100
subject to the provisions of this section, except that
a wholesale financial institution and its securities af-
filiate shall be subject to subsections (k) and (l) in
the same manner and to the same extent such sub-
sections would apply if the wholesale financial insti-
tution were an insured depository institution.
(2) PROHIBITION ON EVASION OF FIREWALLS
BY
AFFILIATED
INSURED
DEPOSITORY
INSTITU-
TIONS.—An insured depository institution that is af-
filiated with a wholesale financial institution shall
not evade any requirement or restriction imposed by
this section by engaging in transactions or arrange-
ments with its affiliated wholesale financial institu-
tion.
(3) SIMILAR TREATMENT FOR NATIONAL MAR-
KET
LENDING
INSTITUTIONS.—A national market
lending institution, as defined in section 5158 of the
Revised Statutes of the United States, that is con-
trolled by a financial services holding company shall
be subject to this section in the same manner and
to the same extent as a wholesale financial institu-
tion.
(o) AUTHORITY OF NATIONAL FINANCIAL SERVICES
COMMITTEE.—
101
(1) IN GENERAL.—Except for rules issued pur-
suant to subsections (f) or (g), no rule, regulation,
or order authorized or required by this section shall
be issued without the approval of the National Fi-
nancial Services Committee.
(2) UNIFORM
STANDARDS.—Any regulation,
rule, or order subject to the approval of the National
Financial Services Committee under paragraph (1)
shall be identical for each appropriate Federal bank-
ing agency, except as otherwise permitted by such
Committee, taking into account existing require-
ments, coordination of new requirements, minimiza-
tion of duplicative regulation, the degree of uniform-
ity between regulation of securities affiliates or in-
vestment companies affiliated with or advised by de-
pository institutions or their affiliates and other
broker dealers or investment companies, and an
analysis of any of the benefits to be obtained by any
unique regulatory burdens placed on securities affili-
ates or investment companies affiliated with or ad-
vised by depository institutions or their affiliates.
102
SEC. 123. JOINT STANDARDS RELATING TO RETAIL SALES
OF 
CERTAIN 
NONDEPOSIT 
INVESTMENT
PRODUCTS.
(a) IN GENERAL.—The National Financial Services
Committee shall prescribe standards applicable to any de-
pository institution which—
(1) is not registered as a broker under the Se-
curities Exchange Act of 1934;
(2) effects retail transactions in securities, in-
cluding securities issued by an investment company
or annuities; and
(3) is affiliated with a financial services holding
company.
(b) SCOPE OF STANDARDS.—The standards required
under paragraph (1) with respect to retail sales of securi-
ties and annuities referred to in such paragraph shall, at
a minimum, establish requirements with respect to—
(1) sales practices;
(2) disclosures and advertising in connection
with transactions in such securities and annuities,
including—
(A) the content, form, and timing of any
such disclosure; and
(B) disclaimers concerning the noninsured
status of the security or annuity;
103
(3) the compensation of sales personnel with re-
spect to referrals or transactions;
(4) the training of and qualifications for per-
sonnel involved in such transactions, including train-
ing in making an accurate judgment about the suit-
ability of a particular investment product for a pro-
spective customer; and
(5) the setting in which and the circumstances
under which transactions may be effected, and refer-
rals made, by sales personnel with respect to such
securities and annuities.
(c) COMPARABILITY REQUIREMENT.—The standards
required under paragraph (1) shall be comparable to the
standards applicable to brokers and dealers registered
under the Securities Exchange Act of 1934 unless the Na-
tional Financial Services Committee determines that im-
plementation of comparable standards is not necessary or
appropriate for the maintenance of fair and orderly mar-
kets or the protection of investors or is not in the public
interest.
104
Subtitle C—Insurance and Real Estate Devel-
opment Activities of Financial Services
Holding Companies
SEC. 131. LIMITATION ON INSURANCE UNDERWRITING AND
REAL ESTATE DEVELOPMENT ACTIVITIES OF
DEPOSITORY INSTITUTIONS.
(a) IN GENERAL.—No depository institution that is
an affiliate of a financial services holding company shall
directly engage in—
(1) insurance underwriting (other than credit-
related insurance underwriting); or
(2) real estate investment or development, ex-
cept to the extent that such activities are performed
in relation to the premises of the depository institu-
tion or in connection with securing or collecting a
debt previously contracted in good faith, or would be
authorized for a national bank under section 5137
of the Revised Statutes of the United States or the
first section of the Act of September 28, 1962 (12
U.S.C. 92a).
(b) CONSTRUCTION.—Nothing contained in this sec-
tion shall be construed to prohibit or impede—
(1) a financial services holding company or any
affiliate of a financial services holding company
105
other than a depository institution from engaging in
any of the activities set forth in paragraph (1); or
(2) any employee of a depository institution
that is an affiliate of a financial services holding
company from promoting or advertising products or
services of an affiliate of such insured depository in-
stitution that engages in any of such activities.
SEC. 132. ACQUISITION OF PREEXISTING INSURANCE AGEN-
CY BY BANK HOLDING COMPANIES.
(a) IN GENERAL.— No bank holding company which
becomes a financial services holding company and no fi-
nancial services holding company which did not at any
time prior to becoming such a holding company, directly
or indirectly, engage in insurance agency activities other
than activities generally permissible for bank holding com-
panies under section 4(c)(8) of the Bank Holding Com-
pany Act of 1956, shall commence any insurance agency
activities not generally permissible for bank holding com-
panies under section 4(c)(8) of the Bank Holding Com-
pany Act of 1956, unless such activities are conducted
through an existing insurance agency acquired directly or
indirectly by such financial services holding company or
106
through any successor to such insurance agency, and un-
less such acquired insurance agency shall have been ac-
tively engaged in such insurance activities during the 2-
year period preceding the date of such acquisition.
SEC. 133. EXISTING CONTRACTS.
Nothing in sections 131 or 132 shall require the
breach of any contract entered into before the date of en-
actment of this Act.
Subtitle D—Redomestication of
Mutual Life Insurers
SEC. 141. REDOMESTICATION OF MUTUAL LIFE INSURERS.
(a) REDOMESTICATION.—A mutual life insurer orga-
nized under the laws of any State may transfer its domi-
cile to a transferee domicile as a step in a reorganization
in which, pursuant to the laws of the transferee domicile,
the mutual life insurer becomes a stock life insurer, wheth-
er as a direct or indirect subsidiary of a mutual holding
company or otherwise. Upon compliance with the applica-
ble law of the transferee domicile governing transfers of
domicile and completion of a transfer pursuant to this sec-
tion, the mutual life 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.
107
(b) LICENSES, ETC.—The certificate of authority,
agents’ appointments and licenses, rates, approvals and
other items which a licensed State allows and that are in
existence immediately prior to the time a redomesticating
insurer transfers its domicile pursuant to this section shall
continue in full force and effect upon transfer if the in-
surer remains duly qualified to transact the business of
insurance in such licensed State. All outstanding insur-
ance policies and annuity contracts of a redomesticating
insurer shall remain in full force and effect and need not
be endorsed as to the new domicile of the insurer unless
so ordered by the State insurance regulator of a licensed
State, and then only as to those outstanding policies whose
owners reside in such licensed State. Applicable State law
may require a redomesticating insurer to file new policy
forms with the State insurance regulator of a licensed
State on or before the effective date of the transfer, but
a redomesticating insurer may use existing policy forms
with appropriate endorsements to reflect the new domicile
of the redomesticating insurer until the new policy forms
are approved for use by the State insurance regulator of
such licensed State. 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
108
be filed by a foreign licensed mutual life insurer with the
insurance regulator of each such licensed State.
(c) PREEMPTION OF STATE LAWS RESTRICTING RE-
DOMESTICATION.—(1) Any State law conflicting with the
provisions of this section is hereby preempted. Without
limiting the generality of the preceding sentence, the fol-
lowing State laws purporting to regulate redomesticated
or redomesticating insurers shall be preempted with re-
spect to such insurers:
(A) Any provision impeding or intended to im-
pede the activities of, taking any action against, or
applying any provision of law or regulation to, any
insurer or affiliate of such insurer because that in-
surer or any affiliate plans to redomesticate or has
redomesticated pursuant to this section.
(B) Any provision impeding the activities of,
taking any action against, or applying any provision
of law or regulation to, any insured or any insurance
licensee or other intermediary because such insured
or such insurance licensee or other intermediary has
procured insurance from or placed insurance with
any insurer or any affiliate of such insurer that
plans to redomesticate or has redomesticated pursu-
ant to this section.
109
(C) Any provision purporting to terminate, by
reason of the redomestication of a mutual life in-
surer pursuant to this section, any certificate of au-
thority, agent appointment or license, rate approval
or other approval of any State insurance regulator
or other State authority in existence immediately
prior to the redomestication in any State other than
the transferee domicile.
Where a State applies any State law to a redomesticating
or redomesticated insurer or insurers (as well as affiliates
of such insurer or insurers) in a different manner than
the State has applied such law to insurers that are not
redomesticating or redomesticated insurers, such applica-
tion of such law or regulation to the redomesticating or
redomesticated insurer or insurers shall be preempted.
(2) If any licensed State fails to issue, delays the issu-
ance of, or seeks to revoke an original or renewal certifi-
cate of authority of a redomesticated insurer immediately
following redomestication, except on grounds and in a
manner consistent with its past practices regarding the
issuance of certificates of authority to foreign insurers
that are not redomesticating, then the redomesticating in-
surer shall be exempt from any State law of the licensed
State to the extent that such State law or the operation
110
of such State law would make unlawful, or regulate, di-
rectly or indirectly, the operation of the redomesticated in-
surer, except that such licensed State may require the re-
domesticated insurer to—
(A) comply with the unfair claim settlement
practices law of the licensed State;
(B) 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;
(C) register with and designate the State insur-
ance regulator as its agent solely for the purpose of
receiving service of legal documents or process;
(D) 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 (i) the
State insurance regulator of the transferee domicile
has not begun and has refused to initiate an exam-
ination of the redomesticated insurer; and (ii) any
such examination is coordinated to avoid unjustified
duplication and repetition;
(E) comply with a lawful order issued in (i) a
delinquency proceeding commenced by the State in-
surance regulator of any licensed State if there has
111
been a judicial finding of financial impairment under
subparagraph (G) below, or (ii) a voluntary dissolu-
tion proceeding;
(F) 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 subparagraph (D);
(G) comply with an injunction issued by a court
of competent jurisdiction, upon a petition by the
State insurance regulator alleging that the redomes-
ticated insurer is in hazardous financial condition or
is financially impaired;
(H) participate in any insurance insolvency
guaranty association on the same basis as any other
insurer licensed in the licensed State;
(I) 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 which discriminates
against a nonresident insurance licensee.
(d) JUDICIAL REVIEW.—The appropriate United
States district court shall have exclusive jurisdiction over
112
litigation arising under this section involving any redomes-
ticating or redomesticated company.
(e) SEPARABILITY.—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.
(f) DEFINITIONS.—For purposes of this section, the
following definitions shall apply:
(1) COURT
OF
COMPETENT
JURISDICTION.—
The term ‘‘court of competent jurisdiction’’ means a
court authorized pursuant to subsection (d) to adju-
dicate litigation arising under this section.
(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 who or which holds
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.
113
(5) LICENSED
STATE.—The term ‘‘licensed
State’’ means any State, 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 LIFE INSURER.—The term ‘‘mu-
tual life insurer’’ means a mutual life insurer orga-
nized 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-
lic corporation, board, association, estate, trustee, or
fiduciary, or any similar entity.
(8) REDOMESTICATED
INSURER.—The term
‘‘redomesticated insurer’’ means a mutual life in-
surer that has redomesticated pursuant to this sec-
tion.
(9) REDOMESTICATING
INSURER.—The term
‘‘redomesticating insurer’’ means a mutual life in-
surer that is redomesticating pursuant to this sec-
tion.
(10) REDOMESTICATION
OR
TRANSFER.—The
terms ‘‘redomestication’’ and ‘‘transfer’’ mean the
transfer of the domicile of a mutual life insurer from
one State to another State pursuant to this section.
114
(11) STATE
INSURANCE
REGULATOR.—The
term ‘‘State insurance regulator’’ means the prin-
cipal insurance regulatory authority of a State or of
Puerto Rico or the United States Virgin Islands.
(12) STATE
LAW.—The term ‘‘State law’’
means the statutes of any State or of Puerto Rico
or the United States Virgin Islands and any regula-
tion, order, or requirement prescribed pursuant to
any such statute.
(13) 
TRANSFEREE
DOMICILE.—The 
term
‘‘transferee domicile’’ means the State to which a
mutual life insurer is redomesticating pursuant to
the provisions of this section.
(14) 
TRANSFEROR
DOMICILE.—The 
term
‘‘transferor domicile’’ means the State from which a
mutual life insurer is redomesticating pursuant to
the provisions of this section.
(15) VOTING SECURITIES.—The term ‘‘voting
securities’’ means securities of any class or any own-
ership interest having voting power for the election
of the board of directors of a person, other than se-
curities having voting power only because of the oc-
currence of a contingency.
115
TITLE II—CONFORMING AMENDMENTS TO
OTHER LAWS FOR FINANCIAL SERV-
ICES HOLDING COMPANIES
SEC. 201. EXEMPTION OF FINANCIAL SERVICES HOLDING
COMPANIES FROM THE BANK HOLDING COM-
PANY ACT OF 1956.
Section 2(c)(2) of the Bank Holding Company Act
of 1956 (12 U.S.C. 1841(c)(2)) is amended by adding at
the end the following new subparagraphs:
‘‘(K) An insured bank, as defined in sec-
tion 3 of the Federal Deposit Insurance Act,
that is controlled by a financial services holding
company, as defined in section 102(a) of the
Financial Services Holding Company Act.
‘‘(L) A wholesale financial institution, as
defined in section 102(i) of the Financial Serv-
ices Holding Company Act, that is controlled by
a financial services holding company, as defined
in section 102(a) of such Act.’’.
SEC. 202. AMENDMENTS TO THE FEDERAL RESERVE ACT.
(a) IN GENERAL.—Section 23B(b)(1)(B) of the Fed-
eral Reserve Act (12 U.S.C. 371c–1(b)(1)(B)) is amended
by inserting ‘‘and for 30 days thereafter’’ after ‘‘during
the existence of any underwriting or selling syndicate’’.
116
(b) AFFILIATES OF MEMBER BANKS.—The 22d un-
designated paragraph of section 9 of the Federal Reserve
Act (12 U.S.C. 338) is amended by adding at the end the
following new sentence: ‘‘No provision of this paragraph
shall be construed as authorizing an examination of an
affiliate of a member bank if the member bank is an affili-
ate of a financial services holding company (as defined in
section 102 of the Financial Services Holding Company
Act).’’.
SEC. 203. AMENDMENTS TO THE BANKING ACT OF 1933.
(a) SECTION 20.—Section 20 of the Banking Act of
1933 (12 U.S.C. 377) is amended by inserting after the
first undesignated paragraph the following: ‘‘The provi-
sions of this section shall not apply to a financial services
holding company or any of its affiliates, as such terms
are defined in section 102 of the Financial Services Hold-
ing Company Act.’’
(b) SECTION 32.—Section 32 of the Banking Act of
1933 (12 U.S.C. 78) is amended by adding at the end
the following: ‘‘This section shall not apply so as to pro-
hibit an officer, director, or employee of a securities affili-
ate (as defined in section 102(r) of the Financial Services
Holding Company Act) from serving at the same time as
an officer, director, or employee of a member bank affili-
ated with the securities affiliate pursuant to such Act.
117
This section shall not apply so as to prohibit an officer,
director, or employee of an investment company registered
under the Investment Company Act of 1940 or an invest-
ment adviser registered under the Investment Advisers
Act of 1940 from serving at the same time as an officer,
director, or employee of a member bank that is affiliated
with a financial services holding company (as defined in
section 102(a) of the Financial Services Holding Company
Act).’’.
SEC. 204. AMENDMENTS TO THE FEDERAL DEPOSIT INSUR-
ANCE ACT.
(a) SECTION 7.—Section 7(j) of the Federal Deposit
Insurance Act (12 U.S.C. 1817(j)) is amended—
(1) in paragraph (8), by striking subparagraph
(B) and inserting the following:
‘‘(B) the term ‘control’ means the power,
directly or indirectly, to direct the management
or policies of a company, or to vote 25 percent
or more of any class of voting securities of a
company, except that no company shall be
deemed to control or to have acquired control of
any other company by virtue of its ownership of
the voting securities of such other company—
‘‘(i) acquired or held in an agency,
trust, or other fiduciary capacity;
118
‘‘(ii) acquired or held in connection
with or incidental to—
‘‘(I) the underwriting of securi-
ties if such securities are held only for
such person of time as will permit the
sale thereof on a reasonable basis; or
‘‘(II) market making, dealing,
trading, brokerage, or other securities-
related activities and not with a view
to acquiring, exercising, or transfer-
ring any control over the management
or policies of such company; or
‘‘(iii) acquired in securing or collect-
ing a debt previously contracted in good
faith, until 2 years after the date of acqui-
sition, except that no company formed for
the sole purpose of participating in a proxy
solicitation is in control of a company by
virtue of its acquisition of voting rights
with respect to shares of such company ac-
quired in the course of such solicitation.’’;
and
(2) by adding at the end the following new
paragraph:
119
‘‘(19) DEFINITION.—For purposes of this sub-
section, the term ‘insured depository institution’
shall include—
‘‘(A) any ‘bank holding company’, as that
term is defined in section 2 of the Bank Hold-
ing Company Act of 1956, which has control of
any insured bank (as defined in that section 2),
and the appropriate Federal banking agency in
the case of a bank holding company shall be the
Board of Governors of the Federal Reserve Sys-
tem; and
‘‘(B) any ‘financial services holding com-
pany’, as that term is defined in section 102(a)
of the Financial Services Holding Company
Act, which has control of any such insured
bank, and the appropriate Federal banking
agency in the case of a financial services hold-
ing company shall be the appropriate Federal
banking agency of the lead depository institu-
tion (as defined in section 102(h) of the Finan-
cial Services Holding Company Act) of the fi-
nancial services holding company.
(b) SECTION 18.—Section 18(j)(1)(A) of the Federal
Deposit Insurance Act (12 U.S.C. 1828(j)(1)(A)) is
amended by striking ‘‘Sections’’ and inserting ‘‘Subject to
120
section 104(a)(2) of the Financial Services Holding Com-
pany Act, sections’’.
(c) APPROPRIATE FEDERAL BANKING AGENCY.—
(1) STATE MEMBER WHOLESALE FINANCIAL IN-
STITUTIONS.—Section 3(g)(2)(A) of the Federal De-
posit Insurance Act (12 U.S.C. 1813 (q)(2)(A)) is
amended to read as follows:
‘‘(A) any State member insured bank (ex-
cept a District bank) and State member whole-
sale financial institution as authorized pursuant
to section 9B of the Federal Reserve Act.’’.
(2) NATIONAL WHOLESALE FINANCIAL INSTI-
TUTION.—Section 3(g)(1) of the Federal Deposit In-
surance Act (12 U.S.C. 1813(q)(1)) is amended by
inserting ‘‘(including any national wholesale finan-
cial institution and any national market funded lend-
ing institution, as authorized pursuant to sections
5136B and 5158 of the Revised Statutes of the
United States)’’.
(d) SECURITIES COMPANY AFFILIATIONS OF FDIC–
INSURED BANKS.—Section 18 of the Federal Deposit In-
surance Act (12 U.S.C. 1828) is amended by adding at
the end thereof the following new subsection:
‘‘(s) SECURITIES AFFILIATIONS OF BANKS.—
121
‘‘(1) IN GENERAL.—A bank shall not be an af-
filiate of any company that, directly or indirectly,
acts as an underwriter or dealer of any security,
other than—
‘‘(A) a bank;
‘‘(B) a securities affiliate as defined in sec-
tion 102(r) of the Financial Services Holding
Company Act; or
‘‘C) a company that underwrites or deals
only in securities that are described in section
121 of the Depository Institution Affiliation
and Thrift Charter Conversion Act.
‘‘(2) EXCEPTIONS.—
‘‘(A) CERTAIN BANKS NOT INCLUDED.—
For purposes of this subsection, the term ‘bank’
does not include—
‘‘(i) an insured bank described in sub-
paragraph (D), (F), or (H) of section
2(c)(2) of the Bank Holding Company Act
of 1956; and
‘‘(ii) a Federal branch or an insured
branch (as defined in section 3 of the Fed-
eral Deposit Insurance Act).
‘‘(B) AFFILIATIONS WITH EDGE ACT AND
AGREEMENT
CORPORATIONS.—Paragraph (1)
122
shall not apply with respect to the affiliation of
a bank with a company held pursuant to section
25 or 25A of the Federal Reserve Act or section
4(c)(13) of the Bank Holding Company Act of
1956.
‘‘(3) GRANDFATHER
PROVISION.—This sub-
section shall not apply with respect to—
‘‘(A) an affiliation between a bank and a
company that underwrites or deals in securities,
provided that—
‘‘(i) the affiliation is authorized pur-
suant to an order issued by the Board of
Governors of the Federal Reserved System
under section 4(c)(8) of the Bank Holding
Company Act of 1956; and
‘‘(ii) such company complies with the
limitations, restrictions, and conditions, in-
cluding the limitation on the revenue that
may be derived from underwriting or deal-
ing activities, that were generally applica-
ble to companies that, as of January 1,
1996, were subject to orders described in
clause (i);
‘‘(B) any other lawful affiliation that ex-
isted on January 1, 1996; or
123
‘‘(C) any new affiliation by an insured that
has an affiliation that would be prohibited if the
affiliation were not covered by subparagraph
(B).
‘‘(4) DEFINITIONS.—For purposes of this sub-
section, the following definitions shall apply:
‘‘(A) DEALER.—The term ‘dealer’ has the
meaning given to such term in section 3(a)(5)
of the Securities Exchange Act of 1934.
‘‘(B) SECURITY.—The term ‘security’ has
the meaning given to such term in section
121(c) of the Financial Services Holding Com-
pany Act.
‘‘(C) UNDERWRITER.—The term ‘under-
writer’ has the meaning given to such term in
section 2(11) of the Securities Act of 1933.’’.
(e) AFFILIATE OF AN INSURED DEPOSITORY INSTI-
TUTION.—Section 10(b)(4) of the Federal Deposit Insur-
ance Act (12 U.S.C. 1820(b)(4)) is amended by adding
at the end the following new subparagraph:
124
‘‘(C) AFFILIATES OF FINANCIAL SERVICES
HOLDING COMPANY.—No provision of this para-
graph shall be construed as authorizing an ex-
amination of an affiliate of an insured deposi-
tory institution if the insured depository institu-
tion is an affiliate of a financial services holding
company (as defined in section 102 of the Fi-
nancial Services Holding Company Act).’’.
SEC. 205. AMENDMENT TO THE COMMUNITY REINVEST-
MENT ACT.
Section 803(3) of the Community Reinvestment Act
of 1977 (12 U.S.C. 2902(3)) is amended—
(1) by inserting ‘‘or notice, as appropriate’’
after ‘‘an application’’;
(2) in subparagraph (E), by striking ‘‘or’’ at
the end;
(3) in subparagraph (F), by striking the period
at the end and inserting ‘‘; or’’; and
(4) by adding at the end the following new sub-
paragraph:
‘‘(G) the acquisition of an insured deposi-
tory institution requiring prior notice under sec-
tion 103 of the Financial Services Holding
Company Act.’’.
125
SEC. 206. AMENDMENT TO THE FEDERAL POWER ACT.
Section 305(b) of the Federal Power Act shall not
apply to any person now holding, or proposing to hold,
at the same time the position of officer or director of a
public utility and the position of officer or director of a
bank, trust company, banking association, or firm per-
mitted by the Financial Services Holding Company Act
to underwrite or participate in the marketing of securities
of the public utility for which the person serves, or pro-
poses to serve, as an officer of director.
SEC. 207. AMENDMENT TO THE RIGHT TO FINANCIAL PRI-
VACY ACT.
Section 1112(e) of the Right to Financial Privacy Act
(12 U.S.C. 3412(e)) is amended as follows—
(1) by striking ‘‘this title’’ and inserting ‘‘law’’;
and
(2) by inserting ‘‘, examination reports,’’ after
‘‘financial records’’.
SEC. 208. AMENDMENTS TO THE INTERNATIONAL BANKING
ACT.
(a) EXEMPTION FROM PROVISIONS OF BANK HOLD-
ING COMPANY ACT FOR FOREIGN BANKS QUALIFYING AS
FINANCIAL SERVICES HOLDING COMPANIES.—Section
8(a) of the International Banking Act (12 U.S.C.
32016(a)) is amended by adding at the end by striking
126
‘‘provisions.’’ and inserting the following: ‘‘provisions, ex-
cept that any such foreign bank or company that qualifies
and elects to be treated as a financial services holding
company, shall not be so subject to the provisions of the
Bank Holding Company Act of 1956.’’.
(b) AUTHORITY
TO
TERMINATE
GRANDFATHER
RIGHTS.—Section 8(c) of the International Banking Act
of 1978 (12 U.S.C. 3106(c)) is amended by adding at the
end the following new paragraph:
‘‘(3) PARITY IN CONDUCT OF AUTHORIZED SE-
CURITIES ACTIVITIES.—
‘‘(A) IN
GENERAL.—Notwithstanding the
provisions of paragraph (1) or any other provi-
sion of law, any authority conferred under this
subsection on any foreign bank or company
with respect to securities activities authorized
for bank holding companies in the United
States shall terminate 30 days after such for-
eign bank or company becomes a financial serv-
ices holding company under the Financial Serv-
ices Holding Company Act.’’.
SEC. 209. AMENDMENT CONCERNING NATIONAL BANKS.
The 1st undesignated paragraph of section 5240 of
the Revised Statutes of the United States (12 U.S.C. 481)
127
is amended by inserting after the 1st sentence the follow-
ing new sentence: ‘‘No provision of this paragraph shall
be construed as authorizing an examination of an affiliate
of a national bank if the national bank is an affiliate of
a financial services holding company (as defined in section
102 of the Financial Services Holding Company Act).’’.
TITLE 
III—FUNCTIONAL 
REGULATION
AMENDMENTS TO SECURITIES LAWS
FOR FINANCIAL SERVICES HOLDING
COMPANIES
Subtitle A—Broker Dealer Provisions
SEC. 301. DEFINITION OF BROKER.
Section 3(a)(4) of the Securities Exchange Act of
1934 (15 U.S.C. 78c(a)(4)) is amended to read as follows:
‘‘(4) BROKER.—
‘‘(A) IN
GENERAL.—The term ‘broker’
means any person engaged in the business of
effecting transactions in securities for the ac-
count of others.
‘‘(B) EXCLUSION
OF
BANKS.—The term
‘broker’ does not include a bank unless such
bank is affiliated with a financial services hold-
ing company, as defined in section 102(a) of
the Financial Services Holding Company Act
and—
128
‘‘(i) publicly solicits the business of
effecting securities transactions for the ac-
count of others; or
‘‘(ii) is compensated for such business
by the payment of commissions or similar
remuneration based on effecting trans-
actions in securities (other than fees cal-
culated as a percentage of assets under
management) in excess of the bank’s incre-
mental 
costs 
directly 
attributable 
to
effecting such transactions (hereafter re-
ferred to as ‘incentive compensation’).
‘‘(C) EXEMPTION FOR CERTAIN BANK AC-
TIVITIES.—A bank shall not be considered to be
a broker because the bank engages in any of
the following activities under the conditions de-
scribed:
‘‘(i) THIRD
PARTY
BROKERAGE
AR-
RANGEMENTS.—The bank enters into a
contractual or other arrangement with a
broker or dealer registered under this title
under which the broker or dealer offers
brokerage services on or off the premises
of the bank if—
129
‘‘(I) such broker or dealer is
clearly identified as the person per-
forming the brokerage services;
‘‘(II) the broker or dealer per-
forms brokerage services in an area
that is clearly marked, and unless
made impossible by space or personnel
considerations, 
physically 
separate
from the routine deposit-taking activi-
ties of the bank;
‘‘(III) any materials used by the
bank to advertise or promote generally
the availability of brokerage services
under the contractual or other ar-
rangement clearly indicate that the
brokerage services are being provided
by the broker or dealer and not by the
bank;
‘‘(IV) any materials used by the
bank to advertise or promote generally
the availability of brokerage services
under the contractual or other ar-
rangement are in compliance with the
Federal securities laws before dis-
tribution;
130
‘‘(V) bank employees perform
only clerical or ministerial functions in
connection with brokerage actions, in-
cluding scheduling appointments with
the associated persons of a broker or
dealer, and on behalf of a broker or
dealer, transmitting orders or han-
dling customers’ funds or securities,
except that bank employees who are
not so qualified may describe in gen-
eral terms investment vehicles under
the contractual or other arrangement
and accept customers’ orders on be-
half of the broker or dealer if such
employees have received training that
is substantially equivalent to the
training required for personnel quali-
fied to sell securities pursuant to the
requirements of a self-regulatory orga-
nization (as defined in section 3(a) of
the Securities Exchange Act of 1934);
‘‘(VI) bank employees do not di-
rectly receive incentive compensation
for any brokerage transaction unless
such employees are associated persons
131
of a broker or dealer and are qualified
pursuant to the requirements of a
self-regulatory organization (as so de-
fined) except that the bank employees
may 
receive 
nominal 
cash 
and
noncash compensation for customer
referrals if the cash compensation is a
one-time fee of a fixed dollar amount
and the payment of the fee is not con-
tingent on whether the referral results
in a transaction;
‘‘(VII) such services are provided
by the broker or dealer on a basis in
which all customers which receive any
services are fully disclosed to the
broker or dealer; and
‘‘(VIII) the broker or dealer in-
forms each customer that the broker-
age services are provided by the
broker or dealer and not by the bank
and that the securities are not depos-
its or other obligations of the bank,
are not guaranteed by the bank, and
are not insured by the Federal De-
posit Insurance Corporation.
132
‘‘(ii) TRUST
ACTIVITIES.—The bank
engages 
in 
trust 
activities 
(including
effecting transactions in the course of such
trust activities) permissible for national
banks under the first section of the Act of
September 28, 1962, or for State banks
under relevant State trust statutes or law
(including securities safekeeping, self-di-
rected individual retirement accounts, or
managed agency accounts or other func-
tionally equivalent accounts of a bank) un-
less the bank—
‘‘(I) publicly solicits brokerage
business, other than by advertising
that it effects transactions in securi-
ties in conjunction with advertising its
other activities; or
‘‘(II) 
receives 
incentive 
com-
pensation for such brokerage activi-
ties.
‘‘(iii) 
PERMISSIBLE
SECURITIES
TRANSACTIONS.—The bank effects trans-
actions in exempted securities, other than
municipal securities, in commercial paper,
bankers 
acceptances, 
commercial 
bills,
133
qualified Canadian Government obligations
as defined in section 5136 of the Revised
Statues, obligations of the Washington
Metropolitan Area Transit Authority which
are guaranteed by the Secretary of Trans-
portation under section 9 of the National
Capital Transportation Act of 1969, obli-
gations of the North American Develop-
ment Bank, and obligations of any local
public agency (as defined in section 110(h)
of the Housing Act of 1949) or any public
housing agency (as defined in the United
States Housing Act of 1937) that are ex-
pressly authorized by section 5136 of the
Revised Statutes of the United States as
permissible for a national bank to under-
write or deal in.
‘‘(iv) MUNICIPAL
SECURITIES.—The
bank effects transactions in municipal se-
curities.
‘‘(v) EMPLOYEE
AND
SHAREHOLDER
BENEFIT PLANS.—The bank effects trans-
actions as part of any bonus, profit-shar-
ing, pension, retirement, thrift, savings, in-
centive, stock purchase, stock ownership,
134
stock appreciation, stock option, dividend
reinvestment, or similar plan for employees
or shareholders of an issuer or its subsidi-
aries.
‘‘(vi) SWEEP
ACCOUNTS.—The bank
effects transactions as part of a program
for the investment or reinvestment of bank
deposit funds into any no-load, open-end
management investment company reg-
istered under the Investment Company Act
of 1940 that holds itself out as a money
market fund.
‘‘(vii) AFFILIATE
TRANSACTIONS.—
The bank effects transactions for the ac-
count of any affiliate of the bank, as de-
fined in section 102(c) of the Financial
Services Holding Company Act.
‘‘(viii) PRIVATE
SECURITIES
OFFER-
INGS.—The bank—
‘‘(I) effects sales as part of pri-
mary offering of securities by an is-
suer, not involving a public offering,
pursuant to section 3(b), 4(2), or 4(6)
of the Securities Act of 1933 and the