[Congressional Record Volume 145, Number 63 (Tuesday, May 4, 1999)]
[Senate]
[Pages S4682-S4717]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                          AMENDMENTS SUBMITTED

                                 ______
                                 

              FINANCIAL SERVICES MODERNIZATION ACT OF 1999

                                 ______
                                 

                 DASCHLE (AND OTHERS) AMENDMENT NO. 302

  Mr. SARBANES (for Mr. Daschle, for himself, Mr. Sarbanes, Mr. Dodd, 
Mr. Kerry, Mr. Bryan, Mr. Reed, Mr. Schumer, Mr. Bayh, and Mr. Edwards) 
proposed an amendment to the bill (S. 900) to enhance competition in 
the financial services industry by providing a prudenital framework for 
the affiliation of banks, securities firms, insurance companies, and 
other financial service providers, and for other purposes; as follows:

       Strike all after the enacting clause and insert the 
     following:

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

       (a) Short Title.--This Act may be cited as the ``Financial 
     Services Act of 1999''.
       (b) Purposes.--The purposes of this Act are as follows:
       (1) To enhance competition in the financial services 
     industry, in order to foster innovation and efficiency.
       (2) To ensure the continued safety and soundness of 
     depository institutions.
       (3) To provide necessary and appropriate protections for 
     investors and ensure fair and honest markets in the delivery 
     of financial services.
       (4) To avoid duplicative, potentially conflicting, and 
     overly burdensome regulatory requirements through the 
     creation of a regulatory framework for financial holding 
     companies that respects the divergent requirements of each of 
     the component businesses of the holding company, and that is 
     based upon principles of strong functional regulation and 
     enhanced regulatory coordination.
       (5) To reduce and, to the maximum extent practicable, to 
     eliminate the legal barriers preventing affiliation among 
     depository institutions, securities firms, insurance 
     companies, and other financial service providers and to 
     provide a prudential framework for achieving that result.
       (6) To enhance the availability of financial services to 
     citizens of all economic circumstances and in all geographic 
     areas.
       (7) To enhance the competitiveness of United States 
     financial service providers internationally.
       (8) To ensure compliance by depository institutions with 
     the provisions of the Community Reinvestment Act of 1977 and 
     enhance the ability of depository institutions to meet the 
     capital and credit needs of all citizens and communities, 
     including underserved communities and populations.
       (c) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; purposes; table of contents.

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

                        Subtitle A--Affiliations

Sec. 101. Glass-Steagall Act reformed.
Sec. 102. Activity restrictions applicable to bank holding companies 
              which are not financial holding companies.
Sec. 103. Financial holding companies.
Sec. 104. Operation of State law.
Sec. 105. Mutual bank holding companies authorized.
Sec. 106. Prohibition on deposit production offices.
Sec. 107. Clarification of branch closure requirements.
Sec. 108. Amendments relating to limited purpose banks.
Sec. 109. Reports on ongoing FTC study of consumer privacy issues.
Sec. 110. GAO study of economic impact on community banks and other 
              small financial institutions.

  Subtitle B--Streamlining Supervision of Financial Holding Companies

Sec. 111. Streamlining financial holding company supervision.
Sec. 112. Elimination of application requirement for financial holding 
              companies.
Sec. 113. Authority of State insurance regulator and Securities and 
              Exchange Commission.
Sec. 114. Prudential safeguards.
Sec. 115. Examination of investment companies.
Sec. 116. Limitation on rulemaking, prudential, supervisory, and 
              enforcement authority of the Board.
Sec. 117. Interagency consultation.
Sec. 118. Equivalent regulation and supervision.
Sec. 119. Prohibition on FDIC assistance to affiliates and 
              subsidiaries.

               Subtitle C--Subsidiaries of National Banks

Sec. 121. Subsidiaries of national banks authorized to engage in 
              financial activities.
Sec. 122. Subsidiaries of State banks.
Sec. 123. Safety and soundness firewalls between banks and their 
              financial subsidiaries.
Sec. 124. Functional regulation.
Sec. 125. Misrepresentations regarding depository institution liability 
              for obligations of affiliates.
Sec. 126. Repeal of stock loan limit in Federal Reserve Act.

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

            Chapter 1--Wholesale Financial Holding Companies

Sec. 131. Wholesale financial holding companies established.
Sec. 132. Authorization to release reports.
Sec. 133. Conforming amendments.

              Chapter 2--Wholesale Financial Institutions

Sec. 136. Wholesale financial institutions.

               Subtitle E--Preservation of FTC Authority

Sec. 141. Amendment to the Bank Holding Company Act of 1956 to modify 
              notification and post-approval waiting period for section 
              3 transactions.
Sec. 142. Interagency data sharing.
Sec. 143. Clarification of status of subsidiaries and affiliates.
Sec. 144. Annual GAO report.

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

Sec. 151. Applying the principles of national treatment and equality of 
              competitive opportunity to foreign banks that are 
              financial holding companies.
Sec. 152. Applying the principles of national treatment and equality of 
              competitive opportunity to foreign banks and foreign 
              financial institutions that are wholesale financial 
              institutions.
Sec. 153. Representative offices.

        Subtitle G--Federal Home Loan Bank System Modernization

Sec. 161. Short title.
Sec. 162. Definitions.
Sec. 163. Savings association membership.
Sec. 164. Advances to members; collateral.
Sec. 165. Eligibility criteria.
Sec. 166. Management of banks.
Sec. 167. Resolution Funding Corporation.

                 Subtitle H--Direct Activities of Banks

Sec. 181. Authority of national banks to underwrite certain municipal 
              bonds.

                  Subtitle I--Deposit Insurance Funds

Sec. 186. Study of safety and soundness of funds.
Sec. 187. Elimination of SAIF and DIF special reserves.

                  Subtitle J--Effective Date of Title

Sec. 191. Effective date.

                    TITLE II--FUNCTIONAL REGULATION

                    Subtitle A--Brokers and Dealers

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

             Subtitle B--Bank Investment Company Activities

Sec. 211. Custody of investment company assets by affiliated bank.
Sec. 212. Lending to an affiliated investment company.
Sec. 213. Independent directors.
Sec. 214. Additional SEC disclosure authority.
Sec. 215. Definition of broker under the Investment Company Act of 
              1940.
Sec. 216. Definition of dealer under the Investment Company Act of 
              1940.
Sec. 217. Removal of the exclusion from the definition of investment 
              adviser for banks that advise investment companies.
Sec. 218. Definition of broker under the Investment Advisers Act of 
              1940.
Sec. 219. Definition of dealer under the Investment Advisers Act of 
              1940.
Sec. 220. Interagency consultation.
Sec. 221. Treatment of bank common trust funds.
Sec. 222. Investment advisers prohibited from having controlling 
              interest in registered investment company.

[[Page S4683]]

Sec. 223. Conforming change in definition.
Sec. 224. Conforming amendment.
Sec. 225. Effective date.

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

Sec. 231. Supervision of investment bank holding companies by the 
              Securities and Exchange Commission.

                          Subtitle D--Studies

Sec. 241. Study of methods to inform investors and consumers of 
              uninsured products.
Sec. 242. Study of limitation on fees associated with acquiring 
              financial products.

                          TITLE III--INSURANCE

               Subtitle A--State Regulation of Insurance

Sec. 301. State regulation of the business of insurance.
Sec. 302. Mandatory insurance licensing requirements.
Sec. 303. Functional regulation of insurance.
Sec. 304. Insurance underwriting in national banks.
Sec. 305. Title insurance activities of national banks and their 
              affiliates.
Sec. 306. Expedited and equalized dispute resolution for Federal 
              regulators.
Sec. 307. Consumer protection regulations.
Sec. 308. Certain State affiliation laws preempted for insurance 
              companies and affiliates.
Sec. 309. Publication of preemption of State laws.

   Subtitle B--National Association of Registered Agents and Brokers

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

          TITLE IV--UNITARY SAVINGS AND LOAN HOLDING COMPANIES

Sec. 401. Prevention of creation of new savings and loan holding 
              companies with commercial affiliates.
Sec. 402. Optional conversion of Federal savings associations to 
              national banks.
Sec. 403. Retention of ``Federal'' in name of converted Federal savings 
              association.

               TITLE V--FINANCIAL INFORMATION ANTI-FRAUD

Sec. 501. Financial information anti-fraud.
Sec. 502. Report to Congress on financial privacy.

                        TITLE VI--MISCELLANEOUS

Sec. 601. Grand jury proceedings.
Sec. 602. Sense of the Committee on Banking, Housing, and Urban Affairs 
              of the Senate.
Sec. 603. Investments in Government sponsored enterprises.
Sec. 604. Repeal of savings bank provisions in the Bank Holding Company 
              Act of 1956.
Sec. 605. Service of members of the Board of Governors of the Federal 
              Reserve System.
Sec. 606. Provision of technical assistance to microenterprises.
  TITLE I--FACILITATING AFFILIATION AMONG SECURITIES FIRMS, INSURANCE 
                 COMPANIES, AND DEPOSITORY INSTITUTIONS
                        Subtitle A--Affiliations

     SEC. 101. GLASS-STEAGALL ACT REFORMED.

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

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

       (a) In General.--Section 4(c)(8) of the Bank Holding 
     Company Act of 1956 (12 U.S.C. 1843(c)(8)) is amended to read 
     as follows:
       ``(8) shares of any company the activities of which had 
     been determined by the Board by regulation under this 
     paragraph as of the day before the date of enactment of the 
     Financial Services Act of 1999, to be so closely related to 
     banking as to be a proper incident thereto (subject to such 
     terms and conditions contained in such regulation, unless 
     modified by the Board);''.
       (b) Conforming Changes to Other Statutes.--
       (1) Amendment to the bank holding company act amendments of 
     1970.--Section 105 of the Bank Holding Company Act Amendments 
     of 1970 (12 U.S.C. 1850) is amended by striking ``, to engage 
     directly or indirectly in a nonbanking activity pursuant to 
     section 4 of such Act,''.
       (2) Amendment to the bank service company act.--Section 
     4(f) of the Bank Service Company Act (12 U.S.C. 1864(f)) is 
     amended by striking the period and adding at the end the 
     following: ``as of the day before the date of enactment of 
     the Financial Services Act of 1999.''.

     SEC. 103. FINANCIAL HOLDING COMPANIES.

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

     ``SEC. 6. FINANCIAL HOLDING COMPANIES.

       ``(a) Financial Holding Company Defined.--For purposes of 
     this section, the term `financial holding company' means a 
     bank holding company which meets the requirements of 
     subsection (b).
       ``(b) Eligibility Requirements for Financial Holding 
     Companies.--
       ``(1) In general.--No bank holding company may engage in 
     any activity or directly or indirectly acquire or retain 
     shares of any company under this section unless the bank 
     holding company meets the following requirements:
       ``(A) All of the subsidiary depository institutions of the 
     bank holding company are well capitalized.
       ``(B) All of the subsidiary depository institutions of the 
     bank holding company are well managed.
       ``(C) All of the subsidiary depository institutions of the 
     bank holding company have achieved a rating of `satisfactory 
     record of meeting community credit needs', or better, at the 
     most recent examination of each such institution under the 
     Community Reinvestment Act of 1977.
       ``(D) The company has filed with the Board a declaration 
     that the company elects to be a financial holding company and 
     certifying that the company meets the requirements of 
     subparagraphs (A) through (C).
       ``(2) Foreign banks and companies.--For purposes of 
     paragraph (1), the Board shall establish and apply comparable 
     capital and other operating standards to a foreign bank that 
     operates a branch or agency or owns or controls a bank or 
     commercial lending company in the United States, and any 
     company that owns or controls such foreign bank, giving due 
     regard to the principle of national treatment and equality of 
     competitive opportunity.
       ``(3) Limited exclusions from community needs requirements 
     for newly acquired depository institutions.--
       ``(A) In general.--If the requirements of subparagraph (B) 
     are met, any depository institution acquired by a bank 
     holding company during the 24-month period preceding the 
     submission of a declaration under paragraph (1)(D) and any 
     depository institution acquired after the submission of such 
     declaration may be excluded for purposes of paragraph (1)(C) 
     until the later of--
       ``(i) the end of the 24-month period beginning on the date 
     the acquisition of the depository institution by such company 
     is consummated; or
       ``(ii) the date of completion of the first examination of 
     such depository institution under the Community Reinvestment 
     Act of 1977 which is conducted after the date of the 
     acquisition of the depository institution.
       ``(B) Requirements.--The requirements of this subparagraph 
     are met with respect to any bank holding company referred to 
     in subparagraph (A) if--
       ``(i) the bank holding company has submitted an affirmative 
     plan to the appropriate Federal banking agency to take such 
     action as may be necessary in order for such institution to 
     achieve a rating of `satisfactory record of meeting community 
     credit needs', or better, at the next examination of the 
     institution under the Community Reinvestment Act of 1977; and
       ``(ii) the plan has been approved by such agency.
       ``(c) Engaging in Activities That Are Financial in 
     Nature.--
       ``(1) Financial activities.--Notwithstanding section 4(a), 
     a financial holding company and a wholesale financial holding 
     company may engage in any activity, and acquire and retain 
     the shares of any company engaged in any activity, that the 
     Board and the Secretary of the Treasury have jointly 
     determined, pursuant to paragraph (2) (by regulation or 
     order), to be financial in nature or incidental to such 
     financial activities.
       ``(2) Factors to be considered.--In determining whether an 
     activity is financial in nature or incidental to financial 
     activities, the Board and the Secretary of the Treasury shall 
     take into account--
       ``(A) the purposes of this Act and the Financial Services 
     Act of 1999;
       ``(B) changes or reasonably expected changes in the 
     marketplace in which bank holding companies compete;
       ``(C) changes or reasonably expected changes in the 
     technology for delivering financial services; and
       ``(D) whether such activity is necessary or appropriate to 
     allow bank holding companies to--
       ``(i) compete effectively with any company seeking to 
     provide financial services in the United States;
       ``(ii) use any available or emerging technological means, 
     including any application necessary to protect the security 
     or efficacy of systems for the transmission of data or 
     financial transactions, in providing financial services; and

[[Page S4684]]

       ``(iii) offer customers any available or emerging 
     technological means for using financial services.
       ``(3) Activities that are financial in nature.--The 
     following activities shall be considered to be financial in 
     nature:
       ``(A) Lending, exchanging, transferring, investing for 
     others, or safeguarding money or securities.
       ``(B) Insuring, guaranteeing, or indemnifying against loss, 
     harm, damage, illness, disability, or death, or providing and 
     issuing annuities, and acting as principal, agent, or broker 
     for purposes of the foregoing.
       ``(C) Providing financial, investment, or economic advisory 
     services, including advising an investment company (as 
     defined in section 3 of the Investment Company Act of 1940).
       ``(D) Issuing or selling instruments representing interests 
     in pools of assets permissible for a bank to hold directly.
       ``(E) Underwriting, dealing in, or making a market in 
     securities.
       ``(F) Engaging in any activity that the Board has 
     determined, by order or regulation that is in effect on the 
     date of enactment of the Financial Services Act of 1999, to 
     be so closely related to banking or managing or controlling 
     banks as to be a proper incident thereto (subject to the same 
     terms and conditions contained in such order or regulation, 
     unless modified by the Board).
       ``(G) Engaging, in the United States, in any activity 
     that--
       ``(i) a bank holding company may engage in outside the 
     United States; and
       ``(ii) the Board has determined, under regulations issued 
     pursuant to section 4(c)(13) of this Act (as in effect on the 
     day before the date of enactment of the Financial Services 
     Act of 1999) to be usual in connection with the transaction 
     of banking or other financial operations abroad.
       ``(H) Directly or indirectly acquiring or controlling, 
     whether as principal, on behalf of 1 or more entities 
     (including entities, other than a depository institution, 
     that the bank holding company controls) or otherwise, shares, 
     assets, or ownership interests (including without limitation 
     debt or equity securities, partnership interests, trust 
     certificates or other instruments representing ownership) of 
     a company or other entity, whether or not constituting 
     control of such company or entity, engaged in any activity 
     not authorized pursuant to this section if--
       ``(i) the shares, assets, or ownership interests are not 
     acquired or held by a depository institution;
       ``(ii) such shares, assets, or ownership interests are 
     acquired and held by a securities affiliate or an affiliate 
     thereof as part of a bona fide underwriting or merchant 
     banking activity, including investment activities engaged in 
     for the purpose of appreciation and ultimate resale or 
     disposition of the investment;
       ``(iii) such shares, assets, or ownership interests are 
     held only for such a period of time as will permit the sale 
     or disposition thereof on a reasonable basis consistent with 
     the nature of the activities described in clause (ii); and
       ``(iv) during the period such shares, assets, or ownership 
     interests are held, the bank holding company does not 
     actively participate in the day to day management or 
     operation of such company or entity, except insofar as 
     necessary to achieve the objectives of clause (ii).
       ``(I) Directly or indirectly acquiring or controlling, 
     whether as principal, on behalf of 1 or more entities 
     (including entities, other than a depository institution or 
     subsidiary of a depository institution, that the bank holding 
     company controls) or otherwise, shares, assets, or ownership 
     interests (including without limitation debt or equity 
     securities, partnership interests, trust certificates or 
     other instruments representing ownership) of a company or 
     other entity, whether or not constituting control of such 
     company or entity, engaged in any activity not authorized 
     pursuant to this section if--
       ``(i) the shares, assets, or ownership interests are not 
     acquired or held by a depository institution or a subsidiary 
     of a depository institution;
       ``(ii) such shares, assets, or ownership interests are 
     acquired and held by an insurance company that is 
     predominantly engaged in underwriting life, accident and 
     health, or property and casualty insurance (other than 
     credit-related insurance);
       ``(iii) such shares, assets, or ownership interests 
     represent an investment made in the ordinary course of 
     business of such insurance company in accordance with 
     relevant State law governing such investments; and
       ``(iv) during the period such shares, assets, or ownership 
     interests are held, the bank holding company does not 
     directly or indirectly participate in the day-to-day 
     management or operation of the company or entity except 
     insofar as necessary to achieve the objectives of clauses 
     (ii) and (iii).
       ``(4) Actions required.--
       ``(A) Regulation of merchant banking.--The Board may 
     prescribe regulations and issue interpretations to implement 
     paragraph (3)(H).
       ``(B) Regulation of other activities.--The Board and the 
     Secretary of the Treasury--
       ``(i) may jointly prescribe regulations and issue 
     interpretations under paragraph (3), other than subparagraph 
     (H); and
       ``(ii) shall jointly define, by regulation, activities 
     described in paragraph (5), to the extent that they are 
     consistent with the purposes of this Act, as financial in 
     nature or incidental to activities that are financial in 
     nature.
       ``(5) Activities described.--The activities described in 
     this paragraph are--
       ``(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; and
       ``(C) arranging, effecting, or facilitating financial 
     transactions for the account of third parties.
       ``(6) Post-consummation notification.--
       ``(A) In general.--A financial holding company and a 
     wholesale financial holding company that acquires any 
     company, or commences any activity, pursuant to this 
     subsection shall provide written notice to the Board 
     describing the activity commenced or conducted by the company 
     acquired no later than 30 calendar days after commencing the 
     activity or consummating the acquisition.
       ``(B) Approval not required for certain financial 
     activities.--Except as provided in section 4(j) with regard 
     to the acquisition of a savings association or in paragraph 
     (7) of this subsection, a financial holding company and a 
     wholesale financial holding company may commence any 
     activity, or acquire any company, pursuant to paragraph (3) 
     or any regulation prescribed or order issued under paragraph 
     (4), without prior approval of the Board.
       ``(7) Notice required for large combinations.--
       ``(A) In general.--No financial holding company or 
     wholesale financial holding company shall directly or 
     indirectly acquire, and no company that becomes a financial 
     holding company or a wholesale financial holding company 
     shall directly or indirectly acquire control of, any company 
     in the United States, including through merger, 
     consolidation, or other type of business combination, that--
       ``(i) is engaged in activities permitted under this 
     subsection or subsection (g); and
       ``(ii) has consolidated total assets in excess of 
     $40,000,000,000,
     unless such holding company has provided notice to the Board, 
     not later than 60 days prior to such proposed acquisition or 
     prior to becoming a financial holding company or wholesale 
     financial holding company, and during that time period, or 
     such longer time period not exceeding an additional 60 days, 
     as established by the Board, the Board has not issued a 
     notice disapproving the proposed acquisition or retention.
       ``(B) Factors for consideration.--In reviewing any prior 
     notice filed under this paragraph, the Board shall take into 
     consideration--
       ``(i) whether the company is in compliance with all 
     applicable criteria set forth in subsection (b) and the 
     provisions of subsection (d);
       ``(ii) whether the proposed combination represents an undue 
     aggregation of resources;
       ``(iii) whether the proposed combination poses a risk to 
     the deposit insurance system;
       ``(iv) whether the proposed combination poses a risk to 
     State insurance guaranty funds;
       ``(v) whether the proposed combination can reasonably be 
     expected to be in the best interests of depositors or 
     policyholders of the respective entities; and
       ``(vi) whether the proposed transaction can reasonably be 
     expected to produce benefits to the public.
       ``(C) Required information.--The Board may disapprove any 
     prior notice filed under this paragraph if the company 
     submitting such notice neglects, fails, or refuses to furnish 
     to the Board all relevant information required by the Board.
       ``(D) Solicitation of views of other supervisory 
     agencies.--
       ``(i) In general.--Upon receiving a prior notice under this 
     paragraph, in order to provide for the submission of their 
     views and recommendations, the Board shall give notice of the 
     proposal to--

       ``(I) the appropriate Federal banking agency of any bank 
     involved;
       ``(II) the appropriate functional regulator of any 
     functionally regulated nondepository institution (as defined 
     in section 5(c)(1)(C)) involved; and
       ``(III) the Secretary of the Treasury, the Department of 
     Justice, and the Federal Trade Commission.

       ``(ii) Timing.--The views and recommendations of any agency 
     provided notice under this paragraph shall be submitted to 
     the Board not later than 30 calendar days after the date on 
     which notice to the agency was given, unless the Board 
     determines that another shorter time period is appropriate.
       ``(d) Provisions Applicable to Financial Holding Companies 
     That Fail To Meet Requirements.--
       ``(1) In general.--If a financial holding company is not in 
     compliance with the requirements of subparagraph (A), (B), 
     (C), or (D) of subsection (b)(1), the appropriate Federal 
     banking agency of the subsidiary depository institution shall 
     notify the Board which shall give notice of such finding to 
     the company.
       ``(2) Agreement to correct conditions required.--
       ``(A) In general.--Not later than 45 days after receipt by 
     a financial holding company of a notice given under paragraph 
     (1) (or such additional period as the Board may permit),

[[Page S4685]]

     the company and any relevant depository institution shall 
     execute an agreement acceptable to the Board and the 
     appropriate Federal banking agency to comply with the 
     requirements applicable to a financial holding company.
       ``(B) Certain failures to comply.--A financial holding 
     company shall not be required to divest any company held, or 
     terminate any activity conducted pursuant to, subsection (c) 
     solely because of a failure to comply with subsection 
     (b)(1)(C).
       ``(3) Board may impose limitations.--Until the conditions 
     described in a notice to a financial holding company under 
     paragraph (1) are corrected--
       ``(A) the Board may impose such limitations on the conduct 
     or activities of the company or any affiliate of the company 
     (other than a depository to institution or a subsidiary of a 
     depository institution) as the Board determines to be 
     appropriate under the circumstances; and
       ``(B) the appropriate Federal banking agency may impose 
     such limitations on the conduct or activities of an 
     affiliated depository institution or subsidiary of a 
     depository institution as the appropriate Federal banking 
     agency determines to be appropriate under the circumstances.
       ``(4) Failure to correct.--If, after receiving a notice 
     under paragraph (1), a financial holding company or a 
     depository institution affiliate of such company does not--
       ``(A) execute and implement an agreement in accordance with 
     paragraph (2);
       ``(B) comply with any limitations imposed under paragraph 
     (3);
       ``(C) in the case of a notice of failure to comply with 
     subsection (b)(1)(A), restore each depository institution 
     subsidiary to well capitalized status before the end of the 
     180-day period beginning on the date such notice is received 
     by the company (or such other period permitted by the Board); 
     or
       ``(D) in the case of a notice of failure to comply with 
     subparagraph (B) or (C) of subsection (b)(1), restore 
     compliance with any such subparagraph on or before the date 
     on which the next examination of the depository institution 
     subsidiary is completed or by the end of such other period as 
     the Board determines to be appropriate,
     the Board may require such company, under such terms and 
     conditions as may be imposed by the Board and subject to such 
     extension of time as may be granted in the Board's 
     discretion, to divest control of any depository institution 
     subsidiary or, at the election of the financial holding 
     company, instead to cease to engage in any activity conducted 
     by such company or its subsidiaries pursuant to this section.
       ``(5) Consultation.--In taking any action under this 
     subsection, the Board shall consult with all relevant Federal 
     and State regulatory agencies.
       ``(e) Safeguards for Bank Subsidiaries.--A financial 
     holding company shall assure that--
       ``(1) the procedures of the holding company for identifying 
     and managing financial and operational risks within the 
     company, and the subsidiaries of such company, adequately 
     protect the subsidiaries of such company which are insured 
     depository institutions from such risks;
       ``(2) the holding company has reasonable policies and 
     procedures to preserve the separate corporate identity and 
     limited liability of such company and the subsidiaries of 
     such company, for the protection of the company's subsidiary 
     insured depository institutions; and
       ``(3) the holding company complies with this section.
       ``(f) Authority To Retain Limited Nonfinancial Activities 
     and Affiliations.--
       ``(1) In general.--Notwithstanding section 4(a), a company 
     that is not a bank holding company or a foreign bank (as 
     defined in section 1(b)(7) of the International Banking Act 
     of 1978) and becomes a financial holding company after the 
     date of enactment of the Financial Services Act of 1999 may 
     continue to engage in any activity and retain direct or 
     indirect ownership or control of shares of a company engaged 
     in any activity if--
       ``(A) the holding company lawfully was engaged in the 
     activity or held the shares of such company on September 30, 
     1997;
       ``(B) the holding company is predominantly engaged in 
     financial activities as defined in paragraph (2); and
       ``(C) the company engaged in such activity continues to 
     engage only in the same activities that such company 
     conducted on September 30, 1997, and other activities 
     permissible under this Act.
       ``(2) Predominantly financial.--For purposes of this 
     subsection, a company is predominantly engaged in financial 
     activities if the annual gross revenues derived by the 
     holding company and all subsidiaries of the holding company 
     (excluding revenues derived from subsidiary depository 
     institutions), on a consolidated basis, from engaging in 
     activities that are financial in nature or are incidental to 
     activities that are financial in nature under subsection (c) 
     represent at least 85 percent of the consolidated annual 
     gross revenues of the company.
       ``(3) No expansion of grandfathered commercial activities 
     through merger or consolidation.--A financial holding company 
     that engages in activities or holds shares pursuant to this 
     subsection, or a subsidiary of such financial holding 
     company, may not acquire, in any merger, consolidation, or 
     other type of business combination, assets of any other 
     company which is engaged in any activity which the Board has 
     not determined to be financial in nature or incidental to 
     activities that are financial in nature under subsection (c).
       ``(4) Continuing revenue limitation on grandfathered 
     commercial activities.--Notwithstanding any other provision 
     of this subsection, a financial holding company may continue 
     to engage in activities or hold shares in companies pursuant 
     to this subsection only to the extent that the aggregate 
     annual gross revenues derived from all such activities and 
     all such companies does not exceed 15 percent of the 
     consolidated annual gross revenues of the financial holding 
     company (excluding revenues derived from subsidiary 
     depository institutions).
       ``(5) Cross marketing restrictions applicable to commercial 
     activities.--A depository institution controlled by a 
     financial holding company shall not--
       ``(A) offer or market, directly or through any arrangement, 
     any product or service of a company whose activities are 
     conducted or whose shares are owned or controlled by the 
     financial holding company pursuant to this subsection or 
     subparagraph (H) or (I) of subsection (c)(3); or
       ``(B) permit any of its products or services to be offered 
     or marketed, directly or through any arrangement, by or 
     through any company described in subparagraph (A).
       ``(6) Transactions with nonfinancial affiliates.--An 
     insured depository institution controlled by a financial 
     holding company or wholesale financial holding company may 
     not engage in a covered transaction (as defined by section 
     23A(b)(7) of the Federal Reserve Act) with any affiliate 
     controlled by the company pursuant to section 10(c), this 
     subsection, or subparagraph (H) or (I) of subsection (c)(3).
       ``(7) Sunset of grandfather.--A financial holding company 
     engaged in any activity, or retaining direct or indirect 
     ownership or control of shares of a company, pursuant to this 
     subsection, shall terminate such activity and divest 
     ownership or control of the shares of such company before the 
     end of the 10-year period beginning on the date of enactment 
     of the Financial Services Act of 1999. The Board may, upon 
     application by a financial holding company, extend such 10-
     year period by a period not to exceed an additional 5 years 
     if such extension would not be detrimental to the public 
     interest.
       ``(g) Developing Activities.--A financial holding company 
     and a wholesale financial holding company may engage directly 
     or indirectly, or acquire shares of any company engaged, in 
     any activity that the Board has not determined to be 
     financial in nature or incidental to financial activities 
     under subsection (c) if--
       ``(1) the holding company reasonably concludes that the 
     activity is financial in nature or incidental to financial 
     activities;
       ``(2) the gross revenues from all activities conducted 
     under this subsection represent less than 5 percent of the 
     consolidated gross revenues of the holding company;
       ``(3) the aggregate total assets of all companies the 
     shares of which are held under this subsection do not exceed 
     5 percent of the holding company's consolidated total assets;
       ``(4) the total capital invested in activities conducted 
     under this subsection represents less than 5 percent of the 
     consolidated total capital of the holding company;
       ``(5) the Board has not determined that the activity is not 
     financial in nature or incidental to financial activities 
     under subsection (c);
       ``(6) the holding company is not required to provide prior 
     written notice of the transaction to the Board under 
     subsection (c)(6); and
       ``(7) the holding company provides written notification to 
     the Board describing the activity commenced or conducted by 
     the company acquired no later than 10 business days after 
     commencing the activity or consummating the acquisition.
       ``(h) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       ``(1) Well capitalized.--The term `well capitalized' has 
     the same meaning as in section 38 of the Federal Deposit 
     Insurance Act. For purposes of this section, the appropriate 
     Federal banking agency shall have exclusive jurisdiction to 
     determine whether an depository institution is well 
     capitalized.
       ``(2) Well managed.--
       ``(A) In general.--The term `well managed' means--
       ``(i) in the case of an depository institution that has 
     been examined, unless otherwise determined in writing by the 
     appropriate Federal banking agency, the achievement of--

       ``(I) a composite rating of 1 or 2 under the Uniform 
     Financial Institutions Rating System (or an equivalent rating 
     under an equivalent rating system) in connection with the 
     most recent examination or subsequent review of the 
     depository institution; and
       ``(II) at least a rating of 2 for management, if that 
     rating is given; or

       ``(ii) in the case of an depository institution that has 
     not been examined, the existence and use of such managerial 
     resources as the appropriate Federal banking agency 
     determines are satisfactory.
       ``(B) Existing jurisdiction preserved.--For purposes of 
     this section, the appropriate Federal banking agency shall 
     have exclusive jurisdiction to determine whether a depository 
     institution is well managed.''.

     SEC. 104. OPERATION OF STATE LAW.

       (a) Affiliations.--

[[Page S4686]]

       (1) In general.--Except as provided in paragraph (2), no 
     State may, by statute, regulation, order, interpretation, or 
     other action, prevent or restrict an insured depository 
     institution or wholesale financial institution, or a 
     subsidiary or affiliate thereof, from being affiliated 
     directly or indirectly or associated with any person or 
     entity, as authorized or permitted by this Act or any other 
     provision of Federal law.
       (2) Insurance.--With respect to affiliations between 
     insured depository institutions or wholesale financial 
     institutions, or any subsidiary or affiliate thereof, and 
     persons or entities engaged in the business of insurance, 
     paragraph (1) does not prohibit any State from--
       (A) requiring any person or entity that proposes to acquire 
     control of an entity that is engaged in the business of 
     insurance and domiciled in that State (hereafter in this 
     subparagraph referred to as the ``insurer'') to furnish to 
     the insurance regulatory authority of that State, not later 
     than 60 days before the effective date of the proposed 
     acquisition--
       (i) the name and address of each person by whom, or on 
     whose behalf, the affiliation referred to in this 
     subparagraph is to be effected (hereafter in this 
     subparagraph referred to as the ``acquiring party'');
       (ii) if the acquiring party is an individual, his or her 
     principal occupation and all offices and positions held 
     during the 5 years preceding the date of notification, and 
     any conviction of crimes other than minor traffic violations 
     during the 10 years preceding the date of notification;
       (iii) if the acquiring party is not an individual--

       (I) a report of the nature of its business operations 
     during the 5 years preceding the date of notification, or for 
     such shorter period as such person and any predecessors 
     thereof shall have been in existence;
       (II) an informative description of the business intended to 
     be done by the acquiring party and any subsidiary thereof; 
     and
       (III) a list of all individuals who are, or who have been 
     selected to become, directors or executive officers of the 
     acquiring party or who perform, or will perform, functions 
     appropriate to such positions, including, for each such 
     individual, the information required by clause (ii);

       (iv) the source, nature, and amount of the consideration 
     used, or to be used, in effecting the merger or other 
     acquisition of control, a description of any transaction 
     wherein funds were, or are to be, obtained for any such 
     purpose, and the identity of persons furnishing such 
     consideration, except that, if a source of such consideration 
     is a loan made in the lender's ordinary course of business, 
     the identity of the lender shall remain confidential if the 
     person filing such statement so requests;
       (v) fully audited financial information as to the earnings 
     and financial condition of each acquiring party for the 5 
     fiscal years preceding the date of notification of each such 
     acquiring party, or for such lesser period as such acquiring 
     party and any predecessors thereof shall have been in 
     existence, and similar unaudited information as of a date not 
     earlier than 90 days before the date of notification, except 
     that, in the case of an acquiring party that is an insurer 
     actively engaged in the business of insurance, the financial 
     statements of such insurer need not be audited, but such 
     audit may be required if the need therefor is determined by 
     the insurance regulatory authority of the State;
       (vi) any plans or proposals that each acquiring party may 
     have to liquidate such insurer, to sell its assets, or to 
     merge or consolidate it with any person or to make any other 
     material change in its business or corporate structure or 
     management;
       (vii) the number of shares of any security of the insurer 
     that each acquiring party proposes to acquire, the terms of 
     any offer, request, invitation, agreement, or acquisition, 
     and a statement as to the method by which the fairness of the 
     proposal was arrived at;
       (viii) the amount of each class of any security of the 
     insurer that is beneficially owned or concerning which there 
     is a right to acquire beneficial ownership by each acquiring 
     party;
       (ix) a full description of any contracts, arrangements, or 
     understandings with respect to any security of the insurer in 
     which any acquiring party is involved, including transfer of 
     any of the securities, joint ventures, loan or option 
     arrangements, puts or calls, guarantees of loans, guarantees 
     against loss or guarantees of profits, division of losses or 
     profits, or the giving or withholding of proxies, and 
     identification of the persons with whom such contracts, 
     arrangements, or understandings have been entered into;
       (x) a description of the purchase of any security of the 
     insurer during the 12-month period preceding the date of 
     notification by any acquiring party, including the dates of 
     purchase, names of the purchasers, and consideration paid, or 
     agreed to be paid, therefor;
       (xi) a description of any recommendations to purchase any 
     security of the insurer made during the 12-month period 
     preceding the date of notification by any acquiring party or 
     by any person based upon interviews or at the suggestion of 
     such acquiring party;
       (xii) copies of all tender offers for, requests or 
     invitations for tenders of, exchange offers for and 
     agreements to acquire or exchange any securities of the 
     insurer and, if distributed, of additional soliciting 
     material relating thereto; and
       (xiii) the terms of any agreement, contract, or 
     understanding made with any broker-dealer as to solicitation 
     of securities of the insurer for tender and the amount of any 
     fees, commissions, or other compensation to be paid to 
     broker-dealers with regard thereto;
       (B) requiring an entity that is acquiring control of an 
     entity that is engaged in the business of insurance and 
     domiciled in that State to maintain or restore the capital 
     requirements of that insurance entity to the level required 
     under the capital regulations of general applicability in 
     that State to avoid the requirement of preparing and filing 
     with the insurance regulatory authority of that State a plan 
     to increase the capital of the entity, except that any 
     determination by the State insurance regulatory authority 
     with respect to such requirement shall be made not later than 
     60 days after the date of notification under subparagraph 
     (A);
       (C) taking actions with respect to the receivership or 
     conservatorship of any insurance company; or
       (D) restricting a change in the ownership of stock in an 
     insurance company, or a company formed for the purpose of 
     controlling such insurance company, for a period of not more 
     than 3 years beginning on the date of the conversion of such 
     company from mutual to stock form.
       (3) Preservation of state antitrust and general corporate 
     laws.--
       (A) In general.--Nothing in paragraph (1) shall be 
     construed as affecting State laws, regulations, orders, 
     interpretations, or other actions of general applicability 
     relating to the governance of corporations, partnerships, 
     limited liability companies or other business associations 
     incorporated or formed under the laws of that State or 
     domiciled in that State, or the applicability of the 
     antitrust laws of any State or any State law that is similar 
     to the antitrust laws.
       (B) Definition.--For purposes of this paragraph, the term 
     ``antitrust laws'' has the same meaning as in subsection (a) 
     of the first section of the Clayton Act, and includes section 
     5 of the Federal Trade Commission Act to the extent that such 
     section 5 relates to unfair methods of competition.
       (b) Activities.--
       (1) In general.--Except as provided in paragraph (3), and 
     except with respect to insurance sales, solicitation, and 
     cross marketing activities, which shall be governed by 
     paragraph (2), no State may, by statute, regulation, order, 
     interpretation, or other action, prevent or restrict an 
     insured depository institution, wholesale financial 
     institution, or subsidiary or affiliate thereof from engaging 
     directly or indirectly, either by itself or in conjunction 
     with a subsidiary, affiliate, or any other entity or person, 
     in any activity authorized or permitted under this Act.
       (2) Insurance sales.--
       (A) In general.--In accordance with the legal standards for 
     preemption set forth in the decision of the Supreme Court of 
     the United States in Barnett Bank of Marion County N.A. v. 
     Nelson, 116 S. Ct. 1103 (1996), no State may, by statute, 
     regulation, order, interpretation, or other action, prevent 
     or significantly interfere with the ability of an insured 
     depository institution or wholesale financial institution, or 
     a subsidiary or affiliate thereof, to engage, directly or 
     indirectly, either by itself or in conjunction with a 
     subsidiary, affiliate, or any other party, in any insurance 
     sales, solicitation, or cross-marketing activity.
       (B) Certain state laws preserved.--Notwithstanding 
     subparagraph (A), a State may impose any of the following 
     restrictions, or restrictions which are substantially the 
     same as, but no more burdensome or restrictive than, those in 
     each of the following clauses:
       (i) Restrictions prohibiting the rejection of an insurance 
     policy solely because the policy has been issued or 
     underwritten by any person who is not associated with such 
     insured depository institution or wholesale financial 
     institution, or any subsidiary or affiliate thereof, when 
     such insurance is required in connection with a loan or 
     extension of credit.
       (ii) Restrictions prohibiting a requirement for any debtor, 
     insurer, or insurance agent or broker to pay a separate 
     charge in connection with the handling of insurance that is 
     required in connection with a loan or other extension of 
     credit or the provision of another traditional banking 
     product, unless such charge would be required when the 
     insured depository institution or wholesale financial 
     institution, or any subsidiary or affiliate thereof, is the 
     licensed insurance agent or broker providing the insurance.
       (iii) Restrictions prohibiting the use of any advertisement 
     or other insurance promotional material by an insured 
     depository institution or wholesale financial institution, or 
     any subsidiary or affiliate thereof, that would cause a 
     reasonable person to believe mistakenly that--

       (I) a State or the Federal Government is responsible for 
     the insurance sales activities of, or stands behind the 
     credit of, the institution, affiliate, or subsidiary; or
       (II) a State, or the Federal Government guarantees any 
     returns on insurance products, or is a source of payment on 
     any insurance obligation of or sold by the institution, 
     affiliate, or subsidiary.

       (iv) Restrictions prohibiting the payment or receipt of any 
     commission or brokerage fee or other valuable consideration 
     for services as an insurance agent or broker to or by

[[Page S4687]]

     any person, unless such person holds a valid State license 
     regarding the applicable class of insurance at the time at 
     which the services are performed, except that, in this 
     clause, the term ``services as an insurance agent or broker'' 
     does not include a referral by an unlicensed person of a 
     customer or potential customer to a licensed insurance agent 
     or broker that does not include a discussion of specific 
     insurance policy terms and conditions.
       (v) Restrictions prohibiting any compensation paid to or 
     received by any individual who is not licensed to sell 
     insurance, for the referral of a customer that seeks to 
     purchase, or seeks an opinion or advice on, any insurance 
     product to a person that sells or provides opinions or advice 
     on such product, based on the purchase of insurance by the 
     customer.
       (vi) Restrictions prohibiting the release of the insurance 
     information of a customer (defined as information concerning 
     the premiums, terms, and conditions of insurance coverage, 
     including expiration dates and rates, and insurance claims of 
     a customer contained in the records of the insured depository 
     institution or wholesale financial institution, or a 
     subsidiary or affiliate thereof) to any person or entity 
     other than an officer, director, employee, agent, subsidiary, 
     or affiliate of an insured depository institution or a 
     wholesale financial institution, for the purpose of 
     soliciting or selling insurance, without the express consent 
     of the customer, other than a provision that prohibits--

       (I) a transfer of insurance information to an unaffiliated 
     insurance company, agent, or broker in connection with 
     transferring insurance in force on existing insureds of the 
     insured depository institution or wholesale financial 
     institution, or subsidiary or affiliate thereof, or in 
     connection with a merger with or acquisition of an 
     unaffiliated insurance company, agent, or broker; or
       (II) the release of information as otherwise authorized by 
     State or Federal law.

       (vii) Restrictions prohibiting the use of health 
     information obtained from the insurance records of a customer 
     for any purpose, other than for its activities as a licensed 
     agent or broker, without the express consent of the customer.
       (viii) Restrictions prohibiting the extension of credit or 
     any product or service that is equivalent to an extension of 
     credit, lease or sale of property of any kind, or furnishing 
     of any services, or fixing or varying the consideration for 
     any of the foregoing, on the condition or requirement that 
     the customer obtain insurance from the insured depository 
     institution, wholesale financial institution, a subsidiary or 
     affiliate thereof, or a particular insurer, agent, or broker, 
     other than a prohibition that would prevent any insured 
     depository institution or wholesale financial institution, or 
     any subsidiary or affiliate thereof--

       (I) from engaging in any activity that would not violate 
     section 106 of the Bank Holding Company Act Amendments of 
     1970, as interpreted by the Board of Governors of the Federal 
     Reserve System; or
       (II) from informing a customer or prospective customer that 
     insurance is required in order to obtain a loan or credit, 
     that loan or credit approval is contingent upon the 
     procurement by the customer of acceptable insurance, or that 
     insurance is available from the insured depository 
     institution or wholesale financial institution, or any 
     subsidiary or affiliate thereof.

       (ix) Restrictions requiring, when an application by a 
     consumer for a loan or other extension of credit from an 
     insured depository institution or wholesale financial 
     institution is pending, and insurance is offered or sold to 
     the consumer or is required in connection with the loan or 
     extension of credit by the insured depository institution or 
     wholesale financial institution, or any subsidiary or 
     affiliate thereof, that a written disclosure be provided to 
     the consumer (or prospective customer) indicating that his or 
     her choice of an insurance provider will not affect the 
     credit decision or credit terms in any way, except that the 
     insured depository institution or wholesale financial 
     institution may impose reasonable requirements concerning the 
     creditworthiness of the insurance provider and scope of 
     coverage chosen.
       (x) Restrictions requiring clear and conspicuous 
     disclosure, in writing, where practicable, to the customer 
     prior to the sale of any insurance policy that such policy--

       (I) is not a deposit;
       (II) is not insured by the Federal Deposit Insurance 
     Corporation;
       (III) is not guaranteed by the insured depository 
     institution or wholesale financial institution or, if 
     appropriate, its subsidiaries or affiliates or any person 
     soliciting the purchase of or selling insurance on the 
     premises thereof; and
       (IV) where appropriate, involves investment risk, including 
     potential loss of principal.

       (xi) Restrictions requiring that, when a customer obtains 
     insurance (other than credit insurance or flood insurance) 
     and credit from an insured depository institution or 
     wholesale financial institution, or its subsidiaries or 
     affiliates, or any person soliciting the purchase of or 
     selling insurance on the premises thereof, the credit and 
     insurance transactions be completed through separate 
     documents.
       (xii) Restrictions prohibiting, when a customer obtains 
     insurance (other than credit insurance or flood insurance) 
     and credit from an insured depository institution or 
     wholesale financial institution or its subsidiaries or 
     affiliates, or any person soliciting the purchase of or 
     selling insurance on the premises thereof, inclusion of the 
     expense of insurance premiums in the primary credit 
     transaction without the express written consent of the 
     customer.
       (xiii) Restrictions requiring maintenance of separate and 
     distinct books and records relating to insurance 
     transactions, including all files relating to and reflecting 
     consumer complaints, and requiring that such insurance books 
     and records be made available to the appropriate State 
     insurance regulator for inspection upon reasonable notice.
       (C) Limitations.--
       (i) OCC deference.--Section 306(e) does not apply with 
     respect to any State statute, regulation, order, 
     interpretation, or other action regarding insurance sales, 
     solicitation, or cross marketing activities described in 
     subparagraph (A) that was issued, adopted, or enacted before 
     March 4, 1999, and that is not described in subparagraph 
     (B).
       (ii) Nondiscrimination.--Subsection (c) does not apply with 
     respect to any State statute, regulation, order, 
     interpretation, or other action regarding insurance sales, 
     solicitation, or cross marketing activities described in 
     subparagraph (A) that was issued, adopted, or enacted before 
     March 4, 1999, and that is not described in subparagraph (B).
       (iii) Construction.--Nothing in this paragraph shall be 
     construed to limit the applicability of the decision of the 
     Supreme Court in Barnett Bank of Marion County N.A. v. 
     Nelson, 116 S. Ct. 1103 (1996) with respect to a State 
     statute, regulation, order, interpretation, or other action 
     that is not described in subparagraph (B).
       (iv) Limitation on inferences.--Nothing in this paragraph 
     shall be construed to create any inference with respect to 
     any State statute, regulation, order, interpretation, or 
     other action that is not referred to or described in this 
     paragraph.
       (3) Insurance activities other than sales.--State statutes, 
     regulations, interpretations, orders, and other actions shall 
     not be preempted under subsection (b)(1) to the extent that 
     they--
       (A) relate to, or are issued, adopted, or enacted for the 
     purpose of regulating the business of insurance in accordance 
     with the Act of March 9, 1945 (commonly known as the 
     ``McCarran-Ferguson Act'');
       (B) apply only to persons or entities that are not insured 
     depository institutions or wholesale financial institutions, 
     but that are directly engaged in the business of insurance 
     (except that they may apply to depository institutions 
     engaged in providing savings bank life insurance as principal 
     to the extent of regulating such insurance);
       (C) do not relate to or directly or indirectly regulate 
     insurance sales, solicitations, or cross-marketing 
     activities; and
       (D) are not prohibited under subsection (c).
       (4) Financial activities other than insurance.--No State 
     statute, regulation, interpretation, order, or other action 
     shall be preempted under subsection (b)(1) to the extent 
     that--
       (A) it does not relate to, and is not issued and adopted, 
     or enacted for the purpose of regulating, directly or 
     indirectly, insurance sales, solicitations, or cross 
     marketing activities covered under paragraph (2);
       (B) it does not relate to, and is not issued and adopted, 
     or enacted for the purpose of regulating, directly or 
     indirectly, the business of insurance activities other than 
     sales, solicitations, or cross marketing activities, covered 
     under paragraph (3);
       (C) it does not relate to securities investigations or 
     enforcement actions referred to in subsection (d); and
       (D) it--
       (i) does not distinguish by its terms between insured 
     depository institutions, wholesale financial institutions, 
     and subsidiaries and affiliates thereof engaged in the 
     activity at issue and other persons or entities engaged in 
     the same activity in a manner that is in any way adverse with 
     respect to the conduct of the activity by any such insured 
     depository institution, wholesale financial institution, or 
     subsidiary or affiliate thereof engaged in the activity at 
     issue;
       (ii) as interpreted or applied, does not have, and will not 
     have, an impact on depository institutions, wholesale 
     financial institutions, or subsidiaries or affiliates thereof 
     engaged in the activity at issue, or any person or entity 
     affiliated therewith, that is substantially more adverse than 
     its impact on other persons or entities engaged in the same 
     activity that are not insured depository institutions, 
     wholesale financial institutions, or subsidiaries or 
     affiliates thereof, or persons or entities affiliated 
     therewith;
       (iii) does not effectively prevent a depository 
     institution, wholesale financial institution, or subsidiary 
     or affiliate thereof from engaging in activities authorized 
     or permitted by this Act or any other provision of Federal 
     law; and
       (iv) does not conflict with the intent of this Act 
     generally to permit affiliations that are authorized or 
     permitted by Federal law.
       (c) Nondiscrimination.--Except as provided in any 
     restrictions described in subsection (b)(2)(B), no State may, 
     by statute, regulation, order, interpretation, or other 
     action, regulate the insurance activities authorized or 
     permitted under this Act or any other provision of Federal 
     law of an insured depository institution or wholesale 
     financial institution, or subsidiary or affiliate thereof, to 
     the extent that such statute, regulation, order, 
     interpretation, or other action--

[[Page S4688]]

       (1) distinguishes by its terms between insured depository 
     institutions or wholesale financial institutions, or 
     subsidiaries or affiliates thereof, and other persons or 
     entities engaged in such activities, in a manner that is in 
     any way adverse to any such insured depository institution or 
     wholesale financial institution, or subsidiary or affiliate 
     thereof;
       (2) as interpreted or applied, has or will have an impact 
     on depository institutions or wholesale financial 
     institutions, or subsidiaries or affiliates thereof, that is 
     substantially more adverse than its impact on other persons 
     or entities providing the same products or services or 
     engaged in the same activities that are not insured 
     depository institutions, wholesale financial institutions, or 
     subsidiaries or affiliates thereof, or persons or entities 
     affiliated therewith;
       (3) effectively prevents a depository institution or 
     wholesale financial institution, or subsidiary or affiliate 
     thereof, from engaging in insurance activities authorized or 
     permitted by this Act or any other provision of Federal law; 
     or
       (4) conflicts with the intent of this Act generally to 
     permit affiliations that are authorized or permitted by 
     Federal law between insured depository institutions or 
     wholesale financial institutions, or subsidiaries or 
     affiliates thereof, and persons and entities engaged in the 
     business of insurance.
       (d) Limitation.--Subsections (a) and (b) shall not be 
     construed to affect the jurisdiction of the securities 
     commission (or any agency or office performing like 
     functions) of any State, under the laws of such State, to 
     investigate and bring enforcement actions, consistent with 
     section 18(c) of the Securities Act of 1933, with respect to 
     fraud or deceit or unlawful conduct by any person, in 
     connection with securities or securities transactions.
       (e) Definition.--For purposes of this section, the term 
     ``State'' means any State of the United States, the District 
     of Columbia, any territory of the United States, Puerto Rico, 
     Guam, American Samoa, the Trust Territory of the Pacific 
     Islands, the Virgin Islands, and the Northern Mariana 
     Islands.

     SEC. 105. MUTUAL BANK HOLDING COMPANIES AUTHORIZED.

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

     SEC. 106. PROHIBITION ON DEPOSIT PRODUCTION OFFICES.

       (a) In General.--Section 109(d) of the Riegle-Neal 
     Interstate Banking and Branching Efficiency Act of 1994 (12 
     U.S.C. 1835a(d)) is amended--
       (1) by inserting ``, the Financial Services Act of 1999,'' 
     after ``pursuant to this title''; and
       (2) by inserting ``or such Act'' after ``made by this 
     title''.
       (b) Technical and Conforming Amendment.--Section 109(e)(4) 
     of the Riegle-Neal Interstate Banking and Branching 
     Efficiency Act of 1994 (12 U.S.C. 1835a(e)(4)) is amended by 
     inserting ``and any branch of a bank controlled by an out-of-
     State bank holding company (as defined in section 2(o)(7) of 
     the Bank Holding Company Act of 1956)'' before the period.

     SEC. 107. CLARIFICATION OF BRANCH CLOSURE REQUIREMENTS.

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

     SEC. 108. AMENDMENTS RELATING TO LIMITED PURPOSE BANKS.

       (a) In General.--Section 4(f) of the Bank Holding Company 
     Act of 1956 (12 U.S.C. 1843(f)) is amended--
       (1) in paragraph (2)(A)(ii)--
       (A) by striking ``and'' at the end of subclause (IX);
       (B) by inserting ``and'' after the semicolon at the end of 
     subclause (X); and
       (C) by inserting after subclause (X) the following new 
     subclause:

       ``(XI) assets that are derived from, or incidental to, 
     consumer lending activities in which institutions described 
     in section 2(c)(2)(F) or section 2(c)(2)(H) are permitted to 
     engage;'';

       (2) in paragraph (2), by striking subparagraph (B) and 
     inserting the following new subparagraphs:
       ``(B) any bank subsidiary of such company engages in any 
     activity in which the bank was not lawfully engaged as of 
     March 5, 1987, unless the bank is well managed and well 
     capitalized;
       ``(C) any bank subsidiary of such company both--
       ``(i) accepts demand deposits or deposits that the 
     depositor may withdraw by check or similar means for payment 
     to third parties; and
       ``(ii) engages in the business of making commercial loans 
     (and, for purposes of this clause, loans made in the ordinary 
     course of a credit card operation shall not be treated as 
     commercial loans); or
       ``(D) after the date of enactment of the Competitive 
     Equality Amendments of 1987, any bank subsidiary of such 
     company permits any overdraft (including any intraday 
     overdraft), or incurs any such overdraft in such bank's 
     account at a Federal reserve bank, on behalf of an affiliate, 
     other than an overdraft described in paragraph (3).''; and
       (3) by striking paragraphs (3) and (4) and inserting the 
     following new paragraphs:
       ``(3) Permissible overdrafts described.--For purposes of 
     paragraph (2)(D), an overdraft is described in this paragraph 
     if--
       ``(A) such overdraft results from an inadvertent computer 
     or accounting error that is beyond the control of both the 
     bank and the affiliate;
       ``(B) such overdraft--
       ``(i) is permitted or incurred on behalf of an affiliate 
     which is monitored by, reports to, and is recognized as a 
     primary dealer by the Federal Reserve Bank of New York; and
       ``(ii) is fully secured, as required by the Board, by 
     bonds, notes, or other obligations which are direct 
     obligations of the United States or on which the principal 
     and interest are fully guaranteed by the United States or by 
     securities and obligations eligible for settlement on the 
     Federal Reserve book entry system; or
       ``(C) such overdraft--
       ``(i) is permitted or incurred by or on behalf of an 
     affiliate that is engaged predominantly in activities that 
     are financial in nature, and is incurred solely in connection 
     with an activity that is financial in nature, as determined 
     under section 6(c); 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.
       ``(4) Divestiture in case of loss of exemption.--If any 
     company described in paragraph (1) fails to qualify for the 
     exemption provided under such paragraph by operation of 
     paragraph (2), such exemption shall cease to apply to such 
     company and such company shall divest control of each bank it 
     controls before the end of the 180-day period beginning on 
     the date that the company receives notice from the Board that 
     the company has failed to continue to qualify for such 
     exemption, unless before the end of such 180-day period, the 
     company has--
       ``(A) corrected the condition or ceased the activity that 
     caused the company to fail to continue to qualify for the 
     exemption; and
       ``(B) implemented procedures that are reasonably adapted to 
     avoid the reoccurrence of such condition or activity.''.
       (b) Industrial Loan Companies Affiliate Overdrafts.--
     Section 2(c)(2)(H) of the Bank Holding Company Act of 1956 
     (12 U.S.C. 1841(c)(2)(H)) is amended by inserting before the 
     period at the end ``, or that is otherwise permissible for a 
     bank controlled by a company described in section 4(f)(1)''.

     SEC. 109. REPORTS ON ONGOING FTC STUDY OF CONSUMER PRIVACY 
                   ISSUES.

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

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

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

     SEC. 111. STREAMLINING FINANCIAL HOLDING COMPANY SUPERVISION.

       Section 5(c) of the Bank Holding Company Act of 1956 (12 
     U.S.C. 1844(c)) is amended to read as follows:
       ``(c) Reports and Examinations.--
       ``(1) Reports.--
       ``(A) In general.--The Board from time to time may require 
     any bank holding company and any subsidiary of such company 
     to submit reports under oath to keep the Board informed as 
     to--
       ``(i) its financial condition, systems for monitoring and 
     controlling financial and operating risks, and transactions 
     with depository institution subsidiaries of the holding 
     company; and
       ``(ii) compliance by the company or subsidiary with 
     applicable provisions of this Act.
       ``(B) Use of existing reports.--
       ``(i) In general.--The Board shall, to the fullest extent 
     possible, accept reports in fulfillment of the Board's 
     reporting requirements under this paragraph that a bank 
     holding company or any subsidiary of such company has 
     provided or been required to provide to other Federal and 
     State supervisors or to appropriate self-regulatory 
     organizations.

[[Page S4689]]

       ``(ii) Availability.--A bank holding company or a 
     subsidiary of such company shall provide to the Board, at the 
     request of the Board, a report referred to in clause (i).
       ``(iii) Required use of publicly reported information.--The 
     Board shall, to the fullest extent possible, accept in 
     fulfillment of any reporting or recordkeeping requirements 
     under this Act information that is otherwise required to be 
     reported publicly and externally audited financial 
     statements.
       ``(iv) Reports filed with other agencies.--In the event the 
     Board requires a report from a functionally regulated 
     nondepository institution subsidiary of a bank holding 
     company of a kind that is not required by another Federal or 
     State regulator or appropriate self-regulatory organization, 
     the Board shall request that the appropriate regulator or 
     self-regulatory organization obtain such report. If the 
     report is not made available to the Board, and the report is 
     necessary to assess a material risk to the bank holding 
     company or any of its subsidiary depository institutions or 
     compliance with this Act, the Board may require such 
     subsidiary to provide such a report to the Board.
       ``(C) Definition.--For purposes of this subsection, the 
     term `functionally regulated nondepository institution' 
     means--
       ``(i) a broker or dealer registered under the Securities 
     Exchange Act of 1934;
       ``(ii) an investment adviser registered under the 
     Investment Advisers Act of 1940, or with any State, with 
     respect to the investment advisory activities of such 
     investment adviser and activities incidental to such 
     investment advisory activities;
       ``(iii) an insurance company subject to supervision by a 
     State insurance commission, agency, or similar authority; and
       ``(iv) an entity subject to regulation by the Commodity 
     Futures Trading Commission, with respect to the commodities 
     activities of such entity and activities incidental to such 
     commodities activities.
       ``(2) Examinations.--
       ``(A) Examination authority.--
       ``(i) In general.--The Board may make examinations of each 
     bank holding company and each subsidiary of a bank holding 
     company.
       ``(ii) Functionally regulated nondepository institution 
     subsidiaries.--Notwithstanding clause (i), the Board may make 
     examinations of a functionally regulated nondepository 
     institution subsidiary of a bank holding company only if--

       ``(I) the Board has reasonable cause to believe that such 
     subsidiary is engaged in activities that pose a material risk 
     to an affiliated depository institution, or
       ``(II) based on reports and other available information, 
     the Board has reasonable cause to believe that a subsidiary 
     is not in compliance with this Act or with provisions 
     relating to transactions with an affiliated depository 
     institution and the Board cannot make such determination 
     through examination of the affiliated depository institution 
     or bank holding company.

       ``(B) Limitations on examination authority for bank holding 
     companies and subsidiaries.--Subject to subparagraph (A)(ii), 
     the Board may make examinations under subparagraph (A)(i) of 
     each bank holding company and each subsidiary of such holding 
     company in order to--
       ``(i) inform the Board of the nature of the operations and 
     financial condition of the holding company and such 
     subsidiaries;
       ``(ii) inform the Board of--

       ``(I) the financial and operational risks within the 
     holding company system that may pose a threat to the safety 
     and soundness of any subsidiary depository institution of 
     such holding company; and
       ``(II) the systems for monitoring and controlling such 
     risks; and

       ``(iii) monitor compliance with the provisions of this Act 
     and those governing transactions and relationships between 
     any subsidiary depository institution and its affiliates.
       ``(C) Restricted focus of examinations.--The Board shall, 
     to the fullest extent possible, limit the focus and scope of 
     any examination of a bank holding company to--
       ``(i) the bank holding company; and
       ``(ii) any subsidiary of the holding company that, because 
     of--

       ``(I) the size, condition, or activities of the subsidiary;
       ``(II) the nature or size of transactions between such 
     subsidiary and any depository institution which is also a 
     subsidiary of such holding company; or
       ``(III) the centralization of functions within the holding 
     company system,

     could have a materially adverse effect on the safety and 
     soundness of any depository institution affiliate of the 
     holding company.
       ``(D) Deference to bank examinations.--The Board shall, to 
     the fullest extent possible, use, for the purposes of this 
     paragraph, the reports of examinations of depository 
     institutions made by the appropriate Federal and State 
     depository institution supervisory authority.
       ``(E) Deference to other examinations.--The Board shall, to 
     the fullest extent possible, address the circumstances which 
     might otherwise permit or require an examination by the Board 
     by forgoing an examination and instead reviewing the reports 
     of examination made of--
       ``(i) any registered broker or dealer by or on behalf of 
     the Securities and Exchange Commission;
       ``(ii) any registered investment adviser properly 
     registered by or on behalf of either the Securities and 
     Exchange Commission or any State;
       ``(iii) any licensed insurance company by or on behalf of 
     any state regulatory authority responsible for the 
     supervision of insurance companies; and
       ``(iv) any other subsidiary that the Board finds to be 
     comprehensively supervised by a Federal or State authority.
       ``(3) Capital.--
       ``(A) In general.--The Board shall not, by regulation, 
     guideline, order or otherwise, prescribe or impose any 
     capital or capital adequacy rules, guidelines, standards, or 
     requirements on any subsidiary of a financial holding company 
     that is not a depository institution and--
       ``(i) is in compliance with applicable capital requirements 
     of another Federal regulatory authority (including the 
     Securities and Exchange Commission) or State insurance 
     authority; or
       ``(ii) is properly registered as an investment adviser 
     under the Investment Advisers Act of 1940, or with any State.
       ``(B) Rule of construction.--Subparagraph (A) shall not be 
     construed as preventing the Board from imposing capital or 
     capital adequacy rules, guidelines, standards, or 
     requirements with respect to activities of a registered 
     investment adviser other than investment advisory activities 
     or activities incidental to investment advisory activities.
       ``(C) Limitations on indirect action.--In developing, 
     establishing, or assessing holding company capital or capital 
     adequacy rules, guidelines, standards, or requirements for 
     purposes of this paragraph, the Board shall not take into 
     account the activities, operations, or investments of an 
     affiliated investment company registered under the Investment 
     Company Act of 1940, if the investment company is not--
       ``(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, where the shares owned by the bank 
     holding company have a market value equal to more than 
     $1,000,000.
       ``(4) Transfer of board authority to appropriate federal 
     banking agency.--
       ``(A) In general.--In the case of any bank holding company 
     which is not significantly engaged in nonbanking activities, 
     the Board, in consultation with the appropriate Federal 
     banking agency, may designate the appropriate Federal banking 
     agency of the lead insured depository institution subsidiary 
     of such holding company as the appropriate Federal banking 
     agency for the bank holding company.
       ``(B) Authority transferred.--An agency designated by the 
     Board under subparagraph (A) shall have the same authority as 
     the Board under this Act to--
       ``(i) examine and require reports from the bank holding 
     company and any affiliate of such company (other than a 
     depository institution) under section 5;
       ``(ii) approve or disapprove applications or transactions 
     under section 3;
       ``(iii) take actions and impose penalties under subsections 
     (e) and (f) of section 5 and section 8; and
       ``(iv) take actions regarding the holding company, any 
     affiliate of the holding company (other than a depository 
     institution), or any institution-affiliated party of such 
     company or affiliate under the Federal Deposit Insurance Act 
     and any other statute which the Board may designate.
       ``(C) Agency orders.--Section 9 of this Act and section 105 
     of the Bank Holding Company Act Amendments of 1970, shall 
     apply to orders issued by an agency designated under 
     subparagraph (A) in the same manner such sections apply to 
     orders issued by the Board.
       ``(5) Functional regulation of securities and insurance 
     activities.--The Board shall defer to--
       ``(A) the Securities and Exchange Commission with regard to 
     all interpretations of, and the enforcement of, applicable 
     Federal securities laws (and rules, regulations, orders, and 
     other directives issued thereunder) relating to the 
     activities, conduct, and operations of registered brokers, 
     dealers, investment advisers, and investment companies;
       ``(B) the relevant State securities authorities with regard 
     to all interpretations of, and the enforcement of, applicable 
     State securities laws (and rules, regulations, orders, and 
     other directives issued thereunder) relating to the 
     activities, conduct, and operations of registered brokers, 
     dealers, and investment advisers; and
       ``(C) the relevant State insurance authorities with regard 
     to all interpretations of, and the enforcement of, applicable 
     State insurance laws (and rules, regulations, orders, and 
     other directives issued thereunder) relating to the 
     activities, conduct, and operations of insurance companies 
     and insurance agents.''.

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

       (a) Prevention of Duplicative Filings.--Section 5(a) of the 
     Bank Holding Company Act of 1956 (12 U.S.C. 1844(a)) is 
     amended by adding the following new sentence at the end: ``A 
     declaration filed in accordance with section 6(b)(1)(D) shall 
     satisfy the requirements of this subsection with regard to 
     the registration of a bank holding company but not any 
     requirement to file an application to acquire a bank pursuant 
     to section 3.''.
       (b) Divestiture Procedures.--Section 5(e)(1) of the Bank 
     Holding Company Act of 1956 (12 U.S.C. 1844(e)(1)) is 
     amended--

[[Page S4690]]

       (1) by striking ``Financial Institutions Supervisory Act of 
     1966, order'' and inserting ``Financial Institutions 
     Supervisory Act of 1966, at the election of the bank holding 
     company--
       ``(A) order''; and
       (2) by striking ``shareholders of the bank holding company. 
     Such distribution'' and inserting ``shareholders of the bank 
     holding company; or
       ``(B) order the bank holding company, after due notice and 
     opportunity for hearing, and after consultation with the 
     primary supervisor for the bank, which shall be the 
     Comptroller of the Currency in the case of a national bank, 
     and the Federal Deposit Insurance Corporation and the 
     appropriate State supervisor in the case of an insured 
     nonmember bank, to terminate (within 120 days or such longer 
     period as the Board may direct) the ownership or control of 
     any such bank by such company.
     ``The distribution referred to in subparagraph (A)''.

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

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

     SEC. 114. PRUDENTIAL SAFEGUARDS.

       Section 5 of the Bank Holding Company Act of 1956 (12 
     U.S.C. 1844) is amended by inserting after subsection (g) (as 
     added by section 113 of this subtitle) the following new 
     subsection:
       ``(h) Prudential Safeguards.--
       ``(1) In general.--The Board and the appropriate Federal 
     banking agency may, jointly, by regulation or order, impose, 
     modify, or eliminate restrictions or requirements on 
     relationships or transactions between a depository 
     institution subsidiary of a bank holding company and any 
     affiliate of such depository institution which the Board and 
     the appropriate Federal banking agency jointly find is 
     consistent with the public interest, the purposes of this 
     Act, the Financial Services Act of 1999, the Federal Reserve 
     Act, and other Federal law applicable to depository 
     institution subsidiaries of bank holding companies and the 
     standards in paragraph (2).
       ``(2) Standards.--The Board and the appropriate Federal 
     banking agency may exercise joint authority under paragraph 
     (1) if they find that such action would--
       ``(A) avoid any significant risk to the safety and 
     soundness of depository institutions or any Federal deposit 
     insurance fund;
       ``(B) enhance the financial stability of bank holding 
     companies;
       ``(C) avoid conflicts of interest or other abuses;
       ``(D) enhance the privacy of customers of depository 
     institutions; or
       ``(E) promote the application of national treatment and 
     equality of competitive opportunity between nonbank 
     affiliates owned or controlled by domestic bank holding 
     companies and nonbank affiliates owned or controlled by 
     foreign banks operating in the United States.
       ``(3) Review.--The appropriate Federal banking agency shall 
     regularly--
       ``(A) review all restrictions or requirements established 
     pursuant to paragraph (1) to determine whether there is a 
     continuing need for any such restriction or requirement to 
     carry out the purposes of the Act, including any purpose 
     described in paragraph (2); and
       ``(B) propose the modification or elimination of any 
     restriction or requirement that it 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 foreign bank and any affiliate in 
     the United States of such foreign bank that the Board finds 
     are consistent with the public interest, the purposes of this 
     Act, the Financial Services Act of 1999, the Federal Reserve 
     Act, and other Federal law applicable to foreign banks and 
     their affiliates in the United States, and the standards in 
     paragraphs (2) and (3).''.

     SEC. 115. EXAMINATION OF INVESTMENT COMPANIES.

       (a) Exclusive Commission Authority.--
       (1) In general.--Except as provided in paragraph (3), the 
     Commission shall be the sole Federal agency with authority to 
     inspect and examine any registered investment company that is 
     not a bank holding company or a savings and loan holding 
     company.
       (2) Prohibition on banking agencies.--Except as provided in 
     paragraph (3), a Federal banking agency may not inspect or 
     examine any registered investment company that is not a bank 
     holding company or a savings and loan holding company.
       (3) Certain examinations authorized.-- Nothing in this 
     subsection prevents the Federal Deposit Insurance 
     Corporation, if the Corporation finds it necessary to 
     determine the condition of an insured depository institution 
     for insurance purposes, from examining an affiliate of any 
     insured depository institution, pursuant to its authority 
     under section 10(b)(4) of the Federal Deposit Insurance Act, 
     as may be necessary to disclose fully the relationship 
     between the depository institution and the affiliate, and the 
     effect of such relationship on the depository institution.
       (b) Examination Results and Other Information.--The 
     Commission shall provide to any Federal banking agency, upon 
     request, the results of any examination, reports, records, or 
     other information with respect to any registered investment 
     company to the extent necessary for the agency to carry out 
     its statutory responsibilities.
       (c) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       (1) Bank holding company.--The term ``bank holding 
     company'' has the same meaning as in section 2 of the Bank 
     Holding Company Act of 1956.
       (2) Commission.--The term ``Commission'' means the 
     Securities and Exchange Commission.
       (3) Federal banking agency.--The term ``Federal banking 
     agency'' has the same meaning as in section 3(z) of the 
     Federal Deposit Insurance Act.
       (4) Registered investment company.--The term ``registered 
     investment company'' means an investment company which is 
     registered with the Commission under the Investment Company 
     Act of 1940.
       (5) Savings and loan holding company.--The term ``savings 
     and loan holding company'' has the same meaning as in section 
     10(a)(1)(D) of the Home Owners' Loan Act.

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

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

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

       ``(a) Limitation on Direct Action.--
       ``(1) In general.--The Board may not prescribe regulations, 
     issue or seek entry of orders, impose restraints, 
     restrictions, guidelines, requirements, safeguards, or 
     standards, or otherwise take any action under or pursuant to 
     any provision of this Act or section 8 of the Federal Deposit 
     Insurance Act against or with respect to a regulated 
     subsidiary of a bank holding company unless the action is 
     necessary to prevent or redress an unsafe or unsound practice 
     or breach of fiduciary duty by such subsidiary that poses a 
     material risk to--
       ``(A) the financial safety, soundness, or stability of an 
     affiliated depository institution; or
       ``(B) the domestic or international payment system.
       ``(2) Criteria for board action.--The Board shall not take 
     action otherwise permitted under paragraph (1) unless the 
     Board finds that it is not reasonably possible to effectively 
     protect against the material risk at issue through action 
     directed at or against

[[Page S4691]]

     the affiliated depository institution or against depository 
     institutions generally.
       ``(b) Limitation on Indirect Action.--The Board may not 
     prescribe regulations, issue or seek entry of orders, impose 
     restraints, restrictions, guidelines, requirements, 
     safeguards, or standards, or otherwise take any action under 
     or pursuant to any provision of this Act or section 8 of the 
     Federal Deposit Insurance Act against or with respect to a 
     financial holding company or a wholesale financial holding 
     company where the purpose or effect of doing so would be to 
     take action indirectly against or with respect to a regulated 
     subsidiary that may not be taken directly against or with 
     respect to such subsidiary in accordance with subsection (a).
       ``(c) Actions Specifically Authorized.--Notwithstanding 
     subsection (a), the Board may take action under this Act or 
     section 8 of the Federal Deposit Insurance Act to enforce 
     compliance by a regulated subsidiary with Federal law that 
     the Board has specific jurisdiction to enforce against such 
     subsidiary.
       ``(d) Regulated Subsidiary Defined.--For purposes of this 
     section, the term `regulated subsidiary' means any company 
     that is not a bank holding company and is--
       ``(1) a broker or dealer registered under the Securities 
     Exchange Act of 1934;
       ``(2) 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;
       ``(3) an investment company registered under the Investment 
     Company Act of 1940;
       ``(4) an insurance company or an insurance agency subject 
     to supervision by a State insurance commission, agency, or 
     similar authority; or
       ``(5) an entity subject to regulation by the Commodity 
     Futures Trading Commission, with respect to the commodities 
     activities of such entity and activities incidental to such 
     commodities activities.''.

     SEC. 117. INTERAGENCY CONSULTATION.

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

     SEC. 118. EQUIVALENT REGULATION AND SUPERVISION.

       (a) In General.--Notwithstanding any other provision of 
     law, the provisions of--
       (1) section 5(c) of the Bank Holding Company Act of 1956 
     (as amended by this Act) that limit the authority of the 
     Board of Governors of the Federal Reserve System to require 
     reports from, to make examinations of, or to impose capital 
     requirements on bank holding companies and their nonbank 
     subsidiaries; and
       (2) section 10A of the Bank Holding Company Act of 1956 (as 
     added by this Act) that limit whatever authority the Board 
     might otherwise have to take direct or indirect action with 
     respect to bank holding companies and their nonbank 
     subsidiaries,
     shall also limit whatever authority that the Federal Deposit 
     Insurance Corporation might otherwise have under any statute 
     to require reports, make examinations, impose capital 
     requirements or take any other direct or indirect action with 
     respect to bank holding companies and their nonbank 
     subsidiaries (including nonbank subsidiaries of depository 
     institutions), subject to the same standards and requirements 
     as are applicable to the Board under such provisions.
       (b) Certain Examinations Authorized.--Nothing in this 
     section shall prevent the Federal Deposit Insurance 
     Corporation, if the Corporation finds it necessary to 
     determine the condition of an insured depository institution 
     for insurance purposes, from examining an affiliate of any 
     insured depository institution, pursuant to its authority 
     under section 10(b)(4) of the Federal Deposit Insurance Act, 
     as may be necessary to disclose fully the relationship 
     between the depository institution and the affiliate, and the 
     effect of such relationship on the depository institution.

     SEC. 119. PROHIBITION ON FDIC ASSISTANCE TO AFFILIATES AND 
                   SUBSIDIARIES.

       Section 11(a)(4)(B) of the Federal Deposit Insurance Act 
     (12 U.S.C. 1821(a)(4)(B)) is amended by striking ``to benefit 
     any shareholder of'' and inserting ``to benefit any 
     shareholder, affiliate (other than an insured depository 
     institution that receives assistance in accordance with the 
     provisions of this Act), or subsidiary of''.
               Subtitle C--Subsidiaries of National Banks

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

       (a) Financial Subsidiaries of National Banks.--Chapter one 
     of title LXII of the Revised Statutes of United States (12 
     U.S.C. 21 et seq.) is amended--
       (1) by redesignating section 5136A (12 U.S.C. 25a) as 
     section 5136C; and
       (2) by inserting after section 5136 (12 U.S.C. 24) the 
     following new section:

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

       ``(a) Activities Permissible.--

[[Page S4692]]

       ``(1) In general.--A subsidiary of a national bank may--
       ``(A) engage in any activity that is permissible for the 
     parent national bank;
       ``(B) engage in any activity that is authorized under the 
     Bank Service Company Act, section 25 or 25A of the Federal 
     Reserve Act, or any other Federal statute that expressly 
     authorizes national banks to own or control subsidiaries; and
       ``(C) engage in any activity that is permissible for a bank 
     holding company under any provision of section 6(c) of the 
     Bank Holding Company Act of 1956, other than--
       ``(i) paragraph (3)(B) of that section (relating to 
     insurance activities), insofar as that paragraph (3)(B) 
     permits a bank holding company to engage as principal in 
     insuring, guaranteeing, or indemnifying against loss, harm, 
     damage, illness, disability, or death, or in providing or 
     issuing annuities; and
       ``(ii) paragraph (3)(I) of that section (relating to 
     insurance company investments).
       ``(2) Activity limitations.--In addition to any other 
     limitation imposed on the activity of subsidiaries of 
     national banks, a subsidiary of a national bank may not, 
     pursuant to paragraph (1)--
       ``(A) engage as principal in insuring, guaranteeing, or 
     indemnifying against loss, harm, damage, illness, disability, 
     or death (other than in connection with credit-related 
     insurance) or in providing or issuing annuities; or
       ``(B) engage in real estate investment or development 
     activities,
     (except to the extent that a Federal statute expressly 
     authorizes a national bank to engage directly in such an 
     activity).
       ``(3) Size factor with regard to free-standing national 
     banks.--A national bank which has total assets of 
     $10,000,000,000 or more may not control a subsidiary engaged 
     in activities pursuant to paragraph (1) or (2) unless such 
     national bank is a subsidiary of a bank holding company.
       ``(b) Requirements Applicable to National Banks With 
     Financial Subsidiaries.--
       ``(1) In general.--A financial subsidiary of a national 
     bank may engage in activities pursuant to subsection 
     (a)(1)(C) only if--
       ``(A) the national bank is well capitalized, is well 
     managed, and achieved the rating described in section 
     6(b)(1)(C) of the Bank Holding Company Act of 1956, during 
     the most recent examination of the bank by the Comptroller of 
     the Currency;
       ``(B) each insured depository institution affiliate of the 
     national bank is well capitalized, is well managed, and 
     achieved the rating described in section 6(b)(1)(C) of the 
     Bank Holding Company Act of 1956, during the most recent 
     examination of the institution by the appropriate Federal 
     banking agency;
       ``(C) the national bank and each of the subsidiary 
     depository institutions of the same bank holding company have 
     achieved a rating of `satisfactory record of meeting 
     community credit needs', or better, at the most recent 
     examination of each such institution under the Community 
     Reinvestment Act of 1977; and
       ``(D) the national bank has received the approval of the 
     Comptroller of the Currency by regulation or order.
       ``(2) Corrective procedure.--
       ``(A) In general.--If a national bank that controls a 
     financial subsidiary, or any insured depository institution 
     affiliated with such national bank, fails to meet the 
     requirements of paragraph (1), the Comptroller shall give 
     written notice to the national bank to that effect, 
     describing the conditions giving rise to the notice.
       ``(B) Agreement to correct conditions required.--
       ``(i) Content of agreement.--Not later than 45 days after 
     the date on which the national bank receives a notice under 
     subparagraph (A) (or such additional period of time as the 
     Comptroller may permit), the national bank or its insured 
     depository institution affiliate failing to meet the 
     requirements of paragraph (1) shall provide a plan to the 
     appropriate Federal banking agency for such institution to 
     correct the conditions described in the notice.
       ``(ii) Comptroller may impose limitations.--Until the 
     conditions giving rise to the notice referred to in clause 
     (i) are corrected, the Comptroller may (notwithstanding any 
     other provision of law) impose such limitations on the 
     conduct of the business of the national bank or the financial 
     subsidiary of the national bank as the Comptroller determines 
     to be appropriate under the circumstances.
       ``(iii) Certain failures to comply.--A national bank shall 
     not be required to divest any financial subsidiary held, or 
     terminate any activity conducted pursuant to, subsection (a) 
     solely because of a failure to comply with subsection 
     (b)(1)(D).
       ``(C) Failure to correct.--If the conditions described in 
     the notice under subparagraph (A) are not corrected before 
     the end of the 180-day period beginning on the date on which 
     the bank receives the notice, the Comptroller may 
     (notwithstanding any other provision of law) require, under 
     such terms and conditions as the Comptroller may impose--
       ``(i) that the national bank divest control of each 
     financial subsidiary engaged in an activity that is not 
     permissible for the bank to engage in directly; or
       ``(ii) that each financial subsidiary of the national bank 
     cease any activity that is not permissible for the bank to 
     engage in directly.
       ``(c) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       ``(1) Affiliate.--The term `affiliate' has the same meaning 
     in section 3 of the Federal Deposit Insurance Act.
       ``(2) Financial subsidiary.--The term `financial 
     subsidiary' means a company that--
       ``(A) is a subsidiary of an insured bank; and
       ``(B) is engaged in any financial activity that is not 
     otherwise permissible under subparagraph (A) or (B) of 
     subsection (a)(1) of this section.
       ``(3) Subsidiary.--The term `subsidiary' has the same 
     meaning as in section 2 of the Bank Holding Company Act of 
     1956.
       ``(4) Well capitalized.--The term `well capitalized' has 
     the same meaning as in section 38 of the Federal Deposit 
     Insurance Act. For purposes of this section, the appropriate 
     Federal banking agency shall have exclusive jurisdiction to 
     determine whether an insured depository institution is well 
     capitalized.
       ``(5) Well managed.--The term `well managed' means--
       ``(A) in the case of an insured depository institution that 
     has been examined, the achievement of--
       ``(i) a composite rating of 1 or 2 under the Uniform 
     Financial Institutions Rating System (or an equivalent rating 
     under an equivalent rating system) in connection with the 
     most recent examination or subsequent review of the 
     insured depository institution; and
       ``(ii) at least a rating of 2 for management, if that 
     rating is given; or
       ``(B) in the case of an insured depository institution that 
     has not been examined, the existence and use of managerial 
     resources that the appropriate Federal banking agency 
     determines are satisfactory.''.
       (b) Clerical Amendment.--The table of sections for chapter 
     one of title LXII of the Revised Statutes of the United 
     States is amended--
       (1) by redesignating the item relating to section 5136A as 
     section 5136C; and
       (2) by inserting after the item relating to section 5136 
     the following new item:

``5136A. Subsidiaries of national banks.''.

     SEC. 122. SUBSIDIARIES OF STATE BANKS.

       (a) Subsidiaries of State Banks Authorized To Engage in 
     Financial Activities.--Section 24(d) of the Federal Deposit 
     Insurance Act (12 U.S.C. 1831a(d)) is amended by adding at 
     the end the following new paragraphs:
       ``(4) Conditions on certain activities.--
       ``(A) In general.--No subsidiary of a State bank shall 
     engage as principal in an activity that is not described in 
     subparagraph (A) or (B) of section 5136A(a)(1) of the Revised 
     Statutes of the United States unless the State bank is in 
     compliance with the requirements of subsection (b) of that 
     section 5136A and receives the approval of the appropriate 
     Federal banking agency.
       ``(B) Application of section 5136a of revised statutes.--
     For purposes of applying section 5136A of the Revised 
     Statutes of the United States to the activities of a 
     subsidiary of a State bank under this paragraph--
       ``(i) all references in that section to a national bank 
     shall be deemed to be references to a State bank;
       ``(ii) all references in that section to the Comptroller of 
     the Currency shall be deemed to be references to the 
     appropriate Federal banking agency with respect to such State 
     bank; and
       ``(iii) all references to regulations and orders of the 
     Comptroller shall be deemed to be references to regulations 
     and orders of the appropriate Federal banking agency.
       ``(C) Notification of noncompliance.--The Board of 
     Governors of the Federal Reserve System, the Corporation, the 
     Comptroller of the Currency, and the Office of Thrift 
     Supervision shall establish procedures for notifying the 
     appropriate Federal banking agency if a national bank, State 
     bank, or savings association that is affiliated with a State 
     bank under this paragraph fails to meet the requirements 
     described in subparagraph (A).''.
       (b) Financial Subsidiaries of State Member Banks.--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 new sentence: ``To the extent permitted under State 
     law, a State member bank may acquire, establish, or retain a 
     financial subsidiary (as defined in section 5136A(c) of the 
     Revised Statutes of the United States), except that all 
     references in subsection (b) of that section 5136A to the 
     Comptroller of the Currency, the Comptroller, or regulations 
     or orders of the Comptroller, shall be deemed to be 
     references to the Board or regulations or orders of the 
     Board.''.

     SEC. 123. SAFETY AND SOUNDNESS FIREWALLS BETWEEN BANKS AND 
                   THEIR FINANCIAL SUBSIDIARIES.

       (a) Purposes.--The purposes of this section are--
       (1) to protect the safety and soundness of any insured bank 
     that has a financial subsidiary;
       (2) to apply to any transaction between the bank and the 
     financial subsidiary (including a loan, extension of credit, 
     guarantee, or purchase of assets), other than an equity 
     investment, the same restrictions and requirements as would 
     apply if the financial subsidiary were a subsidiary of a bank 
     holding company having control of the bank; and

[[Page S4693]]

       (3) to apply to any equity investment of the bank in the 
     financial subsidiary restrictions and requirements equivalent 
     to those that would apply if--
       (A) the bank paid a dividend in the same dollar amount to a 
     bank holding company having control of the bank; and
       (B) the bank holding company used the proceeds of the 
     dividend to make an equity investment in a subsidiary that 
     was engaged in the same activities as the financial 
     subsidiary of the bank.
       (b) Safety and Soundness Firewalls Applicable to 
     Subsidiaries of Banks.--The Federal Deposit Insurance Act (12 
     U.S.C. 1811 et seq.) is amended by adding at the end the 
     following new section:

     ``SEC. 45. SAFETY AND SOUNDNESS FIRE WALLS APPLICABLE TO 
                   SUBSIDIARIES OF BANKS.

       ``(a) Limiting the Equity Investment of a Bank in a 
     Subsidiary.--
       ``(1) Capital deduction.--In determining whether an insured 
     bank complies with applicable regulatory capital standards, 
     the appropriate Federal banking agency shall deduct from 
     assets and tangible equity of the bank the aggregate amount 
     of the outstanding equity investments of the bank in the 
     financial subsidiaries of the bank, and the assets and 
     liabilities of such financial subsidiaries shall not be 
     consolidated with those of the bank.
       ``(2) Investment limitation.--An insured bank may not, 
     without the prior approval of the appropriate Federal banking 
     agency, purchase or make an investment in the equity 
     securities of a financial subsidiary that would, at the time 
     of such purchase or investment, exceed the amount that the 
     bank could pay as a dividend without obtaining prior 
     regulatory approval.
       ``(b) Operational and Financial Safeguards for the Bank.--
     An insured bank that has a financial subsidiary shall 
     maintain procedures for identifying and managing financial 
     and operational risks posed by the financial subsidiary.
       ``(c) Maintenance of Separate Corporate Identity and 
     Separate Legal Status.--
       ``(1) In general.--Each insured bank shall ensure that the 
     bank maintains and complies with reasonable policies and 
     procedures to preserve the separate corporate identity and 
     legal status of the bank and any financial subsidiary or 
     affiliate of the bank.
       ``(2) Examinations.--The appropriate Federal banking 
     agency, as part of each examination, shall review whether an 
     insured bank is observing the separate corporate identity and 
     separate legal status of any subsidiaries and affiliates of 
     the bank.
       ``(d) Financial Subsidiary Defined.--For purposes of this 
     section, the term `financial subsidiary' has the same meaning 
     as section 5136A(c) of the Revised Statutes of the United 
     States.
       ``(e) Regulations.--The appropriate Federal banking 
     agencies shall jointly prescribe regulations implementing 
     this section.''.
       (c) Limiting the Credit Exposure of a Bank to a Financial 
     Subsidiary to the Amount of Permissible Credit Exposure to an 
     Affiliate.--Section 23A of the Federal Reserve Act (12 U.S.C. 
     371c) is amended--
       (1) by redesignating subsection (e) as subsection (f); and
       (2) by inserting after subsection (d), the following new 
     subsection:
       ``(e) Rules Relating to Banks With Financial 
     Subsidiaries.--
       ``(1) Financial subsidiary defined.--For purposes of this 
     section and section 23B, the term `financial subsidiary' has 
     the same meaning as section 5136A(c) of the Revised Statutes 
     of the United States.
       ``(2) Application to transactions between a financial 
     subsidiary of a bank and the bank.--For purposes of applying 
     this section and section 23B to a transaction between a 
     financial subsidiary of a bank and the bank (or between such 
     financial subsidiary and any other subsidiary of the bank 
     that is not a financial subsidiary), and notwithstanding 
     subsection (b)(2) of this section and section 23B(d)(1)--
       ``(A) the financial subsidiary of the bank--
       ``(i) shall be an affiliate of the bank and of any other 
     subsidiary of the bank that is not a financial subsidiary; 
     and
       ``(ii) shall not be deemed a subsidiary of the bank; and
       ``(B) a purchase of or investment in equity securities 
     issued by the financial subsidiary shall not be deemed to be 
     a covered transaction.
       ``(3) Application to transactions between financial 
     subsidiary and nonbank affiliates.--
       ``(A) In general.--A transaction between a financial 
     subsidiary and an affiliate of the financial subsidiary (that 
     is not a subsidiary of a bank) shall not be deemed to be a 
     transaction between a subsidiary of a bank and an affiliate 
     of the bank for purposes of section 23A or section 23B of 
     this Act.
       ``(B) Certain affiliates excluded.--For purposes of this 
     paragraph and notwithstanding paragraph (4), the term 
     `affiliate' shall not include a bank, or a subsidiary of a 
     bank that is engaged exclusively in activities permissible 
     for a national bank to engage in directly or activities 
     referred to in section 5136A(a)(1)(B) of the Revised Statutes 
     of the United States.''.

     SEC. 124. FUNCTIONAL REGULATION.

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

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

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

     SEC. 125. MISREPRESENTATIONS REGARDING DEPOSITORY INSTITUTION 
                   LIABILITY FOR OBLIGATIONS OF AFFILIATES.

       (a) In General.--Chapter 47 of title 18, United States 
     Code, is amended by inserting after section 1007 the 
     following new section:

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

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

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

     SEC. 126. REPEAL OF STOCK LOAN LIMIT IN FEDERAL RESERVE ACT.

       Section 11 of the Federal Reserve Act (12 U.S.C. 248) is 
     amended by striking the paragraph designated as ``(m)'' and 
     inserting ``(m) [Repealed]''.
Subtitle D--Wholesale Financial Holding Companies; Wholesale Financial 
                              Institutions

            CHAPTER 1--WHOLESALE FINANCIAL HOLDING COMPANIES

     SEC. 131. WHOLESALE FINANCIAL HOLDING COMPANIES ESTABLISHED.

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

     ``SEC. 10. WHOLESALE FINANCIAL HOLDING COMPANIES.

       ``(a) Companies That Control Wholesale Financial 
     Institutions.--
       ``(1) Wholesale financial holding company defined.--The 
     term `wholesale financial holding company' means any company 
     that--
       ``(A) is registered as a bank holding company;
       ``(B) is predominantly engaged in financial activities as 
     defined in section 6(g)(2);
       ``(C) controls 1 or more wholesale financial institutions;
       ``(D) does not control--
       ``(i) a bank other than a wholesale financial institution;
       ``(ii) an insured bank other than an institution permitted 
     under subparagraph (D), (F), or (G) of section 2(c)(2); or
       ``(iii) a savings association; and
       ``(E) is not a foreign bank (as defined in section 1(b)(7) 
     of the International Banking Act of 1978).
       ``(2) Savings association transition period.--
     Notwithstanding paragraph (1)(D)(iii),

[[Page S4694]]

     the Board may permit a company that controls a savings 
     association and that otherwise meets the requirements of 
     paragraph (1) to become supervised under paragraph (1), if 
     the company divests control of any such savings association 
     within such period, not to exceed 5 years after becoming 
     supervised under paragraph (1), as permitted by the Board.
       ``(b) Supervision by the Board.--
       ``(1) In general.--The provisions of this section shall 
     govern the reporting, examination, and capital requirements 
     of wholesale financial holding companies.
       ``(2) Reports.--
       ``(A) In general.--The Board from time to time may require 
     any wholesale financial holding company and any subsidiary of 
     such company to submit reports under oath to keep the Board 
     informed as to--
       ``(i) the company's or subsidiary's activities, financial 
     condition, policies, systems for monitoring and controlling 
     financial and operational risks, and transactions with 
     depository institution subsidiaries of the holding company; 
     and
       ``(ii) the extent to which the company or subsidiary has 
     complied with the provisions of this Act and regulations 
     prescribed and orders issued under this Act.
       ``(B) Use of existing reports.--
       ``(i) In general.--The Board shall, to the fullest extent 
     possible, accept reports in fulfillment of the Board's 
     reporting requirements under this paragraph that the 
     wholesale financial holding company or any subsidiary of such 
     company has provided or been required to provide to other 
     Federal and State supervisors or to appropriate self-
     regulatory organizations.
       ``(ii) Availability.--A wholesale financial holding company 
     or a subsidiary of such company shall provide to the Board, 
     at the request of the Board, a report referred to in clause 
     (i).
       ``(C) Exemptions from reporting requirements.--
       ``(i) In general.--The Board may, by regulation or order, 
     exempt any company or class of companies, under such terms 
     and conditions and for such periods as the Board shall 
     provide in such regulation or order, from the provisions of 
     this paragraph and any regulation prescribed under this 
     paragraph.
       ``(ii) Criteria for consideration.--In making any 
     determination under clause (i) with regard to any exemption 
     under such clause, the Board shall consider, among such other 
     factors as the Board may determine to be appropriate, the 
     following factors:

       ``(I) Whether information of the type required under this 
     paragraph is available from a supervisory agency (as defined 
     in section 1101(7) of the Right to Financial Privacy Act of 
     1978) or a foreign regulatory authority of a similar type.
       ``(II) The primary business of the company.
       ``(III) The nature and extent of the domestic and foreign 
     regulation of the activities of the company.

       ``(3) Examinations.--
       ``(A) Limited use of examination authority.--The Board may 
     make examinations of each wholesale financial holding company 
     and each subsidiary of such company in order to--
       ``(i) inform the Board regarding the nature of the 
     operations and financial condition of the wholesale financial 
     holding company and its subsidiaries;
       ``(ii) inform the Board regarding--

       ``(I) the financial and operational risks within the 
     wholesale financial holding company system that may affect 
     any depository institution owned by such holding company; and
       ``(II) the systems of the holding company and its 
     subsidiaries for monitoring and controlling those risks; and

       ``(iii) monitor compliance with the provisions of this Act 
     and those governing transactions and relationships between 
     any depository institution controlled by the wholesale 
     financial holding company and any of the company's other 
     subsidiaries.
       ``(B) Restricted focus of examinations.--The Board shall, 
     to the fullest extent possible, limit the focus and scope of 
     any examination of a wholesale financial holding company 
     under this paragraph to--
       ``(i) the holding company; and
       ``(ii) any subsidiary (other than an insured depository 
     institution subsidiary) of the holding company that, because 
     of the size, condition, or activities of the subsidiary, the 
     nature or size of transactions between such subsidiary and 
     any affiliated depository institution, or the centralization 
     of functions within the holding company system, could have a 
     materially adverse effect on the safety and soundness of any 
     depository institution affiliate of the holding company.
       ``(C) Deference to bank examinations.--The Board shall, to 
     the fullest extent possible, use the reports of examination 
     of depository institutions made by the Comptroller of the 
     Currency, the Federal Deposit Insurance Corporation, the 
     Director of the Office of Thrift Supervision or the 
     appropriate State depository institution supervisory 
     authority for the purposes of this section.
       ``(D) Deference to other examinations.--The Board shall, to 
     the fullest extent possible, address the circumstances which 
     might otherwise permit or require an examination by the Board 
     by forgoing an examination and by instead reviewing the 
     reports of examination made of--
       ``(i) any registered broker or dealer or any registered 
     investment adviser by or on behalf of the Commission; and
       ``(ii) any licensed insurance company by or on behalf of 
     any State government insurance agency responsible for the 
     supervision of the insurance company.
       ``(E) Confidentiality of reported information.--
       ``(i) In general.--Notwithstanding any other provision of 
     law, the Board shall not be compelled to disclose any 
     nonpublic information required to be reported under this 
     paragraph, or any information supplied to the Board by any 
     domestic or foreign regulatory agency, that relates to the 
     financial or operational condition of any wholesale financial 
     holding company or any subsidiary of such company.
       ``(ii) Compliance with requests for information.--No 
     provision of this subparagraph shall be construed as 
     authorizing the Board to withhold information from the 
     Congress, or preventing the Board from complying with a 
     request for information from any other Federal department or 
     agency for purposes within the scope of such department's or 
     agency's jurisdiction, or from complying with any order of a 
     court of competent jurisdiction in an action brought by the 
     United States or the Board.
       ``(iii) Coordination with other law.--For purposes of 
     section 552 of title 5, United States Code, this subparagraph 
     shall be considered to be a statute described in subsection 
     (b)(3)(B) of such section.
       ``(iv) Designation of confidential information.--In 
     prescribing regulations to carry out the requirements of this 
     subsection, the Board shall designate information described 
     in or obtained pursuant to this paragraph as confidential 
     information.
       ``(F) Costs.--The cost of any examination conducted by the 
     Board under this section may be assessed against, and made 
     payable by, the wholesale financial holding company.
       ``(4) Capital adequacy guidelines.--
       ``(A) Capital adequacy provisions.--Subject to the 
     requirements of, and solely in accordance with, the terms of 
     this paragraph, the Board may adopt capital adequacy rules or 
     guidelines for wholesale financial holding companies.
       ``(B) Method of calculation.--In developing rules or 
     guidelines under this paragraph, the following provisions 
     shall apply:
       ``(i) Focus on double leverage.--The Board shall focus on 
     the use by wholesale financial holding companies of debt and 
     other liabilities to fund capital investments in 
     subsidiaries.
       ``(ii) No unweighted capital ratio.--The Board shall not, 
     by regulation, guideline, order, or otherwise, impose under 
     this section a capital ratio that is not based on appropriate 
     risk-weighting considerations.
       ``(iii) No capital requirement on regulated entities.--The 
     Board shall not, by regulation, guideline, order or 
     otherwise, prescribe or impose any capital or capital 
     adequacy rules, standards, guidelines, or requirements upon 
     any subsidiary that--

       ``(I) is not a depository institution; and
       ``(II) is in compliance with applicable capital 
     requirements of another Federal regulatory authority 
     (including the Securities and Exchange Commission) or State 
     insurance authority.

       ``(iv) Certain subsidiaries.--The Board shall not, by 
     regulation, guideline, order or otherwise, prescribe or 
     impose any capital or capital adequacy rules, standards, 
     guidelines, or requirements upon any subsidiary that is not a 
     depository institution and that is registered as an 
     investment adviser under the Investment Advisers Act of 1940, 
     except that this clause shall not be construed as preventing 
     the Board from imposing capital or capital adequacy rules, 
     guidelines, standards, or requirements with respect to 
     activities of a registered investment adviser other than 
     investment advisory activities or activities incidental to 
     investment advisory activities.
       ``(v) Limitations on indirect action.--In developing, 
     establishing, or assessing holding company capital or capital 
     adequacy rules, guidelines, standards, or requirements for 
     purposes of this paragraph, the Board shall not take into 
     account the activities, operations, or investments of an 
     affiliated investment company registered under the Investment 
     Company Act of 1940, if the investment company is not--

       ``(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, where the shares owned by the bank 
     holding company have a market value equal to more than 
     $1,000,000.

       ``(vi) Appropriate exclusions.--The Board shall take full 
     account of--

       ``(I) the capital requirements made applicable to any 
     subsidiary that is not a depository institution by another 
     Federal regulatory authority or State insurance authority; 
     and
       ``(II) industry norms for capitalization of a company's 
     unregulated subsidiaries and activities.

       ``(vii) Internal risk management models.--The Board may 
     incorporate internal risk management models of wholesale 
     financial holding companies into its capital adequacy 
     guidelines or rules and may take account of the extent to 
     which resources of a subsidiary depository institution may be 
     used to service the debt or other liabilities of the 
     wholesale financial holding company.

[[Page S4695]]

       ``(c) Nonfinancial Activities and Investments.--
       ``(1) Grandfathered activities.--
       ``(A) In general.--Notwithstanding section 4(a), a company 
     that becomes a wholesale financial holding company may 
     continue to engage, directly or indirectly, in any activity 
     and may retain ownership and control of shares of a company 
     engaged in any activity if--
       ``(i) on the date of enactment of the Financial Services 
     Act of 1999, such wholesale financial holding company was 
     lawfully engaged in that nonfinancial activity, held the 
     shares of such company, or had entered into a contract to 
     acquire shares of any company engaged in such activity; and
       ``(ii) the company engaged in such activity continues to 
     engage only in the same activities that such company 
     conducted on the date of enactment of the Financial Services 
     Act of 1999, and other activities permissible under this Act.
       ``(B) No expansion of grandfathered commercial activities 
     through merger or consolidation.--A wholesale financial 
     holding company that engages in activities or holds shares 
     pursuant to this paragraph, or a subsidiary of such wholesale 
     financial holding company, may not acquire, in any merger, 
     consolidation, or other type of business combination, assets 
     of any other company which is engaged in any activity which 
     the Board has not determined to be financial in nature or 
     incidental to activities that are financial in nature under 
     section 6(c).
       ``(C) Limitation to single exemption.--No company that 
     engages in any activity or controls any shares under 
     subsection (f) of section 6 may engage in any activity or own 
     any shares pursuant to this paragraph.
       ``(2) Commodities.--
       ``(A) In general.--Notwithstanding section 4(a), a 
     wholesale financial holding company which was predominately 
     engaged as of January 1, 1997, in financial activities in the 
     United States (or any successor to any such company) may 
     engage in, or directly or indirectly own or control shares of 
     a company engaged in, activities related to the trading, 
     sale, or investment in commodities and underlying physical 
     properties that were not permissible for bank holding 
     companies to conduct in the United States as of January 1, 
     1997, if such wholesale financial holding company, or any 
     subsidiary of such holding company, was engaged directly, 
     indirectly, or through any such company in any of such 
     activities as of January 1, 1997, in the United States.
       ``(B) Limitation.--The attributed aggregate consolidated 
     assets of a wholesale financial holding company held under 
     the authority granted under this paragraph and not otherwise 
     permitted to be held by all wholesale financial holding 
     companies under this section may not exceed 5 percent of the 
     total consolidated assets of the wholesale financial holding 
     company, except that the Board may increase such percentage 
     of total consolidated assets by such amounts and under such 
     circumstances as the Board considers appropriate, consistent 
     with the purposes of this Act.
       ``(3) Cross marketing restrictions.--A wholesale financial 
     holding company shall not permit--
       ``(A) any company whose shares it owns or controls pursuant 
     to paragraph (1) or (2) to offer or market any product or 
     service of an affiliated wholesale financial institution; or
       ``(B) any affiliated wholesale financial institution to 
     offer or market any product or service of any company whose 
     shares are owned or controlled by such wholesale financial 
     holding company pursuant to such paragraphs.
       ``(d) Qualification of Foreign Bank as Wholesale Financial 
     Holding Company.--
       ``(1) In general.--Any foreign bank, or any company that 
     owns or controls a foreign bank, that operates a branch, 
     agency, or commercial lending company in the United States, 
     including a foreign bank or company that owns or controls a 
     wholesale financial institution, may request a determination 
     from the Board that such bank or company be treated as a 
     wholesale financial holding company (other than for purposes 
     of subsection (c)), subject to such conditions as the Board 
     deems appropriate, giving due regard to the principle of 
     national treatment and equality of competitive opportunity 
     and the requirements imposed on domestic banks and companies.
       ``(2) Conditions for treatment as a wholesale financial 
     holding company.--A foreign bank and a company that owns or 
     controls a foreign bank may not be treated as a wholesale 
     financial holding company unless the bank and company meet 
     and continue to meet the following criteria:
       ``(A) No insured deposits.--No deposits held directly by a 
     foreign bank or through an affiliate (other than an 
     institution described in subparagraph (D) or (F) of section 
     2(c)(2)) are insured under the Federal Deposit Insurance Act.
       ``(B) Capital standards.--The foreign bank meets risk-based 
     capital standards comparable to the capital standards 
     required for a wholesale financial institution, giving due 
     regard to the principle of national treatment and equality of 
     competitive opportunity.
       ``(C) Transaction with affiliates.--Transactions between a 
     branch, agency, or commercial lending company subsidiary of 
     the foreign bank in the United States, and any securities 
     affiliate or company in which the foreign bank (or any 
     company that owns or controls such foreign bank) has invested 
     and which engages in any activity authorized only as a result 
     of the application of subsection (c) or (g) of section 6, 
     comply with the provisions of sections 23A and 23B of the 
     Federal Reserve Act in the same manner and to the same extent 
     as such transactions would be required to comply with such 
     sections if the foreign bank were a member bank.
       ``(3) Treatment as a wholesale financial institution.--Any 
     foreign bank which is, or is affiliated with a company which 
     is, treated as a wholesale financial holding company under 
     this subsection shall be treated as a wholesale financial 
     institution for purposes of paragraphs (1)(C) and (3) of 
     section 9B(c) of the Federal Reserve Act, and any such 
     foreign bank or company shall be subject to paragraphs (3), 
     (4), and (5) of section 9B(d) of the Federal Reserve Act, 
     except that the Board may adopt such modifications, 
     conditions, or exemptions as the Board deems appropriate, 
     giving due regard to the principle of national treatment and 
     equality of competitive opportunity.
       ``(4) Supervision of foreign bank which maintains no 
     banking presence other than control of a wholesale financial 
     institution.--A foreign bank that owns or controls a 
     wholesale financial institution but does not operate a 
     branch, agency, or commercial lending company in the United 
     States (and any company that owns or controls such foreign 
     bank) may request a determination from the Board that such 
     bank or company be treated as a wholesale financial holding 
     company, except that such bank or company shall be subject to 
     the restrictions of paragraphs (2)(A) and (3) of this 
     subsection.
       ``(5) No effect on other provisions.--This section shall 
     not be construed as limiting the authority of the Board under 
     the International Banking Act of 1978 with respect to the 
     regulation, supervision, or examination of foreign banks and 
     their offices and affiliates in the United States.''.
       (b) Uninsured State Banks.--Section 9 of the Federal 
     Reserve Act (12 U.S.C. 321 et seq.) is amended by adding at 
     the end the following new paragraph:
       ``(24) Enforcement authority over uninsured state member 
     banks.--Section 3(u) of the Federal Deposit Insurance Act, 
     subsections (j) and (k) of section 7 of such Act, and 
     subsections (b) through (n), (s), (u), and (v) of section 8 
     of such Act shall apply to an uninsured State member bank in 
     the same manner and to the same extent such provisions apply 
     to an insured State member bank and any reference in any such 
     provision to `insured depository institution' shall be deemed 
     to be a reference to `uninsured State member bank' for 
     purposes of this paragraph.''.

     SEC. 132. AUTHORIZATION TO RELEASE REPORTS.

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

     SEC. 133. CONFORMING AMENDMENTS.

       (a) Bank Holding Company Act of 1956.--
       (1) Definitions.--Section 2 of the Bank Holding Company Act 
     of 1956 (12 U.S.C. 1842) is amended by adding at the end the 
     following new subsections:
       ``(p) Wholesale Financial Institution.--The term `wholesale 
     financial institution' means a wholesale financial 
     institution subject to section 9B of the Federal Reserve Act.
       ``(q) Commission.--The term `Commission' means the 
     Securities and Exchange Commission.
       ``(r) Depository Institution.--The term `depository 
     institution'--
       ``(1) has the same meaning as in section 3 of the Federal 
     Deposit Insurance Act; and
       ``(2) includes a wholesale financial institution.''.
       (2) Definition of bank includes wholesale financial 
     institution.--Section 2(c)(1) of the Bank Holding Company Act 
     of 1956 (12 U.S.C. 1841(c)(1)) is amended by adding at the 
     end the following new subparagraph:
       ``(C) A wholesale financial institution.''.
       (3) Incorporated definitions.--Section 2(n) of the Bank 
     Holding Company Act of 1956 (12 U.S.C. 1841(n)) is amended by 
     inserting `` `insured bank','' after `` `in danger of 
     default',''.
       (4) Exception to deposit insurance requirement.--Section 
     3(e) of the Bank Holding Company Act of 1956 (12 U.S.C. 
     1842(e)) is

[[Page S4696]]

     amended by adding at the end the following: ``This subsection 
     shall not apply to a wholesale financial institution.''.
       (b) Federal Deposit Insurance Act.--Section 3(q)(2)(A) of 
     the Federal Deposit Insurance Act (12 U.S.C. 1813(q)(2)(A)) 
     is amended to read as follows:
       ``(A) any State member insured bank (except a District 
     bank) and any wholesale financial institution as authorized 
     pursuant to section 9B of the Federal Reserve Act;''.

              CHAPTER 2--WHOLESALE FINANCIAL INSTITUTIONS

     SEC. 136. WHOLESALE FINANCIAL INSTITUTIONS.

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

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

       ``(a) Authorization of the Comptroller Required.--A 
     national bank may apply to the Comptroller on such forms and 
     in accordance with such regulations as the Comptroller may 
     prescribe, for permission to operate as a national wholesale 
     financial institution.
       ``(b) Regulation.--A national wholesale financial 
     institution may exercise, in accordance with such 
     institution's articles of incorporation and regulations 
     issued by the Comptroller, all the powers and privileges of a 
     national bank formed in accordance with section 5133 of the 
     Revised Statutes of the United States, subject to section 9B 
     of the Federal Reserve Act and the limitations and 
     restrictions contained therein.
       ``(c) Community Reinvestment Act of 1977.--A national 
     wholesale financial institution shall be subject to the 
     Community Reinvestment Act of 1977, only if the wholesale 
     financial institution has an affiliate that is an insured 
     depository institution or that operates an insured branch, as 
     those terms are defined in section 3 of the Federal Deposit 
     Insurance Act.''.
       (2) Clerical amendment.--The table of sections for chapter 
     one of title LXII of the Revised Statutes of the United 
     States is amended by inserting after the item relating to 
     section 5136A (as added by section 121(d) of this title) the 
     following new item:

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

     ``SEC. 9B. WHOLESALE FINANCIAL INSTITUTIONS.

       ``(a) Application for Membership as Wholesale Financial 
     Institution.--
       ``(1) Application required.--
       ``(A) In general.--Any bank may apply to the Board of 
     Governors of the Federal Reserve System to become a wholesale 
     financial institution and, as a wholesale financial 
     institution, to subscribe to the stock of the Federal reserve 
     bank organized within the district where the applying bank is 
     located.
       ``(B) Treatment as member bank.--Any application under 
     subparagraph (A) shall be treated as an application under, 
     and shall be subject to the provisions of, section 9.
       ``(2) Insurance termination.--No bank the deposits of which 
     are insured under the Federal Deposit Insurance Act may 
     become a wholesale financial institution unless it has met 
     all requirements under that Act for voluntary termination of 
     deposit insurance.
       ``(b) General Requirements Applicable to Wholesale 
     Financial Institutions.--
       ``(1) Federal reserve act.--Except as otherwise provided in 
     this section, wholesale financial institutions shall be 
     member banks and shall be subject to the provisions of this 
     Act that apply to member banks to the same extent and in the 
     same manner as State member insured banks, except that a 
     wholesale financial institution may terminate membership 
     under this Act only with the prior written approval of the 
     Board and on terms and conditions that the Board determines 
     are appropriate to carry out the purposes of this Act.
       ``(2) Prompt corrective action.--A wholesale financial 
     institution shall be deemed to be an insured depository 
     institution for purposes of section 38 of the Federal Deposit 
     Insurance Act except that--
       ``(A) the relevant capital levels and capital measures for 
     each capital category shall be the levels specified by the 
     Board for wholesale financial institutions; and
       ``(B) all references to the appropriate Federal banking 
     agency or to the Corporation in that section shall be deemed 
     to be references to the Board.
       ``(3) Enforcement authority.--Subsections (j) and (k) of 
     section 7, subsections (b) through (n), (s), and (v) of 
     section 8, and section 19 of the Federal Deposit Insurance 
     Act shall apply to a wholesale financial institution in the 
     same manner and to the same extent as such provisions apply 
     to State member insured banks and any reference in such 
     sections to an insured depository institution shall be deemed 
     to include a reference to a wholesale financial institution.
       ``(4) Certain other statutes applicable.--A wholesale 
     financial institution shall be deemed to be a banking 
     institution, and the Board shall be the appropriate Federal 
     banking agency for such bank and all such bank's affiliates, 
     for purposes of the International Lending Supervision Act.
       ``(5) Bank merger act.--A wholesale financial institution 
     shall be subject to sections 18(c) and 44 of the Federal 
     Deposit Insurance Act in the same manner and to the same 
     extent the wholesale financial institution would be subject 
     to such sections if the institution were a State member 
     insured bank.
       ``(6) Branching.--Notwithstanding any other provision of 
     law, a wholesale financial institution may establish and 
     operate a branch at any location on such terms and conditions 
     as established by the Board and, in the case of a State-
     chartered wholesale financial institution, with the approval 
     of the Board, and, in the case of a national bank wholesale 
     financial institution, with the approval of the Comptroller 
     of the Currency.
       ``(7) Activities of out-of-state branches of wholesale 
     financial institutions.--
       ``(A) General.--A State-chartered wholesale financial 
     institution shall be deemed to be a State bank and an insured 
     State bank for purposes of paragraphs (1), (2), and (3) of 
     section 24(j) of the Federal Deposit Insurance Act, and a 
     national wholesale financial institution shall be deemed to 
     be a national bank for purposes of section 5155(f) of the 
     Revised Statutes of the United States.
       ``(B) Definitions.--The following definitions shall apply 
     solely for purposes of applying paragraph (1):
       ``(i) Home state.--The term `home State' means--

       ``(I) with respect to a national wholesale financial 
     institution, the State in which the main office of the 
     institution is located; and
       ``(II) with respect to a State-chartered wholesale 
     financial institution, the State by which the institution is 
     chartered.

       ``(ii) Host state.--The term `host State' means a State, 
     other than the home State of the wholesale financial 
     institution, in which the institution maintains, or seeks to 
     establish and maintain, a branch.
       ``(iii) Out-of-state bank.--The term `out-of-State bank' 
     means, with respect to any State, a wholesale financial 
     institution whose home State is another State.
       ``(8) Discrimination regarding interest rates.--Section 27 
     of the Federal Deposit Insurance Act shall apply to State-
     chartered wholesale financial institutions in the same manner 
     and to the same extent as such provisions apply to State 
     member insured banks and any reference in such section to a 
     State-chartered insured depository institution shall be 
     deemed to include a reference to a State-chartered wholesale 
     financial institution.
       ``(9) Preemption of state laws requiring deposit insurance 
     for wholesale financial institutions.--The appropriate State 
     banking authority may grant a charter to a wholesale 
     financial institution notwithstanding any State constitution 
     or statute requiring that the institution obtain insurance of 
     its deposits and any such State constitution or statute is 
     hereby preempted solely for purposes of this paragraph.
       ``(10) Parity for wholesale financial institutions.--A 
     State bank that is a wholesale financial institution under 
     this section shall have all of the rights, powers, 
     privileges, and immunities (including those derived from 
     status as a federally chartered institution) of and as if it 
     were a national bank, subject to such terms and conditions as 
     established by the Board.
       ``(11) Community reinvestment act of 1977.--A State 
     wholesale financial institution shall be subject to the 
     Community Reinvestment Act of 1977, only if the wholesale 
     financial institution has an affiliate that is an insured 
     depository institution or that operates an insured branch, as 
     those terms are defined in section 3 of the Federal Deposit 
     Insurance Act.
       ``(c) Specific Requirements Applicable to Wholesale 
     Financial Institutions.--
       ``(1) Limitations on deposits.--
       ``(A) Minimum amount.--
       ``(i) In general.--No wholesale financial institution may 
     receive initial deposits of $100,000 or less, other than on 
     an incidental and occasional basis.
       ``(ii) Limitation on deposits of less than $100,000.--No 
     wholesale financial institution may receive initial deposits 
     of $100,000 or less if such deposits constitute more than 5 
     percent of the institution's total deposits.
       ``(B) No deposit insurance.--Except as otherwise provided 
     in section 8A(f) of the Federal Deposit Insurance Act, no 
     deposits held by a wholesale financial institution shall be 
     insured deposits under the Federal Deposit Insurance Act.
       ``(C) Advertising and disclosure.--The Board shall 
     prescribe regulations pertaining to advertising and 
     disclosure by wholesale financial institutions to ensure that 
     each depositor is notified that deposits at the wholesale 
     financial institution are not federally insured or otherwise 
     guaranteed by the United States Government.
       ``(2) Minimum capital levels applicable to wholesale 
     financial institutions.--The Board shall, by regulation, 
     adopt capital requirements for wholesale financial 
     institutions--
       ``(A) to account for the status of wholesale financial 
     institutions as institutions that accept deposits that are 
     not insured under the Federal Deposit Insurance Act; and
       ``(B) to provide for the safe and sound operation of the 
     wholesale financial institution without undue risk to 
     creditors or other persons, including Federal reserve banks, 
     engaged in transactions with the bank.
       ``(3) Additional requirements applicable to wholesale 
     financial institutions.--In

[[Page S4697]]

     addition to any requirement otherwise applicable to State 
     member insured banks or applicable, under this section, to 
     wholesale financial institutions, the Board may impose, by 
     regulation or order, upon wholesale financial institutions--
       ``(A) limitations on transactions, direct or indirect, with 
     affiliates to prevent--
       ``(i) the transfer of risk to the deposit insurance funds; 
     or
       ``(ii) an affiliate from gaining access to, or the benefits 
     of, credit from a Federal reserve bank, including overdrafts 
     at a Federal reserve bank;
       ``(B) special clearing balance requirements; and
       ``(C) any additional requirements that the Board determines 
     to be appropriate or necessary to--
       ``(i) promote the safety and soundness of the wholesale 
     financial institution or any insured depository institution 
     affiliate of the wholesale financial institution;
       ``(ii) prevent the transfer of risk to the deposit 
     insurance funds; or
       ``(iii) protect creditors and other persons, including 
     Federal reserve banks, engaged in transactions with the 
     wholesale financial institution.
       ``(4) Exemptions for wholesale financial institutions.--The 
     Board may, by regulation or order, exempt any wholesale 
     financial institution from any provision applicable to a 
     member bank that is not a wholesale financial institution, if 
     the Board finds that such exemption is not inconsistent 
     with--
       ``(A) the promotion of the safety and soundness of the 
     wholesale financial institution or any insured depository 
     institution affiliate of the wholesale financial institution;
       ``(B) the protection of the deposit insurance funds; and
       ``(C) the protection of creditors and other persons, 
     including Federal reserve banks, engaged in transactions with 
     the wholesale financial institution.
       ``(5) Limitation on transactions between a wholesale 
     financial institution and an insured bank.--For purposes of 
     section 23A(d)(1) of the Federal Reserve Act, a wholesale 
     financial institution that is affiliated with an insured bank 
     shall not be a bank.
       ``(6) No effect on other provisions.--This section shall 
     not be construed as limiting the Board's authority over 
     member banks under any other provision of law, or to create 
     any obligation for any Federal reserve bank to make, 
     increase, renew, or extend any advance or discount under this 
     Act to any member bank or other depository institution.
       ``(d) Capital and Managerial Requirements.--
       ``(1) In general.--A wholesale financial institution shall 
     be well capitalized and well managed.
       ``(2) Notice to company.--The Board shall promptly provide 
     notice to a company that controls a wholesale financial 
     institution whenever such wholesale financial institution is 
     not well capitalized or well managed.
       ``(3) Agreement to restore institution.--Not later than 45 
     days after the date of receipt of a notice under paragraph 
     (2) (or such additional period not to exceed 90 days as the 
     Board may permit), the company shall execute an agreement 
     acceptable to the Board to restore the wholesale financial 
     institution to compliance with all of the requirements of 
     paragraph (1).
       ``(4) Limitations until institution restored.--Until the 
     wholesale financial institution is restored to compliance 
     with all of the requirements of paragraph (1), the Board may 
     impose such limitations on the conduct or activities of the 
     company or any affiliate of the company as the Board 
     determines to be appropriate under the circumstances.
       ``(5) Failure to restore.--If the company does not execute 
     and implement an agreement in accordance with paragraph (3), 
     comply with any limitation imposed under paragraph (4), 
     restore the wholesale financial institution to well 
     capitalized status not later than 180 days after the date of 
     receipt by the company of the notice described in paragraph 
     (2), or restore the wholesale financial institution to well 
     managed status within such period as the Board may permit, 
     the company shall, under such terms and conditions as may be 
     imposed by the Board and subject to such extension of time as 
     may be granted in the Board's discretion, divest control of 
     its subsidiary depository institutions.
       ``(6) Well managed defined.--For purposes of this 
     subsection, the term `well managed' has the same meaning as 
     in section 2 of the Bank Holding Company Act of 1956.
       ``(e) Resolution of Wholesale Financial Institutions.--
       ``(1) Conservatorship or receivership.--
       ``(A) Appointment.--The Board may appoint a conservator or 
     receiver for a wholesale financial institution to the same 
     extent and in the same manner as the Comptroller of the 
     Currency may appoint a conservator or receiver for a national 
     bank.
       ``(B) Powers.--The conservator or receiver for a wholesale 
     financial institution shall exercise the same powers, 
     functions, and duties, subject to the same limitations, as a 
     conservator or receiver for a national bank.
       ``(2) Board authority.--The Board shall have the same 
     authority with respect to any conservator or receiver 
     appointed for a wholesale financial institution under 
     paragraph (1), and the wholesale financial institution for 
     which it has been appointed, as the Comptroller of the 
     Currency has with respect to a conservator or receiver for a 
     national bank and the national bank for which the conservator 
     or receiver has been appointed.
       ``(3) Bankruptcy proceedings.--The Comptroller of the 
     Currency (in the case of a national wholesale financial 
     institution) and the Board may direct the conservator or 
     receiver of a wholesale financial institution to file a 
     petition pursuant to title 11, United States Code, in which 
     case, title 11, United States Code, shall apply to the 
     wholesale financial institution in lieu of otherwise 
     applicable Federal or State insolvency law.
       ``(f) Exclusive Jurisdiction.--Subsections (c) and (e) of 
     section 43 of the Federal Deposit Insurance Act shall not 
     apply to any wholesale financial institution.''.
       (c) Voluntary Termination of Insured Status by Certain 
     Institutions.--
       (1) Section 8 designations.--Section 8(a) of the Federal 
     Deposit Insurance Act (12 U.S.C. 1818(a)) is amended--
       (A) by striking paragraph (1); and
       (B) by redesignating paragraphs (2) through (10) as 
     paragraphs (1) through (9), respectively.
       (2) Voluntary termination of insured status.--The Federal 
     Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended by 
     inserting after section 8 the following new section:

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

       ``(a) In General.--Except as provided in subsection (b), an 
     insured State bank or a national bank may voluntarily 
     terminate such bank's status as an insured depository 
     institution in accordance with regulations of the Corporation 
     if--
       ``(1) the bank provides written notice of the bank's intent 
     to terminate such insured status--
       ``(A) to the Corporation and the Board of Governors of the 
     Federal Reserve System not less than 6 months before the 
     effective date of such termination; and
       ``(B) to all depositors at such bank, not less than 6 
     months before the effective date of the termination of such 
     status; and
       ``(2) either--
       ``(A) the deposit insurance fund of which such bank is a 
     member equals or exceeds the fund's designated reserve ratio 
     as of the date the bank provides a written notice 
     under paragraph (1) and the Corporation determines that 
     the fund will equal or exceed the applicable designated 
     reserve ratio for the 2 semiannual assessment periods 
     immediately following such date; or
       ``(B) the Corporation and the Board of Governors of the 
     Federal Reserve System approved the termination of the bank's 
     insured status and the bank pays an exit fee in accordance 
     with subsection (e).
       ``(b) Exception.--Subsection (a) shall not apply with 
     respect to--
       ``(1) an insured savings association; or
       ``(2) an insured branch that is required to be insured 
     under subsection (a) or (b) of section 6 of the International 
     Banking Act of 1978.
       ``(c) Eligibility for Insurance Terminated.--Any bank that 
     voluntarily elects to terminate the bank's insured status 
     under subsection (a) shall not be eligible for insurance on 
     any deposits or any assistance authorized under this Act 
     after the period specified in subsection (f)(1).
       ``(d) Institution Must Become Wholesale Financial 
     Institution or Terminate Deposit-Taking Activities.--Any 
     depository institution which voluntarily terminates such 
     institution's status as an insured depository institution 
     under this section may not, upon termination of insurance, 
     accept any deposits unless the institution is a wholesale 
     financial institution subject to section 9B of the Federal 
     Reserve Act.
       ``(e) Exit Fees.--
       ``(1) In general.--Any bank that voluntarily terminates 
     such bank's status as an insured depository institution under 
     this section shall pay an exit fee in an amount that the 
     Corporation determines is sufficient to account for the 
     institution's pro rata share of the amount (if any) which 
     would be required to restore the relevant deposit insurance 
     fund to the fund's designated reserve ratio as of the date 
     the bank provides a written notice under subsection (a)(1).
       ``(2) Procedures.--The Corporation shall prescribe, by 
     regulation, procedures for assessing any exit fee under this 
     subsection.
       ``(f) Temporary Insurance of Deposits Insured as of 
     Termination.--
       ``(1) Transition period.--The insured deposits of each 
     depositor in a State bank or a national bank on the effective 
     date of the voluntary termination of the bank's insured 
     status, less all subsequent withdrawals from any deposits of 
     such depositor, shall continue to be insured for a period of 
     not less than 6 months and not more than 2 years, as 
     determined by the Corporation. During such period, no 
     additions to any such deposits, and no new deposits in the 
     depository institution made after the effective date of such 
     termination shall be insured by the Corporation.
       ``(2) Temporary assessments; obligations and duties.--
     During the period specified in paragraph (1) with respect to 
     any bank, the bank shall continue to pay assessments under 
     section 7 as if the bank were an insured depository 
     institution. The bank shall, in all other respects, be 
     subject to the authority of the Corporation and the duties 
     and obligations of an insured depository institution under 
     this Act during such period, and in the event that the bank 
     is closed due to an inability to meet the demands of the 
     bank's depositors during such period, the

[[Page S4698]]

     Corporation shall have the same powers and rights with 
     respect to such bank as in the case of an insured depository 
     institution.
       ``(g) Advertisements.--
       ``(1) In general.--A bank that voluntarily terminates the 
     bank's insured status under this section shall not advertise 
     or hold itself out as having insured deposits, except that 
     the bank may advertise the temporary insurance of deposits 
     under subsection (f) if, in connection with any such 
     advertisement, the advertisement also states with equal 
     prominence that additions to deposits and new deposits made 
     after the effective date of the termination are not insured.
       ``(2) Certificates of deposit, obligations, and 
     securities.--Any certificate of deposit or other obligation 
     or security issued by a State bank or a national bank after 
     the effective date of the voluntary termination of the bank's 
     insured status under this section shall be accompanied by a 
     conspicuous, prominently displayed notice that such 
     certificate of deposit or other obligation or security is not 
     insured under this Act.
       ``(h) Notice Requirements.--
       ``(1) Notice to the corporation.--The notice required under 
     subsection (a)(1)(A) shall be in such form as the Corporation 
     may require.
       ``(2) Notice to depositors.--The notice required under 
     subsection (a)(1)(B) shall be--
       ``(A) sent to each depositor's last address of record with 
     the bank; and
       ``(B) in such manner and form as the Corporation finds to 
     be necessary and appropriate for the protection of 
     depositors.''.
       (3) Definition.--Section 19(b)(1)(A)(i) of the Federal 
     Reserve Act (12 U.S.C. 461(b)(1)(A)(i)) is amended by 
     inserting ``, or any wholesale financial institution subject 
     to section 9B of this Act'' after ``such Act''.
       (d) Technical and Conforming Amendments to the Bankruptcy 
     Code.--
       (1) Bankruptcy code debtors.--Section 109(b)(2) of title 
     11, United States Code, is amended by striking ``; or'' and 
     inserting the following: ``, except that--
       ``(A) a wholesale financial institution established under 
     section 5136B of the Revised Statutes of the United States or 
     section 9B of the Federal Reserve Act may be a debtor if a 
     petition is filed at the direction of the Comptroller of the 
     Currency (in the case of a wholesale financial institution 
     established under section 5136B of the Revised Statutes of 
     the United States) or the Board of Governors of the Federal 
     Reserve System (in the case of any wholesale financial 
     institution); and
       ``(B) a corporation organized under section 25A of the 
     Federal Reserve Act may be a debtor if a petition is filed at 
     the direction of the Board of Governors of the Federal 
     Reserve System; or''.
       (2) Chapter 7 debtors.--Section 109(d) of title 11, United 
     States Code, is amended to read as follows:
       ``(d) Only a railroad and a person that may be a debtor 
     under chapter 7 of this title, except that a stockbroker, a 
     wholesale financial institution established under section 
     5136B of the Revised Statutes of the United States or section 
     9B of the Federal Reserve Act, a corporation organized under 
     section 25A of the Federal Reserve Act, or a commodity 
     broker, may be a debtor under chapter 11 of this title.''.
       (3) Definition of financial institution.--Section 101(22) 
     of title 11, United States Code, is amended to read as 
     follows:
       ``(22) `financial institution' means a person that is a 
     commercial or savings bank, industrial savings bank, savings 
     and loan association, trust company, wholesale financial 
     institution established under section 5136B of the Revised 
     Statutes of the United States or section 9B of the Federal 
     Reserve Act, or corporation organized under section 25A of 
     the Federal Reserve Act and, when any such person is acting 
     as agent or custodian for a customer in connection with a 
     securities contract, as defined in section 741 of this title, 
     such customer,''.
       (4) Subchapter v of chapter 7.--
       (A) In general.--Section 103 of title 11, United States 
     Code, is amended--
       (i) by redesignating subsections (e) through (i) as 
     subsections (f) through (j), respectively; and
       (ii) by inserting after subsection (d) the following:
       ``(e) Subchapter V of chapter 7 of this title applies only 
     in a case under such chapter concerning the liquidation of a 
     wholesale financial institution established under section 
     5136B of the Revised Statutes of the United States or section 
     9B of the Federal Reserve Act, or a corporation organized 
     under section 25A of the Federal Reserve Act.''.
       (B) Wholesale bank liquidation.--Chapter 7 of title 11, 
     United States Code, is amended by adding at the end the 
     following:

               ``SUBCHAPTER V--WHOLESALE BANK LIQUIDATION

     ``Sec. 781. Definitions for subchapter

       ``In this subchapter--
       ``(1) the term `Board' means the Board of Governors of the 
     Federal Reserve System;
       ``(2) the term `depository institution' has the same 
     meaning as in section 3 of the Federal Deposit Insurance Act, 
     and includes any wholesale bank;
       ``(3) the term `national wholesale financial institution' 
     means a wholesale financial institution established under 
     section 5136B of the Revised Statutes of the United States; 
     and
       ``(4) the term `wholesale bank' means a national wholesale 
     financial institution, a wholesale financial institution 
     established under section 9B of the Federal Reserve Act, or a 
     corporation organized under section 25A of the Federal 
     Reserve Act.

     ``Sec. 782. Selection of trustee

       ``Notwithstanding any other provision of this title, the 
     conservator or receiver who files the petition shall be the 
     trustee under this chapter, unless the Comptroller of the 
     Currency (in the case of a national wholesale financial 
     institution for which it appointed the conservator or 
     receiver) or the Board (in the case of any wholesale bank for 
     which it appointed the conservator or receiver) designates an 
     alternative trustee. The Comptroller of the Currency or the 
     Board (as applicable) may designate a successor trustee, if 
     required.

     ``Sec. 783. Additional powers of trustee

       ``(a) The trustee under this subchapter has power, with 
     permission of the court--
       ``(1) to sell the wholesale bank to a depository 
     institution or consortium of depository institutions (which 
     consortium may agree on the allocation of the wholesale bank 
     among the consortium);
       ``(2) to merge the wholesale bank with a depository 
     institution;
       ``(3) to transfer contracts to the same extent as could a 
     receiver for a depository institution under paragraphs (9) 
     and (10) of section 11(e) of the Federal Deposit Insurance 
     Act;
       ``(4) to transfer assets or liabilities to a depository 
     institution;
       ``(5) to distribute property not of the estate, including 
     distributions to customers that are mandated by subchapters 
     III and IV of this chapter; or
       ``(6) to transfer assets and liabilities to a bridge bank 
     as provided in paragraphs (1), (3)(A), (5), (6), and (9) 
     through (13), and subparagraphs (A) through (H) and (K) of 
     paragraph (4) of section 11(n) of the Federal Deposit 
     Insurance Act, except that--
       ``(A) the bridge bank shall be treated as a wholesale bank 
     for the purpose of this subsection; and
       ``(B) any references in any such provision of law to the 
     Federal Deposit Insurance Corporation shall be construed to 
     be references to the appointing agency and that references to 
     deposit insurance shall be omitted.
       ``(b) Any reference in this section to transfers of 
     liabilities includes a ratable transfer of liabilities within 
     a priority class.

     ``Sec. 784. Right to be heard

       ``The Comptroller of the Currency (in the case of a 
     national wholesale financial institution), the Board (in the 
     case of any wholesale bank), or a Federal Reserve bank (in 
     the case of a wholesale bank that is a member of that bank) 
     may raise and may appear and be heard on any issue in a case 
     under this subchapter.

     ``Sec. 785. Expedited transfers

       ``The trustee may make a transfer pursuant to section 783 
     without prior judicial approval, if the Comptroller of the 
     Currency (in the case of a national wholesale financial 
     institution for which it appointed the conservator or 
     receiver) or the Board (in the case of any wholesale bank for 
     which it appointed the conservator or receiver) determines 
     that the transfer would be necessary to avert serious adverse 
     effects on economic conditions or financial stability.''.
       (C) Conforming amendment.--The table of sections for 
     chapter 7 of title 11, United States Code, is amended by 
     adding at the end the following:

``781. Definitions for subchapter.
``782. Selection of trustee.
``783. Additional powers of trustee.
``784. Right to be heard.
``785. Expedited transfers.''.
       (e) Resolution of Edge Corporations.--Section 25A(16) of 
     the Federal Reserve Act (12 U.S.C. 624(16)) is amended to 
     read as follows:
       ``(16) Appointment of receiver or conservator.--
       ``(A) In general.--The Board may appoint a conservator or 
     receiver for a corporation organized under the provisions of 
     this section to the same extent and in the same manner as the 
     Comptroller of the Currency may appoint a conservator or 
     receiver for a national bank, and the conservator or receiver 
     for such corporation shall exercise the same powers, 
     functions, and duties, subject to the same limitations, as a 
     conservator or receiver for a national bank.
       ``(B) Equivalent authority.--The Board shall have the same 
     authority with respect to any conservator or receiver 
     appointed for a corporation organized under the provisions of 
     this section under this paragraph and any such corporation as 
     the Comptroller of the Currency has with respect to a 
     conservator or receiver of a national bank and the national 
     bank for which a conservator or receiver has been appointed.
       ``(C) Title 11 petitions.--The Board may direct the 
     conservator or receiver of a corporation organized under the 
     provisions of this section to file a petition pursuant to 
     title 11, United States Code, in which case, title 11, United 
     States Code, shall apply to the corporation in lieu of 
     otherwise applicable Federal or State insolvency law.''.
               Subtitle E--Preservation of FTC Authority

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

       Section 11(b)(1) of the Bank Holding Company Act of 1956 
     (12 U.S.C. 1849(b)(1)) is amended by inserting ``and, if the 
     transaction also involves an acquisition under

[[Page S4699]]

     section 4 or section 6, the Board shall also notify the 
     Federal Trade Commission of such approval'' before the period 
     at the end of the first sentence.

     SEC. 142. INTERAGENCY DATA SHARING.

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

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

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

     SEC. 144. ANNUAL GAO REPORT.

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

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

       Section 8(c) of the International Banking Act of 1978 (12 
     U.S.C. 3106(c)) is amended by adding at the end the following 
     new paragraph:
       ``(3) Termination of grandfathered rights.--
       ``(A) In general.--If any foreign bank or foreign company 
     files a declaration under section 6(b)(1)(D) of the Bank 
     Holding Company Act of 1956, or receives a determination 
     under section 10(d)(1) of the Bank Holding Company Act of 
     1956, any authority conferred by this subsection on any 
     foreign bank or company to engage in any activity which the 
     Board has determined to be permissible for financial holding 
     companies under section 6 of such Act shall terminate 
     immediately.
       ``(B) Restrictions and requirements authorized.--If a 
     foreign bank or company that engages, directly or through an 
     affiliate pursuant to paragraph (1), in an activity which the 
     Board has determined to be permissible for financial holding 
     companies under section 6 of the Bank Holding Company Act of 
     1956 has not filed a declaration with the Board of its status 
     as a financial holding company under such section or received 
     a determination under section 10(d)(1) by the end of the 2-
     year period beginning on the date of enactment of the 
     Financial Services Act of 1999, the Board, giving due regard 
     to the principle of national treatment and equality of 
     competitive opportunity, may impose such restrictions and 
     requirements on the conduct of such activities by such 
     foreign bank or company as are comparable to those imposed on 
     a financial holding company organized under the laws of the 
     United States, including a requirement to conduct such 
     activities in compliance with any prudential safeguards 
     established under section 5(h) of the Bank Holding Company 
     Act of 1956.''.

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

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

     SEC. 153. REPRESENTATIVE OFFICES.

       (a) Definition of ``Representative Office''.--Section 
     1(b)(15) of the International Banking Act of 1978 (12 U.S.C. 
     3101(15)) is amended by striking ``State agency, or 
     subsidiary of a foreign bank'' and inserting ``or State 
     agency''.
       (b) Examinations.--Section 10(c) of the International 
     Banking Act of 1978 (12 U.S.C. 3107(c)) is amended by adding 
     at the end the following: ``The Board may also make 
     examinations of any affiliate of a foreign bank conducting 
     business in any State if the Board deems it necessary to 
     determine and enforce compliance with this Act, the Bank 
     Holding Company Act of 1956 (12 U.S.C. 1841 et seq.), or 
     other applicable Federal banking law.''.
        Subtitle G--Federal Home Loan Bank System Modernization

     SEC. 161. SHORT TITLE.

       This subtitle may be cited as the ``Federal Home Loan Bank 
     System Modernization Act of 1999''.

     SEC. 162. DEFINITIONS.

       Section 2 of the Federal Home Loan Bank Act (12 U.S.C. 
     1422) is amended--
       (1) in paragraph (1), by striking ``term `Board' means'' 
     and inserting ``terms `Finance Board' and `Board' mean'';
       (2) by striking paragraph (3) and inserting the following:
       ``(3) State.--The term `State', in addition to the States 
     of the United States, includes the District of Columbia, 
     Guam, Puerto Rico, the United States Virgin Islands, American 
     Samoa, and the Commonwealth of the Northern Mariana 
     Islands.''; and
       (3) by adding at the end the following new paragraph:
       ``(13) Community financial institution.--
       ``(A) In general.--The term `community financial 
     institution' means a member--
       ``(i) the deposits of which are insured under the Federal 
     Deposit Insurance Act; and
       ``(ii) that has, as of the date of the transaction at 
     issue, less than $500,000,000 in average total assets, based 
     on an average of total assets over the 3 years preceding that 
     date.
       ``(B) Adjustments.--The $500,000,000 limit referred to in 
     subparagraph (A)(ii) shall be adjusted annually by the 
     Finance Board, based on the annual percentage increase, if 
     any, in the Consumer Price Index for all urban consumers, as 
     published by the Department of Labor.''.

     SEC. 163. SAVINGS ASSOCIATION MEMBERSHIP.

       (a) Federal Home Loan Bank Membership.--Section 5(f) of the 
     Home Owners' Loan Act (12 U.S.C. 1464(f)) is amended to read 
     as follows:
       ``(f) Federal Home Loan Bank Membership.--On and after 
     January 1, 1999, a Federal savings association may become a 
     member of the Federal Home Loan Bank System, and shall 
     qualify for such membership in the manner provided by the 
     Federal Home Loan Bank Act.''.
       (b) Withdrawal.--Section 6(e) of the Federal Home Loan Bank 
     Act (12 U.S.C. 1426(e)) is amended by striking ``Any member 
     other than a Federal savings and loan association may 
     withdraw'' and inserting ``Any member may withdraw''.

     SEC. 164. ADVANCES TO MEMBERS; COLLATERAL.

       (a) In General.--Section 10(a) of the Federal Home Loan 
     Bank Act (12 U.S.C. 1430(a)) is amended--
       (1) by redesignating paragraphs (1) through (4) as 
     subparagraphs (A) through (D), respectively, and indenting 
     appropriately;
       (2) by striking ``(a) Each'' and inserting the following:
       ``(a) In General.--
       ``(1) All advances.--Each'';
       (3) by striking the second sentence and inserting the 
     following:
       ``(2) Purposes of advances.--A long-term advance may only 
     be made for the purposes of--
       ``(A) providing funds to any member for residential housing 
     finance; and
       ``(B) providing funds to any community financial 
     institution for small businesses, agricultural, rural 
     development, or low-income community development lending.'';
       (4) by striking ``A Bank'' and inserting the following:

[[Page S4700]]

       ``(3) Collateral.--A Bank'';
       (5) in paragraph (3) (as so designated by paragraph (4) of 
     this subsection)--
       (A) in subparagraph (C) (as so redesignated by paragraph 
     (1) of this subsection) by striking ``Deposits'' and 
     inserting ``Cash or deposits'';
       (B) in subparagraph (D) (as so redesignated by paragraph 
     (1) of this subsection), by striking the second sentence; and
       (C) by inserting after subparagraph (D) (as so redesignated 
     by paragraph (1) of this subsection) the following new 
     subparagraph:
       ``(E) Secured loans for small business, agriculture, rural 
     development, or low-income community development, or 
     securities representing a whole interest in such secured 
     loans, in the case of any community financial institution.'';
       (6) in paragraph (5)--
       (A) in the second sentence, by striking ``and the Board'';
       (B) in the third sentence, by striking ``Board'' and 
     inserting ``Federal home loan bank''; and
       (C) by striking ``(5) Paragraphs (1) through (4)'' and 
     inserting the following:
       ``(4) Additional bank authority.--Subparagraphs (A) through 
     (E) of paragraph (3)''; and
       (7) by adding at the end the following:
       ``(5) Review of certain collateral standards.--The Board 
     may review the collateral standards applicable to each 
     Federal home loan bank for the classes of collateral 
     described in subparagraphs (D) and (E) of paragraph (3), and 
     may, if necessary for safety and soundness purposes, require 
     an increase in the collateral standards for any or all of 
     those classes of collateral.
       ``(6) Definitions.--For purposes of this subsection, the 
     terms `small business', `agriculture', `rural development', 
     and `low-income community development' shall have the 
     meanings given those terms by rule or regulation of the 
     Finance Board.''.
       (b) Clerical Amendment.--The section heading for section 10 
     of the Federal Home Loan Bank Act (12 U.S.C. 1430) is amended 
     to read as follows:

     ``SEC. 10. ADVANCES TO MEMBERS.''.

       (c) Conforming Amendments Relating to Members Which Are Not 
     Qualified Thrift Lenders--Section 10(e)(1) of the Federal 
     Home Loan Bank Act (12 U.S.C. 1430(e)(1)) is amended in the 
     second sentence, by inserting before the period ``or, in the 
     case of any community financial institution, for the purposes 
     described in subsection (a)(2)''.

     SEC. 165. ELIGIBILITY CRITERIA.

       Section 4(a) of the Federal Home Loan Bank Act (12 U.S.C. 
     1424(a)) is amended--
       (1) in paragraph (2)(A), by inserting, ``(other than a 
     community financial institution)'' after ``institution''; and
       (2) by adding at the end the following new paragraph:
       ``(3) Limited exemption for community financial 
     institutions.--A community financial institution that 
     otherwise meets the requirements of paragraph (2) may become 
     a member without regard to the percentage of its total assets 
     that is represented by residential mortgage loans, as 
     described in subparagraph (A) of paragraph (2).''.

     SEC. 166. MANAGEMENT OF BANKS.

       (a) Board of Directors.--Section 7(d) of the Federal Home 
     Loan Bank Act (12 U.S.C. 1427(d)) is amended--
       (1) by striking ``(d) The term'' and inserting the 
     following:
       ``(d) Terms of Office.--The term''; and
       (2) by striking ``shall be two years''.
       (b) Compensation.--Section 7(i) of the Federal Home Loan 
     Bank Act (12 U.S.C. 1427(i)) is amended by striking ``, 
     subject to the approval of the board''.
       (c) Repeal of Sections 22A and 27.--The Federal Home Loan 
     Bank Act (12 U.S.C. 1421 et seq.) is amended by striking 
     sections 22A (12 U.S.C. 1442a) and 27 (12 U.S.C. 1447).
       (d) Section 12.--Section 12 of the Federal Home Loan Bank 
     Act (12 U.S.C. 1432) is amended--
       (1) in subsection (a)--
       (A) by striking ``, but, except'' and all that follows 
     through ``ten years'';
       (B) by striking ``, subject to the approval of the Board'' 
     each 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'' each place that term 
     appears and inserting ``board of directors''; and
       (2) in subsection (b), by striking ``loans banks'' and 
     inserting ``loan banks''.
       (e) Powers and Duties of Federal Housing Finance Board.--
       (1) Issuance of notices of violations.--Section 2B(a) of 
     the Federal Home Loan Bank Act (12 U.S.C. 1422b(a)) is 
     amended by adding at the end the following new paragraphs:
       ``(5) To issue and serve a notice of charges upon a Federal 
     home loan bank or upon any executive officer or director of a 
     Federal home loan bank if, in the determination of the 
     Finance Board, the bank, executive officer, or director is 
     engaging or has engaged in, or the Finance Board has 
     reasonable cause to believe that the bank, executive officer, 
     or director is about to engage in, any conduct that violates 
     any provision of this Act or any law, order, rule, or 
     regulation or any condition imposed in writing by the Finance 
     Board in connection with the granting of any application or 
     other request by the bank, or any written agreement entered 
     into by the bank with the agency, in accordance with the 
     procedures provided in section 1371(c) of the Federal Housing 
     Enterprises Financial Safety and Soundness Act of 1992. Such 
     authority includes the same authority to take affirmative 
     action to correct conditions resulting from violations or 
     practices or to limit activities of a bank or any executive 
     officer or director of a bank as appropriate Federal banking 
     agencies have to take with respect to insured depository 
     institutions under paragraphs (6) and (7) of section 8(b) of 
     the Federal Deposit Insurance Act, and to have all other 
     powers, rights, and duties to enforce this Act with respect 
     to the Federal home loan banks and their executive officers 
     and directors as the Office of Federal Housing Enterprise 
     Oversight has to enforce the Federal Housing Enterprises 
     Financial Safety and Soundness Act of 1992, the Federal 
     National Mortgage Association Charter Act, or the Federal 
     Home Loan Mortgage Corporation Act with respect to the 
     Federal housing enterprises under the Federal Housing 
     Enterprises Financial Safety and Soundness Act of 1992.
       ``(6) To address any insufficiencies in capital levels 
     resulting from the application of section 5(f) of the Home 
     Owners' Loan Act.
       ``(7) To sue and be sued, by and through its own 
     attorneys.''.
       (2) Technical amendment.--Section 111 of Public Law 93-495 
     (12 U.S.C. 250) is amended by inserting ``Federal Housing 
     Finance Board,'' after ``Director of the Office of Thrift 
     Supervision,''.
       (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) in the second sentence, by striking ``held by'' and 
     all that follows before the period;
       (B) in subsection (d)--
       (i) in the first sentence, by striking ``and the approval 
     of the Board''; and
       (ii) by striking ``Subject to the approval of the Board, 
     any'' and inserting ``Any''; and
       (C) in subsection (j)(1)--
       (i) by striking ``to subsidize the interest rate on 
     advances'' and inserting ``to provide subsidies, including 
     subsidized interest rates on advances'';
       (ii) by striking ``Pursuant'' and inserting the following:
       ``(A) Establishment.--Pursuant''; and
       (iii) by adding at the end the following new subparagraph:
       ``(B) Nondelegation of approval authority.--Subject to such 
     regulations as the Finance Board may prescribe, the board of 
     directors of each Federal home loan bank may approve or 
     disapprove requests from members for Affordable Housing 
     Program subsidies, and may not delegate such authority.''.
       (g) Section 16.--Section 16(a) of the Federal Home Loan 
     Bank Act (12 U.S.C. 1436(a)) is amended--
       (1) in the third sentence--
       (A) by striking ``net earnings'' and inserting ``previously 
     retained earnings or current net earnings''; and
       (B) by striking ``, and then only with the approval of the 
     Federal Housing Finance Board''; and
       (2) by striking the fourth sentence.
       (h) Section 18.--Section 18(b) of the Federal Home Loan 
     Bank Act (12 U.S.C. 1438(b)) is amended by striking paragraph 
     (4).

     SEC. 167. RESOLUTION FUNDING CORPORATION.

       (a) In General.--Section 21B(f)(2)(C) of the Federal Home 
     Loan Bank Act (12 U.S.C. 1441b(f)(2)(C)) is amended to read 
     as follows:
       ``(C) Payments by federal home loan banks.--
       ``(i) In general.--To the extent that the amounts available 
     pursuant to subparagraphs (A) and (B) are insufficient to 
     cover the amount of interest payments, each Federal home loan 
     bank shall pay to the Funding Corporation in each calendar 
     year, 20.75 percent of the net earnings of that bank (after 
     deducting expenses relating to section 10(j) and operating 
     expenses).
       ``(ii) Annual determination.--The Board annually shall 
     determine the extent to which the value of the aggregate 
     amounts paid by the Federal home loan banks exceeds or falls 
     short of the value of an annuity of $300,000,000 per year 
     that commences on the issuance date and ends on the final 
     scheduled maturity date of the obligations, and shall select 
     appropriate present value factors for making such 
     determinations.
       ``(iii) Payment term alterations.--The Board shall extend 
     or shorten the term of the payment obligations of a Federal 
     home loan bank under this subparagraph as necessary to ensure 
     that the value of all payments made by the banks is 
     equivalent to the value of an annuity referred to in clause 
     (ii).

[[Page S4701]]

       ``(iv) Term beyond maturity.--If the Board extends the term 
     of payments beyond the final scheduled maturity date for the 
     obligations, each Federal home loan bank shall continue to 
     pay 20.75 percent of its net earnings (after deducting 
     expenses relating to section 10(j) and operating expenses) to 
     the Treasury of the United States until the value of all such 
     payments by the Federal home loan banks is equivalent to the 
     value of an annuity referred to in clause (ii). In the final 
     year in which the Federal home loan banks are required to 
     make any payment to the Treasury under this subparagraph, if 
     the dollar amount represented by 20.75 percent of the net 
     earnings of the Federal home loan banks exceeds the remaining 
     obligation of the banks to the Treasury, the Finance Board 
     shall reduce the percentage pro rata to a level sufficient to 
     pay the remaining obligation.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall become effective on January 1, 1999. Payments made by a 
     Federal home loan bank before that effective date shall be 
     counted toward the total obligation of that bank under 
     section 21B(f)(2)(C) of the Federal Home Loan Bank Act, as 
     amended by this section.
                 Subtitle H--Direct Activities of Banks

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

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

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

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

     SEC. 187. ELIMINATION OF SAIF AND DIF SPECIAL RESERVES.

       (a) SAIF Special Reserves.--Section 11(a)(6) of the Federal 
     Deposit Insurance Act (12 U.S.C. 1821(a)(6)) is amended by 
     striking subparagraph (L).
       (b) DIF Special Reserves.--Section 2704 of the Deposit 
     Insurance Funds Act of 1996 (12 U.S.C. 1821 note) is 
     amended--
       (1) by striking subsection (b); and
       (2) in subsection (d)--
       (A) by striking paragraph (4);
       (B) in paragraph (6)(C)(i), by striking ``(6) and (7)'' and 
     inserting ``(5), (6), and (7)''; and
       (C) in paragraph (6)(C), by striking clause (ii) and 
     inserting the following:
       ``(ii) by redesignating paragraph (8) as paragraph (5).''.
                  Subtitle J--Effective Date of Title

     SEC. 191. EFFECTIVE DATE.

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

     SEC. 201. DEFINITION OF BROKER.

       Section 3(a)(4) of the Securities Exchange Act of 1934 (15 
     U.S.C. 78c(a)(4)) is amended to read as follows:
       ``(4) Broker.--
       ``(A) In general.--The term `broker' means any person 
     engaged in the business of effecting transactions in 
     securities for the account of others.
       ``(B) Exception for certain bank activities.--A bank shall 
     not be considered to be a broker because the bank engages in 
     any of the following activities under the conditions 
     described:
       ``(i) Third party brokerage arrangements.--The bank enters 
     into a contractual or other arrangement with a broker or 
     dealer registered under this title under which the broker or 
     dealer offers brokerage services on or off the premises of 
     the bank if--

       ``(I) such broker or dealer is clearly identified as the 
     person performing the brokerage services;
       ``(II) the broker or dealer performs brokerage services in 
     an area that is clearly marked and, to the extent 
     practicable, physically separate from the routine deposit-
     taking activities of the bank;
       ``(III) any materials used by the bank to advertise or 
     promote generally the availability of brokerage services 
     under the contractual or other arrangement clearly indicate 
     that the brokerage services are being provided by the broker 
     or dealer and not by the bank;
       ``(IV) any materials used by the bank to advertise or 
     promote generally the availability of brokerage services 
     under the contractual or other arrangement are in compliance 
     with the Federal securities laws before distribution;
       ``(V) bank employees (other than associated persons of a 
     broker or dealer who are qualified pursuant to the rules of a 
     self-regulatory organization) perform only clerical or 
     ministerial functions in connection with brokerage 
     transactions including scheduling appointments with the 
     associated persons of a broker or dealer, except that bank 
     employees may forward customer funds or securities and may 
     describe in general terms the range of investment vehicles 
     available from the bank and the broker or dealer under the 
     contractual or other arrangement;
       ``(VI) bank employees do not directly receive incentive 
     compensation for any brokerage transaction unless such 
     employees are associated persons of a broker or dealer and 
     are qualified pursuant to the rules of a self-regulatory 
     organization, except that the bank employees may receive 
     compensation for the referral of any customer if the 
     compensation is a nominal one-time cash fee of a fixed dollar 
     amount and the payment of the fee is not contingent on 
     whether the referral results in a transaction;
       ``(VII) such services are provided by the broker or dealer 
     on a basis in which all customers which receive any services 
     are fully disclosed to the broker or dealer;
       ``(VIII) the bank does not carry a securities account of 
     the customer except in a customary custodian or trustee 
     capacity; and
       ``(IX) the bank, broker, or dealer informs each customer 
     that the brokerage services are provided by the broker or 
     dealer and not by the bank and that the securities are not 
     deposits or other obligations of the bank, are not guaranteed 
     by the bank, and are not insured by the Federal Deposit 
     Insurance Corporation.

       ``(ii) Trust activities.--The bank effects transactions in 
     a trustee capacity, or effects transactions in a fiduciary 
     capacity in its trust department or other department that is 
     regularly examined by bank examiners for compliance with 
     fiduciary principles and standards, and (in either case)--

       ``(I) is primarily compensated for such transactions on the 
     basis of an administration or annual fee (payable on a 
     monthly, quarterly, or other basis), a percentage of assets 
     under management, or a flat or capped per order processing 
     fee equal to not more than the cost incurred by the bank in 
     connection with executing securities transactions for trustee 
     and fiduciary customers, or any combination of such fees, 
     consistent with fiduciary principles and standards; and
       ``(II) does not publicly solicit brokerage business, other 
     than by advertising that it effects transactions in 
     securities in conjunction with advertising its other trust 
     activities.

[[Page S4702]]

       ``(iii) Permissible securities transactions.--The bank 
     effects transactions in--

       ``(I) commercial paper, bankers acceptances, or commercial 
     bills;
       ``(II) exempted securities;
       ``(III) qualified Canadian government obligations as 
     defined in section 5136 of the Revised Statutes, in 
     conformity with section 15C of this title and the rules and 
     regulations thereunder, or obligations of the North American 
     Development Bank; or
       ``(IV) any standardized, credit enhanced debt security 
     issued by a foreign government pursuant to the March 1989 
     plan of then Secretary of the Treasury Brady, used by such 
     foreign government to retire outstanding commercial bank 
     loans.

       ``(iv) Certain stock purchase plans.--

       ``(I) Employee benefit plans.--The bank effects 
     transactions, as part of its transfer agency activities, in 
     the securities of an issuer as part of any pension, 
     retirement, profit-sharing, bonus, thrift, savings, 
     incentive, or other similar benefit plan for the employees of 
     that issuer or its subsidiaries, if--

       (aa) the bank does not solicit transactions or provide 
     investment advice with respect to the purchase or sale of 
     securities in connection with the plan; and
       ``(bb) the bank's compensation for such plan or program 
     consists primarily of administration fees, or flat or capped 
     per order processing fees, or both.

       ``(II) Dividend reinvestment plans.--The bank effects 
     transactions, as part of its transfer agency activities, in 
     the securities of an issuer as part of that issuer's dividend 
     reinvestment plan, if--

       ``(aa) the bank does not solicit transactions or provide 
     investment advice with respect to the purchase or sale of 
     securities in connection with the plan;
       ``(bb) the bank does not net shareholders' buy and sell 
     orders, other than for programs for odd-lot holders or plans 
     registered with the Commission; and
       ``(cc) the bank's compensation for such plan or program 
     consists primarily of administration fees, or flat or capped 
     per order processing fees, or both.

       ``(III) Issuer plans.--The bank effects transactions, as 
     part of its transfer agency activities, in the securities of 
     an issuer as part of a plan or program for the purchase or 
     sale of that issuer's shares, if--

       ``(aa) the bank does not solicit transactions or provide 
     investment advice with respect to the purchase or sale of 
     securities in connection with the plan or program;
       ``(bb) the bank does not net shareholders' buy and sell 
     orders, other than for programs for odd-lot holders or plans 
     registered with the Commission; and
       ``(cc) the bank's compensation for such plan or program 
     consists primarily of administration fees, or flat or capped 
     per order processing fees, or both.

       ``(IV) Permissible delivery of materials.--The exception to 
     being considered a broker for a bank engaged in activities 
     described in subclauses (I), (II), and (III) will not be 
     affected by a bank's delivery of written or electronic plan 
     materials to employees of the issuer, shareholders of the 
     issuer, or members of affinity groups of the issuer, so long 
     as such materials are--

       ``(aa) comparable in scope or nature to that permitted by 
     the Commission as of the date of enactment of the Financial 
     Services Act of 1999; or
       ``(bb) otherwise permitted by the Commission.
       ``(v) Sweep accounts.--The bank effects transactions as 
     part of a program for the investment or reinvestment of bank 
     deposit funds into any no-load, open-end management 
     investment company registered under the Investment Company 
     Act of 1940 that holds itself out as a money market fund.
       ``(vi) Affiliate transactions.--The bank effects 
     transactions for the account of any affiliate of the bank (as 
     defined in section 2 of the Bank Holding Company Act of 1956) 
     other than--

       ``(I) a registered broker or dealer; or
       ``(II) an affiliate that is engaged in merchant banking, as 
     described in section 6(c)(3)(H) of the Bank Holding Company 
     Act of 1956.

       ``(vii) Private securities offerings.--The bank--

       ``(I) effects sales as part of a primary offering of 
     securities not involving a public offering, pursuant to 
     section 3(b), 4(2), or 4(6) of the Securities Act of 1933 or 
     the rules and regulations issued thereunder;
       ``(II) at any time after the date that is 1 year after the 
     date of enactment of the Financial Services Act of 1999, is 
     not affiliated with a broker or dealer that has been 
     registered for more than 1 year in accordance with this 
     title, and engages in dealing, market making, or underwriting 
     activities, other than with respect to exempted securities; 
     and
       ``(III) effects transactions exclusively with qualified 
     investors.

       ``(viii) Safekeeping and custody activities.--

       ``(I) In general.--The bank, as part of customary banking 
     activities--

       ``(aa) provides safekeeping or custody services with 
     respect to securities, including the exercise of warrants and 
     other rights on behalf of customers;
       ``(bb) facilitates the transfer of funds or securities, as 
     a custodian or a clearing agency, in connection with the 
     clearance and settlement of its customers' transactions in 
     securities;
       ``(cc) effects securities lending or borrowing transactions 
     with or on behalf of customers as part of services provided 
     to customers pursuant to division (aa) or (bb) or invests 
     cash collateral pledged in connection with such transactions; 
     or
       ``(dd) holds securities pledged by a customer to another 
     person or securities subject to purchase or resale agreements 
     involving a customer, or facilitates the pledging or transfer 
     of such securities by book entry or as otherwise provided 
     under applicable law.

       ``(II) Exception for carrying broker activities.--The 
     exception to being considered a broker for a bank engaged in 
     activities described in subclause (I) shall not apply if the 
     bank, in connection with such activities, acts in the United 
     States as a carrying broker (as such term, and different 
     formulations thereof, are used in section 15(c)(3) and the 
     rules and regulations thereunder) for any broker or dealer, 
     unless such carrying broker activities are engaged in with 
     respect to government securities (as defined in paragraph 
     (42) of this subsection).

       ``(ix) Banking products.--The bank effects transactions in 
     traditional banking products, as defined in section 206(a) of 
     the Financial Services Act of 1999.
       ``(x) De minimis exception.--The bank effects, other than 
     in transactions referred to in clauses (i) through (ix), not 
     more than 500 transactions in securities in any calendar 
     year, and such transactions are not effected by an 
     employee of the bank who is also an employee of a broker 
     or dealer.
       ``(C) Broker dealer execution.--The exception to being 
     considered a broker for a bank engaged in activities 
     described in clauses (ii), (iv), and (viii) of subparagraph 
     (B) shall not apply if the activities described in such 
     provisions result in the trade in the United States of any 
     security that is a publicly traded security in the United 
     States, unless--
       ``(i) the bank directs such trade to a registered broker 
     dealer for execution;
       ``(ii) the trade is a cross trade or other substantially 
     similar trade of a security that--

       ``(I) is made by the bank or between the bank and an 
     affiliated fiduciary; and
       ``(II) is not in contravention of fiduciary principles 
     established under applicable Federal or State law; or

       ``(iii) the trade is conducted in some other manner 
     permitted under rules, regulations, or orders as the 
     Commission may prescribe or issue.
       ``(D) No effect of bank exemptions on other commission 
     authority.--The exception to being considered a broker for a 
     bank engaged in activities described in subparagraphs (B) and 
     (C) shall not affect the authority of the Commission under 
     any other provision of this Act or any other securities law.
       ``(E) Fiduciary capacity.--For purposes of subparagraph 
     (B)(ii), the term `fiduciary capacity' means--
       ``(i) in the capacity as trustee, executor, administrator, 
     registrar of stocks and bonds, transfer agent, guardian, 
     assignee, receiver, or custodian under a uniform gift to 
     minor act, or as an investment adviser if the bank receives a 
     fee for its investment advice;
       ``(ii) in any capacity in which the bank possesses 
     investment discretion on behalf of another; or
       ``(iii) in any other similar capacity.
       ``(F) Exception for entities subject to section 15(e).--The 
     term `broker' does not include a bank that--
       ``(i) was, immediately prior to the enactment of the 
     Financial Services Act of 1999, subject to section 15(e); and
       ``(ii) is subject to such restrictions and requirements as 
     the Commission considers appropriate.''.

     SEC. 202. DEFINITION OF DEALER.

       Section 3(a)(5) of the Securities Exchange Act of 1934 (15 
     U.S.C. 78c(a)(5)) is amended to read as follows:
       ``(5) Dealer.--
       ``(A) In general.--The term `dealer' means any person 
     engaged in the business of buying and selling securities for 
     such person's own account through a broker or otherwise.
       ``(B) Exception for person not engaged in the business of 
     dealing.--The term `dealer' does not include a person that 
     buys or sells securities for such person's own account, 
     either individually or in a fiduciary capacity, but not as a 
     part of a regular business.
       ``(C) Exception for certain bank activities.--A bank shall 
     not be considered to be a dealer because the bank engages in 
     any of the following activities under the conditions 
     described:
       ``(i) Permissible securities transactions.--The bank buys 
     or sells--

       ``(I) commercial paper, bankers acceptances, or commercial 
     bills;
       ``(II) exempted securities;
       ``(III) qualified Canadian government obligations as 
     defined in section 5136 of the Revised Statutes of the United 
     States, in conformity with section 15C of this title and the 
     rules and regulations thereunder, or obligations of the North 
     American Development Bank; or
       ``(IV) any standardized, credit enhanced debt security 
     issued by a foreign government pursuant to the March 1989 
     plan of then Secretary of the Treasury Brady, used by such 
     foreign government to retire outstanding commercial bank 
     loans.

       ``(ii) Investment, trustee, and fiduciary transactions.--
     The bank buys or sells securities for investment purposes--

       ``(I) for the bank; or
       ``(II) for accounts for which the bank acts as a trustee or 
     fiduciary.

[[Page S4703]]

       ``(iii) Asset-backed transactions.--The bank engages in the 
     issuance or sale to qualified investors, through a grantor 
     trust or otherwise, of securities backed by or representing 
     an interest in notes, drafts, acceptances, loans, leases, 
     receivables, other obligations, or pools of any such 
     obligations predominantly originated by the bank, or a 
     syndicate of banks of which the bank is a member, or an 
     affiliate of any such bank other than a broker or dealer.
       ``(iv) Banking products.--The bank buys or sells 
     traditional banking products, as defined in section 206(a) of 
     the Financial Services Act of 1999.
       ``(v) Derivative instruments.--The bank issues, buys, or 
     sells any derivative instrument to which the bank is a 
     party--

       ``(I) to or from a qualified investor, except that if the 
     instrument provides for the delivery of one or more 
     securities (other than a derivative instrument or government 
     security), the transaction shall be effected with or through 
     a registered broker or dealer;
       ``(II) to or from other persons, except that if the 
     derivative instrument provides for the delivery of one or 
     more securities (other than a derivative instrument or 
     government security), or is a security (other than a 
     government security), the transaction shall be effected with 
     or through a registered broker or dealer; or
       ``(III) to or from any person if the instrument is neither 
     a security nor provides for the delivery of one or more 
     securities (other than a derivative instrument).''.

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

       Section 15A of the Securities Exchange Act of 1934 (15 
     U.S.C. 78o-3) is amended by inserting after subsection (i) 
     the following new subsection:
       ``(j) Registration for Sales of Private Securities 
     Offerings.--A registered securities association shall create 
     a limited qualification category for any associated person of 
     a member who effects sales as part of a primary offering of 
     securities not involving a public offering, pursuant to 
     section 3(b), 4(2), or 4(6) of the Securities Act of 1933 and 
     the rules and regulations thereunder, and shall deem 
     qualified in such limited qualification category, without 
     testing, any bank employee who, in the 6-month period 
     preceding the date of enactment of the Financial Services Act 
     of 1999, engaged in effecting such sales.''.

     SEC. 204. SALES PRACTICES AND COMPLAINT PROCEDURES.

       Section 18 of the Federal Deposit Insurance Act is amended 
     by adding at the end the following new subsection:
       ``(s) Sales Practices and Complaint Procedures With Respect 
     to Bank Securities Activities.--
       ``(1) Regulations required.--Each Federal banking agency 
     shall prescribe and publish in final form, not later than 6 
     months after the date of enactment of the Financial Services 
     Act of 1999, regulations which apply to retail transactions, 
     solicitations, advertising, or offers of any security by any 
     insured depository institution or any affiliate thereof other 
     than a registered broker or dealer or an individual acting on 
     behalf of such a broker or dealer who is an associated person 
     of such broker or dealer. Such regulations shall include--
       ``(A) requirements that sales practices comply with just 
     and equitable principles of trade that are substantially 
     similar to the Rules of Fair Practice of the National 
     Association of Securities Dealers; and
       ``(B) requirements prohibiting (i) conditioning an 
     extension of credit on the purchase or sale of a security; 
     and (ii) any conduct leading a customer to believe that an 
     extension of credit is conditioned upon the purchase or sale 
     of a security.
       ``(2) Procedures required.--The appropriate Federal banking 
     agencies shall jointly establish procedures and facilities 
     for receiving and expeditiously processing complaints against 
     any bank or employee of a bank arising in connection with the 
     purchase or sale of a security by a customer, including a 
     complaint alleging a violation of the regulations prescribed 
     under paragraph (1), but excluding a complaint involving an 
     individual acting on behalf of such a broker or dealer who is 
     an associated person of such broker or dealer. The use of any 
     such procedures and facilities by such a customer shall be at 
     the election of the customer. Such procedures shall include 
     provisions to refer a complaint alleging fraud to the 
     Securities and Exchange Commission and appropriate State 
     securities commissions.
       ``(3) Required actions.--The actions required by the 
     Federal banking agencies under paragraph (2) shall include 
     the following:
       ``(A) establishing a group, unit, or bureau within each 
     such agency to receive such complaints;
       ``(B) developing and establishing procedures for 
     investigating, and permitting customers to investigate, such 
     complaints;
       ``(C) developing and establishing procedures for informing 
     customers of the rights they may have in connection with such 
     complaints;
       ``(D) developing and establishing procedures that allow 
     customers a period of at least 6 years to make complaints and 
     that do not require customers to pay the costs of the 
     proceeding; and
       ``(E) developing and establishing procedures for resolving 
     such complaints, including procedures for the recovery of 
     losses to the extent appropriate.
       ``(4) Consultation and joint regulations.--The Federal 
     banking agencies shall consult with each other and prescribe 
     joint regulations pursuant to paragraphs (1) and (2), after 
     consultation with the Securities and Exchange Commission.
       ``(5) Procedures in addition to other remedies.--The 
     procedures and remedies provided under this subsection shall 
     be in addition to, and not in lieu of, any other remedies 
     available under law.
       ``(6) Definition.--As used in this subsection--
       ``(A) the term `security' has the same meaning as in 
     section 3(a)(10) of the Securities Exchange Act of 1934;
       ``(B) the term `registered broker or dealer' has the same 
     meaning as in section 3(a)(48) of the Securities Exchange Act 
     of 1934; and
       ``(C) the term `associated person' has the same meaning as 
     in section 3(a)(18) of the Securities Exchange Act of 
     1934.''.

     SEC. 205. INFORMATION SHARING.

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

     SEC. 206. DEFINITION AND TREATMENT OF BANKING PRODUCTS.

       (a) Definition of Traditional Banking Product.--For 
     purposes of paragraphs (4) and (5) of section 3(a) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78c(a) (4), (5)), 
     the term ``traditional banking product'' means--
       (1) a deposit account, savings account, certificate of 
     deposit, or other deposit instrument issued by a bank;
       (2) a banker's acceptance;
       (3) a letter of credit issued or loan made by a bank;
       (4) a debit account at a bank arising from a credit card or 
     similar arrangement;
       (5) a participation in a loan which the bank or an 
     affiliate of the bank (other than a broker or dealer) funds, 
     participates in, or owns that is sold--
       (A) to qualified investors; or
       (B) to other persons that--
       (i) have the opportunity to review and assess any material 
     information, including information regarding the borrower's 
     creditworthiness; and
       (ii) based on such factors as financial sophistication, net 
     worth, and knowledge and experience in financial matters, 
     have the capability to evaluate the information available, as 
     determined under generally applicable banking standards or 
     guidelines; and
       (6) any derivative instrument, whether or not individually 
     negotiated, involving or relating to--
       (A) foreign currencies, except options on foreign 
     currencies that trade on a national securities exchange;
       (B) interest rates, except interest rate derivative 
     instruments that--
       (i) are based on a security or a group or index of 
     securities (other than government securities or a group or 
     index of government securities);
       (ii) provide for the delivery of one or more securities 
     (other than government securities); or
       (iii) trade on a national securities exchange; and
       (C) commodities, other rates, indices, or other assets, 
     except derivative instruments that--
       (i) are securities or that are based on a group or index of 
     securities (other than government securities or a group or 
     index of government securities);
       (ii) provide for the delivery of one or more securities 
     (other than government securities); or
       (iii) trade on a national securities exchange.
       (b) Amendment to the Securities Exchange Act of 1934.--
     Section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 
     78o) is amended by adding at the end the following new 
     subsection:
       ``(i) Transactions Involving Hybrid Products.--
       ``(1) Commission authority.--
       ``(A) In general.--The Commission may, after consultation 
     with the Board, determine, by regulation published in the 
     Federal Register, that a bank that effects transactions in, 
     or buys or sells, a new product should be subject to the 
     registration requirements of this section.
       ``(B) Limitation.--The Commission may not impose the 
     registration requirements of this section on any bank that 
     effects transactions in, or buys or sells, a product under 
     this subsection unless the Commission determines in the 
     regulations described in subparagraph (A) that--
       ``(i) the subject product is a new product;
       ``(ii) the subject product is a security; and

[[Page S4704]]

       ``(iii) imposing the registration requirements of this 
     section is necessary or appropriate in the public interest 
     and for the protection of investors.
       ``(2) Objection to commission regulation.--
       ``(A) Filing of petition for review.--The Board, or any 
     aggrieved party, may obtain review of any final regulation 
     described in paragraph (1) in the United States Court of 
     Appeals for the District of Columbia Circuit by filing in 
     such court, not later than 60 days after the date of 
     publication of the final regulation, a written petition 
     requesting that the regulation be set aside.
       ``(B) Transmittal of petition and record.--A copy of a 
     petition described in subparagraph (A) shall be transmitted 
     as soon as possible by the Clerk of the Court to an officer 
     or employee of the Commission designated for that purpose. 
     Upon receipt of the petition, the Commission shall file with 
     the court the regulation under review and any documents 
     referred to therein, and any other relevant materials 
     prescribed by the court.
       ``(C) Exclusive jurisdiction.--On the date of the filing of 
     the petition under subparagraph (A), the court has 
     jurisdiction, which becomes exclusive on the filing of the 
     materials set forth in subparagraph (B), to affirm and 
     enforce or to set aside the regulation at issue.
       ``(D) Standard of review.--
       ``(i) In general.--The court shall determine to affirm and 
     enforce or set aside a regulation of the Commission under 
     this subsection, based on the determination of the court as 
     to whether the subject product--

       ``(I) is a new product, as defined in this subsection;
       ``(II) is a security; and
       ``(III) would be more appropriately regulated under the 
     Federal securities laws or the Federal banking laws, giving 
     equal deference to the views of the Commission and the Board.

       ``(ii) Considerations.--In making a determination under 
     clause (i)(III), the court shall consider--

       ``(I) the nature of the subject new product;
       ``(II) the history, purpose, extent, and appropriateness of 
     the regulation of the new product under the Federal 
     securities laws; and
       ``(III) the history, purpose, extent, and appropriateness 
     of the regulation of the new product under the Federal 
     banking laws.

       ``(E) Judicial stay.--The filing of a petition by the Board 
     or an aggrieved party pursuant to subparagraph (A) shall 
     operate as a judicial stay, until the date on which the court 
     makes a final determination under this paragraph, of--
       ``(i) any Commission requirement that a bank register as a 
     broker or dealer under this section, because the bank engages 
     in any transaction in, or buys or sells, the new product that 
     is the subject of the petition; and
       ``(ii) any Commission action against a bank for a failure 
     to comply with a requirement described in clause (i).
       ``(3) Definitions.--For purposes of this subsection--
       ``(A) the term `Board' means the Board of Governors of the 
     Federal Reserve System; and
       ``(B) the term `new product' means a product or instrument 
     offered or provided by a bank that--
       ``(i) was not subject to regulation by the Commission as a 
     security under this title before the date of enactment of 
     this subsection; and
       ``(ii) is not a traditional banking product, as defined in 
     paragraphs (1) through (6) of section 206(a) of the Financial 
     Services Act of 1999.''.
       (c) Classification Limited.--Classification of a particular 
     product or instrument as a traditional banking product 
     pursuant to this section or the amendments made by this 
     section shall not be construed as finding or implying that 
     such product or instrument is or is not a security for any 
     purpose under the securities laws, or is or is not an 
     account, agreement, contract, or transaction for any purpose 
     under the Commodity Exchange Act.
       (d) No Limitation on Other Authority To Challenge.--Nothing 
     in this section or the amendments made by this section shall 
     affect the right or authority of the Board of Governors of 
     the Federal Reserve System, any appropriate Federal banking 
     agency, or any interested party under any other provision of 
     law to object to or seek judicial review as to whether a 
     product or instrument is or is not appropriately classified 
     as a traditional banking product under paragraphs (1) through 
     (6) of section 206(a).
       (e) Incorporated Definitions.--For purposes of this 
     section--
       (1) the term ``appropriate Federal banking agency'' has the 
     same meaning as in section 3 of the Federal Deposit Insurance 
     Act;
       (2) the term ``bank'' has the same meaning as in section 
     3(a)(6) of the Securities Exchange Act of 1934;
       (3) the term ``Board'' means the Board of Governors of the 
     Federal Reserve System;
       (4) the term ``government securities'' has the same meaning 
     as in section 3(a)(42) of the Securities Exchange Act of 
     1934, and, for purposes of this subsection, commercial paper, 
     bankers acceptances, and commercial bills shall be treated in 
     the same manner as government securities; and
       (5) the term ``qualified investor'' has the same meaning as 
     in section 3(a)(55) of the Securities Exchange Act of 1934, 
     as amended by this Act.

     SEC. 207. DERIVATIVE INSTRUMENT AND QUALIFIED INVESTOR 
                   DEFINED.

       Section 3(a) of the Securities Exchange Act of 1934 (15 
     U.S.C. 78c(a)) is amended by adding at the end the following 
     new paragraphs:
       ``(54) Derivative instrument.--
       ``(A) Definition.--The term `derivative instrument' means 
     any individually negotiated contract, agreement, warrant, 
     note, or option that is based, in whole or in part, on the 
     value of, any interest in, or any quantitative measure or the 
     occurrence of any event relating to, one or more commodities, 
     securities, currencies, interest or other rates, indices, or 
     other assets, but does not include a traditional banking 
     product, as defined in section 206(a) of the Financial 
     Services Act of 1999.
       ``(B) Classification limited.-- Classification of a 
     particular contract as a derivative instrument pursuant to 
     this paragraph shall not be construed as finding or implying 
     that such instrument is or is not a security for any purpose 
     under the securities laws, or is or is not an account, 
     agreement, contract, or transaction for any purpose under the 
     Commodity Exchange Act.
       ``(55) Qualified investor.--
       ``(A) Definition.--For purposes of this title, the term 
     `qualified investor' means--
       ``(i) any investment company registered with the Commission 
     under section 8 of the Investment Company Act of 1940;
       ``(ii) any issuer eligible for an exclusion from the 
     definition of investment company pursuant to section 3(c)(7) 
     of the Investment Company Act of 1940;
       ``(iii) any bank (as defined in paragraph (6) of this 
     subsection), savings association (as defined in section 3(b) 
     of the Federal Deposit Insurance Act), broker, dealer, 
     insurance company (as defined in section 2(a)(13) of the 
     Securities Act of 1933), or business development company (as 
     defined in section 2(a)(48) of the Investment Company Act of 
     1940);
       ``(iv) any small business investment company licensed by 
     the United States Small Business Administration under section 
     301(c) or (d) of the Small Business Investment Act of 1958;
       ``(v) any State sponsored employee benefit plan, or any 
     other employee benefit plan, within the meaning of the 
     Employee Retirement Income Security Act of 1974, other than 
     an individual retirement account, if the investment decisions 
     are made by a plan fiduciary, as defined in section 3(21) of 
     that Act, which is either a bank, savings and loan 
     association, insurance company, or registered investment 
     adviser;
       ``(vi) any trust whose purchases of securities are directed 
     by a person described in clauses (i) through (v) of this 
     subparagraph;
       ``(vii) any market intermediary exempt under section 
     3(c)(2) of the Investment Company Act of 1940;
       ``(viii) any associated person of a broker or dealer other 
     than a natural person;
       ``(ix) any foreign bank (as defined in section 1(b)(7) of 
     the International Banking Act of 1978);
       ``(x) the government of any foreign country;
       ``(xi) any corporation, company, or partnership that owns 
     and invests on a discretionary basis, not less than 
     $10,000,000 in investments;
       ``(xii) any natural person who owns and invests on a 
     discretionary basis, not less than $10,000,000 in 
     investments;
       ``(xiii) any government or political subdivision, agency, 
     or instrumentality of a government who owns and invests on a 
     discretionary basis not less than $50,000,000 in investments; 
     or
       ``(xiv) any multinational or supranational entity or any 
     agency or instrumentality thereof.
       ``(B) Additional authority.--The Commission may, by rule or 
     order, define a `qualified investor' as any other person, 
     taking into consideration such factors as the financial 
     sophistication of the person, net worth, and knowledge and 
     experience in financial matters.''.

     SEC. 208. GOVERNMENT SECURITIES DEFINED.

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

     SEC. 209. EFFECTIVE DATE.

       This subtitle shall take effect at the end of the 270-day 
     period beginning on the date of 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:

[[Page S4705]]

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

     SEC. 212. LENDING TO AN AFFILIATED INVESTMENT COMPANY.

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

     SEC. 213. INDEPENDENT DIRECTORS.

       (a) In General.--Section 2(a)(19)(A) of the Investment 
     Company Act of 1940 (15 U.S.C. 80a-2(a)(19)(A)) is amended--
       (1) by striking clause (v) and inserting the following new 
     clause:
       ``(v) any person or any affiliated person of a person 
     (other than a registered investment company) that, at any 
     time during the 6-month period preceding the date of the 
     determination of whether that person or affiliated person is 
     an interested person, has executed any portfolio transactions 
     for, engaged in any principal transactions with, or 
     distributed shares for--

       ``(I) the investment company;
       ``(II) any other investment company having the same 
     investment adviser as such investment company or holding 
     itself out to investors as a related company for purposes of 
     investment or investor services; or
       ``(III) any account over which the investment company's 
     investment adviser has brokerage placement discretion,'';

       (2) by redesignating clause (vi) as clause (vii); and
       (3) by inserting after clause (v) the following new clause:
       ``(vi) any person or any affiliated person of a person 
     (other than a registered investment company) that, at any 
     time during the 6-month period preceding the date of the 
     determination of whether that person or affiliated person is 
     an interested person, has loaned money or other property to--

       ``(I) the investment company;
       ``(II) any other investment company having the same 
     investment adviser as such investment company or holding 
     itself out to investors as a related company for purposes of 
     investment or investor services; or
       ``(III) any account for which the investment company's 
     investment adviser has borrowing authority,''.

       (b) Conforming Amendment.--Section 2(a)(19)(B) of the 
     Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(19)(B)) is 
     amended--
       (1) by striking clause (v) and inserting the following new 
     clause:
       ``(v) any person or any affiliated person of a person 
     (other than a registered investment company) that, at any 
     time during the 6-month period preceding the date of the 
     determination of whether that person or affiliated person is 
     an interested person, has executed any portfolio transactions 
     for, engaged in any principal transactions with, or 
     distributed shares for--

       ``(I) any investment company for which the investment 
     adviser or principal underwriter serves as such;
       ``(II) any investment company holding itself out to 
     investors, for purposes of investment or investor services, 
     as a company related to any investment company for which the 
     investment adviser or principal underwriter serves as such; 
     or
       ``(III) any account over which the investment adviser has 
     brokerage placement discretion,'';

       (2) by redesignating clause (vi) as clause (vii); and
       (3) by inserting after clause (v) the following new clause:
       ``(vi) any person or any affiliated person of a person 
     (other than a registered investment company) that, at any 
     time during the 6-month period preceding the date of the 
     determination of whether that person or affiliated person is 
     an interested person, has loaned money or other property to--

       ``(I) any investment company for which the investment 
     adviser or principal underwriter serves as such;
       ``(II) any investment company holding itself out to 
     investors, for purposes of investment or investor services, 
     as a company related to any investment company for which the 
     investment adviser or principal underwriter serves as such; 
     or
       ``(III) any account for which the investment adviser has 
     borrowing authority,''.

       (c) Affiliation of Directors.--Section 10(c) of the 
     Investment Company Act of 1940 (15 U.S.C. 80a-10(c)) is 
     amended by striking ``bank, except'' and inserting ``bank 
     (together with its affiliates and subsidiaries) or any one 
     bank holding company (together with its affiliates and 
     subsidiaries) (as such terms are defined in section 2 of the 
     Bank Holding Company Act of 1956), except''.
       (d) Effective Date.--The amendments made by this section 
     shall take effect at the end of the 1-year period beginning 
     on the date of enactment of this subtitle.

     SEC. 214. ADDITIONAL SEC DISCLOSURE AUTHORITY.

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

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

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

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

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

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

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

[[Page S4706]]

       ``(B) for which all of the records relating to its 
     investment adviser activities are separately maintained in or 
     extractable from such unit's own facilities or the facilities 
     of the bank, and such records are so maintained or otherwise 
     accessible as to permit independent examination and 
     enforcement by the Commission of this Act or the Investment 
     Company Act of 1940 and rules and regulations promulgated 
     under this Act or the Investment Company Act of 1940.''.

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

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

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

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

     SEC. 220. INTERAGENCY CONSULTATION.

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

     ``SEC. 210A. CONSULTATION.

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

     SEC. 221. TREATMENT OF BANK COMMON TRUST FUNDS.

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

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

       Section 15 of the Investment Company Act of 1940 (15 U.S.C. 
     80a-15) is amended by adding at the end the following new 
     subsection:
       ``(g) Controlling Interest in Investment Company 
     Prohibited.--
       ``(1) In general.--If an investment adviser to a registered 
     investment company, or an affiliated person of that 
     investment adviser, holds a controlling interest in that 
     registered investment company in a trustee or fiduciary 
     capacity, such person shall--
       ``(A) if it holds the shares in a trustee or fiduciary 
     capacity with respect to any employee benefit plan subject to 
     the Employee Retirement Income Security Act of 1974, transfer 
     the power to vote the shares of the investment company 
     through to another person acting in a fiduciary capacity with 
     respect to the plan who is not an affiliated person of that 
     investment adviser or any affiliated person thereof; or
       ``(B) if it holds the shares in a trustee or fiduciary 
     capacity with respect to any person or entity other than an 
     employee benefit plan subject to the Employee Retirement 
     Income Security Act of 1974--
       ``(i) transfer the power to vote the shares of the 
     investment company through to--

       ``(I) the beneficial owners of the shares;
       ``(II) another person acting in a fiduciary capacity who is 
     not an affiliated person of that investment adviser or any 
     affiliated person thereof; or
       ``(III) any person authorized to receive statements and 
     information with respect to the trust who is not an 
     affiliated person of that investment adviser or any 
     affiliated person thereof;

       ``(ii) vote the shares of the investment company held by it 
     in the same proportion as shares held by all other 
     shareholders of the investment company; or
       ``(iii) vote the shares of the investment company as 
     otherwise permitted under such rules, regulations, or orders 
     as the Commission may prescribe or issue consistent with the 
     protection of investors.
       ``(2) Exemption.--Paragraph (1) shall not apply to any 
     investment adviser to a registered investment company, or any 
     affiliated person of that investment adviser, that holds 
     shares of the investment company in a trustee or fiduciary 
     capacity if that registered investment company consists 
     solely of assets held in such capacities.
       ``(3) Safe harbor.--No investment adviser to a registered 
     investment company or any affiliated person of such 
     investment adviser shall be deemed to have acted unlawfully 
     or to have breached a fiduciary duty under State or Federal 
     law solely by reason of acting in accordance with clause (i), 
     (ii), or (iii) of paragraph (1)(B).
       ``(4) Church plan exemption.--Paragraph (1) does not apply 
     to any investment adviser to a registered investment company, 
     or an affiliated person of that investment adviser, holding 
     shares in such a capacity, if such investment adviser or such 
     affiliated person is an organization described in section 
     414(e)(3)(A) of the Internal Revenue Code of 1986.''.

     SEC. 223. CONFORMING CHANGE IN DEFINITION.

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

     SEC. 224. CONFORMING AMENDMENT.

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

     SEC. 225. EFFECTIVE DATE.

       This subtitle shall take effect 90 days after the date of 
     enactment of this Act.
     Subtitle C--Securities and Exchange Commission Supervision of 
                   Investment Bank Holding Companies

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

       (a) Amendment.--Section 17 of the Securities Exchange Act 
     of 1934 (15 U.S.C. 78q) is amended--
       (1) by redesignating subsection (i) as subsection (l); and
       (2) by inserting after subsection (h) the following new 
     subsections:
       ``(i) Investment Bank Holding Companies.--
       ``(1) Elective supervision of an investment bank holding 
     company not having a bank or savings association affiliate.--
       ``(A) In general.--An investment bank holding company that 
     is not--
       ``(i) an affiliate of a wholesale financial institution, an 
     insured bank (other than an institution described in 
     subparagraph (D), (F), or (G) of section 2(c)(2), or held 
     under section 4(f), of the Bank Holding Company Act of 1956), 
     or a savings association;
       ``(ii) a foreign bank, foreign company, or company that is 
     described in section 8(a) of the International Banking Act of 
     1978; or
       ``(iii) a foreign bank that controls, directly or 
     indirectly, a corporation chartered under section 25A of the 
     Federal Reserve Act,

     may elect to become supervised by filing with the Commission 
     a notice of intention to become supervised, pursuant to 
     subparagraph (B) of this paragraph. Any investment bank 
     holding company filing such a notice shall be supervised in 
     accordance with this

[[Page S4707]]

     section and comply with the rules promulgated by the 
     Commission applicable to supervised investment bank holding 
     companies.
       ``(B) Notification of status as a supervised investment 
     bank holding company.--An investment bank holding company 
     that elects under subparagraph (A) to become supervised by 
     the Commission shall file with the Commission a written 
     notice of intention to become supervised by the Commission in 
     such form and containing such information and documents 
     concerning such investment bank holding company as the 
     Commission, by rule, may prescribe as necessary or 
     appropriate in furtherance of the purposes of this section. 
     Unless the Commission finds that such supervision is not 
     necessary or appropriate in furtherance of the purposes of 
     this section, such supervision shall become effective 45 days 
     after the date of receipt of such written notice by the 
     Commission, or within such shorter time period as the 
     Commission, by rule or order, may determine.
       ``(2) Election not to be supervised by the commission as an 
     investment bank holding company.--
       ``(A) Voluntary withdrawal.--A supervised investment bank 
     holding company that is supervised pursuant to paragraph (1) 
     may, upon such terms and conditions as the Commission deems 
     necessary or appropriate, elect not to be supervised by the 
     Commission by filing a written notice of withdrawal from 
     Commission supervision. Such notice shall not become 
     effective until one year after receipt by the Commission, or 
     such shorter or longer period as the Commission deems 
     necessary or appropriate to ensure effective supervision of 
     the material risks to the supervised investment bank holding 
     company and to the affiliated broker or dealer, or to prevent 
     evasion of the purposes of this section.
       ``(B) Discontinuation of commission supervision.--If the 
     Commission finds that any supervised investment bank holding 
     company that is supervised pursuant to paragraph (1) is no 
     longer in existence or has ceased to be an investment bank 
     holding company, or if the Commission finds that continued 
     supervision of such a supervised investment bank holding 
     company is not consistent with the purposes of this section, 
     the Commission may discontinue the supervision pursuant to a 
     rule or order, if any, promulgated by the Commission under 
     this section.
       ``(3) Supervision of investment bank holding companies.--
       ``(A) Recordkeeping and reporting.--
       ``(i) In general.--Every supervised investment bank holding 
     company and each affiliate thereof shall make and keep for 
     prescribed periods such records, furnish copies thereof, and 
     make such reports, as the Commission may require by rule, in 
     order to keep the Commission informed as to--

       ``(I) the company's or affiliate's activities, financial 
     condition, policies, systems for monitoring and controlling 
     financial and operational risks, and transactions and 
     relationships between any broker or dealer affiliate of the 
     supervised investment bank holding company; and
       ``(II) the extent to which the company or affiliate has 
     complied with the provisions of this Act and regulations 
     prescribed and orders issued under this Act.

       ``(ii) Form and contents.--Such records and reports shall 
     be prepared in such form and according to such specifications 
     (including certification by an independent public 
     accountant), as the Commission may require and shall be 
     provided promptly at any time upon request by the Commission. 
     Such records and reports may include--

       ``(I) a balance sheet and income statement;
       ``(II) an assessment of the consolidated capital of the 
     supervised investment bank holding company;
       ``(III) an independent auditor's report attesting to the 
     supervised investment bank holding company's compliance with 
     its internal risk management and internal control objectives; 
     and
       ``(IV) reports concerning the extent to which the company 
     or affiliate has complied with the provisions of this title 
     and any regulations prescribed and orders issued under this 
     title.

       ``(B) Use of existing reports.--
       ``(i) In general.--The Commission shall, to the fullest 
     extent possible, accept reports in fulfillment of the 
     requirements under this paragraph that the supervised 
     investment bank holding company or its affiliates have been 
     required to provide to another appropriate regulatory agency 
     or self-regulatory organization.
       ``(ii) Availability.--A supervised investment bank holding 
     company or an affiliate of such company shall provide to the 
     Commission, at the request of the Commission, any report 
     referred to in clause (i).
       ``(C) Examination authority.--
       ``(i) Focus of examination authority.--The Commission may 
     make examinations of any supervised investment bank holding 
     company and any affiliate of such company in order to--

       ``(I) inform the Commission regarding--

       ``(aa) the nature of the operations and financial condition 
     of the supervised investment bank holding company and its 
     affiliates;
       ``(bb) the financial and operational risks within the 
     supervised investment bank holding company that may affect 
     any broker or dealer controlled by such supervised investment 
     bank holding company; and
       ``(cc) the systems of the supervised investment bank 
     holding company and its affiliates for monitoring and 
     controlling those risks; and

       ``(II) monitor compliance with the provisions of this 
     subsection, provisions governing transactions and 
     relationships between any broker or dealer affiliated with 
     the supervised investment bank holding company and any of the 
     company's other affiliates, and applicable provisions of 
     subchapter II of chapter 53, title 31, United States Code 
     (commonly referred to as the `Bank Secrecy Act') and 
     regulations thereunder.

       ``(ii) Restricted focus of examinations.--The Commission 
     shall limit the focus and scope of any examination of a 
     supervised investment bank holding company to--

       ``(I) the company; and
       ``(II) any affiliate of the company that, because of its 
     size, condition, or activities, the nature or size of the 
     transactions between such affiliate and any affiliated broker 
     or dealer, or the centralization of functions within the 
     holding company system, could, in the discretion of the 
     Commission, have a materially adverse effect on the 
     operational or financial condition of the broker or dealer.

       ``(iii) Deference to other examinations.--For purposes of 
     this subparagraph, the Commission shall, to the fullest 
     extent possible, use the reports of examination of an 
     institution described in subparagraph (D), (F), or (G) of 
     section 2(c)(2), or held under section 4(f), of the Bank 
     Holding Company Act of 1956 made by the appropriate 
     regulatory agency, or of a licensed insurance company made by 
     the appropriate State insurance regulator.
       ``(4) Holding company capital.--
       ``(A) Authority.--If the Commission finds that it is 
     necessary to adequately supervise investment bank holding 
     companies and their broker or dealer affiliates consistent 
     with the purposes of this subsection, the Commission may 
     adopt capital adequacy rules for supervised investment bank 
     holding companies.
       ``(B) Method of calculation.--In developing rules under 
     this paragraph:
       ``(i) Double leverage.--The Commission shall consider the 
     use by the supervised investment bank holding company of debt 
     and other liabilities to fund capital investments in 
     affiliates.
       ``(ii) No unweighted capital ratio.--The Commission shall 
     not impose under this section a capital ratio that is not 
     based on appropriate risk-weighting considerations.
       ``(iii) No capital requirement on regulated entities.--The 
     Commission shall not, by rule, regulation, guideline, order 
     or otherwise, impose any capital adequacy provision on a 
     nonbanking affiliate (other than a broker or dealer) that is 
     in compliance with applicable capital requirements of another 
     Federal regulatory authority or State insurance authority.
       ``(iv) Appropriate exclusions.--The Commission shall take 
     full account of the applicable capital requirements of 
     another Federal regulatory authority or State insurance 
     regulator.
       ``(C) Internal risk management models.--The Commission may 
     incorporate internal risk management models into its capital 
     adequacy rules for supervised investment bank holding 
     companies.
       ``(5) Functional regulation of banking and insurance 
     activities of supervised investment bank holding companies.--
     The Commission shall defer to--
       ``(A) the appropriate regulatory agency with regard to all 
     interpretations of, and the enforcement of, applicable 
     banking laws relating to the activities, conduct, ownership, 
     and operations of banks, and institutions described in 
     subparagraph (D), (F), and (G) of section 2(c)(2), or held 
     under section 4(f), of the Bank Holding Company Act of 1956; 
     and
       ``(B) the appropriate State insurance regulators with 
     regard to all interpretations of, and the enforcement of, 
     applicable State insurance laws relating to the activities, 
     conduct, and operations of insurance companies and insurance 
     agents.
       ``(6) Definitions.--For purposes of this subsection and 
     subsection (j)--
       ``(A) the term `investment bank holding company' means--
       ``(i) any person other than a natural person that owns or 
     controls one or more brokers or dealers; and
       ``(ii) the associated persons of the investment bank 
     holding company;
       ``(B) the term `supervised investment bank holding company' 
     means any investment bank holding company that is supervised 
     by the Commission pursuant to this subsection;
       ``(C) the terms `affiliate', `bank', `bank holding 
     company', `company', `control', and `savings association' 
     have the same meanings as in section 2 of the Bank Holding 
     Company Act of 1956;
       ``(D) the term `insured bank' has the same meaning as in 
     section 3 of the Federal Deposit Insurance Act;
       ``(E) the term `foreign bank' has the same meaning as in 
     section 1(b)(7) of the International Banking Act of 1978; and
       ``(F) the terms `person associated with an investment bank 
     holding company' and `associated person of an investment bank 
     holding company' mean any person directly or indirectly 
     controlling, controlled by, or under common control with, an 
     investment bank holding company.
       ``(j) Commission Backup Authority.--
       ``(1) Authority.--The Commission may make inspections of 
     any wholesale financial holding company that--

[[Page S4708]]

       ``(A) controls a wholesale financial institution;
       ``(B) is not a foreign bank; and
       ``(C) does not control an insured bank (other than an 
     institution permitted under subparagraph (D), (F), or (G) of 
     section 2(c)(2), or held under section 4(f), of the Bank 
     Holding Company Act of 1956) or a savings association,
     and any affiliate of such company, for the purpose of 
     monitoring and enforcing compliance by the wholesale 
     financial holding company with the Federal securities laws.
       ``(2) Limitation.--The Commission shall limit the focus and 
     scope of any inspection under paragraph (1) to those 
     transactions, policies, procedures, or records that are 
     reasonably necessary to monitor and enforce compliance by the 
     wholesale financial holding company or any affiliate with the 
     Federal securities laws.
       ``(3) Deference to examinations.--To the fullest extent 
     possible, the Commission shall use, for the purposes of this 
     subsection, the reports of examinations--
       ``(A) made by the Board of Governors of the Federal Reserve 
     System of any wholesale financial holding company that is 
     supervised by the Board;
       ``(B) made by or on behalf of any State regulatory agency 
     responsible for the supervision of an insurance company of 
     any licensed insurance company; and
       ``(C) made by any Federal or State banking agency of any 
     bank or institution described in subparagraph (D), (F), or 
     (G) of section 2(c)(2), or held under section 4(f), of the 
     Bank Holding Company Act of 1956.
       ``(4) Notice.--To the fullest extent possible, the 
     Commission shall notify the appropriate regulatory agency 
     prior to conducting an inspection of a wholesale financial 
     institution or institution described in subparagraph (D), 
     (F), or (G) of section 2(c)(2), or held under section 4(f), 
     of the Bank Holding Company Act of 1956.
       ``(k) Authority To Limit Disclosure of Information.--
     Notwithstanding any other provision of law, the Commission 
     shall not be compelled to disclose any information required 
     to be reported under subsection (h) or (i) or any information 
     supplied to the Commission by any domestic or foreign 
     regulatory agency that relates to the financial or 
     operational condition of any associated person of a broker or 
     dealer, investment bank holding company, or any affiliate of 
     an investment bank holding company. Nothing in this 
     subsection shall authorize the Commission to withhold 
     information from Congress, or prevent the Commission from 
     complying with a request for information from any other 
     Federal department or agency or any self-regulatory 
     organization requesting the information for purposes within 
     the scope of its jurisdiction, or complying with an order of 
     a court of the United States in an action brought by the 
     United States or the Commission. For purposes of section 552 
     of title 5, United States Code, this subsection shall be 
     considered a statute described in subsection (b)(3)(B) of 
     such section 552. In prescribing regulations to carry out the 
     requirements of this subsection, the Commission shall 
     designate information described in or obtained pursuant to 
     subparagraphs (A), (B), and (C) of subsection (i)(5) as 
     confidential information for purposes of section 24(b)(2) of 
     this title.''.
       (b) Conforming Amendments.--
       (1) Section 3(a)(34) of the Securities Exchange Act of 1934 
     (15 U.S.C. 78c(a)(34)) is amended by adding at the end the 
     following new subparagraphs:
       ``(H) When used with respect to an institution described in 
     subparagraph (D), (F), or (G) of section 2(c)(2), or held 
     under section 4(f), of the Bank Holding Company Act of 1956--
       ``(i) the Comptroller of the Currency, in the case of a 
     national bank or a bank in the District of Columbia examined 
     by the Comptroller of the Currency;
       ``(ii) the Board of Governors of the Federal Reserve 
     System, in the case of a State member bank of the Federal 
     Reserve System or any corporation chartered under section 25A 
     of the Federal Reserve Act;
       ``(iii) the Federal Deposit Insurance Corporation, in the 
     case of any other bank the deposits of which are insured in 
     accordance with the Federal Deposit Insurance Act; or
       ``(iv) the Commission in the case of all other such 
     institutions.''.
       (2) Section 1112(e) of the Right to Financial Privacy Act 
     of 1978 (12 U.S.C. 3412(e)) is amended--
       (A) by striking ``this title'' and inserting ``law''; and
       (B) by inserting ``, examination reports'' after 
     ``financial records''.
                          Subtitle D--Studies

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

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

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

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

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

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

     SEC. 302. MANDATORY INSURANCE LICENSING REQUIREMENTS.

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

     SEC. 303. FUNCTIONAL REGULATION OF INSURANCE.

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

     SEC. 304. INSURANCE UNDERWRITING IN NATIONAL BANKS.

       (a) In General.--Except as provided in section 305, a 
     national bank and the subsidiaries of a national bank may not 
     provide insurance in a State as principal except that this 
     prohibition shall not apply to authorized products.
       (b) Authorized Products.--For the purposes of this section, 
     a product is authorized if--
       (1) as of January 1, 1997, the Comptroller of the Currency 
     had determined in writing that national banks may provide 
     such product as principal, or national banks were in fact 
     lawfully providing such product as principal;
       (2) no court of relevant jurisdiction had, by final 
     judgment, overturned a determination of the Comptroller of 
     the Currency that national banks may provide such product as 
     principal; and
       (3) the product is not title insurance, or an annuity 
     contract the income of which is subject to tax treatment 
     under section 72 of the Internal Revenue Code of 1986.
       (c) Definition.--For purposes of this section, the term 
     ``insurance'' means--
       (1) any product regulated as insurance as of January 1, 
     1997, in accordance with the relevant State insurance law, in 
     the State in which the product is provided;
       (2) any product first offered after January 1, 1997, 
     which--
       (A) a State insurance regulator determines shall be 
     regulated as insurance in the State in which the product is 
     provided because the product insures, guarantees, or 
     indemnifies against liability, loss of life, loss of health, 
     or loss through damage to or destruction of property, 
     including, but not limited to, surety bonds, life insurance, 
     health insurance, title insurance, and property and casualty 
     insurance (such as private passenger or commercial 
     automobile, homeowners, mortgage, commercial multiperil, 
     general liability, professional liability, workers' 
     compensation, fire and allied lines, farm owners multiperil, 
     aircraft, fidelity, surety, medical malpractice, ocean 
     marine, inland marine, and boiler and machinery insurance); 
     and
       (B) is not a product or service of a bank that is--
       (i) a deposit product;
       (ii) a loan, discount, letter of credit, or other extension 
     of credit;
       (iii) a trust or other fiduciary service;
       (iv) a qualified financial contract (as defined in or 
     determined pursuant to section 11(e)(8)(D)(i) of the Federal 
     Deposit Insurance Act); or
       (v) a financial guaranty, except that this subparagraph (B) 
     shall not apply to a product that includes an insurance 
     component such that if the product is offered or proposed to 
     be offered by the bank as principal--

       (I) it would be treated as a life insurance contract under 
     section 7702 of the Internal Revenue Code of 1986; or
       (II) in the event that the product is not a letter of 
     credit or other similar extension of credit, a qualified 
     financial contract, or a financial guaranty, it would qualify 
     for treatment for losses incurred with respect to such 
     product under section 832(b)(5) of the Internal Revenue Code 
     of 1986, if the bank were subject to tax as an insurance 
     company under section 831 of that Code; or

       (3) any annuity contract, the income on which is subject to 
     tax treatment under section 72 of the Internal Revenue Code 
     of 1986.

     SEC. 305. TITLE INSURANCE ACTIVITIES OF NATIONAL BANKS AND 
                   THEIR AFFILIATES.

       (a) Authority.--Notwithstanding any other provision of this 
     Act or any other law, no national bank, and no subsidiary of 
     a national bank, may engage in any activity involving the 
     underwriting of title insurance, other than title insurance 
     underwriting activities in which such national bank or 
     subsidiary was actively and lawfully engaged before the date 
     of enactment of this Act.
       (b) Insurance Affiliate.--In the case of a national bank 
     which has an affiliate which provides insurance as principal 
     and is not a subsidiary of the bank, the national bank

[[Page S4709]]

     and any subsidiary of the national bank may not engage in any 
     activity involving the underwriting of title insurance 
     pursuant to subsection (a).
       (c) Insurance Subsidiary.--In the case of a national bank 
     which has a subsidiary which provides insurance as principal 
     and has no affiliate which provides insurance as principal 
     and is not a subsidiary, the national bank may not engage in 
     any activity involving the underwriting of title insurance 
     pursuant to subsection (a).
       (d) ``Affiliate'' and ``Subsidiary'' Defined.--For purposes 
     of this section, the terms ``affiliate'' and ``subsidiary'' 
     have the same meanings as in section 2 of the Bank Holding 
     Company Act of 1956.

     SEC. 306. EXPEDITED AND EQUALIZED DISPUTE RESOLUTION FOR 
                   FEDERAL REGULATORS.

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

     SEC. 307. CONSUMER PROTECTION REGULATIONS.

       The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) 
     is amended by adding at the end the following new section:

     ``SEC. 45. CONSUMER PROTECTION REGULATIONS.

       ``(a) Regulations Required.--
       ``(1) In general.--The Federal banking agencies shall 
     prescribe and publish in final form, before the end of the 1-
     year period beginning on the date of enactment of the 
     Financial Services Act of 1999, consumer protection 
     regulations (which the agencies jointly determine to be 
     appropriate) that--
       ``(A) apply to retail sales practices, solicitations, 
     advertising, or offers of any insurance product by any 
     insured depository institution or wholesale financial 
     institution or any person who is engaged in such activities 
     at an office of the institution or on behalf of the 
     institution; and
       ``(B) are consistent with the requirements of this Act and 
     provide such additional protections for consumers to whom 
     such sales, solicitations, advertising, or offers are 
     directed as the agency determines to be appropriate.
       ``(2) Applicability to subsidiaries.--The regulations 
     prescribed pursuant to paragraph (1) shall extend such 
     protections to any subsidiaries of an insured depository 
     institution, as deemed appropriate by the regulators referred 
     to in paragraph (3), where such extension is determined to be 
     necessary to ensure the consumer protections provided by this 
     section.
       ``(3) Consultation and joint regulations.--The Federal 
     banking agencies shall consult with each other and prescribe 
     joint regulations pursuant to paragraph (1), after 
     consultation with the State insurance regulators, as 
     appropriate.
       ``(b) Sales Practices.--The regulations prescribed pursuant 
     to subsection (a) shall include anticoercion rules applicable 
     to the sale of insurance products which prohibit an insured 
     depository institution from engaging in any practice that 
     would lead a consumer to believe an extension of credit, in 
     violation of section 106(b) of the Bank Holding Company Act 
     Amendments of 1970, is conditional upon--
       ``(1) the purchase of an insurance product from the 
     institution or any of its affiliates or subsidiaries; or
       ``(2) an agreement by the consumer not to obtain, or a 
     prohibition on the consumer from obtaining, an insurance 
     product from an unaffiliated entity.
       ``(c) Disclosures and Advertising.--The regulations 
     prescribed pursuant to subsection (a) shall include the 
     following provisions relating to disclosures and advertising 
     in connection with the initial purchase of an insurance 
     product:
       ``(1) Disclosures.--
       ``(A) In general.--Requirements that the following 
     disclosures be made orally and in writing before the 
     completion of the initial sale and, in the case of clause 
     (iii), at the time of application for an extension of credit:
       ``(i) Uninsured status.--As appropriate, the product is not 
     insured by the Federal Deposit Insurance Corporation, the 
     United States Government, or the insured depository 
     institution.
       ``(ii) Investment risk.--In the case of a variable annuity 
     or other insurance product which involves an investment risk, 
     that there is an investment risk associated with the product, 
     including possible loss of value.
       ``(iii) Coercion.--The approval of an extension of credit 
     may not be conditioned on--

       ``(I) the purchase of an insurance product from the 
     institution in which the application for credit is pending or 
     any of its affiliates or subsidiaries; or
       ``(II) an agreement by the consumer not to obtain, or a 
     prohibition on the consumer from obtaining, an insurance 
     product from an unaffiliated entity.

       ``(B) Making disclosure readily understandable.--
     Regulations prescribed under subparagraph (A) shall encourage 
     the use of disclosure that is conspicuous, simple, direct, 
     and readily understandable, such as the following:
       ``(i) `NOT FDIC-INSURED'.
       ``(ii) `NOT GUARANTEED BY THE BANK'.
       ``(iii) `MAY GO DOWN IN VALUE'.
       ``(C) Adjustments for alternative methods of purchase.--In 
     prescribing the requirements under subparagraphs (A) and (D), 
     necessary adjustments shall be made for purchase in person, 
     by telephone, or by electronic media to provide for the most 
     appropriate and complete form of disclosure and 
     acknowledgments.
       ``(D) Consumer acknowledgment.--A requirement that an 
     insured depository institution shall require any person 
     selling an insurance product at any office of, or on behalf 
     of, the institution to obtain, at the time a consumer 
     receives the disclosures required under this paragraph or at 
     the time of the initial purchase by the consumer of such 
     product, an acknowledgment by such consumer of the receipt of 
     the disclosure required under this paragraph with respect to 
     such product.
       ``(2) Prohibition on misrepresentations.--A prohibition on 
     any practice, or any advertising, at any office of, or on 
     behalf of, the insured depository institution, or any 
     subsidiary as appropriate, which could mislead any person or 
     otherwise cause a reasonable person to reach an erroneous 
     belief with respect to--
       ``(A) the uninsured nature of any insurance product sold, 
     or offered for sale, by the institution or any subsidiary of 
     the institution; or
       ``(B) in the case of a variable annuity or other insurance 
     product that involves an investment risk, the investment risk 
     associated with any such product.
       ``(d) Separation of Banking and Nonbanking Activities.--
       ``(1) Regulations required.--The regulations prescribed 
     pursuant to subsection (a) shall include such provisions as 
     the Federal banking agencies consider appropriate to ensure 
     that the routine acceptance of deposits is kept, to the 
     extent practicable, physically segregated from insurance 
     product activity.
       ``(2) Requirements.--Regulations prescribed pursuant to 
     paragraph (1) shall include the following requirements:
       ``(A) Separate setting.--A clear delineation of the setting 
     in which, and the circumstances under which, transactions 
     involving insurance products should be conducted in a 
     location physically segregated from an area where retail 
     deposits are routinely accepted.
       ``(B) Referrals.--Standards which permit any person 
     accepting deposits from the public in an area where such 
     transactions are routinely conducted in an insured depository 
     institution to refer a customer who seeks to purchase any 
     insurance product to a qualified person who sells such 
     product, only if the person making the referral receives no 
     more than a one-time nominal fee of a fixed dollar amount for 
     each referral that does not depend on whether the referral 
     results in a transaction.
       ``(C) Qualification and licensing requirements.--Standards 
     prohibiting any insured depository institution from 
     permitting any person to sell or offer for sale any insurance 
     product in any part of any office of the institution, or on 
     behalf of the institution, unless such person is 
     appropriately qualified and licensed.
       ``(e) Domestic Violence Discrimination Prohibition.--
       ``(1) In general.--In the case of an applicant for, or an 
     insured under, any insurance product described in paragraph 
     (2), the status of the applicant or insured as a victim of 
     domestic violence, or as a provider of services to victims of 
     domestic violence, shall not be considered as a criterion in 
     any decision with regard to insurance underwriting, pricing, 
     renewal, or scope of coverage of insurance policies, or 
     payment of insurance

[[Page S4710]]

     claims, except as required or expressly permitted under State 
     law.
       ``(2) Scope of application.--The prohibition contained in 
     paragraph (1) shall apply to any insurance product which is 
     sold or offered for sale, as principal, agent, or broker, by 
     any insured depository institution or any person who is 
     engaged in such activities at an office of the institution or 
     on behalf of the institution.
       ``(3) Sense of the congress.--It is the sense of the 
     Congress that, by the end of the 30-month period beginning on 
     the date of enactment of the Financial Services Act of 1999, 
     the States should enact prohibitions against discrimination 
     with respect to insurance products that are at least as 
     strict as the prohibitions contained in paragraph (1).
       ``(4) Domestic violence defined.--For purposes of this 
     subsection, the term `domestic violence' means the occurrence 
     of 1 or more of the following acts by a current or former 
     family member, household member, intimate partner, or 
     caretaker:
       ``(A) Attempting to cause or causing or threatening another 
     person with 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 causing 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 this section, which mechanism shall--
       ``(1) establish a group within each regulatory agency to 
     receive such complaints;
       ``(2) develop procedures for investigating such complaints;
       ``(3) develop procedures for informing consumers of rights 
     they may have in connection with such complaints; and
       ``(4) develop procedures for addressing concerns raised by 
     such complaints, as appropriate, including procedures for the 
     recovery of losses to the extent appropriate.
       ``(g) Effect on Other Authority.--
       ``(1) In general.--No provision of this section shall be 
     construed as granting, limiting, or otherwise affecting--
       ``(A) any authority of the Securities and Exchange 
     Commission, any self-regulatory organization, the Municipal 
     Securities Rulemaking Board, or the Secretary of the Treasury 
     under any Federal securities law; or
       ``(B) except as provided in paragraph (2), any authority of 
     any State insurance commissioner or other State authority 
     under any State law.
       ``(2) Coordination with state law.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     regulations prescribed by a Federal banking agency under this 
     section shall not apply to retail sales, solicitations, 
     advertising, or offers of any insurance product by any 
     insured depository institution or wholesale financial 
     institution or to any person who is engaged in such 
     activities at an office of such institution or on behalf of 
     the institution, in a State where the State has in effect 
     statutes, regulations, orders, or interpretations, that are 
     inconsistent with or contrary to the regulations prescribed 
     by the Federal banking agencies.
       ``(B) Preemption.--If, with respect to any provision of the 
     regulations prescribed under this section, the Board of 
     Governors of the Federal Reserve System, the Comptroller of 
     the Currency, and the Board of Directors of the Federal 
     Deposit Insurance Corporation determine jointly that the 
     protection afforded by such provision for consumers is 
     greater than the protection provided by a comparable 
     provision of the statutes, regulations, orders, or 
     interpretations referred to in subparagraph (A) of any State, 
     such provision of the regulations prescribed under this 
     section shall supersede the comparable provision of such 
     State statute, regulation, order, or interpretation.
       ``(h) Insurance Product Defined.--For purposes of this 
     section, the term `insurance product' includes an annuity 
     contract the income of which is subject to tax treatment 
     under section 72 of the Internal Revenue Code of 1986.''.

     SEC. 308. CERTAIN STATE AFFILIATION LAWS PREEMPTED FOR 
                   INSURANCE COMPANIES AND AFFILIATES.

       Except as provided in section 104(a)(2), no State may, by 
     law, regulation, order, interpretation, or otherwise--
       (1) prevent or significantly interfere with the ability of 
     any insurer, or any affiliate of an insurer (whether such 
     affiliate is organized as a stock company, mutual holding 
     company, or otherwise), to become a financial holding company 
     or to acquire control of an insured depository institution;
       (2) limit the amount of an insurer's assets that may be 
     invested in the voting securities of an insured depository 
     institution (or any company which controls such institution), 
     except that the laws of an insurer's State of domicile may 
     limit the amount of such investment to an amount that is not 
     less than 5 percent of the insurer's admitted assets; or
       (3) prevent, significantly interfere with, or have the 
     authority to review, approve, or disapprove a plan of 
     reorganization by which an insurer proposes to reorganize 
     from mutual form to become a stock insurer (whether as a 
     direct or indirect subsidiary of a mutual holding company or 
     otherwise) unless such State is the State of domicile of the 
     insurer.

     SEC. 309. PUBLICATION OF PREEMPTION OF STATE LAWS.

       Section 5244 of the Revised Statutes of the United States 
     (12 U.S.C. 43) is amended--
       (1) by inserting ``or Federal savings association'' after 
     ``national bank'' each place that term appears; and
       (2) in subsection (c)(3)(B)(i), by inserting ``or savings 
     associations'' after ``banks''.
   Subtitle B--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 
     enactment of this Act, at least a majority of the States--
       (1) have enacted uniform laws and regulations governing the 
     licensure of individuals and entities authorized to sell and 
     solicit the purchase of insurance within the State; or
       (2) have enacted reciprocity laws and regulations governing 
     the licensure of nonresident individuals and entities 
     authorized to sell and solicit insurance within those States.
       (b) Uniformity Required.--States shall be deemed to have 
     established the uniformity necessary to satisfy subsection 
     (a)(1) if the States--
       (1) establish uniform criteria regarding the integrity, 
     personal qualifications, education, training, and experience 
     of licensed insurance producers, including the qualification 
     and training of sales personnel in ascertaining the 
     appropriateness of a particular insurance product for a 
     prospective customer;
       (2) establish uniform continuing education requirements for 
     licensed insurance producers;
       (3) establish uniform ethics course requirements for 
     licensed insurance producers in conjunction with the 
     continuing education requirements under paragraph (2);
       (4) establish uniform criteria to ensure that an insurance 
     product, including any annuity contract, sold to a consumer 
     is suitable and appropriate for the consumer based on 
     financial information disclosed by the consumer; and
       (5) do not impose any requirement upon any insurance 
     producer to be licensed or otherwise qualified to do business 
     as a nonresident that has the effect of limiting or 
     conditioning that producer's activities because of its 
     residence or place of operations, except that counter-
     signature requirements imposed on nonresident producers shall 
     not be deemed to have the effect of limiting or conditioning 
     a producer's activities because of its residence or place of 
     operations under this section.
       (c) Reciprocity Required.--States shall be deemed to have 
     established the reciprocity required to satisfy subsection 
     (a)(2) if the following conditions are met:
       (1) Administrative licensing procedures.--At least a 
     majority of the States permit a producer that has a resident 
     license for selling or soliciting the purchase of insurance 
     in its home State to receive a license to sell or solicit the 
     purchase of insurance in such majority of States as a 
     nonresident to the same extent that such producer is 
     permitted to sell or solicit the purchase of insurance in its 
     State, if the producer's home State also awards such licenses 
     on such a reciprocal basis, without satisfying any additional 
     requirements other than submitting--
       (A) a request for licensure;
       (B) the application for licensure that the producer 
     submitted to its home State;
       (C) proof that the producer is licensed and in good 
     standing in its home State; and
       (D) the payment of any requisite fee to the appropriate 
     authority.
       (2) Continuing education requirements.--A majority of the 
     States accept an insurance producer's satisfaction of its 
     home State's continuing education requirements for licensed 
     insurance producers to satisfy the States' own continuing 
     education requirements if the producer's home State also 
     recognizes the satisfaction of continuing education 
     requirements on such a reciprocal basis.
       (3) No limiting nonresident requirements.--A majority of 
     the States do not impose any requirement upon any insurance 
     producer to be licensed or otherwise qualified to do business 
     as a nonresident that has the effect of limiting or 
     conditioning that producer's activities because of its 
     residence or place of operations, except that 
     countersignature requirements imposed on nonresident 
     producers shall not be deemed to have the effect of limiting 
     or conditioning a producer's activities because of its 
     residence or place of operations under this section.
       (4) Reciprocal reciprocity.--Each of the States that 
     satisfies paragraphs (1), (2), and (3) grants reciprocity to 
     residents of all of the other States that satisfy such 
     paragraphs.
       (d) Determination.--
       (1) NAIC determination.--At the end of the 3-year period 
     beginning on the date of enactment of this Act, the National 
     Association of Insurance Commissioners shall determine, in 
     consultation with the insurance commissioners or chief 
     insurance regulatory officials of the States, whether the 
     uniformity or reciprocity required by subsections (b) and (c) 
     has been achieved.

[[Page S4711]]

       (2) Judicial review.--The appropriate United States 
     district court shall have exclusive jurisdiction over any 
     challenge to the National Association of Insurance 
     Commissioners' determination under this section and such 
     court shall apply the standards set forth in section 706 of 
     title 5, United States Code, when reviewing any such 
     challenge.
       (e) Continued Application.--If, at any time, the uniformity 
     or reciprocity required by subsections (b) and (c) no longer 
     exists, the provisions of this subtitle shall take effect 2 
     years after the date on which such uniformity or reciprocity 
     ceases to exist, unless the uniformity or reciprocity 
     required by those provisions is satisfied before the 
     expiration of that 2-year period.
       (f) Savings Provision.--No provision of this section shall 
     be construed as requiring that any law, regulation, 
     provision, or action of any State which purports to regulate 
     insurance producers, including any such law, regulation, 
     provision, or action which purports to regulate unfair trade 
     practices or establish consumer protections, including 
     countersignature laws, be altered or amended in order to 
     satisfy the uniformity or reciprocity required by subsections 
     (b) and (c), unless any such law, regulation, provision, or 
     action is inconsistent with a specific requirement of any 
     such subsection and then only to the extent of such 
     inconsistency.
       (g) Uniform Licensing.--Nothing in this section shall be 
     construed to require any State to adopt new or additional 
     licensing requirements to achieve the uniformity necessary to 
     satisfy subsection (a)(1).

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

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

     SEC. 323. PURPOSE.

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

     SEC. 324. RELATIONSHIP TO THE FEDERAL GOVERNMENT.

       The Association shall be subject to the supervision and 
     oversight of the National Association of Insurance 
     Commissioners (hereafter in this subtitle referred to as the 
     ``NAIC'').

     SEC. 325. MEMBERSHIP.

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

     SEC. 326. BOARD OF DIRECTORS.

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

     SEC. 327. OFFICERS.

       (a) In General.--

[[Page S4712]]

       (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) for such longer period as to which the Association 
     consents.
       (4) Standards for review.--
       (A) Grounds for approval.--The NAIC shall approve a 
     proposed rule or amendment if the NAIC finds that the rule or 
     amendment is in the public interest and is consistent with 
     the purposes of this Act.
       (B) Approval before end of notice period.--The NAIC shall 
     not approve any proposed rule before the end of the 30-day 
     period beginning on the date on which the Association files 
     proposed rules or amendments in accordance with paragraph 
     (1), unless the NAIC finds good cause for so doing and sets 
     forth the reasons for so finding.
       (5) Alternate procedure.--
       (A) In general.--Notwithstanding any provision of this 
     subsection other than subparagraph (B), a proposed rule or 
     amendment relating to the administration or organization of 
     the Association shall take effect--
       (i) upon the date of filing with the NAIC, if such proposed 
     rule or amendment is designated by the Association as 
     relating solely to matters which the NAIC, consistent with 
     the public interest and the purposes of this subsection, 
     determines by rule do not require the procedures set forth in 
     this paragraph; or
       (ii) upon such date as the NAIC shall for good cause 
     determine.
       (B) Abrogation by the naic.--
       (i) In general.--At any time within 60 days after the date 
     of filing of any proposed rule or amendment under 
     subparagraph (A)(i) or clause (ii) of this subparagraph, the 
     NAIC may repeal such rule or amendment and require that the 
     rule or amendment be refiled and reviewed in accordance with 
     this paragraph, if the NAIC finds that such action is 
     necessary or appropriate in the public interest, for the 
     protection of insurance producers or policyholders, or 
     otherwise in furtherance of the purposes of this subtitle.
       (ii) Effect of reconsideration by the naic.--Any action of 
     the NAIC pursuant to clause (i) shall--

       (I) not affect the validity or force of a rule change 
     during the period such rule or amendment was in effect; and
       (II) not be considered to be a final action.

       (c) Action Required by the NAIC.--The NAIC may, in 
     accordance with such rules as the NAIC determines to be 
     necessary or appropriate to the public interest or to carry 
     out the purposes of this subtitle, require the Association to 
     adopt, amend, or repeal any bylaw, rule or amendment of the 
     Association, whenever adopted.
       (d) Disciplinary Action by the Association.--
       (1) Specification of charges.--In any proceeding to 
     determine whether membership shall be denied, suspended, 
     revoked, or not renewed (hereafter in this section referred 
     to as a ``disciplinary action''), the Association shall bring 
     specific charges, notify such member of such charges, give 
     the member an opportunity to defend against the charges, and 
     keep a record.
       (2) Supporting statement.--A determination to take 
     disciplinary action shall be supported by a statement setting 
     forth--
       (A) any act or practice in which such member has been found 
     to have been engaged;
       (B) the specific provision of this subtitle, the rules or 
     regulations under this subtitle, or the rules of the 
     Association which any such act or practice is deemed to 
     violate; and
       (C) the sanction imposed and the reason for such sanction.
       (e) NAIC Review of Disciplinary Action.--
       (1) Notice to the naic.--If the Association orders any 
     disciplinary action, the Association shall promptly notify 
     the NAIC of such action.
       (2) Review by the naic.--Any disciplinary action taken by 
     the Association shall be subject to review by the NAIC--
       (A) on the NAIC's own motion; or
       (B) upon application by any person aggrieved by such action 
     if such application is filed with the NAIC not more than 30 
     days after the later of--
       (i) the date the notice was filed with the NAIC pursuant to 
     paragraph (1); or
       (ii) the date the notice of the disciplinary action was 
     received by such aggrieved person.
       (f) Effect of Review.--The filing of an application to the 
     NAIC for review of a disciplinary action, or the institution 
     of review by the NAIC on the NAIC's own motion, shall not 
     operate as a stay of disciplinary action unless the NAIC 
     otherwise orders.
       (g) Scope of Review.--
       (1) In general.--In any proceeding to review such action, 
     after notice and the opportunity for hearing, the NAIC 
     shall--
       (A) determine whether the action should be taken;
       (B) affirm, modify, or rescind the disciplinary sanction; 
     or
       (C) remand to the Association for further proceedings.
       (2) Dismissal of review.--The NAIC may dismiss a proceeding 
     to review disciplinary action if the NAIC finds that--
       (A) the specific grounds on which the action is based exist 
     in fact;
       (B) the action is in accordance with applicable rules and 
     regulations; and
       (C) such rules and regulations are, and were, applied in a 
     manner consistent with the purposes of this subtitle.

     SEC. 329. ASSESSMENTS.

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

     SEC. 330. FUNCTIONS OF THE NAIC.

       (a) Administrative Procedure.--Determinations of the NAIC, 
     for purposes of making rules pursuant to section 328, shall 
     be made after appropriate notice and opportunity for a 
     hearing and for submission of views of interested persons.
       (b) Examinations and Reports.--
       (1) Examinations.--The NAIC may make such examinations and 
     inspections of the Association and require the Association to 
     furnish to the NAIC such reports and records or copies 
     thereof as the NAIC may consider necessary or appropriate in 
     the public interest or to effectuate the purposes of this 
     subtitle.

[[Page S4713]]

       (2) Report by association.--As soon as practicable after 
     the close of each fiscal year, the Association shall submit 
     to the NAIC a written report regarding the conduct of its 
     business, and the exercise of the other rights and powers 
     granted by this subtitle, during such fiscal year. Such 
     report shall include financial statements setting forth the 
     financial position of the Association at the end of such 
     fiscal year and the results of its operations (including the 
     source and application of its funds) for such fiscal year. 
     The NAIC shall transmit such report to the President and the 
     Congress with such comment thereon as the NAIC determines to 
     be appropriate.

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

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

     SEC. 332. ELIMINATION OF NAIC OVERSIGHT.

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

     SEC. 333. RELATIONSHIP TO STATE LAW.

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

     SEC. 334. COORDINATION WITH OTHER REGULATORS.

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

     SEC. 335. JUDICIAL REVIEW.

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

     SEC. 336. DEFINITIONS.

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

[[Page S4714]]

          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 March 4, 1999, 
     unless the company is engaged, directly or indirectly 
     (including through a subsidiary other than a savings 
     association), only in activities that are permitted--
       ``(i) under paragraph (1)(C) or (2); or
       ``(ii) for financial holding companies under section 6(c) 
     of the Bank Holding Company Act of 1956.
       ``(B) 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 March 4, 1999, or that becomes a savings 
     and loan holding company pursuant to an application pending 
     before the Office of Thrift Supervision 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 March 4, 1999, or that it 
     acquired pursuant to an application pending before the Office 
     of Thrift Supervision 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 March 4, 1999, or a subsequent date, 
     pursuant to an application pending before the Office of 
     Thrift Supervision on or before March 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 March 4, 1999, or a subsequent date, pursuant to an 
     application pending before the Office of Thrift Supervision 
     on or before March 4, 1999.''.
       (b) Conforming Amendment.--Section 10(o)(5)(E) of the Home 
     Owners' Loan Act (15 U.S.C. 1467a(o)(5)(E)) is amended by 
     striking ``, except subparagraph (B)'' and inserting ``or 
     (c)(9)(A)(ii)''.

     SEC. 402. OPTIONAL CONVERSION OF FEDERAL SAVINGS ASSOCIATIONS 
                   TO NATIONAL BANKS.

       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 a national bank.--Notwithstanding any 
     other provision of law, any Federal savings association 
     chartered and in operation before the date of enactment of 
     the Financial Services Act of 1999, with branches in 1 or 
     more States, may convert, with the approval of the 
     Comptroller of the Currency, into 1 or more national banks, 
     each of which may encompass one or more of the branches of 
     the Federal savings association in 1 or more States, but only 
     if the resulting national bank or banks will meet any and all 
     financial, management, and capital requirements applicable to 
     a national bank.''.

     SEC. 403. 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 enactment of the Financial Services Act of 1999 may retain 
     the term `Federal' in the name of such institution if such 
     depository institution remains an insured depository 
     institution.
       ``(2) Definitions.--For purposes of this subsection, the 
     terms `depository institution', `insured depository 
     institution', `national bank', and `State bank' have the same 
     meanings as in section 3 of the Federal Deposit Insurance 
     Act.''.
               TITLE V--FINANCIAL INFORMATION ANTI-FRAUD

     SEC. 501. FINANCIAL INFORMATION ANTI-FRAUD.

       The Consumer Credit Protection Act (15 U.S.C. 1601 et seq.) 
     is amended by adding at the end the following:
          ``TITLE X--FINANCIAL INFORMATION PRIVACY PROTECTION

     ``SEC. 1001. SHORT TITLE; TABLE OF CONTENTS.

       ``(a) Short Title.--This title may be cited as the 
     `Financial Information Anti-Fraud Act of 1999'.
       ``(b) Table of Contents.--The table of contents for this 
     title is as follows:

          ``TITLE X--FINANCIAL INFORMATION PRIVACY PROTECTION

``Sec. 1001. Short title; table of contents.
``Sec. 1002. Definitions.
``Sec. 1003. Privacy protection for customer information of financial 
              institutions.
``Sec. 1004. Administrative enforcement.
``Sec. 1005. Civil liability.
``Sec. 1006. Criminal penalty.
``Sec. 1007. Relation to State laws.
``Sec. 1008. Agency guidance.

     ``SEC. 1002. DEFINITIONS.

       ``For purposes of this title, 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 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 loan or finance company, any 
     credit card issuer or operator of a credit card system, and 
     any consumer reporting agency that compiles and maintains 
     files on consumers on a nationwide basis (as defined in 
     section 603(p)).
       ``(C) Further definition by regulation.--The Board of 
     Governors of the Federal Reserve System may prescribe 
     regulations further defining the term `financial 
     institution', in accordance with subparagraph (A), for 
     purposes of this title.

     ``SEC. 1003. PRIVACY PROTECTION FOR CUSTOMER INFORMATION OF 
                   FINANCIAL INSTITUTIONS.

       ``(a) Prohibition on Obtaining Customer Information by 
     False Pretenses.--It shall be a violation of this title 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 knowingly making a false, fictitious, or 
     fraudulent statement or representation to an officer, 
     employee, or agent of a financial institution with the intent 
     to deceive the officer, employee, or agent into relying on 
     that statement or representation for purposes of releasing 
     the customer information;
       ``(2) by knowingly making a false, fictitious, or 
     fraudulent statement or representation to a customer of a 
     financial institution with the intent to deceive the customer 
     into relying on that statement or representation for purposes 
     of releasing the customer information or authorizing the 
     release of such information; or
       ``(3) by knowingly 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, if the document is 
     provided with the intent to deceive the officer, employee, or 
     agent into relying on that document for

[[Page S4715]]

     purposes of releasing the customer information.
       ``(b) Prohibition on Solicitation of a Person To Obtain 
     Customer Information From Financial Institution Under False 
     Pretenses.--It shall be a violation of this title to request 
     a person to obtain customer information of a financial 
     institution, knowing or consciously avoiding 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 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 Certain Types of Customer 
     Information of Financial Institutions.--No provision of this 
     section shall be construed 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).

     ``SEC. 1004. ADMINISTRATIVE ENFORCEMENT.

       ``(a) Enforcement by Federal Trade Commission.--Except as 
     provided in subsection (b), compliance with this title 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 that title.
       ``(b) Enforcement by Other Agencies in Certain Cases.--
       ``(1) In general.--Compliance with this title 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 title 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 title 
     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 title, any other 
     authority conferred on such agency by law.
       ``(c) State Action for Violations.--
       ``(1) Authority of states.--In addition to such other 
     remedies as are provided under State law, if the chief law 
     enforcement officer of a State, or an official or agency 
     designated by a State, has reason to believe that any person 
     has violated or is violating this title, the State--
       ``(A) may bring an action to enjoin such violation in any 
     appropriate United States district court or in any other 
     court of competent jurisdiction;
       ``(B) may bring an action on behalf of the residents of the 
     State to recover damages of not more than $1,000 for each 
     violation; and
       ``(C) in the case of any successful action under 
     subparagraph (A) or (B), shall be awarded the costs of the 
     action and reasonable attorney fees as determined by the 
     court.
       ``(2) Rights of federal regulators.--
       ``(A) Prior notice.--The State shall serve prior written 
     notice of any action under paragraph (1) upon the Federal 
     Trade Commission and, in the case of an action which involves 
     a financial institution described in section 1004(b)(1), the 
     agency referred to in such section with respect to such 
     institution and provide the Federal Trade Commission and any 
     such agency with a copy of its complaint, except in any case 
     in which such prior notice is not feasible, in which case the 
     State shall serve such notice immediately upon instituting 
     such action.
       ``(B) Right to intervene.--The Federal Trade Commission or 
     an agency described in subsection (b) shall have the right--
       ``(i) to intervene in an action under paragraph (1);
       ``(ii) upon so intervening, to be heard on all matters 
     arising therein;
       ``(iii) to remove the action to the appropriate United 
     States district court; and
       ``(iv) to file petitions for appeal.
       ``(3) Investigatory powers.--For purposes of bringing any 
     action under this subsection, no provision of this subsection 
     shall be construed as preventing the chief law enforcement 
     officer, or an official or agency designated by a State, from 
     exercising the powers conferred on the chief law enforcement 
     officer or such official by the laws of such State to conduct 
     investigations or to administer oaths or affirmations or to 
     compel the attendance of witnesses or the production of 
     documentary and other evidence.
       ``(4) Limitation on state action while federal action 
     pending.--If the Federal Trade Commission or any agency 
     described in subsection (b) has instituted a civil action for 
     a violation of this title, no State may, during the pendency 
     of such action, bring an action under this section against 
     any defendant named in the complaint of the Federal Trade 
     Commission or such agency for any violation of this title 
     that is alleged in that complaint.

     ``SEC. 1005. CIVIL LIABILITY.

       ``Any person, other than a financial institution, who fails 
     to comply with any provision of this title with respect to 
     any financial institution or any customer information of a 
     financial institution shall be liable to such financial 
     institution or the customer to whom such information relates 
     in an amount equal to the sum of the amounts determined under 
     each of the following paragraphs:
       ``(1) Actual damages.--The greater of--
       ``(A) the amount of any actual damage sustained by the 
     financial institution or customer as a result of such 
     failure; or
       ``(B) any amount received by the person who failed to 
     comply with this title, including an amount equal to the 
     value of any nonmonetary consideration, as a result of the 
     action which constitutes such failure.
       ``(2) Additional damages.--Such additional amount as the 
     court may allow.
       ``(3) Attorneys' fees.--In the case of any successful 
     action to enforce any liability under paragraph (1) or (2), 
     the costs of the action, together with reasonable attorneys' 
     fees.

     ``SEC. 1006. CRIMINAL PENALTY.

       ``(a) In General.--Whoever violates, or attempts to 
     violate, section 1003 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 1003 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. 1007. RELATION TO STATE LAWS.

       ``(a) In General.--This title 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 title, 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 title if the protection such statute, regulation, order, 
     or interpretation affords any person is greater than the 
     protection provided under this title.

     ``SEC. 1008. AGENCY GUIDANCE.

       ``In furtherance of the objectives of this title, each 
     Federal banking agency (as defined in section 3(z) of the 
     Federal Deposit Insurance Act) shall issue advisories to 
     depository institutions under the jurisdiction of the agency, 
     in order to assist such depository institutions in deterring 
     and detecting activities proscribed under section 1003.''.

     SEC. 502. REPORT TO CONGRESS ON FINANCIAL PRIVACY.

       Not later than 18 months after the date of enactment of 
     this Act, the Comptroller General of the United States, in 
     consultation with the Federal Trade Commission, the Federal 
     banking agencies, and other appropriate Federal law 
     enforcement agencies, shall submit to the Congress a report 
     on--
       (1) the efficacy and adequacy of the remedies provided in 
     the amendments made by section 501 in addressing attempts to 
     obtain financial information by fraudulent means or by false 
     pretenses; and
       (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.
                        TITLE VI--MISCELLANEOUS

     SEC. 601. GRAND JURY PROCEEDINGS.

       Section 3322(b) of title 18, United States Code, is 
     amended--

[[Page S4716]]

       (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''.

     SEC. 602. SENSE OF THE COMMITTEE ON BANKING, HOUSING, AND 
                   URBAN AFFAIRS OF THE SENATE.

       (a) Findings.--The Committee on Banking, Housing, and Urban 
     Affairs of the Senate finds that--
       (1) financial modernization legislation should benefit 
     small institutions as well as large institutions;
       (2) the Congress made the subchapter S election of the 
     Internal Revenue Code of 1986, available to banks in 1996, 
     reflecting a desire by the Congress to reduce the tax burden 
     on community banks;
       (3) large numbers of community banks have elected or 
     expressed interest in the subchapter S election; and
       (4) the Committee on Banking, Housing, and Urban Affairs of 
     the Senate recognizes that some obstacles remain for 
     community banks wishing to make the subchapter S election.
       (b) Sense of the Committee.--It is the sense of the 
     Committee on Banking, Housing, and Urban Affairs of the 
     Senate that--
       (1) the small business tax provisions of the Internal 
     Revenue Code of 1986, should be more widely available to 
     community banks;
       (2) legislation should be passed to amend the Internal 
     Revenue Code of 1986, to--
       (A) increase the allowed number of S corporation 
     shareholders;
       (B) permit S corporation stock to be held in individual 
     retirement accounts;
       (C) clarify that interest on investments held for safety, 
     soundness, and liquidity purposes should not be considered to 
     be passive income;
       (D) provide that bank director stock is not treated as a 
     disqualifying second class of stock for S corporations; and
       (E) improve the tax treatment of bad debt and interest 
     deductions; and
       (3) the legislation described in paragraph (2) should be 
     adopted by the Congress in conjunction with any financial 
     modernization legislation.

     SEC. 603. INVESTMENTS IN GOVERNMENT SPONSORED ENTERPRISES.

       Section 18(s) of the Federal Deposit Insurance Act (12 
     U.S.C. 1828(s)) is amended--
       (1) by redesignating paragraph (4) as paragraph (6); and
       (2) by inserting after paragraph (3) the following:
       ``(4) Certain investments.--Paragraph (1) shall not apply 
     with respect to investments lawfully made before April 11, 
     1996, by a depository institution in any Government sponsored 
     enterprise.
       ``(5) Student loans.--
       ``(A) In general.--This subsection does not apply to any 
     arrangement between a Holding Company (or any subsidiary of 
     the Holding Company other than the Student Loan Marketing 
     Association, hereafter in this paragraph referred to as the 
     `Association') and a depository institution, if the Secretary 
     approves the affiliation and determines that--
       ``(i) the reorganization of the Association in accordance 
     with section 440 of the Higher Education Act of 1965 (20 
     U.S.C. 1087-3), will not be adversely affected by the 
     arrangement;
       ``(ii) the dissolution of the Association pursuant to such 
     reorganization will occur before the end of the 2-year period 
     beginning on the date on which such arrangement is 
     consummated, or on such earlier date as the Secretary 
     determines to be appropriate, except that the Secretary may 
     extend such period for not more than 1 year at a time (not to 
     exceed 2 years, in the aggregate) if the Secretary determines 
     that such extension is in the public interest and is 
     appropriate to achieve an orderly reorganization of the 
     Association or to prevent market disruptions in connection 
     with such reorganization;
       ``(iii) the Association will not purchase or extend credit 
     to, or guarantee or provide credit enhancement to, any 
     obligation of the depository institution;
       ``(iv) the operations of the Association will be separate 
     from the operations of the depository institution; and
       ``(v) until the dissolution date (as that term is defined 
     in section 440(i)(2) of the Higher Education Act of 1965) has 
     occurred, such depository institution will not use the trade 
     name or service mark `Sallie Mae' in connection with any 
     product or service it offers, if the appropriate Federal 
     banking agency for the depository institution determines 
     that--

       ``(I) the depository institution is the only institution 
     offering such product or service using the Sallie Mae name; 
     and
       ``(II) the use of such name would result in the depository 
     institution having an unfair competitive advantage over other 
     depository institutions.

       ``(B) Terms and conditions.--In approving any arrangement 
     referred to in subparagraph (A), the Secretary may impose any 
     terms and conditions on the arrangement that the Secretary 
     considers appropriate, including--
       ``(i) imposing additional restrictions on the issuance of 
     debt obligations by the Association; or
       ``(ii) restricting the use of proceeds from the issuance of 
     such debt.
       ``(C) Additional limitations.--In the event that the 
     Holding Company (or any subsidiary of the Holding Company) 
     enters into such an arrangement, the value of the investment 
     portfolio of the Association shall not at any time exceed the 
     lesser of--
       ``(i) the value of such portfolio on the date of enactment 
     of the Financial Services Act of 1999; or
       ``(ii) the value of such portfolio on the date on which 
     such an arrangement is consummated.
       ``(D) Enforcement.--The terms and conditions imposed under 
     subparagraph (B) may be enforced by the Secretary in 
     accordance with section 440 of the Higher Education Act of 
     1965.
       ``(E) Definitions.--For purposes of this paragraph, the 
     following definition shall apply:
       ``(i) Association; holding company.--Notwithstanding any 
     provision in section 3, the terms `Association' and `Holding 
     Company' have the same meanings as in section 440(i) of the 
     Higher Education Act of 1965.
       ``(ii) Investment portfolio.--The term `investment 
     portfolio' means all investments shown on the consolidated 
     balance sheet of the Association, other than--

       ``(I) any instruments or assets described in section 439(d) 
     of the Higher Education Act of 1965 (20 U.S.C. 1087-2(d));
       ``(II) any direct non-callable obligations of the United 
     States, or any agency thereof, for which the full faith and 
     credit of the United States is pledged; or
       ``(III) cash or cash equivalents.

       ``(iii) Secretary.--The term `Secretary' means the 
     Secretary of the Treasury.''.

     SEC. 604. 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) [Reserved].''.

     SEC. 605. SERVICE OF MEMBERS OF THE BOARD OF GOVERNORS OF THE 
                   FEDERAL RESERVE SYSTEM.

       Notwithstanding the first undesignated paragraph of section 
     10 of the Federal Reserve Act, the vice chairman of the Board 
     of Governors of the Federal Reserve System may serve as a 
     member of the District of Columbia Financial Responsibility 
     and Management Assistance Authority established by section 
     101 of the District of Columbia Financial Responsibility and 
     Management Assistance Act of 1995.

     SEC. 606. PROVISION OF TECHNICAL ASSISTANCE TO 
                   MICROENTERPRISES.

       (a) In General.--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--
       ``(1) the term `Administrator' has the same meaning as in 
     section 103;
       ``(2) the term `capacity building services' means services 
     provided to an organization that is, or 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;
       ``(3) the term `collaborative' means 2 or more nonprofit 
     entities that agree to act jointly as a qualified 
     organization under this subtitle;
       ``(4) 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;
       ``(5) the term `Fund' has the same meaning as in section 
     103;
       ``(6) the term `Indian tribe' has the same meaning as in 
     section 103;
       ``(7) the term `intermediary' means a private, nonprofit 
     entity that seeks to serve microenterprise development 
     organizations and programs as authorized under section 175;
       ``(8) the term `low-income person' has the same meaning as 
     in section 103;
       ``(9) the term `microentrepreneur' means the owner or 
     developer of a microenterprise;
       ``(10) 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) 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 or prospective 
     entrepreneurs;
       ``(12) the term `training and technical assistance' means 
     services and support provided to disadvantaged entrepreneurs 
     or prospective 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; and

[[Page S4717]]

       ``(13) 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 Fund 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 Fund 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 
     organization or entity 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 and racially and 
     ethnically diverse populations.

     ``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 Fund.
       ``(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 Fund 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 Fund shall establish.

     ``SEC. 179. RECORDKEEPING.

       ``The requirements of section 115 shall apply to a 
     qualified organization receiving assistance from the Fund 
     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 Fund to carry out this 
     subtitle--
       ``(1) $15,000,000 for fiscal year 2000;
       ``(2) $25,000,000 for fiscal year 2001;
       ``(3) $30,000,000 for fiscal year 2002; and
       ``(4) $35,000,000 for fiscal year 2003.

     ``SEC. 181. IMPLEMENTATION.

       ``The Administrator shall, by regulation, establish such 
     requirements as may be necessary to carry out this 
     subtitle.''.
       (b) Administrative Expenses.--Section 121(a)(2)(A) of the 
     Riegle Community Development and Regulatory Improvement Act 
     of 1994 (12 U.S.C. 4718(a)(2)(A)) is amended--
       (1) by striking ``$5,550,000'' and inserting 
     ``$6,100,000''; and
       (2) in the first sentence, by inserting before the period 
     ``, including costs and expenses associated with carrying out 
     subtitle C''.
       (c) Conforming Amendments.--Section 104(d) of the Riegle 
     Community Development and Regulatory Improvement Act of 1994 
     (12 U.S.C. 4703(d)) is amended--
       (1) in paragraph (2)--
       (A) by striking ``15'' and inserting ``17''; and
       (B) in subparagraph (G)--
       (i) by striking ``9'' and inserting ``11'';
       (ii) by redesignating clauses (iv) and (v) as clauses (v) 
     and (vi), respectively; and
       (iii) by inserting after clause (iii) the following:
       ``(iv) 2 individuals who have expertise in microenterprises 
     and microenterprise development;''; and
       (2) in paragraph (4), in the first sentence, by inserting 
     before the period ``and subtitle C''.

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