I

104TH CONGRESS

1ST SESSION H. R. 19

To encourage foreign countries to accord national treatment to United States

banking, securities, and insurance organizations that operate or seek

to operate in those countries.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 4, 1995

Mr. LEACH and Mr. SCHUMER (for themselves, Mr. FRANK of Massachusetts,

and Mr. BEREUTER) introduced the following bill; which was referred to

the Committee on Banking and Financial Services and, in addition, to

the Committees on Commerce and Ways and Means, for a period to be

subsequently determined by the Speaker, in each case for consideration

of such provisions as fall within the jurisdiction of the committee concerned

A BILL

To encourage foreign countries to accord national treatment

to United States banking, securities, and insurance organizations that operate or seek to operate in those countries.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Fair Trade in Finan5 cial Services Act of 1995’’.
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1 SEC. 2. PURPOSE; DEFINITIONS.

2 (a) PURPOSE.—The purpose of this Act is to encour3 age foreign countries to accord national treatment to Unit4 ed States banking, securities, and insurance organizations

5 that operate or seek to operate in those countries.

6 (b) DEFINITIONS.—For purposes of this Act, the fol7 lowing definitions shall apply:

8 (1) NATIONAL TREATMENT.—The term ‘‘na9 tional treatment’’ means, with respect to any foreign

10 country, treatment that offers United States bank11 ing, securities, or insurance organizations, as the

12 case may be, the same competitive opportunities (in13 cluding effective market access) in such country as

14 are available to the foreign country’s domestic bank15 ing, securities, or insurance organizations in like cir16 cumstances.

17 (6) PERSON OF A FOREIGN COUNTRY.—

18 (A) IN GENERAL.—The term ‘‘person of a

19 foreign country’’ means—

20 (i) any entity that—

21 (I) is organized under the laws of

22 the foreign country, or

23 (II) has the entity’s principal

24 place of business in the foreign coun25 try;

26 (ii) an individual who—
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1 (I) is a citizen of the foreign

2 country; or

3 (II) is permanently domiciled in

4 the foreign country; and

5 (iii) any person that is, directly or in6 directly, under the control of any entity or

7 individual described in clause (i) or (ii).

8 (B) CONTROL.—For purposes of subpara9 graph (A), the term ‘‘control’’—

10 (i) in the case of a banking organiza11 tion, has the same meaning as in section 2

12 of the Bank Holding Company Act of

13 1956;

14 (ii) in the case of a securities organi15 zation, has the meaning which the Sec16 retary shall prescribe, by regulation, in

17 consultation with the Commission; and

18 (iii) in the case of an insurance orga19 nization, has the meaning which the Presi20 dent shall prescribe.

21 (3) SECRETARY.—The term ‘‘Secretary’’ means

22 the Secretary of the Treasury.

23 (4) TRADE REPRESENTATIVE.—The term

24 ‘‘Trade Representative’’ means the United States

25 Trade Representative.
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1 SEC. 3. EFFECTUATING THE PRINCIPLE OF NATIONAL

2 TREATMENT FOR BANKING ORGANIZATIONS.

3 (a) IDENTIFYING COUNTRIES THAT MAY BE DENY4 ING NATIONAL TREATMENT TO UNITED STATES BANK5 ING ORGANIZATIONS.—The Secretary shall identify, after

6 consultation in accordance with subsection (i), the extent

7 to which foreign countries may be denying national treat8 ment to United States banking organizations—

9 (1) according to the most recent report under

10 section 3602 of the Omnibus Trade and Competi11 tiveness Act of 1988 (or the most recent update of

12 such report); or

13 (2) based on more recent information that the

14 Secretary considers appropriate.

15 (b) DETERMINING WHETHER POSSIBLE DENIAL OF

16 NATIONAL TREATMENT MAY BE HAVING A SIGNIFICANT

17 ADVERSE EFFECT.—

18 (1) IN GENERAL.—The Secretary shall deter19 mine, after consultation in accordance with sub20 section (i), whether the possible denial of national

21 treatment to United States banking organizations by

22 a foreign country identified under subsection (a)

23 may be having a significant adverse effect on such

24 organizations.

25 (2) FACTORS TO BE CONSIDERED.—In making

26 any determination under paragraph (1), the Sec-
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1 retary shall consider appropriate factors, including

2 the following:

3 (A) The extent of United States trade with

4 and investment in the foreign country, the size

5 of the foreign country’s markets for the finan6 cial services involved, and the extent to which

7 United States banking organizations operate or

8 seek to operate in those markets.

9 (B) The importance of operations by Unit10 ed States banking organizations in the foreign

11 country to the export of goods and services by

12 United States firms to such country.

13 (C) The extent to which the foreign coun14 try provides in advance to United States bank15 ing organizations a written draft of any meas16 ure of general application that the country pro17 poses to adopt, such as regulations, guidelines,

18 or other policies regarding new products and

19 services, in order to allow an opportunity for

20 such organizations to comment on the measure

21 and for such comments to be taken into account

22 by the foreign country.

23 (D) The extent to which the foreign coun24 try—
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1 (i) makes available, in writing, to

2 United States banking organizations the

3 foreign country’s requirements for complet4 ing any application relating to the provi5 sion of financial services by any such orga6 nization;

7 (ii) applies published, objective stand8 ards and criteria in evaluating any such

9 application from any United States bank10 ing organization; and

11 (iii) renders administrative decisions

12 relating to any such application within a

13 reasonable period of time.

14 (3) SOLICITATION OF COMMENTS.—Before

15 making any determination under paragraph (1), the

16 Secretary shall solicit comments concerning the ef17 fect of the possible denial of national treatment on

18 United States banking organizations from interested

19 parties.

20 (c) NEGOTIATIONS.—

21 (1) MANDATORY INITIATION OF NEGOTIATIONS

22 IN CERTAIN CASES.—If the Secretary determines

23 under subsection (b) that the possible denial of na24 tional treatment to United States banking organiza25 tions by a foreign country identified under sub-
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1 section (a) may be having a significant adverse ef2 fect on such organizations, the Secretary shall initi3 ate negotiations with such foreign country to ensure

4 that such country accords national treatment to

5 United States banking organizations.

6 (2) EXCEPTIONS.—Paragraph (1) shall not

7 apply with respect to any foreign country if the Sec8 retary—

9 (A) determines that negotiations with such

10 country in accordance with paragraph (1)—

11 (i) would be unlikely to result in

12 progress toward according national treat13 ment to United States banking organiza14 tions; or

15 (ii) would impair the economic inter16 ests of the United States; and

17 (B) gives written notice of that determina18 tion to the Congress.

19 (d) PUBLICATION OF POSTNEGOTIATION DETER20 MINATION; DISPUTE RESOLUTION PROCEEDING.—

21 (1) PUBLICATION.—If, after making a deter22 mination under subsection (b) that the possible de23 nial of national treatment to United States banking

24 organizations by a foreign country may be having a

25 significant adverse effect on such organizations, the
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1 Secretary determines, after consultation in accord2 ance with subsection (i), that—

3 (A) any negotiations under subsection (c)

4 have not resulted in, or are not likely to result

5 in, progress toward according national treat6 ment to United States banking organizations;

7 and

8 (B) effective relief is not available under

9 any bilateral or multilateral agreement de10 scribed in paragraph (2)(A);

11 the Secretary may publish, in the Federal Register,

12 a final determination in accordance with subsections

13 (a) and (b) that such country is denying national

14 treatment to United States banking organizations

15 and the denial is having a significant adverse effect

16 on any such organizations.

17 (2) DISPUTE RESOLUTION UNDER APPLICABLE

18 AGREEMENTS.—If, after making a determination

19 under subsection (b) that the possible denial of na20 tional treatment to United States banking organiza21 tions by a foreign country may be having a signifi22 cant adverse effect on such organizations—

23 (A) the Secretary determines that the acts,

24 policies, or practices of the foreign country

25 which give rise to such determination are sub-
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1 ject to any bilateral or multilateral agreement

2 that governs financial services that has been en3 tered into by the President and approved by the

4 Senate and House of Representatives; and

5 (B) the agreement provides for a formal

6 process for resolving disputes regarding obliga7 tions under the agreement;

8 the United States shall initiate a proceeding under

9 the agreement to enforce the rights of the United

10 States under the agreement.

11 (3) ANNUAL REVIEW OF DETERMINATIONS.—

12 The Secretary shall, not less frequently than annu13 ally and after consultation in accordance with sub14 section (i), review each determination published pur15 suant to paragraph (1) to determine whether the de16 termination should be rescinded.

17 (4) NOTIFICATION OF APPROPRIATE STATE OF18 FICIALS OF PUBLICATION OF DETERMINATION.—The

19 Secretary shall inform State bank supervisors (as

20 defined in section 3(r) of the Federal Deposit Insur21 ance Act) of the publication of any determination

22 under paragraph (1).

23 (e) DISCRETIONARY SANCTIONS.—

24 (1) ACTION BY THE SECRETARY.—
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1 (A) IN GENERAL.—Subject to subpara2 graph (B) and paragraph (2), the Secretary

3 may, after consultation in accordance with sub4 section (i), recommend to the appropriate Fed5 eral banking agency that such agency suspend

6 consideration of or deny a request for author7 ization that is filed—

8 (i) by a person of a foreign country

9 listed in a determination published under

10 subsection (d)(1); and

11 (ii) after the date of the publication of

12 such determination.

13 (B) CONDITIONS FOR EXERCISE OF AU14 THORITY.—The Secretary may make a rec15 ommendation under subparagraph (A), if the

16 Secretary determines that—

17 (i) such action would assist the Unit18 ed States in negotiations to eliminate deni19 als of national treatment against United

20 States banking organizations; or

21 (ii) the country has not adhered ade22 quately to an agreement reached as a re23 sult of negotiations undertaken pursuant

24 to subsection (c).
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1 (2) CONSISTENCY WITH BILATERAL AND MUL2 TILATERAL AGREEMENTS.—The authority of the

3 Secretary under paragraph (1) may not be used to

4 take actions with respect to a foreign country which

5 are inconsistent with any bilateral or multilateral

6 agreement that governs financial services in which

7 such country is obligated to provide national treat8 ment for United States banking organizations.

9 (3) DIRECTION OF PRESIDENT.—The exercise

10 of any authority of the Secretary under paragraph

11 (1) shall be subject to the specific direction (if any)

12 of the President.

13 (4) SUSPENSIONS OF REQUESTS.—

14 (A) IN GENERAL.—Notwithstanding any

15 other provision of law, but subject to paragraph

16 (5), if, pursuant to paragraph (1), the Sec17 retary recommends to the appropriate Federal

18 banking agency that the agency suspend the

19 agency’s consideration of a request for author20 ization by a person of a foreign country, the

21 agency shall—

22 (i) suspend the agency’s consideration

23 of the request for a period of 180 days;

24 and
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1 (ii) at the recommendation of the Sec2 retary, extend any such suspension for an

3 additional period of 180 days.

4 (B) TERMINATION OF SUSPENSION.—The

5 appropriate Federal banking agency shall, at

6 any time, terminate a suspension under sub7 paragraph (A) at the recommendation of the

8 Secretary.

9 (5) EXCEPTIONS.—

10 (A) IN GENERAL.—The appropriate Fed11 eral banking agency shall act in accordance

12 with any recommendation of the Secretary

13 made under paragraph (1) unless the agency

14 determines, in writing, and transmits such de15 termination to the Secretary and the Congress,

16 that action in accordance with such rec17 ommendation—

18 (i) would have a serious adverse effect

19 on—

20 (I) the stability of the United

21 States financial system; or

22 (II) the safe and sound operation

23 of the payments system; or

24 (ii) would adversely affect the ability

25 of the appropriate Federal banking agen-
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1 cies to act on a request for authorization

2 made in connection with the resolution of

3 an insured depository institution described

4 in section 13(c)(2)(B) of the Federal De5 posit Insurance Act because the foreign

6 bank represents the only bona fide reason7 able offer available with respect to such

8 resolution.

9 (B) DETERMINATION OF REASONABLE10 NESS OF OFFER.—In determining whether the

11 offer of a foreign bank represents the only bona

12 fide reasonable offer available for purposes of

13 subparagraph (A)(ii), the appropriate Federal

14 banking agency shall consider, among such

15 other factors as the agency may consider to be

16 appropriate, whether the offer represents the

17 least cost to the respective deposit insurance

18 fund relative to all other possible means for

19 meeting the requirements of section 13(c)(4) of

20 the Federal Deposit Insurance Act.

21 (f) RECIPROCAL GRANDFATHER EXEMPTION FROM

22 SANCTIONS.—The authority of subsection (e) may not be

23 used to suspend or deny a request for authorization by

24 any United States depository institution (other than a

25 branch of a foreign bank (as defined in section 1(b) of
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1 the International Banking Act of 1978)) or any company

2 established pursuant to section 4(c)(8) of the Bank Hold3 ing Company Act of 1956 if—

4 (1) such institution or company was controlled

5 as of December 31, 1994, by a person of a foreign

6 country and such control has been maintained con7 tinuously since that date; and

8 (2) such person’s foreign country, by law or

9 regulation (which took effect on or before December

10 31, 1994, and remains in effect) and in practice, ex11 plicitly provides national treatment to—

12 (A) banks which were established or ac13 quired in such country by United States bank14 ing organizations before the effective date of

15 such law or regulation of the foreign country;

16 and

17 (B) subsidiaries (of such banks) which

18 were established or acquired in such country by

19 United States banking organizations before

20 such effective date.

21 (g) REPORT.—

22 (1) CONTENTS OF REPORT.—Not later than

23 December 1, 1996, and annually after such date, the

24 Secretary shall submit to the Speaker of the House

25 of Representatives and the Committee on Banking,
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1 Housing, and Urban Affairs of the Senate a report

2 that—

3 (A) specifies the foreign countries identi4 fied under subsection (a);

5 (B) if a determination has been published

6 under subsection (d)(1) with respect to a for7 eign country, provides the reasons for such de8 termination;

9 (C) if the Secretary has not made or has

10 rescinded such a determination with respect to

11 a foreign country, provides the reasons for the

12 failure to make the determination or for the re13 scission;

14 (D) describes the results of any negotia15 tions conducted under subsection (c)(1) with a

16 foreign country; and

17 (E) discusses the effectiveness of the ad18 ministration of this section in achieving the

19 purposes of the section.

20 (2) SUBMISSION OF REPORT.—The report re21 quired by paragraph (1) may be submitted as part

22 of a report or update submitted under section 3602

23 of the Omnibus Trade and Competitiveness Act of

24 1988.
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1 (h) DEFINITIONS.—The following definitions shall

2 apply for purposes of this section:

3 (1) APPROPRIATE FEDERAL BANKING AGEN4 CY.—The term ‘‘appropriate Federal banking agen5 cy’’—

6 (A) has the same meaning as in section

7 3(q) of the Federal Deposit Insurance Act; and

8 (B) includes the Board of Governors of the

9 Federal Reserve System (in addition to any

10 other agency which may be an appropriate Fed11 eral banking agency under such section 3(q)) in

12 the case of any request for authorization to—

13 (i) establish a United States rep14 resentative office, agency, or branch of a

15 foreign bank (as such terms are defined in

16 section 1(b) of the International Banking

17 Act of 1978);

18 (ii) establish or acquire an interest in

19 a commercial lending company (as defined

20 in section 1(b) of the International Bank21 ing Act of 1978) or a corporation orga22 nized or operating under section 25 or 25A

23 of the Federal Reserve Act; or

24 (iii) acquire an interest in a bank or

25 bank holding company, or any company
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1 that is not a bank, under the Bank Hold2 ing Company Act of 1956 or this Act.

3 (2) BANKING ORGANIZATION.—

4 (A) IN GENERAL.—The term ‘‘banking or5 ganization’’ means any bank, any bank holding

6 company (including any company required to

7 file reports pursuant to section 4(f)(6) of the

8 Bank Holding Company Act of 1956), any sav9 ings and loan holding company (as such term is

10 defined in section 10(a)(1)(D) of the Home

11 Owners’’ Loan Act), any nonbank financial en12 tity the primary purpose of which is to provide

13 credit or financing (regardless of whether such

14 entity accepts deposits), and any subsidiary of

15 any such bank, company, or entity.

16 (B) BANKING TERMS.—For purposes of

17 this paragraph and paragraph (1)(B)(iii), the

18 terms ‘‘bank’’, ‘‘bank holding company’’, ‘‘com19 pany’’, and ‘‘subsidiary’’ have the same mean20 ing as in section 2 of the Bank Holding Com21 pany Act of 1956.

22 (4) DEFINITIONS RELATING TO DEPOSITORY

23 INSTITUTIONS.—The terms ‘‘depository institution’’

24 and ‘‘depository institution holding company’’ have
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1 the same meaning as in section 3 of the Federal De2 posit Insurance Act.

3 (5) REQUEST FOR AUTHORIZATION.—The term

4 ‘‘request for authorization’’ means any application,

5 notice, registration, or other request for authoriza6 tion that is required under Federal banking law or

7 regulation—

8 (A) to establish facilities or engage in ac9 tivities at a new geographic location;

10 (B) to engage in additional activities or ex11 pand existing activities; or

12 (C) involving a change in control of any

13 depository institution or depository institution

14 holding company.

15 (i) CONSULTATION.—In the case of any consultation

16 pursuant to this section which is required to be made in

17 accordance with this subsection, the Secretary of the

18 Treasury shall consult with the Secretary of State, the

19 Trade Representative, the Secretary of Commerce, and

20 any appropriate Federal banking agency.

21 SEC. 4. EFFECTUATING THE PRINCIPLE OF NATIONAL

22 TREATMENT FOR SECURITIES ORGANIZA23 TIONS.

24 (a) IDENTIFYING COUNTRIES THAT MAY BE DENY25 ING NATIONAL TREATMENT TO UNITED STATES SECURI-
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1 TIES ORGANIZATIONS.—The Secretary shall identify, after

2 consultation in accordance with subsection (i), the extent

3 to which foreign countries may be denying national treat4 ment to United States securities organizations—

5 (1) according to the most recent report under

6 section 3602 of the Omnibus Trade and Competi7 tiveness Act of 1988 (or the most recent update of

8 such report); or

9 (2) based on more recent information that the

10 Secretary considers appropriate.

11 (b) DETERMINING WHETHER POSSIBLE DENIAL OF

12 NATIONAL TREATMENT MAY BE HAVING A SIGNIFICANT

13 ADVERSE EFFECT.—

14 (1) IN GENERAL.—The Secretary shall deter15 mine, after consultation in accordance with sub16 section (i), whether the possible denial of national

17 treatment to United States securities organizations

18 by a foreign country identified under subsection (a)

19 may be having a significant adverse effect on such

20 organizations.

21 (2) FACTORS TO BE CONSIDERED.—In making

22 any determination under paragraph (1), the Sec23 retary shall consider appropriate factors, including

24 the following:
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1 (A) The extent of United States trade with

2 and investment in the foreign country, the size

3 of the foreign country’s markets for the finan4 cial services involved, and the extent to which

5 United States securities organizations operate

6 or seek to operate in those markets.

7 (B) The importance of operations by Unit8 ed States securities organizations in the foreign

9 country to the export of goods and services by

10 United States firms to such country.

11 (C) The extent to which the foreign coun12 try provides in advance to United States securi13 ties organizations a written draft of any meas14 ure of general application that the country pro15 poses to adopt, such as regulations, guidelines,

16 or other policies regarding new products and

17 services, in order to allow an opportunity for

18 such organizations to comment on the measure

19 and for such comments to be taken into account

20 by the foreign country.

21 (D) The extent to which the foreign coun22 try—

23 (i) makes available, in writing, to

24 United States securities organizations the

25 foreign country’s requirements for complet-
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1 ing any application relating to the provi2 sion of financial services by any such orga3 nization;

4 (ii) applies published, objective stand5 ards and criteria in evaluating any such

6 application from any United States securi7 ties organization; and

8 (iii) renders administrative decisions

9 relating to any such application within a

10 reasonable period of time.

11 (3) SOLICITATION OF COMMENTS.—Before

12 making any determination under paragraph (1), the

13 Secretary shall solicit comments concerning the ef14 fect of the possible denial of national treatment on

15 United States securities organizations from inter16 ested parties.

17 (c) NEGOTIATIONS.—

18 (1) MANDATORY INITIATION OF NEGOTIATIONS

19 IN CERTAIN CASES.—If the Secretary determines

20 under subsection (b) that the possible denial of na21 tional treatment to United States securities organi22 zations by a foreign country identified under sub23 section (a) may be having a significant adverse ef24 fect on such organizations, the Secretary shall initi25 ate negotiations with such foreign country to ensure
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1 that such country accords national treatment to

2 United States securities organizations.

3 (2) EXCEPTIONS.—Paragraph (1) shall not

4 apply with respect to any foreign country if the Sec5 retary—

6 (A) determines that negotiations with such

7 country in accordance with paragraph (1)—

8 (i) would be unlikely to result in

9 progress toward according national treat10 ment to United States securities organiza11 tions; or

12 (ii) would impair the economic inter13 ests of the United States; and

14 (B) gives written notice of that determina15 tion to the Congress.

16 (d) PUBLICATION OF POSTNEGOTIATION DETER17 MINATION; DISPUTE RESOLUTION PROCEEDING.—

18 (1) PUBLICATION.—If, after making a deter19 mination under subsection (b) that the possible de20 nial of national treatment to United States securities

21 organizations by a foreign country may be having a

22 significant adverse effect on such organizations, the

23 Secretary determines, after consultation in accord24 ance with subsection (i), that—
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1 (A) any negotiations under subsection (c)

2 have not resulted in, or are not likely to result

3 in, progress toward according national treat4 ment to United States securities organizations;

5 and

6 (B) effective relief is not available under

7 any bilateral or multilateral agreement de8 scribed in paragraph (2)(A);

9 the Secretary may publish, in the Federal Register,

10 a final determination in accordance with subsections

11 (a) and (b) that such country is denying national

12 treatment to United States securities organizations

13 and the denial is having a significant adverse effect

14 on any such organizations.

15 (2) DISPUTE RESOLUTION UNDER APPLICABLE

16 AGREEMENTS.—If, after making a determination

17 under subsection (b) that the possible denial of na18 tional treatment to United States securities organi19 zations by a foreign country may be having a signifi20 cant adverse effect on such organizations—

21 (A) the Secretary determines that the acts,

22 policies, or practices of the foreign country

23 which give rise to such determination are sub24 ject to any bilateral or multilateral agreement

25 that governs financial services that has been en-
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1 tered into by the President and approved by the

2 Senate and House of Representatives; and

3 (B) the agreement provides for a formal

4 process for resolving disputes regarding obliga5 tions under the agreement;

6 the United States shall initiate a proceeding under

7 the agreement to enforce the rights of the United

8 States under the agreement.

9 (3) ANNUAL REVIEW OF DETERMINATIONS.—

10 The Secretary shall, not less frequently than annu11 ally and after consultation in accordance with sub12 section (i), review each determination published pur13 suant to paragraph (1) to determine whether the de14 termination should be rescinded.

15 (4) NOTIFICATION OF APPROPRIATE STATE OF16 FICIALS OF PUBLICATION OF DETERMINATION.—The

17 Secretary shall inform appropriate State securities

18 regulatory agencies of the publication of any deter19 mination under paragraph (1).

20 (e) DISCRETIONARY SANCTIONS.—

21 (1) ACTION BY THE SECRETARY.—

22 (A) IN GENERAL.—Subject to subpara23 graph (B) and paragraph (2), the Secretary

24 may, after consultation in accordance with sub25 section (i), recommend to the Commission that
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1 the Commission suspend consideration of or

2 deny a request for authorization that is filed—

3 (i) by a person of a foreign country

4 listed in a determination published under

5 subsection (d)(1); and

6 (ii) after the date of the publication of

7 such determination.

8 (B) CONDITIONS FOR EXERCISE OF AU9 THORITY.—The Secretary may make a rec10 ommendation under subparagraph (A), if the

11 Secretary determines that—

12 (i) such action would assist the Unit13 ed States in negotiations to eliminate deni14 als of national treatment against United

15 States securities organizations; or

16 (ii) the country has not adhered ade17 quately to an agreement reached as a re18 sult of negotiations undertaken pursuant

19 to subsection (c).

20 (2) CONSISTENCY WITH BILATERAL AND MUL21 TILATERAL AGREEMENTS.—The authority of the

22 Secretary under paragraph (1) may not be used to

23 take actions with respect to a foreign country which

24 are inconsistent with any bilateral or multilateral

25 agreement that governs financial services in which
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1 such country is obligated to provide national treat2 ment for United States securities organizations.

3 (3) DIRECTION OF PRESIDENT.—The exercise

4 of any authority of the Secretary under paragraph

5 (1) shall be subject to the specific direction (if any)

6 of the President.

7 (4) ADDITIONAL PROVISIONS APPLICABLE TO

8 REQUESTS FOR AUTHORIZATION.—

9 (A) AUTHORITY UPON DENIAL OF AU10 THORIZATION.—

11 (i) IN GENERAL.—In connection with

12 a recommendation under paragraph (1)(A)

13 to deny a request for authorization de14 scribed in subsection (h)(2), the Commis15 sion may order—

16 (I) the disposition of any control17 ling interest referred to in clause

18 (ii)(I) of such subsection;

19 (II) the closure of any office re20 ferred to in subsection clause (ii)(II)

21 of such subsection; or

22 (III) the termination of any advi23 sory relationship referred to in clause

24 (iii) or (iv) of such subsection.
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1 (ii) ENFORCEMENT.—The Commis2 sion may enforce an order under clause (i)

3 through appropriate action under the secu4 rities laws, including, if necessary, revoca5 tion of the underlying registration of any

6 person who fails to comply with such an

7 order.

8 (B) NOTICE REQUIRED TO FILE REQUESTS

9 FOR AUTHORIZATION.—

10 (i) IN GENERAL.—If a determination

11 is published under subsection (d)(1) with

12 respect to a foreign country on the basis of

13 the adverse effect the denial of national

14 treatment by such country is having on se15 curities organizations, no person of that

16 foreign country may file a request for au17 thorization described in subsection (h)(2)

18 unless such person files notice of such re19 quest simultaneously with the Commission

20 and the Secretary, not less than 90 days in

21 advance of the action that is the subject of

22 the request, in such form and containing

23 such information as the Commission may

24 prescribe by rule.
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1 (ii) EXTENDING 90-DAY PERIOD.—The

2 Commission may, by order, extend for an

3 additional 180 days the period during

4 which the Commission may consider a re5 quest for authorization described in sub6 section (h)(2) that is the subject of a no7 tice received under clause (i).

8 (5) SUSPENSIONS OF REQUESTS.—

9 (A) IN GENERAL.—Notwithstanding any

10 other provision of law, but subject to paragraph

11 (6), if, pursuant to paragraph (1), the Sec12 retary recommends to the Commission that the

13 Commission suspend the Commission’s consid14 eration of a request for authorization by a per15 son of a foreign country, the Commission

16 shall—

17 (i) suspend the Commission’s consid18 eration of the request for a period of 180

19 days; and

20 (ii) at the recommendation of the Sec21 retary, extend any such suspension for an

22 additional period of 180 days.

23 (B) TERMINATION OF SUSPENSION.—The

24 Commission, as the case may be, shall, at any

25 time, terminate a suspension under subpara-
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1 graph (A) at the recommendation of the Sec2 retary.

3 (6) EXCEPTIONS.—The Commission shall act in

4 accordance with any recommendation of the Sec5 retary made under paragraph (1) unless the Com6 mission determines, in writing, and transmits such

7 determination to the Secretary and the Congress,

8 that action in accordance with such recommendation

9 would have a serious adverse effect on—

10 (A) the maintenance of fair and orderly se11 curities markets; or

12 (B) the protection of investors.

13 (f) RECIPROCAL GRANDFATHER EXEMPTION FROM

14 SANCTIONS.—

15 (1) IN GENERAL.—The authority of subsection

16 (e) may not be used to suspend or deny a request

17 for authorization by any securities organization

18 which is organized under the laws of the United

19 States, any State, or the District of Columbia, if—

20 (A) organization was controlled as of De21 cember 31, 1994, by a person of a foreign coun22 try and such control has been maintained con23 tinuously since that date; and

24 (B) such person’s foreign country, by law

25 or regulation (which took effect on or before
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1 December 31, 1994, and remains in effect) and

2 in practice, explicitly provides national treat3 ment to—

4 (i) securities companies which were

5 established or acquired in such country by

6 United States securities organizations be7 fore the effective date of such law or regu8 lation of the foreign country; and

9 (ii) subsidiaries (of such securities

10 companies) which were established or ac11 quired in such country by United States

12 securities organizations before such effec13 tive date.

14 (2) SECURITIES COMPANY DEFINED.—For pur15 poses of paragraph (1)(B), the term ‘‘securities com16 pany’’ means any company engaged, under the laws

17 or regulations of a foreign country, in the business

18 of—

19 (A) buying, selling, or underwriting securi20 ties, including municipal and government secu21 rities and instruments which are similar to se22 curities; or

23 (B) acting as an investment adviser, fidu24 ciary, transfer agent, or any similar function in25 volving the provision of investment services.
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1 (3) TREATMENT OF EUROPEAN COMMUNITY DI2 RECTIVE DURING PERIOD OF IMPLEMENTATION BY

3 MEMBER STATES.—During the period beginning on

4 the date of the enactment of the Fair Trade in Fi5 nancial Services Act of 1995 and ending on Decem6 ber 31, 1995, any directive of the European Com7 munity which—

8 (A) was adopted before December 31,

9 1994; and

10 (B) requires the implementation in na11 tional law by the Member States of the Euro12 pean Community of national treatment for se13 curities companies and subsidiaries described in

14 paragraph (1)(B);

15 may be treated as a law in effect in each such Mem16 ber State for purposes of paragraph (1).

17 (g) REPORT.—

18 (1) CONTENTS OF REPORT.—Not later than

19 December 1, 1996, and annually after such date, the

20 Secretary shall submit to the Speaker of the House

21 of Representatives and the Committee on Banking,

22 Housing, and Urban Affairs of the Senate a report

23 that—

24 (A) specifies the foreign countries identi25 fied under subsection (a);
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1 (B) if a determination has been published

2 under subsection (d)(1) with respect to a for3 eign country, provides the reasons for such de4 termination;

5 (C) if the Secretary has not made or has

6 rescinded such a determination with respect to

7 a foreign country, provides the reasons for the

8 failure to make the determination or for the re9 scission;

10 (D) describes the results of any negotia11 tions conducted under subsection (c)(1) with a

12 foreign country; and

13 (E) discusses the effectiveness of the ad14 ministration of this section in achieving the

15 purposes of the section.

16 (2) SUBMISSION OF REPORT.—The report re17 quired by paragraph (1) may be submitted as part

18 of a report or update submitted under section 3602

19 of the Omnibus Trade and Competitiveness Act of

20 1988.

21 (h) DEFINITIONS.—The following definitions shall

22 apply for purposes of this section:

23 (1) COMMISSION.—The term ‘‘Commission’’

24 means the Securities and Exchange Commission.
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1 (2) REQUEST FOR AUTHORIZATION.—The term

2 ‘‘request for authorization’’ means—

3 (A) an application to register under section

4 15(b), 15B, or 15C of the Securities Exchange

5 Act of 1934, or section 203(c) of the Invest6 ment Advisers Act of 1940, including an appli7 cation to succeed to the business of a registered

8 entity;

9 (B) an amendment to a registration re10 ferred to in clause (i) that reflects—

11 (i) the acquisition of control of the

12 registered entity; or

13 (ii) the addition of a United States of14 fice by the registered entity;

15 (C) a registration statement filed by an in16 vestment company under section 8 of the In17 vestment Company Act of 1940, if a person of

18 a foreign country will serve as an investment

19 adviser to the investment company; and

20 (D) an amendment to an investment com21 pany registration statement filed under section

22 8 of the Investment Company Act of 1940 that

23 reflects the retention of a person of a foreign

24 country as an investment adviser.
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1 (3) SECURITIES ORGANIZATION.—The term

2 ‘‘securities organization’’ means—

3 (A) any broker or dealer (as such terms

4 are defined in paragraphs (4) and (5), respec5 tively, of section 3(a) of the Securities Ex6 change Act of 1934);

7 (B) any investment adviser (as defined in

8 section 202(a)(11) of the Investment Advisers

9 Act of 1940); and

10 (C) any investment company (as defined in

11 section 3 of the Investment Company Act of

12 1940).

13 (i) CONSULTATION.—In the case of any consultation

14 pursuant to this section which is required to be made in

15 accordance with this subsection, the Secretary of the

16 Treasury shall consult with the Secretary of State, the

17 Secretary of Commerce, the Trade Representative, and the

18 Commission.

19 SEC. 5. EFFECTUATING THE PRINCIPLE OF NATIONAL

20 TREATMENT FOR INSURANCE ORGANIZA21 TIONS.

22 (a) IDENTIFYING COUNTRIES THAT MAY BE DENY23 ING NATIONAL TREATMENT TO UNITED STATES INSUR24 ANCE ORGANIZATIONS.—The President shall identify the
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1 extent to which foreign countries may be denying national

2 treatment to United States insurance organizations—

3 (1) according to the most recent report under

4 section 3602 of the Omnibus Trade and Competi5 tiveness Act of 1988 (or the most recent update of

6 such report); or

7 (2) based on other or more recent information

8 that the President considers appropriate.

9 (b) DETERMINING WHETHER POSSIBLE DENIAL OF

10 NATIONAL TREATMENT MAY BE HAVING A SIGNIFICANT

11 ADVERSE EFFECT.—

12 (1) IN GENERAL.—The President shall deter13 mine whether the possible denial of national treat14 ment to United States insurance organizations by a

15 foreign country identified under subsection (a) may

16 be having a significant adverse effect on such orga17 nizations.

18 (2) FACTORS TO BE CONSIDERED.—In making

19 any determination under paragraph (1), the Presi20 dent shall consider appropriate factors, including the

21 following:

22 (A) The extent of United States trade with

23 and investment in the foreign country, the size

24 of the foreign country’s markets for the finan25 cial services involved, and the extent to which
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1 United States insurance organizations operate

2 or seek to operate in those markets.

3 (B) The importance of operations by Unit4 ed States insurance organizations in the foreign

5 country to the export of goods and services by

6 United States firms to such country.

7 (C) The extent to which the foreign coun8 try provides in advance to United States insur9 ance organizations a written draft of any meas10 ure of general application that the country pro11 poses to adopt, such as regulations, guidelines,

12 or other policies regarding new products and

13 services, in order to allow an opportunity for

14 such organizations to comment on the measure

15 and for such comments to be taken into account

16 by the foreign country.

17 (D) The extent to which the foreign coun18 try—

19 (i) makes available, in writing, to

20 United States insurance organizations the

21 foreign country’s requirements for complet22 ing any application relating to the provi23 sion of financial services by any such orga24 nization;
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1 (ii) applies published, objective stand2 ards and criteria in evaluating any such

3 application from any United States insur4 ance organization; and

5 (iii) renders administrative decisions

6 relating to any such application within a

7 reasonable period of time.

8 (3) SOLICITATION OF COMMENTS.—Before

9 making any determination under paragraph (1), the

10 President shall solicit comments concerning the ef11 fect of the possible denial of national treatment on

12 United States insurance organizations from inter13 ested parties.

14 (c) NEGOTIATIONS.—

15 (1) MANDATORY INITIATION OF NEGOTIATIONS

16 IN CERTAIN CASES.—If the President determines

17 under subsection (b) that the possible denial of na18 tional treatment to United States insurance organi19 zations by a foreign country identified under sub20 section (a) may be having a significant adverse ef21 fect on such organizations, the Trade Representative

22 shall initiate negotiations with such foreign country

23 to ensure that such country accords national treat24 ment to United States insurance organizations.
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1 (2) EXCEPTIONS.—Paragraph (1) shall not

2 apply with respect to any foreign country if the

3 President—

4 (A) determines that negotiations with such

5 country in accordance with paragraph (1)—

6 (i) would be unlikely to result in

7 progress toward according national treat8 ment to United States insurance organiza9 tions; or

10 (ii) would impair the economic inter11 ests of the United States; and

12 (B) gives written notice of that determina13 tion to the Congress.

14 (d) PUBLICATION OF POSTNEGOTIATION DETER15 MINATION; DISPUTE RESOLUTION PROCEEDING.—

16 (1) PUBLICATION.—If, after making a deter17 mination under subsection (b) that the possible de18 nial of national treatment to United States insur19 ance organizations by a foreign country may be hav20 ing a significant adverse effect on such organiza21 tions, the President determines that—

22 (A) any negotiations under subsection (c)

23 have not resulted in, or are not likely to result

24 in, progress toward according national treat-
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1 ment to United States insurance organizations;

2 and

3 (B) effective relief is not available under

4 any bilateral or multilateral agreement de5 scribed in paragraph (2)(A);

6 the President may publish, in the Federal Register,

7 a final determination in accordance with subsections

8 (a) and (b) that such country is denying national

9 treatment to United States insurance organizations

10 and the denial is having a significant adverse effect

11 on any such organizations.

12 (2) DISPUTE RESOLUTION UNDER APPLICABLE

13 AGREEMENTS.—If, after making a determination

14 under subsection (b) that the possible denial of na15 tional treatment to United States insurance organi16 zations by a foreign country may be having a signifi17 cant adverse effect on such organizations—

18 (A) the President determines that the acts,

19 policies, or practices of the foreign country

20 which give rise to such determination are sub21 ject to any bilateral or multilateral agreement

22 that governs financial services that has been en23 tered into by the President and approved by the

24 Senate and House of Representatives; and
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1 (B) the agreement provides for a formal

2 process for resolving disputes regarding obliga3 tions under the agreement;

4 the United States shall initiate a proceeding under

5 the agreement to enforce the rights of the United

6 States under the agreement.

7 (3) ANNUAL REVIEW OF DETERMINATIONS.—

8 The President shall, not less frequently than annu9 ally, review each determination published pursuant

10 to paragraph (1) to determine whether the deter11 mination should be rescinded.

12 (4) NOTIFICATION OF APPROPRIATE STATE OF13 FICIALS OF PUBLICATION OF DETERMINATION.—The

14 President shall inform appropriate State insurance

15 regulatory agencies of the publication of any deter16 mination under paragraph (1).

17 (e) DISCRETIONARY SANCTIONS.—

18 (1) ACTION BY THE PRESIDENT.—Subject to

19 paragraph (2), the President may recommend to the

20 Secretary of the Treasury that the Secretary sus21 pend the acceptance of, or not accept, a registration

22 statement that is filed pursuant to subsection (j)

23 after the date of publication of a determination

24 under subsection (d)(1) by a person of a foreign
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1 country listed in such publication if the President

2 determines that—

3 (i) such action would assist the Unit4 ed States in negotiations to eliminate deni5 als of national treatment against United

6 States insurance organizations;

7 (ii) the country has not adequately

8 adhered to an agreement reached as a re9 sult of negotiations undertaken pursuant

10 to subsection (c).

11 (2) CONSISTENCY WITH BILATERAL AND MUL12 TILATERAL AGREEMENTS.—The authority of the

13 President under paragraph (1) may not be used to

14 take actions with respect to a foreign country which

15 are inconsistent with any bilateral or multilateral

16 agreement that governs financial services in which

17 such country is obligated to provide national treat18 ment for United States insurance organizations.

19 (3) SUSPENSIONS OF FILINGS OF REGISTRA20 TIONS.—

21 (A) IN GENERAL.—Notwithstanding any

22 other provision of law, if the President rec23 ommends, pursuant to paragraph (1), that the

24 Secretary suspend the acceptance of any reg-
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1 istration of an alien insurance company under

2 subsection (j), the Secretary shall—

3 (i) suspend the Secretary’s acceptance

4 of such registration for a period of 180

5 days; and

6 (ii) at the recommendation of the

7 President, extend such suspension for an

8 additional period of 180 days.

9 (B) TERMINATION OF SUSPENSION.—The

10 Secretary shall, on the recommendation of the

11 President, terminate any suspension in effect

12 under clause (i).

13 (C) ALTERNATIVE ACTION.—If the Presi14 dent determines that the procedure outlined in

15 subparagraph (A) is either inappropriate or im16 practical to achieve the purpose of this section,

17 the President may take such action under other

18 provisions of law as the President considers

19 necessary and appropriate to encourage foreign

20 countries to accord national treatment to Unit21 ed States insurance organizations that operate

22 or seek to operate in those countries.

23 (f) EXISTING ALIEN INSURANCE ORGANIZATION AC24 TIVITY.—The authority of subsection (e) may not be exer25 cised with the respect to any registration filed by an alien
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1 insurance organization which is engaged in insurance ac2 tivities within the United States as of January 4, 1995.

3 (g) REPORT.—

4 (1) CONTENTS OF REPORT.—Not later than

5 December 1, 1996, and annually after such date, the

6 President shall transmit to the Speaker of the

7 House of Representatives and the Committee on

8 Banking, Housing, and Urban Affairs of the Senate

9 a report that—

10 (A) specifies the foreign countries identi11 fied under subsection (a);

12 (B) if a determination has been published

13 under subsection (d)(1) with respect to a for14 eign country, provides the reasons for such de15 termination;

16 (C) if the President has not made or has

17 rescinded such a determination with respect to

18 a foreign country, provides the reasons for the

19 failure to make the determination or for the re20 scission;

21 (D) describes the results of any negotia22 tions conducted under subsection (c)(1) with a

23 foreign country; and
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1 (E) discusses the effectiveness of the ad2 ministration of this section in achieving the

3 purposes of the section.

4 (2) SUBMISSION OF REPORT.—The report re5 quired by paragraph (1) may be submitted as part

6 of a report or update submitted under section 3602

7 of the Omnibus Trade and Competitiveness Act of

8 1988.

9 (h) DEFINITIONS.—For purposes of this section, the

10 following definitions shall apply:

11 (1) ALIEN INSURANCE ORGANIZATION.—The

12 term ‘‘alien insurance organization’’ means an insur13 ance organization which is a person of a foreign

14 country.

15 (2) INSURANCE ORGANIZATION.—The term ‘‘in16 surance organization’’ means any insurer and any

17 reinsurer.

18 (3) INSURER.—The term ‘‘insurer’’ means a

19 party to a contract of insurance who assumes the

20 risk and undertakes to indemnify the insured, or to

21 pay a certain sum on the occurrence of a specified

22 contingency.

23 (4) REINSURER.—The term ‘‘reinsurer’’ means

24 an insurer which contracts to indemnify a ceding in-
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1 surer for all or part of a risk originally undertaken

2 by the ceding insurer.

3 (i) CONSULTATION.—In carrying out the duties

4 under this section, the President may consult with the ap5 propriate State insurance commissioners or regulatory

6 agencies and other entities the President may consider ap7 propriate.

8 (j) REGISTRATION OF ALIEN INSURANCE ORGANIZA9 TIONS WITH THE SECRETARY.—

10 (1) IN GENERAL.—No alien insurance organiza11 tion may engage in insurance activities within the

12 United States after the date of the enactment of this

13 Act unless—

14 (A) a registration statement has been filed

15 by the organization with the Secretary indicat16 ing the organization’s intention to engage in in17 surance activities within the United States; and

18 (B) applicable State insurance require19 ments have been satisfied.

20 (2) ANNUAL REPORT.—The Secretary shall

21 submit an annual report to the Congress on the ex22 tent of alien insurance organization activity within

23 the United States.

24 (k) DELEGATION.—
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1 (1) IN GENERAL.—The President may delegate

2 any authority of the President under this section.

3 (2) EXERCISE OF AUTHORITY.—If the Presi4 dent delegates any authority of the President under

5 this section, the designee’s authority shall be exer6 cised according to the specific direction (if any) of

7 the President.

8 SEC. 6. CONFORMING AMENDMENTS.

9 (a) REPORTS ON FOREIGN TREATMENT OF UNITED

10 STATES FINANCIAL INSTITUTIONS.—Section 3602 of the

11 Omnibus Trade and Competitiveness Act of 1988 (22

12 U.S.C. 5352) is amended—

13 (1) in the 1st sentence, by inserting ‘‘with up14 dates on significant developments every 2 years fol15 lowing the study conducted in 1994,’’ before ‘‘the

16 Secretary of the Treasury’’; and

17 (2) by adding at the end the following: ‘‘For

18 purposes of this section, a foreign country denies na19 tional treatment to United States entities unless the

20 foreign country offers such entities the same com21 petitive opportunities (including effective market ac22 cess) as are available to the domestic entities of the

23 foreign country in like circumstances.’’.

24 (b) NEGOTIATIONS TO PROMOTE FAIR TRADE IN FI25 NANCIAL SERVICES.—Section 3603(a)(1) of the Omnibus
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1 Trade and Competitiveness Act of 1988 (22 U.S.C.

2 5353(a)(1)) is amended by inserting ‘‘effective’’ before

3 ‘‘access’’.

4 (c) PRIMARY DEALERS IN GOVERNMENT DEBT IN5 STRUMENTS.—Section 3502(b)(1) of the Omnibus Trade

6 and Competitiveness Act of 1988 (22 U.S.C. 5342(b)(1))

7 is amended—

8 (1) by striking ‘‘does not accord to’’ and insert9 ing ‘‘does not offer’’; and

10 (2) by striking ‘‘as such country accords to do11 mestic companies of such country.’’ and inserting

12 ‘‘as are available to domestic companies of such

13 country in like circumstances.’’.

14 (d) CONFORMING AMENDMENTS TO THE SECURITIES

15 EXCHANGE ACT OF 1934.—

16 (1) SECTION 15.—Section 15(b)(1) of the Secu17 rities Exchange Act of 1934 (15 U.S.C. 78o(b)(1))

18 is amended by adding at the end the following: ‘‘The

19 Commission may suspend consideration or deny reg20 istration, as provided in section 4(e) of the Fair

21 Trade in Financial Services Act of 1995.’’.

22 (2) SECTION 15B.—Section 15B(a)(2) of the

23 Securities Exchange Act of 1934 (15 U.S.C. 78o–

24 4(a)(2)) is amended by adding at the end the follow25 ing: ‘‘The Commission may suspend consideration
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1 and deny registration, as provided in section 4(e) of

2 the Fair Trade in Financial Services Act of 1995’’.

3 (3) SECTION 15C.—Section 15C(a)(2) of the Se4 curities Exchange Act of 1934 (15 U.S.C. 78o–

5 5(a)(2)) is amended by adding at the end the follow6 ing: ‘‘The Commission may suspend consideration

7 and deny registration, as provided in section 4(e) of

8 the Fair Trade in Financial Services Act of 1995.’’.

9 (e) CONFORMING AMENDMENT TO THE INVESTMENT

10 COMPANY ACT OF 1940.—Section 8 of the Investment

11 Company Act of 1940 (15 U.S.C. 80a–8) is amended by

12 adding at the end the following new subsection:

13 ‘‘(g) The Commission may suspend consideration and

14 deny registration, as provided in section 4(e) of the Fair

15 Trade in Financial Services Act of 1995.’’.

16 (f) CONFORMING AMENDMENT TO THE INVESTMENT

17 ADVISERS ACT OF 1940.—Section 203(c)(2) of the Invest18 ment Advisers Act of 1940 (15 U.S.C. (c)(2)) is amended

19 by adding at the end the following: ‘‘The Commission may

20 suspend consideration or deny registration, as provided in

21 section 4(e) of the Fair Trade in Financial Services Act

22 of 1995.’’.

23 (g) REPORT ON DENIAL OF NATIONAL TREATMENT

24 FOR INSURANCE ORGANIZATIONS.—Section 3602(3) of

25 the Omnibus Trade and Competitiveness Act of 1988 (22
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1 U.S.C. 5352(3)) is amended by inserting ‘‘, insurance or2 ganizations,’’ after ‘‘banking organizations’’.

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