[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 665 Introduced in House (IH)]







106th CONGRESS
  1st Session
                                H. R. 665

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


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           February 10, 1999

 Mr. LaFalce (for himself, Mr. Vento, Mr. Baker, Mr. Capuano, and Mr. 
  Ackerman) introduced the following bill; which was referred to the 
  Committee on Banking and Financial Services, and in addition to the 
 Committee on Commerce, for a period to be subsequently determined by 
the Speaker, in each case for consideration of such provisions as fall 
           within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
 To enhance the financial services industry by providing a prudential 
  framework for the affiliation of banks, securities firms, and other 
   financial service providers and ensuring adequate protection for 
                   consumers, 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.

    This Act may be cited as the ``Financial Services Modernization 
Act''.

SEC. 2. TABLE OF CONTENTS.

    The table of contents for this Act is as follows:

Sec. 1. Short title.
Sec. 2. Table of contents.
               TITLE I--FINANCIAL SERVICES MODERNIZATION

                        Subtitle A--Affiliations

Sec. 101. Anti-affiliation provisions of ``Glass-Steagall Act'' 
                            repealed.
Sec. 102. Financial activities.
Sec. 103. Limited nonfinancial activities and affiliations permitted.
Sec. 104. Operation of State law.
Sec. 105. Mutual bank holding companies authorized.
Sec. 106. Amendments relating to limited purpose banks.
     Subtitle B--Streamlining Supervision of Bank Holding Companies

Sec. 111. Streamlining bank holding company supervision.
Sec. 112. Authority of State insurance regulator and securities and 
                            exchange commission.
Sec. 113. Limitation on rulemaking, prudential, supervisory, and 
                            enforcement authority of the Board.
Sec. 114. Examination of investment companies.
Sec. 115. Equivalent regulation and supervision.
               Subtitle C--Subsidiaries of National Banks

Sec. 121. Subsidiaries of national banks authorized to engage in 
                            financial activities.
Sec. 122. Safety and soundness firewalls between banks and their 
                            financial subsidiaries.
Sec. 123. Functional regulation.
          Subtitle D--Review of Bank Mergers and Acquisitions

Sec. 131. Amendment to the Bank Holding Company Act of 1956 to modify 
                            notification and post-approval waiting 
                            period for section 3 transactions.
Sec. 132. Interagency data sharing.
Sec. 133. Clarification of status of subsidiaries and affiliates.
Sec. 134. Annual GAO report.
                 Subtitle E--Direct Activities of Banks

Sec. 141. Authority of national banks to underwrite certain municipal 
                            bonds.
                    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. Definition and treatment of banking products.
Sec. 206. Derivative instrument and qualified investor defined.
Sec. 207. Government securities defined.
Sec. 208. Effective date.
Sec. 209. Rule of construction.
             Subtitle B--Bank Investment Company Activities

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

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

Sec. 241. Study of methods to inform investors and consumers of 
                            uninsured products.
Sec. 242. Study of limitation on fees associated with acquiring 
                            financial products.
                          TITLE III--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 dispute resolution for Federal regulators.
Sec. 307. Certain State affiliation laws preempted for insurance 
                            companies and affiliates.
                TITLE IV--CUSTOMER SERVICE AND EDUCATION

Sec. 401. Customer service and education regulations.

               TITLE I--FINANCIAL SERVICES MODERNIZATION

                        Subtitle A--Affiliations

SEC. 101. ANTI-AFFILIATION PROVISIONS OF ``GLASS-STEAGALL ACT'' 
              REPEALED.

    (a) Section 20 Repealed.--Section 20 of the Banking Act of 1933 (12 
U.S.C. 377) is repealed.
    (b) Section 32 Repealed.--Section 32 of the Banking Act of 1933 (12 
U.S.C. 78) is repealed.

SEC. 102. FINANCIAL ACTIVITIES.

    (a) Engaging in Activities Financial in Nature.--Section 4 of the 
Bank Holding Company Act of 1956 (12 U.S.C. 1843) is amended by adding 
at the end the following new subsections:
    ``(k) Engaging in Activities Financial in Nature.--
            ``(1) In general.--Notwithstanding subsection (a) and 
        subject to subsection (l) and (m), a bank holding company may 
        engage in any activity, and acquire and retain the shares of 
        any company engaged in any activity, which the Board and the 
        Secretary of the Treasury have jointly determined (by 
        regulation or order) to be financial in nature or incidental to 
        such financial activities.
            ``(2) Factors to be considered.--In determining whether an 
        activity is financial in nature or incidental to financial 
        activities, the Board and the Secretary shall take into 
        account--
                    ``(A) the purposes of this Act and the Financial 
                Services Modernization Act;
                    ``(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 bank holding companies 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, in any State, in full compliance with the 
                laws and regulations of such State that apply to each 
                type of insurance license or authorization in such 
                State, except that--
                            ``(i) in no event shall the bank holding 
                        company or any affiliate of the bank holding 
                        company be subject to any State law or 
                        regulation that restricts a bank from having an 
                        affiliate, agent, or employee in such State 
                        licensed to provide insurance as principal, 
                        agent, or broker; and
                            ``(ii) the Board shall prescribe 
                        regulations concerning insurance affiliations 
                        that provide equivalent treatment for all stock 
                        and mutual insurance companies that control or 
                        are otherwise affiliated with a bank and fully 
                        accommodate and are consistent with State law.
                    ``(C) Providing financial, investment, or economic 
                advisory services, including advising an investment 
                company (as defined in section 3 of the Investment 
                Company Act of 1940).
                    ``(D) Issuing or selling instruments representing 
                interests in pools of assets permissible for a bank to 
                hold directly.
                    ``(E) Underwriting, dealing in, or making a market 
                in securities.
                    ``(F) Engaging in any activity that the Board has 
                determined, by order or regulation that is in effect on 
                the date of enactment of the Financial Services 
                Modernization Act, 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 subsection 
                        (c)(13) (as in effect on the day before the 
                        date of enactment of the Financial Services 
                        Modernization Act) to be usual in connection 
                        with the transaction of banking or other 
                        financial operations abroad.
                    ``(H) Directly or indirectly acquiring or 
                controlling, whether as principal, on behalf of 1 or 
                more entities (including entities, other than a 
                depository institution or subsidiary of a depository 
                institution, that the bank holding company controls) or 
                otherwise, shares, assets, or ownership interests 
                (including without limitation debt or equity 
                securities, partnership interests, trust certificates 
                or other instruments representing ownership) of a 
                company or other entity, whether or not constituting 
                control of such company or entity, engaged in any 
                activity not authorized pursuant to this section if--
                            ``(i) the shares, assets, or ownership 
                        interests are not acquired or held by a 
                        depository institution;
                            ``(ii) such shares, assets, or ownership 
                        interests are acquired and held as part of a 
                        bona fide underwriting or merchant banking 
                        activity, including investment activities 
                        engaged in for the purpose of appreciation and 
                        ultimate resale or disposition of the 
                        investment;
                            ``(iii) such shares, assets, or ownership 
                        interests, are held 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, directly or indirectly, in the day 
                        to day management or operation of such company 
                        or entity, except insofar as necessary to 
                        achieve the objectives of clause (ii).
                    ``(I) Directly or indirectly acquiring or 
                controlling, whether as principal, on behalf of 1 or 
                more entities (including any subsidiary of the holding 
                company which is not a depository institution or 
                subsidiary of a depository institution) or otherwise, 
                shares, assets, or ownership interests (including 
                without limitation debt or equity securities, 
                partnership interests, trust certificates or other 
                instruments representing ownership) of a company or 
                other entity, whether or not constituting control of 
                such company or entity, engaged in any activity not 
                authorized pursuant to this section if--
                            ``(i) the shares, assets, or ownership 
                        interests are not acquired or held by a 
                        depository institution or a subsidiary of a 
                        depository institution;
                            ``(ii) such shares, assets, or ownership 
                        interests are acquired and held by an insurance 
                        company that is predominantly engaged in 
                        underwriting life, accident and health, or 
                        property and casualty insurance (other than 
                        credit-related insurance);
                            ``(iii) such shares, assets, or ownership 
                        interests represent an investment made in the 
                        ordinary course of business of such insurance 
                        company in accordance with relevant State law 
                        governing such investments; and
                            ``(iv) during the period such shares, 
                        assets, or ownership interests are held, the 
                        bank holding company does not directly or 
                        indirectly participate in the day-to-day 
                        management or operation of the company or 
                        entity except insofar as necessary to achieve 
                        the objectives of clause (iii).
            ``(4) Actions required.--
                    ``(A) Regulation of merchant banking.--The Board 
                may prescribe regulations and issue interpretations to 
                implement paragraph 3(H);
                    ``(B) Regulation of other activities.--The Board 
                and the Secretary--
                    ``(i) may jointly prescribe regulations and issue 
                interpretations under paragraph (3), other than 
                subparagraph (H); and
                    ``(ii) shall jointly define by regulation the 
                following activities, to the extent they are consistent 
                with the purposes of this Act, as financial in nature 
                or incidental to activities that are financial in 
                nature:
                                    ``(I) Lending, exchanging, 
                                transferring, investing for others, or 
                                safeguarding financial assets other 
                                than money or securities.
                                    ``(II) Providing any device or 
                                other instrumentality for transferring 
                                money or other financial assets;
                                    ``(III) Arranging, effecting, or 
                                facilitating financial transactions for 
                                the account of third parties.
            ``(5) Notification.--
                    ``(A) Commencement of new activity.--
                A bank holding company that 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) Notice required for acquisitions.--
                            ``(i) In general.--At least 12 business 
                        days before acquiring shares or assets of any 
going concern pursuant to paragraphs (3), (4), or (5), a bank holding 
company shall provide written notice of the proposal to the Board, 
unless the Board determines that no notice or a shorter notice period 
is appropriate.
                            ``(ii) Grounds for disapproval The Board 
                        shall not approve--
                                    ``(I) any acquisition which would 
                                result in a monopoly, or which would be 
                                in furtherance of any combination or 
                                conspiracy to monopolize or attempt to 
                                monopolize the business of financial 
                                intermediation in any part of the 
                                United States, or
                                    ``(II) any other proposed 
                                acquisition whose effect in any section 
                                of the country may be substantially to 
                                lessen competition, or to tend to 
                                create a monopoly, or which in any 
                                other manner would be in restraint of 
                                trade, unless it finds that the 
                                anticompetitive effects of the proposed 
                                transaction are clearly outweighed in 
                                the public interest by the probable 
                                effect of the transaction in meeting 
                                the convenience and needs of the 
                                community to be served.
                            ``(iii) Additional information and 
                        extension of period.--Before the expiration of 
                        the 12-day period referred to in clause (i), 
                        the Board may require the submission of 
                        additional information and may extend the 12-
                        day period for no more than 60 calendar days to 
                        consider such additional information.
                            ``(iv) Disapproval before end of period.--
                        If, at the end of the 12-day period referred to 
                        in clause (i) or the end of any extension of 
                        such period pursuant to clause (iii), as the 
                        case may be, the Board has not issued an order 
                        disapproving the notice, the notice shall be 
                        deemed approved.''
                    ``(C) Approval not required for certain financial 
                activities.--Except as provided in subsection (j) with 
                regard to the acquisition of a savings association, a 
                bank holding company may commence any activity pursuant 
                to paragraph (3) or any regulation prescribed under 
                paragraph (4), without prior approval of the Board.
    ``(l) Conditions for Engaging in Broad Range of Financial 
Activities.--Notwithstanding subsection (k), a bank holding company may 
not engage in any activity, or directly or indirectly acquire or retain 
shares of any company engaged in any activity, under subsection (k), 
other than activities permissible for a bank holding company under 
subsection (c)(8), unless the bank holding company meets the following 
requirements:
            ``(1) All of the subsidiary depository institutions of the 
        bank holding company are well capitalized, as determined 
        pursuant to section 38 of the Federal Deposit Insurance Act.
            ``(2) All of the subsidiary depository institutions of the 
        bank holding company are well managed, as determined by the 
        appropriate Federal banking agency.
            ``(3) All of the subsidiary depository institutions of the 
        bank holding company have achieved a rating of `satisfactory 
        record of meeting community credit needs', or better, at the 
        most recent examination of each such institution under the 
        Community Reinvestment Act of 1977.
            ``(4) The company has filed with the Board--
                    ``(A) a declaration that the company elects to 
                engage in activities or acquire and retain shares of a 
                company which were not permissible for a bank holding 
                company to engage in or acquire before the enactment of 
                the Financial Services Modernization Act; and
                    ``(B) a certification that the company meets the 
                requirements of paragraphs (1), (2), and (3).
    ``(m) Provisions Applicable to Bank Holding Companies That Fail To 
Meet Certain Requirements.--
            ``(1) In general.--If--
                    ``(A) a bank holding company is engaged, directly 
                or indirectly, in any activity under subsection (k), 
                other than activities permissible for a bank holding 
                company under subsection (c)(8); and
                    ``(B) such company is not in compliance with the 
                requirements of subsection (l),

        the Board shall give notice to the company to that effect, 
        describing the conditions giving rise to the notice.
            ``(2) Agreement to correct conditions required.--Within 45 
        days of receipt by a bank holding company of a notice given 
        under paragraph (1) (or such additional period as the Board may 
        permit), the company shall execute an agreement with the Board 
        to comply with the requirements applicable to a bank holding 
        company under subsection (l).
            ``(3) Appropriate federal banking agency may impose 
        limitations.--Until the conditions described in a notice to a 
        bank holding company under paragraph (1) are corrected, the 
        appropriate Federal banking agency may impose such limitations 
        on the conduct or activities of the company or any affiliate of 
        the company as the agency determines to be appropriate under 
        the circumstances.
            ``(4) Failure to correct.--If the conditions described in a 
        notice to a bank holding company under paragraph (1) are not 
        corrected within 180 days after receipt by the company of 
        notice under paragraph (1), 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, either--
                    ``(A) to divest control of any subsidiary insured 
                depository institutions; or
                    ``(B) to cease to engage in any activity conducted 
                by such company or its subsidiaries (other than a 
                depository institution or a subsidiary of a depository 
                institution) that is not an activity that is 
                permissible for a bank holding company under subsection 
                (c)(8).''.
    (b) Financial Activities of Bank Holding Companies Ineligible for 
Subsection (k) Powers.--
            (1) In general.--Section 4(c)(8) of the Bank Holding 
        Company Act of 1956 (12 U.S.C. 1843(c)(8)) is amended to read 
        as follows:
            ``(8) shares of any company the activities of which had 
        been determined by the Board by regulation under this paragraph 
        as of the day before the date of the enactment of the Financial 
        Services Modernization Act, to be so closely related to banking 
        as to be a proper incident thereto (subject to such terms and 
        conditions contained in such regulation, unless modified by the 
        Board);''.
            (2) Conforming changes to other statutes.--
                    (A) 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,''.
                    (B) Amendments to the homeowners loan act.--
                            (i) Section 10(c)(2)(F)(i) of the Home 
                        Owners Loan Act is amended--
                                    (I) by inserting ``is permitted for 
                                bank holding companies under 
                                subsections (c) or (k) of section 4 of 
                                the Bank Holding company Act of 1956, 
                                or which'' after ``(i) which''; and
                                    (II) by striking ``section 4(c)'' 
                                and inserting ``such subsections''.
                            (ii) Section 10(o)(5) of the Home Owners 
                        Loan Act is amended by striking ``, except 
                        subparagraph (B)''.

SEC. 103. LIMITED NONFINANCIAL ACTIVITIES AND AFFILIATIONS PERMITTED.

    Section 4 of the Bank Holding Company Act of 1956 (12 U.S.C. 1843) 
is amended by inserting after subsection (m) (as added by section 3(a) 
of this Act) the following new subsection:
    ``(n) Nonfinancial Activities.--
            ``(1) In general.--Notwithstanding subsection (a), a bank 
        holding company may engage in activities which are not (or have 
        not been determined to be) financial in nature or incidental to 
        activities which are financial in nature, or acquire and retain 
        ownership and control of the shares of a company engaged in 
        such activities, if--
                    ``(A) 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 bank holding company;
                    ``(B) the consolidated total assets of any company 
                the shares of which are acquired by the bank holding 
                company pursuant to this paragraph are less than 
                $750,000,000 at the time the shares are acquired by the 
                holding company; and
                    ``(C) the holding company provides notice to the 
                Board within 30 days of commencing the activity or 
                acquiring the ownership or control.
            ``(2) Foreign banks.--In lieu of the limitation contained 
        in paragraph (1)(A) in the case of a foreign bank or a company 
        that owns or controls a foreign bank which engages in any 
        activity or acquires or retains ownership or control of shares 
        of any company pursuant to paragraph (1), the aggregate annual 
        gross revenues derived from all such activities and all such 
        companies in the United States shall not exceed 15 percent of 
        the consolidated annual gross revenues of the foreign bank or 
        company in the United States derived from any branch, agency, 
        commercial lending company, or depository institution 
        controlled by the foreign bank or company and any subsidiary 
        engaged in the United States in activities permissible under 
        this section.
            ``(3) Nonapplicability of other exemption.--Any foreign 
        bank or company that owns or controls a foreign bank which 
        engages in any activity or acquires or retains ownership or 
        control of shares of any company pursuant to this subsection 
        shall not be eligible for any exception described in section 
        2(h).
            ``(4) Transactions with nonfinancial affiliates.--An 
        insured depository institution controlled by a bank holding 
        company may not engage in a covered transaction (as defined by 
        section 23A(b)(7) of the Federal Reserve Act) with any 
        affiliate controlled by the company pursuant to this subsection 
or subparagraph (H) or (I) of subsection (k)(3).''.

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 
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 any subsidiary or affiliate 
        thereof, and persons or entities engaged in the business of 
        insurance, paragraph (1) does not prohibit any State from--
                    (A) 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) 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);
                    (C) taking actions with respect to the receivership 
                or conservatorship of any insurance company; or
                    (D) 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.
            (3) Preservation of state antitrust and general corporate 
        laws.--
                    (A) In general.--Nothing 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 paragraphs (2) and 
        (3), no State may, by statute, regulation, order, 
        interpretation, or other action, prevent or restrict an insured 
        depository institution or any subsidiary or affiliate of an 
        insured depository institution 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 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, 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).
            (3) 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;
                    (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;
                    (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 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 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 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, or 
                        subsidiaries or affiliates thereof, or persons 
                        or entities affiliated therewith;
                            (iii) does not effectively prevent a 
                        depository institution, or a 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.
            (4) Construction.--No provision of this subsection 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.
    (c) Nondiscrimination.--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 a 
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 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 subsidiary or affiliate thereof;
            (2) as interpreted or applied, has or will have an impact 
        on depository 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, or subsidiaries or affiliates thereof, or 
persons or entities affiliated therewith;
            (3) effectively prevents a depository 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 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, 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.
    (e) Definition.--For purposes of this section, 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. 106. 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) consumer loan assets that 
                                are derived from, or are incidental to, 
                                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; or
                    ``(B) such overdraft--
                            ``(i) is permitted or incurred on behalf of 
                        an affiliate which is monitored by, reports to, 
                        and is recognized as a primary dealer by the 
                        Federal Reserve Bank of New York; and
                            ``(ii) is fully secured, as required by the 
                        Board, by bonds, notes, or other obligations 
                        which are direct obligations of the United 
                        States or on which the principal and interest 
                        are fully guaranteed by the United States or by 
securities and obligations eligible for settlement on the Federal 
Reserve book entry system.
            ``(4) Divestiture in case of loss of exemption.--If any 
        company described in paragraph (1) fails to qualify for the 
        exemption provided under such paragraph by operation of 
        paragraph (2), such exemption shall cease to apply to such 
        company and such company shall divest control of each bank it 
        controls before the end of the 180-day period beginning on the 
        date that the company receives notice from the Board that the 
        company has failed to continue to qualify for such exemption, 
        unless before the end of such 180-day period, the company has--
                    ``(A) corrected the condition or ceased the 
                activity that caused the company to fail to continue to 
                qualify for the exemption; and
                    ``(B) implemented procedures that are reasonably 
                adapted to avoid the reoccurrence of such condition or 
                activity.''.
    (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)''.

     Subtitle B--Streamlining Supervision of Bank Holding Companies

SEC. 111. STREAMLINING BANK 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;
                                    ``(II) the nature or size of 
                                transactions between such subsidiary 
                                and any depository institution which is 
                                also a subsidiary of such holding 
                                company; or
                                    ``(III) the centralization of 
                                functions within the holding company 
                                system,
                        could have a materially adverse effect on the 
                        safety and soundness of any depository 
                        institution affiliate of the holding company.
                    ``(D) Deference to bank examinations.--The Board 
                shall, to the fullest extent possible, use, for the 
                purposes of this paragraph, the reports of examinations 
                of depository institutions made by the appropriate 
                Federal and State depository institution supervisory 
                authority.
                    ``(E) Deference to other examinations.--The Board 
                shall, to the fullest extent possible, address the 
                circumstances which might otherwise permit or require 
                an examination by the Board by forgoing an examination 
                and instead reviewing the reports of examination made 
                of--
                            ``(i) any registered broker or dealer by or 
                        on behalf of the Securities and Exchange 
                        Commission;
                            ``(ii) any registered investment adviser 
                        properly registered by or on behalf of either 
                        the Securities and Exchange Commission or any 
                        State;
                            ``(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 bank holding company that is not a 
                depository institution and--
                            ``(i) is in compliance with applicable 
                        capital requirements of another Federal 
                        regulatory authority (including the Securities 
                        and Exchange Commission) or State insurance 
                        authority; or
                            ``(ii) is properly registered as an 
                        investment adviser under the Investment 
                        Advisers Act of 1940, or with any State.
                    ``(B) Rule of construction.--Subparagraph (A) shall 
                not be construed as preventing the Board from imposing 
                capital or capital adequacy rules, guidelines, 
                standards, or requirements with respect to activities 
                of a registered investment adviser other than 
                investment advisory activities or activities incidental 
                to investment advisory activities.
            ``(4) Transfer of board authority to appropriate federal 
        banking agency.--
                    ``(A) In general.--In the case of any bank holding 
                company which is not significantly engaged in 
                nonbanking activities, the Board, in consultation with 
                the appropriate Federal banking agency, may designate 
                the appropriate Federal banking agency of the lead 
                insured depository institution subsidiary of such 
                holding company as the appropriate Federal banking 
                agency for the bank holding company.
                    ``(B) Authority transferred.--An agency designated 
                by the Board under subparagraph (A) shall have the same 
                authority as the Board under this Act to--
                            ``(i) examine and require reports from the 
                        bank holding company and any affiliate of such 
                        company (other than a depository institution) 
                        under section 5;
                            ``(ii) approve or disapprove applications 
                        or transactions under section 3;
                            ``(iii) take actions and impose penalties 
                        under subsections (e) and (f) of section 5 and 
                        section 8; and
                            ``(iv) take actions regarding the holding 
                        company, any affiliate of the holding company 
                        (other than a depository institution), or any 
                        institution-affiliated party of such company or 
                        affiliate under the Federal Deposit Insurance 
                        Act and any other statute which the Board may 
                        designate.
                    ``(C) Agency orders.--Section 9 of this Act and 
                section 105 of the Bank Holding Company Act Amendments 
                of 1970 shall apply to orders issued by an agency 
                designated under subparagraph (A) in the same manner 
                such sections apply to orders issued by the Board.''.

SEC. 112. AUTHORITY OF STATE INSURANCE REGULATOR AND SECURITIES AND 
              EXCHANGE COMMISSION.

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

SEC. 113. 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 bank holding company where the purpose or effect of doing 
so would be to take action indirectly against or with respect to a 
regulated subsidiary that may not be taken directly against or with 
respect to such subsidiary in accordance with subsection (a).
    ``(c) Actions Specifically Authorized.--Notwithstanding subsection 
(a), the Board may take action under this Act or section 8 of the 
Federal Deposit Insurance Act to enforce compliance by a regulated 
subsidiary with Federal law that the Board has specific jurisdiction to 
enforce against such subsidiary.
    ``(d) Regulated Subsidiary Defined.--For purposes of this section, 
the term `regulated subsidiary' means any company that is not a bank 
holding company and is--
            ``(1) a broker or dealer registered under the Securities 
        Exchange Act of 1934;
            ``(2) an investment adviser registered under the Investment 
        Advisers Act of 1940, with respect to the investment advisory 
        activities of such investment adviser and activities incidental 
        to such investment advisory activities;
            ``(3) an investment company registered under the Investment 
        Company Act of 1940;
            ``(4) an insurance company or an insurance agency subject 
        to supervision by a State insurance commission, agency, or 
        similar authority; or
            ``(5) an entity subject to regulation by the Commodity 
        Futures Trading Commission, with respect to the commodities 
        activities of such entity and activities incidental to such 
        commodities activities.''.

SEC. 114. 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. 115. 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; 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 the Federal Deposit Insurance 
Corporation 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.--Nothing in this section shall 
prevent 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.

               Subtitle C--Subsidiaries of National Banks

SEC. 121. SUBSIDIARIES OF NATIONAL BANKS AUTHORIZED TO ENGAGE IN 
              FINANCIAL ACTIVITIES.

    Chapter one of title LXII of the revised statutes of United States 
(12 U.S.C. 21 et seq.) is amended--
            (1) by redesignating section 5136A (12 U.S.C. 25a) 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) Activities Permissible.--
            ``(1) In general.--A subsidiary of a national bank may--
                    ``(A) engage in any activity that is permissible 
                for the parent national bank; and
                    ``(B) engage in any activity permissible for a bank 
                holding company under any provision of section 4(k) of 
                the Bank Holding Company Act of 1956 other than--
                            ``(i) paragraph (3)(B) of such section 
                        (relating to insurance activities) insofar as 
                        such paragraph permits a bank holding company 
                        to engage as principal in insuring, 
                        guaranteeing, or indemnifying against loss, 
                        harm, damage, illness, disability, or death, on 
                        in providing or issuing annuities; and
                            ``(ii) paragraph (3)(I) of such section 
                        (relating to insurance company investments).
            ``(2) Limitations.--A subsidiary of a national bank--
                    ``(A) may not, pursuant to subparagraph (C) of 
                paragraph (1)--
                            ``(i) underwrite insurance other than 
                        credit-related insurance;
                            ``(ii) engage in real estate investment or 
                        development activities (except to the extent 
                        that a Federal statute expressly authorizes a 
                        national bank to engage directly in such an 
                        activity); and
                            ``(B) may not engage in any activity not 
                        permissible under paragraph (1).
    ``(b) Requirements Applicable to National Banks With Financial 
Subsidiaries.--
            ``(1) In general.--A financial subsidiary of a national 
        bank may engage in activities pursuant to subsection (a)(1)(C) 
        only if--
                    ``(A) the national bank is well capitalized, is 
                well managed, and achieved the rating described in 
                section 4(l)(3) of the Bank Holding Company Act of 1956 
                during the most recent examination of the bank by the 
                Comptroller of the Currency;
                    ``(B) each insured depository institution affiliate 
                of the national bank is well capitalized, is well 
                managed, and achieved the rating described in section 
                4(1)(3) of the Bank Holding Company Act of 1956 during 
                the most recent examination of the institution by the 
                appropriate Federal banking agency; and
                    ``(C) the national bank has received the approval 
                of the Comptroller of the Currency by regulation or 
                order.
            ``(2) Corrective procedures.--
                    ``(A) In general.--The Comptroller of the Currency 
                shall, by regulation prescribe procedures to enforce 
                paragraph (1).
                    ``(B) Stringency.--The regulation prescribed under 
                subparagraph (A) shall be no less stringent than the 
                corresponding restrictions and requirements of section 
                4(m) of the Bank Holding Company Act of 1956.
    ``(c) Definitions.--For purposes of this section, the following 
definitions shall apply:
            ``(1) Affiliate.--The term `affiliate' has the same meaning 
        in section 3 of the Federal Deposit Insurance Act.
            ``(2) Financial subsidiary.--The term `financial 
        subsidiary' means a company that--
                    ``(A) is a subsidiary of an insured bank; and
                    ``(B) is engaged as principal in any financial 
                activity that is not permissible under subparagraph (A) 
                or (B) of subsection (a)(1) of this section.
            ``(3) Subsidiary.--The term `subsidiary' has the same 
        meaning as in section 2 of the Bank Holding Company Act of 
        1956.
            ``(4) Well capitalized.--The term `well capitalized' has 
        the same meaning as in section 38 of the Federal Deposit 
        Insurance Act.
            ``(5) Well managed.--The term `well managed' means--
                    ``(A) in the case of an insured depository 
                institution that has been examined, the achievement 
                of--
                            ``(i) 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 insured depository institution; 
                        and
                            ``(ii) at least a rating of 2 for 
                        management, if that rating is given; or
                    ``(B) in the case of an insured depository 
                institution that has not been examined, the existence 
                and use of managerial resources that the appropriate 
                Federal banking agency determines are satisfactory.
    ``(d) Rule of Construction.--No provision of this section shall be 
construed so as to prohibit national banks from owning or controlling 
subsidiaries pursuant to section 25 or 25A of the Federal Reserve Act, 
the Bank Service Company Act, or any other Federal statute that 
expressly by its terms authorizes national banks to own or control 
subsidiaries.''.

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 adding at the end the following new section:

``SEC. 45. 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.
    ``(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 same meaning as section 
5136A(c)(2)(B) of the Revised Statutes of the United States.
    ``(e) Regulations.--The appropriate Federal banking agencies shall 
jointly prescribe regulations implementing this section.''.
    (c) Limiting a Bank's Credit Exposure to a Financial Subsidiary to 
the Amount of Permissible Credit Exposure to an Affiliate.--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' has 
        the same meaning as section 5136A(c)(2)(B) 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 that 
        is not a financial subsidiary), and notwithstanding subsection 
        (b)(2) and section 23B(d)(1)--
                    ``(A) the financial subsidiary of the bank--
                            ``(i) shall be deemed to be an affiliate of 
                        the bank and of any other subsidiary of the 
                        bank that is not a financial subsidiary; and
                            ``(ii) shall not be deemed a subsidiary of 
                        the bank; and
                    ``(B) a purchase of or investment in equity 
                securities issued by the financial subsidiary shall not 
                be deemed to be a covered transaction.
            ``(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 (that is not a subsidiary of a bank) shall 
                not be deemed to be a transaction between a subsidiary 
                of a bank and an affiliate of the bank for purposes of 
                section 23A or section 23B of this Act.
                    ``(B) Certain affiliates excluded.--For purposes of 
                this paragraph, the term `affiliate' shall not include 
                a bank, or a subsidiary of a bank that is engaged 
                exclusively in activities permissible for a national 
                bank to engage in directly or activities described in 
                clause (ii) of paragraph (1)(B).''.

SEC. 123. FUNCTIONAL REGULATION.

    (a) Purpose.--The purpose of this section is to ensure that--
            (1) securities activities conducted in a subsidiary of a 
        bank are functionally regulated by the Securities and Exchange 
        Commission to the same extent as if they were conducted in a 
        nondepository subsidiary of a bank holding company; and
            (2) insurance agency and brokerage activities conducted in 
        a subsidiary of a bank are functionally regulated by a State 
        insurance authority to the same extent as if they were 
        conducted in a nondepository subsidiary of a bank holding 
        company.
    (b) Functional Regulation of Financial Subsidiaries.--The Federal 
Deposit Insurance Act (12 U.S.C. 1811 et seq.), is amended by inserting 
after section 45 (as added by section 122 of this subtitle) the 
following new section:

``SEC. 46. FUNCTIONAL REGULATION OF SECURITIES SUBSIDIARIES AND 
              INSURANCE AGENCY SUBSIDIARIES OF INSURED DEPOSITORY 
              INSTITUTIONS.

    ``(a) Broker or Dealer Subsidiary.--A broker or dealer that is a 
subsidiary of an insured depository institution shall be subject to 
regulation under the Securities Exchange Act of 1934 in the same manner 
and to the same extent as a broker or dealer that--
            ``(1) is controlled by the same bank holding company as 
        controls the insured depository institution; and
            ``(2) is not an insured depository institution or a 
        subsidiary of an insured depository institution.
    ``(b) Insurance Agency Subsidiary.--An insurance agency or 
brokerage that is a subsidiary of an insured depository institution 
shall be subject to regulation by a State insurance authority in the 
same manner and to the same extent as an insurance agency or brokerage 
that--
            ``(1) is controlled by the same bank holding company as 
        controls the insured depository institution; and
            ``(2) is not an insured depository institution or a 
        subsidiary of an insured depository institution.
    ``(c) Definitions.--For purposes of this section, the terms 
`broker' and `dealer' have the same meanings as in section 3 of the 
Securities Exchange Act of 1934.''.

          Subtitle D--Review of Bank Mergers and Acquisitions

SEC. 131. 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. 132. 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. 133. CLARIFICATION OF STATUS OF SUBSIDIARIES AND AFFILIATES.

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

SEC. 134. ANNUAL GAO REPORT.

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

                 Subtitle E--Direct Activities of Banks

SEC. 141. AUTHORITY OF NATIONAL BANKS TO UNDERWRITE CERTAIN MUNICIPAL 
              BONDS.

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

                    TITLE II--FUNCTIONAL REGULATION

                    Subtitle A--Brokers and Dealers

SEC. 201. DEFINITION OF BROKER.

    Section 3(a)(4) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)(4)) is amended to read as follows:
            ``(4) Broker.--
                    ``(A) In general.--The term `broker' means any 
                person engaged in the business of effecting 
                transactions in securities for the account of others.
                    ``(B) Exception for certain bank activities.--A 
                bank shall not be considered to be a broker because the 
                bank engages in any of the following activities under 
                the conditions described:
                            ``(i) Third party brokerage arrangements.--
                        The bank enters into a contractual or other 
                        arrangement with a broker or dealer registered 
                        under this title under which the broker or 
dealer offers brokerage services on or off the premises of the bank 
if--
                                    ``(I) such broker or dealer is 
                                clearly identified as the person 
                                performing the brokerage services;
                                    ``(II) the broker or dealer 
                                performs brokerage services in an area 
                                that is clearly marked and, to the 
                                extent practicable, physically separate 
                                from the routine deposit-taking 
                                activities of the bank;
                                    ``(III) any materials used by the 
                                bank to advertise or promote generally 
                                the availability of brokerage services 
                                under the contractual or other 
                                arrangement clearly indicate that the 
                                brokerage services are being provided 
                                by the broker or dealer and not by the 
                                bank;
                                    ``(IV) any materials used by the 
                                bank to advertise or promote generally 
                                the availability of brokerage services 
                                under the contractual or other 
                                arrangement are in compliance with the 
                                Federal securities laws before 
                                distribution;
                                    ``(V) bank employees (other than 
                                associated persons of a broker or 
                                dealer who are qualified pursuant to 
                                the rules of a self-regulatory 
                                organization) perform only clerical or 
                                ministerial functions in connection 
                                with brokerage transactions including 
                                scheduling appointments with the 
                                associated persons of a broker or 
                                dealer, except that bank employees may 
                                forward customer funds or securities 
                                and may describe in general terms the 
                                range of investment vehicles available 
                                from the bank and the broker or dealer 
                                under the contractual or other 
                                arrangement;
                                    ``(VI) bank employees do not 
                                directly receive incentive compensation 
                                for any brokerage transaction unless 
                                such employees are associated persons 
                                of a broker or dealer and are qualified 
                                pursuant to the rules of a self-
                                regulatory organization, except that 
                                the bank employees may receive 
                                compensation for the referral of any 
                                customer if the compensation is a 
                                nominal one-time cash fee of a fixed 
                                dollar amount and the payment of the 
                                fee is not contingent on whether the 
                                referral results in a transaction;
                                    ``(VII) such services are provided 
                                by the broker or dealer on a basis in 
                                which all customers which receive any 
                                services are fully disclosed to the 
                                broker or dealer;
                                    ``(VIII) the bank does not carry a 
                                securities account of the customer 
                                except in a customary custodian or 
                                trustee capacity; and
                                    ``(IX) the bank, broker, or dealer 
                                informs each customer that the 
                                brokerage services are provided by the 
                                broker or dealer and not by the bank 
                                and that the securities are not 
                                deposits or other obligations of the 
                                bank, are not guaranteed by the bank, 
                                and are not insured by the Federal 
                                Deposit Insurance Corporation.
                            ``(ii) Trust activities.--The bank effects 
                        transactions in a trustee capacity, or effects 
                        transactions in a fiduciary capacity in its 
                        trust department or other department that is 
                        regularly examined by bank examiners for 
                        compliance with fiduciary principles and 
                        standards, and (in either case)--
                                    ``(I) is primarily compensated for 
                                such transactions 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, consistent with fiduciary 
                                principles and standards; and
                                    ``(II) does not publicly solicit 
                                brokerage business, other than by 
                                advertising that it effects 
                                transactions in securities in 
                                conjunction with advertising its other 
                                trust activities.
                            ``(iii) Permissible securities 
                        transactions.--The bank effects transactions 
                        in--
                                    ``(I) commercial paper, bankers 
                                acceptances, or commercial bills;
                                    ``(II) exempted securities;
                                    ``(III) qualified Canadian 
                                government obligations as defined in 
                                section 5136 of the Revised Statutes, 
                                in conformity with section 15C of this 
                                title and the rules and regulations 
                                thereunder, or obligations of the North 
                                American Development Bank; or
                                    ``(IV) any standardized, credit 
                                enhanced debt security issued by a 
                                foreign government pursuant to the 
                                March 1989 plan of then Secretary of 
                                the Treasury Brady, used by such 
                                foreign government to retire 
                                outstanding commercial bank loans.
                            ``(iv) Certain stock purchase plans.--
                                    ``(I) Employee benefit plans.--The 
                                bank effects transactions, as part of 
                                its transfer agency activities, in the 
                                securities of an issuer as part of any 
                                pension, retirement, profit-sharing, 
                                bonus, thrift, savings, incentive, or 
                                other similar benefit plan for the 
                                employees of that issuer or its 
                                subsidiaries, if--
                                            ``(aa) the bank does not 
                                        solicit transactions or provide 
                                        investment advice with respect 
                                        to the purchase or sale of 
                                        securities in connection with 
                                        the plan; and
                                            ``(bb) the bank's 
                                        compensation for such plan or 
                                        program consists primarily of 
                                        administration fees, or flat or 
                                        capped per order processing 
                                        fees, or both.
                                    ``(II) Dividend reinvestment 
                                plans.--The bank effects transactions, 
                                as part of its transfer agency 
                                activities, in the securities of an 
                                issuer as part of that issuer's 
                                dividend reinvestment plan, if--
                                            ``(aa) the bank does not 
                                        solicit transactions or provide 
                                        investment advice with respect 
                                        to the purchase or sale of 
                                        securities in connection with 
                                        the plan;
                                            ``(bb) the bank does not 
                                        net shareholders' buy and sell 
                                        orders, other than for programs 
                                        for odd-lot holders or plans 
                                        registered with the Commission; 
                                        and
                                            ``(cc) the bank's 
                                        compensation for such plan or 
                                        program consists primarily of 
                                        administration fees, or flat or 
                                        capped per order processing 
                                        fees, or both.
                                    ``(III) Issuer plans.--The bank 
                                effects transactions, as part of its 
                                transfer agency activities, in the 
                                securities of an issuer as part of a 
                                plan or program for the purchase or 
                                sale of that issuer's shares, if--
                                            ``(aa) the bank does not 
                                        solicit transactions or provide 
                                        investment advice with respect 
                                        to the purchase or sale of 
                                        securities in connection with 
                                        the plan or program;
                                            ``(bb) the bank does not 
                                        net shareholders' buy and sell 
                                        orders, other than for programs 
                                        for odd-lot holders or plans 
                                        registered with the Commission; 
                                        and
                                            ``(cc) the bank's 
                                        compensation for such plan or 
                                        program consists primarily 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 
                                        Modernization 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 bank deposit 
                        funds into any no-load, open-end management 
                        investment company registered under the 
                        Investment Company Act of 1940 that holds 
                        itself out as a money market fund.
                            ``(vi) Affiliate transactions.--The bank 
                        effects transactions for the account of any 
                        affiliate of the bank (as defined in section 2 
                        of the Bank Holding Company Act of 1956) other 
                        than--
                                    ``(I) a registered broker or 
                                dealer; or
                                    ``(II) an affiliate that is engaged 
                                in merchant banking, as described in 
                                section 6(c)(3)(H) of the Bank Holding 
                                Company Act of 1956.
                            ``(vii) Private securities offerings.--The 
                        bank--
                                    ``(I) effects sales as part of a 
                                primary offering of securities not 
                                involving a public offering, pursuant 
                                to section 3(b), 4(2), or 4(6) of the 
                                Securities Act of 1933 or the rules and 
                                regulations issued thereunder;
                                    ``(II) at any time after the date 
                                that is 1 year after the date of 
                                enactment of the Financial Services 
                                Modernization 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.
                                    ``(II) Exception for carrying 
                                broker activities.--The exception to 
                                being considered a broker for a bank 
                                engaged in activities described in 
                                subclause (I) shall not apply if the 
                                bank, in connection with such 
                                activities, acts in the United States 
                                as a carrying broker (as such term, and 
                                different formulations thereof, are 
                                used in section 15(c)(3) and the rules 
                                and regulations thereunder) for any 
                                broker or dealer, unless such carrying 
                                broker activities are engaged in with 
                                respect to government securities (as 
                                defined in paragraph (42) of this 
                                subsection).
                            ``(ix) Banking products.--The bank effects 
                        transactions in traditional banking products, 
                        as defined in section 205(a) of the Financial 
                        Services Modernization Act of 1999.
                            ``(x) De minimis exception.--The bank 
                        effects, other than in transactions referred to 
                        in clauses (i) through (ix), not more than 500 
                        transactions in securities in any calendar 
                        year, and such transactions are not effected by 
                        an employee of the bank who is also an employee 
                        of a broker or dealer.
                    ``(C) Broker dealer execution.--The exception to 
                being considered a broker for a bank engaged in 
                activities described in clauses (ii), (iv), and (viii) 
                of subparagraph (B) shall not apply if the activities 
                described in such provisions result in the trade in the 
                United States of any security that is a publicly traded 
                security in the United States, unless--
                            ``(i) the bank directs such trade to a 
                        registered 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) No effect of bank exemptions on other 
                commission authority.--The exception to being 
                considered a broker for a bank engaged in activities 
                described in subparagraphs (B) and (C) shall not affect 
                the authority of the Commission under any other 
                provision of this Act or any other securities law.
                    ``(E) Fiduciary capacity.--For purposes of 
                subparagraph (B)(ii), the term `fiduciary capacity' 
                means--
                            ``(i) in the capacity as trustee, executor, 
                        administrator, registrar of stocks and bonds, 
                        transfer agent, guardian, assignee, receiver, 
                        or custodian under a uniform gift to minor act, 
                        or as an investment adviser if the bank 
                        receives a fee for its investment advice;
                            ``(ii) in any capacity in which the bank 
                        possesses investment discretion on behalf of 
                        another; or
                            ``(iii) in any other similar capacity.
                    ``(F) Exception for entities subject to section 
                15(e).--The term `broker' does not include a bank 
                that--
                            ``(i) was, immediately prior to the 
                        enactment of the Financial Services 
                        Modernization Act of 1999, subject to section 
                        15(e); and
                            ``(ii) is subject to such restrictions and 
                        requirements as the Commission considers 
                        appropriate.''.

SEC. 202. DEFINITION OF DEALER.

    Section 3(a)(5) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)(5)) is amended to read as follows:
            ``(5) Dealer.--
                    ``(A) In general.--The term `dealer' means any 
                person engaged in the business of buying and selling 
                securities for such person's own account through a 
                broker or otherwise.
                    ``(B) Exception for person not engaged in the 
                business of dealing.--The term `dealer' does not 
                include a person that buys or sells securities for such 
                person's own account, either individually or in a 
                fiduciary capacity, but not as a part of a regular 
                business.
                    ``(C) Exception for certain bank activities.--A 
                bank shall not be considered to be a dealer because the 
                bank engages in any of the following activities under 
                the conditions described:
                            ``(i) Permissible securities 
                        transactions.--The bank buys or sells--
                                    ``(I) commercial paper, bankers 
                                acceptances, or commercial bills;
                                    ``(II) exempted securities;
                                    ``(III) qualified Canadian 
                                government obligations as defined in 
                                section 5136 of the Revised Statutes of 
                                the United States, in conformity with 
                                section 15C of this title and the rules 
                                and regulations thereunder, or 
                                obligations of the North American 
                                Development Bank; or
                                    ``(IV) any standardized, credit 
                                enhanced debt security issued by a 
                                foreign government pursuant to the 
                                March 1989 plan of then Secretary of 
                                the Treasury Brady, used by such 
                                foreign government to retire 
                                outstanding commercial bank loans.
                            ``(ii) Investment, trustee, and fiduciary 
                        transactions.--The bank buys or sells 
                        securities for investment purposes--
                                    ``(I) for the bank; or
                                    ``(II) for accounts for which the 
                                bank acts as a trustee or fiduciary.
                            ``(iii) Asset-backed transactions.--The 
                        bank engages in the issuance or sale to 
                        qualified investors, through a grantor trust or 
                        otherwise, of securities backed by or 
                        representing an interest in notes, drafts, 
                        acceptances, loans, leases, receivables, other 
                        obligations, or pools of any such obligations 
                        predominantly originated by the bank, or a 
                        syndicate of banks of which the bank is a 
                        member, or an affiliate of any such bank other 
                        than a broker or dealer.
                            ``(iv) Banking products.--The bank buys or 
                        sells traditional banking products, as defined 
in section 205(a) of the Financial Services Modernization 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;
                                    ``(II) to or from other persons, 
                                except that if the derivative 
                                instrument provides for the delivery of 
                                one or more securities (other than a 
                                derivative instrument or government 
                                security), or is a security (other than 
                                a government security), the transaction 
                                shall be effected with or through a 
                                registered broker or dealer; or
                                    ``(III) to or from any person if 
                                the instrument is neither a security 
                                nor provides for the delivery of one or 
                                more securities (other than a 
                                derivative instrument).''.

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

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

SEC. 204. 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. DEFINITION AND TREATMENT OF BANKING PRODUCTS.

    (a) Definition of Traditional 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 ``traditional 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; and
            (6) any derivative instrument, whether or not individually 
        negotiated, involving or relating to--
                    (A) foreign currencies, except options on foreign 
                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) Amendment to the Securities Exchange Act of 1934.--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) Transactions Involving Hybrid Products.--
            ``(1) Commission authority.--
                    ``(A) In general.--The Commission may, after 
                consultation with the Board, determine, by regulation 
                published in the Federal Register, that a bank that 
                effects transactions in, or buys or sells, a new 
                product should be subject to the registration 
                requirements of this section.
                    ``(B) Limitation.--The Commission may not impose 
                the registration requirements of this section on any 
                bank that effects transactions in, or buys or sells, a 
                product under this subsection unless the Commission 
                determines in the regulations described in subparagraph 
                (A) that--
                            ``(i) the subject product is a new product;
                            ``(ii) the subject product is a security; 
                        and
                            ``(iii) imposing the registration 
                        requirements of this section is necessary or 
                        appropriate in the public interest and for the 
                        protection of investors.
            ``(2) Objection to commission regulation.--
                    ``(A) Filing of petition for review.--The Board, or 
                any aggrieved party, may obtain review of any final 
                regulation described in paragraph (1) in the United 
                States Court of Appeals for the District of Columbia 
                Circuit by filing in such court, not later than 60 days 
                after the date of publication of the final regulation, 
                a written petition requesting that the regulation be 
                set aside.
                    ``(B) Transmittal of petition and record.--A copy 
                of a petition described in subparagraph (A) shall be 
                transmitted as soon as possible by the Clerk of the 
                Court to an officer or employee of the Commission 
                designated for that purpose. Upon receipt of the 
                petition, the Commission shall file with the court the 
                regulation under review and any documents referred to 
                therein, and any other relevant materials prescribed by 
                the court.
                    ``(C) Exclusive jurisdiction.--On the date of the 
                filing of the petition under subparagraph (A), the 
                court has jurisdiction, which becomes exclusive on the 
                filing of the materials set forth in subparagraph (B), 
                to affirm and enforce or to set aside the regulation at 
                issue.
                    ``(D) Standard of review.--
                            ``(i) In general.--The court shall 
                        determine to affirm and enforce or set aside a 
                        regulation of the Commission under this 
                        subsection, based on the determination of the 
                        court as to whether the subject product--
                                    ``(I) is a new product, as defined 
                                in this subsection;
                                    ``(II) is a security; and
                                    ``(III) would be more appropriately 
                                regulated under the Federal securities 
                                laws or the Federal banking laws, 
                                giving equal deference to the views of 
                                the Commission and the Board.
                            ``(ii) Considerations.--In making a 
                        determination under clause (i)(III), the court 
                        shall consider--
                                    ``(I) the nature of the subject new 
                                product;
                                    ``(II) the history, purpose, 
                                extent, and appropriateness of the 
                                regulation of the new product under the 
Federal securities laws; and
                                    ``(III) the history, purpose, 
                                extent, and appropriateness of the 
                                regulation of the new product under the 
                                Federal banking laws.
                    ``(E) Judicial stay.--The filing of a petition by 
                the Board or an aggrieved party pursuant to 
                subparagraph (A) shall operate as a judicial stay, 
                until the date on which the court makes a final 
                determination under this paragraph, of--
                            ``(i) any Commission requirement that a 
                        bank register as a broker or dealer under this 
                        section, because the bank engages in any 
                        transaction in, or buys or sells, the new 
                        product that is the subject of the petition; 
                        and
                            ``(ii) any Commission action against a bank 
                        for a failure to comply with a requirement 
                        described in clause (i).
            ``(3) Definitions.--For purposes of this subsection--
                    ``(A) the term `Board' means the Board of Governors 
                of the Federal Reserve System; and
                    ``(B) the term `new product' means a product or 
                instrument offered or provided by a bank that--
                            ``(i) was not subject to regulation by the 
                        Commission as a security under this Act before 
                        the date of enactment of this subsection; and
                            ``(ii) is not a traditional banking 
                        product, as defined in paragraphs (1) through 
                        (6) of section 205(a) of the Financial Services 
                        Modernization Act of 1999.''.
    (c) Classification Limited.--Classification of a particular product 
or instrument as a traditional banking product pursuant to this section 
or the amendments made by this section shall not be construed as 
finding or implying that such product or 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.
    (d) No Limitation on Other Authority To Challenge.--Nothing in this 
section or the amendments made by this section shall affect the right 
or authority of the Board of Governors of the Federal Reserve System, 
any appropriate Federal banking agency, or any interested party under 
any other provision of law to object to or seek judicial review as to 
whether a product or instrument is or is not appropriately classified 
as a traditional banking product under paragraphs (1) through (6) of 
section 205(a).
    (e) Incorporated Definitions.--For purposes of this section--
            (1) the term ``appropriate Federal banking agency'' has the 
        same meaning as in section 3 of the Federal Deposit Insurance 
        Act;
            (2) the term ``bank'' has the same meaning as in section 
        3(a)(6) of the Securities Exchange Act of 1934;
            (3) the term ``Board'' means the Board of Governors of the 
        Federal Reserve System;
            (4) the term ``government securities'' has the same meaning 
        as in section 3(a)(42) of the Securities Exchange Act of 1934, 
        and, for purposes of this subsection, commercial paper, bankers 
        acceptances, and commercial bills shall be treated in the same 
        manner as government securities; and
            (5) the term ``qualified investor'' has the same meaning as 
        in section 3(a)(55) of the Securities Exchange Act of 1934, as 
        amended by this Act.

SEC. 206. DERIVATIVE INSTRUMENT AND QUALIFIED INVESTOR DEFINED.

    Section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)) is amended by adding at the end the following new paragraphs:
            ``(54) Derivative instrument.--
                    ``(A) Definition.--The term `derivative instrument' 
                means any individually negotiated contract, agreement, 
                warrant, note, or option that is based, in whole or in 
                part, on the value of, any interest in, or any 
                quantitative measure or the occurrence of any event 
                relating to, one or more commodities, securities, 
                currencies, interest or other rates, indices, or other 
                assets, but does not include a traditional banking 
                product, as defined in section 205(a) of the Financial 
                Services Modernization 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. 207. GOVERNMENT SECURITIES DEFINED.

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

SEC. 208. 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. 209. 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) Services as trustee or custodian.--The Commission may 
        adopt rules and regulations, and issue orders, consistent with 
        the protection of investors, prescribing the conditions under 
        which a bank, or an affiliated person of a bank, either of 
        which is an affiliated person, promoter, organizer, or sponsor 
        of, or principal underwriter for, a registered management 
        company may serve as custodian of that registered management 
        company.''.
    (b) Unit Investment Trusts.--Section 26 of the Investment Company 
Act of 1940 (15 U.S.C. 80a-26) is amended--
            (1) by redesignating subsections (b) through (e) as 
        subsections (c) through (f), respectively; and
            (2) by inserting after subsection (a) the following new 
        subsection:
    ``(b) The Commission may adopt rules and regulations, and issue 
orders, consistent with the protection of investors, prescribing the 
conditions under which a bank, or an affiliated person of a bank, 
either of which is an affiliated person of a principal underwriter for, 
or depositor of, a registered unit investment trust, may serve as 
trustee or custodian under subsection (a)(1).''.
    (c) Fiduciary Duty of Custodian.--Section 36(a) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-35(a)) is amended--
            (1) in paragraph (1), by striking ``or'' at the end;
            (2) in paragraph (2), by striking the period at the end and 
        inserting ``; or''; and
            (3) by inserting after paragraph (2) the following:
            ``(3) as custodian.''.

SEC. 212. LENDING TO AN AFFILIATED INVESTMENT COMPANY.

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

SEC. 213. INDEPENDENT DIRECTORS.

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

SEC. 214. ADDITIONAL SEC DISCLOSURE AUTHORITY.

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

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

    Section 2(a)(6) of the Investment Company Act of 1940 (15 U.S.C. 
80a-2(a)(6)) is amended to read as follows:
            ``(6) The term `broker' has the same meaning as in 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 as in section 
        3 of the Securities Exchange Act of 1934, but does not include 
        an insurance company or investment company.''.

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

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

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

    Section 202(a)(3) of the Investment Advisers Act of 1940 (15 U.S.C. 
80b-2(a)(3)) is amended to read as follows:
            ``(3) The term `broker' has the same meaning as in 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 as 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, any of which is registered under section 
        203 of this title.
    ``(b) Effect on Other Authority.--Nothing in this section shall 
limit in any respect the authority of the appropriate Federal banking 
agency with respect to such bank holding company, bank, or department 
or division under any provision of law.
    ``(c) Definition.--For purposes of this section, the term 
`appropriate Federal banking agency' has the same meaning as in section 
3 of the Federal Deposit Insurance Act.''.

SEC. 221. TREATMENT OF BANK COMMON TRUST FUNDS.

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

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

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

SEC. 223. CONFORMING CHANGE IN DEFINITION.

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

SEC. 224. CONFORMING AMENDMENT.

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

SEC. 225. EFFECTIVE DATE.

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

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

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

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

                          Subtitle D--Studies

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

    Not later than 1 year after the date of enactment of this Act, the 
Comptroller General of the United States shall submit a report to the 
Congress regarding the efficacy, costs, and benefits of requiring that 
any depository institution that accepts federally insured deposits and 
that, directly or through a contractual or other arrangement with a 
broker, dealer, or agent, buys from, sells to, or effects transactions 
for retail investors in securities or consumers of insurance to inform 
such investors and consumers through the use of a logo or seal that the 
security or insurance is not insured by the Federal Deposit Insurance 
Corporation.

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

    Not later than 1 year after the date of enactment of this Act, the 
Comptroller General of the United States shall submit a report to the 
Congress regarding the efficacy and benefits of uniformly limiting any 
commissions, fees, markups, or other costs incurred by customers in the 
acquisition of financial products.

                          TITLE III--INSURANCE

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

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

SEC. 302. MANDATORY INSURANCE LICENSING REQUIREMENTS.

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

SEC. 303. FUNCTIONAL REGULATION OF INSURANCE.

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

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, 1997, the Comptroller of the Currency 
        had determined in writing that national banks may provide such 
        product as principal, or national banks were in fact lawfully 
providing such product as principal;
            (2) no court of relevant jurisdiction had, by final 
        judgment, overturned a determination of the Comptroller of the 
        Currency that national banks may provide such product as 
        principal; and
            (3) the product is not title insurance, or an annuity 
        contract the income of which is subject to tax treatment under 
        section 72 of the Internal Revenue Code of 1986.
    (c) Definition.--For purposes of this section, the term 
``insurance'' means--
            (1) any product regulated as insurance as of January 1, 
        1997, in accordance with the relevant State insurance law, in 
        the State in which the product is provided;
            (2) any product first offered after January 1, 1997, 
        which--
                    (A) a State insurance regulator determines shall be 
                regulated as insurance in the State in which the 
                product is provided because the product insures, 
                guarantees, or indemnifies against liability, loss of 
                life, loss of health, or loss through damage to or 
                destruction of property, including, but not limited to, 
                surety bonds, life insurance, health insurance, title 
insurance, and property and casualty insurance (such as private 
passenger or commercial automobile, homeowners, mortgage, commercial 
multiperil, general liability, professional liability, workers' 
compensation, fire and allied lines, farm owners multiperil, aircraft, 
fidelity, surety, medical malpractice, ocean marine, inland marine, and 
boiler and machinery insurance); and
                    (B) is not a product or service of a bank that is--
                            (i) a deposit product;
                            (ii) a loan, discount, letter of credit, or 
                        other extension of credit;
                            (iii) a trust or other fiduciary service;
                            (iv) a qualified financial contract (as 
                        defined in or determined pursuant to section 
                        11(e)(8)(D)(i) of the Federal Deposit Insurance 
                        Act); or
                            (v) a financial guaranty, except that this 
                        subparagraph (B) shall not apply to a product 
                        that includes an insurance component such that 
                        if the product is offered or proposed to be 
                        offered by the bank as principal--
                                    (I) it would be treated as a life 
                                insurance contract under section 7702 
                                of the Internal Revenue Code of 1986; 
                                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) Authority.--Notwithstanding any other provision of this Act or 
any other law, no national bank, and no subsidiary of a national bank, 
may engage in any activity involving the underwriting of title 
insurance, other than title insurance underwriting activities in which 
such national bank or subsidiary was actively and lawfully engaged 
before the date of the enactment of this Act.
    (b) Insurance Affiliate.--In the case of a national bank which has 
an affiliate which provides insurance as principal and is not a 
subsidiary of the bank, the national bank and any subsidiary of the 
national bank may not engage in any activity involving the underwriting 
of title insurance pursuant to subsection (a).
    (c) Insurance Subsidiary.--In the case of a national bank which has 
a subsidiary which provides insurance as principal and has no affiliate 
which provides insurance as principal and is not a subsidiary, the 
national bank may not engage in any activity involving the underwriting 
of title insurance pursuant to subsection (a).
    (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.

SEC. 306. EXPEDITED 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, 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 action 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 an action filed 
under this section based on its review on the merits of all questions 
presented under State and Federal law, including the nature of the 
product or activity and the history and purpose of its regulation under 
State and Federal law.

SEC. 307. 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 bank 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.

                TITLE IV--CUSTOMER SERVICE AND EDUCATION

SEC. 401. CUSTOMER PROTECTION AND EDUCATION REGULATIONS.

    The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is 
amended by inserting after section 46 (as added by section 123 of this 
Act) the following new section:

``SEC. 47. CUSTOMER SERVICE AND EDUCATION 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 enactment of the Financial 
        Services Modernization Act, customer protection regulations 
        (which the agencies jointly determine to be appropriate) that--
                    ``(A) apply to retail sales practices, 
                solicitations, advertising, or offers of any nondeposit 
                product by any insured depository institution or any 
                person who is engaged in such activities at an office 
                of the institution or on behalf of the institution; and
                    ``(B) are consistent with the requirements of this 
                Act and provide such additional protections for 
                customers 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 subsidiary 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 customer 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.
            ``(4) Nondeposit product defined.--For purposes of this 
        section, the term `nondeposit product'--
                    ``(A) means any investment and insurance product 
                which is not a deposit;
                    ``(B) includes shares issued by a registered 
                investment company; and
                    ``(C) does not include--
                            ``(i) any loan or any other extension of 
                        credit by an insured depository institution;
                            ``(ii) any letter of credit;
                            ``(iii) any trust services;
                            ``(iv) any discount; or
                            ``(v) any other instrument or insurance or 
                        investment product specifically excluded from 
                        the definition of such term by regulations 
                        prescribed jointly by the Federal banking 
                        agencies, to the extent necessary to carry out 
                        the purpose of this Act.
            ``(5) 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.
    ``(b) Sales Practices.--
            ``(1) Anticoercion rules.--The regulations prescribed 
        pursuant to subsection (a) shall include anticoercion rules 
        applicable to the sale of nondeposit products which prohibit an 
        insured depository institution from engaging in any practice 
        that would lead a customer to believe an extension of credit, 
in violation of section 106(b) of the Bank Holding Company Act 
Amendments of 1970, is conditional upon--
                    ``(A) the purchase of a nondeposit product from the 
                institution or any of its affiliates; or
                    ``(B) an agreement by the customer not to obtain, 
                or a prohibition on the customer from obtaining, a 
                nondeposit product from an unaffiliated entity.
            ``(2) Suitability of product.--
                    ``(A) In general.--The regulations prescribed 
                pursuant to subsection (a) with respect to the sale of 
                nondeposit products shall include standards to ensure 
                that an investment product sold to a customer is 
                suitable and any other nondeposit product is 
                appropriate for the customer based on financial 
                information disclosed by the customer.
                    ``(B) Rules of fair practice.--In prescribing the 
                standards under subparagraph (A) with respect to the 
                sale of investments, the Federal banking agencies shall 
                take into account the Rules of Fair Practice of the 
                National Association of Securities Dealers.
    ``(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 a nondeposit 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) Insurance product.--In the case of 
                        an insurance policy which is sold by the 
                        depository institution, or any affiliate of the 
                        institution, as agent, the product is not an 
                        obligation of or guaranteed by the depository 
                        institution.
                            ``(iii) Investment risk.--In the case of an 
                        investment product, variable annuity, or other 
                        product which involves an investment risk, that 
                        there is an investment risk associated with the 
                        product, including possible loss of value.
                            ``(iv) Coercion.--The approval of an 
                        extension of credit may not be conditioned on--
                                    ``(I) the purchase of a nondeposit 
                                product from the institution in which 
                                the application for credit is pending 
                                or any of affiliate of the institution; 
                                or
                                    ``(II) an agreement by the customer 
                                not to obtain, or a prohibition on the 
                                customer from obtaining, a nondeposit 
                                product from an unaffiliated entity.
                    ``(B) Making disclosure readily understandable.--
                Regulations prescribed under subparagraph (A) shall 
                encourage the use of disclosure that is conspicuous, 
                simple, direct, and readily understandable, such as the 
                following:
                            ``(i) `NOT FDIC-INSURED'.
                            ``(ii) `NOT GUARANTEED BY THE BANK'.
                            ``(iii) `MAY GO DOWN IN VALUE'.
                    ``(C) Adjustments for alternative methods of 
                purchase.--In prescribing the requirements under 
                subparagraphs (A) and (D), necessary adjustments shall 
                be made for purchase in person, by telephone, or by 
                electronic media to provide for the most appropriate 
                and complete form of disclosure and acknowledgments.
                    ``(D) Customer acknowledgment.--A requirement that 
                an insured depository institution shall require any 
                person selling a nondeposit product at any office of, 
                or on behalf of, the institution to obtain, at the time 
                a customer receives the disclosures required under this 
                paragraph or at the time of the initial purchase by the 
                customer of such product, an acknowledgment by such 
                customer of the receipt of the disclosure required 
                under this paragraph 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 nondeposit 
                product sold, or offered for sale, by the institution 
                or any subsidiary of the institution; or
                    ``(B) in the case of a nondeposit product that 
                involves an investment risk, the investment risk 
                associated with any such product.
    ``(d) Separation of Banking and Nonbanking Activities.--
            ``(1) Regulations required.--The regulations prescribed 
        pursuant to subsection (a) shall include such provisions as the 
        Federal banking agencies consider appropriate to ensure that 
        the routine acceptance of deposits is kept, to the extent 
        practicable, physically segregated from nondeposit product 
        activity.
            ``(2) Requirements.--Regulations prescribed pursuant to 
        paragraph (1) shall include the following requirements:
                    ``(A) Separate setting.--A clear delineation of the 
                setting in which, and the circumstances under which, 
                transactions involving nondeposit 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 nondeposit 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 nondeposit 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) Customer Grievance Process.--The Federal banking agencies 
shall jointly establish a customer complaint mechanism, for receiving 
and expeditiously addressing customer complaints alleging a violation 
of regulations issued under this section, which mechanism 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 customers 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.
    ``(f) 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 nondeposit product by any insured depository 
                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, the Director 
                of the Office of Thrift Supervision, 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.''.
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