222
rately maintained in or extractable from such
unit’s own facilities or the facilities of the bank,
and such records are so maintained or other-
wise accessible as to permit independent exam-
ination 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 fol-
lows:
‘‘(3) The term ‘broker’ has the same meaning
as in section 3 of the Securities Exchange Act of
1934.’’.
SEC. 219. DEFINITION OF DEALER UNDER THE INVEST-
MENT 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 fol-
lows:
‘‘(7) The term ‘dealer’ has the same meaning as
in section 3 of the Securities Exchange Act of 1934,
223
but does not include an insurance company or in-
vestment company.’’.
SEC. 220. INTERAGENCY CONSULTATION.
The Investment Advisers Act of 1940 (15 U.S.C.
80b–1 et seq.) is amended by inserting after section 210
the following new section:
‘‘SEC. 210A. CONSULTATION.
‘‘(a) EXAMINATION RESULTS AND OTHER INFORMA-
TION.—
‘‘(1) The appropriate Federal banking agency
shall provide the Commission upon request the re-
sults of any examination, reports, records, or other
information to which such agency may have access
with respect to the investment advisory activities—
‘‘(A) of any—
‘‘(i) bank holding company;
‘‘(ii) bank; or
‘‘(iii) separately identifiable depart-
ment or division of a bank, that is reg-
istered under section 203 of this title; and
‘‘(B) in the case of a bank holding com-
pany or bank that has a subsidiary or a sepa-
rately identifiable department or division reg-
istered under that section, of such bank or bank
holding company.
224
‘‘(2) The Commission shall provide to the ap-
propriate Federal banking agency upon request the
results of any examination, reports, records, or other
information with respect to the investment advisory
activities of any bank holding company, bank, or
separately identifiable department or division of a
bank, 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
appropriate 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 by striking ‘‘or any interest or participation in
any common trust fund or similar fund maintained by a
bank exclusively for the collective investment and reinvest-
ment of assets contributed thereto by such bank in its ca-
pacity as trustee, executor, administrator, or guardian’’
225
and inserting ‘‘or any interest or participation in any com-
mon 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 fol-
lows:
‘‘(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;
‘‘(B) except in connection with the ordi-
nary advertising of the bank’s fiduciary serv-
ices, interests in such fund are not—
‘‘(i) advertised; or
226
‘‘(ii) offered for sale to the general
public; and
‘‘(C) fees and expenses charged by such
fund are not in contravention of fiduciary prin-
ciples 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
following 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
person of that investment adviser, holds a control-
ling interest in that registered investment company
in a trustee or fiduciary capacity, such person
shall—
‘‘(A) if it holds the shares in a trustee or
fiduciary capacity with respect to any employee
benefit plan subject to the Employee Retire-
ment Income Security Act of 1974, transfer the
power to vote the shares of the investment com-
227
pany through to another person acting in a fi-
duciary capacity with respect to the plan who is
not an affiliated person of that investment ad-
viser or any affiliated person thereof; or
‘‘(B) if it holds the shares in a trustee or
fiduciary capacity with respect to any person or
entity other than an employee benefit plan sub-
ject to the Employee Retirement Income Secu-
rity 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
affiliated person of that investment
adviser or any affiliated person there-
of;
228
‘‘(ii) vote the shares of the investment
company held by it in the same proportion
as shares held by all other shareholders of
the investment company; or
‘‘(iii) vote the shares of the invest-
ment company as otherwise permitted
under such rules, regulations, or orders as
the Commission may prescribe or issue
consistent with the protection of investors.
‘‘(2) EXEMPTION.—Paragraph (1) shall not
apply to any investment adviser to a registered in-
vestment company, or any affiliated person of that
investment adviser, that holds shares of the invest-
ment company in a trustee or fiduciary capacity if
that registered investment company consists solely of
assets held in such capacities.
‘‘(3) SAFE HARBOR.—No investment adviser to
a registered investment company or any affiliated
person of such investment adviser shall be deemed to
have acted unlawfully or to have breached a fidu-
ciary duty under State or Federal law solely by rea-
son of acting in accordance with clause (i), (ii), or
(iii) of paragraph (1)(B).’’.
229
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
following new subsection:
‘‘(c) CONSIDERATION
OF
PROMOTION
OF
EFFI-
CIENCY, COMPETITION, AND
CAPITAL
FORMATION.—
Whenever pursuant to this title the Commission is en-
gaged in rulemaking and is required to consider or deter-
mine whether an action is necessary or appropriate in the
public interest, the Commission shall also consider, in ad-
dition to the protection of investors, whether the action
will promote efficiency, competition, and capital forma-
tion.’’.
SEC. 225. EFFECTIVE DATE.
This subtitle shall take effect 90 days after the date
of the enactment of this Act.
230
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
(l); and
(2) by inserting after subsection (h) the follow-
ing new subsections:
‘‘(i) INVESTMENT BANK HOLDING COMPANIES.—
‘‘(1) ELECTIVE
SUPERVISION
OF
AN
INVEST-
MENT
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 a wholesale finan-
cial institution, an insured bank (other
than an institution described in subpara-
graph (D), (F), or (G) of section 2(c)(2),
or held under section 4(f), of the Bank
231
Holding Company Act of 1956), or a sav-
ings association;
‘‘(ii) a foreign bank, foreign company,
or company that is described in section
8(a) of the International Banking Act of
1978; or
‘‘(iii) a foreign bank that controls, 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
supervised, pursuant to subparagraph (B) of
this paragraph. Any investment bank holding
company filing such a notice shall be supervised
in accordance with this section and comply with
the rules promulgated by the Commission appli-
cable to supervised investment bank holding
companies.
‘‘(B) NOTIFICATION OF STATUS AS A SU-
PERVISED
INVESTMENT
BANK
HOLDING
COM-
PANY.—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 be-
233
sion, or such shorter or longer period as the
Commission deems necessary or appropriate to
ensure effective supervision of the material
risks to the supervised investment bank holding
company and to the affiliated broker or dealer,
or to prevent evasion of the purposes of this
section.
‘‘(B) DISCONTINUATION
OF
COMMISSION
SUPERVISION.—If the Commission finds that
any supervised investment bank holding com-
pany that is supervised pursuant to paragraph
(1) is no longer in existence or has ceased to be
an investment bank holding company, or if the
Commission finds that continued supervision of
such a supervised investment bank holding com-
pany is not consistent with the purposes of this
section, the Commission may discontinue the
supervision pursuant to a rule or order, if any,
promulgated by the Commission under this sec-
tion.
‘‘(3) SUPERVISION
OF
INVESTMENT
BANK
HOLDING COMPANIES.—
‘‘(A) RECORDKEEPING AND REPORTING.—
‘‘(i) IN GENERAL.—Every supervised
investment bank holding company and
234
each affiliate thereof shall make and keep
for prescribed periods such records, furnish
copies thereof, and make such reports, as
the Commission may require by rule, in
order to keep the Commission informed as
to—
‘‘(I) the company’s or affiliate’s
activities, financial condition, policies,
systems for monitoring and control-
ling financial and operational risks,
and transactions and relationships be-
tween any broker or dealer affiliate of
the supervised investment bank hold-
ing company; and
‘‘(II) the extent to which the
company or affiliate has complied with
the provisions of this Act and regula-
tions 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 Com-
mission may require and shall be provided
235
promptly at any time upon request by the
Commission. Such records and reports may
include—
‘‘(I) a balance sheet and income
statement;
‘‘(II) an assessment of the con-
solidated capital of the supervised in-
vestment bank holding company;
‘‘(III) an independent auditor’s
report attesting to the supervised in-
vestment bank holding company’s
compliance with its internal risk man-
agement and internal control objec-
tives; 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
reports in fulfillment of the requirements
under this paragraph that the supervised
236
investment bank holding company or its af-
filiates have been required to provide to
another appropriate regulatory agency or
self-regulatory organization.
‘‘(ii) AVAILABILITY.—A supervised in-
vestment bank holding company or an af-
filiate 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
AU-
THORITY.—The Commission may make ex-
aminations 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
237
company that may affect any
broker or dealer controlled by
such supervised investment bank
holding 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, pro-
visions governing transactions and re-
lationships between any broker or
dealer affiliated with the supervised
investment bank holding company and
any of the company’s other affiliates,
and applicable provisions of sub-
chapter II of chapter 53, title 31,
United States Code (commonly re-
ferred to as the ‘Bank Secrecy Act’)
and regulations thereunder.
‘‘(ii) RESTRICTED FOCUS OF EXAMI-
NATIONS.—The Commission shall limit the
focus and scope of any examination of a
238
supervised investment bank holding com-
pany to—
‘‘(I) the company; and
‘‘(II) any affiliate of the company
that, because of its size, condition, or
activities, the nature or size of the
transactions between such affiliate
and any affiliated broker or dealer, or
the centralization of functions within
the holding company system, could, in
the discretion of the Commission,
have a materially adverse effect on the
operational or financial condition of
the broker or dealer.
‘‘(iii) DEFERENCE TO OTHER 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 appropriate regulatory agency, or of a
licensed insurance company made by the
appropriate State insurance regulator.
239
‘‘(4) HOLDING COMPANY CAPITAL.—
‘‘(A) AUTHORITY.—If the Commission
finds that it is necessary to adequately super-
vise investment bank holding companies and
their broker or dealer affiliates consistent with
the purposes of this subsection, the Commission
may adopt capital adequacy rules for supervised
investment bank holding companies.
‘‘(B) METHOD OF CALCULATION.—In de-
veloping rules under this paragraph:
‘‘(i) DOUBLE LEVERAGE.—The Com-
mission shall consider the use by the su-
pervised investment bank holding company
of debt and other liabilities to fund capital
investments in affiliates.
‘‘(ii) 
NO
UNWEIGHTED
CAPITAL
RATIO.—The Commission shall not impose
under this section a capital ratio that is
not based on appropriate risk-weighting
considerations.
‘‘(iii) NO CAPITAL REQUIREMENT ON
REGULATED
ENTITIES.—The Commission
shall not, by rule, regulation, guideline,
order or otherwise, impose any capital ade-
quacy provision on a nonbanking affiliate
240
(other than a broker or dealer) that is in
compliance with applicable capital require-
ments of another Federal regulatory au-
thority or State insurance authority.
‘‘(iv) APPROPRIATE
EXCLUSIONS.—
The Commission shall take full account of
the applicable capital requirements of an-
other Federal regulatory authority or State
insurance regulator.
‘‘(C) INTERNAL RISK MANAGEMENT MOD-
ELS.—The Commission may incorporate inter-
nal risk management models into its capital
adequacy rules for supervised investment bank
holding companies.
‘‘(5) FUNCTIONAL
REGULATION
OF
BANKING
AND
INSURANCE
ACTIVITIES
OF
SUPERVISED
IN-
VESTMENT BANK HOLDING COMPANIES.—The Com-
mission shall defer to—
‘‘(A) the appropriate regulatory agency
with regard to all interpretations of, and the
enforcement of, applicable banking laws relating
to the activities, conduct, ownership, and oper-
ations of banks, and institutions described in
subparagraph (D), (F), and (G) of section
241
2(c)(2), or held under section 4(f), of the Bank
Holding Company Act of 1956; and
‘‘(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 op-
erations 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
holding company’, ‘company’, ‘control’, and
‘savings association’ have the same meanings as
242
in section 2 of the Bank Holding Company Act
of 1956;
‘‘(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
control with, an investment bank holding com-
pany.
‘‘(j) COMMISSION BACKUP AUTHORITY.—
‘‘(1) AUTHORITY.—The Commission may make
inspections of any wholesale financial holding com-
pany that—
‘‘(A) controls a wholesale financial institu-
tion;
‘‘(B) is not a foreign bank; and
‘‘(C) does not control an insured bank
(other than an institution permitted under sub-
paragraph (D), (F), or (G) of section 2(c)(2),
243
or held under section 4(f), of the Bank Holding
Company Act of 1956) or a savings association,
and any affiliate of such company, for the purpose
of monitoring and enforcing compliance by the
wholesale financial holding company with the Fed-
eral securities laws.
‘‘(2) LIMITATION.—The Commission shall limit
the focus and scope of any inspection under para-
graph (1) to those transactions, policies, procedures,
or records that are reasonably necessary to monitor
and enforce compliance by the wholesale financial
holding company or any affiliate with the Federal
securities laws.
‘‘(3) DEFERENCE TO EXAMINATIONS.—To the
fullest extent possible, the Commission shall use, for
the purposes of this subsection, the reports of
examinations—
‘‘(A) made by the Board of Governors of
the Federal Reserve System of any wholesale fi-
nancial holding company that is supervised by
the Board;
‘‘(B) made by or on behalf of any State
regulatory agency responsible for the super-
vision of an insurance company of any licensed
insurance company; and
244
‘‘(C) made by any Federal or State bank-
ing agency of any bank or institution described
in subparagraph (D), (F), or (G) of section
2(c)(2), or held under section 4(f), of the Bank
Holding Company Act of 1956.
‘‘(4) NOTICE.—To the fullest extent possible,
the Commission shall notify the appropriate regu-
latory agency prior to conducting an inspection of a
wholesale financial institution or institution de-
scribed in subparagraph (D), (F), or (G) of section
2(c)(2), or held under section 4(f), of the Bank
Holding Company Act of 1956.
‘‘(k) AUTHORITY TO LIMIT DISCLOSURE OF INFOR-
MATION.—Notwithstanding any other provision of law, the
Commission shall not be compelled to disclose any infor-
mation required to be reported under subsection (h) or
(i) or any information supplied to the Commission by any
domestic or foreign regulatory agency that relates to the
financial or operational condition of any associated person
of a broker or dealer, investment bank holding company,
or any affiliate of an investment bank holding company.
Nothing in this subsection shall authorize the Commission
to withhold information from Congress, or prevent the
Commission from complying with a request for informa-
tion from any other Federal department or agency or any
245
self-regulatory organization requesting the information for
purposes within the scope of its jurisdiction, or complying
with an order of a court of the United States in an action
brought by the United States or the Commission. For pur-
poses of section 552 of title 5, United States Code, this
subsection shall be considered a statute described in sub-
section (b)(3)(B) of such section 552. In prescribing regu-
lations to carry out the requirements of this subsection,
the Commission shall designate information described in
or obtained pursuant to subparagraphs (A), (B), and (C)
of subsection (i)(5) as confidential information for pur-
poses 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 subparagraphs:
‘‘(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;
246
‘‘(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 ac-
cordance with the Federal Deposit Insur-
ance 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 effi-
247
cacy, costs, and benefits of requiring that any depository
institution that accepts federally insured deposits and
that, directly or through a contractual or other arrange-
ment 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 con-
sumers through the use of a logo or seal that the security
or insurance is not insured by the Federal Deposit Insur-
ance 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 effi-
cacy and benefits of uniformly limiting any commissions,
fees, markups, or other costs incurred by customers in the
acquisition of financial 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.
248
1011 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
section 104.
SEC. 
304. 
INSURANCE 
UNDERWRITING 
IN 
NATIONAL
BANKS.
(a) IN GENERAL.—Except as provided in section 305,
a national bank and the subsidiaries of a national bank
may not provide insurance in a State as principal except
that this prohibition shall not apply to authorized prod-
ucts.
(b) AUTHORIZED PRODUCTS.—For the purposes of
this section, a product is authorized if—
(1) as of January 1, 1997, the Comptroller of
the Currency had determined in writing that na-
tional banks may provide such product as principal,
249
or national banks were in fact lawfully providing
such product as principal;
(2) no court of relevant jurisdiction had, by
final judgment, overturned a determination of the
Comptroller of the Currency that national banks
may provide such product as principal; and
(3) the product is not title insurance, or an 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, 1997, 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,
1997, 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
250
insurance, health insurance, title insurance, and
property and casualty insurance (such as pri-
vate passenger or commercial automobile,
homeowners, mortgage, commercial multiperil,
general liability, professional liability, workers’
compensation, fire and allied lines, farm owners
multiperil, aircraft, fidelity, surety, medical
malpractice, ocean marine, inland marine, and
boiler and machinery insurance); and
(B) is not a product or service of a bank
that is—
(i) a deposit product;
(ii) a loan, discount, letter of credit,
or other extension of credit;
(iii) a trust or other fiduciary service;
(iv) a qualified financial contract (as
defined in or determined pursuant to 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—
251
(I) it would be treated as a life
insurance contract under section 7702
of the Internal Revenue Code of 1986;
or
(II) in the event that the product
is not a letter of credit or other simi-
lar extension of credit, a qualified fi-
nancial contract, or a financial guar-
anty, it would qualify for treatment
for losses incurred with respect to
such product under section 832(b)(5)
of the Internal Revenue Code of 1986,
if the bank were subject to tax as an
insurance company under section 831
of that Code; or
(3) any annuity contract, the income on which
is subject to tax treatment under section 72 of the
Internal Revenue Code of 1986.
SEC. 305. TITLE INSURANCE ACTIVITIES OF NATIONAL
BANKS AND THEIR AFFILIATES.
(a) 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
252
national bank or subsidiary was actively and lawfully en-
gaged before the date of the enactment of this Act.
(b) INSURANCE AFFILIATE.—In the case of a na-
tional bank which has an affiliate which provides insur-
ance as principal and is not a subsidiary of the bank, the
national bank and any subsidiary of the national bank
may not engage in any activity involving the underwriting
of title insurance 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) ‘‘AFFILIATE’’ AND ‘‘SUBSIDIARY’’ DEFINED.—
For purposes of this section, the terms ‘‘affiliate’’ and
‘‘subsidiary’’ have the same meanings as in section 2 of
the Bank Holding Company Act of 1956.
SEC. 306. EXPEDITED AND EQUALIZED DISPUTE 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 whether a State statute, regulation, order, or interpre-
253
tation regarding any insurance sales or solicitation activity
is properly treated as preempted under Federal law, either
regulator may seek expedited judicial review of such deter-
mination 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 Cir-
cuit 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
petition is filed, unless all parties to such proceeding agree
to any extension of such period.
(c) SUPREME COURT REVIEW.—Any request for cer-
tiorari to the Supreme Court of the United States of any
judgment of a United States Court of Appeals with respect
to a petition for review under this section shall be filed
with the Supreme Court of the United States as soon as
practicable after such judgment is issued.
(d) STATUTE OF LIMITATION.—No action may be
filed under this section challenging an order, ruling, deter-
mination, or other action of a Federal regulator or State
insurance regulator after the later of—
254
(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 Fed-
eral law, including the nature of the product or activity
and the history and purpose of its regulation under State
and Federal law, without unequal deference.
SEC. 307. CONSUMER PROTECTION REGULATIONS.
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. CONSUMER PROTECTION REGULATIONS.
‘‘(a) REGULATIONS REQUIRED.—
‘‘(1) IN GENERAL.—The Federal banking agen-
cies shall prescribe and publish in final form, before
the end of the 1-year period beginning on the date
of enactment of the Financial Services Act of 1999,
consumer protection regulations (which the agencies
jointly determine to be appropriate) that—
255
‘‘(A) apply to retail sales practices, solici-
tations, advertising, or offers of any insurance
product by any insured depository institution or
wholesale financial institution or any person
who is engaged in such activities at an office of
the institution or on behalf of the institution;
and
‘‘(B) are consistent with the requirements
of this Act and provide such additional protec-
tions for consumers to whom such sales, solici-
tations, advertising, or offers are directed as
the agency determines to be appropriate.
‘‘(2) APPLICABILITY
TO
SUBSIDIARIES.—The
regulations prescribed pursuant to paragraph (1)
shall extend such protections to any subsidiaries of
an insured depository institution, as deemed appro-
priate by the regulators referred to in paragraph (3),
where such extension is determined to be necessary
to ensure the consumer protections provided by this
section.
‘‘(3) CONSULTATION
AND
JOINT
REGULA-
TIONS.—The Federal banking agencies shall consult
with each other and prescribe joint regulations pur-
suant to paragraph (1), after consultation with the
State insurance regulators, as appropriate.
256
‘‘(b) SALES PRACTICES.—The regulations prescribed
pursuant to subsection (a) shall include anticoercion rules
applicable to the sale of insurance products which prohibit
an insured depository institution from engaging in any
practice that would lead a consumer to believe an exten-
sion of credit, in violation of section 106(b) of the Bank
Holding Company Act Amendments of 1970, is condi-
tional upon—
‘‘(1) the purchase of an insurance product from
the institution or any of its affiliates or subsidiaries;
or
‘‘(2) an agreement by the consumer not to ob-
tain, or a prohibition on the consumer from obtain-
ing, an insurance product from an unaffiliated en-
tity.
‘‘(c) DISCLOSURES AND ADVERTISING.—The regula-
tions prescribed pursuant to subsection (a) shall include
the following provisions relating to disclosures and adver-
tising in connection with the initial purchase of an insur-
ance product:
‘‘(1) DISCLOSURES.—
‘‘(A) IN GENERAL.—Requirements that the
following disclosures be made orally and in writ-
ing before the completion of the initial sale and,
257
in the case of clause (iii), at the time of applica-
tion for an extension of credit:
‘‘(i) UNINSURED STATUS.—As appro-
priate, the product is not insured by the
Federal Deposit Insurance Corporation,
the United States Government, or the in-
sured depository institution.
‘‘(ii) INVESTMENT RISK.—In the case
of a variable annuity or other insurance
product which involves an investment risk,
that there is an investment risk associated
with the product, including possible loss of
value.
‘‘(iii) COERCION.—The approval of an
extension of credit may not be conditioned
on—
‘‘(I) the purchase of an insurance
product from the institution in which
the application for credit is pending or
any of its affiliates or subsidiaries; or
‘‘(II) an agreement by the con-
sumer not to obtain, or a prohibition
on the consumer from obtaining, an
insurance product from an unaffili-
ated entity.
258
‘‘(B) MAKING DISCLOSURE READILY UN-
DERSTANDABLE.—Regulations prescribed under
subparagraph (A) shall encourage the use of
disclosure that is conspicuous, simple, direct,
and readily understandable, such as the follow-
ing:
‘‘(i) ‘NOT FDIC–INSURED’.
‘‘(ii) ‘NOT GUARANTEED BY THE
BANK’.
‘‘(iii) ‘MAY GO DOWN IN VALUE’.
‘‘(C) ADJUSTMENTS
FOR
ALTERNATIVE
METHODS
OF
PURCHASE.—In prescribing the
requirements under subparagraphs (A) and
(D), necessary adjustments shall be made for
purchase in person, by telephone, or by elec-
tronic media to provide for the most appro-
priate and complete form of disclosure and ac-
knowledgments.
‘‘(D) CONSUMER
ACKNOWLEDGMENT.—A
requirement that an insured depository institu-
tion shall require any person selling an insur-
ance product at any office of, or on behalf of,
the institution to obtain, at the time a con-
sumer receives the disclosures required under
this paragraph or at the time of the initial pur-
259
chase by the consumer of such product, an ac-
knowledgment by such consumer of the receipt
of the disclosure required under this paragraph
with respect to such product.
‘‘(2) 
PROHIBITION
ON
MISREPRESENTA-
TIONS.—A prohibition on any practice, or any adver-
tising, at any office of, or on behalf of, the insured
depository institution, or any subsidiary as appro-
priate, which could mislead any person or otherwise
cause a reasonable person to reach an erroneous be-
lief with respect to—
‘‘(A) the uninsured nature of any insur-
ance product sold, or offered for sale, by the in-
stitution or any subsidiary of the institution; or
‘‘(B) in the case of a variable annuity or
other insurance product that involves an invest-
ment risk, the investment risk associated with
any such product.
‘‘(d) SEPARATION OF BANKING AND NONBANKING
ACTIVITIES.—
‘‘(1) REGULATIONS
REQUIRED.—The regula-
tions prescribed pursuant to subsection (a) shall in-
clude such provisions as the Federal banking agen-
cies consider appropriate to ensure that the routine
acceptance of deposits is kept, to the extent prac-
260
ticable, physically segregated from insurance product
activity.
‘‘(2) REQUIREMENTS.—Regulations prescribed
pursuant to paragraph (1) shall include the follow-
ing requirements:
‘‘(A) SEPARATE SETTING.—A clear delin-
eation of the setting in which, and the cir-
cumstances under which, transactions involving
insurance products should be conducted in a lo-
cation physically segregated from an area where
retail deposits are routinely accepted.
‘‘(B) REFERRALS.—Standards which per-
mit any person accepting deposits from the
public in an area where such transactions are
routinely conducted in an insured depository in-
stitution to refer a customer who seeks to pur-
chase any insurance product to a qualified per-
son who sells such product, only if the person
making the referral receives no more than a
one-time nominal fee of a fixed dollar amount
for each referral that does not depend on
whether the referral results in a transaction.
‘‘(C) QUALIFICATION AND LICENSING RE-
QUIREMENTS.—Standards prohibiting any in-
sured depository institution from permitting
261
any person to sell or offer for sale any insur-
ance product in any part of any office of the in-
stitution, or on behalf of the institution, unless
such person is appropriately qualified and li-
censed.
‘‘(e) DOMESTIC VIOLENCE DISCRIMINATION PROHI-
BITION.—
‘‘(1) IN GENERAL.—In the case of an applicant
for, or an insured under, any insurance product de-
scribed in paragraph (2), the status of the applicant
or insured as a victim of domestic violence, or as a
provider of services to victims of domestic violence,
shall not be considered as a criterion in any decision
with regard to insurance underwriting, pricing, re-
newal, or scope of coverage of insurance policies, or
payment of insurance claims, except as required or
expressly permitted under State law.
‘‘(2) SCOPE OF APPLICATION.—The prohibition
contained in paragraph (1) shall apply to any insur-
ance product which is sold or offered for sale, as
principal, agent, or broker, by any insured deposi-
tory institution or any person who is engaged in
such activities at an office of the institution or on
behalf of the institution.
262
‘‘(3) SENSE OF THE CONGRESS.—It is the sense
of the Congress that, by the end of the 30-month pe-
riod beginning on the date of the enactment of the
Financial Services Act of 1999, the States should
enact prohibitions against discrimination with re-
spect to insurance products that are at least as
strict as the prohibitions contained in paragraph (1).
‘‘(4) DOMESTIC VIOLENCE DEFINED.—For pur-
poses of this subsection, the term ‘domestic violence’
means the occurrence of 1 or more of the following
acts by a current or former family member, house-
hold member, intimate partner, or caretaker:
‘‘(A) Attempting to cause or causing or
threatening another person with physical harm,
severe emotional distress, psychological trauma,
rape, or sexual assault.
‘‘(B) Engaging in a course of conduct or
repeatedly committing acts toward another per-
son, including following the person without
proper authority, under circumstances that
place the person in reasonable fear of bodily in-
jury or physical harm.
‘‘(C) Subjecting another person to false
imprisonment.
263
‘‘(D) Attempting to cause or causing dam-
age to property so as to intimidate or attempt
to control the behavior of another person.
‘‘(f) CONSUMER GRIEVANCE PROCESS.—The Federal
banking agencies shall jointly establish a consumer com-
plaint mechanism, for receiving and expeditiously address-
ing consumer complaints alleging a violation of regulations
issued under this section, which mechanism shall—
‘‘(1) establish a group within each regulatory
agency to receive such complaints;
‘‘(2) develop procedures for investigating such
complaints;
‘‘(3) develop procedures for informing consum-
ers of rights they may have in connection with such
complaints; and
‘‘(4) develop procedures for addressing concerns
raised by such complaints, as appropriate, including
procedures for the recovery of losses to the extent
appropriate.
‘‘(g) EFFECT ON OTHER AUTHORITY.—
‘‘(1) IN GENERAL.—No provision of this section
shall be construed as granting, limiting, or otherwise
affecting—
‘‘(A) any authority of the Securities and
Exchange Commission, any self-regulatory or-
264
ganization, the Municipal Securities Rule-
making Board, or the Secretary of the Treasury
under any Federal securities law; or
‘‘(B) except as provided in paragraph (2),
any authority of any State insurance commis-
sioner or other State authority under any State
law.
‘‘(2) COORDINATION WITH STATE LAW.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), regulations prescribed by a
Federal banking agency under this section shall
not apply to retail sales, solicitations, advertis-
ing, or offers of any insurance product by any
insured depository institution or wholesale fi-
nancial institution or to any person who is en-
gaged in such activities at an office of such in-
stitution or on behalf of the institution, in a
State where the State has in effect statutes,
regulations, orders, or interpretations, that are
inconsistent with or contrary to the regulations
prescribed by the Federal banking agencies.
‘‘(B) PREEMPTION.—If, with respect to
any provision of the regulations prescribed
under this section, the Board of Governors of
the Federal Reserve System, the Comptroller of
265
the Currency, and the Board of Directors of the
Federal Deposit Insurance Corporation deter-
mine jointly that the protection afforded by
such provision for consumers is greater than
the protection provided by a comparable provi-
sion of the statutes, regulations, orders, or in-
terpretations referred to in subparagraph (A) of
any State, such provision of the regulations pre-
scribed under this section shall supersede the
comparable provision of such State statute, reg-
ulation, order, or interpretation.
‘‘(h) INSURANCE PRODUCT DEFINED.—For purposes
of this section, the term ‘insurance product’ includes an
annuity contract the income of which is subject to tax
treatment under section 72 of the Internal Revenue Code
of 1986.’’.
SEC. 308. CERTAIN STATE AFFILIATION LAWS PREEMPTED
FOR INSURANCE COMPANIES AND AFFILI-
ATES.
Except as provided in section 104(a)(2), no State
may, by law, regulation, order, interpretation, or
otherwise—
(1) prevent or significantly interfere with the
ability of any insurer, or any affiliate of an insurer
(whether such affiliate is organized as a stock com-
266
pany, mutual holding company, or otherwise), to be-
come a financial holding company or to acquire con-
trol of an insured depository institution;
(2) limit the amount of an insurer’s assets that
may be invested in the voting securities of an in-
sured depository institution (or any company which
controls such institution), except that the laws of an
insurer’s State of domicile may limit the amount of
such investment to an amount that is not less than
5 percent of the insurer’s admitted assets; or
(3) prevent, significantly interfere with, or have
the authority to review, approve, or disapprove a
plan of reorganization by which an insurer proposes
to reorganize from mutual form to become a stock
insurer (whether as a direct or indirect subsidiary of
a mutual holding company or otherwise) unless such
State is the State of domicile of the insurer.
SEC. 309. PUBLICATION OF PREEMPTION OF STATE LAWS.
Section 5244 of the Revised Statutes of the United
States (12 U.S.C. 43) is amended—
(1) by inserting ‘‘or Federal savings associa-
tion’’ after ‘‘national bank’’ each place that term ap-
pears; and
(2) in subsection (c)(3)(B)(i), by inserting ‘‘or
savings associations’’ after ‘‘banks’’.
267
Subtitle B—Redomestication of
Mutual Insurers
SEC. 311. GENERAL APPLICATION.
This subtitle shall only apply to a mutual insurance
company in a State which has not enacted a law which
expressly establishes reasonable terms and conditions for
a mutual insurance company domiciled in such State to
reorganize into a mutual holding company.
SEC. 312. REDOMESTICATION OF MUTUAL INSURERS.
(a) REDOMESTICATION.—A mutual insurer organized
under the laws of any State may transfer its domicile to
a transferee domicile as a step in a reorganization in
which, pursuant to the laws of the transferee domicile and
consistent with the standards in subsection (f), the mutual
insurer becomes a stock insurer that is a direct or indirect
subsidiary of a mutual holding company.
(b) RESULTING DOMICILE.—Upon complying with
the applicable law of the transferee domicile governing
transfers of domicile and completion of a transfer pursu-
ant to this section, the mutual insurer shall cease to be
a domestic insurer in the transferor domicile and, as a
continuation of its corporate existence, shall be a domestic
insurer of the transferee domicile.
(c) LICENSES PRESERVED.—The certificate of au-
thority, agents’ appointments and licenses, rates, approv-
268
als and other items that a licensed State allows and that
are in existence immediately prior to the date that a re-
domesticating insurer transfers its domicile pursuant to
this subtitle shall continue in full force and effect upon
transfer, if the insurer remains duly qualified to transact
the business of insurance in such licensed State.
(d) EFFECTIVENESS
OF OUTSTANDING POLICIES
AND CONTRACTS.—
(1) IN
GENERAL.—All outstanding insurance
policies and annuities contracts of a redomesticating
insurer shall remain in full force and effect and need
not be endorsed as to the new domicile of the in-
surer, unless so ordered by the State insurance regu-
lator of a licensed State, and then only in the case
of outstanding policies and contracts whose owners
reside in such licensed State.
(2) FORMS.—
(A) Applicable State law may require a re-
domesticating insurer to file new policy forms
with the State insurance regulator of a licensed
State on or before the effective date of the
transfer.
(B) Notwithstanding subparagraph (A), a
redomesticating insurer may use existing policy
forms with appropriate endorsements to reflect
269
the new domicile of the redomesticating insurer
until the new policy forms are approved for use
by the State insurance regulator of such li-
censed State.
(e) NOTICE.—A redomesticating insurer shall give
notice of the proposed transfer to the State insurance reg-
ulator of each licensed State and shall file promptly any
resulting amendments to corporate documents required to
be filed by a foreign licensed mutual insurer with the in-
surance regulator of each such licensed State.
(f) PROCEDURAL REQUIREMENTS.—No mutual in-
surer may redomesticate to another State and reorganize
into a mutual holding company pursuant to this section
unless the State insurance regulator of the transferee
domicile determines that the plan of reorganization of the
insurer includes the following requirements:
(1) APPROVAL BY BOARD OF DIRECTORS AND
POLICYHOLDERS.—The reorganization is approved
by at least a majority of the board of directors of
the mutual insurer and at least a majority of the
policyholders who vote after notice, disclosure of the
reorganization and the effects of the transaction on
policyholder contractual rights, and reasonable op-
portunity to vote, in accordance with such notice,
disclosure, and voting procedures as are approved by
271
(4) CONTRACTUAL RIGHTS.—Upon reorganiza-
tion into a mutual holding company, the contractual
rights of the policyholders are preserved.
(5) FAIR AND EQUITABLE TREATMENT OF POL-
ICYHOLDERS.—The reorganization is approved as
fair and equitable to the policyholders by the insur-
ance regulator of the transferee domicile.
SEC. 313. EFFECT ON STATE LAWS RESTRICTING REDOMES-
TICATION.
(a) IN GENERAL.—Unless otherwise permitted by
this subtitle, State laws of any transferor domicile that
conflict with the purposes and intent of this subtitle are
preempted, including but not limited to—
(1) any law that has the purpose or effect of
impeding the activities of, taking any action against,
or applying any provision of law or regulation to,
any insurer or an affiliate of such insurer because
that insurer or any affiliate plans to redomesticate,
or has redomesticated, pursuant to this subtitle;
(2) any law that has the purpose or effect of
impeding the activities of, taking action against, or
applying any provision of law or regulation to, any
insured or any insurance licensee or other inter-
mediary because such person or entity has procured
insurance from or placed insurance with any insurer
272
or affiliate of such insurer that plans to redomes-
ticate, or has redomesticated, pursuant to this sub-
title, but only to the extent that such law would
treat such insured licensee or other intermediary dif-
ferently than if the person or entity procured insur-
ance from, or placed insurance with, an insured li-
censee or other intermediary which had not redomes-
ticated;
(3) any law that has the purpose or effect of
terminating, because of the redomestication of a mu-
tual insurer pursuant to this subtitle, any certificate
of authority, agent appointment or license, rate ap-
proval, or other approval, of any State insurance
regulator or other State authority in existence imme-
diately prior to the redomestication in any State
other than the transferee domicile.
(b) DIFFERENTIAL TREATMENT PROHIBITED.—No
State law, regulation, interpretation, or functional equiva-
lent thereof, of a State other than a transferee domicile
may treat a redomesticating or redomesticated insurer or
any affiliate thereof any differently than an insurer oper-
ating in that State that is not a redomesticating or re-
domesticated insurer.
(c) LAWS PROHIBITING OPERATIONS.—If any li-
censed State fails to issue, delays the issuance of, or seeks
273
to revoke an original or renewal certificate of authority
of a redomesticated insurer immediately following re-
domestication, except on grounds and in a manner consist-
ent with its past practices regarding the issuance of cer-
tificates of authority to foreign insurers that are not re-
domesticating, then the redomesticating insurer shall be
exempt from any State law of the licensed State to the
extent that such State law or the operation of such State
law would make unlawful, or regulate, directly or indi-
rectly, the operation of the redomesticated insurer, except
that such licensed State may require the redomesticated
insurer to—
(1) comply with the unfair claim settlement
practices law of the licensed State;
(2) pay, on a nondiscriminatory basis, applica-
ble premium and other taxes which are levied on li-
censed insurers or policyholders under the laws of
the licensed State;
(3) register with and designate the State insur-
ance regulator as its agent solely for the purpose of
receiving service of legal documents or process;
(4) submit to an examination by the State in-
surance regulator in any licensed state in which the
redomesticated insurer is doing business to deter-
mine the insurer’s financial condition, if—
274
(A) the State insurance regulator of the
transferee domicile has not begun an examina-
tion of the redomesticated insurer and has not
scheduled such an examination to begin before
the end of the 1-year period beginning on the
date of the redomestication; and
(B) any such examination is coordinated to
avoid unjustified duplication and repetition;
(5) comply with a lawful order issued in—
(A) a delinquency proceeding commenced
by the State insurance regulator of any licensed
State if there has been a judicial finding of fi-
nancial impairment under paragraph (7); or
(B) a voluntary dissolution proceeding;
(6) comply with any State law regarding decep-
tive, false, or fraudulent acts or practices, except
that if the licensed State seeks an injunction regard-
ing the conduct described in this paragraph, such in-
junction must be obtained from a court of competent
jurisdiction as provided in section 314(a);
(7) comply with an injunction issued by a court
of competent jurisdiction, upon a petition by the
State insurance regulator alleging that the redomes-
ticating insurer is in hazardous financial condition
or is financially impaired;
275
(8) participate in any insurance insolvency
guaranty association on the same basis as any other
insurer licensed in the licensed State; and
(9) require a person acting, or offering to act,
as an insurance licensee for a redomesticated insurer
in the licensed State to obtain a license from that
State, except that such State may not impose any
qualification or requirement that discriminates
against a nonresident insurance licensee.
SEC. 314. OTHER PROVISIONS.
(a) JUDICIAL REVIEW.—The appropriate United
States district court shall have exclusive jurisdiction over
litigation arising under this section involving any redomes-
ticating or redomesticated insurer.
(b) SEVERABILITY.—If any provision of this section,
or the application thereof to any person or circumstances,
is held invalid, the remainder of the section, and the appli-
cation of such provision to other persons or circumstances,
shall not be affected thereby.
SEC. 315. DEFINITIONS.
For purposes of this subtitle, the following definitions
shall apply:
(1) COURT
OF
COMPETENT
JURISDICTION.—
The term ‘‘court of competent jurisdiction’’ means a
276
court authorized pursuant to section 314(a) to adju-
dicate litigation arising under this subtitle.
(2) DOMICILE.—The term ‘‘domicile’’ means
the State in which an insurer is incorporated, char-
tered, or organized.
(3) INSURANCE LICENSEE.—The term ‘‘insur-
ance licensee’’ means any person holding a license
under State law to act as insurance agent, subagent,
broker, or consultant.
(4) 
INSTITUTION.—The 
term 
‘‘institution’’
means a corporation, joint stock company, limited li-
ability company, limited liability partnership, asso-
ciation, trust, partnership, or any similar entity.
(5) LICENSED
STATE.—The term ‘‘licensed
State’’ means any State, the District of Columbia,
American Samoa, Guam, Puerto Rico, or the United
States Virgin Islands in which the redomesticating
insurer has a certificate of authority in effect imme-
diately prior to the redomestication.
(6) MUTUAL INSURER.—The term ‘‘mutual in-
surer’’ means a mutual insurer organized under the
laws of any State.
(7) PERSON.—The term ‘‘person’’ means an in-
dividual, institution, government or governmental
agency, State or political subdivision of a State, pub-
277
lic corporation, board, association, estate, trustee, or
fiduciary, or other similar entity.
(8) POLICYHOLDER.—The term ‘‘policyholder’’
means the owner of a policy issued by a mutual in-
surer, except that, with respect to voting rights, the
term means a member of a mutual insurer or mu-
tual holding company granted the right to vote, as
determined under applicable State law.
(9) REDOMESTICATED
INSURER.—The term
‘‘redomesticated insurer’’ means a mutual insurer
that has redomesticated pursuant to this subtitle.
(10) REDOMESTICATING
INSURER.—The term
‘‘redomesticating insurer’’ means a mutual insurer
that is redomesticating pursuant to this subtitle.
(11) REDOMESTICATION
OR
TRANSFER.—The
terms ‘‘redomestication’’ and ‘‘transfer’’ mean the
transfer of the domicile of a mutual insurer from
one State to another State pursuant to this subtitle.
(12) STATE
INSURANCE
REGULATOR.—The
term ‘‘State insurance regulator’’ means the prin-
cipal insurance regulatory authority of a State, the
District of Columbia, American Samoa, Guam,
Puerto Rico, or the United States Virgin Islands.
(13) STATE
LAW.—The term ‘‘State law’’
means the statutes of any State, the District of Co-
278
lumbia, American Samoa, Guam, Puerto Rico, or the
United States Virgin Islands and any regulation,
order, or requirement prescribed pursuant to any
such statute.
(14) 
TRANSFEREE
DOMICILE.—The 
term
‘‘transferee domicile’’ means the State to which a
mutual insurer is redomesticating pursuant to this
subtitle.
(15) 
TRANSFEROR
DOMICILE.—The 
term
‘‘transferor domicile’’ means the State from which a
mutual insurer is redomesticating pursuant to this
subtitle.
SEC. 316. EFFECTIVE DATE.
This subtitle shall take effect on the date of the en-
actment of this Act.
Subtitle C—National Association of
Registered Agents and Brokers
SEC. 321. STATE FLEXIBILITY IN MULTISTATE LICENSING
REFORMS.
(a) IN GENERAL.—The provisions of this subtitle
shall take effect unless, not later than 3 years after the
date of enactment of this Act, at least a majority of the
States—
(1) have enacted uniform laws and regulations
governing the licensure of individuals and entities
279
authorized to sell and solicit the purchase of insur-
ance 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
subsection (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;
(2) establish uniform continuing education re-
quirements for licensed insurance producers;
(3) establish uniform ethics course require-
ments for licensed insurance producers in conjunc-
tion with the continuing education requirements
under paragraph (2);
(4) establish uniform criteria to ensure that an
insurance product, including any annuity contract,
sold to a consumer is suitable and appropriate for
280
the consumer based on financial information dis-
closed by the consumer; and
(5) do not impose any requirement upon any in-
surance producer to be licensed or otherwise quali-
fied to do business as a nonresident that has the ef-
fect of limiting or conditioning that producer’s ac-
tivities because of its residence or place of oper-
ations, except that counter-signature requirements
imposed on nonresident producers shall not be
deemed to have the effect of limiting or conditioning
a producer’s activities because of its residence or
place of operations under this section.
(c) 
RECIPROCITY
REQUIRED.—States 
shall 
be
deemed to have established the reciprocity required to sat-
isfy subsection (a)(2) if the following conditions are met:
(1) 
ADMINISTRATIVE
LICENSING
PROCE-
DURES.—At least a majority of the States permit a
producer that has a resident license for selling or so-
liciting 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 non-
resident to the same extent that such producer is
permitted to sell or solicit the purchase of insurance
in its State, if the producer’s home State also
awards such licenses on such a reciprocal basis,
281
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
REQUIRE-
MENTS.—A majority of the States accept an insur-
ance producer’s satisfaction of its home State’s con-
tinuing education requirements for licensed insur-
ance producers to satisfy the States’ own continuing
education requirements if the producer’s home State
also recognizes the satisfaction of continuing edu-
cation 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
licensed or otherwise qualified to do business as a
nonresident that has the effect of limiting or condi-
tioning that producer’s activities because of its resi-
dence 
or 
place 
of 
operations, 
except 
that
countersignature requirements imposed on non-
282
resident producers shall not be deemed to have the
effect of limiting or conditioning a producer’s activi-
ties 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 enact-
ment of this Act, the National Association of Insur-
ance Commissioners shall determine, in consultation
with the insurance commissioners or chief insurance
regulatory officials of the States, whether the uni-
formity or reciprocity required by subsections (b)
and (c) has been achieved.
(2) 
JUDICIAL
REVIEW.—The 
appropriate
United States district court shall have exclusive ju-
risdiction over any challenge to the National Asso-
ciation of Insurance Commissioners’ determination
under this section and such court shall apply the
standards set forth in section 706 of title 5, United
States Code, when reviewing any such challenge.
283
(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 sec-
tion shall be construed as requiring that any law, regula-
tion, provision, or action of any State which purports to
regulate insurance producers, including any such law, reg-
ulation, provision, or action which purports to regulate un-
fair trade practices or establish consumer protections, in-
cluding countersignature laws, be altered or amended in
order to satisfy the uniformity or reciprocity required by
subsections (b) and (c), unless any such law, regulation,
provision, or action is inconsistent with a specific require-
ment of any such subsection and then only to the extent
of such inconsistency.
(g) UNIFORM LICENSING.—Nothing in this section
shall be construed to require any State to adopt new or
additional licensing requirements to achieve the uniformity
necessary to satisfy subsection (a)(1).
284
SEC. 
322. 
NATIONAL 
ASSOCIATION 
OF 
REGISTERED
AGENTS AND BROKERS.
(a) ESTABLISHMENT.—There is established the Na-
tional Association of Registered Agents and Brokers
(hereafter in this subtitle referred to as the ‘‘Associa-
tion’’).
(b) STATUS.—The Association shall—
(1) be a nonprofit corporation;
(2) have succession until dissolved by an Act of
Congress;
(3) not be an agent or instrumentality of the
United States Government; and
(4) except as otherwise provided in this Act, be
subject to, and have all the powers conferred upon
a nonprofit corporation by the District of Columbia
Nonprofit Corporation Act (D.C. Code, sec. 29y–
1001 et seq.).
SEC. 323. PURPOSE.
The purpose of the Association shall be to provide
a mechanism through which uniform licensing, appoint-
ment, continuing education, and other insurance producer
sales qualification requirements and conditions can be
adopted and applied on a multistate basis, while preserv-
ing the right of States to license, supervise, and discipline
insurance producers and to prescribe and enforce laws and
285
regulations with regard to insurance-related consumer
protection and unfair trade practices.
SEC. 324. RELATIONSHIP TO THE FEDERAL GOVERNMENT.
The Association shall be subject to the supervision
and oversight of the National Association of Insurance
Commissioners (hereafter in this subtitle referred to as the
‘‘NAIC’’).
SEC. 325. MEMBERSHIP.
(a) ELIGIBILITY.—
(1) IN GENERAL.—Any State-licensed insurance
producer shall be eligible to become a member in the
Association.
(2) INELIGIBILITY FOR SUSPENSION OR REV-
OCATION OF LICENSE.—Notwithstanding paragraph
(1), a State-licensed insurance producer shall not be
eligible to become a member if a State insurance
regulator has suspended or revoked such producer’s
license in that State during the 3-year period pre-
ceding the date on which such producer applies for
membership.
(3) RESUMPTION OF ELIGIBILITY.—Paragraph
(2) shall cease to apply to any insurance producer
if—
286
(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
CAT-
EGORIES.—
(1) CLASSES OF MEMBERSHIP.—The Associa-
tion may establish separate classes of membership,
with separate criteria, if the Association reasonably
determines that performance of different duties re-
quires different levels of education, training, or expe-
rience.
(2) CATEGORIES.—The Association may estab-
lish separate categories of membership for individ-
uals and for other persons. The establishment of any
such categories of membership shall be based either
on the types of licensing categories that exist under
287
State laws or on the aggregate amount of business
handled by an insurance producer. No special cat-
egories of membership, and no distinct membership
criteria, shall be established for members which are
insured depository institutions or wholesale financial
institutions or for their employees, agents, or affili-
ates.
(d) MEMBERSHIP CRITERIA.—
(1) IN GENERAL.—The Association may estab-
lish criteria for membership which shall include
standards for integrity, personal qualifications, edu-
cation, 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
Association shall entitle the member to licensure in each
State for which the member pays the requisite fees, includ-
ing licensing fees and, where applicable, bonding require-
ments, set by such State.
(f) ANNUAL RENEWAL.—Membership in the Associa-
tion shall be renewed on an annual basis.
288
(g) CONTINUING EDUCATION.—The Association shall
establish, as a condition of membership, continuing edu-
cation requirements which shall be comparable to or great-
er than the continuing education requirements under the
licensing laws of a majority of the States.
(h) SUSPENSION AND REVOCATION.—The Associa-
tion 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 applica-
ble membership criteria of the Association; or
(B) the producer has been subject to dis-
ciplinary action pursuant to a final adjudicatory
proceeding under the jurisdiction of a State in-
surance regulator, and the Association con-
cludes that retention of membership in the As-
sociation would not be in the public interest.
(i) OFFICE OF CONSUMER COMPLAINTS.—
(1) IN GENERAL.—The Association shall estab-
lish an office of consumer complaints that shall—
289
(A) receive and investigate complaints
from both consumers and State insurance regu-
lators 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 rec-
ommendation 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 of-
fice of consumer complaints shall maintain a toll-free
telephone number for the purpose of this subsection
and, as practicable, other alternative means of com-
munication with consumers, such as an Internet
home page.
290
SEC. 326. BOARD OF DIRECTORS.
(a) ESTABLISHMENT.—There is established the
board of directors of the Association (hereafter in this sub-
title referred to as the ‘‘Board’’) for the purpose of govern-
ing and supervising the activities of the Association and
the members of the Association.
(b) POWERS.—The Board shall have such powers and
authority as may be specified in the bylaws of the 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
initial 7 members of the Board of the Associa-
tion, the initial Board shall consist of the 7
State insurance regulators of the 7 States with
the greatest total dollar amount of commercial-
291
lines insurance 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
insurance in place, as determined by the NAIC
as of the end of such period, shall serve as a
member of the Board.
(C) INOPERABILITY.—If fewer than 7
State insurance regulators accept appointment
to the Board, the Association shall be estab-
lished without NAIC oversight pursuant to sec-
tion 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 appoint-
ment of the initial Board for the remainder of the term
of the vacating member.
292
(f) MEETINGS.—The Board shall meet at the call of
the chairperson, or as otherwise provided by the bylaws
of the Association.
SEC. 327. OFFICERS.
(a) IN GENERAL.—
(1) POSITIONS.—The officers of the Association
shall consist of a chairperson and a vice chairperson
of the Board, a president, secretary, and treasurer
of the Association, and such other officers and as-
sistant 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 pre-
scribed 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 by-
laws or any proposed amendment to the bylaws, ac-
293
companied by a concise general statement of the
basis and purpose of such proposal.
(2) EFFECTIVE DATE.—Except as provided in
paragraph (3), any proposed bylaw or proposed
amendment shall take effect—
(A) 30 days after the date of the filing of
a copy with the NAIC;
(B) upon such later date as the Associa-
tion 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 inter-
est that public comment should be obtained, in
which case it may, after notifying the Associa-
tion in writing of such finding, require that the
294
procedures set forth in subsection (b) be fol-
lowed with respect to such proposal, in the
same manner as if such proposed bylaw change
were a proposed rule change within the mean-
ing of such subsection.
(b) ADOPTION AND AMENDMENT OF RULES.—
(1) FILING PROPOSED REGULATIONS WITH THE
NAIC.—
(A) IN GENERAL.—The board of directors
of the Association shall file with the NAIC a
copy of any proposed rule or any proposed
amendment to a rule of the Association which
shall be accompanied by a concise general state-
ment of the basis and purpose of such proposal.
(B) OTHER RULES AND AMENDMENTS IN-
EFFECTIVE.—No proposed rule or amendment
shall take effect unless approved by the NAIC
or otherwise permitted in accordance with this
paragraph.
(2) INITIAL CONSIDERATION BY THE NAIC.—
Not later than 35 days after the date of publication
of notice of filing of a proposal, or before the end
of such longer period not to exceed 90 days as the
NAIC may designate after such date, if the NAIC
finds such longer period to be appropriate and sets
295
forth its reasons for so finding, or as to which the
Association consents, the NAIC shall—
(A) by order approve such proposed rule or
amendment; or
(B) institute proceedings to determine
whether such proposed rule or amendment
should be modified or disapproved.
(3) NAIC PROCEEDINGS.—
(A) IN GENERAL.—Proceedings instituted
by the NAIC with respect to a proposed rule or
amendment pursuant to paragraph (2) shall—
(i) include notice of the grounds for
disapproval under consideration;
(ii) provide opportunity for hearing;
and
(iii) be concluded not later than 180
days after the date of the Association’s 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
296
concluding any proceeding under subparagraph
(A) for—
(i) not more than 60 days if the
NAIC finds good cause for such extension
and sets forth its reasons for so finding; or
(ii) for such longer period as to which
the Association consents.
(4) STANDARDS FOR REVIEW.—
(A) GROUNDS FOR APPROVAL.—The NAIC
shall approve a proposed rule or amendment if
the NAIC finds that the rule or amendment is
in the public interest and is consistent with the
purposes of this Act.
(B) APPROVAL BEFORE END OF NOTICE
PERIOD.—The NAIC shall not approve any pro-
posed rule before the end of the 30-day period
beginning 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 rea-
sons 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-