292
‘‘(B) the term ‘new product’ means a prod-
uct or instrument offered or provided by a bank
that—
‘‘(i) was not subject to regulation by
the Commission as a security under this Act
before the date of enactment of this sub-
section; and
‘‘(ii) is not a traditional banking
product, as defined in paragraphs (1)
through (6) of section 205(a) of the Finan-
cial Services Act of 1999.’’.
(c) CLASSIFICATION LIMITED.—Classification of a
particular product or instrument as a traditional banking
product pursuant to this section or the amendments made
by this section shall not be construed as finding or implying
that such product or instrument is or is not a security for
any purpose under the securities laws, or is or is not an
account, agreement, contract, or transaction for any pur-
pose under the Commodity Exchange Act.
(d) NO LIMITATION ON OTHER AUTHORITY TO CHAL-
LENGE.—Nothing in this section or the amendments made
by this section shall affect the right or authority of the
Board of Governors of the Federal Reserve System, any ap-
propriate Federal banking agency, or any interested party
under any other provision of law to object to or seek judicial
293
review as to whether a product or instrument is or is not
appropriately classified as a traditional banking product
under paragraphs (1) through (6) of section 205(a).
(e) INCORPORATED DEFINITIONS.—For purposes of
this section—
(1) the term ‘‘appropriate Federal banking agen-
cy’’ has the same meaning as in section 3 of the Fed-
eral Deposit Insurance Act;
(2) the term ‘‘bank’’ has the same meaning as in
section 3(a)(6) of the Securities Exchange Act of
1934;
(3) the term ‘‘Board’’ means the Board of Gov-
ernors of the Federal Reserve System;
(4) the term ‘‘government securities’’ has the
same meaning as in section 3(a)(42) of the Securities
Exchange Act of 1934, and, for purposes of this sub-
section, commercial paper, bankers acceptances, and
commercial bills shall be treated in the same manner
as government securities; and
(5) the term ‘‘qualified investor’’ has the same
meaning as in section 3(a)(54) of the Securities Ex-
change Act of 1934, as amended by this Act.
294
SEC. 206. QUALIFIED INVESTOR DEFINED.
Section 3(a) of the Securities Exchange Act of 1934
(15 U.S.C. 78c(a)) is amended by adding at the end the
following new paragraph:
‘‘(54) QUALIFIED INVESTOR.—
‘‘(A) DEFINITION.—For purposes of this
title, the term ‘qualified investor’ means—
‘‘(i) any investment company reg-
istered with the Commission under section 8
of the Investment Company Act of 1940;
‘‘(ii) any issuer eligible for an exclu-
sion from the definition of investment com-
pany pursuant to section 3(c)(7) of the In-
vestment Company Act of 1940;
‘‘(iii) any bank (as defined in para-
graph (6) of this subsection), savings asso-
ciation (as defined in section 3(b) of the
Federal Deposit Insurance Act), broker,
dealer, insurance company (as defined in
section 2(a)(13) of the Securities Act of
1933), or business development company (as
defined in section 2(a)(48) of the Investment
Company Act of 1940);
‘‘(iv) any small business investment
company licensed by the United States
Small Business Administration under sec-
295
tion 301 (c) or (d) of the Small Business
Investment Act of 1958;
‘‘(v) any State sponsored employee
benefit plan, or any other employee benefit
plan, within the meaning of the Employee
Retirement Income Security Act of 1974,
other than an individual retirement ac-
count, if the investment decisions are made
by a plan fiduciary, as defined in section
3(21) of that Act, which is either a bank,
savings and loan association, insurance
company, or registered investment adviser;
‘‘(vi) any trust whose purchases of se-
curities are directed by a person described
in clauses (i) through (v) of this subpara-
graph;
‘‘(vii) any market intermediary ex-
empt under section 3(c)(2) of the Investment
Company Act of 1940;
‘‘(viii) any associated person of a
broker or dealer other than a natural per-
son;
‘‘(ix) any foreign bank (as defined in
section 1(b)(7) of the International Banking
Act of 1978);
296
‘‘(x) the government of any foreign
country;
‘‘(xi) any corporation, company, or
partnership that owns and invests on a dis-
cretionary basis, not less than $10,000,000
in investments;
‘‘(xii) any natural person who owns
and invests on a discretionary basis, not
less than $10,000,000 in investments;
‘‘(xiii) any government or political
subdivision, agency, or instrumentality of a
government who owns and invests on a dis-
cretionary basis not less than $50,000,000
in investments; or
‘‘(xiv) any multinational or supra-
national entity or any agency or instru-
mentality thereof.
‘‘(B) ADDITIONAL AUTHORITY.—The Com-
mission may, by rule or order, define a ‘qualified
investor’ as any other person, taking into consid-
eration such factors as the financial sophistica-
tion of the person, net worth, and knowledge and
experience in financial matters.’’.
297
SEC. 207. GOVERNMENT SECURITIES DEFINED.
Section 3(a)(42) of the Securities Exchange Act of
1934 (15 U.S.C. 78c(a)(42)) is amended—
(1) by striking ‘‘or’’ at the end of subparagraph
(C);
(2) by striking the period at the end of subpara-
graph (D) and inserting ‘‘; or’’; and
(3) by adding at the end the following new sub-
paragraph:
‘‘(E) for purposes of section 15C as applied
to a bank, a qualified Canadian government ob-
ligation as defined in section 5136 of the Revised
Statutes.’’.
SEC. 208. EFFECTIVE DATE.
This subtitle shall take effect at the end of the 270-
day period beginning on the date of the enactment of this
Act.
SEC. 209. RULE OF CONSTRUCTION.
Nothing in this Act shall supersede, affect, or otherwise
limit the scope and applicability of the Commodity Ex-
change Act (7 U.S.C. 1 et seq.).
298
Subtitle B—Bank Investment
Company Activities
SEC. 211. CUSTODY OF INVESTMENT COMPANY ASSETS BY
AFFILIATED BANK.
(a) MANAGEMENT COMPANIES.—Section 17(f) of the
Investment Company Act of 1940 (15 U.S.C. 80a–17(f)) is
amended—
(1) by redesignating paragraphs (1), (2), and (3)
as subparagraphs (A), (B), and (C), respectively;
(2) by striking ‘‘(f) Every registered’’ and insert-
ing the following:
‘‘(f) CUSTODY OF SECURITIES.—
‘‘(1) Every registered’’;
(3) by redesignating the second, third, fourth,
and fifth sentences of such subsection as paragraphs
(2) through (5), respectively, and indenting the left
margin of such paragraphs appropriately; and
(4) by adding at the end the following new para-
graph:
‘‘(6) SERVICES AS TRUSTEE OR CUSTODIAN.—
The Commission may adopt rules and regulations,
and issue orders, consistent with the protection of in-
vestors, prescribing the conditions under which a
bank, or an affiliated person of a bank, either of
which is an affiliated person, promoter, organizer, or
299
sponsor of, or principal underwriter for, a registered
management company may serve as custodian of that
registered management company.’’.
(b) UNIT INVESTMENT TRUSTS.—Section 26 of the In-
vestment Company Act of 1940 (15 U.S.C. 80a–26) is
amended—
(1) by redesignating subsections (b) through (e)
as subsections (c) through (f), respectively; and
(2) by inserting after subsection (a) the following
new subsection:
‘‘(b) The Commission may adopt rules and regula-
tions, and issue orders, consistent with the protection of in-
vestors, prescribing the conditions under which a bank, or
an affiliated person of a bank, either of which is an affili-
ated person of a principal underwriter for, or depositor of,
a registered unit investment trust, may serve as trustee or
custodian under subsection (a)(1).’’.
(c) FIDUCIARY DUTY OF CUSTODIAN.—Section 36(a)
of the Investment Company Act of 1940 (15 U.S.C. 80a–
35(a)) is amended—
(1) in paragraph (1), by striking ‘‘or’’ at the
end;
(2) in paragraph (2), by striking the period at
the end and inserting ‘‘; or’’; and
300
(3) by inserting after paragraph (2) the fol-
lowing:
‘‘(3) as custodian.’’.
SEC. 212. LENDING TO AN AFFILIATED INVESTMENT COM-
PANY.
Section 17(a) of the Investment Company Act of 1940
(15 U.S.C. 80a–17(a)) is amended—
(1) by striking ‘‘or’’ at the end of paragraph (2);
(2) by striking the period at the end of para-
graph (3) and inserting ‘‘; or’’; and
(3) by adding at the end the following new para-
graph:
‘‘(4) to loan money or other property to such reg-
istered company, or to any company controlled by
such registered company, in contravention of such
rules, regulations, or orders as the Commission may
prescribe or issue consistent with the protection of in-
vestors.’’.
SEC. 213. INDEPENDENT DIRECTORS.
(a) IN GENERAL.—Section 2(a)(19)(A) of the Invest-
ment Company Act of 1940 (15 U.S.C. 80a–2(a)(19)(A))
is amended—
(1) by striking clause (v) and inserting the fol-
lowing new clause:
301
‘‘(v) any person or any affiliated per-
son of a person (other than a registered in-
vestment company) that, at any time dur-
ing the 6-month period preceding the date
of the determination of whether that person
or affiliated person is an interested person,
has executed any portfolio transactions for,
engaged in any principal transactions with,
or distributed shares for—
‘‘(I) the investment company;
‘‘(II) any other investment com-
pany having the same investment ad-
viser as such investment company or
holding itself out to investors as a re-
lated company for purposes of invest-
ment or investor services; or
‘‘(III) any account over which the
investment company’s investment ad-
viser has brokerage placement discre-
tion,’’;
(2) by redesignating clause (vi) as clause (vii);
and
(3) by inserting after clause (v) the following
new clause:
302
‘‘(vi) any person or any affiliated per-
son of a person (other than a registered in-
vestment company) that, at any time dur-
ing the 6-month period preceding the date
of the determination of whether that person
or affiliated person is an interested person,
has loaned money or other property to—
‘‘(I) the investment company;
‘‘(II) any other investment com-
pany having the same investment ad-
viser as such investment company or
holding itself out to investors as a re-
lated company for purposes of invest-
ment or investor services; or
‘‘(III) any account for which the
investment company’s investment ad-
viser has borrowing authority,’’.
(b) CONFORMING AMENDMENT.—Section 2(a)(19)(B)
of the Investment Company Act of 1940 (15 U.S.C. 80a–
2(a)(19)(B)) is amended—
(1) by striking clause (v) and inserting the fol-
lowing new clause:
‘‘(v) any person or any affiliated per-
son of a person (other than a registered in-
vestment company) that, at any time dur-
303
ing the 6-month period preceding the date
of the determination of whether that person
or affiliated person is an interested person,
has executed any portfolio transactions for,
engaged in any principal transactions with,
or distributed shares for—
‘‘(I) any investment company for
which the investment adviser or prin-
cipal underwriter serves as such;
‘‘(II) any investment company
holding itself out to investors, for pur-
poses of investment or investor services,
as a company related to any invest-
ment company for which the invest-
ment adviser or principal underwriter
serves as such; or
‘‘(III) any account over which the
investment adviser has brokerage place-
ment discretion,’’;
(2) by redesignating clause (vi) as clause (vii);
and
(3) by inserting after clause (v) the following
new clause:
‘‘(vi) any person or any affiliated per-
son of a person (other than a registered in-
304
vestment company) that, at any time dur-
ing the 6-month period preceding the date
of the determination of whether that person
or affiliated person is an interested person,
has loaned money or other property to—
‘‘(I) any investment company for
which the investment adviser or prin-
cipal underwriter serves as such;
‘‘(II) any investment company
holding itself out to investors, for pur-
poses of investment or investor services,
as a company related to any invest-
ment company for which the invest-
ment adviser or principal underwriter
serves as such; or
‘‘(III) any account for which the
investment adviser has borrowing au-
thority,’’.
(c) AFFILIATION OF DIRECTORS.—Section 10(c) of the
Investment Company Act of 1940 (15 U.S.C. 80a–10(c)) is
amended by striking ‘‘bank, except’’ and inserting ‘‘bank
(together with its affiliates and subsidiaries) or any one
bank holding company (together with its affiliates and sub-
sidiaries) (as such terms are defined in section 2 of the
Bank Holding Company Act of 1956), except’’.
305
(d) EFFECTIVE DATE.—The amendments made by this
section shall take effect at the end of the 1-year period begin-
ning on the date of enactment of this subtitle.
SEC. 214. ADDITIONAL SEC DISCLOSURE AUTHORITY.
Section 35(a) of the Investment Company Act of 1940
(15 U.S.C. 80a–34(a)) is amended to read as follows:
‘‘(a) MISREPRESENTATION OF GUARANTEES.—
‘‘(1) IN GENERAL.—It shall be unlawful for any
person, issuing or selling any security of which a reg-
istered investment company is the issuer, to represent
or imply in any manner whatsoever that such secu-
rity or company—
‘‘(A) has been guaranteed, sponsored, rec-
ommended, or approved by the United States, or
any agency, instrumentality or officer of the
United States;
‘‘(B) has been insured by the Federal De-
posit Insurance Corporation; or
‘‘(C) is guaranteed by or is otherwise an ob-
ligation of any bank or insured depository insti-
tution.
‘‘(2) DISCLOSURES.—Any person issuing or sell-
ing the securities of a registered investment company
that is advised by, or sold through, a bank shall
prominently disclose that an investment in the com-
306
pany is not insured by the Federal Deposit Insurance
Corporation or any other government agency. The
Commission may adopt rules and regulations, and
issue orders, consistent with the protection of inves-
tors, prescribing the manner in which the disclosure
under this paragraph shall be provided.
‘‘(3) DEFINITIONS.—The terms ‘insured deposi-
tory institution’ and ‘appropriate Federal banking
agency’ have the same meanings as in section 3 of the
Federal Deposit Insurance Act.’’.
SEC. 215. DEFINITION OF BROKER UNDER THE INVEST-
MENT COMPANY ACT OF 1940.
Section 2(a)(6) of the Investment Company Act of
1940 (15 U.S.C. 80a–2(a)(6)) is amended to read as follows:
‘‘(6) The term ‘broker’ has the same meaning as
in section 3 of the Securities Exchange Act of 1934,
except that such term does not include any person
solely by reason of the fact that such person is an un-
derwriter for one or more investment companies.’’.
SEC. 216. DEFINITION OF DEALER UNDER THE INVESTMENT
COMPANY ACT OF 1940.
Section 2(a)(11) of the Investment Company Act of
1940 (15 U.S.C. 80a–2(a)(11)) is amended to read as fol-
lows:
307
‘‘(11) The term ‘dealer’ has the same meaning as
in section 3 of the Securities Exchange Act of 1934,
but does not include an insurance company or invest-
ment company.’’.
SEC. 217. REMOVAL OF THE EXCLUSION FROM THE DEFINI-
TION OF INVESTMENT ADVISER FOR BANKS
THAT ADVISE INVESTMENT COMPANIES.
(a) INVESTMENT ADVISER.—Section 202(a)(11) of the
Investment Advisers Act of 1940 (15 U.S.C. 80b–2(a)(11))
is amended in subparagraph (A), by striking ‘‘investment
company’’ and inserting ‘‘investment company, except that
the term ‘investment adviser’ includes any bank or bank
holding company to the extent that such bank or bank hold-
ing company serves or acts as an investment adviser to a
registered investment company, but if, in the case of a bank,
such services or actions are performed through a separately
identifiable department or division, the department or divi-
sion, and not the bank itself, shall be deemed to be the in-
vestment adviser’’.
(b) SEPARATELY IDENTIFIABLE DEPARTMENT OR DI-
VISION.—Section 202(a) of the Investment Advisers Act of
1940 (15 U.S.C. 80b–2(a)) is amended by adding at the
end the following:
‘‘(26) The term ‘separately identifiable depart-
ment or division’ of a bank means a unit—
308
‘‘(A) that is under the direct supervision of
an officer or officers designated by the board of
directors of the bank as responsible for the day-
to-day conduct of the bank’s investment adviser
activities for one or more investment companies,
including the supervision of all bank employees
engaged in the performance of such activities;
and
‘‘(B) for which all of the records relating to
its investment adviser activities are separately
maintained in or extractable from such unit’s
own facilities or the facilities of the bank, and
such records are so maintained or otherwise ac-
cessible as to permit independent examination
and enforcement by the Commission of this Act
or the Investment Company Act of 1940 and
rules and regulations promulgated under this
Act or the Investment Company Act of 1940.’’.
SEC. 218. DEFINITION OF BROKER UNDER THE INVEST-
MENT ADVISERS ACT OF 1940.
Section 202(a)(3) of the Investment Advisers Act of
1940 (15 U.S.C. 80b–2(a)(3)) is amended to read as follows:
‘‘(3) The term ‘broker’ has the same meaning as
in section 3 of the Securities Exchange Act of 1934.’’.
309
SEC. 219. DEFINITION OF DEALER UNDER THE INVESTMENT
ADVISERS ACT OF 1940.
Section 202(a)(7) of the Investment Advisers Act of
1940 (15 U.S.C. 80b–2(a)(7)) is amended to read as follows:
‘‘(7) The term ‘dealer’ has the same meaning as
in section 3 of the Securities Exchange Act of 1934,
but does not include an insurance company or invest-
ment company.’’.
SEC. 220. INTERAGENCY CONSULTATION.
The Investment Advisers Act of 1940 (15 U.S.C. 80b–
1 et seq.) is amended by inserting after section 210 the fol-
lowing new section:
‘‘SEC. 210A. CONSULTATION.
‘‘(a) EXAMINATION RESULTS AND OTHER INFORMA-
TION.—
‘‘(1) The appropriate Federal banking agency
shall provide the Commission upon request the results
of any examination, reports, records, or other infor-
mation to which such agency may have access with
respect to the investment advisory activities—
‘‘(A) of any—
‘‘(i) bank holding company;
‘‘(ii) bank; or
‘‘(iii) separately identifiable depart-
ment or division of a bank, that is reg-
istered under section 203 of this title; and
310
‘‘(B) in the case of a bank holding company
or bank that has a subsidiary or a separately
identifiable department or division registered
under that section, of such bank or bank holding
company.
‘‘(2) The Commission shall provide to the appro-
priate Federal banking agency upon request the re-
sults of any examination, reports, records, or other
information with respect to the investment advisory
activities of any bank holding company, bank, or sep-
arately identifiable department or division of a bank,
any of which is registered under section 203 of this
title.
‘‘(b) EFFECT ON OTHER AUTHORITY.—Nothing in this
section shall limit in any respect the authority of the appro-
priate Federal banking agency with respect to such bank
holding company, bank, or department or division under
any provision of law.
‘‘(c) DEFINITION.—For purposes of this section, the
term ‘appropriate Federal banking agency’ has the same
meaning as in section 3 of the Federal Deposit Insurance
Act.’’.
SEC. 221. TREATMENT OF BANK COMMON TRUST FUNDS.
(a) SECURITIES ACT OF 1933.—Section 3(a)(2) of the
Securities Act of 1933 (15 U.S.C. 77c(a)(2)) is amended
311
by striking ‘‘or any interest or participation in any com-
mon trust fund or similar fund maintained by a bank ex-
clusively for the collective investment and reinvestment of
assets contributed thereto by such bank in its capacity as
trustee, executor, administrator, or guardian’’ and insert-
ing ‘‘or any interest or participation in any common trust
fund or similar fund that is excluded from the definition
of the term ‘investment company’ under section 3(c)(3) of
the Investment Company Act of 1940’’.
(b) SECURITIES EXCHANGE ACT OF 1934.—Section
3(a)(12)(A)(iii) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)(12)(A)(iii)) is amended to read as follows:
‘‘(iii) any interest or participation in any
common trust fund or similar fund that is ex-
cluded from the definition of the term ‘invest-
ment company’ under section 3(c)(3) of the In-
vestment Company Act of 1940;’’.
(c) INVESTMENT COMPANY ACT
OF 1940.—Section
3(c)(3) of the Investment Company Act of 1940 (15 U.S.C.
80a–3(c)(3)) is amended by inserting before the period the
following: ‘‘, if—
‘‘(A) such fund is employed by the bank
solely as an aid to the administration of trusts,
estates, or other accounts created and main-
tained for a fiduciary purpose;
312
‘‘(B) except in connection with the ordinary
advertising of the bank’s fiduciary services, in-
terests in such fund are not—
‘‘(i) advertised; or
‘‘(ii) offered for sale to the general pub-
lic; and
‘‘(C) fees and expenses charged by such fund
are not in contravention of fiduciary principles
established under applicable Federal or State
law’’.
SEC. 222. INVESTMENT ADVISERS PROHIBITED FROM HAV-
ING 
CONTROLLING 
INTEREST 
IN 
REG-
ISTERED INVESTMENT COMPANY.
Section 15 of the Investment Company Act of 1940 (15
U.S.C. 80a–15) is amended by adding at the end the fol-
lowing new subsection:
‘‘(g) CONTROLLING INTEREST IN INVESTMENT COM-
PANY PROHIBITED.—
‘‘(1) IN GENERAL.—If an investment adviser to
a registered investment company, or an affiliated per-
son of that investment adviser, holds a controlling in-
terest in that registered investment company in a
trustee or fiduciary capacity, such person shall—
‘‘(A) if it holds the shares in a trustee or fi-
duciary capacity with respect to any employee
313
benefit plan subject to the Employee Retirement
Income Security Act of 1974, transfer the power
to vote the shares of the investment company
through to another person acting in a fiduciary
capacity with respect to the plan who is not an
affiliated person of that investment adviser or
any affiliated person thereof; or
‘‘(B) if it holds the shares in a trustee or fi-
duciary capacity with respect to any person or
entity other than an employee benefit plan sub-
ject to the Employee Retirement Income Security
Act of 1974—
‘‘(i) transfer the power to vote the
shares of the investment company through
to—
‘‘(I) the beneficial owners of the
shares;
‘‘(II) another person acting in a
fiduciary capacity who is not an affili-
ated person of that investment adviser
or any affiliated person thereof; or
‘‘(III) any person authorized to
receive statements and information
with respect to the trust who is not an
315
SEC. 223. CONFORMING CHANGE IN DEFINITION.
Section 2(a)(5) of the Investment Company Act of
1940 (15 U.S.C. 80a–2(a)(5)) is amended by striking ‘‘(A)
a banking institution organized under the laws of the
United States’’ and inserting ‘‘(A) a depository institution
(as defined in section 3 of the Federal Deposit Insurance
Act) or a branch or agency of a foreign bank (as such terms
are defined in section 1(b) of the International Banking Act
of 1978)’’.
SEC. 224. CONFORMING AMENDMENT.
Section 202 of the Investment Advisers Act of 1940 (15
U.S.C. 80b–2) is amended by adding at the end the fol-
lowing new subsection:
‘‘(c) CONSIDERATION OF PROMOTION OF EFFICIENCY,
COMPETITION, AND CAPITAL FORMATION.—Whenever pur-
suant to this title the Commission is engaged in rulemaking
and is required to consider or determine whether an action
is necessary or appropriate in the public interest, the Com-
mission shall also consider, in addition to the protection
of investors, whether the action will promote efficiency, com-
petition, and capital formation.’’.
SEC. 225. EFFECTIVE DATE.
This subtitle shall take effect 90 days after the date
of the enactment of this Act.
316
Subtitle 
C—Securities 
and 
Ex-
change Commission Supervision
of 
Investment 
Bank 
Holding
Companies
SEC. 231. SUPERVISION OF INVESTMENT BANK HOLDING
COMPANIES BY THE SECURITIES AND EX-
CHANGE COMMISSION.
(a) AMENDMENT.—Section 17 of the Securities Ex-
change Act of 1934 (15 U.S.C. 78q) is amended—
(1) by redesignating subsection (i) as subsection
(k); and
(2) by inserting after subsection (h) the following
new subsections:
‘‘(i) INVESTMENT BANK HOLDING COMPANIES.—
‘‘(1) ELECTIVE SUPERVISION OF AN INVESTMENT
BANK HOLDING COMPANY NOT HAVING A BANK OR
SAVINGS ASSOCIATION AFFILIATE.—
‘‘(A) IN
GENERAL.—An investment bank
holding company that is not—
‘‘(i) an affiliate of an insured bank
(other than an institution described in sub-
paragraph (D), (F), or (G) of section
2(c)(2), or held under section 4(f), of the
Bank Holding Company Act of 1956) or a
savings association;
317
‘‘(ii) a foreign bank, foreign company,
or company that is described in section 8(a)
of the International Banking Act of 1978;
or
‘‘(iii) a foreign bank that controls, di-
rectly or indirectly, a corporation chartered
under section 25A of the Federal Reserve
Act,
may elect to become supervised by filing with the
Commission a notice of intention to become su-
pervised, pursuant to subparagraph (B) of this
paragraph. Any investment bank holding com-
pany filing such a notice shall be supervised in
accordance with this section and comply with the
rules promulgated by the Commission applicable
to supervised investment bank holding compa-
nies.
‘‘(B) NOTIFICATION OF STATUS AS A SUPER-
VISED INVESTMENT BANK HOLDING COMPANY.—
An investment bank holding company that elects
under subparagraph (A) to become supervised by
the Commission shall file with the Commission a
written notice of intention to become supervised
by the Commission in such form and containing
such information and documents concerning such
318
investment bank holding company as the Com-
mission, by rule, may prescribe as necessary or
appropriate in furtherance of the purposes of
this section. Unless the Commission finds that
such supervision is not necessary or appropriate
in furtherance of the purposes of this section,
such supervision shall become effective 45 days
after the date of receipt of such written notice by
the Commission, or within such shorter time pe-
riod as the Commission, by rule or order, may
determine.
‘‘(2) ELECTION NOT TO BE SUPERVISED BY THE
COMMISSION AS AN INVESTMENT BANK HOLDING COM-
PANY.—
‘‘(A) VOLUNTARY WITHDRAWAL.—A super-
vised investment bank holding company that is
supervised pursuant to paragraph (1) may, upon
such terms and conditions as the Commission
deems necessary or appropriate, elect not to be
supervised by the Commission by filing a written
notice of withdrawal from Commission super-
vision. Such notice shall not become effective
until one year after receipt by the Commission,
or such shorter or longer period as the Commis-
sion deems necessary or appropriate to ensure ef-
319
fective supervision of the material risks to the su-
pervised investment bank holding company and
to the affiliated broker or dealer, or to prevent
evasion of the purposes of this section.
‘‘(B) DISCONTINUATION OF COMMISSION SU-
PERVISION.—If the Commission finds that any
supervised investment bank holding company
that is supervised pursuant to paragraph (1) is
no longer in existence or has ceased to be an in-
vestment bank holding company, or if the Com-
mission finds that continued supervision of such
a supervised investment bank holding company
is not consistent with the purposes of this sec-
tion, the Commission may discontinue the super-
vision pursuant to a rule or order, if any, pro-
mulgated by the Commission under this section.
‘‘(3) SUPERVISION OF INVESTMENT BANK HOLD-
ING COMPANIES.—
‘‘(A) RECORDKEEPING AND REPORTING.—
‘‘(i) IN
GENERAL.—Every supervised
investment bank holding company and each
affiliate thereof shall make and keep for pre-
scribed periods such records, furnish copies
thereof, and make such reports, as the Com-
320
mission may require by rule, in order to
keep the Commission informed as to—
‘‘(I) the company’s or affiliate’s
activities, financial condition, policies,
systems for monitoring and controlling
financial and operational risks, and
transactions and relationships between
any broker or dealer affiliate of the su-
pervised investment bank holding com-
pany; and
‘‘(II) the extent to which the com-
pany or affiliate has complied with the
provisions of this Act and regulations
prescribed and orders issued under this
Act.
‘‘(ii) FORM
AND
CONTENTS.—Such
records and reports shall be prepared in
such form and according to such specifica-
tions (including certification by an inde-
pendent public accountant), as the Commis-
sion may require and shall be provided
promptly at any time upon request by the
Commission. Such records and reports may
include—
321
‘‘(I) a balance sheet and income
statement;
‘‘(II) an assessment of the consoli-
dated capital of the supervised invest-
ment bank holding company;
‘‘(III) an independent auditor’s
report attesting to the supervised in-
vestment bank holding company’s com-
pliance with its internal risk manage-
ment and internal control objectives;
and
‘‘(IV) reports concerning the ex-
tent to which the company or affiliate
has complied with the provisions of
this title and any regulations pre-
scribed and orders issued under this
title.
‘‘(B) USE OF EXISTING REPORTS.—
‘‘(i) IN
GENERAL.—The Commission
shall, to the fullest extent possible, accept re-
ports in fulfillment of the requirements
under this paragraph that the supervised
investment bank holding company or its af-
filiates have been required to provide to an-
322
other appropriate regulatory agency or self-
regulatory organization.
‘‘(ii) AVAILABILITY.—A supervised in-
vestment bank holding company or an affil-
iate of such company shall provide to the
Commission, at the request of the Commis-
sion, any report referred to in clause (i).
‘‘(C) EXAMINATION AUTHORITY.—
‘‘(i) FOCUS OF EXAMINATION AUTHOR-
ITY.—The Commission may make examina-
tions of any supervised investment bank
holding company and any affiliate of such
company in order to—
‘‘(I) 
inform 
the 
Commission
regarding—
‘‘(aa) the nature of the oper-
ations and financial condition of
the supervised investment bank
holding company and its affili-
ates;
‘‘(bb) the financial and oper-
ational risks within the super-
vised investment bank holding
company that may affect any
broker or dealer controlled by such
323
supervised investment bank hold-
ing company; and
‘‘(cc) the systems of the su-
pervised investment bank holding
company and its affiliates for
monitoring and controlling those
risks; and
‘‘(II) monitor compliance with the
provisions of this subsection, provisions
governing transactions and relation-
ships between any broker or dealer af-
filiated with the supervised investment
bank holding company and any of the
company’s other affiliates, and appli-
cable provisions of subchapter II of
chapter 53, title 31, United States
Code (commonly referred to as the
‘Bank Secrecy Act’) and regulations
thereunder.
‘‘(ii) RESTRICTED FOCUS OF EXAMINA-
TIONS.—The Commission shall limit the
focus and scope of any examination of a su-
pervised investment bank holding company
to—
‘‘(I) the company; and
324
‘‘(II) any affiliate of the company
that, because of its size, condition, or
activities, the nature or size of the
transactions between such affiliate and
any affiliated broker or dealer, or the
centralization of functions within the
holding company system, could, in the
discretion of the Commission, have a
materially adverse effect on the oper-
ational or financial condition of the
broker or dealer.
‘‘(iii) DEFERENCE TO OTHER EXAMI-
NATIONS.—For purposes of this subpara-
graph, the Commission shall, to the fullest
extent possible, use the reports of examina-
tion of an institution described in subpara-
graph (D), (F), or (G) of section 2(c)(2), or
held under section 4(f), of the Bank Holding
Company Act of 1956 made by the appro-
priate regulatory agency, or of a licensed
insurance company made by the appro-
priate State insurance regulator.
‘‘(4) HOLDING COMPANY CAPITAL.—
‘‘(A) AUTHORITY.—If the Commission finds
that it is necessary to adequately supervise in-
326
ments of another Federal regulatory author-
ity or State insurance authority.
‘‘(iv) APPROPRIATE EXCLUSIONS.—The
Commission shall take full account of the
applicable capital requirements of another
Federal regulatory authority or State insur-
ance regulator.
‘‘(C) INTERNAL
RISK
MANAGEMENT
MOD-
ELS.—The Commission may incorporate inter-
nal risk management models into its capital ade-
quacy rules for supervised investment bank hold-
ing companies.
‘‘(5) FUNCTIONAL REGULATION OF BANKING AND
INSURANCE ACTIVITIES OF SUPERVISED INVESTMENT
BANK HOLDING COMPANIES.—The Commission shall
defer to—
‘‘(A) the appropriate regulatory agency
with regard to all interpretations of, and the en-
forcement of, applicable banking laws relating to
the activities, conduct, ownership, and oper-
ations of banks, and institutions described in
subparagraph (D), (F), and (G) of section
2(c)(2), or held under section 4(f), of the Bank
Holding Company Act of 1956; and
327
‘‘(B) the appropriate State insurance regu-
lators with regard to all interpretations of, and
the enforcement of, applicable State insurance
laws relating to the activities, conduct, and oper-
ations of insurance companies and insurance
agents.
‘‘(6) DEFINITIONS.—For purposes of this sub-
section and subsection (j)—
‘‘(A) the term ‘investment bank holding
company’ means—
‘‘(i) any person other than a natural
person that owns or controls one or more
brokers or dealers; and
‘‘(ii) the associated persons of the in-
vestment bank holding company;
‘‘(B) the term ‘supervised investment bank
holding company’ means any investment bank
holding company that is supervised by the Com-
mission pursuant to this subsection;
‘‘(C) the terms ‘affiliate’, ‘bank’, ‘bank hold-
ing company’, ‘company’, ‘control’, and ‘savings
association’ have the same meanings as in sec-
tion 2 of the Bank Holding Company Act of
1956;
328
‘‘(D) the term ‘insured bank’ has the same
meaning as in section 3 of the Federal Deposit
Insurance Act;
‘‘(E) the term ‘foreign bank’ has the same
meaning as in section 1(b)(7) of the Inter-
national Banking Act of 1978; and
‘‘(F) the terms ‘person associated with an
investment bank holding company’ and ‘associ-
ated person of an investment bank holding com-
pany’ mean any person directly or indirectly
controlling, controlled by, or under common con-
trol with, an investment bank holding company.
‘‘(j) AUTHORITY TO LIMIT DISCLOSURE OF INFORMA-
TION.—Notwithstanding any other provision of law, the
Commission shall not be compelled to disclose any informa-
tion required to be reported under subsection (h) or (i) or
any information supplied to the Commission by any domes-
tic or foreign regulatory agency that relates to the financial
or operational condition of any associated person of a
broker or dealer, investment bank holding company, or any
affiliate of an investment bank holding company. Nothing
in this subsection shall authorize the Commission to with-
hold information from Congress, or prevent the Commission
from complying with a request for information from any
other Federal department or agency or any self-regulatory
329
organization requesting the information for purposes with-
in the scope of its jurisdiction, or complying with an order
of a court of the United States in an action brought by
the United States or the Commission. For purposes of sec-
tion 552 of title 5, United States Code, this subsection shall
be considered a statute described in subsection (b)(3)(B) of
such section 552. In prescribing regulations to carry out
the requirements of this subsection, the Commission shall
designate information described in or obtained pursuant to
subparagraphs (A), (B), and (C) of subsection (i)(5) as con-
fidential information for purposes of section 24(b)(2) of this
title.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 3(a)(34) of the Securities Exchange
Act of 1934 (15 U.S.C. 78c(a)(34)) is amended by
adding at the end the following new subparagraph:
‘‘(H) When used with respect to an institu-
tion described in subparagraph (D), (F), or (G)
of section 2(c)(2), or held under section 4(f), of
the Bank Holding Company Act of 1956—
‘‘(i) the Comptroller of the Currency,
in the case of a national bank or a bank in
the District of Columbia examined by the
Comptroller of the Currency;
330
‘‘(ii) the Board of Governors of the
Federal Reserve System, in the case of a
State member bank of the Federal Reserve
System or any corporation chartered under
section 25A of the Federal Reserve Act;
‘‘(iii) the Federal Deposit Insurance
Corporation, in the case of any other bank
the deposits of which are insured in accord-
ance with the Federal Deposit Insurance
Act; or
‘‘(iv) the Commission in the case of all
other such institutions.’’.
(2) Section 1112(e) of the Right to Financial
Privacy Act of 1978 (12 U.S.C. 3412(e)) is
amended—
(A) by striking ‘‘this title’’ and inserting
‘‘law’’; and
(B) by inserting ‘‘, examination reports’’
after ‘‘financial records’’.
Subtitle D—Studies
SEC. 241. STUDY OF METHODS TO INFORM INVESTORS AND
CONSUMERS OF UNINSURED PRODUCTS.
Not later than 1 year after the date of enactment of
this Act, the Comptroller General of the United States shall
submit a report to the Congress regarding the efficacy, costs,
331
and benefits of requiring that any depository institution
that accepts federally insured deposits and that, directly or
through a contractual or other arrangement with a broker,
dealer, or agent, buys from, sells to, or effects transactions
for retail investors in securities or consumers of insurance
to inform such investors and consumers through the use of
a logo or seal that the security or insurance is not insured
by the Federal Deposit Insurance Corporation.
SEC. 242. STUDY OF LIMITATION ON FEES ASSOCIATED
WITH ACQUIRING FINANCIAL PRODUCTS.
Not later than 1 year after the date of enactment of
this Act, the Comptroller General of the United States shall
submit a report to the Congress regarding the impact of
regulations limiting any commissions, fees, markups, or
other costs incurred by customers in the acquisition of fi-
nancial products.
TITLE III—INSURANCE
Subtitle A—State Regulation of
Insurance
SEC. 301. STATE REGULATION OF THE BUSINESS OF INSUR-
ANCE.
The Act entitled ‘‘An Act to express the intent of the
Congress with reference to the regulation of the business of
insurance’’ and approved March 9, 1945 (15 U.S.C. 1011
332
et seq.), commonly referred to as the ‘‘McCarran-Ferguson
Act’’ remains the law of the United States.
SEC. 302. MANDATORY INSURANCE LICENSING REQUIRE-
MENTS.
No person or entity shall provide insurance in a State
as principal or agent unless such person or entity is li-
censed as required by the appropriate insurance regulator
of such State in accordance with the relevant State insur-
ance law, subject to section 104.
SEC. 303. FUNCTIONAL REGULATION OF INSURANCE.
The insurance sales activity of any person or entity
shall be functionally regulated by the States, subject to sec-
tion 104.
SEC. 304. INSURANCE UNDERWRITING IN NATIONAL BANKS.
(a) IN GENERAL.—Except as provided in section 305,
a national bank and the subsidiaries of a national bank
may not provide insurance in a State as principal except
that this prohibition shall not apply to authorized products.
(b) AUTHORIZED PRODUCTS.—For the purposes of this
section, a product is authorized if—
(1) as of January 1, 1999, the Comptroller of the
Currency had determined in writing that national
banks may provide such product as principal, or na-
tional banks were in fact lawfully providing such
product as principal;
333
(2) no court of relevant jurisdiction had, by final
judgment, overturned a determination of the Comp-
troller of the Currency that national banks may pro-
vide such product as principal; and
(3) the product is not title insurance, or an an-
nuity contract the income of which is subject to tax
treatment under section 72 of the Internal Revenue
Code of 1986.
(c) DEFINITION.—For purposes of this section, the
term ‘‘insurance’’ means—
(1) any product regulated as insurance as of
January 1, 1999, in accordance with the relevant
State insurance law, in the State in which the prod-
uct is provided;
(2) any product first offered after January 1,
1999, which—
(A) a State insurance regulator determines
shall be regulated as insurance in the State in
which the product is provided because the prod-
uct insures, guarantees, or indemnifies against
liability, loss of life, loss of health, or loss
through damage to or destruction of property,
including, but not limited to, surety bonds, life
insurance, health insurance, title insurance, and
property and casualty insurance (such as pri-
334
vate passenger or commercial automobile, home-
owners, mortgage, commercial multiperil, general
liability, professional liability, workers’ com-
pensation, fire and allied lines, farm owners
multiperil, aircraft, fidelity, surety, medical
malpractice, ocean marine, inland marine, and
boiler and machinery insurance); and
(B) is not a product or service of a bank
that is—
(i) a deposit product;
(ii) a loan, discount, letter of credit, or
other extension of credit;
(iii) a trust or other fiduciary service;
(iv) a qualified financial contract (as
defined in or determined pursuant to sec-
tion 11(e)(8)(D)(i) of the Federal Deposit
Insurance Act); or
(v) a financial guaranty, except that
this subparagraph (B) shall not apply to a
product that includes an insurance compo-
nent such that if the product is offered or
proposed to be offered by the bank as
principal—
(I) it would be treated as a life
insurance contract under section 7702
335
of the Internal Revenue Code of 1986;
or
(II) in the event that the product
is not a letter of credit or other similar
extension of credit, a qualified finan-
cial contract, or a financial guaranty,
it would qualify for treatment for
losses incurred with respect to such
product under section 832(b)(5) of the
Internal Revenue Code of 1986, if the
bank were subject to tax as an insur-
ance company under section 831 of
that Code; or
(3) any annuity contract, the income on which
is subject to tax treatment under section 72 of the In-
ternal Revenue Code of 1986.
SEC. 305. TITLE INSURANCE ACTIVITIES OF NATIONAL
BANKS AND THEIR AFFILIATES.
(a) AUTHORITY.—Notwithstanding any other provi-
sion of this Act or any other law, no national bank, and
no subsidiary of a national bank, may engage in any activ-
ity involving the underwriting of title insurance, other than
title insurance underwriting activities in which such na-
tional bank or subsidiary was actively and lawfully en-
gaged before the date of the enactment of this Act.
336
(b) INSURANCE AFFILIATE.—In the case of a national
bank which has an affiliate which provides insurance as
principal and is not a subsidiary of the bank, the national
bank and any subsidiary of the national bank may not en-
gage in any activity involving the underwriting of title in-
surance pursuant to subsection (a).
(c) INSURANCE SUBSIDIARY.—In the case of a na-
tional bank which has a subsidiary which provides insur-
ance as principal and has no affiliate which provides insur-
ance as principal and is not a subsidiary, the national
bank may not engage in any activity involving the under-
writing of title insurance pursuant to subsection (a).
(d) LIMITATION ON OTHER TITLE INSURANCE ACTIVI-
TIES.—Notwithstanding any other provision of law, no na-
tional bank may engage, directly or indirectly, in any ac-
tivity involving the sale of title insurance, other than title
insurance sales activities in which such national bank was
actively and lawfully engaged, directly or through a sub-
sidiary, as of the date of the enactment of this Act.
(e) ‘‘AFFILIATE’’ AND ‘‘SUBSIDIARY’’ DEFINED.—For
purposes of this section, the terms ‘‘affiliate’’ and ‘‘sub-
sidiary’’ have the same meanings as in section 2 of the
Bank Holding Company Act of 1956.
(f) RULE OF CONSTRUCTION.—No provision of this Act
or any other Federal law shall be construed as superseding
337
or affecting a State law which was in effect before the date
of the enactment of this Act and which prohibits title insur-
ance from being offered, provided, or sold in such State,
or from being underwritten with respect to real property
in such State, by any person whatsoever.
SEC. 306. EXPEDITED AND EQUALIZED DISPUTE RESOLU-
TION FOR FEDERAL REGULATORS.
(a) FILING IN COURT OF APPEALS.—In the case of a
regulatory conflict between a State insurance regulator and
a Federal regulator as to whether any product is or is not
insurance, as defined in section 304(c) of this Act, or wheth-
er a State statute, regulation, order, or interpretation re-
garding any insurance sales or solicitation activity is prop-
erly treated as preempted under Federal law, either regu-
lator may seek expedited judicial review of such determina-
tion by the United States Court of Appeals for the circuit
in which the State is located or in the United States Court
of Appeals for the District of Columbia Circuit by filing
a petition for review in such court.
(b) EXPEDITED REVIEW.—The United States Court of
Appeals in which a petition for review is filed in accord-
ance with subsection (a) shall complete all action on such
petition, including rendering a judgment, before the end of
the 60-day period beginning on the date on which such peti-
338
tion is filed, unless all parties to such proceeding agree to
any extension of such period.
(c) SUPREME COURT REVIEW.—Any request for certio-
rari to the Supreme Court of the United States of any judg-
ment of a United States Court of Appeals with respect to
a petition for review under this section shall be filed with
the Supreme Court of the United States as soon as prac-
ticable after such judgment is issued.
(d) STATUTE OF LIMITATION.—No action may be filed
under this section challenging an order, ruling, determina-
tion, or other action of a Federal regulator or State insur-
ance regulator after the later of—
(1) the end of the 12-month period beginning on
the date on which the first public notice is made of
such order, ruling, determination or other action in
its final form; or
(2) the end of the 6-month period beginning on
the date on which such order, ruling, determination,
or other action takes effect.
(e) STANDARD OF REVIEW.—The court shall decide an
action filed under this section based on its review on the
merits of all questions presented under State and Federal
law, including the nature of the product or activity and
the history and purpose of its regulation under State and
Federal law, without unequal deference.
340
Subtitle B—National Association of
Registered Agents and Brokers
SEC. 321. STATE FLEXIBILITY IN MULTISTATE LICENSING
REFORMS.
(a) IN GENERAL.—The provisions of this subtitle shall
take effect unless, not later than 3 years after the date of
enactment of this Act, at least a majority of the States—
(1) have enacted uniform laws and regulations
governing the licensure of individuals and entities au-
thorized to sell and solicit the purchase of insurance
within the State; or
(2) have enacted reciprocity laws and regula-
tions governing the licensure of nonresident individ-
uals and entities authorized to sell and solicit insur-
ance within those States.
(b) UNIFORMITY REQUIRED.—States shall be deemed
to have established the uniformity necessary to satisfy sub-
section (a)(1) if the States—
(1) establish uniform criteria regarding the in-
tegrity, personal qualifications, education, training,
and experience of licensed insurance producers, in-
cluding the qualification and training of sales per-
sonnel in ascertaining the appropriateness of a par-
ticular insurance product for a prospective customer;
341
(2) establish uniform continuing education re-
quirements for licensed insurance producers;
(3) establish uniform ethics course requirements
for licensed insurance producers in conjunction with
the continuing education requirements under para-
graph (2);
(4) establish uniform criteria to ensure that an
insurance product, including any annuity contract,
sold to a consumer is suitable and appropriate for the
consumer based on financial information disclosed by
the consumer; and
(5) do not impose any requirement upon any in-
surance producer to be licensed or otherwise qualified
to do business as a nonresident that has the effect of
limiting or conditioning that producer’s activities be-
cause of its residence or place of operations, except
that counter-signature requirements imposed on non-
resident producers shall not be deemed to have the ef-
fect of limiting or conditioning a producer’s activities
because of its residence or place of operations under
this section.
(c) RECIPROCITY REQUIRED.—States shall be deemed
to have established the reciprocity required to satisfy sub-
section (a)(2) if the following conditions are met:
342
(1) ADMINISTRATIVE LICENSING PROCEDURES.—
At least a majority of the States permit a producer
that has a resident license for selling or soliciting the
purchase of insurance in its home State to receive a
license to sell or solicit the purchase of insurance in
such majority of States as a nonresident to the same
extent that such producer is permitted to sell or solicit
the purchase of insurance in its State, if the pro-
ducer’s home State also awards such licenses on such
a reciprocal basis, without satisfying any additional
requirements other than submitting—
(A) a request for licensure;
(B) the application for licensure that the
producer submitted to its home State;
(C) proof that the producer is licensed and
in good standing in its home State; and
(D) the payment of any requisite fee to the
appropriate authority.
(2) CONTINUING EDUCATION REQUIREMENTS.—A
majority of the States accept an insurance producer’s
satisfaction of its home State’s continuing education
requirements for licensed insurance producers to sat-
isfy the States’ own continuing education require-
ments if the producer’s home State also recognizes the
343
satisfaction of continuing education requirements on
such a reciprocal basis.
(3) 
NO
LIMITING
NONRESIDENT
REQUIRE-
MENTS.—A majority of the States do not impose any
requirement upon any insurance producer to be li-
censed or otherwise qualified to do business as a non-
resident that has the effect of limiting or conditioning
that producer’s activities because of its residence or
place of operations, except that countersignature re-
quirements imposed on nonresident producers shall
not be deemed to have the effect of limiting or condi-
tioning a producer’s activities because of its residence
or place of operations under this section.
(4) RECIPROCAL
RECIPROCITY.—Each of the
States that satisfies paragraphs (1), (2), and (3)
grants reciprocity to residents of all of the other
States that satisfy such paragraphs.
(d) DETERMINATION.—
(1) NAIC DETERMINATION.—At the end of the 3-
year period beginning on the date of the enactment of
this Act, the National Association of Insurance Com-
missioners shall determine, in consultation with the
insurance commissioners or chief insurance regu-
latory officials of the States, whether the uniformity
344
or reciprocity required by subsections (b) and (c) has
been achieved.
(2) JUDICIAL REVIEW.—The appropriate United
States district court shall have exclusive jurisdiction
over any challenge to the National Association of In-
surance Commissioners’ determination under this sec-
tion and such court shall apply the standards set
forth in section 706 of title 5, United States Code,
when reviewing any such challenge.
(e) CONTINUED APPLICATION.—If, at any time, the
uniformity or reciprocity required by subsections (b) and
(c) no longer exists, the provisions of this subtitle shall take
effect 2 years after the date on which such uniformity or
reciprocity ceases to exist, unless the uniformity or reci-
procity required by those provisions is satisfied before the
expiration of that 2-year period.
(f) SAVINGS PROVISION.—No provision of this section
shall be construed as requiring that any law, regulation,
provision, or action of any State which purports to regulate
insurance producers, including any such law, regulation,
provision, or action which purports to regulate unfair trade
practices or establish consumer protections, including
countersignature laws, be altered or amended in order to
satisfy the uniformity or reciprocity required by subsections
(b) and (c), unless any such law, regulation, provision, or
345
action is inconsistent with a specific requirement of any
such subsection and then only to the extent of such incon-
sistency.
(g) UNIFORM LICENSING.—Nothing in this section
shall be construed to require any State to adopt new or ad-
ditional licensing requirements to achieve the uniformity
necessary to satisfy subsection (a)(1).
SEC. 322. NATIONAL ASSOCIATION OF REGISTERED AGENTS
AND BROKERS.
(a) ESTABLISHMENT.—There is established the Na-
tional Association of Registered Agents and Brokers (here-
after in this subtitle referred to as the ‘‘Association’’).
(b) STATUS.—The Association shall—
(1) be a nonprofit corporation;
(2) have succession until dissolved by an Act of
Congress;
(3) not be an agent or instrumentality of the
United States Government; and
(4) except as otherwise provided in this Act, be
subject to, and have all the powers conferred upon a
nonprofit corporation by the District of Columbia
Nonprofit Corporation Act (D.C. Code, sec. 29y–1001
et seq.).
346
SEC. 323. PURPOSE.
The purpose of the Association shall be to provide a
mechanism through which uniform licensing, appointment,
continuing education, and other insurance producer sales
qualification requirements and conditions can be adopted
and applied on a multistate basis, while preserving the
right of States to license, supervise, and discipline insur-
ance producers and to prescribe and enforce laws and regu-
lations with regard to insurance-related consumer protec-
tion and unfair trade practices.
SEC. 324. RELATIONSHIP TO THE FEDERAL GOVERNMENT.
The Association shall be subject to the supervision and
oversight of the National Association of Insurance Commis-
sioners (hereafter in this subtitle referred to as the ‘‘NAIC’’).
SEC. 325. MEMBERSHIP.
(a) ELIGIBILITY.—
(1) IN GENERAL.—Any State-licensed insurance
producer shall be eligible to become a member in the
Association.
(2) INELIGIBILITY FOR SUSPENSION OR REVOCA-
TION OF LICENSE.—Notwithstanding paragraph (1),
a State-licensed insurance producer shall not be eligi-
ble to become a member if a State insurance regulator
has suspended or revoked such producer’s license in
that State during the 3-year period preceding the date
on which such producer applies for membership.
347
(3) RESUMPTION
OF
ELIGIBILITY.—Paragraph
(2) shall cease to apply to any insurance producer
if—
(A) the State insurance regulator renews the
license of such producer in the State in which the
license was suspended or revoked; or
(B) the suspension or revocation is subse-
quently overturned.
(b) AUTHORITY TO ESTABLISH MEMBERSHIP CRI-
TERIA.—The Association shall have the authority to estab-
lish membership criteria that—
(1) bear a reasonable relationship to the pur-
poses for which the Association was established; and
(2) do not unfairly limit the access of smaller
agencies to the Association membership.
(c) ESTABLISHMENT OF CLASSES AND CATEGORIES.—
(1) CLASSES OF MEMBERSHIP.—The Association
may establish separate classes of membership, with
separate criteria, if the Association reasonably deter-
mines that performance of different duties requires
different levels of education, training, or experience.
(2) CATEGORIES.—The Association may estab-
lish separate categories of membership for individuals
and for other persons. The establishment of any such
categories of membership shall be based either on the
348
types of licensing categories that exist under State
laws or on the aggregate amount of business handled
by an insurance producer. No special categories of
membership, and no distinct membership criteria,
shall be established for members which are insured de-
pository institutions or wholesale financial institu-
tions or for their employees, agents, or affiliates.
(d) MEMBERSHIP CRITERIA.—
(1) IN GENERAL.—The Association may establish
criteria for membership which shall include standards
for integrity, personal qualifications, education,
training, and experience.
(2) MINIMUM
STANDARD.—In establishing cri-
teria under paragraph (1), the Association shall con-
sider the highest levels of insurance producer quali-
fications established under the licensing laws of the
States.
(e) EFFECT OF MEMBERSHIP.—Membership in the As-
sociation shall entitle the member to licensure in each State
for which the member pays the requisite fees, including li-
censing fees and, where applicable, bonding requirements,
set by such State.
(f) ANNUAL RENEWAL.—Membership in the Associa-
tion shall be renewed on an annual basis.
349
(g) CONTINUING EDUCATION.—The Association shall
establish, as a condition of membership, continuing edu-
cation requirements which shall be comparable to or greater
than the continuing education requirements under the li-
censing laws of a majority of the States.
(h) SUSPENSION AND REVOCATION.—The Association
may—
(1) inspect and examine the records and offices
of the members of the Association to determine com-
pliance with the criteria for membership established
by the Association; and
(2) suspend or revoke the membership of an in-
surance producer if—
(A) the producer fails to meet the applicable
membership criteria of the Association; or
(B) the producer has been subject to dis-
ciplinary action pursuant to a final adjudica-
tory proceeding under the jurisdiction of a State
insurance regulator, and the Association con-
cludes that retention of membership in the Asso-
ciation would not be in the public interest.
(i) OFFICE OF CONSUMER COMPLAINTS.—
(1) IN GENERAL.—The Association shall establish
an office of consumer complaints that shall—
350
(A) receive and investigate complaints from
both consumers and State insurance regulators
related to members of the Association; and
(B) recommend to the Association any dis-
ciplinary actions that the office considers appro-
priate, to the extent that any such recommenda-
tion is not inconsistent with State law.
(2) RECORDS
AND
REFERRALS.—The office of
consumer complaints of the Association shall—
(A) maintain records of all complaints re-
ceived in accordance with paragraph (1) and
make such records available to the NAIC and to
each State insurance regulator for the State of
residence of the consumer who filed the com-
plaint; and
(B) refer, when appropriate, any such com-
plaint to any appropriate State insurance regu-
lator.
(3) TELEPHONE AND OTHER ACCESS.—The office
of consumer complaints shall maintain a toll-free tele-
phone number for the purpose of this subsection and,
as practicable, other alternative means of communica-
tion with consumers, such as an Internet home page.
351
SEC. 326. BOARD OF DIRECTORS.
(a) ESTABLISHMENT.—There is established the board
of directors of the Association (hereafter in this subtitle re-
ferred to as the ‘‘Board’’) for the purpose of governing and
supervising the activities of the Association and the mem-
bers of the Association.
(b) POWERS.—The Board shall have such powers and
authority as may be specified in the bylaws of the Associa-
tion.
(c) COMPOSITION.—
(1) MEMBERS.—The Board shall be composed of
7 members appointed by the NAIC.
(2) REQUIREMENT.—At least 4 of the members of
the Board shall have significant experience with the
regulation of commercial lines of insurance in at least
1 of the 20 States in which the greatest total dollar
amount of commercial-lines insurance is placed in the
United States.
(3) INITIAL BOARD MEMBERSHIP.—
(A) IN GENERAL.—If, by the end of the 2-
year period beginning on the date of enactment
of this Act, the NAIC has not appointed the ini-
tial 7 members of the Board of the Association,
the initial Board shall consist of the 7 State in-
surance regulators of the 7 States with the great-
352
est total dollar amount of commercial-lines in-
surance in place as of the end of such period.
(B) ALTERNATE COMPOSITION.—If any of
the State insurance regulators described in sub-
paragraph (A) declines to serve on the Board, the
State insurance regulator with the next greatest
total dollar amount of commercial-lines insur-
ance in place, as determined by the NAIC as of
the end of such period, shall serve as a member
of the Board.
(C) INOPERABILITY.—If fewer than 7 State
insurance regulators accept appointment to the
Board, the Association shall be established with-
out NAIC oversight pursuant to section 332.
(d) TERMS.—The term of each director shall, after the
initial appointment of the members of the Board, be for 3
years, with 1⁄3 of the directors to be appointed each year.
(e) BOARD VACANCIES.—A vacancy on the Board shall
be filled in the same manner as the original appointment
of the initial Board for the remainder of the term of the
vacating member.
(f) MEETINGS.—The Board shall meet at the call of
the chairperson, or as otherwise provided by the bylaws of
the Association.
353
SEC. 327. OFFICERS.
(a) IN GENERAL.—
(1) POSITIONS.—The officers of the Association
shall consist of a chairperson and a vice chairperson
of the Board, a president, secretary, and treasurer of
the Association, and such other officers and assistant
officers as may be deemed necessary.
(2) MANNER OF SELECTION.—Each officer of the
Board and the Association shall be elected or ap-
pointed at such time and in such manner and for
such terms not exceeding 3 years as may be prescribed
in the bylaws of the Association.
(b) CRITERIA FOR CHAIRPERSON.—Only individuals
who are members of the NAIC shall be eligible to serve as
the chairperson of the board of directors.
SEC. 328. BYLAWS, RULES, AND DISCIPLINARY ACTION.
(a) ADOPTION AND AMENDMENT OF BYLAWS.—
(1) COPY REQUIRED TO BE FILED WITH THE
NAIC.—The board of directors of the Association shall
file with the NAIC a copy of the proposed bylaws or
any proposed amendment to the bylaws, accompanied
by a concise general statement of the basis and pur-
pose of such proposal.
(2) EFFECTIVE DATE.—Except as provided in
paragraph (3), any proposed bylaw or proposed
amendment shall take effect—
354
(A) 30 days after the date of the filing of
a copy with the NAIC;
(B) upon such later date as the Association
may designate; or
(C) upon such earlier date as the NAIC
may determine.
(3) DISAPPROVAL
BY
THE
NAIC.—Notwith-
standing paragraph (2), a proposed bylaw or amend-
ment shall not take effect if, after public notice and
opportunity to participate in a public hearing—
(A) the NAIC disapproves such proposal as
being contrary to the public interest or contrary
to the purposes of this subtitle and provides no-
tice to the Association setting forth the reasons
for such disapproval; or
(B) the NAIC finds that such proposal in-
volves a matter of such significant public interest
that public comment should be obtained, in
which case it may, after notifying the Associa-
tion in writing of such finding, require that the
procedures set forth in subsection (b) be followed
with respect to such proposal, in the same man-
ner as if such proposed bylaw change were a pro-
posed rule change within the meaning of such
subsection.
355
(b) ADOPTION AND AMENDMENT OF RULES.—
(1) FILING PROPOSED REGULATIONS WITH THE
NAIC.—
(A) IN GENERAL.—The board of directors of
the Association shall file with the NAIC a copy
of any proposed rule or any proposed amend-
ment to a rule of the Association which shall be
accompanied by a concise general statement of
the basis and purpose of such proposal.
(B) OTHER RULES AND AMENDMENTS INEF-
FECTIVE.—No proposed rule or amendment shall
take effect unless approved by the NAIC or other-
wise permitted in accordance with this para-
graph.
(2) INITIAL CONSIDERATION BY THE NAIC.—Not
later than 35 days after the date of publication of no-
tice of filing of a proposal, or before the end of such
longer period not to exceed 90 days as the NAIC may
designate after such date, if the NAIC finds such
longer period to be appropriate and sets forth its rea-
sons for so finding, or as to which the Association
consents, the NAIC shall—
(A) by order approve such proposed rule or
amendment; or
356
(B) institute proceedings to determine
whether such proposed rule or amendment should
be modified or disapproved.
(3) NAIC PROCEEDINGS.—
(A) IN
GENERAL.—Proceedings instituted
by the NAIC with respect to a proposed rule or
amendment pursuant to paragraph (2) shall—
(i) include notice of the grounds for
disapproval under consideration;
(ii) provide opportunity for hearing;
and
(iii) be concluded not later than 180
days after the date of the Association’s fil-
ing of such proposed rule or amendment.
(B) DISPOSITION
OF
PROPOSAL.—At the
conclusion of any proceeding under subpara-
graph (A), the NAIC shall, by order, approve or
disapprove the proposed rule or amendment.
(C) EXTENSION
OF
TIME
FOR
CONSIDER-
ATION.—The NAIC may extend the time for con-
cluding any proceeding under subparagraph (A)
for—
(i) not more than 60 days if the NAIC
finds good cause for such extension and sets
forth its reasons for so finding; or
357
(ii) for such longer period as to which
the Association consents.
(4) STANDARDS FOR REVIEW.—
(A) GROUNDS FOR APPROVAL.—The NAIC
shall approve a proposed rule or amendment if
the NAIC finds that the rule or amendment is in
the public interest and is consistent with the
purposes of this Act.
(B) APPROVAL BEFORE END OF NOTICE PE-
RIOD.—The NAIC shall not approve any pro-
posed rule before the end of the 30-day period be-
ginning on the date on which the Association
files proposed rules or amendments in accord-
ance with paragraph (1), unless the NAIC finds
good cause for so doing and sets forth the reasons
for so finding.
(5) ALTERNATE PROCEDURE.—
(A) IN
GENERAL.—Notwithstanding any
provision of this subsection other than subpara-
graph (B), a proposed rule or amendment relat-
ing to the administration or organization of the
Association shall take effect—
(i) upon the date of filing with the
NAIC, if such proposed rule or amendment
is designated by the Association as relating
358
solely to matters which the NAIC, consistent
with the public interest and the purposes of
this subsection, determines by rule do not
require the procedures set forth in this
paragraph; or
(ii) upon such date as the NAIC shall
for good cause determine.
(B) ABROGATION BY THE NAIC.—
(i) IN GENERAL.—At any time within
60 days after the date of filing of any pro-
posed rule or amendment under subpara-
graph (A)(i) or clause (ii) of this subpara-
graph, the NAIC may repeal such rule or
amendment and require that the rule or
amendment be refiled and reviewed in ac-
cordance with this paragraph, if the NAIC
finds that such action is necessary or ap-
propriate in the public interest, for the pro-
tection of insurance producers or policy-
holders, or otherwise in furtherance of the
purposes of this subtitle.
(ii) EFFECT OF RECONSIDERATION BY
THE NAIC.—Any action of the NAIC pursu-
ant to clause (i) shall—
359
(I) not affect the validity or force
of a rule change during the period such
rule or amendment was in effect; and
(II) not be considered to be a final
action.
(c) ACTION REQUIRED BY THE NAIC.—The NAIC
may, in accordance with such rules as the NAIC determines
to be necessary or appropriate to the public interest or to
carry out the purposes of this subtitle, require the Associa-
tion to adopt, amend, or repeal any bylaw, rule or amend-
ment of the Association, whenever adopted.
(d) DISCIPLINARY ACTION BY THE ASSOCIATION.—
(1) SPECIFICATION OF CHARGES.—In any pro-
ceeding to determine whether membership shall be de-
nied, suspended, revoked, or not renewed (hereafter in
this section referred to as a ‘‘disciplinary action’’),
the Association shall bring specific charges, notify
such member of such charges, give the member an op-
portunity to defend against the charges, and keep a
record.
(2) SUPPORTING STATEMENT.—A determination
to take disciplinary action shall be supported by a
statement setting forth—
(A) any act or practice in which such mem-
ber has been found to have been engaged;
360
(B) the specific provision of this subtitle,
the rules or regulations under this subtitle, or the
rules of the Association which any such act or
practice is deemed to violate; and
(C) the sanction imposed and the reason for
such sanction.
(e) NAIC REVIEW OF DISCIPLINARY ACTION.—
(1) NOTICE TO THE NAIC.—If the Association or-
ders any disciplinary action, the Association shall
promptly notify the NAIC of such action.
(2) REVIEW BY THE NAIC.—Any disciplinary ac-
tion taken by the Association shall be subject to re-
view by the NAIC—
(A) on the NAIC’s own motion; or
(B) upon application by any person ag-
grieved by such action if such application is filed
with the NAIC not more than 30 days after the
later of—
(i) the date the notice was filed with
the NAIC pursuant to paragraph (1); or
(ii) the date the notice of the discipli-
nary action was received by such aggrieved
person.
(f) EFFECT OF REVIEW.—The filing of an application
to the NAIC for review of a disciplinary action, or the insti-
361
tution of review by the NAIC on the NAIC’s own motion,
shall not operate as a stay of disciplinary action unless the
NAIC otherwise orders.
(g) SCOPE OF REVIEW.—
(1) IN GENERAL.—In any proceeding to review
such action, after notice and the opportunity for hear-
ing, the NAIC shall—
(A) determine whether the action should be
taken;
(B) affirm, modify, or rescind the discipli-
nary sanction; or
(C) remand to the Association for further
proceedings.
(2) DISMISSAL OF REVIEW.—The NAIC may dis-
miss a proceeding to review disciplinary action if the
NAIC finds that—
(A) the specific grounds on which the action
is based exist in fact;
(B) the action is in accordance with appli-
cable rules and regulations; and
(C) such rules and regulations are, and
were, applied in a manner consistent with the
purposes of this subtitle.
362
SEC. 329. ASSESSMENTS.
(a) INSURANCE PRODUCERS SUBJECT
TO ASSESS-
MENT.—The Association may establish such application
and membership fees as the Association finds necessary to
cover the costs of its operations, including fees made reim-
bursable to the NAIC under subsection (b), except that, in
setting such fees, the Association may not discriminate
against smaller insurance producers.
(b) NAIC ASSESSMENTS.—The NAIC may assess the
Association for any costs that the NAIC incurs under this
subtitle.
SEC. 330. FUNCTIONS OF THE NAIC.
(a) ADMINISTRATIVE PROCEDURE.—Determinations of
the NAIC, for purposes of making rules pursuant to section
328, shall be made after appropriate notice and oppor-
tunity for a hearing and for submission of views of inter-
ested persons.
(b) EXAMINATIONS AND REPORTS.—
(1) EXAMINATIONS.—The NAIC may make such
examinations and inspections of the Association and
require the Association to furnish to the NAIC such
reports and records or copies thereof as the NAIC may
consider necessary or appropriate in the public inter-
est or to effectuate the purposes of this subtitle.
(2) REPORT BY ASSOCIATION.—As soon as prac-
ticable after the close of each fiscal year, the Associa-
363
tion shall submit to the NAIC a written report re-
garding the conduct of its business, and the exercise
of the other rights and powers granted by this sub-
title, during such fiscal year. Such report shall in-
clude financial statements setting forth the financial
position of the Association at the end of such fiscal
year and the results of its operations (including the
source and application of its funds) for such fiscal
year. The NAIC shall transmit such report to the
President and the Congress with such comment there-
on as the NAIC determines to be appropriate.
SEC. 331. LIABILITY OF THE ASSOCIATION AND THE DIREC-
TORS, OFFICERS, AND EMPLOYEES OF THE
ASSOCIATION.
(a) IN GENERAL.—The Association shall not be deemed
to be an insurer or insurance producer within the meaning
of any State law, rule, regulation, or order regulating or
taxing insurers, insurance producers, or other entities en-
gaged in the business of insurance, including provisions im-
posing premium taxes, regulating insurer solvency or fi-
nancial condition, establishing guaranty funds and levying
assessments, or requiring claims settlement practices.
(b) LIABILITY OF THE ASSOCIATION, ITS DIRECTORS,
OFFICERS, AND EMPLOYEES.—Neither the Association nor
any of its directors, officers, or employees shall have any
364
liability to any person for any action taken or omitted in
good faith under or in connection with any matter subject
to this subtitle.
SEC. 332. ELIMINATION OF NAIC OVERSIGHT.
(a) IN GENERAL.—The Association shall be established
without NAIC oversight and the provisions set forth in sec-
tion 324, subsections (a), (b), (c), and (e) of section 328,
and sections 329(b) and 330 of this subtitle shall cease to
be effective if, at the end of the 2-year period beginning on
the date on which the provisions of this subtitle take effect
pursuant to section 321—
(1) at least a majority of the States representing
at least 50 percent of the total United States commer-
cial-lines insurance premiums have not satisfied the
uniformity or reciprocity requirements of subsections
(a), (b), and (c) of section 321; and
(2) the NAIC has not approved the Association’s
bylaws as required by section 328 or is unable to op-
erate or supervise the Association, or the Association
is not conducting its activities as required under this
Act.
(b) BOARD APPOINTMENTS.—If the repeals required by
subsection (a) are implemented, the following shall apply:
(1) GENERAL APPOINTMENT POWER.—The Presi-
dent, with the advice and consent of the Senate, shall
365
appoint the members of the Association’s Board estab-
lished under section 326 from lists of candidates rec-
ommended to the President by the National Associa-
tion of Insurance Commissioners.
(2) PROCEDURES FOR OBTAINING NATIONAL AS-
SOCIATION OF INSURANCE COMMISSIONERS APPOINT-
MENT RECOMMENDATIONS.—
(A) INITIAL
DETERMINATION
AND
REC-
OMMENDATIONS.—After the date on which the
provisions of subsection (a) take effect, the NAIC
shall, not later than 60 days thereafter, provide
a list of recommended candidates to the Presi-
dent. If the NAIC fails to provide a list by that
date, or if any list that is provided does not in-
clude at least 14 recommended candidates or
comply with the requirements of section 326(c),
the President shall, with the advice and consent
of the Senate, make the requisite appointments
without considering the views of the NAIC.
(B) SUBSEQUENT
APPOINTMENTS.—After
the initial appointments, the NAIC shall provide
a list of at least 6 recommended candidates for
the Board to the President by January 15 of
each subsequent year. If the NAIC fails to pro-
vide a list by that date, or if any list that is pro-
366
vided does not include at least 6 recommended
candidates or comply with the requirements of
section 326(c), the President, with the advice and
consent of the Senate, shall make the requisite
appointments without considering the views of
the NAIC.
(C) PRESIDENTIAL OVERSIGHT.—
(i) REMOVAL.—If the President deter-
mines that the Association is not acting in
the interests of the public, the President
may remove the entire existing Board for
the remainder of the term to which the
members of the Board were appointed and
appoint, with the advice and consent of the
Senate, new members to fill the vacancies
on the Board for the remainder of such
terms.
(ii) SUSPENSION
OF
RULES
OR
AC-
TIONS.—The President, or a person des-
ignated by the President for such purpose,
may suspend the effectiveness of any rule, or
prohibit any action, of the Association
which the President or the designee deter-
mines is contrary to the public interest.
367
(c) ANNUAL REPORT.—As soon as practicable after the
close of each fiscal year, the Association shall submit to the
President and to the Congress a written report relative to
the conduct of its business, and the exercise of the other
rights and powers granted by this subtitle, during such fis-
cal year. Such report shall include financial statements set-
ting forth the financial position of the Association at the
end of such fiscal year and the results of its operations (in-
cluding the source and application of its funds) for such
fiscal year.
SEC. 333. RELATIONSHIP TO STATE LAW.
(a) PREEMPTION OF STATE LAWS.—State laws, regu-
lations, provisions, or other actions purporting to regulate
insurance producers shall be preempted as provided in sub-
section (b).
(b) PROHIBITED ACTIONS.—No State shall—
(1) impede the activities of, take any action
against, or apply any provision of law or regulation
to, any insurance producer because that insurance
producer or any affiliate plans to become, has applied
to become, or is a member of the Association;
(2) impose any requirement upon a member of
the Association that it pay different fees to be licensed
or otherwise qualified to do business in that State, in-
cluding bonding requirements, based on its residency;
368
(3) impose any licensing, appointment, integ-
rity, personal or corporate qualifications, education,
training, experience, residency, or continuing edu-
cation requirement upon a member of the Association
that is different from the criteria for membership in
the Association or renewal of such membership, except
that counter-signature requirements imposed on non-
resident producers shall not be deemed to have the ef-
fect of limiting or conditioning a producer’s activities
because of its residence or place of operations under
this section; or
(4) implement the procedures of such State’s sys-
tem of licensing or renewing the licenses of insurance
producers in a manner different from the authority of
the Association under section 325.
(c) SAVINGS PROVISION.—Except as provided in sub-
sections (a) and (b), no provision of this section shall be
construed as altering or affecting the continuing effective-
ness of any law, regulation, provision, or other action of
any State which purports to regulate insurance producers,
including any such law, regulation, provision, or action
which purports to regulate unfair trade practices or estab-
lish consumer protections, including countersignature laws.
369
SEC. 334. COORDINATION WITH OTHER REGULATORS.
(a) COORDINATION WITH STATE INSURANCE REGU-
LATORS.—The Association shall have the authority to—
(1) issue uniform insurance producer applica-
tions and renewal applications that may be used to
apply for the issuance or removal of State licenses,
while preserving the ability of each State to impose
such conditions on the issuance or renewal of a license
as are consistent with section 333;
(2) establish a central clearinghouse through
which members of the Association may apply for the
issuance or renewal of licenses in multiple States; and
(3) establish or utilize a national database for
the collection of regulatory information concerning
the activities of insurance producers.
(b) COORDINATION WITH THE NATIONAL ASSOCIATION
OF SECURITIES DEALERS.—The Association shall coordi-
nate with the National Association of Securities Dealers in
order to ease any administrative burdens that fall on per-
sons that are members of both associations, consistent with
the purposes of this subtitle and the Federal securities laws.
SEC. 335. JUDICIAL REVIEW.
(a) JURISDICTION.—The appropriate United States
district court shall have exclusive jurisdiction over litiga-
tion involving the Association, including disputes between
the Association and its members that arise under this sub-
370
title. Suits brought in State court involving the Association
shall be deemed to have arisen under Federal law and there-
fore be subject to jurisdiction in the appropriate United
States district court.
(b) EXHAUSTION OF REMEDIES.—An aggrieved person
shall be required to exhaust all available administrative
remedies before the Association and the NAIC before it may
seek judicial review of an Association decision.
(c) STANDARDS OF REVIEW.—The standards set forth
in section 553 of title 5, United States Code, shall be ap-
plied whenever a rule or bylaw of the Association is under
judicial review, and the standards set forth in section 554
of title 5, United States Code, shall be applied whenever
a disciplinary action of the Association is judicially re-
viewed.
SEC. 336. DEFINITIONS.
For purposes of this subtitle, the following definitions
shall apply:
(1) HOME
STATE.—The term ‘‘home State’’
means the State in which the insurance producer
maintains its principal place of residence and is li-
censed to act as an insurance producer.
(2) INSURANCE.—The term ‘‘insurance’’ means
any product, other than title insurance, defined or
371
regulated as insurance by the appropriate State in-
surance regulatory authority.
(3) INSURANCE PRODUCER.—The term ‘‘insur-
ance producer’’ means any insurance agent or broker,
surplus lines broker, insurance consultant, limited in-
surance representative, and any other person that so-
licits, negotiates, effects, procures, delivers, renews,
continues or binds policies of insurance or offers ad-
vice, counsel, opinions or services related to insur-
ance.
(4) STATE.—The term ‘‘State’’ includes any
State, the District of Columbia, American Samoa,
Guam, Puerto Rico, and the United States Virgin Is-
lands.
(5) STATE LAW.—The term ‘‘State law’’ includes
all laws, decisions, rules, regulations, or other State
action having the effect of law, of any State. A law
of the United States applicable only to the District of
Columbia shall be treated as a State law rather than
a law of the United States.
372
TITLE IV—UNITARY SAVINGS
AND LOAN HOLDING COMPANIES
SEC. 401. PROHIBITION ON NEW UNITARY SAVINGS AND
LOAN HOLDING COMPANIES.
(a) IN GENERAL.—Section 10(c) of the Home Owners’
Loan Act (12 U.S.C. 1467a(c)) is amended by adding at
the end the following new paragraph:
‘‘(9) TERMINATION OF EXPANDED POWERS FOR
NEW UNITARY HOLDING COMPANY.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B) and notwithstanding paragraph (3),
no company may directly or indirectly, includ-
ing through any merger, consolidation, or other
type of business combination, acquire control of
a savings association after March 4, 1999, unless
the company is engaged, directly or indirectly
(including through a subsidiary other than a
savings association), only in activities that are
permitted—
‘‘(i) under paragraph (1)(C) or (2); or
‘‘(ii) for financial holding companies
under section 6(c) of the Bank Holding
Company Act of 1956.
‘‘(B) EXISTING UNITARY HOLDING COMPA-
NIES AND THE SUCCESSORS TO SUCH COMPA-
373
NIES.—Subparagraph (A) shall not apply, and
paragraph (3) shall continue to apply, to a com-
pany (or any subsidiary of such company)
that—
‘‘(i) either—
‘‘(I) acquired 1 or more savings
associations described in paragraph (3)
pursuant to applications at least 1 of
which was filed on or before March 4,
1999; or
‘‘(II) became a savings and loan
holding company by acquiring control
of the company described in subclause
(I); and
‘‘(ii) continues to control the savings
association referred to in clause (i)(II) or
the successor to any such savings associa-
tion.’’.
(b) TECHNICAL AND CONFORMING AMENDMENT.—Sec-
tion 10(c)(3) of the Home Owners’ Loan Act (12 U.S.C.
1467a(c)(3)) is amended by striking ‘‘Notwithstanding’’
and inserting ‘‘Except as provided in paragraph (9) and
notwithstanding’’.
374
(c) CONFORMING AMENDMENT.—Section 10(o)(5) of
the Home Owners’ Loan Act (12 U.S.C. 1467a(o)(5)) is
amended—
(1) in subparagraph (E), by striking ‘‘, except
subparagraph (B)’’; and
(2) by adding at the end the following new sub-
paragraph:
‘‘(F) In the case of a mutual holding com-
pany which is a savings and loan holding com-
pany described in subsection (c)(3), engaging in
the activities permitted for financial holding
companies under section 6(c) of the Bank Hold-
ing Company Act of 1956.’’.
SEC. 402. RETENTION OF ‘‘FEDERAL’’ IN NAME OF CON-
VERTED FEDERAL SAVINGS ASSOCIATION.
Section 2 of the Act entitled ‘‘An Act to enable national
banking associations to increase their capital stock and to
change their names or locations’’, approved May 1, 1886
(12 U.S.C. 30), is amended by adding at the end the fol-
lowing new subsection:
‘‘(d) RETENTION OF ‘FEDERAL’ IN NAME OF CON-
VERTED FEDERAL SAVINGS ASSOCIATION.—
‘‘(1) IN GENERAL.—Notwithstanding subsection
(a) or any other provision of law, any depository in-
stitution the charter of which is converted from that
375
of a Federal savings association to a national bank
or a State bank after the date of the enactment of the
Financial Services Act of 1999 may retain the term
‘Federal’ in the name of such institution if such de-
pository institution remains an insured depository
institution.
‘‘(2) DEFINITIONS.—For purposes of this sub-
section, the terms ‘depository institution’, ‘insured de-
pository institution’, ‘national bank’, and ‘State
bank’ have the same meanings as in section 3 of the
Federal Deposit Insurance Act.’’.
SECTION 1. SHORT TITLE; PURPOSES; TABLE OF CON-
TENTS.
(a) SHORT TITLE.—This Act may be cited as
the ‘‘Financial Services Act of 1999’’.
(b) PURPOSES.—The purposes of this Act
are as follows:
(1) To enhance competition in the fi-
nancial services industry, in order to fos-
ter innovation and efficiency.
(2) To ensure the continued safety
and soundness of depository institutions.
(3) To provide necessary and appro-
priate protections for investors and en-
376
sure fair and honest markets in the deliv-
ery of financial services.
(4) To avoid duplicative, potentially
conflicting, and overly burdensome regu-
latory requirements through the creation
of a regulatory framework for financial
holding companies that respects the di-
vergent requirements of each of the com-
ponent businesses of the holding com-
pany, and that is based upon principles
of strong functional regulation and en-
hanced regulatory coordination.
(5) To reduce and, to the maximum
extent practicable, to eliminate the legal
barriers preventing affiliation among de-
pository institutions, securities firms, in-
surance companies, and other financial
service providers and to provide a pru-
dential framework for achieving that re-
sult.
(6) To enhance the availability of fi-
nancial services to citizens of all eco-
nomic circumstances and in all geo-
graphic areas.
377
(7) To enhance the competitiveness of
United States financial service providers
internationally.
(8) To ensure compliance by deposi-
tory institutions with the provisions of
the Community Reinvestment Act of 1977
and enhance the ability of depository in-
stitutions to meet the capital and credit
needs of all citizens and communities, in-
cluding underserved communities and
populations.
(c) TABLE OF CONTENTS.—The table of con-
tents for this Act is as follows:
Sec. 1. Short title; purposes; table of contents.
TITLE I—FACILITATING AFFILIATION AMONG SECURITIES
FIRMS, INSURANCE COMPANIES, AND DEPOSITORY IN-
STITUTIONS
Subtitle A—Affiliations
Sec. 101. Glass-Steagall Act reformed.
Sec. 102. Activity restrictions applicable to bank holding com-
panies which are not financial holding compa-
nies.
Sec. 103. Financial holding companies.
Sec. 104. Operation of State law.
Sec. 105. Mutual bank holding companies authorized.
Sec. 105A. Public meetings for large bank acquisitions and
mergers.
Sec. 106. Prohibition on deposit production offices.
Sec. 107. Clarification of branch closure requirements.
Sec. 108. Amendments relating to limited purpose banks.
Sec. 109. GAO study of economic impact on community banks,
other 
small 
financial 
institutions, 
insurance
agents, and consumers.
Sec. 110. Responsiveness to community needs for financial
services.
Subtitle B—Streamlining Supervision of Financial Holding
Companies
378
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 sub-
sidiaries.
Sec. 119. Repeal of savings bank provisions in the Bank Hold-
ing Company Act of 1956.
Sec. 120. Technical amendment.
Subtitle C—Subsidiaries of National Banks
Sec. 121. Permissible activities for subsidiaries of national
banks.
Sec. 122. Misrepresentations regarding depository institution
liability for obligations of affiliates.
Sec. 123. Repeal of stock loan limit in Federal Reserve Act.
Subtitle D—Wholesale Financial Holding Companies;
Wholesale Financial Institutions
CHAPTER 1—WHOLESALE FINANCIAL HOLDING COMPANIES
Sec. 131. Wholesale financial holding companies established.
Sec. 132. Authorization to release reports.
Sec. 133. Conforming amendments.
CHAPTER 2—WHOLESALE FINANCIAL INSTITUTIONS
Sec. 136. Wholesale financial institutions.
Subtitle E—Preservation of FTC Authority
Sec. 141. Amendment to the Bank Holding Company Act of
1956 to modify notification and post-approval
waiting period for section 3 transactions.
Sec. 142. Interagency data sharing.
Sec. 143. Clarification of status of subsidiaries and affiliates.
Sec. 144. Annual GAO report.
Subtitle F—National Treatment
Sec. 151. Foreign banks that are financial holding companies.
Sec. 152. Foreign banks and foreign financial institutions that
are wholesale financial institutions.
Sec. 153. Reciprocity.
Subtitle G—Federal Home Loan Bank System Modernization
Sec. 161. Short title.
Sec. 162. Definitions.
Sec. 163. Savings association membership.
379
Sec. 164. Advances to members; collateral.
Sec. 165. Eligibility criteria.
Sec. 166. Management of banks.
Sec. 167. Resolution Funding Corporation.
Sec. 168. Capital structure of Federal home loan banks.
Subtitle H—ATM Fee Reform
Sec. 171. Short title.
Sec. 172. Electronic fund transfer fee disclosures at any host
ATM.
Sec. 173. Disclosure of possible fees to consumers when ATM
card is issued.
Sec. 174. Feasibility study.
Sec. 175. No liability if posted notices are damaged.
Sec. 176. Effective date.
Subtitle I—Direct Activities of Banks
Sec. 181. Authority of national banks to underwrite certain
municipal bonds.
Subtitle J—Deposit Insurance Funds
Sec. 186. Study of safety and soundness of funds.
Sec. 187. Elimination of SAIF and DIF special reserves.
Subtitle K—Miscellaneous Provisions
Sec. 191. Termination of ‘‘Know Your Customer’’ regulations.
Sec. 192. Study and report on Federal electronic fund Trans-
fers.
Sec. 193. Study and report on adapting existing legislative re-
quirements to online banking and lending.
TITLE II—FUNCTIONAL REGULATION
Subtitle A—Brokers and Dealers
Sec. 201. Definition of broker.
Sec. 202. Definition of dealer.
Sec. 203. Registration for sales of private securities offerings.
Sec. 204. Information sharing.
Sec. 205. Treatment of new hybrid products.
Sec. 206. Additional definitions.
Sec. 207. Government securities defined.
Sec. 208. Effective date.
Sec. 209. Rule of construction.
Subtitle B—Bank Investment Company Activities
Sec. 211. Custody of investment company assets by affiliated
bank.
Sec. 212. Lending to an affiliated investment company.
Sec. 213. Independent directors.
Sec. 214. Additional SEC disclosure authority.
Sec. 215. Definition of broker under the Investment Company
Act of 1940.
380
Sec. 216. Definition of dealer under the Investment Company
Act of 1940.
Sec. 217. Removal of the exclusion from the definition of in-
vestment adviser for banks that advise invest-
ment 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 control-
ling interest in registered investment company.
Sec. 223. Statutory disqualification for bank wrongdoing.
Sec. 224. Conforming change in definition.
Sec. 225. Conforming amendment.
Sec. 226. Effective date.
Subtitle C—Securities and Exchange Commission Supervision
of Investment Bank Holding Companies
Sec. 231. Supervision of investment bank holding companies
by the Securities and Exchange Commission.
Subtitle D—Disclosure of Customer Costs of Acquiring
Financial Products
Sec. 241. Improved and consistent disclosure.
TITLE III—INSURANCE
Subtitle A—State Regulation of Insurance
Sec. 301. State regulation of the business of insurance.
Sec. 302. Mandatory insurance licensing requirements.
Sec. 303. Functional regulation of insurance.
Sec. 304. Insurance underwriting in national banks.
Sec. 305. Title insurance activities of national banks and their
affiliates.
Sec. 306. Expedited and equalized dispute resolution for Fed-
eral regulators.
Sec. 307. Consumer protection regulations.
Sec. 308. Certain State affiliation laws preempted for insur-
ance companies and affiliates.
Sec. 309. Interagency consultation.
Sec. 310. Definition of State.
Subtitle B—Redomestication of Mutual Insurers
Sec. 311. General application.
Sec. 312. Redomestication of mutual insurers.
Sec. 313. Effect on State laws restricting redomestication.
Sec. 314. Other provisions.
Sec. 15. Definitions.
Sec. 316. Effective date.
381
Subtitle C—National Association of Registered Agents and
Brokers
Sec. 321. State flexibility in multistate licensing reforms.
Sec. 322. National association of registered agents and brokers.
Sec. 323. Purpose.
Sec. 324. Relationship to the Federal Government.
Sec. 325. Membership.
Sec. 326. Board of directors.
Sec. 327. Officers.
Sec. 328. Bylaws, rules, and disciplinary action.
Sec. 329. Assessments.
Sec. 330. Functions of the NAIC.
Sec. 331. Liability of the Association and the directors, officers,
and employees of the Association.
Sec. 332. Elimination of NAIC oversight.
Sec. 333. Relationship to State law.
Sec. 334. Coordination with other regulators.
Sec. 335. Judicial review.
Sec. 336. Definitions.
Subtitle D—Rental Car Agency Insurance Activities
Sec. 341. Standard of regulation for motor vehicle rentals.
Subtitle E—Confidentiality
SEC. 351. Confidentiality of health and medical information.
TITLE IV—UNITARY SAVINGS AND LOAN HOLDING
COMPANIES
Sec. 401. Prohibition on new unitary savings and loan holding
companies.
Sec. 402. Retention of ‘‘Federal’’ in name of converted Federal
savings association.
TITLE V—PRIVACY OF CONSUMER INFORMATION
Subtitle A—Disclosure of Nonpublic Personal Information
Sec. 501. Obligations with respect to personal information.
Sec. 502. Notice concerning divulging information.
Sec. 503. Enforcement.
Sec. 505. Definitions.
Sec. 506. Effective date.
Subtitle B—Fraudulent Access to Financial Information
Sec. 521. Privacy protection for customer information of finan-
cial institutions.
Sec. 522. Administrative enforcement.
Sec. 523. Criminal penalty.
Sec. 524. Relation to State laws.
Sec. 525. Agency guidance.
Sec. 526. Reports.
Sec. 527. Definitions.
382
TITLE I—FACILITATING AFFILI-
ATION 
AMONG 
SECURITIES
FIRMS, INSURANCE COMPA-
NIES, AND DEPOSITORY IN-
STITUTIONS
Subtitle A—Affiliations
SEC. 101. GLASS-STEAGALL ACT REFORMED.
(a) SECTION 20 REPEALED.—Section 20 of
the Banking Act of 1933 (12 U.S.C. 377) (com-
monly referred to as the ‘‘Glass-Steagall Act’’)
is repealed.
(b) SECTION 32 REPEALED.—Section 32 of
the Banking Act of 1933 (12 U.S.C. 78) is re-
pealed.
SEC. 102. ACTIVITY RESTRICTIONS APPLICABLE TO BANK
HOLDING COMPANIES WHICH ARE NOT FI-
NANCIAL HOLDING COMPANIES.
(a) IN GENERAL.—Section 4(c)(8) of the
Bank Holding Company Act of 1956 (12 U.S.C.
1843(c)(8)) is amended to read as follows:
‘‘(8) shares of any company the activi-
ties of which had been determined by the
Board by regulation or order under this
paragraph as of the day before the date
of the enactment of the Financial Serv-
383
ices Act of 1999, to be so closely related to
banking as to be a proper incident there-
to (subject to such terms and conditions
contained in such regulation or order,
unless modified by the Board);’’.
(b) CONFORMING CHANGES TO OTHER STAT-
UTES.—
(1) AMENDMENT TO THE BANK HOLDING
COMPANY
ACT
AMENDMENTS
OF
1970.—Sec-
tion 105 of the Bank Holding Company
Act Amendments of 1970 (12 U.S.C. 1850)
is amended by striking ‘‘, to engage di-
rectly or indirectly in a nonbanking ac-
tivity pursuant to section 4 of such Act,’’.
(2) AMENDMENT TO THE BANK SERVICE
COMPANY
ACT.—Section 4(f) of the Bank
Service Company Act (12 U.S.C. 1864(f)) is
amended by striking the period and add-
ing at the end the following: ‘‘as of the
day before the date of enactment of the
Financial Services Act of 1999.’’.
SEC. 103. FINANCIAL HOLDING COMPANIES.
(a) IN GENERAL.—The Bank Holding Com-
pany Act of 1956 is amended by inserting after
384
section 5 (12 U.S.C. 1844) the following new
section:
‘‘SEC. 6. FINANCIAL HOLDING COMPANIES.
‘‘(a) FINANCIAL
HOLDING
COMPANY
DE-
FINED.—For purposes of this section, the term
‘financial holding company’ means a bank
holding company which meets the require-
ments of subsection (b).
‘‘(b) ELIGIBILITY REQUIREMENTS FOR FINAN-
CIAL HOLDING COMPANIES.—
‘‘(1) IN
GENERAL.—No bank holding
company may engage in any activity or
directly or indirectly acquire or retain
shares of any company under this section
unless the bank holding company meets
the following requirements:
‘‘(A) All of the subsidiary deposi-
tory institutions of the bank holding
company are well capitalized.
‘‘(B) All of the subsidiary deposi-
tory institutions of the bank holding
company are well managed.
‘‘(C) All of the subsidiary deposi-
tory institutions of the bank holding
company have achieved a rating,
385
under the Community Reinvestment
Act of 1977, of ‘satisfactory record of
meeting community credit needs’, or
better, at the most recent examina-
tion of each such institution;
‘‘(D) The company has filed with
the Board a declaration that the com-
pany elects to be a financial holding
company and certifying that the com-
pany meets the requirements of sub-
paragraphs (A), (B), and (C).
‘‘(2) FOREIGN BANKS AND COMPANIES.—
For purposes of paragraph (1), the Board
shall establish and apply comparable cap-
ital and other operating standards to a
foreign bank that operates a branch or
agency or owns or controls a bank or
commercial 
lending 
company 
in 
the
United States, and any company that
owns or controls such foreign bank, giv-
ing due regard to the principle of na-
tional treatment and equality of competi-
tive opportunity.
386
‘‘(3) LIMITED EXCLUSIONS FROM COMMU-
NITY NEEDS REQUIREMENTS FOR NEWLY AC-
QUIRED DEPOSITORY INSTITUTIONS.—
‘‘(A) IN GENERAL.—If the require-
ments of subparagraph (B) are met,
any depository institution acquired
by a bank holding company during
the 24-month period preceding the
submission of a declaration under
paragraph (1)(D) and any depository
institution acquired after the submis-
sion of such declaration may be ex-
cluded for purposes of paragraph
(1)(C) until the later of—
‘‘(i) the end of the 24-month
period beginning on the date the
acquisition of the depository in-
stitution by such company is con-
summated; or
‘‘(ii) the date of completion of
the first examination of such de-
pository 
institution 
under 
the
Community Reinvestment Act of
1977 which is conducted after the
387
date of the acquisition of the de-
pository institution.
‘‘(B) REQUIREMENTS.—The require-
ments of this subparagraph are met
with respect to any bank holding
company referred to in subparagraph
(A) if—
‘‘(i) the bank holding company
has submitted an affirmative plan
to the appropriate Federal bank-
ing agency to take such action as
may be necessary in order for
such institution to achieve a rat-
ing 
of 
‘satisfactory 
record 
of
meeting community credit needs’,
or better, at the next examination
of the institution; and
‘‘(ii) the plan has been ap-
proved by such agency.
‘‘(c) ENGAGING IN ACTIVITIES THAT ARE FI-
NANCIAL IN NATURE.—
‘‘(1) FINANCIAL
ACTIVITIES.—Notwith-
standing section 4(a), a financial holding
company and a wholesale financial hold-
ing company may engage in any activity,
388
and acquire and retain the shares of any
company engaged in any activity, that
the Board has determined (by regulation
or order) to be—
‘‘(A) financial in nature or inci-
dental to such financial activities; or
‘‘(B) complementary to activities
that have been determined to be fi-
nancial in nature under this sub-
section to the extent that the amount
of such complementary activities re-
mains small in relation to the author-
ized activities to which they are com-
plementary.
‘‘(2) FACTORS
TO
BE
CONSIDERED.—In
determining whether an activity is finan-
cial in nature or incidental to financial
activities, the Board shall take into
account—
‘‘(A) the purposes of this Act and
the Financial Services Act of 1999;
‘‘(B) changes or reasonably ex-
pected changes in the marketplace in
which bank holding companies com-
pete;
389
‘‘(C) changes or reasonably ex-
pected changes in the technology for
delivering financial services; and
‘‘(D) whether such activity is nec-
essary or appropriate to allow a bank
holding company and the affiliates of
a bank holding company to—
‘‘(i) compete effectively with
any company seeking to provide
financial services in the United
States;
‘‘(ii) 
use 
any 
available 
or
emerging technological means, in-
cluding any application necessary
to protect the security or efficacy
of systems for the transmission of
data or financial transactions, in
providing financial services; and
‘‘(iii) 
offer 
customers 
any
available 
or 
emerging 
techno-
logical means for using financial
services.
‘‘(3) ACTIVITIES THAT ARE FINANCIAL IN
NATURE.—The following activities shall be
considered to be financial in nature:
390
‘‘(A) Lending, exchanging, trans-
ferring, investing for others, or safe-
guarding money or securities.
‘‘(B) Insuring, guaranteeing, or in-
demnifying against loss, harm, dam-
age, illness, disability, or death, or
providing and issuing annuities, and
acting as principal, agent, or broker
for purposes of the foregoing.
‘‘(C) Providing financial, invest-
ment, or economic advisory services,
including 
advising 
an 
investment
company (as defined in section 3 of
the Investment Company Act of 1940).
‘‘(D) Issuing or selling instru-
ments representing interests in pools
of assets permissible for a bank to
hold directly.
‘‘(E) Underwriting, dealing in, or
making a market in securities.
‘‘(F) Engaging in any activity that
the Board has determined, by order
or regulation that is in effect on the
date of enactment of the Financial
Services Act of 1999, to be so closely
391
related to banking or managing or
controlling banks as to be a proper
incident thereto (subject to the same
terms and conditions contained in
such order or regulation, as modified
by the Board).
‘‘(G) 
Engaging, 
in 
the 
United
States, in any activity that—
‘‘(i) a bank holding company
may engage in outside the United
States; and
‘‘(ii) the Board has deter-
mined, under regulations issued
pursuant to section 4(c)(13) of this
Act (as in effect on the day before
the date of enactment of the Fi-
nancial Services Act of 1999) to be
usual in connection with the
transaction of banking or other fi-
nancial operations abroad.
‘‘(H) Directly or indirectly acquir-
ing or controlling, whether as prin-
cipal, on behalf of 1 or more entities
(including entities, other than a de-
pository institution or subsidiary of a
392
depository institution, that the finan-
cial holding company controls) or
otherwise, shares, assets, or owner-
ship interests (including without limi-
tation debt or equity securities, part-
nership interests, trust certificates or
other instruments representing own-
ership) of a company or other entity,
whether or not constituting control of
such company or entity, engaged in
any activity not authorized pursuant
to this section if—
‘‘(i) the shares, assets, or own-
ership interests are not acquired
or held by a depository institu-
tion or subsidiary of a depository
institution;
‘‘(ii) such shares, assets, or
ownership interests are acquired
and held by an affiliate of the fi-
nancial holding company that is a
registered broker or dealer that is
engaged 
in 
securities 
under-
writing activities, or an affiliate
of such broker or dealer, as part
393
of a bona fide underwriting or in-
vestment banking activity, includ-
ing investment activities engaged
in for the purpose of appreciation
and ultimate resale or disposition
of the investment;
‘‘(iii) such shares, assets, or
ownership interests are held only
for such a period of time as will
permit the sale or disposition
thereof on a reasonable basis con-
sistent with the nature of the ac-
tivities described in clause (ii);
and
‘‘(iv) during the period such
shares, assets, or ownership inter-
ests are held, the holding com-
pany does not actively participate
in the day-to-day management or
operation of such company or en-
tity, except insofar as necessary
to achieve the objectives of clause
(ii).
‘‘(I) Directly or indirectly acquir-
ing or controlling, whether as prin-
394
cipal, on behalf of 1 or more entities
(including entities, other than a de-
pository institution or subsidiary of a
depository institution, that the finan-
cial holding company controls) or
otherwise, shares, assets, or owner-
ship interests (including without limi-
tation debt or equity securities, part-
nership interests, trust certificates or
other instruments representing own-
ership) of a company or other entity,
whether or not constituting control of
such company or entity, engaged in
any activity not authorized pursuant
to this section if—
‘‘(i) the shares, assets, or own-
ership interests are not acquired
or held by a depository institu-
tion or a subsidiary of a deposi-
tory institution;
‘‘(ii) such shares, assets, or
ownership interests are acquired
and held by an insurance com-
pany that is predominantly en-
gaged in underwriting life, acci-
395
dent and health, or property and
casualty insurance (other than
credit-related insurance) or pro-
viding and issuing annuities;
‘‘(iii) such shares, assets, or
ownership interests represent an
investment made in the ordinary
course of business of such insur-
ance company in accordance with
relevant State law governing such
investments; and
‘‘(iv) during the period such
shares, assets, or ownership inter-
ests are held, the financial hold-
ing company does not directly or
indirectly participate in the day-
to-day management or operation
of the company or entity except
insofar as necessary to achieve
the objectives of clauses (ii) and
(iii).
‘‘(4) AUTHORIZATION OF NEW FINANCIAL
ACTIVITIES.—The Board shall, by regula-
tion or order, define, consistent with the
purposes of this Act, the following activi-
396
ties as, and the extent to which such ac-
tivities are, financial in nature or inci-
dental to activities which are financial in
nature:
‘‘(A) Lending, exchanging, trans-
ferring, investing for others, or safe-
guarding financial assets other than
money or securities.
‘‘(B) 
Providing 
any 
device 
or
other instrumentality for transferring
money or other financial assets.
‘‘(C) Arranging, effecting, or facili-
tating financial transactions for the
account of third parties.
‘‘(5) 
POST-CONSUMMATION
NOTIFICA-
TION.—
‘‘(A) 
IN
GENERAL.—A 
financial
holding company and a wholesale fi-
nancial holding company that ac-
quires any company, or commences
any activity, pursuant to this sub-
section shall provide written notice
to the Board describing the activity
commenced or conducted by the com-
pany acquired no later than 30 cal-
397
endar days after commencing the ac-
tivity or consummating the acquisi-
tion.
‘‘(B) APPROVAL NOT REQUIRED FOR
CERTAIN FINANCIAL ACTIVITIES.—Except
as provided in section 4(j) with re-
gard to the acquisition of a savings
association or in paragraph (6) of this
subsection, a financial holding com-
pany and a wholesale financial hold-
ing company may commence any ac-
tivity, or acquire any company, pur-
suant to paragraph (3) or any regula-
tion prescribed or order issued under
paragraph (4), without prior approval
of the Board.
‘‘(6) NOTICE REQUIRED FOR LARGE COM-
BINATIONS.—
‘‘(A) IN
GENERAL.—No financial
holding company or wholesale finan-
cial holding company shall directly or
indirectly acquire, and no company
that becomes a financial holding com-
pany or a wholesale financial holding
company shall directly or indirectly
398
acquire control of, any company in
the United States, including through
merger, consolidation, or other type
of business combination, that—
‘‘(i) is engaged in activities
permitted under this subsection
or subsection (g); and
‘‘(ii) has consolidated total as-
sets in excess of $40,000,000,000,
unless such holding company has pro-
vided notice to the Board, not later
than 60 days prior to such proposed
acquisition or prior to becoming a fi-
nancial holding company or whole-
sale financial holding company, and
during that time period, or such
longer time period not exceeding an
additional 60 days, as established by
the Board, the Board has not issued a
notice disapproving the proposed ac-
quisition or retention.
‘‘(B) 
FACTORS
FOR
CONSIDER-
ATION.—In reviewing any prior notice
filed under this paragraph, the Board
shall take into consideration—
399
‘‘(i) whether the company is in
compliance with all applicable
criteria set forth in subsection (b)
and the provisions of subsection
(d);
‘‘(ii) whether the proposed
combination represents an undue
aggregation of resources;
‘‘(iii) whether the proposed
combination poses a risk to the
deposit insurance system;
‘‘(iv) whether the proposed
combination poses a risk to State
insurance guaranty funds;
‘‘(v) 
whether 
the 
proposed
combination can reasonably be
expected to be in the best inter-
ests of depositors or policyholders
of the respective entities;
‘‘(vi) whether the proposed
transaction can reasonably be ex-
pected to further the purposes of
this Act and produce benefits to
the public; and
400
‘‘(vii) whether, and the extent
to which, any subsequent failure
or default of the financial holding
company or wholesale financial
holding company, or any affiliate
of any such company, after the
proposed combination could have
serious adverse effects on eco-
nomic conditions or financial sta-
bility.
‘‘(C) REQUIRED INFORMATION.—The
Board may disapprove any prior no-
tice filed under this paragraph if the
company submitting such notice ne-
glects, fails, or refuses to furnish to
the Board all relevant information re-
quired by the Board.
‘‘(D) SOLICITATION
OF
VIEWS
OF
OTHER SUPERVISORY AGENCIES.—
‘‘(i) IN GENERAL.—Upon receiv-
ing a prior notice under this
paragraph, in order to provide for
the submission of their views and
recommendations, the Board shall
give notice of the proposal to—
401
‘‘(I) the appropriate Fed-
eral banking agency of any
bank involved;
‘‘(II) the appropriate func-
tional regulator of any func-
tionally regulated nondeposi-
tory institution (as defined in
section 
5(c)(1)(C)) 
involved;
and
‘‘(III) the Secretary of the
Treasury, the Attorney Gen-
eral, and the Federal Trade
Commission.
‘‘(ii) TIMING.—The views and
recommendations of any agency
provided notice under this para-
graph shall be submitted to the
Board not later than 30 calendar
days after the date on which no-
tice to the agency was given, un-
less the Board determines that
another shorter time period is ap-
propriate.
402
‘‘(d) PROVISIONS APPLICABLE TO FINANCIAL
HOLDING COMPANIES THAT FAIL TO MEET RE-
QUIREMENTS.—
‘‘(1) IN GENERAL.—If the Board finds
that a financial holding company is not
in compliance with the requirements of
subparagraph (A), (B), or (C) of sub-
section (b)(1), the Board shall give notice
of such finding to the company.
‘‘(2) AGREEMENT
TO
CORRECT
CONDI-
TIONS
REQUIRED.—Within 45 days of re-
ceipt by a financial holding company of a
notice given under paragraph (1) (or such
additional period as the Board may per-
mit), the company shall execute an agree-
ment acceptable to the Board to comply
with the requirements applicable to a fi-
nancial holding company.
‘‘(3) BOARD MAY IMPOSE LIMITATIONS.—
Until the conditions described in a notice
to a financial holding company under
paragraph (1) are corrected, the Board
may impose such limitations on the con-
duct or activities of the company or any
affiliate of the company as the Board de-
403
termines to be appropriate under the cir-
cumstances.
‘‘(4) FAILURE TO CORRECT.—If, after re-
ceiving a notice under paragraph (1), a fi-
nancial holding company does not—
‘‘(A) execute and implement an
agreement in accordance with para-
graph (2);
‘‘(B) comply with any limitations
imposed under paragraph (3);
‘‘(C) in the case of a notice of fail-
ure 
to 
comply 
with 
subsection
(b)(1)(A), restore each depository in-
stitution subsidiary to well capital-
ized status before the end of the 180-
day period beginning on the date
such notice is received by the com-
pany (or such other period permitted
by the Board); or
‘‘(D) in the case of a notice of fail-
ure to comply with subparagraph (B)
or (C) of subsection (b)(1), restore
compliance with any such subpara-
graph by the date the next examina-
tion of the depository institution sub-
404
sidiary is completed or by the end of
such other period as the Board deter-
mines to be appropriate,
the Board may require such company,
under such terms and conditions as may
be imposed by the Board and subject to
such extension of time as may be granted
in the Board’s discretion, to divest con-
trol of any depository institution sub-
sidiary or, at the election of the financial
holding company, instead to cease to en-
gage in any activity conducted by such
company or its subsidiaries pursuant to
this section.
‘‘(5) CONSULTATION.—In taking any ac-
tion under this subsection, the Board
shall consult with all relevant Federal
and State regulatory agencies.
‘‘(e) SAFEGUARDS FOR BANK SUBSIDIARIES.—
A financial holding company shall assure
that—
‘‘(1) the procedures of the holding
company for identifying and managing fi-
nancial and operational risks within the
company, and the subsidiaries of such
405
company, adequately protect the subsidi-
aries of such company which are insured
depository institutions or wholesale fi-
nancial institutions from such risks;
‘‘(2) the holding company has reason-
able policies and procedures to preserve
the separate corporate identity and lim-
ited liability of such company and the
subsidiaries of such company, for the
protection of the company’s subsidiary
insured depository institutions or whole-
sale financial institutions; and
‘‘(3) the holding company complies
with this section.
‘‘(f) AUTHORITY TO RETAIN LIMITED NON-
FINANCIAL ACTIVITIES AND AFFILIATIONS.—
‘‘(1) 
IN
GENERAL.—Notwithstanding
section 4(a), a company that is not a bank
holding company or a foreign bank (as
defined in section 1(b)(7) of the Inter-
national Banking Act of 1978) and be-
comes a financial holding company after
the date of the enactment of the Finan-
cial Services Act of 1999 may continue to
engage in any activity and retain direct
406
or indirect ownership or control of
shares of a company engaged in any ac-
tivity if—
‘‘(A) the holding company lawfully
was engaged in the activity or held
the shares of such company on Sep-
tember 30, 1997;
‘‘(B) the holding company is pre-
dominantly engaged in financial ac-
tivities as defined in paragraph (2);
and
‘‘(C) the company engaged in such
activity continues to engage only in
the same activities that such com-
pany conducted on September 30,
1997, and other activities permissible
under this Act.
‘‘(2) PREDOMINANTLY
FINANCIAL.—For
purposes of this subsection, a company is
predominantly engaged in financial ac-
tivities if the annual gross revenues de-
rived by the holding company and all
subsidiaries of the holding company (ex-
cluding revenues derived from subsidiary
depository institutions), on a consoli-
407
dated basis, from engaging in activities
that are financial in nature or are inci-
dental to activities that are financial in
nature under subsection (c) represent at
least 85 percent of the consolidated an-
nual gross revenues of the company.
‘‘(3) NO EXPANSION OF GRANDFATHERED
COMMERCIAL
ACTIVITIES
THROUGH
MERGER
OR
CONSOLIDATION.—A financial holding
company that engages in activities or
holds shares pursuant to this subsection,
or a subsidiary of such financial holding
company, may not acquire, in any merg-
er, consolidation, or other type of busi-
ness combination, assets of any other
company which is engaged in any activ-
ity which the Board has not determined
to be financial in nature or incidental to
activities that are financial in nature
under subsection (c).
‘‘(4) CONTINUING
REVENUE
LIMITATION
ON
GRANDFATHERED
COMMERCIAL
ACTIVI-
TIES.—Notwithstanding any other provi-
sion of this subsection, a financial hold-
ing company may continue to engage in
408
activities or hold shares in companies
pursuant to this subsection only to the
extent that the aggregate annual gross
revenues derived from all such activities
and all such companies does not exceed
15 percent of the consolidated annual
gross revenues of the financial holding
company (excluding revenues derived
from subsidiary depository institutions).
‘‘(5) CROSS
MARKETING
RESTRICTIONS
APPLICABLE
TO
COMMERCIAL
ACTIVITIES.—
An insured depository institution or
wholesale financial institution controlled
by a financial holding company shall
not—
‘‘(A) offer or market, directly or
through any arrangement, any prod-
uct or service of a company whose ac-
tivities 
are 
conducted 
or 
whose
shares are owned or controlled by the
financial holding company pursuant
to this subsection or subparagraph
(H) or (I) of subsection (c)(3); or
‘‘(B) permit any of its products or
services to be offered or marketed, di-
409
rectly or through any arrangement,
by or through any company described
in subparagraph (A).
‘‘(6) TRANSACTIONS WITH NONFINANCIAL
AFFILIATES.—An insured depository insti-
tution or wholesale financial institution
controlled by a financial holding com-
pany or wholesale financial holding com-
pany may not engage in a covered trans-
action (as defined by section 23A(b)(7) of
the Federal Reserve Act) with any affil-
iate controlled by the company pursuant
to section 10(c), this subsection, or sub-
paragraph (H) or (I) of subsection (c)(3).
‘‘(7) SUNSET
OF
GRANDFATHER.—A fi-
nancial holding company engaged in any
activity, or retaining direct or indirect
ownership or control of shares of a com-
pany, pursuant to this subsection, shall
terminate such activity and divest owner-
ship or control of the shares of such com-
pany before the end of the 10-year period
beginning on the date of the enactment of
the Financial Services Act of 1999. The
Board may, upon application, extend
410
such 10-year period by a period not to ex-
ceed an additional 5 years if such exten-
sion would not be detrimental to the pub-
lic interest.
‘‘(g) DEVELOPING ACTIVITIES.—A financial
holding company and a wholesale financial
holding company may engage directly or indi-
rectly, or acquire shares of any company en-
gaged, in any activity that the Board has not
determined to be financial in nature or inci-
dental to financial activities under subsection
(c) if—
‘‘(1) the holding company reasonably
concludes that the activity is financial in
nature or incidental to financial activi-
ties;
‘‘(2) the gross revenues from all ac-
tivities conducted under this subsection
represent less than 5 percent of the con-
solidated gross revenues of the holding
company;
‘‘(3) the aggregate total assets of all
companies the shares of which are held
under this subsection do not exceed 5
411
percent of the holding company’s consoli-
dated total assets;
‘‘(4) the total capital invested in ac-
tivities conducted under this subsection
represents less than 5 percent of the con-
solidated total capital of the holding com-
pany;
‘‘(5) the Board has not determined
that the activity is not financial in nature
or incidental to financial activities under
subsection (c);
‘‘(6) the holding company is not re-
quired to provide prior written notice of
the transaction to the Board under sub-
section (c)(6); and
‘‘(7) the holding company provides
written notification to the Board describ-
ing the activity commenced or conducted
by the company acquired no later than 10
business days after commencing the ac-
tivity or consummating the acquisition.’’.
(b) FACTORS FOR CONSIDERATION
IN RE-
VIEWING APPLICATION
BY FINANCIAL HOLDING
COMPANY TO ACQUIRE BANK.—Section 3(c) of
the Bank Holding Company Act of 1956 (12
412
U.S.C. 1842(c)) is amended by adding at the
end the following new paragraph:
‘‘(6) ‘TOO BIG TO FAIL’ FACTOR.—In con-
sidering an acquisition, merger, or con-
solidation under this section involving a
financial holding company, a wholesale
financial holding company, or a company
that would be any such holding company
upon the consummation of the trans-
action, the Board shall consider whether,
and the extent to which, any subsequent
failure or default of the financial holding
company or wholesale financial holding
company, or any affiliate of any such
company, after the consummation of the
transaction could have serious adverse
effects on economic conditions or finan-
cial stability.’’.
(c) TECHNICAL
AND CONFORMING AMEND-
MENTS.—
(1) Section 2 of the Bank Holding
Company Act of 1956 (12 U.S.C. 1841) is
amended by adding at the end the fol-
lowing new subsection:
413
‘‘(p) INSURANCE COMPANY.—For purposes
of sections 5, 6, and 10, the term ‘insurance
company’ includes any person engaged in the
business of insurance to the extent of such ac-
tivities.’’.
(2) Section 4(j) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1843(j)) is
amended—
(1) in paragraph (1)(A), by inserting
‘‘or in any complementary activity under
section 6(c)(1)(B)’’ after ‘‘subsection (c)(8)
or (a)(2)’’; and
(2) in paragraph (3)—
(A) by inserting ‘‘, other than any
complementary activity under section
6(c)(1)(B),’’ after ‘‘to engage in any ac-
tivity’’; and
(B) by inserting ‘‘or a company
engaged in any complementary activ-
ity under section 6(c)(1)(B)’’ after ‘‘in-
sured depository institution’’.
(d) REPORT.—
(1) IN
GENERAL.—The Board of Gov-
ernors of the Federal Reserve System
shall submit a report to the Congress by
414
the end of each of the 1st two 5-year peri-
ods beginning after the date of the enact-
ment of this Act, containing a summary
of new activities which are financial in
nature, including grandfathered commer-
cial activities, in which any financial
holding company is engaged pursuant to
subsection (c)(1) or (f) of section 6 of the
Bank Holding Company Act of 1956 (as
added by subsection (a)).
(2) OTHER
CONTENTS.—Each report
submitted to the Congress pursuant to
paragraph (1) shall also contain the fol-
lowing:
(A) A discussion of actions by the
Board of Governors of the Federal
Reserve System, whether by regula-
tion, order, interpretation, or guide-
line or by approval or disapproval of
an application, with regard to activi-
ties of financial holding companies
which are incidental to activities fi-
nancial in nature or complementary
to such financial activities.
415
(B) An analysis and discussion of
the risks posed by commercial activi-
ties of financial holding companies to
the safety and soundness of affiliate
depository institutions.
(C) An analysis and discussion of
the effect of mergers and acquisitions
under section 6 of the Bank Holding
Company Act of 1956 on market con-
centration in the financial services
industry.
(D) An analysis and discussion, by
the Board in consultation with the
other Federal banking agencies (as
defined in section 3(z) of the Federal
Deposit Insurance Act), of the impact
of the implementation of this Act, and
the amendments made by this Act, on
the extent of meeting community
credit needs and capital availability
under the Community Reinvestment
Act of 1977.
SEC. 104. OPERATION OF STATE LAW.
(a) AFFILIATIONS.—
416
(1) IN GENERAL.—Except as provided
in paragraph (2), no State may, by stat-
ute, regulation, order, interpretation, or
other action, prevent or restrict an in-
sured depository institution or wholesale
financial institution, or a subsidiary or
affiliate thereof, from being affiliated di-
rectly or indirectly or associated with
any person, as authorized or permitted
by this Act or any other provision of Fed-
eral law.
(2) INSURANCE.—With respect to affili-
ations between insured depository insti-
tutions or wholesale financial institu-
tions, or any subsidiary or affiliate there-
of, and persons engaged in the business
of insurance, paragraph (1) does not
prohibit—
(A) any State from collecting in-
formation as may be necessary con-
cerning 
proposed 
acquisitions 
or
changes or continuations in control
of any person engaged in the business
of insurance in the State, as long as—
417
(i) the State makes reasonable
efforts to first collect any such in-
formation from the insurance reg-
ulator of the State of domicile of
such person; and
(ii) the collection of such in-
formation with regard to any
such person, in the case of any
State other than the State of
domicile of such person, does not
impede or delay any such acquisi-
tion or change or continuation in
control; or
(B) in the case of a person en-
gaged in the business of insurance
which is the subject of an acquisition
or change or continuation in control,
the State of domicile of such person
from reviewing or taking action (in-
cluding approval or disapproval) with
regard to the acquisition or change
or continuation in control, as long as
the State reviews and actions—
(i) are completed by the end
of the 60-day period beginning on
418
the later of the date the State re-
ceived notice of the proposed ac-
tion or the date the State received
the information required under
State law regarding such acquisi-
tion or change or continuation in
control;
(ii) do not have the effect of
discriminating, intentionally or
unintentionally, against an in-
sured depository institution or af-
filiate thereof or against any
other person based upon affili-
ation with an insured depository
institution; and
(iii) are based on standards or
requirements relating to solvency
or managerial fitness;
(C) any State from requiring an
entity that is acquiring control of an
entity that is engaged in the business
of insurance and domiciled in that
State to maintain or restore the cap-
ital requirements of that insurance
entity to the level required under the
419
capital regulations of general applica-
bility in that State to avoid the re-
quirement of preparing and filing
with the insurance regulatory author-
ity of that State a plan to increase the
capital of the entity, except that any
determination by the State insurance
regulatory authority with respect to
such requirement shall be made not
later than 60 days after the date of
notification under subparagraph (A);
(D) any State from taking actions
with respect to the receivership or
conservatorship 
of 
any 
insurance
company;
(E) any State from restricting a
change in the ownership of stock in
an insurance company, or a company
formed for the purpose of controlling
such insurance company, for a period
authorized by State law but not to ex-
ceed 5 years beginning on the date of
the conversion of such company from
mutual to stock form; or
420
(F) any State from requiring an
organization which has been eligible
at any time since January 1, 1987, to
claim the special deduction provided
by section 833 of the Internal Rev-
enue Code of 1986 to meet certain
conditions in order to undergo, as de-
termined by the State, a reorganiza-
tion, 
recapitalization, 
conversion,
merger, consolidation, sale or other
disposition of substantial operating
assets, demutualization, dissolution,
or to undertake other similar actions
and which is governed under a State
statute enacted on May 22, 1998, re-
lating to hospital, medical, and dental
service corporation conversions.
(3) PRESERVATION OF STATE ANTITRUST
AND GENERAL CORPORATE LAWS.—
(A) IN
GENERAL.—Subject to sub-
section (c) and the nondiscrimination
provisions contained in such sub-
section, no provision in paragraph (1)
shall be construed as affecting State
laws, regulations, orders, interpreta-
421
tions, or other actions of general ap-
plicability relating to the governance
of corporations, partnerships, limited
liability companies or other business
associations incorporated or formed
under the laws of that State or domi-
ciled in that State, or the applica-
bility of the antitrust laws of any
State or any State law that is similar
to the antitrust laws.
(B) DEFINITION.—The term ‘‘anti-
trust laws’’ has the same meaning as
in subsection (a) of the first section of
the Clayton Act, and includes section
5 of the Federal Trade Commission
Act to the extent that such section 5
relates to unfair methods of competi-
tion.
(b) ACTIVITIES.—
(1) IN GENERAL.—Except as provided
in paragraph (3), and except with respect
to insurance sales, solicitation, and cross
marketing activities, which shall be gov-
erned by paragraph (2), no State may, by
statute, regulation, order, interpretation,
422
or other action, prevent an insured de-
pository institution, wholesale financial
institution, or subsidiary or affiliate
thereof from engaging, or significantly
interfere with the ability of any such per-
son to engage, directly or indirectly, ei-
ther by itself or in conjunction with a
subsidiary, affiliate, or any other entity
or person, in any activity authorized or
permitted under this Act.
(2) INSURANCE SALES.—
(A) IN
GENERAL.—In accordance
with the legal standards for preemp-
tion set forth in the decision of the
Supreme Court of the United States
in Barnett Bank of Marion County
N.A. v. Nelson, 517 U.S. 25 (1996), no
State may, by statute, regulation,
order, interpretation, or other action,
prevent 
or 
significantly 
interfere
with the ability of an insured deposi-
tory institution or wholesale financial
institution, or a subsidiary or affiliate
thereof, to engage, directly or indi-
rectly, either by itself or in conjunc-
423
tion with a subsidiary, affiliate, or
any other party, in any insurance
sales, solicitation, or cross-marketing
activity.
(B) 
CERTAIN
STATE
LAWS
PRE-
SERVED.—Notwithstanding 
subpara-
graph (A), a State may impose any of
the following restrictions, or restric-
tions which are substantially the
same as but no more burdensome or
restrictive than those in each of the
following clauses:
(i) 
Restrictions 
prohibiting
the rejection of an insurance pol-
icy by an insured depository insti-
tution, wholesale financial insti-
tution, or any subsidiary or affil-
iate thereof, solely because the
policy has been issued or under-
written by any person who is not
associated with such insured de-
pository institution or wholesale
financial institution, or any sub-
sidiary or affiliate thereof, when
such insurance is required in con-
424
nection with a loan or extension
of credit.
(ii) Restrictions prohibiting a
requirement for any debtor, in-
surer, 
or 
insurance 
agent 
or
broker to pay a separate charge
in connection with the handling
of insurance that is required in
connection with a loan or other
extension of credit or the provi-
sion of another traditional bank-
ing product by an insured deposi-
tory institution, wholesale finan-
cial institution, or any subsidiary
or affiliate thereof, unless such
charge would be required when
the insured depository institution
or wholesale financial institution,
or any subsidiary or affiliate
thereof, is the licensed insurance
agent or broker providing the in-
surance.
(iii) Restrictions prohibiting
the use of any advertisement or
other insurance promotional ma-
425
terial by an insured depository in-
stitution or wholesale financial
institution, or any subsidiary or
affiliate thereof, that would cause
a reasonable person to believe
mistakenly that—
(I) a State or the Federal
Government is responsible for
the insurance sales activities
of, or stands behind the credit
of, the institution, affiliate, or
subsidiary; or
(II) a State, or the Federal
Government guarantees any
returns on insurance prod-
ucts, or is a source of pay-
ment on any insurance obliga-
tion of or sold by the institu-
tion, affiliate, or subsidiary;
(iv) Restrictions prohibiting
the payment or receipt of any
commission or brokerage fee or
other valuable consideration for
services as an insurance agent or
broker to or by any person, unless
426
such person holds a valid State li-
cense regarding the applicable
class of insurance at the time at
which the services are performed,
except that, in this clause, the
term ‘‘services as an insurance
agent or broker’’ does not include
a referral by an unlicensed per-
son of a customer or potential
customer to a licensed insurance
agent or broker that does not in-
clude a discussion of specific in-
surance policy terms and condi-
tions.
(v) 
Restrictions 
prohibiting
any compensation paid to or re-
ceived by any individual who is
not licensed to sell insurance, for
the referral of a customer that
seeks to purchase, or seeks an
opinion or advice on, any insur-
ance product to a person that
sells or provides opinions or ad-
vice on such product, based on
427
the purchase of insurance by the
customer.
(vi) Restrictions prohibiting
the release of the insurance infor-
mation of a customer (defined as
information concerning the pre-
miums, terms, and conditions of
insurance coverage, including ex-
piration dates and rates, and in-
surance claims of a customer con-
tained in the records of the in-
sured depository institution or
wholesale financial institution, or
a subsidiary or affiliate thereof)
to any person or entity other than
an 
officer, 
director, 
employee,
agent, subsidiary, or affiliate of
an insured depository institution
or a wholesale financial institu-
tion, for the purpose of soliciting
or selling insurance, without the
express consent of the customer,
other 
than 
a 
provision 
that
prohibits—
428
(I) a transfer of insurance
information to an unaffiliated
insurance company, agent, or
broker 
in 
connection 
with
transferring 
insurance 
in
force on existing insureds of
the insured depository insti-
tution or wholesale financial
institution, or subsidiary or
affiliate thereof, or in connec-
tion with a merger with or ac-
quisition of an unaffiliated in-
surance company, agent, or
broker; or
(II) the release of informa-
tion as otherwise authorized
by State or Federal law.
(vii) Restrictions prohibiting
the use of health information ob-
tained from the insurance records
of a customer for any purpose,
other than for its activities as a li-
censed agent or broker, without
the express consent of the cus-
tomer.
429
(viii) Restrictions prohibiting
the extension of credit or any
product or service that is equiva-
lent to an extension of credit,
lease or sale of property of any
kind, or furnishing of any serv-
ices or fixing or varying the con-
sideration for any of the fore-
going, on the condition or re-
quirement that the customer ob-
tain insurance from an insured
depository institution, wholesale
financial institution, a subsidiary
or affiliate thereof, or a particular
insurer, agent, or broker, other
than a prohibition that would
prevent any insured depository
institution or wholesale financial
institution, or any subsidiary or
affiliate thereof—
(I) from engaging in any
activity 
described 
in 
this
clause that would not violate
section 106 of the Bank Hold-
ing 
Company 
Act 
Amend-
430
ments of 1970, as interpreted
by the Board of Governors of
the Federal Reserve System;
or
(II) from informing a cus-
tomer 
or 
prospective 
cus-
tomer that insurance is re-
quired in order to obtain a
loan or credit, that loan or
credit approval is contingent
upon the procurement by the
customer of acceptable insur-
ance, or that insurance is
available from the insured de-
pository institution or whole-
sale financial institution, or
any 
subsidiary 
or 
affiliate
thereof.
(ix) 
Restrictions 
requiring,
when an application by a con-
sumer for a loan or other exten-
sion of credit from an insured de-
pository institution or wholesale
financial institution is pending,
and insurance is offered or sold
431
to the consumer or is required in
connection with the loan or ex-
tension of credit by the insured
depository institution or whole-
sale financial institution or any
affiliate or subsidiary thereof,
that a written disclosure be pro-
vided to the consumer or prospec-
tive customer indicating that his
or her choice of an insurance pro-
vider will not affect the credit de-
cision or credit terms in any way,
except that the insured deposi-
tory institution or wholesale fi-
nancial institution may impose
reasonable 
requirements 
con-
cerning the creditworthiness of
the insurance provider and scope
of coverage chosen.
(x) 
Restrictions 
requiring
clear and conspicuous disclosure,
in writing, where practicable, to
the customer prior to the sale of
any insurance policy that such
policy—
432
(I) is not a deposit;
(II) is not insured by the
Federal 
Deposit 
Insurance
Corporation;
(III) is not guaranteed by
the insured depository insti-
tution or wholesale financial
institution or, if appropriate,
its subsidiaries or affiliates or
any person soliciting the pur-
chase of or selling insurance
on the premises thereof; and
(IV) 
where 
appropriate,
involves investment risk, in-
cluding potential loss of prin-
cipal.
(xi) 
Restrictions 
requiring
that, when a customer obtains in-
surance (other than credit insur-
ance or flood insurance) and
credit from an insured depository
institution or wholesale financial
institution, or its subsidiaries or
affiliates, or any person soliciting
the purchase of or selling insur-
433
ance on the premises thereof, the
credit and insurance transactions
be completed through separate
documents.
(xii) Restrictions prohibiting,
when a customer obtains insur-
ance (other than credit insurance
or flood insurance) and credit
from an insured depository insti-
tution or wholesale financial in-
stitution or its subsidiaries or af-
filiates, or any person soliciting
the purchase of or selling insur-
ance on the premises thereof, in-
clusion of the expense of insur-
ance premiums in the primary
credit transaction without the ex-
press written consent of the cus-
tomer.
(xiii) Restrictions requiring
maintenance of separate and dis-
tinct books and records relating
to insurance transactions, includ-
ing all files relating to and re-
flecting 
consumer 
complaints,
434
and requiring that such insur-
ance books and records be made
available to the appropriate State
insurance regulator for inspec-
tion upon reasonable notice.
(C) 
CONSTRUCTION.—Nothing 
in
this paragraph shall be construed to
limit the applicability of the decision
of the Supreme Court in Barnett
Bank of Marion County N.A. v. Nel-
son, 517 U.S. 25 (1996), with respect to
a State statute, regulation, order, in-
terpretation, or other action that is
not described in subparagraph (B).
(3) INSURANCE ACTIVITIES OTHER THAN
SALES.—State statutes, regulations, inter-
pretations, orders, and other actions
shall not be preempted under subsection
(b)(1) to the extent that they—
(A) relate to, or are issued, adopt-
ed, or enacted for the purpose of reg-
ulating the business of insurance in
accordance with the Act of March 9,
1945 
(commonly 
known 
as 
the
‘‘McCarran-Ferguson Act’’);
435
(B) apply only to persons that are
not insured depository institutions or
wholesale financial institutions, but
that are directly engaged in the busi-
ness of insurance, except that such
State statutes, regulations, interpre-
tations, orders, and other actions may
apply to—
(i) insured depository institu-
tions and wholesale financial in-
stitutions engaged in providing
savings bank life insurance as
principal to the extent of regu-
lating such insurance; and
(ii) insured depository institu-
tions and wholesale financial in-
stitutions which are engaged in
the business of insurance on be-
half, directly or indirectly, of a
company providing insurance as
principal, such as by performing
administrative 
or 
investment
management or claims processing
functions related to insurance,
but only—
436
(I) to the extent of such
functions;
(II) 
if 
such 
functions
would normally be regulated
by the insurance regulator of
such State as part of the busi-
ness of insurance;
(III) if the State statute,
regulation, 
interpretation,
order, or other action does
not directly conflict with any
Federal law expressly gov-
erning such function; and
(IV) if the State insurance
regulator makes an effort to
obtain any required informa-
tion 
from 
the 
appropriate
banking regulator of such in-
sured depository institution
or wholesale financial institu-
tion;
(C) do not relate to or directly or
indirectly regulate insurance sales,
solicitations, or cross-marketing ac-
tivities; and
437
(D) are not prohibited under sub-
section (c).
(4) FINANCIAL
ACTIVITIES
OTHER
THAN
INSURANCE.—No State statute, regulation,
interpretation, order, or other action
shall be preempted under subsection
(b)(1) to the extent that—
(A) it does not relate to, and is not
issued and adopted, or enacted for
the purpose of regulating, directly or
indirectly, insurance sales, solicita-
tions, or cross marketing activities
covered under paragraph (2);
(B) it does not relate to, and is not
issued and adopted, or enacted for
the purpose of regulating, directly or
indirectly, the business of insurance
activities other than sales, solicita-
tions, or cross marketing activities,
covered under paragraph (3);
(C) it does not relate to securities
investigations, enforcement actions,
registration, or licensure actions re-
ferred to in subsection (d); and
(D) it—
438
(i) does not distinguish by its
terms between insured depository
institutions, wholesale financial
institutions, and subsidiaries and
affiliates thereof engaged in the
activity at issue and other per-
sons or entities engaged in the
same activity in a manner that is
in any way adverse with respect
to the conduct of the activity by
any such insured depository insti-
tution, wholesale financial insti-
tution, or subsidiary or affiliate
thereof engaged in the activity at
issue;
(ii) as interpreted or applied,
does not have, and will not have,
an impact on insured depository
institutions, wholesale financial
institutions, or subsidiaries or af-
filiates thereof engaged in the ac-
tivity at issue, or any person or
entity affiliated therewith, that is
substantially more adverse than
its impact on other persons or en-
439
tities engaged in the same activ-
ity that are not insured deposi-
tory institutions, wholesale finan-
cial institutions, or subsidiaries
or affiliates thereof, or persons or
entities affiliated therewith;
(iii) does not effectively pre-
vent an insured depository insti-
tution, wholesale financial insti-
tution, or subsidiary or affiliate
thereof from engaging in activi-
ties authorized or permitted by
this Act or any other provision of
Federal law; and
(iv) does not conflict with the
intent of this Act generally to per-
mit affiliations that are author-
ized or permitted by Federal law.
(c) NONDISCRIMINATION.—
(1) IN GENERAL.—Except as provided
in subsection (b)(2)(B), no State may, by
statute, regulation, order, interpretation,
or other action, regulate the insurance
activities authorized or permitted under
this Act or any other provision of Federal
440
law of an insured depository institution
or wholesale financial institution, or sub-
sidiary or affiliate thereof, to the extent
that such statute, regulation, order, inter-
pretation, or other action—
(A) distinguishes by its terms be-
tween insured depository institutions
or wholesale financial institutions, or
subsidiaries or affiliates thereof, and
other persons or entities engaged in
such activities, in a manner that is
more adverse to insured depository
institutions or wholesale financial in-
stitutions, or subsidiaries or affiliates
thereof, than to other persons or enti-
ties providing the same products or
services or engaged in the same ac-
tivities that are not insured deposi-
tory institutions, wholesale financial
institutions, or subsidiaries or affili-
ates thereof, or persons or entities af-
filiated therewith;
(B)(i) as interpreted or applied,
has or will have an impact on insured
depository institutions or wholesale
441
financial institutions, or subsidiaries
or affiliates thereof, based on their
status, that is substantially more ad-
verse than its impact on other per-
sons or entities providing the same
products or services or engaged in
the same activities that are not in-
sured depository institutions, whole-
sale financial institutions, or subsidi-
aries or affiliates thereof, or persons
or entities affiliated therewith; and
(ii) for purposes of this subpara-
graph, the term ‘‘based on their sta-
tus’’ means—
(I) with respect to insured de-
pository institutions and whole-
sale financial institutions, based
on an attribute of insured deposi-
tory institutions or wholesale fi-
nancial institutions, such as a
Federal charter or the insured
status, either as a whole or with
regard to a particular type or
class of such institutions; and
442
(II) with respect to subsidi-
aries or affiliates of insured de-
pository institutions or wholesale
financial institutions, based on
their relationship with such insti-
tutions;
(C) effectively prevents a insured
depository institution or wholesale fi-
nancial institution, or subsidiary or
affiliate thereof, from engaging in in-
surance activities authorized or per-
mitted by this Act or any other provi-
sion of Federal law; or
(D) conflicts with the intent of
this Act generally to permit affili-
ations that are authorized or per-
mitted by Federal law between in-
sured 
depository 
institutions 
or
wholesale financial institutions, or
subsidiaries or affiliates thereof, and
persons and entities engaged in the
business of insurance.
(2) PROSPECTIVE
APPLICATION.—Para-
graph (1) shall not apply to any State
statute, regulation, order, interpretation,
443
or other action regarding any insurance
sales, solicitation, or cross-marketing ac-
tivity described in subsection (b)(2)(A)
that was issued, adopted, enacted, or
taken before January 1, 1999.
(d) LIMITATION.—Subsections (a) and (b)
shall not be construed to affect the jurisdic-
tion of the securities commission (or any
agency or office performing like functions) of
any State, under the laws of such State—
(1) to investigate and bring enforce-
ment actions, consistent with section
18(c) of the Securities Act of 1933, with
respect to fraud or deceit or unlawful
conduct by any person, in connection
with securities or securities transactions;
or
(2) to require the registration of secu-
rities or the licensure or registration of
brokers, dealers, or investment advisers
(consistent with section 203A of the In-
vestment Advisers Act of 1940), or the as-
sociated persons of a broker, dealer, or
investment adviser (consistent with such
section 203A).
444
(e) DEFINITIONS.—For purposes of this sec-
tion, the following definitions shall apply:
(1) INSURED DEPOSITORY INSTITUTION.—
The term ‘‘insured depository institution’’
includes any foreign bank that maintains
a branch, agency, or commercial lending
company in the United States.
(2) STATE.—The term ‘‘State’’ means
any State of the United States, the Dis-
trict of Columbia, any territory of the
United States, Puerto Rico, Guam, Amer-
ican Samoa, the Trust Territory of the
Pacific Islands, the Virgin Islands, and
the Northern Mariana Islands.
SEC. 105. MUTUAL BANK HOLDING COMPANIES AUTHOR-
IZED.
Section 3(g)(2) of the Bank Holding Com-
pany Act of 1956 (12 U.S.C. 1842(g)(2)) is
amended to read as follows:
‘‘(2) REGULATIONS.—A bank holding
company organized as a mutual holding
company shall be regulated on terms, and
shall be subject to limitations, com-
parable to those applicable to any other
bank holding company.’’.
445
SEC. 105A. PUBLIC MEETINGS FOR LARGE BANK ACQUISI-
TIONS AND MERGERS.
(a) BANK HOLDING COMPANY ACT OF 1956.—
Section 3(c)(2) of the Bank Holding Company
Act of 1956 (12 U.S.C. 1842(c)(2)) is amended—
(1) by striking ‘‘FACTORS.—In every
case’’ and inserting ‘‘FACTORS.—
‘‘(A) IN GENERAL.—In every case’’;
and
(2) by adding at the end the following
new subparagraph:
‘‘(B) PUBLIC
MEETINGS.—In each
case involving 1 or more insured de-
pository institutions each of which
has total assets of $1,000,000,000 or
more, the Board shall, as necessary
and on a timely basis, conduct public
meetings in 1 or more areas where
the Board believes, in the sole discre-
tion of the Board, there will be a sub-
stantial public impact.’’.
(b) FEDERAL DEPOSIT INSURANCE ACT.—Sec-
tion 18(c) of the Federal Deposit Insurance
Act (12 U.S.C. 1828(c)) is amended by adding
at the end the following new paragraph:
446
‘‘(12) PUBLIC MEETINGS.—In each merger
transaction involving 1 or more insured de-
pository institutions each of which has total
assets of $1,000,000,000 or more, the respon-
sible agency shall, as necessary and on a time-
ly basis, conduct public meetings in 1 or more
areas where the agency believes, in the sole
discretion of the agency, there will be a sub-
stantial public impact.’’.
(c) NATIONAL
BANK
CONSOLIDATION
AND
MERGER ACT.—The National Bank Consolida-
tion and Merger Act (12 U.S.C. 215 et seq.) is
amended by adding at the end the following
new section:
‘‘SEC. 6. PUBLIC MEETINGS FOR LARGE BANK CONSOLIDA-
TIONS AND MERGERS.
‘‘In each case of a consolidation or merger
under this Act involving 1 or more banks each
of which has total assets of $1,000,000,000 or
more, the Comptroller shall, as necessary and
on a timely basis, conduct public meetings in
1 or more areas where the Comptroller be-
lieves, in the sole discretion of the Comp-
troller, there will be a substantial public im-
pact.’’.
447
(d) HOME
OWNERS’ LOAN
ACT.—Section
10(e) of the Home Owners’ Loan Act (12 U.S.C.
1463) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(7) PUBLIC
MEETINGS
FOR
LARGE
DE-
POSITORY
INSTITUTION
ACQUISITIONS
AND
MERGERS.—In each case involving 1 or
more 
insured 
depository 
institutions
each 
of 
which 
has 
total 
assets 
of
$1,000,000,000 or more, the Director shall,
as necessary and on a timely basis, con-
duct public meetings in 1 or more areas
where the Director believes, in the sole
discretion of the Director, there will be a
substantial public impact.’’.
SEC. 106. PROHIBITION ON DEPOSIT PRODUCTION OF-
FICES.
(a) IN GENERAL.—Section 109(d) of the Rie-
gle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (12 U.S.C. 1835a(d)) is
amended—
(1) by inserting ‘‘, the Financial Serv-
ices Act of 1999,’’ after ‘‘pursuant to this
title’’; and
448
(2) by inserting ‘‘or such Act’’ after
‘‘made by this title’’.
(b) TECHNICAL
AND CONFORMING AMEND-
MENT.—Section 109(e)(4) of the Riegle-Neal
Interstate Banking and Branching Efficiency
Act of 1994 (12 U.S.C. 1835a(e)(4)) is amended
by inserting ‘‘and any branch of a bank con-
trolled by an out-of-State bank holding com-
pany (as defined in section 2(o)(7) of the Bank
Holding Company Act of 1956)’’ before the pe-
riod.
SEC. 107. CLARIFICATION OF BRANCH CLOSURE REQUIRE-
MENTS.
Section 42(d)(4)(A) of the Federal Deposit
Insurance Act (12 U.S.C. 1831r–1(d)(4)(A)) is
amended by inserting ‘‘and any bank con-
trolled by an out-of-State bank holding com-
pany (as defined in section 2(o)(7) of the Bank
Holding Company Act of 1956)’’ before the pe-
riod.
SEC. 108. AMENDMENTS RELATING TO LIMITED PURPOSE
BANKS.
Section 4(f) of the Bank Holding Company
Act of 1956 (12 U.S.C. 1843(f)) is amended—
(1) in paragraph (2)(A)(ii)—
449
(A) by striking ‘‘and’’ at the end of
subclause (IX);
(B) by inserting ‘‘and’’ after the
semicolon at the end of subclause (X);
and
(C) by inserting after subclause
(X) the following new subclause:
‘‘(XI) assets that are de-
rived from, or are incidental
to, activities in which institu-
tions 
described 
in 
section
2(c)(2)(F) are permitted to en-
gage,’’;
(2) in paragraph (2), by striking sub-
paragraph (B) and inserting the following
new subparagraphs:
‘‘(B) any bank subsidiary of such
company engages in any activity in
which the bank was not lawfully en-
gaged as of March 5, 1987, unless the
bank is well managed and well cap-
italized;
‘‘(C) any bank subsidiary of such
company both—
450
‘‘(i) accepts demand deposits
or deposits that the depositor
may withdraw by check or similar
means for payment to third par-
ties; and
‘‘(ii) engages in the business
of making commercial loans (and,
for purposes of this clause, loans
made in the ordinary course of a
credit card operation shall not be
treated as commercial loans); or
‘‘(D) after the date of the enact-
ment of the Competitive Equality
Amendments of 1987, any bank sub-
sidiary of such company permits any
overdraft 
(including 
any 
intraday
overdraft), or incurs any such over-
draft in such bank’s account at a Fed-
eral reserve bank, on behalf of an af-
filiate, other than an overdraft de-
scribed in paragraph (3).’’; and
(3) by striking paragraphs (3) and (4)
and inserting the following new para-
graphs:
451
‘‘(3) 
PERMISSIBLE
OVERDRAFTS
DE-
SCRIBED.—For 
purposes 
of 
paragraph
(2)(D), an overdraft is described in this
paragraph if—
‘‘(A) such overdraft results from
an inadvertent computer or account-
ing error that is beyond the control of
both the bank and the affiliate; or
‘‘(B) such overdraft—
‘‘(i) is permitted or incurred
on behalf of an affiliate which is
monitored by, reports to, and is
recognized as a primary dealer by
the Federal Reserve Bank of New
York; and
‘‘(ii) is fully secured, as re-
quired by the Board, by bonds,
notes, or other obligations which
are 
direct 
obligations 
of 
the
United States or on which the
principal and interest are fully
guaranteed by the United States
or by securities and obligations
eligible for settlement on the Fed-
eral Reserve book entry system.
452
‘‘(4) DIVESTITURE IN CASE OF LOSS OF
EXEMPTION.—If any company described in
paragraph (1) fails to qualify for the ex-
emption provided under such paragraph
by operation of paragraph (2), such ex-
emption shall cease to apply to such com-
pany and such company shall divest con-
trol of each bank it controls before the
end of the 180-day period beginning on
the date that the company receives notice
from the Board that the company has
failed to continue to qualify for such ex-
emption, unless before the end of such
180-day period, the company has—
‘‘(A) corrected the condition or
ceased the activity that caused the
company to fail to continue to qualify
for the exemption; and
‘‘(B) implemented procedures that
are reasonably adapted to avoid the
reoccurrence of such condition or ac-
tivity.’’.
453
SEC. 109. GAO STUDY OF ECONOMIC IMPACT ON COMMU-
NITY BANKS, OTHER SMALL FINANCIAL IN-
STITUTIONS, INSURANCE AGENTS, AND CON-
SUMERS.
(a) STUDY
REQUIRED.—The Comptroller
General of the United States shall conduct a
study of the projected economic impact and
the actual economic impact that the enact-
ment of this Act will have on financial institu-
tions, including community banks, registered
brokers and dealers and insurance compa-
nies, which have total assets of $100,000,000 or
less, insurance agents, and consumers.
(b) REPORTS TO THE CONGRESS.—
(1) 
IN
GENERAL.—The 
Comptroller
General of the United States shall submit
reports to the Congress, at the times re-
quired under paragraph (2), containing
the findings and conclusions of the
Comptroller General with regard to the
study required under subsection (a) and
such recommendations for legislative or
administrative action as the Comptroller
General may determine to be appro-
priate.
454
(2) TIMING
OF
REPORTS.—The Comp-
troller General shall submit—
(A) an interim report before the
end of the 6-month period beginning
after the date of the enactment of this
Act;
(B) another interim report before
the end of the next 6-month period;
and
(C) a final report before the end
of the 1-year period after such second
6-month period,’’
SEC. 110. RESPONSIVENESS TO COMMUNITY NEEDS FOR FI-
NANCIAL SERVICES.
(a) STUDY.—The Secretary of the Treasury,
in consultation with the Federal banking
agencies (as defined in section 3(z) of the Fed-
eral Deposit Insurance Act) and the Securities
and Exchange Commission, shall conduct a
study of the extent to which adequate serv-
ices are being provided as intended by the
Community Reinvestment Act of 1977, includ-
ing services in low- and moderate-income
neighborhoods and for persons of modest
455
means, as a result of the enactment of this
Act.
(b) REPORT.—Before the end of the 2-year
period beginning on the date of the enact-
ment of this Act, the Secretary of the Treas-
ury, in consultation with the Federal banking
agencies and the Securities and Exchange
Commission, shall submit a report to the Con-
gress on the study conducted pursuant to sub-
section (a) and shall include such rec-
ommendations as the Secretary determines to
be appropriate for administrative and legisla-
tive action with respect to institutions cov-
ered under the Community Reinvestment Act
of 1977.
Subtitle 
B—Streamlining 
Super-
vision 
of 
Financial 
Holding
Companies
SEC. 111. STREAMLINING FINANCIAL HOLDING COMPANY
SUPERVISION.
Section 5(c) of the Bank Holding Company
Act of 1956 (12 U.S.C. 1844(c)) is amended to
read as follows:
‘‘(c) REPORTS AND EXAMINATIONS.—
‘‘(1) REPORTS.—
456
‘‘(A) IN GENERAL.—The Board from
time to time may require any bank
holding company and any subsidiary
of such company to submit reports
under oath to keep the Board in-
formed as to—
‘‘(i) its financial condition,
systems for monitoring and con-
trolling financial and operating
risks, and transactions with de-
pository institution subsidiaries
of the holding company; and
‘‘(ii) compliance by the com-
pany or subsidiary with applica-
ble provisions of this Act.
‘‘(B) USE OF EXISTING REPORTS.—
‘‘(i) IN
GENERAL.—The Board
shall, to the fullest extent pos-
sible, accept reports in fulfillment
of the Board’s reporting require-
ments under this paragraph that
a bank holding company or any
subsidiary of such company has
provided or been required to pro-
vide to other Federal and State
457
supervisors or to appropriate self-
regulatory organizations.
‘‘(ii) 
AVAILABILITY.—A 
bank
holding company or a subsidiary
of such company shall provide to
the Board, at the request of the
Board, a report referred to in
clause (i).
‘‘(iii) REQUIRED
USE
OF
PUB-
LICLY
REPORTED
INFORMATION.—
The Board shall, to the fullest ex-
tent possible, accept in fulfillment
of any reporting or recordkeeping
requirements under this Act in-
formation that is otherwise re-
quired to be reported publicly
and externally audited financial
statements.
‘‘(iv) 
REPORTS
FILED
WITH
OTHER AGENCIES.—In the event the
Board requires a report from a
functionally regulated nondeposi-
tory institution subsidiary of a
bank holding company of a kind
that is not required by another
458
Federal or State regulator or ap-
propriate self-regulatory organi-
zation, the Board shall request
that the appropriate regulator or
self-regulatory organization ob-
tain such report. If the report is
not made available to the Board,
and the report is necessary to as-
sess a material risk to the bank
holding company or any of its
subsidiary depository institutions
or compliance with this Act, the
Board may require such sub-
sidiary to provide such a report
to the Board.
‘‘(C) DEFINITION.—For purposes of
this subsection, the term ‘functionally
regulated nondepository institution’
means—
‘‘(i) a broker or dealer reg-
istered under the Securities Ex-
change Act of 1934;
‘‘(ii) an investment adviser
registered under the Investment
Advisers Act of 1940, or with any
459
State, with respect to the invest-
ment advisory activities of such
investment adviser and activities
incidental to such investment ad-
visory activities;
‘‘(iii) an insurance company
subject to supervision by a State
insurance commission, agency, or
similar authority; and
‘‘(iv) an entity subject to regu-
lation by the Commodity Futures
Trading Commission, with respect
to the commodities activities of
such entity and activities inci-
dental to such commodities activi-
ties.
‘‘(2) EXAMINATIONS.—
‘‘(A) EXAMINATION AUTHORITY.—
‘‘(i) IN
GENERAL.—The Board
may make examinations of each
bank holding company and each
subsidiary of a bank holding com-
pany.
‘‘(ii) FUNCTIONALLY REGULATED
NONDEPOSITORY
INSTITUTION
SUB-
460
SIDIARIES.—Notwithstanding
clause (i), the Board may make
examinations of a functionally
regulated nondepository institu-
tion subsidiary of a bank holding
company only if—
‘‘(I) the Board has reason-
able cause to believe that
such subsidiary is engaged in
activities that pose a material
risk to an affiliated deposi-
tory institution, or
‘‘(II) based on reports and
other available information,
the 
Board 
has 
reasonable
cause to believe that a sub-
sidiary is not in compliance
with this Act or with provi-
sions relating to transactions
with an affiliated depository
institution and the Board can-
not make such determination
through examination of the
affiliated depository institu-
461
tion or bank holding com-
pany.
‘‘(B) LIMITATIONS
ON
EXAMINATION
AUTHORITY FOR BANK HOLDING COMPA-
NIES
AND
SUBSIDIARIES.—Subject to
subparagraph (A)(ii), the Board may
make examinations under subpara-
graph (A)(i) of each bank holding
company and each subsidiary of such
holding company in order to—
‘‘(i) inform the Board of the
nature of the operations and fi-
nancial condition of the holding
company and such subsidiaries;
‘‘(ii) inform the Board of—
‘‘(I) 
the 
financial 
and
operational risks within the
holding company system that
may pose a threat to the safe-
ty and soundness of any sub-
sidiary depository institution
of such holding company; and
‘‘(II) the systems for moni-
toring and controlling such
risks; and
462
‘‘(iii) monitor compliance with
the provisions of this Act and
those governing transactions and
relationships between any sub-
sidiary depository institution and
its affiliates.
‘‘(C) RESTRICTED FOCUS OF EXAMI-
NATIONS.—The Board shall, to the full-
est extent possible, limit the focus
and scope of any examination of a
bank holding company to—
‘‘(i) the bank holding com-
pany; and
‘‘(ii) any subsidiary of the
holding company that, because
of—
‘‘(I) the size, condition, or
activities of the subsidiary; or
‘‘(II) the nature or size of
transactions 
between 
such
subsidiary and any depository
institution which is also a
subsidiary of such holding
company,
463
could have a materially adverse
effect on the safety and sound-
ness of any depository institution
affiliate of the holding company.
‘‘(D) DEFERENCE TO BANK EXAMINA-
TIONS.—The Board shall, to the fullest
extent possible, use, for the purposes
of this paragraph, the reports of ex-
aminations of depository institutions
made by the appropriate Federal and
State depository institution super-
visory authority.
‘‘(E) DEFERENCE TO OTHER EXAMI-
NATIONS.—The Board shall, to the full-
est extent possible, address the cir-
cumstances which might otherwise
permit or require an examination by
the Board by forgoing an examination
and instead reviewing the reports of
examination made of—
‘‘(i) any registered broker or
dealer by or on behalf of the Se-
curities and Exchange Commis-
sion;
464
‘‘(ii) any investment adviser
registered by or on behalf of ei-
ther the Securities and Exchange
Commission or any State, which-
ever is required by law;
‘‘(iii) any licensed insurance
company by or on behalf of any
state regulatory authority respon-
sible for the supervision of insur-
ance companies; and
‘‘(iv) any other subsidiary that
the Board finds to be comprehen-
sively supervised by a Federal or
State authority.
‘‘(3) CAPITAL.—
‘‘(A) IN GENERAL.—The Board shall
not, by regulation, guideline, order or
otherwise, prescribe or impose any
capital or capital adequacy rules,
guidelines, 
standards, 
or 
require-
ments on any subsidiary of a finan-
cial holding company that is not a de-
pository institution and—
‘‘(i) is in compliance with ap-
plicable capital requirements of
465
another Federal regulatory au-
thority (including the Securities
and Exchange Commission) or
State insurance authority;
‘‘(ii) is registered as an invest-
ment adviser under the Invest-
ment Advisers Act of 1940, or with
any State, whichever is required
by law; or
‘‘(iii) is licensed as an insur-
ance agent with the appropriate
State insurance authority.
‘‘(B) RULE OF CONSTRUCTION.—Sub-
paragraph (A) shall not be construed
as preventing the Board from impos-
ing capital or capital adequacy rules,
guidelines, 
standards, 
or 
require-
ments with respect to—
‘‘(i) activities of a registered
investment adviser other than in-
vestment advisory activities or
activities incidental to investment
advisory activities; or
‘‘(ii) activities of a licensed in-
surance agent other than insur-
466
ance agency activities or activi-
ties incidental to insurance agen-
cy activities.
‘‘(C) LIMITATIONS ON INDIRECT AC-
TION.—In developing, establishing, or
assessing holding company capital or
capital adequacy rules, guidelines,
standards, or requirements for pur-
poses of this paragraph, the Board
shall not take into account the activi-
ties, operations, or investments of an
affiliated investment company reg-
istered under the Investment Com-
pany Act of 1940, unless the invest-
ment company is—
‘‘(i) a bank holding company;
or
‘‘(ii) controlled by a bank
holding company by reason of
ownership by the bank holding
company (including through all of
its affiliates) of 25 percent or
more of the shares of the invest-
ment company, and the shares
owned by the bank holding com-
467
pany have a market value equal
to more than $1,000,000.
‘‘(4) FUNCTIONAL REGULATION OF SECU-
RITIES
AND
INSURANCE
ACTIVITIES.—The
Board shall defer to—
‘‘(A) the Securities and Exchange
Commission with regard to all inter-
pretations of, and the enforcement of,
applicable Federal securities laws
(and rules, regulations, orders, and
other directives issued thereunder)
relating to the activities, conduct,
and operations of registered brokers,
dealers, investment advisers, and in-
vestment companies;
‘‘(B) the relevant State securities
authorities with regard to all inter-
pretations of, and the enforcement of,
applicable State securities laws (and
rules, regulations, orders, and other
directives issued thereunder) relating
to the activities, conduct, and oper-
ations of brokers, dealers, and invest-
ment advisers required to be reg-
istered under State law; and
468
‘‘(C) the relevant State insurance
authorities with regard to all inter-
pretations of, and the enforcement of,
applicable State insurance laws (and
rules, regulations, orders, and other
directives issued thereunder) relating
to the activities, conduct, and oper-
ations of insurance companies and in-
surance agents.’’.
SEC. 112. ELIMINATION OF APPLICATION REQUIREMENT
FOR FINANCIAL HOLDING COMPANIES.
(a) PREVENTION OF DUPLICATIVE FILINGS.—
Section 5(a) of the Bank Holding Company
Act of 1956 (12 U.S.C. 1844(a)) is amended by
adding the following new sentence at the end:
‘‘A declaration filed in accordance with sec-
tion 6(b)(1)(D) shall satisfy the requirements
of this subsection with regard to the registra-
tion of a bank holding company but not any
requirement to file an application to acquire
a bank pursuant to section 3.’’.
(b) 
DIVESTITURE
PROCEDURES.—Section
5(e)(1) of the Bank Holding Company Act of
1956 (12 U.S.C. 1844(e)(1)) is amended—
469
(1) by striking ‘‘Financial Institutions
Supervisory Act of 1966, order’’ and in-
serting 
‘‘Financial 
Institutions 
Super-
visory Act of 1966, at the election of the
bank holding company—
‘‘(A) order’’; and
(2) by striking ‘‘shareholders of the
bank holding company. Such distribu-
tion’’ and inserting ‘‘shareholders of the
bank holding company; or
‘‘(B) order the bank holding company,
after due notice and opportunity for
hearing, and after consultation with the
primary supervisor for the bank, which
shall be the Comptroller of the Currency
in the case of a national bank, and the
Federal Deposit Insurance Corporation
and the appropriate State supervisor in
the case of an insured nonmember bank,
to terminate (within 120 days or such
longer period as the Board may direct)
the ownership or control of any such
bank by such company.
The distribution referred to in subparagraph
(A)’’.
470
SEC. 113. AUTHORITY OF STATE INSURANCE REGULATOR
AND SECURITIES AND EXCHANGE COMMIS-
SION.
(a) BANK HOLDING COMPANIES.—Section 5
of the Bank Holding Company Act of 1956 (12
U.S.C. 1844) is amended by adding at the end
the following new subsection:
‘‘(g) AUTHORITY OF STATE INSURANCE REGU-
LATOR AND THE SECURITIES AND EXCHANGE COM-
MISSION.—
‘‘(1) 
IN
GENERAL.—Notwithstanding
any other provision of law, any regula-
tion, order, or other action of the Board
which requires a bank holding company
to provide funds or other assets to a sub-
sidiary insured depository institution
shall not be effective nor enforceable if—
‘‘(A) such funds or assets are to be
provided by—
‘‘(i) a bank holding company
that is an insurance company, a
broker or dealer registered under
the Securities Exchange Act of
1934, or an investment company
registered under the Investment
Company of 1940; or
471
‘‘(ii) an affiliate of the deposi-
tory institution which is an insur-
ance company or a broker or
dealer registered under such Act;
and
‘‘(B) the State insurance authority
for the insurance company or the Se-
curities and Exchange Commission
for the registered broker, dealer, or
investment company, as the case may
be, determines in writing sent to the
holding company and the Board that
the holding company shall not pro-
vide such funds or assets because
such action would have a material ad-
verse effect on the financial condition
of the insurance company or the
broker, dealer, or investment com-
pany, as the case may be.
‘‘(2) NOTICE
TO
STATE
INSURANCE
AU-
THORITY OR SEC REQUIRED.—If the Board
requires a bank holding company, or an
affiliate of a bank holding company,
which is an insurance company or a
broker, dealer, or investment company
472
described in paragraph (1)(A) to provide
funds or assets to an insured depository
institution subsidiary of the holding com-
pany pursuant to any regulation, order,
or other action of the Board referred to
in paragraph (1), the Board shall prompt-
ly notify the State insurance authority
for the insurance company or the Securi-
ties and Exchange Commission, as the
case may be, of such requirement.
‘‘(3) DIVESTITURE IN LIEU OF OTHER AC-
TION.—If the Board receives a notice de-
scribed in paragraph (1)(B) from a State
insurance authority or the Securities and
Exchange Commission with regard to a
bank holding company or affiliate re-
ferred to in that paragraph, the Board
may order the bank holding company to
divest the insured depository institution
not later than 180 days after receiving
the notice, or such longer period as the
Board determines consistent with the
safe and sound operation of the insured
depository institution.
473
‘‘(4) CONDITIONS BEFORE DIVESTITURE.—
During the period beginning on the date
an order to divest is issued by the Board
under paragraph (3) to a bank holding
company and ending on the date the di-
vestiture is completed, the Board may im-
pose any conditions or restrictions on the
holding company’s ownership or oper-
ation of the insured depository institu-
tion, including restricting or prohibiting
transactions between the insured deposi-
tory institution and any affiliate of the
institution, as are appropriate under the
circumstances.’’.
(b) SUBSIDIARIES OF DEPOSITORY INSTITU-
TIONS.—The Federal Deposit Insurance Act (12
U.S.C. 1811 et seq.) is amended by adding at
the end the following new section:
‘‘SEC. 45. AUTHORITY OF STATE INSURANCE REGULATOR
AND SECURITIES AND EXCHANGE COMMIS-
SION.
‘‘(a) IN
GENERAL.—Notwithstanding any
other provision of law, any regulation, order,
or other action of the appropriate Federal
banking agency which requires a subsidiary
474
to provide funds or other assets to an insured
depository institution shall not be effective
nor enforceable if—
‘‘(1) such funds or assets are to be
provided by a subsidiary which is an in-
surance company, a broker or dealer reg-
istered under the Securities Exchange
Act of 1934, or an investment company
registered under the Investment Com-
pany Act of 1940; and
‘‘(2) the State insurance authority for
the insurance company or the Securities
and Exchange Commission for the reg-
istered broker or dealer or the invest-
ment company, as the case may be, deter-
mines in writing sent to the insured de-
pository institution and the appropriate
Federal banking agency that the sub-
sidiary shall not provide such funds or
assets because such action would have a
material adverse effect on the financial
condition of the insurance company or
the broker, dealer, or investment com-
pany, as the case may be.
475
‘‘(b) NOTICE TO STATE INSURANCE AUTHOR-
ITY
OR SEC REQUIRED.—If the appropriate
Federal banking agency requires a sub-
sidiary, which is an insurance company, a
broker or dealer, or an investment company
described in subsection (a)(1) to provide
funds or assets to an insured depository insti-
tution pursuant to any regulation, order, or
other action of the appropriate Federal bank-
ing agency referred to in subsection (a), the
appropriate Federal banking agency shall
promptly notify the State insurance authority
for the insurance company or the Securities
and Exchange Commission, as the case may
be, of such requirement.
‘‘(c) DIVESTITURE
IN LIEU
OF OTHER AC-
TION.—If the appropriate Federal banking
agency receives a notice described in sub-
section (a)(2) from a State insurance author-
ity or the Securities and Exchange Commis-
sion with regard to a subsidiary referred to in
that subsection, the appropriate Federal
banking agency may order the insured depos-
itory institution to divest the subsidiary not
later than 180 days after receiving the notice,
476
or such longer period as the appropriate Fed-
eral banking agency determines consistent
with the safe and sound operation of the in-
sured depository institution.
‘‘(d) CONDITIONS
BEFORE
DIVESTITURE.—
During the period beginning on the date an
order to divest is issued by the appropriate
Federal banking agency under subsection (c)
to an insured depository institution and end-
ing on the date the divestiture is complete,
the appropriate Federal banking agency may
impose any conditions or restrictions on the
insured depository institution’s ownership or
operation of the subsidiary including restrict-
ing or prohibiting transactions between the
insured depository institution and the sub-
sidiary, as are appropriate under the cir-
cumstances.’’.
SEC. 114. PRUDENTIAL SAFEGUARDS.
Section 5 of the Bank Holding Company
Act of 1956 (12 U.S.C. 1844) is amended by in-
serting after subsection (g) (as added by sec-
tion 113 of this subtitle) the following new
subsection:
‘‘(h) PRUDENTIAL SAFEGUARDS.—
477
‘‘(1) IN GENERAL.—The Board may, by
regulation or order, impose restrictions
or 
requirements 
on 
relationships 
or
transactions between a depository insti-
tution subsidiary of a bank holding com-
pany and any affiliate of such depository
institution (other than a subsidiary of
such institution) which the Board finds is
consistent with the public interest, the
purposes of this Act, the Financial Serv-
ices Act of 1999, the Federal Reserve Act,
and other Federal law applicable to de-
pository institution subsidiaries of bank
holding companies and the standards in
paragraph (2).
‘‘(2) STANDARDS.—The Board may ex-
ercise authority under paragraph (1) if
the Board finds that such action will
have any of the following effects:
‘‘(A) Avoid any significant risk to
the safety and soundness of deposi-
tory institutions or any Federal de-
posit insurance fund.
‘‘(B) Enhance the financial sta-
bility of bank holding companies.
478
‘‘(C) Avoid conflicts of interest or
other abuses.
‘‘(D) Enhance the privacy of cus-
tomers of depository institutions.
‘‘(E) Promote the application of
national treatment and equality of
competitive 
opportunity 
between
nonbank affiliates owned or con-
trolled by domestic bank holding
companies 
and 
nonbank 
affiliates
owned or controlled by foreign banks
operating in the United States.
‘‘(3) 
REVIEW.—The 
Board 
shall
regularly—
‘‘(A) review all restrictions or re-
quirements established pursuant to
paragraph (1) to determine whether
there is a continuing need for any
such restriction or requirement to
carry out the purposes of the Act, in-
cluding any purpose described in
paragraph (2); and
‘‘(B) modify or eliminate any re-
striction or requirement the Board
479
finds is no longer required for such
purposes.’’.
SEC. 115. EXAMINATION OF INVESTMENT COMPANIES.
(a) EXCLUSIVE COMMISSION AUTHORITY.—
(1) IN GENERAL.—Except as provided
in paragraph (3), the Commission shall be
the sole Federal agency with authority to
inspect and examine any registered in-
vestment company that is not a bank
holding company or a savings and loan
holding company.
(2) PROHIBITION
ON
BANKING
AGEN-
CIES.—Except as provided in paragraph
(3), a Federal banking agency may not in-
spect or examine any registered invest-
ment company that is not a bank holding
company or a savings and loan holding
company.
(3) CERTAIN
EXAMINATIONS
AUTHOR-
IZED.— Nothing in this subsection pre-
vents the Federal Deposit Insurance Cor-
poration, if the Corporation finds it nec-
essary to determine the condition of an
insured depository institution for insur-
ance purposes, from examining an affil-
480
iate of any insured depository institution,
pursuant to its authority under section
10(b)(4) of the Federal Deposit Insurance
Act, as may be necessary to disclose fully
the relationship between the depository
institution and the affiliate, and the ef-
fect of such relationship on the deposi-
tory institution.
(b) EXAMINATION RESULTS AND OTHER IN-
FORMATION.—The Commission shall provide to
any Federal banking agency, upon request,
the results of any examination, reports,
records, or other information with respect to
any registered investment company to the ex-
tent necessary for the agency to carry out its
statutory responsibilities.
(c) DEFINITIONS.—For purposes of this sec-
tion, the following definitions shall apply:
(1) BANK HOLDING COMPANY.—The term
‘‘bank holding company’’ has the same
meaning as in section 2 of the Bank Hold-
ing Company Act of 1956.
(2) COMMISSION.—The term ‘‘Commis-
sion’’ means the Securities and Exchange
Commission.
481
(3) FEDERAL
BANKING
AGENCY.—The
term ‘‘Federal banking agency’’ has the
same meaning as in section 3(z) of the
Federal Deposit Insurance Act.
(4) 
REGISTERED
INVESTMENT
COM-
PANY.—The term ‘‘registered investment
company’’ means an investment company
which is registered with the Commission
under the Investment Company Act of
1940.
(5) SAVINGS
AND
LOAN
HOLDING
COM-
PANY.—The term ‘‘savings and loan hold-
ing company’’ has the same meaning as in
section 10(a)(1)(D) of the Home Owners’
Loan Act.
SEC. 116. LIMITATION ON RULEMAKING, PRUDENTIAL, SU-
PERVISORY, AND ENFORCEMENT AUTHORITY
OF THE BOARD.
The Bank Holding Company Act of 1956
(12 U.S.C. 1841 et seq.) is amended by insert-
ing after section 10 the following new section:
‘‘SEC. 10A. LIMITATION ON RULEMAKING, PRUDENTIAL, SU-
PERVISORY, AND ENFORCEMENT AUTHORITY
OF THE BOARD.
‘‘(a) LIMITATION ON DIRECT ACTION.—
482
‘‘(1) IN GENERAL.—The Board may not
prescribe regulations, issue or seek entry
of orders, impose restraints, restrictions,
guidelines, requirements, safeguards, or
standards, or otherwise take any action
under or pursuant to any provision of
this Act or section 8 of the Federal De-
posit Insurance Act against or with re-
spect to a regulated subsidiary of a bank
holding company unless the action is nec-
essary to prevent or redress an unsafe or
unsound practice or breach of fiduciary
duty by such subsidiary that poses a ma-
terial risk to—
‘‘(A) the financial safety, sound-
ness, or stability of an affiliated de-
pository institution; or
‘‘(B) the domestic or international
payment system.
‘‘(2) CRITERIA FOR BOARD ACTION.—The
Board shall not take action otherwise
permitted under paragraph (1) unless the
Board finds that it is not reasonably pos-
sible to effectively protect against the
material risk at issue through action di-
483
rected at or against the affiliated deposi-
tory institution or against depository in-
stitutions generally.
‘‘(b) LIMITATION ON INDIRECT ACTION.—The
Board may not prescribe regulations, issue or
seek entry of orders, impose restraints, re-
strictions, 
guidelines, 
requirements, 
safe-
guards, or standards, or otherwise take any
action under or pursuant to any provision of
this Act or section 8 of the Federal Deposit In-
surance Act against or with respect to a finan-
cial holding company or a wholesale financial
holding company where the purpose or effect
of doing so would be to take action indirectly
against or with respect to a regulated sub-
sidiary that may not be taken directly against
or with respect to such subsidiary in accord-
ance with subsection (a).
‘‘(c) ACTIONS SPECIFICALLY AUTHORIZED.—
Notwithstanding subsection (a), the Board
may take action under this Act or section 8 of
the Federal Deposit Insurance Act to enforce
compliance by a regulated subsidiary with
Federal law that the Board has specific juris-
diction to enforce against such subsidiary.
484
‘‘(d) REGULATED SUBSIDIARY DEFINED.—For
purposes of this section, the term ‘regulated
subsidiary’ means any company that is not a
bank holding company and is—
‘‘(1) a broker or dealer registered
under the Securities Exchange Act of
1934;
‘‘(2) an investment adviser registered
by or on behalf of either the Securities
and Exchange Commission or any State,
whichever is required by law, with re-
spect to the investment advisory activi-
ties of such investment adviser and ac-
tivities incidental to such investment ad-
visory activities;
‘‘(3) an investment company reg-
istered under the Investment Company
Act of 1940;
‘‘(4) an insurance company or an in-
surance agency, with respect to the in-
surance activities and activities inci-
dental to such insurance activities, sub-
ject to supervision by a State insurance
commission, agency, or similar authority;
or
485
‘‘(5) an entity subject to regulation by
the Commodity Futures Trading Commis-
sion, with respect to the commodities ac-
tivities of such entity and activities inci-
dental to such commodities activities.’’.
SEC. 117. EQUIVALENT REGULATION AND SUPERVISION.
(a) IN
GENERAL.—Notwithstanding any
other provision of law, the provisions of—
(1) section 5(c) of the Bank Holding
Company Act of 1956 (as amended by this
Act) that limit the authority of the Board
of Governors of the Federal Reserve Sys-
tem to require reports from, to make ex-
aminations of, or to impose capital re-
quirements on bank holding companies
and their nonbank subsidiaries or that
require deference to other regulators;
and
(2) section 10A of the Bank Holding
Company Act of 1956 (as added by this
Act) that limit whatever authority the
Board might otherwise have to take di-
rect or indirect action with respect to
bank 
holding 
companies 
and 
their
nonbank subsidiaries,
486
shall also limit whatever authority that a Fed-
eral banking agency (as defined in section 3(z)
of the Federal Deposit Insurance Act) might
otherwise have under any statute to require
reports, make examinations, impose capital
requirements or take any other direct or indi-
rect action with respect to bank holding com-
panies and their nonbank subsidiaries (in-
cluding nonbank subsidiaries of depository
institutions), subject to the same standards
and requirements as are applicable to the
Board under such provisions.
(b) CERTAIN EXAMINATIONS AUTHORIZED.—
No provision of this section shall be construed
as preventing the Federal Deposit Insurance
Corporation, if the Corporation finds it nec-
essary to determine the condition of an in-
sured depository institution for insurance
purposes, from examining an affiliate of any
insured depository institution, pursuant to its
authority under section 10(b)(4) of the Fed-
eral Deposit Insurance Act, as may be nec-
essary to disclose fully the relationship be-
tween the depository institution and the affil-
487
iate, and the effect of such relationship on the
depository institution.
SEC. 118. PROHIBITION ON FDIC ASSISTANCE TO AFFILI-
ATES AND SUBSIDIARIES.
Section 11(a)(4)(B) of the Federal Deposit
Insurance Act (12 U.S.C. 1821(a)(4)(B)) is
amended by striking ‘‘to benefit any share-
holder of’’ and inserting ‘‘to benefit any share-
holder, affiliate (other than an insured depos-
itory institution that receives assistance in
accordance with the provisions of this Act), or
subsidiary of’’.
SEC. 119. REPEAL OF SAVINGS BANK PROVISIONS IN THE
BANK HOLDING COMPANY ACT OF 1956.
Section 3(f) of the Bank Holding Company
Act of 1956 (12 U.S.C. 1842(f)) is amended to
read as follows:
‘‘(f) [Repealed].’’.
SEC. 120. TECHNICAL AMENDMENT.
Section 2(o)(1)(A) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1841(o)(1)(A))
is amended by striking ‘‘section 38(b)’’ and in-
serting ‘‘section 38’’.
488
Subtitle C—Subsidiaries of
National Banks
SEC. 121. PERMISSIBLE ACTIVITIES FOR SUBSIDIARIES OF
NATIONAL BANKS.
(a) FINANCIAL SUBSIDIARIES
OF NATIONAL
BANKS.—Chapter one of title LXII of the Re-
vised Statutes of the United States (12 U.S.C.
21 et seq.) is amended—
(1) by redesignating section 5136A as
section 5136C; and
(2) by inserting after section 5136 (12
U.S.C. 24) the following new section:
‘‘SEC. 5136A. SUBSIDIARIES OF NATIONAL BANKS.
‘‘(a) SUBSIDIARIES OF NATIONAL BANKS AU-
THORIZED
TO
ENGAGE
IN
FINANCIAL
ACTIVI-
TIES.—
‘‘(1) EXCLUSIVE AUTHORITY.—No provi-
sion of section 5136 or any other provi-
sion of this title LXII of the Revised Stat-
utes shall be construed as authorizing a
subsidiary of a national bank to engage
in, or own any share of or any other in-
terest in any company engaged in, any
activity that—
489
‘‘(A) is not permissible for a na-
tional bank to engage in directly; or
‘‘(B) is conducted under terms or
conditions 
other 
than 
those 
that
would govern the conduct of such ac-
tivity by a national bank,
unless a national bank is specifically au-
thorized by the express terms of a Fed-
eral statute and not by implication or in-
terpretation to acquire shares of or an in-
terest in, or to control, such subsidiary,
such as by paragraph (2) of this sub-
section and section 25A of the Federal
Reserve Act.
‘‘(2) SPECIFIC
AUTHORIZATION
TO
CON-
DUCT AGENCY ACTIVITIES WHICH ARE FINAN-
CIAL
IN
NATURE.—A national bank may
control a company that engages in agen-
cy activities that have been determined
to be financial in nature or incidental to
such financial activities pursuant to and
in accordance with section 6(c) of the
Bank Holding Company Act of 1956 if—
490
‘‘(A) the company engages in such
activities solely as agent and not di-
rectly or indirectly as principal;
‘‘(B) the national bank is well cap-
italized and well managed, and has
achieved a rating of satisfactory or
better at the most recent examination
of the bank under the Community Re-
investment Act of 1977;
‘‘(C) all depository institution af-
filiates of the national bank are well
capitalized and well managed, and
have achieved a rating of satisfactory
or better at the most recent examina-
tion of each such depository institu-
tion under the Community Reinvest-
ment Act of 1977; and
‘‘(D) the bank has received the ap-
proval of the Comptroller of the Cur-
rency.
‘‘(3) DEFINITIONS.—
‘‘(A) COMPANY; CONTROL; AFFILIATE;
SUBSIDIARY.—The 
terms 
‘company’,
‘control’, ‘affiliate’, and ‘subsidiary’
have the meanings given to such