[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 900 Enrolled Bill (ENR)]
S.900
One Hundred Sixth Congress
of the
United States of America
AT THE FIRST SESSION
Begun and held at the City of Washington on Wednesday,
the sixth day of January, one thousand nine hundred and ninety-nine
An Act
To enhance competition in the financial services industry by providing a
prudential framework for the affiliation of banks, securities firms,
insurance companies, and other financial service providers, and for
other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Gramm-Leach-Bliley
Act''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
TITLE I--FACILITATING AFFILIATION AMONG BANKS, SECURITIES FIRMS, AND
INSURANCE COMPANIES
Subtitle A--Affiliations
Sec. 101. Glass-Steagall Act repeals.
Sec. 102. Activity restrictions applicable to bank holding companies
that are not financial holding companies.
Sec. 103. Financial activities.
Sec. 104. Operation of State law.
Sec. 105. Mutual bank holding companies authorized.
Sec. 106. Prohibition on deposit production offices.
Sec. 107. Cross marketing restriction; limited purpose bank relief;
divestiture.
Sec. 108. Use of subordinated debt to protect financial system and
deposit funds from ``too big to fail'' institutions.
Sec. 109. Study of financial modernization's effect on the accessibility
of small business and farm loans.
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. Role of the Board of Governors of the Federal Reserve System.
Sec. 114. Prudential safeguards.
Sec. 115. Examination of investment companies.
Sec. 116. Elimination of application requirement for financial holding
companies.
Sec. 117. Preserving the integrity of FDIC resources.
Sec. 118. Repeal of savings bank provisions in the Bank Holding Company
Act of 1956.
Sec. 119. Technical amendment.
Subtitle C--Subsidiaries of National Banks
Sec. 121. Subsidiaries of national banks.
Sec. 122. Consideration of merchant banking activities by financial
subsidiaries.
Subtitle D--Preservation of FTC Authority
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.
Subtitle E--National Treatment
Sec. 141. Foreign banks that are financial holding companies.
Sec. 142. Representative offices.
Subtitle F--Direct Activities of Banks
Sec. 151. Authority of national banks to underwrite certain municipal
bonds.
Subtitle G--Effective Date
Sec. 161. Effective date.
TITLE II--FUNCTIONAL REGULATION
Subtitle A--Brokers and Dealers
Sec. 201. Definition of broker.
Sec. 202. Definition of dealer.
Sec. 203. Registration for sales of private securities offerings.
Sec. 204. Information sharing.
Sec. 205. Treatment of new hybrid products.
Sec. 206. Definition of identified banking product.
Sec. 207. Additional definitions.
Sec. 208. Government securities defined.
Sec. 209. Effective date.
Sec. 210. Rule of construction.
Subtitle B--Bank Investment Company Activities
Sec. 211. Custody of investment company assets by affiliated bank.
Sec. 212. Lending to an affiliated investment company.
Sec. 213. Independent directors.
Sec. 214. Additional SEC disclosure authority.
Sec. 215. Definition of broker under the Investment Company Act of 1940.
Sec. 216. Definition of dealer under the Investment Company Act of 1940.
Sec. 217. Removal of the exclusion from the definition of investment
adviser for banks that advise investment companies.
Sec. 218. Definition of broker under the Investment Advisers Act of
1940.
Sec. 219. Definition of dealer under the Investment Advisers Act of
1940.
Sec. 220. Interagency consultation.
Sec. 221. Treatment of bank common trust funds.
Sec. 222. Statutory disqualification for bank wrongdoing.
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--Banks and Bank Holding Companies
Sec. 241. Consultation.
TITLE III--INSURANCE
Subtitle A--State Regulation of Insurance
Sec. 301. Functional regulation of insurance.
Sec. 302. Insurance underwriting in national banks.
Sec. 303. Title insurance activities of national banks and their
affiliates.
Sec. 304. Expedited and equalized dispute resolution for Federal
regulators.
Sec. 305. Insurance customer protections.
Sec. 306. Certain State affiliation laws preempted for insurance
companies and affiliates.
Sec. 307. Interagency consultation.
Sec. 308. Definition of State.
Subtitle B--Redomestication of Mutual Insurers
Sec. 311. General application.
Sec. 312. Redomestication of mutual insurers.
Sec. 313. Effect on State laws restricting redomestication.
Sec. 314. Other provisions.
Sec. 315. Definitions.
Sec. 316. Effective date.
Subtitle C--National Association of Registered Agents and Brokers
Sec. 321. State flexibility in multistate licensing reforms.
Sec. 322. National Association of Registered Agents and Brokers.
Sec. 323. Purpose.
Sec. 324. Relationship to the Federal Government.
Sec. 325. Membership.
Sec. 326. Board of directors.
Sec. 327. Officers.
Sec. 328. Bylaws, rules, and disciplinary action.
Sec. 329. Assessments.
Sec. 330. Functions of the NAIC.
Sec. 331. Liability of the association and the directors, officers, and
employees of the association.
Sec. 332. Elimination of NAIC oversight.
Sec. 333. Relationship to State law.
Sec. 334. Coordination with other regulators.
Sec. 335. Judicial review.
Sec. 336. Definitions.
Subtitle D--Rental Car Agency Insurance Activities
Sec. 341. Standard of regulation for motor vehicle rentals.
TITLE IV--UNITARY SAVINGS AND LOAN HOLDING COMPANIES
Sec. 401. Prevention of creation of new S&L holding companies with
commercial affiliates.
TITLE V--PRIVACY
Subtitle A--Disclosure of Nonpublic Personal Information
Sec. 501. Protection of nonpublic personal information.
Sec. 502. Obligations with respect to disclosures of personal
information.
Sec. 503. Disclosure of institution privacy policy.
Sec. 504. Rulemaking.
Sec. 505. Enforcement.
Sec. 506. Protection of Fair Credit Reporting Act.
Sec. 507. Relation to State laws.
Sec. 508. Study of information sharing among financial affiliates.
Sec. 509. Definitions.
Sec. 510. Effective date.
Subtitle B--Fraudulent Access to Financial Information
Sec. 521. Privacy protection for customer information of financial
institutions.
Sec. 522. Administrative enforcement.
Sec. 523. Criminal penalty.
Sec. 524. Relation to State laws.
Sec. 525. Agency guidance.
Sec. 526. Reports.
Sec. 527. Definitions.
TITLE VI--FEDERAL HOME LOAN BANK SYSTEM MODERNIZATION
Sec. 601. Short title.
Sec. 602. Definitions.
Sec. 603. Savings association membership.
Sec. 604. Advances to members; collateral.
Sec. 605. Eligibility criteria.
Sec. 606. Management of banks.
Sec. 607. Resolution Funding Corporation.
Sec. 608. Capital structure of Federal home loan banks.
TITLE VII--OTHER PROVISIONS
Subtitle A--ATM Fee Reform
Sec. 701. Short title.
Sec. 702. Electronic fund transfer fee disclosures at any host ATM.
Sec. 703. Disclosure of possible fees to consumers when ATM card is
issued.
Sec. 704. Feasibility study.
Sec. 705. No liability if posted notices are damaged.
Subtitle B--Community Reinvestment
Sec. 711. CRA sunshine requirements.
Sec. 712. Small bank regulatory relief.
Sec. 713. Federal Reserve Board study of CRA lending.
Sec. 714. Preserving the Community Reinvestment Act of 1977.
Sec. 715. Responsiveness to community needs for financial services.
Subtitle C--Other Regulatory Improvements
Sec. 721. Expanded small bank access to S corporation treatment.
Sec. 722. ``Plain language'' requirement for Federal banking agency
rules.
Sec. 723. Retention of ``Federal'' in name of converted Federal savings
association.
Sec. 724. Control of bankers' banks.
Sec. 725. Provision of technical assistance to microenterprises.
Sec. 726. Federal Reserve audits.
Sec. 727. Authorization to release reports.
Sec. 728. General Accounting Office study of conflicts of interest.
Sec. 729. Study and report on adapting existing legislative requirements
to online banking and lending.
Sec. 730. Clarification of source of strength doctrine.
Sec. 731. Interest rates and other charges at interstate branches.
Sec. 732. Interstate branches and agencies of foreign banks.
Sec. 733. Fair treatment of women by financial advisers.
Sec. 734. Membership of loan guarantee boards.
Sec. 735. Repeal of stock loan limit in Federal Reserve Act.
Sec. 736. Elimination of SAIF and DIF special reserves.
Sec. 737. Bank officers and directors as officers and directors of
public utilities.
Sec. 738. Approval for purchases of securities.
Sec. 739. Optional conversion of Federal savings associations.
Sec. 740. Grand jury proceedings.
TITLE I--FACILITATING AFFILIATION AMONG BANKS, SECURITIES FIRMS, AND
INSURANCE COMPANIES
Subtitle A--Affiliations
SEC. 101. GLASS-STEAGALL ACT REPEALS.
(a) Section 20 Repealed.--Section 20 of the Banking Act of 1933 (12
U.S.C. 377) (commonly referred to as the ``Glass-Steagall Act'') is
repealed.
(b) Section 32 Repealed.--Section 32 of the Banking Act of 1933 (12
U.S.C. 78) is repealed.
SEC. 102. ACTIVITY RESTRICTIONS APPLICABLE TO BANK HOLDING
COMPANIES THAT ARE NOT FINANCIAL HOLDING COMPANIES.
(a) In General.--Section 4(c)(8) of the Bank Holding Company Act of
1956 (12 U.S.C. 1843(c)(8)) is amended to read as follows:
``(8) shares of any company the activities of which had been
determined by the Board by regulation or order under this paragraph
as of the day before the date of the enactment of the Gramm-Leach-
Bliley 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 or order, unless modified by the Board);''.
(b) Conforming Changes to Other Statutes.--
(1) Amendment to the bank holding company act amendments of
1970.--Section 105 of the Bank Holding Company Act Amendments of
1970 (12 U.S.C. 1850) is amended by striking ``, to engage directly
or indirectly in a nonbanking activity pursuant to section 4 of
such Act,''.
(2) Amendment to the bank service company act.--Section 4(f) of
the Bank Service Company Act (12 U.S.C. 1864(f)) is amended by
inserting before the period at the end the following: ``as of the
day before the date of the enactment of the Gramm-Leach-Bliley
Act''.
SEC. 103. FINANCIAL ACTIVITIES.
(a) In General.--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 That Are Financial in Nature.--
``(1) In general.--Notwithstanding subsection (a), a financial
holding company may engage in any activity, and may acquire and
retain the shares of any company engaged in any activity, that the
Board, in accordance with paragraph (2), determines (by regulation
or order)--
``(A) to be financial in nature or incidental to such
financial activity; or
``(B) is complementary to a financial activity and does not
pose a substantial risk to the safety or soundness of
depository institutions or the financial system generally.
``(2) Coordination between the board and the secretary of the
treasury.--
``(A) Proposals raised before the board.--
``(i) Consultation.--The Board shall notify the
Secretary of the Treasury of, and consult with the
Secretary of the Treasury concerning, any request,
proposal, or application under this subsection for a
determination of whether an activity is financial in nature
or incidental to a financial activity.
``(ii) Treasury view.--The Board shall not determine
that any activity is financial in nature or incidental to a
financial activity under this subsection if the Secretary
of the Treasury notifies the Board in writing, not later
than 30 days after the date of receipt of the notice
described in clause (i) (or such longer period as the Board
determines to be appropriate under the circumstances) that
the Secretary of the Treasury believes that the activity is
not financial in nature or incidental to a financial
activity or is not otherwise permissible under this
section.
``(B) Proposals raised by the treasury.--
``(i) Treasury recommendation.--The Secretary of the
Treasury may, at any time, recommend in writing that the
Board find an activity to be financial in nature or
incidental to a financial activity.
``(ii) Time period for board action.--Not later than 30
days after the date of receipt of a written recommendation
from the Secretary of the Treasury under clause (i) (or
such longer period as the Secretary of the Treasury and the
Board determine to be appropriate under the circumstances),
the Board shall determine whether to initiate a public
rulemaking proposing that the recommended activity be found
to be financial in nature or incidental to a financial
activity under this subsection, and shall notify the
Secretary of the Treasury in writing of the determination
of the Board and, if the Board determines not to seek
public comment on the proposal, the reasons for that
determination.
``(3) Factors to be considered.--In determining whether an
activity is financial in nature or incidental to a financial
activity, the Board shall take into account--
``(A) the purposes of this Act and the Gramm-Leach-Bliley
Act;
``(B) changes or reasonably expected changes in the
marketplace in which financial holding companies compete;
``(C) changes or reasonably expected changes in the
technology for delivering financial services; and
``(D) whether such activity is necessary or appropriate to
allow a financial holding company and the affiliates of a
financial holding company to--
``(i) compete effectively with any company seeking to
provide financial services in the United States;
``(ii) efficiently deliver information and services
that are financial in nature through the use of
technological means, including any application necessary to
protect the security or efficacy of systems for the
transmission of data or financial transactions; and
``(iii) offer customers any available or emerging
technological means for using financial services or for the
document imaging of data.
``(4) Activities that are financial in nature.--For purposes of
this subsection, 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.
``(C) Providing financial, investment, or economic advisory
services, including advising an investment company (as defined
in section 3 of the Investment Company Act of 1940).
``(D) Issuing or selling instruments representing interests
in pools of assets permissible for a bank to hold directly.
``(E) Underwriting, dealing in, or making a market in
securities.
``(F) Engaging in any activity that the Board has
determined, by order or regulation that is in effect on the
date of the enactment of the Gramm-Leach-Bliley 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 of
the United States; and
``(ii) the Board has determined, under regulations
prescribed or interpretations issued pursuant to subsection
(c)(13) (as in effect on the day before the date of the
enactment of the Gramm-Leach-Bliley 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 debt or equity securities, partnership
interests, trust certificates, or other instruments
representing ownership) of a company or other entity, whether
or not constituting control of such company or entity, engaged
in any activity not authorized pursuant to this section if--
``(i) the shares, assets, or ownership interests are
not acquired or held by a depository institution or
subsidiary of a depository institution;
``(ii) such shares, assets, or ownership interests are
acquired and held by--
``(I) a securities affiliate or an affiliate
thereof; or
``(II) an affiliate of an insurance company
described in subparagraph (I)(ii) that provides
investment advice to an insurance company and is
registered pursuant to the Investment Advisers Act of
1940, or an affiliate of such investment adviser;
as part of a bona fide underwriting or merchant or
investment banking activity, including investment
activities engaged in for the purpose of appreciation and
ultimate resale or disposition of the investment;
``(iii) such shares, assets, or ownership interests are
held for a period of time to enable the sale or disposition
thereof on a reasonable basis consistent with the financial
viability 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 routinely manage or operate such company or entity
except as may be necessary or required to obtain a
reasonable return on investment upon resale or disposition.
``(I) Directly or indirectly acquiring or controlling,
whether as principal, on behalf of 1 or more entities
(including entities, other than a depository institution or
subsidiary of a depository institution, that the bank holding
company controls) or otherwise, shares, assets, or ownership
interests (including debt or equity securities, partnership
interests, trust certificates or other instruments representing
ownership) of a company or other entity, whether or not
constituting control of such company or entity, engaged in any
activity not authorized pursuant to this section if--
``(i) the shares, assets, or ownership interests are
not acquired or held by a depository institution or a
subsidiary of a depository institution;
``(ii) such shares, assets, or ownership interests are
acquired and held by an insurance company that is
predominantly engaged in underwriting life, accident and
health, or property and casualty insurance (other than
credit-related insurance) or providing and issuing
annuities;
``(iii) such shares, assets, or ownership interests
represent an investment made in the ordinary course of
business of such insurance company in accordance with
relevant State law governing such investments; and
``(iv) during the period such shares, assets, or
ownership interests are held, the bank holding company does
not routinely manage or operate such company except as may
be necessary or required to obtain a reasonable return on
investment.
``(5) Actions required.--
``(A) In general.--The Board shall, by regulation or order,
define, consistent with the purposes of this Act, the
activities described in subparagraph (B) as financial in
nature, and the extent to which such activities are financial
in nature or incidental to a financial activity.
``(B) Activities.--The activities described in this
subparagraph are as follows:
``(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.
``(6) Required notification.--
``(A) In general.--A financial holding company that
acquires any company or commences any activity pursuant to this
subsection shall provide written notice to the Board describing
the activity commenced or conducted by the company acquired not
later than 30 calendar days after commencing the activity or
consummating the acquisition, as the case may be.
``(B) Approval not required for certain financial
activities.--Except as provided in subsection (j) with regard
to the acquisition of a savings association, a financial
holding company may commence any activity, or acquire any
company, pursuant to paragraph (4) or any regulation prescribed
or order issued under paragraph (5), without prior approval of
the Board.
``(7) Merchant banking activities.--
``(A) Joint regulations.--The Board and the Secretary of
the Treasury may issue such regulations implementing paragraph
(4)(H), including limitations on transactions between
depository institutions and companies
controlled pursuant to such paragraph, as the Board and the
Secretary jointly deem appropriate to assure compliance with
the purposes and prevent evasions of this Act and the Gramm-
Leach-Bliley Act and to protect depository institutions.
``(B) Sunset of restrictions on merchant banking activities
of financial subsidiaries.--The restrictions contained in
paragraph (4)(H) on the ownership and control of shares,
assets, or ownership interests by or on behalf of a subsidiary
of a depository institution shall not apply to a financial
subsidiary (as defined in section 5136A of the Revised Statutes
of the United States) of a bank, if the Board and the Secretary
of the Treasury jointly authorize financial subsidiaries of
banks to engage in merchant banking activities pursuant to
section 122 of the Gramm-Leach-Bliley Act.
``(l) Conditions for Engaging in Expanded Financial Activities.--
``(1) In general.--Notwithstanding subsection (k), (n), or (o),
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), (n), or (o), other than
activities permissible for any bank holding company under
subsection (c)(8), unless--
``(A) all of the depository institution subsidiaries of the
bank holding company are well capitalized;
``(B) all of the depository institution subsidiaries of the
bank holding company are well managed; and
``(C) the bank holding company has filed with the Board--
``(i) a declaration that the company elects to be a
financial holding company to engage in activities or
acquire and retain shares of a company that were not
permissible for a bank holding company to engage in or
acquire before the enactment of the Gramm-Leach-Bliley Act;
and
``(ii) a certification that the company meets the
requirements of subparagraphs (A) and (B).
``(2) CRA requirement.--Notwithstanding subsection (k) or (n)
of this section, section 5136A(a) of the Revised Statutes of the
United States, or section 46(a) of the Federal Deposit Insurance
Act, the appropriate Federal banking agency shall prohibit a
financial holding company or any insured depository institution
from--
``(A) commencing any new activity under subsection (k) or
(n) of this section, section 5136A(a) of the Revised Statutes
of the United States, or section 46(a) of the Federal Deposit
Insurance Act; or
``(B) directly or indirectly acquiring control of a company
engaged in any activity under subsection (k) or (n) of this
section, section 5136A(a) of the Revised Statutes of the United
States, or section 46(a) of the Federal Deposit Insurance Act
(other than an investment made pursuant to subparagraph (H) or
(I) of subsection (k)(4), or section 122 of the Gramm-Leach-
Bliley Act, or under section 46(a) of the Federal Deposit
Insurance Act by reason of such section 122, by an affiliate
already engaged in activities under any such provision);
if any insured depository institution subsidiary of such financial
holding company, or the insured depository institution or any of
its insured depository institution affiliates, has received in its
most recent examination under the Community Reinvestment Act of
1977, a rating of less than `satisfactory record of meeting
community credit needs'.
``(3) Foreign banks.--For purposes of paragraph (1), the Board
shall apply comparable capital and management standards to a
foreign bank that operates a branch or agency or owns or controls a
commercial lending company in the United States, giving due regard
to the principle of national treatment and equality of competitive
opportunity.
``(m) Provisions Applicable to Financial Holding Companies That
Fail To Meet Certain Requirements.--
``(1) In general.--If the Board finds that--
``(A) a financial holding company is engaged, directly or
indirectly, in any activity under subsection (k), (n), or (o),
other than activities that are permissible for a bank holding
company under subsection (c)(8); and
``(B) such financial holding company is not in compliance
with the requirements of subsection (l)(1);
the Board shall give notice to the financial holding company to
that effect, describing the conditions giving rise to the notice.
``(2) Agreement to correct conditions required.--Not later than
45 days after the date of receipt by a financial holding company of
a notice given under paragraph (1) (or such additional period as
the Board may permit), the financial holding company shall execute
an agreement with the Board to comply with the requirements
applicable to a financial holding company under subsection (l)(1).
``(3) Board may impose limitations.--Until the conditions
described in a notice to a financial holding company under
paragraph (1) are corrected, the Board may impose such limitations
on the conduct or activities of that financial holding company or
any affiliate of that company as the Board determines to be
appropriate under the circumstances and consistent with the
purposes of this Act.
``(4) Failure to correct.--If the conditions described in a
notice to a financial holding company under paragraph (1) are not
corrected within 180 days after the date of receipt by the
financial holding company of a notice under paragraph (1), the
Board may require such financial holding 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 discretion of the Board,
either--
``(A) to divest control of any subsidiary depository
institution; or
``(B) at the election of the financial holding company
instead to cease to engage in any activity conducted by such
financial holding 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).
``(5) Consultation.--In taking any action under this
subsection, the Board shall consult with all relevant Federal and
State regulatory agencies and authorities.
``(n) Authority To Retain Limited Nonfinancial Activities and
Affiliations.--
``(1) In general.--Notwithstanding subsection (a), a company
that is not a bank holding company or a foreign bank (as defined in
section 1(b)(7) of the International Banking Act of 1978) and
becomes a financial holding company after the date of the enactment
of the Gramm-Leach-Bliley Act may continue to engage in any
activity and retain direct or indirect ownership or control of
shares of a company engaged in any activity if--
``(A) the holding company lawfully was engaged in the
activity or held the shares of such company on September 30,
1999;
``(B) the holding company is predominantly engaged in
financial activities as defined in paragraph (2); and
``(C) the company engaged in such activity continues to
engage only in the same activities that such company conducted
on September 30, 1999, and other activities permissible under
this Act.
``(2) Predominantly financial.--For purposes of this
subsection, a company is predominantly engaged in financial
activities if the annual gross revenues derived by the holding
company and all subsidiaries of the holding company (excluding
revenues derived from subsidiary depository institutions), on a
consolidated basis, from engaging in activities that are financial
in nature or are incidental to a financial activity under
subsection (k) represent at least 85 percent of the consolidated
annual gross revenues of the company.
``(3) No expansion of grandfathered commercial activities
through merger or consolidation.--A financial holding company that
engages in activities or holds shares pursuant to this subsection,
or a subsidiary of such financial holding company, may not acquire,
in any merger, consolidation, or other type of business
combination, assets of any other company that is engaged in any
activity that the Board has not determined to be financial in
nature or incidental to a financial activity under subsection (k),
except this paragraph shall not apply with respect to a company
that owns a broadcasting station licensed under title III of the
Communications Act of 1934 and the shares of which are under common
control with an insurance company since January 1, 1998, unless
such company is acquired by, or otherwise becomes an affiliate of,
a bank holding company that, at the time such acquisition or
affiliation is consummated, is 1 of the 5 largest domestic bank
holding companies (as determined on the basis of the consolidated
total assets of such companies).
``(4) Continuing revenue limitation on grandfathered commercial
activities.--Notwithstanding any other provision of this
subsection, a financial holding company may continue to engage in
activities or hold shares in companies pursuant to this subsection
only to the extent that the aggregate annual gross revenues derived
from all such activities and all such companies does not exceed 15
percent of the consolidated annual gross revenues of the financial
holding company (excluding revenues derived from subsidiary
depository institutions).
``(5) Cross marketing restrictions applicable to commercial
activities.--
``(A) In general.--A depository institution controlled by a
financial holding company shall not--
``(i) offer or market, directly or through any
arrangement, any product or service of a company whose
activities are conducted or whose shares are owned or
controlled by the financial holding company pursuant to
this subsection or subparagraph (H) or (I) of subsection
(k)(4); or
``(ii) permit any of its products or services to be
offered or marketed, directly or through any arrangement,
by or through any company described in clause (i).
``(B) Rule of construction.--Subparagraph (A) shall not be
construed as prohibiting an arrangement between a depository
institution and a company owned or controlled pursuant to
subsection (k)(4)(I) for the marketing of products or services
through statement inserts or Internet websites if--
``(i) such arrangement does not violate section 106 of
the Bank Holding Company Act Amendments of 1970; and
``(ii) the Board determines that the arrangement is in
the public interest, does not undermine the separation of
banking and commerce, and is consistent with the safety and
soundness of depository institutions.
``(6) Transactions with nonfinancial affiliates.--A depository
institution controlled by a financial holding company may not
engage in a covered transaction (as defined in section 23A(b)(7) of
the Federal Reserve Act) with any affiliate controlled by the
company pursuant to this subsection.
``(7) Sunset of grandfather.--A financial holding company
engaged in any activity, or retaining direct or indirect ownership
or control of shares of a company, pursuant to this subsection,
shall terminate such activity and divest ownership or control of
the shares of such company before the end of the 10-year period
beginning on the date of the enactment of the Gramm-Leach-Bliley
Act. The Board may, upon application by a financial holding
company, extend such 10-year period by a period not to exceed an
additional 5 years if such extension would not be detrimental to
the public interest.
``(o) Regulation of Certain Financial Holding Companies.--
Notwithstanding subsection (a), a company that is not a bank holding
company or a foreign bank (as defined in section 1(b)(7) of the
International Banking Act of 1978) and becomes a financial holding
company after the date of enactment of the Gramm-Leach-Bliley Act, may
continue to engage in, or directly or indirectly own or control shares
of a company engaged in, activities related to the trading, sale, or
investment in commodities and underlying physical properties that were
not permissible for bank holding companies to conduct in the United
States as of September 30, 1997, if--
``(1) the holding company, or any subsidiary of the holding
company, lawfully was engaged, directly or indirectly, in any of
such activities as of September 30, 1997, in the United States;
``(2) the attributed aggregate consolidated assets of the
company held by the holding company pursuant to this subsection,
and not otherwise permitted to be held by a financial holding
company, are equal to not more than 5 percent of the total
consolidated assets of the bank holding company, except that the
Board may increase that percentage by such amounts and under such
circumstances as the Board considers appropriate, consistent with
the purposes of this Act; and
``(3) the holding company does not permit--
``(A) any company, the shares of which it owns or controls
pursuant to this subsection, to offer or market any product or
service of an affiliated depository institution; or
``(B) any affiliated depository institution to offer or
market any product or service of any company, the shares of
which are owned or controlled by such holding company pursuant
to this subsection.''.
(b) Community Reinvestment Requirement.--Section 804 of the
Community Reinvestment Act of 1977 (12 U.S.C. 2903) is amended by
adding at the end the following new subsection:
``(c) Financial Holding Company Requirement.--
``(1) In general.--An election by a bank holding company to
become a financial holding company under section 4 of the Bank
Holding Company Act of 1956 shall not be effective if--
``(A) the Board finds that, as of the date the declaration
of such election and the certification is filed by such holding
company under section 4(l)(1)(C) of the Bank Holding Company
Act of 1956, not all of the subsidiary insured depository
institutions of the bank holding company had achieved a rating
of `satisfactory record of meeting community credit needs', or
better, at the most recent examination of each such
institution; and
``(B) the Board notifies the company of such finding before
the end of the 30-day period beginning on such date.
``(2) Limited exclusions for newly acquired insured depository
institutions.--Any insured depository institution acquired by a
bank holding company during the 12-month period preceding the date
of the submission to the Board of the declaration and certification
under section 4(l)(1)(C) of the Bank Holding Company Act of 1956
may be excluded for purposes of paragraph (1) during the 12-month
period beginning on the date of such acquisition if--
``(A) the bank holding company has submitted an affirmative
plan to the appropriate Federal financial supervisory agency to
take such action as may be necessary in order for such
institution to achieve a rating of `satisfactory record of
meeting community credit needs', or better, at the next
examination of the institution; and
``(B) the plan has been accepted by such agency.
``(3) Definitions.--For purposes of this subsection, the
following definitions shall apply:
``(A) Bank holding company; financial holding company.--The
terms `bank holding company' and `financial holding company'
have the meanings given those terms in section 2 of the Bank
Holding Company Act of 1956.
``(B) Board.--The term `Board' means the Board of Governors
of the Federal Reserve System.
``(C) Insured depository institution.--The term `insured
depository institution' has the meaning given the term in
section 3(c) of the Federal Deposit Insurance Act.''.
(c) Technical and Conforming Amendments.--
(1) Definitions.--Section 2 of the Bank Holding Company Act of
1956 (12 U.S.C. 1841) is amended--
(A) in subsection (n), by inserting ```depository
institution','' after ``the terms''; and
(B) by adding at the end the following new subsections:
``(p) Financial Holding Company.--For purposes of this Act, the
term `financial holding company' means a bank holding company that
meets the requirements of section 4(l)(1).
``(q) Insurance Company.--For purposes of sections 4 and 5, the
term `insurance company' includes any person engaged in the business of
insurance to the extent of such activities.''.
(2) Notice procedures.--Section 4(j) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1843(j)) is amended--
(A) in each of subparagraphs (A) and (E) of paragraph (1),
by inserting ``or in any complementary activity under
subsection (k)(1)(B)'' after ``subsection (c)(8) or (a)(2)'';
and
(B) in paragraph (3)--
(i) by inserting ``, other than any complementary
activity under subsection (k)(1)(B),'' after ``to engage in
any activity''; and
(ii) by inserting ``or a company engaged in any
complementary activity under subsection (k)(1)(B)'' after
``insured depository institution''.
(d) Report.--
(1) In general.--By the end of the 4-year period beginning on
the date of the enactment of this Act, the Board of Governors of
the Federal Reserve System and the Secretary of the Treasury shall
submit a joint report to the Congress containing a summary of new
activities, including grandfathered commercial activities, in which
any financial holding company is engaged pursuant to subsection
(k)(1) or (n) of section 4 of the Bank Holding Company Act of 1956
(as added by subsection (a)).
(2) Other contents.--The report submitted to the Congress
pursuant to paragraph (1) shall also contain the following:
(A) A discussion of actions by the Board of Governors of
the Federal Reserve System and the Secretary of the Treasury,
whether by regulation, order, interpretation, or guideline or
by approval or disapproval of an application, with regard to
activities of financial holding companies that are incidental
to activities that are financial in nature or complementary to
such financial activities.
(B) An analysis and discussion of the risks posed by
commercial activities of financial holding companies to the
safety and soundness of affiliate depository institutions.
(C) An analysis and discussion of the effect of mergers and
acquisitions under section 4(k) of the Bank Holding Company Act
of 1956 on market concentration in the financial services
industry.
SEC. 104. OPERATION OF STATE LAW.
(a) State Regulation of the Business of Insurance.--The Act
entitled ``An Act to express the intent of 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.
(b) Mandatory Insurance Licensing Requirements.--No person shall
engage in the business of insurance in a State as principal or agent
unless such person is licensed as required by the appropriate insurance
regulator of such State in accordance with the relevant State insurance
law, subject to subsections (c), (d), and (e).
(c) Affiliations.--
(1) In general.--Except as provided in paragraph (2), no State
may, by statute, regulation, order, interpretation, or other
action, prevent or restrict a depository institution, or an
affiliate thereof, from being affiliated directly or indirectly or
associated with any person, as authorized or permitted by this Act
or any other provision of Federal law.
(2) Insurance.--With respect to affiliations between depository
institutions, or any affiliate thereof, and any insurer, paragraph
(1) does not prohibit--
(A) any State from--
(i) collecting, reviewing, and taking actions
(including approval and disapproval) on applications and
other documents or reports concerning any proposed
acquisition of, or a change or continuation of control of,
an insurer domiciled in that State; and
(ii) exercising authority granted under applicable
State law to collect information concerning any proposed
acquisition of, or a change or continuation of control of,
an insurer engaged in the business of insurance in, and
regulated as an insurer by, such State;
during the 60-day period preceding the effective date of the
acquisition or change or continuation of control, so long as
the collecting, reviewing, taking actions, or exercising
authority by the State does not have the effect of
discriminating, intentionally or unintentionally, against a
depository institution or an affiliate thereof, or against any
other person based upon an association of such person with a
depository institution;
(B) any State from requiring any person that is acquiring
control of an insurer domiciled in that State to maintain or
restore the capital requirements of that insurer 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 insurer, 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); or
(C) any State from restricting a change in the ownership of
stock in an insurer, or a company formed for the purpose of
controlling such insurer, after the conversion of the insurer
from mutual to stock form so long as such restriction does not
have the effect of discriminating, intentionally or
unintentionally, against a depository institution or an
affiliate thereof, or against any other person based upon an
association of such person with a depository institution.
(d) Activities.--
(1) In general.--Except as provided in paragraph (3), and
except with respect to insurance sales, solicitation, and cross
marketing activities, which shall be governed by paragraph (2), no
State may, by statute, regulation, order, interpretation, or other
action, prevent or restrict a depository institution or an
affiliate thereof from engaging directly or indirectly, either by
itself or in conjunction with an affiliate, or any other person, in
any activity authorized or permitted under this Act and the
amendments made by this Act.
(2) Insurance sales.--
(A) In general.--In accordance with the legal standards for
preemption set forth in the decision of the Supreme Court of
the United States in Barnett Bank of Marion County N.A. v.
Nelson, 517 U.S. 25 (1996), no State may, by statute,
regulation, order, interpretation, or other action, prevent or
significantly interfere with the ability of a depository
institution, or an affiliate thereof, to engage, directly or
indirectly, either by itself or in conjunction with an
affiliate or any other person, in any insurance sales,
solicitation, or crossmarketing activity.
(B) Certain state laws preserved.--Notwithstanding
subparagraph (A), a State may impose any of the following
restrictions, or restrictions that are substantially the same
as but no more burdensome or restrictive than those in each of
the following clauses:
(i) Restrictions prohibiting the rejection of an
insurance policy by a depository institution or an
affiliate of a depository institution, solely because the
policy has been issued or underwritten by any person who is
not associated with such depository institution or
affiliate when the insurance is required in connection with
a loan or extension of credit.
(ii) Restrictions prohibiting a requirement for any
debtor, insurer, or insurance agent or broker to pay a
separate charge in connection with the handling of
insurance that is required in connection with a loan or
other extension of credit or the provision of another
traditional banking product by a depository institution, or
any affiliate of a depository institution, unless such
charge would be required when the depository institution or
affiliate is the licensed insurance agent or broker
providing the insurance.
(iii) Restrictions prohibiting the use of any
advertisement or other insurance promotional material by a
depository institution or any affiliate of a depository
institution that would cause a reasonable person to believe
mistakenly that--
(I) the Federal Government or a State is
responsible for the insurance sales activities of, or
stands behind the credit of, the institution or
affiliate; or
(II) a State, or the Federal Government guarantees
any returns on insurance products, or is a source of
payment on any insurance obligation of or sold by the
institution or affiliate;
(iv) Restrictions prohibiting the payment or receipt of
any commission or brokerage fee or other valuable
consideration for services as an insurance agent or broker
to or by any person, unless such person holds a valid State
license regarding the applicable class of insurance at the
time at which the services are performed, except that, in
this clause, the term ``services as an insurance agent or
broker'' does not include a referral by an unlicensed
person of a customer or potential customer to a licensed
insurance agent or broker that does not include a
discussion of specific insurance policy terms and
conditions.
(v) Restrictions prohibiting any compensation paid to
or received by any individual who is not licensed to sell
insurance, for the referral of a customer that seeks to
purchase, or seeks an opinion or advice on, any insurance
product to a person that sells or provides opinions or
advice on such product, based on the purchase of insurance
by the customer.
(vi) Restrictions prohibiting the release of the
insurance information of a customer (defined as information
concerning the premiums, terms, and conditions of insurance
coverage, including expiration dates and rates, and
insurance claims of a customer contained in the records of
the depository institution or an affiliate thereof) to any
person other than an officer, director, employee, agent, or
affiliate of a depository institution, for the purpose of
soliciting or selling insurance, without the express
consent of the customer, other than a provision that
prohibits--
(I) a transfer of insurance information to an
unaffiliated insurer in connection with transferring
insurance in force on existing insureds of the
depository institution or an affiliate thereof, or in
connection with a merger with or acquisition of an
unaffiliated insurer; or
(II) the release of information as otherwise
authorized by State or Federal law.
(vii) Restrictions prohibiting the use of health
information obtained from the insurance records of a
customer for any purpose, other than for its activities as
a licensed agent or broker, without the express consent of
the customer.
(viii) Restrictions prohibiting the extension of credit
or any product or service that is equivalent to an
extension of credit, lease or sale of property of any kind,
or furnishing of any services or fixing or varying the
consideration for any of the foregoing, on the condition or
requirement that the customer obtain insurance from a
depository institution or an affiliate of a depository
institution, or a particular insurer, agent, or broker,
other than a prohibition that would prevent any such
depository institution or affiliate--
(I) from engaging in any activity described in this
clause that would not violate section 106 of the Bank
Holding Company Act Amendments of 1970, as interpreted
by the Board of Governors of the Federal Reserve
System; or
(II) from informing a customer or prospective
customer that insurance is required in order to obtain
a loan or credit, that loan or credit approval is
contingent upon the procurement by the customer of
acceptable insurance, or that insurance is available
from the depository institution or an affiliate of the
depository institution.
(ix) Restrictions requiring, when an application by a
consumer for a loan or other extension of credit from a
depository institution is pending, and insurance is offered
or sold to the consumer or is required in connection with
the loan or extension of credit by the depository
institution or any affiliate thereof, that a written
disclosure be provided to the consumer or prospective
customer indicating that the customer's choice of an
insurance provider will not affect the credit decision or
credit terms in any way, except that the depository
institution may impose reasonable requirements concerning
the creditworthiness of the insurer and scope of coverage
chosen.
(x) Restrictions requiring clear and conspicuous
disclosure, in writing, where practicable, to the customer
prior to the sale of any insurance policy that such
policy--
(I) is not a deposit;
(II) is not insured by the Federal Deposit
Insurance Corporation;
(III) is not guaranteed by any depository
institution or, if appropriate, an affiliate of any
such institution or any person soliciting the purchase
of or selling insurance on the premises thereof; and
(IV) where appropriate, involves investment risk,
including potential loss of principal.
(xi) Restrictions requiring that, when a customer
obtains insurance (other than credit insurance or flood
insurance) and credit from a depository institution, or any
affiliate of such institution, or any person soliciting the
purchase of or selling insurance on the premises thereof,
the credit and insurance transactions be completed through
separate documents.
(xii) Restrictions prohibiting, when a customer obtains
insurance (other than credit insurance or flood insurance)
and credit from a depository institution or an affiliate of
such institution, or any person soliciting the purchase of
or selling insurance on the premises thereof, inclusion of
the expense of insurance premiums in the primary credit
transaction without the express written consent of the
customer.
(xiii) Restrictions requiring maintenance of separate
and distinct books and records relating to insurance
transactions, including all files relating to and
reflecting consumer complaints, and requiring that such
insurance books and records be made available to the
appropriate State insurance regulator for inspection upon
reasonable notice.
(C) Limitations.--
(i) OCC deference.--Section 304(e) does not apply with
respect to any State statute, regulation, order,
interpretation, or other action regarding insurance sales,
solicitation, or cross marketing activities described in
subparagraph (A) that was issued, adopted, or enacted
before September 3, 1998, and that is not described in
subparagraph (B).
(ii) Nondiscrimination.--Subsection (e) does not apply
with respect to any State statute, regulation, order,
interpretation, or other action regarding insurance sales,
solicitation, or cross marketing activities described in
subparagraph (A) that was issued, adopted, or enacted
before September 3, 1998, and that is not described in
subparagraph (B).
(iii) Construction.--Nothing in this paragraph shall be
construed--
(I) to limit the applicability of the decision of
the Supreme Court in Barnett Bank of Marion County N.A.
v. Nelson, 517 U.S. 25 (1996) with respect to any State
statute, regulation, order, interpretation, or other
action that is not referred to or described in
subparagraph (B); or
(II) to create any inference with respect to any
State statute, regulation, order, interpretation, or
other action that is not described in this paragraph.
(3) Insurance activities other than sales.--State statutes,
regulations, interpretations, orders, and other actions shall not
be preempted under paragraph (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 entitled ``An Act to express the intent of
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'');
(B) apply only to persons that are not 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 (e).
(4) Financial activities other than insurance.--No State
statute, regulation, order, interpretation, or other action shall
be preempted under paragraph (1) to the extent that--
(A) it does not relate to, and is not issued and adopted,
or enacted for the purpose of regulating, directly or
indirectly, insurance sales, solicitations, or cross marketing
activities covered under paragraph (2);
(B) it does not relate to, and is not issued and adopted,
or enacted for the purpose of regulating, directly or
indirectly, the business of insurance activities other than
sales, solicitations, or cross marketing activities, covered
under paragraph (3);
(C) it does not relate to securities investigations or
enforcement actions referred to in subsection (f); and
(D) it--
(i) does not distinguish by its terms between
depository institutions, and affiliates thereof, engaged in
the activity at issue and other persons 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
depository institution or affiliate engaged in the activity
at issue;
(ii) as interpreted or applied, does not have, and will
not have, an impact on depository institutions, or
affiliates thereof, engaged in the activity at issue, or
any person who has an association with any such depository
institution or affiliate, that is substantially more
adverse than its impact on other persons engaged in the
same activity that are not depository institutions or
affiliates thereof, or persons who do not have an
association with any such depository institution or
affiliate;
(iii) does not effectively prevent a depository
institution 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.
(e) Nondiscrimination.--Except as provided in any restrictions
described in subsection (d)(2)(B), no State may, by statute,
regulation, order, interpretation, or other action, regulate the
insurance activities authorized or permitted under this Act or any
other provision of Federal law of a depository institution, or
affiliate thereof, to the extent that such statute, regulation, order,
interpretation, or other action--
(1) distinguishes by its terms between depository institutions,
or affiliates thereof, and other persons engaged in such
activities, in a manner that is in any way adverse to any such
depository institution, or affiliate thereof;
(2) as interpreted or applied, has or will have an impact on
depository institutions, or affiliates thereof, that is
substantially more adverse than its impact on other persons
providing the same products or services or engaged in the same
activities that are not depository institutions, or affiliates
thereof, or persons or entities affiliated therewith;
(3) effectively prevents a depository institution, 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 depository institutions, or affiliates thereof, and persons
engaged in the business of insurance.
(f) Limitation.--Subsections (c) and (d) shall not be construed to
affect--
(1) the jurisdiction of the securities commission (or any
agency or office performing like functions) of any State, under the
laws of such State--
(A) to investigate and bring enforcement actions,
consistent with section 18(c) of the Securities Act of 1933,
with respect to fraud or deceit or unlawful conduct by any
person, in connection with securities or securities
transactions; or
(B) to require the registration of securities or the
licensure or registration of brokers, dealers, or investment
advisers (consistent with section 203A of the Investment
Advisers Act of 1940), or the associated persons of a broker,
dealer, or investment adviser (consistent with such section
203A); or
(2) 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 if such laws, regulations, orders, interpretations,
or other actions are not inconsistent with the purposes of this Act
to authorize or permit certain affiliations and to remove barriers
to such affiliations.
(g) Definitions.--For purposes of this section, the following
definitions shall apply:
(1) Affiliate.--The term ``affiliate'' means any company that
controls, is controlled by, or is under common control with another
company.
(2) Antitrust laws.--The term ``antitrust laws'' has the
meaning given the term 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).
(3) Depository institution.--The term ``depository
institution''--
(A) has the meaning given the term in section 3 of the
Federal Deposit Insurance Act; and
(B) includes any foreign bank that maintains a branch,
agency, or commercial lending company in the United States.
(4) Insurer.--The term ``insurer'' means any person engaged in
the business of insurance.
(5) State.--The term ``State'' means any State of the United
States, the District of Columbia, any territory of the United
States, Puerto Rico, Guam, American Samoa, the Trust Territory of
the Pacific Islands, the Virgin Islands, and the Northern Mariana
Islands.
SEC. 105. MUTUAL BANK HOLDING COMPANIES AUTHORIZED.
Section 3(g)(2) of the Bank Holding Company Act of 1956 (12 U.S.C.
1842(g)(2)) is amended to read as follows:
``(2) Regulations.--A bank holding company organized as a
mutual holding company shall be regulated on terms, and shall be
subject to limitations, comparable to those applicable to any other
bank holding company.''.
SEC. 106. PROHIBITION ON DEPOSIT PRODUCTION OFFICES.
Section 109(e)(4) of the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 (12 U.S.C. 1835a(e)(4)) is amended by
inserting ``and any branch of a bank controlled by an out-of-State bank
holding company (as defined in section 2(o)(7) of the Bank Holding
Company Act of 1956)'' before the period.
SEC. 107. CROSS MARKETING RESTRICTION; LIMITED PURPOSE BANK RELIEF;
DIVESTITURE.
(a) Cross Marketing Restriction.--Section 4(f) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1843(f)) is amended by striking
paragraph (3).
(b) Daylight Overdrafts.--Section 4(f) of the Bank Holding Company
Act of 1956 (12 U.S.C. 1843(f)) is amended by inserting after paragraph
(2) the following new paragraph:
``(3) Permissible overdrafts described.--For purposes of
paragraph (2)(C), an overdraft is described in this paragraph if--
``(A) such overdraft results from an inadvertent computer
or accounting error that is beyond the control of both the bank
and the affiliate;
``(B) such overdraft--
``(i) is permitted or incurred on behalf of an
affiliate that 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 that are direct
obligations of the United States or on which the principal
and interest are fully guaranteed by the United States or
by securities and obligations eligible for settlement on
the Federal Reserve book entry system; or
``(C) such overdraft--
``(i) is permitted or incurred by, or on behalf of, an
affiliate in connection with an activity that is financial
in nature or incidental to a financial activity; and
``(ii) does not cause the bank to violate any provision
of section 23A or 23B of the Federal Reserve Act, either
directly, in the case of a bank that is a member of the
Federal Reserve System, or by virtue of section 18(j) of
the Federal Deposit Insurance Act, in the case of a bank
that is not a member of the Federal Reserve System.''.
(c) 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 ``, or that is otherwise
permissible for a bank controlled by a company described in section
4(f)(1)'' before the period at the end.
(d) Activities Limitations.--Section 4(f)(2) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1843(f)(2)) is amended--
(1) by striking ``Paragraph (1) shall cease to apply to any
company described in such paragraph if--'' and inserting ``Subject
to paragraph (3), a company described in paragraph (1) shall no
longer qualify for the exemption provided under that paragraph if--
'';
(2) in subparagraph (A)--
(A) in clause (ii)(IX), by striking ``and'' at the end;
(B) in clause (ii)(X), by inserting ``and'' after the
semicolon;
(C) in clause (ii), by inserting after subclause (X) the
following new subclause:
``(XI) assets that are derived from, or incidental
to, activities in which institutions described in
subparagraph (F) or (H) of section 2(c)(2) are
permitted to engage;''; and
(D) by striking ``or'' at the end; and
(3) by striking subparagraph (B) and inserting the following:
``(B) any bank subsidiary of such company--
``(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 (except that, for purposes of this clause, loans made
in the ordinary course of a credit card operation shall not
be treated as commercial loans); or
``(C) 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 the account of the
bank at a Federal reserve bank, on behalf of an affiliate,
other than an overdraft described in paragraph (3).''.
(e) Divestiture Requirement.--Section 4(f)(4) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1843(f)(4)) is amended to read as
follows:
``(4) Divestiture in case of loss of exemption.--If any company
described in paragraph (1) fails to qualify for the exemption
provided under paragraph (1) 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 on which 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) either--
``(i) corrected the condition or ceased the activity
that caused the company to fail to continue to qualify for
the exemption; or
``(ii) submitted a plan to the Board for approval to
cease the activity or correct the condition in a timely
manner (which shall not exceed 1 year); and
``(B) implemented procedures that are reasonably adapted to
avoid the reoccurrence of such condition or activity.''.
(f) Foreign Bank Subsidiaries of Limited Purpose Credit Card
Banks.--Section 4(f) of the Bank Holding Company Act of 1956 (12 U.S.C.
1843(f)) is amended by adding at the end the following new paragraph:
``(14) Foreign bank subsidiaries of limited purpose credit card
banks.--
``(A) In general.--An institution described in section
2(c)(2)(F) may control a foreign bank if--
``(i) the investment of the institution in the foreign
bank meets the requirements of section 25 or 25A of the
Federal Reserve Act and the foreign bank qualifies under
such sections;
``(ii) the foreign bank does not offer any products or
services in the United States; and
``(iii) the activities of the foreign bank are
permissible under otherwise applicable law.
``(B) Other limitations inapplicable.--The limitations
contained in any clause of section 2(c)(2)(F) shall not apply
to a foreign bank described in subparagraph (A) that is
controlled by an institution described in such section.''.
SEC. 108. USE OF SUBORDINATED DEBT TO PROTECT FINANCIAL SYSTEM AND
DEPOSIT FUNDS FROM ``TOO BIG TO FAIL'' INSTITUTIONS.
(a) Study Required.--The Board of Governors of the Federal Reserve
System and the Secretary of the Treasury shall conduct a study of--
(1) the feasibility and appropriateness of establishing a
requirement that, with respect to large insured depository
institutions and depository institution holding companies the
failure of which could have serious adverse effects on economic
conditions or financial stability, such institutions and holding
companies maintain some portion of their capital in the form of
subordinated debt in order to bring market forces and market
discipline to bear on the operation of, and the assessment of the
viability of, such institutions and companies and reduce the risk
to economic conditions, financial stability, and any deposit
insurance fund;
(2) if such requirement is feasible and appropriate, the
appropriate amount or percentage of capital that should be
subordinated debt consistent with such purposes; and
(3) the manner in which any such requirement could be
incorporated into existing capital standards and other issues
relating to the transition to such a requirement.
(b) Report.--Before the end of the 18-month period beginning on the
date of the enactment of this Act, the Board of Governors of the
Federal Reserve System and the Secretary of the Treasury shall submit a
report to the Congress containing the findings and conclusions of the
Board and the Secretary in connection with the study required under
subsection (a), together with such legislative and administrative
proposals as the Board and the Secretary may determine to be
appropriate.
(c) Definitions.--For purposes of subsection (a), the following
definitions shall apply:
(1) Bank holding company.--The term ``bank holding company''
has the meaning given the term in section 2 of the Bank Holding
Company Act of 1956.
(2) Insured depository institution.--The term ``insured
depository institution'' has the meaning given the term in section
3(c) of the Federal Deposit Insurance Act.
(3) Subordinated debt.--The term ``subordinated debt'' means
unsecured debt that--
(A) has an original weighted average maturity of not less
than 5 years;
(B) is subordinated as to payment of principal and interest
to all other indebtedness of the bank, including deposits;
(C) is not supported by any form of credit enhancement,
including a guarantee or standby letter of credit; and
(D) is not held in whole or in part by any affiliate or
institution-affiliated party of the insured depository
institution or bank holding company.
SEC. 109. STUDY OF FINANCIAL MODERNIZATION'S EFFECT ON THE
ACCESSIBILITY OF SMALL BUSINESS AND FARM LOANS.
(a) Study.--The Secretary of the Treasury, in consultation with the
Federal banking agencies (as defined in section 3(z) of the Federal
Deposit Insurance Act), shall conduct a study of the extent to which
credit is being provided to and for small businesses and farms, as a
result of this Act and the amendments made by this Act.
(b) Report.--Before the end of the 5-year period beginning on the
date of the enactment of this Act, the Secretary, in consultation with
the Federal banking agencies, shall submit a report to the Congress on
the study conducted pursuant to subsection (a) and shall include such
recommendations as the Secretary determines to be appropriate for
administrative and legislative action.
Subtitle B--Streamlining Supervision of 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 a 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 bank holding company; and
``(ii) compliance by the company or subsidiary with
applicable provisions of this Act or any other Federal law
that the Board has specific jurisdiction to enforce against
such company or subsidiary.
``(B) Use of existing reports.--
``(i) In general.--For purposes of compliance with this
paragraph, the Board shall, to the fullest extent possible,
accept--
``(I) reports that a bank holding company or any
subsidiary of such company has provided or been
required to provide to other Federal or State
supervisors or to appropriate self-regulatory
organizations;
``(II) information that is otherwise required to be
reported publicly; and
``(III) externally audited financial statements.
``(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) Reports filed with other agencies.--
``(I) In general.--In the event that the Board
requires a report under this subsection from a
functionally regulated subsidiary of a bank holding
company of a kind that is not required by another
Federal or State regulatory authority or an appropriate
self-regulatory organization, the Board shall first
request that the appropriate regulatory authority or
self-regulatory organization obtain such report.
``(II) Availability from other subsidiary.--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 depository
institution subsidiaries or compliance with this Act or
any other Federal law that the Board has specific
jurisdiction to enforce against such company or
subsidiary or the systems described in paragraph
(2)(A)(ii)(II), the Board may require such functionally
regulated subsidiary to provide such a report to the
Board.
``(2) Examinations.--
``(A) Examination authority for bank holding companies and
subsidiaries.--Subject to subparagraph (B), the Board may make
examinations of each bank holding company and each subsidiary
of such holding company in order--
``(i) to inform the Board of the nature of the
operations and financial condition of the holding company
and such subsidiaries;
``(ii) to 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 depository institution
subsidiary of such holding company; and
``(II) the systems for monitoring and controlling
such risks; and
``(iii) to monitor compliance with the provisions of
this Act or any other Federal law that the Board has
specific jurisdiction to enforce against such company or
subsidiary and those governing transactions and
relationships between any depository institution subsidiary
and its affiliates.
``(B) Functionally regulated subsidiaries.--Notwithstanding
subparagraph (A), the Board may make examinations of a
functionally regulated 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;
``(ii) the Board reasonably determines, after reviewing
relevant reports, that examination of the subsidiary is
necessary to adequately inform the Board of the systems
described in subparagraph (A)(ii)(II); or
``(iii) 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 any
other Federal law that the Board has specific jurisdiction
to enforce against such subsidiary, including provisions
relating to transactions with an affiliated depository
institution, and the Board cannot make such determination
through examination of the affiliated depository
institution or the bank holding company.
``(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 bank holding company that
could have a materially adverse effect on the safety and
soundness of any depository institution subsidiary of the
holding company due to--
``(I) the size, condition, or activities of the
subsidiary; or
``(II) the nature or size of transactions between
the subsidiary and any depository institution that is
also a subsidiary of the bank holding company.
``(D) Deference to bank examinations.--The Board shall, to
the fullest extent possible, for the purposes of this
paragraph, use 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, forego an examination by the Board
under this paragraph and instead review 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 may not, by regulation,
guideline, order, or otherwise, prescribe or impose any capital
or capital adequacy rules, guidelines, standards, or
requirements on any functionally regulated subsidiary of a bank
holding company that--
``(i) is not a depository institution; and
``(ii) is--
``(I) in compliance with the applicable capital
requirements of its Federal regulatory authority
(including the Securities and Exchange Commission) or
State insurance authority;
``(II) properly registered as an investment adviser
under the Investment Advisers Act of 1940, or with any
State; or
``(III) is licensed as an insurance agent with the
appropriate State insurance authority.
``(B) Rule of construction.--Subparagraph (A) shall not be
construed as preventing the Board from imposing capital or
capital adequacy rules, guidelines, standards, or requirements
with respect to--
``(i) activities of a registered investment adviser
other than with respect to investment advisory activities
or activities incidental to investment advisory activities;
or
``(ii) activities of a licensed insurance agent other
than insurance agency activities or activities incidental
to insurance agency activities.
``(C) Limitations on indirect action.--In developing,
establishing, or assessing bank holding company capital or
capital adequacy rules, guidelines, standards, or requirements
for purposes of this paragraph, the Board may not take into
account the activities, operations, or investments of an
affiliated investment company registered under the Investment
Company Act of 1940, unless the investment company is--
``(i) a bank holding company; or
``(ii) controlled by a bank holding company by reason
of ownership by the bank holding company (including through
all of its affiliates) of 25 percent or more of the shares
of the investment company, and the shares owned by the bank
holding company have a market value equal to more than
$1,000,000.
``(4) Functional regulation of securities and insurance
activities.--
``(A) Securities activities.--Securities activities
conducted in a functionally regulated subsidiary of a
depository institution shall be subject to regulation by the
Securities and Exchange Commission, and by relevant State
securities authorities, as appropriate, subject to section 104
of the Gramm-Leach-Bliley Act, to the same extent as if they
were conducted in a nondepository institution subsidiary of a
bank holding company.
``(B) Insurance activities.--Subject to section 104 of the
Gramm-Leach-Bliley Act, insurance agency and brokerage
activities and activities as principal conducted in a
functionally regulated subsidiary of a depository institution
shall be subject to regulation by a State insurance authority
to the same extent as if they were conducted in a nondepository
institution subsidiary of a bank holding company.
``(5) Definition.--For purposes of this subsection, the term
`functionally regulated subsidiary' means any company--
``(A) that is not a bank holding company or a depository
institution; and
``(B) that is--
``(i) a broker or dealer that is registered under the
Securities Exchange Act of 1934;
``(ii) a registered investment adviser, properly
registered by or on behalf of either the Securities and
Exchange Commission or any State, with respect to the
investment advisory activities of such investment adviser
and activities incidental to such investment advisory
activities;
``(iii) an investment company that is registered under
the Investment Company Act of 1940;
``(iv) an insurance company, with respect to insurance
activities of the insurance company and activities
incidental to such insurance activities, that is subject to
supervision by a State insurance regulator; or
``(v) an entity that is 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. 112. AUTHORITY OF STATE INSURANCE REGULATOR AND SECURITIES AND
EXCHANGE COMMISSION.
(a) Bank Holding Companies.--Section 5 of the Bank Holding Company
Act of 1956 (12 U.S.C. 1844) is amended by adding at the end the
following new subsection:
``(g) Authority of State Insurance Regulator and the Securities and
Exchange Commission.--
``(1) In general.--Notwithstanding any other provision of law,
any regulation, order, or other action of the Board that requires a
bank holding company to provide funds or other assets to a
subsidiary depository institution shall not be effective nor
enforceable with respect to an entity described in subparagraph (A)
if--
``(A) such funds or assets are to be provided by--
``(i) a bank holding company that is an insurance
company, a broker or dealer registered under the Securities
Exchange Act of 1934, an investment company registered
under the Investment Company Act of 1940, or an investment
adviser registered by or on behalf of either the Securities
and Exchange Commission or any State; or
``(ii) an affiliate of the depository institution that
is an insurance company or a broker or dealer registered
under the Securities Exchange Act of 1934, an investment
company registered under the Investment Company Act of
1940, or an investment adviser registered by or on behalf
of either the Securities and Exchange Commission or any
State; and
``(B) the State insurance authority for the insurance
company or the Securities and Exchange Commission for the
registered broker, dealer, investment adviser (solely with
respect to investment advisory activities or activities
incidental thereto), or investment company, as the case may be,
determines in writing sent to the holding company and the Board
that the holding company shall not provide such funds or assets
because such action would have a material adverse effect on the
financial condition of the insurance company or the broker,
dealer, investment company, or investment adviser, as the case
may be.
``(2) Notice to state insurance authority or sec required.--If
the Board requires a bank holding company, or an affiliate of a
bank holding company, that is an insurance company or a broker,
dealer, investment company, or investment adviser described in
paragraph (1)(A) to provide funds or assets to a depository
institution subsidiary of the holding company pursuant to any
regulation, order, or other action of the Board referred to in
paragraph (1), the Board shall promptly notify the State insurance
authority for the insurance company, the Securities and Exchange
Commission, or State securities regulator, as the case may be, of
such requirement.
``(3) Divestiture in lieu of other action.--If the Board
receives a notice described in paragraph (1)(B) from a State
insurance authority or the Securities and Exchange Commission with
regard to a bank holding company or affiliate referred to in that
paragraph, the Board may order the bank holding company to divest
the depository institution not later than 180 days after receiving
the notice, or such longer period as the Board determines
consistent with the safe and sound operation of the 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 depository institution, including restricting or
prohibiting transactions between the depository institution and any
affiliate of the institution, as are appropriate under the
circumstances.
``(5) Rule of construction.--No provision of this subsection
may be construed as limiting or otherwise affecting, except to the
extent specifically provided in this subsection, the regulatory
authority, including the scope of the authority, of any Federal
agency or department with regard to any entity that is within the
jurisdiction of such agency or department.''.
(b) Subsidiaries of Depository Institutions.--The Federal Deposit
Insurance Act (12 U.S.C. 1811 et seq.) is amended by adding at the end
the following new section:
``SEC. 45. AUTHORITY OF STATE INSURANCE REGULATOR AND SECURITIES
AND EXCHANGE COMMISSION.
``(a) In General.--Notwithstanding any other provision of law, the
provisions of--
``(1) section 5(c) of the Bank Holding Company Act of 1956 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 holding companies and their
functionally regulated subsidiaries or that require deference to
other regulators;
``(2) section 5(g) of the Bank Holding Company Act of 1956 that
limit the authority of the Board to require a functionally
regulated subsidiary of a holding company to provide capital or
other funds or assets to a depository institution subsidiary of the
holding company and to take certain actions including requiring
divestiture of the depository institution; and
``(3) section 10A of the Bank Holding Company Act of 1956 that
limit whatever authority the Board might otherwise have to take
direct or indirect action with respect to holding companies and
their functionally regulated subsidiaries;
shall also limit whatever authority that a Federal banking agency might
otherwise have under any statute or regulation to require reports, make
examinations, impose capital requirements, or take any other direct or
indirect action with respect to any functionally regulated affiliate of
a depository institution, subject to the same standards and
requirements as are applicable to the Board under those provisions.
``(b) Certain Exemption Authorized.--No provision of this section
shall be construed as preventing the Corporation, if the Corporation
finds it necessary to determine the condition of a depository
institution for insurance purposes, from examining an affiliate of any
depository institution, pursuant to section 10(b)(4), 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.
``(c) Definitions.--For purposes of this section, the following
definitions shall apply:
``(1) Functionally regulated subsidiary.--The term
`functionally regulated subsidiary' has the meaning given the term
in section 5(c)(5) of the Bank Holding Company Act of 1956.
``(2) Functionally regulated affiliate.--The term `functionally
regulated affiliate' means, with respect to any depository
institution, any affiliate of such depository institution that is--
``(A) not a depository institution holding company; and
``(B) a company described in any clause of section
5(c)(5)(B) of the Bank Holding Company Act of 1956.''.
SEC. 113. ROLE OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE
SYSTEM.
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.--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 functionally regulated subsidiary of a bank holding
company unless--
``(1) 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; and
``(2) the Board finds that it is not reasonably possible to
protect effectively 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 that requires the bank holding
company to require a functionally regulated subsidiary of the holding
company to engage, or to refrain from engaging, in any conduct or
activities unless the Board could take such action directly against or
with respect to the functionally regulated subsidiary in accordance
with subsection (a).
``(c) Actions Specifically Authorized.--Notwithstanding subsection
(a) or (b), the Board may take action under this Act or section 8 of
the Federal Deposit Insurance Act to enforce compliance by a
functionally regulated subsidiary of a bank holding company with any
Federal law that the Board has specific jurisdiction to enforce against
such subsidiary.
``(d) Functionally Regulated Subsidiary Defined.--For purposes of
this section, the term `functionally regulated subsidiary' has the
meaning given the term in section 5(c)(5).''.
SEC. 114. PRUDENTIAL SAFEGUARDS.
(a) Comptroller of the Currency.--
(1) In general.--The Comptroller of the Currency may, by
regulation or order, impose restrictions or requirements on
relationships or transactions between a national bank and a
subsidiary of the national bank that the Comptroller finds are--
(A) consistent with the purposes of this Act, title LXII of
the Revised Statutes of the United States, and other Federal
law applicable to national banks; and
(B) appropriate to avoid any significant risk to the safety
and soundness of insured depository institutions or any Federal
deposit insurance fund or other adverse effects, such as undue
concentration of resources, decreased or unfair competition,
conflicts of interests, or unsound banking practices.
(2) Review.--The Comptroller of the Currency shall regularly--
(A) review all restrictions or requirements established
pursuant to paragraph (1) to determine whether there is a
continuing need for any such restriction or requirement to
carry out the purposes of the Act, including the avoidance of
any adverse effect referred to in paragraph (1)(B); and
(B) modify or eliminate any such restriction or requirement
the Comptroller finds is no longer required for such purposes.
(b) Board of Governors of the Federal Reserve System.--
(1) In general.--The Board of Governors of the Federal Reserve
System may, by regulation or order, impose restrictions or
requirements on relationships or transactions--
(A) between a depository institution subsidiary of a bank
holding company and any affiliate of such depository
institution (other than a subsidiary of such institution); or
(B) between a State member bank and a subsidiary of such
bank;
if the Board makes a finding described in paragraph (2) with
respect to such restriction or requirement.
(2) Finding.--The Board of Governors of the Federal Reserve
System may exercise authority under paragraph (1) if the Board
finds that the exercise of such authority is--
(A) consistent with the purposes of this Act, the Bank
Holding Company Act of 1956, the Federal Reserve Act, and other
Federal law applicable to depository institution subsidiaries
of bank holding companies or State member banks, as the case
may be; and
(B) appropriate to prevent an evasion of any provision of
law referred to in subparagraph (A) or to avoid any significant
risk to the safety and soundness of depository institutions or
any Federal deposit insurance fund or other adverse effects,
such as undue concentration of resources, decreased or unfair
competition, conflicts of interests, or unsound banking
practices.
(3) Review.--The Board of Governors of the Federal Reserve
System shall regularly--
(A) review all restrictions or requirements established
pursuant to paragraph (1) or (4) to determine whether there is
a continuing need for any such restriction or requirement to
carry out the purposes of the Act, including the avoidance of
any adverse effect referred to in paragraph (2)(B) or (4)(B);
and
(B) modify or eliminate any such restriction or requirement
the Board finds is no longer required for such purposes.
(4) Foreign banks.--The Board may, by regulation or order,
impose restrictions or requirements on relationships or
transactions between a branch, agency, or commercial lending
company of a foreign bank in the United States and any affiliate in
the United States of such foreign bank that the Board finds are--
(A) consistent with the purposes of this Act, the Bank
Holding Company Act of 1956, the Federal Reserve Act, and other
Federal law applicable to foreign banks and their affiliates in
the United States; and
(B) appropriate to prevent an evasion of any provision of
law referred to in subparagraph (A) or to avoid any significant
risk to the safety and soundness of depository institutions or
any Federal deposit insurance fund or other adverse effects,
such as undue concentration of resources, decreased or unfair
competition, conflicts of interests, or unsound banking
practices.
(c) Federal Deposit Insurance Corporation.--
(1) In general.--The Federal Deposit Insurance Corporation may,
by regulation or order, impose restrictions or requirements on
relationships or transactions between a State nonmember bank (as
defined in section 3 of the Federal Deposit Insurance Act) and a
subsidiary of the State nonmember bank that the Corporation finds
are--
(A) consistent with the purposes of this Act, the Federal
Deposit Insurance Act, or other Federal law applicable to State
nonmember banks; and
(B) appropriate to avoid any significant risk to the safety
and soundness of depository institutions or any Federal deposit
insurance fund or other adverse effects, such as undue
concentration of resources, decreased or unfair competition,
conflicts of interests, or unsound banking practices.
(2) Review.--The Federal Deposit Insurance Corporation shall
regularly--
(A) review all restrictions or requirements established
pursuant to paragraph (1) to determine whether there is a
continuing need for any such restriction or requirement to
carry out the purposes of the Act, including the avoidance of
any adverse effect referred to in paragraph (1)(B); and
(B) modify or eliminate any such restriction or requirement
the Corporation finds is no longer required for such purposes.
SEC. 115. EXAMINATION OF INVESTMENT COMPANIES.
(a) Exclusive Commission Authority.--Except as provided in
subsection (c), 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.
(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) Certain Examinations Authorized.--Nothing in this section shall
prevent the 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 insured depository
institution and the affiliate, and the effect of such relationship on
the insured depository institution.
(d) Definitions.--For purposes of this section, the following
definitions shall apply:
(1) Bank holding company.--The term ``bank holding company''
has the meaning given the term in section 2 of the Bank Holding
Company Act of 1956.
(2) Commission.--The term ``Commission'' means the Securities
and Exchange Commission.
(3) Corporation.--The term ``Corporation'' means the Federal
Deposit Insurance Corporation.
(4) Federal banking agency.--The term ``Federal banking
agency'' has the meaning given the term in section 3(z) of the
Federal Deposit Insurance Act.
(5) Insured depository institution.--The term ``insured
depository institution'' has the meaning given the term in section
3(c) of the Federal Deposit Insurance Act.
(6) Registered investment company.--The term ``registered
investment company'' means an investment company that is registered
with the Commission under the Investment Company Act of 1940.
(7) Savings and loan holding company.--The term ``savings and
loan holding company'' has the meaning given the term in section
10(a)(1)(D) of the Home Owners' Loan Act.
SEC. 116. ELIMINATION OF APPLICATION REQUIREMENT FOR FINANCIAL
HOLDING COMPANIES.
(a) Prevention of Duplicative Filings.--Section 5(a) of the Bank
Holding Company Act of 1956 (12 U.S.C. 1844(a)) is amended by adding at
the end the following new sentence: ``A declaration filed in accordance
with section 4(l)(1)(C) shall satisfy the requirements of this
subsection with regard to the registration of a bank holding company
but not any requirement to file an application to acquire a bank
pursuant to section 3.''.
(b) Divestiture Procedures.--Section 5(e)(1) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1844(e)(1)) is amended--
(1) by striking ``Financial Institutions Supervisory Act of
1966, order'' and inserting ``Financial Institutions Supervisory
Act of 1966, at the election of the bank holding company--
``(A) order''; and
(2) by striking ``shareholders of the bank holding company.
Such distribution'' and inserting ``shareholders of the bank
holding company; or
``(B) order the bank holding company, after due notice and
opportunity for hearing, and after consultation with the primary
supervisor for the bank, which shall be the Comptroller of the
Currency in the case of a national bank, and the Federal Deposit
Insurance Corporation and the appropriate State supervisor in the
case of an insured nonmember bank, to terminate (within 120 days or
such longer period as the Board may direct) the ownership or
control of any such bank by such company.
The distribution referred to in subparagraph (A)''.
SEC. 117. PRESERVING THE INTEGRITY OF FDIC RESOURCES.
Section 11(a)(4)(B) of the Federal Deposit Insurance Act (12 U.S.C.
1821(a)(4)(B)) is amended by striking ``to benefit any shareholder of''
and inserting ``to benefit any shareholder or affiliate (other than an
insured depository institution that receives assistance in accordance
with the provisions of this Act) of''.
SEC. 118. REPEAL OF SAVINGS BANK PROVISIONS IN THE BANK HOLDING
COMPANY ACT OF 1956.
Section 3(f) of the Bank Holding Company Act of 1956 (12 U.S.C.
1842(f)) is amended to read as follows:
``(f) [Repealed].''.
SEC. 119. TECHNICAL AMENDMENT.
Section 2(o)(1)(A) of the Bank Holding Company Act of 1956 (12
U.S.C. 1841(o)(1)(A)) is amended by striking ``section 38(b)'' and
inserting ``section 38''.
Subtitle C--Subsidiaries of National Banks
SEC. 121. SUBSIDIARIES OF NATIONAL BANKS.
(a) In General.--Chapter one of title LXII of the Revised Statutes
of the United States (12 U.S.C. 21 et seq.) is amended--
(1) by redesignating section 5136A as section 5136B; and
(2) by inserting after section 5136 (12 U.S.C. 24) the
following new section:
``SEC. 5136A. FINANCIAL SUBSIDIARIES OF NATIONAL BANKS.
``(a) Authorization To Conduct in Subsidiaries Certain Activities
That are Financial in Nature.--
``(1) In general.--Subject to paragraph (2), a national bank
may control a financial subsidiary, or hold an interest in a
financial subsidiary.
``(2) Conditions and requirements.--A national bank may control
a financial subsidiary, or hold an interest in a financial
subsidiary, only if--
``(A) the financial subsidiary engages only in--
``(i) activities that are financial in nature or
incidental to a financial activity pursuant to subsection
(b); and
``(ii) activities that are permitted for national banks
to engage in directly (subject to the same terms and
conditions that govern the conduct of the activities by a
national bank);
``(B) the activities engaged in by the financial subsidiary
as a principal do not include--
``(i) insuring, guaranteeing, or indemnifying against
loss, harm, damage, illness, disability, or death (except
to the extent permitted under section 302 or 303(c) of the
Gramm-Leach-Bliley Act) or providing or issuing annuities
the income of which is subject to tax treatment under
section 72 of the Internal Revenue Code of 1986;
``(ii) real estate development or real estate
investment activities, unless otherwise expressly
authorized by law; or
``(iii) any activity permitted in subparagraph (H) or
(I) of section 4(k)(4) of the Bank Holding Company Act of
1956, except activities described in section 4(k)(4)(H)
that may be permitted in accordance with section 122 of the
Gramm-Leach-Bliley Act;
``(C) the national bank and each depository institution
affiliate of the national bank are well capitalized and well
managed;
``(D) the aggregate consolidated total assets of all
financial subsidiaries of the national bank do not exceed the
lesser of--
``(i) 45 percent of the consolidated total assets of
the parent bank; or
``(ii) $50,000,000,000;
``(E) except as provided in paragraph (4), the national
bank meets any applicable rating or other requirement set forth
in paragraph (3); and
``(F) the national bank has received the approval of the
Comptroller of the Currency for the financial subsidiary to
engage in such activities, which approval shall be based solely
upon the factors set forth in this section.
``(3) Rating or comparable requirement.--
``(A) In general.--A national bank meets the requirements
of this paragraph if--
``(i) the bank is 1 of the 50 largest insured banks and
has not fewer than 1 issue of outstanding eligible debt
that is currently rated within the 3 highest investment
grade rating categories by a nationally recognized
statistical rating organization; or
``(ii) the bank is 1 of the second 50 largest insured
banks and meets the criteria set forth in clause (i) or
such other criteria as the Secretary of the Treasury and
the Board of Governors of the Federal Reserve System may
jointly establish by regulation and determine to be
comparable to and consistent with the purposes of the
rating required in clause (i).
``(B) Consolidated total assets.--For purposes of this
paragraph, the size of an insured bank shall be determined on
the basis of the consolidated total assets of the bank as of
the end of each calendar year.
``(4) Financial agency subsidiary.--The requirement in
paragraph (2)(E) shall not apply with respect to the ownership or
control of a financial subsidiary that engages in activities
described in subsection (b)(1) solely as agent and not directly or
indirectly as principal.
``(5) Regulations required.--Before the end of the 270-day
period beginning on the date of the enactment of the Gramm-Leach-
Bliley Act, the Comptroller of the Currency shall, by regulation,
prescribe procedures to implement this section.
``(6) Indexed asset limit.--The dollar amount contained in
paragraph (2)(D) shall be adjusted according to an indexing
mechanism jointly established by regulation by the Secretary of the
Treasury and the Board of Governors of the Federal Reserve System.
``(7) Coordination with section 4(l)(2) of the bank holding
company act of 1956.--Section 4(l)(2) of the Bank Holding Company
Act of 1956 applies to a national bank that controls a financial
subsidiary in the manner provided in that section.
``(b) Activities That Are Financial in Nature.--
``(1) Financial activities.--
``(A) In general.--An activity shall be financial in nature
or incidental to such financial activity only if--
``(i) such activity has been defined to be financial in
nature or incidental to a financial activity for bank
holding companies pursuant to section 4(k)(4) of the Bank
Holding Company Act of 1956; or
``(ii) the Secretary of the Treasury determines the
activity is financial in nature or incidental to a
financial activity in accordance with subparagraph (B).
``(B) Coordination between the board and the secretary of
the treasury.--
``(i) Proposals raised before the secretary of the
treasury.--
``(I) Consultation.--The Secretary of the Treasury
shall notify the Board of, and consult with the Board
concerning, any request, proposal, or application under
this section for a determination of whether an activity
is financial in nature or incidental to a financial
activity.
``(II) Board view.--The Secretary of the Treasury
shall not determine that any activity is financial in
nature or incidental to a financial activity under this
section if the Board notifies the Secretary in writing,
not later than 30 days after the date of receipt of the
notice described in subclause (I) (or such longer
period as the Secretary determines to be appropriate
under the circumstances) that the Board believes that
the activity is not financial in nature or incidental
to a financial activity or is not otherwise permissible
under this section.
``(ii) Proposals raised by the board.--
``(I) Board recommendation.--The Board may, at any
time, recommend in writing that the Secretary of the
Treasury find an activity to be financial in nature or
incidental to a financial activity for purposes of this
section.
``(II) Time period for secretarial action.--Not
later than 30 days after the date of receipt of a
written recommendation from the Board under subclause
(I) (or such longer period as the Secretary of the
Treasury and the Board determine to be appropriate
under the circumstances), the Secretary shall determine
whether to initiate a public rulemaking proposing that
the subject recommended activity be found to be
financial in nature or incidental to a financial
activity under this section, and shall notify the Board
in writing of the determination of the Secretary and,
in the event that the Secretary determines not to seek
public comment on the proposal, the reasons for that
determination.
``(2) Factors to be considered.--In determining whether an
activity is financial in nature or incidental to a financial
activity, the Secretary shall take into account--
``(A) the purposes of this Act and the Gramm-Leach-Bliley
Act;
``(B) changes or reasonably expected changes in the
marketplace in which banks compete;
``(C) changes or reasonably expected changes in the
technology for delivering financial services; and
``(D) whether such activity is necessary or appropriate to
allow a bank and the subsidiaries of a bank to--
``(i) compete effectively with any company seeking to
provide financial services in the United States;
``(ii) efficiently deliver information and services
that are financial in nature through the use of
technological means, including any application necessary to
protect the security or efficacy of systems for the
transmission of data or financial transactions; and
``(iii) offer customers any available or emerging
technological means for using financial services or for the
document imaging of data.
``(3) Authorization of new financial activities.--The Secretary
of the Treasury shall, by regulation or order and in accordance
with paragraph (1)(B), define, consistent with the purposes of this
Act and the Gramm-Leach-Bliley Act, the following activities as,
and the extent to which such activities are, financial in nature or
incidental to a financial activity:
``(A) Lending, exchanging, transferring, investing for
others, or safeguarding financial assets other than money or
securities.
``(B) Providing any device or other instrumentality for
transferring money or other financial assets.
``(C) Arranging, effecting, or facilitating financial
transactions for the account of third parties.
``(c) Capital Deduction.--
``(1) Capital deduction required.--In determining compliance
with applicable capital standards--
``(A) the aggregate amount of the outstanding equity
investment, including retained earnings, of a national bank in
all financial subsidiaries shall be deducted from the assets
and tangible equity of the national bank; and
``(B) the assets and liabilities of the financial
subsidiaries shall not be consolidated with those of the
national bank.
``(2) Financial statement disclosure of capital deduction.--Any
published financial statement of a national bank that controls a
financial subsidiary shall, in addition to providing information
prepared in accordance with generally accepted accounting
principles, separately present financial information for the bank
in the manner provided in paragraph (1).
``(d) Safeguards for the Bank.--A national bank that establishes or
maintains a financial subsidiary shall assure that--
``(1) the procedures of the national bank for identifying and
managing financial and operational risks within the national bank
and the financial subsidiary adequately protect the national bank
from such risks;
``(2) the national bank has, for the protection of the bank,
reasonable policies and procedures to preserve the separate
corporate identity and limited liability of the national bank and
the financial subsidiaries of the national bank; and
``(3) the national bank is in compliance with this section.
``(e) Provisions Applicable to National Banks That Fail To Continue
To Meet Certain Requirements.--
``(1) In general.--If a national bank or insured depository
institution affiliate does not continue to meet the requirements of
subsection (a)(2)(C) or subsection (d), the Comptroller of the
Currency shall promptly give notice to the national bank to that
effect describing the conditions giving rise to the notice.
``(2) Agreement to correct conditions.--Not later than 45 days
after the date of receipt by a national bank of a notice given
under paragraph (1) (or such additional period as the Comptroller
of the Currency may permit), the national bank shall execute an
agreement with the Comptroller of the Currency and any relevant
insured depository institution affiliate shall execute an agreement
with its appropriate Federal banking agency to comply with the
requirements of subsection (a)(2)(C) and subsection (d).
``(3) Imposition of conditions.--Until the conditions described
in a notice under paragraph (1) are corrected--
``(A) the Comptroller of the Currency may impose such
limitations on the conduct or activities of the national bank
or any subsidiary of the national bank as the Comptroller of
the Currency determines to be appropriate under the
circumstances and consistent with the purposes of this section;
and
``(B) the appropriate Federal banking agency may impose
such limitations on the conduct or activities of any relevant
insured depository institution affiliate or any subsidiary of
the institution as such agency determines to be appropriate
under the circumstances and consistent with the purposes of
this section.
``(4) Failure to correct.--If the conditions described in a
notice to a national bank under paragraph (1) are not corrected
within 180 days after the date of receipt by the national bank of
the notice, the Comptroller of the Currency may require the
national bank, under such terms and conditions as may be imposed by
the Comptroller and subject to such extension of time as may be
granted in the discretion of the Comptroller, to divest control of
any financial subsidiary.
``(5) Consultation.--In taking any action under this
subsection, the Comptroller shall consult with all relevant Federal
and State regulatory agencies and authorities.
``(f) Failure To Maintain Public Rating or Meet Applicable
Criteria.--
``(1) In general.--A national bank that does not continue to
meet any applicable rating or other requirement of subsection
(a)(2)(E) after acquiring or establishing a financial subsidiary
shall not, directly or through a subsidiary, purchase or acquire
any additional equity capital of any financial subsidiary until the
bank meets such requirements.
``(2) Equity capital.--For purposes of this subsection, the
term `equity capital' includes, in addition to any equity
instrument, any debt instrument issued by a financial subsidiary,
if the instrument qualifies as capital of the subsidiary under any
Federal or State law, regulation, or interpretation applicable to
the subsidiary.
``(g) Definitions.--For purposes of this section, the following
definitions shall apply:
``(1) Affiliate, company, control, and subsidiary.--The terms
`affiliate', `company', `control', and `subsidiary' have the
meanings given those terms in section 2 of the Bank Holding Company
Act of 1956.
``(2) Appropriate federal banking agency, depository
institution, insured bank, and insured depository institution.--The
terms `appropriate Federal banking agency', `depository
institution', `insured bank', and `insured depository institution'
have the meanings given those terms in section 3 of the Federal
Deposit Insurance Act.
``(3) Financial subsidiary.--The term `financial subsidiary'
means any company that is controlled by 1 or more insured
depository institutions other than a subsidiary that--
``(A) engages solely in activities that national banks are
permitted to engage in directly and are conducted subject to
the same terms and conditions that govern the conduct of such
activities by national banks; or
``(B) a national bank is specifically authorized by the
express terms of a Federal statute (other than this section),
and not by implication or interpretation, to control, such as
by section 25 or 25A of the Federal Reserve Act or the Bank
Service Company Act.
``(4) Eligible debt.--The term `eligible debt' means unsecured
long-term debt that--
``(A) is not supported by any form of credit enhancement,
including a guarantee or standby letter of credit; and
``(B) is not held in whole or in any significant part by
any affiliate, officer, director, principal shareholder, or
employee of the bank or any other person acting on behalf of or
with funds from the bank or an affiliate of the bank.
``(5) Well capitalized.--The term `well capitalized' has the
meaning given the term in section 38 of the Federal Deposit
Insurance Act.
``(6) Well managed.--The term `well managed' means--
``(A) in the case of a depository institution that has been
examined, unless otherwise determined in writing by the
appropriate Federal banking agency--
``(i) the achievement of a composite rating of 1 or 2
under the Uniform Financial Institutions Rating System (or
an equivalent rating under an equivalent rating system) in
connection with the most recent examination or subsequent
review of the depository institution; and
``(ii) at least a rating of 2 for management, if such
rating is given; or
``(B) in the case of any depository institution that has
not been examined, the existence and use of managerial
resources that the appropriate Federal banking agency
determines are satisfactory.''.
(b) Sections 23A and 23B of the Federal Reserve Act.--
(1) Limiting the exposure of a bank to a financial subsidiary
to the amount of permissible exposure to an affiliate.--Section 23A
of the Federal Reserve Act (12 U.S.C. 371c) is amended--
(A) by redesignating subsection (e) as subsection (f); and
(B) by inserting after subsection (d), the following new
subsection:
``(e) Rules Relating to Banks with Financial Subsidiaries.--
``(1) Financial subsidiary defined.--For purposes of this
section and section 23B, the term `financial subsidiary' means any
company that is a subsidiary of a bank that would be a financial
subsidiary of a national bank under section 5136A of the Revised
Statutes of the United States.
``(2) Financial subsidiary treated as an affiliate.--For
purposes of applying this section and section 23B, and
notwithstanding subsection (b)(2) of this section or section
23B(d)(1), a financial subsidiary of a bank--
``(A) shall be deemed to be an affiliate of the bank; and
``(B) shall not be deemed to be a subsidiary of the bank.
``(3) Exceptions for transactions with financial
subsidiaries.--
``(A) Exception from limit on covered transactions with any
individual financial subsidiary.--Notwithstanding paragraph
(2), the restriction contained in subsection (a)(1)(A) shall
not apply with respect to covered transactions between a bank
and any individual financial subsidiary of the bank.
``(B) Exception for earnings retained by financial
subsidiaries.--Notwithstanding paragraph (2) or subsection
(b)(7), a bank's investment in a financial subsidiary of the
bank shall not include retained earnings of the financial
subsidiary.
``(4) Anti-evasion provision.--For purposes of this section and
section 23B--
``(A) any purchase of, or investment in, the securities of
a financial subsidiary of a bank by an affiliate of the bank
shall be considered to be a purchase of or investment in such
securities by the bank; and
``(B) any extension of credit by an affiliate of a bank to
a financial subsidiary of the bank shall be considered to be an
extension of credit by the bank to the financial subsidiary if
the Board determines that such treatment is necessary or
appropriate to prevent evasions of this Act and the Gramm-
Leach-Bliley Act.''.
(2) Rebuttable presumption of control of portfolio company.--
Section 23A(b) of the Federal Reserve Act (12 U.S.C. 371c(b)) is
amended by adding at the end the following new paragraph--
``(11) Rebuttable presumption of control of portfolio
companies.--In addition to paragraph (3), a company or shareholder
shall be presumed to control any other company if the company or
shareholder, directly or indirectly, or acting through 1 or more
other persons, owns or controls 15 percent or more of the equity
capital of the other company pursuant to subparagraph (H) or (I) of
section 4(k)(4) of the Bank Holding Company Act of 1956 or rules
adopted under section 122 of the Gramm-Leach-Bliley Act, if any,
unless the company or shareholder provides information acceptable
to the Board to rebut this presumption of control.''.
(3) Rulemaking required concerning derivative transactions and
intraday credit.--Section 23A(f) of the Federal Reserve Act (12
U.S.C. 371c(f)) (as so redesignated by paragraph (1)(A) of this
subsection) is amended by inserting at the end the following new
paragraph:
``(3) Rulemaking required concerning derivative transactions
and intraday credit.--
``(A) In general.--Not later than 18 months after the date
of the enactment of the Gramm-Leach-Bliley Act, the Board shall
adopt final rules under this section to address as covered
transactions credit exposure arising out of derivative
transactions between member banks and their affiliates and
intraday extensions of credit by member banks to their
affiliates.
``(B) Effective date.--The effective date of any final rule
adopted by the Board pursuant to subparagraph (A) shall be
delayed for such period as the Board deems necessary or
appropriate to permit banks to conform their activities to the
requirements of the final rule without undue hardship.''.
(c) Antitying.--Section 106(a) of the Bank Holding Company Act
Amendments of 1970 (12 U.S.C. 1971) is amended by adding at the end the
following: ``For purposes of this section, a financial subsidiary of a
national bank engaging in activities pursuant to section 5136A(a) of
the Revised Statutes of the United States shall be deemed to be a
subsidiary of a bank holding company, and not a subsidiary of a
bank.''.
(d) Safety and Soundness Firewalls for State Banks With Financial
Subsidiaries.--
(1) Federal deposit insurance act.--The Federal Deposit
Insurance Act (12 U.S.C. 1811 et seq.) is amended by inserting
after section 45 (as added by section 112(b) of this title) the
following new section:
``SEC. 46. SAFETY AND SOUNDNESS FIREWALLS APPLICABLE TO FINANCIAL
SUBSIDIARIES OF BANKS.
``(a) In General.--An insured State bank may control or hold an
interest in a subsidiary that engages in activities as principal that
would only be permissible for a national bank to conduct through a
financial subsidiary if--
``(1) the State bank and each insured depository institution
affiliate of the State bank are well capitalized (after the capital
deduction required by paragraph (2));
``(2) the State bank complies with the capital deduction and
financial statement disclosure requirements in section 5136A(c) of
the Revised Statutes of the United States;
``(3) the State bank complies with the financial and
operational safeguards required by section 5136A(d) of the Revised
Statutes of the United States; and
``(4) the State bank complies with the amendments to sections
23A and 23B of the Federal Reserve Act made by section 121(b) of
the Gramm-Leach-Bliley Act.
``(b) Preservation of Existing Subsidiaries.--Notwithstanding
subsection (a), an insured State bank may retain control of a
subsidiary, or retain an interest in a subsidiary, that the State bank
lawfully controlled or acquired before the date of the enactment of the
Gramm-Leach-Bliley Act, and conduct through such subsidiary any
activities lawfully conducted in such subsidiary as of such date.
``(c) Definitions.--For purposes of this section, the following
definitions shall apply:
``(1) Subsidiary.--The term `subsidiary' means any company that
is a subsidiary (as defined in section 3(w)(4)) of 1 or more
insured banks.
``(2) Financial subsidiary.--The term `financial subsidiary'
has the meaning given the term in section 5136A(g) of the Revised
Statutes of the United States.
``(d) Preservation of Authority.--
``(1) Federal deposit insurance act.--No provision of this
section shall be construed as superseding the authority of the
Federal Deposit Insurance Corporation to review subsidiary
activities under section 24.
``(2) Federal reserve act.--No provision of this section shall
be construed as affecting the applicability of the 20th
undesignated paragraph of section 9 of the Federal Reserve Act.''.
(2) Federal Reserve Act.--The 20th undesignated paragraph of
section 9 of the Federal Reserve Act (12 U.S.C. 335) is amended by
adding at the end the following: ``This paragraph shall not apply
to any interest held by a State member bank in accordance with
section 5136A of the Revised Statutes of the United States and
subject to the same conditions and limitations provided in such
section.''.
(e) Clerical Amendment.--The table of sections for chapter one of
title LXII of the Revised Statutes of the United States is amended--
(1) by redesignating the item relating to section 5136A as
section 5136B; and
(2) by inserting after the item relating to section 5136 the
following new item:
``5136A. Financial subsidiaries of national banks.''.
SEC. 122. CONSIDERATION OF MERCHANT BANKING ACTIVITIES BY FINANCIAL
SUBSIDIARIES.
After the end of the 5-year period beginning on the date of the
enactment of the Gramm-Leach-Bliley Act, the Board of Governors of the
Federal Reserve System and the Secretary of the Treasury may, if
appropriate, after considering--
(1) the experience with the effects of financial modernization
under this Act and merchant banking activities of financial holding
companies;
(2) the potential effects on depository institutions and the
financial system of allowing merchant banking activities in
financial subsidiaries; and
(3) other relevant facts;
jointly adopt rules that permit financial subsidiaries to engage in
merchant banking activities described in section 4(k)(4)(H) of the Bank
Holding Company Act of 1956, under such terms and conditions as the
Board of Governors of the Federal Reserve System and the Secretary of
the Treasury jointly determine to be appropriate.
Subtitle D--Preservation of FTC Authority
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, 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.
(a) In General.--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 or 4 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.
(b) Confidentiality Requirements.--
(1) In general.--Any information or material obtained by any
agency pursuant to subsection (a) shall be treated as confidential.
(2) Procedures for disclosure.--If any information or material
obtained by any agency pursuant to subsection (a) is proposed to be
disclosed to a third party, written notice of such disclosure shall
first be provided to the agency from which such information or
material was obtained and an opportunity shall be given to such
agency to oppose or limit the proposed disclosure.
(3) Other privileges not waived by disclosure under this
section.--The provision by any Federal agency of any information or
material pursuant to subsection (a) to another agency shall not
constitute a waiver, or otherwise affect, any privilege any agency
or person may claim with respect to such information under Federal
or State law.
(4) Exception.--No provision of this section shall be construed
as preventing or limiting access to any information by any duly
authorized committee of the Congress or the Comptroller General of
the United States.
(c) Banking Agency Information Sharing.--The provisions of
subsection (b) shall apply to--
(1) any information or material obtained by any Federal banking
agency (as defined in section 3(z) of the Federal Deposit Insurance
Act) from any other Federal banking agency; and
(2) any report of examination or other confidential supervisory
information obtained by any State agency or authority, or any other
person, from a Federal banking agency.
SEC. 133. CLARIFICATION OF STATUS OF SUBSIDIARIES AND AFFILIATES.
(a) Clarification of Federal Trade Commission Jurisdiction.--Any
person that 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 any provisions applied by the Federal Trade
Commission under the Federal Trade Commission Act.
(b) Savings Provision.--No provision of this section shall be
construed as restricting the authority of any Federal banking agency
(as defined in section 3 of the Federal Deposit Insurance Act) under
any Federal banking law, including section 8 of the Federal Deposit
Insurance Act.
(c) Hart-Scott-Rodino Amendments.--
(1) Banks.--Section 7A(c)(7) of the Clayton Act (15 U.S.C.
18a(c)(7)) is amended by inserting before the semicolon at the end
the following: ``, except that a portion of a transaction is not
exempt under this paragraph if such portion of the transaction (A)
is subject to section 4(k) of the Bank Holding Company Act of 1956;
and (B) does not require agency approval under section 3 of the
Bank Holding Company Act of 1956''.
(2) Bank holding companies.--Section 7A(c)(8) of the Clayton
Act (15 U.S.C. 18a(c)(8)) is amended by inserting before the
semicolon at the end the following: ``, except that a portion of a
transaction is not exempt under this paragraph if such portion of
the transaction (A) is subject to section 4(k) of the Bank Holding
Company Act of 1956; and (B) does not require agency approval under
section 4 of the Bank Holding Company Act of 1956''.
Subtitle E--National Treatment
SEC. 141. FOREIGN BANKS THAT ARE FINANCIAL HOLDING COMPANIES.
Section 8(c) of the International Banking Act of 1978 (12 U.S.C.
3106(c)) is amended by adding at the end the following new paragraph:
``(3) Termination of grandfathered rights.--
``(A) In general.--If any foreign bank or foreign company
files a declaration under section 4(l)(1)(C) of the Bank
Holding Company Act of 1956, any authority conferred by this
subsection on any foreign bank or company to engage in any
activity that the Board has determined to be permissible for
financial holding companies under section 4(k) of such Act
shall terminate immediately.
``(B) Restrictions and requirements authorized.--If a
foreign bank or company that engages, directly or through an
affiliate pursuant to paragraph (1), in an activity that the
Board has determined to be permissible for financial holding
companies under section 4(k) of the Bank Holding Company Act of
1956 has not filed a declaration with the Board of its status
as a financial holding company under such section by the end of
the 2-year period beginning on the date of the enactment of the
Gramm-Leach-Bliley Act, the Board, giving due regard to the
principle of national treatment and equality of competitive
opportunity, may impose such restrictions and requirements on
the conduct of such activities by such foreign bank or company
as are comparable to those imposed on a financial holding
company organized under the laws of the United States,
including a requirement to conduct such activities in
compliance with any prudential safeguards established under
section 114 of the Gramm-Leach-Bliley Act.''.
SEC. 142. REPRESENTATIVE OFFICES.
(a) Definition.--Section 1(b)(15) of the International Banking Act
of 1978 (12 U.S.C. 3101(15)) is amended by striking ``State agency, or
subsidiary of a foreign bank'' and inserting ``or State agency''.
(b) Examinations.--Section 10(c) of the International Banking Act
of 1978 (12 U.S.C. 3107(c)) is amended by adding at the end the
following new sentence: ``The Board may also make examinations of any
affiliate of a foreign bank conducting business in any State if the
Board deems it necessary to determine and enforce compliance with this
Act, the Bank Holding Company Act of 1956, or other applicable Federal
banking law.''.
Subtitle F--Direct Activities of Banks
SEC. 151. 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 bank is well capitalized (as
defined in section 38 of the Federal Deposit Insurance Act).''.
Subtitle G--Effective Date
SEC. 161. EFFECTIVE DATE.
This title (other than section 104) and the amendments made by this
title shall take effect 120 days after the date of the enactment of
this Act.
TITLE II--FUNCTIONAL REGULATION
Subtitle A--Brokers and Dealers
SEC. 201. DEFINITION OF BROKER.
Section 3(a)(4) of the Securities Exchange Act of 1934 (15 U.S.C.
78c(a)(4)) is amended to read as follows:
``(4) Broker.--
``(A) In general.--The term `broker' means any person
engaged in the business of effecting transactions in securities
for the account of others.
``(B) Exception for certain bank activities.--A bank shall
not be considered to be a broker because the bank engages in
any one or more of the following activities under the
conditions described:
``(i) Third party brokerage arrangements.--The bank
enters into a contractual or other written arrangement with
a broker or dealer registered under this title under which
the broker or dealer offers brokerage services on or off
the premises of the bank if--
``(I) such broker or dealer is clearly identified
as the person performing the brokerage services;
``(II) the broker or dealer performs brokerage
services in an area that is clearly marked and, to the
extent practicable, physically separate from the
routine deposit-taking activities of the bank;
``(III) any materials used by the bank to advertise
or promote generally the availability of brokerage
services under the arrangement clearly indicate that
the brokerage services are being provided by the broker
or dealer and not by the bank;
``(IV) any materials used by the bank to advertise
or promote generally the availability of
brokerage services under the arrangement are in
compliance with the Federal securities laws before
distribution;
``(V) bank employees (other than associated persons
of a broker or dealer who are qualified pursuant to the
rules of a self-regulatory organization) perform only
clerical or ministerial functions in connection with
brokerage transactions including scheduling
appointments with the associated persons of a broker or
dealer, except that bank employees may forward customer
funds or securities and may describe in general terms
the types of investment vehicles available from the
bank and the broker or dealer under the arrangement;
``(VI) bank employees do not receive incentive
compensation for any brokerage transaction unless such
employees are associated persons of a broker or dealer
and are qualified pursuant to the rules of a self-
regulatory organization, except that the bank employees
may receive compensation for the referral of any
customer if the compensation is a nominal one-time cash
fee of a fixed dollar amount and the payment of the fee
is not contingent on whether the referral results in a
transaction;
``(VII) such services are provided by the broker or
dealer on a basis in which all customers that receive
any services are fully disclosed to the broker or
dealer;
``(VIII) the bank does not carry a securities
account of the customer except as permitted under
clause (ii) or (viii) of this subparagraph; and
``(IX) the bank, broker, or dealer informs each
customer that the brokerage services are provided by
the broker or dealer and not by the bank and that the
securities are not deposits or other obligations of the
bank, are not guaranteed by the bank, and are not
insured by the Federal Deposit Insurance Corporation.
``(ii) Trust activities.--The bank effects transactions
in a trustee 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--
``(I) is chiefly compensated for such transactions,
consistent with fiduciary principles and standards, on
the basis of an administration or annual fee (payable
on a monthly, quarterly, or other basis), a percentage
of assets under management, or a flat or capped per
order processing fee equal to not more than the cost
incurred by the bank in connection with executing
securities transactions for trustee and fiduciary
customers, or any combination of such fees; and
``(II) does not 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 affiliates (as
defined in section 2 of the Bank Holding Company Act of
1956), if the bank does not solicit transactions or
provide investment advice with respect to the purchase
or sale of securities in connection with the plan.
``(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; and
``(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.
``(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; and
``(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.
``(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 delivery of
written or electronic plan materials by a bank 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 Gramm-Leach-Bliley Act; or
``(bb) otherwise permitted by the Commission.
``(v) Sweep accounts.--The bank effects transactions as
part of a program for the investment or reinvestment of
deposit funds into any no-load, open-end management
investment company registered under the Investment Company
Act of 1940 that holds itself out as a money market fund.
``(vi) Affiliate transactions.--The bank effects
transactions for the account of any affiliate 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 4(k)(4)(H) of the Bank
Holding Company Act of 1956.
``(vii) Private securities offerings.--The bank--
``(I) effects sales as part of a primary offering
of securities not involving a public offering, pursuant
to section 3(b), 4(2), or 4(6) of the Securities Act of
1933 or the rules and regulations issued thereunder;
``(II) at any time after the date that is 1 year
after the date of the enactment of the Gramm-Leach-
Bliley Act, 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) if the bank is not affiliated with a broker
or dealer, does not effect any primary offering
described in subclause (I) the aggregate amount of
which exceeds 25 percent of the capital of the bank,
except that the limitation of this subclause shall not
apply with respect to any sale of government securities
or municipal securities.
``(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;
``(dd) holds securities pledged by a customer
to another person or securities subject to purchase
or resale agreements involving a customer, or
facilitates the pledging or transfer of such
securities by book entry or as otherwise provided
under applicable law, if the bank maintains records
separately identifying the securities and the
customer; or
``(ee) serves as a custodian or provider of
other related administrative services to any
individual retirement account, pension, retirement,
profit sharing, bonus, thrift savings, incentive,
or other similar benefit plan.
``(II) Exception for carrying broker activities.--
The exception to being considered a broker for a bank
engaged in activities described in subclause (I) shall
not apply if the bank, in connection with such
activities, acts in the United States as a carrying
broker (as such term, and different formulations
thereof, are used in section 15(c)(3) of this title and
the rules and regulations thereunder) for any broker or
dealer, unless such carrying broker activities are
engaged in with respect to government securities (as
defined in paragraph (42) of this subsection).
``(ix) Identified banking products.--The bank effects
transactions in identified banking products as defined in
section 206 of the Gramm-Leach-Bliley Act.
``(x) Municipal securities.--The bank effects
transactions in municipal securities.
``(xi) De minimis exception.--The bank effects, other
than in transactions referred to in clauses (i) through
(x), not more than 500 transactions in securities in any
calendar year, and such transactions are not effected by an
employee of the bank who is also an employee of a broker or
dealer.
``(C) Execution by broker or dealer.--The exception to
being considered a broker for a bank engaged in activities
described in clauses (ii), (iv), and (viii) of subparagraph (B)
shall not apply if the activities described in such provisions
result in the trade in the United States of any security that
is a publicly traded security in the United States, unless--
``(i) the bank directs such trade to a registered
broker or dealer for execution;
``(ii) the trade is a cross trade or other
substantially similar trade of a security that--
``(I) is made by the bank or between the bank and
an affiliated fiduciary; and
``(II) is not in contravention of fiduciary
principles established under applicable Federal or
State law; or
``(iii) the trade is conducted in some other manner
permitted under rules, regulations, or orders as the
Commission may prescribe or issue.
``(D) Fiduciary capacity.--For purposes of subparagraph
(B)(ii), the term `fiduciary capacity' means--
``(i) in the capacity as trustee, executor,
administrator, registrar of stocks and bonds, transfer
agent, guardian, assignee, receiver, or custodian under a
uniform gift to minor act, or as an investment adviser if
the bank receives a fee for its investment advice;
``(ii) in any capacity in which the bank possesses
investment discretion on behalf of another; or
``(iii) in any other similar capacity.
``(E) Exception for entities subject to section 15(e).--The
term `broker' does not include a bank that--
``(i) was, on the day before the date of enactment of
the Gramm-Leach-Bliley Act, 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 other separate entity, of securities
backed by or representing an interest in notes, drafts,
acceptances, loans, leases, receivables, other obligations
(other than securities of which the bank is not the
issuer), or pools of any such obligations predominantly
originated by--
``(I) the bank;
``(II) an affiliate of any such bank other than a
broker or dealer; or
``(III) a syndicate of banks of which the bank is a
member, if the obligations or pool of obligations
consists of mortgage obligations or consumer-related
receivables.
``(iv) Identified banking products.--The bank buys or
sells identified banking products, as defined in section
206 of the Gramm-Leach-Bliley Act.''.
SEC. 203. REGISTRATION FOR SALES OF PRIVATE SECURITIES OFFERINGS.
Section 15A of the Securities Exchange Act of 1934 (15 U.S.C. 78o-
3) is amended by inserting after subsection (i) the following new
subsection:
``(j) Registration for Sales of Private Securities Offerings.--A
registered securities association shall create a limited qualification
category for any associated person of a member who effects sales as
part of a primary offering of securities not involving a public
offering, pursuant to section 3(b), 4(2), or 4(6) of the Securities Act
of 1933 and the rules and regulations thereunder, and shall deem
qualified in such limited qualification category, without testing, any
bank employee who, in the six month period preceding the date of the
enactment of the Gramm-Leach-Bliley 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.
``(2) Availability to commission; confidentiality.--Each
appropriate Federal banking agency shall make any information
required under paragraph (1) available to the Commission upon
request. Notwithstanding any other provision of law, the Commission
shall not be compelled to disclose any such information. Nothing in
this paragraph 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 paragraph shall
be considered a statute described in subsection (b)(3)(B) of such
section 552.
``(3) Definition.--As used in this subsection the term
`Commission' means the Securities and Exchange Commission.''.
SEC. 205. TREATMENT OF NEW HYBRID PRODUCTS.
Section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o)
is amended by adding at the end the following new subsection:
``(i) Rulemaking To Extend Requirements to New Hybrid Products.--
``(1) Consultation.--Prior to commencing a rulemaking under
this subsection, the Commission shall consult with and seek the
concurrence of the Board concerning the imposition of broker or
dealer registration requirements with respect to any new hybrid
product. In developing and promulgating rules under this
subsection, the Commission shall consider the views of the Board,
including views with respect to the nature of the new hybrid
product; the history, purpose, extent, and appropriateness of the
regulation of the new product under the Federal banking laws; and
the impact of the proposed rule on the banking industry.
``(2) Limitation.--The Commission shall not--
``(A) require a bank to register as a broker or dealer
under this section because the bank engages in any transaction
in, or buys or sells, a new hybrid product; or
``(B) bring an action against a bank for a failure to
comply with a requirement described in subparagraph (A),
unless the Commission has imposed such requirement by rule or
regulation issued in accordance with this section.
``(3) Criteria for rulemaking.--The Commission shall not impose
a requirement under paragraph (2) of this subsection with respect
to any new hybrid product unless the Commission determines that--
``(A) the new hybrid product is a security; and
``(B) imposing such requirement is necessary and
appropriate in the public interest and for the protection of
investors.
``(4) Considerations.--In making a determination under
paragraph (3), the Commission shall consider--
``(A) the nature of the new hybrid product; and
``(B) the history, purpose, extent, and appropriateness of
the regulation of the new hybrid product under the Federal
securities laws and under the Federal banking laws.
``(5) Objection to commission regulation.--
``(A) Filing of petition for review.--The Board may obtain
review of any final regulation described in paragraph (2) 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. Any
proceeding to challenge any such rule shall be expedited by the
Court of Appeals.
``(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.--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--
``(i) the subject product is a new hybrid product, as
defined in this subsection;
``(ii) the subject product is a security; and
``(iii) imposing a requirement to register as a broker
or dealer for banks engaging in transactions in such
product is appropriate in light of the history, purpose,
and extent of regulation under the Federal securities laws
and under the Federal banking laws, giving deference
neither to the views of the Commission nor the Board.
``(E) Judicial stay.--The filing of a petition by the Board
pursuant to subparagraph (A) shall operate as a judicial stay,
until the date on which the determination of the court is final
(including any appeal of such determination).
``(F) Other authority to challenge.--Any aggrieved party
may seek judicial review of the Commission's rulemaking under
this subsection pursuant to section 25 of this title.
``(6) Definitions.--For purposes of this subsection:
``(A) New hybrid product.--The term `new hybrid product'
means a product that--
``(i) was not subjected to regulation by the Commission
as a security prior to the date of the enactment of the
Gramm-Leach-Bliley Act;
``(ii) is not an identified banking product as such
term is defined in section 206 of such Act; and
``(iii) is not an equity swap within the meaning of
section 206(a)(6) of such Act.
``(B) Board.--The term `Board' means the Board of Governors
of the Federal Reserve System.''.
SEC. 206. DEFINITION OF IDENTIFIED BANKING PRODUCT.
(a) Definition of Identified 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 ``identified banking
product'' means--
(1) a deposit account, savings account, certificate of deposit,
or other deposit instrument issued by a bank;
(2) a banker's acceptance;
(3) a letter of credit issued or loan made by a bank;
(4) a debit account at a bank arising from a credit card or
similar arrangement;
(5) a participation in a loan which the bank or an affiliate of
the bank (other than a broker or dealer) funds, participates in, or
owns that is sold--
(A) to qualified investors; or
(B) to other persons that--
(i) have the opportunity to review and assess any
material information, including information regarding the
borrower's creditworthiness; and
(ii) based on such factors as financial sophistication,
net worth, and knowledge and experience in financial
matters, have the capability to evaluate the information
available, as determined under generally applicable banking
standards or guidelines; or
(6) any swap agreement, including credit and equity swaps,
except that an equity swap that is sold directly to any person
other than a qualified investor (as defined in section 3(a)(54) of
the Securities Act of 1934) shall not be treated as an identified
banking product.
(b) Definition of Swap Agreement.--For purposes of subsection
(a)(6), the term ``swap agreement'' 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 any other identified banking
product, as defined in paragraphs (1) through (5) of subsection (a).
(c) Classification Limited.--Classification of a particular product
as an identified banking product pursuant to this section shall not be
construed as finding or implying that such product is or is not a
security for any purpose under the securities laws, or is or is not an
account, agreement, contract, or transaction for any purpose under the
Commodity Exchange Act.
(d) Incorporated Definitions.--For purposes of this section, the
terms ``bank'' and ``qualified investor'' have the same meanings as
given in section 3(a) of the Securities Exchange Act of 1934, as
amended by this Act.
SEC. 207. ADDITIONAL DEFINITIONS.
Section 3(a) of the Securities Exchange Act of 1934 is amended by
adding at the end the following new paragraph:
``(54) Qualified investor.--
``(A) Definition.--Except as provided in subparagraph (B),
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
$25,000,000 in investments;
``(xii) any natural person who owns and invests on a
discretionary basis, not less than $25,000,000 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) Altered thresholds for asset-backed securities and
loan participations.--For purposes of section 3(a)(5)(C)(iii)
of this title and section 206(a)(5) of the Gramm-Leach-Bliley
Act, the term `qualified investor' has the meaning given such
term by subparagraph (A) of this paragraph except that clauses
(xi) and (xii) shall be applied by substituting `$10,000,000'
for `$25,000,000'.
``(C) Additional authority.--The Commission may, by rule or
order, define a `qualified investor' as any other person,
taking into consideration such factors as the financial
sophistication of the person, net worth, and knowledge and
experience in financial matters.''.
SEC. 208. GOVERNMENT SECURITIES DEFINED.
Section 3(a)(42) of the Securities Exchange Act of 1934 (15 U.S.C.
78c(a)(42)) is amended--
(1) by striking ``or'' at the end of subparagraph (C);
(2) by striking the period at the end of subparagraph (D) and
inserting ``; or''; and
(3) by adding at the end the following new subparagraph:
``(E) for purposes of sections 15, 15C, and 17A as applied
to a bank, a qualified Canadian government obligation as
defined in section 5136 of the Revised Statutes of the United
States.''.
SEC. 209. EFFECTIVE DATE.
This subtitle shall take effect at the end of the 18-month period
beginning on the date of the enactment of this Act.
SEC. 210. RULE OF CONSTRUCTION.
Nothing in this Act shall supersede, affect, or otherwise limit the
scope and applicability of the Commodity Exchange Act (7 U.S.C. 1 et
seq.).
Subtitle B--Bank Investment Company Activities
SEC. 211. CUSTODY OF INVESTMENT COMPANY ASSETS BY AFFILIATED BANK.
(a) Management Companies.--Section 17(f) of the Investment Company
Act of 1940 (15 U.S.C. 80a-17(f)) is amended--
(1) by redesignating paragraphs (1), (2), and (3) as
subparagraphs (A), (B), and (C), respectively;
(2) by striking ``(f) Every registered'' and inserting the
following:
``(f) Custody of Securities.--
``(1) Every registered'';
(3) by redesignating the second, third, fourth, and fifth
sentences of such subsection as paragraphs (2) through (5),
respectively, and indenting the left margin of such paragraphs
appropriately; and
(4) by adding at the end the following new paragraph:
``(6) The Commission may, after consultation with and taking
into consideration the views of the Federal banking agencies (as
defined in section 3 of the Federal Deposit Insurance Act), 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, after consultation with and taking into
consideration the views of the Federal banking agencies (as defined in
section 3 of the Federal Deposit Insurance Act), 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).''.
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, after consultation with and taking into
consideration the views of the Federal banking agencies (as defined
in section 3 of the Federal Deposit Insurance Act), 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''.
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, after consultation with and taking into
consideration the views of the Federal banking agencies (as defined
in section 3 of the Federal Deposit Insurance Act), 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
given in section 3 of the Federal Deposit Insurance Act.''.
SEC. 215. DEFINITION OF BROKER UNDER THE INVESTMENT COMPANY ACT OF
1940.
Section 2(a)(6) of the Investment Company Act of 1940 (15 U.S.C.
80a-2(a)(6)) is amended to read as follows:
``(6) The term `broker' has the same meaning as given in
section 3 of the Securities Exchange Act of 1934, except that such
term does not include any person solely by reason of the fact that
such person is an underwriter for one or more investment
companies.''.
SEC. 216. DEFINITION OF DEALER UNDER THE INVESTMENT COMPANY ACT OF
1940.
Section 2(a)(11) of the Investment Company Act of 1940 (15 U.S.C.
80a-2(a)(11)) is amended to read as follows:
``(11) The term `dealer' has the same meaning as given in the
Securities Exchange Act of 1934, but does not include an insurance
company or investment company.''.
SEC. 217. REMOVAL OF THE EXCLUSION FROM THE DEFINITION OF
INVESTMENT ADVISER FOR BANKS THAT ADVISE INVESTMENT COMPANIES.
(a) Investment Adviser.--Section 202(a)(11)(A) of the Investment
Advisers Act of 1940 (15 U.S.C. 80b-2(a)(11)(A)) is amended by striking
``investment company'' and inserting ``investment company, except that
the term `investment adviser' includes any bank or bank holding company
to the extent that such bank or bank holding company serves or acts as
an investment adviser to a registered investment company, but if, in
the case of a bank, such services or actions are performed through a
separately identifiable department or division, the department or
division, and not the bank itself, shall be deemed to be the investment
adviser''.
(b) Separately Identifiable Department or Division.--Section 202(a)
of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)) is amended
by adding at the end the following:
``(26) The term `separately identifiable department or
division' of a bank means a unit--
``(A) that is under the direct supervision of an officer or
officers designated by the board of directors of the bank as
responsible for the day-to-day conduct of the bank's investment
adviser activities for one or more investment companies,
including the supervision of all bank employees engaged in the
performance of such activities; and
``(B) for which all of the records relating to its
investment adviser activities are separately maintained in or
extractable from such unit's own facilities or the facilities
of the bank, and such records are so maintained or otherwise
accessible as to permit independent examination and enforcement
by the Commission of this Act or the Investment Company Act of
1940 and rules and regulations promulgated under this Act or
the Investment Company Act of 1940.''.
SEC. 218. DEFINITION OF BROKER UNDER THE INVESTMENT ADVISERS ACT OF
1940.
Section 202(a)(3) of the Investment Advisers Act of 1940 (15 U.S.C.
80b-2(a)(3)) is amended to read as follows:
``(3) The term `broker' has the same meaning as given in
section 3 of the Securities Exchange Act of 1934.''.
SEC. 219. DEFINITION OF DEALER UNDER THE INVESTMENT ADVISERS ACT OF
1940.
Section 202(a)(7) of the Investment Advisers Act of 1940 (15 U.S.C.
80b-2(a)(7)) is amended to read as follows:
``(7) The term `dealer' has the same meaning as given in
section 3 of the Securities Exchange Act of 1934, but does not
include an insurance company or investment company.''.
SEC. 220. INTERAGENCY CONSULTATION.
The Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.) is
amended by inserting after section 210 the following new section:
``SEC. 210A. CONSULTATION.
``(a) Examination Results and Other Information.--
``(1) The appropriate Federal banking agency shall provide the
Commission upon request the results of any examination, reports,
records, or other information to which such agency may have
access--
``(A) with respect to the investment advisory activities 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, with respect to the
investment advisory activities of such bank or bank holding
company.
``(2) The Commission shall provide to the appropriate Federal
banking agency upon request the results of any examination,
reports, records, or other information with respect to the
investment advisory activities of any bank holding company, bank,
or separately identifiable department or division of a bank, which
is registered under section 203 of this title.
``(3) Notwithstanding any other provision of law, the
Commission and the appropriate Federal banking agencies shall not
be compelled to disclose any information provided under paragraph
(1) or (2). Nothing in this paragraph shall authorize the
Commission or such agencies to withhold information from Congress,
or prevent the Commission or such agencies 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, the Commission, or such agencies. For purposes of
section 552 of title 5, United States Code, this paragraph shall be
considered a statute described in subsection (b)(3)(B) of such
section 552.
``(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 (or affiliates or
subsidiaries thereof), bank, or subsidiary, department, or division or
a bank under any other provision of law.
``(c) Definition.--For purposes of this section, the term
`appropriate Federal banking agency' shall have the same meaning as
given in section 3 of the Federal Deposit Insurance Act.''.
SEC. 221. TREATMENT OF BANK COMMON TRUST FUNDS.
(a) Securities Act of 1933.--Section 3(a)(2) of the Securities Act
of 1933 (15 U.S.C. 77c(a)(2)) is amended by striking ``or any interest
or participation in any common trust fund or similar fund maintained by
a bank exclusively for the collective investment and reinvestment of
assets contributed thereto by such bank in its capacity as trustee,
executor, administrator, or guardian'' and inserting ``or any interest
or participation in any common trust fund or similar fund that is
excluded from the definition of the term `investment company' under
section 3(c)(3) of the Investment Company Act of 1940''.
(b) Securities Exchange Act of 1934.--Section 3(a)(12)(A)(iii) of
the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(12)(A)(iii)) is
amended to read as follows:
``(iii) any interest or participation in any common trust
fund or similar fund that is excluded from the definition of
the term `investment company' under section 3(c)(3) of the
Investment Company Act of 1940;''.
(c) Investment Company Act of 1940.--Section 3(c)(3) of the
Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(3)) is amended by
inserting before the period the following: ``, if--
``(A) such fund is employed by the bank solely as an aid to
the administration of trusts, estates, or other accounts
created and maintained for a fiduciary purpose;
``(B) except in connection with the ordinary advertising of
the bank's fiduciary services, interests in such fund are not--
``(i) advertised; or
``(ii) offered for sale to the general public; and
``(C) fees and expenses charged by such fund are not in
contravention of fiduciary principles established under
applicable Federal or State law''.
SEC. 222. STATUTORY DISQUALIFICATION FOR BANK WRONGDOING.
Section 9(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-
9(a)) is amended in paragraphs (1) and (2) by striking ``securities
dealer, transfer agent,'' and inserting ``securities dealer, bank,
transfer agent,''.
SEC. 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 18 months 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 1 year after receipt by the Commission, or such shorter
or longer period as the Commission deems necessary or
appropriate to ensure effective supervision of the material
risks to the supervised investment bank holding company and to
the affiliated broker or dealer, or to prevent evasion of the
purposes of this section.
``(B) Discontinuation of commission supervision.--If the
Commission finds that any supervised investment bank holding
company that is supervised pursuant to paragraph (1) is no
longer in existence or has ceased to be an investment bank
holding company, or if the Commission finds that continued
supervision of such a supervised investment bank holding
company is not consistent with the purposes of this section,
the Commission may discontinue the supervision pursuant to a
rule or order, if any, promulgated by the Commission under this
section.
``(3) Supervision of investment bank holding companies.--
``(A) Recordkeeping and reporting.--
``(i) In general.--Every supervised investment bank
holding company and each affiliate thereof shall make and
keep for prescribed periods such records, furnish copies
thereof, and make such reports, as the Commission may
require by rule, in order to keep the Commission informed
as to--
``(I) the company's or affiliate's activities,
financial condition, policies, systems for monitoring
and controlling financial and operational risks, and
transactions and relationships between any broker or
dealer affiliate of the supervised investment bank
holding company; and
``(II) the extent to which the company or affiliate
has complied with the provisions of this Act and
regulations prescribed and orders issued under this
Act.
``(ii) Form and contents.--Such records and reports
shall be prepared in such form and according to such
specifications (including certification by an independent
public accountant), as the Commission may require and shall
be provided promptly at any time upon request by the
Commission. Such records and reports may include--
``(I) a balance sheet and income statement;
``(II) an assessment of the consolidated capital of
the supervised investment bank holding company;
``(III) an independent auditor's report attesting
to the supervised investment bank holding company's
compliance with its internal risk management and
internal control objectives; and
``(IV) reports concerning the extent to which the
company or affiliate has complied with the provisions
of this title and any regulations prescribed and orders
issued under this title.
``(B) Use of existing reports.--
``(i) In general.--The Commission shall, to the fullest
extent possible, accept reports in fulfillment of the
requirements under this paragraph that the supervised
investment bank holding company or its affiliates have been
required to provide to another appropriate regulatory
agency or self-regulatory organization.
``(ii) Availability.--A supervised investment bank
holding company or an affiliate of such company shall
provide to the Commission, at the request of the
Commission, any report referred to in clause (i).
``(C) Examination authority.--
``(i) Focus of examination authority.--The Commission
may make examinations of any supervised investment bank
holding company and any affiliate of such company in order
to--
``(I) inform the Commission regarding--
``(aa) the nature of the operations and
financial condition of the supervised investment
bank holding company and its affiliates;
``(bb) the financial and operational risks
within the supervised investment bank holding
company that may affect any broker or dealer
controlled by such supervised investment bank
holding company; and
``(cc) the systems of the supervised investment
bank holding company and its affiliates for
monitoring and controlling those risks; and
``(II) monitor compliance with the provisions of
this subsection, provisions governing transactions and
relationships between any broker or dealer affiliated
with the supervised investment bank holding company and
any of the company's other affiliates, and applicable
provisions of subchapter II of chapter 53, title 31,
United States Code (commonly referred to as the `Bank
Secrecy Act') and regulations thereunder.
``(ii) Restricted focus of examinations.--The
Commission shall limit the focus and scope of any
examination of a supervised investment bank holding company
to--
``(I) the company; and
``(II) any affiliate of the company that, because
of its size, condition, or activities, the nature or
size of the transactions between such affiliate and any
affiliated broker or dealer, or the centralization of
functions within the holding company system, could, in
the discretion of the Commission, have a materially
adverse effect on the operational or financial
condition of the broker or dealer.
``(iii) Deference to other examinations.--For purposes
of this subparagraph, the Commission shall, to the fullest
extent possible, use the reports of examination of an
institution described in subparagraph (D), (F), or (G) of
section 2(c)(2), or held under section 4(f), of the Bank
Holding Company Act of 1956 made by the appropriate
regulatory agency, or of a licensed insurance company made
by the appropriate State insurance regulator.
``(4) 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.
``(5) Definitions.--For purposes of this subsection:
``(A) The term `investment bank holding company' means--
``(i) any person other than a natural person that owns
or controls one or more brokers or dealers; and
``(ii) the associated persons of the investment bank
holding company.
``(B) The term `supervised investment bank holding company'
means any investment bank holding company that is supervised by
the Commission pursuant to this subsection.
``(C) The terms `affiliate', `bank', `bank holding
company', `company', `control', and `savings association' have
the same meanings as given in section 2 of the Bank Holding
Company Act of 1956 (12 U.S.C. 1841).
``(D) The term `insured bank' has the same meaning as given
in section 3 of the Federal Deposit Insurance Act.
``(E) The term `foreign bank' has the same meaning as given
in section 1(b)(7) of the International Banking Act of 1978.
``(F) The terms `person associated with an investment bank
holding company' and `associated person of an investment bank
holding company' mean any person directly or indirectly
controlling, controlled by, or under common control with, an
investment bank holding company.
``(j) Authority To Limit Disclosure of Information.--
Notwithstanding any other provision of law, the Commission shall not be
compelled to disclose any information required to be reported under
subsection (h) or (i) or any information supplied to the Commission by
any domestic or foreign regulatory agency that relates to the financial
or operational condition of any associated person of a broker or
dealer, investment bank holding company, or any affiliate of an
investment bank holding company. Nothing in this subsection shall
authorize the Commission to withhold information from Congress, or
prevent the Commission from complying with a request for information
from any other Federal department or agency or any self-regulatory
organization requesting the information for purposes within the scope
of its jurisdiction, or complying with an order of a court of the
United States in an action brought by the United States or the
Commission. For purposes of section 552 of title 5, United States Code,
this subsection shall be considered a statute described in subsection
(b)(3)(B) of such section 552. In prescribing regulations to carry out
the requirements of this subsection, the Commission shall designate
information described in or obtained pursuant to subparagraphs (A),
(B), and (C) of subsection (i)(5) as confidential information for
purposes of section 24(b)(2) of this title.''.
(b) Conforming Amendments.--
(1) Section 3(a)(34) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)(34)) is amended by adding at the end the following
new subparagraph:
``(H) When used with respect to an institution described in
subparagraph (D), (F), or (G) of section 2(c)(2), or held under
section 4(f), of the Bank Holding Company Act of 1956--
``(i) the Comptroller of the Currency, in the case of a
national bank or a bank in the District of Columbia
examined by the Comptroller of the Currency;
``(ii) the Board of Governors of the Federal Reserve
System, in the case of a State member bank of the Federal
Reserve System or any corporation chartered under section
25A of the Federal Reserve Act;
``(iii) the Federal Deposit Insurance Corporation, in
the case of any other bank the deposits of which are
insured in accordance with the Federal Deposit Insurance
Act; or
``(iv) the Commission in the case of all other such
institutions.''.
(2) Section 1112(e) of the Right to Financial Privacy Act of
1978 (12 U.S.C. 3412(e)) is amended--
(A) by striking ``this title'' and inserting ``law''; and
(B) by inserting ``, examination reports'' after
``financial records''.
Subtitle D--Banks and Bank Holding Companies
SEC. 241. CONSULTATION.
(a) In General.--The Securities and Exchange Commission shall
consult and coordinate comments with the appropriate Federal banking
agency before taking any action or rendering any opinion with respect
to the manner in which any insured depository institution or depository
institution holding company reports loan loss reserves in its financial
statement, including the amount of any such loan loss reserve.
(b) Definitions.--For purposes of subsection (a), the terms
``insured depository institution'', ``depository institution holding
company'', and ``appropriate Federal banking agency'' have the same
meaning as given in section 3 of the Federal Deposit Insurance Act.
TITLE III--INSURANCE
Subtitle A--State Regulation of Insurance
SEC. 301. FUNCTIONAL REGULATION OF INSURANCE.
The insurance activities of any person (including a national bank
exercising its power to act as agent under the eleventh undesignated
paragraph of section 13 of the Federal Reserve Act) shall be
functionally regulated by the States, subject to section 104.
SEC. 302. INSURANCE UNDERWRITING IN NATIONAL BANKS.
(a) In General.--Except as provided in section 303, a national bank
and the subsidiaries of a national bank may not provide insurance in a
State as principal except that this prohibition shall not apply to
authorized products.
(b) Authorized Products.--For the purposes of this section, a
product is authorized if--
(1) as of January 1, 1999, the Comptroller of the Currency had
determined in writing that national banks may provide such product
as principal, or national banks were in fact lawfully providing
such product as principal;
(2) no court of relevant jurisdiction had, by final judgment,
overturned a determination of the Comptroller of the Currency that
national banks may provide such product as principal; and
(3) the product is not title insurance, or an annuity contract
the income of which is subject to tax treatment under section 72 of
the Internal Revenue Code of 1986.
(c) Definition.--For purposes of this section, the term
``insurance'' means--
(1) any product regulated as insurance as of January 1, 1999,
in accordance with the relevant State insurance law, in the State
in which the product is provided;
(2) any product first offered after January 1, 1999, which--
(A) a State insurance regulator determines shall be
regulated as insurance in the State in which the product is
provided because the product insures, guarantees, or
indemnifies against liability, loss of life, loss of health, or
loss through damage to or destruction of property, including,
but not limited to, surety bonds, life insurance, health
insurance, title insurance, and property and casualty insurance
(such as private passenger or commercial automobile,
homeowners, mortgage, commercial multiperil, general liability,
professional liability, workers' compensation, fire and allied
lines, farm owners multiperil, aircraft, fidelity, surety,
medical malpractice, ocean marine, inland marine, and boiler
and machinery insurance); and
(B) is not a product or service of a bank that is--
(i) a deposit product;
(ii) a loan, discount, letter of credit, or other
extension of credit;
(iii) a trust or other fiduciary service;
(iv) a qualified financial contract (as defined in or
determined pursuant to section 11(e)(8)(D)(i) of the
Federal Deposit Insurance Act); or
(v) a financial guaranty, except that this subparagraph
(B) shall not apply to a product that includes an insurance
component such that if the product is offered or proposed
to be offered by the bank as principal--
(I) it would be treated as a life insurance
contract under section 7702 of the Internal Revenue
Code of 1986; or
(II) in the event that the product is not a letter
of credit or other similar extension of credit, a
qualified financial contract, or a financial guaranty,
it would qualify for treatment for losses incurred with
respect to such product under section 832(b)(5) of the
Internal Revenue Code of 1986, if the bank were subject
to tax as an insurance company under section 831 of
that Code; or
(3) any annuity contract, the income on which is subject to tax
treatment under section 72 of the Internal Revenue Code of 1986.
(d) Rule of Construction.--For purposes of this section, providing
insurance (including reinsurance) outside the United States that
insures, guarantees, or indemnifies insurance products provided in a
State, or that indemnifies an insurance company with regard to
insurance products provided in a State, shall be considered to be
providing insurance as principal in that State.
SEC. 303. TITLE INSURANCE ACTIVITIES OF NATIONAL BANKS AND THEIR
AFFILIATES.
(a) General Prohibition.--No national bank may engage in any
activity involving the underwriting or sale of title insurance.
(b) Nondiscrimination Parity Exception.--
(1) In general.--Notwithstanding any other provision of law
(including section 104 of this Act), in the case of any State in
which banks organized under the laws of such State are authorized
to sell title insurance as agent, a national bank may sell title
insurance as agent in such State, but only in the same manner, to
the same extent, and under the same restrictions as such State
banks are authorized to sell title insurance as agent in such
State.
(2) Coordination with ``wildcard'' provision.--A State law
which authorizes State banks to engage in any activities in such
State in which a national bank may engage shall not be treated as a
statute which authorizes State banks to sell title insurance as
agent, for purposes of paragraph (1).
(c) Grandfathering With Consistent Regulation.--
(1) In general.--Except as provided in paragraphs (2) and (3)
and notwithstanding subsections (a) and (b), a national bank, and a
subsidiary of a national bank, may conduct title insurance
activities which such national bank or subsidiary was actively and
lawfully conducting before the date of the enactment of this Act.
(2) Insurance affiliate.--In the case of a national bank which
has an affiliate which provides insurance as principal and is not a
subsidiary of the bank, the national bank and any subsidiary of the
national bank may not engage in the underwriting of title insurance
pursuant to paragraph (1).
(3) Insurance subsidiary.--In the case of a national bank which
has a subsidiary which provides insurance as principal and has no
affiliate other than a subsidiary which provides insurance as
principal, the national bank may not directly engage in any
activity involving the underwriting of title insurance.
(d) ``Affiliate'' and ``Subsidiary'' Defined.--For purposes of this
section, the terms ``affiliate'' and ``subsidiary'' have the same
meanings as in section 2 of the Bank Holding Company Act of 1956.
(e) Rule of Construction.--No provision of this Act or any other
Federal law shall be construed as superseding or affecting a State law
which was in effect before the date of the enactment of this Act and
which prohibits title insurance from being offered, provided, or sold
in such State, or from being underwritten with respect to real property
in such State, by any person whatsoever.
SEC. 304. EXPEDITED AND EQUALIZED DISPUTE RESOLUTION FOR FEDERAL
REGULATORS.
(a) Filing in Court of Appeals.--In the case of a regulatory
conflict between a State insurance regulator and a Federal regulator
regarding insurance issues, including whether a State law, rule,
regulation, order, or interpretation regarding any insurance sales or
solicitation activity is properly treated as preempted under Federal
law, the Federal or State regulator may seek expedited judicial review
of such determination by the United States Court of Appeals for the
circuit in which the State is located or in the United States Court of
Appeals for the District of Columbia Circuit by filing a petition for
review in such court.
(b) Expedited Review.--The United States Court of Appeals in which
a petition for review is filed in accordance with subsection (a) shall
complete all action on such petition, including rendering a judgment,
before the end of the 60-day period beginning on the date on which such
petition is filed, unless all parties to such proceeding agree to any
extension of such period.
(c) Supreme Court Review.--Any request for certiorari to the
Supreme Court of the United States of any judgment of a United States
Court of Appeals with respect to a petition for review under this
section shall be filed with the Supreme Court of the United States as
soon as practicable after such judgment is issued.
(d) Statute of Limitation.--No petition may be filed under this
section challenging an order, ruling, determination, or other action of
a Federal regulator or State insurance regulator after the later of--
(1) the end of the 12-month period beginning on the date on
which the first public notice is made of such order, ruling,
determination or other action in its final form; or
(2) the end of the 6-month period beginning on the date on
which such order, ruling, determination, or other action takes
effect.
(e) Standard of Review.--The court shall decide a petition filed
under this section based on its review on the merits of all questions
presented under State and Federal law, including the nature of the
product or activity and the history and purpose of its regulation under
State and Federal law, without unequal deference.
SEC. 305. INSURANCE CUSTOMER PROTECTIONS.
The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is
amended by inserting after section 46, as added by section 121(d) of
this Act, the following new section:
``SEC. 47. INSURANCE CUSTOMER PROTECTIONS.
``(a) Regulations Required.--
``(1) In general.--The Federal banking agencies shall prescribe
and publish in final form, before the end of the 1-year period
beginning on the date of the enactment of the Gramm-Leach-Bliley
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 insurance product by any
depository institution or any person that 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.
``(2) Applicability to subsidiaries.--The regulations
prescribed pursuant to paragraph (1) shall extend such protections
to any subsidiary of a depository institution, as deemed
appropriate by the regulators referred to in paragraph (3), where
such extension is determined to be necessary to ensure the consumer
protections provided by this section.
``(3) Consultation and joint regulations.--The Federal banking
agencies shall consult with each other and prescribe joint
regulations pursuant to paragraph (1), after consultation with the
State insurance regulators, as appropriate.
``(b) Sales Practices.--The regulations prescribed pursuant to
subsection (a) shall include antitying and anticoercion rules
applicable to the sale of insurance products that prohibit a 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--
``(1) the purchase of an insurance product from the institution
or any of its affiliates; or
``(2) an agreement by the consumer not to obtain, or a
prohibition on the consumer from obtaining, an insurance product
from an unaffiliated entity.
``(c) Disclosures and Advertising.--The regulations prescribed
pursuant to subsection (a) shall include the following provisions
relating to disclosures and advertising in connection with the initial
purchase of an insurance product:
``(1) Disclosures.--
``(A) In general.--Requirements that the following
disclosures be made orally and in writing before the completion
of the initial sale and, in the case of clause (iii), at the
time of application for an extension of credit:
``(i) Uninsured status.--As appropriate, the product is
not insured by the Federal Deposit Insurance Corporation,
the United States Government, or the depository
institution.
``(ii) Investment risk.--In the case of a variable
annuity or other insurance product which involves an
investment risk, that there is an investment risk
associated with the product, including possible loss of
value.
``(iii) Coercion.--The approval of an extension of
credit may not be conditioned on--
``(I) the purchase of an insurance product from the
institution in which the application for credit is
pending or of any affiliate of the institution; or
``(II) an agreement by the consumer not to obtain,
or a prohibition on the consumer from obtaining, an
insurance product from an unaffiliated entity.
``(B) Making disclosure readily understandable.--
Regulations prescribed under subparagraph (A) shall encourage
the use of disclosure that is conspicuous, simple, direct, and
readily understandable, such as the following:
``(i) `NOT FDIC--INSURED'.
``(ii) `NOT GUARANTEED BY THE BANK'.
``(iii) `MAY GO DOWN IN VALUE'.
``(iv) `NOT INSURED BY ANY GOVERNMENT AGENCY'.
``(C) Limitation.--Nothing in this paragraph requires the
inclusion of the foregoing disclosures in advertisements of a
general nature describing or listing the services or products
offered by an institution.
``(D) Meaningful disclosures.--Disclosures shall not be
considered to be meaningfully provided under this paragraph if
the institution or its representative states that disclosures
required by this subsection were available to the customer in
printed material available for distribution, where such printed
material is not provided and such information is not orally
disclosed to the customer.
``(E) Adjustments for alternative methods of purchase.--In
prescribing the requirements under subparagraphs (A) and (F),
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.
``(F) Consumer acknowledgment.--A requirement that a
depository institution shall require any person selling an
insurance product at any office of, or on behalf of, the
institution to obtain, at the time a consumer receives the
disclosures required under this paragraph or at the time of the
initial purchase by the consumer of such product, an
acknowledgment by such consumer of the receipt of the
disclosure required under this subsection with respect to such
product.
``(2) Prohibition on misrepresentations.--A prohibition on any
practice, or any advertising, at any office of, or on behalf of,
the depository institution, or any subsidiary, as appropriate, that
could mislead any person or otherwise cause a reasonable person to
reach an erroneous belief with respect to--
``(A) the uninsured nature of any insurance product sold,
or offered for sale, by the institution or any subsidiary of
the institution;
``(B) in the case of a variable annuity or insurance
product that involves an investment risk, the investment risk
associated with any such product; or
``(C) in the case of an institution or subsidiary at which
insurance products are sold or offered for sale, the fact
that--
``(i) the approval of an extension of credit to a
customer by the institution or subsidiary may not be
conditioned on the purchase of an insurance product by such
customer from the institution or subsidiary; and
``(ii) the customer is free to purchase the insurance
product from another source.
``(d) Separation of Banking and Nonbanking Activities.--
``(1) Regulations required.--The regulations prescribed
pursuant to subsection (a) shall include such provisions as the
Federal banking agencies consider appropriate to ensure that the
routine acceptance of deposits is kept, to the extent practicable,
physically segregated from insurance product activity.
``(2) Requirements.--Regulations prescribed pursuant to
paragraph (1) shall include the following requirements:
``(A) Separate setting.--A clear delineation of the setting
in which, and the circumstances under which, transactions
involving insurance products should be conducted in a location
physically segregated from an area where retail deposits are
routinely accepted.
``(B) Referrals.--Standards that permit any person
accepting deposits from the public in an area where such
transactions are routinely conducted in a depository
institution to refer a customer who seeks to purchase any
insurance product to a qualified person who sells such product,
only if the person making the referral receives no more than a
one-time nominal fee of a fixed dollar amount for each referral
that does not depend on whether the referral results in a
transaction.
``(C) Qualification and licensing requirements.--Standards
prohibiting any depository institution from permitting any
person to sell or offer for sale any insurance product in any
part of any office of the institution, or on behalf of the
institution, unless such person is appropriately qualified and
licensed.
``(e) Domestic Violence Discrimination Prohibition.--
``(1) In general.--In the case of an applicant for, or an
insured under, any insurance product described in paragraph (2),
the status of the applicant or insured as a victim of domestic
violence, or as a provider of services to victims of domestic
violence, shall not be considered as a criterion in any decision
with regard to insurance underwriting, pricing, renewal, or scope
of coverage of insurance policies, or payment of insurance claims,
except as required or expressly permitted under State law.
``(2) Scope of application.--The prohibition contained in
paragraph (1) shall apply to any life or health insurance product
which is sold or offered for sale, as principal, agent, or broker,
by any depository institution or any person who is engaged in such
activities at an office of the institution or on behalf of the
institution.
``(3) Domestic violence defined.--For purposes of this
subsection, the term `domestic violence' means the occurrence of
one or more of the following acts by a current or former family
member, household member, intimate partner, or caretaker:
``(A) Attempting to cause or causing or threatening another
person physical harm, severe emotional distress, psychological
trauma, rape, or sexual assault.
``(B) Engaging in a course of conduct or repeatedly
committing acts toward another person, including following the
person without proper authority, under circumstances that place
the person in reasonable fear of bodily injury or physical
harm.
``(C) Subjecting another person to false imprisonment.
``(D) Attempting to cause or cause damage to property so as
to intimidate or attempt to control the behavior of another
person.
``(f) Consumer Grievance Process.--The Federal banking agencies
shall jointly establish a consumer complaint mechanism, for receiving
and expeditiously addressing consumer complaints alleging a violation
of regulations issued under the section, which shall--
``(1) establish a group within each regulatory agency to
receive such complaints;
``(2) develop procedures for investigating such complaints;
``(3) develop procedures for informing consumers of rights they
may have in connection with such complaints; and
``(4) develop procedures for addressing concerns raised by such
complaints, as appropriate, including procedures for the recovery
of losses to the extent appropriate.
``(g) Effect on Other Authority.--
``(1) In general.--No provision of this section shall be
construed as granting, limiting, or otherwise affecting--
``(A) any authority of the Securities and Exchange
Commission, any self-regulatory organization, the Municipal
Securities Rulemaking Board, or the Secretary of the Treasury
under any Federal securities law; or
``(B) except as provided in paragraph (2), any authority of
any State insurance commission (or any agency or office
performing like functions), or of any State securities
commission (or any agency or office performing like functions),
or other State authority under any State law.
``(2) Coordination with state law.--
``(A) In general.--Except as provided in subparagraph (B),
insurance customer protection regulations prescribed by a
Federal banking agency under this section shall not apply to
retail sales, solicitations, advertising, or offers of any
insurance product by any 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.--
``(i) In general.--If, with respect to any provision of
the regulations prescribed under this section, the Board of
Governors of the Federal Reserve System, the Comptroller of
the Currency, and the Board of Directors of the Corporation
determine jointly that the protection afforded by such
provision for customers 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, the appropriate State
regulatory authority shall be notified of such
determination in writing.
``(ii) Considerations.--Before making a final
determination under clause (i), the Federal agencies
referred to in clause (i) shall give appropriate
consideration to comments submitted by the appropriate
State regulatory authorities relating to the level of
protection afforded to consumers under State law.
``(iii) Federal preemption and ability of states to
override federal preemption.--If the Federal agencies
referred to in clause (i) jointly determine that any
provision of the regulations prescribed under this section
affords greater protections than a comparable State law,
rule, regulation, order, or interpretation, those agencies
shall send a written preemption notice to the appropriate
State regulatory authority to notify the State that the
Federal provision will preempt the State provision and will
become applicable unless, not later than 3 years after the
date of such notice, the State adopts legislation to
override such preemption.
``(h) Non-Discrimination Against Non-Affiliated Agents.--The
Federal banking agencies shall ensure that the regulations prescribed
pursuant to subsection (a) shall not have the effect of discriminating,
either intentionally or unintentionally, against any person engaged in
insurance sales or solicitations that is not affiliated with a
depository institution.''.
SEC. 306. CERTAIN STATE AFFILIATION LAWS PREEMPTED FOR INSURANCE
COMPANIES AND AFFILIATES.
Except as provided in section 104(c)(2), no State may, by law,
regulation, order, interpretation, or otherwise--
(1) prevent or significantly interfere with the ability of any
insurer, or any affiliate of an insurer (whether such affiliate is
organized as a stock company, mutual holding company, or
otherwise), to become a financial holding company or to acquire
control of a depository institution;
(2) limit the amount of an insurer's assets that may be
invested in the voting securities of a depository institution (or
any company which controls such institution), except that the laws
of an insurer's State of domicile may limit the amount of such
investment to an amount that is not less than 5 percent of the
insurer's admitted assets; or
(3) prevent, significantly interfere with, or have the
authority to review, approve, or disapprove a plan of
reorganization by which an insurer proposes to reorganize from
mutual form to become a stock insurer (whether as a direct or
indirect subsidiary of a mutual holding company or otherwise)
unless such State is the State of domicile of the insurer.
SEC. 307. INTERAGENCY CONSULTATION.
(a) Purpose.--It is the intention of the Congress that the Board of
Governors of the Federal Reserve System, as the umbrella supervisor for
financial holding companies, and the State insurance regulators, as the
functional regulators of companies engaged in insurance activities,
coordinate efforts to supervise companies that control both a
depository institution and a company engaged in insurance activities
regulated under State law. In particular, Congress believes that the
Board and the State insurance regulators should share, on a
confidential basis, information relevant to the supervision of
companies that control both a depository institution and a company
engaged in insurance activities, including information regarding the
financial health of the consolidated organization and information
regarding transactions and relationships between insurance companies
and affiliated depository institutions. The appropriate Federal banking
agencies for depository institutions should also share, on a
confidential basis, information with the relevant State insurance
regulators regarding transactions and relationships between depository
institutions and affiliated companies engaged in insurance activities.
The purpose of this section is to encourage this coordination and
confidential sharing of information, and to thereby improve both the
efficiency and the quality of the supervision of financial holding
companies and their affiliated depository institutions and companies
engaged in insurance activities.
(b) Examination Results and Other Information.--
(1) Information of the board.--Upon the request of the
appropriate insurance regulator of any State, the Board may provide
any information of the Board regarding the financial condition,
risk management policies, and operations of any financial holding
company that controls a company that is engaged in insurance
activities and is regulated by such State insurance regulator, and
regarding any transaction or relationship between such an insurance
company and any affiliated depository institution. The Board may
provide any other information to the appropriate State insurance
regulator that the Board believes is necessary or appropriate to
permit the State insurance regulator to administer and enforce
applicable State insurance laws.
(2) Banking agency information.--Upon the request of the
appropriate insurance regulator of any State, the appropriate
Federal banking agency may provide any information of the agency
regarding any transaction or relationship between a depository
institution supervised by such Federal banking agency and any
affiliated company that is engaged in insurance activities
regulated by such State insurance regulator. The appropriate
Federal banking agency may provide any other information to the
appropriate State insurance regulator that the agency believes is
necessary or appropriate to permit the State insurance regulator to
administer and enforce applicable State insurance laws.
(3) State insurance regulator information.--Upon the request of
the Board or the appropriate Federal banking agency, a State
insurance regulator may provide any examination or other reports,
records, or other information to which such insurance regulator may
have access with respect to a company which--
(A) is engaged in insurance activities and regulated by
such insurance regulator; and
(B) is an affiliate of a depository institution or
financial holding company.
(c) Consultation.--Before making any determination relating to the
initial affiliation of, or the continuing affiliation of, a depository
institution or financial holding company with a company engaged in
insurance activities, the appropriate Federal banking agency shall
consult with the appropriate State insurance regulator of such company
and take the views of such insurance regulator into account in making
such determination.
(d) Effect on Other Authority.--Nothing in this section shall limit
in any respect the authority of the appropriate Federal banking agency
with respect to a depository institution or bank holding company or any
affiliate thereof under any provision of law.
(e) Confidentiality and Privilege.--
(1) Confidentiality.--The appropriate Federal banking agency
shall not provide any information or material that is entitled to
confidential treatment under applicable Federal banking agency
regulations, or other applicable law, to a State insurance
regulator unless such regulator agrees to maintain the information
or material in confidence and to take all reasonable steps to
oppose any effort to secure disclosure of the information or
material by the regulator. The appropriate Federal banking agency
shall treat as confidential any information or material obtained
from a State insurance regulator that is entitled to confidential
treatment under applicable State regulations, or other applicable
law, and take all reasonable steps to oppose any effort to secure
disclosure of the information or material by the Federal banking
agency.
(2) Privilege.--The provision pursuant to this section of
information or material by a Federal banking agency or State
insurance regulator shall not constitute a waiver of, or otherwise
affect, any privilege to which the information or material is
otherwise subject.
(f) Definitions.--For purposes of this section, the following
definitions shall apply:
(1) Appropriate federal banking agency; depository
institution.--The terms ``appropriate Federal banking agency'' and
``depository institution'' have the same meanings as in section 3
of the Federal Deposit Insurance Act.
(2) Board and financial holding company.--The terms ``Board''
and ``financial holding company'' have the same meanings as in
section 2 of the Bank Holding Company Act of 1956.
SEC. 308. DEFINITION OF STATE.
For purposes of this subtitle, the term ``State'' means any State
of the United States, the District of Columbia, any territory of the
United States, Puerto Rico, Guam, American Samoa, the Trust Territory
of the Pacific Islands, the Virgin Islands, and the Northern Mariana
Islands.
Subtitle B--Redomestication of Mutual Insurers
SEC. 311. GENERAL APPLICATION.
This subtitle shall only apply to a mutual insurance company in a
State which has not enacted a law which expressly establishes
reasonable terms and conditions for a mutual insurance company
domiciled in such State to reorganize into a mutual holding company.
SEC. 312. REDOMESTICATION OF MUTUAL INSURERS.
(a) Redomestication.--A mutual insurer organized under the laws of
any State may transfer its domicile to a transferee domicile as a step
in a reorganization in which, pursuant to the laws of the transferee
domicile and consistent with the standards in subsection (f), the
mutual insurer becomes a stock insurer that is a direct or indirect
subsidiary of a mutual holding company.
(b) Resulting Domicile.--Upon complying with the applicable law of
the transferee domicile governing transfers of domicile and completion
of a transfer pursuant to this section, the mutual insurer shall cease
to be a domestic insurer in the transferor domicile and, as a
continuation of its corporate existence, shall be a domestic insurer of
the transferee domicile.
(c) Licenses Preserved.--The certificate of authority, agents'
appointments and licenses, rates, approvals and other items that a
licensed State allows and that are in existence immediately prior to
the date that a redomesticating insurer transfers its domicile pursuant
to this subtitle shall continue in full force and effect upon transfer,
if the insurer remains duly qualified to transact the business of
insurance in such licensed State.
(d) Effectiveness of Outstanding Policies and Contracts.--
(1) In general.--All outstanding insurance policies and
annuities contracts of a redomesticating insurer shall remain in
full force and effect and need not be endorsed as to the new
domicile of the insurer, unless so ordered by the State insurance
regulator of a licensed State, and then only in the case of
outstanding policies and contracts whose owners reside in such
licensed State.
(2) Forms.--
(A) Applicable State law may require a redomesticating
insurer to file new policy forms with the State insurance
regulator of a licensed State on or before the effective date
of the transfer.
(B) Notwithstanding subparagraph (A), a redomesticating
insurer may use existing policy forms with appropriate
endorsements to reflect the new domicile of the redomesticating
insurer until the new policy forms are approved for use by the
State insurance regulator of such licensed State.
(e) Notice.--A redomesticating insurer shall give notice of the
proposed transfer to the State insurance regulator of each licensed
State and shall file promptly any resulting amendments to corporate
documents required to be filed by a foreign licensed mutual insurer
with the insurance regulator of each such licensed State.
(f) Procedural Requirements.--No mutual insurer may redomesticate
to another State and reorganize into a mutual holding company pursuant
to this section unless the State insurance regulator of the transferee
domicile determines that the plan of reorganization of the insurer
includes the following requirements:
(1) Approval by board of directors and policyholders.--The
reorganization is approved by at least a majority of the board of
directors of the mutual insurer and at least a majority of the
policyholders who vote after notice, disclosure of the
reorganization and the effects of the transaction on policyholder
contractual rights, and reasonable opportunity to vote, in
accordance with such notice, disclosure, and voting procedures as
are approved by the State insurance regulator of the transferee
domicile.
(2) Continued voting control by policyholders; review of public
stock offering.--After the consummation of a reorganization, the
policyholders of the reorganized insurer shall have the same voting
rights with respect to the mutual holding company as they had
before the reorganization with respect to the mutual insurer. With
respect to an initial public offering of stock, the offering shall
be conducted in compliance with applicable securities laws and in a
manner approved by the State insurance regulator of the transferee
domicile.
(3) Award of stock or grant of options to officers and
directors.--During the applicable period provided for under the
State law of the transferee domicile following completion of an
initial public offering, or for a period of six months if no such
applicable period is provided, neither a stock holding company nor
the converted insurer shall award any stock options or stock grants
to persons who are elected officers or directors of the mutual
holding company, the stock holding company, or the converted
insurer, except with respect to any such awards or options to which
a person is entitled as a policyholder and as approved by the State
insurance regulator of the transferee domicile.
(4) Policyholder rights.--Upon reorganization into a mutual
holding company, the contractual rights of the policyholders are
preserved.
(5) Fair and equitable treatment of policyholders.--The
reorganization is approved as fair and equitable to the
policyholders by the insurance regulator of the transferee
domicile.
SEC. 313. EFFECT ON STATE LAWS RESTRICTING REDOMESTICATION.
(a) In General.--Unless otherwise permitted by this subtitle, State
laws of any transferor domicile that conflict with the purposes and
intent of this subtitle are preempted, including but not limited to--
(1) any law that has the purpose or effect of impeding the
activities of, taking any action against, or applying any provision
of law or regulation to, any insurer or an affiliate of such
insurer because that insurer or any affiliate plans to
redomesticate, or has redomesticated, pursuant to this subtitle;
(2) any law that has the purpose or effect of impeding the
activities of, taking action against, or applying any provision of
law or regulation to, any insured or any insurance licensee or
other intermediary because such person has procured insurance from
or placed insurance with any insurer or affiliate of such insurer
that plans to redomesticate, or has redomesticated, pursuant to
this subtitle, but only to the extent that such law would treat
such insured licensee or other intermediary differently than if the
person procured insurance from, or placed insurance with, an
insured licensee or other intermediary which had not
redomesticated; and
(3) any law that has the purpose or effect of terminating,
because of the redomestication of a mutual insurer pursuant to this
subtitle, any certificate of authority, agent appointment or
license, rate approval, or other approval, of any State insurance
regulator or other State authority in existence immediately prior
to the redomestication in any State other than the transferee
domicile.
(b) Differential Treatment Prohibited.--No State law, regulation,
interpretation, or functional equivalent thereof, of a State other than
a transferee domicile may treat a redomesticating or redomesticated
insurer or any affiliate thereof any differently than an insurer
operating in that State that is not a redomesticating or redomesticated
insurer.
(c) Laws Prohibiting Operations.--If any licensed State fails to
issue, delays the issuance of, or seeks to revoke an original or
renewal certificate of authority of a redomesticated insurer promptly
following redomestication, except on grounds and in a manner consistent
with its past practices regarding the issuance of certificates of
authority to foreign insurers that are not redomesticating, then the
redomesticating insurer shall be exempt from any State law of the
licensed State to the extent that such State law or the operation of
such State law would make unlawful, or regulate, directly or
indirectly, the operation of the redomesticated insurer, except that
such licensed State may require the redomesticated insurer to--
(1) comply with the unfair claim settlement practices law of
the licensed State;
(2) pay, on a nondiscriminatory basis, applicable premium and
other taxes which are levied on licensed insurers or policyholders
under the laws of the licensed State;
(3) register with and designate the State insurance regulator
as its agent solely for the purpose of receiving service of legal
documents or process;
(4) submit to an examination by the State insurance regulator
in any licensed State in which the redomesticated insurer is doing
business to determine the insurer's financial condition, if--
(A) the State insurance regulator of the transferee
domicile has not begun an examination of the redomesticated
insurer and has not scheduled such an examination to begin
before the end of the 1-year period beginning on the date of
the redomestication; and
(B) any such examination is coordinated to avoid
unjustified duplication and repetition;
(5) comply with a lawful order issued in--
(A) a delinquency proceeding commenced by the State
insurance regulator of any licensed State if there has been a
judicial finding of financial impairment under paragraph (7);
or
(B) a voluntary dissolution proceeding;
(6) comply with any State law regarding deceptive, false, or
fraudulent acts or practices, except that if the licensed State
seeks an injunction regarding the conduct described in this
paragraph, such injunction must be obtained from a court of
competent jurisdiction as provided in section 314(a);
(7) comply with an injunction issued by a court of competent
jurisdiction, upon a petition by the State insurance regulator
alleging that the redomesticating insurer is in hazardous financial
condition or is financially impaired;
(8) participate in any insurance insolvency guaranty
association on the same basis as any other insurer licensed in the
licensed State; and
(9) require a person acting, or offering to act, as an
insurance licensee for a redomesticated insurer in the licensed
State to obtain a license from that State, except that such State
may not impose any qualification or requirement that discriminates
against a nonresident insurance licensee.
SEC. 314. OTHER PROVISIONS.
(a) Judicial Review.--The appropriate United States district court
shall have exclusive jurisdiction over litigation arising under this
section involving any redomesticating or redomesticated insurer.
(b) Severability.--If any provision of this section, or the
application thereof to any person or circumstances, is held invalid,
the remainder of the section, and the application of such provision to
other persons or circumstances, shall not be affected thereby.
SEC. 315. DEFINITIONS.
For purposes of this subtitle, the following definitions shall
apply:
(1) Court of competent jurisdiction.--The term ``court of
competent jurisdiction'' means a court authorized pursuant to
section 314(a) to adjudicate litigation arising under this
subtitle.
(2) Domicile.--The term ``domicile'' means the State in which
an insurer is incorporated, chartered, or organized.
(3) Insurance licensee.--The term ``insurance licensee'' means
any person holding a license under State law to act as insurance
agent, subagent, broker, or consultant.
(4) Institution.--The term ``institution'' means a corporation,
joint stock company, limited liability company, limited liability
partnership, association, trust, partnership, or any similar
entity.
(5) Licensed state.--The term ``licensed State'' means any
State, the District of Columbia, 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 in which the redomesticating insurer has a certificate of
authority in effect immediately prior to the redomestication.
(6) Mutual insurer.--The term ``mutual insurer'' means a mutual
insurer organized under the laws of any State.
(7) Person.--The term ``person'' means an individual,
institution, government or governmental agency, State or political
subdivision of a State, public corporation, board, association,
estate, trustee, or fiduciary, or other similar entity.
(8) Policyholder.--The term ``policyholder'' means the owner of
a policy issued by a mutual insurer, except that, with respect to
voting rights, the term means a member of a mutual insurer or
mutual holding company granted the right to vote, as determined
under applicable State law.
(9) Redomesticated insurer.--The term ``redomesticated
insurer'' means a mutual insurer that has redomesticated pursuant
to this subtitle.
(10) Redomesticating insurer.--The term ``redomesticating
insurer'' means a mutual insurer that is redomesticating pursuant
to this subtitle.
(11) Redomestication or transfer.--The term ``redomestication''
or ``transfer'' means the transfer of the domicile of a mutual
insurer from one State to another State pursuant to this subtitle.
(12) State insurance regulator.--The term ``State insurance
regulator'' means the principal insurance regulatory authority of a
State, the District of Columbia, 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.
(13) State law.--The term ``State law'' means the statutes of
any State, 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 and any regulation, order, or requirement prescribed
pursuant to any such statute.
(14) Transferee domicile.--The term ``transferee domicile''
means the State to which a mutual insurer is redomesticating
pursuant to this subtitle.
(15) Transferor domicile.--The term ``transferor domicile''
means the State from which a mutual insurer is redomesticating
pursuant to this subtitle.
SEC. 316. EFFECTIVE DATE.
This subtitle shall take effect on the date of the enactment of
this Act.
Subtitle C--National Association of Registered Agents and Brokers
SEC. 321. STATE FLEXIBILITY IN MULTISTATE LICENSING REFORMS.
(a) In General.--The provisions of this subtitle shall take effect
unless, not later than 3 years after the date of the enactment of this
Act, at least a majority of the States--
(1) have enacted uniform laws and regulations governing the
licensure of individuals and entities authorized to sell and
solicit the purchase of insurance within the State; or
(2) have enacted reciprocity laws and regulations governing the
licensure of nonresident individuals and entities authorized to
sell and solicit insurance within those States.
(b) Uniformity Required.--States shall be deemed to have
established the uniformity necessary to satisfy subsection (a)(1) if
the States--
(1) establish uniform criteria regarding the integrity,
personal qualifications, education, training, and experience of
licensed insurance producers, including the qualification and
training of sales personnel in ascertaining the appropriateness of
a particular insurance product for a prospective customer;
(2) establish uniform continuing education requirements for
licensed insurance producers;
(3) establish uniform ethics course requirements for licensed
insurance producers in conjunction with the continuing education
requirements under paragraph (2);
(4) establish uniform criteria to ensure that an insurance
product, including any annuity contract, sold to a consumer is
suitable and appropriate for the consumer based on financial
information disclosed by the consumer; and
(5) do not impose any requirement upon any insurance producer
to be licensed or otherwise qualified to do business as a
nonresident that has the effect of limiting or conditioning that
producer's activities because of its residence or place of
operations, except that countersignature requirements imposed on
nonresident producers shall not be deemed to have the effect of
limiting or conditioning a producer's activities because of its
residence or place of operations under this section.
(c) Reciprocity Required.--States shall be deemed to have
established the reciprocity required to satisfy subsection (a)(2) if
the following conditions are met:
(1) Administrative licensing procedures.--At least a majority
of the States permit a producer that has a resident license for
selling or soliciting the purchase of insurance in its home State
to receive a license to sell or solicit the purchase of insurance
in such majority of States as a nonresident to the same extent that
such producer is permitted to sell or solicit the purchase of
insurance in its State, if the producer's home State also awards
such licenses on such a reciprocal basis, without satisfying any
additional requirements other than submitting--
(A) a request for licensure;
(B) the application for licensure that the producer
submitted to its home State;
(C) proof that the producer is licensed and in good
standing in its home State; and
(D) the payment of any requisite fee to the appropriate
authority.
(2) Continuing education requirements.--A majority of the
States accept an insurance producer's satisfaction of its home
State's continuing education requirements for licensed insurance
producers to satisfy the States' own continuing education
requirements if the producer's home State also recognizes the
satisfaction of continuing education requirements on such a
reciprocal basis.
(3) No limiting nonresident requirements.--A majority of the
States do not impose any requirement upon any insurance producer to
be licensed or otherwise qualified to do business as a nonresident
that has the effect of limiting or conditioning that producer's
activities because of its residence or place of operations, except
that countersignature requirements imposed on nonresident producers
shall not be deemed to have the effect of limiting or conditioning
a producer's activities because of its residence or place of
operations under this section.
(4) Reciprocal reciprocity.--Each of the States that satisfies
paragraphs (1), (2), and (3) grants reciprocity to residents of all
of the other States that satisfy such paragraphs.
(d) Determination.--
(1) NAIC determination.--At the end of the 3-year period
beginning on the date of the enactment of this Act, the National
Association of Insurance Commissioners (hereafter in this subtitle
referred to as the ``NAIC'') shall determine, in consultation with
the insurance commissioners or chief insurance regulatory officials
of the States, whether the uniformity or reciprocity required by
subsections (b) and (c) has been achieved.
(2) Judicial review.--The appropriate United States district
court shall have exclusive jurisdiction over any challenge to the
NAIC's determination under this section and such court shall apply
the standards set forth in section 706 of title 5, United States
Code, when reviewing any such challenge.
(e) Continued Application.--If, at any time, the uniformity or
reciprocity required by subsections (b) and (c) no longer exists, the
provisions of this subtitle shall take effect 2 years after the date on
which such uniformity or reciprocity ceases to exist, unless the
uniformity or reciprocity required by those provisions is satisfied
before the expiration of that 2-year period.
(f) Savings Provision.--No provision of this section shall be
construed as requiring that any law, regulation, provision, or action
of any State which purports to regulate insurance producers, including
any such law, regulation, provision, or action which purports to
regulate unfair trade practices or establish consumer protections,
including countersignature laws, be altered or amended in order to
satisfy the uniformity or reciprocity required by subsections (b) and
(c), unless any such law, regulation, provision, or action is
inconsistent with a specific requirement of any such subsection and
then only to the extent of such inconsistency.
(g) Uniform Licensing.--Nothing in this section shall be construed
to require any State to adopt new or additional licensing requirements
to achieve the uniformity necessary to satisfy subsection (a)(1).
SEC. 322. NATIONAL ASSOCIATION OF REGISTERED AGENTS AND BROKERS.
(a) Establishment.--There is established the National Association
of Registered Agents and Brokers (hereafter in this subtitle referred
to as the ``Association'').
(b) Status.--The Association shall--
(1) be a nonprofit corporation;
(2) have succession until dissolved by an Act of Congress;
(3) not be an agent or instrumentality of the United States
Government; and
(4) except as otherwise provided in this Act, be subject to,
and have all the powers conferred upon a nonprofit corporation by
the District of Columbia Nonprofit Corporation Act (D.C. Code, sec.
29y-1001 et seq.).
SEC. 323. PURPOSE.
The purpose of the Association shall be to provide a mechanism
through which uniform licensing, appointment, continuing education, and
other insurance producer sales qualification requirements and
conditions can be adopted and applied on a multistate basis, while
preserving the right of States to license, supervise, and discipline
insurance producers and to prescribe and enforce laws and regulations
with regard to insurance-related consumer protection and unfair trade
practices.
SEC. 324. RELATIONSHIP TO THE FEDERAL GOVERNMENT.
The Association shall be subject to the supervision and oversight
of the NAIC.
SEC. 325. MEMBERSHIP.
(a) Eligibility.--
(1) In general.--Any State-licensed insurance producer shall be
eligible to become a member in the Association.
(2) Ineligibility for suspension or revocation of license.--
Notwithstanding paragraph (1), a State-licensed insurance producer
shall not be eligible to become a member if a State insurance
regulator has suspended or revoked such producer's license in that
State during the 3-year period preceding the date on which such
producer applies for membership.
(3) Resumption of eligibility.--Paragraph (2) shall cease to
apply to any insurance producer if--
(A) the State insurance regulator renews the license of
such producer in the State in which the license was suspended
or revoked; or
(B) the suspension or revocation is subsequently
overturned.
(b) Authority To Establish Membership Criteria.--The Association
shall have the authority to establish membership criteria that--
(1) bear a reasonable relationship to the purposes for which
the Association was established; and
(2) do not unfairly limit the access of smaller agencies to the
Association membership.
(c) Establishment of Classes and Categories.--
(1) Classes of membership.--The Association may establish
separate classes of membership, with separate criteria, if the
Association reasonably determines that performance of different
duties requires different levels of education, training, or
experience.
(2) Categories.--The Association may establish separate
categories of membership for individuals and for other persons. The
establishment of any such categories of membership shall be based
either on the types of licensing categories that exist under State
laws or on the aggregate amount of business handled by an insurance
producer. No special categories of membership, and no distinct
membership criteria, shall be established for members which are
depository institutions or for their employees, agents, or
affiliates.
(d) Membership Criteria.--
(1) In general.--The Association may establish criteria for
membership which shall include standards for integrity, personal
qualifications, education, training, and experience.
(2) Minimum standard.--In establishing criteria under paragraph
(1), the Association shall consider the highest levels of insurance
producer qualifications established under the licensing laws of the
States.
(e) Effect of Membership.--Membership in the Association shall
entitle the member to licensure in each State for which the member pays
the requisite fees, including licensing fees and, where applicable,
bonding requirements, set by such State.
(f) Annual Renewal.--Membership in the Association shall be renewed
on an annual basis.
(g) Continuing Education.--The Association shall establish, as a
condition of membership, continuing education requirements which shall
be comparable to or greater than the continuing education requirements
under the licensing laws of a majority of the States.
(h) Suspension and Revocation.--The Association may--
(1) inspect and examine the records and offices of the members
of the Association to determine compliance with the criteria for
membership established by the Association; and
(2) suspend or revoke the membership of an insurance producer
if--
(A) the producer fails to meet the applicable membership
criteria of the Association; or
(B) the producer has been subject to disciplinary action
pursuant to a final adjudicatory proceeding under the
jurisdiction of a State insurance regulator, and the
Association concludes that retention of membership in the
Association would not be in the public interest.
(i) Office of Consumer Complaints.--
(1) In general.--The Association shall establish an office of
consumer complaints that shall--
(A) receive and investigate complaints from both consumers
and State insurance regulators related to members of the
Association; and
(B) recommend to the Association any disciplinary actions
that the office considers appropriate, to the extent that any
such recommendation is not inconsistent with State law.
(2) Records and referrals.--The office of consumer complaints
of the Association shall--
(A) maintain records of all complaints received in
accordance with paragraph (1) and make such records available
to the NAIC and to each State insurance regulator for the State
of residence of the consumer who filed the complaint; and
(B) refer, when appropriate, any such complaint to any
appropriate State insurance regulator.
(3) Telephone and other access.--The office of consumer
complaints shall maintain a toll-free telephone number for the
purpose of this subsection and, as practicable, other alternative
means of communication with consumers, such as an Internet home
page.
SEC. 326. BOARD OF DIRECTORS.
(a) Establishment.--There is established the board of directors of
the Association (hereafter in this subtitle referred to as the
``Board'') for the purpose of governing and supervising the activities
of the Association and the members of the Association.
(b) Powers.--The Board shall have such powers and authority as may
be specified in the bylaws of the Association.
(c) Composition.--
(1) Members.--The Board shall be composed of 7 members
appointed by the NAIC.
(2) Requirement.--At least 4 of the members of the Board shall
each have significant experience with the regulation of commercial
lines of insurance in at least 1 of the 20 States in which the
greatest total dollar amount of commercial-lines insurance is
placed in the United States.
(3) Initial board membership.--
(A) In general.--If, by the end of the 2-year period
beginning on the date of the enactment of this Act, the NAIC
has not appointed the initial 7 members of the Board of the
Association, the initial Board shall consist of the 7 State
insurance regulators of the 7 States with the greatest total
dollar amount of commercial-lines insurance in place as of the
end of such period.
(B) Alternate composition.--If any of the State insurance
regulators described in subparagraph (A) declines to serve on
the Board, the State insurance regulator with the next greatest
total dollar amount of commercial-lines insurance in place, as
determined by the NAIC as of the end of such period, shall
serve as a member of the Board.
(C) Inoperability.--If fewer than 7 State insurance
regulators accept appointment to the Board, the Association
shall be established without NAIC oversight pursuant to section
332.
(d) Terms.--The term of each director shall, after the initial
appointment of the members of the Board, be for 3 years, with one-third
of the directors to be appointed each year.
(e) Board Vacancies.--A vacancy on the Board shall be filled in the
same manner as the original appointment of the initial Board for the
remainder of the term of the vacating member.
(f) Meetings.--The Board shall meet at the call of the chairperson,
or as otherwise provided by the bylaws of the Association.
SEC. 327. OFFICERS.
(a) In General.--
(1) Positions.--The officers of the Association shall consist
of a chairperson and a vice chairperson of the Board, a president,
secretary, and treasurer of the Association, and such other
officers and assistant officers as may be deemed necessary.
(2) Manner of selection.--Each officer of the Board and the
Association shall be elected or appointed at such time and in such
manner and for such terms not exceeding 3 years as may be
prescribed in the bylaws of the Association.
(b) Criteria for Chairperson.--Only individuals who are members of
the NAIC shall be eligible to serve as the chairperson of the board of
directors.
SEC. 328. BYLAWS, RULES, AND DISCIPLINARY ACTION.
(a) Adoption and Amendment of Bylaws.--
(1) Copy required to be filed with the naic.--The board of
directors of the Association shall file with the NAIC a copy of the
proposed bylaws or any proposed amendment to the bylaws,
accompanied by a concise general statement of the basis and purpose
of such proposal.
(2) Effective date.--Except as provided in paragraph (3), any
proposed bylaw or proposed amendment shall take effect--
(A) 30 days after the date of the filing of a copy with the
NAIC;
(B) upon such later date as the Association may designate;
or
(C) upon such earlier date as the NAIC may determine.
(3) Disapproval by the naic.--Notwithstanding paragraph (2), a
proposed bylaw or amendment shall not take effect if, after public
notice and opportunity to participate in a public hearing--
(A) the NAIC disapproves such proposal as being contrary to
the public interest or contrary to the purposes of this
subtitle and provides notice to the Association setting forth
the reasons for such disapproval; or
(B) the NAIC finds that such proposal involves a matter of
such significant public interest that public comment should be
obtained, in which case it may, after notifying the Association
in writing of such finding, require that the procedures set
forth in subsection (b) be followed with respect to such
proposal, in the same manner as if such proposed bylaw change
were a proposed rule change within the meaning of such
subsection.
(b) Adoption and Amendment of Rules.--
(1) Filing proposed regulations with the naic.--
(A) In general.--The board of directors of the Association
shall file with the NAIC a copy of any proposed rule or any
proposed amendment to a rule of the Association which shall be
accompanied by a concise general statement of the basis and
purpose of such proposal.
(B) Other rules and amendments ineffective.--No proposed
rule or amendment shall take effect unless approved by the NAIC
or otherwise permitted in accordance with this paragraph.
(2) Initial consideration by the naic.--Not later than 35 days
after the date of publication of notice of filing of a proposal, or
before the end of such longer period not to exceed 90 days as the
NAIC may designate after such date, if the NAIC finds such longer
period to be appropriate and sets forth its reasons for so finding,
or as to which the Association consents, the NAIC shall--
(A) by order approve such proposed rule or amendment; or
(B) institute proceedings to determine whether such
proposed rule or amendment should be modified or disapproved.
(3) NAIC proceedings.--
(A) In general.--Proceedings instituted by the NAIC with
respect to a proposed rule or amendment pursuant to paragraph
(2) shall--
(i) include notice of the grounds for disapproval under
consideration;
(ii) provide opportunity for hearing; and
(iii) be concluded not later than 180 days after the
date of the Association's filing of such proposed rule or
amendment.
(B) Disposition of proposal.--At the conclusion of any
proceeding under subparagraph (A), the NAIC shall, by order,
approve or disapprove the proposed rule or amendment.
(C) Extension of time for consideration.--The NAIC may
extend the time for concluding any proceeding under
subparagraph (A) for--
(i) not more than 60 days if the NAIC finds good cause
for such extension and sets forth its reasons for so
finding; or
(ii) such longer period as to which the Association
consents.
(4) Standards for review.--
(A) Grounds for approval.--The NAIC shall approve a
proposed rule or amendment if the NAIC finds that the rule or
amendment is in the public interest and is consistent with the
purposes of this Act.
(B) Approval before end of notice period.--The NAIC shall
not approve any proposed rule before the end of the 30-day
period beginning on the date on which the Association files
proposed rules or amendments in accordance with paragraph (1),
unless the NAIC finds good cause for so doing and sets forth
the reasons for so finding.
(5) Alternate procedure.--
(A) In general.--Notwithstanding any provision of this
subsection other than subparagraph (B), a proposed rule or
amendment relating to the administration or organization of the
Association shall take effect--
(i) upon the date of filing with the NAIC, if such
proposed rule or amendment is designated by the Association
as relating solely to matters which the NAIC, consistent
with the public interest and the purposes of this
subsection, determines by rule do not require the
procedures set forth in this paragraph; or
(ii) upon such date as the NAIC shall for good cause
determine.
(B) Abrogation by the naic.--
(i) In general.--At any time within 60 days after the
date of filing of any proposed rule or amendment under
subparagraph (A)(i) or clause (ii) of this subparagraph,
the NAIC may repeal such rule or amendment and require that
the rule or amendment be refiled and reviewed in accordance
with this paragraph, if the NAIC finds that such action is
necessary or appropriate in the public interest, for the
protection of insurance producers or policyholders, or
otherwise in furtherance of the purposes of this subtitle.
(ii) Effect of reconsideration by the naic.--Any action
of the NAIC pursuant to clause (i) shall--
(I) not affect the validity or force of a rule
change during the period such rule or amendment was in
effect; and
(II) not be considered to be a final action.
(c) Action Required by the NAIC.--The NAIC may, in accordance with
such rules as the NAIC determines to be necessary or appropriate to the
public interest or to carry out the purposes of this subtitle, require
the Association to adopt, amend, or repeal any bylaw, rule, or
amendment of the Association, whenever adopted.
(d) Disciplinary Action by the Association.--
(1) Specification of charges.--In any proceeding to determine
whether membership shall be denied, suspended, revoked, or not
renewed (hereafter in this section referred to as a ``disciplinary
action''), the Association shall bring specific charges, notify
such member of such charges, give the member an opportunity to
defend against the charges, and keep a record.
(2) Supporting statement.--A determination to take disciplinary
action shall be supported by a statement setting forth--
(A) any act or practice in which such member has been found
to have been engaged;
(B) the specific provision of this subtitle, the rules or
regulations under this subtitle, or the rules of the
Association which any such act or practice is deemed to
violate; and
(C) the sanction imposed and the reason for such sanction.
(e) NAIC Review of Disciplinary Action.--
(1) Notice to the naic.--If the Association orders any
disciplinary action, the Association shall promptly notify the NAIC
of such action.
(2) Review by the naic.--Any disciplinary action taken by the
Association shall be subject to review by the NAIC--
(A) on the NAIC's own motion; or
(B) upon application by any person aggrieved by such action
if such application is filed with the NAIC not more than 30
days after the later of--
(i) the date the notice was filed with the NAIC
pursuant to paragraph (1); or
(ii) the date the notice of the disciplinary action was
received by such aggrieved person.
(f) Effect of Review.--The filing of an application to the NAIC for
review of a disciplinary action, or the institution of review by the
NAIC on the NAIC's own motion, shall not operate as a stay of
disciplinary action unless the NAIC otherwise orders.
(g) Scope of Review.--
(1) In general.--In any proceeding to review such action, after
notice and the opportunity for hearing, the NAIC shall--
(A) determine whether the action should be taken;
(B) affirm, modify, or rescind the disciplinary sanction;
or
(C) remand to the Association for further proceedings.
(2) Dismissal of review.--The NAIC may dismiss a proceeding to
review disciplinary action if the NAIC finds that--
(A) the specific grounds on which the action is based exist
in fact;
(B) the action is in accordance with applicable rules and
regulations; and
(C) such rules and regulations are, and were, applied in a
manner consistent with the purposes of this subtitle.
SEC. 329. ASSESSMENTS.
(a) Insurance Producers Subject to Assessment.--The Association may
establish such application and membership fees as the Association finds
necessary to cover the costs of its operations, including fees made
reimbursable to the NAIC under subsection (b), except that, in setting
such fees, the Association may not discriminate against smaller
insurance producers.
(b) NAIC Assessments.--The NAIC may assess the Association for any
costs that the NAIC incurs under this subtitle.
SEC. 330. FUNCTIONS OF THE NAIC.
(a) Administrative Procedure.--Determinations of the NAIC, for
purposes of making rules pursuant to section 328, shall be made after
appropriate notice and opportunity for a hearing and for submission of
views of interested persons.
(b) Examinations and Reports.--
(1) Examinations.--The NAIC may make such examinations and
inspections of the Association and require the Association to
furnish to the NAIC such reports and records or copies thereof as
the NAIC may consider necessary or appropriate in the public
interest or to effectuate the purposes of this subtitle.
(2) Report by association.--As soon as practicable after the
close of each fiscal year, the Association shall submit to the NAIC
a written report regarding the conduct of its business, and the
exercise of the other rights and powers granted by this subtitle,
during such fiscal year. Such report shall include financial
statements setting forth the financial position of the Association
at the end of such fiscal year and the results of its operations
(including the source and application of its funds) for such fiscal
year. The NAIC shall transmit such report to the President and the
Congress with such comment thereon as the NAIC determines to be
appropriate.
SEC. 331. LIABILITY OF THE ASSOCIATION AND THE DIRECTORS, OFFICERS,
AND EMPLOYEES OF THE ASSOCIATION.
(a) In General.--The Association shall not be deemed to be an
insurer or insurance producer within the meaning of any State law,
rule, regulation, or order regulating or taxing insurers, insurance
producers, or other entities engaged in the business of insurance,
including provisions imposing premium taxes, regulating insurer
solvency or financial condition, establishing guaranty funds and
levying assessments, or requiring claims settlement practices.
(b) Liability of the Association, Its Directors, Officers, and
Employees.--Neither the Association nor any of its directors, officers,
or employees shall have any liability to any person for any action
taken or omitted in good faith under or in connection with any matter
subject to this subtitle.
SEC. 332. ELIMINATION OF NAIC OVERSIGHT.
(a) In General.--The Association shall be established without NAIC
oversight and the provisions set forth in section 324, subsections (a),
(b), (c), and (e) of section 328, and sections 329(b) and 330 of this
subtitle shall cease to be effective if, at the end of the 2-year
period beginning on the date on which the provisions of this subtitle
take effect pursuant to section 321--
(1) at least a majority of the States representing at least 50
percent of the total United States commercial-lines insurance
premiums have not satisfied the uniformity or reciprocity
requirements of subsections (a), (b), and (c) of section 321; and
(2) the NAIC has not approved the Association's bylaws as
required by section 328 or is unable to operate or supervise the
Association, or the Association is not conducting its activities as
required under this Act.
(b) Board Appointments.--If the repeals required by subsection (a)
are implemented, the following shall apply:
(1) General appointment power.--The President, with the advice
and consent of the Senate, shall appoint the members of the
Association's Board established under section 326 from lists of
candidates recommended to the President by the NAIC.
(2) Procedures for obtaining naic appointment
recommendations.--
(A) Initial determination and recommendations.--After the
date on which the provisions of subsection (a) take effect, the
NAIC shall, not later than 60 days thereafter, provide a list
of recommended candidates to the President. If the NAIC fails
to provide a list by that date, or if any list that is provided
does not include at least 14 recommended candidates or comply
with the requirements of section 326(c), the President shall,
with the advice and consent of the Senate, make the requisite
appointments without considering the views of the NAIC.
(B) Subsequent appointments.--After the initial
appointments, the NAIC shall provide a list of at least six
recommended candidates for the Board to the President by
January 15 of each subsequent year. If the NAIC fails to
provide a list by that date, or if any list that is provided
does not include at least six recommended candidates or comply
with the requirements of section 326(c), the President, with
the advice and consent of the Senate, shall make the requisite
appointments without considering the views of the NAIC.
(C) Presidential oversight.--
(i) Removal.--If the President determines that the
Association is not acting in the interests of the public,
the President may remove the entire existing Board for the
remainder of the term to which the members of the Board
were appointed and appoint, with the advice and consent of
the Senate, new members to fill the vacancies on the Board
for the remainder of such terms.
(ii) Suspension of rules or actions.--The President, or
a person designated by the President for such purpose, may
suspend the effectiveness of any rule, or prohibit any
action, of the Association which the President or the
designee determines is contrary to the public interest.
(c) Annual Report.--As soon as practicable after the close of each
fiscal year, the Association shall submit to the President and to the
Congress a written report relative to the conduct of its business, and
the exercise of the other rights and powers granted by this subtitle,
during such fiscal year. Such report shall include financial statements
setting forth the financial position of the Association at the end of
such fiscal year and the results of its operations (including the
source and application of its funds) for such fiscal year.
SEC. 333. RELATIONSHIP TO STATE LAW.
(a) Preemption of State Laws.--State laws, regulations, provisions,
or other actions purporting to regulate insurance producers shall be
preempted as provided in subsection (b).
(b) Prohibited Actions.--No State shall--
(1) impede the activities of, take any action against, or apply
any provision of law or regulation to, any insurance producer
because that insurance producer or any affiliate plans to become,
has applied to become, or is a member of the Association;
(2) impose any requirement upon a member of the Association
that it pay different fees to be licensed or otherwise qualified to
do business in that State, including bonding requirements, based on
its residency;
(3) impose any licensing, appointment, integrity, personal or
corporate qualifications, education, training, experience,
residency, or continuing education requirement upon a member of the
Association that is different from the criteria for membership in
the Association or renewal of such membership, except that
countersignature requirements imposed on nonresident producers
shall not be deemed to have the effect of limiting or conditioning
a producer's activities because of its residence or place of
operations under this section; or
(4) implement the procedures of such State's system of
licensing or renewing the licenses of insurance producers in a
manner different from the authority of the Association under
section 325.
(c) Savings Provision.--Except as provided in subsections (a) and
(b), no provision of this section shall be construed as altering or
affecting the continuing effectiveness of any law, regulation,
provision, or other action of any State which purports to regulate
insurance producers, including any such law, regulation, provision, or
action which purports to regulate unfair trade practices or establish
consumer protections, including countersignature laws.
SEC. 334. COORDINATION WITH OTHER REGULATORS.
(a) Coordination With State Insurance Regulators.--The Association
shall have the authority to--
(1) issue uniform insurance producer applications and renewal
applications that may be used to apply for the issuance or removal
of State licenses, while preserving the ability of each State to
impose such conditions on the issuance or renewal of a license as
are consistent with section 333;
(2) establish a central clearinghouse through which members of
the Association may apply for the issuance or renewal of licenses
in multiple States; and
(3) establish or utilize a national database for the collection
of regulatory information concerning the activities of insurance
producers.
(b) Coordination With the National Association of Securities
Dealers.--The Association shall coordinate with the National
Association of Securities Dealers in order to ease any administrative
burdens that fall on persons that are members of both associations,
consistent with the purposes of this subtitle and the Federal
securities laws.
SEC. 335. JUDICIAL REVIEW.
(a) Jurisdiction.--The appropriate United States district court
shall have exclusive jurisdiction over litigation involving the
Association, including disputes between the Association and its members
that arise under this subtitle. Suits brought in State court involving
the Association shall be deemed to have arisen under Federal law and
therefore be subject to jurisdiction in the appropriate United States
district court.
(b) Exhaustion of Remedies.--An aggrieved person shall be required
to exhaust all available administrative remedies before the Association
and the NAIC before it may seek judicial review of an Association
decision.
(c) Standards of Review.--The standards set forth in section 553 of
title 5, United States Code, shall be applied whenever a rule or bylaw
of the Association is under judicial review, and the standards set
forth in section 554 of title 5, United States Code, shall be applied
whenever a disciplinary action of the Association is judicially
reviewed.
SEC. 336. DEFINITIONS.
For purposes of this subtitle, the following definitions shall
apply:
(1) Home state.--The term ``home State'' means the State in
which the insurance producer maintains its principal place of
residence and is licensed to act as an insurance producer.
(2) Insurance.--The term ``insurance'' means any product, other
than title insurance, defined or regulated as insurance by the
appropriate State insurance regulatory authority.
(3) Insurance producer.--The term ``insurance producer'' means
any insurance agent or broker, surplus lines broker, insurance
consultant, limited insurance representative, and any other person
that solicits, negotiates, effects, procures, delivers, renews,
continues or binds policies of insurance or offers advice, counsel,
opinions or services related to insurance.
(4) State.--The term ``State'' includes any State, the District
of Columbia, 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.
(5) State law.--The term ``State law'' includes all laws,
decisions, rules, regulations, or other State action having the
effect of law, of any State. A law of the United States applicable
only to the District of Columbia shall be treated as a State law
rather than a law of the United States.
Subtitle D--Rental Car Agency Insurance Activities
SEC. 341. STANDARD OF REGULATION FOR MOTOR VEHICLE RENTALS.
(a) Protection Against Retroactive Application of Regulatory and
Legal Action.--Except as provided in subsection (b), during the 3-year
period beginning on the date of the enactment of this Act, it shall be
a presumption that no State law imposes any licensing, appointment, or
education requirements on any person who solicits the purchase of or
sells insurance connected with, and incidental to, the lease or rental
of a motor vehicle.
(b) Preeminence of State Insurance Law.--No provision of this
section shall be construed as altering the validity, interpretation,
construction, or effect of--
(1) any State statute;
(2) the prospective application of any court judgment
interpreting or applying any State statute; or
(3) the prospective application of any final State regulation,
order, bulletin, or other statutorily authorized interpretation or
action,
which, by its specific terms, expressly regulates or exempts from
regulation any person who solicits the purchase of or sells insurance
connected with, and incidental to, the short-term lease or rental of a
motor vehicle.
(c) Scope of Application.--This section shall apply with respect
to--
(1) the lease or rental of a motor vehicle for a total period
of 90 consecutive days or less; and
(2) insurance which is provided in connection with, and
incidentally to, such lease or rental for a period of consecutive
days not exceeding the lease or rental period.
(d) Motor Vehicle Defined.--For purposes of this section, the term
``motor vehicle'' has the same meaning as in section 13102 of title 49,
United States Code.
TITLE IV--UNITARY SAVINGS AND LOAN HOLDING COMPANIES
SEC. 401. PREVENTION OF CREATION OF NEW S&L HOLDING COMPANIES WITH
COMMERCIAL AFFILIATES.
(a) In General.--Section 10(c) of the Home Owners' Loan Act (12
U.S.C. 1467a(c)) is amended by adding at the end the following new
paragraph:
``(9) Prevention of new affiliations between s&l holding
companies and commercial firms.--
``(A) In general.--Notwithstanding paragraph (3), no
company may directly or indirectly, including through any
merger, consolidation, or other type of business combination,
acquire control of a savings association after May 4, 1999,
unless the company is engaged, directly or indirectly
(including through a subsidiary other than a savings
association), only in activities that are permitted--
``(i) under paragraph (1)(C) or (2) of this subsection;
or
``(ii) for financial holding companies under section
4(k) of the Bank Holding Company Act of 1956.
``(B) Prevention of new commercial affiliations.--
Notwithstanding paragraph (3), no savings and loan holding
company may engage directly or indirectly (including through a
subsidiary other than a savings association) in any activity
other than as described in clauses (i) and (ii) of subparagraph
(A).
``(C) Preservation of authority of existing unitary s&l
holding companies.--Subparagraphs (A) and (B) do not apply with
respect to any company that was a savings and loan holding
company on May 4, 1999, or that becomes a savings and loan
holding company pursuant to an application pending before the
Office on or before that date, and that--
``(i) meets and continues to meet the requirements of
paragraph (3); and
``(ii) continues to control not fewer than 1 savings
association that it controlled on May 4, 1999, or that it
acquired pursuant to an application pending before the
Office on or before that date, or the successor to such
savings association.
``(D) Corporate reorganizations permitted.--This paragraph
does not prevent a transaction that--
``(i) involves solely a company under common control
with a savings and loan holding company from acquiring,
directly or indirectly, control of the savings and loan
holding company or any savings association that is already
a subsidiary of the savings and loan holding company; or
``(ii) involves solely a merger, consolidation, or
other type of business combination as a result of which a
company under common control with the savings and loan
holding company acquires, directly or indirectly, control
of the savings and loan holding company or any savings
association that is already a subsidiary of the savings and
loan holding company.
``(E) Authority to prevent evasions.--The Director may
issue interpretations, regulations, or orders that the Director
determines necessary to administer and carry out the purpose
and prevent evasions of this paragraph, including a
determination that, notwithstanding the form of a transaction,
the transaction would in substance result in a company
acquiring control of a savings association.
``(F) Preservation of authority for family trusts.--
Subparagraphs (A) and (B) do not apply with respect to any
trust that becomes a savings and loan holding company with
respect to a savings association, if--
``(i) not less than 85 percent of the beneficial
ownership interests in the trust are continuously owned,
directly or indirectly, by or for the benefit of members of
the same family, or their spouses, who are lineal
descendants of common ancestors who controlled, directly or
indirectly, such savings association on May 4, 1999, or a
subsequent date, pursuant to an application pending before
the Office on or before May 4, 1999; and
``(ii) at the time at which such trust becomes a
savings and loan holding company, such ancestors or lineal
descendants, or spouses of such descendants, have directly
or indirectly controlled the savings association
continuously since May 4, 1999, or a subsequent date,
pursuant to an application pending before the Office on or
before May 4, 1999.''.
(b) Conforming Amendment.--Section 10(o)(5)(E) of the Home Owners'
Loan Act (12 U.S.C. 1467a(o)(5)(E)) is amended by striking ``, except
subparagraph (B)'' and inserting ``or (c)(9)(A)(ii)''.
(c) Rule of Construction for Certain Applications.--
(1) In general.--In the case of a company that--
(A) submits an application with the Director of the Office
of Thrift Supervision before the date of the enactment of this
Act to convert a State-chartered trust company controlled by
such company on May 4, 1999, to a savings association; and
(B) controlled a subsidiary on May 4, 1999, that had
submitted an application to the Director on September 2, 1998;
the company (including any subsidiary controlled by such company as
of such date of enactment) shall be treated as having filed such
conversion application with the Director before May 4, 1999, for
purposes of section 10(c)(9)(C) of the Home Owners' Loan Act (as
added by subsection (a)).
(2) Definitions.--For purposes of paragraph (1), the terms
``company'', ``control'', ``savings association'', and
``subsidiary'' have the meanings given those terms in section 10 of
the Home Owners' Loan Act.
TITLE V--PRIVACY
Subtitle A--Disclosure of Nonpublic Personal Information
SEC. 501. PROTECTION OF NONPUBLIC PERSONAL INFORMATION.
(a) Privacy Obligation Policy.--It is the policy of the Congress
that each financial institution has an affirmative and continuing
obligation to respect the privacy of its customers and to protect the
security and confidentiality of those customers' nonpublic personal
information.
(b) Financial Institutions Safeguards.--In furtherance of the
policy in subsection (a), each agency or authority described in section
505(a) shall establish appropriate standards for the financial
institutions subject to their jurisdiction relating to administrative,
technical, and physical safeguards--
(1) to insure the security and confidentiality of customer
records and information;
(2) to protect against any anticipated threats or hazards to
the security or integrity of such records; and
(3) to protect against unauthorized access to or use of such
records or information which could result in substantial harm or
inconvenience to any customer.
SEC. 502. OBLIGATIONS WITH RESPECT TO DISCLOSURES OF PERSONAL
INFORMATION.
(a) Notice Requirements.--Except as otherwise provided in this
subtitle, a financial institution may not, directly or through any
affiliate, disclose to a nonaffiliated third party any nonpublic
personal information, unless such financial institution provides or has
provided to the consumer a notice that complies with section 503.
(b) Opt Out.--
(1) In general.--A financial institution may not disclose
nonpublic personal information to a nonaffiliated third party
unless--
(A) such financial institution clearly and conspicuously
discloses to the consumer, in writing or in electronic form or
other form permitted by the regulations prescribed under
section 504, that such information may be disclosed to such
third party;
(B) the consumer is given the opportunity, before the time
that such information is initially disclosed, to direct that
such information not be disclosed to such third party; and
(C) the consumer is given an explanation of how the
consumer can exercise that nondisclosure option.
(2) Exception.--This subsection shall not prevent a financial
institution from providing nonpublic personal information to a
nonaffiliated third party to perform services for or functions on
behalf of the financial institution, including marketing of the
financial institution's own products or services, or financial
products or services offered pursuant to joint agreements between
two or more financial institutions that comply with the
requirements imposed by the regulations prescribed under section
504, if the financial institution fully discloses the providing of
such information and enters into a contractual agreement with the
third party that requires the third party to maintain the
confidentiality of such information.
(c) Limits on Reuse of Information.--Except as otherwise provided
in this subtitle, a nonaffiliated third party that receives from a
financial institution nonpublic personal information under this section
shall not, directly or through an affiliate of such receiving third
party, disclose such information to any other person that is a
nonaffiliated third party of both the financial institution and such
receiving third party, unless such disclosure would be lawful if made
directly to such other person by the financial institution.
(d) Limitations on the Sharing of Account Number Information for
Marketing Purposes.--A financial institution shall not disclose, other
than to a consumer reporting agency, an account number or similar form
of access number or access code for a credit card account, deposit
account, or transaction account of a consumer to any nonaffiliated
third party for use in telemarketing, direct mail marketing, or other
marketing through electronic mail to the consumer.
(e) General Exceptions.--Subsections (a) and (b) shall not prohibit
the disclosure of nonpublic personal information--
(1) as necessary to effect, administer, or enforce a
transaction requested or authorized by the consumer, or in
connection with--
(A) servicing or processing a financial product or service
requested or authorized by the consumer;
(B) maintaining or servicing the consumer's account with
the financial institution, or with another entity as part of a
private label credit card program or other extension of credit
on behalf of such entity; or
(C) a proposed or actual securitization, secondary market
sale (including sales of servicing rights), or similar
transaction related to a transaction of the consumer;
(2) with the consent or at the direction of the consumer;
(3)(A) to protect the confidentiality or security of the
financial institution's records pertaining to the consumer, the
service or product, or the transaction therein; (B) to protect
against or prevent actual or potential fraud, unauthorized
transactions, claims, or other liability; (C) for required
institutional risk control, or for resolving customer disputes or
inquiries; (D) to persons holding a legal or beneficial interest
relating to the consumer; or (E) to persons acting in a fiduciary
or representative capacity on behalf of the consumer;
(4) to provide information to insurance rate advisory
organizations, guaranty funds or agencies, applicable rating
agencies of the financial institution, persons assessing the
institution's compliance with industry standards, and the
institution's attorneys, accountants, and auditors;
(5) to the extent specifically permitted or required under
other provisions of law and in accordance with the Right to
Financial Privacy Act of 1978, to law enforcement agencies
(including a Federal functional regulator, the Secretary of the
Treasury with respect to subchapter II of chapter 53 of title 31,
United States Code, and chapter 2 of title I of Public Law 91-508
(12 U.S.C. 1951-1959), a State insurance authority, or the Federal
Trade Commission), self-regulatory organizations, or for an
investigation on a matter related to public safety;
(6)(A) to a consumer reporting agency in accordance with the
Fair Credit Reporting Act, or (B) from a consumer report reported
by a consumer reporting agency;
(7) in connection with a proposed or actual sale, merger,
transfer, or exchange of all or a portion of a business or
operating unit if the disclosure of nonpublic personal information
concerns solely consumers of such business or unit; or
(8) to comply with Federal, State, or local laws, rules, and
other applicable legal requirements; to comply with a properly
authorized civil, criminal, or regulatory investigation or subpoena
or summons by Federal, State, or local authorities; or to respond
to judicial process or government regulatory authorities having
jurisdiction over the financial institution for examination,
compliance, or other purposes as authorized by law.
SEC. 503. DISCLOSURE OF INSTITUTION PRIVACY POLICY.
(a) Disclosure Required.--At the time of establishing a customer
relationship with a consumer and not less than annually during the
continuation of such relationship, a financial institution shall
provide a clear and conspicuous disclosure to such consumer, in writing
or in electronic form or other form permitted by the regulations
prescribed under section 504, of such financial institution's policies
and practices with respect to--
(1) disclosing nonpublic personal information to affiliates and
nonaffiliated third parties, consistent with section 502, including
the categories of information that may be disclosed;
(2) disclosing nonpublic personal information of persons who
have ceased to be customers of the financial institution; and
(3) protecting the nonpublic personal information of consumers.
Such disclosures shall be made in accordance with the regulations
prescribed under section 504.
(b) Information To Be Included.--The disclosure required by
subsection (a) shall include--
(1) the policies and practices of the institution with respect
to disclosing nonpublic personal information to nonaffiliated third
parties, other than agents of the institution, consistent with
section 502 of this subtitle, and including--
(A) the categories of persons to whom the information is or
may be disclosed, other than the persons to whom the
information may be provided pursuant to section 502(e); and
(B) the policies and practices of the institution with
respect to disclosing of nonpublic personal information of
persons who have ceased to be customers of the financial
institution;
(2) the categories of nonpublic personal information that are
collected by the financial institution;
(3) the policies that the institution maintains to protect the
confidentiality and security of nonpublic personal information in
accordance with section 501; and
(4) the disclosures required, if any, under section
603(d)(2)(A)(iii) of the Fair Credit Reporting Act.
SEC. 504. RULEMAKING.
(a) Regulatory Authority.--
(1) Rulemaking.--The Federal banking agencies, the National
Credit Union Administration, the Secretary of the Treasury, the
Securities and Exchange Commission, and the Federal Trade
Commission shall each prescribe, after consultation as appropriate
with representatives of State insurance authorities designated by
the National Association of Insurance Commissioners, such
regulations as may be necessary to carry out the purposes of this
subtitle with respect to the financial institutions subject to
their jurisdiction under section 505.
(2) Coordination, consistency, and comparability.--Each of the
agencies and authorities required under paragraph (1) to prescribe
regulations shall consult and coordinate with the other such
agencies and authorities for the purposes of assuring, to the
extent possible, that the regulations prescribed by each such
agency and authority are consistent and comparable with the
regulations prescribed by the other such agencies and authorities.
(3) Procedures and deadline.--Such regulations shall be
prescribed in accordance with applicable requirements of title 5,
United States Code, and shall be issued in final form not later
than 6 months after the date of the enactment of this Act.
(b) Authority To Grant Exceptions.--The regulations prescribed
under subsection (a) may include such additional exceptions to
subsections (a) through (d) of section 502 as are deemed consistent
with the purposes of this subtitle.
SEC. 505. ENFORCEMENT.
(a) In General.--This subtitle and the regulations prescribed
thereunder shall be enforced by the Federal functional regulators, the
State insurance authorities, and the Federal Trade Commission with
respect to financial institutions and other persons subject to their
jurisdiction under applicable law, as follows:
(1) Under section 8 of the Federal Deposit Insurance Act, in
the case of--
(A) national banks, Federal branches and Federal agencies
of foreign banks, and any subsidiaries of such entities (except
brokers, dealers, persons providing insurance, investment
companies, and investment advisers), by the Office of the
Comptroller of the Currency;
(B) member banks of the Federal Reserve System (other than
national banks), branches and agencies of foreign banks (other
than Federal branches, Federal agencies, and insured State
branches of foreign banks), commercial lending companies owned
or controlled by foreign banks, organizations operating under
section 25 or 25A of the Federal Reserve Act, and bank holding
companies and their nonbank subsidiaries or affiliates (except
brokers, dealers, persons providing insurance, investment
companies, and investment advisers), by the Board of Governors
of the Federal Reserve System;
(C) banks insured by the Federal Deposit Insurance
Corporation (other than members of the Federal Reserve System),
insured State branches of foreign banks, and any subsidiaries
of such entities (except brokers, dealers, persons providing
insurance, investment companies, and investment advisers), by
the Board of Directors of the Federal Deposit Insurance
Corporation; and
(D) savings associations the deposits of which are insured
by the Federal Deposit Insurance Corporation, and any
subsidiaries of such savings associations (except brokers,
dealers, persons providing insurance, investment companies, and
investment advisers), by the Director of the Office of Thrift
Supervision.
(2) Under the Federal Credit Union Act, by the Board of the
National Credit Union Administration with respect to any federally
insured credit union, and any subsidiaries of such an entity.
(3) Under the Securities Exchange Act of 1934, by the
Securities and Exchange Commission with respect to any broker or
dealer.
(4) Under the Investment Company Act of 1940, by the Securities
and Exchange Commission with respect to investment companies.
(5) Under the Investment Advisers Act of 1940, by the
Securities and Exchange Commission with respect to investment
advisers registered with the Commission under such Act.
(6) Under State insurance law, in the case of any person
engaged in providing insurance, by the applicable State insurance
authority of the State in which the person is domiciled, subject to
section 104 of this Act.
(7) Under the Federal Trade Commission Act, by the Federal
Trade Commission for any other financial institution or other
person that is not subject to the jurisdiction of any agency or
authority under paragraphs (1) through (6) of this subsection.
(b) Enforcement of Section 501.--
(1) In general.--Except as provided in paragraph (2), the
agencies and authorities described in subsection (a) shall
implement the standards prescribed under section 501(b) in the same
manner, to the extent practicable, as standards prescribed pursuant
to section 39(a) of the Federal Deposit Insurance Act are
implemented pursuant to such section.
(2) Exception.--The agencies and authorities described in
paragraphs (3), (4), (5), (6), and (7) of subsection (a) shall
implement the standards prescribed under section 501(b) by rule
with respect to the financial institutions and other persons
subject to their respective jurisdictions under subsection (a).
(c) Absence of State Action.--If a State insurance authority fails
to adopt regulations to carry out this subtitle, such State shall not
be eligible to override, pursuant to section 47(g)(2)(B)(iii) of the
Federal Deposit Insurance Act, the insurance customer protection
regulations prescribed by a Federal banking agency under section 47(a)
of such Act.
(d) Definitions.--The terms used in subsection (a)(1) that are not
defined in this subtitle or otherwise defined in section 3(s) of the
Federal Deposit Insurance Act shall have the same meaning as given in
section 1(b) of the International Banking Act of 1978.
SEC. 506. PROTECTION OF FAIR CREDIT REPORTING ACT.
(a) Amendment.--Section 621 of the Fair Credit Reporting Act (15
U.S.C. 1681s) is amended--
(1) in subsection (d), by striking everything following the end
of the second sentence; and
(2) by striking subsection (e) and inserting the following:
``(e) Regulatory Authority.--
``(1) The Federal banking agencies referred to in paragraphs
(1) and (2) of subsection (b) shall jointly prescribe such
regulations as necessary to carry out the purposes of this Act with
respect to any persons identified under paragraphs (1) and (2) of
subsection (b), and the Board of Governors of the Federal Reserve
System shall have authority to prescribe regulations consistent
with such joint regulations with respect to bank holding companies
and affiliates (other than depository institutions and consumer
reporting agencies) of such holding companies.
``(2) The Board of the National Credit Union Administration
shall prescribe such regulations as necessary to carry out the
purposes of this Act with respect to any persons identified under
paragraph (3) of subsection (b).''.
(b) Conforming Amendment.--Section 621(a) of the Fair Credit
Reporting Act (15 U.S.C. 1681s(a)) is amended by striking paragraph
(4).
(c) Relation to Other Provisions.--Except for the amendments made
by subsections (a) and (b), nothing in this title shall be construed to
modify, limit, or supersede the operation of the Fair Credit Reporting
Act, and no inference shall be drawn on the basis of the provisions of
this title regarding whether information is transaction or experience
information under section 603 of such Act.
SEC. 507. RELATION TO STATE LAWS.
(a) In General.--This subtitle and the amendments made by this
subtitle shall not be construed as superseding, altering, or affecting
any statute, regulation, order, or interpretation in effect in any
State, except to the extent that such statute, regulation, order, or
interpretation is inconsistent with the provisions of this subtitle,
and then only to the extent of the inconsistency.
(b) Greater Protection Under State Law.--For purposes of this
section, a State statute, regulation, order, or interpretation is not
inconsistent with the provisions of this subtitle if the protection
such statute, regulation, order, or interpretation affords any person
is greater than the protection provided under this subtitle and the
amendments made by this subtitle, as determined by the Federal Trade
Commission, after consultation with the agency or authority with
jurisdiction under section 505(a) of either the person that initiated
the complaint or that is the subject of the complaint, on its own
motion or upon the petition of any interested party.
SEC. 508. STUDY OF INFORMATION SHARING AMONG FINANCIAL AFFILIATES.
(a) In General.--The Secretary of the Treasury, in conjunction with
the Federal functional regulators and the Federal Trade Commission,
shall conduct a study of information sharing practices among financial
institutions and their affiliates. Such study shall include--
(1) the purposes for the sharing of confidential customer
information with affiliates or with nonaffiliated third parties;
(2) the extent and adequacy of security protections for such
information;
(3) the potential risks for customer privacy of such sharing of
information;
(4) the potential benefits for financial institutions and
affiliates of such sharing of information;
(5) the potential benefits for customers of such sharing of
information;
(6) the adequacy of existing laws to protect customer privacy;
(7) the adequacy of financial institution privacy policy and
privacy rights disclosure under existing law;
(8) the feasibility of different approaches, including opt-out
and opt-in, to permit customers to direct that confidential
information not be shared with affiliates and nonaffiliated third
parties; and
(9) the feasibility of restricting sharing of information for
specific uses or of permitting customers to direct the uses for
which information may be shared.
(b) Consultation.--The Secretary shall consult with representatives
of State insurance authorities designated by the National Association
of Insurance Commissioners, and also with financial services industry,
consumer organizations and privacy groups, and other representatives of
the general public, in formulating and conducting the study required by
subsection (a).
(c) Report.--On or before January 1, 2002, the Secretary shall
submit a report to the Congress containing the findings and conclusions
of the study required under subsection (a), together with such
recommendations for legislative or administrative action as may be
appropriate.
SEC. 509. DEFINITIONS.
As used in this subtitle:
(1) Federal banking agency.--The term ``Federal banking
agency'' has the same meaning as given in section 3 of the Federal
Deposit Insurance Act.
(2) Federal functional regulator.--The term ``Federal
functional regulator'' means--
(A) the Board of Governors of the Federal Reserve System;
(B) the Office of the Comptroller of the Currency;
(C) the Board of Directors of the Federal Deposit Insurance
Corporation;
(D) the Director of the Office of Thrift Supervision;
(E) the National Credit Union Administration Board; and
(F) the Securities and Exchange Commission.
(3) Financial institution.--
(A) In general.--The term ``financial institution'' means
any institution the business of which is engaging in financial
activities as described in section 4(k) of the Bank Holding
Company Act of 1956.
(B) Persons subject to cftc regulation.--Notwithstanding
subparagraph (A), the term ``financial institution'' does not
include any person or entity with respect to any financial
activity that is subject to the jurisdiction of the Commodity
Futures Trading Commission under the Commodity Exchange Act.
(C) Farm credit institutions.--Notwithstanding subparagraph
(A), the term ``financial institution'' does not include the
Federal Agricultural Mortgage Corporation or any entity
chartered and operating under the Farm Credit Act of 1971.
(D) Other secondary market institutions.--Notwithstanding
subparagraph (A), the term ``financial institution'' does not
include institutions chartered by Congress specifically to
engage in transactions described in section 502(e)(1)(C), as
long as such institutions do not sell or transfer nonpublic
personal information to a nonaffiliated third party.
(4) Nonpublic personal information.--
(A) The term ``nonpublic personal information'' means
personally identifiable financial information--
(i) provided by a consumer to a financial institution;
(ii) resulting from any transaction with the consumer
or any service performed for the consumer; or
(iii) otherwise obtained by the financial institution.
(B) Such term does not include publicly available
information, as such term is defined by the regulations
prescribed under section 504.
(C) Notwithstanding subparagraph (B), such term--
(i) shall include any list, description, or other
grouping of consumers (and publicly available information
pertaining to them) that is derived using any nonpublic
personal information other than publicly available
information; but
(ii) shall not include any list, description, or other
grouping of consumers (and publicly available information
pertaining to them) that is derived without using any
nonpublic personal information.
(5) Nonaffiliated third party.--The term ``nonaffiliated third
party'' means any entity that is not an affiliate of, or related by
common ownership or affiliated by corporate control with, the
financial institution, but does not include a joint employee of
such institution.
(6) Affiliate.--The term ``affiliate'' means any company that
controls, is controlled by, or is under common control with another
company.
(7) Necessary to effect, administer, or enforce.--The term ``as
necessary to effect, administer, or enforce the transaction''
means--
(A) the disclosure is required, or is a usual, appropriate,
or acceptable method, to carry out the transaction or the
product or service business of which the transaction is a part,
and record or service or maintain the consumer's account in the
ordinary course of providing the financial service or financial
product, or to administer or service benefits or claims
relating to the transaction or the product or service business
of which it is a part, and includes--
(i) providing the consumer or the consumer's agent or
broker with a confirmation, statement, or other record of
the transaction, or information on the status or value of
the financial service or financial product; and
(ii) the accrual or recognition of incentives or
bonuses associated with the transaction that are provided
by the financial institution or any other party;
(B) the disclosure is required, or is one of the lawful or
appropriate methods, to enforce the rights of the financial
institution or of other persons engaged in carrying out the
financial transaction, or providing the product or service;
(C) the disclosure is required, or is a usual, appropriate,
or acceptable method, for insurance underwriting at the
consumer's request or for reinsurance purposes, or for any of
the following purposes as they relate to a consumer's
insurance: Account administration, reporting, investigating, or
preventing fraud or material misrepresentation, processing
premium payments, processing insurance claims, administering
insurance benefits (including utilization review activities),
participating in research projects, or as otherwise required or
specifically permitted by Federal or State law; or
(D) the disclosure is required, or is a usual, appropriate
or acceptable method, in connection with--
(i) the authorization, settlement, billing, processing,
clearing, transferring, reconciling, or collection of
amounts charged, debited, or otherwise paid using a debit,
credit or other payment card, check, or account number, or
by other payment means;
(ii) the transfer of receivables, accounts or interests
therein; or
(iii) the audit of debit, credit or other payment
information.
(8) State insurance authority.--The term ``State insurance
authority'' means, in the case of any person engaged in providing
insurance, the State insurance authority of the State in which the
person is domiciled.
(9) Consumer.--The term ``consumer'' means an individual who
obtains, from a financial institution, financial products or
services which are to be used primarily for personal, family, or
household purposes, and also means the legal representative of such
an individual.
(10) Joint agreement.--The term ``joint agreement'' means a
formal written contract pursuant to which two or more financial
institutions jointly offer, endorse, or sponsor a financial product
or service, and as may be further defined in the regulations
prescribed under section 504.
(11) Customer relationship.--The term ``time of establishing a
customer relationship'' shall be defined by the regulations
prescribed under section 504, and shall, in the case of a financial
institution engaged in extending credit directly to consumers to
finance purchases of goods or services, mean the time of
establishing the credit relationship with the consumer.
SEC. 510. EFFECTIVE DATE.
This subtitle shall take effect 6 months after the date on which
rules are required to be prescribed under section 504(a)(3), except--
(1) to the extent that a later date is specified in the rules
prescribed under section 504; and
(2) that sections 504 and 506 shall be effective upon
enactment.
Subtitle B--Fraudulent Access to Financial Information
SEC. 521. PRIVACY PROTECTION FOR CUSTOMER INFORMATION OF FINANCIAL
INSTITUTIONS.
(a) Prohibition on Obtaining Customer Information by False
Pretenses.--It shall be a violation of this subtitle for any person to
obtain or attempt to obtain, or cause to be disclosed or attempt to
cause to be disclosed to any person, customer information of a
financial institution relating to another person--
(1) by making a false, fictitious, or fraudulent statement or
representation to an officer, employee, or agent of a financial
institution;
(2) by making a false, fictitious, or fraudulent statement or
representation to a customer of a financial institution; or
(3) by providing any document to an officer, employee, or agent
of a financial institution, knowing that the document is forged,
counterfeit, lost, or stolen, was fraudulently obtained, or
contains a false, fictitious, or fraudulent statement or
representation.
(b) Prohibition on Solicitation of a Person To Obtain Customer
Information From Financial Institution Under False Pretenses.--It shall
be a violation of this subtitle to request a person to obtain customer
information of a financial institution, knowing that the person will
obtain, or attempt to obtain, the information from the institution in
any manner described in subsection (a).
(c) Nonapplicability to Law Enforcement Agencies.--No provision of
this section shall be construed so as to prevent any action by a law
enforcement agency, or any officer, employee, or agent of such agency,
to obtain customer information of a financial institution in connection
with the performance of the official duties of the agency.
(d) Nonapplicability to Financial Institutions in Certain Cases.--
No provision of this section shall be construed so as to prevent any
financial institution, or any officer, employee, or agent of a
financial institution, from obtaining customer information of such
financial institution in the course of--
(1) testing the security procedures or systems of such
institution for maintaining the confidentiality of customer
information;
(2) investigating allegations of misconduct or negligence on
the part of any officer, employee, or agent of the financial
institution; or
(3) recovering customer information of the financial
institution which was obtained or received by another person in any
manner described in subsection (a) or (b).
(e) Nonapplicability to Insurance Institutions for Investigation of
Insurance Fraud.--No provision of this section shall be construed so as
to prevent any insurance institution, or any officer, employee, or
agency of an insurance institution, from obtaining information as part
of an insurance investigation into criminal activity, fraud, material
misrepresentation, or material nondisclosure that is authorized for
such institution under State law, regulation, interpretation, or order.
(f) Nonapplicability to Certain Types of Customer Information of
Financial Institutions.--No provision of this section shall be
construed so as to prevent any person from obtaining customer
information of a financial institution that otherwise is available as a
public record filed pursuant to the securities laws (as defined in
section 3(a)(47) of the Securities Exchange Act of 1934).
(g) Nonapplicability to Collection of Child Support Judgments.--No
provision of this section shall be construed to prevent any State-
licensed private investigator, or any officer, employee, or agent of
such private investigator, from obtaining customer information of a
financial institution, to the extent reasonably necessary to collect
child support from a person adjudged to have been delinquent in his or
her obligations by a Federal or State court, and to the extent that
such action by a State-licensed private investigator is not unlawful
under any other Federal or State law or regulation, and has been
authorized by an order or judgment of a court of competent
jurisdiction.
SEC. 522. ADMINISTRATIVE ENFORCEMENT.
(a) Enforcement by Federal Trade Commission.--Except as provided in
subsection (b), compliance with this subtitle shall be enforced by the
Federal Trade Commission in the same manner and with the same power and
authority as the Commission has under the Fair Debt Collection
Practices Act to enforce compliance with such Act.
(b) Enforcement by Other Agencies in Certain Cases.--
(1) In general.--Compliance with this subtitle shall be
enforced under--
(A) section 8 of the Federal Deposit Insurance Act, in the
case of--
(i) national banks, and Federal branches and Federal
agencies of foreign banks, by the Office of the Comptroller
of the Currency;
(ii) member banks of the Federal Reserve System (other
than national banks), branches and agencies of foreign
banks (other than Federal branches, Federal agencies, and
insured State branches of foreign banks), commercial
lending companies owned or controlled by foreign banks, and
organizations operating under section 25 or 25A of the
Federal Reserve Act, by the Board;
(iii) banks insured by the Federal Deposit Insurance
Corporation (other than members of the Federal Reserve
System and national nonmember banks) and insured State
branches of foreign banks, by the Board of Directors of the
Federal Deposit Insurance Corporation; and
(iv) savings associations the deposits of which are
insured by the Federal Deposit Insurance Corporation, by
the Director of the Office of Thrift Supervision; and
(B) the Federal Credit Union Act, by the Administrator of
the National Credit Union Administration with respect to any
Federal credit union.
(2) Violations of this subtitle treated as violations of other
laws.--For the purpose of the exercise by any agency referred to in
paragraph (1) of its powers under any Act referred to in that
paragraph, a violation of this subtitle shall be deemed to be a
violation of a requirement imposed under that Act. In addition to
its powers under any provision of law specifically referred to in
paragraph (1), each of the agencies referred to in that paragraph
may exercise, for the purpose of enforcing compliance with this
subtitle, any other authority conferred on such agency by law.
SEC. 523. CRIMINAL PENALTY.
(a) In General.--Whoever knowingly and intentionally violates, or
knowingly and intentionally attempts to violate, section 521 shall be
fined in accordance with title 18, United States Code, or imprisoned
for not more than 5 years, or both.
(b) Enhanced Penalty for Aggravated Cases.--Whoever violates, or
attempts to violate, section 521 while violating another law of the
United States or as part of a pattern of any illegal activity involving
more than $100,000 in a 12-month period shall be fined twice the amount
provided in subsection (b)(3) or (c)(3) (as the case may be) of section
3571 of title 18, United States Code, imprisoned for not more than 10
years, or both.
SEC. 524. RELATION TO STATE LAWS.
(a) In General.--This subtitle shall not be construed as
superseding, altering, or affecting the statutes, regulations, orders,
or interpretations in effect in any State, except to the extent that
such statutes, regulations, orders, or interpretations are inconsistent
with the provisions of this subtitle, and then only to the extent of
the inconsistency.
(b) Greater Protection Under State Law.--For purposes of this
section, a State statute, regulation, order, or interpretation is not
inconsistent with the provisions of this subtitle if the protection
such statute, regulation, order, or interpretation affords any person
is greater than the protection provided under this subtitle as
determined by the Federal Trade Commission, after consultation with the
agency or authority with jurisdiction under section 522 of either the
person that initiated the complaint or that is the subject of the
complaint, on its own motion or upon the petition of any interested
party.
SEC. 525. AGENCY GUIDANCE.
In furtherance of the objectives of this subtitle, each Federal
banking agency (as defined in section 3(z) of the Federal Deposit
Insurance Act), the National Credit Union Administration, and the
Securities and Exchange Commission or self-regulatory organizations, as
appropriate, shall review regulations and guidelines applicable to
financial institutions under their respective jurisdictions and shall
prescribe such revisions to such regulations and guidelines as may be
necessary to ensure that such financial institutions have policies,
procedures, and controls in place to prevent the unauthorized
disclosure of customer financial information and to deter and detect
activities proscribed under section 521.
SEC. 526. REPORTS.
(a) Report to the Congress.--Before the end of the 18-month period
beginning on the date of the enactment of this Act, the Comptroller
General, in consultation with the Federal Trade Commission, Federal
banking agencies, the National Credit Union Administration, the
Securities and Exchange Commission, appropriate Federal law enforcement
agencies, and appropriate State insurance regulators, shall submit to
the Congress a report on the following:
(1) The efficacy and adequacy of the remedies provided in this
subtitle in addressing attempts to obtain financial information by
fraudulent means or by false pretenses.
(2) Any recommendations for additional legislative or
regulatory action to address threats to the privacy of financial
information created by attempts to obtain information by fraudulent
means or false pretenses.
(b) Annual Report by Administering Agencies.--The Federal Trade
Commission and the Attorney General shall submit to Congress an annual
report on number and disposition of all enforcement actions taken
pursuant to this subtitle.
SEC. 527. DEFINITIONS.
For purposes of this subtitle, the following definitions shall
apply:
(1) Customer.--The term ``customer'' means, with respect to a
financial institution, any person (or authorized representative of
a person) to whom the financial institution provides a product or
service, including that of acting as a fiduciary.
(2) Customer information of a financial institution.--The term
``customer information of a financial institution'' means any
information maintained by or for a financial institution which is
derived from the relationship between the financial institution and
a customer of the financial institution and is identified with the
customer.
(3) Document.--The term ``document'' means any information in
any form.
(4) Financial institution.--
(A) In general.--The term ``financial institution'' means
any institution engaged in the business of providing financial
services to customers who maintain a credit, deposit, trust, or
other financial account or relationship with the institution.
(B) Certain financial institutions specifically included.--
The term ``financial institution'' includes any depository
institution (as defined in section 19(b)(1)(A) of the Federal
Reserve Act), any broker or dealer, any investment adviser or
investment company, any insurance company, any loan or finance
company, any credit card issuer or operator of a credit card
system, and any consumer reporting agency that compiles and
maintains files on consumers on a nationwide basis (as defined
in section 603(p) of the Consumer Credit Protection Act).
(C) Securities institutions.--For purposes of subparagraph
(B)--
(i) the terms ``broker'' and ``dealer'' have the same
meanings as given in section 3 of the Securities Exchange
Act of 1934 (15 U.S.C. 78c);
(ii) the term ``investment adviser'' has the same
meaning as given in section 202(a)(11) of the Investment
Advisers Act of 1940 (15 U.S.C. 80b-2(a)); and
(iii) the term ``investment company'' has the same
meaning as given in section 3 of the Investment Company Act
of 1940 (15 U.S.C. 80a-3).
(D) Certain persons and entities specifically excluded.--
The term ``financial institution'' does not include any person
or entity with respect to any financial activity that is
subject to the jurisdiction of the Commodity Futures Trading
Commission under the Commodity Exchange Act and does not
include the Federal Agricultural Mortgage Corporation or any
entity chartered and operating under the Farm Credit Act of
1971.
(E) Further definition by regulation.--The Federal Trade
Commission, after consultation with Federal banking agencies
and the Securities and Exchange Commission, may prescribe
regulations clarifying or describing the types of institutions
which shall be treated as financial institutions for purposes
of this subtitle.
TITLE VI--FEDERAL HOME LOAN BANK SYSTEM MODERNIZATION
SEC. 601. SHORT TITLE.
This title may be cited as the ``Federal Home Loan Bank System
Modernization Act of 1999''.
SEC. 602. DEFINITIONS.
Section 2 of the Federal Home Loan Bank Act (12 U.S.C. 1422) is
amended--
(1) in paragraph (1), by striking ``term `Board' means'' and
inserting ``terms `Finance Board' and `Board' mean'';
(2) by striking paragraph (3) and inserting the following:
``(3) State.--The term `State', in addition to the States of
the United States, includes the District of Columbia, Guam, Puerto
Rico, the United States Virgin Islands, American Samoa, and the
Commonwealth of the Northern Mariana Islands.''; and
(3) by adding at the end the following new paragraph:
``(13) Community financial institution.--
``(A) In general.--The term `community financial
institution' means a member--
``(i) the deposits of which are insured under the
Federal Deposit Insurance Act; and
``(ii) that has, as of the date of the transaction at
issue, less than $500,000,000 in average total assets,
based on an average of total assets over the 3 years
preceding that date.
``(B) Adjustments.--The $500,000,000 limit referred to in
subparagraph (A)(ii) shall be adjusted annually by the Finance
Board, based on the annual percentage increase, if any, in the
Consumer Price Index for all urban consumers, as published by
the Department of Labor.''.
SEC. 603. SAVINGS ASSOCIATION MEMBERSHIP.
Section 5(f) of the Home Owners' Loan Act (12 U.S.C. 1464(f)) is
amended to read as follows:
``(f) Federal Home Loan Bank Membership.--After the end of the 6-
month period beginning on the date of the enactment of the Federal Home
Loan Bank System Modernization Act of 1999, a Federal savings
association may become a member of the Federal Home Loan Bank System,
and shall qualify for such membership in the manner provided by the
Federal Home Loan Bank Act.''.
SEC. 604. ADVANCES TO MEMBERS; COLLATERAL.
(a) In General.--Section 10(a) of the Federal Home Loan Bank Act
(12 U.S.C. 1430(a)) is amended--
(1) by redesignating paragraphs (1) through (4) as
subparagraphs (A) through (D), respectively, and indenting
appropriately;
(2) by striking ``(a) Each'' and inserting the following:
``(a) In General.--
``(1) All advances.--Each'';
(3) by striking the second sentence and inserting the
following:
``(2) Purposes of advances.--A long-term advance may only be
made for the purposes of--
``(A) providing funds to any member for residential housing
finance; and
``(B) providing funds to any community financial
institution for small businesses, small farms, and small agri-
businesses.'';
(4) by striking ``A Bank'' and inserting the following:
``(3) Collateral.--A Bank'';
(5) in paragraph (3) (as so designated by paragraph (4) of this
subsection)--
(A) in subparagraph (C) (as so redesignated by paragraph
(1) of this subsection) by striking ``Deposits'' and inserting
``Cash or deposits'';
(B) in subparagraph (D) (as so redesignated by paragraph
(1) of this subsection), by striking the second sentence; and
(C) by inserting after subparagraph (D) (as so redesignated
by paragraph (1) of this subsection) the following new
subparagraph:
``(E) Secured loans for small business, agriculture, or
securities representing a whole interest in such secured loans,
in the case of any community financial institution.'';
(6) in paragraph (5)--
(A) in the second sentence, by striking ``and the Board'';
(B) in the third sentence, by striking ``Board'' and
inserting ``Federal home loan bank''; and
(C) by striking ``(5) Paragraphs (1) through (4)'' and
inserting the following:
``(4) Additional bank authority.--Subparagraphs (A) through (E)
of paragraph (3)''; and
(7) by adding at the end the following:
``(5) Review of certain collateral standards.--The Board may
review the collateral standards applicable to each Federal home
loan bank for the classes of collateral described in subparagraphs
(D) and (E) of paragraph (3), and may, if necessary for safety and
soundness purposes, require an increase in the collateral standards
for any or all of those classes of collateral.
``(6) Definitions.--For purposes of this subsection, the terms
`small business', `agriculture', `small farm', and `small agri-
business' shall have the meanings given those terms by regulation
of the Finance Board.''.
(b) Clerical Amendment.--The section heading for section 10 of the
Federal Home Loan Bank Act (12 U.S.C. 1430) is amended to read as
follows:
``SEC. 10. ADVANCES TO MEMBERS.''.
(c) Qualified Thrift Lender Status.--Section 10 of the Federal Home
Loan Bank Act (12 U.S.C. 1430) is amended by striking the first of the
2 subsections designated as subsection (e).
(d) Federal Home Loan Bank Access.--Section 10(m)(3)(B) of the Home
Owners' Loan Act (12 U.S.C. 1467a(m)(3)(B)) is amended--
(1) in clause (i), by striking subclause (III) and
redesignating subclause (IV) as subclause (III); and
(2) by striking clause (ii) and inserting the following:
``(ii) Additional restrictions effective after 3
years.--Beginning 3 years after the date on which a savings
association should have become a qualified thrift lender,
or the date on which the savings association ceases to be a
qualified thrift lender, as applicable, the savings
association shall not retain any investment (including an
investment in any subsidiary) or engage, directly or
indirectly, in any activity, unless that investment or
activity--
``(I) would be permissible for the savings
association if it were a national bank; and
``(II) is permissible for the savings association
as a savings association.''.
SEC. 605. ELIGIBILITY CRITERIA.
Section 4(a) of the Federal Home Loan Bank Act (12 U.S.C. 1424(a))
is amended--
(1) in paragraph (2)(A), by inserting ``(other than a community
financial institution)'' after ``institution'';
(2) in the matter immediately following paragraph (2)(C)--
(A) by striking ``An insured'' and inserting the following:
``(3) Certain institutions.--An insured''; and
(B) by striking ``preceding sentence'' and inserting
``paragraph (2)''; and
(3) by adding at the end the following new paragraph:
``(4) Limited exemption for community financial institutions.--
A community financial institution that otherwise meets the
requirements of paragraph (2) may become a member without regard to
the percentage of its total assets that is represented by
residential mortgage loans, as described in subparagraph (A) of
paragraph (2).''.
SEC. 606. MANAGEMENT OF BANKS.
(a) Board of Directors.--Section 7 of the Federal Home Loan Bank
Act (12 U.S.C. 1427(d)) is amended--
(1) in subsection (a), by striking ``and bona fide residents of
the district in which such bank is located'' and inserting ``, and
each of whom shall be either a bona fide resident of the district
in which such bank is located or an officer or director of a member
of such bank located in that district'';
(2) in subsection (d), by striking the first sentence and
inserting the following: ``The term of each director, whether
elected or appointed, shall be 3 years. The board of directors of
each Federal home loan bank and the Finance Board shall adjust the
terms of members first elected or appointed after the date of the
enactment of the Federal Home Loan Bank System Modernization Act of
1999 to ensure that the terms of the members of the board of
directors are staggered with approximately \1/3\ of the terms
expiring each year.''; and
(3) by striking subsection (g) and inserting the following:
``(g) Chairperson and Vice Chairperson.--
``(1) Election.--The Chairperson and Vice Chairperson of the
board of directors of each Federal home loan bank shall be elected
by a majority of all the directors of such bank from among the
directors of the bank.
``(2) Terms.--The term of office of the Chairperson and the
Vice Chairperson of the board of directors of a Federal home loan
bank shall be 2 years.
``(3) Acting chairperson.--In the event of a vacancy in the
position of Chairperson of the board of directors or during the
absence or disability of the Chairperson, the Vice Chairperson
shall act as Chairperson.
``(4) Procedures.--The board of directors of each Federal home
loan bank shall establish procedures, in the bylaws of such board,
for designating an acting chairperson for any period during which
the Chairperson and the Vice Chairperson are not available to carry
out the requirements of that position for any reason and removing
any person from any such position for good cause.''.
(b) Compensation.--Section 7(i) of the Federal Home Loan Bank Act
(12 U.S.C. 1427(i)) is amended--
(1) by striking ``(i) Each bank may pay its directors'' and
inserting ``(i) Directors' Compensation.--
``(1) In general.--Subject to paragraph (2), each bank may pay
its directors''; and
(2) by adding at the end the following new paragraph:
``(2) Limitation.--
``(A) In general.--The annual salary of each of the
following members of the board of directors of a Federal home
loan bank may not exceed the amount specified:
``In the case of the--
The annual compensation
may not exceed--
Chairperson...............................................
$25,000
Vice Chairperson..........................................
$20,000
All other members.........................................
$15,000.
``(B) Adjustment.--Beginning January 1, 2001, each dollar
amount referred to in the table in subparagraph (A) shall be
adjusted annually by the Finance Board, based on the annual
percentage increase, if any, in the Consumer Price Index for
all urban consumers, as published by the Department of Labor.
``(C) Expenses.--Subparagraph (A) shall not be construed as
prohibiting the reimbursement of expenses incurred by members
of the board of directors of any Federal home loan bank in
connection with service on the board of directors.''.
(c) Repeal of Sections 22A and 27.--The Federal Home Loan Bank Act
(12 U.S.C. 1421 et seq.) is amended by striking sections 22A (12 U.S.C.
1442a) and 27 (12 U.S.C. 1447).
(d) Section 12.--Section 12 of the Federal Home Loan Bank Act (12
U.S.C. 1432) is amended--
(1) in subsection (a)--
(A) by striking ``, but, except'' and all that follows
through ``ten years'';
(B) by striking ``subject to the approval of the Board''
the first place that term appears;
(C) by striking ``and, by its Board of directors,'' and all
that follows through ``agent of such bank,'' and inserting
``and, by the board of directors of the bank, to prescribe,
amend, and repeal by-laws governing the manner in which its
affairs may be administered, consistent with applicable laws
and regulations, as administered by the Finance Board. No
officer, employee, attorney, or agent of a Federal home loan
bank''; and
(D) by striking ``Board of directors'' where such term
appears in the penultimate sentence and inserting ``board of
directors''; and
(2) in subsection (b), by striking ``loans banks'' and
inserting ``loan banks''.
(e) Powers and Duties of Federal Housing Finance Board.--
(1) Issuance of notices of violations.--Section 2B(a) of the
Federal Home Loan Bank Act (12 U.S.C. 1422b(a)) is amended by
adding at the end the following new paragraphs:
``(5) To issue and serve a notice of charges upon a Federal
home loan bank or upon any executive officer or director of a
Federal home loan bank if, in the determination of the Finance
Board, the Bank, executive officer, or director is engaging or has
engaged in, or the Finance Board has reasonable cause to believe
that the Bank, executive officer, or director is about to engage in
an unsafe or unsound practice in conducting the business of the
bank, or any conduct that violates any provision of this Act or any
law, order, rule, or regulation or any condition imposed in writing
by the Finance Board in connection with the granting of any
application or other request by the Bank, or any written agreement
entered into by the Bank with the agency, in accordance with the
procedures provided in subsection (c) or (f) of section 1371 of the
Federal Housing Enterprises Financial Safety and Soundness Act of
1992. Such authority includes the same authority to issue an order
requiring a party to take affirmative action to correct conditions
resulting from violations or practices or to limit activities of a
Bank or any executive officer or director of a Bank as appropriate
Federal banking agencies have to take with respect to insured
depository institutions under paragraphs (6) and (7) of section
8(b) of the Federal Deposit Insurance Act, and to have all other
powers, rights, and duties to enforce this Act with respect to the
Federal home loan banks and their executive officers and directors
as the Office of Federal Housing Enterprise Oversight has to
enforce the Federal Housing Enterprises Financial Safety and
Soundness Act of 1992, the Federal National Mortgage Association
Charter Act, or the Federal Home Loan Mortgage Corporation Act with
respect to the Federal housing enterprises under subtitle C (other
than section 1371) of the Federal Housing Enterprises Financial
Safety and Soundness Act of 1992.
``(6) To address any insufficiencies in capital levels
resulting from the application of section 5(f) of the Home Owners'
Loan Act.
``(7) To act in its own name and through its own attorneys--
``(A) in enforcing any provision of this Act or any
regulation promulgated under this Act; or
``(B) in any action, suit, or proceeding to which the
Finance Board is a party that involves the Board's regulation
or supervision of any Federal home loan bank.''.
(2) Technical amendment.--Section 111 of Public Law 93-495 (12
U.S.C. 250) is amended by striking ``Federal Home Loan Bank
Board,'' and inserting ``Director of the Office of Thrift
Supervision, the Federal Housing Finance Board,''.
(f) Eligibility To Secure Advances.--
(1) Section 9.--Section 9 of the Federal Home Loan Bank Act (12
U.S.C. 1429) is amended--
(A) in the second sentence, by striking ``with the approval
of the Board''; and
(B) in the third sentence, by striking ``, subject to the
approval of the Board,''.
(2) Section 10.--Section 10 of the Federal Home Loan Bank Act
(12 U.S.C. 1430) is amended--
(A) in subsection (c)--
(i) in the first sentence, by striking ``Board'' and
inserting ``Federal home loan bank''; and
(ii) by striking the second sentence; and
(B) in subsection (d)--
(i) in the first sentence, by striking ``and the
approval of the Board''; and
(ii) by striking ``Subject to the approval of the
Board, any'' and inserting ``Any''.
(g) Section 16.--Section 16(a) of the Federal Home Loan Bank Act
(12 U.S.C. 1436(a)) is amended--
(1) in the third sentence--
(A) by striking ``net earnings'' and inserting ``previously
retained earnings or current net earnings''; and
(B) by striking ``, and then only with the approval of the
Federal Housing Finance Board''; and
(2) by striking the fourth sentence.
(h) Section 18.--Section 18(b) of the Federal Home Loan Bank Act
(12 U.S.C. 1438(b)) is amended by striking paragraph (4).
SEC. 607. RESOLUTION FUNDING CORPORATION.
(a) In General.--Section 21B(f)(2)(C) of the Federal Home Loan Bank
Act (12 U.S.C. 1441b(f)(2)(C)) is amended to read as follows:
``(C) Payments by federal home loan banks.--
``(i) In general.--To the extent that the amounts
available pursuant to subparagraphs (A) and (B) are
insufficient to cover the amount of interest payments, each
Federal home loan bank shall pay to the Funding Corporation
in each calendar year, 20.0 percent of the net earnings of
that Bank (after deducting expenses relating to section
10(j) and operating expenses).
``(ii) Annual determination.--The Board annually shall
determine the extent to which the value of the aggregate
amounts paid by the Federal home loan banks exceeds or
falls short of the value of an annuity of $300,000,000 per
year that commences on the issuance date and ends on the
final scheduled maturity date of the obligations, and shall
select appropriate present value factors for making such
determinations, in consultation with the Secretary of the
Treasury.
``(iii) Payment term alterations.--The Board shall
extend or shorten the term of the payment obligations of a
Federal home loan bank under this subparagraph as necessary
to ensure that the value of all payments made by the Banks
is equivalent to the value of an annuity referred to in
clause (ii).
``(iv) Term beyond maturity.--If the Board extends the
term of payment obligations beyond the final scheduled
maturity date for the obligations, each Federal home loan
bank shall continue to pay 20.0 percent of its net earnings
(after deducting expenses relating to section 10(j) and
operating expenses) to the Treasury of the United States
until the value of all such payments by the Federal home
loan banks is equivalent to the value of an annuity
referred to in clause (ii). In the final year in which the
Federal home loan banks are required to make any payment to
the Treasury under this subparagraph, if the dollar amount
represented by 20.0 percent of the net earnings of the
Federal home loan banks exceeds the remaining obligation of
the Banks to the Treasury, the Finance Board shall reduce
the percentage pro rata to a level sufficient to pay the
remaining obligation.''.
(b) Effective Date.--The amendment made by subsection (a) shall
become effective on January 1, 2000. Payments made by a Federal home
loan bank before that effective date shall be counted toward the total
obligation of that Bank under section 21B(f)(2)(C) of the Federal Home
Loan Bank Act, as amended by this section.
SEC. 608. CAPITAL STRUCTURE OF FEDERAL HOME LOAN BANKS.
Section 6 of the Federal Home Loan Bank Act (12 U.S.C. 1426) is
amended to read as follows:
``SEC. 6. CAPITAL STRUCTURE OF FEDERAL HOME LOAN BANKS.
``(a) Regulations.--
``(1) Capital standards.--Not later than 1 year after the date
of the enactment of the Federal Home Loan Bank System Modernization
Act of 1999, the Finance Board shall issue regulations prescribing
uniform capital standards applicable to each Federal home loan
bank, which shall require each such bank to meet--
``(A) the leverage requirement specified in paragraph (2);
and
``(B) the risk-based capital requirements, in accordance
with paragraph (3).
``(2) Leverage requirement.--
``(A) In general.--The leverage requirement shall require
each Federal home loan bank to maintain a minimum amount of
total capital based on the total assets of the bank and shall
be 5 percent.
``(B) Treatment of stock and retained earnings.--In
determining compliance with the minimum leverage ratio
established under subparagraph (A), the paid-in value of the
outstanding Class B stock and the amount of retained earnings
shall be multiplied by 1.5, and such higher amounts shall be
deemed to be capital for purposes of meeting the 5 percent
minimum leverage ratio, except that a Federal home loan bank's
total capital (determined without taking into account any such
multiplier) shall not be less than 4 percent of the total
assets of the bank.
``(3) Risk-based capital standards.--
``(A) In general.--Each Federal home loan bank shall
maintain permanent capital in an amount that is sufficient, as
determined in accordance with the regulations of the Finance
Board, to meet--
``(i) the credit risk to which the Federal home loan
bank is subject; and
``(ii) the market risk, including interest rate risk,
to which the Federal home loan bank is subject, based on a
stress test established by the Finance Board that
rigorously tests for changes in market variables, including
changes in interest rates, rate volatility, and changes in
the shape of the yield curve.
``(B) Consideration of other risk-based standards.--In
establishing the risk-based standard under subparagraph
(A)(ii), the Finance Board shall take due consideration of any
risk-based capital test established pursuant to section 1361 of
the Federal Housing Enterprises Financial Safety and Soundness
Act of 1992 (12 U.S.C. 4611) for the enterprises (as defined in
that Act), with such modifications as the Finance Board
determines to be appropriate to reflect differences in
operations between the Federal home loan banks and those
enterprises.
``(4) Other regulatory requirements.--The regulations issued by
the Finance Board under paragraph (1) shall--
``(A) permit each Federal home loan bank to issue, with
such rights, terms, and preferences, not inconsistent with this
Act and the regulations issued hereunder, as the board of
directors of that bank may approve, any 1 or more of--
``(i) Class A stock, which shall be redeemable in cash
and at par 6 months following submission by a member of a
written notice of its intent to redeem such shares; and
``(ii) Class B stock, which shall be redeemable in cash
and at par 5 years following submission by a member of a
written notice of its intent to redeem such shares;
``(B) provide that the stock of a Federal home loan bank
may be issued to and held by only members of the bank, and that
a bank may not issue any stock other than as provided in this
section;
``(C) prescribe the manner in which stock of a Federal home
loan bank may be sold, transferred, redeemed, or repurchased;
and
``(D) provide the manner of disposition of outstanding
stock held by, and the liquidation of any claims of the Federal
home loan bank against, an institution that ceases to be a
member of the bank, through merger or otherwise, or that
provides notice of intention to withdraw from membership in the
bank.
``(5) Definitions of capital.--For purposes of determining
compliance with the capital standards established under this
subsection--
``(A) permanent capital of a Federal home loan bank shall
include--
``(i) the amounts paid for the Class B stock; and
``(ii) the retained earnings of the bank (as determined
in accordance with generally accepted accounting
principles); and
``(B) total capital of a Federal home loan bank shall
include--
``(i) permanent capital;
``(ii) the amounts paid for the Class A stock;
``(iii) consistent with generally accepted accounting
principles, and subject to the regulation of the Finance
Board, a general allowance for losses, which may not
include any reserves or allowances made or held against
specific assets; and
``(iv) any other amounts from sources available to
absorb losses incurred by the bank that the Finance Board
determines by regulation to be appropriate to include in
determining total capital.
``(6) Transition period.--Notwithstanding any other provision
of this Act, the requirements relating to purchase and retention of
capital stock of a Federal home loan bank by any member thereof in
effect on the day before the date of the enactment of the Federal
Home Loan Bank System Modernization Act of 1999, shall continue in
effect with respect to each Federal home loan bank until the
regulations required by this subsection have taken effect and the
capital structure plan required by subsection (b) has been approved
by the Finance Board and implemented by such bank.
``(b) Capital Structure Plan.--
``(1) Approval of plans.--Not later than 270 days after the
date of publication by the Finance Board of final regulations in
accordance with subsection (a), the board of directors of each
Federal home loan bank shall submit for Finance Board approval a
plan establishing and implementing a capital structure for such
bank that--
``(A) the board of directors determines is best suited for
the condition and operation of the bank and the interests of
the members of the bank;
``(B) meets the requirements of subsection (c); and
``(C) meets the minimum capital standards and requirements
established under subsection (a) and other regulations
prescribed by the Finance Board.
``(2) Approval of modifications.--The board of directors of a
Federal home loan bank shall submit to the Finance Board for
approval any modifications that the bank proposes to make to an
approved capital structure plan.
``(c) Contents of Plan.--The capital structure plan of each Federal
home loan bank shall contain provisions addressing each of the
following:
``(1) Minimum investment.--
``(A) In general.--Each capital structure plan of a Federal
home loan bank shall require each member of the bank to
maintain a minimum investment in the stock of the bank, the
amount of which shall be determined in a manner to be
prescribed by the board of directors of each bank and to be
included as part of the plan.
``(B) Investment alternatives.--
``(i) In general.--In establishing the minimum
investment required for each member under subparagraph (A),
a Federal home loan bank may, in its discretion, include
any 1 or more of the requirements referred to in clause
(ii), or any other provisions approved by the Finance
Board.
``(ii) Authorized requirements.--A requirement is
referred to in this clause if it is a requirement for--
``(I) a stock purchase based on a percentage of the
total assets of a member; or
``(II) a stock purchase based on a percentage of
the outstanding advances from the bank to the member.
``(C) Minimum amount.--Each capital structure plan of a
Federal home loan bank shall require that the minimum stock
investment established for members shall be set at a level that
is sufficient for the bank to meet the minimum capital
requirements established by the Finance Board under subsection
(a).
``(D) Adjustments to minimum required investment.--The
capital structure plan of each Federal home loan bank shall
impose a continuing obligation on the board of directors of the
bank to review and adjust the minimum investment required of
each member of that bank, as necessary to ensure that the bank
remains in compliance with applicable minimum capital levels
established by the Finance Board, and shall require each member
to comply promptly with any adjustments to the required minimum
investment.
``(2) Transition rule.--
``(A) In general.--The capital structure plan of each
Federal home loan bank shall specify the date on which it shall
take effect, and may provide for a transition period of not
longer than 3 years to allow the bank to come into compliance
with the capital requirements prescribed under subsection (a),
and to allow any institution that was a member of the bank on
the date of the enactment of the Federal Home Loan Bank System
Modernization Act of 1999, to come into compliance with the
minimum investment required pursuant to the plan.
``(B) Interim purchase requirements.--The capital structure
plan of a Federal home loan bank may allow any member referred
to in subparagraph (A) that would be required by the terms of
the capital structure plan to increase its investment in the
stock of the bank to do so in periodic installments during the
transition period.
``(3) Disposition of shares.--The capital structure plan of a
Federal home loan bank shall provide for the manner of disposition
of any stock held by a member of that bank that terminates its
membership or that provides notice of its intention to withdraw
from membership in that bank.
``(4) Classes of stock.--
``(A) In general.--The capital structure plan of a Federal
home loan bank shall afford each member of that bank the option
of maintaining its required investment in the bank through the
purchase of any combination of classes of stock authorized by
the board of directors of the bank and approved by the Finance
Board in accordance with its regulations.
``(B) Rights requirement.--A Federal home loan bank shall
include in its capital structure plan provisions establishing
terms, rights, and preferences, including minimum investment,
dividends, voting, and liquidation preferences of each class of
stock issued by the bank, consistent with Finance Board
regulations and market requirements.
``(C) Reduced minimum investment.--The capital structure
plan of a Federal home loan bank may provide for a reduced
minimum stock investment for any member of that bank that
elects to purchase Class B in a manner that is consistent with
meeting the minimum capital requirements of the bank, as
established by the Finance Board.
``(D) Liquidation of claims.--The capital structure plan of
a Federal home loan bank shall provide for the liquidation in
an orderly manner, as determined by the bank, of any claim of
that bank against a member, including claims for any applicable
prepayment fees or penalties resulting from prepayment of
advances prior to stated maturity.
``(5) Limited transferability of stock.--The capital structure
plan of a Federal home loan bank shall--
``(A) provide that any stock issued by that bank shall be
available only to and held only by members of that bank and
tradable only between that bank and its members; and
``(B) establish standards, criteria, and requirements for
the issuance, purchase, transfer, retirement, and redemption of
stock issued by that bank.
``(6) Bank review of plan.--Before filing a capital structure
plan with the Finance Board, each Federal home loan bank shall
conduct a review of the plan by--
``(A) an independent certified public accountant, to
ensure, to the extent possible, that implementation of the plan
would not result in any write-down of the redeemable bank stock
investment of its members; and
``(B) at least one major credit rating agency, to
determine, to the extent possible, whether implementation of
the plan would have any material effect on the credit ratings
of the bank.
``(d) Termination of Membership.--
``(1) Voluntary withdrawal.--Any member may withdraw from a
Federal home loan bank if the member provides written notice to the
bank of its intent to do so and if, on the date of withdrawal,
there is in effect a certification by the Finance Board that the
withdrawal will not cause the Federal Home Loan Bank System to fail
to meet its obligation under section 21B(f)(2)(C) to contribute to
the debt service for the obligations issued by the Resolution
Funding Corporation. The applicable stock redemption notice periods
shall commence upon receipt of the notice by the bank. Upon the
expiration of the applicable notice period for each class of
redeemable stock, the member may surrender such stock to the bank,
and shall be entitled to receive in cash the par value of the
stock. During the applicable notice periods, the member shall be
entitled to dividends and other membership rights commensurate with
continuing stock ownership.
``(2) Involuntary withdrawal.--
``(A) In general.--The board of directors of a Federal home
loan bank may terminate the membership of any institution if,
subject to Finance Board regulations, it determines that--
``(i) the member has failed to comply with a provision
of this Act or any regulation prescribed under this Act; or
``(ii) the member has been determined to be insolvent,
or otherwise subject to the appointment of a conservator,
receiver, or other legal custodian, by a Federal or State
authority with regulatory and supervisory responsibility
for the member.
``(B) Stock disposition.--An institution, the membership of
which is terminated in accordance with subparagraph (A)--
``(i) shall surrender redeemable stock to the Federal
home loan bank, and shall receive in cash the par value of
the stock, upon the expiration of the applicable notice
period under subsection (a)(4)(A);
``(ii) shall receive any dividends declared on its
redeemable stock, during the applicable notice period under
subsection (a)(4)(A); and
``(iii) shall not be entitled to any other rights or
privileges accorded to members after the date of the
termination.
``(C) Commencement of notice period.--With respect to an
institution, the membership of which is terminated in
accordance with subparagraph (A), the applicable notice period
under subsection (a)(4) for each class of redeemable stock
shall commence on the earlier of--
``(i) the date of such termination; or
``(ii) the date on which the member has provided notice
of its intent to redeem such stock.
``(3) Liquidation of indebtedness.--Upon the termination of the
membership of an institution for any reason, the outstanding
indebtedness of the member to the bank shall be liquidated in an
orderly manner, as determined by the bank and, upon the
extinguishment of all such indebtedness, the bank shall return to
the member all collateral pledged to secure the indebtedness.
``(e) Redemption of Excess Stock.--
``(1) In general.--A Federal home loan bank, in its sole
discretion, may redeem or repurchase, as appropriate, any shares of
Class A or Class B stock issued by the bank and held by a member
that are in excess of the minimum stock investment required of that
member.
``(2) Excess stock.--Shares of stock held by a member shall not
be deemed to be `excess stock' for purposes of this subsection by
virtue of a member's submission of a notice of intent to withdraw
from membership or termination of its membership in any other
manner.
``(3) Priority.--A Federal home loan bank may not redeem any
excess Class B stock prior to the end of the 5-year notice period,
unless the member has no Class A stock outstanding that could be
redeemed as excess.
``(f) Impairment of Capital.--If the Finance Board or the board of
directors of a Federal home loan bank determines that the bank has
incurred or is likely to incur losses that result in or are expected to
result in charges against the capital of the bank, the bank shall not
redeem or repurchase any stock of the bank without the prior approval
of the Finance Board while such charges are continuing or are expected
to continue. In no case may a bank redeem or repurchase any applicable
capital stock if, following the redemption, the bank would fail to
satisfy any minimum capital requirement.
``(g) Rejoining After Divestiture of All Shares.--
``(1) In general.--Except as provided in paragraph (2), and
notwithstanding any other provision of this Act, an institution
that divests all shares of stock in a Federal home loan bank may
not, after such divestiture, acquire shares of any Federal home
loan bank before the end of the 5-year period beginning on the date
of the completion of such divestiture, unless the divestiture is a
consequence of a transfer of membership on an uninterrupted basis
between banks.
``(2) Exception for withdrawals from membership before 1998.--
Any institution that withdrew from membership in any Federal home
loan bank before December 31, 1997, may acquire shares of a Federal
home loan bank at any time after that date, subject to the approval
of the Finance Board and the requirements of this Act.
``(h) Treatment of Retained Earnings.--
``(1) In general.--The holders of the Class B stock of a
Federal home loan bank shall own the retained earnings, surplus,
undivided profits, and equity reserves, if any, of the bank.
``(2) Exception.--Except as specifically provided in this
section or through the declaration of a dividend or a capital
distribution by a Federal home loan bank, or in the event of
liquidation of the bank, a member shall have no right to withdraw
or otherwise receive distribution of any portion of the retained
earnings of the bank.
``(3) Limitation.--A Federal home loan bank may not make any
distribution of its retained earnings unless, following such
distribution, the bank would continue to meet all applicable
capital requirements.''.
TITLE VII--OTHER PROVISIONS
Subtitle A--ATM Fee Reform
SEC. 701. SHORT TITLE.
This subtitle may be cited as the ``ATM Fee Reform Act of 1999''.
SEC. 702. ELECTRONIC FUND TRANSFER FEE DISCLOSURES AT ANY HOST ATM.
Section 904(d) of the Electronic Fund Transfer Act (15 U.S.C.
1693b(d)) is amended by adding at the end the following new paragraph:
``(3) Fee disclosures at automated teller machines.--
``(A) In general.--The regulations prescribed under
paragraph (1) shall require any automated teller machine
operator who imposes a fee on any consumer for providing host
transfer services to such consumer to provide notice in
accordance with subparagraph (B) to the consumer (at the time
the service is provided) of--
``(i) the fact that a fee is imposed by such operator
for providing the service; and
``(ii) the amount of any such fee.
``(B) Notice requirements.--
``(i) On the machine.--The notice required under clause
(i) of subparagraph (A) with respect to any fee described
in such subparagraph shall be posted in a prominent and
conspicuous location on or at the automated teller machine
at which the electronic fund transfer is initiated by the
consumer.
``(ii) On the screen.--The notice required under
clauses (i) and (ii) of subparagraph (A) with respect to
any fee described in such subparagraph shall appear on the
screen of the automated teller machine, or on a paper
notice issued from such machine, after the transaction is
initiated and before the consumer is irrevocably committed
to completing the transaction, except that during the
period beginning on the date of the enactment of the Gramm-
Leach-Bliley Act and ending on December 31, 2004, this
clause shall not apply to any automated teller machine that
lacks the technical capability to disclose the notice on
the screen or to issue a paper notice after the transaction
is initiated and before the consumer is irrevocably
committed to completing the transaction.
``(C) Prohibition on fees not properly disclosed and
explicitly assumed by consumer.--No fee may be imposed by any
automated teller machine operator in connection with any
electronic fund transfer initiated by a consumer for which a
notice is required under subparagraph (A), unless--
``(i) the consumer receives such notice in accordance
with subparagraph (B); and
``(ii) the consumer elects to continue in the manner
necessary to effect the transaction after receiving such
notice.
``(D) Definitions.--For purposes of this paragraph, the
following definitions shall apply:
``(i) Automated teller machine operator.--The term
`automated teller machine operator' means any person who--
``(I) operates an automated teller machine at which
consumers initiate electronic fund transfers; and
``(II) is not the financial institution that holds
the account of such consumer from which the transfer is
made.
``(ii) Electronic fund transfer.--The term `electronic
fund transfer' includes a transaction that involves a
balance inquiry initiated by a consumer in the same manner
as an electronic fund transfer, whether or not the consumer
initiates a transfer of funds in the course of the
transaction.
``(iii) Host transfer services.--The term `host
transfer services' means any electronic fund transfer made
by an automated teller machine operator in connection with
a transaction initiated by a consumer at an automated
teller machine operated by such operator.''.
SEC. 703. DISCLOSURE OF POSSIBLE FEES TO CONSUMERS WHEN ATM CARD IS
ISSUED.
Section 905(a) of the Electronic Fund Transfer Act (15 U.S.C.
1693c(a)) is amended--
(1) by striking ``and'' at the end of paragraph (8);
(2) by striking the period at the end of paragraph (9) and
inserting ``; and''; and
(3) by inserting after paragraph (9) the following new
paragraph:
``(10) a notice to the consumer that a fee may be imposed by--
``(A) an automated teller machine operator (as defined in
section 904(d)(3)(D)(i)) if the consumer initiates a transfer
from an automated teller machine that is not operated by the
person issuing the card or other means of access; and
``(B) any national, regional, or local network utilized to
effect the transaction.''.
SEC. 704. FEASIBILITY STUDY.
(a) In General.--The Comptroller General of the United States shall
conduct a study of the feasibility of requiring, in connection with any
electronic fund transfer initiated by a consumer through the use of an
automated teller machine--
(1) a notice to be provided to the consumer before the consumer
is irrevocably committed to completing the transaction, which
clearly states the amount of any fee that will be imposed upon the
consummation of the transaction by--
(A) any automated teller machine operator (as defined in
section 904(d)(3)(D)(i) of the Electronic Fund Transfer Act)
involved in the transaction;
(B) the financial institution holding the account of the
consumer;
(C) any national, regional, or local network utilized to
effect the transaction; and
(D) any other party involved in the transfer; and
(2) the consumer to elect to consummate the transaction after
receiving the notice described in paragraph (1).
(b) Factors To Be Considered.--In conducting the study required
under subsection (a) with regard to the notice requirement described in
such subsection, the Comptroller General shall consider the following
factors:
(1) The availability of appropriate technology.
(2) Implementation and operating costs.
(3) The competitive impact any such notice requirement would
have on various sizes and types of institutions, if implemented.
(4) The period of time that would be reasonable for
implementing any such notice requirement.
(5) The extent to which consumers would benefit from any such
notice requirement.
(6) Any other factor the Comptroller General determines to be
appropriate in analyzing the feasibility of imposing any such
notice requirement.
(c) Report to the Congress.--Before the end of the 6-month period
beginning on the date of the enactment of this Act, the Comptroller
General shall submit a report to the Congress containing--
(1) the findings and conclusions of the Comptroller General in
connection with the study required under subsection (a); and
(2) the recommendation of the Comptroller General with regard
to the question of whether a notice requirement described in
subsection (a) should be implemented and, if so, the manner in
which such requirement should be implemented.
SEC. 705. NO LIABILITY IF POSTED NOTICES ARE DAMAGED.
Section 910 of the Electronic Fund Transfer Act (15 U.S.C. 1693h)
is amended by adding at the end the following new subsection:
``(d) Exception for Damaged Notices.--If the notice required to be
posted pursuant to section 904(d)(3)(B)(i) by an automated teller
machine operator has been posted by such operator in compliance with
such section and the notice is subsequently removed, damaged, or
altered by any person other than the operator of the automated teller
machine, the operator shall have no liability under this section for
failure to comply with section 904(d)(3)(B)(i).''.
Subtitle B--Community Reinvestment
SEC. 711. CRA SUNSHINE REQUIREMENTS.
The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is
amended by inserting after section 47, as added by section 305 of this
Act, the following new section:
``SEC. 48. CRA SUNSHINE REQUIREMENTS.
``(a) Public Disclosure of Agreements.--Any agreement (as defined
in subsection (e)) entered into after the date of the enactment of the
Gramm-Leach-Bliley Act by an insured depository institution or
affiliate with a nongovernmental entity or person made pursuant to or
in connection with the Community Reinvestment Act of 1977 involving
funds or other resources of such insured depository institution or
affiliate--
``(1) shall be in its entirety fully disclosed, and the full
text thereof made available to the appropriate Federal banking
agency with supervisory responsibility over the insured depository
institution and to the public by each party to the agreement; and
``(2) shall obligate each party to comply with this section.
``(b) Annual Report of Activity by Insured Depository
Institution.--Each insured depository institution or affiliate that is
a party to an agreement described in subsection (a) shall report to the
appropriate Federal banking agency with supervisory responsibility over
the insured depository institution, not less frequently than once each
year, such information as the Federal banking agency may by rule
require relating to the following actions taken by the party pursuant
to the agreement during the preceding 12-month period:
``(1) Payments, fees, or loans made to any party to the
agreement or received from any party to the agreement and the terms
and conditions of the same.
``(2) Aggregate data on loans, investments, and services
provided by each party in its community or communities pursuant to
the agreement.
``(3) Such other pertinent matters as determined by regulation
by the appropriate Federal banking agency with supervisory
responsibility over the insured depository institution.
``(c) Annual Report of Activity by Nongovernmental Entities.--
``(1) In general.--Each nongovernmental entity or person that
is not an affiliate of an insured depository institution and that
is a party to an agreement described in subsection (a) shall report
to the appropriate Federal banking agency with supervisory
responsibility over the insured depository institution that is a
party to such agreement, not less frequently than once each year,
an accounting of the use of funds received pursuant to each such
agreement during the preceding 12-month period.
``(2) Submission to insured depository institution.--A
nongovernmental entity or person referred to in paragraph (1) may
comply with the reporting requirement in such paragraph by
transmitting the report to the insured depository institution that
is a party to the agreement, and such insured depository
institution shall promptly transmit such report to the appropriate
Federal banking agency with supervisory authority over the insured
depository institution.
``(3) Information to be included.--The accounting referred to
in paragraph (1) shall include a detailed, itemized list of the
uses to which such funds have been made, including compensation,
administrative expenses, travel, entertainment, consulting and
professional fees paid, and such other categories, as determined by
regulation by the appropriate Federal banking agency with
supervisory responsibility over the insured depository institution.
``(d) Applicability.--Subsections (b) and (c) shall not apply with
respect to any agreement entered into before the end of the 6-month
period beginning on the date of the enactment of the Gramm-Leach-Bliley
Act.
``(e) Definitions.--
``(1) Agreement.--For purposes of this section, the term
`agreement'--
``(A) means--
``(i) any written contract, written arrangement, or
other written understanding that provides for cash
payments, grants, or other consideration with a value in
excess of $10,000, or for loans the aggregate amount of
principal of which exceeds $50,000, annually (or the sum of
all such agreements during a 12-month period with an
aggregate value of cash payments, grants, or other
consideration in excess of $10,000, or with an aggregate
amount of loan principal in excess of $50,000); or
``(ii) a group of substantively related contracts with
an aggregate value of cash payments, grants, or other
consideration in excess of $10,000, or with an aggregate
amount of loan principal in excess of $50,000, annually;
made pursuant to, or in connection with, the fulfillment of the
Community Reinvestment Act of 1977, at least 1 party to which
is an insured depository institution or affiliate thereof,
whether organized on a profit or not-for-profit basis; and
``(B) does not include--
``(i) any individual mortgage loan;
``(ii) any specific contract or commitment for a loan
or extension of credit to individuals, businesses, farms,
or other entities, if the funds are loaned at rates not
substantially below market rates and if the purpose of the
loan or extension of credit does not include any re-lending
of the borrowed funds to other parties; or
``(iii) any agreement entered into by an insured
depository institution or affiliate with a nongovernmental
entity or person who has not commented on, testified about,
or discussed with the institution, or otherwise contacted
the institution, concerning the Community Reinvestment Act
of 1977.
``(2) Fulfillment of cra.--For purposes of subparagraph (A),
the term `fulfillment' means a list of factors that the appropriate
Federal banking agency determines have a material impact on the
agency's decision--
``(A) to approve or disapprove an application for a deposit
facility (as defined in section 803 of the Community
Reinvestment Act of 1977); or
``(B) to assign a rating to an insured depository
institution under section 807 of the Community Reinvestment Act
of 1977.
``(f) Violations.--
``(1) Violations by persons other than insured depository
institutions or their affiliates.--
``(A) Material failure to comply.--If the party to an
agreement described in subsection (a) that is not an insured
depository institution or affiliate willfully fails to comply
with this section in a material way, as determined by the
appropriate Federal banking agency, the agreement shall be
unenforceable after the offending party has been given notice
and a reasonable period of time to perform or comply.
``(B) Diversion of funds or resources.--If funds or
resources received under an agreement described in subsection
(a) have been diverted contrary to the purposes of the
agreement for personal financial gain, the appropriate Federal
banking agency with supervisory responsibility over the insured
depository institution may impose either or both of the
following penalties:
``(i) Disgorgement by the offending individual of funds
received under the agreement.
``(ii) Prohibition of the offending individual from
being a party to any agreement described in subsection (a)
for a period of not to exceed 10 years.
``(2) Designation of successor nongovernmental party.--If an
agreement described in subsection (a) is found to be unenforceable
under this subsection, the appropriate Federal banking agency may
assist the insured depository institution in identifying a
successor nongovernmental party to assume the responsibilities of
the agreement.
``(3) Inadvertent or de minimis reporting errors.--An error in
a report filed under subsection (c) that is inadvertent or de
minimis shall not subject the filing party to any penalty.
``(g) Rule of Construction.--No provision of this section shall be
construed as authorizing any appropriate Federal banking agency to
enforce the provisions of any agreement described in subsection (a).
``(h) Regulations.--
``(1) In general.--Each appropriate Federal banking agency
shall prescribe regulations, in accordance with paragraph (4),
requiring procedures reasonably designed to ensure and monitor
compliance with the requirements of this section.
``(2) Protection of parties.--In carrying out paragraph (1),
each appropriate Federal banking agency shall--
``(A) ensure that the regulations prescribed by the agency
do not impose an undue burden on the parties and that
proprietary and confidential information is protected; and
``(B) establish procedures to allow any nongovernmental
entity or person who is a party to a large number of agreements
described in subsection (a) to make a single or consolidated
filing of a report under subsection (c) to an insured
depository institution or an appropriate Federal banking
agency.
``(3) Parties not subject to reporting requirements.--The Board
of Governors of the Federal Reserve System may prescribe
regulations--
``(A) to prevent evasions of subsection (e)(1)(B)(iii); and
``(B) to provide further exemptions under such subsection,
consistent with the purposes of this section.
``(4) Coordination, consistency, and comparability.--In
carrying out paragraph (1), each appropriate Federal banking agency
shall consult and coordinate with the other such agencies for the
purposes of assuring, to the extent possible, that the regulations
prescribed by each such agency are consistent and comparable with
the regulations prescribed by the other such agencies.''.
SEC. 712. SMALL BANK REGULATORY RELIEF.
The Community Reinvestment Act of 1977 (12 U.S.C. 2901 et seq.) is
amended by adding at the end the following new section:
``SEC. 809. SMALL BANK REGULATORY RELIEF.
``(a) In General.--Except as provided in subsections (b) and (c),
any regulated financial institution with aggregate assets of not more
than $250,000,000 shall be subject to routine examination under this
title--
``(1) not more than once every 60 months for an institution
that has achieved a rating of `outstanding record of meeting
community credit needs' at its most recent examination under
section 804;
``(2) not more than once every 48 months for an institution
that has received a rating of `satisfactory record of meeting
community credit needs' at its most recent examination under
section 804; and
``(3) as deemed necessary by the appropriate Federal financial
supervisory agency, for an institution that has received a rating
of less than `satisfactory record of meeting community credit
needs' at its most recent examination under section 804.
``(b) No Exception From CRA Examinations in Connection With
Applications for Deposit Facilities.--A regulated financial institution
described in subsection (a) shall remain subject to examination under
this title in connection with an application for a deposit facility.
``(c) Discretion.--A regulated financial institution described in
subsection (a) may be subject to more frequent or less frequent
examinations for reasonable cause under such circumstances as may be
determined by the appropriate Federal financial supervisory agency.''.
SEC. 713. FEDERAL RESERVE BOARD STUDY OF CRA LENDING.
The Board of Governors of the Federal Reserve System shall conduct
a comprehensive study, in consultation with the Chairman and Ranking
Member of the Committee on Banking and Financial Services of the House
of Representatives and the Chairman and Ranking Member of the Committee
on Banking, Housing, and Urban Affairs of the Senate, of the Community
Reinvestment Act of 1977, which shall focus on--
(1) the default rates;
(2) the delinquency rates; and
(3) the profitability;
of loans made in conformity with such Act, and report on the study to
such Committees not later than March 15, 2000. Such report and
supporting data shall also be made available by the Board of Governors
of the Federal Reserve System to the public.
SEC. 714. PRESERVING THE COMMUNITY REINVESTMENT ACT OF 1977.
Nothing in this Act shall be construed to repeal any provision of
the Community Reinvestment Act of 1977.
SEC. 715. RESPONSIVENESS TO COMMUNITY NEEDS FOR FINANCIAL SERVICES.
(a) Study.--The Secretary of the Treasury, in consultation with the
Federal banking agencies (as defined in section 3(z) of the Federal
Deposit Insurance Act), shall conduct a study of the extent to which
adequate services are being provided as intended by the Community
Reinvestment Act of 1977, including services in low- and moderate-
income neighborhoods and for persons of modest means, as a result of
the enactment of this Act.
(b) Reports.--
(1) In general.--The Secretary of the Treasury shall--
(A) before March 15, 2000, submit a baseline report to the
Congress on the study conducted pursuant to subsection (a); and
(B) before the end of the 2-year period beginning on the
date of the enactment of this Act, in consultation with the
Federal banking agencies, submit a final report to the Congress
on the study conducted pursuant to subsection (a).
(2) Recommendations.--The final report submitted under
paragraph (1)(B) shall include such recommendations as the
Secretary determines to be appropriate for administrative and
legislative action with respect to institutions covered under the
Community Reinvestment Act of 1977.
Subtitle C--Other Regulatory Improvements
SEC. 721. EXPANDED SMALL BANK ACCESS TO S CORPORATION TREATMENT.
(a) Study.--The Comptroller General of the United States shall
conduct a study of--
(1) possible revisions to the rules governing S corporations,
including--
(A) increasing the permissible number of shareholders in
such corporations;
(B) permitting shares of such corporations to be held in
individual retirement accounts;
(C) clarifying that interest on investments held for
safety, soundness, and liquidity purposes should not be
considered to be passive income;
(D) discontinuation of the treatment of stock held by bank
directors as a disqualifying personal class of stock for such
corporations; and
(E) improving Federal tax treatment of bad debt and
interest deductions; and
(2) what impact such revisions might have on community banks.
(b) Report to the Congress.--Not later than 6 months after the date
of the enactment of this Act, the Comptroller General of the United
States shall submit a report to the Congress on the results of the
study conducted under subsection (a).
(c) Definition.--For purposes of this section, the term ``S
corporation'' has the meaning given the term in section 1361(a)(1) of
the Internal Revenue Code of 1986.
SEC. 722. ``PLAIN LANGUAGE'' REQUIREMENT FOR FEDERAL BANKING AGENCY
RULES.
(a) In General.--Each Federal banking agency shall use plain
language in all proposed and final rulemakings published by the agency
in the Federal Register after January 1, 2000.
(b) Report.--Not later than March 1, 2001, each Federal banking
agency shall submit to the Congress a report that describes how the
agency has complied with subsection (a).
(c) Definition.--For purposes of this section, the term ``Federal
banking agency'' has the meaning given that term in section 3 of the
Federal Deposit Insurance Act.
SEC. 723. RETENTION OF ``FEDERAL'' IN NAME OF CONVERTED FEDERAL
SAVINGS ASSOCIATION.
Section 2 of the Act entitled ``An Act to enable national banking
associations to increase their capital stock and to change their names
or locations'', approved May 1, 1886 (12 U.S.C. 30), is amended by
adding at the end the following new subsection:
``(d) Retention of `Federal' in Name of Converted Federal Savings
Association.--
``(1) In general.--Notwithstanding subsection (a) or any other
provision of law, any depository institution, the charter of which
is converted from that of a Federal savings association to a
national bank or a State bank after the date of the enactment of
the Gramm-Leach-Bliley Act may retain the term `Federal' in the
name of such institution if such institution remains an insured
depository institution.
``(2) Definitions.--For purposes of this subsection, the terms
`depository institution', `insured depository institution',
`national bank', and `State bank' have the meanings given those
terms in section 3 of the Federal Deposit Insurance Act.''.
SEC. 724. CONTROL OF BANKERS' BANKS.
Section 2(a)(5)(E)(i) of the Bank Holding Company Act of 1956 (12
U.S.C. 1841(a)(5)(E)(i)) is amended by inserting ``1 or more'' before
``thrift institutions''.
SEC. 725. PROVISION OF TECHNICAL ASSISTANCE TO MICROENTERPRISES.
Title I of the Riegle Community Development and Regulatory
Improvement Act of 1994 (12 U.S.C. 4701 et seq.) is amended by adding
at the end the following new subtitle:
``Subtitle C--Microenterprise Technical Assistance and Capacity
Building Program
``SEC. 171. SHORT TITLE.
``This subtitle may be cited as the `Program for Investment in
Microentrepreneurs Act of 1999', also referred to as the `PRIME Act'.
``SEC. 172. DEFINITIONS.
``For purposes of this subtitle, the following definitions shall
apply:
``(1) Administration.--The term `Administration' means the
Small Business Administration.
``(2) Administrator.--The term `Administrator' means the
Administrator of the Small Business Administration.
``(3) Capacity building services.--The term `capacity building
services' means services provided to an organization that is, or
that is in the process of becoming, a microenterprise development
organization or program, for the purpose of enhancing its ability
to provide training and services to disadvantaged entrepreneurs.
``(4) Collaborative.--The term `collaborative' means 2 or more
nonprofit entities that agree to act jointly as a qualified
organization under this subtitle.
``(5) Disadvantaged entrepreneur.--The term `disadvantaged
entrepreneur' means a microentrepreneur that is--
``(A) a low-income person;
``(B) a very low-income person; or
``(C) an entrepreneur that lacks adequate access to capital
or other resources essential for business success, or is
economically disadvantaged, as determined by the Administrator.
``(6) Indian tribe.--The term `Indian tribe' has the meaning
given the term in section 103.
``(7) Intermediary.--The term `intermediary' means a private,
nonprofit entity that seeks to serve microenterprise development
organizations and programs as authorized under section 175.
``(8) Low-income person.--The term `low-income person' has the
meaning given the term in section 103.
``(9) Microentrepreneur.--The term `microentrepreneur' means
the owner or developer of a microenterprise.
``(10) Microenterprise.--The term `microenterprise' means a
sole proprietorship, partnership, or corporation that--
``(A) has fewer than 5 employees; and
``(B) generally lacks access to conventional loans, equity,
or other banking services.
``(11) Microenterprise development organization or program.--
The term `microenterprise development organization or program'
means a nonprofit entity, or a program administered by such an
entity, including community development corporations or other
nonprofit development organizations and social service
organizations, that provides services to disadvantaged
entrepreneurs.
``(12) Training and technical assistance.--The term `training
and technical assistance' means services and support provided to
disadvantaged entrepreneurs, such as assistance for the purpose of
enhancing business planning, marketing, management, financial
management skills, and assistance for the purpose of accessing
financial services.
``(13) Very low-income person.--The term `very low-income
person' means having an income, adjusted for family size, of not
more than 150 percent of the poverty line (as defined in section
673(2) of the Community Services Block Grant Act (42 U.S.C.
9902(2)), including any revision required by that section).
``SEC. 173. ESTABLISHMENT OF PROGRAM.
``The Administrator shall establish a microenterprise technical
assistance and capacity building grant program to provide assistance
from the Administration in the form of grants to qualified
organizations in accordance with this subtitle.
``SEC. 174. USES OF ASSISTANCE.
``A qualified organization shall use grants made under this
subtitle--
``(1) to provide training and technical assistance to
disadvantaged entrepreneurs;
``(2) to provide training and capacity building services to
microenterprise development organizations and programs and groups
of such organizations to assist such organizations and programs in
developing microenterprise training and services;
``(3) to aid in researching and developing the best practices
in the field of microenterprise and technical assistance programs
for disadvantaged entrepreneurs; and
``(4) for such other activities as the Administrator determines
are consistent with the purposes of this subtitle.
``SEC. 175. QUALIFIED ORGANIZATIONS.
``For purposes of eligibility for assistance under this subtitle, a
qualified organization shall be--
``(1) a nonprofit microenterprise development organization or
program (or a group or collaborative thereof) that has a
demonstrated record of delivering microenterprise services to
disadvantaged entrepreneurs;
``(2) an intermediary;
``(3) a microenterprise development organization or program
that is accountable to a local community, working in conjunction
with a State or local government or Indian tribe; or
``(4) an Indian tribe acting on its own, if the Indian tribe
can certify that no private organization or program referred to in
this paragraph exists within its jurisdiction.
``SEC. 176. ALLOCATION OF ASSISTANCE; SUBGRANTS.
``(a) Allocation of Assistance.--
``(1) In general.--The Administrator shall allocate assistance
from the Administration under this subtitle to ensure that--
``(A) activities described in section 174(1) are funded
using not less than 75 percent of amounts made available for
such assistance; and
``(B) activities described in section 174(2) are funded
using not less than 15 percent of amounts made available for
such assistance.
``(2) Limit on individual assistance.--No single person may
receive more than 10 percent of the total funds appropriated under
this subtitle in a single fiscal year.
``(b) Targeted Assistance.--The Administrator shall ensure that not
less than 50 percent of the grants made under this subtitle are used to
benefit very low-income persons, including those residing on Indian
reservations.
``(c) Subgrants Authorized.--
``(1) In general.--A qualified organization receiving
assistance under this subtitle may provide grants using that
assistance to qualified small and emerging microenterprise
organizations and programs, subject to such rules and regulations
as the Administrator determines to be appropriate.
``(2) Limit on administrative expenses.--Not more than 7.5
percent of assistance received by a qualified organization under
this subtitle may be used for administrative expenses in connection
with the making of subgrants under paragraph (1).
``(d) Diversity.--In making grants under this subtitle, the
Administrator shall ensure that grant recipients include both large and
small microenterprise organizations, serving urban, rural, and Indian
tribal communities serving diverse populations.
``(e) Prohibition on Preferential Consideration of Certain SBA
Program Participants.--In making grants under this subtitle, the
Administrator shall ensure that any application made by a qualified
organization that is a participant in the program established under
section 7(m) of the Small Business Act does not receive preferential
consideration over applications from other qualified organizations that
are not participants in such program.
``SEC. 177. MATCHING REQUIREMENTS.
``(a) In General.--Financial assistance under this subtitle shall
be matched with funds from sources other than the Federal Government on
the basis of not less than 50 percent of each dollar provided by the
Administration.
``(b) Sources of Matching Funds.--Fees, grants, gifts, funds from
loan sources, and in-kind resources of a grant recipient from public or
private sources may be used to comply with the matching requirement in
subsection (a).
``(c) Exception.--
``(1) In general.--In the case of an applicant for assistance
under this subtitle with severe constraints on available sources of
matching funds, the Administrator may reduce or eliminate the
matching requirements of subsection (a).
``(2) Limitation.--Not more than 10 percent of the total funds
made available from the Administration in any fiscal year to carry
out this subtitle may be excepted from the matching requirements of
subsection (a), as authorized by paragraph (1) of this subsection.
``SEC. 178. APPLICATIONS FOR ASSISTANCE.
``An application for assistance under this subtitle shall be
submitted in such form and in accordance with such procedures as the
Administrator shall establish.
``SEC. 179. RECORDKEEPING.
``The requirements of section 115 shall apply to a qualified
organization receiving assistance from the Administration under this
subtitle as if it were a community development financial institution
receiving assistance from the Fund under subtitle A.
``SEC. 180. AUTHORIZATION.
``In addition to funds otherwise authorized to be appropriated to
the Fund to carry out this title, there are authorized to be
appropriated to the Administrator to carry out this subtitle--
``(1) $15,000,000 for fiscal year 2000;
``(2) $15,000,000 for fiscal year 2001;
``(3) $15,000,000 for fiscal year 2002; and
``(4) $15,000,000 for fiscal year 2003.
``SEC. 181. IMPLEMENTATION.
``The Administrator shall, by regulation, establish such
requirements as may be necessary to carry out this subtitle.''.
SEC. 726. FEDERAL RESERVE AUDITS.
The Federal Reserve Act (12 U.S.C. 221 et seq.) is amended by
inserting after section 11A the following new section:
``SEC. 11B. ANNUAL INDEPENDENT AUDITS OF FEDERAL RESERVE BANKS AND
BOARD.
``The Board shall order an annual independent audit of the
financial statements of each Federal reserve bank and the Board.''.
SEC. 727. AUTHORIZATION TO RELEASE REPORTS.
(a) Federal Reserve Act.--The eighth undesignated paragraph of
section 9 of the Federal Reserve Act (12 U.S.C. 326) is amended by
striking the last sentence and inserting the following: ``The Board of
Governors of the Federal Reserve System, at its discretion, may furnish
any report of examination or other confidential supervisory information
concerning any State member bank or other entity examined under any
other authority of the Board, to any Federal or State agency or
authority with supervisory or regulatory authority over the examined
entity, to any officer, director, or receiver of the examined entity,
and to any other person that the Board determines to be proper.''.
(b) Commodity Futures Trading Commission.--The Right to Financial
Privacy Act of 1978 (12 U.S.C. 3401 et seq.) is amended--
(1) in section 1101(7)--
(A) by redesignating subparagraphs (G) and (H) as
subparagraphs (H) and (I), respectively; and
(B) by inserting after subparagraph (F) the following new
subparagraph:
``(G) the Commodity Futures Trading Commission;''; and
(2) in section 1112(e), by striking ``and the Securities and
Exchange Commission'' and inserting ``, the Securities and Exchange
Commission, and the Commodity Futures Trading Commission''.
SEC. 728. GENERAL ACCOUNTING OFFICE STUDY OF CONFLICTS OF INTEREST.
(a) Study Required.--The Comptroller General of the United States
shall conduct a study analyzing the conflict of interest faced by the
Board of Governors of the Federal Reserve System between its role as a
primary regulator of the banking industry and its role as a vendor of
services to the banking and financial services industry.
(b) Specific Conflict Required To Be Addressed.--In the course of
the study required under subsection (a), the Comptroller General shall
address the conflict of interest faced by the Board of Governors of the
Federal Reserve System between the role of the Board as a regulator of
the payment system, generally, and its participation in the payment
system as a competitor with private entities who are providing payment
services.
(c) Report to the Congress.--Before the end of the 1-year period
beginning on the date of the enactment of this Act, the Comptroller
General shall submit a report to the Congress containing the findings
and conclusions of the Comptroller General in connection with the study
required under this section, together with such recommendations for
such legislative or administrative actions as the Comptroller General
may determine to be appropriate, including recommendations for
resolving any such conflict of interest.
SEC. 729. STUDY AND REPORT ON ADAPTING EXISTING LEGISLATIVE
REQUIREMENTS TO ONLINE BANKING AND LENDING.
(a) Study Required.--The Federal banking agencies shall conduct a
study of banking regulations regarding the delivery of financial
services, including those regulations that may assume that there will
be person-to-person contact during the course of a financial services
transaction, and report their recommendations on adapting those
existing requirements to online banking and lending.
(b) Report Required.--Before the end of the 2-year period beginning
on the date of the enactment of this Act, the Federal banking agencies
shall submit a report to the Congress on the findings and conclusions
of the agencies with respect to the study required under subsection
(a), together with such recommendations for legislative or regulatory
action as the agencies may determine to be appropriate.
(c) Definition.--For purposes of this section, the term ``Federal
banking agencies'' means each Federal banking agency (as defined in
section 3(z) of the Federal Deposit Insurance Act).
SEC. 730. CLARIFICATION OF SOURCE OF STRENGTH DOCTRINE.
Section 18 of the Federal Deposit Insurance Act (12 U.S.C. 1828) is
amended by adding at the end the following new subsection:
``(t) Limitation on Claims.--
``(1) In general.--No person may bring a claim against any
Federal banking agency (including in its capacity as conservator or
receiver) for the return of assets of an affiliate or controlling
shareholder of the insured depository institution transferred to,
or for the benefit of, an insured depository institution by such
affiliate or controlling shareholder of the insured depository
institution, or a claim against such Federal banking agency for
monetary damages or other legal or equitable relief in connection
with such transfer, if at the time of the transfer--
``(A) the insured depository institution is subject to any
direction issued in writing by a Federal banking agency to
increase its capital;
``(B) the insured depository institution is
undercapitalized (as defined in section 38 of this Act); and
``(C) for that portion of the transfer that is made by an
entity covered by section 5(g) of the Bank Holding Company Act
of 1956 or section 45 of this Act, the Federal banking agency
has followed the procedure set forth in such section.
``(2) Definition of claim.--For purposes of paragraph (1), the
term `claim'--
``(A) means a cause of action based on Federal or State law
that--
``(i) provides for the avoidance of preferential or
fraudulent transfers or conveyances; or
``(ii) provides similar remedies for preferential or
fraudulent transfers or conveyances; and
``(B) does not include any claim based on actual intent to
hinder, delay, or defraud pursuant to such a fraudulent
transfer or conveyance law.''.
SEC. 731. INTEREST RATES AND OTHER CHARGES AT INTERSTATE BRANCHES.
Section 44 of the Federal Deposit Insurance Act (12 U.S.C. 1831u)
is amended--
(1) by redesignating subsection (f) as subsection (g); and
(2) by inserting after subsection (e) the following new
subsection:
``(f) Applicable Rate and Other Charge Limitations.--
``(1) In general.--In the case of any State that has a
constitutional provision that sets a maximum lawful annual
percentage rate of interest on any contract at not more than 5
percent above the discount rate for 90-day commercial paper in
effect at the Federal reserve bank for the Federal reserve district
in which such State is located, except as provided in paragraph
(2), upon the establishment in such State of a branch of any out-
of-State insured depository institution in such State under this
section, the maximum interest rate or amount of interest, discount
points, finance charges, or other similar charges that may be
charged, taken, received, or reserved from time to time in any loan
or discount made or upon any note, bill of exchange, financing
transaction, or other evidence of debt by any insured depository
institution whose home State is such State shall be equal to not
more than the greater of--
``(A) the maximum interest rate or amount of interest,
discount points, finance charges, or other similar charges that
may be charged, taken, received, or reserved in a similar
transaction under the constitution or any statute or other law
of the home State of the out-of-State insured depository
institution establishing any such branch, without reference to
this section, as such maximum interest rate or amount of
interest may change from time to time; or
``(B) the maximum rate or amount of interest, discount
points, finance charges, or other similar charges that may be
charged, taken, received, or reserved in a similar transaction
by a State insured depository institution chartered under the
laws of such State or a national bank or Federal savings
association whose main office is located in such State without
reference to this section.
``(2) Rule of construction.--No provision of this subsection
shall be construed as superseding or affecting--
``(A) the authority of any insured depository institution
to take, receive, reserve, and charge interest on any loan made
in any State other than the State referred to in paragraph (1);
or
``(B) the applicability of section 501 of the Depository
Institutions Deregulation and Monetary Control Act of 1980,
section 5197 of the Revised Statutes of the United States, or
section 27 of this Act.''.
SEC. 732. INTERSTATE BRANCHES AND AGENCIES OF FOREIGN BANKS.
Section 5(a)(7) of the International Banking Act of 1978 (12 U.S.C.
3103(a)(7)) is amended to read as follows:
``(7) Additional authority for interstate branches and agencies
of foreign banks, upgrades of certain foreign bank agencies and
branches.--Notwithstanding paragraphs (1) and (2), a foreign bank
may--
``(A) with the approval of the Board and the Comptroller of
the Currency, establish and operate a Federal branch or Federal
agency or, with the approval of the Board and the appropriate
State bank supervisor, a State branch or State agency in any
State outside the foreign bank's home State if--
``(i) the establishment and operation of such branch or
agency is permitted by the State in which the branch or
agency is to be established; and
``(ii) in the case of a Federal or State branch, the
branch receives only such deposits as would be permitted
for a corporation organized under section 25A of the
Federal Reserve Act; or
``(B) with the approval of the Board and the relevant
licensing authority (the Comptroller in the case of a Federal
branch or the appropriate State supervisor in the case of a
State branch), upgrade an agency, or a branch of the type
referred to in subparagraph (A)(ii), located in a State outside
the foreign bank's home State, into a Federal or State branch
if--
``(i) the establishment and operation of such branch is
permitted by such State; and
``(ii) such agency or branch--
``(I) was in operation in such State on the day
before September 29, 1994; or
``(II) has been in operation in such State for a
period of time that meets the State's minimum age
requirement permitted under section 44(a)(5) of the
Federal Deposit Insurance Act.''.
SEC. 733. FAIR TREATMENT OF WOMEN BY FINANCIAL ADVISERS.
It is the sense of the Congress that individuals offering financial
advice and products should offer such services and products in a
nondiscriminatory, nongender-specific manner.
SEC. 734. MEMBERSHIP OF LOAN GUARANTEE BOARDS.
(a) Emergency Steel Loan Guarantee Board.--Section 101(e) of the
Emergency Steel Loan Guarantee Act of 1999 is amended--
(1) in paragraph (2), by inserting ``, or a member of the Board
of Governors of the Federal Reserve System designated by the
Chairman'' after ``the Chairman of the Board of Governors of the
Federal Reserve System''; and
(2) in paragraph (3), by inserting ``, or a commissioner of the
Securities and Exchange Commission designated by the Chairman''
before the period.
(b) Emergency Oil and Gas Loan Guarantee Board.--Section 201(d)(2)
of the Emergency Oil and Gas Guarantee Loan Program Act is amended--
(1) in subparagraph (B), by inserting ``, or a member of the
Board of Governors of the Federal Reserve System designated by the
Chairman'' after ``the Chairman of the Board of Governors of the
Federal Reserve System''; and
(2) in subparagraph (C), by inserting ``, or a commissioner of
the Securities and Exchange Commission designated by the Chairman''
before the period.
SEC. 735. REPEAL OF STOCK LOAN LIMIT IN FEDERAL RESERVE ACT.
Section 11 of the Federal Reserve Act (12 U.S.C. 248) is amended by
striking the paragraph designated as ``(m)'' and inserting ``(m)
[Repealed]''.
SEC. 736. ELIMINATION OF SAIF AND DIF SPECIAL RESERVES.
(a) SAIF Special Reserve.--Section 11(a)(6) of the Federal Deposit
Insurance Act (12 U.S.C. 1821(a)(6)) is amended by striking
subparagraph (L).
(b) DIF Special Reserve.--Section 2704 of the Deposit Insurance
Funds Act of 1996 (12 U.S.C. 1821 note) is amended--
(1) by striking subsection (b); and
(2) in subsection (d)--
(A) by striking paragraph (4);
(B) in paragraph (6)(C)(i), by striking ``(6) and (7)'' and
inserting ``(5), (6), and (7)''; and
(C) in paragraph (6)(C), by striking clause (ii) and
inserting the following:
``(ii) by redesignating paragraph (8) as paragraph
(5).''.
(c) Effective Date.--This section and the amendments made by this
section shall become effective on the date of the enactment of this
Act.
SEC. 737. BANK OFFICERS AND DIRECTORS AS OFFICERS AND DIRECTORS OF
PUBLIC UTILITIES.
Section 305(b) of the Federal Power Act (16 U.S.C. 825d(b)) is
amended--
(1) by striking ``(b) After six'' and inserting the following:
``(b) Interlocking Directorates.--
``(1) In general.--After 6''; and
(2) by adding at the end the following:
``(2) Applicability.--
``(A) In general.--In the circumstances described in
subparagraph (B), paragraph (1) shall not apply to a person
that holds or proposes to hold the positions of--
``(i) officer or director of a public utility; and
``(ii) officer or director of a bank, trust company,
banking association, or firm authorized by law to
underwrite or participate in the marketing of securities of
a public utility.
``(B) Circumstances.--The circumstances described in this
subparagraph are that--
``(i) a person described in subparagraph (A) does not
participate in any deliberations or decisions of the public
utility regarding the selection of a bank, trust company,
banking association, or firm to underwrite or participate
in the marketing of securities of the public utility, if
the person serves as an officer or director of a bank,
trust company, banking association, or firm that is under
consideration in the deliberation process;
``(ii) the bank, trust company, banking association, or
firm of which the person is an officer or director does not
engage in the underwriting of, or participate in the
marketing of, securities of the public utility of which the
person holds the position of officer or director;
``(iii) the public utility for which the person serves
or proposes to serve as an officer or director selects
underwriters by competitive procedures; or
``(iv) the issuance of securities of the public utility
for which the person serves or proposes to serve as an
officer or director has been approved by all Federal and
State regulatory agencies having jurisdiction over the
issuance.''.
SEC. 738. APPROVAL FOR PURCHASES OF SECURITIES.
Section 23B(b)(2) of the Federal Reserve Act (12 U.S.C. 371c-1) is
amended to read as follows:
``Subparagraph (B) of paragraph (1) shall not apply if the purchase
or acquisition of such securities has been approved, before such
securities are initially offered for sale to the public, by a majority
of the directors of the bank based on a determination that the purchase
is a sound investment for the bank irrespective of the fact that an
affiliate of the bank is a principal underwriter of the securities.''.
SEC. 739. OPTIONAL CONVERSION OF FEDERAL SAVINGS ASSOCIATIONS.
Section 5(i) of the Home Owners' Loan Act (12 U.S.C. 1464(i)) is
amended by adding at the end the following new paragraph:
``(5) Conversion to national or state bank.--
``(A) In general.--Any Federal savings association
chartered and in operation before the date of the enactment of
the Gramm-Leach-Bliley Act, with branches in operation before
such date of enactment in 1 or more States, may convert, at its
option, with the approval of the Comptroller of the Currency or
the appropriate State bank supervisor, into 1 or more national
or State banks, each of which may encompass 1 or more of the
branches of the Federal savings association in operation before
such date of enactment in 1 or more States, but only if each
resulting national or State bank will meet all financial,
management, and capital requirements applicable to the
resulting national or State bank.
``(B) Definitions.--For purposes of this paragraph, the
terms `State bank' and `State bank supervisor' have the
meanings given those terms in section 3 of the Federal Deposit
Insurance Act.''.
SEC. 740. GRAND JURY PROCEEDINGS.
Section 3322(b) of title 18, United States Code, is amended--
(1) in paragraph (1), by inserting ``Federal or State'' before
``financial institution''; and
(2) in paragraph (2), by inserting ``at any time during or
after the completion of the investigation of the grand jury,''
before ``upon''.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.