[106th Congress Public Law 102]
[From the U.S. Government Printing Office]
<DOC>
[DOCID: f:publ102.106]
[[Page 1338]]
GRAMM-LEACH-BLILEY ACT
[[Page 113 STAT. 1338]]
Public Law 106-102
106th Congress
An Act
To enhance competition in the financial services industry by providing a
prudential framework for the affiliation of banks, securities firms,
insurance companies, and other financial service providers, and for
other purposes. <<NOTE: Nov. 12, 1999 - [S. 900]>>
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress <<NOTE: Gramm-Leach- Bliley
Act.>> assembled,
SECTION 1. SHORT <<NOTE: Inter- governmental relations. 12 USC 1811
note.>> TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Gramm-Leach-Bliley
Act''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
TITLE I--FACILITATING AFFILIATION AMONG BANKS, SECURITIES FIRMS, AND
INSURANCE COMPANIES
Subtitle A--Affiliations
Sec. 101. Glass-Steagall Act repeals.
Sec. 102. Activity restrictions applicable to bank holding companies
that are not financial holding companies.
Sec. 103. Financial activities.
Sec. 104. Operation of State law.
Sec. 105. Mutual bank holding companies authorized.
Sec. 106. Prohibition on deposit production offices.
Sec. 107. Cross marketing restriction; limited purpose bank relief;
divestiture.
Sec. 108. Use of subordinated debt to protect financial system and
deposit funds from ``too big to fail'' institutions.
Sec. 109. Study of financial modernization's effect on the accessibility
of small business and farm loans.
Subtitle B--Streamlining Supervision of Bank Holding Companies
Sec. 111. Streamlining bank holding company supervision.
Sec. 112. Authority of State insurance regulator and Securities and
Exchange Commission.
Sec. 113. Role of the Board of Governors of the Federal Reserve System.
Sec. 114. Prudential safeguards.
Sec. 115. Examination of investment companies.
Sec. 116. Elimination of application requirement for financial holding
companies.
Sec. 117. Preserving the integrity of FDIC resources.
Sec. 118. Repeal of savings bank provisions in the Bank Holding Company
Act of 1956.
Sec. 119. Technical amendment.
Subtitle C--Subsidiaries of National Banks
Sec. 121. Subsidiaries of national banks.
Sec. 122. Consideration of merchant banking activities by financial
subsidiaries.
Subtitle D--Preservation of FTC Authority
Sec. 131. Amendment to the Bank Holding Company Act of 1956 to modify
notification and post-approval waiting period for section 3
transactions.
Sec. 132. Interagency data sharing.
[[Page 113 STAT. 1339]]
Sec. 133. Clarification of status of subsidiaries and affiliates.
Subtitle E--National Treatment
Sec. 141. Foreign banks that are financial holding companies.
Sec. 142. Representative offices.
Subtitle F--Direct Activities of Banks
Sec. 151. Authority of national banks to underwrite certain municipal
bonds.
Subtitle G--Effective Date
Sec. 161. Effective date.
TITLE II--FUNCTIONAL REGULATION
Subtitle A--Brokers and Dealers
Sec. 201. Definition of broker.
Sec. 202. Definition of dealer.
Sec. 203. Registration for sales of private securities offerings.
Sec. 204. Information sharing.
Sec. 205. Treatment of new hybrid products.
Sec. 206. Definition of identified banking product.
Sec. 207. Additional definitions.
Sec. 208. Government securities defined.
Sec. 209. Effective date.
Sec. 210. Rule of construction.
Subtitle B--Bank Investment Company Activities
Sec. 211. Custody of investment company assets by affiliated bank.
Sec. 212. Lending to an affiliated investment company.
Sec. 213. Independent directors.
Sec. 214. Additional SEC disclosure authority.
Sec. 215. Definition of broker under the Investment Company Act of 1940.
Sec. 216. Definition of dealer under the Investment Company Act of 1940.
Sec. 217. Removal of the exclusion from the definition of investment
adviser for banks that advise investment companies.
Sec. 218. Definition of broker under the Investment Advisers Act of
1940.
Sec. 219. Definition of dealer under the Investment Advisers Act of
1940.
Sec. 220. Interagency consultation.
Sec. 221. Treatment of bank common trust funds.
Sec. 222. Statutory disqualification for bank wrongdoing.
Sec. 223. Conforming change in definition.
Sec. 224. Conforming amendment.
Sec. 225. Effective date.
Subtitle C--Securities and Exchange Commission Supervision of Investment
Bank Holding Companies
Sec. 231. Supervision of investment bank holding companies by the
Securities and Exchange Commission.
Subtitle D--Banks and Bank Holding Companies
Sec. 241. Consultation.
TITLE III--INSURANCE
Subtitle A--State Regulation of Insurance
Sec. 301. Functional regulation of insurance.
Sec. 302. Insurance underwriting in national banks.
Sec. 303. Title insurance activities of national banks and their
affiliates.
Sec. 304. Expedited and equalized dispute resolution for Federal
regulators.
Sec. 305. Insurance customer protections.
Sec. 306. Certain State affiliation laws preempted for insurance
companies and affiliates.
Sec. 307. Interagency consultation.
Sec. 308. Definition of State.
Subtitle B--Redomestication of Mutual Insurers
Sec. 311. General application.
Sec. 312. Redomestication of mutual insurers.
Sec. 313. Effect on State laws restricting redomestication.
Sec. 314. Other provisions.
[[Page 113 STAT. 1340]]
Sec. 315. Definitions.
Sec. 316. Effective date.
Subtitle C--National Association of Registered Agents and Brokers
Sec. 321. State flexibility in multistate licensing reforms.
Sec. 322. National Association of Registered Agents and Brokers.
Sec. 323. Purpose.
Sec. 324. Relationship to the Federal Government.
Sec. 325. Membership.
Sec. 326. Board of directors.
Sec. 327. Officers.
Sec. 328. Bylaws, rules, and disciplinary action.
Sec. 329. Assessments.
Sec. 330. Functions of the NAIC.
Sec. 331. Liability of the association and the directors, officers, and
employees of the association.
Sec. 332. Elimination of NAIC oversight.
Sec. 333. Relationship to State law.
Sec. 334. Coordination with other regulators.
Sec. 335. Judicial review.
Sec. 336. Definitions.
Subtitle D--Rental Car Agency Insurance Activities
Sec. 341. Standard of regulation for motor vehicle rentals.
TITLE IV--UNITARY SAVINGS AND LOAN HOLDING COMPANIES
Sec. 401. Prevention of creation of new S&L holding companies with
commercial affiliates.
TITLE V--PRIVACY
Subtitle A--Disclosure of Nonpublic Personal Information
Sec. 501. Protection of nonpublic personal information.
Sec. 502. Obligations with respect to disclosures of personal
information.
Sec. 503. Disclosure of institution privacy policy.
Sec. 504. Rulemaking.
Sec. 505. Enforcement.
Sec. 506. Protection of Fair Credit Reporting Act.
Sec. 507. Relation to State laws.
Sec. 508. Study of information sharing among financial affiliates.
Sec. 509. Definitions.
Sec. 510. Effective date.
Subtitle B--Fraudulent Access to Financial Information
Sec. 521. Privacy protection for customer information of financial
institutions.
Sec. 522. Administrative enforcement.
Sec. 523. Criminal penalty.
Sec. 524. Relation to State laws.
Sec. 525. Agency guidance.
Sec. 526. Reports.
Sec. 527. Definitions.
TITLE VI--FEDERAL HOME LOAN BANK SYSTEM MODERNIZATION
Sec. 601. Short title.
Sec. 602. Definitions.
Sec. 603. Savings association membership.
Sec. 604. Advances to members; collateral.
Sec. 605. Eligibility criteria.
Sec. 606. Management of banks.
Sec. 607. Resolution Funding Corporation.
Sec. 608. Capital structure of Federal home loan banks.
TITLE VII--OTHER PROVISIONS
Subtitle A--ATM Fee Reform
Sec. 701. Short title.
Sec. 702. Electronic fund transfer fee disclosures at any host ATM.
Sec. 703. Disclosure of possible fees to consumers when ATM card is
issued.
Sec. 704. Feasibility study.
Sec. 705. No liability if posted notices are damaged.
[[Page 113 STAT. 1341]]
Subtitle B--Community Reinvestment
Sec. 711. CRA sunshine requirements.
Sec. 712. Small bank regulatory relief.
Sec. 713. Federal Reserve Board study of CRA lending.
Sec. 714. Preserving the Community Reinvestment Act of 1977.
Sec. 715. Responsiveness to community needs for financial services.
Subtitle C--Other Regulatory Improvements
Sec. 721. Expanded small bank access to S corporation treatment.
Sec. 722. ``Plain language'' requirement for Federal banking agency
rules.
Sec. 723. Retention of ``Federal'' in name of converted Federal savings
association.
Sec. 724. Control of bankers' banks.
Sec. 725. Provision of technical assistance to microenterprises.
Sec. 726. Federal Reserve audits.
Sec. 727. Authorization to release reports.
Sec. 728. General Accounting Office study of conflicts of interest.
Sec. 729. Study and report on adapting existing legislative requirements
to online banking and lending.
Sec. 730. Clarification of source of strength doctrine.
Sec. 731. Interest rates and other charges at interstate branches.
Sec. 732. Interstate branches and agencies of foreign banks.
Sec. 733. Fair treatment of women by financial advisers.
Sec. 734. Membership of loan guarantee boards.
Sec. 735. Repeal of stock loan limit in Federal Reserve Act.
Sec. 736. Elimination of SAIF and DIF special reserves.
Sec. 737. Bank officers and directors as officers and directors of
public utilities.
Sec. 738. Approval for purchases of securities.
Sec. 739. Optional conversion of Federal savings associations.
Sec. 740. Grand jury proceedings.
TITLE I--FACILITATING AFFILIATION AMONG BANKS, SECURITIES FIRMS, AND
INSURANCE COMPANIES
Subtitle A--Affiliations
SEC. 101. GLASS-STEAGALL ACT REPEALS.
(a) Section 20 Repealed.--Section 20 of the Banking Act of 1933 (12
U.S.C. 377) (commonly referred to as the ``Glass-Steagall Act'') is
repealed.
(b) Section 32 Repealed.--Section 32 of the Banking Act of 1933 (12
U.S.C. 78) is repealed.
SEC. 102. ACTIVITY RESTRICTIONS APPLICABLE TO BANK HOLDING
COMPANIES THAT ARE NOT FINANCIAL HOLDING
COMPANIES.
(a) In General.--Section 4(c)(8) of the Bank Holding Company Act of
1956 (12 U.S.C. 1843(c)(8)) is amended to read as follows:
``(8) shares of any company the activities of which had been
determined by the Board by regulation or order under this
paragraph as of the day before the date of the enactment of the
Gramm-Leach-Bliley Act, to be so closely related to banking as
to be a proper incident thereto (subject to such terms and
conditions contained in such regulation or order, unless
modified by the Board);''.
(b) Conforming Changes to Other Statutes.--
(1) Amendment to the bank holding company act amendments of
1970.--Section 105 of the Bank Holding Company Act Amendments of
1970 (12 U.S.C. 1850) is amended by striking ``, to engage
directly or indirectly in a nonbanking activity pursuant to
section 4 of such Act,''.
[[Page 113 STAT. 1342]]
(2) Amendment to the bank service company act.--Section 4(f)
of the Bank Service Company Act (12 U.S.C. 1864(f)) is amended
by inserting before the period at the end the following: ``as of
the day before the date of the enactment of the Gramm-Leach-
Bliley Act''.
SEC. 103. FINANCIAL ACTIVITIES.
(a) In General.--Section 4 of the Bank Holding Company Act of 1956
(12 U.S.C. 1843) is amended by adding at the end the following new
subsections:
``(k) Engaging in Activities That Are Financial in Nature.--
``(1) In general.--Notwithstanding subsection (a), a
financial holding company may engage in any activity, and may
acquire and retain the shares of any company engaged in any
activity, that the Board, in accordance with paragraph (2),
determines (by regulation or order)--
``(A) to be financial in nature or incidental to
such financial activity; or
``(B) is complementary to a financial activity and
does not pose a substantial risk to the safety or
soundness of depository institutions or the financial
system generally.
``(2) Coordination between the board and the secretary of
the treasury.--
``(A) Proposals raised before the board.--
``(i) Consultation.--
The <<NOTE: Notification.>> Board shall notify the
Secretary of the Treasury of, and consult with the
Secretary of the Treasury concerning, any request,
proposal, or application under this subsection for
a determination of whether an activity is
financial in nature or incidental to a financial
activity.
``(ii) Treasury view.--
The <<NOTE: Deadline.>> Board shall not determine
that any activity is financial in nature or
incidental to a financial activity under this
subsection if the Secretary of the Treasury
notifies the Board in writing, not later than 30
days after the date of receipt of the notice
described in clause (i) (or such longer period as
the Board determines to be appropriate under the
circumstances) that the Secretary of the Treasury
believes that the activity is not financial in
nature or incidental to a financial activity or is
not otherwise permissible under this section.
``(B) Proposals raised by the treasury.--
``(i) Treasury recommendation.--The Secretary
of the Treasury may, at any time, recommend in
writing that the Board find an activity to be
financial in nature or incidental to a financial
activity.
``(ii)
Time <<NOTE: Deadline. Notification.>> period for
board action.--Not later than 30 days after the
date of receipt of a written recommendation from
the Secretary of the Treasury under clause (i) (or
such longer period as the Secretary of the
Treasury and the Board determine to be appropriate
under the circumstances), the Board shall
determine whether to initiate a public rulemaking
proposing that the recommended activity be found
to be financial in nature or incidental to a
financial activity under this subsection, and
shall notify the Secretary of the
[[Page 113 STAT. 1343]]
Treasury in writing of the determination of the
Board and, if the Board determines not to seek
public comment on the proposal, the reasons for
that determination.
``(3) Factors to be considered.--In determining whether an
activity is financial in nature or incidental to a financial
activity, the Board shall take into account--
``(A) the purposes of this Act and the Gramm-Leach-
Bliley Act;
``(B) changes or reasonably expected changes in the
marketplace in which financial holding companies
compete;
``(C) changes or reasonably expected changes in the
technology for delivering financial services; and
``(D) whether such activity is necessary or
appropriate to allow a financial holding company and the
affiliates of a financial holding company to--
``(i) compete effectively with any company
seeking to provide financial services in the
United States;
``(ii) efficiently deliver information and
services that are financial in nature through the
use of technological means, including any
application necessary to protect the security or
efficacy of systems for the transmission of data
or financial transactions; and
``(iii) offer customers any available or
emerging technological means for using financial
services or for the document imaging of data.
``(4) Activities that are financial in nature.--For purposes
of this subsection, the following activities shall be considered
to be financial in nature:
``(A) Lending, exchanging, transferring, investing
for others, or safeguarding money or securities.
``(B) Insuring, guaranteeing, or indemnifying
against loss, harm, damage, illness, disability, or
death, or providing and issuing annuities, and acting as
principal, agent, or broker for purposes of the
foregoing, in any State.
``(C) Providing financial, investment, or economic
advisory services, including advising an investment
company (as defined in section 3 of the Investment
Company Act of 1940).
``(D) Issuing or selling instruments representing
interests in pools of assets permissible for a bank to
hold directly.
``(E) Underwriting, dealing in, or making a market
in securities.
``(F) Engaging in any activity that the Board has
determined, by order or regulation that is in effect on
the date of the enactment of the Gramm-Leach-Bliley Act,
to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto
(subject to the same terms and conditions contained in
such order or regulation, unless modified by the Board).
``(G) Engaging, in the United States, in any
activity that--
``(i) a bank holding company may engage in
outside of the United States; and
[[Page 113 STAT. 1344]]
``(ii) the Board has determined, under
regulations prescribed or interpretations issued
pursuant to subsection (c)(13) (as in effect on
the day before the date of the enactment of the
Gramm-Leach-Bliley Act) to be usual in connection
with the transaction of banking or other financial
operations abroad.
``(H) Directly or indirectly acquiring or
controlling, whether as principal, on behalf of 1 or
more entities (including entities, other than a
depository institution or subsidiary of a depository
institution, that the bank holding company controls), or
otherwise, shares, assets, or ownership interests
(including debt or equity securities, partnership
interests, trust certificates, or other instruments
representing ownership) of a company or other entity,
whether or not constituting control of such company or
entity, engaged in any activity not authorized pursuant
to this section if--
``(i) the shares, assets, or ownership
interests are not acquired or held by a depository
institution or subsidiary of a depository
institution;
``(ii) such shares, assets, or ownership
interests are acquired and held by--
``(I) a securities affiliate or an
affiliate thereof; or
``(II) an affiliate of an insurance
company described in subparagraph
(I)(ii) that provides investment advice
to an insurance company and is
registered pursuant to the Investment
Advisers Act of 1940, or an affiliate of
such investment adviser;
as part of a bona fide underwriting or merchant or
investment banking activity, including investment
activities engaged in for the purpose of
appreciation and ultimate resale or disposition of
the investment;
``(iii) such shares, assets, or ownership
interests are held for a period of time to enable
the sale or disposition thereof on a reasonable
basis consistent with the financial viability of
the activities described in clause (ii); and
``(iv) during the period such shares, assets,
or ownership interests are held, the bank holding
company does not routinely manage or operate such
company or entity except as may be necessary or
required to obtain a reasonable return on
investment upon resale or disposition.
``(I) Directly or indirectly acquiring or
controlling, whether as principal, on behalf of 1 or
more entities (including entities, other than a
depository institution or subsidiary of a depository
institution, that the bank holding company controls) or
otherwise, shares, assets, or ownership interests
(including debt or equity securities, partnership
interests, trust certificates or other instruments
representing ownership) of a company or other entity,
whether or not constituting control of such company or
entity, engaged in any activity not authorized pursuant
to this section if--
[[Page 113 STAT. 1345]]
``(i) the shares, assets, or ownership
interests are not acquired or held by a depository
institution or a subsidiary of a depository
institution;
``(ii) such shares, assets, or ownership
interests are acquired and held by an insurance
company that is predominantly engaged in
underwriting life, accident and health, or
property and casualty insurance (other than
credit-related insurance) or providing and issuing
annuities;
``(iii) such shares, assets, or ownership
interests represent an investment made in the
ordinary course of business of such insurance
company in accordance with relevant State law
governing such investments; and
``(iv) during the period such shares, assets,
or ownership interests are held, the bank holding
company does not routinely manage or operate such
company except as may be necessary or required to
obtain a reasonable return on investment.
``(5) Actions required.--
``(A) In <<NOTE: Regulations.>> general.--The Board
shall, by regulation or order, define, consistent with
the purposes of this Act, the activities described in
subparagraph (B) as financial in nature, and the extent
to which such activities are financial in nature or
incidental to a financial activity.
``(B) Activities.--The activities described in this
subparagraph are as follows:
``(i) Lending, exchanging, transferring,
investing for others, or safeguarding financial
assets other than money or securities.
``(ii) Providing any device or other
instrumentality for transferring money or other
financial assets.
``(iii) Arranging, effecting, or facilitating
financial transactions for the account of third
parties.
``(6) Required notification.--
``(A) In <<NOTE: Deadline.>> general.--A financial
holding company that acquires any company or commences
any activity pursuant to this subsection shall provide
written notice to the Board describing the activity
commenced or conducted by the company acquired not later
than 30 calendar days after commencing the activity or
consummating the acquisition, as the case may be.
``(B) Approval not required for certain financial
activities.--Except as provided in subsection (j) with
regard to the acquisition of a savings association, a
financial holding company may commence any activity, or
acquire any company, pursuant to paragraph (4) or any
regulation prescribed or order issued under paragraph
(5), without prior approval of the Board.
``(7) Merchant banking activities.--
``(A) Joint regulations.--The Board and the
Secretary of the Treasury may issue such regulations
implementing paragraph (4)(H), including limitations on
transactions between depository institutions and
companies
controlled pursuant to such paragraph, as the Board and
the Secretary jointly deem appropriate to assure
compliance with the purposes and prevent evasions of
this Act and
[[Page 113 STAT. 1346]]
the Gramm-Leach-Bliley Act and to protect depository
institutions.
``(B) Sunset of restrictions on merchant banking
activities of financial subsidiaries.--The restrictions
contained in paragraph (4)(H) on the ownership and
control of shares, assets, or ownership interests by or
on behalf of a subsidiary of a depository institution
shall not apply to a financial subsidiary (as defined in
section 5136A of the Revised Statutes of the United
States) of a bank, if the Board and the Secretary of the
Treasury jointly authorize financial subsidiaries of
banks to engage in merchant banking activities pursuant
to section 122 of the Gramm-Leach-Bliley Act.
``(l) Conditions for Engaging in Expanded Financial Activities.--
``(1) In general.--Notwithstanding subsection (k), (n), or
(o), a bank holding company may not engage in any activity, or
directly or indirectly acquire or retain shares of any company
engaged in any activity, under subsection (k), (n), or (o),
other than activities permissible for any bank holding company
under subsection (c)(8), unless--
``(A) all of the depository institution subsidiaries
of the bank holding company are well capitalized;
``(B) all of the depository institution subsidiaries
of the bank holding company are well managed; and
``(C) the bank holding company has filed with the
Board--
``(i) a declaration that the company elects to
be a financial holding company to engage in
activities or acquire and retain shares of a
company that were not permissible for a bank
holding company to engage in or acquire before the
enactment of the Gramm-Leach-Bliley Act; and
``(ii) a certification that the company meets
the requirements of subparagraphs (A) and (B).
``(2) CRA requirement.--Notwithstanding subsection (k) or
(n) of this section, section 5136A(a) of the Revised Statutes of
the United States, or section 46(a) of the Federal Deposit
Insurance Act, the appropriate Federal banking agency shall
prohibit a financial holding company or any insured depository
institution from--
``(A) commencing any new activity under subsection
(k) or (n) of this section, section 5136A(a) of the
Revised Statutes of the United States, or section 46(a)
of the Federal Deposit Insurance Act; or
``(B) directly or indirectly acquiring control of a
company engaged in any activity under subsection (k) or
(n) of this section, section 5136A(a) of the Revised
Statutes of the United States, or section 46(a) of the
Federal Deposit Insurance Act (other than an investment
made pursuant to subparagraph (H) or (I) of subsection
(k)(4), or section 122 of the Gramm-Leach-Bliley Act, or
under section 46(a) of the Federal Deposit Insurance Act
by reason of such section 122, by an affiliate already
engaged in activities under any such provision);
if any insured depository institution subsidiary of such
financial holding company, or the insured depository institution
or any
[[Page 113 STAT. 1347]]
of its insured depository institution affiliates, has received
in its most recent examination under the Community Reinvestment
Act of 1977, a rating of less than `satisfactory record of
meeting community credit needs'.
``(3) Foreign banks.--For purposes of paragraph (1), the
Board shall apply comparable capital and management standards to
a foreign bank that operates a branch or agency or owns or
controls a commercial lending company in the United States,
giving due regard to the principle of national treatment and
equality of competitive opportunity.
``(m) Provisions Applicable to Financial Holding Companies That Fail
To Meet Certain Requirements.--
``(1) In general.--If the Board finds that--
``(A) a financial holding company is engaged,
directly or indirectly, in any activity under subsection
(k), (n), or (o), other than activities that are
permissible for a bank holding company under subsection
(c)(8); and
``(B) such financial holding company is not in
compliance with the requirements of subsection (l)(1);
the Board shall give notice to the financial holding company to
that effect, describing the conditions giving rise to the
notice.
``(2) Agreement <<NOTE: Deadline.>> to correct conditions
required.--Not later than 45 days after the date of receipt by a
financial holding company of a notice given under paragraph (1)
(or such additional period as the Board may permit), the
financial holding company shall execute an agreement with the
Board to comply with the requirements applicable to a financial
holding company under subsection (l)(1).
``(3) Board may impose limitations.--Until the conditions
described in a notice to a financial holding company under
paragraph (1) are corrected, the Board may impose such
limitations on the conduct or activities of that financial
holding company or any affiliate of that company as the Board
determines to be appropriate under the circumstances and
consistent with the purposes of this Act.
``(4) Failure to correct.--If the conditions described in a
notice to a financial holding company under paragraph (1) are
not corrected within 180 days after the date of receipt by the
financial holding company of a notice under paragraph (1), the
Board may require such financial holding company, under such
terms and conditions as may be imposed by the Board and subject
to such extension of time as may be granted in the discretion of
the Board, either--
``(A) to divest control of any subsidiary depository
institution; or
``(B) at the election of the financial holding
company instead to cease to engage in any activity
conducted by such financial holding company or its
subsidiaries (other than a depository institution or a
subsidiary of a depository institution) that is not an
activity that is permissible for a bank holding company
under subsection (c)(8).
``(5) Consultation.--In taking any action under this
subsection, the Board shall consult with all relevant Federal
and State regulatory agencies and authorities.
``(n) Authority To Retain Limited Nonfinancial Activities and
Affiliations.--
[[Page 113 STAT. 1348]]
``(1) In general.--Notwithstanding subsection (a), a company
that is not a bank holding company or a foreign bank (as defined
in section 1(b)(7) of the International Banking Act of 1978) and
becomes a financial holding company after the date of the
enactment of the Gramm-Leach-Bliley Act may continue to engage
in any activity and retain direct or indirect ownership or
control of shares of a company engaged in any activity if--
``(A) the holding company lawfully was engaged in
the activity or held the shares of such company on
September 30, 1999;
``(B) the holding company is predominantly engaged
in financial activities as defined in paragraph (2); and
``(C) the company engaged in such activity continues
to engage only in the same activities that such company
conducted on September 30, 1999, and other activities
permissible under this Act.
``(2) Predominantly financial.--For purposes of this
subsection, a company is predominantly engaged in financial
activities if the annual gross revenues derived by the holding
company and all subsidiaries of the holding company (excluding
revenues derived from subsidiary depository institutions), on a
consolidated basis, from engaging in activities that are
financial in nature or are incidental to a financial activity
under subsection (k) represent at least 85 percent of the
consolidated annual gross revenues of the company.
``(3) No expansion of grandfathered commercial activities
through merger or consolidation.--A financial holding company
that engages in activities or holds shares pursuant to this
subsection, or a subsidiary of such financial holding company,
may not acquire, in any merger, consolidation, or other type of
business combination, assets of any other company that is
engaged in any activity that the Board has not determined to be
financial in nature or incidental to a financial activity under
subsection (k), except this paragraph shall not apply with
respect to a company that owns a broadcasting station licensed
under title III of the Communications Act of 1934 and the shares
of which are under common control with an insurance company
since January 1, 1998, unless such company is acquired by, or
otherwise becomes an affiliate of, a bank holding company that,
at the time such acquisition or affiliation is consummated, is 1
of the 5 largest domestic bank holding companies (as determined
on the basis of the consolidated total assets of such
companies).
``(4) Continuing revenue limitation on grandfathered
commercial activities.--Notwithstanding any other provision of
this subsection, a financial holding company may continue to
engage in activities or hold shares in companies pursuant to
this subsection only to the extent that the aggregate annual
gross revenues derived from all such activities and all such
companies does not exceed 15 percent of the consolidated annual
gross revenues of the financial holding company (excluding
revenues derived from subsidiary depository institutions).
``(5) Cross marketing restrictions applicable to commercial
activities.--
[[Page 113 STAT. 1349]]
``(A) In general.--A depository institution
controlled by a financial holding company shall not--
``(i) offer or market, directly or through any
arrangement, any product or service of a company
whose activities are conducted or whose shares are
owned or controlled by the financial holding
company pursuant to this subsection or
subparagraph (H) or (I) of subsection (k)(4); or
``(ii) permit any of its products or services
to be offered or marketed, directly or through any
arrangement, by or through any company described
in clause (i).
``(B) Rule of construction.--Subparagraph (A) shall
not be construed as prohibiting an arrangement between a
depository institution and a company owned or controlled
pursuant to subsection (k)(4)(I) for the marketing of
products or services through statement inserts or
Internet websites if--
``(i) such arrangement does not violate
section 106 of the Bank Holding Company Act
Amendments of 1970; and
``(ii) the Board determines that the
arrangement is in the public interest, does not
undermine the separation of banking and commerce,
and is consistent with the safety and soundness of
depository institutions.
``(6) Transactions with nonfinancial affiliates.--A
depository institution controlled by a financial holding company
may not engage in a covered transaction (as defined in section
23A(b)(7) of the Federal Reserve Act) with any affiliate
controlled by the company pursuant to this subsection.
``(7) Sunset of grandfather.--A financial holding company
engaged in any activity, or retaining direct or indirect
ownership or control of shares of a company, pursuant to this
subsection, shall terminate such activity and divest ownership
or control of the shares of such company before the end of the
10-year period beginning on the date of the enactment of the
Gramm-Leach-Bliley Act. The Board may, upon application by a
financial holding company, extend such 10-year period by a
period not to exceed an additional 5 years if such extension
would not be detrimental to the public interest.
``(o) Regulation of Certain Financial Holding Companies.--
Notwithstanding subsection (a), a company that is not a bank holding
company or a foreign bank (as defined in section 1(b)(7) of the
International Banking Act of 1978) and becomes a financial holding
company after the date of enactment of the Gramm-Leach-Bliley Act, may
continue to engage in, or directly or indirectly own or control shares
of a company engaged in, activities related to the trading, sale, or
investment in commodities and underlying physical properties that were
not permissible for bank holding companies to conduct in the United
States as of September 30, 1997, if--
``(1) the holding company, or any subsidiary of the holding
company, lawfully was engaged, directly or indirectly, in any of
such activities as of September 30, 1997, in the United States;
[[Page 113 STAT. 1350]]
``(2) the attributed aggregate consolidated assets of the
company held by the holding company pursuant to this subsection,
and not otherwise permitted to be held by a financial holding
company, are equal to not more than 5 percent of the total
consolidated assets of the bank holding company, except that the
Board may increase that percentage by such amounts and under
such circumstances as the Board considers appropriate,
consistent with the purposes of this Act; and
``(3) the holding company does not permit--
``(A) any company, the shares of which it owns or
controls pursuant to this subsection, to offer or market
any product or service of an affiliated depository
institution; or
``(B) any affiliated depository institution to offer
or market any product or service of any company, the
shares of which are owned or controlled by such holding
company pursuant to this subsection.''.
(b) Community Reinvestment Requirement.--Section 804 of the
Community Reinvestment Act of 1977 (12 U.S.C. 2903) is amended by adding
at the end the following new subsection:
``(c) Financial Holding Company Requirement.--
``(1) In general.--An election by a bank holding company to
become a financial holding company under section 4 of the Bank
Holding Company Act of 1956 shall not be effective if--
``(A) the Board finds that, as of the date the
declaration of such election and the certification is
filed by such holding company under section 4(l)(1)(C)
of the Bank Holding Company Act of 1956, not all of the
subsidiary insured depository institutions of the bank
holding company had achieved a rating of `satisfactory
record of meeting community credit needs', or better, at
the most recent examination of each such institution;
and
``(B) the Board notifies the company of such finding
before the end of the 30-day period beginning on such
date.
``(2) Limited exclusions for newly acquired insured
depository institutions.--Any insured depository institution
acquired by a bank holding company during the 12-month period
preceding the date of the submission to the Board of the
declaration and certification under section 4(l)(1)(C) of the
Bank Holding Company Act of 1956 may be excluded for purposes of
paragraph (1) during the 12-month period beginning on the date
of such acquisition if--
``(A) the bank holding company has submitted an
affirmative plan to the appropriate Federal financial
supervisory agency to take such action as may be
necessary in order for such institution to achieve a
rating of `satisfactory record of meeting community
credit needs', or better, at the next examination of the
institution; and
``(B) the plan has been accepted by such agency.
``(3) Definitions.--For purposes of this subsection, the
following definitions shall apply:
``(A) Bank holding company; financial holding
company.--The terms `bank holding company' and
`financial holding company' have the meanings given
those terms in section 2 of the Bank Holding Company Act
of 1956.
[[Page 113 STAT. 1351]]
``(B) Board.--The term `Board' means the Board of
Governors of the Federal Reserve System.
``(C) Insured depository institution.--The term
`insured depository institution' has the meaning given
the term in section 3(c) of the Federal Deposit
Insurance Act.''.
(c) Technical and Conforming Amendments.--
(1) Definitions.--Section 2 of the Bank Holding Company Act
of 1956 (12 U.S.C. 1841) is amended--
(A) in subsection (n), by inserting `` `depository
institution','' after ``the terms''; and
(B) by adding at the end the following new
subsections:
``(p) Financial Holding Company.--For purposes of this Act, the term
`financial holding company' means a bank holding company that meets the
requirements of section 4(l)(1).
``(q) Insurance Company.--For purposes of sections 4 and 5, the term
`insurance company' includes any person engaged in the business of
insurance to the extent of such activities.''.
(2) Notice procedures.--Section 4(j) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1843(j)) is amended--
(A) in each of subparagraphs (A) and (E) of
paragraph (1), by inserting ``or in any complementary
activity under subsection (k)(1)(B)'' after ``subsection
(c)(8) or (a)(2)''; and
(B) in paragraph (3)--
(i) by inserting ``, other than any
complementary activity under subsection
(k)(1)(B),'' after ``to engage in any activity'';
and
(ii) by inserting ``or a company engaged in
any complementary activity under subsection
(k)(1)(B)'' after ``insured depository
institution''.
(d) <<NOTE: 12 USC 1843 note.>> Report.--
(1) In general.--By the end of the 4-year period beginning
on the date of the enactment of this Act, the Board of Governors
of the Federal Reserve System and the Secretary of the Treasury
shall submit a joint report to the Congress containing a summary
of new activities, including grandfathered commercial
activities, in which any financial holding company is engaged
pursuant to subsection (k)(1) or (n) of section 4 of the Bank
Holding Company Act of 1956 (as added by subsection (a)).
(2) Other contents.--The report submitted to the Congress
pursuant to paragraph (1) shall also contain the following:
(A) A discussion of actions by the Board of
Governors of the Federal Reserve System and the
Secretary of the Treasury, whether by regulation, order,
interpretation, or guideline or by approval or
disapproval of an application, with regard to activities
of financial holding companies that are incidental to
activities that are financial in nature or complementary
to such financial activities.
(B) An analysis and discussion of the risks posed by
commercial activities of financial holding companies to
the safety and soundness of affiliate depository
institutions.
(C) An analysis and discussion of the effect of
mergers and acquisitions under section 4(k) of the Bank
Holding Company Act of 1956 on market concentration in
the financial services industry.
[[Page 113 STAT. 1352]]
SEC. 104. <<NOTE: 15 USC 6701.>> OPERATION OF STATE LAW.
(a) State Regulation of the Business of Insurance.--The Act entitled
``An Act to express the intent of Congress with reference to the
regulation of the business of insurance'' and approved March 9, 1945 (15
U.S.C. 1011 et seq.) (commonly referred to as the ``McCarran-Ferguson
Act'') remains the law of the United States.
(b) Mandatory Insurance Licensing Requirements.--No person shall
engage in the business of insurance in a State as principal or agent
unless such person is licensed as required by the appropriate insurance
regulator of such State in accordance with the relevant State insurance
law, subject to subsections (c), (d), and (e).
(c) Affiliations.--
(1) In general.--Except as provided in paragraph (2), no
State may, by statute, regulation, order, interpretation, or
other action, prevent or restrict a depository institution, or
an affiliate thereof, from being affiliated directly or
indirectly or associated with any person, as authorized or
permitted by this Act or any other provision of Federal law.
(2) Insurance.--With respect to affiliations between
depository institutions, or any affiliate thereof, and any
insurer, paragraph (1) does not prohibit--
(A) any State from--
(i) collecting, reviewing, and taking actions
(including approval and disapproval) on
applications and other documents or reports
concerning any proposed acquisition of, or a
change or continuation of control of, an insurer
domiciled in that State; and
(ii) exercising authority granted under
applicable State law to collect information
concerning any proposed acquisition of, or a
change or continuation of control of, an insurer
engaged in the business of insurance in, and
regulated as an insurer by, such State;
during the 60-day period preceding the effective date of
the acquisition or change or continuation of control, so
long as the collecting, reviewing, taking actions, or
exercising authority by the State does not have the
effect of discriminating, intentionally or
unintentionally, against a depository institution or an
affiliate thereof, or against any other person based
upon an association of such person with a depository
institution;
(B) any State from requiring any person that is
acquiring control of an insurer domiciled in that State
to maintain or restore the capital requirements of that
insurer to the level required under the capital
regulations of general applicability in that State to
avoid the requirement of preparing and filing with the
insurance regulatory authority of that State a plan to
increase the capital of the insurer, except that any
determination by the State insurance regulatory
authority with respect to such requirement shall be made
not later than 60 days after the date of notification
under subparagraph (A); or
(C) any State from restricting a change in the
ownership of stock in an insurer, or a company formed
for the purpose of controlling such insurer, after the
conversion of the insurer from mutual to stock form so
long as such
[[Page 113 STAT. 1353]]
restriction does not have the effect of discriminating,
intentionally or unintentionally, against a depository
institution or an affiliate thereof, or against any
other person based upon an association of such person
with a depository institution.
(d) Activities.--
(1) In general.--Except as provided in paragraph (3), and
except with respect to insurance sales, solicitation, and cross
marketing activities, which shall be governed by paragraph (2),
no State may, by statute, regulation, order, interpretation, or
other action, prevent or restrict a depository institution or an
affiliate thereof from engaging directly or indirectly, either
by itself or in conjunction with an affiliate, or any other
person, in any activity authorized or permitted under this Act
and the amendments made by this Act.
(2) Insurance sales.--
(A) In general.--In accordance with the legal
standards for preemption set forth in the decision of
the Supreme Court of the United States in Barnett Bank
of Marion County N.A. v. Nelson, 517 U.S. 25 (1996), no
State may, by statute, regulation, order,
interpretation, or other action, prevent or
significantly interfere with the ability of a depository
institution, or an affiliate thereof, to engage,
directly or indirectly, either by itself or in
conjunction with an affiliate or any other person, in
any insurance sales, solicitation, or crossmarketing
activity.
(B) Certain state laws preserved.--Notwithstanding
subparagraph (A), a State may impose any of the
following restrictions, or restrictions that are
substantially the same as but no more burdensome or
restrictive than those in each of the following clauses:
(i) Restrictions prohibiting the rejection of
an insurance policy by a depository institution or
an affiliate of a depository institution, solely
because the policy has been issued or underwritten
by any person who is not associated with such
depository institution or affiliate when the
insurance is required in connection with a loan or
extension of credit.
(ii) Restrictions prohibiting a requirement
for any debtor, insurer, or insurance agent or
broker to pay a separate charge in connection with
the handling of insurance that is required in
connection with a loan or other extension of
credit or the provision of another traditional
banking product by a depository institution, or
any affiliate of a depository institution, unless
such charge would be required when the depository
institution or affiliate is the licensed insurance
agent or broker providing the insurance.
(iii) Restrictions prohibiting the use of any
advertisement or other insurance promotional
material by a depository institution or any
affiliate of a depository institution that would
cause a reasonable person to believe mistakenly
that--
(I) the Federal Government or a
State is responsible for the insurance
sales activities of, or stands behind
the credit of, the institution or
affiliate; or
[[Page 113 STAT. 1354]]
(II) a State, or the Federal
Government guarantees any returns on
insurance products, or is a source of
payment on any insurance obligation of
or sold by the institution or affiliate;
(iv) Restrictions prohibiting the payment or
receipt of any commission or brokerage fee or
other valuable consideration for services as an
insurance agent or broker to or by any person,
unless such person holds a valid State license
regarding the applicable class of insurance at the
time at which the services are performed, except
that, in this clause, the term ``services as an
insurance agent or broker'' does not include a
referral by an unlicensed person of a customer or
potential customer to a licensed insurance agent
or broker that does not include a discussion of
specific insurance policy terms and conditions.
(v) Restrictions prohibiting any compensation
paid to or received by any individual who is not
licensed to sell insurance, for the referral of a
customer that seeks to purchase, or seeks an
opinion or advice on, any insurance product to a
person that sells or provides opinions or advice
on such product, based on the purchase of
insurance by the customer.
(vi) Restrictions prohibiting the release of
the insurance information of a customer (defined
as information concerning the premiums, terms, and
conditions of insurance coverage, including
expiration dates and rates, and insurance claims
of a customer contained in the records of the
depository institution or an affiliate thereof) to
any person other than an officer, director,
employee, agent, or affiliate of a depository
institution, for the purpose of soliciting or
selling insurance, without the express consent of
the customer, other than a provision that
prohibits--
(I) a transfer of insurance
information to an unaffiliated insurer
in connection with transferring
insurance in force on existing insureds
of the depository institution or an
affiliate thereof, or in connection with
a merger with or acquisition of an
unaffiliated insurer; or
(II) the release of information as
otherwise authorized by State or Federal
law.
(vii) Restrictions prohibiting the use of
health information obtained from the insurance
records of a customer for any purpose, other than
for its activities as a licensed agent or broker,
without the express consent of the customer.
(viii) Restrictions prohibiting the extension
of credit or any product or service that is
equivalent to an extension of credit, lease or
sale of property of any kind, or furnishing of any
services or fixing or varying the consideration
for any of the foregoing, on the condition or
requirement that the customer obtain insurance
from a depository institution or an affiliate of a
depository institution, or a particular insurer,
agent, or broker, other than a prohibition that
[[Page 113 STAT. 1355]]
would prevent any such depository institution or
affiliate--
(I) from engaging in any activity
described in this clause that would not
violate section 106 of the Bank Holding
Company Act Amendments of 1970, as
interpreted by the Board of Governors of
the Federal Reserve System; or
(II) from informing a customer or
prospective customer that insurance is
required in order to obtain a loan or
credit, that loan or credit approval is
contingent upon the procurement by the
customer of acceptable insurance, or
that insurance is available from the
depository institution or an affiliate
of the depository institution.
(ix) Restrictions requiring, when an
application by a consumer for a loan or other
extension of credit from a depository institution
is pending, and insurance is offered or sold to
the consumer or is required in connection with the
loan or extension of credit by the depository
institution or any affiliate thereof, that a
written disclosure be provided to the consumer or
prospective customer indicating that the
customer's choice of an insurance provider will
not affect the credit decision or credit terms in
any way, except that the depository institution
may impose reasonable requirements concerning the
creditworthiness of the insurer and scope of
coverage chosen.
(x) Restrictions requiring clear and
conspicuous disclosure, in writing, where
practicable, to the customer prior to the sale of
any insurance policy that such policy--
(I) is not a deposit;
(II) is not insured by the Federal
Deposit Insurance Corporation;
(III) is not guaranteed by any
depository institution or, if
appropriate, an affiliate of any such
institution or any person soliciting the
purchase of or selling insurance on the
premises thereof; and
(IV) where appropriate, involves
investment risk, including potential
loss of principal.
(xi) Restrictions requiring that, when a
customer obtains insurance (other than credit
insurance or flood insurance) and credit from a
depository institution, or any affiliate of such
institution, or any person soliciting the purchase
of or selling insurance on the premises thereof,
the credit and insurance transactions be completed
through separate documents.
(xii) Restrictions prohibiting, when a
customer obtains insurance (other than credit
insurance or flood insurance) and credit from a
depository institution or an affiliate of such
institution, or any person soliciting the purchase
of or selling insurance on the premises thereof,
inclusion of the expense of insurance premiums in
the primary credit transaction without the express
written consent of the customer.
[[Page 113 STAT. 1356]]
(xiii) Restrictions requiring maintenance of
separate and distinct books and records relating
to insurance transactions, including all files
relating to and reflecting consumer complaints,
and requiring that such insurance books and
records be made available to the appropriate State
insurance regulator for inspection upon reasonable
notice.
(C) Limitations.--
(i) OCC deference.--Section 304(e) does not
apply with respect to any State statute,
regulation, order, interpretation, or other action
regarding insurance sales, solicitation, or cross
marketing activities described in subparagraph (A)
that was issued, adopted, or enacted before
September 3, 1998, and that is not described in
subparagraph (B).
(ii) Nondiscrimination.--Subsection (e) does
not apply with respect to any State statute,
regulation, order, interpretation, or other action
regarding insurance sales, solicitation, or cross
marketing activities described in subparagraph (A)
that was issued, adopted, or enacted before
September 3, 1998, and that is not described in
subparagraph (B).
(iii) Construction.--Nothing in this paragraph
shall be construed--
(I) to limit the applicability of
the decision of the Supreme Court in
Barnett Bank of Marion County N.A. v.
Nelson, 517 U.S. 25 (1996) with respect
to any State statute, regulation, order,
interpretation, or other action that is
not referred to or described in
subparagraph (B); or
(II) to create any inference with
respect to any State statute,
regulation, order, interpretation, or
other action that is not described in
this paragraph.
(3) Insurance activities other than sales.--State statutes,
regulations, interpretations, orders, and other actions shall
not be preempted under paragraph (1) to the extent that they--
(A) relate to, or are issued, adopted, or enacted
for the purpose of regulating the business of insurance
in accordance with the Act entitled ``An Act to express
the intent of Congress with reference to the regulation
of the business of insurance'' and approved March 9,
1945 (15 U.S.C. 1011 et seq.) (commonly referred to as
the ``McCarran-Ferguson Act'');
(B) apply only to persons that are not depository
institutions, but that are directly engaged in the
business of insurance (except that they may apply to
depository institutions engaged in providing savings
bank life insurance as principal to the extent of
regulating such insurance);
(C) do not relate to or directly or indirectly
regulate insurance sales, solicitations, or cross
marketing activities; and
(D) are not prohibited under subsection (e).
[[Page 113 STAT. 1357]]
(4) Financial activities other than insurance.--No State
statute, regulation, order, interpretation, or other action
shall be preempted under paragraph (1) to the extent that--
(A) it does not relate to, and is not issued and
adopted, or enacted for the purpose of regulating,
directly or indirectly, insurance sales, solicitations,
or cross marketing activities covered under paragraph
(2);
(B) it does not relate to, and is not issued and
adopted, or enacted for the purpose of regulating,
directly or indirectly, the business of insurance
activities other than sales, solicitations, or cross
marketing activities, covered under paragraph (3);
(C) it does not relate to securities investigations
or enforcement actions referred to in subsection (f);
and
(D) it--
(i) does not distinguish by its terms between
depository institutions, and affiliates thereof,
engaged in the activity at issue and other persons
engaged in the same activity in a manner that is
in any way adverse with respect to the conduct of
the activity by any such depository institution or
affiliate engaged in the activity at issue;
(ii) as interpreted or applied, does not have,
and will not have, an impact on depository
institutions, or affiliates thereof, engaged in
the activity at issue, or any person who has an
association with any such depository institution
or affiliate, that is substantially more adverse
than its impact on other persons engaged in the
same activity that are not depository institutions
or affiliates thereof, or persons who do not have
an association with any such depository
institution or affiliate;
(iii) does not effectively prevent a
depository institution or affiliate thereof from
engaging in activities authorized or permitted by
this Act or any other provision of Federal law;
and
(iv) does not conflict with the intent of this
Act generally to permit affiliations that are
authorized or permitted by Federal law.
(e) Nondiscrimination.--Except as provided in any restrictions
described in subsection (d)(2)(B), no State may, by statute, regulation,
order, interpretation, or other action, regulate the insurance
activities authorized or permitted under this Act or any other provision
of Federal law of a depository institution, or affiliate thereof, to the
extent that such statute, regulation, order, interpretation, or other
action--
(1) distinguishes by its terms between depository
institutions, or affiliates thereof, and other persons engaged
in such activities, in a manner that is in any way adverse to
any such depository institution, or affiliate thereof;
(2) as interpreted or applied, has or will have an impact on
depository institutions, or affiliates thereof, that is
substantially more adverse than its impact on other persons
providing the same products or services or engaged in the same
activities that are not depository institutions, or affiliates
thereof, or persons or entities affiliated therewith;
[[Page 113 STAT. 1358]]
(3) effectively prevents a depository institution, or
affiliate thereof, from engaging in insurance activities
authorized or permitted by this Act or any other provision of
Federal law; or
(4) conflicts with the intent of this Act generally to
permit affiliations that are authorized or permitted by Federal
law between depository institutions, or affiliates thereof, and
persons engaged in the business of insurance.
(f) Limitation.--Subsections (c) and (d) shall not be construed to
affect--
(1) the jurisdiction of the securities commission (or any
agency or office performing like functions) of any State, under
the laws of such State--
(A) to investigate and bring enforcement actions,
consistent with section 18(c) of the Securities Act of
1933, with respect to fraud or deceit or unlawful
conduct by any person, in connection with securities or
securities transactions; or
(B) to require the registration of securities or the
licensure or registration of brokers, dealers, or
investment advisers (consistent with section 203A of the
Investment Advisers Act of 1940), or the associated
persons of a broker, dealer, or investment adviser
(consistent with such section 203A); or
(2) State laws, regulations, orders, interpretations, or
other actions of general applicability relating to the
governance of corporations, partnerships, limited liability
companies, or other business associations incorporated or formed
under the laws of that State or domiciled in that State, or the
applicability of the antitrust laws of any State or any State
law that is similar to the antitrust laws if such laws,
regulations, orders, interpretations, or other actions are not
inconsistent with the purposes of this Act to authorize or
permit certain affiliations and to remove barriers to such
affiliations.
(g) Definitions.--For purposes of this section, the following
definitions shall apply:
(1) Affiliate.--The term ``affiliate'' means any company
that controls, is controlled by, or is under common control with
another company.
(2) Antitrust laws.--The term ``antitrust laws'' has the
meaning given the term in subsection (a) of the first section of
the Clayton Act, and includes section 5 of the Federal Trade
Commission Act (to the extent that such section 5 relates to
unfair methods of competition).
(3) Depository institution.--The term ``depository
institution''--
(A) has the meaning given the term in section 3 of
the Federal Deposit Insurance Act; and
(B) includes any foreign bank that maintains a
branch, agency, or commercial lending company in the
United States.
(4) Insurer.--The term ``insurer'' means any person engaged
in the business of insurance.
(5) State.--The term ``State'' means any State of the United
States, the District of Columbia, any territory of the United
States, Puerto Rico, Guam, American Samoa, the Trust
[[Page 113 STAT. 1359]]
Territory of the Pacific Islands, the Virgin Islands, and the
Northern Mariana Islands.
SEC. 105. MUTUAL BANK HOLDING COMPANIES AUTHORIZED.
Section 3(g)(2) of the Bank Holding Company Act of 1956 (12 U.S.C.
1842(g)(2)) is amended to read as follows:
``(2) Regulations.--A bank holding company organized as a
mutual holding company shall be regulated on terms, and shall be
subject to limitations, comparable to those applicable to any
other bank holding company.''.
SEC. 106. PROHIBITION ON DEPOSIT PRODUCTION OFFICES.
Section 109(e)(4) of the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 (12 U.S.C. 1835a(e)(4)) is amended by
inserting ``and any branch of a bank controlled by an out-of-State bank
holding company (as defined in section 2(o)(7) of the Bank Holding
Company Act of 1956)'' before the period.
SEC. 107. CROSS MARKETING RESTRICTION; LIMITED PURPOSE BANK
RELIEF; DIVESTITURE.
(a) Cross Marketing Restriction.--Section 4(f) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1843(f)) is amended by striking paragraph
(3).
(b) Daylight Overdrafts.--Section 4(f) of the Bank Holding Company
Act of 1956 (12 U.S.C. 1843(f)) is amended by inserting after paragraph
(2) the following new paragraph:
``(3) Permissible overdrafts described.--For purposes of
paragraph (2)(C), an overdraft is described in this paragraph
if--
``(A) such overdraft results from an inadvertent
computer or accounting error that is beyond the control
of both the bank and the affiliate;
``(B) such overdraft--
``(i) is permitted or incurred on behalf of an
affiliate that is monitored by, reports to, and is
recognized as a primary dealer by the Federal
Reserve Bank of New York; and
``(ii) is fully secured, as required by the
Board, by bonds, notes, or other obligations that
are direct obligations of the United States or on
which the principal and interest are fully
guaranteed by the United States or by securities
and obligations eligible for settlement on the
Federal Reserve book entry system; or
``(C) such overdraft--
``(i) is permitted or incurred by, or on
behalf of, an affiliate in connection with an
activity that is financial in nature or incidental
to a financial activity; and
``(ii) does not cause the bank to violate any
provision of section 23A or 23B of the Federal
Reserve Act, either directly, in the case of a
bank that is a member of the Federal Reserve
System, or by virtue of section 18(j) of the
Federal Deposit Insurance Act, in the case of a
bank that is not a member of the Federal Reserve
System.''.
(c) Industrial Loan Companies; Affiliate Overdrafts.--Section
2(c)(2)(H) of the Bank Holding Company Act of 1956 (12 U.S.C.
[[Page 113 STAT. 1360]]
1841(c)(2)(H)) is amended by inserting ``, or that is otherwise
permissible for a bank controlled by a company described in section
4(f)(1)'' before the period at the end.
(d) Activities Limitations.--Section 4(f)(2) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1843(f)(2)) is amended--
(1) by striking ``Paragraph (1) shall cease to apply to any
company described in such paragraph if--'' and inserting
``Subject to paragraph (3), a company described in paragraph (1)
shall no longer qualify for the exemption provided under that
paragraph if--'';
(2) in subparagraph (A)--
(A) in clause (ii)(IX), by striking ``and'' at the
end;
(B) in clause (ii)(X), by inserting ``and'' after
the semicolon;
(C) in clause (ii), by inserting after subclause (X)
the following new subclause:
``(XI) assets that are derived from,
or incidental to, activities in which
institutions described in subparagraph
(F) or (H) of section 2(c)(2) are
permitted to engage;''; and
(D) by striking ``or'' at the end; and
(3) by striking subparagraph (B) and inserting the
following:
``(B) any bank subsidiary of such company--
``(i) accepts demand deposits or deposits that
the depositor may withdraw by check or similar
means for payment to third parties; and
``(ii) engages in the business of making
commercial loans (except that, for purposes of
this clause, loans made in the ordinary course of
a credit card operation shall not be treated as
commercial loans); or
``(C) after the date of the enactment of the
Competitive Equality Amendments of 1987, any bank
subsidiary of such company permits any overdraft
(including any intraday overdraft), or incurs any such
overdraft in the account of the bank at a Federal
reserve bank, on behalf of an affiliate, other than an
overdraft described in paragraph (3).''.
(e) Divestiture Requirement.--Section 4(f)(4) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1843(f)(4)) is amended to read as
follows:
``(4) Divestiture in case of loss of exemption.--If any
company described in paragraph (1) fails to qualify for the
exemption provided under paragraph (1) by operation of paragraph
(2), such exemption shall cease to apply to such company and
such company shall divest control of each bank it controls
before the end of the 180-day period beginning on the date on
which the company receives notice from the Board that the
company has failed to continue to qualify for such exemption,
unless, before the end of such 180-day period, the company has--
``(A) either--
``(i) corrected the condition or ceased the
activity that caused the company to fail to
continue to qualify for the exemption; or
[[Page 113 STAT. 1361]]
``(ii) submitted a plan to the Board for
approval to cease the activity or correct the
condition in a timely manner (which shall not
exceed 1 year); and
``(B) implemented procedures that are reasonably
adapted to avoid the reoccurrence of such condition or
activity.''.
(f) Foreign Bank Subsidiaries of Limited Purpose Credit Card
Banks.--Section 4(f) of the Bank Holding Company Act of 1956 (12 U.S.C.
1843(f)) is amended by adding at the end the following new paragraph:
``(14) Foreign bank subsidiaries of limited purpose credit
card banks.--
``(A) In general.--An institution described in
section 2(c)(2)(F) may control a foreign bank if--
``(i) the investment of the institution in the
foreign bank meets the requirements of section 25
or 25A of the Federal Reserve Act and the foreign
bank qualifies under such sections;
``(ii) the foreign bank does not offer any
products or services in the United States; and
``(iii) the activities of the foreign bank are
permissible under otherwise applicable law.
``(B) Other limitations inapplicable.--The
limitations contained in any clause of section
2(c)(2)(F) shall not apply to a foreign bank described
in subparagraph (A) that is controlled by an institution
described in such section.''.
SEC. 108. USE <<NOTE: 12 USC 4801 note.>> OF SUBORDINATED DEBT TO
PROTECT FINANCIAL SYSTEM AND DEPOSIT FUNDS
FROM ``TOO BIG TO FAIL'' INSTITUTIONS.
(a) Study Required.--The Board of Governors of the Federal Reserve
System and the Secretary of the Treasury shall conduct a study of--
(1) the feasibility and appropriateness of establishing a
requirement that, with respect to large insured depository
institutions and depository institution holding companies the
failure of which could have serious adverse effects on economic
conditions or financial stability, such institutions and holding
companies maintain some portion of their capital in the form of
subordinated debt in order to bring market forces and market
discipline to bear on the operation of, and the assessment of
the viability of, such institutions and companies and reduce the
risk to economic conditions, financial stability, and any
deposit insurance fund;
(2) if such requirement is feasible and appropriate, the
appropriate amount or percentage of capital that should be
subordinated debt consistent with such purposes; and
(3) the manner in which any such requirement could be
incorporated into existing capital standards and other issues
relating to the transition to such a requirement.
(b) Report.--Before the end of the 18-month period beginning on the
date of the enactment of this Act, the Board of Governors of the Federal
Reserve System and the Secretary of the Treasury shall submit a report
to the Congress containing the findings and conclusions of the Board and
the Secretary in connection with
[[Page 113 STAT. 1362]]
the study required under subsection (a), together with such legislative
and administrative proposals as the Board and the Secretary may
determine to be appropriate.
(c) Definitions.--For purposes of subsection (a), the following
definitions shall apply:
(1) Bank holding company.--The term ``bank holding company''
has the meaning given the term in section 2 of the Bank Holding
Company Act of 1956.
(2) Insured depository institution.--The term ``insured
depository institution'' has the meaning given the term in
section 3(c) of the Federal Deposit Insurance Act.
(3) Subordinated debt.--The term ``subordinated debt'' means
unsecured debt that--
(A) has an original weighted average maturity of not
less than 5 years;
(B) is subordinated as to payment of principal and
interest to all other indebtedness of the bank,
including deposits;
(C) is not supported by any form of credit
enhancement, including a guarantee or standby letter of
credit; and
(D) is not held in whole or in part by any affiliate
or institution-affiliated party of the insured
depository institution or bank holding company.
SEC. 109. STUDY <<NOTE: 12 USC 252 note.>> OF FINANCIAL
MODERNIZATION'S EFFECT ON THE
ACCESSIBILITY OF SMALL BUSINESS AND FARM
LOANS.
(a) Study.--The Secretary of the Treasury, in consultation with the
Federal banking agencies (as defined in section 3(z) of the Federal
Deposit Insurance Act), shall conduct a study of the extent to which
credit is being provided to and for small businesses and farms, as a
result of this Act and the amendments made by this Act.
(b) Report.--Before the end of the 5-year period beginning on the
date of the enactment of this Act, the Secretary, in consultation with
the Federal banking agencies, shall submit a report to the Congress on
the study conducted pursuant to subsection (a) and shall include such
recommendations as the Secretary determines to be appropriate for
administrative and legislative action.
Subtitle B--Streamlining Supervision of Bank Holding Companies
SEC. 111. STREAMLINING BANK HOLDING COMPANY SUPERVISION.
Section 5(c) of the Bank Holding Company Act of 1956 (12 U.S.C.
1844(c)) is amended to read as follows:
``(c) Reports and Examinations.--
``(1) Reports.--
``(A) In general.--The Board, from time to time, may
require a bank holding company and any subsidiary of
such company to submit reports under oath to keep the
Board informed as to--
``(i) its financial condition, systems for
monitoring and controlling financial and operating
risks, and transactions with depository
institution subsidiaries of the bank holding
company; and
[[Page 113 STAT. 1363]]
``(ii) compliance by the company or subsidiary
with applicable provisions of this Act or any
other Federal law that the Board has specific
jurisdiction to enforce against such company or
subsidiary.
``(B) Use of existing reports.--
``(i) In general.--For purposes of compliance
with this paragraph, the Board shall, to the
fullest extent possible, accept--
``(I) reports that a bank holding
company or any subsidiary of such
company has provided or been required to
provide to other Federal or State
supervisors or to appropriate self-
regulatory organizations;
``(II) information that is otherwise
required to be reported publicly; and
``(III) externally audited financial
statements.
``(ii) Availability.--A bank holding company
or a subsidiary of such company shall provide to
the Board, at the request of the Board, a report
referred to in clause (i).
``(iii) Reports filed with other agencies.--
``(I) In general.--In the event that
the Board requires a report under this
subsection from a functionally regulated
subsidiary of a bank holding company of
a kind that is not required by another
Federal or State regulatory authority or
an appropriate self-regulatory
organization, the Board shall first
request that the appropriate regulatory
authority or self-regulatory
organization obtain such report.
``(II) Availability from other
subsidiary.--If the report is not made
available to the Board, and the report
is necessary to assess a material risk
to the bank holding company or any of
its depository institution subsidiaries
or compliance with this Act or any other
Federal law that the Board has specific
jurisdiction to enforce against such
company or subsidiary or the systems
described in paragraph (2)(A)(ii)(II),
the Board may require such functionally
regulated subsidiary to provide such a
report to the Board.
``(2) Examinations.--
``(A) Examination authority for bank holding
companies and subsidiaries.--Subject to subparagraph
(B), the Board may make examinations of each bank
holding company and each subsidiary of such holding
company in order--
``(i) to inform the Board of the nature of the
operations and financial condition of the holding
company and such subsidiaries;
``(ii) to inform the Board of--
``(I) the financial and operational
risks within the holding company system
that may pose a threat to the safety and
soundness of any depository institution
subsidiary of such holding company; and
[[Page 113 STAT. 1364]]
``(II) the systems for monitoring
and controlling such risks; and
``(iii) to monitor compliance with the
provisions of this Act or any other Federal law
that the Board has specific jurisdiction to
enforce against such company or subsidiary and
those governing transactions and relationships
between any depository institution subsidiary and
its affiliates.
``(B) Functionally regulated subsidiaries.--
Notwithstanding subparagraph (A), the Board may make
examinations of a functionally regulated subsidiary of a
bank holding company only if--
``(i) the Board has reasonable cause to
believe that such subsidiary is engaged in
activities that pose a material risk to an
affiliated depository institution;
``(ii) the Board reasonably determines, after
reviewing relevant reports, that examination of
the subsidiary is necessary to adequately inform
the Board of the systems described in subparagraph
(A)(ii)(II); or
``(iii) based on reports and other available
information, the Board has reasonable cause to
believe that a subsidiary is not in compliance
with this Act or any other Federal law that the
Board has specific jurisdiction to enforce against
such subsidiary, including provisions relating to
transactions with an affiliated depository
institution, and the Board cannot make such
determination through examination of the
affiliated depository institution or the bank
holding company.
``(C) Restricted focus of examinations.--The Board
shall, to the fullest extent possible, limit the focus
and scope of any examination of a bank holding company
to--
``(i) the bank holding company; and
``(ii) any subsidiary of the bank holding
company that could have a materially adverse
effect on the safety and soundness of any
depository institution subsidiary of the holding
company due to--
``(I) the size, condition, or
activities of the subsidiary; or
``(II) the nature or size of
transactions between the subsidiary and
any depository institution that is also
a subsidiary of the bank holding
company.
``(D) Deference to bank examinations.--The Board
shall, to the fullest extent possible, for the purposes
of this paragraph, use the reports of examinations of
depository institutions made by the appropriate Federal
and State depository institution supervisory authority.
``(E) Deference to other examinations.--The Board
shall, to the fullest extent possible, forego an
examination by the Board under this paragraph and
instead review the reports of examination made of--
``(i) any registered broker or dealer by or on
behalf of the Securities and Exchange Commission;
``(ii) any registered investment adviser
properly registered by or on behalf of either the
Securities and Exchange Commission or any State;
[[Page 113 STAT. 1365]]
``(iii) any licensed insurance company by or
on behalf of any State regulatory authority
responsible for the supervision of insurance
companies; and
``(iv) any other subsidiary that the Board
finds to be comprehensively supervised by a
Federal or State authority.
``(3) Capital.--
``(A) In general.--The Board may not, by regulation,
guideline, order, or otherwise, prescribe or impose any
capital or capital adequacy rules, guidelines,
standards, or requirements on any functionally regulated
subsidiary of a bank holding company that--
``(i) is not a depository institution; and
``(ii) is--
``(I) in compliance with the
applicable capital requirements of its
Federal regulatory authority (including
the Securities and Exchange Commission)
or State insurance authority;
``(II) properly registered as an
investment adviser under the Investment
Advisers Act of 1940, or with any State;
or
``(III) is licensed as an insurance
agent with the appropriate State
insurance authority.
``(B) Rule of construction.--Subparagraph (A) shall
not be construed as preventing the Board from imposing
capital or capital adequacy rules, guidelines,
standards, or requirements with respect to--
``(i) activities of a registered investment
adviser other than with respect to investment
advisory activities or activities incidental to
investment advisory activities; or
``(ii) activities of a licensed insurance
agent other than insurance agency activities or
activities incidental to insurance agency
activities.
``(C) Limitations on indirect action.--In
developing, establishing, or assessing bank holding
company capital or capital adequacy rules, guidelines,
standards, or requirements for purposes of this
paragraph, the Board may not take into account the
activities, operations, or investments of an affiliated
investment company registered under the Investment
Company Act of 1940, unless the investment company is--
``(i) a bank holding company; or
``(ii) controlled by a bank holding company by
reason of ownership by the bank holding company
(including through all of its affiliates) of 25
percent or more of the shares of the investment
company, and the shares owned by the bank holding
company have a market value equal to more than
$1,000,000.
``(4) Functional regulation of securities and insurance
activities.--
``(A) Securities activities.--Securities activities
conducted in a functionally regulated subsidiary of a
depository institution shall be subject to regulation by
the Securities and Exchange Commission, and by relevant
State securities authorities, as appropriate, subject to
section 104 of the Gramm-Leach-Bliley Act, to the same
extent as if they
[[Page 113 STAT. 1366]]
were conducted in a nondepository institution subsidiary
of a bank holding company.
``(B) Insurance activities.--Subject to section 104
of the Gramm-Leach-Bliley Act, insurance agency and
brokerage activities and activities as principal
conducted in a functionally regulated subsidiary of a
depository institution shall be subject to regulation by
a State insurance authority to the same extent as if
they were conducted in a nondepository institution
subsidiary of a bank holding company.
``(5) Definition.--For purposes of this subsection, the term
`functionally regulated subsidiary' means any company--
``(A) that is not a bank holding company or a
depository institution; and
``(B) that is--
``(i) a broker or dealer that is registered
under the Securities Exchange Act of 1934;
``(ii) a registered investment adviser,
properly registered by or on behalf of either the
Securities and Exchange Commission or any State,
with respect to the investment advisory activities
of such investment adviser and activities
incidental to such investment advisory activities;
``(iii) an investment company that is
registered under the Investment Company Act of
1940;
``(iv) an insurance company, with respect to
insurance activities of the insurance company and
activities incidental to such insurance
activities, that is subject to supervision by a
State insurance regulator; or
``(v) an entity that is subject to regulation
by the Commodity Futures Trading Commission, with
respect to the commodities activities of such
entity and activities incidental to such
commodities activities.''.
SEC. 112. AUTHORITY OF STATE INSURANCE REGULATOR AND SECURITIES
AND EXCHANGE COMMISSION.
(a) Bank Holding Companies.--Section 5 of the Bank Holding Company
Act of 1956 (12 U.S.C. 1844) is amended by adding at the end the
following new subsection:
``(g) Authority of State Insurance Regulator and the Securities and
Exchange Commission.--
``(1) In general.--Notwithstanding any other provision of
law, any regulation, order, or other action of the Board that
requires a bank holding company to provide funds or other assets
to a subsidiary depository institution shall not be effective
nor enforceable with respect to an entity described in
subparagraph (A) if--
``(A) such funds or assets are to be provided by--
``(i) a bank holding company that is an
insurance company, a broker or dealer registered
under the Securities Exchange Act of 1934, an
investment company registered under the Investment
Company Act of 1940, or an investment adviser
registered by or on behalf of either the
Securities and Exchange Commission or any State;
or
``(ii) an affiliate of the depository
institution that is an insurance company or a
broker or dealer registered under the Securities
Exchange Act of 1934,
[[Page 113 STAT. 1367]]
an investment company registered under the
Investment Company Act of 1940, or an investment
adviser registered by or on behalf of either the
Securities and Exchange Commission or any State;
and
``(B) the State insurance authority for the
insurance company or the Securities and Exchange
Commission for the registered broker, dealer, investment
adviser (solely with respect to investment advisory
activities or activities incidental thereto), or
investment company, as the case may be, determines in
writing sent to the holding company and the Board that
the holding company shall not provide such funds or
assets because such action would have a material adverse
effect on the financial condition of the insurance
company or the broker, dealer, investment company, or
investment adviser, as the case may be.
``(2) Notice to state insurance authority or sec required.--
If the Board requires a bank holding company, or an affiliate of
a bank holding company, that is an insurance company or a
broker, dealer, investment company, or investment adviser
described in paragraph (1)(A) to provide funds or assets to a
depository institution subsidiary of the holding company
pursuant to any regulation, order, or other action of the Board
referred to in paragraph (1), the Board shall promptly notify
the State insurance authority for the insurance company, the
Securities and Exchange Commission, or State securities
regulator, as the case may be, of such requirement.
``(3) Divestiture in lieu of other action.--If the Board
receives a notice described in paragraph (1)(B) from a State
insurance authority or the Securities and Exchange Commission
with regard to a bank holding company or affiliate referred to
in that paragraph, the Board may order the bank holding company
to divest the depository institution not later than 180 days
after receiving the notice, or such longer period as the Board
determines consistent with the safe and sound operation of the
depository institution.
``(4) Conditions before divestiture.--During the period
beginning on the date an order to divest is issued by the Board
under paragraph (3) to a bank holding company and ending on the
date the divestiture is completed, the Board may impose any
conditions or restrictions on the holding company's ownership or
operation of the depository institution, including restricting
or prohibiting transactions between the depository institution
and any affiliate of the institution, as are appropriate under
the circumstances.
``(5) Rule of construction.--No provision of this subsection
may be construed as limiting or otherwise affecting, except to
the extent specifically provided in this subsection, the
regulatory authority, including the scope of the authority, of
any Federal agency or department with regard to any entity that
is within the jurisdiction of such agency or department.''.
(b) Subsidiaries of Depository Institutions.--The Federal Deposit
Insurance Act (12 U.S.C. 1811 et seq.) is amended by adding at the end
the following new section:
[[Page 113 STAT. 1368]]
``SEC. 45. AUTHORITY <<NOTE: 12 USC 1831v.>> OF STATE INSURANCE
REGULATOR AND SECURITIES AND EXCHANGE
COMMISSION.
``(a) In General.--Notwithstanding any other provision of law, the
provisions of--
``(1) section 5(c) of the Bank Holding Company Act of 1956
that limit the authority of the Board of Governors of the
Federal Reserve System to require reports from, to make
examinations of, or to impose capital requirements on holding
companies and their functionally regulated subsidiaries or that
require deference to other regulators;
``(2) section 5(g) of the Bank Holding Company Act of 1956
that limit the authority of the Board to require a functionally
regulated subsidiary of a holding company to provide capital or
other funds or assets to a depository institution subsidiary of
the holding company and to take certain actions including
requiring divestiture of the depository institution; and
``(3) section 10A of the Bank Holding Company Act of 1956
that limit whatever authority the Board might otherwise have to
take direct or indirect action with respect to holding companies
and their functionally regulated subsidiaries;
shall also limit whatever authority that a Federal banking agency might
otherwise have under any statute or regulation to require reports, make
examinations, impose capital requirements, or take any other direct or
indirect action with respect to any functionally regulated affiliate of
a depository institution, subject to the same standards and requirements
as are applicable to the Board under those provisions.
``(b) Certain Exemption Authorized.--No provision of this section
shall be construed as preventing the Corporation, if the Corporation
finds it necessary to determine the condition of a depository
institution for insurance purposes, from examining an affiliate of any
depository institution, pursuant to section 10(b)(4), as may be
necessary to disclose fully the relationship between the depository
institution and the affiliate, and the effect of such relationship on
the depository institution.
``(c) Definitions.--For purposes of this section, the following
definitions shall apply:
``(1) Functionally regulated subsidiary.--The term
`functionally regulated subsidiary' has the meaning given the
term in section 5(c)(5) of the Bank Holding Company Act of 1956.
``(2) Functionally regulated affiliate.--The term
`functionally regulated affiliate' means, with respect to any
depository institution, any affiliate of such depository
institution that is--
``(A) not a depository institution holding company;
and
``(B) a company described in any clause of section
5(c)(5)(B) of the Bank Holding Company Act of 1956.''.
SEC. 113. ROLE OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE
SYSTEM.
The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is
amended by inserting after section 10 the following new section:
[[Page 113 STAT. 1369]]
``SEC. 10A. LIMITATION <<NOTE: 12 USC 1848a.>> ON RULEMAKING,
PRUDENTIAL, SUPERVISORY, AND ENFORCEMENT
AUTHORITY OF THE BOARD.
``(a) Limitation on Direct Action.--The Board may not prescribe
regulations, issue or seek entry of orders, impose restraints,
restrictions, guidelines, requirements, safeguards, or standards, or
otherwise take any action under or pursuant to any provision of this Act
or section 8 of the Federal Deposit Insurance Act against or with
respect to a functionally regulated subsidiary of a bank holding company
unless--
``(1) the action is necessary to prevent or redress an
unsafe or unsound practice or breach of fiduciary duty by such
subsidiary that poses a material risk to--
``(A) the financial safety, soundness, or stability
of an affiliated depository institution; or
``(B) the domestic or international payment system;
and
``(2) the Board finds that it is not reasonably possible to
protect effectively against the material risk at issue through
action directed at or against the affiliated depository
institution or against depository institutions generally.
``(b) Limitation on Indirect Action.--The Board may not prescribe
regulations, issue or seek entry of orders, impose restraints,
restrictions, guidelines, requirements, safeguards, or standards, or
otherwise take any action under or pursuant to any provision of this Act
or section 8 of the Federal Deposit Insurance Act against or with
respect to a bank holding company that requires the bank holding company
to require a functionally regulated subsidiary of the holding company to
engage, or to refrain from engaging, in any conduct or activities unless
the Board could take such action directly against or with respect to the
functionally regulated subsidiary in accordance with subsection (a).
``(c) Actions Specifically Authorized.--Notwithstanding subsection
(a) or (b), the Board may take action under this Act or section 8 of the
Federal Deposit Insurance Act to enforce compliance by a functionally
regulated subsidiary of a bank holding company with any Federal law that
the Board has specific jurisdiction to enforce against such subsidiary.
``(d) Functionally Regulated Subsidiary Defined.--For purposes of
this section, the term `functionally regulated subsidiary' has the
meaning given the term in section 5(c)(5).''.
SEC. 114. <<NOTE: 12 USC 1828a.>> PRUDENTIAL SAFEGUARDS.
(a) Comptroller of the Currency.--
(1) In general.--The Comptroller of the Currency may, by
regulation or order, impose restrictions or requirements on
relationships or transactions between a national bank and a
subsidiary of the national bank that the Comptroller finds are--
(A) consistent with the purposes of this Act, title
LXII of the Revised Statutes of the United States, and
other Federal law applicable to national banks; and
(B) appropriate to avoid any significant risk to the
safety and soundness of insured depository institutions
or any Federal deposit insurance fund or other adverse
effects, such as undue concentration of resources,
decreased or unfair competition, conflicts of interests,
or unsound banking practices.
[[Page 113 STAT. 1370]]
(2) Review.--The Comptroller of the Currency shall
regularly--
(A) review all restrictions or requirements
established pursuant to paragraph (1) to determine
whether there is a continuing need for any such
restriction or requirement to carry out the purposes of
the Act, including the avoidance of any adverse effect
referred to in paragraph (1)(B); and
(B) modify or eliminate any such restriction or
requirement the Comptroller finds is no longer required
for such purposes.
(b) Board of Governors of the Federal Reserve System.--
(1) In general.--The Board of Governors of the Federal
Reserve System may, by regulation or order, impose restrictions
or requirements on relationships or transactions--
(A) between a depository institution subsidiary of a
bank holding company and any affiliate of such
depository institution (other than a subsidiary of such
institution); or
(B) between a State member bank and a subsidiary of
such bank;
if the Board makes a finding described in paragraph (2) with
respect to such restriction or requirement.
(2) Finding.--The Board of Governors of the Federal Reserve
System may exercise authority under paragraph (1) if the Board
finds that the exercise of such authority is--
(A) consistent with the purposes of this Act, the
Bank Holding Company Act of 1956, the Federal Reserve
Act, and other Federal law applicable to depository
institution subsidiaries of bank holding companies or
State member banks, as the case may be; and
(B) appropriate to prevent an evasion of any
provision of law referred to in subparagraph (A) or to
avoid any significant risk to the safety and soundness
of depository institutions or any Federal deposit
insurance fund or other adverse effects, such as undue
concentration of resources, decreased or unfair
competition, conflicts of interests, or unsound banking
practices.
(3) Review.--The Board of Governors of the Federal Reserve
System shall regularly--
(A) review all restrictions or requirements
established pursuant to paragraph (1) or (4) to
determine whether there is a continuing need for any
such restriction or requirement to carry out the
purposes of the Act, including the avoidance of any
adverse effect referred to in paragraph (2)(B) or
(4)(B); and
(B) modify or eliminate any such restriction or
requirement the Board finds is no longer required for
such purposes.
(4) Foreign banks.--The Board may, by regulation or order,
impose restrictions or requirements on relationships or
transactions between a branch, agency, or commercial lending
company of a foreign bank in the United States and any affiliate
in the United States of such foreign bank that the Board finds
are--
(A) consistent with the purposes of this Act, the
Bank Holding Company Act of 1956, the Federal Reserve
Act,
[[Page 113 STAT. 1371]]
and other Federal law applicable to foreign banks and
their affiliates in the United States; and
(B) appropriate to prevent an evasion of any
provision of law referred to in subparagraph (A) or to
avoid any significant risk to the safety and soundness
of depository institutions or any Federal deposit
insurance fund or other adverse effects, such as undue
concentration of resources, decreased or unfair
competition, conflicts of interests, or unsound banking
practices.
(c) Federal Deposit Insurance Corporation.--
(1) In general.--The Federal Deposit Insurance Corporation
may, by regulation or order, impose restrictions or requirements
on relationships or transactions between a State nonmember bank
(as defined in section 3 of the Federal Deposit Insurance Act)
and a subsidiary of the State nonmember bank that the
Corporation finds are--
(A) consistent with the purposes of this Act, the
Federal Deposit Insurance Act, or other Federal law
applicable to State nonmember banks; and
(B) appropriate to avoid any significant risk to the
safety and soundness of depository institutions or any
Federal deposit insurance fund or other adverse effects,
such as undue concentration of resources, decreased or
unfair competition, conflicts of interests, or unsound
banking practices.
(2) Review.--The Federal Deposit Insurance Corporation shall
regularly--
(A) review all restrictions or requirements
established pursuant to paragraph (1) to determine
whether there is a continuing need for any such
restriction or requirement to carry out the purposes of
the Act, including the avoidance of any adverse effect
referred to in paragraph (1)(B); and
(B) modify or eliminate any such restriction or
requirement the Corporation finds is no longer required
for such purposes.
SEC. 115. <<NOTE: 12 USC 1820a.>> EXAMINATION OF INVESTMENT COMPANIES.
(a) Exclusive Commission Authority.--Except as provided in
subsection (c), a Federal banking agency may not inspect or examine any
registered investment company that is not a bank holding company or a
savings and loan holding company.
(b) Examination Results and Other Information.--The Commission shall
provide to any Federal banking agency, upon request, the results of any
examination, reports, records, or other information with respect to any
registered investment company to the extent necessary for the agency to
carry out its statutory responsibilities.
(c) Certain Examinations Authorized.--Nothing in this section shall
prevent the Corporation, if the Corporation finds it necessary to
determine the condition of an insured depository institution for
insurance purposes, from examining an affiliate of any insured
depository institution, pursuant to its authority under section 10(b)(4)
of the Federal Deposit Insurance Act, as may be necessary to disclose
fully the relationship between the insured depository institution and
the affiliate, and the effect of such relationship on the insured
depository institution.
[[Page 113 STAT. 1372]]
(d) Definitions.--For purposes of this section, the following
definitions shall apply:
(1) Bank holding company.--The term ``bank holding company''
has the meaning given the term in section 2 of the Bank Holding
Company Act of 1956.
(2) Commission.--The term ``Commission'' means the
Securities and Exchange Commission.
(3) Corporation.--The term ``Corporation'' means the Federal
Deposit Insurance Corporation.
(4) Federal banking agency.--The term ``Federal banking
agency'' has the meaning given the term in section 3(z) of the
Federal Deposit Insurance Act.
(5) Insured depository institution.--The term ``insured
depository institution'' has the meaning given the term in
section 3(c) of the Federal Deposit Insurance Act.
(6) Registered investment company.--The term ``registered
investment company'' means an investment company that is
registered with the Commission under the Investment Company Act
of 1940.
(7) Savings and loan holding company.--The term ``savings
and loan holding company'' has the meaning given the term in
section 10(a)(1)(D) of the Home Owners' Loan Act.
SEC. 116. ELIMINATION OF APPLICATION REQUIREMENT FOR FINANCIAL
HOLDING COMPANIES.
(a) Prevention of Duplicative Filings.--Section 5(a) of the Bank
Holding Company Act of 1956 (12 U.S.C. 1844(a)) is amended by adding at
the end the following new sentence: ``A declaration filed in accordance
with section 4(l)(1)(C) shall satisfy the requirements of this
subsection with regard to the registration of a bank holding company but
not any requirement to file an application to acquire a bank pursuant to
section 3.''.
(b) Divestiture Procedures.--Section 5(e)(1) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1844(e)(1)) is amended--
(1) by striking ``Financial Institutions Supervisory Act of
1966, order'' and inserting ``Financial Institutions Supervisory
Act of 1966, at the election of the bank holding company--
``(A) order''; and
(2) by striking ``shareholders of the bank holding company.
Such distribution'' and inserting ``shareholders of the bank
holding company; or
``(B) order the bank holding company, after due notice and
opportunity for hearing, and after consultation with the primary
supervisor for the bank, which shall be the Comptroller of the
Currency in the case of a national bank, and the Federal Deposit
Insurance Corporation and the appropriate State supervisor in
the case of an insured nonmember bank, to terminate (within 120
days or such longer period as the Board may direct) the
ownership or control of any such bank by such company.
The distribution referred to in subparagraph (A)''.
SEC. 117. PRESERVING THE INTEGRITY OF FDIC RESOURCES.
Section 11(a)(4)(B) of the Federal Deposit Insurance Act (12 U.S.C.
1821(a)(4)(B)) is amended by striking ``to benefit any shareholder of''
and inserting ``to benefit any shareholder or affiliate
[[Page 113 STAT. 1373]]
(other than an insured depository institution that receives assistance
in accordance with the provisions of this Act) of''.
SEC. 118. REPEAL OF SAVINGS BANK PROVISIONS IN THE BANK HOLDING
COMPANY ACT OF 1956.
Section 3(f) of the Bank Holding Company Act of 1956 (12 U.S.C.
1842(f)) is amended to read as follows:
``(f) [Repealed].''.
SEC. 119. TECHNICAL AMENDMENT.
Section 2(o)(1)(A) of the Bank Holding Company Act of 1956 (12
U.S.C. 1841(o)(1)(A)) is amended by striking ``section 38(b)'' and
inserting ``section 38''.
Subtitle C--Subsidiaries of National Banks
SEC. 121. SUBSIDIARIES OF NATIONAL BANKS.
(a) In General.--Chapter one of title LXII of the Revised Statutes
of the United States (12 U.S.C. 21 et seq.) is amended--
(1) by <<NOTE: 12 USC 25a.>> redesignating section 5136A as
section 5136B; and
(2) by inserting after section 5136 (12 U.S.C. 24) the
following new section:
``SEC. 5136A. <<NOTE: 12 USC 24a.>> FINANCIAL SUBSIDIARIES OF NATIONAL
BANKS.
``(a) Authorization To Conduct in Subsidiaries Certain Activities
That are Financial in Nature.--
``(1) In general.--Subject to paragraph (2), a national bank
may control a financial subsidiary, or hold an interest in a
financial subsidiary.
``(2) Conditions and requirements.--A national bank may
control a financial subsidiary, or hold an interest in a
financial subsidiary, only if--
``(A) the financial subsidiary engages only in--
``(i) activities that are financial in nature
or incidental to a financial activity pursuant to
subsection (b); and
``(ii) activities that are permitted for
national banks to engage in directly (subject to
the same terms and conditions that govern the
conduct of the activities by a national bank);
``(B) the activities engaged in by the financial
subsidiary as a principal do not include--
``(i) insuring, guaranteeing, or indemnifying
against loss, harm, damage, illness, disability,
or death (except to the extent permitted under
section 302 or 303(c) of the Gramm-Leach-Bliley
Act) or providing or issuing annuities the income
of which is subject to tax treatment under section
72 of the Internal Revenue Code of 1986;
``(ii) real estate development or real estate
investment activities, unless otherwise expressly
authorized by law; or
``(iii) any activity permitted in subparagraph
(H) or (I) of section 4(k)(4) of the Bank Holding
Company Act of 1956, except activities described
in section 4(k)(4)(H) that may be permitted in
accordance with section 122 of the Gramm-Leach-
Bliley Act;
[[Page 113 STAT. 1374]]
``(C) the national bank and each depository
institution affiliate of the national bank are well
capitalized and well managed;
``(D) the aggregate consolidated total assets of all
financial subsidiaries of the national bank do not
exceed the lesser of--
``(i) 45 percent of the consolidated total
assets of the parent bank; or
``(ii) $50,000,000,000;
``(E) except as provided in paragraph (4), the
national bank meets any applicable rating or other
requirement set forth in paragraph (3); and
``(F) the national bank has received the approval of
the Comptroller of the Currency for the financial
subsidiary to engage in such activities, which approval
shall be based solely upon the factors set forth in this
section.
``(3) Rating or comparable requirement.--
``(A) In general.--A national bank meets the
requirements of this paragraph if--
``(i) the bank is 1 of the 50 largest insured
banks and has not fewer than 1 issue of
outstanding eligible debt that is currently rated
within the 3 highest investment grade rating
categories by a nationally recognized statistical
rating organization; or
``(ii) the bank is 1 of the second 50 largest
insured banks and meets the criteria set forth in
clause (i) or such other criteria as the Secretary
of the Treasury and the Board of Governors of the
Federal Reserve System may jointly establish by
regulation and determine to be comparable to and
consistent with the purposes of the rating
required in clause (i).
``(B) Consolidated total assets.--For purposes of
this paragraph, the size of an insured bank shall be
determined on the basis of the consolidated total assets
of the bank as of the end of each calendar year.
``(4) Financial agency subsidiary.--The requirement in
paragraph (2)(E) shall not apply with respect to the ownership
or control of a financial subsidiary that engages in activities
described in subsection (b)(1) solely as agent and not directly
or indirectly as principal.
``(5) Regulations required.--Before the end of the 270-day
period beginning on the date of the enactment of the Gramm-
Leach-Bliley Act, the Comptroller of the Currency shall, by
regulation, prescribe procedures to implement this section.
``(6) Indexed <<NOTE: Regulations.>> asset limit.--The
dollar amount contained in paragraph (2)(D) shall be adjusted
according to an indexing mechanism jointly established by
regulation by the Secretary of the Treasury and the Board of
Governors of the Federal Reserve System.
``(7) Coordination <<NOTE: Applicability.>> with section
4(l)(2) of the bank holding company act of 1956.--Section
4(l)(2) of the Bank Holding Company Act of 1956 applies to a
national bank that controls a financial subsidiary in the manner
provided in that section.
``(b) Activities That Are Financial in Nature.--
``(1) Financial activities.--
[[Page 113 STAT. 1375]]
``(A) In general.--An activity shall be financial in
nature or incidental to such financial activity only
if--
``(i) such activity has been defined to be
financial in nature or incidental to a financial
activity for bank holding companies pursuant to
section 4(k)(4) of the Bank Holding Company Act of
1956; or
``(ii) the Secretary of the Treasury
determines the activity is financial in nature or
incidental to a financial activity in accordance
with subparagraph (B).
``(B) Coordination between the board and the
secretary of the treasury.--
``(i) Proposals raised before the secretary of
the treasury.--
``(I) Consultation.--
The <<NOTE: Notification.>> Secretary of
the Treasury shall notify the Board of,
and consult with the Board concerning,
any request, proposal, or application
under this section for a determination
of whether an activity is financial in
nature or incidental to a financial
activity.
``(II) Board view.--The Secretary of
the Treasury shall not determine that
any activity is financial in nature or
incidental to a financial activity under
this section if the Board notifies the
Secretary in writing, not later than 30
days after the date of receipt of the
notice described in subclause (I) (or
such longer period as the Secretary
determines to be appropriate under the
circumstances) that the Board believes
that the activity is not financial in
nature or incidental to a financial
activity or is not otherwise permissible
under this section.
``(ii) Proposals raised by the board.--
``(I) Board recommendation.--The
Board may, at any time, recommend in
writing that the Secretary of the
Treasury find an activity to be
financial in nature or incidental to a
financial activity for purposes of this
section.
``(II) Time period for secretarial
action.--Not later than 30 days after
the date of receipt of a written
recommendation from the Board under
subclause (I) (or such longer period as
the Secretary of the Treasury and the
Board determine to be appropriate under
the circumstances), the Secretary shall
determine whether to initiate a public
rulemaking proposing that the subject
recommended activity be found to be
financial in nature or incidental to a
financial activity under this section,
and shall notify the Board in writing of
the determination of the Secretary and,
in the event that the Secretary
determines not to seek public comment on
the proposal, the reasons for that
determination.
``(2) Factors to be considered.--In determining whether an
activity is financial in nature or incidental to a financial
activity, the Secretary shall take into account--
``(A) the purposes of this Act and the Gramm-Leach-
Bliley Act;
[[Page 113 STAT. 1376]]
``(B) changes or reasonably expected changes in the
marketplace in which banks compete;
``(C) changes or reasonably expected changes in the
technology for delivering financial services; and
``(D) whether such activity is necessary or
appropriate to allow a bank and the subsidiaries of a
bank to--
``(i) compete effectively with any company
seeking to provide financial services in the
United States;
``(ii) efficiently deliver information and
services that are financial in nature through the
use of technological means, including any
application necessary to protect the security or
efficacy of systems for the transmission of data
or financial transactions; and
``(iii) offer customers any available or
emerging technological means for using financial
services or for the document imaging of data.
``(3) Authorization <<NOTE: Regulations.>> of new financial
activities.--The Secretary of the Treasury shall, by regulation
or order and in accordance with paragraph (1)(B), define,
consistent with the purposes of this Act and the Gramm-Leach-
Bliley Act, the following activities as, and the extent to which
such activities are, financial in nature or incidental to a
financial activity:
``(A) Lending, exchanging, transferring, investing
for others, or safeguarding financial assets other than
money or securities.
``(B) Providing any device or other instrumentality
for transferring money or other financial assets.
``(C) Arranging, effecting, or facilitating
financial transactions for the account of third parties.
``(c) Capital Deduction.--
``(1) Capital deduction required.--In determining compliance
with applicable capital standards--
``(A) the aggregate amount of the outstanding equity
investment, including retained earnings, of a national
bank in all financial subsidiaries shall be deducted
from the assets and tangible equity of the national
bank; and
``(B) the assets and liabilities of the financial
subsidiaries shall not be consolidated with those of the
national bank.
``(2) Financial statement disclosure of capital deduction.--
Any published financial statement of a national bank that
controls a financial subsidiary shall, in addition to providing
information prepared in accordance with generally accepted
accounting principles, separately present financial information
for the bank in the manner provided in paragraph (1).
``(d) Safeguards for the Bank.--A national bank that establishes or
maintains a financial subsidiary shall assure that--
``(1) the procedures of the national bank for identifying
and managing financial and operational risks within the national
bank and the financial subsidiary adequately protect the
national bank from such risks;
``(2) the national bank has, for the protection of the bank,
reasonable policies and procedures to preserve the separate
corporate identity and limited liability of the national bank
and the financial subsidiaries of the national bank; and
``(3) the national bank is in compliance with this section.
[[Page 113 STAT. 1377]]
``(e) Provisions Applicable to National Banks That Fail To Continue
To Meet Certain Requirements.--
``(1) In <<NOTE: Notice.>> general.--If a national bank or
insured depository institution affiliate does not continue to
meet the requirements of subsection (a)(2)(C) or subsection (d),
the Comptroller of the Currency shall promptly give notice to
the national bank to that effect describing the conditions
giving rise to the notice.
``(2) Agreement <<NOTE: Deadline.>> to correct conditions.--
Not later than 45 days after the date of receipt by a national
bank of a notice given under paragraph (1) (or such additional
period as the Comptroller of the Currency may permit), the
national bank shall execute an agreement with the Comptroller of
the Currency and any relevant insured depository institution
affiliate shall execute an agreement with its appropriate
Federal banking agency to comply with the requirements of
subsection (a)(2)(C) and subsection (d).
``(3) Imposition of conditions.--Until the conditions
described in a notice under paragraph (1) are corrected--
``(A) the Comptroller of the Currency may impose
such limitations on the conduct or activities of the
national bank or any subsidiary of the national bank as
the Comptroller of the Currency determines to be
appropriate under the circumstances and consistent with
the purposes of this section; and
``(B) the appropriate Federal banking agency may
impose such limitations on the conduct or activities of
any relevant insured depository institution affiliate or
any subsidiary of the institution as such agency
determines to be appropriate under the circumstances and
consistent with the purposes of this section.
``(4) Failure <<NOTE: Deadline.>> to correct.--If the
conditions described in a notice to a national bank under
paragraph (1) are not corrected within 180 days after the date
of receipt by the national bank of the notice, the Comptroller
of the Currency may require the national bank, under such terms
and conditions as may be imposed by the Comptroller and subject
to such extension of time as may be granted in the discretion of
the Comptroller, to divest control of any financial subsidiary.
``(5) Consultation.--In taking any action under this
subsection, the Comptroller shall consult with all relevant
Federal and State regulatory agencies and authorities.
``(f) Failure To Maintain Public Rating or Meet Applicable
Criteria.--
``(1) In general.--A national bank that does not continue to
meet any applicable rating or other requirement of subsection
(a)(2)(E) after acquiring or establishing a financial subsidiary
shall not, directly or through a subsidiary, purchase or acquire
any additional equity capital of any financial subsidiary until
the bank meets such requirements.
``(2) Equity capital.--For purposes of this subsection, the
term `equity capital' includes, in addition to any equity
instrument, any debt instrument issued by a financial
subsidiary, if the instrument qualifies as capital of the
subsidiary under any Federal or State law, regulation, or
interpretation applicable to the subsidiary.
``(g) Definitions.--For purposes of this section, the following
definitions shall apply:
[[Page 113 STAT. 1378]]
``(1) Affiliate, company, control, and subsidiary.--The
terms `affiliate', `company', `control', and `subsidiary' have
the meanings given those terms in section 2 of the Bank Holding
Company Act of 1956.
``(2) Appropriate federal banking agency, depository
institution, insured bank, and insured depository institution.--
The terms `appropriate Federal banking agency', `depository
institution', `insured bank', and `insured depository
institution' have the meanings given those terms in section 3 of
the Federal Deposit Insurance Act.
``(3) Financial subsidiary.--The term `financial subsidiary'
means any company that is controlled by 1 or more insured
depository institutions other than a subsidiary that--
``(A) engages solely in activities that national
banks are permitted to engage in directly and are
conducted subject to the same terms and conditions that
govern the conduct of such activities by national banks;
or
``(B) a national bank is specifically authorized by
the express terms of a Federal statute (other than this
section), and not by implication or interpretation, to
control, such as by section 25 or 25A of the Federal
Reserve Act or the Bank Service Company Act.
``(4) Eligible debt.--The term `eligible debt' means
unsecured long-term debt that--
``(A) is not supported by any form of credit
enhancement, including a guarantee or standby letter of
credit; and
``(B) is not held in whole or in any significant
part by any affiliate, officer, director, principal
shareholder, or employee of the bank or any other person
acting on behalf of or with funds from the bank or an
affiliate of the bank.
``(5) Well capitalized.--The term `well capitalized' has the
meaning given the term in section 38 of the Federal Deposit
Insurance Act.
``(6) Well managed.--The term `well managed' means--
``(A) in the case of a depository institution that
has been examined, unless otherwise determined in
writing by the appropriate Federal banking agency--
``(i) the achievement of a composite rating of
1 or 2 under the Uniform Financial Institutions
Rating System (or an equivalent rating under an
equivalent rating system) in connection with the
most recent examination or subsequent review of
the depository institution; and
``(ii) at least a rating of 2 for management,
if such rating is given; or
``(B) in the case of any depository institution that
has not been examined, the existence and use of
managerial resources that the appropriate Federal
banking agency determines are satisfactory.''.
(b) Sections 23A and 23B of the Federal Reserve Act.--
(1) Limiting the exposure of a bank to a financial
subsidiary to the amount of permissible exposure to an
affiliate.--Section 23A of the Federal Reserve Act (12 U.S.C.
371c) is amended--
(A) by redesignating subsection (e) as subsection
(f); and
[[Page 113 STAT. 1379]]
(B) by inserting after subsection (d), the following
new subsection:
``(e) Rules Relating to Banks with Financial Subsidiaries.--
``(1) Financial subsidiary defined.--For purposes of this
section and section 23B, the term `financial subsidiary' means
any company that is a subsidiary of a bank that would be a
financial subsidiary of a national bank under section 5136A of
the Revised Statutes of the United States.
``(2) Financial subsidiary treated as an affiliate.--For
purposes of applying this section and section 23B, and
notwithstanding subsection (b)(2) of this section or section
23B(d)(1), a financial subsidiary of a bank--
``(A) shall be deemed to be an affiliate of the
bank; and
``(B) shall not be deemed to be a subsidiary of the
bank.
``(3) Exceptions for transactions with financial
subsidiaries.--
``(A) Exception from limit on covered transactions
with any individual financial subsidiary.--
Notwithstanding paragraph (2), the restriction contained
in subsection (a)(1)(A) shall not apply with respect to
covered transactions between a bank and any individual
financial subsidiary of the bank.
``(B) Exception for earnings retained by financial
subsidiaries.--Notwithstanding paragraph (2) or
subsection (b)(7), a bank's investment in a financial
subsidiary of the bank shall not include retained
earnings of the financial subsidiary.
``(4) Anti-evasion provision.--For purposes of this section
and section 23B--
``(A) any purchase of, or investment in, the
securities of a financial subsidiary of a bank by an
affiliate of the bank shall be considered to be a
purchase of or investment in such securities by the
bank; and
``(B) any extension of credit by an affiliate of a
bank to a financial subsidiary of the bank shall be
considered to be an extension of credit by the bank to
the financial subsidiary if the Board determines that
such treatment is necessary or appropriate to prevent
evasions of this Act and the Gramm-Leach-Bliley Act.''.
(2) Rebuttable presumption of control of portfolio
company.--Section 23A(b) of the Federal Reserve Act (12 U.S.C.
371c(b)) is amended by adding at the end the following new
paragraph--
``(11) Rebuttable presumption of control of portfolio
companies.--In addition to paragraph (3), a company or
shareholder shall be presumed to control any other company if
the company or shareholder, directly or indirectly, or acting
through 1 or more other persons, owns or controls 15 percent or
more of the equity capital of the other company pursuant to
subparagraph (H) or (I) of section 4(k)(4) of the Bank Holding
Company Act of 1956 or rules adopted under section 122 of the
Gramm-Leach-Bliley Act, if any, unless the company or
shareholder provides information acceptable to the Board to
rebut this presumption of control.''.
[[Page 113 STAT. 1380]]
(3) Rulemaking required concerning derivative transactions
and intraday credit.--Section 23A(f) of the Federal Reserve Act
(12 U.S.C. 371c(f)) (as so redesignated by paragraph (1)(A) of
this subsection) is amended by inserting at the end the
following new paragraph:
``(3) Rulemaking required concerning derivative transactions
and intraday credit.--
``(A) In <<NOTE: Deadline.>> general.--Not later
than 18 months after the date of the enactment of the
Gramm-Leach-Bliley Act, the Board shall adopt final
rules under this section to address as covered
transactions credit exposure arising out of derivative
transactions between member banks and their affiliates
and intraday extensions of credit by member banks to
their affiliates.
``(B) Effective date.--The effective date of any
final rule adopted by the Board pursuant to subparagraph
(A) shall be delayed for such period as the Board deems
necessary or appropriate to permit banks to conform
their activities to the requirements of the final rule
without undue hardship.''.
(c) Antitying.--Section 106(a) of the Bank Holding Company Act
Amendments of 1970 (12 U.S.C. 1971) is amended by adding at the end the
following: ``For purposes of this section, a financial subsidiary of a
national bank engaging in activities pursuant to section 5136A(a) of the
Revised Statutes of the United States shall be deemed to be a subsidiary
of a bank holding company, and not a subsidiary of a bank.''.
(d) Safety and Soundness Firewalls for State Banks With Financial
Subsidiaries.--
(1) Federal deposit insurance act.--The Federal Deposit
Insurance Act (12 U.S.C. 1811 et seq.) is amended by inserting
after section 45 (as added by section 112(b) of this title) the
following new section:
``SEC. 46. SAFETY <<NOTE: 12 USC 1831w.>> AND SOUNDNESS FIREWALLS
APPLICABLE TO FINANCIAL SUBSIDIARIES OF
BANKS.
``(a) In General.--An insured State bank may control or hold an
interest in a subsidiary that engages in activities as principal that
would only be permissible for a national bank to conduct through a
financial subsidiary if--
``(1) the State bank and each insured depository institution
affiliate of the State bank are well capitalized (after the
capital deduction required by paragraph (2));
``(2) the State bank complies with the capital deduction and
financial statement disclosure requirements in section 5136A(c)
of the Revised Statutes of the United States;
``(3) the State bank complies with the financial and
operational safeguards required by section 5136A(d) of the
Revised Statutes of the United States; and
``(4) the State bank complies with the amendments to
sections 23A and 23B of the Federal Reserve Act made by section
121(b) of the Gramm-Leach-Bliley Act.
``(b) Preservation of Existing Subsidiaries.--Notwithstanding
subsection (a), an insured State bank may retain control of a
subsidiary, or retain an interest in a subsidiary, that the State bank
lawfully controlled or acquired before the date of the enactment of the
Gramm-Leach-Bliley Act, and conduct through
[[Page 113 STAT. 1381]]
such subsidiary any activities lawfully conducted in such subsidiary as
of such date.
``(c) Definitions.--For purposes of this section, the following
definitions shall apply:
``(1) Subsidiary.--The term `subsidiary' means any company
that is a subsidiary (as defined in section 3(w)(4)) of 1 or
more insured banks.
``(2) Financial subsidiary.--The term `financial subsidiary'
has the meaning given the term in section 5136A(g) of the
Revised Statutes of the United States.
``(d) Preservation of Authority.--
``(1) Federal deposit insurance act.--No provision of this
section shall be construed as superseding the authority of the
Federal Deposit Insurance Corporation to review subsidiary
activities under section 24.
``(2) Federal reserve act.--No provision of this section
shall be construed as affecting the applicability of the 20th
undesignated paragraph of section 9 of the Federal Reserve
Act.''.
(2) Federal Reserve Act.--The 20th undesignated paragraph of
section 9 of the Federal Reserve Act (12 U.S.C. 335) is amended
by adding at the end the following: ``This paragraph shall not
apply to any interest held by a State member bank in accordance
with section 5136A of the Revised Statutes of the United States
and subject to the same conditions and limitations provided in
such section.''.
(e) Clerical Amendment.--The table of sections for chapter one of
title LXII of the Revised Statutes of the United States is amended--
(1) by redesignating the item relating to section 5136A as
section 5136B; and
(2) by inserting after the item relating to section 5136 the
following new item:
``5136A. Financial subsidiaries of national banks.''.
SEC. 122. CONSIDERATION <<NOTE: 12 USC 1843 note.>> OF MERCHANT
BANKING ACTIVITIES BY FINANCIAL
SUBSIDIARIES.
After the end of the 5-year period beginning on the date of the
enactment of the Gramm-Leach-Bliley Act, the Board of Governors of the
Federal Reserve System and the Secretary of the Treasury may, if
appropriate, after considering--
(1) the experience with the effects of financial
modernization under this Act and merchant banking activities of
financial holding companies;
(2) the potential effects on depository institutions and the
financial system of allowing merchant banking activities in
financial subsidiaries; and
(3) other relevant facts;
jointly adopt rules that permit financial subsidiaries to engage in
merchant banking activities described in section 4(k)(4)(H) of the Bank
Holding Company Act of 1956, under such terms and conditions as the
Board of Governors of the Federal Reserve System and the Secretary of
the Treasury jointly determine to be appropriate.
[[Page 113 STAT. 1382]]
Subtitle D--Preservation of FTC Authority
SEC. 131. AMENDMENT TO THE BANK HOLDING COMPANY ACT OF 1956 TO
MODIFY NOTIFICATION AND POST-APPROVAL
WAITING PERIOD FOR SECTION 3 TRANSACTIONS.
Section 11(b)(1) of the Bank Holding Company Act of 1956 (12 U.S.C.
1849(b)(1)) is amended by inserting ``and, if the transaction also
involves an acquisition under section 4, the Board shall also notify the
Federal Trade Commission of such approval'' before the period at the end
of the first sentence.
SEC. 132. <<NOTE: 12 USC 1828b.>> INTERAGENCY DATA SHARING.
(a) In General.--To the extent not prohibited by other law, the
Comptroller of the Currency, the Director of the Office of Thrift
Supervision, the Federal Deposit Insurance Corporation, and the Board of
Governors of the Federal Reserve System shall make available to the
Attorney General and the Federal Trade Commission any data in the
possession of any such banking agency that the antitrust agency deems
necessary for antitrust review of any transaction requiring notice to
any such antitrust agency or the approval of such agency under section 3
or 4 of the Bank Holding Company Act of 1956, section 18(c) of the
Federal Deposit Insurance Act, the National Bank Consolidation and
Merger Act, section 10 of the Home Owners' Loan Act, or the antitrust
laws.
(b) Confidentiality Requirements.--
(1) In general.--Any information or material obtained by any
agency pursuant to subsection (a) shall be treated as
confidential.
(2) Procedures for disclosure.--If any information or
material obtained by any agency pursuant to subsection (a) is
proposed to be disclosed to a third party, written notice of
such disclosure shall first be provided to the agency from which
such information or material was obtained and an opportunity
shall be given to such agency to oppose or limit the proposed
disclosure.
(3) Other privileges not waived by disclosure under this
section.--The provision by any Federal agency of any information
or material pursuant to subsection (a) to another agency shall
not constitute a waiver, or otherwise affect, any privilege any
agency or person may claim with respect to such information
under Federal or State law.
(4) Exception.--No provision of this section shall be
construed as preventing or limiting access to any information by
any duly authorized committee of the Congress or the Comptroller
General of the United States.
(c) Banking <<NOTE: Applicability.>> Agency Information Sharing.--
The provisions of subsection (b) shall apply to--
(1) any information or material obtained by any Federal
banking agency (as defined in section 3(z) of the Federal
Deposit Insurance Act) from any other Federal banking agency;
and
(2) any report of examination or other confidential
supervisory information obtained by any State agency or
authority, or any other person, from a Federal banking agency.
[[Page 113 STAT. 1383]]
SEC. 133. CLARIFICATION OF STATUS OF SUBSIDIARIES AND AFFILIATES.
(a) Clarification <<NOTE: 15 USC 41 note.>> of Federal Trade
Commission Jurisdiction.--Any person that directly or indirectly
controls, is controlled directly or indirectly by, or is directly or
indirectly under common control with, any bank or savings association
(as such terms are defined in section 3 of the Federal Deposit Insurance
Act) and is not itself a bank or savings association shall not be deemed
to be a bank or savings association for purposes of any provisions
applied by the Federal Trade Commission under the Federal Trade
Commission Act.
(b) Savings <<NOTE: 15 USC 41 note.>> Provision.--No provision of
this section shall be construed as restricting the authority of any
Federal banking agency (as defined in section 3 of the Federal Deposit
Insurance Act) under any Federal banking law, including section 8 of the
Federal Deposit Insurance Act.
(c) Hart-Scott-Rodino Amendments.--
(1) Banks.--Section 7A(c)(7) of the Clayton Act (15 U.S.C.
18a(c)(7)) is amended by inserting before the semicolon at the
end the following: ``, except that a portion of a transaction is
not exempt under this paragraph if such portion of the
transaction (A) is subject to section 4(k) of the Bank Holding
Company Act of 1956; and (B) does not require agency approval
under section 3 of the Bank Holding Company Act of 1956''.
(2) Bank holding companies.--Section 7A(c)(8) of the Clayton
Act (15 U.S.C. 18a(c)(8)) is amended by inserting before the
semicolon at the end the following: ``, except that a portion of
a transaction is not exempt under this paragraph if such portion
of the transaction (A) is subject to section 4(k) of the Bank
Holding Company Act of 1956; and (B) does not require agency
approval under section 4 of the Bank Holding Company Act of
1956''.
Subtitle E--National Treatment
SEC. 141. FOREIGN BANKS THAT ARE FINANCIAL HOLDING COMPANIES.
Section 8(c) of the International Banking Act of 1978 (12 U.S.C.
3106(c)) is amended by adding at the end the following new paragraph:
``(3) Termination of grandfathered rights.--
``(A) In general.--If any foreign bank or foreign
company files a declaration under section 4(l)(1)(C) of
the Bank Holding Company Act of 1956, any authority
conferred by this subsection on any foreign bank or
company to engage in any activity that the Board has
determined to be permissible for financial holding
companies under section 4(k) of such Act shall terminate
immediately.
``(B) Restrictions and requirements authorized.--If
a foreign bank or company that engages, directly or
through an affiliate pursuant to paragraph (1), in an
activity that the Board has determined to be permissible
for financial holding companies under section 4(k) of
the Bank Holding Company Act of 1956 has not filed a
declaration with the Board of its status as a financial
holding company under such section by the end of the 2-
year period
[[Page 113 STAT. 1384]]
beginning on the date of the enactment of the Gramm-
Leach-Bliley Act, the Board, giving due regard to the
principle of national treatment and equality of
competitive opportunity, may impose such restrictions
and requirements on the conduct of such activities by
such foreign bank or company as are comparable to those
imposed on a financial holding company organized under
the laws of the United States, including a requirement
to conduct such activities in compliance with any
prudential safeguards established under section 114 of
the Gramm-Leach-Bliley Act.''.
SEC. 142. REPRESENTATIVE OFFICES.
(a) Definition.--Section 1(b)(15) of the International Banking Act
of 1978 (12 U.S.C. 3101(15)) is amended by striking ``State agency, or
subsidiary of a foreign bank'' and inserting ``or State agency''.
(b) Examinations.--Section 10(c) of the International Banking Act of
1978 (12 U.S.C. 3107(c)) is amended by adding at the end the following
new sentence: ``The Board may also make examinations of any affiliate of
a foreign bank conducting business in any State if the Board deems it
necessary to determine and enforce compliance with this Act, the Bank
Holding Company Act of 1956, or other applicable Federal banking law.''.
Subtitle F--Direct Activities of Banks
SEC. 151. AUTHORITY OF NATIONAL BANKS TO UNDERWRITE CERTAIN
MUNICIPAL BONDS.
The paragraph designated the Seventh of section 5136 of the Revised
Statutes of the United States (12 U.S.C. 24(7)) is amended by adding at
the end the following new sentence: ``In addition to the provisions in
this paragraph for dealing in, underwriting, or purchasing securities,
the limitations and restrictions contained in this paragraph as to
dealing in, underwriting, and purchasing investment securities for the
national bank's own account shall not apply to obligations (including
limited obligation bonds, revenue bonds, and obligations that satisfy
the requirements of section 142(b)(1) of the Internal Revenue Code of
1986) issued by or on behalf of any State or political subdivision of a
State, including any municipal corporate instrumentality of 1 or more
States, or any public agency or authority of any State or political
subdivision of a State, if the national bank is well capitalized (as
defined in section 38 of the Federal Deposit Insurance Act).''.
Subtitle G--Effective Date
SEC. 161. <<NOTE: 12 USC 24 note.>> EFFECTIVE DATE.
This title (other than section 104) and the amendments made by this
title shall take effect 120 days after the date of the enactment of this
Act.
[[Page 113 STAT. 1385]]
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
[[Page 113 STAT. 1386]]
a nominal one-time cash fee of a fixed
dollar amount and the payment of the fee
is not contingent on whether the
referral results in a transaction;
``(VII) such services are provided
by the broker or dealer on a basis in
which all customers that receive any
services are fully disclosed to the
broker or dealer;
``(VIII) the bank does not carry a
securities account of the customer
except as permitted under clause (ii) or
(viii) of this subparagraph; and
``(IX) the bank, broker, or dealer
informs each customer that the brokerage
services are provided by the broker or
dealer and not by the bank and that the
securities are not deposits or other
obligations of the bank, are not
guaranteed by the bank, and are not
insured by the Federal Deposit Insurance
Corporation.
``(ii) Trust activities.--The bank effects
transactions in a trustee capacity, or effects
transactions in a fiduciary capacity in its trust
department or other department that is regularly
examined by bank examiners for compliance with
fiduciary principles and standards, and--
``(I) is chiefly compensated for
such transactions, consistent with
fiduciary principles and standards, on
the basis of an administration or annual
fee (payable on a monthly, quarterly, or
other basis), a percentage of assets
under management, or a flat or capped
per order processing fee equal to not
more than the cost incurred by the bank
in connection with executing securities
transactions for trustee and fiduciary
customers, or any combination of such
fees; and
``(II) does not publicly solicit
brokerage business, other than by
advertising that it effects transactions
in securities in conjunction with
advertising its other trust activities.
``(iii) Permissible securities transactions.--
The bank effects transactions in--
``(I) commercial paper, bankers
acceptances, or commercial bills;
``(II) exempted securities;
``(III) qualified Canadian
government obligations as defined in
section 5136 of the Revised Statutes, in
conformity with section 15C of this
title and the rules and regulations
thereunder, or obligations of the North
American Development Bank; or
``(IV) any standardized, credit
enhanced debt security issued by a
foreign government pursuant to the March
1989 plan of then Secretary of the
Treasury Brady, used by such foreign
government to retire outstanding
commercial bank loans.
``(iv) Certain stock purchase plans.--
``(I) Employee benefit plans.--The
bank effects transactions, as part of
its transfer agency
[[Page 113 STAT. 1387]]
activities, in the securities of an
issuer as part of any pension,
retirement, profit-sharing, bonus,
thrift, savings, incentive, or other
similar benefit plan for the employees
of that issuer or its affiliates (as
defined in section 2 of the Bank Holding
Company Act of 1956), if the bank does
not solicit transactions or provide
investment advice with respect to the
purchase or sale of securities in
connection with the plan.
``(II) Dividend reinvestment
plans.--The bank effects transactions,
as part of its transfer agency
activities, in the securities of an
issuer as part of that issuer's dividend
reinvestment plan, if--
``(aa) the bank does not
solicit transactions or provide
investment advice with respect
to the purchase or sale of
securities in connection with
the plan; and
``(bb) the bank does not net
shareholders' buy and sell
orders, other than for programs
for odd-lot holders or plans
registered with the Commission.
``(III) Issuer plans.--The bank
effects transactions, as part of its
transfer agency activities, in the
securities of an issuer as part of a
plan or program for the purchase or sale
of that issuer's shares, if--
``(aa) the bank does not
solicit transactions or provide
investment advice with respect
to the purchase or sale of
securities in connection with
the plan or program; and
``(bb) the bank does not net
shareholders' buy and sell
orders, other than for programs
for odd-lot holders or plans
registered with the Commission.
``(IV) Permissible delivery of
materials.--The exception to being
considered a broker for a bank engaged
in activities described in subclauses
(I), (II), and (III) will not be
affected by delivery of written or
electronic plan materials by a bank to
employees of the issuer, shareholders of
the issuer, or members of affinity
groups of the issuer, so long as such
materials are--
``(aa) comparable in scope
or nature to that permitted by
the Commission as of the date of
the enactment of the Gramm-
Leach-Bliley Act; or
``(bb) otherwise permitted
by the Commission.
``(v) Sweep accounts.--The bank effects
transactions as part of a program for the
investment or reinvestment of deposit funds into
any no-load, open-end management investment
company registered under the Investment Company
Act of 1940 that holds itself out as a money
market fund.
``(vi) Affiliate transactions.--The bank
effects transactions for the account of any
affiliate of the
[[Page 113 STAT. 1388]]
bank (as defined in section 2 of the Bank Holding
Company Act of 1956) other than--
``(I) a registered broker or dealer;
or
``(II) an affiliate that is engaged
in merchant banking, as described in
section 4(k)(4)(H) of the Bank Holding
Company Act of 1956.
``(vii) Private securities offerings.--The
bank--
``(I) effects sales as part of a
primary offering of securities not
involving a public offering, pursuant to
section 3(b), 4(2), or 4(6) of the
Securities Act of 1933 or the rules and
regulations issued thereunder;
``(II) at any time after the date
that is 1 year after the date of the
enactment of the Gramm-Leach-Bliley Act,
is not affiliated with a broker or
dealer that has been registered for more
than 1 year in accordance with this Act,
and engages in dealing, market making,
or underwriting activities, other than
with respect to exempted securities; and
``(III) if the bank is not
affiliated with a broker or dealer, does
not effect any primary offering
described in subclause (I) the aggregate
amount of which exceeds 25 percent of
the capital of the bank, except that the
limitation of this subclause shall not
apply with respect to any sale of
government securities or municipal
securities.
``(viii) Safekeeping and custody activities.--
``(I) In general.--The bank, as part
of customary banking activities--
``(aa) provides safekeeping
or custody services with respect
to securities, including the
exercise of warrants and other
rights on behalf of customers;
``(bb) facilitates the
transfer of funds or securities,
as a custodian or a clearing
agency, in connection with the
clearance and settlement of its
customers' transactions in
securities;
``(cc) effects securities
lending or borrowing
transactions with or on behalf
of customers as part of services
provided to customers pursuant
to division (aa) or (bb) or
invests cash collateral pledged
in connection with such
transactions;
``(dd) holds securities
pledged by a customer to another
person or securities subject to
purchase or resale agreements
involving a customer, or
facilitates the pledging or
transfer of such securities by
book entry or as otherwise
provided under applicable law,
if the bank maintains records
separately identifying the
securities and the customer; or
``(ee) serves as a custodian
or provider of other related
administrative services to any
[[Page 113 STAT. 1389]]
individual retirement account,
pension, retirement, profit
sharing, bonus, thrift savings,
incentive, or other similar
benefit plan.
``(II) Exception for carrying broker
activities.--The exception to being
considered a broker for a bank engaged
in activities described in subclause (I)
shall not apply if the bank, in
connection with such activities, acts in
the United States as a carrying broker
(as such term, and different
formulations thereof, are used in
section 15(c)(3) of this title and the
rules and regulations thereunder) for
any broker or dealer, unless such
carrying broker activities are engaged
in with respect to government securities
(as defined in paragraph (42) of this
subsection).
``(ix) Identified banking products.--The bank
effects transactions in identified banking
products as defined in section 206 of the Gramm-
Leach-Bliley Act.
``(x) Municipal securities.--The bank effects
transactions in municipal securities.
``(xi) De minimis exception.--The bank
effects, other than in transactions referred to in
clauses (i) through (x), not more than 500
transactions in securities in any calendar year,
and such transactions are not effected by an
employee of the bank who is also an employee of a
broker or dealer.
``(C) Execution by broker or dealer.--The exception
to being considered a broker for a bank engaged in
activities described in clauses (ii), (iv), and (viii)
of subparagraph (B) shall not apply if the activities
described in such provisions result in the trade in the
United States of any security that is a publicly traded
security in the United States, unless--
``(i) the bank directs such trade to a
registered broker or dealer for execution;
``(ii) the trade is a cross trade or other
substantially similar trade of a security that--
``(I) is made by the bank or between
the bank and an affiliated fiduciary;
and
``(II) is not in contravention of
fiduciary principles established under
applicable Federal or State law; or
``(iii) the trade is conducted in some other
manner permitted under rules, regulations, or
orders as the Commission may prescribe or issue.
``(D) Fiduciary capacity.--For purposes of
subparagraph (B)(ii), the term `fiduciary capacity'
means--
``(i) in the capacity as trustee, executor,
administrator, registrar of stocks and bonds,
transfer agent, guardian, assignee, receiver, or
custodian under a uniform gift to minor act, or as
an investment adviser if the bank receives a fee
for its investment advice;
``(ii) in any capacity in which the bank
possesses investment discretion on behalf of
another; or
``(iii) in any other similar capacity.
``(E) Exception for entities subject to section
15(e).--The term `broker' does not include a bank that--
[[Page 113 STAT. 1390]]
``(i) was, on the day before the date of
enactment of the Gramm-Leach-Bliley Act, subject
to section 15(e); and
``(ii) is subject to such restrictions and
requirements as the Commission considers
appropriate.''.
SEC. 202. DEFINITION OF DEALER.
Section 3(a)(5) of the Securities Exchange Act of 1934 (15 U.S.C.
78c(a)(5)) is amended to read as follows:
``(5) Dealer.--
``(A) In general.--The term `dealer' means any
person engaged in the business of buying and selling
securities for such person's own account through a
broker or otherwise.
``(B) Exception for person not engaged in the
business of dealing.--The term `dealer' does not include
a person that buys or sells securities for such person's
own account, either individually or in a fiduciary
capacity, but not as a part of a regular business.
``(C) Exception for certain bank activities.--A bank
shall not be considered to be a dealer because the bank
engages in any of the following activities under the
conditions described:
``(i) Permissible securities transactions.--
The bank buys or sells--
``(I) commercial paper, bankers
acceptances, or commercial bills;
``(II) exempted securities;
``(III) qualified Canadian
government obligations as defined in
section 5136 of the Revised Statutes of
the United States, in conformity with
section 15C of this title and the rules
and regulations thereunder, or
obligations of the North American
Development Bank; or
``(IV) any standardized, credit
enhanced debt security issued by a
foreign government pursuant to the March
1989 plan of then Secretary of the
Treasury Brady, used by such foreign
government to retire outstanding
commercial bank loans.
``(ii) Investment, trustee, and fiduciary
transactions.--The bank buys or sells securities
for investment purposes--
``(I) for the bank; or
``(II) for accounts for which the
bank acts as a trustee or fiduciary.
``(iii) Asset-backed transactions.--The bank
engages in the issuance or sale to qualified
investors, through a grantor trust or other
separate entity, of securities backed by or
representing an interest in notes, drafts,
acceptances, loans, leases, receivables, other
obligations (other than securities of which the
bank is not the issuer), or pools of any such
obligations predominantly originated by--
``(I) the bank;
``(II) an affiliate of any such bank
other than a broker or dealer; or
[[Page 113 STAT. 1391]]
``(III) a syndicate of banks of
which the bank is a member, if the
obligations or pool of obligations
consists of mortgage obligations or
consumer-related receivables.
``(iv) Identified banking products.--The bank
buys or sells identified banking products, as
defined in section 206 of the Gramm-Leach-Bliley
Act.''.
SEC. 203. REGISTRATION FOR SALES OF PRIVATE SECURITIES OFFERINGS.
Section 15A of the Securities Exchange Act of 1934 (15 U.S.C. 78o-3)
is amended by inserting after subsection (i) the following new
subsection:
``(j) Registration for Sales of Private Securities Offerings.--A
registered securities association shall create a limited qualification
category for any associated person of a member who effects sales as part
of a primary offering of securities not involving a public offering,
pursuant to section 3(b), 4(2), or 4(6) of the Securities Act of 1933
and the rules and regulations thereunder, and shall deem qualified in
such limited qualification category, without testing, any bank employee
who, in the six month period preceding the date of the enactment of the
Gramm-Leach-Bliley Act, engaged in effecting such sales.''.
SEC. 204. INFORMATION SHARING.
Section <<NOTE: 12 USC 1828.>> 18 of the Federal Deposit Insurance
Act is amended by adding at the end the following new subsection:
``(t) Recordkeeping Requirements.--
``(1) Requirements.--Each appropriate Federal banking
agency, after consultation with and consideration of the views
of the Commission, shall establish recordkeeping requirements
for banks relying on exceptions contained in paragraphs (4) and
(5) of section 3(a) of the Securities Exchange Act of 1934. Such
recordkeeping requirements shall be sufficient to demonstrate
compliance with the terms of such exceptions and be designed to
facilitate compliance with such exceptions.
``(2) Availability to commission; confidentiality.--Each
appropriate Federal banking agency shall make any information
required under paragraph (1) available to the Commission upon
request. Notwithstanding any other provision of law, the
Commission shall not be compelled to disclose any such
information. Nothing in this paragraph shall authorize the
Commission to withhold information from Congress, or prevent the
Commission from complying with a request for information from
any other Federal department or agency or any self-regulatory
organization requesting the information for purposes within the
scope of its jurisdiction, or complying with an order of a court
of the United States in an action brought by the United States
or the Commission. For purposes of section 552 of title 5,
United States Code, this paragraph shall be considered a statute
described in subsection (b)(3)(B) of such section 552.
``(3) Definition.--As used in this subsection the term
`Commission' means the Securities and Exchange Commission.''.
SEC. 205. TREATMENT OF NEW HYBRID PRODUCTS.
Section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o) is
amended by adding at the end the following new subsection:
[[Page 113 STAT. 1392]]
``(i) Rulemaking To Extend Requirements to New Hybrid Products.--
``(1) Consultation.--Prior to commencing a rulemaking under
this subsection, the Commission shall consult with and seek the
concurrence of the Board concerning the imposition of broker or
dealer registration requirements with respect to any new hybrid
product. In developing and promulgating rules under this
subsection, the Commission shall consider the views of the
Board, including views with respect to the nature of the new
hybrid product; the history, purpose, extent, and
appropriateness of the regulation of the new product under the
Federal banking laws; and the impact of the proposed rule on the
banking industry.
``(2) Limitation.--The Commission shall not--
``(A) require a bank to register as a broker or
dealer under this section because the bank engages in
any transaction in, or buys or sells, a new hybrid
product; or
``(B) bring an action against a bank for a failure
to comply with a requirement described in subparagraph
(A),
unless the Commission has imposed such requirement by rule or
regulation issued in accordance with this section.
``(3) Criteria for rulemaking.--The Commission shall not
impose a requirement under paragraph (2) of this subsection with
respect to any new hybrid product unless the Commission
determines that--
``(A) the new hybrid product is a security; and
``(B) imposing such requirement is necessary and
appropriate in the public interest and for the
protection of investors.
``(4) Considerations.--In making a determination under
paragraph (3), the Commission shall consider--
``(A) the nature of the new hybrid product; and
``(B) the history, purpose, extent, and
appropriateness of the regulation of the new hybrid
product under the Federal securities laws and under the
Federal banking laws.
``(5) Objection to commission regulation.--
``(A) Filing of petition for review.--The Board may
obtain review of any final regulation described in
paragraph (2) in the United States Court of Appeals for
the District of Columbia Circuit by filing in such
court, not later than 60 days after the date of
publication of the final regulation, a written petition
requesting that the regulation be set aside. Any
proceeding to challenge any such rule shall be expedited
by the Court of Appeals.
``(B) Transmittal of petition and record.--A copy of
a petition described in subparagraph (A) shall be
transmitted as soon as possible by the Clerk of the
Court to an officer or employee of the Commission
designated for that purpose. Upon receipt of the
petition, the Commission shall file with the court the
regulation under review and any documents referred to
therein, and any other relevant materials prescribed by
the court.
``(C) Exclusive jurisdiction.--On the date of the
filing of the petition under subparagraph (A), the court
has jurisdiction, which becomes exclusive on the filing
of
[[Page 113 STAT. 1393]]
the materials set forth in subparagraph (B), to affirm
and enforce or to set aside the regulation at issue.
``(D) Standard of review.--The court shall determine
to affirm and enforce or set aside a regulation of the
Commission under this subsection, based on the
determination of the court as to whether--
``(i) the subject product is a new hybrid
product, as defined in this subsection;
``(ii) the subject product is a security; and
``(iii) imposing a requirement to register as
a broker or dealer for banks engaging in
transactions in such product is appropriate in
light of the history, purpose, and extent of
regulation under the Federal securities laws and
under the Federal banking laws, giving deference
neither to the views of the Commission nor the
Board.
``(E) Judicial stay.--The filing of a petition by
the Board pursuant to subparagraph (A) shall operate as
a judicial stay, until the date on which the
determination of the court is final (including any
appeal of such determination).
``(F) Other authority to challenge.--Any aggrieved
party may seek judicial review of the Commission's
rulemaking under this subsection pursuant to section 25
of this title.
``(6) Definitions.--For purposes of this subsection:
``(A) New hybrid product.--The term `new hybrid
product' means a product that--
``(i) was not subjected to regulation by the
Commission as a security prior to the date of the
enactment of the Gramm-Leach-Bliley Act;
``(ii) is not an identified banking product as
such term is defined in section 206 of such Act;
and
``(iii) is not an equity swap within the
meaning of section 206(a)(6) of such Act.
``(B) Board.--The term `Board' means the Board of
Governors of the Federal Reserve System.''.
SEC. 206. <<NOTE: 15 USC 78c note.>> DEFINITION OF IDENTIFIED BANKING
PRODUCT.
(a) Definition of Identified Banking Product.--For purposes of
paragraphs (4) and (5) of section 3(a) of the Securities Exchange Act of
1934 (15 U.S.C. 78c(a) (4), (5)), the term ``identified banking
product'' means--
(1) a deposit account, savings account, certificate of
deposit, or other deposit instrument issued by a bank;
(2) a banker's acceptance;
(3) a letter of credit issued or loan made by a bank;
(4) a debit account at a bank arising from a credit card or
similar arrangement;
(5) a participation in a loan which the bank or an affiliate
of the bank (other than a broker or dealer) funds, participates
in, or owns that is sold--
(A) to qualified investors; or
(B) to other persons that--
(i) have the opportunity to review and assess
any material information, including information
regarding the borrower's creditworthiness; and
[[Page 113 STAT. 1394]]
(ii) based on such factors as financial
sophistication, net worth, and knowledge and
experience in financial matters, have the
capability to evaluate the information available,
as determined under generally applicable banking
standards or guidelines; or
(6) any swap agreement, including credit and equity swaps,
except that an equity swap that is sold directly to any person
other than a qualified investor (as defined in section 3(a)(54)
of the Securities Act of 1934) shall not be treated as an
identified banking product.
(b) Definition of Swap Agreement.--For purposes of subsection
(a)(6), the term ``swap agreement'' means any individually negotiated
contract, agreement, warrant, note, or option that is based, in whole or
in part, on the value of, any interest in, or any quantitative measure
or the occurrence of any event relating to, one or more commodities,
securities, currencies, interest or other rates, indices, or other
assets, but does not include any other identified banking product, as
defined in paragraphs (1) through (5) of subsection (a).
(c) Classification Limited.--Classification of a particular product
as an identified banking product pursuant to this section shall not be
construed as finding or implying that such product is or is not a
security for any purpose under the securities laws, or is or is not an
account, agreement, contract, or transaction for any purpose under the
Commodity Exchange Act.
(d) Incorporated Definitions.--For purposes of this section, the
terms ``bank'' and ``qualified investor'' have the same meanings as
given in section 3(a) of the Securities Exchange Act of 1934, as amended
by this Act.
SEC. 207. ADDITIONAL DEFINITIONS.
Section <<NOTE: 15 USC 78c.>> 3(a) of the Securities Exchange Act of
1934 is amended by adding at the end the following new paragraph:
``(54) Qualified investor.--
``(A) Definition.--Except as provided in
subparagraph (B), for purposes of this title, the term
`qualified investor' means--
``(i) any investment company registered with
the Commission under section 8 of the Investment
Company Act of 1940;
``(ii) any issuer eligible for an exclusion
from the definition of investment company pursuant
to section 3(c)(7) of the Investment Company Act
of 1940;
``(iii) any bank (as defined in paragraph (6)
of this subsection), savings association (as
defined in section 3(b) of the Federal Deposit
Insurance Act), broker, dealer, insurance company
(as defined in section 2(a)(13) of the Securities
Act of 1933), or business development company (as
defined in section 2(a)(48) of the Investment
Company Act of 1940);
``(iv) any small business investment company
licensed by the United States Small Business
Administration under section 301 (c) or (d) of the
Small Business Investment Act of 1958;
``(v) any State sponsored employee benefit
plan, or any other employee benefit plan, within
the meaning of the Employee Retirement Income
Security Act of
[[Page 113 STAT. 1395]]
1974, other than an individual retirement account,
if the investment decisions are made by a plan
fiduciary, as defined in section 3(21) of that
Act, which is either a bank, savings and loan
association, insurance company, or registered
investment adviser;
``(vi) any trust whose purchases of securities
are directed by a person described in clauses (i)
through (v) of this subparagraph;
``(vii) any market intermediary exempt under
section 3(c)(2) of the Investment Company Act of
1940;
``(viii) any associated person of a broker or
dealer other than a natural person;
``(ix) any foreign bank (as defined in section
1(b)(7) of the International Banking Act of 1978);
``(x) the government of any foreign country;
``(xi) any corporation, company, or
partnership that owns and invests on a
discretionary basis, not less than $25,000,000 in
investments;
``(xii) any natural person who owns and
invests on a discretionary basis, not less than
$25,000,000 in investments;
``(xiii) any government or political
subdivision, agency, or instrumentality of a
government who owns and invests on a discretionary
basis not less than $50,000,000 in investments; or
``(xiv) any multinational or supranational
entity or any agency or instrumentality thereof.
``(B) Altered thresholds for asset-backed securities
and loan participations.--For purposes of section
3(a)(5)(C)(iii) of this title and section 206(a)(5) of
the Gramm-Leach-Bliley Act, the term `qualified
investor' has the meaning given such term by
subparagraph (A) of this paragraph except that clauses
(xi) and (xii) shall be applied by substituting
`$10,000,000' for `$25,000,000'.
``(C) Additional authority.--The Commission may, by
rule or order, define a `qualified investor' as any
other person, taking into consideration such factors as
the financial sophistication of the person, net worth,
and knowledge and experience in financial matters.''.
SEC. 208. GOVERNMENT SECURITIES DEFINED.
Section 3(a)(42) of the Securities Exchange Act of 1934 (15 U.S.C.
78c(a)(42)) is amended--
(1) by striking ``or'' at the end of subparagraph (C);
(2) by striking the period at the end of subparagraph (D)
and inserting ``; or''; and
(3) by adding at the end the following new subparagraph:
``(E) for purposes of sections 15, 15C, and 17A as
applied to a bank, a qualified Canadian government
obligation as defined in section 5136 of the Revised
Statutes of the United States.''.
SEC. 209. <<NOTE: 12 USC 1828 note.>> EFFECTIVE DATE.
This subtitle shall take effect at the end of the 18-month period
beginning on the date of the enactment of this Act.
[[Page 113 STAT. 1396]]
SEC. 210. <<NOTE: 12 USC 1811 note.>> RULE OF CONSTRUCTION.
Nothing in this Act shall supersede, affect, or otherwise limit the
scope and applicability of the Commodity Exchange Act (7 U.S.C. 1 et
seq.).
Subtitle B--Bank Investment Company Activities
SEC. 211. CUSTODY OF INVESTMENT COMPANY ASSETS BY AFFILIATED BANK.
(a) Management Companies.--Section 17(f) of the Investment Company
Act of 1940 (15 U.S.C. 80a-17(f)) is amended--
(1) by redesignating paragraphs (1), (2), and (3) as
subparagraphs (A), (B), and (C), respectively;
(2) by striking ``(f) Every registered'' and inserting the
following:
``(f) Custody of Securities.--
``(1) Every registered'';
(3) by redesignating the second, third, fourth, and fifth
sentences of such subsection as paragraphs (2) through (5),
respectively, and indenting the left margin of such paragraphs
appropriately; and
(4) by adding at the end the following new paragraph:
``(6) The Commission may, after consultation with and taking
into consideration the views of the Federal banking agencies (as
defined in section 3 of the Federal Deposit Insurance Act),
adopt rules and regulations, and issue orders, consistent with
the protection of investors, prescribing the conditions under
which a bank, or an affiliated person of a bank, either of which
is an affiliated person, promoter, organizer, or sponsor of, or
principal underwriter for, a registered management company may
serve as custodian of that registered management company.''.
(b) Unit Investment Trusts.--Section 26 of the Investment Company
Act of 1940 (15 U.S.C. 80a-26) is amended--
(1) by redesignating subsections (b) through (e) as
subsections (c) through (f), respectively; and
(2) by inserting after subsection (a) the following new
subsection:
``(b) The Commission may, after consultation with and taking into
consideration the views of the Federal banking agencies (as defined in
section 3 of the Federal Deposit Insurance Act), adopt rules and
regulations, and issue orders, consistent with the protection of
investors, prescribing the conditions under which a bank, or an
affiliated person of a bank, either of which is an affiliated person of
a principal underwriter for, or depositor of, a registered unit
investment trust, may serve as trustee or custodian under subsection
(a)(1).''.
SEC. 212. LENDING TO AN AFFILIATED INVESTMENT COMPANY.
Section 17(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-
17(a)) is amended--
(1) by striking ``or'' at the end of paragraph (2);
(2) by striking the period at the end of paragraph (3) and
inserting ``; or''; and
(3) by adding at the end the following new paragraph:
[[Page 113 STAT. 1397]]
``(4) to loan money or other property to such registered
company, or to any company controlled by such registered
company, in contravention of such rules, regulations, or orders
as the Commission may, after consultation with and taking into
consideration the views of the Federal banking agencies (as
defined in section 3 of the Federal Deposit Insurance Act),
prescribe or issue consistent with the protection of
investors.''.
SEC. 213. INDEPENDENT DIRECTORS.
(a) In General.--Section 2(a)(19)(A) of the Investment Company Act
of 1940 (15 U.S.C. 80a-2(a)(19)(A)) is amended--
(1) by striking clause (v) and inserting the following new
clause:
``(v) any person or any affiliated person of a
person (other than a registered investment
company) that, at any time during the 6-month
period preceding the date of the determination of
whether that person or affiliated person is an
interested person, has executed any portfolio
transactions for, engaged in any principal
transactions with, or distributed shares for--
``(I) the investment company;
``(II) any other investment company
having the same investment adviser as
such investment company or holding
itself out to investors as a related
company for purposes of investment or
investor services; or
``(III) any account over which the
investment company's investment adviser
has brokerage placement discretion,'';
(2) by redesignating clause (vi) as clause (vii); and
(3) by inserting after clause (v) the following new clause:
``(vi) any person or any affiliated person of
a person (other than a registered investment
company) that, at any time during the 6-month
period preceding the date of the determination of
whether that person or affiliated person is an
interested person, has loaned money or other
property to--
``(I) the investment company;
``(II) any other investment company
having the same investment adviser as
such investment company or holding
itself out to investors as a related
company for purposes of investment or
investor services; or
``(III) any account for which the
investment company's investment adviser
has borrowing authority,''.
(b) Conforming Amendment.--Section 2(a)(19)(B) of the Investment
Company Act of 1940 (15 U.S.C. 80a-2(a)(19)(B)) is amended--
(1) by striking clause (v) and inserting the following new
clause:
``(v) any person or any affiliated person of a
person (other than a registered investment
company) that, at any time during the 6-month
period preceding the date of the determination of
whether that person or affiliated person is an
interested person, has executed
[[Page 113 STAT. 1398]]
any portfolio transactions for, engaged in any
principal transactions with, or distributed shares
for--
``(I) any investment company for
which the investment adviser or
principal underwriter serves as such;
``(II) any investment company
holding itself out to investors, for
purposes of investment or investor
services, as a company related to any
investment company for which the
investment adviser or principal
underwriter serves as such; or
``(III) any account over which the
investment adviser has brokerage
placement discretion,'';
(2) by redesignating clause (vi) as clause (vii); and
(3) by inserting after clause (v) the following new clause:
``(vi) any person or any affiliated person of
a person (other than a registered investment
company) that, at any time during the 6-month
period preceding the date of the determination of
whether that person or affiliated person is an
interested person, has loaned money or other
property to--
``(I) any investment company for
which the investment adviser or
principal underwriter serves as such;
``(II) any investment company
holding itself out to investors, for
purposes of investment or investor
services, as a company related to any
investment company for which the
investment adviser or principal
underwriter serves as such; or
``(III) any account for which the
investment adviser has borrowing
authority,''.
(c) Affiliation of Directors.--Section 10(c) of the Investment
Company Act of 1940 (15 U.S.C. 80a-10(c)) is amended by striking ``bank,
except'' and inserting ``bank (together with its affiliates and
subsidiaries) or any one bank holding company (together with its
affiliates and subsidiaries) (as such terms are defined in section 2 of
the Bank Holding Company Act of 1956), except''.
SEC. 214. ADDITIONAL SEC DISCLOSURE AUTHORITY.
Section 35(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-
34(a)) is amended to read as follows:
``(a) Misrepresentation of Guarantees.--
``(1) In general.--It shall be unlawful for any person,
issuing or selling any security of which a registered investment
company is the issuer, to represent or imply in any manner
whatsoever that such security or company--
``(A) has been guaranteed, sponsored, recommended,
or approved by the United States, or any agency,
instrumentality or officer of the United States;
``(B) has been insured by the Federal Deposit
Insurance Corporation; or
``(C) is guaranteed by or is otherwise an obligation
of any bank or insured depository institution.
``(2) Disclosures.--Any person issuing or selling the
securities of a registered investment company that is advised
by, or sold through, a bank shall prominently disclose that an
[[Page 113 STAT. 1399]]
investment in the company is not insured by the Federal Deposit
Insurance Corporation or any other government agency. The
Commission may, after consultation with and taking into
consideration the views of the Federal banking agencies (as
defined in section 3 of the Federal Deposit Insurance Act),
adopt rules and regulations, and issue orders, consistent with
the protection of investors, prescribing the manner in which the
disclosure under this paragraph shall be provided.
``(3) Definitions.--The terms `insured depository
institution' and `appropriate Federal banking agency' have the
same meanings as given in section 3 of the Federal Deposit
Insurance Act.''.
SEC. 215. DEFINITION OF BROKER UNDER THE INVESTMENT COMPANY ACT OF
1940.
Section 2(a)(6) of the Investment Company Act of 1940 (15 U.S.C.
80a-2(a)(6)) is amended to read as follows:
``(6) The term `broker' has the same meaning as given in
section 3 of the Securities Exchange Act of 1934, except that
such term does not include any person solely by reason of the
fact that such person is an underwriter for one or more
investment companies.''.
SEC. 216. DEFINITION OF DEALER UNDER THE INVESTMENT COMPANY ACT OF
1940.
Section 2(a)(11) of the Investment Company Act of 1940 (15 U.S.C.
80a-2(a)(11)) is amended to read as follows:
``(11) The term `dealer' has the same meaning as given in
the Securities Exchange Act of 1934, but does not include an
insurance company or investment company.''.
SEC. 217. REMOVAL OF THE EXCLUSION FROM THE DEFINITION OF
INVESTMENT ADVISER FOR BANKS THAT ADVISE
INVESTMENT COMPANIES.
(a) Investment Adviser.--Section 202(a)(11)(A) of the Investment
Advisers Act of 1940 (15 U.S.C. 80b-2(a)(11)(A)) is amended by striking
``investment company'' and inserting ``investment company, except that
the term `investment adviser' includes any bank or bank holding company
to the extent that such bank or bank holding company serves or acts as
an investment adviser to a registered investment company, but if, in the
case of a bank, such services or actions are performed through a
separately identifiable department or division, the department or
division, and not the bank itself, shall be deemed to be the investment
adviser''.
(b) Separately Identifiable Department or Division.--Section 202(a)
of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)) is amended
by adding at the end the following:
``(26) The term `separately identifiable department or
division' of a bank means a unit--
``(A) that is under the direct supervision of an
officer or officers designated by the board of directors
of the bank as responsible for the day-to-day conduct of
the bank's investment adviser activities for one or more
investment companies, including the supervision of all
bank employees engaged in the performance of such
activities; and
``(B) for which all of the records relating to its
investment adviser activities are separately maintained
in or extractable from such unit's own facilities or the
facilities
[[Page 113 STAT. 1400]]
of the bank, and such records are so maintained or
otherwise accessible as to permit independent
examination and enforcement by the Commission of this
Act or the Investment Company Act of 1940 and rules and
regulations promulgated under this Act or the Investment
Company Act of 1940.''.
SEC. 218. DEFINITION OF BROKER UNDER THE INVESTMENT ADVISERS ACT
OF 1940.
Section 202(a)(3) of the Investment Advisers Act of 1940 (15 U.S.C.
80b-2(a)(3)) is amended to read as follows:
``(3) The term `broker' has the same meaning as given in
section 3 of the Securities Exchange Act of 1934.''.
SEC. 219. DEFINITION OF DEALER UNDER THE INVESTMENT ADVISERS ACT
OF 1940.
Section 202(a)(7) of the Investment Advisers Act of 1940 (15 U.S.C.
80b-2(a)(7)) is amended to read as follows:
``(7) The term `dealer' has the same meaning as given in
section 3 of the Securities Exchange Act of 1934, but does not
include an insurance company or investment company.''.
SEC. 220. INTERAGENCY CONSULTATION.
The Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.) is
amended by inserting after section 210 the following new section:
``SEC. 210A. <<NOTE: 15 USC 80b-10a.>> CONSULTATION.
``(a) Examination Results and Other Information.--
``(1) The appropriate Federal banking agency shall provide
the Commission upon request the results of any examination,
reports, records, or other information to which such agency may
have access--
``(A) with respect to the investment advisory
activities of any--
``(i) bank holding company;
``(ii) bank; or
``(iii) separately identifiable department or
division of a bank,
that is registered under section 203 of this title; and
``(B) in the case of a bank holding company or bank
that has a subsidiary or a separately identifiable
department or division registered under that section,
with respect to the investment advisory activities of
such bank or bank holding company.
``(2) The Commission shall provide to the appropriate
Federal banking agency upon request the results of any
examination, reports, records, or other information with respect
to the investment advisory activities of any bank holding
company, bank, or separately identifiable department or division
of a bank, which is registered under section 203 of this title.
``(3) Notwithstanding any other provision of law, the
Commission and the appropriate Federal banking agencies shall
not be compelled to disclose any information provided under
paragraph (1) or (2). Nothing in this paragraph shall authorize
the Commission or such agencies to withhold information from
Congress, or prevent the Commission or such agencies from
complying with a request for information from any other Federal
department or agency or any self-regulatory organization
[[Page 113 STAT. 1401]]
requesting the information for purposes within the scope of its
jurisdiction, or complying with an order of a court of the
United States in an action brought by the United States, the
Commission, or such agencies. For purposes of section 552 of
title 5, United States Code, this paragraph shall be considered
a statute described in subsection (b)(3)(B) of such section 552.
``(b) Effect on Other Authority.--Nothing in this section shall
limit in any respect the authority of the appropriate Federal banking
agency with respect to such bank holding company (or affiliates or
subsidiaries thereof), bank, or subsidiary, department, or division or a
bank under any other provision of law.
``(c) Definition.--For purposes of this section, the term
`appropriate Federal banking agency' shall have the same meaning as
given in section 3 of the Federal Deposit Insurance Act.''.
SEC. 221. TREATMENT OF BANK COMMON TRUST FUNDS.
(a) Securities Act of 1933.--Section 3(a)(2) of the Securities Act
of 1933 (15 U.S.C. 77c(a)(2)) is amended by striking ``or any interest
or participation in any common trust fund or similar fund maintained by
a bank exclusively for the collective investment and reinvestment of
assets contributed thereto by such bank in its capacity as trustee,
executor, administrator, or guardian'' and inserting ``or any interest
or participation in any common trust fund or similar fund that is
excluded from the definition of the term `investment company' under
section 3(c)(3) of the Investment Company Act of 1940''.
(b) Securities Exchange Act of 1934.--Section 3(a)(12)(A)(iii) of
the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(12)(A)(iii)) is
amended to read as follows:
``(iii) any interest or participation in any common
trust fund or similar fund that is excluded from the
definition of the term `investment company' under
section 3(c)(3) of the Investment Company Act of
1940;''.
(c) Investment Company Act of 1940.--Section 3(c)(3) of the
Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(3)) is amended by
inserting before the period the following: ``, if--
``(A) such fund is employed by the bank solely as an
aid to the administration of trusts, estates, or other
accounts created and maintained for a fiduciary purpose;
``(B) except in connection with the ordinary
advertising of the bank's fiduciary services, interests
in such fund are not--
``(i) advertised; or
``(ii) offered for sale to the general public;
and
``(C) fees and expenses charged by such fund are not
in contravention of fiduciary principles established
under applicable Federal or State law''.
SEC. 222. STATUTORY DISQUALIFICATION FOR BANK WRONGDOING.
Section 9(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-
9(a)) is amended in paragraphs (1) and (2) by striking ``securities
dealer, transfer agent,'' and inserting ``securities dealer, bank,
transfer agent,''.
SEC. 223. CONFORMING CHANGE IN DEFINITION.
Section 2(a)(5) of the Investment Company Act of 1940 (15 U.S.C.
80a-2(a)(5)) is amended by striking ``(A) a banking institution
[[Page 113 STAT. 1402]]
organized under the laws of the United States'' and inserting ``(A) a
depository institution (as defined in section 3 of the Federal Deposit
Insurance Act) or a branch or agency of a foreign bank (as such terms
are defined in section 1(b) of the International Banking Act of 1978)''.
SEC. 224. CONFORMING AMENDMENT.
Section 202 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2)
is amended by adding at the end the following new subsection:
``(c) Consideration of Promotion of Efficiency, Competition, and
Capital Formation.--Whenever pursuant to this title the Commission is
engaged in rulemaking and is required to consider or determine whether
an action is necessary or appropriate in the public interest, the
Commission shall also consider, in addition to the protection of
investors, whether the action will promote efficiency, competition, and
capital formation.''.
SEC. 225. <<NOTE: 15 USC 77c note.>> EFFECTIVE DATE.
This subtitle shall take effect 18 months after the date of the
enactment of this Act.
Subtitle C--Securities and Exchange Commission Supervision of Investment
Bank Holding Companies
SEC. 231. SUPERVISION OF INVESTMENT BANK HOLDING COMPANIES BY THE
SECURITIES AND EXCHANGE COMMISSION.
(a) Amendment.--Section 17 of the Securities Exchange Act of 1934
(15 U.S.C. 78q) is amended--
(1) by redesignating subsection (i) as subsection (k); and
(2) by inserting after subsection (h) the following new
subsections:
``(i) Investment Bank Holding Companies.--
``(1) Elective supervision of an investment bank holding
company not having a bank or savings association affiliate.--
``(A) In general.--An investment bank holding
company that is not--
``(i) an affiliate of an insured bank (other
than an institution described in subparagraph (D),
(F), or (G) of section 2(c)(2), or held under
section 4(f), of the Bank Holding Company Act of
1956), or a savings association;
``(ii) a foreign bank, foreign company, or
company that is described in section 8(a) of the
International Banking Act of 1978; or
``(iii) a foreign bank that controls, directly
or indirectly, a corporation chartered under
section 25A of the Federal Reserve Act,
may elect to become supervised by filing with the
Commission a notice of intention to become supervised,
pursuant to subparagraph (B) of this paragraph. Any
investment bank holding company filing such a notice
shall be supervised in accordance with this section and
comply with
[[Page 113 STAT. 1403]]
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. <<NOTE: Effective date.>> Such notice shall
not become effective until 1 year after receipt by the
Commission, or such shorter or longer period as the
Commission deems necessary or appropriate to ensure
effective supervision of the material risks to the
supervised investment bank holding company and to the
affiliated broker or dealer, or to prevent evasion of
the purposes of this section.
``(B) Discontinuation of commission supervision.--If
the Commission finds that any supervised investment bank
holding company that is supervised pursuant to paragraph
(1) is no longer in existence or has ceased to be an
investment bank holding company, or if the Commission
finds that continued supervision of such a supervised
investment bank holding company is not consistent with
the purposes of this section, the Commission may
discontinue the supervision pursuant to a rule or order,
if any, promulgated by the Commission under this
section.
``(3) Supervision of investment bank holding companies.--
``(A) Recordkeeping and reporting.--
``(i) In general.--Every supervised investment
bank holding company and each affiliate thereof
shall make and keep for prescribed periods such
records, furnish copies thereof, and make such
reports, as the Commission may require by rule, in
order to keep the Commission informed as to--
``(I) the company's or affiliate's
activities, financial condition,
policies, systems for monitoring and
controlling financial and operational
risks, and transactions and
relationships between any broker
[[Page 113 STAT. 1404]]
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
[[Page 113 STAT. 1405]]
dealer affiliated with the supervised
investment bank holding company and any
of the company's other affiliates, and
applicable provisions of subchapter II
of chapter 53, title 31, United States
Code (commonly referred to as the `Bank
Secrecy Act') and regulations
thereunder.
``(ii) Restricted focus of examinations.--The
Commission shall limit the focus and scope of any
examination of a supervised investment bank
holding company to--
``(I) the company; and
``(II) any affiliate of the company
that, because of its size, condition, or
activities, the nature or size of the
transactions between such affiliate and
any affiliated broker or dealer, or the
centralization of functions within the
holding company system, could, in the
discretion of the Commission, have a
materially adverse effect on the
operational or financial condition of
the broker or dealer.
``(iii) Deference to other examinations.--For
purposes of this subparagraph, the Commission
shall, to the fullest extent possible, use the
reports of examination of an institution described
in subparagraph (D), (F), or (G) of section
2(c)(2), or held under section 4(f), of the Bank
Holding Company Act of 1956 made by the
appropriate regulatory agency, or of a licensed
insurance company made by the appropriate State
insurance regulator.
``(4) Functional regulation of banking and insurance
activities of supervised investment bank holding companies.--The
Commission shall defer to--
``(A) the appropriate regulatory agency with regard
to all interpretations of, and the enforcement of,
applicable banking laws relating to the activities,
conduct, ownership, and operations of banks, and
institutions described in subparagraph (D), (F), and (G)
of section 2(c)(2), or held under section 4(f), of the
Bank Holding Company Act of 1956; and
``(B) the appropriate State insurance regulators
with regard to all interpretations of, and the
enforcement of, applicable State insurance laws relating
to the activities, conduct, and operations of insurance
companies and insurance agents.
``(5) Definitions.--For purposes of this subsection:
``(A) The term `investment bank holding company'
means--
``(i) any person other than a natural person
that owns or controls one or more brokers or
dealers; and
``(ii) the associated persons of the
investment bank holding company.
``(B) The term `supervised investment bank holding
company' means any investment bank holding company that
is supervised by the Commission pursuant to this
subsection.
``(C) The terms `affiliate', `bank', `bank holding
company', `company', `control', and `savings
association' have
[[Page 113 STAT. 1406]]
the same meanings as given in section 2 of the Bank
Holding Company Act of 1956 (12 U.S.C. 1841).
``(D) The term `insured bank' has the same meaning
as given in section 3 of the Federal Deposit Insurance
Act.
``(E) The term `foreign bank' has the same meaning
as given in section 1(b)(7) of the International Banking
Act of 1978.
``(F) The terms `person associated with an
investment bank holding company' and `associated person
of an investment bank holding company' mean any person
directly or indirectly controlling, controlled by, or
under common control with, an investment bank holding
company.
``(j) Authority To Limit Disclosure of Information.--Notwithstanding
any other provision of law, the Commission shall not be compelled to
disclose any information required to be reported under subsection (h) or
(i) or any information supplied to the Commission by any domestic or
foreign regulatory agency that relates to the financial or operational
condition of any associated person of a broker or dealer, investment
bank holding company, or any affiliate of an investment bank holding
company. Nothing in this subsection shall authorize the Commission to
withhold information from Congress, or prevent the Commission from
complying with a request for information from any other Federal
department or agency or any self-regulatory organization requesting the
information for purposes within the scope of its jurisdiction, or
complying with an order of a court of the United States in an action
brought by the United States or the Commission. For purposes of section
552 of title 5, United States Code, this subsection shall be considered
a statute described in subsection (b)(3)(B) of such section
552. <<NOTE: Regulations.>> 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.''.
[[Page 113 STAT. 1407]]
(2) Section 1112(e) of the Right to Financial Privacy Act of
1978 (12 U.S.C. 3412(e)) is amended--
(A) by striking ``this title'' and inserting
``law''; and
(B) by inserting ``, examination reports'' after
``financial records''.
Subtitle D--Banks and Bank Holding Companies
SEC. 241. <<NOTE: 15 USC 78m note.>> CONSULTATION.
(a) In General.--The Securities and Exchange Commission shall
consult and coordinate comments with the appropriate Federal banking
agency before taking any action or rendering any opinion with respect to
the manner in which any insured depository institution or depository
institution holding company reports loan loss reserves in its financial
statement, including the amount of any such loan loss reserve.
(b) Definitions.--For purposes of subsection (a), the terms
``insured depository institution'', ``depository institution holding
company'', and ``appropriate Federal banking agency'' have the same
meaning as given in section 3 of the Federal Deposit Insurance Act.
TITLE III--INSURANCE
Subtitle A--State Regulation of Insurance
SEC. 301. <<NOTE: 15 USC 6711.>> FUNCTIONAL REGULATION OF INSURANCE.
The insurance activities of any person (including a national bank
exercising its power to act as agent under the eleventh undesignated
paragraph of section 13 of the Federal Reserve Act) shall be
functionally regulated by the States, subject to section 104.
SEC. 302. <<NOTE: 15 USC 6712.>> INSURANCE UNDERWRITING IN NATIONAL
BANKS.
(a) In General.--Except as provided in section 303, a national bank
and the subsidiaries of a national bank may not provide insurance in a
State as principal except that this prohibition shall not apply to
authorized products.
(b) Authorized Products.--For the purposes of this section, a
product is authorized if--
(1) as of January 1, 1999, the Comptroller of the Currency
had determined in writing that national banks may provide such
product as principal, or national banks were in fact lawfully
providing such product as principal;
(2) no court of relevant jurisdiction had, by final
judgment, overturned a determination of the Comptroller of the
Currency that national banks may provide such product as
principal; and
(3) the product is not title insurance, or an annuity
contract the income of which is subject to tax treatment under
section 72 of the Internal Revenue Code of 1986.
(c) Definition.--For purposes of this section, the term
``insurance'' means--
[[Page 113 STAT. 1408]]
(1) any product regulated as insurance as of January 1,
1999, in accordance with the relevant State insurance law, in
the State in which the product is provided;
(2) any product first offered after January 1, 1999, which--
(A) a State insurance regulator determines shall be
regulated as insurance in the State in which the product
is provided because the product insures, guarantees, or
indemnifies against liability, loss of life, loss of
health, or loss through damage to or destruction of
property, including, but not limited to, surety bonds,
life insurance, health insurance, title insurance, and
property and casualty insurance (such as private
passenger or commercial automobile, homeowners,
mortgage, commercial multiperil, general liability,
professional liability, workers' compensation, fire and
allied lines, farm owners multiperil, aircraft,
fidelity, surety, medical malpractice, ocean marine,
inland marine, and boiler and machinery insurance); and
(B) is not a product or service of a bank that is--
(i) a deposit product;
(ii) a loan, discount, letter of credit, or
other extension of credit;
(iii) a trust or other fiduciary service;
(iv) a qualified financial contract (as
defined in or determined pursuant to section
11(e)(8)(D)(i) of the Federal Deposit Insurance
Act); or
(v) a financial guaranty, except that this
subparagraph (B) shall not apply to a product that
includes an insurance component such that if the
product is offered or proposed to be offered by
the bank as principal--
(I) it would be treated as a life
insurance contract under section 7702 of
the Internal Revenue Code of 1986; or
(II) in the event that the product
is not a letter of credit or other
similar extension of credit, a qualified
financial contract, or a financial
guaranty, it would qualify for treatment
for losses incurred with respect to such
product under section 832(b)(5) of the
Internal Revenue Code of 1986, if the
bank were subject to tax as an insurance
company under section 831 of that Code;
or
(3) any annuity contract, the income on which is subject to
tax treatment under section 72 of the Internal Revenue Code of
1986.
(d) Rule of Construction.--For purposes of this section, providing
insurance (including reinsurance) outside the United States that
insures, guarantees, or indemnifies insurance products provided in a
State, or that indemnifies an insurance company with regard to insurance
products provided in a State, shall be considered to be providing
insurance as principal in that State.
SEC. 303. TITLE <<NOTE: 15 USC 6713.>> INSURANCE ACTIVITIES OF
NATIONAL BANKS AND THEIR AFFILIATES.
(a) General Prohibition.--No national bank may engage in any
activity involving the underwriting or sale of title insurance.
(b) Nondiscrimination Parity Exception.--
[[Page 113 STAT. 1409]]
(1) In general.--Notwithstanding any other provision of law
(including section 104 of this Act), in the case of any State in
which banks organized under the laws of such State are
authorized to sell title insurance as agent, a national bank may
sell title insurance as agent in such State, but only in the
same manner, to the same extent, and under the same restrictions
as such State banks are authorized to sell title insurance as
agent in such State.
(2) Coordination with ``wildcard'' provision.--A State law
which authorizes State banks to engage in any activities in such
State in which a national bank may engage shall not be treated
as a statute which authorizes State banks to sell title
insurance as agent, for purposes of paragraph (1).
(c) Grandfathering With Consistent Regulation.--
(1) In general.--Except as provided in paragraphs (2) and
(3) and notwithstanding subsections (a) and (b), a national
bank, and a subsidiary of a national bank, may conduct title
insurance activities which such national bank or subsidiary was
actively and lawfully conducting before the date of the
enactment of this Act.
(2) Insurance affiliate.--In the case of a national bank
which has an affiliate which provides insurance as principal and
is not a subsidiary of the bank, the national bank and any
subsidiary of the national bank may not engage in the
underwriting of title insurance pursuant to paragraph (1).
(3) Insurance subsidiary.--In the case of a national bank
which has a subsidiary which provides insurance as principal and
has no affiliate other than a subsidiary which provides
insurance as principal, the national bank may not directly
engage in any activity involving the underwriting of title
insurance.
(d) ``Affiliate'' and ``Subsidiary'' Defined.--For purposes of this
section, the terms ``affiliate'' and ``subsidiary'' have the same
meanings as in section 2 of the Bank Holding Company Act of 1956.
(e) Rule of Construction.--No provision of this Act or any other
Federal law shall be construed as superseding or affecting a State law
which was in effect before the date of the enactment of this Act and
which prohibits title insurance from being offered, provided, or sold in
such State, or from being underwritten with respect to real property in
such State, by any person whatsoever.
SEC. 304. EXPEDITED <<NOTE: 15 USC 6714.>> AND EQUALIZED DISPUTE
RESOLUTION FOR FEDERAL REGULATORS.
(a) Filing in Court of Appeals.--In the case of a regulatory
conflict between a State insurance regulator and a Federal regulator
regarding insurance issues, including whether a State law, rule,
regulation, order, or interpretation regarding any insurance sales or
solicitation activity is properly treated as preempted under Federal
law, the Federal or State regulator may seek expedited judicial review
of such determination by the United States Court of Appeals for the
circuit in which the State is located or in the United States Court of
Appeals for the District of Columbia Circuit by filing a petition for
review in such court.
(b) Expedited Review.--The United States Court of Appeals in which a
petition for review is filed in accordance with subsection (a) shall
complete all action on such petition, including rendering
[[Page 113 STAT. 1410]]
a judgment, before the end of the 60-day period beginning on the date on
which such petition is filed, unless all parties to such proceeding
agree to any extension of such period.
(c) Supreme Court Review.--Any request for certiorari to the Supreme
Court of the United States of any judgment of a United States Court of
Appeals with respect to a petition for review under this section shall
be filed with the Supreme Court of the United States as soon as
practicable after such judgment is issued.
(d) Statute of Limitation.--No petition may be filed under this
section challenging an order, ruling, determination, or other action of
a Federal regulator or State insurance regulator after the later of--
(1) the end of the 12-month period beginning on the date on
which the first public notice is made of such order, ruling,
determination or other action in its final form; or
(2) the end of the 6-month period beginning on the date on
which such order, ruling, determination, or other action takes
effect.
(e) Standard of Review.--The court shall decide a petition filed
under this section based on its review on the merits of all questions
presented under State and Federal law, including the nature of the
product or activity and the history and purpose of its regulation under
State and Federal law, without unequal deference.
SEC. 305. INSURANCE CUSTOMER PROTECTIONS.
The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is
amended by inserting after section 46, as added by section 121(d) of
this Act, the following new section:
``SEC. 47. <<NOTE: 12 USC 1831x.>> INSURANCE CUSTOMER PROTECTIONS.
``(a) Regulations Required.--
``(1) In general.--The <<NOTE: Publication.>> Federal
banking agencies shall prescribe and publish in final form,
before the end of the 1-year period beginning on the date of the
enactment of the Gramm-Leach-Bliley Act, customer protection
regulations (which the agencies jointly determine to be
appropriate) that--
``(A) apply to retail sales practices,
solicitations, advertising, or offers of any insurance
product by any depository institution or any person that
is engaged in such activities at an office of the
institution or on behalf of the institution; and
``(B) are consistent with the requirements of this
Act and provide such additional protections for
customers to whom such sales, solicitations,
advertising, or offers are directed.
``(2) Applicability to subsidiaries.--The regulations
prescribed pursuant to paragraph (1) shall extend such
protections to any subsidiary of a depository institution, as
deemed appropriate by the regulators referred to in paragraph
(3), where such extension is determined to be necessary to
ensure the consumer protections provided by this section.
``(3) Consultation and joint regulations.--The Federal
banking agencies shall consult with each other and prescribe
joint regulations pursuant to paragraph (1), after consultation
with the State insurance regulators, as appropriate.
``(b) Sales Practices.--The regulations prescribed pursuant to
subsection (a) shall include antitying and anticoercion rules
[[Page 113 STAT. 1411]]
applicable to the sale of insurance products that prohibit a depository
institution from engaging in any practice that would lead a customer to
believe an extension of credit, in violation of section 106(b) of the
Bank Holding Company Act Amendments of 1970, is conditional upon--
``(1) the purchase of an insurance product from the
institution or any of its affiliates; or
``(2) an agreement by the consumer not to obtain, or a
prohibition on the consumer from obtaining, an insurance product
from an unaffiliated entity.
``(c) Disclosures and Advertising.--The regulations prescribed
pursuant to subsection (a) shall include the following provisions
relating to disclosures and advertising in connection with the initial
purchase of an insurance product:
``(1) Disclosures.--
``(A) In general.--Requirements that the following
disclosures be made orally and in writing before the
completion of the initial sale and, in the case of
clause (iii), at the time of application for an
extension of credit:
``(i) Uninsured status.--As appropriate, the
product is not insured by the Federal Deposit
Insurance Corporation, the United States
Government, or the depository institution.
``(ii) Investment risk.--In the case of a
variable annuity or other insurance product which
involves an investment risk, that there is an
investment risk associated with the product,
including possible loss of value.
``(iii) Coercion.--The approval of an
extension of credit may not be conditioned on--
``(I) the purchase of an insurance
product from the institution in which
the application for credit is pending or
of any affiliate of the institution; or
``(II) an agreement by the consumer
not to obtain, or a prohibition on the
consumer from obtaining, an insurance
product from an unaffiliated entity.
``(B) Making disclosure readily understandable.--
Regulations prescribed under subparagraph (A) shall
encourage the use of disclosure that is conspicuous,
simple, direct, and readily understandable, such as the
following:
``(i) `NOT FDIC--INSURED'.
``(ii) `NOT GUARANTEED BY THE BANK'.
``(iii) `MAY GO DOWN IN VALUE'.
``(iv) `NOT INSURED BY ANY GOVERNMENT AGENCY'.
``(C) Limitation.--Nothing in this paragraph
requires the inclusion of the foregoing disclosures in
advertisements of a general nature describing or listing
the services or products offered by an institution.
``(D) Meaningful disclosures.--Disclosures shall not
be considered to be meaningfully provided under this
paragraph if the institution or its representative
states that disclosures required by this subsection were
available to the customer in printed material available
for distribution, where such printed material is not
provided and such information is not orally disclosed to
the customer.
[[Page 113 STAT. 1412]]
``(E) Adjustments for alternative methods of
purchase.--In prescribing the requirements under
subparagraphs (A) and (F), necessary adjustments shall
be made for purchase in person, by telephone, or by
electronic media to provide for the most appropriate and
complete form of disclosure and acknowledgments.
``(F) Consumer acknowledgment.--A requirement that a
depository institution shall require any person selling
an insurance product at any office of, or on behalf of,
the institution to obtain, at the time a consumer
receives the disclosures required under this paragraph
or at the time of the initial purchase by the consumer
of such product, an acknowledgment by such consumer of
the receipt of the disclosure required under this
subsection with respect to such product.
``(2) Prohibition on misrepresentations.--A prohibition on
any practice, or any advertising, at any office of, or on behalf
of, the depository institution, or any subsidiary, as
appropriate, that could mislead any person or otherwise cause a
reasonable person to reach an erroneous belief with respect to--
``(A) the uninsured nature of any insurance product
sold, or offered for sale, by the institution or any
subsidiary of the institution;
``(B) in the case of a variable annuity or insurance
product that involves an investment risk, the investment
risk associated with any such product; or
``(C) in the case of an institution or subsidiary at
which insurance products are sold or offered for sale,
the fact that--
``(i) the approval of an extension of credit
to a customer by the institution or subsidiary may
not be conditioned on the purchase of an insurance
product by such customer from the institution or
subsidiary; and
``(ii) the customer is free to purchase the
insurance product from another source.
``(d) Separation of Banking and Nonbanking Activities.--
``(1) Regulations required.--The regulations prescribed
pursuant to subsection (a) shall include such provisions as the
Federal banking agencies consider appropriate to ensure that the
routine acceptance of deposits is kept, to the extent
practicable, physically segregated from insurance product
activity.
``(2) Requirements.--Regulations prescribed pursuant to
paragraph (1) shall include the following requirements:
``(A) Separate setting.--A clear delineation of the
setting in which, and the circumstances under which,
transactions involving insurance products should be
conducted in a location physically segregated from an
area where retail deposits are routinely accepted.
``(B) Referrals.--Standards that permit any person
accepting deposits from the public in an area where such
transactions are routinely conducted in a depository
institution to refer a customer who seeks to purchase
any insurance product to a qualified person who sells
such product, only if the person making the referral
receives no more
[[Page 113 STAT. 1413]]
than a one-time nominal fee of a fixed dollar amount for
each referral that does not depend on whether the
referral results in a transaction.
``(C) Qualification and licensing requirements.--
Standards prohibiting any depository institution from
permitting any person to sell or offer for sale any
insurance product in any part of any office of the
institution, or on behalf of the institution, unless
such person is appropriately qualified and licensed.
``(e) Domestic Violence Discrimination Prohibition.--
``(1) In general.--In the case of an applicant for, or an
insured under, any insurance product described in paragraph (2),
the status of the applicant or insured as a victim of domestic
violence, or as a provider of services to victims of domestic
violence, shall not be considered as a criterion in any decision
with regard to insurance underwriting, pricing, renewal, or
scope of coverage of insurance policies, or payment of insurance
claims, except as required or expressly permitted under State
law.
``(2) Scope of application.--The prohibition contained in
paragraph (1) shall apply to any life or health insurance
product which is sold or offered for sale, as principal, agent,
or broker, by any depository institution or any person who is
engaged in such activities at an office of the institution or on
behalf of the institution.
``(3) Domestic violence defined.--For purposes of this
subsection, the term `domestic violence' means the occurrence of
one or more of the following acts by a current or former family
member, household member, intimate partner, or caretaker:
``(A) Attempting to cause or causing or threatening
another person physical harm, severe emotional distress,
psychological trauma, rape, or sexual assault.
``(B) Engaging in a course of conduct or repeatedly
committing acts toward another person, including
following the person without proper authority, under
circumstances that place the person in reasonable fear
of bodily injury or physical harm.
``(C) Subjecting another person to false
imprisonment.
``(D) Attempting to cause or cause damage to
property so as to intimidate or attempt to control the
behavior of another person.
``(f) Consumer <<NOTE: Establishment.>> 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.--
[[Page 113 STAT. 1414]]
``(1) In general.--No provision of this section shall be
construed as granting, limiting, or otherwise affecting--
``(A) any authority of the Securities and Exchange
Commission, any self-regulatory organization, the
Municipal Securities Rulemaking Board, or the Secretary
of the Treasury under any Federal securities law; or
``(B) except as provided in paragraph (2), any
authority of any State insurance commission (or any
agency or office performing like functions), or of any
State securities commission (or any agency or office
performing like functions), or other State authority
under any State law.
``(2) Coordination with state law.--
``(A) In general.--Except as provided in
subparagraph (B), insurance customer protection
regulations prescribed by a Federal banking agency under
this section shall not apply to retail sales,
solicitations, advertising, or offers of any insurance
product by any depository institution or to any person
who is engaged in such activities at an office of such
institution or on behalf of the institution, in a State
where the State has in effect statutes, regulations,
orders, or interpretations, that are inconsistent with
or contrary to the regulations prescribed by the Federal
banking agencies.
``(B) Preemption.--
``(i) In <<NOTE: Notification.>> general.--If,
with respect to any provision of the regulations
prescribed under this section, the Board of
Governors of the Federal Reserve System, the
Comptroller of the Currency, and the Board of
Directors of the Corporation determine jointly
that the protection afforded by such provision for
customers is greater than the protection provided
by a comparable provision of the statutes,
regulations, orders, or interpretations referred
to in subparagraph (A) of any State, the
appropriate State regulatory authority shall be
notified of such determination in writing.
``(ii) Considerations.--Before making a final
determination under clause (i), the Federal
agencies referred to in clause (i) shall give
appropriate consideration to comments submitted by
the appropriate State regulatory authorities
relating to the level of protection afforded to
consumers under State law.
``(iii) Federal <<NOTE: Notice.>> preemption
and ability of states to override federal
preemption.--If the Federal agencies referred to
in clause (i) jointly determine that any provision
of the regulations prescribed under this section
affords greater protections than a comparable
State law, rule, regulation, order, or
interpretation, those agencies shall send a
written preemption notice to the appropriate State
regulatory authority to notify the State that the
Federal provision will preempt the State provision
and will become applicable unless, not later than
3 years after the date of such notice, the State
adopts legislation to override such preemption.
``(h) Non-Discrimination Against Non-Affiliated Agents.--The Federal
banking agencies shall ensure that the regulations prescribed pursuant
to subsection (a) shall not have the effect of discriminating, either
intentionally or unintentionally, against
[[Page 113 STAT. 1415]]
any person engaged in insurance sales or solicitations that is not
affiliated with a depository institution.''.
SEC. 306. CERTAIN <<NOTE: 15 USC 6715.>> STATE AFFILIATION LAWS
PREEMPTED FOR INSURANCE COMPANIES AND
AFFILIATES.
Except as provided in section 104(c)(2), no State may, by law,
regulation, order, interpretation, or otherwise--
(1) prevent or significantly interfere with the ability of
any insurer, or any affiliate of an insurer (whether such
affiliate is organized as a stock company, mutual holding
company, or otherwise), to become a financial holding company or
to acquire control of a depository institution;
(2) limit the amount of an insurer's assets that may be
invested in the voting securities of a depository institution
(or any company which controls such institution), except that
the laws of an insurer's State of domicile may limit the amount
of such investment to an amount that is not less than 5 percent
of the insurer's admitted assets; or
(3) prevent, significantly interfere with, or have the
authority to review, approve, or disapprove a plan of
reorganization by which an insurer proposes to reorganize from
mutual form to become a stock insurer (whether as a direct or
indirect subsidiary of a mutual holding company or otherwise)
unless such State is the State of domicile of the insurer.
SEC. 307. <<NOTE: 15 USC 6716.>> INTERAGENCY CONSULTATION.
(a) Purpose.--It is the intention of the Congress that the Board of
Governors of the Federal Reserve System, as the umbrella supervisor for
financial holding companies, and the State insurance regulators, as the
functional regulators of companies engaged in insurance activities,
coordinate efforts to supervise companies that control both a depository
institution and a company engaged in insurance activities regulated
under State law. In particular, Congress believes that the Board and the
State insurance regulators should share, on a confidential basis,
information relevant to the supervision of companies that control both a
depository institution and a company engaged in insurance activities,
including information regarding the financial health of the consolidated
organization and information regarding transactions and relationships
between insurance companies and affiliated depository institutions. The
appropriate Federal banking agencies for depository institutions should
also share, on a confidential basis, information with the relevant State
insurance regulators regarding transactions and relationships between
depository institutions and affiliated companies engaged in insurance
activities. The purpose of this section is to encourage this
coordination and confidential sharing of information, and to thereby
improve both the efficiency and the quality of the supervision of
financial holding companies and their affiliated depository institutions
and companies engaged in insurance activities.
(b) Examination Results and Other Information.--
(1) Information of the board.--Upon the request of the
appropriate insurance regulator of any State, the Board may
provide any information of the Board regarding the financial
condition, risk management policies, and operations of any
financial holding company that controls a company that is
engaged in insurance activities and is regulated by such State
[[Page 113 STAT. 1416]]
insurance regulator, and regarding any transaction or
relationship between such an insurance company and any
affiliated depository institution. The Board may provide any
other information to the appropriate State insurance regulator
that the Board believes is necessary or appropriate to permit
the State insurance regulator to administer and enforce
applicable State insurance laws.
(2) Banking agency information.--Upon the request of the
appropriate insurance regulator of any State, the appropriate
Federal banking agency may provide any information of the agency
regarding any transaction or relationship between a depository
institution supervised by such Federal banking agency and any
affiliated company that is engaged in insurance activities
regulated by such State insurance regulator. The appropriate
Federal banking agency may provide any other information to the
appropriate State insurance regulator that the agency believes
is necessary or appropriate to permit the State insurance
regulator to administer and enforce applicable State insurance
laws.
(3) State insurance regulator information.--Upon the request
of the Board or the appropriate Federal banking agency, a State
insurance regulator may provide any examination or other
reports, records, or other information to which such insurance
regulator may have access with respect to a company which--
(A) is engaged in insurance activities and regulated
by such insurance regulator; and
(B) is an affiliate of a depository institution or
financial holding company.
(c) Consultation.--Before making any determination relating to the
initial affiliation of, or the continuing affiliation of, a depository
institution or financial holding company with a company engaged in
insurance activities, the appropriate Federal banking agency shall
consult with the appropriate State insurance regulator of such company
and take the views of such insurance regulator into account in making
such determination.
(d) Effect on Other Authority.--Nothing in this section shall limit
in any respect the authority of the appropriate Federal banking agency
with respect to a depository institution or bank holding company or any
affiliate thereof under any provision of law.
(e) Confidentiality and Privilege.--
(1) Confidentiality.--The appropriate Federal banking agency
shall not provide any information or material that is entitled
to confidential treatment under applicable Federal banking
agency regulations, or other applicable law, to a State
insurance regulator unless such regulator agrees to maintain the
information or material in confidence and to take all reasonable
steps to oppose any effort to secure disclosure of the
information or material by the regulator. The appropriate
Federal banking agency shall treat as confidential any
information or material obtained from a State insurance
regulator that is entitled to confidential treatment under
applicable State regulations, or other applicable law, and take
all reasonable steps to oppose any effort to secure disclosure
of the information or material by the Federal banking agency.
[[Page 113 STAT. 1417]]
(2) Privilege.--The provision pursuant to this section of
information or material by a Federal banking agency or State
insurance regulator shall not constitute a waiver of, or
otherwise affect, any privilege to which the information or
material is otherwise subject.
(f) Definitions.--For purposes of this section, the following
definitions shall apply:
(1) Appropriate federal banking agency; depository
institution.--The terms ``appropriate Federal banking agency''
and ``depository institution'' have the same meanings as in
section 3 of the Federal Deposit Insurance Act.
(2) Board and financial holding company.--The terms
``Board'' and ``financial holding company'' have the same
meanings as in section 2 of the Bank Holding Company Act of
1956.
SEC. 308. <<NOTE: 15 USC 6717.>> 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. <<NOTE: 15 USC 6731.>> 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. <<NOTE: 15 USC 6732.>> REDOMESTICATION OF MUTUAL INSURERS.
(a) Redomestication.--A mutual insurer organized under the laws of
any State may transfer its domicile to a transferee domicile as a step
in a reorganization in which, pursuant to the laws of the transferee
domicile and consistent with the standards in subsection (f), the mutual
insurer becomes a stock insurer that is a direct or indirect subsidiary
of a mutual holding company.
(b) Resulting Domicile.--Upon complying with the applicable law of
the transferee domicile governing transfers of domicile and completion
of a transfer pursuant to this section, the mutual insurer shall cease
to be a domestic insurer in the transferor domicile and, as a
continuation of its corporate existence, shall be a domestic insurer of
the transferee domicile.
(c) Licenses Preserved.--The certificate of authority, agents'
appointments and licenses, rates, approvals and other items that a
licensed State allows and that are in existence immediately prior to the
date that a redomesticating insurer transfers its domicile pursuant to
this subtitle shall continue in full force and effect upon transfer, if
the insurer remains duly qualified to transact the business of insurance
in such licensed State.
(d) Effectiveness of Outstanding Policies and Contracts.--
[[Page 113 STAT. 1418]]
(1) In general.--All outstanding insurance policies and
annuities contracts of a redomesticating insurer shall remain in
full force and effect and need not be endorsed as to the new
domicile of the insurer, unless so ordered by the State
insurance regulator of a licensed State, and then only in the
case of outstanding policies and contracts whose owners reside
in such licensed State.
(2) Forms.--
(A) Applicable State law may require a
redomesticating insurer to file new policy forms with
the State insurance regulator of a licensed State on or
before the effective date of the transfer.
(B) Notwithstanding subparagraph (A), a
redomesticating insurer may use existing policy forms
with appropriate endorsements to reflect the new
domicile of the redomesticating insurer until the new
policy forms are approved for use by the State insurance
regulator of such licensed State.
(e) Notice.--A redomesticating insurer shall give notice of the
proposed transfer to the State insurance regulator of each licensed
State and shall file promptly any resulting amendments to corporate
documents required to be filed by a foreign licensed mutual insurer with
the insurance regulator of each such licensed State.
(f) Procedural Requirements.--No mutual insurer may redomesticate to
another State and reorganize into a mutual holding company pursuant to
this section unless the State insurance regulator of the transferee
domicile determines that the plan of reorganization of the insurer
includes the following requirements:
(1) Approval by board of directors and policyholders.--The
reorganization is approved by at least a majority of the board
of directors of the mutual insurer and at least a majority of
the policyholders who vote after notice, disclosure of the
reorganization and the effects of the transaction on
policyholder contractual rights, and reasonable opportunity to
vote, in accordance with such notice, disclosure, and voting
procedures as are approved by the State insurance regulator of
the transferee domicile.
(2) Continued voting control by policyholders; review of
public stock offering.--After the consummation of a
reorganization, the policyholders of the reorganized insurer
shall have the same voting rights with respect to the mutual
holding company as they had before the reorganization with
respect to the mutual insurer. With respect to an initial public
offering of stock, the offering shall be conducted in compliance
with applicable securities laws and in a manner approved by the
State insurance regulator of the transferee domicile.
(3) Award of stock or grant of options to officers and
directors.--During the applicable period provided for under the
State law of the transferee domicile following completion of an
initial public offering, or for a period of six months if no
such applicable period is provided, neither a stock holding
company nor the converted insurer shall award any stock options
or stock grants to persons who are elected officers or directors
of the mutual holding company, the stock holding company, or the
converted insurer, except with respect to any such awards or
options to which a person is entitled as a
[[Page 113 STAT. 1419]]
policyholder and as approved by the State insurance regulator of
the transferee domicile.
(4) Policyholder rights.--Upon reorganization into a mutual
holding company, the contractual rights of the policyholders are
preserved.
(5) Fair and equitable treatment of policyholders.--The
reorganization is approved as fair and equitable to the
policyholders by the insurance regulator of the transferee
domicile.
SEC. 313. <<NOTE: 15 USC 6733.>> EFFECT ON STATE LAWS RESTRICTING
REDOMESTICATION.
(a) In General.--Unless otherwise permitted by this subtitle, State
laws of any transferor domicile that conflict with the purposes and
intent of this subtitle are preempted, including but not limited to--
(1) any law that has the purpose or effect of impeding the
activities of, taking any action against, or applying any
provision of law or regulation to, any insurer or an affiliate
of such insurer because that insurer or any affiliate plans to
redomesticate, or has redomesticated, pursuant to this subtitle;
(2) any law that has the purpose or effect of impeding the
activities of, taking action against, or applying any provision
of law or regulation to, any insured or any insurance licensee
or other intermediary because such person has procured insurance
from or placed insurance with any insurer or affiliate of such
insurer that plans to redomesticate, or has redomesticated,
pursuant to this subtitle, but only to the extent that such law
would treat such insured licensee or other intermediary
differently than if the person procured insurance from, or
placed insurance with, an insured licensee or other intermediary
which had not redomesticated; and
(3) any law that has the purpose or effect of terminating,
because of the redomestication of a mutual insurer pursuant to
this subtitle, any certificate of authority, agent appointment
or license, rate approval, or other approval, of any State
insurance regulator or other State authority in existence
immediately prior to the redomestication in any State other than
the transferee domicile.
(b) Differential Treatment Prohibited.--No State law, regulation,
interpretation, or functional equivalent thereof, of a State other than
a transferee domicile may treat a redomesticating or redomesticated
insurer or any affiliate thereof any differently than an insurer
operating in that State that is not a redomesticating or redomesticated
insurer.
(c) Laws Prohibiting Operations.--If any licensed State fails to
issue, delays the issuance of, or seeks to revoke an original or renewal
certificate of authority of a redomesticated insurer promptly following
redomestication, except on grounds and in a manner consistent with its
past practices regarding the issuance of certificates of authority to
foreign insurers that are not redomesticating, then the redomesticating
insurer shall be exempt from any State law of the licensed State to the
extent that such State law or the operation of such State law would make
unlawful, or regulate, directly or indirectly, the operation of the
redomesticated insurer, except that such licensed State may require the
redomesticated insurer to--
[[Page 113 STAT. 1420]]
(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. <<NOTE: 15 USC 6734.>> 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. <<NOTE: 15 USC 6735.>> 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
[[Page 113 STAT. 1421]]
to section 314(a) to adjudicate litigation arising under this
subtitle.
(2) Domicile.--The term ``domicile'' means the State in
which an insurer is incorporated, chartered, or organized.
(3) Insurance licensee.--The term ``insurance licensee''
means any person holding a license under State law to act as
insurance agent, subagent, broker, or consultant.
(4) Institution.--The term ``institution'' means a
corporation, joint stock company, limited liability company,
limited liability partnership, association, trust, partnership,
or any similar entity.
(5) Licensed state.--The term ``licensed State'' means any
State, the District of Columbia, any territory of the United
States, Puerto Rico, Guam, American Samoa, the Trust Territory
of the Pacific Islands, the Virgin Islands, and the Northern
Mariana Islands in which the redomesticating insurer has a
certificate of authority in effect immediately prior to the
redomestication.
(6) Mutual insurer.--The term ``mutual insurer'' means a
mutual insurer organized under the laws of any State.
(7) Person.--The term ``person'' means an individual,
institution, government or governmental agency, State or
political subdivision of a State, public corporation, board,
association, estate, trustee, or fiduciary, or other similar
entity.
(8) Policyholder.--The term ``policyholder'' means the owner
of a policy issued by a mutual insurer, except that, with
respect to voting rights, the term means a member of a mutual
insurer or mutual holding company granted the right to vote, as
determined under applicable State law.
(9) Redomesticated insurer.--The term ``redomesticated
insurer'' means a mutual insurer that has redomesticated
pursuant to this subtitle.
(10) Redomesticating insurer.--The term ``redomesticating
insurer'' means a mutual insurer that is redomesticating
pursuant to this subtitle.
(11) Redomestication or transfer.--The term
``redomestication'' or ``transfer'' means the transfer of the
domicile of a mutual insurer from one State to another State
pursuant to this subtitle.
(12) State insurance regulator.--The term ``State insurance
regulator'' means the principal insurance regulatory authority
of a State, the District of Columbia, any territory of the
United States, Puerto Rico, Guam, American Samoa, the Trust
Territory of the Pacific Islands, the Virgin Islands, and the
Northern Mariana Islands.
(13) State law.--The term ``State law'' means the statutes
of any State, the District of Columbia, any territory of the
United States, Puerto Rico, Guam, American Samoa, the Trust
Territory of the Pacific Islands, the Virgin Islands, and the
Northern Mariana Islands and any regulation, order, or
requirement prescribed pursuant to any such statute.
(14) Transferee domicile.--The term ``transferee domicile''
means the State to which a mutual insurer is redomesticating
pursuant to this subtitle.
(15) Transferor domicile.--The term ``transferor domicile''
means the State from which a mutual insurer is redomesticating
pursuant to this subtitle.
[[Page 113 STAT. 1422]]
SEC. 316. <<NOTE: 15 USC 6731 note.>> 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. <<NOTE: 15 USC 6751.>> STATE FLEXIBILITY IN MULTISTATE
LICENSING REFORMS.
(a) In <<NOTE: Effective date.>> General.--The provisions of this
subtitle shall take effect unless, not later than 3 years after the date
of the enactment of this Act, at least a majority of the States--
(1) have enacted uniform laws and regulations governing the
licensure of individuals and entities authorized to sell and
solicit the purchase of insurance within the State; or
(2) have enacted reciprocity laws and regulations governing
the licensure of nonresident individuals and entities authorized
to sell and solicit insurance within those States.
(b) Uniformity Required.--States shall be deemed to have established
the uniformity necessary to satisfy subsection (a)(1) if the States--
(1) establish uniform criteria regarding the integrity,
personal qualifications, education, training, and experience of
licensed insurance producers, including the qualification and
training of sales personnel in ascertaining the appropriateness
of a particular insurance product for a prospective customer;
(2) establish uniform continuing education requirements for
licensed insurance producers;
(3) establish uniform ethics course requirements for
licensed insurance producers in conjunction with the continuing
education requirements under paragraph (2);
(4) establish uniform criteria to ensure that an insurance
product, including any annuity contract, sold to a consumer is
suitable and appropriate for the consumer based on financial
information disclosed by the consumer; and
(5) do not impose any requirement upon any insurance
producer to be licensed or otherwise qualified to do business as
a nonresident that has the effect of limiting or conditioning
that producer's activities because of its residence or place of
operations, except that countersignature requirements imposed on
nonresident producers shall not be deemed to have the effect of
limiting or conditioning a producer's activities because of its
residence or place of operations under this section.
(c) Reciprocity Required.--States shall be deemed to have
established the reciprocity required to satisfy subsection (a)(2) if the
following conditions are met:
(1) Administrative licensing procedures.--At least a
majority of the States permit a producer that has a resident
license for selling or soliciting the purchase of insurance in
its home State to receive a license to sell or solicit the
purchase of insurance in such majority of States as a
nonresident to the same extent that such producer is permitted
to sell or solicit the purchase of insurance in its State, if
the producer's home State also awards such licenses on such a
reciprocal basis, without satisfying any additional requirements
other than submitting--
[[Page 113 STAT. 1423]]
(A) a request for licensure;
(B) the application for licensure that the producer
submitted to its home State;
(C) proof that the producer is licensed and in good
standing in its home State; and
(D) the payment of any requisite fee to the
appropriate authority.
(2) Continuing education requirements.--A majority of the
States accept an insurance producer's satisfaction of its home
State's continuing education requirements for licensed insurance
producers to satisfy the States' own continuing education
requirements if the producer's home State also recognizes the
satisfaction of continuing education requirements on such a
reciprocal basis.
(3) No limiting nonresident requirements.--A majority of the
States do not impose any requirement upon any insurance producer
to be licensed or otherwise qualified to do business as a
nonresident that has the effect of limiting or conditioning that
producer's activities because of its residence or place of
operations, except that countersignature requirements imposed on
nonresident producers shall not be deemed to have the effect of
limiting or conditioning a producer's activities because of its
residence or place of operations under this section.
(4) Reciprocal reciprocity.--Each of the States that
satisfies paragraphs (1), (2), and (3) grants reciprocity to
residents of all of the other States that satisfy such
paragraphs.
(d) Determination.--
(1) NAIC determination.--At the end of the 3-year period
beginning on the date of the enactment of this Act, the National
Association of Insurance Commissioners (hereafter in this
subtitle referred to as the ``NAIC'') shall determine, in
consultation with the insurance commissioners or chief insurance
regulatory officials of the States, whether the uniformity or
reciprocity required by subsections (b) and (c) has been
achieved.
(2) Judicial review.--The appropriate United States district
court shall have exclusive jurisdiction over any challenge to
the NAIC's determination under this section and such court shall
apply the standards set forth in section 706 of title 5, United
States Code, when reviewing any such challenge.
(e) Continued Application.--If, at any time, the uniformity or
reciprocity required by subsections (b) and (c) no longer exists, the
provisions of this subtitle shall take effect 2 years after the date on
which such uniformity or reciprocity ceases to exist, unless the
uniformity or reciprocity required by those provisions is satisfied
before the expiration of that 2-year period.
(f) Savings Provision.--No provision of this section shall be
construed as requiring that any law, regulation, provision, or action of
any State which purports to regulate insurance producers, including any
such law, regulation, provision, or action which purports to regulate
unfair trade practices or establish consumer protections, including
countersignature laws, be altered or amended in order to satisfy the
uniformity or reciprocity required by subsections (b) and (c), unless
any such law, regulation, provision, or action is inconsistent with a
specific requirement of any such subsection and then only to the extent
of such inconsistency.
(g) Uniform Licensing.--Nothing in this section shall be construed
to require any State to adopt new or additional licensing
[[Page 113 STAT. 1424]]
requirements to achieve the uniformity necessary to satisfy subsection
(a)(1).
SEC. 322. NATIONAL <<NOTE: 15 USC 6752.>> 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. <<NOTE: 15 USC 6753.>> 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. <<NOTE: 15 USC 6754.>> RELATIONSHIP TO THE FEDERAL GOVERNMENT.
The Association shall be subject to the supervision and oversight of
the NAIC.
SEC. 325. <<NOTE: 15 USC 6755.>> 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.--
[[Page 113 STAT. 1425]]
(1) Classes of membership.--The Association may establish
separate classes of membership, with separate criteria, if the
Association reasonably determines that performance of different
duties requires different levels of education, training, or
experience.
(2) Categories.--The Association may establish separate
categories of membership for individuals and for other persons.
The establishment of any such categories of membership shall be
based either on the types of licensing categories that exist
under State laws or on the aggregate amount of business handled
by an insurance producer. No special categories of membership,
and no distinct membership criteria, shall be established for
members which are depository institutions or for their
employees, agents, or affiliates.
(d) Membership Criteria.--
(1) In general.--The Association may establish criteria for
membership which shall include standards for integrity, personal
qualifications, education, training, and experience.
(2) Minimum standard.--In establishing criteria under
paragraph (1), the Association shall consider the highest levels
of insurance producer qualifications established under the
licensing laws of the States.
(e) Effect of Membership.--Membership in the Association shall
entitle the member to licensure in each State for which the member pays
the requisite fees, including licensing fees and, where applicable,
bonding requirements, set by such State.
(f) Annual Renewal.--Membership in the Association shall be renewed
on an annual basis.
(g) Continuing Education.--The Association shall establish, as a
condition of membership, continuing education requirements which shall
be comparable to or greater than the continuing education requirements
under the licensing laws of a majority of the States.
(h) Suspension and Revocation.--The Association may--
(1) inspect and examine the records and offices of the
members of the Association to determine compliance with the
criteria for membership established by the Association; and
(2) suspend or revoke the membership of an insurance
producer if--
(A) the producer fails to meet the applicable
membership criteria of the Association; or
(B) the producer has been subject to disciplinary
action pursuant to a final adjudicatory proceeding under
the jurisdiction of a State insurance regulator, and the
Association concludes that retention of membership in
the Association would not be in the public interest.
(i) Office of Consumer Complaints.--
(1) In <<NOTE: Establishment.>> 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.
[[Page 113 STAT. 1426]]
(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. <<NOTE: 15 USC 6756.>> BOARD OF DIRECTORS.
(a) Establishment.--There is established the board of directors of
the Association (hereafter in this subtitle referred to as the
``Board'') for the purpose of governing and supervising the activities
of the Association and the members of the Association.
(b) Powers.--The Board shall have such powers and authority as may
be specified in the bylaws of the Association.
(c) Composition.--
(1) Members.--The Board shall be composed of 7 members
appointed by the NAIC.
(2) Requirement.--At least 4 of the members of the Board
shall each have significant experience with the regulation of
commercial lines of insurance in at least 1 of the 20 States in
which the greatest total dollar amount of commercial-lines
insurance is placed in the United States.
(3) Initial board membership.--
(A) In general.--If, by the end of the 2-year period
beginning on the date of the enactment of this Act, the
NAIC has not appointed the initial 7 members of the
Board of the Association, the initial Board shall
consist of the 7 State insurance regulators of the 7
States with the greatest total dollar amount of
commercial-lines insurance in place as of the end of
such period.
(B) Alternate composition.--If any of the State
insurance regulators described in subparagraph (A)
declines to serve on the Board, the State insurance
regulator with the next greatest total dollar amount of
commercial-lines insurance in place, as determined by
the NAIC as of the end of such period, shall serve as a
member of the Board.
(C) Inoperability.--If fewer than 7 State insurance
regulators accept appointment to the Board, the
Association shall be established without NAIC oversight
pursuant to section 332.
(d) Terms.--The term of each director shall, after the initial
appointment of the members of the Board, be for 3 years, with one-third
of the directors to be appointed each year.
(e) Board Vacancies.--A vacancy on the Board shall be filled in the
same manner as the original appointment of the initial Board for the
remainder of the term of the vacating member.
(f) Meetings.--The Board shall meet at the call of the chairperson,
or as otherwise provided by the bylaws of the Association.
[[Page 113 STAT. 1427]]
SEC. 327. <<NOTE: 15 USC 6757.>> 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. <<NOTE: 15 USC 6758.>> 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.
[[Page 113 STAT. 1428]]
(2) Initial <<NOTE: Deadline.>> 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) <<NOTE: Notice.>> include notice of the
grounds for disapproval under consideration;
(ii) provide opportunity for hearing; and
(iii) <<NOTE: Deadline.>> be concluded not
later than 180 days after the date of the
Association's filing of such proposed rule or
amendment.
(B) Disposition of proposal.--At the conclusion of
any proceeding under subparagraph (A), the NAIC shall,
by order, approve or disapprove the proposed rule or
amendment.
(C) Extension of time for consideration.--The NAIC
may extend the time for concluding any proceeding under
subparagraph (A) for--
(i) not more than 60 days if the NAIC finds
good cause for such extension and sets forth its
reasons for so finding; or
(ii) such longer period as to which the
Association consents.
(4) Standards for review.--
(A) Grounds for approval.--The NAIC shall approve a
proposed rule or amendment if the NAIC finds that the
rule or amendment is in the public interest and is
consistent with the purposes of this Act.
(B) Approval before end of notice period.--The NAIC
shall not approve any proposed rule before the end of
the 30-day period beginning on the date on which the
Association files proposed rules or amendments in
accordance with paragraph (1), unless the NAIC finds
good cause for so doing and sets forth the reasons for
so finding.
(5) Alternate procedure.--
(A) In general.--Notwithstanding any provision of
this subsection other than subparagraph (B), a proposed
rule or amendment relating to the administration or
organization of the Association shall take effect--
(i) upon the date of filing with the NAIC, if
such proposed rule or amendment is designated by
the Association as relating solely to matters
which the NAIC, consistent with the public
interest and the purposes of this subsection,
determines by rule do not require the procedures
set forth in this paragraph; or
[[Page 113 STAT. 1429]]
(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 <<NOTE: Notification. Records.>> 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.
[[Page 113 STAT. 1430]]
(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. <<NOTE: 15 USC 6759.>> 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. <<NOTE: 15 USC 6760.>> 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 <<NOTE: 15 USC 6761.>> 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
[[Page 113 STAT. 1431]]
law, rule, regulation, or order regulating or taxing insurers, insurance
producers, or other entities engaged in the business of insurance,
including provisions imposing premium taxes, regulating insurer solvency
or financial condition, establishing guaranty funds and levying
assessments, or requiring claims settlement practices.
(b) Liability of the Association, Its Directors, Officers, and
Employees.--Neither the Association nor any of its directors, officers,
or employees shall have any liability to any person for any action taken
or omitted in good faith under or in connection with any matter subject
to this subtitle.
SEC. 332. <<NOTE: 15 USC 6762.>> 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 <<NOTE: President. Congress.>> appointment
power.--The President, with the advice and consent of the
Senate, shall appoint the members of the Association's Board
established under section 326 from lists of candidates
recommended to the President by the NAIC.
(2) Procedures for obtaining naic appointment
recommendations.--
(A) Initial determination and recommendations.--
After the date <<NOTE: Deadline.>> 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 <<NOTE: Deadline.>> appointments.--
After the initial appointments, the NAIC shall provide a
list of at least six recommended candidates for the
Board to the President by January 15 of each subsequent
year. If the NAIC fails to provide a list by that date,
or if any list that is provided does not include at
least six recommended candidates or comply with the
requirements of section 326(c), the President, with the
advice and consent of the Senate, shall make the
requisite appointments without considering the views of
the NAIC.
(C) Presidential oversight.--
[[Page 113 STAT. 1432]]
(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. <<NOTE: 15 USC 6763.>> RELATIONSHIP TO STATE LAW.
(a) Preemption of State Laws.--State laws, regulations, provisions,
or other actions purporting to regulate insurance producers shall be
preempted as provided in subsection (b).
(b) Prohibited Actions.--No State shall--
(1) impede the activities of, take any action against, or
apply any provision of law or regulation to, any insurance
producer because that insurance producer or any affiliate plans
to become, has applied to become, or is a member of the
Association;
(2) impose any requirement upon a member of the Association
that it pay different fees to be licensed or otherwise qualified
to do business in that State, including bonding requirements,
based on its residency;
(3) impose any licensing, appointment, integrity, personal
or corporate qualifications, education, training, experience,
residency, or continuing education requirement upon a member of
the Association that is different from the criteria for
membership in the Association or renewal of such membership,
except that countersignature requirements imposed on nonresident
producers shall not be deemed to have the effect of limiting or
conditioning a producer's activities because of its residence or
place of operations under this section; or
(4) implement the procedures of such State's system of
licensing or renewing the licenses of insurance producers in a
manner different from the authority of the Association under
section 325.
(c) Savings Provision.--Except as provided in subsections (a) and
(b), no provision of this section shall be construed as altering or
affecting the continuing effectiveness of any law, regulation,
provision, or other action of any State which purports to regulate
insurance producers, including any such law, regulation, provision,
[[Page 113 STAT. 1433]]
or action which purports to regulate unfair trade practices or establish
consumer protections, including countersignature laws.
SEC. 334. <<NOTE: 15 USC 6764.>> 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. <<NOTE: 15 USC 6765.>> 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. <<NOTE: 15 USC 6766.>> 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.
[[Page 113 STAT. 1434]]
(4) State.--The term ``State'' includes any State, the
District of Columbia, any territory of the United States, Puerto
Rico, Guam, American Samoa, the Trust Territory of the Pacific
Islands, the Virgin Islands, and the Northern Mariana Islands.
(5) State law.--The term ``State law'' includes all laws,
decisions, rules, regulations, or other State action having the
effect of law, of any State. A law of the United States
applicable only to the District of Columbia shall be treated as
a State law rather than a law of the United States.
Subtitle D--Rental Car Agency Insurance Activities
SEC. 341. <<NOTE: 15 USC 6781.>> STANDARD OF REGULATION FOR MOTOR
VEHICLE RENTALS.
(a) Protection Against Retroactive Application of Regulatory and
Legal Action.--Except as provided in subsection (b), during the 3-year
period beginning on the date of the enactment of this Act, it shall be a
presumption that no State law imposes any licensing, appointment, or
education requirements on any person who solicits the purchase of or
sells insurance connected with, and incidental to, the lease or rental
of a motor vehicle.
(b) Preeminence of State Insurance Law.--No provision of this
section shall be construed as altering the validity, interpretation,
construction, or effect of--
(1) any State statute;
(2) the prospective application of any court judgment
interpreting or applying any State statute; or
(3) the prospective application of any final State
regulation, order, bulletin, or other statutorily authorized
interpretation or action,
which, by its specific terms, expressly regulates or exempts from
regulation any person who solicits the purchase of or sells insurance
connected with, and incidental to, the short-term lease or rental of a
motor vehicle.
(c) Scope of Application.--This section shall apply with respect
to--
(1) the lease or rental of a motor vehicle for a total
period of 90 consecutive days or less; and
(2) insurance which is provided in connection with, and
incidentally to, such lease or rental for a period of
consecutive days not exceeding the lease or rental period.
(d) Motor Vehicle Defined.--For purposes of this section, the term
``motor vehicle'' has the same meaning as in section 13102 of title 49,
United States Code.
TITLE IV--UNITARY SAVINGS AND LOAN HOLDING COMPANIES
SEC. 401. PREVENTION OF CREATION OF NEW S&L HOLDING COMPANIES WITH
COMMERCIAL AFFILIATES.
(a) In General.--Section 10(c) of the Home Owners' Loan Act (12
U.S.C. 1467a(c)) is amended by adding at the end the following new
paragraph:
[[Page 113 STAT. 1435]]
``(9) Prevention of new affiliations between s&l holding
companies and commercial firms.--
``(A) In general.--Notwithstanding paragraph (3), no
company may directly or indirectly, including through
any merger, consolidation, or other type of business
combination, acquire control of a savings association
after May 4, 1999, unless the company is engaged,
directly or indirectly (including through a subsidiary
other than a savings association), only in activities
that are permitted--
``(i) under paragraph (1)(C) or (2) of this
subsection; or
``(ii) for financial holding companies under
section 4(k) of the Bank Holding Company Act of
1956.
``(B) Prevention of new commercial affiliations.--
Notwithstanding paragraph (3), no savings and loan
holding company may engage directly or indirectly
(including through a subsidiary other than a savings
association) in any activity other than as described in
clauses (i) and (ii) of subparagraph (A).
``(C) Preservation of authority of existing unitary
s&l holding companies.--Subparagraphs (A) and (B) do not
apply with respect to any company that was a savings and
loan holding company on May 4, 1999, or that becomes a
savings and loan holding company pursuant to an
application pending before the Office on or before that
date, and that--
``(i) meets and continues to meet the
requirements of paragraph (3); and
``(ii) continues to control not fewer than 1
savings association that it controlled on May 4,
1999, or that it acquired pursuant to an
application pending before the Office on or before
that date, or the successor to such savings
association.
``(D) Corporate reorganizations permitted.--This
paragraph does not prevent a transaction that--
``(i) involves solely a company under common
control with a savings and loan holding company
from acquiring, directly or indirectly, control of
the savings and loan holding company or any
savings association that is already a subsidiary
of the savings and loan holding company; or
``(ii) involves solely a merger,
consolidation, or other type of business
combination as a result of which a company under
common control with the savings and loan holding
company acquires, directly or indirectly, control
of the savings and loan holding company or any
savings association that is already a subsidiary
of the savings and loan holding company.
``(E) Authority to prevent evasions.--The Director
may issue interpretations, regulations, or orders that
the Director determines necessary to administer and
carry out the purpose and prevent evasions of this
paragraph, including a determination that,
notwithstanding the form of a transaction, the
transaction would in substance result in a company
acquiring control of a savings association.
``(F) Preservation of authority for family trusts.--
Subparagraphs (A) and (B) do not apply with
[[Page 113 STAT. 1436]]
respect to any trust that becomes a savings and loan
holding company with respect to a savings association,
if--
``(i) not less than 85 percent of the
beneficial ownership interests in the trust are
continuously owned, directly or indirectly, by or
for the benefit of members of the same family, or
their spouses, who are lineal descendants of
common ancestors who controlled, directly or
indirectly, such savings association on May 4,
1999, or a subsequent date, pursuant to an
application pending before the Office on or before
May 4, 1999; and
``(ii) at the time at which such trust becomes
a savings and loan holding company, such ancestors
or lineal descendants, or spouses of such
descendants, have directly or indirectly
controlled the savings association continuously
since May 4, 1999, or a subsequent date, pursuant
to an application pending before the Office on or
before May 4, 1999.''.
(b) Conforming Amendment.--Section 10(o)(5)(E) of the Home Owners'
Loan Act (12 U.S.C. 1467a(o)(5)(E)) is amended by striking ``, except
subparagraph (B)'' and inserting ``or (c)(9)(A)(ii)''.
(c) Rule <<NOTE: 12 USC 1467a note.>> of Construction for Certain
Applications.--
(1) In general.--In the case of a company that--
(A) submits an application with the Director of the
Office of Thrift Supervision before the date of the
enactment of this Act to convert a State-chartered trust
company controlled by such company on May 4, 1999, to a
savings association; and
(B) controlled a subsidiary on May 4, 1999, that had
submitted an application to the Director on September 2,
1998;
the company (including any subsidiary controlled by such company
as of such date of enactment) shall be treated as having filed
such conversion application with the Director before May 4,
1999, for purposes of section 10(c)(9)(C) of the Home Owners'
Loan Act (as added by subsection (a)).
(2) Definitions.--For purposes of paragraph (1), the terms
``company'', ``control'', ``savings association'', and
``subsidiary'' have the meanings given those terms in section 10
of the Home Owners' Loan Act.
TITLE V--PRIVACY
Subtitle A--Disclosure of Nonpublic Personal Information
SEC. 501. <<NOTE: 15 USC 6801.>> PROTECTION OF NONPUBLIC PERSONAL
INFORMATION.
(a) Privacy Obligation Policy.--It is the policy of the Congress
that each financial institution has an affirmative and continuing
obligation to respect the privacy of its customers and to protect the
security and confidentiality of those customers' nonpublic personal
information.
(b) Financial Institutions Safeguards.--In furtherance of the policy
in subsection (a), each agency or authority described
[[Page 113 STAT. 1437]]
in section 505(a) shall establish appropriate standards for the
financial institutions subject to their jurisdiction relating to
administrative, technical, and physical safeguards--
(1) to insure the security and confidentiality of customer
records and information;
(2) to protect against any anticipated threats or hazards to
the security or integrity of such records; and
(3) to protect against unauthorized access to or use of such
records or information which could result in substantial harm or
inconvenience to any customer.
SEC. 502. OBLIGATIONS <<NOTE: 15 USC 6802.>> WITH RESPECT TO
DISCLOSURES OF PERSONAL INFORMATION.
(a) Notice Requirements.--Except as otherwise provided in this
subtitle, a financial institution may not, directly or through any
affiliate, disclose to a nonaffiliated third party any nonpublic
personal information, unless such financial institution provides or has
provided to the consumer a notice that complies with section 503.
(b) Opt Out.--
(1) In general.--A financial institution may not disclose
nonpublic personal information to a nonaffiliated third party
unless--
(A) such financial institution clearly and
conspicuously discloses to the consumer, in writing or
in electronic form or other form permitted by the
regulations prescribed under section 504, that such
information may be disclosed to such third party;
(B) the consumer is given the opportunity, before
the time that such information is initially disclosed,
to direct that such information not be disclosed to such
third party; and
(C) the consumer is given an explanation of how the
consumer can exercise that nondisclosure option.
(2) Exception.--This subsection shall not prevent a
financial institution from providing nonpublic personal
information to a nonaffiliated third party to perform services
for or functions on behalf of the financial institution,
including marketing of the financial institution's own products
or services, or financial products or services offered pursuant
to joint agreements between two or more financial institutions
that comply with the requirements imposed by the regulations
prescribed under section 504, if the financial institution fully
discloses the providing of such information and enters into a
contractual agreement with the third party that requires the
third party to maintain the confidentiality of such information.
(c) Limits on Reuse of Information.--Except as otherwise provided in
this subtitle, a nonaffiliated third party that receives from a
financial institution nonpublic personal information under this section
shall not, directly or through an affiliate of such receiving third
party, disclose such information to any other person that is a
nonaffiliated third party of both the financial institution and such
receiving third party, unless such disclosure would be lawful if made
directly to such other person by the financial institution.
(d) Limitations on the Sharing of Account Number Information for
Marketing Purposes.--A financial institution
[[Page 113 STAT. 1438]]
shall not disclose, other than to a consumer reporting agency, an
account number or similar form of access number or access code for a
credit card account, deposit account, or transaction account of a
consumer to any nonaffiliated third party for use in telemarketing,
direct mail marketing, or other marketing through electronic mail to the
consumer.
(e) General Exceptions.--Subsections (a) and (b) shall not prohibit
the disclosure of nonpublic personal information--
(1) as necessary to effect, administer, or enforce a
transaction requested or authorized by the consumer, or in
connection with--
(A) servicing or processing a financial product or
service requested or authorized by the consumer;
(B) maintaining or servicing the consumer's account
with the financial institution, or with another entity
as part of a private label credit card program or other
extension of credit on behalf of such entity; or
(C) a proposed or actual securitization, secondary
market sale (including sales of servicing rights), or
similar transaction related to a transaction of the
consumer;
(2) with the consent or at the direction of the consumer;
(3)(A) to protect the confidentiality or security of the
financial institution's records pertaining to the consumer, the
service or product, or the transaction therein; (B) to protect
against or prevent actual or potential fraud, unauthorized
transactions, claims, or other liability; (C) for required
institutional risk control, or for resolving customer disputes
or inquiries; (D) to persons holding a legal or beneficial
interest relating to the consumer; or (E) to persons acting in a
fiduciary or representative capacity on behalf of the consumer;
(4) to provide information to insurance rate advisory
organizations, guaranty funds or agencies, applicable rating
agencies of the financial institution, persons assessing the
institution's compliance with industry standards, and the
institution's attorneys, accountants, and auditors;
(5) to the extent specifically permitted or required under
other provisions of law and in accordance with the Right to
Financial Privacy Act of 1978, to law enforcement agencies
(including a Federal functional regulator, the Secretary of the
Treasury with respect to subchapter II of chapter 53 of title
31, United States Code, and chapter 2 of title I of Public Law
91-508 (12 U.S.C. 1951-1959), a State insurance authority, or
the Federal Trade Commission), self-regulatory organizations, or
for an investigation on a matter related to public safety;
(6)(A) to a consumer reporting agency in accordance with the
Fair Credit Reporting Act, or (B) from a consumer report
reported by a consumer reporting agency;
(7) in connection with a proposed or actual sale, merger,
transfer, or exchange of all or a portion of a business or
operating unit if the disclosure of nonpublic personal
information concerns solely consumers of such business or unit;
or
(8) to comply with Federal, State, or local laws, rules, and
other applicable legal requirements; to comply with a properly
authorized civil, criminal, or regulatory investigation or
subpoena or summons by Federal, State, or local authorities; or
to respond to judicial process or government regulatory
[[Page 113 STAT. 1439]]
authorities having jurisdiction over the financial institution
for examination, compliance, or other purposes as authorized by
law.
SEC. 503. <<NOTE: 15 USC 6803.>> DISCLOSURE OF INSTITUTION PRIVACY
POLICY.
(a) Disclosure Required.--At the time of establishing a customer
relationship with a consumer and not less than annually during the
continuation of such relationship, a financial institution shall provide
a clear and conspicuous disclosure to such consumer, in writing or in
electronic form or other form permitted by the regulations prescribed
under section 504, of such financial institution's policies and
practices with respect to--
(1) disclosing nonpublic personal information to affiliates
and nonaffiliated third parties, consistent with section 502,
including the categories of information that may be disclosed;
(2) disclosing nonpublic personal information of persons who
have ceased to be customers of the financial institution; and
(3) protecting the nonpublic personal information of
consumers.
Such disclosures shall be made in accordance with the regulations
prescribed under section 504.
(b) Information To Be Included.--The disclosure required by
subsection (a) shall include--
(1) the policies and practices of the institution with
respect to disclosing nonpublic personal information to
nonaffiliated third parties, other than agents of the
institution, consistent with section 502 of this subtitle, and
including--
(A) the categories of persons to whom the
information is or may be disclosed, other than the
persons to whom the information may be provided pursuant
to section 502(e); and
(B) the policies and practices of the institution
with respect to disclosing of nonpublic personal
information of persons who have ceased to be customers
of the financial institution;
(2) the categories of nonpublic personal information that
are collected by the financial institution;
(3) the policies that the institution maintains to protect
the confidentiality and security of nonpublic personal
information in accordance with section 501; and
(4) the disclosures required, if any, under section
603(d)(2)(A)(iii) of the Fair Credit Reporting Act.
SEC. 504. <<NOTE: 15 USC 6804.>> RULEMAKING.
(a) Regulatory Authority.--
(1) Rulemaking.--The Federal banking agencies, the National
Credit Union Administration, the Secretary of the Treasury, the
Securities and Exchange Commission, and the Federal Trade
Commission shall each prescribe, after consultation as
appropriate with representatives of State insurance authorities
designated by the National Association of Insurance
Commissioners, such regulations as may be necessary to carry out
the purposes of this subtitle with respect to the financial
institutions subject to their jurisdiction under section 505.
(2) Coordination, consistency, and comparability.--Each of
the agencies and authorities required under paragraph (1) to
prescribe regulations shall consult and coordinate with
[[Page 113 STAT. 1440]]
the other such agencies and authorities for the purposes of
assuring, to the extent possible, that the regulations
prescribed by each such agency and authority are consistent and
comparable with the regulations prescribed by the other such
agencies and authorities.
(3) Procedures and deadline.--Such regulations shall be
prescribed in accordance with applicable requirements of title
5, United States Code, and shall be issued in final form not
later than 6 months after the date of the enactment of this Act.
(b) Authority To Grant Exceptions.--The regulations prescribed under
subsection (a) may include such additional exceptions to subsections (a)
through (d) of section 502 as are deemed consistent with the purposes of
this subtitle.
SEC. 505. <<NOTE: 15 USC 6805.>> ENFORCEMENT.
(a) In General.--This subtitle and the regulations prescribed
thereunder shall be enforced by the Federal functional regulators, the
State insurance authorities, and the Federal Trade Commission with
respect to financial institutions and other persons subject to their
jurisdiction under applicable law, as follows:
(1) Under section 8 of the Federal Deposit Insurance Act, in
the case of--
(A) national banks, Federal branches and Federal
agencies of foreign banks, and any subsidiaries of such
entities (except brokers, dealers, persons providing
insurance, investment companies, and investment
advisers), by the Office of the Comptroller of the
Currency;
(B) member banks of the Federal Reserve System
(other than national banks), branches and agencies of
foreign banks (other than Federal branches, Federal
agencies, and insured State branches of foreign banks),
commercial lending companies owned or controlled by
foreign banks, organizations operating under section 25
or 25A of the Federal Reserve Act, and bank holding
companies and their nonbank subsidiaries or affiliates
(except brokers, dealers, persons providing insurance,
investment companies, and investment advisers), by the
Board of Governors of the Federal Reserve System;
(C) banks insured by the Federal Deposit Insurance
Corporation (other than members of the Federal Reserve
System), insured State branches of foreign banks, and
any subsidiaries of such entities (except brokers,
dealers, persons providing insurance, investment
companies, and investment advisers), by the Board of
Directors of the Federal Deposit Insurance Corporation;
and
(D) savings associations the deposits of which are
insured by the Federal Deposit Insurance Corporation,
and any subsidiaries of such savings associations
(except brokers, dealers, persons providing insurance,
investment companies, and investment advisers), by the
Director of the Office of Thrift Supervision.
(2) Under the Federal Credit Union Act, by the Board of the
National Credit Union Administration with respect to any
federally insured credit union, and any subsidiaries of such an
entity.
[[Page 113 STAT. 1441]]
(3) Under the Securities Exchange Act of 1934, by the
Securities and Exchange Commission with respect to any broker or
dealer.
(4) Under the Investment Company Act of 1940, by the
Securities and Exchange Commission with respect to investment
companies.
(5) Under the Investment Advisers Act of 1940, by the
Securities and Exchange Commission with respect to investment
advisers registered with the Commission under such Act.
(6) Under State insurance law, in the case of any person
engaged in providing insurance, by the applicable State
insurance authority of the State in which the person is
domiciled, subject to section 104 of this Act.
(7) Under the Federal Trade Commission Act, by the Federal
Trade Commission for any other financial institution or other
person that is not subject to the jurisdiction of any agency or
authority under paragraphs (1) through (6) of this subsection.
(b) Enforcement of Section 501.--
(1) In general.--Except as provided in paragraph (2), the
agencies and authorities described in subsection (a) shall
implement the standards prescribed under section 501(b) in the
same manner, to the extent practicable, as standards prescribed
pursuant to section 39(a) of the Federal Deposit Insurance Act
are implemented pursuant to such section.
(2) Exception.--The agencies and authorities described in
paragraphs (3), (4), (5), (6), and (7) of subsection (a) shall
implement the standards prescribed under section 501(b) by rule
with respect to the financial institutions and other persons
subject to their respective jurisdictions under subsection (a).
(c) Absence of State Action.--If a State insurance authority fails
to adopt regulations to carry out this subtitle, such State shall not be
eligible to override, pursuant to section 47(g)(2)(B)(iii) of the
Federal Deposit Insurance Act, the insurance customer protection
regulations prescribed by a Federal banking agency under section 47(a)
of such Act.
(d) Definitions.--The terms used in subsection (a)(1) that are not
defined in this subtitle or otherwise defined in section 3(s) of the
Federal Deposit Insurance Act shall have the same meaning as given in
section 1(b) of the International Banking Act of 1978.
SEC. 506. PROTECTION OF FAIR CREDIT REPORTING ACT.
(a) Amendment.--Section 621 of the Fair Credit Reporting Act (15
U.S.C. 1681s) is amended--
(1) in subsection (d), by striking everything following the
end of the second sentence; and
(2) by striking subsection (e) and inserting the following:
``(e) Regulatory Authority.--
``(1) The Federal banking agencies referred to in paragraphs
(1) and (2) of subsection (b) shall jointly prescribe such
regulations as necessary to carry out the purposes of this Act
with respect to any persons identified under paragraphs (1) and
(2) of subsection (b), and the Board of Governors of the Federal
Reserve System shall have authority to prescribe regulations
consistent with such joint regulations with respect to bank
[[Page 113 STAT. 1442]]
holding companies and affiliates (other than depository
institutions and consumer reporting agencies) of such holding
companies.
``(2) The Board of the National Credit Union Administration
shall prescribe such regulations as necessary to carry out the
purposes of this Act with respect to any persons identified
under paragraph (3) of subsection (b).''.
(b) Conforming Amendment.--Section 621(a) of the Fair Credit
Reporting Act (15 U.S.C. 1681s(a)) is amended by striking paragraph (4).
(c) Relation <<NOTE: 15 USC 6806.>> to Other Provisions.--Except for
the amendments made by subsections (a) and (b), nothing in this title
shall be construed to modify, limit, or supersede the operation of the
Fair Credit Reporting Act, and no inference shall be drawn on the basis
of the provisions of this title regarding whether information is
transaction or experience information under section 603 of such Act.
SEC. 507. <<NOTE: 15 USC 6807.>> RELATION TO STATE LAWS.
(a) In General.--This subtitle and the amendments made by this
subtitle shall not be construed as superseding, altering, or affecting
any statute, regulation, order, or interpretation in effect in any
State, except to the extent that such statute, regulation, order, or
interpretation is inconsistent with the provisions of this subtitle, and
then only to the extent of the inconsistency.
(b) Greater Protection Under State Law.--For purposes of this
section, a State statute, regulation, order, or interpretation is not
inconsistent with the provisions of this subtitle if the protection such
statute, regulation, order, or interpretation affords any person is
greater than the protection provided under this subtitle and the
amendments made by this subtitle, as determined by the Federal Trade
Commission, after consultation with the agency or authority with
jurisdiction under section 505(a) of either the person that initiated
the complaint or that is the subject of the complaint, on its own motion
or upon the petition of any interested party.
SEC. 508. STUDY <<NOTE: 15 USC 6808.>> OF INFORMATION SHARING
AMONG FINANCIAL AFFILIATES.
(a) In General.--The Secretary of the Treasury, in conjunction with
the Federal functional regulators and the Federal Trade Commission,
shall conduct a study of information sharing practices among financial
institutions and their affiliates. Such study shall include--
(1) the purposes for the sharing of confidential customer
information with affiliates or with nonaffiliated third parties;
(2) the extent and adequacy of security protections for such
information;
(3) the potential risks for customer privacy of such sharing
of information;
(4) the potential benefits for financial institutions and
affiliates of such sharing of information;
(5) the potential benefits for customers of such sharing of
information;
(6) the adequacy of existing laws to protect customer
privacy;
(7) the adequacy of financial institution privacy policy and
privacy rights disclosure under existing law;
[[Page 113 STAT. 1443]]
(8) the feasibility of different approaches, including opt-
out and opt-in, to permit customers to direct that confidential
information not be shared with affiliates and nonaffiliated
third parties; and
(9) the feasibility of restricting sharing of information
for specific uses or of permitting customers to direct the uses
for which information may be shared.
(b) Consultation.--The Secretary shall consult with representatives
of State insurance authorities designated by the National Association of
Insurance Commissioners, and also with financial services industry,
consumer organizations and privacy groups, and other representatives of
the general public, in formulating and conducting the study required by
subsection (a).
(c) Report.--On <<NOTE: Deadline.>> or before January 1, 2002, the
Secretary shall submit a report to the Congress containing the findings
and conclusions of the study required under subsection (a), together
with such recommendations for legislative or administrative action as
may be appropriate.
SEC. 509. <<NOTE: 15 USC 6809.>> DEFINITIONS.
As used in this subtitle:
(1) Federal banking agency.--The term ``Federal banking
agency'' has the same meaning as given in section 3 of the
Federal Deposit Insurance Act.
(2) Federal functional regulator.--The term ``Federal
functional regulator'' means--
(A) the Board of Governors of the Federal Reserve
System;
(B) the Office of the Comptroller of the Currency;
(C) the Board of Directors of the Federal Deposit
Insurance Corporation;
(D) the Director of the Office of Thrift
Supervision;
(E) the National Credit Union Administration Board;
and
(F) the Securities and Exchange Commission.
(3) Financial institution.--
(A) In general.--The term ``financial institution''
means any institution the business of which is engaging
in financial activities as described in section 4(k) of
the Bank Holding Company Act of 1956.
(B) Persons subject to cftc regulation.--
Notwithstanding subparagraph (A), the term ``financial
institution'' does not include any person or entity with
respect to any financial activity that is subject to the
jurisdiction of the Commodity Futures Trading Commission
under the Commodity Exchange Act.
(C) Farm credit institutions.--Notwithstanding
subparagraph (A), the term ``financial institution''
does not include the Federal Agricultural Mortgage
Corporation or any entity chartered and operating under
the Farm Credit Act of 1971.
(D) Other secondary market institutions.--
Notwithstanding subparagraph (A), the term ``financial
institution'' does not include institutions chartered by
Congress specifically to engage in transactions
described in section 502(e)(1)(C), as long as such
institutions do not sell or
[[Page 113 STAT. 1444]]
transfer nonpublic personal information to a
nonaffiliated third party.
(4) Nonpublic personal information.--
(A) The term ``nonpublic personal information''
means personally identifiable financial information--
(i) provided by a consumer to a financial
institution;
(ii) resulting from any transaction with the
consumer or any service performed for the
consumer; or
(iii) otherwise obtained by the financial
institution.
(B) Such term does not include publicly available
information, as such term is defined by the regulations
prescribed under section 504.
(C) Notwithstanding subparagraph (B), such term--
(i) shall include any list, description, or
other grouping of consumers (and publicly
available information pertaining to them) that is
derived using any nonpublic personal information
other than publicly available information; but
(ii) shall not include any list, description,
or other grouping of consumers (and publicly
available information pertaining to them) that is
derived without using any nonpublic personal
information.
(5) Nonaffiliated third party.--The term ``nonaffiliated
third party'' means any entity that is not an affiliate of, or
related by common ownership or affiliated by corporate control
with, the financial institution, but does not include a joint
employee of such institution.
(6) Affiliate.--The term ``affiliate'' means any company
that controls, is controlled by, or is under common control with
another company.
(7) Necessary to effect, administer, or enforce.--The term
``as necessary to effect, administer, or enforce the
transaction'' means--
(A) the disclosure is required, or is a usual,
appropriate, or acceptable method, to carry out the
transaction or the product or service business of which
the transaction is a part, and record or service or
maintain the consumer's account in the ordinary course
of providing the financial service or financial product,
or to administer or service benefits or claims relating
to the transaction or the product or service business of
which it is a part, and includes--
(i) providing the consumer or the consumer's
agent or broker with a confirmation, statement, or
other record of the transaction, or information on
the status or value of the financial service or
financial product; and
(ii) the accrual or recognition of incentives
or bonuses associated with the transaction that
are provided by the financial institution or any
other party;
(B) the disclosure is required, or is one of the
lawful or appropriate methods, to enforce the rights of
the financial institution or of other persons engaged in
carrying out the financial transaction, or providing the
product or service;
(C) the disclosure is required, or is a usual,
appropriate, or acceptable method, for insurance
underwriting at the
[[Page 113 STAT. 1445]]
consumer's request or for reinsurance purposes, or for
any of the following purposes as they relate to a
consumer's insurance: Account administration, reporting,
investigating, or preventing fraud or material
misrepresentation, processing premium payments,
processing insurance claims, administering insurance
benefits (including utilization review activities),
participating in research projects, or as otherwise
required or specifically permitted by Federal or State
law; or
(D) the disclosure is required, or is a usual,
appropriate or acceptable method, in connection with--
(i) the authorization, settlement, billing,
processing, clearing, transferring, reconciling,
or collection of amounts charged, debited, or
otherwise paid using a debit, credit or other
payment card, check, or account number, or by
other payment means;
(ii) the transfer of receivables, accounts or
interests therein; or
(iii) the audit of debit, credit or other
payment information.
(8) State insurance authority.--The term ``State insurance
authority'' means, in the case of any person engaged in
providing insurance, the State insurance authority of the State
in which the person is domiciled.
(9) Consumer.--The term ``consumer'' means an individual who
obtains, from a financial institution, financial products or
services which are to be used primarily for personal, family, or
household purposes, and also means the legal representative of
such an individual.
(10) Joint agreement.--The term ``joint agreement'' means a
formal written contract pursuant to which two or more financial
institutions jointly offer, endorse, or sponsor a financial
product or service, and as may be further defined in the
regulations prescribed under section 504.
(11) Customer <<NOTE: Regulations.>> relationship.--The term
``time of establishing a customer relationship'' shall be
defined by the regulations prescribed under section 504, and
shall, in the case of a financial institution engaged in
extending credit directly to consumers to finance purchases of
goods or services, mean the time of establishing the credit
relationship with the consumer.
SEC. 510. <<NOTE: 15 USC 6801 note.>> EFFECTIVE DATE.
This subtitle shall take effect 6 months after the date on which
rules are required to be prescribed under section 504(a)(3), except--
(1) to the extent that a later date is specified in the
rules prescribed under section 504; and
(2) that sections 504 and 506 shall be effective upon
enactment.
[[Page 113 STAT. 1446]]
Subtitle B--Fraudulent Access to Financial Information
SEC. 521. PRIVACY <<NOTE: 15 USC 6821.>> 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.
[[Page 113 STAT. 1447]]
(f) Nonapplicability to Certain Types of Customer Information of
Financial Institutions.--No provision of this section shall be construed
so as to prevent any person from obtaining customer information of a
financial institution that otherwise is available as a public record
filed pursuant to the securities laws (as defined in section 3(a)(47) of
the Securities Exchange Act of 1934).
(g) Nonapplicability to Collection of Child Support Judgments.--No
provision of this section shall be construed to prevent any State-
licensed private investigator, or any officer, employee, or agent of
such private investigator, from obtaining customer information of a
financial institution, to the extent reasonably necessary to collect
child support from a person adjudged to have been delinquent in his or
her obligations by a Federal or State court, and to the extent that such
action by a State-licensed private investigator is not unlawful under
any other Federal or State law or regulation, and has been authorized by
an order or judgment of a court of competent jurisdiction.
SEC. 522. <<NOTE: 15 USC 6822.>> ADMINISTRATIVE ENFORCEMENT.
(a) Enforcement by Federal Trade Commission.--Except as provided in
subsection (b), compliance with this subtitle shall be enforced by the
Federal Trade Commission in the same manner and with the same power and
authority as the Commission has under the Fair Debt Collection Practices
Act to enforce compliance with such Act.
(b) Enforcement by Other Agencies in Certain Cases.--
(1) In general.--Compliance with this subtitle shall be
enforced under--
(A) section 8 of the Federal Deposit Insurance Act,
in the case of--
(i) national banks, and Federal branches and
Federal agencies of foreign banks, by the Office
of the Comptroller of the Currency;
(ii) member banks of the Federal Reserve
System (other than national banks), branches and
agencies of foreign banks (other than Federal
branches, Federal agencies, and insured State
branches of foreign banks), commercial lending
companies owned or controlled by foreign banks,
and organizations operating under section 25 or
25A of the Federal Reserve Act, by the Board;
(iii) banks insured by the Federal Deposit
Insurance Corporation (other than members of the
Federal Reserve System and national nonmember
banks) and insured State branches of foreign
banks, by the Board of Directors of the Federal
Deposit Insurance Corporation; and
(iv) savings associations the deposits of
which are insured by the Federal Deposit Insurance
Corporation, by the Director of the Office of
Thrift Supervision; and
(B) the Federal Credit Union Act, by the
Administrator of the National Credit Union
Administration with respect to any Federal credit union.
(2) Violations of this subtitle treated as violations of
other laws.--For the purpose of the exercise by any agency
[[Page 113 STAT. 1448]]
referred to in paragraph (1) of its powers under any Act
referred to in that paragraph, a violation of this subtitle
shall be deemed to be a violation of a requirement imposed under
that Act. In addition to its powers under any provision of law
specifically referred to in paragraph (1), each of the agencies
referred to in that paragraph may exercise, for the purpose of
enforcing compliance with this subtitle, any other authority
conferred on such agency by law.
SEC. 523. <<NOTE: 15 USC 6823.>> 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. <<NOTE: 15 USC 6824.>> RELATION TO STATE LAWS.
(a) In General.--This subtitle shall not be construed as
superseding, altering, or affecting the statutes, regulations, orders,
or interpretations in effect in any State, except to the extent that
such statutes, regulations, orders, or interpretations are inconsistent
with the provisions of this subtitle, and then only to the extent of the
inconsistency.
(b) Greater Protection Under State Law.--For purposes of this
section, a State statute, regulation, order, or interpretation is not
inconsistent with the provisions of this subtitle if the protection such
statute, regulation, order, or interpretation affords any person is
greater than the protection provided under this subtitle as determined
by the Federal Trade Commission, after consultation with the agency or
authority with jurisdiction under section 522 of either the person that
initiated the complaint or that is the subject of the complaint, on its
own motion or upon the petition of any interested party.
SEC. 525. <<NOTE: 15 USC 6825.>> AGENCY GUIDANCE.
In furtherance of the objectives of this subtitle, each Federal
banking agency (as defined in section 3(z) of the Federal Deposit
Insurance Act), the National Credit Union Administration, and the
Securities and Exchange Commission or self-regulatory organizations, as
appropriate, shall review regulations and guidelines applicable to
financial institutions under their respective jurisdictions and shall
prescribe such revisions to such regulations and guidelines as may be
necessary to ensure that such financial institutions have policies,
procedures, and controls in place to prevent the unauthorized disclosure
of customer financial information and to deter and detect activities
proscribed under section 521.
SEC. 526. <<NOTE: 15 USC 6826.>> REPORTS.
(a) Report to the Congress.--Before the end of the 18-month period
beginning on the date of the enactment of this Act, the Comptroller
General, in consultation with the Federal Trade Commission, Federal
banking agencies, the National Credit Union
[[Page 113 STAT. 1449]]
Administration, the Securities and Exchange Commission, appropriate
Federal law enforcement agencies, and appropriate State insurance
regulators, shall submit to the Congress a report on the following:
(1) The efficacy and adequacy of the remedies provided in
this subtitle in addressing attempts to obtain financial
information by fraudulent means or by false pretenses.
(2) Any recommendations for additional legislative or
regulatory action to address threats to the privacy of financial
information created by attempts to obtain information by
fraudulent means or false pretenses.
(b) Annual Report by Administering Agencies.--The Federal Trade
Commission and the Attorney General shall submit to Congress an annual
report on number and disposition of all enforcement actions taken
pursuant to this subtitle.
SEC. 527. <<NOTE: 15 USC 6827.>> DEFINITIONS.
For purposes of this subtitle, the following definitions shall
apply:
(1) Customer.--The term ``customer'' means, with respect to
a financial institution, any person (or authorized
representative of a person) to whom the financial institution
provides a product or service, including that of acting as a
fiduciary.
(2) Customer information of a financial institution.--The
term ``customer information of a financial institution'' means
any information maintained by or for a financial institution
which is derived from the relationship between the financial
institution and a customer of the financial institution and is
identified with the customer.
(3) Document.--The term ``document'' means any information
in any form.
(4) Financial institution.--
(A) In general.--The term ``financial institution''
means any institution engaged in the business of
providing financial services to customers who maintain a
credit, deposit, trust, or other financial account or
relationship with the institution.
(B) Certain financial institutions specifically
included.--The term ``financial institution'' includes
any depository institution (as defined in section
19(b)(1)(A) of the Federal Reserve Act), any broker or
dealer, any investment adviser or investment company,
any insurance company, any loan or finance company, any
credit card issuer or operator of a credit card system,
and any consumer reporting agency that compiles and
maintains files on consumers on a nationwide basis (as
defined in section 603(p) of the Consumer Credit
Protection Act).
(C) Securities institutions.--For purposes of
subparagraph (B)--
(i) the terms ``broker'' and ``dealer'' have
the same meanings as given in section 3 of the
Securities Exchange Act of 1934 (15 U.S.C. 78c);
(ii) the term ``investment adviser'' has the
same meaning as given in section 202(a)(11) of the
Investment Advisers Act of 1940 (15 U.S.C. 80b-
2(a)); and
[[Page 113 STAT. 1450]]
(iii) the term ``investment company'' has the
same meaning as given in section 3 of the
Investment Company Act of 1940 (15 U.S.C. 80a-3).
(D) Certain persons and entities specifically
excluded.--The term ``financial institution'' does not
include any person or entity with respect to any
financial activity that is subject to the jurisdiction
of the Commodity Futures Trading Commission under the
Commodity Exchange Act and does not include the Federal
Agricultural Mortgage Corporation or any entity
chartered and operating under the Farm Credit Act of
1971.
(E) Further definition by regulation.--The Federal
Trade Commission, after consultation with Federal
banking agencies and the Securities and Exchange
Commission, may prescribe regulations clarifying or
describing the types of institutions which shall be
treated as financial institutions for purposes of this
subtitle.
TITLE <<NOTE: Federal Home Loan Bank System Modernization Act of
1999.>> VI--FEDERAL HOME LOAN BANK SYSTEM MODERNIZATION
SEC. 601. <<NOTE: 12 USC 1421 note.>> SHORT TITLE.
This title may be cited as the ``Federal Home Loan Bank System
Modernization Act of 1999''.
SEC. 602. DEFINITIONS.
Section 2 of the Federal Home Loan Bank Act (12 U.S.C. 1422) is
amended--
(1) in paragraph (1), by striking ``term `Board' means'' and
inserting ``terms `Finance Board' and `Board' mean'';
(2) by striking paragraph (3) and inserting the following:
``(3) State.--The term `State', in addition to the States of
the United States, includes the District of Columbia, Guam,
Puerto Rico, the United States Virgin Islands, American Samoa,
and the Commonwealth of the Northern Mariana Islands.''; and
(3) by adding at the end the following new paragraph:
``(13) Community financial institution.--
``(A) In general.--The term `community financial
institution' means a member--
``(i) the deposits of which are insured under
the Federal Deposit Insurance Act; and
``(ii) that has, as of the date of the
transaction at issue, less than $500,000,000 in
average total assets, based on an average of total
assets over the 3 years preceding that date.
``(B) Adjustments.--The $500,000,000 limit referred
to in subparagraph (A)(ii) shall be adjusted annually by
the Finance Board, based on the annual percentage
increase, if any, in the Consumer Price Index for all
urban consumers, as published by the Department of
Labor.''.
SEC. 603. SAVINGS ASSOCIATION MEMBERSHIP.
Section 5(f) of the Home Owners' Loan Act (12 U.S.C. 1464(f)) is
amended to read as follows:
[[Page 113 STAT. 1451]]
``(f) Federal Home Loan Bank Membership.--After the end of the 6-
month period beginning on the date of the enactment of the Federal Home
Loan Bank System Modernization Act of 1999, a Federal savings
association may become a member of the Federal Home Loan Bank System,
and shall qualify for such membership in the manner provided by the
Federal Home Loan Bank Act.''.
SEC. 604. ADVANCES TO MEMBERS; COLLATERAL.
(a) In General.--Section 10(a) of the Federal Home Loan Bank Act (12
U.S.C. 1430(a)) is amended--
(1) by redesignating paragraphs (1) through (4) as
subparagraphs (A) through (D), respectively, and indenting
appropriately;
(2) by striking ``(a) Each'' and inserting the following:
``(a) In General.--
``(1) All advances.--Each'';
(3) by striking the second sentence and inserting the
following:
``(2) Purposes of advances.--A long-term advance may only be
made for the purposes of--
``(A) providing funds to any member for residential
housing finance; and
``(B) providing funds to any community financial
institution for small businesses, small farms, and small
agri-businesses.'';
(4) by striking ``A Bank'' and inserting the following:
``(3) Collateral.--A Bank'';
(5) in paragraph (3) (as so designated by paragraph (4) of
this subsection)--
(A) in subparagraph (C) (as so redesignated by
paragraph (1) of this subsection) by striking
``Deposits'' and inserting ``Cash or deposits'';
(B) in subparagraph (D) (as so redesignated by
paragraph (1) of this subsection), by striking the
second sentence; and
(C) by inserting after subparagraph (D) (as so
redesignated by paragraph (1) of this subsection) the
following new subparagraph:
``(E) Secured loans for small business, agriculture,
or securities representing a whole interest in such
secured loans, in the case of any community financial
institution.'';
(6) in paragraph (5)--
(A) in the second sentence, by striking ``and the
Board'';
(B) in the third sentence, by striking ``Board'' and
inserting ``Federal home loan bank''; and
(C) by striking ``(5) Paragraphs (1) through (4)''
and inserting the following:
``(4) Additional bank authority.--Subparagraphs (A) through
(E) of paragraph (3)''; and
(7) by adding at the end the following:
``(5) Review of certain collateral standards.--The Board may
review the collateral standards applicable to each Federal home
loan bank for the classes of collateral described in
subparagraphs (D) and (E) of paragraph (3), and may, if
necessary for safety and soundness purposes, require an
[[Page 113 STAT. 1452]]
increase in the collateral standards for any or all of those
classes of collateral.
``(6) Definitions.--For purposes of this subsection, the
terms `small business', `agriculture', `small farm', and `small
agri-business' shall have the meanings given those terms by
regulation of the Finance Board.''.
(b) Clerical Amendment.--The section heading for section 10 of the
Federal Home Loan Bank Act (12 U.S.C. 1430) is amended to read as
follows:
``SEC. 10. ADVANCES TO MEMBERS.''.
(c) Qualified Thrift Lender Status.--Section 10 of the Federal Home
Loan Bank Act (12 U.S.C. 1430) is amended by striking the first of the 2
subsections designated as subsection (e).
(d) Federal Home Loan Bank Access.--Section 10(m)(3)(B) of the Home
Owners' Loan Act (12 U.S.C. 1467a(m)(3)(B)) is amended--
(1) in clause (i), by striking subclause (III) and
redesignating subclause (IV) as subclause (III); and
(2) by striking clause (ii) and inserting the following:
``(ii) Additional restrictions effective after
3 years.--Beginning 3 years after the date on
which a savings association should have become a
qualified thrift lender, or the date on which the
savings association ceases to be a qualified
thrift lender, as applicable, the savings
association shall not retain any investment
(including an investment in any subsidiary) or
engage, directly or indirectly, in any activity,
unless that investment or activity--
``(I) would be permissible for the
savings association if it were a
national bank; and
``(II) is permissible for the
savings association as a savings
association.''.
SEC. 605. ELIGIBILITY CRITERIA.
Section 4(a) of the Federal Home Loan Bank Act (12 U.S.C. 1424(a))
is amended--
(1) in paragraph (2)(A), by inserting ``(other than a
community financial institution)'' after ``institution'';
(2) in the matter immediately following paragraph (2)(C)--
(A) by striking ``An insured'' and inserting the
following:
``(3) Certain institutions.--An insured''; and
(B) by striking ``preceding sentence'' and inserting
``paragraph (2)''; and
(3) by adding at the end the following new paragraph:
``(4) Limited exemption for community financial
institutions.--A community financial institution that otherwise
meets the requirements of paragraph (2) may become a member
without regard to the percentage of its total assets that is
represented by residential mortgage loans, as described in
subparagraph (A) of paragraph (2).''.
SEC. 606. MANAGEMENT OF BANKS.
(a) Board of Directors.--Section 7 of the Federal Home Loan Bank Act
(12 U.S.C. 1427(d)) is amended--
(1) in subsection (a), by striking ``and bona fide residents
of the district in which such bank is located'' and inserting
[[Page 113 STAT. 1453]]
``, and each of whom shall be either a bona fide resident of the
district in which such bank is located or an officer or director
of a member of such bank located in that district'';
(2) in subsection (d), by striking the first sentence and
inserting the following: ``The term of each director, whether
elected or appointed, shall be 3 years. The board of directors
of each Federal home loan bank and the Finance Board shall
adjust the terms of members first elected or appointed after the
date of the enactment of the Federal Home Loan Bank System
Modernization Act of 1999 to ensure that the terms of the
members of the board of directors are staggered with
approximately \1/3\ of the terms expiring each year.''; and
(3) by striking subsection (g) and inserting the following:
``(g) Chairperson and Vice Chairperson.--
``(1) Election.--The Chairperson and Vice Chairperson of the
board of directors of each Federal home loan bank shall be
elected by a majority of all the directors of such bank from
among the directors of the bank.
``(2) Terms.--The term of office of the Chairperson and the
Vice Chairperson of the board of directors of a Federal home
loan bank shall be 2 years.
``(3) Acting chairperson.--In the event of a vacancy in the
position of Chairperson of the board of directors or during the
absence or disability of the Chairperson, the Vice Chairperson
shall act as Chairperson.
``(4) Procedures.--The board of directors of each Federal
home loan bank shall establish procedures, in the bylaws of such
board, for designating an acting chairperson for any period
during which the Chairperson and the Vice Chairperson are not
available to carry out the requirements of that position for any
reason and removing any person from any such position for good
cause.''.
(b) Compensation.--Section 7(i) of the Federal Home Loan Bank Act
(12 U.S.C. 1427(i)) is amended--
(1) by striking ``(i) Each bank may pay its directors'' and
inserting ``(i) Directors' Compensation.--
``(1) In general.--Subject to paragraph (2), each bank may
pay its directors''; and
(2) by adding at the end the following new paragraph:
``(2) Limitation.--
``(A) In general.--The annual salary of each of the
following members of the board of directors of a Federal
home loan bank may not exceed the amount specified:
``In the case of the-- The annual compensation
may not exceed--
Chairperson $25,000
Vice Chairperson $20,000
All other members $15,000.
``(B) Adjustment.--Beginning <<NOTE: Effective
date.>> January 1, 2001, each dollar amount referred to
in the table in subparagraph (A) shall be adjusted
annually by the Finance Board, based on the annual
percentage increase, if any, in the Consumer Price Index
for all urban consumers, as published by the Department
of Labor.
``(C) Expenses.--Subparagraph (A) shall not be
construed as prohibiting the reimbursement of expenses
[[Page 113 STAT. 1454]]
incurred by members of the board of directors of any
Federal home loan bank in connection with service on the
board of directors.''.
(c) Repeal of Sections 22A and 27.--The Federal Home Loan Bank Act
(12 U.S.C. 1421 et seq.) is amended by striking sections 22A (12 U.S.C.
1442a) and 27 (12 U.S.C. 1447).
(d) Section 12.--Section 12 of the Federal Home Loan Bank Act (12
U.S.C. 1432) is amended--
(1) in subsection (a)--
(A) by striking ``, but, except'' and all that
follows through ``ten years'';
(B) by striking ``subject to the approval of the
Board'' the first place that term appears;
(C) by striking ``and, by its Board of directors,''
and all that follows through ``agent of such bank,'' and
inserting ``and, by the board of directors of the bank,
to prescribe, amend, and repeal by-laws governing the
manner in which its affairs may be administered,
consistent with applicable laws and regulations, as
administered by the Finance Board. No officer, employee,
attorney, or agent of a Federal home loan bank''; and
(D) by striking ``Board of directors'' where such
term appears in the penultimate sentence and inserting
``board of directors''; and
(2) in subsection (b), by striking ``loans banks'' and
inserting ``loan banks''.
(e) Powers and Duties of Federal Housing Finance Board.--
(1) Issuance of notices of violations.--Section 2B(a) of the
Federal Home Loan Bank Act (12 U.S.C. 1422b(a)) is amended by
adding at the end the following new paragraphs:
``(5) To issue and serve a notice of charges upon a Federal
home loan bank or upon any executive officer or director of a
Federal home loan bank if, in the determination of the Finance
Board, the Bank, executive officer, or director is engaging or
has engaged in, or the Finance Board has reasonable cause to
believe that the Bank, executive officer, or director is about
to engage in an unsafe or unsound practice in conducting the
business of the bank, or any conduct that violates any provision
of this Act or any law, order, rule, or regulation or any
condition imposed in writing by the Finance Board in connection
with the granting of any application or other request by the
Bank, or any written agreement entered into by the Bank with the
agency, in accordance with the procedures provided in subsection
(c) or (f) of section 1371 of the Federal Housing Enterprises
Financial Safety and Soundness Act of 1992. Such authority
includes the same authority to issue an order requiring a party
to take affirmative action to correct conditions resulting from
violations or practices or to limit activities of a Bank or any
executive officer or director of a Bank as appropriate Federal
banking agencies have to take with respect to insured depository
institutions under paragraphs (6) and (7) of section 8(b) of the
Federal Deposit Insurance Act, and to have all other powers,
rights, and duties to enforce this Act with respect to the
Federal home loan banks and their executive officers and
directors as the Office of Federal Housing Enterprise Oversight
has to enforce the
[[Page 113 STAT. 1455]]
Federal Housing Enterprises Financial Safety and Soundness Act
of 1992, the Federal National Mortgage Association Charter Act,
or the Federal Home Loan Mortgage Corporation Act with respect
to the Federal housing enterprises under subtitle C (other than
section 1371) of the Federal Housing Enterprises Financial
Safety and Soundness Act of 1992.
``(6) To address any insufficiencies in capital levels
resulting from the application of section 5(f) of the Home
Owners' Loan Act.
``(7) To act in its own name and through its own attorneys--
``(A) in enforcing any provision of this Act or any
regulation promulgated under this Act; or
``(B) in any action, suit, or proceeding to which
the Finance Board is a party that involves the Board's
regulation or supervision of any Federal home loan
bank.''.
(2) Technical amendment.--Section 111 of Public Law 93-495
(12 U.S.C. 250) is amended by striking ``Federal Home Loan Bank
Board,'' and inserting ``Director of the Office of Thrift
Supervision, the Federal Housing Finance Board,''.
(f) Eligibility To Secure Advances.--
(1) Section 9.--Section 9 of the Federal Home Loan Bank Act
(12 U.S.C. 1429) is amended--
(A) in the second sentence, by striking ``with the
approval of the Board''; and
(B) in the third sentence, by striking ``, subject
to the approval of the Board,''.
(2) Section 10.--Section 10 of the Federal Home Loan Bank
Act (12 U.S.C. 1430) is amended--
(A) in subsection (c)--
(i) in the first sentence, by striking
``Board'' and inserting ``Federal home loan
bank''; and
(ii) by striking the second sentence; and
(B) in subsection (d)--
(i) in the first sentence, by striking ``and
the approval of the Board''; and
(ii) by striking ``Subject to the approval of
the Board, any'' and inserting ``Any''.
(g) Section 16.--Section 16(a) of the Federal Home Loan Bank Act (12
U.S.C. 1436(a)) is amended--
(1) in the third sentence--
(A) by striking ``net earnings'' and inserting
``previously retained earnings or current net
earnings''; and
(B) by striking ``, and then only with the approval
of the Federal Housing Finance Board''; and
(2) by striking the fourth sentence.
(h) Section 18.--Section 18(b) of the Federal Home Loan Bank Act (12
U.S.C. 1438(b)) is amended by striking paragraph (4).
SEC. 607. RESOLUTION FUNDING CORPORATION.
(a) In General.--Section 21B(f)(2)(C) of the Federal Home Loan Bank
Act (12 U.S.C. 1441b(f)(2)(C)) is amended to read as follows:
``(C) Payments by federal home loan banks.--
``(i) In general.--To the extent that the
amounts available pursuant to subparagraphs (A)
and (B) are insufficient to cover the amount of
interest payments, each Federal home loan bank
shall pay to the Funding
[[Page 113 STAT. 1456]]
Corporation in each calendar year, 20.0 percent of
the net earnings of that Bank (after deducting
expenses relating to section 10(j) and operating
expenses).
``(ii) Annual determination.--The Board
annually shall determine the extent to which the
value of the aggregate amounts paid by the Federal
home loan banks exceeds or falls short of the
value of an annuity of $300,000,000 per year that
commences on the issuance date and ends on the
final scheduled maturity date of the obligations,
and shall select appropriate present value factors
for making such determinations, in consultation
with the Secretary of the Treasury.
``(iii) Payment term alterations.--The Board
shall extend or shorten the term of the payment
obligations of a Federal home loan bank under this
subparagraph as necessary to ensure that the value
of all payments made by the Banks is equivalent to
the value of an annuity referred to in clause
(ii).
``(iv) Term beyond maturity.--If the Board
extends the term of payment obligations beyond the
final scheduled maturity date for the obligations,
each Federal home loan bank shall continue to pay
20.0 percent of its net earnings (after deducting
expenses relating to section 10(j) and operating
expenses) to the Treasury of the United States
until the value of all such payments by the
Federal home loan banks is equivalent to the value
of an annuity referred to in clause (ii). In the
final year in which the Federal home loan banks
are required to make any payment to the Treasury
under this subparagraph, if the dollar amount
represented by 20.0 percent of the net earnings of
the Federal home loan banks exceeds the remaining
obligation of the Banks to the Treasury, the
Finance Board shall reduce the percentage pro rata
to a level sufficient to pay the remaining
obligation.''.
(b) Effective <<NOTE: 12 USC 1441b note.>> Date.--The amendment made
by subsection (a) shall become effective on January 1, 2000. Payments
made by a Federal home loan bank before that effective date shall be
counted toward the total obligation of that Bank under section
21B(f)(2)(C) of the Federal Home Loan Bank Act, as amended by this
section.
SEC. 608. CAPITAL STRUCTURE OF FEDERAL HOME LOAN BANKS.
Section 6 of the Federal Home Loan Bank Act (12 U.S.C. 1426) is
amended to read as follows:
``SEC. 6. CAPITAL STRUCTURE OF FEDERAL HOME LOAN BANKS.
``(a) Regulations.--
``(1) Capital <<NOTE: Deadline.>> standards.--Not later than
1 year after the date of the enactment of the Federal Home Loan
Bank System Modernization Act of 1999, the Finance Board shall
issue regulations prescribing uniform capital standards
applicable to each Federal home loan bank, which shall require
each such bank to meet--
``(A) the leverage requirement specified in
paragraph (2); and
``(B) the risk-based capital requirements, in
accordance with paragraph (3).
[[Page 113 STAT. 1457]]
``(2) Leverage requirement.--
``(A) In general.--The leverage requirement shall
require each Federal home loan bank to maintain a
minimum amount of total capital based on the total
assets of the bank and shall be 5 percent.
``(B) Treatment of stock and retained earnings.--In
determining compliance with the minimum leverage ratio
established under subparagraph (A), the paid-in value of
the outstanding Class B stock and the amount of retained
earnings shall be multiplied by 1.5, and such higher
amounts shall be deemed to be capital for purposes of
meeting the 5 percent minimum leverage ratio, except
that a Federal home loan bank's total capital
(determined without taking into account any such
multiplier) shall not be less than 4 percent of the
total assets of the bank.
``(3) Risk-based capital standards.--
``(A) In general.--Each Federal home loan bank shall
maintain permanent capital in an amount that is
sufficient, as determined in accordance with the
regulations of the Finance Board, to meet--
``(i) the credit risk to which the Federal
home loan bank is subject; and
``(ii) the market risk, including interest
rate risk, to which the Federal home loan bank is
subject, based on a stress test established by the
Finance Board that rigorously tests for changes in
market variables, including changes in interest
rates, rate volatility, and changes in the shape
of the yield curve.
``(B) Consideration of other risk-based standards.--
In establishing the risk-based standard under
subparagraph (A)(ii), the Finance Board shall take due
consideration of any risk-based capital test established
pursuant to section 1361 of the Federal Housing
Enterprises Financial Safety and Soundness Act of 1992
(12 U.S.C. 4611) for the enterprises (as defined in that
Act), with such modifications as the Finance Board
determines to be appropriate to reflect differences in
operations between the Federal home loan banks and those
enterprises.
``(4) Other regulatory requirements.--The regulations issued
by the Finance Board under paragraph (1) shall--
``(A) permit each Federal home loan bank to issue,
with such rights, terms, and preferences, not
inconsistent with this Act and the regulations issued
hereunder, as the board of directors of that bank may
approve, any 1 or more of--
``(i) Class A stock, which shall be redeemable
in cash and at par 6 months following submission
by a member of a written notice of its intent to
redeem such shares; and
``(ii) Class B stock, which shall be
redeemable in cash and at par 5 years following
submission by a member of a written notice of its
intent to redeem such shares;
``(B) provide that the stock of a Federal home loan
bank may be issued to and held by only members of the
[[Page 113 STAT. 1458]]
bank, and that a bank may not issue any stock other than
as provided in this section;
``(C) prescribe the manner in which stock of a
Federal home loan bank may be sold, transferred,
redeemed, or repurchased; and
``(D) provide the manner of disposition of
outstanding stock held by, and the liquidation of any
claims of the Federal home loan bank against, an
institution that ceases to be a member of the bank,
through merger or otherwise, or that provides notice of
intention to withdraw from membership in the bank.
``(5) Definitions of capital.--For purposes of determining
compliance with the capital standards established under this
subsection--
``(A) permanent capital of a Federal home loan bank
shall include--
``(i) the amounts paid for the Class B stock;
and
``(ii) the retained earnings of the bank (as
determined in accordance with generally accepted
accounting principles); and
``(B) total capital of a Federal home loan bank
shall include--
``(i) permanent capital;
``(ii) the amounts paid for the Class A stock;
``(iii) consistent with generally accepted
accounting principles, and subject to the
regulation of the Finance Board, a general
allowance for losses, which may not include any
reserves or allowances made or held against
specific assets; and
``(iv) any other amounts from sources
available to absorb losses incurred by the bank
that the Finance Board determines by regulation to
be appropriate to include in determining total
capital.
``(6) Transition period.--Notwithstanding any other
provision of this Act, the requirements relating to purchase and
retention of capital stock of a Federal home loan bank by any
member thereof in effect on the day before the date of the
enactment of the Federal Home Loan Bank System Modernization Act
of 1999, shall continue in effect with respect to each Federal
home loan bank until the regulations required by this subsection
have taken effect and the capital structure plan required by
subsection (b) has been approved by the Finance Board and
implemented by such bank.
``(b) Capital Structure Plan.--
``(1) Approval <<NOTE: Deadline.>> 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.
[[Page 113 STAT. 1459]]
``(2) Approval of modifications.--The board of directors of
a Federal home loan bank shall submit to the Finance Board for
approval any modifications that the bank proposes to make to an
approved capital structure plan.
``(c) Contents of Plan.--The capital structure plan of each Federal
home loan bank shall contain provisions addressing each of the
following:
``(1) Minimum investment.--
``(A) In general.--Each capital structure plan of a
Federal home loan bank shall require each member of the
bank to maintain a minimum investment in the stock of
the bank, the amount of which shall be determined in a
manner to be prescribed by the board of directors of
each bank and to be included as part of the plan.
``(B) Investment alternatives.--
``(i) In general.--In establishing the minimum
investment required for each member under
subparagraph (A), a Federal home loan bank may, in
its discretion, include any 1 or more of the
requirements referred to in clause (ii), or any
other provisions approved by the Finance Board.
``(ii) Authorized requirements.--A requirement
is referred to in this clause if it is a
requirement for--
``(I) a stock purchase based on a
percentage of the total assets of a
member; or
``(II) a stock purchase based on a
percentage of the outstanding advances
from the bank to the member.
``(C) Minimum amount.--Each capital structure plan
of a Federal home loan bank shall require that the
minimum stock investment established for members shall
be set at a level that is sufficient for the bank to
meet the minimum capital requirements established by the
Finance Board under subsection (a).
``(D) Adjustments to minimum required investment.--
The capital structure plan of each Federal home loan
bank shall impose a continuing obligation on the board
of directors of the bank to review and adjust the
minimum investment required of each member of that bank,
as necessary to ensure that the bank remains in
compliance with applicable minimum capital levels
established by the Finance Board, and shall require each
member to comply promptly with any adjustments to the
required minimum investment.
``(2) Transition rule.--
``(A) In general.--The capital structure plan of
each Federal home loan bank shall specify the date on
which it shall take effect, and may provide for a
transition period of not longer than 3 years to allow
the bank to come into compliance with the capital
requirements prescribed under subsection (a), and to
allow any institution that was a member of the bank on
the date of the enactment of the Federal Home Loan Bank
System Modernization Act of 1999, to come into
compliance with the minimum investment required pursuant
to the plan.
[[Page 113 STAT. 1460]]
``(B) Interim purchase requirements.--The capital
structure plan of a Federal home loan bank may allow any
member referred to in subparagraph (A) that would be
required by the terms of the capital structure plan to
increase its investment in the stock of the bank to do
so in periodic installments during the transition
period.
``(3) Disposition of shares.--The capital structure plan of
a Federal home loan bank shall provide for the manner of
disposition of any stock held by a member of that bank that
terminates its membership or that provides notice of its
intention to withdraw from membership in that bank.
``(4) Classes of stock.--
``(A) In general.--The capital structure plan of a
Federal home loan bank shall afford each member of that
bank the option of maintaining its required investment
in the bank through the purchase of any combination of
classes of stock authorized by the board of directors of
the bank and approved by the Finance Board in accordance
with its regulations.
``(B) Rights requirement.--A Federal home loan bank
shall include in its capital structure plan provisions
establishing terms, rights, and preferences, including
minimum investment, dividends, voting, and liquidation
preferences of each class of stock issued by the bank,
consistent with Finance Board regulations and market
requirements.
``(C) Reduced minimum investment.--The capital
structure plan of a Federal home loan bank may provide
for a reduced minimum stock investment for any member of
that bank that elects to purchase Class B in a manner
that is consistent with meeting the minimum capital
requirements of the bank, as established by the Finance
Board.
``(D) Liquidation of claims.--The capital structure
plan of a Federal home loan bank shall provide for the
liquidation in an orderly manner, as determined by the
bank, of any claim of that bank against a member,
including claims for any applicable prepayment fees or
penalties resulting from prepayment of advances prior to
stated maturity.
``(5) Limited transferability of stock.--The capital
structure plan of a Federal home loan bank shall--
``(A) provide that any stock issued by that bank
shall be available only to and held only by members of
that bank and tradable only between that bank and its
members; and
``(B) establish standards, criteria, and
requirements for the issuance, purchase, transfer,
retirement, and redemption of stock issued by that bank.
``(6) Bank review of plan.--Before filing a capital
structure plan with the Finance Board, each Federal home loan
bank shall conduct a review of the plan by--
``(A) an independent certified public accountant, to
ensure, to the extent possible, that implementation of
the plan would not result in any write-down of the
redeemable bank stock investment of its members; and
``(B) at least one major credit rating agency, to
determine, to the extent possible, whether
implementation of
[[Page 113 STAT. 1461]]
the plan would have any material effect on the credit
ratings of the bank.
``(d) Termination of Membership.--
``(1) Voluntary withdrawal.--Any member may withdraw from a
Federal home loan bank if the member provides written notice to
the bank of its intent to do so and if, on the date of
withdrawal, there is in effect a certification by the Finance
Board that the withdrawal will not cause the Federal Home Loan
Bank System to fail to meet its obligation under section
21B(f)(2)(C) to contribute to the debt service for the
obligations issued by the Resolution Funding Corporation. The
applicable stock redemption notice periods shall commence upon
receipt of the notice by the bank. Upon the expiration of the
applicable notice period for each class of redeemable stock, the
member may surrender such stock to the bank, and shall be
entitled to receive in cash the par value of the stock. During
the applicable notice periods, the member shall be entitled to
dividends and other membership rights commensurate with
continuing stock ownership.
``(2) Involuntary withdrawal.--
``(A) In general.--The board of directors of a
Federal home loan bank may terminate the membership of
any institution if, subject to Finance Board
regulations, it determines that--
``(i) the member has failed to comply with a
provision of this Act or any regulation prescribed
under this Act; or
``(ii) the member has been determined to be
insolvent, or otherwise subject to the appointment
of a conservator, receiver, or other legal
custodian, by a Federal or State authority with
regulatory and supervisory responsibility for the
member.
``(B) Stock disposition.--An institution, the
membership of which is terminated in accordance with
subparagraph (A)--
``(i) shall surrender redeemable stock to the
Federal home loan bank, and shall receive in cash
the par value of the stock, upon the expiration of
the applicable notice period under subsection
(a)(4)(A);
``(ii) shall receive any dividends declared on
its redeemable stock, during the applicable notice
period under subsection (a)(4)(A); and
``(iii) shall not be entitled to any other
rights or privileges accorded to members after the
date of the termination.
``(C) Commencement of notice period.--With respect
to an institution, the membership of which is terminated
in accordance with subparagraph (A), the applicable
notice period under subsection (a)(4) for each class of
redeemable stock shall commence on the earlier of--
``(i) the date of such termination; or
``(ii) the date on which the member has
provided notice of its intent to redeem such
stock.
``(3) Liquidation of indebtedness.--Upon the termination of
the membership of an institution for any reason, the outstanding
indebtedness of the member to the bank shall be liquidated in an
orderly manner, as determined by the bank
[[Page 113 STAT. 1462]]
and, upon the extinguishment of all such indebtedness, the bank
shall return to the member all collateral pledged to secure the
indebtedness.
``(e) Redemption of Excess Stock.--
``(1) In general.--A Federal home loan bank, in its sole
discretion, may redeem or repurchase, as appropriate, any shares
of Class A or Class B stock issued by the bank and held by a
member that are in excess of the minimum stock investment
required of that member.
``(2) Excess stock.--Shares of stock held by a member shall
not be deemed to be `excess stock' for purposes of this
subsection by virtue of a member's submission of a notice of
intent to withdraw from membership or termination of its
membership in any other manner.
``(3) Priority.--A Federal home loan bank may not redeem any
excess Class B stock prior to the end of the 5-year notice
period, unless the member has no Class A stock outstanding that
could be redeemed as excess.
``(f) Impairment of Capital.--If the Finance Board or the board of
directors of a Federal home loan bank determines that the bank has
incurred or is likely to incur losses that result in or are expected to
result in charges against the capital of the bank, the bank shall not
redeem or repurchase any stock of the bank without the prior approval of
the Finance Board while such charges are continuing or are expected to
continue. In no case may a bank redeem or repurchase any applicable
capital stock if, following the redemption, the bank would fail to
satisfy any minimum capital requirement.
``(g) Rejoining After Divestiture of All Shares.--
``(1) In general.--Except as provided in paragraph (2), and
notwithstanding any other provision of this Act, an institution
that divests all shares of stock in a Federal home loan bank may
not, after such divestiture, acquire shares of any Federal home
loan bank before the end of the 5-year period beginning on the
date of the completion of such divestiture, unless the
divestiture is a consequence of a transfer of membership on an
uninterrupted basis between banks.
``(2) Exception for withdrawals from membership before
1998.--Any institution that withdrew from membership in any
Federal home loan bank before December 31, 1997, may acquire
shares of a Federal home loan bank at any time after that date,
subject to the approval of the Finance Board and the
requirements of this Act.
``(h) Treatment of Retained Earnings.--
``(1) In general.--The holders of the Class B stock of a
Federal home loan bank shall own the retained earnings, surplus,
undivided profits, and equity reserves, if any, of the bank.
``(2) Exception.--Except as specifically provided in this
section or through the declaration of a dividend or a capital
distribution by a Federal home loan bank, or in the event of
liquidation of the bank, a member shall have no right to
withdraw or otherwise receive distribution of any portion of the
retained earnings of the bank.
``(3) Limitation.--A Federal home loan bank may not make any
distribution of its retained earnings unless, following such
[[Page 113 STAT. 1463]]
distribution, the bank would continue to meet all applicable
capital requirements.''.
TITLE VII--OTHER PROVISIONS
Subtitle <<NOTE: ATM Fee Reform Act of 1999.>> A--ATM Fee Reform
SEC. 701. <<NOTE: 15 USC 1601 note.>> SHORT TITLE.
This subtitle may be cited as the ``ATM Fee Reform Act of 1999''.
SEC. 702. ELECTRONIC FUND TRANSFER FEE DISCLOSURES AT ANY HOST
ATM.
Section 904(d) of the Electronic Fund Transfer Act (15 U.S.C.
1693b(d)) is amended by adding at the end the following new paragraph:
``(3) Fee disclosures at automated teller machines.--
``(A) In general.--The regulations prescribed under
paragraph (1) shall require any automated teller machine
operator who imposes a fee on any consumer for providing
host transfer services to such consumer to provide
notice in accordance with subparagraph (B) to the
consumer (at the time the service is provided) of--
``(i) the fact that a fee is imposed by such
operator for providing the service; and
``(ii) the amount of any such fee.
``(B) Notice requirements.--
``(i) On the machine.--The notice required
under clause (i) of subparagraph (A) with respect
to any fee described in such subparagraph shall be
posted in a prominent and conspicuous location on
or at the automated teller machine at which the
electronic fund transfer is initiated by the
consumer.
``(ii) On the screen.--The notice required
under clauses (i) and (ii) of subparagraph (A)
with respect to any fee described in such
subparagraph shall appear on the screen of the
automated teller machine, or on a paper notice
issued from such machine, after the transaction is
initiated and before the consumer is irrevocably
committed to completing the transaction, except
that during the period beginning on the date of
the enactment of the Gramm-Leach-Bliley Act and
ending on December 31, 2004, this clause shall not
apply to any automated teller machine that lacks
the technical capability to disclose the notice on
the screen or to issue a paper notice after the
transaction is initiated and before the consumer
is irrevocably committed to completing the
transaction.
``(C) Prohibition on fees not properly disclosed and
explicitly assumed by consumer.--No fee may be imposed
by any automated teller machine operator in connection
with any electronic fund transfer initiated by a
consumer for which a notice is required under
subparagraph (A), unless--
``(i) the consumer receives such notice in
accordance with subparagraph (B); and
[[Page 113 STAT. 1464]]
``(ii) the consumer elects to continue in the
manner necessary to effect the transaction after
receiving such notice.
``(D) Definitions.--For purposes of this paragraph,
the following definitions shall apply:
``(i) Automated teller machine operator.--The
term `automated teller machine operator' means any
person who--
``(I) operates an automated teller
machine at which consumers initiate
electronic fund transfers; and
``(II) is not the financial
institution that holds the account of
such consumer from which the transfer is
made.
``(ii) Electronic fund transfer.--The term
`electronic fund transfer' includes a transaction
that involves a balance inquiry initiated by a
consumer in the same manner as an electronic fund
transfer, whether or not the consumer initiates a
transfer of funds in the course of the
transaction.
``(iii) Host transfer services.--The term
`host transfer services' means any electronic fund
transfer made by an automated teller machine
operator in connection with a transaction
initiated by a consumer at an automated teller
machine operated by such operator.''.
SEC. 703. DISCLOSURE OF POSSIBLE FEES TO CONSUMERS WHEN ATM CARD
IS ISSUED.
Section 905(a) of the Electronic Fund Transfer Act (15 U.S.C.
1693c(a)) is amended--
(1) by striking ``and'' at the end of paragraph (8);
(2) by striking the period at the end of paragraph (9) and
inserting ``; and''; and
(3) by inserting after paragraph (9) the following new
paragraph:
``(10) a notice to the consumer that a fee may be imposed
by--
``(A) an automated teller machine operator (as
defined in section 904(d)(3)(D)(i)) if the consumer
initiates a transfer from an automated teller machine
that is not operated by the person issuing the card or
other means of access; and
``(B) any national, regional, or local network
utilized to effect the transaction.''.
SEC. 704. FEASIBILITY STUDY.
(a) In General.--The Comptroller General of the United States shall
conduct a study of the feasibility of requiring, in connection with any
electronic fund transfer initiated by a consumer through the use of an
automated teller machine--
(1) a notice to be provided to the consumer before the
consumer is irrevocably committed to completing the transaction,
which clearly states the amount of any fee that will be imposed
upon the consummation of the transaction by--
(A) any automated teller machine operator (as
defined in section 904(d)(3)(D)(i) of the Electronic
Fund Transfer Act) involved in the transaction;
[[Page 113 STAT. 1465]]
(B) the financial institution holding the account of
the consumer;
(C) any national, regional, or local network
utilized to effect the transaction; and
(D) any other party involved in the transfer; and
(2) the consumer to elect to consummate the transaction
after receiving the notice described in paragraph (1).
(b) Factors To Be Considered.--In conducting the study required
under subsection (a) with regard to the notice requirement described in
such subsection, the Comptroller General shall consider the following
factors:
(1) The availability of appropriate technology.
(2) Implementation and operating costs.
(3) The competitive impact any such notice requirement would
have on various sizes and types of institutions, if implemented.
(4) The period of time that would be reasonable for
implementing any such notice requirement.
(5) The extent to which consumers would benefit from any
such notice requirement.
(6) Any other factor the Comptroller General determines to
be appropriate in analyzing the feasibility of imposing any such
notice requirement.
(c) Report to the Congress.--Before the end of the 6-month period
beginning on the date of the enactment of this Act, the Comptroller
General shall submit a report to the Congress containing--
(1) the findings and conclusions of the Comptroller General
in connection with the study required under subsection (a); and
(2) the recommendation of the Comptroller General with
regard to the question of whether a notice requirement described
in subsection (a) should be implemented and, if so, the manner
in which such requirement should be implemented.
SEC. 705. NO LIABILITY IF POSTED NOTICES ARE DAMAGED.
Section 910 of the Electronic Fund Transfer Act (15 U.S.C. 1693h) is
amended by adding at the end the following new subsection:
``(d) Exception for Damaged Notices.--If the notice required to be
posted pursuant to section 904(d)(3)(B)(i) by an automated teller
machine operator has been posted by such operator in compliance with
such section and the notice is subsequently removed, damaged, or altered
by any person other than the operator of the automated teller machine,
the operator shall have no liability under this section for failure to
comply with section 904(d)(3)(B)(i).''.
Subtitle B--Community Reinvestment
SEC. 711. CRA SUNSHINE REQUIREMENTS.
The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is
amended by inserting after section 47, as added by section 305 of this
Act, the following new section:
[[Page 113 STAT. 1466]]
``SEC. 48. <<NOTE: 12 USC 1831y.>> CRA SUNSHINE REQUIREMENTS.
``(a) Public Disclosure of Agreements.--Any agreement (as defined in
subsection (e)) entered into after the date of the enactment of the
Gramm-Leach-Bliley Act by an insured depository institution or affiliate
with a nongovernmental entity or person made pursuant to or in
connection with the Community Reinvestment Act of 1977 involving funds
or other resources of such insured depository institution or affiliate--
``(1) shall be in its entirety fully disclosed, and the full
text thereof made available to the appropriate Federal banking
agency with supervisory responsibility over the insured
depository institution and to the public by each party to the
agreement; and
``(2) shall obligate each party to comply with this section.
``(b) Annual Report of Activity by Insured Depository Institution.--
Each insured depository institution or affiliate that is a party to an
agreement described in subsection (a) shall report to the appropriate
Federal banking agency with supervisory responsibility over the insured
depository institution, not less frequently than once each year, such
information as the Federal banking agency may by rule require relating
to the following actions taken by the party pursuant to the agreement
during the preceding 12-month period:
``(1) Payments, fees, or loans made to any party to the
agreement or received from any party to the agreement and the
terms and conditions of the same.
``(2) Aggregate data on loans, investments, and services
provided by each party in its community or communities pursuant
to the agreement.
``(3) Such other pertinent matters as determined by
regulation by the appropriate Federal banking agency with
supervisory responsibility over the insured depository
institution.
``(c) Annual Report of Activity by Nongovernmental Entities.--
``(1) In general.--Each nongovernmental entity or person
that is not an affiliate of an insured depository institution
and that is a party to an agreement described in subsection (a)
shall report to the appropriate Federal banking agency with
supervisory responsibility over the insured depository
institution that is a party to such agreement, not less
frequently than once each year, an accounting of the use of
funds received pursuant to each such agreement during the
preceding 12-month period.
``(2) Submission to insured depository institution.--A
nongovernmental entity or person referred to in paragraph (1)
may comply with the reporting requirement in such paragraph by
transmitting the report to the insured depository institution
that is a party to the agreement, and such insured depository
institution shall promptly transmit such report to the
appropriate Federal banking agency with supervisory authority
over the insured depository institution.
``(3) Information to be included.--The accounting referred
to in paragraph (1) shall include a detailed, itemized list of
the uses to which such funds have been made, including
compensation, administrative expenses, travel, entertainment,
consulting and professional fees paid, and such other
categories, as determined by regulation by the appropriate
Federal banking
[[Page 113 STAT. 1467]]
agency with supervisory responsibility over the insured
depository institution.
``(d) Applicability.--Subsections (b) and (c) shall not apply with
respect to any agreement entered into before the end of the 6-month
period beginning on the date of the enactment of the Gramm-Leach-Bliley
Act.
``(e) Definitions.--
``(1) Agreement.--For purposes of this section, the term
`agreement'--
``(A) means--
``(i) any written contract, written
arrangement, or other written understanding that
provides for cash payments, grants, or other
consideration with a value in excess of $10,000,
or for loans the aggregate amount of principal of
which exceeds $50,000, annually (or the sum of all
such agreements during a 12-month period with an
aggregate value of cash payments, grants, or other
consideration in excess of $10,000, or with an
aggregate amount of loan principal in excess of
$50,000); or
``(ii) a group of substantively related
contracts with an aggregate value of cash
payments, grants, or other consideration in excess
of $10,000, or with an aggregate amount of loan
principal in excess of $50,000, annually;
made pursuant to, or in connection with, the fulfillment
of the Community Reinvestment Act of 1977, at least 1
party to which is an insured depository institution or
affiliate thereof, whether organized on a profit or not-
for-profit basis; and
``(B) does not include--
``(i) any individual mortgage loan;
``(ii) any specific contract or commitment for
a loan or extension of credit to individuals,
businesses, farms, or other entities, if the funds
are loaned at rates not substantially below market
rates and if the purpose of the loan or extension
of credit does not include any re-lending of the
borrowed funds to other parties; or
``(iii) any agreement entered into by an
insured depository institution or affiliate with a
nongovernmental entity or person who has not
commented on, testified about, or discussed with
the institution, or otherwise contacted the
institution, concerning the Community Reinvestment
Act of 1977.
``(2) Fulfillment of cra.--For purposes of subparagraph (A),
the term `fulfillment' means a list of factors that the
appropriate Federal banking agency determines have a material
impact on the agency's decision--
``(A) to approve or disapprove an application for a
deposit facility (as defined in section 803 of the
Community Reinvestment Act of 1977); or
``(B) to assign a rating to an insured depository
institution under section 807 of the Community
Reinvestment Act of 1977.
``(f) Violations.--
``(1) Violations by persons other than insured depository
institutions or their affiliates.--
[[Page 113 STAT. 1468]]
``(A) Material failure to comply.--If the party to
an agreement described in subsection (a) that is not an
insured depository institution or affiliate willfully
fails to comply with this section in a material way, as
determined by the appropriate Federal banking agency,
the agreement shall be unenforceable after the offending
party has been given notice and a reasonable period of
time to perform or comply.
``(B) Diversion of funds or resources.--If funds or
resources received under an agreement described in
subsection (a) have been diverted contrary to the
purposes of the agreement for personal financial gain,
the appropriate Federal banking agency with supervisory
responsibility over the insured depository institution
may impose either or both of the following penalties:
``(i) Disgorgement by the offending individual
of funds received under the agreement.
``(ii) Prohibition of the offending individual
from being a party to any agreement described in
subsection (a) for a period of not to exceed 10
years.
``(2) Designation of successor nongovernmental party.--If an
agreement described in subsection (a) is found to be
unenforceable under this subsection, the appropriate Federal
banking agency may assist the insured depository institution in
identifying a successor nongovernmental party to assume the
responsibilities of the agreement.
``(3) Inadvertent or de minimis reporting errors.--An error
in a report filed under subsection (c) that is inadvertent or de
minimis shall not subject the filing party to any penalty.
``(g) Rule of Construction.--No provision of this section shall be
construed as authorizing any appropriate Federal banking agency to
enforce the provisions of any agreement described in subsection (a).
``(h) Regulations.--
``(1) In general.--Each appropriate Federal banking agency
shall prescribe regulations, in accordance with paragraph (4),
requiring procedures reasonably designed to ensure and monitor
compliance with the requirements of this section.
``(2) Protection of parties.--In carrying out paragraph (1),
each appropriate Federal banking agency shall--
``(A) ensure that the regulations prescribed by the
agency do not impose an undue burden on the parties and
that proprietary and confidential information is
protected; and
``(B) establish procedures to allow any
nongovernmental entity or person who is a party to a
large number of agreements described in subsection (a)
to make a single or consolidated filing of a report
under subsection (c) to an insured depository
institution or an appropriate Federal banking agency.
``(3) Parties not subject to reporting requirements.--The
Board of Governors of the Federal Reserve System may prescribe
regulations--
``(A) to prevent evasions of subsection
(e)(1)(B)(iii); and
``(B) to provide further exemptions under such
subsection, consistent with the purposes of this
section.
[[Page 113 STAT. 1469]]
``(4) Coordination, consistency, and comparability.--In
carrying out paragraph (1), each appropriate Federal banking
agency shall consult and coordinate with the other such agencies
for the purposes of assuring, to the extent possible, that the
regulations prescribed by each such agency are consistent and
comparable with the regulations prescribed by the other such
agencies.''.
SEC. 712. SMALL BANK REGULATORY RELIEF.
The Community Reinvestment Act of 1977 (12 U.S.C. 2901 et seq.) is
amended by adding at the end the following new section:
``SEC. 809. <<NOTE: 12 USC 2908.>> SMALL BANK REGULATORY RELIEF.
``(a) In General.--Except as provided in subsections (b) and (c),
any regulated financial institution with aggregate assets of not more
than $250,000,000 shall be subject to routine examination under this
title--
``(1) not more than once every 60 months for an institution
that has achieved a rating of `outstanding record of meeting
community credit needs' at its most recent examination under
section 804;
``(2) not more than once every 48 months for an institution
that has received a rating of `satisfactory record of meeting
community credit needs' at its most recent examination under
section 804; and
``(3) as deemed necessary by the appropriate Federal
financial supervisory agency, for an institution that has
received a rating of less than `satisfactory record of meeting
community credit needs' at its most recent examination under
section 804.
``(b) No Exception From CRA Examinations in Connection With
Applications for Deposit Facilities.--A regulated financial institution
described in subsection (a) shall remain subject to examination under
this title in connection with an application for a deposit facility.
``(c) Discretion.--A regulated financial institution described in
subsection (a) may be subject to more frequent or less frequent
examinations for reasonable cause under such circumstances as may be
determined by the appropriate Federal financial supervisory agency.''.
SEC. 713. FEDERAL RESERVE BOARD STUDY OF CRA LENDING.
The <<NOTE: Reports. Deadline.>> Board of Governors of the Federal
Reserve System shall conduct a comprehensive study, in consultation with
the Chairman and Ranking Member of the Committee on Banking and
Financial Services of the House of Representatives and the Chairman and
Ranking Member of the Committee on Banking, Housing, and Urban Affairs
of the Senate, of the Community Reinvestment Act of 1977, which shall
focus on--
(1) the default rates;
(2) the delinquency rates; and
(3) the profitability;
of loans made in conformity with such Act, and report on the study to
such Committees not later than <<NOTE: Public information.>> March 15,
2000. Such report and supporting data shall also be made available by
the Board of Governors of the Federal Reserve System to the public.
[[Page 113 STAT. 1470]]
SEC. 714. <<NOTE: 12 USC 1811 note.>> PRESERVING THE COMMUNITY
REINVESTMENT ACT OF 1977.
Nothing in this Act shall be construed to repeal any provision of
the Community Reinvestment Act of 1977.
SEC. 715. RESPONSIVENESS <<NOTE: 12 USC 2901 note.>> TO COMMUNITY
NEEDS FOR FINANCIAL SERVICES.
(a) Study.--The Secretary of the Treasury, in consultation with the
Federal banking agencies (as defined in section 3(z) of the Federal
Deposit Insurance Act), shall conduct a study of the extent to which
adequate services are being provided as intended by the Community
Reinvestment Act of 1977, including services in low- and moderate-income
neighborhoods and for persons of modest means, as a result of the
enactment of this Act.
(b) Reports.--
(1) In <<NOTE: Deadlines.>> general.--The Secretary of the
Treasury shall--
(A) before March 15, 2000, submit a baseline report
to the Congress on the study conducted pursuant to
subsection (a); and
(B) before the end of the 2-year period beginning on
the date of the enactment of this Act, in consultation
with the Federal banking agencies, submit a final report
to the Congress on the study conducted pursuant to
subsection (a).
(2) Recommendations.--The final report submitted under
paragraph (1)(B) shall include such recommendations as the
Secretary determines to be appropriate for administrative and
legislative action with respect to institutions covered under
the Community Reinvestment Act of 1977.
Subtitle C--Other Regulatory Improvements
SEC. 721. EXPANDED SMALL BANK ACCESS TO S CORPORATION TREATMENT.
(a) Study.--The Comptroller General of the United States shall
conduct a study of--
(1) possible revisions to the rules governing S
corporations, including--
(A) increasing the permissible number of
shareholders in such corporations;
(B) permitting shares of such corporations to be
held in individual retirement accounts;
(C) clarifying that interest on investments held for
safety, soundness, and liquidity purposes should not be
considered to be passive income;
(D) discontinuation of the treatment of stock held
by bank directors as a disqualifying personal class of
stock for such corporations; and
(E) improving Federal tax treatment of bad debt and
interest deductions; and
(2) what impact such revisions might have on community
banks.
(b) Report <<NOTE: Deadline.>> to the Congress.--Not later than 6
months after the date of the enactment of this Act, the Comptroller
General of the United States shall submit a report to the Congress on
the results of the study conducted under subsection (a).
[[Page 113 STAT. 1471]]
(c) Definition.--For purposes of this section, the term ``S
corporation'' has the meaning given the term in section 1361(a)(1) of
the Internal Revenue Code of 1986.
SEC. 722. ``PLAIN <<NOTE: 12 USC 4809.>> LANGUAGE'' REQUIREMENT
FOR FEDERAL BANKING AGENCY RULES.
(a) In General.--Each Federal banking agency shall use plain
language in all proposed and final rulemakings published by the agency
in the Federal Register after January 1, 2000.
(b) Report.--Not <<NOTE: Deadline.>> later than March 1, 2001, each
Federal banking agency shall submit to the Congress a report that
describes how the agency has complied with subsection (a).
(c) Definition.--For purposes of this section, the term ``Federal
banking agency'' has the meaning given that term in section 3 of the
Federal Deposit Insurance Act.
SEC. 723. RETENTION OF ``FEDERAL'' IN NAME OF CONVERTED FEDERAL
SAVINGS ASSOCIATION.
Section 2 of the Act entitled ``An Act to enable national banking
associations to increase their capital stock and to change their names
or locations'', approved May 1, 1886 (12 U.S.C. 30), is amended by
adding at the end the following new subsection:
``(d) Retention of `Federal' in Name of Converted Federal Savings
Association.--
``(1) In general.--Notwithstanding subsection (a) or any
other provision of law, any depository institution, the charter
of which is converted from that of a Federal savings association
to a national bank or a State bank after the date of the
enactment of the Gramm-Leach-Bliley Act may retain the term
`Federal' in the name of such institution if such institution
remains an insured depository institution.
``(2) Definitions.--For purposes of this subsection, the
terms `depository institution', `insured depository
institution', `national bank', and `State bank' have the
meanings given those terms in section 3 of the Federal Deposit
Insurance Act.''.
SEC. 724. CONTROL OF BANKERS' BANKS.
Section 2(a)(5)(E)(i) of the Bank Holding Company Act of 1956 (12
U.S.C. 1841(a)(5)(E)(i)) is amended by inserting ``1 or more'' before
``thrift institutions''.
SEC. 725. PROVISION OF TECHNICAL ASSISTANCE TO MICROENTERPRISES.
Title I of the Riegle Community Development and Regulatory
Improvement Act of 1994 (12 U.S.C. 4701 et seq.) is amended by adding at
the end the following new subtitle:
``Subtitle C--Microenterprise <<NOTE: Program for Investment in Micro-
entrepreneurs Act of 1999.>> Technical Assistance and Capacity Building
Program
``SEC. 171. <<NOTE: 15 USC 6901 note.>> SHORT TITLE.
``This subtitle may be cited as the `Program for Investment in
Microentrepreneurs Act of 1999', also referred to as the `PRIME Act'.
[[Page 113 STAT. 1472]]
``SEC. 172. <<NOTE: 15 USC 6901.>> DEFINITIONS.
``For purposes of this subtitle, the following definitions shall
apply:
``(1) Administration.--The term `Administration' means the
Small Business Administration.
``(2) Administrator.--The term `Administrator' means the
Administrator of the Small Business Administration.
``(3) Capacity building services.--The term `capacity
building services' means services provided to an organization
that is, or that is in the process of becoming, a
microenterprise development organization or program, for the
purpose of enhancing its ability to provide training and
services to disadvantaged entrepreneurs.
``(4) Collaborative.--The term `collaborative' means 2 or
more nonprofit entities that agree to act jointly as a qualified
organization under this subtitle.
``(5) Disadvantaged entrepreneur.--The term `disadvantaged
entrepreneur' means a microentrepreneur that is--
``(A) a low-income person;
``(B) a very low-income person; or
``(C) an entrepreneur that lacks adequate access to
capital or other resources essential for business
success, or is economically disadvantaged, as determined
by the Administrator.
``(6) Indian tribe.--The term `Indian tribe' has the meaning
given the term in section 103.
``(7) Intermediary.--The term `intermediary' means a
private, nonprofit entity that seeks to serve microenterprise
development organizations and programs as authorized under
section 175.
``(8) Low-income person.--The term `low-income person' has
the meaning given the term in section 103.
``(9) Microentrepreneur.--The term `microentrepreneur' means
the owner or developer of a microenterprise.
``(10) Microenterprise.--The term `microenterprise' means a
sole proprietorship, partnership, or corporation that--
``(A) has fewer than 5 employees; and
``(B) generally lacks access to conventional loans,
equity, or other banking services.
``(11) Microenterprise development organization or
program.--The term `microenterprise development organization or
program' means a nonprofit entity, or a program administered by
such an entity, including community development corporations or
other nonprofit development organizations and social service
organizations, that provides services to disadvantaged
entrepreneurs.
``(12) Training and technical assistance.--The term
`training and technical assistance' means services and support
provided to disadvantaged entrepreneurs, such as assistance for
the purpose of enhancing business planning, marketing,
management, financial management skills, and assistance for the
purpose of accessing financial services.
``(13) Very low-income person.--The term `very low-income
person' means having an income, adjusted for family size, of not
more than 150 percent of the poverty line (as defined in section
673(2) of the Community Services Block
[[Page 113 STAT. 1473]]
Grant Act (42 U.S.C. 9902(2)), including any revision required
by that section).
``SEC. 173. <<NOTE: 15 USC 6902.>> ESTABLISHMENT OF PROGRAM.
``The Administrator shall establish a microenterprise technical
assistance and capacity building grant program to provide assistance
from the Administration in the form of grants to qualified organizations
in accordance with this subtitle.
``SEC. 174. <<NOTE: 15 USC 6903.>> USES OF ASSISTANCE.
``A qualified organization shall use grants made under this
subtitle--
``(1) to provide training and technical assistance to
disadvantaged entrepreneurs;
``(2) to provide training and capacity building services to
microenterprise development organizations and programs and
groups of such organizations to assist such organizations and
programs in developing microenterprise training and services;
``(3) to aid in researching and developing the best
practices in the field of microenterprise and technical
assistance programs for disadvantaged entrepreneurs; and
``(4) for such other activities as the Administrator
determines are consistent with the purposes of this subtitle.
``SEC. 175. <<NOTE: 15 USC 6904.>> QUALIFIED ORGANIZATIONS.
``For purposes of eligibility for assistance under this subtitle, a
qualified organization shall be--
``(1) a nonprofit microenterprise development organization
or program (or a group or collaborative thereof) that has a
demonstrated record of delivering microenterprise services to
disadvantaged entrepreneurs;
``(2) an intermediary;
``(3) a microenterprise development organization or program
that is accountable to a local community, working in conjunction
with a State or local government or Indian tribe; or
``(4) an Indian tribe acting on its own, if the Indian tribe
can certify that no private organization or program referred to
in this paragraph exists within its jurisdiction.
``SEC. 176. <<NOTE: 15 USC 6905.>> ALLOCATION OF ASSISTANCE; SUBGRANTS.
``(a) Allocation of Assistance.--
``(1) In general.--The Administrator shall allocate
assistance from the Administration under this subtitle to ensure
that--
``(A) activities described in section 174(1) are
funded using not less than 75 percent of amounts made
available for such assistance; and
``(B) activities described in section 174(2) are
funded using not less than 15 percent of amounts made
available for such assistance.
``(2) Limit on individual assistance.--No single person may
receive more than 10 percent of the total funds appropriated
under this subtitle in a single fiscal year.
``(b) Targeted Assistance.--The Administrator shall ensure that not
less than 50 percent of the grants made under this subtitle are used to
benefit very low-income persons, including those residing on Indian
reservations.
``(c) Subgrants Authorized.--
[[Page 113 STAT. 1474]]
``(1) In general.--A qualified organization receiving
assistance under this subtitle may provide grants using that
assistance to qualified small and emerging microenterprise
organizations and programs, subject to such rules and
regulations as the Administrator determines to be appropriate.
``(2) Limit on administrative expenses.--Not more than 7.5
percent of assistance received by a qualified organization under
this subtitle may be used for administrative expenses in
connection with the making of subgrants under paragraph (1).
``(d) Diversity.--In making grants under this subtitle, the
Administrator shall ensure that grant recipients include both large and
small microenterprise organizations, serving urban, rural, and Indian
tribal communities serving diverse populations.
``(e) Prohibition on Preferential Consideration of Certain SBA
Program Participants.--In making grants under this subtitle, the
Administrator shall ensure that any application made by a qualified
organization that is a participant in the program established under
section 7(m) of the Small Business Act does not receive preferential
consideration over applications from other qualified organizations that
are not participants in such program.
``SEC. 177. <<NOTE: 15 USC 6906.>> MATCHING REQUIREMENTS.
``(a) In General.--Financial assistance under this subtitle shall be
matched with funds from sources other than the Federal Government on the
basis of not less than 50 percent of each dollar provided by the
Administration.
``(b) Sources of Matching Funds.--Fees, grants, gifts, funds from
loan sources, and in-kind resources of a grant recipient from public or
private sources may be used to comply with the matching requirement in
subsection (a).
``(c) Exception.--
``(1) In general.--In the case of an applicant for
assistance under this subtitle with severe constraints on
available sources of matching funds, the Administrator may
reduce or eliminate the matching requirements of subsection (a).
``(2) Limitation.--Not more than 10 percent of the total
funds made available from the Administration in any fiscal year
to carry out this subtitle may be excepted from the matching
requirements of subsection (a), as authorized by paragraph (1)
of this subsection.
``SEC. 178. <<NOTE: 15 USC 6907.>> APPLICATIONS FOR ASSISTANCE.
``An application for assistance under this subtitle shall be
submitted in such form and in accordance with such procedures as the
Administrator shall establish.
``SEC. 179. <<NOTE: 15 USC 6908.>> RECORDKEEPING.
``The <<NOTE: Applicability.>> requirements of section 115 shall
apply to a qualified organization receiving assistance from the
Administration under this subtitle as if it were a community development
financial institution receiving assistance from the Fund under subtitle
A.
``SEC. 180. <<NOTE: 15 USC 6909.>> AUTHORIZATION.
``In addition to funds otherwise authorized to be appropriated to
the Fund to carry out this title, there are authorized to be
appropriated to the Administrator to carry out this subtitle--
``(1) $15,000,000 for fiscal year 2000;
[[Page 113 STAT. 1475]]
``(2) $15,000,000 for fiscal year 2001;
``(3) $15,000,000 for fiscal year 2002; and
``(4) $15,000,000 for fiscal year 2003.
``SEC. 181. <<NOTE: Regulations. 15 USC 6910.>> IMPLEMENTATION.
``The Administrator shall, by regulation, establish such
requirements as may be necessary to carry out this subtitle.''.
SEC. 726. FEDERAL RESERVE AUDITS.
The Federal Reserve Act (12 U.S.C. 221 et seq.) is amended by
inserting after section 11A the following new section:
``SEC. 11B. <<NOTE: 12 USC 248b.>> ANNUAL INDEPENDENT AUDITS OF FEDERAL
RESERVE BANKS AND BOARD.
``The Board shall order an annual independent audit of the financial
statements of each Federal reserve bank and the Board.''.
SEC. 727. AUTHORIZATION TO RELEASE REPORTS.
(a) Federal Reserve Act.--The eighth undesignated paragraph of
section 9 of the Federal Reserve Act (12 U.S.C. 326) is amended by
striking the last sentence and inserting the following: ``The Board of
Governors of the Federal Reserve System, at its discretion, may furnish
any report of examination or other confidential supervisory information
concerning any State member bank or other entity examined under any
other authority of the Board, to any Federal or State agency or
authority with supervisory or regulatory authority over the examined
entity, to any officer, director, or receiver of the examined entity,
and to any other person that the Board determines to be proper.''.
(b) Commodity Futures Trading Commission.--The Right to Financial
Privacy Act of 1978 (12 U.S.C. 3401 et seq.) is amended--
(1) <<NOTE: 12 USC 3401.>> in section 1101(7)--
(A) by redesignating subparagraphs (G) and (H) as
subparagraphs (H) and (I), respectively; and
(B) by inserting after subparagraph (F) the
following new subparagraph:
``(G) the Commodity Futures Trading Commission;'';
and
(2) in section 1112(e), <<NOTE: 12 USC 3412.>> by striking
``and the Securities and Exchange Commission'' and inserting ``,
the Securities and Exchange Commission, and the Commodity
Futures Trading Commission''.
SEC. 728. GENERAL <<NOTE: 12 USC 241 note.>> ACCOUNTING OFFICE
STUDY OF CONFLICTS OF INTEREST.
(a) Study Required.--The Comptroller General of the United States
shall conduct a study analyzing the conflict of interest faced by the
Board of Governors of the Federal Reserve System between its role as a
primary regulator of the banking industry and its role as a vendor of
services to the banking and financial services industry.
(b) Specific Conflict Required To Be Addressed.--In the course of
the study required under subsection (a), the Comptroller General shall
address the conflict of interest faced by the Board of Governors of the
Federal Reserve System between the role of the Board as a regulator of
the payment system, generally, and its participation in the payment
system as a competitor with private entities who are providing payment
services.
[[Page 113 STAT. 1476]]
(c) Report to the Congress.--Before the end of the 1-year period
beginning on the date of the enactment of this Act, the Comptroller
General shall submit a report to the Congress containing the findings
and conclusions of the Comptroller General in connection with the study
required under this section, together with such recommendations for such
legislative or administrative actions as the Comptroller General may
determine to be appropriate, including recommendations for resolving any
such conflict of interest.
SEC. 729. STUDY <<NOTE: 12 USC 4801 note.>> AND REPORT ON ADAPTING
EXISTING LEGISLATIVE REQUIREMENTS TO
ONLINE BANKING AND LENDING.
(a) Study Required.--The Federal banking agencies shall conduct a
study of banking regulations regarding the delivery of financial
services, including those regulations that may assume that there will be
person-to-person contact during the course of a financial services
transaction, and report their recommendations on adapting those existing
requirements to online banking and lending.
(b) Report Required.--Before the end of the 2-year period beginning
on the date of the enactment of this Act, the Federal banking agencies
shall submit a report to the Congress on the findings and conclusions of
the agencies with respect to the study required under subsection (a),
together with such recommendations for legislative or regulatory action
as the agencies may determine to be appropriate.
(c) Definition.--For purposes of this section, the term ``Federal
banking agencies'' means each Federal banking agency (as defined in
section 3(z) of the Federal Deposit Insurance Act).
SEC. 730. CLARIFICATION OF SOURCE OF STRENGTH DOCTRINE.
Section 18 of the Federal Deposit Insurance Act (12 U.S.C. 1828) is
amended by adding at the end the following new subsection:
``(t) Limitation on Claims.--
``(1) In general.--No person may bring a claim against any
Federal banking agency (including in its capacity as conservator
or receiver) for the return of assets of an affiliate or
controlling shareholder of the insured depository institution
transferred to, or for the benefit of, an insured depository
institution by such affiliate or controlling shareholder of the
insured depository institution, or a claim against such Federal
banking agency for monetary damages or other legal or equitable
relief in connection with such transfer, if at the time of the
transfer--
``(A) the insured depository institution is subject
to any direction issued in writing by a Federal banking
agency to increase its capital;
``(B) the insured depository institution is
undercapitalized (as defined in section 38 of this Act);
and
``(C) for that portion of the transfer that is made
by an entity covered by section 5(g) of the Bank Holding
Company Act of 1956 or section 45 of this Act, the
Federal banking agency has followed the procedure set
forth in such section.
``(2) Definition of claim.--For purposes of paragraph (1),
the term `claim'--
``(A) means a cause of action based on Federal or
State law that--
[[Page 113 STAT. 1477]]
``(i) provides for the avoidance of
preferential or fraudulent transfers or
conveyances; or
``(ii) provides similar remedies for
preferential or fraudulent transfers or
conveyances; and
``(B) does not include any claim based on actual
intent to hinder, delay, or defraud pursuant to such a
fraudulent transfer or conveyance law.''.
SEC. 731. INTEREST RATES AND OTHER CHARGES AT INTERSTATE BRANCHES.
Section 44 of the Federal Deposit Insurance Act (12 U.S.C. 1831u) is
amended--
(1) by redesignating subsection (f) as subsection (g); and
(2) by inserting after subsection (e) the following new
subsection:
``(f) Applicable Rate and Other Charge Limitations.--
``(1) In general.--In the case of any State that has a
constitutional provision that sets a maximum lawful annual
percentage rate of interest on any contract at not more than 5
percent above the discount rate for 90-day commercial paper in
effect at the Federal reserve bank for the Federal reserve
district in which such State is located, except as provided in
paragraph (2), upon the establishment in such State of a branch
of any out-of-State insured depository institution in such State
under this section, the maximum interest rate or amount of
interest, discount points, finance charges, or other similar
charges that may be charged, taken, received, or reserved from
time to time in any loan or discount made or upon any note, bill
of exchange, financing transaction, or other evidence of debt by
any insured depository institution whose home State is such
State shall be equal to not more than the greater of--
``(A) the maximum interest rate or amount of
interest, discount points, finance charges, or other
similar charges that may be charged, taken, received, or
reserved in a similar transaction under the constitution
or any statute or other law of the home State of the
out-of-State insured depository institution establishing
any such branch, without reference to this section, as
such maximum interest rate or amount of interest may
change from time to time; or
``(B) the maximum rate or amount of interest,
discount points, finance charges, or other similar
charges that may be charged, taken, received, or
reserved in a similar transaction by a State insured
depository institution chartered under the laws of such
State or a national bank or Federal savings association
whose main office is located in such State without
reference to this section.
``(2) Rule of construction.--No provision of this subsection
shall be construed as superseding or affecting--
``(A) the authority of any insured depository
institution to take, receive, reserve, and charge
interest on any loan made in any State other than the
State referred to in paragraph (1); or
``(B) the applicability of section 501 of the
Depository Institutions Deregulation and Monetary
Control Act of
[[Page 113 STAT. 1478]]
1980, section 5197 of the Revised Statutes of the United
States, or section 27 of this Act.''.
SEC. 732. INTERSTATE BRANCHES AND AGENCIES OF FOREIGN BANKS.
Section 5(a)(7) of the International Banking Act of 1978 (12 U.S.C.
3103(a)(7)) is amended to read as follows:
``(7) Additional authority for interstate branches and
agencies of foreign banks, upgrades of certain foreign bank
agencies and branches.--Notwithstanding paragraphs (1) and (2),
a foreign bank may--
``(A) with the approval of the Board and the
Comptroller of the Currency, establish and operate a
Federal branch or Federal agency or, with the approval
of the Board and the appropriate State bank supervisor,
a State branch or State agency in any State outside the
foreign bank's home State if--
``(i) the establishment and operation of such
branch or agency is permitted by the State in
which the branch or agency is to be established;
and
``(ii) in the case of a Federal or State
branch, the branch receives only such deposits as
would be permitted for a corporation organized
under section 25A of the Federal Reserve Act; or
``(B) with the approval of the Board and the
relevant licensing authority (the Comptroller in the
case of a Federal branch or the appropriate State
supervisor in the case of a State branch), upgrade an
agency, or a branch of the type referred to in
subparagraph (A)(ii), located in a State outside the
foreign bank's home State, into a Federal or State
branch if--
``(i) the establishment and operation of such
branch is permitted by such State; and
``(ii) such agency or branch--
``(I) was in operation in such State
on the day before September 29, 1994; or
``(II) has been in operation in such
State for a period of time that meets
the State's minimum age requirement
permitted under section 44(a)(5) of the
Federal Deposit Insurance Act.''.
SEC. 733. FAIR TREATMENT OF WOMEN BY FINANCIAL ADVISERS.
It is the sense of the Congress that individuals offering financial
advice and products should offer such services and products in a
nondiscriminatory, nongender-specific manner.
SEC. 734. MEMBERSHIP OF LOAN GUARANTEE BOARDS.
(a) Emergency Steel Loan Guarantee Board.--Section 101(e) of the
Emergency Steel Loan Guarantee Act <<NOTE: Ante, p. 252.>> of 1999 is
amended--
(1) in paragraph (2), by inserting ``, or a member of the
Board of Governors of the Federal Reserve System designated by
the Chairman'' after ``the Chairman of the Board of Governors of
the Federal Reserve System''; and
(2) in paragraph (3), by inserting ``, or a commissioner of
the Securities and Exchange Commission designated by the
Chairman'' before the period.
[[Page 113 STAT. 1479]]
(b) Emergency Oil and Gas Loan Guarantee Board.--Section 201(d)(2)
of the Emergency Oil and Gas Guarantee Loan Program Act <<NOTE: Ante, p.
255.>> is amended--
(1) in subparagraph (B), by inserting ``, or a member of the
Board of Governors of the Federal Reserve System designated by
the Chairman'' after ``the Chairman of the Board of Governors of
the Federal Reserve System''; and
(2) in subparagraph (C), by inserting ``, or a commissioner
of the Securities and Exchange Commission designated by the
Chairman'' before the period.
SEC. 735. REPEAL OF STOCK LOAN LIMIT IN FEDERAL RESERVE ACT.
Section 11 of the Federal Reserve Act (12 U.S.C. 248) is amended by
striking the paragraph designated as ``(m)'' and inserting ``(m)
[Repealed]''.
SEC. 736. ELIMINATION OF SAIF AND DIF SPECIAL RESERVES.
(a) SAIF Special Reserve.--Section 11(a)(6) of the Federal Deposit
Insurance Act (12 U.S.C. 1821(a)(6)) is amended by striking subparagraph
(L).
(b) DIF Special Reserve.--Section 2704 of the Deposit Insurance
Funds Act of 1996 (12 U.S.C. 1821 note) is amended--
(1) <<NOTE: 12 USC 1821 note.>> by striking subsection (b);
and
(2) <<NOTE: 12 USC 1821.>> in subsection (d)--
(A) by striking paragraph (4);
(B) in paragraph (6)(C)(i), by striking ``(6) and
(7)'' and inserting ``(5), (6), and (7)''; and
(C) in paragraph (6)(C), by striking clause (ii) and
inserting the following:
``(ii) by redesignating paragraph (8) as
paragraph (5).''.
(c) Effective <<NOTE: 12 USC 1821 note.>> Date.--This section and
the amendments made by this section shall become effective on the date
of the enactment of this Act.
SEC. 737. BANK OFFICERS AND DIRECTORS AS OFFICERS AND DIRECTORS OF
PUBLIC UTILITIES.
Section 305(b) of the Federal Power Act (16 U.S.C. 825d(b)) is
amended--
(1) by striking ``(b) After six'' and inserting the
following:
``(b) Interlocking Directorates.--
``(1) In general.--After 6''; and
(2) by adding at the end the following:
``(2) Applicability.--
``(A) In general.--In the circumstances described in
subparagraph (B), paragraph (1) shall not apply to a
person that holds or proposes to hold the positions of--
``(i) officer or director of a public utility;
and
``(ii) officer or director of a bank, trust
company, banking association, or firm authorized
by law to underwrite or participate in the
marketing of securities of a public utility.
``(B) Circumstances.--The circumstances described in
this subparagraph are that--
``(i) a person described in subparagraph (A)
does not participate in any deliberations or
decisions of the public utility regarding the
selection of a bank,
[[Page 113 STAT. 1480]]
trust company, banking association, or firm to
underwrite or participate in the marketing of
securities of the public utility, if the person
serves as an officer or director of a bank, trust
company, banking association, or firm that is
under consideration in the deliberation process;
``(ii) the bank, trust company, banking
association, or firm of which the person is an
officer or director does not engage in the
underwriting of, or participate in the marketing
of, securities of the public utility of which the
person holds the position of officer or director;
``(iii) the public utility for which the
person serves or proposes to serve as an officer
or director selects underwriters by competitive
procedures; or
``(iv) the issuance of securities of the
public utility for which the person serves or
proposes to serve as an officer or director has
been approved by all Federal and State regulatory
agencies having jurisdiction over the issuance.''.
SEC. 738. APPROVAL FOR PURCHASES OF SECURITIES.
Section 23B(b)(2) of the Federal Reserve Act (12 U.S.C. 371c-1) is
amended to read as follows:
``Subparagraph (B) of paragraph (1) shall not apply if the purchase
or acquisition of such securities has been approved, before such
securities are initially offered for sale to the public, by a majority
of the directors of the bank based on a determination that the purchase
is a sound investment for the bank irrespective of the fact that an
affiliate of the bank is a principal underwriter of the securities.''.
SEC. 739. OPTIONAL CONVERSION OF FEDERAL SAVINGS ASSOCIATIONS.
Section 5(i) of the Home Owners' Loan Act (12 U.S.C. 1464(i)) is
amended by adding at the end the following new paragraph:
``(5) Conversion to national or state bank.--
``(A) In general.--Any Federal savings association
chartered and in operation before the date of the
enactment of the Gramm-Leach-Bliley Act, with branches
in operation before such date of enactment in 1 or more
States, may convert, at its option, with the approval of
the Comptroller of the Currency or the appropriate State
bank supervisor, into 1 or more national or State banks,
each of which may encompass 1 or more of the branches of
the Federal savings association in operation before such
date of enactment in 1 or more States, but only if each
resulting national or State bank will meet all
financial, management, and capital requirements
applicable to the resulting national or State bank.
``(B) Definitions.--For purposes of this paragraph,
the terms `State bank' and `State bank supervisor' have
the meanings given those terms in section 3 of the
Federal Deposit Insurance Act.''.
SEC. 740. GRAND JURY PROCEEDINGS.
Section 3322(b) of title 18, United States Code, is amended--
[[Page 113 STAT. 1481]]
(1) in paragraph (1), by inserting ``Federal or State''
before ``financial institution''; and
(2) in paragraph (2), by inserting ``at any time during or
after the completion of the investigation of the grand jury,''
before ``upon''.
Approved November 12, 1999.
LEGISLATIVE HISTORY--S. 900 (H.R. 10):
---------------------------------------------------------------------------
HOUSE REPORTS: Nos. 106-74, Pts. 1 and 2 (Comm. on Banking and Financial
Services) and Pt. 3 (Comm. on Commerce) accompanying H.R. 10 and
106-434 (Comm. of Conference).
SENATE REPORTS: No. 106-44 (Comm. on Banking, Housing, and Urban
Affairs).
CONGRESSIONAL RECORD, Vol. 145 (1999):
May 4-6, considered and passed Senate.
July 20, considered and passed House, amended, in lieu of
H.R. 10.
Nov. 3, Senate considered conference report.
Nov. 4, Senate and House agreed to conference report.
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 35 (1999):
Nov. 12, Presidential remarks and statement.
<all>
The Carpenter Group is a licensed private investigations firm and can be reached at 972-617-9210.
