[House Report 106-74]
[From the U.S. Government Publishing Office]



106th Congress                                             Rept. 106-74
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     Part 3

======================================================================



 
                     FINANCIAL SERVICES ACT OF 1999

                                _______

 June 15, 1999.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Mr. Bliley, from the Committee on Commerce, submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                         [To accompany H.R. 10]

  The Committee on Commerce, to whom was referred the bill 
(H.R. 10) to enhance competition in the financial services 
industry by providing a prudential framework for the 
affiliation of banks, securities firms, and other financial 
service providers, and for other purposes, having considered 
the same, report favorably thereon with an amendment and 
recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     2
Purpose and Summary..............................................    98
Background and Need for Legislation..............................   110
Hearings.........................................................   120
Committee Consideration..........................................   120
Roll Call Votes..................................................   120
Committee Oversight Findings.....................................   129
Committee on Government Reform Oversight Findings................   129
New Budget Authority, Entitlement Authority, and Tax Expenditures   129
Committee Cost Estimate, Congressional Budget Office Estimate, 
  and Unfunded Mandates Statement................................   129
Advisory Committee Statement.....................................   129
Constitutional Authority Statement...............................   129
Applicability to Legislative Branch..............................   129
Section-by-Section Analysis of the Legislation...................   130
Changes in Existing Law Made by the Bill, as Reported............   207
Additional Views.................................................   336

                               Amendment

  The amendment is as follows:
  Strike out all after the enacting clause and insert in lieu 
thereof the following:

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

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

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

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

                        Subtitle A--Affiliations

Sec. 101. Glass-Steagall Act reformed.
Sec. 102. Activity restrictions applicable to bank holding companies 
which are not financial holding companies.
Sec. 103. Financial holding companies.
Sec. 104. Operation of State law.
Sec. 105. Mutual bank holding companies authorized.
Sec. 105A. Public meetings for large bank acquisitions and mergers.
Sec. 106. Prohibition on deposit production offices.
Sec. 107. Clarification of branch closure requirements.
Sec. 108. Amendments relating to limited purpose banks.
Sec. 109. GAO study of economic impact on community banks, other small 
financial institutions, insurance agents, and consumers.
Sec. 110. Responsiveness to community needs for financial services.

  Subtitle B--Streamlining Supervision of Financial Holding Companies

Sec. 111. Streamlining financial holding company supervision.
Sec. 112. Elimination of application requirement for financial holding 
companies.
Sec. 113. Authority of State insurance regulator and Securities and 
Exchange Commission.
Sec. 114. Prudential safeguards.
Sec. 115. Examination of investment companies.
Sec. 116. Limitation on rulemaking, prudential, supervisory, and 
enforcement authority of the Board.
Sec. 117. Equivalent regulation and supervision.
Sec. 118. Prohibition on FDIC assistance to affiliates and 
subsidiaries.
Sec. 119. Repeal of savings bank provisions in the Bank Holding Company 
Act of 1956.
Sec. 120. Technical amendment.

               Subtitle C--Subsidiaries of National Banks

Sec. 121. Permissible activities for subsidiaries of national banks.
Sec. 122. Misrepresentations regarding depository institution liability 
for obligations of affiliates.
Sec. 123. Repeal of stock loan limit in Federal Reserve Act.

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

            Chapter 1--Wholesale Financial Holding Companies

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

              Chapter 2--Wholesale Financial Institutions

Sec. 136. Wholesale financial institutions.

               Subtitle E--Preservation of FTC Authority

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

                     Subtitle F--National Treatment

Sec. 151. Foreign banks that are financial holding companies.
Sec. 152. Foreign banks and foreign financial institutions that are 
wholesale financial institutions.
Sec. 153. Reciprocity.

        Subtitle G--Federal Home Loan Bank System Modernization

Sec. 161. Short title.
Sec. 162. Definitions.
Sec. 163. Savings association membership.
Sec. 164. Advances to members; collateral.
Sec. 165. Eligibility criteria.
Sec. 166. Management of banks.
Sec. 167. Resolution Funding Corporation.
Sec. 168. Capital structure of Federal home loan banks.

                       Subtitle H--ATM Fee Reform

Sec. 171. Short title.
Sec. 172. Electronic fund transfer fee disclosures at any host ATM.
Sec. 173. Disclosure of possible fees to consumers when ATM card is 
issued.
Sec. 174. Feasibility study.
Sec. 175. No liability if posted notices are damaged.
Sec. 176. Effective date.

                 Subtitle I--Direct Activities of Banks

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

                  Subtitle J--Deposit Insurance Funds

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

                  Subtitle K--Miscellaneous Provisions

Sec. 191. Termination of ``Know Your Customer'' regulations.
Sec. 192. Study and report on Federal electronic fund Transfers.
Sec. 193. Study and report on adapting existing legislative 
requirements to online banking and lending.

                    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. Additional definitions.
Sec. 207. Government securities defined.
Sec. 208. Effective date.
Sec. 209. Rule of construction.

             Subtitle B--Bank Investment Company Activities

Sec. 211. Custody of investment company assets by affiliated bank.
Sec. 212. Lending to an affiliated investment company.
Sec. 213. Independent directors.
Sec. 214. Additional SEC disclosure authority.
Sec. 215. Definition of broker under the Investment Company Act of 
1940.
Sec. 216. Definition of dealer under the Investment Company Act of 
1940.
Sec. 217. Removal of the exclusion from the definition of investment 
adviser for banks that advise investment companies.
Sec. 218. Definition of broker under the Investment Advisers Act of 
1940.
Sec. 219. Definition of dealer under the Investment Advisers Act of 
1940.
Sec. 220. Interagency consultation.
Sec. 221. Treatment of bank common trust funds.
Sec. 222. Investment advisers prohibited from having controlling 
interest in registered investment company.
Sec. 223. Statutory disqualification for bank wrongdoing.
Sec. 224. Conforming change in definition.
Sec. 225. Conforming amendment.
Sec. 226. 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--Disclosure of Customer Costs of Acquiring Financial 
                                Products

Sec. 241. Improved and consistent disclosure.

                          TITLE III--INSURANCE

               Subtitle A--State Regulation of Insurance

Sec. 301. State regulation of the business of insurance.
Sec. 302. Mandatory insurance licensing requirements.
Sec. 303. Functional regulation of insurance.
Sec. 304. Insurance underwriting in national banks.
Sec. 305. Title insurance activities of national banks and their 
affiliates.
Sec. 306. Expedited and equalized dispute resolution for Federal 
regulators.
Sec. 307. Consumer protection regulations.
Sec. 308. Certain State affiliation laws preempted for insurance 
companies and affiliates.
Sec. 309. Interagency consultation.
Sec. 310. 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.

                      Subtitle E--Confidentiality

Sec. 351. Confidentiality of health and medical information.

          TITLE IV--UNITARY SAVINGS AND LOAN HOLDING COMPANIES

Sec. 401. Prohibition on new unitary savings and loan holding 
companies.
Sec. 402. Retention of ``Federal'' in name of converted Federal savings 
association.

                TITLE V--PRIVACY OF CONSUMER INFORMATION

        Subtitle A--Disclosure of Nonpublic Personal Information

Sec. 501. Obligations with respect to personal information.
Sec. 502. Notice concerning divulging information.
Sec. 503. Enforcement.
Sec. 505. Definitions.
Sec. 506. 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 I--FACILITATING AFFILIATION AMONG SECURITIES FIRMS, INSURANCE 
                 COMPANIES, AND DEPOSITORY INSTITUTIONS

                        Subtitle A--Affiliations

SEC. 101. GLASS-STEAGALL ACT REFORMED.

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

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

  (a) In General.--Section 4(c)(8) of the Bank Holding Company Act of 
1956 (12 U.S.C. 1843(c)(8)) is amended to read as follows:
          ``(8) shares of any company the activities of which had been 
        determined by the Board by regulation or order under this 
        paragraph as of the day before the date of the enactment of the 
        Financial Services Act of 1999, to be so closely related to 
        banking as to be a proper incident thereto (subject to such 
        terms and conditions contained in such regulation 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 striking the period and adding at the end the following: 
        ``as of the day before the date of enactment of the Financial 
        Services Act of 1999.''.

SEC. 103. FINANCIAL HOLDING COMPANIES.

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

``SEC. 6. FINANCIAL HOLDING COMPANIES.

  ``(a) Financial Holding Company Defined.--For purposes of this 
section, the term `financial holding company' means a bank holding 
company which meets the requirements of subsection (b).
  ``(b) Eligibility Requirements for Financial Holding Companies.--
          ``(1) In general.--No bank holding company may engage in any 
        activity or directly or indirectly acquire or retain shares of 
        any company under this section unless the bank holding company 
        meets the following requirements:
                  ``(A) All of the subsidiary depository institutions 
                of the bank holding company are well capitalized.
                  ``(B) All of the subsidiary depository institutions 
                of the bank holding company are well managed.
                  ``(C) All of the subsidiary depository institutions 
                of the bank holding company have achieved a rating, 
                under the Community Reinvestment Act of 1977, of 
                `satisfactory record of meeting community credit 
                needs', or better, at the most recent examination of 
                each such institution;
                  ``(D) The company has filed with the Board a 
                declaration that the company elects to be a financial 
                holding company and certifying that the company meets 
                the requirements of subparagraphs (A), (B), and (C).
          ``(2) Foreign banks and companies.--For purposes of paragraph 
        (1), the Board shall establish and apply comparable capital and 
        other operating standards to a foreign bank that operates a 
        branch or agency or owns or controls a bank or commercial 
        lending company in the United States, and any company that owns 
        or controls such foreign bank, giving due regard to the 
        principle of national treatment and equality of competitive 
        opportunity.
          ``(3) Limited exclusions from community needs requirements 
        for newly acquired depository institutions.--
                  ``(A) In general.--If the requirements of 
                subparagraph (B) are met, any depository institution 
                acquired by a bank holding company during the 24-month 
                period preceding the submission of a declaration under 
                paragraph (1)(D) and any depository institution 
                acquired after the submission of such declaration may 
                be excluded for purposes of paragraph (1)(C) until the 
                later of--
                          ``(i) the end of the 24-month period 
                        beginning on the date the acquisition of the 
                        depository institution by such company is 
                        consummated; or
                          ``(ii) the date of completion of the first 
                        examination of such depository institution 
                        under the Community Reinvestment Act of 1977 
                        which is conducted after the date of the 
                        acquisition of the depository institution.
                  ``(B) Requirements.--The requirements of this 
                subparagraph are met with respect to any bank holding 
                company referred to in subparagraph (A) if--
                          ``(i) the bank holding company has submitted 
                        an affirmative plan to the appropriate Federal 
                        banking agency to take such action as may be 
                        necessary in order for such institution to 
                        achieve a rating of `satisfactory record of 
                        meeting community credit needs', or better, at 
                        the next examination of the institution; and
                          ``(ii) the plan has been approved by such 
                        agency.
  ``(c) Engaging in Activities That Are Financial in Nature.--
          ``(1) Financial activities.--Notwithstanding section 4(a), a 
        financial holding company and a wholesale financial holding 
        company may engage in any activity, and acquire and retain the 
        shares of any company engaged in any activity, that the Board 
        has determined (by regulation or order) to be--
                  ``(A) financial in nature or incidental to such 
                financial activities; or
                  ``(B) complementary to activities that have been 
                determined to be financial in nature under this 
                subsection to the extent that the amount of such 
                complementary activities remains small in relation to 
                the authorized activities to which they are 
                complementary.
          ``(2) Factors to be considered.--In determining whether an 
        activity is financial in nature or incidental to financial 
        activities, the Board shall take into account--
                  ``(A) the purposes of this Act and the Financial 
                Services Act of 1999;
                  ``(B) changes or reasonably expected changes in the 
                marketplace in which bank holding companies compete;
                  ``(C) changes or reasonably expected changes in the 
                technology for delivering financial services; and
                  ``(D) whether such activity is necessary or 
                appropriate to allow a bank holding company and the 
                affiliates of a bank holding company to--
                          ``(i) compete effectively with any company 
                        seeking to provide financial services in the 
                        United States;
                          ``(ii) use any available or emerging 
                        technological means, including any application 
                        necessary to protect the security or efficacy 
                        of systems for the transmission of data or 
                        financial transactions, in providing financial 
                        services; and
                          ``(iii) offer customers any available or 
                        emerging technological means for using 
                        financial services.
          ``(3) Activities that are financial in nature.--The following 
        activities shall be considered to be financial in nature:
                  ``(A) Lending, exchanging, transferring, investing 
                for others, or safeguarding money or securities.
                  ``(B) Insuring, guaranteeing, or indemnifying against 
                loss, harm, damage, illness, disability, or death, or 
                providing and issuing annuities, and acting as 
                principal, agent, or broker for purposes of the 
                foregoing.
                  ``(C) Providing financial, investment, or economic 
                advisory services, including advising an investment 
                company (as defined in section 3 of the Investment 
                Company Act of 1940).
                  ``(D) Issuing or selling instruments representing 
                interests in pools of assets permissible for a bank to 
                hold directly.
                  ``(E) Underwriting, dealing in, or making a market in 
                securities.
                  ``(F) Engaging in any activity that the Board has 
                determined, by order or regulation that is in effect on 
                the date of enactment of the Financial Services Act of 
                1999, to be so closely related to banking or managing 
                or controlling banks as to be a proper incident thereto 
                (subject to the same terms and conditions contained in 
                such order or regulation, as modified by the Board).
                  ``(G) Engaging, in the United States, in any activity 
                that--
                          ``(i) a bank holding company may engage in 
                        outside the United States; and
                          ``(ii) the Board has determined, under 
                        regulations issued pursuant to section 4(c)(13) 
                        of this Act (as in effect on the day before the 
                        date of enactment of the Financial Services Act 
                        of 1999) to be usual in connection with the 
                        transaction of banking or other financial 
                        operations abroad.
                  ``(H) Directly or indirectly acquiring or 
                controlling, whether as principal, on behalf of 1 or 
                more entities (including entities, other than a 
                depository institution or subsidiary of a depository 
                institution, that the financial holding company 
                controls) or otherwise, shares, assets, or ownership 
                interests (including without limitation debt or equity 
                securities, partnership interests, trust certificates 
                or other instruments representing ownership) of a 
                company or other entity, whether or not constituting 
                control of such company or entity, engaged in any 
                activity not authorized pursuant to this section if--
                          ``(i) the shares, assets, or ownership 
                        interests are not acquired or held by a 
                        depository institution or subsidiary of a 
                        depository institution;
                          ``(ii) such shares, assets, or ownership 
                        interests are acquired and held by an affiliate 
                        of the financial holding company that is a 
                        registered broker or dealer that is engaged in 
                        securities underwriting activities, or an 
                        affiliate of such broker or dealer, as part of 
                        a bona fide underwriting 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 only for such a period of 
                        time as will permit the sale or disposition 
                        thereof on a reasonable basis consistent with 
                        the nature of the activities described in 
                        clause (ii); and
                          ``(iv) during the period such shares, assets, 
                        or ownership interests are held, the holding 
                        company does not actively participate in the 
                        day-to-day management or operation of such 
                        company or entity, except insofar as necessary 
                        to achieve the objectives of clause (ii).
                  ``(I) Directly or indirectly acquiring or 
                controlling, whether as principal, on behalf of 1 or 
                more entities (including entities, other than a 
                depository institution or subsidiary of a depository 
                institution, that the financial holding company 
                controls) or otherwise, shares, assets, or ownership 
                interests (including without limitation debt or equity 
                securities, partnership interests, trust certificates 
                or other instruments representing ownership) of a 
                company or other entity, whether or not constituting 
                control of such company or entity, engaged in any 
                activity not authorized pursuant to this section if--
                          ``(i) the shares, assets, or ownership 
                        interests are not acquired or held by a 
                        depository institution or a subsidiary of a 
                        depository institution;
                          ``(ii) such shares, assets, or ownership 
                        interests are acquired and held by an insurance 
                        company that is predominantly engaged in 
                        underwriting life, accident and health, or 
                        property and casualty insurance (other than 
                        credit-related insurance) 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 financial 
                        holding company does not directly or indirectly 
                        participate in the day-to-day management or 
                        operation of the company or entity except 
                        insofar as necessary to achieve the objectives 
                        of clauses (ii) and (iii).
          ``(4) Authorization of new financial activities.--The Board 
        shall, by regulation or order, define, consistent with the 
        purposes of this Act, the following activities as, and the 
        extent to which such activities are, financial in nature or 
        incidental to activities which are financial in nature:
                  ``(A) Lending, exchanging, transferring, investing 
                for others, or safeguarding financial assets other than 
                money or securities.
                  ``(B) Providing any device or other instrumentality 
                for transferring money or other financial assets.
                  ``(C) Arranging, effecting, or facilitating financial 
                transactions for the account of third parties.
          ``(5) Post-consummation notification.--
                  ``(A) In general.--A financial holding company and a 
                wholesale financial holding company that acquires any 
                company, or commences any activity, pursuant to this 
                subsection shall provide written notice to the Board 
                describing the activity commenced or conducted by the 
                company acquired no later than 30 calendar days after 
                commencing the activity or consummating the 
                acquisition.
                  ``(B) Approval not required for certain financial 
                activities.--Except as provided in section 4(j) with 
                regard to the acquisition of a savings association or 
                in paragraph (6) of this subsection, a financial 
                holding company and a wholesale financial holding 
                company may commence any activity, or acquire any 
                company, pursuant to paragraph (3) or any regulation 
                prescribed or order issued under paragraph (4), without 
                prior approval of the Board.
          ``(6) Notice required for large combinations.--
                  ``(A) In general.--No financial holding company or 
                wholesale financial holding company shall directly or 
                indirectly acquire, and no company that becomes a 
                financial holding company or a wholesale financial 
                holding company shall directly or indirectly acquire 
                control of, any company in the United States, including 
                through merger, consolidation, or other type of 
                business combination, that--
                          ``(i) is engaged in activities permitted 
                        under this subsection or subsection (g); and
                          ``(ii) has consolidated total assets in 
                        excess of $40,000,000,000,
                unless such holding company has provided notice to the 
                Board, not later than 60 days prior to such proposed 
                acquisition or prior to becoming a financial holding 
                company or wholesale financial holding company, and 
                during that time period, or such longer time period not 
                exceeding an additional 60 days, as established by the 
                Board, the Board has not issued a notice disapproving 
                the proposed acquisition or retention.
                  ``(B) Factors for consideration.--In reviewing any 
                prior notice filed under this paragraph, the Board 
                shall take into consideration--
                          ``(i) whether the company is in compliance 
                        with all applicable criteria set forth in 
                        subsection (b) and the provisions of subsection 
                        (d);
                          ``(ii) whether the proposed combination 
                        represents an undue aggregation of resources;
                          ``(iii) whether the proposed combination 
                        poses a risk to the deposit insurance system;
                          ``(iv) whether the proposed combination poses 
                        a risk to State insurance guaranty funds;
                          ``(v) whether the proposed combination can 
                        reasonably be expected to be in the best 
                        interests of depositors or policyholders of the 
                        respective entities;
                          ``(vi) whether the proposed transaction can 
                        reasonably be expected to further the purposes 
                        of this Act and produce benefits to the public; 
                        and
                          ``(vii) whether, and the extent to which, any 
                        subsequent failure or default of the financial 
                        holding company or wholesale financial holding 
                        company, or any affiliate of any such company, 
                        after the proposed combination could have 
                        serious adverse effects on economic conditions 
                        or financial stability.
                  ``(C) Required information.--The Board may disapprove 
                any prior notice filed under this paragraph if the 
                company submitting such notice neglects, fails, or 
                refuses to furnish to the Board all relevant 
                information required by the Board.
                  ``(D) Solicitation of views of other supervisory 
                agencies.--
                          ``(i) In general.--Upon receiving a prior 
                        notice under this paragraph, in order to 
                        provide for the submission of their views and 
                        recommendations, the Board shall give notice of 
                        the proposal to--
                                  ``(I) the appropriate Federal banking 
                                agency of any bank involved;
                                  ``(II) the appropriate functional 
                                regulator of any functionally regulated 
                                nondepository institution (as defined 
                                in section 5(c)(1)(C)) involved; and
                                  ``(III) the Secretary of the 
                                Treasury, the Attorney General, and the 
                                Federal Trade Commission.
                          ``(ii) Timing.--The views and recommendations 
                        of any agency provided notice under this 
                        paragraph shall be submitted to the Board not 
                        later than 30 calendar days after the date on 
                        which notice to the agency was given, unless 
                        the Board determines that another shorter time 
                        period is appropriate.
  ``(d) Provisions Applicable to Financial Holding Companies That Fail 
To Meet Requirements.--
          ``(1) In general.--If the Board finds that a financial 
        holding company is not in compliance with the requirements of 
        subparagraph (A), (B), or (C) of subsection (b)(1), the Board 
        shall give notice of such finding to the company.
          ``(2) Agreement to correct conditions required.--Within 45 
        days of receipt by a financial holding company of a notice 
        given under paragraph (1) (or such additional period as the 
        Board may permit), the company shall execute an agreement 
        acceptable to the Board to comply with the requirements 
        applicable to a financial holding company.
          ``(3) Board may impose limitations.--Until the conditions 
        described in a notice to a financial holding company under 
        paragraph (1) are corrected, the Board may impose such 
        limitations on the conduct or activities of the company or any 
        affiliate of the company as the Board determines to be 
        appropriate under the circumstances.
          ``(4) Failure to correct.--If, after receiving a notice under 
        paragraph (1), a financial holding company does not--
                  ``(A) execute and implement an agreement in 
                accordance with paragraph (2);
                  ``(B) comply with any limitations imposed under 
                paragraph (3);
                  ``(C) in the case of a notice of failure to comply 
                with subsection (b)(1)(A), restore each depository 
                institution subsidiary to well capitalized status 
                before the end of the 180-day period beginning on the 
                date such notice is received by the company (or such 
                other period permitted by the Board); or
                  ``(D) in the case of a notice of failure to comply 
                with subparagraph (B) or (C) of subsection (b)(1), 
                restore compliance with any such subparagraph by the 
                date the next examination of the depository institution 
                subsidiary is completed or by the end of such other 
                period as the Board determines to be appropriate,
        the Board may require such company, under such terms and 
        conditions as may be imposed by the Board and subject to such 
        extension of time as may be granted in the Board's discretion, 
        to divest control of any depository institution subsidiary or, 
        at the election of the financial holding company, instead to 
        cease to engage in any activity conducted by such company or 
        its subsidiaries pursuant to this section.
          ``(5) Consultation.--In taking any action under this 
        subsection, the Board shall consult with all relevant Federal 
        and State regulatory agencies.
  ``(e) Safeguards for Bank Subsidiaries.--A financial holding company 
shall assure that--
          ``(1) the procedures of the holding company for identifying 
        and managing financial and operational risks within the 
        company, and the subsidiaries of such company, adequately 
        protect the subsidiaries of such company which are insured 
        depository institutions or wholesale financial institutions 
        from such risks;
          ``(2) the holding company has reasonable policies and 
        procedures to preserve the separate corporate identity and 
        limited liability of such company and the subsidiaries of such 
        company, for the protection of the company's subsidiary insured 
        depository institutions or wholesale financial institutions; 
        and
          ``(3) the holding company complies with this section.
  ``(f) Authority To Retain Limited Nonfinancial Activities and 
Affiliations.--
          ``(1) In general.--Notwithstanding section 4(a), a company 
        that is not a bank holding company or a foreign bank (as 
        defined in section 1(b)(7) of the International Banking Act of 
        1978) and becomes a financial holding company after the date of 
        the enactment of the Financial Services Act of 1999 may 
        continue to engage in any activity and retain direct or 
        indirect ownership or control of shares of a company engaged in 
        any activity if--
                  ``(A) the holding company lawfully was engaged in the 
                activity or held the shares of such company on 
                September 30, 1997;
                  ``(B) the holding company is predominantly engaged in 
                financial activities as defined in paragraph (2); and
                  ``(C) the company engaged in such activity continues 
                to engage only in the same activities that such company 
                conducted on September 30, 1997, and other activities 
                permissible under this Act.
          ``(2) Predominantly financial.--For purposes of this 
        subsection, a company is predominantly engaged in financial 
        activities if the annual gross revenues derived by the holding 
        company and all subsidiaries of the holding company (excluding 
        revenues derived from subsidiary depository institutions), on a 
        consolidated basis, from engaging in activities that are 
        financial in nature or are incidental to activities that are 
        financial in nature under subsection (c) represent at least 85 
        percent of the consolidated annual gross revenues of the 
        company.
          ``(3) No expansion of grandfathered commercial activities 
        through merger or consolidation.--A financial holding company 
        that engages in activities or holds shares pursuant to this 
        subsection, or a subsidiary of such financial holding company, 
        may not acquire, in any merger, consolidation, or other type of 
        business combination, assets of any other company which is 
        engaged in any activity which the Board has not determined to 
        be financial in nature or incidental to activities that are 
        financial in nature under subsection (c).
          ``(4) Continuing revenue limitation on grandfathered 
        commercial activities.--Notwithstanding any other provision of 
        this subsection, a financial holding company may continue to 
        engage in activities or hold shares in companies pursuant to 
        this subsection only to the extent that the aggregate annual 
        gross revenues derived from all such activities and all such 
        companies does not exceed 15 percent of the consolidated annual 
        gross revenues of the financial holding company (excluding 
        revenues derived from subsidiary depository institutions).
          ``(5) Cross marketing restrictions applicable to commercial 
        activities.--An insured depository institution or wholesale 
        financial institution controlled by a financial holding company 
        shall not--
                  ``(A) offer or market, directly or through any 
                arrangement, any product or service of a company whose 
                activities are conducted or whose shares are owned or 
                controlled by the financial holding company pursuant to 
                this subsection or subparagraph (H) or (I) of 
                subsection (c)(3); or
                  ``(B) permit any of its products or services to be 
                offered or marketed, directly or through any 
                arrangement, by or through any company described in 
                subparagraph (A).
          ``(6) Transactions with nonfinancial affiliates.--An insured 
        depository institution or wholesale financial institution 
        controlled by a financial holding company or wholesale 
        financial holding company may not engage in a covered 
        transaction (as defined by section 23A(b)(7) of the Federal 
        Reserve Act) with any affiliate controlled by the company 
        pursuant to section 10(c), this subsection, or subparagraph (H) 
        or (I) of subsection (c)(3).
          ``(7) Sunset of grandfather.--A financial holding company 
        engaged in any activity, or retaining direct or indirect 
        ownership or control of shares of a company, pursuant to this 
        subsection, shall terminate such activity and divest ownership 
        or control of the shares of such company before the end of the 
        10-year period beginning on the date of the enactment of the 
        Financial Services Act of 1999. The Board may, upon 
        application, extend such 10-year period by a period not to 
        exceed an additional 5 years if such extension would not be 
        detrimental to the public interest.
  ``(g) Developing Activities.--A financial holding company and a 
wholesale financial holding company may engage directly or indirectly, 
or acquire shares of any company engaged, in any activity that the 
Board has not determined to be financial in nature or incidental to 
financial activities under subsection (c) if--
          ``(1) the holding company reasonably concludes that the 
        activity is financial in nature or incidental to financial 
        activities;
          ``(2) the gross revenues from all activities conducted under 
        this subsection represent less than 5 percent of the 
        consolidated gross revenues of the holding company;
          ``(3) the aggregate total assets of all companies the shares 
        of which are held under this subsection do not exceed 5 percent 
        of the holding company's consolidated total assets;
          ``(4) the total capital invested in activities conducted 
        under this subsection represents less than 5 percent of the 
        consolidated total capital of the holding company;
          ``(5) the Board has not determined that the activity is not 
        financial in nature or incidental to financial activities under 
        subsection (c);
          ``(6) the holding company is not required to provide prior 
        written notice of the transaction to the Board under subsection 
        (c)(6); and
          ``(7) the holding company provides written notification to 
        the Board describing the activity commenced or conducted by the 
        company acquired no later than 10 business days after 
        commencing the activity or consummating the acquisition.''.
  (b) Factors for Consideration in Reviewing Application by Financial 
Holding Company To Acquire Bank.--Section 3(c) of the Bank Holding 
Company Act of 1956 (12 U.S.C. 1842(c)) is amended by adding at the end 
the following new paragraph:
          ``(6) `Too big to fail' factor.--In considering an 
        acquisition, merger, or consolidation under this section 
        involving a financial holding company, a wholesale financial 
        holding company, or a company that would be any such holding 
        company upon the consummation of the transaction, the Board 
        shall consider whether, and the extent to which, any subsequent 
        failure or default of the financial holding company or 
        wholesale financial holding company, or any affiliate of any 
        such company, after the consummation of the transaction could 
        have serious adverse effects on economic conditions or 
        financial stability.''.
  (c) Technical and Conforming Amendments.--
          (1) Section 2 of the Bank Holding Company Act of 1956 (12 
        U.S.C. 1841) is amended by adding at the end the following new 
        subsection:
  ``(p) Insurance Company.--For purposes of sections 5, 6, and 10, the 
term `insurance company' includes any person engaged in the business of 
insurance to the extent of such activities.''.
          (2) Section 4(j) of the Bank Holding Company Act of 1956 (12 
        U.S.C. 1843(j)) is amended--
          (1) in paragraph (1)(A), by inserting ``or in any 
        complementary activity under section 6(c)(1)(B)'' after 
        ``subsection (c)(8) or (a)(2)''; and
          (2) in paragraph (3)--
                  (A) by inserting ``, other than any complementary 
                activity under section 6(c)(1)(B),'' after ``to engage 
                in any activity''; and
                  (B) by inserting ``or a company engaged in any 
                complementary activity under section 6(c)(1)(B)'' after 
                ``insured depository institution''.
  (d) Report.--
          (1) In general.--The Board of Governors of the Federal 
        Reserve System shall submit a report to the Congress by the end 
        of each of the 1st two 5-year periods beginning after the date 
        of the enactment of this Act, containing a summary of new 
        activities which are financial in nature, including 
        grandfathered commercial activities, in which any financial 
        holding company is engaged pursuant to subsection (c)(1) or (f) 
        of section 6 of the Bank Holding Company Act of 1956 (as added 
        by subsection (a)).
          (2) Other contents.--Each 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, whether by regulation, 
                order, interpretation, or guideline or by approval or 
                disapproval of an application, with regard to 
                activities of financial holding companies which are 
                incidental to activities 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 6 of the Bank 
                Holding Company Act of 1956 on market concentration in 
                the financial services industry.
                  (D) An analysis and discussion, by the Board in 
                consultation with the other Federal banking agencies 
                (as defined in section 3(z) of the Federal Deposit 
                Insurance Act), of the impact of the implementation of 
                this Act, and the amendments made by this Act, on the 
                extent of meeting community credit needs and capital 
                availability under the Community Reinvestment Act of 
                1977.

SEC. 104. OPERATION OF STATE LAW.

  (a) Affiliations.--
          (1) In general.--Except as provided in paragraph (2), no 
        State may, by statute, regulation, order, interpretation, or 
        other action, prevent or restrict an insured depository 
        institution or wholesale financial institution, or a subsidiary 
        or 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 insured 
        depository institutions or wholesale financial institutions, or 
        any subsidiary or affiliate thereof, and persons engaged in the 
        business of insurance, paragraph (1) does not prohibit--
                  (A) any State from collecting information as may be 
                necessary concerning proposed acquisitions or changes 
                or continuations in control of any person engaged in 
                the business of insurance in the State, as long as--
                          (i) the State makes reasonable efforts to 
                        first collect any such information from the 
                        insurance regulator of the State of domicile of 
                        such person; and
                          (ii) the collection of such information with 
                        regard to any such person, in the case of any 
                        State other than the State of domicile of such 
                        person, does not impede or delay any such 
                        acquisition or change or continuation in 
                        control; or
                  (B) in the case of a person engaged in the business 
                of insurance which is the subject of an acquisition or 
                change or continuation in control, the State of 
                domicile of such person from reviewing or taking action 
                (including approval or disapproval) with regard to the 
                acquisition or change or continuation in control, as 
                long as the State reviews and actions--
                          (i) are completed by the end of the 60-day 
                        period beginning on the later of the date the 
                        State received notice of the proposed action or 
                        the date the State received the information 
                        required under State law regarding such 
                        acquisition or change or continuation in 
                        control;
                          (ii) do not have the effect of 
                        discriminating, intentionally or 
                        unintentionally, against an insured depository 
                        institution or affiliate thereof or against any 
                        other person based upon affiliation with an 
                        insured depository institution; and
                          (iii) are based on standards or requirements 
                        relating to solvency or managerial fitness;
                  (C) any State from requiring an entity that is 
                acquiring control of an entity that is engaged in the 
                business of insurance and domiciled in that State to 
                maintain or restore the capital requirements of that 
                insurance entity to the level required under the 
                capital regulations of general applicability in that 
                State to avoid the requirement of preparing and filing 
                with the insurance regulatory authority of that State a 
                plan to increase the capital of the entity, except that 
                any determination by the State insurance regulatory 
                authority with respect to such requirement shall be made 
                not later than 60 days after the date of notification 
                under subparagraph (A);
                  (D) any State from taking actions with respect to the 
                receivership or conservatorship of any insurance 
                company;
                  (E) any State from restricting a change in the 
                ownership of stock in an insurance company, or a 
                company formed for the purpose of controlling such 
                insurance company, for a period authorized by State law 
                but not to exceed 5 years beginning on the date of the 
                conversion of such company from mutual to stock form; 
                or
                  (F) any State from requiring an organization which 
                has been eligible at any time since January 1, 1987, to 
                claim the special deduction provided by section 833 of 
                the Internal Revenue Code of 1986 to meet certain 
                conditions in order to undergo, as determined by the 
                State, a reorganization, recapitalization, conversion, 
                merger, consolidation, sale or other disposition of 
                substantial operating assets, demutualization, 
                dissolution, or to undertake other similar actions and 
                which is governed under a State statute enacted on May 
                22, 1998, relating to hospital, medical, and dental 
                service corporation conversions.
          (3) Preservation of state antitrust and general corporate 
        laws.--
                  (A) In general.--Subject to subsection (c) and the 
                nondiscrimination provisions contained in such 
                subsection, no provision in paragraph (1) shall be 
                construed as affecting State laws, regulations, orders, 
                interpretations, or other actions of general 
                applicability relating to the governance of 
                corporations, partnerships, limited liability companies 
                or other business associations incorporated or formed 
                under the laws of that State or domiciled in that 
                State, or the applicability of the antitrust laws of 
                any State or any State law that is similar to the 
                antitrust laws.
                  (B) Definition.--The term ``antitrust laws'' has the 
                same meaning as in subsection (a) of the first section 
                of the Clayton Act, and includes section 5 of the 
                Federal Trade Commission Act to the extent that such 
                section 5 relates to unfair methods of competition.
  (b) Activities.--
          (1) In general.--Except as provided in 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 an insured depository institution, 
        wholesale financial institution, or subsidiary or affiliate 
        thereof from engaging, or significantly interfere with the 
        ability of any such person to engage, directly or indirectly, 
        either by itself or in conjunction with a subsidiary, 
        affiliate, or any other entity or person, in any activity 
        authorized or permitted under this Act.
          (2) Insurance sales.--
                  (A) In general.--In accordance with the legal 
                standards for preemption set forth in the decision of 
                the Supreme Court of the United States in Barnett Bank 
                of Marion County N.A. v. Nelson, 517 U.S. 25 (1996), no 
                State may, by statute, regulation, order, 
                interpretation, or other action, prevent or 
                significantly interfere with the ability of an insured 
                depository institution or wholesale financial 
                institution, or a subsidiary or affiliate thereof, to 
                engage, directly or indirectly, either by itself or in 
                conjunction with a subsidiary, affiliate, or any other 
                party, in any insurance sales, solicitation, or cross-
                marketing activity.
                  (B) Certain state laws preserved.--Notwithstanding 
                subparagraph (A), a State may impose any of the 
                following restrictions, or restrictions which are 
                substantially the same as but no more burdensome or 
                restrictive than those in each of the following 
                clauses:
                          (i) Restrictions prohibiting the rejection of 
                        an insurance policy by an insured depository 
                        institution, wholesale financial institution, 
                        or any subsidiary or affiliate thereof, solely 
                        because the policy has been issued or 
                        underwritten by any person who is not 
                        associated with such insured depository 
                        institution or wholesale financial institution, 
                        or any subsidiary or affiliate thereof, when 
                        such insurance is required in connection with a 
                        loan or extension of credit.
                          (ii) Restrictions prohibiting a requirement 
                        for any debtor, insurer, or insurance agent or 
                        broker to pay a separate charge in connection 
                        with the handling of insurance that is required 
                        in connection with a loan or other extension of 
                        credit or the provision of another traditional 
                        banking product by an insured depository 
                        institution, wholesale financial institution, 
                        or any subsidiary or affiliate thereof, unless 
                        such charge would be required when the insured 
                        depository institution or wholesale financial 
                        institution, or any subsidiary or affiliate 
                        thereof, is the licensed insurance agent or 
                        broker providing the insurance.
                          (iii) Restrictions prohibiting the use of any 
                        advertisement or other insurance promotional 
                        material by an insured depository institution 
                        or wholesale financial institution, or any 
                        subsidiary or affiliate thereof, that would 
                        cause a reasonable person to believe mistakenly 
                        that--
                                  (I) a State or the Federal Government 
                                is responsible for the insurance sales 
                                activities of, or stands behind the 
                                credit of, the institution, affiliate, 
                                or subsidiary; or
                                  (II) a State, or the Federal 
                                Government guarantees any returns on 
                                insurance products, or is a source of 
                                payment on any insurance obligation of 
                                or sold by the institution, affiliate, 
                                or subsidiary;
                          (iv) Restrictions prohibiting the payment or 
                        receipt of any commission or brokerage fee or 
                        other valuable consideration for services as an 
                        insurance agent or broker to or by any person, 
                        unless such person holds a valid State license 
                        regarding the applicable class of insurance at 
                        the time at which the services are performed, 
                        except that, in this clause, the term 
                        ``services as an insurance agent or broker'' 
                        does not include a referral by an unlicensed 
                        person of a customer or potential customer to a 
                        licensed insurance agent or broker that does 
                        not include a discussion of specific insurance 
                        policy terms and conditions.
                          (v) Restrictions prohibiting any compensation 
                        paid to or received by any individual who is 
                        not licensed to sell insurance, for the 
                        referral of a customer that seeks to purchase, 
                        or seeks an opinion or advice on, any insurance 
                        product to a person that sells or provides 
                        opinions or advice on such product, based on 
                        the purchase of insurance by the customer.
                          (vi) Restrictions prohibiting the release of 
                        the insurance information of a customer 
                        (defined as information concerning the 
                        premiums, terms, and conditions of insurance 
                        coverage, including expiration dates and rates, 
                        and insurance claims of a customer contained in 
                        the records of the insured depository 
                        institution or wholesale financial institution, 
                        or a subsidiary or affiliate thereof) to any 
                        person or entity other than an officer, 
                        director, employee, agent, subsidiary, or 
                        affiliate of an insured depository institution 
                        or a wholesale financial institution, for the 
                        purpose of soliciting or selling insurance, 
                        without the express consent of the customer, 
                        other than a provision that prohibits--
                                  (I) a transfer of insurance 
                                information to an unaffiliated 
                                insurance company, agent, or broker in 
                                connection with transferring insurance 
                                in force on existing insureds of the 
                                insured depository institution or 
                                wholesale financial institution, or 
                                subsidiary or affiliate thereof, or in 
                                connection with a merger with or 
                                acquisition of an unaffiliated 
                                insurance company, agent, or broker; or
                                  (II) the release of information as 
                                otherwise authorized by State or 
                                Federal law.
                          (vii) Restrictions prohibiting the use of 
                        health information obtained from the insurance 
                        records of a customer for any purpose, other 
                        than for its activities as a licensed agent or 
                        broker, without the express consent of the 
                        customer.
                          (viii) Restrictions prohibiting the extension 
                        of credit or any product or service that is 
                        equivalent to an extension of credit, lease or 
                        sale of property of any kind, or furnishing of 
                        any services or fixing or varying the 
                        consideration for any of the foregoing, on the 
                        condition or requirement that the customer 
                        obtain insurance from an insured depository 
                        institution, wholesale financial institution, a 
                        subsidiary or affiliate thereof, or a 
                        particular insurer, agent, or broker, other 
                        than a prohibition that would prevent any 
                        insured depository institution or wholesale 
                        financial institution, or any subsidiary or 
                        affiliate thereof--
                                  (I) from engaging in any activity 
                                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 insured 
                                depository institution or wholesale 
                                financial institution, or any subsidiary 
                                or affiliate thereof.
                          (ix) Restrictions requiring, when an 
                        application by a consumer for a loan or other 
                        extension of credit from an insured depository 
                        institution or wholesale financial institution 
                        is pending, and insurance is offered or sold to 
                        the consumer or is required in connection with 
                        the loan or extension of credit by the insured 
                        depository institution or wholesale financial 
                        institution or any affiliate or subsidiary 
                        thereof, that a written disclosure be provided 
                        to the consumer or prospective customer 
                        indicating that his or her choice of an 
                        insurance provider will not affect the credit 
                        decision or credit terms in any way, except 
                        that the insured depository institution or 
                        wholesale financial institution may impose 
                        reasonable requirements concerning the 
                        creditworthiness of the insurance provider and 
                        scope of coverage chosen.
                          (x) Restrictions requiring clear and 
                        conspicuous disclosure, in writing, where 
                        practicable, to the customer prior to the sale 
                        of any insurance policy that such policy--
                                  (I) is not a deposit;
                                  (II) is not insured by the Federal 
                                Deposit Insurance Corporation;
                                  (III) is not guaranteed by the 
                                insured depository institution or 
                                wholesale financial institution or, if 
                                appropriate, its subsidiaries or 
                                affiliates or any person soliciting the 
                                purchase of or selling insurance on the 
                                premises thereof; and
                                  (IV) where appropriate, involves 
                                investment risk, including potential 
                                loss of principal.
                          (xi) Restrictions requiring that, when a 
                        customer obtains insurance (other than credit 
                        insurance or flood insurance) and credit from 
                        an insured depository institution or wholesale 
                        financial institution, or its subsidiaries or 
                        affiliates, or any person soliciting the 
                        purchase of or selling insurance on the 
                        premises thereof, the credit and insurance 
                        transactions be completed through separate 
                        documents.
                          (xii) Restrictions prohibiting, when a 
                        customer obtains insurance (other than credit 
                        insurance or flood insurance) and credit from 
                        an insured depository institution or wholesale 
                        financial institution or its subsidiaries or 
                        affiliates, or any person soliciting the 
                        purchase of or selling insurance on the 
                        premises thereof, inclusion of the expense of 
                        insurance premiums in the primary credit 
                        transaction without the express written consent 
                        of the customer.
                          (xiii) Restrictions requiring maintenance of 
                        separate and distinct books and records 
                        relating to insurance transactions, including 
                        all files relating to and reflecting consumer 
                        complaints, and requiring that such insurance 
                        books and records be made available to the 
                        appropriate State insurance regulator for 
                        inspection upon reasonable notice.
                  (C) Construction.--Nothing in this paragraph shall be 
                construed to limit the applicability of the decision of 
                the Supreme Court in Barnett Bank of Marion County N.A. 
                v. Nelson, 517 U.S. 25 (1996), with respect to a State 
                statute, regulation, order, interpretation, or other 
                action that is not described in subparagraph (B).
          (3) Insurance activities other than sales.--State statutes, 
        regulations, interpretations, orders, and other actions shall 
        not be preempted under subsection (b)(1) to the extent that 
        they--
                  (A) relate to, or are issued, adopted, or enacted for 
                the purpose of regulating the business of insurance in 
                accordance with the Act of March 9, 1945 (commonly 
                known as the ``McCarran-Ferguson Act'');
                  (B) apply only to persons that are not insured 
                depository institutions or wholesale financial 
                institutions, but that are directly engaged in the 
                business of insurance, except that such State statutes, 
                regulations, interpretations, orders, and other actions 
                may apply to--
                          (i) insured depository institutions and 
                        wholesale financial institutions engaged in 
                        providing savings bank life insurance as 
                        principal to the extent of regulating such 
                        insurance; and
                          (ii) insured depository institutions and 
                        wholesale financial institutions which are 
                        engaged in the business of insurance on behalf, 
                        directly or indirectly, of a company providing 
                        insurance as principal, such as by performing 
                        administrative or investment management or 
                        claims processing functions related to 
                        insurance, but only--
                                  (I) to the extent of such functions;
                                  (II) if such functions would normally 
                                be regulated by the insurance regulator 
                                of such State as part of the business 
                                of insurance;
                                  (III) if the State statute, 
                                regulation, interpretation, order, or 
                                other action does not directly conflict 
                                with any Federal law expressly 
                                governing such function; and
                                  (IV) if the State insurance regulator 
                                makes an effort to obtain any required 
                                information from the appropriate 
                                banking regulator of such insured 
                                depository institution or wholesale 
                                financial institution;
                  (C) do not relate to or directly or indirectly 
                regulate insurance sales, solicitations, or cross-
                marketing activities; and
                  (D) are not prohibited under subsection (c).
          (4) Financial activities other than insurance.--No State 
        statute, regulation, interpretation, order, or other action 
        shall be preempted under subsection (b)(1) to the extent that--
                  (A) it does not relate to, and is not issued and 
                adopted, or enacted for the purpose of regulating, 
                directly or indirectly, insurance sales, solicitations, 
                or cross marketing activities covered under paragraph 
                (2);
                  (B) it does not relate to, and is not issued and 
                adopted, or enacted for the purpose of regulating, 
                directly or indirectly, the business of insurance 
                activities other than sales, solicitations, or cross 
                marketing activities, covered under paragraph (3);
                  (C) it does not relate to securities investigations, 
                enforcement actions, registration, or licensure actions 
                referred to in subsection (d); and
                  (D) it--
                          (i) does not distinguish by its terms between 
                        insured depository institutions, wholesale 
                        financial institutions, and subsidiaries and 
                        affiliates thereof engaged in the activity at 
                        issue and other persons or entities engaged in 
                        the same activity in a manner that is in any 
                        way adverse with respect to the conduct of the 
                        activity by any such insured depository 
                        institution, wholesale financial institution, 
                        or subsidiary or affiliate thereof engaged in 
                        the activity at issue;
                          (ii) as interpreted or applied, does not 
                        have, and will not have, an impact on insured 
                        depository institutions, wholesale financial 
                        institutions, or subsidiaries or affiliates 
                        thereof engaged in the activity at issue, or 
                        any person or entity affiliated therewith, that 
                        is substantially more adverse than its impact 
                        on other persons or entities engaged in the 
                        same activity that are not insured depository 
                        institutions, wholesale financial institutions, 
                        or subsidiaries or affiliates thereof, or 
                        persons or entities affiliated therewith;
                          (iii) does not effectively prevent an insured 
                        depository institution, wholesale financial 
                        institution, or subsidiary or affiliate thereof 
                        from engaging in activities authorized or 
                        permitted by this Act or any other provision of 
                        Federal law; and
                          (iv) does not conflict with the intent of 
                        this Act generally to permit affiliations that 
                        are authorized or permitted by Federal law.
  (c) Nondiscrimination.--
          (1) In general.--Except as provided in subsection (b)(2)(B), 
        no State may, by statute, regulation, order, interpretation, or 
        other action, regulate the insurance activities authorized or 
        permitted under this Act or any other provision of Federal law 
        of an insured depository institution or wholesale financial 
        institution, or subsidiary or affiliate thereof, to the extent 
        that such statute, regulation, order, interpretation, or other 
        action--
                  (A) distinguishes by its terms between insured 
                depository institutions or wholesale financial 
                institutions, or subsidiaries or affiliates thereof, 
                and other persons or entities engaged in such 
                activities, in a manner that is more adverse to insured 
                depository institutions or wholesale financial 
                institutions, or subsidiaries or affiliates thereof, 
                than to other persons or entities providing the same 
                products or services or engaged in the same activities 
                that are not insured depository institutions, wholesale 
                financial institutions, or subsidiaries or affiliates 
                thereof, or persons or entities affiliated therewith;
                  (B)(i) as interpreted or applied, has or will have an 
                impact on insured depository institutions or wholesale 
                financial institutions, or subsidiaries or affiliates 
                thereof, based on their status, that is substantially 
                more adverse than its impact on other persons or 
                entities providing the same products or services or 
                engaged in the same activities that are not insured 
                depository institutions, wholesale financial institutions, 
                or subsidiaries or affiliates thereof, or persons or 
                entities affiliated therewith; and
                  (ii) for purposes of this subparagraph, the term 
                ``based on their status'' means--
                          (I) with respect to insured depository 
                        institutions and wholesale financial 
                        institutions, based on an attribute of insured 
                        depository institutions or wholesale financial 
                        institutions, such as a Federal charter or the 
                        insured status, either as a whole or with 
                        regard to a particular type or class of such 
                        institutions; and
                          (II) with respect to subsidiaries or 
                        affiliates of insured depository institutions 
                        or wholesale financial institutions, based on 
                        their relationship with such institutions;
                  (C) effectively prevents an insured depository 
                institution or wholesale financial institution, or 
                subsidiary or affiliate thereof, from engaging in 
                insurance activities authorized or permitted by this 
                Act or any other provision of Federal law; or
                  (D) conflicts with the intent of this Act generally 
                to permit affiliations that are authorized or permitted 
                by Federal law between insured depository institutions 
                or wholesale financial institutions, or subsidiaries or 
                affiliates thereof, and persons and entities engaged in 
                the business of insurance.
          (2) Prospective application.--Paragraph (1) shall not apply 
        to any State statute, regulation, order, interpretation, or 
        other action regarding any insurance sales, solicitation, or 
        cross-marketing activity described in subsection (b)(2)(A) that 
        was issued, adopted, enacted, or taken before January 1, 1999.
  (d) Limitation.--Subsections (a) and (b) shall not be construed to 
affect the jurisdiction of the securities commission (or any agency or 
office performing like functions) of any State, under the laws of such 
State--
          (1) 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
          (2) 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).
  (e) Definitions.--For purposes of this section, the following 
definitions shall apply:
          (1) Insured depository institution.--The term ``insured 
        depository institution'' includes any foreign bank that 
        maintains a branch, agency, or commercial lending company in 
        the United States.
          (2) 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. 105A. PUBLIC MEETINGS FOR LARGE BANK ACQUISITIONS AND MERGERS.

  (a) Bank Holding Company Act of 1956.--Section 3(c)(2) of the Bank 
Holding Company Act of 1956 (12 U.S.C. 1842(c)(2)) is amended--
          (1) by striking ``factors.--In every case'' and inserting 
        ``factors.--
                  ``(A) In general.--In every case''; and
          (2) by adding at the end the following new subparagraph:
                  ``(B) Public meetings.--In each case involving 1 or 
                more insured depository institutions each of which has 
                total assets of $1,000,000,000 or more, the Board 
                shall, as necessary and on a timely basis, conduct 
                public meetings in 1 or more areas where the Board 
                believes, in the sole discretion of the Board, there 
                will be a substantial public impact.''.
  (b) Federal Deposit Insurance Act.--Section 18(c) of the Federal 
Deposit Insurance Act (12 U.S.C. 1828(c)) is amended by adding at the 
end the following new paragraph:
  ``(12) Public Meetings.--In each merger transaction involving 1 or 
more insured depository institutions each of which has total assets of 
$1,000,000,000 or more, the responsible agency shall, as necessary and 
on a timely basis, conduct public meetings in 1 or more areas where the 
agency believes, in the sole discretion of the agency, there will be a 
substantial public impact.''.
  (c) National Bank Consolidation and Merger Act.--The National Bank 
Consolidation and Merger Act (12 U.S.C. 215 et seq.) is amended by 
adding at the end the following new section:

``SEC. 6. PUBLIC MEETINGS FOR LARGE BANK CONSOLIDATIONS AND MERGERS.

  ``In each case of a consolidation or merger under this Act involving 
1 or more banks each of which has total assets of $1,000,000,000 or 
more, the Comptroller shall, as necessary and on a timely basis, 
conduct public meetings in 1 or more areas where the Comptroller 
believes, in the sole discretion of the Comptroller, there will be a 
substantial public impact.''.
  (d) Home Owners' Loan Act.--Section 10(e) of the Home Owners' Loan 
Act (12 U.S.C. 1463) is amended by adding at the end the following new 
paragraph:
          ``(7) Public meetings for large depository institution 
        acquisitions and mergers.--In each case involving 1 or more 
        insured depository institutions each of which has total assets 
        of $1,000,000,000 or more, the Director shall, as necessary and 
        on a timely basis, conduct public meetings in 1 or more areas 
        where the Director believes, in the sole discretion of the 
        Director, there will be a substantial public impact.''.

SEC. 106. PROHIBITION ON DEPOSIT PRODUCTION OFFICES.

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

SEC. 107. CLARIFICATION OF BRANCH CLOSURE REQUIREMENTS.

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

SEC. 108. AMENDMENTS RELATING TO LIMITED PURPOSE BANKS.

  Section 4(f) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(f)) is amended--
          (1) in paragraph (2)(A)(ii)--
                  (A) by striking ``and'' at the end of subclause (IX);
                  (B) by inserting ``and'' after the semicolon at the 
                end of subclause (X); and
                  (C) by inserting after subclause (X) the following 
                new subclause:
                                  ``(XI) assets that are derived from, 
                                or are incidental to, activities in 
                                which institutions described in section 
                                2(c)(2)(F) are permitted to engage,'';
          (2) in paragraph (2), by striking subparagraph (B) and 
        inserting the following new subparagraphs:
                  ``(B) any bank subsidiary of such company engages in 
                any activity in which the bank was not lawfully engaged 
                as of March 5, 1987, unless the bank is well managed 
                and well capitalized;
                  ``(C) any bank subsidiary of such company both--
                          ``(i) accepts demand deposits or deposits 
                        that the depositor may withdraw by check or 
                        similar means for payment to third parties; and
                          ``(ii) engages in the business of making 
                        commercial loans (and, for purposes of this 
                        clause, loans made in the ordinary course of a 
                        credit card operation shall not be treated as 
                        commercial loans); or
                  ``(D) after the date of the enactment of the 
                Competitive Equality Amendments of 1987, any bank 
                subsidiary of such company permits any overdraft 
                (including any intraday overdraft), or incurs any such 
                overdraft in such bank's account at a Federal reserve 
                bank, on behalf of an affiliate, other than an 
                overdraft described in paragraph (3).''; and
          (3) by striking paragraphs (3) and (4) and inserting the 
        following new paragraphs:
          ``(3) Permissible overdrafts described.--For purposes of 
        paragraph (2)(D), an overdraft is described in this paragraph 
        if--
                  ``(A) such overdraft results from an inadvertent 
                computer or accounting error that is beyond the control 
                of both the bank and the affiliate; or
                  ``(B) such overdraft--
                          ``(i) is permitted or incurred on behalf of 
                        an affiliate which is monitored by, reports to, 
                        and is recognized as a primary dealer by the 
                        Federal Reserve Bank of New York; and
                          ``(ii) is fully secured, as required by the 
                        Board, by bonds, notes, or other obligations 
                        which are direct obligations of the United 
                        States or on which the principal and interest 
                        are fully guaranteed by the United States or by 
                        securities and obligations eligible for 
                        settlement on the Federal Reserve book entry 
                        system.
          ``(4) Divestiture in case of loss of exemption.--If any 
        company described in paragraph (1) fails to qualify for the 
        exemption provided under such paragraph by operation of 
        paragraph (2), such exemption shall cease to apply to such 
        company and such company shall divest control of each bank it 
        controls before the end of the 180-day period beginning on the 
        date that the company receives notice from the Board that the 
        company has failed to continue to qualify for such exemption, 
        unless before the end of such 180-day period, the company has--
                  ``(A) corrected the condition or ceased the activity 
                that caused the company to fail to continue to qualify 
                for the exemption; and
                  ``(B) implemented procedures that are reasonably 
                adapted to avoid the reoccurrence of such condition or 
                activity.''.

SEC. 109. GAO STUDY OF ECONOMIC IMPACT ON COMMUNITY BANKS, OTHER SMALL 
                    FINANCIAL INSTITUTIONS, INSURANCE AGENTS, AND 
                    CONSUMERS.

  (a) Study Required.--The Comptroller General of the United States 
shall conduct a study of the projected economic impact and the actual 
economic impact that the enactment of this Act will have on financial 
institutions, including community banks, registered brokers and dealers 
and insurance companies, which have total assets of $100,000,000 or 
less, insurance agents, and consumers.
  (b) Reports to the Congress.--
          (1) In general.--The Comptroller General of the United States 
        shall submit reports to the Congress, at the times required 
        under paragraph (2), containing the findings and conclusions of 
        the Comptroller General with regard to the study required under 
        subsection (a) and such recommendations for legislative or 
        administrative action as the Comptroller General may determine 
        to be appropriate.
          (2) Timing of reports.--The Comptroller General shall 
        submit--
                  (A) an interim report before the end of the 6-month 
                period beginning after the date of the enactment of 
                this Act;
                  (B) another interim report before the end of the next 
                6-month period; and
                  (C) a final report before the end of the 1-year 
                period after such second 6-month period,''

SEC. 110. 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) and the Securities and Exchange Commission, 
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) Report.--Before the end of the 2-year period beginning on the 
date of the enactment of this Act, the Secretary of the Treasury, in 
consultation with the Federal banking agencies and the Securities and 
Exchange Commission, 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 with respect to institutions 
covered under the Community Reinvestment Act of 1977.

  Subtitle B--Streamlining Supervision of Financial Holding Companies

SEC. 111. STREAMLINING FINANCIAL HOLDING COMPANY SUPERVISION.

  Section 5(c) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1844(c)) is amended to read as follows:
  ``(c) Reports and Examinations.--
          ``(1) Reports.--
                  ``(A) In general.--The Board from time to time may 
                require any bank holding company and any subsidiary of 
                such company to submit reports under oath to keep the 
                Board informed as to--
                          ``(i) its financial condition, systems for 
                        monitoring and controlling financial and 
                        operating risks, and transactions with 
                        depository institution subsidiaries of the 
                        holding company; and
                          ``(ii) compliance by the company or 
                        subsidiary with applicable provisions of this 
                        Act.
                  ``(B) Use of existing reports.--
                          ``(i) In general.--The Board shall, to the 
                        fullest extent possible, accept reports in 
                        fulfillment of the Board's reporting 
                        requirements under this paragraph that a bank 
                        holding company or any subsidiary of such 
                        company has provided or been required to 
                        provide to other Federal and State supervisors 
                        or to appropriate self-regulatory 
                        organizations.
                          ``(ii) Availability.--A bank holding company 
                        or a subsidiary of such company shall provide 
                        to the Board, at the request of the Board, a 
                        report referred to in clause (i).
                          ``(iii) Required use of publicly reported 
                        information.--The Board shall, to the fullest 
                        extent possible, accept in fulfillment of any 
                        reporting or recordkeeping requirements under 
                        this Act information that is otherwise required 
                        to be reported publicly and externally audited 
                        financial statements.
                          ``(iv) Reports filed with other agencies.--In 
                        the event the Board requires a report from a 
                        functionally regulated nondepository 
                        institution subsidiary of a bank holding 
                        company of a kind that is not required by 
                        another Federal or State regulator or 
                        appropriate self-regulatory organization, the 
                        Board shall request that the appropriate 
                        regulator or self-regulatory organization 
                        obtain such report. If the report is not made 
                        available to the Board, and the report is 
                        necessary to assess a material risk to the bank 
                        holding company or any of its subsidiary 
                        depository institutions or compliance with this 
                        Act, the Board may require such subsidiary to 
                        provide such a report to the Board.
                  ``(C) Definition.--For purposes of this subsection, 
                the term `functionally regulated nondepository 
                institution' means--
                          ``(i) a broker or dealer registered under the 
                        Securities Exchange Act of 1934;
                          ``(ii) an investment adviser registered under 
                        the Investment Advisers Act of 1940, or with 
                        any State, with respect to the investment 
                        advisory activities of such investment adviser 
                        and activities incidental to such investment 
                        advisory activities;
                          ``(iii) an insurance company subject to 
                        supervision by a State insurance commission, 
                        agency, or similar authority; and
                          ``(iv) an entity subject to regulation by the 
                        Commodity Futures Trading Commission, with 
                        respect to the commodities activities of such 
                        entity and activities incidental to such 
                        commodities activities.
          ``(2) Examinations.--
                  ``(A) Examination authority.--
                          ``(i) In general.--The Board may make 
                        examinations of each bank holding company and 
                        each subsidiary of a bank holding company.
                          ``(ii) Functionally regulated nondepository 
                        institution subsidiaries.--Notwithstanding 
                        clause (i), the Board may make examinations of 
                        a functionally regulated nondepository 
                        institution subsidiary of a bank holding 
                        company only if--
                                  ``(I) the Board has reasonable cause 
                                to believe that such subsidiary is 
                                engaged in activities that pose a 
                                material risk to an affiliated 
                                depository institution, or
                                  ``(II) based on reports and other 
                                available information, the Board has 
                                reasonable cause to believe that a 
                                subsidiary is not in compliance with 
                                this Act or with provisions relating to 
                                transactions with an affiliated 
                                depository institution and the Board 
                                cannot make such determination through 
                                examination of the affiliated 
                                depository institution or bank holding 
                                company.
                  ``(B) Limitations on examination authority for bank 
                holding companies and subsidiaries.--Subject to 
                subparagraph (A)(ii), the Board may make examinations 
                under subparagraph (A)(i) of each bank holding company 
                and each subsidiary of such holding company in order 
                to--
                          ``(i) inform the Board of the nature of the 
                        operations and financial condition of the 
                        holding company and such subsidiaries;
                          ``(ii) inform the Board of--
                                  ``(I) the financial and operational 
                                risks within the holding company system 
                                that may pose a threat to the safety 
                                and soundness of any subsidiary 
                                depository institution of such holding 
                                company; and
                                  ``(II) the systems for monitoring and 
                                controlling such risks; and
                          ``(iii) monitor compliance with the 
                        provisions of this Act and those governing 
                        transactions and relationships between any 
                        subsidiary depository institution and its 
                        affiliates.
                  ``(C) Restricted focus of examinations.--The Board 
                shall, to the fullest extent possible, limit the focus 
                and scope of any examination of a bank holding company 
                to--
                          ``(i) the bank holding company; and
                          ``(ii) any subsidiary of the holding company 
                        that, because of--
                                  ``(I) the size, condition, or 
                                activities of the subsidiary; or
                                  ``(II) the nature or size of 
                                transactions between such subsidiary 
                                and any depository institution which is 
                                also a subsidiary of such holding 
                                company,
                        could have a materially adverse effect on the 
                        safety and soundness of any depository 
                        institution affiliate of the holding company.
                  ``(D) Deference to bank examinations.--The Board 
                shall, to the fullest extent possible, use, for the 
                purposes of this paragraph, the reports of examinations 
                of depository institutions made by the appropriate 
                Federal and State depository institution supervisory 
                authority.
                  ``(E) Deference to other examinations.--The Board 
                shall, to the fullest extent possible, address the 
                circumstances which might otherwise permit or require 
                an examination by the Board by forgoing an examination 
                and instead reviewing the reports of examination made 
                of--
                          ``(i) any registered broker or dealer by or 
                        on behalf of the Securities and Exchange 
                        Commission;
                          ``(ii) any investment adviser registered by 
                        or on behalf of either the Securities and 
                        Exchange Commission or any State, whichever is 
                        required by law;
                          ``(iii) any licensed insurance company by or 
                        on behalf of any state regulatory authority 
                        responsible for the supervision of insurance 
                        companies; and
                          ``(iv) any other subsidiary that the Board 
                        finds to be comprehensively supervised by a 
                        Federal or State authority.
          ``(3) Capital.--
                  ``(A) In general.--The Board shall not, by 
                regulation, guideline, order or otherwise, prescribe or 
                impose any capital or capital adequacy rules, 
                guidelines, standards, or requirements on any 
                subsidiary of a financial holding company that is not a 
                depository institution and--
                          ``(i) is in compliance with applicable 
                        capital requirements of another Federal 
                        regulatory authority (including the Securities 
                        and Exchange Commission) or State insurance 
                        authority;
                          ``(ii) is registered as an investment adviser 
                        under the Investment Advisers Act of 1940, or 
                        with any State, whichever is required by law; 
                        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 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 holding company capital or 
                capital adequacy rules, guidelines, standards, or 
                requirements for purposes of this paragraph, the Board 
                shall not take into account the activities, operations, 
                or investments of an affiliated investment company 
                registered under the Investment Company Act of 1940, 
                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.--The Board shall defer to--
                  ``(A) the Securities and Exchange Commission with 
                regard to all interpretations of, and the enforcement 
                of, applicable Federal securities laws (and rules, 
                regulations, orders, and other directives issued 
                thereunder) relating to the activities, conduct, and 
                operations of registered brokers, dealers, investment 
                advisers, and investment companies;
                  ``(B) the relevant State securities authorities with 
                regard to all interpretations of, and the enforcement 
                of, applicable State securities laws (and rules, 
                regulations, orders, and other directives issued 
                thereunder) relating to the activities, conduct, and 
                operations of brokers, dealers, and investment advisers 
                required to be registered under State law; and
                  ``(C) the relevant State insurance authorities with 
                regard to all interpretations of, and the enforcement 
                of, applicable State insurance laws (and rules, 
                regulations, orders, and other directives issued 
                thereunder) relating to the activities, conduct, and 
                operations of insurance companies and insurance 
                agents.''.

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

  (a) Prevention of Duplicative Filings.--Section 5(a) of the Bank 
Holding Company Act of 1956 (12 U.S.C. 1844(a)) is amended by adding 
the following new sentence at the end: ``A declaration filed in 
accordance with section 6(b)(1)(D) shall satisfy the requirements of 
this subsection with regard to the registration of a bank holding 
company but not any requirement to file an application to acquire a 
bank pursuant to section 3.''.
  (b) Divestiture Procedures.--Section 5(e)(1) of the Bank Holding 
Company Act of 1956 (12 U.S.C. 1844(e)(1)) is amended--
          (1) by striking ``Financial Institutions Supervisory Act of 
        1966, order'' and inserting ``Financial Institutions 
        Supervisory Act of 1966, at the election of the bank holding 
        company--
          ``(A) order''; and
          (2) by striking ``shareholders of the bank holding company. 
        Such distribution'' and inserting ``shareholders of the bank 
        holding company; or
          ``(B) order the bank holding company, after due notice and 
        opportunity for hearing, and after consultation with the 
        primary supervisor for the bank, which shall be the Comptroller 
        of the Currency in the case of a national bank, and the Federal 
        Deposit Insurance Corporation and the appropriate State 
        supervisor in the case of an insured nonmember bank, to 
        terminate (within 120 days or such longer period as the Board 
        may direct) the ownership or control of any such bank by such 
        company.
The distribution referred to in subparagraph (A)''.

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

  (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 which 
        requires a bank holding companyto provide funds or other assets 
to a subsidiary insured depository institution shall not be effective 
nor enforceable if--
                  ``(A) such funds or assets are to be provided by--
                          ``(i) a bank holding company that is an 
                        insurance company, a broker or dealer 
                        registered under the Securities Exchange Act of 
                        1934, or an investment company registered under 
                        the Investment Company of 1940; or
                          ``(ii) an affiliate of the depository 
                        institution which is an insurance company or a 
                        broker or dealer registered under such Act; and
                  ``(B) the State insurance authority for the insurance 
                company or the Securities and Exchange Commission for 
                the registered broker, dealer, 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, or investment company, as the case may 
                be.
          ``(2) Notice to state insurance authority or sec required.--
        If the Board requires a bank holding company, or an affiliate 
        of a bank holding company, which is an insurance company or a 
        broker, dealer, or investment company described in paragraph 
        (1)(A) to provide funds or assets to an insured depository 
        institution subsidiary of the holding company pursuant to any 
        regulation, order, or other action of the Board referred to in 
        paragraph (1), the Board shall promptly notify the State 
        insurance authority for the insurance company or the Securities 
        and Exchange Commission, as the case may be, of such 
        requirement.
          ``(3) Divestiture in lieu of other action.--If the Board 
        receives a notice described in paragraph (1)(B) from a State 
        insurance authority or the Securities and Exchange Commission 
        with regard to a bank holding company or affiliate referred to 
        in that paragraph, the Board may order the bank holding company 
        to divest the insured depository institution not later than 180 
        days after receiving the notice, or such longer period as the 
        Board determines consistent with the safe and sound operation 
        of the insured depository institution.
          ``(4) Conditions before divestiture.--During the period 
        beginning on the date an order to divest is issued by the Board 
        under paragraph (3) to a bank holding company and ending on the 
        date the divestiture is completed, the Board may impose any 
        conditions or restrictions on the holding company's ownership 
        or operation of the insured depository institution, including 
        restricting or prohibiting transactions between the insured 
        depository institution and any affiliate of the institution, as 
        are appropriate under the circumstances.''.
  (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, any 
regulation, order, or other action of the appropriate Federal banking 
agency which requires a subsidiary to provide funds or other assets to 
an insured depository institution shall not be effective nor 
enforceable if--
          ``(1) such funds or assets are to be provided by a subsidiary 
        which is an insurance company, a broker or dealer registered 
        under the Securities Exchange Act of 1934, or an investment 
        company registered under the Investment Company Act of 1940; 
        and
          ``(2) the State insurance authority for the insurance company 
        or the Securities and Exchange Commission for the registered 
        broker or dealer or the investment company, as the case may be, 
        determines in writing sent to the insured depository 
        institution and the appropriate Federal banking agency that the 
        subsidiary 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, or 
        investment company, as the case may be.
  ``(b) Notice to State Insurance Authority or SEC Required.--If the 
appropriate Federal banking agency requires a subsidiary, which is an 
insurance company, a broker or dealer, or an investment company 
described in subsection (a)(1) to provide funds or assets to an insured 
depository institution pursuant to any regulation, order, or other 
action of the appropriate Federal banking agency referred to in 
subsection (a), the appropriate Federal banking agency shall promptly 
notify the State insurance authority for the insurance company or the 
Securities and Exchange Commission, as the case may be, of such 
requirement.
  ``(c) Divestiture in Lieu of Other Action.--If the appropriate 
Federal banking agency receives a notice described in subsection (a)(2) 
from a State insurance authority or the Securities and Exchange 
Commission with regard to a subsidiary referred to in that subsection, 
the appropriate Federal banking agency may order the insured depository 
institution to divest the subsidiary not later than 180 days after 
receiving the notice, or such longer period as the appropriate Federal 
banking agency determines consistent with the safe and sound operation 
of the insured depository institution.
  ``(d) Conditions Before Divestiture.--During the period beginning on 
the date an order to divest is issued by the appropriate Federal 
banking agency under subsection (c) to an insured depository 
institution and ending on the date the divestiture is complete, the 
appropriate Federal banking agency may impose any conditions or 
restrictions on the insured depository institution's ownership or 
operation of the subsidiary including restricting or prohibiting 
transactions between the insured depository institution and the 
subsidiary, as are appropriate under the circumstances.''.

SEC. 114. PRUDENTIAL SAFEGUARDS.

  Section 5 of the Bank Holding Company Act of 1956 (12 U.S.C. 1844) is 
amended by inserting after subsection (g) (as added by section 113 of 
this subtitle) the following new subsection:
  ``(h) Prudential Safeguards.--
          ``(1) In general.--The Board may, by regulation or order, 
        impose restrictions or requirements on relationships or 
        transactions between a depository institution subsidiary of a 
        bank holding company and any affiliate of such depository 
        institution (other than a subsidiary of such institution) which 
        the Board finds is consistent with the public interest, the 
        purposes of this Act, the Financial Services Act of 1999, the 
        Federal Reserve Act, and other Federal law applicable to 
        depository institution subsidiaries of bank holding companies 
        and the standards in paragraph (2).
          ``(2) Standards.--The Board may exercise authority under 
        paragraph (1) if the Board finds that such action will have any 
        of the following effects:
                  ``(A) Avoid any significant risk to the safety and 
                soundness of depository institutions or any Federal 
                deposit insurance fund.
                  ``(B) Enhance the financial stability of bank holding 
                companies.
                  ``(C) Avoid conflicts of interest or other abuses.
                  ``(D) Enhance the privacy of customers of depository 
                institutions.
                  ``(E) Promote the application of national treatment 
                and equality of competitive opportunity between nonbank 
                affiliates owned or controlled by domestic bank holding 
                companies and nonbank affiliates owned or controlled by 
                foreign banks operating in the United States.
          ``(3) Review.--The Board shall regularly--
                  ``(A) review all restrictions or requirements 
                established pursuant to paragraph (1) to determine 
                whether there is a continuing need for any such 
                restriction or requirement to carry out the purposes of 
                the Act, including any purpose described in paragraph 
                (2); and
                  ``(B) modify or eliminate any restriction or 
                requirement the Board finds is no longer required for 
                such purposes.''.

SEC. 115. EXAMINATION OF INVESTMENT COMPANIES.

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

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

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

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

  ``(a) Limitation on Direct Action.--
          ``(1) In general.--The Board may not prescribe regulations, 
        issue or seek entry of orders, impose restraints, restrictions, 
        guidelines, requirements, safeguards, or standards, or 
        otherwise take any action under or pursuant to any provision of 
        this Act or section 8 of the Federal Deposit Insurance Act 
        against or with respect to a regulated subsidiary of a bank 
        holding company unless the action is necessary to prevent or 
        redress an unsafe or unsound practice or breach of fiduciary 
        duty by such subsidiary that poses a material risk to--
                  ``(A) the financial safety, soundness, or stability 
                of an affiliated depository institution; or
                  ``(B) the domestic or international payment system.
          ``(2) Criteria for board action.--The Board shall not take 
        action otherwise permitted under paragraph (1) unless the Board 
        finds that it is not reasonably possible to effectively protect 
        against the material risk at issue through action directed at 
        or against the affiliated depository institution or against 
        depository institutions generally.
  ``(b) Limitation on Indirect Action.--The Board may not prescribe 
regulations, issue or seek entry of orders, impose restraints, 
restrictions, guidelines, requirements, safeguards, or standards, or 
otherwise take any action under or pursuant to any provision of this 
Act or section 8 of the Federal Deposit Insurance Act against or with 
respect to a financial holding company or a wholesale financial holding 
company where the purpose or effect of doing so would be to take action 
indirectly against or with respect to a regulated subsidiary that may 
not be taken directly against or with respect to such subsidiary in 
accordance with subsection (a).
  ``(c) Actions Specifically Authorized.--Notwithstanding subsection 
(a), the Board may take action under this Act or section 8 of the 
Federal Deposit Insurance Act to enforce compliance by a regulated 
subsidiary with Federal law that the Board has specific jurisdiction to 
enforce against such subsidiary.
  ``(d) Regulated Subsidiary Defined.--For purposes of this section, 
the term `regulated subsidiary' means any company that is not a bank 
holding company and is--
          ``(1) a broker or dealer registered under the Securities 
        Exchange Act of 1934;
          ``(2) an investment adviser registered by or on behalf of 
        either the Securities and Exchange Commission or any State, 
        whichever is required by law, with respect to the investment 
        advisory activities of such investment adviser and activities 
        incidental to such investment advisory activities;
          ``(3) an investment company registered under the Investment 
        Company Act of 1940;
          ``(4) an insurance company or an insurance agency, with 
        respect to the insurance activities and activities incidental 
        to such insurance activities, subject to supervision by a State 
        insurance commission, agency, or similar authority; or
          ``(5) an entity subject to regulation by the Commodity 
        Futures Trading Commission, with respect to the commodities 
        activities of such entity and activities incidental to such 
        commodities activities.''.

SEC. 117. EQUIVALENT REGULATION AND SUPERVISION.

  (a) In General.--Notwithstanding any other provision of law, the 
provisions of--
          (1) section 5(c) of the Bank Holding Company Act of 1956 (as 
        amended by this Act) that limit the authority of the Board of 
        Governors of the Federal Reserve System to require reports 
        from, to make examinations of, or to impose capital 
        requirements on bank holding companies and their nonbank 
        subsidiaries or that require deference to other regulators; and
          (2) section 10A of the Bank Holding Company Act of 1956 (as 
        added by this Act) that limit whatever authority the Board 
        might otherwise have to take direct or indirect action with 
        respect to bank holding companies and their nonbank 
        subsidiaries,
shall also limit whatever authority that a Federal banking agency (as 
defined in section 3(z) of the Federal Deposit Insurance Act) might 
otherwise have under any statute to require reports, make examinations, 
impose capital requirements or take any other direct or indirect action 
with respect to bank holding companies and their nonbank subsidiaries 
(including nonbank subsidiaries of depository institutions), subject to 
the same standards and requirements as are applicable to the Board 
under such provisions.
  (b) Certain Examinations Authorized.--No provision of this section 
shall be construed as preventing the Federal Deposit Insurance 
Corporation, if the Corporation finds it necessary to determine the 
condition of an insured depository institution for insurance purposes, 
from examining an affiliate of any insured depository institution, 
pursuant to its authority under section 10(b)(4) of the Federal Deposit 
Insurance Act, as may be necessary to disclose fully the relationship 
between the depository institution and the affiliate, and the effect of 
such relationship on the depository institution.

SEC. 118. PROHIBITION ON FDIC ASSISTANCE TO AFFILIATES AND 
                    SUBSIDIARIES.

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

SEC. 119. 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. 120. 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. PERMISSIBLE ACTIVITIES FOR SUBSIDIARIES OF NATIONAL BANKS.

  (a) Financial Subsidiaries of National Banks.--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 5136C; and
          (2) by inserting after section 5136 (12 U.S.C. 24) the 
        following new section:

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

  ``(a) Subsidiaries of National Banks Authorized To Engage in 
Financial Activities.--
          ``(1) Exclusive authority.--No provision of section 5136 or 
        any other provision of this title LXII of the Revised Statutes 
        shall be construed as authorizing a subsidiary of a national 
        bank to engage in, or own any share of or any other interest in 
        any company engaged in, any activity that--
                  ``(A) is not permissible for a national bank to 
                engage in directly; or
                  ``(B) is conducted under terms or conditions other 
                than those that would govern the conduct of such 
                activity by a national bank,
        unless a national bank is specifically authorized by the 
        express terms of a Federal statute and not by implication or 
        interpretation to acquire shares of or an interest in, or to 
        control, such subsidiary, such as by paragraph (2) of this 
        subsection and section 25A of the Federal Reserve Act.
          ``(2) Specific authorization to conduct agency activities 
        which are financial in nature.--A national bank may control a 
        company that engages in agency activities that have been 
        determined to be financial in nature or incidental to such 
        financial activities pursuant to and in accordance with section 
        6(c) of the Bank Holding Company Act of 1956 if--
                  ``(A) the company engages in such activities solely 
                as agent and not directly or indirectly as principal;
                  ``(B) the national bank is well capitalized and well 
                managed, and has achieved a rating of satisfactory or 
                better at the most recent examination of the bank under 
                the Community Reinvestment Act of 1977;
                  ``(C) all depository institution affiliates of the 
                national bank are well capitalized and well managed, 
                and have achieved a rating of satisfactory or better at 
                the most recent examination of each such depository 
                institution under the Community Reinvestment Act of 
                1977; and
                  ``(D) the bank has received the approval of the 
                Comptroller of the Currency.
          ``(3) Definitions.--
                  ``(A) Company; control; affiliate; subsidiary.--The 
                terms `company', `control', `affiliate', and 
                `subsidiary' have the meanings given to such terms in 
                section 2 of the Bank Holding Company Act of 1956.
                  ``(B) Well capitalized.--The term `well capitalized' 
                has the same meaning as in section 38 of the Federal 
                Deposit Insurance Act and, for purposes of this 
                section, the Comptroller shall have exclusive 
                jurisdiction to determine whether a national bank is 
                well capitalized.
                  ``(C) Well managed.--The term `well managed' means--
                          ``(i) in the case of a 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 that rating is given; or
                          ``(ii) 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.
                  ``(D) Other incorporated terms.--For purposes of this 
                paragraph, the terms `appropriate Federal banking 
                agency' and `depository institution' have the meanings 
                given to such terms in section 3 of the Federal Deposit 
                Insurance Act.
  ``(b) Limited Exclusions From Community Needs Requirements for Newly 
Acquired Depository Institutions.--Any depository institution which 
becomes affiliated with a national bank during the 24-month period 
preceding the submission of an application to acquire a subsidiary 
under subsection (a)(2), and any depository institution which becomes 
so affiliated after the approval of such application, may be excluded 
for purposes of subsection (a)(2)(C) during the 24-month period 
beginning on the date of such acquisition if--
          ``(1) the depository institution has submitted an affirmative 
        plan to the appropriate Federal banking agency (as defined in 
        section 3 of the Federal Deposit Insurance Act) to take such 
        action as may be necessary in order for such institution to 
        achieve a `satisfactory record of meeting community credit 
        needs', or better, at the next examination of the institution 
        under the Community Reinvestment Act of 1977; and
          ``(2) the plan has been approved by the appropriate Federal 
        banking agency.''.
  (b) Limitation on Certain Activities in Subsidiaries.--Section 
21(a)(1) of the Banking Act of 1933 (12 U.S.C. 378(a)(1)) is amended--
          (1) by inserting ``, or to be a subsidiary of any person, 
        firm, corporation, association, business trust, or similar 
        organization engaged (unless such subsidiary (A) was lawfully 
        engaged in such securities activities as of September 15, 1997, 
        or (B) is a nondepository subsidiary of (i) a foreign bank and 
        is not also a subsidiary of a domestic depository institution, 
        or (ii) an unincorporatedprivate bank that is in operation as 
of the date of the enactment of the Financial Services Act of 1999 and 
is not insured under the Federal Deposit Insurance Act)'' after ``to 
engage at the same time''; and
          (2) by inserting ``or any subsidiary of such bank, company, 
        or institution'' after ``or private bankers''.
  (c) Technical and Conforming Amendments.--
          (1) Antitying.--Section 106(a) of the Bank Holding Company 
        Act Amendments of 1970 is amended by adding at the end the 
        following new sentence: ``For purposes of this section, a 
        subsidiary of a national bank which engages in activities as an 
        agent pursuant to section 5136A(a)(2) shall be deemed to be a 
        subsidiary of a bank holding company, and not a subsidiary of a 
        bank.''.
          (2) Section 23b.--Section 23B(a) of the Federal Reserve Act 
        (12 U.S.C. 371c-1(a)) is amended by adding at the end the 
        following new paragraph:
          ``(4) Subsidiary of national bank.--For purposes of this 
        section, a subsidiary of a national bank which engages in 
        activities as an agent pursuant to section 5136A(a)(2) shall be 
        deemed to be an affiliate of the national bank and not a 
        subsidiary of the bank.''.
  (d) Clerical Amendment.--The table of sections for chapter one of 
title LXII of the Revised Statutes of the United States is amended--
           (1) by redesignating the item relating to section 5136A as 
        section 5136C; and
           (2) by inserting after the item relating to section 5136 the 
        following new item:

``5136A. Financial subsidiaries of national banks.''.

SEC. 122. MISREPRESENTATIONS REGARDING DEPOSITORY INSTITUTION LIABILITY 
                    FOR OBLIGATIONS OF AFFILIATES.

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

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

  ``(a) In General.--No institution-affiliated party of an insured 
depository institution or institution-affiliated party of a subsidiary 
or affiliate of an insured depository institution shall fraudulently 
represent that the institution is or will be liable for any obligation 
of a subsidiary or other affiliate of the institution.
  ``(b) Criminal Penalty.--Whoever violates subsection (a) shall be 
fined under this title, imprisoned for not more than 5 year, or both.
  ``(c) Institution-Affiliated Party Defined.--For purposes of this 
section, the term `institution-affiliated party' with respect to a 
subsidiary or affiliate has the same meaning as in section 3 of the 
Federal Deposit Insurance Act, except references to an insured 
depository institution shall be deemed to be references to a subsidiary 
or affiliate of an insured depository institution.
  ``(d) Other Definitions.--For purposes of this section, the terms 
`affiliate', `insured depository institution', and `subsidiary' have 
same meanings as in section 3 of the Federal Deposit Insurance Act.''.
  (b) Clerical Amendment.--The table of sections for chapter 47 of 
title 18, United States Code, is amended by inserting after the item 
relating to section 1007 the following new item:

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

SEC. 123. REPEAL OF STOCK LOAN LIMIT IN FEDERAL RESERVE ACT.

  Section 11 of the Federal Reserve Act (12 U.S.C. 248) is amended by 
striking the paragraph designated as ``(m)'' and inserting ``(m) 
[Repealed]''.

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

            CHAPTER 1--WHOLESALE FINANCIAL HOLDING COMPANIES

SEC. 131. WHOLESALE FINANCIAL HOLDING COMPANIES ESTABLISHED.

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

``SEC. 10. WHOLESALE FINANCIAL HOLDING COMPANIES.

  ``(a) Companies That Control Wholesale Financial Institutions.--
          ``(1) Wholesale financial holding company defined.--The term 
        `wholesale financial holding company' means any company that--
                  ``(A) is registered as a bank holding company;
                  ``(B) is predominantly engaged in financial 
                activities as defined in section 6(f)(2);
                  ``(C) controls 1 or more wholesale financial 
                institutions;
                  ``(D) does not control--
                          ``(i) a bank other than a wholesale financial 
                        institution;
                          ``(ii) an insured bank other than an 
                        institution permitted under subparagraph (D), 
                        (F), or (G) of section 2(c)(2); or
                          ``(iii) a savings association; and
                  ``(E) is not a foreign bank (as defined in section 
                1(b)(7) of the International Banking Act of 1978).
          ``(2) Savings association transition period.--Notwithstanding 
        paragraph (1)(D)(iii), the Board may permit a company that 
        controls a savings association and that otherwise meets the 
        requirements of paragraph (1) to become supervised under 
        paragraph (1), if the company divests control of any such 
        savings association within such period not to exceed 5 years 
        after becoming supervised under paragraph (1) as permitted by 
        the Board.
          ``(3) Companies supervised by securities and exchange 
        commission.--Any wholesale financial institution holding 
        company for which an election to be subject to supervision by 
        the Commission is in effect under section 17(i) of the 
        Securities Exchange Act of 1934 shall not be treated as a 
        wholesale financial institution holding company, and shall not 
        be subject to supervision by the Board, for purposes of this 
        Act.
  ``(b) Supervision by the Board.--
          ``(1) In general.--The provisions of this section shall 
        govern the reporting, examination, and capital requirements of 
        wholesale financial holding companies.
          ``(2) Reports.--
                  ``(A) In general.--The Board from time to time may 
                require any wholesale financial holding company and any 
                subsidiary of such company to submit reports under oath 
                to keep the Board informed as to--
                          ``(i) the company's or subsidiary's 
                        activities, financial condition, policies, 
                        systems for monitoring and controlling 
                        financial and operational risks, and 
                        transactions with depository institution 
                        subsidiaries of the holding company; and
                          ``(ii) the extent to which the company or 
                        subsidiary has complied with the provisions of 
                        this Act and regulations prescribed and orders 
                        issued under this Act.
                  ``(B) Use of existing reports.--
                          ``(i) In general.--The Board shall, to the 
                        fullest extent possible, accept reports in 
                        fulfillment of the Board's reporting 
                        requirements under this paragraph that the 
                        wholesale financial holding company or any 
                        subsidiary of such company has provided or been 
                        required to provide to other Federal and State 
                        supervisors or to appropriate self-regulatory 
                        organizations.
                          ``(ii) Availability.--A wholesale financial 
                        holding company or a subsidiary of such company 
                        shall provide to the Board, at the request of 
                        the Board, a report referred to in clause (i).
                  ``(C) Exemptions from reporting requirements.--
                          ``(i) In general.--The Board may, by 
                        regulation or order, exempt any company or 
                        class of companies, under such terms and 
                        conditions and for such periods as the Board 
                        shall provide in such regulation or order, from 
                        the provisions of this paragraph and any 
                        regulation prescribed under this paragraph.
                          ``(ii) Criteria for consideration.--In making 
                        any determination under clause (i) with regard 
                        to any exemption under such clause, the Board 
                        shall consider, among such other factors as the 
                        Board may determine to be appropriate, the 
                        following factors:
                                  ``(I) Whether information of the type 
                                required under this paragraph is 
                                available from a supervisory agency (as 
                                defined in section 1101(7) of the Right 
                                to Financial Privacy Act of 1978) or a 
                                foreign regulatory authority of a 
                                similar type.
                                  ``(II) The primary business of the 
                                company.
                                  ``(III) The nature and extent of the 
                                domestic and foreign regulation of the 
                                activities of the company.
          ``(3) Examinations.--
                  ``(A) Limited use of examination authority.--The 
                Board may make examinations of each wholesale financial 
                holding company and each subsidiary of such company in 
                order to--
                          ``(i) inform the Board regarding the nature 
                        of the operations and financial condition of 
                        the wholesale financial holding company and its 
                        subsidiaries;
                          ``(ii) inform the Board regarding--
                                  ``(I) the financial and operational 
                                risks within the wholesale financial 
                                holding company system that may affect 
                                any depository institution owned by 
                                such holding company; and
                                  ``(II) the systems of the holding 
                                company and its subsidiaries for 
                                monitoring and controlling those risks; 
                                and
                          ``(iii) monitor compliance with the 
                        provisions of this Act and those governing 
                        transactions and relationships between any 
                        depository institution controlled by the 
                        wholesale financial holding company and any of 
                        the company's other subsidiaries.
                  ``(B) Restricted focus of examinations.--The Board 
                shall, to the fullest extent possible, limit the focus 
                and scope of any examination of a wholesale financial 
                holding company under this paragraph to--
                          ``(i) the holding company; and
                          ``(ii) any subsidiary (other than an insured 
                        depository institution subsidiary) of the 
                        holding company that, because of the size, 
                        condition, or activities of the subsidiary, the 
                        nature or size of transactions between such 
                        subsidiary and any affiliated depository 
                        institution, or the centralization of functions 
                        within the holding company system, could have a 
                        materially adverse effect on the safety and 
                        soundness of any depository institution 
                        affiliate of the holding company.
                  ``(C) Deference to bank examinations.--The Board 
                shall, to the fullest extent possible, use the reports 
                of examination of depository institutions made by the 
                Comptroller of the Currency, the Federal Deposit 
                Insurance Corporation, the Director of the Office of 
                Thrift Supervision or the appropriate State depository 
                institution supervisory authority for the purposes of 
                this section.
                  ``(D) Deference to other examinations.--The Board 
                shall, to the fullest extent possible, address the 
                circumstances which might otherwise permit or require 
                an examination by the Board by forgoing an examination 
                and by instead reviewing the reports of examination 
                made of--
                          ``(i) any registered broker or dealer or any 
                        registered investment adviser by or on behalf 
                        of the Commission; and
                          ``(ii) any licensed insurance company by or 
                        on behalf of any State government insurance 
                        agency responsible for the supervision of the 
                        insurance company.
                  ``(E) Confidentiality of reported information.--
                          ``(i) In general.--Notwithstanding any other 
                        provision of law, the Board shall not be 
                        compelled to disclose any nonpublic information 
                        required to be reported under this paragraph, 
                        or any information supplied to the Board by any 
                        domestic or foreign regulatory agency, that 
                        relates to the financial or operational 
                        condition of any wholesale financial holding 
                        company or any subsidiary of such company.
                          ``(ii) Compliance with requests for 
                        information.--No provision of this subparagraph 
                        shall be construed as authorizing the Board to 
                        withhold information from the Congress, or 
                        preventing the Board from complying with a 
                        request for information from any other Federal 
                        department or agency for purposes within the 
                        scope of such department's or agency's 
                        jurisdiction, or from complying with any order 
                        of a court of competent jurisdiction in an 
                        action brought by the United States or the 
                        Board.
                          ``(iii) Coordination with other law.--For 
                        purposes of section 552 of title 5, United 
                        States Code, this subparagraph shall be 
                        considered to be a statute described in 
                        subsection (b)(3)(B) of such section.
                          ``(iv) Designation of confidential 
                        information.--In prescribing regulations to 
                        carry out the requirements of this subsection, 
                        the Board shall designate information described 
                        in or obtained pursuant to this paragraph as 
                        confidential information.
                  ``(F) Costs.--The cost of any examination conducted 
                by the Board under this section may be assessed 
                against, and made payable by, the wholesale financial 
                holding company.
          ``(4) Capital adequacy guidelines.--
                  ``(A) Capital adequacy provisions.--Subject to the 
                requirements of, and solely in accordance with, the 
                terms of this paragraph, the Board may adopt capital 
                adequacy rules or guidelines for wholesale financial 
                holding companies.
                  ``(B) Method of calculation.--In developing rules or 
                guidelines under this paragraph, the following 
                provisions shall apply:
                          ``(i) Focus on double leverage.--The Board 
                        shall focus on the use by wholesale financial 
                        holding companies of debt and other liabilities 
                        to fund capital investments in subsidiaries.
                          ``(ii) No unweighted capital ratio.--The 
                        Board shall not, by regulation, guideline, 
                        order, or otherwise, impose under this section 
                        a capital ratio that is not based on 
                        appropriate risk-weighting considerations.
                          ``(iii) No capital requirement on regulated 
                        entities.--The Board shall not, by regulation, 
                        guideline, order or otherwise, prescribe or 
                        impose any capital or capital adequacy rules, 
                        standards, guidelines, or requirements upon any 
                        subsidiary that--
                                  ``(I) is not a depository 
                                institution; and
                                  ``(II) is in compliance with 
                                applicable capital requirements of 
                                another Federal regulatory authority 
                                (including the Securities and Exchange 
                                Commission) or State insurance 
                                authority.
                          ``(iv) Limitation.--The Board shall not, by 
                        regulation, guideline, order or otherwise, 
                        prescribe or impose any capital or capital 
                        adequacy rules, standards, guidelines, or 
                        requirements upon any subsidiary that is not a 
                        depository institution and that is registered 
                        as an investment adviser under the Investment 
                        Advisers Act of 1940, except that this clause 
                        shall not be construed as preventing the Board 
                        from imposing capital or capital adequacy 
                        rules, guidelines, standards, or requirements 
                        with respect to activities of a registered 
                        investment adviser other than investment 
                        advisory activities or activities incidental to 
                        investment advisory activities.
                          ``(v) Limitations on indirect action.--In 
                        developing, establishing, or assessing holding 
                        company capital or capital adequacy rules, 
                        guidelines, standards, or requirements for 
                        purposes of this paragraph, the Board shall not 
                        take into account the activities, operations, 
                        or investments of an affiliated investment 
                        company registered under the Investment Company 
                        Act of 1940, 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.
                          ``(vi) Appropriate exclusions.--The Board 
                        shall take full account of--
                                  ``(I) the capital requirements made 
                                applicable to any subsidiary that is 
                                not a depository institution by another 
                                Federal regulatory authority or State 
                                insurance authority; and
                                  ``(II) industry norms for 
                                capitalization of a company's 
                                unregulated subsidiaries and 
                                activities.
                          ``(vii) Internal risk management models.--The 
                        Board may incorporate internal risk management 
                        models of wholesale financial holding companies 
                        into its capital adequacy guidelines or rules 
                        and may take account of the extent to which 
                        resources of a subsidiary depository 
                        institution may be used to service the debt or 
                        other liabilities of the wholesale financial 
                        holding company.
  ``(c) Nonfinancial Activities and Investments.--
          ``(1) Grandfathered activities.--
                  ``(A) In general.--Notwithstanding section 4(a), a 
                company that becomes a wholesale financial holding 
                company may continue to engage, directly or indirectly, 
                in any activity and may retain ownership and control of 
                shares of a company engaged in any activity if--
                          ``(i) on the date of the enactment of the 
                        Financial Services Act of 1999, such wholesale 
                        financial holding company was lawfully engaged 
                        in that nonfinancial activity, held the shares 
                        of such company, or had entered into a contract 
                        to acquire shares of any company engaged in 
                        such activity; and
                          ``(ii) the company engaged in such activity 
                        continues to engage only in the same activities 
                        that such company conducted on the date of the 
                        enactment of the Financial Services Act of 
                        1999, and other activities permissible under 
                        this Act.
                  ``(B) No expansion of grandfathered commercial 
                activities through merger or consolidation.--A 
                wholesale financial holding company that engages in 
                activities or holds shares pursuant to this paragraph, 
                or a subsidiary of such wholesale financial holding 
                company, may not acquire, in any merger, consolidation, 
                or other type of business combination, assets of any 
                other company which is engaged in any activity which 
                the Board has not determined to be financial in nature 
                or incidental to activities that are financial in 
                nature under section 6(c).
                  ``(C) Limitation to single exemption.--No company 
                that engages in any activity or controls any shares 
                under subsection (f) of section 6 may engage in any 
                activity or own any shares pursuant to this paragraph.
          ``(2) Commodities.--
                  ``(A) In general.--Notwithstanding section 4(a), a 
                wholesale financial holding company which was 
                predominately engaged as of January 1, 1997, in 
                financial activities in the United States (or any 
                successor to any such company) may engage in, or 
                directly or indirectly own or control shares of a 
                company engaged in, activities related to the trading, 
                sale, or investment in commodities and underlying 
                physical properties that were not permissible for bank 
                holding companies to conduct in the United States as of 
                January 1, 1997, if such wholesale financial holding 
                company, or any subsidiary of such holding company, was 
                engaged directly, indirectly, or through any such 
                company in any of such activities as of January 1, 
                1997, in the United States.
                  ``(B) Limitation.--The attributed aggregate 
                consolidated assets of a wholesale financial holding 
                company held under the authority granted under this 
                paragraph and not otherwise permitted to be held by all 
                wholesale financial holding companies under this 
                section may not exceed 5 percent of the total 
                consolidated assets of the wholesale financial holding 
                company, except that the Board may increase such 
                percentage of total consolidated assets by such amounts 
                and under such circumstances as the Board considers 
                appropriate, consistent with the purposes of this Act.
          ``(3) Cross marketing restrictions.--A wholesale financial 
        holding company shall not permit--
                  ``(A) any company whose shares it owns or controls 
                pursuant to paragraph (1) or (2) to offer or market any 
                product or service of an affiliated wholesale financial 
                institution; or
                  ``(B) any affiliated wholesale financial institution 
                to offer or market any product or service of any 
                company whose shares are owned or controlled by such 
                wholesale financial holding company pursuant to such 
                paragraphs.
  ``(d) Qualification of Foreign Bank as Wholesale Financial Holding 
Company.--
          ``(1) In general.--Any foreign bank, or any company that owns 
        or controls a foreign bank, that operates a branch, agency, or 
        commercial lending company in the United States, including a 
        foreign bank or company that owns or controls a wholesale 
        financial institution, may request a determination from the 
        Board that such bank or company be treated as a wholesale 
        financial holding company other than for purposes of subsection 
        (c), subject to such conditions as the Board considers 
        appropriate, giving due regard to the principle of national 
        treatment and equality of competitive opportunity and the 
        requirements imposed on domestic banks and companies.
          ``(2) Conditions for treatment as a wholesale financial 
        holding company.--A foreign bank and a company that owns or 
        controls a foreign bank may not be treated as a wholesale 
        financial holding company unless the bank and company meet and 
        continue to meet the following criteria:
                  ``(A) No insured deposits.--No deposits held directly 
                by a foreign bank or through an affiliate (other than 
                an institution described in subparagraph (D) or (F) of 
                section 2(c)(2)) are insured under the Federal Deposit 
                Insurance Act.
                  ``(B) Capital standards.--The foreign bank meets 
                risk-based capital standards comparable to the capital 
                standards required for a wholesale financial 
                institution, giving due regard to the principle of 
                national treatment and equality of competitive 
                opportunity.
                  ``(C) Transaction with affiliates.--Transactions 
                between a branch, agency, or commercial lending company 
                subsidiary of the foreign bank in the United States, 
                and any securities affiliate or company in which the 
                foreign bank (or any company that owns or controls such 
                foreign bank) has invested and which engages in any 
                activity pursuant to subsection (e) or (g) of section 
                6, comply with the provisions of sections 23A and 23B 
                of the Federal Reserve Act in the same manner and to 
                the same extent as such transactions would be required 
                to comply with such sections if the bank were a member 
                bank.
          ``(3) Treatment as a wholesale financial institution.--Any 
        foreign bank which is, or is affiliated with a company which 
        is, treated as a wholesale financial holding company under this 
        subsection shall be treated as a wholesale financial 
        institution for purposes of subsections (c)(1)(C) and (c)(3) of 
        section 9B of the Federal Reserve Act, and any such foreign 
        bank or company shall be subject to paragraphs (3), (4), and 
        (5) of section 9B(d) of the Federal Reserve Act, except that 
        the Board may adopt such modifications, conditions, or 
        exemptions as the Board deems appropriate, giving due regard to 
        the principle of national treatment and equality of competitive 
        opportunity.
          ``(4) Supervision of foreign bank which maintains no banking 
        presence other than control of a wholesale financial 
        institution.--A foreign bank that owns or controls a wholesale 
        financial institution but does not operate a branch, agency, or 
        commercial lending company in the United States (and any 
        company that owns or controls such foreign bank) may request a 
        determination from the Board that such bank or company be 
        treated as a wholesale financial holding company, except that 
        such bank or company shall be subject to the restrictions of 
        paragraphs (2)(A) and (3) of this subsection.
          ``(5) No effect on other provisions.--This section shall not 
        be construed as limiting the authority of the Board under the 
        International Banking Act of 1978 with respect to the 
        regulation, supervision, or examination of foreign banks and 
        their offices and affiliates in the United States.
          ``(6) Applicability of community reinvestment act of 1977.--
        The branches in the United States of a foreign bank that is, or 
        is affiliated with a company that is, treated as a wholesale 
        financial holding company shall be subject to section 9B(b)(11) 
        of the Federal Reserve Act as if the foreign bank were a 
        wholesale financial institution under such section. The Board 
        and the Comptroller of the Currency shall apply the provisions 
        of sections 803(2), 804, and 807(1) of the Community 
        Reinvestment Act of 1977 to branches of foreign banks which 
        receive only such deposits as are permissible for receipt by a 
        corporation organized under section 25A of the Federal Reserve 
        Act, in the same manner and to the same extent such sections 
        apply to such a corporation.''.
  (b) Uninsured State Banks.--Section 9 of the Federal Reserve Act (12 
U.S.C. 321 et seq.) is amended by adding at the end the following new 
paragraph:
          ``(24) Enforcement authority over uninsured state member 
        banks.--Section 3(u) of the Federal Deposit Insurance Act, 
        subsections (j) and (k) of section 7 of such Act, and 
        subsections (b) through (n), (s), (u), and (v) of section 8 of 
        such Act shall apply to an uninsured State member bank in the 
        same manner and to the same extent such provisions apply to an 
        insured State member bank and any reference in any such 
        provision to `insured depository institution' shall be deemed 
        to be a reference to `uninsured State member bank' for purposes 
        of this paragraph.''.

SEC. 132. AUTHORIZATION TO RELEASE REPORTS.

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

SEC. 133. CONFORMING AMENDMENTS.

  (a) Bank Holding Company Act of 1956.--
          (1) Definitions.--Section 2 of the Bank Holding Company Act 
        of 1956 (12 U.S.C. 1841) is amended by inserting after 
        subsection (p) (as added by section 103(b)(1)) the following 
        new subsections:
  ``(q) Wholesale Financial Institution.--The term `wholesale financial 
institution' means a wholesale financial institution subject to section 
9B of the Federal Reserve Act.
  ``(r) Commission.--The term `Commission' means the Securities and 
Exchange Commission.
  ``(s) Depository Institution.--The term `depository institution'--
          ``(1) has the meaning given to such term in section 3 of the 
        Federal Deposit Insurance Act; and
          ``(2) includes a wholesale financial institution.''.
          (2) Definition of bank includes wholesale financial 
        institution.--Section 2(c)(1) of the Bank Holding Company Act 
        of 1956 (12 U.S.C. 1841(c)(1)) is amended by adding at the end 
        the following new subparagraph:
                  ``(C) A wholesale financial institution.''.
          (3) Incorporated definitions.--Section 2(n) of the Bank 
        Holding Company Act of 1956 (12 U.S.C. 1841(n)) is amended by 
        inserting `` `insured bank','' after `` `in danger of 
        default',''.
          (4) Exception to deposit insurance requirement.--Section 3(e) 
        of the Bank Holding Company Act of 1956 (12 U.S.C. 1842(e)) is 
        amended by adding at the end the following: ``This subsection 
        shall not apply to a wholesale financial institution.''.
  (b) Federal Deposit Insurance Act.--Section 3(q)(2)(A) of the Federal 
Deposit Insurance Act (12 U.S.C. 1813(q)(2)(A)) is amended to read as 
follows:
                  ``(A) any State member insured bank (except a 
                District bank) and any wholesale financial institution 
                subject to section 9B of the Federal Reserve Act;''.

              CHAPTER 2--WHOLESALE FINANCIAL INSTITUTIONS

SEC. 136. WHOLESALE FINANCIAL INSTITUTIONS.

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

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

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

``5136B. National wholesale financial institutions.''.

  (b) Wholesale Financial Institutions.--The Federal Reserve Act (12 
U.S.C. 221 et seq.) is amended by inserting after section 9A the 
following new section:

``SEC. 9B. WHOLESALE FINANCIAL INSTITUTIONS.

  ``(a) Application for Membership as Wholesale Financial 
Institution.--
          ``(1) Application required.--
                  ``(A) In general.--Any bank may apply to the Board of 
                Governors of the Federal Reserve System to become a 
                State wholesale financial institution or to the 
                Comptroller of the Currency to become a national 
                wholesale financial institution and, as a wholesale 
                financial institution, to subscribe to the stock of the 
                Federal reserve bank organized within the district 
                where the applying bank is located.
                  ``(B) Treatment as member bank.--Any application 
                under subparagraph (A) shall be treated as an 
                application under, and shall be subject to the 
                provisions of section 9.
          ``(2) Insurance termination.--No bank the deposits of which 
        are insured under the Federal Deposit Insurance Act may become 
        a wholesale financial institution unless it has met all 
        requirements under that Act for voluntary termination of 
        deposit insurance.
  ``(b) General Requirements Applicable to Wholesale Financial 
Institutions.--
          ``(1) Federal reserve act.--Except as otherwise provided in 
        this section, wholesale financial institutions shall be member 
        banks and shall be subject to the provisions of this Act that 
        apply to member banks to the same extent and in the same manner 
        as State member insured banks or national banks, except that a 
        wholesale financial institution may terminate membership under 
        this Act only with the prior written approval of the Board and 
        on terms and conditions that the Board determines are 
        appropriate to carry out the purposes of this Act.
          ``(2) Prompt corrective action.--A wholesale financial 
        institution shall be deemed to be an insured depository 
        institution for purposes of section 38 of the Federal Deposit 
        Insurance Act except that--
                  ``(A) the relevant capital levels and capital 
                measures for each capital category shall be the levels 
                specified by the Board for wholesale financial 
                institutions;
                  ``(B) subject to subparagraph (A), all references to 
                the appropriate Federal banking agency or to the 
                Corporation in that section shall be deemed to be 
                references to the Comptroller of the Currency, in the 
                case of a national wholesale financial institution, and 
                to the Board, in the case of all other wholesale 
                financial institutions; and
                  ``(C) in the case of wholesale financial 
                institutions, the purpose of prompt corrective action 
                shall be to protect taxpayers and the financial system 
                from the risks associated with the operation and 
                activities of wholesale financial institutions.
          ``(3) Enforcement authority.--Section 3(u), subsections (j) 
        and (k) of section 7, subsections (b) through (n), (s), (u), 
        and (v) of section 8, and section 19 of the Federal Deposit 
        Insurance Act shall apply to a wholesale financial institution 
        in the same manner and to the same extent as such provisions 
        apply to State member insured banks or national banks and any 
        reference in such sections to an insured depository institution 
        shall be deemed to include a reference to a wholesale financial 
        institution.
          ``(4) Certain other statutes applicable.--A wholesale 
        financial institution shall be deemed to be a banking 
        institution, and the Board shall be the appropriate Federal 
        banking agency for such bank and all such bank's affiliates, 
        for purposes of the International Lending Supervision Act.
          ``(5) Bank merger act.--A wholesale financial institution 
        shall be subject to sections 18(c) and 44 of the Federal 
        Deposit Insurance Act in the same manner and to the same extent 
        the wholesale financial institution would be subject to such 
        sections if the institution were a State member insured bank or 
        a national bank.
          ``(6) Branching.--Notwithstanding any other provision of law, 
        a wholesale financial institution may establish and operate a 
        branch at any location on such terms and conditions as 
        established by, and with the approval of--
                  ``(A) the Board, in the case of a State-chartered 
                wholesale financial institution; and
                  ``(B) the Comptroller of the Currency, in the case of 
                a national bank wholesale financial institution.
          ``(7) Activities of out-of-state branches of wholesale 
        financial institutions.--
                  ``(A) General.--A State-chartered wholesale financial 
                institution shall be deemed a State bank and an insured 
                State bank and a national wholesale financial 
                institution shall be deemed a national bank for 
                purposes of paragraphs (1), (2), and (3) of section 
                24(j) of the Federal Deposit Insurance Act.
                  ``(B) Definitions.--The following definitions shall 
                apply solely for purposes of applying paragraph (1):
                          ``(i) Home state.--The term `home State' 
                        means, with respect to a State-chartered 
                        wholesale financial institution, the State by 
                        which the institution is chartered.
                          ``(ii) Host state.--The term `host State' 
                        means a State, other than the home State of the 
                        wholesale financial institution, in which the 
                        institution maintains, or seeks to establish 
                        and maintain, a branch.
                          ``(iii) Out-of-state bank.--The term `out-of-
                        State bank' means, with respect to any State, a 
                        wholesale financial institution whose home 
                        State is another State.
          ``(8) Discrimination regarding interest rates.--Section 27 of 
        the Federal Deposit Insurance Act shall apply to State-
        chartered wholesale financial institutions in the same manner 
        and to the same extent as such provisions apply to State member 
        insured banks and any reference in such section to a State-
        chartered insured depository institution shall be deemed to 
        include a reference to a State-chartered wholesale financial 
        institution.
          ``(9) Preemption of state laws requiring deposit insurance 
        for wholesale financial institutions.--The appropriate State 
        banking authority may grant a charter to a wholesale financial 
        institution notwithstanding any State constitution or statute 
        requiring that the institution obtain insurance of its deposits 
        and any such State constitution or statute is hereby preempted 
        solely for purposes of this paragraph.
          ``(10) Parity for wholesale financial institutions.--A State 
        bank that is a wholesale financial institution under this 
        section shall have all of the rights, powers, privileges, and 
        immunities (including those derived from status as a federally 
        chartered institution) of and as if it were a national bank, 
        subject to such terms and conditions as established by the 
        Board.
          ``(11) Community reinvestment act of 1977.--A State wholesale 
        financial institution shall be subject to the Community 
        Reinvestment Act of 1977.
  ``(c) Specific Requirements Applicable to Wholesale Financial 
Institutions.--
          ``(1) Limitations on deposits.--
                  ``(A) Minimum amount.--
                          ``(i) In general.--No wholesale financial 
                        institution may receive initial deposits of 
                        $100,000 or less, other than on an incidental 
                        and occasional basis.
                          ``(ii) Limitation on deposits of less than 
                        $100,000.--No wholesale financial institution 
                        may receive initial deposits of $100,000 or 
                        less if such deposits constitute more than 5 
                        percent of the institution's total deposits.
                  ``(B) No deposit insurance.--Except as otherwise 
                provided in section 8A(f) of the Federal Deposit 
                Insurance Act, no deposits held by a wholesale 
                financial institution shall be insured deposits under 
                the Federal Deposit Insurance Act.
                  ``(C) Advertising and disclosure.--The Board and the 
                Comptroller of the Currency shall prescribe jointly 
                regulations pertaining to advertising and disclosure by 
                wholesale financial institutions to ensure that each 
                depositor is notified that deposits at the wholesale 
                financial institution are not federally insured or 
                otherwise guaranteed by the United States Government.
          ``(2) Minimum capital levels applicable to wholesale 
        financial institutions.--The Board shall, by regulation, adopt 
        capital requirements for wholesale financial institutions--
                  ``(A) to account for the status of wholesale 
                financial institutions as institutions that accept 
                deposits that are not insured under the Federal Deposit 
                Insurance Act; and
                  ``(B) to provide for the safe and sound operation of 
                the wholesale financial institution without undue risk 
                to creditors or other persons, including Federal 
                reserve banks, engaged in transactions with the bank.
          ``(3) Additional requirements applicable to wholesale 
        financial institutions.--In addition to any requirement 
        otherwise applicable to State member insured banks or 
        applicable, under this section, to wholesale financial 
        institutions, the Board may impose, by regulation or order, 
        upon wholesale financial institutions--
                  ``(A) limitations on transactions, direct or 
                indirect, with affiliates to prevent--
                          ``(i) the transfer of risk to the deposit 
                        insurance funds; or
                          ``(ii) an affiliate from gaining access to, 
                        or the benefits of, credit from a Federal 
                        reserve bank, including overdrafts at a Federal 
                        reserve bank;
                  ``(B) special clearing balance requirements; and
                  ``(C) any additional requirements that the Board 
                determines to be appropriate or necessary to--
                          ``(i) promote the safety and soundness of the 
                        wholesale financial institution or any insured 
                        depository institution affiliate of the 
                        wholesale financial institution;
                          ``(ii) prevent the transfer of risk to the 
                        deposit insurance funds; or
                          ``(iii) protect creditors and other persons, 
                        including Federal reserve banks, engaged in 
                        transactions with the wholesale financial 
                        institution.
          ``(4) Exemptions for wholesale financial institutions.--The 
        Board may, by regulation or order, exempt any wholesale 
        financial institution from any provision applicable to a member 
        bank that is not a wholesale financial institution, if the 
        Board finds that such exemption is not inconsistent with--
                  ``(A) the promotion of the safety and soundness of 
                the wholesale financial institution or any insured 
                depository institution affiliate of the wholesale 
                financial institution;
                  ``(B) the protection of the deposit insurance funds; 
                and
                  ``(C) the protection of creditors and other persons, 
                including Federal reserve banks, engaged in 
                transactions with the wholesale financial institution.
          ``(5) Limitation on transactions between a wholesale 
        financial institution and an insured bank.--For purposes of 
        section 23A(d)(1) of the Federal Reserve Act, a wholesale 
        financial institution that is affiliated with an insured bank 
        shall not be a bank.
          ``(6) No effect on other provisions.--This section shall not 
        be construed as limiting the Board's authority over member 
        banks or the authority of the Comptroller of the Currency over 
        national banks under any other provision of law, or to create 
        any obligation for any Federal reserve bank to make, increase, 
        renew, or extend any advance or discount under this Act to any 
        member bank or other depository institution.
  ``(d) Capital and Managerial Requirements.--
          ``(1) In general.--A wholesale financial institution shall be 
        well capitalized and well managed.
          ``(2) Notice to company.--The Board shall promptly provide 
        notice to a company that controls a wholesale financial 
        institution whenever such wholesale financial institution is 
        not well capitalized or well managed.
          ``(3) Agreement to restore institution.--Within 45 days of 
        receipt of a notice under paragraph (2) (or such additional 
        period not to exceed 90 days as the Board may permit), the 
        company shall execute an agreement acceptable to the Board to 
        restore the wholesale financial institution to compliance with 
        all of the requirements of paragraph (1).
          ``(4) Limitations until institution restored.--Until the 
        wholesale financial institution is restored to compliance with 
        all of the requirements of paragraph (1), the Board may impose 
        such limitations on the conduct or activities of the company or 
        any affiliate of the company as the Board determines to be 
        appropriate under the circumstances.
          ``(5) Failure to restore.--If the company does not execute 
        and implement an agreement in accordance with paragraph (3), 
        comply with any limitation imposed under paragraph (4), restore 
        the wholesale financial institution to well capitalized status 
        within 180 days after receipt by the company of the notice 
        described in paragraph (2), or restore the wholesale financial 
        institution to well managed status within such period as the 
        Board may permit, the company shall, under such terms and 
        conditions as may be imposed by the Board and subject to such 
        extension of time as may be granted in the Board's discretion, 
        divest control of its subsidiary depository institutions.
          ``(6) Well managed defined.--For purposes of this subsection, 
        the term `well managed' has the same meaning as in section 2 of 
        the Bank Holding Company Act of 1956.
  ``(e) Resolution of Wholesale Financial Institutions.--
          ``(1) Conservatorship and receivership authority.--
                  ``(A) Appointment.--The Board may appoint a 
                conservator or receiver to take possession and control 
                of a wholesale financial institution to the same extent 
                and in the same manner as the Comptroller of the 
                Currency may appoint a conservator or receiver for a 
                national bank.
                  ``(B) Powers.--The conservator or receiver for a 
                wholesale financial institution shall exercise the same 
                powers, functions, and duties, subject to the same 
                limitations, as a conservator or receiver for a 
                national bank.
          ``(2) Board authority.--The Board shall have the same 
        authority with respect to any conservator or receiver appointed 
        under paragraph (1) and the wholesale financial institution for 
        which such conservator has been appointed as the Comptroller of 
        the Currency has with respect to a conservator or receiver for 
        a national bank and the national bank for which the conservator 
        or receiver has been appointed.
          ``(3) Bankruptcy proceedings.--The Comptroller of the 
        Currency (in the case of a national wholesale financial 
        institution) and the Board may direct the conservator or 
        receiver of a wholesale financial institution to file a 
        petition pursuant to title 11, United States Code, in which 
        case, title 11, United States Code, shall apply to the 
        wholesale financial institution in lieu of otherwise applicable 
        Federal or State insolvency law.
  ``(f) Exclusive Jurisdiction.--Subsections (c) and (e) of section 43 
of the Federal Deposit Insurance Act shall not apply to any wholesale 
financial institution.''.
  (c) Voluntary Termination of Insured Status by Certain 
Institutions.--
          (1) Section 8 designations.--Section 8(a) of the Federal 
        Deposit Insurance Act (12 U.S.C. 1818(a)) is amended--
                  (A) by striking paragraph (1); and
                  (B) by redesignating paragraphs (2) through (10) as 
                paragraphs (1) through (9), respectively.
          (2) Voluntary termination of insured status.--The Federal 
        Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended by 
        inserting after section 8 the following new section:

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

  ``(a) In General.--Except as provided in subsection (b), an insured 
State bank or a national bank may voluntarily terminate such bank's 
status as an insured depository institution in accordance with 
regulations of the Corporation if--
          ``(1) the bank provides written notice of the bank's intent 
        to terminate such insured status--
                  ``(A) to the Corporation and the Board of Governors 
                of the Federal Reserve System, in the case of an 
                insured State bank, or to the Corporation and the 
                Comptroller of the Currency, in the case of an insured 
                national bank authorized to operate as a wholesale 
                financial institution, not less than 6 months before 
                the effective date of such termination; and
                  ``(B) to all depositors at such bank, not less than 6 
                months before the effective date of the termination of 
                such status; and
          ``(2) either--
                  ``(A) the deposit insurance fund of which such bank 
                is a member equals or exceeds the fund's designated 
                reserve ratio as of the date the bank provides a 
                written notice under paragraph (1) and the Corporation 
                determines that the fund will equal or exceed the 
                applicable designated reserve ratio for the 2 
                semiannual assessment periods immediately following 
                such date; or
                  ``(B) the Corporation and the Board of Governors of 
                the Federal Reserve System, in the case of an insured 
                State bank, or the Corporation and the Comptroller of 
                the Currency, in the case of an insured national bank 
                authorized to operate as a wholesale financial 
                institution, has approved the termination of the bank's 
                insured status and the bank pays an exit fee in 
                accordance with subsection (e).
  ``(b) Exception.--Subsection (a) shall not apply with respect to--
          ``(1) an insured savings association; or
          ``(2) an insured branch that is required to be insured under 
        subsection (a) or (b) of section 6 of the International Banking 
        Act of 1978.
  ``(c) Eligibility for Insurance Terminated.--Any bank that 
voluntarily elects to terminate the bank's insured status under 
subsection (a) shall not be eligible for insurance on any deposits or 
any assistance authorized under this Act after the period specified in 
subsection (f)(1).
  ``(d) Institution Must Become Wholesale Financial Institution or 
Terminate Deposit-Taking Activities.--Any depository institution which 
voluntarily terminates such institution's status as an insured 
depository institution under this section may not, upon termination of 
insurance, accept any deposits unless the institution is a wholesale 
financial institution subject to section 9B of the Federal Reserve Act.
  ``(e) Exit Fees.--
          ``(1) In general.--Any bank that voluntarily terminates such 
        bank's status as an insured depository institution under this 
        section shall pay an exit fee in an amount that the Corporation 
        determines is sufficient to account for the institution's pro 
        rata share of the amount (if any) which would be required to 
        restore the relevant deposit insurance fund to the fund's 
        designated reserve ratio as of the date the bank provides a 
        written notice under subsection (a)(1).
          ``(2) Procedures.--The Corporation shall prescribe, by 
        regulation, procedures for assessing any exit fee under this 
        subsection.
  ``(f) Temporary Insurance of Deposits Insured as of Termination.--
          ``(1) Transition period.--The insured deposits of each 
        depositor in a State bank or a national bank on the effective 
        date of the voluntary termination of the bank's insured status, 
        less all subsequent withdrawals from any deposits of such 
        depositor, shall continue to be insured for a period of not 
        less than 6 months and not more than 2 years, as determined by 
        the Corporation. During such period, no additions to any such 
        deposits, and no new deposits in the depository institution 
        made after the effective date of such termination shall be 
        insured by the Corporation.
          ``(2) Temporary assessments; obligations and duties.--During 
        the period specified in paragraph (1) with respect to any bank, 
        the bank shall continue to pay assessments under section 7 as 
        if the bank were an insured depository institution. The bank 
        shall, in all other respects, be subject to the authority of 
        the Corporation and the duties and obligations of an insured 
        depository institution under this Act during such period, and 
        in the event that the bank is closed due to an inability to 
        meet the demands of the bank's depositors during such period, 
        the Corporation shall have the same powers and rights with 
        respect to such bank as in the case of an insured depository 
        institution.
  ``(g) Advertisements.--
          ``(1) In general.--A bank that voluntarily terminates the 
        bank's insured status under this section shall not advertise or 
        hold itself out as having insured deposits, except that the 
        bank may advertise the temporary insurance of deposits under 
        subsection (f) if, in connection with any such advertisement, 
        the advertisement also states with equal prominence that 
        additions to deposits and new deposits made after the effective 
        date of the termination are not insured.
          ``(2) Certificates of deposit, obligations, and securities.--
        Any certificate of deposit or other obligation or security 
        issued by a State bank or a national bank after the effective 
        date of the voluntary termination of the bank's insured status 
        under this section shall be accompanied by a conspicuous, 
        prominently displayed notice that such certificate of deposit 
        or other obligation or security is not insured under this Act.
  ``(h) Notice Requirements.--
          ``(1) Notice to the corporation.--The notice required under 
        subsection (a)(1)(A) shall be in such form as the Corporation 
        may require.
          ``(2) Notice to depositors.--The notice required under 
        subsection (a)(1)(B) shall be--
                  ``(A) sent to each depositor's last address of record 
                with the bank; and
                  ``(B) in such manner and form as the Corporation 
                finds to be necessary and appropriate for the 
                protection of depositors.''.
          (3) Definition.--Section 19(b)(1)(A)(i) of the Federal 
        Reserve Act (12 U.S.C. 461(b)(1)(A)(i)) is amended by inserting 
        ``, or any wholesale financial institution subject to section 
        9B of this Act'' after ``such Act''.
  (d) Technical and Conforming Amendments to the Bankruptcy Code.--
          (1) Bankruptcy code debtors.--Section 109(b)(2) of title 11, 
        United States Code, is amended by striking ``; or'' and 
        inserting the following: ``, except that--
                  ``(A) a wholesale financial institution established 
                under section 5136B of the Revised Statutes of the 
                United States or section 9B of the Federal Reserve Act 
                may be a debtor if a petition is filed at the direction 
                of the Comptroller of the Currency (in the case of a 
                wholesale financial institution established under 
                section 5136B of the Revised Statutes of the United 
                States) or the Board of Governors of the Federal 
                Reserve System (in the case of any wholesale financial 
                institution); and
                  ``(B) a corporation organized under section 25A of 
                the Federal Reserve Act may be a debtor if a petition 
                is filed at the direction of the Board of Governors of 
                the Federal Reserve System; or''.
          (2) Chapter 7 debtors.--Section 109(d) of title 11, United 
        States Code, is amended to read as follows:
  ``(d) Only a railroad and a person that may be a debtor under chapter 
7 of this title, except that a stockbroker, a wholesale financial 
institution established under section 5136B of the Revised Statutes of 
the United States or section 9B of the Federal Reserve Act, a 
corporation organized under section 25A of the Federal Reserve Act, or 
a commodity broker, may be a debtor under chapter 11 of this title.''.
          (3) Definition of financial institution.--Section 101(22) of 
        title 11, United States Code, is amended to read as follows:
          ``(22) `financial institution' means a person that is a 
        commercial or savings bank, industrial savings bank, savings 
        and loan association, trust company, wholesale financial 
        institution established under section 5136B of the Revised 
        Statutes of the United States or section 9B of the Federal 
        Reserve Act, or corporation organized under section 25A of the 
        Federal Reserve Act and, when any such person is acting as 
        agent or custodian for a customer in connection with a 
        securities contract, as defined in section 741 of this title, 
        such customer,''.
          (4) Subchapter v of chapter 7.--
                  (A) In general.--Section 103 of title 11, United 
                States Code, is amended--
                          (i) by redesignating subsections (e) through 
                        (i) as subsections (f) through (j), 
                        respectively; and
                          (ii) by inserting after subsection (d) the 
                        following:
  ``(e) Subchapter V of chapter 7 of this title applies only in a case 
under such chapter concerning the liquidation of a wholesale financial 
institution established under section 5136B of the Revised Statutes of 
the United States or section 9B of the Federal Reserve Act, or a 
corporation organized under section 25A of the Federal Reserve Act.''.
                  (B) Wholesale bank liquidation.--Chapter 7 of title 
                11, United States Code, is amended by adding at the end 
                the following:

               ``SUBCHAPTER V--WHOLESALE BANK LIQUIDATION

``Sec. 781. Definitions for subchapter

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

``Sec. 782. Selection of trustee

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

``Sec. 783. Additional powers of trustee

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

``Sec. 784. Right to be heard

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

``Sec. 785. Expedited transfers

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

               ``SUBCHAPTER V--WHOLESALE BANK LIQUIDATION

``781. Definitions for subchapter.
``782. Selection of trustee.
``783. Additional powers of trustee.
``784. Right to be heard.
``785. Expedited transfers.''.

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

               Subtitle E--Preservation of FTC Authority

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

  Section 11(b)(1) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1849(b)(1)) is amended by inserting ``and, if the transaction also 
involves an acquisition under section 4 or section 6, the Board shall 
also notify the Federal Trade Commission of such approval'' before the 
period at the end of the first sentence.

SEC. 142. INTERAGENCY DATA SHARING.

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

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

  (a) Clarification of Federal Trade Commission Jurisdiction.--Any 
person which directly or indirectly controls, is controlled directly or 
indirectly by, or is directly or indirectly under common control with, 
any bank or savings association (as such terms are defined in section 3 
of the Federal Deposit Insurance Act) and is not itself a bank or 
savings association shall not be deemed to be a bank or savings 
association for purposes of the Federal Trade Commission Act or any 
other law enforced by the Federal Trade Commission.
  (b) Savings Provision.--No provision of this section shall be 
construed as restricting the authority of any Federal banking agency 
(as defined in section 3 of the Federal Deposit Insurance Act) under 
any Federal banking law, including section 8 of the Federal Deposit 
Insurance Act.
  (c) Hart-Scott-Rodino 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 6 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 6 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''.

SEC. 144. ANNUAL GAO REPORT.

  (a) In General.--By the end of the 1-year period beginning on the 
date of the enactment of this Act and annually thereafter, the 
Comptroller General of the United States shall submit a report to the 
Congress on market concentration in the financial services industry and 
its impact on consumers.
  (b) Analysis.--Each report submitted under subsection (a) shall 
contain an analysis of--
          (1) the positive and negative effects of affiliations between 
        various types of financial companies, and of acquisitions 
        pursuant to this Act and the amendments made by this Act to 
        other provisions of law, including any positive or negative 
        effects on consumers, area markets, and submarkets thereof or 
        on registered securities brokers and dealers which have been 
        purchased by depository institutions or depository institution 
        holding companies;
          (2) the changes in business practices and the effects of any 
        such changes on the availability of venture capital, consumer 
        credit, and other financial services or products and the 
        availability of capital and credit for small businesses; and
          (3) the acquisition patterns among depository institutions, 
        depository institution holding companies, securities firms, and 
        insurance companies including acquisitions among the largest 20 
        percent of firms and acquisitions within regions or other 
        limited geographical areas.
  (c) Sunset.--This section shall not apply after the end of the 5-year 
period beginning on the date of the enactment of this Act.

                     Subtitle F--National Treatment

SEC. 151. FOREIGN BANKS THAT ARE FINANCIAL HOLDING COMPANIES.

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

SEC. 152. FOREIGN BANKS AND FOREIGN FINANCIAL INSTITUTIONS THAT ARE 
                    WHOLESALE FINANCIAL INSTITUTIONS.

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

SEC. 153. RECIPROCITY.

  (a) National Treatment Reports.--
          (1) Report required in the event of certain acquisitions.--
                  (A) In general.--Whenever a person from a foreign 
                country announces its intention to acquire or acquires 
                a bank, a securities underwriter, broker, or dealer, an 
                investment adviser, or insurance company that ranks 
                within the top 50 firms in that line of business in the 
                United States, the Secretary of Commerce shall, within 
                the earlier of 6 months of such announcement or such 
                acquisition and in consultation with other appropriate 
                Federal and State agencies, prepare and submit to the 
                Congress a report on whether a United States person 
                would be able, de facto or de jure, to acquire an 
                equivalent sized firm in the country in which such 
                person from a foreign country is located.
                  (B) Analysis and recommendations.--If a report 
                submitted under subparagraph (A) states that the 
                equivalent treatment referred to in such subparagraph, 
                de facto and de jure, is not provided in the country 
                which is the subject of the report, the Secretary of 
                Commerce, in consultation with other appropriate 
                Federal and State agencies, shall include in the report 
                analysis and recommendations as to how that country's 
                laws and regulations would need to be changed so that 
                reciprocal treatment would exist.
          (2) Report required before financial services negotiations 
        commence.--The Secretary of Commerce shall, not less than 6 
        months before the commencement of the financial services 
        negotiations of the World Trade Organization and in 
        consultation with other appropriate Federal and State agencies, 
        prepare and submit to the Congress a report containing--
                  (A) an assessment of the 30 largest financial 
                services markets with regard to whether reciprocal 
                access is available in such markets to United States 
                financial services providers; and
                  (B) with respect to any such financial services 
                markets in which reciprocal access is not available to 
                United States financial services providers, an analysis 
                and recommendations as to what legislative, regulatory, 
                or enforcement changes would be required to ensure full 
                reciprocity for such providers.
          (3) Person of a foreign country defined.--For purposes of 
        this subsection, the term ``person of a foreign country'' means 
        a person, or a person which directly or indirectly owns or 
        controls that person, that is a resident of that country, is 
        organized under the laws of that country, or has its principal 
        place of business in that country.
  (b) Provisions Applicable to Submissions.--
          (1) Notice.--Before preparing any report required under 
        subsection (a), the Secretary of Commerce shall publish notice 
        that a report is in preparation and seek comment from United 
        States persons.
          (2) Privileged submissions.--Upon the request of the 
        submitting person, any comments or related communications 
        received by the Secretary with regard to the report shall, for 
        the purposes of section 552 of title 5, of the United States 
        Code, be treated as commercial information obtained from a 
        person that is privileged or confidential, regardless of the 
        medium in which the information is obtained. This confidential 
        information shall be the property of the Secretary and shall be 
        privileged from disclosure to any other person. However, this 
        privilege shall not be construed as preventing access to that 
        confidential information by the Congress.
          (3) Prohibition of unauthorized disclosures.--No person in 
        possession of confidential information, provided under this 
        section may disclose that information, in whole or in part, 
        except for disclosure made in published statistical material 
        that does not disclose, either directly or when used in 
        conjunction with publicly available information, the 
        confidential information of any person.

        Subtitle G--Federal Home Loan Bank System Modernization

SEC. 161. SHORT TITLE.

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

SEC. 162. DEFINITIONS.

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

SEC. 163. SAVINGS ASSOCIATION MEMBERSHIP.

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

SEC. 164. ADVANCES TO MEMBERS; COLLATERAL.

  (a) In General.--Section 10(a) of the Federal Home Loan Bank Act (12 
U.S.C. 1430(a)) is amended--
          (1) by redesignating paragraphs (1) through (4) as 
        subparagraphs (A) through (D), respectively, and indenting 
        appropriately;
          (2) by striking ``(a) Each'' and inserting the following:
  ``(a) In General.--
          ``(1) All advances.--Each'';
          (3) by striking the 2d 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 business, agricultural, rural 
                development, or low-income community development 
                lending.'';
          (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 2d 
                sentence; and
                  (C) by inserting after subparagraph (D) (as so 
                redesignated by paragraph (1) of this subsection) the 
                following new subparagraph:
                  ``(E) Secured loans for small business, agriculture, 
                rural development, or low-income community development, 
                or securities representing a whole interest in such 
                secured loans, in the case of any community financial 
                institution.'';
          (6) in paragraph (5)--
                  (A) in the 2d sentence, by striking ``and the 
                Board'';
                  (B) in the 3d sentence, by striking ``Board'' and 
                inserting ``Federal home loan bank''; and
                  (C) by striking ``(5) Paragraphs (1) through (4)'' 
                and inserting the following:
          ``(4) Additional bank authority.--Subparagraphs (A) through 
        (E) of paragraph (3)''; and
          (7) by adding at the end the following:
          ``(5) Review of certain collateral standards.--The Board may 
        review the collateral standards applicable to each Federal home 
        loan bank for the classes of collateral described in 
        subparagraphs (D) and (E) of paragraph (3), and may, if 
        necessary for safety and soundness purposes, require an 
        increase in the collateral standards for any or all of those 
        classes of collateral.
          ``(6) Definitions.--For purposes of this subsection, the 
        terms `small business', `agriculture', `rural development', and 
        `low-income community development' shall have the meanings 
        given those terms by rule or regulation of the Finance 
        Board.''.
  (b) Clerical Amendment.--The section heading for section 10 of the 
Federal Home Loan Bank Act (12 U.S.C. 1430) is amended to read as 
follows:

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

  (c) Conforming Amendments Relating to Members Which Are Not Qualified 
Thrift Lenders--The 1st of the 2 subsections designated as subsection 
(e) of section 10 of the Federal Home Loan Bank Act (12 U.S.C. 
1430(e)(1)) is amended--
          (1) in the last sentence of paragraph (1), by inserting ``or, 
        in the case of any community financial institution, for the 
        purposes described in subsection (a)(2)'' before the period; 
        and
          (2) in paragraph (5)(C), by inserting ``except that, in 
        determining the actual thrift investment percentage of any 
        community financial institution for purposes of this 
        subsection, the total investment of such member in loans for 
        small business, agriculture, rural development, or low-income 
        community development, or securities representing a whole 
        interest in such loans, shall be treated as a qualified thrift 
        investment (as defined in such section 10(m))'' before the 
        period.

SEC. 165. ELIGIBILITY CRITERIA.

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

SEC. 166. MANAGEMENT OF BANKS.

  (a) Board of Directors.--Section 7(d) of the Federal Home Loan Bank 
Act (12 U.S.C. 1427(d)) is amended--
          (1) by striking ``(d) The term'' and inserting the following:
  ``(d) Terms of Office.--The term''; and
          (2) by striking ``shall be two years''.
  (b) Compensation.--Section 7(i) of the Federal Home Loan Bank Act (12 
U.S.C. 1427(i)) is amended by striking ``, subject to the approval of 
the board''.
  (c) Repeal of Sections 22A and 27.--The Federal Home Loan Bank Act 
(12 U.S.C. 1421 et seq.) is amended by striking sections 22A (12 U.S.C. 
1442a) and 27 (12 U.S.C. 1447).
  (d) Section 12.--Section 12 of the Federal Home Loan Bank Act (12 
U.S.C. 1432) is amended--
          (1) in subsection (a)--
                  (A) by striking ``, but, except'' and all that 
                follows through ``ten years'';
                  (B) by striking ``subject to the approval of the 
                Board'' 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, any conduct that violates any provision of this 
        Act or any law, order, rule, or regulation or any condition 
        imposed in writing by the Finance Board in connection with the 
        granting of any application or other request by the bank, or 
        any written agreement entered into by the bank with the agency, 
        in accordance with the procedures provided in section 1371(c) 
        of the Federal Housing Enterprises Financial Safety and 
        Soundness Act of 1992. Such authority includes the same 
        authority to take affirmative action to correct conditions 
        resulting from violations or practices or to limit activities 
        of a bank or any executive officer or director of a bank as 
        appropriate Federal banking agencies have to take with respect 
        to insured depository institutions under paragraphs (6) and (7) 
        of section 8(b) of the Federal Deposit Insurance Act, and to 
        have all other powers, rights, and duties to enforce this Act 
        with respect to the Federal home loan banks and their executive 
        officers and directors as the Office of Federal Housing 
        Enterprise Oversight has to enforce the Federal Housing 
        Enterprises Financial Safety and Soundness Act of 1992, the 
        Federal National Mortgage Association Charter Act, or the 
        Federal Home Loan Mortgage Corporation Act with respect to the 
        Federal housing enterprises under the Federal Housing 
        Enterprises Financial Safety and Soundness Act of 1992.
          ``(6) To address any insufficiencies in capital levels 
        resulting from the application of section 5(f) of the Home 
        Owners' Loan Act.
          ``(7) To sue and be sued, by and through its own 
        attorneys.''.
          (2) Technical amendment.--Section 111 of Public Law 93-495 
        (12 U.S.C. 250) is amended by 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 2d sentence, by striking ``with the 
                approval of the Board''; and
                  (B) in the 3d 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 1st sentence, by striking 
                        ``Board'' and inserting ``Federal home loan 
                        bank''; and
                          (ii) by striking the 2d sentence;
                  (B) in subsection (d)--
                          (i) in the 1st sentence, by striking ``and 
                        the approval of the Board''; and
                          (ii) by striking ``Subject to the approval of 
                        the Board, any'' and inserting ``Any''; and
                  (C) in subsection (j)(1)--
                          (i) by striking ``to subsidize the interest 
                        rate on advances'' and inserting ``to provide 
                        subsidies, including subsidized interest rates 
                        on advances'';
                          (ii) by striking ``Pursuant'' and inserting 
                        the following:
                  ``(A) Establishment.--Pursuant''; and
                          (iii) by adding at the end the following new 
                        subparagraph:
                  ``(B) Nondelegation of approval authority.--Subject 
                to such regulations as the Finance Board may prescribe, 
                the board of directors of each Federal home loan bank 
                may approve or disapprove requests from members for 
                Affordable Housing Program subsidies, and may not 
                delegate such authority.''.
  (g) Section 16.--Section 16(a) of the Federal Home Loan Bank Act (12 
U.S.C. 1436(a)) is amended--
          (1) in the 3d 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 4th sentence.
  (h) Section 18.--Section 18(b) of the Federal Home Loan Bank Act (12 
U.S.C. 1438(b)) is amended by striking paragraph (4).

SEC. 167. RESOLUTION FUNDING CORPORATION.

  (a) In General.--Section 21B(f)(2)(C) of the Federal Home Loan Bank 
Act (12 U.S.C. 1441b(f)(2)(C)) is amended to read as follows:
                  ``(C) Payments by federal home loan banks.--
                          ``(i) In general.--To the extent that the 
                        amounts available pursuant to subparagraphs (A) 
                        and (B) are insufficient to cover the amount of 
                        interest payments, each Federal home loan bank 
                        shall pay to the Funding Corporation in each 
                        calendar year, 20.75 percent of the net 
                        earnings of that bank (after deducting expenses 
                        relating to section 10(j) and operating 
                        expenses).
                          ``(ii) Annual determination.--The Board 
                        annually shall determine the extent to which 
                        the value of the aggregate amounts paid by the 
                        Federal home loan banks exceeds or falls short 
                        of the value of an annuity of $300,000,000 per 
                        year that commences on the issuance date and 
                        ends on the final scheduled maturity date of 
                        the obligations, and shall select appropriate 
                        present value factors for making such 
                        determinations.
                          ``(iii) Payment term alterations.--The Board 
                        shall extend or shorten the term of the payment 
                        obligations of a Federal home loan bank under 
                        this subparagraph as necessary to ensure that 
                        the value of all payments made by the banks is 
                        equivalent to the value of an annuity referred 
                        to in clause (ii).
                          ``(iv) Term beyond maturity.--If the Board 
                        extends the term of payments beyond the final 
                        scheduled maturity date for the obligations, 
                        each Federal home loan bank shall continue to 
                        pay 20.75 percent of its net earnings (after 
                        deducting expenses relating to section 10(j) 
                        and operating expenses) to the Treasury of the 
                        United States until the value of all such 
                        payments by the Federal home loan banks is 
                        equivalent to the value of an annuity referred 
                        to in clause (ii). In the final year in which 
                        the Federal home loan banks are required to 
                        make any payment to the Treasury under this 
                        subparagraph, if the dollar amount represented 
                        by 20.75 percent of the net earnings of the 
                        Federal home loan banks exceeds the remaining 
                        obligation of the banks to the Treasury, the 
                        Finance Board shall reduce the percentage pro 
                        rata to a level sufficient to pay the remaining 
                        obligation.''.
  (b) Effective Date.--The amendment made by subsection (a) shall 
become effective on January 1, 1999. Payments made by a Federal home 
loan bank before that effective date shall be counted toward the total 
obligation of that bank under section 21B(f)(2)(C) of the Federal Home 
Loan Bank Act, as amended by this section.

SEC. 168. 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 enactment of the Financial Services 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 aggregate 
                on-balance sheet 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 shall be multiplied by 
                1.5, the paid-in value of the outstanding Class C stock 
                and the amount of retained earnings shall be multiplied 
                by 2.0, and such higher amounts shall be deemed to be 
                capital for purposes of meeting the 5 percent minimum 
                leverage ratio.
          ``(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;
                          ``(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; and
                          ``(iii) Class C stock, which shall be 
                        nonredeemable;
                  ``(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 (as determined in accordance with 
                generally accepted accounting principles)--
                          ``(i) the amounts paid for the Class C stock 
                        and any other nonredeemable stock approved by 
                        the Finance Board;
                          ``(ii) the amounts paid for the Class B 
                        stock, in an amount not to exceed 1 percent of 
                        the total assets of the bank; and
                          ``(iii) the retained earnings of the bank; 
                        and
                  ``(B) total capital of a Federal home loan bank shall 
                include--
                          ``(i) permanent capital;
                          ``(ii) the amounts paid for the Class A 
                        stock, Class B stock (excluding any amount 
                        treated as permanent capital under subparagraph 
                        (5)(A)(ii)), or any other class of redeemable 
                        stock approved by the Finance Board;
                          ``(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 
        provisions 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 
        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 enactment of the Financial Services 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, Class C, 
                or any other class of nonredeemable stock, 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--
                          ``(i) any stock issued by that bank shall be 
                        available only to, held only by, and tradable 
                        only among members of that bank and between 
                        that bank and its members; and
                          ``(ii) a bank has no obligation to repurchase 
                        its outstanding Class C stock but may do so, 
                        provided it is consistent with Finance Board 
                        regulations and is at a price that is mutually 
                        agreeable to the bank and the member; 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 1 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 by providing written notice to the bank 
        of its intent to do so. 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 State or Federal 
                        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 C stock of a 
        Federal home loan bank, and any other classes of nonredeemable 
        stock approved by the Finance Board (to the extent provided in 
        the terms thereof), shall own the retained earnings, surplus, 
        undivided profits, and equity reserves, if any, of the bank.
          ``(2) No nonredeemable classes of stock.--If a Federal home 
        loan bank has no outstanding Class C or other such 
        nonredeemable stock, then the holders of any other classes of 
        stock of the bank then outstanding shall have ownership in, and 
        a private property right in, the retained earnings, surplus, 
        undivided profits, and equity reserves, if any, of the bank.
          ``(3) 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.
          ``(4) 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.''.

                       Subtitle H--ATM Fee Reform

SEC. 171. SHORT TITLE.

  This subtitle may be cited as the ``ATM Fee Reform Act of 1999''.

SEC. 172. 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; and
                          ``(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.
                  ``(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) Electronic fund transfer.--The term 
                        `electronic fund transfer' includes a 
                        transaction which 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.
                          ``(ii) 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 which holds the account of 
                                such consumer from which the transfer 
                                is made.
                          ``(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. 173. 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)(ii)) if the consumer 
                initiates a transfer from an automated teller machine 
                which 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. 174. 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 which 
        will be imposed upon the consummation of the transaction by--
                  (A) any automated teller machine operator (as defined 
                in section 904(d)(2)(D)(ii) 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 which 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, how such 
        requirement should be implemented.

SEC. 175. 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).''.

SEC. 176. EFFECTIVE DATE.

  The amendments made by this subtitle shall take effect at the end of 
the 270-day period beginning on the date of the enactment of this Act.

                 Subtitle I--Direct Activities of Banks

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

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

                  Subtitle J--Deposit Insurance Funds

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

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

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

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

                  Subtitle K--Miscellaneous Provisions

SEC. 191. TERMINATION OF ``KNOW YOUR CUSTOMER'' REGULATIONS.

  (a) In General.--None of the proposed regulations described in 
subsection (b) may be published in final form and, to the extent any 
such regulation has become effective before the date of the enactment 
of this Act, such regulation shall cease to be effective as of such 
date.
  (b) Proposed Regulations Described.--The proposed regulations 
referred to in subsection (a) are as follows:
          (1) The regulation proposed by the Comptroller of the 
        Currency to amend part 21 of title 12 of the Code of Federal 
        Regulations, as published in the Federal Register on December 
        7, 1998.
          (2) The regulation proposed by the Director of the Office of 
        Thrift Supervision to amend part 563 of title 12 of the Code of 
        Federal Regulations, as published in the Federal Register on 
        December 7, 1998.
          (3) The regulation proposed by the Board of Governors of the 
        Federal Reserve System to amend parts 208, 211, and 225 of 
        title 12 of the Code of Federal Regulations, as published in 
        the Federal Register on December 7, 1998.
          (4) The regulation proposed by the Federal Deposit Insurance 
        Corporation to amend part 326 of title 12 of the Code of 
        Federal Regulations, as published in the Federal Register on 
        December 7, 1998.

SEC. 192. STUDY AND REPORT ON FEDERAL ELECTRONIC FUND TRANSFERS.

  (a) Study.--The Secretary of the Treasury shall conduct a feasibility 
study to determine--
          (1) whether all electronic payments issued by Federal 
        agencies could be routed through the Regional Finance Centers 
        of the Department of the Treasury for verification and 
        reconciliation;
          (2) whether all electronic payments made by the Federal 
        Government could be subjected to the same level of 
        reconciliation as United States Treasury checks, including 
        matching each payment issued with each corresponding deposit at 
        financial institutions;
          (3) whether the appropriate computer security controls are in 
        place in order to ensure the integrity of electronic payments;
          (4) the estimated costs of implementing, if so recommended, 
        the processes and controls described in paragraphs (1), (2), 
        and (3); and
          (5) a possible timetable for implementing those processes if 
        so recommended.
  (b) Report to Congress.--Not later than October 1, 2000, the 
Secretary of the Treasury shall submit a report to Congress containing 
the results of the study required by subsection (a).
  (c) Definition.--For purposes of this section, the term ``electronic 
payment'' means any transfer of funds, other than a transaction 
originated by check, draft, or similar paper instrument, which is 
initiated through an electronic terminal, telephonic instrument, or 
computer or magnetic tapes so as to order, instruct, or authorize a 
debit or credit to a financial account.

SEC. 193. 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.--Within 1 year of the date of the enactment of 
this Act, the Federal banking agencies shall submit a report to the 
Congress on the findings and conclusions of the agencies with respect 
to the study required under subsection (a), together with such 
recommendations for legislative or regulatory action as the agencies 
may determine to be appropriate.
  (c) Definition.--For purposes of this section, the term ``Federal 
banking agencies'' means each Federal banking agency (as defined in 
section 3(z) of the Federal Deposit Insurance Act).

                    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 which receive any 
                                services are fully disclosed to the 
                                broker or dealer;
                                  ``(VIII) the bank does not carry a 
                                securities account of the customer 
                                except 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 or fiduciary capacity 
                        in its trust department, or another department 
                        where the trust or fiduciary activity is 
                        regularly examined by bank examiners under the 
                        same standards and in the same way as such 
                        activities are examined in the trust 
                        department, 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 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 a 
                                registered transfer agent (including as 
                                a registrar of stocks), 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, if--
                                          ``(aa) the bank does not 
                                        solicit transactions or provide 
                                        investment advice with respect 
                                        to the purchase or sale of 
                                        securities in connection with 
                                        the plan; and
                                          ``(bb) the bank's 
                                        compensation for such plan or 
                                        program consists chiefly of 
                                        administration fees, or flat or 
                                        capped per order processing 
                                        fees, or both.
                                  ``(II) Dividend reinvestment plans.--
                                The bank effects transactions, as a 
                                registered transfer agent (including as 
                                a registrar of stocks), in the 
                                securities of an issuer as part of that 
                                issuer's dividend reinvestment plan, 
                                if--
                                          ``(aa) the bank does not 
                                        solicit transactions or provide 
                                        investment advice with respect 
                                        to the purchase or sale of 
                                        securities in connection with 
                                        the plan;
                                          ``(bb) the bank does not net 
                                        shareholders' buy and sell 
                                        orders, other than for programs 
                                        for odd-lot holders or plans 
                                        registered with the Commission; 
                                        and
                                          ``(cc) the bank's 
                                        compensation for such plan or 
                                        program consists chiefly of 
                                        administration fees, or flat or 
                                        capped per order processing 
                                        fees, or both.
                                  ``(III) Issuer plans.--The bank 
                                effects transactions, as a registered 
                                transfer agent (including as a 
                                registrar of stocks), in the securities 
                                of an issuer as part of that issuer's 
                                plan for the purchase or sale of that 
                                issuer's shares, if--
                                          ``(aa) the bank does not 
                                        solicit transactions or provide 
                                        investment advice with respect 
                                        to the purchase or sale of 
                                        securities in connection with 
                                        the plan or program;
                                          ``(bb) the bank does not net 
                                        shareholders' buy and sell 
                                        orders, other than for programs 
                                        for odd-lot holders or plans 
                                        registered with the Commission; 
                                        and
                                          ``(cc) the bank's 
                                        compensation for such plan or 
                                        program consists chiefly of 
                                        administration fees, or flat or 
                                        capped per order processing 
                                        fees, or both.
                                  ``(IV) Permissible delivery of 
                                materials.--The exception to being 
                                considered a broker for a bank engaged 
                                in activities described in subclauses 
                                (I), (II), and (III) will not be 
                                affected by a bank's delivery of 
                                written or electronic plan materials to 
                                employees of the issuer, shareholders 
                                of the issuer, or members of affinity 
                                groups of the issuer, so long as such 
                                materials are--
                                          ``(aa) comparable in scope or 
                                        nature to that permitted by the 
                                        Commission as of the date of 
                                        the enactment of the Financial 
                                        Services Act of 1999; or
                                          ``(bb) otherwise permitted by 
                                        the Commission.
                          ``(v) Sweep accounts.--The bank effects 
                        transactions as part of a program for the 
                        investment or reinvestment of 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 (as defined in section 2 of the Bank 
                        Holding Company Act of 1956) of the bank other 
                        than--
                                  ``(I) a registered broker or dealer; 
                                or
                                  ``(II) an affiliate that is engaged 
                                in merchant banking, as described in 
                                section 6(c)(3)(H) of the Bank Holding 
                                Company Act of 1956.
                          ``(vii) Private securities offerings.--The 
                        bank--
                                  ``(I) effects sales as part of a 
                                primary offering of securities not 
                                involving a public offering, pursuant 
                                to section 3(b), 4(2), or 4(6) of the 
                                Securities Act of 1933 or the rules and 
                                regulations issued thereunder;
                                  ``(II) at any time after one year 
                                after the date of enactment of the 
                                Financial Services Act of 1999, is not 
                                affiliated with a broker or dealer that 
                                has been registered for more than one 
                                year; and
                                  ``(III) effects transactions 
                                exclusively with qualified investors.
                          ``(viii) Safekeeping and custody 
                        activities.--
                                  ``(I) In general.--The bank, as part 
                                of customary banking activities--
                                          ``(aa) provides safekeeping 
                                        or custody services with 
                                        respect to securities, 
                                        including the exercise of 
                                        warrants and other rights on 
                                        behalf of customers;
                                          ``(bb) facilitates the 
                                        transfer of funds or 
                                        securities, as a custodian or a 
                                        clearing agency, in connection 
                                        with the clearance and 
                                        settlement of its customers' 
                                        transactions in securities;
                                          ``(cc) effects securities 
                                        lending or borrowing 
                                        transactions with or on behalf 
                                        of customers as part of 
                                        services provided to customers 
                                        pursuant to division (aa) or 
                                        (bb) or invests cash collateral 
                                        pledged in connection with such 
                                        transactions; or
                                          ``(dd) holds securities 
                                        pledged by a customer to 
                                        another person or securities 
                                        subject to purchase or resale 
                                        agreements involving a 
                                        customer, or facilitates the 
                                        pledging or transfer of such 
                                        securities by book entry or as 
                                        otherwise provided under 
                                        applicable law, if the bank 
                                        maintains records separately 
                                        identifying the securities and 
                                        the customer.
                                  ``(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) Excepted financial products.--The bank 
                        effects transactions in excepted financial 
                        products, as defined in paragraph (56)(A) of 
                        this subsection.
                          ``(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) Broker dealer execution.--The exception to 
                being considered a broker for a bank engaged in 
                activities described in clauses (ii), (iv), and (viii) 
                of subparagraph (B) shall not apply if the activities 
                described in such provisions result in the trade in the 
                United States of any security that is a publicly traded 
                security in the United States, unless--
                          ``(i) the bank directs such trade to a 
                        registered broker or dealer for execution;
                          ``(ii) the trade is a cross trade or other 
                        substantially similar trade of a security 
                        that--
                                  ``(I) is made by the bank or between 
                                the bank and an affiliated fiduciary; 
                                and
                                  ``(II) is not in contravention of 
                                fiduciary principles established under 
                                applicable Federal or State law; or
                          ``(iii) the trade is conducted in some other 
                        manner permitted under rules, regulations, or 
                        orders as the Commission may prescribe or 
                        issue.
                  ``(D) Fiduciary capacity.--For purposes of 
                subparagraph (B)(ii), the term `fiduciary capacity' 
                means--
                          ``(i) in the capacity as trustee, executor, 
                        administrator, guardian, assignee, receiver, or 
                        custodian under a uniform gift to minor act, or 
                        as an investment adviser if the bank receives a 
                        fee for its investment advice;
                          ``(ii) in any capacity in which the bank 
                        possesses investment discretion on behalf of 
                        another; or
                          ``(iii) in any other similar capacity.
                  ``(F) Exception for entities subject to section 
                15(e).--The term `broker' does not include a bank 
                that--
                          ``(i) was, immediately prior to the enactment 
                        of the Financial Services Act of 1999, subject 
                        to section 15(e) of this title; 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 the 
                        bank, or an affiliate of any such bank other 
                        than a broker or dealer, or, in the case of 
                        mortgage obligations or consumer-related 
                        receivables, a syndicate of banks of which the 
                        bank is a member (other than as an 
                        insignificant member).
                          ``(iv) Excepted financial products.--The bank 
                        buys or sells excepted financial products, as 
                        defined in paragraph (56)(A) of this 
                        subsection.
                          ``(v) Derivative instruments.--The bank 
                        issues, buys, or sells any derivative 
                        instrument to which the bank is a party--
                                  ``(I) to or from a corporation, 
                                limited liability company, or 
                                partnership that owns and invests on a 
                                discretionary basis, not less than 
                                $100,000,000 in investments, or to or 
                                from a qualified investor, except that 
                                if the instrument provides for the 
                                delivery of one or more securities 
                                (other than a derivative instrument or 
                                government security), the transaction 
                                shall be effected with or through a 
                                registered broker or dealer; or
                                  ``(II) to or from other persons, 
                                except that if the derivative 
                                instrument provides for the delivery of 
                                one or more securities (other than a 
                                derivative instrument or government 
                                security), or is a security (other than 
                                a government security), the transaction 
                                shall be effected with or through a 
                                registered broker or dealer; or
                                  ``(III) to or from any person if the 
                                instrument is neither a security nor 
                                provides for the delivery of one or 
                                more securities (other than a 
                                derivative instrument).''.

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

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

SEC. 204. INFORMATION SHARING.

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

SEC. 205. 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) 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.
          ``(2) Criteria for rulemaking.--The Commission shall not 
        impose a requirement under paragraph (1) 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 or 
                appropriate in the public interest and for the 
                protection of investors, consistent with the 
                requirements of section 3(f).
          ``(3) New hybrid product.--For purposes of this subsection, 
        the term `new hybrid product' means a product that--
                  ``(A) was not subjected to regulation by the 
                Commission as a security prior to the date of enactment 
                of this subsection; and
                  ``(B) is not an excepted financial product, as such 
                term is defined in section 3(a)(56)(A) of this title.
          ``(4) Consultation.--In promulgating rules under this 
        subsection, the Commission shall consult with and consider the 
        views of the appropriate regulatory agencies concerning the 
        proposed rule and the impact on the banking industry.''.

SEC. 206. ADDITIONAL DEFINITIONS.

  Section 3(a) of the Securities Exchange Act of 1934 is amended by 
adding at the end the following new paragraphs:
          ``(54) Derivative instrument.--
                  ``(A) Definition.--The term `derivative instrument' 
                means any individually negotiated contract, agreement, 
                warrant, note, or option that is based, in whole or in 
                part, on the value of, any interest in, or any 
                quantitative measure or the occurrence of any event 
                relating to, one or more commodities, securities, 
                currencies, interest or other rates, indices, or other 
                assets, but does not include an excepted financial 
                product, as defined in clauses (i) through (v) of 
                paragraph (56)(A) of this subsection.
                  ``(B) Classification limited.--Classification of a 
                particular contract as a derivative instrument pursuant 
                to this paragraph shall not be construed as finding or 
                implying that such instrument is or is not a security 
                for any purpose under the securities laws, or is or is 
                not an account, agreement, contract, or transaction for 
                any purpose under the Commodity Exchange Act.
          ``(55) Qualified investor.--
                  ``(A) Definition.--For purposes of this title, the 
                term `qualified investor' means--
                          ``(i) any investment company registered with 
                        the Commission under section 8 of the 
                        Investment Company Act of 1940;
                          ``(ii) any issuer eligible for an exclusion 
                        from the definition of investment company 
                        pursuant to section 3(c)(7) of the Investment 
                        Company Act of 1940;
                          ``(iii) any bank (as defined in paragraph (6) 
                        of this subsection), savings and loan 
                        association (as defined in section 3(b) of the 
                        Federal Deposit Insurance Act), broker, dealer, 
                        insurance company (as defined in section 
                        2(a)(13) of the Securities Act of 1933), or 
                        business development company (as defined in 
                        section 2(a)(48) of the Investment Company Act 
                        of 1940);
                          ``(iv) any small business investment company 
                        licensed by the United States Small Business 
                        Administration under section 301(c) or (d) of 
                        the Small Business Investment Act of 1958;
                          ``(v) any State sponsored employee benefit 
                        plan, or any other employee benefit plan, 
                        within the meaning of the Employee 
                        Retirement Income Security Act of 1974, other 
                        than an individual retirement account, if the 
                        investment decisions are made by a plan 
                        fiduciary, as defined in section 3(21) of that 
                        Act, which is either a bank, savings and loan 
                        association, insurance company, or registered 
                        investment adviser;
                          ``(vi) any trust whose purchases of 
                        securities are directed by a person described 
                        in clauses (i) through (v) of this 
                        subparagraph;
                          ``(vii) any market intermediary exempt under 
                        section 3(c)(2) of the Investment Company Act 
                        of 1940;
                          ``(viii) any associated person of a broker or 
                        dealer other than a natural person;
                          ``(ix) any foreign bank (as defined in 
                        section 1(b)(7) of the International Banking 
                        Act of 1978); or
                          ``(x) the government of any foreign country.
                  ``(B) Additional qualifications defined.--For 
                purposes of paragraphs (4)(B)(vii), (5)(C)(iii), and 
                (56)(A)(v) of this subsection, the term `qualified 
                investor' also means--
                          ``(i) any corporation, company, or 
                        partnership that owns and invests on a 
                        discretionary basis, not less than $10,000,000 
                        in investments;
                          ``(ii) any natural person who owns and 
                        invests on a discretionary basis, not less than 
                        $10,000,000 in investments;
                          ``(iii) any government or political 
                        subdivision, agency, or instrumentality of a 
                        government who owns and invests on a 
                        discretionary basis not less than $50,000,000 
                        in investments; or
                          ``(iv) any multinational or supranational 
                        entity or any agency or instrumentality 
                        thereof.
                  ``(C) Additional authority.--The Commission may, by 
                rule or order, define a `qualified investor' as any 
                other person, other than a natural person, taking into 
                consideration such factors as the person's financial 
                sophistication, net worth, and knowledge and experience 
                in financial matters.
          ``(56) Excepted financial products.--
                  ``(A) In general.--For purposes of paragraphs (4) and 
                (5) of this subsection, the term `excepted financial 
                product' means--
                          ``(i) a deposit account, savings account, 
                        certificate of deposit, or other deposit 
                        instrument issued by a bank;
                          ``(ii) a banker's acceptance;
                          ``(iii) a letter of credit issued or loan 
                        made by a bank;
                          ``(iv) a debit account at a bank arising from 
                        a credit card or similar arrangement;
                          ``(v) a participation in a loan which the 
                        bank or an affiliate of the bank (other than a 
                        broker or dealer) funds, participates in, or 
                        owns that is sold--
                                  ``(I) to qualified investors; or
                                  ``(II) to other persons that--
                                          ``(aa) have the opportunity 
                                        to review and assess any 
                                        material information, including 
                                        information regarding the 
                                        borrower's creditworthiness; 
                                        and
                                          ``(bb) 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
                          ``(vi) a derivative instrument that involves 
                        or relates to--
                                  ``(I) currencies, except options on 
                                currencies that trade on a national 
                                securities exchange;
                                  ``(II) interest rates, except 
                                interest rate derivative instruments 
                                that--
                                          ``(aa) are based on a 
                                        security or a group or index of 
                                        securities (other than 
                                        government securities or a 
                                        group or index of government 
                                        securities);
                                          ``(bb) provide for the 
                                        delivery of one or more 
                                        securities (other than 
                                        government securities); or
                                          ``(cc) trade on a national 
                                        securities exchange; or
                                  ``(III) commodities, other rates, 
                                indices, or other assets, except 
                                derivative instruments that--
                                          ``(aa) are securities or that 
                                        are based on a group or index 
                                        of securities (other than 
                                        government securities or a 
                                        group or index of government 
                                        securities);
                                          ``(bb) provide for the 
                                        delivery of one or more 
                                        securities (other than 
                                        government securities); or
                                          ``(cc) trade on a national 
                                        securities exchange.
                  ``(B) Classification limited.--Classification of a 
                particular product as a excepted financial product 
                pursuant to this subsection shall not be construed as 
                finding or implying that such product is or is not a 
                security for any purpose under the securities laws, or 
                is or is not an account, agreement, contract, or 
                transaction for any purpose under the Commodity 
                Exchange Act.''.

SEC. 207. GOVERNMENT SECURITIES DEFINED.

  Section 3(a)(42) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)(42)) is amended--
          (1) by striking ``or'' at the end of subparagraph (C);
          (2) by striking the period at the end of subparagraph (D) and 
        inserting ``; or''; and
          (3) by adding at the end the following new subparagraph:
                  ``(E) for purposes of 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. 208. EFFECTIVE DATE.

  This subtitle shall take effect at the end of the 270-day period 
beginning on the date of the enactment of this Act.

SEC. 209. RULE OF CONSTRUCTION.

  Nothing in this Act shall supersede, affect, or otherwise limit the 
scope and applicability of the Commodity Exchange Act (7 U.S.C. 1 et 
seq.).

             Subtitle B--Bank Investment Company Activities

SEC. 211. CUSTODY OF INVESTMENT COMPANY ASSETS BY AFFILIATED BANK.

  (a) Management Companies.--Section 17(f) of the Investment Company 
Act of 1940 (15 U.S.C. 80a-17(f)) is amended--
          (1) by redesignating paragraphs (1), (2), and (3) as 
        subparagraphs (A), (B), and (C), respectively;
          (2) by striking ``(f) Every registered'' and inserting the 
        following:
  ``(f) Custody of Securities.--
          ``(1) Every registered'';
          (3) by redesignating the second, third, fourth, and fifth 
        sentences of such subsection as paragraphs (2) through (5), 
        respectively, and indenting the left margin of such paragraphs 
        appropriately; and
          (4) by adding at the end the following new paragraph:
          ``(6) The Commission may adopt rules and regulations, and 
        issue orders, consistent with the protection of investors, 
        prescribing the conditions under which a bank, or an affiliated 
        person of a bank, either of which is an affiliated person, 
        promoter, organizer, or sponsor of, or principal underwriter 
        for, a registered management company may serve as custodian of 
        that registered management company.''.
  (b) Unit Investment Trusts.--Section 26 of the Investment Company Act 
of 1940 (15 U.S.C. 80a-26) is amended--
          (1) by redesignating subsections (b) through (e) as 
        subsections (c) through (f), respectively; and
          (2) by inserting after subsection (a) the following new 
        subsection:
  ``(b) The Commission may adopt rules and regulations, and issue 
orders, consistent with the protection of investors, prescribing the 
conditions under which a bank, or an affiliated person of a bank, 
either of which is an affiliated person of a principal underwriter for, 
or depositor of, a registered unit investment trust, may serve as 
trustee or custodian under subsection (a)(1).''.
  (c) Fiduciary Duty of Custodian.--Section 36(a) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-35(a)) is amended--
          (1) in paragraph (1), by striking ``or'' at the end;
          (2) in paragraph (2), by striking the period at the end and 
        inserting ``; or''; and
          (3) by inserting after paragraph (2) the following:
          ``(3) as custodian.''.

SEC. 212. LENDING TO AN AFFILIATED INVESTMENT COMPANY.

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

SEC. 213. INDEPENDENT DIRECTORS.

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

SEC. 214. ADDITIONAL SEC DISCLOSURE AUTHORITY.

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

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

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

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

  Section 2(a)(11) of the Investment Company Act of 1940 (15 U.S.C. 
80a-2(a)(11)) is amended to read as follows:
          ``(11) The term `dealer' has the same meaning as in 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 in section 3 
        of the Securities Exchange Act of 1934.''.

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

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

SEC. 220. INTERAGENCY CONSULTATION.

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

``SEC. 210A. CONSULTATION.

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

SEC. 221. TREATMENT OF BANK COMMON TRUST FUNDS.

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

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

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

SEC. 223. 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. 224. 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. 225. 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. 226. EFFECTIVE DATE.

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

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

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

  (a) Amendment.--Section 17 of the Securities Exchange Act of 1934 (15 
U.S.C. 78q) is amended--
          (1) by redesignating subsection (i) as subsection (l); and
          (2) by inserting after subsection (h) the following new 
        subsections:
  ``(i) Investment Bank Holding Companies.--
          ``(1) Elective supervision of an investment bank holding 
        company not having a bank or savings association affiliate.--
                  ``(A) In general.--An investment bank holding company 
                that is not--
                          ``(i) an affiliate of an insured bank (other 
                        than an institution described in subparagraph 
                        (D), (F), or (G) of section 2(c)(2), or held 
                        under section 4(f), of the Bank Holding Company 
                        Act of 1956), or a savings association;
                          ``(ii) a foreign bank, foreign company, or 
                        company that is described in section 8(a) of 
                        the International Banking Act of 1978; or
                          ``(iii) a foreign bank that controls, 
                        directly or indirectly, a corporation chartered 
                        under section 25A of the Federal Reserve Act,
                may elect to become supervised by filing with the 
                Commission a notice of intention to become supervised, 
                pursuant to subparagraph (B) of this paragraph. Any 
                investment bank holding company filing such a notice 
                shall be supervised in accordance with this section and 
                comply with the rules promulgated by the Commission 
                applicable to supervised investment bank holding 
                companies.
                  ``(B) Notification of status as a supervised 
                investment bank holding company.--An investment bank 
                holding company that elects under subparagraph (A) to 
                become supervised by the Commission shall file with the 
                Commission a written notice of intention to become 
                supervised by the Commission in such form and 
                containing such information and documents concerning 
                such investment bank holding company as the Commission, 
                by rule, may prescribe as necessary or appropriate in 
                furtherance of the purposes of this section. Unless the 
                Commission finds that such supervision is not necessary 
                or appropriate in furtherance of the purposes of this 
                section, such supervision shall become effective 45 
                days after the date of receipt of such written notice 
                by the Commission or within such shorter time period as 
                the Commission, by rule or order, may determine.
          ``(2) Election not to be supervised by the commission as an 
        investment bank holding company.--
                  ``(A) Voluntary withdrawal.--A supervised investment 
                bank holding company that is supervised pursuant to 
                paragraph (1) may, upon such terms and conditions as 
                the Commission deems necessary or appropriate, elect 
                not to be supervised by the Commission by filing a 
                written notice of withdrawal from Commission 
                supervision. Such notice shall not become effective 
                until one year after receipt by the Commission, or such 
                shorter or longer period as the Commission deems 
                necessary or appropriate to ensure effective 
                supervision of the material risks to the supervised 
                investment bank holding company and to the affiliated 
                broker or dealer, or to prevent evasion of the purposes 
                of this section.
                  ``(B) Discontinuation of commission supervision.--If 
                the Commission finds that any supervised investment 
                bank holding company that is supervised pursuant to 
                paragraph (1) is no longer in existence or has ceased 
                to be an investment bank holding company, or if the 
                Commission finds that continued supervision of such a 
                supervised investment bank holding company is not 
                consistent with the purposes of this section, the 
                Commission may discontinue the supervision pursuant to 
                a rule or order, if any, promulgated by the Commission 
                under this section.
          ``(3) Supervision of investment bank holding companies.--
                  ``(A) Recordkeeping and reporting.--
                          ``(i) In general.--Every supervised 
                        investment bank holding company and each 
                        affiliate thereof shall make and keep for 
                        prescribed periods such records, furnish copies 
                        thereof, and make such reports, as the 
                        Commission may require by rule, in order to 
                        keep the Commission informed as to--
                                  ``(I) the company's or affiliate's 
                                activities, financial condition, 
                                policies, systems for monitoring and 
                                controlling financial and operational 
                                risks, and transactions and 
                                relationships between any broker or 
                                dealer affiliate of the supervised 
                                investment bank holding company; and
                                  ``(II) the extent to which the 
                                company or affiliate has complied with 
                                the provisions of this Act and 
                                regulations prescribed and orders 
                                issued under this Act.
                          ``(ii) Form and contents.--Such records and 
                        reports shall be prepared in such form and 
                        according to such specifications (including 
                        certification by an independent public 
                        accountant), as the Commission may require and 
                        shall be provided promptly at any time upon 
                        request by the Commission. Such records and 
                        reports may include--
                                  ``(I) a balance sheet and income 
                                statement;
                                  ``(II) an assessment of the 
                                consolidated capital of the supervised 
                                investment bank holding company;
                                  ``(III) an independent auditor's 
                                report attesting to the supervised 
                                investment bank holding company's 
                                compliance with its internal risk 
                                management and internal control 
                                objectives; and
                                  ``(IV) reports concerning the extent 
                                to which the company or affiliate has 
                                complied with the provisions of this 
                                title and any regulations prescribed 
                                and orders issued under this title.
                  ``(B) Use of existing reports.--
                          ``(i) In general.--The Commission shall, to 
                        the fullest extent possible, accept reports in 
                        fulfillment of the requirements under this 
                        paragraph that the supervised investment bank 
                        holding company or its affiliates have been 
                        required to provide to another appropriate 
                        regulatory agency or self-regulatory 
                        organization.
                          ``(ii) Availability.--A supervised investment 
                        bank holding company or an affiliate of such 
                        company shall provide to the Commission, at the 
                        request of the Commission, any report referred 
                        to in clause (i).
                  ``(C) Examination authority.--
                          ``(i) Focus of examination authority.--The 
                        Commission may make examinations of any 
                        supervised investment bank holding company and 
                        any affiliate of such company in order to--
                                  ``(I) inform the Commission 
                                regarding--
                                          ``(aa) the nature of the 
                                        operations and financial 
                                        condition of the supervised 
                                        investment bank holding company 
                                        and its affiliates;
                                          ``(bb) the financial and 
                                        operational risks within the 
                                        supervised investment bank 
                                        holding company that may affect 
                                        any broker or dealer controlled 
                                        by such supervised investment 
                                        bank holding company; and
                                          ``(cc) the systems of the 
                                        supervised investment bank 
                                        holding company and its 
                                        affiliates for monitoring and 
                                        controlling those risks; and
                                  ``(II) monitor compliance with the 
                                provisions of this subsection, 
                                provisions governing transactions and 
                                relationships between any broker or 
                                dealer affiliated with the supervised 
                                investment bank holding company and any 
                                of the company's other affiliates, and 
                                applicable provisions of subchapter II 
                                of chapter 53, title 31, United States 
                                Code (commonly referred to as the `Bank 
                                Secrecy Act') and regulations 
                                thereunder.
                          ``(ii) Restricted focus of examinations.--The 
                        Commission shall limit the focus and scope of 
                        any examination of a supervised investment bank 
                        holding company to--
                                  ``(I) the company; and
                                  ``(II) any affiliate of the company 
                                that, because of its size, condition, 
                                or activities, the nature or size of 
                                the transactions between such affiliate 
                                and any affiliated broker or dealer, or 
                                the centralization of functions within 
                                the holding company system, could, in 
                                the discretion of the Commission, have 
                                a materially adverse effect on the 
                                operational or financial condition of 
                                the broker or dealer.
                          ``(iii) Deference to other examinations.--For 
                        purposes of this subparagraph, the Commission 
                        shall, to the fullest extent possible, use the 
                        reports of examination of an institution 
                        described in subparagraph (D), (F), or (G) of 
                        section 2(c)(2), or held under section 4(f), of 
                        the Bank Holding Company Act of 1956 made by 
                        the appropriate regulatory agency, or of a 
                        licensed insurance company made by the 
                        appropriate State insurance regulator.
          ``(4) Holding company capital.--
                  ``(A) Authority.--If the Commission finds that it is 
                necessary to adequately supervise investment bank 
                holding companies and their broker or dealer affiliates 
                consistent with the purposes of this subsection, the 
                Commission may adopt capital adequacy rules for 
                supervised investment bank holding companies.
                  ``(B) Method of calculation.--In developing rules 
                under this paragraph:
                          ``(i) Double leverage.--The Commission shall 
                        consider the use by the supervised investment 
                        bank holding company of debt and other 
                        liabilities to fund capital investments in 
                        affiliates.
                          ``(ii) No unweighted capital ratio.--The 
                        Commission shall not impose under this section 
                        a capital ratio that is not based on 
                        appropriate risk-weighting considerations.
                          ``(iii) No capital requirement on regulated 
                        entities.--The Commission shall not, by rule, 
                        regulation, guideline, order or otherwise, 
                        impose any capital adequacy provision on a 
                        nonbanking affiliate (other than a broker or 
                        dealer) that is in compliance with applicable 
                        capital requirements of another Federal 
                        regulatory authority or State insurance 
                        authority.
                          ``(iv) Appropriate exclusions.--The 
                        Commission shall take full account of the 
                        applicable capital requirements of another 
                        Federal regulatory authority or State insurance 
                        regulator.
                  ``(C) Internal risk management models.--The 
                Commission may incorporate internal risk management 
                models into its capital adequacy rules for supervised 
                investment bank holding companies.
          ``(5) Functional regulation of banking and insurance 
        activities of supervised investment bank holding companies.--
        The Commission shall defer to--
                  ``(A) the appropriate regulatory agency with regard 
                to all interpretations of, and the enforcement of, 
                applicable banking laws relating to the activities, 
                conduct, ownership, and operations of banks, and 
                institutions described in subparagraph (D), (F), and 
                (G) of section 2(c)(2), or held under section 4(f), of 
                the Bank Holding Company Act of 1956; and
                  ``(B) the appropriate State insurance regulators with 
                regard to all interpretations of, and the enforcement 
                of, applicable State insurance laws relating to the 
                activities, conduct, and operations of insurance 
                companies and insurance agents.
          ``(6) Definitions.--For purposes of this subsection and 
        subsection (j):
                  ``(A) The term `investment bank holding company' 
                means--
                          ``(i) any person other than a natural person 
                        that owns or controls one or more brokers or 
                        dealers; and
                          ``(ii) the associated persons of the 
                        investment bank holding company.
                  ``(B) The term `supervised investment bank holding 
                company' means any investment bank holding company that 
                is supervised by the Commission pursuant to this 
                subsection.
                  ``(C) The terms `affiliate', `bank', `bank holding 
                company', `company', `control', `savings association', 
                and `wholesale financial institution' have the meanings 
                given to those terms in section 2 of the Bank Holding 
                Company Act of 1956 (12 U.S.C. 1841).
                  ``(D) The term `insured bank' has the meaning given 
                to that term in section 3 of the Federal Deposit 
                Insurance Act.
                  ``(E) The term `foreign bank' has the meaning given 
                to that term in section 1(b)(7) of the International 
                Banking Act of 1978.
                  ``(F) The terms `person associated with an investment 
                bank holding company' and `associated person of an 
                investment bank holding company' mean any person 
                directly or indirectly controlling, controlled by, or 
                under common control with, an investment bank holding 
                company.
  ``(j) Commission Backup Authority.--
          ``(1) Authority.--The Commission may make inspections of any 
        wholesale financial holding company (as defined in section 
        10A(a)(1) of the Bank Holding Company Act of 1956) that--
                  ``(A) controls a wholesale financial institution;
                  ``(B) is not a foreign bank; and
                  ``(C) does not control an insured bank (other than an 
                institution permitted under subparagraph (D), (F), or 
                (G) of section 2(c)(2), or held under section 4(f), of 
                the Bank Holding Company Act of 1956) or a savings 
                association,
        and any affiliate of such company, for the purpose of 
        monitoring and enforcing compliance by the wholesale financial 
        holding company with the Federal securities laws.
          ``(2) Limitation.--The Commission shall limit the focus and 
        scope of any inspection under paragraph (1) to those 
        transactions, policies, procedures, or records that are 
        reasonably necessary to monitor and enforce compliance by the 
        wholesale financial holding company or any affiliate with the 
        Federal securities laws.
          ``(3) Deference to examinations.--To the fullest extent 
        possible, the Commission shall use, for the purposes of this 
        subsection, the reports of examinations--
                  ``(A) made by the Board of Governors of the Federal 
                Reserve System of any wholesale financial holding 
                company that is supervised by the Board;
                  ``(B) made of any licensed insurance company by or on 
                behalf of any State regulatory agency responsible for 
                the supervision of an insurance company; and
                  ``(C) made by any Federal or State banking agency of 
                any bank or institution described in subparagraph (D), 
                (F), or (G) of section 2(c)(2), or held under section 
                4(f), of the Bank Holding Company Act of 1956.
          ``(4) Notice.--To the fullest extent possible, the Commission 
        shall notify the appropriate regulatory agency prior to 
        conducting an inspection of a wholesale financial institution 
        or institution described in subparagraph (D), (F), or (G) of 
        section 2(c)(2), or held under section 4(f), of the Bank 
        Holding Company Act of 1956.
  ``(k) Authority To Limit Disclosure of Information.--Notwithstanding 
any other provision of law, the Commission shall not be compelled to 
disclose any information required to be reported under subsection (h) 
or (i) or any information supplied to the Commission by any domestic or 
foreign regulatory agency that relates to the financial or operational 
condition of any associated person of a broker or dealer, investment 
bank holding company, or any affiliate of an investment bank holding 
company. Nothing in this subsection shall authorize the Commission to 
withhold information from Congress, or prevent the Commission from 
complying with a request for information from any other Federal 
department or agency or any self-regulatory organization requesting the 
information for purposes within the scope of its jurisdiction, or 
complying with an order of a court of the United States in an action 
brought by the United States or the Commission. For purposes of section 
552 of title 5, United States Code, this subsection shall be considered 
a statute described in subsection (b)(3)(B) of such section 552. In 
prescribing regulations to carry out the requirements of this 
subsection, the Commission shall designate information described in or 
obtained pursuant to subparagraphs (A), (B), and (C) of subsection 
(i)(5) as confidential information for purposes of section 24(b)(2) of 
this title.''.
  (b) Conforming Amendments.--
          (1) Section 3(a)(34) of the Securities Exchange Act of 1934 
        (15 U.S.C. 78c(a)(34)) is amended by adding at the end the 
        following new 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--Disclosure of Customer Costs of Acquiring Financial 
                                Products

SEC. 241. IMPROVED AND CONSISTENT DISCLOSURE.

  (a) Revised Regulations Required.--Within one year after the date of 
enactment of this Act, each Federal financial regulatory authority 
shall prescribe rules, or revisions to its rules, to improve the 
accuracy, simplicity, and completeness, and to make more consistent, 
the disclosure of information by persons subject to the jurisdiction of 
such regulatory authority concerning any commissions, fees, or other 
costs incurred by customers in the acquisition of financial products.
  (b) Consultation.--In prescribing rules and revisions under 
subsection (a), the Federal financial regulatory authorities shall 
consult with each other and with appropriate State financial regulatory 
authorities.
  (c) Consideration of Existing Disclosures.--In prescribing rules and 
revisions under subsection (a), the Federal financial regulatory 
authorities shall consider the sufficiency and appropriateness of then 
existing laws and rules applicable to persons subject to their 
jurisdiction, and may prescribe exemptions from the rules and revisions 
required by subsection (a) to the extent appropriate in light of the 
objective of this section to increase the consistency of disclosure 
practices.
  (d) Enforcement.--Any rule prescribed by a Federal financial 
regulatory authority pursuant to this section shall, for purposes of 
enforcement, be treated as a rule prescribed by such regulatory 
authority pursuant to the statute establishing such regulatory 
authority's jurisdiction over the persons to whom such rule applies.
  (e) Definition.--As used in this section, the term ``Federal 
financial regulatory authority'' means the Board of Governors of the 
Federal Reserve System, the Securities and Exchange Commission, the 
Comptroller of the Currency, the Federal Deposit Insurance Corporation, 
the Commodity Futures Trading Commission, and any self-regulatory 
organization under the supervision of any of the foregoing.

                          TITLE III--INSURANCE

               Subtitle A--State Regulation of Insurance

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

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

SEC. 302. MANDATORY INSURANCE LICENSING REQUIREMENTS.

  No person 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 section 104.

SEC. 303. FUNCTIONAL REGULATION OF INSURANCE.

  The insurance activities of any person (including a national bank 
exercising its power to act as agent under the 11th undesignated 
paragraph of section 13 of the Federal Reserve Act) shall be 
functionally regulated by the States, subject to section 104.

SEC. 304. INSURANCE UNDERWRITING IN NATIONAL BANKS.

  (a) In General.--Except as provided in section 305, a national bank 
and the subsidiaries of a national bank may not provide insurance in a 
State as principal except that this prohibition shall not apply to 
authorized products.
  (b) Authorized Products.--For the purposes of this section, a product 
is authorized if--
          (1) as of January 1, 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.

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

  (a) General Prohibition.--No national bank, and no subsidiary of a 
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 agency, a national bank 
        and a subsidiary of 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.

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

  (a) Filing in Court of Appeals.--In the case of a regulatory conflict 
between a State insurance regulator and a Federal regulator as to 
whether any product is or is not insurance, as defined in section 
304(c) of this Act, or whether a State statute, regulation, order, or 
interpretation regarding any insurance sales or solicitation activity 
is properly treated as preempted under Federal law, either regulator 
may seek expedited judicial review of such determination by the United 
States Court of Appeals for the circuit in which the State is located 
or in the United States Court of Appeals for the District of Columbia 
Circuit by filing a petition for review in such court.
  (b) Expedited Review.--The United States Court of Appeals in which a 
petition for review is filed in accordance with 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.
  (f) Limitation.--
          (1) In general.--Except as provided in paragraph (2), 
        subsection (e) shall not apply to any petition involving the 
        consideration of any State statute, regulation, order, 
        interpretation, or other action regarding insurance sales, 
        solicitation, or cross marketing activities described in 
        section 104(b)(2)(A) that was adopted, issued, enacted, or 
        taken before January 1, 1999, but only to the extent that such 
        petition presents an issue with regard to--
                  (A) impeding affiliations between persons licensed to 
                sell insurance and insured depository institutions by 
                requiring that all shareholders of a licensee be 
                licensed persons even if such persons do not engage in 
                any activities that would otherwise require licensure, 
                or by imposing any similar licensure requirement;
                  (B) limiting the volume or portion of insurance sales 
                made by an agent on the basis of whether such sales are 
                made to customers of affiliates of the agent; or
                  (C) requiring any office from which insurance is 
                sold, or any office of an entity affiliated or 
                otherwise associated with such insurance sales office, 
                must be located in such State.
          (2) Exceptions to the limitation.--
                  (A) In general.--Paragraph (1) shall not apply with 
                respect to any State statute, regulation, order, 
                interpretation, or other action described in section 
                104(b)(2)(B).
                  (B) Resident insurance agent requirements.--
                Subparagraph (C) of paragraph (1) shall not apply with 
                respect to any resident insurance agent requirement 
                that applies equally to all sellers of insurance in the 
                State.

SEC. 307. CONSUMER PROTECTION REGULATIONS.

  (a) Regulations Required.--
          (1) In general.--The Federal banking agencies shall prescribe 
        and publish in final form, before the end of the 1-year period 
        beginning on the date of the enactment of this Act, consumer 
        protection regulations (which the agencies jointly determine to 
        be appropriate) that--
                  (A) apply to retail sales practices, solicitations, 
                advertising, or offers of any insurance product by any 
                insured depository institution or wholesale financial 
                institution or any person who is engaged in such 
                activities at an office of the institution or on behalf 
                of the institution; and
                  (B) are consistent with the requirements of this Act 
                and provide such additional protections for consumers 
                to whom such sales, solicitations, advertising, or 
                offers are directed as the agency determines to be 
                appropriate.
          (2) Applicability to subsidiaries.--The regulations 
        prescribed pursuant to paragraph (1) shall extend such 
        protections to any subsidiaries of an insured depository 
        institution or wholesale financial institution, as deemed 
        appropriate by the regulators referred to in paragraph (3), 
        where such extension is necessary to ensure the consumer 
        protections provided by this section.
          (3) Consultation and joint regulations.--The Federal banking 
        agencies shall consult with each other and prescribe joint 
        regulations pursuant to paragraph (1), after consultation with 
        the State insurance regulators, as appropriate.
  (b) Sales Practices.--The regulations prescribed pursuant to 
subsection (a) shall include anticoercion rules applicable to the sale 
of insurance products which prohibit an insured depository institution 
or wholesale financial institution from engaging in any practice that 
would lead a consumer to believe an extension of credit, in violation 
of section 106(b) of the Bank Holding Company Act Amendments of 1970, 
is conditional upon--
          (1) the purchase of an insurance product from the institution 
        or any of its affiliates or subsidiaries; or
          (2) an agreement by the consumer not to obtain, or a 
        prohibition on the consumer from obtaining, an insurance 
        product from an unaffiliated entity.
  (c) Disclosures and Advertising.--The regulations prescribed pursuant 
to subsection (a) shall include the following provisions relating to 
disclosures and advertising in connection with the initial purchase of 
an insurance product:
          (1) Disclosures.--
                  (A) In general.--Requirements that the following 
                disclosures be made orally and in writing before the 
                completion of the initial sale and, in the case of 
                clause (iv), at the time of application for an 
                extension of credit:
                          (i) Uninsured status.--As appropriate, the 
                        product is not insured by the Federal Deposit 
                        Insurance Corporation, the United States 
                        Government, or the insured depository 
                        institution or wholesale financial institution.
                          (ii) Investment risk.--In the case of a 
                        variable annuity or other insurance product 
                        which involves an investment risk, that there 
                        is an investment risk associated with the 
                        product, including possible loss of value.
                          (iv) Coercion.--The approval of an extension 
                        of credit may not be conditioned on--
                                  (I) the purchase of an insurance 
                                product from the institution in which 
                                the application for credit is pending 
                                or any of its affiliates or 
                                subsidiaries; or
                                  (II) an agreement by the consumer not 
                                to obtain, or a prohibition on the 
                                consumer from obtaining, an insurance 
                                product from an unaffiliated entity.
                  (B) Making disclosure readily understandable.--
                Regulations prescribed under subparagraph (A) shall 
                encourage the use of disclosure that is conspicuous, 
                simple, direct, and readily understandable, such as 
                the following:
                          (i) ``NOT FDIC-INSURED''.
                          (ii) ``NOT GUARANTEED BY THE BANK''.
                          (iii) ``MAY GO DOWN IN VALUE''.
                          (iv) ``NOT INSURED BY ANY GOVERNMENT 
                        AGENCY''.
                  (C) Adjustments for alternative methods of 
                purchase.--In prescribing the requirements under 
                subparagraphs (A) and (D), necessary adjustments shall 
                be made for purchase in person, by telephone, or by 
                electronic media to provide for the most appropriate 
                and complete form of disclosure and acknowledgements.
                  (D) Consumer acknowledgement.--A requirement that an 
                insured depository institution or wholesale financial 
                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 acknowledgement by such consumer of 
                the receipt of the disclosure required under this 
                subsection with respect to such product.
          (2) Prohibition on misrepresentations.--A prohibition on any 
        practice, or any advertising, at any office of, or on behalf 
        of, the insured depository institution or wholesale financial 
        institution, or any subsidiary thereof as appropriate, which 
        could mislead any person or otherwise cause a reasonable person 
        to reach an erroneous belief with respect to--
                  (A) the uninsured nature of any insurance product 
                sold, or offered for sale, by the institution or any 
                subsidiary of the institution; or
                  (B) in the case of a variable annuity or other 
                insurance product that involves an investment risk, the 
                investment risk associated with any such product.
  (d) Separation of Banking and Nonbanking Activities.--
          (1) Regulations required.--The regulations prescribed 
        pursuant to subsection (a) shall include such provisions as the 
        Federal banking agencies consider appropriate to ensure that 
        the routine acceptance of deposits and the making of loans is 
        kept, to the extent practicable, physically segregated from 
        insurance product activity.
          (2) Requirements.--Regulations prescribed pursuant to 
        paragraph (1) shall include the following requirements:
                  (A) Separate setting.--A clear delineation of the 
                setting in which, and the circumstances under which, 
                transactions involving insurance products should be 
                conducted in a location physically segregated from an 
                area where retail deposits are routinely accepted or 
                loans are made.
                  (B) Referrals.--Standards which permit any person 
                accepting deposits from, or making loans to, the public 
                in an area where such transactions are routinely 
                conducted in an insured depository institution or 
                wholesale financial institution to refer a customer who 
                seeks to purchase any insurance product to a qualified 
                person who sells such product, only if the person 
                making the referral receives no more than a one-time 
                nominal fee of a fixed dollar amount for each referral 
                that does not depend on whether the referral results in 
                a transaction.
                  (C) Qualification and licensing requirements.--
                Standards prohibiting any insured depository 
                institution or wholesale financial institution from 
                permitting any person to sell or offer for sale any 
                insurance product in any part of any office of the 
                institution, or on behalf of the institution, unless 
                such person is appropriately qualified and licensed.
  (e) Domestic Violence Discrimination Prohibition.--
          (1) In general.--In the case of an applicant for, or an 
        insured under, any insurance product described in paragraph 
        (2), the status of the applicant or insured as a victim of 
        domestic violence, or as a provider of services to victims of 
        domestic violence, shall not be considered as a criterion in 
        any decision with regard to insurance underwriting, pricing, 
        renewal, or scope of coverage of insurance policies, or payment 
        of insurance claims, except as required or expressly permitted 
        under State law.
          (2) Scope of application.--The prohibition contained in 
        paragraph (1) shall apply to any insurance product which is 
        sold or offered for sale, as principal, agent, or broker, by 
        any insured depository institution or wholesale financial 
        institution or any person who is engaged in such activities at 
        an office of the institution or on behalf of the institution.
          (3) Sense of the congress.--It is the sense of the Congress 
        that, by the end of the 30-month period beginning on the date 
        of the enactment of this Act, the States should enact 
        prohibitions against discrimination with respect to insurance 
        products that are at least as strict as the prohibitions 
        contained in paragraph (1).
          (4) Domestic violence defined.--For purposes of this 
        subsection, the term ``domestic violence'' means the occurrence 
        of 1 or more of the following acts by a current or former 
        family member, household member, intimate partner, or 
        caretaker:
                  (A) Attempting to cause or causing or threatening 
                another person physical harm, severe emotional 
                distress, psychological trauma, rape, or sexual 
                assault.
                  (B) Engaging in a course of conduct or repeatedly 
                committing acts toward another person, including 
                following the person without proper authority, under 
                circumstances that place the person in reasonable fear 
                of bodily injury or physical harm.
                  (C) Subjecting another person to false imprisonment.
                  (D) Attempting to cause or cause damage to property 
                so as to intimidate or attempt to control the behavior 
                of another person.
  (f) Consumer Grievance Process.--The Federal banking agencies shall 
jointly establish a consumer complaint mechanism, for receiving and 
expeditiously addressing consumer complaints alleging a violation of 
regulations issued under the section, which shall--
          (1) establish a group within each regulatory agency to 
        receive such complaints;
          (2) develop procedures for investigating such complaints;
          (3) develop procedures for informing consumers of rights they 
        may have in connection with such complaints; and
          (4) develop procedures for addressing concerns raised by such 
        complaints, as appropriate, including procedures for the 
        recovery of losses to the extent appropriate.
  (g) Effect on Other Authority.--
          (1) In general.--No provision of this section shall be 
        construed as granting, limiting, or otherwise affecting--
                  (A) any authority of the Securities and Exchange 
                Commission, any self-regulatory organization, the 
                Municipal Securities Rulemaking Board, or the Secretary 
                of the Treasury under any Federal securities law; or
                  (B) except as provided in paragraph (2), any 
                authority of any State insurance commissioner or other 
                State authority under any State law.
          (2) Coordination with state law.--
                  (A) In general.--Except as provided in subparagraph 
                (B), regulations prescribed by a Federal banking agency 
                under this section shall not apply to retail sales, 
                solicitations, advertising, or offers of any insurance 
                product by any insured depository institution or 
                wholesale financial institution or to any person who is 
                engaged in such activities at an office of such 
                institution or on behalf of the institution, in a State 
                where the State has in effect statutes, regulations, 
                orders, or interpretations, that are inconsistent with 
                or contrary to the regulations prescribed by the 
                Federal banking agencies.
                  (B) Preemption.--If, with respect to any provision of 
                the regulations prescribed under this section, the 
                Board of Governors of the Federal Reserve System, the 
                Comptroller of the Currency, and the Board of Directors 
                of the Federal Deposit Insurance Corporation determine 
                jointly that the protection afforded by such provision 
                for consumers is greater than the protection provided 
                by a comparable provision of the statutes, regulations, 
                orders, or interpretations referred to in subparagraph 
                (A) of any State, such provision of the regulations 
                prescribed under this section shall supersede the 
                comparable provision of such State statute, regulation, 
                order, or interpretation.
  (h) Definitions.--For purposes of this section, the following 
definitions shall apply:
          (1) Appropriate federal banking agency; insured depository 
        institution.--The terms ``appropriate Federal banking agency'' 
        and ``insured depository institution'' have the same meanings 
        as in section 3 of the Federal Deposit Insurance Act.
          (2) Insurance product.--The term ``insurance product'' 
        includes an annuity contract the income of which is subject to 
        tax treatment under section 72 of the Internal Revenue Code of 
        1986.
          (3) Wholesale financial institution.--The term ``wholesale 
        financial institution'' means a wholesale financial institution 
        subject to section 9B of the Federal Reserve Act.

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

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

SEC. 309. INTERAGENCY CONSULTATION.

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

SEC. 310. 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 upontransfer, 
if the insurer remains duly qualified to transact the business of 
insurance in such licensed State.
  (d) Effectiveness of Outstanding Policies and Contracts.--
          (1) In general.--All outstanding insurance policies and 
        annuities contracts of a redomesticating insurer shall remain 
        in full force and effect and need not be endorsed as to the new 
        domicile of the insurer, unless so ordered by the State 
        insurance regulator of a licensed State, and then only in the 
        case of outstanding policies and contracts whose owners reside 
        in such licensed State.
          (2) Forms.--
                  (A) Applicable State law may require a 
                redomesticating insurer to file new policy forms with 
                the State insurance regulator of a licensed State on or 
                before the effective date of the transfer.
                  (B) Notwithstanding subparagraph (A), a 
                redomesticating insurer may use existing policy forms 
                with appropriate endorsements to reflect the new 
                domicile of the redomesticating insurer until the new 
                policy forms are approved for use by the State 
                insurance regulator of such licensed State.
  (e) Notice.--A redomesticating insurer shall give notice of the 
proposed transfer to the State insurance regulator of each licensed 
State and shall file promptly any resulting amendments to corporate 
documents required to be filed by a foreign licensed mutual insurer 
with the insurance regulator of each such licensed State.
  (f) Procedural Requirements.--No mutual insurer may redomesticate to 
another State and reorganize into a mutual holding company pursuant to 
this section unless the State insurance regulator of the transferee 
domicile determines that the plan of reorganization of the insurer 
includes the following requirements:
          (1) Approval by board of directors and policyholders.--The 
        reorganization is approved by at least a majority of the board 
        of directors of the mutual insurer and at least a majority of 
        the policyholders who vote after notice, disclosure of the 
        reorganization and the effects of the transaction on 
        policyholder contractual rights, and reasonable opportunity to 
        vote, in accordance with such notice, disclosure, and voting 
        procedures as are approved by the State insurance regulator of 
        the transferee domicile.
          (2) Continued voting control by policyholders; review of 
        public stock offering.--After the consummation of a 
        reorganization, the policyholders of the reorganized insurer 
        shall have the same voting rights with respect to the mutual 
        holding company as they had before the reorganization with 
        respect to the mutual insurer. With respect to an initial 
        public offering of stock, the offering shall be conducted in 
        compliance with applicable securities laws and in a manner 
        approved by the State insurance regulator of the transferee 
        domicile.
          (3) Award of stock or grant of options to officers and 
        directors.--For a period of 6 months after completion of an 
        initial public offering, neither a stock holding company nor 
        the converted insurer shall award any stock options or stock 
        grants to persons who are elected officers or directors of the 
        mutual holding company, the stock holding company, or the 
        converted insurer, except with respect to any such awards or 
        options to which a person is entitled as a policyholder and as 
        approved by the State insurance regulator of the transferee 
        domicile.
          (4) Contractual rights.--Upon reorganization into a mutual 
        holding company, the contractual rights of the policyholders 
        are preserved.
          (5) Fair and equitable treatment of policyholders.--The 
        reorganization is approved as fair and equitable to the 
        policyholders by the insurance regulator of the transferee 
        domicile.

SEC. 313. EFFECT ON STATE LAWS RESTRICTING REDOMESTICATION.

  (a) In General.--Unless otherwise permitted by this subtitle, State 
laws of any transferor domicile that conflict with the purposes and 
intent of this subtitle are preempted, including but not limited to--
          (1) any law that has the purpose or effect of impeding the 
        activities of, taking any action against, or applying any 
        provision of law or regulation to, any insurer or an affiliate 
        of such insurer because that insurer or any affiliate plans to 
        redomesticate, or has redomesticated, pursuant to this 
        subtitle;
          (2) any law that has the purpose or effect of impeding the 
        activities of, taking action against, or applying any provision 
        of law or regulation to, any insured or any insurance licensee 
        or other intermediary because such person 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;
          (3) any law that has the purpose or effect of terminating, 
        because of the redomestication of a mutual insurer pursuant to 
        this subtitle, any certificate of authority, agent appointment 
        or license, rate approval, or other approval, of any State 
        insurance regulator or other State authority in existence 
        immediately prior to the redomestication in any State other 
        than the transferee domicile.
  (b) Differential Treatment Prohibited.--No State law, regulation, 
interpretation, or functional equivalent thereof, of a State other than 
a transferee domicile may treat a redomesticating or redomesticated 
insurer or any affiliate thereof any differently than an insurer 
operating in that State that is not a redomesticating or redomesticated 
insurer.
  (c) Laws Prohibiting Operations.--If any licensed State fails to 
issue, delays the issuance of, or seeks to revoke an original or 
renewal certificate of authority of a redomesticated insurer 
immediately following redomestication, except on grounds and in a 
manner consistent with its past practices regarding the issuance of 
certificates of authority to foreign insurers that are not 
redomesticating, then the redomesticating insurer shall be exempt from 
any State law of the licensed State to the extent that such State law 
or the operation of such State law would make unlawful, or regulate, 
directly or indirectly, the operation of the redomesticated insurer, 
except that such licensed State may require the redomesticated insurer 
to--
          (1) comply with the unfair claim settlement practices law of 
        the licensed State;
          (2) pay, on a nondiscriminatory basis, applicable premium and 
        other taxes which are levied on licensed insurers or 
        policyholders under the laws of the licensed State;
          (3) register with and designate the State insurance regulator 
        as its agent solely for the purpose of receiving service of 
        legal documents or process;
          (4) submit to an examination by the State insurance regulator 
        in any licensed state in which the redomesticated insurer is 
        doing business to determine the insurer's financial condition, 
        if--
                  (A) the State insurance regulator of the transferee 
                domicile has not begun an examination of the 
                redomesticated insurer and has not scheduled such an 
                examination to begin before the end of the 1-year 
                period beginning on the date of the redomestication; 
                and
                  (B) any such examination is coordinated to avoid 
                unjustified duplication and repetition;
          (5) comply with a lawful order issued in--
                  (A) a delinquency proceeding commenced by the State 
                insurance regulator of any licensed State if there has 
                been a judicial finding of financial impairment under 
                paragraph (7); or
                  (B) a voluntary dissolution proceeding;
          (6) comply with any State law regarding deceptive, false, or 
        fraudulent acts or practices, except that if the licensed State 
        seeks an injunction regarding the conduct described in this 
        paragraph, such injunction must be obtained from a court of 
        competent jurisdiction as provided in section 314(a);
          (7) comply with an injunction issued by a court of competent 
        jurisdiction, upon a petition by the State insurance regulator 
        alleging that the redomesticating insurer is in hazardous 
        financial condition or is financially impaired;
          (8) participate in any insurance insolvency guaranty 
        association on the same basis as any other insurer licensed in 
        the licensed State; and
          (9) require a person acting, or offering to act, as an 
        insurance licensee for a redomesticated insurer in the licensed 
        State to obtain a license from that State, except that such 
        State may not impose any qualification or requirement that 
        discriminates against a nonresident insurance licensee.

SEC. 314. OTHER PROVISIONS.

  (a) Judicial Review.--The appropriate United States district court 
shall have exclusive jurisdiction over litigation arising under this 
section involving any redomesticating or redomesticated insurer.
  (b) Severability.--If any provision of this section, or the 
application thereof to any person or circumstances, is held invalid, 
the remainder of the section, and the application of such provision to 
other persons or circumstances, shall not be affected thereby.

SEC. 315. DEFINITIONS.

  For purposes of this subtitle, the following definitions shall apply:
          (1) Court of competent jurisdiction.--The term ``court of 
        competent jurisdiction'' means a court authorized pursuant to 
        section 314(a) to adjudicate litigation arising under this 
        subtitle.
          (2) Domicile.--The term ``domicile'' means the State in which 
        an insurer is incorporated, chartered, or organized.
          (3) Insurance licensee.--The term ``insurance licensee'' 
        means any person holding a license under State law to act as 
        insurance agent, subagent, broker, or consultant.
          (4) Institution.--The term ``institution'' means a 
        corporation, joint stock company, limited liability company, 
        limited liability partnership, association, trust, partnership, 
        or any similar entity.
          (5) Licensed state.--The term ``licensed State'' means any 
        State, the District of Columbia, American Samoa, Guam, Puerto 
        Rico, or the United States Virgin Islands in which the 
        redomesticating insurer has a certificate of authority in 
        effect immediately prior to the redomestication.
          (6) Mutual insurer.--The term ``mutual insurer'' means a 
        mutual insurer organized under the laws of any State.
          (7) Person.--The term ``person'' means an individual, 
        institution, government or governmental agency, State or 
        political subdivision of a State, public corporation, board, 
        association, estate, trustee, or fiduciary, or other similar 
        entity.
          (8) Policyholder.--The term ``policyholder'' means the owner 
        of a policy issued by a mutual insurer, except that, with 
        respect to voting rights, the term means a member of a mutual 
        insurer or mutual holding company granted the right to vote, as 
        determined under applicable State law.
          (9) Redomesticated insurer.--The term ``redomesticated 
        insurer'' means a mutual insurer that has redomesticated 
        pursuant to this subtitle.
          (10) Redomesticating insurer.--The term ``redomesticating 
        insurer'' means a mutual insurer that is redomesticating 
        pursuant to this subtitle.
          (11) Redomestication or transfer.--The terms 
        ``redomestication'' and ``transfer'' mean the transfer of the 
        domicile of a mutual insurer from one State to another State 
        pursuant to this subtitle.
          (12) State insurance regulator.--The term ``State insurance 
        regulator'' means the principal insurance regulatory authority 
        of a State, the District of Columbia, American Samoa, Guam, 
        Puerto Rico, or the United States Virgin Islands.
          (13) State law.--The term ``State law'' means the statutes of 
        any State, the District of Columbia, American Samoa, Guam, 
        Puerto Rico, or the United States Virgin Islands and any 
        regulation, order, or requirement prescribed pursuant to any 
        such statute.
          (14) Transferee domicile.--The term ``transferee domicile'' 
        means the State to which a mutual insurer is redomesticating 
        pursuant to this subtitle.
          (15) Transferor domicile.--The term ``transferor domicile'' 
        means the State from which a mutual insurer is redomesticating 
        pursuant to this subtitle.

SEC. 316. EFFECTIVE DATE.

  This subtitle shall take effect on the date of 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 enactment of this Act, 
at least a majority of the States--
          (1) have enacted uniform laws and regulations governing the 
        licensure of individuals and entities authorized to sell and 
        solicit the purchase of insurance within the State; or
          (2) have enacted reciprocity laws and regulations governing 
        the licensure of nonresident individuals and entities 
        authorized to sell and solicit insurance within those States.
  (b) Uniformity Required.--States shall be deemed to have established 
the uniformity necessary to satisfy subsection (a)(1) if the States--
          (1) establish uniform criteria regarding the integrity, 
        personal qualifications, education, training, and experience of 
        licensed insurance producers, including the qualification and 
        training of sales personnel in ascertaining the appropriateness 
        of a particular insurance product for a prospective customer;
          (2) establish uniform continuing education requirements for 
        licensed insurance producers;
          (3) establish uniform ethics course requirements for licensed 
        insurance producers in conjunction with the continuing 
        education requirements under paragraph (2);
          (4) establish uniform criteria to ensure that an insurance 
        product, including any annuity contract, sold to a consumer is 
        suitable and appropriate for the consumer based on financial 
        information disclosed by the consumer; and
          (5) do not impose any requirement upon any insurance producer 
        to be licensed or otherwise qualified to do business as a 
        nonresident that has the effect of limiting or conditioning 
        that producer's activities because of its residence or place of 
        operations, except that counter-signature requirements imposed 
        on nonresident producers shall not be deemed to have the effect 
        of limiting or conditioning a producer's activities because of 
        its residence or place of operations under this section.
  (c) Reciprocity Required.--States shall be deemed to have established 
the reciprocity required to satisfy subsection (a)(2) if the following 
conditions are met:
          (1) Administrative licensing procedures.--At least a majority 
        of the States permit a producer that has a resident license for 
        selling or soliciting the purchase of insurance in its home 
        State to receive a license to sell or solicit the purchase of 
        insurance in such majority of States as a nonresident to the 
        same extent that such producer is permitted to sell or solicit 
        the purchase of insurance in its State, if the producer's home 
        State also awards such licenses on such a reciprocal basis, 
        without satisfying any additional requirements other than 
        submitting--
                  (A) a request for licensure;
                  (B) the application for licensure that the producer 
                submitted to its home State;
                  (C) proof that the producer is licensed and in good 
                standing in its home State; and
                  (D) the payment of any requisite fee to the 
                appropriate authority.
          (2) Continuing education requirements.--A majority of the 
        States accept an insurance producer's satisfaction of its home 
        State's continuing education requirements for licensed 
        insurance producers to satisfy the States' own continuing 
        education requirements if the producer's home State also 
        recognizes the satisfaction of continuing education 
        requirements on such a reciprocal basis.
          (3) No limiting nonresident requirements.--A majority of the 
        States do not impose any requirement upon any insurance 
        producer to be licensed or otherwise qualified to do business 
        as a nonresident that has the effect of limiting or 
        conditioning that producer's activities because of its 
        residence or place of operations, except that countersignature 
        requirements imposed on nonresident producers shall not be 
        deemed to have the effect of limiting or conditioning a 
        producer's activities because of its residence or place of 
        operations under this section.
          (4) Reciprocal reciprocity.--Each of the States that 
        satisfies paragraphs (1), (2), and (3) grants reciprocity to 
        residents of all of the other States that satisfy such 
        paragraphs.
  (d) Determination.--
          (1) NAIC determination.--At the end of the 3-year period 
        beginning on the date of the enactment of this Act, the 
        National Association of Insurance Commissioners shall 
        determine, in consultation with the insurance commissioners or 
        chief insurance regulatory officials of the States, whether the 
        uniformity or reciprocity required by subsections (b) and (c) 
        has been achieved.
          (2) Judicial review.--The appropriate United States district 
        court shall have exclusive jurisdiction over any challenge to 
        the National Association of Insurance Commissioners' 
        determination under this section and such court shall apply the 
        standards set forth in section 706 of title 5, United States 
        Code, when reviewing any such challenge.
  (e) Continued Application.--If, at any time, the uniformity or 
reciprocity required by subsections (b) and (c) no longer exists, the 
provisions of this subtitle shall take effect 2 years after the date on 
which such uniformity or reciprocity ceases to exist, unless the 
uniformity or reciprocity required by those provisions is satisfied 
before the expiration of that 2-year period.
  (f) Savings Provision.--No provision of this section shall be 
construed as requiring that any law, regulation, provision, or action 
of any State which purports to regulate insurance producers, including 
any such law, regulation, provision, or action which purports to 
regulate unfair trade practices or establish consumer protections, 
including countersignature laws, be altered or amended in order to 
satisfy the uniformity or reciprocity required by subsections (b) and 
(c), unless any such law, regulation, provision, or action is 
inconsistent with a specific requirement of any such subsection and 
then only to the extent of such inconsistency.
  (g) Uniform Licensing.--Nothing in this section shall be construed to 
require any State to adopt new or additional licensing requirements to 
achieve the uniformity necessary to satisfy subsection (a)(1).

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

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

SEC. 323. PURPOSE.

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

SEC. 324. RELATIONSHIP TO THE FEDERAL GOVERNMENT.

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

SEC. 325. MEMBERSHIP.

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

SEC. 326. BOARD OF DIRECTORS.

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

SEC. 327. OFFICERS.

  (a) In General.--
          (1) Positions.--The officers of the Association shall consist 
        of a chairperson and a vice chairperson of the Board, a 
        president, secretary, and treasurer of the Association, and 
        such other officers and assistant officers as may be deemed 
        necessary.
          (2) Manner of selection.--Each officer of the Board and the 
        Association shall be elected or appointed at such time and in 
        such manner and for such terms not exceeding 3 years as may be 
        prescribed in the bylaws of the Association.
  (b) Criteria for Chairperson.--Only individuals who are members of 
the NAIC shall be eligible to serve as the chairperson of the board of 
directors.

SEC. 328. BYLAWS, RULES, AND DISCIPLINARY ACTION.

  (a) Adoption and Amendment of Bylaws.--
          (1) Copy required to be filed with the naic.--The board of 
        directors of the Association shall file with the NAIC a copy of 
        the proposed bylaws or any proposed amendment to the bylaws, 
        accompanied by a concise general statement of the basis and 
        purpose of such proposal.
          (2) Effective date.--Except as provided in paragraph (3), any 
        proposed bylaw or proposed amendment shall take effect--
                  (A) 30 days after the date of the filing of a copy 
                with the NAIC;
                  (B) upon such later date as the Association may 
                designate; or
                  (C) upon such earlier date as the NAIC may determine.
          (3) Disapproval by the naic.--Notwithstanding paragraph (2), 
        a proposed bylaw or amendment shall not take effect if, after 
        public notice and opportunity to participate in a public 
        hearing--
                  (A) the NAIC disapproves such proposal as being 
                contrary to the public interest or contrary to the 
                purposes of this subtitle and provides notice to the 
                Association setting forth the reasons for such 
                disapproval; or
                  (B) the NAIC finds that such proposal involves a 
                matter of such significant public interest that public 
                comment should be obtained, in which case it may, after 
                notifying the Association in writing of such finding, 
                require that the procedures set forth in subsection (b) 
                be followed with respect to such proposal, in the same 
                manner as if such proposed bylaw change were a proposed 
                rule change within the meaning of such subsection.
  (b) Adoption and Amendment of Rules.--
          (1) Filing proposed regulations with the naic.--
                  (A) In general.--The board of directors of the 
                Association shall file with the NAIC a copy of any 
                proposed rule or any proposed amendment to a rule of 
                the Association which shall be accompanied by a concise 
                general statement of the basis and purpose of such 
                proposal.
                  (B) Other rules and amendments ineffective.--No 
                proposed rule or amendment shall take effect unless 
                approved by the NAIC or otherwise permitted in 
                accordance with this paragraph.
          (2) Initial consideration by the naic.--Not later than 35 
        days after the date of publication of notice of filing of a 
        proposal, or before the end of such longer period not to exceed 
        90 days as the NAIC may designate after such date, if the NAIC 
        finds such longer period to be appropriate and sets forth its 
        reasons for so finding, or as to which the Association 
        consents, the NAIC shall--
                  (A) by order approve such proposed rule or amendment; 
                or
                  (B) institute proceedings to determine whether such 
                proposed rule or amendment should be modified or 
                disapproved.
          (3) NAIC proceedings.--
                  (A) In general.--Proceedings instituted by the NAIC 
                with respect to a proposed rule or amendment pursuant 
                to paragraph (2) shall--
                          (i) include notice of the grounds for 
                        disapproval under consideration;
                          (ii) provide opportunity for hearing; and
                          (iii) be concluded not later than 180 days 
                        after the date of the Association's filing of 
                        such proposed rule or amendment.
                  (B) Disposition of proposal.--At the conclusion of 
                any proceeding under subparagraph (A), the NAIC shall, 
                by order, approve or disapprove the proposed rule or 
                amendment.
                  (C) Extension of time for consideration.--The NAIC 
                may extend the time for concluding any proceeding under 
                subparagraph (A) for--
                          (i) not more than 60 days if the NAIC finds 
                        good cause for such extension and sets forth 
                        its reasons for so finding; or
                          (ii) for such longer period as to which the 
                        Association consents.
          (4) Standards for review.--
                  (A) Grounds for approval.--The NAIC shall approve a 
                proposed rule or amendment if the NAIC finds that the 
                rule or amendment is in the public interest and is 
                consistent with the purposes of this Act.
                  (B) Approval before end of notice period.--The NAIC 
                shall not approve any proposed rule before the end of 
                the 30-day period beginning on the date on which the 
                Association files proposed rules or amendments in 
                accordance with paragraph (1), unless the NAIC finds 
                good cause for so doing and sets forth the reasons for 
                so finding.
          (5) Alternate procedure.--
                  (A) In general.--Notwithstanding any provision of 
                this subsection other than subparagraph (B), a proposed 
                rule or amendment relating to the administration or 
                organization of the Association shall take effect--
                          (i) upon the date of filing with the NAIC, if 
                        such proposed rule or amendment is designated 
                        by the Association as relating solely to 
                        matters which the NAIC, consistent with the 
                        public interest and the purposes of this 
                        subsection, determines by rule do not require 
                        the procedures set forth in this paragraph; or
                          (ii) upon such date as the NAIC shall for 
                        good cause determine.
                  (B) Abrogation by the naic.--
                          (i) In general.--At any time within 60 days 
                        after the date of filing of any proposed rule 
                        or amendment under subparagraph (A)(i) or 
                        clause (ii) of this subparagraph, the NAIC may 
                        repeal such rule or amendment and require that 
                        the rule or amendment be refiled and reviewed 
                        in accordance with this paragraph, if the NAIC 
                        finds that such action is necessary or 
                        appropriate in the public interest, for the 
                        protection of insurance producers or 
                        policyholders, or otherwise in furtherance of 
                        the purposes of this subtitle.
                          (ii) Effect of reconsideration by the naic.--
                        Any action of the NAIC pursuant to clause (i) 
                        shall--
                                  (I) not affect the validity or force 
                                of a rule change during the period such 
                                rule or amendment was in effect; and
                                  (II) not be considered to be a final 
                                action.
  (c) Action Required by the NAIC.--The NAIC may, in accordance with 
such rules as the NAIC determines to be necessary or appropriate to the 
public interest or to carry out the purposes of this subtitle, require 
the Association to adopt, amend, or repeal any bylaw, rule or amendment 
of the Association, whenever adopted.
  (d) Disciplinary Action by the Association.--
          (1) Specification of charges.--In any proceeding to determine 
        whether membership shall be denied, suspended, revoked, or not 
        renewed (hereafter in this section referred to as a 
        ``disciplinary action''), the Association shall bring specific 
        charges, notify such member of such charges, give the member an 
        opportunity to defend against the charges, and keep a record.
          (2) Supporting statement.--A determination to take 
        disciplinary action shall be supported by a statement setting 
        forth--
                  (A) any act or practice in which such member has been 
                found to have been engaged;
                  (B) the specific provision of this subtitle, the 
                rules or regulations under this subtitle, or the rules 
                of the Association which any such act or practice is 
                deemed to violate; and
                  (C) the sanction imposed and the reason for such 
                sanction.
  (e) NAIC Review of Disciplinary Action.--
          (1) Notice to the naic.--If the Association orders any 
        disciplinary action, the Association shall promptly notify the 
        NAIC of such action.
          (2) Review by the naic.--Any disciplinary action taken by the 
        Association shall be subject to review by the NAIC--
                  (A) on the NAIC's own motion; or
                  (B) upon application by any person aggrieved by such 
                action if such application is filed with the NAIC not 
                more than 30 days after the later of--
                          (i) the date the notice was filed with the 
                        NAIC pursuant to paragraph (1); or
                          (ii) the date the notice of the disciplinary 
                        action was received by such aggrieved person.
  (f) Effect of Review.--The filing of an application to the NAIC for 
review of a disciplinary action, or the institution of review by the 
NAIC on the NAIC's own motion, shall not operate as a stay of 
disciplinary action unless the NAIC otherwise orders.
  (g) Scope of Review.--
          (1) In general.--In any proceeding to review such action, 
        after notice and the opportunity for hearing, the NAIC shall--
                  (A) determine whether the action should be taken;
                  (B) affirm, modify, or rescind the disciplinary 
                sanction; or
                  (C) remand to the Association for further 
                proceedings.
          (2) Dismissal of review.--The NAIC may dismiss a proceeding 
        to review disciplinary action if the NAIC finds that--
                  (A) the specific grounds on which the action is based 
                exist in fact;
                  (B) the action is in accordance with applicable rules 
                and regulations; and
                  (C) such rules and regulations are, and were, applied 
                in a manner consistent with the purposes of this 
                subtitle.

SEC. 329. ASSESSMENTS.

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

SEC. 330. FUNCTIONS OF THE NAIC.

  (a) Administrative Procedure.--Determinations of the NAIC, for 
purposes of making rules pursuant to section 328, shall be made after 
appropriate notice and opportunity for a hearing and for submission of 
views of interested persons.
  (b) Examinations and Reports.--
          (1) Examinations.--The NAIC may make such examinations and 
        inspections of the Association and require the Association to 
        furnish to the NAIC such reports and records or copies thereof 
        as the NAIC may consider necessary or appropriate in the public 
        interest or to effectuate the purposes of this subtitle.
          (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 insurersolvency 
or financial condition, establishing guaranty funds and levying 
assessments, or requiring claims settlement practices.
  (b) Liability of the Association, Its Directors, Officers, and 
Employees.--Neither the Association nor any of its directors, officers, 
or employees shall have any liability to any person for any action 
taken or omitted in good faith under or in connection with any matter 
subject to this subtitle.

SEC. 332. ELIMINATION OF NAIC OVERSIGHT.

  (a) In General.--The Association shall be established without NAIC 
oversight and the provisions set forth in section 324, subsections (a), 
(b), (c), and (e) of section 328, and sections 329(b) and 330 of this 
subtitle shall cease to be effective if, at the end of the 2-year 
period beginning on the date on which the provisions of this subtitle 
take effect pursuant to section 321--
          (1) at least a majority of the States representing at least 
        50 percent of the total United States commercial-lines 
        insurance premiums have not satisfied the uniformity or 
        reciprocity requirements of subsections (a), (b), and (c) of 
        section 321; and
          (2) the NAIC has not approved the Association's bylaws as 
        required by section 328 or is unable to operate or supervise 
        the Association, or the Association is not conducting its 
        activities as required under this Act.
  (b) Board Appointments.--If the repeals required by subsection (a) 
are implemented, the following shall apply:
          (1) General appointment power.--The President, with the 
        advice and consent of the Senate, shall appoint the members of 
        the Association's Board established under section 326 from 
        lists of candidates recommended to the President by the 
        National Association of Insurance Commissioners.
          (2) Procedures for obtaining national association of 
        insurance commissioners appointment recommendations.--
                  (A) Initial determination and recommendations.--After 
                the date on which the provisions of subsection (a) take 
                effect, the NAIC shall, not later than 60 days 
                thereafter, provide a list of recommended candidates to 
                the President. If the NAIC fails to provide a list by 
                that date, or if any list that is provided does not 
                include at least 14 recommended candidates or comply 
                with the requirements of section 326(c), the President 
                shall, with the advice and consent of the Senate, make 
                the requisite appointments without considering the 
                views of the NAIC.
                  (B) Subsequent appointments.--After the initial 
                appointments, the NAIC shall provide a list of at least 
                6 recommended candidates for the Board to the President 
                by January 15 of each subsequent year. If the NAIC 
                fails to provide a list by that date, or if any list 
                that is provided does not include at least 6 
                recommended candidates or comply with the requirements 
                of section 326(c), the President, with the advice and 
                consent of the Senate, shall make the requisite 
                appointments without considering the views of the NAIC.
                  (C) Presidential oversight.--
                          (i) Removal.--If the President determines 
                        that the Association is not acting in the 
                        interests of the public, the President may 
                        remove the entire existing Board for the 
                        remainder of the term to which the members of 
                        the Board were appointed and appoint, with the 
                        advice and consent of the Senate, new members 
                        to fill the vacancies on the Board for the 
                        remainder of such terms.
                          (ii) Suspension of rules or actions.--The 
                        President, or a person designated by the 
                        President for such purpose, may suspend the 
                        effectiveness of any rule, or prohibit any 
                        action, of the Association which the President 
                        or the designee determines is contrary to the 
                        public interest.
  (c) Annual Report.--As soon as practicable after the close of each 
fiscal year, the Association shall submit to the President and to the 
Congress a written report relative to the conduct of its business, and 
the exercise of the other rights and powers granted by this subtitle, 
during such fiscal year. Such report shall include financial statements 
setting forth the financial position of the Association at the end of 
such fiscal year and the results of its operations (including the 
source and application of its funds) for such fiscal year.

SEC. 333. RELATIONSHIP TO STATE LAW.

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

SEC. 334. COORDINATION WITH OTHER REGULATORS.

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

SEC. 335. JUDICIAL REVIEW.

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

SEC. 336. DEFINITIONS.

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

           Subtitle D--Rental Car Agency Insurance Activities

SEC. 341. STANDARD OF REGULATION FOR MOTOR VEHICLE RENTALS.

  (a) Protection Against Retroactive Application of Regulatory and 
Legal Action.--Except as provided in subsection (b), during the 3-year 
period beginning on the date of the enactment of this Act, it shall be 
a presumption that no State law imposes any licensing, appointment, or 
education requirements on any person who solicits the purchase of or 
sells insurance connected with, and incidental to, the lease or rental 
of a motor vehicle.
  (b) Preeminence of State Insurance Law.--No provision of this section 
shall be construed as altering the validity, interpretation, 
construction, or effect of--
          (1) any State statute;
          (2) the prospective application of any court judgment 
        interpreting or applying any State statute; or
          (3) the prospective application of any final State 
        regulation, order, bulletin, or other statutorily authorized 
        interpretation or action, which, by its specific terms, 
        expressly regulates or exempts from regulation any person 
        who solicits the purchase of or sells insurance connected 
        with, and incidental to, the short-term lease or rental of 
        a motor vehicle.
  (c) Scope of Application.--This section shall apply with respect to--
          (1) the lease or rental of a motor vehicle for a total period 
        of 90 consecutive days or less; and
          (2) insurance which is provided in connection with, and 
        incidentally to, such lease or rental for a period of 
        consecutive days not exceeding the lease or rental period.
  (d) Motor Vehicle Defined.--For purposes of this section, the term 
``motor vehicle'' has the meaning given to such term in section 13102 
of title 49, United States Code.

                      Subtitle E--Confidentiality

SEC. 351. CONFIDENTIALITY OF HEALTH AND MEDICAL INFORMATION.

  (a) In General.--A company which underwrites or sells annuities 
contracts or contracts insuring, guaranteeing, or indemnifying against 
loss, harm, damage, illness, disability, or death (other than credit-
related insurance) and any subsidiary or affiliate thereof shall 
maintain a practice of protecting the confidentiality of individually 
identifiable customer health and medical and genetic information and 
may disclose such information only--
          (1) with the consent, or at the direction, of the customer;
          (2) for insurance underwriting and reinsuring policies, 
        account administration, reporting, investigating, or preventing 
        fraud or material misrepresentation, processing premium 
        payments, processing insurance claims, administering insurance 
        benefits (including utilization review activities), providing 
        information to the customer's physician or other health care 
        provider, participating in research projects, enabling the 
        purchase, transfer, merger, or sale of any insurance-related 
        business, or as otherwise required or specifically permitted by 
        Federal or State law; or
          (3) in connection with--
                  (A) 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 or 
                account number, or by other payment means;
                  (B) the transfer of receivables, accounts, or 
                interest therein;
                  (C) the audit of the debit, credit, or other payment 
                information;
                  (D) compliance with Federal, State, or local law;
                  (E) compliance with a properly authorized civil, 
                criminal, or regulatory investigation by Federal, 
                State, or local authorities as governed by the 
                requirements of this section; or
                  (F) fraud protection, risk control, resolving 
                customer disputes or inquiries, communicating with the 
                person to whom the information relates, or reporting to 
                consumer reporting agencies.
  (b) State Actions for Violations.--In addition to such other remedies 
as are provided under State law, if the chief law enforcement officer 
of a State, State insurance regulator, or an official or agency 
designated by a State, has reason to believe that any person has 
violated or is violating this title, the State may bring an action to 
enjoin such violation in any appropriate United States district court 
or in any other court of competent jurisdiction.
  (c) Effective Date; Sunset.--
          (1) Effective date.--Except as provided in paragraph (2), 
        subsection (a) shall take effect on February 1, 2000.
          (2) Sunset.--Subsection (a) shall not take effect if, or 
        shall cease to be effective on and after the date on which, 
        legislation is enacted that satisfies the requirements in 
        section 264(c)(1) of the Health Insurance Portability and 
        Accountability Act of 1996 (Public Law 104-191; 110 Stat. 
        2033).
  (d) Consultation.--While subsection (a) is in effect, State insurance 
regulatory authorities, through the National Association of Insurance 
Commissioners, shall consult with the Secretary of Health and Human 
Services in connection with the administration of such subsection.

          TITLE IV--UNITARY SAVINGS AND LOAN HOLDING COMPANIES

SEC. 401. PREVENTION OF CREATION OF NEW S&L HOLDING COMPANIES WITH 
                    COMMERCIAL AFFILIATES.

  (a) Amendment to Home Owners' Loan Act.--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 27, 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 paragraphs (1)(C) or (2); or
                          ``(ii) for financial holding companies under 
                        section 6(c) of the Bank Holding Company Act of 
                        1956.
                  ``(B) Prevention of new commercial affiliations.--
                Notwithstanding paragraph (3), no savings and loan 
                holding company may engage directly or indirectly 
                (including through a subsidiary other than a savings 
                association) in any activity other than as described in 
                clauses (i) and (ii) of subparagraph (A).
                  ``(C) Preservation of authority of existing unitary 
                s&l holding companies.--Subparagraphs (A) and (B) shall 
                not apply with respect to any company that was a 
                savings and loan holding company on May 27, 1999, or 
                that becomes a savings and loan holding company 
                pursuant to an application pending before the Office of 
                Thrift Supervision on or before that date, and that--
                          ``(i) meets and continues to meet the 
                        requirements of paragraph (3); and
                          ``(ii) continues to control not fewer than 1 
                        savings association that it controlled on May 
                        27, 1999, or that it acquired pursuant to an 
                        application pending before the Office of Thrift 
                        Supervision on or before that date, or the 
                        successor to such savings association.
                  ``(D) Corporate reorganizations permitted.--This 
                paragraph does not prevent a transaction--
                          ``(i) that 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) that 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 deems 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) shall 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 27, 1999, or a subsequent 
                        date pursuant to an application pending before 
                        the Office of Thrift Supervision on or before 
                        May 27, 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 27, 1999, or a 
                        subsequent date pursuant to an applications 
                        pending before the Office of Thrift Supervision 
                        on or before May 27, 1999.''.
  (b) Conforming Amendment.--Section 10(o)(5) of the Home Owners' Loan 
Act (15 U.S.C. 1467a(o)(5)) is amended--
          (1) in subparagraph (E), by striking ``, except subparagraph 
        (B)''; and
          (2) by adding at the end the following new subparagraph:
                  ``(F) In the case of a mutual holding company which 
                is a savings and loan holding company described in 
                subsection (c)(3), engaging in the activities permitted 
                under subsection (c)(9)(A)(ii).''.
  (c) GAO Study of Affiliation of Savings Associations With Commercial 
Companies and S&L Holding Company Regulation.--
          (1) In general.--The Comptroller General shall conduct a 
        study of--
                  (A) the effect of permitting the affiliation of 
                savings associations with commercial companies, 
                including--
                          (i) competitive effects as between--
                                  (I) commercial companies that are not 
                                permitted to affiliate with depository 
                                institutions and ones that have a 
                                savings association affiliate; and
                                  (II) savings associations that do not 
                                have a commercial affiliate and ones 
                                who do; and
                          (ii) conflicts of interest; and
                  (B) the diligence and effectiveness of the Director 
                of the Office of Thrift Supervision in examining and 
                regulating savings and loan holding companies, 
                generally, and savings and loan holding companies which 
                are a commercial company or have a commercial 
                affiliate, in particular.
          (2) Report.--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 with respect to the 
        study required under paragraph (1), together with such 
        recommendations for administrative and legislative action as 
        the Comptroller General may determine to be appropriate.

SEC. 402. 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 Financial Services Act of 1999 may 
        retain the term `Federal' in the name of such institution if 
        such depository institution remains an insured depository 
        institution.
          ``(2) Definitions.--For purposes of this subsection, the 
        terms `depository institution', `insured depository 
        institution', `national bank', and `State bank' have the same 
        meanings as in section 3 of the Federal Deposit Insurance 
        Act.''.

                TITLE V--PRIVACY OF CONSUMER INFORMATION

        Subtitle A--Disclosure of Nonpublic Personal Information

SEC. 501. OBLIGATIONS WITH RESPECT TO PERSONAL INFORMATION.

  (a) General Requirements.--Except as otherwise provided in this 
subtitle, a financial institution may not, directly or through any 
affiliate, divulge or make an unrelated use of any nonpublic personal 
information collected by the financial institution in connection with 
any transaction with a consumer in any financial product or any 
financial service, unless--
          (1) such financial institution provides or has provided to 
        the consumer a notice that complies with section 502 and the 
        rules thereunder; and
          (2) such financial institution maintains procedures to 
        protect the confidentiality and security of nonpublic personal 
        information.
  (b) Opt-Out Required for Information Transfers.--The Commission shall 
by rule prohibit a financial institution from making available any 
nonpublic personal information to any affiliate of the institution, or 
to any other person that is not an affiliate of the institution, unless 
the consumer to whom the information pertains--
          (1) is given the opportunity in accordance with such rule to 
        object to the transfer of such information; and
          (2) does not object, or withdraws the objection.
  (c) Access to and Correction of Information Vended to Third 
Parties.--
          (1) Rule required.--The Commission shall by rule require a 
        financial institution that, for any consideration, makes 
        available nonpublic personal information collected by the 
        financial institution in connection with any transaction with a 
        consumer in any financial product or any financial service to 
        any person or entity other than an employee or agent of such 
        institution, an affiliate of such institution, or an employee 
        or agent of such affiliate, to afford that consumer--
                  (A) the opportunity to examine, upon request, the 
                nonpublic personal information that was so made 
                available; and
                  (B) the opportunity to dispute the accuracy of any of 
                such information, and to present evidence thereon.
          (2) Exception for proprietary information.--The rule required 
        by paragraph (1) shall not require a financial institution to 
        afford a customer who requests access to the nonpublic personal 
        information that was made available the opportunity to examine 
        or dispute any data obtained by any analysis or evaluation 
        performed using such information, or to examine or dispute the 
        methodology of such analysis or evaluation.
  (d) General Exceptions.--Subsections (a) and (b) shall not prohibit 
the divulging of nonpublic personal information, the making of an 
unrelated use of such information, or the making available of such 
information to affiliates or other persons by the financial 
institution--
          (1) as necessary to effect or enforce the transaction or a 
        related transaction;
          (2) as necessary to protect the confidentiality or security 
        of its records pertaining to the consumer, the financial 
        service or financial product, or the transaction therein;
          (3) as necessary to take precautions against liability;
          (4) as necessary to respond to judicial process;
          (5) to the extent permitted or required under other 
        provisions of law and in accordance with the Right to Financial 
        Privacy Act of 1974, to provide information to law enforcement 
        agencies (including a functional regulator or the Commission) 
        or for an investigation on a matter related to public safety;
          (6) to a consumer reporting agency in accordance with title 
        VI of the Consumer Credit Protection Act; or
          (7) in executing a sale or exchange whereby the financial 
        institution transfers to another financial institution or other 
        person the business unit or operation, or substantially all the 
        assets of the business unit or operation, with which the 
        customer's transactions were effected.

SEC. 502. NOTICE CONCERNING DIVULGING INFORMATION.

  (a) Rule Required.--The Commission shall, after consultation with the 
Federal functional regulators and one or more representatives of State 
insurance regulators, prescribe rules in accordance with this section 
to prohibit unfair and deceptive acts and practices in connection with 
the divulging of nonpublic personal information or with making 
unrelated uses of such information. Such rules shall require any 
financial institution, through the use of a form that complies with the 
rules prescribed under subsection (b), to clearly and conspicuously 
disclose to the consumer--
          (1) the categories of nonpublic personal information that are 
        collected by the financial institution;
          (2) the practices and policies of the financial institution 
        with respect to divulging nonpublic personal information, or 
        making unrelated uses of such information, including--
                  (A) the categories of persons to whom the information 
                is or may be divulged or who may be permitted to make 
                unrelated uses of such information, other than the 
                persons to whom the information must be provided to 
                effect or enforce the transaction; and
                  (B) the practices and policies of the institution 
                with respect to divulging or making unrelated uses of 
                nonpublic personal information of persons who have 
                ceased to be customers of the financial institution; 
                and
          (3) the policies that the institution maintains to protect 
        the confidentiality and security of nonpublic personal 
        information.
  (b) Design of Notice Requirements.--In prescribing the form of a 
notice for purposes of subsection (a), the Commission shall ensure that 
consumers are readily able to compare differences in the measures that 
the financial institution takes, and the policies that the institution 
has established, to protect the consumer's privacy as compared to the 
measures taken and the policies established by other financial 
institutions. Such form shall specifically identify any rights the 
institution affords consumers to grant or deny consent to (1) the 
divulging of nonpublic personal information for any purpose other than 
as required in order to effect or enforce the consumer's transaction, 
or (2) the making of an unrelated use of such information.
  (c) Additional Contents of Rules; Exemptive Rules.--The Commission 
shall, by rule after consultation with the functional regulators, and 
may by order--
          (1) specify the divulgences and uses of information which, 
        for purposes of this subtitle and the rules prescribed 
        thereunder, may be treated as necessary to effect or enforce a 
        consumer's transaction with respect to a variety of financial 
        services and financial products;
          (2) specify timing requirements with respect to notices to 
        new and existing customers, which shall not require notices 
        more frequently than annually unless there has been a change in 
        the information required to be disclosed pursuant to subsection 
        (a); and
          (3) provide, consistent with the purposes of this subtitle, 
        exemptions or temporary waivers to, or delayed effective dates 
        for, any requirement of this subtitle or the rules prescribed 
        thereunder.
  (d) Exemptive Rules To Permit Efficient Data Storage and Retrieval.--
The exemptive rules prescribed by the Commission pursuant to subsection 
(c)(3) shall include such rules as may be necessary to permit financial 
institutions and their affiliates to establish and maintain efficient 
systems to collect and access nonpublic personal information in shared 
or networked data storage and retrieval facilities that are implemented 
in a manner consistent with the requirements of section 501.
  (e) Rulemaking Deadline.--The Commission shall initially prescribe 
the rules required by this section within one year after the date of 
enactment of this Act. Such rules, and any revisions of such rules, 
shall be prescribed in accordance with section 553 of title 5, United 
States Code.

SEC. 503. ENFORCEMENT.

  (a) In general.--This subtitle and the rules prescribed thereunder 
shall be enforced by the Federal Trade Commission under the Federal 
Trade Commission Act (15 U.S.C. 41 et seq.).
  (b) Actions by the Commission.--The Federal Trade Commission shall 
prevent any person from violating this subtitle and the rules 
prescribed thereunder in the same manner, by the same means, and with 
the same jurisdiction, powers, and duties as though all applicable 
terms and provisions of the Federal Trade Commission Act (15 U.S.C. 41 
et seq.) were incorporated into and made a part of this subtitle, 
except that notwithstanding section 5(a)(2) of such Act (15 U.S.C. 
45(a)(2)) the Commission shall, for purposes of this title, have 
jurisdiction with respect to banks, savings and loan institutions, and 
Federal credit unions. Any person who violates this subtitle or the 
rules prescribed thereunder shall be subject to the penalties and 
entitled to the privileges and immunities provided in the Federal Trade 
Commission Act in the same manner, by the same means, and with the same 
jurisdiction, power, and duties as though all applicable terms and 
provisions of the Federal Trade Commission Act were incorporated into 
and made a part of this subtitle.
  (c) Treatment of Rules.--A rule issued by the Commission under this 
title shall be treated as a rule issued under section 18(a)(1)(B) of 
the Federal Trade Commission Act (15 U.S.C. 57a(a)(1)(B)).

SEC. 504. DEFINITIONS.

  As used in this subtitle:
          (1) Commission.--The term ``Commission'' means the Federal 
        Trade Commission.
          (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;
                  (F) the Farm Credit Administration; and
                  (G) the Securities and Exchange Commission.
          (3) Financial institution.--The term ``financial 
        institution'' means any institution the business of which is 
        engaging in financial activities or activities that are 
        incidental to financial activities, as determined under section 
        6(c) of the Bank Holding Company Act of 1956. Such term, when 
        used in connection with a transaction for a consumer, means 
        only the financial institution with which the consumer expects 
        to conduct such transaction and does not include any affiliate, 
        subsidiary, or contractually-related party of that financial 
        institution, even if such affiliate, subsidiary, or party is 
        also a financial institution and participates in the effecting 
        or enforcement of such transaction.
          (4) Nonpublic personal information.--The term ``nonpublic 
        personal information'' means personally identifiable 
        information, other than publicly available directory 
        information, pertaining to an individual's transactions with a 
        financial institution.
          (5) Directory information.--The term ``publicly available 
        directory information'' means subscriber list information 
        required to be made available for publication pursuant to 
        section 222(e) of the Communications Act of 1934 (47 U.S.C. 
        222(3)).
          (6) Unrelated use.--The term ``unrelated use'', when used 
        with respect to information collected by the financial 
        institution in connection with any transaction with a consumer 
        in any financial product or any financial service, means any 
        use other than a use that is necessary to effect or enforce 
        such transaction.
          (7) Divulge; divulgence.--The terms ``divulge'' and 
        ``divulgence'', when used with respect nonpublic personal 
        information collected by the financial institution in 
        connection with any transaction with a consumer in any 
        financial product or any financial service, means to make such 
        information available to any person or entity other than an 
        employee or agent of such institution, an affiliate of such 
        institution, or an employee or agent of such affiliate.
          (8) Affiliate.--The term ``affiliate'' means any company that 
        controls, is controlled by, or is under common control with 
        another company.
          (9) Necessary to effect or enforce.--The divulging or use of 
        nonpublic personal information shall be treated--
                  (A) as necessary to effect a transaction with a 
                consumer if the divulging or use is required, or is one 
                of the usual and accepted methods, to carry out the 
                transaction and record and maintain the customer's 
                account in the ordinary course of providing the 
                financial service or financial product, and includes--
                          (i) providing the consumer 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; and
                  (B) as necessary to enforce a transaction with a 
                consumer if the divulging or use is required, or is one 
                of the lawful methods, to enforce the rights of the 
                financial institution or of other persons engaged in 
                carrying out the financial transaction, or providing 
                the financial product or financial service.
        The Commission shall, consistent with the purposes of this 
        subtitle, prescribe by rule actions that shall, in a variety of 
        financial services, and with respect to a variety of financial 
        products, be treated as necessary to effect or enforce a 
        financial transaction.
          (10) Financial services; financial products; transaction; 
        related transaction.--The Commission shall, consistent with the 
        purposes of this subtitle, prescribe by rule definitions of the 
        terms ``financial services'', ``financial products'', 
        ``transaction'', ``related transaction'', and ``unrelated third 
        party'' for purposes of this subtitle.

SEC. 505. EFFECTIVE DATE.

  This subtitle shall take effect one year after the date on which the 
Commission prescribes in final form the rules required by section 
502(a), except to the extent that a later date is specified in such 
rules.

         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).

SEC. 522. ADMINISTRATIVE ENFORCEMENT.

  (a) Enforcement by Federal Trade Commission.--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 title VIII, the Fair Debt Collection Practices Act, to 
enforce compliance with such title.
  (b) Notice of Actions.--The Federal Trade Commission shall--
          (1) notify the Securities and Exchange Commission whenever 
        the Federal Trade Commission initiates an investigation with 
        respect to a financial institution subject to regulation by the 
        Securities and Exchange Commission;
          (2) notify the Federal banking agency (as defined in section 
        3(z) of the Federal Deposit Insurance Act) whenever the 
        Commission initiates an investigation with respect to a 
        financial institution subject to regulation by such Federal 
        banking agency; and
          (3) notify the appropriate State insurance regulator whenever 
        the Commission initiates an investigation with respect to a 
        financial institution subject to regulation by such regulator.

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 Commission, 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) 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 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)).
                  (C) Securities institutions.--For purposes of 
                subparagraph (B)--
                          (i) the terms ``broker'' and ``dealer'' have 
                        the meanings provided in section 3 of the 
                        Securities Exchange Act of 1934 (15 U.S.C. 
                        78c);
                          (ii) the term ``investment adviser'' has the 
                        meaning provided 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 
                        meaning provided in section 3 of the Investment 
                        Company Act of 1940 (15 U.S.C. 80a-3).
                  (D) 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.

                          Purpose and Summary

    The purpose of H.R. 10, the Financial Services Act of 1999 
(the Act), as reported by the Committee on Commerce, is to 
establish a comprehensive framework to permit affiliations 
among securities firms, insurance companies, and commercial 
banks. The primary objective of allowing such affiliations is 
to enhance consumer choice in the financial services 
marketplace, eliminate anti-competitive regulatory disparities 
among financial services providers, and increase competition 
among providers of financial services. This legislation seeks 
to help participants in the financial services marketplace to 
realize the cost savings, efficiency, and other benefits 
resulting from increased competition. The Act is also designed 
to improve the international competitiveness of U.S. companies, 
which may have been constrained by the barriers to affiliation 
that exist pursuant to certain sections of the Banking Act of 
1933, commonly referred to as the Glass-Steagall Act. (Sections 
16, 20, 21, and 32 of the Banking Act of 1933 are referred to 
as the ``Glass-Steagall Act.'')
    The Act provides for a number of prudential safeguards 
designed to protect investors and their privacy, avoid risk to 
the Federal deposit insurance funds, protect the safety and 
soundness of insured depository institutions and the Federal 
payments system, prevent the expansion of the Federal subsidy 
provided to banks, and protect consumers.

                                TITLE I

    Title I repeals the anti-affiliation provisions of the 
Glass-Steagall Act (section 20 and section 32 of the Banking 
Act of 1933). It also sets up a structure, based on the holding 
company framework successfully implemented in the Bank Holding 
Company Act of 1956, permitting affiliations among securities 
firms, insurance companies, and banks. This structure is 
designed to promote efficiency and competition and to protect 
investors and consumers.
    The Committee found that a structure based on a financial 
services holding company was the most beneficial to the goals 
of efficiency, competition, and protection of investors and 
consumers. Specifically, requiring that securities and 
insurance underwriting activities be conducted in separately 
capitalized affiliates in a holding company structure helps 
prevent taxpayer subsidized funds from migrating into banks to 
finance such affiliates' activities. The Committee does not 
wish to expand unnecessarily the reach of the Federal safety 
net. It has, therefore, opted for a structure based on 
affiliation in a financial services holding company rather than 
one based on granting powers to direct subsidiaries of insured 
depository institutions.
    Title I preempts State laws that prevent affiliation among 
financial services providers. In addition, the title prevents 
the States from significantly interfering in the ability of 
national banks or wholesale financial institutions to engage in 
activities authorized under sections 6 and 10 of the Bank 
Holding Company Act, while preserving nondiscriminatory State 
law and establishing a number of safe harbors for critical 
State consumer protections governing banks' insurance sales 
activities.
    Title I also expressly limits the authority of the Board of 
Governors of the Federal Reserve System (Federal Reserve 
Board), the Comptroller of the Currency, the Federal Deposit 
Insurance Corporation, and the Office of Thrift Supervision 
over the affiliates of financial services holding companies. 
These limitations are designed to facilitate functional 
regulation of the operative components of a financial services 
holding company. Specifically, the preeminent authority of the 
Securities and Exchange Commission (SEC or the Commission) and 
the State insurance regulators over securities firms and the 
business of insurance, respectively, is preserved.
    Title I grants to State insurance commissioners and the SEC 
the authority to prevent the Federal Reserve Board from 
compelling the insurance and securities subsidiaries of a 
financial holding company to provide funds to any 
undercapitalized insured depository institution. This provision 
makes clear that the source of strength doctrine does not 
extend to securities firms and insurance companies affiliated 
with banks.
    Title I specifically limits the activities of national bank 
subsidiaries to those activities a national bank is authorized 
to engage in directly. Title I also specifically authorizes 
national bank subsidiaries to engage in financial activities as 
agents, including insurance sales. The Comptroller of the 
Currency (OCC or the Comptroller) has proposed interpretative 
changes to Part 5 of the National Bank Act that the Committee 
found: (1) exceed the Comptroller'sstatutory authority; and (2) 
are bad public policy. The Committee intends that this provision 
prevent future unauthorized actions by the Comptroller.
    Title I sets up a structure for supervision of wholesale 
financial holding companies, and creates a new depository 
institution, a Wholesale Financial Institution (WFI), which 
wholesale financial holding companies may own. Because WFIs do 
not take retail deposits or have Federal deposit insurance, 
their holding companies do not require as extensive regulatory 
oversight as do financial holding companies that own insured 
banks. The Committee has set up a supervisory structure in 
which either the SEC or the Federal Reserve Board is the 
holding company regulator for wholesale financial holding 
companies.
    Title I includes a grandfather provision that permits 
financial holding companies to retain all non-financial 
activities and affiliates, for a period of 10 years from 
September 1997 (with the possibility of a 5 year extension), so 
long as the financial holding company derives at least 85 
percent of its gross worldwide revenues from financial 
activities. These provisions are designed to provide financial 
holding companies that own insured banks with the flexibility 
to conform their commercial operations to the limits of the Act 
over a sufficiently long period to allow full recovery of the 
value of these commercial operations by the financial holding 
company. The title provides a similar grandfather provision 
applicable to WFIs, but because WFIs are uninsured 
institutions, the holding period for commercial affiliates is 
not limited. Title I also grants the Board a limited amount of 
flexibility to permit financial holding companies to engage, to 
a limited extent, in nonfinancial activities that are 
complementary to a financial activity, provided that the 
nonfinancial activities are conducted on a small scale relative 
to the permissible activities to which they are associated. 
Title I allows these entities to directly or indirectly acquire 
or control shares, assets, or ownership interests in commercial 
concerns without limit for the purpose of appreciation and 
ultimate resale by expressly including ``merchant banking'' in 
the definition of activities that are ``financial in nature.''
    With further respect to activities that are included as 
``financial in nature,'' the term ``providing financial, 
investment or economic advisory services, including advising an 
investment company (as defined in section 3 of the Investment 
Company Act of 1940)'' is intended to include all activities 
that are necessary or incidental to the business or operation 
of an investment company or an investment adviser registered 
under the Investment Advisers Act of 1940, including the 
provision of personnel to an investment company or to a company 
that provides products or services to an investment company, as 
well as money management and investment management services and 
related activities for other clients. It is the Committee's 
intention that these activities be deemed financial in nature, 
regardless of whether they are conducted separately or in 
combination with other activities, and regardless of whether 
they are conducted in accordance with limitations imposed by 
the Federal Reserve Board prior to the enactment of this Act. 
The term, thus, includes, for example, such activities as 
acting as the sponsor, organizer, distributor, principal 
underwriter, sales agent, broker, dealer, placement agent, 
administrator, transfer agent, registrar, shareholder servicing 
agent, dividend disbursement agent, custodian, investment 
adviser or sub-investment adviser of an investment company, or 
controlling an investment company.

                                TITLE II

    Subtitle A of title II of the Act amends the Federal 
securities laws in order to provide functional regulation of 
bank securities activities. The Act repeals the exemptions 
under the Federal securities laws that currently apply to 
banks, subjecting banks and their affiliates and subsidiaries 
to the same regulation as all other providers of securities 
products in order to provide investors with the same level of 
protections.
    H.R. 10, as reported by the Committee on Banking and 
Financial Services, also eliminated the blanket exemptions for 
banks from the definition of ``broker'' and ``dealer,'' but 
included sixteen new exceptions for activities in which banks 
could engage without being subject to broker-dealer regulation 
under the Federal securities laws. The breadth of the 
exceptions in the Banking Committee's bill would have had the 
effect of allowing banks to engage in extensive securities 
activities without being subject to the securities laws that 
apply to their broker-dealer competitors engaged in the same 
activity.
    H.R. 10, as passed by the Full House in the 105th Congress, 
contained certain narrow exceptions that were intended to (1) 
address competitiveness concerns, (2) address market integrity 
issues, and (3) minimize the risks to investors, particularly 
individuals.
    Accordingly, the Committee on Commerce restored H.R. 10 to 
the narrow approach passed last year by the Full House. This 
approach repeals the blanket exemptions from the definition of 
``broker'' and ``dealer'' and provides a number of exceptions 
that permit banks to engage in certain securities activities 
that have traditionally been provided by banks, subject to 
certain limitations, without becoming subject to the Federal 
securities laws. 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, and derivatives.
    Banks today also engage in a wide range of investment 
advisory activities that are comparable to, and competitive 
with, the services of other investment advisers. Banks that 
advise mutual funds, however, are not currently required to 
register as investment advisers under the Investment Advisers 
Act of 1940 and, therefore, are not subject to the same 
securities regulatory scheme that applies to other entities 
that advise mutual funds. The Committee believes that existing 
banking regulation does not adequately address the investor 
protection concerns that are raised by bank involvement in 
mutual fund activities. Subtitle B amends the Investment 
Advisers Act to subject banks that advise mutual funds to the 
same regulatory scheme as other advisers to mutual funds. 
Subtitle B also addresses specific conflicts of interest that 
may arise when banks advise mutual funds.
    Subtitle B broadens the definition of ``investment 
adviser'' in the Investment Advisers Act to include banks that 
advise mutual funds. This amendment ensures that all mutual 
fund advisers are subject to the same rules. The current 
exclusion for banks under the Investment AdvisersAct, like the 
exclusions for banks under the Securities Act of 1933 and the 
Securities Exchange Act of 1934 (the Exchange Act), is a holdover from 
a time when it was assumed that banks could not engage in securities-
related activities. That assumption is no longer valid, and the 
Committee believes that corrective legislation is essential. Excluding 
banks from the definition of ``investment adviser'' hampers effective 
Commission oversight of bank-advised mutual funds because Commission 
examiners do not have access to all of the books and records normally 
available when they examine a mutual fund whose adviser is registered 
with the Commission. Requiring banks that advise mutual funds to 
register under the Investment Advisers Act provides the Commission with 
the authority it needs to oversee the activities of these advisers, and 
provides investors in bank-advised mutual funds with the same 
protections enjoyed by other mutual fund investors.
    Although the Investment Company Act and the Investment 
Advisers Act currently restrict transactions between mutual 
funds and their affiliates, the statutes do not address 
specifically all of the concerns that may exist when banks 
provide investment management and related services to funds. 
Because banks advising mutual funds may be subject to 
particular conflicts of interest because of the nature of their 
other activities, H.R. 10 provides the Commission with 
additional authority to address special conflicts of interest 
that may exist when a bank and the mutual fund it advises do 
business with each other. These conflicts may arise, for 
example, when a bank loans money to a fund it advises, acts as 
the fund's custodian, or holds the fund's shares in a fiduciary 
capacity. Another area of concern involves the potential 
investor confusion that may be created when a bank advises a 
mutual fund or sells fund shares on bank premises. Because the 
Federal government insures bank deposits, it is possible that 
some investors may mistakenly believe that a mutual fund 
advised by a bank or sold on bank premises also is insured. The 
bill addresses this concern by requiring banks to disclose, in 
this situation, that an investment in the fund is not insured 
by the Federal Deposit Insurance Corporation (FDIC) or any 
other government agency. Because the Committee believes that 
the potential for investor confusion about whether a mutual 
fund investment is insured by the government exists only where 
those funds are sold through, or advised by a bank, H.R. 10 
applies this disclosure obligation only to such funds, and not 
to funds that are not sold through or advised by a bank.
    The bill grants the Commission authority to address 
concerns that arise when banks advise or sell mutual funds. 
This authority is not intended to subject bank advisers to more 
regulation than other fund advisers, but rather is intended to 
provide the Commission with the flexibility to effectively 
address problems particular to mutual funds that are advised by 
a bank or sold on bank premises.
    Subtitle C 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 voluntarily elect SEC supervision. In 
addition, the bill contemplates that an investment bank holding 
company could include one or more wholesale financial 
institutions.
    Under this voluntary supervision, the SEC will have greater 
authority to oversee the entire entity, thus satisfying the 
expectations of foreign jurisdictions that the entity be 
subject to consolidated supervision. This provision is designed 
to improve the competitiveness of U.S. investment bank holding 
companies that do business in foreign jurisdictions that 
require consolidated holding company supervision for securities 
firms.

                               TITLE III

    Title III pertains to the regulation of insurance. Subtitle 
A provides guidelines for the regulation of insurance 
activities of insured depository institutions, wholesale 
financial institutions, or affiliates thereof, and sets forth 
appropriate standards for judicial review of regulatory 
insurance disputes. These provisions were drafted after 
numerous hearings in which the Committee found that there were 
significant questions regarding which regulators had the 
responsibility to regulate the insurance activities of 
Federally chartered entities, and serious questions were raised 
about the applicability and enforcement of consumer protections 
in the underwriting and sale of insurance by various financial 
entities.
    Subtitle A specifically provides for the functional 
regulation of insurance. The Committee's purpose in the first 
part of Subtitle A is to reaffirm the McCarran-Ferguson Act and 
require State licensing for insurance activities. The Committee 
further requires functional regulation of insurance, but 
subjects all the functional regulation requirements set forth 
in subtitle A to the ``prevent or significantly interfere'' 
preemption standard in section 104 of the Act, and specifically 
preserves Barnett Bank of Marion County, N.A. v. Nelson, 116 
S.Ct. 1103 (1996), for adjudicating future insurance law 
preemption questions.
    Subtitle A prohibits national banks and their subsidiaries 
from underwriting insurance, except for products that they are 
currently providing or authorized to provide. A definition of 
insurance versus banking products is created, based on State 
insurance codes and referencing sections from the Internal 
Revenue Code which determine whether a product is treated as 
insurance for tax purposes, with carve-outs for core banking 
products.
    The Committee heard conflicting views from witnesses on the 
propriety of allowing banks to underwrite and sell title 
insurance. In particular, concerns were raised about conflicts 
of interest, consumer confusion, and unfair competition, in 
contrast to conflicting testimony about the need to increase 
competition, provide more availability for consumers, and the 
synergies created between a bank's mortgage or loan functions 
and title insurance activities. Not wanting to push banks out 
of business they are currently engaged in, the Committee in 
Subtitle A grandfathered title insurance activities currently 
being conducted by national banks. However, in States that have 
authorized their State banks to sell title insurance, the 
Committee desired not to disadvantage national banks 
competitively, and thus grants them parity powers to the same 
manner and extent authorized for State banks.
    To address concerns that the insurance industry was placed 
at a competitive disadvantage versus national banks in terms of 
the regulatory tensions between Federal banking and State 
insurance regulators, Subtitle A includes an expedited and 
equalized dispute resolution procedure. Such inter-regulatory 
conflicts would be brought to and decided by a United 
StatesCircuit Court of Appeals within an expedited time frame, with the 
courts directed to look at the merits of the questions presented, under 
both State and Federal law, including the nature and history of a 
product and its regulation, without unequal deference. This provision 
helps create an even playing field, on the merits, for disputes between 
regulators.
    Subtitle A also codifies a modified version of guidelines 
drafted by the Federal banking regulators to ensure a minimum 
level of consumer protection for bank insurance customers, 
including requirements for: anti-coercion rules (prohibiting 
banks from misleading consumers into believing that an 
extension of credit is conditional upon the purchase of 
insurance); easily understandable disclosures as to whether a 
product is FDIC insured; physical separation between insurance 
sales and the loan and teller activities of an IDI, WFI, or 
affiliate thereof; standards limiting compensation systems for 
insurance referrals by bank tellers or loan personnel; proper 
licensing and qualification of bank insurance personnel; 
prohibitions on insurance discrimination against victims of 
domestic violence; and establishment of a consumer grievance 
process to address consumer complaints.
    In order to complete the repeal of anti-affiliation 
provisions begun in title I that prevent financial companies 
from integrating and fully competing with each other, subtitle 
A of title III preempts State laws that prohibit insurance 
companies from affiliating in a financial holding company or 
from buying or investing in a bank.
    During the Committee's consideration of financial services 
reform, concerns were raised regarding the financial stability 
of mutual insurance companies following reform of the Glass-
Steagall Act, particularly if the State of domicile of the 
mutual insurance company did not have a statute or regulation 
allowing such company to reorganize into a mutual holding 
company. The last provision in subtitle A of title III protects 
the reorganization of a mutual insurance company in a State 
which has an enabling statute, applying against States (other 
than the insurer's domicile) that may try to prevent or 
restrict such reorganization, either directly or indirectly 
through a formal review or approval requirement.
    Subtitle B of title III allows for redomestication and 
reorganization of mutual insurance companies domiciled in 
States which do not have enabling reorganization laws or 
regulations for mutual holding companies. The Committee's 
purpose in this subtitle is to avoid preempting reasonable 
State laws which allow such reorganizations, and only apply 
Federal procedures to those States that are silent on the 
issue. To allow such a reorganization to be reasonably 
effected, the Committee has directed that all company licenses 
be preserved and all policies and forms remain in force during 
the transition, and that laws in such States (other than those 
of the transferee State domicile) which discriminate or 
otherwise impede the reorganization are preempted. To take 
advantage of these provisions, a redomesticating and 
reorganizing mutual insurer must present a plan to the State 
insurance regulator of the transferee State, and such regulator 
must affirmatively determine that the plan includes 
requirements for: a majority vote of policyholders and the 
board of directors after reasonable notice and disclosure; a 
transfer of equivalent voting and contractual rights in the new 
holding company parent; certain limits on initial public stock 
offerings; and awards of stock options to elected officers and 
directors. The insurance regulator of the transferee domicile 
must also determine that the reorganization is fair and 
equitable to the company's policyholders.
    Subtitle C of title III creates a voluntary licensing 
clearinghouse for insurance agents and brokers. The Committee 
received lengthy hearing testimony that many States imposed 
brokerage licensing requirements that did not appear to serve a 
pro-competitive or consumer protection purpose, and which made 
the placement of insurance on a multistate basis prohibitively 
expensive. Questions were raised to the Committee, for example, 
as to what purpose is served by requiring multiple continuing 
education requirements in numerous States when the material 
learned may be largely duplicative.
    Subtitle C first allows the States an opportunity to 
establish uniform or reciprocal licensing and continuing 
eligibility requirements independently without further Federal 
imposition. If such uniformity or reciprocity is not achieved 
within three years, then the National Association of Insurance 
Commissioners (NAIC) is directed to establish the National 
Association of Agents and Brokers (NARAB) under its 
supervision. The NARAB shall be a private, non-profit 
corporation, which shall establish national uniform licensing 
qualifications and continuing education requirements that would 
preempt State licensing standards for NARAB's members.
    A broker whose license has been suspended or revoked by a 
State is ineligible for NARAB membership for three years, and 
NARAB members shall remit to the States the appropriate fees 
for license renewal. The NARAB shall establish an Office of 
Consumer Complaints to investigate consumer problems and 
recommend disciplinary actions for members, referring such 
complaints to State insurance regulators where appropriate. The 
NARAB's board shall be appointed by the NAIC, and the NARAB's 
bylaws and any rules are subject to disapproval by the NAIC. 
State laws which discriminate against NARAB's members based on 
residency are preempted, as are State laws requiring additional 
licensing requirements for NARAB members, except for State 
unfair trade practices, consumer protection laws, and counter-
signature requirements. If the NAIC does not implement the 
NARAB, and the States do not meet the uniformity and 
reciprocity requirements, then the NARAB shall be created and 
supervised by the President, with its board members subject to 
the advice and consent of the Senate.
    Subtitle D establishes protections for insurance sales and 
solicitations made in connection with a short term automobile 
rental or lease. It is impractical in many instances for car 
rental employees to obtain comprehensive insurance licenses. 
Some States have worked out limited licenses required for 
either the rental companies or their employees. Other States 
have chosen to not require an insurance license for bona fide 
short term car rental insurance sales. Subtitle D creates a 
presumption for three years from the date of enactment of this 
Act that a license is not required, but the presumption only 
acts where a State has not spoken on the issue, by statute, 
regulation, order, interpretation, or other action. The 
presumption also does not apply after a court judgment has been 
rendered establishing a licensing requirement. Essentially, 
this subtitle allows the auto rental companies and consumers a 
short breathing space to continue theiractivities without 
threat of further lawsuits caused by uncertain State licensing 
requirements. But the subtitle maintains the precedence of State law 
and limits the presumption to only the minimum amount of time necessary 
for the State legislatures to resolve the issue.
    Subtitle E establishes privacy protections for consumers' 
individually identifiable health, medical, and genetic records. 
The subtitle prohibits the disclosure of such information 
without the consumer's consent, except under certain limited 
exceptions such as in the regular course of business to 
effectuate or enforce the business transaction (such as for 
purposes of underwriting, reinsuring, account administration, 
preventing fraud, administering benefits, etc.). These privacy 
protections for medical health care records are enforced by the 
State regulators, reflecting continued affirmation of the 
McCarran-Ferguson Act. The legislation will be sunsetted when 
Congress enacts more comprehensive reforms governing protection 
of health insurance information, as contemplated by the Health 
Insurance Portability and Accountability Act of 1996 (Public 
Law 104-191; 110 Stat. 2033).

                                TITLE IV

    Title IV addresses concerns about the mixing of insured 
deposit-taking activities that are supported by the Federal 
safety net with commercial activities in the context of unitary 
savings and loan holding companies. The Committee had concerns 
with respect to this title, including the grandfather 
provisions, as reported by the Committee on Banking and 
Financial Services. In order to provide existing unitary thrift 
holding companies with the greatest flexibility possible, while 
limiting the potential for risk to the safety and soundness of 
the banking system, and the potential for competitive 
unfairness among financial services providers, the Committee on 
Commerce approved an amendment adopted by the Subcommittee on 
Finance and Hazardous Materials. Pursuant to that amendment, 
the grandfather provisions permit a unitary savings and loan 
holding company that was such a holding company or had filed an 
application to become such a holding company as of May 27, 
1999, to maintain or enter into any non-bank affiliation and to 
engage in any activity, including holding any asset, that was 
permissible pursuant to the Home Owners' Loan Act (HOLA) as of 
the day before the date of enactment of the Act.
    Because these expansive grandfather rights would permit a 
savings and loan holding company to engage in unlimited 
commercial, securities, and other activities without becoming 
subject to the limitations on these activities that would apply 
to bank holding companies and their subsidiaries pursuant to 
titles I, II, and III of the Act, the grandfather rights, as 
approved by the Committee on Commerce, are subject to 
prudential limitations. A savings and loan holding company's 
grandfather rights cannot be transferred, and cease to exist, 
if the savings and loan acquires control of a bank.

                                TITLE V

    As a result of the explosion of information available via 
electronic services such as the Internet, as well as the 
expansion of financial institutions through affiliations and 
other means as they seek to provide more and better products to 
consumers, the privacy of data about personal financial 
information has become an increasingly significant concern of 
consumers.
    H.R. 10 would create new opportunities for affiliations 
among different types of financial institutions, in turn 
providing an environment that will benefit consumers by 
enhancing competition, expanding the array of financial 
products available to consumers, increasing the efficiency of 
institutions providing those products, and reducing costs to 
consumers as a result of this competition and efficiency.
    At the same time, the use of personal customer information 
by these new multi-service institutions underscores the 
importance of providing consumers with the ability to prevent, 
if they choose, their personal financial information from being 
bartered to affiliated parties of a financial institution or 
unaffiliated third parties or otherwise used in ways that are 
unrelated to the purpose for which the consumer has provided 
that information. Title V provides a mechanism to protect the 
confidentiality of consumers' personal financial information 
and provide consumers with this power to choose how their 
personal financial information may be used by their financial 
institutions, without undermining the benefits that consumers 
stand to reap as a result of enhanced affiliations, 
competition, choice, and efficiency that H.R. 10 is designed to 
provide.

                               SUBTITLE A

    Subtitle A addresses the disclosure of nonpublic personal 
information by providing new protections for the privacy of 
customers of financial institutions. The subtitle creates a new 
regulatory obligation for all financial institutions to do four 
things: (1) they must put into place procedures to protect the 
confidentiality and security of nonpublic personal information 
of their customers; (2) they must disclose to customers what 
those procedures are; (3) they must provide customers with the 
ability to ``opt out'' of having their financial institution 
share nonpublic personal information about the customer; and 
(4) they must provide customers, upon request, with access to 
the information that the financial institution shares with 
persons other than its employees, agents, affiliates, or its 
affiliates' employees or agents in order to correct any 
inaccuracies.

Disclosure of privacy policies

    The subtitle requires the Federal Trade Commission (FTC) to 
promulgate rules to require that a financial institution 
disclose the procedures it has in place to protect the 
confidentiality and security of its customers' nonpublic 
personal information, as well as information regarding the 
types of entities to whom it divulges or with whom they make 
unrelated use of nonpublic personal information about customers 
other than in connection with effecting or enforcing the 
transaction (which includes recording and maintaining the 
customer's account).
    These rules must prescribe the form of disclosure to permit 
consumers to readily compare differences in the privacy 
practices and policies among financial institutions.
    In addition, the rules must specify the divulgences and 
uses of information which may be treated as necessary to effect 
or enforce a customer's transaction for a variety of financial 
services and products. This directive is designed to result in 
rules that, consistent with the purposes of this subtitle, 
afford financial institutions broad flexibility to use customer 
information to provide customers with their services and 
products in an efficient and cost-effective manner.
    The subtitle gives the FTC authority to provide for 
exemptions, temporary waivers, or delayed effective dates for 
any requirement of this subtitle or the rules the FTC 
prescribes thereunder. The Committee intends that the FTC to 
use this exemptive authority to minimize costs and logistical 
difficulties potentially incurred by entities in complying with 
the provisions of the subtitle.

Customer ``opt-out'' of information sharing

    The ``opt-out'' provision requires the FTC to promulgate 
rules to permit customers to instruct a financial institution 
not to share personal nonpublic information about them or to 
make that information available to any party, either affiliated 
or unaffiliated. The purpose of the provision is to allow 
consumers an opportunity to ``just say no'' to having their 
personal nonpublic information shared with either affiliates or 
unrelated third parties. For example, the Committee envisions 
that when a consumer initiates a relationship with a financial 
institution, the FTC's rule will require that the consumer be 
given a form by which the consumer will be presented with an 
easy-to-understand question, such as: ``From time to time this 
financial institution provides information about its customers 
to its affiliates or unrelated third parties for a variety of 
purposes, such as direct marketing. Do you give your consent to 
our use of information about you in this manner?''
    It is equally important to describe what the opt-out 
provision does not require. Under the expanded opt out 
provision, an institution is only prohibited from making such 
information available if a customer has affirmatively 
instructed the institution not to do so. The institution is not 
required to obtain prior consent from its customers prior to 
making such information available to affiliated or unaffiliated 
parties.

Access to shared customer information

    This provision requires the FTC to promulgate rules to 
require a financial institution to provide its customers with 
access to personal nonpublic information about the customer 
that it has shared with a person other than its employees, 
agents, or affiliates, or its affiliates' employees or agents 
in order to review such information and correct any 
inaccuracies. The section provides an exception from this 
access requirement so that a financial institution would not be 
required to afford a customer access to data obtained by any 
analysis or evaluation, or to examine or dispute the 
methodology of such analysis or evaluation.

Exceptions from disclosure, opt-out, and access provisions

    The subtitle provides for a number of exceptions from the 
disclosure, opt-out, and access provisions. Pursuant to these 
exceptions, the institution may divulge or make unrelated use 
of the information to effect or enforce the transaction or a 
related transaction; to protect the confidentiality or security 
of its records; to take precautions against liability; to 
respond to judicial process, to the extent permitted or 
required under other provisions of law and in accordance with 
the Right to Financial Privacy Act of 1974; to provide 
information to law enforcement agencies or for an investigation 
on a matter related to public safety; to provide information to 
a consumer reporting agency in accordance with the Consumer 
Credit Protection Act; or in executing a sale or exchange 
whereby the financial institution transfers the business unit 
or operation, or substantially all the assets of the business 
unit or operation with which the customer's transactions were 
effected.
    The scope of these exceptions is designed to ensure that 
the disclosure, access, and opt-out rules promulgated by the 
FTC pursuant to the subtitle do not impede the ability of 
financial institutions, consistent with the purposes of this 
subtitle, to provide a multitude of services in an efficient 
manner to their customers. The Committee intends that the 
definitions of the terms used in the exception provisions, 
including the exemptive and rulemaking authority granted to the 
FTC regarding these terms, will be applied in a manner, 
consistent with the subtitle's goal of providing consumers with 
a reliable means to protect their personal financial 
information.

Enforcement

    The subtitle designates the FTC to enforce the subtitle and 
the rules prescribed thereunder. The FTC is to use this 
enforcement authority in the same manner, with the same 
authority and using the same remedies, as are provided by the 
Federal Trade Commission Act, with respect to all financial 
institutions.

                               SUBTITLE B

    Subtitle B addresses the practice of ``pretexting,'' that 
is, the obtaining of personal confidential information from 
financial institutions under false pretenses. This subtitle 
provides additional protections against pretexting violations 
by increasing the penalties for fraudulent information 
gathering and providing specific direction to the FTC to 
prosecute such fraudulent activities.
    The subtitle makes it unlawful 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 by (1) making 
a false, fictitious, or fraudulent statement or representation 
to an officer, employee, or agent of a financial institution; 
(2) making a false, fictitious, or fraudulent statement or 
representation to a customer of a financial institution; or (3) 
providing any document to an officer, employee, or agent of a 
financialinstitution, knowing that the document is forged, 
counterfeit, lost, or stolen, was fraudulently obtained, or contains a 
false, fictitious, or fraudulent statement or representation.
    The subtitle also makes it unlawful to request a person to 
obtain customer information of a financial institution knowing 
that it was or will be obtained through any of the three 
methods described in this section.
    The subtitle provides exceptions for law enforcement 
actions and for actions by a financial institution to (1) test 
its security systems; (2) investigate allegations of misconduct 
or negligence on the part of its officers, employees, or 
agents; or (3) recover customer information of the financial 
institution obtained by means of pretexting by another person. 
Thus, for example, when a fraud prevention unit of a financial 
institution succeeds in retrieving information from an 
information broker that has been obtained through fraud or 
deceit, the financial institution is not in violation of this 
statute. This ``safe harbor'' extends to agents, officers, or 
employees retained by a financial institution to implement 
anti-fraud or self-testing programs.
    The subtitle's prohibitions do not apply to instances in 
which an insurance institution or its officers, employees or 
agents, obtain 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. There is also an exception for 
information that is otherwise available as a public record 
filed pursuant to the Federal securities laws.
    The Committee does not intend that any provision of 
subtitle B be construed as limiting, expanding, or in any way 
interfering with the sharing of information among affiliates or 
subsidiaries within a financial services institution as 
permitted under any other applicable law, including the new 
delegations established under subtitle A.
    The subtitle designates the FTC as the enforcer of the 
subtitle. It also provides for criminal penalties for knowing 
and intentional violations of the subtitle. It preempts State 
authority only to the extent that the State's laws, 
regulations, orders, or interpretations are inconsistent with 
the Act.
    The subtitle requires regulators to review their 
regulations and guidelines governing the protection of 
confidential consumer financial information and to revise such 
provisions as necessary to ensure appropriate confidentiality 
safeguards. The Committee expects the appropriate examining 
authorities to include compliance with such guidelines and the 
adequacy of such internal controls in their examinations of 
these institutions.
    The subtitle also requires a report by the Comptroller 
General regarding the effectiveness of the Act in preventing 
the fraudulent obtaining of confidential consumer financial 
information. The Federal Trade Commission and the Attorney 
General also must submit to Congress an annual report on their 
enforcement actions pursuant to the legislation.

                  Background and Need for Legislation

    The Glass-Steagall Act imposes barriers between commercial 
banking, commonly the taking of deposits and the making of 
commercial loans, and investment banking, the raising of 
capital for companies through the public offering of 
securities. The stated legislative purpose for the Glass-
Steagall Act, passed in the wake of the stock market crash of 
1929 and the ensuing Depression, was to prevent banks from 
engaging in activity deemed at the time to be too risky for 
banks, such as securities underwriting, and to prevent 
conflicts of interest between commercial and investment 
banking, which were thought to have led to speculative frenzy 
on the stock market. The principal Federal statute governing 
securities activity, the Securities Exchange Act, was enacted 
in 1934. Because commercial banks effectively were barred from 
the securities industry by the Glass-Steagall Act, the Exchange 
Act excluded banks from the definitions of ``broker'' and 
``dealer'', effectively excluding banks from broker-dealer 
regulation under the Federal securities laws.
    In recent years, the financial services industry has 
undergone significant change, largely as a result of 
administrative actions by Federal banking regulators. Actions 
by the OCC and by the Federal Reserve Board have enabled banks 
to become increasingly engaged in securities and insurance 
activities. Notably, the erosion of these limitations has 
resulted from administrative, rather than Congressional action, 
by broad interpretations of the Glass-Steagall Act and the 
National Bank Act.
    In November of 1996, the OCC announced interpretive changes 
to Part 5 of the National Bank Act, greatly expanding the 
standard for determining the scope of permissible activities 
for national banks. Pursuant to this interpretive action, 
national banks would be permitted, through their operating 
subsidiaries, to engage in activities that are statutorily 
prohibited to the bank itself. Based on these interpretive 
changes by the Comptroller, national banks to date have applied 
to the Comptroller for the authority to conduct real estate 
development in an operating subsidiary and to underwrite 
municipal revenue bonds in an operating subsidiary. As noted 
above, the Committee finds that the Comptroller's interpretive 
changes to Part 5 are ultra vires.
    The OCC has further undertaken numerous 
``reinterpretations'' of the National Bank Act to authorize 
increased national bank insurance activities. Of particular 
note is a decision by the OCC to reinterpret Federal banking 
laws to authorize national banks to sell insurance nationwide 
through small town branches. The OCC has also expanded the 
sphere of bank-eligible and incidental products into what many 
insurance underwriters have argued is their traditional 
authority.
    The Federal Reserve Board also has taken action that has 
expanded the extent to which bank holding companies, through 
their affiliates, may engage in securities activities. 
Originally, in 1987, the Federal Reserve Board permitted a bank 
holding company affiliate to derive no more than 5 percent of 
its gross revenues from securities activities. This limitation 
was designed to comply with the language of section 20 of the 
Glass-Steagall Act prohibiting commercial bankers from being 
``engaged principally'' in investment banking. In 1989, the 
Federal ReserveBoard raised the so-called ``section 20 caps'' 
to 10 percent of the affiliate's gross revenues, and in 1996, raised 
the caps again to 25 percent. In August of 1997, the Federal Reserve 
Board rescinded many of the prudential restrictions, commonly referred 
to as firewalls, imposed in its original section 20 order and designed 
to prevent the risks of securities underwriting and dealing from being 
passed to an affiliated bank. The Federal Reserve Board consolidated 
the remaining restrictions as a series of eight operating standards.
    The administrative actions of the OCC have led to numerous 
court battles to define permissible lines of activities among 
financial services providers, focusing primarily upon 
activities involving insurance sales and underwriting. The 
actions of banking regulators expanding the permissible 
securities activities of banks have also led to competitive 
imbalances among financial services providers, by providing for 
differing regulatory schemes among banks, securities firms, and 
insurance providers engaged in the same activities. The ability 
of banks to own securities firms and engage in securities and 
insurance activities, while securities and insurance firms are 
unable to own banks, has given banks competitive advantages 
that are unavailable to securities and insurance firms.
    The Financial Services Act of 1999 addresses these 
developments by creating a new regulatory structure that 
permits affiliations among different financial services 
providers, provides for functional regulation of securities 
activities, and preserves State regulation of insurance 
activities, while preserving the ability of banks to engage in 
traditional banking activities.

Affiliations

    Title I of the bill eliminates the barriers to affiliation 
among financial services providers that are contained in the 
Glass-Steagall Act of 1933 and the Bank Holding Company Act of 
1956, and creates a new type of financial holding company that 
is permitted to control banks, securities firms, insurance 
companies, and other financial firms. As a result, for the 
first time, securities firms and insurance companies would be 
permitted to own or affiliate with a commercial bank, thus 
creating competitive equality among financial services 
providers. Financial holding companies would be subject to 
streamlined oversight by the Federal Reserve Board to ensure 
that activities of the holding company and its affiliates are 
consistent with the preservation of the safety and soundness of 
the U.S. banking system and monetary system and are not subject 
to unnecessary or duplicative Federal regulation.
    Title I also includes provisions limiting the powers of 
operating subsidiaries of national banks to only those powers 
that are permissible for national banks to engage in, except 
that the title also authorizes national banks to own operating 
subsidiaries that are engaged in financial activities solely as 
agent, including insurance agency activities. These provisions 
are designed to limit the expansion of the Federal safety net 
that many argue would result if operating subsidiaries, which 
enjoy the subsidy created by the existence of Federal deposit 
insurance, access to the Federal payment system, and favorable 
access to the Federal Reserve Board discount window, were able 
to engage in securities and other activities that are 
prohibited to their parents, and to prevent the competitive 
disparities that would result from such an expansion of the 
Federal safety net. In hearings before the Subcommittee on 
Finance and Hazardous Materials, Federal Reserve Board Chairman 
Alan Greenspan raised concerns with respect to the competitive 
disparity that would be created by permitting national bank 
operating subsidiaries to engage in activities, such as 
securities underwriting activities, not permitted to the 
national bank itself:

          * * * one cannot eliminate the fact that equity 
        investment in [bank] subsidiaries is funded by the sum 
        of insured deposits and other bank borrowings that 
        directly benefit from the subsidy of the safety net.
          Thus, inevitably, a bank subsidiary must have lower 
        cost of capital than an independent entity and even a 
        subsidiary of the bank's parent [(e.g., a separately 
        capitalized affiliate)]. Indeed, one would expect that 
        a rational banking organization would, as much as 
        possible, shift its nonbank activity from the bank 
        holding company structure to the bank subsidiary 
        structure. Such a shift from affiliates to bank 
        subsidiaries would increase the subsidy and the 
        competitive advantage of the entire banking 
        organization relative to its nonbank competitors. 
        (Testimony of Alan Greenspan, Chairman, Board of 
        Governors of the Federal Reserve System, before the 
        Committee on Banking and Financial Services, February 
        13, 1997. PRINTED, Serial No. 105-1, Committee on 
        Banking and Financial Services).

Functional regulation

    The Committee on Commerce strongly believes that functional 
regulation--regulation of the same functions, or activities, by 
the same expert regulator, regardless of the nature of the 
entity engaging in those activities--has become essential to a 
coherent financial regulatory scheme, as activities and 
affiliations expand and change within the financial 
marketplace. Title II amends the Federal securities laws to 
provide for functional regulation of securities activities.
    Subtitle A of title II amends the Exchange Act to eliminate 
the blanket exemptions for banks from the definitions of 
``broker'' and ``dealer.'' These exceptions, which have been 
part of the Exchange Act since its inception, were included in 
the Exchange Act based on the assumption that the Glass-
Steagall Act, which had become law just one year before the 
Exchange Act, had prohibited all but extremely limited 
specified bank securities activities. Specifically, at the time 
of its enactment, the Glass-Steagall Act included exceptions 
that permitted banks to underwrite and deal in obligations of 
the United States and many of its instrumentalities, as well as 
obligations of States and their subdivisions. Amendments to the 
Glass-Steagall Act made in 1935 permitted banks to provide 
limited securities brokerage services as an accommodation to 
their customers, by permitting banks to engage in stock 
purchases and sales in an ``agency'' capacity, at the request 
of customers.
    Section 20 of the Glass-Steagall Act forbids affiliation of 
any Federal Reserve member bank with any business entity 
``principally engaged'' in investment banking activities. For 
more than fifty years following the enactment of the Glass-
Steagall Act, bank holding companies could not underwrite 
securities.
    As noted above, however, the limitations on bank securities 
activities have eroded as a result of administrative actions by 
Federal banking regulators. The rationale for the exemptions in 
the Federal securities laws that apply to banks is, thus, no 
longer sound, given the extensive and increasing securities 
activities in which banks are engaging.
    In addition, these exemptions have created a competitive 
disparity between competitors in the financial services 
marketplace by permitting banks to engage in securities 
activities without being subject to the same regulatory 
requirements that apply to broker-dealers engaging in the same 
activities. The Committee is also greatly concerned that these 
exemptions have permitted banks to engage in securities 
activities for investors who are not protected by the 
provisions of the Federal securities laws.
    Blanket exemptions from securities regulation no longer 
work for banks actively participating in securities activities. 
The Committee believes that functional regulation is necessary 
to ensure that all entities engaged in securities activities 
and securities professionals are regulated by the same 
regulatory scheme, administered by the same functional 
regulator: the Securities and Exchange Commission, which has 
over 60 years of expertise focused specifically on these 
activities. The Committee recognizes, however, that certain 
limited existing bank securities activities may remain excepted 
from SEC regulation without significantly jeopardizing investor 
protection and market integrity, based on the limited nature of 
certain activities and the existing scheme of regulation of 
other activities.
    The limited exceptions from the definitions of ``broker'' 
and ``dealer'' in H.R. 10 reflect the Committee's commitment to 
ensure that activities that require securities regulation are 
subject to the Federal securities laws, with minimal disruption 
of traditional banking activities. The Committee has crafted 
these exceptions to preserve the ability of banks to continue 
to engage in activities that are connected to traditional 
banking activities, while preventing activities that should be 
subject to securities regulation from being conducted by banks 
without functional regulation. The Committee also notes that in 
the National Securities Markets Improvement Act of 1996 (Public 
Law 104-290, October 11, 1996), it gave the SEC broad exemptive 
authority as new Section 36 of the Exchange Act and that 
authority can be used should banks require additional exemption 
in this area.

Insurance

    Ever since the Great Depression and the enactment of Glass-
Steagall barriers between banking and commerce, questions have 
been raised over the extent to which banks should be allowed to 
participate in traditionally non-banking activities such as 
insurance. Recent regulatory actions by the OCC have greatly 
increased the controversy over appropriate bank insurance 
powers.
    The Committee's concern over the recent trend towards 
expansion of bank insurance powers is partly a recognition of 
the differing goals of traditional banking and insurance 
regulators. The primary goal of Federal banking regulators is 
to protect the liquidity and solvency of the banking system. In 
contrast, insurance regulators are primarily focused on market 
conduct of agents in terms of consumer protection and the long-
term ability of underwriters to pay claims in order to protect 
insurance consumers and State insurance guarantee funds. These 
objectives are sometimes in conflict, particularly in relation 
to the transfer of funds between bank and insurance affiliates.
    Banks are allowed to choose between a State or Federal 
charter and have some degree of regulatory arbitrage available 
in the competition between the different regulators. In 
contrast to the dual regulatory system provided for banks under 
Federal law, insurance is governed solely at the State level, 
by fifty separate State statutes. When the Supreme Court in 
1944 tried to shift the power of insurance regulation from the 
States to the Federal government, Congress passed the McCarran-
Ferguson Act, overturning the Supreme Court ruling and 
clarifying State supremacy in insurance regulation. The 
McCarran-Ferguson Act states that:

          No Act of Congress shall be construed to invalidate, 
        impair, or supersede any law enacted by any State for 
        the purpose of regulating the business of insurance, * 
        * * unless such Act specifically relates to the 
        business of insurance. 15 U.S.C. Sec. 1012(b).

    The banking and insurance regulatory systems potentially 
clash when banks become involved in insurance activities. 
Despite the limits of the McCarran-Ferguson Act, the OCC over 
the last decade has slowly been encouraging national banks to 
expand into the field of insurance, beyond what has been 
permissible under State law. When the OCC and State insurance 
regulators clash over whether a product is a banking or 
insurance activity and how it should be regulated, courts, as a 
result of the Unites States Supreme Court Chevron ruling, defer 
to reasonable interpretations of law by Federal regulators--in 
this case, the OCC. In Barnett Bank of Marion County, N.A. v. 
Nelson, the Supreme Court upheld the OCC's Federal preemption 
of State insurance law, ruling that State regulation would only 
be applicable where it did not ``prevent or significantly 
interfere'' with the Federally authorized activities of a 
national bank.
    Because the courts are required to give deference to 
Federal agencies over State regulators, this gives the OCC the 
upper hand in choosing which insurance powers it wants to give 
to its Federally chartered banks, and which State laws it wants 
to preempt or allow. For example, the OCC has repeatedly 
indicated they are considering whether to preempt Rhode Island 
law governing bank insurance sales, which sets forth licensing 
and disclosure requirements, as well as limits on the sale of 
insurance by loan officers. The OCC has alsoexpanded the ``town 
of 5,000'' law, which permitted bank insurance sales within small 
towns, to allow insurance sales nationwide through banks which have a 
branch in a small town.
    The Committee is particularly concerned about the potential 
preemption of State consumer protection law by the OCC in light 
of recent comments made by the Comptroller and by the Secretary 
of the Treasury. For example, in response to a question from 
Senator Bryan, Comptroller Hawke stated that the OCC looks at 
bank insurance activities from the perspective of the relative 
risk the activity poses to the overall banking company. The 
Committee on Commerce is concerned that this sole focus on bank 
solvency leaves out the most important perspective--protecting 
the consumer. Mr. Hawke further stated that any State consumer 
protection that infringes or burdens the ability of a bank to 
sell insurance may be preempted. This statement highlights the 
need for Congressional action to clarify the appropriate extent 
of State consumer protection laws governing insurance sales by 
Federally chartered entities.
    The Committee takes further note of two recent court cases 
which used very strong language in condemning the Comptroller's 
attempted preemption of State law and accordingly limiting the 
ability of the OCC to expand national banks' insurance powers. 
In Blackfeet National Bank v. Nelson, No. 96-3021, 1999 U.S. 
Appellate LEXIS 6069 (11th Cir. April 4, 1999) (concluding in 
its primary holding that the OCC's ruling that national banks 
are authorized to underwrite an annuity product was precluded 
by the applicable provisions of the National Bank Act), the 
United States Court of Appeals for the 11th Circuit overturned 
the Comptroller's actions allowing the underwriting of 
retirement CD's in a national bank, finding that ``the 
Comptroller's interpretation of the Bank Act is an unreasonable 
expansion of the powers of national banks beyond those intended 
by Congress.'' Id.
    In Independent Insurance Agents of America v. Hawke, No. 
98-cv-0562 slip op. (D.D.C. March 29, 1999) (granting the 
Plaintiff's Motion for Summary Judgment and concluding that the 
OCC's ruling that national banks located outside of small towns 
were authorized to sell crop insurance products was precluded 
by the applicable provisions of the National Bank Act), the 
United States District Court for the District of Columbia 
struck down the Comptroller's attempted expansion of bank crop 
insurance sales outside of towns of 5,000, stating that the 
language was not ambiguous and the Comptroller's interpretation 
was unreasonable. The OCC has now filed a notice of appeal to 
overturn the District Court's ruling in IIAA v. Hawke, 
highlighting the need for Congressional action to clarify the 
scope of Federal preemption and protect reasonable and 
nondiscriminatory State law.
    The Committee recognizes, however, that a majority of 
States now allow their State chartered banks some degree of 
permissible insurance activities. Many States have ``wild 
card'' statutes which allow their State chartered banks parity 
with any insurance powers authorized by the OCC for Federally 
chartered banks, in order to equalize competition and lessen 
the number of banks that switch charters to take advantage of 
the regulator offering them the most new powers and the least 
regulation. The Committee also received testimony from numerous 
witnesses pointing out that bank insurance activities could 
increase consumer choice and create greater synergies, 
particularly in under-served communities. Additional testimony 
was received on the advantages of uniform national insurance 
standards over 50+ different State standards, many of which are 
arguably anti-competitive or discriminatory in nature.
    In considering the appropriate level of regulation and 
consumer protection that should be applied to banks, the 
Committee took particular note of the Illinois and New York 
State bills governing bank insurance activities. These 
agreements were jointly negotiated and widely supported by all 
of the involved industries and addresses many of the same 
issues involved in the current Glass-Steagall reform 
legislation. The thirteen safe harbors created by the bill were 
largely taken from these two laws.
    The Committee also heard testimony on the importance of 
distinguishing between insurance and banking products for the 
purpose of determining bank underwriting eligibility and 
regulation. When the Glass-Steagall Act was first enacted, the 
lines between traditional bank and insurance products were 
readily discernable and easy to draw. Recently, these lines 
have become increasingly blurred, as many modern financial 
products are hybrids of banking, securities, and insurance 
services. For example, a variable annuity might include 
elements of actuarial expectations (insurance), traditional 
bank savings, and securities investments.
    Currently, the courts are required to defer to the OCC's 
determination of whether an insurance related instrument is a 
bank product, or even ``incidental'' to a banking product. Past 
legislative proposals have tried to define insurance, based on 
either specific definitions or according to current State law. 
Other proposals have separately, or in conjunction with a 
definition, tried to create a dispute resolution system to 
equalize the deference given to the banking regulator over the 
insurance regulators.
    To create a level playing field among the industries and 
avoid regulatory arbitrage, a consensus developed within the 
Committee that an iron clad definition of insurance needed to 
be created, based on the tax codes and with a broad 
grandfathering, and an expedited dispute resolution system 
needed to be established to quickly adjudicate conflicts 
between State and Federal law and regulations governing 
insurance, with all issues considered on their merits without 
unequal deference given to either regulator. Comprehensive 
guidelines were also needed to set forth the standards for 
preemption of State law, for appropriate safe harbors for 
critical consumer protections, and to establish an 
antidiscrimination rule to govern future State insurance sales 
regulations. In light of these new Federal clarifications of 
the appropriate interaction between State and Federal law 
relating to insurance, the Committee also received testimony on 
the need for an affirmation of McCarran-Ferguson, and a 
heightened emphasis of the continued need for State licensing 
of all insurance activities.

Thrift charter

    H.R. 10 as reported by the Committee on Commerce eliminates 
the availability of new unitary thrift charters and limits the 
transferability of existing unitary thrift charters to 
financial entities.

Financial privacy

    The evolution of electronic commerce has brought privacy 
issues, especially financial information privacy, into the 
public and media spotlight. An increasing amount of personal 
consumer data is being stored by financial institutions, 
including asset and investment accounts, payments or loans 
related to commercial transactions, and insurance-related 
information. Consumers have a reasonable expectation of 
confidentiality for their information.
    Subtitle A addresses the issue of how and when a financial 
institution may disclose the nonpublic personal information of 
their customers. Under current law, there is no requirement 
that financial institutions take any particular measures to 
fully protect the security and confidentiality of the personal, 
nonpublic information about their customers. H.R. 10 fills in 
this gap.
    H.R. 10 provides a regulatory structure that will enable 
financial institutions to expand and affiliate in ways that 
will bring consumers the benefits of more services, greater 
efficiency, and increased convenience. Already, consumers today 
may enjoy an increasing array of benefits stemming from 
alliances that financial institutions establish with unrelated 
third parties to provide products such as affinity programs 
whereby consumers earn ``mileage'' or other incentive points 
based on their transactions with a financial institution, for 
example, through a credit card.
    As financial institutions become increasingly diversified 
and complex, they must rely upon databases and customer service 
mechanisms that require the sharing of information both within 
the institution itself, among its affiliates, and among various 
service providers, in order to provide consumers with 
competitive products.
    At the same time, consumers have become increasingly 
sensitive to the use of their personal information by financial 
institutions as a commodity to be sold to outside parties with 
which the consumer has no expectation or, necessarily, desire 
to do business, as well as the use of that personal information 
by the financial institution itself in ways that are unrelated 
to the transaction or product the consumer originally sought 
from the institution.
    Subtitle A provides a balanced approach to protect consumer 
privacy without undermining the benefit of affiliation that is 
the fundamental purpose of H.R. 10.
    The subtitle accomplishes this by imposing a new four-
pronged requirement on all financial institutions to protect 
consumer privacy. First, the subtitle requires that financial 
institutions establish a policy to protect the security and 
confidentiality of their customers' nonpublic personal 
information. Second, the subtitle requires that financial 
institutions provide an understandable disclosure to consumers 
stating exactly what their privacy policies are, in a form that 
will enable consumers to compare one financial institution's 
privacy policy against another and choose where he or she 
prefers to do business. Third, the subtitle requires financial 
institutions to give their customers the right to say no to the 
institution's divulgence or unrelated use of their nonpublic 
personal information, either with the institution's affiliates 
or with unrelated parties. And fourth, the subtitle requires 
financial institutions to provide their customers with access 
to, and the ability to correct errors in, any nonpublic 
personal information that the institution has provided for 
consideration to a third party (i.e., not an employee, agent, 
or affiliate of the institution).
    These requirements are designed to provide consumers with 
greater privacy protection through competition--as a result of 
the ability consumers will have to choose among the privacy 
policies disclosed by competing financial institutions, as well 
as regulatory restrictions, in the form of the requirement that 
consumers be able to opt out of information sharing and gain 
access to and correct personal nonpublic information about 
themselves.
    The Committee has provided for certain exceptions from 
these requirements, as well as directives to the FTC to 
promulgate rules further defining the scope of the subtitle, in 
order to ensure that the privacy protections afforded by the 
subtitle do not interfere with the ability of financial 
institutions to effect or enforce a customer's transaction, 
protect confidentiality or security, take precautions against 
liability, respond to judicial process or provide information 
to law enforcement agencies, provide information to a consumer 
reporting agency, or effectuate a sale or merger, especially as 
these institutions become increasingly diversified under the 
regime provided by H.R. 10.
    Subtitle B addresses financial privacy concerns raised by 
the fraudulent practices of unscrupulous individuals to obtain 
personal consumer information by means of ``pretexting.''
    Private detectives, information brokers, and lawyers, among 
others, have been exploiting the information explosion, using 
false identities or other deceptive pretexts to wrongly obtain 
information about targeted victims from financial institutions. 
These ``pretexters'' might use information gained from one 
source, such as a social security number or mother's maiden 
name, to gather information from a second source, such as an 
investment account, credit card limit, or savings balance. 
Financial institutions are being placed in the increasingly 
difficult position of trying to maintain the balance between 
providing simple and remote access by legitimate consumers to 
their financial accounts while still preventing the 
unauthorized access to confidential information by skillful 
pretexters.
    The FTC currently has authority under the Federal Trade 
Commission Act to act against persons who use deceptive 
practices to obtain confidential consumer information. 
Additionally, the use of false or deceptive methods to procure 
confidential financial information will often give rise to wire 
fraud, punishable under Title 18, United States Code. However, 
prosecution of fraudulent information brokers under Title 18 
has not been frequent, and under current law, the FTC cannot 
impose civil penalties against an entity until after a second 
violation has occurred. Furthermore, the availability of 
criminal penalties are limited. Subtitle B makes it clear that, 
with limited exceptions for financial institutions and law 
enforcement agents, using pretexting to fraudulently obtain 
confidential customer financial information is illegal, and 
immediately subject to criminal and administrative punishment.
    In addition, subtitle B recognizes the importance of 
financial institutions implementing strong internal controls to 
prevent unauthorized disclosure of their customers' private 
financial information. The legislation requires financial 
regulatory agencies to review their confidentiality rules and 
guidelines and, if necessary, make adjustments in order to 
ensure that supervised financial institutions maintain 
appropriate privacy protections.
    This subtitle is largely identical to a bill approved by 
the Committee on Commerce in the 105th Congress, H.R. 4321, the 
Financial Information Privacy Act of 1998, with one exception 
relating to the enforcement provisions. Subtitle B conforms the 
enforcement treatment to that provided in subtitle A of the 
privacy subtitle, where enforcement is carried out by the 
Federal Trade Commission, rather than by private lawsuits, 
actions brought by State Attorneys General, or other 
regulators.

                                Hearings

    The Subcommittee on Finance and Hazardous Materials held 
two legislative hearings on H.R. 10, the Financial Services 
Reform Act of 1999, on April 28, 1999, and May 5, 1999. The 
hearing on April 28, 1999 focused on the operating subsidiary. 
The Subcommittee received testimony from The Honorable Alan 
Greenspan, Chairman, Board of Governors of the Federal Reserve 
System.
    On May 5, 1999, the Subcommittee received testimony on H.R. 
10 from the following witnesses: The Honorable Robert E. Rubin, 
Secretary, Department of the Treasury; The Honorable George 
Nichols, III, Chairman, Committee on Financial Services 
Modernization, Commissioner of Insurance, Kentucky Department 
of Insurance, representing The National Association of 
Insurance Commissioners; The Honorable Arthur Levitt, Chairman, 
Securities and Exchange Commission; Mr. Arnold Schultz, Board 
Chairman, The Grundy National Bank; Mr. Mark P. Sutton, 
President, Private Client Group, PaineWebber Inc.; Mr. Craig 
Zimpher, Vice President, Government Relations, Nationwide 
Insurance Corporation; Mr. Scott A. Sinder, Partner, Baker and 
Hostetler, LLP, representing the Independent Insurance Agents 
of America, the National Association of Life Underwriters, and 
the National Association of Professional Insurance Agents of 
America.

                        Committee Consideration

    On May 27, 1999, the Subcommittee on Finance and Hazardous 
Materials met in open markup session to consider H.R. 10 and, 
by a roll call vote of 26 yeas to 1 nay, agreed to H.R. 10, as 
amended, and approved the bill for Full Committee 
consideration. On June 10, 1999, the Full Committee met in open 
markup session and ordered H.R. 10 favorably reported to the 
House, amended, by a voice vote, a quorum being present.

                            Roll Call Votes

    Clause 3(b) of rule XIII of the Rules of the House requires 
the Committee to list the recorded votes on the motion to 
report legislation and amendments thereto. The following are 
the recorded votes on the motion to report H.R. 10 and on 
amendments offered to the measure, including the names of those 
Members voting for and against.


                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee held legislative 
hearings and made findings that are reflected in this report.

           Committee on Government Reform Oversight Findings

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, no oversight findings have been 
submitted to the Committee by the Committee on Government 
Reform.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee finds that H.R. 
10, the Financial Services Act of 1999, would result in no new 
or increased budget authority, entitlement authority, or tax 
expenditures or revenues.

  Committee Cost Estimate, Congressional Budget Office Estimate, and 
                      Unfunded Mandates Statement

    The Congressional Budget Office estimate required pursuant 
to clause 3(c)(3) of rule XIII of the Rules of the House of 
Representatives and section 402 of the Congressional Budget Act 
of 1974, and the estimate of Federal mandates required pursuant 
to section 423 of the Unfunded Mandates Reform Act were 
requested from the Congressional Budget Office but not prepared 
as of the date of filing of this report. The Congressional 
Budget Office estimate and accompanying materials will be 
contained in a supplemental report.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional authority for this legislation is provided in 
Article I, section 8, clause 3, which grants Congress the power 
to regulate commerce with foreign nations, among the several 
States, and with the Indian tribes.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation


Section 1. Short title; purposes

    Section 1 designates the Act as the ``Financial Services 
Act of 1999'' and sets forth the purposes of the Act.

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

                        SUBTITLE A--AFFILIATIONS

Section 101. Glass-Steagall Act reformed

    Section 101 of the Financial Services Act of 1999 (the Act) 
repeals section 20 and section 32 of the Banking Act of 1933, 
the anti-affiliation provisions of the Glass-Steagall Act.
    Section 20 currently prohibits any bank that is a member of 
the Federal Reserve System from affiliating with any company 
that is ``engaged principally in the issue, floatation, 
underwriting, public sale or distribution'' of securities (12 
U.S.C. 377). The effect of repealing section 20 is to permit 
affiliations between securities firms and banks regardless of 
the type or volume of securities activities conducted by the 
securities firm.
    Section 32 currently prohibits any officer, director, or 
employee of a company ``primarily engaged in the issue, 
floatation, underwriting, public sale, or distribution'' of 
securities from serving simultaneously as an officer, director, 
or employee of any member bank, except as allowed by the 
Federal Reserve Board (12 U.S.C. 78). Repealing section 32 will 
permit banks and securities firms to have common officers, 
directors, and employees.
    These changes are intended to facilitate a two-way 
competitive street between securities firms, insurance 
companies, and banks. Under current law, banking regulators 
have effectively allowed banks into the securities business and 
the business of insurance sales. Securities firms and insurance 
companies are statutorily barred from owning insured depository 
institutions. Repeal of these sections is necessary to 
facilitate a two-way street.

Section 102. Activity restrictions applicable to bank holding companies 
        which are not financial holding companies

    Section 102 amends section 4(c)(8) of the Bank Holding 
Company Act of 1956, as amended, (HCA) to permit all bank 
holding companies to engage in those activities that the 
Federal Reserve Board has determined, by regulation or order in 
effect as of the day before enactment of the Act, to be so 
closely related to banking as to be a proper incident thereto. 
Bank holding companies that qualify as financial holding 
companies also may engage in those activities authorized under 
Section 6 of the HCA, as added by section 103 of the Act. 
Section 102 also makes technical and conforming amendments to 
section 105 of the Bank Holding Company Act Amendments of 1970 
and section 4(f) of the Bank Service Company Act.

Section 103. Financial holding companies

    Section 103 adds a new Section 6 to the Bank Holding 
Company Act and creates a structure for affiliations, entitled 
``Financial Holding Companies.'' This section establishes the 
new framework for affiliations between and among securities 
firms, insurance companies, banks, and other financial 
entities. The framework adopted in section 6 is based on the 
well established holding company framework embodied in the Bank 
Holding Company Act.
            a. Eligibility requirements
    This subsection establishes the ongoing eligibility 
requirements to become a financial holding company (FHC). 
First, all of a holding company's subsidiary depository 
institutions must be well capitalized. Second, all of a holding 
company's subsidiary depository institutions must be well 
managed. Third, all of the subsidiary depository institutions 
must have achieved at least a ``satisfactory record of meeting 
community credit needs,'' under the Community Reinvestment Act 
of 1977 (CRA), at the most recent exam of each institution. 
Fourth, the company must have filed with the Federal Reserve 
Board a declaration that it has met the first three 
requirements and that it elected to become an FHC. An exception 
from the third test is provided for an FHC's newly acquired 
depository institutions to allow the FHC the later of two years 
or the completion of an institution's first subsequent CRA exam 
to bring the institution back towards a satisfactory CRA 
rating.
            b. Financial in nature and complementary activities
    This subsection permits financial holding companies and 
wholesale financial companies to engage in, and affiliate with 
any company engaged in, activities that the Federal Reserve 
Board has determined by regulation or order are ``financial in 
nature'' or that are incidental to activities that are 
financial in nature (even if the incidental activity is not 
itself financial in nature). Incidental activities are those 
that are similar, related, or comparable to, or that are 
necessary, useful, or convenient to the conduct of a financial 
activity. Financial holding companies and wholesale financial 
companies are also allowed to engage in, and affiliate with any 
company engaged in, activities that the Federal Reserve Board 
determines arecomplementary to one or more financial 
activities, so long as such complementary activities remain small in 
relation to the complemented financial activities. Companies that are 
not a bank holding company when they elect to become a financial 
holding company are permitted to retain nonfinancial activities and 
affiliations in which they were engaged or with which they were 
affiliated as of September 30, 1997, so long as the resulting FHC (and 
its affiliates) remains predominantly engaged in financial activities, 
subject to certain restrictions further described below in subsection 
(h), ``Grandfather of commercial activities.''
    The ``financial in nature'' test established by section 103 
is significantly more flexible than the ``closely related to 
banking'' standard in current law and permits authorization of 
financial activities that banks and their financial affiliates 
are not currently permitted to conduct. In defining these 
activities, the Federal Reserve Board is required to take into 
account factors such as the purposes of the Act and the changes 
reasonably expected in the financial services marketplace, 
including technological advances.
    These expanded financial and nonfinancial affiliations are 
permissible for holding companies that meet the criteria set 
forth for financial holding companies. This is a new test that 
is independent of the restrictions contained in the Bank 
Holding Company Act. Existing bank holding companies that wish 
to limit their activities to those that currently are 
permissible under Section 4 of the Bank Holding Company Act may 
do so without meeting the requirements for being a financial 
holding company.
            c. Specific activities that are financial in nature
    This subsection specifically provides that certain 
activities are financial in nature, including: lending, 
investing, or safeguarding money; providing insurance as an 
underwriter, agent, or broker; providing financial or 
investment advice; issuing or selling instruments representing 
pools of assets permissible for a bank to hold directly; 
underwriting or dealing in securities; engaging in activities 
that the Federal Reserve Board previously has determined by 
order or regulation to be closely related to banking; 
financial, investment or economic advisory services; and 
engaging in activities conducted in the United States that the 
Federal Reserve Board has found by regulation to be both 
permissible for a bank holding company and usual in connection 
with the transaction of banking or other financial operations 
abroad. The reference in the section to providing insurance, 
specifically regarding ``insuring, guaranteeing, or 
indemnifying against * * * illness,'' is meant to include all 
companies commonly thought of as providing health insurance 
benefits in consideration of the payment of premiums or 
subscriber contributions, regardless of the insurer's form of 
organization, the type of insurance benefits provided, or the 
nature of the State authority under which they are licensed or 
regulated.
    The Act also provides that it is financial in nature to 
acquire or control a company or entity that is not engaged in 
activities which are financial in nature, so long as the 
ownership is not held by a depository institution or its 
subsidiaries but instead by an insurance underwriter, or a 
registered broker or dealer engaging in securities underwriting 
as part of a bona fide underwriting or investment banking 
activity (including for the purpose of appreciation and 
subsequent resale), or their non-depository institution 
affiliates. In the case of ownership by a securities 
underwriter, the shares or assets or ownership may only be held 
for a period of time that would permit the sale thereof on a 
reasonable basis consistent with the nature of the underwriting 
or investment activity, and the holding company and its 
affiliates may only participate actively in the day-to-day 
management of the company or entity as necessary to facilitate 
such ownership for resale. In the case of ownership by an 
insurance underwriter, the shares or assets or ownership must 
represent an investment made in the ordinary course of business 
in accordance with State law, and the holding company and its 
affiliates may not participate in the day-to-day management 
except as necessary to facilitate the objectives of the 
investment and of State law. Under these provisions, the 
depository subsidiaries of a financial holding company may not 
directly or indirectly engage in merchant banking or insurance 
company investment activities, and may not engage in covered 
transactions (as defined in Section 23A of the Federal Reserve 
Act) with any affiliate company whose shares are held under the 
merchant banking or insurance company investment authority.
            d. Authority to engage in financial activities
    The Federal Reserve Board, by regulation or order, is 
directed to define the permissible scope of several activities, 
including arranging financial transactions for the account of 
third parties, transferring financial assets, and lending or 
investing financial assets other than money or securities.
            e. Notification and approval
    Section 6(c) provides that a financial holding company may 
engage, directly or indirectly, in any financial (or 
incidental) activity authorized under Section 6 (other than the 
acquisition of a savings association or company with assets 
over $40,000,000,000) without the prior approval of the Federal 
Reserve Board. This change is intended to facilitate the 
entrepreneurial culture of investment banks which take risk 
without need for prior government approval of their activities. 
In order to inform the Federal Reserve Board of the company's 
activities, the financial holding company must provide the 
Federal Reserve Board with written notice within 30 days of 
commencing an activity or acquiring shares of a company engaged 
in a financial activity (or an activity incidental to a 
financial activity).
    In the case of a merger or affiliation with an entity in 
the United States that has consolidated assets in excess of $40 
billion, the financial holding company (or company that is 
electing to become a financial holding company or wholesale 
financial holding company (WFHC) while retaining affiliation 
with the entity) must provide the Federal Reserve Board with 
notice of the merger or affiliation not later than 60 days 
prior to the transaction (or 60 days prior to becoming an FHC 
or WFHC). The Federal Reserve Board may issue a notice 
disapproving such transaction (or in the case of a company 
electing to become an FHC or WFHC, disapproving the retention 
of such entity) during the 60 day period, or may extend the 
period of review by up to an additional 60 days. Various 
factors are set forth for the Federal Reserve Board to consider 
in reviewing the transaction, including whether the entity is 
in compliance with theeligibility requirements for FHCs with 
depository institutions under this section, whether the proposed merger 
or affiliation would create an undue aggregation of resources or pose a 
risk to the deposit insurance system or State insurance guaranty funds, 
whether the merger or affiliation would be in the interests of the 
depositors or policyholders involved or produce benefits to the public, 
and whether a subsequent default of some part of the FHC or WFHC after 
the merger or affiliation could have serious adverse effects on 
economic conditions or financial stability. Upon receipt of a notice of 
such a transaction, the Federal Reserve Board shall immediately give 
notice to, and solicit the views of, any appropriate Federal banking 
agencies, functional regulators, the Secretary of the Treasury, the 
Attorney General, and the Federal Trade Commission, which shall return 
their recommendations to the Federal Reserve Board within 30 days of 
the Federal Reserve Board's notice, or such shorter time as indicated 
by the Federal Reserve Board as appropriate.
            f. Noncompliance
    Section 6(d) (as established by this section) sets out the 
procedures to be followed if a financial holding company or its 
subsidiaries fail to continue to meet the capital, management 
and CRA requirements set out in section 6(b) for such companies 
and subsidiaries. If the Federal Reserve Board finds that a 
financial holding company is not in compliance with these 
requirements as set forth in section 6(b), the Federal Reserve 
Board must provide notice to the company. The company must, 
within 45 days of receipt of such notice (or such additional 
period as the Federal Reserve Board may permit), execute an 
agreement with the Federal Reserve Board to comply with the 
requirements for financial holding companies. Until the company 
complies with the requirements of section 6(b), the Federal 
Reserve Board may impose such limitations on the company or an 
affiliate as the Federal Reserve Board deems appropriate. If a 
financial holding company has not restored its subsidiary 
depository institutions to compliance with the capital, 
managerial, or CRA requirements of section 6(b) within 
specified time periods, the Federal Reserve Board may require 
the company either to divest control of any subsidiary 
depository institution or cease engaging in any activity under 
section 6. The Federal Reserve Board may take similar action if 
the company fails to execute and implement an agreement with 
the Federal Reserve Board, or abide by any limitations imposed 
by the Federal Reserve Board under section 6(d).
            g. Safeguards and internal controls
    Section 6(e) requires a financial holding company to have 
appropriate internal controls to assure that its procedures for 
identifying and managing financial and operational risks within 
the company and its subsidiaries adequately protect the 
company's subsidiary insured depository institutions from such 
risks and that it has reasonable policies and procedures to 
preserve the separate corporate identity and limited liability 
of the company and its subsidiaries for the protection of the 
subsidiary insured depository institutions.
            h. Grandfather of commercial activities
    Section 6(f) permits an entity (other than a bank holding 
company or a foreign bank) that becomes a financial holding 
company to retain for a limited period of time those 
nonfinancial investments and activities that the company held 
or engaged in as of September 30, 1997. To qualify for these 
grandfather rights, the company must derive at least 85 percent 
of its consolidated annual gross revenues from financial (and 
incidental) activities on an ongoing basis. Thus, an eligible 
company that becomes a financial holding company after the date 
of enactment of the Act may continue to engage in commercial 
activities under section 6(f) provided that such activities do 
not comprise more than 15 percent of the FHC's annual gross 
revenues.
    Strict limits are placed on the expansion of these 
grandfathered nonfinancial activities. Any company engaged in 
grandfathered activities under section 6(f) is prohibited from 
acquiring the nonfinancial (or non-incidental thereto) assets 
of any third party. An insured depository institution or 
wholesale financial institution subsidiary of a financial 
holding company that engages in nonfinancial activities or owns 
any company engaged in nonfinancial activities pursuant to 
section 6(f) may not engage in cross marketing activities with 
such nonfinancial affiliates, or in covered transactions (as 
defined in section 23A of the Federal Reserve Act) with any 
affiliate engaged in nonfinancial activities. All depository 
institution subsidiaries of an FHC are also prohibited from 
engaging in cross marketing activities with any affiliate held 
pursuant to the merchant banking or insurance company 
investment authority in section 6(c)(3)(H) and (I). Any 
commercial activities conducted, and any shares of a company 
engaged in commercial activities retained, by a financial 
holding company must be terminated or divested within 10 years 
of the date of enactment. The Federal Reserve Board may, upon 
application, extend this period for up to an additional 5 years 
if the Federal Reserve Board determines that such extension 
would not be detrimental to the public interest.
            i. Developing activities
    Section 6(g) allows all financial holding companies to 
engage in a limited amount of financial activities in 
circumstances where the Federal Reserve Board has not 
previously considered whether the activity in question is 
financial in nature. This section has been specifically 
included by the Committee to allow financial holding companies 
to respond quickly and efficiently to developments in the 
financial services industry. In particular, a financial holding 
company may engage in an activity that the Federal Reserve 
Board has not yet determined to be a financial activity (or 
incidental to a financial activity) if the holding company 
reasonably believes that the activity is financial in nature or 
incidental to financial activities. The company's determination 
must take into consideration the factors set forth in section 
6(c), as well as actions taken by the Federal Reserve Board 
under section 6(c), including whether the Federal Reserve Board 
previously has determined that the activity is not financial in 
nature (or incidental to financial activities). Activities 
conducted pursuant to section 6(g) also are subject to certain 
revenue, asset, and capital investment limitations. A financial 
holding company must provide the Federal Reserve Board with 
written notice within 10 business days of acquiring shares or 
commencing an activity under section 6(g).
            j. ``Too big to fail'' considerations
    Section 103 amends section 3 of the HCA to require that the 
Federal Reserve Board, in acting on bank acquisitions involving 
a financial holding company or wholesale financial holding 
company, consider whether the failure of the company (or any of 
its affiliates) could have serious adverse effects on economic 
conditions or financial stability.
            k. Report on new activities
    Section 103 also directs the Federal Reserve Board to 
report to the Congress summarizing the new activities which 
have been determined to be financial in nature, as well as any 
grandfathered activities being conducted by financial holding 
companies. These reports, which must be submitted 5 years and 
10 years after the date of enactment, must discuss any actions 
taken by the Federal Reserve Board to effectively allow or 
disapprove activities which are incidental to or complementary 
to activities which are financial in nature, as well as a 
discussion of any risks posed by commercial activities of FHCs 
to the safety and soundness of affiliate depository 
institutions, the effect of mergers and acquisitions of this 
section on market concentration in the financial services 
industry, and the impact of this Act on capital availability 
under the Community Reinvestment Act.

Section 104. Operation of State Law

    Section 104 is intended to establish the parameters of 
appropriate State regulation of the activities and affiliations 
of an insured depository institution or wholesale financial 
institution.
    Section 104(a)(1) establishes the general rule that States 
may not prevent or restrict an insured depository institution 
or wholesale financial institution from affiliating with 
another entity except as provided for in paragraph (2). This 
subsection is not intended to preempt State functional 
regulation of activities, but rather State anti-affiliation 
laws that prevent or restrict a merger (including an 
acquisition or change in control) of a person that shares 
common ownership or control with an insured depository 
institution or wholesale financial institution.
    Subsection 104(a)(2) establishes an exception to the rule 
in subsection (a)(1) to allow continued participation by State 
insurance regulators mergers involving persons engaged in the 
business of insurance. Section 104(a)(2)(A) is intended to 
allow all State insurance regulators where a person is engaging 
in the business of insurance to collect information as 
authorized under State law, so long as the State first makes a 
reasonable effort to obtain the information from the person's 
State of domicile, and the collection of such information does 
not impede or delay the merger. Section 104(a)(2)(B) is 
intended to protect the ability of an insurance regulator in 
the State of domicile of the person to approve or disapprove a 
merger, or take other action as appropriate and authorized by 
such State law, subject to certain restrictions. First, the 
State action must be completed within 60 days of receiving 
notice and the necessary information required under State law. 
The States must actually receive the required information 
before the 60 day clock begins to toll, and this time limit may 
not be extended without the mutual agreement of the involved 
parties. Second, any State action taken against a merger must 
not discriminate against the persons involved based on a 
current or prospective affiliation with an insured depository 
institution or its affiliates. The discrimination does not have 
to be overt. Third, a State's actions must be based on a State 
standard requirement relating to solvency or managerial 
fitness, allowing State regulators to determine whether the 
financial condition of an acquiring party might jeopardize the 
financial stability of the person, or whether the management or 
business plan is otherwise likely to prejudice the interests of 
the person's policyholders. Section 104(a)(2)(C) enables the 
insurance regulator of the person's State of domicile to ensure 
compliance with the State's capital requirements, by requiring 
a restoration of capital to the person as authorized under 
State law. Section 104(a)(2)(D) allows a State to take any 
authorized action with respect to the receivership or 
conservatorship of an insurance company. Section 104(a)(2)(E) 
allows a State to restrict any change in ownership of a 
recently demutualized insurance company or insurance holding 
company, for a period not to exceed 5 years, or less, as 
authorized under State law. Section 104(a)(2)(F) is intended by 
the Committee to protect the laws of the State of North 
Carolina in governing a certain specific type of health 
insurance institution that may reorganize pursuant to a State 
approved plan. The Committee does not intend this subparagraph 
to create any inference regarding the appropriate standards of 
preemption or protection for State actions in other States or 
for other types of organizations.
    Subsection 104(a)(3) is intended to preserve State actions 
based on antitrust and as well as general corporate State 
authorization, such as State laws relating to the governance of 
corporations or laws similar to antitrust laws, so long as the 
State authorization is generally applicable and 
nondiscriminatory.
    Subsection 104(b)(1) clarifies the general rule that States 
may not prevent or significantly interfere with the activities 
of an insured depository institution or wholesale financial 
institution (or their affiliates) that are authorized or 
permitted under this Act--activities that are financial in 
nature, such as set forth in section 103. The ``prevent or 
significantly interfere'' standard maintains the test 
established in the decision of the United States Supreme Court 
in Barnett Bank of Marion County N.A. v. Nelson, 15 U.S. 25 
(1996).
    Subsection 104(b)(2), in conjunction with Title III, 
establishes a comprehensive structure for determining the 
appropriate applicability or preemption of State law regulating 
the insurance sales or solicitation or cross-marketing 
activities of an insured depository institution or wholesale 
financial institution or their affiliates. Section 104(b)(2)(A) 
affirms the ``prevent or significantly interfere'' standard set 
forth in Barnett, which shall continue to be used for all 
Federal preemption determinations of State statutes, 
regulations, orders, interpretations, or other actions 
governing insurance sales, solicitation, or cross-marketing 
activities.
    Subsection 104(b)(2)(B) creates 13 safe harbors for State 
laws. This section protects State requirements which are 
substantially the same as, but not more restrictive than, the 
13 safe harbors. These harbors are intended to allow States 
some flexibility in regulating insurance sales and solicitation 
and cross-marketing activities, including particularly those of 
insured depository institutions and wholesale financial 
institutions, without fear of preemption. These safe 
harborsreflect significant public policy concerns when fairly applied 
and have, therefore, been protected from the nondiscrimination 
provisions and other Federal preemption. They apply to State statutes, 
regulations, orders, interpretations, and other actions or restrictions 
that are currently in place as well as those that may be applied in the 
future. State actions which are more restrictive than the safe harbors 
are not necessarily preempted, but are potentially subject to the 
nondiscrimination provisions and other protections and preemptions in 
this Act. The safe harbors were derived from the laws governing bank 
insurance activities in the States of Illinois and New York.
    Specifically, the thirteen safe harbors protect State 
restrictions that:
          (1) prohibit the rejection of an insurance policy 
        required in connection with a loan or other extension 
        of credit because it was sold, or underwritten, by a 
        person who is not associated or affiliated with an 
        insured depository institution (IDI), wholesale 
        financial institution (WFI) or their affiliates;
          (2) prohibit a requirement for a debtor, insurer, or 
        insurance agent or broker to pay a separate charge on 
        insurance required in connection with a loan or other 
        extension of credit or banking product--in other words, 
        if an IDI or WFI or affiliate does not impose a 
        requirement on the insurance supplied directly (or 
        indirectly by an affiliate) in connection with a 
        banking product, States can prohibit a further 
        requirement from being imposed because the insurance is 
        being provided by a third party;
          (3) prohibit the use of advertising or other 
        promotional material which could cause a reasonable 
        person to mistakenly believe that a State or the 
        Federal Government is responsible for the insurance 
        activities or credit of an entity, or that they 
        guarantee a return or would act as a source of payment 
        on an insurance product;
          (4) prohibit the payment of commissions or other 
        consideration for services as an insurance agent except 
        to agents with proper State licenses for the activity 
        being performed (except that referrals to a licensed 
        agent without specific discussion of insurance policy 
        terms and conditions does not constitute ``services as 
        an insurance agent'');
          (5) prohibit consideration being provided to a person 
        without a State insurance license for a referral of a 
        potential insurance customer based on whether the 
        referral consummates in an insurance transaction;
          (6) prohibit the release of insurance information to 
        any third party, for the purpose of selling insurance 
        without the express written consent of the customer;
          (7) prohibit any use of health information other than 
        for its activities as State licensed agent or broker 
        without the express written consent of the customer;
          (8) prohibit the provision of any services by an IDI, 
        WFI, or their affiliates on the condition that a 
        consumer (or prospective consumer) obtain insurance 
        from such entity or any particular person, so long as 
        the activities restricted are the same as would result 
        in a violation of section 106 of the Bank Holding 
        Company Act Amendments of 1970 (as interpreted by the 
        Federal Reserve Board), and insofar as the State does 
        not restrict a person from informing a customer that 
        insurance from some source is required in connection 
        with a loan or credit approval or that such insurance 
        is available from such person or their affiliate. 
        Furthermore, the Committee does not intend the carve-
        out for activities which do not violate the Bank 
        Holding Company Act to apply to State restrictions 
        which prohibit in a nondiscriminatory manner the 
        offering of an inducement to the sale of an insurance 
        product if such inducement is not specified in the 
        insurance product and where such inducement constitutes 
        an unfair trade practice under the law of such State;
          (9) require a written disclosure to a consumer (or 
        prospective consumer), when an application for an 
        extension of credit is pending where insurance is 
        required in connection with the transaction, that the 
        choice of insurance provider will not affect the credit 
        decision or terms in any way, except that reasonable 
        (and nondiscriminatory) requirements may be established 
        regarding the creditworthiness of the insurer and the 
        scope of the coverage;
          (10) require a disclosure to a customer prior to the 
        sale of an insurance policy, which should be in 
        writing, where practicable, prior to any insurance 
        sale, that the policy--(i) is not a deposit; (ii) is 
        not insured by the Federal Deposit Insurance 
        Corporation (FDIC); (iii) is not guaranteed by the IDI, 
        WFI, or as appropriate their affiliates or other person 
        on the premises soliciting insurance; and (iv) where 
        appropriate, involves investment risk, including 
        potential loss of principal;
          (11) require separate documents for completing credit 
        and insurance transactions (except that the Committee 
        does not intend this particular safe harbor to extend 
        to requiring separate documents for credit insurance or 
        flood insurance which are currently provided by some 
        institutions on the same documentation as the credit 
        transaction);
          (12) prohibit inclusion of the expense of insurance 
        premiums in the credit transaction without the express 
        written consent of the customer (except that the 
        Committee does not intend this particular safe harbor 
        to extend to requiring separation of premium expenses 
        for credit insurance or flood insurance, which are 
        currently provided by some institutions on the same 
        documentation as the credit transaction); and
          (13) require maintenance of separate and distinct 
        insurance books and records, including consumer 
        complaint files, and including requiring such books and 
        records be made available to State insurance regulators 
        for inspection.
    Subsection 104(b)(2)(C) reiterates the underlying 
principles of subsection 104(b)(2)(A), affirming that the 
Barnett standard and case law continues to be applicable to 
insurance sales,solicitations, and cross-marketing activities 
that are not protected by the safe harbors set forth in subsection 
104(b)(2)(B).
    Subsection 104(b)(3) establishes the standards for 
applicability or potential preemption of State authority 
governing a person's insurance activities other than sales, 
solicitations, or cross-marketing. This paragraph is intended 
to apply to underwriting insurance as principal and activities 
related to underwriting insurance as principal, including 
reinsurance and activities such as claims processing, 
investment management of insurance premiums, and various 
administrative functions related to the underlying insurance 
underwriting or underwriting transaction. This section 
establishes a safe harbor for State regulation of insurance 
underwriting and related activities, so long as the State 
authority relates to the business of insurance, does not apply 
to insured depository institutions or wholesale financial 
institutions, does not relate to insurance sales activities 
(including solicitations and cross-marketing), and is not 
discriminatory (as provided in subsection 104(c)). State 
authority may apply to the activities of an insured depository 
institution or wholesale financial institution to the extent 
that such institution provides savings bank life insurance as 
principal. This provision is intended to preserve the ability 
of the States to functionally regulate credit insurance, 
regardless of the provider. State authority may also apply to 
an insured depository institution or wholesale financial 
institution, which is engaged in the business of insurance on 
behalf, directly, or indirectly, of a company providing 
insurance as principal, but only to the extent of the insurance 
related functions, only if such functions would normally be 
regulated by the insurance regulator of the State as part of 
the business of insurance, only if there is no conflict with an 
express Federal law, and only if the State regulator tries to 
obtain any required information from the appropriate banking 
functional regulator before going to the institution. This 
provision is intended to prevent persons providing insurance as 
principal or reinsurer, or providing insurance services 
indirectly on behalf of such persons, from shielding their 
activities from the authority of State insurance regulators by 
transferring them to an insured depository institution or 
wholesale financial institution.
    Subsection 104(b)(4) creates an additional safe harbor for 
State authority that does not relate to insurance 
solicitations, sales, cross-marketing, other insurance 
activities, or securities investigations, enforcement, 
registration, or licensure. To the extent that this Act permits 
or authorizes activities other than those addressed by 
subsections 104(b)(2), 104(b)(3), or 104(d)--in other words any 
financial activity other than insurance or securities 
activities, then subsection 104(b)(4) would act as a potential 
safe harbor to preserve such State authority. The safe harbor 
only applies if the State authority does not distinguish on its 
face in an adverse manner between an insured depository 
institution or wholesale financial institution (or their 
affiliates) and other persons engaged in the same activity, 
does not have a substantially more adverse impact, as 
interpreted or applied, on such institution or affiliate as 
compared to other persons, does not effectively prevent the 
institution or its affiliates from engaging in activities 
authorized or permitted by this Act, and does not conflict with 
the intent of this Act regarding authorized or permitted 
affiliations.
    Subsection 104(c) is an expansion of the nondiscrimination 
test for non-insurance/securities activities regulation in 
subsection 104(b)(4), except applied as modified to govern the 
potential preemption of State insurance authority. It does not 
apply to the 13 safe harbors for State authority established in 
subsection 104(b)(2)(B), and it does not apply to State 
authority that was issued, adopted, enacted, or taken before 
January 1, 1999, that relates to insurance sales, solicitation, 
or cross-marketing activities. With the exceptions above, to 
the extent that Federal law authorizes or permits an insured 
depository institution or wholesale financial institution or 
their affiliates to engage in an insurance activity, State 
authority governing such activity is subject to preemption if 
it (A) distinguishes on its face in a more adverse manner 
between an insured depository institution or wholesale 
financial institution (or their affiliates) and other persons 
engaged in the same activity; (B) has a substantially more 
adverse impact, as interpreted or applied, on an IDI or WFI or 
their affiliates as compared, based on their status, to other 
persons providing the same product or service or engaged in the 
same activities that are not IDIs, WFIs, or their affiliates; 
(C) effectively prevents an IDI or WFI or their affiliates from 
engaging in activities authorized or permitted by this Act; or 
(D) conflicts with the intent of this Act generally to 
permitted affiliations among financial services firms. The 
modification in subsection104(c)(1)(B) from the 
nondiscrimination test in subsection 104(b)(4), requiring that 
the substantially more adverse impact be based on the 
institutions' status, is intended to save neutral State 
authority that might have a greater impact on institutions for 
a reason completely unrelated to their special status. For 
example, a State insurance privacy law that was applied to 
insurance information collection would not be struck down as 
having a substantially more adverse impact on a national bank, 
even if national banks tend to collect more or less of such 
information on average. In contrast, a State insurance law 
which discriminated against affiliates of domestic branches of 
foreign companies which hold insured deposits would be subject 
to preemption, if it has a substantially more adverse impact on 
the affiliates because of the special insured status of its 
foreign parent. Similarly, if a Federal statute in the future 
required national banks with over $10 billion in deposits to 
collect personal information from their customers, then that 
attribute would be a ``status'' of national banks, and a State 
insurance privacy law which had a substantially more adverse 
impact on persons who collected such information would thus be 
subject to preemption for discrimination against a class of 
depository institutions based on their status.
    Subsection 104(d) establishes a safe harbor from the 
preemption standards in section 104 for State securities 
investigations and enforcement, consistent with section 18(c) 
of the Securities Act of 1933, with respect to unlawful conduct 
related to a securities transaction, and for the registration 
of securities and licensure/registration of brokers, dealers, 
or investment advisors, consistent with section 203A of the 
Investment Advisors Act of 1940.
    Subsection 104(e) defines insured depository institutions 
to include foreign banks that maintain a branch, agency, or 
commercial lending company in the United States, to provide for 
parallel treatment of these entities with domestic banks for 
the purposes of section 104.

Section 105. Mutual bank holding companies authorized

    Section 105 provides that mutual bank holding companies 
will be regulated similarly to other bank holding companies. 
This section is intended by the Committee to allow 
mutualinsurance companies to participate in a financial holding company 
structure without losing their mutual status.

Section 105(a). Public meetings for large bank acquisitions

    Section 105A provides that the relevant Federal banking 
agency shall conduct one or more public meetings on an 
acquisition or merger proposal under section 3 of the HCA, the 
Bank Merger Act (12 U.S.C. 1828(c)), the National Bank 
Consolidation and Merger Act (12 U.S.C. 215 et seq.), or 
section 10 of the Home Owners Loan Act (12 U.S.C. 1463), if the 
proposal involves an acquisition of (or other merger with) one 
or more insured depository institutions each with assets of $1 
billion or more and the agency, in its sole discretion, 
believes a public meeting is necessary and the transaction 
would have a substantial public impact on the relevant area.

Section 106. Prohibition on deposit production offices

    Section 106 applies the provisions of the Riegle-Neal 
Interstate Banking and Branching Efficiency Act regarding 
deposit production offices and out-of-State lending to any 
interstate branch established or acquired under this Act. In 
addition, this section expands the definition of interstate 
branch for purposes of the deposit production provisions to 
include all branches of a bank owned by an out-of-State bank 
holding company.

Section 107. Clarification of branch closure requirements

    Section 107 applies the provisions of the Riegle-Neal 
Interstate Banking and Branching Efficiency Act regarding 
branch closures by an interstate bank to any branch of a bank 
that is controlled by an out-of-State bank holding company.

Section 108. Amendments relating to limited purpose banks

    Limited purpose banks are banks that do not accept demand 
deposits and make commercial loans, but that are insured by the 
Federal Deposit Insurance Corporation. Prior to 1987, companies 
that controlled a limited purpose bank were not subject to the 
HCA. The Competitive Equality Banking Act of 1987 grandfathered 
those companies that controlled a limited purpose bank in 
existence at the time. In order to retain their exemption from 
the HCA, grandfathered companies and the limited purpose banks 
they control are required to comply with certain restrictions.
    Specifically, a limited purpose bank currently is not 
allowed to engage in any activity in which it was not engaged 
in as of March 5, 1987. Section 108 permits well capitalized 
and well managed limited purpose banks to engage in any banking 
activity, but maintains the restriction whereby limited purpose 
banks are permitted to either accept demand deposits or make 
commercial loans, but not both. Limited purpose banks that 
accept demand deposits would continue to be restricted in their 
ability to engage in making traditional commercial loans, but 
the section would permit them to issue corporate credit cards 
(e.g., cards used by business employees for travel and 
entertainment expenses). This section also amends current law 
to permit limited purpose banks to cross market affiliate 
products and to acquire assets that are derived from, or 
incidental to, activities in which a limited purpose credit 
card bank (described in subsection 2(c)(2)(FF) of the HCA) may 
engage.
    Current law requires divestiture of a limited purpose bank 
that violates the established activities restrictions. Section 
108 amends current law to permit limited purpose banks to avoid 
divestiture by correcting violations within six months upon 
receiving notice from the Federal Reserve Board.

Section 109. GAO study

    Section 109 requires that the Comptroller General study the 
projected and actual impact of the enactment of the Act on 
financial institutions (including community banks, brokers, 
dealers, and insurance companies) that have total assets of 
$100 million or less, insurance agents, and consumers. The 
Comptroller General must separately report his or her findings 
and recommendations to the Congress 6 months, 1 year, and 2 
years after the date of enactment of the Act.

Section 110. Study of responsiveness to community needs for financial 
        services

    Section 110 requires that the Secretary of the Treasury, in 
consultation with the Federal banking agencies and the 
Securities and Exchange Commission, 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 the 
Act. The Secretary of the Treasury is required to submit a 
report to Congress and include any recommendations for 
administrative and legislative action with respect to 
institutions covered under the Community Reinvestment Act of 
1977. The Committee notes that nothing in this section confers 
any new administrative or rulemaking authority under the 
Community Reinvestment Act of 1977 on any regulator. This study 
is identical to the study that was included in H.R. 10 as 
passed by the House of Representatives during the 105th 
Congress.

  SUBTITLE B--STREAMLINING SUPERVISION OF FINANCIAL HOLDING COMPANIES

    This subtitle establishes a new system of supervision for 
financial holding companies and their affiliates. The Committee 
determined that because securities firms and insurance 
companies will be important components of these holding 
companies, a new regulatory structure for them would be 
appropriate, consistent with the Committee's interest in 
securities and exchanges and regulation of the business of 
insurance.

Section 111. Streamlining financial holding company supervision

    This section clarifies and limits the role of the Federal 
Reserve Board in overseeing holding companies. The Committee 
determined that these changes are necessary to implement the 
two-way street and avoid duplicative regulation of securities 
firms and insurance companies. Section 111 replaces current 
section 5(e) of the HCA and specifies the reporting and 
examination requirements applicable to bank holding companies 
under the HCA. These changes were made because the Committee 
determined that the authorization of new financial services 
holding companies including securities firms and insurance 
companies necessitated clear codification of the principles of 
functional regulation.
    Section 111 provides that the Federal Reserve Board may 
examine the non-bank subsidiaries of financial services holding 
companies only under specified and limited circumstances. The 
Committee determined that although it was appropriate for the 
Federal Reserve Board to have supervisory authority over 
holding companies, the authority over affiliates should rest 
first and foremost with the appropriate functional regulators. 
Section 111 requires the Federal Reserve Board, to the fullest 
extent possible, to focus its examinations on the holding 
company and affiliates that may pose a material risk to a 
depository institution affiliate. The Federal Reserve Board 
must use reports of examinations made by the Securities and 
Exchange Commission (SEC), State insurance regulators and any 
other authorities that the Federal Reserve Board finds 
comprehensively supervise an affiliate. The Federal Reserve 
Board may examine a bank holding company and its subsidiaries 
to inform the Federal Reserve Board of: (1) the nature of the 
operations and financial condition of the holding company and 
its subsidiaries; (2) the financial and operational risks 
within the holding company system that may pose a threat to the 
safety and soundness of any subsidiary depository institution; 
and (3) the company's systems for monitoring and controlling 
such risks.
    The Federal Reserve Board may examine a functionally 
regulated non-depository subsidiary only if the Federal Reserve 
Board has reasonable cause to believe that the subsidiary (1) 
is engaged in activities that pose a material risk to an 
affiliated depository institution, or (2) is not in compliance 
with the provisions of the Bank Holding Company Act, as amended 
by this legislation, or with the provisions governing 
transactions with affiliated depository institutions. The 
Federal Reserve Board cannot determine compliance through an 
examination of the bank holding company or its subsidiary 
depository institutions.
    The Federal Reserve Board is required, to the fullest 
extent possible, to use the reports provided by the bank 
holding company or subsidiary to other Federal or State 
regulatory agencies or appropriate self-regulatory 
organizations, information that is otherwise publicly reported 
and audited financial statements. If the Federal Reserve Board 
seeks a report from a functionally regulated non-depository 
subsidiary (i.e., a registered securities broker or dealer, a 
registered investment adviser with regard to investment 
advisory activities, an insurance company, an insurance agency 
with respect to its insurance agency activities, or an entity 
regulated by the Commodity Futures Trading Commission with 
respect to commodities activities) of a bank holding company 
that is not required by the subsidiary's functional regulator 
or appropriate self-regulatory organization, the Federal 
Reserve Board must first ask the subsidiary's functional 
regulator or appropriate self-regulatory organization to obtain 
the report.
    Section 111 also provides that the Federal Reserve Board 
may not impose any capital adequacy rules, guidelines or other 
actions on a non-depository subsidiary of a bank holding 
company that is in compliance with the applicable capital 
requirements of another Federal regulatory authority or State 
insurance authority. The Federal Reserve Board also may not 
impose capital adequacy rules on a non-depository subsidiary 
that is a registered investment adviser or licensed insurance 
agent with respect to such subsidiary's functionally regulated 
activities or activities incidental thereto. The Committee 
determined that the Securities and Exchange Commission and the 
State insurance regulators are better situated to regulate 
these entities.
    This section also requires the Federal Reserve Board to 
defer to the SEC regarding the interpretation and enforcement 
of applicable Federal securities laws relating to the 
activities of registered brokers, dealers, investment advisers 
and investment companies. In addition, this section requires 
the Federal Reserve Board to defer to the relevant State 
insurance authorities regarding the interpretation and 
enforcement of applicable State insurance laws relating to the 
activities of insurance companies and agents.
    The standards established in section 111 for the 
supervision of holding companies are consistent with standards 
adopted internationally and by some major trading partners of 
the United States.

Section 112. Administration of application requirement for financial 
        holding companies

    This section amends section 5(a) of the Bank Holding 
Company Act to provide that a declaration filed under section 6 
by a company seeking to be a financial holding company 
satisfies the bank holding company registration requirement, 
but does not satisfy any requirement to file an application to 
acquire a bank under section 3. The divestiture provisions of 
section 5(e) are amended to allow a bank holding company to 
make a choice between divesting a nonbanking subsidiary and 
divesting an insured depository institution.

Section 113. Authority of state insurance regulators and the Securities 
        and Exchange Commission

    This section amends the Bank Holding Company Act to limit 
the Federal Reserve Board's ability to require that an 
insurance company, a registered broker or dealer, or a 
registered investment company provide funds to an affiliated 
bank if the State insurance authority or the SEC determines in 
writing that such action would have a materially adverse effect 
on the financial condition of the insurance company or the 
broker or dealer. The Committee determined that this provision 
was necessary to avoid conflicts between the source of strength 
doctrine and other Federal or State laws designed to protect 
the financial integrity of securities and insurance affiliates 
of banks. The section allows the Federal Reserve Board to 
require thebank holding company to divest the bank within 180 
days of receiving such notice from the State insurance authority or 
SEC.
    The section provides an identical limitation for other 
banking regulators under the Federal Deposit Insurance Act.

Section 114. Prudential safeguards

    Section 114 authorizes the Federal Reserve Board to impose 
restrictions on relationships or transactions between a 
depository institution subsidiary of a bank holding company and 
any of its affiliates (other than a subsidiary of the 
depository institution). Such restrictions may be imposed to 
avoid significant risk to the safety and soundness of 
depository institutions or to the Federal deposit insurance 
funds. Restrictions also may be imposed for the purpose of 
enhancing the financial stability of bank holding companies, 
avoiding conflicts of interest, enhancing the privacy of 
customers, and promoting the application of national treatment 
and equality of competitive opportunity between domestic and 
foreign bank holding companies. The Federal Reserve Board is 
required to regularly review the continuing need for any 
restrictions that may be imposed. Limitations are imposed by 
section 116 on the Federal Reserve Board's authority to 
establish prudential safeguards under section 114 on certain 
functionally regulated affiliates. The Committee determined 
that these limitations were appropriate to avoid duplicative 
regulation.

Section 115. Examination of investment companies

    Section 115 provides that the Federal banking agencies may 
not examine or inspect a registered investment company that is 
not a bank holding company or savings and loan holding company. 
The SEC is granted sole authority to inspect such registered 
investment companies and must provide to the Federal banking 
agencies, upon request, the results of any examination or other 
information with respect to a registered investment company.
    This section does not prohibit the Federal Deposit 
Insurance Corporation from examining an affiliate of an insured 
depository institution pursuant to section 10(b)(4) of the 
Federal Deposit Insurance Act (FDIA) if the FDIC believes the 
examination is necessary to determine the condition of an 
insured depository institution.

Section 116.  Limitation on rulemaking, prudential, supervisory and 
        enforcement authority of the board

    Section 116 adds a new section 10A to the Bank Holding 
Company Act that provides that the Federal Reserve Board may 
not take any action under the HCA or section 8 of FDIA against 
a regulated subsidiary of a bank holding company unless such 
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 the financial safety, soundness or 
stability of an affiliated depository institution or to the 
domestic or international payment systems. This section is 
intended to protect regulated subsidiaries of financial holding 
companies from additional or duplicative regulation by the 
Federal Reserve Board and to preserve the functional regulation 
of the day-to-day operations of regulated subsidiaries, which 
is more appropriately left to the functional regulators. The 
Federal Reserve Board may not take such an action against a 
regulated subsidiary if it is reasonably possible for the 
Federal Reserve Board to protect effectively against the risk 
by taking action against a depository institution or against 
depository institutions generally. This section is also not 
intended to limit or preempt the functional regulation of an 
insured depository or wholesale financial institution's 
insurance or securities activities.
    The Committee intends the term ``material risk'' to mean a 
risk of serious harm to the financial safety, soundness or 
stability of the particular depository institution or to the 
payment system.
    Section 10A does not affect the Federal Reserve Board's 
ability to take action under the HCA or section 8 of FDIA to 
enforce compliance by a regulated subsidiary with any Federal 
law that the Federal Reserve Board has specific jurisdiction to 
enforce against the subsidiary. For purposes of this section, a 
regulated subsidiary means a company that (1) is not a bank 
holding company, and (2) is a registered securities broker or 
dealer, a registered investment advisor (to the extent of such 
company's investment advisory and incidental activities), an 
insurance company or insurance agency subject to State 
supervision (to the extent of the company's insurance and 
incidental activities), or an entity regulated by the Commodity 
Futures Trading Commission (to the extent of its commodities 
and incidental activities).

Section 117. Equivalent regulation and supervision

    The Committee believes that, in order to ensure the 
functional regulation of activities conducted by all affiliates 
of banks, the same limitations that restrict the ability of the 
Federal Reserve Board to take action with respect to a 
functionally regulated non-depository subsidiary of a holding 
company also should limit the ability of the other Federal 
banking agencies to take action with respect to a functionally 
regulated subsidiary of an insured depository institution. 
Section 117 applies the same so-called ``Fed-lite'' provisions 
contained in section 113 and section 116 of the Act to the 
other Federal banking agencies. Thus, section 117 limits the 
ability of such agencies to obtain reports from, examine, 
impose capital requirements on, or take enforcement action 
against a functionally regulated subsidiary of an insured 
depository institution, and requires such agencies to defer to 
the SEC regarding the interpretation and enforcement of the 
Federal securities laws relating to registered brokers, 
dealers, investment advisers and investment companies, and to 
the State insurance authorities regarding the interpretation 
and enforcement of State insurance laws relating to insurance 
companies and agents. This section, however, would specifically 
preserve the ability of the Federal Deposit Insurance 
Corporation to examine any affiliate of an insured depository 
institution pursuant to section 10(b)(4) of the Federal Deposit 
Insurance Act if the FDIC believes the examination is necessary 
to determine the condition of an insured depository 
institution.

Section 118. Prohibition on FDIC assistance to affiliates and 
        subsidiaries

    Section 118 amends section 11(a)(4)(B) of the Federal 
Deposit Insurance Act to clarify that the FDIC insurance funds 
may not be used to benefit any shareholder (including a bank 
holding company) or any nondepository affiliate or subsidiary 
of an insured depository institution.

Section 119. Repeal of savings bank provisions in the Bank Holding 
        Company Act of 1956

    This section repeals section 3(f) of the Bank Holding 
Company Act.

Section 120. Technical amendment

    This section makes a technical amendment to the definition 
of ``well capitalized'' in section 2(o)(1)(A) of the Bank 
Holding Company Act.

               SUBTITLE C--SUBSIDIARIES OF NATIONAL BANKS

Section 121. Permissible activities for subsidiaries of national banks

    Section 121 reinstates the provisions of Subtitle C that 
were contained in the version of H.R. 10 passed by the House of 
Representatives in May 1998. Accordingly, Subtitle C would not 
permit national banks to engage indirectly through a subsidiary 
in potentially volatile principal activities, such as 
securities underwriting and dealing, insurance underwriting, 
merchant banking, and real estate investment and development, 
that Congress has not authorized national banks to conduct 
directly. The Committee notes that in considering H.R. 10 in 
1998, the House of Representative specifically defeated, by a 
vote of 306 to 115, an amendment that would have permitted 
subsidiaries of national banks to engage in volatile principal 
activities that Congress has not authorized national banks to 
conduct directly.
            a. Limitation to activities permissible for national banks
    Section 121 imposes a general prohibition on a subsidiary 
of a national bank engaging in any activity, or owning any 
shares of a company engaged in any activity, that a national 
bank is not permitted to engage in directly or that is 
conducted under terms or conditions other than those that would 
govern the conduct of the activity by a national bank. Section 
121 allows a national bank to own a subsidiary engaged in 
activities that are not permissible for a national bank, but 
only if a national bank is specifically authorized by the 
express terms of a Federal statute to own or control the 
subsidiary. For example, a national bank may control a 
subsidiary established under section 25A of the Federal Reserve 
Act or a subsidiary engaged in financial agency activities as 
specifically authorized by section 121. Section 121 also amends 
section 21 of the Glass-Steagall Act, which applies to all 
banks, to clarify that a subsidiary of a bank may not engage in 
securities underwriting or dealing. A bank, however, is 
permitted to retain control of a subsidiary engaged in such 
activities as of September 15, 1997.
            b. Authorization to own subsidiary engaged in financial 
                    agency activities
    Section 121 also specifically authorizes a national bank to 
own a subsidiary that engages as agent, and not as principal, 
in agency activities that the Federal Reserve Board has 
determined to be financial in nature (or incidental to such 
activities) under section 6(c) of the Bank Holding Company Act, 
if the national bank and all of its depository institution 
affiliates are well capitalized and well managed and have 
achieved a ``satisfactory'' or better rating under the CRA at 
the institution's most recent examination. In addition, prior 
to establishing any subsidiary under this authority, the 
national bank must receive the approval of the Comptroller of 
the Currency. Because an agency subsidiary may engage in 
activities not permissible for a national bank, such 
subsidiaries are treated as nonbank affiliates of the bank for 
purposes of applying the anti-tying restrictions of the Bank 
Holding Company Act Amendments of 1970 and the restrictions of 
section 23B of the Federal Reserve Act. Under this authority, a 
national bank could control a subsidiary engaged in general 
insurance agency activities.

Section 122. Misrepresentation regarding depository institution 
        liability for obligations of affiliates

    Section 122 makes it a criminal offense for any 
institution-affiliated party of an insured depository 
institution or of a subsidiary or affiliate of an insured 
depository institution to represent fraudulently that an 
insured depository institution is liable for any obligation of 
its subsidiary or affiliate.

Section 123. Repeal of stock loan limit in Federal Reserve Act

    Section 123 repeals the restriction 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 authorizations 
are not affected.

  SUBTITLE D--INVESTMENT BANK HOLDING COMPANIES; WHOLESALE FINANCIAL 
                              INSTITUTIONS

    Subtitle D creates a new type of depository institution--a 
wholesale financial institution (WFI)--that can accept 
wholesale deposits which are not insured by the Federal Deposit 
Insurance Corporation. The Committee determined that this new 
institution, which would not take Federally insured deposits, 
should have holding company supervision diminished from that 
required of financial holding companies that hold insured 
depository institutions. The subtitle also establishes a 
special supervisory regime for companies that do not own a 
depository institution other than a WFI or specified, limited-
purpose institutions. To qualify for this supervisory regime, 
the company must be a bank holding company (and not a foreign 
bank), not own any depository institution other than a WFI or a 
credit card bank, trust company or Edge Act company. The 
company also must be predominantly engaged in financial 
activities, which means that at least 85 percent of the 
company's annual consolidated gross revenues must bederived 
from activities that are financial in nature (or activities incidental 
thereto) under section 6(c) of the HCA (excluding revenues derived from 
subsidiary depository institutions).

            CHAPTER 1--WHOLESALE FINANCIAL HOLDING COMPANIES

Section 131. Wholesale financial holding companies established

            a. Definition of wholesale financial holding companies
    Section 131 creates a new section 10 of the HCA governing 
the nonbanking activities and supervision of wholesale 
financial holding companies. An investment bank holding company 
is a bank holding company that controls one or more WFIs and 
does not control any other type of bank (other than a credit 
card bank, a limited purpose trust company, or Edge or 
Agreement Corporation) or a savings association.
    Section 131 also provides an exception for WFIs that opt 
for SEC supervision under section 17(i) of the Exchange Act.
            b. Supervision of wholesale financial holding companies
    Section 131 establishes the provisions governing the 
reporting, examination and capital requirements for wholesale 
financial holding companies. The Federal Reserve Board may 
require such a company and any subsidiary to submit reports to 
inform the Federal Reserve Board of the company's or 
subsidiary's activities, financial condition, policies, risk-
management systems, and transactions with affiliated depository 
institutions. The Federal Reserve Board also may require 
reports to keep it informed regarding the compliance of a 
company or its subsidiaries with the HCA and related 
regulations and orders. The Federal Reserve Board is required 
to accept, to the fullest extent possible, reports submitted to 
other Federal or State supervisors or appropriate self-
regulatory organizations. The Federal Reserve Board may grant 
exemptions from these reporting requirements to any company or 
class of companies. In determining whether to grant such an 
exemption, the Federal Reserve Board must consider, among other 
factors, the primary business of the company, the nature and 
extent of the regulation of the company's activities, and 
whether the requested information is available from other 
domestic or foreign regulatory agencies.
    The Federal Reserve Board is permitted to examine a 
wholesale financial holding company or any subsidiary to 
monitor compliance with the HCA and the laws governing 
transactions and relationships with affiliated depository 
institutions, or to inform the Federal Reserve Board of the 
company's or subsidiary's operations or financial condition, 
the risks within the holding company system that may affect an 
affiliated depository institution and the systems for 
controlling such risks. The Federal Reserve Board must, to the 
fullest extent possible, limit the focus and scope of any 
examination to the holding company itself and any subsidiary 
that for specified reasons could have a materially adverse 
effect on a depository institution affiliate of the company. In 
addition, the Federal Reserve Board must, to the fullest extent 
possible, use reports of examinations made by other Federal 
banking agencies, the SEC, and State insurance regulators.
    The Federal Reserve Board is authorized to adopt capital 
adequacy rules or guidelines for wholesale financial holding 
companies. Any such capital requirements must be based on 
appropriate risk-weighting considerations and must focus on the 
use by holding companies of so-called ``double leverage,'' that 
is debt and other liabilities incurred by a company to fund 
investments in subsidiaries. The Federal Reserve Board may not 
impose any capital adequacy requirement on a nondepository 
subsidiary that is in compliance with applicable capital 
requirements of another Federal regulatory authority or State 
insurance authority. The Federal Reserve Board also may not 
impose capital adequacy rules on a non-depository subsidiary 
that is registered as an investment adviser with the SEC with 
respect to such subsidiary's investment advisory or incidental 
activities. Furthermore, the Federal Reserve Board must take 
full account of the capital requirements imposed on a 
nondepository subsidiary by such a Federal or State authority 
and industry norms for capitalization of unregulated 
subsidiaries.
            c. Grandfathered nonfinancial investments and activities
    Companies that become wholesale financial holding companies 
may continue to engage in any activity, or control shares of a 
company engaged in any activity, that the company was engaged 
in or held on the date of enactment of the Act. These 
grandfathered investments and activities may not be expanded 
through a merger, consolidation or any other type of business 
combination. A wholesale financial company that engages in any 
activity or holds shares pursuant to the grandfather rights 
conferred under section 131 may not take advantage of the 
similar grandfather rights provided in section 6(f) of the HCA, 
which permit eligible financial holding companies to retain a 
limited amount of nonfinancial activities.
    Section 131 permits a wholesale financial holding company 
to engage in, or own the shares of a company lawfully engaged 
in, commodity investment and trading activities if the holding 
company was predominantly engaged in financial activities in 
the United States as of January 1, 1997, and was engaged in 
such commodity investment and trading activities in the United 
States on that date. The aggregate consolidated assets of a 
wholesale financial holding company held under this authority 
may not exceed 5 percent of the company's total consolidated 
assets, or such greater percentage as the Federal Reserve Board 
may permit.
    Section 2(a)(1)(A) of the Commodity Exchange Act confers 
upon the Commodity Futures Trading Commission (CFTC) exclusive 
jurisdiction with respect to accounts, agreements, and 
transactions involving contracts of sale of a commodity for 
future delivery. Nothing contained in section 131 of H.R. 10 is 
intended to supersede or limit the jurisdiction at any time 
conferred on the CFTC, or to restrict the CFTC from carrying 
out its duties and responsibilities under the Commodity 
Exchange Act or any other law.
    Under section 131, the subsidiary WFIs of a wholesale 
financial holding company may not engage in cross marketing 
activities with any nonfinancial company whose shares are held 
under the grandfather provision or the commodities provision.
            d. Foreign banks
    Foreign banks are not eligible for supervision as wholesale 
financial holding companies under Section 10 of the HCA. A 
foreign bank that directly or indirectly holds no insured 
deposits in the Unites States (other than through certain 
limited-purpose institutions), however, may request a 
determination from the Federal Reserve Board that it be treated 
as a wholesale financial holding company (other than for 
purposes of the activity provision of section 10(c) of the 
HCA).
    To be eligible for treatment as a wholesale financial 
holding company, a foreign bank must not hold any deposits 
insured by the FDIC (other than through certain limited-purpose 
institutions). In addition, the foreign bank must meet risk-
based capital standards comparable to those required for a WFI. 
The Act provides that a foreign bank that is treated as a 
wholesale financial holding company shall be considered a WFI 
for certain specified purposes. In addition, if a foreign bank 
is treated as a wholesale financial holding company, then 
sections 23A and 23B of the Federal Reserve Act apply to any 
transactions between the bank's branches, agencies and 
commercial lending affiliates and any U.S. securities affiliate 
or company controlled pursuant to section 6(c) or (g) of the 
HCA. The U.S. branches of any foreign bank treated as a 
wholesale financial holding company also would be subject to 
the Community Reinvestment Act of 1977.
    The Act does not limit in any way the Federal Reserve 
Board's authority under the International Banking Act of 1987 
with respect to the regulation, supervision, or examination of 
foreign banks.
            e. Enforcement authority over uninsured State banks
    Section 131(b) provides that the provisions of the banking 
laws authorizing the Federal Reserve Board to take enforcement 
actions, including section 3(u), subsections (j) and (k) of 
section 7, and subsections (b) through (n), (s), (u), and (v) 
of section 8 of the FDIA, apply to an uninsured State bank in 
the same manner that they apply to insured State member banks.

Section 132. Authorization to release reports

    Section 132 authorizes the Federal Reserve Board to release 
reports of examination or other confidential supervisory 
information concerning any entity that the Federal Reserve 
Board has authority to examine to any Federal or State 
supervisory or regulatory authorities, the officers, directors 
or receivers of the entity, or any other person deemed proper 
by the Federal Reserve Board. Section 132 also amends the Right 
to Financial Privacy Act to treat the Commodity Futures Trading 
Commission in a manner consistent with the other financial 
supervisory agencies.

Section 133. Conforming amendments

    Section 133 defines the terms ``wholesale financial 
institution'', ``Commission'', ``depository institution'', and 
``insured bank'' for purposes of the HCA and amends the 
definition of the term ``bank'' in the HCA to include WFIs. 
Section 3(e) is amended to permit a bank holding company to 
control a WFI even though the deposits of such institutions are 
not insured by the FDIC. The Federal Reserve Board also is 
designated as the appropriate Federal banking agency for all 
WFIs under the FDIA.

              CHAPTER 2--WHOLESALE FINANCIAL INSTITUTIONS

Section 136. Wholesale financial institutions

    Section 136 authorizes the establishment of WFIs. A WFI may 
be either a national bank or a State member bank. A national 
bank is required to apply to the Comptroller for permission to 
operate as a WFI. The approval of the Federal Reserve Board is 
required for a State bank to operate as a WFI. Section 136 also 
authorizes State banking authorities to grant a charter to a 
WFI notwithstanding any State law requiring that a State bank 
obtain deposit insurance.
    Section 161(b) amends the Federal Reserve Act by adding a 
new section 9B that requires all WFIs to become members of the 
Federal Reserve System. All WFIs are subject to the provisions 
of Section 9B and to the other provisions of the Federal 
Reserve Act to the same extent and in the same manner as if the 
WFI were a State member insured bank or a national bank, except 
that a WFI may only terminate membership on the terms and 
conditions set by the Federal Reserve Board and with prior 
written approval of the Federal Reserve Board.
    Section 9B also contains special capital requirements 
applicable to wholesale financial institutions. The Federal 
Reserve Board is authorized to adopt capital requirements for 
all WFIs, taking into account their uninsured status and 
providing for the safe and sound operation of such institutions 
without undue risk to creditors or other persons, including 
Federal Reserve Banks, engaged in transactions with the 
institution.
    Section 9B also makes WFIs subject to the prompt corrective 
action provisions contained in section 38 of the FDIA, the 
enforcement provisions contained in the FDIA, the Bank Merger 
Act, and the International Lending Supervision Act. The Federal 
Reserve Board is granted exclusive authority to establish the 
appropriate capital levels for all WFIs under section 38 of the 
FDIA. WFIs may branch to the extent permitted by the Federal 
Reserve Board (in the case of State-chartered WFIs) or the 
Comptroller (in the case of national WFIs). State chartered 
WFIs are treated as State member insured banks for purposes of 
the provisions of section 27 of the FDIA governing the 
activities of interstate branches and are granted all the 
rights, powers, privileges and immunities of national banks. 
All WFIs are subject to the Community Reinvestment Act of 1977.
    A WFI may not receive initial deposits of $100,000 dollars 
or less other than on an incidental and occasional basis. 
Deposits of that amount received on an incidental basis may not 
represent more than 5 percent of the institution's total 
deposits and are subject to regulations prescribed by the 
Federal Reserve Board. In addition, deposits of a WFI may not 
be insured by the FDIC.
    The Federal Reserve Board is authorized to adopt for WFIs 
(1) limitations on transactions with affiliates to prevent the 
transfer of risk to the deposit insurance funds or an affiliate 
from gaining access to, or the benefits of, credit from a 
Federal reserve bank; (2) special clearing balances; and (3) 
any additional requirements that the Federal Reserve Board 
determines necessary or appropriate to achieve designated 
purposes. Transactions between an insured bank and an 
affiliated WFI are not eligible for the sister bank exemption 
from section 23A of the Federal Reserve Act. The Federal 
Reserve Board also may grant a WFI exemptions from any 
requirement applicable to member banks.
    All WFIs must remain well capitalized and well managed. If 
a WFI is not well capitalized or well managed, any company that 
controls the WFI must execute an agreement with the Federal 
Reserve Board to restore the WFI to well capitalized and well 
managed status and the Federal Reserve Board may impose limits 
on the activities of the company (or any of its affiliates) 
until such status is restored. The Federal Reserve Board may 
order a company to divest its subsidiary depository 
institutions if the company does not execute an acceptable 
agreement with the Federal Reserve Board, comply with any 
limitations imposed during the cure period, or restore the WFI 
to well capitalized or well managed status within specified 
time periods.
    In order to permit existing insured banks to become WFIs, 
section 136(c) adds a new section 8A to the FDIA. Section 8A 
permits a State-chartered or national bank to terminate its 
status as an insured institution after providing 6 months prior 
notice to the FDIC, the Federal Reserve Board, or the 
Comptroller of the Currency (as appropriate), and depositors. 
An insured bank may terminate its insurance if the deposit 
insurance fund of which the bank is a member has met or exceeds 
its designated reserve ratio and the bank pays an exit fee to 
the FDIC, or the bank receives regulatory approval and pays the 
appropriate exit fee. A depository institution that voluntarily 
terminates its deposit insurance under section 8A must either 
become a WFI or terminate all deposit-taking activities. 
Transition arrangements are established that permit previously 
insured deposits (less withdrawals) of a bank that terminates 
its insured status under section 8A to remain insured for up to 
2 years.
    Section 136 also makes several amendments to the Bankruptcy 
Code to allow for the resolution of a WFI or a corporation 
established under section 25A of the Federal Reserve Act under 
the Federal bankruptcy laws.

               SUBTITLE E--PRESERVATION OF FTC AUTHORITY

Section 141. Amendment to the Bank Holding Company Act of 1956

    Section 141 amends section 11(b) of the HCA to require that 
the Federal Reserve Board notify the Federal Trade Commission 
of any approval of a transaction under section 3 of that act if 
the transaction also involved an acquisition subject to section 
4 or section 6 of the HCA.

Section 142. Interagency data sharing

    Section 142 requires that the Federal banking agencies 
share data on the antitrust implications of a banking 
acquisition with the Justice Department and the Federal Trade 
Commission where permissible under law.

Section 143. Clarification of status of subsidiaries and affiliates

    Section 143 clarifies that any affiliate of a bank or 
savings association that is not itself a bank or a savings 
association shall not be considered a bank for purposes of the 
Federal Trade Commission Act or any other law enforced by the 
Federal Trade Commission. Section 143 also makes conforming 
amendments to the Hart-Scott-Rodino Act. Currently, 
transactions involving banks or bank holding companies that 
require Federal Reserve Board approval under section 3 or 
section 4 of the HCA are exempt from the filing requirements of 
the Hart-Scott-Rodino Act. Section 143 provides that these 
exemptions are not available for any portion of a transaction 
that is subject to section 6 of the HCA and does not require 
Federal Reserve Board approval under section 3 or section 4 of 
the HCA.

Section 144. Annual GAO report

    Section 144 requires that the Comptroller General submit a 
report to Congress each year for the first 5 years after the 
date of enactment of the Act on market concentration in the 
financial services industry and its impact on consumers.

                     SUBTITLE F--NATIONAL TREATMENT

Section 151. Foreign banks that are financial bank holding companies

    Section 151 amends section 8(c) of the International 
Banking Act of 1978 (IBA) to provide that, if a foreign bank or 
foreign company becomes a financial holding company or is 
treated as a wholesale financial holding company under section 
10(d)(1) of the HCA, the foreign bank or foreign company shall 
forfeit its grandfather rights under the IBA with respect to 
all financial activities. The IBA provided such grandfather 
rights because of the activity restrictions contained in 
current law. With the repeal of these restrictions, foreign 
banks with grandfathered financial affiliates would be 
permitted to retain these affiliates under Section 6 of the 
HCA, subject to the same terms and conditions that govern the 
ownership of such companies bydomestic banking organizations. 
In order to provide both competitive equality between domestic and 
foreign banks and fairness to the foreign banks that have relied for 
many years on their grandfathering rights, the foreign bank is granted 
two years in which to have an application approved under section 6 or 
to receive a determination under section 10(d)(1). Failing such 
approval within this time period, the Federal Reserve Board may impose 
restrictions and requirements comparable to those on a financial 
holding company, including a requirement that the activities be 
conducted in compliance with any prudential safeguards established 
under section 5(h) of the HCA.

Section 152. Foreign banks and foreign financial institutions that are 
        wholesale financial institutions

    Section 152 amends section 8A of the FDIA (as added by this 
Act) to allow an insured branch of a foreign bank to 
voluntarily terminate its deposit insurance in the same manner 
and to the same extent as insured State and national banks. 
This section is intended to allow foreign banks to convert 
their insured branches to WFIs.

Section 153. Reciprocity

    Section 153 requires that the Secretary of Commerce, in 
consultation with the appropriate Federal and State agencies 
and after seeking public comment, submit a report to the 
Congress whenever a foreign person seeks to acquire one of the 
top 50 banks, securities brokers or dealers, investment 
advisers, or insurance companies in the United States. The 
report must be submitted within 6 months of the announcement or 
consummation of the transaction and must discuss whether a U.S. 
person would be able to acquire an equivalent sized firm in the 
relevant foreign country and, if not, how such country's laws 
would have to be altered to provide reciprocal treatment for 
U.S. entities.
    Section 153 also requires that the Secretary of Commerce, 
in consultation with the appropriate Federal and State agencies 
and after seeking public comment, submit a report to the 
Congress not less than 6 months before the commencement of the 
financial services negotiations of the World Trade 
Organization. The report must discus whether the 30 largest 
foreign financial services markets provide reciprocal access to 
U.S. entities and, if not, those changes necessary to ensure 
full reciprocity for U.S. financial service providers.

            SUBTITLE G--FEDERAL HOME LOAN BANK MODERNIZATION

Section 161. Short title

    Section 161 designates this subtitle as the ``Federal Home 
Loan Bank System Modernization Act of 1999''.

Section 162. Definitions

    Section 162 provides technical changes to definitions 
within the Federal Home Loan Bank Act. It also creates a new 
class of ``community financial institutions'' with assets less 
than $500 million.

Section 163. Savings association membership

    This section eliminates mandatory membership for Federal 
savings associations and Federal savings banks, which under 
current law may not withdraw from the Federal Home Loan Bank 
(FHLBanks) System. This allows any mandatory member to withdraw 
from membership on the same terms and conditions as any 
voluntary member may do under current law. The right of Federal 
savings associations and savings banks to leave the System is 
not limited by the inclusion elsewhere in the bill of a 
transition provision that preserves the current capital 
structure of the FHLBanks (which includes a bar on withdrawals 
by such institutions) until the new capital structure can be 
implemented. It is intended that the amendments made by section 
163 are the sole provision governing the ability of mandatory 
members to withdraw from the System.

Section 164. Advances to members; collateral

    Current law allows the FHLBanks to make long-term advances 
to their members only for providing funds for residential 
housing finance. To give ``community financial institutions'' 
(CFIs) greater access to the FHLBanks System, section 164 
authorizes CFIs (banks with less than $500 million in assets) 
to obtain long-term advances for providing funds for small 
business, agricultural, rural development, or low-income 
community development leading. Section 164 also allows a CFI to 
secure its advances with new categories of collateral, i.e., 
secured loans made for the purpose of small business, 
agriculture, rural development, or low-income community 
development, or securities representing interests in such 
loans. Separately, section 164 repeals a cap (30 percent of a 
member's capital) on the amount of advances that may be secured 
by ``other real estate related collateral,'' but requires that 
the FHLBank accepting such collateral must be able to ascertain 
the value of the collateral and to perfect a security interest 
in the collateral. As they do with currently authorized types 
of collateral, the FHLBanks are expected to establish 
appropriate discounts for all of these new categories of 
collateral.
    Section 164 authorizes the Finance Board to review the 
collateral standards of any FHLBank relating to the new 
categories of collateral for CFIs and for the expanded category 
of ``other real estate related collateral.'' The Finance Board 
may order a FHLBank to make its standards for those types of 
collateral more stringent, if necessary for reasons of safety 
and soundness. The addition of this provision is intended to 
ensure that the new collateral provisions are implemented 
prudently, and does not limit the authority of the Finance 
Board to review or revise any other collateral standards or 
practices of the FHLBanks. The Finance Board, as the safety and 
soundness regulator for the FHLBanks, has the authority under 
current law to address such matters. The Committee notes the 
financial disclosure for fiscal year 1998 for the Federal Home 
Loan Banks is late. Improvement is needed in this area. 
Providing investors withappropriate disclosure in a timely 
fashion (e.g., consistent with SEC requirements for public companies) 
should be a goal of the Federal Home Loan Bank System and the Finance 
Board.

Section 165. Eligibility criteria

    Section 165 waives the ten percent residential mortgage 
asset test for FDIC-insured institutions with less $500 million 
in assets. All institutions are currently required to have ten 
percent of their total assets in residential mortgage loans in 
order to become members of the system.

Section 166. Management of banks

    Section 166 transfer from the Finance Board to the 
individual FHLBanks authority over a number of operational 
areas, including director and employee compensation, terms and 
conditions for advances, interest rates on advances, dividends, 
and forms for advance applications. The section also clarifies 
other powers and duties of the Finance Board with regard to 
enforcement.

Section 167. Resolution Funding Corporation

    Section 167 changes the current annual $300 million funding 
formula for the Resolution Funding Corporation obligations of 
the FHLBanks to a percentage of annual net earnings. The 
Committee does not intend a REFCorp fix that will result in a 
significant payment increase for the FHLBanks. The Committee 
will continue to review whether 20.75 percent is the most 
appropriate figure.

Section 168. Capital structure of Federal Home Loan Banks

    Section 168 replaces the existing redeemable stock 
structure of the FHLBank System with a capital structure that 
requires each FHLBank to meet a leverage limit and a risk-based 
permanent capital requirement. The bill authorizes the FHLBanks 
to issue three classes of stock: one class could be redeemed on 
6-months notice (Class A), one class could be redeemed on 5-
years notice (Class B), and one class would be non-redeemable 
(Class C). After the Finance Board adopts new capital 
regulations, each FHLBank must submit a capital structure plan 
establishing the manner in which it is to be capitalized.
    The bill includes a leverage capital requirement, under 
which each FHLBank must maintain at a minimum total capital in 
an amount equal to 5 percent of the total on-balance sheet 
assets of the FHLBank. Total capital includes all of a 
FHLBank's permanent capital as well as all of its Class A 
stock, all Class B stock (other than the limited amounts that 
count as permanent capital), certain general loss reserves, and 
other items determined by the Finance Board as capable of 
absorbing losses. The permanent capital of a FHLBank includes 
only its Class C stock, retained earnings, and limited amounts 
of Class B stock (not to exceed 1 percent of the assets of the 
FHLBank).
    To encourage the FHLBanks to build their permanent capital, 
the bill includes a weighting provision, under which the 
capital items with the most permanence (Class C stock and 
retained earnings) count more toward the leverage requirement 
than do capital items with less permanence (Class B and Class 
A). Accordingly, the Class C stock and retained earnings are 
weighted at two times the paid-in face value, while the Class B 
stock is weighted at one and one-half times the paid-in face 
value. Class A stock is counted at paid-in face value for 
leverage purposes. The rationale for the weighting provision is 
that the permanent and longer-term stock is better able to 
absorb losses than is the short-term redeemable stock, and it 
is the intent to include incentives, both for the FHLBanks and 
their members, to build permanent capital at each FHLBank. As a 
further incentive, each FHLBank is authorized to establish 
preferences--such as greater dividends, additional voting 
rights, liquidation preferences, or reduced minimum 
investments--for holders of its permanent and longer-term stock 
that are not available to the Class A stock.
    To ensure that the amount of a FHLBank's capital is 
commensurate with the risks (both on- and off-balance sheet) 
that it undertakes, the bill requires the Finance Board to 
establish a risk-based capital requirement that can be met only 
with permanent capital, i.e., Class C stock, retained earnings, 
and limited amounts of Class B stock. Requiring permanent 
capital is intended to provide a degree of market discipline on 
the risks undertaken by the FHLBanks.
    The risk-based capital requirement must take into account 
both the credit risk and the market risk (which includes 
interest rate risk) to which the FHLBanks are exposed. The 
risk-based requirement will operate in conjunction with the 
leverage requirement, and a FHLBank must at all times be in 
compliance with both requirements. If a FHLBank takes greater 
risks in its operations, the risk-based capital requirement may 
well cause it to maintain a greater amount of capital than 
would be required under the leverage limit alone. The 
assessment of market risks is to be determined by use of a 
stress test to be developed by the Finance Board. The stress 
test must take into account how certain market variables, such 
as changes in interest rates, rate volatility, and changes in 
the shape of the yield curve, would affect the FHLBanks. The 
Finance Board must give due consideration to any risk-based 
capital test established by the Office of Federal Housing 
Enterprise Oversight (OFHEO) for Fannie Mae and Freddie Mac, 
and may incorporate any provisions of the OFHEO risk-based 
capital regulations it deems appropriate for the operations of 
the FHLBanks.
    Because the new capital structure plans will not take 
effect until two years or more after enactment, the bill 
includes a transition provision that effectively preserves the 
current capital structure of the FHLBanks until the new capital 
structure is implemented. During the transition period a 
FHLBank may continue to admit new members and may permit 
existing members (including Federal savings associations and 
Federal savings banks) to withdraw. For institutions that 
previously had withdrawn from membership, the bill shortens the 
10-year ``lock-out'' period to 5 years, but also would allow 
any former member that had withdrawn prior to December 31, 1997 
to reapply for membership at any time.
    It is expected that the Finance Board, to the extent 
possible, will manage the transition to the new capital 
structure in a manner that will minimize or avoid any adverse 
effect on the Affordable Housing Program (AHP). The Federal 
Home Loan Banks' AHP is one of the nation's most effective 
targeted housing programs. Over the last decade, the 12 Federal 
Home Loan Banks have contributed more than $800 million of 
their net earnings to the AHP. Those funds have helped 
subsidize approximately 200,000 units of affordable housing for 
very-low-, low-, and moderate-income families throughout the 
country. The AHP's continued success depends critically upon a 
profitable and well-capitalized Federal Home Loan Bank System.
    The bill authorizes the board of directors at each FHLBank, 
subject to Finance Board approval, to determine the details of 
the capital structure plan for the FHLBank, which may vary from 
one FHLBank to another. In all cases, each member must maintain 
a minimum investment in the stock of the FHLBank, and each 
FHLBank must at all times maintain sufficient capital to remain 
in compliance with both the leverage and risk-based capital 
requirements. The bill provides the FHLBanks up to three years 
to fully implement their capital structure plans. As an 
inducement for the members to purchase Class C stock, the bill 
provides that the holders of the outstanding Class C stock of 
the FHLBank shall own the retained earnings, surplus, undivided 
profits, and equity reserves of the FHLBank. If a FHLBank has 
no permanent stock outstanding, then the members owning the 
other classes of stock would own the retained earnings of the 
FHLBank.

                       SUBTITLE H--ATM FEE REFORM

Section 171. Short title

    Section 171 designates subtitle H as the ``ATM Fee Reform 
Act of 1999''.

Section 172. Electronic fund transfer fee disclosures at any host ATM

    Section 172 amends the Electronic Funds Transfer Act (EFTA) 
by requiring certain disclosures regarding automated teller 
machine (ATM) surcharge fees. The disclosures are required only 
with respect to surcharges imposed by ATM operators on 
noncustomers, not fees that the consumer's own bank may charge. 
ATM operators assessing surcharges are required to (1) post a 
sign on the ATM machine stating that a fee will be charged; and 
(2) post a notice on the screen (or on a paper notice issued by 
the machine) that a fee will be charged and the amount of such 
fee after the transaction is initiated and before the consumer 
is irrevocably committed to completing the transaction. No 
surcharge fee may be charged unless the required disclosures 
are made and the consumer elects to proceed with the 
transactions after receiving the notice.

Section 173. Disclosure of possible fees to consumers when ATM card is 
        issued

    Section 173 amends the EFTA to require that, when ATM cards 
are issued, the consumer receive a notice that surcharges may 
be imposed by other parties when transactions are initiated at 
ATMs not operated by the card issuer.

Section 174. Feasibility study

    Section 174 requires that the Comptroller General study the 
feasibility, costs, benefits to consumers, and competitive 
impact of requiring that ATM operators disclose not only any 
surcharge imposed by the machine in use, but also any fees 
imposed by the consumer's own bank, any network used to effect 
the transaction, and any other party involved in the 
transaction. The Comptroller General must report its findings 
to the Congress within 6 months of the date of enactment of the 
Act.

Section 175. No liability if posted notices are damaged

    Section 175 provides that an ATM operator will not be 
liable for failing to comply with the signage requirement 
imposed by section 172 if a properly posted sign is 
subsequently removed, damaged, or altered by any person other 
than the operator of the ATM.

Section 176. Effective date

    Section 176 provides that the amendments made by subtitle H 
shall take effect 270 days after the date of enactment of the 
Act.

                 SUBTITLE I--DIRECT ACTIVITIES OF BANKS

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

    Section 181 amends section 24(Seventh) of the National Bank 
Act to permit any well capitalized national bank to underwrite 
and deal in obligations issued by or on behalf of any State or 
political subdivision or any agency or authority of any State 
or political subdivision, including municipal revenue bonds, 
limited obligation bonds and other obligations that meet the 
requirements of section 142(b)(1) of the Internal Revenue Code.

                  SUBTITLE J--DEPOSIT INSURANCE FUNDS

Section 186. Study of safety and soundness of funds

    Section 186 directs the FDIC to study the following issues 
concerning the deposit insurance funds: (1) the safety and 
soundness

of the funds in light of recent mergers involving insured 
depository institutions and the expanded types of affiliations 
permitted by the Act; (2) the geographic concentration of the 
funds; and (3) the planned merger of the Bank InsuranceFund and 
the Savings Association Insurance Fund. The FDIC must report its 
findings to the Congress within nine months of enactment.

Section 187. Elimination of SAIF and DIF special reserves

    Section 187 eliminates the requirement that the FDIC 
establish a ``special reserve'' for the Savings Association 
Insurance Fund.

                  SUBTITLE L--MISCELLANEOUS PROVISIONS

Section 191. Termination of ``Know Your Customer'' regulations

    Section 191 prohibits the Federal banking agencies from 
publishing in final form the ``Know Your Customer'' regulations 
that were jointly proposed by the agencies on December 7, 1998. 
Section 191 also provides that, to the extent such regulations 
may have become effective before the date of enactment of the 
Act, the regulations shall cease to be effective.

Section 192. Study and report on Federal electronic fund transfers

    Section 192 requires the Secretary of the Treasury to 
conduct a feasibility study to determine: (1) whether all 
electronic payments issued by Federal agencies could be routed 
through the Department of the Treasury; (2) whether all 
electronic payments made by the Federal Government could be 
subjected to the same level of reconciliation as United States 
Treasury checks; (3) whether appropriate computer security 
controls are in place to ensure the integrity of electronic 
payments; (4) the estimated costs of implementing processes and 
controls studied in items (1) through (3); and (5) a timetable 
for implementing these processes. The Secretary of the Treasury 
is required to provide to Congress a report on the results of 
this study no later than October 1, 2000.

Section 193. Study and report on adapting existing legislative 
        requirements to online banking and lending

    Section 195 requires that the Federal banking agencies 
conduct a study on how existing banking regulations concerning 
the delivery of financial services should be adapted to online 
banking and lending. The Federal banking agencies must report 
their findings and recommendations to the Congress within one 
year of the date of enactment of the Act.

                    TITLE II--FUNCTIONAL REGULATION

                    SUBTITLE A--BROKERS AND DEALERS

    Subtitle A amends the definitions of ``broker'' and 
``dealer'' in the Securities Exchange Act of 1934 (Exchange 
Act), to eliminate the existing broad exemptions for banks. 
These exemptions, which have been part of the Exchange Act 
since its inception, were based on the assumption that the 
Glass-Steagall Act, which became law one year before the 
Exchange Act, had prohibited most bank securities activities. 
In recent years, however, these exemptions became historic 
anomalies. Banks, with the approval of their regulators, have 
been providing an increasing array of securities products to 
the public outside the scope of the Federal securities laws. 
There has been growing concern that these bank securities 
activities occur without the protections provided by the 
Federal securities laws. In addition, these exemptions have 
permitted banks to compete directly with registered broker-
dealers, which, unlike banks, are subject to full regulatory 
oversight by the Commission and the securities self-regulatory 
organizations.
    Subtitle A recognizes that a complete exclusion from 
securities regulation is no longer appropriate for banks that 
engage actively in a greater universe of securities activity. 
In place of the broad exemptions, subtitle A provides 
circumscribed exceptions from the definitions for specific 
securities activities. This is consistent with ``functional 
regulation'' the Commission will regulate securities activities 
generally, except in circumstances where bank regulators will 
have oversight responsibilities for limited securities services 
of banks that have traditionally been provided in connection 
with other banking services.
    Subtitle A also contains a process for handling new hybrid 
products sold by banks that might have securities elements, as 
well as, a record keeping requirement for banks and an 
information-sharing provision to allow banking regulators and 
the Commission to determine whether banks are complying with 
the terms of the exceptions.

Section 201. Definition of broker

    Section 3(a)(4) of the Exchange Act currently excludes 
banks from its definition of ``broker''. 15 U.S.C. 
Sec. 78c(a)(4). As a result, banks that directly conduct 
brokerage activities are not required to register as broker-
dealers or to satisfy most other requirements applicable to 
Commission-registered brokers under the Exchange Act.
    Section 201 amends the Exchange Act's definition of 
``broker'', deleting the absolute exemption for banks, subject 
to certain enumerated exceptions. As a general matter, a bank 
will be considered a ``broker'' under the Exchange Act if it is 
engaged in the business of effecting transactions in securities 
for the account of others.
    Section 201 goes on to specify eleven exceptions for banks 
that engage in securities activities. If a bank limits its 
brokerage activities to the activities described in these 
exceptions, then the bank will not be subject to broker-dealer 
registration under the Exchange Act. These exceptions recognize 
that it may not be necessary, under certain conditions, to 
require a bank to register as a broker-dealer. In particular, 
registration may not be required because the conditions imposed 
on the excepted activities are tailored to protect investors 
and to ensure competitive fairness among different types of 
financial services providers. Banks continue, however, to be 
subject to other provisions of the Exchange Act (that are not 
based on broker-dealerstatus) including germane anti-fraud 
provisions under section 10 in connection with their securities 
activities.
            a. Third party brokerage arrangements
    Currently, banks sell securities to bank customers in one 
of three ways: (1) by contracting with registered broker-
dealers; (2) by registering broker-dealer subsidiaries or 
affiliates; or (3) by selling securities directly through bank 
employees who are neither registered as broker-dealers nor 
licensed as registered representatives of a broker-dealer. 
Banks may sell securities directly to customers because, under 
existing law, banks are specifically excluded from broker-
dealer registration under the Federal securities laws.
    Section 201 provides an exception for so-called 
``networking'' arrangements between a bank and a registered 
broker-dealer. This exception follows a long line of Commission 
no-action letters. See e.g., Chubb Securities Corp., SEC No-
Action Letter, 1993 SEC No-Act. LEXIS 1204 (Nov. 24, 1993). 
Under this exception, a bank will not be considered a 
``broker'' if it offers brokerage services pursuant to a 
contract or other written arrangement with an affiliated or 
unaffiliated broker-dealer. The exception is, however, limited 
by a variety of conditions designed to promote investor 
protection. The networking exception provides a bank with a 
flexible mechanism by which it can provide securities services 
to its customers, use its personnel, and obtain commission fee 
income from the broker-dealer, without full broker-dealer 
registration.
    In general, the conditions contained in the networking 
exception foster a degree of separation from the bank and 
restrict the securities activities of unregistered bank 
personnel to reduce sales practice concerns. For example, under 
the exception, the broker-dealer ``networking'' activities must 
be conducted at a location that is clearly identified and, to 
the extent practicable, physically separate from the routine 
deposit-taking activities of the bank.
    As part of networking arrangements, banks frequently 
designate employees who become licensed registered 
representatives under the supervision of a broker-dealer for 
the purpose of conducting brokerage transactions. These 
employees, known as ``dual employees,'' are associated persons 
of a broker-dealer and receive incentive compensation (i.e., 
compensation that depends on the successful outcome of the 
transaction) from the broker-dealer. Such employees are subject 
to regulation and disciplinary actions by the securities self-
regulatory organizations and the Commission in connection with 
their brokerage activities.
    Under this exception, bank employees who are not dual 
employees may only perform clerical or ministerial functions. 
Permissible clerical or ministerial functions include 
scheduling appointments with an associated person of a broker-
dealer. In addition to their clerical or ministerial functions, 
bank employees (who routinely handle customer funds and 
securities as part of their banking function) also may forward 
customer funds or securities to the registered broker-dealer. 
Bank employees who are not registered representatives may not 
make general or specific investment recommendations regarding 
securities, qualify a customer as eligible to purchase 
securities, or accept orders for securities. Bank employees 
may, however, describe in general terms the types of 
investments available from the bank. Finally, bank employees 
who are not registered representatives may not receive 
incentive compensation in connection with securities 
transactions. Bank employees may receive a one-time nominal 
referral fee of a fixed dollar amount that does not depend on 
whether the referral results in a transaction.
    As a general matter, under the networking exception, the 
registered broker-dealer and its registered personnel will be 
conducting all significant securities activities for the 
customer, including establishing the account, making 
suitability determinations, taking orders, executing the 
orders, sending confirmations, clearing and settling the trade, 
sending the account statements, and carrying the account on an 
on-going basis.
    In order to ensure that an investor has SIPC protection for 
the securities that he or she purchases--protection that 
applies to a broker-dealer but not a bank--the broker-dealer 
that is part of a networking arrangement must carry the 
investor's account. Section 201 also contains provisions 
governing advertising and promotional materials and disclosure 
requirements.
            b. Trust activities
    Section 201 provides an exception for bank trust 
activities, recognizing the traditional role banks have played 
in executing securities transactions in connection with their 
trust accounts. In general, bank trust and fiduciary activities 
in the securities area have arisen as an accommodation to bank 
customers, and have not been promoted through public 
solicitation of bank brokerage services.
    Under the exception, a bank will not be considered a 
``broker'' if it conducts brokerage transactions in a trustee 
or fiduciary capacity, subject to certain conditions. 
Specifically, the bank may not solicit brokerage business, 
except in connection with advertising its other trust services. 
The term ``advertising'' is not intended to permit general 
public solicitation, but to permit a bank to indicate briefly--
in a more general announcement of all the services provided in 
its trust department--that securities execution services in 
connection with trust and fiduciary services are also provided.
    Under the exception, a bank acting as trustee or fiduciary 
is also subject to limitations on the type of compensation it 
may receive. For example, a bank must be chiefly compensated 
for its trust and fiduciary activities on the basis of an 
administration or annual fee, 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 its trustee or 
fiduciary customers. Charging such fees, or any combination of 
such fees, must also be consistent with ``fiduciary principles 
and standards.'' The Commission is expected to interpret this 
exception, and, in particular, the references to ``chiefly'' 
and ``fiduciary principles and standards'' contained in this 
exception, so as to limit a bank's ability to receive incentive 
compensation or similar compensation that could foster a 
``salesman's stake'' in promoting a securities transaction. The 
Committee does not intend for a bank to conduct a full-
scalesecurities brokerage operation in the trust department exempt from 
SEC regulation and the imposition of appropriate investor protections 
under the Federal securities laws.
    To obtain this exception, a bank's trust or fiduciary 
activities also must be regularly examined by bank examiners 
for compliance with trust principles. The Committee understands 
that examinations of bank trust departments today are rigorous 
in nature. If, as in small banks, the trust or fiduciary 
activities occur outside of the trust department, these 
activities must be examined in the same way, and with the same 
rigor, as if they occurred in a bank trust department. Because 
these activities will be conducted by banks acting in a strict 
trustee or fiduciary capacity, subject to Federal and State 
trust law, and rigorously and regularly examined by bank 
examiners, bank trust customers will be afforded some basic 
protections. This mitigates concerns that would otherwise exist 
because of the lack of Federal securities law protections for 
these customers. Absent this protection, the exemption may be 
inappropriate.
    The term ``fiduciary capacity'' is defined to include banks 
that act in the capacity of trustee, executor, guardian, 
assignee, receiver, or custodian under a uniform gift to minor 
act, as an investment adviser if the bank receives a fee for 
its investment advice, or in any capacity in which the bank 
possesses investment discretion on behalf of another. This 
definition also permits the Commission to interpret the term 
fiduciary activity to include a bank that acts in a ``similar 
capacity'' to the enumerated trust and fiduciary activities. 
The Committee expects that ``similar'' will be read to mean 
``strictly comparable'' without any diminution of fiduciary 
obligation. Any bank claiming to act in a ``similar capacity'' 
must be subject to a trust or fiduciary agreement with its 
customers, subject to Federal and State trust and fiduciary 
requirements, and strictly regulated and examined for bank 
trust purposes, as contemplated by the exception. Additionally, 
the Committee believes that churning customer accounts and 
recommending investments without regard to the suitability of 
the investment for the customer is not consistent with 
fiduciary obligations.
            c. Permissible securities transactions
    An exception for ``permissible securities transactions'' 
recognizes transactions in specific types of securities and 
instruments that banks commonly engage in today. In some cases, 
to ease compliance for banks unfamiliar with the Federal 
securities laws, these exceptions restate exceptions found 
elsewhere in the Exchange Act.
    A bank will not be considered a ``broker'' if it conducts 
brokerage transactions in commercial paper, bankers 
acceptances, or commercial bills. This exception mirrors the 
current exceptions already contained in section 15(a) of the 
Exchange Act, and is to be construed in the same manner as the 
Exchange Act exceptions.
    Similarly, a bank will not be considered a ``broker'' if it 
conducts brokerage transactions in ``exempted securities'' 
under the Exchange Act. Banks acting as government securities 
brokers are already subject to section 15C of the Exchange Act 
in connection with their government securities business. For 
purposes of this exception, municipal securities are not 
treated as ``exempted securities,'' but are covered by a 
separate exception.
    In addition, a bank will not be considered a ``broker'' if 
it effects transactions in qualified Canadian government 
obligations under the regulatory framework applicable to U.S. 
government securities (section 15C of the Exchange Act), 
securities of the North American Development Bank, or Brady 
Bonds.
            d. Certain stock purchase plans: Employee benefit, dividend 
                    reinvestment, and issuer plans
    Another group of related exceptions contained in section 
201 would permit banks, as they currently do today, to act as 
agents for issuers that want to sell securities directly to 
employees and shareholders. Currently, banks that engage in 
such activities do so in their capacity as transfer agents, 
regulated under section 17A of the Exchange Act. The exceptions 
for: (1) employee benefit plans; (2) dividend reinvestment 
plans; and (3) issuer plans, are conditioned on a bank's acting 
in the capacity of a regulated transfer agent.
    Moreover, currently issuers commonly pay banks to establish 
these programs--so that banks do not receive incentive-based 
fees from employees or shareholders participating in the plans. 
Accordingly, the exceptions provided for these stock purchase 
plans contain fee restrictions designed to limit ``success'' or 
incentive-fees from the employees or shareholders. For example, 
under these three exceptions, a bank must be chiefly 
compensated for its stock purchase plan responsibilities on the 
basis of administration fees, or flat or capped per order 
processing fees (or both). These limitations are intended to 
guard against a bank's ability to charge incentive compensation 
or similar compensation that could foster a ``salesman's 
stake'' in promoting securities transactions. These fee 
limitations act as investor protections in an environment where 
the bank essentially is acting as an agent for the issuer--
rather than as agent for the investor.
    Specifically, under the employee benefit plan exception, a 
bank will not be considered a ``broker'' if it conducts 
brokerage transactions for employee benefit plans and: (i) does 
not solicit investors; or (ii) provide investment advice. As 
noted above, the bank's compensation must be limited chiefly to 
administration fees or flat or capped per order processing fees 
(or both). As a general matter, the limitation to charges 
representing per order processing fees should not be read to 
permit payments analogous to commissions. Such payments should 
generally reflect the cost incurred by the bank in connection 
with executing securities transactions.
    In addition, a bank will not be considered a ``broker'' if 
it conducts brokerage transactions for an issuer's shareholders 
in a dividend reinvestment or issuer stock purchase plan, and 
the bank: (1) does not solicit investors; (2) does not net 
shareholders' buy and sell orders; and (3) is compensated 
chiefly by an administration fee or a flat or capped per order 
handling fee (or both). Again, as noted above, these 
limitations on charging commissions to investors serve 
topromote investor protection in an environment where the bank is 
serving as an agent for the issuer--and typically is paid by the issuer 
for establishing the issuer stock purchase programs.
    Bank transfer agents that operate under these three 
exceptions may act passively to deliver written or electronic 
plan materials to employees or shareholders of the issuer or 
members of affinity groups of the issuer. Such materials, 
however, must not go beyond those permitted by the Commission 
when this legislation is enacted.
            e. Sweep accounts
    Section 201 contains a limited exception for banks that 
``sweep'' depositors' funds on an overnight basis into a no-
load money market account. The exception has the effect of 
permitting banks to continue investing depositors' funds from 
depository accounts into no-load money market accounts.
            f. Affiliate transactions
    A bank will not be considered a ``broker'' if it conducts 
brokerage transactions for the account of any affiliate of the 
bank, as defined in section 2 of the Bank Holding Company Act, 
other than an affiliate that is a broker-dealer or an affiliate 
that is engaged in merchant banking as defined in the Bank 
Holding Company Act.
            g. Private securities offerings
    Private placement of securities is a traditional broker-
dealer activity, requiring broker-dealer regulation. Because 
private placements are an ``agency'' activity, they pose little 
risk to the bank; this agency function does not, however, 
mitigate risk to investors. Sales of private placements to 
qualified investors are not necessarily free of misleading and 
deceptive sales conduct. Notably, sales practice cases like the 
Prudential Securities, Inc. debacle involved private 
placements. In the Matter of Prudential Securities Inc., 
Exchange Act Release No. 33082 (Oct. 21, 1993), 55 SEC Docket 
720 (Nov. 9, 1993). See also, SEC v. Prudential Securities 
Inc., Litigation Release No. 13840 (Oct. 21, 1993), 55 SEC 
Docket 830 (Nov. 9, 1993). Moreover, because private placements 
qualify for an exemption from the Securities Act of 1933, they 
are subject to fewer disclosure requirements under the Federal 
securities laws often making purchasers more dependent on the 
representations of persons selling these securities.
    Today, large banks that engage in private placement 
activities typically do so through so-called ``Section 20'' 
affiliates. However, small banks may conduct private placements 
directly in the bank, using unregistered employees. The bill 
recognizes these realities by requiring the private placement 
activities of large banks with broker-dealer affiliates to 
continue to be conducted through the affiliate, while 
permitting smaller banks to continue to service the needs of 
their local communities. Section 201 thus contains a limited 
exception that would permit smaller banks to continue to 
privately place securities with qualified investors, if they do 
not have an affiliated or subsidiary broker-dealer. The 
Committee believes that this exception would enable small 
banks, without broker-dealer subsidiaries or affiliates, to 
continue to assist local businesses with their capital 
formation needs.
    Section 201, therefore, creates an exception for private 
securities offerings. Briefly, a bank that has not been 
affiliated with a broker-dealer for more than one year will not 
be considered a ``broker'' if it privately places securities 
exclusively to qualified investors. Under section 201, the term 
``qualified investor'' is defined to include mutual funds; 
hedge funds; banks; thrifts; business development companies; 
small business investment companies licensed under the Small 
Business Investment Act; certain employee benefit plans; trusts 
managed by any of the preceding investors; market 
intermediaries exempted under the Investment Company Act; 
associated persons of a broker-dealer (other than natural 
persons); foreign banks; foreign governments; corporations, 
companies, partnerships, or natural persons that own and invest 
on a discretionary basis not less than $10,000,000 in 
investments; governments or political subdivisions, agencies, 
or instrumentalities of governments that own and invest on a 
discretionary basis not less than $50,000,000 in investments; 
and multinational or supranational entities, agencies, or 
instrumentalities thereof. The Commission may expand the list 
of qualified investors, provided it considers such factors as 
the person's financial sophistication, net worth, and knowledge 
and experience in financial matters.
    As described more fully below, to assist bank employees to 
become trained and qualified for sales of private placements 
within a broker-dealer, section 203 of Title II directs 
registered securities associations (i.e., the NASD) to create a 
limited qualification test for private placement securities 
activities, and to grandfather certain bank employees who have 
participated in sales of privately placed securities in the six 
months before the bill's enactment.
            h. Safekeeping and custody services
    Bank safekeeping and custody services may involve effecting 
securities transactions for bank customers. Section 201 
contains a limited exception from broker-dealer registration 
for banks that provide safekeeping and custody services to 
their customers as part of their customary banking activities.
    Many of the activities permitted under the safekeeping and 
custody exception are incidental to activities that banks 
perform today--such as selling securities dividends on custody 
securities or satisfying a guarantee or investing cash that 
serves as collateral on a securities loan. Others technically 
may not even involve ``effecting transactions in securities'' 
the Exchange Act--for example, purchasing securities to cover 
shortfalls in an account or liquidating collateral for the 
bank's own account. Banks today that engage in such activities 
have done so with the comfort of the existing blanket bank 
exemption from broker-dealer regulation. The safekeeping and 
custody services exception essentially permits banks to 
continue to engage in the limited and incidental activities 
they engage in today in conjunction with their clearing and 
depository activities. However, for the exception to apply, 
banks that perform functions customarily performed by clearing 
agencies or transfer agents in connection with securities must 
register as clearing agencies or transfer agents as is already 
required under the Exchange Act.
    Section 201 provides that a bank will not be considered a 
``broker'' if it engages in the customary banking activities 
of: (i) providing safekeeping and custody services to its 
customers with respect to securities, including the exercise of 
warrants and other rights on behalf of bank customers; (ii) 
facilitating the transfer of funds or securities, as a 
custodian or clearing agent, in connection with the clearance 
and settlement of its customers' transactions in securities; 
and (iii) facilitating lending or financing transactions or 
investing cash in connection with its safekeeping, custody, and 
securities transfer services. Additionally, a bank may hold 
securities pledged by a customer to another person or 
securities subject to repurchase agreements involving a 
customer, or facilitate the pledging or transfer of such 
securities by book entry or as otherwise provided under 
applicable law, provided that the bank maintains records 
separately identifying the securities and the customer. This 
exception is not intended to allow banks to engage in broader 
securities activities.
    The exception also will not apply to a bank that acts as a 
clearing broker in connection with securities transactions, 
except if the bank is acting in the U.S. as a clearing broker 
with respect to government securities.
            i. Excepted financial products
    Under previous versions of H.R. 10, banks would have been 
excepted from the definition of ``broker'' (and ``dealer'') in 
connection with transactions in products defined as 
``traditional banking products.'' Generally speaking, the 
purpose of this provision is to provide for exceptions from the 
registration requirements of the Federal securities laws for 
banks engaging in activities relating to the specified 
products. The Committee has amended this provision to rename it 
``excepted financial products.'' Notably, many of the products 
contained in the definition of ``excepted financial products'' 
involve products and instruments that have not traditionally 
been characterized as securities--such as bank deposit 
accounts, letters of credit, credit card debit accounts, 
certain loan participation and certain derivative instruments.
    Under section 201, a bank may continue to engage in 
brokerage transactions in products defined as ``excepted 
financial products'' in section 3(a)(56)(A) of the Exchange 
Act. ``Excepted financial products'' include deposit accounts, 
letters of credit and loans made by a bank, credit card debit 
accounts, and loan participation that are sold to qualified 
investors or other investors who have the financial 
sophistication and opportunity to review any material 
information. In addition, certain ``plain vanilla'' derivative 
instruments are included as ``excepted financial products.'' 
These include derivatives involving currencies (except options 
on currencies traded on a national securities exchange). In 
addition, banks may also sell derivatives involving or relating 
to interest rates, commodities, other rates, indices or other 
assets, except when such instruments: (i) are based on a 
security, including a group or index of securities (other than 
government securities or a group or index of government 
securities); (ii) provide for the delivery of one or more 
securities (other than government securities); or (iii) trade 
on a national securities exchange.
    The classification of a product as an excepted financial 
product does not imply that such product is or is not a 
security, or an account, agreement, contract, or transaction 
for any purpose under the Commodity Exchange Act.
            j. Municipal securities
    Section 201 contains an exception for a bank that acts as a 
broker in municipal securities. Today, the regulatory scheme 
for bank municipal securities excepts banks that act in a 
brokerage capacity; this exception preserves that exception.
            k. De minimis transactions
    To accommodate limited securities brokerage of small banks, 
a bank will be excepted from the definition of a ``broker'' if 
it effects less than 500 securities transactions in any 
calendar year (in addition to other excepted bank activities). 
Because this exception may not be used to evade the Federal 
securities laws, bank employees who also are employees of a 
broker-dealer may not claim the exception for any transactions 
that they effect.
            l. Limitations on the exceptions
    Section 201 provides for an additional limitation promoting 
best execution in connection with new bank exceptions for trust 
and fiduciary activities, stock purchase plans, and safekeeping 
and custody services. The section makes clear that these 
exceptions do not apply if the bank effects securities 
transactions that result in the trade in the U.S. of any 
security that is a publicly traded security in the U.S. unless: 
(i) the bank directs the trade to a registered broker or 
dealer; (ii) the trade is a cross-trade or substantially 
similar trade; or (iii) the trade is conducted in some other 
way permitted by the Commission.

Section 202. Definition of dealer

    Section 3(a)(5) of the Exchange Act currently excludes 
banks from the definition of ``dealer.'' 15 U.S.C. 
Sec. 78c(a)(5). As a general matter, a bank will be deemed a 
``dealer'' if it is engaged in the business of buying and 
selling securities for its own account, through a broker or 
otherwise. Section 202 amends section 3(a)(5) to include banks 
within the general definition of dealer, but creates five 
specific exceptions for certain activities. Section 202 
preserves the existing distinction between dealer activities 
and non-dealer principal transactions, including bank 
investment and trading portfolio transactions for its own 
account, as reflected in current Commission interpretive 
positions regarding dealers.
            a. Permissible securities transactions
    An exception for ``permissible securities transactions''--
similar to the one found in the ``broker'' definition--
recognizes transactions in specific types of securities and 
instruments that banks commonly engage in today. In some cases, 
to ease compliance for banks unfamiliar withthe Federal 
securities laws, these exceptions restate several exceptions found 
elsewhere in the Exchange Act.
    A bank will be excepted from the definition of ``dealer'' 
if it buys or sells commercial paper, bankers acceptances, 
commercial bills, or ``exempted securities'' under the Exchange 
Act. In addition, this exception extends to a bank if it buys 
or sells qualified Canadian government obligations under the 
regulatory framework applicable to U.S. government securities 
(section 15C of the Exchange Act), securities of the North 
American Development Bank, or Brady Bonds.
            b. Investment, trustee, and fiduciary transactions
    Section 202 excepts a bank from the definition of 
``dealer'' when it buys and sells securities for investment 
purposes for the bank or for accounts for which the bank acts 
as trustee or fiduciary. This mirrors existing law 
distinguishing between investors and dealers, and is limited to 
the portfolio trading of the bank and accounts for which it 
makes investment decisions.
            c. Asset-backed transactions
    Banks engage increasingly today in asset-backed securities 
transactions, designed to move assets off their balance sheets 
by selling them as securities to investors. Section 202 
contains a limited exception for bank asset-backed securities 
transactions that is designed to foster investor protection 
while preserving the ability of banks to continue to provide 
services relating to asset-backed securities where the bank has 
a significant stake in the assets being securitized.
    Under section 202, a bank will be excepted from the 
definition of ``dealer'' if it 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 obligations 
predominantly originated by the bank, or an affiliate of the 
bank (other than a broker or dealer). Asset-backed transactions 
involving mortgage obligations or consumer-related receivables 
must be originated by a syndicate of banks of which the bank is 
a member. Additionally, the bank must be more than an 
insignificant member of the syndicate. The Committee expects 
this provision shall be interpreted so that a bank will leave 
not less than ten percent of the assets in the syndicate or 
pool of obligations. This has the effect of generally limiting 
availability of this underwriting exception to asset-backed 
securities predominantly originated by banks, or involving 
syndications where the bank is not an insignificant member. For 
the exception to apply, the asset-backed securities must be 
placed in a grantor trust or other separate entity, so that 
applicable Securities Act registration requirements apply. In 
addition, the separation requirement also fosters the market 
practice of requiring rating agency scrutiny of the assets and 
appropriate collateralization. Because the underwriting of 
asset-backed securities raises the same issues of subsidy as 
does underwriting in an operating subsidiary (which this 
legislation prohibits), this exemption is intended to limit 
banks to the universe of asset-backed underwriting in which 
banks can engage.
            d. Transactions in excepted financial products
    An exception similar to the broker exception for 
transactions in ``excepted financial products'' is also 
contained in section 202. As noted above, many of the products 
contained in the definition of ``excepted financial products'' 
involve products and instruments that have not traditionally 
been characterized as securities--such as bank deposit 
accounts, letters of credit, credit card debit accounts, 
certain loan participation and certain derivative instruments.
    Under section 202, a bank may buy or sell products defined 
as ``excepted financial products'' in section 3(a)(56)(A) of 
the Exchange Act without being subject to registration as a 
securities dealer. ``Excepted financial products'' include 
deposit accounts, letters of credit and loans made by a bank, 
credit card debit accounts, or loan participation that are sold 
to qualified investors or other investors who have the 
financial sophistication and opportunity to review any material 
information. In addition, certain plain vanilla derivative 
instruments are included as ``excepted financial products.'' 
These include derivatives involving currencies (except options 
on currencies traded on a national securities exchange). In 
addition, banks may also buy and sell derivatives involving or 
relating to interest rates, commodities, other rates, indices 
or other assets, except when such instruments: (i) are based on 
a security, including a group or index of securities (other 
than government securities or a group or index of government 
securities); (ii) provide for the delivery of one or more 
securities (other than government securities); or (iii) trade 
on a national securities exchange.
            e. Derivative instruments
    In addition to the plain vanilla derivative instruments 
that banks may deal in pursuant to the exception for excepted 
financial products, section 202 contains a separate exception 
for derivatives products that could include securities-related 
derivative products (i.e., where the derivatives involved could 
be a security, or involve the delivery of securities). In 
general, the derivatives exception permits banks to book all 
derivatives products in the bank, but, if they involve a 
security or delivery of a security (other than government 
securities), they would be required to be conducted only with 
qualified investors and/or effected through a registered 
broker-dealer.
    Under section 202, a bank will be exempted from the 
definition of ``dealer'' if it engages in certain derivative 
transactions:
          If the derivative is neither a security nor provides 
        for settlement by the delivery of securities, the bank 
        would not be deemed a ``dealer'' and would be permitted 
        to engage in the transaction directly with any person. 
        Banks also would be permitted to act as counterparty in 
        transactions involving derivatives that are, or that 
        require the delivery of, U.S. government securities 
        without being deemed a ``dealer.''
          Second, if the bank acts as counterparty in any 
        derivatives transaction with a qualified investor (or a 
        corporation, limited liability company, or partnership 
        having at least $100 million in investments) and the 
        transaction is settled in cash, the bank would not be 
        deemed a ``dealer'' or be required to effect the 
        transaction through a registered broker-dealer 
        affiliate. Transactions settled by delivering 
        securities, however, could be booked in the bank but 
        would have to be sold through a registered broker-
        dealer.
          Third, if the derivative is a security or the bank 
        settles the transaction by delivering securities, and 
        the transaction is effected with a person who is not a 
        qualified investor (or a corporation, limited liability 
        company, or partnership having at least $100 million in 
        investments), the bank would be deemed a ``dealer'' 
        unless it effected the transaction through a broker-
        dealer affiliate.
    This provision will permit banks to continue to act as 
counterparties in derivative transactions, while applying 
securities law protections where the derivative product 
involves delivery of a security, or is a security and is sold 
to persons that are not qualified investors or companies and 
similar entities having at least $100 million in investments.
    The term ``derivative instruments'' is broadly defined in 
section 206 to include any individually negotiated contract, 
agreement, warrant, note, or option that is partially or wholly 
based 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. Equity and credit swaps are 
not treated separately under the exception for derivative 
instruments. Their treatment will depend on whether the swaps 
may be deemed a security or require settlement by delivering 
one or more securities. Whether a swap or other derivative 
product is a security for Exchange Act purposes depends on 
whether it is an option on a security or satisfies established 
legal tests for determining whether a financial product is a 
security.
    ``Qualified investors'' include mutual funds, hedge funds, 
banks, thrifts, business development companies, small business 
investment companies licensed under the Small Business 
Investment Act, certain employee benefit plans, trusts managed 
by any of the preceding investors, market intermediaries 
exempted under the Investment Company Act, associated persons 
of a broker-dealer (other than natural persons), and foreign 
banks. The Commission may expand the list of qualified 
investors, provided it considers such factors as the person's 
financial sophistication, net worth, and knowledge and 
experience in financial matters. The Commission should not add 
natural persons to the list of qualified investors.

Section 203. Registration for sales of private securities offerings

    Section 203 amends section 15A of the Exchange Act, which 
sets out the requirements to be a registered securities 
association, by adding new subsection (j). This new subsection 
directs a registered securities association to create a limited 
qualification category, without a testing requirement, for 
associated persons of members who effect private placement 
sales. The registered securities association is directed to 
``deem qualified'' for such limited qualification category, 
without testing, those associated persons who have been bank 
employees engaged in private placement sales in the six months 
before this bill is enacted.

Section 204. Information sharing

    Section 204 also amends section 18 of the Federal Deposit 
Insurance Act by adding new subsection (t). This new subsection 
requires each appropriate Federal banking agency, after 
consultation with and consideration of the Commission's views, 
to establish recordkeeping requirements for banks that are 
relying on the exceptions from the definitions of ``broker'' 
and ``dealer'' in sections 3(a)(4) and 3(a)(5) of the Exchange 
Act made in sections 201 and 202 of Title II.
    These recordkeeping requirements must result in records 
that are sufficient to demonstrate compliance with the terms of 
the exceptions. The records kept must be made available by the 
appropriate Federal banking agency upon the Commission's 
request.

Section 205. Treatment of new hybrid products

    The new products provision contained in section 205 
provides an express procedure for handling new hybrid products 
sold by banks that have securities elements. This process would 
require the Commission 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.
    Briefly, the process contemplated by section 205 would work 
as follows. Prior to seeking to register a bank as a broker or 
dealer with respect to sales of any new hybrid product, or 
bringing an enforcement action for failure to register, the 
Commission would have to engage in a rulemaking.
    In its rulemaking, the Commission would need to find that 
the new product is a security. In addition, the Commission 
would have to determine that the bank product is a ``new hybrid 
product.'' The bill provides certain guideposts to help the 
Commission in its analysis.
    For example, the definition of ``new hybrid product'' 
carves out products that are already viewed as a security as of 
the date of enactment of the bill. As a result, these 
traditional securities products do not require rulemaking 
before bank compliance with broker-dealer registration 
requirements, even if these securities products are called by a 
different name. Traditional securities could include, for 
example, products that were regularly subject to securities 
registration statements or which have been viewed as a security 
in the context of a Commission enforcement action prior to the 
date of enactment.
    A new hybrid product is not one of the products listed in 
the definition of ``Excepted Financial Products'', contained in 
section 3(a)(56)(A) of the Exchange Act. These products,which 
the Committee views as products that existed in those categories as of 
the date of enactment of the bill, typically are not securities and are 
already exempt from broker-dealer registration requirements. Of course, 
merely labeling a security as a product on the list of excepted 
financial products will not suffice to exclude it from being either a 
security or a new hybrid product.
    Using these guideposts, the Commission should make its 
traditional analysis of whether the new bank product is a 
``security'' under the Federal securities laws, and whether it 
is a new hybrid product under this section.
    In addition, during the rulemaking process, the Commission 
must also find that imposing a registration requirement on a 
bank to sell the new hybrid product is necessary or appropriate 
in the public interest and for the protection of investors. 
When considering whether such an action is in the public 
interest, the Commission must also consider whether the action 
will promote efficiency, competition and capital formation, as 
set forth in section 3(f) of the Exchange Act. Finally, during 
the rulemaking process, the Commission is required to consult 
with and consider the views of the appropriate Federal bank 
regulatory agencies concerning the proposed rule and the effect 
of those rules on the banking industry.

Section 206. Additional definitions

    Section 206 amends subsection 3(a) of the Exchange Act to 
add paragraphs (54), (55) and (56) defining, respectively, 
``derivative instrument,'' ``qualified investor,'' and 
``excepted financial products.''
    New paragraph (54) defines ``derivative instrument'' as 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 an excepted financial product listed in 
subpart (i)-(v) of section 3(a)(56)(A).
    Nothing in paragraph (54) is intended to imply that any 
``derivative instrument'' is or is not a security, or an 
account, agreement, contract, or transaction for any purpose 
under the Commodity Exchange Act.
    New paragraph (55) defines ``qualified investor.'' The 
definition includes: (1) registered investment companies; (2) 
issuers eligible for any exclusion from the definition of 
investment company pursuant to section 3(c)(7) of the 
Investment Company Act; (3) banks, savings and loan 
associations, brokers, dealers, insurance companies and 
business development companies (as defined in section 2(a)(48) 
of the Investment Company Act); (4) small business investment 
companies licensed by the Small Business Administration under 
section 301(c) or (d) of the Small Business Investment Act of 
1958; (5) State sponsored employee benefit plans, and certain 
other employee benefit plans within the meaning of the Employee 
Retirement Income Securities Act of 1974, other than individual 
retirement accounts; (6) certain trusts; (7) market 
intermediaries exempted under section 3(c)(2) of the Investment 
Company Act of 1940; (8) associated persons of a broker or 
dealer that are not natural persons; (9) foreign banks (as 
defined in section 1(b)(7) of the International Banking Act of 
1978), and (10) foreign governments.
    For purposes of sectioning 3(a)(4)(B)(vii) (private 
placements), 3(a)(5)(C)(iii) (asset-backed transactions) and 
3(a)(56)(A)(v) (loan participation) of the Exchange Act, the 
term ``qualified investor'' also includes: (1) any corporation, 
company or partnership that owns and invests on a discretionary 
basis not less than $10,000,000 in investments; (2) any natural 
person who owns and invests on a discretionary basis not less 
than $10,000,000 in investments; (3) 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; and (4) any multinational 
or supranational entity or any agency or instrumentality 
thereof.
    New paragraph (56) defines ``excepted financial product'' 
as: (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 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 (i) is sold to 
qualified investors; or (ii) is sold by an employee of a bank 
who is not also a broker-dealer employee and sales are limited 
to persons who have the opportunity to review and assess 
material information, including information about the 
borrower's creditworthiness, and who, based on such factors as 
financial sophistication, net worth, and knowledge and 
experience in financial matters, have the capability to 
evaluate the information available; or (6) any derivative 
instrument, whether or not individually negotiated, involving 
or relating to currencies, except options on foreign currencies 
that trade on a national securities exchange.
    Two categories of excepted financial products deserve 
additional consideration: loans and loan participation. It is 
important to point out that the exception for loans made by a 
bank is only available for loans that are not securities under 
the Exchange Act. What constitutes a loan that is not a 
security is determined by reference to the Supreme Court's 
decision in Reves v. Ernst & Young, 494 U.S. 56 (1990), which 
sets out a ``family resemblance test,'' for notes to determine 
whether they are securities.
    In Reves, a list of notes previously deemed not to be 
securities is recognized. These include: (1) the note delivered 
in consumer financing; (2) the note secured by a mortgage on a 
home; (3) the short-term note secured by a lien on a small 
business or some of its assets; (4) the note evidencing a 
character loan to a bank customer; (5) short-term notes secured 
by an assignment of accounts receivable; (6) a note which 
simply formalizes as an open-account debt incurred in the 
ordinary course of business; and (7) notes evidencing loans by 
commercial banks for current operations.
    For other instruments, Reves presumes that every note is a 
security and then applies the ``family resemblance'' test to 
determine whether the presumption is correct. The presumptionis 
rebutted if a note bears a strong resemblance to any instrument on a 
list of notes that have previously been deemed not to be securities, 
or, if upon applying the test, it is determined that the note should be 
added to the list. Reves identifies four factors to consider in 
determining whether a note should be added to the list. These four 
factors are: (1) the motivations that would prompt a reasonable buyer 
and seller to enter into the transaction; (2) the plan of distribution 
of the instrument; (3) the reasonable expectations of the investing 
public; and (4) whether some factor, such as the existence of another 
regulatory scheme, significantly reduces the risk of the instrument, 
thereby rendering application of the securities laws unnecessary.
    Accordingly, the loans included in the definition of 
``excepted financial products'' do not include instruments that 
would be deemed to be securities under the Reves family 
resemblance test. In general, the Reves test does not include 
instruments that are purchased, delivered, or sold in 
connection with consumer or commercial financing transactions. 
In contrast, notes that have characteristics typically 
associated with an investment purpose would be deemed 
securities under the Federal securities laws, and therefore 
outside the scope of the term excepted financial product.
    With respect to loan participation, a similar analysis 
should be used to create the conditions for sales of loan 
participation by banks. Moreover, it is important to note that 
the requirement that purchasers of loan participation from 
banks have an opportunity to review and assess any material 
information, including information regarding the borrower's 
creditworthiness, comes directly from Banco Espanol de Credito 
v. Security Pacific National Bank, 973 F.2d 51 (2d Cir. 1992), 
cert. denied, 509 U.S. 903 (1993). In that case, the United 
States Court of Appeals for the Second Circuit determined that 
the loan participation sold by Security Pacific were not 
securities. Id. Under the Banco Espanol facts, purchasers 
signed an agreement that ``acknowledge[d] that it [had] 
independently and without reliance upon [the bank] and based 
upon such documents and information as the participant[s] 
deemed appropriate, made its own credit analysis.'' Id. at 53. 
The Court specifically noted that the plan of distribution 
``limit[ed] eligible buyers to those with the capacity to 
acquire information about the debtor.'' Id. at 55. Both the 
District Court and the Court of Appeals determined the offering 
was a ``limited solicitation to sophisticated financial or 
commercial institutions.'' Id.
    Subsequent cases have distinguished the Banco Espanol case 
when offerings were not restricted to sophisticated investors 
who have the capacity to acquire information about the debtor. 
In Pollack v. Laidlaw Holdings, Inc., 27 F.3d 808 (2d Cir.), 
cert. denied, 513 U.S. 963 (1994), the United States Court of 
Appeals for the Second Circuit determined that the sale of 
mortgage interests to less sophisticated investors was a sale 
of securities. In this case the Second Circuit uses the phrase 
``opportunity to evaluate the value of the [instrument]'' 
interchangeably with the phrase ``capacity to acquire 
information about the debtor.'' Id. at 813-814.
    In general, many of the products contained in the 
definition of ``excepted financial products'' involve products 
and instruments that have not traditionally been characterized 
as securities--such as bank deposit accounts, letters of 
credit, and credit card debit accounts. In any event, paragraph 
(56) specifies that classification of a product as an 
``excepted financial product'' is not intended to imply that 
any such product is or is not a security, or an account, 
agreement, contract, or transaction for any purpose under the 
Commodity Exchange Act.
    Finally, it is important to note that the Committee intends 
that the definition of the term ``excepted financial products'' 
cover those products as they were commonly understood as of the 
date of enactment of the bill. Merely denominating a new 
instrument as one of the ``excepted financial products'' does 
not necessarily except this new product from broker-dealer 
registration requirements. If the new instrument is not an 
excepted financial product as they were commonly understood 
when the bill was enacted, and if the new instrument is a 
security, other than a traditional security, the new instrument 
would be subject to the new hybrid product rulemaking process. 
If the new bank instrument is a traditional security, like a 
stock, bond, or collateralized mortgage obligation, the bank 
would be subject to the broker-dealer registration requirements 
without the Commission following the new hybrid product 
process.

Section 207. Government securities defined

    Section 207 amends paragraph (42) of subsection 3(a) of the 
Exchange Act to add new subparagraph (E). This new subparagraph 
includes in the definition of ``government securities,'' for 
purposes of sections 15, 15C, and 17A of the Exchange Act as 
applied to banks, qualified Canadian government obligations as 
defined in section 5136 of the Revised Statutes. As a result, 
banks engaging in activities in Canadian government obligations 
must comply with the government securities requirements with 
respect to these securities.

Section 208. Effective date

    Section 208 establishes the effective date of this subtitle 
as 270 days from the date of enactment.

Section 209. Rule of construction

    Section 209 provides that nothing in the Financial Services 
Act of 1999 will supersede, effect, or otherwise limit the 
scope and applicability of the Commodity Exchange Act.

             SUBTITLE B--BANK INVESTMENT COMPANY ACTIVITIES

    Subtitle B of the bill addresses many of the concerns 
raised by the increased involvement of banks in investment 
company activities. Banks are now significant participants in 
the mutual fund industry. Because this was not the case when 
the Investment Company Act and the Investment Advisers Act were 
enacted, these statutes currently do not address many of the 
concerns that may be raised when banks provide investment 
management and related services to investment companies. The 
bill addresses these concerns by, among other things, 
broadening the definition of ``investment adviser'' in the 
Investment Advisers Act to include banks that advise investment 
companies, and including specific provisions to address the 
conflicts of interest that may arise when banks provide 
investment management and related services to funds. 
Inaddition, the bill addresses potential customer confusion that can 
occur when investors purchase shares of an investment company when it 
is implied that the investment is guaranteed by a bank or insured by 
the government. Finally, the bill addresses the circumstances under 
which bank-maintained common trust funds are exempt from the securities 
laws.

Section 211. Custody of investment company assets by affiliated bank

    The Investment Company Act does not currently limit the 
ability of a bank to serve as custodian of the assets of an 
affiliated management investment company or unit investment 
trust. Although the Investment Company Act gives the Commission 
general rulemaking authority regarding investment company 
custodial arrangements, sections 211(a) and (b) of the bill 
clarifies and confirms that this rulemaking authority extends 
to custodial arrangements involving affiliated banks.
    Section 211(a) of the bill amends section 17(f) of the 
Investment Company Act (15 U.S.C. Sec. 80a-17(f)) to expressly 
authorize the Commission to adopt rules and issue orders 
prescribing the conditions under which a bank, or an affiliated 
person of a bank, either of which is an affiliated person, 
promoter, organizer, sponsor, or principal underwriter of such 
a company, may serve as the investment company's custodian.
    Section 26(a)(1) of the Investment Company Act (15 U.S.C. 
Sec. 80a-26(a)(1)) requires a unit investment trust to 
designate as trustee or custodian a bank meeting certain 
qualifications. Section 211(b) of the bill amends section 26(a) 
to expressly authorize the Commission to adopt rules and issue 
orders 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 or depositor of a unit 
investment trust, may serve as trustee or custodian of the 
trust.
    Section 36(a) of the Investment Company Act authorizes the 
Commission to bring an action in Federal court against an 
officer, director, investment adviser, depositor, or principal 
underwriter of an investment company that engages in personal 
misconduct that constitutes a breach of fiduciary duty owed to 
the investment company. Section 211(c) of the bill extends 
section 36(a) to cover misconduct by an investment company 
custodian.

Section 212. Lending to an affiliated investment company

    Section 17(a) of the Investment Company Act makes it 
unlawful for an affiliated person of a registered investment 
company, or an affiliated person of that person, among other 
things, to borrow money or other property from the company, 
except as otherwise permitted under the Act. The Investment 
Company Act, however, does not clearly restrict a person's 
ability to make a loan to an affiliated investment company. 
Loans to an investment company from an affiliate carry the 
potential for overreaching. The affiliate could, for example, 
charge the company an above-market interest rate. To address 
the potential for overreaching, section 212 of the bill amends 
section 17(a) to also make it clearly unlawful for any 
affiliated person of an investment company, or any affiliated 
person of that person, to loan money or other property to the 
company in contravention of any rules or orders that the 
Commission may prescribe or issue.

Section 213. Independent directors

    The Investment Company Act deems certain persons with a 
material relationship to an investment company or to a 
company's investment adviser or principal underwriter to be 
``interested persons'' of those entities. The Act limits the 
number of interested persons who may serve on the board of an 
investment company and uses the interested person concept to 
minimize conflicts of interests. For example, the Act requires 
a fund's investment advisory contract to be approved annually 
by a majority of directors who are not interested persons of 
the fund or the fund's adviser.
    Section 2(A)(19)(A)(v) of the Investment Company Act (15 
U.S.C. Sec. 80a-2(A)(19)(A)(v)) currently defines ``interested 
person'' of an investment company to include any registered 
broker or dealer or any affiliated person of the broker or 
dealer. Section 213(a) of the bill amends this definition to 
include any person, or any affiliated person of a person that, 
during the six-month period preceding the determination of 
whether the person is an interested person, has executed any 
portfolio transactions for, engaged in any principal 
transactions with, distributed shares for, or lent money or 
property to the investment company or a related investment 
company or account. Section 213(b) of the bill makes similar 
changes to section 2(a)(19)(B)(v) of the Investment Company 
Act, the definition of ``interested person'' of an investment 
adviser or principal underwriter of an investment company.
    Section 10(c) of the Investment Company Act (15 U.S.C. 
Sec. 80a-10(c)) currently prohibits a registered investment 
company from having a majority of its board of directors 
comprised of individuals who are officers, directors, or 
employees of any one bank. Section 213(c) of the bill amends 
section 10(c) to extend this prohibition to any one bank, 
together with its affiliates and subsidiaries, or any one bank 
holding company, together with its affiliates and subsidiaries. 
This provision would strengthen the independence of a fund's 
board of directors.
    To accommodate those funds that will have to change the 
composition of their boards as a result of sections 213(a), 
(b), and (c), section 213(d) provides that the amendments made 
by section 213 shall not take effect until one year after the 
enactment of Subtitle B.

Section 214. Additional SEC disclosure authority

    Section 214 of the bill is intended to address potential 
customer confusion that can occur when investors purchase 
shares of an investment company when it is implied that the 
investment is guaranteed by a bank or insured by the 
government. Section 214 amends section 35(a) of the Investment 
Company Act to prohibit any person issuing or selling the 
securities of a registered investment company from representing 
or implying that the company or securities are insured by the 
Federal Deposit Insurance Corporation or are guaranteed by or 
otherwise an obligation of any insured depository institution.
    Section 214 further amends section 35(a) by requiring any 
person issuing or selling the securities of a registered 
investment company that is advised by or sold through a bank to 
disclose prominently that an investment in the company is not 
insured by the FDIC or any other government agency. Section 214 
authorizes the Commission to adopt rules and issue orders 
prescribing the manner in which such disclosure must be 
provided. Even if the Commission has not adopted rules under 
this section, however, bank advised investment companies still 
are required to disclose that investments in their companies 
are not insured by the FDIC or any other government agency.

Section 215. Definition of broker under the Investment Company Act of 
        1940

    Section 215 of the bill replaces the definition of 
``broker'' in section 2(a)(6) of the Investment Company Act 
with a reference to the definition of ``broker'' in the 
Exchange Act. The amended definition continues to exclude any 
person that would be deemed a broker solely because the person 
is an underwriter for one or more investment companies.

Section 216. Definition of dealer under the Investment Company Act of 
        1940

    Section 216 of the bill similarly replaces the definition 
of ``dealer'' in section 2(a)(11) of the Investment Company Act 
with a reference to the definition of ``dealer'' in the 
Exchange Act. The amended definition continues to exclude 
insurance companies and investment companies.

Section 217. Removal of the exclusion from the definition of investment 
        adviser for banks that advise investment companies

    Section 202(a)(11) of the Investment Advisers Act (15 
U.S.C. Sec. 80b-202(a)(11)) currently excludes banks and bank 
holding companies from the definition of ``investment 
adviser.'' Section 217(a) of the bill amends section 202(a)(11) 
to include within the definition of ``investment adviser'' any 
bank or bank holding company that serves as investment adviser 
to a registered investment company. This amendment is intended 
to make banks and bank holding companies that advise investment 
companies subject to the same regulatory scheme as other 
investment company advisers. It also is intended to help the 
Commission more effectively protect the interests of 
shareholders in bank-advised investment companies.
    Section 217 protects shareholders of bank-advised 
investment companies by giving the Commission greater access to 
records and information necessary to ensure that bank advisers 
comply with the Federal securities laws. Currently, when 
Commission examiners examine an investment company that is 
advised by a bank that is not a registered investment adviser, 
the Commission staff does not have the authority to require the 
bank to produce trading records related to advisory customers 
other than registered investment companies. This limitation 
makes it difficult to uncover certain practices that may 
violate the Federal securities laws. For example, a bank that 
advises an investment company could allocate more profitable 
trades to bank trust accounts and less profitable trades to the 
investment company. Bank advisory personnel also could engage 
in frontrunning the securities transactions of the investment 
company by trading the same securities for their personal 
accounts. If all banks that advise investment companies were 
subject to the Advisers Act, the staff would have greater 
access to books and records that might reveal these practices.
    A bank may establish a ``separately identifiable department 
or division'' (SID) to act as investment adviser to a 
registered investment company, in which case only the SID, and 
not the bank, would be deemed an investment adviser under the 
Investment Advisers Act. Section 217(b) of the bill amends 
section 202(a) of the Investment Advisers Act to add a 
definition of a ``separately identifiable department or 
division'' of a bank.

Section 218. Definition of broker under the Investment Advisers Act of 
        1940

    Section 218 of the bill replaces the definition of 
``broker'' in section 202(a)(3) of the Investment Advisers Act 
(15 U.S.C. Sec. 80b-2(a)(3)) with a reference to the definition 
of ``broker'' in the Exchange Act.

Section 219. Definition of dealer under the Investment Advisers Act of 
        1940

    Section 219 of the bill similarly replaces the definition 
of ``dealer'' in section 202(a)(7) of the Investment Advisers 
Act (15 U.S.C Sec. 80b-2(a)(7)) with a reference to the 
definition of ``dealer'' in the Exchange Act. The amended 
definition continues to exclude insurance companies and 
investment companies.

Section 220. Interagency consultation

    Section 220 of the bill adds a new section 210A to the 
Investment Advisers Act that requires the appropriate Federal 
banking agency to share with the Commission, and the Commission 
to share with the banking agency, upon request, the results of 
any examination, reports, records, or other information 
regarding the investment advisory activities of any bank 
holding company, bank, or SID that is registered as an 
investment adviser under the Investment Advisers Act. If a bank 
holding company or bank has a subsidiary or a SID registered as 
an investment adviser under the Investment Advisers Act, the 
section requires that the banking agency share with the 
Commission, upon request, the results of any examination, 
reports, records, or other information regarding the bank 
holding company or bank. Section 220 also clarifies that it 
does not in any way limit the authority of the banking agency 
to regulate the bank holding company, bank, or SID.
    Section 220 is intended to assist the Commission and the 
Federal banking agencies in obtaining information from one 
another that may be necessary or helpful in carrying out their 
statutory responsibilities. The section also is intended to 
provide the Commission with access to information regarding a 
bank holding company or bank that, although not itself 
registered as an investment adviser under the Investment 
Advisers Act, has a subsidiary or SID that is registered as an 
investment adviser under the Investment Advisers Act.

Section 221. Treatment of bank common trust funds

    The Federal securities laws currently exempt interests in 
common trust funds from the registration requirements of the 
Securities Act and exclude common trust funds from the 
definition of investment company under the Investment Company 
Act. In addition, because interests in common trust funds are 
exempted securities under the Exchange Act, persons effecting 
transactions in these interests need not register as broker-
dealers. All three statutes limit the exception to a common 
trust fund or similar fund maintained by a bank exclusively for 
the collective investment or reinvestment of moneys contributed 
thereto by the bank in its capacity as a trustee, executor, 
administrator, or guardian.
    Section 221 of the bill largely codifies a long-standing 
Commission position that the exception from the securities laws 
available to a bank common trust fund applies only when the 
underlying trust relationship is created for bona fide 
fiduciary purposes, and when the fund is operated for the 
administrative convenience of the bank in a manner incidental 
to the bank's traditional trust department activities and not 
as a vehicle for general investment by the public.
    Section 221 amends the common trust fund exception in 
section 3(c)(3) of the Investment Company Act (15 U.S.C. 
Sec. 80a-3(c)(3)) so that it applies only to a common trust 
fund that meets three conditions. First, the common trust fund 
must be employed solely as an administrative convenience for 
the management of accounts created and maintained for fiduciary 
purposes. Second, interests in the fund may not be advertised 
or offered for sale to the public, except in connection with 
generic advertising of the bank's overall fiduciary services. 
Third, the common trust fund may not charge fees and expenses 
in contravention of fiduciary principles established under 
applicable Federal or State law. Section 221 also amends the 
exemptions provided to common trust funds by section 3(a)(2) of 
the Securities Act (15 U.S.C. Sec. 77c(a)(2)) and section 
3(a)(12)(A)(iii) of the Exchange Act (15 U.S.C. 
Sec. 78c(a)(12)(A)(iii)) to reference the conditions set forth 
in section 3(c)(3) of the Investment Company Act.

Section 222. Investment advisers prohibited from having controlling 
        interest in registered investment company

    Section 222 of the bill amends section 15 of the Investment 
Company Act to add a new subsection (g) that is intended to 
address certain conflicts that may arise when an investment 
adviser to an investment company, or an affiliated person of 
the adviser, has voting control over the investment company 
through shares held in a trustee or fiduciary capacity. Section 
2(a)(9) of the Investment Company Act creates a presumption of 
``control'' when a person owns more than 25 percent of a 
company's voting securities. To ensure that the adviser does 
not use its fiduciary authority to further its own interests 
(such as by voting to perpetuate itself as adviser to the 
investment company), section 222 requires the fiduciary to 
follow certain procedures when voting investment company 
shares.
    If the adviser has a controlling interest in the investment 
company through shares held in a trustee or fiduciary capacity 
on behalf of an employee benefit plan subject to the Employee 
Retirement Income Security Act of 1974 (ERISA), section 222 
requires that the adviser transfer the power to vote the shares 
of the investment company to another fiduciary of the plan that 
is not an affiliated person of the investment adviser, or an 
affiliated person of such a person. Transferring the power to 
vote to another plan fiduciary (such as the plan administrator 
or plan sponsor) that will exercise voting authority in 
accordance with ERISA requirements is neither an improper 
delegation of voting authority nor an improper exercise of 
voting responsibilities by the investment adviser in violation 
of ERISA.
    If the adviser has a controlling interest in the investment 
company through shares held in a trustee or fiduciary capacity 
for persons other than employee benefit plans subject to ERISA, 
section 222 provides the adviser with several options for 
voting the shares. First, the adviser may transfer the power to 
vote the shares of the company to: (i) the beneficial owners of 
the shares; (ii) another fiduciary who is not an affiliated 
person of the adviser, or an affiliated person of such person; 
or (iii) any person authorized to receive statements and 
information with respect to the trust who is not an affiliated 
person of the adviser or an affiliated person of such person. 
Second, the adviser may vote the shares held by it in the same 
proportion as shares held by all other shareholders of the 
investment company. Finally, the adviser may vote the shares in 
accordance with such rules or orders as the Commission may 
prescribe or issue.
    Under well-established principles of fiduciary law, a 
fiduciary has an obligation to vote shares held by it in a 
fiduciary capacity in the best interests of the shareholders, 
without regard to the fiduciary's own interests. Transferring 
the power to vote the shares to another person, therefore, 
might be deemed to be an improper delegation or abdication of 
the fiduciary's responsibilities. Similar concerns might be 
presented by proportionate voting of shares held in a fiduciary 
capacity. For this reason, section 222 includes a safe harbor 
that provides that an investment adviser to a registered 
investment company that has voting control over the investment 
company through shares held in a fiduciary capacity (for 
persons other than employee benefit plans subject to ERISA) 
will not be deemed to have acted unlawfully or to have breached 
a fiduciary duty under State or Federal law solely because it 
voted shares, or transferred the power to vote shares, in 
accordance with the standards set forth in new section 15(g) of 
the Investment Company Act.
    Section 222 further provides that the voting procedures 
described above shall not apply when the investment company 
consists solely of assets held in a trustee or fiduciary 
capacity. Fiduciary customers have adequate protection under 
applicable State and Federal fiduciary law. The voting 
procedures prescribed by section 222 are, therefore, meant only 
to protect those investors that are not fiduciary customers of 
the investment adviser, and these protections are not necessary 
when the investment company consists solely of assets held in a 
trustee or fiduciary capacity.

Section 223. Statutory disqualification for bank wrongdoing

    The Investment Company Act generally statutorily 
disqualifies from acting in certain capacities with respect to 
a mutual fund certain types of entities (such as brokers, 
dealers,advisers, and transfer agents) and their employees that 
have been convicted of a felony or have been subject to a civil 
injunction. Although this disqualification applies to affiliated 
persons or employees of banks, it currently does not apply to banks 
themselves.
    Section 223 of the bill amends section 9(a) of the 
Investment Company Act in paragraphs (1) and (2) by adding 
``bank'' to a list of entities that may be statutorily 
disqualified for wrongdoing from acting in certain capacities 
with respect to a mutual fund. This amendment is intended to 
provide investors in bank-advised funds the same protections 
provided to investors in other funds.

Section 224. Conforming change in definition

    Section 224 of the bill amends the definition of ``bank'' 
in section 2(a)(5) of the Investment Company Act by deleting 
the reference to ``a banking institution organized under the 
laws of the United States,'' and substituting a reference to 
``a depository institution,'' as defined in the Federal Deposit 
Insurance Act, or ``a branch or agency of a foreign bank,'' as 
those terms are defined in the International Banking Act of 
1978. The Exchange Act continues to define banks by reference 
to organization under the laws of the United States.

Section 225. Conforming amendment

    Section 225 of the bill amends section 202 of the 
Investment Advisers Act to add a new subsection (c) that 
requires that when the Commission, as part of a rulemaking, 
considers whether an action is necessary or appropriate in the 
public interest, it consider, in addition to the protection of 
investors, whether the action will promote efficiency, 
competition, and capital formation. This provision is intended 
to incorporate into the Investment Advisers Act a standard for 
Commission rulemaking similar to those that were added to the 
Securities Act, the Exchange Act, and the Investment Company 
Act as part of the National Securities Markets Improvement Act 
of 1996.

Section 226. Effective date

    Subtitle B shall become effective 90 days after the date of 
enactment of this act.

     subtitle c--securities and exchange commission supervision of 
                   investment bank holding companies

    Subtitle C creates a new investment bank holding company 
structure under the Federal securities laws. This subtitle is 
designed to implement a new voluntary concept of Commission 
supervision of investment bank holding companies. Under this 
voluntary supervision structure, the Commission will have 
greater authority to oversee the entire entity, thus satisfying 
the expectations of foreign jurisdictions and some 
counterparties that the entity be subject to consolidated 
supervision. This option should be useful, or perhaps even 
necessary, for investment bank holding companies that do 
business in foreign jurisdictions that require consolidated 
holding company supervision. In addition, the bill contemplates 
that an investment bank holding company could include one or 
more wholesale financial institutions (WFIs).

Section 231. Supervision of investment bank holding companies by the 
        securities and exchange commission

    Generally, section 231(a) of the bill amends section 17 of 
the Exchange Act by adding new subsections (i), (j) and (k).
    New subsection 17(i) creates the investment bank holding 
company, which is defined as: (i) any person, other than a 
natural person, that owns or controls one or more brokers or 
dealers; and (ii) any associated person of an investment bank 
holding company. Subsection 17(i) prescribes a scheme of 
voluntary Commission oversight for investment bank holding 
companies that have no affiliated insured banks or savings 
associations but desire consolidated holding company oversight
            a. Elective supervision of investment bank holding 
                    companies that do not have affiliated banks or 
                    savings associations
    Paragraph (1) of new subsection 17(i) permits any 
investment bank holding company that does not have an 
affiliated insured bank or savings association, but may include 
a WFI, to elect Commission supervision. This supervision may be 
useful or necessary to engage in financial activities globally, 
and, therefore, may be a desirable option for those investment 
bank holding companies that operate on a global basis or with 
global parties.
            b. Withdrawals
    Paragraph (2) of new subsection 17(i) permits a supervised 
investment bank holding company to voluntarily withdraw from 
Commission supervision. The Commission may impose any necessary 
terms and conditions on the withdrawal deemed necessary or 
appropriate. In addition, the Commission may discontinue 
supervision over any supervised investment bank holding company 
under certain circumstances. For example, if the Commission 
finds that the investment bank holding company no longer exists 
or is no longer an investment bank holding company, or that 
supervision is not consistent with the purposes of section 
17(i), the Commission may discontinue its supervision.
            c. Scheme of regulation
    If an investment bank holding company elects to be 
supervised by the Commission, the investment bank holding 
company and its affiliates are subject to Commission 
recordkeeping and reporting requirements, and to Commission 
examinations as set forth in paragraph (3).
            d. Recordkeeping and reporting
    Paragraph (3) of new subsection 17(i) contains the 
recordkeeping, reporting, and examination requirements 
applicable to investment bank holding companies supervised by 
the Commission. The Commission, in its new role as a holding 
company supervisor, may adopt rules necessary to provide 
information about each supervised investment bank holding 
company's or its affiliates' activities, financial condition, 
policies, systems for monitoring and controlling financial and 
operational risks, and transactions and relationships between 
affiliated brokers or dealers. The Commission also may adopt 
rules necessary to permit it to ascertain the extent to which 
an investment bank holding company and its affiliates are 
complying with the Exchange Act.
    The Commission may require supervised investment bank 
holding companies to keep records containing the information 
necessary to inform the Commission as described above, and to 
make and provide reports to the Commission. Reports may include 
financial statements, capital assessments, reports by 
independent auditors regarding compliance with risk management 
and internal control objectives, and reports regarding such 
company's or affiliate's compliance with the Exchange Act and 
regulations.
    To minimize duplicative and burdensome regulatory 
requirements, the Commission is expressly directed to use, to 
the fullest extent possible, reports that a supervised 
investment bank holding company or its affiliates have provided 
to another appropriate regulatory agency or SRO. Supervised 
investment bank holding companies and their affiliates must 
provide reports prepared for other regulators to the 
Commission, when requested.
            e. Examinations
    The Commission may examine any supervised investment bank 
holding company and any affiliate to gather information about 
the operations and financial condition of the investment bank 
holding company and its affiliates, the risks within the 
investment bank holding company that may affect any affiliated 
broker-dealer and the systems for monitoring such risks. 
Examinations also may be conducted to monitor compliance with 
new subsection 17(i), applicable restrictions on transactions 
and relationships between any broker or dealer affiliate of the 
investment bank holding company and any of the company's other 
affiliates, and the Bank Secrecy Act. Examinations must be 
restricted to the investment bank holding company and any 
affiliate that could have a material adverse effect on the 
condition of any affiliated broker or dealer. The Commission 
must use, to the fullest extent possible, the examination 
reports made by other ``functional regulators'' such as the 
relevant bank regulator (for an affiliated credit card bank, 
Edge Act corporation, WFI, or State-chartered trust company) or 
the State insurance regulator (in the case of an affiliated 
insurance company).
            f. Capital adequacy
    In addition, the Commission can adopt capital adequacy 
rules for investment bank holding companies. The Commission may 
only adopt capital adequacy rules in this context after making 
a public interest finding that includes considering whether 
such rules will promote efficiency, competition and capital 
formation as required by section 3(f) of the Exchange Act. The 
Committee expects that the Commission would use this authority 
only in the most exceptional of circumstances.
            g. Functional regulation of banking and insurance 
                    activities
    Paragraph (5) of new subsection 17(i) requires that the 
Commission, in exercising its holding company supervisory 
authority, defer to the appropriate regulatory agency with 
regard to interpretations and enforcement of banking laws, and 
to the appropriate State insurance regulators with regard to 
interpretations and enforcement of applicable State insurance 
laws.
            h. Definitions
    Paragraph (6) of new subsection 17(i) defines the terms 
``investment bank holding company'' and ``supervised investment 
bank holding company.'' The terms ``affiliate,'' ``bank,'' 
``bank holding company,'' ``company,'' ``control,'' and 
``savings association'' are defined by reference to the Bank 
Holding Company Act. The term ``insured bank'' is defined by 
reference to the Federal Deposit Insurance Act, and the term 
``foreign bank'' is defined by reference to the International 
Banking Act of 1978.
            i. Securities and Exchange Commission backup authority
    New subsection 17(j) gives the Commission backup authority 
to inspect any wholesale financial holding company, that is not 
a foreign bank and that controls a wholesale financial 
institution but does not control an insured bank or a savings 
association, and any of its affiliates, to monitor and enforce 
compliance with the Federal securities laws. The Commission 
must limit its inspections to the transactions, policies, 
procedures and records reasonably necessary to monitor and 
enforce compliance by the wholesale financial holding company 
and any affiliate with the Federal securities laws. To the 
fullest extent possible, the Commission must use examination 
reports made by banking and insurance regulators. The 
Commission also must, to the fullest extent possible, notify 
the appropriate regulatory agency prior to conducting an 
inspection of a wholesale financial institution, Edge Act 
corporation, State-chartered trust company, or credit card bank 
pursuant to the authority granted in this subsection.
            j. Exclusion from Freedom of Information Act
    New subsection 17(k) provides authority for the Commission 
to limit disclosure, pursuant to the Freedom of Information 
Act, of information required to be reported to it under 
subsections (h) or (i), or information supplied to it by any 
domestic or foreign regulatory agencythat 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. This subsection expressly does not 
authorize the Commission to withhold information from Congress or from 
another Federal department or agency.
            k. Conforming amendments
    Section 231(b) of the bill contains a conforming amendment 
to the definition of ``appropriate regulatory agency'' in 
section 3(a)(34) of the Exchange Act. In addition, the Right to 
Financial Privacy Act is amended to facilitate information-
sharing between financial regulators.

    subtitle d--disclosure of customer costs of acquiring financial 
                                products

Section 241. Improved and consistent disclosure

    Section 241 requires Federal financial regulators to 
proscribe or revise rules within one year of enactment to 
improve the accuracy and understandability of disclosure of 
fees changed by entities under their respective jurisdiction to 
customers of financial firms acquiring financial products.

                          title iii--insurance

               subtitle a--state regulation of insurance

Section 301. State regulation of the business of insurance

    Section 301 reaffirms that the McCarran-Ferguson Act 
remains the law of the United States. The Committee intends 
this provision to reaffirm that the business of insurance shall 
continue to be regulated by the States, regardless of the 
entity conducting the insurance activities.

Section 302. Mandatory insurance licensing requirements

    Section 302 provides that no person shall engage in the 
business of insurance in a State as principal or agent unless 
such person is licensed by the appropriate insurance regulator 
of such State. The Committee does not intend to impose a new 
licensing requirement where none exists under applicable State 
law, such as for certain surplus or reinsurance surplus lines 
or Internet portals in some States. The mandatory licensing 
requirement is subject to the general antidiscrimination 
provisions and preemption standards of section 104.

Section 303. Functional regulation of insurance

    Section 303 provides that the insurance activities of any 
person or entity shall be functionally regulated. In 
particular, the Committee specifically intends that the 
insurance activities of Federally chartered banks be 
functionally regulated by the States to the extent of such 
activities, including the activities of a national bank 
pursuant to the ``place of 5,000'' provisions (allowing 
national bank insurance sales in small towns), subject to the 
general antidiscrimination provisions and preemption standards 
of section 104.

Section 304. Insurance underwriting in national banks

    Section 304 prohibits national banks and their subsidiaries 
from underwriting insurance, except for authorized products. 
Authorized products are anything (1) that as of January 1, 
1999, the Office of the Comptroller of the Currency (OCC) 
determined in writing that national banks may underwrite, or 
that national banks were in fact lawfully underwriting, (2) 
where no court has overturned the OCC's determination, and (3) 
not including title insurance or annuities. Insurance products 
are defined as anything regulated by the relevant State as 
insurance as of January 1, 1999, including annuities. Products 
developed in the future are classified as insurance if so 
regulated by the State, so long as the product insures against 
liability or loss. However, future products that are core 
banking products, such as deposits, loans, letters of credits, 
trusts, derivatives, and guarantees are protected for banks, 
unless they are treated as insurance under the Internal Revenue 
Service tax code, in which case such products are insurance 
(except where the product is a bank extension of credit, 
derivative, or financial guaranty).

Section 305. Title insurance activities of national banks and their 
        affiliates

    Section 305 establishes the general rule that national 
banks and subsidiaries of national banks may not engage in any 
activity involving the underwriting or sale of title insurance. 
As in section 104, the Committee intends this prohibition to 
apply to foreign banks that maintain a branch, agency, or 
commercial lending company in the United States, wholesale 
financial institutions, and other depository institutions which 
are not State chartered, including wholesale financial 
institutions, to avoid the preemption of State law governing 
title insurance activities.
    Section 305(b) establishes a ``parity'' exception to the 
general prohibition for title insurance sales and solicitation 
activities. Under the parity exception, national banks may sell 
title insurance products in any State in which State-chartered 
banks are authorized to do so, but such sales must be 
undertaken ``in the same manner, to the same extent, and under 
the same restrictions'' that apply to such State-chartered 
banks. Thus, if State chartered banks in a State must comply 
with licensing, ``title plant'' data base requirements, 
financial responsibility, and (where relevant) practice of law 
requirements, national banks also must do so. Section 306(b)(2) 
clarifies that, if the authority for State-chartered banks to 
sell title insurance in any State is based on a State ``wild-
card'' provision that authorizes State banks to exercise any 
power that national banks may exercise--based on, for example, 
a ``small towns'' or ``incidental to banking''provision--that 
``authority'' does not entitle national banks located in that State to 
take advantage of the parity powers authorized under Section 305(b).
    Section 305(c)(1) grandfathers the title insurance 
activities of a national bank and its subsidiaries. In other 
words, a national bank (or a national bank subsidiary) that, as 
of the date of enactment of this Act, is actively and lawfully 
engaged in title insurance sales, solicitation, or 
underwriting, can continue to engage in such activities. 
However, section 305(c)(2) requires that a national bank (or 
subsidiary) with an affiliate providing insurance as principal 
must push out any title insurance underwriting activities into 
an affiliate. Section 305(c)(3) requires that a national bank 
which does not have an affiliate providing insurance as 
principal, but which has a subsidiary which underwrites 
insurance, must push out any title insurance underwriting 
activities into the subsidiary. In other words, while the title 
insurance activities of a national bank and its subsidiaries 
are grandfathered, any title insurance underwriting activities 
must be pushed out, first to an insurance affiliate, or if no 
insurance affiliate exists, to any subsidiary providing 
insurance as principal.

Section 306. Expedited and equalized dispute resolution for financial 
        regulators

    Section 306 establishes expedited and equalized dispute 
resolution mechanisms to guide the courts in deciding conflicts 
between the application of State insurance law and Federal law. 
Specifically, the section ensures speedy resolution of 
regulatory conflicts between State insurance regulators and 
Federal agencies as to whether a product is or is not 
insurance, or whether or not a State provision regulating an 
insurance activity is or is not preempted by Federal law. 
Either the State or a Federal agency may file a petition for 
review in the United States Court of Appeals to resolve a 
regulatory dispute, with a judgment required to be rendered and 
all action completed by the Court of Appeals within 60 days 
unless an extension is agreed to by all parties. Any petition 
for certiorari to the Supreme Court must be filed as soon as 
practicable after a Court of Appeals judgment is issued.
    Section 306(d) provides a statute of limitations for filing 
a petition of review. In general, a State or Federal regulator 
may not challenge an order, ruling, determination, or other 
action of the other party applying to a product classification 
or preemption question governed by this section unless a 
petition is filed within 12 months from the first public notice 
of the action's final form, or 6 months after the action takes 
effect, whichever is later.
    Section 306(e) provides that to the extent a petition filed 
under this section pertains to the classification of a product 
as insurance (pursuant to section 304) or a preemption of a 
State provision governing an insurance sales or solicitation 
activity, the courts are directed to resolve the conflict based 
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. The phrase ``without 
unequal deference'' means that the court is not required to 
grant either party deference to resolve a particular question, 
but to the extent deference may be granted, neither the State 
regulator nor the Federal regulator is to be given any more 
deference than the other in resolving conflicts between 
(including interpretations of) State and Federal statutes, 
regulations, orders, interpretations, or other actions.
    Section 306(f)(1) establishes three exceptions to the 
``without unequal deference'' standard of review. These 
exceptions apply only to State provisions governing insurance 
sales, solicitations, and cross-marketing activities that were 
adopted or implemented before January 1, 1999. In other words, 
for resolving conflicts between Federal law and State 
provisions, to the extent that the State provisions were 
adopted or implemented before January 1, 1999, and fall within 
one of the three listed categories, the Federal regulators will 
continue to receive deference as accorded under the doctrine 
established by Chevron, U.S.A., Inc. v. Natural Resources 
Defense Council, 467 U.S. 837 (1984). The three types of State 
statutes, regulations, orders, interpretations, or other 
actions that do not receive the protection of equalized 
deference are:
          (1) actions that impede affiliations between 
        depository institutions and insurance agents, by 
        requiring that all shareholders be licensed even though 
        they do not engage in any activities that would 
        separately require licensure, or by imposing any 
        similar licensure requirement;
          (2) actions that limit the volume or portion of 
        insurance sales made by an agent on the basis of 
        whether such sales are made to customers of affiliates 
        of the agent; or
          (3) actions that require insurance sales to be made 
        from an office located in the State in which the sales 
        are made.
    Such conflicts may still be subject to the expedited 
dispute resolution provisions of this section. While these 
three types of State laws were singled out because of their 
current litigation status or past controversy in discussing 
discriminatory law, the Committee in no way intends to create 
any inference regarding this special treatment. Instead, the 
courts are to apply whatever standard of review is appropriate 
under current law.

Section 307. Consumer protection regulations

    Section 307 directs the Federal banking regulators to issue 
final consumer protection regulations within one year, which 
shall govern the sale of insurance by any insured depository 
institution, or wholesale financial institution, or subsidiary 
or affiliate thereof, or any person at or on behalf of such 
entities. The regulators shall provide additional consumer 
protections as they deem appropriate. The regulators shall also 
(after consulting with State insurance regulators) jointly 
prescribe regulations where appropriate, including extending 
such regulations to bank operating subsidiaries where necessary 
to ensure consumer protection. Such regulations shall include:
          Anticoercion rules, prohibiting a bank from leading a 
        consumer to believe that an extension of a loan is 
        conditional upon the purchase of insurance from the 
        bank or its affiliates.
          Oral and written disclosures stating that the 
        applicable insurance product is not FDIC insured; in 
        the case of a variable annuity, that the product may 
        involve an investment risk and may lose value; and that 
        extension of credit may not be based on the purchase 
        of insurance. Such disclosures shall be simple and 
        easily understandable, such as ``NOT FDIC-INSURED,'' 
        ``NOT GUARANTEED BY THE BANK,'' ``MAY GO DOWN IN 
        VALUE,'' or ``NOT INSURED BY ANY GOVERNMENT AGENCY.'' 
        Regulations may be modified according to whether the 
        purchase is in person or by electronic media as 
        appropriate. An acknowledgment must be obtained from 
        the consumer that the disclosure has been conveyed, 
        either at the time of the disclosure or at the initial 
        purchase of the product.
          Provisions that ensure the routine acceptance of 
        deposits and the making of loans are kept, to the 
        extent practicable, physically separated from insurance 
        product activity. The Committee envisions that the 
        qualifier ``to the extent practicable'' be used to 
        facilitate situations such as small bank settings or 
        kiosks where a separate space requirement might be 
        unduly burdensome.
          Standards limiting compensation for referrals by bank 
        tellers and loan personnel. Such compensation may not 
        exceed a one-time nominal fixed fee for each referral, 
        which can not be contingent upon a successful 
        transaction.
          Standards requiring proper qualification and 
        licensure under State law of those who solicit and sell 
        insurance on behalf of or on the premises of a bank.
          Prohibitions on discrimination against victims of 
        domestic violence, preventing such status from being 
        considered as a criterion in any insurance activity 
        conducted by or at a bank, or by a bank representative. 
        Such discrimination may only be allowed in accordance 
        with State law--the Committee anticipates that some 
        States may require affirmative discrimination on behalf 
        of domestic violence victims. The legislation describes 
        the sense of Congress that the States should adopt, 
        within the next few years, regulations prohibiting 
        insurance discrimination against domestic violence 
        which are at least as strict as those under this 
        subsection. The Committee further anticipates that the 
        Federal banking regulators will coordinate their anti-
        domestic violence regulations with the States and the 
        model laws being adopted by the National Association of 
        Insurance Commissioners (NAIC).
          Establishment of a consumer grievance process to 
        receive and investigate consumer complaints, inform 
        consumers of their rights and address their concerns, 
        and recover losses to the extent appropriate. The 
        Committee anticipates that the consumer grievance 
        process will be coordinated and implemented in 
        cooperation with the appropriate State insurance 
        regulators.
    The regulations established pursuant to this section shall 
apply in a State that has inconsistent or contrary regulations, 
if the Federal banking regulators jointly determine that the 
Federal standard gives consumers greater protection.

Section 308. Certain State affiliation laws preempted for insurance 
        companies and affiliates

    Section 308 preempts State laws that prevent or restrict 
insurance companies or insurance affiliates from becoming a 
financial holding company or acquiring control of a bank. The 
section further preempts State laws that limit the amount of an 
insurer's assets that can be invested in a bank, except that 
the insurer's State of domicile can limit such insurer's 
investments to 5 percent (or any higher threshold) of the 
insurer's admitted assets. If an insurance company is 
reorganizing from a mutual form into a stock company (including 
into a mutual holding company), then States other than the 
insurer's domicile may not prevent or restrict or require 
approval or formal review of such reorganization.

Section 309. Interagency consultation

    Section 309 directs the Federal Reserve Board and the State 
insurance regulators to coordinate efforts to supervise 
companies that control both depository institutions and persons 
engaged in the business of insurance. In particular, this 
section directs the Federal Reserve Board and State regulators 
to share, on a confidential basis, supervisory information 
including financial health and affiliate/business unit 
transactions. Other Federal banking regulators are directed 
similarly to share such information, on a confidential basis 
where appropriate.
    Section 309(c) requires any appropriate banking agency to 
consult with the appropriate State insurance regulator before 
making any determination relating to an affiliation between a 
depository institution or financial holding company and a 
company engaged in insurance activities. The Committee intends 
that the appropriate banking agency shall include every banking 
agency that is adjudicating, approving, disapproving, or 
otherwise altering some aspect of an affiliation with a person 
engaged in insurance activities. The Committee further intends 
that the appropriate insurance regulator shall include at 
minimum the insurance regulator of the State of domicile of a 
person engaged in insurance activities, and the State where the 
primary insurance activities take place.
    Section 309(e) provides that information which is treated 
as confidential under Federal or State law must retain its 
confidentiality. 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 take 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.

Section 310. Definition of State

    This section sets forth the definition of the term 
``State'', consistent with the intention of this Act.

             SUBTITLE B--REDOMESTICATION OF MUTUAL INSURERS

Section 311. General application

    Section 311 limits application of the provisions of the 
Subtitle to those States which have not enacted, or promulgated 
through regulation, reasonable terms and conditions for 
allowing mutual insurance companies to reorganize into a mutual 
holding company.

Section 312. Redomestication of mutual insurers

    Section 312 allows mutual insurance companies to 
redomesticate to another State and reorganize into a mutual 
holding company or stock 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 Section if the State insurance regulator of the new 
(transferee) domicile affirmatively determines that the 
company's reorganization plan includes the following 
requirements:
          The reorganization must be 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 notice and disclosure, as well 
        as a determination of ensuring a reasonable opportunity 
        for policyholders to vote, shall be determined by the 
        State insurance regulator of the transferee domicile.
          The policyholders must 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, for six months after 
        the completion of an initial public offering, may not 
        award any stock options or grants to its elected 
        officers or directors or those of any of its 
        reorganized stock insurance companies. An exception is 
        created for awards or options entitled to 
        policyholders, where such awards or options are 
        approved by the State insurance regulators of the 
        transferee domicile.
          The reorganization preserves the contractual rights 
        of the policyholders.
          The reorganization is approved as fair and equitable 
        to the policyholders by the insurance regulators of 
        transferee domicile.

Section 313. Effect on State laws restricting redomestication

    Section 313 preempts certain State laws (other than those 
of the transferee State domicile) which impede the 
redomestication or discriminate against the redomesticating 
company or its affiliates or policyholders. State laws are not 
preempted pertaining to unfair claim settlement practices, 
nondiscriminatory premiums and taxes, registration for service 
of legal documents and process, financial examination of the 
redomestication company if the insurance regulator of the new 
domicile has not scheduled such an examination to begin within 
a year of the redomestication, delinquency proceedings and 
voluntary dissolution proceedings, deceptive or false or 
fraudulent acts or practices, filing of petitions regarding 
financial impairment or hazardous condition of the 
redomesticating company, participation in insurance insolvency 
guaranty associations or other State insurance guaranty funds, 
or nondiscriminatory licensing requirements.

Section 314. Other provisions

    Section 314 grants the United States District Courts 
exclusive jurisdiction over litigation arising under this 
Subtitle. It further allows any provision of the subtitle that 
is held invalid to be severed independently.

Section 315. Definitions

    Section 315 provides definitions for the purposes of this 
subtitle only.

Section 316. Effective date

    Section 316 makes the subtitle effective upon enactment.

         SUBTITLE C--NATIONAL ASSOCIATION OF AGENTS AND BROKERS

Section 321. State flexibility in multistate licensing reforms

    Section 321 provides that the National Association of 
Agents and Brokers (NARAB) shall only become effective if, 
within 3 years, a majority of the States have not enacted 
uniform or reciprocal laws for licensing of persons engaged in 
insurance activities.
    Uniformity must include:
          Criteria for licensed producers regarding integrity, 
        personal qualifications, training, and experience, 
        including any suitability training requirements.
          Continuing education requirements.
          Ethics course requirements.
          Suitability requirements, including for annuity 
        contracts (that are regulated at least in part as 
        insurance by the States).
          No other additional licensing requirement that limits 
        a producers activities based on residence or location 
        of operations. States may continue, however, to impose 
        countersignature requirements.
    In the alternative, to meet the reciprocity requirement, a 
majority of States must:
          Permit each other's resident licensed producers to 
        conduct insurance activities to the same extent as 
        allowed for resident producers, by imposing no 
        administrative licensing procedures other than 
        submitting--
                  --A request for licensure.
                  --A copy of the home State license 
                application.
                  --Proof of licensure and good standing in the 
                resident State.
                  --Payment of appropriate fees.
          Accept the completion by the non-resident producer of 
        the producer's home State's continuing education 
        requirements.
          Impose no limitations which discriminate against 
        nonresidents (except for countersignature laws).
    The National Association of Insurance Commissioners shall 
determine if either the uniformity or reciprocity standard has 
been met within three years of enactment. Exclusive 
jurisdiction over any challenge of such determination shall be 
given to the appropriate United States District Court. If a 
majority of the States fail to maintain either uniform or 
reciprocal standards, then NARAB shall be created within two 
years (from a determination or ruling regarding such failure), 
unless within such time a majority of the States re-achieve the 
uniformity or reciprocity standards. State insurance laws and 
regulations shall not be required to be altered to meet the 
requirements of this section except to the extent that they are 
inconsistent with a specific requirement of the section.

Section 322. National Association of Registered Agents and Brokers

    Section 322 provides that if the States do not enact 
uniform or reciprocal regulations in accordance with section 
321, then NARAB is created as a non-profit private corporation 
under D.C. law.

Section 323. Purpose

    Section 323 establishes that the purpose of NARAB is to 
provide for uniform licensing, appointment, and continuing 
education requirements for insurance agents. States shall 
continue unaffected in their capacity to license, supervise, 
enforce agency regulations regarding consumer protections and 
unfair trade practices, and impose countersignature laws.

Section 324. Relationship to the Federal Government

    Section 324 directs that NARAB shall be overseen by the 
NAIC, and shall not be considered a Federal agency.

Section 325. Membership

    Section 325 provides that membership in NARAB is voluntary 
and does not affect the rights of a producer under each 
individual State license. Any State-licensed insurance producer 
is eligible to join NARAB. A producer whose license has been 
suspended or revoked by a State within the previous three years 
is ineligible for NARAB membership, unless such suspension or 
revocation is overturned or such license renewed by the 
appropriate State. NARAB can establish other membership 
criteria or classes, which shall be based upon 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.

Section 326. Board of directors

    Section 326 provides that the NARAB Board shall consist of 
7 members appointed by the NAIC, at least 4 of which must have 
significant experience with the regulation of commercial 
insurance lines in the 20 States with the most commercial lines 
business. Terms shall be for 3 years each, with a third to be 
replaced each year. If within the required two year period for 
NARAB's creation (two years from the provisions of section 322 
taking effect), 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. If a State 
insurance regulator declines to serve under this appointment 
procedure, then the State insurance regulator from the State 
with the next greatest amount of commercial lines insurance 
shall be appointed to serve. If fewer than seven State 
insurance regulators accept appointment under this procedure, 
then NARAB will be created without NAIC oversight pursuant to 
section 332.

Section 327. Officers

    Section 327 provides that NARAB's officers shall be elected 
or appointed for not more than 3 years. Only NAIC members may 
Chair the board of directors (unless NARAB is established 
pursuant to section 332).

Section 328. Bylaws, rules, and disciplinary action

    Section 328 directs NARAB to adopt bylaws and file them 
with the NAIC. Proposed bylaws shall take effect 30 days after 
filing with the NAIC, unless the NAIC disapproves them (after a 
public hearing with notice and opportunity to participate) as 
being contrary to the public interest or requiring a public 
hearing. Any proposed rules shall be filed with the NAIC, which 
shall either approve the rules as being in the public interest, 
or institute review proceedings including an opportunity for a 
hearing. The NAIC may allow any rule relating solely to the 
administration or organization of NARAB to take effect without 
a public hearing immediately upon filing. The NAIC may require 
NARAB to adopt or repeal additional bylaws or rules as it 
determines appropriate to the public interest. In a 
disciplinary action of one of its members, NARAB must provide 
notice to the member of the specific charges, and provide a 
recordedopportunity for a defense. If a disciplinary action is 
ordered, NARAB must notify the NAIC, which may review and modify or 
overturn such action.

Section 329. Assessments

    Section 329 allows NARAB to impose application and 
membership fees to cover its costs, including reimbursement to 
the NAIC for its expenses. NARAB may not discriminate against 
smaller insurance producers in setting such fees. The Committee 
anticipates that the NAIC shall determine whether a fee 
discriminates in such a manner.

Section 330. Functions of the NAIC

    Section 330 allows the NAIC, after notice and hearing, to 
examine and inspect NARAB's records, and require NARAB to 
furnish it with any reports. NARAB shall report to the NAIC 
annually on its activities. The NAIC shall have the 
responsibility of overseeing NARAB.

Section 331. Liability of the association and the directors, officers, 
        and employees of the association

    Section 331 clarifies that NARAB is not an insurer or 
insurance producer. NARAB and its directors, officers, and 
employees shall not be liable for any action taken or omitted 
in good faith in connection with matters subject to this title.

Section 332. Elimination of NAIC oversight

    Section 332 provides that, if at the end of two years after 
NARAB is required to be established, (1) a majority of the 
States representing at least 50 percent 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.

Section 333. Relationship to State law

    Section 333 preempts State laws regulating insurance 
licensing that discriminate against NARAB members based on non-
residency. The section also preempts State laws and regulations 
which impose additional licensing requirements on non-resident 
NARAB members beyond those set forth in Section 325, except 
that State unfair trade practices and consumer protection laws 
are protected from preemption, including counter-signature 
requirements.

Section 334. Coordination with other regulators

    Section 334 directs NARAB to coordinate its multistate 
licensing with the various States, while preserving the ability 
of each State to impose appropriate conditions on licensing 
issuance and renewal. NARAB shall also coordinate with the 
States 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.

Section 335. Judicial review

    Section 335 provides that 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.

Section 336. Definitions

    Section 336 provides definitions for the purposes of the 
subtitle only.

           SUBTITLE D--RENTAL CAR AGENCY INSURANCE ACTIVITIES

Section 341. Standard of regulation for motor vehicles Rentals

    This section creates a legal presumption that the sale or 
solicitation of automobile rental insurance is not an activity 
that triggers a State insurance licensing law. Subsection (a) 
establishes the presumption that no State law imposes a license 
or other similar requirement on car rental insurance for three 
years from the date of enactment of this Act. Subsection (b) 
provides that the presumption only applies where a State has 
not expressly addressed the issue of car rental insurance. 
Where a State has expressly regulated (or exempted from 
regulation) such activities, whether by statute, regulation, 
order, or other action, including by the prospective 
application of a court judgment, such State action cancels the 
presumption. Subsection (c) sets forth the scope of the 
presumption, applying it to a short term (90 days or less) 
lease or rental of a motor vehicle. The presumption is intended 
by the Committee to protect auto rental companies from lawsuits 
claiming damages for activities which took place before a State 
or court had expressly required some form of licensure. The 
Committee limited the presumption to three years in order to 
force all interested parties to resolve the question of 
appropriate licensure in the State legislatures without 
predetermining the issue permanently.

                      SUBTITLE E--CONFIDENTIALITY

Section 351. Confidentiality of health and medical information

    Section 351 requires companies that provide insurance as 
agent or principal, and affiliates and subsidiaries of such 
companies, shall protect the confidentiality of individually 
identifiable customer health and medical and genetic 
information. Such information may only be disclosed with the 
consent of the customer, or as a part of the business of 
insurance (for purposes of underwriting, reinsuring, account 
administration, preventing fraud, administering benefits, 
etc.), or in connection with effectuating and enforcing the 
transaction, transferring accounts, auditing payment 
information, compliance with Federal, State, or local law, 
compliance with governmental investigations, or conducting 
fraud control, resolving customer inquiries, or reporting to 
consumer reporting agencies. Enforcement of this section shall 
be through injunctive actions by State regulators, in addition 
to other remedies that State law provides. This section shall 
become effective on February 1, 2000, but shall cease to be 
effective if legislation is enacted that satisfies the 
requirements of section 264(c)(1) of the Health Insurance 
Portability and Accountability Act of 1996 (Public Law 104-191; 
110 Stat. 2033). The Committee intends to provide consumers 
with stronger protections of their medical records so that 
their individually identifiable medical information is not 
compromised.

          TITLE IV--UNITARY SAVINGS AND LOAN HOLDING COMPANIES

Section 401. Prevention of creation of new S&L holding companies with 
        commercial affiliates

    Section 401 prohibits any company from acquiring control of 
a thrift after May 27, 1999, unless that company is engaged in 
activities that are permissible under the Home Owners Loan Act 
(HOLA) or under the Bank Holding Company Act. Savings and Loan 
(S&L) holding companies are also prohibited from entering into 
any new commercial affiliations that are not otherwise 
permissible under these Acts. Existing S&L holding companies 
may transfer their charters to firms that are principally 
engaged in activities that are financial in nature.
    Section 401 preserves, or ``grandfathers'' the ability of 
existing S&L holding companies, or that which had filed an 
application to become a such a holding company as of May 27, 
1999, to engage in any activity that was permissible under HOLA 
as of the date of enactment provided it meets the requirements 
of paragraph (3) of HOLA and continues to control at least one 
savings association.
    Section 401 preserves the ability of companies to 
reorganize without triggering a violation of the commercial 
affiliation restrictions as intended by this Act. Additionally, 
the authority of family trusts to convert to an S&L holding 
company and not be subject to the commercial affiliation 
restrictions is preserved provided it meets certain 
requirements pertaining to the beneficial ownership and control 
of the savings association.
    Section 401(c) requires the GAO to conduct a study on the 
competitive effects of commercial affiliations with thrifts 
compared to non affiliated competing thrifts and commercial 
companies. A report is to be submitted to Congress within 1 
year containing the findings together with any recommendations 
that may be appropriate.

Section 402. Retention of ``Federal'' in name of converted Federal 
        savings association

    Section 402 permits Federal savings associations that 
convert to national or State bank charters to keep the word 
``Federal'' in their names.

                TITLE V--PRIVACY OF CONSUMER INFORMATION

        SUBTITLE A--DISCLOSURE OF NONPUBLIC PERSONAL INFORMATION

    Subtitle A provides new protections for the privacy of 
customers of financial institutions. This Subtitle creates a 
new regulatory obligation for all financial institutions to do 
four things: (1) they must put into place procedures to protect 
the confidentiality and security of nonpublic personal 
information collected in connection with any transaction of 
their customers; (2) they must disclose to customers what those 
procedures are, as well as disclose information regarding the 
types of entities with which they divulge or make unrelated use 
of nonpublic personal information collected in connection with 
any transaction about customers other than in connection with 
effecting or enforcing the transaction (which includes 
recording and maintaining the customer's account); (3) they 
must provide customers with the ability to instruct the 
financial institution not to sell their nonpublic personal 
information to third parties for marketing purposes; and (4) 
they must allow consumers access to and an opportunity to 
dispute any nonpublic personal information collected in 
connection with any transaction that is sold to unaffiliated 
third parties
    The Federal Trade Commission (the ``Commission'' or the 
``FTC'') is directed to promulgate rules to effectuate the 
provisions of this Subtitle, including to prescribe the content 
and form of the disclosure to customers, as well as to specify 
the scope of the disclosure by defining what constitutes 
``unrelated use'' of customer information.

Section 501. Obligations with Respect to Personal Information.

    Section 501 prohibits a financial institution from 
divulging or making unrelated use of any nonpublic personal 
information that the institution collects in connection with a 
transaction with a consumer in any financial product or service 
unless the institution (1) provides a notice to the consumer 
that complies with the requirements of section 502 and (2) 
maintains procedures to protect the confidentiality and 
security of customers' nonpublic personal information.
    The FTC is directed to promulgate rules to prohibit a 
financial institution from making available any nonpublic 
personal information to any affiliate or unaffiliated person of 
the institution, unless the customer to whom that information 
pertains is given an opportunity toobject to the transfer of 
such information and does not object (a so-called ``opt out'' 
provision). The Committee underscores that this opt-out requirement 
does not require an institution to obtain prior consent from its 
customers prior to making such information available to affiliated or 
unaffiliated parties, as would be the case under the ``opt-in'' model 
that has been followed in Europe. Instead, the provision requires that 
the institution may use customer information in that manner so long as 
the customer has not provided the institution with instructions not to 
do so, pursuant to the rules to be promulgated by the FTC. The opt-out 
provision is intended to be coterminous with the disclosure 
requirement.
    The FTC is also directed to promulgate rules to require 
that a financial institution provide customers with the 
opportunity to examine and dispute the accuracy of information 
that the institution collects in connection with a financial 
transaction with a consumer, which the financial institution 
makes available for consideration to any person other than an 
employee, agent, affiliate, or employee or agent of an 
affiliate, of the institution. The section provides an 
exception from this access requirement so that a financial 
institution would not be required to afford a customer access 
to data obtained by any analysis or evaluation, or to examine 
or dispute the methodology of such analysis or evaluation.
    Section 501(d) provides for a number of exceptions from the 
disclosure, opt-out, and access provisions. Pursuant to these 
exceptions, the institution may divulge, make available 
nonpublic personal information to affiliates or other persons, 
or make unrelated use of such information to effect or enforce 
the transaction or a related transaction, to protect the 
confidentiality or security of its records, to take precautions 
against liability, to respond to judicial process, to the 
extent permitted or required under other provisions of law and 
in accordance with the Right to Financial Privacy Act of 1974, 
to provide information to law enforcement agencies (including 
the Internal Revenue Service) or for an investigation on a 
matter related to public safety, to provide information to a 
consumer reporting agency in accordance with the Consumer 
Credit Protection Act, or in executing a sale or exchange 
whereby the financial institution transfers the business unit 
or operation, or substantially all the assets of the business 
unit or operation with which the customer's transactions were 
effected.
    The scope of these exceptions is designed to ensure that 
the disclosure, access, and opt-out rules promulgated by the 
FTC pursuant to the subtitle do not impede the ordinary 
business activities of financial institutions or their ability 
to provide a multitude of services in an efficient manner to 
their customers. The Committee intends that the definitions of 
the terms used in the exception provisions, including the 
exemptive and rulemaking authority granted to the FTC regarding 
these terms, will be used in a manner consistent with the 
subtitle's goal of providing consumers with a reliable means to 
protect their personal financial information.

Section 502. Notice concerning divulging information

    Section 502 directs the FTC, in consultation with the 
functional regulators of each financial institution, to 
prescribe rules to prohibit unfair and deceptive acts and 
practices in connection with the divulging of nonpublic 
personal information or making unrelated uses of such 
information as set forth in section 501. The Commission's rules 
shall require the disclosure of (1) the categories of nonpublic 
personal information that are collected by the financial 
institution, (2) the practices and policies of the financial 
institution with respect to divulging or making unrelated use 
of such information (including the categories of persons to 
whom the information is divulged or who may make unrelated uses 
of the information and the practices and policies of the 
institutions with respect to the divulging or making unrelated 
uses of information of former customers), and (3) the policies 
that the institution maintains to protect the confidentiality 
and security of nonpublic personal information.
    Section 502(b) stipulates that the FTC must, in prescribing 
these rules, prescribe the form of the notice in a manner that 
permits consumers to readily compare differences in the privacy 
practices and policies among financial institutions. The notice 
must, consistent with the requirements set forth in section 
501(b), specifically identify any rights the institution 
affords its customers to deny or grant consent to the 
institution to divulge or make unrelated use of the customer's 
nonpublic personal information, except as appropriate to effect 
or enforce the consumer's transaction.
    Section 502(c)(1) requires that the FTC's rules specify the 
divulgences and uses of information which may be treated as 
necessary to effect or enforce a customer's transaction and 
indicate timing requirements as to the provision of notices to 
old and new customers. This directive is designed to result in 
rules that, consistent with the purposes of this section, 
afford financial institutions flexibility to use customer 
information to provide customers with services and products in 
an efficient and cost-effective manner.
    Section 502(c)(2) directs the FTC to specify timing 
requirements for providing disclosures to new and existing 
customers. Such notices are not to be provided more often than 
on an annual basis unless there has been a change in the 
information required in such disclosure, with the FTC able to 
set forth what types of changes are significant enough to merit 
a new or additional disclosure.
    Section 502(c)(3) gives the FTC authority to provide for 
exemptions, temporary waivers or delayed effective dates for 
any requirement of this subtitle or the rules that the FTC 
prescribes thereunder. The Committee intends that the FTC use 
this exemptive authority to minimize costs and logistical 
difficulties potentially incurred by entities in complying with 
the provisions of the subtitle, in light of companies' current 
data classification practices, hardware limits, data base 
coordination issues, and other technological hurdles.
    Section 502(e) requires the FTC to initially prescribe the 
required rules within one year after the enactment of the Act 
(subject to revisions and final adoption after that period, if 
necessary).

Section 503. Enforcement

    Section 503 designates the FTC to enforce the subtitle and 
the rules prescribed thereunder with respect to all financial 
institutions. The section directs the FTC to prevent violations 
of the subtitle and the rules prescribed thereunder in the same 
manner, with the same authority, and using the same remedies, 
as are provided by the Federal Trade Commission Act. The rules 
prescribed by the FTC under the subtitle are to be treated as 
rules issued under the FTC Act.

Section 504. Definitions

    Section 504 defines certain terms used in the subtitle. 
Included among the defined terms are: ``financial 
institution''; ``nonpublic personal information'', defined to 
mean personally identifiable information, other than publicly 
available directory information, pertaining to an individual's 
transactions with the financial institution; ``directory 
information,'' defined to mean subscriber list information 
required to be made available for publication pursuant to 
section 222(e) of the Communications Act of 1934; ``unrelated 
use,'' defined to mean any use other than a use necessary to 
effect or enforce a transaction; ``divulge,'' defined to mean 
making available to persons other than employees, agents, 
affiliates, or employees or agents of affiliates of a financial 
institution, nonpublic personal information collected by the 
financial institution in connection with a financial 
transaction with a consumer; ``affiliate''; and ``necessary to 
effect or enforce,'' defined to mean a divulging or use that is 
required, or is one of the usual and accepted methods, to carry 
out the transaction or record or maintain the account in the 
ordinary course of providing the financial service or product, 
including providing customer confirmations, statements, 
records, and status reports, the accrual or recognition of 
incentives or bonuses associated with the transaction that are 
provided by any party, as well as a divulging or use that is 
permissible or required to enforce the rights of the financial 
institution or others in carrying out the transaction or 
providing the service.
    Of particular significance is the definition of ``necessary 
to effect or enforce,'' which the Committee has defined in 
recognition of the fact that certain businesses must share 
information about their customers with both affiliated and 
unaffiliated parties in order to provide the services that the 
customers have come to that institution to receive. For 
example, an investment company must provide information about 
its shareholders to a variety of affiliated and unaffiliated 
parties, including investment advisers, transfer agents, 
administrators, distributors, and others, in order to execute 
shareholders' investment transactions, maintain their accounts, 
and provide them with information about their accounts. 
Similarly, if a prospective purchaser of an annuity divulges 
nonpublic information to a marketer, and the marketer in turn 
provides such information to an unaffiliated issuer of 
annuities, such divulging or use should be considered necessary 
to effect a transaction with the customer whether or not the 
prospective annuity purchaser actually acquires the annuity. 
None of these activities should trigger the disclosure, opt-
out, or access provisions of the title.
    Other types of financial providers also must share 
information with affiliated and unaffiliated entities in order 
to carry out their ordinary business. Accordingly, the section 
directs the FTC to prescribe by rule actions that will be 
deemed necessary to effect or enforce a financial transaction, 
for purposes of a variety of different financial services and 
products.
    The Committee expects that the FTC, in prescribing rules to 
further define the term ``necessary to effect or enforce,'' 
will permit financial institutions to conduct their business 
efficiently and effectively, taking into account current and 
future developments in technology, without unnecessarily 
triggering the disclosure, opt-out, and access provisions of 
the subtitle, but to ensure that those provisions will be 
triggered in the case of an institution divulging or making 
unrelated uses of customer information outside of their 
customary business processes.

Section 506. Effective date

    Section 506 sets the effective date of the subtitle as the 
later of one year after the date on which the FTC prescribes in 
final form the rules required by section 502 or any later date 
specified in those rules.

         SUBTITLE B--FRAUDULENT ACCESS TO FINANCIAL INFORMATION

    Subtitle B addresses the subject of ``pretexting,'' that 
is, the obtaining of personal confidential information from 
financial institutions under false pretenses. This subtitle 
provides protection against pretexting violations by increasing 
the penalties for fraudulent information gathering and 
enhancing the ability of the FTC to prosecute such fraudulent 
activities.

Section 521. Privacy protection for customer information of financial 
        institutions

    This section makes it unlawful 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 by (1) making 
a false, fictitious, or fraudulent statement or representation 
to an officer, employee, or agent of a financial institution; 
(2) making a false, fictitious, or fraudulent statement or 
representation to a customer of a financial institution; or (3) 
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.
    This section also makes it unlawful to request a person to 
obtain customer information of a financial institution knowing 
that it was obtained through any of the three methods described 
in this section.
    The prohibitions specified in this section do not apply to 
any action by a law enforcement agency to obtain customer 
information of a financial institution in the performance of 
its official duties. For purposes of this section, the term 
``law enforcement agency'' is intended to include Federal, 
State and local agencies, and specifically encompasses those 
agencies responsible for enforcing child-support obligations.
    This section's prohibitions do not apply to instances in 
which a financial institution or its officers, employees, or 
agents, obtain 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 this section. Thus, for example, when a 
fraud prevention unit of a financial institution succeeds in 
retrieving information from an information broker that has been 
obtained through fraud or deceit, the financial institution is 
not in violation of this statute. This ``safe harbor'' extends 
to any officer, employee, or agent retained by a financial 
institution to implement anti-fraud or self-testing programs.
    This section's prohibitions do not apply to instances in 
which an insurance institution or its officers, employees or 
agents, obtain 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. This section also does not apply to 
the obtaining of customer information of a financial 
institution that is otherwise available as a public record 
filed pursuant to the Federal securities laws.
    The Committee does not intend that any provision of 
subtitle B be construed as limiting, expanding, or otherwise 
interfering with the sharing of information among affiliates or 
subsidiaries within a financial services institution as 
permitted under any other applicable law, including the new 
obligations established under subtitle A.

Section 522. Administrative enforcement

    Section 522 designates the FTC as the enforcer of the 
subtitle, in the same manner and with the same power and with 
authority under the Fair Debt Collection Practices Act. The FTC 
is required to provide notice to the functional regulator of 
any institution against whom the FTC initiates an action under 
the subtitle, upon initiation of such action.

Section 523. Criminal penalty

    This section provides that persons who knowingly and 
intentionally attempt to violate the subtitle are subject to 
criminal penalties for commission of a felony of up to 5 years 
imprisonment plus fines of up to $250,000 for individuals and 
$500,000 for corporations, with aggravated cases (significant 
multiple offenses or a violation of multiple laws) resulting in 
doubled penalties.

Section 524. Relation to State laws

    Section 524 preempts State authority only to the extent 
that the State's laws, regulations, orders, or interpretations 
are inconsistent with the Act. If State authority provides 
greater protection to any person, as determined by the FTC, 
then that State authority remains controlling law.

Section 525. Agency guidance

    This section requires each Federal banking agency and the 
SEC or self-regulatory organizations to review their 
regulations and guidelines governing the protection of 
confidential consumer financial information and to revise such 
provisions as necessary to ensure appropriate confidentiality 
safeguards. Those safeguards will include those policies, 
procedures, and controls as would reasonably be expected to 
prevent and detect, insofar as practicable, activities 
proscribed by the legislation. The Committee expects the 
appropriate examining authorities to include compliance with 
such guidelines and the adequacy of such internal controls in 
their examinations of these institutions.

Section 526. Reports

    Section 526 requires that, within 18 months of enactment, 
the Comptroller General will consult with the FTC, SEC, 
appropriate Federal banking and law enforcement agencies, and 
relevant State insurance regulators, and report to Congress on 
the effectiveness and adequacy of the Act in preventing the 
fraudulent attempts to obtain confidential consumer financial 
information, as well as any recommendations for additional 
legislative or regulatory action that is appropriate. The 
regulatory bodies charged with enforcing the bill must submit 
to Congress an annual report on their enforcement actions 
pursuant to the legislation.

Section 527. Definitions

    This section defines several terms. The term ``customer'' 
is defined as any person to whom a financial institution 
provides a product or service, including that of acting as a 
fiduciary. It also defines the term ``customer information of a 
financial institution'' as any information maintained by or for 
a financial institution which is derived from the relationship 
between the financial institution and its customer and is 
identified with the customer, and the term ``document'' as 
information in any form.
    Finally, the term ``financial institution'' is defined as 
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, 
including but not limited to depository institutions (as 
defined in section 19(b)(1)(A) of the Federal Reserve Act); 
brokers and dealers (as defined in section 3 of the Securities 
Exchange Act of 1934); investment advisers (as defined in 
section 202(a)(11) of the Investment Advisers Act of 1940); 
investment companies (as defined in section 3 of the Investment 
Company Act of 1940); insurance companies; loan or finance 
companies; credit card issuers; operators of credit card 
systems; and consumer reporting agencies. In addition, the FTC, 
after consultation with Federal banking agencies and the SEC, 
may prescribe regulations further defining the types of 
institutions that are treated as ``financial institutions'' for 
purposes of this subtitle.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                         BANKING ACT OF 1933

           *       *       *       *       *       *       *


    [Sec. 20. After one year from the date of the enactment of 
this Act, no member bank shall be affiliated in any manner 
described in section 2 (b) hereof with any corporation, 
association, business trust, or other similar organization 
engaged principally in the issue, flotation, underwriting, 
public sale, or distribution at wholesale or retail or through 
syndicate participation of stocks, bonds, debentures, notes, or 
other securities: Provided, That nothing in this paragraph 
shall apply to any such organization which shall have been 
placed in formal liquidation and which shall transact no 
business except such as may be incidental to the liquidation of 
its affairs.
    [For every violation of this section the member bank 
involved shall be subject to a penalty not exceeding $1,000 per 
day for each day during which such violation continues. Such 
penalty may be assessed by the Federal Reserve Board, in its 
discretion, and, when so assessed, may be collected by the 
Federal reserve bank by suit or otherwise.
    [If any such violation shall continue for six calendar 
months after the member bank shall have been warned by the 
Federal Reserve Board to discontinue the same, (a) in the case 
of a national bank, all the rights, privileges, and franchises 
granted to it under the National Bank Act may be forfeited in 
the manner prescribed in section 2 of the Federal Reserve Act, 
as amended (U.S.C., title 12, secs. 141, 222-225, 281-286, and 
502) or, (b) in the case of a State member bank, all of its 
rights and privileges of membership in the Federal Reserve 
System may be forfeited in the manner prescribed in section 9 
of the Federal Reserve Act, as amended (U.S.C., title 12, secs. 
321-332).]

           *       *       *       *       *       *       *

    Sec. 21. (a) After the expiration of one year after the 
date of enactment of this Act it shall be unlawful--
  (1) For any person, firm, corporation, association, business 
trust, or other similar organization, engaged in the business 
of issuing, underwriting, selling, or distributing, at 
wholesale or retail, or through syndicate participation, 
stocks, bonds, debentures, notes, or other securities, to 
engage at the same time, or to be a subsidiary of any person, 
firm, corporation, association, business trust, or similar 
organization engaged (unless such subsidiary (A) was lawfully 
engaged in such securities activities as of September 15, 1997, 
or (B) is a nondepository subsidiary of (i) a foreign bank and 
is not also a subsidiary of a domestic depository institution, 
or (ii) an unincorporated private bank that is in operation as 
of the date of the enactment of the Financial Services Act of 
1999 and is not insured under the Federal Deposit Insurance 
Act) to any extent whatever in the business of receiving 
deposits subject to check or to repayment upon presentation of 
a passbook, certificate of deposit, or other evidence of debt, 
or upon request of the depositor: Provided, That the provisions 
of this paragraph shall not prohibit national banks or State 
banks or trust companies (whether or not members of the Federal 
Reserve System) or other financial institutions or private 
bankers or any subsidiary of such bank, company, or institution 
from dealing in, underwriting, purchasing, and selling 
investment securities, or issuing securities, to the extent 
permitted to national banking associations by the provisions of 
section 5136 of the Revised Statutes, as amended (U.S.C. title 
12, sec. 24; Supp. VII, title 12, sec. 24): Provided further, 
That nothing in this paragraph shall be construed as affecting 
in any way such right as any bank, banking association, savings 
bank, trust company, or other banking institution, may 
otherwise possess to sell, without recourse or agreement to 
repurchase, obligations evidencing loans on real estate; or

           *       *       *       *       *       *       *

    [Sec. 32. No officer, director, or employee of any 
corporation or unincorporated association, no partner or 
employee of any partnership, and no individual, primarily 
engaged in the issue, flotation, underwriting, public sale, or 
distribution, at wholesale or retail, or through syndicate 
participation, of stocks, bonds, or other similar securities, 
shall serve the same time as an officer, director, or employee 
of any member bank except in limited classes of cases in which 
the Board of Governors of the Federal Reserve System may allow 
such service by general regulations when in the judgment of the 
said Board it would not unduly influence the investment 
policies of such member bank or the advice it gives its 
customers regarding investments.]

           *       *       *       *       *       *       *

                              ----------                              


                 BANK HOLDING COMPANY ACT OF 1956

           *       *       *       *       *       *       *



                              definitions

  Sec. 2. (a) * * *

           *       *       *       *       *       *       *

  (c) Bank Defined.--For purposes of this Act--
          (1) In general.--Except as provided in paragraph (2), 
        the term ``bank'' means any of the following:
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) A wholesale financial institution.

           *       *       *       *       *       *       *

  (n) Incorporated Definitions.--For purposes of this Act, the 
terms ``insured depository institution'', ``appropriate Federal 
banking agency'', ``default'', ``in danger of default'', 
``insured bank'', and ``State bank supervisor'' have the same 
meanings as in section 3 of the Federal Deposit Insurance Act.
  (o) Other Definitions.--For purposes of this Act, the 
following definitions shall apply:
          (1) Capital terms.--
                  (A) Insured depository institutions.--With 
                respect to insured depository institutions, the 
                terms ``well capitalized'', ``adequately 
                capitalized'', and ``undercapitalized'' have 
                the same meanings as in section [38(b)] 38 of 
                the Federal Deposit Insurance Act.

           *       *       *       *       *       *       *

  (p) Insurance Company.--For purposes of sections 5, 6, and 
10, the term ``insurance company'' includes any person engaged 
in the business of insurance to the extent of such activities.
  (q) Wholesale Financial Institution.--The term ``wholesale 
financial institution'' means a wholesale financial institution 
subject to section 9B of the Federal Reserve Act.
  (r) Commission.--The term ``Commission'' means the Securities 
and Exchange Commission.
  (s) Depository Institution.--The term ``depository 
institution''--
          (1) has the meaning given to such term in section 3 
        of the Federal Deposit Insurance Act; and
          (2) includes a wholesale financial institution.

                  acquisition of bank shares or assets

  Sec. 3. (a) * * *

           *       *       *       *       *       *       *

  (c) Factors for Consideration by Board.--
          (1) * * *
          (2) Banking and community [factors.--In every case] 
        factors.--
                  (A) In general.--In every case, the Board 
                shall take into consideration the financial and 
                managerial resources and future prospects of 
                the company or companies and the banks 
                concerned, and the convenience and needs of the 
                community to be served.
                  (B) Public meetings.--In each case involving 
                1 or more insured depository institutions each 
                of which has total assets of $1,000,000,000 or 
                more, the Board shall, as necessary and on a 
                timely basis, conduct public meetings in 1 or 
                more areas where the Board believes, in the 
                sole discretion of the Board, there will be a 
                substantial public impact.

           *       *       *       *       *       *       *

          (6) ``Too big to fail'' factor.--In considering an 
        acquisition, merger, or consolidation under this 
        section involving a financial holding company, a 
        wholesale financial holding company, or a company that 
        would be any such holding company upon the consummation 
        of the transaction, the Board shall consider whether, 
        and the extent to which, any subsequent failure or 
        default of the financial holding company or wholesale 
        financial holding company, or any affiliate of any such 
        company, after the consummation of the transaction 
        could have serious adverse effects on economic 
        conditions or financial stability.

           *       *       *       *       *       *       *

  (e) Every bank that is a holding company and every bank that 
is a subsidiary of such company shall become and remain an 
insured depository institution as such term is defined in 
section 3 of the Federal Deposit Insurance Act. This subsection 
shall not apply to a wholesale financial institution.
  [(f) Savings Bank Subsidiaries of Bank Holding Companies.--
          [(1) In general.--Notwithstanding any other provision 
        of this Act (other than paragraphs (2) and (3)), any 
        qualified savings bank which is a subsidiary of a bank 
        holding company may engage, directly or through a 
        subsidiary, in any activity in which such savings bank 
        may engage (as a State chartered savings bank) pursuant 
        to express, incidental, or implied powers under any 
        statute or regulation, or under any judicial 
        interpretation of any law, of the State in which such 
        savings bank is located.
          [(2) Insurance activities.--Except as provided in 
        paragraph (3), any insurance activities of any 
        qualified savings bank which is a subsidiary of a bank 
        holding company shall be limited to insurance 
        activities allowed under section 4(c)(8).
          [(3) Savings bank life insurance.--Any qualified 
        savings bank permitted, as of March 5, 1987, to engage 
        in the sale or underwriting of savings bank life 
        insurance may sell or underwrite such insurance after 
        such savings bank is a subsidiary of a bank holding 
        company if--
                  [(A) the savings bank is located in the State 
                of Connecticut, Massachusetts, or New York;
                  [(B) such activity is expressly authorized by 
                the law of the State in which such savings bank 
                is located;
                  [(C) the savings bank retains its character 
                as a savings bank;
                  [(D) such activity is carried out by the 
                savings bank directly and not by--
                          [(i) any subsidiary or affiliate of 
                        the savings bank; or
                          [(ii) the bank holding company which 
                        controls such savings bank;
                  [(E) such activity is carried out by the 
                savings bank in accordance with any residency 
                or employment limitations set forth in the 
                savings bank life insurance statute in effect 
                on March 5, 1987, in the State in which such 
                bank is located; and
                  [(F) such activity is otherwise carried out 
                in the same manner as savings bank life 
                insurance activity is carried out in the State 
                in which such bank is located by savings banks 
                which are not subsidiaries of any bank holding 
                company registered under this Act.
          [(4) Subsection shall cease to apply under certain 
        circumstances.--If any company which is not a savings 
        bank or a savings bank holding company acquires control 
        of a qualified savings bank, such savings bank shall 
        cease to engage in any activity authorized under 
        paragraph (1) or (3) before the end of the 2-year 
        period beginning on the date such company acquires 
        control, unless such activity is otherwise authorized 
        pursuant to this Act.
          [(5) Special asset aggregation rule for purposes of 
        paragraph (3).--For the sole purpose of determining 
        whether a qualified savings bank may continue to sell 
        and underwrite savings bank life insurance in 
        accordance with this subsection after control of such 
        savings bank is acquired by a bank holding company, the 
        assets of any other bank affiliated with, or under 
        contract to affiliate with, such savings bank as of 
        March 5, 1987, shall be treated as assets of the 
        savings bank in determining whether such bank holding 
        company is a savings bank holding company.]
  (f) [Repealed].
  (g) Mutual Bank Holding Company.--
          (1) * * *
          [(2) Regulation.--A corporation organized as a 
        holding company under this subsection shall be 
        regulated on the same terms and be subject to the same 
        limitations as any other holding company which controls 
        a savings bank.]
          (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.

                 interests in nonbanking organizations

  Sec. 4. (a) * * *

           *       *       *       *       *       *       *

  (c) The prohibitions in this section shall not apply to (i) 
any company that was on January 4, 1977, both a bank holding 
company and a labor, agricultural, or horticultural 
organization exempt from taxation under section 501 of the 
Internal Revenue Code of 1954, or to any labor, agricultural, 
or horticultural organization to which all or substantially all 
of the assets of such company are hereafter transferred, or 
(ii) a company covered in 1970 more than 85 per centum of the 
voting stock of which was collectively owned on June 30, 1968, 
and continuously thereafter, directly or indirectly, by or for 
members of the same family, or their spouses, who are lineal 
descendants of common ancestors; and such prohibitions shall 
not, with respect to any other bank holding company, apply to--
          (1) * * *

           *       *       *       *       *       *       *

          [(8) shares of any company the activities of which 
        the Board after due notice (and opportunity for hearing 
        in the case of an acquisition of a savings association) 
        has determined (by order or regulation) to be so 
        closely related to banking or managing or controlling 
        banks as to be a proper incident thereto, but for 
        purposes of this subsection it is not closely related 
        to banking or managing or controlling banks for a bank 
        holding company to provide insurance as a principal, 
        agent, or broker except (A) where the insurance is 
        limited to assuring repayment of the outstanding 
        balance due on a specific extension of credit by a bank 
        holding company or its subsidiary in the event of the 
        death, disability, or involuntary unemployment of the 
        debtor; (B) in the case of a finance company which is a 
        subsidiary of a bank holding company, where the 
        insurance is also limited to assuring repayment of the 
        outstanding balance on an extension of credit in the 
        event of loss or damage to any property used as 
        collateral on such extention of credit and, during the 
        period beginning on the date of the enactment of this 
        subparagraph and ending on December 31, 1982, such 
        extension of credit is not more than $10,000 ($25,000 
        in the case of an extension of credit which is made to 
        finance the purchase of a residential manufactured home 
        and which is secured by such residential manufactured 
        home) and for any given year after 1982, such extension 
        of credit is not more than an amount equal to $10,000 
        ($25,000 in the case of an extension of credit which is 
        made to finance the purchase of a residential 
        manufactured home and which is secured by such 
        residential manufactured home) increased by the 
        percentage increase in the Consumer Price Index for 
        Urban Wage Earners and Clerical Workers published 
        monthly by the Bureau of Labor Statistics for the 
        period beginning on January 1, 1982, and ending on 
        December 31 of the year preceding the year in which 
        such extension of credit is made; (C) any insurance 
        agency activity in a place that (i) has a population 
        not exceeding five thousand (as shown by the last 
        preceding decennial census), or (ii) the bank holding 
        company, after notice and opportunity for a hearing, 
        demonstrates has inadequate insurance agency 
        facilities; (D) any insurance agency activity which was 
        engaged in by the bank holding company or any of its 
        subsidiaries on May 1, 1982, or which the Board 
        approved for such company or any of its subsidiaries on 
        or before May 1, 1982, including (i) sales of insurance 
        at new locations of the same bank holding company or 
        the same subsidiary or subsidiaries with respect to 
        which insurance was sold on May 1, 1982, or approved to 
        be sold on or before May 1, 1982, if such new locations 
        are confined to the State in which the principal place 
        of business of the bank holding company is located, any 
        State or States immediately adjacent to such State, and 
        any State or States in which insurance activities were 
        conducted by the bank holding company or any of its 
        subsidiaries on May 1, 1982, or were approved to be 
        conducted by the bank holding company or any of its 
        subsidiaries on or before May 1, 1982, and (ii) sales 
        of insurance coverages which may become available after 
        May 1, 1982, so long as those coverages insure against 
        the same types of risks as, or are otherwise 
        functionally equivalent to, coverages sold on May 1, 
        1982, or approved to be sold on or before May 1, 1982 
        (for purposes of this subparagraph, activities engaged 
        in or approved by the Board on May 1, 1982, shall 
        include activities carried on subsequent to that date 
        as the resultof an application to engage in such 
activities pending on May 1, 1982, and approved subsequent to that date 
or of the acquisition by such company pursuant to a binding written 
contract entered into on or before May 1, 1982, of another company 
engaged in such activities at the time of the acquisition); (E) any 
insurance activity where the activity is limited solely to supervising 
on behalf of insurance underwriters the activities of retail insurance 
agents who sell (i) fidelity insurance and property and casualty 
insurance on the real and personal property used in the operations of 
the bank holding company or any of its subsidiaries, and (ii) group 
insurance that protects the employees of the bank holding company or 
any of its subsidiaries; (F) any insurance agency activity engaged in 
by a bank holding company, or any of its subsidiaries, which bank 
holding company has total assets of $50,000,000 or less: Provided, 
however, That such a bank holding company and its subsidiaries may not 
engage in the sale of life insurance or annuities except as provided in 
subparagraph (A), (B), or (C); or (G) where the activity is performed, 
or shares of the company involved are owned, directly or indirectly, by 
a bank holding company which is registered with the Board of Governors 
of the Federal Reserve System and which, prior to January 1, 1971, was 
engaged, directly or indirectly, in insurance agency activities as a 
consequence of approval by the Board prior to January 1, 1971. In 
determining whether a particular activity is a proper incident to 
banking or managing or controlling banks the Board shall consider 
whether its performance by an affiliate of a holding company can 
reasonably be expected to produce benefits to the public, such as 
greater convenience, increased competition, or gains in efficiency, 
that outweigh possible adverse effects, such as undue concentration of 
resources, decreased or unfair competition, conflicts of interests, or 
unsound banking practices. In orders and regulation under this 
subsection, the Board may differentiate between activities commenced de 
novo and activities commenced by the acquisition, in whole or in part, 
of a going concern. Notwithstanding any other provision of this Act, if 
the Board finds that an emergency exists which requires the Board to 
act immediately on any application under this subsection involving a 
thrift institution, and the primary Federal regulator of such 
institution concurs in such finding, the Board may dispense with the 
notice and hearing requirement of this subsection and the Board may 
approve or deny any such application without notice or hearing. If an 
application is filed under this paragraph in connection with an 
application to make an acquisition pursuant to section 13(f) of the 
Federal Deposit Insurance Act, the Board may dispense with the notice 
and hearing requirement of this paragraph and the Board may approve or 
deny the application under this paragraph without notice or hearing. If 
an application described in the preceding sentence is approved, the 
Board shall publish in the Federal Register, not later than 7 days 
after such approval is granted, the order approving the application and 
a description of the nonbanking activities involved in the 
acquisition;]
          (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 Financial Services Act of 1999, to 
        be so closely related to banking as to be a proper 
        incident thereto (subject to such terms and conditions 
        contained in such regulation or order, unless modified 
        by the Board);

           *       *       *       *       *       *       *

  (f) Certain Companies Not Treated as Bank Holding 
Companies.--
          (1) * * *
          (2) Loss of exemption.--Paragraph (1) shall cease to 
        apply to any company described in such paragraph if--
                  (A) such company directly or indirectly--
                          (i) * * *
                          (ii) acquires control of more than 5 
                        percent of the shares or assets of an 
                        additional bank or a savings 
                        association other than--
                                  (I) * * *

           *       *       *       *       *       *       *

                                  (IX) shares of a savings 
                                association held by any 
                                insurance company, as defined 
                                in section 2(a)(17) of the 
                                Investment Company Act of 1940, 
                                except as provided in paragraph 
                                (11); [and]
                                  (X) shares issued in a 
                                qualified stock insuance under 
                                section 10(q) of the Home 
                                Owners' Loan Act; and
                                  (XI) assets that are derived 
                                from, or are incidental to, 
                                activities in which 
                                institutions described in 
                                section 2(c)(2)(F) are 
                                permitted to engage,
                except that the aggregate amount of shares held 
                under this clause (other than under subclauses 
                (I), (II), (III), (IV), (V), and (VIII)) may 
                not exceed 15 percent of all outstanding shares 
                or of the voting power of a savings 
                association; or
                  [(B) any bank subsidiary of such company 
                fails to comply with the restrictions contained 
                in paragraph (3)(B).]
                  (B) any bank subsidiary of such company 
                engages in any activity in which the bank was 
                not lawfully engaged as of March 5, 1987, 
                unless the bank is well managed and well 
                capitalized;
                  (C) any bank subsidiary of such company 
                both--
                          (i) accepts demand deposits or 
                        deposits that the depositor may 
                        withdraw by check or similar means for 
                        payment to third parties; and
                          (ii) engages in the business of 
                        making commercial loans (and, for 
                        purposes of this clause, loans made in 
                        the ordinary course of a credit card 
                        operation shall not be treated as 
                        commercial loans); or
                  (D) after the date of the enactment of the 
                Competitive Equality Amendments of 1987, any 
                bank subsidiary of such company permits any 
                overdraft (including any intraday overdraft), 
                or incurs any such overdraft in such bank's 
                account at a Federal reserve bank, on behalf of 
                an affiliate, other than an overdraft described 
                in paragraph (3).
          [(3) Limitation on banks controlled by paragraph (1) 
        companies.--
                  [(A) Findings.--The Congress finds that banks 
                controlled by companies referred to in 
                paragraph (1) may, because of relationships 
                with affiliates, be involved in conflicts of 
                interest, concentration of resources, or other 
                effects adverse to bank safety and soundness, 
                and may also be able to compete unfairly 
                against banks controlled by bank holding 
                companies by combining banking services with 
                financial services not permissible for bank 
                holding companies. The purpose of this 
                paragraph is to minimize any such potential 
                adverse effects or inequities by temporarily 
                restricting the activities of banks controlled 
                by companies referred to in paragraph (1) until 
                such time as the Congress has enacted proposals 
                to allow, with appropriate safeguards, all 
                banks or bank holding companies to compete on a 
                more equal basis with banks controlled by 
                companies referred to in paragraph (1) or, 
                alternatively, proposals to permanently 
                restrict the activities of banks controlled by 
                companies referred to in paragraph (1).
                  [(B) Limitations.--Until such time as the 
                Congress has taken action pursuant to 
                subparagraph (A), a bank controlled by a 
                company described in paragraph (1) shall not--
                          [(i) engage in any activity in which 
                        such bank was not lawfully engaged as 
                        of March 5, 1987;
                          [(ii) offer or market products or 
                        services of an affiliate that are not 
                        permissible for bank holding companies 
                        to provide under subsection (c)(8), or 
                        permit its products or services to be 
                        offered or marketed in connection with 
                        products and services of an affiliate, 
                        unless--
                                  [(I) the Board, by 
                                regulation, has determined such 
                                products and services are 
                                permissible for bank holding 
                                companies to provide under 
                                subsection (c)(8);
                                  [(II) such products and 
                                services are described in 
                                section 20 of the Banking Act 
                                of 1933 and the Board, by 
                                regulation, has permitted bank 
                                holding companies to offer or 
                                market such products or 
                                services, but has prohibited 
                                bank holding companies and 
                                their affiliates from 
                                principally engaging in the 
                                offering or marketing of such 
                                products or services; or
                                  [(III) such products or 
                                services were being so offered 
                                or marketed as of March 5, 
                                1987, and then only in the same 
                                manner in which they were being 
                                offered or marketed as of that 
                                date; or
                          [(iii) after the date of the 
                        enactment of the Competitive Equality 
                        Amendments of 1987, permit any 
                        overdraft (including an intraday 
                        overdraft), or incur any such overdraft 
                        in such bank''s account at a Federal 
                        Reserve bank, on behalf of an 
                        affiliate, other than an overdraft 
                        described in subparagraph (C).
                  [(C) Permissible overdrafts described.--For 
                purposes of subparagraph (B)(iii), an overdraft 
                is described in this subparagraph if--
                          [(i) such overdraft results from an 
                        inadvertent computer or accounting 
                        error that is beyond the control of 
                        both the bank and the affiliate; or
                          [(ii) such overdraft--
                                  [(I) is permitted or incurred 
                                on behalf of an affiliate which 
                                is monitored by, reports to, 
                                and is recognized as a primary 
                                dealer by the Federal Reserve 
                                Bank of New York; and
                                  [(II) is fully secured, as 
                                required by the Board, by 
                                bonds, notes, or other 
                                obligations which are direct 
                                obligations of the United 
                                States or on which the 
                                principal and interest are 
                                fully guaranteed by the United 
                                States or by securities and 
                                obligations eligible for 
                                settlement on the Federal 
                                Reserve book entry system.
          [(4) Divestiture in case of loss of exemption.--If 
        any company described in paragraph (1) loses the 
        exemption provided under such paragraph by operation of 
        paragraph (2), such company shall divest control of 
        each bank it controls within 180 days after such 
        company becomes a bank holding company due to the loss 
        of such exemption.]
          (3) Permissible overdrafts described.--For purposes 
        of paragraph (2)(D), an overdraft is described in this 
        paragraph if--
                  (A) such overdraft results from an 
                inadvertent computer or accounting error that 
                is beyond the control of both the bank and the 
                affiliate; or
                  (B) such overdraft--
                          (i) is permitted or incurred on 
                        behalf of an affiliate which is 
                        monitored by, reports to, and is 
                        recognized as a primary dealer by the 
                        Federal Reserve Bank of New York; and
                          (ii) is fully secured, as required by 
                        the Board, by bonds, notes, or other 
                        obligations which are direct 
                        obligations of the United States or on 
                        which the principal and interest are 
                        fully guaranteed by the United States 
                        or by securities and obligations 
                        eligible for settlement on the Federal 
                        Reserve book entry system.
          (4) Divestiture in case of loss of exemption.--If any 
        company described in paragraph (1) fails to qualify for 
        the exemption provided under such paragraph by 
        operation of paragraph (2), such exemption shall cease 
        to apply to such company and such company shall divest 
        control of each bank it controls before the end of the 
        180-day period beginning on the date that the company 
        receives notice from the Board that the company has 
        failed to continue to qualify for such exemption, 
        unless before the end of such 180-day period, the 
        company has--
                  (A) corrected the condition or ceased the 
                activity that caused the company to fail to 
                continue to qualify for the exemption; and
                  (B) implemented procedures that are 
                reasonably adapted to avoid the reoccurrence of 
                such condition or activity.

           *       *       *       *       *       *       *

  (j) Notice Procedures for Nonbanking Activities.--
          (1) General notice procedure.--
                  (A) Notice requirement.--Except as provided 
                in paragraph (3), no bank holding company may 
                engage in any nonbanking activity or acquire or 
                retain ownership or control of the shares of a 
                company engaged in activities based on 
                subsection (c)(8) or (a)(2) or in any 
                complementary activity under section 6(c)(1)(B) 
                without providing the Board with written notice 
                of the proposed transaction or activity at 
                least 60 days before the transaction or 
                activity is proposed to occur or commence.

           *       *       *       *       *       *       *

          (3) No notice required for certain transactions.--No 
        notice under paragraph (1) of this subsection or under 
        subsection (c)(8) or (a)(2)(B) is required for a 
        proposal by a bank holding company to engage in any 
        activity, other than any complementary activity under 
        section 6(c)(1)(B), or acquire the shares or assets of 
        any company, other than an insured depository 
        institution or a company engaged in any complementary 
        activity under section 6(c)(1)(B), if the proposal 
        qualifies under paragraph (4).

           *       *       *       *       *       *       *


                             administration

  Sec. 5. (a) Within one hundred and eighty days after the date 
of enactment of this Act, or within one hundred and eighty days 
after becoming a bank holding company, whichever is later, each 
bank holding company shall register with the Board on forms 
prescribed by the Board, which shall include such information 
with respect to the financial condition and operations, 
management, and intercompany relationships of the bank holding 
company and its subsidiaries, and related matters, as the Board 
may deem necessary or appropriate to carry about the purposes 
of this Act. The Board may, in its discretion, extend the time 
within which a bank holding company shall register and file the 
requisite information. A declaration filed in accordance with 
section 6(b)(1)(D) shall satisfy the requirements of this 
subsection with regard to the registration of a bank holding 
company but not any requirement to file an application to 
acquire a bank pursuant to section 3. 

           *       *       *       *       *       *       *

  [(c) The Board from time to time may require reports under 
oath to keep it informed as to whether the provisions of this 
Act and such regulations and orders issued thereunder have been 
complied with; and the Board may make examinations of each bank 
holding company and each subsidiary thereof, the cost of which 
shall be assessed against, and paid by, such holding company. 
The Board shall, as far as possible, use the reports of 
examinations made by the Comptroller of the Currency, the 
Federal Deposit Insurance Corporation, or the appropriate State 
bank supervisory authority for the purposes of this section.]
  (c) Reports and Examinations.--
          (1) Reports.--
                  (A) In general.--The Board from time to time 
                may require any bank holding company and any 
                subsidiary of such company to submit reports 
                under oath to keep the Board informed as to--
                          (i) its financial condition, systems 
                        for monitoring and controlling 
                        financial and operating risks, and 
                        transactions with depository 
                        institution subsidiaries of the holding 
                        company; and
                          (ii) compliance by the company or 
                        subsidiary with applicable provisions 
                        of this Act.
                  (B) Use of existing reports.--
                          (i) In general.--The Board shall, to 
                        the fullest extent possible, accept 
                        reports in fulfillment of the Board's 
                        reporting requirements under this 
                        paragraph that a bank holding company 
                        or any subsidiary of such company has 
                        provided or been required to provide to 
                        other Federal and State supervisors or 
                        to appropriate self-regulatory 
                        organizations.
                          (ii) Availability.--A bank holding 
                        company or a subsidiary of such company 
                        shall provide to the Board, at the 
                        request of the Board, a report referred 
                        to in clause (i).
                          (iii) Required use of publicly 
                        reported information.--The Board shall, 
                        to the fullest extent possible, accept 
                        in fulfillment of any reporting or 
                        recordkeeping requirements under this 
                        Act information that is otherwise 
                        required to be reported publicly and 
                        externally audited financial 
                        statements.
                          (iv) Reports filed with other 
                        agencies.--In the event the Board 
                        requires a report from a functionally 
                        regulated nondepository institution 
                        subsidiary of a bank holding company of 
                        a kind that is not required by another 
                        Federal or State regulator or 
                        appropriate self-regulatory 
                        organization, the Board shall request 
                        that the appropriate regulator or self-
                        regulatory organization obtain such 
                        report. If the report is not made 
                        available to the Board, and the report 
                        is necessary to assess a material risk 
                        to the bank holding company or any of 
                        its subsidiary depository institutions 
                        or compliance with this Act, the Board 
                        may require such subsidiary to provide 
                        such a report to the Board.
                  (C) Definition.--For purposes of this 
                subsection, the term ``functionally regulated 
                nondepository institution'' means--
                          (i) a broker or dealer registered 
                        under the Securities Exchange Act of 
                        1934;
                          (ii) an investment adviser registered 
                        under the Investment Advisers Act of 
                        1940, or with any State, with respect 
                        to the investment advisory activities 
                        of such investment adviser and 
                        activities incidental to such 
                        investment advisory activities;
                          (iii) an insurance company subject to 
                        supervision by a State insurance 
                        commission, agency, or similar 
                        authority; and
                          (iv) an entity subject to regulation 
                        by the Commodity Futures Trading 
                        Commission, with respect to the 
                        commodities activities of such entity 
                        and activities incidental to such 
                        commodities activities.
          (2) Examinations.--
                  (A) Examination authority.--
                          (i) In general.--The Board may make 
                        examinations of each bank holding 
                        company and each subsidiary of a bank 
                        holding company.
                          (ii) Functionally regulated 
                        nondepository institution 
                        subsidiaries.--Notwithstanding clause 
                        (i), the Board may make examinations of 
                        a functionally regulated nondepository 
                        institution subsidiary of a bank 
                        holding company only if--
                                  (I) the Board has reasonable 
                                cause to believe that such 
                                subsidiary is engaged in 
                                activities that pose a material 
                                risk to an affiliated 
                                depository institution, or
                                  (II) based on reports and 
                                other available information, 
                                the Board has reasonable cause 
                                to believe that a subsidiary is 
                                not in compliance with this Act 
                                or with provisions relating to 
                                transactions with an affiliated 
                                depository institution and the 
                                Board cannot make such 
                                determination through 
                                examination of the affiliated 
                                depository institution or bank 
                                holding company.
                  (B) Limitations on examination authority for 
                bank holding companies and subsidiaries.--
                Subject to subparagraph (A)(ii), the Board may 
                make examinations under subparagraph (A)(i) of 
                each bank holding company and each subsidiary 
                of such holding company in order to--
                          (i) inform the Board of the nature of 
                        the operations and financial condition 
                        of the holding company and such 
                        subsidiaries;
                          (ii) inform the Board of--
                                  (I) the financial and 
                                operational risks within the 
                                holding company system that may 
                                pose a threat to the safety and 
                                soundness of any subsidiary 
                                depository institution of such 
                                holding company; and
                                  (II) the systems for 
                                monitoring and controlling such 
                                risks; and
                          (iii) monitor compliance with the 
                        provisions of this Act and those 
                        governing transactions and 
                        relationships between any subsidiary 
                        depository institution and its 
                        affiliates.
                  (C) Restricted focus of examinations.--The 
                Board shall, to the fullest extent possible, 
                limit the focus and scope of any examination of 
                a bank holding company to--
                          (i) the bank holding company; and
                          (ii) any subsidiary of the holding 
                        company that, because of--
                                  (I) the size, condition, or 
                                activities of the subsidiary; 
                                or
                                  (II) the nature or size of 
                                transactions between such 
                                subsidiary and any depository 
                                institution which is also a 
                                subsidiary of such holding 
                                company,
                        could have a materially adverse effect 
                        on the safety and soundness of any 
                        depository institution affiliate of the 
                        holding company.
                  (D) Deference to bank examinations.--The 
                Board shall, to the fullest extent possible, 
                use, for the purposes of this paragraph, the 
                reports of examinations of depository 
                institutions made by the appropriate Federal 
                and State depository institution supervisory 
                authority.
                  (E) Deference to other examinations.--The 
                Board shall, to the fullest extent possible, 
                address the circumstances which might otherwise 
                permit or require an examination by the Board 
                by forgoing an examination and instead 
                reviewing the reports of examination made of--
                          (i) any registered broker or dealer 
                        by or on behalf of the Securities and 
                        Exchange Commission;
                          (ii) any investment adviser 
                        registered by or on behalf of either 
                        the Securities and Exchange Commission 
                        or any State, whichever is required by 
                        law;
                          (iii) any licensed insurance company 
                        by or on behalf of any state regulatory 
                        authority responsible for the 
                        supervision of insurance companies; and
                          (iv) any other subsidiary that the 
                        Board finds to be comprehensively 
                        supervised by a Federal or State 
                        authority.
          (3) Capital.--
                  (A) In general.--The Board shall not, by 
                regulation, guideline, order or otherwise, 
                prescribe or impose any capital or capital 
                adequacy rules, guidelines, standards, or 
                requirements on any subsidiary of a financial 
                holding company that is not a depository 
                institution and--
                          (i) is in compliance with applicable 
                        capital requirements of another Federal 
                        regulatory authority (including the 
                        Securities and Exchange Commission) or 
                        State insurance authority;
                          (ii) is registered as an investment 
                        adviser under the Investment Advisers 
                        Act of 1940, or with any State, 
                        whichever is required by law; 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 
                        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 holding 
                company capital or capital adequacy rules, 
                guidelines, standards, or requirements for 
                purposes of this paragraph, the Board shall not 
                take into account the activities, operations, 
                or investments of an affiliated investment 
                company registered under the Investment Company 
                Act of 1940, 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.--The Board shall defer to--
                  (A) the Securities and Exchange Commission 
                with regard to all interpretations of, and the 
                enforcement of, applicable Federal securities 
                laws (and rules, regulations, orders, and other 
                directives issued thereunder) relating to the 
                activities, conduct, and operations of 
                registered brokers, dealers, investment 
                advisers, and investment companies;
                  (B) the relevant State securities authorities 
                with regard to all interpretations of, and the 
                enforcement of, applicable State securities 
                laws (and rules, regulations, orders, and other 
                directives issued thereunder) relating to the 
                activities, conduct, and operations of brokers, 
                dealers, and investment advisers required to be 
                registered under State law; and
                  (C) the relevant State insurance authorities 
                with regard to all interpretations of, and the 
                enforcement of, applicable State insurance laws 
                (and rules, regulations, orders, and other 
                directives issued thereunder) relating to the 
                activities, conduct, and operations of 
                insurance companies and insurance agents.

           *       *       *       *       *       *       *

  (e)(1) Notwithstanding any other provision of this Act, the 
Board may, whenever it has reasonable cause to believe that the 
continuation by a bank holding company of any activity or of 
ownership or control of any of its nonbank subsidiaries, other 
than a nonbank subsidiary of a bank, constitutes a serious risk 
to the financial safety, soundness, or stability of a bank 
holding company subsidiary bank and is inconsistent with sound 
banking principles or with the purposes of this Act or with the 
[Financial Institutions Supervisory Act of 1966, order] 
Financial Institutions Supervisory Act of 1966, at the election 
of the bank holding company--
          (A) order the bank holding company or any such 
        nonbank subsidiaries, after due notice and opportunity 
        for hearing, and after considering the views of the 
        bank's primary supervisor, which shall be the 
        Comptroller of the Currency in the case of a national 
        bank or the Federal Deposit Insurance Corporation and 
        the appropriate State supervisory authority in the case 
        of an insured nonmember bank, to terminate such 
        activities or to terminate (within one hundred and 
        twenty days or such longer period as the Board may 
        direct in unusual circumstances) its ownership or 
        control of any such subsidiary either by sale or by 
        distribution of the shares of the subsidiary to the 
        [shareholders of the bank holding company. Such 
        distribution] 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) shall be pro 
rata with respect to all of the shareholders of the 
distributing bank holding company, and the holding company 
shall not make any charge to its shareholders arising out of 
such a distribution.

           *       *       *       *       *       *       *

  (g) Authority of State Insurance Regulator and the Securities 
and Exchange Commission.--
          (1) In general.--Notwithstanding any other provision 
        of law, any regulation, order, or other action of the 
        Board which requires a bank holding company to provide 
        funds or other assets to a subsidiary insured 
        depository institution shall not be effective nor 
        enforceable if--
                  (A) such funds or assets are to be provided 
                by--
                          (i) a bank holding company that is an 
                        insurance company, a broker or dealer 
                        registered under the Securities 
                        Exchange Act of 1934, or an investment 
                        company registered under the Investment 
                        Company of 1940; or
                          (ii) an affiliate of the depository 
                        institution which is an insurance 
                        company or a broker or dealer 
                        registered under such Act; and
                  (B) the State insurance authority for the 
                insurance company or the Securities and 
                Exchange Commission for the registered broker, 
                dealer, 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, or 
                investment company, as the case may be.
          (2) Notice to state insurance authority or sec 
        required.--If the Board requires a bank holding 
        company, or an affiliate of a bank holding company, 
        which is an insurance company or a broker, dealer, or 
        investment company described in paragraph (1)(A) to 
        provide funds or assets to an insured depository 
        institution subsidiary of the holding company pursuant 
        to any regulation, order, or other action of the Board 
        referred to in paragraph (1), the Board shall promptly 
        notify the State insurance authority for the insurance 
        company or the Securities and Exchange Commission, as 
        the case may be, of such requirement.
          (3) Divestiture in lieu of other action.--If the 
        Board receives a notice described in paragraph (1)(B) 
        from a State insurance authority or the Securities and 
        Exchange Commission with regard to a bank holding 
        company or affiliate referred to in that paragraph, the 
        Board may order the bank holding company to divest the 
        insured depository institution not later than 180 days 
        after receiving the notice, or such longer period as 
        the Board determines consistent with the safe and sound 
        operation of the insured depository institution.
          (4) Conditions before divestiture.--During the period 
        beginning on the date an order to divest is issued by 
        the Board under paragraph (3) to a bank holding company 
        and ending on the date the divestiture is completed, 
        the Board may impose any conditions or restrictions on 
        the holding company's ownership or operation of the 
        insured depository institution, including restricting 
        or prohibiting transactions between the insured 
        depository institution and any affiliate of the 
        institution, as are appropriate under the 
        circumstances.
  (h) Prudential Safeguards.--
          (1) In general.--The Board may, by regulation or 
        order, impose restrictions or requirements on 
        relationships or transactions between a depository 
        institution subsidiary of a bank holding company and 
        any affiliate of such depository institution (other 
        than a subsidiary of such institution) which the Board 
        finds is consistent with the public interest, the 
        purposes of this Act, the Financial Services Act of 
        1999, the Federal Reserve Act, and other Federal law 
        applicable to depository institution subsidiaries of 
        bank holding companies and the standards in paragraph 
        (2).
          (2) Standards.--The Board may exercise authority 
        under paragraph (1) if the Board finds that such action 
        will have any of the following effects:
                  (A) Avoid any significant risk to the safety 
                and soundness of depository institutions or any 
                Federal deposit insurance fund.
                  (B) Enhance the financial stability of bank 
                holding companies.
                  (C) Avoid conflicts of interest or other 
                abuses.
                  (D) Enhance the privacy of customers of 
                depository institutions.
                  (E) Promote the application of national 
                treatment and equality of competitive 
                opportunity between nonbank affiliates owned or 
                controlled by domestic bank holding companies 
                and nonbank affiliates owned or controlled by 
                foreign banks operating in the United States.
          (3) Review.--The Board shall regularly--
                  (A) review all restrictions or requirements 
                established pursuant to paragraph (1) to 
                determine whether there is a continuing need 
                for any such restriction or requirement to 
                carry out the purposes of the Act, including 
                any purpose described in paragraph (2); and
                  (B) modify or eliminate any restriction or 
                requirement the Board finds is no longer 
                required for such purposes.

SEC. 6. FINANCIAL HOLDING COMPANIES.

  (a) Financial Holding Company Defined.--For purposes of this 
section, the term ``financial holding company'' means a bank 
holding company which meets the requirements of subsection (b).
  (b) Eligibility Requirements for Financial Holding 
Companies.--
          (1) In general.--No bank holding company may engage 
        in any activity or directly or indirectly acquire or 
        retain shares of any company under this section unless 
        the bank holding company meets the following 
        requirements:
                  (A) All of the subsidiary depository 
                institutions of the bank holding company are 
                well capitalized.
                  (B) All of the subsidiary depository 
                institutions of the bank holding company are 
                well managed.
                  (C) All of the subsidiary depository 
                institutions of the bank holding company have 
                achieved a rating, under the Community 
                Reinvestment Act of 1977, of ``satisfactory 
                record of meeting community credit needs'', or 
                better, at the most recent examination of each 
                such institution;
                  (D) The company has filed with the Board a 
                declaration that the company elects to be a 
                financial holding company and certifying that 
                the company meets the requirements of 
                subparagraphs (A), (B), and (C).
          (2) Foreign banks and companies.--For purposes of 
        paragraph (1), the Board shall establish and apply 
        comparable capital and other operating standards to a 
        foreign bank that operates a branch or agency or owns 
        or controls a bank or commercial lending company in the 
        United States, and any company that owns or controls 
        such foreign bank, giving due regard to the principle 
        of national treatment and equality of competitive 
        opportunity.
          (3) Limited exclusions from community needs 
        requirements for newly acquired depository 
        institutions.--
                  (A) In general.--If the requirements of 
                subparagraph (B) are met, any depository 
                institution acquired by a bank holding company 
                during the 24-month period preceding the 
                submission of a declaration under paragraph 
                (1)(D) and any depository institution acquired 
                after the submission of such declaration may be 
                excluded for purposes of paragraph (1)(C) until 
                the later of--
                          (i) the end of the 24-month period 
                        beginning on the date the acquisition 
                        of the depository institution by such 
                        company is consummated; or
                          (ii) the date of completion of the 
                        first examination of such depository 
                        institution under the Community 
                        Reinvestment Act of 1977 which is 
                        conducted after the date of the 
                        acquisition of the depository 
                        institution.
                  (B) Requirements.--The requirements of this 
                subparagraph are met with respect to any bank 
                holding company referred to in subparagraph (A) 
                if--
                          (i) the bank holding company has 
                        submitted an affirmative plan to the 
                        appropriate Federal banking agency to 
                        take such action as may be necessary in 
                        order for such institution to achieve a 
                        rating of ``satisfactory record of 
                        meeting community credit needs'', or 
                        better, at the next examination of the 
                        institution; and
                          (ii) the plan has been approved by 
                        such agency.
  (c) Engaging in Activities That Are Financial in Nature.--
          (1) Financial activities.--Notwithstanding section 
        4(a), a financial holding company and a wholesale 
        financial holding company may engage in any activity, 
        and acquire and retain the shares of any company 
        engaged in any activity, that the Board has determined 
        (by regulation or order) to be--
                  (A) financial in nature or incidental to such 
                financial activities; or
                  (B) complementary to activities that have 
                been determined to be financial in nature under 
                this subsection to the extent that the amount 
                of such complementary activities remains small 
                in relation to the authorized activities to 
                which they are complementary.
          (2) Factors to be considered.--In determining whether 
        an activity is financial in nature or incidental to 
        financial activities, the Board shall take into 
        account--
                  (A) the purposes of this Act and the 
                Financial Services Act of 1999;
                  (B) changes or reasonably expected changes in 
                the marketplace in which bank holding companies 
                compete;
                  (C) changes or reasonably expected changes in 
                the technology for delivering financial 
                services; and
                  (D) whether such activity is necessary or 
                appropriate to allow a bank holding company and 
                the affiliates of a bank holding company to--
                          (i) compete effectively with any 
                        company seeking to provide financial 
                        services in the United States;
                          (ii) use any available or emerging 
                        technological means, including any 
                        application necessary to protect the 
                        security or efficacy of systems for the 
                        transmission of data or financial 
                        transactions, in providing financial 
                        services; and
                          (iii) offer customers any available 
                        or emerging technological means for 
                        using financial services.
          (3) Activities that are financial in nature.--The 
        following activities shall be considered to be 
        financial in nature:
                  (A) Lending, exchanging, transferring, 
                investing for others, or safeguarding money or 
                securities.
                  (B) Insuring, guaranteeing, or indemnifying 
                against loss, harm, damage, illness, 
                disability, or death, or providing and issuing 
                annuities, and acting as principal, agent, or 
                broker for purposes of the foregoing.
                  (C) Providing financial, investment, or 
                economic advisory services, including advising 
                an investment company (as defined in section 3 
                of the Investment Company Act of 1940).
                  (D) Issuing or selling instruments 
                representing interests in pools of assets 
                permissible for a bank to hold directly.
                  (E) Underwriting, dealing in, or making a 
                market in securities.
                  (F) Engaging in any activity that the Board 
                has determined, by order or regulation that is 
                in effect on the date of enactment of the 
                Financial Services Act of 1999, to be so 
                closely related to banking or managing or 
                controlling banks as to be a proper incident 
                thereto (subject to the same terms and 
                conditions contained in such order or 
                regulation, as modified by the Board).
                  (G) Engaging, in the United States, in any 
                activity that--
                          (i) a bank holding company may engage 
                        in outside the United States; and
                          (ii) the Board has determined, under 
                        regulations issued pursuant to section 
                        4(c)(13) of this Act (as in effect on 
                        the day before the date of enactment of 
                        the Financial Services Act of 1999) to 
                        be usual in connection with the 
                        transaction of banking or other 
                        financial operations abroad.
                  (H) Directly or indirectly acquiring or 
                controlling, whether as principal, on behalf of 
                1 or more entities (including entities, other 
                than a depository institution or subsidiary of 
                a depository institution, that the financial 
                holding company controls) or otherwise, shares, 
                assets, or ownership interests (including 
                without limitation debt or equity securities, 
                partnership interests, trust certificates or 
                other instruments representing ownership) of a 
                company or other entity, whether or not 
                constituting control of such company or entity, 
                engaged in any activity not authorized pursuant 
                to this section if--
                          (i) the shares, assets, or ownership 
                        interests are not acquired or held by a 
                        depository institution or subsidiary of 
                        a depository institution;
                          (ii) such shares, assets, or 
                        ownership interests are acquired and 
                        held by an affiliate of the financial 
                        holding company that is a registered 
                        broker or dealer that is engaged in 
                        securities underwriting activities, or 
                        an affiliate of such broker or dealer, 
                        as part of a bona fide underwriting 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 only for 
                        such a period of time as will permit 
                        the sale or disposition thereof on a 
                        reasonable basis consistent with the 
                        nature of the activities described in 
                        clause (ii); and
                          (iv) during the period such shares, 
                        assets, or ownership interests are 
                        held, the financial holding company 
                        does not actively participate in the 
                        day-to-day management or operation of 
                        such company or entity, except insofar 
                        as necessary to achieve the objectives 
                        of clause (ii).
                  (I) Directly or indirectly acquiring or 
                controlling, whether as principal, on behalf of 
                1 or more entities (including entities, other 
                than a depository institution or subsidiary of 
                a depository institution, that the financial 
                holding company controls) or otherwise, shares, 
                assets, or ownership interests (including 
                without limitation debt or equity securities, 
                partnership interests, trust certificates or 
                other instruments representing ownership) of a 
                company or other entity, whether or not 
                constituting control of such company or entity, 
                engaged in any activity not authorized pursuant 
                to this section if--
                          (i) the shares, assets, or ownership 
                        interests are not acquired or held by a 
                        depository institution or a subsidiary 
                        of a depository institution;
                          (ii) such shares, assets, or 
                        ownership interests are acquired and 
                        held by an insurance company that is 
                        predominantly engaged in underwriting 
                        life, accident and health, or property 
                        and casualty insurance (other than 
                        credit-related insurance) 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 financial holding company 
                        does not directly or indirectly 
                        participate in the day-to-day 
                        management or operation of the company 
                        or entity except insofar as necessary 
                        to achieve the objectives of clauses 
                        (ii) and (iii).
          (4) Authorization of new financial activities.--The 
        Board shall, by regulation or order, define, consistent 
        with the purposes of this Act, the following activities 
        as, and the extent to which such activities are, 
        financial in nature or incidental to activities which 
        are financial in nature:
                  (A) Lending, exchanging, transferring, 
                investing for others, or safeguarding financial 
                assets other than money or securities.
                  (B) Providing any device or other 
                instrumentality for transferring money or other 
                financial assets.
                  (C) Arranging, effecting, or facilitating 
                financial transactions for the account of third 
                parties.
          (5) Post-consummation notification.--
                  (A) In general.--A financial holding company 
                and a wholesale financial holding company that 
                acquires any company, or commences any 
                activity, pursuant to this subsection shall 
                provide written notice to the Board describing 
                the activity commenced or conducted by the 
                company acquired no later than 30 calendar days 
                after commencing the activity or consummating 
                the acquisition.
                  (B) Approval not required for certain 
                financial activities.--Except as provided in 
                section 4(j) with regard to the acquisition of 
                a savings association or in paragraph (6) of 
                this subsection, a financial holding company 
                and a wholesale financial holding company may 
                commence any activity, or acquire any company, 
                pursuant to paragraph (3) or any regulation 
                prescribed or order issued under paragraph (4), 
                without prior approval of the Board.
          (6) Notice required for large combinations.--
                  (A) In general.--No financial holding company 
                or wholesale financial holding company shall 
                directly or indirectly acquire, and no company 
                that becomes a financial holding company or a 
                wholesale financial holding company shall 
                directly or indirectly acquire control of, any 
                company in the United States, including through 
                merger, consolidation, or other type of 
                business combination, that--
                          (i) is engaged in activities 
                        permitted under this subsection or 
                        subsection (g); and
                          (ii) has consolidated total assets in 
                        excess of $40,000,000,000,
                unless such holding company has provided notice 
                to the Board, not later than 60 days prior to 
                such proposed acquisition or prior to becoming 
                a financial holding company or wholesale 
                financial holding company, and during that time 
                period, or such longer time period not 
                exceeding an additional 60 days, as established 
                by the Board, the Board has not issued a notice 
                disapproving the proposed acquisition or 
                retention.
                  (B) Factors for consideration.--In reviewing 
                any prior notice filed under this paragraph, 
                the Board shall take into consideration--
                          (i) whether the company is in 
                        compliance with all applicable criteria 
                        set forth in subsection (b) and the 
                        provisions of subsection (d);
                          (ii) whether the proposed combination 
                        represents an undue aggregation of 
                        resources;
                          (iii) whether the proposed 
                        combination poses a risk to the deposit 
                        insurance system;
                          (iv) whether the proposed combination 
                        poses a risk to State insurance 
                        guaranty funds;
                          (v) whether the proposed combination 
                        can reasonably be expected to be in the 
                        best interests of depositors or 
                        policyholders of the respective 
                        entities;
                          (vi) whether the proposed transaction 
                        can reasonably be expected to further 
                        the purposes of this Act and produce 
                        benefits to the public; and
                          (vii) whether, and the extent to 
                        which, any subsequent failure or 
                        default of the financial holding 
                        company or wholesale financial holding 
                        company, or any affiliate of any such 
                        company, after the proposed combination 
                        could have serious adverse effects on 
                        economic conditions or financial 
                        stability.
                  (C) Required information.--The Board may 
                disapprove any prior notice filed under this 
                paragraph if the company submitting such notice 
                neglects, fails, or refuses to furnish to the 
                Board all relevant information required by the 
                Board.
                  (D) Solicitation of views of other 
                supervisory agencies.--
                          (i) In general.--Upon receiving a 
                        prior notice under this paragraph, in 
                        order to provide for the submission of 
                        their views and recommendations, the 
                        Board shall give notice of the proposal 
                        to--
                                  (I) the appropriate Federal 
                                banking agency of any bank 
                                involved;
                                  (II) the appropriate 
                                functional regulator of any 
                                functionally regulated 
                                nondepository institution (as 
                                defined in section 5(c)(1)(C)) 
                                involved; and
                                  (III) the Secretary of the 
                                Treasury, the Attorney General, 
                                and the Federal Trade 
                                Commission.
                          (ii) Timing.--The views and 
                        recommendations of any agency provided 
                        notice under this paragraph shall be 
                        submitted to the Board not later than 
                        30 calendar days after the date on 
                        which notice to the agency was given, 
                        unless the Board determines that 
                        another shorter time period is 
                        appropriate.
  (d) Provisions Applicable to Financial Holding Companies That 
Fail To Meet Requirements.--
          (1) In general.--If the Board finds that a financial 
        holding company is not in compliance with the 
        requirements of subparagraph (A), (B), or (C) of 
        subsection (b)(1), the Board shall give notice of such 
        finding to the company.
          (2) Agreement to correct conditions required.--Within 
        45 days of receipt by a financial holding company of a 
        notice given under paragraph (1) (or such additional 
        period as the Board may permit), the company shall 
        execute an agreement acceptable to the Board to comply 
        with the requirements applicable to a financial holding 
        company.
          (3) Board may impose limitations.--Until the 
        conditions described in a notice to a financial holding 
        company under paragraph (1) are corrected, the Board 
        may impose such limitations on the conduct or 
        activities of the company or any affiliate of the 
        company as the Board determines to be appropriate under 
        the circumstances.
          (4) Failure to correct.--If, after receiving a notice 
        under paragraph (1), a financial holding company does 
        not--
                  (A) execute and implement an agreement in 
                accordance with paragraph (2);
                  (B) comply with any limitations imposed under 
                paragraph (3);
                  (C) in the case of a notice of failure to 
                comply with subsection (b)(1)(A), restore each 
                depository institution subsidiary to well 
                capitalized status before the end of the 180-
                day period beginning on the date such notice is 
                received by the company (or such other period 
                permitted by the Board); or
                  (D) in the case of a notice of failure to 
                comply with subparagraph (B) or (C) of 
                subsection (b)(1), restore compliance with any 
                such subparagraph by the date the next 
                examination of the depository institution 
                subsidiary is completed or by the end of such 
                other period as the Board determines to be 
                appropriate,
        the Board may require such company, under such terms 
        and conditions as may be imposed by the Board and 
        subject to such extension of time as may be granted in 
        the Board's discretion, to divest control of any 
        depository institution subsidiary or, at the election 
        of the financial holding company, instead to cease to 
        engage in any activity conducted by such company or its 
        subsidiaries pursuant to this section.
          (5) Consultation.--In taking any action under this 
        subsection, the Board shall consult with all relevant 
        Federal and State regulatory agencies.
  (e) Safeguards for Bank Subsidiaries.--A financial holding 
company shall assure that--
          (1) the procedures of the holding company for 
        identifying and managing financial and operational 
        risks within the company, and the subsidiaries of such 
        company, adequately protect the subsidiaries of such 
        company which are insured depository institutions or 
        wholesale financial institutions from such risks;
          (2) the holding company has reasonable policies and 
        procedures to preserve the separate corporate identity 
        and limited liability of such company and the 
        subsidiaries of such company, for the protection of the 
        company's subsidiary insured depository institutions or 
        wholesale financial institutions; and
          (3) the holding company complies with this section.
  (f) Authority To Retain Limited Nonfinancial Activities and 
Affiliations.--
          (1) In general.--Notwithstanding section 4(a), a 
        company that is not a bank holding company or a foreign 
        bank (as defined in section 1(b)(7) of the 
        International Banking Act of 1978) and becomes a 
        financial holding company after the date of the 
        enactment of the Financial Services Act of 1999 may 
        continue to engage in any activity and retain direct or 
        indirect

        ownership or control of shares of a company engaged in 
        any activity if--
                  (A) the holding company lawfully was engaged 
                in the activity or held the shares of such 
                company on September 30, 1997;
                  (B) the holding company is predominantly 
                engaged in financial activities as defined in 
                paragraph (2); and
                  (C) the company engaged in such activity 
                continues to engage only in the same activities 
                that such company conducted on September 30, 
                1997, and other activities permissible under 
                this Act.
          (2) Predominantly financial.--For purposes of this 
        subsection, a company is predominantly engaged in 
        financial activities if the annual gross revenues 
        derived by the holding company and all subsidiaries of 
        the holding company (excluding revenues derived from 
        subsidiary depository institutions), on a consolidated 
        basis, from engaging in activities that are financial 
        in nature or are incidental to activities that are 
        financial in nature under subsection (c) represent at 
        least 85 percent of the consolidated annual gross 
        revenues of the company.
          (3) No expansion of grandfathered commercial 
        activities through merger or consolidation.--A 
        financial holding company that engages in activities or 
        holds shares pursuant to this subsection, or a 
        subsidiary of such financial holding company, may not 
        acquire, in any merger, consolidation, or other type of 
        business combination, assets of any other company which 
        is engaged in any activity which the Board has not 
        determined to be financial in nature or incidental to 
        activities that are financial in nature under 
        subsection (c).
          (4) Continuing revenue limitation on grandfathered 
        commercial activities.--Notwithstanding any other 
        provision of this subsection, a financial holding 
        company may continue to engage in activities or hold 
        shares in companies pursuant to this subsection only to 
        the extent that the aggregate annual gross revenues 
        derived from all such activities and all such companies 
        does not exceed 15 percent of the consolidated annual 
        gross revenues of the financial holding company 
        (excluding revenues derived from subsidiary depository 
        institutions).
          (5) Cross marketing restrictions applicable to 
        commercial activities.--An insured depository 
        institution or wholesale financial institution 
        controlled by a financial holding company shall not--
                  (A) offer or market, directly or through any 
                arrangement, any product or service of a 
                company whose activities are conducted or whose 
                shares are owned or controlled by the financial 
                holding company pursuant to this subsection or 
                subparagraph (H) or (I) of subsection (c)(3); 
                or
                  (B) permit any of its products or services to 
                be offered or marketed, directly or through any 
                arrangement, by or through any company 
                described in subparagraph (A).
          (6) Transactions with nonfinancial affiliates.--An 
        insured depository institution or wholesale financial 
        institution controlled by a financial holding company 
        or wholesale financial holding company may not engage 
        in a covered transaction (as defined by section 
        23A(b)(7) of the Federal Reserve Act) with any 
        affiliate controlled by the company pursuant to section 
        10(c), this subsection, or subparagraph (H) or (I) of 
        subsection (c)(3).
          (7) Sunset of grandfather.--A financial holding 
        company engaged in any activity, or retaining direct or 
        indirect ownership or control of shares of a company, 
        pursuant to this subsection, shall terminate such 
        activity and divest ownership or control of the shares 
        of such company before the end of the 10-year period 
        beginning on the date of the enactment of the Financial 
        Services Act of 1999. The Board may, upon application, 
        extend such 10-year period by a period not to exceed an 
        additional 5 years if such extension would not be 
        detrimental to the public interest.
  (g) Developing Activities.--A financial holding company and a 
wholesale financial holding company may engage directly or 
indirectly, or acquire shares of any company engaged, in any 
activitythat the Board has not determined to be financial in 
nature or incidental to financial activities under subsection (c) if--
          (1) the holding company reasonably concludes that the 
        activity is financial in nature or incidental to 
        financial activities;
          (2) the gross revenues from all activities conducted 
        under this subsection represent less than 5 percent of 
        the consolidated gross revenues of the holding company;
          (3) the aggregate total assets of all companies the 
        shares of which are held under this subsection do not 
        exceed 5 percent of the holding company's consolidated 
        total assets;
          (4) the total capital invested in activities 
        conducted under this subsection represents less than 5 
        percent of the consolidated total capital of the 
        holding company;
          (5) the Board has not determined that the activity is 
        not financial in nature or incidental to financial 
        activities under subsection (c);
          (6) the holding company is not required to provide 
        prior written notice of the transaction to the Board 
        under subsection (c)(6); and
          (7) the holding company provides written notification 
        to the Board describing the activity commenced or 
        conducted by the company acquired no later than 10 
        business days after commencing the activity or 
        consummating the acquisition.

              [amendments to internal revenue code of 1954

    [Sec.  10. (a) subchapter O of chapter 1 of the internal 
revenue code of 1954 is amended by adding at the end thereof 
the following new part:

  [``PART VIII--DISTRIBUTIONS PURSUANT TO BANK HOLDING COMPANY ACT OF 
                                  1956

[``Sec. 1101. Distributions pursuant to Bank Holding Company Act of 
          1956.
[``Sec. 1102. Special rules.
[``Sec. 1103. Definitions.

[``SEC. 1101. DISTRIBUTIONS PURSUANT TO BANK HOLDING COMPANY ACT OF 
                    1956.

    [``(a) Distributions of Certain Non-Banking Property.--
          [``(1) Distributions of prohibited property.--If--
                  [``(A) a qualified bank holding corporation 
                distributes prohibited property (other than 
                stock received in an exchange to which 
                subsection (c) (2) applies)--
                          [``(i) to a shareholder (with respect 
                        to its stock held by such shareholder), 
                        without the surrender by such share-
                        holder of stock in such corporation; or
                          [``(ii) to a shareholder, in exchange 
                        for its preferred stock; or
                          [``(iii) to a security holder, in 
                        exchange for its securities; and
                  [``(B) the Board has, before the 
                distribution, certified that the distribution 
                of such prohibited property is necessary or 
                appropriate to effectuate section 4 of the Bank 
                Holding Company Act of 1956,
        then no gain to the shareholder or security holder from 
        the receipt of such property shall be recognized.
          [``(2) Distributions of stock and securities received 
        in an exchange to which subsection (c)(2) applies.--
        If--
                  [``(A) a qualified bank holding corporation 
                distributes--
                          [``(i) common stock received in an 
                        exchange to which subsection (c) (2) 
                        applies to a shareholder (with respect 
                        to its stock held by such shareholder), 
                        without the surrender by such 
                        shareholder of stock in such 
                        corporation; or
                          [``(ii) common stock received in an 
                        exchange to which subsection (c) (2) 
                        applies to a shareholder, in exchange 
                        for its common stock; or
                          [``(iii) preferred stock or common 
                        stock received in an exchange to which 
                        subsection (c) (2) applies to a 
                        shareholder, in exchange for its 
                        preferred stock; or
                          [``(iv) securities or preferred or 
                        common stock received in an exchange to 
                        which subsection (c) (2) applies to a 
                        security holder, in exchange for its 
                        securities; and
                  [``(B) any preferred stock received has 
                substantially the same terms as the preferred 
                stock exchanged, and any securities received 
                have substantially the same terms as the 
                securities exchanged,
        then, except as provided in subsection (f), no gain to 
        the shareholder or security holder from the receipt of 
        such stock or such securities or such stock and 
        securities shall be recognized.
          [``(3) Non pro rata distributions.--Paragraphs (1) 
        and (2) shall apply to a distribution whether or not 
        the distribution is pro rata with respect to all of the 
        shareholders of the distributing qualified bank holding 
        corporation.
          [``(4) Exception.--This subsection shall not apply to 
        any distribution by a corporation which has made any 
        distribution pursuant to subsection (b).
          [``(5) Distributions involving gifts or 
        compensation.--

          [``In the case of a distribution to which paragraph (1) or (2) 
        applies, but which--
          [``(A) results in a gift, see section 2501, and following, or
          [``(B) has the effect of the payment of compensation, see 
        section 61(a)(1).

    [``(b) Corporation Ceasing To Be a Bank Holding Company.--
          [``(1) Distrubions of property which cause a 
        corporation to be a bank holding company.--If--
                  [``(A) a qualified bank holding corporation 
                distributes property (other than stock received 
                in an exchange to which subsection (c)(3) 
                applies)--
                          [``(i) to a shareholder (with respect 
                        to its stock held by such shareholder), 
                        without the surrender by such 
                        shareholder of stock in such 
                        corporation; or
                          [``(ii) to a shareholder, in exchange 
                        for its preferred stock; or
                          [``(iii) to a security holder, in 
                        change for its securities; and
                  [``(B) the Board has, before the 
                distribution, certified that--
                          [``(i) such property is all or part 
                        of the property by reason of which such 
                        corporation controls (within the 
                        meaning of section 2(a) of the Bank 
                        Holding Company Act of 1956) a bank or 
                        bank holding company, or such property 
                        is part of the property by reason of 
                        which such corporation did control a 
                        bank or a bank holding company before 
                        any property of the same kind was 
                        distributed under this subsection or 
                        exchanged under subsection (c)(3) ; and
                          [``(ii) the distribution is necessary 
                        or appropriate to effectuate the 
                        policies of such Act,
        then no gain to the shareholder or security holder from 
        the receipt of such property shall be recognized.
          [``(2) Distributions of stock and securities received 
        in an exchange to which subsection (c)(3) applies.--
        If--
                  [``(A) a qualified bank holding corporation 
                distributes--
                          [``(i) common stock received in an 
                        exchange to which subsection (c)(3) 
                        applies to a shareholder (with respect 
                        to its stock held by such shareholder), 
                        without the surrender by such 
                        shareholder of stock in such 
                        corporation; or
                          [``(ii) common stock received in an 
                        exchange to which subsection (c)(3) 
                        applies to a shareholder, in exchange 
                        for its common stock; or
                          [``(iii) preferred stock or common 
                        stock received in an exchange to which 
                        subsection (c)(3) applies to a 
                        shareholder, in exchange for its 
                        preferred stock; or
                          [``(iv) securities or preferred or 
                        common stock received in an exchange to 
                        which subsection (c)(3) applies to a 
                        security holder, in exchange for its 
                        securities; and
                  [``(B) any preferred stock received has 
                substantially the same terms as the preferred 
                stock exchanged, and any securities received 
                have substantially the same terms as the 
                securities exchanged,
        then, except as provided in subsection (f), no gain to 
        the shareholder or security holder from the receipt of 
        such stock or such securities or such stock and 
        securities shall be recognized.
          [``(3) Non pro rata distributions.--Paragraphs (1) 
        and (2) shall apply to a distribution whether or not 
        the distribution is pro rata with respect to all of the 
        shareholders of the distributing qualified bank holding 
        corporation.
          [``(4) Exception.--This subsection shall not apply to 
        any distribution by a corporation which has made any 
        distribution pursuant to subsection (a).
          [``(5) Distributions involving gift or 
        compensation.--

          [``In the case of a distribution to which paragraph (1) or (2) 
        applies, but which--
          [``(A) results in a gift, see section 2501, and following, or
          [``(B) has the effect of the payment of compensation, see 
        section 61(a)(1).

      [``(c) Property Acquired After May 15, 1955.--
          [``(1) In general.--Except as provided in paragraphs 
        (2) and (3), subsection (a) or (b) shall not apply to--
                  [``(A) any property acquired by the 
                distributing corporation after May 15, 1955, 
                unless (i) gain to such corporation with 
                respect to the receipt of such property was not 
                recognized by reason of subsection (a) or (b), 
                or (ii) such property was received by it in 
                exchange for all of its stock in an exchange to 
                which paragraph (2) or (3) applies, or (iii) 
                such property was acquired by the distributing 
                corporation in a transaction in which gain was 
                not recognized under section 305(a) or section 
                332, or under section 354 with respect to a 
                reorganization described in section 368(a)(1) 
                (E) or (F), or
                  [``(B) any property which was acquired by the 
                distributing corporation in a distribution with 
                respect to stock acquired by such corporation 
                after May 15, 1955, unless such stock was 
                acquired by such corporation (i) in a 
                distribution (with respect to stock held by it 
                on May 15, 1955, or with respect to stock in 
                respect of which all previous applications of 
                this clause are satisfied) with respect to 
                which gain to it was not recognized by reason 
                of subsection (a) or (b), or (ii) in exchange 
                for all of its stock in an exchange to which 
                paragraph (2) or (3) applies, or (iii) in a 
                transaction in which gain was not recognized 
                under section 305(a) or section 332, or under 
                section 354 with respect to a reorganization 
                described in section 368(a)(1) (E) or (F), or
                  [``(C) any property acquired by the 
                distributing corporation in a transaction in 
                which gain was not recognized under section 
                332, unless such property was acquired from a 
                corporation which, if it had been a qualified 
                bank holding corporation, could have 
                distributed such property under subsection 
                (a)(1) or (b)(1).
          [``(2) Exchanges involving prohibited property.--If--
                  [``(A) Any qualified bank holding corporation 
                exchanges (i) property, which, under subsection 
                (a)(1), such corporation could distribute 
                directly to its shareholders or security 
                holders without the recognition of gain to such 
                shareholders or security holders, and other 
                property (except property described in 
                subsection (b)(1)(B)(i)), for (ii) all of the 
                stock of a second corporation created and 
                availed of solely for the purpose of receiving 
                such property;
                  [``(B) immediately after the exchange, the 
                qualified bank holding corporation distributes 
                all of such stock in a manner prescribed in 
                subsection (a)(2)(A); and
                  [``(C) before such exchange, the Board has 
                certified (with respect to the property 
                exchanged which consists of property which, 
                under subsection (a)(1), such corporation could 
                distribute directly to its shareholders or 
                security holders without the recognition of 
                gain) that the exchange and distribution are 
                necessary or appropriate to effectuate section 
                4 of the Bank Holding Company Act of 1956, then 
                paragraph (1) shall not apply with respect to 
                such distribution.
          [``(3) Exchanges involving interests in banks.--If--
                  [``(A) any qualified bank holding corporation 
                exchanges (i) property which, under subsection 
                (b)(1), such corporation could distribute 
                directly to its shareholders or securities 
                holders without the recognition of gain to such 
                shareholders or security holders, and other 
                property (except prohibited property), for (ii) 
                all of the stock of a second corporation 
                created and availed of solely for the purpose 
                of receiving such property;
                  [``(B) immediately after the exchange, the 
                qualified bank holding corporation distributes 
                all of such stock in a manner prescribed in 
                subsection (b)(2)(A); and
                  [``(C) before such exchange, the Board has 
                certified (with respect to the property 
                exchanged which consists of property which, 
                under subsection (b)(1), such corporation could 
                distribute directly to its shareholders or 
                security holders without the recognition of 
                gain) that--
                          [``(i) such property is all or part 
                        of the property by reason of which such 
                        corporation controls (within the 
                        meaning of section 2(a) of the Bank 
                        Holding Company Act of 1956) a bank or 
                        bank holding company, or such property 
                        is part of the property by reason of 
                        which such corporation did control a 
                        bank or a bank holding company before 
                        any property of the same kind was 
                        distributed under subsection (b)(1) or 
                        exchanged under this paragraph: and
                          [``(ii) the exchange and distribution 
                        are necessary or appropriate to 
                        effectuate the policies of such Act,
        then paragraph (1) shall not apply with respect to such 
        distribution.
    [``(d) Distributions To Avoid Federal Income Tax.--
          [``(1) Prohibited property.--Subsection (a) shall not 
        apply to a distribution if, connection with such 
        distribution, the distributing corporation retains, or 
        transfers after May 15, 1955, to any corporation, 
        property (other than prohibited property) as part of a 
        plan one of the principal purposes of which is the 
        distribution of the earnings and profits of any 
        corporation.
          [``(2) Banking property.--Subsection (b) shall not 
        apply to a distribution if, in connection with such 
        distribution, the distributing corporation retains, or 
        transfers after May 15, 1955, to any corporation, 
        property (other than property described in subsection 
        (b)(1)(B)(i)) as part of a plan one of the principal 
        purposes of which is the distribution of the earnings 
        and profits of any corporation.
          [``(3) Certain contributions to capital.--In the case 
        of a distribution a portion of which is attributable to 
        a transfer which is a contribution to the capital of a 
        corporation, made after May 15, 1955, and prior to the 
        date of the enactment of this part, if subsection (a) 
        or (b) would apply to such distribution but for the 
        fact that, under paragraph (1) or (2) (as the case may 
        be) of this subsection, such contribution to capital is 
        part of a plan one of the principal purposes of which 
        is to distribute the earnings and profits of any 
        corporation, then, notwithstanding paragraph (1) or 
        (2), subsection (a) or (b) (as the case may be) shall 
        apply to that portion of such distribution not 
        attributable to such contribution to capital, and shall 
        not apply to that portion of such distribution 
        attributable to such contribution to capital.
    [``(e) Final Certification.--
          [``(1) For subsection (a).--Subsection (a) shall not 
        apply with respect to any distribution by a corporation 
        unless the Board certifies that, before the expiration 
        of the period permitted under section 4(a) of the Bank 
        Holding Company Act of 1956 (including any extensions 
        thereof granted to such corporation under section 
        4(a)), the corporation has disposed of all the property 
        the disposition of which is necessary or appropriate to 
        effectuate section 4 of such Act (or would have been so 
        necessary or appropriate if the corporation had 
        continued to be a bank holding company).
          [``(2) For subsection (b).--
                  [``(A) Subsection (b) shall not apply with 
                respect to any distribution by any corporation 
                unless the Board certifies that, before the 
                expiration of the period specified in 
                subparagraph (B), the corporation has ceased to 
                be a bank holding company.
                  [``(B) The period referred to in subparagraph 
                (A) is the period which expires 2 years after 
                the date of the enactment of this part or 2 
                years after the date on which the corporation 
                becomes a bank holding company, whichever date 
                is later. The Board is authorized, on 
                application by any corporation, to extend such 
                period from time to time with respect to such 
                corporation for not more than one year at a 
                time if, in its judgment, such an extension 
                would not be detrimental to the public 
                interest; except that such period may not in 
                any case be extended beyond the date 5 years 
                after the date of the enactment of this part or 
                5 years after the date on which the corporation 
                becomes a bank holding company, whichever date 
                is later.
    [``(f) Certain Exchanges of Securities.--In the case of an 
exchange described in subsection (a)(2)(A)(iv) or subsection 
(b)(2)(A)(iv), subsection (a) or subsection (b) (as the case 
may be) shall apply only to the extent that the principal 
amount of the securities received does not exceed the principal 
amount of the securities exchanged.

[``SEC. 1102. SPECIAL RULES.

    [``(a) Basis of Property Acquired in Distributions.--If, by 
reason of section 1101, gain is not recognized with respect to 
the receipt of any property, then, under regulations prescribed 
by the Secretary or his delegate--
          [``(1) if the property is received by a shareholder 
        with respect to stock, without the surrender by such 
        shareholder of stock, the basis of the property 
        received and of the stock with respect to which it is 
        distributed shall, in the distributee's hands, be 
        determined by allocating between such property and such 
        stock the adjusted basis of such stock; or
          [``(2) if the property is received by a shareholder 
        in exchange for stock or by a security holder in 
        exchange for securities, the basis of the property 
        received shall, in the distributee's hands, be the same 
        as the adjusted basis of the stock or securities 
        exchanged, increased by--
                  [``(A) the amount of the property received 
                which was treated as a dividend, and
                  [``(B) the amount of gain to the taxpayer 
                recognized on the property received (not 
                including any portion of such gain which was 
                treated as a dividend).
    [``(b) Periods of Limitation.--The periods of limitation 
provided in section 6501 (relating to limitations on assessment 
and collection) shall not expire, with respect to any 
deficiency (including interest and additions to the tax) 
resulting solely from the receipt of property by shareholders 
in a distribution which is certified by the Board under 
subsection (a), (b), or (c) of section 1101, until five years 
after the distributing corporation notifies the Secretary or 
his delegate (in such manner and with such accompanying 
information as the Secretary or his delegate may be regulations 
prescribe) that the period (including extensions thereof) 
prescribed in section 4(a) of the Bank Holding Company Act of 
1956, or section 1101(e)(2)(B), whichever is applicable, has 
expired; and such assessment may be made notwithstanding any 
provision of law or rule of law which would otherwise prevent 
such assessment.
    [``(c) Allocation of Earnings and Profits.--
          [``(1) Distribution of stock in a controlled 
        corporation.--In the case of a distribution by a 
        qualified bank holding corporation under section 
        1101(a)(1) or (b)(1) of stock in a controlled 
        corporation, proper allocation with respect to the 
        earnings and profits of the distributing corporation 
        and the controlled corporation shall be made under 
        regulations prescribed by the Secretary or his 
        delegate.
          [``(2) Exchanges described in section 1101(c) (2) or 
        (3).--In the case of any exchange described in section 
        1101(c) (2) or (3), proper allocation with respect to 
        the earnings and profits of the corporation 
        transferring the property and the corporation receiving 
        such property shall be made under regulations 
        prescribed by the Secretary or his delegate.
          [``(3) Definition of controlled corporation.--For 
        purposes of paragraph (1), the term `controlled 
        corporation' means a corporation with respect to which 
        at least 80 percent of the total combined voting power 
        of all classes of stock entitled to vote and at least 
        80 percent of the total number of shares of all other 
        classes of stock is owned by the distributing qualified 
        bank holding corporation.
    [``(d) Itemization of Property.--In any certification under 
this part, the Board shall make such specification and 
itemization of property as may be necessary to carry out the 
provisions of this part.

[``SEC. 1103. DEFINITIONS.

    [``(a) Bank Holding Company.--For purposes of this part, 
the term `bank holding company' has the meaning assigned to 
such term by section 2 of the Bank Holding Company Act of 1956.
    [``(b) Qualified Bank Holding Corporation.--
          [``(1) In general.--Except as provided in paragraph 
        (2), for purposes of this part the term `qualified bank 
        holding corporation' means any corporation (as defined 
        in section 7701(a)(3)) which is a bank holding company 
        and which holds prohibited property acquired by it--
                  [``(A) on or before May 15, 1955,
                  [``(B) in a distribution in which gain to 
                such corporation with respect to the receipt of 
                such property was not recognized by reason of 
                subsection (a) or (b) of section 1101, or
                  [``(C) in exchange for all of its stock in an 
                exchange described in section 1101 (c)(2) or 
                (c)(3).
          [``(2) Limitations.--
                  [``(A) A bank holding company shall not be a 
                qualified bank holding corporation, unless it 
                would have been a bank holding company on May 
                15, 1955, if the Bank Holding Company Act of 
                1956 had been in effect on such date, or unless 
                it is a bank holding company determined solely 
                by reference to--
                          [``(i) property acquired by it on or 
                        before May 15, 1955,
                          [``(ii) property acquired by it in a 
                        distribution in which gain to such 
                        corporation with respect to the receipt 
                        of such property was not recognized by 
                        reason of subsection (a) or (b) of 
                        section 1101, and
                          [``(iii) property acquired by it in 
                        exchange for all of its stock in an 
                        exchange described in section 1101(c) 
                        (2) or (3).
                  [``(B) A bank holding company shall not be a 
                qualified bank holding corporation by reason of 
                property described in subparagraph (B) of 
                paragraph (1) or clause (ii) of subparagraph 
                (A) of this paragraph, unless such property was 
                acquired in a distribution with respect to 
                stock, which stock was acquired by such bank 
                holding company--
                          [``(i) on or before May 15, 1955,
                          [``(ii) in a distribution (with 
                        respect to stock held by it on May 15, 
                        1955, or with respect to stock in 
                        respect of which all previous 
                        applications of this clause are 
                        satisfied) with respect to which gain 
                        to it was not recognized by reason of 
                        subsection (a) or (b) of section 1101, 
                        or
                          [``(iii) in exchange for all of its 
                        stock in an exchange described in 
                        section 1101(c) (2) or (3).
                  [``(C) A corporation shall be treated as a 
                qualified bank holding corporation only if the 
                Board certifies that it satisfies the foregoing 
                requirements of this subsection.
    [``(c) Prohibited Property.--For purposes of this part, the 
term `prohibited property' means, in the case of any bank 
holding company, property (other than nonexempt property) the 
disposition of which would be necessary or appropriate to 
effectuate section 4 of the Bank Holding Company Act of 1956 if 
such company continued to be a bank holding company beyond the 
period (including any extensions thereof) specified in 
subsection (a) of such section or in section 1101(e)(2)(B) of 
this part, as the case may be. The term`prohibited property' 
does not include shares of any company held by a bank holding company 
to the extent that the prohibitions of section 4 of the Bank Holding 
Company Act of 1956 do not apply to the ownership by such bank holding 
company of such property by reason of subsection (c)(5) of such 
section.
    [``(d) Nonexempt Property.--For purposes of this part, the 
term `nonexempt property' means--
          [``(1) obligations (including notes, drafts, bills of 
        exchange, and bankers' acceptances) having a maturity 
        at the time of issuance of not exceeding 24 months, 
        exclusive of days of grace;
          [``(2) securities issued by or guaranteed as to 
        principal or interest by a government or subdivision 
        thereof or by any instrumentality of a government or 
        subdivision; or
          [``(3) money, and the right to receive money not 
        evidenced by a security or obligation (other than a 
        security or obligation described in paragraph (1) or 
        (2)).
    [``(e) Board.--For purposes of this part, the term `Board' 
means the Board of Governors of the Federal Reserve System.''
    [(b) The table of parts of subchapter O of chapter 1 of the 
Internal Revenue Code of 1954 is amended by adding at the end 
thereof the following:

        [``Part VIII. Distributions pursuant to Bank Holding Company Act 
        of 1956.''

    [(c) The amendments made by this section shall apply with 
respect to taxable years ending after the date of the enactment 
of this Act.]

SEC. 10. WHOLESALE FINANCIAL HOLDING COMPANIES.

  (a) Companies That Control Wholesale Financial 
Institutions.--
          (1) Wholesale financial holding company defined.--The 
        term ``wholesale financial holding company'' means any 
        company that--
                  (A) is registered as a bank holding company;
                  (B) is predominantly engaged in financial 
                activities as defined in section 6(f)(2);
                  (C) controls 1 or more wholesale financial 
                institutions;
                  (D) does not control--
                          (i) a bank other than a wholesale 
                        financial institution;
                          (ii) an insured bank other than an 
                        institution permitted under 
                        subparagraph (D), (F), or (G) of 
                        section 2(c)(2); or
                          (iii) a savings association; and
                  (E) is not a foreign bank (as defined in 
                section 1(b)(7) of the International Banking 
                Act of 1978).
          (2) Savings association transition period.--
        Notwithstanding paragraph (1)(D)(iii), the Board may 
        permit a company that controls a savings association 
        and that otherwise meets the requirements of paragraph 
        (1) to become supervised under paragraph (1), if the 
        company divests control of any such savings association 
        within such period not to exceed 5 years after becoming 
        supervised under paragraph (1) as permitted by the 
        Board.
          (3) Companies supervised by securities and exchange 
        commission.--Any wholesale financial institution 
        holding company for which an election to be subject to 
        supervision by the Commission is in effect under 
        section 17(i) of the Securities Exchange Act of 1934 
        shall not be treated as a wholesale financial 
        institution holding company, and shall not be subject 
        to supervision by the Board, for purposes of this Act.
  (b) Supervision by the Board.--
          (1) In general.--The provisions of this section shall 
        govern the reporting, examination, and capital 
        requirements of wholesale financial holding companies.
          (2) Reports.--
                  (A) In general.--The Board from time to time 
                may require any wholesale financial holding 
                company and any subsidiary of such company to 
                submit reports under oath to keep the Board 
                informed as to--
                          (i) the company's or subsidiary's 
                        activities, financial condition, 
                        policies, systems for monitoring and 
                        controlling financial and operational 
                        risks, and transactions with depository 
                        institution subsidiaries of the holding 
                        company; and
                          (ii) the extent to which the company 
                        or subsidiary has complied with the 
                        provisions of this Act and regulations 
                        prescribed and orders issued under this 
                        Act.
                  (B) Use of existing reports.--
                          (i) In general.--The Board shall, to 
                        the fullest extent possible, accept 
                        reports in fulfillment of the Board's 
                        reporting requirements under this 
                        paragraph that the wholesale financial 
                        holding company or any subsidiary of 
                        such company has provided or been 
                        required to provide to other Federal 
                        and State supervisors or to appropriate 
                        self-regulatory organizations.
                          (ii) Availability.--A wholesale 
                        financial holding company or a 
                        subsidiary of such company shall 
                        provide to the Board, at the request of 
                        the Board, a report referred to in 
                        clause (i).
                  (C) Exemptions from reporting requirements.--
                          (i) In general.--The Board may, by 
                        regulation or order, exempt any company 
                        or class of companies, under such terms 
                        and conditions and for such periods as 
                        the Board shall provide in such 
                        regulation or order, from the 
                        provisions of this paragraph and any 
                        regulation prescribed under this 
                        paragraph.
                          (ii) Criteria for consideration.--In 
                        making any determination under clause 
                        (i) with regard to any exemption under 
                        such clause, the Board shall consider, 
                        among such other factors as the Board 
                        may determine to be appropriate, the 
                        following factors:
                                  (I) Whether information of 
                                the type required under this 
                                paragraph is available from a 
                                supervisory agency (as defined 
                                in section 1101(7) of the Right 
                                to Financial Privacy Act of 
                                1978) or a foreign regulatory 
                                authority of a similar type.
                                  (II) The primary business of 
                                the company.
                                  (III) The nature and extent 
                                of the domestic and foreign 
                                regulation of the activities of 
                                the company.
          (3) Examinations.--
                  (A) Limited use of examination authority.--
                The Board may make examinations of each 
                wholesale financial holding company and each 
                subsidiary of such company in order to--
                          (i) inform the Board regarding the 
                        nature of the operations and financial 
                        condition of the wholesale financial 
                        holding company and its subsidiaries;
                          (ii) inform the Board regarding--
                                  (I) the financial and 
                                operational risks within the 
                                wholesale financial holding 
                                company system that may affect 
                                any depository institution 
                                owned by such holding company; 
                                and
                                  (II) the systems of the 
                                holding company and its 
                                subsidiaries for monitoring and 
                                controlling those risks; and
                          (iii) monitor compliance with the 
                        provisions of this Act and those 
                        governing transactions and 
                        relationships between any depository 
                        institution controlled by the wholesale 
                        financial holding company and any of 
                        the company's other subsidiaries.
                  (B) Restricted focus of examinations.--The 
                Board shall, to the fullest extent possible, 
                limit the focus and scope of any examination of 
                a wholesale financial holding company under 
                this paragraph to--
                          (i) the holding company; and
                          (ii) any subsidiary (other than an 
                        insured depository institution 
                        subsidiary) of the holding company 
                        that, because of the size, condition, 
                        or activities of the subsidiary, the 
                        nature or size of transactions between 
                        such subsidiary and any affiliated 
                        depository institution, or the 
                        centralization of functions within the 
                        holding company system, could have a 
                        materially adverse effect on the safety 
                        and soundness of any depository 
                        institution affiliate of the holding 
                        company.
                  (C) Deference to bank examinations.--The 
                Board shall, to the fullest extent possible, 
                use the reports of examination of depository 
                institutions made by the Comptroller of the 
                Currency, the Federal Deposit Insurance 
                Corporation, the Director of the Office of 
                Thrift Supervision or the appropriate State 
                depository institution supervisory authority 
                for the purposes of this section.
                  (D) Deference to other examinations.--The 
                Board shall, to the fullest extent possible, 
                address the circumstances which might otherwise 
                permit or require an examination by the Board 
                by forgoing an examination and by instead 
                reviewing the reports of examination made of--
                          (i) any registered broker or dealer 
                        or any registered investment adviser by 
                        or on behalf of the Commission; and
                          (ii) any licensed insurance company 
                        by or on behalf of any State government 
                        insurance agency responsible for the 
                        supervision of the insurance company.
                  (E) Confidentiality of reported 
                information.--
                          (i) In general.--Notwithstanding any 
                        other provision of law, the Board shall 
                        not be compelled to disclose any 
                        nonpublic information required to be 
                        reported under this paragraph, or any 
                        information supplied to the Board by 
                        any domestic or foreign regulatory 
                        agency, that relates to the financial 
                        or operational condition of any 
                        wholesale financial holding company or 
                        any subsidiary of such company.
                          (ii) Compliance with requests for 
                        information.--No provision of this 
                        subparagraph shall be construed as 
                        authorizing the Board to withhold 
                        information from the Congress, or 
                        preventing the Board from complying 
                        with a request for information from any 
                        other Federal department or agency for 
                        purposes within the scope of such 
                        department's or agency's jurisdiction, 
                        or from complying with any order of a 
                        court of competent jurisdiction in an 
                        action brought by the United States or 
                        the Board.
                          (iii) Coordination with other law.--
                        For purposes of section 552 of title 5, 
                        United States Code, this subparagraph 
                        shall be considered to be a statute 
                        described in subsection (b)(3)(B) of 
                        such section.
                          (iv) Designation of confidential 
                        information.--In prescribing 
                        regulations to carry out the 
                        requirements of this subsection, the 
                        Board shall designate information 
                        described in or obtained pursuant to 
                        this paragraph as confidential 
                        information.
                  (F) Costs.--The cost of any examination 
                conducted by the Board under this section may 
                be assessed against, and made payable by, the 
                wholesale financial holding company.
          (4) Capital adequacy guidelines.--
                  (A) Capital adequacy provisions.--Subject to 
                the requirements of, and solely in accordance 
                with, the terms of this paragraph, the Board 
                may adopt capital adequacy rules or guidelines 
                for wholesale financial holding companies.
                  (B) Method of calculation.--In developing 
                rules or guidelines under this paragraph, the 
                following provisions shall apply:
                          (i) Focus on double leverage.--The 
                        Board shall focus on the use by 
                        wholesale financial holding companies 
                        of debt and other liabilities to fund 
                        capital investments in subsidiaries.
                          (ii) No unweighted capital ratio.--
                        The Board shall not, by regulation, 
                        guideline, order, or otherwise, impose 
                        under this section a capital ratio that 
                        is not based on appropriate risk-
                        weighting considerations.
                          (iii) No capital requirement on 
                        regulated entities.--The Board shall 
                        not, by regulation, guideline, order or 
                        otherwise, prescribe or impose any 
                        capital or capital adequacy rules, 
                        standards, guidelines, or requirements 
                        upon any subsidiary that--
                                  (I) is not a depository 
                                institution; and
                                  (II) is in compliance with 
                                applicable capital requirements 
                                of another Federal regulatory 
                                authority (including the 
                                Securities and Exchange 
                                Commission) or State insurance 
                                authority.
                          (iv) Limitation.--The Board shall 
                        not, by regulation, guideline, order or 
                        otherwise, prescribe or impose any 
                        capital or capital adequacy rules, 
                        standards, guidelines, or requirements 
                        upon any subsidiary that is not a 
                        depository institution and that is 
                        registered as an investment adviser 
                        under the Investment Advisers Act of 
                        1940, except that this clause shall not 
                        be construed as preventing the Board 
                        from imposing capital or capital 
                        adequacy rules, guidelines, standards, 
                        or requirements with respect to 
                        activities of a registered investment 
                        adviser other than investment advisory 
                        activities or activities incidental to 
                        investment advisory activities.
                          (v) Limitations on indirect action.--
                        In developing, establishing, or 
                        assessing holding company capital or 
                        capital adequacy rules, guidelines, 
                        standards, or requirements for purposes 
                        of this paragraph, the Board shall not 
                        take into account the activities, 
                        operations, or investments of an 
                        affiliated investment company 
                        registered under the Investment Company 
                        Act of 1940, 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.
                          (vi) Appropriate exclusions.--The 
                        Board shall take full account of--
                                  (I) the capital requirements 
                                made applicable to any 
                                subsidiary that is not a 
                                depository institution by 
                                another Federal regulatory 
                                authority or State insurance 
                                authority; and
                                  (II) industry norms for 
                                capitalization of a company's 
                                unregulated subsidiaries and 
                                activities.
                          (vii) Internal risk management 
                        models.--The Board may incorporate 
                        internal risk management models of 
                        wholesale financial holding companies 
                        into its capital adequacy guidelines or 
                        rules and may take account of the 
                        extent to which resources of a 
                        subsidiary depository institution may 
                        be used to service the debt or other 
                        liabilities of the wholesale financial 
                        holding company.
  (c) Nonfinancial Activities and Investments.--
          (1) Grandfathered activities.--
                  (A) In general.--Notwithstanding section 
                4(a), a company that becomes a wholesale 
                financial holding company may continue to 
                engage, directly or indirectly, in any activity 
                and may retain ownership and control of shares 
                of a company engaged in any activity if--
                          (i) on the date of the enactment of 
                        the Financial Services Act of 1999, 
                        such wholesale financial holding 
                        company was lawfully engaged in that 
                        nonfinancial activity, held the shares 
                        of such company, or had entered into a 
                        contract to acquire shares of any 
                        company engaged in such activity; and
                          (ii) the company engaged in such 
                        activity continues to engage only in 
                        the same activities that such company 
                        conducted on the date of the enactment 
                        of the Financial Services Act of 1999, 
                        and other activities permissible under 
                        this Act.
                  (B) No expansion of grandfathered commercial 
                activities through merger or consolidation.--A 
                wholesale financial holding company that 
                engages in activities or holds shares pursuant 
                to this paragraph, or a subsidiary of such 
                wholesale financial holding company, may not 
                acquire, in any merger, consolidation, or other 
                type of business combination, assets of any 
                other company which is engaged in any activity 
                which the Board has not determined to be 
                financial in nature or incidental to activities 
                that are financial in nature under section 
                6(c).
                  (C) Limitation to single exemption.--No 
                company that engages in any activity or 
                controls any shares under subsection (f) of 
                section 6 may engage in any activity or own any 
                shares pursuant to this paragraph.
          (2) Commodities.--
                  (A) In general.--Notwithstanding section 
                4(a), a wholesale financial holding company 
                which was predominately engaged as of January 
                1, 1997, in financial activities in the United 
                States (or any successor to any such company) 
                may engage in, or directly or indirectly own or 
                control shares of a company engaged in, 
                activities related to the trading, sale, or 
                investment in commodities and underlying 
                physical properties that were not permissible 
                for bank holding companies to conduct in the 
                United States as of January 1, 1997, if such 
                wholesale financial holding company, or any 
                subsidiary of such holding company, was engaged 
                directly, indirectly, or through any such 
                company in any of such activities as of January 
                1, 1997, in the United States.
                  (B) Limitation.--The attributed aggregate 
                consolidated assets of a wholesale financial 
                holding company held under the authority 
                granted under this paragraph and not otherwise 
                permitted to be held by all wholesale financial 
                holding companies under this section may not 
                exceed 5 percent of the total consolidated 
                assets of the wholesale financial holding 
                company, except that the Board may increase 
                such percentage of total consolidated assets by 
                such amounts and under such circumstances as the 
                Board considers appropriate, consistent with 
                the purposes of this Act.
          (3) Cross marketing restrictions.--A wholesale 
        financial holding company shall not permit--
                  (A) any company whose shares it owns or 
                controls pursuant to paragraph (1) or (2) to 
                offer or market any product or service of an 
                affiliated wholesale financial institution; or
                  (B) any affiliated wholesale financial 
                institution to offer or market any product or 
                service of any company whose shares are owned 
                or controlled by such wholesale financial 
                holding company pursuant to such paragraphs.
  (d) Qualification of Foreign Bank as Wholesale Financial 
Holding Company.--
          (1) In general.--Any foreign bank, or any company 
        that owns or controls a foreign bank, that operates a 
        branch, agency, or commercial lending company in the 
        United States, including a foreign bank or company that 
        owns or controls a wholesale financial institution, may 
        request a determination from the Board that such bank 
        or company be treated as a wholesale financial holding 
        company other than for purposes of subsection (c), 
        subject to such conditions as the Board considers 
        appropriate, giving due regard to the principle of 
        national treatment and equality of competitive 
        opportunity and the requirements imposed on domestic 
        banks and companies.
          (2) Conditions for treatment as a wholesale financial 
        holding company.--A foreign bank and a company that 
        owns or controls a foreign bank may not be treated as a 
        wholesale financial holding company unless the bank and 
        company meet and continue to meet the following 
        criteria:
                  (A) No insured deposits.--No deposits held 
                directly by a foreign bank or through an 
                affiliate (other than an institution described 
                in subparagraph (D) or (F) of section 2(c)(2)) 
                are insured under the Federal Deposit Insurance 
                Act.
                  (B) Capital standards.--The foreign bank 
                meets risk-based capital standards comparable 
                to the capital standards required for a 
                wholesale financial institution, giving due 
                regard to the principle of national treatment 
                and equality of competitive opportunity.
                  (C) Transaction with affiliates.--
                Transactions between a branch, agency, or 
                commercial lending company subsidiary of the 
                foreign bank in the United States, and any 
                securities affiliate or company in which the 
                foreign bank (or any company that owns or 
                controls such foreign bank) has invested and 
                which engages in any activity pursuant to 
                subsection (e) or (g) of section 6, comply with 
                the provisions of sections 23A and 23B of the 
                Federal Reserve Act in the same manner and to 
                the same extent as such transactions would be 
                required to comply with such sections if the 
                bank were a member bank.
          (3) Treatment as a wholesale financial institution.--
        Any foreign bank which is, or is affiliated with a 
        company which is, treated as a wholesale financial 
        holding company under this subsection shall be treated 
        as a wholesale financial institution for purposes of 
        subsections (c)(1)(C) and (c)(3) of section 9B of the 
        Federal Reserve Act, and any such foreign bank or 
        company shall be subject to paragraphs (3), (4), and 
        (5) of section 9B(d) of the Federal Reserve Act, except 
        that the Board may adopt such modifications, 
        conditions, or exemptions as the Board deems 
        appropriate, giving due regard to the principle of 
        national treatment and equality of competitive 
        opportunity.
          (4) Supervision of foreign bank which maintains no 
        banking presence other than control of a wholesale 
        financial institution.--A foreign bank that owns or 
        controls a wholesale financial institution but does not 
        operate a branch, agency, or commercial lending company 
        in the United States (and any company that owns or 
        controls such foreign bank) may request a determination 
        from the Board that such bank or company be treated as 
        a wholesale financial holding company, except that such 
        bank or company shall be subject to the restrictions of 
        paragraphs (2)(A) and (3) of this subsection.
          (5) No effect on other provisions.--This section 
        shall not be construed as limiting the authority of the 
        Board under the International Banking Act of 1978 with 
        respect to the regulation, supervision, or examination 
        of foreign banks and their offices and affiliates in 
        the United States.
          (6) Applicability of community reinvestment act of 
        1977.--The branches in the United States of a foreign 
        bank that is, or is affiliated with a company that is, 
        treated as a wholesale financial holding company shall 
        be subject to section 9B(b)(11) of the Federal Reserve 
        Act as if the foreign bank were a wholesale financial 
        institution under such section. The Board and the 
        Comptroller of the Currency shall apply the provisions 
        of sections 803(2), 804, and 807(1) of the Community 
        Reinvestment Act of 1977 to branches of foreign banks 
        which receive only such deposits as are permissible for 
        receipt by a corporation organized under section 25A of 
        the Federal Reserve Act, in the same manner and to the 
        same extent such sections apply to such a corporation.

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

  (a) Limitation on Direct Action.--
          (1) In general.--The Board may not prescribe 
        regulations, issue or seek entry of orders, impose 
        restraints, restrictions, guidelines, requirements, 
        safeguards, or standards, or otherwise take any action 
        under or pursuant to any provision of this Act or 
        section 8 of the Federal Deposit Insurance Act against 
        or with respect to a regulated subsidiary of a bank 
        holding company unless the action is necessary to 
        prevent or redress an unsafe or unsound practice or 
        breach of fiduciary duty by such subsidiary that poses 
        a material risk to--
                  (A) the financial safety, soundness, or 
                stability of an affiliated depository 
                institution; or
                  (B) the domestic or international payment 
                system.
          (2) Criteria for board action.--The Board shall not 
        take action otherwise permitted under paragraph (1) 
        unless the Board finds that it is not reasonably 
        possible to effectively protect against the material 
        risk at issue through action directedat or against the 
affiliated depository institution or against depository institutions 
generally.
  (b) Limitation on Indirect Action.--The Board may not 
prescribe regulations, issue or seek entry of orders, impose 
restraints, restrictions, guidelines, requirements, safeguards, 
or standards, or otherwise take any action under or pursuant to 
any provision of this Act or section 8 of the Federal Deposit 
Insurance Act against or with respect to a financial holding 
company or a wholesale financial holding company where the 
purpose or effect of doing so would be to take action 
indirectly against or with respect to a regulated subsidiary 
that may not be taken directly against or with respect to such 
subsidiary in accordance with subsection (a).
  (c) Actions Specifically Authorized.--Notwithstanding 
subsection (a), the Board may take action under this Act or 
section 8 of the Federal Deposit Insurance Act to enforce 
compliance by a regulated subsidiary with Federal law that the 
Board has specific jurisdiction to enforce against such 
subsidiary.
  (d) Regulated Subsidiary Defined.--For purposes of this 
section, the term ``regulated subsidiary'' means any company 
that is not a bank holding company and is--
          (1) a broker or dealer registered under the 
        Securities Exchange Act of 1934;
          (2) an investment adviser registered by or on behalf 
        of either the Securities and Exchange Commission or any 
        State, whichever is required by law, with respect to 
        the investment advisory activities of such investment 
        adviser and activities incidental to such investment 
        advisory activities;
          (3) an investment company registered under the 
        Investment Company Act of 1940;
          (4) an insurance company or an insurance agency, with 
        respect to the insurance activities and activities 
        incidental to such insurance activities, subject to 
        supervision by a State insurance commission, agency, or 
        similar authority; or
          (5) an entity subject to regulation by the Commodity 
        Futures Trading Commission, with respect to the 
        commodities activities of such entity and activities 
        incidental to such commodities activities.

                            saving provision

  Sec. 11. (a) * * *
  (b) Antitrust Review.--
          (1) In general.--The Board shall immediately notify 
        the Attorney General of any approval by it pursuant to 
        section 3 of a proposed acquisition, merger, or 
        consolidation transaction and, if the transaction also 
        involves an acquisition under section 4 or section 6, 
        the Board shall also notify the Federal Trade 
        Commission of such approval. If the Board has found 
        that it must act immediately in order to prevent the 
        probable failure of a bank or bank holding company 
        involved in any such transaction, the transaction may 
        be consummated immediately upon approval by the Board. 
        If the Board has advised the Comptroller of the 
        Currency or the State supervisory authority, as the 
        case may be, of the existence of an emergency requiring 
        expeditious action and has required the submission of 
        views and recommendations within ten days, the 
        transaction may not be consummated before the fifth 
        calendar day after the date of approval by the Board. 
        In all other cases, the transaction may not be 
        consummated before the thirtieth calendar day after the 
        date of approval by the Board or, if the Board has not 
        received any adverse comment from the Attorney General 
        of the United States relating to competitive factors, 
        such shorter period of time as may be prescribed by the 
        Board with the concurrence of the Attorney General, but 
        in no event less than 15 calendar days after the date 
        of approval. Any action brought under the antitrust 
        laws arising out of an acquisition, merger, or 
        consolidation transaction approved under section 3 
        shall be commenced prior to the earliest time under 
        this subsection at which the transaction approval under 
        section 3 might be consummated. The commencement of 
        such an action shall stay the effectiveness of the 
        Board's approval unless the court shall otherwise 
        specifically order. In any such action, the court shall 
        review de novo the issues presented. In any judicial 
        proceeding attacking any acquisition, merger, or 
        consolidation transaction approved pursuant to section 
        3 on the ground that such transaction alone and of 
        itself constituted a violation of any antitrust laws 
        other than section 2 of the Act of July 2, 1890 
        (section 2 of the Sherman Antitrust Act, 15 U.S.C. 2), 
        the standards applied by the court shall be identical 
        with those that the Board is directed to apply under 
        section 3 of this Act. Upon the consummation of an 
        acquisition, merger, or consolidation transaction 
        approved under section 3 in compliance with this Act 
        and after the termination of any antitrust litigation 
        commenced within the period prescribed in this section, 
        or upon the termination of such period if no such 
        litigation is commenced therein, the transaction may 
        not thereafter be attacked in any judicial proceeding 
        on the ground that it alone and of itself constituted a 
        violation of any antitrust laws other than section 2 of 
        the Act of July 2, 1890 (section 2 of the Sherman 
        Antitrust Act, 15 U.S.C. 2), but nothing in this Act 
        shall exempt any bank holding company involved in such 
        a transaction from complying with the antitrust laws 
        after the consummation of such transaction.

           *       *       *       *       *       *       *

                              ----------                              


                     FEDERAL DEPOSIT INSURANCE ACT

           *       *       *       *       *       *       *


  Sec. 3. As used in this Act--
  (a) * * *

           *       *       *       *       *       *       *

  (q) Appropriate Federal Banking Agency.--The term 
``appropriate Federal banking agency'' means--
          (1) * * *
          (2) the Board of Governors of the Federal Reserve 
        System, in the case of--
                  [(A) any State member insured bank (except a 
                District bank),]
                  (A) any State member insured bank (except a 
                District bank) and any wholesale financial 
                institution subject to section 9B of the 
                Federal Reserve Act;

           *       *       *       *       *       *       *

  Sec. 8. (a) Termination of Insurance.--
          [(1) Voluntary termination.--Any insured depository 
        institution which is not--
                  [(A) a national member bank;
                  [(B) a State member bank;
                  [(C) a Federal branch;
                  [(D) a Federal savings association; or
                  [(E) an insured branch which is required to 
                be insured under subsection (a) or (b) of 
                section 6 of the International Banking Act of 
                1978,
        may terminate such depository institution's status as 
        an insured depository institution if such insured 
        institution provides written notice to the Corporation 
        of the institution's intent to terminate such status 
        not less than 90 days before the effective date of such 
        termination.]
          [(2)] (1) Involuntary termination.--

           *       *       *       *       *       *       *

          [(3)] (2) Hearing; termination.--If, on the basis of 
        the evidence presented at a hearing before the Board of 
        Directors (or any person designated by the Board for 
        such purpose), in which all issues shall be determined 
        on the record pursuant to section 554 of title 5, 
        United States Code, and the written findings of the 
        Board of Directors (or such person) with respect to 
        such evidence (which shall be conclusive), the Board of 
        Directors finds that any unsafe or unsound practice or 
        condition or any violation specified in the notice to 
        an insured depository institution under paragraph 
        (2)(B) or subsection (w) has been established, the 
        Board of Directors may issue an order terminating the 
        insured status of such depository institution effective 
        as of a date subsequent to such finding.
          [(4)] (3) Appearance; consent to termination.--Unless 
        the depository institution shall appear at the hearing 
        by a duly authorized representative, it shall be deemed 
        to have consented to the termination of its status as 
        an insured depository institution and termination of 
        such status thereupon may be ordered.
          [(5)] (4) Judicial review.--Any insured depository 
        institution whose insured status has been terminated by 
        order of the Board of Directors under this subsection 
        shall have the right of judicial review of such order 
        only to the same extent as provided for the review of 
        orders under subsection (h) of this section.
          [(6)] (5) Publication of notice of termination.--The 
        Corporation may publish notice of such termination and 
        the depository institution shall give notice of such 
        termination to each of its depositors at his last 
        address of record on the books of the depository 
        institution, in such manner and at such time as the 
        Board of Directors may find to be necessary and may 
        order for the protection of depositors.
          [(7)] (6) Temporary insurance of deposits insured as 
        of termination.--After the termination of the insured 
        status of any depository institution under the 
        provisions of this subsection, the insured deposits of 
        each depositor in the depository institution on the 
        date of such termination, less all subsequent 
        withdrawals from any deposits of such depositor, shall 
        continue for a period of at least 6 months or up to 2 
        years, within the discretion of the Board of Directors, 
        to be insured, and the depository institution shall 
        continue to pay to the Corporation assessments as in 
        the case of an insured depository institution during 
        such period. No additions to any such deposits and no 
        new deposits in such depository institution made after 
        the date of such termination shall be insured by the 
        Corporation, and the depository institution shall not 
        advertise or hold itself out as having insured deposits 
        unless in the same connection it shall also state with 
        equal prominence that such additions to deposits and 
        new deposits made after such date are not so insured. 
        Such depository institution shall, in all other 
        respects, be subject to the duties and obligations of 
        an insured depository institution for the period 
        referred to in the 1st sentence from the date of such 
        termination, and in the event that such depository 
        institution shall be closed on account of inability to 
        meet the demands of its depositors within such period, 
        the Corporation shall have the same powers and rights 
        with respect to such depository institution as in case 
        of an insured depository institution.
          [(8)] (7) Temporary suspension of insurance.--

           *       *       *       *       *       *       *

          [(9)] (8) Final decisions to terminate insurance.--
        Any decision by the Board of Directors to--
                  (A) * * *

           *       *       *       *       *       *       *

          [(10)] (9) Low- to moderate-income housing lender.--
        In making any determination regarding the termination 
        of insurance of a solvent savings association, the 
        Corporation may consider the extent of the 
        association's low- to moderate-income housing loans.

           *       *       *       *       *       *       *


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

  (a) In General.--Except as provided in subsection (b), an 
insured State bank or a national bank may voluntarily terminate 
such bank's status as an insured depository institution in 
accordance with regulations of the Corporation if--
          (1) the bank provides written notice of the bank's 
        intent to terminate such insured status--
                  (A) to the Corporation and the Board of 
                Governors of the Federal Reserve System, in the 
                case of an insured State bank, or to the 
                Corporation and the Comptroller of the 
                Currency, in the case of an insured national 
                bank authorized to operate as a wholesale 
                financial institution, not less than 6 months 
                before the effective date of such termination; and
                  (B) to all depositors at such bank, not less 
                than 6 months before the effective date of the 
                termination of such status; and
          (2) either--
                  (A) the deposit insurance fund of which such 
                bank is a member equals or exceeds the fund's 
                designated reserve ratio as of the date the 
                bank provides a written notice under paragraph 
                (1) and the Corporation determines that the 
                fund will equal or exceed the applicable 
                designated reserve ratio for the 2 semiannual 
                assessment periods immediately following such 
                date; or
                  (B) the Corporation and the Board of 
                Governors of the Federal Reserve System, in the 
                case of an insured State bank, or the 
                Corporation and the Comptroller of the 
                Currency, in the case of an insured national 
                bank authorized to operate as a wholesale 
                financial institution, has approved the 
                termination of the bank's insured status and 
                the bank pays an exit fee in accordance with 
                subsection (e).
  (b) Exception.--Subsection (a) shall not apply with respect 
to--
          (1) an insured savings association; or
          (2) an insured branch that is required to be insured 
        under subsection (a) or (b) of section 6 of the 
        International Banking Act of 1978.
  (c) Eligibility for Insurance Terminated.--Any bank that 
voluntarily elects to terminate the bank's insured status under 
subsection (a) shall not be eligible for insurance on any 
deposits or any assistance authorized under this Act after the 
period specified in subsection (f)(1).
  (d) Institution Must Become Wholesale Financial Institution 
or Terminate Deposit-Taking Activities.--Any depository 
institution which voluntarily terminates such institution's 
status as an insured depository institution under this section 
may not, upon termination of insurance, accept any deposits 
unless the institution is a wholesale financial institution 
subject to section 9B of the Federal Reserve Act.
  (e) Exit Fees.--
          (1) In general.--Any bank that voluntarily terminates 
        such bank's status as an insured depository institution 
        under this section shall pay an exit fee in an amount 
        that the Corporation determines is sufficient to 
        account for the institution's pro rata share of the 
        amount (if any) which would be required to restore the 
        relevant deposit insurance fund to the fund's 
        designated reserve ratio as of the date the bank 
        provides a written notice under subsection (a)(1).
          (2) Procedures.--The Corporation shall prescribe, by 
        regulation, procedures for assessing any exit fee under 
        this subsection.
  (f) Temporary Insurance of Deposits Insured as of 
Termination.--
          (1) Transition period.--The insured deposits of each 
        depositor in a State bank or a national bank on the 
        effective date of the voluntary termination of the 
        bank's insured status, less all subsequent withdrawals 
        from any deposits of such depositor, shall continue to 
        be insured for a period of not less than 6 months and 
        not more than 2 years, as determined by the 
        Corporation. During such period, no additions to any 
        such deposits, and no new deposits in the depository 
        institution made after the effective date of such 
        termination shall be insured by the Corporation.
          (2) Temporary assessments; obligations and duties.--
        During the period specified in paragraph (1) with 
        respect to any bank, the bank shall continue to pay 
        assessments under section 7 as if the bank were an 
        insured depository institution. The bank shall, in all 
        other respects, be subject to the authority of the 
        Corporation and the duties and obligations of an 
        insured depository institution under this Act during 
        such period, and in the event that the bank is closed 
        due to an inability to meet the demands of the bank's 
        depositors during such period, the Corporation shall 
        have the same powers and rights with respect to such 
        bank as in the case of an insured depository 
        institution.
  (g) Advertisements.--
          (1) In general.--A bank that voluntarily terminates 
        the bank's insured status under this section shall not 
        advertise or hold itself out as having insured 
        deposits, except that the bank may advertise the 
        temporary insurance of deposits under subsection (f) 
        if, in connection with any such advertisement, the 
        advertisement also states with equal prominence that 
        additions to deposits and new deposits made after the 
        effective date of the termination are not insured.
          (2) Certificates of deposit, obligations, and 
        securities.--Any certificate of deposit or other 
        obligation or security issued by a State bank or a 
        national bank after the effective date of the voluntary 
        termination of the bank's insured status under this 
        section shall be accompanied by a conspicuous, 
        prominently displayed notice that such certificate of 
        deposit or other obligation or security is not insured 
        under this Act.
  (h) Notice Requirements.--
          (1) Notice to the corporation.--The notice required 
        under subsection (a)(1)(A) shall be in such form as the 
        Corporation may require.
          (2) Notice to depositors.--The notice required under 
        subsection (a)(1)(B) shall be--
                  (A) sent to each depositor's last address of 
                record with the bank; and
                  (B) in such manner and form as the 
                Corporation finds to be necessary and 
                appropriate for the protection of depositors.
  (i) Voluntary Termination of Deposit Insurance.--The 
provisions on voluntary termination of insurance in this 
section shall apply to an insured branch of a foreign bank 
(including a Federal branch) in the same manner and to the same 
extent as they apply to an insured State bank or a national 
bank.

           *       *       *       *       *       *       *

  Sec. 11. (a) Deposit Insurance.--
          (1) * * *

           *       *       *       *       *       *       *

          (4) General provisions relating to funds.--
                  (A) * * *
                  (B) Limitation on use.--Notwithstanding any 
                provision of law other than section 
                13(c)(4)(G), the Bank Insurance Fund and the 
                Savings Association Insurance Fund shall not be 
                used in any manner [to benefit any shareholder 
                of] to benefit any shareholder, affiliate 
                (other than an insured depository institution 
                that receives assistance in accordance with the 
                provisions of this Act), or subsidiary of--
                          (i) * * *

           *       *       *       *       *       *       *

          (6) Savings association insurance fund.--
                  (A) * * *

           *       *       *       *       *       *       *

                  [(L) Establishment of saif special reserve.--
                          [(i) Establishment.--If, on January 
                        1, 1999, the reserve ratio of the 
                        Savings Association Insurance Fund 
                        exceeds the designated reserve ratio, 
                        there is established a Special Reserve 
                        of the Savings Association Insurance 
                        Fund, which shall be administered by 
                        the Corporation and shall be invested 
                        in accordance with section 13(a).
                          [(ii) Amounts in special reserve.--
                        If, on January 1, 1999, the reserve 
                        ratio of the Savings Association 
                        Insurance Fund exceeds the designated 
                        reserve ratio, the amount by which the 
                        reserve ratio exceeds the designated 
                        reserve ratio shall be placed in the 
                        Special Reserve of the Savings 
                        Association Insurance Fund established 
                        by clause (i).
                          [(iii) Limitation.--The Corporation 
                        shall not provide any assessment 
                        credit, refund, or other payment from 
                        any amount in the Special Reserve of 
                        the Savings Association Insurance Fund.
                          [(iv) Emergency use of special 
                        reserve.--Notwithstanding clause (iii), 
                        the Corporation may, in its sole 
                        discretion, transfer amounts from the 
                        Special Reserve of the Savings 
                        Association Insurance Fund to the 
                        Savings Association Insurance Fund for 
                        the purposes set forth in paragraph 
                        (4), only if--
                                  [(I) the reserve ratio of the 
                                Savings Association Insurance 
                                Fund is less than 50 percent of 
                                the designated reserve ratio; 
                                and
                                  [(II) the Corporation expects 
                                the reserve ratio of the 
                                Savings Association Insurance 
                                Fund to remain at less than 50 
                                percent of the designated 
                                reserve ratio for each of the 
                                next 4 calendar quarters.
                          [(v) Exclusion of special reserve in 
                        calculating reserve ratio.--
                        Notwithstanding any other provision of 
                        law, any amounts in the Special Reserve 
                        of the Savings Association Insurance 
                        Fund shall be excluded in calculating 
                        the reserve ratio of the Savings 
                        Association Insurance Fund.]

           *       *       *       *       *       *       *

  Sec. 18. (a) * * *

           *       *       *       *       *       *       *

  (c)(1) * * *

           *       *       *       *       *       *       *

  (12) Public Meetings.--In each merger transaction involving 1 
or more insured depository institutions each of which has total 
assets of $1,000,000,000 or more, the responsible agency shall, 
as necessary and on a timely basis, conduct public meetings in 
1 or more areas where the agency believes, in the sole 
discretion of the agency, there will be a substantial public 
impact.

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *


SEC. 45. AUTHORITY OF STATE INSURANCE REGULATOR AND SECURITIES AND 
                    EXCHANGE COMMISSION.

  (a) In General.--Notwithstanding any other provision of law, 
any regulation, order, or other action of the appropriate 
Federal banking agency which requires a subsidiary to provide 
funds or other assets to an insured depository institution 
shall not be effective nor enforceable if--
          (1) such funds or assets are to be provided by a 
        subsidiary which is an insurance company, a broker or 
        dealer registered under the Securities Exchange Act of 
        1934, or an investment company registered under the 
        Investment Company Act of 1940; and
          (2) the State insurance authority for the insurance 
        company or the Securities and Exchange Commission for 
        the registered broker or dealer or the investment 
        company, as the case may be, determines in writing sent 
        to the insured depository institution and the 
        appropriate Federal banking agency that the subsidiary 
        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, or investment company, as the case may 
        be.
  (b) Notice to State Insurance Authority or SEC Required.--If 
the appropriate Federal banking agency requires a subsidiary, 
which is an insurance company, a broker or dealer, or an 
investment company described in subsection (a)(1) to provide 
funds or assets to an insured depository institution pursuant 
to any regulation, order, or other action of the appropriate 
Federal banking agency referred to in subsection (a), the 
appropriate Federal banking agency shall promptly notify the 
State insurance authority for the insurance company or the 
Securities and Exchange Commission, as the case may be, of such 
requirement.
  (c) Divestiture in Lieu of Other Action.--If the appropriate 
Federal banking agency receives a notice described in 
subsection (a)(2) from a State insurance authority or the 
Securities and Exchange Commission with regard to a subsidiary 
referred to in that subsection, the appropriate Federal banking 
agency may order the insured depository institution to divest 
the subsidiary not later than 180 days after receiving the 
notice, or such longer period as the appropriate Federal 
banking agency determines consistent with the safe and sound 
operation of the insured depository institution.
  (d) Conditions Before Divestiture.--During the period 
beginning on the date an order to divest is issued by the 
appropriate Federal banking agency under subsection (c) to an 
insured depository institution and ending on the date the 
divestiture is complete, the appropriate Federal banking agency 
may impose any conditions or restrictions on the insured 
depository institution ownership or operation of the subsidiary 
including restricting or prohibiting transactions between the 
insured depository institution and the subsidiary, as are 
appropriate under the circumstances.
                              ----------                              


      SECTION 6 OF THE NATIONAL BANK CONSOLIDATION AND MERGER ACT

SEC. 6. PUBLIC MEETINGS FOR LARGE BANK CONSOLIDATIONS AND MERGERS.

  In each case of a consolidation or merger under this Act 
involving 1 or more banks each of which has total assets of 
$1,000,000,000 or more, the Comptroller shall, as necessary and 
on a timely basis, conduct public meetings in 1 or more areas 
where the Comptroller believes, in the sole discretion of the 
Comptroller, there will be a substantial public impact.
                              ----------                              


                     HOME OWNERS' LOAN ACT

           *       *       *       *       *       *       *


SEC. 5. FEDERAL SAVINGS ASSOCIATIONS.

  (a) * * *

           *       *       *       *       *       *       *

  [(f) Federal Home Loan Bank Membership.--Each Federal savings 
association, upon receiving its charter, shall become 
automatically a member of the Federal home loan bank of the 
district in which it is located, or if convenience requires and 
the Director approves, shall become a member of a Federal home 
loan bank of an adjoining district. Such associations shall 
qualify for such membership in the manner provided in the 
Federal Home Loan Bank Act with respect to other members.]
  (f) Federal Home Loan Bank Membership.--On and after January 
1, 1999, a Federal savings association may become a member of 
the Federal Home Loan Bank System, and shall qualify for such 
membership in the manner provided by the Federal Home Loan Bank 
Act.

SEC. 10. REGULATION OF HOLDING COMPANIES.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Holding Company Activities.--
          (1) * * *

           *       *       *       *       *       *       *

          (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 27, 
                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 paragraphs (1)(C) or (2); 
                        or
                          (ii) for financial holding companies 
                        under section 6(c) of the Bank Holding 
                        Company Act of 1956.
                  (B) Prevention of new commercial 
                affiliations.--Notwithstanding paragraph (3), 
                no savings and loan holding company may engage 
                directly or indirectly (including through a 
                subsidiary other than a savings association) in 
                any activity other than as described in clauses 
                (i) and (ii) of subparagraph (A).
                  (C) Preservation of authority of existing 
                unitary s&l holding companies.--Subparagraphs 
                (A) and (B) shall not apply with respect to any 
                company that was a savings and loan holding 
                company on May 27, 1999, or that becomes a 
                savings and loan holding company pursuant to an 
                application pending before the Office of Thrift 
                Supervision on or before that date, and that--
                          (i) meets and continues to meet the 
                        requirements of paragraph (3); and
                          (ii) continues to control not fewer 
                        than 1 savings association that it 
                        controlled on May 27, 1999, or that it 
                        acquired pursuant to an application 
                        pending before the Office of Thrift 
                        Supervision on or before that date, or 
                        the successor to such savings 
                        association.
                  (D) Corporate reorganizations permitted.--
                This paragraph does not prevent a transaction--
                          (i) that 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) that 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 deems 
                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) shall 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 27, 1999, or a 
                        subsequent date pursuant to an 
                        application pending before the Office 
                        of Thrift Supervision on or before May 
                        27, 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 27, 
                        1999, or a subsequent date pursuant to 
                        an applications pending before the 
                        Office of Thrift Supervision on or 
                        before May 27, 1999.

           *       *       *       *       *       *       *

  (e) Acquisitions.--
          (1) * * *

           *       *       *       *       *       *       *

          (7) Public meetings for large depository institution 
        acquisitions and mergers.--In each case involving 1 or 
        more insured depository institutions each of which has 
        total assets of $1,000,000,000 or more, the Director 
        shall, as necessary and on a timely basis, conduct 
        public meetings in 1 or more areas where the Director 
        believes, in the sole discretion of the Director, there 
        will be a substantial public impact.

           *       *       *       *       *       *       *

  (o) Mutual Holding Companies.--
          (1) * * *

           *       *       *       *       *       *       *

          (5) Permitted activities.--A mutual holding company 
        may engage only in the following activities:
                  (A) * * *

           *       *       *       *       *       *       *

                  (E) Engaging in the activities described in 
                subsection (c)(2)[, except subparagraph (B)].
                   (F) In the case of a mutual holding company 
                which is a savings and loan holding company 
                described in subsection (c)(3), engaging in the 
                activities permitted under subsection 
                (c)(9)(A)(ii).

           *       *       *       *       *       *       *

                              ----------                              


    SECTION 109 OF THE RIEGLE-NEAL INTERSTATE BANKING AND BRANCHING 
                         EFFICIENCY ACT OF 1994

SEC. 109. PROHIBITION AGAINST DEPOSIT PRODUCTION OFFICES.

  (a) * * *

           *       *       *       *       *       *       *

  (d) Application.--This section shall apply with respect to 
any interstate branch established or acquired in a host State 
pursuant to this title, the Financial Services Act of 1999, or 
any amendment made by this title or such Act to any other 
provision of law.
  (e) Definitions.--For the purposes of this section, the 
following definitions shall apply:
          (1) * * *

           *       *       *       *       *       *       *

          (4) Interstate branch.--The term ``interstate 
        branch'' means a branch established pursuant to this 
        title or any amendment made by this title to any other 
        provision of law 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).

           *       *       *       *       *       *       *

                              ----------                              


                   TITLE LXII OF THE REVISED STATUTES

                  Title LXII.--NATIONAL BANKS.--Ch. 1.

                          T I T L E  L X I I.

                            NATIONAL BANKS.

                         C H A P T E R  O N E.

                        ORGANIZATION AND POWERS.

Sec.
5133.  Formation of national banking associations.
     * * * * * * *
5136A. Subsidiaries of national banks.
5136B. National wholesale financial institutions.
[5136A.] 5136C. Participation in lotteries prohibited.

           *       *       *       *       *       *       *

  Sec. 5136. Upon duly making and filing articles of 
association and an organization certificate, the association 
shall become, as from the date of the execution of its 
organization certificate, a body corporate, and as such, and in 
the name designated in the organization certificate, it shall 
have power--
  First. To adopt and use a corporate seal.

           *       *       *       *       *       *       *

  Seventh. To exercise by its board of directors or duly 
authorized officers or agents, subject to law, all such 
incidental powers as shall be necessary to carry on the 
business of banking; by discounting and negotiating promissory 
notes, drafts, bills of exchange, and other evidences of debt; 
by receiving deposits; by buying and selling exchange, coin, 
and bullion; by loaning money on personal security; and by 
obtaining, issuing, and circulating notes according to the 
provisions of this title. The business of dealing in securities 
and stock by the association shall be limited to purchasing and 
selling such securities and stock without recourse, solely upon 
the order, and for the account of, customers, and in no case 
for its own account, and the association shall not underwrite 
any issue of securities or stock: Provided, That the 
association may purchase for its own account investment 
securities under such limitations and restrictions as the 
Comptroller of the Currency may by regulation prescribe. In no 
event shall the total amount of the investment securities of 
any one obligor or maker, held by the association for its own 
account, exceed at any time 10 per centum of its capital stock 
actually paid in and unimpaired and 10 per centum of its 
unimpaired surplus fund, except that this limitation shall not 
require any association to dispose of any securities lawfully 
held by it on the date of enactment of the Banking Act of 1935. 
As used in this section the term ``investment securities'' 
shall mean marketable obligations evidencing indebtedness of 
any person, copartnership, association, or corporation in the 
form of bonds, notes and/or debentures commonly known as 
investment securities under such further definition of the term 
``investment securities'' as may by regulation be prescribed by 
the Comptroller of the Currency. Except as hereinafter provided 
or otherwise permitted by law, nothing herein contained shall 
authorize the purchase by the association for its own account 
of any shares of stock of any corporation. The limitations and 
restrictions herein contained as to dealing in, underwriting 
and purchasing for its own account, investment securities shall 
not apply to obligations of the United States, or general 
obligations of any State or of any political subdivision 
thereof, or obligations of the Washington Metropolitan Area 
Transit Authority which are guaranteed by the Secretary of 
Transportation under section 9 of the National Capital 
Transportation Act of 1969, or obligations issued under 
authority of the Federal Farm Loan Act, as amended, or issued 
by the thirteen banks for cooperatives or any of them or the 
Federal Home Loan Banks, or obligations which are insured by 
the Secretary of Housing and Urban Development under title XI 
of the National Housing Act, or obligations which are insured 
by the Secretary of Housing and Urban Development (hereafter in 
this sentence referred to as the ``Secretary'' pursuant to 
section 207 of the National Housing Act, if the debentures to 
be issued in payment of such insured obligations are guaranteed 
as to principal and interest by the United States, or 
obligations, participations, or other instruments of or issued 
by the Federal National Mortgage Association or the Government 
National Mortgage Association, or mortgages, obligations, or 
other securities which are or ever have been sold by the 
Federal Home Loan Mortgage Corporation pursuant to section 305 
or section 306 of the Federal Home Loan Mortgage Corporation 
Act or obligations of the Federal Financing Bank or obligations 
of the Environmental Financing Authority or obligations or 
other instruments or securities of the Student Loan Marketing 
Association, or such obligations of any local public agency (as 
defined in section 110 (h) of the Housing Act of 1949) as are 
secured by an agreement between the local public agency and the 
Secretary in which the local public agency agrees to borrow 
from said Secretary and said Secretary agrees to lend to said 
local public agency, monies in an aggregate amount which 
(together with any other monies irrevocably committed to the 
payment of interest on such obligations) will suffice to pay, 
when due, the interest on and all installments (including the 
final installment) of the principal of such obligations, which 
monies under the terms of said agreement are required to be 
used for such payments, or such obligations of a public housing 
agency (as defined in the United States Housing Act of 1937, as 
amended) as are secured (1) by an agreement between the public 
housing agency and the Secretary in which the public housing 
agency agrees to borrow from the Secretary and the Secretary 
agrees to lend to the public housing agency, prior to the 
maturity of such obligations, monies in an amount which 
(together with any other monies irrevocably committed to the 
payment of interest on such obligations) will suffice to pay 
the principal of such obligations with interest to maturity 
thereon, which monies under the terms of said agreement are 
required to be used for the purpose of paying the principal of 
and the interest on such obligations at their maturity, (2) by 
a pledge of annual contributions under an annual contributions 
contract between such public housing agency and the Secretary 
if such contract shall contain the covenant by the Secretary 
which is authorized by subsection (b) of section 22 of the 
United States Housing Act of 1937, as amended, and if the 
maximum sum and the maximum period specified in such contract 
pursuant to said subsection 22(b) shall not be less than the 
annual amount and the period for payment which are requisite to 
provide for the payment when due of all installments of 
principal and interest on such obligations, or (3) by a pledge 
or both annual contributions under an annual contributions 
contract containing the covenant by the Secretary which is 
authorized by section 6(g) of the United States Housing Act of 
1937, and a loan under an agreement between the local public 
housing agency and the Secretary in which the public housing 
agency agrees to borrow from the Secretary, and the Secretary 
agrees to lend to the public housing agency, prior to the 
maturity of the obligations involved, moneys in an amount which 
(together with any other moneys irrevocably committed under the 
annual contributions contract to the payment of principal and 
interest on such obligations) will suffice to provide for the 
payment when due of all installments of principal and interest 
on such obligations, which moneys under the terms of the 
agreement are required to be used for the purpose of paying the 
principal and interest on such obligations at their maturity: 
Provided, That in carrying on the business commonly known as 
the safe-deposit business the association shall not invest in 
the capital stock of a corporation organized under the law of 
any State to conduct a safe-deposit business in an amount in 
excess of 15 per centum of the capital stock of the association 
actually paid in and unimpaired and 15 per centum of its 
unimpaired surplus. The limitations and restrictions herein 
contained as to dealing in and underwriting investment 
securities shall not apply to obligations issued by the 
International Bank for Reconstruction and Development, the 
European Bank for Reconstruction and Development, the Inter-
American Development Bank, Bank for Economic Cooperation and 
Development in the Middle East and North Africa, the Asian 
Development Bank the African Development Bank, the Inter-
American Investment Corporation, or the International Finance 
Corporation, or obligations issued by any State or political 
subdivision or any agency of a State or political subdivision 
for housing, university, or dormitory purposes, which are at 
the time eligible for purchase by a national bank for its own 
account, nor to bonds, notes and other obligations issued by 
the Tennessee Valley Authority or by the United States Postal 
Service: Provided, That no association shall hold obligations 
issued by any of said organizations as a result of 
underwriting, dealing, or purchasing for its own account (and 
for this purpose obligations as to which it is under commitment 
shall be deemed to be held by it) in a total amount exceeding 
at any one time 10 per centum of its capital stock actually 
paid in and unimpaired and 10 per centum of its unimpaired 
surplus fund. Notwithstanding any other provision in this 
paragraph, the association may purchase for its own account 
shares of stock issued by a corporation authorized to be 
created pursuant to title IX of the Housing and Urban 
Development Act of 1968, and may make investments in a 
partnership, limited partnership, or joint venture formed 
pursuant to section 907(a) or 907(c) of that Act. 
Notwithstanding any other provision of this paragraph, the 
association may purchase for its own account shares of stock 
issued by any State housing corporation incorporated in the 
State in which the association is located and may make 
investments in loans and commitments for loans to any such 
corporation: Provided, That in no event shall the total amount 
of such stock held for its own account and such investments in 
loans and commitments made by the association exceed at any 
time 5 per centum of its capital stock actuallypaid in and 
unimpaired plus 5 per centum of its unimpaired surplus fund. 
Notwithstanding any other provision in this paragraph, the association 
may purchase for its own account shares of stock issued by a 
corporation organized solely for the purpose of making loans to farmers 
and ranchers for agricultural purposes, including the breeding, 
raising, fattening, or marketing of livestock. However, unless the 
association owns at least 80 per centum of the stock of such 
agricultural credit corporation the amount invested by the association 
at any one time in the stock of such corporation shall not exceed 20 
per centum of the unimpaired capital and surplus of the association: 
Provided further, That notwithstanding any other provision of this 
paragraph, the association may purchase for its own account shares of 
stock of a bank insured by the Federal Deposit Insurance Corporation or 
a holding company which owns or controls such an insured bank if the 
stock of such bank or company is owned exclusively (except to the 
extent directors' qualifying shares are required by law) by depository 
institutions or depository institution holding companies (as defined in 
section 3 of the Federal Deposit Insurance Act) and such bank or 
company and all subsidiaries thereof are engaged exclusively in 
providing services to or for other depository institutions, their 
holding companies, and the officers, directors, and employees of such 
institutions and companies, and in providing correspondent banking 
services at the request of other depository institutions or their 
holding companies (also referred to as a ``banker's bank''), but in no 
event shall the total amount of such stock held by the association in 
any bank or holding company exceed at any time 10 per centum of the 
associations capital stock and paid in and unimpaired surplus and in no 
event shall the purchase of such stock result in an association's 
acquiring more than 5 per centum of any class of voting securities of 
such bank or company. The limitations and restrictions contained in 
this paragraph as to an association purchasing for its own account 
investment securities shall not apply to securities that (A) are 
offered and sold pursuant to section 4(5) of the Securities Act of 1933 
(15 U.S.C. 77d(5)); (B) are small business related securities (as 
defined in section 3(a)(53) of the Securities Exchange Act of 1934); or 
(C) are mortgage related securities (as that term is defined in section 
3(a)(41) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(41)). 
The exception provided for the securities described in subparagraphs 
(A), (B), and (C) shall be subject to such regulations as the 
Comptroller of the Currency may prescribe, including regulations 
prescribing minimum size of the issue (at the time of initial 
distribution) or minimum aggregate sales prices, or both. A national 
banking association may deal in, underwrite, and purchase for such 
association's own account qualified Canadian government obligations to 
the same extent that such association may deal in, underwrite, and 
purchase for such association's own account obligations of the United 
States or general obligations of any State or of any political 
subdivision thereof. For purposes of this paragraph--
          (1) the term ``qualified Canadian government 
        obligations'' means any debt obligation which is backed 
        by Canada, any Province of Canada, or any political 
        subdivision of any such Province to a degree which is 
        comparable to the liability of the United States, any 
        State, or any political subdivision thereof for any 
        obligation which is backed by the full faith and credit 
        of the United States, such State, or such political 
        subdivision, and such term includes any debt obligation 
        of any agent of Canada or any such Province or any 
        political subdivision of such Province if--
                  (A) the obligation of the agent is assumed in 
                such agent's capacity as agent for Canada or 
                such Province or such political subdivision; 
                and
                  (B) Canada, such Province, or such political 
                subdivision on whose behalf such agent is 
                acting with respect to such obligation is 
                ultimately and unconditionally liable for such 
                obligation; and
          (2) the term ``Province of Canada'' means a Province 
        of Canada and includes the Yukon Territory and the 
        Northwest Territories and their successors.
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).

SEC. 5136A. SUBSIDIARIES OF NATIONAL BANKS.

  (a) Subsidiaries of National Banks Authorized To Engage in 
Financial Activities.--
          (1) Exclusive authority.--No provision of section 
        5136 or any other provision of this title LXII of the 
        Revised Statutes shall be construed as authorizing a 
        subsidiary of a national bank to engage in, or own any 
        share of or any other interest in any company engaged 
        in, any activity that--
                  (A) is not permissible for a national bank to 
                engage in directly; or
                  (B) is conducted under terms or conditions 
                other than those that would govern the conduct 
                of such activity by a national bank,
        unless a national bank is specifically authorized by 
        the express terms of a Federal statute and not by 
        implication or interpretation to acquire shares of or 
        an interest in, or to control, such subsidiary, such as 
        by paragraph (2) of this subsection and section 25A of 
        the Federal Reserve Act.
          (2) Specific authorization to conduct agency 
        activities which are financial in nature.--A national 
        bank may control a company that engages in agency 
        activities that have been determined to be financial in 
        nature or incidental to such financial activities 
        pursuant to and in accordance with section 6(c) of the 
        Bank Holding Company Act of 1956 if--
                  (A) the company engages in such activities 
                solely as agent and not directly or indirectly 
                as principal;
                  (B) the national bank is well capitalized and 
                well managed, and has achieved a rating of 
                satisfactory or better at the most recent 
                examination of the bank under the Community 
                Reinvestment Act of 1977;
                  (C) all depository institution affiliates of 
                the national bank are well capitalized and well 
                managed, and have achieved a rating of 
                satisfactory or better at the most recent 
                examination of each such depository institution 
                under the Community Reinvestment Act of 1977; 
                and
                  (D) the bank has received the approval of the 
                Comptroller of the Currency.
          (3) Definitions.--
                  (A) Company; control; affiliate; 
                subsidiary.--The terms ``company'', 
                ``control'', ``affiliate'', and ``subsidiary'' 
                have the meanings given to such terms in 
                section 2 of the Bank Holding Company Act of 
                1956.
                  (B) Well capitalized.--The term ``well 
                capitalized'' has the same meaning as in 
                section 38 of the Federal Deposit Insurance Act 
                and, for purposes of this section, the 
                Comptroller shall have exclusive jurisdiction 
                to determine whether a national bank is well 
                capitalized.
                  (C) Well managed.--The term ``well managed'' 
                means--
                          (i) in the case of a 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 that rating 
                                is given; or
                          (ii) 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.
                  (D) Other incorporated terms.--For purposes 
                of this paragraph, the terms ``appropriate 
                Federal banking agency'' and ``depository 
                institution'' have the meanings given to such 
                terms in section 3 of the Federal Deposit 
                Insurance Act.
  (b) Limited Exclusions From Community Needs Requirements for 
Newly Acquired Depository Institutions.--Any depository 
institution which becomes affiliated with a national bank 
during the 24-month period preceding the submission of an 
application to acquire a subsidiary under subsection (a)(2), 
and any depository institution which becomes so affiliated 
after the approval of such application, may be excluded for 
purposes of subsection (a)(2)(C) during the 24-month period 
beginning on the date of such acquisition if--
          (1) the depository institution has submitted an 
        affirmative plan to the appropriate Federal banking 
        agency (as defined in section 3 of the Federal Deposit 
        Insurance Act) to take such action as may be necessary 
        in order for such institution to achieve a 
        ``satisfactory record of meeting community credit 
        needs'', or better, at the next examination of the 
        institution under the Community Reinvestment Act of 
        1977; and
          (2) the plan has been approved by the appropriate 
        Federal banking agency.

SEC. 5136B. NATIONAL WHOLESALE FINANCIAL INSTITUTIONS.

  (a) Authorization of the Comptroller Required.--A national 
bank may apply to the Comptroller on such forms and in 
accordance with such regulations as the Comptroller may 
prescribe, for permission to operate as a national wholesale 
financial institution.
  (b) Regulation.--A national wholesale financial institution 
may exercise, in accordance with such institution's articles of 
incorporation and regulations issued by the Comptroller, all 
the powers and privileges of a national bank formed in 
accordance with section 5133 of the Revised Statutes of the 
United States, subject to section 9B of the Federal Reserve Act 
and the limitations and restrictions contained therein.
  (c) Community Reinvestment Act of 1977.--A national wholesale 
financial institution shall be subject to the Community 
Reinvestment Act of 1977.
  Sec. [5136A.] 5136C. (a) A national bank may not--
          (1) * * *

           *       *       *       *       *       *       *

                              ----------                              


     SECTION 106 OF THE BANK HOLDING COMPANY ACT AMENDMENTS OF 1970

  Sec. 106. (a) As used in this section, the terms ``bank'', 
``bank holding company'', ``subsidiary'', and ``Board'' have 
the meaning ascribed to such terms in section 2 of the Bank 
Holding Company Act of 1956. For purposes of this section only, 
the term ``company'', as used in section 2 of the Bank Holding 
Company Act of 1956, means any person, estate, trust, 
partnership, corporation, association, or similar organization, 
but does not include any corporation the majority of the shares 
of which are owned by the United States or by any State. The 
term ``trust service'' means any service customarily performed 
by a bank trust department. For purposes of this section, a 
subsidiary of a national bank which engages in activities as an 
agent pursuant to section 5136A(a)(2) shall be deemed to be a 
subsidiary of a bank holding company, and not a subsidiary of a 
bank.

           *       *       *       *       *       *       *

                              ----------                              


                          FEDERAL RESERVE ACT

           *       *       *       *       *       *       *


  Sec. 9. Any bank incorporated by special law of any State, or 
organized under the general laws of any State or of the 
UnitedStates, including Morris Plan banks and other incorporated 
banking institutions engaged in similar business, desiring to become a 
member of the Federal Reserve System, may make application to the Board 
of Governors of the Federal Reserve System, under such rules and 
regulations as it may prescribe, for the right to subscribe to the 
stock of the Federal reserve bank organized within the district in 
which the applying bank is located. Such application shall be for the 
same amount of stock that the applying bank would be required to 
subscribe to as a national bank. For the purposes of membership of any 
such bank the terms ``capital'' and ``capital stock'' shall include the 
amount of outstanding capital notes and debentures legally issued by 
the applying bank and purchased by the Reconstruction Finance 
Corporation. The Board of Governors of the Federal Reserve System, 
subject to the provisions of this Act and to such conditions as it may 
prescribe pursuant thereto may permit the applying bank to become a 
stockholder of such Federal reserve bank.

           *       *       *       *       *       *       *

  If at any time it shall appear to the Board of Governors of 
the Federal Reserve System that a member bank has failed to 
comply with the provisions of this section or the regulations 
of the Board of Governors of the Federal Reserve System made 
pursuant thereto, or has ceased to exercise banking functions 
without a receiver or liquidating agent having been appointed 
therefor, it shall be within the power of the board after 
hearing to require such bank to surrender its stock in the 
Federal reserve bank and to forfeit all rights and privileges 
of membership. [The Board of Governors of the Federal Reserve 
System may restore membership upon due proof of compliance with 
the conditions imposed by this section.] The Board of Governors 
of the Federal Reserve System, at its discretion, may furnish 
reports of examination or other confidential supervisory 
information concerning State member banks or any other entities 
examined under any other authority of the Board to any Federal 
or State authorities with supervisory or regulatory authority 
over the examined entity, to officers, directors, or receivers 
of the examined entity, and to any other person that the Board 
determines to be proper.

           *       *       *       *       *       *       *

          (24) Enforcement authority over uninsured state 
        member banks.--Section 3(u) of the Federal Deposit 
        Insurance Act, subsections (j) and (k) of section 7 of 
        such Act, and subsections (b) through (n), (s), (u), 
        and (v) of section 8 of such Act shall apply to an 
        uninsured State member bank in the same manner and to 
        the same extent such provisions apply to an insured 
        State member bank and any reference in any such 
        provision to ``insured depository institution'' shall 
        be deemed to be a reference to ``uninsured State member 
        bank'' for purposes of this paragraph.

           *       *       *       *       *       *       *


SEC. 9B. WHOLESALE FINANCIAL INSTITUTIONS.

  (a) Application for Membership as Wholesale Financial 
Institution.--
          (1) Application required.--
                  (A) In general.--Any bank may apply to the 
                Board of Governors of the Federal Reserve 
                System to become a State wholesale financial 
                institution or to the Comptroller of the 
                Currency to become a national wholesale 
                financial institution and, as a wholesale 
                financial institution, to subscribe to the 
                stock of the Federal reserve bank organized 
                within the district where the applying bank is 
                located.
                  (B) Treatment as member bank.--Any 
                application under subparagraph (A) shall be 
                treated as an application under, and shall be 
                subject to the provisions of section 9.
          (2) Insurance termination.--No bank the deposits of 
        which are insured under the Federal Deposit Insurance 
        Act may become a wholesale financial institution unless 
        it has met all requirements under that Act for 
        voluntary termination of deposit insurance.
  (b) General Requirements Applicable to Wholesale Financial 
Institutions.--
          (1) Federal reserve act.--Except as otherwise 
        provided in this section, wholesale financial 
        institutions shall be member banks and shall be subject 
        to the provisions of this Act that apply to member 
        banks to the same extent and in the same manner as 
        State member insured banks or national banks, except 
        that a wholesale financial institution may terminate 
        membership under this Act only with the prior written 
        approval of the Board and on terms and conditions that 
        the Board determines are appropriate to carry out the 
        purposes of this Act.
          (2) Prompt corrective action.--A wholesale financial 
        institution shall be deemed to be an insured depository 
        institution for purposes of section 38 of the Federal 
        Deposit Insurance Act except that--
                  (A) the relevant capital levels and capital 
                measures for each capital category shall be the 
                levels specified by the Board for wholesale 
                financial institutions;
                  (B) subject to subparagraph (A), all 
                references to the appropriate Federal banking 
                agency or to the Corporation in that section 
                shall be deemed to be references to the 
                Comptroller of the Currency, in the case of a 
                national wholesale financial institution, and 
                to the Board, in the case of all other 
                wholesale financial institutions; and
                  (C) in the case of wholesale financial 
                institutions, the purpose of prompt corrective 
                action shall be to protect taxpayers and the 
                financial system from the risks associated with 
                the operation and activities of wholesale 
                financial institutions.
          (3) Enforcement authority.--Section 3(u), subsections 
        (j) and (k) of section 7, subsections (b) through (n), 
        (s), (u), and (v) of section 8, and section 19 of the 
        Federal Deposit Insurance Act shall apply to a 
        wholesale financial institution in the same manner and 
        to the same extent as such provisions apply to State 
        member insured banks or national banks and any 
        reference in such sections to an insured depository 
        institution shall be deemed to include a reference to a 
        wholesale financial institution.
          (4) Certain other statutes applicable.--A wholesale 
        financial institution shall be deemed to be a banking 
        institution, and the Board shall be the appropriate 
        Federal banking agency for such bank and all such 
        bank's affiliates, for purposes of the International 
        Lending Supervision Act.
          (5) Bank merger act.--A wholesale financial 
        institution shall be subject to sections 18(c) and 44 
        of the Federal Deposit Insurance Act in the same manner 
        and to the same extent the wholesale financial 
        institution would be subject to such sections if the 
        institution were a State member insured bank or a 
        national bank.
          (6) Branching.--Notwithstanding any other provision 
        of law, a wholesale financial institution may establish 
        and operate a branch at any location on such terms and 
        conditions as established by, and with the approval 
        of--
                  (A) the Board, in the case of a State-
                chartered wholesale financial institution; and
                  (B) the Comptroller of the Currency, in the 
                case of a national bank wholesale financial 
                institution.
          (7) Activities of out-of-state branches of wholesale 
        financial institutions.--
                  (A) General.--A State-chartered wholesale 
                financial institution shall be deemed a State 
                bank and an insured State bank and a national 
                wholesale financial institution shall be deemed 
                a national bank for purposes of paragraphs (1), 
                (2), and (3) of section 24(j) of the Federal 
                Deposit Insurance Act.
                  (B) Definitions.--The following definitions 
                shall apply solely for purposes of applying 
                paragraph (1):
                          (i) Home state.--The term ``home 
                        State'' means, with respect to a State-
                        chartered wholesale financial 
                        institution, the State by which the 
                        institution is chartered.
                          (ii) Host state.--The term ``host 
                        State'' means a State, other than the 
                        home State of the wholesale financial 
                        institution, in which the institution 
                        maintains, or seeks to establish and 
                        maintain, a branch.
                          (iii) Out-of-state bank.--The term 
                        ``out-of-State bank'' means, with 
                        respect to any State, a wholesale 
                        financial institution whose home State 
                        is another State.
          (8) Discrimination regarding interest rates.--Section 
        27 of the Federal Deposit Insurance Act shall apply to 
        State-chartered wholesale financial institutions in the 
        same manner and to the same extent as such provisions 
        apply to State member insured banks and any reference 
        in such section to a State-chartered insured depository 
        institution shall be deemed to include a reference to a 
        State-chartered wholesale financial institution.
          (9) Preemption of state laws requiring deposit 
        insurance for wholesale financial institutions.--The 
        appropriate State banking authority may grant a charter 
        to a wholesale financial institution notwithstanding 
        any State constitution or statute requiring that the 
        institution obtain insurance of its deposits and any 
        such State constitution or statute is hereby preempted 
        solely for purposes of this paragraph.
          (10) Parity for wholesale financial institutions.--A 
        State bank that is a wholesale financial institution 
        under this section shall have all of the rights, 
        powers, privileges, and immunities (including those 
        derived from status as a federally chartered 
        institution) of and as if it were a national bank, 
        subject to such terms and conditions as established by 
        the Board.
          (11) Community reinvestment act of 1977.--A State 
        wholesale financial institution shall be subject to the 
        Community Reinvestment Act of 1977.
  (c) Specific Requirements Applicable to Wholesale Financial 
Institutions.--
          (1) Limitations on deposits.--
                  (A) Minimum amount.--
                          (i) In general.--No wholesale 
                        financial institution may receive 
                        initial deposits of $100,000 or less, 
                        other than on an incidental and 
                        occasional basis.
                          (ii) Limitation on deposits of less 
                        than $100,000.--No wholesale financial 
                        institution may receive initial 
                        deposits of $100,000 or less if such 
                        deposits constitute more than 5 percent 
                        of the institution's total deposits.
                  (B) No deposit insurance.--Except as 
                otherwise provided in section 8A(f) of the 
                Federal Deposit Insurance Act, no deposits held 
                by a wholesale financial institution shall be 
                insured deposits under the Federal Deposit 
                Insurance Act.
                  (C) Advertising and disclosure.--The Board 
                and the Comptroller of the Currency shall 
                prescribe jointly regulations pertaining to 
                advertising and disclosure by wholesale 
                financial institutions to ensure that each 
                depositor is notified that deposits at the 
                wholesale financial institution are not 
                federally insured or otherwise guaranteed by 
                the United States Government.
          (2) Minimum capital levels applicable to wholesale 
        financial institutions.--The Board shall, by 
        regulation, adopt capital requirements for wholesale 
        financial institutions--
                  (A) to account for the status of wholesale 
                financial institutions as institutions that 
                accept deposits that are not insured under the 
                Federal Deposit Insurance Act; and
                  (B) to provide for the safe and sound 
                operation of the wholesale financial 
                institution without undue risk to creditors or 
                other persons, including Federal reserve banks, 
                engaged in transactions with the bank.
          (3) Additional requirements applicable to wholesale 
        financial institutions.--In addition to any requirement 
        otherwise applicable to State member insured banks or 
        applicable, under this section, to wholesale financial 
        institutions, the Board may impose, by regulation or 
        order, upon wholesale financial institutions--
                  (A) limitations on transactions, direct or 
                indirect, with affiliates to prevent--
                          (i) the transfer of risk to the 
                        deposit insurance funds; or
                          (ii) an affiliate from gaining access 
                        to, or the benefits of, credit from a 
                        Federal reserve bank, including 
                        overdrafts at a Federal reserve bank;
                  (B) special clearing balance requirements; 
                and
                  (C) any additional requirements that the 
                Board determines to be appropriate or necessary 
                to--
                          (i) promote the safety and soundness 
                        of the wholesale financial institution 
                        or any insured depository institution 
                        affiliate of the wholesale financial 
                        institution;
                          (ii) prevent the transfer of risk to 
                        the deposit insurance funds; or
                          (iii) protect creditors and other 
                        persons, including Federal reserve 
                        banks, engaged in transactions with the 
                        wholesale financial institution.
          (4) Exemptions for wholesale financial 
        institutions.--The Board may, by regulation or order, 
        exempt any wholesale financial institution from any 
        provision applicable to a member bank that is not a 
        wholesale financial institution, if the Board finds 
        that such exemption is not inconsistent with--
                  (A) the promotion of the safety and soundness 
                of the wholesale financial institution or any 
                insured depository institution affiliate of the 
                wholesale financial institution;
                  (B) the protection of the deposit insurance 
                funds; and
                  (C) the protection of creditors and other 
                persons, including Federal reserve banks, 
                engaged in transactions with the wholesale 
                financial institution.
          (5) Limitation on transactions between a wholesale 
        financial institution and an insured bank.--For 
        purposes of section 23A(d)(1) of the Federal Reserve 
        Act, a wholesale financial institution that is 
        affiliated with an insured bank shall not be a bank.
          (6) No effect on other provisions.--This section 
        shall not be construed as limiting the Board's 
        authority over member banks or the authority of the 
        Comptroller of the Currency over national banks under 
        any other provision of law, or to create any obligation 
        for any Federal reserve bank to make, increase, renew, 
        or extend any advance or discount under this Act to any 
        member bank or other depository institution.
  (d) Capital and Managerial Requirements.--
          (1) In general.--A wholesale financial institution 
        shall be well capitalized and well managed.
          (2) Notice to company.--The Board shall promptly 
        provide notice to a company that controls a wholesale 
        financial institution whenever such wholesale financial 
        institution is not well capitalized or well managed.
          (3) Agreement to restore institution.--Within 45 days 
        of receipt of a notice under paragraph (2) (or such 
        additional period not to exceed 90 days as the Board 
        may permit), the company shall execute an agreement 
        acceptable to the Board to restore the wholesale 
        financial institution to compliance with all of the 
        requirements of paragraph (1).
          (4) Limitations until institution restored.--Until 
        the wholesale financial institution is restored to 
        compliance with all of the requirements of paragraph 
        (1), the Board may impose such limitations on the 
        conduct or activities of the company or any affiliate 
        of the company as the Board determines to be 
        appropriate under the circumstances.
          (5) Failure to restore.--If the company does not 
        execute and implement an agreement in accordance with 
        paragraph (3), comply with any limitation imposed under 
        paragraph (4), restore the wholesale financial 
        institution to well capitalized status within 180 days 
        after receipt by the company of the notice described in 
        paragraph (2), or restore the wholesale financial 
        institution to well managed status within such period 
        as the Board may permit, the company shall, under such 
        terms and conditions as may be imposed by the Board and 
        subject to such extension of time as may be granted in 
        the Board's discretion, divest control of its 
        subsidiary depository institutions.
          (6) Well managed defined.--For purposes of this 
        subsection, the term ``well managed'' has the same 
        meaning as in section 2 of the Bank Holding Company Act 
        of 1956.
  (e) Resolution of Wholesale Financial Institutions.--
          (1) Conservatorship and receivership authority.--
                  (A) Appointment.--The Board may appoint a 
                conservator or receiver to take possession and 
                control of a wholesale financial institution to 
                the same extent and in the same manner as the 
                Comptroller of the Currency may appoint a 
                conservator or receiver for a national bank.
                  (B) Powers.--The conservator or receiver for 
                a wholesale financial institution shall 
                exercise the same powers, functions, and 
                duties, subject to the same limitations, as a 
                conservator or receiver for a national bank.
          (2) Board authority.--The Board shall have the same 
        authority with respect to any conservator or receiver 
        appointed under paragraph (1) and the wholesale 
        financial institution for which such conservator has 
        been appointed as the Comptroller of the Currency has 
        with respect to a conservator or receiver for a 
        national bank and the national bank for which the 
        conservator or receiver has been appointed.
          (3) Bankruptcy proceedings.--The Comptroller of the 
        Currency (in the case of a national wholesale financial 
        institution) and the Board may direct the conservator 
        or receiver of a wholesale financial institution to 
        file a petition pursuant to title 11, United States 
        Code, in which case, title 11, United States Code, 
        shall apply to the wholesale financial institution in 
        lieu of otherwise applicable Federal or State 
        insolvency law.
  (f) Exclusive Jurisdiction.--Subsections (c) and (e) of 
section 43 of the Federal Deposit Insurance Act shall not apply 
to any wholesale financial institution.

           *       *       *       *       *       *       *

  Sec. 11. The Board of Governors of the Federal Reserve System 
shall be authorized and empowered:
  (a) * * *

           *       *       *       *       *       *       *

  [(m) Upon the affirmative vote of not less than six of its 
members the Board of Governors of the Federal Reserve System 
shall have power to fix from time to time for each Federal 
reserve district the percentage of individual bank capital and 
surplus which may be represented by loans secured by stock or 
bond collateral made by member banks within such district, but 
no such loan shall be made by any such bank to any person in an 
amount in excess of 15 percent of the unimpaired capital and 
surplus of such bank: Provided, That with respect to loans 
represented by obligations secured by not less than a like 
amount of bonds or notes of the United States issued since 
April 24, 1917, certificates of indebtedness of the United 
States, Treasury bills of the United States, or obligations 
fully guaranteed both as to principal and interest by the 
United States, such limitation of 15 percent on loans to any 
person shall not apply, but State member banks shall be subject 
to the same limitations and conditions as are applicable in the 
case of national banks under section 5200(c)(4) of the Revised 
Statutes. Any percentage so fixed by the Board of Governors of 
the Federal Reserve System shall be subject to change from time 
to time upon ten days' notice, and it shall be the duty of the 
Board to establish such percentages with a view to preventing 
the undue use of bank loans for the speculative carrying of 
securities. The Board of Governors of the Federal Reserve 
System shall have power to direct any member bank to refrain 
from further increase of its loans secured by stock or bond 
collateral for any period up to one year under penalty of 
suspension of all rediscount privileges at Federal reserve 
banks.]
  (m) [Repealed]

           *       *       *       *       *       *       *

  Sec. 19. (a) * * *
  (b) Reserve Requirements.--
          (1) Definitions.--The following definitions and rules 
        apply to this subsection, subsection (c), section 11A, 
        the first paragraph of section 13, and the second, 
        thirteenth, and fourteenth paragraphs of section 16:
                  (A) The term ``depository institution'' 
                means--
                          (i) any insured bank as defined in 
                        section 3 of the Federal Deposit 
                        Insurance Act or any bank which is 
                        eligible to make application to become 
                        an insured bank under section 5 of such 
                        Act, or any wholesale financial 
                        institution subject to section 9B of 
                        this Act;

           *       *       *       *       *       *       *


              restrictions on transactions with affiliates

  Sec. 23B. (a) In General.--
          (1) * * *

           *       *       *       *       *       *       *

          (4) Subsidiary of national bank.--For purposes of 
        this section, a subsidiary of a national bank which 
        engages in activities as an agent pursuant to section 
        5136A(a)(2) shall be deemed to be an affiliate of the 
        national bank and not a subsidiary of the bank.

           *       *       *       *       *       *       *


     banking corporations authorized to do foreign banking business

  Sec. 25A. Corporations to be organized for the purpose of 
engaging in international or foreign banking or other 
international or foreign financial operations, or in banking or 
other financial operations in a dependency or insular 
possession of the United States, either directly or through the 
agency, ownership, or control of local institutions in foreign 
countries, or in such dependencies or insular possessions as 
provided by this section, and to act when required by the 
Secretary of the Treasury as fiscal agents of the United 
States, may be formed by any number of natural persons, not 
less in any case than five: Provided, That nothing in this 
section shall be construed to deny the right of the Secretary 
of the Treasury to use any corporation organized under this 
section as depositaries in Panama and the Panama Canal Zone, or 
in the Philippine Islands and other insular possessions and 
dependencies of the United States.

           *       *       *       *       *       *       *

  [Whenever the Board of Governors of the Federal Reserve 
System shall become satisfied of the insolvency of any such 
corporation, it may appoint a receiver who shall take 
possession of all of the property and assets of the corporation 
and exercise the same rights, privileges, powers, and authority 
with respect thereto as are now exercised by receivers of 
national banks appointed by the Comptroller of the Currency of 
the United States: Provided, however, That the assets of the 
corporation subject to the laws of other countries or 
jurisdictions shall be dealt with in accordance with the terms 
of such laws.]
  (16) Appointment of Receiver or Conservator.--
          (A) In general.--The Board may appoint a conservator 
        or receiver for a corporation organized under the 
        provisions of this section to the same extent and in 
        the same manner as the Comptroller of the Currency may 
        appoint a conservator or receiver for a national bank, 
        and the conservator or receiver for such corporation 
        shall exercise the same powers, functions, and duties, 
        subject to the same limitations, as a conservator or 
        receiver for a national bank.
          (B) Equivalent authority.--The Board shall have the 
        same authority with respect to any conservator or 
        receiver appointed for a corporation organized under 
        the provisions of this section under this paragraph and 
        any such corporation as the Comptroller of the Currency 
        has with respect to a conservator or receiver of a 
        national bank and the national bank for which a 
        conservator or receiver has been appointed.
          (C) Title 11 petitions.--The Board may direct the 
        conservator or receiver of a corporation organized 
        under the provisions of this section to file a petition 
        pursuant to title 11, United States Code, in which 
        case, title 11, United States Code, shall apply to the 
        corporation in lieu of otherwise applicable Federal or 
        State insolvency law.

           *       *       *       *       *       *       *


               CHAPTER 47 OF TITLE 18, UNITED STATES CODE


                 CHAPTER 47--FRAUD AND FALSE STATEMENTS

Sec.
1001. Statements or entries generally.
     * * * * * * *
1008. Misrepresentations regarding financial institution liability for 
          obligations of affiliates.

           *       *       *       *       *       *       *


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

  (a) In General.--No institution-affiliated party of an 
insured depository institution or institution-affiliated party 
of a subsidiary or affiliate of an insured depository 
institution shall fraudulently represent that the institution 
is or will be liable for any obligation of a subsidiary or 
other affiliate of the institution.
  (b) Criminal Penalty.--Whoever violates subsection (a) shall 
be fined under this title, imprisoned for not more than 5 year, 
or both.
  (c) Institution-Affiliated Party Defined.--For purposes of 
this section, the term ``institution-affiliated party'' with 
respect to a subsidiary or affiliate has the same meaning as in 
section 3 of the Federal Deposit Insurance Act, except 
references to an insured depository institution shall be deemed 
to be references to a subsidiary or affiliate of an insured 
depository institution.
  (d) Other Definitions.--For purposes of this section, the 
terms ``affiliate'', ``insured depository institution'', and 
``subsidiary'' have same meanings as in section 3 of the 
Federal Deposit Insurance Act.
                              ----------                              


                RIGHT TO FINANCIAL PRIVACY ACT OF 1978

           *       *       *       *       *       *       *


                              definitions

      Sec. 1101. For the purpose of this title, the term--
          (1) * * *

           *       *       *       *       *       *       *

          (7) ``supervisory agency'' means with respect to any 
        particular financial institution, holding company, or 
        any subsidiary of a financial institution or holding 
        company, any of the following which has statutory 
        authority to examine the financial condition, business 
        operations, or records or transactions of that 
        institution, holding company, or subsidiary--
                  (A) * * *

           *       *       *       *       *       *       *

                  (G) the Commodity Futures Trading Commission; 
                or
                  [(G)] (H) the Secretary of the Treasury, with 
                respect to the Bank Secrecy Act and the 
                Currency and Foreign Transactions Reporting Act 
                (Public Law 91-508, title I and II); or
                  [(H)] (I) any State banking or securities 
                department or agency: and

           *       *       *       *       *       *       *


                           use of information

    Sec. 1112. (a) * * *

           *       *       *       *       *       *       *

    (e) Notwithstanding section 1101(6) or any other provision 
of this title, the exchange of financial records or other 
information with respect to a financial institution, holding 
company, or a subsidiary of a depository institution or holding 
company, among and between the five member supervisory agencies 
of the Federal Financial Institutions Examination Council [and 
the Securities and Exchange Commission], the Securities and 
Exchange Commission, and the Commodity Futures Trading 
Commission is permitted.

           *       *       *       *       *       *       *

                              ----------                              


                     TITLE 11, UNITED STATES CODE

           *       *       *       *       *       *       *


                     CHAPTER 1--GENERAL PROVISIONS

           *       *       *       *       *       *       *


Sec. 101. Definitions

  In this title--
          (1) * * *

           *       *       *       *       *       *       *

          [(22) ``financial institution'' means a person that 
        is a commercial or savings bank, industrial savings 
        bank, savings and loan association, or trust company 
        and, when any such person is acting as agent or 
        custodian for a customer in connection with a 
        securities contract, as defined in section 741 of this 
        title, such customer;]
          (22) ``financial institution'' means a person that is 
        a commercial or savings bank, industrial savings bank, 
        savings and loan association, trust company, wholesale 
        financial institution established under section 5136B 
        of the Revised Statutes of the United States or section 
        9B of the Federal Reserve Act, or corporation organized 
        under section 25A of the Federal Reserve Act and, when 
        any such person is acting as agent or custodian for a 
        customer in connection with a securities contract, as 
        defined in section 741 of this title, such customer,

           *       *       *       *       *       *       *


Sec. 103. Applicability of chapters

  (a) * * *

           *       *       *       *       *       *       *

  (e) Subchapter V of chapter 7 of this title applies only in a 
case under such chapter concerning the liquidation of a 
wholesale financial institution established under section 5136B 
of the Revised Statutes of the United States or section 9B of 
the Federal Reserve Act, or a corporation organized under 
section 25A of the Federal Reserve Act.
  [(e)] (f) Except as provided in section 901 of this title, 
only chapters 1 and 9 of this title apply in a case under such 
chapter 9.
  [(f)] (g) Except as provided in section 901 of this title, 
subchapters I, II, and III of chapter 11 of this title apply 
only in a case under such chapter.
  [(g)] (h) Subchapter IV of chapter 11 of this title applies 
only in a case under such chapter concerning a railroad.
  [(h)] (i) Chapter 13 of this title applies only in a case 
under such chapter.
  [(i)] (j) Chapter 12 of this title applies only in a case 
under such chapter.

           *       *       *       *       *       *       *


Sec. 109. Who may be a debtor

  (a) * * *
  (b) A person may be a debtor under chapter 7 of this title 
only if such person is not--
          (1) a railroad;
          (2) a domestic insurance company, bank, savings bank, 
        cooperative bank, savings and loan association, 
        building and loan association, homestead association, a 
        small business investment company licensed by the Small 
        Business Administration under subsection (c) or (d) of 
        section 301 of the Small Business Investment Act of 
        1958, credit union, or industrial bank or similar 
        institution which is an insured bank as defined in 
        section 3(h) of the Federal Deposit Insurance Act[; 
        or], except that--
                  (A) a wholesale financial institution 
                established under section 5136B of the Revised 
                Statutes of the United States or section 9B of 
                the Federal Reserve Act may be a debtor if a 
                petition is filed at the direction of the 
                Comptroller of the Currency (in the case of a 
                wholesale financial institution established 
                under section 5136B of the Revised Statutes of 
                the United States) or the Board of Governors of 
                the Federal Reserve System (in the case of any 
                wholesale financial institution); and
                  (B) a corporation organized under section 25A 
                of the Federal Reserve Act may be a debtor if a 
                petition is filed at the direction of the Board 
                of Governors of the Federal Reserve System; or

           *       *       *       *       *       *       *

  [(d) Only a person that may be a debtor under chapter 7 of 
this title, except a stockbroker or a commodity broker, and a 
railroad may be a debtor under chapter 11 of this title.]
  (d) Only a railroad and a person that may be a debtor under 
chapter 7 of this title, except that a stockbroker, a wholesale 
financial institution established under section 5136B of the 
Revised Statutes of the United States or section 9B of the 
Federal Reserve Act, a corporation organized under section 25A 
of the Federal Reserve Act, or a commodity broker, may be a 
debtor under chapter 11 of this title.

           *       *       *       *       *       *       *


                         CHAPTER 7--LIQUIDATION

                SUBCHAPTER I--OFFICERS AND ADMINISTRATION

Sec.
701. Interim trustee.
     * * * * * * *

                SUBCHAPTER V--WHOLESALE BANK LIQUIDATION

781. Definitions for subchapter.
782. Selection of trustee.
783. Additional powers of trustee.
784. Right to be heard.
785. Expedited transfers.

           *       *       *       *       *       *       *


                SUBCHAPTER V--WHOLESALE BANK LIQUIDATION

Sec. 781. Definitions for subchapter

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

Sec. 782. Selection of trustee

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

Sec. 783. Additional powers of trustee

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

Sec. 784. Right to be heard

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

Sec. 785. Expedited transfers

  The trustee may make a transfer pursuant to section 783 
without prior judicial approval, if the Comptroller of the 
Currency (in the case of a national wholesale financial 
institution for which it appointed the conservator or receiver) 
or the Board (in the case of any wholesale bank for which it 
appointed the conservator or receiver) determines that the 
transfer would be necessary to avert serious adverse effects on 
economic conditions or financial stability.
                              ----------                              


                     SECTION 7A OF THE CLAYTON ACT

  Sec. 7A. (a) * * *

           *       *       *       *       *       *       *

  (c) The following classes of transactions are exempt from the 
requirements of this section--
          (1) * * *

           *       *       *       *       *       *       *

          (7) transactions which require agency approval under 
        section 10(e) of the Home Owners' Loan Act, section 
        18(c) of the Federal Deposit Insurance Act (12 U.S.C. 
        1828(c)), or section 3 of the Bank Holding Company Act 
        of 1956 (12 U.S.C. 1842), except that a portion of a 
        transaction is not exempt under this paragraph if such 
        portion of the transaction (A) is subject to section 6 
        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;
          (8) transactions which require agency approval under 
        section 4 of the Bank Holding Company Act of 1956 (12 
        U.S.C. 1843) or section 5 of the Home Owners' Loan Act 
        of 1933 (12 U.S.C. 1464), if copies of all information 
        and documentary material filed with any such agency are 
        contemporaneously filed with the Federal Trade 
        Commission and the Assistant Attorney General at least 
        30 days prior to consummation of the proposed 
        transaction, except that a portion of a transaction is 
        not exempt under this paragraph if such portion of the 
        transaction (A) is subject to section 6 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;
                              ----------                              


           SECTION 8 OF THE INTERNATIONAL BANKING ACT OF 1978

                         nonbanking activities

  Sec. 8. (a) * * *

           *       *       *       *       *       *       *

  (c)(1) * * *

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

                              ----------                              


                       FEDERAL HOME LOAN BANK ACT

           *       *       *       *       *       *       *


                              definitions

  Sec. 2. As used in this Act--
          (1) Board.--The [term ``Board'' means] terms 
        ``Finance Board'' and ``Board'' mean the Federal 
        Housing Finance Board established under section 2A.

           *       *       *       *       *       *       *

          [(3) The term ``State'' includes the District of 
        Columbia, Guam, Puerto Rico, and the Virgin Islands of 
        the United States.]
          (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.

           *       *       *       *       *       *       *

          (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. 2B. POWERS AND DUTIES.

  (a) General Powers.--The Board shall have the following 
powers:
          (1)  * * *

           *       *       *       *       *       *       *

          (5) To issue and serve a notice of charges upon a 
        Federal home loan bank or upon any executive officer or 
        director of a Federal home loan bank if, in the 
        determination of the Finance Board, the bank, executive 
        officer, or director is engaging or has engaged in, or 
        the Finance Board has reasonable cause to believe that 
        the bank, executive officer, or director is about to 
        engage in, any conduct that violates any provision of 
        this Act or any law, order, rule, or regulation or any 
        condition imposed in writing by the Finance Board in 
        connection with the granting of any application or 
        other request by the bank, or any written agreement 
        entered into by the bank with the agency, in accordance 
        with the procedures provided in section 1371(c) of the 
        Federal Housing Enterprises Financial Safety and 
        Soundness Act of 1992. Such authority includes the same 
        authority to take affirmative action to correct 
        conditions resulting from violations or practices or to 
        limit activities of a bank or any executive officer or 
        director of a bank as appropriate Federal banking 
        agencies have to take with respect to insured 
        depository institutions under paragraphs (6) and (7) of 
        section 8(b) of the Federal Deposit Insurance Act, and 
        to have all other powers, rights, and duties to enforce 
        this Act with respect to the Federal home loan banks 
        and their executive officers and directors as the 
        Office of Federal Housing Enterprise Oversight has to 
        enforce the Federal Housing Enterprises Financial 
        Safety and Soundness Act of 1992, the Federal National 
        Mortgage Association Charter Act, or the Federal Home 
        Loan Mortgage Corporation Act with respect to the 
        Federal housing enterprises under the Federal Housing 
        Enterprises Financial Safety and Soundness Act of 1992.
          (6) To address any insufficiencies in capital levels 
        resulting from the application of section 5(f) of the 
        Home Owners' Loan Act.
          (7) To sue and be sued, by and through its own 
        attorneys.

           *       *       *       *       *       *       *

  Sec. 4. (a) Criteria for Eligibility.--
          (1)  * * *
          (2) Qualified thrift lender.--An insured depository 
        institution that is not a member on January 1, 1989, 
        may become a member of a Federal Home Loan Bank only 
        if--
                  (A) the insured depository institution (other 
                than a community financial institution) has at 
                least 10 percent of its total assets in 
                residential mortgage loans;

           *       *       *       *       *       *       *

          (3) Limited exemption for community financial 
        institutions.--A community financial institution that 
        otherwise meets the requirements of paragraph (2) may 
        become a member without regard to the percentage of its 
        total assets that is represented by residential 
        mortgage loans, as described in subparagraph (A) of 
        paragraph (2).

           *       *       *       *       *       *       *


     [capital of federal home loan banks and subscriptions thereto

  [Sec. 6. (a) The capital stock of each Federal Home Loan Bank 
shall be divided into shares of a par value of $100 each. The 
minimum capital stock shall be issued at par. Stock issued 
thereafter shall be issued at such price not less than par as 
may be fixed by the Board.
  [(b)(1) The original stock subscription of each institution 
eligible to become a member under section 4 shall be an amount 
equal to 1 per centum of the subscriber's aggregate unpaid loan 
principal, but not less than $500. The bank shall annually, as 
of the close of the calendar year, adjust, at such time and in 
such manner and upon such terms and conditions as the Board may 
by regulations or otherwise prescribe, the amount of stock held 
by each member so that such member shall have invested in the 
stock of the Federal Home Loan Bank at least an amount 
calculated in the manner provided in the next preceding 
sentence (but not less than $500). If the bank finds that the 
investment of any member in stock is greater than that required 
under this subsection it may, unless prohibited by said Board 
or by the provisions of paragraph (2) of this subsection, in 
its discretion and upon application of such member retire the 
stock of such member in excess of the amount so required. Said 
Board, in its discretion, may, by regulations or otherwise, 
provide for adjustments in amounts of stock to be issued or 
retired in order that stock may be issued or retired only in 
entire shares.
  [(2) Notwithstanding any other provision of this subsection, 
no action shall be taken by any bank with respect to any member 
pursuant to any of the foregoing provisions of this subsection 
if the effect of such action would be to cause the aggregate 
outstanding advances, within the meaning of the last sentence 
of subsection (c) of section 10 of this Act or within the 
meaning of regulations of the Board defining such term for the 
purposes of this sentence, made by such bank to such member to 
exceed twenty times the amounts paid in by such member for 
outstanding capital stock held by such member.
  [(3) Except as provided in subsection (i), upon retirement of 
stock of any member the bank shall pay such member for the 
stock retired an amount equal to the par value of such stock, 
or, at the election of the bank, the whole or any part of the 
payment which would otherwise be so made shall be credited upon 
the indebtedness of the member to the bank. In either such 
event, stock equal in par value to the amount of the payment or 
credit, or both, as the case may be, shall be canceled.
  [(4) For the purposes of this subsection, the term 
``aggregate unpaid loan principal'' means the aggregate unpaid 
principal of a subscriber's or member's home mortgage loans, 
home-purchase contracts, and similar obligations.
  [(5) The Board, by regulations or otherwise, may require each 
member to submit such reports and information as said Board, in 
its discretion, may determine to be necessary or appropriate 
for the purposes of this subsection.
  [(c) Stock subscriptions other than by the United States 
shall be paid for in cash, and shall be paid for at the time of 
application therefor, or, at the election of the subscriber, in 
installments, but not less than one-fourth of the total amount 
payable shall be paid at the time of filing application, and a 
further sum of not less than one-fourth of such total shall 
have been paid at the end of each succeeding period of four 
months.
  [(d) Stock subscribed for otherwise than by the United 
States, and the right to the proceeds thereof, shall not be 
transferred or hypothecated except as hereinafter provided and 
the certificates therefor shall so state.
  [(e) Any member other than a Federal savings and loan 
association may withdraw from membership in a Federal Home Loan 
Bank six months after filing with the Board written notice of 
intention so to do, and the Board may, after hearing, remove 
any member from membership, if, in the opinion of the Board, 
such member (i) has failed to comply with any provision of this 
Act or regulation of the Board made pursuant thereto; (ii) is 
insolvent: Provided, That any member of a bank which is a 
building and loan association, savings and loan association, 
cooperative bank, or homestead association shall be deemed 
insolvent if the assets of such member are less than its 
obligations to its creditors and others, including the holders 
of its withdrawable accounts; or (iii) has a management or 
home-financing policy of a character inconsistent with sound 
and economical home financing or with the purposes of this Act. 
If any member's membership in a Federal Home Loan Bank is 
terminated, the indebtedness of such member to the Federal Home 
Loan Bank shall be liquidated in an orderly manner (as 
determined by the Federal Home Loan Bank), and upon completion 
of such liquidation, the capital stock in the Federal Home Loan 
Bank owned by such member shall be surrendered and canceled. 
Any such liquidation shall be deemed a prepayment of any such 
indebtedness, and shall be subject to any penalties or other 
fees applicable to such prepayment. Upon the liquidation of 
such indebtedness such member shall be entitled to the return 
of its collateral, and, upon surrender and cancellation of such 
capital stock, the member shall receive a sum equal to its cash 
paid subscriptions for the capital stock surrendered, except 
that if at any time the Board finds that the paid-in capital of 
a Federal Home Loan Bank is or is likely to be impaired as a 
result of losses in or depreciation of the assets held, the 
Federal Home Loan Bank shall on the order of the Board withhold 
from the amount to be paid in retirement of the stock a pro 
rata share of the amount of such impairment as determined by 
the Board.
  [(f) A Federal Home Loan Bank may, with the approval of the 
Board, permit the disposal of stock to another member, or to an 
institution eligible to become a member, but only to enable 
such an institution to become a member.
  [(g) All stock of any Federal Home Loan Bank shall share in 
dividend distributions without preference.
  [(h) Notwithstanding any other provision of this Act, an 
institution which withdraws from membership may acquire 
membership in any Federal Home Loan Bank only after the 
expiration of a period of 10 years thereafter, except where 
such withdrawal is a consequence of a transfer of membership on 
a non-interrupted basis between banks or in connection with 
obtaining a charter as a Federal savings association (as 
defined in section 3 of the Federal Deposit Insurance Act).]

SEC. 6. CAPITAL STRUCTURE OF FEDERAL HOME LOAN BANKS.

  (a) Regulations.--
          (1) Capital standards.--Not later than 1 year after 
        the date of enactment of the Financial Services 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 aggregate on-balance sheet 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 shall be multiplied 
                by 1.5, the paid-in value of the outstanding 
                Class C stock and the amount of retained 
                earnings shall be multiplied by 2.0, and such 
                higher amounts shall be deemed to be capital 
                for purposes of meeting the 5 percent minimum 
                leverage ratio.
          (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;
                          (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; and
                          (iii) Class C stock, which shall be 
                        nonredeemable;
                  (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 (as determined in accordance 
                with generally accepted accounting 
                principles)--
                          (i) the amounts paid for the Class C 
                        stock and any other nonredeemable stock 
                        approved by the Finance Board;
                          (ii) the amounts paid for the Class B 
                        stock, in an amount not to exceed 1 
                        percent of the total assets of the 
                        bank; and
                          (iii) the retained earnings of the 
                        bank; and
                  (B) total capital of a Federal home loan bank 
                shall include--
                          (i) permanent capital;
                          (ii) the amounts paid for the Class A 
                        stock, Class B stock (excluding any 
                        amount treated as permanent capital 
                        under subparagraph (5)(A)(ii)), or any 
                        other class of redeemable stock 
                        approved by the Finance Board;
                          (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 
        provisions 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 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 enactment of the Financial 
                Services 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, Class C, or any other class 
                of nonredeemable stock, 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--
                          (i) any stock issued by that bank 
                        shall be available only to, held only 
                        by, and tradable only among members of 
                        that bank and between that bank and its 
                        members; and
                          (ii) a bank has no obligation to 
                        repurchase its outstanding Class C 
                        stock but may do so, provided it is 
                        consistent with Finance Board 
                        regulations and is at a price that is 
                        mutually agreeable to the bank and the 
                        member; 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 1 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 by providing written 
        notice to the bank of its intent to do so. 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 State or Federal 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 C stock of 
        a Federal home loan bank, and any other classes of 
        nonredeemable stock approved by the Finance Board (to 
        the extent provided in the terms thereof), shall own 
        the retained earnings, surplus, undivided profits, and 
        equity reserves, if any, of the bank.
          (2) No nonredeemable classes of stock.--If a Federal 
        home loan bank has no outstanding Class C or other such 
        nonredeemable stock, then the holders of any other 
        classes of stock of the bank then outstanding shall 
        have ownership in, and a private property right in, the 
        retained earnings, surplus, undivided profits, and 
        equity reserves, if any, of the bank.
          (3) 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.
          (4) 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.

                          management of banks

  Sec. 7. (a)  * * *

           *       *       *       *       *       *       *

  [(d) The term] (d) Terms of Office.--The term of each 
elective directorship [shall be two years] and the term of each 
appointive directorship shall be four years. If any person, 
before or after, or partly before and partly after, the date of 
the enactment of this sentence, has been elected to each of 
three consecutive full terms as an elective director of a 
Federal home loan bank in any electivedirectorship or elective 
directorships and has served for all or part of each of said terms, 
such person shall not be eligible for election to an elective 
directorship of such bank for a term which begins earlier than two 
years after the expiration of the last expiring of said three terms. 
The Board is hereby authorized to prescribe such rules and regulations 
as it may deem necessary or appropriate for the nomination and election 
of directors of Federal home loan banks, including, without limitation 
on the generality of the foregoing, rules and regulations with respect 
to the breaking of ties and with respect to the inclusion of more than 
one directorship on a single ballot and the methods of voting and of 
determining the results of voting in such cases.

           *       *       *       *       *       *       *

  (i) Each bank may pay its directors reasonable compensation 
for the time required of them, and their necessary expenses, in 
the performance of their duties, in accordance with the 
resolutions adopted by the such directors[, subject to the 
approval of the board].

           *       *       *       *       *       *       *

  Sec. 9. Any member of a Federal Home Loan Bank shall be 
entitled to apply in writing for advances. Such application 
shall be in such form as shall be required by the Federal Home 
Loan Bank [with the approval of the Board]. Such Federal Home 
Loan Bank may at its discretion deny any such application, or[, 
subject to the approval of the Board,] may grant it on such 
conditions as the Federal Home Loan Bank may prescribe.

           *       *       *       *       *       *       *


                          [advances to members

  [Sec. 10. (a) Each]

SEC. 10. ADVANCES TO MEMBERS.

  (a) In General.--
          (1) All advances.--Each Federal Home Loan Bank is 
        authorized to make secured advances to its members upon 
        collateral sufficient, in the judgment of the Bank, to 
        fully secure advances obtained from the Bank under this 
        section or section 11(g) of this Act. [All long-term 
        advances shall only be made for the purpose of 
        providing funds for residential housing finance. A 
        Bank]
          (2) Purposes of advances.--A long-term advance may 
        only be made for the purposes of--
                  (A) providing funds to any member for 
                residential housing finance; and
                  (B) providing funds to any community 
                financial institution for small businesses, 
                agricultural, rural development, or low-income 
                community development lending.
          (3) Collateral.--A Bank, at the time of origination 
        or renewal of a loan or advance, shall obtain and 
        maintain a security interest in collateral eligible 
        pursuant to one or more of the following categories:
                  [(1)] (A) Fully disbursed, whole first 
                mortgages on improved residential property (not 
                more than 90 days delinquent), or securities 
                representing a whole interest in such 
                mortgages.
                  [(2)] (B) Securities issued, insured, or 
                guaranteed by the United States Government or 
                any agency thereof (including without 
                limitation, mortgage-backed securities issued 
                or guaranteed by the Federal Home Loan Mortgage 
                Corporation, the Federal National Mortgage 
                Corporation, and the Government National 
                Mortgage Association).
                  [(3)] (C) [Deposits] Cash or deposits of a 
                Federal Home Loan Bank.
                  [(4)] (D) Other real estate related 
                collateral acceptable to the Bank if such 
                collateral has a readily ascertainable value 
                and the Bank can perfect its interest in the 
                collateral. [The aggregate amount of 
                outstanding advances secured by such other real 
                estate related collateral shall not exceed 30 
                percent of such member's capital.]
                  (E) Secured loans for small business, 
                agriculture, rural development, or low-income 
                community development, or securities 
                representing a whole interest in such secured 
                loans, in the case of any community financial 
                institution.
          [(5) Paragraphs (1) through (4)] (4) Additional bank 
        authority.--Subparagraphs (A) through (E) of paragraph 
        (3) shall not affect the ability of any Federal Home 
        Loan Bank to take such steps as it deems necessary to 
        protect its security position with respect to 
        outstanding advances, including requiring deposits of 
        additional collateral security, whether or not such 
        additional security would be eligible to originate an 
        advance. If an advance existing on the date of 
        enactment of the Financial Institutions Reform, 
        Recovery, and Enforcement Act of 1989 matures and the 
        member does not have sufficient eligible collateral to 
        fully secure a renewal of such advance, a Bank may 
        renew such advance secured by such collateral as the 
        Bank [and the Board] determines is appropriate. A 
        member that has an advance secured by such insufficient 
        eligible collateral must reduce its level of 
        outstanding advances promptly and prudently in 
        accordance with a schedule determined by the [Board] 
        Federal home loan bank.
          (5) Review of certain collateral standards.--The 
        Board may review the collateral standards applicable to 
        each Federal home loan bank for the classes of 
        collateral described in subparagraphs (D) and (E) of 
        paragraph (3), and may, if necessary for safety and 
        soundness purposes, require an increase in the 
        collateral standards for any or all of those classes of 
        collateral.
          (6) Definitions.--For purposes of this subsection, 
        the terms ``small business'', ``agriculture'', ``rural 
        development'', and ``low-income community development'' 
        shall have the meanings given those terms by rule or 
        regulation of the Finance Board.

           *       *       *       *       *       *       *

  (c) Such advances shall be made upon the note or obligation 
of the member secured as provided in this section, bearing such 
rate of interest as the [Board] Federal home loan bank may 
approve or determine, and the Federal Home Loan Bank shall have 
a lien upon and shall hold the stock of such member as further 
collateralsecurity for all indebtedness of the member to the 
Federal Home Loan Bank. [At no time shall the aggregate outstanding 
advances made by any Federal Home Loan Bank to any member exceed twenty 
times the amounts paid in by such member for outstanding capital stock 
held by it exceed twenty times the value of the security required to be 
deposited under section 6(e)].
  (d) The institution applying for an advance shall enter into 
a primary and unconditional obligation to pay off all advances, 
together with interest and any unpaid costs and expenses in 
connection therewith according to the terms under which they 
were made, in such form as shall meet the requirements of the 
bank [and the approval of the Board]. The bank shall reserve 
the right to require at any time, when deemed necessary for its 
protection, deposits of additional collateral security or 
substitutions of security by the borrowing institution, and 
each borrowing institution shall assign additional or 
substituted security when and as so required. [Subject to the 
approval of the Board, any] Any Federal Home Loan Bank shall 
have power to sell to any other Federal Home Loan Bank, with or 
without recourse, any advance made under the provisions of this 
Act, or to allow to such bank a participation therein, and any 
other Federal Home Loan Bank shall have power to purchase such 
advance or to accept a participation therein, together with an 
appropriate assignment of security therefor.
  (e) Qualified Thrift Lender Status.--
          (1) In general.--A member that is not a qualified 
        thrift lender may only receive an advance if it holds 
        stock in its Federal Home Loan Bank at the time it 
        receives that advance in an amount equal to at least--
                  (A) 5 percent of that member's total 
                advances, divided by
                  (B) such member's actual thrift investment 
                percentage.
        Such members that are not qualified thrift lenders may 
        only apply for advances under this section for the 
        purpose of obtaining funds for housing finance or, in 
        the case of any community financial institution, for 
        the purposes described in subsection (a)(2).

           *       *       *       *       *       *       *

          (5) Definitions.--As used in this subsection--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Actual thrift investment percentage.--The 
                term ``actual thrift investment percentage'' 
                has the same meaning as in section 10(m) of the 
                Home Owners' Loan Act except that, in 
                determining the actual thrift investment 
                percentage of any community financial 
                institution for purposes of this subsection, 
                the total investment of such member in loans 
                for small business, agriculture, rural 
                development, or low-income community 
                development, or securities representing a whole 
                interest in such loans, shall be treated as a 
                qualified thrift investment (as defined in such 
                section 10(m)).

           *       *       *       *       *       *       *

  (j) Affordable Housing Program.--
          (1) In general.--[Pursuant]
                  (A) Establishment.--Pursuant to regulations 
                promulgated by the Board, each Bank shall 
                establish an Affordable Housing Program [to 
                subsidize the interest rate on advances] to 
                provide subsidies, including subsidized 
                interest rates on advances to members engaged 
                in lending for long term, low- and moderate-
                income, owner-occupied and affordable rental 
                housing at subsidized interest rates.
                  (B) Nondelegation of approval authority.--
                Subject to such regulations as the Finance 
                Board may prescribe, the board of directors of 
                each Federal home loan bank may approve or 
                disapprove requests from members for Affordable 
                Housing Program subsidies, and may not delegate 
                such authority.

           *       *       *       *       *       *       *


              incorporation of banks, and corporate powers

  Sec. 12. (a) The directors of each Federal Home Loan Bank 
shall, in accordance with such rules and regulations as the 
Board may prescribe, make and file with the Board at the 
earliest practicable date after the establishment of such bank, 
an organization certificate which shall contain such 
information as the Board may require. Upon the making and 
filing of such organization certificate with the Board, such 
bank shall become, as of the date of the execution of its 
organization certificate, a body corporate, and as such and in 
its name as designated by the Board it shall have power to 
adopt, alter, and use a corporate seal; to make contracts; to 
purchase or lease and hold or dispose of such real estate as 
may be necessary or convenient for the transaction of its 
business[, but, except with the prior approval of the Board, no 
bank building shall be bought or erected to house any such 
bank, or leased by such bank under any lease for such purpose 
which has a term of more than ten years]; to sue and be sued, 
to complain, and to defend, in any court of competent 
jurisdiction, State or Federal; to select, employ, and fix the 
compensation of such officers, employees, attorneys, and agents 
as shall be necessary for the transaction of its business 
[subject to the approval of the Board]; to define their duties, 
require bonds of them and fix the penalties thereof, and to 
dismiss at pleasure such officers, employees, attorneys, and 
agents; [and, by its Board of directors, to prescribe, amend, 
and repeal by-laws, rules, and regulations governing the manner 
in which its affairs may be administered; and the powers 
granted to it by law may be exercised and enjoyed subject to 
the approval of the Board. The president of a Federal Home Loan 
Bank may also be a member of the Board of directors thereof, 
but no other officer, employee, attorney, or agent of such 
bank,] and, 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 who receives compensation, may be a member of the 
[Board] board of directors. Each such bank shall have all such 
incidental powers, not inconsistent with the provisions of this Act, as 
are customary and usual in corporations generally.
  (b) Subject to such regulations as may be prescribed by the 
Board, one or more Federal home [loans banks] loan banks may 
acquire, hold, or dispose of, in whole or in part, or 
facilitate such acquisition, holding, or disposition by members 
of any such bank of, housing project loans, or interests 
therein, having the benefit of any guaranty under section 221 
of the Foreign Assistance Act of 1961, as now or hereafter in 
effect, or loans, or interests therein, having the benefit of 
any guaranty under section 224 of such Act, or any commitment 
or agreement with respect to such loans, or interests therein, 
made pursuant to either of such sections. This authority 
extends to the acquisition, holding, and disposition of loans, 
or interests therein, having the benefit of any guaranty under 
section 221 or 222 of the Foreign Assistance Act of 1961, as 
amended by section 105 of the Foreign Assistance Act of 1969 or 
as hereafter amended or extended, or of any commitment or 
agreement for any such guaranty.

           *       *       *       *       *       *       *


                         reserves and dividends

  Sec. 16. (a) Each Federal Home Loan Bank may carry to a 
reserve account from time-to-time such portion of its net 
earnings as may be determined by its board of directors. Each 
Federal Home Loan Bank shall establish such additional reserves 
and/or make such charge-offs on account of depreciation or 
impairment of its assets as the Board shall require from time 
to time. No dividends shall be paid except out of [net 
earnings] previously retained earnings or current net earnings 
remaining after reductions for all reserves, chargeoffs, 
purchases of capital certificates of the Financing Corporation, 
and payments relating to the Funding Corporation required under 
this Act have been provided for, other than chargeoffs or 
expenses incurred by a Bank in connection with the purchase of 
capital stock of the Financing Corporation under section 21 or 
payments relating to the Funding Corporation Principal Fund 
under section 21B(e)[, and then only with the approval of the 
Federal Housing Finance Board]. [Beginning on January 1, 1992, 
the preceding sentence shall be applied by substituting 
``previously retained earnings or current net earnings'' for 
``net earnings''.] The reserves of each Federal Home Loan Bank 
shall be invested, subject to such regulations, restrictions, 
and limitations as may be prescribed by the Board, in direct 
obligations of the United States, in obligations, 
participations, or other instruments of or issued by the 
Federal National Mortgage Association or the Government 
National Mortgage Association, in mortgages, obligations, or 
other securities which are or ever have been sold by the 
Federal Home Loan Mortgage Corporation pursuant to section 305 
or section 306 of the Federal Home Loan Mortgage Corporation 
Act, and in such securities as fiduciary and trust funds may be 
invested in under the laws of the State in which the Federal 
Home Loan Bank is located.

           *       *       *       *       *       *       *


                        administrative expenses

  Sec. 18. (a) * * *
  (b) Assessments for Administrative Expenses.--
          (1)  * * *

           *       *       *       *       *       *       *

          [(4) Transition provision.--On or after the effective 
        date of the Financial Institutions Reform, Recovery, 
        and Enforcement Act of 1989, the Board may levy a one-
        time special assessment on the Banks pursuant to this 
        subsection for the Board's estimated expenses for the 
        transitional period following enactment of such Act, if 
        such assessment is made before the Board's first 
        semiannual assessment under paragraph (1).]

           *       *       *       *       *       *       *


SEC. 21B. RESOLUTION FUNDING CORPORATION ESTABLISHED.

  (a)  * * *

           *       *       *       *       *       *       *

  (f) Obligations of Funding Corporation.--
          (1)  * * *
          (2) Interest payments.--The Funding Corporation shall 
        pay the interest due on such obligations from funds 
        obtained for such interest payments from the following 
        sources:
                  (A)  * * *

           *       *       *       *       *       *       *

                  [(C) Payments by federal home loan banks.--To 
                the extent the amounts available pursuant to 
                subparagraphs (A) and (B) are insufficient to 
                cover the amount of interest payments, the 
                Federal Home Loan Banks shall pay to the 
                Funding Corporation each calendar year the 
                aggregate amount of $300,000,000 minus the 
                amounts required in such year for Financing 
                Corporation principal payments (pursuant to 
                section 21) and the amounts required in such 
                year by the Funding Corporation pursuant to 
                subsection (e). Each Bank's individual share of 
                any amounts required to be paid by the Banks 
                under this subparagraph shall be determined as 
                follows:
                          [(i) Amounts up to 20 percent of net 
                        earnings.--Each Federal Home Loan Bank 
                        shall pay an equal percentage of its 
                        net earnings for the year for which 
                        such amount is required to be paid, up 
                        to a maximum of 20 percent of net 
                        earnings.
                          [(ii) Amounts in excess of 20 percent 
                        of net earnings.--If the aggregate 
                        amount required to be paid by the 
                        Federal Home Loan Banks under this 
                        subparagraph for any year exceeds 20 
                        percent of the aggregate net earnings 
                        of the Banks for such year, each Bank 
                        shall pay 20 percent of its net 
                        earnings for such year as provided in 
                        clause (i), and each Bank's individual 
                        share of the excess of the required 
                        amount over 20 percent of the aggregate 
                        net earnings of the Banks for such year 
                        shall be determined by dividing--
                                  [(I) the average month-end 
                                level in the prior year of 
                                advances outstanding by such 
                                Bank to Savings Associations 
                                Insurance Fund members; by
                                  [(II) the average month-end 
                                level in the prior year of 
                                advances outstanding by all 
                                such Banks to Savings 
                                Associations Insurance Fund 
                                members.]
                  (C) Payments by federal home loan banks.--
                          (i) In general.--To the extent that 
                        the amounts available pursuant to 
                        subparagraphs (A) and (B) are 
                        insufficient to cover the amount of 
                        interest payments, each Federal home 
                        loan bank shall pay to the Funding 
                        Corporation in each calendar year, 
                        20.75 percent of the net earnings of 
                        that bank (after deducting expenses 
                        relating to section 10(j) and operating 
                        expenses).
                          (ii) Annual determination.--The Board 
                        annually shall determine the extent to 
                        which the value of the aggregate 
                        amounts paid by the Federal home loan 
                        banks exceeds or falls short of the 
                        value of an annuity of $300,000,000 per 
                        year that commences on the issuance 
                        date and ends on the final scheduled 
                        maturity date of the obligations, and 
                        shall select appropriate present value 
                        factors for making such determinations.
                          (iii) Payment term alterations.--The 
                        Board shall extend or shorten the term 
                        of the payment obligations of a Federal 
                        home loan bank under this subparagraph 
                        as necessary to ensure that the value 
                        of all payments made by the banks is 
                        equivalent to the value of an annuity 
                        referred to in clause (ii).
                          (iv) Term beyond maturity.--If the 
                        Board extends the term of payments 
                        beyond the final scheduled maturity 
                        date for the obligations, each Federal 
                        home loan bank shall continue to pay 
                        20.75 percent of its net earnings 
                        (after deducting expenses relating to 
                        section 10(j) and operating expenses) 
                        to the Treasury of the United States 
                        until the value of all such payments by 
                        the Federal home loan banks is 
                        equivalent to the value of an annuity 
                        referred to in clause (ii). In the 
                        final year in which the Federal home 
                        loan banks are required to make any 
                        payment to the Treasury under this 
                        subparagraph, if the dollar amount 
                        represented by 20.75 percent of the net 
                        earnings of the Federal home loan banks 
                        exceeds the remaining obligation of the 
                        banks to the Treasury, the Finance 
                        Board shall reduce the percentage pro 
                        rata to a level sufficient to pay the 
                        remaining obligation.

           *       *       *       *       *       *       *


[SEC. 22A. INFORMAL REVIEW OF CERTAIN SUPERVISORY DECISIONS.

  [(a) Review of Certain Supervisory Decisions.--The Board 
shall establish an informal review procedure under which any 
association, insured institution, or member may obtain a 
review, by the principal supervisory agent for the Federal home 
loan bank district in which such association, institution, or 
member is located, of any decision by any examiner or 
supervisory agent of the Federal home loan bank for such 
district with respect to--
          [(1) the appraisal value of--
                  [(A) any loan held by the association, 
                insured institution, or member; or
                  [(B) any property serving as collateral to 
                secure the repayment of any loan (held by the 
                association, institution, or member);
          [(2) the classification of any loan held by the 
        association, institution, or member; or
          [(3) any requirement imposed on the association, 
        institution, or member to establish or to add to a 
        reserve or allowance for a possible loss on any loan 
        held by such institution.
  [(b) Standards for Review.--The review procedure established 
pursuant to subsection (a) shall provide that the principal 
supervisory agent for the appropriate Federal home loan bank 
district, after taking into account the report described in 
subsection (c)(2) by the arbiter (or panel of arbiters), shall 
approve, modify, or set aside any decision for which a review 
has been requested on the basis of the supervisory agent's 
review of all the facts and the regulations applicable to such 
decision and shall take such action as such agent may determine 
to be necessary or appropriate in light of such review.
  [(c) Appointment of Independent Arbiter.--The review 
procedure established pursuant to subsection (a) shall provide 
for the appointment (by the principal supervisory agent for the 
appropriate Federal home loan bank district, upon the filing of 
a request for a review under this section by an association, 
insured institution, or member) of an independent arbiter (or, 
upon the request of such association, institution, or member, a 
panel of independent arbiters) who shall--
          [(1) review the decision which is the subject of the 
        review in light of all the facts of the case and the 
        regulations applicable to such determination; and
          [(2) report the conclusions and recommendations of 
        the independent arbiter (or the panel) with respect to 
        the decision under review to the principal supervisory 
        agent for the appropriate Federal home loan bank 
        district and the association, insured institution, or 
        member.
  [(d) Consolidation of Reviews of Related Decisions.--The 
principal supervisory agent may consolidate requests for review 
under this section of related decisions and conduct a single 
review of all such related decisions.
  [(e) 25-Day Arbiter Review Period; 20-Day PSA Review 
Period.--
          [(1) Arbiter review.--The review procedure 
        established pursuant to subsection (a) shall provide 
        that any review described in subsection (c) by an 
        arbiter (or panel of arbiters) shall be completed 
        before the end of the 25-day period beginning on the 
        date the request for the review was filed with the 
        principal supervisory agent.
          [(2) Review by psa.--The review procedure established 
        pursuant to subsection (a) shall provide that any 
        review by the principal supervisory agent of an 
        arbiter's report described in subsection (c)(2) (or the 
        report of a panel of arbiters) shall be completed 
        before the end of the 20-day period beginning on the 
        date the agent receives such report.
          [(3) Only business days included.--Saturdays, 
        Sundays, and holidays shall not be taken into account 
        in determining the periods described in paragraphs (1) 
        and (2).
  [(f) Clarification of Relationship Between Informal Review 
and Other Available Review.--
          [(1) Informal review not exclusive.--The informal 
        review procedure established pursuant to subsection (a) 
        for reviewing any decision referred to in such 
        subsection shall be in addition to, and not in lieu of, 
        any other procedure established by law, or any 
        regulation of the Board, which provides for formal 
        administrative or judicial review of such decision.
          [(2) Only the original decision is within scope of 
        administrative and judicial review.--If any 
        association, insured institution, or member seeks 
        administrative or judicial review of any examiner or 
        supervisory agent decision for which such association, 
        insured institution, or member obtained an informal 
        review under the procedure established pursuant to 
        subsection (a), such administrative or judicial review 
        shall be carried out--
                  [(A) without regard to the fact that such 
                informal review was made; and
                  [(B) without admitting into evidence, or 
                otherwise taking into account, the findings, 
                recommendations, or conclusions of the 
                principal supervisory agent and the independent 
                arbiter (or the panel of independent arbiters) 
                which conducted the informal review.
          [(3) Informal review not subject to formal review.--
        The findings, recommendations, or conclusions of any 
        principal supervisory agent who conducted a review 
        under the procedure established pursuant to subsection 
        (a) are not decisions which may be subject to review by 
        the Board or any court under any regulation of the 
        Board or any law.
  [(g) Expenses of Review Borne by Association, Institution, or 
Member.--All reasonable expenses incurred as a direct or 
indirect result of any review under the procedure established 
pursuant to subsection (a) shall be paid by the association, 
insured institution, or member which requested the review.]

           *       *       *       *       *       *       *


[SEC. 27. HOUSING OPPORTUNITY HOTLINE PROGRAM.

  [(a) Establishment.--The Federal Home Loan Banks shall, 
individually or (at the discretion of the Federal Housing 
Finance Board) on a consolidated basis, establish and provide a 
service substantially similar (in the determination of the 
Board) to the ``Housing Opportunity Hotline'' program 
established in October 1992, by the Federal Home Loan Bank of 
Dallas.
  [(b) Purpose.--The service or services established under this 
section shall provide information regarding the availability 
for purchase of single family properties that are owned or held 
by Federal agencies and are located in the Federal Home Loan 
Bank district for such Bank. Such agencies shall provide to the 
Federal Home Loan Banks the information necessary to provide 
such service or services.
  [(c) Required Information.--The service or services 
established under this section shall use the information 
obtained from Federal agencies to provide information regarding 
the size, location, price, and other characteristics of such 
single family properties, the eligibility requirements for 
purchasers of such properties, the terms for such sales, and 
the terms of any available seller financing, and shall identify 
properties that are affordable to low- and moderate-income 
families.
  [(d) Toll-Free Telephone Number.--The service or services 
established under this section shall establish and maintain a 
toll-free telephone line for providing the information made 
available under the service or services.
  [(e) Definitions.--For purposes of this section, the 
following definitions shall apply:
          [(1) Federal agencies.--The term ``Federal agencies'' 
        means--
                  [(A) the Farmers Home Administration, the 
                Federal National Mortgage Association, the 
                Federal Home Loan Mortgage Corporation, the 
                General Services Administration, the Department 
                of Housing and Urban Development, and the 
                Department of Veterans Affairs;
                  [(B) the Resolution Trust Corporation, 
                subject to the discretion of such Corporation; 
                and
                  [(C) the Federal Deposit Insurance 
                Corporation, subject to the discretion of such 
                Corporation.
          [(2) Single family property.--The term ``single 
        family property'' means a 1- to 4-family residence, 
        including a manufactured home.]

           *       *       *       *       *       *       *

                              ----------                              


                        ACT OF OCTOBER 28, 1974


   AN ACT To increase deposit insurance from $20,000 to $40,000, to 
    provide full insurance for public unit deposits of $100,000 per 
    account, to establish a National Commission on Electronic Fund 
                   Transfers, and for other purposes.

TITLE I--AMENDMENTS TO AND EXTENSIONS OF PROVISIONS OF LAW RELATING TO 
             FEDERAL REGULATION OF DEPOSITORY INSTITUTIONS

           *       *       *       *       *       *       *



             independence of financial regulatory agencies

  Sec. 111. No officer or agency of the United States shall 
have any authority to require the Securities and Exchange 
Commission, the Board of Governors of the Federal Reserve 
System, the Federal Deposit Insurance Corporation, the 
Comptroller of the Currency, the [Federal Home Loan Bank 
Board,] Director of the Office of Thrift Supervision, the 
Federal Housing Finance Board, or the National Credit Union 
Administration to submit legislative recommendations, or 
testimony, or comments on legislation, to any officer or agency 
of the United States for approval, comments, or review, prior 
to the submission of such recommendations, testimony, or 
comments to the Congress if such recommendations, testimony, or 
comments to the Congress include a statement indicating that 
the views expressed therein are those of the agency submitting 
them and do not necessarily represent the views of the 
President.

           *       *       *       *       *       *       *

                              ----------                              


                     ELECTRONIC FUND TRANSFER ACT

           *       *       *       *       *       *       *



Sec. 904. Regulations

  (a)  * * *

           *       *       *       *       *       *       *

  (d) Applicability to Service Providers Other Than Certain 
Financial Institutions.--
          (1)  * * *

           *       *       *       *       *       *       *

          (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; and
                          (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.
                  (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) Electronic fund transfer.--The 
                        term ``electronic fund transfer'' 
                        includes a transaction which 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.
                          (ii) 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 which holds the 
                                account of such consumer from 
                                which the transfer is made.
                          (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. 905. Terms and conditions of transfers

  (a) The terms and conditions of electronic fund transfers 
involving a consumer's account shall be disclosed at the time 
the consumer contracts for an electronic fund transfer service, 
in accordance with regulations of the Board. Such disclosures 
shall be in readily understandable language and shall include, 
to the extent applicable--
          (1)  * * *

           *       *       *       *       *       *       *

          (8) the financial institution's liability to the 
        consumer under section 910; [and]
          (9) under what circumstances the financial 
        institution will in the ordinary course of business 
        disclose information concerning the consumer's account 
        to third persons[.]; and
          (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)(ii)) if the 
                consumer initiates a transfer from an automated 
                teller machine which 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. 910. Liability of financial institutions

  (a)  * * *

           *       *       *       *       *       *       *

  (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).

           *       *       *       *       *       *       *

                              ----------                              


                  DEPOSIT INSURANCE FUNDS ACT OF 1996

           *       *       *       *       *       *       *


SEC. 2704. MERGER OF BIF AND SAIF.

  (a)  * * *

           *       *       *       *       *       *       *

  [(b) Special Reserve of the Deposit Insurance Fund.--
          [(1) In general.--Immediately before the merger of 
        the Bank Insurance Fund and the Savings Association 
        Insurance Fund, if the reserve ratio of the Savings 
        Association Insurance Fund exceeds the designated 
        reserve ratio, the amount by which that reserve ratio 
        exceeds the designated reserve ratio shall be placed in 
        the Special Reserve of the Deposit Insurance Fund, 
        established under section 11(a)(5) of the Federal 
        Deposit Insurance Act, as amended by this section.
          [(2) Definition.--For purposes of this subsection, 
        the term ``reserve ratio'' means the ratio of the net 
        worth of the Savings Association Insurance Fund to the 
        aggregate estimated amount of deposits insured by the 
        Savings Association Insurance Fund.]

           *       *       *       *       *       *       *

  (d) Technical and Conforming Amendments.--
          (1)  * * *

           *       *       *       *       *       *       *

          [(4) Special reserve of deposits.--Section 11(a)(5) 
        of the Federal Deposit Insurance Act (12 U.S.C. 
        1821(a)(5)) is amended to read as follows:
          [``(5) Special reserve of deposit insurance fund.--
                  [``(A) Establishment.--
                          [``(i) In general.--There is 
                        established a Special Reserve of the 
                        Deposit Insurance Fund, which shall be 
                        administered by the Corporation and 
                        shall be invested in accordance with 
                        section 13(a).
                          [``(ii) Limitation.--The Corporation 
                        shall not provide any assessment 
                        credit, refund, or other payment from 
                        any amount in the Special Reserve.
                  [``(B) Emergency use of special reserve.--
                Notwithstanding subparagraph (A)(ii), the 
                Corporation may, in its sole discretion, 
                transfer amounts from the Special Reserve to 
                the Deposit Insurance Fund, for the purposes 
                set forth in paragraph (4), only if--
                          [``(i) the reserve ratio of the 
                        Deposit Insurance Fund is less than 50 
                        percent of the designated reserve 
                        ratio; and
                          [``(ii) the Corporation expects the 
                        reserve ratio of the Deposit Insurance 
                        Fund to remain at less than 50 percent 
                        of the designated reserve ratio for 
                        each of the next 4 calendar quarters.
                  [``(C) Exclusion of special reserve in 
                calculating reserve ratio.--Notwithstanding any 
                other provision of law, any amounts in the 
                Special Reserve shall be excluded in 
                calculating the reserve ratio of the Deposit 
                Insurance Fund under section 7.''.]

           *       *       *       *       *       *       *

          (6) Repeals.--
                  (A)  * * *

           *       *       *       *       *       *       *

                  (C) Section 11.--Section 11(a) of the Federal 
                Deposit Insurance Act (12 U.S.C. 1821(a)) is 
                amended--
                          (i) by striking paragraphs [(6) and 
                        (7)] (5), (6), and (7); and
                          [(ii) by redesignating paragraph (8) 
                        as paragraph (6).]
                          (ii) by redesignating paragraph (8) 
                        as paragraph (5).

           *       *       *       *       *       *       *

                              ----------                              


                    SECURITIES EXCHANGE ACT OF 1934

           *       *       *       *       *       *       *


                  definitions and application of title

  Sec. 3. (a) When used in this title, unless the context 
otherwise requires--
          (1)  * * *

           *       *       *       *       *       *       *

          [(4) The term ``broker'' means any person engaged in 
        the business of effecting transactions in securities 
        for the account of others, but does not include a bank.
          [(5) The term ``dealer'' means any person engaged in 
        the business of buying and selling securities for his 
        own account, through a broker or otherwise, but does 
        not include a bank, or any person insofar as he buys or 
        sells securities for his own account, either 
        individually or in some fiduciary capacity, but not as 
        a part of a regular business.]
          (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 which receive any 
                                services are fully disclosed to 
                                the broker or dealer;
                                  (VIII) the bank does not 
                                carry a securities account of 
                                the customer except 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 or 
                        fiduciary capacity in its trust 
                        department, or another department where 
                        the trust or fiduciary activity is 
                        regularly examined by bank examiners 
                        under the same standards and in the 
                        same way as such activities are 
                        examined in the trust department, 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 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 a registered transfer agent 
                                (including as a registrar of 
                                stocks), 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, if--
                                          (aa) the bank does 
                                        not solicit 
                                        transactions or provide 
                                        investment advice with 
                                        respect to the purchase 
                                        or sale of securities 
                                        in connection with the 
                                        plan; and
                                          (bb) the bank's 
                                        compensation for such 
                                        plan or program 
                                        consists chiefly of 
                                        administration fees, or 
                                        flat or capped per 
                                        order processing fees, 
                                        or both.
                                  (II) Dividend reinvestment 
                                plans.--The bank effects 
                                transactions, as a registered 
                                transfer agent (including as a 
                                registrar of stocks), in the 
                                securities of an issuer as part 
                                of that issuer's dividend 
                                reinvestment plan, if--
                                          (aa) the bank does 
                                        not solicit 
                                        transactions or provide 
                                        investment advice with 
                                        respect to the purchase 
                                        or sale of securities 
                                        in connection with the 
                                        plan;
                                          (bb) the bank does 
                                        not net shareholders' 
                                        buy and sell orders, 
                                        other than for programs 
                                        for odd-lot holders or 
                                        plans registered with 
                                        the Commission; and
                                          (cc) the bank's 
                                        compensation for such 
                                        plan or program 
                                        consists chiefly of 
                                        administration fees, or 
                                        flat or capped per 
                                        order processing fees, 
                                        or both.
                                  (III) Issuer plans.--The bank 
                                effects transactions, as a 
                                registered transfer agent 
                                (including as a registrar of 
                                stocks), in the securities of 
                                an issuer as part of that 
                                issuer's plan for the purchase 
                                or sale of that issuer's 
                                shares, if--
                                          (aa) the bank does 
                                        not solicit 
                                        transactions or provide 
                                        investment advice with 
                                        respect to the purchase 
                                        or sale of securities 
                                        in connection with the 
                                        plan or program;
                                          (bb) the bank does 
                                        not net shareholders' 
                                        buy and sell orders, 
                                        other than for programs 
                                        for odd-lot holders or 
                                        plans registered with 
                                        the Commission; and
                                          (cc) the bank's 
                                        compensation for such 
                                        plan or program 
                                        consists chiefly of 
                                        administration fees, or 
                                        flat or capped per 
                                        order processing fees, 
                                        or both.
                                  (IV) Permissible delivery of 
                                materials.--The exception to 
                                being considered a broker for a 
                                bank engaged in activities 
                                described in subclauses (I), 
                                (II), and (III) will not be 
                                affected by a bank's delivery 
                                of written or electronic plan 
                                materials to employees of the 
                                issuer, shareholders of the 
                                issuer, or members of affinity 
                                groups of the issuer, so long 
                                as such materials are--
                                          (aa) comparable in 
                                        scope or nature to that 
                                        permitted by the 
                                        Commission as of the 
                                        date of the enactment 
                                        of the Financial 
                                        Services Act of 1999; 
                                        or
                                          (bb) otherwise 
                                        permitted by the 
                                        Commission.
                          (v) Sweep accounts.--The bank effects 
                        transactions as part of a program for 
                        the investment or reinvestment of 
                        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 (as defined in 
                        section 2 of the Bank Holding Company 
                        Act of 1956) of the bank other than--
                                  (I) a registered broker or 
                                dealer; or
                                  (II) an affiliate that is 
                                engaged in merchant banking, as 
                                described in section 6(c)(3)(H) 
                                of the Bank Holding Company Act 
                                of 1956.
                          (vii) Private securities offerings.--
                        The bank--
                                  (I) effects sales as part of 
                                a primary offering of 
                                securities not involving a 
                                public offering, pursuant to 
                                section 3(b), 4(2), or 4(6) of 
                                the Securities Act of 1933 or 
                                the rules and regulations 
                                issued thereunder;
                                  (II) at any time after one 
                                year after the date of 
                                enactment of the Financial 
                                Services Act of 1999, is not 
                                affiliated with a broker or 
                                dealer that has been registered 
                                for more than one year; and
                                  (III) effects transactions 
                                exclusively with qualified 
                                investors.
                          (viii) Safekeeping and custody 
                        activities.--
                                  (I) In general.--The bank, as 
                                part of customary banking 
                                activities--
                                          (aa) provides 
                                        safekeeping or custody 
                                        services with respect 
                                        to securities, 
                                        including the exercise 
                                        of warrants and other 
                                        rights on behalf of 
                                        customers;
                                          (bb) facilitates the 
                                        transfer of funds or 
                                        securities, as a 
                                        custodian or a clearing 
                                        agency, in connection 
                                        with the clearance and 
                                        settlement of its 
                                        customers' transactions 
                                        in securities;
                                          (cc) effects 
                                        securities lending or 
                                        borrowing transactions 
                                        with or on behalf of 
                                        customers as part of 
                                        services provided to 
                                        customers pursuant to 
                                        division (aa) or (bb) 
                                        or invests cash 
                                        collateral pledged in 
                                        connection with such 
                                        transactions; or
                                          (dd) holds securities 
                                        pledged by a customer 
                                        to another person or 
                                        securities subject to 
                                        purchase or resale 
                                        agreements involving a 
                                        customer, or 
                                        facilitates the 
                                        pledging or transfer of 
                                        such securities by book 
                                        entry or as otherwise 
                                        provided under 
                                        applicable law, if the 
                                        bank maintains records 
                                        separately identifying 
                                        the securities and the 
                                        customer.
                                  (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) Excepted financial products.--
                        The bank effects transactions in 
                        excepted financial products, as defined 
                        in paragraph (56)(A) of this 
                        subsection.
                          (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) Broker dealer execution.--The exception 
                to being considered a broker for a bank engaged 
                in activities described in clauses (ii), (iv), 
                and (viii) of subparagraph (B) shall not apply 
                if the activities described in such provisions 
                result in the trade in the United States of any 
                security that is a publicly traded security in 
                the United States, unless--
                          (i) the bank directs such trade to a 
                        registered broker or dealer for 
                        execution;
                          (ii) the trade is a cross trade or 
                        other substantially similar trade of a 
                        security that--
                                  (I) is made by the bank or 
                                between the bank and an 
                                affiliated fiduciary; and
                                  (II) is not in contravention 
                                of fiduciary principles 
                                established under applicable 
                                Federal or State law; or
                          (iii) the trade is conducted in some 
                        other manner permitted under rules, 
                        regulations, or orders as the 
                        Commission may prescribe or issue.
                  (D) Fiduciary capacity.--For purposes of 
                subparagraph (B)(ii), the term ``fiduciary 
                capacity'' means--
                          (i) in the capacity as trustee, 
                        executor, administrator, guardian, 
                        assignee, receiver, or custodian under 
                        a uniform gift to minor act, or as an 
                        investment adviser if the bank receives 
                        a fee for its investment advice;
                          (ii) in any capacity in which the 
                        bank possesses investment discretion on 
                        behalf of another; or
                          (iii) in any other similar capacity.
                  (F) Exception for entities subject to section 
                15(e).--The term ``broker'' does not include a 
                bank that--
                          (i) was, immediately prior to the 
                        enactment of the Financial Services Act 
                        of 1999, subject to section 15(e) of 
                        this title; and
                          (ii) is subject to such restrictions 
                        and requirements as the Commission 
                        considers appropriate.
          (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 the bank, 
                        or an affiliate of any such bank other 
                        than a broker or dealer, or, in the 
                        case of mortgage obligations or 
                        consumer-related receivables, a 
                        syndicate of banks of which the bank is 
                        a member (other than as an 
                        insignificant member).
                          (iv) Excepted financial products.--
                        The bank buys or sells excepted 
                        financial products, as defined in 
                        paragraph (56)(A) of this subsection.
                          (v) Derivative instruments.--The bank 
                        issues, buys, or sells any derivative 
                        instrument to which the bank is a 
                        party--
                                  (I) to or from a corporation, 
                                limited liability company, or 
                                partnership that owns and 
                                invests on a discretionary 
                                basis, not less than 
                                $100,000,000 in investments, or 
                                to or from a qualified 
                                investor, except that if the 
                                instrument provides for the 
                                delivery of one or more 
                                securities (other than a 
                                derivative instrument or 
                                government security), the 
                                transaction shall be effected 
                                with or through a registered 
                                broker or dealer; or
                                  (II) to or from other 
                                persons, except that if the 
                                derivative instrument provides 
                                for the delivery of one or more 
                                securities (other than a 
                                derivative instrument or 
                                government security), or is a 
                                security (other than a 
                                government security), the 
                                transaction shall be effected 
                                with or through a registered 
                                broker or dealer; or
                                  (III) to or from any person 
                                if the instrument is neither a 
                                security nor provides for the 
                                delivery of one or more 
                                securities (other than a 
                                derivative instrument).
          (12)(A) The term ``exempted security'' or ``exempted 
        securities'' includes--
                  (i)  * * *

           *       *       *       *       *       *       *

                  [(iii) 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;]
                  (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;

           *       *       *       *       *       *       *

          (34) The term ``appropriate regulatory agency'' 
        means--
                  (A)  * * *
          * * * * * * *
                  (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.

           *       *       *       *       *       *       *

          (42) The term ``government securities'' means--
                  (A)  * * *

           *       *       *       *       *       *       *

                  (C) securities issued or guaranteed as to 
                principal or interest by any corporation the 
                securities of which are designated, by statute 
                specifically naming such corporation, to 
                constitute exempt securities within the meaning 
                of the laws administered by the Commission; 
                [or]
                  (D) for purposes of sections 15C and 17A, any 
                put, call, straddle, option, or privilege on a 
                security described in subparagraph (A), (B), or 
                (C) other than a put, call, straddle, option, 
                or privilege--
                          (i) that is traded on one or more 
                        national securities exchanges; or
                          (ii) for which quotations are 
                        disseminated through an automated 
                        quotation system operated by a 
                        registered securities association[.]; 
                        or
                  (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.

           *       *       *       *       *       *       *

          (54) Derivative instrument.--
                  (A) Definition.--The term ``derivative 
                instrument'' means any individually negotiated 
                contract, agreement, warrant, note, or option 
                that is based, in whole or in part, on the 
                value of, any interest in, or any quantitative 
                measure or the occurrence of any event relating 
                to, one or more commodities, securities, 
                currencies, interest or other rates, indices, 
                or other assets, but does not include an 
                excepted financial product, as defined in 
                clauses (i) through (v) of paragraph (56)(A) of 
                this subsection.
                  (B) Classification limited.--Classification 
                of a particular contract as a derivative 
                instrument pursuant to this paragraph shall not 
                be construed as finding or implying that such 
                instrument is or is not a security for any 
                purpose under the securities laws, or is or is 
                not an account, agreement, contract, or 
                transaction for any purpose under the Commodity 
                Exchange Act.
          (55) Qualified investor.--
                  (A) Definition.--For purposes of this title, 
                the term ``qualified investor'' means--
                          (i) any investment company registered 
                        with the Commission under section 8 of 
                        the Investment Company Act of 1940;
                          (ii) any issuer eligible for an 
                        exclusion from the definition of 
                        investment company pursuant to section 
                        3(c)(7) of the Investment Company Act 
                        of 1940;
                          (iii) any bank (as defined in 
                        paragraph (6) of this subsection), 
                        savings and loan association (as 
                        defined in section 3(b) of the Federal 
                        Deposit Insurance Act), broker, dealer, 
                        insurance company (as defined in 
                        section 2(a)(13) of the Securities Act 
                        of 1933), or business development 
                        company (as defined in section 2(a)(48) 
                        of the Investment Company Act of 1940);
                          (iv) any small business investment 
                        company licensed by the United States 
                        Small Business Administration under 
                        section 301(c) or (d) of the Small 
                        Business Investment Act of 1958;
                          (v) any State sponsored employee 
                        benefit plan, or any other employee 
                        benefit plan, within the meaning of the 
                        Employee Retirement Income Security Act 
                        of 1974, other than an individual 
                        retirement account, if the investment 
                        decisions are made by a plan fiduciary, 
                        as defined in section 3(21) of that 
                        Act, which is either a bank, savings 
                        and loan association, insurance 
                        company, or registered investment 
                        adviser;
                          (vi) any trust whose purchases of 
                        securities are directed by a person 
                        described in clauses (i) through (v) of 
                        this subparagraph;
                          (vii) any market intermediary exempt 
                        under section 3(c)(2) of the Investment 
                        Company Act of 1940;
                          (viii) any associated person of a 
                        broker or dealer other than a natural 
                        person;
                          (ix) any foreign bank (as defined in 
                        section 1(b)(7) of the International 
                        Banking Act of 1978); or
                          (x) the government of any foreign 
                        country.
                  (B) Additional qualifications defined.--For 
                purposes of paragraphs (4)(B)(vii), 
                (5)(C)(iii), and (56)(A)(v) of this subsection, 
                the term ``qualified investor'' also means--
                          (i) any corporation, company, or 
                        partnership that owns and invests on a 
                        discretionary basis, not less than 
                        $10,000,000 in investments;
                          (ii) any natural person who owns and 
                        invests on a discretionary basis, not 
                        less than $10,000,000 in investments;
                          (iii) any government or political 
                        subdivision, agency, or instrumentality 
                        of a government who owns and invests on 
                        a discretionary basis not less than 
                        $50,000,000 in investments; or
                          (iv) any multinational or 
                        supranational entity or any agency or 
                        instrumentality thereof.
                  (C) Additional authority.--The Commission 
                may, by rule or order, define a ``qualified 
                investor'' as any other person, other than a 
                natural person, taking into consideration such 
                factors as the person's financial 
                sophistication, net worth, and knowledge and 
                experience in financial matters.
          (56) Excepted financial products.--
                  (A) In general.--For purposes of paragraphs 
                (4) and (5) of this subsection, the term 
                ``excepted financial product'' means--
                          (i) a deposit account, savings 
                        account, certificate of deposit, or 
                        other deposit instrument issued by a 
                        bank;
                          (ii) a banker's acceptance;
                          (iii) a letter of credit issued or 
                        loan made by a bank;
                          (iv) a debit account at a bank 
                        arising from a credit card or similar 
                        arrangement;
                          (v) a participation in a loan which 
                        the bank or an affiliate of the bank 
                        (other than a broker or dealer) funds, 
                        participates in, or owns that is sold--
                                  (I) to qualified investors; 
                                or
                                  (II) to other persons that--
                                          (aa) have the 
                                        opportunity to review 
                                        and assess any material 
                                        information, including 
                                        information regarding 
                                        the borrower's 
                                        creditworthiness; and
                                          (bb) 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
                          (vi) a derivative instrument that 
                        involves or relates to--
                                  (I) currencies, except 
                                options on currencies that 
                                trade on a national securities 
                                exchange;
                                  (II) interest rates, except 
                                interest rate derivative 
                                instruments that--
                                          (aa) are based on a 
                                        security or a group or 
                                        index of securities 
                                        (other than government 
                                        securities or a group 
                                        or index of government 
                                        securities);
                                          (bb) provide for the 
                                        delivery of one or more 
                                        securities (other than 
                                        government securities); 
                                        or
                                          (cc) trade on a 
                                        national securities 
                                        exchange; or
                                  (III) commodities, other 
                                rates, indices, or other 
                                assets, except derivative 
                                instruments that--
                                          (aa) are securities 
                                        or that are based on a 
                                        group or index of 
                                        securities (other than 
                                        government securities 
                                        or a group or index of 
                                        government securities);
                                          (bb) provide for the 
                                        delivery of one or more 
                                        securities (other than 
                                        government securities); 
                                        or
                                          (cc) trade on a 
                                        national securities 
                                        exchange.
                  (B) Classification limited.--Classification 
                of a particular product as a excepted financial 
                product pursuant to this subsection shall not 
                be construed as finding or implying that such 
                product is or is not a security for any purpose 
                under the securities laws, or is or is not an 
                account, agreement, contract, or transaction 
                for any purpose under the Commodity Exchange 
                Act.

           *       *       *       *       *       *       *


           registration and regulation of brokers and dealers

  Sec. 15. (a)  * * *

           *       *       *       *       *       *       *

  (i) Rulemaking to Extend Requirements to New Hybrid 
Products.--
          (1) Limitation.--The Commission shall not--
                  (A) require a bank to register as a broker or 
                dealer under this section because the bank 
                engages in any transaction in, or buys or 
                sells, a new 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.
          (2) Criteria for rulemaking.--The Commission shall 
        not impose a requirement under paragraph (1) 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 or 
                appropriate in the public interest and for the 
                protection of investors, consistent with the 
                requirements of section 3(f).
          (3) New hybrid product.--For purposes of this 
        subsection, the term ``new hybrid product'' means a 
        product that--
                  (A) was not subjected to regulation by the 
                Commission as a security prior to the date of 
                enactment of this subsection; and
                  (B) is not an excepted financial product, as 
                such term is defined in section 3(a)(56)(A) of 
                this title.
          (4) Consultation.--In promulgating rules under this 
        subsection, the Commission shall consult with and 
        consider the views of the appropriate regulatory 
        agencies concerning the proposed rule and the impact on 
        the banking industry.

           *       *       *       *       *       *       *


                   registered securities associations

  Sec. 15A. (a)  * * *

           *       *       *       *       *       *       *

  (j) Registration for Sales of Private Securities Offerings.--
A registered securities association shall create a limited 
qualification category for any associated person of a member 
who effects sales as part of a primary offering of securities 
not involving a public offering, pursuant to section 3(b), 
4(2), or 4(6) of the Securities Act of 1933 and the rules and 
regulations thereunder, and shall deem qualified in such 
limited qualification category, without testing, any bank 
employee who, in the six month period preceding the date of 
enactment of this Act, engaged in effecting such sales.

           *       *       *       *       *       *       *


  accounts and records, examinations of exchanges, members, and others

  Sec. 17. (a)  * * *

           *       *       *       *       *       *       *

  (i) Investment Bank Holding Companies.--
          (1) Elective supervision of an investment bank 
        holding company not having a bank or savings 
        association affiliate.--
                  (A) In general.--An investment bank holding 
                company that is not--
                          (i) an affiliate of an insured bank 
                        (other than an institution described in 
                        subparagraph (D), (F), or (G) of 
                        section 2(c)(2), or held under section 
                        4(f), of the Bank Holding Company Act 
                        of 1956), or a savings association;
                          (ii) a foreign bank, foreign company, 
                        or company that is described in section 
                        8(a) of the International Banking Act 
                        of 1978; or
                          (iii) a foreign bank that controls, 
                        directly or indirectly, a corporation 
                        chartered under section 25A of the 
                        Federal Reserve Act,
                may elect to become supervised by filing with 
                the Commission a notice of intention to become 
                supervised, pursuant to subparagraph (B) of 
                this paragraph. Any investment bank holding 
                company filing such a notice shall be 
                supervised in accordance with this section and 
                comply with the rules promulgated by the 
                Commission applicable to supervised investment 
                bank holding companies.
                  (B) Notification of status as a supervised 
                investment bank holding company.--An investment 
                bank holding company that elects under 
                subparagraph (A) to become supervised by the 
                Commission shall file with the Commission a 
                written notice of intention to become 
                supervised by the Commission in such form and 
                containing such information and documents 
                concerning such investment bank holding company 
                as the Commission, by rule, may prescribe as 
                necessary or appropriate in furtherance of the 
                purposes of this section. Unless the Commission 
                finds that such supervision is not necessary or 
                appropriate in furtherance of the purposes of 
                this section, such supervision shall become 
                effective 45 days after the date of receipt of 
                such written notice by the Commission or within 
                such shorter time period as the Commission, by 
                rule or order, may determine.
          (2) Election not to be supervised by the commission 
        as an investment bank holding company.--
                  (A) Voluntary withdrawal.--A supervised 
                investment bank holding company that is 
                supervised pursuant to paragraph (1) may, upon 
                such terms and conditions as the Commission 
                deems necessary or appropriate, elect not to 
                be supervised by the Commission by filing a 
                written notice of withdrawal from Commission 
                supervision. Such notice shall not become 
                effective until one year after receipt by the 
                Commission, or such shorter or longer period 
                as the Commission deems necessary or 
                appropriate to ensure effective supervision 
                of the material risks to the supervised 
                investment bank holding company and to the 
                affiliated broker or dealer, or to prevent 
                evasion of the purposes of this section.
                  (B) Discontinuation of commission 
                supervision.--If the Commission finds that any 
                supervised investment bank holding company that 
                is supervised pursuant to paragraph (1) is no 
                longer in existence or has ceased to be an 
                investment bank holding company, or if the 
                Commission finds that continued supervision of 
                such a supervised investment bank holding 
                company is not consistent with the purposes of 
                this section, the Commission may discontinue 
                the supervision pursuant to a rule or order, if 
                any, promulgated by the Commission under this 
                section.
          (3) Supervision of investment bank holding 
        companies.--
                  (A) Recordkeeping and reporting.--
                          (i) In general.--Every supervised 
                        investment bank holding company and 
                        each affiliate thereof shall make and 
                        keep for prescribed periods such 
                        records, furnish copies thereof, and 
                        make such reports, as the Commission 
                        may require by rule, in order to keep 
                        the Commission informed as to--
                                  (I) the company's or 
                                affiliate's activities, 
                                financial condition, policies, 
                                systems for monitoring and 
                                controlling financial and 
                                operational risks, and 
                                transactions and relationships 
                                between any broker or dealer 
                                affiliate of the supervised 
                                investment bank holding 
                                company; and
                                  (II) the extent to which the 
                                company or affiliate has 
                                complied with the provisions of 
                                this Act and regulations 
                                prescribed and orders issued 
                                under this Act.
                          (ii) Form and contents.--Such records 
                        and reports shall be prepared in such 
                        form and according to such 
                        specifications (including certification 
                        by an independent public accountant), 
                        as the Commission may require and shall 
                        be provided promptly at any time upon 
                        request by the Commission. Such records 
                        and reports may include--
                                  (I) a balance sheet and 
                                income statement;
                                  (II) an assessment of the 
                                consolidated capital of the 
                                supervised investment bank 
                                holding company;
                                  (III) an independent 
                                auditor's report attesting to 
                                the supervised investment bank 
                                holding company's compliance 
                                with its internal risk 
                                management and internal control 
                                objectives; and
                                  (IV) reports concerning the 
                                extent to which the company or 
                                affiliate has complied with the 
                                provisions of this title and 
                                any regulations prescribed and 
                                orders issued under this title.
                  (B) Use of existing reports.--
                          (i) In general.--The Commission 
                        shall, to the fullest extent possible, 
                        accept reports in fulfillment of the 
                        requirements under this paragraph that 
                        the supervised investment bank holding 
                        company or its affiliates have been 
                        required to provide to another 
                        appropriate regulatory agency or self-
                        regulatory organization.
                          (ii) Availability.--A supervised 
                        investment bank holding company or an 
                        affiliate of such company shall provide 
                        to the Commission, at the request of 
                        the Commission, any report referred to 
                        in clause (i).
                  (C) Examination authority.--
                          (i) Focus of examination authority.--
                        The Commission may make examinations of 
                        any supervised investment bank holding 
                        company and any affiliate of such 
                        company in order to--
                                  (I) inform the Commission 
                                regarding--
                                          (aa) the nature of 
                                        the operations and 
                                        financial condition of 
                                        the supervised 
                                        investment bank holding 
                                        company and its 
                                        affiliates;
                                          (bb) the financial 
                                        and operational risks 
                                        within the supervised 
                                        investment bank holding 
                                        company that may affect 
                                        any broker or dealer 
                                        controlled by such 
                                        supervised investment 
                                        bank holding company; 
                                        and
                                          (cc) the systems of 
                                        the supervised 
                                        investment bank holding 
                                        company and its 
                                        affiliates for 
                                        monitoring and 
                                        controlling those 
                                        risks; and
                                  (II) monitor compliance with 
                                the provisions of this 
                                subsection, provisions 
                                governing transactions and 
                                relationships between any 
                                broker or dealer affiliated 
                                with the supervised investment 
                                bank holding company and any of 
                                the company's other affiliates, 
                                and applicable provisions of 
                                subchapter II of chapter 53, 
                                title 31, United States Code 
                                (commonly referred to as the 
                                ``Bank Secrecy Act'') and 
                                regulations thereunder.
                          (ii) Restricted focus of 
                        examinations.--The Commission shall 
                        limit the focus and scope of any 
                        examination of a supervised investment 
                        bank holding company to--
                                  (I) the company; and
                                  (II) any affiliate of the 
                                company that, because of its 
                                size, condition, or activities, 
                                the nature or size of the 
                                transactions between such 
                                affiliate and any affiliated 
                                broker or dealer, or the 
                                centralization of functions 
                                within the holding company 
                                system, could, in the 
                                discretion of the Commission,
                                have a materially adverse 
                                effect on the operational or 
                                financial condition of the 
                                broker or dealer.
                          (iii) Deference to other 
                        examinations.--For purposes of this 
                        subparagraph, the Commission shall, to 
                        the fullest extent possible, use the 
                        reports of examination of an 
                        institution described in subparagraph 
                        (D), (F), or (G) of section 2(c)(2), or 
                        held under section 4(f), of the Bank 
                        Holding Company Act of 1956 made by the 
                        appropriate regulatory agency, or of a 
                        licensed insurance company made by the 
                        appropriate State insurance regulator.
          (4) Holding company capital.--
                  (A) Authority.--If the Commission finds that 
                it is necessary to adequately supervise 
                investment bank holding companies and their 
                broker or dealer affiliates consistent with the 
                purposes of this subsection, the Commission may 
                adopt capital adequacy rules for supervised 
                investment bank holding companies.
                  (B) Method of calculation.--In developing 
                rules under this paragraph:
                          (i) Double leverage.--The Commission 
                        shall consider the use by the 
                        supervised investment bank holding 
                        company of debt and other liabilities 
                        to fund capital investments in 
                        affiliates.
                          (ii) No unweighted capital ratio.--
                        The Commission shall not impose under 
                        this section a capital ratio that is 
                        not based on appropriate risk-weighting 
                        considerations.
                          (iii) No capital requirement on 
                        regulated entities.--The Commission 
                        shall not, by rule, regulation, 
                        guideline, order or otherwise, impose 
                        any capital adequacy provision on a 
                        nonbanking affiliate (other than a 
                        broker or dealer) that is in compliance 
                        with applicable capital requirements of 
                        another Federal regulatory authority or 
                        State insurance authority.
                          (iv) Appropriate exclusions.--The 
                        Commission shall take full account of 
                        the applicable capital requirements of 
                        another Federal regulatory authority or 
                        State insurance regulator.
                  (C) Internal risk management models.--The 
                Commission may incorporate internal risk 
                management models into its capital adequacy 
                rules for supervised investment bank holding 
                companies.
          (5) Functional regulation of banking and insurance 
        activities of supervised investment bank holding 
        companies.--The Commission shall defer to--
                  (A) the appropriate regulatory agency with 
                regard to all interpretations of, and the 
                enforcement of, applicable banking laws 
                relating to the activities, conduct, ownership, 
                and operations of banks, and institutions 
                described in subparagraph (D), (F), and (G) of 
                section 2(c)(2), or held under section 4(f), of 
                the Bank Holding Company Act of 1956; and
                  (B) the appropriate State insurance 
                regulators with regard to all interpretations 
                of, and the enforcement of, applicable State 
                insurance laws relating to the activities, 
                conduct, and operations of insurance companies 
                and insurance agents.
          (6) Definitions.--For purposes of this subsection and 
        subsection (j):
                  (A) The term ``investment bank holding 
                company'' means--
                          (i) any person other than a natural 
                        person that owns or controls one or 
                        more brokers or dealers; and
                          (ii) the associated persons of the 
                        investment bank holding company.
                  (B) The term ``supervised investment bank 
                holding company'' means any investment bank 
                holding company that is supervised by the 
                Commission pursuant to this subsection.
                  (C) The terms ``affiliate'', ``bank'', ``bank 
                holding company'', ``company'', ``control'', 
                ``savings association'', and ``wholesale 
                financial institution'' have the meanings given 
                to those terms in section 2 of the Bank Holding 
                Company Act of 1956 (12 U.S.C. 1841).
                  (D) The term ``insured bank'' has the meaning 
                given to that term in section 3 of the Federal 
                Deposit Insurance Act.
                  (E) The term ``foreign bank'' has the meaning 
                given to that term in section 1(b)(7) of the 
                International Banking Act of 1978.
                  (F) The terms ``person associated with an 
                investment bank holding company'' and 
                ``associated person of an investment bank 
                holding company'' mean any person directly or 
                indirectly controlling, controlled by, or under 
                common control with, an investment bank holding 
                company.
  (j) Commission Backup Authority.--
          (1) Authority.--The Commission may make inspections 
        of any wholesale financial holding company (as defined 
        in section 10A(a)(1) of the Bank Holding Company Act of 
        1956) that--
                  (A) controls a wholesale financial 
                institution;
                  (B) is not a foreign bank; and
                  (C) does not control an insured bank (other 
                than an institution permitted under 
                subparagraph (D), (F), or (G) of section 
                2(c)(2), or held under section 4(f), of the 
                Bank Holding Company Act of 1956) or a savings 
                association,
        and any affiliate of such company, for the purpose of 
        monitoring and enforcing compliance by the wholesale 
        financial holding company with the Federal securities 
        laws.
          (2) Limitation.--The Commission shall limit the focus 
        and scope of any inspection under paragraph (1) to 
        those transactions, policies, procedures, or records 
        that are reasonably necessary to monitor and enforce 
        compliance by the wholesale financial holding company 
        or any affiliate with the Federal securities laws.
          (3) Deference to examinations.--To the fullest extent 
        possible, the Commission shall use, for the purposes of 
        this subsection, the reports of examinations--
                  (A) made by the Board of Governors of the 
                Federal Reserve System of any wholesale 
                financial holding company that is supervised by 
                the Board that is supervised by the Board;
                  (B) made by or on behalf of any State 
                regulatory agency responsible for the 
                supervision of an insurance company; and
                  (C) made by any Federal or State banking 
                agency of any bank or institution described in 
                subparagraph (D), (F), or (G) of section 
                2(c)(2), or held under section 4(f), of the 
                Bank Holding Company Act of 1956.
          (4) Notice.--To the fullest extent possible, the 
        Commission shall notify the appropriate regulatory 
        agency prior to conducting an inspection of a wholesale 
        financial institution or institution described in 
        subparagraph (D), (F), or (G) of section 2(c)(2), or 
        held under section 4(f), of the Bank Holding Company 
        Act of 1956.
  (k) Authority To Limit Disclosure of Information.--
Notwithstanding any other provision of law, the Commission 
shall not be compelled to disclose any information required to 
be reported under subsection (h) or (i) or any information 
supplied to the Commission by any domestic or foreign 
regulatory agency that relates to the financial or operational 
condition of any associated person of a broker or dealer, 
investment bank holding company, or any affiliate of an 
investment bank holding company. Nothing in this subsection 
shall authorize the Commission to withhold information from 
Congress, or prevent the Commission from complying with a 
request for information from any other Federal department or 
agency or any self-regulatory organization requesting the 
information for purposes within the scope of its jurisdiction, 
or complying with an order of a court of the United States in 
an action brought by the United States or the Commission. For 
purposes of section 552 of title 5, United States Code, this 
subsection shall be considered a statute described in 
subsection (b)(3)(B) of such section 552. In prescribing 
regulations to carry out the requirements of this subsection, 
the Commission shall designate information described in or 
obtained pursuant to subparagraphs (A), (B), and (C) of 
subsection (i)(5) as confidential information for purposes of 
section 24(b)(2) of this title.
  [(i)] (l) Coordination of Examining Authorities.--
          (1) * * *

           *       *       *       *       *       *       *

                              ----------                              


                     INVESTMENT COMPANY ACT OF 1940

                     TITLE I--INVESTMENT COMPANIES

           *       *       *       *       *       *       *


                          general definitions

  Sec. 2. (a) When used in this title, unless the context 
otherwise requires--
          (1) * * *

           *       *       *       *       *       *       *

          (5) ``Bank'' means [(A) a banking institution 
        organized under the laws of the United States] (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), (B) a 
        member bank of the Federal Reserve System, (C) any 
        other banking institution or trust company, whether 
        incorporated or not, doing business under the laws of 
        any State or of the United States, a substantial 
        portion of the business of which consists of receiving 
        deposits or exercising fiduciary powers similar to 
        those permitted to national banks under the authority 
        of the Comptroller of the Currency, and which is 
        supervised and examined by State or Federal authority 
        having supervision over banks, and which is not 
        operated for the purpose of evading the provisions of 
        this title, and (D) a receiver, conservator, or other 
        liquidating agent of any institution or firm included 
        in clause (A), (B), or (C) of this paragraph.
          [(6) ``Broker'' means any person engaged in the 
        business of effecting transactions in securities for 
        the account of others, but does not include a bank or 
        any person solely by reason of the fact that such 
        person is an underwriter for one or more investment 
        companies.]
          (6) The term ``broker'' has the same meaning as in 
        section 3 of the Securities Exchange Act of 1934, 
        except that such term does not include any person 
        solely by reason of the fact that such person is an 
        underwriter for one or more investment companies.

           *       *       *       *       *       *       *

          [(11) ``Dealer'' means any person regularly engaged 
        in the business of buying and selling securities for 
        his own account, through a broker or otherwise, but 
        does not include a bank, insurance company, or 
        investment company, or any person insofar as he is 
        engaged in investing, reinvesting, or trading in 
        securities, or in owning or holding securities, for his 
        own account, either individually or in some fiduciary 
        capacity, but not as a part of a regular business.]
          (11) The term ``dealer'' has the same meaning as in 
        the Securities Exchange Act of 1934, but does not 
        include an insurance company or investment company.

           *       *       *       *       *       *       *

          (19) ``Interested person'' of another person means--
                  (A) when used with respect to an investment 
                company--
                          (i) * * *

           *       *       *       *       *       *       *

                          [(v) any broker or dealer registered 
                        under the Securities Exchange Act of 
                        1934 or any affiliated person of such a 
                        broker or dealer, and]
                          (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,
                          (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,
                          [(vi)] (vii) any natural person whom 
                        the Commission by order shall have 
                        determined to be an interested person 
                        by reason of having had, at any time 
                        since the beginning of the last two 
                        completed fiscal years of such company, 
                        a material business or professional 
                        relationship with such company or with 
                        the principal executive officer of such 
                        company or with any other investment 
                        company having the same investment 
                        adviser or principal underwriter or 
                        with the principal executive officer of 
                        such other investment company: 
                        Provided, That no person shall be 
                        deemed to be an interested person of an 
                        investment company solely by reason of 
                        (aa) his being a member of its board of 
                        directors or advisory board or an owner 
                        of its securities, or (bb) his 
                        membership in the immediate family of 
                        any person specified in clause (aa) of 
                        this proviso; and
                  (B) when used with respect to an investment 
                adviser of or principal underwriter for any 
                investment company--
                          (i) * * *

           *       *       *       *       *       *       *

                          [(v) any broker or dealer registered 
                        under the Securities Exchange Act of 
                        1934 or any affiliated person of such a 
                        broker or dealer, and]
                          (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,
                          (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,
                          [(vi)] (vii) any natural person whom 
                        the Commission by order shall have 
                        determined to be an interested person 
                        by reason of having had at any time 
                        since the beginning of the last two 
                        completed fiscal years of such 
                        investment company a material business 
                        or professional relationship with such 
                        investment adviser or principal 
                        underwriter or with the principal 
                        executive officer or any controlling 
                        person of such investment adviser or 
                        principal underwriter.

           *       *       *       *       *       *       *


                    definition of investment company

  Sec. 3. (a) * * *

           *       *       *       *       *       *       *

  (c) Notwithstanding subsection (a), none of the following 
persons is an investment company within the meaning of this 
title:
          (1) * * *

           *       *       *       *       *       *       *

           (3) Any bank or insurance company; any savings and 
        loan association, building and loan association, 
        cooperative bank, homestead association, or similar 
        institution, or any receiver, conservator, liquidator, 
        liquidating agent, or similar official or person 
        thereof or therefor; or any common trust fund or 
        similar fund maintained by a bank exclusively for the 
        collective investment and reinvestment of moneys 
        contributed thereto by the bank in its capacity as a 
        trustee, executor, administrator, or guardian, 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.

           *       *       *       *       *       *       *


      ineligibility of certain affiliated persons and underwriters

  Sec. 9. (a) It shall be unlawful for any of the following 
persons to serve or act in the capacity of employee, officer, 
director, member of an advisory board, investment adviser, or 
depositor of any registered investment company, or principal 
underwriter for any registered open-end company, registered 
unit investment trust, or registered face-amount certificate 
company:
          (1) any person who within 10 years has been convicted 
        of any felony or misdemeanor involving the purchase or 
        sale of any security or arising out of such person's 
        conduct as an underwriter, broker, dealer, investment 
        adviser, municipal securities dealer, government 
        securities broker, government securities dealer, bank, 
        transfer agent, or entity or person required to be 
        registered under the Commodity Exchange Act, or as an 
        affiliated person, salesman, or employee of any 
        investment company, bank, insurance company, or entity 
        or person required to be registered under the Commodity 
        Exchange Act;
          (2) any person who, by reason of any misconduct, is 
        permanently or temporarily enjoined by order, judgment, 
        or decree of any court of competent jurisdiction from 
        acting as an underwriter, broker, dealer, investment 
        adviser, municipal securities dealer, government 
        securities broker, government securities dealer, bank, 
        transfer agent, or entity or person required to be 
        registered under the Commodity Exchange Act, or as an 
        affiliated person, salesman, or employee of any 
        investment company, bank, insurance company, or entity 
        or person required to be registered under the Commodity 
        Exchange Act, or from engaging in or continuing any 
        conduct or practice in connection with any such 
        activity or in connection with the purchase or sale of 
        any security; or

           *       *       *       *       *       *       *


                       affiliations of directors

  Sec. 10. (a) * * *

           *       *       *       *       *       *       *

  (c) No registered investment company shall have a majority of 
its board of directors consisting of persons who are officers, 
directors, or employees of any one [bank, except] 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 that, if on March 15, 1940, any 
registered investment company had a majority of its directors 
consisting of persons who are directors, officers, or employees 
of any one bank, such company may continue to have the same 
percentage of its board of directors consisting of persons who 
are directors, officers, or employees of such bank.

           *       *       *       *       *       *       *


             investment advisory and underwriting contracts

  Sec. 15. (a) * * *

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *


      transactions of certain affiliated persons and underwriters

  Sec. 17. (a) It shall be unlawful for any affiliated person 
or promoter of or principal underwriter for a registered 
investment company (other than a company of the character 
described in section 12(d)(3) (A) and (B)), or any affiliated 
person of such a person, promoter, or principal underwriter, 
acting as principal--
          (1) * * *
          (2) knowingly to purchase from such registered 
        company, or from any company controlled by such 
        registered company, any security or other property 
        (except securities of which the seller is the issuer); 
        [or]
          (3) to borrow money or other property from such 
        registered company or from any company controlled by 
        such registered company (unless the borrower is 
        controlled by the lender) except as permitted in 
        section 21(b)[.]; or
          (4) to loan money or other property to such 
        registered company, or to any company controlled by 
        such registered company, in contravention of such 
        rules, regulations, or orders as the Commission may 
        prescribe or issue consistent with the protection of 
        investors.

           *       *       *       *       *       *       *

  [(f) Every registered] (f) Custody of Securities.--
          (1) Every registered management company shall place 
        and maintain its securities and similar investments in 
        the custody of [(1)] (A) a bank or banks having the 
        qualifications prescribed in paragraph (1) of section 
        26(a) of this title for the trustees of unit investment 
        trusts; or [(2)] (B) a company which is a member of a 
        national securities exchange as defined in the 
        Securities Exchange Act of 1934, subject to such rules 
        and regulations as the Commission may from time to time 
        prescribe for the protection of investors; or [(3)] (C) 
        such registered company, but only in accordance with 
        such rules and regulations or orders as the Commission 
        may from time to time prescribe for the protection of 
        investors.
          (2) Subject to such rules, regulations, and orders as 
        the Commission may adopt as necessary or appropriate 
        for the protection of investors, a registered 
        management company or any such custodian, with the 
        consent of the registered management company for which 
        it acts as custodian, may deposit all or any part of 
        the securities owned by such registered management 
        company in a system for the central handling of 
        securities established by a national securities 
        exchange or national securities association registered 
        with the Commission under the Securities Exchange Act 
        of 1934, or such other person as may be permitted by 
        the Commission, pursuant to which system all securities 
        of any particular class or series of any issuer 
        deposited within the system are treated as fungible and 
        may be transferred or pledged by bookkeeping entry 
        without physical delivery of such securities.
          (3) Rules, regulations, and orders of the Commission 
        under this subsection, among other things, may make 
        appropriate provision with respect to such matters as 
        the earmarking, segregation, and hypothecation of such 
        securities and investments, and may provide for or 
        require periodic or other inspections by any or all of 
        the following: Independent public accountants, 
        employees and agents of the Commission, and such other 
        persons as the Commission may designate.
          (4) No such member which trades in securities for its 
        own account may act as custodian except in accordance 
        with rules and regulations prescribed by the Commission 
        for the protection of investors.
          (5) If a registered company maintains its securities 
        and similar investments in the custody of a qualified 
        bank or banks, the cash proceeds from the sale of such 
        securities and similar investments and other cash 
        assets of the company shall likewise be kept in the 
        custody of such a bank or banks, or in accordance with 
        such rules and regulations or orders as the Commission 
        may from time to time prescribe for the protection of 
        investors, except that such a registered company may 
        maintain a checking account in a bank or banks having 
        the qualifications prescribed in paragraph (1) of 
        section 26(a) of this title for the trustees of unit 
        investment trusts with the balance of such account or 
        the aggregate balances of such accounts at no time in 
        excess of the amount of the fidelity bond, maintained 
        pursuant to section 17(g) of this title, covering the 
        officers or employees authorized to draw on such 
        account or accounts.
          (6) The Commission may adopt rules and regulations, 
        and issue orders, consistent with the protection of 
        investors, prescribing the conditions under which a 
        bank, or an affiliated person of a bank, either of 
        which is an affiliated person, promoter, organizer, or 
        sponsor of, or principal underwriter for, a registered 
        management company may serve as custodian of that 
        registered management company.

           *       *       *       *       *       *       *


                         unit investment trusts

  Sec. 26. (a) * * *
  (b) The Commission may adopt rules and regulations, and issue 
orders, consistent with the protection of investors, 
prescribing the conditions under which a bank, or an affiliated 
person of a bank, either of which is an affiliated person of a 
principal underwriter for, or depositor of, a registered unit 
investment trust, may serve as trustee or custodian under 
subsection (a)(1).
  [(b)] (c) It shall be unlawful for any depositor or trustee 
of a registered unit investment trust holding the security of a 
single issuer to substitute another security for such security 
unless the Commission shall have approved such substitution. 
The Commission shall issue an order approving such substitution 
if the evidence establishes that it is consistent with the 
protection of investors and the purposes fairly intended by the 
policy and provisions of this title.
  [(c)] (d) In the event that a trust indenture, agreement of 
custodianship, or other instrument pursuant to which securities 
of a registered unit investment trust are issued does not 
comply with the requirements of subsection (a) of this section, 
such instrument will be deemed to meet such requirements if a 
written contract or agreement binding on the parties and 
embodying such requirements has been executed by the depositor 
on the one part and the trustee or custodian on the other part, 
and three copies of such contract or agreement have been filed 
with the Commission.
  [(d)] (e) Whenever the Commission has reason to believe that 
a unit investment trust is inactive and that its liquidation is 
in the interest of the security holders of such trust, the 
Commission may file a complaint seeking the liquidation of such 
trust in the district court of the United States in any 
district wherein any trustee of such trust resides or has its 
principal place of business. A copy of such complaint shall be 
served on every trustee of such trust, and notice of the 
proceeding shall be given such other interested persons in such 
manner and at such times as the court may direct. If the court 
determines that such liquidation is in the interest of the 
security holders of such trust, the court shall order such 
liquidation and, after payment of necessary expenses, the 
distribution of the proceeds to the security holders of the 
trust in such manner and on such terms as may to the court 
appear equitable.
  [(e)] (f) Exemption.--
          (1) * * *

           *       *       *       *       *       *       *


                   unlawful representations and names

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

           *       *       *       *       *       *       *


                        breach of fiduciary duty

  Sec. 36. (a) The Commission is authorized to bring an action 
in the proper district court of the United States, or in the 
United States court of any territory or other place subject to 
the jurisdiction of the United States, alleging that a person 
serving or acting in one or more of the following capacities 
has engaged within five years of the commencement of the action 
or is about to engage in any act or practice constituting a 
breach of fiduciary duty involving personal misconduct in 
respect of any registered investment company for which such 
person so serves or acts--
          (1) as officer, director, member of any advisory 
        board, investment adviser, or depositor; [or]
          (2) as principal underwriter, if such registered 
        company is an open-end company, unit investment trust, 
        or face-amount certificate company[.]; or
          (3) as custodian.
If such allegations are established, the court may enjoin such 
persons from acting in any or all such capacities either 
permanently or temporarily and award such injunctive or other 
relief against such person as may be reasonable and appropriate 
in the circumstances, having due regard to the protection of 
investors and to the effectuation of the policies declared in 
section 1(b) of this title.

           *       *       *       *       *       *       *

                              ----------                              


                    INVESTMENT ADVISERS ACT OF 1940


                     TITLE II--INVESTMENT ADVISERS

           *       *       *       *       *       *       *



                              definitions

  Sec. 202. (a) When used in this title, unless the context 
otherwise requires, the following definitions shall apply:
          (1) * * *

           *       *       *       *       *       *       *

          [(3) ``Broker'' means any person engaged in the 
        business of effecting transactions in securities for 
        the account of others, but does not include a bank.]
          (3) The term ``broker'' has the same meaning as in 
        section 3 of the Securities Exchange Act of 1934.

           *       *       *       *       *       *       *

          [(7) ``Dealer'' means any person regularly engaged in 
        the business of buying and selling securities for his 
        own account, through a broker or otherwise, but does 
        not include a bank, insurance company, or investment 
        company, or any person insofar as he is engaged in 
        investing, reinvesting or trading in securities, or in 
        owning or holding securities, for his own account, 
        either individually or in some fiduciary capacity, but 
        not as a part of a regular business.]
          (7) The term ``dealer'' has the same meaning as in 
        section 3 of the Securities Exchange Act of 1934, but 
        does not include an insurance company or investment 
        company.

           *       *       *       *       *       *       *

          (11) ``Investment adviser'' means any person who, for 
        compensation, engages in the business of advising 
        others, either directly or through publications or 
        writings, as to the value of securities or as to the 
        advisability of investing in, purchasing, or selling 
        securities, or who, for compensation and as part of a 
        regular business, issues or promulgates analyses or 
        reports concerning securities; but does not include (A) 
        a bank, or any bank holding company as defined in the 
        Bank Holding Company Act of 1956, which is not an 
        [investment company] 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) any lawyer, accountant, engineer, or 
        teacher whose performance of such services is solely 
        incidental to the practice of his profession; (C) any 
        broker or dealer whose performance of such services is 
        solely incidental to the conduct of his business as a 
        broker or dealer and who receives no special 
        compensation therefor; (D) the publisher of any bona 
        fide newspaper, news magazine or business or financial 
        publication of general and regular circulation; (E) any 
        person whose advice, analyses, or reports relate to no 
        securities other than securities which are direct 
        obligations of or obligations guaranteed as to 
        principal or interest by the United States, or 
        securities issued or guaranteed by corporations in 
        which the United States has a direct or indirect 
        interest which shall have been designated by the 
        Secretary of the Treasury, pursuant to section 3(a)(12) 
        of the Securities Exchange Act of 1934, as exempted 
        securities for the purposes of that Act; or (F) such 
        other persons not within the intent of this paragraph, 
        as the Commission may designate by rules and 
        regulations or order.

           *       *       *       *       *       *       *

          (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.

           *       *       *       *       *       *       *

  (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. 210A. CONSULTATION.

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

           *       *       *       *       *       *       *

                              ----------                              


                SECTION 3 OF THE SECURITIES ACT OF 1933

                          exempted securities

  Sec. 3. (a) Except as hereinafter expressly provided, the 
provisions of this title shall not apply to any of the 
following classes of securities:
          (1) Reserved.
          (2) Any security issued or guaranteed by the United 
        States or any Territory thereof, or by the District of 
        Columbia, or by any State of the United States, or by 
        any political subdivision of a State or Territory, or 
        by any public instrumentality of one or more States or 
        Territories, or by any person controlled or supervised 
        by and acting as an instrumentality of the Government 
        of the United States pursuant to authority granted by 
        the Congress of the United States; or any certificate 
        of deposit for any of the foregoing; or any security 
        issued or guaranteed by any bank; or any security 
        issued by or representing an interest in or a direct 
        obligation of a Federal Reserve bank; [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] 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; or any security 
        which is an industrial development bond (as defined in 
        section 103(c)(2) of the Internal Revenue Code of 1954) 
        the interest on which is excludable from gross income 
        under section 103(a)(1) of such Code if, by reason of 
        the application of paragraph (4) or (6) of section 
        103(c) of such Code (determined as if paragraphs 
        (4)(A), (5), and (7) were not included in such section 
        103(c)), paragraph (1) of such section 103(c) does not 
        apply to such security; or any interest or 
        participation in a single trust fund, or in a 
        collective trust fund maintained by a bank, or any 
        security arising out of a contract issued by an 
        insurance company, which interest, participation, or 
        security is issued in connection with (A) a stock 
        bonus, pension, or profit-sharing plan which meets the 
        requirements for qualification under section 401 of the 
        Internal Revenue Code of 1954, (B) an annuity plan 
        which meets the requirements for the deduction of the 
        employer's contributions under section 404(a)(2) of 
        such Code, or (C) a governmental plan as defined in 
        section 414(d) of such Code which has been established 
        by an employer for the exclusive benefit of its 
        employees or their beneficiaries for the purpose of 
        distributing to such employees or their beneficiaries 
        the corpus and income of the funds accumulated under 
        such plan, if under such plan it is impossible, prior 
        to the satisfaction of all liabilities with respect to 
        such employees and their beneficiaries, for any part of 
        the corpus or income to be used for, or diverted to, 
        purposes other than the exclusive benefit of such 
        employees or their beneficiaries, other than any plan 
        described in clause (A), (B), or (C) of this paragraph 
        (i) the contributions under which are held in a single 
        trust fund or in a separate account maintained by an 
        insurance company for a single employer and under which 
        an amount in excess of the employer's contribution is 
        allocated to the purchase of securities (other than 
        interests or participations in the trust or separate 
        account itself) issued by the employer or any company 
        directly or indirectly controlling, controlled by, or 
        under common control with the employer, (ii) which 
        covers employees some or all of whom are employees 
        within the meaning of section 401(c)(1) of such Code, 
        or (iii) which is a plan funded by an annuity contract 
        described in section 403(b) of such Code. The 
        Commission, by rules and regulations or order, shall 
        exempt from the provisions of section 5 of this title 
        any interest or participation issued in connection with 
        a stock bonus, pension, profit-sharing, or annuity plan 
        which covers employees some or all of whom are 
        employees within the meaning of section 401(c)(1) of 
        the Internal Revenue Code of 1954, if and to the extent 
        that the Commission determines this to be necessary or 
        appropriate in the public interest and consistent with 
        the protection of investors and the purposes fairly 
        intended by the policy and provisions of this title. 
        For purposes of this paragraph, a security issued or 
        guaranteed by a bank shall not include any interest or 
        participation in any collective trust fund maintained 
        by a bank; and the term ``bank'' means any national 
        bank, or any banking institution organized under the 
        laws of any State, territory, or the District of 
        Columbia, the business of which is substantially 
        confined to banking and is supervised by the State or 
        territorial banking commission or similar official; 
        except that in the case of a common trust fund or 
        similar fund, or a collective trust fund, the term 
        ``bank'' has the same meaning as in the Investment 
        Company Act of 1940;
                              ----------                              


       SECTION 1112 OF THE RIGHT TO FINANCIAL PRIVACY ACT OF 1978

                           use of information

    Sec. 1112. (a)  * * *

           *       *       *       *       *       *       *

    (e) Notwithstanding section 1101(6) or any other provision 
of [this title] law, the exchange of financial records, 
examination reports or other information with respect to a 
financial institution, holding company, or a subsidiary of a 
depository institution or holding company, among and between 
the five member supervisory agencies of the Federal Financial 
Institutions Examination Council and the Securities and 
Exchange Commission is permitted.
                              ----------                              


                           ACT OF MAY 1, 1886

 CHAP. 73.--An Act to enable national banking associations to increase 
their capital stock and to change their names or locations.

           *       *       *       *       *       *       *


  Sec. 2. (a) * * *

           *       *       *       *       *       *       *

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

                            ADDITIONAL VIEWS

    During the consideration of H.R. 10, an amendment was 
offered to add a new section 351, entitled ``Confidentiality of 
Health and Medical Information.'' While we support increased 
protection for medical information, we opposed this provision, 
because, unfortunately, the provision weakens existing 
protections for medical confidentiality, and establishes a 
number of poor precedents for private medical information 
disclosure.
    While the provision at first blush appears to place limits 
on the disclosure of medical information, the lengthy list of 
exceptions to these limits leaves the consumer with little, if 
any protection. In fact, the provision ends up authorizing 
disclosure of information rather than limiting it.
    In medicine, the first principle is ``Do no harm.'' In 
crafting a Federal medical privacy law, this principle requires 
that state laws providing a greater level of protection be left 
in place. Yet section 351 could preempt the laws of 21 states 
that have enacted medical privacy laws. While we agree that 
genetic information should also be protected--in fact, should 
deserve a higher level of protection--this provision could also 
preempt 36 state laws which protect the confidentiality of 
genetic information.
    The provision also lacks any right for the individual to 
inspect and correct one's medical records. As a result, an 
individual has greater rights to inspect and correct credit 
information than medical records.
    There is no requirement that the customer even be told that 
his medical information is being provided to a third party. 
Thus there is no way that the customer could prevent the 
records from being disseminated if the customer believed that 
statutory rights were being violated.
    An individual has no right to seek redress if the rights 
under this provision are violated. In fact, the customer is 
unlikely to even know that the rights were violated. The only 
enforcement authority is given to the states. If the individual 
is unlikely to have knowledge of the transfer of confidential 
medical records, it is hard to understand how the state 
Attorney General would know to bring an action as provided in 
subsection (b) of the provision. Even if the state brings an 
action, it can only enjoin further disclosures. The customer 
has no right to seek damages.
    The provision places absolutely no restrictions on the 
subsequent disclosure of medical records by anyone receiving 
the records. Once the records are out the door for any of the 
myriad exceptions in this provision, they are fair game for 
anyone.
    We agree that information should be disclosed only with the 
consent of the customer, as provided in (a)(1), but this right 
is rendered meaningless with the extensive laundry list of 
exceptions that swallows this simple rule. We shall only 
discuss a few of these exceptions.
    The provision allows financial institutions to provide 
medical records, including genetic information, for purposes of 
underwriting. As a result, customers could find themselves 
beinguninsurable, or facing whopping rate increases for health 
insurance, based upon their genetic information, or health records. In 
addition, the information may be inaccurate, but the customer cannot 
correct it.
    The provision allows financial institutions to provide 
medical records for ``research projects.'' This term is 
undefined, and could include marketing research, or nearly 
anything else. For example, a customer's prescription drug 
information could be provided to a drug company doing marketing 
research on candidates for a new related drug.
    Moreover, the provision establishes no research protections 
for individually identifiable records. The majority of human 
subject research studies conducted in this country are subject 
to the Common Rule, a set of requirements for federally-funded 
research. Analogous requirements apply to clinical trials 
conducted pursuant to the FDA's product approval procedures. 
The Common Rule dictates that a study must be approved by an 
entity that specifically examines whether the potential 
benefits of the study outweigh the potential intrusion into an 
individual's private records and whether the study includes 
strong safeguards to protect the confidentiality of those 
records. Two weeks ago at a hearing before the Health and 
Environment Subcommittee, witnesses from the National Breast 
Cancer Coalition and the National Organization for Rare 
Disorders testified that these Federal standards should be 
extended to all research using individually-identifiable 
medical records. Extending these protections would strengthen 
confidence in the integrity of the research community and 
encourage more individuals to participate in studies. Because 
this provision establishes no protections for individually-
identifiable records, it could actually stifle research.
    The provision allows the disclosure of confidential medical 
records ``in connection with'' a laundry list of transactions, 
most of which have nothing to do with medical records. The 
provision does not define who can receive the records, but 
instead allows disclosure to anyone, so long as it is ``in 
connection with'' a transaction. There was no explanation at 
the markup why medical records should be disclosed in 
connection with ``the transfer of receivables, accounts, or 
interest therein.'' There is no definition of ``fraud 
protection'' or ``risk control'' for which the provision also 
authorizes disclosure. The provision gives carte blanche to 
financial institutions to disclose confidential medical records 
for ``account administration'' or for ``reporting, 
investigating, or preventing fraud.'' Reporting to whom? An 
investigation by whom?
    While most laws protecting medical records provide for 
disclosure in compliance with criminal investigations, those 
laws provide safeguards to permit the individual the 
opportunity to raise legal issues. This provision does not. In 
fact, as is the case with all other disclosures in this 
provision, the consumer would not even be informed that the 
information has been disclosed. Thus, a customer's medical 
records could be disclosed to an opponent in a civil action 
without the customer even knowing it.
    Within hours of passage of this provision, we began 
learning from patient groups and others who have fought to 
improve the privacy rights of individuals that this provision 
is seriously flawed. These concerns demonstrate why Congress 
needs to deal comprehensively with the issue of medical 
confidentiality, not in a slapdash amendment that has received 
no scrutiny. The Health and Environment Subcommittee of the 
Commerce Committee has already held a hearing on medical 
privacy, and a Senate committee has held multiple hearings on 
the subject. We look forward to enacting real medical 
information privacy provisions that will truly protect 
individuals. Unfortunately, this premature move by the 
Committee will actually set back the health and medical 
information privacy rights of all Americans.

                                   John D. Dingell.
                                   Henry A. Waxman.
                                   Edward J. Markey.
                                   Rick Boucher.
                                   Edolphus Towns.
                                   Frank Pallone, Jr.
                                   Sherrod Brown.
                                   Bart Gordon.
                                   Peter Deutsch.
                                   Bobby L. Rush.
                                   Ron Klink.
                                   Bart Stupak.
                                   Tom Sawyer.
                                   Albert R. Wynn.
                                   Gene Green.
                                   Ted Strickland.
                                   Diana DeGette.
                                   Thomas M. Barrett.
                                   Lois Capps.

                                  
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