133
‘‘(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 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
134
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
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-
135
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.
‘‘(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.
136
‘‘(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
(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.
137
‘‘(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
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
138
‘‘(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
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.
139
‘‘(j) 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
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.’’.
140
(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;
‘‘(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.’’.
141
(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-
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.
142
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
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 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.
143
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,
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.
144
(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
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
146
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
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).
147
(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 DISPUTE RESOLUTION FOR FEDERAL
REGULATORS.
(a) FILING IN COURT OF APPEALS.—In the case of
a regulatory conflict between a State insurance regulator
and a Federal regulator as to whether any product is or
is not insurance, as defined in section 304(c) of this Act,
either regulator may seek expedited judicial review of such
determination by the United States Court of Appeals for
the circuit in which the State is located or in the United
States Court of Appeals for the District of Columbia 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
148
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—
(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
149
and the history and purpose of its regulation under State
and Federal law.
SEC. 307. 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-
pany, mutual holding company, or otherwise), to be-
come a bank holding company or to acquire control
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
150
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.
TITLE IV—CUSTOMER SERVICE
AND EDUCATION
SEC. 401. CUSTOMER PROTECTION AND EDUCATION REGU-
LATIONS.
The Federal Deposit Insurance Act (12 U.S.C. 1811
et seq.) is amended by inserting after section 46 (as added
by section 123 of this Act) the following new section:
‘‘SEC. 47. CUSTOMER SERVICE AND EDUCATION REGULA-
TIONS.
‘‘(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 Moderniza-
tion Act, customer protection regulations (which the
agencies jointly determine to be appropriate) that—
‘‘(A) apply to retail sales practices, solici-
tations, advertising, or offers of any nondeposit
product by any insured depository institution or
any person who is engaged in such activities at
an office of the institution or on behalf of the
institution; and
151
‘‘(B) are consistent with the requirements
of this Act and provide such additional protec-
tions for customers to whom such sales, solicita-
tions, 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 subsidiary 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 customer 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.
‘‘(4) NONDEPOSIT
PRODUCT
DEFINED.—For
purposes of this section, the term ‘nondeposit
product’—
‘‘(A) means any investment and insurance
product which is not a deposit;
‘‘(B) includes shares issued by a registered
investment company; and
152
‘‘(C) does not include—
‘‘(i) any loan or any other extension
of credit by an insured depository institu-
tion;
‘‘(ii) any letter of credit;
‘‘(iii) any trust services;
‘‘(iv) any discount; or
‘‘(v) any other instrument or insur-
ance or investment product specifically ex-
cluded from the definition of such term by
regulations prescribed jointly by the Fed-
eral banking agencies, to the extent nec-
essary to carry out the purpose of this Act.
‘‘(5) INSURANCE PRODUCT DEFINED.—For pur-
poses 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 In-
ternal Revenue Code of 1986.
‘‘(b) SALES PRACTICES.—
‘‘(1) ANTICOERCION
RULES.—The regulations
prescribed pursuant to subsection (a) shall include
anticoercion rules applicable to the sale of non-
deposit products which prohibit an insured deposi-
tory institution from engaging in any practice that
would lead a customer to believe an extension of
153
credit, in violation of section 106(b) of the Bank
Holding Company Act Amendments of 1970, is con-
ditional upon—
‘‘(A) the purchase of a nondeposit product
from the institution or any of its affiliates; or
‘‘(B) an agreement by the customer not to
obtain, or a prohibition on the customer from
obtaining, a nondeposit product from an unaf-
filiated entity.
‘‘(2) SUITABILITY OF PRODUCT.—
‘‘(A) IN GENERAL.—The regulations pre-
scribed pursuant to subsection (a) with respect
to the sale of nondeposit products shall include
standards to ensure that an investment product
sold to a customer is suitable and any other
nondeposit product is appropriate for the cus-
tomer based on financial information disclosed
by the customer.
‘‘(B) RULES OF FAIR PRACTICE.—In pre-
scribing the standards under subparagraph (A)
with respect to the sale of investments, the
Federal banking agencies shall take into ac-
count the Rules of Fair Practice of the Na-
tional Association of Securities Dealers.
154
‘‘(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 a non-
deposit 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,
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) INSURANCE
PRODUCT.—In the
case of an insurance policy which is sold by
the depository institution, or any affiliate
of the institution, as agent, the product is
not an obligation of or guaranteed by the
depository institution.
‘‘(iii) INVESTMENT RISK.—In the case
of an investment product, variable annuity,
or other product which involves an invest-
155
ment risk, that there is an investment risk
associated with the product, including pos-
sible loss of value.
‘‘(iv) COERCION.—The approval of an
extension of credit may not be conditioned
on—
‘‘(I) the purchase of a nondeposit
product from the institution in which
the application for credit is pending or
any of affiliate of the institution; or
‘‘(II) an agreement by the cus-
tomer not to obtain, or a prohibition
on the customer from obtaining, a
nondeposit product from an unaffili-
ated entity.
‘‘(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’.
156
‘‘(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) CUSTOMER
ACKNOWLEDGMENT.—A
requirement that an insured depository institu-
tion shall require any person selling a non-
deposit product at any office of, or on behalf of,
the institution to obtain, at the time a customer
receives the disclosures required under this
paragraph or at the time of the initial purchase
by the customer of such product, an acknowl-
edgment by such customer 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
157
cause a reasonable person to reach an erroneous be-
lief with respect to—
‘‘(A) the uninsured nature of any non-
deposit product sold, or offered for sale, by the
institution or any subsidiary of the institution;
or
‘‘(B) in the case of a nondeposit product
that involves an investment 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-
ticable, physically segregated from nondeposit prod-
uct 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
nondeposit products should be conducted in a