[House Report 105-474]
[From the U.S. Government Publishing Office]
105th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 105-474
_______________________________________________________________________
PROVIDING FOR THE CONSIDERATION OF H.R. 10, FINANCIAL SERVICES ACT OF
1998
_______
March 31 (legislative day, March 30), 1998.--Referred to the House
Calendar and ordered to be printed
_______________________________________________________________________
Mr. Solomon, from the Committee on Rules, submitted the following
R E P O R T
[To accompany H. Res. 403]
The Committee on Rules, having had under consideration
House Resolution 403, by a nonrecord vote, report the same to
the House with the recommendation that the resolution be
adopted.
brief summary of provisions of resolution
The resolution provides for the consideration of H.R. 10,
the ``Financial Services Act of 1998'' under a modified closed
rule. The rule provides two hours of general debate: one hour
equally divided between the chairman and ranking minority
member of the Committee on Banking and Financial Services and
one hour equally divided between the chairman and ranking
minority member of the Committee on Commerce. The rule waives
all points of order against consideration of the bill.
The rule provides that the amendment in the nature of a
substitute printed in part 1 of this report be considered as an
original bill for the purpose of amendment and that it shall be
considered as read. The rule waives all points of order against
the amendment in the nature of a substitute.
The rule provides that no amendment to the amendment in the
nature of a substitute shall be in order except those printed
in part 2 of this report, which may only be offered in the
order printed in the report, may only be offered by a Member
designated in the report, shall be considered as read, shall be
debatable for the time specified in the report equally divided
and controlled by the proponent and an opponent, shall not be
subject to amendment except as specified in the report, and
shall not be subject to a demand for a division of the question
in the House or in the Committee of the Whole. The rule waives
all points of order against the amendments printed in the
report.
The rule allows the chairman of the Committee of the Whole
to postpone recorded votes and to reduce to five minutes the
voting time on any postponed question, provided voting time on
the first in any series of questions is not less than 15
minutes. Finally, the rule provides for one motion to recommit
with or without instructions.
PART I
Amendment in the nature of a substitute made in order by
the rule:
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 1998''.
(b) Purposes.--The purposes of this Act are as follows:
(1) To enhance competition in the financial services
industry, in order to foster innovation and efficiency.
(2) To ensure the continued safety and soundness of
depository institutions.
(3) To provide necessary and appropriate protections
for investors and ensure fair and honest markets in the
delivery of financial services.
(4) To provide for appropriate functional regulation
of insurance activities.
(5) To reduce and, to the maximum extent practicable,
to eliminate the legal barriers preventing affiliation
among depository institutions, securities firms,
insurance companies, and other financial service
providers and to provide a prudential framework for
achieving that result.
(6) To enhance the availability of financial services
to citizens of all economic circumstances and in all
geographic areas.
(7) To enhance the competitiveness of United States
financial service providers internationally.
(8) To ensure compliance by depository institutions
with the provisions of the Community Reinvestment Act
of 1977 and enhance the ability of depository
institutions to meet the capital and credit needs of
all citizens and communities, including undeserved
communities and populations.
(c) Table of Contents.--The table of contents for this Act is
as follows:
Sec. 1. Short title; purposes; table of contents.
TITLE I--FACILITATING AFFILIATION AMONG SECURITIES FIRMS, INSURANCE
COMPANIES, AND DEPOSITORY INSTITUTIONS
Subtitle A--Affiliations
Sec. 101. Glass-Steagall Act reformed.
Sec. 102. Activity restrictions applicable to bank holding companies
which are not financial holding companies.
Sec. 103. Financial holding companies.
Sec. 104. Certain State laws preempted.
Sec. 105. Mutual bank holding companies authorized.
Sec. 106. Prohibition on deposit production offices.
Sec. 107. Clarification of branch closure requirements.
Sec. 108. Amendments relating to limited purpose banks.
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.
Subtitle C--Subsidiaries of National Banks
Sec. 121. Permissible activities for subsidiaries of national banks.
Sec. 122. Misrepresentations regarding depository institution liability
for obligations of affiliates.
Sec. 123. Repeal of stock loan limit in Federal reserve act.
Subtitle D--Wholesale Financial Holding Companies; Wholesale Financial
Institutions
Chapter 1--Wholesale Financial Holding Companies
Sec. 131. Wholesale financial holding companies established.
Sec. 132. Authorization to release reports.
Sec. 133. Conforming amendments.
Chapter 2--Wholesale Financial Institutions
Sec. 136. Wholesale financial institutions.
Subtitle E--Streamlining Antitrust Review of Bank Acquisitions and
Mergers
Sec. 141. Amendments to the Bank Holding Company Act of 1956.
Sec. 142. Amendments to the Federal Deposit Insurance Act to vest in the
Attorney General sole responsibility for antitrust review of
depository institution mergers.
Sec. 143. Information filed by depository institutions; interagency data
sharing.
Sec. 144. Applicability of antitrust laws.
Sec. 145. Clarification of status of subsidiaries and affiliates.
Sec. 146. Effective date.
Subtitle F--Applying the Principles of National Treatment and Equality
of Competitive Opportunity to Foreign Banks and Foreign Financial
Institutions
Sec. 151. Applying the principles of national treatment and equality of
competitive opportunity to foreign banks that are financial
holding companies.
Sec. 152. Applying the principles of national treatment and equality of
competitive opportunity to foreign banks and foreign financial
institutions that are wholesale financial institutions.
Subtitle G--Federal Home Loan Bank System
Sec. 161. Federal home loan banks.
Sec. 162. Membership and collateral.
Sec. 163. The Office of Finance.
Sec. 164. Management of banks.
Sec. 165. Advances to nonmember borrowers.
Sec. 166. Powers and duties of banks.
Sec. 167. Mergers and consolidations of Federal home loan banks.
Sec. 168. Technical amendments.
Sec. 169. Definitions.
Sec. 170. Resolution funding corporation.
Sec. 171. Capital structure of the Federal home loan banks.
Sec. 172. Investments.
Sec. 173. Federal Housing Finance Board.
Subtitle H--Direct Activities of Banks
Sec. 181. Authority of national banks to underwrite certain municipal
bonds.
Subtitle I--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.
Subtitle B--Bank Investment Company Activities
Sec. 211. Custody of investment company assets by affiliated bank.
Sec. 212. Lending to an affiliated investment company.
Sec. 213. Independent directors.
Sec. 214. Additional SEC disclosure authority.
Sec. 215. Definition of broker under the Investment Company Act of 1940.
Sec. 216. Definition of dealer under the Investment Company Act of 1940.
Sec. 217. Removal of the exclusion from the definition of investment
adviser for banks that advise investment companies.
Sec. 218. Definition of broker under the Investment Advisers Act of
1940.
Sec. 219. Definition of dealer under the Investment Advisers Act of
1940.
Sec. 220. Interagency consultation.
Sec. 221. Treatment of bank common trust funds.
Sec. 222. Investment advisers prohibited from having controlling
interest in registered investment company.
Sec. 223. Conforming change in definition.
Sec. 224. Conforming amendment.
Sec. 225. Effective date.
Subtitle C--Securities and Exchange Commission Supervision of Investment
Bank Holding Companies
Sec. 231. Supervision of investment bank holding companies by the
Securities and Exchange Commission.
Subtitle D--Study
Sec. 241. Study of methods to inform investors and consumers of
uninsured products.
TITLE III--INSURANCE
Subtitle A--State Regulation of Insurance
Sec. 301. State regulation of the business of insurance.
Sec. 302. Mandatory insurance licensing requirements.
Sec. 303. Functional regulation of insurance.
Sec. 304. Insurance underwriting in national banks.
Sec. 305. New bank agency activities only through acquisition of
existing licensed agents.
Sec. 306. Title insurance activities of national banks and their
affiliates.
Sec. 307. Expedited and equalized dispute resolution for financial
regulators.
Sec. 308. Consumer protection regulations.
``Sec. 45. Consumer protection regulations.''
Sec. 309. Certain State affiliation laws preempted for insurance
companies and affiliates.
Subtitle B--Redomestication of Mutual Insurers
Sec. 311. General application.
Sec. 312. Redomestication of mutual insurers.
Sec. 313. Effect on State laws restricting redomestication.
Sec. 314. Other provisions.
Sec. 315. Definitions.
Sec. 316. Effective date.
Subtitle C--National Association of Registered Agents and Brokers
Sec. 321. State flexibility in multistate licensing reforms.
Sec. 322. National Association of Registered Agents and Brokers.
Sec. 323. Purpose.
Sec. 324. Relationship to the Federal Government.
Sec. 325. Membership.
Sec. 326. Board of directors.
Sec. 327. Officers.
Sec. 328. Bylaws, rules, and disciplinary action.
Sec. 329. Assessments.
Sec. 330. Functions of the NAIC.
Sec. 331. Liability of the Association and the directors, officers, and
employees of the Association.
Sec. 332. Elimination of NAIC oversight.
Sec. 333. Relationship to State law.
Sec. 334. Coordination with other regulators.
Sec. 335. Judicial review.
Sec. 336. Definitions.
TITLE IV--UNITARY SAVINGS AND LOAN HOLDING COMPANIES
Sec. 401. Termination of expanded powers for new unitary S&L holding
companies.
TITLE V--CREDIT UNIONS
Sec. 501. Short title.
Sec. 502. Findings.
Subtitle A--Credit Union Membership
Sec. 511. Fields of membership.
Sec. 512. Criteria for approval of expansion of membership of multiple
common-bond credit unions.
Sec. 513. Geographical guidelines for community credit unions.
Subtitle B--Regulation of Credit Unions
Sec. 521. Financial statement and audit requirements.
Sec. 522. Conversions of credit unions into other depository
institutions.
Sec. 523. Freeze on Board regulations relating to commercial loans and
certain appraisal requirements relating to such loans.
Sec. 524. Serving persons of modest means within the field of membership
of credit unions.
Sec. 525. National Credit Union Administration Board membership.
Sec. 526. Report and congressional review requirement for certain
regulations.
Subtitle C--Capitalization and Net Worth of Credit Unions
Sec. 531. Prompt corrective action.
Sec. 532. National Credit Union Share Insurance Fund equity ratio,
available assets ratio, and standby premium charge.
Sec. 533. Access to liquidity.
Subtitle D--Miscellaneous Provisions
Sec. 541. Assuring independent decision making in connection with
certain conversions.
Sec. 542. Payment of interest on reserves at Federal reserve banks.
Sec. 543. Transfer of Federal reserve surpluses.
TITLE I--FACILITATING AFFILIATION AMONG SECURITIES FIRMS, INSURANCE
COMPANIES, AND DEPOSITORY INSTITUTIONS
Subtitle A--Affiliations
SEC. 101. GLASS-STEAGALL ACT REFORMED.
(a) Section 20 Repealed.--Section 20 (12 U.S.C. 377) of the
Banking Act of 1933 (commonly referred to as the ``Glass-
Steagall Act'') is repealed.
(b) Section 32 Repealed.--Section 32 (12 U.S.C. 78) of the
Banking Act of 1933 is repealed.
SEC. 102. ACTIVITY RESTRICTIONS APPLICABLE TO BANK HOLDING COMPANIES
WHICH ARE NOT FINANCIAL HOLDING COMPANIES.
(a) In General.--Section 4(c)(8) of the Bank Holding Company
Act of 1956 (12 U.S.C. 1843(c)(8)) is amended to read as
follows:
``(8) shares of any company the activities of which
had been determined by the Board by regulation under
this paragraph as of the day before the date of the
enactment of the Financial Services Act of 1998, to be
so closely related to banking as to be a proper
incident thereto (subject to such terms and conditions
contained in such regulation, unless modified by the
Board);''.
(b) Conforming Changes to Other Statutes.--
(1) Amendment to the bank holding company act
amendments of 1970.--Section 105 of the Bank Holding
Company Act Amendments of 1970 (12 U.S.C. 1850) is
amended by striking ``, to engage directly or
indirectly in a nonbanking activity pursuant to section
4 of such Act,''.
(2) Amendment to the bank service company act.--
Section 4(f) of the Bank Service Company Act (12 U.S.C.
1864(f)) is amended by striking the period and adding
at the end the following: ``as of the day before the
date of enactment of the Financial Services Act of
1998.''.
SEC. 103. FINANCIAL HOLDING COMPANIES.
(a) In General.--The Bank Holding Company Act of 1956 is
amended by inserting after section 5 (12 U.S.C. 1844) the
following new section:
``SEC. 6. FINANCIAL HOLDING COMPANIES.
``(a) Financial Holding Company Defined.--For purposes of
this section, the term `financial holding company' means a bank
holding company which meets the requirements of subsection (b).
``(b) Eligibility Requirements for Financial Holding
Companies.--
``(1) In general.--No bank holding company may engage
in any activity or directly or indirectly acquire or
retain shares of any company under this section unless
the bank holding company meets the following
requirements:
``(A) All of the subsidiary depository
institutions of the bank holding company are
well capitalized.
``(B) All of the subsidiary depository
institutions of the bank holding company are
well managed.
``(C) All of the subsidiary depository
institutions of the bank holding company have
achieved a rating of `satisfactory record of
meeting community credit needs', or better, at
the most recent examination of each such
institution under the Community Reinvestment
Act of 1977.
``(D) All of the subsidiary insured
depository institutions of the bank holding
company (other than any such depository
institution which does not, in the ordinary
course of the business of the depository
institution, offer consumer transaction
accounts to the general public) offer and
maintain low-cost basic banking accounts.
``(E) The company has filed with the Board a
declaration that the company elects to be a
financial holding company and certifying that
the company meets the requirements of
subparagraphs (A) through (D).
``(2) Foreign banks and companies.--For purposes of
paragraph (1), the Board shall establish and apply
comparable capital standards to a foreign bank that
operates a branch or agency or owns or controls a bank
or commercial lending company in the United States, and
any company that owns or controls such foreign bank,
giving due regard to the principle of national
treatment and equality of competitive opportunity.
``(3) Limited exclusions from community needs
requirements for newly acquired depository
institutions.--
``(A) In general.--If the requirements of
subparagraph (B) are met, any depository
institution acquired by a bank holding company
during the 24-month period preceding the
submission of a declaration under paragraph
(1)(E) and any depository institution acquired
after the submission of such declaration may be
excluded for purposes of paragraph (1)(C) until
the later of--
``(i) the end of the 24-month period
beginning on the date the acquisition
of the depository institution by such
company is consummated; or
``(ii) the date of completion of the
1st examination of such depository
institution under the Community
Reinvestment Act of 1977 which is
conducted after the date of the
acquisition of the depository
institution.
``(B) Requirements.--The requirements of this
subparagraph are met with respect to any bank
holding company referred to in subparagraph (A)
if--
``(i) the bank holding company has
submitted an affirmative plan to the
appropriate Federal banking agency to
take such action as may be necessary in
order for such institution to achieve a
rating of `satisfactory record of
meeting community credit needs', or
better, at the next examination of the
institution under the Community
Reinvestment Act of 1977; and
``(ii) the plan has been approved by
such agency.
``(c) Engaging in Activities Financial in Nature.--
``(1) In general.--Notwithstanding section 4(a), a
financial holding company and a wholesale financial
holding company may engage in any activity, and acquire
and retain the shares of any company engaged in any
activity, which the Board has determined (by regulation
or order) to be financial in nature or incidental to
such financial activities.
``(2) Factors to be considered.--In determining
whether an activity is financial in nature or
incidental to financial activities, the Board shall
take into account--
``(A) the purposes of this Act and the
Financial Services Act of 1998;
``(B) changes or reasonably expected changes
in the marketplace in which bank holding
companies compete;
``(C) changes or reasonably expected changes
in the technology for delivering financial
services; and
``(D) whether such activity is necessary or
appropriate to allow a bank holding company and
the affiliates of a bank holding company to--
``(i) compete effectively with any
company seeking to provide financial
services in the United States;
``(ii) use any available or emerging
technological means, including any
application necessary to protect the
security or efficacy of systems for the
transmission of data or financial
transactions, in providing financial
services; and
``(iii) offer customers any available
or emerging technological means for
using financial services.
``(3) Activities that are financial in nature.--The
following activities shall be considered to be
financial in nature:
``(A) Lending, exchanging, transferring,
investing for others, or safeguarding money or
securities.
``(B) Insuring, guaranteeing, or indemnifying
against loss, harm, damage, illness,
disability, or death, or providing and issuing
annuities, and acting as principal, agent, or
broker for purposes of the foregoing.
``(C) Providing financial, investment, or
economic advisory services, including advising
an investment company (as defined in section 3
of the Investment Company Act of 1940).
``(D) Issuing or selling instruments
representing interests in pools of assets
permissible for a bank to hold directly.
``(E) Underwriting, dealing in, or making a
market in securities.
``(F) Engaging in any activity that the Board
has determined, by order or regulation that is
in effect on the date of enactment of the
Financial Services Act of 1998, to be so
closely related to banking or managing or
controlling banks as to be a proper incident
thereto (subject to the same terms and
conditions contained in such order or
regulation, unless modified by the Board).
``(G) Engaging, in the United States, in any
activity that--
``(i) a bank holding company may
engage in outside the United States;
and
``(ii) the Board has determined,
under regulations issued pursuant to
section 4(c)(13) of this Act (as in
effect on the day before the date of
enactment of the Financial Services Act
of 1998) to be usual in connection with
the transaction of banking or other
financial operations abroad.
``(H) Directly or indirectly acquiring or
controlling, whether as principal, on behalf of
1 or more entities (including entities, other
than a depository institution or subsidiary of
a depository institution, that the bank holding
company controls) or otherwise, shares, assets,
or ownership interests (including without
limitation debt or equity securities,
partnership interests, trust certificates or
other instruments representing ownership) of a
company or other entity, whether or not
constituting control of such company or entity,
engaged in any activity not authorized pursuant
to this section if--
``(i) the shares, assets, or
ownership interests are not acquired or
held by a depository institution or
subsidiary of a depository institution;
``(ii) such shares, assets, or
ownership interests are acquired and
held by a securities affiliate or an
affiliate thereof as part of a bona
fide underwriting or merchant banking
activity, including investment
activities engaged in for the purpose
of appreciation and ultimate resale or
disposition of the investment;
``(iii) such shares, assets, or
ownership interests, are held only for
such a period of time as will permit
the sale or disposition thereof on a
reasonable basis consistent with the
nature of the activities described in
clause (ii); and
``(iv) during the period such shares,
assets, or ownership interests are
held, the bank holding company does not
actively participate in the day to day
management or operation of such company
or entity, except insofar as necessary
to achieve the objectives of clause
(ii).
``(I) Directly or indirectly acquiring or
controlling, whether as principal, on behalf of
1 or more entities (including entities, other
than a depository institution or subsidiary of
a depository institution, that the bank holding
company controls) or otherwise, shares, assets,
or ownership interests (including without
limitation debt or equity securities,
partnership interests, trust certificates or
other instruments representing ownership) of a
company or other entity, whether or not
constituting control of such company or entity,
engaged in any activity not authorized pursuant
to this section if--
``(i) the shares, assets, or
ownership interests are not acquired or
held by a depository institution or a
subsidiary of a depository institution;
``(ii) such shares, assets, or
ownership interests are acquired and
held by an insurance company that is
predominantly engaged in underwriting
life, accident and health, or property
and casualty insurance (other than
credit-related insurance);
``(iii) such shares, assets, or
ownership interests represent an
investment made in the ordinary course
of business of such insurance company
in accordance with relevant State law
governing such investments; and
``(iv) during the period such shares,
assets, or ownership interests are
held, the bank holding company does not
directly or indirectly participate in
the day-to-day management or operation
of the company or entity except insofar
as necessary to achieve the objectives
of clauses (ii) and (iii).
``(4) Actions required.--The Board shall, by
regulation or order, define, consistent with the
purposes of this Act, the following activities as, and
the extent to which such activities are, financial in
nature or incidental to activities which are financial
in nature:
``(A) Lending, exchanging, transferring,
investing for others, or safeguarding financial
assets other than money or securities.
``(B) Providing any device or other
instrumentality for transferring money or other
financial assets;
``(C) Arranging, effecting, or facilitating
financial transactions for the account of third
parties.
``(5) Post consummation notification.--
``(A) In general.--A financial holding
company and a wholesale financial holding
company that acquires any company, or commences
any activity, pursuant to this subsection shall
provide written notice to the Board describing
the activity commenced or conducted by the
company acquired no later than 30 calendar days
after commencing the activity or consummating
the acquisition.
``(B) Approval not required for certain
financial activities.--Except as provided in
section 4(j) with regard to the acquisition of
a savings association, a financial holding
company and a wholesale financial holding
company may commence any activity, or acquire
any company, pursuant to paragraph (3) or any
regulation prescribed or order issued under
paragraph (4), without prior approval of the
Board.
``(d) Provisions Applicable to Financial Holding Companies
That Fail To Meet Requirements.--
``(1) In general.--If the Board finds that a
financial holding company is not in compliance with the
requirements of subparagraph (A), (B), or (C) of
subsection (b)(1), the Board shall give notice of such
finding to the company.
``(2) Agreement to correct conditions required.--
Within 45 days of receipt by a financial holding
company of a notice given under paragraph (1) (or such
additional period as the Board may permit), the company
shall execute an agreement acceptable to the Board to
comply with the requirements applicable to a financial
holding company.
``(3) Board may impose limitations.--Until the
conditions described in a notice to a financial holding
company under paragraph (1) are corrected, the Board
may impose such limitations on the conduct or
activities of the company or any affiliate of the
company as the Board determines to be appropriate under
the circumstances.
``(4) Failure to correct.--If, after receiving a
notice under paragraph (1), a financial holding company
does not--
``(A) execute and implement an agreement in
accordance with paragraph (2);
``(B) comply with any limitations imposed
under paragraph (3);
``(C) in the case of a notice of failure to
comply with subsection (b)(1)(A), restore each
depository institution subsidiary to well
capitalized status before the end of the 180-
day period beginning on the date such notice is
received by the company (or such other period
permitted by the Board); or
``(D) in the case of a notice of failure to
comply with subparagraph (B) or (C) of
subsection (b)(1), restore compliance with any
such subparagraph by the date the next
examination of the depository institution
subsidiary is completed or by the end of such
other period as the Board determines to be
appropriate,
the Board may require such company, under such terms
and conditions as may be imposed by the Board and
subject to such extension of time as may be granted in
the Board's discretion, to divest control of any
depository institution subsidiary or, at the election
of the financial holding company, instead to cease to
engage in any activity conducted by such company or its
subsidiaries pursuant to this section.
``(5) Consultation.--In taking any action under this
subsection, the Board shall consult with all relevant
Federal and State regulatory agencies.
``(e) Safeguards for Bank Subsidiaries.--A financial holding
company shall assure that--
``(1) the procedures of the holding company for
identifying and managing financial and operational
risks within the company, and the subsidiaries of such
company, adequately protect the subsidiaries of such
company which are insured depository institutions 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) Nonfinancial Activities.--
``(1) In general.--Notwithstanding section 4(a), a
financial holding company may engage in activities
which are not (or have not been determined to be)
financial in nature or incidental to activities which
are financial in nature, or acquire and retain
ownership and control of the shares of a company
engaged in such activities, if--
``(A) the aggregate annual gross revenues
derived from all such activities and all such
companies does not exceed the lesser of--
``(i) 5 percent of the consolidated
annual gross revenues of the financial
holding company; or
``(ii) $500,000,000;
``(B) the consolidated total assets of any
company the shares of which are acquired by the
financial holding company pursuant to this
paragraph are less than $750,000,000 at the
time the shares are acquired by the holding
company; and
``(C) the holding company provides notice to
the Board within 30 days of commencing the
activity or acquiring the ownership or control.
``(2) Inclusion of grandfathered activities.--For
purposes of determining the limits contained in
paragraph (1)(A), the gross revenues derived from all
activities conducted, and companies the shares of which
are held, under subsection (g) shall be considered to
be derived or held under this subsection.
``(3) Foreign banks.--In lieu of the limitation
contained in paragraph (1)(A) in the case of a foreign
bank or a company that owns or controls a foreign bank
which engages in any activity or acquires or retains
ownership or control of shares of any company pursuant
to paragraph (1), the aggregate annual gross revenues
derived from all such activities and all such companies
in the United States shall not exceed the lesser of--
``(A) 5 percent of the consolidated annual
gross revenues of the foreign bank or company
in the United States derived from any branch,
agency, commercial lending company, or
depository institution controlled by the
foreign bank or company and any subsidiary
engaged in the United States in activities
permissible under section 4 or 6; or
``(B) $500,000,000.
``(4) Indexing revenue test.--After December 31,
1998, the Board shall annually adjust the dollar amount
contained in paragraphs (1)(A) and (3) by the annual
percentage increase in the Consumer Price Index for
Urban Wage Earners and Clerical Workers published by
the Bureau of Labor Statistics.
``(5) Nonapplicability of other exemption.--Any
foreign bank or company that owns or controls a foreign
bank which engages in any activity or acquires or
retains ownership or control of shares of any company
pursuant to this subsection shall not be eligible for
any exception described in section 2(h).
``(g) Authority To Retain Limited Nonfinancial Activities and
Affiliations.--
``(1) In general.--Notwithstanding subsection (f)(1)
and section 4(a), a company that is not a bank holding
company or a foreign bank (as defined in section
1(b)(7) of the International Banking Act of 1978) and
becomes a financial holding company after the date of
the enactment of the Financial Services Act of 1998 may
continue to engage in any activity and retain direct or
indirect ownership or control of shares of a company
engaged in any activity if--
``(A) the holding company lawfully was
engaged in the activity or held the shares of
such company on September 30, 1997;
``(B) the holding company is predominantly
engaged in financial activities as defined in
paragraph (2); and
``(C) the company engaged in such activity
continues to engage only in the same activities
that such company conducted on September 30,
1997, and other activities permissible under
this Act.
``(2) Predominantly financial.--For purposes of this
subsection, a company is predominantly engaged in
financial activities if, as of the day before the
company becomes a financial holding company, the annual
gross revenues derived by the holding company and all
subsidiaries of the holding company, 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.
``(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,
subsection (f), or subparagraph (H) or (I) of
subsection (c)(3); or
``(B) permit any of its products or services
to be offered or marketed, directly or through
any arrangement, by or through any company
described in subparagraph (A).
``(6) Transactions with nonfinancial affiliates.--An
insured depository institution controlled by a
financial holding company may not engage in a covered
transaction (as defined by section 23A(b)(7) of the
Federal Reserve Act) with any affiliate controlled by
the company pursuant to this subsection, subsection
(f), or subparagraph (H) or (I) of subsection (c)(3).
``(h) Developing Activities.--A financial holding company and
a wholesale financial holding company may engage directly or
indirectly, or acquire shares of any company engaged, in any
activity that the Board has not determined to be financial in
nature or incidental to financial activities under subsection
(c) if--
``(1) the holding company reasonably concludes that
the activity is financial in nature or incidental to
financial activities;
``(2) the gross revenues from all activities
conducted under this subsection represent less than 5
percent of the consolidated gross revenues of the
holding company;
``(3) the aggregate total assets of all companies the
shares of which are held under this subsection do not
exceed 5 percent of the holding company's consolidated
total assets;
``(4) the total capital invested in activities
conducted under this subsection represents less than 5
percent of the consolidated total capital of the
holding company;
``(5) the Board has not determined that the activity
is not financial in nature or incidental to financial
activities under subsection (c); and
``(6) the holding company provides written
notification to the Board describing the activity
commenced or conducted by the company acquired no later
than 10 business days after commencing the activity or
consummating the acquisition.''.
SEC. 104. CERTAIN STATE LAWS PREEMPTED.
(a) Affiliations.--No State may by statute, regulation,
order, interpretation, or otherwise, prevent or restrict an
insured depository institution or a wholesale financial
institution from being affiliated with an entity (including an
entity engaged in insurance activities) as authorized by this
Act or any other provision of Federal law.
(b) Activities.--
(1) Except as provided in paragraphs (2) and (3) and
subject to section 18(c) of the Securities Act of 1933,
no State may by statute, regulation, order,
interpretation, or otherwise, prevent or restrict an
insured depository institution or a wholesale financial
institution from engaging, directly or indirectly or in
conjunction with an affiliate, in any activity
authorized under this Act or any other provision of
Federal law.
(2) As stated by the United States Supreme Court in
Barnett Bank of Marion County, N.A. v. Nelson, 116
S.Ct. 1103 (1996), no State may, by statute,
regulation, order, interpretation, or otherwise,
prevent or significantly interfere with the ability of
an insured depository institution or wholesale
financial institution to engage, directly or
indirectly, or in conjunction with an affiliate, in any
insurance sales or solicitation activity, except that--
(A) State statutes and regulations governing
insurance sales and solicitations which are no
more restrictive than provisions in the
Illinois ``Act Authorizing and Regulating the
Sale of Insurance by Financial Institutions,
Public Act 90-41'' (215 ILCS 5/1400-1416), as
in effect on October 1, 1997, shall not be
deemed to prevent or significantly interfere
with the ability of an insured depository
institution or wholesale financial institution
to engage, directly or indirectly, or in
conjunction with an affiliate, in any insurance
sales or solicitation activity; and
(B) subparagraph (A) shall not create any
inference regarding State statutes, and
regulations governing insurance sales and
solicitations which are more restrictive than
any provision in the Illinois ``Act Authorizing
and Regulating the Sale of Insurance by
Financial Institutions'', (Public Act 90-41;
215 ILCS 5/1400-1416), as in effect on October
1, 1997.
(3) State statutes, regulations, orders, and
interpretations which are applicable to and are applied
in the same manner with respect to insurance
underwriting activities of an affiliate of an insured
depository institution or a wholesale financial
institution as they are applicable to and are applied
to an insurance underwriter which is not affiliated
with an insured depository institution or a wholesale
financial institution shall not be preempted under
paragraph (1).
SEC. 105. MUTUAL BANK HOLDING COMPANIES AUTHORIZED.
(a) In General.--Section 3(g)(2) of the Bank Holding Company
Act of 1956 (12 U.S.C. 1842(g)(2)) is amended to read as
follows:
``(2) Regulations.--A bank holding company organized
as a mutual holding company shall be regulated on
terms, and shall be subject to limitations, comparable
to those applicable to any other bank holding
company.''.
SEC. 106. PROHIBITION ON DEPOSIT PRODUCTION OFFICES.
(a) In General.--Section 109(d) of the Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994 (12 U.S.C.
1835a(d)) is amended--
(1) by inserting ``, the Financial Services Act of
1998,'' after ``pursuant to this title''; and
(2) by inserting ``or such Act'' after ``made by this
title''.
(b) Technical and Conforming Amendment.--Section 109(e)(4) of
the Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994 (12 U.S.C. 1835a(e)(4)) is amended by inserting ``and
any branch of a bank controlled by an out-of-State bank holding
company (as defined in section 2(o)(7) of the Bank Holding
Company Act of 1956)'' before the period.
SEC. 107. CLARIFICATION OF BRANCH CLOSURE REQUIREMENTS.
Section 42(d)(4)(A) of the Federal Deposit Insurance Act (12
U.S.C. 1831r-1(d)(4)(A)) is amended by inserting ``and any bank
controlled by an out-of-State bank holding company (as defined
in section 2(o)(7) of the Bank Holding Company Act of 1956)''
before the period.
SEC. 108. AMENDMENTS RELATING TO LIMITED PURPOSE BANKS.
Section 4(f) of the Bank Holding Company Act of 1956 (12
U.S.C. 1843(f)) is amended--
(1) in paragraph (2)(A)(ii)--
(A) by striking ``and'' at the end of
subclause (IX);
(B) by inserting ``and'' after the semicolon
at the end of subclause (X); and
(C) by inserting after subclause (X) the
following new subclause:
``(XI) assets that are
derived from, or are incidental
to, activities in which
institutions described in
section 2(c)(2)(F) are
permitted to engage,'';
(2) in paragraph (2), by striking subparagraph (B)
and inserting the following new subparagraphs:
``(B) any bank subsidiary of such company
engages in any activity in which the bank was
not lawfully engaged as of March 5, 1987,
unless the bank is well managed and well
capitalized;
``(C) any bank subsidiary of such company
both--
``(i) accepts demand deposits or
deposits that the depositor may
withdraw by check or similar means for
payment to third parties; and
``(ii) engages in the business of
making commercial loans (and, for
purposes of this clause, loans made in
the ordinary course of a credit card
operation shall not be treated as
commercial loans); or
``(D) after the date of the enactment of the
Competitive Equality Amendments of 1987, any
bank subsidiary of such company permits any
overdraft (including any intraday overdraft),
or incurs any such overdraft in such bank's
account at a Federal reserve bank, on behalf of
an affiliate, other than an overdraft described
in paragraph (3).''; and
(3) by striking paragraphs (3) and (4) and inserting
the following new paragraphs:
``(3) Permissible overdrafts described.--For purposes
of paragraph (2)(D), an overdraft is described in this
paragraph if--
``(A) such overdraft results from an
inadvertent computer or accounting error that
is beyond the control of both the bank and the
affiliate; or
``(B) such overdraft--
``(i) is permitted or incurred on
behalf of an affiliate which is
monitored by, reports to, and is
recognized as a primary dealer by the
Federal Reserve Bank of New York; and
``(ii) is fully secured, as required
by the Board, by bonds, notes, or other
obligations which are direct
obligations of the United States or on
which the principal and interest are
fully guaranteed by the United States
or by securities and obligations
eligible for settlement on the Federal
Reserve book entry system.
``(4) Divestiture in case of loss of exemption.--If
any company described in paragraph (1) fails to qualify
for the exemption provided under such paragraph by
operation of paragraph (2), such exemption shall cease
to apply to such company and such company shall divest
control of each bank it controls before the end of the
180-day period beginning on the date that the company
receives notice from the Board that the company has
failed to continue to qualify for such exemption,
unless before the end of such 180-day period, the
company has--
``(A) corrected the condition or ceased the
activity that caused the company to fail to
continue to qualify for the exemption; and
``(B) implemented procedures that are
reasonably adapted to avoid the reoccurrence of
such condition or activity.''.
Subtitle B--Streamlining Supervision of Financial Holding Companies
SEC. 111. STREAMLINING FINANCIAL HOLDING COMPANY SUPERVISION.
Section 5(c) of the Bank Holding Company Act of 1956 (12
U.S.C. 1844(c)) is amended to read as follows:
``(c) Reports and Examinations.--
``(1) Reports.--
``(A) In general.--The Board from time to
time may require any bank holding company and
any subsidiary of such company to submit
reports under oath to keep the Board informed
as to--
``(i) its financial condition,
systems for monitoring and controlling
financial and operating risks, and
transactions with depository
institution subsidiaries of the holding
company; and
``(ii) compliance by the company or
subsidiary with applicable provisions
of this Act.
``(B) Use of existing reports.--
``(i) In general.--The Board shall,
to the fullest extent possible, accept
reports in fulfillment of the Board's
reporting requirements under this
paragraph that a bank holding company
or any subsidiary of such company has
provided or been required to provide to
other Federal and State supervisors or
to appropriate self-regulatory
organizations.
``(ii) Availability.--A bank holding
company or a subsidiary of such company
shall provide to the Board, at the
request of the Board, a report referred
to in clause (i).
``(iii) Required use of publicly
reported information.--The Board shall,
to the fullest extent possible, accept
in fulfillment of any reporting or
recordkeeping requirements under this
Act information that is otherwise
required to be reported publicly and
externally audited financial
statements.
``(iv) Reports filed with other
agencies.--In the event the Board
requires a report from a functionally
regulated nondepository institution
subsidiary of a bank holding company of
a kind that is not required by another
Federal or State regulator or
appropriate self-regulatory
organization, the Board shall request
that the appropriate regulator or self-
regulatory organization obtain such
report. If the report is not made
available to the Board, and the report
is necessary to assess a material risk
to the bank holding company or its
subsidiary depository institution or
compliance with this Act, the Board may
require such subsidiary to provide such
a report to the Board.
``(C) Definition.--For purposes of this
subsection, the term `functionally regulated
nondepository institution' means--
``(i) a broker or dealer registered
under the Securities Exchange Act of
1934;
``(ii) an investment adviser
registered under the Investment
Advisers Act of 1940, with respect to
the investment advisory activities of
such investment adviser and activities
incidental to such investment advisory
activities;
``(iii) an insurance company subject
to supervision by a State insurance
commission, agency, or similar
authority; and
``(iv) an entity subject to
regulation by the Commodity Futures
Trading Commission, with respect to the
commodities activities of such entity
and activities incidental to such
commodities activities.
``(2) Examinations.--
``(A) Examination authority.--
``(i) In general.--The Board may make
examinations of each bank holding
company and each subsidiary of a bank
holding company.
``(ii) Functionally regulated
nondepository institution
subsidiaries.--Notwithstanding clause
(i), the Board may make examinations of
a functionally regulated nondepository
institution subsidiary of a bank
holding company only if--
``(I) the Board has
reasonable cause to believe
that such subsidiary is engaged
in activities that pose a
material risk to an affiliated
depository institution, or
``(II) based on reports and
other available information,
the Board has reasonable cause
to believe that a subsidiary is
not in compliance with this Act
or with provisions relating to
transactions with an affiliated
depository institution and the
Board cannot make such
determination through
examination of the affiliated
depository institution or bank
holding company.
``(B) Limitations on examination authority
for bank holding companies and subsidiaries.--
Subject to subparagraph (A)(ii), the Board may
make examinations under subparagraph (A)(i) of
each bank holding company and each subsidiary
of such holding company in order to--
``(i) inform the Board of the nature
of the operations and financial
condition of the holding company and
such subsidiaries;
``(ii) inform the Board of--
``(I) the financial and
operational risks within the
holding company system that may
pose a threat to the safety and
soundness of any subsidiary
depository institution of such
holding company; and
``(II) the systems for
monitoring and controlling such
risks; and
``(iii) monitor compliance with the
provisions of this Act and those
governing transactions and
relationships between any subsidiary
depository institution and its
affiliates.
``(C) Restricted focus of examinations.--The
Board shall, to the fullest extent possible,
limit the focus and scope of any examination of
a bank holding company to--
``(i) the bank holding company; and
``(ii) any subsidiary of the holding
company that, because of--
``(I) the size, condition, or
activities of the subsidiary;
``(II) the nature or size of
transactions between such
subsidiary and any depository
institution which is also a
subsidiary of such holding
company; or
``(III) the centralization of
functions within the holding
company system,
could have a materially adverse effect
on the safety and soundness of any
depository institution affiliate of the
holding company.
``(D) Deference to bank examinations.--The
Board shall, to the fullest extent possible,
use, for the purposes of this paragraph, the
reports of examinations of depository
institutions made by the appropriate Federal
and State depository institution supervisory
authority.
``(E) Deference to other examinations.--The
Board shall, to the fullest extent possible,
address the circumstances which might otherwise
permit or require an examination by the Board
by forgoing an examination and instead
reviewing the reports of examination made of--
``(i) any registered broker or dealer
or registered investment adviser by or
on behalf of the Securities and
Exchange Commission;
``(ii) any licensed insurance company
by or on behalf of any state regulatory
authority responsible for the
supervision of insurance companies; and
``(iii) any other subsidiary that the
Board finds to be comprehensively
supervised by a Federal or State
authority.
``(3) Capital.--
``(A) In general.--The Board shall not, by
regulation, guideline, order or otherwise,
prescribe or impose any capital or capital
adequacy rules, guidelines, standards, or
requirements on any subsidiary of a financial
holding company that is not a depository
institution and--
``(i) is in compliance with
applicable capital requirements of
another Federal regulatory authority
(including the Securities and Exchange
Commission) or State insurance
authority; or
``(ii) is registered as an investment
adviser under the Investment Advisers
Act of 1940.
``(B) Rule of construction.--Subparagraph (A)
shall not be construed as preventing the Board
from imposing capital or capital adequacy
rules, guidelines, standards, or requirements
with respect to activities of a registered
investment adviser other than investment
advisory activities or activities incidental to
investment advisory activities.
``(4) Transfer of board authority to appropriate
federal banking agency.--
``(A) In general.--In the case of any bank
holding company which is not significantly
engaged in nonbanking activities, the Board, in
consultation with the appropriate Federal
banking agency, may designate the appropriate
Federal banking agency of the lead insured
depository institution subsidiary of such
holding company as the appropriate Federal
banking agency for the bank holding company.
``(B) Authority transferred.--An agency
designated by the Board under subparagraph (A)
shall have the same authority as the Board
under this Act to--
``(i) examine and require reports
from the bank holding company and any
affiliate of such company (other than a
depository institution) under section
5;
``(ii) approve or disapprove
applications or transactions under
section 3;
``(iii) take actions and impose
penalties under subsections (e) and (f)
of section 5 and section 8; and
``(iv) take actions regarding the
holding company, any affiliate of the
holding company (other than a
depository institution), or any
institution-affiliated party of such
company or affiliate under the Federal
Deposit Insurance Act and any other
statute which the Board may designate.
``(C) Agency orders.--Section 9 (of this Act)
and section 105 of the Bank Holding Company Act
Amendments of 1970 shall apply to orders issued
by an agency designated under subparagraph (A)
in the same manner such sections apply to
orders issued by the Board.
``(5) Functional regulation of securities and
insurance activities.--The Board shall defer to--
``(A) the Securities and Exchange Commission
with regard to all interpretations of, and the
enforcement of, applicable Federal securities
laws relating to the activities, conduct, and
operations of registered brokers, dealers,
investment advisers, and investment companies;
and
``(B) the relevant State insurance
authorities with regard to all interpretations
of, and the enforcement of, applicable State
insurance laws relating to the activities,
conduct, and operations of insurance companies
and insurance agents.''.
SEC. 112. ELIMINATION OF APPLICATION REQUIREMENT FOR FINANCIAL HOLDING
COMPANIES.
(a) Prevention of Duplicative Filings.--Section 5(a) of the
Bank Holding Company Act of 1956 (12 U.S.C. 1844(a)) is amended
by adding the following new sentence at the end: ``A
declaration filed in accordance with section 6(b)(1)(E) shall
satisfy the requirements of this subsection with regard to the
registration of a bank holding company but not any requirement
to file an application to acquire a bank pursuant to section
3.''.
(b) Divestiture Procedures.--Section 5(e)(1) of the Bank
Holding Company Act of 1956 (12 U.S.C. 1844(e)(1)) is amended--
(1) by striking ``Financial Institutions Supervisory
Act of 1966, order'' and inserting ``Financial
Institutions Supervisory Act of 1966, at the election
of the bank holding company--
``(A) order''; and
(2) by striking ``shareholders of the bank holding
company. Such distribution'' and inserting
``shareholders of the bank holding company; or
``(B) order the bank holding company, after due
notice and opportunity for hearing, and after
consultation with the bank's primary supervisor, which
shall be the Comptroller of the Currency in the case of
a national bank, and the Federal Deposit Insurance
Corporation and the appropriate State supervisor in the
case of an insured nonmember bank, to terminate (within
120 days or such longer period as the Board may direct)
the ownership or control of any such bank by such
company.
The distribution referred to in subparagraph (A)''.
SEC. 113. AUTHORITY OF STATE INSURANCE REGULATOR AND SECURITIES AND
EXCHANGE COMMISSION.
Section 5 of the Bank Holding Company Act of 1956 (12 U.S.C.
1844) is amended by adding at the end the following new
subsection:
``(g) Authority of State Insurance Regulator and the
Securities and Exchange Commission.--
``(1) In general.--Notwithstanding any other
provision of law, any regulation, order, or other
action of the Board which requires a bank holding
company to provide funds or other assets to a
subsidiary insured depository institution shall not be
effective nor enforceable if--
``(A) such funds or assets are to be provided
by--
``(i) a bank holding company that is
an insurance company or is a broker or
dealer registered under the Securities
Exchange Act of 1934; or
``(ii) an affiliate of the depository
institution which is an insurance
company or a broker or dealer
registered under such Act; and
``(B) the State insurance authority for the
insurance company or the Securities and
Exchange Commission for the registered broker
or dealer, as the case may be, determines in
writing sent to the holding company and the
Board that the holding company shall not
provide such funds or assets because such
action would have a material adverse effect on
the financial condition of the insurance
company or the broker or dealer, as the case
may be.
``(2) Notice to state insurance authority or sec
required.--If the Board requires a bank holding
company, or an affiliate of a bank holding company,
which is an insurance company or a broker or dealer
described in paragraph (1)(A) to provide funds or
assets to an insured depository institution subsidiary
of the holding company pursuant to any regulation,
order, or other action of the Board referred to in
paragraph (1), the Board shall promptly notify the
State insurance authority for the insurance company or
the Securities and Exchange Commission, as the case may
be, of such requirement.
``(3) Divestiture in lieu of other action.--If the
Board receives a notice described in paragraph (1)(B)
from a State insurance authority or the Securities and
Exchange Commission with regard to a bank holding
company or affiliate referred to in such paragraph, the
Board may order the bank holding company to divest the
insured depository institution within 180 days of
receiving notice or such longer period as the Board
determines consistent with the safe and sound operation
of the insured depository institution.
``(4) Conditions before divestiture.--During the
period beginning on the date an order to divest is
issued by the Board under paragraph (3) to a bank
holding company and ending on the date the divestiture
is completed, the Board may impose any conditions or
restrictions on the holding company's ownership or
operation of the insured depository institution,
including restricting or prohibiting transactions
between the insured depository institution and any
affiliate of the institution, as are appropriate under
the circumstances.''.
SEC. 114. PRUDENTIAL SAFEGUARDS.
Section 5 of the Bank Holding Company Act of 1956 (12 U.S.C.
1844) is amended by inserting after subsection (g) (as added by
section 113 of this subtitle) the following new subsection:
``(h) Prudential Safeguards.--
``(1) In general.--The Board may, by regulation or
order, impose restrictions or requirements on
relationships or transactions between a depository
institution subsidiary of a bank holding company and
any affiliate of such depository institution (other
than a subsidiary of such institution) which the Board
finds is consistent with the public interest, the
purposes of this Act, the Financial Services Act of
1998, the Federal Reserve Act, and other Federal law
applicable to depository institution subsidiaries of
bank holding companies and the standards in paragraph
(2).
``(2) Standards.--The Board may exercise authority
under paragraph (1) if the Board finds that such action
will have any of the following effects:
``(A) Avoid any significant risk to the
safety and soundness of depository institutions
or any Federal deposit insurance fund.
``(B) Enhance the financial stability of bank
holding companies.
``(C) Avoid conflicts of interest or other
abuses.
``(D) Enhance the privacy of customers of
depository institutions.
``(E) Promote the application of national
treatment and equality of competitive
opportunity between nonbank affiliates owned or
controlled by domestic bank holding companies
and nonbank affiliates owned or controlled by
foreign banks operating in the United States.
``(3) Review.--The Board shall regularly--
``(A) review all restrictions or requirements
established pursuant to paragraph (1) to
determine whether there is a continuing need
for any such restriction or requirement to
carry out the purposes of the Act, including
any purpose described in paragraph (2); and
``(B) modify or eliminate any restriction or
requirement the Board finds is no longer
required for such purposes.''.
SEC. 115. EXAMINATION OF INVESTMENT COMPANIES.
(a) Exclusive Commission Authority.--
(1) In general.--The Commission shall be the sole
Federal agency with authority to inspect and examine
any registered investment company that is not a bank
holding company.
(2) Prohibition on banking agencies.--A Federal
banking agency may not inspect or examine any
registered investment company that is not a bank
holding company.
(b) Examination Results and Other Information.--The
Commission shall provide to any Federal banking agency, upon
request, the results of any examination, reports, records, or
other information with respect to any registered investment
company to the extent necessary for the agency to carry out its
statutory responsibilities.
(c) Definitions.--For purposes of this section, the following
definitions shall apply:
(1) Bank holding company.--The term ``bank holding
company'' has the meaning given to such term in section
2 of the Bank Holding Company Act of 1956.
(2) Commission.--The term ``Commission'' means the
Securities and Exchange Commission.
(3) Federal banking agency.--The term ``Federal
banking agency'' has the meaning given to such term in
section 3(z) of the Federal Deposit Insurance Act.
(4) Registered investment company.--The term
``registered investment company'' means an investment
company which is registered with the Commission under
the Investment Company Act of 1940.
SEC. 116. LIMITATION ON RULEMAKING, PRUDENTIAL, SUPERVISORY, AND
ENFORCEMENT AUTHORITY OF THE BOARD.
The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.)
is amended by inserting after section 10 the following new
section:
``SEC. 10A. LIMITATION ON RULEMAKING, PRUDENTIAL, SUPERVISORY, AND
ENFORCEMENT AUTHORITY OF THE BOARD.
``(a) Limitation on Direct Action.--
``(1) In general.--The Board may not prescribe
regulations, issue or seek entry of orders, impose
restraints, restrictions, guidelines, requirements,
safeguards, or standards, or otherwise take any action
under or pursuant to any provision of this Act or
section 8 of the Federal Deposit Insurance Act against
or with respect to a regulated subsidiary of a bank
holding company unless the action is necessary to
prevent or redress an unsafe or unsound practice or
breach of fiduciary duty by such subsidiary that poses
a material risk to--
``(A) the financial safety, soundness, or
stability of an affiliated depository
institution; or
``(B) the domestic or international payment
system.
``(2) Criteria for board action.--The Board shall not
take action otherwise permitted under paragraph (1)
unless the Board finds that it is not reasonably
possible to effectively protect against the material
risk at issue through action directed at or against the
affiliated depository institution or against depository
institutions generally.
``(b) Limitation on Indirect Action.--The Board may not
prescribe regulations, issue or seek entry of orders, impose
restraints, restrictions, guidelines, requirements, safeguards,
or standards, or otherwise take any action under or pursuant to
any provision of this Act or section 8 of the Federal Deposit
Insurance Act against or with respect to a financial holding
company or a wholesale financial holding company where the
purpose or effect of doing so would be to take action
indirectly against or with respect to a regulated subsidiary
that may not be taken directly against or with respect to such
subsidiary in accordance with subsection (a).
``(c) Actions Specifically Authorized.--Notwithstanding
subsection (a), the Board may take action under this Act or
section 8 of the Federal Deposit Insurance Act to enforce
compliance by a regulated subsidiary with Federal law that the
Board has specific jurisdiction to enforce against such
subsidiary.
``(d) Regulated Subsidiary Defined.--For purposes of this
section, the term `regulated subsidiary' means any company that
is not a bank holding company and is--
``(1) a broker or dealer registered under the
Securities Exchange Act of 1934;
``(2) an investment adviser registered under the
Investment Advisers Act of 1940, with respect to the
investment advisory activities of such investment
adviser and activities incidental to such investment
advisory activities;
``(3) an investment company registered under the
Investment Company Act of 1940;
``(4) an insurance company or an insurance agency
subject to supervision by a State insurance commission,
agency, or similar authority; or
``(5) an entity subject to regulation by the
Commodity Futures Trading Commission, with respect to
the commodities activities of such entity and
activities incidental to such commodities
activities.''.
Subtitle C--Subsidiaries of National Banks
SEC. 121. PERMISSIBLE ACTIVITIES FOR SUBSIDIARIES OF NATIONAL BANKS.
(a) Financial Subsidiaries of National Banks.--Chapter one of
title LXII of the Revised Statutes of United States (12 U.S.C.
21 et seq.) is amended--
(1) by redesignating section 5136A as section 5136C;
and
(2) by inserting after section 5136 (12 U.S.C. 24)
the following new section:
``SEC. 5136A. SUBSIDIARIES OF NATIONAL BANKS.
``(a) Subsidiaries of National Banks Authorized To Engage in
Financial Activities.--
``(1) Exclusive authority.--No provision of section
5136 or any other provision of this title LXII of the
Revised Statutes shall be construed as authorizing a
subsidiary of a national bank to engage in, or own any
share of or any other interest in any company engaged
in, any activity that--
``(A) is not permissible for a national bank
to engage in directly; or
``(B) is conducted under terms or conditions
other than those that would govern the conduct
of such activity by a national bank,
unless a national bank is specifically authorized by
the express terms of a Federal statute and not by
implication or interpretation to acquire shares of or
an interest in, or to control, such subsidiary, such as
by paragraph (2) of this subsection and section 25A of
the Federal Reserve Act.
``(2) Specific authorization to conduct agency
activities which are financial in nature.--A national
bank may control a company that engages in agency
activities that have been determined to be financial in
nature or incidental to such financial activities
pursuant to and in accordance with section 6(c) of the
Bank Holding Company Act of 1956 if--
``(A) the company engages in such activities
solely as agent and not directly or indirectly
as principal,
``(B) the national bank is well capitalized
and well managed, and has achieved a rating of
satisfactory or better at the most recent
examination of the bank under the Community
Reinvestment Act of 1977;
``(C) all depository institution affiliates
of the national bank are well capitalized and
well managed, and have achieved a rating of
satisfactory or better at the most recent
examination of each such depository institution
under the Community Reinvestment Act of 1977;
and
``(D) the bank has received the approval of
the Comptroller of the Currency.
``(3) Definitions.--
``(A) Company; control; subsidiary.--The
terms `company', `control', and `subsidiary'
have the meanings given to such terms in
section 2 of the Bank Holding Company Act of
1956.
``(B) Well capitalized.--The term `well
capitalized' has the same meaning as in section
38 of the Federal Deposit Insurance Act and,
for purposes of this section, the Comptroller
shall have exclusive jurisdiction to determine
whether a national bank is well capitalized.
``(C) Well managed.--The term `well managed'
means--
``(i) in the case of a bank that has
been examined, unless otherwise
determined in writing by the
Comptroller--
``(I) the achievement of a
composite rating of 1 or 2
under the Uniform Financial
Institutions Rating System (or
an equivalent rating under an
equivalent rating system) in
connection with the most recent
examination or subsequent
review of the bank; and
``(II) at least a rating of 2
for management, if that rating
is given; or
``(ii) in the case of any national
bank that has not been examined, the
existence and use of managerial
resources that the Comptroller
determines are satisfactory.
``(b) Limited Exclusions From Community Needs Requirements
for Newly Acquired Depository Institutions.--Any depository
institution which becomes affiliated with a national bank
during the 24-month period preceding the submission of an
application to acquire a subsidiary under subsection (a)(2),
and any depository institution which becomes so affiliated
after the approval of such application, may be excluded for
purposes of subsection (a)(2)(B) during the 24-month period
beginning on the date of such acquisition if--
``(1) the depository institution has submitted an
affirmative plan to the appropriate Federal banking
agency (as defined in section 3 of the Federal Deposit
Insurance Act) to take such action as may be necessary
in order for such institution to achieve a
`satisfactory record of meeting community credit
needs', or better, at the next examination of the
institution under the Community Reinvestment Act of
1977; and
``(2) the plan has been approved by the appropriate
Federal banking agency.''.
(b) Limitation on Certain Activities in Subsidiaries.--
Section 21(a)(1) of the Banking Act of 1933 (12 U.S.C.
378(a)(1)) is amended--
(1) by inserting ``, or to be a subsidiary of any
person, firm, corporation, association, business trust,
or similar organization engaged (unless such subsidiary
(A) was engaged in such securities activities as of
September 15, 1997, or (B) is a nondepository
subsidiary of a foreign bank and is not also a
subsidiary of a domestic depository institution),''
after ``to engage at the same time''; and
(2) by inserting ``or any subsidiary of such bank,
company, or institution'' after ``or private bankers''.
(c) Technical and Conforming Amendments.--
(1) Antitying.--Section 106(a) of the Bank Holding
Company Act Amendments of 1970 is amended by adding at
the end the following new sentence: ``For purposes of
this section, a subsidiary of a national bank which
engages in activities as an agent pursuant to section
5136A(a)(2) shall be deemed to be a subsidiary of a
bank holding company, and not a subsidiary of a
bank.''.
(2) Section 23b.--Section 23B(a) of the Federal
Reserve Act (12 U.S.C. 371c-1(a)) is amended by adding
at the end the following new paragraph:
``(4) Subsidiary of national bank.--For purposes of
this section, a subsidiary of a national bank which
engages in activities as an agent pursuant to section
5136A(a)(2) shall be deemed to be an affiliate of the
national bank and not a subsidiary of the bank.''
(d) Clerical Amendment.--The table of sections for chapter
one of title LXII of the Revised Statutes of the United States
is amended--
(1) by redesignating the item relating to section
5136A as section 5136C; and
(2) by inserting after the item relating to section
5136 the following new item:
``5136A. Financial subsidiaries of national banks.''.
SEC. 122. MISREPRESENTATIONS REGARDING DEPOSITORY INSTITUTION LIABILITY
FOR OBLIGATIONS OF AFFILIATES.
(a) In General.--Chapter 47 of title 18, United States Code,
is amended by inserting after section 1007 the following new
section:
``Sec. 1008. Misrepresentations regarding financial institution
liability for obligations of affiliates
``(a) In General.--No institution-affiliated party of an
insured depository institution or institution-affiliated party
of a subsidiary or affiliate of an insured depository
institution shall fraudulently represent that the institution
is or will be liable for any obligation of a subsidiary or
other affiliate of the institution.
``(b) Criminal Penalty.--Whoever violates subsection (a)
shall be fined under this title, imprisoned for not more than 1
year, or both.
``(c) Institution-Affiliated Party Defined.--For purposes of
this section, the term `institution-affiliated party' with
respect to a subsidiary or affiliate has the same meaning as in
section 3 except references to an insured depository
institution shall be deemed to be references to a subsidiary or
affiliate of an insured depository institution.
``(d) Other Definitions.--For purposes of this section, the
terms `affiliate', `insured depository institution', and
`subsidiary' have same meanings as in section 3 of the Federal
Deposit Insurance Act.''.
(b) Clerical Amendment.--The table of sections for chapter 47
of title 18, United States Code, is amended by inserting after
the item relating to section 1007 the following new item:
``1008. Misrepresentations regarding financial institution liability for
obligations of affiliates.''.
SEC. 123. REPEAL OF STOCK LOAN LIMIT IN FEDERAL RESERVE ACT.
Section 11 of the Federal Reserve Act (12 U.S.C. 248) is
amended by striking the paragraph designated as ``(m)'' and
inserting ``(m) [Repealed]''.
Subtitle D--Wholesale Financial Holding Companies; Wholesale Financial
Institutions
CHAPTER 1--WHOLESALE FINANCIAL HOLDING COMPANIES
SEC. 131. WHOLESALE FINANCIAL HOLDING COMPANIES ESTABLISHED.
(a) Definition and Supervision.--Section 10 of the Bank
Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is amended
to read as follows:
``SEC. 10. WHOLESALE FINANCIAL HOLDING COMPANIES.
``(a) Companies That Control Wholesale Financial
Institutions.--
``(1) Wholesale financial holding company defined.--
The term `wholesale financial holding company' means
any company that--
``(A) is registered as a bank holding
company;
``(B) is predominantly engaged in financial
activities as defined in section 6(g)(2);
``(C) controls 1 or more wholesale financial
institutions;
``(D) does not control--
``(i) a bank other than a wholesale
financial institution;
``(ii) an insured bank other than an
institution permitted under
subparagraph (D), (F), or (G) of
section 2(c)(2); or
``(iii) a savings association; and
``(E) is not a foreign bank (as defined in
section 1(b)(7) of the International Banking
Act of 1978).
``(2) Savings association transition period.--
Notwithstanding paragraph (1)(C)(iii), the Board may
permit a company that controls a savings association
and that otherwise meets the requirements of paragraph
(1) to become supervised under paragraph (1), if the
company divests control of any such savings association
within such period not to exceed 5 years after becoming
supervised under paragraph (1) as permitted by the
Board.
``(b) Supervision by the Board.--
``(1) In general.--The provisions of this section
shall govern the reporting, examination, and capital
requirements of wholesale financial holding companies.
``(2) Reports.--
``(A) In general.--The Board from time to
time may require any wholesale financial
holding company and any subsidiary of such
company to submit reports under oath to keep
the Board informed as to--
``(i) the company's or subsidiary's
activities, financial condition,
policies, systems for monitoring and
controlling financial and operational
risks, and transactions with depository
institution subsidiaries of the holding
company; and
``(ii) the extent to which the
company or subsidiary has complied with
the provisions of this Act and
regulations prescribed and orders
issued under this Act.
``(B) Use of existing reports.--
``(i) In general.--The Board shall,
to the fullest extent possible, accept
reports in fulfillment of the Board's
reporting requirements under this
paragraph that the wholesale financial
holding company or any subsidiary of
such company has provided or been
required to provide to other Federal
and State supervisors or to appropriate
self-regulatory organizations.
``(ii) Availability.--A wholesale
financial holding company or a
subsidiary of such company shall
provide to the Board, at the request of
the Board, a report referred to in
clause (i).
``(C) Exemptions from reporting
requirements.--
``(i) In general.--The Board may, by
regulation or order, exempt any company
or class of companies, under such terms
and conditions and for such periods as
the Board shall provide in such
regulation or order, from the
provisions of this paragraph and any
regulation prescribed under this
paragraph.
``(ii) Criteria for consideration.--
In making any determination under
clause (i) with regard to any exemption
under such clause, the Board shall
consider, among such other factors as
the Board may determine to be
appropriate, the following factors:
``(I) Whether information of
the type required under this
paragraph is available from a
supervisory agency (as defined
in section 1101(7) of the Right
to Financial Privacy Act of
1978) or a foreign regulatory
authority of a similar type.
``(II) The primary business
of the company.
``(III) The nature and extent
of the domestic and foreign
regulation of the activities of
the company.
``(3) Examinations.--
``(A) Limited use of examination authority.--
The Board may make examinations of each
wholesale financial holding company and each
subsidiary of such company in order to--
``(i) inform the Board regarding the
nature of the operations and financial
condition of the wholesale financial
holding company and its subsidiaries;
``(ii) inform the Board regarding--
``(I) the financial and
operational risks within the
wholesale financial holding
company system that may affect
any depository institution
owned by such holding company;
and
``(II) the systems of the
holding company and its
subsidiaries for monitoring and
controlling those risks; and
``(iii) monitor compliance with the
provisions of this Act and those
governing transactions and
relationships between any depository
institution controlled by the wholesale
financial holding company and any of
the company's other subsidiaries.
``(B) Restricted focus of examinations.--The
Board shall, to the fullest extent possible,
limit the focus and scope of any examination of
a wholesale financial holding company under
this paragraph to--
``(i) the holding company; and
``(ii) any subsidiary (other than an
insured depository institution
subsidiary) of the holding company
that, because of the size, condition,
or activities of the subsidiary, the
nature or size of transactions between
such subsidiary and any affiliated
depository institution, or the
centralization of functions within the
holding company system, could have a
materially adverse effect on the safety
and soundness of any depository
institution affiliate of the holding
company.
``(C) Deference to bank examinations.--The
Board shall, to the fullest extent possible,
use the reports of examination of depository
institutions made by the Comptroller of the
Currency, the Federal Deposit Insurance
Corporation, the Director of the Office of
Thrift Supervision or the appropriate State
depository institution supervisory authority
for the purposes of this section.
``(D) Deference to other examinations.--The
Board shall, to the fullest extent possible,
address the circumstances which might otherwise
permit or require an examination by the Board
by forgoing an examination and by instead
reviewing the reports of examination made of--
``(i) any registered broker or dealer
or any registered investment adviser by
or on behalf of the Commission; and
``(ii) any licensed insurance company
by or on behalf of any State government
insurance agency responsible for the
supervision of the insurance company.
``(E) Confidentiality of reported
information.--
``(i) In general.--Notwithstanding
any other provision of law, the Board
shall not be compelled to disclose any
nonpublic information required to be
reported under this paragraph, or any
information supplied to the Board by
any domestic or foreign regulatory
agency, that relates to the financial
or operational condition of any
wholesale financial holding company or
any subsidiary of such company.
``(ii) Compliance with requests for
information.--No provision of this
subparagraph shall be construed as
authorizing the Board to withhold
information from the Congress, or
preventing the Board from complying
with a request for information from any
other Federal department or agency for
purposes within the scope of such
department's or agency's jurisdiction,
or from complying with any order of a
court of competent jurisdiction in an
action brought by the United States or
the Board.
``(iii) Coordination with other
law.--For purposes of section 552 of
title 5, United States Code, this
subparagraph shall be considered to be
a statute described in subsection
(b)(3)(B) of such section.
``(iv) Designation of confidential
information.--In prescribing
regulations to carry out the
requirements of this subsection, the
Board shall designate information
described in or obtained pursuant to
this paragraph as confidential
information.
``(F) Costs.--The cost of any examination
conducted by the Board under this section may
be assessed against, and made payable by, the
wholesale financial holding company.
``(4) Capital adequacy guidelines.--
``(A) Capital adequacy provisions.--Subject
to the requirements of, and solely in
accordance with, the terms of this paragraph,
the Board may adopt capital adequacy rules or
guidelines for wholesale financial holding
companies.
``(B) Method of calculation.--In developing
rules or guidelines under this paragraph, the
following provisions shall apply:
``(i) Focus on double leverage.--The
Board shall focus on the use by
wholesale financial holding companies
of debt and other liabilities to fund
capital investments in subsidiaries.
``(ii) No unweighted capital ratio.--
The Board shall not, by regulation,
guideline, order, or otherwise, impose
under this section a capital ratio that
is not based on appropriate risk-
weighting considerations.
``(iii) No capital requirement on
regulated entities.--The Board shall
not, by regulation, guideline, order or
otherwise, prescribe or impose any
capital or capital adequacy rules,
standards, guidelines, or requirements
upon any subsidiary that--
``(I) is not a depository
institution; and
``(II) is in compliance with
applicable capital requirements
of another Federal regulatory
authority (including the
Securities and Exchange
Commission) or State insurance
authority.
``(iv) Limitation.--The Board shall
not, by regulation, guideline, order or
otherwise, prescribe or impose any
capital or capital adequacy rules,
standards, guidelines, or requirements
upon any subsidiary that is not a
depository institution and that is
registered as an investment adviser
under the Investment Advisers Act of
1940, except that this clause shall not
be construed as preventing the Board
from imposing capital or capital
adequacy rules, guidelines, standards,
or requirements with respect to
activities of a registered investment
adviser other than investment advisory
activities or activities incidental to
investment advisory activities.
``(v) Appropriate exclusions.--The
Board shall take full account of--
``(I) the capital
requirements made applicable to
any subsidiary that is not a
depository institution by
another Federal regulatory
authority or State insurance
authority; and
``(II) industry norms for
capitalization of a company's
unregulated subsidiaries and
activities.
``(vi) Internal risk management
models.--The Board may incorporate
internal risk management models of
wholesale financial holding companies
into its capital adequacy guidelines or
rules and may take account of the
extent to which resources of a
subsidiary depository institution may
be used to service the debt or other
liabilities of the wholesale financial
holding company.
``(c) Nonfinancial Activities and Investments.--
``(1) Authority for limited amounts of new activities
and investments.--
``(A) In general.--Notwithstanding section
4(a), a wholesale financial holding company may
engage in activities which are not (or have not
been determined to be) financial in nature or
incidental to activities which are financial in
nature, or acquire and retain ownership and
control of the shares of a company engaged in
such activities if--
``(i) the aggregate annual gross
revenues derived from all such
activities and of all such companies
does not exceed 5 percent of the
consolidated annual gross revenues of
the wholesale financial holding company
or, in the case of a foreign bank or
any company that owns or controls a
foreign bank, the aggregate annual
gross revenues derived from any such
activities in the United States does
not exceed 5 percent of the
consolidated annual gross revenues of
the foreign bank or company in the
United States derived from any branch,
agency, commercial lending company, or
depository institution controlled by
the foreign bank or company and any
subsidiary engaged in the United States
in activities permissible under section
4 or 6 or this subsection;
``(ii) the consolidated total assets
of any company the shares of which are
acquired pursuant to this subsection
are less than $750,000,000 at the time
the shares are acquired by the
wholesale financial holding company;
and
``(iii) such company provides notice
to the Board within 30 days of
commencing the activity or acquiring
the ownership or control.
``(B) Inclusion of grandfathered
activities.--For purposes of determining
compliance with the limits contained in
subparagraph (A), the gross revenues derived
from all activities conducted and companies the
shares of which are held under paragraph (2)
shall be considered to be derived or held under
this paragraph.
``(C) Report.--No later than 5 years after
the date of enactment of the Financial Services
Act of 1998, the Board shall submit to the
Congress a report regarding the activities
conducted and companies held pursuant to this
paragraph and the effect, if any, that
affiliations permitted under this paragraph
have had on affiliated depository institutions.
The report shall include recommendations
regarding the appropriateness of retaining,
increasing, or decreasing the limits contained
in those provisions.
``(2) Grandfathered activities.--
``(A) In general.--Notwithstanding paragraph
(1)(A) and section 4(a), a company that becomes
a wholesale financial holding company may
continue to engage, directly or indirectly, in
any activity and may retain ownership and
control of shares of a company engaged in any
activity if--
``(i) on the date of the enactment of
the Financial Services Act of 1998,
such wholesale financial holding
company was lawfully engaged in that
nonfinancial activity, held the shares
of such company, or had entered into a
contract to acquire shares of any
company engaged in such activity; and
``(ii) the company engaged in such
activity continues to engage only in
the same activities that such company
conducted on the date of the enactment
of the Financial Services Act of 1998,
and other activities permissible under
this Act.
``(B) No expansion of grandfathered
commercial activities through merger or
consolidation.--A wholesale financial holding
company that engages in activities or holds
shares pursuant to this paragraph, or a
subsidiary of such wholesale financial holding
company, may not acquire, in any merger,
consolidation, or other type of business
combination, assets of any other company which
is engaged in any activity which the Board has
not determined to be financial in nature or
incidental to activities that are financial in
nature under section 6(c).
``(C) Limitation to single exemption.--No
company that engages in any activity or
controls any shares under subsection (f) or (g)
of section 6 may engage in any activity or own
any shares pursuant to this paragraph or
paragraph (1).
``(3) 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.--Notwithstanding paragraph
(1)(A)(i), 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.
``(4) Cross marketing restrictions.--A wholesale
financial holding company shall not permit--
``(A) any company whose shares it owns or
controls pursuant to paragraph (1), (2), or (3)
to offer or market any product or service of an
affiliated wholesale financial institution; or
``(B) any affiliated wholesale financial
institution to offer or market any product or
service of any company whose shares are owned
or controlled by such wholesale financial
holding company pursuant to such paragraphs.
``(d) Qualification of Foreign Bank as Wholesale Financial
Holding Company.--
``(1) In general.--Any foreign bank, or any company
that owns or controls a foreign bank, that--
``(A) operates a branch, agency, or
commercial lending company in the United
States, including a foreign bank or company
that owns or controls a wholesale financial
institution; and
``(B) owns, controls, or is affiliated with a
security affiliate that engages in underwriting
corporate equity securities,
may request a determination from the Board that such
bank or company be treated as a wholesale financial
holding company for purposes of subsection (c).
``(2) Conditions for treatment as a wholesale
financial holding company.--A foreign bank and a
company that owns or controls a foreign bank may not be
treated as a wholesale financial holding company unless
the bank and company meet and continue to meet the
following criteria:
``(A) No insured deposits.--No deposits held
directly by a foreign bank or through an
affiliate (other than an institution described
in subparagraph (D) or (F) of section 2(c)(2))
are insured under the Federal Deposit Insurance
Act.
``(B) Capital standards.--The foreign bank
meets risk-based capital standards comparable
to the capital standards required for a
wholesale financial institution, giving due
regard to the principle of national treatment
and equality of competitive opportunity.
``(C) Transaction with affiliates.--
Transactions between a branch, agency, or
commercial lending company subsidiary of the
foreign bank in the United States, and any
securities affiliate or company in which the
foreign bank (or any company that owns or
controls such foreign bank) has invested
pursuant to subsection (d) comply with the
provisions of sections 23A and 23B of the
Federal Reserve Act in the same manner and to
the same extent as such transactions would be
required to comply with such sections if the
bank were a member bank.
``(3) Treatment as a wholesale financial
institution.--Any foreign bank which is, or is
affiliated with a company which is, treated as a
wholesale financial holding company under this
subsection shall be treated as a wholesale financial
institution for purposes of subsection (c)(4) of this
section and subsections (c)(1)(C) and (c)(3) of section
9B of the Federal Reserve Act, and any such foreign
bank or company shall be subject to paragraphs (3),
(4), and (5) of section 9B(d) of the Federal Reserve
Act, except that the Board may adopt such
modifications, conditions, or exemptions as the Board
deems appropriate, giving due regard to the principle
of national treatment and equality of competitive
opportunity.
``(4) Nonapplicability of other exemption.--Any
foreign bank or company which is treated as a wholesale
financial holding company under this subsection shall
not be eligible for any exception described in section
2(h).
``(5) Supervision of foreign bank which maintains no
banking presence other than control of a wholesale
financial institution.--A foreign bank that owns or
controls a wholesale financial institution but does not
operate a branch, agency, or commercial lending company
in the United States (and any company that owns or
controls such foreign bank) may request a determination
from the Board that such bank or company be treated as
a wholesale financial holding company for purposes of
subsection (c), except that such bank or company shall
be subject to the restrictions of paragraphs (2)(A),
(3), and (4) of this subsection.
``(6) No effect on other provisions.--This section
shall not be construed as limiting the authority of the
Board under the International Banking Act of 1978 with
respect to the regulation, supervision, or examination
of foreign banks and their offices and affiliates in
the United States.
``(7) Applicability of community reinvestment act of
1977.--The branches in the United States of a foreign
bank that is, or is affiliated with a company that is,
treated as a wholesale financial holding company shall
be subject to section 9B(b)(11) of the Federal Reserve
Act as if the foreign bank were a wholesale financial
institution under such section. The Board and the
Comptroller of the Currency shall apply the provisions
of sections 803(2), 804, and 807(1) of the Community
Reinvestment Act of 1977 to branches of foreign banks
which receive only such deposits as are permissible for
receipt by a corporation organized under section 25A of
the Federal Reserve Act, in the same manner and to the
same extent such sections apply to such a
corporation.''.
(b) Uninsured State Banks.--Section 9 of the Federal Reserve
Act (U.S.C. 321 et seq.) is amended by adding at the end the
following new paragraph:
``(24) Enforcement authority over uninsured state
member banks.--Section 3(u) of the Federal Deposit
Insurance Act, subsections (j) and (k) of section 7 of
such Act, and subsections (b) through (n), (s), (u),
and (v) of section 8 of such Act shall apply to an
uninsured State member bank in the same manner and to
the same extent such provisions apply to an insured
State member bank and any reference in any such
provision to `insured depository institution' shall be
deemed to be a reference to `uninsured State member
bank' for purposes of this paragraph.''.
SEC. 132. AUTHORIZATION TO RELEASE REPORTS.
(a) Federal Reserve Act.--The last sentence of the 8th
undesignated paragraph of section 9 of the Federal Reserve Act
(12 U.S.C. 326) is amended to read as follows: ``The Board of
Governors of the Federal Reserve System, at its discretion, may
furnish reports of examination or other confidential
supervisory information concerning State member banks or any
other entities examined under any other authority of the Board
to any Federal or State authorities with supervisory or
regulatory authority over the examined entity, to officers,
directors, or receivers of the examined entity, and to any
other person that the Board determines to be proper.''.
(b) Commodity Futures Trading Commission.--
(1) Section 1101(7) of the Right to Financial Privacy
Act of 1978 (12 U.S.C. 3401(7)) is amended--
(A) by redesignating subparagraphs (G) and
(H) as subparagraphs (H) and (I), respectively;
and
(B) by inserting after subparagraph (F) the
following new subparagraph:
``(G) the Commodity Futures Trading
Commission; or'' and
(2) Section 1112(e) of the Right to Financial Privacy
Act (12 U.S.C. 3412(e)) is amended by striking ``and
the Securities and Exchange Commission'' and inserting
``, the Securities and Exchange Commission, and the
Commodity Futures Trading Commission''.
SEC. 133. CONFORMING AMENDMENTS.
(a) Bank Holding Company Act of 1956.--
(1) Definitions.--Section 2 of the Bank Holding
Company Act of 1956 (12 U.S.C. 1842) is amended by
adding at the end the following new subsections:
``(p) Wholesale Financial Institution.--The term `wholesale
financial institution' means a wholesale financial institution
subject to section 9B of the Federal Reserve Act.
``(q) Commission.--The term `Commission' means the Securities
and Exchange Commission.
``(r) Depository Institution.--The term `depository
institution'--
``(1) has the meaning given to such term in section 3
of the Federal Deposit Insurance Act; and
``(2) includes a wholesale financial institution.''.
(2) Definition of bank includes wholesale financial
institution.--Section 2(c)(1) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1841(c)(1)) is amended
by adding at the end the following new subparagraph:
``(C) A wholesale financial institution.''.
(3) Incorporated definitions.--Section 2(n) of the
Bank Holding Company Act of 1956 (12 U.S.C. 1841(n)) is
amended by inserting `` `insured bank','' after `` `in
danger of default',''.
(4) Exception to deposit insurance requirement.--
Section 3(e) of the Bank Holding Company Act of 1956
(12 U.S.C. 1842(e)) is amended by adding at the end the
following: ``This subsection shall not apply to a
wholesale financial institution.''
(b) Federal Deposit Insurance Act.--Section 3(q)(2)(A) of the
Federal Deposit Insurance Act (12 U.S.C. 1813(q)(2)(A)) is
amended to read as follows:
``(A) any State member insured bank (except a
District bank) and any wholesale financial
institution as authorized pursuant to section
9B of the Federal Reserve Act;''.
CHAPTER 2--WHOLESALE FINANCIAL INSTITUTIONS
SEC. 136. WHOLESALE FINANCIAL INSTITUTIONS.
(a) National Wholesale Financial Institutions.--
(1) In general.--Chapter one of title LXII of the
Revised Statutes of the United States (12 U.S.C. 21 et
seq.) is amended by inserting after section 5136A (as
added by section 121(a) of this title) the following
new section:
``SEC. 5136B. NATIONAL WHOLESALE FINANCIAL INSTITUTIONS.
``(a) Authorization of the Comptroller Required.--A national
bank may apply to the Comptroller on such forms and in
accordance with such regulations as the Comptroller may
prescribe, for permission to operate as a national wholesale
financial institution.
``(b) Regulation.--A national wholesale financial institution
may exercise, in accordance with such institution's articles of
incorporation and regulations issued by the Comptroller, all
the powers and privileges of a national bank formed in
accordance with section 5133 of the Revised Statutes of the
United States, subject to section 9B of the Federal Reserve Act
and the limitations and restrictions contained therein.
``(c) Community Reinvestment Act of 1977.--A national
wholesale financial institution shall be subject to the
Community Reinvestment Act of 1977.
``(d) Examination Reports.--The Comptroller of the Currency
shall, to the fullest extent possible, use the report of
examinations made by the Board of Governors of the Federal
Reserve System of a wholesale financial institution.''.
(2) Clerical amendment.--The table of sections for
chapter one of title LXII of the Revised Statutes of
the United States is amended by inserting after the
item relating to section 5136A (as added by section
121(d) of this title) the following new item:
``5136B. National wholesale financial institutions.''.
(b) State Wholesale Financial Institutions.--The Federal
Reserve Act (12 U.S.C. 221 et seq.) is amended by inserting
after section 9A the following new section:
``SEC. 9B. WHOLESALE FINANCIAL INSTITUTIONS.
``(a) Application for Membership as Wholesale Financial
Institution.--
``(1) Application required.--
``(A) In general.--Any bank may apply to the
Board of Governors of the Federal Reserve
System to become a wholesale financial
institution and, as a wholesale financial
institution, to subscribe to the stock of the
Federal reserve bank organized within the
district where the applying bank is located.
``(B) Treatment as member bank.--Any
application under subparagraph (A) shall be
treated as an application under, and shall be
subject to the provisions of, section 9.
``(2) Insurance termination.--No bank the deposits of
which are insured under the Federal Deposit Insurance
Act may become a wholesale financial institution unless
it has met all requirements under that Act for
voluntary termination of deposit insurance.
``(b) General Requirements Applicable to Wholesale Financial
Institutions.--
``(1) Federal reserve act.--Except as otherwise
provided in this section, wholesale financial
institutions shall be member banks and shall be subject
to the provisions of this Act that apply to member
banks to the same extent and in the same manner as
State member insured banks, except that a wholesale
financial institution may terminate membership under
this Act only with the prior written approval of the
Board and on terms and conditions that the Board
determines are appropriate to carry out the purposes of
this Act.
``(2) Prompt corrective action.--A wholesale
financial institution shall be deemed to be an insured
depository institution for purposes of section 38 of
the Federal Deposit Insurance Act except that--
``(A) the relevant capital levels and capital
measures for each capital category shall be the
levels specified by the Board for wholesale
financial institutions; and
``(B) all references to the appropriate
Federal banking agency or to the Corporation in
that section shall be deemed to be references
to the Board.
``(3) Enforcement authority.--Subsections (j) and (k)
of section 7, subsections (b) through (n), (s), and (v)
of section 8, and section 19 of the Federal Deposit
Insurance Act shall apply to a wholesale financial
institution in the same manner and to the same extent
as such provisions apply to State member insured banks
and any reference in such sections to an insured
depository institution shall be deemed to include a
reference to a wholesale financial institution.
``(4) Certain other statutes applicable.--A wholesale
financial institution shall be deemed to be a banking
institution, and the Board shall be the appropriate
Federal banking agency for such bank and all such
bank's affiliates, for purposes of the International
Lending Supervision Act.
``(5) Bank merger act.--A wholesale financial
institution shall be subject to sections 18(c) and 44
of the Federal Deposit Insurance Act in the same manner
and to the same extent the wholesale financial
institution would be subject to such sections if the
institution were a State member insured bank.
``(6) Branching.--Notwithstanding any other provision
of law, a wholesale financial institution may establish
and operate a branch at any location on such terms and
conditions as established by the Board and, in the case
of a State-chartered wholesale financial institution,
with the approval of the Board, and, in the case of a
national bank wholesale financial institution, with the
approval of the Comptroller of the Currency.
``(7) Activities of out-of-state branches of
wholesale financial institutions.--
``(A) General.--A State-chartered wholesale
financial institution shall be deemed a State
bank and an insured State bank and a national
wholesale financial institution shall be deemed
a national bank for purposes of paragraphs (1),
(2), and (3) of section 24(j) of the Federal
Deposit Insurance Act.
``(B) Definitions.--The following definitions
shall apply solely for purposes of applying
paragraph (1):
``(i) Home state.--The term `home
State' means--
``(I) with respect to a
national wholesale financial
institution, the State in which
the main office of the
institution is located; and
``(II) with respect to a
State-chartered wholesale
financial institution, the
State by which the institution
is chartered.
``(ii) Host state.--The term `host
State' means a State, other than the
home State of the wholesale financial
institution, in which the institution
maintains, or seeks to establish and
maintain, a branch.
``(iii) Out-of-state bank.--The term
`out-of-State bank' means, with respect
to any State, a wholesale financial
institution whose home State is another
State.
``(8) Discrimination regarding interest rates.--
Section 27 of the Federal Deposit Insurance Act shall
apply to State-chartered wholesale financial
institutions in the same manner and to the same extent
as such provisions apply to State member insured banks
and any reference in such section to a State-chartered
insured depository institution shall be deemed to
include a reference to a State-chartered wholesale
financial institution.
``(9) Preemption of state laws requiring deposit
insurance for wholesale financial institutions.--The
appropriate State banking authority may grant a charter
to a wholesale financial institution notwithstanding
any State constitution or statute requiring that the
institution obtain insurance of its deposits and any
such State constitution or statute is hereby preempted
solely for purposes of this paragraph.
``(10) Parity for wholesale financial institutions.--
A State bank that is a wholesale financial institution
under this section shall have all of the rights,
powers, privileges, and immunities (including those
derived from status as a federally chartered
institution) of and as if it were a national bank,
subject to such terms and conditions as established by
the Board.
``(11) Community reinvestment act of 1977.--A State
wholesale financial institution shall be subject to the
Community Reinvestment Act of 1977.
``(c) Specific Requirements Applicable to Wholesale Financial
Institutions.--
``(1) Limitations on deposits.--
``(A) Minimum amount.--
``(i) In general.--No wholesale
financial institution may receive
initial deposits of $100,000 or less,
other than on an incidental and
occasional basis.
``(ii) Limitation on deposits of less
than $100,000.--No wholesale financial
institution may receive initial
deposits of $100,000 or less if such
deposits constitute more than 5 percent
of the institution's total deposits.
``(B) No deposit insurance.--No deposits held
by a wholesale financial institution shall be
insured deposits under the Federal Deposit
Insurance Act.
``(C) Advertising and disclosure.--The Board
shall prescribe regulations pertaining to
advertising and disclosure by wholesale
financial institutions to ensure that each
depositor is notified that deposits at the
wholesale financial institution are not
federally insured or otherwise guaranteed by
the United States Government.
``(2) Minimum capital levels applicable to wholesale
financial institutions.--The Board shall, by
regulation, adopt capital requirements for wholesale
financial institutions--
``(A) to account for the status of wholesale
financial institutions as institutions that
accept deposits that are not insured under the
Federal Deposit Insurance Act; and
``(B) to provide for the safe and sound
operation of the wholesale financial
institution without undue risk to creditors or
other persons, including Federal reserve banks,
engaged in transactions with the bank.
``(3) Additional requirements applicable to wholesale
financial institutions.--In addition to any requirement
otherwise applicable to State member insured banks or
applicable, under this section, to wholesale financial
institutions, the Board may impose, by regulation or
order, upon wholesale financial institutions--
``(A) limitations on transactions, direct or
indirect, with affiliates to prevent--
``(i) the transfer of risk to the
deposit insurance funds; or
``(ii) an affiliate from gaining
access to, or the benefits of, credit
from a Federal reserve bank, including
overdrafts at a Federal reserve bank;
``(B) special clearing balance requirements;
and
``(C) any additional requirements that the
Board determines to be appropriate or necessary
to--
``(i) promote the safety and
soundness of the wholesale financial
institution or any insured depository
institution affiliate of the wholesale
financial institution;
``(ii) prevent the transfer of risk
to the deposit insurance funds; or
``(iii) protect creditors and other
persons, including Federal reserve
banks, engaged in transactions with the
wholesale financial institution.
``(4) Exemptions for wholesale financial
institutions.--The Board may, by regulation or order,
exempt any wholesale financial institution from any
provision applicable to a member bank that is not a
wholesale financial institution, if the Board finds
that such exemption is not inconsistent with--
``(A) the promotion of the safety and
soundness of the wholesale financial
institution or any insured depository
institution affiliate of the wholesale
financial institution;
``(B) the protection of the deposit insurance
funds; and
``(C) the protection of creditors and other
persons, including Federal reserve banks,
engaged in transactions with the wholesale
financial institution.
``(5) Limitation on transactions between a wholesale
financial institution and an insured bank.--For
purposes of section 23A(d)(1) of the Federal Reserve
Act, a wholesale financial institution that is
affiliated with an insured bank shall not be a bank.
``(6) No effect on other provisions.--This section
shall not be construed as limiting the Board's
authority over member banks under any other provision
of law, or to create any obligation for any Federal
reserve bank to make, increase, renew, or extend any
advance or discount under this Act to any member bank
or other depository institution.
``(d) Capital and Managerial Requirements.--
``(1) In general.--A wholesale financial institution
shall be well capitalized and well managed.
``(2) Notice to company.--The Board shall promptly
provide notice to a company that controls a wholesale
financial institution whenever such wholesale financial
institution is not well capitalized or well managed.
``(3) Agreement to restore institution.--Within 45
days of receipt of a notice under paragraph (2) (or
such additional period not to exceed 90 days as the
Board may permit), the company shall execute an
agreement acceptable to the Board to restore the
wholesale financial institution to compliance with all
of the requirements of paragraph (1).
``(4) Limitations until institution restored.--Until
the wholesale financial institution is restored to
compliance with all of the requirements of paragraph
(1), the Board may impose such limitations on the
conduct or activities of the company or any affiliate
of the company as the Board determines to be
appropriate under the circumstances.
``(5) Failure to restore.--If the company does not
execute and implement an agreement in accordance with
paragraph (3), comply with any limitation imposed under
paragraph (4), restore the wholesale financial
institution to well capitalized status within 180 days
after receipt by the company of the notice described in
paragraph (2), or restore the wholesale financial
institution to well managed status within such period
as the Board may permit, the company shall, under such
terms and conditions as may be imposed by the Board and
subject to such extension of time as may be granted in
the Board's discretion, divest control of its
subsidiary depository institutions.
``(6) Well managed defined.--For purposes of this
subsection, the term `well managed' has the same
meaning as in section 2 of the Bank Holding Company Act
of 1956.
``(e) Conservatorship Authority.--
``(1) In general.--The Board may appoint a
conservator to take possession and control of a
wholesale financial institution to the same extent and
in the same manner as the Comptroller of the Currency
may appoint a conservator for a national bank under
section 203 of the Bank Conservation Act, and the
conservator shall exercise the same powers, functions,
and duties, subject to the same limitations, as are
provided under such Act for conservators of national
banks.
``(2) Board authority.--The Board shall have the same
authority with respect to any conservator appointed
under paragraph (1) and the wholesale financial
institution for which such conservator has been
appointed as the Comptroller of the Currency has under
the Bank Conservation Act with respect to a conservator
appointed under such Act and a national bank for which
the conservator has been appointed.
``(f) Exclusive Jurisdiction.--Subsections (c) and (e) of
section 43 of the Federal Deposit Insurance Act shall not apply
to any wholesale financial institution.''.
(c) Voluntary Termination of Insured Status by Certain
Institutions.--
(1) Section 8 designations.--Section 8(a) of the
Federal Deposit Insurance Act (12 U.S.C. 1818(a)) is
amended--
(A) by striking paragraph (1); and
(B) by redesignating paragraphs (2) through
(10) as paragraphs (1) through (9),
respectively.
(2) Voluntary termination of insured status.--The
Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.)
is amended by inserting after section 8 the following
new section:
``SEC. 8A. VOLUNTARY TERMINATION OF STATUS AS INSURED DEPOSITORY
INSTITUTION.
``(a) In General.--Except as provided in subsection (b), an
insured State bank or a national bank may voluntarily terminate
such bank's status as an insured depository institution in
accordance with regulations of the Corporation if--
``(1) the bank provides written notice of the bank's
intent to terminate such insured status--
``(A) to the Corporation and the Board of
Governors of the Federal Reserve System not
less than 6 months before the effective date of
such termination; and
``(B) to all depositors at such bank, not
less than 6 months before the effective date of
the termination of such status; and
``(2) either--
``(A) the deposit insurance fund of which
such bank is a member equals or exceeds the
fund's designated reserve ratio as of the date
the bank provides a written notice under
paragraph (1) and the Corporation determines
that the fund will equal or exceed the
applicable designated reserve ratio for the 2
semiannual assessment periods immediately
following such date; or
``(B) the Corporation and the Board of
Governors of the Federal Reserve System
approved the termination of the bank's insured
status and the bank pays an exit fee in
accordance with subsection (e).
``(b) Exception.--Subsection (a) shall not apply with respect
to--
``(1) an insured savings association; or
``(2) an insured branch that is required to be
insured under subsection (a) or (b) of section 6 of the
International Banking Act of 1978.
``(c) Eligibility for Insurance Terminated.--Any bank that
voluntarily elects to terminate the bank's insured status under
subsection (a) shall not be eligible for insurance on any
deposits or any assistance authorized under this Act after the
period specified in subsection (f)(1).
``(d) Institution Must Become Wholesale Financial Institution
or Terminate Deposit-Taking Activities.--Any depository
institution which voluntarily terminates such institution's
status as an insured depository institution under this section
may not, upon termination of insurance, accept any deposits
unless the institution is a wholesale financial institution
subject to section 9B of the Federal Reserve Act.
``(e) Exit Fees.--
``(1) In general.--Any bank that voluntarily
terminates such bank's status as an insured depository
institution under this section shall pay an exit fee in
an amount that the Corporation determines is sufficient
to account for the institution's pro rata share of the
amount (if any) which would be required to restore the
relevant deposit insurance fund to the fund's
designated reserve ratio as of the date the bank
provides a written notice under subsection (a)(1).
``(2) Procedures.--The Corporation shall prescribe,
by regulation, procedures for assessing any exit fee
under this subsection.
``(f) Temporary Insurance of Deposits Insured as of
Termination.--
``(1) Transition period.--The insured deposits of
each depositor in a State bank or a national bank on
the effective date of the voluntary termination of the
bank's insured status, less all subsequent withdrawals
from any deposits of such depositor, shall continue to
be insured for a period of not less than 6 months and
not more than 2 years, as determined by the
Corporation. During such period, no additions to any
such deposits, and no new deposits in the depository
institution made after the effective date of such
termination shall be insured by the Corporation.
``(2) Temporary assessments; obligations and
duties.--During the period specified in paragraph (1)
with respect to any bank, the bank shall continue to
pay assessments under section 7 as if the bank were an
insured depository institution. The bank shall, in all
other respects, be subject to the authority of the
Corporation and the duties and obligations of an
insured depository institution under this Act during
such period, and in the event that the bank is closed
due to an inability to meet the demands of the bank's
depositors during such period, the Corporation shall
have the same powers and rights with respect to such
bank as in the case of an insured depository
institution.
``(g) Advertisements.--
``(1) In general.--A bank that voluntarily terminates
the bank's insured status under this section shall not
advertise or hold itself out as having insured
deposits, except that the bank may advertise the
temporary insurance of deposits under subsection (f)
if, in connection with any such advertisement, the
advertisement also states with equal prominence that
additions to deposits and new deposits made after the
effective date of the termination are not insured.
``(2) Certificates of deposit, obligations, and
securities.--Any certificate of deposit or other
obligation or security issued by a State bank or a
national bank after the effective date of the voluntary
termination of the bank's insured status under this
section shall be accompanied by a conspicuous,
prominently displayed notice that such certificate of
deposit or other obligation or security is not insured
under this Act.
``(h) Notice Requirements.--
``(1) Notice to the corporation.--The notice required
under subsection (a)(1)(A) shall be in such form as the
Corporation may require.
``(2) Notice to depositors.--The notice required
under subsection (a)(1)(B) shall be--
``(A) sent to each depositor's last address
of record with the bank; and
``(B) in such manner and form as the
Corporation finds to be necessary and
appropriate for the protection of
depositors.''.
(3) Definition.--Section 19(b)(1)(A)(i) of the
Federal Reserve Act (12 U.S.C. 461(b)(1)(A)(i)) is
amended by inserting ``, or any wholesale financial
institution subject to section 9B of this Act'' after
``such Act''.
Subtitle E--Streamlining Antitrust Review of Bank Acquisitions and
Mergers
SEC. 141. AMENDMENTS TO THE BANK HOLDING COMPANY ACT OF 1956.
(a) Amendments to Section 3 To Require Filing of Application
Copies With Antitrust Agencies.--Section 3 of the Bank Holding
Company Act of 1956 (12 U.S.C. 1842) is amended--
(1) in subsection (b) by inserting after paragraph
(2) the following new paragraph:
``(3) Requirement to file information with antitrust
agencies.--Any applicant seeking prior approval of the
Board to engage in an acquisition transaction under
this section must file simultaneously with the Attorney
General and, if the transaction also involves an
acquisition under section 4 or 6, the Federal Trade
Commission copies of any documents regarding the
proposed transaction required by the Board.''; and
(2) in subsection (c)--
(A) by striking paragraph (1); and
(B) by redesignating paragraphs (2) through
(5) as paragraphs (1) through (4),
respectively.
(b) Amendments to Section 11 To Modify Justice Department
Notification and Post-Approval Waiting Period for Section 3
Transactions.--Section 11 of the Bank Holding Company Act of
1956 (12 U.S.C. 1849) is amended--
(1) in subsection (b)(1)--
(A) by striking ``, if the Board has not
received any adverse comment from the Attorney
General of the United States relating to
competitive factors,'';
(B) by striking ``as may be prescribed by the
Board with the concurrence of the Attorney
General, but in no event less than 15 calendar
days after the date of approval.'' and
inserting ``as may be prescribed by the
appropriate antitrust agency.''; and
(C) by striking the 3d to last sentence and
the penultimate sentence; and
(2) by striking subsections (c) and (e) and
redesignating subsections (d) and (f) as subsections
(c) and (d), respectively.
(c) Definitions.--Section 2(o) of the Bank Holding Company
Act of 1956 (12 U.S.C. 1841(o)) is amended by adding at the end
the following new paragraphs:
``(8) Antitrust agencies.--The term `antitrust
agencies' means the Attorney General and the Federal
Trade Commission.
``(9) Appropriate antitrust agency.--With respect to
a particular transaction, the term `appropriate
antitrust agency' means the antitrust agency engaged in
reviewing the competitive effects of such
transaction.''.
SEC. 142. AMENDMENTS TO THE FEDERAL DEPOSIT INSURANCE ACT TO VEST IN
THE ATTORNEY GENERAL SOLE RESPONSIBILITY FOR
ANTITRUST REVIEW OF DEPOSITORY INSTITUTION MERGERS.
Section 18(c) of the Federal Deposit Insurance Act (12 U.S.C.
1828) is amended--
(1) in paragraph (3)(C) by striking ``during a period
at least as long as the period allowed for furnishing
reports under paragraph (4) of this subsection'';
(2) by striking paragraph (4) and inserting the
following new paragraph:
``(4) Factors to be considered.--In determining
whether to approve a transaction, the responsible
agency shall in every case take into consideration the
financial and managerial resources and future prospects
of the existing and proposed institutions, and the
convenience and needs of the community to be served.'';
(3) by striking paragraph (5) and inserting the
following new paragraph:
``(5) Notice to attorney general.--The responsible
agency shall immediately notify the Attorney General of
any approval by it pursuant to this subsection of a
proposed merger transaction. If the responsible agency
has found that it must act immediately in order to
prevent the probable failure of one of the banks
involved, the transaction may be consummated
immediately upon approval by the agency. If the
responsible agency has notified the other Federal
banking agencies referred to in this section of the
existence of an emergency requiring expeditious action
and has required the submission of views and
recommendations within 10 days, the transaction may not
be consummated before the 5th calendar day after the
date of approval of the responsible agency. In all
other cases, the transaction may not be consummated
before the 30th calendar day after the date of approval
by the agency, or such shorter period of time as may be
prescribed by the Attorney General.'';
(4) by striking paragraph (6) and redesignating
paragraphs (7) through (11) as paragraphs (6) through
(10), respectively;
(5) in subparagraph (A) of paragraph (6) (as so
redesignated by paragraph (4) of this section)--
(A) by striking ``(5)'' and inserting
``(4)''; and
(B) by striking ``(6)'' and inserting
``(5)'';
(C) by striking ``In any such action, the
court shall review de novo the issues
presented.'';
(6) in paragraph (6) (as so redesignated by paragraph
(4) of this section)--
(A) by striking subparagraphs (B) and (D);
and
(B) by redesignating subparagraph (C) as
subparagraph (B);
(7) in paragraph (8) (as so redesignated by paragraph
(4) of this section)--
(A) by inserting ``and'' after the semicolon
at the end of subparagraph (A):
(B) by striking subparagraph (B); and
(C) by redesignating subparagraph (C) as
subparagraph (B); and
(8) by inserting after paragraph (10) (as so
redesignated by paragraph (4) of this section) the
following new paragraph:
``(11) Requirement to file information with attorney
general.--Any applicant seeking prior written approval
of the responsible Federal banking agency to engage in
a merger transaction under this subsection shall file
simultaneously with the Attorney General copies of any
documents regarding the proposed transaction required
by the Federal banking agency.''.
SEC. 143. INFORMATION FILED BY DEPOSITORY INSTITUTIONS; INTERAGENCY
DATA SHARING.
(a) Format of Notice.--
(1) In general.--Notice of any proposed transaction
for which approval is required under section 3 of the
Bank Holding Company Act of 1956 or section 18(c) of
the Federal Deposit Insurance Act shall be in a format
designated and required by the appropriate Federal
banking agency (as defined in section 3 of the Federal
Deposit Insurance Act) and shall contain a section on
the likely competitive effects of the proposed
transaction.
(2) Designation by agency.--The appropriate Federal
banking agency, with the concurrence of the antitrust
agencies, shall designate and require the form and
content of the competitive effects section.
(3) Notice of suspension.--Upon notification by the
appropriate antitrust agency that the competitive
effects section of an application is incomplete, the
appropriate Federal banking agency shall notify the
applicant that the agency will suspend processing of
the application until the appropriate antitrust agency
notifies the agency that the application is complete.
(4) Emergency action.--This provision shall not
affect the appropriate Federal banking agency's
authority to act immediately--
(A) to prevent the probable failure of 1 of
the banks involved; or
(B) to reduce or eliminate a post approval
waiting period in case of an emergency
requiring expeditious action.
(5) Exemption for certain filings.--With the
concurrence of the antitrust agencies, the appropriate
Federal banking agency may exempt classes of persons,
acquisitions, or transactions that are not likely to
violate the antitrust laws from the requirement that
applicants file a competitive effects section.
(b) Interagency Data Sharing Requirement.--
(1) In general.--To the extent not prohibited by
other law, the Federal banking agencies shall make
available to the antitrust agencies any data in their
possession that the antitrust agencies deem necessary
for antitrust reviews of transactions requiring
approval under section 3 of the Bank Holding Company
Act of 1956 or section 18(c) of the Federal Deposit
Insurance Act.
(2) Continuation of data collection and analysis.--
The Federal banking agencies shall continue to provide
market analysis, deposit share information, and other
relevant information for determining market competition
as needed by the Attorney General in the same manner
such agencies provided analysis and information under
section 18(c) of the Federal Deposit Insurance Act and
3(c) of the Bank Holding Company Act of 1956 (as such
sections were in effect on the day before the date of
the enactment of this Act) and shall continue to
collect information necessary or useful for such
analysis.
(c) Definitions.--For purposes of this section, the following
definitions shall apply:
(1) Antitrust agencies.--The term ``antitrust
agencies'' means the Attorney General and the Federal
Trade Commission.
(2) Appropriate antitrust agency.--With respect to a
particular transaction, the term ``appropriate
antitrust agency'' means the antitrust agency engaged
in reviewing the competitive effects of such
transaction.
SEC. 144. APPLICABILITY OF ANTITRUST LAWS.
No provision of this subtitle shall be construed as
affecting--
(1) the applicability of antitrust laws (as defined
in section 11(d) of the Bank Holding Company Act of
1956; as so redesignated pursuant to this subtitle); or
(2) the applicability, if any, of any State law which
is similar to the antitrust laws.
SEC. 145. 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.
SEC. 146. EFFECTIVE DATE.
This subtitle shall take effect 6 months after the date of
enactment of this Act.
Subtitle F--Applying the Principles of National Treatment and Equality
of Competitive Opportunity to Foreign Banks and Foreign Financial
Institutions
SEC. 151. APPLYING THE PRINCIPLES OF NATIONAL TREATMENT AND EQUALITY
OF COMPETITIVE OPPORTUNITY TO FOREIGN BANKS THAT
ARE FINANCIAL HOLDING COMPANIES.
Section 8(c) of the International Banking Act of 1978 (12
U.S.C. 3106(c)) is amended by adding at the end the following
new paragraph:
``(3) Termination of grandfathered rights.--
``(A) In general.--If any foreign bank or
foreign company files a declaration under
section 6(b)(1)(E) or which receives a
determination under section 10(d)(1) of the
Bank Holding Company Act of 1956, any authority
conferred by this subsection on any foreign
bank or company to engage in any activity which
the Board has determined to be permissible for
financial holding companies under section 6 of
such Act shall terminate immediately.
``(B) Restrictions and requirements
authorized.--If a foreign bank or company that
engages, directly or through an affiliate
pursuant to paragraph (1), in an activity which
the Board has determined to be permissible for
financial holding companies under section 6 of
the Bank Holding Company Act of 1956 has not
filed a declaration with the Board of its
status as a financial holding company under
such section or received a determination under
section 10(d)(1) by the end of the 2-year
period beginning on the date of enactment of
the Financial Services Act of 1998, the Board,
giving due regard to the principle of national
treatment and equality of competitive
opportunity, may impose such restrictions and
requirements on the conduct of such activities
by such foreign bank or company as are
comparable to those imposed on a financial
holding company organized under the laws of the
United States, including a requirement to
conduct such activities in compliance with any
prudential safeguards established under section
5(h) of the Bank Holding Company Act of
1956.''.
SEC. 152. APPLYING THE PRINCIPLES OF NATIONAL TREATMENT AND EQUALITY OF
COMPETITIVE OPPORTUNITY TO FOREIGN BANKS AND
FOREIGN FINANCIAL INSTITUTIONS THAT ARE WHOLESALE
FINANCIAL INSTITUTIONS.
Section 8A of the Federal Deposit Insurance Act (as added by
section 136(c)(2) of this Act) is amended by adding at the end
the following new subsection:
``(i) Voluntary Termination of Deposit Insurance.--The
provisions on voluntary termination of insurance in this
section shall apply to an insured branch of a foreign bank
(including a Federal branch) in the same manner and to the same
extent as they apply to an insured State bank or a national
bank.''.
Subtitle G--Federal Home Loan Bank System
SEC. 161. FEDERAL HOME LOAN BANKS.
The 1st sentence of section 3 of the Federal Home Loan Bank
Act (12 U.S.C. 1423) is amended--
(1) by striking ``the continental United States'' and
all that follows through the ``eight''; and
(2) by inserting ``the States into not less than 1''
before ``nor''.
SEC. 162. MEMBERSHIP AND COLLATERAL.
(a) Subsection (f) of section 5 of the Home Owners' Loan Act
(12 U.S.C. 1464) is amended to read as follows:
``(f) Federal Home Loan Bank Membership.--A Federal savings
association may become a member, of the Federal Home Loan Bank
System, and shall qualify for such membership in the manner
provided by the Federal Home Loan Bank Act, beginning January
1, 1999.''.
(b) Section 10(a)(5) of the Federal Home Loan Bank Act (12
U.S.C. 1430(a)(5)) is amended--
(1) in the 2d sentence, by striking ``and the
Board''; and
(2) in the 3d sentence, by striking ``Board'' and
inserting ``Bank''.
(c) Section 10(a) of the Federal Home Loan Bank Act (12
U.S.C. 1430(a)) is amended--
(1) in the 2d sentence, by striking ``All long-term
advances'' and inserting ``Except as provided in the
succeeding sentence, all long-term advances'';
(2) by inserting after the 2d sentence, the following
sentence: ``Notwithstanding the preceding sentence,
long-term advances may be made to members insured by
the Federal Deposit Insurance Corporation which have
less than $500,000,000 in total assets for the purpose
of funding small businesses, agriculture, rural
development, or low-income community development (as
defined by the Board).''; and
(3) by redesignating paragraph (5) as paragraph (6)
and inserting after paragraph (4) the following new
paragraph:
``(5) In the case of any member insured by the
Federal Deposit Insurance Corporation which has total
assets of less than $500,000,000, secured loans for
small business, agriculture, rural development, or low-
income community development, or securities
representing a whole interest in such secured loans.''.
(d) Section 4(a) of the Federal Home Loan Bank Act (12 U.S.C.
1424(a)) is amended by adding at the end the following new
paragraph:
``(3) Eligibility requirements for community
financial institutions.--The requirements of paragraph
(2) (other than subparagraph (B) of such paragraph)
shall not apply to any insured depository institution
which has total assets of less than $500,000,000.
(e) Section 10 of the Federal Home Loan Bank Act (12 U.S.C.
1430) is amended by striking the 1st of the 2 subsections
designated as subsection (e) (relating to qualified thrift
lender status).
SEC. 163. THE OFFICE OF FINANCE.
The Federal Home Loan Bank Act (12 U.S.C. 1421) is amended by
inserting after section 4 the following new section:
``SEC. 5. THE OFFICE OF FINANCE.
``(a) Operation.--The Federal home loan banks shall operate
jointly an office of finance (hereafter in this section
referred to as the `Office') to issue the notes, bonds, and
debentures of the Federal home loan banks in accordance with
this Act.
``(b) Powers.--Subject to the other provisions of this Act
and such safety and soundness regulations as the Finance Board
may prescribe, the Office shall be authorized by the Federal
home loan banks to act as the agent of such banks to issue
Federal home loan bank notes, bonds and debentures pursuant to
section 11 of this Act on behalf of the banks.
``(c) Central Board of Directors.--
``(1) Establishment.--The Federal home loan banks
shall establish a central board of directors of the
Office to administer the affairs of the Office in
accordance with the provisions of this Act.
``(2) Composition of Board.--Each Federal home loan
bank shall annually select 1 individual who, as of the
time of the election, is an officer or director of such
bank to serve as a member of the central board of
directors of the Office.
``(d) Status.--Except to the extent expressly provided in
this Act, the Office shall be treated as a Federal home loan
bank for purposes of any law.''.
SEC. 164. MANAGEMENT OF BANKS.
(a) Subsections (a) and (b) of section 7 of the Federal Home
Loan Bank Act (12 U.S.C. 1427(a) and (b)) are amended to read
as follows:
``(a) The management of each Federal home loan bank shall be
vested in a board of 15 directors, 9 of whom shall be elected
by the members in accordance with this section, 6 of whom shall
be appointed by the Board referred to in section 2A, and all of
whom shall be citizens of the United States and bona fide
residents of the district in which such bank is located. At
least 2 of the Federal home loan bank directors who are
appointed by the Board shall be representatives chosen from
organizations with more than a 2-year history of representing
consumer or community interests on banking services, credit
needs, housing, or financial consumer protections. No Federal
home loan bank director who is appointed pursuant to this
subsection may, during such bank director's term of office,
serve as an officer of any Federal home loan bank or a director
or officer of any member of a bank, or hold shares, or any
other financial interest in, any member of a bank.
``(b) The elective directors shall be divided into three
classes, designated as classes A, B, and C, as nearly equal in
number as possible. Each directorship shall be filled by a
person who is an officer or director of a member located in
that bank's district. Each class shall represent members of
similar asset size, and the Board shall, to the maximum extent
possible, seek to achieve geographic diversity. The Finance
Board shall establish the minimum and maximum asset size for
each class. Any member shall be entitled to nominate and elect
eligible persons for its class of directorship; such offices
shall be filled from such nominees by a plurality of the votes
which members of each class may cast for nominees in their
corresponding class of directors in an election held for the
purpose of filling such offices. Each member shall be permitted
to cast one vote for each share of Federal home loan bank stock
owned by that member. No person who is an officer or director
of a member that fails to meet any applicable capital
requirement is eligible to hold the office of Federal Home Loan
Bank director. As used in this subsection, the term ``member''
means a member of a Federal home loan bank which was a member
of such Bank as of a record date established by the Bank.''.
(b) Section 7 of the Federal Home Loan Bank Act (12 U.S.C.
1427) is amended--
(1) by striking subsections (c) and (h); and
(2) by redesignating subsections (d), (e), (f), (g),
(i), (j), and (k) as subsections (c), (d), (e), (f),
(g), (h), and (i), respectively.
(c) Subsection (c) of section 7 of the Federal Home Loan Bank
Act (12 U.S.C. 1427(d)) (as so redesignated by subsection (b)
of this section) is amended by striking the 1st and 2d
sentences and inserting the following 2 new sentences: ``The
term of each position of director shall be 3 years. No director
serving for 3 consecutive terms, nor any other officer,
director or that member or any affiliated depository
institution, shall be eligible for another term earlier than 3
years after the expiration of the last expiring of said 3-year
terms. 3 elected directors of different classes as specified by
the Finance Board shall be elected by ballot annually.''.
(d) Subsection (d) of section 7 of the Federal Home Loan Bank
Act (12 U.S.C. 1427(e)) (as so redesignated by subsection (b)
of this section) is amended to read as follows:
``(d) Transition Provision.--In the 1st election after the
date of the enactment of the Financial Services Act of 1998, 3
directors shall be elected in each of the 3 classes of elective
directorship. The Finance Board may, in the 1st election after
such date of enactment, designate the terms of each elected
director in each class, not to exceed 3 years, to assure that,
in each subsequent election, 3 directors from different classes
of elective directorships are elected each year.''.
(e) Subsection (g) of section 7 of the Federal Home Loan Bank
Act (12 U.S.C. 1427(i)) (as so redesignated by subsection (b)
of this section) is amended by striking ``subject to the
approval of the board''.
SEC. 165. ADVANCES TO NONMEMBER BORROWERS.
Section 10b of the Federal Home Loan Bank Act (12 U.S.C.
1430b) is amended--
(1) in subsection (a), by striking ``(a) In
General.--'';
(2) by striking the 4th sentence of subsection (a),
and inserting ``Notwithstanding the preceding sentence,
if an advance is made for the purpose of facilitating
mortgage lending that benefits individuals and families
that meet the income requirements set forth in section
142(d) or 143(f) of the Internal Revenue Code of 1986,
the advance may be collateralized as provided in
section 10(a) of this Act.''; and
(3) by striking subsection (b).
SEC. 166. POWERS AND DUTIES OF BANKS.
(a) Subsection (a) of section 11 of the Federal Home Loan
Bank Act (12 U.S.C. 1431(a)) is amended--
(1) by inserting ``through the Office of Finance''
after ``to issue'';
(2) by striking ``Board'' after ``upon such terms and
conditions as the'' and inserting ``board of directors
of the bank''.
(b) Subsection (b) of section 11 of the Federal Home Loan
Bank Act (12 U.S.C. 1431(b)) is amended to read as follows:
``(b) Issuance of Federal Home Loan Bank Consolidated
Bonds.--
``(1) In general.-- The Office of Finance may issue
consolidated Federal home loan bank bonds and other
consolidated obligations on behalf of the banks.
``(2) Joint and several obligation; terms and
conditions.--Consolidated obligations issued by the
Office of Finance under paragraph (1) shall--
``(A) be the joint and several obligations of
all the Federal home loan banks; and
``(B) shall be issued upon such terms and
conditions as shall be established by the
Office of Finance subject to such rules and
regulations as the Finance Board may
prescribe.''.
(c) Section 11(f) of the Federal Home Loan Bank Act (12
U.S.C. 1430(f) (as designated before the redesignation by
subsection (e) of this section) is amended by striking both
commas immediately following ``permit'' and inserting ``or''.
(d) Subsection (i) of section 11 of the Federal Home Loan
Bank Act (12 U.S.C. 1431(i)) is amended by striking the 2d
undesignated paragraph.
(e) Section 11 of the Federal Home Loan Bank Act (12 U.S.C.
1431) is amended--
(1) by striking subsection (c); and
(2) by redesignating subsections (d) through (k) as
subsections (c) through (j), respectively.
SEC. 167. MERGERS AND CONSOLIDATIONS OF FEDERAL HOME LOAN BANKS.
Section 26 of the Federal Home Loan Bank Act (12 U.S.C. 1446)
is amended by designating the current paragraph as ``(a)'' and
adding the following new sections:
``(b) Nothing in this section shall preclude voluntary
mergers, combinations or consolidation by or among the Federal
home loan banks pursuant to such regulations as the Finance
Board may prescribe.
``(c) Number of Elected Directors of Resulting Bank.--
Subject to section 7 of this Act, any bank resulting from a
merger, combination, or consolidation pursuant to this section
may have a number of elected directors equal to or less than
the total number of elected directors of all the banks which
participated in such transaction (as determined immediately
before such transaction).
``(d) Number of Appointed Directors of Resulting Bank.--The
number of appointed directors of any bank resulting from a
merger, combination, or consolidation pursuant to this section
shall be a number that is three less than the number of elected
directors.
``(e) Adjustment of District Boundaries.--After consummation
of any merger, combination, or consolidation of 2 or more
Federal home loan banks, the Finance Board shall adjust the
districts established in section 3 of this Act to reflect such
merger, combination, or consolidation.''.
SEC. 168. TECHNICAL AMENDMENTS.
(a) Repeal of Sections 22A and 27.--The Federal Home Loan
Bank Act (12 U.S.C. 1421 et seq.) is amended by striking
sections 22A (12 U.S.C. 1442a) and 27 (12 U.S.C. 1447).
(b) Section 12.--
(1) Section 12(a) of the Federal Home Loan Bank Act
(12 U.S.C. 1432(a)) is amended--
(A) by striking ``subject to the approval of
the Board'' immediately following ``transaction
of its business''; and
(B) by striking ``and, by its Board of
directors, to prescribe, amend, and repeal by-
laws, rules, and regulations governing the
manner in which its affairs may be
administered; and the powers granted to it by
law may be exercised and enjoyed subject to the
approval of the Board. The president of a
Federal Home Loan Bank may also be a member of
the Board of directors thereof, but no other
officer, employee, attorney, or agent of such
bank,'' and inserting ``and, by the board of
directors of the bank, to prescribe, amend, and
repeal by-laws governing the manner in which
its affairs may be administered, consistent
with applicable statute and regulation, as
administered by the Finance Board. No officer,
employee, attorney, or agent of a Federal home
loan bank''.
(2) Section 12 of the Federal Home Loan Bank Act (12
U.S.C. 1432) is amended by inserting after subsection
(b) the following new subsection:
``(c) Prohibition on Excessive Compensation.--
``(1) In general.--The Finance Board shall prohibit
the Federal home loan banks from providing compensation
to any officer, director, or employee that is not
reasonable and comparable with the compensation for
employment in other similar businesses involving
similar duties and responsibilities. However, the
Finance Board may not prescribe or set a specific level
or range of compensation for any officer, director, or
employee.
``(2) Regulations.--The Finance Board, by regulation,
may provide for the requirements of paragraph (1) to be
phased-in over a period not to exceed 3 years.
``(3) Exception for existing contracts.--Paragraph
(1) shall not apply to any contract entered into before
June 1, 1997.''.
(c) Powers and Duties of Federal Housing Finance Board.--
(1) Subsection (a)(1) of section 2B of the Federal
Home Loan Bank Act (12 U.S.C. 1422b(a)(1)) is amended
by striking the period at the end of the sentence and
inserting ``; and to have the same powers, rights, and
duties to enforce this Act with respect to the Federal
home loan banks and the senior officers and directors
of such banks as the Office of Federal Housing
Enterprise Oversight has over the Federal housing
enterprises and the senior officers and directors of
such enterprises under the Federal Housing Enterprises
Financial Safety and Soundness Act of 1992.''.
(2) Subsection (b) of section 2B of the Federal Home
Loan Bank Act (12 U.S.C. 1422b(b)) is amended--
(A) by striking ``(1) Board staff.--'';
(B) by striking ``function to any employee,
administrative unit'' and inserting ``function
to any employee or administrative unit'';
(C) by striking the 2d sentence in paragraph
(1); and
(D) by striking paragraph (2).
(3) Section 111 of Public Law 93-495 (12 U.S.C. 250)
is amended by striking ``Federal Home Loan Bank Board''
and inserting ``Federal Housing Finance Board''.
(d) Eligibility to Secure Advances.--
(1) Section 9.--Section 9 of the Federal Home Loan
Bank Act (12 U.S.C. 1429) is amended--
(A) in the second sentence, by striking
``with the approval of the Board''; and
(B) in the third sentence, by striking ``,
subject to the approval of the Board,''.
(2) Section 10.--
(A) Subsection (a) of section 10 of the
Federal Home Loan Bank Act (12 U.S.C. 1430(a))
is amended in paragraph (3), by striking
``Deposits'' and inserting ``Cash or
deposits''.
(B) Subsection (c) of section 10 of the
Federal Home Loan Bank Act (12 U.S.C. 1430(c))
is amended--
(i) in the 1st sentence by striking
``Board'' and inserting ``Federal home
loan bank''; and
(ii) by striking the 2d sentence.
(C) Subsection (d) of section 10 of the
Federal Home Loan Bank Act (12 U.S.C. 1430(d))
is amended--
(i) in the 1st sentence, by striking
``and the approval of the Board'';
(ii) in the last sentence, by
striking ``Subject to the approval of
the Board, any'' and inserting ``Any''.
(D) Section 10(j) of the Federal Home Loan
Bank Act (12 U.S.C. 1430(j)) is amended--
(i) in the 1st sentence of paragraph
(1) by striking ``to subsidize the
interest rate on advances'' and
inserting ``to provide subsidies,
including subsidized interest rates on
advances'';
(ii) in paragraphs (2), (3), (4),
(5), (9), (11), and (12) by striking
``advances'' and ``subsidized
advances'' each place such terms appear
and inserting ``subsidies, including
subsidized advances'';
(iii) in paragraph (1), by inserting
``(A)'' before the 1st sentence, and
inserting the following at the end of
the paragraph:
``(B) Subject to such regulations as the
Finance Board may prescribe, the board of
directors of each Federal home loan bank may
approve or disapprove requests from members for
Affordable Housing Program subsidies, and may
not delegate such authority.'';
(iv) in paragraph (2), by striking
subparagraph (B) and inserting the
following new subparagraph:
``(B) finance the purchase, construction or
rehabilitation of rental housing if, for a
period of at least 15 years, either 20 percent
or more of the units in such housing are
occupied by and affordable for households whose
income is 50 percent or less of area median
income (as determined by the Secretary of
Housing and Urban Development, and as adjusted
for family size); or 40 percent or more of the
units in such housing are occupied by and
affordable for households whose income is 60
percent or less of area median income (as
determined by the Secretary of Housing and
Urban Development, and as adjusted for family
size).'';
(v) in paragraph (5)--
(I) by striking the colon
after ``Affordable Housing
Program'';
(II) by striking
subparagraphs (A) and (B); and
(III) by striking ``(C) In
1995, and subsequent years,'';
(vi) in paragraph (11)--
(I) by inserting ``, pursuant
to a nomination process that is
as broad and as participatory
as possible, and giving
consideration to the size of
the District and the diversity
of low- and moderate-income
housing needs and activities
within the District,'' after
``Advisory Council of 7 to 15
persons'';
(II) by inserting ``a diverse
range of'' before ``community
and nonprofit organizations'';
and
(III) by inserting after the
1st sentence, the following new
sentence: ``Representatives of
no one group shall constitute
an undue proportion of the
membership of the Advisory
Council.''; and
(vii) in paragraph (13), by striking
subparagraph (D) and inserting the
following new subparagraph:
``(D) Affordable.--For purposes of paragraph
(2)(B), the term ``affordable'' means that the
rent with respect to a unit shall not exceed 30
percent of the income limitation under
paragraph (2)(B) applicable to occupants of
such unit.''.
(e) Section 16.--Subsection (a) of section 16 of the Federal
Home Loan Bank Act (12 U.S.C. 1436) is amended in the 3d
sentence by striking ``net earnings'' and inserting
``previously retained earnings or current net earnings''; by
striking ``, and then only with the approval of the Federal
Housing Finance Board''; and by striking the 4th sentence.
(f) Section 18.--Subsection (b) of section 18 of the Federal
Home Loan Bank Act (12 U.S.C. 1438) is amended by striking
paragraph (4).
(g) Section 11.--Section 11 of the Federal Home Loan Bank Act
(12 U.S.C. 1431) is amended by inserting after subsection (j)
(as so redesignated by section 166(e) of this subtitle) the
following subsection:
``(k) Prohibition on Other Activities.--
``(1) A Federal home loan bank may not engage in any
activity other than the activities authorized under
this Act and activities incidental to such authorized
activities.
``(2) All activities specified in paragraph (1) are
subject to Finance Board approval.''.
SEC. 169. DEFINITIONS.
Paragraph (3) of section 2 of the Federal Home Loan Bank Act
(12 U.S.C. 1422(3)) is amended to read as follows:
``(3) The term ``State'' in addition to the states of
the United States, includes the District of Columbia,
Guam, Puerto Rico, the United States Virgin Islands,
American Samoa, and the Commonwealth of the Northern
Mariana Islands.''
SEC. 170. RESOLUTION FUNDING CORPORATION
(a) In General.--Section 21B(f)(2)(C) of the Federal Home
Loan Bank Act (12 U.S.C. 1441b(f)(2)(C)) is amended to read as
follows:
``(C) Payments by federal home loan banks.--
To the extent the amounts available pursuant to
subparagraphs (A) and (B) are insufficient to
cover the amount of interest payments, each
Federal home loan bank shall pay to the Funding
Corporation each calendar year 20.75 percent of
the net earnings of such bank (after deducting
expenses relating to subsection (j) of section
10 and operating expenses).''.
(b) Effective Date.--The amendment made by subsection (a)
shall take effect on January 1, 1999.
SEC. 171. CAPITAL STRUCTURE OF THE FEDERAL HOME LOAN BANKS.
(a) In General.--Section 6 of the Federal Home Loan Bank Act
(12 U.S.C. 1426) is amended to read as follows:
``SEC. 6. CAPITAL STRUCTURE OF FEDERAL HOME LOAN BANKS.
``(a) Capital Structure Plan.--On or before January 1, 1999,
the board of directors of each Federal home loan bank shall
submit for Finance Board approval a plan establishing and
implementing a capital structure for such bank which--
``(1) the board of directors determines is the best
suited for the condition and operation of the bank and
the interests of the shareholders of the bank;
``(2) meets the requirements of subsection (b); and
``(3) meets the minimum capital standards and
requirements established under subsection (c) and any
regulations prescribed by the Finance Board pursuant to
such subsection.
``(b) Contents of Plan.--The capital structure plan of each
Federal home loan bank shall meet the following requirements:
``(1) Stock purchase requirements.--
``(A) In general.--Each capital structure
plan of a Federal home loan bank shall require
the shareholders of the bank to maintain an
investment in the stock of the bank in amount
not less than--
``(i) a minimum percentage of the
total assets of the shareholder; and
``(ii) a minimum percentage of the
outstanding advances from the bank to
the shareholder.
``(B) Minimum percentage levels.--The minimum
percentages established pursuant to
subparagraph (A) shall be set at levels
sufficient to meet the bank's minimum capital
requirements established by the Finance Board
under subsection (c).
``(C) Maximum asset based capital
requirement.--The asset-based capital
requirement applicable to any shareholder of a
Federal home loan bank in any year shall not
exceed the lesser of--
``(i) 0.6 percent of a shareholder's
total assets at the close of the
preceding year; or
``(ii) $300,000,000.
``(D) Maximum advance-based requirement.--The
advance-based capital requirement applicable to
any shareholder of a Federal home loan bank
shall not exceed 6 percent of the total
outstanding advances from the bank to the
shareholder.
``(E) Minimum stock purchase requirement
authorized.--A capital structure plan may
establish a minimum dollar amount of stock of a
Federal home loan bank in which a shareholder
shall be required to invest.
``(2) Adjustments to stock purchase requirements.--
The capital structure plan adopted by each Federal home
loan bank shall impose a continuing obligation on the
board of directors of the bank to review and adjust as
necessary member stock purchase requirements in order
to ensure that the bank remains in compliance with
applicable minimum capital levels established by the
Finance Board.
``(3) Transition rule for stock purchase
requirements.--
``(A) In general.--A capital structure plan
may allow shareholders who were members of a
Federal home loan bank on the date of the
enactment of the Financial Services Act of 1998
to come into compliance with the asset-based
stock purchase requirement established under
paragraph (1) during a transition period
established under the plan of not more than 3
years, if such requirement exceeds the asset-
based stock purchase requirement in effect on
such date of enactment.
``(B) Interim purchase requirements.--A
capital structure plan may establish interim
asset-based stock purchase requirements
applicable to members referred to in
subparagraph (A) during a transition period
established under subparagraph (A).
``(4) Classes of stock.--
``(A) In general.--Each capital structure
plan shall afford each shareholder of a Federal
home loan bank the option of meeting the
shareholder's stock purchase requirements
through the purchase of any combination of
Class A or Class B stock.
``(B) Class a stock.--Class A stock shall be
stock of a Federal home loan bank that shall be
redeemed in cash and at par by the bank no
later than 12 months following submission of a
written notice by a shareholder of the
shareholder's intention to divest all shares of
stock in the bank.
``(C) Class b stock.--Class B stock shall be
stock of a Federal home loan bank that shall be
redeemed in cash and at par by the bank no
later than 5 years following submission of a
written notice by a shareholder of the
shareholder's intention to divest all shares of
stock in the bank.
``(D) Rights requirement.--The Class B stock
of a Federal home loan bank may receive a
dividend premium over that paid on Class A
stock, and may have preferential voting rights
in the election of Federal home loan bank
directors.
``(E) Lower stock purchase requirements for
class b stock.--A capital structure plan may
provide for lower stock purchase requirements
with respect to those shareholder's that elect
to purchase Class B stock in a manner that is
consistent with meeting the bank's own minimum
capital requirements as established by the
Finance Board.
``(F) No other classes of stock permitted.--
No class of stock other than the Class A and
Class B stock described in subparagraphs (B)
and (C) may be issued by a Federal home loan
bank.
``(5) Limited transferability of stock.--Each capital
structure plan shall provide that any equity securities
issued by the bank shall be available only to, held
only by, and tradable only among shareholders of the
bank.
``(c) Capital Standards.--
``(1) In general.--The Finance Board shall prescribe,
by regulation, uniform capital standards applicable to
each Federal home loan bank which shall include--
``(A) a leverage limit in accordance with
paragraph (2); and
``(B) a risk-based capital requirement in
accordance with paragraph (3).
``(2) Minimum leverage limit.--The leverage limit
established by the Finance Board shall require each
Federal home loan bank to maintain total capital in an
amount not less than 5 percent of the total assets of
the bank. In determining compliance with the minimum
leverage ratio, the amount of retained earnings and the
paid-in value of Class B stock, if any, shall be
multiplied by 1.5 and such higher amount shall be
deemed to be capital for purposes of meeting the 5
percent minimum leverage ratio.
``(3) Risk-based capital standard.--The risk-based
capital requirement shall be composed of the following
components:
``(A) Capital sufficient to meet the credit
risk to which a Federal home loan bank is
subject, based on an amount which is not less
than the amount of tier 1, risk-based capital
required by regulations prescribed, or
guidelines issued under section 38 of the
Federal Deposit Insurance Act for a well
capitalized insured depository institution.
``(B) Capital sufficient to meet the interest
rate risk to which a Federal home loan bank is
subject, based on an interest rate stress test
applied by the Finance Board that rigorously
tests for changes in interest rates, rate
volatility, and changes in the shape of the
yield curve.
``(d) Redemption of Capital.--
``(1) In general.--Any shareholder of a Federal home
loan bank shall have the right to withdraw the
shareholder's membership from a Federal home loan bank
and to redeem the shareholder's stock in accordance
with the redemption rights associated with the class of
stock the shareholder holds, if--
``(A) such shareholder has filed a written
notice of an intention to redeem all such
shares; and
``(B) the shareholder has no outstanding
advances from any Federal home loan bank at the
time of such redemption.
``(2) Partial redemption.--A shareholder who files
notice of intention to redeem all shares of stock in a
Federal home loan bank may redeem not more than 1/2 of
all such shares, in cash and at par, 6 months before
the date by which the bank is required to redeem such
stock pursuant to subparagraph (B) or (C) of subsection
(b)(4).
``(3) Divestiture.--The board of directors of any
Federal home loan bank may, after a hearing, order the
divestiture by any shareholder of all ownership
interests of such shareholder in the bank, if--
``(A) in the opinion of the board of
directors, such shareholder has failed to
comply with a provision of this Act or any
regulation prescribed under this Act; or
``(B) the shareholder has been determined to
be insolvent, or otherwise subject to the
appointment of a conservator, receiver, or
other legal custodian, by a State or Federal
authority with regulatory and supervisory
responsibility for such shareholder.
``(4) Retirement of excess stock.--Any shareholder
may--
``(A) retire shares of Class A stock or, at
the option of the shareholder, shares of Class
B stock, or any combination of Class A and
Class B stock, that are excess to the minimum
stock purchase requirements applicable to the
shareholder; and
``(B) receive from the Federal home loan bank
a prompt payment in cash equal to the par value
of such stock.
``(5) Impairment of capital.--If the Finance Board or
the board of directors of a Federal home loan bank
determines that the paid-in capital of the bank is, or
is likely to be, impaired as a result of losses in or
depreciation of the assets of the bank, the Federal
home loan bank shall withhold that portion of the
amount due any shareholder with respect to any
redemption or retirement of any class of stock which
bears the same ratio to the total of such amount as the
amount of the impaired capital bears to the total
amount of capital allocable to such class of stock.
``(6) Policies.--Subject to the requirements of this
section, the board of directors of each Federal home
loan bank shall promptly establish policies, consistent
with this Act, governing the capital stock of such bank
and other provisions of this section.''.
SEC. 172. INVESTMENTS.
Subsection (j) of section 11 of the Federal Home Loan Bank
Act (12 U.S.C. 1431) (as so redesignated by section 166(e) of
this subtitle) is amended to read as follows:
``(j) Investments.--Each bank shall reduce its investments to
those necessary for liquidity purposes, for safe and sound
operation of the banks, or for housing finance, as administered
by the Finance Board.''.
SEC. 173. FEDERAL HOUSING FINANCE BOARD.
Section 2A(b)(1) of the Federal Home Loan Bank Act (12 U.S.C.
1422(b)(1)) is amended--
(1) by redesignating subparagraphs (A) and (B) as
subparagraphs (B) and (C), respectively;
(2) by inserting before subparagraph (B) (as so
redesignated by paragraph (1) of this section) the
following new subparagraph:
``(A) The Secretary of the Treasury (or the
Secretary of the Treasury's designee), who
shall serve without additional compensation.'';
and
(3) in subparagraph (C) (as so redesignated by
paragraph (1) of this section) by striking ``Four'' and
inserting ``3''.
Subtitle H--Direct Activities of Banks
SEC. 181. AUTHORITY OF NATIONAL BANKS TO UNDERWRITE CERTAIN MUNICIPAL
BONDS
The paragraph designated the Seventh of section 5136 of the
Revised Statutes of the United States (12 U.S.C. 24(7)) is
amended by adding at the end the following new sentence: ``In
addition to the provisions in this paragraph for dealing in,
underwriting or purchasing securities, the limitations and
restrictions contained in this paragraph as to dealing in,
underwriting, and purchasing investment securities for the
national bank's own account shall not apply to obligations
(including limited obligation bonds, revenue bonds, and
obligations that satisfy the requirements of section 142(b)(1)
of the Internal Revenue Code of 1986) issued by or on behalf of
any state or political subdivision of a state, including any
municipal corporate instrumentality of 1 or more states, or any
public agency or authority of any state or political
subdivision of a state, if the national banking association is
well capitalized (as defined in section 38 of the Federal
Deposit Insurance Act).''.
Subtitle I--Effective Date of Title
SEC. 191. EFFECTIVE DATE.
Except with regard to any subtitle or other provision of this
title for which a specific effective date is provided, this
title and the amendments made by this title shall take effect
at the end of the 270-day period beginning on the date of the
enactment of this Act.
TITLE II--FUNCTIONAL REGULATION
Subtitle A--Brokers and Dealers
SEC. 201. DEFINITION OF BROKER.
Section 3(a)(4) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)(4)) is amended to read as follows:
``(4) Broker.--
``(A) In general.--The term `broker' means
any person engaged in the business of effecting
transactions in securities for the account of
others.
``(B) Exception for certain bank
activities.--A bank shall not be considered to
be a broker because the bank engages in any of
the following activities under the conditions
described:
``(i) Third party brokerage
arrangements.--The bank enters into a
contractual or other arrangement with a
broker or dealer registered under this
title under which the broker or dealer
offers brokerage services on or off the
premises of the bank if--
``(I) such broker or dealer
is clearly identified as the
person performing the brokerage
services;
``(II) the broker or dealer
performs brokerage services in
an area that is clearly marked
and, to the extent practicable,
physically separate from the
routine deposit-taking
activities of the bank;
``(III) any materials used by
the bank to advertise or
promote generally the
availability of brokerage
services under the contractual
or other arrangement clearly
indicate that the brokerage
services are being provided by
the broker or dealer and not by
the bank;
``(IV) any materials used by
the bank to advertise or
promote generally the
availability of brokerage
services under the contractual
or other arrangement are in
compliance with the Federal
securities laws before
distribution;
``(V) bank employees (other
than associated persons of a
broker or dealer who are
qualified pursuant to the rules
of a self-regulatory
organization) perform only
clerical or ministerial
functions in connection with
brokerage transactions
including scheduling
appointments with the
associated persons of a broker
or dealer, except that bank
employees may forward customer
funds or securities and may
describe in general terms the
range of investment vehicles
available from the bank and the
broker or dealer under the
contractual or other
arrangement;
``(VI) bank employees do not
directly receive incentive
compensation for any brokerage
transaction unless such
employees are associated
persons of a broker or dealer
and are qualified pursuant to
the rules of a self-regulatory
organization, except that the
bank employees may receive
compensation for the referral
of any customer if the
compensation is a nominal one-
time cash fee of a fixed dollar
amount and the payment of the
fee is not contingent on
whether the referral results in
a transaction;
``(VII) such services are
provided by the broker or
dealer on a basis in which all
customers which receive any
services are fully disclosed to
the broker or dealer;
``(VIII) the bank does not
carry a securities account of
the customer except in a
customary custodian or trustee
capacity; and
``(IX) the bank, broker, or
dealer informs each customer
that the brokerage services are
provided by the broker or
dealer and not by the bank and
that the securities are not
deposits or other obligations
of the bank, are not guaranteed
by the bank, and are not
insured by the Federal Deposit
Insurance Corporation.
``(ii) Trust activities.--The bank--
``(I) effects transactions in
a trustee capacity and is
primarily compensated based on
an annual fee (payable on a
monthly, quarterly, or other
basis) or percentage of assets
under management, or both; or
``(II) 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--
``(aa) is primarily
compensated on the
basis of either an
annual fee (payable on
a monthly, quarterly,
or other basis), a
percentage of assets
under management, or
both, and does not
receive brokerage
commissions or other
similar remuneration
based on effecting
transactions in
securities, other than
the cost incurred by
the bank in connection
with executing
securities transactions
for fiduciary
customers; and
``(bb) does not
publicly solicit
brokerage business,
other than by
advertising that it
effects transactions in
securities in
conjunction with
advertising its other
trust activities.
``(iii) Permissible securities
transactions.--The bank effects
transactions in--
``(I) commercial paper,
bankers acceptances, or
commercial bills;
``(II) exempted securities;
``(III) qualified Canadian
government obligations as
defined in section 5136 of the
Revised Statutes, in conformity
with section 15C of this title
and the rules and regulations
thereunder, or obligations of
the North American Development
Bank; or
``(IV) any standardized,
credit enhanced debt security
issued by a foreign government
pursuant to the March 1989 plan
of then Secretary of the
Treasury Brady, used by such
foreign government to retire
outstanding commercial bank
loans.
``(iv) Certain stock purchase
plans.--
``(I) In general.--The bank
effects transactions, as part
of its transfer agency
activities, in--
``(aa) 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 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 securities
of an issuer as part of
that issuer's dividend
reinvestment plan, if
the bank does not--
``(AA)
solicit
transactions or
provide
investment
advice with
respect to the
purchase or
sale of
securities in
connection with
the plan;
``(BB) net
shareholders'
buy and sell
orders, other
than for
programs for
odd-lot holders
or plans
registered with
the Commission;
or
``(cc) the securities
of an issuer as part of
a plan or program for
the purchase or sale of
that issuer's shares,
if--
``(AA) the
bank does not
solicit
transactions or
provide
investment
advice with
respect to the
purchase or
sale of
securities in
connection with
the plan or
program;
``(BB) the
bank does not
net
shareholders'
buy and sell
orders, other
than for
programs for
odd-lot holders
or plans
registered with
the Commission;
and
``(CC) the
bank's
compensation
for such plan
or program
consists of
administration
fees, or flat
or capped per
order
processing
fees, or both,
plus the cost
incurred by the
bank in
connection with
executing
securities
transactions
resulting from
such plan or
program.
``(II) Permissible delivery
of materials.--The exception to
being considered a broker for a
bank engaged in activities
described in subclause (I) will
not be affected by a bank's
delivery of written or
electronic plan materials to
employees of the issuer,
shareholders of the issuer, or
members of affinity groups of
the issuer, so long as such
materials are--
``(aa) comparable in
scope or nature to that
permitted by the
Commission as of the
date of the enactment
of the Financial
Services Act of 1998;
or
``(bb) otherwise
permitted by the
Commission.
``(v) Sweep accounts.--The bank
effects transactions as part of a
program for the investment or
reinvestment of bank deposit funds into
any no-load, open-end management
investment company registered under the
Investment Company Act of 1940 that
holds itself out as a money market
fund.
``(vi) Affiliate transactions.--The
bank effects transactions for the
account of any affiliate of the bank
(as defined in section 2 of the Bank
Holding Company Act of 1956) other
than--
``(I) a registered broker or
dealer; or
``(II) an affiliate that is
engaged in merchant banking, as
described in section 6(c)(3)(H)
of the Bank Holding company Act
of 1956.
``(vii) Private securities
offerings.--The bank--
``(I) effects sales as part
of a primary offering of
securities not involving a
public offering, pursuant to
section 3(b), 4(2), or 4(6) of
the Securities Act of 1933 or
the rules and regulations
issued thereunder;
``(II) at any time after one
year after the date of
enactment of the Financial
Services Act of 1998, is not
affiliated with a broker or
dealer that has been registered
for more than one year; and
``(III) effects transactions
exclusively with qualified
investors.
``(viii) Safekeeping and custody
activities.--
``(I) In general.--The bank,
as part of customary banking
activities--
``(aa) provides
safekeeping or custody
services with respect
to securities,
including the exercise
of warrants and other
rights on behalf of
customers;
``(bb) facilitates
the transfer of funds
or securities, as a
custodian or a clearing
agency, in connection
with the clearance and
settlement of its
customers' transactions
in securities;
``(cc) effects
securities lending or
borrowing transactions
with or on behalf of
customers as part of
services provided to
customers pursuant to
division (aa) or (bb)
or invests cash
collateral pledged in
connection with such
transactions; or
``(dd) holds
securities pledged by a
customer to another
person or securities
subject to purchase or
resale agreements
involving a customer,
or facilitates the
pledging or transfer of
such securities by book
entry or as otherwise
provided under
applicable law.
``(II) Exception for carrying
broker activities.--The
exception to being considered a
broker for a bank engaged in
activities described in
subclause (I) shall not apply
if the bank, in connection with
such activities, acts in the
United States as a carrying
broker (as such term, and
different formulations thereof,
are used in section 15(c)(3)
and the rules and regulations
thereunder) for any broker or
dealer, unless such carrying
broker activities are engaged
in with respect to government
securities (as defined in
paragraph (42) of this
subsection).
``(ix) Banking products.--The bank
effects transactions in traditional
banking products, as defined in section
206(a) of the Financial Services Act of
1998.
``(x) De minimis exception.--The bank
effects, other than in transactions
referred to in clauses (i) through
(ix), not more than 500 transactions in
securities in any calendar year, and
such transactions are not effected by
an employee of the bank who is also an
employee of a broker or dealer.
``(C) Broker dealer execution.--The exception
to being considered a broker for a bank engaged
in activities described in clauses (ii), (iv),
and (viii) of subparagraph (B) shall not apply
if the activities described in such provisions
result in the trade in the United States of any
security that is a publicly traded security in
the United States, unless--
``(i) the bank directs such trade to
a registered or broker dealer for
execution;
``(ii) the trade is a cross trade or
other substantially similar trade of a
security that--
``(I) is made by the bank or
between the bank and an
affiliated fiduciary; and
``(II) is not in
contravention of fiduciary
principles established under
applicable Federal or State
law; or
``(iii) the trade is conducted in
some other manner permitted under
rules, regulations, or orders as the
Commission may prescribe or issue.
``(D) No effect of bank exemptions on other
commission authority.--The exception to being
considered a broker for a bank engaged in
activities described in subparagraphs (B) and
(C) shall not affect the commission's authority
under any other provision of this Act or any
other securities law.
``(E) Fiduciary capacity.--For purposes of
subparagraph (B)(ii), the term `fiduciary
capacity' means--
``(i) in the capacity as trustee,
executor, administrator, registrar of
stocks and bonds, transfer agent,
guardian, assignee, receiver, or
custodian under a uniform gift to minor
act, or as an investment adviser if the
bank receives a fee for its investment
advice;
``(ii) in any capacity in which the
bank possesses investment discretion on
behalf of another; or
``(iii) in any other similar
capacity.
``(F) Exception for entities subject to
section 15(e).--The term `broker' does not
include a bank that--
``(i) was, immediately prior to the
enactment of the Financial Services Act
of 1998, subject to section 15(e); and
``(ii) is subject to such
restrictions and requirements as the
Commission considers appropriate.''.
SEC. 202. DEFINITION OF DEALER.
Section 3(a)(5) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)(5)) is amended to read as follows:
``(5) Dealer.--
``(A) In general.--The term `dealer' means
any person engaged in the business of buying
and selling securities for such person's own
account through a broker or otherwise.
``(B) Exception for person not engaged in the
business of dealing.--The term `dealer' does
not include a person that buys or sells
securities for such person's own account,
either individually or in a fiduciary capacity,
but not as a part of a regular business.
``(C) Exception for certain bank
activities.--A bank shall not be considered to
be a dealer because the bank engages in any of
the following activities under the conditions
described:
``(i) Permissible securities
transactions.--The bank buys or sells--
``(I) commercial paper,
bankers acceptances, or
commercial bills;
``(II) exempted securities;
``(III) qualified Canadian
government obligations as
defined in section 5136 of the
Revised Statutes of the United
States, in conformity with
section 15C of this title and
the rules and regulations
thereunder, or obligations of
the North American Development
Bank; or
``(IV) any standardized,
credit enhanced debt security
issued by a foreign government
pursuant to the March 1989 plan
of then Secretary of the
Treasury Brady, used by such
foreign government to retire
outstanding commercial bank
loans.
``(ii) Investment, trustee, and
fiduciary transactions.--The bank buys
or sells securities for investment
purposes--
``(I) for the bank; or
``(II) for accounts for which
the bank acts as a trustee or
fiduciary.
``(iii) Asset-backed transactions.--
The bank engages in the issuance or
sale to qualified investors, through a
grantor trust or otherwise, of
securities backed by or representing an
interest in notes, drafts, acceptances,
loans, leases, receivables, other
obligations, or pools of any such
obligations predominantly originated by
the bank, or a syndicate of banks of
which the bank is a member, or an
affiliate of any such bank other than a
broker or dealer.
``(iv) Banking products.--The bank
buys or sells traditional banking
products, as defined in section 206(a)
of the Financial Services Act of 1998.
``(v) Derivative instruments.--The
bank issues, buys, or sells any
derivative instrument to which the bank
is a party--
``(I) to or from a
corporation, limited liability
company, or partnership that
owns and invests on a
discretionary basis, not less
than $10,000,000 in
investments, or to or from a
qualified investor, except that
if the instrument provides for
the delivery of one or more
securities (other than a
derivative instrument or
government security), the
transaction shall be effected
with or through a registered
broker or dealer; or
``(II) to or from other
persons, except that if the
derivative instrument provides
for the delivery of one or more
securities (other than a
derivative instrument or
government security), or is a
security (other than a
government security), the
transaction shall be effected
with or through a registered
broker or dealer; or
``(III) to or from any person
if the instrument is neither a
security nor provides for the
delivery of one or more
securities (other than a
derivative instrument).''.
SEC. 203. REGISTRATION FOR SALES OF PRIVATE SECURITIES OFFERINGS.
Section 15A of the Securities Exchange Act of 1934 (15 U.S.C.
78o-3) is amended by inserting after subsection (i) the
following new subsection:
``(j) Registration for Sales of Private Securities
Offerings.--A registered securities association shall create a
limited qualification category for any associated person of a
member who effects sales as part of a primary offering of
securities not involving a public offering, pursuant to section
3(b), 4(2), or 4(6) of the Securities Act of 1933 and the rules
and regulations thereunder, and shall deem qualified in such
limited qualification category, without testing, any bank
employee who, in the six month period preceding the date of
enactment of this Act, engaged in effecting such sales.''.
SEC. 204. SALES PRACTICES AND COMPLAINT PROCEDURES.
Section 18 of the Federal Deposit Insurance Act is amended by
adding at the end the following new subsection:
``(s) Sales Practices and Complaint Procedures With Respect
to Bank Securities Activities.--
``(1) Regulations Required.--Each Federal banking
agency shall prescribe and publish in final form, not
later than 6 months after the date of enactment of the
Financial Services Act of 1998, regulations which apply
to retail transactions, solicitations, advertising, or
offers of any security by any insured depository
institution or any affiliate thereof other than a
registered broker or dealer or an individual acting on
behalf of such a broker or dealer who is an associated
person of such broker or dealer. Such regulations shall
include--
``(A) requirements that sales practices
comply with just and equitable principles of
trade that are substantially similar to the
Rules of Fair Practice of the National
Association of Securities Dealers; and
``(B) requirements prohibiting (i)
conditioning an extension of credit on the
purchase or sale of a security; and (ii) any
conduct leading a customer to believe that an
extension of credit is conditioned upon the
purchase or sale of a security.
``(2) Procedures required.--The appropriate Federal
banking agencies shall jointly establish procedures and
facilities for receiving and expeditiously processing
complaints against any bank or employee of a bank
arising in connection with the purchase or sale of a
security by a customer, including a complaint alleging
a violation of the regulations prescribed under
paragraph (1), but excluding a complaint involving an
individual acting on behalf of such a broker or dealer
who is an associated person of such broker or dealer.
The use of any such procedures and facilities by such a
customer shall be at the election of the customer. Such
procedures shall include provisions to refer a
complaint alleging fraud to the Securities and Exchange
Commission and appropriate State securities
commissions.
``(3) Required actions.--The actions required by the
Federal banking agencies under paragraph (2) shall
include the following:
``(A) establishing a group, unit, or bureau
within each such agency to receive such
complaints;
``(B) developing and establishing procedures
for investigating, and permitting customers to
investigate, such complaints;
``(C) developing and establishing procedures
for informing customers of the rights they may
have in connection with such complaints;
``(D) developing and establishing procedures
that allow customers a period of at least 6
years to make complaints and that do not
require customers to pay the costs of the
proceeding; and
``(E) developing and establishing procedures
for resolving such complaints, including
procedures for the recovery of losses to the
extent appropriate.
``(4) Consultation and joint regulations.--The
Federal banking agencies shall consult with each other
and prescribe joint regulations pursuant to paragraphs
(1) and (2), after consultation with the Securities and
Exchange Commission.
``(5) Procedures in addition to other remedies.--The
procedures and remedies provided under this subsection
shall be in addition to, and not in lieu of, any other
remedies available under law.
``(6) Definition.--As used in this subsection--
``(A) the term `security' has the meaning
provided in section 3(a)(10) of the Securities
Exchange Act of 1934;
``(B) the term `registered broker or dealer'
has the meaning provided in section 3(a)(48) of
such Act; and
``(C) the term `associated person' has the
meaning provided in section 3(a)(18) of such
Act.''.
SEC. 205. INFORMATION SHARING.
Section 18 of the Federal Deposit Insurance Act is amended by
adding at the end the following new subsection:
``(t) Recordkeeping Requirements.--
``(1) Requirements.--Each appropriate Federal banking
agency, after consultation with and consideration of
the views of the Commission, shall establish
recordkeeping requirements for banks relying on
exceptions contained in paragraphs (4) and (5) of
section 3(a) of the Securities Exchange Act of 1934.
Such recordkeeping requirements shall be sufficient to
demonstrate compliance with the terms of such
exceptions and be designed to facilitate compliance
with such exceptions. Each appropriate Federal banking
agency shall make any such information available to the
Commission upon request.
``(2) Definitions.--As used in this subsection the
term `Commission' means the Securities and Exchange
Commission.''.
SEC. 206. DEFINITION AND TREATMENT OF BANKING PRODUCTS.
(a) Definition of Traditional Banking Product.--
(1) In general.--For purposes of paragraphs (4) and
(5) of section 3(a) of the Securities Exchange Act of
1934 (15 U.S.C. 78c(a)(4), (5)), the term `traditional
banking product' means--
(A) a deposit account, savings account,
certificate of deposit, or other deposit
instrument issued by a bank;
(B) a banker's acceptance;
(C) a letter of credit issued or loan made by
a bank;
(D) a debit account at a bank arising from a
credit card or similar arrangement;
(E) a participation in a loan which the bank
or an affiliate of the bank (other than a
broker or dealer) funds, participates in, or
owns that is sold--
(i) to qualified investors; or
(ii) to other persons that--
``(I) have the opportunity to
review and assess any material
information, including
information regarding the
borrower's creditworthiness;
and
``(II) based on such factors
as financial sophistication,
net worth, and knowledge and
experience in financial
matters, have the capability to
evaluate the information
available, as determined under
generally applicable banking
standards or guidelines; or
(F) any derivative instrument, whether or not
individually negotiated, involving or relating
to--
(i) foreign currencies, except
options on foreign currencies that
trade on a national securities
exchange;
(ii) interest rates, except interest
rate derivative instruments (I) that
are based on a security; or (II) that
provide for the delivery of one or more
securities; or
(iii) commodities, other rates,
indices, or other assets, except
derivative instruments that are
securities or that provide for the
delivery of one or more securities.
(2) Classification limited.--Classification of a
particular product as a traditional banking product
pursuant to this subsection shall not be construed as
finding or implying that such product is or is not a
security for any purpose under the securities laws, or
is or is not an account, agreement, contract, or
transaction for any purpose under the Commodity
Exchange Act.
(3) Definitions.--For purposes of this subsection--
(A) the term ``bank'' has the meaning
provided in section 3(a)(6) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a)(6));
(B) the term ``qualified investor'' has the
meaning provided in section 3(a)(55) of such
Act; and
(C) the term ``Federal banking agency'' has
the meaning provided in section 3(z) of the
Federal Deposit Insurance Act (12 U.S.C.
1813(z)).
(b) Treatment of New Banking Products for Purposes of Broker/
Dealer Requirements.--Section 15 of the Securities Exchange Act
of 1934 (15 U.S.C. 78o) is amended by adding at the end the
following new subsection:
``(i) Rulemaking to Extend Requirements to New Banking
Products.--
``(1) Limitation.--The Commission shall not--
``(A) require a bank to register as a broker
or dealer under this section because the bank
engages in any transaction in, or buys or
sells, a new banking product; or
``(B) bring an action against a bank for a
failure to comply with a requirement described
in subparagraph (A);
unless the Commission has imposed such requirement by
rule or regulation issued in accordance with this
section.
``(2) Criteria for rulemaking.--The Commission shall
not impose a requirement under paragraph (1) of this
subsection with respect to any new banking product
unless the Commission determines that--
``(A) the new banking product is a security;
and
``(B) imposing such requirement is necessary
or appropriate in the public interest and for
the protection of investors, consistent with
the requirements of section 3(f).
``(3) New banking product.--For purposes of this
subsection, the term `new banking product' means a
product that--
``(A) was not subjected to regulation by the
Commission as a security prior to the date of
enactment of this subsection; and
``(B) is not a traditional banking product,
as such term is defined in section 206(a) of
the Financial Services Act of 1998.
``(4) Consultation.--In promulgating rules under this
subsection, the Commission shall consult with and
consider the views of the appropriate regulatory
agencies concerning the proposed rule and the impact on
the banking industry.''.
SEC. 207. DERIVATIVE INSTRUMENT AND QUALIFIED INVESTOR DEFINED.
Section 3(a) of the Securities Exchange Act of 1934 is
amended by adding at the end the following new paragraphs:
``(54) Derivative instrument.--
``(A) Definition.--The term `derivative
instrument' means any individually negotiated
contract, agreement, warrant, note, or option
that is based, in whole or in part, on the
value of, any interest in, or any quantitative
measure or the occurrence of any event relating
to, one or more commodities, securities,
currencies, interest or other rates, indices,
or other assets, but does not include a
traditional banking product, as defined in
section 206(a) of the Financial Services Act of
1998.
``(B) Classification limited.--Classification
of a particular contract as a derivative
instrument pursuant to this paragraph shall not
be construed as finding or implying that such
instrument is or is not a security for any
purpose under the securities laws, or is or is
not an account, agreement, contract, or
transaction for any purpose under the Commodity
Exchange Act.
``(55) Qualified investor.--
``(A) Definition.--For purposes of this title
and section 206(a)(1)(E) of the Financial
Services Act of 1998, the term `qualified
investor' means--
``(i) any investment company
registered with the Commission under
section 8 of the Investment Company Act
of 1940;
``(ii) any issuer eligible for an
exclusion from the definition of
investment company pursuant to section
3(c)(7) of the Investment Company Act
of 1940;
``(iii) any bank (as defined in
paragraph (6) of this subsection),
savings and loan association (as
defined in section 3(b) of the Federal
Deposit Insurance Act), broker, dealer,
insurance company (as defined in
section 2(a)(13) of the Securities Act
of 1933), or business development
company (as defined in section 2(a)(48)
of the Investment Company Act of 1940);
``(iv) any small business investment
company licensed by the United States
Small Business Administration under
section 301(c) or (d) of the Small
Business Investment Act of 1958;
``(v) any State sponsored employee
benefit plan, or any other employee
benefit plan, within the meaning of the
Employee Retirement Income Security Act
of 1974, other than an individual
retirement account, if the investment
decisions are made by a plan fiduciary,
as defined in section 3(21) of that
Act, which is either a bank, savings
and loan association, insurance
company, or registered investment
adviser;
``(vi) any trust whose purchases of
securities are directed by a person
described in clauses (i) through (v) of
this subparagraph;
``(vii) any market intermediary
exempt under section 3(c)(2) of the
Investment Company Act of 1940;
``(viii) any associated person of a
broker or dealer other than a natural
person; or
``(ix) any foreign bank (as defined
in section 1(b)(7) of the International
Banking Act of 1978).
``(B) Additional qualifications defined.--For
purposes of paragraphs (4)(B)(vii) and
(5)(C)(iii) of this subsection, and section
206(a)(1)(E) of the Financial Services Act of
1998, the term `qualified investor' also
means--
``(i) any corporation, company, or
partnership that owns and invests on a
discretionary basis, not less than
$10,000,000 in investments;
``(ii) any natural person who owns
and invests on a discretionary basis,
not less than $10,000,000 in
investments;
``(iii) any government or political
subdivision, agency, or instrumentality
of a government who owns and invests on
a discretionary basis not less than
$50,000,000 in investments; or
``(iv) any multinational or
supranational entity or any agency or
instrumentality thereof.
``(C) Additional authority.--The Commission
may, by rule or order, define a `qualified
investor' as any other person, other than a
natural person, taking into consideration such
factors as the person's financial
sophistication, net worth, and knowledge and
experience in financial matters.''.
SEC. 208. GOVERNMENT SECURITIES DEFINED.
Section 3(a)(42) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)(42)) is amended--
(1) by striking ``or'' at the end of subparagraph
(C);
(2) by striking the period at the end of subparagraph
(D) and inserting ``; or''; and
(3) by adding at the end the following new
subparagraph:
``(E) for purposes of section 15C as applied
to a bank, a qualified Canadian government
obligation as defined in section 5136 of the
Revised Statutes.''.
SEC. 209. EFFECTIVE DATE.
This subtitle shall take effect at the end of the 270-day
period beginning on the date of the enactment of this Act.
Subtitle B--Bank Investment Company Activities
SEC. 211. CUSTODY OF INVESTMENT COMPANY ASSETS BY AFFILIATED BANK.
(a) Management Companies.--Section 17(f) of the Investment
Company Act of 1940 (15 U.S.C. 80a-17(f)) is amended--
(1) by redesignating paragraphs (1), (2), and (3) as
subparagraphs (A), (B), and (C), respectively;
(2) by striking ``(f) Every registered'' and
inserting the following:
``(f) Custody of Securities.--
``(1) Every registered'';
(3) by redesignating the 2d, 3d, 4th, and 5th
sentences of such subsection as paragraphs (2) through
(5), respectively, and indenting the left margin of
such paragraphs appropriately; and
(4) by adding at the end the following new paragraph:
``(6) The Commission may adopt rules and regulations,
and issue orders, consistent with the protection of
investors, prescribing the conditions under which a
bank, or an affiliated person of a bank, either of
which is an affiliated person, promoter, organizer, or
sponsor of, or principal underwriter for, a registered
management company may serve as custodian of that
registered management company.''.
(b) Unit Investment Trusts.--Section 26 of the Investment
Company Act of 1940 (15 U.S.C. 80a-26) is amended--
(1) by redesignating subsections (b) through (e) as
subsections (c) through (f), respectively; and
(2) by inserting after subsection (a) the following
new subsection:
``(b) The Commission may adopt rules and regulations, and
issue orders, consistent with the protection of investors,
prescribing the conditions under which a bank, or an affiliated
person of a bank, either of which is an affiliated person of a
principal underwriter for, or depositor of, a registered unit
investment trust, may serve as trustee or custodian under
subsection (a)(1).''.
(c) Fiduciary Duty of Custodian.--Section 36(a) of the
Investment Company Act of 1940 (15 U.S.C. 80a-35(a)) is
amended--
(1) in paragraph (1), by striking ``or'' at the end;
(2) in paragraph (2), by striking the period at the
end and inserting ``; or''; and
(3) by inserting after paragraph (2) the following:
``(3) as custodian.''.
SEC. 212. LENDING TO AN AFFILIATED INVESTMENT COMPANY.
Section 17(a) of the Investment Company Act of 1940 (15
U.S.C. 80a-17(a)) is amended--
(1) by striking ``or'' at the end of paragraph (2);
(2) by striking the period at the end of paragraph
(3) and inserting ``; or''; and
(3) by adding at the end the following new paragraph:
``(4) to loan money or other property to such
registered company, or to any company controlled by
such registered company, in contravention of such
rules, regulations, or orders as the Commission may
prescribe or issue consistent with the protection of
investors.''.
SEC. 213. INDEPENDENT DIRECTORS.
(a) In General.--Section 2(a)(19)(A) of the Investment
Company Act of 1940 (15 U.S.C. 80a-2(a)(19)(A)) is amended--
(1) by striking clause (v) and inserting the
following new clause:
``(v) any person or any affiliated
person of a person (other than a
registered investment company) that, at
any time during the 6-month period
preceding the date of the determination
of whether that person or affiliated
person is an interested person, has
executed any portfolio transactions
for, engaged in any principal
transactions with, or distributed
shares for--
``(I) the investment company,
``(II) any other investment
company having the same
investment adviser as such
investment company or holding
itself out to investors as a
related company for purposes of
investment or investor
services, or
``(III) any account over
which the investment company's
investment adviser has
brokerage placement
discretion,'';
(2) by redesignating clause (vi) as clause (vii); and
(3) by inserting after clause (v) the following new
clause:
``(vi) any person or any affiliated
person of a person (other than a
registered investment company) that, at
any time during the 6-month period
preceding the date of the determination
of whether that person or affiliated
person is an interested person, has
loaned money or other property to--
``(I) the investment company,
``(II) any other investment
company having the same
investment adviser as such
investmentcompany or holding
itself out to investors as a related company for purposes of investment
or investor services, or
``(III) any account for which
the investment company's
investment adviser has
borrowing authority,''.
(b) Conforming Amendment.--Section 2(a)(19)(B) of the
Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(19)(B)) is
amended--
(1) by striking clause (v) and inserting the
following new clause:
``(v) any person or any affiliated
person of a person (other than a
registered investment company) that, at
any time during the 6-month period
preceding the date of the determination
of whether that person or affiliated
person is an interested person, has
executed any portfolio transactions
for, engaged in any principal
transactions with, or distributed
shares for--
``(I) any investment company
for which the investment
adviser or principal
underwriter serves as such,
``(II) any investment company
holding itself out to
investors, for purposes of
investment or investor
services, as a company related
to any investment company for
which the investment adviser or
principal underwriter serves as
such, or
``(III) any account over
which the investment adviser
has brokerage placement
discretion,'';
(2) by redesignating clause (vi) as clause (vii); and
(3) by inserting after clause (v) the following new
clause:
``(vi) any person or any affiliated
person of a person (other than a
registered investment company) that, at
any time during the 6-month period
preceding the date of the determination
of whether that person or affiliated
person is an interested person, has
loaned money or other property to--
``(I) any investment company
for which the investment
adviser or principal
underwriter serves as such,
``(II) any investment company
holding itself out to
investors, for purposes of
investment or investor
services, as a company related
to any investment company for
which the investment adviser or
principal underwriter serves as
such, or
``(III) any account for which
the investment adviser has
borrowing authority,''.
(c) Affiliation of Directors.--Section 10(c) of the
Investment Company Act of 1940 (15 U.S.C. 80a-10(c)) is amended
by striking ``bank, except'' and inserting ``bank (together
with its affiliates and subsidiaries) or any one bank holding
company (together with its affiliates and subsidiaries) (as
such terms are defined in section 2 of the Bank Holding Company
Act of 1956), except''.
(d) Effective Date.--The amendments made by this section
shall take effect at the end of the 1-year period beginning on
the date of enactment of this subtitle.
SEC. 214. ADDITIONAL SEC DISCLOSURE AUTHORITY.
Section 35(a) of the Investment Company Act of 1940 (15
U.S.C. 80a-34(a)) is amended to read as follows:
``(a) Misrepresentation of Guarantees.--
``(1) In general.--It shall be unlawful for any
person, issuing or selling any security of which a
registered investment company is the issuer, to
represent or imply in any manner whatsoever that such
security or company--
``(A) has been guaranteed, sponsored,
recommended, or approved by the United States,
or any agency, instrumentality or officer of
the United States;
``(B) has been insured by the Federal Deposit
Insurance Corporation; or
``(C) is guaranteed by or is otherwise an
obligation of any bank or insured depository
institution.
``(2) Disclosures.--Any person issuing or selling the
securities of a registered investment company that is
advised by, or sold through, a bank shall prominently
disclose that an investment in the company is not
insured by the Federal Deposit Insurance Corporation or
any other government agency. The Commission may adopt
rules and regulations, and issue orders, consistent
with the protection of investors, prescribing the
manner in which the disclosure under this paragraph
shall be provided.
``(3) Definitions.--The terms `insured depository
institution' and `appropriate Federal banking agency'
have the meaning given to such terms in section 3 of
the Federal Deposit Insurance Act.''.
SEC. 215. DEFINITION OF BROKER UNDER THE INVESTMENT COMPANY ACT OF
1940.
Section 2(a)(6) of the Investment Company Act of 1940 (15
U.S.C. 80a-2(a)(6)) is amended to read as follows:
``(6) The term `broker' has the same meaning as in
the Securities Exchange Act of 1934, except that such
term does not include any person solely by reason of
the fact that such person is an underwriter for one or
more investment companies.''.
SEC. 216. DEFINITION OF DEALER UNDER THE INVESTMENT COMPANY ACT OF
1940.
Section 2(a)(11) of the Investment Company Act of 1940 (15
U.S.C. 80a-2(a)(11)) is amended to read as follows:
``(11) The term `dealer' has the same meaning as in
the Securities Exchange Act of 1934, but does not
include an insurance company or investment company.''.
SEC. 217. REMOVAL OF THE EXCLUSION FROM THE DEFINITION OF INVESTMENT
ADVISER FOR BANKS THAT ADVISE INVESTMENT COMPANIES.
(a) Investment Adviser.--Section 202(a)(11) of the Investment
Advisers Act of 1940 (15 U.S.C. 80b-2(a)(11)) is amended in
subparagraph (A), by striking ``investment company'' and
inserting ``investment company, except that the term
`investment adviser' includes any bank or bank holding company
to the extent that such bank or bank holding company serves or
acts as an investment adviser to a registered investment
company, but if, in the case of a bank, such services or
actions are performed through a separately identifiable
department or division, the department or division, and not the
bank itself, shall be deemed to be the investment adviser''.
(b) Separately Identifiable Department or Division.--Section
202(a) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-
2(a)) is amended by adding at the end the following:
``(26) The term `separately identifiable department
or division' of a bank means a unit--
``(A) that is under the direct supervision of
an officer or officers designated by the board
of directors of the bank as responsible for the
day-to-day conduct of the bank's investment
adviser activities for one or more investment
companies, including the supervision of all
bank employees engaged in the performance of
such activities; and
``(B) for which all of the records relating
to its investment adviser activities are
separately maintained in or extractable from
such unit's own facilities or the facilities of
the bank, and such records are so maintained or
otherwise accessible as to permit independent
examination and enforcement by the Commission
of this Act or the Investment Company Act of
1940 and rules and regulations promulgated
under this Act or the Investment Company Act of
1940.''.
SEC. 218. DEFINITION OF BROKER UNDER THE INVESTMENT ADVISERS ACT OF
1940.
Section 202(a)(3) of the Investment Advisers Act of 1940 (15
U.S.C. 80b-2(a)(3)) is amended to read as follows:
``(3) The term `broker' has the same meaning as in
the Securities Exchange Act of 1934.''.
SEC. 219. DEFINITION OF DEALER UNDER THE INVESTMENT ADVISERS ACT OF
1940.
Section 202(a)(7) of the Investment Advisers Act of 1940 (15
U.S.C. 80b-2(a)(7)) is amended to read as follows:
``(7) The term `dealer' has the same meaning as in
the Securities Exchange Act of 1934, but does not
include an insurance company or investment company.''.
SEC. 220. INTERAGENCY CONSULTATION.
The Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.)
is amended by inserting after section 210 the following new
section:
``SEC. 210A. CONSULTATION.
``(a) Examination Results and Other Information.--
``(1) The appropriate Federal banking agency shall
provide the Commission upon request the results of any
examination, reports, records, or other information to
which such agency may have access with respect to the
investment advisory activities--
``(A) of any--
``(i) bank holding company,
``(ii) bank, or
``(iii) separately identifiable
department or division of a bank,
that is registered under section 203 of this
title; and
``(B) in the case of a bank holding company
or bank that has a subsidiary or a separately
identifiable department or division registered
under that section, of such bank or bank
holding company.
``(2) The Commission shall provide to the appropriate
Federal banking agency upon request the results of any
examination, reports, records, or other information
with respect to the investment advisory activities of
any bank holding company, bank, or separately
identifiable department or division of a bank, any of
which is registered under section 203 of this title.
``(b) Effect on Other Authority.--Nothing in this section
shall limit in any respect the authority of the appropriate
Federal banking agency with respect to such bank holding
company, bank, or department or division under any provision of
law.
``(c) Definition.--For purposes of this section, the term
`appropriate Federal banking agency' shall have the same
meaning as in section 3 of the Federal Deposit Insurance
Act.''.
SEC. 221. TREATMENT OF BANK COMMON TRUST FUNDS.
(a) Securities Act of 1933.--Section 3(a)(2) of the
Securities Act of 1933 (15 U.S.C. 77c(a)(2)) is amended by
striking ``or any interest or participation in any common trust
fund or similar fund maintained by a bank exclusively for the
collective investment and reinvestment of assets contributed
thereto by such bank in its capacity as trustee, executor,
administrator, or guardian'' and inserting ``or any interest or
participation in any common trust fund or similar fund that is
excluded from the definition of the term `investment company'
under section 3(c)(3) of the Investment Company Act of 1940''.
(b) Securities Exchange Act of 1934.--Section
3(a)(12)(A)(iii) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)(12)(A)(iii)) is amended to read as follows:
``(iii) any interest or participation in any
common trust fund or similar fund that is
excluded from the definition of the term
`investment company' under section 3(c)(3) of
the Investment Company Act of 1940;''.
(c) Investment Company Act of 1940.--Section 3(c)(3) of the
Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(3)) is
amended by inserting before the period the following: ``, if--
``(A) such fund is employed by the bank
solely as an aid to the administration of
trusts, estates, or other accounts created and
maintained for a fiduciary purpose;
``(B) except in connection with the ordinary
advertising of the bank's fiduciary services,
interests in such fund are not--
``(i) advertised; or
``(ii) offered for sale to the
general public; and
``(C) fees and expenses charged by such fund
are not in contravention of fiduciary
principles established under applicable Federal
or State law''.
SEC. 222. INVESTMENT ADVISERS PROHIBITED FROM HAVING CONTROLLING
INTEREST IN REGISTERED INVESTMENT COMPANY.
Section 15 of the Investment Company Act of 1940 (15 U.S.C.
80a-15) is amended by adding at the end the following new
subsection:
``(g) Controlling Interest in Investment Company
Prohibited.--
``(1) In general.--If an investment adviser to a
registered investment company, or an affiliated person
of that investment adviser, holds a controlling
interest in that registered investment company in a
trustee or fiduciary capacity, such person shall--
``(A) if it holds the shares in a trustee or
fiduciary capacity with respect to any employee
benefit plan subject to the Employee Retirement
Income Security Act of 1974, transfer the power
to vote the shares of the investment company
through to another person acting in a fiduciary
capacity with respect to the plan who is not an
affiliated person of that investment adviser or
any affiliated person thereof; or
``(B) if it holds the shares in a trustee or
fiduciary capacity with respect to any person
or entity other than an employee benefit plan
subject to the Employee Retirement Income
Security Act of 1974--
``(i) transfer the power to vote the
shares of the investment company
through to--
``(I) the beneficial owners
of the shares;
``(II) another person acting
in a fiduciary capacity who is
not an affiliated person of
that investment adviser or any
affiliated person thereof; or
``(III) any person authorized
to receive statements and
information with respect to the
trust who is not an affiliated
person of that investment
adviser or any affiliated
person thereof;
``(ii) vote the shares of the
investment company held by it in the
same proportion as shares held by all
other shareholders of the investment
company; or
``(iii) vote the shares of the
investment company as otherwise
permitted under such rules,
regulations, or orders as the
Commission may prescribe or issue
consistent with the protection of
investors.
``(2) Exemption.--Paragraph (1) shall not apply to
any investment adviser to a registered investment
company, or any affiliated person of that investment
adviser, that holds shares of the investment company in
a trustee or fiduciary capacity if that registered
investment company consists solely of assets held in
such capacities.
``(3) Safe harbor.--No investment adviser to a
registered investment company or any affiliated person
of such investment adviser shall be deemed to have
acted unlawfully or to have breached a fiduciary duty
under State or Federal law solely by reason of acting
in accordance with clause (i), (ii), or (iii) of
paragraph (1)(B).''.
SEC. 223. CONFORMING CHANGE IN DEFINITION.
Section 2(a)(5) of the Investment Company Act of 1940 (15
U.S.C. 80a-2(a)(5)) is amended by striking ``(A) a banking
institution organized under the laws of the United States'' and
inserting ``(A) a depository institution (as defined in section
3 of the Federal Deposit Insurance Act) or a branch or agency
of a foreign bank (as such terms are defined in section 1(b) of
the International Banking Act of 1978)''.
SEC. 224. CONFORMING AMENDMENT.
Section 202 of the Investment Advisers Act of 1940 (15 U.S.C.
80b-2) is amended by adding at the end the following new
subsection:
``(c) Consideration of Promotion of Efficiency, Competition,
and Capital Formation.--Whenever pursuant to this title the
Commission is engaged in rulemaking and is required to consider
or determine whether an action is necessary or appropriate in
the public interest, the Commission shall also consider, in
addition to the protection of investors, whether the action
will promote efficiency, competition, and capital formation.''.
SEC. 225. EFFECTIVE DATE.
This subtitle shall take effect 90 days after the date of the
enactment of this Act.
Subtitle C--Securities and Exchange Commission Supervision of
Investment Bank Holding Companies
SEC. 231. SUPERVISION OF INVESTMENT BANK HOLDING COMPANIES BY THE
SECURITIES AND EXCHANGE COMMISSION.
(a) Amendment.--Section 17 of the Securities Exchange Act of
1934 (15 U.S.C. 78q) is amended--
(1) by redesignating subsection (i) as subsection
(l); and
(2) by inserting after subsection (h) the following
new subsections:
``(i) Investment Bank Holding Companies.--
``(1) Elective supervision of an investment bank
holding company not having a bank or savings
association affiliate.--
``(A) In general.--An investment bank holding
company that is not--
``(i) an affiliate of a wholesale
financial institution, an insured bank
(other than an institution described in
subparagraph (D), (F), or (G) of
section 2(c)(2), or held under section
4(f), of the Bank Holding Company Act
of 1956), or a savings association,
``(ii) a foreign bank, foreign
company, or company that is described
in section 8(a) of the International
Banking Act of 1978, or
``(iii) a foreign bank that controls,
directly or indirectly, a corporation
chartered under section 25A of the
Federal Reserve Act,
may elect to become supervised by filing with
the Commission a notice of intention to become
supervised, pursuant to subparagraph (B) of
this paragraph. Any investment bank holding
company filing such a notice shall be
supervised in accordance with this section and
comply with the rules promulgated by the
Commission applicable to supervised investment
bank holding companies.
``(B) Notification of status as a supervised
investment bank holding company.--An investment
bank holding company that elects under
subparagraph (A) to become supervised by the
Commission shall file with the Commission a
written notice of intention to become
supervised by the Commission in such form and
containing such information and documents
concerning such investment bank holding company
as the Commission, by rule, may prescribe as
necessary or appropriate in furtherance of the
purposes of this section. Unless the Commission
finds that such supervision is not necessary or
appropriate in furtherance of the purposes of
this section, such supervision shall become
effective 45 days after receipt of such written
notice by the Commission or within such shorter
time period as the Commission, by rule or
order, may determine.
``(2) Election not to be supervised by the commission
as an investment bank holding company.--
``(A) Voluntary withdrawal.--A supervised
investment bank holding company that is
supervised pursuant to paragraph (1) may, upon
such terms and conditions as the Commission
deems necessary or appropriate, elect not to be
supervised by the Commission by filing a
written notice of withdrawal from Commission
supervision. Such notice shall not become
effective until one year after receipt by the
Commission, or such shorter or longer period as
the Commission deems necessary or appropriate
to ensure effective supervision of the material
risks to the supervised investment bank holding
company and to the affiliated broker or dealer,
or to prevent evasion of the purposes of this
section.
``(B) Discontinuation of commission
supervision.--If the Commission finds that any
supervised investment bank holding company that
is supervised pursuant to paragraph (1) is no
longer in existence or has ceased to be an
investment bank holding company, or if the
Commission finds that continued supervision of
such a supervised investment bank holding
company is not consistent with the purposes of
this section, the Commission may discontinue
the supervision pursuant to a rule or order, if
any, promulgated by the Commission under this
section.
``(3) Supervision of investment bank holding
companies.--
``(A) Recordkeeping and reporting.--
``(i) In general.--Every supervised
investment bank holding company and
each affiliate thereof shall make and
keep for prescribed periods such
records, furnish copies thereof, and
make such reports, as the Commission
may require by rule, in order to keep
the Commission informed as to--
``(I) the company's or
affiliate's activities,
financial condition, policies,
systems for monitoring and
controlling financial and
operational risks, and
transactions and relationships
between any broker or dealer
affiliate of the supervised
investment bank holding
company; and
``(II) the extent to which
the company or affiliate has
complied with the provisions of
this Act and regulations
prescribed and orders issued
under this Act.
``(ii) Form and contents.--Such
records and reports shall be prepared
in such form and according to such
specifications (including certification
by an independent public accountant),
as the Commission may require and shall
be providedpromptly at any time upon
request by the Commission. Such records and reports may include--
``(I) a balance sheet and
income statement;
``(II) an assessment of the
consolidated capital of the
supervised investment bank
holding company;
``(III) an independent
auditor's report attesting to
the supervised investment bank
holding company's compliance
with its internal risk
management and internal control
objectives; and
``(IV) reports concerning the
extent to which the company or
affiliate has complied with the
provisions of this title and
any regulations prescribed and
orders issued under this title.
``(B) Use of existing reports.--
``(i) In general.--The Commission
shall, to the fullest extent possible,
accept reports in fulfillment of the
requirements under this paragraph that
the supervised investment bank holding
company or its affiliates have been
required to provide to another
appropriate regulatory agency or self-
regulatory organization.
``(ii) Availability.--A supervised
investment bank holding company or an
affiliate of such company shall provide
to the Commission, at the request of
the Commission, any report referred to
in clause (i).
``(C) Examination authority.--
``(i) Focus of examination
authority.--The Commission may make
examinations of any supervised
investment bank holding company and any
affiliate of such company in order to--
``(I) inform the Commission
regarding--
``(aa) the nature of
the operations and
financial condition of
the supervised
investment bank holding
company and its
affiliates;
``(bb) the financial
and operational risks
within the supervised
investment bank holding
company that may affect
any broker or dealer
controlled by such
supervised investment
bank holding company;
and
``(cc) the systems of
the supervised
investment bank holding
company and its
affiliates for
monitoring and
controlling those
risks; and
``(II) monitor compliance
with the provisions of this
subsection, provisions
governing transactions and
relationships between any
broker or dealer affiliated
with the supervised investment
bank holding company and any of
the company's other affiliates,
and applicable provisions of
subchapter II of chapter 53,
title 31, United States Code
(commonly referred to as the
`Bank Secrecy Act') and
regulations thereunder.
``(ii) Restricted focus of
examinations.--The Commission shall
limit the focus and scope of any
examination of a supervised investment
bank holding company to--
``(I) the company; and
``(II) any affiliate of the
company that, because of its
size, condition, or activities,
the nature or size of the
transactions between such
affiliate and any affiliated
broker or dealer, or the
centralization of functions
within the holding company
system, could, in the
discretion of the Commission,
have a materially adverse
effect on the operational or
financial condition of the
broker or dealer.
``(iii) Deference to other
examinations.--For purposes of this
subparagraph, the Commission shall, to
the fullest extent possible, use the
reports of examination of an
institution described in subparagraph
(D), (F), or (G) of section 2(c)(2), or
held under section 4(f), of the Bank
Holding Company Act of 1956 made by the
appropriate regulatory agency, or of a
licensed insurance company made by the
appropriate State insurance regulator.
``(4) Holding company capital.--
``(A) Authority.--If the Commission finds
that it is necessary to adequately supervise
investment bank holding companies and their
broker or dealer affiliates consistent with the
purposes of this subsection, the Commission may
adopt capital adequacy rules for supervised
investment bank holding companies.
``(B) Method of calculation.--In developing
rules under this paragraph:
``(i) Double leverage.--The
Commission shall consider the use by
the supervised investment bank holding
company of debt and other liabilities
to fund capital investments in
affiliates.
``(ii) No unweighted capital ratio.--
The Commission shall not impose under
this section a capital ratio that is
not based on appropriate risk-weighting
considerations.
``(iii) No capital requirement on
regulated entities.--The Commission
shall not, by rule, regulation,
guideline, order or otherwise, impose
any capital adequacy provision on a
nonbanking affiliate (other than a
broker or dealer) that is in compliance
with applicable capital requirements of
another Federal regulatory authority or
State insurance authority.
``(iv) Appropriate exclusions.--The
Commission shall take full account of
the applicable capital requirements of
another Federal regulatory authority or
State insurance regulator.
``(C) Internal risk management models.--The
Commission may incorporate internal risk
management models into its capital adequacy
rules for supervised investment bank holding
companies.
``(5) Functional regulation of banking and insurance
activities of supervised investment bank holding
companies.--The Commission shall defer to--
``(A) the appropriate regulatory agency with
regard to all interpretations of, and the
enforcement of, applicable banking laws
relating to the activities, conduct, ownership,
and operations of banks, and institutions
described in subparagraph (D), (F), and (G) of
section 2(c)(2), or held under section 4(f), of
the Bank Holding Company Act of 1956; and
``(B) the appropriate State insurance
regulators with regard to all interpretations
of, and the enforcement of, applicable State
insurance laws relating to the activities,
conduct, and operations of insurance companies
and insurance agents.
``(6) Definitions.--For purposes of this subsection--
``(A) The term `investment bank holding
company' means--
``(i) any person other than a natural
person that owns or controls one or
more brokers or dealers; and
``(ii) the associated persons of the
investment bank holding company.
``(B) The term `supervised investment bank
holding company' means any investment bank
holding company that is supervised by the
Commission pursuant to this subsection.
``(C) The terms `affiliate', `bank', `bank
holding company', `company', `control', and
`savings association' have the meanings given
tothose terms in section 2 of the Bank Holding
Company Act of 1956 (12 U.S.C. 1841).
``(D) The term `insured bank' has the meaning
given to that term in section 3 of the Federal
Deposit Insurance Act.
``(E) The term `foreign bank' has the meaning
given to that term in section 1(b)(7) of the
International Banking Act of 1978.
``(F) The terms `person associated with an
investment bank holding company' and
`associated person of an investment bank
holding company' means any person directly or
indirectly controlling, controlled by, or under
common control with, an investment bank holding
company.
``(j) Authority To Limit Disclosure of Information.--
Notwithstanding any other provision of law, the Commission
shall not be compelled to disclose any information required to
be reported under subsection (h) or (i) or any information
supplied to the Commission by any domestic or foreign
regulatory agency that relates to the financial or operational
condition of any associated person of a broker or dealer,
investment bank holding company, or any affiliate of an
investment bank holding company. Nothing in this subsection
shall authorize the Commission to withhold information from
Congress, or prevent the Commission from complying with a
request for information from any other Federal department or
agency or any self-regulatory organization requesting the
information for purposes within the scope of its jurisdiction,
or complying with an order of a court of the United States in
an action brought by the United States or the Commission. For
purposes of section 552 of title 5, United States Code, this
subsection shall be considered a statute described in
subsection (b)(3)(B) of such section 552. In prescribing
regulations to carry out the requirements of this subsection,
the Commission shall designate information described in or
obtained pursuant to subparagraphs (A), (B), and (C) of
subsection (i)(5) as confidential information for purposes of
section 24(b)(2) of this title.''.
(b) Conforming Amendments.--
(1) Section 3(a)(34) of the Securities Exchange Act
of 1934 (15 U.S.C. 78c(a)(34)) is amended by adding at
the end the following new subparagraphs:
``(H) When used with respect to an
institution described in subparagraph (D), (F),
or (G) of section 2(c)(2), or held under
section 4(f), of the Bank Holding Company Act
of 1956--
``(i) the Comptroller of the
Currency, in the case of a national
bank or a bank in the District of
Columbia examined by the Comptroller of
the Currency;
``(ii) the Board of Governors of the
Federal Reserve System, in the case of
a State member bank of the Federal
Reserve System or any corporation
chartered under section 25A of the
Federal Reserve Act;
``(iii) the Federal Deposit Insurance
Corporation, in the case of any other
bank the deposits of which are insured
in accordance with the Federal Deposit
Insurance Act; or
``(iv) the Commission in the case of
all other such institutions.''.
(2) Section 1112(e) of the Right to Financial Privacy
Act of 1978 (12 U.S.C. 3412(e)) is amended--
(A) by striking ``this title'' and inserting
``law''; and
(B) by inserting ``, examination reports''
after ``financial records''.
Subtitle D--Study
SEC. 241. STUDY OF METHODS TO INFORM INVESTORS AND CONSUMERS OF
UNINSURED PRODUCTS.
Within one year after the date of enactment of this Act, the
Comptroller General of the United States shall submit a report
to the Congress regarding the efficacy, costs, and benefits of
requiring that any depository institution that accepts
federally insured deposits and that, directly or through a
contractual or other arrangement with a broker, dealer, or
agent, buys from, sells to, or effects transactions for retail
investors in securities or consumers of insurance to inform
such investors and consumers through the use of a logo or seal
that the security or insurance is not insured by the Federal
Deposit Insurance Corporation.
TITLE III--INSURANCE
Subtitle A--State Regulation of Insurance
SEC. 301. STATE REGULATION OF THE BUSINESS OF INSURANCE.
The Act entitled ``An Act to express the intent of the
Congress with reference to the regulation of the business of
insurance'' and approved March 9, 1945 (15 U.S.C. 1011 et
seq.), commonly referred to as the ``McCarran--Ferguson Act'')
remains the law of the United States.
SEC. 302. MANDATORY INSURANCE LICENSING REQUIREMENTS.
No person or entity shall provide insurance in a State as
principal or agent unless such person or entity is licensed as
required by the appropriate insurance regulator of such State
in accordance with the relevant State insurance law, subject to
section 104 of this Act.
SEC. 303. FUNCTIONAL REGULATION OF INSURANCE.
The insurance sales activity of any person or entity shall be
functionally regulated by the States, subject to section 104 of
this Act.
SEC. 304. INSURANCE UNDERWRITING IN NATIONAL BANKS.
(a) In General.--Except as provided in section 306, a
national bank and the subsidiaries of a national bank may not
provide insurance in a State as principal except that this
prohibition shall not apply to authorized products.
(b) Authorized Products.--For the purposes of this section, a
product is authorized if--
(1) as of January 1, 1997, the Comptroller of the
Currency had determined in writing that national banks
may provide such product as principal, or national
banks were in fact lawfully providing such product as
principal;
(2) no court of relevant jurisdiction had, by final
judgment, overturned a determination of the Comptroller
of the Currency that national banks may provide such
product as principal; and
(3) the product is not title insurance, or an annuity
contract the income of which is subject to tax
treatment under section 72 of the Internal Revenue Code
of 1986.
(c) Definition.--For purposes of this section, the term
``insurance'' means--
(1) any product regulated as insurance as of January
1, 1997, in accordance with the relevant State
insurance law, in the State in which the product is
provided;
(2) any product first offered after January 1, 1997,
which--
(A) a State insurance regulator determines
shall be regulated as insurance in the State in
which the product is provided because the
product insures, guarantees, or indemnifies
against liability, loss of life, loss of
health, or loss through damage to or
destruction of property, including, but not
limited to, surety bonds, life insurance,
health insurance, title insurance, and property
and casualty insurance (such as private
passenger or commercial automobile, homeowners,
mortgage, commercial multiperil, general
liability, professional liability, workers'
compensation, fire and allied lines, farm
owners multiperil, aircraft, fidelity, surety,
medical malpractice, ocean marine, inland
marine, and boiler and machinery insurance);
and
(B) is not a product or service of a bank
that is--
(i) a deposit product;
(ii) a loan, discount, letter of
credit, or other extension of credit;
(iii) a trust or other fiduciary
service;
(iv) a qualified financial contract
(as defined in or determined pursuant
to section 11(e)(8)(D)(i) of the
Federal Deposit Insurance Act); or
(v) a financial guaranty, except that
this subparagraph (B) shall not apply
to a product that includes an insurance
component such that if the product is
offered or proposed to be offered by
the bank as principal--
(I) it would be treated as a
life insurance contract under
section 7702 of the Internal
Revenue Code of 1986, as
amended; or
(II) in the event that the
product is not a letter of
credit or other similar
extension of credit, a
qualified financial contract,
or a financial guaranty, it
would qualify for treatment for
losses incurred with respect to
such product under section
832(b)(5) of the Internal
Revenue Code of 1986, as
amended, if the bank were
subject to tax as an insurance
company under section 831 of
such Code; or
(3) any annuity contract the income on which is
subject to tax treatment under section 72 of the
Internal Revenue Code of 1986, as amended.
SEC. 305. NEW BANK AGENCY ACTIVITIES ONLY THROUGH ACQUISITION OF
EXISTING LICENSED AGENTS.
If a national bank or a subsidiary of a national bank is not
providing insurance as agent in a State as of the date of the
enactment of this Act, the national bank and the subsidiary of
the national bank may provide insurance (which such bank or
subsidiary is otherwise authorized to provide) as agent in such
State after such date only by acquiring a company which has
been licensed by the appropriate State regulator to provide
insurance as agent in such State for not less than 2 years
before such acquisition.
SEC. 306. TITLE INSURANCE ACTIVITIES OF NATIONAL BANKS AND THEIR
AFFILIATES.
(a) Authority.--
(1) In general.--Notwithstanding any other provision
of this Act or any other law, no national bank, and no
subsidiary of a national bank, may engage in any
activity involving the underwriting or sale of title
insurance other than title insurance activities in
which such national bank or subsidiary was actively and
lawfully engaged before the date of the enactment of
this Act.
(2) Insurance affiliate.--In the case of a national
bank which has an affiliate which provides insurance as
principal and is not a subsidiary of the bank, the
national bank and any subsidiary of the national bank
may not engage in any activity involving the
underwriting or sale of title insurance pursuant to
paragraph (1).
(3) Insurance subsidiary.--In the case of a national
bank which has a subsidiary which provides insurance as
principal and has no affiliate which provides insurance
as principal and is not a subsidiary, the national bank
may not engage in any activity involving the
underwriting or sale of title insurance pursuant to
paragraph (1).
(4) Affiliate and subsidiary defined.--For purposes
of this section, the terms ``affiliate'' and
``subsidiary'' have the meaning given such terms in
section 2 of the Bank Holding Company Act of 1956.
(b) Parity Exception.--Notwithstanding subsection (a), in the
case of any State in which banks organized under the laws of
such State were authorized to sell title insurance as agent as
of January 1, 1997, a national bank and a subsidiary of a
national bank may sell title insurance as agent in such State
in the same manner and to the same extent such State banks are
authorized to sell title insurance as agent in such State.
SEC. 307. EXPEDITED AND EQUALIZED DISPUTE RESOLUTION FOR FINANCIAL
REGULATORS.
(a) Filing in Court of Appeal.--In the case of a regulatory
conflict between a State insurance regulator and a Federal
regulator as to whether any product is or is not insurance as
defined in section 304(c) of this Act, or whether a State
statute, regulation, order, or interpretation regarding any
insurance sales or solicitation activity is properly treated as
preempted under Federal law, either regulator may seek
expedited judicial review of such determination by the United
States Court of Appeals for the circuit in which the State is
located or in the United States Court of Appeals for the
District of Columbia Circuit by filing a petition for review in
such court.
(b) Expedited Review.--The United States court of appeals in
which a petition for review is filed in accordance with
paragraph (1) shall complete all action on such petition,
including rendering a judgment, before the end of the 60-day
period beginning on the date such petition is filed, unless all
parties to such proceeding agree to any extension of such
period.
(c) Supreme Court Review.--Any request for certiori to the
Supreme Court of the United States of any judgment of a United
States court of appeals with respect to a petition for review
under this section shall be filed with the United States
Supreme Court as soon as practicable after such judgment is
issued.
(d) Statute of Limitation.--No action may be filed under this
section challenging an order, ruling, determination, or other
action of a Federal financial regulator or State insurance
regulator after the later of--
(1) the end of the 12-month period beginning on the
date the first public notice is made of such order,
ruling, or determination in its final form; or
(2) the end of the 6-month period beginning on the
date such order, ruling, or determination takes effect.
(e) Standard of Review.--The court shall decide an action
filed under this section based on its review on the merits of
all questions presented under State and Federal law, including
the nature of the product or activity and the history and
purpose of its regulation under State and Federal law, without
unequal deference.
SEC. 308. CONSUMER PROTECTION REGULATIONS.
(a) Regulations Required.--
(1) In general.--The Federal Deposit Insurance Act
(12 U.S.C. 1811 et seq.) is amended by adding at the
end the following new section:
``SEC. 45. CONSUMER PROTECTION REGULATIONS.
``(a) Regulations Required.--
``(1) In general.--The Federal banking agencies shall
prescribe and publish in final form, before the end of
the 1-year period beginning on the date of the
enactment of this Act, consumer protection regulations
(which the agencies jointly determine to be
appropriate) that--
``(A) apply to retail sales, solicitations,
advertising, or offers of any insurance product
by any insured depository institution or
wholesale financial institution or any person
who is engaged in such activities at an office
of the institution or on behalf of the
institution; and
``(B) are consistent with the requirements of
this Act and provide such additional
protections for consumers to whom such sales,
solicitations, advertising, or offers are
directed as the agency determines to be
appropriate.
``(2) Applicability to subsidiaries.--The regulations
prescribed pursuant to paragraph (1) shall extend such
protections to any subsidiaries of an insured
depository institution, as deemed appropriate by the
regulators referred to in paragraph (3), where such
extension is determined to be necessary to ensure the
consumer protections provided by this section.
``(3) Consultation and joint regulations.--The
Federal banking agencies shall consult with each other
and prescribe joint regulations pursuant to paragraph
(1), after consultation with the State insurance
regulators, as appropriate.
``(b) Sales Practices.--The regulations prescribed pursuant
to subsection (a) shall include anticoercion rules applicable
to the sale of insurance products which prohibit an insured
depository institution from engaging in any practice that would
lead a consumer to believe an extension of credit, in violation
of section 106(b) of the Bank Holding Company Act Amendments of
1970, is conditional upon--
``(1) the purchase of an insurance product from the
institution or any of its affiliates or subsidiaries;
or
``(2) an agreement by the consumer not to obtain, or
a prohibition on the consumer from obtaining, an
insurance product from an unaffiliated entity.
``(c) Disclosures and Advertising.--The regulations
prescribed pursuant to subsection (a) shall include the
following provisions relating to disclosures and advertising in
connection with the initial purchase of an insurance product:
``(1) Disclosures.--
``(A) In general.--Requirements that the
following disclosures be made orally and in
writing before the completion of the initial
sale and, in the case of clause (iv), at the
time of application for an extension of credit:
``(i) Uninsured status.--As
appropriate, the product is not insured
by the Federal Deposit Insurance
Corporation, the United States
Government, or the insured depository
institution.
``(ii) Investment risk.--In the case
of a variable annuity or other
insurance product which involves an
investment risk, that there is an
investment risk associated with the
product, including possible loss of
value.
``(iv) Coercion.--The approval of an
extension of credit may not be
conditioned on--
``(I) the purchase of an
insurance product from the
institution in which the
application for credit is
pending or any of its
affiliates or subsidiaries; or
``(II) an agreement by the
consumer not to obtain, or a
prohibition on the consumer
from obtaining, an insurance
product from an unaffiliated
entity.
``(B) Making disclosure readily
understandable.--Regulations prescribed under
subparagraph (A) shall encourage the use of
disclosure that is conspicuous, simple, direct,
and readily understandable, such as the
following:
``(i) `NOT FDIC-INSURED'.
``(ii) `NOT GUARANTEED BY THE BANK'.
``(iii) `MAY GO DOWN IN VALUE'.
``(C) Adjustments for alternative methods of
purchase.--In prescribing the requirements
under subparagraphs (A) and (D), necessary
adjustments shall be made for purchase in
person, by telephone, or by electronic media to
provide for the most appropriateand complete
form of disclosure and acknowledgments.
``(D) Consumer acknowledgment.--A requirement
that an insured depository institution shall
require any person selling an insurance product
at any office of, or on behalf of, the
institution to obtain, at the time a consumer
receives the disclosures required under this
paragraph or at the time of the initial
purchase by the consumer of such product, an
acknowledgment by such consumer of the receipt
of the disclosure required under this
subsection with respect to such product.
``(2) Prohibition on misrepresentations.--A
prohibition on any practice, or any advertising, at any
office of, or on behalf of, the insured depository
institution, or any subsidiary as appropriate, which
could mislead any person or otherwise cause a
reasonable person to reach an erroneous belief with
respect to--
``(A) the uninsured nature of any insurance
product sold, or offered for sale, by the
institution or any subsidiary of the
institution; or
``(B) in the case of a variable annuity or
other insurance product that involves an
investment risk, the investment risk associated
with any such product.
``(d) Separation of Banking and Nonbanking Activities.--
``(1) Regulations required.--The regulations
prescribed pursuant to subsection (a) shall include
such provisions as the Federal banking agencies
consider appropriate to ensure that the routine
acceptance of deposits and the making of loans is kept,
to the extent practicable, physically segregated from
insurance product activity.
``(2) Requirements.--Regulations prescribed pursuant
to paragraph (1) shall include the following
requirements:
``(A) Separate setting.--A clear delineation
of the setting in which, and the circumstances
under which, transactions involving insurance
products should be conducted in a location
physically segregated from an area where retail
deposits are routinely accepted.
``(B) Referrals.--Standards which permit any
person accepting deposits from, or making loans
to, the public in an area where such
transactions are routinely conducted in an
insured depository institution to refer a
customer who seeks to purchase any insurance
product to a qualified person who sells such
product, only if the person making the referral
receives no more than a one-time nominal fee of
a fixed dollar amount for each referral that
does not depend on whether the referral results
in a transaction.
``(C) Qualification and licensing
requirements.--Standards prohibiting any
insured depository institution from permitting
any person to sell or offer for sale any
insurance product in any part of any office of
the institution, or on behalf of the
institution, unless such person is
appropriately qualified and licensed.
``(e) Domestic Violence Discrimination Prohibition.--
``(1) In general.--In the case of an applicant for,
or an insured under, any insurance product described in
paragraph (2), the status of the applicant or insured
as a victim of domestic violence, or as a provider of
services to victims of domestic violence, shall not be
considered as a criterion in any decision with regard
to insurance underwriting, pricing, renewal, or scope
of coverage of insurance policies, or payment of
insurance claims, except as required or expressly
permitted under State law.
``(2) Scope of application.--The prohibition
contained in paragraph (1) shall apply to any insurance
product which is sold or offered for sale, as
principal, agent, or broker, by any insured depository
institution or any person who is engaged in such
activities at an office of the institution or on behalf
of the institution.
``(3) Sense of the congress.--It is the sense of the
Congress that, by the end of the 30-month period
beginning on the date of the enactment of this Act, the
States should enact prohibitions against discrimination
with respect to insurance products that are at least as
strict as the prohibitions contained in paragraph (1).
``(4) Domestic violence defined.--For purposes of
this subsection, the term `domestic violence' means the
occurrence of 1 or more of the following acts by a
current or former family member, household member,
intimate partner, or caretaker:
``(A) Attempting to cause or causing or
threatening another person physical harm,
severe emotional distress, psychological
trauma, rape, or sexual assault.
``(B) Engaging in a course of conduct or
repeatedly committing acts toward another
person, including following the person without
proper authority, under circumstances that
place the person in reasonable fear of bodily
injury or physical harm.
``(C) Subjecting another person to false
imprisonment.
``(D) Attempting to cause or cause damage to
property so as to intimidate or attempt to
control the behavior of another person.
``(f) Consumer Grievance Process.--The Federal banking
agencies shall jointly establish a consumer complaint
mechanism, for receiving and expeditiously addressing consumer
complaints alleging a violation of regulations issued under the
section, which shall--
``(1) establish a group within each regulatory agency
to receive such complaints;
``(2) develop procedures for investigating such
complaints;
``(3) develop procedures for informing consumers of
rights they may have in connection with such
complaints; and
``(4) develop procedures for addressing concerns
raised by such complaints, as appropriate, including
procedures for the recovery of losses to the extent
appropriate.
``(g) Effect on Other Authority.--
``(1) 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) any authority of any State insurance
commissioner or other State authority under any
State law.
``(2) 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.
``(h) Insurance Product Defined.--For purposes of this
section, the term `insurance product' includes an annuity
contract the income of which is subject to tax treatment under
section 72 of the Internal Revenue Code of 1986.''.
SEC. 309. CERTAIN STATE AFFILIATION LAWS PREEMPTED FOR INSURANCE
COMPANIES AND AFFILIATES.
No State may, by law, regulation, order, interpretation, or
otherwise--
(1) prevent or restrict any insurer, or any affiliate
of an insurer (whether such affiliate is organized as a
stock company, mutual holding company, or otherwise),
from becoming a financial holding company or acquiring
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, restrict, or have the authority to
review, approve, or disapprove a plan of reorganization
by which an insurer proposes to reorganize from mutual
form to become a stock insurer (whether as a direct or
indirect subsidiary of a mutual holding company or
otherwise) unless such State is the State of domicile
of the insurer.
Subtitle B--Redomestication of Mutual Insurers
SEC. 311. GENERAL APPLICATION.
This subtitle shall only apply to a mutual insurance company
in a State which has not enacted a law which expressly
establishes reasonable terms and conditions for a mutual
insurance company domiciled in such State to reorganize into a
mutual holding company.
SEC. 312. REDOMESTICATION OF MUTUAL INSURERS.
(a) Redomestication.--A mutual insurer organized under the
laws of any State may transfer its domicile to a transferee
domicile as a step in a reorganization in which, pursuant to
the laws of the transferee domicile and consistent with the
standards in subsection (f), the mutual insurer becomes a stock
insurer that is a direct or indirect subsidiary of a mutual
holding company.
(b) Resulting Domicile.--Upon complying with the applicable
law of the transferee domicile governing transfers of domicile
and completion of a transfer pursuant to this section, the
mutual insurer shall cease to be a domestic insurer in the
transferor domicile and, as a continuation of its corporate
existence, shall be a domestic insurer of the transferee
domicile.
(c) Licenses Preserved.--The certificate of authority,
agents' appointments and licenses, rates, approvals and other
items that a licensed State allows and that are in existence
immediately prior to the date that a redomesticating insurer
transfers its domicile pursuant to this subtitle shall continue
in full force and effect upon transfer, if the insurer remains
duly qualified to transact the business of insurance in such
licensed State.
(d) Effectiveness of Outstanding Policies and Contracts.--
(1) In general.--All outstanding insurance policies
and annuities contracts of a redomesticating insurer
shall remain in full force and effect and need not be
endorsed as to the new domicile of the insurer, unless
so ordered by the State insurance regulator of a
licensed State, and then only in the case of
outstanding policies and contracts whose owners reside
in such licensed State.
(2) Forms.--
(A) Applicable State law may require a
redomesticating insurer to file new policy
forms with the State insurance regulator of a
licensed State on or before the effective date
of the transfer.
(B) Notwithstanding subparagraph (A), a
redomesticating insurer may use existing policy
forms with appropriate endorsements to reflect
the new domicile of the redomesticating insurer
until the new policy forms are approved for use
by the State insurance regulator of such
licensed State.
(e) Notice.--A redomesticating insurer shall give notice of
the proposed transfer to the State insurance regulator of each
licensed State and shall file promptly any resulting amendments
to corporate documents required to be filed by a foreign
licensed mutual insurer with the insurance regulator of each
such licensed State.
(f) Procedural Requirements.--No mutual insurer may
redomesticate to another State and reorganize into a mutual
holding company pursuant to this section unless the State
insurance regulator of the transferee domicile determines that
the plan of reorganization of the insurer includes the
following requirements:
(1) Approval by board of directors and
policyholders.--The reorganization is approved by at
least a majority of the board of directors of the
mutual insurer and at least a majority of the
policyholders who vote after notice, disclosure of the
reorganization and the effects of the transaction on
policyholder contractual rights, and reasonable
opportunity to vote, in accordance with such notice,
disclosure, and voting procedures as are approved by
the State insurance regulator of the transferee
domicile.
(2) Continued voting control by policyholders; review
of public stock offering.--After the consummation of a
reorganization, the policyholders of the reorganized
insurer shall have the same voting rights with respect
to the mutual holding company as they had before the
reorganization with respect to the mutual insurer. With
respect to an initial public offering of stock, the
offering shall be conducted in compliance with
applicable securities laws and in a manner approved by
the State insurance regulator of the transferee
domicile.
(3) Award of stock or grant of options to officers
and directors.--For a period of 6 months after
completion of an initial public offering, neither a
stock holding company nor the converted insurer shall
award any stock options or stock grants to persons who
are elected officers or directors of the mutual holding
company, the stock holding company, or the converted
insurer, except with respect to any such awards or
options to which a person is entitled as a policyholder
and as approved by the State insurance regulator of the
transferee domicile.
(4) Contractual rights.--Upon reorganization into a
mutual holding company, the contractual rights of the
policyholders are preserved.
(5) Fair and equitable treatment of policyholders.--
The reorganization is approved as fair and equitable to
the policyholders by the insurance regulator of the
transferee domicile.
SEC. 313. EFFECT ON STATE LAWS RESTRICTING REDOMESTICATION.
(a) In General.--Unless otherwise permitted by this subtitle,
State laws of any transferor domicile that conflict with the
purposes and intent of this subtitle are preempted, including
but not limited to--
(1) any law that has the purpose or effect of
impeding the activities of, taking any action against,
or applying any provision of law or regulation to, any
insurer or an affiliate of such insurer because that
insurer or any affiliate plans to redomesticate, or has
redomesticated, pursuant to this subtitle;
(2) any law that has the purpose or effect of
impeding the activities of, taking action against, or
applying any provision of law or regulation to, any
insured or any insurance licensee or other intermediary
because such person or entity has procured insurance
from or placed insurance with any insurer or affiliate
of such insurer that plans to redomesticate, or has
redomesticated, pursuant to this subtitle, but only to
the extent that such law would treat such insured
licensee or other intermediary differently than if the
person or entity procured insurance from, or placed
insurance with, an insured licensee or other
intermediary which had not redomesticated;
(3) any law that has the purpose or effect of
terminating, because of the redomestication of a mutual
insurer pursuant to this subtitle, any certificate of
authority, agent appointment or license, rate approval,
or other approval, of any State insurance regulator or
other State authority in existence immediately prior to
the redomestication in any State other than the
transferee domicile.
(b) Differential Treatment Prohibited.--No State law,
regulation, interpretation, or functional equivalent thereof,
of a State other than a transferee domicile may treat a
redomesticating or redomesticated insurer or any affiliate
thereof any differently than an insurer operating in that State
that is not a redomesticating or redomesticated insurer.
(c) Laws Prohibiting Operations.--If any licensed State fails
to issue, delays the issuance of, or seeks to revoke an
original or renewal certificate of authority of a
redomesticated insurer immediately following redomestication,
except on grounds and in a manner consistent with its past
practices regarding the issuance of certificates of authority
to foreign insurers that are not redomesticating, then the
redomesticating insurer shall be exempt from any State law of
the licensed State to the extent that such State law or the
operation of such State law would make unlawful, or regulate,
directly or indirectly, the operation of the redomesticated
insurer, except that such licensed State may require the
redomesticated insurer to--
(1) comply with the unfair claim settlement practices
law of the licensed State;
(2) pay, on a nondiscriminatory basis, applicable
premium and other taxes which are levied on licensed
insurers or policyholders under the laws of the
licensed State;
(3) register with and designate the State insurance
regulator as its agent solely for the purpose of
receiving service of legal documents or process;
(4) submit to an examination by the State insurance
regulator in any licensed state in which the
redomesticated insurer is doing business to determine
the insurer's financial condition, if--
(A) the State insurance regulator of the
transferee domicile has not begun an
examination of the redomesticated insurer and
has not scheduled such an examination to begin
before the end of the 1-year period beginning
on the date of the redomestication; and
(B) any such examination is coordinated to
avoid unjustified duplication and repetition;
(5) comply with a lawful order issued in--
(A) a delinquency proceeding commenced by the
State insurance regulator of any licensed State
if there has been a judicial finding of
financial impairment under paragraph (7); or
(B) a voluntary dissolution proceeding;
(6) comply with any State law regarding deceptive,
false, or fraudulent acts or practices, except that if
the licensed State seeks an injunction regarding the
conduct described in this paragraph, such injunction
must be obtained from a court of competent jurisdiction
as provided in section 314(a);
(7) comply with an injunction issued by a court of
competent jurisdiction, upon a petition by the State
insurance regulator alleging that the redomesticating
insurer is in hazardous financial condition or is
financially impaired;
(8) participate in any insurance insolvency guaranty
association on the same basis as any other insurer
licensed in the licensed State; and
(9) require a person acting, or offering to act, as
an insurance licensee for a redomesticated insurer in
the licensed State to obtain a license from that State,
except that such State may not impose any qualification
or requirement that discriminates against a nonresident
insurance licensee.
SEC. 314. OTHER PROVISIONS.
(a) Judicial Review.--The appropriate United States district
court shall have exclusive jurisdiction over litigation arising
under this section involving any redomesticating or
redomesticated insurer.
(b) Severability.--If any provision of this section, or the
application thereof to any person or circumstances, is held
invalid, the remainder of the section, and the application of
such provision to other persons or circumstances, shall not be
affected thereby.
SEC. 315. DEFINITIONS.
For purposes of this subtitle, the following definitions
shall apply:
(1) Court of competent jurisdiction.--The term
``court of competent jurisdiction'' means a court
authorized pursuant to section 314(a) to adjudicate
litigation arising under this subtitle.
(2) Domicile.--The term ``domicile'' means the State
in which an insurer is incorporated, chartered, or
organized.
(3) Insurance licensee.--The term ``insurance
licensee'' means any person holding a license under
State law to act as insurance agent, subagent, broker,
or consultant.
(4) Institution.--The term ``institution'' means a
corporation, joint stock company, limited liability
company, limited liability partnership, association,
trust, partnership, or any similar entity.
(5) Licensed state.--The term ``licensed State''
means any State, the District of Columbia, American
Samoa, Guam, Puerto Rico, or the United States Virgin
Islands in which the redomesticating insurer has a
certificate of authority in effect immediately prior to
the redomestication.
(6) Mutual insurer.--The term ``mutual insurer''
means a mutual insurer organized under the laws of any
State.
(7) Person.--The term ``person'' means an individual,
institution, government or governmental agency, State
or political subdivision of a State, public
corporation, board, association, estate, trustee, or
fiduciary, or other similar entity.
(8) Policyholder.--The term ``policyholder'' means
the owner of a policy issued by a mutual insurer,
except that, with respect to voting rights, the term
means a member of a mutual insurer or mutual holding
company granted the right to vote, as determined under
applicable State law.
(9) Redomesticated insurer.--The term
``redomesticated insurer'' means a mutual insurer that
has redomesticated pursuant to this subtitle.
(10) Redomesticating insurer.--The term
``redomesticating insurer'' means a mutual insurer that
is redomesticating pursuant to this subtitle.
(11) Redomestication or transfer.--The terms
``redomestication'' and ``transfer'' mean the transfer
of the domicile of a mutual insurer from one State to
another State pursuant to this subtitle.
(12) State insurance regulator.--The term ``State
insurance regulator'' means the principal insurance
regulatory authority of a State, the District of
Columbia, American Samoa, Guam, Puerto Rico, or the
United States Virgin Islands.
(13) State law.--The term ``State law'' means the
statutes of any State, the District of Columbia,
American Samoa, Guam, Puerto Rico, or the United States
Virgin Islands and any regulation, order, or
requirement prescribed pursuant to any such statute.
(14) Transferee domicile.--The term ``transferee
domicile'' means the State to which a mutual insurer is
redomesticating pursuant to this subtitle.
(15) Transferor domicile.--The term ``transferor
domicile'' means the State from which a mutual insurer
is redomesticating pursuant to this subtitle.
SEC. 316. EFFECTIVE DATE.
This subtitle shall take effect on the date of enactment of
this Act.
Subtitle C--National Association of Registered Agents and Brokers
SEC. 321. STATE FLEXIBILITY IN MULTISTATE LICENSING REFORMS.
(a) In General.--The provisions of this subtitle shall take
effect unless by the end of the 3-year period beginning on the
date of the enactment of this Act at least a majority of the
States--
(1) have enacted uniform laws and regulations
governing the licensure of individuals and entities
authorized to sell and solicit the purchase of
insurance within the State; or
(2) have enacted reciprocity laws and regulations
governing the licensure of nonresident individuals and
entities authorized to sell and solicit insurance
within those States.
(b) Uniformity Required.--States shall be deemed to have
established the uniformity necessary to satisfy subsection
(a)(1) if the States--
(1) establish uniform criteria regarding the
integrity, personal qualifications, education,
training, and experience of licensed insurance
producers, including the qualification and training of
sales personnel in ascertaining the appropriateness of
a particular insurance product for a prospective
customer;
(2) establish uniform continuing education
requirements for licensed insurance producers;
(3) establish uniform ethics course requirements for
licensed insurance producers in conjunction with the
continuing education requirements under paragraph (2);
(4) establish uniform criteria to ensure that an
insurance product, including any annuity contract, sold
to a consumer is suitable and appropriate for the
consumer based on financial information disclosed by
the consumer; and
(5) do not impose any requirement upon any insurance
producer to be licensed or otherwise qualified to do
business as a nonresident that has the effect of
limiting or conditioning that producer's activities
because of its residence or place of operations, except
that counter-signature requirements imposed on
nonresident producers shall not be deemed to have the
effect of limiting or conditioning a producer's
activities because of its residence or place of
operations under this section.
(c) Reciprocity Required.--States shall be deemed to have
established the reciprocity required to satisfy subsection
(a)(2) if the following conditions are met:
(1) Administrative licensing procedures.--At least a
majority of the States permit a producer that has a
resident license for selling or soliciting the purchase
of insurance in its home State to receive a license to
sell or solicit the purchase of insurance in such
majority of States as a nonresident to the same extent
such producer is permitted to sell or solicit the
purchase of insurance in its State, without satisfying
any additional requirements other than submitting--
(A) a request for licensure;
(B) the application for licensure that the
producer submitted to its home State;
(C) proof that the producer is licensed and
in good standing in its home State; and
(D) the payment of any requisite fee to the
appropriate authority,
if the producer's home State also awards such licenses
on such a reciprocal basis.
(2) Continuing education requirements.--A majority of
the States accept an insurance producer's satisfaction
of its home State's continuing education requirements
for licensed insurance producers to satisfy the States'
own continuing education requirements if the producer's
home State also recognizes the satisfaction of
continuing education requirements on such a reciprocal
basis.
(3) No limiting nonresident requirements.--A majority
of the States do not impose any requirement upon any
insurance producer to be licensed or otherwise
qualified to do business as a nonresident that has the
effect of limiting or conditioning that producer's
activities because of its residence or place of
operations, except that countersignature requirements
imposed on nonresident producers shall not be deemed to
have the effect of limiting or conditioning a
producer's activities because of its residence or place
of operations under this section.
(4) Reciprocal reciprocity.--Each of the States that
satisfies paragraphs (1), (2), and (3) grants
reciprocity to residents of all of the other States
that satisfy such paragraphs.
(d) Determination.--
(1) NAIC determination.--At the end of the 3-year
period beginning on the date of the enactment of this
Act, the National Association of Insurance
Commissioners shall determine, in consultation with the
insurance commissioners or chief insurance regulatory
officials of the States, whether the uniformity or
reciprocity required by subsections (b) and (c) has
been achieved.
(2) Judicial review.--The appropriate United States
district court shall have exclusive jurisdiction over
any challenge to the National Association of Insurance
Commissioners' determination under this section and
such court shall apply the standards set forth in
section 706 of title 5, United States Code, when
reviewing any such challenge.
(e) Continued Application.--If, at any time, the uniformity
or reciprocity required by subsections (b) and (c) no longer
exists, the provisions of this subtitle shall take effect
within 2 years, unless the uniformity or reciprocity required
by those provisions is satisfied before the expiration of that
2-year period.
(f) Savings Provision.--No provision of this section shall be
construed as requiring that any law, regulation, provision, or
action of any State which purports to regulate insurance
producers, including any such law, regulation, provision, or
action which purports to regulate unfair trade practices or
establish consumer protections, including countersignature
laws, be altered or amended in order to satisfy the uniformity
or reciprocity required by subsections (b) and (c), unless any
such law, regulation, provision, or action is inconsistent with
a specific requirement of any such subsection and then only to
the extent of such inconsistency.
SEC. 322. NATIONAL ASSOCIATION OF REGISTERED AGENTS AND BROKERS.
(a) Establishment.--There is established the National
Association of Registered Agents and Brokers (hereafter in this
subtitle referred to as the ``Association'')
(b) Status.--The Association shall--
(1) be a nonprofit corporation and be presumed to
have the status of an organization described in section
501(c)(6) of the Internal Revenue Code of 1986 unless
the Secretary of the Treasury determines that the
Association does not meet the requirements of such
section;
(2) have succession until dissolved by an Act of
Congress;
(3) not be an agency or establishment of the United
States Government; and
(4) except as otherwise provided in this Act, be
subject to, and have all the powers conferred upon a
nonprofit corporation by the District of Columbia
Nonprofit Corporation Act (D.C. Code, sec. 29y-1001 et
seq.).
SEC. 323. PURPOSE.
The purpose of the Association shall be to provide a
mechanism through which uniform licensing, appointment,
continuing education, and other insurance producer sales
qualification requirements and conditions can be adopted and
applied on a multistate basis, while preserving the right of
States to license, supervise, and discipline insurance
producers and to prescribe and enforce laws and regulations
with regard to insurance-related consumer protection and unfair
trade practices.
SEC. 324. RELATIONSHIP TO THE FEDERAL GOVERNMENT.
The Association shall be subject to the supervision and
oversight of the National Association of Insurance
Commissioners (hereafter in this subtitle referred to as the
``NAIC'') and shall not be an agency or an instrumentality of
the United States Government.
SEC. 325. MEMBERSHIP.
(a) Eligibility.--
(1) In general.--Any State-licensed insurance
producer shall be eligible to become a member in the
Association.
(2) Ineligibility for suspension or revocation of
license.--Notwithstanding paragraph (1), a State-
licensed insurance producer shall not be eligible to
become a member if a State insurance regulator has
suspended or revoked such producer's license in that
State during the 3-year preceding the date such
producer applies for membership.
(3) Resumption of eligibility.--Paragraph (2) shall
cease to apply to any insurance producer if--
(A) the State insurance regulator renews the
license of such producer in the State in which
the license was suspended or revoked; or
(B) the suspension or revocation is
subsequently overturned.
(b) Authority To Establish Membership Criteria.--The
Association shall have the authority to establish membership
criteria that--
(1) bear a reasonable relationship to the purposes
for which the Association was established; and
(2) do not unfairly limit the access of smaller
agencies to the Association membership.
(c) Establishment of Classes and Categories.--
(1) Classes of membership.--The Association may
establish separate classes of membership, with separate
criteria, if the Association reasonably determines that
performance of different duties requires different
levels of education, training, or experience.
(2) Categories.--The Association may establish
separate categories of membership for individuals and
for other persons. The establishment of any such
categories of membership shall be based either on the
types of licensing categories that exist under State
laws or on the aggregate amount of business handled by
an insurance producer. No special categories of
membership, and no distinct membership criteria, shall
be established for members which are insured depository
institutions or wholesale financial institutions or for
their employees, agents, or affiliates.
(d) Membership Criteria.--
(1) In general.--The Association may establish
criteria for membership which shall include standards
for integrity, personal qualifications, education,
training, and experience.
(2) Minimum standard.--In establishing criteria under
paragraph (1), the Association shall consider the
highest levels of insurance producer qualifications
established under the licensing laws of the States.
(e) Effect of Membership.--Membership in the Association
shall entitle the member to licensure in each State for which
the member pays the requisite fees, including licensing fees
and, where applicable, bonding requirements, set by such State.
(f) Annual Renewal.--Membership in the Association shall be
renewed on an annual basis.
(g) Continuing Education.--The Association shall establish,
as a condition of membership, continuing education requirements
which shall be comparable to or greater than the continuing
education requirements under the licensing laws of a majority
of the States.
(h) Suspension and Revocation.--The Association may--
(1) inspect and examine the records and offices of
the members of the Association to determine compliance
with the criteria for membership established by the
Association; and
(2) suspend or revoke the membership of an insurance
producer if--
(A) the producer fails to meet the applicable
membership criteria of the Association: or
(B) the producer has been subject to
disciplinary action pursuant to a final
adjudicatory proceeding under the jurisdiction
of a State insurance regulator, and the
Association concludes that retention of
membership in the Association would not be in
the public interest.
(i) Office of Consumer Complaints.--
(1) In general.--The Association shall establish an
office of consumer complaints that shall--
(A) receive and investigate complaints from
both consumers and State insurance regulators
related to members of the Association; and
(B) recommend to the Association any
disciplinary actions that the office considers
appropriate, to the extent that any such
recommendation is not inconsistent with State
law.
(2) Records and referrals.--The office of consumer
complaints of the Association shall--
(A) maintain records of all complaints
received in accordance with paragraph (1) and
make such records available to the NAIC and to
each State insurance regulator for the State of
residence of the consumer who filed the
complaint; and
(B) refer, when appropriate, any such
complaint to any appropriate State insurance
regulator.
(3) Telephone and other access.--The office of
consumer complaints shall maintain a toll-free
telephone number for the purpose of this subsection
and, as practicable, other alternative means of
communication with consumers, such as an Internet home
page.
SEC. 326. BOARD OF DIRECTORS.
(a) Establishment.--There is established the board of
directors of the Association (hereafter in this subtitle
referred to as the ``Board'') for the purpose of governing and
supervising the activities of the Association and the members
of the Association.
(b) Powers.--The Board shall have such powers and authority
as may be specified in the bylaws of the Association.
(c) Composition.--
(1) Members.--The Board shall be composed of 7
members appointed by the NAIC.
(2) Requirement.--At least 4 of the members of the
Board shall have significant experience with the
regulation of commercial lines of insurance in at least
1 of the 20 States in which the greatest total dollar
amount of commercial-lines insurance is placed in the
United States.
(3) Initial board membership.--
(A) In general.--If, by the end of the 2-year
period beginning on the date of the enactment
of this Act, the NAIC has not appointed the
initial 7 members of the Board of the
Association, the initial Board shall consist of
the 7 State insurance regulators of the 7
States with the greatest total dollar amount of
commercial-lines insurance in place as of the
end of such period.
(B) Alternate composition.--If any of the
State insurance regulators described in
subparagraph (A) declines to serve on the
Board, the State insurance regulator with the
next greatest total dollar amount of
commercial-lines insurance in place, as
determined by the NAIC as of the end of such
period, shall serve as a member of the Board.
(C) Inoperability.--If fewer than 7 State
insurance regulators accept appointment to the
Board, the Association shall be established
without NAIC oversight pursuant to section 332.
(d) Terms.--The term of each director shall, after the
initial appointment of the members of the Board, be for 3
years, with \1/3\ of the directors to be appointed each year.
(e) Board Vacancies.--A vacancy on the Board shall be filled
in the same manner as the original appointment of the initial
Board for the remainder of the term of the vacating member.
(f) Meetings.--The Board shall meet at the call of the
chairperson, or as otherwise provided by the bylaws of the
Association.
SEC. 327. OFFICERS.
(a) In General.--
(1) Positions.--The officers of the Association shall
consist of a chairperson and a vice chairperson of the
Board, a president, secretary, and treasurer of the
Association, and such other officers and assistant
officers as may be deemed necessary.
(2) Manner of selection.--Each officer of the Board
and the Association shall be elected or appointed at
such time and in such manner and for such terms not
exceeding 3 years as may be prescribed in the bylaws of
the Association.
(b) Criteria for Chairperson.-- Only individuals who are
members of the National Association of Insurance Commissioners
shall be eligible to serve as the chairperson of the board of
directors.
SEC. 328. BYLAWS, RULES, AND DISCIPLINARY ACTION.
(a) Adoption and Amendment of Bylaws.--
(1) Copy required to be filed with the naic.--The
board of directors of the Association shall file with
the NAIC a copy of the proposed bylaws or any proposed
amendment to the bylaws, accompanied by a concise
general statement of the basis and purpose of such
proposal.
(2) Effective date.--Except as provided in paragraph
(3), any proposed bylaw or proposed amendment shall
take effect--
(A) 30 days after the date of the filing of a
copy with the NAIC;
(B) upon such later date as the Association
may designate; or
(C) such earlier date as the NAIC may
determine.
(3) Disapproval by the naic.--Notwithstanding
paragraph (2), a proposed bylaw or amendment shall not
take effect if, after public notice and opportunity to
participate in a public hearing--
(A) the NAIC disapproves such proposal as
being contrary to the public interest or
contrary to the purposes of this subtitle and
provides notice to the Association setting
forth the reasons for such disapproval; or
(B) the NAIC finds that such proposal
involves a matter of such significant public
interest that public comment should be
obtained, in which case it may, after notifying
the Association in writing of such finding,
require that the procedures set forth in
subsection (b) be followed with respect to such
proposal, in the same manner as if such
proposed bylaw change were a proposed rule
change within the meaning of such paragraph.
(b) Adoption and Amendment of Rules.--
(1) Filing proposed regulations with the naic.--
(A) In general.--The board of directors of
the Association shall file with the NAIC a copy
of any proposed rule or any proposed amendment
to a rule of the Association which shall be
accompanied by a concise general statement of
the basis and purpose of such proposal.
(B) Other rules and amendments ineffective.--
No proposed rule or amendment shall take effect
unless approved by the NAIC or otherwise
permitted in accordance with this paragraph.
(2) Initial consideration by the naic.--Within 35
days after the date of publication of notice of filing
of a proposal, or before the end of such longer period
not to exceed 90 days as the NAIC may designate after
such date if the NAIC finds such longer period to be
appropriate and sets forth its reasons for so finding,
or as to which the Association consents, the NAIC
shall--
(A) by order approve such proposed rule or
amendment; or
(B) institute proceedings to determine
whether such proposed rule or amendment should
be modified or disapproved.
(3) NAIC proceedings.--
(A) In general.--Proceedings instituted by
the NAIC with respect to a proposed rule or
amendment pursuant to paragraph (2) shall--
(i) include notice of the grounds for
disapproval under consideration;
(ii) provide opportunity for hearing;
and
(iii) be concluded within 180 days
after the date of the Association's
filing of such proposed rule or
amendment.
(B) Disposition of proposal.--At the
conclusion of any proceeding under subparagraph
(A), the NAIC shall, by order, approve or
disapprove the proposed rule or amendment.
(C) Extension of time for consideration.--The
NAIC may extend the time for concluding any
proceeding under subparagraph (A) for--
(i) not more than 60 days if the NAIC
finds good cause for such extension and
sets forth its reasons for so finding;
or
(ii) for such longer period as to
which the Association consents.
(4) Standards for review.--
(A) Grounds for approval.--The NAIC shall
approve a proposed rule or amendment if the
NAIC finds that the rule or amendment is in the
public interest and is consistent with the
purposes of this Act.
(B) Approval before end of notice period.--
The NAIC shall not approve any proposed rule
before the end of the 30-day period beginning
on the date the Association files proposed
rules or amendments in accordance with
paragraph (1) unless the NAIC finds good cause
for so doing and sets forth the reasons for so
finding.
(5) Alternate procedure.--
(A) In general.--Notwithstanding any
provision of this subsection other than
subparagraph (B), a proposed rule or amendment
relating to the administration or organization
of the Association may take effect--
(i) upon the date of filing with the
NAIC, if such proposed rule or
amendment is designated by the
Association as relating solely to
matters which the NAIC, consistent with
the public interest and the purposes of
this subsection, determines by rule do
not require the procedures set forth in
this paragraph; or
(ii) upon such date as the NAIC shall
for good cause determine.
(B) Abrogation by the naic.--
(i) In general.--At any time within
60 days after the date of filing of any
proposed rule or amendment under
subparagraph (A)(i) or (B)(ii), the
NAIC may repeal such rule or amendment
and require that the rule or amendment
be refiled and reviewed in accordance
with this paragraph, if the NAIC finds
that such action is necessary or
appropriate in the public interest, for
the protection of insurance producers
or policyholders, or otherwise in
furtherance of the purposes of this
subtitle.
(ii) Effect of reconsideration by the
naic.--Any action of the NAIC pursuant
to clause (i) shall--
(I) not affect the validity
or force of a rule change
during the period such rule or
amendment was in effect; and
(II) not be considered to be
final action.
(c) Action Required by the NAIC.--The NAIC may, in accordance
with such rules as the NAIC determines to be necessary or
appropriate to the public interest or to carry out the purposes
of this subtitle, require the Association to adopt, amend, or
repeal any bylaw, rule or amendment of the Association,
whenever adopted.
(d) Disciplinary Action by the Association.--
(1) Specification of charges.--In any proceeding to
determine whether membership shall be denied,
suspended, revoked, and not renewed (hereafter in this
section referred to as a ``disciplinary action''), the
Association shall bring specific charges, notify such
member of such charges and give the member an
opportunity to defend against the charges, and keep a
record.
(2) Supporting statement.--A determination to take
disciplinary action shall be supported by a statement
setting forth--
(A) any act or practice in which such member
has been found to have been engaged;
(B) the specific provision of this subtitle,
the rules or regulations under this subtitle,
or the rules of the Association which any such
act or practice is deemed to violate; and
(C) the sanction imposed and the reason for
such sanction.
(e) NAIC Review of Disciplinary Action.--
(1) Notice to the naic.--If the Association orders
any disciplinary action, the Association shall promptly
notify the NAIC of such action.
(2) Review by the naic.--Any disciplinary action
taken by the Association shall be subject to review by
the NAIC--
(A) on the NAIC's own motion; or
(B) upon application by any person aggrieved
by such action if such application is filed
with the NAIC not more than 30 days after the
later of--
(i) the date the notice was filed
with the NAIC pursuant to paragraph
(1); or
(ii) the date the notice of the
disciplinary action was received by
such aggrieved person.
(f) Effect of Review.--The filing of an application to the
NAIC for review of a disciplinary action, or the institution of
review by the NAIC on the NAIC's own motion, shall not operate
as a stay of disciplinary action unless the NAIC otherwise
orders.
(g) Scope of Review.--
(A) In general.--In any proceeding to review
such action, after notice and the opportunity
for hearing, the NAIC shall--
(i) determine whether the action
should be taken;
(ii) affirm, modify, or rescind the
disciplinary sanction; or
(iii) remand to the Association for
further proceedings.
(B) Dismissal of review.--The NAIC may
dismiss a proceeding to review disciplinary
action if the NAIC finds that--
(i) the specific grounds on which the
action is based exist in fact;
(ii) the action is in accordance with
applicable rules and regulations; and
(iii) such rules and regulations are,
and were, applied in a manner
consistent with the purposes of this
Act.
SEC. 329. ASSESSMENTS.
(a) Insurance Producers Subject to Assessment.--The
Association may establish such application and membership fees
as the Association finds necessary to cover the costs of its
operations, including fees made reimbursable to the NAIC under
subsection (b), except that, in setting such fees, the
Association may not discriminate against smaller insurance
producers.
(b) NAIC Assessments.--The NAIC may assess the Association
for any costs it incurs under this subtitle.
SEC. 330. FUNCTIONS OF THE NAIC.
(a) Administrative Procedure.--Determinations of the NAIC,
for purposes of making rules pursuant to section 328, shall be
made after appropriate notice and opportunity for a hearing and
for submission of views of interested persons.
(b) Examinations and Reports.--
(1) The NAIC may make such examinations and
inspections of the Association and require the
Association to furnish it with such reports and records
or copies thereof as the NAIC may consider necessary or
appropriate in the public interest or to effectuate the
purposes of this subtitle.
(2) As soon as practicable after the close of each
fiscal year, the Association shall submit to the NAIC a
written report regarding the conduct of its business,
and the exercise of the other rights and powers granted
by this subtitle, during such fiscal year. Such report
shall include financial statements setting forth the
financial position of the Association at the end of
such fiscal year and the results of its operations
(including the source and application of its funds) for
such fiscal year. The NAIC shall transmit such report
to the President and the Congress with such comment
thereon as the NAIC determines to be appropriate.
SEC. 331. LIABILITY OF THE ASSOCIATION AND THE DIRECTORS, OFFICERS,
AND EMPLOYEES OF THE ASSOCIATION.
(a) In General.--The Association shall not be deemed to be an
insurer or insurance producer within the meaning of any State
law, rule, regulation, or order regulating or taxing insurers,
insurance producers, or other entities engaged in the business
of insurance, including provisions imposing premium taxes,
regulating insurer solvency or financial condition,
establishing guaranty funds and levying assessments, or
requiring claims settlement practices.
(b) Liability of the Association, Its Directors, Officers,
and Employees.--Neither the Association nor any of its
directors, officers, or employees shall have any liability to
any person for any action taken or omitted in good faith under
or in connection with any matter subject to this subtitle.
SEC. 332. ELIMINATION OF NAIC OVERSIGHT.
(a) In General.--The Association shall be established without
NAIC oversight and the provisions set forth in section 324,
subsections (a), (b), (c), and (e) of section 328, and sections
329(b) and 330 of this subtitle shall cease to be effective if,
at the end of the 2-year period after the date on which the
provisions of this subtitle take effect pursuant to section
321--
(1) at least a majority of the States representing at
least 50 percent of the total United States commercial-
lines insurance premiums have not satisfied the
uniformity or reciprocity requirements of subsections
(a) and (b) of section 321; and
(2) the NAIC has not approved the Association's
bylaws as required by section 328, the NAIC is unable
to operate or supervise the Association, or the
Association is not conducting its activities as
required under this Act.
(b) Board Appointments.--If the repeals required by
subsection (a) are implemented--
(1) General appointment power.--The President, with
the advice and consent of the United States Senate,
shall appoint the members of the Association's Board
established under section 326 from lists of candidates
recommended to the President by the National
Association of Insurance Commissioners.
(2) Procedures for obtaining national association of
insurance commissioners appointment recommendations.--
(A) Initial determination and
recommendations.--After the date on which the
provisions of part a of this section take
effect, then the National Association of
Insurance Commissioners shall have 60 days to
provide a list of recommended candidates to the
President. If the National Association of
Insurance Commissioners fails to provide a list
by that date, or if any list that is provided
does not include at least 14 recommended
candidates or comply with the requirements of
section 326(c), the President shall, with the
advice and consent of the United States Senate,
make the requisite appointments without
considering the views of the NAIC.
(B) Subsequent appointments.--After the
initial appointments, the National Association
of Insurance Commissioners shall provide a list
of at least 6 recommended candidates for the
Board to the President by January 15 of each
subsequent year. If the National Association of
Insurance Commissioners fails to provide a list
by that date, or if any list that is provided
does not include at least 6 recommended
candidates or comply with the requirements of
section 326(c), the President, with the advice
and consent of the Senate, shall make the
requisite appointments without considering the
views of the NAIC.
(C) Presidential oversight.--
(i) Removal.--If the President
determines that the Association is not
acting in the interests of the public,
the President may remove the entire
existing Board for the remainder of the
term to which the members of the Board
were appointed and appoint, with the
advice and consent of the Senate, new
members to fill the vacancies on the
Board for the remainder of such terms.
(ii) Suspension of rules or
actions.--The President, or a person
designated by the President for such
purpose, may suspend the effectiveness
of any rule, or prohibit any action, of
the Association which the President or
the designee determines is contrary to
the public interest.
(d) Annual Report.--As soon as practicable after the close of
each fiscal year, the Association shall submit to the President
and to Congress a written report relative to the conduct of its
business, and the exercise of the other rights and powers
granted by this subtitle, during such fiscal year. Such report
shall include financial statements setting forth the financial
position of the Association at the end of such fiscal year and
the results of its operations (including the source and
application of its funds) for such fiscal year.
SEC. 333. RELATIONSHIP TO STATE LAW.
(a) Preemption of State Laws.--State laws, regulations,
provisions, or actions purporting to regulate insurance
producers shall be preempted in the following instances:
(1) No State shall impede the activities of, take any
action against, or apply any provision of law or
regulation to, any insurance producer because that
insurance producer or any affiliate plans to become,
has applied to become, or is a member of the
Association.
(2) No State shall impose any requirement upon a
member of the Association that it pay different fees to
be licensed or otherwise qualified to do business in
that State, including bonding requirements, based on
its residency.
(3) No State shall impose any licensing, appointment,
integrity, personal or corporate qualifications,
education, training, experience, residency, or
continuing education requirement upon a member of the
Association that is different than the criteria for
membership in the Association or renewal of such
membership, except that counter-signature requirements
imposed on nonresident producers shall not be deemed to
have the effect of limiting or conditioning a
producer's activities because of its residence or place
of operations under this section.
(4) No State shall implement the procedures of such
State's system of licensing or renewing the licenses of
insurance producers in a manner different from the
authority of the Association under section 325.
(b) Savings Provision.--Except as provided in subsection (a),
no provision of this section shall be construed as altering or
affecting the continuing effectiveness of any law, regulation,
provision, or action of any State which purports to regulate
insurance producers, including any such law, regulation,
provision, or action which purports to regulate unfair trade
practices or establish consumer protections, including, but not
limited to, countersignature laws.
SEC. 334. COORDINATION WITH OTHER REGULATORS.
(a) Coordination With State Insurance Regulators.--The
Association shall have the authority to--
(1) issue uniform insurance producer applications and
renewal applications that may be used to apply for the
issuance or removal of State licenses, while preserving
the ability of each State to impose such conditions on
the issuance or renewal of a license as are consistent
with section 333;
(2) establish a central clearinghouse through which
members of the Association may apply for the issuance
or renewal of licenses in multiple States; and
(3) establish or utilize a national database for the
collection of regulatory information concerning the
activities of insurance producers.
(b) Coordination With the National Association of Securities
Dealers.--The Association shall coordinate with the National
Association of Securities Dealers in order to ease any
administrative burdens that fall on persons that are members of
both associations, consistent with the purposes of this
subtitle and the Federal securities laws.
SEC. 335. JUDICIAL REVIEW.
(a) Jurisdiction.--The appropriate United States district
court shall have exclusive jurisdiction over litigation
involving the Association, including disputes between the
Association and its members that arise under this subtitle.
Suits brought in State court involving the Association shall be
deemed to have arisen under Federal law and therefore be
subject to jurisdiction in the appropriate United States
district court.
(b) Exhaustion of Remedies.--An aggrieved person must exhaust
all available administrative remedies before the Association
and the NAIC before it may seek judicial review of an
Association decision.
(c) Standards of Review.--The standards set forth in section
553 of title 5, United States Code, shall be applied whenever a
rule or bylaw of the Association is under judicial review, and
the standards set forth in section 554 of title 5, United
States Code, shall be applied whenever a disciplinary action of
the Association is judicially reviewed.
SEC. 336. DEFINITIONS.
For purposes of this subtitle, the following definitions
shall apply:
(1) Insurance.--The term ``insurance'' means any
product defined or regulated as insurance by the
appropriate State insurance regulatory authority.
(2) Insurance producer.--The term ``insurance
producer'' means any insurance agent or broker, surplus
lines broker, insurance consultant, limited insurance
representative, and any other person that solicits,
negotiates, effects, procures, delivers, renews,
continues or binds policies of insurance or offers
advice, counsel, opinions or services related to
insurance.
(3) State law.--The term ``State law'' includes all
laws, decisions, rules, regulations, or other State
action having the effect of law, of any State. A law of
the United States applicable only to the District of
Columbia shall be treated as a State law rather than a
law of the United States.
(4) State.--The term ``State'' includes any State,
the District of Columbia, American Samoa, Guam, Puerto
Rico, and the United States Virgin Islands.
(5) Home state.--The term ``home State'' means the
State in which the insurance producer maintains its
principal place of residence and is licensed to act as
an insurance producer.
TITLE IV--UNITARY SAVINGS AND LOAN HOLDING COMPANIES
SEC. 401. TERMINATION OF EXPANDED POWERS FOR NEW UNITARY S&L HOLDING
COMPANIES.
(a) In General.--Section 10(c) of the Home Owners' Loan Act
(12 U.S.C. 1467a(c)) is amended by adding at the end the
following new paragraph:
``(9) Termination of expanded powers for new unitary
s&l holding company.--
``(A) In general.--Subject to subparagraph
(B), paragraph (3) shall not apply with respect
to any company that becomes a savings and loan
holding company pursuant to an application
filed after March 31, 1998.
``(B) Existing unitary s&l holding companies
and the successors to such companies.--
Subparagraph (A) shall not apply, and paragraph
(3) shall continue to apply, to a company (or
any subsidiary of such company) that--
``(i) either--
``(I) acquired 1 or more
savings associations described
in paragraph (3) pursuant to
applications at least 1 of
which was filed before April 1,
1998; or
``(II) became a savings and
loan holding company by
acquiring ownership or control
of the company described in
subclause (I); and
``(ii) continues to control the
savings associations referred to in
clause (i)(I) or the successor to any
such savings association.''.
(b) Technical and Conforming Amendment.--Section 10(c)(3) of
the Home Owners' Loan Act (12 U.S.C. 1467a(c)(3)) is amended by
striking ``Notwithstanding'' and inserting ``Except as provided
in paragraph (9) and notwithstanding''.
TITLE V--CREDIT UNIONS
SEC 501. SHORT TITLE.
This title may be cited as the ``Credit Union Membership
Access Act''.
SEC. 502. FINDINGS.
The Congress finds the following:
(1) The American credit union movement began as a
cooperative effort to serve the productive and
provident credit needs of individuals of modest means.
(2) Credit unions continue to fulfill this public
purpose, and current members and membership groups
should not face divestiture from the financial services
institution of their choice as a result of recent court
action.
(3) To promote thrift and credit extension, a
meaningful affinity and bond among members, manifested
by a commonality of routine interaction, shared and
related work experiences, interests, or activities, or
the maintenance of an otherwise well-understood sense
of cohesion or identity is essential to the fulfillment
of credit unions' public mission.
(4) Credit unions, unlike many other participants in
the financial services market, are exempt from Federal
and most State taxes because they are member-owned,
democratically operated, not-for-profit organizations
generally managed by volunteer boards of directors and
because they have the specified mission of meeting the
credit and savings needs of consumers, especially
persons of modest means.
(5) Improved credit union safety and soundness
provisions will enhance the public benefit that
citizens receive from these cooperative financial
services institutions.
Subtitle A--Credit Union Membership
SEC. 511. FIELDS OF MEMBERSHIP.
Section 109 of the Federal Credit Union Act (12 U.S.C. 1759)
is amended--
(1) in the 1st sentence--
(A) by striking ``Federal credit union
membership shall consist of'' and inserting
``(a) In General.--Subject to subsection (b),
Federal credit union membership shall consist
of''; and
(B) by striking ``, except that'' and all
that follows through the period at the end of
such sentence and inserting a period; and
(2) by adding at the end the following new
subsections:
``(b) Membership Field.--Subject to the other provisions of
this section, the membership of any Federal credit union shall
be limited to the membership described in 1 of the following
categories:
``(1) Single common-bond credit union.--1 group which
has a common bond of occupation or association.
``(2) Multiple common-bond credit union.--More than 1
group--
``(A) each of which has (within such group) a
common bond of occupation or association; and
``(B) the number of members of each of which
(at the time the group is first included within
the field of membership of a credit union
described in this paragraph) does not exceed
any numerical limitation applicable under
subsection (d).
``(3) Community credit union.--Persons or
organizations within a well-defined local community,
neighborhood, or rural district.
``(c) Grandfathered Members and Groups.--
``(1) In general.--Notwithstanding subsection (b)--
``(A) any person or organization who is a
member of any Federal credit union as of the
date of the enactment of the Credit Union
Membership Access Act may remain a member of
such credit union after such date; and
``(B) a member of any group whose members
constituted a portion of the membership of any
Federal credit union as of such date of
enactment shall continue to be eligible to
become a member of such credit union, by virtue
of membership in such group, after such date.
``(2) Successors.--If the common bond of any group
referred to in paragraph (1) is defined by any
particular organization or business entity, paragraph
(1) shall continue to apply with respect to any
successor to such organization or entity.
``(d) Multiple Common-Bond Credit Union Group Requirements.--
``(1) Numerical limitation.--Except as provided in
paragraph (2), only a group with fewer than 3,000
members shall be eligible to be included in the field
of membership of a credit union described in subsection
(b)(2).
``(2) Exceptions.--In the case of any Federal credit
union whose field of membership is determined under
subsection (b)(2), the numerical limitation described
in paragraph (1) shall not apply with respect to the
following:
``(A) Certain larger groups incapable of
supporting and operating a single-group credit
union.--Any group which the Board determines,
in writing and in accordance with the
guidelines and regulations described in
paragraph (4), could not feasibly or reasonably
establish a new single common-bond credit union
described in subsection (b)(1) because--
``(i) the group lacks sufficient
volunteer and other resources to
support the efficient and effective
operation of a credit union;
``(ii) the group does not meet the
criteria which the Board has determined
to be important for the likelihood of
success in establishing and managing a
new credit union, including demographic
characteristics, such as geographical
location of members, diversity of ages
and income levels, and other factors
which may affect the financial
viability and stability of a credit
union; or
``(iii) the group would be unlikely
to operate a safe and sound credit
union.
``(B) Transactions for supervisory reasons.--
Any group transferred from another credit
union--
``(i) in connection with a merger or
consolidation which has been
recommended by the Board or any
appropriate State credit union
supervisor for safety and soundness
concerns with respect to such other
credit union; or
``(ii) by the Board in the Board's
capacity as conservator or liquidating
agent with respect to such other credit
union.
``(3) Exception for underserved areas.--
Notwithstanding subsection (b), in the case of a
Federal credit union described in paragraph (2) of such
subsection, the Board may allow the membership of the
credit union to include any person or organization
within a local community, neighborhood, or rural
district if--
``(A) the Board determines that such local
community, neighborhood, or rural district--
``(i) meets the requirements of
paragraph (3) and subparagraphs (A) and
(B) of paragraph (4) of section 233(b)
of the Bank Enterprise Act of 1991, and
such additional requirements as the
Board may impose; and
``(ii) is underserved, based on data
of the Board and the Federal banking
agencies (as defined in section 3 of
the Federal Deposit Insurance Act), by
other depository institutions (as
defined in section 19(b)(1)(A) of the
Federal Reserve Act); and
``(B) the credit union establishes and
maintains an office or facility in such local
community, neighborhood, or rural district at
which credit union services are available.
``(4) Regulations and guidelines.--The Board shall
issue guidelines or regulations, after notice and
opportunity for comment, setting forth the criteria the
Board will apply in determining whether or not an
additional group may be included within the field of
membership of an existing credit union pursuant to
paragraph (2).
``(e) Additional Membership Eligibility Provisions.--
``(1) Membership eligibility limited to immediate
family or household members.--No individual shall be
eligible for membership in a credit union on the basis
of the relationship of such individual to another
person who is eligible for membership in such credit
union unless the individual is a member of the
immediate family or household (as such terms are
defined by the Board by regulation) of such other
person.
``(2) Retention of membership.--Except as provided in
section 118, once a person becomes a member of a credit
union in accordance with this title, such person or
organization may remain a member of such credit union
until the person or organization chooses to withdraw
from the membership of the credit union.''.
SEC. 512. CRITERIA FOR APPROVAL OF EXPANSION OF MEMBERSHIP OF MULTIPLE
COMMON-BOND CREDIT UNIONS.
Section 109 of the Federal Credit Union Act (12 U.S.C. 1759)
is amended by inserting after subsection (e) (as added by
section 511 of this subtitle) the following new subsection:
``(f) Criteria for Approval of Expansion of Multiple Common-
Bond Credit Unions.--
``(1) In General.--The Board shall--
``(A) encourage the formation of separately
chartered credit unions instead of approving an
application to include an additional group
within the field of membership of an existing
credit union whenever practicable and
consistent with reasonable standards for the
safe and sound operation of the credit union;
and
``(B) if the formation of a separate credit
union by such group is not practicable or
consistent with such standards, require the
inclusion of such group in the field of
membership of a credit union which is within
reasonable proximity to the location of the
group whenever practicable and consistent with
reasonable standards for the safe and sound
operation of the credit union.
``(2) Approval criteria.--The Board may not approve
any application by a Federal credit union described in
subsection (b)(2) to include any additional group
within the field of membership of such credit union (or
an application by a Federal credit union described in
paragraph (1) to include an additional group and become
a credit union described in paragraph (2)) unless the
Board determines, in writing, that--
``(A) such credit union has not engaged in
any unsafe or unsound practice (as defined in
section 206(b)) which is material during the 1-
year period preceding the filing of the
application;
``(B) the credit union is adequately
capitalized;
``(C) the credit union has the administrative
capability to serve the proposed membership
group and the financial resources to meet the
need for additional staff and assets to serve
the new membership group;
``(D) pursuant to the most recent evaluation
of such credit union under section 215, the
credit union is satisfactorily providing
affordable credit union services to all
individuals of modest means within the field of
membership of such credit union;
``(E) any potential harm the expansion of the
field of membership of the credit union may
have on any other insured credit union and its
members is clearly outweighed in the public
interest by the probable beneficial effect of
the expansion in meeting the convenience and
needs of the members of the group proposed to
be included in the field of membership; and
``(F) the credit union has met such
additional requirements as the Board may
prescribe in regulations.''.
SEC. 513. GEOGRAPHICAL GUIDELINES FOR COMMUNITY CREDIT UNIONS.
Section 109 of the Federal Credit Union Act (12 U.S.C. 1759)
is amended by inserting after subsection (f) (as added by
section 512 of this subtitle) the following new subsection:
``(g) Regulations Required for Community Credit Unions.--
``(1) Definition of well-defined local community,
neighborhood, or rural district.--The Board shall
prescribe regulations defining the term `well-defined
local community, neighborhood, or rural district' for
purposes of--
``(A) making any determination with regard to
the field of membership of a credit union
described in subsection (b)(3); and
``(B) establishing the criteria applicable
with respect to any such determination.
``(2) Scope of application.--Paragraph (1) shall
apply with respect to any application to form a new
credit union, or to alter or expand the field of
membership of an existing credit union, which is filed
with the Board after the date of the enactment of
Credit Union Membership Access Act.''.
Subtitle B--Regulation of Credit Unions
SEC. 521. FINANCIAL STATEMENT AND AUDIT REQUIREMENTS.
(a) In General.--Section 202(a)(6) of the Federal Credit
Union Act (12 U.S.C. 1782(a)(6)) is amended by adding at the
end the following new subparagraphs:
``(C) Accounting principles.--
``(i) In general.--Accounting
principles applicable to reports or
statements required to be filed with
the Board by each insured credit union
shall be uniform and consistent with
generally accepted accounting
principles.
``(ii) Board determination.--If the
Board determines that the application
of any generally accepted accounting
principle to any insured credit union
is not appropriate, the Board may
prescribe an accounting principle for
application to such credit unions which
is no less stringent than generally
accepted accounting principles.
``(iii) De minimus exception.--This
subparagraph shall not apply to any
insured credit union the total assets
of which are less than $10,000,000
unless prescribed by the Board or an
appropriate State credit union
supervisor.
``(D) Large credit union audit requirement.--
Each insured credit union which has total
assets of $500,000,000 or more shall have an
annual independent audit of the financial
statement of the credit union performed in
accordance with generally accepted auditing
standards by an independent certified public
accountant or public accountant licensed by the
appropriate State or jurisdiction to perform
such services.''.
(b) Technical and Conforming Amendment.--Section 202(a)(6)(B)
of the Federal Credit Union Act (12 1786(b)(6)(B)) is amended
by striking ``subparagraph (A)'' and inserting ``subparagraph
(A) or (D)''.
SEC. 522. CONVERSIONS OF CREDIT UNIONS INTO OTHER DEPOSITORY
INSTITUTIONS.
(a) Review of Regulations Required.--The National Credit
Union Administration Board shall conduct a detailed review of
all regulations which govern or affect the conversion of a
credit union into any other form of depository institution,
including regulations relating to the form of disclosure
required preceding a vote by the members of a credit union with
regard to any such conversion and the manner in which such vote
shall be conducted, to ensure that such regulations freely and
fairly permit any such conversion after free, fair, and
objective disclosure to the members of the credit union of the
facts and issues involved in any such conversion.
(b) Report to the Congress.--
(1) In general.--Before the end of the 12-month
period beginning on the date of the enactment of this
Act, the National Credit Union Administration Board
shall submit a detailed report on the findings and
conclusions of the Board in connection with the review
required under subsection (a).
(2) Contents of report.--The report submitted
pursuant to paragraph (1) shall contain--
(A) any recommendation for any administrative
or legislative change which the Board may
determine to be appropriate with regard to any
aspect of the conversion of a credit union into
another form of depository institution; and
(B) the justification for any recommendation
of the Board--
(i) to retain in effect any provision
of the regulations in effect on March
13, 1998, which govern or affect the
conversion of a credit union into any
other form of depository institution;
or
(ii) to amend or alter any such
provision.
(c) Definitions.--For purposes of this section, the following
definitions shall apply:
(1) Credit union.--The term ``credit union'' means
any Federal credit union or State credit union (as such
terms are defined in paragraphs (1) and (6),
respectively, of section 101 of the Federal Credit
Union Act).
(2) Depository institution.--The term ``depository
institution'' has the meaning given such term in
section 3 of the Federal Deposit Insurance Act.
SEC. 523. FREEZE ON BOARD REGULATIONS RELATING TO COMMERCIAL LOANS AND
CERTAIN APPRAISAL REQUIREMENTS RELATING TO SUCH
LOANS.
(a) In General.--The regulations of the National Credit Union
Administration Board which are codified in parts 701.21(h) and
722.3(a) of the Code of Federal Regulations, as in effect on
March 13, 1998 (relating to business loans and lines of credit
to members and appraisal requirements), including any other
regulations which are applicable with respect to loans or lines
of credit to which the part applies, shall remain in effect
without amendment or altered application until the end of the
1-year period beginning on such date and, notwithstanding the
Federal Credit Union Act or any other provision of law, any
action of the National Credit Union Administration Board, or
the National Credit Union Administration, on or after such date
which purports to amend (including an amendment by
substitution) or otherwise apply any such regulation
differently than in effect on such date shall have no force or
legal effect before the end of such 1-year period.
(b) Review and Report to the Congress.--Before the end of the
1-year period described in subsection (a), the National Credit
Union Administration Board shall conduct a review of the
effectiveness of the regulations referred to in such subsection
as in effect on March 13, 1998, and shall submit a report to
the Congress on the results of such review before the end of
such 1-year period.
SEC. 524. SERVING PERSONS OF MODEST MEANS WITHIN THE FIELD OF
MEMBERSHIP OF CREDIT UNIONS.
(a) In General.--Title II of the Federal Credit Union Act (12
U.S.C. 1781 et seq.) is amended by adding at the end the
following new section:
``SEC. 215. SERVING PERSONS OF MODEST MEANS WITHIN THE FIELD OF
MEMBERSHIP OF CREDIT UNIONS.
``(a) Continuing and Affirmative Obligation.--The purpose of
this section is to reaffirm that insured credit unions have a
continuing and affirmative obligation to meet the financial
services needs of persons of modest means consistent with safe
and sound operation.
``(b) Evaluation by the Board.--The Board shall, before the
end of the 12-month period beginning on the date of the
enactment of the Credit Union Membership Access Act--
``(1) prescribe criteria for periodically reviewing
the record of each insured credit union in providing
affordable credit union services to all individuals of
modest means (including low- and moderate-income
individuals) within the field of membership of such
credit union; and
``(2) provide for making the results of such review
publicly available.
``(c) Additional Criteria for Community Credit Unions
Required.--The Board shall, by regulation--
``(1) prescribe additional criteria for annually
evaluating the record of any insured credit union which
is organized to serve a well-defined local community,
neighborhood, or rural district in meeting the credit
needs and credit union service needs of the entire
field of membership of such credit union; and
``(2) prescribe procedures for remedying the failure
of any insured credit union described in paragraph (1)
to meet the criteria established pursuant to such
paragraph, including the disapproval of any application
by such credit union to expand the field of membership
of such credit union.
``(d) Emphasis on Performance, Not Paperwork.--In evaluating
any insured credit union under this section, the Board shall--
``(1) focus on the actual performance of the insured
credit union; and
``(2) not impose burdensome paperwork or
recordkeeping requirements.''.
(b) Annual Reports.--With respect to each of the 1st 5 years
which begin after the date of the enactment of this Act, the
National Credit Union Administration Board shall include in the
annual report to the Congress under section 102(d) of the
Federal Credit Union Act a report on the progress of the Board
in implementing section 215 of such Act (as added by subsection
(a) of this section).
SEC. 525. NATIONAL CREDIT UNION ADMINISTRATION BOARD MEMBERSHIP.
Section 102(b) of the Federal Credit Union Act (12 1752a(b))
is amended--
(1) by striking ``(b) The Board'' and inserting ``(b)
Membership and Appointment of Board.--
``(1) In general.--The Board''; and
(2) by adding at the end the following new paragraph:
``(2) Appointment criteria.--
``(A) Experience in financial services.--In
considering appointments to the Board under
paragraph (1), the President shall give
consideration to individuals who, by virtue of
their education, training, or experience
relating to a broad range of financial
services, financial services regulation, or
financial policy, are especially qualified to
serve on the Board.
``(B) Limit on appointment of credit union
officers.--Not more than 1 member of the Board
may be appointed to the Board from among
individuals who, at the time of such
appointment, are, or have recently been,
involved with any insured credit union as a
committee member, director, officer, employee,
or other institution-affiliated party.''.
SEC. 526. REPORT AND CONGRESSIONAL REVIEW REQUIREMENT FOR CERTAIN
REGULATIONS.
Any regulation prescribed by the National Credit Union
Administration Board defining, or amending the definition of--
(1) the term ``immediate family or household'' for
purposes of subsection (e)(1) of section 109 of the
Federal Credit Union Act (as added by section 101 of
this Act); or
(2) the term ``well-defined local community,
neighborhood, or rural district'' for purposes of
subsection (g) of such section (as added by section 103
of this Act),
shall be treated as a major rule for purposes of chapter 8 of
title 5, United States Code.
Subtitle C--Capitalization and Net Worth of Credit Unions
SEC. 531. PROMPT CORRECTIVE ACTION.
(a) In General.--Title II of the Federal Credit Union Act (12
U.S.C. 1781 et seq.) is amended by inserting after section 215
(as added by section 524 of this title) the following new
section:
``SEC. 216. PROMPT CORRECTIVE ACTION
``(a) Resolving Problems to Protect Fund.--
``(1) Purpose.--The purpose of this section is to
resolve the problems of insured credit unions at the
least possible long-term loss to the National Credit
Union Share Insurance Fund.
``(2) Prompt corrective action required.--The Board
shall carry out the purpose of this section by taking
prompt corrective action to resolve the problems of
insured credit unions.
``(b) Regulations.--The Board shall implement subsection (a)
of this section by prescribing regulations, after public notice
and opportunity for comment, which--
``(1) establish criteria and procedures for
classifying credit unions as `well capitalized',
`adequately capitalized', `undercapitalized',
`significantly undercapitalized', or `critically
undercapitalized';
``(2) specify a series of graduated regulatory
enforcement actions that may be imposed upon any credit
union which fails to meet the requirements for
classification as an adequately capitalized credit
union, including--
``(A) the submission of net worth restoration
plans;
``(B) earnings retention requirements;
``(C) prior written approval by the Board for
certain activities such as branching and entry
into new lines of business; and
``(D) the appointment of a conservator or
liquidating agent in appropriate circumstances;
``(3) establish reasonable net worth requirements,
including risk-based net worth requirements in the case
of complex credit unions, for various categories of
credit unions and prescribe the manner in which net
worth is calculated (for purposes of such requirements)
with regard to various types of investments, including
investments in corporate credit unions, taking into
account the unique nature and role of credit unions;
``(4) establish criteria for reclassifying the
capital classifications of credit unions that engage in
unsafe or unsound practices; and
``(5) are generally comparable with the prompt
corrective action provisions set forth in section 38 of
the Federal Deposit Insurance Act, taking into account
the distinct capital structure, cooperative nature, and
other characteristics of credit unions.''.
(b) Effective Date of Regulations.--
(1) Proposed regulations.--The National Credit Union
Administration Board shall publish, in the Federal
Register, proposed regulations which meet the
requirements of the amendment made by subsection (a)
before the end of the 270-day period beginning on the
date of the enactment of this Act.
(2) Final regulations.--The regulations required by
the amendment made by subsection (a) shall take effect
in final form by the end of the 18-month period
beginning on the date of the enactment of this Act.
(c) Report to Congress.--At the time the proposed prompt
corrective action regulations are published in the Federal
Register by the National Credit Union Administration Board
pursuant to subsection (b)(1), the Board shall submit a report
to the Congress on the differences and similarities between
such prompt corrective action regulations and the regulations
prescribed by the Federal bank agencies under section 38 of the
Federal Deposit Insurance Act.
SEC. 532. NATIONAL CREDIT UNION SHARE INSURANCE FUND EQUITY RATIO,
AVAILABLE ASSETS RATIO, AND STANDBY PREMIUM CHARGE.
(a) In General.--Section 202 of the Federal Credit Union Act
(12 U.S.C. 1782) is amended--
(1) by amending subsection (b) to read as follows:
``(b) Certified Statement.--
``(1) Statement required.--
``(A) In general.--For each calendar year in
the case of an insured credit union with total
assets of not more than $50,000,000, and for
each semi-annual period in the case of an
insured credit union with total assets of
$50,000,000 or more, an insured credit union
shall file with the Board, at such time as the
Board prescribes, a certified statement showing
the total amount of insured shares in the
credit union at the close of the relevant
period and both the amount of its deposit or
adjustment of deposit and the amount of the
insurance charge due to the fund for that
period, both as computed under subsection (c).
``(B) Exception for newly insured credit
union.--Subparagraph (A) shall not apply with
respect to a credit union that became insured
during the reporting period.
``(2) Form.--The certified statements required to be
filed with the Board pursuant to this subsection shall
be in such form and shall set forth such supporting
information as the Board shall require.
``(3) Certification.--The president of the credit
union or any officer designated by the board of
directors shall certify, with respect to each such
statement, that to the best of his or her knowledge and
belief the statement is true, correct, complete, and in
accordance with this title and the regulations issued
under this title.'';
(2) by amending clause (iii) of subsection (c)(1)(A)
to read as follows:
``(iii) Periodic adjustment.--The
amount of each insured credit union's
deposit shall be adjusted as follows,
in accordance with procedures
determined by the Board, to reflect
changes in the credit union's insured
shares:
``(I) annually, in the case
of an insured credit union with
total assets of not more than
$50,000,000; and
``(II) semi-annually, in the
case of an insured credit union
with total assets of
$50,000,000 or more.'';
(3) by amending paragraphs (2) and (3) of subsection
(c) to read as follows:
``(2) Insurance premium charges.--
``(A) In general.--Each insured credit union
shall, at such times as the Board prescribes
(but not more than twice in any calendar year),
pay to the fund a premium charge for insurance
in an amount stated as a percentage of insured
shares (which shall be the same for all insured
credit unions).
``(B) Relation of premium charge to equity
ratio of fund.--The Board may assess a premium
charge only if--
``(i) the fund's equity ratio is less
than 1.3 percent; and
``(ii) the premium charge does not
exceed the amount necessary to restore
the equity ratio to 1.3 percent.
``(C) Premium charge required if equity ratio
falls below 1.2 percent.--If the fund's equity
ratio is less than 1.2 percent, the Board
shall, subject to subparagraph (B), assess a
premium charge in such an amount as the Board
determines to be necessary to restore the
equity ratio to, and maintain that ratio at,
1.2 percent.
``(3) Distributions from fund required.--
``(A) In general.--The Board shall effect a
pro rata distribution to insured credit unions
after each calendar year if, as of the end of
that calendar year--
``(i) any loans to the fund from the
Federal Government, and any interest on
those loans, have been repaid;
``(ii) the fund's equity ratio
exceeds the normal operating level; and
``(iii) the fund's available assets
ratio exceeds 1.0 percent.
``(B) Amount of distribution.--The Board
shall distribute under subparagraph (A) the
maximum possible amount that--
``(i) does not reduce the fund's
equity ratio below the normal operating
level; and
``(ii) does not reduce the fund's
available assets ratio below 1.0
percent.
``(C) Calculation based on certified
statements.--In calculating the fund's equity
ratio and available assets ratio for purposes
of this paragraph, the Board shall determine
the aggregate amount of the insured shares in
all insured credit unions from insured credit
unions certified statements under subsection
(b) for the final reporting period of the
calendar year referred to in subparagraph
(A).'';
(4) by adding at the end of subsection (c) the
following new paragraph:
``(4) Timeliness and accuracy of data.--In
calculating the available assets ratio and equity ratio
of the fund, the Board shall use the most current and
accurate data reasonably available.''; and
(5) by amending subsection (h) to read as follows:
``(h) Definitions.--For purposes of this section, the
following definitions shall apply:
``(1) Available assets ratio.--The term `available
assets ratio', when applied to the fund, means the
ratio of--
``(A) the amount determined by subtracting--
``(i) direct liabilities of the fund
and contingent liabilities for which no
provision for losses has been made,
from
``(ii) the sum of cash and the market
value of unencumbered investments
authorized under section 203(c), to
``(B) the aggregate amount of the insured
shares in all insured credit unions.
``(2) Equity ratio.--The term `equity ratio', when
applied to the fund, means the ratio of--
``(A) the amount of fund capitalization,
including insured credit unions' 1 percent
capitalization deposits and the fund's retained
earnings balance (net of direct liabilities of
the fund and contingent liabilities for which
no provision for losses has been made), to
``(B) the aggregate amount of the insured
shares in all insured credit unions.
``(3) Insured shares.--The term `insured shares',
when applied to this section, includes share, share
draft, share certificate, and other similar accounts as
determined by the Board, but does not include amounts
exceeding the insured account limit set forth in
section 207(c)(1).
``(4) Normal operating level.--The term `normal
operating level', when applied to the fund, means an
equity ratio specified by the Board, which shall be not
less than 1.2 percent and not more than 1.5 percent.''.
(b) Effective Date.--This section shall become effective on
January 1 of the first calendar year beginning more than 180
days after the date of enactment of this Act.
SEC. 533. ACCESS TO LIQUIDITY.
Section 204 of the Federal Credit Union Act (12 U.S.C. 1784)
is amended by adding at the end the following new subsections:
``(f) Access to Liquidity.--The Board shall--
``(1) periodically assess the potential liquidity
needs of each insured credit union, and the options
that the credit union has available for meeting those
needs; and
``(2) periodically assess the potential liquidity
needs of insured credit unions as a group, and the
options that insured credit unions have available for
meeting those needs.
``(g) Sharing Information With Federal Reserve Banks.--The
Board shall, for the purpose of facilitating insured credit
unions' access to liquidity, make available to the Federal
reserve banks (subject to appropriate assurances of
confidentiality) information relevant to making advances to
such credit unions, including the Board's reports of
examination.''.
Subtitle D--Miscellaneous Provisions
SEC. 541. ASSURING INDEPENDENT DECISION MAKING IN CONNECTION WITH
CERTAIN CONVERSIONS.
Section 18 of the Federal Deposit Insurance Act (12 U.S.C.
1828) is amended by adding at the end the following new
subsection:
``(t) Conversions Involving Former Credit Unions.--
``(1) In general.--Notwithstanding any other
provision of law--
``(A) an insured credit union may not convert
into an insured depository institution; and
``(B) an insured depository institution which
resulted from a prior conversion of an insured
credit union into such insured depository
institution may not convert from the mutual
form to the stock form and may not convert from
1 form of depository institution into another,
unless the appropriate Federal banking agency for the
insured depository institution which results from any
such conversion reviews the conversion and determines
that the requirements of paragraphs (2) and (3) have
been met.
``(2) Prohibition on economic benefit from conversion
for credit union officers, directors, and committee
members.--An individual who is or, at any time during
the 5-year period preceding any conversion described in
paragraph (1), was a director, committee member, or
senior management official of an insured credit union
described in subparagraph (A) or (B) of such paragraph
(in connection with such conversion) may not receive
any economic benefit as a result of the conversion with
regard to the shares or interests of such director,
member, or officer in the former insured credit union
or in any resulting insured depository institution.
``(3) Acknowledgement and attestation by officers,
directors, and committee members.--Any insured credit
union or insured depository institution which is
seeking to engage in a conversion which is subject to
this subsection shall submit--
``(A) a written acknowledgement, in such form
and manner as the appropriate Federal banking
agency may prescribe, by every individual who
is subject to the prohibition contained in
paragraph (2), that such individual is aware of
such prohibition; and
``(B) an attestation that the conversion
under review will not result in a violation of
such prohibition.
``(4) Definitions.--For purposes of this subsection,
the following definitions shall apply:
``(A) Insured credit union.--The term
`insured credit union' has the meaning given to
such term in section 101(7) of the Federal
Credit Union Act.
``(B) Senior management official.--The term
`senior management official' means a chief
executive officer, an assistant chief executive
officer, a chief financial officer, and any
other senior executive officer (as defined by
the appropriate Federal banking agency pursuant
to section 32(f)).''.
SEC. 542. PAYMENT OF INTEREST ON RESERVES AT FEDERAL RESERVE BANKS.
(a) In General.--Section 19(b) of the Federal Reserve Act (12
U.S.C. 461(b)) is amended by adding at the end the following
new paragraph:
``(12) Earnings on reserves.--
``(A) In general.--Balances maintained at a
Federal reserve bank by or on behalf of a
depository institution to meet the reserve
requirements of this subsection applicable with
respect to such depository institution shall
receive earnings to be paid by the Federal
reserve bank at least once each calendar
quarter at a rate not to exceed the rate earned
on the securities portfolio of the Federal
Reserve System during the preceding quarter.
``(B) Regulations relating to payments and
distributions.--The Board may prescribe
regulations concerning--
``(i) the payment of earnings in
accordance with this paragraph;
``(ii) the distribution of such
earnings to the depository institutions
which maintain balances at such banks
or on whose behalf such balances are
maintained; and
``(iii) the responsibilities of
depository institutions, Federal home
loan banks, and the National Credit
Union Administration Central Liquidity
Facility with respect to the crediting
and distribution of earnings
attributable to balances maintained, in
accordance with subsection (c)(1)(B),
in a Federal reserve bank by any such
entity on behalf of depository
institutions which are not member
banks.''.
(b) Technical and Conforming Amendment.--
(1) Section 19(b)(4) of the Federal Reserve Act (12
U.S.C. 461(b)(4)) is amended by striking subparagraph
(C).
(2) Section 19(c)(1)(A) of the Federal Reserve Act
(12 U.S.C. 461(c)(1)(A)) is amended by striking
``subsection (b)(4)(C)'' and inserting ``subsection
(b)''.
SEC. 543. TRANSFER OF FEDERAL RESERVE SURPLUSES.
(a) Payments From Dividends and Surplus of Federal Reserve
Banks.--Section 7(a)(3) of the Federal Reserve Act (12 U.S.C.
289(3)) is amended by striking ``fiscal years 1997 and 1998''
and inserting ``fiscal years 1998 through 2003''.
(b) Additional Transfers for Fiscal Years 1999 Through
2003.--
(1) In general.--In addition to the amounts required
to be transferred from the surplus funds of the Federal
reserve banks pursuant to section 7(a)(3) of the
Federal Reserve Act and section 3002(b) of the Omnibus
Budget Reconciliation Act of 1993, the Federal reserve
banks shall transfer from such surplus funds to the
Board of Governors of the Federal Reserve System for
transfer to the Secretary of the Treasury for deposit
in the general fund of the Treasury, such sums as are
necessary to equal the net cost of this Act, as
estimated by the Office of Management and Budget,
through fiscal year 2003, except that the total amount
transferred for fiscal years 1999 through 2003 shall
not exceed $708,000,000.
(2) Allocation by fed.--Of the total amount required
to be paid by the Federal reserve banks under paragraph
(1) for fiscal years 1999 through 2003, the Board of
Governors of the Federal Reserve System shall determine
the amount each such bank shall pay in such fiscal
year.
(3) Replenishment of surplus fund prohibited.--No
Federal reserve bank may replenish such bank's surplus
fund by the amount of any transfer by such bank under
paragraph (1) during the fiscal year for which such
transfer is made.
amendments to be made in order to h.r. 10--financial services act of
1998, march 30, 1998
10. Bliley, Leach--20 minutes: Managers' Amendment. Makes
technical changes to treatment of derivatives under the
definition of traditional banking products in Title II. Makes a
technical tax reference change in the Subtitle establishing the
National Association of Registered Agents and Brokers. Makes
minor changes to Section 104(b) to define more exactly the
extent of the state preemption relating to insurance
affiliations. Makes a clarifying change to Section 104(b) to
the authority of the State securities regulators. Deletes
substantially all of Subtitle E of Title I, regarding
streamlining antitrust authority. Requires the Attorney General
to consider fully the deposits, products and other services of
all depository institutions in each relevant geographic area.
Requires the AG to count all savings associations, savings
banks and credit unions in the relevant geographic area.
29. Roukema--30 minutes: Increases from 5% to 15% the
amount of annual gross revenue from commercial activities
(applies to revenue derived in the United States).
26. Leach, Bereuter, Campbell--30 minutes: Amendment to the
Roukema Amendment. Eliminates the 5% commercial basket for
financial services holding companies. Provides that the
grandfather commercial basket of no more than 15% of the annual
gross revenues of the holding company in the proposed
substitute is subject to a sunset after 10 years. Provides that
revenues derived from subsidiary depository institutions of the
holding company must be excluded from the annual gross revenues
of the holding company in calculating the size of the basket.
Eliminates the 5% basket for wholesale financial services
holding companies. However, the grandfather and commodities
basket are retained.
24. Dingell, LaFalce--1 hour: Amends consumer protection
provisions by (1) restoring the SEC's enforcement authority;
(2) directing the financial regulators to review existing
disclosure requirements and, where needed, to promulgate rules
requiring financial services providers to give consumers and
investors clear and meaningful disclosure of all fees and
commissions; (3) requiring the Treasury Secretary, in
consultation with the Federal bank regulators and the SEC, to
devise a program to address the possible loss of financial
support for the Community Reinvestment Act because of
affiliation between banks, insurance companies and security
firms; (4) requiring an enforcement mechanism for life-line
banks; (5) requiring the Federal Trade Commission to report to
Congress on consumer privacy issues; (6) providing general
sales practice rules that address suitability; and (7) allowing
state consumer statutes to preempt federal regulations only
when the state statutes are stronger.
25. Bachus--20 minutes: Reduces Community Reinvestment Act
regulations on small banks.
----------
PART II
The amendments made in order by the rule are as follows:
1. An Amendment To Be Offered by Representative Bliley of Virginia, or
Representative Leach of Iowa, or a Designee, Debatable for 20 minutes
In section 206(a)(1)(F) of the Amendment in the Nature of a
Substitute, strike clauses (ii) and (iii), and insert the
following:
(ii) interest rates, except interest
rate derivative instruments (I) that
are based on a security or a group or
index of securities (other than
government securities or a group or
index of government securities); (II)
that provide for the delivery of one or
more securities (other than government
securities); or (III) that trade on a
national securities exchange; or
(iii) commodities, other rates,
indices, or other assets, except
derivative instruments (I) that are
securities or that are based on a group
or index of securities (other than
government securities or a group or
index of government securities);(II)
that provide for the delivery of one or more securities (other than
government securities); or (III) that trade on a national securities
exchange.
In section 206(a)(3) of the Amendment in the Nature of a
Substitute, strike ``and'' at the end of subparagraph (B);
redesignate subparagraph (C) as subparagraph (D); and after
subparagraph (B), insert the following new subparagraph:
``(C) the term `government securities'' has
the meaning provided in section 3(a)(42) of
such Act, and, for purposes of this section,
commercial paper, bankers acceptances, and
commercial bills shall be treated in the same
manner as government securities; and
In section 322(b) of the Amendment in the Nature of a
Substitute, strike paragraph (1) and insert the following:
(1) be a nonprofit corporation;
In section 104(b) of the Amendment in the Nature of a
Substitute, strike paragraph (3) and insert the following:
(3) State statutes, regulations, orders, and
interpretations (not relating to cross-marketing or any
other insurance sales and solicitation activities
subject to paragraph (2)) which are applicable to and
are applied in the same manner with respect to
insurance underwriting qualifications and activities of
an affiliate of an insured depository institution or a
wholesale financial institution as they are applicable
to and are applied to an insurance underwriter which is
not affiliated with an insured depository institution
or a wholesale financial institution shall not be
preempted under paragraph (1) if such a statute,
regulation, order, or interpretation does not have a
disparate impact on an insurance underwriter affiliated
with an insured depository institution or a wholesale
financial institution by virtue of such affiliation.
(4) Paragraph (1) shall not be construed as affecting
the jurisdiction of the securities commission (or any
agency or office performing like functions) of any
State under the laws of such State to investigate and
bring enforcement actions, consistent with section
18(c) of the Securities Act of 1933, with respect to
fraud or deceit or unlawful conduct by any person in
connection with securities or securities transactions.
In subtitle E of title I of the Amendment in the Nature of a
Substitute, strike sections 141, 142, 143, and 144, redesignate
section 144 as section 141, strike section 145, and conform the
table of contents accordingly.
At the end of subtitle A of title II of the Amendment in the
Nature of a Substitute, insert the following new section (and
conform the table of contents accordingly):
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.).
After the 1st sentence in paragraph (3) of section 3(b) of
the Bank Holding Company Act of 1956, as added by section
141(a)(1) of the amendment in the nature of a substitute,
insert the following new sentence: ``In every case, for
purposes of calculation of market shares to determine whether a
proposed acquisition transaction will substantially lessen
competition, tend to create a monopoly or restrain trade, the
Attorney General shall take into consideration fully and
equally the deposits, and any other measures used by the
Attorney General with respect to all product and service lines,
of each depository institution (as defined in section
19(b)(1)(A) of the Federal Reserve Act), in each relevant
geographic area.''.
At the end of paragraph (5) of section 18(c) of the Federal
Deposit Insurance Act, as amended by section 142(3) of the
amendment in the nature of a substitute, insert the following
new sentence: ``In every case, for purposes of calculation of
market shares to determine whether a proposed merger
transaction will substantially lessen competition, tend to
create a monopoly or restrain trade, the Attorney General shall
take into consideration fully and equally the deposits, and any
other measures used by the Attorney General with respect to all
product and service lines, of each depository institution (as
defined in section 19(b)(1)(A) of the Federal Reserve Act), in
each relevant geographic area.''.
----------
2. An Amendment To Be Offered by Representative Roukema of New Jersey,
or a Designee, Debatable for 30 Minutes
Strike subparagraph (A) of section 6(f)(1) of the Bank
Holding Company Act of 1956, as added by section 103(a) of the
amendment in the nature of a substitute, and insert the
following new subparagraph:
``(A) the aggregate annual gross revenues
derived from all such activities and all such
companies in the United States does not exceed
15 percent of the consolidated annual gross
revenues of the financial holding company in
the United States;''.
Strike paragraph (3) of section 6(f) of the Bank Holding
Company Act of 1956, as added by section 103(a) of the
amendment in the nature of a substitute, and insert the
following new paragraph:
``(3) Foreign banks.--In lieu of the limitation
contained in paragraph (1)(A) in the case of a foreign
bank or a company that owns or controls a foreign bank
which engages in any activity or acquires or retains
ownership or control of shares of any company pursuant
to paragraph (1), the aggregate annual gross revenues
derived from all such activities and all such companies
in the United States shall not exceed 15 percent of the
consolidated annual gross revenues of the foreign bank
or company in the United States derived from any
branch, agency, commercial lending company, or
depository institution controlled by the foreign bank
or company and any subsidiary engaged in the United
States in activities permissible under section 4 or
6.''.
Strike paragraph (4) of section 6(f) of the Bank Holding
Company Act of 1956, as added by section 103(a) of the
amendment in the nature of a substitute (and redesignate the
subsequent paragraph accordingly).
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3. A Substitute Amendment To Be Offered by Representative Leach of Iowa
or Representative Bereuter of Nebraska, or a Designee to the Amendment
Offered by Representative Roukema of New Jersey, Debatable for 30
Minutes
Strike subsection (f) of section 6 of the Bank Holding
Company Act of 1956, as added by section 103(a) of the
amendment in the nature of a substitute (and redesignate
subsequent subsections and any cross-reference to any such
subsection accordingly).
In paragraph (1) of subsection (f) (as so redesignated) of
section 6 of the Bank Holding Company Act of 1956, as added by
section 103(a) of the amendment in the nature of a substitute,
strike ``subsection (f)(1) and''.
In paragraph (2) of subsection (f) (as so redesignated) of
section 6 of the Bank Holding Company Act of 1956, as added by
section 103(a) of the amendment in the nature of a substitute--
(1) strike ``, as of the day before the company
becomes a financial holding company,''; and
(2) insert ``(excluding revenues derived from
subsidiary depository institutions)'' before ``, on a
consolidated basis''.
In paragraph (4) of subsection (f) (as so redesignated) of
section 6 of the Bank Holding Company Act of 1956, as added by
section 103(a) of the amendment in the nature of a substitute,
insert ``(excluding revenues derived from subsidiary depository
institutions)'' before the period at the end.
After paragraph (6) of subsection (f) (as so redesignated) of
section 6 of the Bank Holding Company Act of 1956, as added by
section 103(a) of the amendment in the nature of a substitute,
insert the following new paragraph:
``(7) Sunset of grandfather.--A financial holding
company engaged in any activity, or retaining direct or
indirect ownership or control of shares of a company,
pursuant to this subsection, shall terminate such
activity and divest ownership or control of the shares
of such company before the end of the 10-year period
beginning on the date of the enactment of the Financial
Services Act of 1998. The Board may, upon application
by a financial holding company, extend such 10-year
period by not to exceed an additional 5 years if such
extension would not be detrimental to the public
interest.
Strike paragraph (1) of section 10(c) of the Bank Holding
Company Act of 1956, as added by section 131(a) of the
amendment in the nature of a substitute (and redesignate
subsequent paragraphs and any cross reference to any such
paragraph accordingly).
In subparagraph (A) of paragraph (1) (as so redesignated) of
section 10(c) of the Bank Holding Company Act of 1956, as added
by section 131(a) of the amendment in the nature of a
substitute, strike ``paragraph (1)(A) and''.
In subparagraph (C) of paragraph (1) (as so redesignated) of
section 10(c) of the Bank Holding Company Act of 1956, as added
by section 131(a) of the amendment in the nature of a
substitute, strike ``or (g)''.
In subparagraph (A) of paragraph (3) (as so redesignated) of
section 10(c) of the Bank Holding Company Act of 1956, as added
by section 131(a) of the amendment in the nature of a
substitute, strike ``, (2), or (3)'' and insert ``or (2)''.
4. An Amendment To Be Offered by Representative Dingell of Michigan or
Representative LaFalce of New York, or a Designee, Debatable for 60
Minutes
In section 17(i)(6) of the Securities Exchange Act of 1934,
as amended by section 231(a) of the Amendment in the Nature of
a Substitute, after ``For purposes of this subsection'' insert
``and subsection (j)''.
In section 17 of the Securities Exchange Act of 1934, as
amended by section 231(a) of the Amendment in the Nature of a
Substitute, redesignate subsection (j) as subsection (k) and
before such redesignated subsection (k) insert the following
new subsection:
``(j) Commission Backup Authority.--
``(1) Authority.--The Commission may make inspections
of any wholesale financial holding company that--
``(A) controls a wholesale financial
institution,
``(B) is not a foreign bank, and
``(C) does not control an insured bank (other
than an institution permitted undersubparagraph
(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''.
At the end of title II of the Amendment in the Nature of a
Substitute, insert the following new subtitle (and conform the
table of contents accordingly):
Subtitle E--Disclosure of Customer Costs of Acquiring Financial
Products
SEC. 251. IMPROVED AND CONSISTENT DISCLOSURE.
(a) Revised Regulations Required.--Within one year after the
date of enactment of this Act, each Federal financial
regulatory authority shall prescribe rules, or revisions to its
rules, to improve the accuracy, simplicity, and completeness,
and to make more consistent, the disclosure of information by
persons subject to the jurisdiction of such regulatory
authority concerning any commissions, fees, markups, or other
costs incurred by customers in the acquisition of financial
products.
(b) Consultation.--In prescribing rules and revisions under
subsection (a), the Federal financial regulatory authorities
shall consult with each other and with appropriate State
financial regulatory authorities.
(c) Consideration of Existing Disclosures.--In prescribing
rules and revisions under subsection (a), the Federal financial
regulatory authorities shall consider the sufficiency and
appropriateness of then existing laws and rules applicable to
persons subject to their jurisdiction, and may prescribe
exemptions to the extent appropriate in light of the objective
of this section to increase the consistency of disclosure
practices.
(d) Enforcement.--Any rule prescribed by a Federal financial
regulatory authority pursuant to this section shall, for
purposes of enforcement, be treated as a rule prescribed by
such regulatory authority pursuant to the statute establishing
such regulatory authority's jurisdiction over the persons to
whom such rule applies.
(e) Definition.--As used in this section, the term ``Federal
financial regulatory authority'' means the Board of Governors
of the Federal Reserve System, the Securities and Exchange
Commission, the Comptroller of the Currency, the Federal
Deposit Insurance Corporation, the Commodity Futures Trading
Commission, and any self-regulatory organization under the
supervision of any of the foregoing.
At the end of subtitle A of title I of the Amendment in the
Nature of a Substitute, insert the following new section (and
amend the table of contents accordingly):
SEC. 109. RESPONSIVENESS TO COMMUNITY NEEDS FOR FINANCIAL SERVICES.
(a) Affirmative Obligation.--The purpose of this section is
to recognize that financial holding companies and nondepository
institution affiliates of financial holding companies have,
with respect to communities where such companies and affiliates
have a business presence, a continuing and affirmative
obligation to meet the need for financial services in such
communities, including the needs of low- and moderate-income
neighborhoods and persons of modest means.
(b) Program.--The Secretary of the Treasury, in consultation
with the Federal banking agencies (as defined in section 3(z)
of the Federal Deposit Insurance Act) and the Securities and
Exchange Commission, shall develop a program to ensure that
financial holding companies and the nondepository institution
affiliates of such companies meet the obligation described in
subsection (a).
(c) Report.--Before the end of the 1-year period beginning on
the date of the enactment of this Act, the Secretary of the
Treasury shall submit a report to the Congress on the program
required under subsection (b), including recommendations for
such administrative and legislative action as the Secretary
determines to be appropriate to implement that program.
In paragraph (1) of section 6(d) of the Bank Holding Company
Act of 1956, as added by section 103(a) of the amendment in the
nature of a substitute, strike ``or (C)'' and insert ``(C), or
(D)''.
In paragraph (4)(D) of section 6(d) of the Bank Holding
Company Act of 1956, as added by section 103(a) of the
amendment in the nature of a substitute, strike ``or (C)'' and
insert ``(C), or (D)''.
After section 108 of the amendment in the nature of a
substitute, insert the following new section (and amend the
table of contents accordingly):
SEC. 110. REPORTS ON ONGOING FTC STUDY OF CONSUMER PRIVACY ISSUES.
With respect to the ongoing multistage study being conducted
by the Federal Trade Commission on consumer privacy issues, the
Commission shall submit 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, to the Committee
on Commerce and the Committee on Banking and Financial Services
of the House of Representatives and the Committee on Banking,
Housing, and Urban Affairs of the Senate at the conclusion of
each stage of such study and a final report at the conclusion
of the study.
In paragraph (1) of section 45(a) of the Federal Deposit
Insurance Act, as added by section 308(a) of the amendment in
the nature of a substitute, insert ``governing sales
practices'' after ``regulations'' in the portion of such
paragraph which precedes subparagraph (A).
Strike the heading for subsection (b) of section 45 of the
Federal Deposit Insurance Act, as added by section 308(a) of
the amendment in the nature of a substitute, and insert
``Anticoercion Rules.--''.
Strike paragraph (2) of section 45(g) of the Federal Deposit
Insurance Act, as added by section 308(a) of the amendment in
the nature of a substitute, and insert the following new
paragraph:
``(2) Effect on other laws.--Regulations prescribed
by a Federal banking agency under this section 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 regulations prescribed by a
Federal banking agency under this section and then only
to the extent of the inconsistency. For purposes of
this paragraph, a State statute, regulation, order, or
interpretation is not inconsistent with the regulations
prescribed by a Federal banking agency under this
section if the protection such statute, regulation,
order, or interpretation affords any consumer is
greater than the protection provided by the regulations
under this section''.
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5. An Amendment To Be Offered by Representative Bachus of Alabama, or a
Designee, Debatable for 20 Minutes
After section 181, insert the following new section (and
amend the table of contents accordingly):
SEC. 182. COMMUNITY REINVESTMENT ACT OF 1977 AMENDMENTS.
(a) Existing Standards Applicable Only to Larger Depository
Institutions.--Section 804(a) of the Community Reinvestment Act
of 1977 (12 U.S.C. 2903(a)) is amended by inserting ``which has
total assets of $500,000,000 or more'' after ``financial
institution'' where such term appears in the portion of such
section which precedes paragraph (1).
(b) Flexible Standards for Small Depository Institutions.--
Section 804 of the Community Reinvestment Act of 1977 (12
U.S.C. 2903) is amended by adding at the end the following new
subsection:
``(c) Evaluation of Smaller Institutions.--With regard to
regulated financial institutions which have less than
$500,000,000 in total assets, the appropriate Federal financial
supervisory agency shall--
``(1) prescribe criteria for periodically reviewing
the record of each such financial institution's in
providing affordable financial services to all
individuals of modest means within its entire
community, including low- and moderate-income
neighborhoods; and
``(2) provide for making the results of such review
publicly available.''.
(c) Indexing.--Section 804 of the Community Reinvestment Act
of 1977 (12 U.S.C. 2903) is amended by inserting after
subsection (c) (as added by subsection (b) of this section) the
following new subsection:
``(d) Indexing.--After December 31, 1998, the appropriate
Federal financial supervisory agencies shall jointly and
annually adjust the dollar amount contained subsections (a) and
(c) by the annual percentage increase in the Consumer Price
Index for Urban Wage Earners and Clerical Workers published by
the Bureau of Labor Statistics.''.
(d) Technical and Conforming Amendment.--Section 807(a) of
the Community Reinvestment Act of 1977 (12 U.S.C. 2906) is
amended by striking ``section 804'' and inserting ``section
804(a)''.