Calendar No. 204 

106TH CONGRESS 

1ST SESSION H. R. 10 

AN ACT 

To enhance competition in the financial services inpurposes. other financial service providers, and for other the affiliation of banks, securities firms, and dustry by providing a prudential framework for 

JULY 12, 1999 

Received; read twice and placed on the calendar 


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Calendar No. 204 

106TH CONGRESS 

1ST SESSION H. R. 10 

IN THE SENATE OF THE UNITED STATES 

JULY 12, 1999 

Received; read twice and placed on the Calendar 

AN ACT 

To enhance competition in the financial services industry 

by providing a prudential framework for the affiliation 

of banks, securities firms, and other financial service 

providers, and for other purposes. 

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


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1 SECTION 1. SHORT TITLE; PURPOSES; TABLE OF CON2 TENTS. 

3 (a) SHORT TITLE.—This Act may be cited as the 

4 ‘‘Financial Services Act of 1999’’. 

5 (b) PURPOSES.—The purposes of this Act are as fol6 lows: 

7 (1) To enhance competition in the financial 

8 services industry, in order to foster innovation and 

9 efficiency. 

10 (2) To ensure the continued safety and sound11 ness of depository institutions. 

12 (3) To provide necessary and appropriate pro13 tections for investors and ensure fair and honest 

14 markets in the delivery of financial services. 

15 (4) To avoid duplicative, potentially conflicting, 

16 and overly burdensome regulatory requirements 

17 through the creation of a regulatory framework for 

18 financial holding companies that respects the diver19 gent requirements of each of the component busi20 nesses of the holding company, and that is based 

21 upon principles of strong functional regulation and 

22 enhanced regulatory coordination. 

23 (5) To reduce and, to the maximum extent 

24 practicable, to eliminate the legal barriers preventing 

25 affiliation among depository institutions, securities 

26 firms, insurance companies, and other financial servVerDate Mar 15 2010 15:06 Jun 10, 2011 Jkt 223001 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\ERIC\H10.PCS H10

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1 ice providers and to provide a prudential framework 

2 for achieving that result. 

3 (6) To enhance the availability of financial serv4 ices to citizens of all economic circumstances and in 

5 all geographic areas. 

6 (7) To enhance the competitiveness of United 

7 States financial service providers internationally. 

8 (8) To ensure compliance by depository institu9 tions with the provisions of the Community Rein10 vestment Act of 1977 and enhance the ability of de11 pository institutions to meet the capital and credit 

12 needs of all citizens and communities, including un13 derserved communities and populations. 

14 (c) TABLE OF CONTENTS.—The table of contents for 

15 this Act is as follows: 

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

TITLE I—FACILITATING AFFILIATION AMONG SECURITIES FIRMS, 

INSURANCE COMPANIES, AND DEPOSITORY INSTITUTIONS 

Subtitle A—Affiliations 

Sec. 101. Glass-Steagall Act reformed. 

Sec. 102. Activity restrictions applicable to bank holding companies which are 

not financial holding companies. 

Sec. 103. Financial holding companies. 

Sec. 104. Operation of State law. 

Sec. 105. Mutual bank holding companies authorized. 

Sec. 105A. Public meetings for large bank acquisitions and mergers. 

Sec. 106. Prohibition on deposit production offices. 

Sec. 107. Clarification of branch closure requirements. 

Sec. 108. Amendments relating to limited purpose banks. 

Sec. 109. GAO study of economic impact on community banks, other small financial institutions, insurance agents, and consumers. 

Sec. 110. Responsiveness to community needs for financial services. 

Sec. 110A. Study of financial modernization’s affect on the accessibility of 

small business and farm loans. 


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Subtitle B—Streamlining Supervision of Financial Holding Companies 

Sec. 111. Streamlining financial holding company supervision. 

Sec. 112. Elimination of application requirement for financial holding companies. 

Sec. 113. Authority of State insurance regulator and Securities and Exchange 

Commission. 

Sec. 114. Prudential safeguards. 

Sec. 115. Examination of investment companies. 

Sec. 116. Limitation on rulemaking, prudential, supervisory, and enforcement 

authority of the Board. 

Sec. 117. Equivalent regulation and supervision. 

Sec. 118. Prohibition on FDIC assistance to affiliates and subsidiaries. 

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

of 1956. 

Sec. 120. Technical amendment. 

Subtitle C—Subsidiaries of National Banks 

Sec. 121. Permissible activities for subsidiaries of national banks. 

Sec. 122. Safety and soundness firewalls between banks and their financial subsidiaries. 

Sec. 123. Misrepresentations regarding depository institution liability for obligations of affiliates. 

Sec. 124. Repeal of stock loan limit in Federal Reserve Act. 

Subtitle D—Wholesale Financial Holding Companies; Wholesale Financial 

Institutions 

CHAPTER 1—WHOLESALE FINANCIAL HOLDING COMPANIES

Sec. 131. Wholesale financial holding companies established. 

Sec. 132. Authorization to release reports. 

Sec. 133. Conforming amendments. 

CHAPTER 2—WHOLESALE FINANCIAL INSTITUTIONS

Sec. 136. Wholesale financial institutions. 

Subtitle E—Preservation of FTC Authority 

Sec. 141. Amendment to the Bank Holding Company Act of 1956 to modify 

notification and post-approval waiting period for section 3 

transactions. 

Sec. 142. Interagency data sharing. 

Sec. 143. Clarification of status of subsidiaries and affiliates. 

Sec. 144. Annual GAO report. 

Subtitle F—National Treatment 

Sec. 151. Foreign banks that are financial holding companies. 

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

Sec. 153. Representative offices. 

Sec. 154. Reciprocity. 

Subtitle G—Federal Home Loan Bank System Modernization 


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Sec. 161. Short title. 

Sec. 162. Definitions. 

Sec. 163. Savings association membership. 

Sec. 164. Advances to members; collateral. 

Sec. 165. Eligibility criteria. 

Sec. 166. Management of banks. 

Sec. 167. Resolution Funding Corporation. 

Sec. 168. Capital structure of Federal home loan banks. 

Subtitle H—ATM Fee Reform 

Sec. 171. Short title. 

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

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

Sec. 174. Feasibility study. 

Sec. 175. No liability if posted notices are damaged. 

Subtitle I—Direct Activities of Banks 

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

Subtitle J—Deposit Insurance Funds 

Sec. 186. Study of safety and soundness of funds. 

Sec. 187. Elimination of SAIF and DIF special reserves. 

Subtitle K—Miscellaneous Provisions 

Sec. 191. Termination of ‘‘know your customer’’ regulations. 

Sec. 192. Study and report on Federal electronic fund transfers. 

Sec. 193. General Accounting Office study of conflicts of interest. 

Sec. 194. Study of cost of all Federal banking regulations. 

Sec. 195. Study and report on adapting existing legislative requirements to online banking and lending. 

Sec. 196. Regulation of uninsured State member banks. 

Sec. 197. Clarification of source of strength doctrine. 

Sec. 198. Interest rates and other charges at interstate branches. 

Sec. 198A. Interstate branches and agencies of foreign banks. 

Sec. 198B. Fair treatment of women by financial advisers. 

Subtitle L—Effective Date of Title 

Sec. 199. 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 excepted banking product. 

Sec. 207. Additional definitions. 

Sec. 208. Government securities defined. 

Sec. 209. Effective date. 

Sec. 210. Rule of construction. 


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Subtitle B—Bank Investment Company Activities 

Sec. 211. Custody of investment company assets by affiliated bank. 

Sec. 212. Lending to an affiliated investment company. 

Sec. 213. Independent directors. 

Sec. 214. Additional SEC disclosure authority. 

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

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

Sec. 217. Removal of the exclusion from the definition of investment adviser for 

banks that advise investment companies. 

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

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

Sec. 220. Interagency consultation. 

Sec. 221. Treatment of bank common trust funds. 

Sec. 222. Investment advisers prohibited from having controlling interest in 

registered investment company. 

Sec. 223. Statutory disqualification for bank wrongdoing. 

Sec. 224. Conforming change in definition. 

Sec. 225. Conforming amendment. 

Sec. 226. Church plan exclusion. 

Sec. 227. Effective date. 

Subtitle C—Securities and Exchange Commission Supervision of Investment 

Bank Holding Companies 

Sec. 231. Supervision of investment bank holding companies by the Securities 

and Exchange Commission. 

Subtitle D—Disclosure of Customer Costs of Acquiring Financial Products 

Sec. 241. Improved and consistent disclosure. 

Subtitle E—Banks and Bank Holding Companies 

Sec. 251. Consultation. 

TITLE III—INSURANCE 

Subtitle A—State Regulation of Insurance 

Sec. 301. State regulation of the business of insurance. 

Sec. 302. Mandatory insurance licensing requirements. 

Sec. 303. Functional regulation of insurance. 

Sec. 304. Insurance underwriting in national banks. 

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

Sec. 306. Expedited and equalized dispute resolution for Federal regulators. 

Sec. 307. Consumer protection regulations. 

Sec. 308. Certain State affiliation laws preempted for insurance companies and 

affiliates. 

Sec. 309. Interagency consultation. 

Sec. 310. Definition of State. 

Subtitle B—Redomestication of Mutual Insurers 

Sec. 311. General application. 

Sec. 312. Redomestication of mutual insurers. 

Sec. 313. Effect on State laws restricting redomestication. 

Sec. 314. Other provisions. 


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Sec. 315. Definitions. 

Sec. 316. Effective date. 

Subtitle C—National Association of Registered Agents and Brokers 

Sec. 321. State flexibility in multistate licensing reforms. 

Sec. 322. National Association of Registered Agents and Brokers. 

Sec. 323. Purpose. 

Sec. 324. Relationship to the Federal Government. 

Sec. 325. Membership. 

Sec. 326. Board of directors. 

Sec. 327. Officers. 

Sec. 328. Bylaws, rules, and disciplinary action. 

Sec. 329. Assessments. 

Sec. 330. Functions of the NAIC. 

Sec. 331. Liability of the Association and the directors, officers, and employees 

of the Association. 

Sec. 332. Elimination of NAIC oversight. 

Sec. 333. Relationship to State law. 

Sec. 334. Coordination with other regulators. 

Sec. 335. Judicial review. 

Sec. 336. Definitions. 

Subtitle D—Rental Car Agency Insurance Activities 

Sec. 341. Standard of regulation for motor vehicle rentals. 

Subtitle E—Confidentiality 

Sec. 351. Confidentiality of health and medical information. 

TITLE IV—UNITARY SAVINGS AND LOAN HOLDING COMPANIES 

Sec. 401. Prohibition on new unitary savings and loan holding companies. 

Sec. 402. Retention of ‘‘Federal’’ in name of converted Federal savings association. 

TITLE V—PRIVACY 

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. Fair Credit Reporting Act amendment. 

Sec. 507. Relation to other provisions. 

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. 


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Sec. 525. Agency guidance. 

Sec. 526. Reports. 

Sec. 527. Definitions. 

1 TITLE I—FACILITATING AFFILI2 ATION AMONG SECURITIES 

3 FIRMS, INSURANCE COMPA4 NIES, AND DEPOSITORY IN5 STITUTIONS 

6 Subtitle A—Affiliations 

7 SEC. 101. GLASS-STEAGALL ACT REFORMED. 

8 (a) SECTION 20 REPEALED.—Section 20 of the 

9 Banking Act of 1933 (12 U.S.C. 377) (commonly referred 

10 to as the ‘‘Glass-Steagall Act’’) is repealed. 

11 (b) SECTION 32 REPEALED.—Section 32 of the 

12 Banking Act of 1933 (12 U.S.C. 78) is repealed. 

13 SEC. 102. ACTIVITY RESTRICTIONS APPLICABLE TO BANK 

14 HOLDING COMPANIES WHICH ARE NOT FI15 NANCIAL HOLDING COMPANIES. 

16 (a) IN GENERAL.—Section 4(c)(8) of the Bank Hold17 ing Company Act of 1956 (12 U.S.C. 1843(c)(8)) is 

18 amended to read as follows: 

19 ‘‘(8) shares of any company the activities of 

20 which had been determined by the Board by regula21 tion or order under this paragraph as of the day be22 fore the date of the enactment of the Financial Serv23 ices Act of 1999, to be so closely related to banking 

24 as to be a proper incident thereto (subject to such 


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1 terms and conditions contained in such regulation or 

2 order, unless modified by the Board);’’. 

3 (b) CONFORMING CHANGES TO OTHER STATUTES.— 

4 (1) AMENDMENT TO THE BANK HOLDING COM5 PANY ACT AMENDMENTS OF 1970.—Section 105 of 

6 the Bank Holding Company Act Amendments of 

7 1970 (12 U.S.C. 1850) is amended by striking ‘‘, to 

8 engage directly or indirectly in a nonbanking activity 

9 pursuant to section 4 of such Act,’’. 

10 (2) AMENDMENT TO THE BANK SERVICE COM11 PANY ACT.—Section 4(f) of the Bank Service Com12 pany Act (12 U.S.C. 1864(f)) is amended by strik13 ing the period and adding at the end the following: 

14 ‘‘as of the day before the date of the enactment of 

15 the Financial Services Act of 1999.’’. 

16 SEC. 103. FINANCIAL HOLDING COMPANIES. 

17 (a) IN GENERAL.—The Bank Holding Company Act 

18 of 1956 is amended by inserting after section 5 (12 U.S.C. 

19 1844) the following new section: 

20 ‘‘SEC. 6. FINANCIAL HOLDING COMPANIES. 

21 ‘‘(a) FINANCIAL HOLDING COMPANY DEFINED.— 

22 For purposes of this section, the term ‘financial holding 

23 company’ means a bank holding company which meets the 

24 requirements of subsection (b). 


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1 ‘‘(b) ELIGIBILITY REQUIREMENTS FOR FINANCIAL

2 HOLDING COMPANIES.— 

3 ‘‘(1) IN GENERAL.—No bank holding company 

4 may engage in any activity or directly or indirectly 

5 acquire or retain shares of any company under this 

6 section unless the bank holding company meets the 

7 following requirements: 

8 ‘‘(A) All of the subsidiary depository insti9 tutions of the bank holding company are well 

10 capitalized. 

11 ‘‘(B) All of the subsidiary depository insti12 tutions of the bank holding company are well 

13 managed. 

14 ‘‘(C) All of the subsidiary depository insti15 tutions of the bank holding company have 

16 achieved a rating of ‘satisfactory record of 

17 meeting community credit needs’, or better, at 

18 the most recent examination of each such insti19 tution. 

20 ‘‘(D) The company has filed with the 

21 Board a declaration that the company elects to 

22 be a financial holding company and certifying 

23 that the company meets the requirements of 

24 subparagraphs (A), (B), and (C). 


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1 ‘‘(2) FOREIGN BANKS AND COMPANIES.—For 

2 purposes of paragraph (1), the Board shall establish 

3 and apply comparable capital and other operating 

4 standards to a foreign bank that operates a branch 

5 or agency or owns or controls a bank or commercial 

6 lending company in the United States, and any com7 pany that owns or controls such foreign bank, giving 

8 due regard to the principle of national treatment 

9 and equality of competitive opportunity. 

10 ‘‘(3) LIMITED EXCLUSIONS FROM COMMUNITY

11 NEEDS REQUIREMENTS FOR NEWLY ACQUIRED DE12 POSITORY INSTITUTIONS.—Any depository institu13 tion acquired by a bank holding company during the 

14 12-month period preceding the submission of a no15 tice under paragraph (1)(D) and any depository in16 stitution acquired after the submission of such no17 tice may be excluded for purposes of paragraph 

18 (1)(C) during the 12-month period beginning on the 

19 date of such acquisition if— 

20 ‘‘(A) the bank holding company has sub21 mitted an affirmative plan to the appropriate 

22 Federal banking agency to take such action as 

23 may be necessary in order for such institution 

24 to achieve a rating of ‘satisfactory record of 


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1 meeting community credit needs’, or better, at 

2 the next examination of the institution; and 

3 ‘‘(B) the plan has been accepted by such 

4 agency. 

5 ‘‘(c) ENGAGING IN ACTIVITIES THAT ARE FINANCIAL

6 IN NATURE.— 

7 ‘‘(1) FINANCIAL ACTIVITIES.— 

8 ‘‘(A) IN GENERAL.—Notwithstanding sec9 tion 4(a), a financial holding company may en10 gage in any activity, and acquire and retain the 

11 shares of any company engaged in any activity, 

12 that the Board has determined (by regulation 

13 or order and in accordance with subparagraph 

14 (B)) to be— 

15 ‘‘(i) financial in nature or incidental 

16 to such financial activities; or 

17 ‘‘(ii) complementary to activities au18 thorized under this subsection to the ex19 tent that the amount of such complemen20 tary activities remains small. 

21 ‘‘(B) COORDINATION BETWEEN THE

22 BOARD AND THE SECRETARY OF THE TREAS23 URY.— 

24 ‘‘(i) PROPOSALS RAISED BEFORE THE

25 BOARD.— 


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1 ‘‘(I) CONSULTATION.—The 

2 Board shall notify the Secretary of 

3 the Treasury of, and consult with the 

4 Secretary of the Treasury concerning, 

5 any request, proposal, or application 

6 under this subsection, including a reg7 ulation or order proposed under para8 graph (4), for a determination of 

9 whether an activity is financial in na10 ture or incidental to such a financial 

11 activity. 

12 ‘‘(II) TREASURY VIEW.—The 

13 Board shall not determine that any 

14 activity is financial in nature or inci15 dental to a financial activity under 

16 this subsection if the Secretary of the 

17 Treasury notifies the Board in writ18 ing, not later than 30 days after the 

19 date of receipt of the notice described 

20 in subclause (I) (or such longer period 

21 as the Board determines to be appro22 priate in light of the circumstances) 

23 that the Secretary of the Treasury be24 lieves that the activity is not financial 


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1 in nature or incidental to a financial 

2 activity. 

3 ‘‘(ii) PROPOSALS RAISED BY THE

4 TREASURY.— 

5 ‘‘(I) TREASURY RECOMMENDA6 TION.—The Secretary of the Treasury 

7 may, at any time, recommend in writ8 ing that the Board find an activity to 

9 be financial in nature or incidental to 

10 a financial activity. 

11 ‘‘(II) TIME PERIOD FOR BOARD

12 ACTION.—Not later than 30 days 

13 after the date of receipt of a written 

14 recommendation from the Secretary of 

15 the Treasury under subclause (I) (or 

16 such longer period as the Secretary of 

17 the Treasury and the Board deter18 mine to be appropriate in light of the 

19 circumstances), the Board shall deter20 mine whether to initiate a public rule21 making proposing that the subject 

22 recommended activity be found to be 

23 financial in nature or incidental to a 

24 financial activity under this sub25 section, and shall notify the Secretary 


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1 of the Treasury in writing of the de2 termination of the Board and, in the 

3 event that the Board determines not 

4 to seek public comment on the pro5 posal, the reasons for that determina6 tion. 

7 ‘‘(2) FACTORS TO BE CONSIDERED.—In deter8 mining whether an activity is financial in nature or 

9 incidental to financial activities, the Board shall take 

10 into account— 

11 ‘‘(A) the purposes of this Act and the Fi12 nancial Services Act of 1999; 

13 ‘‘(B) changes or reasonably expected 

14 changes in the marketplace in which bank hold15 ing companies compete; 

16 ‘‘(C) changes or reasonably expected 

17 changes in the technology for delivering finan18 cial services; and 

19 ‘‘(D) whether such activity is necessary or 

20 appropriate to allow a bank holding company 

21 and the affiliates of a bank holding company 

22 to— 

23 ‘‘(i) compete effectively with any com24 pany seeking to provide financial services 

25 in the United States; 


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1 ‘‘(ii) use any available or emerging 

2 technological means, including any applica3 tion necessary to protect the security or ef4 ficacy of systems for the transmission of 

5 data or financial transactions, in providing 

6 financial services; and 

7 ‘‘(iii) offer customers any available or 

8 emerging technological means for using fi9 nancial services. 

10 ‘‘(3) ACTIVITIES THAT ARE FINANCIAL IN NA11 TURE.—The following activities shall be considered 

12 to be financial in nature: 

13 ‘‘(A) Lending, exchanging, transferring, in14 vesting for others, or safeguarding money or se15 curities. 

16 ‘‘(B) Insuring, guaranteeing, or indem17 nifying against loss, harm, damage, illness, dis18 ability, or death, or providing and issuing annu19 ities, and acting as principal, agent, or broker 

20 for purposes of the foregoing. 

21 ‘‘(C) Providing financial, investment, or 

22 economic advisory services, including advising 

23 an investment company (as defined in section 3 

24 of the Investment Company Act of 1940). 


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1 ‘‘(D) Issuing or selling instruments rep2 resenting interests in pools of assets permissible 

3 for a bank to hold directly. 

4 ‘‘(E) Underwriting, dealing in, or making 

5 a market in securities. 

6 ‘‘(F) Engaging in any activity that the 

7 Board has determined, by order or regulation 

8 that is in effect on the date of the enactment 

9 of the Financial Services Act of 1999, to be so 

10 closely related to banking or managing or con11 trolling banks as to be a proper incident thereto 

12 (subject to the same terms and conditions con13 tained in such order or regulation, unless modi14 fied by the Board). 

15 ‘‘(G) Engaging, in the United States, in 

16 any activity that— 

17 ‘‘(i) a bank holding company may en18 gage in outside the United States; and 

19 ‘‘(ii) the Board has determined, under 

20 regulations issued pursuant to section 

21 4(c)(13) of this Act (as in effect on the 

22 day before the date of the enactment of the 

23 Financial Services Act of 1999) to be 

24 usual in connection with the transaction of 


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1 banking or other financial operations 

2 abroad. 

3 ‘‘(H) Directly or indirectly acquiring or 

4 controlling, whether as principal, on behalf of 

5 one or more entities (including entities, other 

6 than a depository institution, that the bank 

7 holding company controls) or otherwise, shares, 

8 assets, or ownership interests (including with9 out limitation debt or equity securities, partner10 ship interests, trust certificates or other instru11 ments representing ownership) of a company or 

12 other entity, whether or not constituting control 

13 of such company or entity, engaged in any ac14 tivity not authorized pursuant to this section 

15 if— 

16 ‘‘(i) the shares, assets, or ownership 

17 interests are not acquired or held by a de18 pository institution; 

19 ‘‘(ii) such shares, assets, or ownership 

20 interests are acquired and held by an affil21 iate of the bank holding company that is a 

22 registered broker or dealer that is engaged 

23 in securities underwriting activities, or an 

24 affiliate of such broker or dealer, as part 

25 of a bona fide underwriting or investment 


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1 banking activity, including investment ac2 tivities engaged in for the purpose of ap3 preciation and ultimate resale or disposi4 tion of the investment; 

5 ‘‘(iii) such shares, assets, or owner6 ship interests are held only for such a pe7 riod of time as will permit the sale or dis8 position thereof on a reasonable basis con9 sistent with the nature of the activities de10 scribed in clause (ii); and 

11 ‘‘(iv) during the period such shares, 

12 assets, or ownership interests are held, the 

13 bank holding company does not actively 

14 participate in the day to day management 

15 or operation of such company or entity, ex16 cept insofar as necessary to achieve the ob17 jectives of clause (ii). 

18 ‘‘(I) Directly or indirectly acquiring or con19 trolling, whether as principal, on behalf of one 

20 or more entities (including entities, other than 

21 a depository institution or subsidiary of a de22 pository institution, that the bank holding com23 pany controls) or otherwise, shares, assets, or 

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1 ests, trust certificates or other instruments rep2 resenting ownership) of a company or other en3 tity, whether or not constituting control of such 

4 company or entity, engaged in any activity not 

5 authorized pursuant to this section if— 

6 ‘‘(i) the shares, assets, or ownership 

7 interests are not acquired or held by a de8 pository institution or a subsidiary of a de9 pository institution; 

10 ‘‘(ii) such shares, assets, or ownership 

11 interests are acquired and held by an in12 surance company that is predominantly en13 gaged in underwriting life, accident and 

14 health, or property and casualty insurance 

15 (other than credit-related insurance) or 

16 providing and issuing annuities; 

17 ‘‘(iii) such shares, assets, or owner18 ship interests represent an investment 

19 made in the ordinary course of business of 

20 such insurance company in accordance 

21 with relevant State law governing such in22 vestments; and 

23 ‘‘(iv) during the period such shares, 

24 assets, or ownership interests are held, the 

25 bank holding company does not directly or 


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1 indirectly participate in the day-to-day 

2 management or operation of the company 

3 or entity except insofar as necessary to 

4 achieve the objectives of clauses (ii) and 

5 (iii). 

6 ‘‘(4) AUTHORIZATION OF NEW FINANCIAL AC7 TIVITIES.—The Board shall, by regulation or order 

8 and in accordance with paragraph (1)(B), define, 

9 consistent with the purposes of this Act, the fol10 lowing activities as, and the extent to which such ac11 tivities are, financial in nature or incidental to ac12 tivities which are financial in nature: 

13 ‘‘(A) Lending, exchanging, transferring, in14 vesting for others, or safeguarding financial as15 sets other than money or securities. 

16 ‘‘(B) Providing any device or other instru17 mentality for transferring money or other finan18 cial assets. 

19 ‘‘(C) Arranging, effecting, or facilitating fi20 nancial transactions for the account of third 

21 parties. 

22 ‘‘(5) POST-CONSUMMATION NOTIFICATION.— 

23 ‘‘(A) IN GENERAL.—A financial holding 

24 company that acquires any company, or com25 mences any activity, pursuant to this subsection 


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1 shall provide written notice to the Board de2 scribing the activity commenced or conducted 

3 by the company acquired no later than 30 cal4 endar days after commencing the activity or 

5 consummating the acquisition. 

6 ‘‘(B) APPROVAL NOT REQUIRED FOR CER7 TAIN FINANCIAL ACTIVITIES.—Except as pro8 vided in section 4(j) with regard to the acquisi9 tion of a savings association or in paragraph 

10 (6) of this subsection, a financial holding com11 pany may commence any activity, or acquire 

12 any company, pursuant to paragraph (3) or any 

13 regulation prescribed or order issued under 

14 paragraph (4), without prior approval of the 

15 Board. 

16 ‘‘(6) NOTICE REQUIRED FOR LARGE COMBINA17 TIONS.— 

18 ‘‘(A) IN GENERAL.—No financial holding 

19 company shall directly or indirectly acquire, and 

20 no company that becomes a financial holding 

21 company shall directly or indirectly acquire con22 trol of, any company in the United States, in23 cluding through merger, consolidation, or other 

24 type of business combination, that— 


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1 ‘‘(i) is engaged in activities permitted 

2 under this subsection or subsection (g); 

3 and 

4 ‘‘(ii) has consolidated total assets in 

5 excess of $40,000,000,000, 

6 unless such holding company has provided no7 tice to the Board, not later than 60 days prior 

8 to such proposed acquisition or prior to becom9 ing a financial holding company, and during 

10 that time period, or such longer time period not 

11 exceeding an additional 60 days, as established 

12 by the Board, the Board has not issued a notice 

13 disapproving the proposed acquisition or reten14 tion. 

15 ‘‘(B) FACTORS FOR CONSIDERATION.—In 

16 reviewing any prior notice filed under this para17 graph, the Board shall take into consider18 ation— 

19 ‘‘(i) whether the company is in com20 pliance with all applicable criteria set forth 

21 in subsection (b) and the provisions of sub22 section (d); 

23 ‘‘(ii) whether the proposed combina24 tion represents an undue aggregation of 

25 resources; 


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1 ‘‘(iii) whether the proposed combina2 tion poses a risk to the deposit insurance 

3 system; 

4 ‘‘(iv) whether the proposed combina5 tion poses a risk to State insurance guar6 anty funds; 

7 ‘‘(v) whether the proposed combina8 tion can reasonably be expected to be in 

9 the best interests of depositors or policy10 holders of the respective entities; 

11 ‘‘(vi) whether the proposed trans12 action can reasonably be expected to fur13 ther the purposes of this Act and produce 

14 benefits to the public; and 

15 ‘‘(vii) whether, and the extent to 

16 which, the proposed combination poses an 

17 undue risk to the stability of the financial 

18 system in the United States. 

19 ‘‘(C) REQUIRED INFORMATION.—The 

20 Board may disapprove any prior notice filed 

21 under this paragraph if the company submitting 

22 such notice neglects, fails, or refuses to furnish 

23 to the Board all relevant information required 

24 by the Board. 


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1 ‘‘(D) SOLICITATION OF VIEWS OF OTHER

2 SUPERVISORY AGENCIES.— 

3 ‘‘(i) IN GENERAL.—Upon receiving a 

4 prior notice under this paragraph, in order 

5 to provide for the submission of their views 

6 and recommendations, the Board shall give 

7 notice of the proposal to— 

8 ‘‘(I) the appropriate Federal 

9 banking agency of any bank involved; 

10 ‘‘(II) the appropriate functional 

11 regulator of any functionally regulated 

12 nondepository institution (as defined 

13 in section 5(c)(1)(C)) involved; and 

14 ‘‘(III) the Secretary of the Treas15 ury, the Attorney General, and the 

16 Federal Trade Commission. 

17 ‘‘(ii) TIMING.—The views and rec18 ommendations of any agency provided no19 tice under this paragraph shall be sub20 mitted to the Board not later than 30 cal21 endar days after the date on which notice 

22 to the agency was given, unless the Board 

23 determines that another shorter time pe24 riod is appropriate. 


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1 ‘‘(d) PROVISIONS APPLICABLE TO FINANCIAL HOLD2 ING COMPANIES THAT FAIL TO MEET REQUIREMENTS.— 

3 ‘‘(1) IN GENERAL.—If the Board finds, after 

4 notice from or consultation with the appropriate 

5 Federal banking agency, that a financial holding 

6 company is not in compliance with the requirements 

7 of subparagraph (A), (B), or (C) of subsection 

8 (b)(1), the Board shall give notice of such finding to 

9 the company. 

10 ‘‘(2) AGREEMENT TO CORRECT CONDITIONS RE11 QUIRED.—Within 45 days of receipt by a financial 

12 holding company of a notice given under paragraph 

13 (1) (or such additional period as the Board may per14 mit), the company shall execute an agreement ac15 ceptable to the Board to comply with the require16 ments applicable to a financial holding company. 

17 ‘‘(3) AUTHORITY TO IMPOSE LIMITATIONS.— 

18 Until the conditions described in a notice to a finan19 cial holding company under paragraph (1) are cor20 rected— 

21 ‘‘(A) the Board may impose such limita22 tions on the conduct or activities of the com23 pany or any affiliate of the company as the 

24 Board determines to be appropriate under the 

25 circumstances; and 


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1 ‘‘(B) the appropriate Federal banking 

2 agency may impose such limitations on the con3 duct or activities of an affiliated depository in4 stitution or subsidiary of a depository institu5 tion as the appropriate Federal banking agency 

6 determines to be appropriate under the cir7 cumstances. 

8 ‘‘(4) FAILURE TO CORRECT.—If, after receiving 

9 a notice under paragraph (1), a financial holding 

10 company does not— 

11 ‘‘(A) execute and implement an agreement 

12 in accordance with paragraph (2); 

13 ‘‘(B) comply with any limitations imposed 

14 under paragraph (3); 

15 ‘‘(C) in the case of a notice of failure to 

16 comply with subsection (b)(1)(A), restore each 

17 depository institution subsidiary to well capital18 ized status before the end of the 180-day period 

19 beginning on the date such notice is received by 

20 the company (or such other period permitted by 

21 the Board); or 

22 ‘‘(D) in the case of a notice of failure to 

23 comply with subparagraph (B) or (C) of sub24 section (b)(1), restore compliance with any such 

25 subparagraph by the date the next examination 


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1 of the depository institution subsidiary is com2 pleted or by the end of such other period as the 

3 Board determines to be appropriate, 

4 the Board may require such company, under such 

5 terms and conditions as may be imposed by the 

6 Board and subject to such extension of time as may 

7 be granted in the Board’s discretion, to divest con8 trol of any depository institution subsidiary or, at 

9 the election of the financial holding company, in10 stead to cease to engage in any activity conducted by 

11 such company or its subsidiaries pursuant to this 

12 section. 

13 ‘‘(5) CONSULTATION.—In taking any action 

14 under this subsection, the Board shall consult with 

15 all relevant Federal and State regulatory agencies. 

16 ‘‘(e) SAFEGUARDS FOR BANK SUBSIDIARIES.—A fi17 nancial holding company shall assure that— 

18 ‘‘(1) the procedures of the holding company for 

19 identifying and managing financial and operational 

20 risks within the company, and the subsidiaries of 

21 such company, adequately protect the subsidiaries of 

22 such company which are insured depository institu23 tions or wholesale financial institution from such 

24 risks; 


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1 ‘‘(2) the holding company has reasonable poli2 cies and procedures to preserve the separate cor3 porate identity and limited liability of such company 

4 and the subsidiaries of such company, for the pro5 tection of the company’s subsidiary insured deposi6 tory institutions and wholesale financial institutions; 

7 and 

8 ‘‘(3) the holding company complies with this 

9 section. 

10 ‘‘(f) AUTHORITY TO RETAIN LIMITED NON11 FINANCIAL ACTIVITIES AND AFFILIATIONS.— 

12 ‘‘(1) IN GENERAL.—Notwithstanding section 

13 4(a), a company that is not a bank holding company 

14 or a foreign bank (as defined in section 1(b)(7) of 

15 the International Banking Act of 1978) and becomes 

16 a financial holding company after the date of the en17 actment of the Financial Services Act of 1999 may 

18 continue to engage in any activity and retain direct 

19 or indirect ownership or control of shares of a com20 pany engaged in any activity if— 

21 ‘‘(A) the holding company lawfully was en22 gaged in the activity or held the shares of such 

23 company on September 30, 1997; 


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1 ‘‘(B) the holding company is predomi2 nantly engaged in financial activities as defined 

3 in paragraph (2); and 

4 ‘‘(C) the company engaged in such activity 

5 continues to engage only in the same activities 

6 that such company conducted on September 30, 

7 1997, and other activities permissible under 

8 this Act. 

9 ‘‘(2) PREDOMINANTLY FINANCIAL.—For pur10 poses of this subsection, a company is predominantly 

11 engaged in financial activities if the annual gross 

12 revenues derived by the holding company and all 

13 subsidiaries of the holding company (excluding reve14 nues derived from subsidiary depository institu15 tions), on a consolidated basis, from engaging in ac16 tivities that are financial in nature or are incidental 

17 to activities that are financial in nature under sub18 section (c) represent at least 85 percent of the con19 solidated annual gross revenues of the company. 

20 ‘‘(3) NO EXPANSION OF GRANDFATHERED COM21 MERCIAL ACTIVITIES THROUGH MERGER OR CON22 SOLIDATION.—A financial holding company that en23 gages in activities or holds shares pursuant to this 

24 subsection, or a subsidiary of such financial holding 

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1 tion, or other type of business combination, assets of 

2 any other company which is engaged in any activity 

3 which the Board has not determined to be financial 

4 in nature or incidental to activities that are financial 

5 in nature under subsection (c), except this para6 graph shall not apply with respect to a company that 

7 owns a broadcasting station licensed under title III 

8 of the Communications Act of 1934 and the shares 

9 of which have been controlled by an insurance com10 pany since January 1, 1998. 

11 ‘‘(4) CONTINUING REVENUE LIMITATION ON

12 GRANDFATHERED COMMERCIAL ACTIVITIES.—Not13 withstanding any other provision of this subsection, 

14 a financial holding company may continue to engage 

15 in activities or hold shares in companies pursuant to 

16 this subsection only to the extent that the aggregate 

17 annual gross revenues derived from all such activi18 ties and all such companies does not exceed 15 per19 cent of the consolidated annual gross revenues of the 

20 financial holding company (excluding revenues de21 rived from subsidiary depository institutions). 

22 ‘‘(5) CROSS MARKETING RESTRICTIONS APPLI23 CABLE TO COMMERCIAL ACTIVITIES.—A depository 

24 institution controlled by a financial holding company 

25 shall not— 


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1 ‘‘(A) offer or market, directly or through 

2 any arrangement, any product or service of a 

3 company whose activities are conducted or 

4 whose shares are owned or controlled by the fi5 nancial holding company pursuant to this sub6 section or subparagraph (H) or (I) of sub7 section (c)(3); or 

8 ‘‘(B) permit any of its products or services 

9 to be offered or marketed, directly or through 

10 any arrangement, by or through any company 

11 described in subparagraph (A). 

12 ‘‘(6) TRANSACTIONS WITH NONFINANCIAL AF13 FILIATES.—A depository institution controlled by a 

14 financial holding company may not engage in a cov15 ered transaction (as defined by section 23A(b)(7) of 

16 the Federal Reserve Act) with any affiliate con17 trolled by the company pursuant to section 10(c), 

18 this subsection, or subparagraph (H) or (I) of sub19 section (c)(3). 

20 ‘‘(7) SUNSET OF GRANDFATHER.—A financial 

21 holding company engaged in any activity, or retain22 ing direct or indirect ownership or control of shares 

23 of a company, pursuant to this subsection, shall ter24 minate such activity and divest ownership or control 

25 of the shares of such company before the end of the 


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1 10-year period beginning on the date of the enact2 ment of the Financial Services Act of 1999. The 

3 Board may, upon application by a financial holding 

4 company, extend such 10-year period by a period not 

5 to exceed an additional 5 years if such extension 

6 would not be detrimental to the public interest. 

7 ‘‘(g) DEVELOPING ACTIVITIES.—A financial holding 

8 company may engage directly or indirectly, or acquire 

9 shares of any company engaged, in any activity that the 

10 Board has not determined to be financial in nature or inci11 dental to financial activities under subsection (c) if— 

12 ‘‘(1) the holding company reasonably concludes 

13 that the activity is financial in nature or incidental 

14 to financial activities; 

15 ‘‘(2) the gross revenues from all activities con16 ducted under this subsection represent less than 5 

17 percent of the consolidated gross revenues of the 

18 holding company; 

19 ‘‘(3) the aggregate total assets of all companies 

20 the shares of which are held under this subsection 

21 do not exceed 5 percent of the holding company’s 

22 consolidated total assets; 

23 ‘‘(4) the total capital invested in activities con24 ducted under this subsection represents less than 5 


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1 percent of the consolidated total capital of the hold2 ing company; 

3 ‘‘(5) neither the Board nor the Secretary of the 

4 Treasury has determined that the activity is not fi5 nancial in nature or incidental to financial activities 

6 under subsection (c); 

7 ‘‘(6) the holding company is not required to 

8 provide prior written notice of the transaction to the 

9 Board under subsection (c)(6); and 

10 ‘‘(7) the holding company provides written noti11 fication to the Board describing the activity com12 menced or conducted by the company acquired no 

13 later than 10 business days after commencing the 

14 activity or consummating the acquisition.’’. 

15 (b) FACTORS FOR CONSIDERATION IN REVIEWING

16 APPLICATION BY FINANCIAL HOLDING COMPANY TO AC17 QUIRE BANK.—Section 3(c) of the Bank Holding Com18 pany Act of 1956 (12 U.S.C. 1842(c)) is amended by add19 ing at the end the following new paragraph: 

20 ‘‘(6) ‘TOO BIG TO FAIL’ FACTOR.—In consid21 ering an acquisition, merger, or consolidation under 

22 this section involving a financial holding company or 

23 a company that would be any such holding company 

24 upon the consummation of the transaction, the 

25 Board shall consider whether, and the extent to 


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1 which, the proposed acquisition, merger, or consoli2 dation poses an undue risk to the stability of the fi3 nancial system of the United States.’’. 

4 (c) TECHNICAL AND CONFORMING AMENDMENTS.— 

5 (1) Section 2 of the Bank Holding Company 

6 Act of 1956 (12 U.S.C. 1841) is amended by adding 

7 at the end the following new subsection: 

8 ‘‘(p) INSURANCE COMPANY.—For purposes of sec9 tions 5, 6, and 10, the term ‘insurance company’ includes 

10 any person engaged in the business of insurance to the 

11 extent of such activities.’’. 

12 (2) Section 4(j) of the Bank Holding Company 

13 Act of 1956 (12 U.S.C. 1843(j)) is amended— 

14 (A) in paragraph (1)(A), by inserting ‘‘or 

15 in any complementary activity under section 

16 6(c)(1)(B)’’ after ‘‘subsection (c)(8) or (a)(2)’’; 

17 and 

18 (B) in paragraph (3)— 

19 (i) by inserting ‘‘, other than any 

20 complementary activity under section 

21 6(c)(1)(B),’’ after ‘‘to engage in any activ22 ity’’; and 

23 (ii) by inserting ‘‘or a company en24 gaged in any complementary activity under 


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1 section 6(c)(1)(B)’’ after ‘‘insured deposi2 tory institution’’. 

3 (d) REPORT.— 

4 (1) IN GENERAL.—By the end of the 4-year pe5 riod beginning on the date of the enactment of this 

6 Act and every 4 years thereafter, the Board of Gov7 ernors of the Federal Reserve System and the Sec8 retary of the Treasury shall submit a joint report to 

9 the Congress containing a summary of new activities 

10 which are financial in nature, including grand11 fathered commercial activities, in which any financial 

12 holding company is engaged pursuant to subsection 

13 (c)(1) or (f) of section 6 of the Bank Holding Com14 pany Act of 1956 (as added by subsection (a)). 

15 (2) OTHER CONTENTS.—Each report submitted 

16 to the Congress pursuant to paragraph (1) shall also 

17 contain the following: 

18 (A) A discussion of actions by the Board 

19 of Governors of the Federal Reserve System 

20 and the Secretary of the Treasury, whether by 

21 regulation, order, interpretation, or guideline or 

22 by approval or disapproval of an application, 

23 with regard to activities of financial holding 

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1 nancial in nature or complementary to such fi2 nancial activities. 

3 (B) An analysis and discussion of the risks 

4 posed by commercial activities of financial hold5 ing companies to the safety and soundness of 

6 affiliate depository institutions. 

7 (C) An analysis and discussion of the ef8 fect of mergers and acquisitions under section 

9 6 of the Bank Holding Company Act of 1956 

10 on market concentration in the financial serv11 ices industry. 

12 (D) An analysis and discussion, by the 

13 Board and the Secretary in consultation with 

14 the other Federal banking agencies (as defined 

15 in section 3(z) of the Federal Deposit Insurance 

16 Act), of the impact of the implementation of 

17 this Act, and the amendments made by this 

18 Act, on the extent of meeting community credit 

19 needs and capital availability under the Com20 munity Reinvestment Act of 1977. 

21 SEC. 104. OPERATION OF STATE LAW. 

22 (a) AFFILIATIONS.— 

23 (1) IN GENERAL.—Except as provided in para24 graph (2), no State may, by statute, regulation, 

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1 strict an insured depository institution or wholesale 

2 financial institution, or a subsidiary or affiliate 

3 thereof, from being affiliated directly or indirectly or 

4 associated with any person or entity, as authorized 

5 or permitted by this Act or any other provision of 

6 Federal law. 

7 (2) INSURANCE.—With respect to affiliations 

8 between insured depository institutions or wholesale 

9 financial institutions, or any subsidiary or affiliate 

10 thereof, and persons or entities engaged in the busi11 ness of insurance, paragraph (1) does not prohibit— 

12 (A) any State from requiring any person 

13 or entity that proposes to acquire control of an 

14 entity that is engaged in the business of insur15 ance and domiciled in that State (hereafter in 

16 this subparagraph referred to as the ‘‘insurer’’) 

17 to furnish to the insurance regulatory authority 

18 of that State, not later than 60 days before the 

19 effective date of the proposed acquisition— 

20 (i) the name and address of each per21 son by whom, or on whose behalf, the af22 filiation referred to in this subparagraph is 

23 to be effected (hereafter in this subpara24 graph referred to as the ‘‘acquiring 

25 party’’); 


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1 (ii) if the acquiring party is an indi2 vidual, his or her principal occupation and 

3 all offices and positions held during the 5 

4 years preceding the date of notification, 

5 and any conviction of crimes other than 

6 minor traffic violations during the 10 years 

7 preceding the date of notification; 

8 (iii) if the acquiring party is not an 

9 individual— 

10 (I) a report of the nature of its 

11 business operations during the 5 years 

12 preceding the date of notification, or 

13 for such shorter period as such person 

14 and any predecessors thereof shall 

15 have been in existence; 

16 (II) an informative description of 

17 the business intended to be done by 

18 the acquiring party and any sub19 sidiary thereof; and 

20 (III) a list of all individuals who 

21 are, or who have been selected to be22 come, directors or executive officers of 

23 the acquiring party or who perform, 

24 or will perform, functions appropriate 

25 to such positions, including, for each 


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1 such individual, the information re2 quired by clause (ii); 

3 (iv) the source, nature, and amount of 

4 the consideration used, or to be used, in ef5 fecting the merger or other acquisition of 

6 control, a description of any transaction 

7 wherein funds were, or are to be, obtained 

8 for any such purpose, and the identity of 

9 persons furnishing such consideration, ex10 cept that, if a source of such consideration 

11 is a loan made in the lender’s ordinary 

12 course of business, the identity of the lend13 er shall remain confidential if the person 

14 filing such statement so requests; 

15 (v) fully audited financial information 

16 as to the earnings and financial condition 

17 of each acquiring party for the 5 fiscal 

18 years preceding the date of notification of 

19 each such acquiring party, or for such less20 er period as such acquiring party and any 

21 predecessors thereof shall have been in ex22 istence, and similar unaudited information 

23 as of a date not earlier than 90 days be24 fore the date of notification, except that, in 

25 the case of an acquiring party that is an 


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1 insurer actively engaged in the business of 

2 insurance, the financial statements of such 

3 insurer need not be audited, but such audit 

4 may be required if the need therefor is de5 termined by the insurance regulatory au6 thority of the State; 

7 (vi) any plans or proposals that each 

8 acquiring party may have to liquidate such 

9 insurer, to sell its assets, or to merge or 

10 consolidate it with any person or to make 

11 any other material change in its business 

12 or corporate structure or management; 

13 (vii) the number of shares of any se14 curity of the insurer that each acquiring 

15 party proposes to acquire, the terms of any 

16 offer, request, invitation, agreement, or ac17 quisition, and a statement as to the meth18 od by which the fairness of the proposal 

19 was arrived at; 

20 (viii) the amount of each class of any 

21 security of the insurer that is beneficially 

22 owned or concerning which there is a right 

23 to acquire beneficial ownership by each ac24 quiring party; 


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1 (ix) a full description of any contracts, 

2 arrangements, or understandings with re3 spect to any security of the insurer in 

4 which any acquiring party is involved, in5 cluding transfer of any of the securities, 

6 joint ventures, loan or option arrange7 ments, puts or calls, guarantees of loans, 

8 guarantees against loss or guarantees of 

9 profits, division of losses or profits, or the 

10 giving or withholding of proxies, and iden11 tification of the persons with whom such 

12 contracts, arrangements, or under13 standings have been entered into; 

14 (x) a description of the purchase of 

15 any security of the insurer during the 12- 

16 month period preceding the date of notifi17 cation by any acquiring party, including 

18 the dates of purchase, names of the pur19 chasers, and consideration paid, or agreed 

20 to be paid, therefor; 

21 (xi) a description of any recommenda22 tions to purchase any security of the in23 surer made during the 12-month period 

24 preceding the date of notification by any 

25 acquiring party or by any person based 


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1 upon interviews or at the suggestion of 

2 such acquiring party; 

3 (xii) copies of all tender offers for, re4 quests or invitations for tenders of, ex5 change offers for and agreements to ac6 quire or exchange any securities of the in7 surer and, if distributed, of additional so8 liciting material relating thereto; and 

9 (xiii) the terms of any agreement, 

10 contract, or understanding made with any 

11 broker-dealer as to solicitation of securities 

12 of the insurer for tender and the amount 

13 of any fees, commissions, or other com14 pensation to be paid to broker-dealers with 

15 regard thereto; 

16 (B) in the case of a person engaged in the 

17 business of insurance which is the subject of an 

18 acquisition or change or continuation in control, 

19 the State of domicile of such person from re20 viewing or taking action (including approval or 

21 disapproval) with regard to the acquisition or 

22 change or continuation in control, as long as 

23 the State reviews and actions— 

24 (i) are completed by the end of the 

25 60-day period beginning on the later of the 


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1 date the State received notice of the pro2 posed action or the date the State received 

3 the information required under State law 

4 regarding such acquisition or change or 

5 continuation in control; 

6 (ii) do not have the effect of discrimi7 nating, intentionally or unintentionally, 

8 against an insured depository institution or 

9 affiliate thereof or against any other per10 son based upon affiliation with an insured 

11 depository institution; and 

12 (iii) are based on standards or re13 quirements relating to solvency or manage14 rial fitness; 

15 (C) any State from requiring an entity 

16 that is acquiring control of an entity that is en17 gaged in the business of insurance and domi18 ciled in that State to maintain or restore the 

19 capital requirements of that insurance entity to 

20 the level required under the capital regulations 

21 of general applicability in that State to avoid 

22 the requirement of preparing and filing with the 

23 insurance regulatory authority of that State a 

24 plan to increase the capital of the entity, except 

25 that any determination by the State insurance 


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1 regulatory authority with respect to such re2 quirement shall be made not later than 60 days 

3 after the date of notification under subpara4 graph (A); 

5 (D) any State from taking actions with re6 spect to the receivership or conservatorship of 

7 any insurance company; 

8 (E) any State from restricting a change in 

9 the ownership of stock in an insurance com10 pany, or a company formed for the purpose of 

11 controlling such insurance company, for a pe12 riod of not more than 3 years beginning on the 

13 date of the conversion of such company from 

14 mutual to stock form; or 

15 (F) any State from requiring an organiza16 tion which has been eligible at any time since 

17 January 1, 1987, to claim the special deduction 

18 provided by section 833 of the Internal Revenue 

19 Code of 1986 to meet certain conditions in 

20 order to undergo, as determined by the State, 

21 a reorganization, recapitalization, conversion, 

22 merger, consolidation, sale or other disposition 

23 of substantial operating assets, demutualization, 

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1 ute enacted on May 22, 1998, relating to hos2 pital, medical, and dental service corporation 

3 conversions. 

4 (3) PRESERVATION OF STATE ANTITRUST AND

5 GENERAL CORPORATE LAWS.— 

6 (A) IN GENERAL.—Subject to subsection 

7 (c) and the nondiscrimination provisions con8 tained in such subsection, no provision in para9 graph (1) shall be construed as affecting State 

10 laws, regulations, orders, interpretations, or 

11 other actions of general applicability relating to 

12 the governance of corporations, partnerships, 

13 limited liability companies or other business as14 sociations incorporated or formed under the 

15 laws of that State or domiciled in that State, or 

16 the applicability of the antitrust laws of any 

17 State or any State law that is similar to the 

18 antitrust laws. 

19 (B) DEFINITION.—The term ‘‘antitrust 

20 laws’’ has the same meaning as in subsection 

21 (a) of the first section of the Clayton Act, and 

22 includes section 5 of the Federal Trade Com23 mission Act to the extent that such section 5 

24 relates to unfair methods of competition. 

25 (b) ACTIVITIES.— 


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1 (1) IN GENERAL.—Except as provided in para2 graph (3), and except with respect to insurance 

3 sales, solicitation, and cross marketing activities, 

4 which shall be governed by paragraph (2), no State 

5 may, by statute, regulation, order, interpretation, or 

6 other action, prevent or restrict an insured deposi7 tory institution, wholesale financial institution, or 

8 subsidiary or affiliate thereof from engaging directly 

9 or indirectly, either by itself or in conjunction with 

10 a subsidiary, affiliate, or any other entity or person, 

11 in any activity authorized or permitted under this 

12 Act. 

13 (2) INSURANCE SALES.— 

14 (A) IN GENERAL.—In accordance with the 

15 legal standards for preemption set forth in the 

16 decision of the Supreme Court of the United 

17 States in Barnett Bank of Marion County N.A. 

18 v. Nelson, 517 U.S. 25 (1996), no State may, 

19 by statute, regulation, order, interpretation, or 

20 other action, prevent or significantly interfere 

21 with the ability of an insured depository institu22 tion or wholesale financial institution, or a sub23 sidiary or affiliate thereof, to engage, directly or 

24 indirectly, either by itself or in conjunction with 

25 a subsidiary, affiliate, or any other party, in 


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1 any insurance sales, solicitation, or cross-mar2 keting activity. 

3 (B) CERTAIN STATE LAWS PRESERVED.— 

4 Notwithstanding subparagraph (A), a State 

5 may impose any of the following restrictions, or 

6 restrictions which are substantially the same as 

7 but no more burdensome or restrictive than 

8 those in each of the following clauses: 

9 (i) Restrictions prohibiting the rejec10 tion of an insurance policy by an insured 

11 depository institution, wholesale financial 

12 institution, or any subsidiary or affiliate 

13 thereof, solely because the policy has been 

14 issued or underwritten by any person who 

15 is not associated with such insured deposi16 tory institution or wholesale financial insti17 tution, or any subsidiary or affiliate there18 of, when such insurance is required in con19 nection with a loan or extension of credit. 

20 (ii) Restrictions prohibiting a require21 ment for any debtor, insurer, or insurance 

22 agent or broker to pay a separate charge 

23 in connection with the handling of insur24 ance that is required in connection with a 

25 loan or other extension of credit or the 


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1 provision of another traditional banking 

2 product by an insured depository institu3 tion, wholesale financial institution, or any 

4 subsidiary or affiliate thereof, unless such 

5 charge would be required when the insured 

6 depository institution or wholesale financial 

7 institution, or any subsidiary or affiliate 

8 thereof, is the licensed insurance agent or 

9 broker providing the insurance. 

10 (iii) Restrictions prohibiting the use of 

11 any advertisement or other insurance pro12 motional material by an insured depository 

13 institution or wholesale financial institu14 tion, or any subsidiary or affiliate thereof, 

15 that would cause a reasonable person to 

16 believe mistakenly that— 

17 (I) a State or the Federal Gov18 ernment is responsible for the insur19 ance sales activities of, or stands be20 hind the credit of, the institution, af21 filiate, or subsidiary; or 

22 (II) a State, or the Federal Gov23 ernment guarantees any returns on 

24 insurance products, or is a source of 

25 payment on any insurance obligation 


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1 of or sold by the institution, affiliate, 

2 or subsidiary; 

3 (iv) Restrictions prohibiting the pay4 ment or receipt of any commission or bro5 kerage fee or other valuable consideration 

6 for services as an insurance agent or 

7 broker to or by any person, unless such 

8 person holds a valid State license regard9 ing the applicable class of insurance at the 

10 time at which the services are performed, 

11 except that, in this clause, the term ‘‘serv12 ices as an insurance agent or broker’’ does 

13 not include a referral by an unlicensed per14 son of a customer or potential customer to 

15 a licensed insurance agent or broker that 

16 does not include a discussion of specific in17 surance policy terms and conditions. 

18 (v) Restrictions prohibiting any com19 pensation paid to or received by any indi20 vidual who is not licensed to sell insurance, 

21 for the referral of a customer that seeks to 

22 purchase, or seeks an opinion or advice on, 

23 any insurance product to a person that 

24 sells or provides opinions or advice on such 


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1 product, based on the purchase of insur2 ance by the customer. 

3 (vi) Restrictions prohibiting the re4 lease of the insurance information of a cus5 tomer (defined as information concerning 

6 the premiums, terms, and conditions of in7 surance coverage, including expiration 

8 dates and rates, and insurance claims of a 

9 customer contained in the records of the 

10 insured depository institution or wholesale 

11 financial institution, or a subsidiary or af12 filiate thereof) to any person or entity 

13 other than an officer, director, employee, 

14 agent, subsidiary, or affiliate of an insured 

15 depository institution or a wholesale finan16 cial institution, for the purpose of soliciting 

17 or selling insurance, without the express 

18 consent of the customer, other than a pro19 vision that prohibits— 

20 (I) a transfer of insurance infor21 mation to an unaffiliated insurance 

22 company, agent, or broker in connec23 tion with transferring insurance in 

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1 sale financial institution, or subsidiary 

2 or affiliate thereof, or in connection 

3 with a merger with or acquisition of 

4 an unaffiliated insurance company, 

5 agent, or broker; or 

6 (II) the release of information as 

7 otherwise authorized by State or Fed8 eral law. 

9 (vii) Restrictions prohibiting the use 

10 of health information obtained from the in11 surance records of a customer for any pur12 pose, other than for its activities as a li13 censed agent or broker, without the ex14 press consent of the customer. 

15 (viii) Restrictions prohibiting the ex16 tension of credit or any product or service 

17 that is equivalent to an extension of credit, 

18 lease or sale of property of any kind, or 

19 furnishing of any services or fixing or vary20 ing the consideration for any of the fore21 going, on the condition or requirement that 

22 the customer obtain insurance from an in23 sured depository institution, wholesale fi24 nancial institution, a subsidiary or affiliate 

25 thereof, or a particular insurer, agent, or 


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1 broker, other than a prohibition that would 

2 prevent any insured depository institution 

3 or wholesale financial institution, or any 

4 subsidiary or affiliate thereof— 

5 (I) from engaging in any activity 

6 described in this clause that would not 

7 violate section 106 of the Bank Hold8 ing Company Act Amendments of 

9 1970, as interpreted by the Board of 

10 Governors of the Federal Reserve Sys11 tem; or 

12 (II) from informing a customer 

13 or prospective customer that insur14 ance is required in order to obtain a 

15 loan or credit, that loan or credit ap16 proval is contingent upon the procure17 ment by the customer of acceptable 

18 insurance, or that insurance is avail19 able from the insured depository insti20 tution or wholesale financial institu21 tion, or any subsidiary or affiliate 

22 thereof. 

23 (ix) Restrictions requiring, when an 

24 application by a consumer for a loan or 

25 other extension of credit from an insured 


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1 depository institution or wholesale financial 

2 institution is pending, and insurance is of3 fered or sold to the consumer or is re4 quired in connection with the loan or ex5 tension of credit by the insured depository 

6 institution or wholesale financial institu7 tion or any affiliate or subsidiary thereof, 

8 that a written disclosure be provided to the 

9 consumer or prospective customer indi10 cating that his or her choice of an insur11 ance provider will not affect the credit de12 cision or credit terms in any way, except 

13 that the insured depository institution or 

14 wholesale financial institution may impose 

15 reasonable requirements concerning the 

16 creditworthiness of the insurance provider 

17 and scope of coverage chosen. 

18 (x) Restrictions requiring clear and 

19 conspicuous disclosure, in writing, where 

20 practicable, to the customer prior to the 

21 sale of any insurance policy that such pol22 icy— 

23 (I) is not a deposit; 

24 (II) is not insured by the Federal 

25 Deposit Insurance Corporation; 


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1 (III) is not guaranteed by the in2 sured depository institution or whole3 sale financial institution or, if appro4 priate, its subsidiaries or affiliates or 

5 any person soliciting the purchase of 

6 or selling insurance on the premises 

7 thereof; and 

8 (IV) where appropriate, involves 

9 investment risk, including potential 

10 loss of principal. 

11 (xi) Restrictions requiring that, when 

12 a customer obtains insurance (other than 

13 credit insurance or flood insurance) and 

14 credit from an insured depository institu15 tion or wholesale financial institution, or 

16 its subsidiaries or affiliates, or any person 

17 soliciting the purchase of or selling insur18 ance on the premises thereof, the credit 

19 and insurance transactions be completed 

20 through separate documents. 

21 (xii) Restrictions prohibiting, when a 

22 customer obtains insurance (other than 

23 credit insurance or flood insurance) and 

24 credit from an insured depository institu25 tion or wholesale financial institution or its 


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1 subsidiaries or affiliates, or any person so2 liciting the purchase of or selling insurance 

3 on the premises thereof, inclusion of the 

4 expense of insurance premiums in the pri5 mary credit transaction without the ex6 press written consent of the customer. 

7 (xiii) Restrictions requiring mainte8 nance of separate and distinct books and 

9 records relating to insurance transactions, 

10 including all files relating to and reflecting 

11 consumer complaints, and requiring that 

12 such insurance books and records be made 

13 available to the appropriate State insur14 ance regulator for inspection upon reason15 able notice. 

16 (C) LIMITATIONS.— 

17 (i) OCC DEFERENCE.—Section 306(e) 

18 does not apply with respect to any State 

19 statute, regulation, order, interpretation, 

20 or other action regarding insurance sales, 

21 solicitation, or cross marketing activities 

22 described in subparagraph (A) that was 

23 issued, adopted, or enacted before Sep24 tember 3, 1998, and that is not described 

25 in subparagraph (B). 


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1 (ii) NONDISCRIMINATION.—Subsection 

2 (c) does not apply with respect to any 

3 State statute, regulation, order, interpreta4 tion, or other action regarding insurance 

5 sales, solicitation, or cross marketing ac6 tivities described in subparagraph (A) that 

7 was issued, adopted, or enacted before 

8 September 3, 1998, and that is not de9 scribed in subparagraph (B). 

10 (iii) CONSTRUCTION.—Nothing in this 

11 paragraph shall be construed to limit the 

12 applicability of the decision of the Supreme 

13 Court in Barnett Bank of Marion County 

14 N.A. v. Nelson, 116 S. Ct. 1103 (1996) 

15 with respect to a State statute, regulation, 

16 order, interpretation, or other action that 

17 is not described in subparagraph (B). 

18 (iv) LIMITATION ON INFERENCES.— 

19 Nothing in this paragraph shall be con20 strued to create any inference with respect 

21 to any State statute, regulation, order, in22 terpretation, or other action that is not re23 ferred to or described in this paragraph. 

24 (3) INSURANCE ACTIVITIES OTHER THAN

25 SALES.—State statutes, regulations, interpretations, 


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1 orders, and other actions shall not be preempted 

2 under subsection (b)(1) to the extent that they— 

3 (A) relate to, or are issued, adopted, or en4 acted for the purpose of regulating the business 

5 of insurance in accordance with the Act of 

6 March 9, 1945 (commonly known as the 

7 ‘‘McCarran-Ferguson Act’’); 

8 (B) apply only to persons or entities that 

9 are not insured depository institutions or whole10 sale financial institutions, but that are directly 

11 engaged in the business of insurance (except 

12 that they may apply to depository institutions 

13 engaged in providing savings bank life insur14 ance as principal to the extent of regulating 

15 such insurance); 

16 (C) do not relate to or directly or indirectly 

17 regulate insurance sales, solicitations, or cross18 marketing activities; and 

19 (D) are not prohibited under subsection 

20 (c). 

21 (4) FINANCIAL ACTIVITIES OTHER THAN INSUR22 ANCE.—No State statute, regulation, interpretation, 

23 order, or other action shall be preempted under sub24 section (b)(1) to the extent that— 


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1 (A) it does not relate to, and is not issued 

2 and adopted, or enacted for the purpose of reg3 ulating, directly or indirectly, insurance sales, 

4 solicitations, or cross marketing activities cov5 ered under paragraph (2); 

6 (B) it does not relate to, and is not issued 

7 and adopted, or enacted for the purpose of reg8 ulating, directly or indirectly, the business of in9 surance activities other than sales, solicitations, 

10 or cross marketing activities, covered under 

11 paragraph (3); 

12 (C) it does not relate to securities inves13 tigations or enforcement actions referred to in 

14 subsection (d); and 

15 (D) it— 

16 (i) does not distinguish by its terms 

17 between insured depository institutions, 

18 wholesale financial institutions, and sub19 sidiaries and affiliates thereof engaged in 

20 the activity at issue and other persons or 

21 entities engaged in the same activity in a 

22 manner that is in any way adverse with re23 spect to the conduct of the activity by any 

24 such insured depository institution, whole25 sale financial institution, or subsidiary or 


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1 affiliate thereof engaged in the activity at 

2 issue; 

3 (ii) as interpreted or applied, does not 

4 have, and will not have, an impact on de5 pository institutions, wholesale financial in6 stitutions, or subsidiaries or affiliates 

7 thereof engaged in the activity at issue, or 

8 any person or entity affiliated therewith, 

9 that is substantially more adverse than its 

10 impact on other persons or entities en11 gaged in the same activity that are not in12 sured depository institutions, wholesale fi13 nancial institutions, or subsidiaries or af14 filiates thereof, or persons or entities affili15 ated therewith; 

16 (iii) does not effectively prevent a de17 pository institution, wholesale financial in18 stitution, or subsidiary or affiliate thereof 

19 from engaging in activities authorized or 

20 permitted by this Act or any other provi21 sion of Federal law; and 

22 (iv) does not conflict with the intent 

23 of this Act generally to permit affiliations 

24 that are authorized or permitted by Fed25 eral law. 


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1 (c) NONDISCRIMINATION.—Except as provided in any 

2 restrictions described in subsection (b)(2)(B), no State 

3 may, by statute, regulation, order, interpretation, or other 

4 action, regulate the insurance activities authorized or per5 mitted under this Act or any other provision of Federal 

6 law of an insured depository institution or wholesale finan7 cial institution, or subsidiary or affiliate thereof, to the 

8 extent that such statute, regulation, order, interpretation, 

9 or other action— 

10 (1) distinguishes by its terms between insured 

11 depository institutions or wholesale financial institu12 tions, or subsidiaries or affiliates thereof, and other 

13 persons or entities engaged in such activities, in a 

14 manner that is in any way adverse to any such in15 sured depository institution or wholesale financial in16 stitution, or subsidiary or affiliate thereof; 

17 (2) as interpreted or applied, has or will have 

18 an impact on depository institutions or wholesale fi19 nancial institutions, or subsidiaries or affiliates 

20 thereof, that is substantially more adverse than its 

21 impact on other persons or entities providing the 

22 same products or services or engaged in the same 

23 activities that are not insured depository institu24 tions, wholesale financial institutions, or subsidiaries 


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1 or affiliates thereof, or persons or entities affiliated 

2 therewith; 

3 (3) effectively prevents a depository institution 

4 or wholesale financial institution, or subsidiary or af5 filiate thereof, from engaging in insurance activities 

6 authorized or permitted by this Act or any other 

7 provision of Federal law; or 

8 (4) conflicts with the intent of this Act gen9 erally to permit affiliations that are authorized or 

10 permitted by Federal law between insured depository 

11 institutions or wholesale financial institutions, or 

12 subsidiaries or affiliates thereof, and persons and en13 tities engaged in the business of insurance. 

14 (d) LIMITATION.—Subsections (a) and (b) shall not 

15 be construed to affect the jurisdiction of the securities 

16 commission (or any agency or office performing like func17 tions) of any State, under the laws of such State— 

18 (1) to investigate and bring enforcement ac19 tions, consistent with section 18(c) of the Securities 

20 Act of 1933, with respect to fraud or deceit or un21 lawful conduct by any person, in connection with se22 curities or securities transactions; or 

23 (2) to require the registration of securities or 

24 the licensure or registration of brokers, dealers, or 

25 investment advisers (consistent with section 203A of 


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1 the Investment Advisers Act of 1940), or the associ2 ated persons of a broker, dealer, or investment ad3 viser (consistent with such section 203A). 

4 (e) DEFINITIONS.—For purposes of this section, the 

5 following definitions shall apply: 

6 (1) INSURED DEPOSITORY INSTITUTION.—The 

7 term ‘‘insured depository institution’’ includes any 

8 foreign bank that maintains a branch, agency, or 

9 commercial lending company in the United States. 

10 (2) STATE.—The term ‘‘State’’ means any 

11 State of the United States, the District of Columbia, 

12 any territory of the United States, Puerto Rico, 

13 Guam, American Samoa, the Trust Territory of the 

14 Pacific Islands, the Virgin Islands, and the Northern 

15 Mariana Islands. 

16 SEC. 105. MUTUAL BANK HOLDING COMPANIES AUTHOR17 IZED. 

18 Section 3(g)(2) of the Bank Holding Company Act 

19 of 1956 (12 U.S.C. 1842(g)(2)) is amended to read as 

20 follows: 

21 ‘‘(2) REGULATIONS.—A bank holding company 

22 organized as a mutual holding company shall be reg23 ulated on terms, and shall be subject to limitations, 

24 comparable to those applicable to any other bank 

25 holding company.’’. 


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1 SEC. 105A. PUBLIC MEETINGS FOR LARGE BANK ACQUISI2 TIONS AND MERGERS. 

3 (a) BANK HOLDING COMPANY ACT OF 1956.—Sec4 tion 3(c)(2) of the Bank Holding Company Act of 1956 

5 (12 U.S.C. 1842(c)(2)) is amended— 

6 (1) by striking ‘‘FACTORS.—In every case’’ and 

7 inserting ‘‘FACTORS.— 

8 ‘‘(A) IN GENERAL.—In every case’’; and 

9 (2) by adding at the end the following new sub10 paragraph: 

11 ‘‘(B) PUBLIC MEETINGS.—In each case in12 volving one or more insured depository institu13 tions each of which has total assets of 

14 $1,000,000,000 or more, the Board shall, as 

15 necessary and on a timely basis, conduct public 

16 meetings in one or more areas where the Board 

17 believes, in the sole discretion of the Board, 

18 there will be a substantial public impact.’’. 

19 (b) FEDERAL DEPOSIT INSURANCE ACT.—Section 

20 18(c) of the Federal Deposit Insurance Act (12 U.S.C. 

21 1828(c)) is amended by adding at the end the following 

22 new paragraph: 

23 ‘‘(12) PUBLIC MEETINGS.—In each merger trans24 action involving one or more insured depository institu25 tions each of which has total assets of $1,000,000,000 or 

26 more, the responsible agency shall, as necessary and on 


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1 a timely basis, conduct public meetings in one or more 

2 areas where the agency believes, in the sole discretion of 

3 the agency, there will be a substantial public impact.’’. 

4 (c) NATIONAL BANK CONSOLIDATION AND MERGER

5 ACT.—The National Bank Consolidation and Merger Act 

6 (12 U.S.C. 215 et seq.) is amended by adding at the end 

7 the following new section: 

8 ‘‘SEC. 6. PUBLIC MEETINGS FOR LARGE BANK CONSOLIDA9 TIONS AND MERGERS. 

10 ‘‘In each case of a consolidation or merger under this 

11 Act involving one or more banks each of which has total 

12 assets of $1,000,000,000 or more, the Comptroller shall, 

13 as necessary and on a timely basis, conduct public meet14 ings in one or more areas where the Comptroller believes, 

15 in the sole discretion of the Comptroller, there will be a 

16 substantial public impact.’’. 

17 (d) HOME OWNERS’ LOAN ACT.—Section 10(e) of 

18 the Home Owners’ Loan Act (12 U.S.C. 1463) is amended 

19 by adding at the end the following new paragraph: 

20 ‘‘(7) PUBLIC MEETINGS FOR LARGE DEPOSI21 TORY INSTITUTION ACQUISITIONS AND MERGERS.— 

22 In each case involving one or more insured deposi23 tory institutions each of which has total assets of 

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1 ings in one or more areas where the Director be2 lieves, in the sole discretion of the Director, there 

3 will be a substantial public impact.’’. 

4 SEC. 106. PROHIBITION ON DEPOSIT PRODUCTION OF5 FICES. 

6 (a) IN GENERAL.—Section 109(d) of the Riegle-Neal 

7 Interstate Banking and Branching Efficiency Act of 1994 

8 (12 U.S.C. 1835a(d)) is amended— 

9 (1) by inserting ‘‘, the Financial Services Act of 

10 1999,’’ after ‘‘pursuant to this title’’; and 

11 (2) by inserting ‘‘or such Act’’ after ‘‘made by 

12 this title’’. 

13 (b) TECHNICAL AND CONFORMING AMENDMENT.— 

14 Section 109(e)(4) of the Riegle-Neal Interstate Banking 

15 and Branching Efficiency Act of 1994 (12 U.S.C. 

16 1835a(e)(4)) is amended by inserting ‘‘and any branch of 

17 a bank controlled by an out-of-State bank holding com18 pany (as defined in section 2(o)(7) of the Bank Holding 

19 Company Act of 1956)’’ before the period. 

20 SEC. 107. CLARIFICATION OF BRANCH CLOSURE REQUIRE21 MENTS. 

22 Section 42(d)(4)(A) of the Federal Deposit Insurance 

23 Act (12 U.S.C. 1831r–1(d)(4)(A)) is amended by inserting 

24 ‘‘and any bank controlled by an out-of-State bank holding 


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1 company (as defined in section 2(o)(7) of the Bank Hold2 ing Company Act of 1956)’’ before the period. 

3 SEC. 108. AMENDMENTS RELATING TO LIMITED PURPOSE 

4 BANKS. 

5 (a) IN GENERAL.—Section 4(f) of the Bank Holding 

6 Company Act of 1956 (12 U.S.C. 1843(f)) is amended— 

7 (1) in paragraph (2)(A)(ii)— 

8 (A) by striking ‘‘and’’ at the end of sub9 clause (IX); 

10 (B) by inserting ‘‘and’’ after the semicolon 

11 at the end of subclause (X); and 

12 (C) by inserting after subclause (X) the 

13 following new subclause: 

14 ‘‘(XI) assets that are derived 

15 from, or are incidental to, consumer 

16 lending activities in which institutions 

17 described in subparagraph (F) or (H) 

18 of section 2(c)(2) are permitted to en19 gage,’’; 

20 (2) in paragraph (2), by striking subparagraph 

21 (B) and inserting the following new subparagraphs: 

22 ‘‘(B) any bank subsidiary of such company 

23 engages in any activity in which the bank was 

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1 less the bank is well managed and well capital2 ized; 

3 ‘‘(C) any bank subsidiary of such company 

4 both— 

5 ‘‘(i) accepts demand deposits or de6 posits that the depositor may withdraw by 

7 check or similar means for payment to 

8 third parties; and 

9 ‘‘(ii) engages in the business of mak10 ing commercial loans (and, for purposes of 

11 this clause, loans made in the ordinary 

12 course of a credit card operation shall not 

13 be treated as commercial loans); or 

14 ‘‘(D) after the date of the enactment of the 

15 Competitive Equality Amendments of 1987, any 

16 bank subsidiary of such company permits any 

17 overdraft (including any intraday overdraft), or 

18 incurs any such overdraft in such bank’s ac19 count at a Federal Reserve bank, on behalf of 

20 an affiliate, other than an overdraft described 

21 in paragraph (3).’’; and 

22 (3) by striking paragraphs (3) and (4) and in23 serting the following new paragraphs: 


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1 ‘‘(3) PERMISSIBLE OVERDRAFTS DESCRIBED.— 

2 For purposes of paragraph (2)(D), an overdraft is 

3 described in this paragraph if— 

4 ‘‘(A) such overdraft results from an inad5 vertent computer or accounting error that is be6 yond the control of both the bank and the affil7 iate; 

8 ‘‘(B) such overdraft— 

9 ‘‘(i) is permitted or incurred on behalf 

10 of an affiliate which is monitored by, re11 ports to, and is recognized as a primary 

12 dealer by the Federal Reserve Bank of 

13 New York; and 

14 ‘‘(ii) is fully secured, as required by 

15 the Board, by bonds, notes, or other obli16 gations which are direct obligations of the 

17 United States or on which the principal 

18 and interest are fully guaranteed by the 

19 United States or by securities and obliga20 tions eligible for settlement on the Federal 

21 Reserve book entry system; or 

22 ‘‘(C) such overdraft— 

23 ‘‘(i) is incurred on behalf of an affil24 iate solely in connection with an activity 

25 that is so closely related to banking, or 


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1 managing or controlling banks, as to be a 

2 proper incident thereto, to the extent the 

3 bank incurring the overdraft and the affil4 iate on whose behalf the overdraft is in5 curred each document that the overdraft is 

6 incurred for such purpose; and 

7 ‘‘(ii) does not cause the bank to vio8 late any provision of section 23A or 23B of 

9 the Federal Reserve Act, either directly, in 

10 the case of a member bank, or by virtue of 

11 section 18(j) of the Federal Deposit Insur12 ance Act, in the case of a nonmember 

13 bank. 

14 ‘‘(4) DIVESTITURE IN CASE OF LOSS OF EX15 EMPTION.—If any company described in paragraph 

16 (1) fails to qualify for the exemption provided under 

17 such paragraph by operation of paragraph (2), such 

18 exemption shall cease to apply to such company and 

19 such company shall divest control of each bank it 

20 controls before the end of the 180-day period begin21 ning on the date that the company receives notice 

22 from the Board that the company has failed to con23 tinue to qualify for such exemption, unless before 

24 the end of such 180-day period, the company has— 


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1 ‘‘(A) corrected the condition or ceased the 

2 activity that caused the company to fail to con3 tinue to qualify for the exemption; and 

4 ‘‘(B) implemented procedures that are rea5 sonably adapted to avoid the reoccurrence of 

6 such condition or activity. 

7 The issuance of any notice under this paragraph 

8 that relates to the activities of a bank shall not be 

9 construed as affecting the authority of the bank to 

10 continue to engage in such activities until the expira11 tion of such 180-day period.’’. 

12 (b) INDUSTRIAL LOAN COMPANIES AFFILIATE OVER13 DRAFTS.—Section 2(c)(2)(H) of the Bank Holding Com14 pany Act of 1956 (12 U.S.C. 1841(c)(2)(H)) is amended 

15 by inserting before the period at the end ‘‘, or that is oth16 erwise permissible for a bank controlled by a company de17 scribed in section 4(f)(1)’’. 

18 SEC. 109. GAO STUDY OF ECONOMIC IMPACT ON COMMU19 NITY BANKS, OTHER SMALL FINANCIAL IN20 STITUTIONS, INSURANCE AGENTS, AND CON21 SUMERS. 

22 (a) STUDY REQUIRED.—The Comptroller General of 

23 the United States shall conduct a study of the projected 

24 economic impact and the actual economic impact that the 

25 enactment of this Act will have on financial institutions, 


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1 including community banks, registered brokers and deal2 ers and insurance companies, which have total assets of 

3 $100,000,000 or less, insurance agents, and consumers. 

4 (b) REPORTS TO THE CONGRESS.— 

5 (1) IN GENERAL.—The Comptroller General of 

6 the United States shall submit reports to the Con7 gress, at the times required under paragraph (2), 

8 containing the findings and conclusions of the 

9 Comptroller General with regard to the study re10 quired under subsection (a) and such recommenda11 tions for legislative or administrative action as the 

12 Comptroller General may determine to be appro13 priate. 

14 (2) TIMING OF REPORTS.—The Comptroller 

15 General shall submit— 

16 (A) an interim report before the end of the 

17 6-month period beginning after the date of the 

18 enactment of this Act; 

19 (B) another interim report before the end 

20 of the next 6-month period; and 

21 (C) a final report before the end of the 1- 

22 year period after such second 6-month period,’’. 


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1 SEC. 110. RESPONSIVENESS TO COMMUNITY NEEDS FOR FI2 NANCIAL SERVICES. 

3 (a) STUDY.—The Secretary of the Treasury, in con4 sultation with the Federal banking agencies (as defined 

5 in section 3(z) of the Federal Deposit Insurance Act), 

6 shall conduct a study of the extent to which adequate serv7 ices are being provided as intended by the Community Re8 investment Act of 1977, including services in low- and 

9 moderate-income neighborhoods and for persons of modest 

10 means, as a result of the enactment of this Act. 

11 (b) REPORT.—Before the end of the 2-year period be12 ginning on the date of the enactment of this Act, the Sec13 retary of the Treasury, in consultation with the Federal 

14 banking agencies, shall submit a report to the Congress 

15 on the study conducted pursuant to subsection (a) and 

16 shall include such recommendations as the Secretary de17 termines to be appropriate for administrative and legisla18 tive action with respect to institutions covered under the 

19 Community Reinvestment Act of 1977. 

20 SEC. 110A. STUDY OF FINANCIAL MODERNIZATION’S AF21 FECT ON THE ACCESSIBILITY OF SMALL 

22 BUSINESS AND FARM LOANS. 

23 (a) STUDY.—The Secretary of the Treasury, in con24 sultation with the Federal banking agencies (as defined 

25 in Section 3(z) of the Federal Deposit Insurance Act), 

26 shall conduct a study of the extent to which credit is being 


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1 provided to and for small business and farms, as a result 

2 of this Act. 

3 (b) REPORT.—Before the end of the 5-year period be4 ginning on the date of the enactment of this Act, the Sec5 retary, in consultation with the Federal banking agencies, 

6 shall submit a report to the Congress on the study con7 ducted pursuant to subsection (a) and shall include such 

8 recommendations as the Secretary determines to be appro9 priate for administrative and legislative action. 

10 Subtitle B—Streamlining Super11 vision of Financial Holding 

12 Companies 

13 SEC. 111. STREAMLINING FINANCIAL HOLDING COMPANY 

14 SUPERVISION. 

15 Section 5(c) of the Bank Holding Company Act of 

16 1956 (12 U.S.C. 1844(c)) is amended to read as follows: 

17 ‘‘(c) REPORTS AND EXAMINATIONS.— 

18 ‘‘(1) REPORTS.— 

19 ‘‘(A) IN GENERAL.—The Board from time 

20 to time may require any bank holding company 

21 and any subsidiary of such company to submit 

22 reports under oath to keep the Board informed 

23 as to— 

24 ‘‘(i) its financial condition, systems 

25 for monitoring and controlling financial 


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1 and operating risks, and transactions with 

2 depository institution subsidiaries of the 

3 holding company; and 

4 ‘‘(ii) compliance by the company or 

5 subsidiary with applicable provisions of 

6 this Act. 

7 ‘‘(B) USE OF EXISTING REPORTS.— 

8 ‘‘(i) IN GENERAL.—The Board shall, 

9 to the fullest extent possible, accept re10 ports in fulfillment of the Board’s report11 ing requirements under this paragraph 

12 that a bank holding company or any sub13 sidiary of such company has provided or 

14 been required to provide to other Federal 

15 and State supervisors or to appropriate 

16 self-regulatory organizations. 

17 ‘‘(ii) AVAILABILITY.—A bank holding 

18 company or a subsidiary of such company 

19 shall provide to the Board, at the request 

20 of the Board, a report referred to in clause 

21 (i). 

22 ‘‘(iii) REQUIRED USE OF PUBLICLY

23 REPORTED INFORMATION.—The Board 

24 shall, to the fullest extent possible, accept 

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1 keeping requirements under this Act infor2 mation that is otherwise required to be re3 ported publicly and externally audited fi4 nancial statements. 

5 ‘‘(iv) REPORTS FILED WITH OTHER

6 AGENCIES.—In the event the Board re7 quires a report from a functionally regu8 lated nondepository institution subsidiary 

9 of a bank holding company of a kind that 

10 is not required by another Federal or State 

11 regulator or appropriate self-regulatory or12 ganization, the Board shall request that 

13 the appropriate regulator or self-regulatory 

14 organization obtain such report. If the re15 port is not made available to the Board, 

16 and the report is necessary to assess a ma17 terial risk to the bank holding company or 

18 any of its subsidiary depository institutions 

19 or compliance with this Act, the Board 

20 may require such subsidiary to provide 

21 such a report to the Board. 

22 ‘‘(C) DEFINITION.—For purposes of this 

23 subsection, the term ‘functionally regulated 

24 nondepository institution’ means— 


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1 ‘‘(i) a broker or dealer registered 

2 under the Securities Exchange Act of 

3 1934; 

4 ‘‘(ii) an investment adviser registered 

5 under the Investment Advisers Act of 

6 1940, or with any State, with respect to 

7 the investment advisory activities of such 

8 investment adviser and activities incidental 

9 to such investment advisory activities; 

10 ‘‘(iii) an insurance company subject to 

11 supervision by a State insurance commis12 sion, agency, or similar authority; and 

13 ‘‘(iv) an entity subject to regulation 

14 by the Commodity Futures Trading Com15 mission, with respect to the commodities 

16 activities of such entity and activities inci17 dental to such commodities activities. 

18 ‘‘(2) EXAMINATIONS.— 

19 ‘‘(A) EXAMINATION AUTHORITY.— 

20 ‘‘(i) IN GENERAL.—The Board may 

21 make examinations of each bank holding 

22 company and each subsidiary of a bank 

23 holding company. 

24 ‘‘(ii) FUNCTIONALLY REGULATED

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1 ARIES.—Notwithstanding clause (i), the 

2 Board may make examinations of a func3 tionally regulated nondepository institution 

4 subsidiary of a bank holding company only 

5 if— 

6 ‘‘(I) the Board has reasonable 

7 cause to believe that such subsidiary 

8 is engaged in activities that pose a 

9 material risk to an affiliated deposi10 tory institution; or 

11 ‘‘(II) based on reports and other 

12 available information, the Board has 

13 reasonable cause to believe that a sub14 sidiary is not in compliance with this 

15 Act or with provisions relating to 

16 transactions with an affiliated deposi17 tory institution and the Board cannot 

18 make such determination through ex19 amination of the affiliated depository 

20 institution or bank holding company. 

21 ‘‘(B) LIMITATIONS ON EXAMINATION AU22 THORITY FOR BANK HOLDING COMPANIES AND

23 SUBSIDIARIES.—Subject to subparagraph 

24 (A)(ii), the Board may make examinations 

25 under subparagraph (A)(i) of each bank holding 


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1 company and each subsidiary of such holding 

2 company in order to— 

3 ‘‘(i) inform the Board of the nature of 

4 the operations and financial condition of 

5 the holding company and such subsidiaries; 

6 ‘‘(ii) inform the Board of— 

7 ‘‘(I) the financial and operational 

8 risks within the holding company sys9 tem that may pose a threat to the 

10 safety and soundness of any sub11 sidiary depository institution of such 

12 holding company; and 

13 ‘‘(II) the systems for monitoring 

14 and controlling such risks; and 

15 ‘‘(iii) monitor compliance with the 

16 provisions of this Act and those governing 

17 transactions and relationships between any 

18 subsidiary depository institution and its af19 filiates. 

20 ‘‘(C) RESTRICTED FOCUS OF EXAMINA21 TIONS.—The Board shall, to the fullest extent 

22 possible, limit the focus and scope of any exam23 ination of a bank holding company to— 

24 ‘‘(i) the bank holding company; and 


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1 ‘‘(ii) any subsidiary of the holding 

2 company that, because of— 

3 ‘‘(I) the size, condition, or activi4 ties of the subsidiary; or 

5 ‘‘(II) the nature or size of trans6 actions between such subsidiary and 

7 any depository institution which is 

8 also a subsidiary of such holding com9 pany, 

10 could have a materially adverse effect on 

11 the safety and soundness of any depository 

12 institution affiliate of the holding company. 

13 ‘‘(D) DEFERENCE TO BANK EXAMINA14 TIONS.—The Board shall, to the fullest extent 

15 possible, use, for the purposes of this para16 graph, the reports of examinations of depository 

17 institutions made by the appropriate Federal 

18 and State depository institution supervisory au19 thority. 

20 ‘‘(E) DEFERENCE TO OTHER EXAMINA21 TIONS.—The Board shall, to the fullest extent 

22 possible, address the circumstances which might 

23 otherwise permit or require an examination by 

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1 stead reviewing the reports of examination 

2 made of— 

3 ‘‘(i) any registered broker or dealer by 

4 or on behalf of the Securities and Ex5 change Commission; 

6 ‘‘(ii) any investment adviser registered 

7 by or on behalf of either the Securities and 

8 Exchange Commission or any State, which9 ever is required by law; 

10 ‘‘(iii) any licensed insurance company 

11 by or on behalf of any State regulatory au12 thority responsible for the supervision of 

13 insurance companies; and 

14 ‘‘(iv) any other subsidiary that the 

15 Board finds to be comprehensively super16 vised by a Federal or State authority. 

17 ‘‘(3) CAPITAL.— 

18 ‘‘(A) IN GENERAL.—The Board shall not, 

19 by regulation, guideline, order or otherwise, pre20 scribe or impose any capital or capital adequacy 

21 rules, guidelines, standards, or requirements on 

22 any subsidiary of a financial holding company 

23 that is not a depository institution and— 

24 ‘‘(i) is in compliance with applicable 

25 capital requirements of another Federal 


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1 regulatory authority (including the Securi2 ties and Exchange Commission) or State 

3 insurance authority; 

4 ‘‘(ii) is registered as an investment 

5 adviser under the Investment Advisers Act 

6 of 1940, or with any State, whichever is 

7 required by law; or 

8 ‘‘(iii) is licensed as an insurance agent 

9 with the appropriate State insurance au10 thority. 

11 ‘‘(B) RULE OF CONSTRUCTION.—Subpara12 graph (A) shall not be construed as preventing 

13 the Board from imposing capital or capital ade14 quacy rules, guidelines, standards, or require15 ments with respect to— 

16 ‘‘(i) activities of a registered invest17 ment adviser other than investment advi18 sory activities or activities incidental to in19 vestment advisory activities; or 

20 ‘‘(ii) activities of a licensed insurance 

21 agent other than insurance agency activi22 ties or activities incidental to insurance 

23 agency activities. 

24 ‘‘(C) LIMITATIONS ON INDIRECT AC25 TION.—In developing, establishing, or assessing 


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1 holding company capital or capital adequacy 

2 rules, guidelines, standards, or requirements for 

3 purposes of this paragraph, the Board shall not 

4 take into account the activities, operations, or 

5 investments of an affiliated investment company 

6 registered under the Investment Company Act 

7 of 1940, unless the investment company is— 

8 ‘‘(i) a bank holding company; or 

9 ‘‘(ii) controlled by a bank holding 

10 company by reason of ownership by the 

11 bank holding company (including through 

12 all of its affiliates) of 25 percent or more 

13 of the shares of the investment company, 

14 and the shares owned by the bank holding 

15 company have a market value equal to 

16 more than $1,000,000. 

17 ‘‘(4) TRANSFER OF BOARD AUTHORITY TO AP18 PROPRIATE FEDERAL BANKING AGENCY.— 

19 ‘‘(A) IN GENERAL.—In the case of any 

20 bank holding company which is not significantly 

21 engaged in nonbanking activities, the Board, in 

22 consultation with the appropriate Federal bank23 ing agency, may designate the appropriate Fed24 eral banking agency of the lead insured deposi25 tory institution subsidiary of such holding comVerDate Mar 15 2010 15:06 Jun 10, 2011 Jkt 223001 PO 00000 Frm 00085 Fmt 6652 Sfmt 6201 E:\ERIC\H10.PCS H10

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1 pany as the appropriate Federal banking agen2 cy for the bank holding company. 

3 ‘‘(B) AUTHORITY TRANSFERRED.—An 

4 agency designated by the Board under subpara5 graph (A) shall have the same authority as the 

6 Board under this Act to— 

7 ‘‘(i) examine and require reports from 

8 the bank holding company and any affiliate 

9 of such company (other than a depository 

10 institution) under section 5; 

11 ‘‘(ii) approve or disapprove applica12 tions or transactions under section 3; 

13 ‘‘(iii) take actions and impose pen14 alties under subsections (e) and (f) of sec15 tion 5 and section 8; and 

16 ‘‘(iv) take actions regarding the hold17 ing company, any affiliate of the holding 

18 company (other than a depository institu19 tion), or any institution-affiliated party of 

20 such company or affiliate under the Fed21 eral Deposit Insurance Act and any other 

22 statute which the Board may designate. 

23 ‘‘(C) AGENCY ORDERS.—Section 9 of this 

24 Act and section 105 of the Bank Holding Com25 pany Act Amendments of 1970 shall apply to 


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1 orders issued by an agency designated under 

2 subparagraph (A) in the same manner such sec3 tions apply to orders issued by the Board. 

4 ‘‘(5) FUNCTIONAL REGULATION OF SECURITIES

5 AND INSURANCE ACTIVITIES.—The Board shall defer 

6 to— 

7 ‘‘(A) the Securities and Exchange Commis8 sion with regard to all interpretations of, and 

9 the enforcement of, applicable Federal securi10 ties laws (and rules, regulations, orders, and 

11 other directives issued thereunder) relating to 

12 the activities, conduct, and operations of reg13 istered brokers, dealers, investment advisers, 

14 and investment companies; 

15 ‘‘(B) the relevant State securities authori16 ties with regard to all interpretations of, and 

17 the enforcement of, applicable State securities 

18 laws (and rules, regulations, orders, and other 

19 directives issued thereunder) relating to the ac20 tivities, conduct, and operations of brokers, 

21 dealers, and investment advisers required to be 

22 registered under State law; and 

23 ‘‘(C) the relevant State insurance authori24 ties with regard to all interpretations of, and 

25 the enforcement of, applicable State insurance 


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1 laws (and rules, regulations, orders, and other 

2 directives issued thereunder) relating to the ac3 tivities, conduct, and operations of insurance 

4 companies and insurance agents.’’. 

5 SEC. 112. ELIMINATION OF APPLICATION REQUIREMENT 

6 FOR FINANCIAL HOLDING COMPANIES. 

7 (a) PREVENTION OF DUPLICATIVE FILINGS.—Sec8 tion 5(a) of the Bank Holding Company Act of 1956 (12 

9 U.S.C. 1844(a)) is amended by adding the following new 

10 sentence at the end: ‘‘A declaration filed in accordance 

11 with section 6(b)(1)(D) shall satisfy the requirements of 

12 this subsection with regard to the registration of a bank 

13 holding company but not any requirement to file an appli14 cation to acquire a bank pursuant to section 3.’’. 

15 (b) DIVESTITURE PROCEDURES.—Section 5(e)(1) of 

16 the Bank Holding Company Act of 1956 (12 U.S.C. 

17 1844(e)(1)) is amended— 

18 (1) by striking ‘‘Financial Institutions Super19 visory Act of 1966, order’’ and inserting ‘‘Financial 

20 Institutions Supervisory Act of 1966, at the election 

21 of the bank holding company— 

22 ‘‘(A) order’’; and 

23 (2) by striking ‘‘shareholders of the bank hold24 ing company. Such distribution’’ and inserting 

25 ‘‘shareholders of the bank holding company; or 


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1 ‘‘(B) order the bank holding company, after due 

2 notice and opportunity for hearing, and after con3 sultation with the primary supervisor for the bank, 

4 which shall be the Comptroller of the Currency in 

5 the case of a national bank, and the Federal Deposit 

6 Insurance Corporation and the appropriate State su7 pervisor in the case of an insured nonmember bank, 

8 to terminate (within 120 days or such longer period 

9 as the Board may direct) the ownership or control 

10 of any such bank by such company. 

11 The distribution referred to in subparagraph (A)’’. 

12 SEC. 113. AUTHORITY OF STATE INSURANCE REGULATOR 

13 AND SECURITIES AND EXCHANGE COMMIS14 SION. 

15 (a) BANK HOLDING COMPANIES.—Section 5 of the 

16 Bank Holding Company Act of 1956 (12 U.S.C. 1844) 

17 is amended by adding at the end the following new sub18 section: 

19 ‘‘(g) AUTHORITY OF STATE INSURANCE REGULATOR

20 AND THE SECURITIES AND EXCHANGE COMMISSION.— 

21 ‘‘(1) IN GENERAL.—Notwithstanding any other 

22 provision of law, any regulation, order, or other ac23 tion of the Board which requires a bank holding 

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1 fective nor enforceable with respect to an entity de2 scribed in subparagraph (A) if— 

3 ‘‘(A) such funds or assets are to be pro4 vided by— 

5 ‘‘(i) a bank holding company that is 

6 an insurance company, a broker or dealer 

7 registered under the Securities Exchange 

8 Act of 1934, an investment company reg9 istered under the Investment Company Act 

10 of 1940, or an investment adviser reg11 istered by or on behalf of either the Securi12 ties and Exchange Commission or any 

13 State; or 

14 ‘‘(ii) an affiliate of the depository in15 stitution which is an insurance company or 

16 a broker or dealer registered under the Se17 curities Exchange Act of 1934, an invest18 ment company registered under the Invest19 ment Company Act of 1940, or an invest20 ment adviser registered by or on behalf of 

21 either the Securities and Exchange Com22 mission or any State; and 

23 ‘‘(B) the State insurance authority for the 

24 insurance company or the Securities and Ex25 change Commission for the registered broker, 


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1 dealer, investment adviser (solely with respect 

2 to investment advisory activities or activities in3 cidental thereto), or investment company, as 

4 the case may be, determines in writing sent to 

5 the holding company and the Board that the 

6 holding company shall not provide such funds 

7 or assets because such action would have a ma8 terial adverse effect on the financial condition 

9 of the insurance company or the broker, dealer, 

10 investment company, or investment adviser, as 

11 the case may be. 

12 ‘‘(2) NOTICE TO STATE INSURANCE AUTHORITY

13 OR SEC REQUIRED.—If the Board requires a bank 

14 holding company, or an affiliate of a bank holding 

15 company, which is an insurance company or a 

16 broker, dealer, investment company, or investment 

17 adviser described in paragraph (1)(A) to provide 

18 funds or assets to an insured depository institution 

19 subsidiary of the holding company pursuant to any 

20 regulation, order, or other action of the Board re21 ferred to in paragraph (1), the Board shall promptly 

22 notify the State insurance authority for the insur23 ance company, the Securities and Exchange Com24 mission, or State securities regulator, as the case 

25 may be, of such requirement. 


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1 ‘‘(3) DIVESTITURE IN LIEU OF OTHER AC2 TION.—If the Board receives a notice described in 

3 paragraph (1)(B) from a State insurance authority 

4 or the Securities and Exchange Commission with re5 gard to a bank holding company or affiliate referred 

6 to in that paragraph, the Board may order the bank 

7 holding company to divest the insured depository in8 stitution not later than 180 days after receiving the 

9 notice, or such longer period as the Board deter10 mines consistent with the safe and sound operation 

11 of the insured depository institution. 

12 ‘‘(4) CONDITIONS BEFORE DIVESTITURE.—Dur13 ing the period beginning on the date an order to di14 vest is issued by the Board under paragraph (3) to 

15 a bank holding company and ending on the date the 

16 divestiture is completed, the Board may impose any 

17 conditions or restrictions on the holding company’s 

18 ownership or operation of the insured depository in19 stitution, including restricting or prohibiting trans20 actions between the insured depository institution 

21 and any affiliate of the institution, as are appro22 priate under the circumstances.’’. 

23 (b) SUBSIDIARIES OF DEPOSITORY INSTITUTIONS.— 

24 The Federal Deposit Insurance Act (12 U.S.C. 1811 et 


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1 seq.) is amended by adding at the end the following new 

2 section: 

3 ‘‘SEC. 45. AUTHORITY OF STATE INSURANCE REGULATOR 

4 AND SECURITIES AND EXCHANGE COMMIS5 SION. 

6 ‘‘(a) IN GENERAL.—Notwithstanding any other pro7 vision of law, any regulation, order, or other action of the 

8 appropriate Federal banking agency which requires a sub9 sidiary to provide funds or other assets to an insured de10 pository institution shall not be effective nor enforceable 

11 with respect to an entity described in paragraph (1) if— 

12 ‘‘(1) such funds or assets are to be provided by 

13 a subsidiary which is an insurance company, a 

14 broker or dealer registered under the Securities Ex15 change Act of 1934, an investment company reg16 istered under the Investment Company Act of 1940, 

17 or an investment adviser registered by or on behalf 

18 of either the Securities and Exchange Commission 

19 or any State; and 

20 ‘‘(2) the State insurance authority for the in21 surance company or the Securities and Exchange 

22 Commission for the registered broker or dealer, the 

23 investment company, or the investment adviser, as 

24 the case may be, determines in writing sent to the 

25 insured depository institution and the appropriate 


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1 Federal banking agency that the subsidiary shall not 

2 provide such funds or assets because such action 

3 would have a material adverse effect on the financial 

4 condition of the insurance company or the broker, 

5 dealer, investment company, or investment adviser, 

6 as the case may be. 

7 ‘‘(b) NOTICE TO STATE INSURANCE AUTHORITY OR

8 SEC REQUIRED.—If the appropriate Federal banking 

9 agency requires a subsidiary, which is an insurance com10 pany, a broker or dealer, an investment company, or an 

11 investment adviser (solely with respect to investment advi12 sory activities or activities incidental thereto) described in 

13 subsection (a)(1) to provide funds or assets to an insured 

14 depository institution pursuant to any regulation, order, 

15 or other action of the appropriate Federal banking agency 

16 referred to in subsection (a), the appropriate Federal 

17 banking agency shall promptly notify the State insurance 

18 authority for the insurance company, the Securities and 

19 Exchange Commission, or State securities regulator, as 

20 the case may be, of such requirement. 

21 ‘‘(c) DIVESTITURE IN LIEU OF OTHER ACTION.—If 

22 the appropriate Federal banking agency receives a notice 

23 described in subsection (a)(2) from a State insurance au24 thority or the Securities and Exchange Commission with 

25 regard to a subsidiary referred to in that subsection, the 


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1 appropriate Federal banking agency may order the in2 sured depository institution to divest the subsidiary not 

3 later than 180 days after receiving the notice, or such 

4 longer period as the appropriate Federal banking agency 

5 determines consistent with the safe and sound operation 

6 of the insured depository institution. 

7 ‘‘(d) CONDITIONS BEFORE DIVESTITURE.—During 

8 the period beginning on the date an order to divest is 

9 issued by the appropriate Federal banking agency under 

10 subsection (c) to an insured depository institution and 

11 ending on the date the divestiture is complete, the appro12 priate Federal banking agency may impose any conditions 

13 or restrictions on the insured depository institution’s own14 ership of the subsidiary including restricting or prohibiting 

15 transactions between the insured depository institution 

16 and the subsidiary, as are appropriate under the cir17 cumstances.’’. 

18 SEC. 114. PRUDENTIAL SAFEGUARDS. 

19 (a) COMPTROLLER OF THE CURRENCY.— 

20 (1) IN GENERAL.—The Comptroller of the Cur21 rency may, by regulation or order, impose restric22 tions or requirements on relationships or trans23 actions between a national bank and a subsidiary of 

24 the national bank which the Comptroller finds are 

25 consistent with the public interest, the purposes of 


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1 this Act, title LXII of the Revised Statutes of the 

2 United States, and other Federal law applicable to 

3 national banks, and the standards in paragraph (2). 

4 (2) STANDARDS.—The Comptroller of the Cur5 rency may exercise authority under paragraph (1) if 

6 the Comptroller finds that such action will have any 

7 of the following effects: 

8 (A) Avoid any significant risk to the safety 

9 and soundness of depository institutions or any 

10 Federal deposit insurance fund. 

11 (B) Enhance the financial stability of 

12 banks. 

13 (C) Avoid conflicts of interest or other 

14 abuses. 

15 (D) Enhance the privacy of customers of 

16 the national bank or any subsidiary of the 

17 bank. 

18 (E) Promote the application of national 

19 treatment and equality of competitive oppor20 tunity between subsidiaries owned or controlled 

21 by domestic banks and subsidiaries owned or 

22 controlled by foreign banks operating in the 

23 United States. 

24 (3) REVIEW.—The Comptroller of the Currency 

25 shall regularly— 


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1 (A) review all restrictions or requirements 

2 established pursuant to paragraph (1) to deter3 mine whether there is a continuing need for any 

4 such restriction or requirement to carry out the 

5 purposes of the Act, including any purpose de6 scribed in paragraph (2); and 

7 (B) modify or eliminate any restriction or 

8 requirement the Comptroller finds is no longer 

9 required for such purposes. 

10 (b) BOARD OF GOVERNORS OF THE FEDERAL RE11 SERVE SYSTEM.— 

12 (1) IN GENERAL.—The Board of Governors of 

13 the Federal Reserve System may, by regulation or 

14 order, impose restrictions or requirements on rela15 tionships or transactions— 

16 (A) between a depository institution sub17 sidiary of a bank holding company and any af18 filiate of such depository institution (other than 

19 a subsidiary of such institution); or 

20 (B) between a State member bank and a 

21 subsidiary of such bank, 

22 which the Board finds are consistent with the public 

23 interest, the purposes of this Act, the Bank Holding 

24 Company Act of 1956, the Federal Reserve Act, and 

25 other Federal law applicable to depository institution 


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1 subsidiaries of bank holding companies or State 

2 banks (as the case may be), and the standards in 

3 paragraph (2). 

4 (2) STANDARDS.—The Board of Governors of 

5 the Federal Reserve System may exercise authority 

6 under paragraph (1) if the Board finds that such ac7 tion will have any of the following effects: 

8 (A) Avoid any significant risk to the safety 

9 and soundness of depository institutions or any 

10 Federal deposit insurance fund. 

11 (B) Enhance the financial stability of bank 

12 holding companies. 

13 (C) Avoid conflicts of interest or other 

14 abuses. 

15 (D) Enhance the privacy of customers of 

16 the State member bank or any subsidiary of the 

17 bank. 

18 (E) Promote the application of national 

19 treatment and equality of competitive oppor20 tunity between nonbank affiliates owned or con21 trolled by domestic bank holding companies and 

22 nonbank affiliates owned or controlled by for23 eign banks operating in the United States. 

24 (3) REVIEW.—The Board of Governors of the 

25 Federal Reserve System shall regularly— 


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1 (A) review all restrictions or requirements 

2 established pursuant to paragraph (1) to deter3 mine whether there is a continuing need for any 

4 such restriction or requirement to carry out the 

5 purposes of the Act, including any purpose de6 scribed in paragraph (2); and 

7 (B) modify or eliminate any restriction or 

8 requirement the Board finds is no longer re9 quired for such purposes. 

10 (4) FOREIGN BANKS.— 

11 (A) IN GENERAL.—The Board may, by 

12 regulation or order, impose restrictions or re13 quirements on relationships or transactions be14 tween a branch, agency, or commercial lending 

15 company of a foreign bank in the United States 

16 and any affiliate in the United States of such 

17 foreign bank that the Board finds are con18 sistent with the public interest, the purposes of 

19 this Act, the Bank Holding Company Act of 

20 1956, the Federal Reserve Act, and other Fed21 eral law applicable to foreign banks and their 

22 affiliates in the United States, and the stand23 ards in paragraphs (2) and (3). 

24 (B) EVASION.—In the event that the 

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1 cumstances that would result in an evasion of 

2 this paragraph, the Board may also impose re3 strictions or requirements on relationships or 

4 transactions between a foreign bank outside the 

5 United States and any affiliate in the United 

6 States of such foreign bank that are consistent 

7 with national treatment and equality of com8 petitive opportunity. 

9 (c) FEDERAL DEPOSIT INSURANCE CORPORATION.— 

10 (1) IN GENERAL.—The Federal Deposit Insur11 ance Corporation may, by regulation or order, im12 pose restrictions or requirements on relationships or 

13 transactions between a State nonmember bank (as 

14 defined in section 3 of the Federal Deposit Insur15 ance Act) and a subsidiary of the State nonmember 

16 bank which the Corporation finds are consistent with 

17 the public interest, the purposes of this Act, the 

18 Federal Deposit Insurance Act, or other Federal law 

19 applicable to State nonmember banks and the stand20 ards in paragraph (2). 

21 (2) STANDARDS.—The Federal Deposit Insur22 ance Corporation may exercise authority under para23 graph (1) if the Corporation finds that such action 

24 will have any of the following effects: 


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1 (A) Avoid any significant risk to the safety 

2 and soundness of depository institutions or any 

3 Federal deposit insurance fund. 

4 (B) Enhance the financial stability of 

5 banks. 

6 (C) Avoid conflicts of interest or other 

7 abuses. 

8 (D) Enhance the privacy of customers of 

9 the State nonmember bank or any subsidiary of 

10 the bank. 

11 (E) Promote the application of national 

12 treatment and equality of competitive oppor13 tunity between subsidiaries owned or controlled 

14 by domestic banks and subsidiaries owned or 

15 controlled by foreign banks operating in the 

16 United States. 

17 (3) REVIEW.—The Federal Deposit Insurance 

18 Corporation shall regularly— 

19 (A) review all restrictions or requirements 

20 established pursuant to paragraph (1) to deter21 mine whether there is a continuing need for any 

22 such restriction or requirement to carry out the 

23 purposes of the Act, including any purpose de24 scribed in paragraph (2); and 


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1 (B) modify or eliminate any restriction or 

2 requirement the Corporation finds is no longer 

3 required for such purposes. 

4 SEC. 115. EXAMINATION OF INVESTMENT COMPANIES. 

5 (a) EXCLUSIVE COMMISSION AUTHORITY.— 

6 (1) IN GENERAL.—Except as provided in para7 graph (3), the Commission shall be the sole Federal 

8 agency with authority to inspect and examine any 

9 registered investment company that is not a bank 

10 holding company or a savings and loan holding com11 pany. 

12 (2) PROHIBITION ON BANKING AGENCIES.—Ex13 cept as provided in paragraph (3), a Federal bank14 ing agency may not inspect or examine any reg15 istered investment company that is not a bank hold16 ing company or a savings and loan holding company. 

17 (3) CERTAIN EXAMINATIONS AUTHORIZED.— 

18 Nothing in this subsection prevents the Federal De19 posit Insurance Corporation, if the Corporation finds 

20 it necessary to determine the condition of an insured 

21 depository institution for insurance purposes, from 

22 examining an affiliate of any insured depository in23 stitution, pursuant to its authority under section 

24 10(b)(4) of the Federal Deposit Insurance Act, as 

25 may be necessary to disclose fully the relationship 


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1 between the depository institution and the affiliate, 

2 and the effect of such relationship on the depository 

3 institution. 

4 (b) EXAMINATION RESULTS AND OTHER INFORMA5 TION.—The Commission shall provide to any Federal 

6 banking agency, upon request, the results of any examina7 tion, reports, records, or other information with respect 

8 to any registered investment company to the extent nec9 essary for the agency to carry out its statutory responsibil10 ities. 

11 (c) DEFINITIONS.—For purposes of this section, the 

12 following definitions shall apply: 

13 (1) BANK HOLDING COMPANY.—The term 

14 ‘‘bank holding company’’ has the same meaning as 

15 in section 2 of the Bank Holding Company Act of 

16 1956. 

17 (2) COMMISSION.—The term ‘‘Commission’’ 

18 means the Securities and Exchange Commission. 

19 (3) FEDERAL BANKING AGENCY.—The term 

20 ‘‘Federal banking agency’’ has the same meaning as 

21 in section 3(z) of the Federal Deposit Insurance Act. 

22 (4) REGISTERED INVESTMENT COMPANY.—The 

23 term ‘‘registered investment company’’ means an in24 vestment company which is registered with the Com25 mission under the Investment Company Act of 1940. 


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1 (5) SAVINGS AND LOAN HOLDING COMPANY.— 

2 The term ‘‘savings and loan holding company’’ has 

3 the same meaning as in section 10(a)(1)(D) of the 

4 Home Owners’ Loan Act. 

5 SEC. 116. LIMITATION ON RULEMAKING, PRUDENTIAL, SU6 PERVISORY, AND ENFORCEMENT AUTHORITY 

7 OF THE BOARD. 

8 The Bank Holding Company Act of 1956 (12 U.S.C. 

9 1841 et seq.) is amended by inserting after section 10 the 

10 following new section: 

11 ‘‘SEC. 10A. LIMITATION ON RULEMAKING, PRUDENTIAL, SU12 PERVISORY, AND ENFORCEMENT AUTHORITY 

13 OF THE BOARD. 

14 ‘‘(a) LIMITATION ON DIRECT ACTION.— 

15 ‘‘(1) IN GENERAL.—The Board may not pre16 scribe regulations, issue or seek entry of orders, im17 pose restraints, restrictions, guidelines, require18 ments, safeguards, or standards, or otherwise take 

19 any action under or pursuant to any provision of 

20 this Act or section 8 of the Federal Deposit Insur21 ance Act against or with respect to a regulated sub22 sidiary of a bank holding company unless the action 

23 is necessary to prevent or redress an unsafe or un24 sound practice or breach of fiduciary duty by such 

25 subsidiary that poses a material risk to— 


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1 ‘‘(A) the financial safety, soundness, or 

2 stability of an affiliated depository institution; 

3 or 

4 ‘‘(B) the domestic or international pay5 ment system. 

6 ‘‘(2) CRITERIA FOR BOARD ACTION.—The 

7 Board shall not take action otherwise permitted 

8 under paragraph (1) unless the Board finds that it 

9 is not reasonably possible to effectively protect 

10 against the material risk at issue through action di11 rected at or against the affiliated depository institu12 tion or against depository institutions generally. 

13 ‘‘(b) LIMITATION ON INDIRECT ACTION.—The Board 

14 may not prescribe regulations, issue or seek entry of or15 ders, impose restraints, restrictions, guidelines, require16 ments, safeguards, or standards, or otherwise take any ac17 tion under or pursuant to any provision of this Act or sec18 tion 8 of the Federal Deposit Insurance Act against or 

19 with respect to a financial holding company or a wholesale 

20 financial holding company where the purpose or effect of 

21 doing so would be to take action indirectly against or with 

22 respect to a regulated subsidiary that may not be taken 

23 directly against or with respect to such subsidiary in ac24 cordance with subsection (a). 


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1 ‘‘(c) ACTIONS SPECIFICALLY AUTHORIZED.—Not2 withstanding subsection (a), the Board may take action 

3 under this Act or section 8 of the Federal Deposit Insur4 ance Act to enforce compliance by a regulated subsidiary 

5 with Federal law that the Board has specific jurisdiction 

6 to enforce against such subsidiary. 

7 ‘‘(d) REGULATED SUBSIDIARY DEFINED.—For pur8 poses of this section, the term ‘regulated subsidiary’ 

9 means any company that is not a bank holding company 

10 and is— 

11 ‘‘(1) a broker or dealer registered under the Se12 curities Exchange Act of 1934; 

13 ‘‘(2) an investment adviser registered by or on 

14 behalf of either the Securities and Exchange Com15 mission or any State, whichever is required by law, 

16 with respect to the investment advisory activities of 

17 such investment adviser and activities incidental to 

18 such investment advisory activities; 

19 ‘‘(3) an investment company registered under 

20 the Investment Company Act of 1940; 

21 ‘‘(4) an insurance company or an insurance 

22 agency, with respect to the insurance activities and 

23 activities incidental to such insurance activities, sub24 ject to supervision by a State insurance commission, 

25 agency, or similar authority; or 


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1 ‘‘(5) an entity subject to regulation by the Com2 modity Futures Trading Commission, with respect 

3 to the commodities activities of such entity and ac4 tivities incidental to such commodities activities.’’. 

5 SEC. 117. EQUIVALENT REGULATION AND SUPERVISION. 

6 (a) IN GENERAL.—Notwithstanding any other provi7 sion of law, the provisions of— 

8 (1) section 5(c) of the Bank Holding Company 

9 Act of 1956 (as amended by this Act) that limit the 

10 authority of the Board of Governors of the Federal 

11 Reserve System to require reports from, to make ex12 aminations of, or to impose capital requirements on 

13 bank holding companies and their nonbank subsidi14 aries or that require deference to other regulators; 

15 and 

16 (2) section 10A of the Bank Holding Company 

17 Act of 1956 (as added by this Act) that limit what18 ever authority the Board might otherwise have to 

19 take direct or indirect action with respect to bank 

20 holding companies and their nonbank subsidiaries, 

21 shall also limit whatever authority that a Federal banking 

22 agency (as defined in section 3(z) of the Federal Deposit 

23 Insurance Act) might otherwise have under any statute 

24 to require reports, make examinations, impose capital re25 quirements or take any other direct or indirect action with 


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1 respect to bank holding companies and their nonbank sub2 sidiaries (including nonbank subsidiaries of depository in3 stitutions), subject to the same standards and require4 ments as are applicable to the Board under such provi5 sions. 

6 (b) CERTAIN EXAMINATIONS AUTHORIZED.—No pro7 vision of this section shall be construed as preventing the 

8 Federal Deposit Insurance Corporation, if the Corporation 

9 finds it necessary to determine the condition of an insured 

10 depository institution for insurance purposes, from exam11 ining an affiliate of any insured depository institution, 

12 pursuant to its authority under section 10(b)(4) of the 

13 Federal Deposit Insurance Act, as may be necessary to 

14 disclose fully the relationship between the depository insti15 tution and the affiliate, and the effect of such relationship 

16 on the depository institution. 

17 SEC. 118. PROHIBITION ON FDIC ASSISTANCE TO AFFILI18 ATES AND SUBSIDIARIES. 

19 Section 11(a)(4)(B) of the Federal Deposit Insurance 

20 Act (12 U.S.C. 1821(a)(4)(B)) is amended by striking ‘‘to 

21 benefit any shareholder of’’ and inserting ‘‘to benefit any 

22 shareholder, affiliate (other than an insured depository in23 stitution that receives assistance in accordance with the 

24 provisions of this Act), or subsidiary of’’. 


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1 SEC. 119. REPEAL OF SAVINGS BANK PROVISIONS IN THE 

2 BANK HOLDING COMPANY ACT OF 1956. 

3 Section 3(f) of the Bank Holding Company Act of 

4 1956 (12 U.S.C. 1842(f)) is amended to read as follows: 

5 ‘‘(f) [Repealed].’’. 

6 SEC. 120. TECHNICAL AMENDMENT. 

7 Section 2(o)(1)(A) of the Bank Holding Company 

8 Act of 1956 (12 U.S.C. 1841(o)(1)(A)) is amended by 

9 striking ‘‘section 38(b)’’ and inserting ‘‘section 38’’. 

10 Subtitle C—Subsidiaries of 

11 National Banks 

12 SEC. 121. PERMISSIBLE ACTIVITIES FOR SUBSIDIARIES OF 

13 NATIONAL BANKS. 

14 (a) FINANCIAL SUBSIDIARIES OF NATIONAL

15 BANKS.—Chapter 1 of title LXII of the Revised Statutes 

16 of United States (12 U.S.C. 21 et seq.) is amended— 

17 (1) by redesignating section 5136A as section 

18 5136C; and 

19 (2) by inserting after section 5136 (12 U.S.C. 

20 24) the following new section: 

21 ‘‘SEC. 5136A. SUBSIDIARIES OF NATIONAL BANKS. 

22 ‘‘(a) SUBSIDIARIES OF NATIONAL BANKS AUTHOR23 IZED TO ENGAGE IN FINANCIAL ACTIVITIES.— 

24 ‘‘(1) EXCLUSIVE AUTHORITY.—No provision of 

25 section 5136 or any other provision of this title 

26 LXII of the Revised Statutes of the United States 


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1 shall be construed as authorizing a subsidiary of a 

2 national bank to engage in, or own any share of or 

3 any other interest in any company engaged in, any 

4 activity that— 

5 ‘‘(A) is not permissible for a national bank 

6 to engage in directly; or 

7 ‘‘(B) is conducted under terms or condi8 tions other than those that would govern the 

9 conduct of such activity by a national bank, 

10 unless a national bank is specifically authorized by 

11 the express terms of a Federal statute and not by 

12 implication or interpretation to acquire shares of or 

13 an interest in, or to control, such subsidiary, such as 

14 by paragraph (2) of this subsection and section 25A 

15 of the Federal Reserve Act. 

16 ‘‘(2) SPECIFIC AUTHORIZATION TO CONDUCT

17 ACTIVITIES WHICH ARE FINANCIAL IN NATURE.— 

18 Subject to paragraphs (3) and (4), a national bank 

19 may control a financial subsidiary, or hold an inter20 est in a financial subsidiary, that is controlled by in21 sured depository institutions or subsidiaries thereof. 

22 ‘‘(3) ELIGIBILITY REQUIREMENTS.—A national 

23 bank may control or hold an interest in a company 

24 pursuant to paragraph (2) only if— 


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1 ‘‘(A) the national bank and all depository 

2 institution affiliates of the national bank are 

3 well capitalized; 

4 ‘‘(B) the national bank and all depository 

5 institution affiliates of the national bank are 

6 well managed; 

7 ‘‘(C) the national bank and all depository 

8 institution affiliates of such national bank have 

9 achieved a rating of ‘satisfactory record of 

10 meeting community credit needs’, or better, at 

11 the most recent examination of each such bank 

12 or institution; and 

13 ‘‘(D) the bank has received the approval of 

14 the Comptroller of the Currency. 

15 ‘‘(4) ACTIVITY LIMITATIONS.—In addition to 

16 any other limitation imposed on the activity of sub17 sidiaries of national banks, a subsidiary of a na18 tional bank may not, pursuant to paragraph (2)— 

19 ‘‘(A) engage as principal in insuring, guar20 anteeing, or indemnifying against loss, harm, 

21 damage, illness, disability, or death (other than 

22 in connection with credit-related insurance) or 

23 in providing or issuing annuities; 

24 ‘‘(B) engage in real estate investment or 

25 development activities; or 


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1 ‘‘(C) engage in any activity permissible for 

2 a financial holding company under paragraph 

3 (3)(I) of section 6(c) of the Bank Holding Com4 pany Act of 1956 (relating to insurance com5 pany investments). 

6 ‘‘(5) SIZE FACTOR WITH REGARD TO FREE7 STANDING NATIONAL BANKS.—Notwithstanding 

8 paragraph (2), a national bank which has total as9 sets of $10,000,000,000 or more may not control a 

10 subsidiary engaged in financial activities pursuant to 

11 such paragraph unless such national bank is a sub12 sidiary of a bank holding company. 

13 ‘‘(6) LIMITED EXCLUSIONS FROM COMMUNITY

14 NEEDS REQUIREMENTS FOR NEWLY AFFILIATED DE15 POSITORY INSTITUTIONS.—Any depository institu16 tion which becomes an affiliate of a national bank 

17 during the 12-month period preceding the date of an 

18 approval by the Comptroller of the Currency under 

19 paragraph (3)(D) for such bank, and any depository 

20 institution which becomes an affiliate of the national 

21 bank after such date, may be excluded for purposes 

22 of paragraph (3)(C) during the 12-month period be23 ginning on the date of such affiliation if— 

24 ‘‘(A) the national bank or such depository 

25 institution has submitted an affirmative plan to 


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1 the appropriate Federal banking agency to take 

2 such action as may be necessary in order for 

3 such institution to achieve a rating of ‘satisfac4 tory record of meeting community credit needs’, 

5 or better, at the next examination of the insti6 tution; and 

7 ‘‘(B) the plan has been accepted by such 

8 agency. 

9 ‘‘(7) DEFINITIONS.—For purposes of this sec10 tion, the following definitions shall apply: 

11 ‘‘(A) COMPANY; CONTROL; AFFILIATE; 

12 SUBSIDIARY.—The terms ‘company’, ‘control’, 

13 ‘affiliate’, and ‘subsidiary’ have the same mean14 ings as in section 2 of the Bank Holding Com15 pany Act of 1956. 

16 ‘‘(B) FINANCIAL SUBSIDIARY.—The term 

17 ‘financial subsidiary’ means a company which is 

18 a subsidiary of an insured bank and is engaged 

19 in financial activities that have been determined 

20 to be financial in nature or incidental to such 

21 financial activities in accordance with sub22 section (b) or permitted in accordance with sub23 section (b)(4), other than activities that are 

24 permissible for a national bank to engage in di25 rectly or that are authorized under the Bank 


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1 Service Company Act, section 25 or 25A of the 

2 Federal Reserve Act, or any other Federal stat3 ute (other than this section) that specifically 

4 authorizes the conduct of such activities by its 

5 express terms and not by implication or inter6 pretation. 

7 ‘‘(C) WELL CAPITALIZED.—The term ‘well 

8 capitalized’ has the same meaning as in section 

9 38 of the Federal Deposit Insurance Act and, 

10 for purposes of this section, the Comptroller 

11 shall have exclusive jurisdiction to determine 

12 whether a national bank is well capitalized. 

13 ‘‘(D) WELL MANAGED.—The term ‘well 

14 managed’ means— 

15 ‘‘(i) in the case of a depository insti16 tution that has been examined, unless oth17 erwise determined in writing by the appro18 priate Federal banking agency— 

19 ‘‘(I) the achievement of a com20 posite rating of 1 or 2 under the Uni21 form Financial Institutions Rating 

22 System (or an equivalent rating under 

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1 tion or subsequent review of the de2 pository institution; and 

3 ‘‘(II) at least a rating of 2 for 

4 management, if that rating is given; 

5 or 

6 ‘‘(ii) in the case of any depository in7 stitution that has not been examined, the 

8 existence and use of managerial resources 

9 that the appropriate Federal banking agen10 cy determines are satisfactory. 

11 ‘‘(E) INCORPORATED DEFINITIONS.—The 

12 terms ‘appropriate Federal banking agency’ and 

13 ‘depository institution’ have the same meanings 

14 as in section 3 of the Federal Deposit Insur15 ance Act. 

16 ‘‘(b) ACTIVITIES THAT ARE FINANCIAL IN NA17 TURE.— 

18 ‘‘(1) FINANCIAL ACTIVITIES.— 

19 ‘‘(A) IN GENERAL.—For purposes of sub20 section (a)(7)(B), an activity shall be consid21 ered to have been determined to be financial in 

22 nature or incidental to such financial activities 

23 only if— 

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1 tion 6(c)(3) of the Bank Holding Company 

2 Act of 1956 (to the extent such activity is 

3 not otherwise prohibited under this section 

4 or any other provision of law for a sub5 sidiary of a national bank engaged in ac6 tivities pursuant to subsection (a)(2)); or 

7 ‘‘(ii) the Secretary of the Treasury de8 termines the activity to be financial in na9 ture or incidental to such financial activi10 ties in accordance with subparagraph (B) 

11 or paragraph (3). 

12 ‘‘(B) COORDINATION BETWEEN THE

13 BOARD AND THE SECRETARY OF THE TREAS14 URY.— 

15 ‘‘(i) PROPOSALS RAISED BEFORE THE

16 SECRETARY OF THE TREASURY.— 

17 ‘‘(I) CONSULTATION.—The Sec18 retary of the Treasury shall notify the 

19 Board of, and consult with the Board 

20 concerning, any request, proposal, or 

21 application under this subsection, in22 cluding any regulation or order pro23 posed under paragraph (3), for a de24 termination of whether an activity is 


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1 financial in nature or incidental to 

2 such a financial activity. 

3 ‘‘(II) BOARD VIEW.—The Sec4 retary of the Treasury shall not deter5 mine that any activity is financial in 

6 nature or incidental to a financial ac7 tivity under this subsection if the 

8 Board notifies the Secretary in writ9 ing, not later than 30 days after the 

10 date of receipt of the notice described 

11 in subclause (I) (or such longer period 

12 as the Secretary determines to be ap13 propriate in light of the cir14 cumstances) that the Board believes 

15 that the activity is not financial in na16 ture or incidental to a financial activ17 ity. 

18 ‘‘(ii) PROPOSALS RAISED BY THE

19 BOARD.— 

20 ‘‘(I) BOARD RECOMMENDA21 TION.—The Board may, at any time, 

22 recommend in writing that the Sec23 retary of the Treasury find an activity 

24 to be financial in nature or incidental 

25 to a financial activity (other than an 


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1 activity which the Board has sole au2 thority to regulate under subpara3 graph (C)). 

4 ‘‘(II) TIME PERIOD FOR SECRE5 TARIAL ACTION.—Not later than 30 

6 days after the date of receipt of a 

7 written recommendation from the 

8 Board under subclause (I) (or such 

9 longer period as the Secretary of the 

10 Treasury and the Board determine to 

11 be appropriate in light of the cir12 cumstances), the Secretary shall de13 termine whether to initiate a public 

14 rulemaking proposing that the subject 

15 recommended activity be found to be 

16 financial in nature or incidental to a 

17 financial activity under this sub18 section, and shall notify the Board in 

19 writing of the determination of the 

20 Secretary and, in the event that the 

21 Secretary determines not to seek pub22 lic comment on the proposal, the rea23 sons for that determination. 

24 ‘‘(C) AUTHORITY OVER MERCHANT BANK25 ING.—The Board shall have sole authority to 


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1 prescribe regulations and issue interpretations 

2 to implement this paragraph with respect to ac3 tivities described in section 6(c)(3)(H) of the 

4 Bank Holding Company Act of 1956. 

5 ‘‘(2) FACTORS TO BE CONSIDERED.—In deter6 mining whether an activity is financial in nature or 

7 incidental to financial activities, the Secretary shall 

8 take into account— 

9 ‘‘(A) the purposes of this Act and the Fi10 nancial Services Act of 1999; 

11 ‘‘(B) changes or reasonably expected 

12 changes in the marketplace in which banks 

13 compete; 

14 ‘‘(C) changes or reasonably expected 

15 changes in the technology for delivering finan16 cial services; and 

17 ‘‘(D) whether such activity is necessary or 

18 appropriate to allow a bank and the subsidiaries 

19 of a bank to— 

20 ‘‘(i) compete effectively with any com21 pany seeking to provide financial services 

22 in the United States; 

23 ‘‘(ii) use any available or emerging 

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1 ficacy of systems for the transmission of 

2 data or financial transactions, in providing 

3 financial services; and 

4 ‘‘(iii) offer customers any available or 

5 emerging technological means for using fi6 nancial services. 

7 ‘‘(3) AUTHORIZATION OF NEW FINANCIAL AC8 TIVITIES.—The Secretary of the Treasury shall, by 

9 regulation or order and in accordance with para10 graph (1)(B), define, consistent with the purposes of 

11 this Act, the following activities as, and the extent 

12 to which such activities are, financial in nature or 

13 incidental to activities which are financial in nature: 

14 ‘‘(A) Lending, exchanging, transferring, in15 vesting for others, or safeguarding financial as16 sets other than money or securities. 

17 ‘‘(B) Providing any device or other instru18 mentality for transferring money or other finan19 cial assets. 

20 ‘‘(C) Arranging, effecting, or facilitating fi21 nancial transactions for the account of third 

22 parties. 

23 ‘‘(4) DEVELOPING ACTIVITIES.—Subject to sub24 section (a)(2), a financial subsidiary of a national 

25 bank may engage directly or indirectly, or acquire 


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1 shares of any company engaged, in any activity that 

2 the Secretary has not determined to be financial in 

3 nature or incidental to financial activities under this 

4 subsection if— 

5 ‘‘(A) the subsidiary reasonably concludes 

6 that the activity is financial in nature or inci7 dental to financial activities; 

8 ‘‘(B) the gross revenues from all activities 

9 conducted under this paragraph represent less 

10 than 5 percent of the consolidated gross reve11 nues of the national bank; 

12 ‘‘(C) the aggregate total assets of all com13 panies the shares of which are held under this 

14 paragraph do not exceed 5 percent of the na15 tional bank’s consolidated total assets; 

16 ‘‘(D) the total capital invested in activities 

17 conducted under this paragraph represents less 

18 than 5 percent of the consolidated total capital 

19 of the national bank; 

20 ‘‘(E) neither the Secretary of the Treasury 

21 nor the Board has determined that the activity 

22 is not financial in nature or incidental to finan23 cial activities under this subsection; and 

24 ‘‘(F) the national bank provides written 

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1 ing the activity commenced by the subsidiary or 

2 conducted by the company acquired no later 

3 than 10 business days after commencing the ac4 tivity or consummating the acquisition. 

5 ‘‘(c) PROVISIONS APPLICABLE TO NATIONAL BANKS

6 THAT FAIL TO MEET REQUIREMENTS.— 

7 ‘‘(1) IN GENERAL.—If a national bank or de8 pository institution affiliate is not in compliance 

9 with the requirements of subparagraph (A), (B), or 

10 (C) of subsection (a)(3), the appropriate Federal 

11 banking agency shall notify the Comptroller of the 

12 Currency, who shall give notice of such finding to 

13 the national bank. 

14 ‘‘(2) AGREEMENT TO CORRECT CONDITIONS RE15 QUIRED.—Not later than 45 days after receipt by a 

16 national bank of a notice given under paragraph (1) 

17 (or such additional period as the Comptroller of the 

18 Currency may permit), the national bank and any 

19 relevant affiliated depository institution shall execute 

20 an agreement acceptable to the Comptroller of the 

21 Currency and the other appropriate Federal banking 

22 agencies, if any, to comply with the requirements ap23 plicable under subsection (a)(3). 

24 ‘‘(3) COMPTROLLER OF THE CURRENCY MAY

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1 scribed in a notice to a national bank under para2 graph (1) are corrected— 

3 ‘‘(A) the Comptroller of the Currency may 

4 impose such limitations on the conduct or ac5 tivities of the national bank or any subsidiary 

6 of the bank as the Comptroller of the Currency 

7 determines to be appropriate under the cir8 cumstances; and 

9 ‘‘(B) the appropriate Federal banking 

10 agency may impose such limitations on the con11 duct or activities of an affiliated depository in12 stitution or any subsidiary of the depository in13 stitution as such agency determines to be ap14 propriate under the circumstances. 

15 ‘‘(4) FAILURE TO CORRECT.—If, after receiving 

16 a notice under paragraph (1), a national bank and 

17 other affiliated depository institutions do not— 

18 ‘‘(A) execute and implement an agreement 

19 in accordance with paragraph (2); 

20 ‘‘(B) comply with any limitations imposed 

21 under paragraph (3); 

22 ‘‘(C) in the case of a notice of failure to 

23 comply with subsection (a)(3)(A), restore the 

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1 fore the end of the 180-day period beginning on 

2 the date such notice is received by the national 

3 bank (or such other period permitted by the 

4 Comptroller of the Currency); or 

5 ‘‘(D) in the case of a notice of failure to 

6 comply with subparagraph (B) or (C) of sub7 section (a)(3), restore compliance with any such 

8 subparagraph on or before the date on which 

9 the next examination of the depository institu10 tion subsidiary is completed or by the end of 

11 such other period as the Comptroller of the 

12 Currency determines to be appropriate, 

13 the Comptroller of the Currency may require such 

14 national bank, under such terms and conditions as 

15 may be imposed by the Comptroller of the Currency 

16 and subject to such extension of time as may be 

17 granted in the Comptroller of the Currency’s discre18 tion, to divest control of any subsidiary engaged in 

19 activities pursuant to subsection (a)(2) or, at the 

20 election of the national bank, instead to cease to en21 gage in any activity conducted by a subsidiary of the 

22 national bank pursuant to subsection (a)(2). 

23 ‘‘(5) CONSULTATION.—In taking any action 

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1 rency shall consult with all relevant Federal and 

2 State regulatory agencies.’’. 

3 (b) CLERICAL AMENDMENT.—The table of sections 

4 for chapter 1 of title LXII of the Revised Statutes of the 

5 United States is amended— 

6 (1) by redesignating the item relating to section 

7 5136A as section 5136C; and 

8 (2) by inserting after the item relating to sec9 tion 5136 the following new item: 

‘‘5136A. Subsidiaries of national banks.’’. 

10 SEC. 122. SAFETY AND SOUNDNESS FIREWALLS BETWEEN 

11 BANKS AND THEIR FINANCIAL SUBSIDIARIES. 

12 (a) PURPOSES.—The purposes of this section are— 

13 (1) to protect the safety and soundness of any 

14 insured bank that has a financial subsidiary; 

15 (2) to apply to any transaction between the 

16 bank and the financial subsidiary (including a loan, 

17 extension of credit, guarantee, or purchase of as18 sets), other than an equity investment, the same re19 strictions and requirements as would apply if the fi20 nancial subsidiary were a subsidiary of a bank hold21 ing company having control of the bank; and 

22 (3) to apply to any equity investment of the 

23 bank in the financial subsidiary restrictions and re24 quirements equivalent to those that would apply if— 


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1 (A) the bank paid a dividend in the same 

2 dollar amount to a bank holding company hav3 ing control of the bank; and 

4 (B) the bank holding company used the 

5 proceeds of the dividend to make an equity in6 vestment in a subsidiary that was engaged in 

7 the same activities as the financial subsidiary of 

8 the bank. 

9 (b) SAFETY AND SOUNDNESS FIREWALLS APPLICA10 BLE TO SUBSIDIARIES OF BANKS.—The Federal Deposit 

11 Insurance Act (12 U.S.C. 1811 et seq.) is amended by 

12 inserting after section 45 (as added by section 113(b) of 

13 this title) the following new section: 

14 ‘‘SEC. 46. SAFETY AND SOUNDNESS FIREWALLS APPLICA15 BLE TO SUBSIDIARIES OF BANKS. 

16 ‘‘(a) LIMITING THE EQUITY INVESTMENT OF A BANK

17 IN A SUBSIDIARY.— 

18 ‘‘(1) CAPITAL DEDUCTION.—In determining 

19 whether an insured bank complies with applicable 

20 regulatory capital standards— 

21 ‘‘(A) the appropriate Federal banking 

22 agency shall deduct from the assets and tan23 gible equity of the bank the aggregate amount 

24 of the outstanding equity investments of the 

25 bank in financial subsidiaries of the bank; and 


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1 ‘‘(B) the assets and liabilities of such fi2 nancial subsidiaries shall not be consolidated 

3 with those of the bank. 

4 ‘‘(2) INVESTMENT LIMITATION.—An insured 

5 bank shall not, without the prior approval of the ap6 propriate Federal banking agency, make any equity 

7 investment in a financial subsidiary of the bank if 

8 that investment would, when made, exceed the 

9 amount that the bank could pay as a dividend with10 out obtaining prior regulatory approval. 

11 ‘‘(3) TREATMENT OF RETAINED EARNINGS.— 

12 The amount of any net earnings retained by a finan13 cial subsidiary of an insured depository institution 

14 shall be treated as an outstanding equity investment 

15 of the bank in the subsidiary for purposes of para16 graph (1). 

17 ‘‘(b) OPERATIONAL AND FINANCIAL SAFEGUARDS

18 FOR THE BANK.—An insured bank that has a financial 

19 subsidiary shall maintain procedures for identifying and 

20 managing any financial and operational risks posed by the 

21 financial subsidiary. 

22 ‘‘(c) MAINTENANCE OF SEPARATE CORPORATE

23 IDENTITY AND SEPARATE LEGAL STATUS.— 

24 ‘‘(1) IN GENERAL.—Each insured bank shall 

25 ensure that the bank maintains and complies with 


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1 reasonable policies and procedures to preserve the 

2 separate corporate identity and legal status of the 

3 bank and any financial subsidiary or affiliate of the 

4 bank. 

5 ‘‘(2) EXAMINATIONS.—The appropriate Federal 

6 banking agency, as part of each examination, shall 

7 review whether an insured bank is observing the sep8 arate corporate identity and separate legal status of 

9 any subsidiaries and affiliates of the bank. 

10 ‘‘(d) FINANCIAL SUBSIDIARY DEFINED.—For pur11 poses of this section, the term ‘financial subsidiary’ has 

12 the meaning given to such term in section 5136A(a)(7)(B) 

13 of the Revised Statutes of the United States. 

14 ‘‘(e) REGULATIONS.—The appropriate Federal bank15 ing agencies shall jointly prescribe regulations imple16 menting this section.’’. 

17 (c) TRANSACTIONS BETWEEN FINANCIAL SUBSIDI18 ARIES AND OTHER AFFILIATES.—Section 23A of the Fed19 eral Reserve Act (12 U.S.C. 371c) is amended— 

20 (1) by redesignating subsection (e) as sub21 section (f); and 

22 (2) by inserting after subsection (d), the fol23 lowing new subsection: 

24 ‘‘(e) RULES RELATING TO BANKS WITH FINANCIAL

25 SUBSIDIARIES.— 


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1 ‘‘(1) FINANCIAL SUBSIDIARY DEFINED.—For 

2 purposes of this section and section 23B, the term 

3 ‘financial subsidiary’ means a company which is a 

4 subsidiary of a bank and is engaged in activities that 

5 are financial in nature or incidental to such financial 

6 activities pursuant to subsection (a)(2) or (b)(4) of 

7 section 5136A of the Revised Statutes of the United 

8 States. 

9 ‘‘(2) APPLICATION TO TRANSACTIONS BETWEEN

10 A FINANCIAL SUBSIDIARY OF A BANK AND THE

11 BANK.—For purposes of applying this section and 

12 section 23B to a transaction between a financial 

13 subsidiary of a bank and the bank (or between such 

14 financial subsidiary and any other subsidiary of the 

15 bank which is not a financial subsidiary) and not16 withstanding subsection (b)(2) and section 

17 23B(d)(1), the financial subsidiary of the bank— 

18 ‘‘(A) shall be an affiliate of the bank and 

19 any other subsidiary of the bank which is not 

20 a financial subsidiary; and 

21 ‘‘(B) shall not be treated as a subsidiary of 

22 the bank. 

23 ‘‘(3) APPLICATION TO TRANSACTIONS BETWEEN

24 FINANCIAL SUBSIDIARY AND NONBANK AFFILI25 ATES.— 


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1 ‘‘(A) IN GENERAL.—A transaction between 

2 a financial subsidiary and an affiliate of the fi3 nancial subsidiary shall not be deemed to be a 

4 transaction between a subsidiary of a national 

5 bank and an affiliate of the bank for purposes 

6 of section 23A or section 23B of the Federal 

7 Reserve Act. 

8 ‘‘(B) CERTAIN AFFILIATES EXCLUDED.— 

9 For purposes of subparagraph (A) and notwith10 standing paragraph (4), the term ‘affiliate’ 

11 shall not include a bank, or a subsidiary of a 

12 bank, which is engaged exclusively in activities 

13 permissible for a national bank to engage in di14 rectly or which are authorized by any Federal 

15 law other than section 5136A of the Revised 

16 Statutes of the United States. 

17 ‘‘(4) EQUITY INVESTMENTS EXCLUDED SUB18 JECT TO THE APPROVAL OF THE BANKING AGEN19 CY.—Subsection (a)(1) shall not apply so as to limit 

20 the equity investment of a bank in a financial sub21 sidiary of such bank, except that any investment 

22 that exceeds the amount of a dividend that the bank 

23 could pay at the time of the investment without ob24 taining prior approval of the appropriate Federal 

25 banking agency and is in excess of the limitation 


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1 which would apply under subsection (a)(1), but for 

2 this paragraph, may be made only with the approval 

3 of the appropriate Federal banking agency (as de4 fined in section 3(q) of the Federal Deposit Insur5 ance Act) with respect to such bank.’’. 

6 (d) ANTITYING.—Section 106(a) of the Bank Hold7 ing Company Act Amendments of 1970 is amended by 

8 adding at the end the following new sentence: ‘‘For pur9 poses of this section, a subsidiary of a national bank which 

10 engages in activities pursuant to subsection (a)(2) or 

11 (b)(4) of section 5136A of the Revised Statutes of the 

12 United States shall be deemed to be a subsidiary of a bank 

13 holding company, and not a subsidiary of a bank.’’. 

14 SEC. 123. MISREPRESENTATIONS REGARDING DEPOSITORY 

15 INSTITUTION LIABILITY FOR OBLIGATIONS 

16 OF AFFILIATES. 

17 (a) IN GENERAL.—Chapter 47 of title 18, United 

18 States Code, is amended by inserting after section 1007 

19 the following new section: 

20 ‘‘§ 1008. Misrepresentations regarding financial insti21 tution liability for obligations of affiliates 

22 ‘‘(a) IN GENERAL.—No institution-affiliated party of 

23 an insured depository institution or institution-affiliated 

24 party of a subsidiary or affiliate of an insured depository 

25 institution shall fraudulently represent that the institution 


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1 is or will be liable for any obligation of a subsidiary or 

2 other affiliate of the institution. 

3 ‘‘(b) CRIMINAL PENALTY.—Whoever violates sub4 section (a) shall be fined under this title, imprisoned for 

5 not more than 5 years, or both. 

6 ‘‘(c) INSTITUTION-AFFILIATED PARTY DEFINED.— 

7 For purposes of this section, the term ‘institution-affili8 ated party’ has the same meaning as in section 3 of the 

9 Federal Deposit Insurance Act and any reference in that 

10 section shall also be deemed to refer to a subsidiary or 

11 affiliate of an insured depository institution. 

12 ‘‘(d) OTHER DEFINITIONS.—For purposes of this 

13 section, the terms ‘affiliate’, ‘insured depository institu14 tion’, and ‘subsidiary’ have same meanings as in section 

15 3 of the Federal Deposit Insurance Act.’’. 

16 (b) CLERICAL AMENDMENT.—The table of sections 

17 for chapter 47 of title 18, United States Code, is amended 

18 by inserting after the item relating to section 1007 the 

19 following new item: 

‘‘1008. Misrepresentations regarding financial institution liability for obligations 

of affiliates.’’. 

20 SEC. 124. REPEAL OF STOCK LOAN LIMIT IN FEDERAL RE21 SERVE ACT. 

22 Section 11 of the Federal Reserve Act (12 U.S.C. 

23 248) is amended by striking the paragraph designated as 

24 ‘‘(m)’’ and inserting ‘‘(m) [Repealed]’’. 


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1 Subtitle D—Wholesale Financial 

2 Holding Companies; Wholesale 

3 Financial Institutions 

4 CHAPTER 1—WHOLESALE FINANCIAL 

5 HOLDING COMPANIES 

6 SEC. 131. WHOLESALE FINANCIAL HOLDING COMPANIES 

7 ESTABLISHED. 

8 Section 10 of the Bank Holding Company Act of 

9 1956 (12 U.S.C. 1841 et seq.) is amended to read as fol10 lows: 

11 ‘‘SEC. 10. WHOLESALE FINANCIAL HOLDING COMPANIES. 

12 ‘‘(a) COMPANIES THAT CONTROL WHOLESALE FI13 NANCIAL INSTITUTIONS.— 

14 ‘‘(1) WHOLESALE FINANCIAL HOLDING COM15 PANY DEFINED.—The term ‘wholesale financial 

16 holding company’ means any company that— 

17 ‘‘(A) is registered as a bank holding com18 pany; 

19 ‘‘(B) is predominantly engaged in financial 

20 activities as defined in section 6(f)(2); 

21 ‘‘(C) controls one or more wholesale finan22 cial institutions; 

23 ‘‘(D) does not control— 

24 ‘‘(i) a bank other than a wholesale fi25 nancial institution; 


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1 ‘‘(ii) an insured bank other than an 

2 institution permitted under subparagraph 

3 (D), (F), or (G) of section 2(c)(2); or 

4 ‘‘(iii) a savings association; and 

5 ‘‘(E) is not a foreign bank (as defined in 

6 section 1(b)(7) of the International Banking 

7 Act of 1978). 

8 ‘‘(2) SAVINGS ASSOCIATION TRANSITION PE9 RIOD.—Notwithstanding paragraph (1)(D)(iii), the 

10 Board may permit a company that controls a sav11 ings association and that otherwise meets the re12 quirements of paragraph (1) to become supervised 

13 under paragraph (1), if the company divests control 

14 of any such savings association within such period 

15 not to exceed 5 years after becoming supervised 

16 under paragraph (1) as permitted by the Board. 

17 ‘‘(b) SUPERVISION BY THE BOARD.— 

18 ‘‘(1) IN GENERAL.—The provisions of this sec19 tion shall govern the reporting, examination, and 

20 capital requirements of wholesale financial holding 

21 companies. 

22 ‘‘(2) REPORTS.— 

23 ‘‘(A) IN GENERAL.—The Board from time 

24 to time may require any wholesale financial 

25 holding company and any subsidiary of such 


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1 company to submit reports under oath to keep 

2 the Board informed as to— 

3 ‘‘(i) the company’s or subsidiary’s ac4 tivities, financial condition, policies, sys5 tems for monitoring and controlling finan6 cial and operational risks, and transactions 

7 with depository institution subsidiaries of 

8 the holding company; and 

9 ‘‘(ii) the extent to which the company 

10 or subsidiary has complied with the provi11 sions of this Act and regulations prescribed 

12 and orders issued under this Act. 

13 ‘‘(B) USE OF EXISTING REPORTS.— 

14 ‘‘(i) IN GENERAL.—The Board shall, 

15 to the fullest extent possible, accept re16 ports in fulfillment of the Board’s report17 ing requirements under this paragraph 

18 that the wholesale financial holding com19 pany or any subsidiary of such company 

20 has provided or been required to provide to 

21 other Federal and State supervisors or to 

22 appropriate self-regulatory organizations. 

23 ‘‘(ii) AVAILABILITY.—A wholesale fi24 nancial holding company or a subsidiary of 

25 such company shall provide to the Board, 


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1 at the request of the Board, a report re2 ferred to in clause (i). 

3 ‘‘(C) EXEMPTIONS FROM REPORTING RE4 QUIREMENTS.— 

5 ‘‘(i) IN GENERAL.—The Board may, 

6 by regulation or order, exempt any com7 pany or class of companies, under such 

8 terms and conditions and for such periods 

9 as the Board shall provide in such regula10 tion or order, from the provisions of this 

11 paragraph and any regulation prescribed 

12 under this paragraph. 

13 ‘‘(ii) CRITERIA FOR CONSIDER14 ATION.—In making any determination 

15 under clause (i) with regard to any exemp16 tion under such clause, the Board shall 

17 consider, among such other factors as the 

18 Board may determine to be appropriate, 

19 the following factors: 

20 ‘‘(I) Whether information of the 

21 type required under this paragraph is 

22 available from a supervisory agency 

23 (as defined in section 1101(7) of the 

24 Right to Financial Privacy Act of 


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1 1978) or a foreign regulatory author2 ity of a similar type. 

3 ‘‘(II) The primary business of the 

4 company. 

5 ‘‘(III) The nature and extent of 

6 the domestic and foreign regulation of 

7 the activities of the company. 

8 ‘‘(3) EXAMINATIONS.— 

9 ‘‘(A) LIMITED USE OF EXAMINATION AU10 THORITY.—The Board may make examinations 

11 of each wholesale financial holding company 

12 and each subsidiary of such company in order 

13 to— 

14 ‘‘(i) inform the Board regarding the 

15 nature of the operations and financial con16 dition of the wholesale financial holding 

17 company and its subsidiaries; 

18 ‘‘(ii) inform the Board regarding— 

19 ‘‘(I) the financial and operational 

20 risks within the wholesale financial 

21 holding company system that may af22 fect any depository institution owned 

23 by such holding company; and 

24 ‘‘(II) the systems of the holding 

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1 itoring and controlling those risks; 

2 and 

3 ‘‘(iii) monitor compliance with the 

4 provisions of this Act and those governing 

5 transactions and relationships between any 

6 depository institution controlled by the 

7 wholesale financial holding company and 

8 any of the company’s other subsidiaries. 

9 ‘‘(B) RESTRICTED FOCUS OF EXAMINA10 TIONS.—The Board shall, to the fullest extent 

11 possible, limit the focus and scope of any exam12 ination of a wholesale financial holding com13 pany under this paragraph to— 

14 ‘‘(i) the holding company; and 

15 ‘‘(ii) any subsidiary (other than an in16 sured depository institution subsidiary) of 

17 the holding company that, because of the 

18 size, condition, or activities of the sub19 sidiary, the nature or size of transactions 

20 between such subsidiary and any affiliated 

21 depository institution, or the centralization 

22 of functions within the holding company 

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1 pository institution affiliate of the holding 

2 company. 

3 ‘‘(C) DEFERENCE TO BANK EXAMINA4 TIONS.—The Board shall, to the fullest extent 

5 possible, use the reports of examination of de6 pository institutions made by the Comptroller of 

7 the Currency, the Federal Deposit Insurance 

8 Corporation, the Director of the Office of Thrift 

9 Supervision or the appropriate State depository 

10 institution supervisory authority for the pur11 poses of this section. 

12 ‘‘(D) DEFERENCE TO OTHER EXAMINA13 TIONS.—The Board shall, to the fullest extent 

14 possible, address the circumstances which might 

15 otherwise permit or require an examination by 

16 the Board by forgoing an examination and by 

17 instead reviewing the reports of examination 

18 made of— 

19 ‘‘(i) any registered broker or dealer or 

20 any registered investment adviser by or on 

21 behalf of the Commission; and 

22 ‘‘(ii) any licensed insurance company 

23 by or on behalf of any State government 

24 insurance agency responsible for the super25 vision of the insurance company. 


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1 ‘‘(E) CONFIDENTIALITY OF REPORTED IN2 FORMATION.— 

3 ‘‘(i) IN GENERAL.—Notwithstanding 

4 any other provision of law, the Board shall 

5 not be compelled to disclose any nonpublic 

6 information required to be reported under 

7 this paragraph, or any information sup8 plied to the Board by any domestic or for9 eign regulatory agency, that relates to the 

10 financial or operational condition of any 

11 wholesale financial holding company or any 

12 subsidiary of such company. 

13 ‘‘(ii) COMPLIANCE WITH REQUESTS

14 FOR INFORMATION.—No provision of this 

15 subparagraph shall be construed as author16 izing the Board to withhold information 

17 from the Congress, or preventing the 

18 Board from complying with a request for 

19 information from any other Federal de20 partment or agency for purposes within the 

21 scope of such department’s or agency’s ju22 risdiction, or from complying with any 

23 order of a court of competent jurisdiction 

24 in an action brought by the United States 

25 or the Board. 


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1 ‘‘(iii) COORDINATION WITH OTHER

2 LAW.—For purposes of section 552 of title 

3 5, United States Code, this subparagraph 

4 shall be considered to be a statute de5 scribed in subsection (b)(3)(B) of such sec6 tion. 

7 ‘‘(iv) DESIGNATION OF CONFIDENTIAL

8 INFORMATION.—In prescribing regulations 

9 to carry out the requirements of this sub10 section, the Board shall designate informa11 tion described in or obtained pursuant to 

12 this paragraph as confidential information. 

13 ‘‘(F) COSTS.—The cost of any examination 

14 conducted by the Board under this section may 

15 be assessed against, and made payable by, the 

16 wholesale financial holding company. 

17 ‘‘(4) CAPITAL ADEQUACY GUIDELINES.— 

18 ‘‘(A) CAPITAL ADEQUACY PROVISIONS.— 

19 Subject to the requirements of, and solely in ac20 cordance with, the terms of this paragraph, the 

21 Board may adopt capital adequacy rules or 

22 guidelines for wholesale financial holding com23 panies. 


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1 ‘‘(B) METHOD OF CALCULATION.—In de2 veloping rules or guidelines under this para3 graph, the following provisions shall apply: 

4 ‘‘(i) FOCUS ON DOUBLE LEVERAGE.— 

5 The Board shall focus on the use by whole6 sale financial holding companies of debt 

7 and other liabilities to fund capital invest8 ments in subsidiaries. 

9 ‘‘(ii) NO UNWEIGHTED CAPITAL

10 RATIO.—The Board shall not, by regula11 tion, guideline, order, or otherwise, impose 

12 under this section a capital ratio that is 

13 not based on appropriate risk-weighting 

14 considerations. 

15 ‘‘(iii) NO CAPITAL REQUIREMENT ON

16 REGULATED ENTITIES.—The Board shall 

17 not, by regulation, guideline, order or oth18 erwise, prescribe or impose any capital or 

19 capital adequacy rules, standards, guide20 lines, or requirements upon any subsidiary 

21 that— 

22 ‘‘(I) is not a depository institu23 tion; and 

24 ‘‘(II) is in compliance with appli25 cable capital requirements of another 


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1 Federal regulatory authority (includ2 ing the Securities and Exchange Com3 mission) or State insurance authority. 

4 ‘‘(iv) LIMITATION.—The Board shall 

5 not, by regulation, guideline, order or oth6 erwise, prescribe or impose any capital or 

7 capital adequacy rules, standards, guide8 lines, or requirements upon any subsidiary 

9 that is not a depository institution and 

10 that is registered as an investment adviser 

11 under the Investment Advisers Act of 

12 1940, except that this clause shall not be 

13 construed as preventing the Board from 

14 imposing capital or capital adequacy rules, 

15 guidelines, standards, or requirements with 

16 respect to activities of a registered invest17 ment adviser other than investment advi18 sory activities or activities incidental to in19 vestment advisory activities. 

20 ‘‘(v) LIMITATIONS ON INDIRECT AC21 TION.—In developing, establishing, or as22 sessing holding company capital or capital 

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1 count the activities, operations, or invest2 ments of an affiliated investment company 

3 registered under the Investment Company 

4 Act of 1940, unless the investment com5 pany is— 

6 ‘‘(I) a bank holding company; or 

7 ‘‘(II) controlled by a bank hold8 ing company by reason of ownership 

9 by the bank holding company (includ10 ing through all of its affiliates) of 25 

11 percent or more of the shares of the 

12 investment company, and the shares 

13 owned by the bank holding company 

14 have a market value equal to more 

15 than $1,000,000. 

16 ‘‘(vi) APPROPRIATE EXCLUSIONS.— 

17 The Board shall take full account of— 

18 ‘‘(I) the capital requirements 

19 made applicable to any subsidiary that 

20 is not a depository institution by an21 other Federal regulatory authority or 

22 State insurance authority; and 

23 ‘‘(II) industry norms for capital24 ization of a company’s unregulated 

25 subsidiaries and activities. 


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1 ‘‘(vii) INTERNAL RISK MANAGEMENT

2 MODELS.—The Board may incorporate in3 ternal risk management models of whole4 sale financial holding companies into its 

5 capital adequacy guidelines or rules and 

6 may take account of the extent to which 

7 resources of a subsidiary depository insti8 tution may be used to service the debt or 

9 other liabilities of the wholesale financial 

10 holding company. 

11 ‘‘(c) NONFINANCIAL ACTIVITIES AND INVEST12 MENTS.— 

13 ‘‘(1) GRANDFATHERED ACTIVITIES.— 

14 ‘‘(A) IN GENERAL.—Notwithstanding sec15 tion 4(a), a company that becomes a wholesale 

16 financial holding company may continue to en17 gage, directly or indirectly, in any activity and 

18 may retain ownership and control of shares of 

19 a company engaged in any activity if— 

20 ‘‘(i) on the date of the enactment of 

21 the Financial Services Act of 1999, such 

22 wholesale financial holding company was 

23 lawfully engaged in that nonfinancial activ24 ity, held the shares of such company, or 

25 had entered into a contract to acquire 


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1 shares of any company engaged in such ac2 tivity; and 

3 ‘‘(ii) the company engaged in such ac4 tivity continues to engage only in the same 

5 activities that such company conducted on 

6 the date of the enactment of the Financial 

7 Services Act of 1999, and other activities 

8 permissible under this Act. 

9 ‘‘(B) NO EXPANSION OF GRANDFATHERED

10 COMMERCIAL ACTIVITIES THROUGH MERGER OR

11 CONSOLIDATION.—A wholesale financial holding 

12 company that engages in activities or holds 

13 shares pursuant to this paragraph, or a sub14 sidiary of such wholesale financial holding com15 pany, may not acquire, in any merger, consoli16 dation, or other type of business combination, 

17 assets of any other company which is engaged 

18 in any activity which the Board has not deter19 mined to be financial in nature or incidental to 

20 activities that are financial in nature under sec21 tion 6(c). 

22 ‘‘(C) LIMITATION TO SINGLE EXEMP23 TION.—No company that engages in any activ24 ity or controls any shares under subsection (f) 


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1 of section 6 may engage in any activity or own 

2 any shares pursuant to this paragraph. 

3 ‘‘(2) COMMODITIES.— 

4 ‘‘(A) IN GENERAL.—Notwithstanding sec5 tion 4(a), a wholesale financial holding company 

6 which was predominately engaged as of Janu7 ary 1, 1997, in financial activities in the United 

8 States (or any successor to any such company) 

9 may engage in, or directly or indirectly own or 

10 control shares of a company engaged in, activi11 ties related to the trading, sale, or investment 

12 in commodities and underlying physical prop13 erties that were not permissible for bank hold14 ing companies to conduct in the United States 

15 as of January 1, 1997, if such wholesale finan16 cial holding company, or any subsidiary of such 

17 holding company, was engaged directly, indi18 rectly, or through any such company in any of 

19 such activities as of January 1, 1997, in the 

20 United States. 

21 ‘‘(B) LIMITATION.—The attributed aggre22 gate consolidated assets of a wholesale financial 

23 holding company held under the authority 

24 granted under this paragraph and not otherwise 

25 permitted to be held by all wholesale financial 


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1 holding companies under this section may not 

2 exceed 5 percent of the total consolidated assets 

3 of the wholesale financial holding company, ex4 cept that the Board may increase such percent5 age of total consolidated assets by such 

6 amounts and under such circumstances as the 

7 Board considers appropriate, consistent with 

8 the purposes of this Act. 

9 ‘‘(3) CROSS MARKETING RESTRICTIONS.—A 

10 wholesale financial holding company shall not per11 mit— 

12 ‘‘(A) any company whose shares it owns or 

13 controls pursuant to paragraph (1) or (2) to 

14 offer or market any product or service of an af15 filiated wholesale financial institution; or 

16 ‘‘(B) any affiliated wholesale financial in17 stitution to offer or market any product or serv18 ice of any company whose shares are owned or 

19 controlled by such wholesale financial holding 

20 company pursuant to such paragraphs. 

21 ‘‘(d) QUALIFICATION OF FOREIGN BANK AS WHOLE22 SALE FINANCIAL HOLDING COMPANY.— 

23 ‘‘(1) IN GENERAL.—Any foreign bank, or any 

24 company that owns or controls a foreign bank, that 

25 operates a branch, agency, or commercial lending 


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1 company in the United States, including a foreign 

2 bank or company that owns or controls a wholesale 

3 financial institution, may request a determination 

4 from the Board that such bank or company be treat5 ed as a wholesale financial holding company other 

6 than for purposes of subsection (c), subject to such 

7 conditions as the Board considers appropriate, giv8 ing due regard to the principle of national treatment 

9 and equality of competitive opportunity and the re10 quirements imposed on domestic banks and compa11 nies. 

12 ‘‘(2) CONDITIONS FOR TREATMENT AS A

13 WHOLESALE FINANCIAL HOLDING COMPANY.—A for14 eign bank and a company that owns or controls a 

15 foreign bank may not be treated as a wholesale fi16 nancial holding company unless the bank and com17 pany meet and continue to meet the following cri18 teria: 

19 ‘‘(A) NO INSURED DEPOSITS.—No deposits 

20 held directly by a foreign bank or through an 

21 affiliate (other than an institution described in 

22 subparagraph (D) or (F) of section 2(c)(2)) are 

23 insured under the Federal Deposit Insurance 

24 Act. 


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1 ‘‘(B) CAPITAL STANDARDS.—The foreign 

2 bank meets risk-based capital standards com3 parable to the capital standards required for a 

4 wholesale financial institution, giving due re5 gard to the principle of national treatment and 

6 equality of competitive opportunity. 

7 ‘‘(C) TRANSACTION WITH AFFILIATES.— 

8 Transactions between a branch, agency, or com9 mercial lending company subsidiary of the for10 eign bank in the United States, and any securi11 ties affiliate or company in which the foreign 

12 bank (or any company that owns or controls 

13 such foreign bank) has invested, directly or in14 directly, and which engages in any activity pur15 suant to subsection (c) or (g) of section 6, com16 ply with the provisions of sections 23A and 23B 

17 of the Federal Reserve Act in the same manner 

18 and to the same extent as such transactions 

19 would be required to comply with such sections 

20 if the bank were a member bank. 

21 ‘‘(3) TREATMENT AS A WHOLESALE FINANCIAL

22 INSTITUTION.—Any foreign bank which is, or is af23 filiated with a company which is, treated as a whole24 sale financial holding company under this subsection 

25 shall be treated as a wholesale financial institution 


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1 for purposes of subsections (c)(1)(C) and (c)(3) of 

2 section 9B of the Federal Reserve Act, and any such 

3 foreign bank or company shall be subject to para4 graphs (3), (4), and (5) of section 9B(d) of the Fed5 eral Reserve Act, except that the Board may adopt 

6 such modifications, conditions, or exemptions as the 

7 Board deems appropriate, giving due regard to the 

8 principle of national treatment and equality of com9 petitive opportunity. 

10 ‘‘(4) SUPERVISION OF FOREIGN BANK WHICH

11 MAINTAINS NO BANKING PRESENCE OTHER THAN

12 CONTROL OF A WHOLESALE FINANCIAL INSTITU13 TION.—A foreign bank that owns or controls a 

14 wholesale financial institution but does not operate 

15 a branch, agency, or commercial lending company in 

16 the United States (and any company that owns or 

17 controls such foreign bank) may request a deter18 mination from the Board that such bank or com19 pany be treated as a wholesale financial holding 

20 company, except that such bank or company shall be 

21 subject to the restrictions of paragraphs (2)(A) and 

22 (3) of this subsection. 

23 ‘‘(5) NO EFFECT ON OTHER PROVISIONS.—This 

24 section shall not be construed as limiting the author25 ity of the Board under the International Banking 


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1 Act of 1978 with respect to the regulation, super2 vision, or examination of foreign banks and their of3 fices and affiliates in the United States. 

4 ‘‘(6) APPLICABILITY OF COMMUNITY REINVEST5 MENT ACT OF 1977.—The branches in the United 

6 States of a foreign bank that is, or is affiliated with 

7 a company that is, treated as a wholesale financial 

8 holding company shall be subject to section 

9 9B(b)(11) of the Federal Reserve Act as if the for10 eign bank were a wholesale financial institution 

11 under such section. The Board and the Comptroller 

12 of the Currency shall apply the provisions of sections 

13 803(2), 804, and 807(1) of the Community Rein14 vestment Act of 1977 to branches of foreign banks 

15 which receive only such deposits as are permissible 

16 for receipt by a corporation organized under section 

17 25A of the Federal Reserve Act, in the same manner 

18 and to the same extent such sections apply to such 

19 a corporation.’’. 

20 SEC. 132. AUTHORIZATION TO RELEASE REPORTS. 

21 (a) FEDERAL RESERVE ACT.—The last sentence of 

22 the eighth undesignated paragraph of section 9 of the 

23 Federal Reserve Act (12 U.S.C. 326) is amended to read 

24 as follows: ‘‘The Board of Governors of the Federal Re25 serve System, at its discretion, may furnish reports of exVerDate Mar 15 2010 15:06 Jun 10, 2011 Jkt 223001 PO 00000 Frm 00152 Fmt 6652 Sfmt 6201 E:\ERIC\H10.PCS H10

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1 amination or other confidential supervisory information 

2 concerning State member banks or any other entities ex3 amined under any other authority of the Board to any 

4 Federal or State authorities with supervisory or regulatory 

5 authority over the examined entity, to officers, directors, 

6 or receivers of the examined entity, and to any other per7 son that the Board determines to be proper.’’. 

8 (b) COMMODITY FUTURES TRADING COMMISSION.— 

9 The Right to Financial Privacy Act of 1978 (12 U.S.C. 

10 3401 et seq.) is amended— 

11 (1) in section 1101(7) of the (12 U.S.C. 

12 3401(7))— 

13 (A) by redesignating subparagraphs (G) 

14 and (H) as subparagraphs (H) and (I), respec15 tively; and 

16 (B) by inserting after subparagraph (F) 

17 the following new subparagraph: 

18 ‘‘(G) the Commodity Futures Trading 

19 Commission; or’’; and 

20 (2) in section 1112(e), by striking ‘‘and the Se21 curities and Exchange Commission’’ and inserting ‘‘, 

22 the Securities and Exchange Commission, and the 

23 Commodity Futures Trading Commission’’. 

24 SEC. 133. CONFORMING AMENDMENTS. 

25 (a) BANK HOLDING COMPANY ACT OF 1956.— 


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1 (1) DEFINITIONS.—Section 2 of the Bank 

2 Holding Company Act of 1956 (12 U.S.C. 1841) is 

3 amended by inserting after subsection (p) (as added 

4 by section 103(b)(1)) the following new subsections: 

5 ‘‘(q) WHOLESALE FINANCIAL INSTITUTION.—The 

6 term ‘wholesale financial institution’ means a wholesale fi7 nancial institution subject to section 9B of the Federal 

8 Reserve Act. 

9 ‘‘(r) COMMISSION.—The term ‘Commission’ means 

10 the Securities and Exchange Commission. 

11 ‘‘(s) DEPOSITORY INSTITUTION.—The term ‘deposi12 tory institution’— 

13 ‘‘(1) has the meaning given to such term in sec14 tion 3 of the Federal Deposit Insurance Act; and 

15 ‘‘(2) includes a wholesale financial institution.’’. 

16 (2) DEFINITION OF BANK INCLUDES WHOLE17 SALE FINANCIAL INSTITUTION.—Section 2(c)(1) of 

18 the Bank Holding Company Act of 1956 (12 U.S.C. 

19 1841(c)(1)) is amended by adding at the end the fol20 lowing new subparagraph: 

21 ‘‘(C) A wholesale financial institution.’’. 

22 (3) INCORPORATED DEFINITIONS.—Section 

23 2(n) of the Bank Holding Company Act of 1956 (12 

24 U.S.C. 1841(n)) is amended by inserting ‘‘ ‘insured 

25 bank’,’’ after ‘‘ ‘in danger of default’,’’. 


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1 (4) EXCEPTION TO DEPOSIT INSURANCE RE2 QUIREMENT.—Section 3(e) of the Bank Holding 

3 Company Act of 1956 (12 U.S.C. 1842(e)) is 

4 amended by adding at the end the following: ‘‘This 

5 subsection shall not apply to a wholesale financial 

6 institution.’’. 

7 (b) FEDERAL DEPOSIT INSURANCE ACT.—Section 

8 3(q)(2)(A) of the Federal Deposit Insurance Act (12 

9 U.S.C. 1813(q)(2)(A)) is amended to read as follows: 

10 ‘‘(A) any State member insured bank (ex11 cept a District bank) and any wholesale finan12 cial institution subject to section 9B of the Fed13 eral Reserve Act;’’. 

14 CHAPTER 2—WHOLESALE FINANCIAL 

15 INSTITUTIONS 

16 SEC. 136. WHOLESALE FINANCIAL INSTITUTIONS. 

17 (a) NATIONAL WHOLESALE FINANCIAL INSTITU18 TIONS.— 

19 (1) IN GENERAL.—Chapter 1 of title LXII of 

20 the Revised Statutes of the United States (12 

21 U.S.C. 21 et seq.) is amended by inserting after sec22 tion 5136A (as added by section 121(a) of this title) 

23 the following new section: 


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1 ‘‘SEC. 5136B. NATIONAL WHOLESALE FINANCIAL INSTITU2 TIONS. 

3 ‘‘(a) AUTHORIZATION OF THE COMPTROLLER RE4 QUIRED.—A national bank may apply to the Comptroller 

5 on such forms and in accordance with such regulations 

6 as the Comptroller may prescribe, for permission to oper7 ate as a national wholesale financial institution. 

8 ‘‘(b) REGULATION.—A national wholesale financial 

9 institution may exercise, in accordance with such institu10 tion’s articles of incorporation and regulations issued by 

11 the Comptroller, all the powers and privileges of a national 

12 bank formed in accordance with section 5133 of the Re13 vised Statutes of the United States, subject to section 9B 

14 of the Federal Reserve Act and the limitations and restric15 tions contained therein. 

16 ‘‘(c) COMMUNITY REINVESTMENT ACT OF 1977.—A 

17 national wholesale financial institution shall be subject to 

18 the Community Reinvestment Act of 1977. 

19 (2) CLERICAL AMENDMENT.—The table of sec20 tions for chapter 1 of title LXII of the Revised Stat21 utes of the United States is amended by inserting 

22 after the item relating to section 5136A (as added 

23 by section 121(d) of this title) the following new 

24 item: 

‘‘5136B. National wholesale financial institutions.’’. 


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1 (b) WHOLESALE FINANCIAL INSTITUTIONS.—The 

2 Federal Reserve Act (12 U.S.C. 221 et seq.) is amended 

3 by inserting after section 9A the following new section: 

4 ‘‘SEC. 9B. WHOLESALE FINANCIAL INSTITUTIONS. 

5 ‘‘(a) APPLICATION FOR MEMBERSHIP AS WHOLE6 SALE FINANCIAL INSTITUTION.— 

7 ‘‘(1) APPLICATION REQUIRED.— 

8 ‘‘(A) IN GENERAL.—Any bank may apply 

9 to the Board of Governors of the Federal Re10 serve System to become a State wholesale fi11 nancial institution, or to the Comptroller of the 

12 Currency to become a national wholesale finan13 cial institution, and, as a wholesale financial in14 stitution, to subscribe to the stock of the Fed15 eral Reserve bank organized within the district 

16 where the applying bank is located. 

17 ‘‘(B) TREATMENT AS MEMBER BANK.— 

18 Any application under subparagraph (A) shall 

19 be treated as an application under, and shall be 

20 subject to the provisions of, section 9. 

21 ‘‘(2) INSURANCE TERMINATION.—No bank the 

22 deposits of which are insured under the Federal De23 posit Insurance Act may become a wholesale finan24 cial institution unless it has met all requirements 


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1 under that Act for voluntary termination of deposit 

2 insurance. 

3 ‘‘(b) GENERAL REQUIREMENTS APPLICABLE TO

4 WHOLESALE FINANCIAL INSTITUTIONS.— 

5 ‘‘(1) FEDERAL RESERVE ACT.—Except as oth6 erwise provided in this section, wholesale financial 

7 institutions shall be member banks and shall be sub8 ject to the provisions of this Act that apply to mem9 ber banks to the same extent and in the same man10 ner as State member insured banks or national 

11 banks, except that a wholesale financial institution 

12 may terminate membership under this Act only with 

13 the prior written approval of the Board and on 

14 terms and conditions that the Board determines are 

15 appropriate to carry out the purposes of this Act. 

16 ‘‘(2) PROMPT CORRECTIVE ACTION.—A whole17 sale financial institution shall be deemed to be an in18 sured depository institution for purposes of section 

19 38 of the Federal Deposit Insurance Act except 

20 that— 

21 ‘‘(A) the relevant capital levels and capital 

22 measures for each capital category shall be the 

23 levels specified by the Board for wholesale fi24 nancial institutions; 


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1 ‘‘(B) subject to subparagraph (A), all ref2 erences to the appropriate Federal banking 

3 agency or to the Corporation in that section 

4 shall be deemed to be references to the Comp5 troller of the Currency, in the case of a national 

6 wholesale financial institution, and to the 

7 Board, in the case of all other wholesale finan8 cial institutions; and 

9 ‘‘(C) in the case of wholesale financial in10 stitutions, the purpose of prompt corrective ac11 tion shall be to protect taxpayers and the finan12 cial system from the risks associated with the 

13 operation and activities of wholesale financial 

14 institutions. 

15 ‘‘(3) ENFORCEMENT AUTHORITY.—Section 

16 3(u), subsections (j) and (k) of section 7, sub17 sections (b) through (n), (s), (u), and (v) of section 

18 8, and section 19 of the Federal Deposit Insurance 

19 Act shall apply to a wholesale financial institution in 

20 the same manner and to the same extent as such 

21 provisions apply to State member insured banks or 

22 national banks, as the case may be, and any ref23 erence in such sections to an insured depository in24 stitution shall be deemed to include a reference to a 

25 wholesale financial institution. 


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1 ‘‘(4) CERTAIN OTHER STATUTES APPLICA2 BLE.—A wholesale financial institution shall be 

3 deemed to be a banking institution, and the Board 

4 shall be the appropriate Federal banking agency for 

5 such bank and all such bank’s affiliates, for pur6 poses of the International Lending Supervision Act. 

7 ‘‘(5) BANK MERGER ACT.—A wholesale finan8 cial institution shall be subject to sections 18(c) and 

9 44 of the Federal Deposit Insurance Act in the same 

10 manner and to the same extent the wholesale finan11 cial institution would be subject to such sections if 

12 the institution were a State member insured bank or 

13 a national bank. 

14 ‘‘(6) BRANCHING.—Notwithstanding any other 

15 provision of law, a wholesale financial institution 

16 may establish and operate a branch at any location 

17 on such terms and conditions as established by, and 

18 with the approval of— 

19 ‘‘(A) the Board, in the case of a State20 chartered wholesale financial institution; and 

21 ‘‘(B) the Comptroller of the Currency, in 

22 the case of a national bank wholesale financial 

23 institution. 

24 ‘‘(7) ACTIVITIES OF OUT-OF-STATE BRANCHES

25 OF WHOLESALE FINANCIAL INSTITUTIONS.—A 


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1 State-chartered wholesale financial institution shall 

2 be deemed to be a State bank and an insured State 

3 bank for purposes of paragraphs (1), (2), and (3) of 

4 section 24(j) of the Federal Deposit Insurance Act. 

5 ‘‘(8) DISCRIMINATION REGARDING INTEREST

6 RATES.—Section 27 of the Federal Deposit Insur7 ance Act shall apply to State-chartered wholesale fi8 nancial institutions in the same manner and to the 

9 same extent as such provisions apply to State mem10 ber insured banks and any reference in such section 

11 to a State-chartered insured depository institution 

12 shall be deemed to include a reference to a State13 chartered wholesale financial institution. 

14 ‘‘(9) PREEMPTION OF STATE LAWS REQUIRING

15 DEPOSIT INSURANCE FOR WHOLESALE FINANCIAL

16 INSTITUTIONS.—The appropriate State banking au17 thority may grant a charter to a wholesale financial 

18 institution notwithstanding any State constitution or 

19 statute requiring that the institution obtain insur20 ance of its deposits and any such State constitution 

21 or statute is hereby preempted solely for purposes of 

22 this paragraph. 

23 ‘‘(10) PARITY FOR WHOLESALE FINANCIAL IN24 STITUTIONS.—A State bank that is a wholesale fi25 nancial institution under this section shall have all 


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1 of the rights, powers, privileges, and immunities (in2 cluding those derived from status as a federally 

3 chartered institution) of and as if it were a national 

4 bank, subject to such terms and conditions as estab5 lished by the Board. 

6 ‘‘(11) COMMUNITY REINVESTMENT ACT OF

7 1977.—A State wholesale financial institution shall 

8 be subject to the Community Reinvestment Act of 

9 1977. 

10 ‘‘(c) SPECIFIC REQUIREMENTS APPLICABLE TO

11 WHOLESALE FINANCIAL INSTITUTIONS.— 

12 ‘‘(1) LIMITATIONS ON DEPOSITS.— 

13 ‘‘(A) MINIMUM AMOUNT.— 

14 ‘‘(i) IN GENERAL.—No wholesale fi15 nancial institution may receive initial de16 posits of $100,000 or less, other than on 

17 an incidental and occasional basis. 

18 ‘‘(ii) LIMITATION ON DEPOSITS OF

19 LESS THAN $100,000.—No wholesale finan20 cial institution may receive initial deposits 

21 of $100,000 or less if such deposits con22 stitute more than 5 percent of the institu23 tion’s total deposits. 

24 ‘‘(B) NO DEPOSIT INSURANCE.—Except as 

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1 eral Deposit Insurance Act, no deposits held by 

2 a wholesale financial institution shall be insured 

3 deposits under the Federal Deposit Insurance 

4 Act. 

5 ‘‘(C) ADVERTISING AND DISCLOSURE.— 

6 The Board and the Comptroller of the Currency 

7 shall prescribe jointly regulations pertaining to 

8 advertising and disclosure by wholesale financial 

9 institutions to ensure that each depositor is no10 tified that deposits at the wholesale financial in11 stitution are not federally insured or otherwise 

12 guaranteed by the United States Government. 

13 ‘‘(2) MINIMUM CAPITAL LEVELS APPLICABLE

14 TO WHOLESALE FINANCIAL INSTITUTIONS.—The 

15 Board shall, by regulation, adopt capital require16 ments for wholesale financial institutions— 

17 ‘‘(A) to account for the status of wholesale 

18 financial institutions as institutions that accept 

19 deposits that are not insured under the Federal 

20 Deposit Insurance Act; and 

21 ‘‘(B) to provide for the safe and sound op22 eration of the wholesale financial institution 

23 without undue risk to creditors or other per24 sons, including Federal Reserve banks, engaged 

25 in transactions with the bank. 


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1 ‘‘(3) ADDITIONAL REQUIREMENTS APPLICABLE

2 TO WHOLESALE FINANCIAL INSTITUTIONS.—In addi3 tion to any requirement otherwise applicable to State 

4 member insured banks or applicable, under this sec5 tion, to wholesale financial institutions, the Board 

6 may impose, by regulation or order, upon wholesale 

7 financial institutions— 

8 ‘‘(A) limitations on transactions, direct or 

9 indirect, with affiliates to prevent— 

10 ‘‘(i) the transfer of risk to the deposit 

11 insurance funds; or 

12 ‘‘(ii) an affiliate from gaining access 

13 to, or the benefits of, credit from a Federal 

14 Reserve bank, including overdrafts at a 

15 Federal Reserve bank; 

16 ‘‘(B) special clearing balance requirements; 

17 and 

18 ‘‘(C) any additional requirements that the 

19 Board determines to be appropriate or nec20 essary to— 

21 ‘‘(i) promote the safety and soundness 

22 of the wholesale financial institution or any 

23 insured depository institution affiliate of 

24 the wholesale financial institution; 


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1 ‘‘(ii) prevent the transfer of risk to 

2 the deposit insurance funds; or 

3 ‘‘(iii) protect creditors and other per4 sons, including Federal Reserve banks, en5 gaged in transactions with the wholesale fi6 nancial institution. 

7 ‘‘(4) EXEMPTIONS FOR WHOLESALE FINANCIAL

8 INSTITUTIONS.—The Board may, by regulation or 

9 order, exempt any wholesale financial institution 

10 from any provision applicable to a member bank 

11 that is not a wholesale financial institution, if the 

12 Board finds that such exemption is consistent 

13 with— 

14 ‘‘(A) the promotion of the safety and 

15 soundness of the wholesale financial institution 

16 or any insured depository institution affiliate of 

17 the wholesale financial institution; 

18 ‘‘(B) the protection of the deposit insur19 ance funds; and 

20 ‘‘(C) the protection of creditors and other 

21 persons, including Federal Reserve banks, en22 gaged in transactions with the wholesale finan23 cial institution. 

24 ‘‘(5) LIMITATION ON TRANSACTIONS BETWEEN

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1 SURED BANK.—For purposes of section 23A(d)(1) of 

2 the Federal Reserve Act, a wholesale financial insti3 tution that is affiliated with an insured bank shall 

4 not be a bank. 

5 ‘‘(6) NO EFFECT ON OTHER PROVISIONS.—This 

6 section shall not be construed as limiting the 

7 Board’s authority over member banks or the author8 ity of the Comptroller of the Currency over national 

9 banks under any other provision of law, or to create 

10 any obligation for any Federal Reserve bank to 

11 make, increase, renew, or extend any advance or dis12 count under this Act to any member bank or other 

13 depository institution. 

14 ‘‘(d) CAPITAL AND MANAGERIAL REQUIREMENTS.— 

15 ‘‘(1) IN GENERAL.—A wholesale financial insti16 tution shall be well capitalized and well managed. 

17 ‘‘(2) NOTICE TO COMPANY.—The Board shall 

18 promptly provide notice to a company that controls 

19 a wholesale financial institution whenever such 

20 wholesale financial institution is not well capitalized 

21 or well managed. 

22 ‘‘(3) AGREEMENT TO RESTORE INSTITUTION.— 

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1 mit), the company shall execute an agreement ac2 ceptable to the Board to restore the wholesale finan3 cial institution to compliance with all of the require4 ments of paragraph (1). 

5 ‘‘(4) LIMITATIONS UNTIL INSTITUTION RE6 STORED.—Until the wholesale financial institution is 

7 restored to compliance with all of the requirements 

8 of paragraph (1), the Board may impose such limi9 tations on the conduct or activities of the company 

10 or any affiliate of the company as the Board deter11 mines to be appropriate under the circumstances. 

12 ‘‘(5) FAILURE TO RESTORE.—If the company 

13 does not execute and implement an agreement in ac14 cordance with paragraph (3), comply with any limi15 tation imposed under paragraph (4), restore the 

16 wholesale financial institution to well capitalized sta17 tus not later than 180 days after the date of receipt 

18 by the company of the notice described in paragraph 

19 (2), or restore the wholesale financial institution to 

20 well managed status within such period as the Board 

21 may permit, the company shall, under such terms 

22 and conditions as may be imposed by the Board sub23 ject to such extension of time as may be granted in 

24 the discretion of the Board, divest control of its sub25 sidiary depository institutions. 


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1 ‘‘(6) WELL MANAGED DEFINED.—For purposes 

2 of this subsection, the term ‘well managed’ has the 

3 same meaning as in section 2 of the Bank Holding 

4 Company Act of 1956. 

5 ‘‘(e) RESOLUTION OF WHOLESALE FINANCIAL INSTI6 TUTIONS.— 

7 ‘‘(1) CONSERVATORSHIP OR RECEIVERSHIP.— 

8 ‘‘(A) APPOINTMENT.—The Board may ap9 point a conservator or receiver to take posses10 sion and control of a wholesale financial institu11 tion to the same extent and in the same manner 

12 as the Comptroller of the Currency may appoint 

13 a conservator or receiver for a national bank. 

14 ‘‘(B) POWERS.—The conservator or re15 ceiver for a wholesale financial institution shall 

16 exercise the same powers, functions, and duties, 

17 subject to the same limitations, as a conser18 vator or receiver for a national bank. 

19 ‘‘(2) BOARD AUTHORITY.—The Board shall 

20 have the same authority with respect to any conser21 vator or receiver appointed under paragraph (1), 

22 and the wholesale financial institution for which it 

23 has been appointed, as the Comptroller of the Cur24 rency has with respect to a conservator or receiver 


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1 for a national bank and the national bank for which 

2 the conservator or receiver has been appointed. 

3 ‘‘(3) BANKRUPTCY PROCEEDINGS.—The Comp4 troller of the Currency (in the case of a national 

5 wholesale financial institution) or the Board may di6 rect the conservator or receiver of a wholesale finan7 cial institution to file a petition pursuant to title 11, 

8 United States Code, in which case, title 11, United 

9 States Code, shall apply to the wholesale financial 

10 institution in lieu of otherwise applicable Federal or 

11 State insolvency law. 

12 ‘‘(f) BOARD BACKUP AUTHORITY.— 

13 ‘‘(1) NOTICE TO THE COMPTROLLER.—Before 

14 taking any action under section 8 of the Federal De15 posit Insurance Act involving a wholesale financial 

16 institution that is chartered as a national bank, the 

17 Board shall notify the Comptroller and recommend 

18 that the Comptroller take appropriate action. If the 

19 Comptroller fails to take the recommended action or 

20 to provide an acceptable plan for addressing the con21 cerns of the Board before the close of the 30-day pe22 riod beginning on the date of receipt of the formal 

23 recommendation from the Board, the Board may 

24 take such action. 


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1 ‘‘(2) EXIGENT CIRCUMSTANCES.—Notwith2 standing paragraph (1), the Board may exercise its 

3 authority without regard to the time period set forth 

4 in paragraph (1) where the Board finds that exigent 

5 circumstances exist and the Board notifies the 

6 Comptroller of the Board’s action and of the exigent 

7 circumstances. 

8 ‘‘(g) EXCLUSIVE JURISDICTION.—Subsections (c) 

9 and (e) of section 43 of the Federal Deposit Insurance 

10 Act shall not apply to any wholesale financial institution.’’. 

11 (c) VOLUNTARY TERMINATION OF INSURED STATUS

12 BY CERTAIN INSTITUTIONS.— 

13 (1) SECTION 8 DESIGNATIONS.—Section 8(a) of 

14 the Federal Deposit Insurance Act (12 U.S.C. 

15 1818(a)) is amended— 

16 (A) by striking paragraph (1); and 

17 (B) by redesignating paragraphs (2) 

18 through (10) as paragraphs (1) through (9), re19 spectively. 

20 (2) VOLUNTARY TERMINATION OF INSURED

21 STATUS.—The Federal Deposit Insurance Act (12 

22 U.S.C. 1811 et seq.) is amended by inserting after 

23 section 8 the following new section: 


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1 ‘‘SEC. 8A. VOLUNTARY TERMINATION OF STATUS AS IN2 SURED DEPOSITORY INSTITUTION. 

3 ‘‘(a) IN GENERAL.—Except as provided in subsection 

4 (b), an insured State bank or a national bank may volun5 tarily terminate such bank’s status as an insured deposi6 tory institution in accordance with regulations of the Cor7 poration if— 

8 ‘‘(1) the bank provides written notice of the 

9 bank’s intent to terminate such insured status— 

10 ‘‘(A) to the Corporation and the Board of 

11 Governors of the Federal Reserve System, in 

12 the case of an insured State bank, or to the 

13 Corporation and the Comptroller of the Cur14 rency, in the case of an insured national bank 

15 authorized to operate as a wholesale financial 

16 institution, not less than 6 months before the 

17 effective date of such termination; and 

18 ‘‘(B) to all depositors at such bank, not 

19 less than 6 months before the effective date of 

20 the termination of such status; and 

21 ‘‘(2) either— 

22 ‘‘(A) the deposit insurance fund of which 

23 such bank is a member equals or exceeds the 

24 fund’s designated reserve ratio as of the date 

25 the bank provides a written notice under para26 graph (1) and the Corporation determines that 


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1 the fund will equal or exceed the applicable des2 ignated reserve ratio for the 2 semiannual as3 sessment periods immediately following such 

4 date; or 

5 ‘‘(B) the Corporation and the Board of 

6 Governors of the Federal Reserve System, in 

7 the case of an insured State bank, or the Cor8 poration and the Comptroller of the Currency, 

9 in the case of an insured national bank author10 ized to operate as a wholesale financial institu11 tion, has approved the termination of the 

12 bank’s insured status and the bank pays an exit 

13 fee in accordance with subsection (e). 

14 ‘‘(b) EXCEPTION.—Subsection (a) shall not apply 

15 with respect to— 

16 ‘‘(1) an insured savings association; or 

17 ‘‘(2) an insured branch that is required to be 

18 insured under subsection (a) or (b) of section 6 of 

19 the International Banking Act of 1978. 

20 ‘‘(c) ELIGIBILITY FOR INSURANCE TERMINATED.— 

21 Any bank that voluntarily elects to terminate the bank’s 

22 insured status under subsection (a) shall not be eligible 

23 for insurance on any deposits or any assistance authorized 

24 under this Act after the period specified in subsection 

25 (f)(1). 


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1 ‘‘(d) INSTITUTION MUST BECOME WHOLESALE FI2 NANCIAL INSTITUTION OR TERMINATE DEPOSIT-TAKING

3 ACTIVITIES.—Any depository institution which voluntarily 

4 terminates such institution’s status as an insured deposi5 tory institution under this section may not, upon termi6 nation of insurance, accept any deposits unless the institu7 tion is a wholesale financial institution subject to section 

8 9B of the Federal Reserve Act. 

9 ‘‘(e) EXIT FEES.— 

10 ‘‘(1) IN GENERAL.—Any bank that voluntarily 

11 terminates such bank’s status as an insured deposi12 tory institution under this section shall pay an exit 

13 fee in an amount that the Corporation determines is 

14 sufficient to account for the institution’s pro rata 

15 share of the amount (if any) which would be re16 quired to restore the relevant deposit insurance fund 

17 to the fund’s designated reserve ratio as of the date 

18 the bank provides a written notice under subsection 

19 (a)(1). 

20 ‘‘(2) PROCEDURES.—The Corporation shall pre21 scribe, by regulation, procedures for assessing any 

22 exit fee under this subsection. 

23 ‘‘(f) TEMPORARY INSURANCE OF DEPOSITS INSURED

24 AS OF TERMINATION.— 


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1 ‘‘(1) TRANSITION PERIOD.—The insured depos2 its of each depositor in a State bank or a national 

3 bank on the effective date of the voluntary termi4 nation of the bank’s insured status, less all subse5 quent withdrawals from any deposits of such deposi6 tor, shall continue to be insured for a period of not 

7 less than 6 months and not more than 2 years, as 

8 determined by the Corporation. During such period, 

9 no additions to any such deposits, and no new de10 posits in the depository institution made after the ef11 fective date of such termination shall be insured by 

12 the Corporation. 

13 ‘‘(2) TEMPORARY ASSESSMENTS; OBLIGATIONS

14 AND DUTIES.—During the period specified in para15 graph (1) with respect to any bank, the bank shall 

16 continue to pay assessments under section 7 as if 

17 the bank were an insured depository institution. The 

18 bank shall, in all other respects, be subject to the 

19 authority of the Corporation and the duties and obli20 gations of an insured depository institution under 

21 this Act during such period, and in the event that 

22 the bank is closed due to an inability to meet the de23 mands of the bank’s depositors during such period, 

24 the Corporation shall have the same powers and 


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1 rights with respect to such bank as in the case of 

2 an insured depository institution. 

3 ‘‘(g) ADVERTISEMENTS.— 

4 ‘‘(1) IN GENERAL.—A bank that voluntarily 

5 terminates the bank’s insured status under this sec6 tion shall not advertise or hold itself out as having 

7 insured deposits, except that the bank may advertise 

8 the temporary insurance of deposits under sub9 section (f) if, in connection with any such advertise10 ment, the advertisement also states with equal prom11 inence that additions to deposits and new deposits 

12 made after the effective date of the termination are 

13 not insured. 

14 ‘‘(2) CERTIFICATES OF DEPOSIT, OBLIGATIONS, 

15 AND SECURITIES.—Any certificate of deposit or 

16 other obligation or security issued by a State bank 

17 or a national bank after the effective date of the vol18 untary termination of the bank’s insured status 

19 under this section shall be accompanied by a con20 spicuous, prominently displayed notice that such cer21 tificate of deposit or other obligation or security is 

22 not insured under this Act. 

23 ‘‘(h) NOTICE REQUIREMENTS.— 


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1 ‘‘(1) NOTICE TO THE CORPORATION.—The no2 tice required under subsection (a)(1)(A) shall be in 

3 such form as the Corporation may require. 

4 ‘‘(2) NOTICE TO DEPOSITORS.—The notice re5 quired under subsection (a)(1)(B) shall be— 

6 ‘‘(A) sent to each depositor’s last address 

7 of record with the bank; and 

8 ‘‘(B) in such manner and form as the Cor9 poration finds to be necessary and appropriate 

10 for the protection of depositors.’’. 

11 (3) DEFINITION.—Section 19(b)(1)(A)(i) of the 

12 Federal Reserve Act (12 U.S.C. 461(b)(1)(A)(i)) is 

13 amended by inserting ‘‘, or any wholesale financial 

14 institution subject to section 9B of this Act’’ after 

15 ‘‘such Act’’. 

16 (d) TECHNICAL AND CONFORMING AMENDMENTS TO

17 THE BANKRUPTCY CODE.— 

18 (1) BANKRUPTCY CODE DEBTORS.—Section 

19 109(b)(2) of title 11, United States Code, is amend20 ed by striking ‘‘; or’’ and inserting the following: ‘‘, 

21 except that— 

22 ‘‘(A) a wholesale financial institution es23 tablished under section 5136B of the Revised 

24 Statutes of the United States or section 9B of 

25 the Federal Reserve Act may be a debtor if a 


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1 petition is filed at the direction of the Comp2 troller of the Currency (in the case of a whole3 sale financial institution established under sec4 tion 5136B of the Revised Statutes of the 

5 United States) or the Board of Governors of 

6 the Federal Reserve System (in the case of any 

7 wholesale financial institution); and 

8 ‘‘(B) a corporation organized under section 

9 25A of the Federal Reserve Act may be a debt10 or if a petition is filed at the direction of the 

11 Board of Governors of the Federal Reserve Sys12 tem; or’’. 

13 (2) CHAPTER 7 DEBTORS.—Section 109(d) of 

14 title 11, United States Code, is amended to read as 

15 follows: 

16 ‘‘(d) Only a railroad and a person that may be a debt17 or under chapter 7 of this title, except that a stockbroker, 

18 a wholesale financial institution established under section 

19 5136B of the Revised Statutes of the United States or 

20 section 9B of the Federal Reserve Act, a corporation orga21 nized under section 25A of the Federal Reserve Act, or 

22 a commodity broker, may be a debtor under chapter 11 

23 of this title.’’. 


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1 (3) DEFINITION OF FINANCIAL INSTITUTION.— 

2 Section 101(22) of title 11, United States Code, is 

3 amended to read as follows: 

4 ‘‘(22) ‘financial institution’ means a person that 

5 is a commercial or savings bank, industrial savings 

6 bank, savings and loan association, trust company, 

7 wholesale financial institution established under sec8 tion 5136B of the Revised Statutes of the United 

9 States or section 9B of the Federal Reserve Act, or 

10 corporation organized under section 25A of the Fed11 eral Reserve Act and, when any such person is act12 ing as agent or custodian for a customer in connec13 tion with a securities contract, as defined in section 

14 741 of this title, such customer,’’. 

15 (4) SUBCHAPTER V OF CHAPTER 7.— 

16 (A) IN GENERAL.—Section 103 of title 11, 

17 United States Code, is amended— 

18 (i) by redesignating subsections (e) 

19 through (i) as subsections (f) through (j), 

20 respectively; and 

21 (ii) by inserting after subsection (d) 

22 the following: 

23 ‘‘(e) Subchapter V of chapter 7 of this title applies 

24 only in a case under such chapter concerning the liquida25 tion of a wholesale financial institution established under 


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1 section 5136B of the Revised Statutes of the United 

2 States or section 9B of the Federal Reserve Act, or a cor3 poration organized under section 25A of the Federal Re4 serve Act.’’. 

5 (B) WHOLESALE BANK LIQUIDATION.— 

6 Chapter 7 of title 11, United States Code, is 

7 amended by adding at the end the following: 

8 ‘‘SUBCHAPTER V—WHOLESALE BANK 

9 LIQUIDATION 

10 ‘‘§ 781. Definitions for subchapter 

11 ‘‘In this subchapter— 

12 ‘‘(1) the term ‘Board’ means the Board of Gov13 ernors of the Federal Reserve System; 

14 ‘‘(2) the term ‘depository institution’ has the 

15 same meaning as in section 3 of the Federal Deposit 

16 Insurance Act, and includes any wholesale bank; 

17 ‘‘(3) the term ‘national wholesale financial insti18 tution’ means a wholesale financial institution estab19 lished under section 5136B of the Revised Statutes 

20 of the United States; and 

21 ‘‘(4) the term ‘wholesale bank’ means a na22 tional wholesale financial institution, a wholesale fi23 nancial institution established under section 9B of 

24 the Federal Reserve Act, or a corporation organized 

25 under section 25A of the Federal Reserve Act. 


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1 ‘‘§ 782. Selection of trustee 

2 ‘‘(a) Notwithstanding any other provision of this title, 

3 the conservator or receiver who files the petition shall be 

4 the trustee under this chapter, unless the Comptroller of 

5 the Currency (in the case of a national wholesale financial 

6 institution for which it appointed the conservator or re7 ceiver) or the Board (in the case of any wholesale bank 

8 for which it appointed the conservator or receiver) des9 ignates an alternative trustee. The Comptroller of the Cur10 rency or the Board (as applicable) may designate a suc11 cessor trustee, if required. 

12 ‘‘(b) Whenever the Comptroller of the Currency or 

13 the Board appoints or designates a trustee, chapter 3 and 

14 sections 704 and 705 of this title shall apply to the Comp15 troller or the Board, as applicable, in the same way and 

16 to the same extent that they apply to a United States 

17 trustee. 

18 ‘‘§ 783. Additional powers of trustee 

19 ‘‘(a) The trustee under this subchapter has power to 

20 distribute property not of the estate, including distribu21 tions to customers that are mandated by subchapters III 

22 and Iv of this chapter. 

23 ‘‘(b) The trustee under this subchapter may, after no24 tice and a hearing— 

25 ‘‘(1) sell the wholesale bank to a depository in26 stitution or consortium of depository institutions 


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1 (which consortium may agree on the allocation of 

2 the wholesale bank among the consortium); 

3 ‘‘(2) merge the wholesale bank with a deposi4 tory institution; 

5 ‘‘(3) transfer contracts to the same extent as 

6 could a receiver for a depository institution under 

7 paragraphs (9) and (10) of section 11(e) of the Fed8 eral Deposit Insurance Act; 

9 ‘‘(4) transfer assets or liabilities to a depository 

10 institution; 

11 ‘‘(5) transfer assets and liabilities to a bridge 

12 bank as provided in paragraphs (1), (3)(A), (5), (6), 

13 and (9) through (13), and subparagraphs (A) 

14 through (H) and (K) of paragraph (4) of section 

15 11(n) of the Federal Deposit Insurance Act, except 

16 that— 

17 ‘‘(A) the bridge bank shall be treated as a 

18 wholesale bank for the purpose of this sub19 section; and 

20 ‘‘(B) any references in any such provision 

21 of law to the Federal Deposit Insurance Cor22 poration shall be construed to be references to 

23 the appointing agency and that references to 

24 deposit insurance shall be omitted. 


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1 ‘‘(c) Any reference in this section to transfers of li2 abilities includes a ratable transfer of liabilities within a 

3 priority class. 

4 ‘‘§ 784. Right to be heard 

5 ‘‘The Comptroller of the Currency (in the case of a 

6 national wholesale financial institution), the Board (in the 

7 case of any wholesale bank), or a Federal Reserve bank 

8 (in the case of a wholesale bank that is a member of that 

9 bank) may raise and may appear and be heard on any 

10 issue in a case under this subchapter. 

11 (C) CONFORMING AMENDMENT.—The 

12 table of sections for chapter 7 of title 11, 

13 United States Code, is amended by adding at 

14 the end the following: 

‘‘SUBCHAPTER V—WHOLESALE BANK LIQUIDATION 

‘‘781. Definitions for subchapter. 

‘‘782. Selection of trustee. 

‘‘783. Additional powers of trustee. 

‘‘784. Right to be heard.’’. 

15 (e) RESOLUTION OF EDGE CORPORATIONS.—The 

16 sixteenth undesignated paragraph of section 25A of the 

17 Federal Reserve Act (12 U.S.C. 624) is amended to read 

18 as follows: 

19 ‘‘(16) APPOINTMENT OF RECEIVER OR CONSER20 VATOR.— 

21 ‘‘(A) IN GENERAL.—The Board may ap22 point a conservator or receiver for a corporation 


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1 organized under the provisions of this section to 

2 the same extent and in the same manner as the 

3 Comptroller of the Currency may appoint a con4 servator or receiver for a national bank, and the 

5 conservator or receiver for such corporation 

6 shall exercise the same powers, functions, and 

7 duties, subject to the same limitations, as a 

8 conservator or receiver for a national bank. 

9 ‘‘(B) EQUIVALENT AUTHORITY.—The 

10 Board shall have the same authority with re11 spect to any conservator or receiver appointed 

12 for a corporation organized under the provisions 

13 of this section under this paragraph and any 

14 such corporation as the Comptroller of the Cur15 rency has with respect to a conservator or re16 ceiver of a national bank and the national bank 

17 for which a conservator or receiver has been ap18 pointed. 

19 ‘‘(C) TITLE 11 PETITIONS.—The Board 

20 may direct the conservator or receiver of a cor21 poration organized under the provisions of this 

22 section to file a petition pursuant to title 11, 

23 United States Code, in which case, title 11, 

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1 tion in lieu of otherwise applicable Federal or 

2 State insolvency law.’’. 

3 Subtitle E—Preservation of FTC 

4 Authority 

5 SEC. 141. AMENDMENT TO THE BANK HOLDING COMPANY 

6 ACT OF 1956 TO MODIFY NOTIFICATION AND 

7 POST-APPROVAL WAITING PERIOD FOR SEC8 TION 3 TRANSACTIONS. 

9 Section 11(b)(1) of the Bank Holding Company Act 

10 of 1956 (12 U.S.C. 1849(b)(1)) is amended by inserting 

11 ‘‘and, if the transaction also involves an acquisition under 

12 section 4 or section 6, the Board shall also notify the Fed13 eral Trade Commission of such approval’’ before the pe14 riod at the end of the first sentence. 

15 SEC. 142. INTERAGENCY DATA SHARING. 

16 To the extent not prohibited by other law, the Comp17 troller of the Currency, the Director of the Office of Thrift 

18 Supervision, the Federal Deposit Insurance Corporation, 

19 and the Board of Governors of the Federal Reserve Sys20 tem shall make available to the Attorney General and the 

21 Federal Trade Commission any data in the possession of 

22 any such banking agency that the antitrust agency deems 

23 necessary for antitrust review of any transaction requiring 

24 notice to any such antitrust agency or the approval of such 

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1 pany Act of 1956, section 18(c) of the Federal Deposit 

2 Insurance Act, the National Bank Consolidation and 

3 Merger Act, section 10 of the Home Owners’ Loan Act, 

4 or the antitrust laws. 

5 SEC. 143. CLARIFICATION OF STATUS OF SUBSIDIARIES 

6 AND AFFILIATES. 

7 (a) CLARIFICATION OF FEDERAL TRADE COMMIS8 SION JURISDICTION.—Any person which directly or indi9 rectly controls, is controlled directly or indirectly by, or 

10 is directly or indirectly under common control with, any 

11 bank or savings association (as such terms are defined in 

12 section 3 of the Federal Deposit Insurance Act) and is 

13 not itself a bank or savings association shall not be 

14 deemed to be a bank or savings association for purposes 

15 of the Federal Trade Commission Act or any other law 

16 enforced by the Federal Trade Commission. 

17 (b) SAVINGS PROVISION.—No provision of this sec18 tion shall be construed as restricting the authority of any 

19 Federal banking agency (as defined in section 3 of the 

20 Federal Deposit Insurance Act) under any Federal bank21 ing law, including section 8 of the Federal Deposit Insur22 ance Act. 

23 (c) HART–SCOTT–RODINO AMENDMENTS.— 

24 (1) BANKS.—Section 7A(c)(7) of the Clayton 

25 Act (15 U.S.C. 18a(c)(7)) is amended by inserting 


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1 before the semicolon at the end the following: ‘‘, ex2 cept that a portion of a transaction is not exempt 

3 under this paragraph if such portion of the trans4 action (A) is subject to section 6 of the Bank Hold5 ing Company Act of 1956; and (B) does not require 

6 agency approval under section 3 of the Bank Hold7 ing Company Act of 1956’’. 

8 (2) BANK HOLDING COMPANIES.—Section 

9 7A(c)(8) of the Clayton Act (15 U.S.C. 18a(c)(8)) is 

10 amended by inserting before the semicolon at the 

11 end the following: ‘‘, except that a portion of a 

12 transaction is not exempt under this paragraph if 

13 such portion of the transaction (A) is subject to sec14 tion 6 of the Bank Holding Company Act of 1956; 

15 and (B) does not require agency approval under sec16 tion 4 of the Bank Holding Company Act of 1956’’. 

17 SEC. 144. ANNUAL GAO REPORT. 

18 (a) IN GENERAL.—By the end of the 1-year period 

19 beginning on the date of the enactment of this Act and 

20 annually thereafter, the Comptroller General of the United 

21 States shall submit a report to the Congress on market 

22 concentration in the financial services industry and its im23 pact on consumers. 

24 (b) ANALYSIS.—Each report submitted under sub25 section (a) shall contain an analysis of— 


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1 (1) the positive and negative effects of affili2 ations between various types of financial companies, 

3 and of acquisitions pursuant to this Act and the 

4 amendments made by this Act to other provisions of 

5 law, including any positive or negative effects on 

6 consumers, area markets, and submarkets thereof or 

7 on registered securities brokers and dealers which 

8 have been purchased by depository institutions or 

9 depository institution holding companies; 

10 (2) the changes in business practices and the 

11 effects of any such changes on the availability of 

12 venture capital, consumer credit, and other financial 

13 services or products and the availability of capital 

14 and credit for small businesses; and 

15 (3) the acquisition patterns among depository 

16 institutions, depository institution holding compa17 nies, securities firms, and insurance companies in18 cluding acquisitions among the largest 20 percent of 

19 firms and acquisitions within regions or other lim20 ited geographical areas. 

21 (c) SUNSET.—This section shall not apply after the 

22 end of the 5-year period beginning on the date of the en23 actment of this Act. 


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1 Subtitle F—National Treatment 

2 SEC. 151. FOREIGN BANKS THAT ARE FINANCIAL HOLDING 

3 COMPANIES. 

4 Section 8(c) of the International Banking Act of 

5 1978 (12 U.S.C. 3106(c)) is amended by adding at the 

6 end the following new paragraph: 

7 ‘‘(3) TERMINATION OF GRANDFATHERED

8 RIGHTS.— 

9 ‘‘(A) IN GENERAL.—If any foreign bank or 

10 foreign company files a declaration under sec11 tion 6(b)(1)(D) or receives a determination 

12 under section 10(d)(1) of the Bank Holding 

13 Company Act of 1956, any authority conferred 

14 by this subsection on any foreign bank or com15 pany to engage in any activity which the Board 

16 has determined to be permissible for financial 

17 holding companies under section 6 of such Act 

18 shall terminate immediately. 

19 ‘‘(B) RESTRICTIONS AND REQUIREMENTS

20 AUTHORIZED.—If a foreign bank or company 

21 that engages, directly or through an affiliate 

22 pursuant to paragraph (1), in an activity which 

23 the Board has determined to be permissible for 

24 financial holding companies under section 6 of 

25 the Bank Holding Company Act of 1956 has 


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1 not filed a declaration with the Board of its sta2 tus as a financial holding company under such 

3 section or received a determination under sec4 tion 10(d)(1) by the end of the 2-year period 

5 beginning on the date of the enactment of the 

6 Financial Services Act of 1999, the Board, giv7 ing due regard to the principle of national 

8 treatment and equality of competitive oppor9 tunity, may impose such restrictions and re10 quirements on the conduct of such activities by 

11 such foreign bank or company as are com12 parable to those imposed on a financial holding 

13 company organized under the laws of the 

14 United States, including a requirement to con15 duct such activities in compliance with any pru16 dential safeguards established under section 

17 114 of the Financial Services Act.’’. 

18 SEC. 152. FOREIGN BANKS AND FOREIGN FINANCIAL INSTI19 TUTIONS THAT ARE WHOLESALE FINANCIAL 

20 INSTITUTIONS. 

21 Section 8A of the Federal Deposit Insurance Act (as 

22 added by section 136(c)(2) of this Act) is amended by add23 ing at the end the following new subsection: 

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1 ance in this section shall apply to an insured branch of 

2 a foreign bank (including a Federal branch) in the same 

3 manner and to the same extent as they apply to an insured 

4 State bank or a national bank.’’. 

5 SEC. 153. REPRESENTATIVE OFFICES. 

6 (a) DEFINITION OF ‘‘REPRESENTATIVE OFFICE’’.— 

7 Section 1(b)(15) of the International Banking Act of 1978 

8 (12 U.S.C. 3101(15)) is amended by striking ‘‘State agen9 cy, or subsidiary of a foreign bank’’ and inserting ‘‘or 

10 State agency’’. 

11 (b) EXAMINATIONS.—Section 10(c) of the Inter12 national Banking Act of 1978 (12 U.S.C. 3107(c)) is 

13 amended by adding at the end the following: ‘‘The Board 

14 may also make examinations of any affiliate of a foreign 

15 bank conducting business in any State if the Board deems 

16 it necessary to determine and enforce compliance with this 

17 Act, the Bank Holding Company Act of 1956 (12 U.S.C. 

18 1841 et seq.), or other applicable Federal banking law.’’. 

19 SEC. 154. RECIPROCITY. 

20 (a) NATIONAL TREATMENT REPORTS.— 

21 (1) REPORT REQUIRED IN THE EVENT OF CER22 TAIN ACQUISITIONS.— 

23 (A) IN GENERAL.—Whenever a person 

24 from a foreign country announces its intention 

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1 derwriter, broker, or dealer, an investment ad2 viser, or insurance company that ranks within 

3 the top 50 firms in that line of business in the 

4 United States, the Secretary of Commerce, in 

5 the case of an insurance company, or the Sec6 retary of the Treasury, in the case of a bank, 

7 a securities underwriter, broker, or dealer, or 

8 an investment adviser, shall, within the earlier 

9 of 6 months of such announcement or such ac10 quisition and in consultation with other appro11 priate Federal and State agencies, prepare and 

12 submit to the Congress a report on whether a 

13 United States person would be able, de facto or 

14 de jure, to acquire an equivalent sized firm in 

15 the country in which such person from a foreign 

16 country is located. 

17 (B) ANALYSIS AND RECOMMENDATIONS.— 

18 If a report submitted under subparagraph (A) 

19 states that the equivalent treatment referred to 

20 in such subparagraph, de facto and de jure, is 

21 not provided in the country which is the subject 

22 of the report, the Secretary of Commerce or the 

23 Secretary of the Treasury, as the case may be 

24 and in consultation with other appropriate Fed25 eral and State agencies, shall include in the reVerDate Mar 15 2010 15:06 Jun 10, 2011 Jkt 223001 PO 00000 Frm 00191 Fmt 6652 Sfmt 6201 E:\ERIC\H10.PCS H10

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1 port analysis and recommendations as to how 

2 that country’s laws and regulations would need 

3 to be changed so that reciprocal treatment 

4 would exist. 

5 (2) REPORT REQUIRED BEFORE FINANCIAL

6 SERVICES NEGOTIATIONS COMMENCE.—The Sec7 retary of Commerce, with respect to insurance com8 panies, and the Secretary of the Treasury, with re9 spect to banks, securities underwriters, brokers, 

10 dealers, and investment advisers, shall, not less than 

11 6 months before the commencement of the financial 

12 services negotiations of the World Trade Organiza13 tion and in consultation with other appropriate Fed14 eral and State agencies, prepare and submit to the 

15 Congress a report containing— 

16 (A) an assessment of the 30 largest finan17 cial services markets with regard to whether re18 ciprocal access is available in such markets to 

19 United States financial services providers; and 

20 (B) with respect to any such financial serv21 ices markets in which reciprocal access is not 

22 available to United States financial services 

23 providers, an analysis and recommendations as 

24 to what legislative, regulatory, or enforcement 


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1 changes would be required to ensure full reci2 procity for such providers. 

3 (3) PERSON OF A FOREIGN COUNTRY DE4 FINED.—For purposes of this subsection, the term 

5 ‘‘person of a foreign country’’ means a person, or a 

6 person which directly or indirectly owns or controls 

7 that person, that is a resident of that country, is or8 ganized under the laws of that country, or has its 

9 principal place of business in that country. 

10 (b) PROVISIONS APPLICABLE TO SUBMISSIONS.— 

11 (1) NOTICE.—Before preparing any report re12 quired under subsection (a), the Secretary of Com13 merce or the Secretary of the Treasury, as the case 

14 may be, shall publish notice that a report is in prep15 aration and seek comment from United States per16 sons. 

17 (2) PRIVILEGED SUBMISSIONS.—Upon the re18 quest of the submitting person, any comments or re19 lated communications received by the Secretary of 

20 Commerce or the Secretary of the Treasury, as the 

21 case may be, with regard to the report shall, for the 

22 purposes of section 552 of title 5, of the United 

23 States Code, be treated as commercial information 

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1 formation is obtained. This confidential information 

2 shall be the property of the Secretary and shall be 

3 privileged from disclosure to any other person. How4 ever, this privilege shall not be construed as pre5 venting access to that confidential information by 

6 the Congress. 

7 (3) PROHIBITION OF UNAUTHORIZED DISCLO8 SURES.—No person in possession of confidential in9 formation, provided under this section may disclose 

10 that information, in whole or in part, except for dis11 closure made in published statistical material that 

12 does not disclose, either directly or when used in 

13 conjunction with publicly available information, the 

14 confidential information of any person. 

15 Subtitle G—Federal Home Loan 

16 Bank System Modernization 

17 SEC. 161. SHORT TITLE. 

18 This subtitle may be cited as the ‘‘Federal Home 

19 Loan Bank System Modernization Act of 1999’’. 

20 SEC. 162. DEFINITIONS. 

21 Section 2 of the Federal Home Loan Bank Act (12 

22 U.S.C. 1422) is amended— 

23 (1) in paragraph (1), by striking ‘‘term ‘Board’ 

24 means’’ and inserting ‘‘terms ‘Finance Board’ and 

25 ‘Board’ mean’’; 


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1 (2) by striking paragraph (3) and inserting the 

2 following: 

3 ‘‘(3) STATE.—The term ‘State’, in addition to 

4 the States of the United States, includes the District 

5 of Columbia, Guam, Puerto Rico, the United States 

6 Virgin Islands, American Samoa, and the Common7 wealth of the Northern Mariana Islands.’’; and 

8 (3) by adding at the end the following new 

9 paragraph: 

10 ‘‘(13) COMMUNITY FINANCIAL INSTITUTION.— 

11 ‘‘(A) IN GENERAL.—The term ‘community 

12 financial institution’ means a member— 

13 ‘‘(i) the deposits of which are insured 

14 under the Federal Deposit Insurance Act; 

15 and 

16 ‘‘(ii) that has, as of the date of the 

17 transaction at issue, less than 

18 $500,000,000 in average total assets, 

19 based on an average of total assets over 

20 the 3 years preceding that date. 

21 ‘‘(B) ADJUSTMENTS.—The $500,000,000 

22 limit referred to in subparagraph (A)(ii) shall 

23 be adjusted annually by the Finance Board, 

24 based on the annual percentage increase, if any, 

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1 sumers, as published by the Department of 

2 Labor.’’. 

3 SEC. 163. SAVINGS ASSOCIATION MEMBERSHIP. 

4 Section 5(f) of the Home Owners’ Loan Act (12 

5 U.S.C. 1464(f)) is amended to read as follows: 

6 ‘‘(f) FEDERAL HOME LOAN BANK MEMBERSHIP.— 

7 On and after January 1, 1999, a Federal savings associa8 tion may become a member of the Federal Home Loan 

9 Bank System, and shall qualify for such membership in 

10 the manner provided by the Federal Home Loan Bank 

11 Act.’’. 

12 SEC. 164. ADVANCES TO MEMBERS; COLLATERAL. 

13 (a) IN GENERAL.—Section 10(a) of the Federal 

14 Home Loan Bank Act (12 U.S.C. 1430(a)) is amended— 

15 (1) by redesignating paragraphs (1) through 

16 (4) as subparagraphs (A) through (D), respectively, 

17 and indenting appropriately; 

18 (2) by striking ‘‘(a) Each’’ and inserting the 

19 following: 

20 ‘‘(a) IN GENERAL.— 

21 ‘‘(1) ALL ADVANCES.—Each’’; 

22 (3) by striking the second sentence and insert23 ing the following: 

24 ‘‘(2) PURPOSES OF ADVANCES.—A long-term 

25 advance may only be made for the purposes of— 


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1 ‘‘(A) providing funds to any member for 

2 residential housing finance; and 

3 ‘‘(B) providing funds to any community fi4 nancial institution for small business, agricul5 tural, rural development, or low-income commu6 nity development lending.’’; 

7 (4) by striking ‘‘A Bank’’ and inserting the fol8 lowing: 

9 ‘‘(3) COLLATERAL.—A Bank’’; 

10 (5) in paragraph (3) (as so designated by para11 graph (4) of this subsection)— 

12 (A) in subparagraph (C) (as so redesig13 nated by paragraph (1) of this subsection) by 

14 striking ‘‘Deposits’’ and inserting ‘‘Cash or de15 posits’’; 

16 (B) in subparagraph (D) (as so redesig17 nated by paragraph (1) of this subsection), by 

18 striking the second sentence; and 

19 (C) by inserting after subparagraph (D) 

20 (as so redesignated by paragraph (1) of this 

21 subsection) the following new subparagraph: 

22 ‘‘(E) Secured loans for small business, ag23 riculture, rural development, or low-income 

24 community development, or securities rep25 resenting a whole interest in such secured 


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1 loans, in the case of any community financial 

2 institution.’’; 

3 (6) in paragraph (5)— 

4 (A) in the second sentence, by striking 

5 ‘‘and the Board’’; 

6 (B) in the third sentence, by striking 

7 ‘‘Board’’ and inserting ‘‘Federal home loan 

8 bank’’; and 

9 (C) by striking ‘‘(5) Paragraphs (1) 

10 through (4)’’ and inserting the following: 

11 ‘‘(4) ADDITIONAL BANK AUTHORITY.—Subpara12 graphs (A) through (E) of paragraph (3)’’; and 

13 (7) by adding at the end the following: 

14 ‘‘(5) REVIEW OF CERTAIN COLLATERAL STAND15 ARDS.—The Board may review the collateral stand16 ards applicable to each Federal home loan bank for 

17 the classes of collateral described in subparagraphs 

18 (D) and (E) of paragraph (3), and may, if necessary 

19 for safety and soundness purposes, require an in20 crease in the collateral standards for any or all of 

21 those classes of collateral. 

22 ‘‘(6) DEFINITIONS.—For purposes of this sub23 section, the terms ‘small business’, ‘agriculture’, 

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1 velopment’ shall have the meanings given those 

2 terms by rule or regulation of the Finance Board.’’. 

3 (b) CLERICAL AMENDMENT.—The section heading 

4 for section 10 of the Federal Home Loan Bank Act (12 

5 U.S.C. 1430) is amended to read as follows: 

6 ‘‘SEC. 10. ADVANCES TO MEMBERS.’’. 

7 (c) CONFORMING AMENDMENTS RELATING TO MEM8 BERS WHICH ARE NOT QUALIFIED THRIFT LENDERS— 

9 The first of the 2 subsections designated as subsection (e) 

10 of section 10 of the Federal Home Loan Bank Act (12 

11 U.S.C. 1430(e)(1)) is amended— 

12 (1) in the last sentence of paragraph (1), by in13 serting ‘‘or, in the case of any community financial 

14 institution, for the purposes described in subsection 

15 (a)(2)’’ before the period; and 

16 (2) in paragraph (5)(C), by inserting ‘‘except 

17 that, in determining the actual thrift investment per18 centage of any community financial institution for 

19 purposes of this subsection, the total investment of 

20 such member in loans for small business, agri21 culture, rural development, or low-income commu22 nity development, or securities representing a whole 

23 interest in such loans, shall be treated as a qualified 

24 thrift investment (as defined in such section 10(m))’’ 

25 before the period. 


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1 SEC. 165. ELIGIBILITY CRITERIA. 

2 Section 4(a) of the Federal Home Loan Bank Act 

3 (12 U.S.C. 1424(a)) is amended— 

4 (1) in paragraph (2)(A), by inserting, ‘‘(other 

5 than a community financial institution)’’ after ‘‘in6 stitution’’; and 

7 (2) by adding at the end the following new 

8 paragraph: 

9 ‘‘(3) LIMITED EXEMPTION FOR COMMUNITY FI10 NANCIAL INSTITUTIONS.—A community financial in11 stitution that otherwise meets the requirements of 

12 paragraph (2) may become a member without regard 

13 to the percentage of its total assets that is rep14 resented by residential mortgage loans, as described 

15 in subparagraph (A) of paragraph (2).’’. 

16 SEC. 166. MANAGEMENT OF BANKS. 

17 (a) BOARD OF DIRECTORS.—Section 7(d) of the Fed18 eral Home Loan Bank Act (12 U.S.C. 1427(d)) is amend19 ed— 

20 (1) by striking ‘‘(d) The term’’ and inserting 

21 the following: 

22 ‘‘(d) TERMS OF OFFICE.—The term’’; and 

23 (2) by striking ‘‘shall be two years’’. 

24 (b) COMPENSATION.—Section 7(i) of the Federal 

25 Home Loan Bank Act (12 U.S.C. 1427(i)) is amended by 

26 striking ‘‘, subject to the approval of the board’’. 


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1 (c) REPEAL OF SECTIONS 22A AND 27.—The Fed2 eral Home Loan Bank Act (12 U.S.C. 1421 et seq.) is 

3 amended by striking sections 22A (12 U.S.C. 1442a) and 

4 27 (12 U.S.C. 1447). 

5 (d) SECTION 12.—Section 12 of the Federal Home 

6 Loan Bank Act (12 U.S.C. 1432) is amended— 

7 (1) in subsection (a)— 

8 (A) by striking ‘‘, but, except’’ and all that 

9 follows through ‘‘ten years’’; 

10 (B) by striking ‘‘subject to the approval of 

11 the Board’’ the first place that term appears; 

12 (C) by striking ‘‘and, by its Board of direc13 tors,’’ and all that follows through ‘‘agent of 

14 such bank,’’ and inserting ‘‘and, by the board 

15 of directors of the bank, to prescribe, amend, 

16 and repeal by-laws governing the manner in 

17 which its affairs may be administered, con18 sistent with applicable laws and regulations, as 

19 administered by the Finance Board. No officer, 

20 employee, attorney, or agent of a Federal home 

21 loan bank’’; and 

22 (D) by striking ‘‘Board of directors’’ where 

23 such term appears in the penultimate sentence 

24 and inserting ‘‘board of directors’’; and 


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1 (2) in subsection (b), by striking ‘‘loans banks’’ 

2 and inserting ‘‘loan banks’’. 

3 (e) POWERS AND DUTIES OF FEDERAL HOUSING FI4 NANCE BOARD.— 

5 (1) ISSUANCE OF NOTICES OF VIOLATIONS.— 

6 Section 2B(a) of the Federal Home Loan Bank Act 

7 (12 U.S.C. 1422b(a)) is amended by adding at the 

8 end the following new paragraphs: 

9 ‘‘(5) To issue and serve a notice of charges 

10 upon a Federal home loan bank or upon any execu11 tive officer or director of a Federal home loan bank 

12 if, in the determination of the Finance Board, the 

13 bank, executive officer, or director is engaging or 

14 has engaged in, or the Finance Board has reason15 able cause to believe that the bank, executive officer, 

16 or director is about to engage in, any conduct that 

17 violates any provision of this Act or any law, order, 

18 rule, or regulation or any condition imposed in writ19 ing by the Finance Board in connection with the 

20 granting of any application or other request by the 

21 bank, or any written agreement entered into by the 

22 bank with the agency, in accordance with the proce23 dures provided in section 1371(c) of the Federal 

24 Housing Enterprises Financial Safety and Sound25 ness Act of 1992. Such authority includes the same 


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1 authority to take affirmative action to correct condi2 tions resulting from violations or practices or to 

3 limit activities of a bank or any executive officer or 

4 director of a bank as appropriate Federal banking 

5 agencies have to take with respect to insured deposi6 tory institutions under paragraphs (6) and (7) of 

7 section 8(b) of the Federal Deposit Insurance Act, 

8 and to have all other powers, rights, and duties to 

9 enforce this Act with respect to the Federal home 

10 loan banks and their executive officers and directors 

11 as the Office of Federal Housing Enterprise Over12 sight has to enforce the Federal Housing Enter13 prises Financial Safety and Soundness Act of 1992, 

14 the Federal National Mortgage Association Charter 

15 Act, or the Federal Home Loan Mortgage Corpora16 tion Act with respect to the Federal housing enter17 prises under the Federal Housing Enterprises Fi18 nancial Safety and Soundness Act of 1992. 

19 ‘‘(6) To address any insufficiencies in capital 

20 levels resulting from the application of section 5(f) 

21 of the Home Owners’ Loan Act. 

22 ‘‘(7) To sue and be sued, by and through its 

23 own attorneys.’’. 

24 (2) TECHNICAL AMENDMENT.—Section 111 of 

25 Public Law 93–495 (12 U.S.C. 250) is amended by 


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1 striking ‘‘Federal Home Loan Bank Board,’’ and in2 serting ‘‘Director of the Office of Thrift Supervision, 

3 ‘‘the Federal Housing Finance Board,’’. 

4 (f) ELIGIBILITY TO SECURE ADVANCES.— 

5 (1) SECTION 9.—Section 9 of the Federal 

6 Home Loan Bank Act (12 U.S.C. 1429) is amend7 ed— 

8 (A) in the second sentence, by striking 

9 ‘‘with the approval of the Board’’; and 

10 (B) in the third sentence, by striking ‘‘, 

11 subject to the approval of the Board,’’. 

12 (2) SECTION 10.—Section 10 of the Federal 

13 Home Loan Bank Act (12 U.S.C. 1430) is amend14 ed— 

15 (A) in subsection (c)— 

16 (i) in the first sentence, by striking 

17 ‘‘Board’’ and inserting ‘‘Federal home loan 

18 bank’’; and 

19 (ii) by striking the second sentence; 

20 (B) in subsection (d)— 

21 (i) in the first sentence, by striking 

22 ‘‘and the approval of the Board’’; and 

23 (ii) by striking ‘‘Subject to the ap24 proval of the Board, any’’ and inserting 

25 ‘‘Any’’; and 


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1 (C) in subsection (j)(1)— 

2 (i) by striking ‘‘to subsidize the inter3 est rate on advances’’ and inserting ‘‘to 

4 provide subsidies, including subsidized in5 terest rates on advances’’; 

6 (ii) by striking ‘‘Pursuant’’ and in7 serting the following: 

8 ‘‘(A) ESTABLISHMENT.—Pursuant’’; and 

9 (iii) by adding at the end the fol10 lowing new subparagraph: 

11 ‘‘(B) NONDELEGATION OF APPROVAL AU12 THORITY.—Subject to such regulations as the 

13 Finance Board may prescribe, the board of di14 rectors of each Federal home loan bank may 

15 approve or disapprove requests from members 

16 for Affordable Housing Program subsidies, and 

17 may not delegate such authority.’’. 

18 (g) SECTION 16.—Section 16(a) of the Federal Home 

19 Loan Bank Act (12 U.S.C. 1436(a)) is amended— 

20 (1) in the third sentence— 

21 (A) by striking ‘‘net earnings’’ and insert22 ing ‘‘previously retained earnings or current net 

23 earnings’’; and 


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1 (B) by striking ‘‘, and then only with the 

2 approval of the Federal Housing Finance 

3 Board’’; and 

4 (2) by striking the fourth sentence. 

5 (h) SECTION 18.—Section 18(b) of the Federal Home 

6 Loan Bank Act (12 U.S.C. 1438(b)) is amended by strik7 ing paragraph (4). 

8 SEC. 167. RESOLUTION FUNDING CORPORATION. 

9 (a) IN GENERAL.—Section 21B(f)(2)(C) of the Fed10 eral Home Loan Bank Act (12 U.S.C. 1441b(f)(2)(C)) is 

11 amended to read as follows: 

12 ‘‘(C) PAYMENTS BY FEDERAL HOME LOAN

13 BANKS.— 

14 ‘‘(i) IN GENERAL.—To the extent that 

15 the amounts available pursuant to sub16 paragraphs (A) and (B) are insufficient to 

17 cover the amount of interest payments, 

18 each Federal home loan bank shall pay to 

19 the Funding Corporation in each calendar 

20 year, 20.75 percent of the net earnings of 

21 that bank (after deducting expenses relat22 ing to section 10(j) and operating ex23 penses). 

24 ‘‘(ii) ANNUAL DETERMINATION.—The 

25 Board annually shall determine the extent 


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1 to which the value of the aggregate 

2 amounts paid by the Federal home loan 

3 banks exceeds or falls short of the value of 

4 an annuity of $300,000,000 per year that 

5 commences on the issuance date and ends 

6 on the final scheduled maturity date of the 

7 obligations, and shall select appropriate 

8 present value factors for making such de9 terminations. 

10 ‘‘(iii) PAYMENT TERM ALTER11 ATIONS.—The Board shall extend or short12 en the term of the payment obligations of 

13 a Federal home loan bank under this sub14 paragraph as necessary to ensure that the 

15 value of all payments made by the banks 

16 is equivalent to the value of an annuity re17 ferred to in clause (ii). 

18 ‘‘(iv) TERM BEYOND MATURITY.—If 

19 the Board extends the term of payments 

20 beyond the final scheduled maturity date 

21 for the obligations, each Federal home loan 

22 bank shall continue to pay 20.75 percent 

23 of its net earnings (after deducting ex24 penses relating to section 10(j) and oper25 ating expenses) to the Treasury of the 


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1 United States until the value of all such 

2 payments by the Federal home loan banks 

3 is equivalent to the value of an annuity re4 ferred to in clause (ii). In the final year in 

5 which the Federal home loan banks are re6 quired to make any payment to the Treas7 ury under this subparagraph, if the dollar 

8 amount represented by 20.75 percent of 

9 the net earnings of the Federal home loan 

10 banks exceeds the remaining obligation of 

11 the banks to the Treasury, the Finance 

12 Board shall reduce the percentage pro rata 

13 to a level sufficient to pay the remaining 

14 obligation.’’. 

15 (b) EFFECTIVE DATE.—The amendment made by 

16 subsection (a) shall become effective on January 1, 1999. 

17 Payments made by a Federal home loan bank before that 

18 effective date shall be counted toward the total obligation 

19 of that bank under section 21B(f)(2)(C) of the Federal 

20 Home Loan Bank Act, as amended by this section. 

21 SEC. 168. CAPITAL STRUCTURE OF FEDERAL HOME LOAN 

22 BANKS. 

23 Section 6 of the Federal Home Loan Bank Act (12 

24 U.S.C. 1426) is amended to read as follows: 


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1 ‘‘SEC. 6. CAPITAL STRUCTURE OF FEDERAL HOME LOAN 

2 BANKS. 

3 ‘‘(a) REGULATIONS.— 

4 ‘‘(1) CAPITAL STANDARDS.—Not later than 1 

5 year after the date of the enactment of the Financial 

6 Services Act of 1999, the Finance Board shall issue 

7 regulations prescribing uniform capital standards 

8 applicable to each Federal home loan bank, which 

9 shall require each such bank to meet— 

10 ‘‘(A) the leverage requirement specified in 

11 paragraph (2); and 

12 ‘‘(B) the risk-based capital requirements, 

13 in accordance with paragraph (3). 

14 ‘‘(2) LEVERAGE REQUIREMENT.— 

15 ‘‘(A) IN GENERAL.—The leverage require16 ment shall require each Federal home loan 

17 bank to maintain a minimum amount of total 

18 capital based on the aggregate on-balance sheet 

19 assets of the bank and shall be 5 percent. 

20 ‘‘(B) TREATMENT OF STOCK AND RE21 TAINED EARNINGS.—In determining compliance 

22 with the minimum leverage ratio established 

23 under subparagraph (A), the paid-in value of 

24 the outstanding Class B stock shall be multi25 plied by 1.5, the paid-in value of the out26 standing Class C stock and the amount of reVerDate Mar 15 2010 15:06 Jun 10, 2011 Jkt 223001 PO 00000 Frm 00209 Fmt 6652 Sfmt 6201 E:\ERIC\H10.PCS H10

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1 tained earnings shall be multiplied by 2.0, and 

2 such higher amounts shall be deemed to be cap3 ital for purposes of meeting the 5 percent min4 imum leverage ratio. 

5 ‘‘(3) RISK-BASED CAPITAL STANDARDS.— 

6 ‘‘(A) IN GENERAL.—Each Federal home 

7 loan bank shall maintain permanent capital in 

8 an amount that is sufficient, as determined in 

9 accordance with the regulations of the Finance 

10 Board, to meet— 

11 ‘‘(i) the credit risk to which the Fed12 eral home loan bank is subject; and 

13 ‘‘(ii) the market risk, including inter14 est rate risk, to which the Federal home 

15 loan bank is subject, based on a stress test 

16 established by the Finance Board that rig17 orously tests for changes in market vari18 ables, including changes in interest rates, 

19 rate volatility, and changes in the shape of 

20 the yield curve. 

21 ‘‘(B) CONSIDERATION OF OTHER RISK22 BASED STANDARDS.—In establishing the risk23 based standard under subparagraph (A)(ii), the 

24 Finance Board shall take due consideration of 

25 any risk-based capital test established pursuant 


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1 to section 1361 of the Federal Housing Enter2 prises Financial Safety and Soundness Act of 

3 1992 (12 U.S.C. 4611) for the enterprises (as 

4 defined in that Act), with such modifications as 

5 the Finance Board determines to be appro6 priate to reflect differences in operations be7 tween the Federal home loan banks and those 

8 enterprises. 

9 ‘‘(4) OTHER REGULATORY REQUIREMENTS.— 

10 The regulations issued by the Finance Board under 

11 paragraph (1) shall— 

12 ‘‘(A) permit each Federal home loan bank 

13 to issue, with such rights, terms, and pref14 erences, not inconsistent with this Act and the 

15 regulations issued hereunder, as the board of 

16 directors of that bank may approve, any one or 

17 more of— 

18 ‘‘(i) Class A stock, which shall be re19 deemable in cash and at par 6 months fol20 lowing submission by a member of a writ21 ten notice of its intent to redeem such 

22 shares; 

23 ‘‘(ii) Class B stock, which shall be re24 deemable in cash and at par 5 years fol25 lowing submission by a member of a writVerDate Mar 15 2010 15:06 Jun 10, 2011 Jkt 223001 PO 00000 Frm 00211 Fmt 6652 Sfmt 6201 E:\ERIC\H10.PCS H10

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1 ten notice of its intent to redeem such 

2 shares; and 

3 ‘‘(iii) Class C stock, which shall be 

4 nonredeemable; 

5 ‘‘(B) provide that the stock of a Federal 

6 home loan bank may be issued to and held by 

7 only members of the bank, and that a bank 

8 may not issue any stock other than as provided 

9 in this section; 

10 ‘‘(C) prescribe the manner in which stock 

11 of a Federal home loan bank may be sold, 

12 transferred, redeemed, or repurchased; and 

13 ‘‘(D) provide the manner of disposition of 

14 outstanding stock held by, and the liquidation 

15 of any claims of the Federal home loan bank 

16 against, an institution that ceases to be a mem17 ber of the bank, through merger or otherwise, 

18 or that provides notice of intention to withdraw 

19 from membership in the bank. 

20 ‘‘(5) DEFINITIONS OF CAPITAL.—For purposes 

21 of determining compliance with the capital standards 

22 established under this subsection— 

23 ‘‘(A) permanent capital of a Federal home 

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1 cordance with generally accepted accounting 

2 principles)— 

3 ‘‘(i) the amounts paid for the Class C 

4 stock and any other nonredeemable stock 

5 approved by the Finance Board; 

6 ‘‘(ii) the amounts paid for the Class B 

7 stock, in an amount not to exceed 1 per8 cent of the total assets of the bank; and 

9 ‘‘(iii) the retained earnings of the 

10 bank; and 

11 ‘‘(B) total capital of a Federal home loan 

12 bank shall include— 

13 ‘‘(i) permanent capital; 

14 ‘‘(ii) the amounts paid for the Class A 

15 stock, Class B stock (excluding any 

16 amount treated as permanent capital 

17 under subparagraph (5)(A)(ii)), or any 

18 other class of redeemable stock approved 

19 by the Finance Board; 

20 ‘‘(iii) consistent with generally accept21 ed accounting principles, and subject to the 

22 regulation of the Finance Board, a general 

23 allowance for losses, which may not include 

24 any reserves or allowances made or held 

25 against specific assets; and 


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1 ‘‘(iv) any other amounts from sources 

2 available to absorb losses incurred by the 

3 bank that the Finance Board determines 

4 by regulation to be appropriate to include 

5 in determining total capital. 

6 ‘‘(6) TRANSITION PERIOD.—Notwithstanding 

7 any other provisions of this Act, the requirements 

8 relating to purchase and retention of capital stock of 

9 a Federal home loan bank by any member thereof in 

10 effect on the day before the date of the enactment 

11 of the Federal Home Loan Bank System Moderniza12 tion Act of 1999, shall continue in effect with re13 spect to each Federal home loan bank until the reg14 ulations required by this subsection have taken ef15 fect and the capital structure plan required by sub16 section (b) has been approved by the Finance Board 

17 and implemented by such bank. 

18 ‘‘(b) CAPITAL STRUCTURE PLAN.— 

19 ‘‘(1) APPROVAL OF PLANS.—Not later than 270 

20 days after the date of publication by the Finance 

21 Board of final regulations in accordance with sub22 section (a), the board of directors of each Federal 

23 home loan bank shall submit for Finance Board ap24 proval a plan establishing and implementing a cap25 ital structure for such bank that— 


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1 ‘‘(A) the board of directors determines is 

2 best suited for the condition and operation of 

3 the bank and the interests of the members of 

4 the bank; 

5 ‘‘(B) meets the requirements of subsection 

6 (c); and 

7 ‘‘(C) meets the minimum capital standards 

8 and requirements established under subsection 

9 (a) and other regulations prescribed by the Fi10 nance Board. 

11 ‘‘(2) APPROVAL OF MODIFICATIONS.—The 

12 board of directors of a Federal home loan bank shall 

13 submit to the Finance Board for approval any modi14 fications that the bank proposes to make to an ap15 proved capital structure plan. 

16 ‘‘(c) CONTENTS OF PLAN.—The capital structure 

17 plan of each Federal home loan bank shall contain provi18 sions addressing each of the following: 

19 ‘‘(1) MINIMUM INVESTMENT.— 

20 ‘‘(A) IN GENERAL.—Each capital structure 

21 plan of a Federal home loan bank shall require 

22 each member of the bank to maintain a min23 imum investment in the stock of the bank, the 

24 amount of which shall be determined in a man25 ner to be prescribed by the board of directors 


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1 of each bank and to be included as part of the 

2 plan. 

3 ‘‘(B) INVESTMENT ALTERNATIVES.— 

4 ‘‘(i) IN GENERAL.—In establishing the 

5 minimum investment required for each 

6 member under subparagraph (A), a Fed7 eral home loan bank may, in its discretion, 

8 include any one or more of the require9 ments referred to in clause (ii), or any 

10 other provisions approved by the Finance 

11 Board. 

12 ‘‘(ii) AUTHORIZED REQUIREMENTS.— 

13 A requirement is referred to in this clause 

14 if it is a requirement for— 

15 ‘‘(I) a stock purchase based on a 

16 percentage of the total assets of a 

17 member; or 

18 ‘‘(II) a stock purchase based on a 

19 percentage of the outstanding ad20 vances from the bank to the member. 

21 ‘‘(C) MINIMUM AMOUNT.—Each capital 

22 structure plan of a Federal home loan bank 

23 shall require that the minimum stock invest24 ment established for members shall be set at a 

25 level that is sufficient for the bank to meet the 


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1 minimum capital requirements established by 

2 the Finance Board under subsection (a). 

3 ‘‘(D) ADJUSTMENTS TO MINIMUM RE4 QUIRED INVESTMENT.—The capital structure 

5 plan of each Federal home loan bank shall im6 pose a continuing obligation on the board of di7 rectors of the bank to review and adjust the 

8 minimum investment required of each member 

9 of that bank, as necessary to ensure that the 

10 bank remains in compliance with applicable 

11 minimum capital levels established by the Fi12 nance Board, and shall require each member to 

13 comply promptly with any adjustments to the 

14 required minimum investment. 

15 ‘‘(2) TRANSITION RULE.— 

16 ‘‘(A) IN GENERAL.—The capital structure 

17 plan of each Federal home loan bank shall 

18 specify the date on which it shall take effect, 

19 and may provide for a transition period of not 

20 longer than 3 years to allow the bank to come 

21 into compliance with the capital requirements 

22 prescribed under subsection (a), and to allow 

23 any institution that was a member of the bank 

24 on the date of the enactment of the Financial 

25 Services Act of 1999, to come into compliance 


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1 with the minimum investment required pursu2 ant to the plan. 

3 ‘‘(B) INTERIM PURCHASE REQUIRE4 MENTS.—The capital structure plan of a Fed5 eral home loan bank may allow any member re6 ferred to in subparagraph (A) that would be re7 quired by the terms of the capital structure 

8 plan to increase its investment in the stock of 

9 the bank to do so in periodic installments dur10 ing the transition period. 

11 ‘‘(3) DISPOSITION OF SHARES.—The capital 

12 structure plan of a Federal home loan bank shall 

13 provide for the manner of disposition of any stock 

14 held by a member of that bank that terminates its 

15 membership or that provides notice of its intention 

16 to withdraw from membership in that bank. 

17 ‘‘(4) CLASSES OF STOCK.— 

18 ‘‘(A) IN GENERAL.—The capital structure 

19 plan of a Federal home loan bank shall afford 

20 each member of that bank the option of main21 taining its required investment in the bank 

22 through the purchase of any combination of 

23 classes of stock authorized by the board of di24 rectors of the bank and approved by the Fi25 nance Board in accordance with its regulations. 


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1 ‘‘(B) RIGHTS REQUIREMENT.—A Federal 

2 home loan bank shall include in its capital 

3 structure plan provisions establishing terms, 

4 rights, and preferences, including minimum in5 vestment, dividends, voting, and liquidation 

6 preferences of each class of stock issued by the 

7 bank, consistent with Finance Board regula8 tions and market requirements. 

9 ‘‘(C) REDUCED MINIMUM INVESTMENT.— 

10 The capital structure plan of a Federal home 

11 loan bank may provide for a reduced minimum 

12 stock investment for any member of that bank 

13 that elects to purchase Class B, Class C, or any 

14 other class of nonredeemable stock, in a manner 

15 that is consistent with meeting the minimum 

16 capital requirements of the bank, as established 

17 by the Finance Board. 

18 ‘‘(D) LIQUIDATION OF CLAIMS.—The cap19 ital structure plan of a Federal home loan bank 

20 shall provide for the liquidation in an orderly 

21 manner, as determined by the bank, of any 

22 claim of that bank against a member, including 

23 claims for any applicable prepayment fees or 

24 penalties resulting from prepayment of ad25 vances prior to stated maturity. 


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1 ‘‘(5) LIMITED TRANSFERABILITY OF STOCK.— 

2 The capital structure plan of a Federal home loan 

3 bank shall— 

4 ‘‘(A) provide that— 

5 ‘‘(i) any stock issued by that bank 

6 shall be available only to, held only by, and 

7 tradable only among members of that bank 

8 and between that bank and its members; 

9 and 

10 ‘‘(ii) a bank has no obligation to re11 purchase its outstanding Class C stock but 

12 may do so, provided it is consistent with 

13 Finance Board regulations and is at a 

14 price that is mutually agreeable to the 

15 bank and the member; and 

16 ‘‘(B) establish standards, criteria, and re17 quirements for the issuance, purchase, transfer, 

18 retirement, and redemption of stock issued by 

19 that bank. 

20 ‘‘(6) BANK REVIEW OF PLAN.—Before filing a 

21 capital structure plan with the Finance Board, each 

22 Federal home loan bank shall conduct a review of 

23 the plan by— 

24 ‘‘(A) an independent certified public ac25 countant, to ensure, to the extent possible, that 


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1 implementation of the plan would not result in 

2 any write-down of the redeemable bank stock 

3 investment of its members; and 

4 ‘‘(B) at least one major credit rating agen5 cy, to determine, to the extent possible, whether 

6 implementation of the plan would have any ma7 terial effect on the credit ratings of the bank. 

8 ‘‘(d) TERMINATION OF MEMBERSHIP.— 

9 ‘‘(1) VOLUNTARY WITHDRAWAL.—Any member 

10 may withdraw from a Federal home loan bank by 

11 providing written notice to the bank of its intent to 

12 do so. The applicable stock redemption notice peri13 ods shall commence upon receipt of the notice by the 

14 bank. Upon the expiration of the applicable notice 

15 period for each class of redeemable stock, the mem16 ber may surrender such stock to the bank, and shall 

17 be entitled to receive in cash the par value of the 

18 stock. During the applicable notice periods, the 

19 member shall be entitled to dividends and other 

20 membership rights commensurate with continuing 

21 stock ownership. 

22 ‘‘(2) INVOLUNTARY WITHDRAWAL.— 

23 ‘‘(A) IN GENERAL.—The board of directors 

24 of a Federal home loan bank may terminate the 


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1 membership of any institution if, subject to Fi2 nance Board regulations, it determines that— 

3 ‘‘(i) the member has failed to comply 

4 with a provision of this Act or any regula5 tion prescribed under this Act; or 

6 ‘‘(ii) the member has been determined 

7 to be insolvent, or otherwise subject to the 

8 appointment of a conservator, receiver, or 

9 other legal custodian, by a State or Fed10 eral authority with regulatory and super11 visory responsibility for the member. 

12 ‘‘(B) STOCK DISPOSITION.—An institution, 

13 the membership of which is terminated in ac14 cordance with subparagraph (A)— 

15 ‘‘(i) shall surrender redeemable stock 

16 to the Federal home loan bank, and shall 

17 receive in cash the par value of the stock, 

18 upon the expiration of the applicable notice 

19 period under subsection (a)(4)(A); 

20 ‘‘(ii) shall receive any dividends de21 clared on its redeemable stock, during the 

22 applicable notice period under subsection 

23 (a)(4)(A); and 


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1 ‘‘(iii) shall not be entitled to any other 

2 rights or privileges accorded to members 

3 after the date of the termination. 

4 ‘‘(C) COMMENCEMENT OF NOTICE PE5 RIOD.—With respect to an institution, the 

6 membership of which is terminated in accord7 ance with subparagraph (A), the applicable no8 tice period under subsection (a)(4) for each 

9 class of redeemable stock shall commence on 

10 the earlier of— 

11 ‘‘(i) the date of such termination; or 

12 ‘‘(ii) the date on which the member 

13 has provided notice of its intent to redeem 

14 such stock. 

15 ‘‘(3) LIQUIDATION OF INDEBTEDNESS.—Upon 

16 the termination of the membership of an institution 

17 for any reason, the outstanding indebtedness of the 

18 member to the bank shall be liquidated in an orderly 

19 manner, as determined by the bank and, upon the 

20 extinguishment of all such indebtedness, the bank 

21 shall return to the member all collateral pledged to 

22 secure the indebtedness. 

23 ‘‘(e) REDEMPTION OF EXCESS STOCK.— 

24 ‘‘(1) IN GENERAL.—A Federal home loan bank, 

25 in its sole discretion, may redeem or repurchase, as 


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1 appropriate, any shares of Class A or Class B stock 

2 issued by the bank and held by a member that are 

3 in excess of the minimum stock investment required 

4 of that member. 

5 ‘‘(2) EXCESS STOCK.—Shares of stock held by 

6 a member shall not be deemed to be ‘excess stock’ 

7 for purposes of this subsection by virtue of a mem8 ber’s submission of a notice of intent to withdraw 

9 from membership or termination of its membership 

10 in any other manner. 

11 ‘‘(3) PRIORITY.—A Federal home loan bank 

12 may not redeem any excess Class B stock prior to 

13 the end of the 5-year notice period, unless the mem14 ber has no Class A stock outstanding that could be 

15 redeemed as excess. 

16 ‘‘(f) IMPAIRMENT OF CAPITAL.—If the Finance 

17 Board or the board of directors of a Federal home loan 

18 bank determines that the bank has incurred or is likely 

19 to incur losses that result in or are expected to result in 

20 charges against the capital of the bank, the bank shall 

21 not redeem or repurchase any stock of the bank without 

22 the prior approval of the Finance Board while such 

23 charges are continuing or are expected to continue. In no 

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1 ital stock if, following the redemption, the bank would fail 

2 to satisfy any minimum capital requirement. 

3 ‘‘(g) REJOINING AFTER DIVESTITURE OF ALL

4 SHARES.— 

5 ‘‘(1) IN GENERAL.—Except as provided in para6 graph (2), and notwithstanding any other provision 

7 of this Act, an institution that divests all shares of 

8 stock in a Federal home loan bank may not, after 

9 such divestiture, acquire shares of any Federal home 

10 loan bank before the end of the 5-year period begin11 ning on the date of the completion of such divesti12 ture, unless the divestiture is a consequence of a 

13 transfer of membership on an uninterrupted basis 

14 between banks. 

15 ‘‘(2) EXCEPTION FOR WITHDRAWALS FROM

16 MEMBERSHIP BEFORE 1998.—Any institution that 

17 withdrew from membership in any Federal home 

18 loan bank before December 31, 1997, may acquire 

19 shares of a Federal home loan bank at any time 

20 after that date, subject to the approval of the Fi21 nance Board and the requirements of this Act. 

22 ‘‘(h) TREATMENT OF RETAINED EARNINGS.— 

23 ‘‘(1) IN GENERAL.—The holders of the Class C 

24 stock of a Federal home loan bank, and any other 

25 classes of nonredeemable stock approved by the FiVerDate Mar 15 2010 15:06 Jun 10, 2011 Jkt 223001 PO 00000 Frm 00225 Fmt 6652 Sfmt 6201 E:\ERIC\H10.PCS H10

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1 nance Board (to the extent provided in the terms 

2 thereof), shall own the retained earnings, surplus, 

3 undivided profits, and equity reserves, if any, of the 

4 bank. 

5 ‘‘(2) NO NONREDEEMABLE CLASSES OF

6 STOCK.—If a Federal home loan bank has no out7 standing Class C or other such nonredeemable stock, 

8 then the holders of any other classes of stock of the 

9 bank then outstanding shall have ownership in, and 

10 a private property right in, the retained earnings, 

11 surplus, undivided profits, and equity reserves, if 

12 any, of the bank. 

13 ‘‘(3) EXCEPTION.—Except as specifically pro14 vided in this section or through the declaration of a 

15 dividend or a capital distribution by a Federal home 

16 loan bank, or in the event of liquidation of the bank, 

17 a member shall have no right to withdraw or other18 wise receive distribution of any portion of the re19 tained earnings of the bank. 

20 ‘‘(4) LIMITATION.—A Federal home loan bank 

21 may not make any distribution of its retained earn22 ings unless, following such distribution, the bank 

23 would continue to meet all applicable capital require24 ments.’’. 


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1 Subtitle H—ATM Fee Reform 

2 SEC. 171. SHORT TITLE. 

3 This subtitle may be cited as the ‘‘ATM Fee Reform 

4 Act of 1999’’. 

5 SEC. 172. ELECTRONIC FUND TRANSFER FEE DISCLOSURES 

6 AT ANY HOST ATM. 

7 Section 904(d) of the Electronic Fund Transfer Act 

8 (15 U.S.C. 1693b(d)) is amended by adding at the end 

9 the following new paragraph: 

10 ‘‘(3) FEE DISCLOSURES AT AUTOMATED TELL11 ER MACHINES.— 

12 ‘‘(A) IN GENERAL.—The regulations pre13 scribed under paragraph (1) shall require any 

14 automated teller machine operator who imposes 

15 a fee on any consumer for providing host trans16 fer services to such consumer to provide notice 

17 in accordance with subparagraph (B) to the 

18 consumer (at the time the service is provided) 

19 of— 

20 ‘‘(i) the fact that a fee is imposed by 

21 such operator for providing the service; 

22 and 

23 ‘‘(ii) the amount of any such fee. 

24 ‘‘(B) NOTICE REQUIREMENTS.— 


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1 ‘‘(i) ON THE MACHINE.—The notice 

2 required under clause (i) of subparagraph 

3 (A) with respect to any fee described in 

4 such subparagraph shall be posted in a 

5 prominent and conspicuous location on or 

6 at the automated teller machine at which 

7 the electronic fund transfer is initiated by 

8 the consumer; and 

9 ‘‘(ii) ON THE SCREEN.—The notice 

10 required under clauses (i) and (ii) of sub11 paragraph (A) with respect to any fee de12 scribed in such subparagraph shall appear 

13 on the screen of the automated teller ma14 chine, or on a paper notice issued from 

15 such machine, after the transaction is initi16 ated and before the consumer is irrev17 ocably committed to completing the trans18 action. 

19 ‘‘(C) PROHIBITION ON FEES NOT PROP20 ERLY DISCLOSED AND EXPLICITLY ASSUMED BY

21 CONSUMER.—No fee may be imposed by any 

22 automated teller machine operator in connec23 tion with any electronic fund transfer initiated 

24 by a consumer for which a notice is required 

25 under subparagraph (A), unless— 


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1 ‘‘(i) the consumer receives such notice 

2 in accordance with subparagraph (B); and 

3 ‘‘(ii) the consumer elects to continue 

4 in the manner necessary to effect the 

5 transaction after receiving such notice. 

6 ‘‘(D) DEFINITIONS.—For purposes of this 

7 paragraph, the following definitions shall apply: 

8 ‘‘(i) ELECTRONIC FUND TRANSFER.— 

9 The term ‘electronic fund transfer’ in10 cludes a transaction which involves a bal11 ance inquiry initiated by a consumer in the 

12 same manner as an electronic fund trans13 fer, whether or not the consumer initiates 

14 a transfer of funds in the course of the 

15 transaction. 

16 ‘‘(ii) AUTOMATED TELLER MACHINE

17 OPERATOR.—The term ‘automated teller 

18 machine operator’ means any person 

19 who— 

20 ‘‘(I) operates an automated teller 

21 machine at which consumers initiate 

22 electronic fund transfers; and 

23 ‘‘(II) is not the financial institu24 tion which holds the account of such 


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1 consumer from which the transfer is 

2 made. 

3 ‘‘(iii) HOST TRANSFER SERVICES.— 

4 The term ‘host transfer services’ means 

5 any electronic fund transfer made by an 

6 automated teller machine operator in con7 nection with a transaction initiated by a 

8 consumer at an automated teller machine 

9 operated by such operator.’’. 

10 SEC. 173. DISCLOSURE OF POSSIBLE FEES TO CONSUMERS 

11 WHEN ATM CARD IS ISSUED. 

12 Section 905(a) of the Electronic Fund Transfer Act 

13 (15 U.S.C. 1693c(a)) is amended— 

14 (1) by striking ‘‘and’’ at the end of paragraph 

15 (8); 

16 (2) by striking the period at the end of para17 graph (9) and inserting ‘‘; and’’; and 

18 (3) by inserting after paragraph (9) the fol19 lowing new paragraph: 

20 ‘‘(10) a notice to the consumer that a fee may 

21 be imposed by— 

22 ‘‘(A) an automated teller machine operator 

23 (as defined in section 904(d)(3)(D)(ii)) if the 

24 consumer initiates a transfer from an auto25 mated teller machine which is not operated by 


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1 the person issuing the card or other means of 

2 access; and 

3 ‘‘(B) any national, regional, or local net4 work utilized to effect the transaction.’’. 

5 SEC. 174. FEASIBILITY STUDY. 

6 (a) IN GENERAL.—The Comptroller General of the 

7 United States shall conduct a study of the feasibility of 

8 requiring, in connection with any electronic fund transfer 

9 initiated by a consumer through the use of an automated 

10 teller machine— 

11 (1) a notice to be provided to the consumer be12 fore the consumer is irrevocably committed to com13 pleting the transaction, which clearly states the 

14 amount of any fee which will be imposed upon the 

15 consummation of the transaction by— 

16 (A) any automated teller machine operator 

17 (as defined in section 904(d)(3)(D)(ii) of the 

18 Electronic Fund Transfer Act) involved in the 

19 transaction; 

20 (B) the financial institution holding the ac21 count of the consumer; 

22 (C) any national, regional, or local network 

23 utilized to effect the transaction; and 

24 (D) any other party involved in the trans25 fer; and 


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1 (2) the consumer to elect to consummate the 

2 transaction after receiving the notice described in 

3 paragraph (1). 

4 (b) FACTORS TO BE CONSIDERED.—In conducting 

5 the study required under subsection (a) with regard to the 

6 notice requirement described in such subsection, the 

7 Comptroller General shall consider the following factors: 

8 (1) The availability of appropriate technology. 

9 (2) Implementation and operating costs. 

10 (3) The competitive impact any such notice re11 quirement would have on various sizes and types of 

12 institutions, if implemented. 

13 (4) The period of time which would be reason14 able for implementing any such notice requirement. 

15 (5) The extent to which consumers would ben16 efit from any such notice requirement. 

17 (6) Any other factor the Comptroller General 

18 determines to be appropriate in analyzing the feasi19 bility of imposing any such notice requirement. 

20 (c) REPORT TO THE CONGRESS.—Before the end of 

21 the 6-month period beginning on the date of the enact22 ment of this Act, the Comptroller General shall submit 

23 a report to the Congress containing— 


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1 (1) the findings and conclusions of the Comp2 troller General in connection with the study required 

3 under subsection (a); and 

4 (2) the recommendation of the Comptroller 

5 General with regard to the question of whether a no6 tice requirement described in subsection (a) should 

7 be implemented and, if so, how such requirement 

8 should be implemented. 

9 SEC. 175. NO LIABILITY IF POSTED NOTICES ARE DAM10 AGED. 

11 Section 910 of the Electronic Fund Transfer Act (15 

12 U.S.C 1693h) is amended by adding at the end the fol13 lowing new subsection: 

14 ‘‘(d) EXCEPTION FOR DAMAGED NOTICES.—If the 

15 notice required to be posted pursuant to section 

16 904(d)(3)(B)(i) by an automated teller machine operator 

17 has been posted by such operator in compliance with such 

18 section and the notice is subsequently removed, damaged, 

19 or altered by any person other than the operator of the 

20 automated teller machine, the operator shall have no li21 ability under this section for failure to comply with section 

22 904(d)(3)(B)(i).’’. 


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1 Subtitle I—Direct Activities of 

2 Banks 

3 SEC. 181. AUTHORITY OF NATIONAL BANKS TO UNDER4 WRITE CERTAIN MUNICIPAL BONDS. 

5 The paragraph designated the Seventh of section 

6 5136 of the Revised Statutes of the United States (12 

7 U.S.C. 24(7)) is amended by adding at the end the fol8 lowing new sentence: ‘‘In addition to the provisions in this 

9 paragraph for dealing in, underwriting or purchasing secu10 rities, the limitations and restrictions contained in this 

11 paragraph as to dealing in, underwriting, and purchasing 

12 investment securities for the national bank’s own account 

13 shall not apply to obligations (including limited obligation 

14 bonds, revenue bonds, and obligations that satisfy the re15 quirements of section 142(b)(1) of the Internal Revenue 

16 Code of 1986) issued by or on behalf of any State or polit17 ical subdivision of a State, including any municipal cor18 porate instrumentality of one or more States, or any pub19 lic agency or authority of any State or political subdivision 

20 of a State, if the national bank is well capitalized (as de21 fined in section 38 of the Federal Deposit Insurance 

22 Act).’’. 


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1 Subtitle J—Deposit Insurance 

2 Funds 

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

4 (a) STUDY REQUIRED.—The Board of Directors of 

5 the Federal Deposit Insurance Corporation shall conduct 

6 a study of the following issues with regard to the Bank 

7 Insurance Fund and the Savings Association Insurance 

8 Fund: 

9 (1) SAFETY AND SOUNDNESS.—The safety and 

10 soundness of the funds and the adequacy of the re11 serve requirements applicable to the funds in light 

12 of— 

13 (A) the size of the insured depository insti14 tutions which are resulting from mergers and 

15 consolidations since the effective date of the 

16 Riegle-Neal Interstate Banking and Branching 

17 Efficiency Act of 1994; and 

18 (B) the affiliation of insured depository in19 stitutions with other financial institutions pur20 suant to this Act and the amendments made by 

21 this Act. 

22 (2) CONCENTRATION LEVELS.—The concentra23 tion levels of the funds, taking into account the 

24 number of members of each fund and the geographic 

25 distribution of such members, and the extent to 


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1 which either fund is exposed to higher risks due to 

2 a regional concentration of members or an insuffi3 cient membership base relative to the size of member 

4 institutions. 

5 (3) MERGER ISSUES.—Issues relating to the 

6 planned merger of the funds, including the cost of 

7 merging the funds and the manner in which such 

8 costs will be distributed among the members of the 

9 respective funds. 

10 (b) REPORT REQUIRED.— 

11 (1) IN GENERAL.—Before the end of the 9- 

12 month period beginning on the date of the enact13 ment of this Act, the Board of Directors of the Fed14 eral Deposit Insurance Corporation shall submit a 

15 report to the Congress on the study conducted pur16 suant to subsection (a). 

17 (2) CONTENTS OF REPORT.—The report shall 

18 include— 

19 (A) detailed findings of the Board of Di20 rectors with regard to the issues described in 

21 subsection (a); 

22 (B) a description of the plans developed by 

23 the Board of Directors for merging the Bank 

24 Insurance Fund and the Savings Association 

25 Insurance Fund, including an estimate of the 


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1 amount of the cost of such merger which would 

2 be borne by Savings Association Insurance 

3 Fund members; and 

4 (C) such recommendations for legislative 

5 and administrative action as the Board of Di6 rectors determines to be necessary or appro7 priate to preserve the safety and soundness of 

8 the deposit insurance funds, reduce the risks to 

9 such funds, provide for an efficient merger of 

10 such funds, and for other purposes. 

11 (c) DEFINITIONS.—For purposes of this section, the 

12 following definitions shall apply: 

13 (1) INSURED DEPOSITORY INSTITUTION.—The 

14 term ‘‘insured depository institution’’ has the same 

15 meaning as in section 3(c) of the Federal Deposit 

16 Insurance Act. 

17 (2) BIF AND SAIF MEMBERS.—The terms 

18 ‘‘Bank Insurance Fund member’’ and ‘‘Savings As19 sociation Insurance Fund member’’ have the same 

20 meanings as in section 7(l) of the Federal Deposit 

21 Insurance Act. 


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1 SEC. 187. ELIMINATION OF SAIF AND DIF SPECIAL RE2 SERVES. 

3 (a) SAIF SPECIAL RESERVES.—Section 11(a)(6) of 

4 the Federal Deposit Insurance Act (12 U.S.C. 1821(a)(6)) 

5 is amended by striking subparagraph (L). 

6 (b) DIF SPECIAL RESERVES.—Section 2704 of the 

7 Deposit Insurance Funds Act of 1996 (12 U.S.C. 1821 

8 note) is amended— 

9 (1) by striking subsection (b); and 

10 (2) in subsection (d)— 

11 (A) by striking paragraph (4); 

12 (B) in paragraph (6)(C)(i), by striking 

13 ‘‘(6) and (7)’’ and inserting ‘‘(5), (6), and (7)’’; 

14 and 

15 (C) in paragraph (6)(C), by striking clause 

16 (ii) and inserting the following: 

17 ‘‘(ii) by redesignating paragraph (8) 

18 as paragraph (5).’’. 

19 Subtitle K—Miscellaneous 

20 Provisions 

21 SEC. 191. TERMINATION OF ‘‘KNOW YOUR CUSTOMER’’ REG22 ULATIONS. 

23 (a) IN GENERAL.—None of the proposed regulations 

24 described in subsection (b) may be published in final form 

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1 tive before the date of the enactment of this Act, such 

2 regulation shall cease to be effective as of such date. 

3 (b) PROPOSED REGULATIONS DESCRIBED.—The 

4 proposed regulations referred to in subsection (a) are as 

5 follows: 

6 (1) The regulation proposed by the Comptroller 

7 of the Currency to amend part 21 of title 12 of the 

8 Code of Federal Regulations, as published in the 

9 Federal Register on December 7, 1998. 

10 (2) The regulation proposed by the Director of 

11 the Office of Thrift Supervision to amend part 563 

12 of title 12 of the Code of Federal Regulations, as 

13 published in the Federal Register on December 7, 

14 1998. 

15 (3) The regulation proposed by the Board of 

16 Governors of the Federal Reserve System to amend 

17 parts 208, 211, and 225 of title 12 of the Code of 

18 Federal Regulations, as published in the Federal 

19 Register on December 7, 1998. 

20 (4) The regulation proposed by the Federal De21 posit Insurance Corporation to amend part 326 of 

22 title 12 of the Code of Federal Regulations, as pub23 lished in the Federal Register on December 7, 1998. 


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1 SEC. 192. STUDY AND REPORT ON FEDERAL ELECTRONIC 

2 FUND TRANSFERS. 

3 (a) STUDY.—The Secretary of the Treasury shall 

4 conduct a feasibility study to determine— 

5 (1) whether all electronic payments issued by 

6 Federal agencies could be routed through the Re7 gional Finance Centers of the Department of the 

8 Treasury for verification and reconciliation; 

9 (2) whether all electronic payments made by the 

10 Federal Government could be subjected to the same 

11 level of reconciliation as United States Treasury 

12 checks, including matching each payment issued 

13 with each corresponding deposit at financial institu14 tions; 

15 (3) whether the appropriate computer security 

16 controls are in place in order to ensure the integrity 

17 of electronic payments; 

18 (4) the estimated costs of implementing, if so 

19 recommended, the processes and controls described 

20 in paragraphs (1), (2), and (3); and 

21 (5) a possible timetable for implementing those 

22 processes if so recommended. 

23 (b) REPORT TO CONGRESS.—Not later than October 

24 1, 2000, the Secretary of the Treasury shall submit a re25 port to Congress containing the results of the study re26 quired by subsection (a). 


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1 (c) DEFINITION.—For purposes of this section, the 

2 term ‘‘electronic payment’’ means any transfer of funds, 

3 other than a transaction originated by check, draft, or 

4 similar paper instrument, which is initiated through an 

5 electronic terminal, telephonic instrument, or computer or 

6 magnetic tapes so as to order, instruct, or authorize a 

7 debit or credit to a financial account. 

8 SEC. 193. GENERAL ACCOUNTING OFFICE STUDY OF CON9 FLICTS OF INTEREST 

10 (a) STUDY REQUIRED.—The Comptroller General of 

11 the United States shall conduct a study analyzing the con12 flict of interest faced by the Board of Governors of the 

13 Federal Reserve System between its role as a primary reg14 ulator of the banking industry and its role as a vendor 

15 of services to the banking and financial services industry. 

16 (b) SPECIFIC CONFLICT REQUIRED TO BE AD17 DRESSED.—In the course of the study required under sub18 section (a), the Comptroller General shall address the con19 flict of interest faced by the Board of Governors of the 

20 Federal Reserve System between the role of the Board as 

21 a regulator of the payment system, generally, and its par22 ticipation in the payment system as a competitor with pri23 vate entities who are providing payment services. 

24 (c) REPORT TO CONGRESS.—Before the end of the 

25 1-year period beginning on the date of the enactment of 


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1 this Act, the Comptroller General shall submit a report 

2 to the Congress containing the findings and conclusions 

3 of the Comptroller General in connection with the study 

4 required under this section, together with such rec5 ommendations for such legislative or administrative ac6 tions as the Comptroller General may determine to be ap7 propriate, including recommendations for resolving any 

8 such conflict of interest. 

9 SEC. 194. STUDY OF COST OF ALL FEDERAL BANKING REG10 ULATIONS. 

11 (a) IN GENERAL.—In accordance with the finding in 

12 the Board of Governors of the Federal Reserve System 

13 Staff Study Numbered 171 (April, 1998) that ‘‘Further 

14 research covering more and different types of regulations 

15 and regulatory requirements is clearly needed to make in16 formed decisions about regulations’’, the Board of Gov17 ernors of the Federal Reserve System, in consultation with 

18 the other Federal banking agencies (as defined in section 

19 3 of the Federal Deposit Insurance Act) shall conduct a 

20 comprehensive study of the total annual costs and benefits 

21 of all Federal financial regulations and regulatory require22 ments applicable to banks. 

23 (b) REPORT REQUIRED.—Before the end of the 2- 

24 year period beginning on the date of the enactment of this 

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1 tem shall submit a comprehensive report to the Congress 

2 containing the findings and conclusions of the Board in 

3 connection with the study required under subsection (a) 

4 and such recommendations for legislative and administra5 tive action as the Board may determine to be appropriate. 

6 SEC. 195. STUDY AND REPORT ON ADAPTING EXISTING 

7 LEGISLATIVE REQUIREMENTS TO ONLINE 

8 BANKING AND LENDING. 

9 (a) STUDY REQUIRED.—The Federal banking agen10 cies shall conduct a study of banking regulations regard11 ing the delivery of financial services, including those regu12 lations that may assume that there will be person-to-per13 son contact during the course of a financial services trans14 action, and report their recommendations on adapting 

15 those existing requirements to online banking and lending. 

16 (b) REPORT REQUIRED.—Within 1 year of the date 

17 of the enactment of this Act, the Federal banking agencies 

18 shall submit a report to the Congress on the findings and 

19 conclusions of the agencies with respect to the study re20 quired under subsection (a), together with such rec21 ommendations for legislative or regulatory action as the 

22 agencies may determine to be appropriate. 

23 (c) DEFINITION.—For purposes of this section, the 

24 term ‘‘Federal banking agencies’’ means each Federal 


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1 banking agency (as defined in section 3(z) of the Federal 

2 Deposit Insurance Act). 

3 SEC. 196. REGULATION OF UNINSURED STATE MEMBER 

4 BANKS. 

5 Section 9 of the Federal Reserve Act (12 U.S.C. 321 

6 et seq.) is amended by adding at the end the following 

7 new paragraph: 

8 ‘‘(24) ENFORCEMENT AUTHORITY OVER UNIN9 SURED STATE MEMBER BANKS.—Section 3(u) of the 

10 Federal Deposit Insurance Act, subsections (j) and 

11 (k) of section 7 of such Act, and subsections (b) 

12 through (n), (s), (u), and (v) of section 8 of such 

13 Act shall apply to an uninsured State member bank 

14 in the same manner and to the same extent such 

15 provisions apply to an insured State member bank 

16 and any reference in any such provision to ‘insured 

17 depository institution’ shall be deemed to be a ref18 erence to ‘uninsured State member bank’ for pur19 poses of this paragraph.’’. 

20 SEC. 197. CLARIFICATION OF SOURCE OF STRENGTH DOC21 TRINE. 

22 Section 18 of the Federal Deposit Insurance Act (21 

23 U.S.C. 1828) is amended by adding at the end the fol24 lowing new subsection: 

25 ‘‘(t) LIMITATION ON CLAIMS.— 


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1 ‘‘(1) IN GENERAL.—Notwithstanding any other 

2 provision of law other than paragraph (2), no person 

3 shall have any claim for monetary damages or re4 turn of assets or other property against any Federal 

5 banking agency (including in its capacity as conser6 vator or receiver) relating to the transfer of money, 

7 assets, or other property to increase the capital of 

8 an insured depository institution by any depository 

9 institution holding company or controlling share10 holder for such depository institution, or any affil11 iate or subsidiary of such depository institution, if at 

12 the time of the transfer— 

13 ‘‘(A) the insured depository institution is 

14 subject to any direction issued in writing by a 

15 Federal banking agency to increase its capital; 

16 ‘‘(B) the depository institution is under17 capitalized, significantly undercapitalized, or 

18 critically undercapitalized (as defined in section 

19 38 of this Act); and 

20 ‘‘(C) for that portion of the transfer that 

21 is made by an entity covered by section 5(g) of 

22 the Bank Holding Company Act of 1956 or sec23 tion 45 of this Act, the Federal banking agency 

24 has followed the procedure set forth in such 

25 section. 


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1 ‘‘(2) EXCEPTION.—No provision of this sub2 section shall be construed as limiting— 

3 ‘‘(A) the right of an insured depository in4 stitution, a depository institution holding com5 pany, or any other agency or person to seek di6 rect review of an order or directive issued by a 

7 Federal banking agency under this Act, the 

8 Bank Holding Company Act of 1956, the Na9 tional Bank Receivership Act, the Bank Con10 servation Act, or the Home Owners’ Loan Act; 

11 ‘‘(B) the rights of any party to a contract 

12 pursuant to section 11(e) of this Act; or 

13 ‘‘(C) the rights of any party to a contract 

14 with a depository institution holding company 

15 or a subsidiary of a depository institution hold16 ing company (other than an insured depository 

17 institution).’’. 

18 SEC. 198. INTEREST RATES AND OTHER CHARGES AT 

19 INTERSTATE BRANCHES. 

20 Section 44 of the Federal Deposit Insurance Act (12 

21 U.S.C. 1831u) is amended— 

22 (1) by redesignating subsection (f) as sub23 section (g); and 

24 (2) by inserting after subsection (e) the fol25 lowing: 


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1 ‘‘(f) APPLICABLE RATE AND OTHER CHARGE LIMI2 TATIONS.— 

3 ‘‘(1) IN GENERAL.—Except as provided for in 

4 paragraph (3), upon the establishment of a branch 

5 of any insured depository institution in a host State 

6 under this section, the maximum interest rate or 

7 amount of interest, discount points, finance charges, 

8 or other similar charges that may be charged, taken, 

9 received, or reserved from time to time in any loan 

10 or discount made or upon any note, bill of exchange, 

11 financing transaction, or other evidence of debt by 

12 any insured depository institution in such State shall 

13 be equal to not more than the greater of— 

14 ‘‘(A) the maximum interest rate or amount 

15 of interest, discount points, finance charges, or 

16 other similar charges that may be charged, 

17 taken, received, or reserved in a similar trans18 action under the constitution, statutory, or 

19 other lows of the home State of the insured de20 pository institution establishing any such 

21 branch, without reference to this section, as 

22 such maximum interest rate or amount of inter23 est may change from time to time; or 

24 ‘‘(B) the maximum rate or amount of in25 terest, discount points, finance charges, or 


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1 other similar charges that may be charged, 

2 taken, received, or reserved in a similar trans3 action by an insured depository institution 

4 under the constitution, statutory, or other laws 

5 of the host State, without reference to this sec6 tion. 

7 ‘‘(2) PREEMPTION.—The limitations established 

8 under paragraph (1) shall apply only in any State 

9 that has a constitutional provision that sets a max10 imum lawful rate of interest on any contract at not 

11 more than 5 percent per annum above the Federal 

12 Reserve Discount Rate or 90-day commercial paper 

13 in effect in the Federal Reserve Bank in the Federal 

14 Reserve District in which the State is located. 

15 ‘‘(3) RULE OF CONSTRUCTION.—No provision 

16 of this subsection shall be construed as superseding 

17 section 501 of the Depository Institutions Deregula18 tion and Monetary Control Act of 1980. 

19 SEC. 198A. INTERSTATE BRANCHES AND AGENCIES OF FOR20 EIGN BANKS. 

21 Section 5(a)(7) of the International Banking Act of 

22 1978 (12 U.S.C. 3103(a)(7)), is amended to read as fol23 lows: 

24 ‘‘(7) ADDITIONAL AUTHORITY FOR INTERSTATE

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1 GRADES OF CERTAIN FOREIGN BANK AGENCIES AND

2 BRANCHES.—Notwithstanding paragraphs (1) and 

3 (2), a foreign bank may— 

4 ‘‘(A) with the approval of the Board and 

5 the Comptroller of the Currency, establish and 

6 operate a Federal branch or Federal agency or, 

7 with the approval of the Board and the appro8 priate State bank supervisor, a State branch or 

9 State agency in any State outside the foreign 

10 bank’s home State if— 

11 ‘‘(i) the establishment and operation 

12 of such branch or agency is permitted by 

13 the State in which the branch or agency is 

14 to be established; and 

15 ‘‘(ii) in the case of a Federal or State 

16 branch, the branch receives only such de17 posits as would be permitted for a corpora18 tion organized under section 25A of the 

19 Federal Reserve Act (12 U.S.C. 611 et 

20 seq.); or 

21 ‘‘(B) with the approval of the Board and 

22 the relevant licensing authority (the Comp23 troller in the case of a Federal branch or the 

24 appropriate State supervisor in the case of a 

25 State branch), upgrade an agency, or a branch 


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1 of the type referred to in subparagraph (A)(ii), 

2 located in a State outside the foreign bank’s 

3 home State, into a Federal or State branch if— 

4 ‘‘(i) the establishment and operation 

5 of such branch is permitted by such State; 

6 and 

7 ‘‘(ii) such agency or branch— 

8 ‘‘(I) was in operation in such 

9 State on the day before September 29, 

10 1994; or 

11 ‘‘(II) has been in operation in 

12 such State for a period of time that 

13 meets the State’s minimum age re14 quirement permitted under section 

15 44(a)(5) of the Federal Deposit Insur16 ance Act.’’. 

17 SEC. 198B. FAIR TREATMENT OF WOMEN BY FINANCIAL AD18 VISERS. 

19 (a) FINDINGS.—The Congress finds as follows: 

20 (1) Women’s stature in society has risen consid21 erably, as they are now able to vote, own property, 

22 and pursue independent careers, and are granted 

23 equal protection under the law. 

24 (2) Women are at least as fiscally responsible 

25 as men, and more than half of all women have sole 


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1 responsibility for balancing the family checkbook and 

2 paying the bills. 

3 (3) Estate planners, trust officers, investment 

4 advisers, and other financial planners and advisers 

5 still encourage the unjust and outdated practice of 

6 leaving assets in trust for the category of wives and 

7 daughters, along with senile parents, minors, and 

8 mentally incompetent children. 

9 (4) Estate planners, trust officers, investment 

10 advisers, and other financial planners and advisers 

11 still use sales themes and tactics detrimental to 

12 women by stereotyping women as uncomfortable 

13 handling money and needing protection from their 

14 own possible errors of judgment and ‘‘fortune hunt15 ers’’. 

16 (b) SENSE OF THE CONGRESS.—It is the sense of 

17 the Congress that estate planners, trust officers, invest18 ment advisers, and other financial planners and advisers 

19 should— 

20 (1) eliminate examples in their training mate21 rials which portray women as incapable and foolish; 

22 and 

23 (2) develop fairer and more balanced presen24 tations that eliminate outmoded and stereotypical 


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1 examples which lead clients to take actions that are 

2 financially detrimental to their wives and daughters. 

3 Subtitle L—Effective Date of Title 

4 SEC. 199. EFFECTIVE DATE. 

5 Except with regard to any subtitle or other provision 

6 of this title for which a specific effective date is provided, 

7 this title and the amendments made by this title shall take 

8 effect at the end of the 180-day period beginning on the 

9 date of the enactment of this Act. 

10 TITLE II—FUNCTIONAL 

11 REGULATION 

12 Subtitle A—Brokers and Dealers 

13 SEC. 201. DEFINITION OF BROKER. 

14 Section 3(a)(4) of the Securities Exchange Act of 

15 1934 (15 U.S.C. 78c(a)(4)) is amended to read as follows: 

16 ‘‘(4) BROKER.— 

17 ‘‘(A) IN GENERAL.—The term ‘broker’ 

18 means any person engaged in the business of 

19 effecting transactions in securities for the ac20 count of others. 

21 ‘‘(B) EXCEPTION FOR CERTAIN BANK AC22 TIVITIES.—A bank shall not be considered to be 

23 a broker because the bank engages in any one 

24 or more of the following activities under the 

25 conditions described: 


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1 ‘‘(i) THIRD PARTY BROKERAGE AR2 RANGEMENTS.—The bank enters into a 

3 contractual or other written arrangement 

4 with a broker or dealer registered under 

5 this title under which the broker or dealer 

6 offers brokerage services on or off the 

7 premises of the bank if— 

8 ‘‘(I) such broker or dealer is 

9 clearly identified as the person per10 forming the brokerage services; 

11 ‘‘(II) the broker or dealer per12 forms brokerage services in an area 

13 that is clearly marked and, to the ex14 tent practicable, physically separate 

15 from the routine deposit-taking activi16 ties of the bank; 

17 ‘‘(III) any materials used by the 

18 bank to advertise or promote generally 

19 the availability of brokerage services 

20 under the arrangement clearly indi21 cate that the brokerage services are 

22 being provided by the broker or dealer 

23 and not by the bank; 

24 ‘‘(IV) any materials used by the 

25 bank to advertise or promote generally 


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1 the availability of brokerage services 

2 under the arrangement are in compli3 ance with the Federal securities laws 

4 before distribution; 

5 ‘‘(V) bank employees (other than 

6 associated persons of a broker or deal7 er who are qualified pursuant to the 

8 rules of a self-regulatory organization) 

9 perform only clerical or ministerial 

10 functions in connection with broker11 age transactions including scheduling 

12 appointments with the associated per13 sons of a broker or dealer, except that 

14 bank employees may forward cus15 tomer funds or securities and may de16 scribe in general terms the types of 

17 investment vehicles available from the 

18 bank and the broker or dealer under 

19 the arrangement; 

20 ‘‘(VI) bank employees do not re21 ceive incentive compensation for any 

22 brokerage transaction unless such em23 ployees are associated persons of a 

24 broker or dealer and are qualified 

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1 latory organization, except that the 

2 bank employees may receive com3 pensation for the referral of any cus4 tomer if the compensation is a nomi5 nal one-time cash fee of a fixed dollar 

6 amount and the payment of the fee is 

7 not contingent on whether the referral 

8 results in a transaction; 

9 ‘‘(VII) such services are provided 

10 by the broker or dealer on a basis in 

11 which all customers which receive any 

12 services are fully disclosed to the 

13 broker or dealer; 

14 ‘‘(VIII) the bank does not carry 

15 a securities account of the customer 

16 except as permitted under clause (ii) 

17 or (viii) of this subparagraph; and 

18 ‘‘(IX) the bank, broker, or dealer 

19 informs each customer that the bro20 kerage services are provided by the 

21 broker or dealer and not by the bank 

22 and that the securities are not depos23 its or other obligations of the bank, 

24 are not guaranteed by the bank, and 


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1 are not insured by the Federal De2 posit Insurance Corporation. 

3 ‘‘(ii) TRUST ACTIVITIES.—The bank 

4 effects transactions in a trustee or fidu5 ciary capacity in its trust department, or 

6 another department where the trust or fi7 duciary activity is regularly examined by 

8 bank examiners under the same standards 

9 and in the same way as such activities are 

10 examined in the trust department, and— 

11 ‘‘(I) is chiefly compensated for 

12 such transactions, consistent with fi13 duciary principles and standards, on 

14 the basis of an administration or an15 nual fee (payable on a monthly, quar16 terly, or other basis), a percentage of 

17 assets under management, or a flat or 

18 capped per order processing fee equal 

19 to not more than the cost incurred by 

20 the bank in connection with executing 

21 securities transactions for trustee and 

22 fiduciary customers, or any combina23 tion of such fees; and 

24 ‘‘(II) does not solicit brokerage 

25 business, other than by advertising 


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1 that it effects transactions in securi2 ties in conjunction with advertising its 

3 other trust activities. 

4 ‘‘(iii) PERMISSIBLE SECURITIES

5 TRANSACTIONS.—The bank effects trans6 actions in— 

7 ‘‘(I) commercial paper, bankers 

8 acceptances, or commercial bills; 

9 ‘‘(II) exempted securities; 

10 ‘‘(III) qualified Canadian govern11 ment obligations as defined in section 

12 5136 of the Revised Statutes, in con13 formity with section 15C of this title 

14 and the rules and regulations there15 under, or obligations of the North 

16 American Development Bank; or 

17 ‘‘(IV) any standardized, credit 

18 enhanced debt security issued by a 

19 foreign government pursuant to the 

20 March 1989 plan of then Secretary of 

21 the Treasury Brady, used by such for22 eign government to retire outstanding 

23 commercial bank loans. 

24 ‘‘(iv) CERTAIN STOCK PURCHASE

25 PLANS.— 


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1 ‘‘(I) EMPLOYEE BENEFIT

2 PLANS.—The bank effects trans3 actions, as a registered transfer agent 

4 (including as a registrar of stocks), in 

5 the securities of an issuer as part of 

6 any pension, retirement, profit-shar7 ing, bonus, thrift, savings, incentive, 

8 or other similar benefit plan for the 

9 employees of that issuer or its affili10 ates (as defined in section 2 of the 

11 Bank Holding Company Act of 1956), 

12 if— 

13 ‘‘(aa) the bank does not so14 licit transactions or provide in15 vestment advice with respect to 

16 the purchase or sale of securities 

17 in connection with the plan; and 

18 ‘‘(bb) the bank’s compensa19 tion for such plan or program 

20 consists chiefly of administration 

21 fees, or flat or capped per order 

22 processing fees, or both. 

23 ‘‘(II) DIVIDEND REINVESTMENT

24 PLANS.—The bank effects trans25 actions, as a registered transfer agent 


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1 (including as a registrar of stocks), in 

2 the securities of an issuer as part of 

3 that issuer’s dividend reinvestment 

4 plan, if— 

5 ‘‘(aa) the bank does not so6 licit transactions or provide in7 vestment advice with respect to 

8 the purchase or sale of securities 

9 in connection with the plan; 

10 ‘‘(bb) the bank does not net 

11 shareholders’ buy and sell orders, 

12 other than for programs for odd13 lot holders or plans registered 

14 with the Commission; and 

15 ‘‘(cc) the bank’s compensa16 tion for such plan or program 

17 consists chiefly of administration 

18 fees, or flat or capped per order 

19 processing fees, or both. 

20 ‘‘(III) ISSUER PLANS.—The bank 

21 effects transactions, as a registered 

22 transfer agent (including as a reg23 istrar of stocks), in the securities of 

24 an issuer as part of that issuer’s plan 


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1 for the purchase or sale of that 

2 issuer’s shares, if— 

3 ‘‘(aa) the bank does not so4 licit transactions or provide in5 vestment advice with respect to 

6 the purchase or sale of securities 

7 in connection with the plan or 

8 program; 

9 ‘‘(bb) the bank does not net 

10 shareholders’ buy and sell orders, 

11 other than for programs for odd12 lot holders or plans registered 

13 with the Commission; and 

14 ‘‘(cc) the bank’s compensa15 tion for such plan or program 

16 consists chiefly of administration 

17 fees, or flat or capped per order 

18 processing fees, or both. 

19 ‘‘(IV) PERMISSIBLE DELIVERY

20 OF MATERIALS.—The exception to 

21 being considered a broker for a bank 

22 engaged in activities described in sub23 clauses (I), (II), and (III) will not be 

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1 ployees of the issuer, shareholders of 

2 the issuer, or members of affinity 

3 groups of the issuer, so long as such 

4 materials are— 

5 ‘‘(aa) comparable in scope or 

6 nature to that permitted by the 

7 Commission as of the date of the 

8 enactment of the Financial Serv9 ices Act of 1999; or 

10 ‘‘(bb) otherwise permitted by 

11 the Commission. 

12 ‘‘(v) SWEEP ACCOUNTS.—The bank 

13 effects transactions as part of a program 

14 for the investment or reinvestment of de15 posit funds into any no-load, open-end 

16 management investment company reg17 istered under the Investment Company Act 

18 of 1940 that holds itself out as a money 

19 market fund. 

20 ‘‘(vi) AFFILIATE TRANSACTIONS.— 

21 The bank effects transactions for the ac22 count of any affiliate (as defined in section 

23 2 of the Bank Holding Company Act of 

24 1956) of the bank other than— 


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1 ‘‘(I) a registered broker or deal2 er; or 

3 ‘‘(II) an affiliate that is engaged 

4 in merchant banking, as described in 

5 section 6(c)(3)(H) of the Bank Hold6 ing Company Act of 1956. 

7 ‘‘(vii) PRIVATE SECURITIES OFFER8 INGS.—The bank— 

9 ‘‘(I) effects sales as part of a pri10 mary offering of securities not involv11 ing a public offering, pursuant to sec12 tion 3(b), 4(2), or 4(6) of the Securi13 ties Act of 1933 or the rules and reg14 ulations issued thereunder; 

15 ‘‘(II) at any time after the date 

16 that is 1 year after the date of the en17 actment of the Financial Services Act 

18 of 1999, is not affiliated with a broker 

19 or dealer that has been registered for 

20 more than 1 year in accordance with 

21 this Act, and engages in dealing, mar22 ket making, or underwriting activities, 

23 other than with respect to exempted 

24 securities; and 


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1 ‘‘(III) effects transactions exclu2 sively with qualified investors. 

3 ‘‘(viii) SAFEKEEPING AND CUSTODY

4 ACTIVITIES.— 

5 ‘‘(I) IN GENERAL.—The bank, as 

6 part of customary banking activities— 

7 ‘‘(aa) provides safekeeping 

8 or custody services with respect 

9 to securities, including the exer10 cise of warrants and other rights 

11 on behalf of customers; 

12 ‘‘(bb) facilitates the transfer 

13 of funds or securities, as a custo14 dian or a clearing agency, in con15 nection with the clearance and 

16 settlement of its customers’ 

17 transactions in securities; 

18 ‘‘(cc) effects securities lend19 ing or borrowing transactions 

20 with or on behalf of customers as 

21 part of services provided to cus22 tomers pursuant to division (aa) 

23 or (bb) or invests cash collateral 

24 pledged in connection with such 

25 transactions; or 


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1 ‘‘(dd) holds securities 

2 pledged by a customer to another 

3 person or securities subject to 

4 purchase or resale agreements in5 volving a customer, or facilitates 

6 the pledging or transfer of such 

7 securities by book entry or as 

8 otherwise provided under applica9 ble law, if the bank maintains 

10 records separately identifying the 

11 securities and the customer. 

12 ‘‘(II) EXCEPTION FOR CARRYING

13 BROKER ACTIVITIES.—The exception 

14 to being considered a broker for a 

15 bank engaged in activities described in 

16 subclause (I) shall not apply if the 

17 bank, in connection with such activi18 ties, acts in the United States as a 

19 carrying broker (as such term, and 

20 different formulations thereof, are 

21 used in section 15(c)(3) of this title 

22 and the rules and regulations there23 under) for any broker or dealer, un24 less such carrying broker activities are 

25 engaged in with respect to government 


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1 securities (as defined in paragraph 

2 (42) of this subsection). 

3 ‘‘(ix) EXCEPTED BANKING PROD4 UCTS.—The bank effects transactions in 

5 excepted banking products, as defined in 

6 section 206 of the Financial Services Act 

7 of 1999. 

8 ‘‘(x) MUNICIPAL SECURITIES.—The 

9 bank effects transactions in municipal se10 curities. 

11 ‘‘(xi) DE MINIMIS EXCEPTION.—The 

12 bank effects, other than in transactions re13 ferred to in clauses (i) through (x), not 

14 more than 500 transactions in securities in 

15 any calendar year, and such transactions 

16 are not effected by an employee of the 

17 bank who is also an employee of a broker 

18 or dealer. 

19 ‘‘(C) BROKER DEALER EXECUTION.—The 

20 exception to being considered a broker for a 

21 bank engaged in activities described in clauses 

22 (ii), (iv), and (viii) of subparagraph (B) shall 

23 not apply if the activities described in such pro24 visions result in the trade in the United States 


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1 of any security that is a publicly traded security 

2 in the United States, unless— 

3 ‘‘(i) the bank directs such trade to a 

4 registered broker or dealer for execution; 

5 ‘‘(ii) the trade is a cross trade or 

6 other substantially similar trade of a secu7 rity that— 

8 ‘‘(I) is made by the bank or be9 tween the bank and an affiliated fidu10 ciary; and 

11 ‘‘(II) is not in contravention of 

12 fiduciary principles established under 

13 applicable Federal or State law; or 

14 ‘‘(iii) the trade is conducted in some 

15 other manner permitted under rules, regu16 lations, or orders as the Commission may 

17 prescribe or issue. 

18 ‘‘(D) FIDUCIARY CAPACITY.—For purposes 

19 of subparagraph (B)(ii), the term ‘fiduciary ca20 pacity’ means— 

21 ‘‘(i) in the capacity as trustee, execu22 tor, administrator, registrar of stocks and 

23 bonds, transfer agent, guardian, assignee, 

24 receiver, or custodian under a uniform gift 

25 to minor act, or as an investment adviser 


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1 if the bank receives a fee for its investment 

2 advice; 

3 ‘‘(ii) in any capacity in which the 

4 bank possesses investment discretion on 

5 behalf of another; or 

6 ‘‘(iii) in any other similar capacity. 

7 ‘‘(F) EXCEPTION FOR ENTITIES SUBJECT

8 TO SECTION 15(e).—The term ‘broker’ does not 

9 include a bank that— 

10 ‘‘(i) was, immediately prior to the en11 actment of the Financial Services Act of 

12 1999, subject to section 15(e) of this title; 

13 and 

14 ‘‘(ii) is subject to such restrictions 

15 and requirements as the Commission con16 siders appropriate.’’. 

17 SEC. 202. DEFINITION OF DEALER. 

18 Section 3(a)(5) of the Securities Exchange Act of 

19 1934 (15 U.S.C. 78c(a)(5)) is amended to read as follows: 

20 ‘‘(5) DEALER.— 

21 ‘‘(A) IN GENERAL.—The term ‘dealer’ 

22 means any person engaged in the business of 

23 buying and selling securities for such person’s 

24 own account through a broker or otherwise. 


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1 ‘‘(B) EXCEPTION FOR PERSON NOT EN2 GAGED IN THE BUSINESS OF DEALING.—The 

3 term ‘dealer’ does not include a person that 

4 buys or sells securities for such person’s own 

5 account, either individually or in a fiduciary ca6 pacity, but not as a part of a regular business. 

7 ‘‘(C) EXCEPTION FOR CERTAIN BANK AC8 TIVITIES.—A bank shall not be considered to be 

9 a dealer because the bank engages in any of the 

10 following activities under the conditions de11 scribed: 

12 ‘‘(i) PERMISSIBLE SECURITIES TRANS13 ACTIONS.—The bank buys or sells— 

14 ‘‘(I) commercial paper, bankers 

15 acceptances, or commercial bills; 

16 ‘‘(II) exempted securities; 

17 ‘‘(III) qualified Canadian govern18 ment obligations as defined in section 

19 5136 of the Revised Statutes of the 

20 United States, in conformity with sec21 tion 15C of this title and the rules 

22 and regulations thereunder, or obliga23 tions of the North American Develop24 ment Bank; or 


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1 ‘‘(IV) any standardized, credit 

2 enhanced debt security issued by a 

3 foreign government pursuant to the 

4 March 1989 plan of then Secretary of 

5 the Treasury Brady, used by such for6 eign government to retire outstanding 

7 commercial bank loans. 

8 ‘‘(ii) INVESTMENT, TRUSTEE, AND FI9 DUCIARY TRANSACTIONS.—The bank buys 

10 or sells securities for investment pur11 poses— 

12 ‘‘(I) for the bank; or 

13 ‘‘(II) for accounts for which the 

14 bank acts as a trustee or fiduciary. 

15 ‘‘(iii) ASSET-BACKED TRANS16 ACTIONS.—The bank engages in the 

17 issuance or sale to qualified investors, 

18 through a grantor trust or other separate 

19 entity, of securities backed by or rep20 resenting an interest in notes, drafts, ac21 ceptances, loans, leases, receivables, other 

22 obligations (other than securities of which 

23 the bank is not the issuer), or pools of any 

24 such obligations predominantly originated 

25 by— 


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1 ‘‘(I) the bank; 

2 ‘‘(II) an affiliate of any such 

3 bank other than a broker or dealer; or 

4 ‘‘(III) a syndicate of banks of 

5 which the bank is a member, if the 

6 obligations or pool of obligations con7 sists of mortgage obligations or con8 sumer-related receivables. 

9 ‘‘(iv) EXCEPTED BANKING PROD10 UCTS.—The bank buys or sells excepted 

11 banking products, as defined in section 

12 206 of the Financial Services Act of 1999. 

13 ‘‘(v) DERIVATIVE INSTRUMENTS.— 

14 The bank issues, buys, or sells any deriva15 tive instrument to which the bank is a 

16 party— 

17 ‘‘(I) to or from a qualified inves18 tor, except that if the instrument pro19 vides for the delivery of one or more 

20 securities (other than a derivative in21 strument or government security), the 

22 transaction shall be effected with or 

23 through a registered broker or dealer; 

24 or 


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1 ‘‘(II) to or from other persons, 

2 except that if the derivative instru3 ment provides for the delivery of one 

4 or more securities (other than a deriv5 ative instrument or government secu6 rity), or is a security (other than a 

7 government security), the transaction 

8 shall be effected with or through a 

9 registered broker or dealer; or 

10 ‘‘(III) to or from any person if 

11 the instrument is neither a security 

12 nor provides for the delivery of one or 

13 more securities (other than a deriva14 tive instrument).’’. 

15 SEC. 203. REGISTRATION FOR SALES OF PRIVATE SECURI16 TIES OFFERINGS. 

17 Section 15A of the Securities Exchange Act of 1934 

18 (15 U.S.C. 78o–3) is amended by inserting after sub19 section (i) the following new subsection: 

20 ‘‘(j) REGISTRATION FOR SALES OF PRIVATE SECURI21 TIES OFFERINGS.—A registered securities association 

22 shall create a limited qualification category for any associ23 ated person of a member who effects sales as part of a 

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1 ties Act of 1933 and the rules and regulations thereunder, 

2 and shall deem qualified in such limited qualification cat3 egory, without testing, any bank employee who, in the six 

4 month period preceding the date of the enactment of this 

5 Act, engaged in effecting such sales.’’. 

6 SEC. 204. INFORMATION SHARING. 

7 Section 18 of the Federal Deposit Insurance Act is 

8 amended by adding at the end the following new sub9 section: 

10 ‘‘(t) RECORDKEEPING REQUIREMENTS.— 

11 ‘‘(1) REQUIREMENTS.—Each appropriate Fed12 eral banking agency, after consultation with and 

13 consideration of the views of the Commission, shall 

14 establish recordkeeping requirements for banks rely15 ing on exceptions contained in paragraphs (4) and 

16 (5) of section 3(a) of the Securities Exchange Act of 

17 1934. Such recordkeeping requirements shall be suf18 ficient to demonstrate compliance with the terms of 

19 such exceptions and be designed to facilitate compli20 ance with such exceptions. Each appropriate Federal 

21 banking agency shall make any such information 

22 available to the Commission upon request. 

23 ‘‘(2) DEFINITIONS.—As used in this subsection 

24 the term ‘Commission’ means the Securities and Ex25 change Commission.’’. 


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1 SEC. 205. TREATMENT OF NEW HYBRID PRODUCTS. 

2 Section 15 of the Securities Exchange Act of 1934 

3 (15 U.S.C. 78o) is amended by adding at the end the fol4 lowing new subsection: 

5 ‘‘(i) RULEMAKING TO EXTEND REQUIREMENTS TO

6 NEW HYBRID PRODUCTS.— 

7 ‘‘(1) LIMITATION.—The Commission shall 

8 not— 

9 ‘‘(A) require a bank to register as a broker 

10 or dealer under this section because the bank 

11 engages in any transaction in, or buys or sells, 

12 a new hybrid product; or 

13 ‘‘(B) bring an action against a bank for a 

14 failure to comply with a requirement described 

15 in subparagraph (A), 

16 unless the Commission has imposed such require17 ment by rule or regulation issued in accordance with 

18 this section. 

19 ‘‘(2) CRITERIA FOR RULEMAKING.—The Com20 mission shall not impose a requirement under para21 graph (1) of this subsection with respect to any new 

22 hybrid product unless the Commission determines 

23 that— 

24 ‘‘(A) the new hybrid product is a security; 

25 and 


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1 ‘‘(B) imposing such requirement is nec2 essary or appropriate in the public interest and 

3 for the protection of investors, consistent with 

4 the requirements of section 3(f). 

5 ‘‘(3) CONSIDERATIONS.—In making a deter6 mination under paragraph (2), the Commission shall 

7 consider— 

8 ‘‘(A) the nature of the new hybrid product; 

9 and 

10 ‘‘(B) the history, purpose, extent, and ap11 propriateness of the regulation of the new hy12 brid product under the Federal securities laws 

13 and under the Federal banking laws. 

14 ‘‘(4) CONSULTATION.—In promulgating rules 

15 under this subsection, the Commission shall consult 

16 with and consider the views of the Board of Gov17 ernors of the Federal Reserve System regarding the 

18 nature of the new hybrid product, the history, pur19 pose, extent, and appropriateness of the regulation 

20 of the new product under the Federal banking laws, 

21 and the impact of the proposed rule on the banking 

22 industry. 

23 ‘‘(5) NEW HYBRID PRODUCT.—For purposes of 

24 this subsection, the term ‘new hybrid product’ means 

25 a product that— 


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1 ‘‘(A) was not subjected to regulation by 

2 the Commission as a security prior to the date 

3 of the enactment of this subsection; and 

4 ‘‘(B) is not an excepted banking product, 

5 as such term is defined in section 206 of the 

6 Financial Services Act of 1999.’’. 

7 SEC. 206. DEFINITION OF EXCEPTED BANKING PRODUCT. 

8 (a) DEFINITION OF EXCEPTED BANKING PROD9 UCT.—For purposes of paragraphs (4) and (5) of section 

10 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 

11 78c(a) (4), (5)), the term ‘‘excepted banking product’’ 

12 means— 

13 (1) a deposit account, savings account, certifi14 cate of deposit, or other deposit instrument issued 

15 by a bank; 

16 (2) a banker’s acceptance; 

17 (3) a letter of credit issued or loan made by a 

18 bank; 

19 (4) a debit account at a bank arising from a 

20 credit card or similar arrangement; 

21 (5) a participation in a loan which the bank or 

22 an affiliate of the bank (other than a broker or deal23 er) funds, participates in, or owns that is sold— 

24 (A) to qualified investors; or 

25 (B) to other persons that— 


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1 (i) have the opportunity to review and 

2 assess any material information, including 

3 information regarding the borrower’s cred4 itworthiness; and 

5 (ii) based on such factors as financial 

6 sophistication, net worth, and knowledge 

7 and experience in financial matters, have 

8 the capability to evaluate the information 

9 available, as determined under generally 

10 applicable banking standards or guidelines; 

11 or 

12 (6) a derivative instrument that involves or re13 lates to— 

14 (A) currencies, except options on cur15 rencies that trade on a national securities ex16 change; 

17 (B) interest rates, except interest rate de18 rivative instruments that— 

19 (i) are based on a security or a group 

20 or index of securities (other than govern21 ment securities or a group or index of gov22 ernment securities); 

23 (ii) provide for the delivery of one or 

24 more securities (other than government se25 curities); or 


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1 (iii) trade on a national securities ex2 change; or 

3 (C) commodities, other rates, indices, or 

4 other assets, except derivative instruments 

5 that— 

6 (i) are securities or that are based on 

7 a group or index of securities (other than 

8 government securities or a group or index 

9 of government securities); 

10 (ii) provide for the delivery of one or 

11 more securities (other than government se12 curities); or 

13 (iii) trade on a national securities ex14 change. 

15 (b) CLASSIFICATION LIMITED.—Classification of a 

16 particular product as an excepted banking product pursu17 ant to this section shall not be construed as finding or 

18 implying that such product is or is not a security for any 

19 purpose under the securities laws, or is or is not an ac20 count, agreement, contract, or transaction for any purpose 

21 under the Commodity Exchange Act. 

22 (c) INCORPORATED DEFINITIONS.—For purposes of 

23 this section— 

24 (1) the terms ‘‘bank’’, ‘‘qualified investor’’, and 

25 ‘‘securities laws’’ have the same meanings given in 


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1 section 3(a) of the Securities Exchange Act of 1934, 

2 as amended by this Act; and 

3 (2) the term ‘‘government securities’’ has the 

4 meaning given in section 3(a)(42) of such Act (as 

5 amended by this Act), and, for purposes of this sec6 tion, commercial paper, bankers acceptances, and 

7 commercial bills shall be treated in the same manner 

8 as government securities. 

9 SEC. 207. ADDITIONAL DEFINITIONS. 

10 Section 3(a) of the Securities Exchange Act of 1934 

11 is amended by adding at the end the following new para12 graphs: 

13 ‘‘(54) DERIVATIVE INSTRUMENT.— 

14 ‘‘(A) DEFINITION.—The term ‘derivative 

15 instrument’ means any individually negotiated 

16 contract, agreement, warrant, note, or option 

17 that is based, in whole or in part, on the value 

18 of, any interest in, or any quantitative measure 

19 or the occurrence of any event relating to, one 

20 or more commodities, securities, currencies, in21 terest or other rates, indices, or other assets, 

22 but does not include an excepted banking prod23 uct, as defined in paragraphs (1) through (5) of 

24 section 206(a) of the Financial Services Act of 

25 1999. 


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1 ‘‘(B) CLASSIFICATION LIMITED.—Classi2 fication of a particular contract as a derivative 

3 instrument pursuant to this paragraph shall not 

4 be construed as finding or implying that such 

5 instrument is or is not a security for any pur6 pose under the securities laws, or is or is not 

7 an account, agreement, contract, or transaction 

8 for any purpose under the Commodity Ex9 change Act. 

10 ‘‘(55) QUALIFIED INVESTOR.— 

11 ‘‘(A) DEFINITION.—For purposes of this 

12 title, the term ‘qualified investor’ means— 

13 ‘‘(i) any investment company reg14 istered with the Commission under section 

15 8 of the Investment Company Act of 1940; 

16 ‘‘(ii) any issuer eligible for an exclu17 sion from the definition of investment com18 pany pursuant to section 3(c)(7) of the In19 vestment Company Act of 1940; 

20 ‘‘(iii) any bank (as defined in para21 graph (6) of this subsection), savings asso22 ciation (as defined in section 3(b) of the 

23 Federal Deposit Insurance Act), broker, 

24 dealer, insurance company (as defined in 

25 section 2(a)(13) of the Securities Act of 


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1 1933), or business development company 

2 (as defined in section 2(a)(48) of the In3 vestment Company Act of 1940); 

4 ‘‘(iv) any small business investment 

5 company licensed by the United States 

6 Small Business Administration under sec7 tion 301 (c) or (d) of the Small Business 

8 Investment Act of 1958; 

9 ‘‘(v) any State sponsored employee 

10 benefit plan, or any other employee benefit 

11 plan, within the meaning of the Employee 

12 Retirement Income Security Act of 1974, 

13 other than an individual retirement ac14 count, if the investment decisions are made 

15 by a plan fiduciary, as defined in section 

16 3(21) of that Act, which is either a bank, 

17 savings and loan association, insurance 

18 company, or registered investment adviser; 

19 ‘‘(vi) any trust whose purchases of se20 curities are directed by a person described 

21 in clauses (i) through (v) of this subpara22 graph; 

23 ‘‘(vii) any market intermediary ex24 empt under section 3(c)(2) of the Invest25 ment Company Act of 1940; 


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1 ‘‘(viii) any associated person of a 

2 broker or dealer other than a natural per3 son; 

4 ‘‘(ix) any foreign bank (as defined in 

5 section 1(b)(7) of the International Bank6 ing Act of 1978); 

7 ‘‘(x) the government of any foreign 

8 country; 

9 ‘‘(xi) any corporation, company, or 

10 partnership that owns and invests on a dis11 cretionary basis, not less than $10,000,000 

12 in investments; 

13 ‘‘(xii) any natural person who owns 

14 and invests on a discretionary basis, not 

15 less than $10,000,000 in investments; 

16 ‘‘(xiii) any government or political 

17 subdivision, agency, or instrumentality of a 

18 government who owns and invests on a dis19 cretionary basis not less than $50,000,000 

20 in investments; or 

21 ‘‘(xiv) any multinational or supra22 national entity or any agency or instru23 mentality thereof. 

24 ‘‘(B) ADDITIONAL AUTHORITY.—The Com25 mission may, by rule or order, define a ‘qualiVerDate Mar 15 2010 15:06 Jun 10, 2011 Jkt 223001 PO 00000 Frm 00281 Fmt 6652 Sfmt 6201 E:\ERIC\H10.PCS H10

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1 fied investor’ as any other person, taking into 

2 consideration such factors as the financial so3 phistication of the person, net worth, and 

4 knowledge and experience in financial mat5 ters.’’. 

6 SEC. 208. GOVERNMENT SECURITIES DEFINED. 

7 Section 3(a)(42) of the Securities Exchange Act of 

8 1934 (15 U.S.C. 78c(a)(42)) is amended— 

9 (1) by striking ‘‘or’’ at the end of subparagraph 

10 (C); 

11 (2) by striking the period at the end of sub12 paragraph (D) and inserting ‘‘; or’’; and 

13 (3) by adding at the end the following new sub14 paragraph: 

15 ‘‘(E) for purposes of sections 15, 15C, and 

16 17A as applied to a bank, a qualified Canadian 

17 government obligation as defined in section 

18 5136 of the Revised Statutes of the United 

19 States.’’. 

20 SEC. 209. EFFECTIVE DATE. 

21 This subtitle shall take effect at the end of the 270- 

22 day period beginning on the date of the enactment of this 

23 Act. 


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1 SEC. 210. RULE OF CONSTRUCTION. 

2 Nothing in this Act shall supersede, affect, or other3 wise limit the scope and applicability of the Commodity 

4 Exchange Act (7 U.S.C. 1 et seq.). 

5 Subtitle B—Bank Investment 

6 Company Activities 

7 SEC. 211. CUSTODY OF INVESTMENT COMPANY ASSETS BY 

8 AFFILIATED BANK. 

9 (a) MANAGEMENT COMPANIES.—Section 17(f) of the 

10 Investment Company Act of 1940 (15 U.S.C. 80a–17(f)) 

11 is amended— 

12 (1) by redesignating paragraphs (1), (2), and 

13 (3) as subparagraphs (A), (B), and (C), respectively; 

14 (2) by striking ‘‘(f) Every registered’’ and in15 serting the following: 

16 ‘‘(f) CUSTODY OF SECURITIES.— 

17 ‘‘(1) Every registered’’; 

18 (3) by redesignating the second, third, fourth, 

19 and fifth sentences of such subsection as paragraphs 

20 (2) through (5), respectively, and indenting the left 

21 margin of such paragraphs appropriately; and 

22 (4) by adding at the end the following new 

23 paragraph: 

24 ‘‘(6) The Commission may adopt rules and reg25 ulations, and issue orders, consistent with the pro26 tection of investors, prescribing the conditions under 


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1 which a bank, or an affiliated person of a bank, ei2 ther of which is an affiliated person, promoter, orga3 nizer, or sponsor of, or principal underwriter for, a 

4 registered management company may serve as custo5 dian of that registered management company.’’. 

6 (b) UNIT INVESTMENT TRUSTS.—Section 26 of the 

7 Investment Company Act of 1940 (15 U.S.C. 80a–26) is 

8 amended— 

9 (1) by redesignating subsections (b) through (e) 

10 as subsections (c) through (f), respectively; and 

11 (2) by inserting after subsection (a) the fol12 lowing new subsection: 

13 ‘‘(b) The Commission may adopt rules and regula14 tions, and issue orders, consistent with the protection of 

15 investors, prescribing the conditions under which a bank, 

16 or an affiliated person of a bank, either of which is an 

17 affiliated person of a principal underwriter for, or deposi18 tor of, a registered unit investment trust, may serve as 

19 trustee or custodian under subsection (a)(1).’’. 

20 (c) FIDUCIARY DUTY OF CUSTODIAN.—Section 36(a) 

21 of the Investment Company Act of 1940 (15 U.S.C. 80a– 

22 35(a)) is amended— 

23 (1) in paragraph (1), by striking ‘‘or’’ at the 

24 end; 


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1 (2) in paragraph (2), by striking the period at 

2 the end and inserting ‘‘; or’’; and 

3 (3) by inserting after paragraph (2) the fol4 lowing: 

5 ‘‘(3) as custodian.’’. 

6 SEC. 212. LENDING TO AN AFFILIATED INVESTMENT COM7 PANY. 

8 Section 17(a) of the Investment Company Act of 

9 1940 (15 U.S.C. 80a–17(a)) is amended— 

10 (1) by striking ‘‘or’’ at the end of paragraph 

11 (2); 

12 (2) by striking the period at the end of para13 graph (3) and inserting ‘‘; or’’; and 

14 (3) by adding at the end the following new 

15 paragraph: 

16 ‘‘(4) to loan money or other property to such 

17 registered company, or to any company controlled by 

18 such registered company, in contravention of such 

19 rules, regulations, or orders as the Commission may 

20 prescribe or issue consistent with the protection of 

21 investors.’’. 

22 SEC. 213. INDEPENDENT DIRECTORS. 

23 (a) IN GENERAL.—Section 2(a)(19)(A) of the Invest24 ment Company Act of 1940 (15 U.S.C. 80a–2(a)(19)(A)) 

25 is amended— 


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1 (1) by striking clause (v) and inserting the fol2 lowing new clause: 

3 ‘‘(v) any person or any affiliated per4 son of a person (other than a registered in5 vestment company) that, at any time dur6 ing the 6-month period preceding the date 

7 of the determination of whether that per8 son or affiliated person is an interested 

9 person, has executed any portfolio trans10 actions for, engaged in any principal trans11 actions with, or distributed shares for— 

12 ‘‘(I) the investment company; 

13 ‘‘(II) any other investment com14 pany having the same investment ad15 viser as such investment company or 

16 holding itself out to investors as a re17 lated company for purposes of invest18 ment or investor services; or 

19 ‘‘(III) any account over which the 

20 investment company’s investment ad21 viser has brokerage placement discre22 tion,’’; 

23 (2) by redesignating clause (vi) as clause (vii); 

24 and 


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1 (3) by inserting after clause (v) the following 

2 new clause: 

3 ‘‘(vi) any person or any affiliated per4 son of a person (other than a registered in5 vestment company) that, at any time dur6 ing the 6-month period preceding the date 

7 of the determination of whether that per8 son or affiliated person is an interested 

9 person, has loaned money or other prop10 erty to— 

11 ‘‘(I) the investment company; 

12 ‘‘(II) any other investment com13 pany having the same investment ad14 viser as such investment company or 

15 holding itself out to investors as a re16 lated company for purposes of invest17 ment or investor services; or 

18 ‘‘(III) any account for which the 

19 investment company’s investment ad20 viser has borrowing authority,’’. 

21 (b) CONFORMING AMENDMENT.—Section 

22 2(a)(19)(B) of the Investment Company Act of 1940 (15 

23 U.S.C. 80a–2(a)(19)(B)) is amended— 

24 (1) by striking clause (v) and inserting the fol25 lowing new clause: 


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1 ‘‘(v) any person or any affiliated per2 son of a person (other than a registered in3 vestment company) that, at any time dur4 ing the 6-month period preceding the date 

5 of the determination of whether that per6 son or affiliated person is an interested 

7 person, has executed any portfolio trans8 actions for, engaged in any principal trans9 actions with, or distributed shares for— 

10 ‘‘(I) any investment company for 

11 which the investment adviser or prin12 cipal underwriter serves as such; 

13 ‘‘(II) any investment company 

14 holding itself out to investors, for pur15 poses of investment or investor serv16 ices, as a company related to any in17 vestment company for which the in18 vestment adviser or principal under19 writer serves as such; or 

20 ‘‘(III) any account over which the 

21 investment adviser has brokerage 

22 placement discretion,’’; 

23 (2) by redesignating clause (vi) as clause (vii); 

24 and 


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1 (3) by inserting after clause (v) the following 

2 new clause: 

3 ‘‘(vi) any person or any affiliated per4 son of a person (other than a registered in5 vestment company) that, at any time dur6 ing the 6-month period preceding the date 

7 of the determination of whether that per8 son or affiliated person is an interested 

9 person, has loaned money or other prop10 erty to— 

11 ‘‘(I) any investment company for 

12 which the investment adviser or prin13 cipal underwriter serves as such; 

14 ‘‘(II) any investment company 

15 holding itself out to investors, for pur16 poses of investment or investor serv17 ices, as a company related to any in18 vestment company for which the in19 vestment adviser or principal under20 writer serves as such; or 

21 ‘‘(III) any account for which the 

22 investment adviser has borrowing au23 thority,’’. 

24 (c) AFFILIATION OF DIRECTORS.—Section 10(c) of 

25 the Investment Company Act of 1940 (15 U.S.C. 80a– 


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1 10(c)) is amended by striking ‘‘bank, except’’ and insert2 ing ‘‘bank (together with its affiliates and subsidiaries) or 

3 any one bank holding company (together with its affiliates 

4 and subsidiaries) (as such terms are defined in section 2 

5 of the Bank Holding Company Act of 1956), except’’. 

6 (d) EFFECTIVE DATE.—The amendments made by 

7 this section shall take effect at the end of the 1-year period 

8 beginning on the date of the enactment of this subtitle. 

9 SEC. 214. ADDITIONAL SEC DISCLOSURE AUTHORITY. 

10 Section 35(a) of the Investment Company Act of 

11 1940 (15 U.S.C. 80a–34(a)) is amended to read as fol12 lows: 

13 ‘‘(a) MISREPRESENTATION OF GUARANTEES.— 

14 ‘‘(1) IN GENERAL.—It shall be unlawful for any 

15 person, issuing or selling any security of which a 

16 registered investment company is the issuer, to rep17 resent or imply in any manner whatsoever that such 

18 security or company— 

19 ‘‘(A) has been guaranteed, sponsored, rec20 ommended, or approved by the United States, 

21 or any agency, instrumentality or officer of the 

22 United States; 

23 ‘‘(B) has been insured by the Federal De24 posit Insurance Corporation; or 


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1 ‘‘(C) is guaranteed by or is otherwise an 

2 obligation of any bank or insured depository in3 stitution. 

4 ‘‘(2) DISCLOSURES.—Any person issuing or 

5 selling the securities of a registered investment com6 pany that is advised by, or sold through, a bank 

7 shall prominently disclose that an investment in the 

8 company is not insured by the Federal Deposit In9 surance Corporation or any other government agen10 cy. The Commission may adopt rules and regula11 tions, and issue orders, consistent with the protec12 tion of investors, prescribing the manner in which 

13 the disclosure under this paragraph shall be pro14 vided. 

15 ‘‘(3) DEFINITIONS.—The terms ‘insured deposi16 tory institution’ and ‘appropriate Federal banking 

17 agency’ have the same meanings given in section 3 

18 of the Federal Deposit Insurance Act.’’. 

19 SEC. 215. DEFINITION OF BROKER UNDER THE INVEST20 MENT COMPANY ACT OF 1940. 

21 Section 2(a)(6) of the Investment Company Act of 

22 1940 (15 U.S.C. 80a–2(a)(6)) is amended to read as fol23 lows: 

24 ‘‘(6) The term ‘broker’ has the same meaning 

25 given in section 3 of the Securities Exchange Act of 


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1 1934, except that such term does not include any 

2 person solely by reason of the fact that such person 

3 is an underwriter for one or more investment compa4 nies.’’. 

5 SEC. 216. DEFINITION OF DEALER UNDER THE INVEST6 MENT COMPANY ACT OF 1940. 

7 Section 2(a)(11) of the Investment Company Act of 

8 1940 (15 U.S.C. 80a–2(a)(11)) is amended to read as fol9 lows: 

10 ‘‘(11) The term ‘dealer’ has the same meaning 

11 given in the Securities Exchange Act of 1934, but 

12 does not include an insurance company or invest13 ment company.’’. 

14 SEC. 217. REMOVAL OF THE EXCLUSION FROM THE DEFINI15 TION OF INVESTMENT ADVISER FOR BANKS 

16 THAT ADVISE INVESTMENT COMPANIES. 

17 (a) INVESTMENT ADVISER.—Section 202(a)(11)(A) 

18 of the Investment Advisers Act of 1940 (15 U.S.C. 80b– 

19 2(a)(11)(A)) is amended by striking ‘‘investment com20 pany’’ and inserting ‘‘investment company, except that the 

21 term ‘investment adviser’ includes any bank or bank hold22 ing company to the extent that such bank or bank holding 

23 company serves or acts as an investment adviser to a reg24 istered investment company, but if, in the case of a bank, 

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1 rately identifiable department or division, the department 

2 or division, and not the bank itself, shall be deemed to 

3 be the investment adviser’’. 

4 (b) SEPARATELY IDENTIFIABLE DEPARTMENT OR

5 DIVISION.—Section 202(a) of the Investment Advisers Act 

6 of 1940 (15 U.S.C. 80b–2(a)) is amended by adding at 

7 the end the following: 

8 ‘‘(26) The term ‘separately identifiable depart9 ment or division’ of a bank means a unit— 

10 ‘‘(A) that is under the direct supervision of 

11 an officer or officers designated by the board of 

12 directors of the bank as responsible for the day13 to-day conduct of the bank’s investment adviser 

14 activities for one or more investment companies, 

15 including the supervision of all bank employees 

16 engaged in the performance of such activities; 

17 and 

18 ‘‘(B) for which all of the records relating 

19 to its investment adviser activities are sepa20 rately maintained in or extractable from such 

21 unit’s own facilities or the facilities of the bank, 

22 and such records are so maintained or other23 wise accessible as to permit independent exam24 ination and enforcement by the Commission of 

25 this Act or the Investment Company Act of 


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1 1940 and rules and regulations promulgated 

2 under this Act or the Investment Company Act 

3 of 1940.’’. 

4 SEC. 218. DEFINITION OF BROKER UNDER THE INVEST5 MENT ADVISERS ACT OF 1940. 

6 Section 202(a)(3) of the Investment Advisers Act of 

7 1940 (15 U.S.C. 80b–2(a)(3)) is amended to read as fol8 lows: 

9 ‘‘(3) The term ‘broker’ has the same meaning 

10 given in section 3 of the Securities Exchange Act of 

11 1934.’’. 

12 SEC. 219. DEFINITION OF DEALER UNDER THE INVEST13 MENT ADVISERS ACT OF 1940. 

14 Section 202(a)(7) of the Investment Advisers Act of 

15 1940 (15 U.S.C. 80b–2(a)(7)) is amended to read as fol16 lows: 

17 ‘‘(7) The term ‘dealer’ has the same meaning 

18 given in section 3 of the Securities Exchange Act of 

19 1934, but does not include an insurance company or 

20 investment company.’’. 

21 SEC. 220. INTERAGENCY CONSULTATION. 

22 The Investment Advisers Act of 1940 (15 U.S.C. 

23 80b–1 et seq.) is amended by inserting after section 210 

24 the following new section: 


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1 ‘‘SEC. 210A. CONSULTATION. 

2 ‘‘(a) EXAMINATION RESULTS AND OTHER INFORMA3 TION.— 

4 ‘‘(1) The appropriate Federal banking agency 

5 shall provide the Commission upon request the re6 sults of any examination, reports, records, or other 

7 information to which such agency may have access 

8 with respect to the investment advisory activities— 

9 ‘‘(A) of any— 

10 ‘‘(i) bank holding company; 

11 ‘‘(ii) bank; or 

12 ‘‘(iii) separately identifiable depart13 ment or division of a bank, 

14 that is registered under section 203 of this title; 

15 and 

16 ‘‘(B) in the case of a bank holding com17 pany or bank that has a subsidiary or a sepa18 rately identifiable department or division reg19 istered under that section, of such bank or bank 

20 holding company. 

21 ‘‘(2) The Commission shall provide to the ap22 propriate Federal banking agency upon request the 

23 results of any examination, reports, records, or other 

24 information with respect to the investment advisory 

25 activities of any bank holding company, bank, or 

26 separately identifiable department or division of a 


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1 bank, which is registered under section 203 of this 

2 title. 

3 ‘‘(b) EFFECT ON OTHER AUTHORITY.—Nothing in 

4 this section shall limit in any respect the authority of the 

5 appropriate Federal banking agency with respect to such 

6 bank holding company, bank, or department or division 

7 under any other provision of law. 

8 ‘‘(c) DEFINITION.—For purposes of this section, the 

9 term ‘appropriate Federal banking agency’ shall have the 

10 same meaning given in section 3 of the Federal Deposit 

11 Insurance Act.’’. 

12 SEC. 221. TREATMENT OF BANK COMMON TRUST FUNDS. 

13 (a) SECURITIES ACT OF 1933.—Section 3(a)(2) of 

14 the Securities Act of 1933 (15 U.S.C. 77c(a)(2)) is 

15 amended by striking ‘‘or any interest or participation in 

16 any common trust fund or similar fund maintained by a 

17 bank exclusively for the collective investment and reinvest18 ment of assets contributed thereto by such bank in its ca19 pacity as trustee, executor, administrator, or guardian’’ 

20 and inserting ‘‘or any interest or participation in any com21 mon trust fund or similar fund that is excluded from the 

22 definition of the term ‘investment company’ under section 

23 3(c)(3) of the Investment Company Act of 1940’’. 

24 (b) SECURITIES EXCHANGE ACT OF 1934.—Section 

25 3(a)(12)(A)(iii) of the Securities Exchange Act of 1934 


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1 (15 U.S.C. 78c(a)(12)(A)(iii)) is amended to read as fol2 lows: 

3 ‘‘(iii) any interest or participation in any 

4 common trust fund or similar fund that is ex5 cluded from the definition of the term ‘invest6 ment company’ under section 3(c)(3) of the In7 vestment Company Act of 1940;’’. 

8 (c) INVESTMENT COMPANY ACT OF 1940.—Section 

9 3(c)(3) of the Investment Company Act of 1940 (15 

10 U.S.C. 80a–3(c)(3)) is amended by inserting before the 

11 period the following: ‘‘, if— 

12 ‘‘(A) such fund is employed by the bank 

13 solely as an aid to the administration of trusts, 

14 estates, or other accounts created and main15 tained for a fiduciary purpose; 

16 ‘‘(B) except in connection with the ordi17 nary advertising of the bank’s fiduciary serv18 ices, interests in such fund are not— 

19 ‘‘(i) advertised; or 

20 ‘‘(ii) offered for sale to the general 

21 public; and 

22 ‘‘(C) fees and expenses charged by such 

23 fund are not in contravention of fiduciary prin24 ciples established under applicable Federal or 

25 State law’’. 


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1 SEC. 222. INVESTMENT ADVISERS PROHIBITED FROM HAV2 ING CONTROLLING INTEREST IN REG3 ISTERED INVESTMENT COMPANY. 

4 Section 15 of the Investment Company Act of 1940 

5 (15 U.S.C. 80a–15) is amended by adding at the end the 

6 following new subsection: 

7 ‘‘(g) CONTROLLING INTEREST IN INVESTMENT COM8 PANY PROHIBITED.— 

9 ‘‘(1) IN GENERAL.—If an investment adviser to 

10 a registered investment company, or an affiliated 

11 person of that investment adviser, holds a control12 ling interest in that registered investment company 

13 in a trustee or fiduciary capacity, such person 

14 shall— 

15 ‘‘(A) if it holds the shares in a trustee or 

16 fiduciary capacity with respect to any employee 

17 benefit plan subject to the Employee Retire18 ment Income Security Act of 1974, transfer the 

19 power to vote the shares of the investment com20 pany through to another person acting in a fi21 duciary capacity with respect to the plan who is 

22 not an affiliated person of that investment ad23 viser or any affiliated person thereof; or 

24 ‘‘(B) if it holds the shares in a trustee or 

25 fiduciary capacity with respect to any person or 

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1 ject to the Employee Retirement Income Secu2 rity Act of 1974— 

3 ‘‘(i) transfer the power to vote the 

4 shares of the investment company through 

5 to— 

6 ‘‘(I) the beneficial owners of the 

7 shares; 

8 ‘‘(II) another person acting in a 

9 fiduciary capacity who is not an affili10 ated person of that investment adviser 

11 or any affiliated person thereof; or 

12 ‘‘(III) any person authorized to 

13 receive statements and information 

14 with respect to the trust who is not an 

15 affiliated person of that investment 

16 adviser or any affiliated person there17 of; 

18 ‘‘(ii) vote the shares of the investment 

19 company held by it in the same proportion 

20 as shares held by all other shareholders of 

21 the investment company; or 

22 ‘‘(iii) vote the shares of the invest23 ment company as otherwise permitted 

24 under such rules, regulations, or orders as 


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1 the Commission may prescribe or issue 

2 consistent with the protection of investors. 

3 ‘‘(2) EXEMPTION.—Paragraph (1) shall not 

4 apply to any investment adviser to a registered in5 vestment company, or any affiliated person of that 

6 investment adviser, that holds shares of the invest7 ment company in a trustee or fiduciary capacity if 

8 that registered investment company consists solely of 

9 assets held in such capacities. 

10 ‘‘(3) SAFE HARBOR.—No investment adviser to 

11 a registered investment company or any affiliated 

12 person of such investment adviser shall be deemed to 

13 have acted unlawfully or to have breached a fidu14 ciary duty under State or Federal law solely by rea15 son of acting in accordance with clause (i), (ii), or 

16 (iii) of paragraph (1)(B).’’. 

17 SEC. 223. STATUTORY DISQUALIFICATION FOR BANK 

18 WRONGDOING. 

19 Section 9(a) of the Investment Company Act of 1940 

20 (15 U.S.C. 80a-9(a)) is amended in paragraphs (1) and 

21 (2) by striking ‘‘securities dealer, transfer agent,’’ and in22 serting ‘‘securities dealer, bank, transfer agent,’’. 

23 SEC. 224. CONFORMING CHANGE IN DEFINITION. 

24 Section 2(a)(5) of the Investment Company Act of 

25 1940 (15 U.S.C. 80a–2(a)(5)) is amended by striking 


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1 ‘‘(A) a banking institution organized under the laws of the 

2 United States’’ and inserting ‘‘(A) a depository institution 

3 (as defined in section 3 of the Federal Deposit Insurance 

4 Act) or a branch or agency of a foreign bank (as such 

5 terms are defined in section 1(b) of the International 

6 Banking Act of 1978)’’. 

7 SEC. 225. CONFORMING AMENDMENT. 

8 Section 202 of the Investment Advisers Act of 1940 

9 (15 U.S.C. 80b–2) is amended by adding at the end the 

10 following new subsection: 

11 ‘‘(c) CONSIDERATION OF PROMOTION OF EFFI12 CIENCY, COMPETITION, AND CAPITAL FORMATION.— 

13 Whenever pursuant to this title the Commission is en14 gaged in rulemaking and is required to consider or deter15 mine whether an action is necessary or appropriate in the 

16 public interest, the Commission shall also consider, in ad17 dition to the protection of investors, whether the action 

18 will promote efficiency, competition, and capital forma19 tion.’’. 

20 SEC. 226. CHURCH PLAN EXCLUSION. 

21 Section 3(c)(14) of the Investment Company Act of 

22 1940 (15 U.S.C. 80a-3(c)(14)) is amended— 

23 (1) by redesignating clauses (i) and (ii) of sub24 paragraph (B) as subclauses (I) and (II), respec25 tively; 


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1 (2) by redesignating subparagraphs (A) and 

2 (B) as clauses (i) and (ii), respectively; 

3 (3) by inserting ‘‘(A)’’ after ‘‘(14)’’; and 

4 (4) by adding at the end the following new sub5 paragraph: 

6 ‘‘(B) If a registered investment company would 

7 be excluded from the definition of investment com8 pany under this subsection but for the fact that 

9 some of the company’s assets do not satisfy the con10 dition of subparagraph (A)(ii) of this paragraph, 

11 then any investment adviser to the company or affili12 ated person of such investment adviser shall not be 

13 subject to the requirements of section 15(g)(1)(B) 

14 with respect to shares of the investment company.’’. 

15 SEC. 227. EFFECTIVE DATE. 

16 This subtitle shall take effect 90 days after the date 

17 of the enactment of this Act. 


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1 Subtitle C—Securities and Ex2 change Commission Supervision 

3 of Investment Bank Holding 

4 Companies 

5 SEC. 231. SUPERVISION OF INVESTMENT BANK HOLDING 

6 COMPANIES BY THE SECURITIES AND EX7 CHANGE COMMISSION. 

8 (a) AMENDMENT.—Section 17 of the Securities Ex9 change Act of 1934 (15 U.S.C. 78q) is amended— 

10 (1) by redesignating subsection (i) as subsection 

11 (k); and 

12 (2) by inserting after subsection (h) the fol13 lowing new subsection: 

14 ‘‘(i) INVESTMENT BANK HOLDING COMPANIES.— 

15 ‘‘(1) ELECTIVE SUPERVISION OF AN INVEST16 MENT BANK HOLDING COMPANY NOT HAVING A

17 BANK OR SAVINGS ASSOCIATION AFFILIATE.— 

18 ‘‘(A) IN GENERAL.—An investment bank 

19 holding company that is not— 

20 ‘‘(i) an affiliate of a wholesale finan21 cial institution, an insured bank (other 

22 than an institution described in subpara23 graph (D), (F), or (G) of section 2(c)(2), 

24 or held under section 4(f), of the Bank 


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1 Holding Company Act of 1956), or a sav2 ings association; 

3 ‘‘(ii) a foreign bank, foreign company, 

4 or company that is described in section 

5 8(a) of the International Banking Act of 

6 1978; or 

7 ‘‘(iii) a foreign bank that controls, di8 rectly or indirectly, a corporation chartered 

9 under section 25A of the Federal Reserve 

10 Act, 

11 may elect to become supervised by filing with 

12 the Commission a notice of intention to become 

13 supervised, pursuant to subparagraph (B) of 

14 this paragraph. Any investment bank holding 

15 company filing such a notice shall be supervised 

16 in accordance with this section and comply with 

17 the rules promulgated by the Commission appli18 cable to supervised investment bank holding 

19 companies. 

20 ‘‘(B) NOTIFICATION OF STATUS AS A SU21 PERVISED INVESTMENT BANK HOLDING COM22 PANY.—An investment bank holding company 

23 that elects under subparagraph (A) to become 

24 supervised by the Commission shall file with the 

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1 come supervised by the Commission in such 

2 form and containing such information and doc3 uments concerning such investment bank hold4 ing company as the Commission, by rule, may 

5 prescribe as necessary or appropriate in fur6 therance of the purposes of this section. Unless 

7 the Commission finds that such supervision is 

8 not necessary or appropriate in furtherance of 

9 the purposes of this section, such supervision 

10 shall become effective 45 days after the date of 

11 receipt of such written notice by the Commis12 sion or within such shorter time period as the 

13 Commission, by rule or order, may determine. 

14 ‘‘(2) ELECTION NOT TO BE SUPERVISED BY

15 THE COMMISSION AS AN INVESTMENT BANK HOLD16 ING COMPANY.— 

17 ‘‘(A) VOLUNTARY WITHDRAWAL.—A su18 pervised investment bank holding company that 

19 is supervised pursuant to paragraph (1) may, 

20 upon such terms and conditions as the Commis21 sion deems necessary or appropriate, elect not 

22 to be supervised by the Commission by filing a 

23 written notice of withdrawal from Commission 

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1 sion, or such shorter or longer period as the 

2 Commission deems necessary or appropriate to 

3 ensure effective supervision of the material 

4 risks to the supervised investment bank holding 

5 company and to the affiliated broker or dealer, 

6 or to prevent evasion of the purposes of this 

7 section. 

8 ‘‘(B) DISCONTINUATION OF COMMISSION

9 SUPERVISION.—If the Commission finds that 

10 any supervised investment bank holding com11 pany that is supervised pursuant to paragraph 

12 (1) is no longer in existence or has ceased to be 

13 an investment bank holding company, or if the 

14 Commission finds that continued supervision of 

15 such a supervised investment bank holding com16 pany is not consistent with the purposes of this 

17 section, the Commission may discontinue the 

18 supervision pursuant to a rule or order, if any, 

19 promulgated by the Commission under this sec20 tion. 

21 ‘‘(3) SUPERVISION OF INVESTMENT BANK

22 HOLDING COMPANIES.— 

23 ‘‘(A) RECORDKEEPING AND REPORTING.— 

24 ‘‘(i) IN GENERAL.—Every supervised 

25 investment bank holding company and 


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1 each affiliate thereof shall make and keep 

2 for prescribed periods such records, furnish 

3 copies thereof, and make such reports, as 

4 the Commission may require by rule, in 

5 order to keep the Commission informed as 

6 to— 

7 ‘‘(I) the company’s or affiliate’s 

8 activities, financial condition, policies, 

9 systems for monitoring and control10 ling financial and operational risks, 

11 and transactions and relationships be12 tween any broker or dealer affiliate of 

13 the supervised investment bank hold14 ing company; and 

15 ‘‘(II) the extent to which the 

16 company or affiliate has complied with 

17 the provisions of this Act and regula18 tions prescribed and orders issued 

19 under this Act. 

20 ‘‘(ii) FORM AND CONTENTS.—Such 

21 records and reports shall be prepared in 

22 such form and according to such specifica23 tions (including certification by an inde24 pendent public accountant), as the Com25 mission may require and shall be provided 


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1 promptly at any time upon request by the 

2 Commission. Such records and reports may 

3 include— 

4 ‘‘(I) a balance sheet and income 

5 statement; 

6 ‘‘(II) an assessment of the con7 solidated capital of the supervised in8 vestment bank holding company; 

9 ‘‘(III) an independent auditor’s 

10 report attesting to the supervised in11 vestment bank holding company’s 

12 compliance with its internal risk man13 agement and internal control objec14 tives; and 

15 ‘‘(IV) reports concerning the ex16 tent to which the company or affiliate 

17 has complied with the provisions of 

18 this title and any regulations pre19 scribed and orders issued under this 

20 title. 

21 ‘‘(B) USE OF EXISTING REPORTS.— 

22 ‘‘(i) IN GENERAL.—The Commission 

23 shall, to the fullest extent possible, accept 

24 reports in fulfillment of the requirements 

25 under this paragraph that the supervised 


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1 investment bank holding company or its af2 filiates have been required to provide to 

3 another appropriate regulatory agency or 

4 self-regulatory organization. 

5 ‘‘(ii) AVAILABILITY.—A supervised in6 vestment bank holding company or an af7 filiate of such company shall provide to the 

8 Commission, at the request of the Commis9 sion, any report referred to in clause (i). 

10 ‘‘(C) EXAMINATION AUTHORITY.— 

11 ‘‘(i) FOCUS OF EXAMINATION AU12 THORITY.—The Commission may make ex13 aminations of any supervised investment 

14 bank holding company and any affiliate of 

15 such company in order to— 

16 ‘‘(I) inform the Commission re17 garding— 

18 ‘‘(aa) the nature of the oper19 ations and financial condition of 

20 the supervised investment bank 

21 holding company and its affili22 ates; 

23 ‘‘(bb) the financial and oper24 ational risks within the super25 vised investment bank holding 


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1 company that may affect any 

2 broker or dealer controlled by 

3 such supervised investment bank 

4 holding company; and 

5 ‘‘(cc) the systems of the su6 pervised investment bank holding 

7 company and its affiliates for 

8 monitoring and controlling those 

9 risks; and 

10 ‘‘(II) monitor compliance with 

11 the provisions of this subsection, pro12 visions governing transactions and re13 lationships between any broker or 

14 dealer affiliated with the supervised 

15 investment bank holding company and 

16 any of the company’s other affiliates, 

17 and applicable provisions of sub18 chapter II of chapter 53, title 31, 

19 United States Code (commonly re20 ferred to as the ‘Bank Secrecy Act’) 

21 and regulations thereunder. 

22 ‘‘(ii) RESTRICTED FOCUS OF EXAMI23 NATIONS.—The Commission shall limit the 

24 focus and scope of any examination of a 


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1 supervised investment bank holding com2 pany to— 

3 ‘‘(I) the company; and 

4 ‘‘(II) any affiliate of the company 

5 that, because of its size, condition, or 

6 activities, the nature or size of the 

7 transactions between such affiliate 

8 and any affiliated broker or dealer, or 

9 the centralization of functions within 

10 the holding company system, could, in 

11 the discretion of the Commission, 

12 have a materially adverse effect on the 

13 operational or financial condition of 

14 the broker or dealer. 

15 ‘‘(iii) DEFERENCE TO OTHER EXAMI16 NATIONS.—For purposes of this subpara17 graph, the Commission shall, to the fullest 

18 extent possible, use the reports of examina19 tion of an institution described in subpara20 graph (D), (F), or (G) of section 2(c)(2), 

21 or held under section 4(f), of the Bank 

22 Holding Company Act of 1956 made by 

23 the appropriate regulatory agency, or of a 

24 licensed insurance company made by the 

25 appropriate State insurance regulator. 


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1 ‘‘(4) HOLDING COMPANY CAPITAL.— 

2 ‘‘(A) AUTHORITY.—If the Commission 

3 finds that it is necessary to adequately super4 vise investment bank holding companies and 

5 their broker or dealer affiliates consistent with 

6 the purposes of this subsection, the Commission 

7 may adopt capital adequacy rules for supervised 

8 investment bank holding companies. 

9 ‘‘(B) METHOD OF CALCULATION.—In de10 veloping rules under this paragraph: 

11 ‘‘(i) DOUBLE LEVERAGE.—The Com12 mission shall consider the use by the su13 pervised investment bank holding company 

14 of debt and other liabilities to fund capital 

15 investments in affiliates. 

16 ‘‘(ii) NO UNWEIGHTED CAPITAL

17 RATIO.—The Commission shall not impose 

18 under this section a capital ratio that is 

19 not based on appropriate risk-weighting 

20 considerations. 

21 ‘‘(iii) NO CAPITAL REQUIREMENT ON

22 REGULATED ENTITIES.—The Commission 

23 shall not, by rule, regulation, guideline, 

24 order or otherwise, impose any capital ade25 quacy provision on a nonbanking affiliate 


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1 (other than a broker or dealer) that is in 

2 compliance with applicable capital require3 ments of another Federal regulatory au4 thority or State insurance authority. 

5 ‘‘(iv) APPROPRIATE EXCLUSIONS.— 

6 The Commission shall take full account of 

7 the applicable capital requirements of an8 other Federal regulatory authority or State 

9 insurance regulator. 

10 ‘‘(C) INTERNAL RISK MANAGEMENT MOD11 ELS.—The Commission may incorporate inter12 nal risk management models into its capital 

13 adequacy rules for supervised investment bank 

14 holding companies. 

15 ‘‘(5) FUNCTIONAL REGULATION OF BANKING

16 AND INSURANCE ACTIVITIES OF SUPERVISED IN17 VESTMENT BANK HOLDING COMPANIES.—The Com18 mission shall defer to— 

19 ‘‘(A) the appropriate regulatory agency 

20 with regard to all interpretations of, and the 

21 enforcement of, applicable banking laws relating 

22 to the activities, conduct, ownership, and oper23 ations of banks, and institutions described in 

24 subparagraph (D), (F), and (G) of section 


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1 2(c)(2), or held under section 4(f), of the Bank 

2 Holding Company Act of 1956; and 

3 ‘‘(B) the appropriate State insurance regu4 lators with regard to all interpretations of, and 

5 the enforcement of, applicable State insurance 

6 laws relating to the activities, conduct, and op7 erations of insurance companies and insurance 

8 agents. 

9 ‘‘(6) DEFINITIONS.—For purposes of this sub10 section: 

11 ‘‘(A) The term ‘investment bank holding 

12 company’ means— 

13 ‘‘(i) any person other than a natural 

14 person that owns or controls one or more 

15 brokers or dealers; and 

16 ‘‘(ii) the associated persons of the in17 vestment bank holding company. 

18 ‘‘(B) The term ‘supervised investment 

19 bank holding company’ means any investment 

20 bank holding company that is supervised by the 

21 Commission pursuant to this subsection. 

22 ‘‘(C) The terms ‘affiliate’, ‘bank’, ‘bank 

23 holding company’, ‘company’, ‘control’, ‘savings 

24 association’, and ‘wholesale financial institution’ 

25 have the same meanings given in section 2 of 


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1 the Bank Holding Company Act of 1956 (12 

2 U.S.C. 1841). 

3 ‘‘(D) The term ‘insured bank’ has the 

4 same meaning given in section 3 of the Federal 

5 Deposit Insurance Act. 

6 ‘‘(E) The term ‘foreign bank’ has the same 

7 meaning given in section 1(b)(7) of the Inter8 national Banking Act of 1978. 

9 ‘‘(F) The terms ‘person associated with an 

10 investment bank holding company’ and ‘associ11 ated person of an investment bank holding com12 pany’ mean any person directly or indirectly 

13 controlling, controlled by, or under common 

14 control with, an investment bank holding com15 pany.’’. 

16 ‘‘(j) AUTHORITY TO LIMIT DISCLOSURE OF INFOR17 MATION.—Notwithstanding any other provision of law, the 

18 Commission shall not be compelled to disclose any infor19 mation required to be reported under subsection (h) or 

20 (i) or any information supplied to the Commission by any 

21 domestic or foreign regulatory agency that relates to the 

22 financial or operational condition of any associated person 

23 of a broker or dealer, investment bank holding company, 

24 or any affiliate of an investment bank holding company. 

25 Nothing in this subsection shall authorize the Commission 


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1 to withhold information from Congress, or prevent the 

2 Commission from complying with a request for informa3 tion from any other Federal department or agency or any 

4 self-regulatory organization requesting the information for 

5 purposes within the scope of its jurisdiction, or complying 

6 with an order of a court of the United States in an action 

7 brought by the United States or the Commission. For pur8 poses of section 552 of title 5, United States Code, this 

9 subsection shall be considered a statute described in sub10 section (b)(3)(B) of such section 552. In prescribing regu11 lations to carry out the requirements of this subsection, 

12 the Commission shall designate information described in 

13 or obtained pursuant to subparagraphs (A), (B), and (C) 

14 of subsection (i)(5) as confidential information for pur15 poses of section 24(b)(2) of this title.’’. 

16 (b) CONFORMING AMENDMENTS.— 

17 (1) Section 3(a)(34) of the Securities Exchange 

18 Act of 1934 (15 U.S.C. 78c(a)(34)) is amended by 

19 adding at the end the following new subparagraph: 

20 ‘‘(H) When used with respect to an institu21 tion described in subparagraph (D), (F), or (G) 

22 of section 2(c)(2), or held under section 4(f), of 

23 the Bank Holding Company Act of 1956— 

24 ‘‘(i) the Comptroller of the Currency, 

25 in the case of a national bank or a bank 


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1 in the District of Columbia examined by 

2 the Comptroller of the Currency; 

3 ‘‘(ii) the Board of Governors of the 

4 Federal Reserve System, in the case of a 

5 State member bank of the Federal Reserve 

6 System or any corporation chartered under 

7 section 25A of the Federal Reserve Act; 

8 ‘‘(iii) the Federal Deposit Insurance 

9 Corporation, in the case of any other bank 

10 the deposits of which are insured in ac11 cordance with the Federal Deposit Insur12 ance Act; or 

13 ‘‘(iv) the Commission in the case of all 

14 other such institutions.’’. 

15 (2) Section 1112(e) of the Right to Financial 

16 Privacy Act of 1978 (12 U.S.C. 3412(e)) is amend17 ed— 

18 (A) by striking ‘‘this title’’ and inserting 

19 ‘‘law’’; and 

20 (B) by inserting ‘‘, examination reports’’ 

21 after ‘‘financial records’’. 


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1 Subtitle D—Disclosure of Customer 

2 Costs of Acquiring Financial 

3 Products 

4 SEC. 241. IMPROVED AND CONSISTENT DISCLOSURE. 

5 (a) REVISED REGULATIONS REQUIRED.—Within 1 

6 year after the date of the enactment of this Act, each Fed7 eral financial regulatory authority shall prescribe rules, or 

8 revisions to its rules, to improve the accuracy, simplicity, 

9 and completeness, and to make more consistent, the dis10 closure of information by persons subject to the jurisdic11 tion of such regulatory authority concerning any commis12 sions, fees, or other costs incurred by customers in the 

13 acquisition of financial products. 

14 (b) CONSULTATION.—In prescribing rules and revi15 sions under subsection (a), the Federal financial regu16 latory authorities shall consult with each other and with 

17 appropriate State financial regulatory authorities. 

18 (c) CONSIDERATION OF EXISTING DISCLOSURES.— 

19 In prescribing rules and revisions under subsection (a), 

20 the Federal financial regulatory authorities shall consider 

21 the sufficiency and appropriateness of then existing laws 

22 and rules applicable to persons subject to their jurisdic23 tion, and may prescribe exemptions from the rules and re24 visions required by subsection (a) to the extent approVerDate Mar 15 2010 15:06 Jun 10, 2011 Jkt 223001 PO 00000 Frm 00318 Fmt 6652 Sfmt 6201 E:\ERIC\H10.PCS H10

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1 priate in light of the objective of this section to increase 

2 the consistency of disclosure practices. 

3 (d) ENFORCEMENT.—Any rule prescribed by a Fed4 eral financial regulatory authority pursuant to this section 

5 shall, for purposes of enforcement, be treated as a rule 

6 prescribed by such regulatory authority pursuant to the 

7 statute establishing such regulatory authority’s jurisdic8 tion over the persons to whom such rule applies. 

9 (e) DEFINITION.—As used in this section, the term 

10 ‘‘Federal financial regulatory authority’’ means the Board 

11 of Governors of the Federal Reserve System, the Securi12 ties and Exchange Commission, the Comptroller of the 

13 Currency, the Federal Deposit Insurance Corporation, the 

14 Commodity Futures Trading Commission, and any self15 regulatory organization under the supervision of any of 

16 the foregoing. 

17 Subtitle E—Banks and Bank 

18 Holding Companies 

19 SEC. 251. CONSULTATION. 

20 (a) IN GENERAL.—The Securities and Exchange 

21 Commission shall consult and coordinate comments with 

22 the appropriate Federal banking agency before taking any 

23 action or rendering any opinion with respect to the man24 ner in which any insured depository institution or deposi25 tory institution holding company reports loan loss reserves 


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1 in its financial statement, including the amount of any 

2 such loan loss reserve. 

3 (b) DEFINITIONS.—For purposes of subsection (a), 

4 the terms ‘‘insured depository institution’’, ‘‘depository in5 stitution holding company’’, and ‘‘appropriate Federal 

6 banking agency’’ have the same meaning as in section 3 

7 of the Federal Deposit Insurance Act. 

8 TITLE III—INSURANCE 

9 Subtitle A—State Regulation of 

10 Insurance 

11 SEC. 301. STATE REGULATION OF THE BUSINESS OF INSUR12 ANCE. 

13 The Act entitled ‘‘An Act to express the intent of the 

14 Congress with reference to the regulation of the business 

15 of insurance’’ and approved March 9, 1945 (15 U.S.C. 

16 1011 et seq.), commonly referred to as the ‘‘McCarran17 Ferguson Act’’ remains the law of the United States. 

18 SEC. 302. MANDATORY INSURANCE LICENSING REQUIRE19 MENTS. 

20 No person shall engage in the business of insurance 

21 in a State as principal or agent unless such person is li22 censed as required by the appropriate insurance regulator 

23 of such State in accordance with the relevant State insur24 ance law, subject to section 104. 


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1 SEC. 303. FUNCTIONAL REGULATION OF INSURANCE. 

2 The insurance activities of any person (including a 

3 national bank exercising its power to act as agent under 

4 the eleventh undesignated paragraph of section 13 of the 

5 Federal Reserve Act) shall be functionally regulated by the 

6 States, subject to section 104. 

7 SEC. 304. INSURANCE UNDERWRITING IN NATIONAL 

8 BANKS. 

9 (a) IN GENERAL.—Except as provided in section 305, 

10 a national bank and the subsidiaries of a national bank 

11 may not provide insurance in a State as principal except 

12 that this prohibition shall not apply to authorized prod13 ucts. 

14 (b) AUTHORIZED PRODUCTS.—For the purposes of 

15 this section, a product is authorized if— 

16 (1) as of January 1, 1999, the Comptroller of 

17 the Currency had determined in writing that na18 tional banks may provide such product as principal, 

19 or national banks were in fact lawfully providing 

20 such product as principal; 

21 (2) no court of relevant jurisdiction had, by 

22 final judgment, overturned a determination of the 

23 Comptroller of the Currency that national banks 

24 may provide such product as principal; and 

25 (3) the product is not title insurance, or an an26 nuity contract the income of which is subject to tax 


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1 treatment under section 72 of the Internal Revenue 

2 Code of 1986. 

3 (c) DEFINITION.—For purposes of this section, the 

4 term ‘‘insurance’’ means— 

5 (1) any product regulated as insurance as of 

6 January 1, 1999, in accordance with the relevant 

7 State insurance law, in the State in which the prod8 uct is provided; 

9 (2) any product first offered after January 1, 

10 1999, which— 

11 (A) a State insurance regulator determines 

12 shall be regulated as insurance in the State in 

13 which the product is provided because the prod14 uct insures, guarantees, or indemnifies against 

15 liability, loss of life, loss of health, or loss 

16 through damage to or destruction of property, 

17 including, but not limited to, surety bonds, life 

18 insurance, health insurance, title insurance, and 

19 property and casualty insurance (such as pri20 vate passenger or commercial automobile, 

21 homeowners, mortgage, commercial multiperil, 

22 general liability, professional liability, workers’ 

23 compensation, fire and allied lines, farm owners 

24 multiperil, aircraft, fidelity, surety, medical 


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1 malpractice, ocean marine, inland marine, and 

2 boiler and machinery insurance); and 

3 (B) is not a product or service of a bank 

4 that is— 

5 (i) a deposit product; 

6 (ii) a loan, discount, letter of credit, 

7 or other extension of credit; 

8 (iii) a trust or other fiduciary service; 

9 (iv) a qualified financial contract (as 

10 defined in or determined pursuant to sec11 tion 11(e)(8)(D)(i) of the Federal Deposit 

12 Insurance Act); or 

13 (v) a financial guaranty, except that 

14 this subparagraph (B) shall not apply to a 

15 product that includes an insurance compo16 nent such that if the product is offered or 

17 proposed to be offered by the bank as prin18 cipal— 

19 (I) it would be treated as a life 

20 insurance contract under section 7702 

21 of the Internal Revenue Code of 1986; 

22 or 

23 (II) in the event that the product 

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1 nancial contract, or a financial guar2 anty, it would qualify for treatment 

3 for losses incurred with respect to 

4 such product under section 832(b)(5) 

5 of the Internal Revenue Code of 1986, 

6 if the bank were subject to tax as an 

7 insurance company under section 831 

8 of that Code; or 

9 (3) any annuity contract, the income on which 

10 is subject to tax treatment under section 72 of the 

11 Internal Revenue Code of 1986. 

12 SEC. 305. TITLE INSURANCE ACTIVITIES OF NATIONAL 

13 BANKS AND THEIR AFFILIATES. 

14 (a) GENERAL PROHIBITION.—No national bank, and 

15 no subsidiary of a national bank, may engage in any activ16 ity involving the underwriting or sale of title insurance. 

17 (b) NONDISCRIMINATION PARITY EXCEPTION.— 

18 (1) IN GENERAL.—Notwithstanding any other 

19 provision of law (including section 104 of this Act), 

20 in the case of any State in which banks organized 

21 under the laws of such State are authorized to sell 

22 title insurance as agency, a national bank and a sub23 sidiary of a national bank may sell title insurance as 

24 agent in such State, but only in the same manner, 

25 to the same extent, and under the same restrictions 


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1 as such State banks are authorized to sell title in2 surance as agent in such State. 

3 (2) COORDINATION WITH ‘‘WILDCARD’’ PROVI4 SION.—A State law which authorizes State banks to 

5 engage in any activities in such State in which a na6 tional bank may engage shall not be treated as a 

7 statute which authorizes State banks to sell title in8 surance as agent, for purposes of paragraph (1). 

9 (c) GRANDFATHERING WITH CONSISTENT REGULA10 TION.— 

11 (1) IN GENERAL.—Except as provided in para12 graphs (2) and (3) and notwithstanding subsections 

13 (a) and (b), a national bank, and a subsidiary of a 

14 national bank, may conduct title insurance activities 

15 which such national bank or subsidiary was actively 

16 and lawfully conducting before the date of the enact17 ment of this Act. 

18 (2) INSURANCE AFFILIATE.—In the case of a 

19 national bank which has an affiliate which provides 

20 insurance as principal and is not a subsidiary of the 

21 bank, the national bank and any subsidiary of the 

22 national bank may not engage in the underwriting of 

23 title insurance pursuant to paragraph (1). 

24 (3) INSURANCE SUBSIDIARY.—In the case of a 

25 national bank which has a subsidiary which provides 


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1 insurance as principal and has no affiliate other 

2 than a subsidiary which provides insurance as prin3 cipal, the national bank may not directly engage in 

4 any activity involving the underwriting of title insur5 ance. 

6 (d) ‘‘AFFILIATE’’ AND ‘‘SUBSIDIARY’’ DEFINED.— 

7 For purposes of this section, the terms ‘‘affiliate’’ and 

8 ‘‘subsidiary’’ have the same meanings as in section 2 of 

9 the Bank Holding Company Act of 1956. 

10 (e) RULE OF CONSTRUCTION.—No provision of this 

11 Act or any other Federal law shall be construed as super12 seding or affecting a State law which was in effect before 

13 the date of the enactment of this Act and which prohibits 

14 title insurance from being offered, provided, or sold in 

15 such State, or from being underwritten with respect to 

16 real property in such State, by any person whatsoever. 

17 SEC. 306. EXPEDITED AND EQUALIZED DISPUTE RESOLU18 TION FOR FEDERAL REGULATORS. 

19 (a) FILING IN COURT OF APPEALS.—In the case of 

20 a regulatory conflict between a State insurance regulator 

21 and a Federal regulator as to whether any product is or 

22 is not insurance, as defined in section 304(c) of this Act, 

23 or whether a State statute, regulation, order, or interpre24 tation regarding any insurance sales or solicitation activity 

25 is properly treated as preempted under Federal law, either 


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1 regulator may seek expedited judicial review of such deter2 mination by the United States Court of Appeals for the 

3 circuit in which the State is located or in the United 

4 States Court of Appeals for the District of Columbia Cir5 cuit by filing a petition for review in such court. 

6 (b) EXPEDITED REVIEW.—The United States Court 

7 of Appeals in which a petition for review is filed in accord8 ance with subsection (a) shall complete all action on such 

9 petition, including rendering a judgment, before the end 

10 of the 60-day period beginning on the date on which such 

11 petition is filed, unless all parties to such proceeding agree 

12 to any extension of such period. 

13 (c) SUPREME COURT REVIEW.—Any request for cer14 tiorari to the Supreme Court of the United States of any 

15 judgment of a United States Court of Appeals with respect 

16 to a petition for review under this section shall be filed 

17 with the Supreme Court of the United States as soon as 

18 practicable after such judgment is issued. 

19 (d) STATUTE OF LIMITATION.—No petition may be 

20 filed under this section challenging an order, ruling, deter21 mination, or other action of a Federal regulator or State 

22 insurance regulator after the later of— 

23 (1) the end of the 12-month period beginning 

24 on the date on which the first public notice is made 


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1 of such order, ruling, determination or other action 

2 in its final form; or 

3 (2) the end of the 6-month period beginning on 

4 the date on which such order, ruling, determination, 

5 or other action takes effect. 

6 (e) STANDARD OF REVIEW.—The court shall decide 

7 a petition filed under this section based on its review on 

8 the merits of all questions presented under State and Fed9 eral law, including the nature of the product or activity 

10 and the history and purpose of its regulation under State 

11 and Federal law, without unequal deference. 

12 SEC. 307. CONSUMER PROTECTION REGULATIONS. 

13 The Federal Deposit Insurance Act (12 U.S.C. 1811 

14 et seq.) is amended by inserting after section 46 (as added 

15 by section 122(b) of this Act) the following new section: 

16 ‘‘SEC. 47. CONSUMER PROTECTION REGULATIONS. 

17 ‘‘(a) REGULATIONS REQUIRED.— 

18 ‘‘(1) IN GENERAL.—The Federal banking agen19 cies shall prescribe and publish in final form, before 

20 the end of the 1-year period beginning on the date 

21 of the enactment of the Financial Services Act of 

22 1999, consumer protection regulations (which the 

23 agencies jointly determine to be appropriate) that— 

24 ‘‘(A) apply to retail sales practices, solici25 tations, advertising, or offers of any insurance 


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1 product by any insured depository institution or 

2 wholesale financial institution or any person 

3 who is engaged in such activities at an office of 

4 the institution or on behalf of the institution; 

5 and 

6 ‘‘(B) are consistent with the requirements 

7 of this Act and provide such additional protec8 tions for consumers to whom such sales, solici9 tations, advertising, or offers are directed as 

10 the agency determines to be appropriate. 

11 ‘‘(2) APPLICABILITY TO SUBSIDIARIES.—The 

12 regulations prescribed pursuant to paragraph (1) 

13 shall extend such protections to any subsidiaries of 

14 an insured depository institution, as deemed appro15 priate by the regulators referred to in paragraph (3), 

16 where such extension is determined to be necessary 

17 to ensure the consumer protections provided by this 

18 section. 

19 ‘‘(3) CONSULTATION AND JOINT REGULA20 TIONS.—The Federal banking agencies shall consult 

21 with each other and prescribe joint regulations pur22 suant to paragraph (1), after consultation with the 

23 State insurance regulators, as appropriate. 

24 ‘‘(b) SALES PRACTICES.—The regulations prescribed 

25 pursuant to subsection (a) shall include anticoercion rules 


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1 applicable to the sale of insurance products which prohibit 

2 an insured depository institution from engaging in any 

3 practice that would lead a consumer to believe an exten4 sion of credit, in violation of section 106(b) of the Bank 

5 Holding Company Act Amendments of 1970, is condi6 tional upon— 

7 ‘‘(1) the purchase of an insurance product from 

8 the institution or any of its affiliates; or 

9 ‘‘(2) an agreement by the consumer not to ob10 tain, or a prohibition on the consumer from obtain11 ing, an insurance product from an unaffiliated enti12 ty. 

13 ‘‘(c) DISCLOSURES AND ADVERTISING.—The regula14 tions prescribed pursuant to subsection (a) shall include 

15 the following provisions relating to disclosures and adver16 tising in connection with the initial purchase of an insur17 ance product: 

18 ‘‘(1) DISCLOSURES.— 

19 ‘‘(A) IN GENERAL.—Requirements that the 

20 following disclosures be made orally and in writ21 ing before the completion of the initial sale and, 

22 in the case of clause (iii), at the time of applica23 tion for an extension of credit: 

24 ‘‘(i) UNINSURED STATUS.—As appro25 priate, the product is not insured by the 


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1 Federal Deposit Insurance Corporation, 

2 the United States Government, or the in3 sured depository institution. 

4 ‘‘(ii) INVESTMENT RISK.—In the case 

5 of a variable annuity or other insurance 

6 product which involves an investment risk, 

7 that there is an investment risk associated 

8 with the product, including possible loss of 

9 value. 

10 ‘‘(iii) COERCION.—The approval of an 

11 extension of credit may not be conditioned 

12 on— 

13 ‘‘(I) the purchase of an insurance 

14 product from the institution in which 

15 the application for credit is pending or 

16 any of its affiliates or subsidiaries; or 

17 ‘‘(II) an agreement by the con18 sumer not to obtain, or a prohibition 

19 on the consumer from obtaining, an 

20 insurance product from an unaffili21 ated entity. 

22 ‘‘(B) MAKING DISCLOSURE READILY UN23 DERSTANDABLE.—Regulations prescribed under 

24 subparagraph (A) shall encourage the use of 

25 disclosure that is conspicuous, simple, direct, 


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1 and readily understandable, such as the fol2 lowing: 

3 ‘‘(i) ‘NOT FDIC—INSURED’. 

4 ‘‘(ii) ‘NOT GUARANTEED BY THE 

5 BANK’. 

6 ‘‘(iii) ‘MAY GO DOWN IN VALUE’. 

7 ‘‘(iv) ‘NOT INSURED BY ANY 

8 GOVERNMENT AGENCY’. 

9 ‘‘(C) ADJUSTMENTS FOR ALTERNATIVE

10 METHODS OF PURCHASE.—In prescribing the 

11 requirements under subparagraphs (A) and 

12 (D), necessary adjustments shall be made for 

13 purchase in person, by telephone, or by elec14 tronic media to provide for the most appro15 priate and complete form of disclosure and ac16 knowledgments. 

17 ‘‘(D) CONSUMER ACKNOWLEDGMENT.—A 

18 requirement that an insured depository institu19 tion shall require any person selling an insur20 ance product at any office of, or on behalf of, 

21 the institution to obtain, at the time a con22 sumer receives the disclosures required under 

23 this paragraph or at the time of the initial pur24 chase by the consumer of such product, an ac25 knowledgment by such consumer of the receipt 


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1 of the disclosure required under this subsection 

2 with respect to such product. 

3 ‘‘(2) PROHIBITION ON MISREPRESENTA4 TIONS.—A prohibition on any practice, or any adver5 tising, at any office of, or on behalf of, the insured 

6 depository institution, or any subsidiary as appro7 priate, which could mislead any person or otherwise 

8 cause a reasonable person to reach an erroneous be9 lief with respect to— 

10 ‘‘(A) the uninsured nature of any insur11 ance product sold, or offered for sale, by the in12 stitution or any subsidiary of the institution; 

13 ‘‘(B) in the case of a variable annuity or 

14 other insurance product that involves an invest15 ment risk, the investment risk associated with 

16 any such product; or 

17 ‘‘(C) in the case of an institution or sub18 sidiary at which insurance products are sold or 

19 offered for sale, the fact that— 

20 ‘‘(i) the approval of an extension of 

21 credit to a customer by the institution or 

22 subsidiary may not be conditioned on the 

23 purchase of an insurance product by such 

24 customer from the institution or sub25 sidiary; and 


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1 ‘‘(ii) the customer is free to purchase 

2 the insurance product from another 

3 source.’’. 

4 ‘‘(d) SEPARATION OF BANKING AND NONBANKING

5 ACTIVITIES.— 

6 ‘‘(1) REGULATIONS REQUIRED.—The regula7 tions prescribed pursuant to subsection (a) shall in8 clude such provisions as the Federal banking agen9 cies consider appropriate to ensure that the routine 

10 acceptance of deposits is kept, to the extent prac11 ticable, physically segregated from insurance product 

12 activity. 

13 ‘‘(2) REQUIREMENTS.—Regulations prescribed 

14 pursuant to paragraph (1) shall include the fol15 lowing: 

16 ‘‘(A) SEPARATE SETTING.—A clear delin17 eation of the setting in which, and the cir18 cumstances under which, transactions involving 

19 insurance products should be conducted in a lo20 cation physically segregated from an area where 

21 retail deposits are routinely accepted. 

22 ‘‘(B) REFERRALS.—Standards which per23 mit any person accepting deposits from the 

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1 stitution to refer a customer who seeks to pur2 chase any insurance product to a qualified per3 son who sells such product, only if the person 

4 making the referral receives no more than a 

5 one-time nominal fee of a fixed dollar amount 

6 for each referral that does not depend on 

7 whether the referral results in a transaction. 

8 ‘‘(C) QUALIFICATION AND LICENSING RE9 QUIREMENTS.—Standards prohibiting any in10 sured depository institution from permitting 

11 any person to sell or offer for sale any insur12 ance product in any part of any office of the in13 stitution, or on behalf of the institution, unless 

14 such person is appropriately qualified and li15 censed. 

16 ‘‘(e) DOMESTIC VIOLENCE DISCRIMINATION PROHI17 BITION.— 

18 ‘‘(1) IN GENERAL.—In the case of an applicant 

19 for, or an insured under, any insurance product de20 scribed in paragraph (2), the status of the applicant 

21 or insured as a victim of domestic violence, or as a 

22 provider of services to victims of domestic violence, 

23 shall not be considered as a criterion in any decision 

24 with regard to insurance underwriting, pricing, re25 newal, or scope of coverage of insurance policies, or 


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1 payment of insurance claims, except as required or 

2 expressly permitted under State law. 

3 ‘‘(2) SCOPE OF APPLICATION.—The prohibition 

4 contained in paragraph (1) shall apply to any insur5 ance product which is sold or offered for sale, as 

6 principal, agent, or broker, by any insured deposi7 tory institution or wholesale financial institution or 

8 any person who is engaged in such activities at an 

9 office of the institution or on behalf of the institu10 tion. 

11 ‘‘(3) SENSE OF THE CONGRESS.—It is the sense 

12 of the Congress that, by the end of the 30-month pe13 riod beginning on the date of the enactment of this 

14 Act, the States should enact prohibitions against dis15 crimination with respect to insurance products that 

16 are at least as strict as the prohibitions contained in 

17 paragraph (1). 

18 ‘‘(4) DOMESTIC VIOLENCE DEFINED.—For pur19 poses of this subsection, the term ‘domestic violence’ 

20 means the occurrence of one or more of the following 

21 acts by a current or former family member, house22 hold member, intimate partner, or caretaker: 

23 ‘‘(A) Attempting to cause or causing or 

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1 vere emotional distress, psychological trauma, 

2 rape, or sexual assault. 

3 ‘‘(B) Engaging in a course of conduct or 

4 repeatedly committing acts toward another per5 son, including following the person without 

6 proper authority, under circumstances that 

7 place the person in reasonable fear of bodily in8 jury or physical harm. 

9 ‘‘(C) Subjecting another person to false 

10 imprisonment. 

11 ‘‘(D) Attempting to cause or cause damage 

12 to property so as to intimidate or attempt to 

13 control the behavior of another person. 

14 ‘‘(f) CONSUMER GRIEVANCE PROCESS.—The Federal 

15 banking agencies shall jointly establish a consumer com16 plaint mechanism, for receiving and expeditiously address17 ing consumer complaints alleging a violation of regulations 

18 issued under the section, which shall— 

19 ‘‘(1) establish a group within each regulatory 

20 agency to receive such complaints; 

21 ‘‘(2) develop procedures for investigating such 

22 complaints; 

23 ‘‘(3) develop procedures for informing con24 sumers of rights they may have in connection with 

25 such complaints; and 


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1 ‘‘(4) develop procedures for addressing concerns 

2 raised by such complaints, as appropriate, including 

3 procedures for the recovery of losses to the extent 

4 appropriate. 

5 ‘‘(g) EFFECT ON OTHER AUTHORITY.— 

6 ‘‘(1) IN GENERAL.—No provision of this section 

7 shall be construed as granting, limiting, or otherwise 

8 affecting— 

9 ‘‘(A) any authority of the Securities and 

10 Exchange Commission, any self-regulatory or11 ganization, the Municipal Securities Rule12 making Board, or the Secretary of the Treasury 

13 under any Federal securities law; or 

14 ‘‘(B) except as provided in paragraph (2), 

15 any authority of any State insurance commis16 sioner or other State authority under any State 

17 law. 

18 ‘‘(2) COORDINATION WITH STATE LAW.— 

19 ‘‘(A) IN GENERAL.—Except as provided in 

20 subparagraph (B), regulations prescribed by a 

21 Federal banking agency under this section shall 

22 not apply to retail sales, solicitations, adver23 tising, or offers of any insurance product by 

24 any insured depository institution or wholesale 

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1 gaged in such activities at an office of such in2 stitution or on behalf of the institution, in a 

3 State where the State has in effect statutes, 

4 regulations, orders, or interpretations, that are 

5 inconsistent with or contrary to the regulations 

6 prescribed by the Federal banking agencies. 

7 ‘‘(B) PREEMPTION.—If, with respect to 

8 any provision of the regulations prescribed 

9 under this section, the Board of Governors of 

10 the Federal Reserve System, the Comptroller of 

11 the Currency, and the Board of Directors of the 

12 Federal Deposit Insurance Corporation deter13 mine jointly that the protection afforded by 

14 such provision for consumers is greater than 

15 the protection provided by a comparable provi16 sion of the statutes, regulations, orders, or in17 terpretations referred to in subparagraph (A) of 

18 any State, such provision of the regulations pre19 scribed under this section shall supersede the 

20 comparable provision of such State statute, reg21 ulation, order, or interpretation. 

22 ‘‘(h) INSURANCE PRODUCT DEFINED.—For purposes 

23 of this section, the term ‘insurance product’ includes an 

24 annuity contract the income of which is subject to tax 


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1 treatment under section 72 of the Internal Revenue Code 

2 of 1986.’’. 

3 SEC. 308. CERTAIN STATE AFFILIATION LAWS PREEMPTED 

4 FOR INSURANCE COMPANIES AND AFFILI5 ATES. 

6 Except as provided in section 104(a)(2), no State 

7 may, by law, regulation, order, interpretation, or other8 wise— 

9 (1) prevent or significantly interfere with the 

10 ability of any insurer, or any affiliate of an insurer 

11 (whether such affiliate is organized as a stock com12 pany, mutual holding company, or otherwise), to be13 come a financial holding company or to acquire con14 trol of an insured depository institution; 

15 (2) limit the amount of an insurer’s assets that 

16 may be invested in the voting securities of an in17 sured depository institution (or any company which 

18 controls such institution), except that the laws of an 

19 insurer’s State of domicile may limit the amount of 

20 such investment to an amount that is not less than 

21 5 percent of the insurer’s admitted assets; or 

22 (3) prevent, significantly interfere with, or have 

23 the authority to review, approve, or disapprove a 

24 plan of reorganization by which an insurer proposes 

25 to reorganize from mutual form to become a stock 


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1 insurer (whether as a direct or indirect subsidiary of 

2 a mutual holding company or otherwise) unless such 

3 State is the State of domicile of the insurer. 

4 SEC. 309. INTERAGENCY CONSULTATION. 

5 (a) PURPOSE.—It is the intention of the Congress 

6 that the Board of Governors of the Federal Reserve Sys7 tem, as the umbrella supervisor for financial holding com8 panies, and the State insurance regulators, as the func9 tional regulators of companies engaged in insurance activi10 ties, coordinate efforts to supervise companies that control 

11 both a depository institution and a company engaged in 

12 insurance activities regulated under State law. In par13 ticular, Congress believes that the Board and the State 

14 insurance regulators should share, on a confidential basis, 

15 information relevant to the supervision of companies that 

16 control both a depository institution and a company en17 gaged in insurance activities, including information re18 garding the financial health of the consolidated organiza19 tion and information regarding transactions and relation20 ships between insurance companies and affiliated deposi21 tory institutions. The appropriate Federal banking agen22 cies for depository institutions should also share, on a con23 fidential basis, information with the relevant State insur24 ance regulators regarding transactions and relationships 

25 between depository institutions and affiliated companies 


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1 engaged in insurance activities. The purpose of this sec2 tion is to encourage this coordination and confidential 

3 sharing of information, and to thereby improve both the 

4 efficiency and the quality of the supervision of financial 

5 holding companies and their affiliated depository institu6 tions and companies engaged in insurance activities. 

7 (b) EXAMINATION RESULTS AND OTHER INFORMA8 TION.— 

9 (1) INFORMATION OF THE BOARD.—Upon the 

10 request of the appropriate insurance regulator of 

11 any State, the Board may provide any information 

12 of the Board regarding the financial condition, risk 

13 management policies, and operations of any financial 

14 holding company that controls a company that is en15 gaged in insurance activities and is regulated by 

16 such State insurance regulator, and regarding any 

17 transaction or relationship between such an insur18 ance company and any affiliated depository institu19 tion. The Board may provide any other information 

20 to the appropriate State insurance regulator that the 

21 Board believes is necessary or appropriate to permit 

22 the State insurance regulator to administer and en23 force applicable State insurance laws. 

24 (2) BANKING AGENCY INFORMATION.—Upon 

25 the request of the appropriate insurance regulator of 


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1 any State, the appropriate Federal banking agency 

2 may provide any information of the agency regard3 ing any transaction or relationship between a deposi4 tory institution supervised by such Federal banking 

5 agency and any affiliated company that is engaged 

6 in insurance activities regulated by such State insur7 ance regulator. The appropriate Federal banking 

8 agency may provide any other information to the ap9 propriate State insurance regulator that the agency 

10 believes is necessary or appropriate to permit the 

11 State insurance regulator to administer and enforce 

12 applicable State insurance laws. 

13 (3) STATE INSURANCE REGULATOR INFORMA14 TION.—Upon the request of the Board or the appro15 priate Federal banking agency, a State insurance 

16 regulator may provide any examination or other re17 ports, records, or other information to which such 

18 insurance regulator may have access with respect to 

19 a company which— 

20 (A) is engaged in insurance activities and 

21 regulated by such insurance regulator; and 

22 (B) is an affiliate of an insured depository 

23 institution, wholesale financial institution, or fi24 nancial holding company. 


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1 (c) CONSULTATION.—Before making any determina2 tion relating to the initial affiliation of, or the continuing 

3 affiliation of, an insured depository institution, wholesale 

4 financial institution, or financial holding company with a 

5 company engaged in insurance activities, the appropriate 

6 Federal banking agency shall consult with the appropriate 

7 State insurance regulator of such company and take the 

8 views of such insurance regulator into account in making 

9 such determination. 

10 (d) EFFECT ON OTHER AUTHORITY.—Nothing in 

11 this section shall limit in any respect the authority of the 

12 appropriate Federal banking agency with respect to an in13 sured depository institution, wholesale financial institu14 tion, or bank holding company or any affiliate thereof 

15 under any provision of law. 

16 (e) CONFIDENTIALITY AND PRIVILEGE.— 

17 (1) CONFIDENTIALITY.—The appropriate Fed18 eral banking agency shall not provide any informa19 tion or material that is entitled to confidential treat20 ment under applicable Federal banking agency regu21 lations, or other applicable law, to a State insurance 

22 regulator unless such regulator agrees to maintain 

23 the information or material in confidence and to 

24 take all reasonable steps to oppose any effort to se25 cure disclosure of the information or material by the 


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1 regulator. The appropriate Federal banking agency 

2 shall treat as confidential any information or mate3 rial obtained from a State insurance regulator that 

4 is entitled to confidential treatment under applicable 

5 State regulations, or other applicable law, and take 

6 all reasonable steps to oppose any effort to secure 

7 disclosure of the information or material by the Fed8 eral banking agency. 

9 (2) PRIVILEGE.—The provision pursuant to this 

10 section of information or material by a Federal 

11 banking agency or State insurance regulator shall 

12 not constitute a waiver of, or otherwise affect, any 

13 privilege to which the information or material is oth14 erwise subject. 

15 (f) DEFINITIONS.—For purposes of this section, the 

16 following definitions shall apply: 

17 (1) APPROPRIATE FEDERAL BANKING AGENCY; 

18 INSURED DEPOSITORY INSTITUTION.—The terms 

19 ‘‘appropriate Federal banking agency’’ and ‘‘insured 

20 depository institution’’ have the same meanings as 

21 in section 3 of the Federal Deposit Insurance Act. 

22 (2) BOARD; FINANCIAL HOLDING COMPANY; 

23 AND WHOLESALE FINANCIAL INSTITUTION.—The 

24 terms ‘‘Board’’, ‘‘financial holding company’’, and 

25 ‘‘wholesale financial institution’’ have the same 


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1 meanings as in section 2 of the Bank Holding Com2 pany Act of 1956. 

3 SEC. 310. DEFINITION OF STATE. 

4 For purposes of this subtitle, the term ‘‘State’’ means 

5 any State of the United States, the District of Columbia, 

6 any territory of the United States, Puerto Rico, Guam, 

7 American Samoa, the Trust Territory of the Pacific Is8 lands, the Virgin Islands, and the Northern Mariana Is9 lands. 

10 Subtitle B—Redomestication of 

11 Mutual Insurers 

12 SEC. 311. GENERAL APPLICATION. 

13 This subtitle shall only apply to a mutual insurance 

14 company in a State which has not enacted a law which 

15 expressly establishes reasonable terms and conditions for 

16 a mutual insurance company domiciled in such State to 

17 reorganize into a mutual holding company. 

18 SEC. 312. REDOMESTICATION OF MUTUAL INSURERS. 

19 (a) REDOMESTICATION.—A mutual insurer organized 

20 under the laws of any State may transfer its domicile to 

21 a transferee domicile as a step in a reorganization in 

22 which, pursuant to the laws of the transferee domicile and 

23 consistent with the standards in subsection (f), the mutual 

24 insurer becomes a stock insurer that is a direct or indirect 

25 subsidiary of a mutual holding company. 


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1 (b) RESULTING DOMICILE.—Upon complying with 

2 the applicable law of the transferee domicile governing 

3 transfers of domicile and completion of a transfer pursu4 ant to this section, the mutual insurer shall cease to be 

5 a domestic insurer in the transferor domicile and, as a 

6 continuation of its corporate existence, shall be a domestic 

7 insurer of the transferee domicile. 

8 (c) LICENSES PRESERVED.—The certificate of au9 thority, agents’ appointments and licenses, rates, approv10 als and other items that a licensed State allows and that 

11 are in existence immediately prior to the date that a re12 domesticating insurer transfers its domicile pursuant to 

13 this subtitle shall continue in full force and effect upon 

14 transfer, if the insurer remains duly qualified to transact 

15 the business of insurance in such licensed State. 

16 (d) EFFECTIVENESS OF OUTSTANDING POLICIES

17 AND CONTRACTS.— 

18 (1) IN GENERAL.—All outstanding insurance 

19 policies and annuities contracts of a redomesticating 

20 insurer shall remain in full force and effect and need 

21 not be endorsed as to the new domicile of the in22 surer, unless so ordered by the State insurance regu23 lator of a licensed State, and then only in the case 

24 of outstanding policies and contracts whose owners 

25 reside in such licensed State. 


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1 (2) FORMS.— 

2 (A) Applicable State law may require a re3 domesticating insurer to file new policy forms 

4 with the State insurance regulator of a licensed 

5 State on or before the effective date of the 

6 transfer. 

7 (B) Notwithstanding subparagraph (A), a 

8 redomesticating insurer may use existing policy 

9 forms with appropriate endorsements to reflect 

10 the new domicile of the redomesticating insurer 

11 until the new policy forms are approved for use 

12 by the State insurance regulator of such li13 censed State. 

14 (e) NOTICE.—A redomesticating insurer shall give 

15 notice of the proposed transfer to the State insurance reg16 ulator of each licensed State and shall file promptly any 

17 resulting amendments to corporate documents required to 

18 be filed by a foreign licensed mutual insurer with the in19 surance regulator of each such licensed State. 

20 (f) PROCEDURAL REQUIREMENTS.—No mutual in21 surer may redomesticate to another State and reorganize 

22 into a mutual holding company pursuant to this section 

23 unless the State insurance regulator of the transferee 

24 domicile determines that the plan of reorganization of the 

25 insurer includes the following requirements: 


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1 (1) APPROVAL BY BOARD OF DIRECTORS AND

2 POLICYHOLDERS.—The reorganization is approved 

3 by at least a majority of the board of directors of 

4 the mutual insurer and at least a majority of the 

5 policyholders who vote after notice, disclosure of the 

6 reorganization and the effects of the transaction on 

7 policyholder contractual rights, and reasonable op8 portunity to vote, in accordance with such notice, 

9 disclosure, and voting procedures as are approved by 

10 the State insurance regulator of the transferee domi11 cile. 

12 (2) CONTINUED VOTING CONTROL BY POLICY13 HOLDERS; REVIEW OF PUBLIC STOCK OFFERING.— 

14 After the consummation of a reorganization, the pol15 icyholders of the reorganized insurer shall have the 

16 same voting rights with respect to the mutual hold17 ing company as they had before the reorganization 

18 with respect to the mutual insurer. With respect to 

19 an initial public offering of stock, the offering shall 

20 be conducted in compliance with applicable securities 

21 laws and in a manner approved by the State insur22 ance regulator of the transferee domicile. 

23 (3) AWARD OF STOCK OR GRANT OF OPTIONS

24 TO OFFICERS AND DIRECTORS.—For a period of 6 

25 months after completion of an initial public offering, 


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1 neither a stock holding company nor the converted 

2 insurer shall award any stock options or stock 

3 grants to persons who are elected officers or direc4 tors of the mutual holding company, the stock hold5 ing company, or the converted insurer, except with 

6 respect to any such awards or options to which a 

7 person is entitled as a policyholder and as approved 

8 by the State insurance regulator of the transferee 

9 domicile. 

10 (4) CONTRACTUAL RIGHTS.—Upon reorganiza11 tion into a mutual holding company, the contractual 

12 rights of the policyholders are preserved. 

13 (5) FAIR AND EQUITABLE TREATMENT OF POL14 ICYHOLDERS.—The reorganization is approved as 

15 fair and equitable to the policyholders by the insur16 ance regulator of the transferee domicile. 

17 SEC. 313. EFFECT ON STATE LAWS RESTRICTING REDOMES18 TICATION. 

19 (a) IN GENERAL.—Unless otherwise permitted by 

20 this subtitle, State laws of any transferor domicile that 

21 conflict with the purposes and intent of this subtitle are 

22 preempted, including but not limited to— 

23 (1) any law that has the purpose or effect of 

24 impeding the activities of, taking any action against, 

25 or applying any provision of law or regulation to, 


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1 any insurer or an affiliate of such insurer because 

2 that insurer or any affiliate plans to redomesticate, 

3 or has redomesticated, pursuant to this subtitle; 

4 (2) any law that has the purpose or effect of 

5 impeding the activities of, taking action against, or 

6 applying any provision of law or regulation to, any 

7 insured or any insurance licensee or other inter8 mediary because such person has procured insurance 

9 from or placed insurance with any insurer or affil10 iate of such insurer that plans to redomesticate, or 

11 has redomesticated, pursuant to this subtitle, but 

12 only to the extent that such law would treat such in13 sured licensee or other intermediary differently than 

14 if the person procured insurance from, or placed in15 surance with, an insured licensee or other inter16 mediary which had not redomesticated; 

17 (3) any law that has the purpose or effect of 

18 terminating, because of the redomestication of a mu19 tual insurer pursuant to this subtitle, any certificate 

20 of authority, agent appointment or license, rate ap21 proval, or other approval, of any State insurance 

22 regulator or other State authority in existence imme23 diately prior to the redomestication in any State 

24 other than the transferee domicile. 


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1 (b) DIFFERENTIAL TREATMENT PROHIBITED.—No 

2 State law, regulation, interpretation, or functional equiva3 lent thereof, of a State other than a transferee domicile 

4 may treat a redomesticating or redomesticated insurer or 

5 any affiliate thereof any differently than an insurer oper6 ating in that State that is not a redomesticating or re7 domesticated insurer. 

8 (c) LAWS PROHIBITING OPERATIONS.—If any li9 censed State fails to issue, delays the issuance of, or seeks 

10 to revoke an original or renewal certificate of authority 

11 of a redomesticated insurer immediately following re12 domestication, except on grounds and in a manner con13 sistent with its past practices regarding the issuance of 

14 certificates of authority to foreign insurers that are not 

15 redomesticating, then the redomesticating insurer shall be 

16 exempt from any State law of the licensed State to the 

17 extent that such State law or the operation of such State 

18 law would make unlawful, or regulate, directly or indi19 rectly, the operation of the redomesticated insurer, except 

20 that such licensed State may require the redomesticated 

21 insurer to— 

22 (1) comply with the unfair claim settlement 

23 practices law of the licensed State; 

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1 censed insurers or policyholders under the laws of 

2 the licensed State; 

3 (3) register with and designate the State insur4 ance regulator as its agent solely for the purpose of 

5 receiving service of legal documents or process; 

6 (4) submit to an examination by the State in7 surance regulator in any licensed state in which the 

8 redomesticated insurer is doing business to deter9 mine the insurer’s financial condition, if— 

10 (A) the State insurance regulator of the 

11 transferee domicile has not begun an examina12 tion of the redomesticated insurer and has not 

13 scheduled such an examination to begin before 

14 the end of the 1-year period beginning on the 

15 date of the redomestication; and 

16 (B) any such examination is coordinated to 

17 avoid unjustified duplication and repetition; 

18 (5) comply with a lawful order issued in— 

19 (A) a delinquency proceeding commenced 

20 by the State insurance regulator of any licensed 

21 State if there has been a judicial finding of fi22 nancial impairment under paragraph (7); or 

23 (B) a voluntary dissolution proceeding; 

24 (6) comply with any State law regarding decep25 tive, false, or fraudulent acts or practices, except 


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1 that if the licensed State seeks an injunction regard2 ing the conduct described in this paragraph, such in3 junction must be obtained from a court of competent 

4 jurisdiction as provided in section 314(a); 

5 (7) comply with an injunction issued by a court 

6 of competent jurisdiction, upon a petition by the 

7 State insurance regulator alleging that the redomes8 ticating insurer is in hazardous financial condition 

9 or is financially impaired; 

10 (8) participate in any insurance insolvency 

11 guaranty association on the same basis as any other 

12 insurer licensed in the licensed State; and 

13 (9) require a person acting, or offering to act, 

14 as an insurance licensee for a redomesticated insurer 

15 in the licensed State to obtain a license from that 

16 State, except that such State may not impose any 

17 qualification or requirement that discriminates 

18 against a nonresident insurance licensee. 

19 SEC. 314. OTHER PROVISIONS. 

20 (a) JUDICIAL REVIEW.—The appropriate United 

21 States district court shall have exclusive jurisdiction over 

22 litigation arising under this section involving any redomes23 ticating or redomesticated insurer. 

24 (b) SEVERABILITY.—If any provision of this section, 

25 or the application thereof to any person or circumstances, 


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1 is held invalid, the remainder of the section, and the appli2 cation of such provision to other persons or circumstances, 

3 shall not be affected thereby. 

4 SEC. 315. DEFINITIONS. 

5 For purposes of this subtitle, the following definitions 

6 shall apply: 

7 (1) COURT OF COMPETENT JURISDICTION.— 

8 The term ‘‘court of competent jurisdiction’’ means a 

9 court authorized pursuant to section 314(a) to adju10 dicate litigation arising under this subtitle. 

11 (2) DOMICILE.—The term ‘‘domicile’’ means 

12 the State in which an insurer is incorporated, char13 tered, or organized. 

14 (3) INSURANCE LICENSEE.—The term ‘‘insur15 ance licensee’’ means any person holding a license 

16 under State law to act as insurance agent, subagent, 

17 broker, or consultant. 

18 (4) INSTITUTION.—The term ‘‘institution’’ 

19 means a corporation, joint stock company, limited li20 ability company, limited liability partnership, asso21 ciation, trust, partnership, or any similar entity. 

22 (5) LICENSED STATE.—The term ‘‘licensed 

23 State’’ means any State, the District of Columbia, 

24 American Samoa, Guam, Puerto Rico, or the United 

25 States Virgin Islands in which the redomesticating 


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1 insurer has a certificate of authority in effect imme2 diately prior to the redomestication. 

3 (6) MUTUAL INSURER.—The term ‘‘mutual in4 surer’’ means a mutual insurer organized under the 

5 laws of any State. 

6 (7) PERSON.—The term ‘‘person’’ means an in7 dividual, institution, government or governmental 

8 agency, State or political subdivision of a State, pub9 lic corporation, board, association, estate, trustee, or 

10 fiduciary, or other similar entity. 

11 (8) POLICYHOLDER.—The term ‘‘policyholder’’ 

12 means the owner of a policy issued by a mutual in13 surer, except that, with respect to voting rights, the 

14 term means a member of a mutual insurer or mu15 tual holding company granted the right to vote, as 

16 determined under applicable State law. 

17 (9) REDOMESTICATED INSURER.—The term 

18 ‘‘redomesticated insurer’’ means a mutual insurer 

19 that has redomesticated pursuant to this subtitle. 

20 (10) REDOMESTICATING INSURER.—The term 

21 ‘‘redomesticating insurer’’ means a mutual insurer 

22 that is redomesticating pursuant to this subtitle. 

23 (11) REDOMESTICATION OR TRANSFER.—The 

24 terms ‘‘redomestication’’ and ‘‘transfer’’ mean the 


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1 transfer of the domicile of a mutual insurer from 

2 one State to another State pursuant to this subtitle. 

3 (12) STATE INSURANCE REGULATOR.—The 

4 term ‘‘State insurance regulator’’ means the prin5 cipal insurance regulatory authority of a State, the 

6 District of Columbia, American Samoa, Guam, 

7 Puerto Rico, or the United States Virgin Islands. 

8 (13) STATE LAW.—The term ‘‘State law’’ 

9 means the statutes of any State, the District of Co10 lumbia, American Samoa, Guam, Puerto Rico, or the 

11 United States Virgin Islands and any regulation, 

12 order, or requirement prescribed pursuant to any 

13 such statute. 

14 (14) TRANSFEREE DOMICILE.—The term 

15 ‘‘transferee domicile’’ means the State to which a 

16 mutual insurer is redomesticating pursuant to this 

17 subtitle. 

18 (15) TRANSFEROR DOMICILE.—The term 

19 ‘‘transferor domicile’’ means the State from which a 

20 mutual insurer is redomesticating pursuant to this 

21 subtitle. 

22 SEC. 316. EFFECTIVE DATE. 

23 This subtitle shall take effect on the date of the en24 actment of this Act. 


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1 Subtitle C—National Association of 

2 Registered Agents and Brokers 

3 SEC. 321. STATE FLEXIBILITY IN MULTISTATE LICENSING 

4 REFORMS. 

5 (a) IN GENERAL.—The provisions of this subtitle 

6 shall take effect unless, not later than 3 years after the 

7 date of the enactment of this Act, at least a majority of 

8 the States— 

9 (1) have enacted uniform laws and regulations 

10 governing the licensure of individuals and entities 

11 authorized to sell and solicit the purchase of insur12 ance within the State; or 

13 (2) have enacted reciprocity laws and regula14 tions governing the licensure of nonresident individ15 uals and entities authorized to sell and solicit insur16 ance within those States. 

17 (b) UNIFORMITY REQUIRED.—States shall be deemed 

18 to have established the uniformity necessary to satisfy 

19 subsection (a)(1) if the States— 

20 (1) establish uniform criteria regarding the in21 tegrity, personal qualifications, education, training, 

22 and experience of licensed insurance producers, in23 cluding the qualification and training of sales per24 sonnel in ascertaining the appropriateness of a par25 ticular insurance product for a prospective customer; 


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1 (2) establish uniform continuing education re2 quirements for licensed insurance producers; 

3 (3) establish uniform ethics course require4 ments for licensed insurance producers in conjunc5 tion with the continuing education requirements 

6 under paragraph (2); 

7 (4) establish uniform criteria to ensure that an 

8 insurance product, including any annuity contract, 

9 sold to a consumer is suitable and appropriate for 

10 the consumer based on financial information dis11 closed by the consumer; and 

12 (5) do not impose any requirement upon any in13 surance producer to be licensed or otherwise quali14 fied to do business as a nonresident that has the ef15 fect of limiting or conditioning that producer’s ac16 tivities because of its residence or place of oper17 ations, except that counter-signature requirements 

18 imposed on nonresident producers shall not be 

19 deemed to have the effect of limiting or conditioning 

20 a producer’s activities because of its residence or 

21 place of operations under this section. 

22 (c) RECIPROCITY REQUIRED.—States shall be 

23 deemed to have established the reciprocity required to sat24 isfy subsection (a)(2) if the following conditions are met: 


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1 (1) ADMINISTRATIVE LICENSING PROCE2 DURES.—At least a majority of the States permit a 

3 producer that has a resident license for selling or so4 liciting the purchase of insurance in its home State 

5 to receive a license to sell or solicit the purchase of 

6 insurance in such majority of States as a non7 resident to the same extent that such producer is 

8 permitted to sell or solicit the purchase of insurance 

9 in its State, if the producer’s home State also 

10 awards such licenses on such a reciprocal basis, 

11 without satisfying any additional requirements other 

12 than submitting— 

13 (A) a request for licensure; 

14 (B) the application for licensure that the 

15 producer submitted to its home State; 

16 (C) proof that the producer is licensed and 

17 in good standing in its home State; and 

18 (D) the payment of any requisite fee to the 

19 appropriate authority. 

20 (2) CONTINUING EDUCATION REQUIRE21 MENTS.—A majority of the States accept an insur22 ance producer’s satisfaction of its home State’s con23 tinuing education requirements for licensed insur24 ance producers to satisfy the States’ own continuing 

25 education requirements if the producer’s home State 


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1 also recognizes the satisfaction of continuing edu2 cation requirements on such a reciprocal basis. 

3 (3) NO LIMITING NONRESIDENT REQUIRE4 MENTS.—A majority of the States do not impose 

5 any requirement upon any insurance producer to be 

6 licensed or otherwise qualified to do business as a 

7 nonresident that has the effect of limiting or condi8 tioning that producer’s activities because of its resi9 dence or place of operations, except that countersig10 nature requirements imposed on nonresident pro11 ducers shall not be deemed to have the effect of lim12 iting or conditioning a producer’s activities because 

13 of its residence or place of operations under this sec14 tion. 

15 (4) RECIPROCAL RECIPROCITY.—Each of the 

16 States that satisfies paragraphs (1), (2), and (3) 

17 grants reciprocity to residents of all of the other 

18 States that satisfy such paragraphs. 

19 (d) DETERMINATION.— 

20 (1) NAIC DETERMINATION.—At the end of the 

21 3-year period beginning on the date of the enact22 ment of this Act, the National Association of Insur23 ance Commissioners shall determine, in consultation 

24 with the insurance commissioners or chief insurance 

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1 formity or reciprocity required by subsections (b) 

2 and (c) has been achieved. 

3 (2) JUDICIAL REVIEW.—The appropriate 

4 United States district court shall have exclusive ju5 risdiction over any challenge to the National Asso6 ciation of Insurance Commissioners’ determination 

7 under this section and such court shall apply the 

8 standards set forth in section 706 of title 5, United 

9 States Code, when reviewing any such challenge. 

10 (e) CONTINUED APPLICATION.—If, at any time, the 

11 uniformity or reciprocity required by subsections (b) and 

12 (c) no longer exists, the provisions of this subtitle shall 

13 take effect 2 years after the date on which such uniformity 

14 or reciprocity ceases to exist, unless the uniformity or reci15 procity required by those provisions is satisfied before the 

16 expiration of that 2-year period. 

17 (f) SAVINGS PROVISION.—No provision of this sec18 tion shall be construed as requiring that any law, regula19 tion, provision, or action of any State which purports to 

20 regulate insurance producers, including any such law, reg21 ulation, provision, or action which purports to regulate un22 fair trade practices or establish consumer protections, in23 cluding countersignature laws, be altered or amended in 

24 order to satisfy the uniformity or reciprocity required by 

25 subsections (b) and (c), unless any such law, regulation, 


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1 provision, or action is inconsistent with a specific require2 ment of any such subsection and then only to the extent 

3 of such inconsistency. 

4 (g) UNIFORM LICENSING.—Nothing in this section 

5 shall be construed to require any State to adopt new or 

6 additional licensing requirements to achieve the uniformity 

7 necessary to satisfy subsection (a)(1). 

8 SEC. 322. NATIONAL ASSOCIATION OF REGISTERED 

9 AGENTS AND BROKERS. 

10 (a) ESTABLISHMENT.—There is established the Na11 tional Association of Registered Agents and Brokers 

12 (hereafter in this subtitle referred to as the ‘‘Associa13 tion’’). 

14 (b) STATUS.—The Association shall— 

15 (1) be a nonprofit corporation; 

16 (2) have succession until dissolved by an Act of 

17 Congress; 

18 (3) not be an agent or instrumentality of the 

19 United States Government; and 

20 (4) except as otherwise provided in this Act, be 

21 subject to, and have all the powers conferred upon 

22 a nonprofit corporation by the District of Columbia 

23 Nonprofit Corporation Act (D.C. Code, sec. 29y– 

24 1001 et seq.). 


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1 SEC. 323. PURPOSE. 

2 The purpose of the Association shall be to provide 

3 a mechanism through which uniform licensing, appoint4 ment, continuing education, and other insurance producer 

5 sales qualification requirements and conditions can be 

6 adopted and applied on a multistate basis, while pre7 serving the right of States to license, supervise, and dis8 cipline insurance producers and to prescribe and enforce 

9 laws and regulations with regard to insurance-related con10 sumer protection and unfair trade practices. 

11 SEC. 324. RELATIONSHIP TO THE FEDERAL GOVERNMENT. 

12 The Association shall be subject to the supervision 

13 and oversight of the National Association of Insurance 

14 Commissioners (hereafter in this subtitle referred to as the 

15 ‘‘NAIC’’). 

16 SEC. 325. MEMBERSHIP. 

17 (a) ELIGIBILITY.— 

18 (1) IN GENERAL.—Any State-licensed insurance 

19 producer shall be eligible to become a member in the 

20 Association. 

21 (2) INELIGIBILITY FOR SUSPENSION OR REV22 OCATION OF LICENSE.—Notwithstanding paragraph 

23 (1), a State-licensed insurance producer shall not be 

24 eligible to become a member if a State insurance 

25 regulator has suspended or revoked such producer’s 

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1 ceding the date on which such producer applies for 

2 membership. 

3 (3) RESUMPTION OF ELIGIBILITY.—Paragraph 

4 (2) shall cease to apply to any insurance producer 

5 if— 

6 (A) the State insurance regulator renews 

7 the license of such producer in the State in 

8 which the license was suspended or revoked; or 

9 (B) the suspension or revocation is subse10 quently overturned. 

11 (b) AUTHORITY TO ESTABLISH MEMBERSHIP CRI12 TERIA.—The Association shall have the authority to estab13 lish membership criteria that— 

14 (1) bear a reasonable relationship to the pur15 poses for which the Association was established; and 

16 (2) do not unfairly limit the access of smaller 

17 agencies to the Association membership. 

18 (c) ESTABLISHMENT OF CLASSES AND CAT19 EGORIES.— 

20 (1) CLASSES OF MEMBERSHIP.—The Associa21 tion may establish separate classes of membership, 

22 with separate criteria, if the Association reasonably 

23 determines that performance of different duties re24 quires different levels of education, training, or expe25 rience. 


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1 (2) CATEGORIES.—The Association may estab2 lish separate categories of membership for individ3 uals and for other persons. The establishment of any 

4 such categories of membership shall be based either 

5 on the types of licensing categories that exist under 

6 State laws or on the aggregate amount of business 

7 handled by an insurance producer. No special cat8 egories of membership, and no distinct membership 

9 criteria, shall be established for members which are 

10 insured depository institutions or wholesale financial 

11 institutions or for their employees, agents, or affili12 ates. 

13 (d) MEMBERSHIP CRITERIA.— 

14 (1) IN GENERAL.—The Association may estab15 lish criteria for membership which shall include 

16 standards for integrity, personal qualifications, edu17 cation, training, and experience. 

18 (2) MINIMUM STANDARD.—In establishing cri19 teria under paragraph (1), the Association shall con20 sider the highest levels of insurance producer quali21 fications established under the licensing laws of the 

22 States. 

23 (e) EFFECT OF MEMBERSHIP.—Membership in the 

24 Association shall entitle the member to licensure in each 

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1 ing licensing fees and, where applicable, bonding require2 ments, set by such State. 

3 (f) ANNUAL RENEWAL.—Membership in the Associa4 tion shall be renewed on an annual basis. 

5 (g) CONTINUING EDUCATION.—The Association shall 

6 establish, as a condition of membership, continuing edu7 cation requirements which shall be comparable to or great8 er than the continuing education requirements under the 

9 licensing laws of a majority of the States. 

10 (h) SUSPENSION AND REVOCATION.—The Associa11 tion may— 

12 (1) inspect and examine the records and offices 

13 of the members of the Association to determine com14 pliance with the criteria for membership established 

15 by the Association; and 

16 (2) suspend or revoke the membership of an in17 surance producer if— 

18 (A) the producer fails to meet the applica19 ble membership criteria of the Association; or 

20 (B) the producer has been subject to dis21 ciplinary action pursuant to a final adjudicatory 

22 proceeding under the jurisdiction of a State in23 surance regulator, and the Association con24 cludes that retention of membership in the As25 sociation would not be in the public interest. 


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1 (i) OFFICE OF CONSUMER COMPLAINTS.— 

2 (1) IN GENERAL.—The Association shall estab3 lish an office of consumer complaints that shall— 

4 (A) receive and investigate complaints 

5 from both consumers and State insurance regu6 lators related to members of the Association; 

7 and 

8 (B) recommend to the Association any dis9 ciplinary actions that the office considers appro10 priate, to the extent that any such rec11 ommendation is not inconsistent with State law. 

12 (2) RECORDS AND REFERRALS.—The office of 

13 consumer complaints of the Association shall— 

14 (A) maintain records of all complaints re15 ceived in accordance with paragraph (1) and 

16 make such records available to the NAIC and 

17 to each State insurance regulator for the State 

18 of residence of the consumer who filed the com19 plaint; and 

20 (B) refer, when appropriate, any such com21 plaint to any appropriate State insurance regu22 lator. 

23 (3) TELEPHONE AND OTHER ACCESS.—The of24 fice of consumer complaints shall maintain a toll-free 

25 telephone number for the purpose of this subsection 


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1 and, as practicable, other alternative means of com2 munication with consumers, such as an Internet 

3 home page. 

4 SEC. 326. BOARD OF DIRECTORS. 

5 (a) ESTABLISHMENT.—There is established the 

6 board of directors of the Association (hereafter in this sub7 title referred to as the ‘‘Board’’) for the purpose of gov8 erning and supervising the activities of the Association 

9 and the members of the Association. 

10 (b) POWERS.—The Board shall have such powers and 

11 authority as may be specified in the bylaws of the Associa12 tion. 

13 (c) COMPOSITION.— 

14 (1) MEMBERS.—The Board shall be composed 

15 of seven members appointed by the NAIC. 

16 (2) REQUIREMENT.—At least four of the mem17 bers of the Board shall have significant experience 

18 with the regulation of commercial lines of insurance 

19 in at least 1 of the 20 States in which the greatest 

20 total dollar amount of commercial-lines insurance is 

21 placed in the United States. 

22 (3) INITIAL BOARD MEMBERSHIP.— 

23 (A) IN GENERAL.—If, by the end of the 2- 

24 year period beginning on the date of the enact25 ment of this Act, the NAIC has not appointed 


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1 the initial seven members of the Board of the 

2 Association, the initial Board shall consist of 

3 the seven State insurance regulators of the 

4 seven States with the greatest total dollar 

5 amount of commercial-lines insurance in place 

6 as of the end of such period. 

7 (B) ALTERNATE COMPOSITION.—If any of 

8 the State insurance regulators described in sub9 paragraph (A) declines to serve on the Board, 

10 the State insurance regulator with the next 

11 greatest total dollar amount of commercial-lines 

12 insurance in place, as determined by the NAIC 

13 as of the end of such period, shall serve as a 

14 member of the Board. 

15 (C) INOPERABILITY.—If fewer than seven 

16 State insurance regulators accept appointment 

17 to the Board, the Association shall be estab18 lished without NAIC oversight pursuant to sec19 tion 332. 

20 (d) TERMS.—The term of each director shall, after 

21 the initial appointment of the members of the Board, be 

22 for 3 years, with one-third of the directors to be appointed 

23 each year. 

24 (e) BOARD VACANCIES.—A vacancy on the Board 

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1 ment of the initial Board for the remainder of the term 

2 of the vacating member. 

3 (f) MEETINGS.—The Board shall meet at the call of 

4 the chairperson, or as otherwise provided by the bylaws 

5 of the Association. 

6 SEC. 327. OFFICERS. 

7 (a) IN GENERAL.— 

8 (1) POSITIONS.—The officers of the Association 

9 shall consist of a chairperson and a vice chairperson 

10 of the Board, a president, secretary, and treasurer 

11 of the Association, and such other officers and as12 sistant officers as may be deemed necessary. 

13 (2) MANNER OF SELECTION.—Each officer of 

14 the Board and the Association shall be elected or ap15 pointed at such time and in such manner and for 

16 such terms not exceeding 3 years as may be pre17 scribed in the bylaws of the Association. 

18 (b) CRITERIA FOR CHAIRPERSON.—Only individuals 

19 who are members of the NAIC shall be eligible to serve 

20 as the chairperson of the board of directors. 

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

22 (a) ADOPTION AND AMENDMENT OF BYLAWS.— 

23 (1) COPY REQUIRED TO BE FILED WITH THE

24 NAIC.—The board of directors of the Association 

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1 laws or any proposed amendment to the bylaws, ac2 companied by a concise general statement of the 

3 basis and purpose of such proposal. 

4 (2) EFFECTIVE DATE.—Except as provided in 

5 paragraph (3), any proposed bylaw or proposed 

6 amendment shall take effect— 

7 (A) thirty days after the date of the filing 

8 of a copy with the NAIC; 

9 (B) upon such later date as the Associa10 tion may designate; or 

11 (C) upon such earlier date as the NAIC 

12 may determine. 

13 (3) DISAPPROVAL BY THE NAIC.—Notwith14 standing paragraph (2), a proposed bylaw or amend15 ment shall not take effect if, after public notice and 

16 opportunity to participate in a public hearing— 

17 (A) the NAIC disapproves such proposal as 

18 being contrary to the public interest or contrary 

19 to the purposes of this subtitle and provides no20 tice to the Association setting forth the reasons 

21 for such disapproval; or 

22 (B) the NAIC finds that such proposal in23 volves a matter of such significant public inter24 est that public comment should be obtained, in 

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1 tion in writing of such finding, require that the 

2 procedures set forth in subsection (b) be fol3 lowed with respect to such proposal, in the 

4 same manner as if such proposed bylaw change 

5 were a proposed rule change within the mean6 ing of such subsection. 

7 (b) ADOPTION AND AMENDMENT OF RULES.— 

8 (1) FILING PROPOSED REGULATIONS WITH THE

9 NAIC.— 

10 (A) IN GENERAL.—The board of directors 

11 of the Association shall file with the NAIC a 

12 copy of any proposed rule or any proposed 

13 amendment to a rule of the Association which 

14 shall be accompanied by a concise general state15 ment of the basis and purpose of such proposal. 

16 (B) OTHER RULES AND AMENDMENTS IN17 EFFECTIVE.—No proposed rule or amendment 

18 shall take effect unless approved by the NAIC 

19 or otherwise permitted in accordance with this 

20 paragraph. 

21 (2) INITIAL CONSIDERATION BY THE NAIC.— 

22 Not later than 35 days after the date of publication 

23 of notice of filing of a proposal, or before the end 

24 of such longer period not to exceed 90 days as the 

25 NAIC may designate after such date, if the NAIC 


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1 finds such longer period to be appropriate and sets 

2 forth its reasons for so finding, or as to which the 

3 Association consents, the NAIC shall— 

4 (A) by order approve such proposed rule or 

5 amendment; or 

6 (B) institute proceedings to determine 

7 whether such proposed rule or amendment 

8 should be modified or disapproved. 

9 (3) NAIC PROCEEDINGS.— 

10 (A) IN GENERAL.—Proceedings instituted 

11 by the NAIC with respect to a proposed rule or 

12 amendment pursuant to paragraph (2) shall— 

13 (i) include notice of the grounds for 

14 disapproval under consideration; 

15 (ii) provide opportunity for hearing; 

16 and 

17 (iii) be concluded not later than 180 

18 days after the date of the Association’s fil19 ing of such proposed rule or amendment. 

20 (B) DISPOSITION OF PROPOSAL.—At the 

21 conclusion of any proceeding under subpara22 graph (A), the NAIC shall, by order, approve or 

23 disapprove the proposed rule or amendment. 

24 (C) EXTENSION OF TIME FOR CONSIDER25 ATION.—The NAIC may extend the time for 


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1 concluding any proceeding under subparagraph 

2 (A) for— 

3 (i) not more than 60 days if the 

4 NAIC finds good cause for such extension 

5 and sets forth its reasons for so finding; or 

6 (ii) for such longer period as to which 

7 the Association consents. 

8 (4) STANDARDS FOR REVIEW.— 

9 (A) GROUNDS FOR APPROVAL.—The NAIC 

10 shall approve a proposed rule or amendment if 

11 the NAIC finds that the rule or amendment is 

12 in the public interest and is consistent with the 

13 purposes of this Act. 

14 (B) APPROVAL BEFORE END OF NOTICE

15 PERIOD.—The NAIC shall not approve any pro16 posed rule before the end of the 30-day period 

17 beginning on the date on which the Association 

18 files proposed rules or amendments in accord19 ance with paragraph (1), unless the NAIC finds 

20 good cause for so doing and sets forth the rea21 sons for so finding. 

22 (5) ALTERNATE PROCEDURE.— 

23 (A) IN GENERAL.—Notwithstanding any 

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1 ing to the administration or organization of the 

2 Association shall take effect— 

3 (i) upon the date of filing with the 

4 NAIC, if such proposed rule or amendment 

5 is designated by the Association as relating 

6 solely to matters which the NAIC, con7 sistent with the public interest and the 

8 purposes of this subsection, determines by 

9 rule do not require the procedures set forth 

10 in this paragraph; or 

11 (ii) upon such date as the NAIC shall 

12 for good cause determine. 

13 (B) ABROGATION BY THE NAIC.— 

14 (i) IN GENERAL.—At any time within 

15 60 days after the date of filing of any pro16 posed rule or amendment under subpara17 graph (A)(i) or clause (ii) of this subpara18 graph, the NAIC may repeal such rule or 

19 amendment and require that the rule or 

20 amendment be refiled and reviewed in ac21 cordance with this paragraph, if the NAIC 

22 finds that such action is necessary or ap23 propriate in the public interest, for the 

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1 holders, or otherwise in furtherance of the 

2 purposes of this subtitle. 

3 (ii) EFFECT OF RECONSIDERATION BY

4 THE NAIC.—Any action of the NAIC pur5 suant to clause (i) shall— 

6 (I) not affect the validity or force 

7 of a rule change during the period 

8 such rule or amendment was in effect; 

9 and 

10 (II) not be considered to be a 

11 final action. 

12 (c) ACTION REQUIRED BY THE NAIC.—The NAIC 

13 may, in accordance with such rules as the NAIC deter14 mines to be necessary or appropriate to the public interest 

15 or to carry out the purposes of this subtitle, require the 

16 Association to adopt, amend, or repeal any bylaw, rule or 

17 amendment of the Association, whenever adopted. 

18 (d) DISCIPLINARY ACTION BY THE ASSOCIATION.— 

19 (1) SPECIFICATION OF CHARGES.—In any pro20 ceeding to determine whether membership shall be 

21 denied, suspended, revoked, or not renewed (here22 after in this section referred to as a ‘‘disciplinary ac23 tion’’), the Association shall bring specific charges, 

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1 ber an opportunity to defend against the charges, 

2 and keep a record. 

3 (2) SUPPORTING STATEMENT.—A determina4 tion to take disciplinary action shall be supported by 

5 a statement setting forth— 

6 (A) any act or practice in which such 

7 member has been found to have been engaged; 

8 (B) the specific provision of this subtitle, 

9 the rules or regulations under this subtitle, or 

10 the rules of the Association which any such act 

11 or practice is deemed to violate; and 

12 (C) the sanction imposed and the reason 

13 for such sanction. 

14 (e) NAIC REVIEW OF DISCIPLINARY ACTION.— 

15 (1) NOTICE TO THE NAIC.—If the Association 

16 orders any disciplinary action, the Association shall 

17 promptly notify the NAIC of such action. 

18 (2) REVIEW BY THE NAIC.—Any disciplinary 

19 action taken by the Association shall be subject to 

20 review by the NAIC— 

21 (A) on the NAIC’s own motion; or 

22 (B) upon application by any person ag23 grieved by such action if such application is 

24 filed with the NAIC not more than 30 days 

25 after the later of— 


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1 (i) the date the notice was filed with 

2 the NAIC pursuant to paragraph (1); or 

3 (ii) the date the notice of the discipli4 nary action was received by such aggrieved 

5 person. 

6 (f) EFFECT OF REVIEW.—The filing of an applica7 tion to the NAIC for review of a disciplinary action, or 

8 the institution of review by the NAIC on the NAIC’s own 

9 motion, shall not operate as a stay of disciplinary action 

10 unless the NAIC otherwise orders. 

11 (g) SCOPE OF REVIEW.— 

12 (1) IN GENERAL.—In any proceeding to review 

13 such action, after notice and the opportunity for 

14 hearing, the NAIC shall— 

15 (A) determine whether the action should be 

16 taken; 

17 (B) affirm, modify, or rescind the discipli18 nary sanction; or 

19 (C) remand to the Association for further 

20 proceedings. 

21 (2) DISMISSAL OF REVIEW.—The NAIC may 

22 dismiss a proceeding to review disciplinary action if 

23 the NAIC finds that— 

24 (A) the specific grounds on which the ac25 tion is based exist in fact; 


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1 (B) the action is in accordance with appli2 cable rules and regulations; and 

3 (C) such rules and regulations are, and 

4 were, applied in a manner consistent with the 

5 purposes of this subtitle. 

6 SEC. 329. ASSESSMENTS. 

7 (a) INSURANCE PRODUCERS SUBJECT TO ASSESS8 MENT.—The Association may establish such application 

9 and membership fees as the Association finds necessary 

10 to cover the costs of its operations, including fees made 

11 reimbursable to the NAIC under subsection (b), except 

12 that, in setting such fees, the Association may not dis13 criminate against smaller insurance producers. 

14 (b) NAIC ASSESSMENTS.—The NAIC may assess the 

15 Association for any costs that the NAIC incurs under this 

16 subtitle. 

17 SEC. 330. FUNCTIONS OF THE NAIC. 

18 (a) ADMINISTRATIVE PROCEDURE.—Determinations 

19 of the NAIC, for purposes of making rules pursuant to 

20 section 328, shall be made after appropriate notice and 

21 opportunity for a hearing and for submission of views of 

22 interested persons. 

23 (b) EXAMINATIONS AND REPORTS.— 

24 (1) EXAMINATIONS.—The NAIC may make 

25 such examinations and inspections of the Association 


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1 and require the Association to furnish to the NAIC 

2 such reports and records or copies thereof as the 

3 NAIC may consider necessary or appropriate in the 

4 public interest or to effectuate the purposes of this 

5 subtitle. 

6 (2) REPORT BY ASSOCIATION.—As soon as 

7 practicable after the close of each fiscal year, the As8 sociation shall submit to the NAIC a written report 

9 regarding the conduct of its business, and the exer10 cise of the other rights and powers granted by this 

11 subtitle, during such fiscal year. Such report shall 

12 include financial statements setting forth the finan13 cial position of the Association at the end of such 

14 fiscal year and the results of its operations (includ15 ing the source and application of its funds) for such 

16 fiscal year. The NAIC shall transmit such report to 

17 the President and the Congress with such comment 

18 thereon as the NAIC determines to be appropriate. 

19 SEC. 331. LIABILITY OF THE ASSOCIATION AND THE DIREC20 TORS, OFFICERS, AND EMPLOYEES OF THE 

21 ASSOCIATION. 

22 (a) IN GENERAL.—The Association shall not be 

23 deemed to be an insurer or insurance producer within the 

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1 tities engaged in the business of insurance, including pro2 visions imposing premium taxes, regulating insurer sol3 vency or financial condition, establishing guaranty funds 

4 and levying assessments, or requiring claims settlement 

5 practices. 

6 (b) LIABILITY OF THE ASSOCIATION, ITS DIREC7 TORS, OFFICERS, AND EMPLOYEES.—Neither the Associa8 tion nor any of its directors, officers, or employees shall 

9 have any liability to any person for any action taken or 

10 omitted in good faith under or in connection with any mat11 ter subject to this subtitle. 

12 SEC. 332. ELIMINATION OF NAIC OVERSIGHT. 

13 (a) IN GENERAL.—The Association shall be estab14 lished without NAIC oversight and the provisions set forth 

15 in section 324, subsections (a), (b), (c), and (e) of section 

16 328, and sections 329(b) and 330 of this subtitle shall 

17 cease to be effective if, at the end of the 2-year period 

18 beginning on the date on which the provisions of this sub19 title take effect pursuant to section 321— 

20 (1) at least a majority of the States rep21 resenting at least 50 percent of the total United 

22 States commercial-lines insurance premiums have 

23 not satisfied the uniformity or reciprocity require24 ments of subsections (a), (b), and (c) of section 321; 

25 and 


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1 (2) the NAIC has not approved the Associa2 tion’s bylaws as required by section 328 or is unable 

3 to operate or supervise the Association, or the Asso4 ciation is not conducting its activities as required 

5 under this Act. 

6 (b) BOARD APPOINTMENTS.—If the repeals required 

7 by subsection (a) are implemented, the following shall 

8 apply: 

9 (1) GENERAL APPOINTMENT POWER.—The 

10 President, with the advice and consent of the Sen11 ate, shall appoint the members of the Association’s 

12 Board established under section 326 from lists of 

13 candidates recommended to the President by the 

14 National Association of Insurance Commissioners. 

15 (2) PROCEDURES FOR OBTAINING NATIONAL

16 ASSOCIATION OF INSURANCE COMMISSIONERS AP17 POINTMENT RECOMMENDATIONS.— 

18 (A) INITIAL DETERMINATION AND REC19 OMMENDATIONS.—After the date on which the 

20 provisions of subsection (a) take effect, the 

21 NAIC shall, not later than 60 days thereafter, 

22 provide a list of recommended candidates to the 

23 President. If the NAIC fails to provide a list by 

24 that date, or if any list that is provided does 

25 not include at least 14 recommended candidates 


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1 or comply with the requirements of section 

2 326(c), the President shall, with the advice and 

3 consent of the Senate, make the requisite ap4 pointments without considering the views of the 

5 NAIC. 

6 (B) SUBSEQUENT APPOINTMENTS.—After 

7 the initial appointments, the NAIC shall pro8 vide a list of at least six recommended can9 didates for the Board to the President by Janu10 ary 15 of each subsequent year. If the NAIC 

11 fails to provide a list by that date, or if any list 

12 that is provided does not include at least six 

13 recommended candidates or comply with the re14 quirements of section 326(c), the President, 

15 with the advice and consent of the Senate, shall 

16 make the requisite appointments without con17 sidering the views of the NAIC. 

18 (C) PRESIDENTIAL OVERSIGHT.— 

19 (i) REMOVAL.—If the President deter20 mines that the Association is not acting in 

21 the interests of the public, the President 

22 may remove the entire existing Board for 

23 the remainder of the term to which the 

24 members of the Board were appointed and 

25 appoint, with the advice and consent of the 


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1 Senate, new members to fill the vacancies 

2 on the Board for the remainder of such 

3 terms. 

4 (ii) SUSPENSION OF RULES OR AC5 TIONS.—The President, or a person des6 ignated by the President for such purpose, 

7 may suspend the effectiveness of any rule, 

8 or prohibit any action, of the Association 

9 which the President or the designee deter10 mines is contrary to the public interest. 

11 (c) ANNUAL REPORT.—As soon as practicable after 

12 the close of each fiscal year, the Association shall submit 

13 to the President and to the Congress a written report rel14 ative to the conduct of its business, and the exercise of 

15 the other rights and powers granted by this subtitle, dur16 ing such fiscal year. Such report shall include financial 

17 statements setting forth the financial position of the Asso18 ciation at the end of such fiscal year and the results of 

19 its operations (including the source and application of its 

20 funds) for such fiscal year. 

21 SEC. 333. RELATIONSHIP TO STATE LAW. 

22 (a) PREEMPTION OF STATE LAWS.—State laws, reg23 ulations, provisions, or other actions purporting to regu24 late insurance producers shall be preempted as provided 

25 in subsection (b). 


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1 (b) PROHIBITED ACTIONS.—No State shall— 

2 (1) impede the activities of, take any action 

3 against, or apply any provision of law or regulation 

4 to, any insurance producer because that insurance 

5 producer or any affiliate plans to become, has ap6 plied to become, or is a member of the Association; 

7 (2) impose any requirement upon a member of 

8 the Association that it pay different fees to be li9 censed or otherwise qualified to do business in that 

10 State, including bonding requirements, based on its 

11 residency; 

12 (3) impose any licensing, appointment, integ13 rity, personal or corporate qualifications, education, 

14 training, experience, residency, or continuing edu15 cation requirement upon a member of the Associa16 tion that is different from the criteria for member17 ship in the Association or renewal of such member18 ship, except that counter-signature requirements im19 posed on nonresident producers shall not be deemed 

20 to have the effect of limiting or conditioning a pro21 ducer’s activities because of its residence or place of 

22 operations under this section; or 

23 (4) implement the procedures of such State’s 

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1 ance producers in a manner different from the au2 thority of the Association under section 325. 

3 (c) SAVINGS PROVISION.—Except as provided in sub4 sections (a) and (b), no provision of this section shall be 

5 construed as altering or affecting the continuing effective6 ness of any law, regulation, provision, or other action of 

7 any State which purports to regulate insurance producers, 

8 including any such law, regulation, provision, or action 

9 which purports to regulate unfair trade practices or estab10 lish consumer protections, including countersignature 

11 laws. 

12 SEC. 334. COORDINATION WITH OTHER REGULATORS. 

13 (a) COORDINATION WITH STATE INSURANCE REGU14 LATORS.—The Association shall have the authority to— 

15 (1) issue uniform insurance producer applica16 tions and renewal applications that may be used to 

17 apply for the issuance or removal of State licenses, 

18 while preserving the ability of each State to impose 

19 such conditions on the issuance or renewal of a li20 cense as are consistent with section 333; 

21 (2) establish a central clearinghouse through 

22 which members of the Association may apply for the 

23 issuance or renewal of licenses in multiple States; 

24 and 


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1 (3) establish or utilize a national database for 

2 the collection of regulatory information concerning 

3 the activities of insurance producers. 

4 (b) COORDINATION WITH THE NATIONAL ASSOCIA5 TION OF SECURITIES DEALERS.—The Association shall 

6 coordinate with the National Association of Securities 

7 Dealers in order to ease any administrative burdens that 

8 fall on persons that are members of both associations, con9 sistent with the purposes of this subtitle and the Federal 

10 securities laws. 

11 SEC. 335. JUDICIAL REVIEW. 

12 (a) JURISDICTION.—The appropriate United States 

13 district court shall have exclusive jurisdiction over litiga14 tion involving the Association, including disputes between 

15 the Association and its members that arise under this sub16 title. Suits brought in State court involving the Associa17 tion shall be deemed to have arisen under Federal law and 

18 therefore be subject to jurisdiction in the appropriate 

19 United States district court. 

20 (b) EXHAUSTION OF REMEDIES.—An aggrieved per21 son shall be required to exhaust all available administra22 tive remedies before the Association and the NAIC before 

23 it may seek judicial review of an Association decision. 

24 (c) STANDARDS OF REVIEW.—The standards set 

25 forth in section 553 of title 5, United States Code, shall 


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1 be applied whenever a rule or bylaw of the Association is 

2 under judicial review, and the standards set forth in sec3 tion 554 of title 5, United States Code, shall be applied 

4 whenever a disciplinary action of the Association is judi5 cially reviewed. 

6 SEC. 336. DEFINITIONS. 

7 For purposes of this subtitle, the following definitions 

8 shall apply: 

9 (1) HOME STATE.—The term ‘‘home State’’ 

10 means the State in which the insurance producer 

11 maintains its principal place of residence and is li12 censed to act as an insurance producer. 

13 (2) INSURANCE.—The term ‘‘insurance’’ means 

14 any product, other than title insurance, defined or 

15 regulated as insurance by the appropriate State in16 surance regulatory authority. 

17 (3) INSURANCE PRODUCER.—The term ‘‘insur18 ance producer’’ means any insurance agent or 

19 broker, surplus lines broker, insurance consultant, 

20 limited insurance representative, and any other per21 son that solicits, negotiates, effects, procures, deliv22 ers, renews, continues or binds policies of insurance 

23 or offers advice, counsel, opinions or services related 

24 to insurance. 


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1 (4) STATE.—The term ‘‘State’’ includes any 

2 State, the District of Columbia, American Samoa, 

3 Guam, Puerto Rico, and the United States Virgin 

4 Islands. 

5 (5) STATE LAW.—The term ‘‘State law’’ in6 cludes all laws, decisions, rules, regulations, or other 

7 State action having the effect of law, of any State. 

8 A law of the United States applicable only to the 

9 District of Columbia shall be treated as a State law 

10 rather than a law of the United States. 

11 Subtitle D—Rental Car Agency 

12 Insurance Activities 

13 SEC. 341. STANDARD OF REGULATION FOR MOTOR VEHI14 CLE RENTALS. 

15 (a) PROTECTION AGAINST RETROACTIVE APPLICA16 TION OF REGULATORY AND LEGAL ACTION.—Except as 

17 provided in subsection (b), during the 3-year period begin18 ning on the date of the enactment of this Act, it shall 

19 be a presumption that no State law imposes any licensing, 

20 appointment, or education requirements on any person 

21 who solicits the purchase of or sells insurance connected 

22 with, and incidental to, the lease or rental of a motor vehi23 cle. 


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1 (b) PREEMINENCE OF STATE INSURANCE LAW.—No 

2 provision of this section shall be construed as altering the 

3 validity, interpretation, construction, or effect of— 

4 (1) any State statute; 

5 (2) the prospective application of any court 

6 judgment interpreting or applying any State statute; 

7 or 

8 (3) the prospective application of any final 

9 State regulation, order, bulletin, or other statutorily 

10 authorized interpretation or action, 

11 which, by its specific terms, expressly regulates or exempts 

12 from regulation any person who solicits the purchase of 

13 or sells insurance connected with, and incidental to, the 

14 short-term lease or rental of a motor vehicle. 

15 (c) SCOPE OF APPLICATION.—This section shall 

16 apply with respect to— 

17 (1) the lease or rental of a motor vehicle for a 

18 total period of 90 consecutive days or less; and 

19 (2) insurance which is provided in connection 

20 with, and incidentally to, such lease or rental for a 

21 period of consecutive days not exceeding the lease or 

22 rental period. 

23 (d) MOTOR VEHICLE DEFINED.—For purposes of 

24 this section, the term ‘‘motor vehicle’’ has the meaning 


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1 given to such term in section 13102 of title 49, United 

2 States Code. 

3 Subtitle E—Confidentiality 

4 SEC. 351. CONFIDENTIALITY OF HEALTH AND MEDICAL IN5 FORMATION. 

6 (a) IN GENERAL.—A company which underwrites or 

7 sells annuities contracts or contracts insuring, guaran8 teeing, or indemnifying against loss, harm, damage, ill9 ness, disability, or death (other than credit-related insur10 ance) and any subsidiary or affiliate thereof shall maintain 

11 a practice of protecting the confidentiality of individually 

12 identifiable customer health and medical and genetic infor13 mation and may disclose such information only— 

14 (1) with the consent, or at the direction, of the 

15 customer; 

16 (2) for insurance underwriting and reinsuring 

17 policies, account administration, reporting, inves18 tigating, or preventing fraud or material misrepre19 sentation, processing premium payments, processing 

20 insurance claims, administering insurance benefits 

21 (including utilization review activities), providing in22 formation to the customer’s physician or other 

23 health care provider, participating in research 

24 projects, enabling the purchase, transfer, merger, or 

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1 wise required or specifically permitted by Federal or 

2 State law; or 

3 (3) in connection with— 

4 (A) the authorization, settlement, billing, 

5 processing, clearing, transferring, reconciling, 

6 or collection of amounts charged, debited, or 

7 otherwise paid using a debit, credit, or other 

8 payment card or account number, or by other 

9 payment means; 

10 (B) the transfer of receivables, accounts, 

11 or interest therein; 

12 (C) the audit of the debit, credit, or other 

13 payment information; 

14 (D) compliance with Federal, State, or 

15 local law; 

16 (E) compliance with a properly authorized 

17 civil, criminal, or regulatory investigation by 

18 Federal, State, or local authorities as governed 

19 by the requirements of this section; or 

20 (F) fraud protection, risk control, resolving 

21 customer disputes or inquiries, communicating 

22 with the person to whom the information re23 lates, or reporting to consumer reporting agen24 cies. 


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1 (b) STATE ACTIONS FOR VIOLATIONS.—In addition 

2 to such other remedies as are provided under State law, 

3 if the chief law enforcement officer of a State, State insur4 ance regulator, or an official or agency designated by a 

5 State, has reason to believe that any person has violated 

6 or is violating this title, the State may bring an action 

7 to enjoin such violation in any appropriate United States 

8 district court or in any other court of competent jurisdic9 tion. 

10 (c) EFFECTIVE DATE; SUNSET.— 

11 (1) EFFECTIVE DATE.—Except as provided in 

12 paragraph (2), subsection (a) shall take effect on 

13 February 1, 2000. 

14 (2) SUNSET.—Subsection (a) shall not take ef15 fect if, or shall cease to be effective on and after the 

16 date on which, legislation is enacted that satisfies 

17 the requirements in section 264(c)(1) of the Health 

18 Insurance Portability and Accountability Act of 

19 1996 (Public Law 104–191; 110 Stat. 2033). 

20 (d) CONSULTATION.—While subsection (a) is in ef21 fect, State insurance regulatory authorities, through the 

22 National Association of Insurance Commissioners, shall 

23 consult with the Secretary of Health and Human Services 

24 in connection with the administration of such subsection. 


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1 TITLE IV—UNITARY SAVINGS 

2 AND LOAN HOLDING COMPA3 NIES 

4 SEC. 401. PROHIBITION ON NEW UNITARY SAVINGS AND 

5 LOAN HOLDING COMPANIES. 

6 (a) IN GENERAL.—Section 10(c) of the Home Own7 ers’ Loan Act (12 U.S.C. 1467a(c)) is amended by adding 

8 at the end the following new paragraph: 

9 ‘‘(9) TERMINATION OF EXPANDED POWERS FOR

10 NEW UNITARY HOLDING COMPANY.— 

11 ‘‘(A) IN GENERAL.—Subject to subpara12 graph (B) and notwithstanding paragraph (3), 

13 no company may directly or indirectly, includ14 ing through any merger, consolidation, or other 

15 type of business combination, acquire control of 

16 a savings association after March 4, 1999, un17 less the company is engaged, directly or indi18 rectly (including through a subsidiary other 

19 than a savings association), only in activities 

20 that are permitted— 

21 ‘‘(i) under paragraph (1)(C) or (2); or 

22 ‘‘(ii) for financial holding companies 

23 under section 6(c) of the Bank Holding 

24 Company Act of 1956. 


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1 ‘‘(B) EXISTING UNITARY HOLDING COMPA2 NIES AND THE SUCCESSORS TO SUCH COMPA3 NIES.—Subparagraph (A) shall not apply, and 

4 paragraph (3) shall continue to apply, to a com5 pany (or any subsidiary of such company) 

6 that— 

7 ‘‘(i) either— 

8 ‘‘(I) acquired one or more sav9 ings associations described in para10 graph (3) pursuant to applications at 

11 least one of which was filed on or be12 fore March 4, 1999; or 

13 ‘‘(II) subject to subparagraph 

14 (C), became a savings and loan hold15 ing company by acquiring control of 

16 the company described in subclause 

17 (I); and 

18 ‘‘(ii) continues to control the savings 

19 association referred to in clause (i)(II) or 

20 the successor to any such savings associa21 tion. 

22 ‘‘(C) NOTICE PROCESS FOR NONFINANCIAL

23 ACTIVITIES BY A SUCCESSOR UNITARY HOLDING

24 COMPANY.— 


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1 ‘‘(i) NOTICE REQUIRED.—Subpara2 graph (B) shall not apply to any company 

3 described in subparagraph (B)(i)(II) which 

4 engages, directly or indirectly, in any activ5 ity other than activities described in 

6 clauses (i) and (ii) of subparagraph (A), 

7 unless— 

8 ‘‘(I) in addition to an application 

9 to the Director under this section to 

10 become a savings and loan holding 

11 company, the company submits a no12 tice to the Board of Governors of the 

13 Federal Reserve System of such non14 financial activities in the same man15 ner as a notice of nonbanking activi16 ties is filed with the Board under sec17 tion 4(j) of the Bank Holding Com18 pany Act of 1956; and 

19 ‘‘(II) before the end of the appli20 cable period under such section 4(j), 

21 the Board either approves or does not 

22 disapprove of the continuation of such 

23 activities by such company, directly or 

24 indirectly, after becoming a savings 

25 and loan holding company. 


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1 ‘‘(ii) PROCEDURE.—Section 4(j) of 

2 the Bank Holding Company Act of 1956, 

3 including the standards for review, shall 

4 apply to any notice filed with the Board 

5 under this subparagraph in the same man6 ner as it applies to notices filed under such 

7 section.’’. 

8 (b) TECHNICAL AND CONFORMING AMENDMENT.— 

9 Section 10(c)(3) of the Home Owners’ Loan Act (12 

10 U.S.C. 1467a(c)(3)) is amended by striking ‘‘Notwith11 standing’’ and inserting ‘‘Except as provided in paragraph 

12 (9) and notwithstanding’’. 

13 (c) CONFORMING AMENDMENT.—Section 10(o)(5) of 

14 the Home Owners’ Loan Act (12 U.S.C. 1467a(o)(5)) is 

15 amended— 

16 (1) in subparagraph (E), by striking ‘‘, except 

17 subparagraph (B)’’; and 

18 (2) by adding at the end the following new sub19 paragraph: 

20 ‘‘(F) In the case of a mutual holding com21 pany which is a savings and loan holding com22 pany described in subsection (c)(3), engaging in 

23 the activities permitted for financial holding 

24 companies under section 6(c) of the Bank Hold25 ing Company Act of 1956.’’. 


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1 SEC. 402. RETENTION OF ‘‘FEDERAL’’ IN NAME OF CON2 VERTED FEDERAL SAVINGS ASSOCIATION. 

3 Section 2 of the Act entitled ‘‘An Act to enable na4 tional banking associations to increase their capital stock 

5 and to change their names or locations’’, approved May 

6 1, 1886 (12 U.S.C. 30), is amended by adding at the end 

7 the following new subsection: 

8 ‘‘(d) RETENTION OF ‘FEDERAL’ IN NAME OF CON9 VERTED FEDERAL SAVINGS ASSOCIATION.— 

10 ‘‘(1) IN GENERAL.—Notwithstanding subsection 

11 (a) or any other provision of law, any depository in12 stitution the charter of which is converted from that 

13 of a Federal savings association to a national bank 

14 or a State bank after the date of the enactment of 

15 the Financial Services Act of 1999 may retain the 

16 term ‘Federal’ in the name of such institution if 

17 such depository institution remains an insured de18 pository institution. 

19 ‘‘(2) DEFINITIONS.—For purposes of this sub20 section, the terms ‘depository institution’, ‘insured 

21 depository institution’, ‘national bank’, and ‘State 

22 bank’ have the same meanings as in section 3 of the 

23 Federal Deposit Insurance Act.’’. 


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1 TITLE V—PRIVACY 

2 Subtitle A—Disclosure of 

3 Nonpublic Personal Information 

4 SEC. 501. PROTECTION OF NONPUBLIC PERSONAL INFOR5 MATION. 

6 (a) PRIVACY OBLIGATION POLICY.—It is the policy 

7 of the Congress that each financial institution has an af8 firmative and continuing obligation to respect the privacy 

9 of its customers and to protect the security and confiden10 tiality of those customers’ nonpublic personal information. 

11 (b) FINANCIAL INSTITUTIONS SAFEGUARDS.—In fur12 therance of the policy in subsection (a), each agency or 

13 authority described in section 505(a) shall establish appro14 priate standards for the financial institutions subject to 

15 their jurisdiction relating to administrative, technical, and 

16 physical safeguards— 

17 (1) to insure the security and confidentiality of 

18 customer records and information; 

19 (2) to protect against any anticipated threats or 

20 hazards to the security or integrity of such records; 

21 and 

22 (3) to protect against unauthorized access to or 

23 use of such records or information which could re24 sult in substantial harm or inconvenience to any cus25 tomer. 


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1 SEC. 502. OBLIGATIONS WITH RESPECT TO DISCLOSURES 

2 OF PERSONAL INFORMATION. 

3 (a) NOTICE REQUIREMENTS.—Except as otherwise 

4 provided in this subtitle, a financial institution may not, 

5 directly or through any affiliate, disclose to a nonaffiliated 

6 third party any nonpublic personal information, unless 

7 such financial institution provides or has provided to the 

8 consumer a notice that complies with section 503(b). 

9 (b) OPT OUT.— 

10 (1) IN GENERAL.—A financial institution may 

11 not disclose nonpublic personal information to non12 affiliated third parties unless— 

13 (A) such financial institution clearly and 

14 conspicuously discloses to the consumer, in 

15 writing or in electronic form (or other form per16 mitted by the regulations prescribed under sec17 tion 504), that such information may be dis18 closed to such third parties; 

19 (B) the consumer is given the opportunity, 

20 before the time that such information is initially 

21 disclosed, to direct that such information not be 

22 disclosed to such third parties; and 

23 (C) the consumer is given an explanation 

24 of how the consumer can exercise that non25 disclosure option. 


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1 (2) EXCEPTION.—This subsection shall not pre2 vent a financial institution from providing nonpublic 

3 personal information to a nonaffiliated third party to 

4 perform services or functions on behalf of the finan5 cial institution, including marketing of the financial 

6 institution’s own products or services or financial 

7 products or services offered pursuant to joint agree8 ments between two or more financial institutions 

9 that comply with the requirements imposed by the 

10 regulations prescribed under section 504, if the fi11 nancial institution fully discloses the providing of 

12 such information and enters into a contractual 

13 agreement with the third party that requires the 

14 third party to maintain the confidentiality of such 

15 information. 

16 (c) LIMITS ON REUSE OF INFORMATION.—Except as 

17 otherwise provided in this subtitle, a nonaffiliated third 

18 party that receives from a financial institution nonpublic 

19 personal information under this section shall not, directly 

20 or through an affiliate of such receiving third party, dis21 close such information to any other person that is a non22 affiliated third party of both the financial institution and 

23 such receiving third party, unless such disclosure would 

24 be lawful if made directly to such other person by the fi25 nancial institution. 


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1 (d) LIMITATIONS ON THE SHARING OF ACCOUNT

2 NUMBER INFORMATION FOR MARKETING PURPOSES.—A 

3 financial institution shall not disclose an account number 

4 or similar form of access number or access code for a cred5 it card account, deposit account, or transaction account 

6 of a consumer to any nonaffiliated third party for use in 

7 telemarketing, direct mail marketing, or other marketing 

8 through electronic mail to the consumer. 

9 (e) GENERAL EXCEPTIONS.—Subsections (a) and (b) 

10 shall not prohibit the disclosure of nonpublic personal in11 formation— 

12 (1) as necessary to effect, administer, or en13 force a transaction requested or authorized by the 

14 consumer, or in connection with— 

15 (A) servicing or processing a financial 

16 product or service requested or authorized by 

17 the consumer; 

18 (B) maintaining or servicing the con19 sumer’s account with the financial institution; 

20 or 

21 (C) a proposed or actual securitization, 

22 secondary market sale (including sales of serv23 icing rights), or similar transaction related to a 

24 transaction of the consumer; 


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1 (2) with the consent or at the direction of the 

2 consumer; 

3 (3) to protect the confidentiality or security of 

4 its records pertaining to the consumer, the service or 

5 product, or the transaction therein, or to protect 

6 against or prevent actual or potential fraud, unau7 thorized transactions, claims, or other liability, for 

8 required institutional risk control, or for resolving 

9 customer disputes or inquiries, or to persons holding 

10 a beneficial interest relating to the consumer, or to 

11 persons acting in a fiduciary capacity on behalf of 

12 the consumer; 

13 (4) to provide information to insurance rate ad14 visory organizations, guaranty funds or agencies, ap15 plicable rating agencies of the financial institution, 

16 persons assessing the institution’s compliance with 

17 industry standards, and the institution’s attorneys, 

18 accountants, and auditors; 

19 (5) to the extent specifically permitted or re20 quired under other provisions of law and in accord21 ance with the Right to Financial Privacy Act of 

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1 latory organizations, or for an investigation on a 

2 matter related to public safety; 

3 (6) to a consumer reporting agency in accord4 ance with the Fair Credit Reporting Act, or in ac5 cordance with interpretations of such Act by the 

6 Board of Governors of the Federal Reserve System 

7 or the Federal Trade Commission, including inter8 pretations published as commentary (16 CFR 601– 

9 622); 

10 (7) in connection with a proposed or actual 

11 sale, merger, transfer, or exchange of all or a por12 tion of a business or operating unit if the disclosure 

13 of nonpublic personal information concerns solely 

14 consumers of such business or unit; or 

15 (8) to comply with Federal, State, or local laws, 

16 rules, and other applicable legal requirements; to 

17 comply with a properly authorized civil, criminal, or 

18 regulatory investigation or subpoena by Federal, 

19 State, or local authorities; or to respond to judicial 

20 process or government regulatory authorities having 

21 jurisdiction over the financial institution for exam22 ination, compliance, or other purposes as authorized 

23 by law. 


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1 SEC. 503. DISCLOSURE OF INSTITUTION PRIVACY POLICY. 

2 (a) DISCLOSURE REQUIRED.—A financial institution 

3 shall clearly and conspicuously disclose to each consumer, 

4 at the time of establishing the customer relationship with 

5 the consumer and not less than annually, in writing or 

6 in electronic form (or other form permitted by the regula7 tions prescribed under section 504), its policies and prac8 tices with respect to protecting the nonpublic personal in9 formation of consumers in accordance with the rules pre10 scribed under section 504. 

11 (b) INFORMATION TO BE INCLUDED.—The disclosure 

12 required by subsection (a) shall include— 

13 (1) the policy and practices of the institution 

14 with respect to disclosing nonpublic personal infor15 mation to nonaffiliated third parties, other than 

16 agents of the institution, consistent with section 502 

17 of this subtitle, and including— 

18 (A) the categories of persons to whom the 

19 information is or may be disclosed, other than 

20 the persons to whom the information may be 

21 provided pursuant to section 502(e); and 

22 (B) the practices and policies of the insti23 tution with respect to disclosing of nonpublic 

24 personal information of persons who have 

25 ceased to be customers of the financial institu26 tion; 


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1 (2) the categories of nonpublic personal infor2 mation that are collected by the financial institution; 

3 (3) the policies that the institution maintains to 

4 protect the confidentiality and security of nonpublic 

5 personal information in accordance with section 501; 

6 and 

7 (4) the disclosures required, if any, under sec8 tion 603(d)(2)(A)(iii) of the Fair Credit Reporting 

9 Act. 

10 SEC. 504. RULEMAKING. 

11 (a) REGULATORY AUTHORITY.—The Federal bank12 ing agencies, the National Credit Union Association, the 

13 Secretary of the Treasury, and the Securities and Ex14 change Commission, shall jointly prescribe, after consulta15 tion with the Federal Trade Commission, and representa16 tives of State insurance authorities designated by the Na17 tional Association of Insurance Commissioners, such regu18 lations as may be necessary to carry out the purposes of 

19 this subtitle. Such regulations shall be prescribed in ac20 cordance with applicable requirements of the title 5, 

21 United States Code, and shall be issued in final form with22 in 6 months after the date of enactment of this Act. 

23 (b) AUTHORITY TO GRANT EXCEPTIONS.—The regu24 lations prescribed under subsection (a) may include such 

25 additional exceptions to subsections (a) and (b) of section 


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1 502 as are deemed consistent with the purposes of this 

2 subtitle. 

3 SEC. 505. ENFORCEMENT. 

4 (a) IN GENERAL.—This subtitle and the rules pre5 scribed thereunder shall be enforced by the Federal func6 tional regulators, the State insurance authorities, and the 

7 Federal Trade Commission with respect to financial insti8 tutions subject to their jurisdiction under applicable law, 

9 as follows: 

10 (1) Under section 8 of the Federal Deposit In11 surance Act, in the case of— 

12 (A) national banks, Federal branches and 

13 Federal agencies of foreign banks, and any sub14 sidiaries of such entities, by the Office of the 

15 Comptroller of the Currency; 

16 (B) member banks of the Federal Reserve 

17 System (other than national banks), branches 

18 and agencies of foreign banks (other than Fed19 eral branches, Federal agencies, and insured 

20 State branches of foreign banks), commercial 

21 lending companies owned or controlled by for22 eign banks, organizations operating under sec23 tion 25 or 25A of the Federal Reserve Act, 

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1 filiates providing insurance, investment compa2 nies, and investment advisers), by the Board of 

3 Governors of the Federal Reserve System; 

4 (C) banks insured by the Federal Deposit 

5 Insurance Corporation (other than members of 

6 the Federal Reserve System), insured State 

7 branches of foreign banks, and any subsidiaries 

8 of such entities, by the Board of Directors of 

9 the Federal Deposit Insurance Corporation; and 

10 (D) savings association the deposits of 

11 which are insured by the Federal Deposit In12 surance Corporation, and any subsidiaries of 

13 such a savings association, by the Director of 

14 the Office of Thrift Supervision. 

15 (2) Under the Federal Credit Union Act, by the 

16 Administrator of the National Credit Union Admin17 istration with respect to any Federal or state char18 tered credit union, and any subsidiaries of such an 

19 entity. 

20 (3) Under the Farm Credit Act of 1971, by the 

21 Farm Credit Administration with respect to the 

22 Federal Agricultural Mortgage Corporation, any 

23 Federal land bank, Federal land bank association, 

24 Federal intermediate credit bank, or production 

25 credit association. 


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1 (4) Under the Securities Exchange Act of 1934, 

2 by the Securities and Exchange Commission with re3 spect to any broker-dealer. 

4 (5) Under the Investment Company Act of 

5 1940, by the Securities and Exchange Commission 

6 with respect to investment companies. 

7 (6) Under the Investment Advisers Act of 1940, 

8 by the Securities and Exchange Commission with re9 spect to investment advisers registered with the 

10 Commission under such Act. 

11 (7) Under Federal Housing Enterprises Finan12 cial Safety and Soundness Act of 1992 (12 U. S. C. 

13 4501 et seq.), by the Office of Federal Housing En14 terprise Oversight with respect to the Federal Na15 tional Mortgage Association and the Federal Home 

16 Loan Mortgage Corporation. 

17 (8) Under the Federal Home Loan Bank Act, 

18 by the Federal Housing Finance Board with respect 

19 to Federal home loan banks. 

20 (9) Under State insurance law, in the case of 

21 any person engaged in providing insurance, by the 

22 State insurance authority of the State in which the 

23 person is domiciled, subject to section 104 of this 

24 Act. 


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1 (10) Under the Federal Trade Commission Act, 

2 by the Federal Trade Commission for any other fi3 nancial institution that is not subject to the jurisdic4 tion of any agency or authority under paragraphs 

5 (1) through (9) of this subsection. 

6 (b) ENFORCEMENT OF SECTION 501.— 

7 (1) IN GENERAL.—Except as provided in para8 graph (2), the agencies and authorities described in 

9 subsection (a) shall implement the standards pre10 scribed under section 501(b) in the same manner, to 

11 the extent practicable, as standards prescribed pur12 suant to subsection (a) of section 39 of the Federal 

13 Deposit Insurance Act are implemented pursuant to 

14 such section. 

15 (2) EXCEPTION.—The agencies and authorities 

16 described in paragraphs (4), (5), (6), (9), and (10) 

17 of subsection (a) shall implement the standards pre18 scribed under section 501(b) by rule with respect to 

19 the financial institutions subject to their respective 

20 jurisdictions under subsection (a). 

21 (c) DEFINITIONS.—The terms used in subsection 

22 (a)(1) that are not defined in this subtitle or otherwise 

23 defined in section 3(s) of the Federal Deposit Insurance 

24 Act shall have the meaning given to them in section 1(b) 

25 of the International Banking Act of 1978. 


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1 SEC. 506. FAIR CREDIT REPORTING ACT AMENDMENT. 

2 (a) AMENDMENT.—Section 621 of the Fair Credit 

3 Reporting Act (15 U.S.C. 1681s) is amended— 

4 (1) in subsection (d), by striking everything fol5 lowing the end of the second sentence; and 

6 (2) by striking subsection ‘‘(e)’’ and inserting in 

7 lieu thereof the following: 

8 ‘‘(e) REGULATORY AUTHORITY.— 

9 ‘‘(1) The Federal banking agencies referred to 

10 in paragraphs (1) and (2) of subsection (b) shall 

11 jointly prescribe such regulations as necessary to 

12 carry out the purposes of this Act with respect to 

13 any persons identified under paragraphs (1) and (2) 

14 of subsection (b), or to the holding companies and 

15 affiliates of such persons. 

16 ‘‘(2) The Administrator of the National Credit 

17 Union Administration shall prescribe such regula18 tions as necessary to carry out the purposes of this 

19 Act with respect to any persons identified under 

20 paragraph (3) of subsection (b).’’. 

21 (b) CONFORMING AMENDMENT.—Section 621(a) of 

22 the Fair Credit Reporting Act (15 U.S.C. 1681s(a)) is 

23 amended by striking paragraph (4). 

24 SEC. 507. RELATION TO OTHER PROVISIONS. 

25 This subtitle shall not apply to any information to 

26 which subtitle D of title III applies. 


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1 SEC. 508. STUDY OF INFORMATION SHARING AMONG FI2 NANCIAL AFFILIATES. 

3 (a) IN GENERAL.—The Secretary of the Treasury, in 

4 conjunction with the Federal functional regulators and the 

5 Federal Trade Commission, shall conduct a study of infor6 mation sharing practices among financial institutions and 

7 their affiliates. Such study shall include— 

8 (1) the purposes for the sharing of confidential 

9 customer information with affiliates or with non10 affiliated third parties; 

11 (2) the extent and adequacy of security protec12 tions for such information; 

13 (3) the potential risks for customer privacy of 

14 such sharing of information; 

15 (4) the potential benefits for financial institu16 tions and affiliates of such sharing of information; 

17 (5) the potential benefits for customers of such 

18 sharing of information; 

19 (6) the adequacy of existing laws to protect cus20 tomer privacy; 

21 (7) the adequacy of financial institution privacy 

22 policy and privacy rights disclosure under existing 

23 law; 

24 (8) the feasibility of different approaches, in25 cluding opt-out and opt-in, to permit customers to 


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1 direct that confidential information not be shared 

2 with affiliates and nonaffiliated third parties; and 

3 (9) the feasibility of restricting sharing of infor4 mation for specific uses or of permitting customers 

5 to direct the uses for which information may be 

6 shared. 

7 (b) CONSULTATION.—The Secretary shall consult 

8 with representatives of State insurance authorities des9 ignated by the National Association of Insurance Commis10 sioners, and also with financial services industry, con11 sumer organizations and privacy groups, and other rep12 resentatives of the general public, in formulating and con13 ducting the study required by subsection (a). 

14 (c) REPORT.—Before the end of the 6-month period 

15 beginning on the date of the enactment of this Act, the 

16 Secretary shall submit a report to the Congress containing 

17 the findings and conclusions of the study required under 

18 subsection (a), together with such recommendations for 

19 legislative or administrative action as may be appropriate. 

20 SEC. 509. DEFINITIONS. 

21 As used in this subtitle: 

22 (1) FEDERAL BANKING AGENCY.—The term 

23 ‘‘Federal banking agency’’ has the meanings given 

24 to such terms in section 3 of the Federal Deposit In25 surance Act. 


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1 (2) FEDERAL FUNCTIONAL REGULATOR.—The 

2 term ‘‘Federal functional regulator’’ means— 

3 (A) the Board of Governors of the Federal 

4 Reserve System; 

5 (B) the Office of the Comptroller of the 

6 Currency; 

7 (C) the Board of Directors of the Federal 

8 Deposit Insurance Corporation; 

9 (D) the Director of the Office of Thrift 

10 Supervision; 

11 (E) the National Credit Union Administra12 tion Board; 

13 (F) the Farm Credit Administration; and 

14 (G) the Securities and Exchange Commis15 sion. 

16 (3) FINANCIAL INSTITUTION.—The term ‘‘fi17 nancial institution’’ means any institution the busi18 ness of which is engaging in financial activities or 

19 activities that are incidental to financial activities, as 

20 described in section 6(c) of the Bank Holding Com21 pany Act of 1956. 

22 (4) NONPUBLIC PERSONAL INFORMATION.— 

23 (A) The term ‘‘nonpublic personal informa24 tion’’ means personally identifiable financial in25 formation— 


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1 (i) provided by a consumer to a finan2 cial institution; 

3 (ii) resulting from any transaction 

4 with the consumer or the service performed 

5 for the consumer; or 

6 (iii) otherwise obtained by the finan7 cial institution. 

8 (B) Such term does not include publicly 

9 available information, as such term is defined 

10 by the regulations prescribed under section 504. 

11 (C) Notwithstanding subparagraph (B), 

12 such term shall include any list, description, or 

13 other grouping of consumers (and publicly 

14 available information pertaining to them) that 

15 is derived using any personally identifiable in16 formation other than publicly available informa17 tion. 

18 (5) NONAFFILIATED THIRD PARTIES.—The 

19 term ‘‘nonaffiliated third parties’’ means any entity 

20 that is not an affiliate of, or related by common 

21 ownership or affiliated by corporate control with, the 

22 financial institution, but does not include a joint em23 ployee of such institution. 


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1 (6) AFFILIATE.—The term ‘‘affiliate’’ means 

2 any company that controls, is controlled by, or is 

3 under common control with another company. 

4 (7) NECESSARY TO EFFECT, ADMINISTER, OR

5 ENFORCE.—The term ‘‘as necessary to effect, ad6 minister or enforce the transaction’’ means— 

7 (A) the disclosure is required, or is a 

8 usual, appropriate or acceptable method, to 

9 carry out the transaction or the product or 

10 service business of which the transaction is a 

11 part, and record or service or maintain the con12 sumer’s account in the ordinary course of pro13 viding the financial service or financial product, 

14 or to administer or service benefits or claims re15 lating to the transaction or the product or serv16 ice business of which it is a part, and in17 cludes— 

18 (i) providing the consumer or the con19 sumer’s agent or broker with a confirma20 tion, statement, or other record of the 

21 transaction, or information on the status 

22 or value of the financial service or financial 

23 product; and 

24 (ii) the accrual or recognition of in25 centives or bonuses associated with the 


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1 transaction that are provided by the finan2 cial institution or any other party; 

3 (B) the disclosure is required, or is one of 

4 the lawful or appropriate methods, to enforce 

5 the rights of the financial institution or of other 

6 persons engaged in carrying out the financial 

7 transaction, or providing the product or service; 

8 (C) the disclosure is required, or is a 

9 usual, appropriate, or acceptable method, for 

10 insurance underwriting at the consumer’s re11 quest or for reinsurance purposes, or for any of 

12 the following purposes as they relate to a con13 sumer’s insurance: account administration, re14 porting, investigating, or preventing fraud or 

15 material misrepresentation, processing premium 

16 payments, processing insurance claims, admin17 istering insurance benefits (including utilization 

18 review activities), participating in research 

19 projects, or as otherwise required or specifically 

20 permitted by Federal or State law; or 

21 (D) the disclosure is required, or is a 

22 usual, appropriate or acceptable method, in con23 nection with— 

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1 onciling, or collection of amounts charged, 

2 debited, or otherwise paid using a debit, 

3 credit or other payment card, check, or ac4 count number, or by other payment means; 

5 (ii) the transfer of receivables, ac6 counts or interests therein; or 

7 (iii) the audit of debit, credit or other 

8 payment information. 

9 (8) STATE INSURANCE AUTHORITY.—The term 

10 ‘‘State insurance authority’’ means, in the case of 

11 any person engaged in providing insurance, the 

12 State insurance authority of the State in which the 

13 person is domiciled. 

14 (9) CONSUMER.—The term ‘‘consumer’’ means 

15 an individual who obtains, from a financial institu16 tion, financial products or services which are to be 

17 used primarily for personal, family, or household 

18 purposes, and also means the legal representative of 

19 such an individual. 

20 (10) JOINT AGREEMENT.—The term ‘‘joint 

21 agreement’’ means a formal written contract pursu22 ant to which two or more financial institutions joint23 ly offer, endorse, or sponsor a financial product or 

24 service, and any payments between the parties are 

25 based on business or profit generated. 


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1 SEC. 510. EFFECTIVE DATE. 

2 This subtitle shall take effect 6 months after the date 

3 on which the rules under section 503 are promulgated, ex4 cept— 

5 (1) to the extent that a later date is specified 

6 in such rules; and 

7 (2) that section 506 shall be effective upon en8 actment. 

9 Subtitle B—Fraudulent Access to 

10 Financial Information 

11 SEC. 521. PRIVACY PROTECTION FOR CUSTOMER INFORMA12 TION OF FINANCIAL INSTITUTIONS. 

13 (a) PROHIBITION ON OBTAINING CUSTOMER INFOR14 MATION BY FALSE PRETENSES.—It shall be a violation 

15 of this subtitle for any person to obtain or attempt to ob16 tain, or cause to be disclosed or attempt to cause to be 

17 disclosed to any person, customer information of a finan18 cial institution relating to another person— 

19 (1) by making a false, fictitious, or fraudulent 

20 statement or representation to an officer, employee, 

21 or agent of a financial institution; 

22 (2) by making a false, fictitious, or fraudulent 

23 statement or representation to a customer of a fi24 nancial institution; or 

25 (3) by providing any document to an officer, 

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1 ing that the document is forged, counterfeit, lost, or 

2 stolen, was fraudulently obtained, or contains a 

3 false, fictitious, or fraudulent statement or represen4 tation. 

5 (b) PROHIBITION ON SOLICITATION OF A PERSON TO

6 OBTAIN CUSTOMER INFORMATION FROM FINANCIAL IN7 STITUTION UNDER FALSE PRETENSES.—It shall be a vio8 lation of this subtitle to request a person to obtain cus9 tomer information of a financial institution, knowing that 

10 the person will obtain, or attempt to obtain, the informa11 tion from the institution in any manner described in sub12 section (a). 

13 (c) NONAPPLICABILITY TO LAW ENFORCEMENT

14 AGENCIES.—No provision of this section shall be con15 strued so as to prevent any action by a law enforcement 

16 agency, or any officer, employee, or agent of such agency, 

17 to obtain customer information of a financial institution 

18 in connection with the performance of the official duties 

19 of the agency. 

20 (d) NONAPPLICABILITY TO FINANCIAL INSTITUTIONS

21 IN CERTAIN CASES.—No provision of this section shall be 

22 construed so as to prevent any financial institution, or any 

23 officer, employee, or agent of a financial institution, from 

24 obtaining customer information of such financial institu25 tion in the course of— 


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1 (1) testing the security procedures or systems 

2 of such institution for maintaining the confiden3 tiality of customer information; 

4 (2) investigating allegations of misconduct or 

5 negligence on the part of any officer, employee, or 

6 agent of the financial institution; or 

7 (3) recovering customer information of the fi8 nancial institution which was obtained or received by 

9 another person in any manner described in sub10 section (a) or (b). 

11 (e) NONAPPLICABILITY TO INSURANCE INSTITU12 TIONS FOR INVESTIGATION OF INSURANCE FRAUD.—No 

13 provision of this section shall be construed so as to prevent 

14 any insurance institution, or any officer, employee, or 

15 agency of an insurance institution, from obtaining infor16 mation as part of an insurance investigation into criminal 

17 activity, fraud, material misrepresentation, or material 

18 nondisclosure that is authorized for such institution under 

19 State law, regulation, interpretation, or order. 

20 (f) NONAPPLICABILITY TO CERTAIN TYPES OF CUS21 TOMER INFORMATION OF FINANCIAL INSTITUTIONS.—No 

22 provision of this section shall be construed so as to prevent 

23 any person from obtaining customer information of a fi24 nancial institution that otherwise is available as a public 


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1 record filed pursuant to the securities laws (as defined in 

2 section 3(a)(47) of the Securities Exchange Act of 1934). 

3 (g) NONAPPLICABILITY TO COLLECTION OF CHILD

4 SUPPORT JUDGMENTS.—No provision of this section shall 

5 be construed to prevent any State-licensed private investi6 gator, or any officer, employee, or agent of such private 

7 investigator, from obtaining customer information of a fi8 nancial institution, to the extent reasonably necessary to 

9 collect child support from a person adjudged to have been 

10 delinquent in his or her obligations by a Federal or State 

11 court, and to the extent that such action by a State-li12 censed private investigator is not unlawful under any other 

13 Federal or State law or regulation, and has been author14 ized by an order or judgment of a court of competent juris15 diction. 

16 SEC. 522. ADMINISTRATIVE ENFORCEMENT. 

17 (a) ENFORCEMENT BY FEDERAL TRADE COMMIS18 SION.—Compliance with this subtitle shall be enforced by 

19 the Federal Trade Commission in the same manner and 

20 with the same power and authority as the Commission has 

21 under the title VIII, the Fair Debt Collection Practices 

22 Act, to enforce compliance with such title. 

23 (b) NOTICE OF ACTIONS.—The Federal Trade Com24 mission shall— 


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1 (1) notify the Securities and Exchange Commis2 sion whenever the Federal Trade Commission initi3 ates an investigation with respect to a financial in4 stitution subject to regulation by the Securities and 

5 Exchange Commission; 

6 (2) notify the Federal banking agency (as de7 fined in section 3(z) of the Federal Deposit Insur8 ance Act) whenever the Commission initiates an in9 vestigation with respect to a financial institution 

10 subject to regulation by such Federal banking agen11 cy; and 

12 (3) notify the appropriate State insurance regu13 lator whenever the Commission initiates an inves14 tigation with respect to a financial institution sub15 ject to regulation by such regulator. 

16 SEC. 523. CRIMINAL PENALTY. 

17 (a) IN GENERAL.—Whoever knowingly and inten18 tionally violates, or knowingly and intentionally attempts 

19 to violate, section 521 shall be fined in accordance with 

20 title 18, United States Code, or imprisoned for not more 

21 than 5 years, or both. 

22 (b) ENHANCED PENALTY FOR AGGRAVATED

23 CASES.—Whoever violates, or attempts to violate, section 

24 521 while violating another law of the United States or 

25 as part of a pattern of any illegal activity involving more 


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1 than $100,000 in a 12-month period shall be fined twice 

2 the amount provided in subsection (b)(3) or (c)(3) (as the 

3 case may be) of section 3571 of title 18, United States 

4 Code, imprisoned for not more than 10 years, or both. 

5 SEC. 524. RELATION TO STATE LAWS. 

6 (a) IN GENERAL.—This subtitle shall not be con7 strued as superseding, altering, or affecting the statutes, 

8 regulations, orders, or interpretations in effect in any 

9 State, except to the extent that such statutes, regulations, 

10 orders, or interpretations are inconsistent with the provi11 sions of this subtitle, and then only to the extent of the 

12 inconsistency. 

13 (b) GREATER PROTECTION UNDER STATE LAW.— 

14 For purposes of this section, a State statute, regulation, 

15 order, or interpretation is not inconsistent with the provi16 sions of this subtitle if the protection such statute, regula17 tion, order, or interpretation affords any person is greater 

18 than the protection provided under this subtitle as deter19 mined by the Commission, on its own motion or upon the 

20 petition of any interested party. 

21 SEC. 525. AGENCY GUIDANCE. 

22 In furtherance of the objectives of this subtitle, each 

23 Federal banking agency (as defined in section 3(z) of the 

24 Federal Deposit Insurance Act) and the Securities and 

25 Exchange Commission or self-regulatory organizations, as 


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1 appropriate, shall review regulations and guidelines appli2 cable to financial institutions under their respective juris3 dictions and shall prescribe such revisions to such regula4 tions and guidelines as may be necessary to ensure that 

5 such financial institutions have policies, procedures, and 

6 controls in place to prevent the unauthorized disclosure 

7 of customer financial information and to deter and detect 

8 activities proscribed under section 521. 

9 SEC. 526. REPORTS. 

10 (a) REPORT TO THE CONGRESS.—Before the end of 

11 the 18-month period beginning on the date of the enact12 ment of this Act, the Comptroller General, in consultation 

13 with the Federal Trade Commission, Federal banking 

14 agencies, the Securities and Exchange Commission, appro15 priate Federal law enforcement agencies, and appropriate 

16 State insurance regulators, shall submit to the Congress 

17 a report on the following: 

18 (1) The efficacy and adequacy of the remedies 

19 provided in this subtitle in addressing attempts to 

20 obtain financial information by fraudulent means or 

21 by false pretenses. 

22 (2) Any recommendations for additional legisla23 tive or regulatory action to address threats to the 

24 privacy of financial information created by attempts 


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1 to obtain information by fraudulent means or false 

2 pretenses. 

3 (b) ANNUAL REPORT BY ADMINISTERING AGEN4 CIES.—The Federal Trade Commission and the Attorney 

5 General shall submit to Congress an annual report on 

6 number and disposition of all enforcement actions taken 

7 pursuant to this subtitle. 

8 SEC. 527. DEFINITIONS. 

9 For purposes of this subtitle, the following definitions 

10 shall apply: 

11 (1) CUSTOMER.—The term ‘‘customer’’ means, 

12 with respect to a financial institution, any person (or 

13 authorized representative of a person) to whom the 

14 financial institution provides a product or service, 

15 including that of acting as a fiduciary. 

16 (2) CUSTOMER INFORMATION OF A FINANCIAL

17 INSTITUTION.—The term ‘‘customer information of 

18 a financial institution’’ means any information main19 tained by or for a financial institution which is de20 rived from the relationship between the financial in21 stitution and a customer of the financial institution 

22 and is identified with the customer. 

23 (3) DOCUMENT.—The term ‘‘document’’ means 

24 any information in any form. 

25 (4) FINANCIAL INSTITUTION.— 


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1 (A) IN GENERAL.—The term ‘‘financial in2 stitution’’ means any institution engaged in the 

3 business of providing financial services to cus4 tomers who maintain a credit, deposit, trust, or 

5 other financial account or relationship with the 

6 institution. 

7 (B) CERTAIN FINANCIAL INSTITUTIONS

8 SPECIFICALLY INCLUDED.—The term ‘‘financial 

9 institution’’ includes any depository institution 

10 (as defined in section 19(b)(1)(A) of the Fed11 eral Reserve Act), any broker or dealer, any in12 vestment adviser or investment company, any 

13 insurance company, any loan or finance com14 pany, any credit card issuer or operator of a 

15 credit card system, and any consumer reporting 

16 agency that compiles and maintains files on 

17 consumers on a nationwide basis (as defined in 

18 section 603(p)). 

19 (C) SECURITIES INSTITUTIONS.—For pur20 poses of subparagraph (B)— 

21 (i) the terms ‘‘broker’’ and ‘‘dealer’’ 

22 have the meanings provided in section 3 of 

23 the Securities Exchange Act of 1934 (15 

24 U.S.C. 78c); 


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1 (ii) the term ‘‘investment adviser’’ has 

2 the meaning provided in section 202(a)(11) 

3 of the Investment Advisers Act of 1940 

4 (15 U.S.C. 80b–2(a)); and 

5 (iii) the term ‘‘investment company’’ 

6 has the meaning provided in section 3 of 

7 the Investment Company Act of 1940 (15 

8 U.S.C. 80a–3). 

9 (D) FURTHER DEFINITION BY REGULA10 TION.—The Federal Trade Commission, after 

11 consultation with Federal banking agencies and 

12 the Securities and Exchange Commission, may 

13 prescribe regulations clarifying or describing 

14 the types of institutions which shall be treated 

15 as financial institutions for purposes of this 

16 subtitle. 

Passed the House of Representatives July 1, 1999. 

Attest: JEFF TRANDAHL, 

Clerk. 


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