institution Under False Pretenses.--It shall
be a violation of this subtitle to request a person to obtain customer
information of a financial institution, knowing that the person will
obtain, or attempt to obtain, the information from the institution in
any manner described in subsection (a).
(c) Nonapplicability to Law Enforcement Agencies.--No provision of
this section shall be construed so as to prevent any action by a law
enforcement agency, or any officer, employee, or agent of such agency,
to obtain customer information of a financial institution in connection
with the performance of the official duties of the agency.
(d) Nonapplicability to Financial Institutions in Certain Cases.--
No provision of this section shall be construed so as to prevent any
financial institution, or any officer, employee, or agent of a
financial institution, from obtaining customer information of such
financial institution in the course of--
(1) testing the security procedures or systems of such
institution for maintaining the confidentiality of customer
information;
(2) investigating allegations of misconduct or negligence
on the part of any officer, employee, or agent of the financial
institution; or
(3) recovering customer information of the financial
institution which was obtained or received by another person in
any manner described in subsection (a) or (b).
(e) Nonapplicability to Insurance Institutions for Investigation of
Insurance Fraud.--No provision of this section shall be construed so as
to prevent any insurance institution, or any officer, employee, or
agency of an insurance institution, from obtaining information as part
of an insurance investigation into criminal activity, fraud, material
misrepresentation, or material nondisclosure that is authorized for
such institution under State law, regulation, interpretation, or order.
(f) Nonapplicability to Certain Types of Customer Information of
Financial Institutions.--No provision of this section shall be
construed so as to prevent any person from obtaining customer
information of a financial institution that otherwise is available as a
public record filed pursuant to the securities laws (as defined in
section 3(a)(47) of the Securities Exchange Act of 1934).
(g) Nonapplicability to Collection of Child Support Judgments.--No
provision of this section shall be construed to prevent any State-
licensed private investigator, or any officer, employee, or agent of
such private investigator, from obtaining customer information of a
financial institution, to the extent reasonably necessary to collect
child support from a person adjudged to have been delinquent in his or
her obligations by a Federal or State court, and to the extent that
such action by a State-licensed private investigator is not unlawful
under any other Federal or State law or regulation, and has been
authorized by an order or judgment of a court of competent
jurisdiction.
SEC. 522. ADMINISTRATIVE ENFORCEMENT.
(a) Enforcement by Federal Trade Commission.--Compliance with this
subtitle shall be enforced by the Federal Trade Commission in the same
manner and with the same power and authority as the Commission has
under the title VIII, the Fair Debt Collection Practices Act, to
enforce compliance with such title.
(b) Notice of Actions.--The Federal Trade Commission shall--
(1) notify the Securities and Exchange Commission whenever
the Federal Trade Commission initiates an investigation with
respect to a financial institution subject to regulation by the
Securities and Exchange Commission;
(2) notify the Federal banking agency (as defined in
section 3(z) of the Federal Deposit Insurance Act) whenever the
Commission initiates an investigation with respect to a
financial institution subject to regulation by such Federal
banking agency; and
(3) notify the appropriate State insurance regulator
whenever the Commission initiates an investigation with respect
to a financial institution subject to regulation by such
regulator.
SEC. 523. CRIMINAL PENALTY.
(a) In General.--Whoever knowingly and intentionally violates, or
knowingly and intentionally attempts to violate, section 521 shall be
fined in accordance with title 18, United States Code, or imprisoned
for not more than 5 years, or both.
(b) Enhanced Penalty for Aggravated Cases.--Whoever violates, or
attempts to violate, section 521 while violating another law of the
United States or as part of a pattern of any illegal activity involving
more than $100,000 in a 12-month period shall be fined twice the amount
provided in subsection (b)(3) or (c)(3) (as the case may be) of section
3571 of title 18, United States Code, imprisoned for not more than 10
years, or both.
SEC. 524. RELATION TO STATE LAWS.
(a) In General.--This subtitle shall not be construed as
superseding, altering, or affecting the statutes, regulations, orders,
or interpretations in effect in any State, except to the extent that
such statutes, regulations, orders, or interpretations are inconsistent
with the provisions of this subtitle, and then only to the extent of
the inconsistency.
(b) Greater Protection Under State Law.--For purposes of this
section, a State statute, regulation, order, or interpretation is not
inconsistent with the provisions of this subtitle if the protection
such statute, regulation, order, or interpretation affords any person
is greater than the protection provided under this subtitle as
determined by the Commission, on its own motion or upon the petition of
any interested party.
SEC. 525. AGENCY GUIDANCE.
In furtherance of the objectives of this subtitle, each Federal
banking agency (as defined in section 3(z) of the Federal Deposit
Insurance Act) and the Securities and Exchange Commission or self-
regulatory organizations, as appropriate, shall review regulations and
guidelines applicable to financial institutions under their respective
jurisdictions and shall prescribe such revisions to such regulations
and guidelines as may be necessary to ensure that such financial
institutions have policies, procedures, and controls in place to
prevent the unauthorized disclosure of customer financial information
and to deter and detect activities proscribed under section 521.
SEC. 526. REPORTS.
(a) Report to the Congress.--Before the end of the 18-month period
beginning on the date of the enactment of this Act, the Comptroller
General, in consultation with the Federal Trade Commission, Federal
banking agencies, the Securities and Exchange Commission, appropriate
Federal law enforcement agencies, and appropriate State insurance
regulators, shall submit to the Congress a report on the following:
(1) The efficacy and adequacy of the remedies provided in
this subtitle in addressing attempts to obtain financial
information by fraudulent means or by false pretenses.
(2) Any recommendations for additional legislative or
regulatory action to address threats to the privacy of
financial information created by attempts to obtain information
by fraudulent means or false pretenses.
(b) Annual Report by Administering Agencies.--The Federal Trade
Commission and the Attorney General shall submit to Congress an annual
report on number and disposition of all enforcement actions taken
pursuant to this subtitle.
SEC. 527. DEFINITIONS.
For purposes of this subtitle, the following definitions shall
apply:
(1) Customer.--The term ``customer'' means, with respect to
a financial institution, any person (or authorized
representative of a person) to whom the financial institution
provides a product or service, including that of acting as a
fiduciary.
(2) Customer information of a financial institution.--The
term ``customer information of a financial institution'' means
any information maintained by or for a financial institution
which is derived from the relationship between the financial
institution and a customer of the financial institution and is
identified with the customer.
(3) Document.--The term ``document'' means any information
in any form.
(4) Financial institution.--
(A) In general.--The term ``financial institution''
means any institution engaged in the business of
providing financial services to customers who maintain
a credit, deposit, trust, or other financial account or
relationship with the institution.
(B) Certain financial institutions specifically
included.--The term ``financial institution'' includes
any depository institution (as defined in section
19(b)(1)(A) of the Federal Reserve Act), any broker or
dealer, any investment adviser or investment company,
any insurance company, any loan or finance company, any
credit card issuer or operator of a credit card system,
and any consumer reporting agency that compiles and
maintains files on consumers on a nationwide basis (as
defined in section 603(p)).
(C) Securities institutions.--For purposes of
subparagraph (B)--
(i) the terms ``broker'' and ``dealer''
have the meanings provided in section 3 of the
Securities Exchange Act of 1934 (15 U.S.C.
78c);
(ii) the term ``investment adviser'' has
the meaning provided in section 202(a)(11) of
the Investment Advisers Act of 1940 (15 U.S.C.
80b-2(a)); and
(iii) the term ``investment company'' has
the meaning provided in section 3 of the
Investment Company Act of 1940 (15 U.S.C. 80a-
3).
(D) Further definition by regulation.--The Federal
Trade Commission, after consultation with Federal
banking agencies and the Securities and Exchange
Commission, may prescribe regulations clarifying or
describing the types of institutions which shall be
treated as financial institutions for purposes of this
subtitle.
Passed the House of Representatives July 1, 1999.
Attest:
JEFF TRANDAHL,
Clerk.