[House Report 106-434]
[From the U.S. Government Publishing Office]
106th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 106-434
======================================================================
GRAMM-LEACH-BLILEY ACT
_______
November 2, 1999.--Ordered to be printed
_______
Mr. Leach, from the committee of conference, submitted the following
CONFERENCE REPORT
[To accompany S. 900]
The committee of conference on the disagreeing votes of
the two Houses on the amendments of the House to the bill (S.
900), to enhance competition in the financial services industry
by providing a prudential framework for the affiliation of
banks, securities firms, insurance companies, and other
financial service providers, and for other purposes, having
met, after full and free conference, have agreed to recommend
and do recommend to their respective Houses as follows:
That the Senate recede from its disagreement to the
amendment of the House to the text of the bill and agree to the
same with an amendment as follows:
In lieu of the matter proposed to be inserted by the
House amendment, insert the following:
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Gramm-
Leach-Bliley Act''.
(b) Table of Contents.--The table of contents for this Act
is as follows:
Sec. 1. Short title; table of contents.
TITLE I--FACILITATING AFFILIATION AMONG BANKS, SECURITIES FIRMS, AND
INSURANCE COMPANIES
Subtitle A--Affiliations
Sec. 101. Glass-Steagall Act repeals.
Sec. 102. Activity restrictions applicable to bank holding companies
that are not financial holding companies.
Sec. 103. Financial activities.
Sec. 104. Operation of State law.
Sec. 105. Mutual bank holding companies authorized.
Sec. 106. Prohibition on deposit production offices.
Sec. 107. Cross marketing restriction; limited purpose bank relief;
divestiture.
Sec. 108. Use of subordinated debt to protect financial system and
deposit funds from ``too big to fail'' institutions.
Sec. 109. Study of financial modernization's effect on the accessibility
of small business and farm loans.
Subtitle B--Streamlining Supervision of Bank Holding Companies
Sec. 111. Streamlining bank holding company supervision.
Sec. 112. Authority of State insurance regulator and Securities and
Exchange Commission.
Sec. 113. Role of the Board of Governors of the Federal Reserve System.
Sec. 114. Prudential safeguards.
Sec. 115. Examination of investment companies.
Sec. 116. Elimination of application requirement for financial holding
companies.
Sec. 117. Preserving the integrity of FDIC resources.
Sec. 118. Repeal of savings bank provisions in the Bank Holding Company
Act of 1956.
Sec. 119. Technical amendment.
Subtitle C--Subsidiaries of National Banks
Sec. 121. Subsidiaries of national banks.
Sec. 122. Consideration of merchant banking activities by financial
subsidiaries.
Subtitle D--Preservation of FTC Authority
Sec. 131. Amendment to the Bank Holding Company Act of 1956 to modify
notification and post-approval waiting period for section 3
transactions.
Sec. 132. Interagency data sharing.
Sec. 133. Clarification of status of subsidiaries and affiliates.
Subtitle E--National Treatment
Sec. 141. Foreign banks that are financial holding companies.
Sec. 142. Representative offices.
Subtitle F--Direct Activities of Banks
Sec. 151. Authority of national banks to underwrite certain municipal
bonds.
Subtitle G--Effective Date
Sec. 161. Effective date.
TITLE II--FUNCTIONAL REGULATION
Subtitle A--Brokers and Dealers
Sec. 201. Definition of broker.
Sec. 202. Definition of dealer.
Sec. 203. Registration for sales of private securities offerings.
Sec. 204. Information sharing.
Sec. 205. Treatment of new hybrid products.
Sec. 206. Definition of identified banking product.
Sec. 207. Additional definitions.
Sec. 208. Government securities defined.
Sec. 209. Effective date.
Sec. 210. Rule of construction.
Subtitle B--Bank Investment Company Activities
Sec. 211. Custody of investment company assets by affiliated bank.
Sec. 212. Lending to an affiliated investment company.
Sec. 213. Independent directors.
Sec. 214. Additional SEC disclosure authority.
Sec. 215. Definition of broker under the Investment Company Act of 1940.
Sec. 216. Definition of dealer under the Investment Company Act of 1940.
Sec. 217. Removal of the exclusion from the definition of investment
adviser for banks that advise investment companies.
Sec. 218. Definition of broker under the Investment Advisers Act of
1940.
Sec. 219. Definition of dealer under the Investment Advisers Act of
1940.
Sec. 220. Interagency consultation.
Sec. 221. Treatment of bank common trust funds.
Sec. 222. Statutory disqualification for bank wrongdoing.
Sec. 223. Conforming change in definition.
Sec. 224. Conforming amendment.
Sec. 225. Effective date.
Subtitle C--Securities and Exchange Commission Supervision of Investment
Bank Holding Companies
Sec. 231. Supervision of investment bank holding companies by the
Securities and Exchange Commission.
Subtitle D--Banks and Bank Holding Companies
Sec. 241. Consultation.
TITLE III--INSURANCE
Subtitle A--State Regulation of Insurance
Sec. 301. Functional regulation of insurance.
Sec. 302. Insurance underwriting in national banks.
Sec. 303. Title insurance activities of national banks and their
affiliates.
Sec. 304. Expedited and equalized dispute resolution for Federal
regulators.
Sec. 305. Insurance customer protections.
Sec. 306. Certain State affiliation laws preempted for insurance
companies and affiliates.
Sec. 307. Interagency consultation.
Sec. 308. Definition of State.
Subtitle B--Redomestication of Mutual Insurers
Sec. 311. General application.
Sec. 312. Redomestication of mutual insurers.
Sec. 313. Effect on State laws restricting redomestication.
Sec. 314. Other provisions.
Sec. 315. Definitions.
Sec. 316. Effective date.
Subtitle C--National Association of Registered Agents and Brokers
Sec. 321. State flexibility in multistate licensing reforms.
Sec. 322. National Association of Registered Agents and Brokers.
Sec. 323. Purpose.
Sec. 324. Relationship to the Federal Government.
Sec. 325. Membership.
Sec. 326. Board of directors.
Sec. 327. Officers.
Sec. 328. Bylaws, rules, and disciplinary action.
Sec. 329. Assessments.
Sec. 330. Functions of the NAIC.
Sec. 331. Liability of the association and the directors, officers, and
employees of the association.
Sec. 332. Elimination of NAIC oversight.
Sec. 333. Relationship to State law.
Sec. 334. Coordination with other regulators.
Sec. 335. Judicial review.
Sec. 336. Definitions.
Subtitle D--Rental Car Agency Insurance Activities
Sec. 341. Standard of regulation for motor vehicle rentals.
TITLE IV--UNITARY SAVINGS AND LOAN HOLDING COMPANIES
Sec. 401. Prevention of creation of new S&L holding companies with
commercial affiliates.
TITLE V--PRIVACY
Subtitle A--Disclosure of Nonpublic Personal Information
Sec. 501. Protection of nonpublic personal information.
Sec. 502. Obligations with respect to disclosures of personal
information.
Sec. 503. Disclosure of institution privacy policy.
Sec. 504. Rulemaking.
Sec. 505. Enforcement.
Sec. 506. Protection of Fair Credit Reporting Act.
Sec. 507. Relation to State laws.
Sec. 508. Study of information sharing among financial affiliates.
Sec. 509. Definitions.
Sec. 510. Effective date.
Subtitle B--Fraudulent Access to Financial Information
Sec. 521. Privacy protection for customer information of financial
institutions.
Sec. 522. Administrative enforcement.
Sec. 523. Criminal penalty.
Sec. 524. Relation to State laws.
Sec. 525. Agency guidance.
Sec. 526. Reports.
Sec. 527. Definitions.
TITLE VI--FEDERAL HOME LOAN BANK SYSTEM MODERNIZATION
Sec. 601. Short title.
Sec. 602. Definitions.
Sec. 603. Savings association membership.
Sec. 604. Advances to members; collateral.
Sec. 605. Eligibility criteria.
Sec. 606. Management of banks.
Sec. 607. Resolution Funding Corporation.
Sec. 608. Capital structure of Federal home loan banks.
TITLE VII--OTHER PROVISIONS
Subtitle A--ATM Fee Reform
Sec. 701. Short title.
Sec. 702. Electronic fund transfer fee disclosures at any host ATM.
Sec. 703. Disclosure of possible fees to consumers when ATM card is
issued.
Sec. 704. Feasibility study.
Sec. 705. No liability if posted notices are damaged.
Subtitle B--Community Reinvestment
Sec. 711. CRA sunshine requirements.
Sec. 712. Small bank regulatory relief.
Sec. 713. Federal Reserve Board study of CRA lending.
Sec. 714. Preserving the Community Reinvestment Act of 1977.
Sec. 715. Responsiveness to community needs for financial services.
Subtitle C--Other Regulatory Improvements
Sec. 721. Expanded small bank access to S corporation treatment.
Sec. 722. ``Plain language'' requirement for Federal banking agency
rules.
Sec. 723. Retention of ``Federal'' in name of converted Federal savings
association.
Sec. 724. Control of bankers' banks.
Sec. 725. Provision of technical assistance to microenterprises.
Sec. 726. Federal Reserve audits.
Sec. 727. Authorization to release reports.
Sec. 728. General Accounting Office study of conflicts of interest.
Sec. 729. Study and report on adapting existing legislative requirements
to online banking and lending.
Sec. 730. Clarification of source of strength doctrine.
Sec. 731. Interest rates and other charges at interstate branches.
Sec. 732. Interstate branches and agencies of foreign banks.
Sec. 733. Fair treatment of women by financial advisers.
Sec. 734. Membership of loan guarantee boards.
Sec. 735. Repeal of stock loan limit in Federal Reserve Act.
Sec. 736. Elimination of SAIF and DIF special reserves.
Sec. 737. Bank officers and directors as officers and directors of
public utilities.
Sec. 738. Approval for purchases of securities.
Sec. 739. Optional conversion of Federal savings associations.
Sec. 740. Grand jury proceedings.
TITLE I--FACILITATING AFFILIATION AMONG BANKS, SECURITIES FIRMS, AND
INSURANCE COMPANIES
Subtitle A--Affiliations
SEC. 101. GLASS-STEAGALL ACT REPEALS.
(a) Section 20 Repealed.--Section 20 of the Banking Act of
1933 (12 U.S.C. 377) (commonly referred to as the ``Glass-
Steagall Act'') is repealed.
(b) Section 32 Repealed.--Section 32 of the Banking Act of
1933 (12 U.S.C. 78) is repealed.
SEC. 102. ACTIVITY RESTRICTIONS APPLICABLE TO BANK HOLDING COMPANIES
THAT ARE NOT FINANCIAL HOLDING COMPANIES.
(a) In General.--Section 4(c)(8) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1843(c)(8)) is amended to read
as follows:
``(8) shares of any company the activities of which
had been determined by the Board by regulation or order
under this paragraph as of the day before the date of
the enactment of the Gramm-Leach-Bliley Act, to be so
closely related to banking as to be a proper incident
thereto (subject to such terms and conditions contained
in such regulation or order, unless modified by the
Board);''.
(b) Conforming Changes to Other Statutes.--
(1) Amendment to the bank holding company act
amendments of 1970.--Section 105 of the Bank Holding
Company Act Amendments of 1970 (12 U.S.C. 1850) is
amended by striking ``, to engage directly or
indirectly in a nonbanking activity pursuant to section
4 of such Act,''.
(2) Amendment to the bank service company act.--
Section 4(f) of the Bank Service Company Act (12 U.S.C.
1864(f)) is amended by inserting before the period at
the end the following: ``as of the day before the date
of the enactment of the Gramm-Leach-Bliley Act''.
SEC. 103. FINANCIAL ACTIVITIES.
(a) In General.--Section 4 of the Bank Holding Company Act
of 1956 (12 U.S.C. 1843) is amended by adding at the end the
following new subsections:
``(k) Engaging in Activities That Are Financial in
Nature.--
``(1) In general.--Notwithstanding subsection (a),
a financial holding company may engage in any activity,
and may acquire and retain the shares of any company
engaged in any activity, that the Board, in accordance
with paragraph (2), determines (by regulation or
order)--
``(A) to be financial in nature or
incidental to such financial activity; or
``(B) is complementary to a financial
activity and does not pose a substantial risk
to the safety or soundness of depository
institutions or the financial system generally.
``(2) Coordination between the board and the
secretary of the treasury.--
``(A) Proposals raised before the board.--
``(i) Consultation.--The Board
shall notify the Secretary of the
Treasury of, and consult with the
Secretary of the Treasury concerning,
any request, proposal, or application
under this subsection for a
determination of whether an activity is
financial in nature or incidental to a
financial activity.
``(ii) Treasury view.--The Board
shall not determine that any activity
is financial in nature or incidental to
a financial activity under this
subsection if the Secretary of the
Treasury notifies the Board in writing,
not later than 30 days after the date
of receipt of the notice described in
clause (i) (or such longer period as
the Board determines to be appropriate
under the circumstances) that the
Secretary of the Treasury believes that
the activity is not financial in nature
or incidental to a financial activity
or is not otherwise permissible under
this section.
``(B) Proposals raised by the treasury.--
``(i) Treasury recommendation.--The
Secretary of the Treasury may, at any
time, recommend in writing that the
Board find an activity to be financial
in nature or incidental to a financial
activity.
``(ii) Time period for board
action.--Not later than 30 days after
the date of receipt of a written
recommendation from the Secretary of
the Treasury under clause (i) (or such
longer period as the Secretary of the
Treasury and the Board determine to be
appropriate under the circumstances),
the Board shall determine whether to
initiate a public rulemaking proposing
that the recommended activity be found
to be financial in nature or incidental
to a financial activity under this subsection,
and shall notify the Secretary of the Treasury
in writing of the determination of the Board
and, if the Board determines not to seek public
comment on the proposal, the reasons for that
determination.
``(3) Factors to be considered.--In determining
whether an activity is financial in nature or
incidental to a financial activity, the Board shall
take into account--
``(A) the purposes of this Act and the
Gramm-Leach-Bliley Act;
``(B) changes or reasonably expected
changes in the marketplace in which financial
holding companies compete;
``(C) changes or reasonably expected
changes in the technology for delivering
financial services; and
``(D) whether such activity is necessary or
appropriate to allow a financial holding
company and the affiliates of a financial
holding company to--
``(i) compete effectively with any
company seeking to provide financial
services in the United States;
``(ii) efficiently deliver
information and services that are
financial in nature through the use of
technological means, including any
application necessary to protect the
security or efficacy of systems for the
transmission of data or financial
transactions; and
``(iii) offer customers any
available or emerging technological
means for using financial services or
for the document imaging of data.
``(4) Activities that are financial in nature.--For
purposes of this subsection, the following activities
shall be considered to be financial in nature:
``(A) Lending, exchanging, transferring,
investing for others, or safeguarding money or
securities.
``(B) Insuring, guaranteeing, or
indemnifying against loss, harm, damage,
illness, disability, or death, or providing and
issuing annuities, and acting as principal,
agent, or broker for purposes of the foregoing,
in any State.
``(C) Providing financial, investment, or
economic advisory services, including advising
an investment company (as defined in section 3
of the Investment Company Act of 1940).
``(D) Issuing or selling instruments
representing interests in pools of assets
permissible for a bank to hold directly.
``(E) Underwriting, dealing in, or making a
market in securities.
``(F) Engaging in any activity that the
Board has determined, by order or regulation
that is in effect on the date of the enactment
of the Gramm-Leach-Bliley Act, to be so closely
related to banking or managing or controlling
banks as to be a proper incident thereto
(subject to the same terms and conditions
contained in such order or regulation, unless
modified by the Board).
``(G) Engaging, in the United States, in
any activity that--
``(i) a bank holding company may
engage in outside of the United States;
and
``(ii) the Board has determined,
under regulations prescribed or
interpretations issued pursuant to
subsection (c)(13) (as in effect on the
day before the date of the enactment of
the Gramm-Leach-Bliley Act) to be usual
in connection with the transaction of
banking or other financial operations
abroad.
``(H) Directly or indirectly acquiring or
controlling, whether as principal, on behalf of
1 or more entities (including entities, other
than a depository institution or subsidiary of
a depository institution, that the bank holding
company controls), or otherwise, shares,
assets, or ownership interests (including debt
or equity securities, partnership interests,
trust certificates, or other instruments
representing ownership) of a company or other
entity, whether or not constituting control of
such company or entity, engaged in any activity
not authorized pursuant to this section if--
``(i) the shares, assets, or
ownership interests are not acquired or
held by a depository institution or
subsidiary of a depository institution;
``(ii) such shares, assets, or
ownership interests are acquired and
held by--
(I) a securities affiliate
or an affiliate thereof; or
(II) an affiliate of an
insurance company described in
subparagraph (I)(ii) that
provides investment advice to
an insurance company and is
registered pursuant to the
Investment Advisers Act of
1940, or an affiliate of such
investment adviser;
as part of a bona fide underwriting or
merchant or investment banking
activity, including investment
activities engaged in for the purpose
of appreciation and ultimate resale or
disposition of the investment;
``(iii) such shares, assets, or
ownership interests are held for a
period of time to enable the sale or
disposition thereof on a reasonable
basis consistent with the financial
viability of the activities described
in clause (ii); and
``(iv) during the period such
shares, assets, or ownership interests
are held, the bank holding company does
not routinely manage or operate such
company or entity except as may be
necessary or required to obtain a
reasonable return on investment upon
resale or disposition.
``(I) Directly or indirectly acquiring or
controlling, whether as principal, on behalf of
1 or more entities (including entities, other
than a depository institution or subsidiary of
a depository institution, that the bank holding
company controls) or otherwise, shares, assets,
or ownership interests (including debt or
equity securities, partnership interests, trust
certificates or other instruments representing
ownership) of a company or other entity,
whether or not constituting control of such
company or entity, engaged in any activity not
authorized pursuant to this section if--
``(i) the shares, assets, or
ownership interests are not acquired or
held by a depository institution or a
subsidiary of a depository institution;
``(ii) such shares, assets, or
ownership interests are acquired and
held by an insurance company that is
predominantly engaged in underwriting
life, accident and health, or property
and casualty insurance (other than
credit-related insurance) or providing
and issuing annuities;
``(iii) such shares, assets, or
ownership interests represent an
investment made in the ordinary course
of business of such insurance company
in accordance with relevant State law
governing such investments; and
``(iv) during the period such
shares, assets, or ownership interests
are held, the bank holding company does
not routinely manage or operate such
company except as may be necessary or
required to obtain a reasonable return
on investment.
``(5) Actions required.--
``(A) In general.--The Board shall, by
regulation or order, define, consistent with
the purposes of this Act, the activities
described in subparagraph (B) as financial in
nature, and the extent to which such activities
are financial in nature or incidental to a
financial activity.
``(B) Activities.--The activities described
in this subparagraph are as follows:
``(i) Lending, exchanging,
transferring, investing for others, or
safeguarding financial assets other
than money or securities.
``(ii) Providing any device or
other instrumentality for transferring
money or other financial assets.
``(iii) Arranging, effecting, or
facilitating financial transactions for
the account of third parties.
``(6) Required notification.--
``(A) In general.--A financial holding
company that acquires any company or commences
any activity pursuant to this subsection shall
provide written notice to the Board describing
the activity commenced or conducted by the
company acquired not later than 30 calendar
days after commencing the activity or
consummating the acquisition, as the case may
be.
``(B) Approval not required for certain
financial activities.--Except as provided in
subsection (j) with regard to the acquisition
of a savings association, a financial holding
company may commence any activity, or acquire
any company, pursuant to paragraph (4) or any
regulation prescribed or order issued under
paragraph (5), without prior approval of the
Board.
``(7) Merchant banking activities.--
``(A) Joint regulations.--The Board and the
Secretary of the Treasury may issue such
regulations implementing paragraph (4)(H),
including limitations on transactions between
depository institutions and companies
controlled pursuant to such paragraph, as the
Board and the Secretary jointly deem
appropriate to assure compliance with the
purposes and prevent evasions of this Act and
the Gramm-Leach-Bliley Act and to protect
depository institutions.
``(B) Sunset of restrictions on merchant
banking activities of financial subsidiaries.--
The restrictions contained in paragraph (4)(H)
on the ownership and control of shares, assets,
or ownership interests by or on behalf of a
subsidiary of a depository institution shall
not apply to a financial subsidiary (as defined
in section 5136A of the Revised Statutes of the
United States) of a bank, if the Board and the
Secretary of the Treasury jointly authorize
financial subsidiaries of banks to engage in
merchant banking activities pursuant to section
122 of the Gramm-Leach-Bliley Act.
``(l) Conditions for Engaging in Expanded Financial
Activities.--
``(1) In general.--Notwithstanding subsection (k),
(n), or (o), a bank holding company may not engage in
any activity, or directly or indirectly acquire or
retain shares of any company engaged in any activity,
under subsection (k), (n), or (o), other than
activities permissible for any bank holding company
under subsection (c)(8), unless--
``(A) all of the depository institution
subsidiaries of the bank holding company are
well capitalized;
``(B) all of the depository institution
subsidiaries of the bank holding company are
well managed; and
``(C) the bank holding company has filed
with the Board--
``(i) a declaration that the
company elects to be a financial
holding company to engage in activities
or acquire and retain shares of a
company that were not permissible for a
bank holding company to engage in or
acquire before the enactment of the
Gramm-Leach-Bliley Act; and
``(ii) a certification that the
company meets the requirements of
subparagraphs (A) and (B).
``(2) CRA requirement.--Notwithstanding subsection
(k) or (n) of this section, section 5136A(a) of the
Revised Statutes of the United States, or section 46(a)
of the Federal Deposit Insurance Act, the appropriate
Federal banking agency shall prohibit a financial
holding company or any insured depository institution
from--
``(A) commencing any new activity under
subsection (k) or (n) of this section, section
5136A(a) of the Revised Statutes of the United
States, or section 46(a) of the Federal Deposit
Insurance Act; or
``(B) directly or indirectly acquiring
control of a company engaged in any activity
under subsection (k) or (n) of this section,
section 5136A(a) of the Revised Statutes of the
United States, or section 46(a) of the Federal
Deposit Insurance Act (other than an investment
made pursuant to subparagraph (H) or (I) of
subsection (k)(4), or section 122 of the Gramm-
Leach-Bliley Act, or under section 46(a) of the
Federal Deposit Insurance Act by reason of such
section 122, by an affiliate already engaged in
activities under any such provision);
if any insured depository institution subsidiary of
such financial holding company, or the insured
depository institution or any of its insured depository
institution affiliates, has received in its most recent
examination under the Community Reinvestment Act of
1977, a rating of less than `satisfactory record of
meeting community credit needs'.
``(3) Foreign banks.--For purposes of paragraph
(1), the Board shall apply comparable capital and
management standards to a foreign bank that operates a
branch or agency or owns or controls a commercial
lending company in the United States, giving due regard
to the principle of national treatment and equality of
competitive opportunity.
``(m) Provisions Applicable to Financial Holding Companies
That Fail To Meet Certain Requirements.--
``(1) In general.--If the Board finds that--
``(A) a financial holding company is
engaged, directly or indirectly, in any
activity under subsection (k), (n), or (o),
other than activities that are permissible
for a bank holding company under subsection
(c)(8); and
``(B) such financial holding company is not
in compliance with the requirements of
subsection (l)(1);
the Board shall give notice to the financial holding
company to that effect, describing the conditions
giving rise to the notice.
``(2) Agreement to correct conditions required.--
Not later than 45 days after the date of receipt by a
financial holding company of a notice given under
paragraph (1) (or such additional period as the Board
may permit), the financial holding company shall
execute an agreement with the Board to comply with the
requirements applicable to a financial holding company
under subsection (l)(1).
``(3) Board may impose limitations.--Until the
conditions described in a notice to a financial holding
company under paragraph (1) are corrected, the Board
may impose such limitations on the conduct or
activities of that financial holding company or any
affiliate of that company as the Board determines to be
appropriate under the circumstances and consistent with
the purposes of this Act.
``(4) Failure to correct.--If the conditions
described in a notice to a financial holding company
under paragraph (1) are not corrected within 180 days
after the date of receipt by the financial holding
company of a notice under paragraph (1), the Board may
require such financial holding company, under such
terms and conditions as may be imposed by the Board and
subject to such extension of time as may be granted in
the discretion of the Board, either--
``(A) to divest control of any subsidiary
depository institution; or
``(B) at the election of the financial
holding company instead to cease to engage in
any activity conducted by such financial
holding company or its subsidiaries (other than
a depository institution or a subsidiary of a
depository institution) that is not an activity
that is permissible for a bank holding company
under subsection (c)(8).
``(5) Consultation.--In taking any action under
this subsection, the Board shall consult with all
relevant Federal and State regulatory agencies and
authorities.
``(n) Authority To Retain Limited Nonfinancial Activities
and Affiliations.--
``(1) In general.--Notwithstanding subsection (a),
a company that is not a bank holding company or a
foreign bank (as defined in section 1(b)(7) of the
International Banking Act of 1978) and becomes a
financial holding company after the date of the
enactment of the Gramm-Leach-Bliley Act may continue to
engage in any activity and retain direct or indirect
ownership or control of shares of a company engaged in
any activity if--
``(A) the holding company lawfully was
engaged in the activity or held the shares of
such company on September 30, 1999;
``(B) the holding company is predominantly
engaged in financial activities as defined in
paragraph (2); and
``(C) the company engaged in such activity
continues to engage only in the same activities
that such company conducted on September 30,
1999, and other activities permissible under
this Act.
``(2) Predominantly financial.--For purposes of
this subsection, a company is predominantly engaged in
financial activities if the annual grossrevenues
derived by the holding company and all subsidiaries of
the holding company (excluding revenues derived from
subsidiary depository institutions), on a consolidated
basis, from engaging in activities that are financial
in nature or are incidental to a financial activity
under subsection (k) represent at least 85 percent of
the consolidated annual gross revenues of the company.
``(3) No expansion of grandfathered commercial
activities through merger or consolidation.--A
financial holding company that engages in activities or
holds shares pursuant to this subsection, or a
subsidiary of such financial holding company, may not
acquire, in any merger, consolidation, or other type of
business combination, assets of any other company that
is engaged in any activity that the Board has not
determined to be financial in nature or incidental to a
financial activity under subsection (k), except this
paragraph shall not apply with respect to a company
that owns a broadcasting station licensed under title
III of the Communications Act of 1934 and the shares of
which are under common control with an insurance
company since January 1, 1998, unless such company is
acquired by, or otherwise becomes an affiliate of, a
bank holding company that, at the time such acquisition
or affiliation is consummated, is 1 of the 5 largest
domestic bank holding companies (as determined on the
basis of the consolidated total assets of such
companies).
``(4) Continuing revenue limitation on
grandfathered commercial activities.--Notwithstanding
any other provision of this subsection, a financial
holding company may continue to engage in activities or
hold shares in companies pursuant to this subsection
only to the extent that the aggregate annual gross
revenues derived from all such activities and all such
companies does not exceed 15 percent of the
consolidated annual gross revenues of the financial
holding company (excluding revenues derived from
subsidiary depository institutions).
``(5) Cross marketing restrictions applicable to
commercial activities.--
``(A) In general.--A depository institution
controlled by a financial holding company shall
not--
``(i) offer or market, directly or
through any arrangement, any product or
service of a company whose activities
are conducted or whose shares are owned
or controlled by the financial holding
company pursuant to this subsection or
subparagraph (H) or (I) of subsection
(k)(4); or
``(ii) permit any of its products
or services to be offered or marketed,
directly or through any arrangement, by
or through any company described in
clause (i).
``(B) Rule of construction.--Subparagraph
(A) shall not be construed as prohibiting an
arrangement between a depository institution
and a company owned or controlled pursuant to
subsection (k)(4)(I) for the marketing of
products or services through statement inserts
or Internet websites if--
``(i) such arrangement does not
violate section 106 of the Bank Holding
Company Act Amendments of 1970; and
``(ii) the Board determines that
the arrangement is in the public
interest, does not undermine the
separation of banking and commerce, and
is consistent with the safety and
soundness of depository institutions.
``(6) Transactions with nonfinancial affiliates.--A
depository institution controlled by a financial
holding company may not engage in a covered transaction
(as defined in section 23A(b)(7) of the Federal Reserve
Act) with any affiliate controlled by the company
pursuant to this subsection.
``(7) Sunset of grandfather.--A financial holding
company engaged in any activity, or retaining direct or
indirect ownership or control of shares of a company,
pursuant to this subsection, shall terminate such
activity and divest ownership or control of the shares
of such company before the end of the 10-year period
beginning on the date of the enactment of the Gramm-
Leach-Bliley Act. The Board may, upon application by a
financial holding company, extend such 10-year period
by a period not to exceed an additional 5 years if such
extension would not be detrimental to the public
interest.
``(o) Regulation of Certain Financial Holding Companies.--
Notwithstanding subsection (a), a company that is not a bank
holding company or a foreign bank (as defined in section
1(b)(7) of the International Banking Act of 1978) and becomes a
financial holding company after the date of enactment of the
Gramm-Leach-Bliley Act, may continue to engage in, or directly
or indirectly own or control shares of a company engaged in,
activities related to the trading, sale, or investment in
commodities and underlying physical properties that were not
permissible for bank holding companies to conduct in the United
States as of September 30, 1997, if--
``(1) the holding company, or any subsidiary of the
holding company, lawfully was engaged, directly or
indirectly, in any of such activities as of September
30, 1997, in the United States;
``(2) the attributed aggregate consolidated assets
of the company held by the holding company pursuant to
this subsection, and not otherwise permitted to be held
by a financial holding company, are equal to not more
than 5 percent of the total consolidated assets of the
bank holding company, except that the Board may
increase that percentage by such amounts and under such
circumstances as the Board considers appropriate,
consistent with the purposes of this Act; and
``(3) the holding company does not permit--
``(A) any company, the shares of which it
owns or controls pursuant to this subsection,
to offer or market any product or service of an
affiliated depository institution; or
``(B) any affiliated depository institution
to offer or market any product or service of
any company, the shares of which are owned or
controlled by such holding company pursuant to
this subsection.''.
(b) Community Reinvestment Requirement.--Section 804 of the
Community Reinvestment Act of 1977 (12 U.S.C. 2903) is amended
by adding at the end the following new subsection:
``(c) Financial Holding Company Requirement.--
``(1) In general.--An election by a bank holding
company to become a financial holding company under
section 4 of the Bank Holding Company Act of 1956 shall
not be effective if--
``(A) the Board finds that, as of the date
the declaration of such election and the
certification is filed by such holding company
under section 4(l)(1)(C) of the Bank Holding
Company Act of 1956, not all of the subsidiary
insured depository institutions of the bank
holding company had achieved a rating of
`satisfactory record of meeting community
credit needs', or better, at the most recent
examination of each such institution; and
``(B) the Board notifies the company of
such finding before the end of the 30-day
period beginning on such date.
``(2) Limited exclusions for newly acquired insured
depository institutions.--Any insured depository
institution acquired by a bank holding company during
the 12-month period preceding the date of the
submission to the Board of the declaration and
certification under section 4(l)(1)(C) of the Bank
Holding Company Act of 1956 may be excluded for
purposes of paragraph (1) during the 12-month period
beginning on the date of such acquisition if--
``(A) the bank holding company has
submitted an affirmative plan to the
appropriate Federal financial supervisory
agency to take such action as may be necessary
in order for such institution to achieve a
rating of `satisfactory record of meeting
community credit needs', or better, at the next
examination of the institution; and
``(B) the plan has been accepted by such
agency.
``(3) Definitions.--For purposes of this
subsection, the following definitions shall apply:
``(A) Bank holding company; financial
holding company.--The terms `bank holding
company' and `financial holding company' have
the meanings given those terms in section 2 of
the Bank Holding Company Act of 1956.
``(B) Board.--The term `Board' means the
Board of Governors of the Federal Reserve
System.
``(C) Insured depository institution.--The
term `insured depository institution' has the
meaning given the term in section 3(c) of the
Federal Deposit Insurance Act.''.
(c) Technical and Conforming Amendments.--
(1) Definitions.--Section 2 of the Bank Holding
Company Act of 1956 (12 U.S.C. 1841) is amended--
(A) in subsection (n), by inserting ``
`depository institution','' after ``the
terms''; and
(B) by adding at the end the following new
subsections:
``(p) Financial Holding Company.--For purposes of this Act,
the term `financial holding company' means a bank holding
company that meets the requirements of section 4(l)(1).
``(q) Insurance Company.--For purposes of sections 4 and 5,
the term `insurance company' includes any person engaged in the
business of insurance to the extent of such activities.''.
(2) Notice procedures.--Section 4(j) of the Bank
Holding Company Act of 1956 (12 U.S.C. 1843(j)) is
amended--
(A) in each of subparagraphs (A) and (E) of
paragraph (1), by inserting ``or in any
complementary activity under subsection
(k)(1)(B)'' after ``subsection (c)(8) or
(a)(2)''; and
(B) in paragraph (3)--
(i) by inserting ``, other than any
complementary activity under subsection
(k)(1)(B),'' after ``to engage in any
activity''; and
(ii) by inserting ``or a company
engaged in any complementary activity
under subsection (k)(1)(B)'' after
``insured depository institution''.
(d) Report.--
(1) In general.--By the end of the 4-year period
beginning on the date of the enactment of this Act, the
Board of Governors of the Federal Reserve System and
the Secretary of the Treasury shall submit a joint
report to the Congress containing a summary of new
activities, including grandfathered commercial
activities, in which any financial holding company is
engaged pursuant to subsection (k)(1) or (n) of section
4 of the Bank Holding Company Act of 1956 (as added by
subsection (a)).
(2) Other contents.--The report submitted to the
Congress pursuant to paragraph (1) shall also contain
the following:
(A) A discussion of actions by the Board of
Governors of the Federal Reserve System and the
Secretary of the Treasury, whether by
regulation, order, interpretation, or guideline
or by approval or disapproval of an
application, with regard to activities of
financial holding companies that are incidental
to activities that are financial in nature or
complementary to such financial activities.
(B) An analysis and discussion of the risks
posed by commercial activities of financial
holding companies to the safety and soundness
of affiliate depository institutions.
(C) An analysis and discussion of the
effect of mergers and acquisitions under
section 4(k) of the Bank Holding Company Act of
1956 on market concentration in the financial
services industry.
SEC. 104. OPERATION OF STATE LAW.
(a) State Regulation of the Business of Insurance.--The Act
entitled ``An Act to express the intent of Congress with
reference to the regulation of the business of insurance'' and
approved March 9, 1945 (15 U.S.C. 1011 et seq.) (commonly
referred to as the ``McCarran-Ferguson Act'') remains the law
of the United States.
(b) Mandatory Insurance Licensing Requirements.--No person
shall engage in the business of insurance in a State as
principal or agent unless such person is licensed as required
by the appropriate insurance regulator of such State in
accordance with the relevant State insurance law, subject to
subsections (c), (d), and (e).
(c) Affiliations.--
(1) In general.--Except as provided in paragraph
(2), no State may, by statute, regulation, order,
interpretation, or other action, prevent or restrict a
depository institution, or an affiliate thereof, from
being affiliated directly or indirectly or associated
with any person, as authorized or permitted by this Act
or any other provision of Federal law.
(2) Insurance.--With respect to affiliations
between depository institutions, or any affiliate
thereof, and any insurer, paragraph (1) does not
prohibit--
(A) any State from--
(i) collecting, reviewing, and
taking actions (including approval and
disapproval) on applications and other
documents or reports concerning any
proposed acquisition of, or a change or
continuation of control of, an insurer
domiciled in that State; and
(ii) exercising authority granted
under applicable State law to collect
information concerning any proposed
acquisition of, or a change or
continuation of control of, an insurer
engaged in the business of insurance
in, and regulated as an insurer by,
such State;
during the 60-day period preceding the
effective date of the acquisition or change or
continuation of control, so long as the
collecting, reviewing, taking actions, or
exercising authority by the State does not have
the effect of discriminating, intentionally or
unintentionally, against a depository
institution or an affiliate thereof, or against
any other person based upon an association of
such person with a depository institution;
(B) any State from requiring any person
that is acquiring control of an insurer
domiciled in that State to maintain or restore
the capital requirements of that insurer to the
level required under the capital regulations of
general applicability in that State to avoid
the requirement of preparing and filing with
the insurance regulatory authority of that
State a plan to increase the capital of the
insurer, except that any determination by the
State insurance regulatory authority with
respect to such requirement shall be made not
later than 60 days after the date of
notification under subparagraph (A); or
(C) any State from restricting a change in
the ownership of stock in an insurer, or a
company formed for the purpose of controlling
such insurer, after the conversion of the
insurer from mutual to stock form so long as
such restriction does not have the effect of
discriminating, intentionally or
unintentionally, against a depository
institution or an affiliate thereof, or against
any other person based upon an association of
such person with a depository institution.
(d) Activities.--
(1) In general.--Except as provided in paragraph
(3), and except with respect to insurance sales,
solicitation, and cross marketing activities, which
shall be governed by paragraph (2), no State may, by
statute, regulation, order, interpretation, or other
action, prevent or restrict a depository institution or
an affiliate thereof from engaging directly or
indirectly, either by itself or in conjunction with an
affiliate, or any other person, in any activity
authorized or permitted under this Act and the
amendments made by this Act.
(2) Insurance sales.--
(A) In general.--In accordance with the
legal standards for preemption set forth in the
decision of the Supreme Court of the United
States in Barnett Bank of Marion County N.A. v.
Nelson, 517 U.S. 25 (1996), no State may, by
statute, regulation, order, interpretation, or
other action, prevent or significantly
interfere with the ability of a depository
institution, or an affiliate thereof, to
engage, directly or indirectly, either by
itself or in conjunction with an affiliate or
any other person, in any insurance sales,
solicitation, or cross-marketing activity.
(B) Certain state laws preserved.--
Notwithstanding subparagraph (A), a State may
impose any of the following restrictions, or
restrictions that are substantially the same as
but no more burdensome or restrictive than
those in each of the following clauses:
(i) Restrictions prohibiting the
rejection of an insurance policy by a
depository institution or an affiliate
of a depository institution, solely
because the policy has been issued or
underwritten by any person who is not
associated with such depository
institution or affiliate when the
insurance is required in connection
with a loan or extension of credit.
(ii) Restrictions prohibiting a
requirement for any debtor, insurer, or
insurance agent or broker to pay a
separate charge in connection with the
handling of insurance that is required
in connection with a loan or other
extension of credit or the provision of
another traditional banking product by
a depository institution, or any
affiliate of a depository institution,
unless such charge would be required
when the depository institution or
affiliate is the licensed insurance
agent or broker providing the
insurance.
(iii) Restrictions prohibiting the
use of any advertisement or other
insurance promotional material by a
depository institution or any affiliate
of a depository institution that would
cause a reasonable person to believe
mistakenly that--
(I) the Federal Government
or a State is responsible for
the insurance sales activities
of, or stands behind the credit
of, the institution or
affiliate; or
(II) a State, or the
Federal Government guarantees
any returns on insurance
products, or is a source of
payment on any insurance
obligation of or sold by the
institution or affiliate;
(iv) Restrictions prohibiting the
payment or receipt of any commission or
brokerage fee or other valuable
consideration for services as an
insurance agent or broker to or by any
person, unless such person holds a
valid State license regarding the
applicable class of insurance at the
time at which the services are
performed, except that, in this clause,
the term ``services as an insurance
agent or broker'' does not include a
referral by an unlicensed person of a
customer or potential customer to a
licensed insurance agent or broker that
does not include a discussion of
specific insurance policy terms and
conditions.
(v) Restrictions prohibiting any
compensation paid to or received by any
individual who is not licensed to sell
insurance, for the referral of a
customer that seeks to purchase, or
seeks an opinion or advice on, any
insurance product to a person that
sells or provides opinions or advice on
such product, based on the purchase of
insurance by the customer.
(vi) Restrictions prohibiting the
release of the insurance information of
a customer (defined as information
concerning the premiums, terms, and
conditions of insurance coverage,
including expiration dates and rates,
and insurance claims of a customer
contained in the records of the
depository institution or an affiliate
thereof) to any person other than an
officer, director, employee, agent, or
affiliate of a depository institution,
for the purpose of soliciting or
selling insurance, without the express
consent of the customer, other than a
provision that prohibits--
(I) a transfer of insurance
information to an unaffiliated
insurer in connection with
transferring insurance in force
on existing insureds of the
depository institution or an
affiliate thereof, or in
connection with a merger with
or acquisition of an
unaffiliated insurer; or
(II) the release of
information as otherwise
authorized by State or Federal
law.
(vii) Restrictions prohibiting the
use of health information obtained from
the insurance records of a customer for
any purpose, other than for its
activities as a licensed agent or
broker, without the express consent of
the customer.
(viii) Restrictions prohibiting the
extension of credit or any product or
service that is equivalent to an
extension of credit, lease or sale of
property of any kind, or furnishing of
any services or fixing or varying the
consideration for any of the foregoing,
on the condition or requirement that
the customer obtain insurance from a
depository institution or an affiliate
of a depository institution, or a
particular insurer, agent, or broker,
other than a prohibition that would
prevent any such depository institution
or affiliate--
(I) from engaging in any
activity described in this
clause that would not violate
section 106 of the Bank Holding
Company Act Amendments of 1970,
as interpreted by the Board of
Governors of the Federal
Reserve System; or
(II) from informing a
customer or prospective
customer that insurance is
required in order to obtain a
loan or credit, that loan or
credit approval is contingent
upon the procurement by the
customer of acceptable
insurance, or that insurance is
available from the depository
institution or an affiliate of
the depository institution.
(ix) Restrictions requiring, when
an application by a consumer for a loan
or other extension of credit from a
depository institution is pending, and
insurance is offered or sold to the
consumer or is required in connection
with the loan or extension of credit by
the depository institution or any
affiliate thereof, that a written
disclosure be provided to the consumer
or prospective customer indicating that
the customer's choice of an insurance
provider will not affect the credit
decision or credit terms in any way,
except that the depository institution
may impose reasonable requirements
concerning the creditworthiness of the
insurer and scope of coverage chosen.
(x) Restrictions requiring clear
and conspicuous disclosure, in writing,
where practicable, to the customer
prior to the sale of any insurance
policy that such policy--
(I) is not a deposit;
(II) is not insured by the
Federal Deposit Insurance
Corporation;
(III) is not guaranteed by
any depository institution or,
if appropriate, an affiliate of
any such institution or any
person soliciting the purchase
of or selling insurance on the
premises thereof; and
(IV) where appropriate,
involves investment risk,
including potential loss of
principal.
(xi) Restrictions requiring that,
when a customer obtains insurance
(other than credit insurance or flood
insurance) and credit from a depository
institution, or any affiliate of such
institution, or any person soliciting
the purchase of or selling insurance on
the premises thereof, the credit and
insurance transactions be completed
through separate documents.
(xii) Restrictions prohibiting,
when a customer obtains insurance
(other than credit insurance or flood
insurance) and credit from a depository
institution or an affiliate of such
institution, or any person soliciting
the purchase of or selling insurance on
the premises thereof, inclusion of the
expense of insurance premiums in the
primary credit transaction without the
express written consent of the
customer.
(xiii) Restrictions requiring
maintenance of separate and distinct
books and records relating to insurance
transactions, including all files
relating to and reflecting consumer
complaints, and requiring that such
insurance books and records be made
available to the appropriate State
insurance regulator for inspection upon
reasonable notice.
(C) Limitations.--
(i) OCC deference.--Section 304(e)
does not apply with respect to any
State statute, regulation, order,
interpretation, or other action
regarding insurance sales,
solicitation, or cross marketing
activities described in subparagraph
(A) that was issued, adopted, or
enacted before September 3, 1998, and
that is not described in subparagraph
(B).
(ii) Nondiscrimination.--Subsection
(e) does not apply with respect to any
State statute, regulation, order,
interpretation, or other action
regarding insurance sales,
solicitation, or cross marketing
activities described in subparagraph
(A) that was issued, adopted, or
enacted before September 3, 1998, and
that is not described in subparagraph
(B).
(iii) Construction.--Nothing in
this paragraph shall be construed--
(I) to limit the
applicability of the decision
of the Supreme Court in Barnett
Bank of Marion County N.A. v.
Nelson, 517 U.S. 25 (1996) with
respect to any State statute,
regulation, order,
interpretation, or other action
that is not referred to or
described in subparagraph (B);
or
(II) to create any
inference with respect to any
State statute, regulation,
order, interpretation, or other
action that is not described in
this paragraph.
(3) Insurance activities other than sales.--State
statutes, regulations, interpretations, orders, and
other actions shall not be preempted under paragraph
(1) to the extent that they--
(A) relate to, or are issued, adopted, or
enacted for the purpose of regulating the
business of insurance in accordance with the
Act entitled ``An Act to express the intent of
Congress with reference to the regulation of
the business of insurance'' and approved March
9, 1945 (15 U.S.C. 1011 et seq.) (commonly
referred to as the ``McCarran-Ferguson Act'');
(B) apply only to persons that are not
depository institutions, but that are directly
engaged in the business of insurance (except
that they may apply to depository institutions
engaged in providing savings bank life
insurance as principal to the extent of
regulating such insurance);
(C) do not relate to or directly or
indirectly regulate insurance sales,
solicitations, or cross marketing activities;
and
(D) are not prohibited under subsection
(e).
(4) Financial activities other than insurance.--No
State statute, regulation, order, interpretation, or
other action shall be preempted under paragraph (1) to
the extent that--
(A) it does not relate to, and is not
issued and adopted, or enacted for the purpose
of regulating, directly or indirectly,
insurance sales, solicitations, or cross
marketing activities covered under paragraph
(2);
(B) it does not relate to, and is not
issued and adopted, or enacted for the purpose
of regulating, directly or indirectly, the
business of insurance activities other than
sales, solicitations, or cross marketing
activities, covered under paragraph (3);
(C) it does not relate to securities
investigations or enforcement actions referred
to in subsection (f); and
(D) it--
(i) does not distinguish by its
terms between depository institutions,
and affiliates thereof, engaged in the
activity at issue and other persons
engaged in the same activity in a
manner that is in any way adverse with
respect to the conduct of the activity
by any such depository institution or
affiliate engaged in the activity at
issue;
(ii) as interpreted or applied,
does not have, and will not have, an
impact on depository institutions, or
affiliates thereof, engaged in the
activity at issue, or any person who
has an association with any such
depository institution or affiliate,
that is substantially more adverse than
its impact on other persons engaged in
the same activity that are not
depository institutions or affiliates
thereof, or persons who do not have an
association with any such depository
institution or affiliate;
(iii) does not effectively prevent
a depository institution or affiliate
thereof from engaging in activities
authorized or permitted by this Act or
any other provision of Federal law; and
(iv) does not conflict with the
intent of this Act generally to permit
affiliations that are authorized or
permitted by Federal law.
(e) Nondiscrimination.--Except as provided in any
restrictions described in subsection (d)(2)(B), no State may,
by statute, regulation, order, interpretation, or other action,
regulate the insurance activities authorized or permitted under
this Act or any other provision of Federal law of a depository
institution, or affiliate thereof, to the extent that such
statute, regulation, order, interpretation, or other action--
(1) distinguishes by its terms between depository
institutions, or affiliates thereof, and other persons
engaged in such activities, in a manner that is in any
way adverse to any such depository institution, or
affiliate thereof;
(2) as interpreted or applied, has or will have an
impact on depository institutions, or affiliates
thereof, that is substantially more adverse than its
impact on other persons providing the same products or
services or engaged in the same activities that are not
depository institutions, or affiliates thereof, or
persons or entities affiliated therewith;
(3) effectively prevents a depository institution,
or affiliate thereof, from engaging in insurance
activities authorized or permitted by this Act or any
other provision of Federal law; or
(4) conflicts with the intent of this Act generally
to permit affiliations that are authorized or permitted
by Federal law between depository institutions, or
affiliates thereof, and persons engaged in the business
of insurance.
(f) Limitation.--Subsections (c) and (d) shall not be
construed to affect--
(1) the jurisdiction of the securities commission
(or any agency or office performing like functions) of
any State, under the laws of such State--
(A) to investigate and bring enforcement
actions, consistent with section 18(c) of the
Securities Act of 1933, with respect to fraud
or deceit or unlawful conduct by any person, in
connection with securities or securities
transactions; or
(B) to require the registration of
securities or the licensure or registration of
brokers, dealers, or investment advisers
(consistent with section 203A of the Investment
Advisers Act of 1940), or the associated
persons of a broker, dealer, or investment
adviser (consistent with such section 203A); or
(2) State laws, regulations, orders,
interpretations, or other actions of general
applicability relating to the governance of
corporations, partnerships, limited liability
companies, or other business associations incorporated
or formed under the laws of that State or domiciled in
that State, or the applicability of the antitrust laws
of any State or any State law that is similar to the
antitrust laws if such laws, regulations, orders,
interpretations, or other actions are not inconsistent
with the purposes of this Act to authorize or permit
certain affiliations and to remove barriers to such
affiliations.
(g) Definitions.--For purposes of this section, the
following definitions shall apply:
(1) Affiliate.--The term ``affiliate'' means any
company that controls, is controlled by, or is under
common control with another company.
(2) Antitrust laws.--The term ``antitrust laws''
has the meaning given the term in subsection (a) of the
first section of the Clayton Act, and includes section
5 of the Federal Trade Commission Act (to the extent
that such section 5 relates to unfair methods of
competition).
(3) Depository institution.--The term ``depository
institution''--
(A) has the meaning given the term in
section 3 of the Federal Deposit Insurance Act;
and
(B) includes any foreign bank that
maintains a branch, agency, or commercial
lending company in the United States.
(4) Insurer.--The term ``insurer'' means any person
engaged in the business of insurance.
(5) State.--The term ``State'' means any State of
the United States, the District of Columbia, any
territory of the United States, Puerto Rico, Guam,
American Samoa, the Trust Territory of the Pacific
Islands, the Virgin Islands, and the Northern Mariana
Islands.
SEC. 105. MUTUAL BANK HOLDING COMPANIES AUTHORIZED.
Section 3(g)(2) of the Bank Holding Company Act of 1956 (12
U.S.C. 1842(g)(2)) is amended to read as follows:
``(2) Regulations.--A bank holding company
organized as a mutual holding company shall be
regulated on terms, and shall be subject to
limitations, comparable to those applicable to any
other bank holding company.''.
SEC. 106. PROHIBITION ON DEPOSIT PRODUCTION OFFICES.
Section 109(e)(4) of the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 (12 U.S.C. 1835a(e)(4)) is
amended by inserting ``and any branch of a bank controlled by
an out-of-State bank holding company (as defined in section
2(o)(7) of the Bank Holding Company Act of 1956)'' before the
period.
SEC. 107. CROSS MARKETING RESTRICTION; LIMITED PURPOSE BANK RELIEF;
DIVESTITURE.
(a) Cross Marketing Restriction.--Section 4(f) of the Bank
Holding Company Act of 1956 (12 U.S.C. 1843(f)) is amended by
striking paragraph (3).
(b) Daylight Overdrafts.--Section 4(f) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1843(f)) is amended by inserting
after paragraph (2) the following new paragraph:
``(3) Permissible overdrafts described.--For
purposes of paragraph (2)(C), an overdraft is described
in this paragraph if--
``(A) such overdraft results from an
inadvertent computer or accounting error that
is beyond the control of both the bank and the
affiliate;
``(B) such overdraft--
``(i) is permitted or incurred on
behalf of an affiliate that is
monitored by, reports to, and is
recognized as a primary dealer by the
Federal Reserve Bank of New York; and
``(ii) is fully secured, as
required by the Board, by bonds, notes,
or other obligations that are direct
obligations of the United States or on
which the principal and interest are
fully guaranteed by the United States
or by securities and obligations
eligible for settlement on the Federal
Reserve book entry system; or
``(C) such overdraft--
``(i) is permitted or incurred by,
or on behalf of, an affiliate in
connection with an activity that is
financial in nature or incidental to a
financial activity; and
``(ii) does not cause the bank to
violate any provision of section 23A or
23B of the Federal Reserve Act, either
directly, in the case of a bank that is
a member of the Federal Reserve System,
or by virtue of section 18(j) of the
Federal Deposit Insurance Act, in the
case of a bank that is not a member of
the Federal Reserve System.''.
(c) Industrial Loan Companies; Affiliate Overdrafts.--
Section 2(c)(2)(H) of the Bank Holding Company Act of 1956 (12
U.S.C. 1841(c)(2)(H)) is amended by inserting ``, or that is
otherwise permissible for a bank controlled by a company
described in section 4(f)(1)'' before the period at the end.
(d) Activities Limitations.--Section 4(f)(2) of the Bank
Holding Company Act of 1956 (12 U.S.C. 1843(f)(2)) is amended--
(1) by striking ``Paragraph (1) shall cease to
apply to any company described in such paragraph if--''
and inserting ``Subject to paragraph (3), a company
described in paragraph (1) shall no longer qualify for
the exemption provided under that paragraph if--'';
(2) in subparagraph (A)--
(A) in clause (ii)(IX), by striking ``and''
at the end;
(B) in clause (ii)(X), by inserting ``and''
after the semicolon;
(C) in clause (ii), by inserting after
subclause (X) the following new subclause:
``(XI) assets that are
derived from, or incidental to,
activities in which
institutions described in
subparagraph (F) or (H) of
section 2(c)(2) are permitted
to engage;''; and
(D) by striking ``or'' at the end; and
(3) by striking subparagraph (B) and inserting the
following:
``(B) any bank subsidiary of such company--
``(i) accepts demand deposits or
deposits that the depositor may
withdraw by check or similar means for
payment to third parties; and
``(ii) engages in the business of
making commercial loans (except that,
for purposes of this clause, loans made
in the ordinary course of a credit card
operation shall not be treated as
commercial loans); or
``(C) after the date of the enactment of
the Competitive Equality Amendments of 1987,
any bank subsidiary of such company permits any
overdraft (including any intraday overdraft),
or incurs any such overdraft in the account of
the bank at a Federal reserve bank, on behalf
of an affiliate, other than an overdraft
described in paragraph (3).''.
(e) Divestiture Requirement.--Section 4(f)(4) of the Bank
Holding Company Act of 1956 (12 U.S.C. 1843(f)(4)) is amended
to read as follows:
``(4) Divestiture in case of loss of exemption.--If
any company described in paragraph (1) fails to qualify
for the exemption provided under paragraph (1) by
operation of paragraph (2), such exemption shall cease
to apply to such company and such company shall divest
control of each bank it controls before the end of the
180-day period beginning on the date on which the
company receives notice from the Board that the company
has failed to continue to qualify for such exemption,
unless, before the end of such 180-day period, the
company has--
``(A) either--
``(i) corrected the condition or
ceased the activity that caused the
company to fail to continue to qualify
for the exemption; or
``(ii) submitted a plan to the
Board for approval to cease the
activity or correct the condition in a
timely manner (which shall not exceed 1
year); and
``(B) implemented procedures that are
reasonably adapted to avoid the reoccurrence of
such condition or activity.''.
(f) Foreign Bank Subsidiaries of Limited Purpose Credit
Card Banks.--Section 4(f) of the Bank Holding Company Act of
1956 (12 U.S.C. 1843(f)) is amended by adding at the end the
following new paragraph:
``(14) Foreign bank subsidiaries of limited purpose
credit card banks.--
``(A) In general.--An institution described
in section 2(c)(2)(F) may control a foreign
bank if--
``(i) the investment of the
institution in the foreign bank meets
the requirements of section 25 or 25A
of the Federal Reserve Act and the
foreign bank qualifies under such
sections;
``(ii) the foreign bank does not
offer any products or services in the
United States; and
``(iii) the activities of the
foreign bank are permissible under
otherwise applicable law.
``(B) Other limitations inapplicable.--The
limitations contained in any clause of section
2(c)(2)(F) shall not apply to a foreign bank
described in subparagraph (A) that is
controlled by an institution described in such
section.''.
SEC. 108. USE OF SUBORDINATED DEBT TO PROTECT FINANCIAL SYSTEM AND
DEPOSIT FUNDS FROM ``TOO BIG TO FAIL''
INSTITUTIONS.
(a) Study Required.--The Board of Governors of the Federal
Reserve System and the Secretary of the Treasury shall conduct
a study of--
(1) the feasibility and appropriateness of
establishing a requirement that, with respect to large
insured depository institutions and depository
institution holding companies the failure of which
could have serious adverse effects on economic
conditions or financial stability, such institutions
and holding companies maintain some portion of their
capital in the form of subordinated debt in order to
bring market forces and market discipline to bear on
the operation of, and the assessment of the viability
of, such institutions and companies and reduce the risk
to economic conditions, financial stability, and any
deposit insurance fund;
(2) if such requirement is feasible and
appropriate, the appropriate amount or percentage of
capital that should be subordinated debt consistent
with such purposes; and
(3) the manner in which any such requirement could
be incorporated into existing capital standards and
other issues relating to the transition to such a
requirement.
(b) Report.--Before the end of the 18-month period
beginning on the date of the enactment of this Act, the Board
of Governors of the Federal Reserve System and the Secretary of
the Treasury shall submit a report to the Congress containing
the findings and conclusions of the Board and the Secretary in
connection with the study required under subsection (a),
together with such legislative and administrative proposals as
the Board and the Secretary may determine to be appropriate.
(c) Definitions.--For purposes of subsection (a), the
following definitions shall apply:
(1) Bank holding company.--The term ``bank holding
company'' has the meaning given the term in section 2
of the Bank Holding Company Act of 1956.
(2) Insured depository institution.--The term
``insured depository institution'' has the meaning
given the term in section 3(c) of the Federal Deposit
Insurance Act.
(3) Subordinated debt.--The term ``subordinated
debt'' means unsecured debt that--
(A) has an original weighted average
maturity of not less than 5 years;
(B) is subordinated as to payment of
principal and interest to all other
indebtedness of the bank, including deposits;
(C) is not supported by any form of credit
enhancement, including a guarantee or standby
letter of credit; and
(D) is not held in whole or in part by any
affiliate or institution-affiliated party of
the insured depository institution or bank
holding company.
SEC. 109. STUDY OF FINANCIAL MODERNIZATION'S EFFECT ON THE
ACCESSIBILITY OF SMALL BUSINESS AND FARM LOANS.
(a) Study.--The Secretary of the Treasury, in consultation
with the Federal banking agencies (as defined in section 3(z)
of the Federal Deposit Insurance Act), shall conduct a study of
the extent to which credit is being provided to and for small
businesses and farms, as a result of this Act and the
amendments made by this Act.
(b) Report.--Before the end of the 5-year period beginning
on the date of the enactment of this Act, the Secretary, in
consultation with the Federal banking agencies, shall submit a
report to the Congress on the study conducted pursuant to
subsection (a) and shall include such recommendations as the
Secretary determines to be appropriate for administrative and
legislative action.
Subtitle B--Streamlining Supervision of Bank Holding Companies
SEC. 111. STREAMLINING BANK HOLDING COMPANY SUPERVISION.
Section 5(c) of the Bank Holding Company Act of 1956 (12
U.S.C. 1844(c)) is amended to read as follows:
``(c) Reports and Examinations.--
``(1) Reports.--
``(A) In general.--The Board, from time to
time, may require a bank holding company and
any subsidiary of such company to submit
reports under oath to keep the Board informed
as to--
``(i) its financial condition,
systems for monitoring and controlling
financial and operating risks, and
transactions with depository
institution subsidiaries of the bank
holding company; and
``(ii) compliance by the company or
subsidiary with applicable provisions
of this Act or any other Federal law
that the Board has specific
jurisdiction to enforce against such
company or subsidiary.
``(B) Use of existing reports.--
``(i) In general.--For purposes of
compliance with this paragraph, the
Board shall, to the fullest extent
possible, accept--
``(I) reports that a bank
holding company or any
subsidiary of such company has
provided or been required to
provide to other Federal or
State supervisors or to
appropriate self-regulatory
organizations;
``(II) information that is
otherwise required to be
reported publicly; and
``(III) externally audited
financial statements.
``(ii) Availability.--A bank
holding company or a subsidiary of such
company shall provide to the Board, at
the request of the Board, a report
referred to in clause (i).
``(iii) Reports filed with other
agencies.--
``(I) In general.--In the
event that the Board requires a
report under this subsection
from a functionally regulated
subsidiary of a bank holding
company of a kind that is not
required by another Federal or
State regulatory authority or
an appropriate self-regulatory
organization, the Board shall
first request that the
appropriate regulatory
authority or self-regulatory
organization obtain such
report.
``(II) Availability from
other subsidiary.--If the
report is not made available to
the Board, and the report is
necessary to assess a material
risk to the bank holding
company or any of its
depository institution
subsidiaries or compliance with
this Act or any other Federal
law that the Board has specific
jurisdiction to enforce against
such company or subsidiary or
the systems described in
paragraph (2)(A)(ii)(II), the
Board may require such
functionally regulated
subsidiary to provide such a
report to the Board.
``(2) Examinations.--
``(A) Examination authority for bank
holding companies and subsidiaries.--Subject to
subparagraph (B), the Board may make
examinations of each bank holding company and
each subsidiary of such holding company in
order--
``(i) to inform the Board of the
nature of the operations and financial
condition of the holding company and
such subsidiaries;
``(ii) to inform the Board of--
``(I) the financial and
operational risks within the
holding company system that may
pose a threat to the safety and
soundness of any depository
institution subsidiary of such
holding company; and
``(II) the systems for
monitoring and controlling such
risks; and
``(iii) to monitor compliance with
the provisions of this Act or any other
Federal law that the Board has specific
jurisdiction to enforce against such
company or subsidiary and those
governing transactions and
relationships between any depository
institution subsidiary and its
affiliates.
``(B) Functionally regulated
subsidiaries.--Notwithstanding subparagraph
(A), the Board may make examinations of a
functionally regulated subsidiary of a bank
holding company only if--
``(i) the Board has reasonable
cause to believe that such subsidiary
is engaged in activities that pose a
material risk to an affiliated
depository institution;
``(ii) the Board reasonably
determines, after reviewing relevant
reports, that examination of the
subsidiary is necessary to adequately
inform the Board of the systems
described in subparagraph (A)(ii)(II);
or
``(iii) based on reports and other
available information, the Board has
reasonable cause to believe that a
subsidiary is not in compliance with
this Act or any other Federal law that
the Board has specific jurisdiction to
enforce against such subsidiary,
including provisions relating to
transactions with an affiliated
depository institution, and the Board
cannot make such determination through
examination of the affiliated
depository institution or the bank
holding company.
``(C) Restricted focus of examinations.--
The Board shall, to the fullest extent
possible, limit the focus and scope of any
examination of a bank holding company to--
``(i) the bank holding company; and
``(ii) any subsidiary of the bank
holding company that could have a
materially adverse effect on the safety
and soundness of any depository
institution subsidiary of the holding
company due to--
``(I) the size, condition,
or activities of the
subsidiary; or
``(II) the nature or size
of transactions between the
subsidiary and any depository
institution that is also a
subsidiary of the bank holding
company.
``(D) Deference to bank examinations.--The
Board shall, to the fullest extent possible,
for the purposes of this paragraph, use the
reports of examinations of depository
institutions made by the appropriate Federal
and State depository institution supervisory
authority.
``(E) Deference to other examinations.--The
Board shall, to the fullest extent possible,
forego an examination by the Board under this
paragraph and instead review the reports of
examination made of--
``(i) any registered broker or
dealer by or on behalf of the
Securities and Exchange Commission;
``(ii) any registered investment
adviser properly registered by or on
behalf of either the Securities and
Exchange Commission or any State;
``(iii) any licensed insurance
company by or on behalf of any State
regulatory authority responsible for
the supervision of insurance companies;
and
``(iv) any other subsidiary that
the Board finds to be comprehensively
supervised by a Federal or State
authority.
``(3) Capital.--
``(A) In general.--The Board may not, by
regulation, guideline, order, or otherwise,
prescribe or impose any capital or capital
adequacy rules, guidelines, standards, or
requirements on any functionally regulated
subsidiary of a bank holding company that--
``(i) is not a depository
institution; and
``(ii) is--
``(I) in compliance with
the applicable capital
requirements of its Federal
regulatory authority (including
the Securities and Exchange
Commission) or State insurance
authority;
``(II) properly registered
as an investment adviser under
the Investment Advisers Act of
1940, or with any State; or
``(III) is licensed as an
insurance agent with the
appropriate State insurance
authority.
``(B) Rule of construction.--Subparagraph
(A) shall not be construed as preventing the
Board from imposing capital or capital adequacy
rules, guidelines, standards, or requirements
with respect to--
``(i) activities of a registered
investment adviser other than with
respect to investment advisory
activities or activities incidental to
investment advisory activities; or
``(ii) activities of a licensed
insurance agent other than insurance
agency activities or activities
incidental to insurance agency
activities.
``(C) Limitations on indirect action.--In
developing, establishing, or assessing bank
holding company capital or capital adequacy
rules, guidelines, standards, or requirements
for purposes of this paragraph, the Board may
not take into account the activities,
operations, or investments of an affiliated
investment company registered under the
Investment Company Act of 1940, unless the
investment company is--
``(i) a bank holding company; or
``(ii) controlled by a bank holding
company by reason of ownership by the
bank holding company (including through
all of its affiliates) of 25 percent or
more of the shares of the investment
company, and the shares owned by the
bank holding company have a market
value equal to more than $1,000,000.
``(4) Functional regulation of securities and
insurance activities.--
``(A) Securities activities.--Securities
activities conducted in a functionally
regulated subsidiary of a depository
institution shall be subject to regulation by
the Securities and Exchange Commission, and by
relevant State securities authorities, as
appropriate, subject to section 104 of the
Gramm-Leach-Bliley Act, to the same extent as
if they were conducted in a nondepository
institution subsidiary of a bank holding
company.
``(B) Insurance activities.--Subject to
section 104 of the Gramm-Leach-Bliley Act,
insurance agency and brokerage activities and
activities as principal conducted in a
functionally regulated subsidiary of a
depository institution shall be subject to
regulation by a State insurance authority to
the same extent as if they were conducted in a
nondepository institution subsidiary of a bank
holding company.
``(5) Definition.--For purposes of this subsection,
the term `functionally regulated subsidiary' means any
company--
``(A) that is not a bank holding company or
a depository institution; and
``(B) that is--
``(i) a broker or dealer that is
registered under the Securities
Exchange Act of 1934;
``(ii) a registered investment
adviser, properly registered by or on
behalf of either the Securities and
Exchange Commission or any State, with
respect to the investment advisory
activities of such investment adviser
and activities incidental to such
investment advisory activities;
``(iii) an investment company that
is registered under the Investment
Company Act of 1940;
``(iv) an insurance company, with
respect to insurance activities of the
insurance company and activities
incidental to such insurance
activities, that is subject to
supervision by a State insurance
regulator; or
``(v) an entity that is subject to
regulation by the Commodity Futures
Trading Commission, with respect to the
commodities activities of such entity
and activities incidental to such
commodities activities.''.
SEC. 112. AUTHORITY OF STATE INSURANCE REGULATOR AND SECURITIES AND
EXCHANGE COMMISSION.
(a) Bank Holding Companies.--Section 5 of the Bank Holding
Company Act of 1956 (12 U.S.C. 1844) is amended by adding at
the end the following new subsection:
``(g) Authority of State Insurance Regulator and the
Securities and Exchange Commission.--
``(1) In general.--Notwithstanding any other
provision of law, any regulation, order, or other
action of the Board that requires a bank holding
company to provide funds or other assets to a
subsidiary depository institution shall not be
effective nor enforceable with respect to an entity
described in subparagraph (A) if--
``(A) such funds or assets are to be
provided by--
``(i) a bank holding company that
is an insurance company, a broker or
dealer registered under the Securities
Exchange Act of 1934, an investment
company registered under the Investment
Company Act of 1940, or an investment
adviser registered by or on behalf of
either the Securities and Exchange
Commission or any State; or
``(ii) an affiliate of the
depository institution that is an
insurance company or a broker or dealer
registered under the Securities
Exchange Act of 1934, an investment
company registered under the Investment
Company Act of 1940, or an investment
adviser registered by or on behalf of
either the Securities and Exchange
Commission or any State; and
``(B) the State insurance authority for the
insurance company or the Securities and
Exchange Commission for the registered broker,
dealer, investment adviser (solely with respect
to investment advisory activities or activities
incidental thereto), or investment company, as
the case may be, determines in writing sent to
the holding company and the Board that the
holding company shall not provide such funds or
assets because such action would have a
material adverse effect on the financial
condition of the insurance company or the
broker, dealer, investment company, or
investment adviser, as the case may be.
``(2) Notice to state insurance authority or sec
required.--If the Board requires a bank holding
company, or an affiliate of a bank holding company,
that is an insurance company or a broker, dealer,
investment company, or investment adviser described in
paragraph (1)(A) to provide funds or assets to a
depository institution subsidiary of the holding
company pursuant to any regulation, order, or other
action of the Board referred to in paragraph (1), the
Board shall promptly notify the State insurance
authority for the insurance company, the Securities and
Exchange Commission, or State securities regulator, as
the case may be, of such requirement.
``(3) Divestiture in lieu of other action.--If the
Board receives a notice described in paragraph (1)(B)
from a State insurance authority or the Securities and
Exchange Commission with regard to a bank holding
company or affiliate referred to in that paragraph, the
Board may order the bank holding company to divest the
depository institution not later than 180 days after
receiving the notice, or such longer period as the
Board determines consistent with the safe and sound
operation of the depository institution.
``(4) Conditions before divestiture.--During the
period beginning on the date an order to divest is
issued by the Board under paragraph (3) to a bank
holding company and ending on the date the divestiture
is completed, the Board may impose any conditions or
restrictions on the holding company's ownership or
operation of the depository institution, including
restricting or prohibiting transactions between the
depository institution and any affiliate of the
institution, as are appropriate under the circumstances.
``(5) Rule of construction.--No provision of this
subsection may be construed as limiting or otherwise
affecting, except to the extent specifically provided
in this subsection, the regulatory authority, including
the scope of the authority, of any Federal agency or
department with regard to any entity that is within the
jurisdiction of such agency or department.''.
(b) Subsidiaries of Depository Institutions.--The Federal
Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended by
adding at the end the following new section:
``SEC. 45. AUTHORITY OF STATE INSURANCE REGULATOR AND SECURITIES AND
EXCHANGE COMMISSION.
``(a) In General.--Notwithstanding any other provision of
law, the provisions of--
``(1) section 5(c) of the Bank Holding Company Act
of 1956 that limit the authority of the Board of
Governors of the Federal Reserve System to require
reports from, to make examinations of, or to impose
capital requirements on holding companies and their
functionally regulated subsidiaries or that require
deference to other regulators;
``(2) section 5(g) of the Bank Holding Company Act
of 1956 that limit the authority of the Board to
require a functionally regulated subsidiary of a
holding company to provide capital or other funds or
assets to a depository institution subsidiary of the
holding company and to take certain actions including
requiring divestiture of the depository institution;
and
``(3) section 10A of the Bank Holding Company Act
of 1956 that limit whatever authority the Board might
otherwise have to take direct or indirect action with
respect to holding companies and their functionally
regulated subsidiaries;
shall also limit whatever authority that a Federal banking
agency might otherwise have under any statute or regulation to
require reports, make examinations, impose capital
requirements, or take any other direct or indirect action with
respect to any functionally regulated affiliate of a depository
institution, subject to the same standards and requirements as
are applicable to the Board under those provisions.
``(b) Certain Exemption Authorized.--No provision of this
section shall be construed as preventing the Corporation, if
the Corporation finds it necessary to determine the condition
of a depository institution for insurance purposes, from
examining an affiliate of any depository institution, pursuant
to section 10(b)(4), as may be necessary to disclose fully the
relationship between the depository institution and the
affiliate, and the effect of such relationship on the
depository institution.
``(c) Definitions.--For purposes of this section, the
following definitions shall apply:
``(1) Functionally regulated subsidiary.--The term
`functionally regulated subsidiary' has the meaning
given the term in section 5(c)(5) of the Bank Holding
Company Act of 1956.
``(2) Functionally regulated affiliate.--The term
`functionally regulated affiliate' means, with respect
to any depository institution, any affiliate of such
depository institution that is--
``(A) not a depository institution holding
company; and
``(B) a company described in any clause of
section 5(c)(5)(B) of the Bank Holding Company
Act of 1956.''.
SEC. 113. ROLE OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.
The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et
seq.) is amended by inserting after section 10 the following
new section:
``SEC. 10A. LIMITATION ON RULEMAKING, PRUDENTIAL, SUPERVISORY, AND
ENFORCEMENT AUTHORITY OF THE BOARD.
``(a) Limitation on Direct Action.--The Board may not
prescribe regulations, issue or seek entry of orders, impose
restraints, restrictions, guidelines, requirements, safeguards,
or standards, or otherwise take any action under or pursuant to
any provision of this Act or section 8 of the Federal Deposit
Insurance Act against or with respect to a functionally
regulated subsidiary of a bank holding company unless--
``(1) the action is necessary to prevent or redress
an unsafe or unsound practice or breach of fiduciary
duty by such subsidiary that poses a material risk to--
``(A) the financial safety, soundness, or
stability of an affiliated depository
institution; or
``(B) the domestic or international payment
system; and
``(2) the Board finds that it is not reasonably
possible to protect effectively against the material
risk at issue through action directed at or against the
affiliated depository institution or against depository
institutions generally.
``(b) Limitation on Indirect Action.--The Board may not
prescribe regulations, issue or seek entry of orders, impose
restraints, restrictions, guidelines, requirements, safeguards,
or standards, or otherwise take any action under or pursuant to
any provision of this Act or section 8 of the Federal Deposit
Insurance Act against or with respect to a bank holding company
that requires the bank holding company to require a
functionally regulated subsidiary of the holding company to
engage, or to refrain from engaging, in any conduct or
activities unless the Board could take such action directly
against or with respect to the functionally regulated
subsidiary in accordance with subsection (a).
``(c) Actions Specifically Authorized.--Notwithstanding
subsection (a) or (b), the Board may take action under this Act
or section 8 of the Federal Deposit Insurance Act to enforce
compliance by a functionally regulated subsidiary of a bank
holding company with any Federal law that the Board has
specific jurisdiction to enforce against such subsidiary.
``(d) Functionally Regulated Subsidiary Defined.--For
purposes of this section, the term `functionally regulated
subsidiary' has the meaning given the term in section
5(c)(5).''.
SEC. 114. PRUDENTIAL SAFEGUARDS.
(a) Comptroller of the Currency.--
(1) In general.--The Comptroller of the Currency
may, by regulation or order, impose restrictions or
requirements on relationships or transactions between a
national bank and a subsidiary of the national bank
that the Comptroller finds are--
(A) consistent with the purposes of this
Act, title LXII of the Revised Statutes of the
United States, and other Federal law applicable
to national banks; and
(B) appropriate to avoid any significant
risk to the safety and soundness of insured
depository institutions or any Federal deposit
insurance fund or other adverse effects, such
as undue concentration of resources, decreased
or unfair competition, conflicts of interests,
or unsound banking practices.
(2) Review.--The Comptroller of the Currency shall
regularly--
(A) review all restrictions or requirements
established pursuant to paragraph (1) to
determine whether there is a continuing need
for any such restriction or requirement to
carry out the purposes of the Act, including
the avoidance of any adverse effect referred to
in paragraph (1)(B); and
(B) modify or eliminate any such
restriction or requirement the Comptroller
finds is no longer required for such purposes.
(b) Board of Governors of the Federal Reserve System.--
(1) In general.--The Board of Governors of the
Federal Reserve System may, by regulation or order,
impose restrictions or requirements on relationships or
transactions--
(A) between a depository institution
subsidiary of a bank holding company and any
affiliate of such depository institution (other
than a subsidiary of such institution); or
(B) between a State member bank and a
subsidiary of such bank;
if the Board makes a finding described in paragraph (2)
with respect to such restriction or requirement.
(2) Finding.--The Board of Governors of the Federal
Reserve System may exercise authority under paragraph
(1) if the Board finds that the exercise of such
authority is--
(A) consistent with the purposes of this
Act, the Bank Holding Company Act of 1956, the
Federal Reserve Act, and other Federal law
applicable to depository institution
subsidiaries of bank holding companies or State
member banks, as the case may be; and
(B) appropriate to prevent an evasion of
any provision of law referred to in
subparagraph (A) or to avoid any significant
risk to the safety and soundness of depository
institutions or any Federal deposit insurance
fund or other adverse effects, such as undue
concentration of resources, decreased or unfair
competition, conflicts of interests, or unsound
banking practices.
(3) Review.--The Board of Governors of the Federal
Reserve System shall regularly--
(A) review all restrictions or requirements
established pursuant to paragraph (1) or (4) to
determine whether there is a continuing need
for any such restriction or requirement to
carry out the purposes of the Act, including
the avoidance of any adverse effect referred to
in paragraph (2)(B) or (4)(B); and
(B) modify or eliminate any such
restriction or requirement the Board finds is
no longer required for such purposes.
(4) Foreign banks.--The Board may, by regulation or
order, impose restrictions or requirements on
relationships or transactions between a branch, agency,
or commercial lending company of a foreign bank in the
United States and any affiliate in the United States of
such foreign bank that the Board finds are--
(A) consistent with the purposes of this
Act, the Bank Holding Company Act of 1956, the
Federal Reserve Act, and other Federal law
applicable to foreign banks and their
affiliates in the United States; and
(B) appropriate to prevent an evasion of
any provision of law referred to in
subparagraph (A) or to avoid any significant
risk to the safety and soundness of depository
institutions or any Federal deposit insurance
fund or other adverse effects, such as undue
concentration of resources, decreased or unfair
competition, conflicts of interests, or unsound
banking practices.
(c) Federal Deposit Insurance Corporation.--
(1) In general.--The Federal Deposit Insurance
Corporation may, by regulation or order, impose
restrictions or requirements on relationships or
transactions between a State nonmember bank (as defined
in section 3 of the Federal Deposit Insurance Act) and
a subsidiary of the State nonmember bank that the
Corporation finds are--
(A) consistent with the purposes of this
Act, the Federal Deposit Insurance Act, or
other Federal law applicable to State nonmember
banks; and
(B) appropriate to avoid any significant
risk to the safety and soundness of depository
institutions or any Federal deposit insurance
fund or other adverse effects, such as undue
concentration of resources, decreased or unfair
competition, conflicts of interests, or unsound
banking practices.
(2) Review.--The Federal Deposit Insurance
Corporation shall regularly--
(A) review all restrictions or requirements
established pursuant to paragraph (1) to
determine whether there is a continuing need
for any such restriction or requirement to
carry out the purposes of the Act, including
the avoidance of any adverse effect referred to
in paragraph (1)(B); and
(B) modify or eliminate any such
restriction or requirement the Corporation
finds is no longer required for such purposes.
SEC. 115. EXAMINATION OF INVESTMENT COMPANIES.
(a) Exclusive Commission Authority.--Except as provided in
subsection (c), a Federal banking agency may not inspect or
examine any registered investment company that is not a bank
holding company or a savings and loan holding company.
(b) Examination Results and Other Information.--The
Commission shall provide to any Federal banking agency, upon
request, the results of any examination, reports, records, or
other information with respect to any registered investment
company to the extent necessary for the agency to carry out its
statutory responsibilities.
(c) Certain Examinations Authorized.--Nothing in this
section shall prevent the Corporation, if the Corporation finds
it necessary to determine the condition of an insured
depository institution for insurance purposes, from examining
an affiliate of any insured depository institution, pursuant to
its authority under section10(b)(4) of the Federal Deposit
Insurance Act, as may be necessary to disclose fully the relationship
between the insured depository institution and the affiliate, and the
effect of such relationship on the insured depository institution.
(d) Definitions.--For purposes of this section, the
following definitions shall apply:
(1) Bank holding company.--The term ``bank holding
company'' has the meaning given the term in section 2
of the Bank Holding Company Act of 1956.
(2) Commission.--The term ``Commission'' means the
Securities and Exchange Commission.
(3) Corporation.--The term ``Corporation'' means
the Federal Deposit Insurance Corporation.
(4) Federal banking agency.--The term ``Federal
banking agency'' has the meaning given the term in
section 3(z) of the Federal Deposit Insurance Act.
(5) Insured depository institution.--The term
``insured depository institution'' has the meaning
given the term in section 3(c) of the Federal Deposit
Insurance Act.
(6) Registered investment company.--The term
``registered investment company'' means an investment
company that is registered with the Commission under
the Investment Company Act of 1940.
(7) Savings and loan holding company.--The term
``savings and loan holding company'' has the meaning
given the term in section 10(a)(1)(D) of the Home
Owners' Loan Act.
SEC. 116. ELIMINATION OF APPLICATION REQUIREMENT FOR FINANCIAL HOLDING
COMPANIES.
(a) Prevention of Duplicative Filings.--Section 5(a) of the
Bank Holding Company Act of 1956 (12 U.S.C. 1844(a)) is amended
by adding at the end the following new sentence: ``A
declaration filed in accordance with section 4(l)(1)(C) shall
satisfy the requirements of this subsection with regard to the
registration of a bank holding company but not any requirement
to file an application to acquire a bank pursuant to section
3.''.
(b) Divestiture Procedures.--Section 5(e)(1) of the Bank
Holding Company Act of 1956 (12 U.S.C. 1844(e)(1)) is amended--
(1) by striking ``Financial Institutions
Supervisory Act of 1966, order'' and inserting
``Financial Institutions Supervisory Act of 1966, at
the election of the bank holding company--
``(A) order''; and
(2) by striking ``shareholders of the bank holding
company. Such distribution'' and inserting
``shareholders of the bank holding company; or
``(B) order the bank holding company, after due
notice and opportunity for hearing, and after
consultation with the primary supervisor for the bank,
which shall be the Comptroller of the Currency in the
case of a national bank, and the Federal Deposit
Insurance Corporation and the appropriate State
supervisor in the case of an insured nonmember bank, to
terminate (within 120 days or such longer period as the
Board may direct) the ownership or control of any such
bank by such company.
The distribution referred to in subparagraph (A)''.
SEC. 117. PRESERVING THE INTEGRITY OF FDIC RESOURCES.
Section 11(a)(4)(B) of the Federal Deposit Insurance Act
(12 U.S.C. 1821(a)(4)(B)) is amended by striking ``to benefit
any shareholder of'' and inserting ``to benefit any shareholder
or affiliate (other than an insured depository institution that
receives assistance in accordance with the provisions of this
Act) of''.
SEC. 118. REPEAL OF SAVINGS BANK PROVISIONS IN THE BANK HOLDING COMPANY
ACT OF 1956.
Section 3(f) of the Bank Holding Company Act of 1956 (12
U.S.C. 1842(f)) is amended to read as follows:
``(f) [Repealed].''.
SEC. 119. TECHNICAL AMENDMENT.
Section 2(o)(1)(A) of the Bank Holding Company Act of 1956
(12 U.S.C. 1841(o)(1)(A)) is amended by striking ``section
38(b)'' and inserting ``section 38''.
Subtitle C--Subsidiaries of National Banks
SEC. 121. SUBSIDIARIES OF NATIONAL BANKS.
(a) In General.--Chapter one of title LXII of the Revised
Statutes of the United States (12 U.S.C. 21 et seq.) is
amended--
(1) by redesignating section 5136A as section
5136B; and
(2) by inserting after section 5136 (12 U.S.C. 24)
the following new section:
``SEC. 5136A. FINANCIAL SUBSIDIARIES OF NATIONAL BANKS.
``(a) Authorization To Conduct in Subsidiaries Certain
Activities That are Financial in Nature.--
``(1) In general.--Subject to paragraph (2), a
national bank may control a financial subsidiary, or
hold an interest in a financial subsidiary.
``(2) Conditions and requirements.--A national bank
may control a financial subsidiary, or hold an interest
in a financial subsidiary, only if--
``(A) the financial subsidiary engages only
in--
``(i) activities that are financial
in nature or incidental to a financial
activity pursuant to subsection (b);
and
``(ii) activities that are
permitted for national banks to engage
in directly (subject to the same terms
and conditions that govern the conduct
of the activities by a national bank);
``(B) the activities engaged in by the
financial subsidiary as a principal do not
include--
``(i) insuring, guaranteeing, or
indemnifying against loss, harm,
damage, illness, disability, or death
(except to the extent permitted under
section 302 or 303(c) of the Gramm-
Leach-Bliley Act) or providing or
issuing annuities the income of which
is subject to tax treatment under
section 72 of the Internal Revenue Code
of 1986;
``(ii) real estate development or
real estate investment activities,
unless otherwise expressly authorized
by law; or
``(iii) any activity permitted in
subparagraph (H) or (I) of section
4(k)(4) of the Bank Holding Company Act
of 1956, except activities described in
section 4(k)(4)(H) that may be
permitted in accordance with section
122 of the Gramm-Leach-Bliley Act;
``(C) the national bank and each depository
institution affiliate of the national bank are
well capitalized and well managed;
``(D) the aggregate consolidated total
assets of all financial subsidiaries of the
national bank do not exceed the lesser of--
``(i) 45 percent of the
consolidated total assets of the parent
bank; or
``(ii) $50,000,000,000;
``(E) except as provided in paragraph (4),
the national bank meets any applicable rating
or other requirement set forth in paragraph
(3); and
``(F) the national bank has received the
approval of the Comptroller of the Currency for
the financial subsidiary to engage in such
activities, which approval shall be based
solely upon the factors set forth in this
section.
``(3) Rating or comparable requirement.--
``(A) In general.--A national bank meets
the requirements of this paragraph if--
``(i) the bank is 1 of the 50
largest insured banks and has not fewer
than 1 issue of outstanding eligible
debt that is currently rated within the
3 highest investment grade rating
categories by a nationally recognized
statistical rating organization; or
``(ii) the bank is 1 of the second
50 largest insured banks and meets the
criteria set forth in clause (i) or
such other criteria as the Secretary of
the Treasury and the Board of Governors
of the Federal Reserve System may
jointly establish by regulation and
determine to be comparable to and
consistent with the purposes of the
rating required in clause (i).
``(B) Consolidated total assets.--For
purposes of this paragraph, the size of an
insured bank shall be determined on the basis
of the consolidated total assets of the bank as
of the end of each calendar year.
``(4) Financial agency subsidiary.--The requirement
in paragraph (2)(E) shall not apply with respect to the
ownership or control of a financial subsidiary that
engages in activities described in subsection (b)(1)
solely as agent and not directly or indirectly as
principal.
``(5) Regulations required.--Before the end of the
270-day period beginning on the date of the enactment
of the Gramm-Leach-Bliley Act, the Comptroller of the
Currency shall, by regulation, prescribe procedures to
implement this section.
``(6) Indexed asset limit.--The dollar amount
contained in paragraph (2)(D) shall be adjusted
according to an indexing mechanism jointly established
by regulation by the Secretary of the Treasury and the
Board of Governors of the Federal Reserve System.
``(7) Coordination with section 4(l)(2) of the bank
holding company act of 1956.--Section 4(l)(2) of the
Bank Holding Company Act of 1956 applies to a national
bank that controls a financial subsidiary in the manner
provided in that section.
``(b) Activities That Are Financial in Nature.--
``(1) Financial activities.--
``(A) In general.--An activity shall be
financial in nature or incidental to such
financial activity only if--
``(i) such activity has been
defined to be financial in nature or
incidental to a financial activity for
bank holding companies pursuant to
section 4(k)(4) of the Bank Holding
Company Act of 1956; or
``(ii) the Secretary of the
Treasury determines the activity is
financial in nature or incidental to a
financial activity in accordance with
subparagraph (B).
``(B) Coordination between the board and
the secretary of the treasury.--
``(i) Proposals raised before the
secretary of the treasury.--
``(I) Consultation.--The
Secretary of the Treasury shall
notify the Board of, and
consult with the Board
concerning, any request,
proposal, or application under
this section for a
determination of whether an
activity is financial in nature
or incidental to a financial
activity.
``(II) Board view.--The
Secretary of the Treasury shall
not determine that any activity
is financial in nature or
incidental to a financial
activity under this section if
the Board notifies the
Secretary in writing, not later
than 30 days after the date of
receipt of the notice described
in subclause (I) (or such
longer period as the Secretary
determines to be appropriate
under the circumstances) that
the Board believes that the
activity is not financial in
nature or incidental to a
financial activity or is not
otherwise permissible under
this section.
``(ii) Proposals raised by the
board.--
``(I) Board
recommendation.--The Board may,
at any time, recommend in
writing that the Secretary of
the Treasury find an activity
to be financial in nature or
incidental to a financial
activity for purposes of this
section.
``(II) Time period for
secretarial action.--Not later
than 30 days after the date of
receipt of a written
recommendation from the Board
under subclause (I) (or such
longer period as the Secretary
of the Treasury and the Board
determine to be appropriate
under the circumstances), the
Secretary shall determine
whether to initiate a public
rulemaking proposing that the
subject recommended activity be
found to be financial in nature
or incidental to a financial
activity under this section,
and shall notify the Board in
writing of the determination of
the Secretary and, in the event
that the Secretary determines
not to seek public comment on
the proposal, the reasons for
that determination.
``(2) Factors to be considered.--In determining
whether an activity is financial in nature or
incidental to a financial activity, the Secretary shall
take into account--
``(A) the purposes of this Act and the
Gramm-Leach-Bliley Act;
``(B) changes or reasonably expected
changes in the marketplace in which banks
compete;
``(C) changes or reasonably expected
changes in the technology for delivering
financial services; and
``(D) whether such activity is necessary or
appropriate to allow a bank and the
subsidiaries of a bank to--
``(i) compete effectively with any
company seeking to provide financial
services in the United States;
``(ii) efficiently deliver
information and services that are
financial in nature through the use of
technological means, including any
application necessary to protect the
security or efficacy of systems for the
transmission of data or financial
transactions; and
``(iii) offer customers any
available or emerging technological
means for using financial services or
for the document imaging of data.
``(3) Authorization of new financial activities.--
The Secretary of the Treasury shall, by regulation or
order and in accordance with paragraph (1)(B), define,
consistent with the purposes of this Act and the Gramm-
Leach-Bliley Act, the following activities as, and the
extent to which such activities are, financial in
nature or incidental to a financial activity:
``(A) Lending, exchanging, transferring,
investing for others, or safeguarding financial
assets other than money or securities.
``(B) Providing any device or other
instrumentality for transferring money or other
financial assets.
``(C) Arranging, effecting, or facilitating
financial transactions for the account of third
parties.
``(c) Capital Deduction.--
``(1) Capital deduction required.--In determining
compliance with applicable capital standards--
``(A) the aggregate amount of the
outstanding equity investment, including
retained earnings, of a national bank in all
financial subsidiaries shall be deducted from
the assets and tangible equity of the national
bank; and
``(B) the assets and liabilities of the
financial subsidiaries shall not be
consolidated with those of the national bank.
``(2) Financial statement disclosure of capital
deduction.--Any published financial statement of a
national bank that controls a financial subsidiary
shall, in addition to providing information prepared in
accordance with generally accepted accounting
principles, separately present financial information
for the bank in the manner provided in paragraph (1).
``(d) Safeguards for the Bank.--A national bank that
establishes or maintains a financial subsidiary shall assure
that--
``(1) the procedures of the national bank for
identifying and managing financial and operational
risks within the national bank and the financial
subsidiary adequately protect the national bank from
such risks;
``(2) the national bank has, for the protection of
the bank, reasonable policies and procedures to
preserve the separate corporate identity and limited
liability of the national bank and the financial
subsidiaries of the national bank; and
``(3) the national bank is in compliance with this
section.
``(e) Provisions Applicable to National Banks That Fail To
Continue To Meet Certain Requirements.--
``(1) In general.--If a national bank or insured
depository institution affiliate does not continue to
meet the requirements of subsection (a)(2)(C) or
subsection (d), the Comptroller of the Currency shall
promptly give notice to the national bank to that
effect describing the conditions giving rise to the
notice.
``(2) Agreement to correct conditions.--Not later
than 45 days after the date of receipt by a national
bank of a notice given under paragraph (1) (or such
additional period as the Comptroller of the Currency
may permit), the national bank shall execute an
agreement with the Comptroller of the Currency and any
relevant insured depository institution affiliate shall
execute an agreement with its appropriate Federal
banking agency to comply with the requirements of
subsection (a)(2)(C) and subsection (d).
``(3) Imposition of conditions.--Until the
conditions described in a notice under paragraph (1)
are corrected--
``(A) the Comptroller of the Currency may
impose such limitations on the conduct or
activities of the national bank or any
subsidiary of the national bank as the
Comptroller of the Currency determines to be
appropriate under the circumstances and
consistent with the purposes of this section;
and
``(B) the appropriate Federal banking
agency may impose such limitations on the
conduct or activities of any relevant insured
depository institution affiliate or any
subsidiary of the institution as such agency
determines to be appropriate under the
circumstances and consistent with the purposes
of this section.
``(4) Failure to correct.--If the conditions
described in a notice to a national bank under
paragraph (1) are not corrected within 180 days after
the date of receipt by the national bank of the notice,
the Comptroller of the Currency may require the
national bank, under such terms and conditions as may
be imposed by the Comptroller and subject to such
extension of time as may be granted in the discretion
of the Comptroller, to divest control of any financial
subsidiary.
``(5) Consultation.--In taking any action under
this subsection, the Comptroller shall consult with all
relevant Federal and State regulatory agencies and
authorities.
``(f) Failure To Maintain Public Rating or Meet Applicable
Criteria.--
``(1) In general.--A national bank that does not
continue to meet any applicable rating or other
requirement of subsection (a)(2)(E) after acquiring or
establishing a financial subsidiary shall not, directly
or through a subsidiary, purchase or acquire any
additional equity capital of any financial subsidiary
until the bank meets such requirements.
``(2) Equity capital.--For purposes of this
subsection, the term `equity capital' includes, in
addition to any equity instrument, any debt instrument
issued by a financial subsidiary, if the instrument
qualifies as capital of the subsidiary under any
Federal or State law, regulation, or interpretation
applicable to the subsidiary.
``(g) Definitions.--For purposes of this section, the
following definitions shall apply:
``(1) Affiliate, company, control, and
subsidiary.--The terms `affiliate', `company',
`control', and `subsidiary' have the meanings given
those terms in section 2 of the Bank Holding Company
Act of 1956.
``(2) Appropriate federal banking agency,
depository institution, insured bank, and insured
depository institution.--The terms `appropriate Federal
banking agency', `depository institution', `insured
bank', and `insured depository institution' have the
meanings given those terms in section 3 of the Federal
Deposit Insurance Act.
``(3) Financial subsidiary.--The term `financial
subsidiary' means any company that is controlled by 1
or more insured depository institutions other than a
subsidiary that--
``(A) engages solely in activities that
national banks are permitted to engage in
directly and are conducted subject to the same
terms and conditions that govern the conduct of
such activities by national banks; or
``(B) a national bank is specifically
authorized by the express terms of a Federal
statute (other than this section), and not by
implication or interpretation, to control, such
as by section 25 or 25A of the Federal Reserve
Act or the Bank Service Company Act.
``(4) Eligible debt.--The term `eligible debt'
means unsecured long-term debt that--
``(A) is not supported by any form of
credit enhancement, including a guarantee or
standby letter of credit; and
``(B) is not held in whole or in any
significant part by any affiliate, officer,
director, principal shareholder, or employee of
the bank or any other person acting on behalf
of or with funds from the bank or an affiliate
of the bank.
``(5) Well capitalized.--The term `well
capitalized' has the meaning given the term in section
38 of the Federal Deposit Insurance Act.
``(6) Well managed.--The term `well managed'
means--
``(A) in the case of a depository
institution that has been examined, unless
otherwise determined in writing by the
appropriate Federal banking agency--
``(i) the achievement of a
composite rating of 1 or 2 under the
Uniform Financial Institutions Rating
System (or an equivalent rating under
an equivalent rating system) in
connection with the most recent
examination or subsequent review of the
depository institution; and
``(ii) at least a rating of 2 for
management, if such rating is given; or
``(B) in the case of any depository
institution that has not been examined, the
existence and use of managerial resources that
the appropriate Federal banking agency
determines are satisfactory.''.
(b) Sections 23A and 23B of the Federal Reserve Act.--
(1) Limiting the exposure of a bank to a financial
subsidiary to the amount of permissible exposure to an
affiliate.--Section 23A of the Federal Reserve Act (12
U.S.C. 371c) is amended--
(A) by redesignating subsection (e) as
subsection (f); and
(B) by inserting after subsection (d), the
following new subsection:
``(e) Rules Relating to Banks with Financial
Subsidiaries.--
``(1) Financial subsidiary defined.--For purposes
of this section and section 23B, the term `financial
subsidiary' means any company that is a subsidiary of a
bank that would be a financial subsidiary of a national
bank under section 5136A of the Revised Statutes of the
United States.
``(2) Financial subsidiary treated as an
affiliate.--For purposes of applying this section and
section 23B, and notwithstanding subsection (b)(2) of
this section or section 23B(d)(1), a financial
subsidiary of a bank--
``(A) shall be deemed to be an affiliate of
the bank; and
``(B) shall not be deemed to be a
subsidiary of the bank.
``(3) Exceptions for transactions with financial
subsidiaries.--
``(A) Exception from limit on covered
transactions with any individual financial
subsidiary.--Notwithstanding paragraph (2), the
restriction contained in subsection (a)(1)(A)
shall not apply with respect to covered
transactions between a bank and any individual
financial subsidiary of the bank.
``(B) Exception for earnings retained by
financial subsidiaries.--Notwithstanding
paragraph (2) or subsection (b)(7), a bank's
investment in a financial subsidiary of the
bank shall not include retained earnings of the
financial subsidiary.
``(4) Anti-evasion provision.--For purposes of this
section and section 23B--
``(A) any purchase of, or investment in,
the securities of a financial subsidiary of a
bank by an affiliate of the bank shall be
considered to be a purchase of or investment in
such securities by the bank; and
``(B) any extension of credit by an
affiliate of a bank to a financial subsidiary
of the bank shall be considered to be an
extension of credit by the bank to the
financial subsidiary if the Board determines
that such treatment is necessary or appropriate
to prevent evasions of this Act and the Gramm-
Leach-Bliley Act.''.
(2) Rebuttable presumption of control of portfolio
company.--Section 23A(b) of the Federal Reserve Act (12
U.S.C. 371c(b)) is amended by adding at the end the
following new paragraph--
``(11) Rebuttable presumption of control of
portfolio companies.--In addition to paragraph (3), a
company or shareholder shall be presumed to control any
other company if the company or shareholder, directly
or indirectly, or acting through 1 or more other
persons, owns or controls 15 percent or more of the
equity capital of the other company pursuant to
subparagraph (H) or (I) of section 4(k)(4) of the Bank
Holding Company Act of 1956 or rules adopted under
section 122 of the Gramm-Leach-Bliley Act, if any,
unless the company or shareholder provides information
acceptable to the Board to rebut this presumption of
control.''.
(3) Rulemaking required concerning derivative
transactions and intraday credit.--Section 23A(f) of
the Federal Reserve Act (12 U.S.C. 371c(f)) (as so
redesignated by paragraph (1)(A) of this subsection) is
amended by inserting at the end the following new
paragraph:
``(3) Rulemaking required concerning derivative
transactions and intraday credit.--
``(A) In general.--Not later than 18 months
after the date of the enactment of the Gramm-
Leach-Bliley Act, the Board shall adopt final
rules under this section to address as covered
transactions credit exposure arising out of
derivative transactions between member banks
and their affiliates and intraday extensions of
credit by member banks to their affiliates.
``(B) Effective date.--The effective date
of any final rule adopted by the Board pursuant
to subparagraph (A) shall be delayed for such
period as the Board deems necessary or
appropriate to permit banks to conform their
activities to the requirements of the final
rule without undue hardship.''.
(c) Antitying.--Section 106(a) of the Bank Holding Company
Act Amendments of 1970 (12 U.S.C. 1971) is amended by adding at
the end the following: ``For purposes of this section, a
financial subsidiary of a national bank engaging in activities
pursuant to section 5136A(a) of the Revised Statutes of the
United States shall be deemed to be a subsidiary of a bank
holding company, and not a subsidiary of a bank.''.
(d) Safety and Soundness Firewalls for State Banks With
Financial Subsidiaries.--
(1) Federal deposit insurance act.--The Federal
Deposit Insurance Act (12 U.S.C. 1811 et seq.) is
amended by inserting after section 45 (as added by
section 112(b) of this title) the following new
section:
``SEC. 46. SAFETY AND SOUNDNESS FIREWALLS APPLICABLE TO FINANCIAL
SUBSIDIARIES OF BANKS.
``(a) In General.--An insured State bank may control or
hold an interest in a subsidiary that engages in activities as
principal that would only be permissible for a national bank to
conduct through a financial subsidiary if--
``(1) the State bank and each insured depository
institution affiliate of the State bank are well
capitalized (after the capital deduction required by
paragraph (2));
``(2) the State bank complies with the capital
deduction and financial statement disclosure
requirements in section 5136A(c) of the Revised
Statutes of the United States;
``(3) the State bank complies with the financial
and operational safeguards required by section 5136A(d)
of the Revised Statutes of the United States; and
``(4) the State bank complies with the amendments
to sections 23A and 23B of the Federal Reserve Act made
by section 121(b) of the Gramm-Leach-Bliley Act.
``(b) Preservation of Existing Subsidiaries.--
Notwithstanding subsection (a), an insured State bank may
retain control of a subsidiary, or retain an interest in a
subsidiary, that the State bank lawfully controlled or acquired
before the date of the enactment of the Gramm-Leach-Bliley Act,
and conduct through such subsidiary any activities lawfully
conducted in such subsidiary as of such date.
``(c) Definitions.--For purposes of this section, the
following definitions shall apply:
``(1) Subsidiary.--The term `subsidiary' means any
company that is a subsidiary (as defined in section
3(w)(4)) of 1 or more insured banks.
``(2) Financial subsidiary.--The term `financial
subsidiary' has the meaning given the term in section
5136A(g) of the Revised Statutes of the United States.
``(d) Preservation of Authority.--
``(1) Federal deposit insurance act.--No provision
of this section shall be construed as superseding the
authority of the Federal Deposit Insurance Corporation
to review subsidiary activities under section 24.
``(2) Federal reserve act.--No provision of this
section shall be construed as affecting the
applicability of the 20th undesignated paragraph of
section 9 of the Federal Reserve Act.''.
(2) Federal Reserve Act.--The 20th undesignated
paragraph of section 9 of the Federal Reserve Act (12
U.S.C. 335) is amended by adding at the end the
following: ``This paragraph shall not apply to any
interest held by a State member bank in accordance with
section 5136A of the Revised Statutes of the United
States and subject to the same conditions and
limitations provided in such section.''.
(e) Clerical Amendment.--The table of sections for chapter
one of title LXII of the Revised Statutes of the United States
is amended--
(1) by redesignating the item relating to section
5136A as section 5136B; and
(2) by inserting after the item relating to section
5136 the following new item:
``5136A. Financial subsidiaries of national banks.''.
SEC. 122. CONSIDERATION OF MERCHANT BANKING ACTIVITIES BY FINANCIAL
SUBSIDIARIES.
After the end of the 5-year period beginning on the date of
the enactment of the Gramm-Leach-Bliley Act, the Board of
Governors of the Federal Reserve System and the Secretary of
the Treasury may, if appropriate, after considering--
(1) the experience with the effects of financial
modernization under this Act and merchant banking
activities of financial holding companies;
(2) the potential effects on depository
institutions and the financial system of allowing
merchant banking activities in financial subsidiaries;
and
(3) other relevant facts;
jointly adopt rules that permit financial subsidiaries to
engage in merchant banking activities described in section
4(k)(4)(H) of the Bank Holding Company Act of 1956, under such
terms and conditions as the Board of Governors of the Federal
Reserve System and the Secretary of the Treasury jointly
determine to be appropriate.
Subtitle D--Preservation of FTC Authority
SEC. 131. AMENDMENT TO THE BANK HOLDING COMPANY ACT OF 1956 TO MODIFY
NOTIFICATION AND POST-APPROVAL WAITING PERIOD FOR
SECTION 3 TRANSACTIONS.
Section 11(b)(1) of the Bank Holding Company Act of 1956
(12 U.S.C. 1849(b)(1)) is amended by inserting ``and, if the
transaction also involves an acquisition under section 4, the
Board shall also notify the Federal Trade Commission of such
approval'' before the period at the end of the first sentence.
SEC. 132. INTERAGENCY DATA SHARING.
(a) In General.--To the extent not prohibited by other law,
the Comptroller of the Currency, the Director of the Office of
Thrift Supervision, the Federal Deposit Insurance Corporation,
and the Board of Governors of the Federal Reserve System shall
make available to the Attorney General and the Federal Trade
Commission any data in the possession of any such banking
agency that the antitrust agency deems necessary for antitrust
review of any transaction requiring notice to any such
antitrust agency or the approval of such agency under section 3
or 4 of the Bank Holding Company Act of 1956, section 18(c) of
the Federal Deposit Insurance Act, the National Bank
Consolidation and Merger Act, section 10 of the Home Owners'
Loan Act, or the antitrust laws.
(b) Confidentiality Requirements.--
(1) In general.--Any information or material
obtained by any agency pursuant to subsection (a) shall
be treated as confidential.
(2) Procedures for disclosure.--If any information
or material obtained by any agency pursuant to
subsection (a) is proposed to be disclosed to a third
party, written notice of such disclosure shall first be
provided to the agency from which such information or
material was obtained and an opportunity shall be given
to such agency to oppose or limit the proposed
disclosure.
(3) Other privileges not waived by disclosure under
this section.--The provision by any Federal agency of
any information or material pursuant to subsection (a)
to another agency shall not constitute a waiver, or
otherwise affect, any privilege any agency or person
may claim with respect to such information under
Federal or State law.
(4) Exception.--No provision of this section shall
be construed as preventing or limiting access to any
information by any duly authorized committee of the
Congress or the Comptroller General of the United
States.
(c) Banking Agency Information Sharing.--The provisions of
subsection (b) shall apply to--
(1) any information or material obtained by any
Federal banking agency (as defined in section 3(z) of
the Federal Deposit Insurance Act) from any other
Federal banking agency; and
(2) any report of examination or other confidential
supervisory information obtained by any State agency or
authority, or any other person, from a Federal banking
agency.
SEC. 133. CLARIFICATION OF STATUS OF SUBSIDIARIES AND AFFILIATES.
(a) Clarification of Federal Trade Commission
Jurisdiction.--Any person that directly or indirectly controls,
is controlled directly or indirectly by, or is directly or
indirectly under common control with, any bank or savings
association (as such terms are defined in section 3 of the
Federal Deposit Insurance Act) and is not itself a bank or
savings association shall not be deemed to be a bank or savings
association for purposes of any provisions applied by the
Federal Trade Commission under the Federal Trade Commission
Act.
(b) Savings Provision.--No provision of this section shall
be construed as restricting the authority of any Federal
banking agency (as defined in section 3 of the Federal Deposit
Insurance Act) under any Federal banking law, including section
8 of the Federal Deposit Insurance Act.
(c) Hart-Scott-Rodino Amendments.--
(1) Banks.--Section 7A(c)(7) of the Clayton Act (15
U.S.C. 18a(c)(7)) is amended by inserting before the
semicolon at the end the following: ``, except that a
portion of a transaction is not exempt under this
paragraph if such portion of the transaction (A) is
subject to section 4(k) of the Bank Holding Company Act
of 1956; and (B) does not require agency approval under
section 3 of the Bank Holding Company Act of 1956''.
(2) Bank holding companies.--Section 7A(c)(8) of
the Clayton Act (15 U.S.C. 18a(c)(8)) is amended by
inserting before the semicolon at the end the
following: ``, except that a portion of a transaction
is not exempt under this paragraph if such portion of
the transaction (A) is subject to section 4(k) of the
Bank Holding Company Act of 1956; and (B) does not
require agency approval under section 4 of the Bank
Holding Company Act of 1956''.
Subtitle E--National Treatment
SEC. 141. FOREIGN BANKS THAT ARE FINANCIAL HOLDING COMPANIES.
Section 8(c) of the International Banking Act of 1978 (12
U.S.C. 3106(c)) is amended by adding at the end the following
new paragraph:
``(3) Termination of grandfathered rights.--
``(A) In general.--If any foreign bank or
foreign company files a declaration under
section 4(l)(1)(C) of the Bank Holding Company
Act of 1956, any authority conferred by this
subsection on any foreign bank or company
toengage in any activity that the Board has determined to be
permissible for financial holding companies under section 4(k) of such
Act shall terminate immediately.
``(B) Restrictions and requirements
authorized.--If a foreign bank or company that
engages, directly or through an affiliate
pursuant to paragraph (1), in an activity that
the Board has determined to be permissible for
financial holding companies under section 4(k)
of the Bank Holding Company Act of 1956 has not
filed a declaration with the Board of its
status as a financial holding company under
such section by the end of the 2-year period
beginning on the date of the enactment of the
Gramm-Leach-Bliley Act, the Board, giving due
regard to the principle of national treatment
and equality of competitive opportunity, may
impose such restrictions and requirements on
the conduct of such activities by such foreign
bank or company as are comparable to those
imposed on a financial holding company
organized under the laws of the United States,
including a requirement to conduct such
activities in compliance with any prudential
safeguards established under section 114 of the
Gramm-Leach-Bliley Act.''.
SEC. 142. REPRESENTATIVE OFFICES.
(a) Definition.--Section 1(b)(15) of the International
Banking Act of 1978 (12 U.S.C. 3101(15)) is amended by striking
``State agency, or subsidiary of a foreign bank'' and inserting
``or State agency''.
(b) Examinations.--Section 10(c) of the International
Banking Act of 1978 (12 U.S.C. 3107(c)) is amended by adding at
the end the following new sentence: ``The Board may also make
examinations of any affiliate of a foreign bank conducting
business in any State if the Board deems it necessary to
determine and enforce compliance with this Act, the Bank
Holding Company Act of 1956, or other applicable Federal
banking law.''.
Subtitle F--Direct Activities of Banks
SEC. 151. AUTHORITY OF NATIONAL BANKS TO UNDERWRITE CERTAIN MUNICIPAL
BONDS.
The paragraph designated the Seventh of section 5136 of the
Revised Statutes of the United States (12 U.S.C. 24(7)) is
amended by adding at the end the following new sentence: ``In
addition to the provisions in this paragraph for dealing in,
underwriting, or purchasing securities, the limitations and
restrictions contained in this paragraph as to dealing in,
underwriting, and purchasing investment securities for the
national bank's own account shall not apply to obligations
(including limited obligation bonds, revenue bonds, and
obligations that satisfy the requirements of section 142(b)(1)
of the Internal Revenue Code of 1986) issued by or on behalf of
any State or political subdivision of a State, including any
municipal corporate instrumentality of 1 or more States, or any
public agency or authority of any State or political
subdivision of a State, if the national bank is well
capitalized (as defined in section 38 of the Federal Deposit
Insurance Act).''.
Subtitle G--Effective Date
SEC. 161. EFFECTIVE DATE.
This title (other than section 104) and the amendments made
by this title shall take effect 120 days after the date of the
enactment of this Act.
TITLE II--FUNCTIONAL REGULATION
Subtitle A--Brokers and Dealers
SEC. 201. DEFINITION OF BROKER.
Section 3(a)(4) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)(4)) is amended to read as follows:
``(4) Broker.--
``(A) In general.--The term `broker' means
any person engaged in the business of effecting
transactions in securities for the account of
others.
``(B) Exception for certain bank
activities.--A bank shall not be considered to
be a broker because the bank engages in any one
or more of the following activities under the
conditions described:
``(i) Third party brokerage
arrangements.--The bank enters into a
contractual or other written
arrangement with a broker or dealer
registered under this title under which
the broker or dealer offers brokerage
services on or off the premises of the
bank if--
``(I) such broker or dealer
is clearly identified as the
person performing the brokerage
services;
``(II) the broker or dealer
performs brokerage services in
an area that is clearly marked
and, to the extent practicable,
physically separate from the
routine deposit-taking
activities of the bank;
``(III) any materials used
by the bank to advertise or
promote generally the
availability of brokerage
services under the arrangement
clearly indicate that the
brokerage services are being
provided by the broker or
dealer and not by the bank;
``(IV) any materials used
by the bank to advertise or
promote generally the
availability of brokerage
services under the arrangement
are in compliance with the
Federal securities laws before
distribution;
``(V) bank employees (other
than associated persons of a
broker or dealer who are
qualified pursuant to the rules
of a self-regulatory
organization) perform only
clerical or ministerial
functions in connection with
brokerage transactions
including scheduling
appointments with the
associated persons of a broker
or dealer, except that bank
employees may forward customer
funds or securities and may
describe in general terms the
types of investment vehicles
available from the bank and the
broker or dealer under the
arrangement;
``(VI) bank employees do
not receive incentive
compensation for any brokerage
transaction unless such
employees are associated
persons of a broker or dealer
and are qualified pursuant to
the rules of a self-regulatory
organization, except that the
bank employees may receive
compensation for the referral
of any customer if the
compensation is a nominal one-
time cash fee of a fixed dollar
amount and the payment of the
fee is not contingent on
whether the referral results in
a transaction;
``(VII) such services are
provided by the broker or
dealer on a basis in which all
customers that receive any
services are fully disclosed to
the broker or dealer;
``(VIII) the bank does not
carry a securities account of
the customer except as
permitted under clause (ii) or
(viii) of this subparagraph;
and
``(IX) the bank, broker, or
dealer informs each customer
that the brokerage services are
provided by the broker or
dealer and not by the bank and
that the securities are not
deposits or other obligations
of the bank, are not guaranteed
by the bank, and are not
insured by the Federal Deposit
Insurance Corporation.
``(ii) Trust activities.--The bank
effects transactions in a trustee
capacity, or effects transactions in a
fiduciary capacity in its trust
department or other department that is
regularly examined by bank examiners
for compliance with fiduciary
principles and standards, and--
``(I) is chiefly
compensated for such
transactions, consistent with
fiduciary principles and
standards, on the basis of an
administration or annual fee
(payable on a monthly,
quarterly, or other basis), a
percentage of assets under
management, or a flat or capped
per order processing fee equal
to not more than the cost
incurred by the bank in
connection with executing
securities transactions for
trustee and fiduciary
customers, or any combination
of such fees; and
``(II) does not publicly
solicit brokerage business,
other than by advertising that
it effects transactions in
securities in conjunction with
advertising its other trust
activities.
``(iii) Permissible securities
transactions.--The bank effects
transactions in--
``(I) commercial paper,
bankers acceptances, or
commercial bills;
``(II) exempted securities;
``(III) qualified Canadian
government obligations as
defined in section 5136 of the
Revised Statutes, in conformity
with section 15C of this title
and the rules and regulations
thereunder, or obligations of
the North American Development
Bank; or
``(IV) any standardized,
credit enhanced debt security
issued by a foreign government
pursuant to the March 1989 plan
of then Secretary of the
Treasury Brady, used by such
foreign government to retire
outstanding commercial bank
loans.
``(iv) Certain stock purchase
plans.--
``(I) Employee benefit
plans.--The bank effects
transactions, as part of its
transfer agency activities, in
the securities of an issuer as
part of any pension,
retirement, profit-sharing,
bonus, thrift, savings,
incentive, or other similar
benefit plan for the employees
of that issuer or its
affiliates (as defined in
section 2 of the Bank Holding
Company Act of 1956), if the
bank does not solicit
transactions or provide
investment advice with respect
to the purchase or sale of
securities in connection with
the plan.
``(II) Dividend
reinvestment plans.--The bank
effects transactions, as part
of its transfer agency
activities, in the securities
of an issuer as part of that
issuer's dividend reinvestment
plan, if--
``(aa) the bank
does not solicit
transactions or provide
investment advice with
respect to the purchase
or sale of securities
in connection with the
plan; and
``(bb) the bank
does not net
shareholders' buy and
sell orders, other than
for programs for odd-
lot holders or plans
registered with the
Commission.
``(III) Issuer plans.--The
bank effects transactions, as
part of its transfer agency
activities, in the securities
of an issuer as part of a plan
or program for the purchase or
sale of that issuer's shares,
if--
``(aa) the bank
does not solicit
transactions or provide
investment advice with
respect to the purchase
or sale of securities
in connection with the
plan or program; and
``(bb) the bank
does not net
shareholders' buy and
sell orders, other than
for programs for odd-
lot holders or plans
registered with the
Commission.
``(IV) Permissible delivery
of materials.--The exception to
being considered a broker for a
bank engaged in activities
described in subclauses (I),
(II), and (III) will not be
affected by delivery of written
or electronic plan materials by
a bank to employees of the
issuer, shareholders of the
issuer, or members of affinity
groups of the issuer, so long
as such materials are--
``(aa) comparable
in scope or nature to
that permitted by the
Commission as of the
date of the enactment
of the Gramm-Leach-
Bliley Act; or
``(bb) otherwise
permitted by the
Commission.
``(v) Sweep accounts.--The bank
effects transactions as part of a
program for the investment or
reinvestment of deposit funds into any
no-load, open-end management investment
company registered under the Investment
Company Act of 1940 that holds itself
out as a money market fund.
``(vi) Affiliate transactions.--The
bank effects transactions for the
account of any affiliate of the bank
(as defined in section 2 of the Bank
Holding Company Act of 1956) other
than--
``(I) a registered broker
or dealer; or
``(II) an affiliate that is
engaged in merchant banking, as
described in section 4(k)(4)(H)
of the Bank Holding Company Act
of 1956.
``(vii) Private securities
offerings.--The bank--
``(I) effects sales as part
of a primary offering of
securities not involving a
public offering, pursuant to
section 3(b), 4(2), or 4(6) of
the Securities Act of 1933 or
the rules and regulations
issued thereunder;
``(II) at any time after
the date that is 1 year after
the date of the enactment of
the Gramm-Leach-Bliley Act, is
not affiliated with a broker or
dealer that has been registered
for more than 1 year in
accordance with this Act, and
engages in dealing, market
making, or underwriting
activities, other than with
respect to exempted securities;
and
``(III) if the bank is not
affiliated with a broker or
dealer, does not effect any
primary offering described in
subclause (I) the aggregate
amount of which exceeds 25
percent of the capital of the
bank, except that the
limitation of this subclause
shall not apply with respect to
any sale of government
securities or municipal
securities.
``(viii) Safekeeping and custody
activities.--
``(I) In general.--The
bank, as part of customary
banking activities--
``(aa) provides
safekeeping or custody
services with respect
to securities,
including the exercise
of warrants and other
rights on behalf of
customers;
``(bb) facilitates
the transfer of funds
or securities, as a
custodian or a clearing
agency, in connection
with the clearance and
settlement of its
customers' transactions
in securities;
``(cc) effects
securities lending or
borrowing transactions
with or on behalf of
customers as part of
services provided to
customers pursuant to
division (aa) or (bb)
or invests cash
collateral pledged in
connection with such
transactions;
``(dd) holds
securities pledged by a
customer to another
person or securities
subject to purchase or
resale agreements
involving a customer,
or facilitates the
pledging or transfer of
such securities by book
entry or as otherwise
provided under
applicable law, if the
bank maintains records
separately identifying
the securities and the
customer; or
``(ee) serves as a
custodian or provider
of other related
administrative services
to any individual
retirement account,
pension, retirement,
profit sharing, bonus,
thrift savings,
incentive, or other
similar benefit plan.
``(II) Exception for
carrying broker activities.--
The exception to being
considered a broker for a bank
engaged in activities described
in subclause (I) shall not
apply if the bank, in
connection with such
activities, acts in the United
States as a carrying broker (as
such term, and different
formulations thereof, are used
in section 15(c)(3) of this
title and the rules and
regulations thereunder) for any
broker or dealer, unless such
carrying broker activities are
engaged in with respect to
government securities (as
defined in paragraph (42) of
this subsection).
``(ix) Identified banking
products.--The bank effects
transactions in identified banking
products as defined in section 206 of
the Gramm-Leach-Bliley Act.
``(x) Municipal securities.--The
bank effects transactions in municipal
securities.
``(xi) De minimis exception.--The
bank effects, other than in
transactions referred to in clauses (i)
through (x), not more than 500
transactions in securities in any
calendar year, and such transactions
are not effected by an employee of the
bank who is also an employee of a
broker or dealer.
``(C) Execution by broker or dealer.--The
exception to being considered a broker for a
bank engaged in activities described in clauses
(ii), (iv), and (viii) of subparagraph (B)
shall not apply if the activities described in
such provisions result in the trade in the
United States of any security that is a
publicly traded security in the United States,
unless--
``(i) the bank directs such trade
to a registered broker or dealer for
execution;
``(ii) the trade is a cross trade
or other substantially similar trade of
a security that--
``(I) is made by the bank
or between the bank and an
affiliated fiduciary; and
``(II) is not in
contravention of fiduciary
principles established under
applicable Federal or State
law; or
``(iii) the trade is conducted in
some other manner permitted under
rules, regulations, or orders as the
Commission may prescribe or issue.
``(D) Fiduciary capacity.--For purposes of
subparagraph (B)(ii), the term `fiduciary
capacity' means--
``(i) in the capacity as trustee,
executor, administrator, registrar of
stocks and bonds, transfer agent,
guardian, assignee, receiver, or
custodian under a uniform gift to minor
act, or as an investment adviser if the
bank receives a fee for its investment
advice;
``(ii) in any capacity in which the
bank possesses investment discretion on
behalf of another; or
``(iii) in any other similar
capacity.
``(E) Exception for entities subject to
section 15(e).--The term `broker' does not
include a bank that--
``(i) was, on the day before the
date of enactment of the Gramm-Leach-
Bliley Act, subject to section 15(e);
and
``(ii) is subject to such
restrictions and requirements as the
Commission considers appropriate.''.
SEC. 202. DEFINITION OF DEALER.
Section 3(a)(5) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)(5)) is amended to read as follows:
``(5) Dealer.--
``(A) In general.--The term `dealer' means
any person engaged in the business of buying
and selling securities for such person's own
account through a broker or otherwise.
``(B) Exception for person not engaged in
the business of dealing.--The term `dealer'
does not include a person that buys or sells
securities for such person's own account,
either individually or in a fiduciary capacity,
but not as a part of a regular business.
``(C) Exception for certain bank
activities.--A bank shall not be considered to
be a dealer because the bank engages in any of
the following activities under the conditions
described:
``(i) Permissible securities
transactions.--The bank buys or sells--
``(I) commercial paper,
bankers acceptances, or
commercial bills;
``(II) exempted securities;
``(III) qualified Canadian
government obligations as
defined in section 5136 of the
Revised Statutes of the United
States, in conformity with
section 15C of this title and
the rules and regulations
thereunder, or obligations of
the North American Development
Bank; or
``(IV) any standardized,
credit enhanced debt security
issued by a foreign government
pursuant to the March 1989 plan
of then Secretary of the
Treasury Brady, used by such
foreign government to retire
outstanding commercial bank
loans.
``(ii) Investment, trustee, and
fiduciary transactions.--The bank buys
or sells securities for investment
purposes--
``(I) for the bank; or
``(II) for accounts for
which the bank acts as a
trustee or fiduciary.
``(iii) Asset-backed
transactions.--The bank engages in the
issuance or sale to qualified
investors, through a grantor trust or
other separate entity, of securities
backed by or representing an interest
in notes, drafts, acceptances, loans,
leases, receivables, other obligations
(other than securities of which the
bank is not the issuer), or pools of
any such obligations predominantly
originated by--
``(I) the bank;
``(II) an affiliate of any
such bank other than a broker
or dealer; or
``(III) a syndicate of
banks of which the bank is a
member, if the obligations or
pool of obligations consists of
mortgage obligations or
consumer-related receivables.
``(iv) Identified banking
products.--The bank buys or sells
identified banking products, as defined
in section 206 of the Gramm-Leach-
Bliley Act.''.
SEC. 203. REGISTRATION FOR SALES OF PRIVATE SECURITIES OFFERINGS.
Section 15A of the Securities Exchange Act of 1934 (15
U.S.C. 78o-3) is amended by inserting after subsection (i) the
following new subsection:
``(j) Registration for Sales of Private Securities
Offerings.--A registered securities association shall create a
limited qualification category for any associated person of a
member who effects sales as part of a primary offering of
securities not involving a public offering, pursuant to section
3(b), 4(2), or 4(6) of the Securities Act of 1933 and the rules
and regulations thereunder, and shall deem qualified in such
limited qualification category, without testing, any bank
employee who, in the six month period preceding the date of the
enactment of the Gramm-Leach-Bliley Act, engaged in effecting
such sales.''.
SEC. 204. INFORMATION SHARING.
Section 18 of the Federal Deposit Insurance Act is amended
by adding at the end the following new subsection:
``(t) Recordkeeping Requirements.--
``(1) Requirements.--Each appropriate Federal
banking agency, after consultation with and
consideration of the views of the Commission, shall
establish recordkeeping requirements for banks relying
on exceptions contained in paragraphs (4) and (5) of
section 3(a) of the Securities Exchange Act of 1934.
Such recordkeeping requirements shall be sufficient to
demonstrate compliance with the terms of such
exceptions and be designed to facilitate compliance
with such exceptions.
``(2) Availability to commission;
confidentiality.--Each appropriate Federal banking
agency shall make any information required under
paragraph (1) available to the Commission upon request.
Notwithstanding any other provision of law, the
Commission shall not be compelled to disclose any such
information. Nothing in this paragraph shall authorize
the Commission to withhold information from Congress,
or prevent the Commission from complying with a request
for information from any other Federal department or
agency or any self-regulatory organization requesting
the information for purposes within the scope of its
jurisdiction, or complying with an order of a court of
the United States in an action brought by the United
States or the Commission. For purposes of section 552
of title 5, United States Code, this paragraph shall be
considered a statute described in subsection (b)(3)(B)
of such section 552.
``(3) Definitions.--As used in this subsection the
term `Commission' means the Securities and Exchange
Commission.''.
SEC. 205. TREATMENT OF NEW HYBRID PRODUCTS.
Section 15 of the Securities Exchange Act of 1934 (15
U.S.C. 78o) is amended by adding at the end the following new
subsection:
``(i) Rulemaking To Extend Requirements to New Hybrid
Products.--
``(1) Consultation.--Prior to commencing a
rulemaking under this subsection, the Commission shall
consult with and seek the concurrence of the Board
concerning the imposition of broker or dealer
registration requirements with respect to any new
hybrid product. In developing and promulgating rules
under this subsection, the Commission shall consider
the views of the Board, including views with respect to
the nature of the new hybrid product; the history,
purpose, extent, and appropriateness of the regulation
of the new product under the Federal banking laws; and
the impact of the proposed rule on the banking
industry.
``(2) Limitation.--The Commission shall not--
``(A) require a bank to register as a
broker or dealer under this section because the
bank engages in any transaction in, or buys or
sells, a new hybrid product; or
``(B) bring an action against a bank for a
failure to comply with a requirement described
in subparagraph (A),
unless the Commission has imposed such requirement by
rule or regulation issued in accordance with this
section.
``(3) Criteria for rulemaking.--The Commission
shall not impose a requirement under paragraph (2) of
this subsection with respect to any new hybrid product
unless the Commission determines that--
``(A) the new hybrid product is a security;
and
``(B) imposing such requirement is
necessary and appropriate in the public
interest and for the protection of investors.
``(4) Considerations.--In making a determination
under paragraph (3), the Commission shall consider--
``(A) the nature of the new hybrid product;
and
``(B) the history, purpose, extent, and
appropriateness of the regulation of the new
hybrid product under the Federal securities
laws and under the Federal banking laws.
``(5) Objection to commission regulation.--
``(A) Filing of petition for review.--The
Board may obtain review of any final regulation
described in paragraph (2) in the United States
Court of Appeals for the District of Columbia
Circuit by filing in such court, not later than
60 days after the date of publication of the
final regulation, a written petition requesting
that the regulation be set aside. Any
proceeding to challenge any such rule shall be
expedited by the Court of Appeals.
``(B) Transmittal of petition and record.--
A copy of a petition described in subparagraph
(A) shall be transmitted as soon as possible by
the Clerk of the Court to an officer or
employee of the Commission designated for that
purpose. Upon receipt of the petition, the
Commission shall file with the court the
regulation under review and any documents
referred to therein, and any other relevant
materials prescribed by the court.
``(C) Exclusive jurisdiction.--On the date
of the filing of the petition under
subparagraph (A), the court has jurisdiction,
which becomes exclusive on the filing of the
materials set forth in subparagraph (B), to
affirm and enforce or to set aside the
regulation at issue.
``(D) Standard of review.--The court shall
determine to affirm and enforce or set aside a
regulation of the Commission under this
subsection, based on the determination of the
court as to whether--
``(i) the subject product is a new
hybrid product, as defined in this
subsection;
``(ii) the subject product is a
security; and
``(iii) imposing a requirement to
register as a broker or dealer for
banks engaging in transactions in such
product is appropriate in light of the
history, purpose, and extent of
regulation under the Federal securities
laws and under the Federal banking
laws, giving deference neither to the
views of the Commission nor the Board.
``(E) Judicial stay.--The filing of a
petition by the Board pursuant to subparagraph
(A) shall operate as a judicial stay, until the
date on which the determination of the court is
final (including any appeal of such
determination).
``(F) Other authority to challenge.--Any
aggrieved party may seek judicial review of the
Commission's rulemaking under this subsection
pursuant to section 25 of this title.
``(6) Definitions.--For purposes of this
subsection:
``(A) New hybrid product.--The term `new
hybrid product' means a product that--
``(i) was not subjected to
regulation by the Commission as a
security prior to the date of the
enactment of the Gramm-Leach-Bliley
Act;
``(ii) is not an identified banking
product as such term is defined in
section 206 of such Act; and
``(iii) is not an equity swap
within the meaning of section 206(a)(6)
of such Act.
``(B) Board.--The term `Board' means the
Board of Governors of the Federal Reserve
System.''.
SEC. 206. DEFINITION OF IDENTIFIED BANKING PRODUCT.
(a) Definition of Identified Banking Product.--For purposes
of paragraphs (4) and (5) of section 3(a) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a) (4), (5)), the term
``identified banking product'' means--
(1) a deposit account, savings account, certificate
of deposit, or other deposit instrument issued by a
bank;
(2) a banker's acceptance;
(3) a letter of credit issued or loan made by a
bank;
(4) a debit account at a bank arising from a credit
card or similar arrangement;
(5) a participation in a loan which the bank or an
affiliate of the bank (other than a broker or dealer)
funds, participates in, or owns that is sold--
(A) to qualified investors; or
(B) to other persons that--
(i) have the opportunity to review
and assess any material information,
including information regarding the
borrower's creditworthiness; and
(ii) based on such factors as
financial sophistication, net worth,
and knowledge and experience in
financial matters, have the capability
to evaluate the information available,
as determined under generally
applicable banking standards or
guidelines; or
(6) any swap agreement, including credit and equity
swaps, except that an equity swap that is sold directly
to any person other than a qualified investor (as
defined in section 3(a)(54) of the Securities Act of
1934) shall not be treated as an identified banking
product.
(b) Definition of Swap Agreement.--For purposes of
subsection (a)(6), the term ``swap agreement'' means any
individually negotiated contract, agreement, warrant, note, or
option that is based, in whole or in part, on the value of, any
interest in, or any quantitative measure or the occurrence of
any event relating to, one or more commodities, securities,
currencies, interest or other rates, indices, or other assets,
but does not include any other identified banking product, as
defined in paragraphs (1) through (5) of subsection (a).
(c) Classification Limited.--Classification of a particular
product as an identified banking product pursuant to this
section shall not be construed as finding or implying that such
product is or is not a security for any purpose under the
securities laws, or is or is not an account, agreement,
contract, or transaction for any purpose under the Commodity
Exchange Act.
(d) Incorporated Definitions.--For purposes of this
section, the terms ``bank'' and ``qualified investor'' have the
same meanings as given in section 3(a) of the Securities
Exchange Act of 1934, as amended by this Act.
SEC. 207. ADDITIONAL DEFINITIONS.
Section 3(a) of the Securities Exchange Act of 1934 is
amended by adding at the end the following new paragraph:
``(54) Qualified investor.--
``(A) Definition.--Except as provided in
subparagraph (B), for purposes of this title,
the term `qualified investor' means--
``(i) any investment company
registered with the Commission under
section 8 of the Investment Company Act
of 1940;
``(ii) any issuer eligible for an
exclusion from the definition of
investment company pursuant to section
3(c)(7) of the Investment Company Act
of 1940;
``(iii) any bank (as defined in
paragraph (6) of this subsection),
savings association (as defined in
section 3(b) of the Federal Deposit
Insurance Act), broker, dealer,
insurance company (as defined in
section 2(a)(13) of the Securities Act
of 1933), or business development
company (as defined in section 2(a)(48)
of the Investment Company Act of 1940);
``(iv) any small business
investment company licensed by the
United States Small Business
Administration under section 301 (c) or
(d) of the Small Business Investment
Act of 1958;
``(v) any State sponsored employee
benefit plan, or any other employee
benefit plan, within the meaning of the
Employee Retirement Income Security Act
of 1974, other than an individual
retirement account, if the investment
decisions are made by a plan fiduciary,
as defined in section 3(21) of that
Act, which is either a bank, savings
and loan association, insurance
company, or registered investment
adviser;
``(vi) any trust whose purchases of
securities are directed by a person
described in clauses (i) through (v) of
this subparagraph;
``(vii) any market intermediary
exempt under section 3(c)(2) of the
Investment Company Act of 1940;
``(viii) any associated person of a
broker or dealer other than a natural
person;
``(ix) any foreign bank (as defined
in section 1(b)(7) of the International
Banking Act of 1978);
``(x) the government of any foreign
country;
``(xi) any corporation, company, or
partnership that owns and invests on a
discretionary basis, not less than
$25,000,000 in investments;
``(xii) any natural person who owns
and invests on a discretionary basis,
not less than $25,000,000 in
investments;
``(xiii) any government or
political subdivision, agency, or
instrumentality of a government who
owns and invests on a discretionary
basis not less than $50,000,000 in
investments; or
``(xiv) any multinational or
supranational entity or any agency or
instrumentality thereof.
``(B) Altered thresholds for asset-back
securities and loan participations.--For
purposes sections 3(a)(5)(C)(iii) of this title
and section 206(a)(5) of the Gramm-Leach-Bliley
Act, the term `qualified investor' has the
meaning given such term by subparagraph (A) of
this paragraph except that clauses (xi) and
(xii) shall be applied by substituting
`$10,000,000' for `$25,000,000'.
``(C) Additional authority.--The Commission
may, by rule or order, define a `qualified
investor' as any other person, taking into
consideration such factors as the financial
sophistication of the person, net worth, and
knowledge and experience in financial
matters.''.
SEC. 208. GOVERNMENT SECURITIES DEFINED.
Section 3(a)(42) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)(42)) is amended--
(1) by striking ``or'' at the end of subparagraph
(C);
(2) by striking the period at the end of
subparagraph (D) and inserting ``; or''; and
(3) by adding at the end the following new
subparagraph:
``(E) for purposes of sections 15, 15C, and
17A as applied to a bank, a qualified Canadian
government obligation as defined in section
5136 of the Revised Statutes of the United
States.''.
SEC. 209. EFFECTIVE DATE.
This subtitle shall take effect at the end of the 18-month
period beginning on the date of the enactment of this Act.
SEC. 210. RULE OF CONSTRUCTION.
Nothing in this Act shall supersede, affect, or otherwise
limit the scope and applicability of the Commodity Exchange Act
(7 U.S.C. 1 et seq.).
Subtitle B--Bank Investment Company Activities
SEC. 211. CUSTODY OF INVESTMENT COMPANY ASSETS BY AFFILIATED BANK.
(a) Management Companies.--Section 17(f) of the Investment
Company Act of 1940 (15 U.S.C. 80a-17(f)) is amended--
(1) by redesignating paragraphs (1), (2), and (3)
as subparagraphs (A), (B), and (C), respectively;
(2) by striking ``(f) Every registered'' and
inserting the following:
``(f) Custody of Securities.--
``(1) Every registered'';
(3) by redesignating the second, third, fourth, and
fifth sentences of such subsection as paragraphs (2)
through (5), respectively, and indenting the left
margin of such paragraphs appropriately; and
(4) by adding at the end the following new
paragraph:
``(6) The Commission may, after consultation with
and taking into consideration the views of the Federal
banking agencies (as defined in section 3 of the
Federal Deposit Insurance Act), adopt rules and
regulations, and issue orders, consistent with the
protection of investors, prescribing the conditions
under which a bank, or an affiliated person of a bank,
either of which is an affiliated person, promoter,
organizer, or sponsor of, or principal underwriter for,
a registered management company may serve as custodian
of that registered management company.''.
(b) Unit Investment Trusts.--Section 26 of the Investment
Company Act of 1940 (15 U.S.C. 80a-26) is amended--
(1) by redesignating subsections (b) through (e) as
subsections (c) through (f), respectively; and
(2) by inserting after subsection (a) the following
new subsection:
``(b) The Commission may, after consultation with and
taking into consideration the views of the Federal banking
agencies (as defined in section 3 of the Federal Deposit
Insurance Act), adopt rules and regulations, and issue orders,
consistent with the protection of investors, prescribing the
conditions under which a bank, or an affiliated person of a
bank, either of which is an affiliated person of a principal
underwriter for, or depositor of, a registered unit investment
trust, may serve as trustee or custodian under subsection
(a)(1).''.
SEC. 212. LENDING TO AN AFFILIATED INVESTMENT COMPANY.
Section 17(a) of the Investment Company Act of 1940 (15
U.S.C. 80a-17(a)) is amended--
(1) by striking ``or'' at the end of paragraph (2);
(2) by striking the period at the end of paragraph
(3) and inserting ``; or''; and
(3) by adding at the end the following new
paragraph:
``(4) to loan money or other property to such
registered company, or to any company controlled by
such registered company, in contravention of such
rules, regulations, or orders as the Commission may,
after consultation with and taking into consideration
the views of the Federal banking agencies (as defined
in section 3 of the Federal Deposit Insurance Act),
prescribe or issue consistent with the protection of
investors.''.
SEC. 213. INDEPENDENT DIRECTORS.
(a) In General.--Section 2(a)(19)(A) of the Investment
Company Act of 1940 (15 U.S.C. 80a-2(a)(19)(A)) is amended--
(1) by striking clause (v) and inserting the
following new clause:
``(v) any person or any affiliated
person of a person (other than a
registered investment company) that, at
any time during the 6-month period
preceding the date of the determination
of whether that person or affiliated
person is an interested person, has
executed any portfolio transactions
for, engaged in any principal
transactions with, or distributed
shares for--
``(I) the investment
company;
``(II) any other investment
company having the same
investment adviser as such
investment company or holding
itself out to investors as a
related company for purposes of
investment or investor
services; or
``(III) any account over
which the investment company's
investment adviser has
brokerage placement
discretion,'';
(2) by redesignating clause (vi) as clause (vii);
and
(3) by inserting after clause (v) the following new
clause:
``(vi) any person or any affiliated
person of a person (other than a
registered investment company) that, at
any time during the 6-month period
preceding the date of the determination
of whether that person or affiliated
person is an interested person, has
loaned money or other property to--
``(I) the investment
company;
``(II) any other investment
company having the same
investment adviser as such
investment company or holding
itself out to investors as a
related company for purposes of
investment or investor
services; or
``(III) any account for
which the investment company's
investment adviser has
borrowing authority,''.
(b) Conforming Amendment.--Section 2(a)(19)(B) of the
Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(19)(B)) is
amended--
(1) by striking clause (v) and inserting the
following new clause:
``(v) any person or any affiliated
person of a person (other than a
registered investment company) that, at
any time during the 6-month period
preceding the date of the determination
of whether that person or affiliated
person is an interested person, has
executed any portfolio transactions
for, engaged in any principal
transactions with, or distributed
shares for--
``(I) any investment
company for which the
investment adviser or principal
underwriter serves as such;
``(II) any investment
company holding itself out to
investors, for purposes of
investment or investor
services, as a company related
to any investment company for
which the investment adviser or
principal underwriter serves as
such; or
``(III) any account over
which the investment adviser
has brokerage placement
discretion,'';
(2) by redesignating clause (vi) as clause (vii);
and
(3) by inserting after clause (v) the following new
clause:
``(vi) any person or any affiliated
person of a person (other than a
registered investment company) that, at
any time during the 6-month period
preceding the date of the determination
of whether that person or affiliated
person is an interested person, has
loaned money or other property to--
``(I) any investment
company for which the
investment adviser or principal
underwriter serves as such;
``(II) any investment
company holding itself out to
investors, for purposes of
investment or investor
services, as a company related
to any investment company for
which the investment adviser or
principal underwriter serves as
such; or
``(III) any account for
which the investment adviser
has borrowing authority,''.
(c) Affiliation of Directors.--Section 10(c) of the
Investment Company Act of 1940 (15 U.S.C. 80a-10(c)) is amended
by striking ``bank, except'' and inserting ``bank (together
with its affiliates and subsidiaries) or any one bank holding
company (together with its affiliates and subsidiaries) (as
such terms are defined in section 2 of the Bank Holding Company
Act of 1956), except''.
SEC. 214. ADDITIONAL SEC DISCLOSURE AUTHORITY.
Section 35(a) of the Investment Company Act of 1940 (15
U.S.C. 80a-34(a)) is amended to read as follows:
``(a) Misrepresentation of Guarantees.--
``(1) In general.--It shall be unlawful for any
person, issuing or selling any security of which a
registered investment company is the issuer, to
represent or imply in any manner whatsoever that such
security or company--
``(A) has been guaranteed, sponsored,
recommended, or approved by the United States,
or any agency, instrumentality or officer of
the United States;
``(B) has been insured by the Federal
Deposit Insurance Corporation; or
``(C) is guaranteed by or is otherwise an
obligation of any bank or insured depository
institution.
``(2) Disclosures.--Any person issuing or selling
the securities of a registered investment company that
is advised by, or sold through, a bankshall prominently
disclose that an investment in the company is not insured by the
Federal Deposit Insurance Corporation or any other government agency.
The Commission may, after consultation with and taking into
consideration the views of the Federal banking agencies (as defined in
section 3 of the Federal Deposit Insurance Act), adopt rules and
regulations, and issue orders, consistent with the protection of
investors, prescribing the manner in which the disclosure under this
paragraph shall be provided.
``(3) Definitions.--The terms `insured depository
institution' and `appropriate Federal banking agency'
have the same meanings as given in section 3 of the
Federal Deposit Insurance Act.''.
SEC. 215. DEFINITION OF BROKER UNDER THE INVESTMENT COMPANY ACT OF
1940.
Section 2(a)(6) of the Investment Company Act of 1940 (15
U.S.C. 80a-2(a)(6)) is amended to read as follows:
``(6) The term `broker' has the same meaning as
given in section 3 of the Securities Exchange Act of
1934, except that such term does not include any person
solely by reason of the fact that such person is an
underwriter for one or more investment companies.''.
SEC. 216. DEFINITION OF DEALER UNDER THE INVESTMENT COMPANY ACT OF
1940.
Section 2(a)(11) of the Investment Company Act of 1940 (15
U.S.C. 80a-2(a)(11)) is amended to read as follows:
``(11) The term `dealer' has the same meaning as
given in the Securities Exchange Act of 1934, but does
not include an insurance company or investment
company.''.
SEC. 217. REMOVAL OF THE EXCLUSION FROM THE DEFINITION OF INVESTMENT
ADVISER FOR BANKS THAT ADVISE INVESTMENT COMPANIES.
(a) Investment Adviser.--Section 202(a)(11)(A) of the
Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)(11)(A)) is
amended by striking ``investment company'' and inserting
``investment company, except that the term `investment adviser'
includes any bank or bank holding company to the extent that
such bank or bank holding company serves or acts as an
investment adviser to a registered investment company, but if,
in the case of a bank, such services or actions are performed
through a separately identifiable department or division, the
department or division, and not the bank itself, shall be
deemed to be the investment adviser''.
(b) Separately Identifiable Department or Division.--
Section 202(a) of the Investment Advisers Act of 1940 (15
U.S.C. 80b-2(a)) is amended by adding at the end the following:
``(26) The term `separately identifiable department
or division' of a bank means a unit--
``(A) that is under the direct supervision
of an officer or officers designated by the
board of directors of the bank as responsible
for the day-to-day conduct of the bank's
investment adviser activities for one or more
investment companies, including the supervision
of all bank employees engaged in the
performance of such activities; and
``(B) for which all of the records relating
to its investment adviser activities are
separately maintained in or extractable from
such unit's own facilities or the facilities of
the bank, and such records are so maintained or
otherwise accessible as to permit independent
examination and enforcement by the Commission
of this Act or the Investment Company Act of
1940 and rules and regulations promulgated
under this Act or the Investment Company Act of
1940.''.
SEC. 218. DEFINITION OF BROKER UNDER THE INVESTMENT ADVISERS ACT OF
1940.
Section 202(a)(3) of the Investment Advisers Act of 1940
(15 U.S.C. 80b-2(a)(3)) is amended to read as follows:
``(3) The term `broker' has the same meaning as
given in section 3 of the Securities Exchange Act of
1934.''.
SEC. 219. DEFINITION OF DEALER UNDER THE INVESTMENT ADVISERS ACT OF
1940.
Section 202(a)(7) of the Investment Advisers Act of 1940
(15 U.S.C. 80b-2(a)(7)) is amended to read as follows:
``(7) The term `dealer' has the same meaning as
given in section 3 of the Securities Exchange Act of
1934, but does not include an insurance company or
investment company.''.
SEC. 220. INTERAGENCY CONSULTATION.
The Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et
seq.) is amended by inserting after section 210 the following
new section:
``SEC. 210A. CONSULTATION.
``(a) Examination Results and Other Information.--
``(1) The appropriate Federal banking agency shall
provide the Commission upon request the results of any
examination, reports, records, or other information to
which such agency may have access--
``(A) with respect to the investment
advisory activities of any--
``(i) bank holding company;
``(ii) bank; or
``(iii) separately identifiable
department or division of a bank,
that is registered under section 203 of this
title; and
``(B) in the case of a bank holding company
or bank that has a subsidiary or a separately
identifiable department or division registered
under that section, with respect to the
investment advisory activities of such bank or
bank holding company.
``(2) The Commission shall provide to the
appropriate Federal banking agency upon request the
results of any examination, reports, records, or other
information with respect to the investment advisory
activities of any bank holding company, bank, or
separately identifiable department or division of a
bank, which is registered under section 203 of this
title.
``(3) Notwithstanding any other provision of law,
the Commission and the appropriate Federal banking
agencies shall not be compelled to disclose any
information provided under paragraph (1) or (2).
Nothing in this paragraph shall authorize the
Commission or such agencies to withhold information
from Congress, or prevent the Commission or such
agencies from complying with a request for information
from any other Federal department or agency or any
self-regulatory organization requesting the information
for purposes within the scope of its jurisdiction, or
complying with an order of a court of the United States
in an action brought by the United States, the
Commission, or such agencies. For purposes of section
552 of title 5, United States Code, this paragraph
shall be considered a statute described in subsection
(b)(3)(B) of such section 552.
``(b) Effect on Other Authority.--Nothing in this section
shall limit in any respect the authority of the appropriate
Federal banking agency with respect to such bank holding
company (or affiliates or subsidiaries thereof), bank, or
subsidiary, department, or division or a bank under any other
provision of law.
``(c) Definition.--For purposes of this section, the term
`appropriate Federal banking agency' shall have the same
meaning as given in section 3 of the Federal Deposit Insurance
Act.''.
SEC. 221. TREATMENT OF BANK COMMON TRUST FUNDS.
(a) Securities Act of 1933.--Section 3(a)(2) of the
Securities Act of 1933 (15 U.S.C. 77c(a)(2)) is amended by
striking ``or any interest or participation in any common trust
fund or similar fund maintained by a bank exclusively for the
collective investment and reinvestment of assets contributed
thereto by such bank in its capacity as trustee, executor,
administrator, or guardian'' and inserting ``or any interest or
participation in any common trust fund or similar fund that is
excluded from the definition of the term `investment company'
under section 3(c)(3) of the Investment Company Act of 1940''.
(b) Securities Exchange Act of 1934.--Section
3(a)(12)(A)(iii) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)(12)(A)(iii)) is amended to read as follows:
``(iii) any interest or participation in
any common trust fund or similar fund that is
excluded from the definition of the term
`investment company' under section 3(c)(3) of
the Investment Company Act of 1940;''.
(c) Investment Company Act of 1940.--Section 3(c)(3) of the
Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(3)) is
amended by inserting before the period the following: ``, if--
``(A) such fund is employed by the bank
solely as an aid to the administration of
trusts, estates, or other accounts created and
maintained for a fiduciary purpose;
``(B) except in connection with the
ordinary advertising of the bank's fiduciary
services, interests in such fund are not--
``(i) advertised; or
``(ii) offered for sale to the
general public; and
``(C) fees and expenses charged by such
fund are not in contravention of fiduciary
principles established under applicable Federal
or State law''.
SEC. 222. STATUTORY DISQUALIFICATION FOR BANK WRONGDOING.
Section 9(a) of the Investment Company Act of 1940 (15
U.S.C. 80a-9(a)) is amended in paragraphs (1) and (2) by
striking ``securities dealer, transfer agent,'' and inserting
``securities dealer, bank, transfer agent,''.
SEC. 223. CONFORMING CHANGE IN DEFINITION.
Section 2(a)(5) of the Investment Company Act of 1940 (15
U.S.C. 80a-2(a)(5)) is amended by striking ``(A) a banking
institution organized under the laws of the United States'' and
inserting ``(A) a depository institution (as defined in section
3 of the Federal Deposit Insurance Act) or a branch or agency
of a foreign bank (as such terms are defined in section 1(b) of
the International Banking Act of 1978)''.
SEC. 224. CONFORMING AMENDMENT.
Section 202 of the Investment Advisers Act of 1940 (15
U.S.C. 80b-2) is amended by adding at the end the following new
subsection:
``(c) Consideration of Promotion of Efficiency,
Competition, and Capital Formation.--Whenever pursuant to this
title the Commission is engaged in rulemaking and is required
to consider or determine whether an action is necessary or
appropriate in the public interest, the Commission shall also
consider, in addition to the protection of investors, whether
the action will promote efficiency, competition, and capital
formation.''.
SEC. 225. EFFECTIVE DATE.
This subtitle shall take effect 18 months after the date of
the enactment of this Act.
Subtitle C--Securities and Exchange Commission Supervision of
Investment Bank Holding Companies
SEC. 231. SUPERVISION OF INVESTMENT BANK HOLDING COMPANIES BY THE
SECURITIES AND EXCHANGE COMMISSION.
(a) Amendment.--Section 17 of the Securities Exchange Act
of 1934 (15 U.S.C. 78q) is amended--
(1) by redesignating subsection (i) as subsection
(k); and
(2) by inserting after subsection (h) the following
new subsections:
``(i) Investment Bank Holding Companies.--
``(1) Elective supervision of an investment bank
holding company not having a bank or savings
association affiliate.--
``(A) In general.--An investment bank
holding company that is not--
``(i) an affiliate of an insured
bank (other than an institution
described in subparagraph (D), (F), or
(G) of section 2(c)(2), or held under
section 4(f), of the Bank Holding
Company Act of 1956), or a savings
association;
``(ii) a foreign bank, foreign
company, or company that is described
in section 8(a) of the International
Banking Act of 1978; or
``(iii) a foreign bank that
controls, directly or indirectly, a
corporation chartered under section 25A
of the Federal Reserve Act,
may elect to become supervised by filing with
the Commission a notice of intention to become
supervised, pursuant to subparagraph (B) of
this paragraph. Any investment bank holding
company filing such a notice shall be
supervised in accordance with this section and
comply with the rules promulgated by the
Commission applicable to supervised investment
bank holding companies.
``(B) Notification of status as a
supervised investment bank holding company.--An
investment bank holding company that elects
under subparagraph (A) to become supervised by
the Commission shall file with the Commission a
written notice of intention to become
supervised by the Commission in such form and
containing such information and documents
concerning such investment bank holding company
as the Commission, by rule, may prescribe as
necessary or appropriate in furtherance of the
purposes of this section. Unless the Commission
finds that such supervision is not necessary or
appropriate in furtherance of the purposes of
this section, such supervision shall become
effective 45 days after the date of receipt of
such written notice by the Commission or within
such shorter time period as the Commission, by
rule or order, may determine.
``(2) Election not to be supervised by the
commission as an investment bank holding company.--
``(A) Voluntary withdrawal.--A supervised
investment bank holding company that is
supervised pursuant to paragraph (1) may, upon
such terms and conditions as the Commission
deems necessary or appropriate, elect not to be
supervised by the Commission by filing a
written notice of withdrawal from Commission
supervision. Such notice shall not become
effective until 1 year after receipt by the
Commission, or such shorter or longer period as
the Commission deems necessary or appropriate
to ensure effective supervision of the material
risks to the supervised investment bank holding
company and to the affiliated broker or dealer,
or to prevent evasion of the purposes of this
section.
``(B) Discontinuation of commission
supervision.--If the Commission finds that any
supervised investment bank holding company that
is supervised pursuant to paragraph (1) is no
longer in existence or has ceased to be an
investment bank holding company, or if the
Commission finds that continued supervision of
such a supervised investment bank holding
company is not consistent with the purposes of
this section, the Commission may discontinue
the supervision pursuant to a rule or order, if
any, promulgated by the Commission under this
section.
``(3) Supervision of investment bank holding
companies.--
``(A) Recordkeeping and reporting.--
``(i) In general.--Every supervised
investment bank holding company and
each affiliate thereof shall make and
keep for prescribed periods such
records, furnish copies thereof, and
make such reports, as the Commission
may require by rule, in order to keep
the Commission informed as to--
``(I) the company's or
affiliate's activities,
financial condition, policies,
systems for monitoring and
controlling financial and
operational risks, and
transactions and relationships
between any broker or dealer
affiliate of the supervised
investment bank holding
company; and
``(II) the extent to which
the company or affiliate has
complied with the provisions of
this Act and regulations
prescribed and orders issued
under this Act.
``(ii) Form and contents.--Such
records and reports shall be prepared
in such form and according to such
specifications (including certification
by an independent public accountant),
as the Commission may require and shall
be 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) Functional regulation of banking and
insurance activities of supervised investment bank
holding companies.--The Commission shall defer to--
``(A) the appropriate regulatory agency
with regard to all interpretations of, and the
enforcement of, applicable banking laws
relating to the activities, conduct, ownership,
and operations of banks, and institutions
described in subparagraph (D), (F), and (G) of
section 2(c)(2), or held under section 4(f), of
the Bank Holding Company Act of 1956; and
``(B) the appropriate State insurance
regulators with regard to all interpretations
of, and the enforcement of, applicable State
insurance laws relating to the activities,
conduct, and operations of insurance companies
and insurance agents.
``(5) Definitions.--For purposes of this
subsection:
``(A) The term `investment bank holding
company' means--
``(i) any person other than a
natural person that owns or controls
one or more brokers or dealers; and
``(ii) the associated persons of
the investment bank holding company.
``(B) The term `supervised investment bank
holding company' means any investment bank
holding company that is supervised by the
Commission pursuant to this subsection.
``(C) The terms `affiliate', `bank', `bank
holding company', `company', `control', and
`savings association' have the same meanings as
given in section 2 of the Bank Holding Company
Act of 1956 (12 U.S.C. 1841).
``(D) The term `insured bank' has the same
meaning as given in section 3 of the Federal
Deposit Insurance Act.
``(E) The term `foreign bank' has the same
meaning as given in section 1(b)(7) of the
International Banking Act of 1978.
``(F) The terms `person associated with an
investment bank holding company' and
`associated person of an investment bank
holding company' mean any person directly or
indirectly controlling, controlled by, or under
common control with, an investment bank holding
company.
``(j) Authority To Limit Disclosure of Information.--
Notwithstanding any other provision of law, the Commission
shall not be compelled to disclose any information required to
be reported under subsection (h) or (i) or any information
supplied to the Commission by any domestic or foreign
regulatory agency that relates to the financial or operational
condition of any associated person of a broker or dealer,
investment bank holding company, or any affiliate of an
investment bank holding company. Nothing in this subsection
shall authorize the Commission to withhold information from
Congress, or prevent the Commission from complying with a
request for information from any other Federal department or
agency or any self-regulatory organization requesting the
information for purposes within the scope of its jurisdiction,
or complying with an order of a court of the United States in
an action brought by the United States or the Commission. For
purposes of section 552 of title 5, United States Code, this
subsection shall be considered a statute described in
subsection (b)(3)(B) of such section 552. In prescribing
regulations to carry out the requirements of this subsection,
the Commission shall designate information described in or
obtained pursuant to subparagraphs (A), (B), and (C) of
subsection (i)(5) as confidential information for purposes of
section 24(b)(2) of this title.''.
(b) Conforming Amendments.--
(1) Section 3(a)(34) of the Securities Exchange Act
of 1934 (15 U.S.C. 78c(a)(34)) is amended by adding at
the end the following new subparagraph:
``(H) When used with respect to an
institution described in subparagraph (D), (F),
or (G) of section 2(c)(2), or held under
section 4(f), of the Bank Holding Company Act
of 1956--
``(i) the Comptroller of the
Currency, in the case of a national
bank or a bank in the District of
Columbia examined by the Comptroller of
the Currency;
``(ii) the Board of Governors of
the Federal Reserve System, in the case
of a State member bank of the Federal
Reserve System or any corporation
chartered under section 25A of the
Federal Reserve Act;
``(iii) the Federal Deposit
Insurance Corporation, in the case of
any other bank the deposits of which
are insured in accordance with the
Federal Deposit Insurance Act; or
``(iv) the Commission in the case
of all other such institutions.''.
(2) Section 1112(e) of the Right to Financial
Privacy Act of 1978 (12 U.S.C. 3412(e)) is amended--
(A) by striking ``this title'' and
inserting ``law''; and
(B) by inserting ``, examination reports''
after ``financial records''.
Subtitle D--Banks and Bank Holding Companies
SEC. 241. CONSULTATION.
(a) In General.--The Securities and Exchange Commission
shall consult and coordinate comments with the appropriate
Federal banking agency before taking any action or rendering
any opinion with respect to the manner in which any insured
depository institution or depository institution holding
company reports loan loss reserves in its financial statement,
including the amount of any such loan loss reserve.
(b) Definitions.--For purposes of subsection (a), the terms
``insured depository institution'', ``depository institution
holding company'', and ``appropriate Federal banking agency''
have the same meaning as given in section 3 of the Federal
Deposit Insurance Act.
TITLE III--INSURANCE
Subtitle A--State Regulation of Insurance
SEC. 301. FUNCTIONAL REGULATION OF INSURANCE.
The insurance activities of any person (including a
national bank exercising its power to act as agent under the
eleventh undesignated paragraph of section 13 of the Federal
Reserve Act) shall be functionally regulated by the States,
subject to section 104.
SEC. 302. INSURANCE UNDERWRITING IN NATIONAL BANKS.
(a) In General.--Except as provided in section 303, a
national bank and the subsidiaries of a national bank may not
provide insurance in a State as principal except that this
prohibition shall not apply to authorized products.
(b) Authorized Products.--For the purposes of this section,
a product is authorized if--
(1) as of January 1, 1999, the Comptroller of the
Currency had determined in writing that national banks
may provide such product as principal, or national
banks were in fact lawfully providing such product as
principal;
(2) no court of relevant jurisdiction had, by final
judgment, overturned a determination of the Comptroller
of the Currency that national banks may provide such
product as principal; and
(3) the product is not title insurance, or an
annuity contract the income of which is subject to tax
treatment under section 72 of the Internal Revenue Code
of 1986.
(c) Definition.--For purposes of this section, the term
``insurance'' means--
(1) any product regulated as insurance as of
January 1, 1999, in accordance with the relevant State
insurance law, in the State in which the product is
provided;
(2) any product first offered after January 1,
1999, which--
(A) a State insurance regulator determines
shall be regulated as insurance in the State in
which the product is provided because the
product insures, guarantees, or indemnifies
against liability, loss of life, loss of
health, or loss through damage to or
destruction of property, including, but not
limited to, surety bonds, life insurance,
health insurance, title insurance, and property
and casualty insurance (such as private
passenger or commercial automobile, homeowners,
mortgage, commercial multiperil, general
liability, professional liability, workers'
compensation, fire and allied lines, farm
owners multiperil, aircraft, fidelity, surety,
medical malpractice, ocean marine, inland
marine, and boiler and machinery insurance);
and
(B) is not a product or service of a bank
that is--
(i) a deposit product;
(ii) a loan, discount, letter of
credit, or other extension of credit;
(iii) a trust or other fiduciary
service;
(iv) a qualified financial contract
(as defined in or determined pursuant
to section 11(e)(8)(D)(i) of the
Federal Deposit Insurance Act); or
(v) a financial guaranty, except
that this subparagraph (B) shall not
apply to a product that includes an
insurance component such that if the
product is offered or proposed to be
offered by the bank as principal--
(I) it would be treated as
a life insurance contract under
section 7702 of the Internal
Revenue Code of 1986; or
(II) in the event that the
product is not a letter of
credit or other similar
extension of credit, a
qualified financial contract,
or a financial guaranty, it
would qualify for treatment for
losses incurred with respect to
such product under section
832(b)(5) of the Internal
Revenue Code of 1986, if the
bank were subject to tax as an
insurance company under section
831 of that Code; or
(3) any annuity contract, the income on which is
subject to tax treatment under section 72 of the
Internal Revenue Code of 1986.
(d) Rule of Construction.--For purposes of this section,
providing insurance (including reinsurance) outside the United
States that insures, guarantees, or indemnifies insurance
products provided in a State, or that indemnifies an insurance
company with regard to insurance products provided in a State,
shall be considered to be providing insurance as principal in
that State.
SEC. 303. TITLE INSURANCE ACTIVITIES OF NATIONAL BANKS AND THEIR
AFFILIATES.
(a) General Prohibition.--No national bank may engage in
any activity involving the underwriting or sale of title
insurance.
(b) Nondiscrimination Parity Exception.--
(1) In general.--Notwithstanding any other
provision of law (including section 104 of this Act),
in the case of any State in which banks organized under
the laws of such State are authorized to sell title
insurance as agent, a national bank may sell title
insurance as agent in such State, but only in the same
manner, to the same extent, and under the same
restrictions as such State banks are authorized to sell
title insurance as agent in such State.
(2) Coordination with ``wildcard'' provision.--A
State law which authorizes State banks to engage in any
activities in such State in which a national bank may
engage shall not be treated as a statute which
authorizes State banks to sell title insurance as
agent, for purposes of paragraph (1).
(c) Grandfathering With Consistent Regulation.--
(1) In general.--Except as provided in paragraphs
(2) and (3) and notwithstanding subsections (a) and
(b), a national bank, and a subsidiary of a national
bank, may conduct title insurance activities which such
national bank or subsidiary was actively and lawfully
conducting before the date of the enactment of this
Act.
(2) Insurance affiliate.--In the case of a national
bank which has an affiliate which provides insurance as
principal and is not a subsidiary of the bank, the
national bank and any subsidiary of the national bank
may not engage in the underwriting of title insurance
pursuant to paragraph (1).
(3) Insurance subsidiary.--In the case of a
national bank which has a subsidiary which provides
insurance as principal and has no affiliate other than
a subsidiary which provides insurance as principal, the
national bank may not directly engage in any activity
involving the underwriting of title insurance.
(d) ``Affiliate'' and ``Subsidiary'' Defined.--For purposes
of this section, the terms ``affiliate'' and ``subsidiary''
have the same meanings as in section 2 of the Bank Holding
Company Act of 1956.
(e) Rule of Construction.--No provision of this Act or any
other Federal law shall be construed as superseding or
affecting a State law which was in effect before the date of
the enactment of this Act and which prohibits title insurance
from being offered, provided, or sold in such State, or from
being underwritten with respect to real property in such State,
by any person whatsoever.
SEC. 304. EXPEDITED AND EQUALIZED DISPUTE RESOLUTION FOR FEDERAL
REGULATORS.
(a) Filing in Court of Appeals.--In the case of a
regulatory conflict between a State insurance regulator and a
Federal regulator regarding insurance issues, including whether
a State law, rule, regulation, order, or interpretation
regarding any insurance sales or solicitation activity is
properly treated as preempted under Federal law, the Federal or
State regulator may seek expedited judicial review of such
determination by the United States Court of Appeals for the
circuit in which the State is located or in the United States
Court of Appeals for the District of Columbia Circuit by filing
a petition for review in such court.
(b) Expedited Review.--The United States Court of Appeals
in which a petition for review is filed in accordance with
subsection (a) shall complete all action on such petition,
including rendering a judgment, before the end of the 60-day
period beginning on the date on which such petition is filed,
unless all parties to such proceeding agree to any extension of
such period.
(c) Supreme Court Review.--Any request for certiorari to
the Supreme Court of the United States of any judgment of a
United States Court of Appeals with respect to a petition for
review under this section shall be filed with the Supreme Court
of the United States as soon as practicable after such judgment
is issued.
(d) Statute of Limitation.--No petition may be filed under
this section challenging an order, ruling, determination, or
other action of a Federal regulator or State insurance
regulator after the later of--
(1) the end of the 12-month period beginning on the
date on which the first public notice is made of such
order, ruling, determination or other action in its
final form; or
(2) the end of the 6-month period beginning on the
date on which such order, ruling, determination, or
other action takes effect.
(e) Standard of Review.--The court shall decide a petition
filed under this section based on its review on the merits of
all questions presented under State and Federal law, including
the nature of the product or activity and the history and
purpose of its regulation under State and Federal law, without
unequal deference.
SEC. 305. INSURANCE CUSTOMER PROTECTIONS.
The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.)
is amended by inserting after section 46, as added by section
121(d) of this Act, the following new section:
``SEC. 47. INSURANCE CUSTOMER PROTECTIONS.
``(a) Regulations Required.--
``(1) In general.--The Federal banking agencies
shall prescribe and publish in final form, before the
end of the 1-year period beginning on the date of the
enactment of the Gramm-Leach-Bliley Act, customer
protection regulations (which the agencies jointly
determine to be appropriate) that--
``(A) apply to retail sales practices,
solicitations, advertising, or offers of any
insurance product by any depository institution
or any person that is engaged in such
activities at an office of the institution or
on behalf of the institution; and
``(B) are consistent with the requirements
of this Act and provide such additional
protections for customers to whom such sales,
solicitations, advertising, or offers are
directed.
``(2) Applicability to subsidiaries.--The
regulations prescribed pursuant to paragraph (1) shall
extend such protections to any subsidiary of a
depository institution, as deemed appropriate by the
regulators referred to in paragraph (3), where such
extension is determined to be necessary to ensure the
consumer protections provided by this section.
``(3) Consultation and joint regulations.--The
Federal banking agencies shall consult with each other
and prescribe joint regulations pursuant to paragraph
(1), after consultation with the State insurance
regulators, as appropriate.
``(b) Sales Practices.--The regulations prescribed pursuant
to subsection (a) shall include antitying and anticoercion
rules applicable to the sale of insurance products that
prohibit a depository institution from engaging in any practice
that would lead a customer to believe an extension of credit,
in violation of section 106(b) of the Bank Holding Company Act
Amendments of 1970, is conditional upon--
``(1) the purchase of an insurance product from the
institution or any of its affiliates; or
``(2) an agreement by the consumer not to obtain,
or a prohibition on the consumer from obtaining, an
insurance product from an unaffiliated entity.
``(c) Disclosures and Advertising.--The regulations
prescribed pursuant to subsection (a) shall include the
following provisions relating to disclosures and advertising in
connection with the initial purchase of an insurance product:
``(1) Disclosures.--
``(A) In general.--Requirements that the
following disclosures be made orally and in
writing before the completion of the initial
sale and, in the case of clause (iii), at the
time of application for an extension of credit:
``(i) Uninsured status.--As
appropriate, the product is not insured
by the Federal Deposit Insurance
Corporation, the United States
Government, or the depository
institution.
``(ii) Investment risk.--In the
case of a variable annuity or other
insurance product which involves an
investment risk, that there is an
investment risk associated with the
product, including possible loss of
value.
``(iii) Coercion.--The approval of
an extension of credit may not be
conditioned on--
``(I) the purchase of an
insurance product from the
institution in which the
application for credit is
pending or any affiliate of the
institution; or
``(II) an agreement by the
consumer not to obtain, or a
prohibition on the consumer
from obtaining, an insurance
product from an unaffiliated
entity.
``(B) Making disclosure readily
understandable.--Regulations prescribed under
subparagraph (A) shall encourage the use of
disclosure that is conspicuous, simple, direct,
and readily understandable, such as the
following:
``(i) `NOT FDIC-INSURED'.
``(ii) `NOT GUARANTEED BY THE
BANK'.
``(iii) `MAY GO DOWN IN VALUE'.
``(iv) `NOT INSURED BY ANY
GOVERNMENT AGENCY'.
``(C) Limitation.--Nothing in this
paragraph requires the inclusion of the
foregoing disclosures in advertisements of a
general nature describing or listing the
services or products offered by an institution.
``(D) Meaningful disclosures.--Disclosures
shall not be considered to be meaningfully
provided under this paragraph if the
institution or its representative states that
disclosures required by this subsection were
available to the customer in printed material
available for distribution, where such printed
material is not provided and such information
is not orally disclosed to the customer.
``(E) Adjustments for alternative methods
of purchase.--In prescribing the requirements
under subparagraphs (A) and (F), necessary
adjustments shall be made for purchase in
person, by telephone, or by electronic media to
provide for the most appropriate and complete
form of disclosure and acknowledgments.
``(F) Consumer acknowledgment.--A
requirement that a depository institution shall
require any person selling an insurance product
at any office of, or on behalf of, the
institution to obtain, at the time a consumer
receives the disclosures required under this
paragraph or at the time of the initial
purchase by the consumer of such product, an
acknowledgment by such consumer of the receipt
of the disclosure required under this
subsection with respect to such product.
``(2) Prohibition on misrepresentations.--A
prohibition on any practice, or any advertising, at any
office of, or on behalf of, the depository institution,
or any subsidiary, as appropriate, that could mislead
any person or otherwise cause a reasonable person to
reach an erroneous belief with respect to--
``(A) the uninsured nature of any insurance
product sold, or offered for sale, by the
institution or any subsidiary of the
institution;
``(B) in the case of a variable annuity or
insurance product that involves an investment
risk, the investment risk associated with any
such product; or
``(C) in the case of an institution or
subsidiary at which insurance products are sold
or offered for sale, the fact that--
``(i) the approval of an extension
of credit to a customer by the
institution or subsidiary may not be
conditioned on the purchase of an
insurance product by such customer from
the institution or subsidiary; and
``(ii) the customer is free to
purchase the insurance product from
another source.
``(d) Separation of Banking and Nonbanking Activities.--
``(1) Regulations required.--The regulations
prescribed pursuant to subsection (a) shall include
such provisions as the Federal banking agencies
consider appropriate to ensure that the routine
acceptance of deposits is kept, to the extent
practicable, physically segregated from insurance
product activity.
``(2) Requirements.--Regulations prescribed
pursuant to paragraph (1) shall include the following
requirements:
``(A) Separate setting.--A clear
delineation of the setting in which, and the
circumstances under which, transactions
involving insurance products should be
conducted in a location physically segregated
from an area where retail deposits are
routinely accepted.
``(B) Referrals.--Standards that permit any
person accepting deposits from the public in an
area where such transactions are routinely
conducted in a depository institution to refer
a customer who seeks to purchase any insurance
product to a qualified person who sells such
product, only if the person making the referral
receives no more than a one-time nominal fee of
a fixed dollar amount for each referral that
does not depend on whether the referral results
in a transaction.
``(C) Qualification and licensing
requirements.--Standards prohibiting any
depository institution from permitting any
person to sell or offer for sale any insurance
product in any part of any office of the
institution, or on behalf of the institution,
unless such person is appropriately qualified
and licensed.
``(e) Domestic Violence Discrimination Prohibition.--
``(1) In general.--In the case of an applicant for,
or an insured under, any insurance product described in
paragraph (2), the status of the applicant or insured
as a victim of domestic violence, or as a provider of
services to victims of domestic violence, shall not be
considered as a criterion in any decision with regard
to insurance underwriting, pricing, renewal, or scope
of coverage of insurance policies, or payment of
insurance claims, except as required or expressly
permitted under State law.
``(2) Scope of application.--The prohibition
contained in paragraph (1) shall apply to any life or
health insurance product which is sold or offered for
sale, as principal, agent, or broker, by any depository
institution or any person who is engaged in such
activities at an office of the institution or on behalf
of the institution.
``(3) Domestic violence defined.--For purposes of
this subsection, the term `domestic violence' means the
occurrence of one or more of the following acts by a
current or former family member, household member,
intimate partner, or caretaker:
``(A) Attempting to cause or causing or
threatening another person physical harm,
severe emotional distress, psychological
trauma, rape, or sexual assault.
``(B) Engaging in a course of conduct or
repeatedly committing acts toward another
person, including following the person without
proper authority, under circumstances that
place the person in reasonable fear of bodily
injury or physical harm.
``(C) Subjecting another person to false
imprisonment.
``(D) Attempting to cause or cause damage
to property so as to intimidate or attempt to
control the behavior of another person.
``(f) Consumer Grievance Process.--The Federal banking
agencies shall jointly establish a consumer complaint
mechanism, for receiving and expeditiously addressing consumer
complaints alleging a violation of regulations issued under the
section, which shall--
``(1) establish a group within each regulatory
agency to receive such complaints;
``(2) develop procedures for investigating such
complaints;
``(3) develop procedures for informing consumers of
rights they may have in connection with such
complaints; and
``(4) develop procedures for addressing concerns
raised by such complaints, as appropriate, including
procedures for the recovery of losses to the extent
appropriate.
``(g) Effect on Other Authority.--
``(1) In general.--No provision of this section
shall be construed as granting, limiting, or otherwise
affecting--
``(A) any authority of the Securities and
Exchange Commission, any self-regulatory
organization, the Municipal Securities
Rulemaking Board, or the Secretary of the
Treasury under any Federal securities law; or
``(B) except as provided in paragraph (2),
any authority of any State insurance commission
(or any agency or office performing like
functions), or of any State securities
commission (or any agency or office performing
like functions), or other State authority under
any State law.
``(2) Coordination with state law.--
``(A) In general.--Except as provided in
subparagraph (B), insurance customer protection
regulations prescribed by a Federal banking
agency under this section shall not apply to
retail sales, solicitations, advertising, or
offers of any insurance product by any
depository institution or to any person who is
engaged in such activities at an office of such
institution or on behalf of the institution, in
a State where the State has in effect statutes,
regulations, orders, or interpretations, that
are inconsistent with or contrary to the
regulations prescribed by the Federal banking
agencies.
``(B) Preemption.--
``(i) In general.--If, with respect
to any provision of the regulations
prescribed under this section, the
Board of Governors of the Federal
Reserve System, the Comptroller of the
Currency, and the Board of Directors of
the Corporation determine jointly that
the protection afforded by such
provision for customers is greater than
the protection provided by a comparable
provision of the statutes, regulations,
orders, or interpretations referred to
in subparagraph (A) of any State, the
appropriate State regulatory authority
shall be notified of such determination
in writing.
``(ii) Considerations.--Before
making a final determination under
clause (i), the Federal agencies
referred to in clause (i) shall give
appropriate consideration to comments
submitted by the appropriate State
regulatory authorities relating to the
level of protection afforded to
consumers under State law.
``(iii) Federal preemption and
ability of states to override federal
preemption.--If the Federal agencies
referred to in clause (i) jointly
determine that any provision of the
regulations prescribed under this
section affords greater protections
than a comparable State law, rule,
regulation, order, or interpretation,
those agencies shall send a written
preemption notice to the appropriate
State regulatory authority to notify
the State that the Federal provision
will preempt the State provision and
will become applicable unless, not
later than 3 years after the date of
such notice, the State adopts
legislation to override such
preemption.
``(h) Non-Discrimination Against Non-Affiliated Agents.--
The Federal banking agencies shall ensure that the regulations
prescribed pursuant to subsection (a) shall not have the effect
of discriminating, either intentionally or unintentionally,
against any person engaged in insurance sales or solicitations
that is not affiliated with a depository institution.''.
SEC. 306. CERTAIN STATE AFFILIATION LAWS PREEMPTED FOR INSURANCE
COMPANIES AND AFFILIATES.
Except as provided in section 104(c)(2), no State may, by
law, regulation, order, interpretation, or otherwise--
(1) prevent or significantly interfere with the
ability of any insurer, or any affiliate of an insurer
(whether such affiliate is organized as a stock
company, mutual holding company, or otherwise), to
become a financial holding company or to acquire
control of a depository institution;
(2) limit the amount of an insurer's assets that
may be invested in the voting securities of a
depository institution (or any company which controls
such institution), except that the laws of an insurer's
State of domicile may limit the amount of such
investment to an amount that is not less than 5 percent
of the insurer's admitted assets; or
(3) prevent, significantly interfere with, or have
the authority to review, approve, or disapprove a plan
of reorganization by which an insurer proposes to
reorganize from mutual form to become a stock insurer
(whether as a direct or indirect subsidiary of a mutual
holding company or otherwise) unless such State is the
State of domicile of the insurer.
SEC. 307. INTERAGENCY CONSULTATION.
(a) Purpose.--It is the intention of the Congress that the
Board of Governors of the Federal Reserve System, as the
umbrella supervisor for financial holding companies, and the
State insurance regulators, as the functional regulators of
companies engaged in insurance activities, coordinate efforts
to supervise companies that control both a depository
institution and a company engaged in insurance activities
regulated under State law. In particular, Congress believes
that the Board and the State insurance regulators should share,
on a confidential basis, information relevant to the
supervision of companies that control both a depository
institution and a company engaged in insurance activities,
including information regarding the financial health of the
consolidated organization and information regarding
transactions and relationships between insurance companies and
affiliated depository institutions. The appropriate Federal
banking agencies for depository institutions should also share,
on a confidential basis, information with the relevant State
insurance regulators regarding transactions and relationships
between depository institutions and affiliated companies
engaged in insurance activities. The purpose of this section is
to encourage this coordination and confidential sharing of
information, and to thereby improve both the efficiency and the
quality of the supervision of financial holding companies and
their affiliated depository institutions and companies engaged
in insurance activities.
(b) Examination Results and Other Information.--
(1) Information of the board.--Upon the request of
the appropriate insurance regulator of any State, the
Board may provide any information of the Board
regarding the financial condition, risk management
policies, and operations of any financial holding
company that controls a company that is engaged in
insurance activities and is regulated by such State
insurance regulator, and regarding any transaction or
relationship between such an insurance company and any
affiliated depository institution. The Board may
provide any other information to the appropriate State
insurance regulator that the Board believes is
necessary or appropriate to permit the State insurance
regulator to administer and enforce applicable State
insurance laws.
(2) Banking agency information.--Upon the request
of the appropriate insurance regulator of any State,
the appropriate Federal banking agency may provide any
information of the agency regarding any transaction or
relationship between a depository institution
supervised by such Federal banking agency and any
affiliated company that is engaged in insurance
activities regulated by such State insurance regulator.
The appropriate Federal banking agency may provide any
other information to the appropriate State insurance
regulator that the agency believes is necessary or
appropriate to permit the State insurance regulator to
administer and enforce applicable State insurance laws.
(3) State insurance regulator information.--Upon
the request of the Board or the appropriate Federal
banking agency, a State insurance regulator may provide
any examination or other reports, records, or other
information to which such insurance regulator may have
access with respect to a company which--
(A) is engaged in insurance activities and
regulated by such insurance regulator; and
(B) is an affiliate of a depository
institution or financial holding company.
(c) Consultation.--Before making any determination relating
to the initial affiliation of, or the continuing affiliation
of, a depository institution or financial holding company with
a company engaged in insurance activities, the appropriate
Federal banking agency shall consult with the appropriate State
insurance regulator of such company and take the views of such
insurance regulator into account in making such determination.
(d) Effect on Other Authority.--Nothing in this section
shall limit in any respect the authority of the appropriate
Federal banking agency with respect to a depository institution
or bank holding company or any affiliate thereof under any
provision of law.
(e) Confidentiality and Privilege.--
(1) Confidentiality.--The appropriate Federal
banking agency shall not provide any information or
material that is entitled to confidential treatment
under applicable Federal banking agency regulations, or
other applicable law, to a State insurance regulator
unless such regulator agrees to maintain the
information or material in confidence and to take all
reasonable steps to oppose any effort to secure
disclosure of the information or material by the
regulator. The appropriate Federal banking agency shall
treat as confidential any information or material
obtained from a State insurance regulator that is
entitled to confidential treatment under applicable
State regulations, or other applicable law, and take
all reasonable steps to oppose any effort to secure
disclosure of the information or material by the
Federal banking agency.
(2) Privilege.--The provision pursuant to this
section of information or material by a Federal banking
agency or State insurance regulator shall not
constitute a waiver of, or otherwise affect, any
privilege to which the information or material is
otherwise subject.
(f) Definitions.--For purposes of this section, the
following definitions shall apply:
(1) Appropriate federal banking agency; depository
institution.--The terms ``appropriate Federal banking
agency'' and ``depository institution'' have the same
meanings as in section 3 of the Federal Deposit
Insurance Act.
(2) Board and financial holding company.--The terms
``Board'' and ``financial holding company'' have the
same meanings as in section 2 of the Bank Holding
Company Act of 1956.
SEC. 308. DEFINITION OF STATE.
For purposes of this subtitle, the term ``State'' means any
State of the United States, the District of Columbia, any
territory of the United States, Puerto Rico, Guam, American
Samoa, the Trust Territory of the Pacific Islands, the Virgin
Islands, and the Northern Mariana Islands.
Subtitle B--Redomestication of Mutual Insurers
SEC. 311. GENERAL APPLICATION.
This subtitle shall only apply to a mutual insurance
company in a State which has not enacted a law which expressly
establishes reasonable terms and conditions for a mutual
insurance company domiciled in such State to reorganize into a
mutual holding company.
SEC. 312. REDOMESTICATION OF MUTUAL INSURERS.
(a) Redomestication.--A mutual insurer organized under the
laws of any State may transfer its domicile to a transferee
domicile as a step in a reorganization in which, pursuant to
the laws of the transferee domicile and consistent with the
standards in subsection (f), the mutual insurer becomes a stock
insurer that is a direct or indirect subsidiary of a mutual
holding company.
(b) Resulting Domicile.--Upon complying with the applicable
law of the transferee domicile governing transfers of domicile
and completion of a transfer pursuant to this section, the
mutual insurer shall cease to be a domestic insurer in the
transferor domicile and, as a continuation of its corporate
existence, shall be a domestic insurer of the transferee
domicile.
(c) Licenses Preserved.--The certificate of authority,
agents' appointments and licenses, rates, approvals and other
items that a licensed State allows and that are in existence
immediately prior to the date that a redomesticating insurer
transfers its domicile pursuant to this subtitle shall continue
in full force and effect upon transfer, if the insurer remains
duly qualified to transact the business of insurance in such
licensed State.
(d) Effectiveness of Outstanding Policies and Contracts.--
(1) In general.--All outstanding insurance policies
and annuities contracts of a redomesticating insurer
shall remain in full force and effect and need not be
endorsed as to the new domicile of the insurer, unless
so ordered by the State insurance regulator of a
licensed State, and then only in the case of
outstanding policies and contracts whose owners reside
in such licensed State.
(2) Forms.--
(A) Applicable State law may require a
redomesticating insurer to file new policy
forms with the State insurance regulator of a
licensed State on or before the effective date
of the transfer.
(B) Notwithstanding subparagraph (A), a
redomesticating insurer may use existing policy
forms with appropriate endorsements to reflect
the new domicile of the redomesticating insurer
until the new policy forms are approved for use
by the State insurance regulator of such
licensed State.
(e) Notice.--A redomesticating insurer shall give notice of
the proposed transfer to the State insurance regulator of each
licensed State and shall file promptly any resulting amendments
to corporate documents required to be filed by a foreign
licensed mutual insurer with the insurance regulator of each
such licensed State.
(f) Procedural Requirements.--No mutual insurer may
redomesticate to another State and reorganize into a mutual
holding company pursuant to this section unless the State
insurance regulator of the transferee domicile determines that
the plan of reorganization of the insurer includes the
following requirements:
(1) Approval by board of directors and
policyholders.--The reorganization is approved by at
least a majority of the board of directors of the
mutual insurer and at least a majority of the
policyholders who vote after notice, disclosure of the
reorganization and the effects of the transaction on
policyholder contractual rights, and reasonable
opportunity to vote, in accordance with such notice,
disclosure, and voting procedures as are approved bythe
State insurance regulator of the transferee domicile.
(2) Continued voting control by policyholders;
review of public stock offering.--After the
consummation of a reorganization, the policyholders of
the reorganized insurer shall have the same voting
rights with respect to the mutual holding company as
they had before the reorganization with respect to the
mutual insurer. With respect to an initial public
offering of stock, the offering shall be conducted in
compliance with applicable securities laws and in a
manner approved by the State insurance regulator of the
transferee domicile.
(3) Award of stock or grant of options to officers
and directors.--During the applicable period provided
for under the State law of the transferee domicile
following completion of an initial public offering, or
for a period of six months if no such applicable period
is provided, neither a stock holding company nor the
converted insurer shall award any stock options or
stock grants to persons who are elected officers or
directors of the mutual holding company, the stock
holding company, or the converted insurer, except with
respect to any such awards or options to which a person
is entitled as a policyholder and as approved by the
State insurance regulator of the transferee domicile.
(4) Policyholder rights.--Upon reorganization into
a mutual holding company, the contractual rights of the
policyholders are preserved.
(5) Fair and equitable treatment of
policyholders.--The reorganization is approved as fair
and equitable to the policyholders by the insurance
regulator of the transferee domicile.
SEC. 313. EFFECT ON STATE LAWS RESTRICTING REDOMESTICATION.
(a) In General.--Unless otherwise permitted by this
subtitle, State laws of any transferor domicile that conflict
with the purposes and intent of this subtitle are preempted,
including but not limited to--
(1) any law that has the purpose or effect of
impeding the activities of, taking any action against,
or applying any provision of law or regulation to, any
insurer or an affiliate of such insurer because that
insurer or any affiliate plans to redomesticate, or has
redomesticated, pursuant to this subtitle;
(2) any law that has the purpose or effect of
impeding the activities of, taking action against, or
applying any provision of law or regulation to, any
insured or any insurance licensee or other intermediary
because such person has procured insurance from or
placed insurance with any insurer or affiliate of such
insurer that plans to redomesticate, or has
redomesticated, pursuant to this subtitle, but only to
the extent that such law would treat such insured
licensee or other intermediary differently than if the
person procured insurance from, or placed insurance
with, an insured licensee or other intermediary which
had not redomesticated; and
(3) any law that has the purpose or effect of
terminating, because of the redomestication of a mutual
insurer pursuant to this subtitle, any certificate of
authority, agent appointment or license, rate approval,
or other approval, of any State insurance regulator or
other State authority in existence immediately prior to
the redomestication in any State other than the
transferee domicile.
(b) Differential Treatment Prohibited.--No State law,
regulation, interpretation, or functional equivalent thereof,
of a State other than a transferee domicile may treat a
redomesticating or redomesticated insurer or any affiliate
thereof any differently than an insurer operating in that State
that is not a redomesticating or redomesticated insurer.
(c) Laws Prohibiting Operations.--If any licensed State
fails to issue, delays the issuance of, or seeks to revoke an
original or renewal certificate of authority of a
redomesticated insurer promptly following redomestication,
except on grounds and in a manner consistent with its past
practices regarding the issuance of certificates of authority
to foreign insurers that are not redomesticating, then the
redomesticating insurer shall be exempt from any State law of
the licensed State to the extent that such State law or the
operation of such State law would make unlawful, or regulate,
directly or indirectly, the operation of the redomesticated
insurer, except that such licensed State may require the
redomesticated insurer to--
(1) comply with the unfair claim settlement
practices law of the licensed State;
(2) pay, on a nondiscriminatory basis, applicable
premium and other taxes which are levied on licensed
insurers or policyholders under the laws of the
licensed State;
(3) register with and designate the State insurance
regulator as its agent solely for the purpose of
receiving service of legal documents or process;
(4) submit to an examination by the State insurance
regulator in any licensed State in which the
redomesticated insurer is doing business to determine
the insurer's financial condition, if--
(A) the State insurance regulator of the
transferee domicile has not begun an
examination of the redomesticated insurer and
has not scheduled such an examination to begin
before the end of the 1-year period beginning
on the date of the redomestication; and
(B) any such examination is coordinated to
avoid unjustified duplication and repetition;
(5) comply with a lawful order issued in--
(A) a delinquency proceeding commenced by
the State insurance regulator of any licensed
State if there has been a judicial finding of
financial impairment under paragraph (7); or
(B) a voluntary dissolution proceeding;
(6) comply with any State law regarding deceptive,
false, or fraudulent acts or practices, except that if
the licensed State seeks an injunction regarding the
conduct described in this paragraph, such injunction
must be obtained from a court of competent jurisdiction
as provided in section 314(a);
(7) comply with an injunction issued by a court of
competent jurisdiction, upon a petition by the State
insurance regulator alleging that the redomesticating
insurer is in hazardous financial condition or is
financially impaired;
(8) participate in any insurance insolvency
guaranty association on the same basis as any other
insurer licensed in the licensed State; and
(9) require a person acting, or offering to act, as
an insurance licensee for a redomesticated insurer in
the licensed State to obtain a license from that State,
except that such State may not impose any qualification
or requirement that discriminates against a nonresident
insurance licensee.
SEC. 314. OTHER PROVISIONS.
(a) Judicial Review.--The appropriate United States
district court shall have exclusive jurisdiction over
litigation arising under this section involving any
redomesticating or redomesticated insurer.
(b) Severability.--If any provision of this section, or the
application thereof to any person or circumstances, is held
invalid, the remainder of the section, and the application of
such provision to other persons or circumstances, shall not be
affected thereby.
SEC. 315. DEFINITIONS.
For purposes of this subtitle, the following definitions
shall apply:
(1) Court of competent jurisdiction.--The term
``court of competent jurisdiction'' means a court
authorized pursuant to section 314(a) to adjudicate
litigation arising under this subtitle.
(2) Domicile.--The term ``domicile'' means the
State in which an insurer is incorporated, chartered,
or organized.
(3) Insurance licensee.--The term ``insurance
licensee'' means any person holding a license under
State law to act as insurance agent, subagent, broker,
or consultant.
(4) Institution.--The term ``institution'' means a
corporation, joint stock company, limited liability
company, limited liability partnership, association,
trust, partnership, or any similar entity.
(5) Licensed state.--The term ``licensed State''
means any State, the District of Columbia, any
territory of the United States, Puerto Rico, Guam,
American Samoa, the Trust Territory of the Pacific
Islands, the Virgin Islands, and the Northern Mariana
Islands in which the redomesticating insurer has a
certificate of authority in effect immediately prior to
the redomestication.
(6) Mutual insurer.--The term ``mutual insurer''
means a mutual insurer organized under the laws of any
State.
(7) Person.--The term ``person'' means an
individual, institution, government or governmental
agency, State or political subdivision of a State,
public corporation, board, association, estate,
trustee, or fiduciary, or other similar entity.
(8) Policyholder.--The term ``policyholder'' means
the owner of a policy issued by a mutual insurer,
except that, with respect to voting rights, the term
means a member of a mutual insurer or mutual holding
company granted the right to vote, as determined under
applicable State law.
(9) Redomesticated insurer.--The term
``redomesticated insurer'' means a mutual insurer that
has redomesticated pursuant to this subtitle.
(10) Redomesticating insurer.--The term
``redomesticating insurer'' means a mutual insurer that
is redomesticating pursuant to this subtitle.
(11) Redomestication or transfer.--The term
``redomestication'' or ``transfer'' means the transfer
of the domicile of a mutual insurer from one State to
another State pursuant to this subtitle.
(12) State insurance regulator.--The term ``State
insurance regulator'' means the principal insurance
regulatory authority of a State, the District of
Columbia, any territory of the United States, Puerto
Rico, Guam, American Samoa, the Trust Territory of the
Pacific Islands, the Virgin Islands, and the Northern
Mariana Islands.
(13) State law.--The term ``State law'' means the
statutes of any State, the District of Columbia, any
territory of the United States, Puerto Rico, Guam,
American Samoa, the Trust Territory of the Pacific
Islands, the Virgin Islands, and the Northern Mariana
Islands and any regulation, order, or requirement
prescribed pursuant to any such statute.
(14) Transferee domicile.--The term ``transferee
domicile'' means the State to which a mutual insurer is
redomesticating pursuant to this subtitle.
(15) Transferor domicile.--The term ``transferor
domicile'' means the State from which a mutual insurer
is redomesticating pursuant to this subtitle.
SEC. 316. EFFECTIVE DATE.
This subtitle shall take effect on the date of the
enactment of this Act.
Subtitle C--National Association of Registered Agents and Brokers
SEC. 321. STATE FLEXIBILITY IN MULTISTATE LICENSING REFORMS.
(a) In General.--The provisions of this subtitle shall
take effect unless, not later than 3 years after the date of
the enactment of this Act, at least a majority of the States--
(1) have enacted uniform laws and regulations
governing the licensure of individuals and entities
authorized to sell and solicit the purchase of
insurance within the State; or
(2) have enacted reciprocity laws and regulations
governing the licensure of nonresident individuals and
entities authorized to sell and solicit insurance
within those States.
(b) Uniformity Required.--States shall be deemed to have
established the uniformity necessary to satisfy subsection
(a)(1) if the States--
(1) establish uniform criteria regarding the
integrity, personal qualifications, education,
training, and experience of licensed insurance
producers, including the qualification and training of
sales personnel in ascertaining the appropriateness of
a particular insurance product for a prospective
customer;
(2) establish uniform continuing education
requirements for licensed insurance producers;
(3) establish uniform ethics course requirements
for licensed insurance producers in conjunction with
the continuing education requirements under paragraph
(2);
(4) establish uniform criteria to ensure that an
insurance product, including any annuity contract, sold
to a consumer is suitable and appropriate for the
consumer based on financial information disclosed by
the consumer; and
(5) do not impose any requirement upon any
insurance producer to be licensed or otherwise
qualified to do business as a nonresident that has the
effect of limiting or conditioning that producer's
activities because of its residence or place of
operations, except that counter-signature requirements
imposed on nonresident producers shall not be deemed to
have the effect of limiting or conditioning a
producer's activities because of its residence or place
of operations under this section.
(c) Reciprocity Required.--States shall be deemed to have
established the reciprocity required to satisfy subsection
(a)(2) if the following conditions are met:
(1) Administrative licensing procedures.--At least
a majority of the States permit a producer that has a
resident license for selling or soliciting the purchase
of insurance in its home State to receive a license to
sell or solicit the purchase of insurance in such
majority of States as a nonresident to the same extent
that such producer is permitted to sell or solicit the
purchase of insurance in its State, if the producer's
home State also awards such licenses on such a
reciprocal basis, without satisfying any additional
requirements other than submitting--
(A) a request for licensure;
(B) the application for licensure that the
producer submitted to its home State;
(C) proof that the producer is licensed and
in good standing in its home State; and
(D) the payment of any requisite fee to the
appropriate authority.
(2) Continuing education requirements.--A majority
of the States accept an insurance producer's
satisfaction of its home State's continuing education
requirements for licensed insurance producers to
satisfy the State's own continuing education
requirements if the producer's home State also
recognizes the satisfaction of continuing education
requirements on such a reciprocal basis.
(3) No limiting nonresident requirements.--A
majority of the States do not impose any requirement
upon any insurance producer to be licensed or otherwise
qualified to do business as a nonresident that has the
effect of limiting or conditioning that producer's
activities because of its residence or place of
operations, except that countersignature requirements
imposed on nonresident producers shall not be deemed to
have the effect of limiting or conditioning a
producer's activities because of its residence or place
of operations under this section.
(4) Reciprocal reciprocity.--Each of the States
that satisfies paragraphs (1), (2), and (3) grants
reciprocity to residents of all of the other States
that satisfy such paragraphs.
(d) Determination.--
(1) NAIC determination.--At the end of the 3-year
period beginning on the date of the enactment of this
Act, the National Association of Insurance
Commissioners (hereafter in this subtitle referred to
as the ``NAIC'') shall determine, in consultation with
the insurance commissioners or chief insurance
regulatory officials of the States, whether the
uniformity or reciprocity required by subsections (b)
and (c) has been achieved.
(2) Judicial review.--The appropriate United States
district court shall have exclusive jurisdiction over
any challenge to the NAIC's determination under this
section and such court shall apply the standards set
forth in section 706 of title 5, United States Code,
when reviewing any such challenge.
(e) Continued Application.--If, at any time, the uniformity
or reciprocity required by subsections (b) and (c) no longer
exists, the provisions of this subtitle shall take effect 2
years after the date on which such uniformity or reciprocity
ceases to exist, unless the uniformity or reciprocity required
by those provisions is satisfied before the expiration of that
2-year period.
(f) Savings Provision.--No provision of this section shall
be construed as requiring that any law, regulation, provision,
or action of any State which purports to regulate insurance
producers, including any such law, regulation, provision, or
action which purports to regulate unfair trade practices or
establish consumer protections, including countersignature
laws, be altered or amended in order to satisfy the uniformity
or reciprocity required by subsections (b) and (c), unless any
such law, regulation, provision, or action is inconsistent with
a specific requirement of any such subsection and then only to
the extent of such inconsistency.
(g) Uniform Licensing.--Nothing in this section shall be
construed to require any State to adopt new or additional
licensing requirements to achieve the uniformity necessary to
satisfy subsection (a)(1).
SEC. 322. NATIONAL ASSOCIATION OF REGISTERED AGENTS AND BROKERS.
(a) Establishment.--There is established the National
Association of Registered Agents and Brokers (hereafter in this
subtitle referred to as the ``Association'').
(b) Status.--The Association shall--
(1) be a nonprofit corporation;
(2) have succession until dissolved by an Act of
Congress;
(3) not be an agent or instrumentality of the
United States Government; and
(4) except as otherwise provided in this Act, be
subject to, and have all the powers conferred upona
nonprofit corporation by the District of Columbia Nonprofit Corporation
Act (D.C. Code, sec. 29y-1001 et seq.).
SEC. 323. PURPOSE.
The purpose of the Association shall be to provide a
mechanism through which uniform licensing, appointment,
continuing education, and other insurance producer sales
qualification requirements and conditions can be adopted and
applied on a multistate basis, while preserving the right of
States to license, supervise, and discipline insurance
producers and to prescribe and enforce laws and regulations
with regard to insurance-related consumer protection and unfair
trade practices.
SEC. 324. RELATIONSHIP TO THE FEDERAL GOVERNMENT.
The Association shall be subject to the supervision and
oversight of the NAIC.
SEC. 325. MEMBERSHIP.
(a) Eligibility.--
(1) In general.--Any State-licensed insurance
producer shall be eligible to become a member in the
Association.
(2) Ineligibility for suspension or revocation of
license.--Notwithstanding paragraph (1), a State-
licensed insurance producer shall not be eligible to
become a member if a State insurance regulator has
suspended or revoked such producer's license in that
State during the 3-year period preceding the date on
which such producer applies for membership.
(3) Resumption of eligibility.--Paragraph (2) shall
cease to apply to any insurance producer if--
(A) the State insurance regulator renews
the license of such producer in the State in
which the license was suspended or revoked; or
(B) the suspension or revocation is
subsequently overturned.
(b) Authority To Establish Membership Criteria.--The
Association shall have the authority to establish membership
criteria that--
(1) bear a reasonable relationship to the purposes
for which the Association was established; and
(2) do not unfairly limit the access of smaller
agencies to the Association membership.
(c) Establishment of Classes and Categories.--
(1) Classes of membership.--The Association may
establish separate classes of membership, with separate
criteria, if the Association reasonably determines that
performance of different duties requires different
levels of education, training, or experience.
(2) Categories.--The Association may establish
separate categories of membership for individuals and
for other persons. The establishment of any such
categories of membership shall be based either on the
types of licensing categories that exist under State
laws or on the aggregate amount of business handled by
an insurance producer. No special categories of
membership, and no distinct membership criteria, shall
be established for members which are depository
institutions or for their employees, agents, or
affiliates.
(d) Membership Criteria.--
(1) In general.--The Association may establish
criteria for membership which shall include standards
for integrity, personal qualifications, education,
training, and experience.
(2) Minimum standard.--In establishing criteria
under paragraph (1), the Association shall consider the
highest levels of insurance producer qualifications
established under the licensing laws of the States.
(e) Effect of Membership.--Membership in the Association
shall entitle the member to licensure in each State for which
the member pays the requisite fees, including licensing fees
and, where applicable, bonding requirements, set by such State.
(f) Annual Renewal.--Membership in the Association shall be
renewed on an annual basis.
(g) Continuing Education.--The Association shall establish,
as a condition of membership, continuing education requirements
which shall be comparable to or greater than the continuing
education requirements under the licensing laws of a majority
of the States.
(h) Suspension and Revocation.--The Association may--
(1) inspect and examine the records and offices of
the members of the Association to determine compliance
with the criteria for membership established by the
Association; and
(2) suspend or revoke the membership of an
insurance producer if--
(A) the producer fails to meet the
applicable membership criteria of the
Association; or
(B) the producer has been subject to
disciplinary action pursuant to a final
adjudicatory proceeding under the jurisdiction
of a State insurance regulator, and the
Association concludes that retention of
membership in the Association would not be in
the public interest.
(i) Office of Consumer Complaints.--
(1) In general.--The Association shall establish an
office of consumer complaints that shall--
(A) receive and investigate complaints from
both consumers and State insurance regulators
related to members of the Association; and
(B) recommend to the Association any
disciplinary actions that the office considers
appropriate, to the extent that any such
recommendation is not inconsistent with State
law.
(2) Records and referrals.--The office of consumer
complaints of the Association shall--
(A) maintain records of all complaints
received in accordance with paragraph (1) and
make such records available to the NAIC and to
each State insurance regulator for the State of
residence of the consumer who filed the
complaint; and
(B) refer, when appropriate, any such
complaint to any appropriate State insurance
regulator.
(3) Telephone and other access.--The office of
consumer complaints shall maintain a toll-free
telephone number for the purpose of this subsection
and, as practicable, other alternative means of
communication with consumers, such as an Internet home
page.
SEC. 326. BOARD OF DIRECTORS.
(a) Establishment.--There is established the board of
directors of the Association (hereafter in this subtitle
referred to as the ``Board'') for the purpose of governing and
supervising the activities of the Association and the members
of the Association.
(b) Powers.--The Board shall have such powers and authority
as may be specified in the bylaws of the Association.
(c) Composition.--
(1) Members.--The Board shall be composed of 7
members appointed by the NAIC.
(2) Requirement.--At least 4 of the members of the
Board shall each have significant experience with the
regulation of commercial lines of insurance in at least
1 of the 20 States in which the greatest total dollar
amount of commercial-lines insurance is placed in the
United States.
(3) Initial board membership.--
(A) In general.--If, by the end of the 2-
year period beginning on the date of the
enactment of this Act, the NAIC has not
appointed the initial 7 members of the Board of
the Association, the initial Board shall
consist of the 7 State insurance regulators of
the 7 States with the greatest total dollar
amount of commercial-lines insurance in place
as of the end of such period.
(B) Alternate composition.--If any of the
State insurance regulators described in
subparagraph (A) declines to serve on the
Board, the State insurance regulator with the
next greatest total dollar amount of
commercial-lines insurance in place, as
determined by the NAIC as of the end of such
period, shall serve as a member of the Board.
(C) Inoperability.--If fewer than 7 State
insurance regulators accept appointment to the
Board, the Association shall be established
without NAIC oversight pursuant to section 332.
(d) Terms.--The term of each director shall, after the
initial appointment of the members of the Board, be for 3
years, with one-third of the directors to be appointed each
year.
(e) Board Vacancies.--A vacancy on the Board shall be
filled in the same manner as the original appointment of the
initial Board for the remainder of the term of the vacating
member.
(f) Meetings.--The Board shall meet at the call of the
chairperson, or as otherwise provided by the bylaws of the
Association.
SEC. 327. OFFICERS.
(a) In General.--
(1) Positions.--The officers of the Association
shall consist of a chairperson and a vice chairperson
of the Board, a president, secretary, and treasurer of
the Association, and such other officers and assistant
officers as may be deemed necessary.
(2) Manner of selection.--Each officer of the Board
and the Association shall be elected or appointed at
such time and in such manner and for such terms not
exceeding 3 years as may be prescribed in the bylaws of
the Association.
(b) Criteria for Chairperson.--Only individuals who are
members of the NAIC shall be eligible to serve as the
chairperson of the board of directors.
SEC. 328. BYLAWS, RULES, AND DISCIPLINARY ACTION.
(a) Adoption and Amendment of Bylaws.--
(1) Copy required to be filed with the naic.--The
board of directors of the Association shall file with
the NAIC a copy of the proposed bylaws or any proposed
amendment to the bylaws, accompanied by a concise
general statement of the basis and purpose of such
proposal.
(2) Effective date.--Except as provided in
paragraph (3), any proposed bylaw or proposed amendment
shall take effect--
(A) 30 days after the date of the filing of
a copy with the NAIC;
(B) upon such later date as the Association
may designate; or
(C) upon such earlier date as the NAIC may
determine.
(3) Disapproval by the naic.--Notwithstanding
paragraph (2), a proposed bylaw or amendment shall not
take effect if, after public notice and opportunity to
participate in a public hearing--
(A) the NAIC disapproves such proposal as
being contrary to the public interest or
contrary to the purposes of this subtitle and
provides notice to the Association setting
forth the reasons for such disapproval; or
(B) the NAIC finds that such proposal
involves a matter of such significant public
interest that public comment should be
obtained, in which case it may, after notifying
the Association in writing of such finding,
require that the procedures set forth in
subsection (b) be followed with respect to such
proposal, in the same manner as if such
proposed bylaw change were a proposed rule
change within the meaning of such subsection.
(b) Adoption and Amendment of Rules.--
(1) Filing proposed regulations with the naic.--
(A) In general.--The board of directors of
the Association shall file with the NAIC a copy
of any proposed rule or any proposed amendment
to a rule of the Association which shall be
accompanied by a concise general statement of
the basis and purpose of such proposal.
(B) Other rules and amendments
ineffective.--No proposed rule or amendment
shall take effect unless approved by the NAIC
or otherwise permitted in accordance with this
paragraph.
(2) Initial consideration by the naic.--Not later
than 35 days after the date of publication of notice of
filing of a proposal, or before the end of such longer
period not to exceed 90 days as the NAIC may designate
after such date, if the NAIC finds such longer period
to be appropriate and sets forth its reasons for so
finding, or as to which the Association consents, the
NAIC shall--
(A) by order approve such proposed rule or
amendment; or
(B) institute proceedings to determine
whether such proposed rule or amendment should
be modified or disapproved.
(3) NAIC proceedings.--
(A) In general.--Proceedings instituted by
the NAIC with respect to a proposed rule or
amendment pursuant to paragraph (2) shall--
(i) include notice of the grounds
for disapproval under consideration;
(ii) provide opportunity for
hearing; and
(iii) be concluded not later than
180 days after the date of the
Association's filing of such proposed
rule or amendment.
(B) Disposition of proposal.--At the
conclusion of any proceeding under subparagraph
(A), the NAIC shall, by order, approve or
disapprove the proposed rule or amendment.
(C) Extension of time for consideration.--
The NAIC may extend the time for concluding any
proceeding under subparagraph (A) for--
(i) not more than 60 days if the
NAIC finds good cause for such
extension and sets forth its reasons
for so finding; or
(ii) such longer period as to which
the Association consents.
(4) Standards for review.--
(A) Grounds for approval.--The NAIC shall
approve a proposed rule or amendment if the
NAIC finds that the rule or amendment is in the
public interest and is consistent with the
purposes of this Act.
(B) Approval before end of notice period.--
The NAIC shall not approve any proposed rule
before the end of the 30-day period beginning
on the date on which the Association files
proposed rules or amendments in accordance with
paragraph (1), unless the NAIC finds good cause
for so doing and sets forth the reasons for so
finding.
(5) Alternate procedure.--
(A) In general.--Notwithstanding any
provision of this subsection other than
subparagraph (B), a proposed rule or amendment
relating to the administration or organization
of the Association shall take effect--
(i) upon the date of filing with
the NAIC, if such proposed rule or
amendment is designated by the
Association as relating solely to
matters which the NAIC, consistent with
the public interest and the purposes of
this subsection, determines by rule do
not require the procedures set forth in
this paragraph; or
(ii) upon such date as the NAIC
shall for good cause determine.
(B) Abrogation by the naic.--
(i) In general.--At any time within
60 days after the date of filing of any
proposed rule or amendment under
subparagraph (A)(i) or clause (ii) of
this subparagraph, the NAIC may repeal
such rule or amendment and require that
the rule oramendment be refiled and
reviewed in accordance with this paragraph, if the NAIC finds that such
action is necessary or appropriate in the public interest, for the
protection of insurance producers or policyholders, or otherwise in
furtherance of the purposes of this subtitle.
(ii) Effect of reconsideration by
the naic.--Any action of the NAIC
pursuant to clause (i) shall--
(I) not affect the validity
or force of a rule change
during the period such rule or
amendment was in effect; and
(II) not be considered to
be a final action.
(c) Action Required by the NAIC.--The NAIC may, in
accordance with such rules as the NAIC determines to be
necessary or appropriate to the public interest or to carry out
the purposes of this subtitle, require the Association to
adopt, amend, or repeal any bylaw, rule, or amendment of the
Association, whenever adopted.
(d) Disciplinary Action by the Association.--
(1) Specification of charges.--In any proceeding to
determine whether membership shall be denied,
suspended, revoked, or not renewed (hereafter in this
section referred to as a ``disciplinary action''), the
Association shall bring specific charges, notify such
member of such charges, give the member an opportunity
to defend against the charges, and keep a record.
(2) Supporting statement.--A determination to take
disciplinary action shall be supported by a statement
setting forth--
(A) any act or practice in which such
member has been found to have been engaged;
(B) the specific provision of this
subtitle, the rules or regulations under this
subtitle, or the rules of the Association which
any such act or practice is deemed to violate;
and
(C) the sanction imposed and the reason for
such sanction.
(e) NAIC Review of Disciplinary Action.--
(1) Notice to the naic.--If the Association orders
any disciplinary action, the Association shall promptly
notify the NAIC of such action.
(2) Review by the naic.--Any disciplinary action
taken by the Association shall be subject to review by
the NAIC--
(A) on the NAIC's own motion; or
(B) upon application by any person
aggrieved by such action if such application is
filed with the NAIC not more than 30 days after
the later of--
(i) the date the notice was filed
with the NAIC pursuant to paragraph
(1); or
(ii) the date the notice of the
disciplinary action was received by
such aggrieved person.
(f) Effect of Review.--The filing of an application to the
NAIC for review of a disciplinary action, or the institution of
review by the NAIC on the NAIC's own motion, shall not operate
as a stay of disciplinary action unless the NAIC otherwise
orders.
(g) Scope of Review.--
(1) In general.--In any proceeding to review such
action, after notice and the opportunity for hearing,
the NAIC shall--
(A) determine whether the action should be
taken;
(B) affirm, modify, or rescind the
disciplinary sanction; or
(C) remand to the Association for further
proceedings.
(2) Dismissal of review.--The NAIC may dismiss a
proceeding to review disciplinary action if the NAIC
finds that--
(A) the specific grounds on which the
action is based exist in fact;
(B) the action is in accordance with
applicable rules and regulations; and
(C) such rules and regulations are, and
were, applied in a manner consistent with the
purposes of this subtitle.
SEC. 329. ASSESSMENTS.
(a) Insurance Producers Subject to Assessment.--The
Association may establish such application and membership fees
as the Association finds necessary to cover the costs of its
operations, including fees made reimbursable to the NAIC under
subsection (b), except that, in setting such fees, the
Association may not discriminate against smaller insurance
producers.
(b) NAIC Assessments.--The NAIC may assess the Association
for any costs that the NAIC incurs under this subtitle.
SEC. 330. FUNCTIONS OF THE NAIC.
(a) Administrative Procedure.--Determinations of the NAIC,
for purposes of making rules pursuant to section 328, shall be
made after appropriate notice and opportunity for a hearing and
for submission of views of interested persons.
(b) Examinations and Reports.--
(1) Examinations.--The NAIC may make such
examinations and inspections of the Association and
require the Association to furnish to the NAIC such
reports and records or copies thereof as the NAIC may
consider necessary or appropriate in the public
interest or to effectuate the purposes of this
subtitle.
(2) Report by association.--As soon as practicable
after the close of each fiscal year, the Association
shall submit to the NAIC a written report regarding the
conduct of its business, and the exercise of the other
rights and powers granted by this subtitle, during such
fiscal year. Such report shall include financial
statements setting forth the financial position of the
Association at the end of such fiscal year and the
results of its operations (including the source and
application of its funds) for such fiscal year. The
NAIC shall transmit such report to the President and
the Congress with such comment thereon as the NAIC
determines to be appropriate.
SEC. 331. LIABILITY OF THE ASSOCIATION AND THE DIRECTORS, OFFICERS, AND
EMPLOYEES OF THE ASSOCIATION.
(a) In General.--The Association shall not be deemed to be
an insurer or insurance producer within the meaning of any
State law, rule, regulation, or order regulating or taxing
insurers, insurance producers, or other entities engaged in the
business of insurance, including provisions imposing premium
taxes, regulating insurer solvency or financial condition,
establishing guaranty funds and levying assessments, or
requiring claims settlement practices.
(b) Liability of the Association, Its Directors, Officers,
and Employees.--Neither the Association nor any of its
directors, officers, or employees shall have any liability to
any person for any action taken or omitted in good faith under
or in connection with any matter subject to this subtitle.
SEC. 332. ELIMINATION OF NAIC OVERSIGHT.
(a) In General.--The Association shall be established
without NAIC oversight and the provisions set forth in section
324, subsections (a), (b), (c), and (e) of section 328, and
sections 329(b) and 330 of this subtitle shall cease to be
effective if, at the end of the 2-year period beginning on the
date on which the provisions of this subtitle take effect
pursuant to section 321--
(1) at least a majority of the States representing
at least 50 percent of the total United States
commercial-lines insurance premiums have not satisfied
the uniformity or reciprocity requirements of
subsections (a), (b), and (c) of section 321; and
(2) the NAIC has not approved the Association's
bylaws as required by section 328 or is unable to
operate or supervise the Association, or the
Association is not conducting its activities as
required under this Act.
(b) Board Appointments.--If the repeals required by
subsection (a) are implemented, the following shall apply:
(1) General appointment power.--The President, with
the advice and consent of the Senate, shall appoint the
members of the Association's Board established under
section 326 from lists of candidates recommended to the
President by the NAIC.
(2) Procedures for obtaining naic appointment
recommendations.--
(A) Initial determination and
recommendations.--After the date on which the
provisions of subsection (a) take effect, the
NAIC shall, not later than 60 days thereafter,
provide a list of recommended candidates to the
President. If the NAIC fails to provide a list
by that date, or if any list that is provided
does not include at least 14 recommended
candidates or comply with the requirements of
section 326(c), the President shall, with the
advice and consent of the Senate, make the
requisite appointments without considering the
views of the NAIC.
(B) Subsequent appointments.--After the
initial appointments, the NAIC shall provide a
list of at least six recommended candidates for
the Board to the President by January 15 of
each subsequent year. If the NAIC fails to
provide a list by that date, or if any list
that is provided does not include at least six
recommended candidates or comply with the
requirements of section 326(c), the President,
with the advice and consent of the Senate,
shall make the requisite appointments without
considering the views of the NAIC.
(C) Presidential oversight.--
(i) Removal.--If the President
determines that the Association is not
acting in the interests of the public,
the President may remove the entire
existing Board for the remainder of the
term to which the members of the Board
were appointed and appoint, with the
advice and consent of the Senate, new
members to fill the vacancies on the
Board for the remainder of such terms.
(ii) Suspension of rules or
actions.--The President, or a person
designated by the President for such
purpose, may suspend the effectiveness
of any rule, or prohibit any action, of
the Association which the President or
the designee determines is contrary to
the public interest.
(c) Annual Report.--As soon as practicable after the close
of each fiscal year, the Association shall submit to the
President and to the Congress a written report relative to the
conduct of its business, and the exercise of the other rights
and powers granted by this subtitle, during such fiscal year.
Such report shall include financial statements setting forth
the financial position of the Association at the end of such
fiscal year and the results of its operations (including the
source and application of its funds) for such fiscal year.
SEC. 333. RELATIONSHIP TO STATE LAW.
(a) Preemption of State Laws.--State laws, regulations,
provisions, or other actions purporting to regulate insurance
producers shall be preempted as provided in subsection (b).
(b) Prohibited Actions.--No State shall--
(1) impede the activities of, take any action
against, or apply any provision of law or regulation
to, any insurance producer because that insurance
producer or any affiliate plans to become, has applied
to become, or is a member of the Association;
(2) impose any requirement upon a member of the
Association that it pay different fees to be licensed
or otherwise qualified to do business in that State,
including bonding requirements, based on its residency;
(3) impose any licensing, appointment, integrity,
personal or corporate qualifications, education,
training, experience, residency, or continuing
education requirement upon a member of the Association
that is different from the criteria for membership in
the Association or renewal of such membership, except
that counter-signature requirements imposed on
nonresident producers shall not be deemed to have the
effect of limiting or conditioning a producer's
activities because of its residence or place of
operations under this section; or
(4) implement the procedures of such State's system
of licensing or renewing the licenses of insurance
producers in a manner different from the authority of
the Association under section 325.
(c) Savings Provision.--Except as provided in subsections
(a) and (b), no provision of this section shall be construed as
altering or affecting the continuing effectiveness of any law,
regulation, provision, or other action of any State which
purports to regulate insurance producers, including any such
law, regulation, provision, or action which purports to
regulate unfair trade practices or establish consumer
protections, including countersignature laws.
SEC. 334. COORDINATION WITH OTHER REGULATORS.
(a) Coordination With State Insurance Regulators.--The
Association shall have the authority to--
(1) issue uniform insurance producer applications
and renewal applications that may be used to apply for
the issuance or removal of State licenses, while
preserving the ability of each State to impose such
conditions on the issuance or renewal of a license as
are consistent with section 333;
(2) establish a central clearinghouse through which
members of the Association may apply for the issuance
or renewal of licenses in multiple States; and
(3) establish or utilize a national database for
the collection of regulatory information concerning the
activities of insurance producers.
(b) Coordination With the National Association of
Securities Dealers.--The Association shall coordinate with the
National Association of Securities Dealers in order to ease any
administrative burdens that fall on persons that are members of
both associations, consistent with the purposes of this
subtitle and the Federal securities laws.
SEC. 335. JUDICIAL REVIEW.
(a) Jurisdiction.--The appropriate United States district
court shall have exclusive jurisdiction over litigation
involving the Association, including disputes between the
Association and its members that arise under this subtitle.
Suits brought in State court involving the Association shall be
deemed to have arisen under Federal law and therefore be
subject to jurisdiction in the appropriate United States
district court.
(b) Exhaustion of Remedies.--An aggrieved person shall be
required to exhaust all available administrative remedies
before the Association and the NAIC before it may seek judicial
review of an Association decision.
(c) Standards of Review.--The standards set forth in
section 553 of title 5, United States Code, shall be applied
whenever a rule or bylaw of the Association is under judicial
review, and the standards set forth in section 554 of title 5,
United States Code, shall be applied whenever a disciplinary
action of the Association is judicially reviewed.
SEC. 336. DEFINITIONS.
For purposes of this subtitle, the following definitions
shall apply:
(1) Home state.--The term ``home State'' means the
State in which the insurance producer maintains its
principal place of residence and is licensed to act as
an insurance producer.
(2) Insurance.--The term ``insurance'' means any
product, other than title insurance, defined or
regulated as insurance by the appropriate State
insurance regulatory authority.
(3) Insurance producer.--The term ``insurance
producer'' means any insurance agent or broker, surplus
lines broker, insurance consultant, limited insurance
representative, and any other person that solicits,
negotiates, effects, procures, delivers, renews,
continues or binds policies of insurance or offers
advice, counsel, opinions or services related to
insurance.
(4) State.--The term ``State'' includes any State,
the District of Columbia, any territory of the United
States, Puerto Rico, Guam, American Samoa, the Trust
Territory of the Pacific Islands, the Virgin Islands,
and the Northern Mariana Islands.
(5) State law.--The term ``State law'' includes all
laws, decisions, rules, regulations, or other State
action having the effect of law, of any State. A law of
the United States applicable only to the District of
Columbia shall be treated as a State law rather than a
law of the United States.
Subtitle D--Rental Car Agency Insurance Activities
SEC. 341. STANDARD OF REGULATION FOR MOTOR VEHICLE RENTALS.
(a) Protection Against Retroactive Application of
Regulatory and Legal Action.--Except as provided in subsection
(b), during the 3-year period beginning on the date of the
enactment of this Act, it shall be a presumption that no State
law imposes any licensing, appointment, or education
requirements on any personwho solicits the purchase of or sells
insurance connected with, and incidental to, the lease or rental of a
motor vehicle.
(b) Preeminence of State Insurance Law.--No provision of
this section shall be construed as altering the validity,
interpretation, construction, or effect of--
(1) any State statute;
(2) the prospective application of any court
judgment interpreting or applying any State statute; or
(3) the prospective application of any final State
regulation, order, bulletin, or other statutorily
authorized interpretation or action,
which, by its specific terms, expressly regulates or exempts
from regulation any person who solicits the purchase of or
sells insurance connected with, and incidental to, the short-
term lease or rental of a motor vehicle.
(c) Scope of Application.--This section shall apply with
respect to--
(1) the lease or rental of a motor vehicle for a
total period of 90 consecutive days or less; and
(2) insurance which is provided in connection with,
and incidentally to, such lease or rental for a period
of consecutive days not exceeding the lease or rental
period.
(d) Motor Vehicle Defined.--For purposes of this section,
the term ``motor vehicle'' has the same meaning as in section
13102 of title 49, United States Code.
TITLE IV--UNITARY SAVINGS AND LOAN HOLDING COMPANIES
SEC. 401. PREVENTION OF CREATION OF NEW S&L HOLDING COMPANIES WITH
COMMERCIAL AFFILIATES.
(a) In General.--Section 10(c) of the Home Owners' Loan Act
(12 U.S.C. 1467a(c)) is amended by adding at the end the
following new paragraph:
``(9) Prevention of new affiliations between s&l
holding companies and commercial firms.--
``(A) In general.--Notwithstanding
paragraph (3), no company may directly or
indirectly, including through any merger,
consolidation, or other type of business
combination, acquire control of a savings
association after May 4, 1999, unless the
company is engaged, directly or indirectly
(including through a subsidiary other than a
savings association), only in activities that
are permitted--
``(i) under paragraph (1)(C) or (2)
of this subsection; or
``(ii) for financial holding
companies under section 4(k) of the
Bank Holding Company Act of 1956.
``(B) Prevention of new commercial
affiliations.--Notwithstanding paragraph (3),
no savings and loan holding company may engage
directly or indirectly (including through a
subsidiary other than a savings association) in
any activity other than as described in clauses
(i) and (ii) of subparagraph (A).
``(C) Preservation of authority of existing
unitary s&l holding companies.--Subparagraphs
(A) and (B) do not apply with respect to any
company that was a savings and loan holding
company on May 4, 1999, or that becomes a
savings and loan holding company pursuant to an
application pending before the Office on or
before that date, and that--
``(i) meets and continues to meet
the requirements of paragraph (3); and
``(ii) continues to control not
fewer than 1 savings association that
it controlled on May 4, 1999, or that
it acquired pursuant to an application
pending beforethe Office on or before
that date, or the successor to such savings association.
``(D) Corporate reorganizations
permitted.--This paragraph does not prevent a
transaction that--
``(i) involves solely a company
under common control with a savings and
loan holding company from acquiring,
directly or indirectly, control of the
savings and loan holding company or any
savings association that is already a
subsidiary of the savings and loan
holding company; or
``(ii) involves solely a merger,
consolidation, or other type of
business combination as a result of
which a company under common control
with the savings and loan holding
company acquires, directly or
indirectly, control of the savings and
loan holding company or any savings
association that is already a
subsidiary of the savings and loan
holding company.
``(E) Authority to prevent evasions.--The
Director may issue interpretations,
regulations, or orders that the Director
determines necessary to administer and carry
out the purpose and prevent evasions of this
paragraph, including a determination that,
notwithstanding the form of a transaction, the
transaction would in substance result in a
company acquiring control of a savings
association.
``(F) Preservation of authority for family
trusts.--Subparagraphs (A) and (B) do not apply
with respect to any trust that becomes a
savings and loan holding company with respect
to a savings association, if--
``(i) not less than 85 percent of
the beneficial ownership interests in
the trust are continuously owned,
directly or indirectly, by or for the
benefit of members of the same family,
or their spouses, who are lineal
descendants of common ancestors who
controlled, directly or indirectly,
such savings association on May 4,
1999, or a subsequent date, pursuant to
an application pending before the
Office on or before May 4, 1999; and
``(ii) at the time at which such
trust becomes a savings and loan
holding company, such ancestors or
lineal descendants, or spouses of such
descendants, have directly or
indirectly controlled the savings
association continuously since May 4,
1999, or a subsequent date, pursuant to
an application pending before the
Office on or before May 4, 1999.''.
(b) Conforming Amendment.--Section 10(o)(5)(E) of the Home
Owners' Loan Act (12 U.S.C. 1467a(o)(5)(E)) is amended by
striking ``, except subparagraph (B)'' and inserting ``or
(c)(9)(A)(ii)''.
(c) Rule of Construction for Certain Applications.--
(1) In general.--In the case of a company that--
(A) submits an application with the
Director of the Office of Thrift Supervision
before the date of the enactment of this Act to
convert a State-chartered trust company
controlled by such company on May 4, 1999, to a
savings association; and
(B) controlled a subsidiary on May 4, 1999,
that had submitted an application to the
Director on September 2, 1998;
the company (including any subsidiary controlled by
such company as of such date of enactment) shall be
treated as having filed such conversion application
with the Director before May 4, 1999, for purposes of
section 10(c)(9)(C) of the Home Owners' Loan Act (as
added by subsection (a)).
(2) Definitions.--For purposes of paragraph (1),
the terms ``company'', ``control'', ``savings
association'', and ``subsidiary'' have the meanings
given those terms in section 10 of the Home Owners'
Loan Act.
TITLE V--PRIVACY
Subtitle A--Disclosure of Nonpublic Personal Information
SEC. 501. PROTECTION OF NONPUBLIC PERSONAL INFORMATION.
(a) Privacy Obligation Policy.--It is the policy of the
Congress that each financial institution has an affirmative and
continuing obligation to respect the privacy of its customers
and to protect the security and confidentiality of those
customers' nonpublic personal information.
(b) Financial Institutions Safeguards.--In furtherance of
the policy in subsection (a), each agency or authority
described in section 505(a) shall establish appropriate
standards for the financial institutions subject to their
jurisdiction relating to administrative, technical, and
physical safeguards--
(1) to insure the security and confidentiality of
customer records and information;
(2) to protect against any anticipated threats or
hazards to the security or integrity of such records;
and
(3) to protect against unauthorized access to or
use of such records or information which could result
in substantial harm or inconvenience to any customer.
SEC. 502. OBLIGATIONS WITH RESPECT TO DISCLOSURES OF PERSONAL
INFORMATION.
(a) Notice Requirements.--Except as otherwise provided in
this subtitle, a financial institution may not, directly or
through any affiliate, disclose to a nonaffiliated third party
any nonpublic personal information, unless such financial
institution provides or has provided to the consumer a notice
that complies with section 503.
(b) Opt Out.--
(1) In general.--A financial institution may not
disclose nonpublic personal information to a
nonaffiliated third party unless--
(A) such financial institution clearly and
conspicuously discloses to the consumer, in
writing or in electronic form or other form
permitted by the regulations prescribed under
section 504, that such information may be
disclosed to such third party;
(B) the consumer is given the opportunity,
before the time that such information is
initially disclosed, to direct that such
information not be disclosed to such third
party; and
(C) the consumer is given an explanation of
how the consumer can exercise that
nondisclosure option.
(2) Exception.--This subsection shall not prevent a
financial institution from providing nonpublic personal
information to a nonaffiliated third party to perform
services for or functions on behalf of the financial
institution, including marketing of the financial
institution's own products or services, or financial
products or services offered pursuant to joint
agreements between two or more financial institutions
that comply with the requirements imposed by the
regulations prescribed under section 504, if the
financial institution fully discloses the providing of
such information and enters into a contractual
agreement with the third party that requires the third
party to maintain the confidentiality of such
information.
(c) Limits on Reuse of Information.--Except as otherwise
provided in this subtitle, a nonaffiliated third party that
receives from a financial institution nonpublic personal
information under this section shall not, directly or through
an affiliate of such receiving third party, disclose such
information to any other person that is a nonaffiliated third
party of both the financial institution and such receiving
third party, unless such disclosure would be lawful if made
directly to such other person by the financial institution.
(d) Limitations on the Sharing of Account Number
Information for Marketing Purposes.--A financial institution
shall not disclose, other than to a consumer reporting agency,
an account number or similar form of access number or access
code for a credit card account, deposit account, or transaction
account of a consumer to any nonaffiliated third party for use
in telemarketing, direct mail marketing, or other marketing
through electronic mail to the consumer.
(e) General Exceptions.--Subsections (a) and (b) shall not
prohibit the disclosure of nonpublic personal information--
(1) as necessary to effect, administer, or enforce
a transaction requested or authorized by the consumer,
or in connection with--
(A) servicing or processing a financial
product or service requested or authorized by
the consumer;
(B) maintaining or servicing the consumer's
account with the financial institution, or with
another entity as part of a private label
credit card program or other extension of
credit on behalf of such entity; or
(C) a proposed or actual securitization,
secondary market sale (including sales of
servicing rights), or similar transaction
related to a transaction of the consumer;
(2) with the consent or at the direction of the
consumer;
(3)(A) to protect the confidentiality or security
of the financial institution's records pertaining to
the consumer, the service or product, or the
transaction therein; (B) to protect against or prevent
actual or potential fraud, unauthorized transactions,
claims, or other liability; (C) for required
institutional risk control, or for resolving customer
disputes or inquiries; (D) to persons holding a legal
or beneficial interest relating to the consumer; or (E)
to persons acting in a fiduciary or representative
capacity on behalf of the consumer;
(4) to provide information to insurance rate
advisory organizations, guaranty funds or agencies,
applicable rating agencies of the financial
institution, persons assessing the institution's
compliance with industry standards, and the
institution's attorneys, accountants, and auditors;
(5) to the extent specifically permitted or
required under other provisions of law and in
accordance with the Right to Financial Privacy Act of
1978, to law enforcement agencies (including a Federal
functional regulator, the Secretary of the Treasury
with respect to subchapter II of chapter 53 of title
31, United States Code, and chapter 2 of title I of
Public Law 91-508 (12 U.S.C. 1951-1959), a State
insurance authority, or the Federal Trade Commission),
self-regulatory organizations, or for an investigation
on a matter related to public safety;
(6)(A) to a consumer reporting agency in accordance
with the Fair Credit Reporting Act, or (B) from a
consumer report reported by a consumer reporting
agency;
(7) in connection with a proposed or actual sale,
merger, transfer, or exchange of all or a portion of a
business or operating unit if the disclosure of
nonpublic personal information concerns solely
consumers of such business or unit; or
(8) to comply with Federal, State, or local laws,
rules, and other applicable legal requirements; to
comply with a properly authorized civil, criminal, or
regulatory investigation or subpoena or summons by
Federal, State, or local authorities; or to respond to
judicial process or government regulatory authorities
having jurisdiction over the financial institution for
examination, compliance, or other purposes as
authorized by law.
SEC. 503. DISCLOSURE OF INSTITUTION PRIVACY POLICY.
(a) Disclosure Required.--At the time of establishing a
customer relationship with a consumer and not less than
annually during the continuation of such relationship, a
financial institution shall provide a clear and conspicuous
disclosure to such consumer, in writing or in electronic form
or other form permitted by the regulations prescribed under
section 504, of such financial institution's policies and
practices with respect to--
(1) disclosing nonpublic personal information to
affiliates and nonaffiliated third parties, consistent
with section 502, including the categories of
information that may be disclosed;
(2) disclosing nonpublic personal information of
persons who have ceased to be customers of the
financial institution; and
(3) protecting the nonpublic personal information
of consumers.
Such disclosures shall be made in accordance with the
regulations prescribed under section 504.
(b) Information To Be Included.--The disclosure required by
subsection (a) shall include--
(1) the policies and practices of the institution
with respect to disclosing nonpublic personal
information to nonaffiliated third parties, other than
agents of the institution, consistent with section 502
of this subtitle, and including--
(A) the categories of persons to whom the
information is or may be disclosed, other than
the persons to whom the information may be
provided pursuant to section 502(e); and
(B) the policies and practices of the
institution with respect to disclosing of
nonpublic personal information of persons who
have ceased to be customers of the financial
institution;
(2) the categories of nonpublic personal
information that are collected by the financial
institution;
(3) the policies that the institution maintains to
protect the confidentiality and security of nonpublic
personal information in accordance with section 501;
and
(4) the disclosures required, if any, under section
603(d)(2)(A)(iii) of the Fair Credit Reporting Act.
SEC. 504. RULEMAKING.
(a) Regulatory Authority.--
(1) Rulemaking.--The Federal banking agencies, the
National Credit Union Administration, the Secretary of
the Treasury, the Securities and Exchange Commission,
and the Federal Trade Commission shall each prescribe,
after consultation as appropriate with representatives
of State insurance authorities designated by the
National Association of Insurance Commissioners, such
regulations as may be necessary to carry out the
purposes of this subtitle with respect to the financial
institutions subject to their jurisdiction under
section 505.
(2) Coordination, consistency, and comparability.--
Each of the agencies and authorities required under
paragraph (1) to prescribe regulations shall consult
and coordinate with the other such agencies and
authorities for the purposes of assuring, to the extent
possible, that the regulations prescribed by each such
agency and authority are consistent and comparable with
the regulations prescribed by the other such agencies
and authorities.
(3) Procedures and deadline.--Such regulations
shall be prescribed in accordance with applicable
requirements of title 5, United States Code, and shall
be issued in final form not later than 6 months after
the date of the enactment of this Act.
(b) Authority To Grant Exceptions.--The regulations
prescribed under subsection (a) may include such additional
exceptions to subsections (a) through (d) of section 502 as are
deemed consistent with the purposes of this subtitle.
SEC. 505. ENFORCEMENT.
(a) In General.--This subtitle and the regulations
prescribed thereunder shall be enforced by the Federal
functional regulators, the State insurance authorities, and the
Federal Trade Commission with respect to financial institutions
and other persons subject to their jurisdiction under
applicable law, as follows:
(1) Under section 8 of the Federal Deposit
Insurance Act, in the case of--
(A) national banks, Federal branches and
Federal agencies of foreign banks, and any
subsidiaries of such entities (except brokers,
dealers, persons providing insurance,
investment companies, and investment advisers),
by the Office of the Comptroller of the
Currency;
(B) member banks of the Federal Reserve
System (other than national banks), branches
and agencies of foreign banks (other than
Federal branches, Federal agencies, and insured
State branches of foreign banks), commercial
lending companies owned or controlled by
foreign banks, organizations operating under
section 25 or 25A of the Federal Reserve Act,
and bank holding companies and their nonbank
subsidiaries or affiliates (except brokers,
dealers, persons providing insurance,
investment companies, and investment advisers),
by the Board of Governors of the Federal
Reserve System;
(C) banks insured by the Federal Deposit
Insurance Corporation (other than members of
the Federal Reserve System), insured State
branches of foreign banks, and any subsidiaries
of such entities (except brokers, dealers,
persons providing insurance, investment
companies, and investment advisers), by the
Board of Directors of the Federal Deposit
Insurance Corporation; and
(D) savings associations the deposits of
which are insured by the Federal Deposit
Insurance Corporation, and any subsidiaries of
such savings associations (except brokers,
dealers, persons providing insurance,
investment companies, and investment advisers),
by the Director of the Office of Thrift
Supervision.
(2) Under the Federal Credit Union Act, by the
Board of the National Credit Union Administration with
respect to any federally insured credit union, and any
subsidiaries of such an entity.
(3) Under the Securities Exchange Act of 1934, by
the Securities and Exchange Commission with respect to
any broker or dealer.
(4) Under the Investment Company Act of 1940, by
the Securities and Exchange Commission with respect to
investment companies.
(5) Under the Investment Advisers Act of 1940, by
the Securities and Exchange Commission with respect to
investment advisers registered with the Commission
under such Act.
(6) Under State insurance law, in the case of any
person engaged in providing insurance, by the
applicable State insurance authority of the State in
which the person is domiciled, subject to section 104
of this Act.
(7) Under the Federal Trade Commission Act, by the
Federal Trade Commission for any other financial
institution or other person that is not subject to the
jurisdiction of any agency or authority under
paragraphs (1) through (6) of this subsection.
(b) Enforcement of Section 501.--
(1) In general.--Except as provided in paragraph
(2), the agencies and authorities described in
subsection (a) shall implement the standards prescribed
under section 501(b) in the same manner, to the extent
practicable, as standards prescribed pursuant to
section 39(a) of the Federal Deposit Insurance Act are
implemented pursuant to such section.
(2) Exception.--The agencies and authorities
described in paragraphs (3), (4), (5), (6), and (7) of
subsection (a) shall implement the standards prescribed
under section 501(b) by rule with respect to the
financial institutions and other persons subject to
their respective jurisdictions under subsection (a).
(c) Absence of State Action.--If a State insurance
authority fails to adopt regulations to carry out this
subtitle, such State shall not be eligible to override,
pursuant to section 47(g)(2)(B)(iii) of the Federal Deposit
Insurance Act, the insurance customer protection regulations
prescribed by a Federal banking agency under section 47(a) of
such Act.
(d) Definitions.--The terms used in subsection (a)(1) that
are not defined in this subtitle or otherwisedefined in section
3(s) of the Federal Deposit Insurance Act shall have the same meaning
as given in section 1(b) of the International Banking Act of 1978.
SEC. 506. PROTECTION OF FAIR CREDIT REPORTING ACT.
(a) Amendment.--Section 621 of the Fair Credit Reporting
Act (15 U.S.C. 1681s) is amended--
(1) in subsection (d), by striking everything
following the end of the second sentence; and
(2) by striking subsection (e) and inserting the
following:
``(e) Regulatory Authority.--
``(1) The Federal banking agencies referred to in
paragraphs (1) and (2) of subsection (b) shall jointly
prescribe such regulations as necessary to carry out
the purposes of this Act with respect to any persons
identified under paragraphs (1) and (2) of subsection
(b), and the Board of Governors of the Federal Reserve
System shall have authority to prescribe regulations
consistent with such joint regulations with respect to
bank holding companies and affiliates (other than
depository institutions and consumer reporting
agencies) of such holding companies.
``(2) The Board of the National Credit Union
Administration shall prescribe such regulations as
necessary to carry out the purposes of this Act with
respect to any persons identified under paragraph (3)
of subsection (b).''.
(b) Conforming Amendment.--Section 621(a) of the Fair
Credit Reporting Act (15 U.S.C. 1681s(a)) is amended by
striking paragraph (4).
(c) Relation to Other Provisions.--Except for the
amendments made by subsections (a) and (b), nothing in this
title shall be construed to modify, limit, or supersede the
operation of the Fair Credit Reporting Act, and no inference
shall be drawn on the basis of the provisions of this title
regarding whether information is transaction or experience
information under section 603 of such Act.
SEC. 507. RELATION TO STATE LAWS.
(a) In General.--This subtitle and the amendments made by
this subtitle shall not be construed as superseding, altering,
or affecting any statute, regulation, order, or interpretation
in effect in any State, except to the extent that such statute,
regulation, order, or interpretation is inconsistent with the
provisions of this subtitle, and then only to the extent of the
inconsistency.
(b) Greater Protection Under State Law.--For purposes of
this section, a State statute, regulation, order, or
interpretation is not inconsistent with the provisions of this
subtitle if the protection such statute, regulation, order, or
interpretation affords any person is greater than the
protection provided under this subtitle and the amendments made
by this subtitle, as determined by the Federal Trade
Commission, after consultation with the agency or authority
with jurisdiction under section 505(a) of either the person
that initiated the complaint or that is the subject of the
complaint, on its own motion or upon the petition of any
interested party.
SEC. 508. STUDY OF INFORMATION SHARING AMONG FINANCIAL AFFILIATES.
(a) In General.--The Secretary of the Treasury, in
conjunction with the Federal functional regulators and the
Federal Trade Commission, shall conduct a study of information
sharing practices among financial institutions and their
affiliates. Such study shall include--
(1) the purposes for the sharing of confidential
customer information with affiliates or with
nonaffiliated third parties;
(2) the extent and adequacy of security protections
for such information;
(3) the potential risks for customer privacy of
such sharing of information;
(4) the potential benefits for financial
institutions and affiliates of such sharing of
information;
(5) the potential benefits for customers of such
sharing of information;
(6) the adequacy of existing laws to protect
customer privacy;
(7) the adequacy of financial institution privacy
policy and privacy rights disclosure under existing
law;
(8) the feasibility of different approaches,
including opt-out and opt-in, to permit customers to
direct that confidential information not be shared with
affiliates and nonaffiliated third parties; and
(9) the feasibility of restricting sharing of
information for specific uses or of permitting
customers to direct the uses for which information may
be shared.
(b) Consultation.--The Secretary shall consult with
representatives of State insurance authorities designated by
the National Association of Insurance Commissioners, and also
with financial services industry, consumer organizations and
privacy groups, and other representatives of the general
public, in formulating and conducting the study required by
subsection (a).
(c) Report.--On or before January 1, 2002, the Secretary
shall submit a report to the Congress containing the findings
and conclusions of the study required under subsection (a),
together with such recommendations for legislative or
administrative action as may be appropriate.
SEC. 509. DEFINITIONS.
As used in this subtitle:
(1) Federal banking agency.--The term ``Federal
banking agency'' has the same meaning as given in
section 3 of the Federal Deposit Insurance Act.
(2) Federal functional regulator.--The term
``Federal functional regulator'' means--
(A) the Board of Governors of the Federal
Reserve System;
(B) the Office of the Comptroller of the
Currency;
(C) the Board of Directors of the Federal
Deposit Insurance Corporation;
(D) the Director of the Office of Thrift
Supervision;
(E) the National Credit Union
Administration Board; and
(F) the Securities and Exchange Commission.
(3) Financial institution.--
(A) In general.--The term ``financial
institution'' means any institution the
business of which is engaging in financial
activities as described in section 4(k) of the
Bank Holding Company Act of 1956.
(B) Persons subject to cftc regulation.--
Notwithstanding subparagraph (A), the term
``financial institution'' does not include any
person or entity with respect to any financial
activity that is subject to the jurisdiction of
the Commodity Futures Trading Commission under
the Commodity Exchange Act.
(C) Farm credit institutions.--
Notwithstanding subparagraph (A), the term
``financial institution'' does not include the
Federal Agricultural Mortgage Corporation or
any entity chartered and operating under the
Farm Credit Act of 1971.
(D) Other secondary market institutions.--
Notwithstanding subparagraph (A), the term
``financial institution'' does not include
institutions chartered by Congress specifically
to engage in transactions described in section
502(e)(1)(C), as long as such institutions do
not sell or transfer nonpublic personal
information to a nonaffiliated third party.
(4) Nonpublic personal information.--
(A) The term ``nonpublic personal
information'' means personally identifiable
financial information--
(i) provided by a consumer to a
financial institution;
(ii) resulting from any transaction
with the consumer or any service
performed for the consumer; or
(iii) otherwise obtained by the
financial institution.
(B) Such term does not include publicly
available information, as such term is defined
by the regulations prescribed under section
504.
(C) Notwithstanding subparagraph (B), such
term--
(i) shall include any list,
description, or other grouping of
consumers (and publicly available
information pertaining to them) that is
derived using any nonpublic personal
information other than publicly
available information; but
(ii) shall not include any list,
description, or other grouping of
consumers (and publicly available
information pertaining to them) that is
derived without using any nonpublic
personal information.
(5) Nonaffiliated third party.--The term
``nonaffiliated third party'' means any entity that is
not an affiliate of, or related by common ownership or
affiliated by corporate control with, the financial
institution, but does not include a joint employee of
such institution.
(6) Affiliate.--The term ``affiliate'' means any
company that controls, is controlled by, or is under
common control with another company.
(7) Necessary to effect, administer, or enforce.--
The term ``as necessary to effect, administer, or
enforce the transaction'' means--
(A) the disclosure is required, or is a
usual, appropriate, or acceptable method, to
carry out the transaction or the product or
service business of which the transaction is a
part, and record or service or maintain the
consumer's account in the ordinary course of
providing the financial service or financial
product, or to administer or service benefits
or claims relating to the transaction or the
product or service business of which it is a
part, and includes--
(i) providing the consumer or the
consumer's agent or broker with a
confirmation, statement, or other
record of the transaction, or
information on the status or value of
the financial service or financial
product; and
(ii) the accrual or recognition of
incentives or bonuses associated with
the transaction that are provided by
the financial institution or any other
party;
(B) the disclosure is required, or is one
of the lawful or appropriate methods, to
enforce the rights of the financial institution
or of other persons engaged in carrying out the
financial transaction, or providing the product
or service;
(C) the disclosure is required, or is a
usual, appropriate, or acceptable method, for
insurance underwriting at the consumer's
request or for reinsurance purposes, or for any
of the following purposes as they relate to a
consumer's insurance: account administration,
reporting, investigating, or preventing fraud
or material misrepresentation, processing
premium payments, processing insurance claims,
administering insurance benefits (including
utilization review activities), participating
in research projects, or as otherwise required
or specifically permitted by Federal or State
law; or
(D) the disclosure is required, or is a
usual, appropriate or acceptable method, in
connection with--
(i) the authorization, settlement,
billing, processing, clearing,
transferring, reconciling, or
collection of amounts charged, debited,
or otherwise paid using a debit, credit
or other payment card, check, or
account number, or by other payment
means;
(ii) the transfer of receivables,
accounts or interests therein; or
(iii) the audit of debit, credit or
other payment information.
(8) State insurance authority.--The term ``State
insurance authority'' means, in the case of any person
engaged in providing insurance, the State insurance
authority of the State in which the person is
domiciled.
(9) Consumer.--The term ``consumer'' means an
individual who obtains, from a financial institution,
financial products or services which are to be used
primarily for personal, family, or household purposes,
and also means the legal representative of such an
individual.
(10) Joint agreement.--The term ``joint agreement''
means a formal written contract pursuant to which two
or more financial institutions jointly offer, endorse,
or sponsor a financial product or service, and as may
be further defined in the regulations prescribed under
section 504.
(11) Customer relationship.--The term ``time of
establishing a customer relationship'' shall be defined
by the regulations prescribed under section 504, and
shall, in the case of a financial institution engaged
in extending credit directly to consumers to finance
purchases of goods or services, mean the time of
establishing the credit relationship with the consumer.
SEC. 510. EFFECTIVE DATE.
This subtitle shall take effect 6 months after the date on
which rules are required to be prescribed under section
504(a)(3), except--
(1) to the extent that a later date is specified in
the rules prescribed under section 504; and
(2) that sections 504 and 506 shall be effective
upon enactment.
Subtitle B--Fraudulent Access to Financial Information
SEC. 521. PRIVACY PROTECTION FOR CUSTOMER INFORMATION OF FINANCIAL
INSTITUTIONS.
(a) Prohibition on Obtaining Customer Information by False
Pretenses.--It shall be a violation of this subtitle for any
person to obtain or attempt to obtain, or cause to be disclosed
or attempt to cause to be disclosed to any person, customer
information of a financial institution relating to another
person--
(1) by making a false, fictitious, or fraudulent
statement or representation to an officer, employee, or
agent of a financial institution;
(2) by making a false, fictitious, or fraudulent
statement or representation to a customer of a
financial institution; or
(3) by providing any document to an officer,
employee, or agent of a financial institution, knowing
that the document is forged, counterfeit, lost, or
stolen, was fraudulently obtained, or contains a false,
fictitious, or fraudulent statement or representation.
(b) Prohibition on Solicitation of a Person To Obtain
Customer Information From Financial Institution Under False
Pretenses.--It shall be a violation of this subtitle to request
a person to obtain customer information of a financial
institution, knowing that the person will obtain, or attempt to
obtain, the information from the institution in any manner
described in subsection (a).
(c) Nonapplicability to Law Enforcement Agencies.--No
provision of this section shall be construed so as to prevent
any action by a law enforcement agency, or any officer,
employee, or agent of such agency, to obtain customer
information of a financial institution in connection with the
performance of the official duties of the agency.
(d) Nonapplicability to Financial Institutions in Certain
Cases.--No provision of this section shall be construed so as
to prevent any financial institution, or any officer, employee,
or agent of a financial institution, from obtaining customer
information of such financial institution in the course of--
(1) testing the security procedures or systems of
such institution for maintaining the confidentiality of
customer information;
(2) investigating allegations of misconduct or
negligence on the part of any officer, employee, or
agent of the financial institution; or
(3) recovering customer information of the
financial institution which was obtained or received by
another person in any manner described in subsection
(a) or (b).
(e) Nonapplicability to Insurance Institutions for
Investigation of Insurance Fraud.--No provision of this section
shall be construed so as to prevent any insurance institution,
or any officer, employee, or agency of an insurance
institution, from obtaining information as part of an insurance
investigation into criminal activity, fraud, material
misrepresentation, or material nondisclosure that is authorized
for such institution under State law, regulation,
interpretation, or order.
(f) Nonapplicability to Certain Types of Customer
Information of Financial Institutions.--No provision of this
section shall be construed so as to prevent any person from
obtaining customer information of a financial institution that
otherwise is available as a public record filed pursuant to the
securities laws (as defined in section 3(a)(47) of the
Securities Exchange Act of 1934).
(g) Nonapplicability to Collection of Child Support
Judgments.--No provision of this section shall be construed to
prevent any State-licensed private investigator, or any
officer, employee, or agent of such private investigator, from
obtaining customer information of a financial institution, to
the extent reasonably necessary to collect child support from a
person adjudged to have been delinquent in his or her
obligations by a Federal or State court, and to the extent that
such action by a State-licensed private investigator is not
unlawful under any other Federal or State law or regulation,
and has been authorized by an order or judgment of a court of
competent jurisdiction.
SEC. 522. ADMINISTRATIVE ENFORCEMENT.
(a) Enforcement by Federal Trade Commission.--Except as
provided in subsection (b), compliance with this subtitle shall
be enforced by the Federal Trade Commission in the same manner
and with the same power and authority as the Commission has
under the Fair Debt Collection Practices Act to enforce
compliance with such Act.
(b) Enforcement by Other Agencies in Certain Cases.--
(1) In general.--Compliance with this subtitle
shall be enforced under--
(A) section 8 of the Federal Deposit
Insurance Act, in the case of--
(i) national banks, and Federal
branches and Federal agencies of
foreignbanks, by the Office of the
Comptroller of the Currency;
(ii) member banks of the Federal
Reserve System (other than national
banks), branches and agencies of
foreign banks (other than Federal
branches, Federal agencies, and insured
State branches of foreign banks),
commercial lending companies owned or
controlled by foreign banks, and
organizations operating under section
25 or 25A of the Federal Reserve Act,
by the Board;
(iii) banks insured by the Federal
Deposit Insurance Corporation (other
than members of the Federal Reserve
System and national nonmember banks)
and insured State branches of foreign
banks, by the Board of Directors of the
Federal Deposit Insurance Corporation;
and
(iv) savings associations the
deposits of which are insured by the
Federal Deposit Insurance Corporation,
by the Director of the Office of Thrift
Supervision; and
(B) the Federal Credit Union Act, by the
Administrator of the National Credit Union
Administration with respect to any Federal
credit union.
(2) Violations of this subtitle treated as
violations of other laws.--For the purpose of the
exercise by any agency referred to in paragraph (1) of
its powers under any Act referred to in that paragraph,
a violation of this subtitle shall be deemed to be a
violation of a requirement imposed under that Act. In
addition to its powers under any provision of law
specifically referred to in paragraph (1), each of the
agencies referred to in that paragraph may exercise,
for the purpose of enforcing compliance with this
subtitle, any other authority conferred on such agency
by law.
SEC. 523. CRIMINAL PENALTY.
(a) In General.--Whoever knowingly and intentionally
violates, or knowingly and intentionally attempts to violate,
section 521 shall be fined in accordance with title 18, United
States Code, or imprisoned for not more than 5 years, or both.
(b) Enhanced Penalty for Aggravated Cases.--Whoever
violates, or attempts to violate, section 521 while violating
another law of the United States or as part of a pattern of any
illegal activity involving more than $100,000 in a 12-month
period shall be fined twice the amount provided in subsection
(b)(3) or (c)(3) (as the case may be) of section 3571 of title
18, United States Code, imprisoned for not more than 10 years,
or both.
SEC. 524. RELATION TO STATE LAWS.
(a) In General.--This subtitle shall not be construed as
superseding, altering, or affecting the statutes, regulations,
orders, or interpretations in effect in any State, except to
the extent that such statutes, regulations, orders, or
interpretations are inconsistent with the provisions of this
subtitle, and then only to the extent of the inconsistency.
(b) Greater Protection Under State Law.--For purposes of
this section, a State statute, regulation, order, or
interpretation is not inconsistent with the provisions of this
subtitle if the protection such statute, regulation, order, or
interpretation affords any person is greater than the
protection provided under this subtitle as determined by the
Federal Trade Commission, after consultation with the agency or
authority with jurisdiction under section 522 of either the
person that initiated the complaint or that is the subject of
the complaint, on its own motion or upon the petition of any
interested party.
SEC. 525. AGENCY GUIDANCE.
In furtherance of the objectives of this subtitle, each
Federal banking agency (as defined in section 3(z) of the
Federal Deposit Insurance Act), the National Credit Union
Administration, and the Securities and Exchange Commission or
self-regulatory organizations, as appropriate, shall review
regulations and guidelines applicable to financial institutions
under their respective jurisdictions and shall prescribe such
revisions to such regulations and guidelines as may be
necessary to ensure that such financial institutions have
policies, procedures, and controls in place to prevent the
unauthorized disclosure of customer financial information and
to deter and detect activities proscribed under section 521.
SEC. 526. REPORTS.
(a) Report to the Congress.--Before the end of the 18-month
period beginning on the date of the enactment of this Act, the
Comptroller General, in consultation with the Federal Trade
Commission, Federal banking agencies, the National Credit Union
Administration, the Securities and Exchange Commission,
appropriate Federal law enforcement agencies, and appropriate
State insurance regulators, shall submit to the Congress a
report on the following:
(1) The efficacy and adequacy of the remedies
provided in this subtitle in addressing attempts to
obtain financial information by fraudulent means or by
false pretenses.
(2) Any recommendations for additional legislative
or regulatory action to address threats to the privacy
of financial information created by attempts to obtain
information by fraudulent means or false pretenses.
(b) Annual Report by Administering Agencies.--The Federal
Trade Commission and the Attorney General shall submit to
Congress an annual report on number and disposition of all
enforcement actions taken pursuant to this subtitle.
SEC. 527. DEFINITIONS.
For purposes of this subtitle, the following definitions
shall apply:
(1) Customer.--The term ``customer'' means, with
respect to a financial institution, any person (or
authorized representative of a person) to whom the
financial institution provides a product or service,
including that of acting as a fiduciary.
(2) Customer information of a financial
institution.--The term ``customer information of a
financial institution'' means any information
maintained by or for a financial institution which is
derived from the relationship between the financial
institution and a customer of the financial institution
and is identified with the customer.
(3) Document.--The term ``document'' means any
information in any form.
(4) Financial institution.--
(A) In general.--The term ``financial
institution'' means any institution engaged in
the business of providing financial services to
customers who maintain a credit, deposit,
trust, or other financial account or
relationship with the institution.
(B) Certain financial institutions
specifically included.--The term ``financial
institution'' includes any depository
institution (as defined in section 19(b)(1)(A)
of the Federal Reserve Act), any broker or
dealer, any investment adviser or investment
company, any insurance company, any loan or
finance company, any credit card issuer or
operator of a credit card system, and any
consumer reporting agency that compiles and
maintains files on consumers on a nationwide
basis (as defined in section 603(p) of the
Consumer Credit Protection Act).
(C) Securities institutions.--For purposes
of subparagraph (B)--
(i) the terms ``broker'' and
``dealer'' have the same meanings as
given in section 3 of the Securities
Exchange Act of 1934 (15 U.S.C. 78c);
(ii) the term ``investment
adviser'' has the same meaning as given
in section 202(a)(11) of the Investment
Advisers Act of 1940 (15 U.S.C. 80b-
2(a)); and
(iii) the term ``investment
company'' has the same meaning as given
in section 3 of the Investment Company
Act of 1940 (15 U.S.C. 80a-3).
(D) Certain persons and entities
specifically excluded.--The term ``financial
institution'' does not include any person or
entity with respect to any financial activity
that is subject to the jurisdiction of the
Commodity Futures Trading Commission under the
Commodity Exchange Act and does not include the
Federal Agricultural Mortgage Corporation or
any entity chartered and operating under the
Farm Credit Act of 1971.
(E) Further definition by regulation.--The
Federal Trade Commission, after consultation
with Federal banking agencies and the
Securities and Exchange Commission, may
prescribe regulations clarifying or describing
the types of institutions which shall be
treated as financial institutions for purposes
of this subtitle.
TITLE VI--FEDERAL HOME LOAN BANK SYSTEM MODERNIZATION
SEC. 601. SHORT TITLE.
This title may be cited as the ``Federal Home Loan Bank
System Modernization Act of 1999''.
SEC. 602. DEFINITIONS.
Section 2 of the Federal Home Loan Bank Act (12 U.S.C.
1422) is amended--
(1) in paragraph (1), by striking ``term `Board'
means'' and inserting ``terms `Finance Board' and
`Board' mean'';
(2) by striking paragraph (3) and inserting the
following:
``(3) State.--The term `State', in addition to the
States of the United States, includes the District of
Columbia, Guam, Puerto Rico, the United States Virgin
Islands, American Samoa, and the Commonwealth of the
Northern Mariana Islands.''; and
(3) by adding at the end the following new
paragraph:
``(13) Community financial institution.--
``(A) In general.--The term `community
financial institution' means a member--
``(i) the deposits of which are
insured under the Federal Deposit
Insurance Act; and
``(ii) that has, as of the date of
the transaction at issue, less than
$500,000,000 in average total assets,
based on an average of total assets
over the 3 years preceding that date.
``(B) Adjustments.--The $500,000,000 limit
referred to in subparagraph (A)(ii) shall be
adjusted annually by the Finance Board, based
on the annual percentage increase, if any, in
the Consumer Price Index for all urban
consumers, as published by the Department of
Labor.''.
SEC. 603. SAVINGS ASSOCIATION MEMBERSHIP.
Section 5(f) of the Home Owners' Loan Act (12 U.S.C.
1464(f)) is amended to read as follows:
``(f) Federal Home Loan Bank Membership.--After the end of
the 6-month period beginning on the date of the enactment of
the Federal Home Loan Bank System Modernization Act of 1999, a
Federal savings association may become a member of the Federal
Home Loan Bank System, and shall qualify for such membership in
the manner provided by the Federal Home Loan Bank Act.''.
SEC. 604. ADVANCES TO MEMBERS; COLLATERAL.
(a) In General.--Section 10(a) of the Federal Home Loan
Bank Act (12 U.S.C. 1430(a)) is amended--
(1) by redesignating paragraphs (1) through (4) as
subparagraphs (A) through (D), respectively, and
indenting appropriately;
(2) by striking ``(a) Each'' and inserting the
following:
``(a) In General.--
``(1) All advances.--Each'';
(3) by striking the second sentence and inserting
the following:
``(2) Purposes of advances.--A long-term advance
may only be made for the purposes of--
``(A) providing funds to any member for
residential housing finance; and
``(B) providing funds to any community
financial institution for small businesses,
small farms, and small agri-businesses.'';
(4) by striking ``A Bank'' and inserting the
following:
``(3) Collateral.--A Bank'';
(5) in paragraph (3) (as so designated by paragraph
(4) of this subsection)--
(A) in subparagraph (C) (as so redesignated
by paragraph (1) of this subsection) by
striking ``Deposits'' and inserting ``Cash or
deposits'';
(B) in subparagraph (D) (as so redesignated
by paragraph (1) of this subsection), by
striking the second sentence; and
(C) by inserting after subparagraph (D) (as
so redesignated by paragraph (1) of this
subsection) the following new subparagraph:
``(E) Secured loans for small business,
agriculture, or securities representing a whole
interest in such secured loans, in the case of
any community financial institution.'';
(6) in paragraph (5)--
(A) in the second sentence, by striking
``and the Board'';
(B) in the third sentence, by striking
``Board'' and inserting ``Federal home loan
bank''; and
(C) by striking ``(5) Paragraphs (1)
through (4)'' and inserting the following:
``(4) Additional bank authority.--Subparagraphs (A)
through (E) of paragraph (3)''; and
(7) by adding at the end the following:
``(5) Review of certain collateral standards.--The
Board may review the collateral standards applicable to
each Federal home loan bank for the classes of
collateral described in subparagraphs (D) and (E) of
paragraph (3), and may, if necessary for safety and
soundness purposes, require an increase in the
collateral standards for any or all of those classes of
collateral.
``(6) Definitions.--For purposes of this
subsection, the terms `small business', `agriculture',
`small farm', and `small agri-business' shall have the
meanings given those terms by regulation of the Finance
Board.''.
(b) Clerical Amendment.--The section heading for section 10
of the Federal Home Loan Bank Act (12 U.S.C. 1430) is amended
to read as follows:
``SEC. 10. ADVANCES TO MEMBERS.''.
(c) Qualified Thrift Lender Status.--Section 10 of the
Federal Home Loan Bank Act (12 U.S.C. 1430) is amended by
striking the 1st of the 2 subsections designated as subsection
(e).
(d) Federal Home Loan Bank Access.--Section 10(m)(3)(B) of
the Home Owners' Loan Act (12 U.S.C. 1467a(m)(3)(B)) is
amended--
(1) in clause (i), by striking subclause (III) and
redesignating subclause (IV) as subclause (III); and
(2) by striking clause (ii) and inserting the
following:
``(ii) Additional restrictions
effective after 3 years.--Beginning 3
years after the date on which a savings
association should have become a
qualified thrift lender, or the date on
which the savings association ceases to
be a qualified thrift lender, as
applicable, the savings association
shall not retain any investment
(including an investment in any
subsidiary) or engage, directly or
indirectly, in any activity, unless
that investment or activity--
``(I) would be permissible
for the savings association if
it were a national bank; and
``(II) is permissible for
the savings association as a
savings association.''.
SEC. 605. ELIGIBILITY CRITERIA.
Section 4(a) of the Federal Home Loan Bank Act (12 U.S.C.
1424(a)) is amended--
(1) in paragraph (2)(A), by inserting, ``(other
than a community financial institution)'' after
``institution'';
(2) in the matter immediately following paragraph
(2)(C)--
(A) by striking ``An insured'' and
inserting the following:
``(3) Certain institutions.--An insured''; and
(B) by striking ``preceding sentence'' and
inserting ``paragraph (2)''; and
(3) by adding at the end the following new
paragraph:
``(4) Limited exemption for community financial
institutions.--A community financial institution that
otherwise meets the requirements of paragraph (2) may
become a member without regard to the percentage of its
total assets that is represented by residential
mortgage loans, as described in subparagraph (A) of
paragraph (2).''.
SEC. 606. MANAGEMENT OF BANKS.
(a) Board of Directors.--Section 7 of the Federal Home Loan
Bank Act (12 U.S.C. 1427(d)) is amended--
(1) in subsection (a), by striking ``and bona fide
residents of the district in which such bank is
located'' and inserting ``, and each of whom shall be
either a bona fide resident of the district in which
such bank is located or an officer or director of a
member of such bank located in that district'';
(2) in subsection (d), by striking the 1st sentence
and inserting the following: ``The term of each
director, whether elected or appointed, shall be 3
years. The board of directors of each Federal home loan
bank and the Finance Board shall adjust the terms of
members first elected or appointed after the date of
the enactment of the Federal Home Loan Bank System
Modernization Act of 1999 to ensure that the terms of
the members of the board of directors are staggered
with approximately \1/3\ of the terms expiring each
year.''; and
(3) by striking subsection (g) and inserting the
following:
``(g) Chairperson and Vice Chairperson.--
``(1) Election.--The Chairperson and Vice
Chairperson of the board of directors of each Federal
home loan bank shall be elected by a majority of all
the directors of such bank from among the directors of
the bank.
``(2) Terms.--The term of office of the Chairperson
and the Vice Chairperson of the board of directors of a
Federal home loan bank shall be 2 years.
``(3) Acting chairperson.--In the event of a
vacancy in the position of Chairperson of the board of
directors or during the absence or disability of the
Chairperson, the Vice Chairperson shall act as
Chairperson.
``(4) Procedures.--The board of directors of each
Federal home loan bank shall establish procedures, in
the bylaws of such board, for designating an acting
chairperson for any period during which the Chairperson
and the Vice Chairperson are not available to carry out
the requirements of that position for any reason and
removing any person from any such position for good
cause.''.
(b) Compensation.--Section 7(i) of the Federal Home Loan
Bank Act (12 U.S.C. 1427(i)) is amended--
(1) by striking ``(i) Each bank may pay its
directors'' and inserting ``(i) Directors'
Compensation.--
``(1) In general.--Subject to paragraph (2), each
bank may pay its directors''; and
(2) by adding at the end the following new
paragraph:
``(2) Limitation.--
``(A) In general.--The annual salary of
each of the following members of the board of
directors of a Federal home loan bank may not
exceed the amount specified:
``In the case of theThe annual compensation may not exceed--
Chairperson............................................... $25,000
Vice Chairperson.......................................... $20,000
All other members......................................... $15,000.
``(B) Adjustment.--Beginning January 1,
2001, each dollar amount referred to in the
table in subparagraph (A) shall be adjusted
annually by the Finance Board, based on the
annual percentage increase, if any, in the
Consumer Price Index for all urban consumers,
as published by the Department of Labor.
``(C) Expenses.--Subparagraph (A) shall not
be construed as prohibiting the reimbursement
of expenses incurred by members of the board of
directors of any Federal home loan bank in
connection with service on the board of
directors.''.
(c) Repeal of Sections 22A and 27.--The Federal Home Loan
Bank Act (12 U.S.C. 1421 et seq.) is amended by striking
sections 22A (12 U.S.C. 1442a) and 27 (12 U.S.C. 1447).
(d) Section 12.--Section 12 of the Federal Home Loan Bank
Act (12 U.S.C. 1432) is amended--
(1) in subsection (a)--
(A) by striking ``, but, except'' and all
that follows through ``ten years'';
(B) by striking ``subject to the approval
of the Board'' the first place that term
appears;
(C) by striking ``and, by its Board of
directors,'' and all that follows through
``agent of such bank,'' and inserting ``and, by
the board of directors of the bank, to
prescribe, amend, and repeal by-laws governing
the manner in which its affairs may be
administered, consistent with applicable laws
and regulations, as administered by the Finance
Board. No officer, employee, attorney, or agent
of a Federal home loan bank''; and
(D) by striking ``Board of directors''
where such term appears in the penultimate
sentence and inserting ``board of directors'';
and
(2) in subsection (b), by striking ``loans banks''
and inserting ``loan banks''.
(e) Powers and Duties of Federal Housing Finance Board.--
(1) Issuance of notices of violations.--Section
2B(a) of the Federal Home Loan Bank Act (12 U.S.C.
1422b(a)) is amended by adding at the end the following
new paragraphs:
``(5) To issue and serve a notice of charges upon a
Federal home loan bank or upon any executive officer or
director of a Federal home loan bank if, in the
determination of the Finance Board, the Bank, executive
officer, or director is engaging or has engaged in, or
the Finance Board has reasonable cause to believe that
the Bank, executive officer, or director is about to
engage in an unsafe or unsound practice in conducting
the business of the bank, or any conduct that violates
any provision of this Act or any law, order, rule, or
regulation or any condition imposed in writing by the
Finance Board in connection with the granting of any
application or other request by the Bank, or any
written agreement entered into by the Bank with the
agency, in accordance with the procedures provided in
subsection (c) or (f) of section 1371 of the Federal
Housing Enterprises Financial Safety and Soundness Act
of 1992. Such authority includes the same authority to
issue an order requiring a party to take affirmative
action to correct conditions resulting from violations
or practices or to limit activities of a Bank or any
executive officer or director of a Bank as appropriate
Federal banking agencies have to take with respect to
insured depository institutions under paragraphs (6)
and (7) of section 8(b) of the Federal Deposit
Insurance Act, and to have all other powers, rights,
and duties to enforce this Act with respect to the
Federal home loan banks and their executive officers
and directors as the Office of Federal Housing
Enterprise Oversight has to enforce the Federal Housing
Enterprises Financial Safety and Soundness Act of 1992,
the Federal National Mortgage Association Charter Act,
or the Federal Home Loan Mortgage Corporation Act with
respect to the Federal housing enterprises under
subtitle C (other than section 1371) of the Federal
Housing Enterprises Financial Safety and Soundness Act
of 1992.
``(6) To address any insufficiencies in capital
levels resulting from the application of section 5(f)
of the Home Owners' Loan Act.
``(7) To act in its own name and through its own
attorneys--
``(A) in enforcing any provision of this
Act or any regulation promulgated under this
Act; or
``(B) in any action, suit, or proceeding to
which the Finance Board is a party that
involves the Board's regulation or supervision
of any Federal home loan bank.''.
(2) Technical amendment.--Section 111 of Public Law
93-495 (12 U.S.C. 250) is amended by striking ``Federal
Home Loan Bank Board,'' and inserting ``Director of the
Office of Thrift Supervision, the Federal Housing
Finance Board,''.
(f) Eligibility To Secure Advances.--
(1) Section 9.--Section 9 of the Federal Home Loan
Bank Act (12 U.S.C. 1429) is amended--
(A) in the second sentence, by striking
``with the approval of the Board''; and
(B) in the third sentence, by striking ``,
subject to the approval of the Board,''.
(2) Section 10.--Section 10 of the Federal Home
Loan Bank Act (12 U.S.C. 1430) is amended--
(A) in subsection (c)--
(i) in the first sentence, by
striking ``Board'' and inserting
``Federal home loan bank''; and
(ii) by striking the second
sentence; and
(B) in subsection (d)--
(i) in the first sentence, by
striking ``and the approval of the
Board''; and
(ii) by striking ``Subject to the
approval of the Board, any'' and
inserting ``Any''.
(g) Section 16.--Section 16(a) of the Federal Home Loan
Bank Act (12 U.S.C. 1436(a)) is amended--
(1) in the third sentence--
(A) by striking ``net earnings'' and
inserting ``previously retained earnings or
current net earnings''; and
(B) by striking ``, and then only with the
approval of the Federal Housing Finance
Board''; and
(2) by striking the fourth sentence.
(h) Section 18.--Section 18(b) of the Federal Home Loan
Bank Act (12 U.S.C. 1438(b)) is amended by striking paragraph
(4).
SEC. 607. RESOLUTION FUNDING CORPORATION.
(a) In General.--Section 21B(f)(2)(C) of the Federal Home
Loan Bank Act (12 U.S.C. 1441b(f)(2)(C)) is amended to read as
follows:
``(C) Payments by federal home loan
banks.--
``(i) In general.--To the extent
that the amounts available pursuant to
subparagraphs (A) and (B) are
insufficient tocover the amount of
interest payments, each Federal home loan bank shall pay to the Funding
Corporation in each calendar year, 20.0 percent of the net earnings of
that Bank (after deducting expenses relating to section 10(j) and
operating expenses).
``(ii) Annual determination.--The
Board annually shall determine the
extent to which the value of the
aggregate amounts paid by the Federal
home loan banks exceeds or falls short
of the value of an annuity of
$300,000,000 per year that commences on
the issuance date and ends on the final
scheduled maturity date of the
obligations, and shall select
appropriate present value factors for
making such determinations, in
consultation with the Secretary of the
Treasury.
``(iii) Payment term alterations.--
The Board shall extend or shorten the
term of the payment obligations of a
Federal home loan bank under this
subparagraph as necessary to ensure
that the value of all payments made by
the Banks is equivalent to the value of
an annuity referred to in clause (ii).
``(iv) Term beyond maturity.--If
the Board extends the term of payment
obligations beyond the final scheduled
maturity date for the obligations, each
Federal home loan bank shall continue
to pay 20.0 percent of its net earnings
(after deducting expenses relating to
section 10(j) and operating expenses)
to the Treasury of the United States
until the value of all such payments by
the Federal home loan banks is
equivalent to the value of an annuity
referred to in clause (ii). In the
final year in which the Federal home
loan banks are required to make any
payment to the Treasury under this
subparagraph, if the dollar amount
represented by 20.0 percent of the net
earnings of the Federal home loan banks
exceeds the remaining obligation of the
Banks to the Treasury, the Finance
Board shall reduce the percentage pro
rata to a level sufficient to pay the
remaining obligation.''.
(b) Effective Date.--The amendment made by subsection (a)
shall become effective on January 1, 2000. Payments made by a
Federal home loan bank before that effective date shall be
counted toward the total obligation of that Bank under section
21B(f)(2)(C) of the Federal Home Loan Bank Act, as amended by
this section.
SEC. 608. CAPITAL STRUCTURE OF FEDERAL HOME LOAN BANKS.
Section 6 of the Federal Home Loan Bank Act (12 U.S.C.
1426) is amended to read as follows:
``SEC. 6. CAPITAL STRUCTURE OF FEDERAL HOME LOAN BANKS.
``(a) Regulations.--
``(1) Capital standards.--Not later than 1 year
after the date of the enactment of the Federal Home
Loan Bank System Modernization Act of 1999, the Finance
Board shall issue regulations prescribing uniform
capital standards applicable to each Federal home loan
bank, which shall require each such bank to meet--
``(A) the leverage requirement specified in
paragraph (2); and
``(B) the risk-based capital requirements,
in accordance with paragraph (3).
``(2) Leverage requirement.--
``(A) In general.--The leverage requirement
shall require each Federal home loan bank to
maintain a minimum amount of total capital
based on the total assets of the bank and shall
be 5 percent.
``(B) Treatment of stock and retained
earnings.--In determining compliance with the
minimum leverage ratio established under
subparagraph (A), the paid-in value of the
outstanding Class B stock and the amount of
retained earnings shall be multiplied by 1.5,
and such higher amounts shall be deemed to be
capital for purposes of meeting the 5 percent
minimum leverage ratio, except that a Federal
home loan bank's total capital (determined
without taking into account any such
multiplier) shall not be less than 4 percent of
the total assets of the bank.
``(3) Risk-based capital standards.--
``(A) In general.--Each Federal home loan
bank shall maintain permanent capital in an
amount that is sufficient, as determined in
accordance with the regulations of the Finance
Board, to meet--
``(i) the credit risk to which the
Federal home loan bank is subject; and
``(ii) the market risk, including
interest rate risk, to which the
Federal home loan bank is subject,
based on a stress test established by
the Finance Board that rigorously tests
for changes in market variables,
including changes in interest rates,
rate volatility, and changes in the
shape of the yield curve.
``(B) Consideration of other risk-based
standards.--In establishing the risk-based
standard under subparagraph (A)(ii), the
Finance Board shall take due consideration of
any risk-based capital test established
pursuant to section 1361 of the Federal Housing
Enterprises Financial Safety and Soundness Act
of 1992 (12 U.S.C. 4611) for the enterprises
(as defined in that Act), with such
modifications as the Finance Board determines
to be appropriate to reflect differences in
operations between the Federal home loan banks
and those enterprises.
``(4) Other regulatory requirements.--The
regulations issued by the Finance Board under paragraph
(1) shall--
``(A) permit each Federal home loan bank to
issue, with such rights, terms, and
preferences, not inconsistent with this Act and
the regulations issued hereunder, as the board
of directors of that bank may approve, any 1 or
more of--
``(i) Class A stock, which shall be
redeemable in cash and at par 6 months
following submission by a member of a
written notice of its intent to redeem
such shares; and
``(ii) Class B stock, which shall
be redeemable in cash and at par 5
years following submission by a member
of a written notice of its intent to
redeem such shares;
``(B) provide that the stock of a Federal
home loan bank may be issued to and held by
only members of the bank, and that a bank may
not issue any stock other than as provided in
this section;
``(C) prescribe the manner in which stock
of a Federal home loan bank may be sold,
transferred, redeemed, or repurchased; and
``(D) provide the manner of disposition of
outstanding stock held by, and the liquidation
of any claims of the Federal home loan bank
against, an institution that ceases to be a
member of the bank, through merger or
otherwise, or that provides notice of intention
to withdraw from membership in the bank.
``(5) Definitions of capital.--For purposes of
determining compliance with the capital standards
established under this subsection--
``(A) permanent capital of a Federal home
loan bank shall include--
``(i) the amounts paid for the
Class B stock; and
``(ii) the retained earnings of the
bank (as determined in accordance with
generally accepted accounting
principles); and
``(B) total capital of a Federal home loan
bank shall include--
``(i) permanent capital;
``(ii) the amounts paid for the
Class A stock;
``(iii) consistent with generally
accepted accounting principles, and
subject to the regulation of the
Finance Board, a general allowance for
losses, which may not include any
reserves or allowances made or held
against specific assets; and
``(iv) any other amounts from
sources available to absorb losses
incurred by the bank that the Finance
Board determines by regulation to be
appropriate to include in determining
total capital.
``(6) Transition period.--Notwithstanding any other
provision of this Act, the requirements relating to
purchase and retention of capital stock of a Federal
home loan bank by any member thereof in effect on the
day before the date of the enactment of the Federal
Home Loan Bank System Modernization Act of 1999, shall
continue in effect with respect to each Federal home
loan bank until the regulations required by this
subsection have taken effect and the capital structure
plan required by subsection (b) has been approved by
the Finance Board and implemented by such bank.
``(b) Capital Structure Plan.--
``(1) Approval of plans.--Not later than 270 days
after the date of publication by the Finance Board of
final regulations in accordance with subsection (a),
the board of directors of each Federal home loan bank
shall submit for Finance Board approval a plan
establishing and implementing a capital structure for
such bank that--
``(A) the board of directors determines is
best suited for the condition and operation of
the bank and the interests of the members of
the bank;
``(B) meets the requirements of subsection
(c); and
``(C) meets the minimum capital standards
and requirements established under subsection
(a) and other regulations prescribed by the
Finance Board.
``(2) Approval of modifications.--The board of
directors of a Federal home loan bank shall submit to
the Finance Board for approval any modifications that
the bank proposes to make to an approved capital
structure plan.
``(c) Contents of Plan.--The capital structure plan of each
Federal home loan bank shall contain provisions addressing each
of the following:
``(1) Minimum investment.--
``(A) In general.--Each capital structure
plan of a Federal home loan bank shall require
each member of the bank to maintain a minimum
investment in the stock of the bank, the amount
of which shall be determined in a manner to be
prescribed by the board of directors of each
bank and to be included as part of the plan.
``(B) Investment alternatives.--
``(i) In general.--In establishing
the minimum investment required for
each member under subparagraph (A), a
Federal home loan bank may, in its
discretion, include any 1 or more of
the requirements referred to in clause
(ii), or any other provisions approved
by the Finance Board.
``(ii) Authorized requirements.--A
requirement is referred to in this
clause if it is a requirement for--
``(I) a stock purchase
based on a percentage of the
total assets of a member; or
``(II) a stock purchase
based on a percentage of the
outstanding advances from the
bank to the member.
``(C) Minimum amount.--Each capital
structure plan of a Federal home loan bank
shall require that the minimum stock investment
established for members shall be set at a level
that is sufficient for the bank to meet the
minimum capital requirements established by the
Finance Board under subsection (a).
``(D) Adjustments to minimum required
investment.--The capital structure plan of each
Federal home loan bank shall impose a
continuing obligation on the board of directors
of the bank to review and adjust the minimum
investment required of each member of that
bank, as necessary to ensure that the bank
remains in compliance with applicable minimum
capital levels established by the Finance
Board, and shall require each member to comply
promptly with any adjustments to the required
minimum investment.
``(2) Transition rule.--
``(A) In general.--The capital structure
plan of each Federal home loan bank shall
specify the date on which it shall take effect,
and may provide for a transition period of not
longer than 3 years to allow the bank to come
into compliance with the capital requirements
prescribed under subsection (a), and to allow
any institution that was a member of the bank
on the date of the enactment of the Federal
Home Loan Bank System Modernization Act of
1999, to come into compliance with the minimum
investment required pursuant to the plan.
``(B) Interim purchase requirements.--The
capital structure plan of a Federal home loan
bank may allow any member referred to in
subparagraph (A) that would be required by the
terms of the capital structure plan to increase
its investment in the stock of the bank to do
so in periodic installments during the
transition period.
``(3) Disposition of shares.--The capital structure
plan of a Federal home loan bank shall provide for the
manner of disposition of any stock held by a member of
that bank that terminates its membership or that
provides notice of its intention to withdraw from
membership in that bank.
``(4) Classes of stock.--
``(A) In general.--The capital structure
plan of a Federal home loan bank shall afford
each member of that bank the option of
maintaining its required investment in the bank
through the purchase of any combination of
classes of stock authorized by the board of
directors of the bank and approved by the
Finance Board in accordance with its
regulations.
``(B) Rights requirement.--A Federal home
loan bank shall include in its capital
structure plan provisions establishing terms,
rights, and preferences, including minimum
investment, dividends, voting, and liquidation
preferences of each class of stock issued by
the bank, consistent with Finance Board
regulations and market requirements.
``(C) Reduced minimum investment.--The
capital structure plan of a Federal home loan
bank may provide for a reduced minimum stock
investment for any member of that bank that
elects to purchase Class B in a manner that is
consistent with meeting the minimum capital
requirements of the bank, as established by the
Finance Board.
``(D) Liquidation of claims.--The capital
structure plan of a Federal home loan bank
shall provide for the liquidation in an orderly
manner, as determined by the bank, of any claim
of that bank against a member, including claims
for any applicable prepayment fees or penalties
resulting from prepayment of advances prior to
stated maturity.
``(5) Limited transferability of stock.--The
capital structure plan of a Federal home loan bank
shall--
``(A) provide that any stock issued by that
bank shall be available only to and held only
by members of that bank and tradable only
between that bank and its members; and
``(B) establish standards, criteria, and
requirements for the issuance, purchase,
transfer, retirement, and redemption of stock
issued by that bank.
``(6) Bank review of plan.--Before filing a capital
structure plan with the Finance Board, each Federal
home loan bank shall conduct a review of the plan by--
``(A) an independent certified public
accountant, to ensure, to the extent possible,
that implementation of the plan would not
result in any write-down of the redeemable bank
stock investment of its members; and
``(B) at least one major credit rating
agency, to determine, to the extent possible,
whether implementation of the plan would have
any material effect on the credit ratings of
the bank.
``(d) Termination of Membership.--
``(1) Voluntary withdrawal.--Any member may
withdraw from a Federal home loan bank if the member
provides written notice to the bank of its intent to do
so and if, on the date of withdrawal, there is in
effect a certification by the Finance Board that the
withdrawal will not cause the Federal Home Loan Bank
System to fail to meet its obligation under section
21B(f)(2)(C) to contribute to the debt service for the
obligations issued by the Resolution Funding
Corporation. The applicable stock redemption notice
periods shall commence upon receipt of the notice by
the bank. Upon the expiration of the applicable notice
period for each class of redeemable stock, the member
may surrender such stock to the bank, and shall be
entitled to receive in cash the par value of the stock.
During the applicable notice periods, the member shall
be entitled to dividends and other membership rights
commensurate with continuing stock ownership.
``(2) Involuntary withdrawal.--
``(A) In general.--The board of directors
of a Federal home loan bank may terminate the
membership of any institution if, subject to
Finance Board regulations, it determines that--
``(i) the member has failed to
comply with a provision of this Act or
any regulation prescribed under this
Act; or
``(ii) the member has been
determined to be insolvent, or
otherwise subject to the appointment of
a conservator, receiver, or other legal
custodian, by a Federal or State
authority with regulatory and
supervisory responsibility for the
member.
``(B) Stock disposition.--An institution,
the membership of which is terminated in
accordance with subparagraph (A)--
``(i) shall surrender redeemable
stock to the Federal home loan bank,
and shall receive in cash the par value
of the stock, upon the expiration of
the applicable notice period under
subsection (a)(4)(A);
``(ii) shall receive any dividends
declared on its redeemable stock,
during the applicable notice period
under subsection (a)(4)(A); and
``(iii) shall not be entitled to
any other rights or privileges accorded
to members after the date of the
termination.
``(C) Commencement of notice period.--With
respect to an institution, the membership of
which is terminated in accordance with
subparagraph (A), the applicable notice period
under subsection (a)(4) for each class of
redeemable stock shall commence on the earlier
of--
``(i) the date of such termination;
or
``(ii) the date on which the member
has provided notice of its intent to
redeem such stock.
``(3) Liquidation of indebtedness.--Upon the
termination of the membership of an institution for any
reason, the outstanding indebtedness of the member to
the bank shall be liquidated in an orderly manner, as
determined by the bank and, upon the extinguishment of
all such indebtedness, the bank shall return to the
member all collateral pledged to secure the
indebtedness.
``(e) Redemption of Excess Stock.--
``(1) In general.--A Federal home loan bank, in its
sole discretion, may redeem or repurchase, as
appropriate, any shares of Class A or Class B stock
issued by the bank and held by a member that are in
excess of the minimum stock investment required of that
member.
``(2) Excess stock.--Shares of stock held by a
member shall not be deemed to be `excess stock' for
purposes of this subsection by virtue of a member's
submission of a notice of intent to withdraw from
membership or termination of its membership in any
other manner.
``(3) Priority.--A Federal home loan bank may not
redeem any excess Class B stock prior to the end of the
5-year notice period, unless the member has no Class A
stock outstanding that could be redeemed as excess.
``(f) Impairment of Capital.--If the Finance Board or the
board of directors of a Federal home loan bank determines that
the bank has incurred or is likely to incur losses that result
in or are expected to result in charges against the capital of
the bank, the bank shall not redeem or repurchase any stock of
the bank without the prior approval of the Finance Board while
such charges are continuing or are expected to continue. In no
case may a bank redeem or repurchase any applicable capital
stock if, following the redemption, the bank would fail to
satisfy any minimum capital requirement.
``(g) Rejoining After Divestiture of All Shares.--
``(1) In general.--Except as provided in paragraph
(2), and notwithstanding any other provision of this
Act, an institution that divests all shares of stock in
a Federal home loan bank may not, after such
divestiture, acquire shares of any Federal home loan
bank before the end of the 5-year period beginning on
the date of the completion of such divestiture, unless
the divestiture is a consequence of a transfer of
membership on an uninterrupted basis between banks.
``(2) Exception for withdrawals from membership
before 1998.--Any institution that withdrew from
membership in any Federal home loan bank before
December 31, 1997, may acquire shares of a Federal home
loan bank at any time after that date, subject to the
approval of the Finance Board and the requirements of
this Act.
``(h) Treatment of Retained Earnings.--
``(1) In general.--The holders of the Class B stock
of a Federal home loan bank shall own the retained
earnings, surplus, undivided profits, and equity
reserves, if any, of the bank.
``(2) Exception.--Except as specifically provided
in this section or through the declaration of a
dividend or a capital distribution by a Federal home
loan bank, or in the event of liquidation of the bank,
a member shall have no right to withdraw or otherwise
receive distribution of any portion of the retained
earnings of the bank.
``(3) Limitation.--A Federal home loan bank may not
make any distribution of its retained earnings unless,
following such distribution, the bank would continue to
meet all applicable capital requirements.''.
TITLE VII--OTHER PROVISIONS
Subtitle A--ATM Fee Reform
SEC. 701. SHORT TITLE.
This subtitle may be cited as the ``ATM Fee Reform Act of
1999''.
SEC. 702. ELECTRONIC FUND TRANSFER FEE DISCLOSURES AT ANY HOST ATM.
Section 904(d) of the Electronic Fund Transfer Act (15
U.S.C. 1693b(d)) is amended by adding at the end the following
new paragraph:
``(3) Fee disclosures at automated teller
machines.--
``(A) In general.--The regulations
prescribed under paragraph (1) shall require
any automated teller machine operator who
imposes a fee on any consumer for providing
host transfer services to such consumer to
provide notice in accordance with subparagraph
(B) to the consumer (at the time the service is
provided) of--
``(i) the fact that a fee is
imposed by such operator for providing
the service; and
``(ii) the amount of any such fee.
``(B) Notice requirements.--
``(i) On the machine.--The notice
required under clause (i) of
subparagraph (A) with respect to any
fee described in such subparagraph
shall be posted in a prominent and
conspicuous location on or at the
automated teller machine at which the
electronic fund transfer is initiated
by the consumer.
``(ii) On the screen.--The notice
required under clauses (i) and (ii) of
subparagraph (A) with respect to any
fee described in such subparagraph
shall appear on the screen of the
automated teller machine, or on a paper
notice issued from such machine, after
the transaction is initiated and before
the consumer is irrevocably committed
to completing the transaction, except
that during the period beginning on the
date of the enactment of the Gramm-
Leach-Bliley Act and ending on December
31, 2004, this clause shall not apply
to any automated teller machine that
lacks the technical capability to
disclose the notice on the screen or to
issue a paper notice after the
transaction is initiated and before the
consumer is irrevocably committed to
completing the transaction.
``(C) Prohibition on fees not properly
disclosed and explicitly assumed by consumer.--
No fee may be imposed by any automated teller
machine operator in connection with any
electronic fund transfer initiated by a
consumer for which a notice is required under
subparagraph (A), unless--
``(i) the consumer receives such
notice in accordance with subparagraph
(B); and
``(ii) the consumer elects to
continue in the manner necessary to
effect the transaction after receiving
such notice.
``(D) Definitions.--For purposes of this
paragraph, the following definitions shall
apply:
``(i) Automated teller machine
operator.--The term `automated teller
machine operator' means any person
who--
``(I) operates an automated
teller machine at which
consumers initiate electronic
fund transfers; and
``(II) is not the financial
institution that holds the
account of such consumer from
which the transfer is made.
``(ii) Electronic fund transfer.--
The term `electronic fund transfer'
includes a transaction that involves a
balance inquiry initiated by a consumer
in the same manner as an electronic
fund transfer, whether or not the
consumer initiates a transfer of funds
in the course of the transaction.
``(iii) Host transfer services.--
The term `host transfer services' means
any electronic fund transfer made by an
automated teller machine operator in
connection with a transaction initiated
by a consumer at an automated teller
machine operated by such operator.''.
SEC. 703. DISCLOSURE OF POSSIBLE FEES TO CONSUMERS WHEN ATM CARD IS
ISSUED.
Section 905(a) of the Electronic Fund Transfer Act (15
U.S.C. 1693c(a)) is amended--
(1) by striking ``and'' at the end of paragraph
(8);
(2) by striking the period at the end of paragraph
(9) and inserting ``; and''; and
(3) by inserting after paragraph (9) the following
new paragraph:
``(10) a notice to the consumer that a fee may be
imposed by--
``(A) an automated teller machine operator
(as defined in section 904(d)(3)(D)(i)) if the
consumer initiates a transfer from an automated
teller machine that is not operated by the
person issuing the card or other means of
access; and
``(B) any national, regional, or local
network utilized to effect the transaction.''.
SEC. 704. FEASIBILITY STUDY.
(a) In General.--The Comptroller General of the United
States shall conduct a study of the feasibility of requiring,
in connection with any electronic fund transfer initiated by a
consumer through the use of an automated teller machine--
(1) a notice to be provided to the consumer before
the consumer is irrevocably committed to completing the
transaction, which clearly states the amount of any fee
that will be imposed upon the consummation of the
transaction by--
(A) any automated teller machine operator
(as defined in section 904(d)(3)(D)(i) of the
Electronic Fund Transfer Act) involved in the
transaction;
(B) the financial institution holding the
account of the consumer;
(C) any national, regional, or local
network utilized to effect the transaction; and
(D) any other party involved in the
transfer; and
(2) the consumer to elect to consummate the
transaction after receiving the notice described in
paragraph (1).
(b) Factors To Be Considered.--In conducting the study
required under subsection (a) with regard to the notice
requirement described in such subsection, the Comptroller
General shall consider the following factors:
(1) The availability of appropriate technology.
(2) Implementation and operating costs.
(3) The competitive impact any such notice
requirement would have on various sizes and types of
institutions, if implemented.
(4) The period of time that would be reasonable for
implementing any such notice requirement.
(5) The extent to which consumers would benefit
from any such notice requirement.
(6) Any other factor the Comptroller General
determines to be appropriate in analyzing the
feasibility of imposing any such notice requirement.
(c) Report to the Congress.--Before the end of the 6-month
period beginning on the date of the enactment of this Act, the
Comptroller General shall submit a report to the Congress
containing--
(1) the findings and conclusions of the Comptroller
General in connection with the study required under
subsection (a); and
(2) the recommendation of the Comptroller General
with regard to the question of whether a notice
requirement described in subsection (a) should be
implemented and, if so, the manner in which such
requirement should be implemented.
SEC. 705. NO LIABILITY IF POSTED NOTICES ARE DAMAGED.
Section 910 of the Electronic Fund Transfer Act (15 U.S.C.
1693h) is amended by adding at the end the following new
subsection:
``(d) Exception for Damaged Notices.--If the notice
required to be posted pursuant to section 904(d)(3)(B)(i) by an
automated teller machine operator has been posted by such
operator in compliance with such section and the notice is
subsequently removed, damaged, or altered by any person other
than the operator of the automated teller machine, the operator
shall have no liability under this section for failure to
comply with section 904(d)(3)(B)(i).''.
Subtitle B--Community Reinvestment
SEC. 711. CRA SUNSHINE REQUIREMENTS.
The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.)
is amended by inserting after section 47, as added by section
305 of this Act, the following new section:
``SEC. 48. CRA SUNSHINE REQUIREMENTS.
``(a) Public Disclosure of Agreements.--Any agreement (as
defined in subsection (e)) entered into after the date of the
enactment of the Gramm-Leach-Bliley Act by an insured
depository institution or affiliate with a nongovernmental
entity or person made pursuant to or in connection with the
Community Reinvestment Act of 1977 involving funds or other
resources of such insured depository institution or affiliate--
``(1) shall be in its entirety fully disclosed, and
the full text thereof made available to the appropriate
Federal banking agency with supervisory responsibility
over the insured depository institution and to the
public by each party to the agreement; and
``(2) shall obligate each party to comply with this
section.
``(b) Annual Report of Activity by Insured Depository
Institution.--Each insured depository institution or affiliate
that is a party to an agreement described in subsection (a)
shall report to the appropriate Federal banking agency with
supervisory responsibility over the insured depository
institution, not less frequently than once each year, such
information as the Federal banking agency may by rule require
relating to the following actions taken by the party pursuant
to the agreement during the preceding 12-month period:
``(1) Payments, fees, or loans made to any party to
the agreement or received from any party to the
agreement and the terms and conditions of the same.
``(2) Aggregate data on loans, investments, and
services provided by each party in its community or
communities pursuant to the agreement.
``(3) Such other pertinent matters as determined by
regulation by the appropriate Federal banking agency
with supervisory responsibility over the insured
depository institution.
``(c) Annual Report of Activity by Nongovernmental
Entities.--
``(1) In general.--Each nongovernmental entity or
person that is not an affiliate of an insured
depository institution and that is a party to an
agreement described in subsection (a) shall report to
the appropriate Federal banking agency with supervisory
responsibility over the insured depository institution
that is a party to such agreement, not less frequently
than once each year, an accounting of the use of funds
received pursuant to each such agreement during the
preceding 12-month period.
``(2) Submission to insured depository
institution.--A nongovernmental entity or person
referred to in paragraph (1) may comply with the
reporting requirement in such paragraph by transmitting
the report to the insured depository institution that
is a party to the agreement, and such insured
depository institution shall promptly transmit such
report to the appropriate Federal banking agency with
supervisory authority over the insured depository
institution.
``(3) Information to be included.--The accounting
referred to in paragraph (1) shall include a detailed,
itemized list of the uses to which such funds have been
made, including compensation, administrative expenses,
travel, entertainment, consulting and professional fees
paid, and such other categories, as determined by
regulation by the appropriate Federal banking agency
with supervisory responsibility over the insured
depository institution.
``(d) Applicability.--Subsections (b) and (c) shall not
apply with respect to any agreement entered into before the end
of the 6-month period beginning on the date of the enactment of
the Gramm-Leach-Bliley Act.
``(e) Definitions.--
``(1) Agreement.--For purposes of this section, the
term `agreement'--
``(A) means--
``(i) any written contract, written
arrangement, or other written
understanding that provides for cash
payments, grants, or other
consideration with a value in excess of
$10,000, or for loans the aggregate
amount of principal of which exceeds
$50,000, annually (or the sum of all
such agreements during a 12-month
period with an aggregate value of cash
payments, grants, or other
consideration in excess of $10,000, or
with an aggregate amount of loan
principal in excess of $50,000); or
``(ii) a group of substantively
related contracts with an aggregate
value of cash payments, grants, or
other consideration in excess of
$10,000, or with an aggregate amount of
loan principal in excess of $50,000,
annually;
made pursuant to, or in connection with, the
fulfillment of the Community Reinvestment Act
of 1977, at least 1 party to which is an
insured depository institution or affiliate
thereof, whether organized on a profit or not-
for-profit basis; and
``(B) does not include--
``(i) any individual mortgage loan;
``(ii) any specific contract or
commitment for a loan or extension of
credit to individuals, businesses,
farms, or other entities, if the funds
are loaned at rates not substantially
below market rates and if the purpose
of the loan or extension of credit does
not include any re-lending of the
borrowed funds to other parties; or
``(iii) any agreement entered into
by an insured depository institution or
affiliate with a nongovernmental entity
or person who has not commented on,
testified about, or discussed with the
institution, or otherwise contacted the
institution, concerning the Community
Reinvestment Act of 1977.
``(2) Fulfillment of cra.--For purposes of
subparagraph (A), the term `fulfillment' means a list
of factors that the appropriate Federal banking agency
determines have a material impact on the agency's
decision--
``(A) to approve or disapprove an
application for a deposit facility (as defined
in section 803 of the Community Reinvestment
Act of 1977); or
``(B) to assign a rating to an insured
depository institution under section 807 of the
Community Reinvestment Act of 1977.
``(f) Violations.--
``(1) Violations by persons other than insured
depository institutions or their affiliates.--
``(A) Material failure to comply.--If the
party to an agreement described in subsection
(a) that is not an insured depository
institution or affiliate willfully fails to
comply with this section in a material way, as
determined by the appropriate Federal banking
agency, the agreement shall be unenforceable
after the offending party has been given notice
and a reasonable period of time to perform or
comply.
``(B) Diversion of funds or resources.--If
funds or resources received under an agreement
described in subsection (a) have been diverted
contrary to the purposes of the agreement for
personal financial gain, the appropriate
Federal banking agency with supervisory
responsibility over the insured depository
institution may impose either or both of the
following penalties:
``(i) Disgorgement by the offending
individual of funds received under the
agreement.
``(ii) Prohibition of the offending
individual from being a party to any
agreement described in subsection (a)
for a period of not to exceed 10 years.
``(2) Designation of successor nongovernmental
party.--If an agreement described in subsection (a) is
found to be unenforceable under this subsection, the
appropriate Federal banking agency may assist the
insured depository institution in identifying a
successor nongovernmental party to assume the
responsibilities of the agreement.
``(3) Inadvertent or de minimis reporting errors.--
An error in a report filed under subsection (c) that is
inadvertent or de minimis shall not subject the filing
party to any penalty.
``(g) Rule of Construction.--No provision of this section
shall be construed as authorizing any appropriate Federal
banking agency to enforce the provisions of any agreement
described in subsection (a).
``(h) Regulations.--
``(1) In general.--Each appropriate Federal banking
agency shall prescribe regulations, in accordance with
paragraph (4), requiring procedures reasonably designed
to ensure and monitor compliance with the requirements
of this section.
``(2) Protection of parties.--In carrying out
paragraph (1), each appropriate Federal banking agency
shall--
``(A) ensure that the regulations
prescribed by the agency do not impose an undue
burden on the parties and that proprietary and
confidential information is protected; and
``(B) establish procedures to allow any
nongovernmental entity or person who is a party
to a large number of agreements described in
subsection (a) to make a single or consolidated
filing of a report under subsection (c) to an
insured depository institution or an
appropriate Federal banking agency.
``(3) Parties not subject to reporting
requirements.--The Board of Governors of the Federal
Reserve System may prescribe regulations--
``(A) to prevent evasions of subsection
(e)(1)(B)(iii); and
``(B) to provide further exemptions under
such subsection, consistent with the purposes
of this section.
``(4) Coordination, consistency, and
comparability.--In carrying out paragraph (1), each
appropriate Federal banking agency shall consult and
coordinate with the other such agencies for the
purposes of assuring, to the extent possible, that the
regulations prescribed by each such agency are
consistent and comparable with the regulations
prescribed by the other such agencies.''.
SEC. 712. SMALL BANK REGULATORY RELIEF.
The Community Reinvestment Act of 1977 (12 U.S.C. 2901 et
seq.) is amended by adding at the end the following new
section:
``SEC. 809. SMALL BANK REGULATORY RELIEF.
``(a) In General.--Except as provided in subsections (b)
and (c), any regulated financial institution with aggregate
assets of not more than $250,000,000 shall be subject to
routine examination under this title--
``(1) not more than once every 60 months for an
institution that has achieved a rating of `outstanding
record of meeting community credit needs' at its most
recent examination under section 804;
``(2) not more than once every 48 months for an
institution that has received a rating of `satisfactory
record of meeting community credit needs' at its most
recent examination under section 804; and
``(3) as deemed necessary by the appropriate
Federal financial supervisory agency, for an
institution that has received a rating of less than
`satisfactory record of meeting community credit needs'
at its most recent examination under section 804.
``(b) No Exception From CRA Examinations in Connection With
Applications for Deposit Facilities.--A regulated financial
institution described in subsection (a) shall remain subject to
examination under this title in connection with an application
for a deposit facility.
``(c) Discretion.--A regulated financial institution
described in subsection (a) may be subject to more frequent or
less frequent examinations for reasonable cause under such
circumstances as may be determined by the appropriate Federal
financial supervisory agency.''.
SEC. 713. FEDERAL RESERVE BOARD STUDY OF CRA LENDING.
The Board of Governors of the Federal Reserve System shall
conduct a comprehensive study, in consultation with the
Chairman and Ranking Member of the Committee on Banking and
Financial Services of the House of Representatives and the
Chairman and Ranking Member of the Committee on Banking,
Housing, and Urban Affairs of the Senate, of the Community
Reinvestment Act of 1977, which shall focus on--
(1) the default rates;
(2) the delinquency rates; and
(3) the profitability;
of loans made in conformity with such Act, and report on the
study to such Committees not later than March 15, 2000. Such
report and supporting data shall also be made available by the
Board of Governors of the Federal Reserve System to the public.
SEC. 714. PRESERVING THE COMMUNITY REINVESTMENT ACT OF 1977.
Nothing in this Act shall be construed to repeal any
provision of the Community Reinvestment Act of 1977.
SEC. 715. RESPONSIVENESS TO COMMUNITY NEEDS FOR FINANCIAL SERVICES.
(a) Study.--The Secretary of the Treasury, in consultation
with the Federal banking agencies (as defined in section 3(z)
of the Federal Deposit Insurance Act), shall conduct a study of
the extent to which adequate services are being provided as
intended by the Community Reinvestment Act of 1977, including
services in low- and moderate-income neighborhoods and for
persons of modest means, as a result of the enactment of this
Act.
(b) Reports.--
(1) In general.--The Secretary of the Treasury
shall--
(A) before March 15, 2000, submit a
baseline report to the Congress on the study
conducted pursuant to subsection (a); and
(B) before the end of the 2-year period
beginning on the date of the enactment of this
Act, in consultation with the Federal banking
agencies, submit a final report to the Congress
on the study conducted pursuant to subsection
(a).
(2) Recommendations.--The final report submitted
under paragraph (1)(B) shall include such
recommendations as the Secretary determines to be
appropriate for administrative and legislative action
with respect to institutions covered under the
Community Reinvestment Act of 1977.
Subtitle C--Other Regulatory Improvements
SEC. 721. EXPANDED SMALL BANK ACCESS TO S CORPORATION TREATMENT.
(a) Study.--The Comptroller General of the United States
shall conduct a study of--
(1) possible revisions to the rules governing S
corporations, including--
(A) increasing the permissible number of
shareholders in such corporations;
(B) permitting shares of such corporations
to be held in individual retirement accounts;
(C) clarifying that interest on investments
held for safety, soundness, and liquidity
purposes should not be considered to be passive
income;
(D) discontinuation of the treatment of
stock held by bank directors as a disqualifying
personal class of stock for such corporations;
and
(E) improving Federal tax treatment of bad
debt and interest deductions; and
(2) what impact such revisions might have on
community banks.
(b) Report to the Congress.--Not later than 6 months after
the date of the enactment of this Act, the Comptroller General
of the United States shall submit a report to the Congress on
the results of the study conducted under subsection (a).
(c) Definition.--For purposes of this section, the term ``S
corporation'' has the meaning given the term in section
1361(a)(1) of the Internal Revenue Code of 1986.
SEC. 722. ``PLAIN LANGUAGE'' REQUIREMENT FOR FEDERAL BANKING AGENCY
RULES.
(a) In General.--Each Federal banking agency shall use
plain language in all proposed and final rulemakings published
by the agency in the Federal Register after January 1, 2000.
(b) Report.--Not later than March 1, 2001, each Federal
banking agency shall submit to the Congress a report that
describes how the agency has complied with subsection (a).
(c) Definition.--For purposes of this section, the term
``Federal banking agency'' has the meaning given that term in
section 3 of the Federal Deposit Insurance Act.
SEC. 723. RETENTION OF ``FEDERAL'' IN NAME OF CONVERTED FEDERAL SAVINGS
ASSOCIATION.
Section 2 of the Act entitled ``An Act to enable national
banking associations to increase their capital stock and to
change their names or locations'', approved May 1, 1886 (12
U.S.C. 30), is amended by adding at the end the following new
subsection:
``(d) Retention of `Federal' in Name of Converted Federal
Savings Association.--
``(1) In general.--Notwithstanding subsection (a)
or any other provision of law, any depository
institution, the charter of which is converted from
that of a Federal savings association to a national
bank or a State bank after the date of the enactment of
the Gramm-Leach-Bliley Act may retain the term
`Federal' in the name of such institution if such
institution remains an insured depository institution.
``(2) Definitions.--For purposes of this
subsection, the terms `depository institution',
`insured depository institution', `national bank', and
`State bank' have the meanings given those terms in
section 3 of the Federal Deposit Insurance Act.''.
SEC. 724. CONTROL OF BANKERS' BANKS.
Section 2(a)(5)(E)(i) of the Bank Holding Company Act of
1956 (12 U.S.C. 1841(a)(5)(E)(i)) is amended by inserting ``1
or more'' before ``thrift institutions''.
SEC. 725. PROVISION OF TECHNICAL ASSISTANCE TO MICROENTERPRISES.
Title I of the Riegle Community Development and Regulatory
Improvement Act of 1994 (12 U.S.C. 4701 et seq.) is amended by
adding at the end the following new subtitle:
``Subtitle C--Microenterprise Technical Assistance and Capacity
Building Program
``SEC. 171. SHORT TITLE.
``This subtitle may be cited as the `Program for Investment
in Microentrepreneurs Act of 1999', also referred to as the
`PRIME Act'.
``SEC. 172. DEFINITIONS.
``For purposes of this subtitle, the following definitions
shall apply:
``(1) Administration.--The term `Administration'
means the Small Business Administration.
``(2) Administrator.--The term `Administrator'
means the Administrator of the Small Business
Administration.
``(3) Capacity building services.--The term
`capacity building services' means services provided to
an organization that is, or that is in the process of
becoming, a microenterprise development organization or
program, for the purpose of enhancing its ability to
provide training and services to disadvantaged
entrepreneurs.
``(4) Collaborative.--The term `collaborative'
means 2 or more nonprofit entities that agree to act
jointly as a qualified organization under this
subtitle.
``(5) Disadvantaged entrepreneur.--The term
`disadvantaged entrepreneur' means a microentrepreneur
that is--
``(A) a low-income person;
``(B) a very low-income person; or
``(C) an entrepreneur that lacks adequate
access to capital or other resources essential
for business success, or is economically
disadvantaged, as determined by the
Administrator.
``(6) Indian tribe.--The term `Indian tribe' has
the meaning given the term in section 103.
``(7) Intermediary.--The term `intermediary' means
a private, nonprofit entity that seeks to serve
microenterprise development organizations and programs
as authorized under section 175.
``(8) Low-income person.--The term `low-income
person' has the meaning given the term in section 103.
``(9) Microentrepreneur.--The term
`microentrepreneur' means the owner or developer of a
microenterprise.
``(10) Microenterprise.--The term `microenterprise'
means a sole proprietorship, partnership, or
corporation that--
``(A) has fewer than 5 employees; and
``(B) generally lacks access to
conventional loans, equity, or other banking
services.
``(11) Microenterprise development organization or
program.--The term `microenterprise development
organization or program' means a nonprofit entity, or a
program administered by such an entity, including
community development corporations or other nonprofit
development organizations and social service
organizations, that provides services to disadvantaged
entrepreneurs.
``(12) Training and technical assistance.--The term
`training and technical assistance' means services and
support provided to disadvantaged entrepreneurs, such
as assistance for the purpose of enhancing business
planning, marketing, management, financial management
skills, and assistance for the purpose of accessing
financial services.
``(13) Very low-income person.--The term `very low-
income person' means having an income, adjusted for
family size, of not more than 150 percent of the
poverty line (as defined in section 673(2) of the
Community Services Block Grant Act (42 U.S.C. 9902(2)),
including any revision required by that section).
``SEC. 173. ESTABLISHMENT OF PROGRAM.
``The Administrator shall establish a microenterprise
technical assistance and capacity building grant program to
provide assistance from the Administration in the form of
grants to qualified organizations in accordance with this
subtitle.
``SEC. 174. USES OF ASSISTANCE.
``A qualified organization shall use grants made under this
subtitle--
``(1) to provide training and technical assistance
to disadvantaged entrepreneurs;
``(2) to provide training and capacity building
services to microenterprise development organizations
and programs and groups of such organizations to assist
such organizations and programs in developing
microenterprise training and services;
``(3) to aid in researching and developing the best
practices in the field of microenterprise and technical
assistance programs for disadvantaged entrepreneurs;
and
``(4) for such other activities as the
Administrator determines are consistent with the
purposes of this subtitle.
``SEC. 175. QUALIFIED ORGANIZATIONS.
``For purposes of eligibility for assistance under this
subtitle, a qualified organization shall be--
``(1) a nonprofit microenterprise development
organization or program (or a group or collaborative
thereof) that has a demonstrated record of delivering
microenterprise services to disadvantaged
entrepreneurs;
``(2) an intermediary;
``(3) a microenterprise development organization or
program that is accountable to a local community,
working in conjunction with a State or local government
or Indian tribe; or
``(4) an Indian tribe acting on its own, if the
Indian tribe can certify that no private organization
or program referred to in this paragraph exists within
its jurisdiction.
``SEC. 176. ALLOCATION OF ASSISTANCE; SUBGRANTS.
``(a) Allocation of Assistance.--
``(1) In general.--The Administrator shall allocate
assistance from the Administration under this subtitle
to ensure that--
``(A) activities described in section
174(1) are funded using not less than 75
percent of amounts made available for such
assistance; and
``(B) activities described in section
174(2) are funded using not less than 15
percent of amounts made available for such
assistance.
``(2) Limit on individual assistance.--No single
person may receive more than 10 percent of the total
funds appropriated under this subtitle in a single
fiscal year.
``(b) Targeted Assistance.--The Administrator shall ensure
that not less than 50 percent of the grants made under this
subtitle are used to benefit very low-income persons, including
those residing on Indian reservations.
``(c) Subgrants Authorized.--
``(1) In general.--A qualified organization
receiving assistance under this subtitle may provide
grants using that assistance to qualified small and
emerging microenterprise organizations and programs,
subject to such rules and regulations as the
Administrator determines to be appropriate.
``(2) Limit on administrative expenses.--Not more
than 7.5 percent of assistance received by a qualified
organization under this subtitle may be used for
administrative expenses in connection with the making
of subgrants under paragraph (1).
``(d) Diversity.--In making grants under this subtitle, the
Administrator shall ensure that grant recipients include both
large and small microenterprise organizations, serving urban,
rural, and Indian tribal communities serving diverse
populations.
``(e) Prohibition on Preferential Consideration of Certain
SBA Program Participants.--In making grants under this
subtitle, the Administrator shall ensure that any application
made by a qualified organization that is a participant in the
program established under section 7(m) of the Small Business
Act does not receive preferential consideration over
applications from other qualified organizations that are not
participants in such program.
``SEC. 177. MATCHING REQUIREMENTS.
``(a) In General.--Financial assistance under this subtitle
shall be matched with funds from sources other than the Federal
Government on the basis of not less than 50 percent of each
dollar provided by the Administration.
``(b) Sources of Matching Funds.--Fees, grants, gifts,
funds from loan sources, and in-kind resources of a grant
recipient from public or private sources may be used to comply
with the matching requirement in subsection (a).
``(c) Exception.--
``(1) In general.--In the case of an applicant for
assistance under this subtitle with severe constraints
on available sources of matching funds, the
Administrator may reduce or eliminate the matching
requirements of subsection (a).
``(2) Limitation.--Not more than 10 percent of the
total funds made available from the Administration in
any fiscal year to carry out this subtitle may be
excepted from the matching requirements of subsection
(a), as authorized by paragraph (1) of this subsection.
``SEC. 178. APPLICATIONS FOR ASSISTANCE.
``An application for assistance under this subtitle shall
be submitted in such form and in accordance with such
procedures as the Administrator shall establish.
``SEC. 179. RECORDKEEPING.
``The requirements of section 115 shall apply to a
qualified organization receiving assistance from the
Administration under this subtitle as if it were a community
development financial institution receiving assistance from the
Fund under subtitle A.
``SEC. 180. AUTHORIZATION.
``In addition to funds otherwise authorized to be
appropriated to the Fund to carry out this title, there are
authorized to be appropriated to the Administrator to carry out
this subtitle--
``(1) $15,000,000 for fiscal year 2000;
``(2) $15,000,000 for fiscal year 2001;
``(3) $15,000,000 for fiscal year 2002; and
``(4) $15,000,000 for fiscal year 2003.
``SEC. 181. IMPLEMENTATION.
``The Administrator shall, by regulation, establish such
requirements as may be necessary to carry out this subtitle.''.
SEC. 726. FEDERAL RESERVE AUDITS.
The Federal Reserve Act (12 U.S.C. 221 et seq.) is amended
by inserting after section 11A the following new section:
``SEC. 11B. ANNUAL INDEPENDENT AUDITS OF FEDERAL RESERVE BANKS AND
BOARD.
``The Board shall order an annual independent audit of the
financial statements of each Federal reserve bank and the
Board.''.
SEC. 727. AUTHORIZATION TO RELEASE REPORTS.
(a) Federal Reserve Act.--The eighth undesignated paragraph
of section 9 of the Federal Reserve Act (12 U.S.C. 326) is
amended by striking the last sentence and inserting the
following: ``The Board of Governors of the Federal Reserve
System, at its discretion, may furnish any report of
examination or other confidential supervisory information
concerning any State member bank or other entity examined under
any other authority of the Board, to any Federal or State
agency or authority with supervisory or regulatory authority
over the examined entity, to any officer, director, or receiver
of the examined entity, and to any other person that the Board
determines to be proper.''.
(b) Commodity Futures Trading Commission.--The Right to
Financial Privacy Act of 1978 (12 U.S.C. 3401 et seq.) is
amended--
(1) in section 1101(7)--
(A) by redesignating subparagraphs (G) and
(H) as subparagraphs (H) and (I), respectively;
and
(B) by inserting after subparagraph (F) the
following new subparagraph:
``(G) the Commodity Futures Trading
Commission;''; and
(2) in section 1112(e), by striking ``and the
Securities and Exchange Commission'' and inserting ``,
the Securities and Exchange Commission, and the
Commodity Futures Trading Commission''.
SEC. 728. GENERAL ACCOUNTING OFFICE STUDY OF CONFLICTS OF INTEREST.
(a) Study Required.--The Comptroller General of the United
States shall conduct a study analyzing the conflict of interest
faced by the Board of Governors of the Federal Reserve System
between its role as a primary regulator of the banking industry
and its role as a vendor of services to the banking and
financial services industry.
(b) Specific Conflict Required To Be Addressed.--In the
course of the study required under subsection (a), the
Comptroller General shall address the conflict of interest
faced by the Board of Governors of the Federal Reserve System
between the role of the Board as a regulator of the payment
system, generally, and its participation in the payment system
as a competitor with private entities who are providing payment
services.
(c) Report to the Congress.--Before the end of the 1-year
period beginning on the date of the enactment of this Act, the
Comptroller General shall submit a report to the Congress
containing the findings and conclusions of the Comptroller
General in connection with the study required under this
section, together with such recommendations for such
legislative or administrative actions as the Comptroller
General may determine to be appropriate, including
recommendations for resolving any such conflict of interest.
SEC. 729. STUDY AND REPORT ON ADAPTING EXISTING LEGISLATIVE
REQUIREMENTS TO ONLINE BANKING AND LENDING.
(a) Study Required.--The Federal banking agencies shall
conduct a study of banking regulations regarding the delivery
of financial services, including those regulations that may
assume that there will be person-to-person contact during the
course of a financial services transaction, and report their
recommendations on adapting those existing requirements to
online banking and lending.
(b) Report Required.--Before the end of the 2-year period
beginning on the date of the enactment of thisAct, the Federal
banking agencies shall submit a report to the Congress on the findings
and conclusions of the agencies with respect to the study required
under subsection (a), together with such recommendations for
legislative or regulatory action as the agencies may determine to be
appropriate.
(c) Definition.--For purposes of this section, the term
``Federal banking agencies'' means each Federal banking agency
(as defined in section 3(z) of the Federal Deposit Insurance
Act).
SEC. 730. CLARIFICATION OF SOURCE OF STRENGTH DOCTRINE.
Section 18 of the Federal Deposit Insurance Act (12 U.S.C.
1828) is amended by adding at the end the following new
subsection:
``(t) Limitation on Claims.--
``(1) In general.--No person may bring a claim
against any Federal banking agency (including in its
capacity as conservator or receiver) for the return of
assets of an affiliate or controlling shareholder of
the insured depository institution transferred to, or
for the benefit of, an insured depository institution
by such affiliate or controlling shareholder of the
insured depository institution, or a claim against such
Federal banking agency for monetary damages or other
legal or equitable relief in connection with such
transfer, if at the time of the transfer--
``(A) the insured depository institution is
subject to any direction issued in writing by a
Federal banking agency to increase its capital;
``(B) the insured depository institution is
undercapitalized (as defined in section 38 of
this Act); and
``(C) for that portion of the transfer that
is made by an entity covered by section 5(g) of
the Bank Holding Company Act of 1956 or section
45 of this Act, the Federal banking agency has
followed the procedure set forth in such
section.
``(2) Definition of claim.--For purposes of
paragraph (1), the term `claim'--
``(A) means a cause of action based on
Federal or State law that--
``(i) provides for the avoidance of
preferential or fraudulent transfers or
conveyances; or
``(ii) provides similar remedies
for preferential or fraudulent
transfers or conveyances; and
``(B) does not include any claim based on
actual intent to hinder, delay, or defraud
pursuant to such a fraudulent transfer or
conveyance law.''.
SEC. 731. INTEREST RATES AND OTHER CHARGES AT INTERSTATE BRANCHES.
Section 44 of the Federal Deposit Insurance Act (12 U.S.C.
1831u) is amended--
(1) by redesignating subsection (f) as subsection
(g); and
(2) by inserting after subsection (e) the following
new subsection:
``(f) Applicable Rate and Other Charge Limitations.--
``(1) In general.--In the case of any State that
has a constitutional provision that sets a maximum
lawful annual percentage rate of interest on any
contract at not more than 5 percent above the discount
rate for 90-day commercial paper in effect at the
Federal reserve bank for the Federal reserve district
in which such State is located, except as provided in
paragraph (2), upon the establishment in such State of
a branch of any out-of-State insured depository
institution in such State under this section, the
maximum interest rate or amount of interest, discount
points, finance charges, or other similar charges that
may be charged, taken, received, or reserved from time
to time in any loan or discount made or upon any note,
bill of exchange, financing transaction, or other
evidence of debt by any insured depository institution
whose home State is such State shall be equal to not
more than the greater of--
``(A) the maximum interest rate or amount
of interest, discount points, finance charges,
or other similar charges that may be charged,
taken, received, or reserved in a similar
transaction under the constitution, statutory,
or other laws of the home State of the out-of-
State insured depository institution
establishing any such branch, without reference
to this section, as such maximum interest rate
or amount of interest may change from time to
time; or
``(B) the maximum rate or amount of
interest, discount points, finance charges, or
other similar charges that may be charged,
taken, received, or reserved in a similar
transaction by a State insured depository
institution chartered under the laws of such
State or a national bank or Federal savings
associationwhose main office is located in such
State without reference to this section.
``(2) Rule of construction.--No provision of this
subsection shall be construed as superseding or
affecting--
``(A) the authority of any insured
depository institution to take, receive,
reserve, and charge interest on any loan made
in any State other than the State referred to
in paragraph (1); or
``(B) the applicability of section 501 of
the Depository Institutions Deregulation and
Monetary Control Act of 1980, section 5197 of
the Revised Statutes of the United States, or
section 27 of this Act.''.
SEC. 732. INTERSTATE BRANCHES AND AGENCIES OF FOREIGN BANKS.
Section 5(a)(7) of the International Banking Act of 1978
(12 U.S.C. 3103(a)(7)) is amended to read as follows:
``(7) Additional authority for interstate branches
and agencies of foreign banks, upgrades of certain
foreign bank agencies and branches.--Notwithstanding
paragraphs (1) and (2), a foreign bank may--
``(A) with the approval of the Board and
the Comptroller of the Currency, establish and
operate a Federal branch or Federal agency or,
with the approval of the Board and the
appropriate State bank supervisor, a State
branch or State agency in any State outside the
foreign bank's home State if--
``(i) the establishment and
operation of such branch or agency is
permitted by the State in which the
branch or agency is to be established;
and
``(ii) in the case of a Federal or
State branch, the branch receives only
such deposits as would be permitted for
a corporation organized under section
25A of the Federal Reserve Act; or
``(B) with the approval of the Board and
the relevant licensing authority (the
Comptroller in the case of a Federal branch or
the appropriate State supervisor in the case of
a State branch), upgrade an agency, or a branch
of the type referred to in subparagraph
(A)(ii), located in a State outside the foreign
bank's home State, into a Federal or State
branch if--
``(i) the establishment and
operation of such branch is permitted
by such State; and
``(ii) such agency or branch--
``(I) was in operation in
such State on the day before
September 29, 1994; or
``(II) has been in
operation in such State for a
period of time that meets the
State's minimum age requirement
permitted under section
44(a)(5) of the Federal Deposit
Insurance Act.''.
SEC. 733. FAIR TREATMENT OF WOMEN BY FINANCIAL ADVISERS.
It is the sense of the Congress that individuals offering
financial advice and products should offer such services and
products in a nondiscriminatory, nongender-specific manner.
SEC. 734. MEMBERSHIP OF LOAN GUARANTEE BOARDS.
(a) Emergency Steel Loan Guarantee Board.--Section 101(e)
of the Emergency Steel Loan Guarantee Act of 1999 is amended--
(1) in paragraph (2), by inserting ``, or a member
of the Board of Governors of the Federal Reserve System
designated by the Chairman'' after ``the Chairman of
the Board of Governors of the Federal Reserve System'';
and
(2) in paragraph (3), by inserting ``, or a
commissioner of the Securities and Exchange Commission
designated by the Chairman'' before the period.
(b) Emergency Oil and Gas Loan Guarantee Board.--Section
201(d)(2) of the Emergency Oil and Gas Guarantee Loan Program
Act is amended--
(1) in subparagraph (B), by inserting ``, or a
member of the Board of Governors of the Federal Reserve
System designated by the Chairman'' after ``the
Chairman of the Board of Governors of the Federal
Reserve System''; and
(2) in subparagraph (C), by inserting ``, or a
commissioner of the Securities and Exchange Commission
designated by the Chairman'' before the period.
SEC. 735. REPEAL OF STOCK LOAN LIMIT IN FEDERAL RESERVE ACT.
Section 11 of the Federal Reserve Act (12 U.S.C. 248) is
amended by striking the paragraph designated as ``(m)'' and
inserting ``(m) [Repealed]''.
SEC. 736. ELIMINATION OF SAIF AND DIF SPECIAL RESERVES.
(a) SAIF Special Reserve.--Section 11(a)(6) of the Federal
Deposit Insurance Act (12 U.S.C. 1821(a)(6)) is amended by
striking subparagraph (L).
(b) DIF Special Reserve.--Section 2704 of the Deposit
Insurance Funds Act of 1996 (12 U.S.C. 1821 note) is amended--
(1) by striking subsection (b); and
(2) in subsection (d)--
(A) by striking paragraph (4);
(B) in paragraph (6)(C)(i), by striking
``(6) and (7)'' and inserting ``(5), (6), and
(7)''; and
(C) in paragraph (6)(C), by striking clause
(ii) and inserting the following:
``(ii) by redesignating paragraph
(8) as paragraph (5).''.
(c) Effective Date.--This section and the amendments made
by this section shall become effective on the date of the
enactment of this Act.
SEC. 737. BANK OFFICERS AND DIRECTORS AS OFFICERS AND DIRECTORS OF
PUBLIC UTILITIES.
Section 305(b) of the Federal Power Act (16 U.S.C. 825d(b))
is amended--
(1) by striking ``(b) After six'' and inserting the
following:
``(b) Interlocking Directorates.--
``(1) In general.--After 6''; and
(2) by adding at the end the following:
``(2) Applicability.--
``(A) In general.--In the circumstances
described in subparagraph (B), paragraph (1)
shall not apply to a person that holds or
proposes to hold the positions of--
``(i) officer or director of a
public utility; and
``(ii) officer or director of a
bank, trust company, banking
association, or firm authorized by law
to underwrite or participate in the
marketing of securities of a public
utility.
``(B) Circumstances.--The circumstances
described in this subparagraph are that--
``(i) a person described in
subparagraph (A) does not participate
in any deliberations or decisions of
the public utility regarding the
selection of a bank, trust company,
banking association, or firm to
underwrite or participate in the
marketing of securities of the public
utility, if the person serves as an
officer or director of a bank, trust
company, banking association, or firm
that is under consideration in the
deliberation process;
``(ii) the bank, trust company,
banking association, or firm of which
the person is an officer or director
does not engage in the underwriting of,
or participate in the marketing of,
securities of the public utility of
which the person holds the position of
officer or director;
``(iii) the public utility for
which the person serves or proposes to
serve as an officer or director selects
underwriters by competitive procedures;
or
``(iv) the issuance of securities
the public utility for which the person
serves or proposes to serve as an
officer or director has been approved
by all Federal and State regulatory
agencies having jurisdiction over the
issuance.''.
SEC. 738. APPROVAL FOR PURCHASES OF SECURITIES.
Section 23B(b)(2) of the Federal Reserve Act (12 U.S.C.
371c-1) is amended to read as follows:
``Subparagraph (B) of paragraph (1) shall not apply if the
purchase or acquisition of such securities has been approved,
before such securities are initially offered for sale to the
public, by a majority of the directors of the bank based on a
determination that the purchase is a sound investment for the
bank irrespective of the fact that an affiliate of the bank is
a principal underwriter of the securities.''.
SEC. 739. OPTIONAL CONVERSION OF FEDERAL SAVINGS ASSOCIATIONS.
Section 5(i) of the Home Owners' Loan Act (12 U.S.C.
1464(i)) is amended by adding at the end the following new
paragraph:
``(5) Conversion to national or state bank.--
``(A) In general.--Any Federal savings
association chartered and in operation before
the date of the enactment of the Gramm-Leach-
Bliley Act, with branches in operation before
such date of enactment in 1 or more States, may
convert, at its option, with the approval of
the Comptroller of the Currency or the
appropriate State bank supervisor, into 1 or
more national or State banks, each of which may
encompass 1 or more of the branches of the
Federal savings association in operation before
such date of enactment in 1 or more States, but
only if each resulting national or State bank
will meet all financial, management, and
capital requirements applicable to the
resulting national or State bank.
``(B) Definitions.--For purposes of this
paragraph, the terms `State bank' and `State
bank supervisor' have the meanings given those
terms in section 3 of the Federal Deposit
Insurance Act.''.
SEC. 740. GRAND JURY PROCEEDINGS.
Section 3322(b) of title 18, United States Code, is
amended--
(1) in paragraph (1), by inserting ``Federal or
State'' before ``financial institution''; and
(2) in paragraph (2), by inserting ``at any time
during or after the completion of the investigation of
the grand jury,'' before ``upon''.
And the House agree to the same.
That the House recede from its amendment to the title of
the bill.
From the Committee on Banking and Financial
Services, for consideration of the Senate bill,
and the House amendment, and modifications
committed to conference:
James A. Leach,
Bill McCollum,
Marge Roukema,
Doug Bereuter,
Rick Lazio,
Spencer Bachus,
Michael N. Castle,
John J. LaFalce,
Bruce F. Vento,
As additional conferees from the Committee on
Banking and Financial Services, for
consideration of titles I, III (except section
304), IV, and VII of the Senate bill, and title
I of the House amendment, and modifications
committed to conference:
Paul E. Kanjorski,
Carolyn B. Maloney,
As additional conferees from the Committee on
Banking and Financial Services, for
consideration of title V of the Senate bill,
and title II of the House amendment, and
modifications committed to conference:
Paul E. Kanjorski,
Carolyn B. Maloney,
James H. Maloney,
As additional conferees from the Committee on
Banking and Financial Services, for
consideration of title II of the Senate bill,
and title III of the House amendment, and
modifications committed to conference:
Paul E. Kanjorski,
Carolyn B. Maloney,
Nydia M. Velazquez,
Darlene Hooley,
As additional conferees from the Committee on
Banking and Financial Services, for
consideration of title VI of the Senate bill,
and title IV of the House amendment, and
modifications committed to conference:
Carolyn B. Maloney,
Luis V. Gutierrez,
Ken Bentsen,
As additional conferees from the Committee on
Banking and Financial Services, for
consideration of section 304 of the Senate
bill, and title V of the House amendment, and
modifications committed to conference:
Paul E. Kanjorski,
Gary L. Ackerman,
From the Committee on Commerce, for
consideration of the Senate bill, and the House
amendment, and modifications committed to
conference:
Tom Bliley,
Michael G. Oxley,
Billy Tauzin,
Paul Gillmor,
James Greenwood,
Chris Cox,
Steve Largent,
Brian Bilbray,
E. Towns,
Diana DeGette,
Lois Capps,
Provided that Mr. Rush is appointed in lieu of
Mrs. Capps for consideration of section 316 of
the Senate bill:
Bobby L. Rush,
From the Committee on Agriculture, for
consideration of title V of the House
amendment, and modifications committed to
conference:
Larry Combest,
Thomas W. Ewing,
Charles W. Stenholm,
From the Committee on the Judiciary, for
consideration of sections 104(a), 104(d)(3),
and 104(f)(2) of the Senate bill, and sections
104(a)(3), 104(b)(3)(A), 104(b)(4)(B), 136(b),
136(d)-(e), 141-44, 197, 301, and 306 of the
House amendment, and modifications committed to
conference:
Henry Hyde,
George W. Gekas,
From the Committee on Banking and Financial
Services, for consideration of section 101 of
the Senate bill and section 101 of the House
amendment: Mr. King is appointed in lieu of Mr.
Bachus; Mr. Royce is appointed in lieu of Mr.
Castle:
Peter T. King,
Ed Royce,
From the Committee on Commerce, for
consideration of section 101 of the Senate bill
and section 101 of the House amendment: Mrs.
Wilson is appointed in lieu of Mr. Largent; Mr.
Fossella is appointed in lieu of Mr. Bilbray:
Heather Wilson,
Vito Fossella,
Managers on the Part of the House.
Phil Gramm,
Connie Mack,
Robert F. Bennett,
Rod Grams,
Wayne Allard,
Michael B. Enzi,
Chuck Hagel,
Rick Santorum,
Jim Bunning,
Mike Crapo,
Paul Sarbanes,
Christopher J. Dodd,
John F. Kerry,
Tim Johnson,
Jack Reed,
Charles Schumer,
Evan Bayh,
John Edwards,
Managers on the Part of the Senate.
JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF CONFERENCE
The Managers on the part of the House and the Senate at
the conference on the disagreeing votes of the two Houses on
the amendments of the House to the bill (S. 900), to enhance
competition in the financial services industry by providing a
prudential framework for the affiliation of banks, securities
firms, insurance companies, and other financial service
providers, and for other purposes, submit the following joint
statement to the House and the Senate in explanation of the
effect of the action agreed upon by the managers and
recommended in the accompanying conference report:
The House amendment to the text of the bill struck all of
the Senate bill after the enacting clause and inserted a
substitute text.
The Senate recedes from its disagreement to the amendment
of the House with an amendment that is a substitute for the
Senate bill and the House amendment. The differences between
the Senate bill, the House amendment, and the substitute agreed
to in conference are noted below, except for clerical
corrections, conforming changes made necessary by agreements
reached by the conferees, and minor drafting and clerical
changes.
Title I--Facilitating Affiliations Among Banks, Securities Firms, and
Insurance Companies
The legislation approved by the Conference Managers
eliminates many Federal and State law barriers to affiliations
among banks and securities firms, insurance companies, and
other financial service providers. The House and Senate bills
established an identical statutory framework (except for minor
drafting differences) pursuant to which full affiliations can
occur between banks and securities firms, insurance companies,
and other financial companies. The Conferees adopted this
framework. Furthermore, the legislation provides financial
organizations with flexibility in structuring these new
financial affiliations through a holding company structure, or
a financial subsidiary (with certain prudential limitations on
activities and appropriate safeguards). Reflected in the
legislation is the determination made by both Houses to
preserve the role of the Board of Governors of the Federal
Reserve System (the ``Federal Reserve Board'' or the ``Board'')
as the umbrella supervisor for holding companies, but to
incorporate a system of functional regulation designed to
utilize the strengths of the various Federal and State
financial supervisors. Incorporating provisions found in both
the House and Senate bills, the legislation establishes a
mechanism for coordination between the Federal Reserve Board
and the Secretary of the Treasury (``the Secretary'') regarding
the approval of new financial activities for both holding
companies and national bank financial subsidiaries. The
legislation enhances safety and soundness and improves access
to financial services by requiring that banks may not
participate in the new financial affiliations unless the banks
are well capitalized and well managed. The appropriate
regulators are given clear authority to address any failure to
maintain these safety and soundness standards in a prompt
manner. The legislation also requires that Federal bank
regulators prohibit banks from participating in the new
financial affiliations if, at the time of certification, any
bank affiliate had received a less than ``satisfactory''
Community Reinvestment Act of 1977 (``CRA'') rating as of its
most recent examination.
Subtitle A--Financial Affiliations
Senate Position: The Senate bill contains provisions
repealing restrictions in the Glass-Steagall Act and the Bank
Holding Company Act of 1956 (``BHCA'') on affiliations
involving securities firms and insurance companies,
respectively. The Senate bill establishes a new framework in
section 4 of the BHCA for bank holding companies to engage in
financial activities. It does not create a separate designation
for bank holding companies engaged in the new financial
activities but it does require that the subsidiary insured
depository institutions of such holding companies be well
capitalized and well managed in order to take advantage of the
new activities. In the event that a bank holding company's
subsidiary depository institutions fall out of compliance, a
``cure'' procedure is established. The Senate bill authorizes
bank holding companies to engage in activities that the Federal
Reserve Board has determined to be financial in nature and
incidentalto such financial activities. It also authorizes
qualifying bank holding companies to engage in activities that the
Federal Reserve Board determines are complementary to financial
activities, or any other service that the Federal Reserve Board
determines not to pose a substantial risk to the safety and soundness
of depository institutions or the financial system generally. It
contains a list of pre-approved activities that includes merchant
banking and insurance company portfolio investment activities. There is
also a grandfather provision for the commodities activities engaged in
by a company as of September 30, 1997, if that company becomes a bank
holding company after the date of enactment.
House Position: The House bill also repeals the
restrictions contained in the Glass-Steagall Act on
affiliations between banks and securities firms engaged in
underwriting and in the BHCA on affiliations between banks and
insurance companies and insurance agents. It creates a new
section 6 of the BHCA which authorizes new financial activities
for bank holding companies that qualify as ``financial holding
companies.'' In order for a bank holding company to qualify as
a financial holding company (``FHC''), its subsidiary
depository institutions must be well managed, well capitalized,
and have received at least a ``satisfactory'' CRA rating as of
their last examination. In the event that an FHC falls out of
compliance, a ``cure'' procedure is established. It authorizes
FHCs to engage in activities that the Federal Reserve Board has
determined to be financial in nature, incidental to such
financial activities or complementary to financial activities
to the extent that the amount of such complementary activities
remains small. It contains a list of pre-approved activities
that includes investment banking and insurance company
portfolio investment activities. The House bill also authorizes
FHCs to engage in developing activities to a limited extent. A
ten-year grandfather is included for the nonfinancial
activities of companies that become bank holding companies
after enactment of this legislation and are predominantly
financial in nature at the time they become FHCs.
Conference Substitute: The Conferees acceded to the
Senate by agreeing to amend section 4 of the BHCA to add a
series of new subsections that contain the framework for
engaging in new financial activities. The Conferees have
acceded to the House in designating as FHCs those bank holding
companies qualifying to engage in the new financial activities.
New section 4(k) permits bank holding companies that
qualify as FHCs to engage in activities, and acquire companies
engaged in activities, that are financial in nature or
incidental to such financial activities. FHCs are also
permitted to engage in activities that are complementary to
financial activities if the Federal Reserve Board determines
that the activity does not pose a substantial risk to the
safety or soundness of depository institutions or the financial
system in general.
Permitting banks to affiliate with firms engaged in
financial activities represents a significant expansion from
the current requirement that bank affiliates may only be
engaged in activities that are closely related to banking. The
Board has primary jurisdiction for determining what activities
are financial in nature, incidental to financial in nature, or
complementary. The Board may act by regulation or order. In
determining what activities are financial in nature or
incidental, the Federal Reserve Board must notify the Secretary
of applications or requests to engage in new financial
activities. The Federal Reserve Board may not determine that
anactivity is financial or incidental to a financial activity if the
Secretary objects. The Secretary may also propose to the Federal
Reserve Board that the Board find that a particular activity is
financial in nature or incidental to a financial activity. A similar
procedure is included in the legislation with regard to the
determination of financial activities and activities that are
incidental to financial activities for financial subsidiaries of
national banks. The intent of the Conferees is that the Federal Reserve
Board and the Secretary of the Treasury will establish a consultative
process that will negate the need for either agency to veto a proposal
of the other agency. Establishing such a process should bring balance
to the determinations regarding the type of activities that are
financial and limit regulatory arbitrage.
Section 4(k) contains a list of activities that are
considered to be financial in nature. An FHC may engage in the
activities on this list without obtaining prior approval from
the Federal Reserve Board. Notice must be given to the Federal
Reserve Board not later than 30 days after the activity is
commenced or a company is acquired. The list includes
securities underwriting, dealing, and market making without any
revenue limitation such as sponsoring and distributing all
types of mutual funds and investment companies. Other
activities include insurance underwriting and agency
activities, merchant banking, and insurance company portfolio
investments. The reference to ``* * * insuring, guaranteeing or
indemnifying against * * * illness,'' is meant to include
activities commonly thought of as health insurance, including
such activities when provided by companies such as Blue Cross
and Blue Shield organizations which are licensed under State
laws to provide health insurance benefits in consideration of
the payment of premiums or subscriber contributions. Such
reference is not meant to include the activity of directly
providing health care on a basis other than to the extent that
it may be incidental to the business of insurance as defined in
section 4(k)(4)(B) of the BHCA.
Merchant banking
The authorization of merchant banking activities as
provided in new section 4(k)(4)(H) of the BHCA is designed to
recognize the essential role that these activities play in
modern finance and permits an FHC that has a securities
affiliate or an affiliate of an insurance company engaged in
underwriting life, accident and health, or property and
casualty insurance, or providing and issuing annuities, to
conduct such activities. Under this provision, the FHC may
directly or indirectly acquire or control any kind of ownership
interest (including debt and equity securities, partnership
interests, trust certificates, or other instruments
representing ownership) in an entity engaged in any kind of
trade or business whatsoever. The FHC may make such acquisition
whether acting as principal, on behalf of one or more entities
(e.g., as adviser to a fund, regardless of whether the FHC is
also an investor in the fund), including entities that the FHC
controls (other than a depository institution or a subsidiary
of a depository institution), or otherwise.
Section 122 provides that after a 5 year period from the
date of enactment, the Board and the Secretary may jointly
adopt rules permitting financial subsidiaries to engage in the
activities under section 4(k)(4)(H) of the BHCA subject to the
conditions that the agencies may jointly determine.
Insurance company portfolio investments
New section 4(k)(4)(I) of the BHCA recognizes that as
part of the ordinary course of business, insurance companies
frequently invest funds received from policyholders by
acquiring most or all the shares of stock of a company that may
not be engaged in a financial activity. These investments are
made in the ordinary course of business pursuant to state
insurance laws governing investments by insurance companies,
and are subject to ongoing review and approval by the
applicable state regulator. Section 4(k)(4)(I) permits an
insurance company that is affiliated with a depository
institution to continue to directly or indirectly acquire or
control any kind of ownership interest in any company if
certain requirements are met. The shares held by such a
company: (i) must not be acquired or held by a depository
institution or a subsidiary of a depository institution; (ii)
must be acquired and held by an insurance company that is
predominantly engaged in underwriting life, accident and
health, or property and casualty (other than credit-related
insurance) or in providing and issuing annuities; and (iii)
must represent an investment made in the ordinary course of
business of such insurance company in accordance with relevant
state law governing such investments. In addition, during the
period such ownership interests are held, the FHC must not
routinely manage or operate the portfolio company except as may
be necessary or required to obtain a reasonable return on the
investment. To the extent an FHC participates in the management
or operation of a portfolio company, such participation would
ordinarily be for the purpose of safeguarding the investment of
the insurance company in accordance with the applicable
requirements of state insurance law. This is irrespective of
any overlap between board members and officers of the FHC and
the portfolio company.
CONDITIONS TO ENGAGE IN NEW ACTIVITIES
New section 4(l) of the BHCA establishes the requirements
for permitting a bank holding company to engage in the new
financial activities and affiliations. A bank holding company
may elect to become a financial holding company if all of its
subsidiary banks are well capitalized and well managed. A bank
holding company that meets such requirements may file a
certification to that effect with the Board and a declaration
that the company chooses to be an FHC.
After the filing of such a declaration and certification,
an FHC may engage either de novo, or through an acquisition, in
any activity that has been determined by the Board to be
financial in nature or incidental to such financial activity.
FHCs may engage in activities on the preapproved list of
financial activities contained in section 4(k) of the BHCA and
any other financial activity approved by the Board without
prior notice. Complementary activities, however, must be
approved by the Board on a case-by-case basis under the notice
procedures contained in section 4(j) of the BHCA.
The legislation also amends the CRA to provide that an
election of a bank holding company to become an FHC shall not
be effective if the Board finds that as of the date of the
election not all of the subsidiary insured depository
institutions of the holding company had received a
``satisfactory'' or better CRA rating at their most recent CRA
examinations. In addition, the legislation amends the BHCA to
require the appropriate Federal banking agency to prohibit an
FHC, or a bank through a financial subsidiary, from commencing
any new activities or acquiring any companies under sections
4(k) or (n) of the BHCA, section 5136A(a) of the Revised
Statutes of the United States, or section 46(a) of the Federal
Deposit Insurance Act, in the event that the bank or any of its
insured depository institution affiliates or any insured
depository institution affiliate of the FHC fails to have at
least a ``satisfactory'' CRA rating at the time of its last
examination. It is the most recent rating alone that shall be
looked to by the regulator in connection with these provisions.
This provision does not authorize any agency to require the
divestiture of any company already owned by the FHC prior to
the time that the prohibition becomes effective or to limit in
any way any activity already engaged in by the FHC prior to
that time. The prohibition ceases to apply once all of the
insured depository institutions controlled by the FHC or the
bank and all of its insured depository institution affiliates
have restored their CRA performance rating to at least the
``satisfactory'' level.
This provision applies to the ownership and activities of
financial subsidiaries of national banks to the same extent as
it applies to FHCs. It also applies in the same way to
subsidiaries held by insured State banks subject to newly added
section 46(a) of the Federal Deposit Insurance Act.
OPERATION OF STATE LAW
Senate Position: The Senate bill establishes in section
104 the parameters for the appropriate balance between Federal
and State regulation of the activities and affiliations allowed
under this legislation.
House Position: The House provision is similar, with
parallel provisions contained in sections 104, 301, and 302 of
the House bill.
Conference Substitute: The House agreed to incorporate
its sections 301 and 302 into section 104, and the Senate
agreed to adopt the language of the House's section 302. The
House discrimination standard was adopted with modifications,
and the Conferees agreed to incorporate House provisions
protecting the ability of the States to require restoration of
an entity's capital, and restricting changes in stock ownership
of demutualizing insurers, as modified. The House receded on
its provision specifically addressing a North Carolina Blue-
Cross Blue-Shield organization, as the State laws governing
those types of entities would not be preempted so long as the
State laws do not discriminate, as set forth in the
legislation.
This section reaffirms the McCarran-Ferguson Act,
recognizing the primacy and legal authority of the States to
regulate insurance activities of all persons. No persons are
permitted to engage in the business of insurance unless they
are licensed by the States, as required under State law. States
are not allowed to prevent certain affiliations or activities
or discriminate against depository institutions in providing
such insurance licenses.
In general, States are not allowed to prevent or restrict
affiliations permitted under Federal law. With respect to an
affiliation by an insurer, States may collect information, and
the insurer's State of domicile may take action on the
affiliation (including approval or disapproval), but only
within 60 days of receiving notice of the affiliation, and only
if the actions do not discriminate against the insurer based on
an association with a depository institution. An affiliating
insurer's State of domicile may require capital restoration to
the level required under State law, so long as such request is
made within 60 days of notice of the affiliation. Any State, as
permitted under State law, may restrict changes in ownership of
a demutualizing insurer so long as the restrictions are not
discriminatory as set forth in the legislation. Section
104(c)(2)(C) means that State laws and State regulators shall
not discriminate against depository institutions or their
affiliates with respect to acquiring or otherwise changing the
ownership of stock in newly demutualized insurance companies
relative to other persons.
Except with respect to insurance, States may not prevent
or restrict a depository institution or affiliate thereof from
engaging in any activity set forth under the Gramm-Leach-Bliley
Act. With respect to insurance sales, solicitations, and cross-
marketing, States may not prevent or significantly interfere
with the activities of depository institutions or their
affiliates, as set forth in Barnett Bank of Marion County N.A.
v. Nelson, 517 U.S. 25 (1996). However, State restrictions that
are substantially the same as but no more burdensome than the
thirteen general safe harbors provided are not subject to
potential preemption. States are also allowed to continue the
regulation of insurance activities other than sales,
solicitation, and cross-marketing, and the preemption standard
does not apply to such regulation if consistent with the
standards set forth in the legislation.
State regulation other than of insurance or securities
activities is not preempted even if it does prevent or restrict
an activity so long as it does not discriminate. The Conferees
adopted the House discrimination standard with respect to
insurance activities. The discrimination standard does not
apply to State regulations governing insurance sales,
solicitations, or cross-marketing activities adopted before
September 3, 1998, and does not apply to State regulations that
are substantially the same as but no more burdensome than the
safe harbors. State securities regulation is not preempted by
the ``prevent or restrict'' standard with regard to a State
securities commission's ability to investigate and enforce
certain unlawful securities transactions or to require the
licensure or registration of securities and securities brokers,
dealers, and investment advisors and their associates. State
actions of general corporate applicability applying to
companies domiciled or incorporated in the State are also
protected from the ``prevent or restrict'' preemption, as well
as State laws similar to the antitrust laws, so long as the
State actions are not inconsistent with the intent of this Act
to permit affiliations. The term ``depository institution'' is
defined as including foreign banks and their domestic
affiliates and subsidiaries. The term ``affiliate'' is defined
for section 104 to include any person under common control
(including a subsidiary).
Subtitle B--Streamlining Supervision of Bank Holding Companies
Both the House and Senate bills generally adhere to the
principle of functional regulation, which holds that similar
activities should be regulated by the same regulator. Different
regulators have expertise at supervising different activities.
It is inefficient and impractical to expect a regulator to have
or develop expertise in regulating all aspects of financial
services. Accordingly, the legislation intends to ensure that
banking activities are regulated by bank regulators, securities
activities are regulated by securities regulators, and
insurance activities are regulated by insurance regulators.
In keeping with the Board's role as an umbrella
supervisor, the legislation provides that the Board may require
any bank holding company or subsidiary thereof to submit
reports regarding its financial condition, systems for
monitoring and controlling financial and operating risks,
transactions with depository institutions, and compliance with
the BHCA or other Federal laws that the Board has specific
jurisdiction to enforce. The Board is directed to use existing
examination reports prepared by other regulators, publicly
reported information, and reports filed with other agencies, to
the fullest extent possible.
The Board is authorized to examine each holding company
and its subsidiaries. It may examine functionally regulated
subsidiaries only if: (1) the Board has reasonable cause to
believe that such a subsidiary is engaged in activities that
pose a material risk to an affiliate depository institution;
(2) it reasonably believes after reviewing the relevant reports
that examining the subsidiary is necessary to adequately inform
the Board of the systems for monitoring risks; or, (3) based on
reports and other available information, the Board has
reasonable cause to believe that a subsidiary is not in
compliance with the BHCA or other Federal law that the Board
has specific jurisdiction to enforce and the Board cannot make
such a determination through examination of an affiliated
depository institution or the holding company. The Board is
directed to use, to the fullest extent possible, examinations
made by appropriate Federal and State regulators.
The Board is not authorized to prescribe capital
requirements for any functionally regulated subsidiary that is
in compliance with applicable capital requirements of another
Federal regulatory authority, a State insurance authority, or
is a registered investment adviser or licensed insurance agent.
The legislation also makes it clear that securities and
insurance activities conducted in regulated entities are
subject to functional regulation by the relevant State
securities authorities, the Securities and Exchange (``SEC''),
or State insurance regulators.
The Board is prohibited from requiring a broker-dealer or
insurance company that is a bank holding company to infuse
funds into a depository institution if the company's functional
regulator determines, in writing, such action would have a
material adverse effect on the broker-dealer or insurance
company. If the functional regulator makes such a
determination, the Board may require the holding company to
divest its depository institution. All the Federal banking
agencies are subject to the same limits on reports,
examinations and capital requirements for functionally
regulated affiliates which apply to the Board. This ensures
that the Office of the Comptroller of the Currency (``OCC''),
the Office of Thrift Supervision (``OTS''), and the Federal
Deposit Insurance Corporation (``FDIC'') will not be able to
assume and duplicate the function of being the general
supervisor over functionally regulated subsidiaries. The
legislation specifically preserves, however, the FDIC's
authority to examine a functionally regulated affiliate. This
authority, which should be used sparingly, is necessary to
protect the deposit insurance funds.
The legislation also specifically addresses indirect
action by the Board against functionally regulated affiliates.
Consistent with functional regulation, the Board's authority to
take indirect action against a functionally regulated affiliate
is limited. The Board may not promulgate rules, adopt
restrictions, safeguards or any other requirement affecting a
functionally regulated affiliate unless the action is necessary
to address a ``material risk'' to the safety and soundness of
the depository institution or the domestic or international
payments system and it is not possible to guard against such
material risk through requirements imposed directly upon the
depository institution.
The Federal banking regulators are empowered to adopt
prudential safeguards governing transactions between depository
institutions, their subsidiaries and affiliates so as to avoid,
among other items, significant risk to the safety and soundness
of the institution. The regulators are required to review these
safeguards regularly and modify or eliminate those requirements
which are no longer necessary.
Bank holding companies may elect to become FHCs by
meeting the statutory requirements and filing a declaration and
a certification with the Board. The legislation makes it clear
that a duplicative registration statement under section 5 of
the BHCA is not required. The integrity of the deposit
insurance funds is preserved by prohibiting the use of deposit
insurance funds to benefit any shareholder, subsidiary or
nondepository affiliate of an FHC. This section ensures that
the federal safety net is not extended to persons who are not
entitled to Federal deposit insurance coverage.
The savings bank restrictions in the BHCA are repealed.
This repeal is designed to conform the regulation of savings
bank life insurance to other provisions of Federal banking law.
The Conferees intend that the Board be flexible in its
application of holding company consolidated capital standards
for the leverage requirement and the timing of the asset
calculations to FHCs of which the predominant regulated
subsidiary is a broker-dealer. The Conferees intend that, to
the extent the Board deems feasible and consistent with the
overall financial condition and activities of the holding
company, the capital requirements for such holding companies be
consistent with the capital standards applied by the SEC to the
broker-dealer, which accounts for the predominant amount of
assets and activities of the holding company.
Subtitle C--Subsidiaries of National Banks
Senate Position: The Senate bill authorizes a national
bank to control a subsidiary engaged in financial activities
permissible for a bank holding company (but not permissible for
a national bank directly) under section 4(k) if the bank has
consolidated total assets not exceeding $1 billion, is not
affiliated with a bank holding company, is well capitalized,
and well managed. For the purpose of determining a parent
national bank's regulatory capital, a deduction from assets and
tangible equity is required for the amount of outstanding
equity investments made in a financial subsidiary. In addition,
the assets and liabilities of the financial subsidiary must not
be consolidated with those of the parent bank. Equity
investments in the operating subsidiary by a parent national
bank must not exceed the amount the bank could pay as a
dividend without obtaining prior regulatory approval. The
Senate bill also clarifies that a national bank may conduct
through a subsidiary any activity which the national bank may
engage directly and any activity lawfully conducted as of the
date of enactment of this legislation.
House Position: The House bill authorizes a national bank
subsidiary to engage only in activities permissible for
national banks to engage in directly, activities otherwise
expressly authorized by statute, and activities that are
financial in nature or incidental to financial activities.
Financial activities are defined as those activities
permissible for an FHC or activities that the Secretary of the
Treasury determines to be financial in nature or incidental to
financial activities in consultation and coordination with the
Federal Reserve Board. Excluded from the list of permissible
financial activities are insurance underwriting, insurance
company portfolio investments, and real estate investment and
development. National bank operating subsidiaries also may
engage in developing activities. In order for a national bank
operating subsidiary to engage in activities that are financial
in nature, its parent bank and all its depository institution
affiliates must be well capitalized, well managed, and have a
satisfactory CRA rating. A cure procedure is established to
address situations where there is a failure to comply with
these conditions. It also requires that the aggregate amount of
the national bank parent's equity investments in the bank be
deducted from the bank's capital including the operating
subsidiary's retained earnings. In addition, the assets and
liabilities of the subsidiary must not be consolidated with
those of its parent bank. Equity investments in the operating
subsidiary by a parent national bank must not exceed the amount
the bank could pay as a dividend without obtaining prior
regulatory approval.
Conference Substitute: The Senate receded to the House
with an amendment.
Under the amendment, national banks of any size are
permitted to engage through a financial subsidiary only in
financial activities (with exceptions) authorized by this Act.
Section 121 specifically excludes four types of activities for
financial subsidiaries: insurance or annuity underwriting,
insurance company portfolio investments, real estate investment
and development, and merchant banking (subject to section 122).
These types of financial activities may only be done in FHC
affiliates. The federal banking regulators are prohibited from
interpreting these provisions to provide for any expansion of
these activities contrary to the express language of this
statute. It is the intent of the Conferees that these new
statutory provisions--and the regulations to be adopted
pursuant thereto--supercede and replace the OCC's Part 5
regulations on operating subsidiaries.
Subtitle D--Preservation of FTC Authority
Section 131. Amendment to the Bank Holding Company Act of 1956 to
modify notification and post-approval waiting period for
section 3 transactions
Senate Position: No provision.
House Position: Section 141 of the House amendment amends
section 11(b)(1) of the BHCA (12 U.S.C. section 1849(b)(1)) to
provide for notice to the Federal Trade Commission (``FTC'')
when the Board of Governors of the Federal Reserve System
approves a transaction under section 3 of the BHCA if that
transaction also involves a transaction under section 4 or 6 of
the BHCA.
Conference Substitute: The Senate receded to the House
with an amendment.
Under section 131 of the Conference Report, the
modification simply eliminated the reference to section 6
because the new activities for FHCs are now included within
section 4 of the BHCA as amended by the Conference Report. The
FTC currently has no role in reviewing pure section 3
transactions, and this amendment does not change that. However,
the FTC does perform reviews of certain section 4 transactions.
This amendment will simply allow the FTC to coordinate its
review with the Board in those cases that also involve a
section 3 transaction.
Section 132. Interagency data sharing
Senate Position: No provision.
House Position: Section 142 of the House amendment
provided that, except as otherwise prohibited by law, the
banking regulators who review mergers or acquisitions (the OCC,
the OTS, the FDIC, and Federal Reserve Board) shall make
available to the antitrust agencies (the Department of Justice
and the Federal Trade Commission (``FTC'')) any information in
the bank regulators' possession that the antitrust agencies
deem necessary for their antitrust review under sections 3, 4,
or 6 of the BHCA, section 18(c) of the Federal Deposit
Insurance Act, the NationalBank Consolidation and Merger Act,
section 10 of the Home Owners' Loan Act, or the antitrust laws.
Conference Substitute: The Senate receded to the House
with an amendment.
Under section 132 of the Conference Report, the
modification eliminated the reference to section 6 of the BHCA
because the new activities for FHCs are now included within
section 4 of the BHCA as amended by the Conference Report. In
addition, the modification added new sections 132(b) and
132(c). New section 132(b) requires that any information shared
under this provision be kept confidential; that before any
information shared under this provision is disclosed to a third
party, the agency which shared it must be notified in writing
and given a chance to oppose or limit the disclosure; that any
sharing under this provision does not affect any claim of
privilege with respect to such information; and that nothing in
this section shall be construed to limit access to any
information by the Congress or the Comptroller General. New
section 132(c) simply applies the provisions of new section
132(b) to the sharing of information between Federal banking
agencies and State regulators or any other party.
In the past, there have been difficulties with banking
agencies sharing bank examination reports with the antitrust
agencies because of doubts about whether they had sufficient
authority to do so. The reports have generally been shared in
the end. However, in cases of failing institutions in which
review has been expedited or of institutions taken over by the
government, delays in providing these reports have sometimes
impeded antitrust review. This language simply allows all of
the involved agencies to do their respective tasks in the most
expeditious manner possible.
Section 133. Clarification of status of subsidiaries and affiliates
Senate Position: No provision.
House Position: Section 143(a) of the House amendment
provided that subsidiaries or affiliates of banks or savings
associations which are not themselves banks or savings
associations shall not be treated as banks or savings
associations for purposes of the FTC Act or any other law
enforced by the FTC. Section 143(b) clarified that nothing in
this section shall be construed as restricting the authority of
any Federal banking agency.
Section 143(c) amended the existing BHCA exceptions to
the Hart-Scott-Rodino (``H-S-R'') Act, 15 U.S.C. section
18a(c)(7) and 18a(c)(8). Under current law, transactions
subject to approval under section 3 of the BHCA are exempt from
H-S-R review. Likewise, assuming certain conditions are met,
transactions subject to approval under section 4 are also
exempt. The amendments in section 143(c) clarified that when
FHCs acquire other FHCs and either of those companies was
involved in new activities under section 6 of the BHCA as
amended by the House amendment, the portion of the transaction
involving those section 6 activities would be subject to H-S-R
review. However, the remainder of the transaction will continue
to be reviewed under the existing BHCA.
Conference Substitute: The Senate receded to the House
with modifications.
Under section 133 of the conference report, the
modification to section 133(a) clarified that the language
applied to any provision of law applied by the FTC under the
FTC Act. This clarification makes it clear that the section is
limited to laws that the FTC currently enforces and is not
intended to provide authority to enforce any new statutes.
Under current law, section 5(a)(2) of the FTC Act prohibits the
FTC from enforcing the Act against banks or savings
associations. The conference report will, however, allow these
entities to acquire other kinds of businesses, for example,
securities firms, against which the FTC can currently enforce
the Act. This provision simply makes it clear that these kinds
of businesses do not fall within the bank or savings
association exemption because they are owned by such an entity.
There was no modification to the savings provision
contained in section 133(b).
The modification to section 133(c) replaced the reference
to section 6 of the BHCA as amended by the House amendment with
a reference to section 4(k) of the BHCA as amended by the
conference report. Under the conference report, section 4(k)
now contains the language allowing FHCs to engage in new
activities. This amendment to the H-S-R exemptions will allow
the antitrust agencies to continue to review mergers between
insurance companies, securities firms, and other businesses
newly allowed to FHCs as they are today, notwithstanding the
ownership interest of the FHC. This clarification for the new
FHC structure is consistent with, and does not disturb,
existing law and precedents under which mergers involving
complex corporate entities, some parts of which are in
industries subject to merger review by specialized regulatory
agencies and other parts of which are not, are considered
according to agency jurisdiction over their respective parts,
so that normal H-S-R Act requirements apply to those parts that
do not fall within the specialized agency's specific authority.
See 16 CFR section 802.6.
Annual GAO report (section 144 of the House amendment)
Senate Position: No provision.
House Position: Section 144 of the House amendment
provided for the General Accounting Office to submit an annual
report to Congress on market concentration in the financial
services industry for each of the next five years.
Conference Substitute: The House receded to the Senate.
Subtitle E--National Treatment
Section 141. Foreign Banks that are Financial Holding Companies
Senate Position: The Senate bill, at section 151, permits
termination of the financial grandfathering authority granted
by the International Banking Act and other statutes to foreign
banks to engage in certain financial activities. Foreign banks
with grandfathered financial affiliates would be permitted to
retain these grandfathered companies on the same terms that
domestic banking organizations are permitted to establish them.
House Position: The House amendment, at section 151, is
similar.
Conference Substitute: The Senate receded to the House.
Section 142. Representative offices
Senate Position: The Senate bill, at section 152,
requires prior approval by the Federal Reserve Board for the
establishment of representative offices that are subsidiaries
of a foreign bank.
House Position: The House bill, at section 153, contains
the same provision.
Conference Substitute: The Senate receded to the House.
Subtitle F--Direct Activities of Banks
Senate Position: The Senate bill authorizes national
banks to deal in, underwrite, and purchase municipal bonds for
their own investment accounts.
House Position: The House amendment is identical.
Conference Substitute: The House receded to the Senate.
Title II
Subtitle A--Brokers and Dealers
Senate Position: The Senate bill repeals the exemptions
from the definition of broker and dealer under the Federal
securities laws that currently apply to banks, generally
subjecting banks and their affiliates and subsidiaries to the
same regulation as all other providers of securities products.
However, the Senate bill replaces the general bank exemption
with specific exemptions for certain bank activities.
House Position: The House amendment also repeals the
general bank exemptions from the definition of broker and
dealer under the Federal securities laws but provides more
limited exemptions than does the Senate bill.
Conference Substitute: Subtitle A of title II of the
Gramm-Leach-Bliley Act provides for functional regulation of
bank securities activities. The Conferees retained certain
limited exemptions to facilitate certain activities in which
banks have traditionally engaged. These exceptions relate to
third-party networking arrangements, trust activities,
traditional banking transactions such as commercial paper and
exempted securities, employee and shareholder benefit plans,
sweep accounts, affiliate transactions, private placements,
safekeeping and custody services, asset-backed securities,
derivatives, and identified banking products.
The Conferees provided for an exception for networking
arrangements between banks and brokers. Revisions to Rule 1060
recently approved by the National Association of Securities
Dealers (``NASD'') are in conflict with this provision. As a
consequence, revisions to the rule should be made to exempt
banks and their employees from the provisions' coverage.
The Conferees provided that banks that effect
transactions in a trustee or fiduciary capacity under certain
conditions will be exempt from registration under the Federal
securities laws if the bank: (1) is chiefly compensated by
means of administration and certain other fees, including a
combination of such fees, and (2) does not publicly solicit
brokerage business. The Conferees expect that the SEC will not
disturb traditional bank trust activities under this provision.
The Conferees also provided that classification of a
particular product as an identified banking product shall not
be construed as a finding or implication that such product is
or is not a security for purposes of the securities laws, or is
or is not a transaction for any purpose under the Commodity
Exchange Act. The Conferees do not intend in the Gramm-Leach-
Bliley Act to express an opinion upon or to address the issue
of legal certainty for swap agreements under the securities and
commodity exchange laws.
The Conferees also provided that the Commodity Exchange
Act is not amended by the Gramm-Leach-Bliley Act, and no
transaction or person which is otherwise subject to the
jurisdiction of the Commodity Futures Trading Commission
pursuant to the Commodity Exchange Act is exempted from such
jurisdiction because of the provisions of the Gramm-Leach-
Bliley Act.
For new hybrid products, the Conferees codified in the
securities laws a process that requires the SEC to act by
rulemaking prior to seeking to regulate any bank sales of any
such new product. This rulemaking process is designed to give
notice to the banking industry in an area that could involve
complex new products with many elements.
The process contemplated by the Conferees would work as
follows. Prior to seeking to require a bank to register as a
broker or dealer with respect to sales of any new hybrid
product, the SEC would have to engage in a rulemaking. In its
rulemaking, the SEC would need to find that the new product is
a security. In addition, the SEC would have to determine that
the product is a ``new hybrid product.''
A new hybrid product is not one of the products listed in
the definition of ``identified banking product''. Including a
product on the list of identified banking products shall not be
construed as a finding or implication that such product is or
is not a security, but it would not be a new hybrid product.
The Conferees codified the definition of Identified Banking
Products as a freestanding provision of law, neither in the
securities laws nor in the banking laws.
In addition, during the rulemaking process, the SEC must
also make a number of findings. When considering whether such
an action is in the public interest, the SEC must also consider
whether the action will promote efficiency, competition and
capital formation, as set forth in section 3(f) of the
Securities Exchange Act of 1934 (``Exchange Act''). The
Conferees note that the SEC's record in implementing section
3(f) has failed to meet Congressional intent. The Conferees
expect that the SEC will improve in this area.
Prior to commencing a rulemaking process, the SEC is
required to consult with and seek the concurrence of the
Federal Reserve Board concerning the imposition of broker or
dealer registration requirements with respect to any new hybrid
product. In developing and promulgating rules under this
subsection, the SEC shall consider the views of the Board,
including views with respect to the nature of the new hybrid
product; the history, purpose, extent, and appropriateness of
the regulation of the new product under the Federal banking
laws; and the impact of the proposed rule on the banking
industry.
If the Board seeks review of any final regulation under
this section, such review will serve as a stay on the
rulemaking until final adjudication of the matter between the
SEC and the Board. In considering such an appeal, the United
States Court of Appeals for the District of Columbia Circuit
shall determine to affirm and enforce or set aside a regulation
of the SEC under this subsection, based on the determination of
the court as to whether: (1) the subject product is a new
hybrid product; (2) the subject product is a security; (3)
imposing a requirement to register as a broker or dealer for
banks engaging in transactions in such product is appropriate
in light of the history, purpose and extent of regulation under
the Federal securities laws and under the Federal banking laws,
giving deference neither to the views of the SEC nor to the
Board.
Subtitle B--Bank Investment Company Activities
Senate Position: No provision.
House Position: The House bill amends the Investment
Advisers Act and the Investment Company Act to subject banks
that advise mutual funds to the same regulatory scheme as other
advisers to mutual funds. It also requires banks to make
additional disclosure when a fund is sold or advised by a bank.
Conference Substitute: The Senate recedes to the House
provision with an amendment.
Subtitle C--Securities and Exchange Commission Supervision of
Investment Bank Holding Companies
Senate Position: No provision.
House Position: The House amendment creates a new
investment bank holding company structure under the Exchange
Act. This subtitle is designed to implement a new concept of
SEC supervision of broker/dealer holding companies (that do not
control depository institutions with certain exceptions) that
voluntarily elect SEC supervision. This provision is designed
to assure that the supervision of an investment bank holding
company by the SEC is a meaningful option. Non-U.S. financial
institutions supervisors, when reviewing regulatory
applications or notices submitted by a U.S. financial
institution supervised in the United States as an investment
bank holding company by the SEC under section 231, shall treat
the SEC as the principal U.S. consolidated home country
supervisor of such financial institution on the same basis and
terms as if the Federal Reserve Board were the principal U.S.
consolidated home country supervisor.
Conference Substitute: The Senate recedes with an
amendment. The Conferees eliminated the authority of the SEC to
regulate investment bank holding company capital.
Subtitle D--Banks and Bank Holding Companies
Senate Position: No provision.
House Position: The House amendment requires the SEC to
consult and coordinate comments with the appropriate Federal
banking regulators before any action or rendering any opinion
with respect to the manner in which an insured depository
institution or insured depository holding company reports loan
loss reserves.
Conference Substitute: The Senate recedes to the House
provision. The Conferees note that the SEC's actions with
respect to the reporting of loan loss reserves by certain
insured depository institutions did not reflect adequate
consultation with the Federal banking agencies with respect to
potential implications on the safety and soundness of the
Federal deposit insurance fund. The Conferees expect that this
provision will facilitate better coordination and decision-
making by the SEC in this area.
Title III--Insurance
Subtitle A--State Regulation of Insurance
Senate Position: The Senate bill contains a number of
provisions intended to preserve State regulation of insurance.
House Position: The House amendment similarly contains a
number of provisions intended to preserve and enhance State
regulation of insurance.
Conference Substitute: The Senate receded to the House
with an amendment.
In general, Subtitle A of Title III reaffirms that States
are the regulators for the insurance activities for all
persons, including acting as the functional regulator for the
insurance activities of federally chartered banks. This
functional regulatory power is subject to section 104 of Title
I, however, which sets forth the appropriate balance of
protections against discriminatory actions. Federally chartered
banks and their subsidiaries are prohibited from underwriting
insurance, except for authorized products. A rule of
construction was added by the Conference Committee to prevent
evasion of State insurance regulation by foreign reinsurance
subsidiaries or offices of domestic banks, clarifying that
providing insurance (including reinsurance) outside of the
United States to indemnify an insurance product or company in a
State shall be considered to be providing insurance as
principal in that State.
Federally chartered banks are prohibited from engaging in
any activity involving the underwriting or sale of title
insurance, except that national banks may sell title insurance
products in any State in which state-chartered banks are
authorized to do so (other than through a ``wild card
provision''), so long as such sales are undertaken ``in the
same manner, to the same extent, and under the same
restrictions'' that apply to such state-chartered banks.
Certain currently and lawfully conducted title insurance
activities of banks are grandfathered, and existing State laws
prohibiting all persons from providing title insurance are
protected.
An expedited and equalized dispute resolution mechanism
is established to guide the courts in deciding conflicts
between Federal and State regulators regarding insurance
issues. The ``without unequal deference'' standard of review
does not apply to State regulation of insurance agency
activities that were issued before September 3, 1998 (other
than those protected by the scope of the safe harbor provision
of section 104).
The Federal banking agencies are required to issue final
consumer protection regulations within one year, to provide
additional safeguards for the sale of insurance by any bank or
other depository institution, or by any person at or on behalf
of such institution.
State laws that prevent or significantly interfere with
the ability of insurers to affiliate, become an FHC, or
demutualize, are preempted, except as provided in section
104(c)(2), and with respect to demutualizing insurers for the
State of domicile (and as set forth in the Redomestication
Subtitle). State laws limiting the investment of an insurer's
assets in a depository institution are also preempted, except
that an insurer's State of domicile may limit such investment
as provided.
The Federal banking agencies and the State insurance
regulators are directed to coordinate efforts to supervise
companies that control both depository institutions and persons
engaged in the business of insurance, and to share, on a
confidential basis, supervisory information including financial
health and business unit transactions. The agencies are further
directed to provide notice and to consult with the State
regulators before taking actions which effect any affiliates
engaging in insurance activities. A banking regulator is not
required to provide confidential information to a State
insurance regulator unless such State regulator agrees to keep
the information in confidence and make all reasonable efforts
to oppose disclosure of such information. Conversely, Federal
banking regulators are directed to treat as confidential any
information received from a State regulator which is entitled
to confidential treatment under State law, and to make similar
reasonable efforts to oppose disclosure of the information.
Subtitle B--Redomestication of Mutual Insurers
Senate Position: No provision.
House Position: The House bill allows mutual insurance
companies to redomesticate to another state and reorganize into
a mutual holding company or stock company. It only applies to
insurers in States which have not established reasonable terms
and conditions for allowing mutual insurance companies to
reorganize into a mutual holding company. All licenses of the
insurer are preserved, and all outstanding policies, contracts,
and forms remain in full force. A redomesticating company must
provide notice to the state insurance regulators of each State
for which the company is licensed. A mutual insurance company
may only redomesticate under this Subtitle if the State
insurance regulator of the new (transferee) domicile
affirmatively determines that the company's reorganization plan
meets certain reasonable terms and conditions: the
reorganization is approved by a majority of the company's board
of directors and voting policyholders, after notice and
disclosure of the reorganization and its effects on
policyholder contractual rights; the policyholders have
equivalent voting rights in the new mutual holding company as
compared to the original mutual insurer; any initial public
offering of stock shall be in accordance with applicable
securities laws and under the supervision of the State
insurance regulator of the transferee domicile; the new mutual
holding company may not award any stock options or grants to
its elected officers or directors for six months; all
contractual rights of thepolicyholders are preserved; and the
reorganization is approved as fair and equitable to the policyholders
by the insurance regulators of transferee domicile.
Conference Substitute: The Senate receded to the House
with an amendment.
Subtitle C--National Association of Registered Agents and Brokers
Senate Position: The Senate bill contains a sense of the
Congress statement that States should provide for a uniform
insurance agent and broker licensing system.
House Position: The House bill encourages the States to
establish uniform or reciprocal requirements for the licensing
of insurance agents. If a majority of the States do not
establish uniform or reciprocal licensing provisions within a
three-year period (as determined by the National Association of
Insurance Commissioners [``NAIC'']), then the National
Association of Registered Agents and Brokers (``NARAB'') would
be established as a private, non-profit entity managed and
supervised by the State insurance regulators. State insurance
laws and regulations shall not be affected except to the extent
that they are inconsistent with a specific requirement of the
Subtitle. Membership in NARAB is voluntary and does not affect
the rights of a producer under each individual state license.
Any state-licensed insurance producer whose license has not
been suspended or revoked is eligible to join NARAB. NARAB
shall be base membership criteria on the highest levels
insurance producer qualification set by the States on standards
such as integrity, personal qualification, education, training,
and experience. NARAB members shall continue to pay the
appropriate fees required by each State in which they are
licensed, and shall renew their membership annually. NARAB may
inspect members records, and revoke a membership where
appropriate. NARAB shall establish an Office of Consumer
Complaints, which shall have a toll-free phone number (and
Internet website) to receive and investigate consumer
complaints and recommend disciplinary actions. The Office shall
maintain records of such complaints, which shall be made
available to the NAIC and individual State insurance
regulators, and shall refer complaints where appropriate to
such regulators.
If the NAIC determines that the States have not met the
uniformity or reciprocity requirements, then the NAIC has two
years to establish NARAB. The NAIC shall appoint NARAB's board
of directors, some of whom must have significant experience
with the regulation of commercial insurance lines in the 20
States with the most commercial lines business. If within the
time period allotted for NARAB's creation, the NAIC has still
not appointed the initial board of directors for NARAB, then
the initial directors shall be the State insurance regulators
of the seven States with the greatest amount of commercial
lines insurance. NARAB's bylaws are required to be filed with
the NAIC, taking effect 30 days after filing unless disapproves
by the NAIC as being contrary to the public interest or
requiring a public hearing. The NAIC may require NARAB to adopt
or repeal additional bylaws or rules as it determines
appropriate to the public interest. The NAIC is given the
responsibility of overseeing NARAB, and is authorized to
examine and inspect NARAB's records, and require NARAB to
furnish it with any reports.
If at the end of two years after NARAB is required to be
established, (1) a majority of the States representing at least
50% of the total commercial-lines insurance premiums in the
United States have not established uniform or reciprocal
licensing regulations, or (2) the NAIC has not approved NARAB's
bylaws or is unable to operate or supervise NARAB (or if NARAB
is not conducting its activities under this Act), then NARAB
shall be created and supervised by the President, and shall
exist without NAIC oversight. The President shall appoint
NARAB's board, with the advice and consent of the Senate, from
lists of candidates submitted by the NAIC. If the President
determines that NARAB's board is not acting in the public
interest, the President may replace the entire board with new
members (subject to the advice and consent of the Senate). The
President may also suspend the effectiveness of any rule or
action by NARAB which the President determines is contrary to
the public interest. NARAB shall report annually to the
President and Congress on its activities.
State laws regulating insurance licensing that
discriminate against NARAB members based on non-residency are
preempted, as well as State laws and regulations which impose
additional licensing requirements on non-resident NARAB members
beyond those established by the NARAB board (pursuant to this
Subtitle), except that State unfair trade practices and
consumer protection laws are protected from preemption,
including counter-signature requirements. NARAB is required to
coordinate its multistate licensing with the various States. It
is also required to coordinate with the States on establishing
a central clearinghouse for license issuance and renewal, and
for the collection of regulatory information on insurance
producer activities. NARAB shall further coordinate with the
NASD to facilitate joint membership. Any dispute involving
NARAB shall be brought in the appropriate U.S. District Court
under federal law, after all administrative remedies through
NARAB and the NAIC have been exhausted.
Conference Substitute: The Senate receded to the House.
Subtitle D--Rental Car Agency Insurance Activities
Senate Position: The Senate bill provides that the
requirements under section 104 with respect to mandatory
licensing do not apply to persons who offer insurance connected
with a short term motor vehicle rental so long as the State
does not require such licensing.
House Position: The House bill creates a Federal
presumption for a three-year period that no State law imposes
any licensing, appointment, or education requirements on
persons who rent motor vehicles for a period of 90 days or less
and sell insurance to customers in connection with the rental
transaction. This presumption shall not apply to a State
statute, the prospective application of a statutorily-
authorized final State regulation or order interpreting a State
statute, or the prospective application of a court judgment
interpreting or applying a State statute, if such State statute
or final State regulation or order specifically and expressly
regulates (or exempts from regulation) persons who solicit or
sell such short term vehicle rental insurance. This presumption
shall apply to the retroactive application of a final State
regulation or order interpreting a general State insurance
licensing statute, or the retroactive application of a
courtjudgment interpreting or applying a general State insurance
licensing statute, with respect to the regulation of persons who
solicit or sell such short term vehicle rental insurance.
Conference Substitute: The Senate receded to the House.
Subtitle E--Confidentiality
Senate Position: No provision.
House Position: The House bill requires insurance
companies and their affiliates to protect the confidentiality
of individually identifiable customer health and medical and
genetic information. Such companies may only disclose such
information with the consent of the customer or for statutorily
specified purposes.
Conference Substitute: The House receded to the Senate.
Title IV--Unitary Thrift Holding Company Provisions
Sec. 401. Prohibition on new unitary savings and loan holding companies
Senate Position: The Senate bill, at section 601(a),
amends the Home Owners' Loan Act to prohibit (except for
corporate reorganizations) new unitary savings and loan holding
companies from engaging in nonfinancial activities or
affiliating with nonfinancial entities. The prohibition applies
to a company that becomes a unitary savings and loan holding
company pursuant to an application filed with the OTS after May
4, 1999. A grandfathered unitary thrift holding company (one in
existence or applied for on or before May 4, 1999) retains its
authority to engage in nonfinancial activities. The Senate
bill, at section 601(b), allows mutual savings and loan holding
companies to engage in new financial activities authorized
under the Gramm-Leach-Bliley Act.
House Position: The House bill, at section 401(a),
prohibits new unitary thrift holding companies after the
grandfather date of March 4, 1999, from engaging in
nonfinancial activities or from affiliating with a nonfinancial
entity. The provision also allows a nonfinancial company to
purchase a grandfathered unitary thrift holding company upon
approval of an application filed with the OTS and approval or
no objection to a notice filed with the Federal Reserve Board.
The House bill, at section 401(b), permits a mutual holding
company to engage in activities permissible for multiple stock
holding companies and permits unitary mutual savings and loan
holding companies to engage in the new financial activities
authorized for FHCs.
Conference Substitute: The House receded to the Senate.
Title V--Privacy
Subtitle A--Disclosure of Nonpublic Personal Information
Senate Position: No provision.
House Position: The House bill contained important
provisions providing consumers with new protections with
respect to the transfer and use of their nonpublic personal
information by financial institutions.
Among other things, the House bill directed relevant
regulators to establish comprehensive standards for ensuring
the security and confidentiality of consumers' personal
information maintained by financial institutions; allowed
customers of financial institutions to ``opt out'' of having
their personal financial information shared with nonaffiliated
third parties, subject to certain exceptions; barred financial
institutions from disclosing customer account numbers or
similar forms of access codes to nonaffiliated third parties
for telemarketing or other direct marketing purposes; and
mandated annual disclosure--in clear and conspicuous terms--of
a financial institution's policies and procedures for
protecting customers' nonpublic personal information.
Conference Substitute: The Senate receded to the House
with an amendment.
The amendment modified the House position in the
following ways:
1. The Federal functional regulators, the Secretary of
the Treasury, and the FTC, in consultation with State insurance
authorities, are directed to prescribe such regulations as may
be necessary to carry out the purposes of the privacy subtitle.
The House bill had called for a joint rulemaking. The relevant
agencies are required to consult and coordinate with one
another in order to assure to the maximum extent possible that
the regulations each prescribes are consistent and comparable
with those prescribed by the other agencies. It is the hope of
the Conferees that State insurance authorities would implement
regulations necessary to carry out the purposes of this title
and enforce such regulations as provided in this title.
2. To address the concern that the House bill failed to
provide a mechanism for enforcing the subtitle's provisions
against non-financial institutions, the Conferees agreed to
clarify that the FTC's enforcement authority extends to such
entities.
3. The Conferees agreed to clarify the relation between
Title V's privacy provisions and other consumer protections
already in law, by stating that nothing in the title shall be
construed to modify, limit, or supersede the operation of the
Fair Credit Reporting Act, and no inference shall be drawn on
the basis of the provisions of the title regarding whether
information is transaction or experience information under
section 603 of that Act.
4. At the request of the Conferees from the Committee on
Agriculture, the Conferees agreed to exclude from the scope of
the privacy title any person or entity that is subject to the
jurisdiction of the Commodity Futures Trading Commission under
theCommodity Exchange Act, as well as the Federal Agricultural
Mortgage Corporation or any entity chartered and operating under the
Farm Credit Act of 1971. The Conferees also excluded from this subtitle
institutions chartered by Congress specifically to engage in
securitization or secondary market transactions, so long as such
institutions do not sell or transfer nonpublic personal information to
nonaffiliated third parties. The Conferees granted the exception based
on the understanding that the covered entities do not market products
directly to consumers.
5. The Conferees agreed to clarify that a financial
institution's annual disclosure of its privacy policy to its
customers must include a statement of the institution's
policies and practices regarding the sharing of nonpublic
personal information with affiliated entities, as well as with
nonaffiliated third parties.
6. The Conferees agreed to provide that the disclosure of
nonpublic personal information contained in a consumer report
reported by a consumer reporting agency does not fall within
section 502's notice and opt out requirements.
7. The Conferees agreed to modify the statutory
definition of ``nonpublic personal information'' by clarifying
that such term does not encompass any list, description, or
other grouping of consumers (and publicly available information
pertaining to them) that is derived without using any nonpublic
personal information.
8. The Conferees agreed to exclude disclosures to
consumer reporting agencies from section 502(d)'s limitations
on the sharing of account number information.
9. The Conferees agreed to give the relevant regulatory
agencies the authority to prescribe exceptions to subsections
(a) through (d) of section 502, rather than just sections 502
(a) and (b), as provided for in the House bill.
10. The Conferees inserted language stating that the
privacy provisions in the subtitle do not supersede any State
statutes, regulations, orders, or interpretations, except to
the extent that such State provisions are inconsistent with the
provisions of the subtitle, and then only to the extent of the
inconsistency. The amendment provides that a State statute,
regulation, order, or interpretation is not inconsistent with
the provisions of this subtitle if the protection such statute,
regulation, order, or interpretation affords any consumer is
greater than the protection provided under this subtitle, as
determined by the FTC in consultation with the agency or
authority with jurisdiction under section 505(a) over either
the person that initiated the complaint or that is the subject
of the complaint, on its own motion or upon the petition of any
interested party.
11. Section 506 authorizes the Federal banking agencies
and the National Credit Union Administration to prescribe joint
regulations governing the institutions under their jurisdiction
with respect to the Fair Credit Reporting Act; the Conferees
agreed to an amendment giving the Board of Governors of the
Federal Reserve the authority to prescribe FCRA regulations
governing bank holding companies and their affiliates.
12. The Conferees agreed to modify section 502(e)(5), to
include the Secretary of the Treasury as a ``law enforcement
agency'' for the purposes of the Bank Secrecy Act, to avoid
unintended interference with the existing functions of the
Treasury's anti-money laundering unit, the Financial Crimes
Enforcement Network (``FinCEN'').
The Conferees wish to ensure that smaller financial
institutions are not placed at acompetitive disadvantage by a
statutory regime that permits certain information to be shared freely
within an affiliate structure while limiting the ability to share that
same information with nonaffiliated third parties. Accordingly, in
prescribing regulations pursuant to this subtitle, the agencies and
authorities described in section 504(a)(1) should take into
consideration any adverse competitive effects upon small commercial
banks, thrifts, and credit unions. In issuing regulations under section
503, the regulators should take into account the degree of consumer
access to disclosure by electronic means.
In exercising their authority under section 504(b), the
agencies and authorities described in section 504(a)(1) may
consider it consistent with the purposes of this subtitle to
permit the disclosure of customer account numbers or similar
forms of access numbers or access codes in an encrypted,
scrambled, or similarly coded form, where the disclosure is
expressly authorized by the customer and is necessary to
service or process a transaction expressly requested or
authorized by the customer.
The Conferees recognize the need to foster technological
innovation in the financial services and related industries.
The Conferees believe that the development of new technologies
that facilitate consumers' access to the broad range of
products and services available through online media should be
encouraged, provided that such technologies continue to
incorporate safeguards for consumer privacy.
Subtitle B--Fraudulent Access to Financial Information
Senate Position: The Senate bill contained provisions
making it a Federal crime--punishable by up to five years in
prison--to obtain or attempt to obtain, or cause to be
disclosed or attempt to cause to be disclosed, customer
information of a financial institution through fraudulent or
deceptive means, such as by misrepresenting the identity of the
person requesting the information or otherwise misleading an
institution or customer into making unwitting disclosures of
such information. In addition, it provided for a private right
of action and enforcement by state attorneys general.
House Position: Similar provisions, with no private right
of action or enforcement by State Attorneys General.
Conference Substitute: The Senate receded to the House
with an amendment.
The amendment provided that authority for enforcing the
subtitle would be placed in the FTC, the Federal banking
agencies and the National Credit Union Administration (for
enforcement of these provisions with respect to compliance by
depository institutions within their jurisdiction).
Title VI--Federal Home Loan Bank System Modernization
The Senate and House bills reform the Federal Home Loan
Bank (``FHLBank'') System in several important ways. Mandatory
FHLBank membership for Federal savings associations is
eliminated, in order to provide completely voluntary
membership. Small bank members are given expanded access to
FHLBank advances. Governance of the FHLBanks is decentralized
from the Federal Housing Finance Board (``FHFB'') to the
individual FHLBanks. The Resolution Funding Corporation
(``REFCORP'') obligation of the FHLBanks, stemming from the
savings and loan crisis, is changed from a fixed dollar amount
to a fixed percentage of annual net earnings. The Senate bill
directs the General Accounting Office to study FHLBank capital
and the House bill establishes a new capital structure for the
FHLBanks. The conference committee addressed three of these
major areas.
Sec. 604. Advances to members; collateral
Senate Position: The Senate bill authorizes community
financial institutions (FDIC-insured depository institutions
with assets less than $500 million) to obtain long-term FHLBank
advances for lending to small businesses, small farms, and
small agri-businesses. Eligible collateral for community
financial institutions receiving any FHLBank advances could
include secured loans for small business, agriculture, or
securities representing a whole interest in such loans.
House Position: The House bill authorizes community
financial institutions to obtain long-term FHLBank advances for
small business, agricultural, rural development, or low-income
community development lending. Eligible collateral for
community financial institutions receiving any FHLBank advances
could include secured loans for small business, agriculture,
rural development, or low-income community development, or
securities representing a whole interest in such loans. Such
advances-funded non-housing loans are treated as qualified
thrift investments in determining required FHLBank stock
purchases for community financial institutions that are not
qualified thrift lenders (``QTLs'').
Conference Substitute: The House receded to the Senate on
the purposes and collateral for advances to community financial
institutions. Greater stock purchases required of FHLBank
members, that are not QTLs, when they receive advances are
eliminated as is the requirement that such members only apply
for advances for housing finance purposes. A priority for
making advances to QTL members and a 30% limit on total
advances to non-QTL members are also removed. Restrictions on
obtaining new advances and having to repay advances after three
years, applicable to savings associations that are not QTLs,
are eliminated.
Sec. 606. Management of FHLBanks
Senate Position: The Senate bill changed the term of
elected FHLBank directors from two to four years to make the
term the same as for appointed directors. It transferred from
the FHFB to the individual FHLBanks authority over a number of
operational areas. It also gave the FHFB the same enforcement
authority over FHLBanks and their executive officers and
directors as the Federal banking agencies and the Office of
Federal Housing Enterprise Oversight have under their statutes.
House Position: The House bill contained the same
provisions. It also empowered the FHFB to address any capital
insufficiencies resulting from voluntary membership and
eliminated the 20:1 advances to stock ratio limit for a FHLBank
member.
Conference Substitute: The Conference set terms for both
elected and appointed directors at 3 years (staggered with
approximately one-third of the terms expiring each year). A
FHLBank's board of directors is authorized to elect by majority
vote the board's Chairperson and Vice Chairperson. The term of
office for the Chairperson and Vice Chairperson is two years.
The annual salaries of FHLBank directors may not exceed
specified amounts plus reimbursement of expenses. The maximum
amounts are: Chairperson--$25,000; Vice Chairperson--$20,000;
and other directors--$15,000. FHLBank directors may reside
outside the FHLBank district if they are an officer or director
of a member institution located in the district. The Senate
receded to the House regarding the provisions on capital
insufficiencies and the advances to stock ratio limit.
Sec. 608. Capital structure of the FHLBanks
Senate Position: The Senate bill directs the General
Accounting Office to submit to Congress within one year of
enactment a study on possible revisions to the FHLBanks'
capital structure, including the need for more permanent
capital, a statutory leverage ratio, and a risk-based capital
structure. GAO would also study the impact such revisions might
have on the FHLBanks' operations, including the REFCORP payment
obligation.
House Position: The House bill establishes a new capital
structure for the FHLBanks. The FHLBanks were authorized to
issue three classes of stock: Class A (redeemable on 6-months
notice), Class B (redeemable on 5-years notice), and Class C
(nonredeemable). FHLBanks were required to meet a 5% leverage
minimum tied to total capital and a risk-based requirement tied
to permanent capital. Permanent capital included Class C stock,
retained earnings, and up to 1% of a FHLBank's assets in Class
B stock. Total capital included permanent capital plus Class A
stock, Class B stock (other than what counted toward permanent
capital), and a general allowance for losses. A FHLBank must at
all times comply with both the leverage and risk-based capital
requirements. In determining compliance with the 5% minimum
leverage ratio, Class A stock was counted at paid-in value,
Class B stock was weighted at 1.5 times paid-in value, and
Class C stock and retained earnings at 2.0 times. The current
capital structure of the FHLBanks must be maintained until the
new capital requirements are fully implemented. Within one year
of enactment, the FHFB must issue implementing regulations. The
board of directorsof each FHLBank must develop a capital plan,
subject to FHFB approval. The FHLBanks have up to three years to carry
out their plans.
Conference Substitute: The Senate receded to the House
with an amendment regarding a new capital structure. Two
classes of stock are authorized: Class A (redeemable on 6-
months notice) and Class B (redeemable on 5-years notice).
FHLBanks are required to meet a 5% leverage minimum tied to
total capital and a risk-based requirement tied to permanent
capital. Permanent capital includes Class B stock and retained
earnings. Total capital includes permanent capital plus Class A
stock, generally. In determining compliance with the 5% minimum
leverage ratio, Class A stock is counted at paid-in value and
Class B stock and retained earnings are weighted at 1.5 times;
however, a FHLBank's total capital, determined without taking
into account any multiplier, must not be less than 4% of total
assets.
The weighting provision is included to encourage the
FHLBanks to build more permanent, longer-term capital. Using
the capital multiplier, the paid-in value of outstanding Class
A stock plus 1.5 times the paid-in value of outstanding Class B
stock and retained earnings must be at least 5% of total
assets. Using no weighting factor, total capital must be at
least 4% of total assets. For example, a FHLBank with $100
million in assets would comply with $5 million in Class A
capital stock or $2 million in Class A capital stock and an
unweighted $2 million in Class B capital stock and retained
earnings (which would constitute $3 million on a weighted
basis).
A FHLBank's permanent capital, used to measure its
compliance with the risk-based capital requirement, consists of
the amounts paid by members for Class B stock and the amount of
the FHLBank's retained earnings. The amount of retained
earnings that may be included in permanent capital must be
determined in accordance with generally accepted accounting
principles (GAAP), which precludes the use of non-GAAP
regulatory accounting standards for measuring retained
earnings. The amount of Class B stock that is to be included in
permanent capital is the full amount paid by a member to the
FHLBank for the purchase of Class B stock.
A FHLBank's total capital, used to measure its compliance
with the statutory leverage ratio, consists of permanent
capital, the amounts paid by members for Class A stock, any
general allowance for losses (consistent with GAAP and subject
to FHFB regulation), and any other amounts from sources
determined by the FHFB to be available to absorb losses
incurred by the FHLBank and appropriate for including as
capital. Any loss reserve that is held or established against a
specific asset of the FHLBank is expressly prohibited from
being included in total capital, as such reserves are not
capable of absorbing potential losses on other assets.
In recognition of Congressional concern regarding the
Financial Management and Mission Achievement (``FMMA'') rule
recently proposed by the FHFB, the Chairman of the FHFB sent a
letter on October 18, 1999 to the Senate and House Banking
Committee Chairmen (inserted below) providing assurances that
the proposal would be withdrawn, upon enactment of this
legislation. It is the conference committee's understanding and
expectation that the FMMA will be withdrawn and that the FHFB
will take no action to promulgate proposed or final regulations
limiting assets or advances beyond those currently in effect
until the statutorily required FHLBank System capital rules are
finalized and the statutory period for submission of capital
plans by the FHLBanks has expired. If and when the FHFB
develops a new FMMA, or similar rules, we expect that the FHFB
will provide ample opportunity for public comment and hearings.
It is the desire of the conference committee that the FHFB
consult with the Banking Committees regarding both the capital
regulations and any financial management and/or mission related
rules prior to issuing them in proposed form.
Federal Housing Finance Board,
Washington, DC, October 18, 1999.
Hon. Phil Gramm,
Chairman, Committee on Banking, Housing, and Urban Affairs, Washington,
DC.
Hon. Jim Leach,
Chairman, Committee on Banking and Financial Services, Washington, DC.
Dear Senator Gramm and Congressman Leach: As you proceed
to consider legislation to modernize the Federal Home Loan Bank
System as part of the S. 900/H.R. 10 conference, I am aware
that there is substantial concern regarding our proposed
Financial Management and Mission Achievement regulation (FMMA).
Unfortunately, this legitimate concern regarding a far-reaching
regulatory initiative has resulted in a proposal for a
statutory moratorium on our regulatory authority. Despite the
best efforts of well-meaning advocates, such statutory language
can only lead to serious ambiguity and potential litigation
over the independent regulatory authority of the Finance Board.
Therefore, this letter is intended to give you and your
colleagues on the Committee of Conference solid assurances
about our intentions upon final enactment of the statute being
drafted in conference. Upon such enactment, the Finance Board
will:
1. Withdraw, forthwith, its proposed FMMA.
2. Proceed in accordance with the statutory instructions
regarding regulations governing a risk-based capital system and
a minimum leverage requirement for the Federal Home Loan Banks.
3. Take no action to promulgate proposed or final
regulations limiting assets or advances beyond those currently
in effect (except to the extent necessary to protect the safety
and soundness of the Federal Home Loan Banks) until such time
as the regulations described in number 2 have become final and
the statutory period for submission of capital plans by the
Banks has expired.
4. Consult with each of you and your colleagues on the
Banking Committees of the House and the Senate, regarding the
content of both the capital regulations and any regulations on
the subjects described in number 3, prior to issuing them in
proposed form.
I believe that these commitments cover the areas of
concern which have led to a proposal for moratorium
legislation. You can rely on this commitment to achieve those
legitimate ends sought by moratorium proponents without
clouding the necessary regulatory authority of the Finance
Board which could result from statutory language.
Thank you for your consideration.
Sincerely,
Bruce A. Morrison.
Title VII--Other Provisions
Subtitle A--ATM Fee Reform
Senate Position: The Senate bill at Title VII requires
automated teller machine (``ATM'') operators who impose a fee
for use of an ATM by a noncustomer to post a notice on the
machine and on the screen that a fee will be charged and the
amount of the fee. This notice must be posted before the
consumer is irrevocably committed to completing the
transaction. A paper notice issued from the machine may be used
in lieu of a posting to the screen. No surcharge may be imposed
unless the notices are made and the consumer elects to proceed
with the transaction. A notice is required when ATM cards are
issued that surcharges may be imposed by other parties when
transactions are initiated from ATMs not operated by the card
issuer. ATM operators are exempt from liability if properly
placed notices on the machines are subsequently removed,
damaged, or altered by anyone other than the ATM operator.
House Position: Same.
Conference Substitute: The House receded to the Senate
with an amendment.
The amendment grants a temporary exemption for those
older machines that are unable to provide certain of the
notices required.
Subtitle B--Community Reinvestment
Sec. 711. CRA sunshine requirements
Senate Position: Section 312 of the Senate bill amends
the Federal Deposit Insurance Act by creating a new Section 46,
to require full disclosure of agreements entered into between
insured depository institutions or their affiliates and
nongovernmental entities or persons made pursuant to or in
connection with the fulfillment of the CRA. The section does
not confer any authority on the Federal banking agencies to
enforce the provisions of these agreements.
House Position: No provision.
Conference Substitute: The House receded to the Senate,
with an amendment.
As recommended by the Conferees, the provision requires
full disclosure of agreements, as defined in this section,
between an insured depository institution or affiliate and a
nongovernmental entity or person where the agreement is made
pursuant to or in connection with the CRA, involving funds or
other resources of an insured depository institution or
affiliate.
The provision is not intended to define as a CRA
agreement an individual mortgage loan (although it could apply
to agreements involving, for example, parties acting as
mortgage intermediaries or facilitators), or other specific
contract to an individual, business, farm, or other entity,
where funds are loaned at rates not substantially below market
rates and if the purpose of the loan or extension of credit
does not include any re-lending of borrowed funds to other
parties. In addition, the scope of the provision does not
extend to an agreement entered into by an insured depository
institution or affiliate with a nongovernmental entity or
person who has not commented on, testified about, or discussed
with the institution, or otherwise contacted the institution,
concerning the CRA. This exception to the coverage could
include, for example, service organizations such as civil
rights groups, community groups providing housing or other
services in low-income neighborhoods, the American Legion,
community theater groups, and so forth. The Federal Reserve
Board may prescribe regulations to provide further exemptions
consistent with the purposes of the provision.
In defining the agreements to which this provision would
apply, the legislation assigns to the appropriate Federal
banking agency the responsibility to identify a list of factors
that the agency determines have a material impact on the
agency's decision to approve or disapprove an application for a
deposit facility or to assign a rating in an examination under
the CRA. It is expected that the regulator will include in such
list a full enumeration of the relevant factors that the agency
reviews and considers in examining the performance of an
insured financial institution in connection with the CRA,
including any and all items a regulator would attach importance
to in determining the evaluation under the act of the
performance of a financial institution.
The Conferees note that while an agency may not give a
great deal of weight to a mere agreement to perform certain
CRA-related activities, per se, the agency does look carefully
at the activities that the institution may have actually
performed in fact pursuant to such an agreement. The disclosure
and reporting requirements of this section apply to agreements
defined in subsection (a) in either event.
As a general rule, the parties are required to disclose
fully such agreements and make them available to the public and
to the Federal banking agencies.
In addition, parties to each CRA agreement are required
to report at least once each year on the use of resources
provided pursuant to each agreement. A bank would file its
report directly with its Federal regulator. A nongovernmental
party is required to file its report with the appropriate
Federal banking agency with supervisory responsibility over the
insured depository institution that is a party to the
agreement, either directly with the agency or via the
insureddepository institution, which would be required promptly to
transmit the report to the Federal banking agency.
The Federal banking agencies are directed, in
implementing regulations under this provision, to minimize the
regulatory burden on reporting parties. One way in which to
accomplish this goal would be wherever possible and appropriate
with the purposes of this section, to make use of existing
reporting and auditing requirements and practices of reporting
parties, and thus avoid unnecessary duplication of effort. The
Managers intend that, in issuing regulations under this
section, the appropriate Federal supervisory agency may provide
that the nongovernmental entity or person that is not an
insured depository institution may, where appropriate and in
keeping with the provisions of this section, fulfill the
requirements of subsection (c) by the submission of its annual
audited financial statement or its Federal income tax return.
Sec. 712. Small bank regulatory relief
Senate Position: The Senate provision amended the CRA to
exempt from the provisions of that Act banks and savings and
loan associations with total assets less than $100 million and
that are located in nonmetropolitan areas.
House Position: No provision.
Conference Substitute: The House receded to the Senate
provision with an amendment.
The provision directs that ``regulated financial
institutions'' with aggregate assets not exceeding $250 million
will be subject to routine examinations under the CRA as
follows: (i) not more than once every 60 months if the
institution received a rating of ``outstanding record of
meeting community credit needs'' at its most recent
examination; (ii) not more than once every 48 months if the
institution received a rating of ``satisfactory record of
meeting community credit needs'' at its most recent
examination; and (iii) as deemed necessary by the appropriate
Federal banking agency if the institution received a rating of
less than ``satisfactory record of meeting community credit
needs'' at its most recent examination. The provision also
states that the Federal banking agencies may subject an
institution to more frequent or less frequent examinations for
reasonable cause. A regulated financial institution shall
remain subject to examination under this title in connection
with an application for a deposit facility.
Sec. 713-715. Federal Reserve Board and Treasury studies, Impact on CRA
Senate Position: No provision.
House Position: The House bill at Section 110 requires a
study by the Secretary of the Treasury, in consultation with
the Federal banking agencies, of the extent to which adequate
services are being provided as intended by the CRA, including
services in low- and moderate-income neighborhoods and for
persons of modest means, as a result of the enactment of the
Gramm-Leach-Bliley Act. The report must be submitted to the
Congress within two years.
Conference Substitute: The Senate receded to the House
with an amendment directing, in addition, that the Federal
Reserve Board conduct a comprehensive study of the CRA, in
consultation with the Chairman and Ranking Member of the House
Banking and Financial Services Committee and the Chairman and
Ranking Member of the Senate Banking, Housing, and Urban
Affairs Committee. The study is to focus on default rates,
delinquency rates, and the profitability of loans made in
conformity with that Act. The report must be submitted to the
House and Senate Banking Committees no later than March 15,
2000. The provision also directs that the report and all of the
supporting data be made available at the same time to the
public by the Federal Reserve Board, to the extent that the
data are not confidential.
The Conferees recommended further amending the House
study with an amendment permitting the Secretary of the
Treasury to submit to the Congress by March 15, 2000, a
baseline report in addition to the final report as required in
the House provision. The purpose of the baseline report is to
give a set of data against which the Secretary will be able to
measure change by the end of the two-year reporting period.
The Conferees also recommended an amendment to the House
language to state that nothing in the Gramm-Leach-Bliley Act
shall be construed to repeal any provision of the CRA.
Subtitle C--Other Regulatory Improvements
Sec. 721. Expanded small bank access to S corporation treatment
Senate Position: The Senate bill at section 302 requires
the GAO to study and report to Congress within six months of
the date of enactment on certain revisions to S corporation
rules permitting greater access by community banks to S
corporation treatment.
House Position: No provision.
Conference Substitute: The House receded to the Senate.
Sec. 722. ``Plain Language'' requirement for Federal banking agency
rules
Senate Position: The Senate bill at section 306 directs
the Federal banking agencies to use plain language in all
proposed and final rule-makings published by the agency in the
Federal Register after January 1, 2000, and to report to
Congress by no later than March 1, 2001 on how they have
complied with the plain language requirement.
House Position: No provision.
Conference Substitute: The House receded to the Senate.
Sec. 723. Retention of ``Federal'' in name of converted Federal savings
associations
Senate Position: The Senate bill at section 307 would
permit Federal savings associations that convert to national or
state bank charters to keep the word ``Federal'' in their
names.
House Position: Same.
Conference Substitute: The Senate receded to the House.
Sec. 724. Control of Bankers' Banks
Senate Position: The Senate bill at section 310 allows
one or more thrift institutions to own a state-chartered bank
or trust company, whose business is restricted to accepting
deposits from thrift institutions or savings banks, deposits
arising from the corporate business of the thrift institutions
or savings banks that own the bank or trust company, or
deposits of public funds.
House Position: No provision.
Conference Substitute: The House receded to the Senate.
Sec. 725. Provision of technical assistance to microenterprises
Senate Position: The Senate bill at section 316
establishes a grant program to fund nonprofit microenterprise
development organizations, programs, collaboratives, or
intermediaries engaged in (1) providing training and technical
assistance to low-income and disadvantaged entrepreneurs
interested in starting or expanding their own businesses; (2)
building the capacity of organizations that serve low-income
and disadvantaged entrepreneurs; and (3) supporting research
and development aimed at identifying and promoting training and
technical assistance programs that effectively serve low-income
and disadvantaged entrepreneurs.
House Position: No provision.
Conference Substitute: The House receded to the Senate
with an amendment.
While the Senate bill made the new microenterprise
program a part of the Treasury Department's Community
Development Financial Institutions program, the Conferees chose
to have the new program administered by the Small Business
Administration.
Sec. 726. Federal Reserve audits
Senate Position: The Senate bill at section 317 requires
annual outside independent accounting firm audits of the
Federal Reserve Banks and the Federal Reserve Board. In
addition, the bill changes the definitions and rules that apply
to the pricing of Federal Reserve System services under the
Monetary Control Act.
House Position: No provision.
Conference Substitute: The House receded to the Senate
with an amendment in the nature of a substitute. The substitute
provision requires the Federal Reserve Board to order an annual
independent audit of the financial statements of each Federal
Reserve Bank and of the Board.
Sec. 727. Authorization to release reports
Senate Position: No provision.
House Position: The House bill at section 132 permits the
Federal Reserve Board, at its discretion, to furnish exam
reports and other confidential supervisory information
concerning State member banks or other entities it examines to
any Federal or State authorities with supervisory authority
over an examined entity, to officers, directors, or receivers
of the entity, or any other person that the Federal Reserve
Board determines is proper. In addition, the House bill
includes the Commodity Futures Trading Commission under
definitions in the Right to Financial Privacy Act.
Conference Substitute: The Senate receded to the House
with an amendment.
The amendment adds to the provision allowing the
disclosure of reports and information by applying certain
confidentiality requirements and procedures for disclosure.
Sec. 728. General Accounting Office study of conflicts of interest
Senate Position: No provision.
House Position: The House bill at section 193 requires
the Comptroller General of the GAO to study the conflict of
interest faced by the Federal Reserve Board between its role as
a primary regulator of the banking industry and its role as a
vendor of services. Specifically, the GAO should address the
conflict between the Board's role as a regulator of the payment
system and its role as a competitor with private sector
providers of payment services, and how best to resolve that
conflict. The study is due one year after enactment of the
legislation.
Conference Substitute: The Senate receded to the House.
Sec. 729. Study and report on adapting existing legislative
requirements to on-line banking and lending
Senate Position: No provision.
House Position: The House bill at section 195 requires
the Federal banking agencies to conduct a study of banking
regulations regarding the delivery of financial services,
including those regulations that may assume that there will be
face-to-face contact, and report their recommendations on
adapting those existing requirements to online banking and
lending. Thereport, with any recommended legislative or
regulatory action, is due one year after the date of enactment of the
legislation.
Conference Substitute: The Senate receded to the House
with an amendment changing the due date of the study to two
years after date of enactment.
Sec. 730. Clarification of source of strength doctrine
Senate Position: No provision.
House Position: The House bill at section 197 enhances
the source of strength doctrine by, in certain circumstances,
protecting the Federal banking agencies and the deposit
insurance funds from claims brought by the bankruptcy trustee
of a depository institution holding company or other person for
the return of capital infusions.
Conference Substitute: The Senate receded to the House
with an amendment in the nature of a substitute.
The substitute narrows and clarifies the circumstances
under which a Federal banking agency would be protected from a
claim. First, it clarifies that the transferred assets must be
those of an affiliate or a controlling shareholder of an
insured depository institution. The House amendment did not so
specify. Second, section 730 provides that the transfer must be
to or for the benefit of an insured depository institution and
that it must be made by an affiliate or controlling shareholder
of such insured depository institution. The House amendment did
not include such clarifying language. Third, section 730
specifies that no person may bring a claim against a Federal
banking agency for monetary damages, return of assets, or for
other legal or equitable relief in connection with such
transfer, consistent with certain limitations. The House
amendment only referred to claims for monetary damages or for
the return of assets or other property. Fourth, section 730
adds a definition of the term ``claim.'' For purposes of this
provision, a claim is defined as a cause of action based on
Federal or State law providing for the avoidance of
preferential or fraudulent transfers or conveyances, or
providing for similar remedies. The definition, however,
explicitly excepts any claim based on actual intent to hinder,
delay or defraud pursuant to such fraudulent transfer or
conveyance law.
This section does not limit the right of a depository
institution, a controlling stockholder, or a depository
institution holding company to seek direct review of an order
or directive of a Federal banking agency under the
Administrative Procedure Act in accordance with various banking
statutes. In addition, the provision does not limit the rights
of a claimant to bring suit against the United States for a
breach of contract or a taking under the 5th Amendment to the
Constitution.
Sec. 731. Interest rates and other charges at interstate branches
Senate Position: No provision.
House Position: The House bill at section 198 provides
loan pricing parity among interstate banks. Specifically, if an
interstate bank can charge a particular interest rate, then a
local bank in the State into which the interstate bank has
branched, may charge a comparable rate.
Conference Substitute: The Senate receded to the House.
Sec. 732. Interstate branches and agencies of foreign banks
Senate Position: The Senate bill at section 313 allows a
Federal or State agency of a foreign bank to upgrade to a
branch with the approval of the appropriate chartering
authority and the Federal Reserve Board.
House Position: Same.
Conference Substitute: The House receded to the Senate.
Sec. 733. Fair treatment of women by financial advisers
Senate Position: No provision.
House Position: The House bill at section 198B
establishes the sense of the Congress that estate planners,
trust officers, investment advisers, and other financial
planners and advisors should eliminate examples in their
training materials which portray women as incapable and
foolish, and develop fairer and more balanced presentations
that eliminate outmoded and stereotypical examples which lead
clients to take actions that are financially detrimental to
their wives and daughters.
Conference Substitute: The Senate receded to the House
with an amendment in the nature of a substitute.
The substitute establishes the sense of the Congress that
individuals offering financial advice and products should do so
in a nondiscriminatory, nongender-specific manner.
Sec. 734. Membership of loan guarantee boards
Senate Position: No provision.
House Position: No provision.
Conference Substitute: The Conferees adopted a provision
that would modify the membership of the Emergency Steel Loan
Guarantee Board and the Emergency Oil and Gas Loan Guarantee
Board. Where under existing law the Chairmen of the Federal
Reserve Board and SEC were designated as members, the provision
permits both to designate another Member of the Board or
another Commissioner as appropriate.
Sec. 735. Repeal of stock loan limit in Federal Reserve Act
Senate Position: No provision.
House Position: The House bill at section 124 repeals the
restrictions in section 11(m) of the Federal Reserve Act on
loans by Federal Reserve member banks secured by stock or bond
collateral. Limitations on loans to one borrower imposed
pursuant to other statutory authority are not affected.
Conference Substitute: The Senate receded to the House.
Sec. 736. Elimination of SAIF and DIF Special Reserves
Senate Position: The Senate bill at section 301
eliminates the need for the establishment of a SAIF ``special
reserve'' which the FDIC was required to establish beginning in
1999. This revision becomes effective on the date of enactment.
House Position: Same other than the effective date.
Conference Substitute: The House receded to the Senate.
Sec. 737. Bank officers and directors as officers and directors of
public utilities
Senate Position: The Senate bill at section 309 amends
the Federal Power Act to permit officers or directors of public
utilities to serve as officers or directors of banks, trust
companies, or securities firms, if certain safeguards against
conflicts of interest are complied with.
House Position: No provision.
Conference Substitute: The House receded to the Senate.
Sec. 738. Approval for purchases of securities
Senate Position: The Senate bill at section 315
authorizes a majority of the entire board of directors of a
bank to vote on the purchase of securities from an affiliate,
based on a determination that the purchase is a sound
investment for the bank. Such a standard does not exist under
current law, which simply requires the vote to be taken by a
majority of independent directors.
House Position: No provision.
Conference Substitute: The House receded to the Senate.
Sec. 739. Optional conversion of Federal savings associations
Senate Position: The Senate bill at section 602 allows a
Federal savings association chartered prior to the date of
enactment to convert into one or more national banks, subject
to the approval of the OCC, each of which may encompass one or
more of the branches of the Federal savings association in one
or more States.
House Position: No provision.
Conference Substitute: The House recedes to the Senate
with an amendment.
The amendment would allow the conversion to State as well
as national banks.
Sec. 740. Grand jury proceedings
Senate Position: No provision.
House Position: No provision.
Conference Substitute: The Conferees adopted a provision
that would permit U.S. Attorneys offices to seek a court order
to provide financial institution regulatory agencies with
access to grand jury material, giving State regulatory agencies
parity with Federal regulatory agencies.
From the Committee on Banking and Financial
Services, for consideration of the Senate bill,
and the House amendment, and modifications
committed to conference:
James A. Leach,
Bill McCollum,
Marge Roukema,
Doug Bereuter,
Rick Lazio,
Spencer Bachus,
Michael N. Castle,
John J. LaFalce,
Bruce F. Vento,
As additional conferees from the Committee on
Banking and Financial Services, for
consideration of titles I, III (except section
304), IV, and VII of the Senate bill, and title
I of the House amendment, and modifications
committed to conference:
Paul E. Kanjorski,
Carolyn B. Maloney,
As additional conferees from the Committee on
Banking and Financial Services, for
consideration of title V of the Senate bill,
and title II of the House amendment, and
modifications committed to conference:
Paul E. Kanjorski,
Carolyn B. Maloney,
James H. Maloney,
As additional conferees from the Committee on
Banking and Financial Services, for
consideration of title II of the Senate bill,
and title III of the House amendment, and
modifications committed to conference:
Paul E. Kanjorski,
Carolyn B. Maloney,
Nydia M. Velazquez,
Darlene Hooley,
As additional conferees from the Committee on
Banking and Financial Services, for
consideration of title VI of the Senate bill,
and title IV of the House amendment, and
modifications committed to conference:
Carolyn B. Maloney,
Luis V. Gutierrez,
Ken Bentsen,
As additional conferees from the Committee on
Banking and Financial Services, for
consideration of section 304 of the Senate
bill, and title V of the House amendment, and
modifications committed to conference:
Paul E. Kanjorski,
Gary L. Ackerman,
From the Committee on Commerce, for
consideration of the Senate bill, and the House
amendment, and modifications committed to
conference:
Tom Bliley,
Michael G. Oxley,
Billy Tauzin,
Paul Gillmor,
James Greenwood,
Chris Cox,
Steve Largent,
Brian Bilbray,
E. Towns,
Diana DeGette,
Lois Capps,
Provided that Mr. Rush is appointed in lieu of
Mrs. Capps for consideration of section 316 of
the Senate bill:
Bobby L. Rush,
From the Committee on Agriculture, for
consideration of title V of the House
amendment, and modifications committed to
conference:
Larry Combest,
Thomas W. Ewing,
Charles W. Stenholm,
From the Committee on the Judiciary, for
consideration of sections 104(a), 104(d)(3),
and 104(f)(2) of the Senate bill, and sections
104(a)(3), 104(d)(3)(A), 104(b)(4)(B), 136(b),
136(d)-(e), 141-44, 197, 301, 306 of the House
amendment, and modifications committed to
conference:
Henry Hyde,
George W. Gekas,
From the Committee on Banking and Financial
Services, for consideration of section 101 of
the Senate bill and section 101 of the House
amendment: Mr. King is appointed in lieu of Mr.
Bachus; Mr. Royce is appointed in lieu of Mr.
Castle
Peter T. King,
Ed Royce,
From the Committee on Commerce, for
consideration of section 101 of the Senate bill
and section 101 of the House amendment: Mrs.
Wilson is appointed in lieu of Mr. Largent; Mr.
Fossella is appointed in lieu of Mr. Bilbray
Heather Wilson,
Vito Fossella,
Managers on the Part of the House.
Phil Gramm,
Connie Mack,
Robert F. Bennett,
Rod Grams,
Wayne Allard,
Michael B. Enzi,
Chuck Hagel,
Rick Santorum,
Jim Bunning,
Mike Crapo,
Paul Sarbanes,
Christopher J. Dodd,
John F. Kerry,
Tim Johnson,
Jack Reed,
Charles Schumer,
Evan Bayh,
John Edwards,
Managers on the Part of the Senate.