264
of any security that is a publicly traded security
in the United States, unless—
‘‘(i) the bank directs such trade to a
registered broker or dealer for execution;
‘‘(ii) the trade is a cross trade or
other substantially similar trade of a secu-
rity that—
‘‘(I) is made by the bank or be-
tween the bank and an affiliated fidu-
ciary; and
‘‘(II) is not in contravention of
fiduciary principles established under
applicable Federal or State law; or
‘‘(iii) the trade is conducted in some
other manner permitted under rules, regu-
lations, or orders as the Commission may
prescribe or issue.
‘‘(D) FIDUCIARY CAPACITY.—For purposes
of subparagraph (B)(ii), the term ‘fiduciary ca-
pacity’ means—
‘‘(i) in the capacity as trustee, execu-
tor, administrator, registrar of stocks and
bonds, transfer agent, guardian, assignee,
receiver, or custodian under a uniform gift
to minor act, or as an investment adviser
265
if the bank receives a fee for its investment
advice;
‘‘(ii) in any capacity in which the
bank possesses investment discretion on
behalf of another; or
‘‘(iii) in any other similar capacity.
‘‘(F) EXCEPTION FOR ENTITIES SUBJECT
TO SECTION 15(e).—The term ‘broker’ does not
include a bank that—
‘‘(i) was, immediately prior to the en-
actment of the Financial Services Act of
1999, subject to section 15(e) of this title;
and
‘‘(ii) is subject to such restrictions
and requirements as the Commission con-
siders appropriate.’’.
SEC. 202. DEFINITION OF DEALER.
Section 3(a)(5) of the Securities Exchange Act of
1934 (15 U.S.C. 78c(a)(5)) is amended to read as follows:
‘‘(5) DEALER.—
‘‘(A) IN
GENERAL.—The term ‘dealer’
means any person engaged in the business of
buying and selling securities for such person’s
own account through a broker or otherwise.
266
‘‘(B) EXCEPTION
FOR
PERSON
NOT
EN-
GAGED IN THE BUSINESS OF DEALING.—The
term ‘dealer’ does not include a person that
buys or sells securities for such person’s own
account, either individually or in a fiduciary ca-
pacity, but not as a part of a regular business.
‘‘(C) EXCEPTION FOR CERTAIN BANK AC-
TIVITIES.—A bank shall not be considered to be
a dealer because the bank engages in any of the
following activities under the conditions de-
scribed:
‘‘(i) PERMISSIBLE SECURITIES TRANS-
ACTIONS.—The bank buys or sells—
‘‘(I) commercial paper, bankers
acceptances, or commercial bills;
‘‘(II) exempted securities;
‘‘(III) qualified Canadian govern-
ment obligations as defined in section
5136 of the Revised Statutes of the
United States, in conformity with sec-
tion 15C of this title and the rules
and regulations thereunder, or obliga-
tions of the North American Develop-
ment Bank; or
267
‘‘(IV) any standardized, credit
enhanced debt security issued by a
foreign government pursuant to the
March 1989 plan of then Secretary of
the Treasury Brady, used by such for-
eign government to retire outstanding
commercial bank loans.
‘‘(ii) INVESTMENT, TRUSTEE, AND FI-
DUCIARY TRANSACTIONS.—The bank buys
or 
sells 
securities 
for 
investment
purposes—
‘‘(I) for the bank; or
‘‘(II) for accounts for which the
bank acts as a trustee or fiduciary.
‘‘(iii) 
ASSET-BACKED
TRANS-
ACTIONS.—The 
bank 
engages 
in 
the
issuance or sale to qualified investors,
through a grantor trust or other separate
entity, of securities backed by or rep-
resenting an interest in notes, drafts, ac-
ceptances, loans, leases, receivables, other
obligations (other than securities of which
the bank is not the issuer), or pools of any
such obligations predominantly originated
by—
268
‘‘(I) the bank;
‘‘(II) an affiliate of any such
bank other than a broker or dealer; or
‘‘(III) a syndicate of banks of
which the bank is a member, if the
obligations or pool of obligations con-
sists of mortgage obligations or con-
sumer-related receivables.
‘‘(iv) 
EXCEPTED
BANKING
PROD-
UCTS.—The bank buys or sells excepted
banking products, as defined in section
206 of the Financial Services Act of 1999.
‘‘(v) DERIVATIVE
INSTRUMENTS.—
The bank issues, buys, or sells any deriva-
tive instrument to which the bank is a
party—
‘‘(I) to or from a qualified inves-
tor, except that if the instrument pro-
vides for the delivery of one or more
securities (other than a derivative in-
strument or government security), the
transaction shall be effected with or
through a registered broker or dealer;
or
269
‘‘(II) to or from other persons,
except that if the derivative instru-
ment provides for the delivery of one
or more securities (other than a deriv-
ative instrument or government secu-
rity), or is a security (other than a
government security), the transaction
shall be effected with or through a
registered broker or dealer; or
‘‘(III) to or from any person if
the instrument is neither a security
nor provides for the delivery of one or
more securities (other than a deriva-
tive instrument).’’.
SEC. 203. REGISTRATION FOR SALES OF PRIVATE SECURI-
TIES OFFERINGS.
Section 15A of the Securities Exchange Act of 1934
(15 U.S.C. 78o–3) is amended by inserting after sub-
section (i) the following new subsection:
‘‘(j) REGISTRATION FOR SALES OF PRIVATE SECURI-
TIES OFFERINGS.—A registered securities association
shall create a limited qualification category for any associ-
ated person of a member who effects sales as part of a
primary offering of securities not involving a public offer-
ing, pursuant to section 3(b), 4(2), or 4(6) of the Securi-
270
ties Act of 1933 and the rules and regulations thereunder,
and shall deem qualified in such limited qualification cat-
egory, without testing, any bank employee who, in the six
month period preceding the date of the enactment of this
Act, engaged in effecting such sales.’’.
SEC. 204. INFORMATION SHARING.
Section 18 of the Federal Deposit Insurance Act is
amended by adding at the end the following new sub-
section:
‘‘(t) RECORDKEEPING REQUIREMENTS.—
‘‘(1) REQUIREMENTS.—Each appropriate Fed-
eral banking agency, after consultation with and
consideration of the views of the Commission, shall
establish recordkeeping requirements for banks rely-
ing on exceptions contained in paragraphs (4) and
(5) of section 3(a) of the Securities Exchange Act of
1934. Such recordkeeping requirements shall be suf-
ficient to demonstrate compliance with the terms of
such exceptions and be designed to facilitate compli-
ance with such exceptions. Each appropriate Federal
banking agency shall make any such information
available to the Commission upon request.
‘‘(2) DEFINITIONS.—As used in this subsection
the term ‘Commission’ means the Securities and Ex-
change Commission.’’.
271
SEC. 205. TREATMENT OF NEW HYBRID PRODUCTS.
Section 15 of the Securities Exchange Act of 1934
(15 U.S.C. 78o) is amended by adding at the end the fol-
lowing new subsection:
‘‘(i) RULEMAKING TO EXTEND REQUIREMENTS TO
NEW HYBRID PRODUCTS.—
‘‘(1) 
LIMITATION.—The 
Commission 
shall
not—
‘‘(A) require a bank to register as a broker
or dealer under this section because the bank
engages in any transaction in, or buys or sells,
a new hybrid product; or
‘‘(B) bring an action against a bank for a
failure to comply with a requirement described
in subparagraph (A),
unless the Commission has imposed such require-
ment by rule or regulation issued in accordance with
this section.
‘‘(2) CRITERIA FOR RULEMAKING.—The Com-
mission shall not impose a requirement under para-
graph (1) of this subsection with respect to any new
hybrid product unless the Commission determines
that—
‘‘(A) the new hybrid product is a security;
and
272
‘‘(B) imposing such requirement is nec-
essary or appropriate in the public interest and
for the protection of investors, consistent with
the requirements of section 3(f).
‘‘(3) CONSIDERATIONS.—In making a deter-
mination under paragraph (2), the Commission shall
consider—
‘‘(A) the nature of the new hybrid product;
and
‘‘(B) the history, purpose, extent, and ap-
propriateness of the regulation of the new hy-
brid product under the Federal securities laws
and under the Federal banking laws.
‘‘(4) CONSULTATION.—In promulgating rules
under this subsection, the Commission shall consult
with and consider the views of the Board of Gov-
ernors of the Federal Reserve System regarding the
nature of the new hybrid product, the history, pur-
pose, extent, and appropriateness of the regulation
of the new product under the Federal banking laws,
and the impact of the proposed rule on the banking
industry.
‘‘(5) NEW HYBRID PRODUCT.—For purposes of
this subsection, the term ‘new hybrid product’ means
a product that—
273
‘‘(A) was not subjected to regulation by
the Commission as a security prior to the date
of the enactment of this subsection; and
‘‘(B) is not an excepted banking product,
as such term is defined in section 206 of the
Financial Services Act of 1999.’’.
SEC. 206. DEFINITION OF EXCEPTED BANKING PRODUCT.
(a) DEFINITION
OF EXCEPTED BANKING PROD-
UCT.—For purposes of paragraphs (4) and (5) of section
3(a) of the Securities Exchange Act of 1934 (15 U.S.C.
78c(a) (4), (5)), the term ‘‘excepted banking product’’
means—
(1) a deposit account, savings account, certifi-
cate of deposit, or other deposit instrument issued
by a bank;
(2) a banker’s acceptance;
(3) a letter of credit issued or loan made by a
bank;
(4) a debit account at a bank arising from a
credit card or similar arrangement;
(5) a participation in a loan which the bank or
an affiliate of the bank (other than a broker or deal-
er) funds, participates in, or owns that is sold—
(A) to qualified investors; or
(B) to other persons that—
274
(i) have the opportunity to review and
assess any material information, including
information regarding the borrower’s cred-
itworthiness; and
(ii) based on such factors as financial
sophistication, net worth, and knowledge
and experience in financial matters, have
the capability to evaluate the information
available, as determined under generally
applicable banking standards or guidelines;
or
(6) a derivative instrument that involves or re-
lates to—
(A) currencies, except options on cur-
rencies that trade on a national securities ex-
change;
(B) interest rates, except interest rate de-
rivative instruments that—
(i) are based on a security or a group
or index of securities (other than govern-
ment securities or a group or index of gov-
ernment securities);
(ii) provide for the delivery of one or
more securities (other than government se-
curities); or
275
(iii) trade on a national securities ex-
change; or
(C) commodities, other rates, indices, or
other assets, except derivative instruments
that—
(i) are securities or that are based on
a group or index of securities (other than
government securities or a group or index
of government securities);
(ii) provide for the delivery of one or
more securities (other than government se-
curities); or
(iii) trade on a national securities ex-
change.
(b) CLASSIFICATION LIMITED.—Classification of a
particular product as an excepted banking product pursu-
ant to this section shall not be construed as finding or
implying that such product is or is not a security for any
purpose under the securities laws, or is or is not an ac-
count, agreement, contract, or transaction for any purpose
under the Commodity Exchange Act.
(c) INCORPORATED DEFINITIONS.—For purposes of
this section—
(1) the terms ‘‘bank’’, ‘‘qualified investor’’, and
‘‘securities laws’’ have the same meanings given in
276
section 3(a) of the Securities Exchange Act of 1934,
as amended by this Act; and
(2) the term ‘‘government securities’’ has the
meaning given in section 3(a)(42) of such Act (as
amended by this Act), and, for purposes of this sec-
tion, commercial paper, bankers acceptances, and
commercial bills shall be treated in the same manner
as government securities.
SEC. 207. ADDITIONAL DEFINITIONS.
Section 3(a) of the Securities Exchange Act of 1934
is amended by adding at the end the following new para-
graphs:
‘‘(54) DERIVATIVE INSTRUMENT.—
‘‘(A) DEFINITION.—The term ‘derivative
instrument’ means any individually negotiated
contract, agreement, warrant, note, or option
that is based, in whole or in part, on the value
of, any interest in, or any quantitative measure
or the occurrence of any event relating to, one
or more commodities, securities, currencies, in-
terest or other rates, indices, or other assets,
but does not include an excepted banking prod-
uct, as defined in paragraphs (1) through (5) of
section 206(a) of the Financial Services Act of
1999.
278
1933), or business development company
(as defined in section 2(a)(48) of the In-
vestment Company Act of 1940);
‘‘(iv) any small business investment
company licensed by the United States
Small Business Administration under sec-
tion 301 (c) or (d) of the Small Business
Investment Act of 1958;
‘‘(v) any State sponsored employee
benefit plan, or any other employee benefit
plan, within the meaning of the Employee
Retirement Income Security Act of 1974,
other than an individual retirement ac-
count, if the investment decisions are made
by a plan fiduciary, as defined in section
3(21) of that Act, which is either a bank,
savings and loan association, insurance
company, or registered investment adviser;
‘‘(vi) any trust whose purchases of se-
curities are directed by a person described
in clauses (i) through (v) of this subpara-
graph;
‘‘(vii) any market intermediary ex-
empt under section 3(c)(2) of the Invest-
ment Company Act of 1940;
279
‘‘(viii) any associated person of a
broker or dealer other than a natural per-
son;
‘‘(ix) any foreign bank (as defined in
section 1(b)(7) of the International Bank-
ing Act of 1978);
‘‘(x) the government of any foreign
country;
‘‘(xi) any corporation, company, or
partnership that owns and invests on a dis-
cretionary basis, not less than $10,000,000
in investments;
‘‘(xii) any natural person who owns
and invests on a discretionary basis, not
less than $10,000,000 in investments;
‘‘(xiii) any government or political
subdivision, agency, or instrumentality of a
government who owns and invests on a dis-
cretionary basis not less than $50,000,000
in investments; or
‘‘(xiv) any multinational or supra-
national entity or any agency or instru-
mentality thereof.
‘‘(B) ADDITIONAL AUTHORITY.—The Com-
mission may, by rule or order, define a ‘quali-
280
fied investor’ as any other person, taking into
consideration such factors as the financial so-
phistication of the person, net worth, and
knowledge and experience in financial mat-
ters.’’.
SEC. 208. GOVERNMENT SECURITIES DEFINED.
Section 3(a)(42) of the Securities Exchange Act of
1934 (15 U.S.C. 78c(a)(42)) is amended—
(1) by striking ‘‘or’’ at the end of subparagraph
(C);
(2) by striking the period at the end of sub-
paragraph (D) and inserting ‘‘; or’’; and
(3) by adding at the end the following new sub-
paragraph:
‘‘(E) for purposes of sections 15, 15C, and
17A as applied to a bank, a qualified Canadian
government obligation as defined in section
5136 of the Revised Statutes of the United
States.’’.
SEC. 209. EFFECTIVE DATE.
This subtitle shall take effect at the end of the 270-
day period beginning on the date of the enactment of this
Act.
281
SEC. 210. RULE OF CONSTRUCTION.
Nothing in this Act shall supersede, affect, or other-
wise limit the scope and applicability of the Commodity
Exchange Act (7 U.S.C. 1 et seq.).
Subtitle B—Bank Investment
Company Activities
SEC. 211. CUSTODY OF INVESTMENT COMPANY ASSETS BY
AFFILIATED BANK.
(a) MANAGEMENT COMPANIES.—Section 17(f) of the
Investment Company Act of 1940 (15 U.S.C. 80a–17(f))
is amended—
(1) by redesignating paragraphs (1), (2), and
(3) as subparagraphs (A), (B), and (C), respectively;
(2) by striking ‘‘(f) Every registered’’ and in-
serting the following:
‘‘(f) CUSTODY OF SECURITIES.—
‘‘(1) Every registered’’;
(3) by redesignating the second, third, fourth,
and fifth sentences of such subsection as paragraphs
(2) through (5), respectively, and indenting the left
margin of such paragraphs appropriately; and
(4) by adding at the end the following new
paragraph:
‘‘(6) The Commission may adopt rules and reg-
ulations, and issue orders, consistent with the pro-
tection of investors, prescribing the conditions under
282
which a bank, or an affiliated person of a bank, ei-
ther of which is an affiliated person, promoter, orga-
nizer, or sponsor of, or principal underwriter for, a
registered management company may serve as custo-
dian of that registered management company.’’.
(b) UNIT INVESTMENT TRUSTS.—Section 26 of the
Investment Company Act of 1940 (15 U.S.C. 80a–26) is
amended—
(1) by redesignating subsections (b) through (e)
as subsections (c) through (f), respectively; and
(2) by inserting after subsection (a) the fol-
lowing new subsection:
‘‘(b) The Commission may adopt rules and regula-
tions, and issue orders, consistent with the protection of
investors, prescribing the conditions under which a bank,
or an affiliated person of a bank, either of which is an
affiliated person of a principal underwriter for, or deposi-
tor of, a registered unit investment trust, may serve as
trustee or custodian under subsection (a)(1).’’.
(c) FIDUCIARY DUTY OF CUSTODIAN.—Section 36(a)
of the Investment Company Act of 1940 (15 U.S.C. 80a–
35(a)) is amended—
(1) in paragraph (1), by striking ‘‘or’’ at the
end;
283
(2) in paragraph (2), by striking the period at
the end and inserting ‘‘; or’’; and
(3) by inserting after paragraph (2) the fol-
lowing:
‘‘(3) as custodian.’’.
SEC. 212. LENDING TO AN AFFILIATED INVESTMENT COM-
PANY.
Section 17(a) of the Investment Company Act of
1940 (15 U.S.C. 80a–17(a)) is amended—
(1) by striking ‘‘or’’ at the end of paragraph
(2);
(2) by striking the period at the end of para-
graph (3) and inserting ‘‘; or’’; and
(3) by adding at the end the following new
paragraph:
‘‘(4) to loan money or other property to such
registered company, or to any company controlled by
such registered company, in contravention of such
rules, regulations, or orders as the Commission may
prescribe or issue consistent with the protection of
investors.’’.
SEC. 213. INDEPENDENT DIRECTORS.
(a) IN GENERAL.—Section 2(a)(19)(A) of the Invest-
ment Company Act of 1940 (15 U.S.C. 80a–2(a)(19)(A))
is amended—
284
(1) by striking clause (v) and inserting the fol-
lowing new clause:
‘‘(v) any person or any affiliated per-
son of a person (other than a registered in-
vestment company) that, at any time dur-
ing the 6-month period preceding the date
of the determination of whether that per-
son or affiliated person is an interested
person, has executed any portfolio trans-
actions for, engaged in any principal trans-
actions with, or distributed shares for—
‘‘(I) the investment company;
‘‘(II) any other investment com-
pany having the same investment ad-
viser as such investment company or
holding itself out to investors as a re-
lated company for purposes of invest-
ment or investor services; or
‘‘(III) any account over which the
investment company’s investment ad-
viser has brokerage placement discre-
tion,’’;
(2) by redesignating clause (vi) as clause (vii);
and
285
(3) by inserting after clause (v) the following
new clause:
‘‘(vi) any person or any affiliated per-
son of a person (other than a registered in-
vestment company) that, at any time dur-
ing the 6-month period preceding the date
of the determination of whether that per-
son or affiliated person is an interested
person, has loaned money or other prop-
erty to—
‘‘(I) the investment company;
‘‘(II) any other investment com-
pany having the same investment ad-
viser as such investment company or
holding itself out to investors as a re-
lated company for purposes of invest-
ment or investor services; or
‘‘(III) any account for which the
investment company’s investment ad-
viser has borrowing authority,’’.
(b) 
CONFORMING
AMENDMENT.—Section
2(a)(19)(B) of the Investment Company Act of 1940 (15
U.S.C. 80a–2(a)(19)(B)) is amended—
(1) by striking clause (v) and inserting the fol-
lowing new clause:
286
‘‘(v) any person or any affiliated per-
son of a person (other than a registered in-
vestment company) that, at any time dur-
ing the 6-month period preceding the date
of the determination of whether that per-
son or affiliated person is an interested
person, has executed any portfolio trans-
actions for, engaged in any principal trans-
actions with, or distributed shares for—
‘‘(I) any investment company for
which the investment adviser or prin-
cipal underwriter serves as such;
‘‘(II) any investment company
holding itself out to investors, for pur-
poses of investment or investor serv-
ices, as a company related to any in-
vestment company for which the in-
vestment adviser or principal under-
writer serves as such; or
‘‘(III) any account over which the
investment 
adviser 
has 
brokerage
placement discretion,’’;
(2) by redesignating clause (vi) as clause (vii);
and
287
(3) by inserting after clause (v) the following
new clause:
‘‘(vi) any person or any affiliated per-
son of a person (other than a registered in-
vestment company) that, at any time dur-
ing the 6-month period preceding the date
of the determination of whether that per-
son or affiliated person is an interested
person, has loaned money or other prop-
erty to—
‘‘(I) any investment company for
which the investment adviser or prin-
cipal underwriter serves as such;
‘‘(II) any investment company
holding itself out to investors, for pur-
poses of investment or investor serv-
ices, as a company related to any in-
vestment company for which the in-
vestment adviser or principal under-
writer serves as such; or
‘‘(III) any account for which the
investment adviser has borrowing au-
thority,’’.
(c) AFFILIATION OF DIRECTORS.—Section 10(c) of
the Investment Company Act of 1940 (15 U.S.C. 80a–
288
10(c)) is amended by striking ‘‘bank, except’’ and insert-
ing ‘‘bank (together with its affiliates and subsidiaries) or
any one bank holding company (together with its affiliates
and subsidiaries) (as such terms are defined in section 2
of the Bank Holding Company Act of 1956), except’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall take effect at the end of the 1-year period
beginning on the date of the enactment of this subtitle.
SEC. 214. ADDITIONAL SEC DISCLOSURE AUTHORITY.
Section 35(a) of the Investment Company Act of
1940 (15 U.S.C. 80a–34(a)) is amended to read as fol-
lows:
‘‘(a) MISREPRESENTATION OF GUARANTEES.—
‘‘(1) IN GENERAL.—It shall be unlawful for any
person, issuing or selling any security of which a
registered investment company is the issuer, to rep-
resent or imply in any manner whatsoever that such
security or company—
‘‘(A) has been guaranteed, sponsored, rec-
ommended, or approved by the United States,
or any agency, instrumentality or officer of the
United States;
‘‘(B) has been insured by the Federal De-
posit Insurance Corporation; or
289
‘‘(C) is guaranteed by or is otherwise an
obligation of any bank or insured depository in-
stitution.
‘‘(2) DISCLOSURES.—Any person issuing or
selling the securities of a registered investment com-
pany that is advised by, or sold through, a bank
shall prominently disclose that an investment in the
company is not insured by the Federal Deposit In-
surance Corporation or any other government agen-
cy. The Commission may adopt rules and regula-
tions, and issue orders, consistent with the protec-
tion of investors, prescribing the manner in which
the disclosure under this paragraph shall be pro-
vided.
‘‘(3) DEFINITIONS.—The terms ‘insured deposi-
tory institution’ and ‘appropriate Federal banking
agency’ have the same meanings given in section 3
of the Federal Deposit Insurance Act.’’.
SEC. 215. DEFINITION OF BROKER UNDER THE INVEST-
MENT COMPANY ACT OF 1940.
Section 2(a)(6) of the Investment Company Act of
1940 (15 U.S.C. 80a–2(a)(6)) is amended to read as fol-
lows:
‘‘(6) The term ‘broker’ has the same meaning
given in section 3 of the Securities Exchange Act of
290
1934, except that such term does not include any
person solely by reason of the fact that such person
is an underwriter for one or more investment compa-
nies.’’.
SEC. 216. DEFINITION OF DEALER UNDER THE INVEST-
MENT COMPANY ACT OF 1940.
Section 2(a)(11) of the Investment Company Act of
1940 (15 U.S.C. 80a–2(a)(11)) is amended to read as fol-
lows:
‘‘(11) The term ‘dealer’ has the same meaning
given in the Securities Exchange Act of 1934, but
does not include an insurance company or invest-
ment company.’’.
SEC. 217. REMOVAL OF THE EXCLUSION FROM THE DEFINI-
TION OF INVESTMENT ADVISER FOR BANKS
THAT ADVISE INVESTMENT COMPANIES.
(a) INVESTMENT ADVISER.—Section 202(a)(11)(A)
of the Investment Advisers Act of 1940 (15 U.S.C. 80b–
2(a)(11)(A)) is amended by striking ‘‘investment com-
pany’’ and inserting ‘‘investment company, except that the
term ‘investment adviser’ includes any bank or bank hold-
ing company to the extent that such bank or bank holding
company serves or acts as an investment adviser to a reg-
istered investment company, but if, in the case of a bank,
such services or actions are performed through a sepa-
291
rately identifiable department or division, the department
or division, and not the bank itself, shall be deemed to
be the investment adviser’’.
(b) SEPARATELY IDENTIFIABLE DEPARTMENT
OR
DIVISION.—Section 202(a) of the Investment Advisers Act
of 1940 (15 U.S.C. 80b–2(a)) is amended by adding at
the end the following:
‘‘(26) The term ‘separately identifiable depart-
ment or division’ of a bank means a unit—
‘‘(A) that is under the direct supervision of
an officer or officers designated by the board of
directors of the bank as responsible for the day-
to-day conduct of the bank’s investment adviser
activities for one or more investment companies,
including the supervision of all bank employees
engaged in the performance of such activities;
and
‘‘(B) for which all of the records relating
to its investment adviser activities are sepa-
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
292
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
given 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
given in section 3 of the Securities Exchange Act of
1934, but does not include an insurance company or
investment 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:
293
‘‘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 registered 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.
‘‘(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
294
bank, 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 other provision of law.
‘‘(c) DEFINITION.—For purposes of this section, the
term ‘appropriate Federal banking agency’ shall have the
same meaning given 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’’
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
295
(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
‘‘(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’’.
296
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-
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-
297
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;
‘‘(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
298
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).’’.
SEC. 
223. 
STATUTORY 
DISQUALIFICATION 
FOR 
BANK
WRONGDOING.
Section 9(a) of the Investment Company Act of 1940
(15 U.S.C. 80a-9(a)) is amended in paragraphs (1) and
(2) by striking ‘‘securities dealer, transfer agent,’’ and in-
serting ‘‘securities dealer, bank, transfer agent,’’.
SEC. 224. 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
299
‘‘(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. 225. 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. 226. CHURCH PLAN EXCLUSION.
Section 3(c)(14) of the Investment Company Act of
1940 (15 U.S.C. 80a-3(c)(14)) is amended—
(1) by redesignating clauses (i) and (ii) of sub-
paragraph (B) as subclauses (I) and (II), respec-
tively;
300
(2) by redesignating subparagraphs (A) and
(B) as clauses (i) and (ii), respectively;
(3) by inserting ‘‘(A)’’ after ‘‘(14)’’; and
(4) by adding at the end the following new sub-
paragraph:
‘‘(B) If a registered investment company would
be excluded from the definition of investment com-
pany under this subsection but for the fact that
some of the company’s assets do not satisfy the con-
dition of subparagraph (A)(ii) of this paragraph,
then any investment adviser to the company or affili-
ated person of such investment adviser shall not be
subject to the requirements of section 15(g)(1)(B)
with respect to shares of the investment company.’’.
SEC. 227. EFFECTIVE DATE.
This subtitle shall take effect 90 days after the date
of the enactment of this Act.
301
Subtitle 
C—Securities 
and 
Ex-
change Commission Supervision
of 
Investment 
Bank 
Holding
Companies
SEC. 231. SUPERVISION OF INVESTMENT BANK HOLDING
COMPANIES BY THE SECURITIES AND EX-
CHANGE COMMISSION.
(a) AMENDMENT.—Section 17 of the Securities Ex-
change Act of 1934 (15 U.S.C. 78q) is amended—
(1) by redesignating subsection (i) as subsection
(k); and
(2) by inserting after subsection (h) the fol-
lowing new subsection:
‘‘(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
302
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-
303
come supervised by the Commission in such
form and containing such information and doc-
uments concerning such investment bank hold-
ing company as the Commission, by rule, may
prescribe as necessary or appropriate in fur-
therance of the purposes of this section. Unless
the Commission finds that such supervision is
not necessary or appropriate in furtherance of
the purposes of this section, such supervision
shall become effective 45 days after the date of
receipt of such written notice by the Commis-
sion or within such shorter time period as the
Commission, by rule or order, may determine.
‘‘(2) ELECTION
NOT
TO
BE
SUPERVISED
BY
THE COMMISSION AS AN INVESTMENT BANK HOLD-
ING COMPANY.—
‘‘(A) VOLUNTARY
WITHDRAWAL.—A su-
pervised investment bank holding company that
is supervised pursuant to paragraph (1) may,
upon such terms and conditions as the Commis-
sion deems necessary or appropriate, elect not
to be supervised by the Commission by filing a
written notice of withdrawal from Commission
supervision. Such notice shall not become effec-
tive until 1 year after receipt by the Commis-
304
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
305
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
306
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
307
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
308
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
309
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.
310
‘‘(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
311
(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
312
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:
‘‘(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
Commission pursuant to this subsection.
‘‘(C) The terms ‘affiliate’, ‘bank’, ‘bank
holding company’, ‘company’, ‘control’, ‘savings
association’, and ‘wholesale financial institution’
have the same meanings given in section 2 of
313
the Bank Holding Company Act of 1956 (12
U.S.C. 1841).
‘‘(D) The term ‘insured bank’ has the
same meaning given in section 3 of the Federal
Deposit Insurance Act.
‘‘(E) The term ‘foreign bank’ has the same
meaning given in section 1(b)(7) of the Inter-
national Banking Act of 1978.
‘‘(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) 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
314
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.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 3(a)(34) of the Securities Exchange
Act of 1934 (15 U.S.C. 78c(a)(34)) is amended by
adding at the end the following new subparagraph:
‘‘(H) When used with respect to an institu-
tion described in subparagraph (D), (F), or (G)
of section 2(c)(2), or held under section 4(f), of
the Bank Holding Company Act of 1956—
‘‘(i) the Comptroller of the Currency,
in the case of a national bank or a bank
315
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.’’.
(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’’.
316
Subtitle D—Disclosure of Customer
Costs of Acquiring Financial
Products
SEC. 241. IMPROVED AND CONSISTENT DISCLOSURE.
(a) REVISED REGULATIONS REQUIRED.—Within 1
year after the date of the enactment of this Act, each Fed-
eral financial regulatory authority shall prescribe rules, or
revisions to its rules, to improve the accuracy, simplicity,
and completeness, and to make more consistent, the dis-
closure of information by persons subject to the jurisdic-
tion of such regulatory authority concerning any commis-
sions, fees, or other costs incurred by customers in the
acquisition of financial products.
(b) CONSULTATION.—In prescribing rules and revi-
sions under subsection (a), the Federal financial regu-
latory authorities shall consult with each other and with
appropriate State financial regulatory authorities.
(c) CONSIDERATION OF EXISTING DISCLOSURES.—
In prescribing rules and revisions under subsection (a),
the Federal financial regulatory authorities shall consider
the sufficiency and appropriateness of then existing laws
and rules applicable to persons subject to their jurisdic-
tion, and may prescribe exemptions from the rules and re-
visions required by subsection (a) to the extent appro-
317
priate in light of the objective of this section to increase
the consistency of disclosure practices.
(d) ENFORCEMENT.—Any rule prescribed by a Fed-
eral financial regulatory authority pursuant to this section
shall, for purposes of enforcement, be treated as a rule
prescribed by such regulatory authority pursuant to the
statute establishing such regulatory authority’s jurisdic-
tion over the persons to whom such rule applies.
(e) DEFINITION.—As used in this section, the term
‘‘Federal financial regulatory authority’’ means the Board
of Governors of the Federal Reserve System, the Securi-
ties and Exchange Commission, the Comptroller of the
Currency, the Federal Deposit Insurance Corporation, the
Commodity Futures Trading Commission, and any self-
regulatory organization under the supervision of any of
the foregoing.
Subtitle E—Banks and Bank
Holding Companies
SEC. 251. CONSULTATION.
(a) IN GENERAL.—The Securities and Exchange
Commission shall consult and coordinate comments with
the appropriate Federal banking agency before taking any
action or rendering any opinion with respect to the man-
ner in which any insured depository institution or deposi-
tory institution holding company reports loan loss reserves
318
in its financial statement, including the amount of any
such loan loss reserve.
(b) DEFINITIONS.—For purposes of subsection (a),
the terms ‘‘insured depository institution’’, ‘‘depository in-
stitution holding company’’, and ‘‘appropriate Federal
banking agency’’ have the same meaning as in section 3
of the Federal Deposit Insurance Act.
TITLE III—INSURANCE
Subtitle A—State Regulation of
Insurance
SEC. 301. STATE REGULATION OF THE BUSINESS OF INSUR-
ANCE.
The Act entitled ‘‘An Act to express the intent of the
Congress with reference to the regulation of the business
of insurance’’ and approved March 9, 1945 (15 U.S.C.
1011 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 shall engage in the business of insurance
in a State as principal or agent unless such person 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.
319
SEC. 303. FUNCTIONAL REGULATION OF INSURANCE.
The insurance activities of any person (including a
national bank exercising its power to act as agent under
the eleventh undesignated paragraph of section 13 of the
Federal Reserve Act) 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, 1999, 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
320
treatment under section 72 of the Internal Revenue
Code of 1986.
(c) DEFINITION.—For purposes of this section, the
term ‘‘insurance’’ means—
(1) any product regulated as insurance as of
January 1, 1999, in accordance with the relevant
State insurance law, in the State in which the prod-
uct is provided;
(2) any product first offered after January 1,
1999, which—
(A) a State insurance regulator determines
shall be regulated as insurance in the State in
which the product is provided because the prod-
uct insures, guarantees, or indemnifies against
liability, loss of life, loss of health, or loss
through damage to or destruction of property,
including, but not limited to, surety bonds, life
insurance, health insurance, title insurance, and
property and casualty insurance (such as pri-
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
321
malpractice, ocean marine, inland marine, and
boiler and machinery insurance); and
(B) is not a product or service of a bank
that is—
(i) a deposit product;
(ii) a loan, discount, letter of credit,
or other extension of credit;
(iii) a trust or other fiduciary service;
(iv) a qualified financial contract (as
defined in or determined pursuant to sec-
tion 11(e)(8)(D)(i) of the Federal Deposit
Insurance Act); or
(v) a financial guaranty, except that
this subparagraph (B) shall not apply to a
product that includes an insurance compo-
nent such that if the product is offered or
proposed to be offered by the bank as
principal—
(I) it would be treated as a life
insurance contract under section 7702
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-
322
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) GENERAL PROHIBITION.—No national bank, and
no subsidiary of a national bank, may engage in any activ-
ity involving the underwriting or sale of title insurance.
(b) NONDISCRIMINATION PARITY EXCEPTION.—
(1) IN GENERAL.—Notwithstanding any other
provision of law (including section 104 of this Act),
in the case of any State in which banks organized
under the laws of such State are authorized to sell
title insurance as agency, a national bank and a sub-
sidiary of a national bank may sell title insurance as
agent in such State, but only in the same manner,
to the same extent, and under the same restrictions
323
as such State banks are authorized to sell title in-
surance as agent in such State.
(2) COORDINATION WITH ‘‘WILDCARD’’ PROVI-
SION.—A State law which authorizes State banks to
engage in any activities in such State in which a na-
tional bank may engage shall not be treated as a
statute which authorizes State banks to sell title in-
surance as agent, for purposes of paragraph (1).
(c) GRANDFATHERING WITH CONSISTENT REGULA-
TION.—
(1) IN GENERAL.—Except as provided in para-
graphs (2) and (3) and notwithstanding subsections
(a) and (b), a national bank, and a subsidiary of a
national bank, may conduct title insurance activities
which such national bank or subsidiary was actively
and lawfully conducting before the date of the enact-
ment of this Act.
(2) INSURANCE AFFILIATE.—In the case of a
national bank which has an affiliate which provides
insurance as principal and is not a subsidiary of the
bank, the national bank and any subsidiary of the
national bank may not engage in the underwriting of
title insurance pursuant to paragraph (1).
(3) INSURANCE SUBSIDIARY.—In the case of a
national bank which has a subsidiary which provides
324
insurance as principal and has no affiliate other
than a subsidiary which provides insurance as prin-
cipal, the national bank may not directly engage in
any activity involving the underwriting of title insur-
ance.
(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.
(e) RULE OF CONSTRUCTION.—No provision of this
Act or any other Federal law shall be construed as super-
seding or affecting a State law which was in effect before
the date of the enactment of this Act and which prohibits
title insurance from being offered, provided, or sold in
such State, or from being underwritten with respect to
real property in such State, by any person whatsoever.
SEC. 306. EXPEDITED AND EQUALIZED DISPUTE RESOLU-
TION FOR FEDERAL REGULATORS.
(a) FILING IN COURT OF APPEALS.—In the case of
a regulatory conflict between a State insurance regulator
and a Federal regulator as to whether any product is or
is not insurance, as defined in section 304(c) of this Act,
or whether a State statute, regulation, order, or interpre-
tation regarding any insurance sales or solicitation activity
is properly treated as preempted under Federal law, either
325
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 petition 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
326
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
a petition 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 inserting after section 46 (as added
by section 122(b) of this Act) the following new section:
‘‘SEC. 47. 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 the enactment of the Financial Services Act of
1999, consumer protection regulations (which the
agencies jointly determine to be appropriate) that—
‘‘(A) apply to retail sales practices, solici-
tations, advertising, or offers of any insurance
327
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.
‘‘(b) SALES PRACTICES.—The regulations prescribed
pursuant to subsection (a) shall include anticoercion rules
328
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
‘‘(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 enti-
ty.
‘‘(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,
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
329
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.
‘‘(B) MAKING DISCLOSURE READILY UN-
DERSTANDABLE.—Regulations prescribed under
subparagraph (A) shall encourage the use of
disclosure that is conspicuous, simple, direct,
330
and readily understandable, such as the fol-
lowing:
‘‘(i) ‘NOT FDIC—INSURED’.
‘‘(ii) ‘NOT GUARANTEED BY THE
BANK’.
‘‘(iii) ‘MAY GO DOWN IN VALUE’.
‘‘(iv) ‘NOT INSURED BY ANY
GOVERNMENT AGENCY’.
‘‘(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-
chase by the consumer of such product, an ac-
knowledgment by such consumer of the receipt
331
of the disclosure required under this subsection
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;
‘‘(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; or
‘‘(C) in the case of an institution or sub-
sidiary at which insurance products are sold or
offered for sale, the fact that—
‘‘(i) the approval of an extension of
credit to a customer by the institution or
subsidiary may not be conditioned on the
purchase of an insurance product by such
customer from the institution or sub-
sidiary; and
332
‘‘(ii) the customer is free to purchase
the 
insurance 
product 
from 
another
source.’’.
‘‘(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 insurance product
activity.
‘‘(2) REQUIREMENTS.—Regulations prescribed
pursuant to paragraph (1) shall include the fol-
lowing:
‘‘(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-
333
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
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
334
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 wholesale financial institution or
any person who is engaged in such activities at an
office of the institution or on behalf of the institu-
tion.
‘‘(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 this
Act, the States should enact prohibitions against dis-
crimination with respect 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 one 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 physical harm, se-
335
vere 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.
‘‘(D) Attempting to cause or cause damage
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 the section, which 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 con-
sumers of rights they may have in connection with
such complaints; and
336
‘‘(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-
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, adver-
tising, or offers of any insurance product by
any insured depository institution or wholesale
financial institution or to any person who is en-
337
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
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
338
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-
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
339
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. INTERAGENCY CONSULTATION.
(a) PURPOSE.—It is the intention of the Congress
that the Board of Governors of the Federal Reserve Sys-
tem, as the umbrella supervisor for financial holding com-
panies, and the State insurance regulators, as the func-
tional regulators of companies engaged in insurance activi-
ties, coordinate efforts to supervise companies that control
both a depository institution and a company engaged in
insurance activities regulated under State law. In par-
ticular, Congress believes that the Board and the State
insurance regulators should share, on a confidential basis,
information relevant to the supervision of companies that
control both a depository institution and a company en-
gaged in insurance activities, including information re-
garding the financial health of the consolidated organiza-
tion and information regarding transactions and relation-
ships between insurance companies and affiliated deposi-
tory institutions. The appropriate Federal banking agen-
cies for depository institutions should also share, on a con-
fidential basis, information with the relevant State insur-
ance regulators regarding transactions and relationships
between depository institutions and affiliated companies
340
engaged in insurance activities. The purpose of this sec-
tion is to encourage this coordination and confidential
sharing of information, and to thereby improve both the
efficiency and the quality of the supervision of financial
holding companies and their affiliated depository institu-
tions and companies engaged in insurance activities.
(b) EXAMINATION RESULTS AND OTHER INFORMA-
TION.—
(1) INFORMATION OF THE BOARD.—Upon the
request of the appropriate insurance regulator of
any State, the Board may provide any information
of the Board regarding the financial condition, risk
management policies, and operations of any financial
holding company that controls a company that is en-
gaged in insurance activities and is regulated by
such State insurance regulator, and regarding any
transaction or relationship between such an insur-
ance company and any affiliated depository institu-
tion. The Board may provide any other information
to the appropriate State insurance regulator that the
Board believes is necessary or appropriate to permit
the State insurance regulator to administer and en-
force applicable State insurance laws.
(2) BANKING
AGENCY
INFORMATION.—Upon
the request of the appropriate insurance regulator of
341
any State, the appropriate Federal banking agency
may provide any information of the agency regard-
ing any transaction or relationship between a deposi-
tory institution supervised by such Federal banking
agency and any affiliated company that is engaged
in insurance activities regulated by such State insur-
ance regulator. The appropriate Federal banking
agency may provide any other information to the ap-
propriate State insurance regulator that the agency
believes is necessary or appropriate to permit the
State insurance regulator to administer and enforce
applicable State insurance laws.
(3) STATE INSURANCE REGULATOR INFORMA-
TION.—Upon the request of the Board or the appro-
priate Federal banking agency, a State insurance
regulator may provide any examination or other re-
ports, records, or other information to which such
insurance regulator may have access with respect to
a company which—
(A) is engaged in insurance activities and
regulated by such insurance regulator; and
(B) is an affiliate of an insured depository
institution, wholesale financial institution, or fi-
nancial holding company.
342
(c) CONSULTATION.—Before making any determina-
tion relating to the initial affiliation of, or the continuing
affiliation of, an insured depository institution, wholesale
financial institution, or financial holding company with a
company engaged in insurance activities, the appropriate
Federal banking agency shall consult with the appropriate
State insurance regulator of such company and take the
views of such insurance regulator into account in making
such determination.
(d) EFFECT ON OTHER AUTHORITY.—Nothing in
this section shall limit in any respect the authority of the
appropriate Federal banking agency with respect to an in-
sured depository institution, wholesale financial institu-
tion, or bank holding company or any affiliate thereof
under any provision of law.
(e) CONFIDENTIALITY AND PRIVILEGE.—
(1) CONFIDENTIALITY.—The appropriate Fed-
eral banking agency shall not provide any informa-
tion or material that is entitled to confidential treat-
ment under applicable Federal banking agency regu-
lations, or other applicable law, to a State insurance
regulator unless such regulator agrees to maintain
the information or material in confidence and to
take all reasonable steps to oppose any effort to se-
cure disclosure of the information or material by the
343
regulator. The appropriate Federal banking agency
shall treat as confidential any information or mate-
rial obtained from a State insurance regulator that
is entitled to confidential treatment under applicable
State regulations, or other applicable law, and take
all reasonable steps to oppose any effort to secure
disclosure of the information or material by the Fed-
eral banking agency.
(2) PRIVILEGE.—The provision pursuant to this
section of information or material by a Federal
banking agency or State insurance regulator shall
not constitute a waiver of, or otherwise affect, any
privilege to which the information or material is oth-
erwise subject.
(f) DEFINITIONS.—For purposes of this section, the
following definitions shall apply:
(1) APPROPRIATE FEDERAL BANKING AGENCY;
INSURED
DEPOSITORY
INSTITUTION.—The terms
‘‘appropriate Federal banking agency’’ and ‘‘insured
depository institution’’ have the same meanings as
in section 3 of the Federal Deposit Insurance Act.
(2) BOARD; FINANCIAL
HOLDING
COMPANY;
AND
WHOLESALE
FINANCIAL
INSTITUTION.—The
terms ‘‘Board’’, ‘‘financial holding company’’, and
‘‘wholesale financial institution’’ have the same
344
meanings as in section 2 of the Bank Holding Com-
pany Act of 1956.
SEC. 310. DEFINITION OF STATE.
For purposes of this subtitle, the term ‘‘State’’ means
any State of the United States, the District of Columbia,
any territory of the United States, Puerto Rico, Guam,
American Samoa, the Trust Territory of the Pacific Is-
lands, the Virgin Islands, and the Northern Mariana Is-
lands.
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.
345
(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-
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.
346
(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
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:
347
(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
the State insurance regulator of the transferee domi-
cile.
(2) CONTINUED VOTING CONTROL BY POLICY-
HOLDERS; REVIEW OF PUBLIC STOCK OFFERING.—
After the consummation of a reorganization, the pol-
icyholders of the reorganized insurer shall have the
same voting rights with respect to the mutual hold-
ing company as they had before the reorganization
with respect to the mutual insurer. With respect to
an initial public offering of stock, the offering shall
be conducted in compliance with applicable securities
laws and in a manner approved by the State insur-
ance regulator of the transferee domicile.
(3) AWARD OF STOCK OR GRANT OF OPTIONS
TO OFFICERS AND DIRECTORS.—For a period of 6
months after completion of an initial public offering,
348
neither a stock holding company nor the converted
insurer shall award any stock options or stock
grants to persons who are elected officers or direc-
tors of the mutual holding company, the stock hold-
ing company, or the converted insurer, except with
respect to any such awards or options to which a
person is entitled as a policyholder and as approved
by the State insurance regulator of the transferee
domicile.
(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,
349
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 has procured insurance
from or placed insurance with any insurer or affil-
iate of such insurer that plans to redomesticate, or
has redomesticated, pursuant to this subtitle, but
only to the extent that such law would treat such in-
sured licensee or other intermediary differently than
if the person procured insurance from, or placed in-
surance with, an insured licensee or other inter-
mediary which had not redomesticated;
(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.
350
(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
to revoke an original or renewal certificate of authority
of a redomesticated insurer immediately following re-
domestication, except on grounds and in a manner con-
sistent with its past practices regarding the issuance of
certificates of authority to foreign insurers that are not
redomesticating, 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-
351
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—
(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
352
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;
(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,
353
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
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
354
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-
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
355
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-
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.
356
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 the 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
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;
357
(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
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:
358
(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,
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
359
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-
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-
360
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.
(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,
361
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).
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.).
362
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 pre-
serving the right of States to license, supervise, and dis-
cipline insurance producers and to prescribe and enforce
laws and regulations with regard to insurance-related con-
sumer 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-
363
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—
(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.
364
(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
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-
365
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.
(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.
366
(i) OFFICE OF CONSUMER COMPLAINTS.—
(1) IN GENERAL.—The Association shall estab-
lish an office of consumer complaints that shall—
(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
367
and, as practicable, other alternative means of com-
munication with consumers, such as an Internet
home page.
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 gov-
erning 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 seven members appointed by the NAIC.
(2) REQUIREMENT.—At least four of the mem-
bers 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 the enact-
ment of this Act, the NAIC has not appointed
368
the initial seven members of the Board of the
Association, the initial Board shall consist of
the seven State insurance regulators of the
seven States with the greatest total dollar
amount of commercial-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 seven
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 one-third 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-
369
ment of the initial Board for the remainder of the term
of the vacating member.
(f) MEETINGS.—The Board shall meet at the call of
the chairperson, or as otherwise provided by the bylaws
of the Association.
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-
370
laws or any proposed amendment to the bylaws, ac-
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) thirty 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-
371
tion in writing of such finding, require that the
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
372
finds such longer period to be appropriate and sets
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
373
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-
374
ing to the administration or organization of the
Association shall take effect—
(i) upon the date of filing with the
NAIC, if such proposed rule or amendment
is designated by the Association as relating
solely to matters which the NAIC, con-
sistent with the public interest and the
purposes of this subsection, determines by
rule do not require the procedures set forth
in this paragraph; or
(ii) upon such date as the NAIC shall
for good cause determine.
(B) ABROGATION BY THE NAIC.—
(i) IN GENERAL.—At any time within
60 days after the date of filing of any pro-
posed rule or amendment under subpara-
graph (A)(i) or clause (ii) of this subpara-
graph, the NAIC may repeal such rule or
amendment and require that the rule or
amendment be refiled and reviewed in ac-
cordance with this paragraph, if the NAIC
finds that such action is necessary or ap-
propriate in the public interest, for the
protection of insurance producers or policy-
375
holders, or otherwise in furtherance of the
purposes of this subtitle.
(ii) EFFECT OF RECONSIDERATION BY
THE NAIC.—Any action of the NAIC pur-
suant to clause (i) shall—
(I) not affect the validity or force
of a rule change during the period
such rule or amendment was in effect;
and
(II) not be considered to be a
final action.
(c) ACTION REQUIRED BY THE NAIC.—The NAIC
may, in accordance with such rules as the NAIC deter-
mines to be necessary or appropriate to the public interest
or to carry out the purposes of this subtitle, require the
Association to adopt, amend, or repeal any bylaw, rule or
amendment of the Association, whenever adopted.
(d) DISCIPLINARY ACTION BY THE ASSOCIATION.—
(1) SPECIFICATION OF CHARGES.—In any pro-
ceeding to determine whether membership shall be
denied, suspended, revoked, or not renewed (here-
after in this section referred to as a ‘‘disciplinary ac-
tion’’), the Association shall bring specific charges,
notify such member of such charges, give the mem-
376
ber an opportunity to defend against the charges,
and keep a record.
(2) SUPPORTING
STATEMENT.—A determina-
tion to take disciplinary action shall be supported by
a statement setting forth—
(A) any act or practice in which such
member has been found to have been engaged;
(B) the specific provision of this subtitle,
the rules or regulations under this subtitle, or
the rules of the Association which any such act
or practice is deemed to violate; and
(C) the sanction imposed and the reason
for such sanction.
(e) NAIC REVIEW OF DISCIPLINARY ACTION.—
(1) NOTICE TO THE NAIC.—If the Association
orders any disciplinary action, the Association shall
promptly notify the NAIC of such action.
(2) REVIEW BY THE NAIC.—Any disciplinary
action taken by the Association shall be subject to
review by the NAIC—
(A) on the NAIC’s own motion; or
(B) upon application by any person ag-
grieved by such action if such application is
filed with the NAIC not more than 30 days
after the later of—
377
(i) the date the notice was filed with
the NAIC pursuant to paragraph (1); or
(ii) the date the notice of the discipli-
nary action was received by such aggrieved
person.
(f) EFFECT OF REVIEW.—The filing of an applica-
tion to the NAIC for review of a disciplinary action, or
the institution of review by the NAIC on the NAIC’s own
motion, shall not operate as a stay of disciplinary action
unless the NAIC otherwise orders.
(g) SCOPE OF REVIEW.—
(1) IN GENERAL.—In any proceeding to review
such action, after notice and the opportunity for
hearing, the NAIC shall—
(A) determine whether the action should be
taken;
(B) affirm, modify, or rescind the discipli-
nary sanction; or
(C) remand to the Association for further
proceedings.
(2) DISMISSAL OF REVIEW.—The NAIC may
dismiss a proceeding to review disciplinary action if
the NAIC finds that—
(A) the specific grounds on which the ac-
tion is based exist in fact;
378
(B) the action is in accordance with appli-
cable rules and regulations; and
(C) such rules and regulations are, and
were, applied in a manner consistent with the
purposes of this subtitle.
SEC. 329. ASSESSMENTS.
(a) INSURANCE PRODUCERS SUBJECT TO ASSESS-
MENT.—The Association may establish such application
and membership fees as the Association finds necessary
to cover the costs of its operations, including fees made
reimbursable to the NAIC under subsection (b), except
that, in setting such fees, the Association may not dis-
criminate against smaller insurance producers.
(b) NAIC ASSESSMENTS.—The NAIC may assess the
Association for any costs that the NAIC incurs under this
subtitle.
SEC. 330. FUNCTIONS OF THE NAIC.
(a) ADMINISTRATIVE PROCEDURE.—Determinations
of the NAIC, for purposes of making rules pursuant to
section 328, shall be made after appropriate notice and
opportunity for a hearing and for submission of views of
interested persons.
(b) EXAMINATIONS AND REPORTS.—
(1) EXAMINATIONS.—The NAIC may make
such examinations and inspections of the Association
379
and require the Association to furnish to the NAIC
such reports and records or copies thereof as the
NAIC may consider necessary or appropriate in the
public interest or to effectuate the purposes of this
subtitle.
(2) REPORT
BY
ASSOCIATION.—As soon as
practicable after the close of each fiscal year, the As-
sociation shall submit to the NAIC a written report
regarding the conduct of its business, and the exer-
cise of the other rights and powers granted by this
subtitle, during such fiscal year. Such report shall
include financial statements setting forth the finan-
cial position of the Association at the end of such
fiscal year and the results of its operations (includ-
ing the source and application of its funds) for such
fiscal year. The NAIC shall transmit such report to
the President and the Congress with such comment
thereon as the NAIC determines to be appropriate.
SEC. 331. LIABILITY OF THE ASSOCIATION AND THE DIREC-
TORS, OFFICERS, AND EMPLOYEES OF THE
ASSOCIATION.
(a) IN GENERAL.—The Association shall not be
deemed to be an insurer or insurance producer within the
meaning of any State law, rule, regulation, or order regu-
lating or taxing insurers, insurance producers, or other en-
380
tities engaged in the business of insurance, including pro-
visions imposing premium taxes, regulating insurer sol-
vency or financial condition, establishing guaranty funds
and levying assessments, or requiring claims settlement
practices.
(b) LIABILITY OF THE ASSOCIATION, ITS DIREC-
TORS, OFFICERS, AND EMPLOYEES.—Neither the Associa-
tion nor any of its directors, officers, or employees shall
have any liability to any person for any action taken or
omitted in good faith under or in connection with any mat-
ter subject to this subtitle.
SEC. 332. ELIMINATION OF NAIC OVERSIGHT.
(a) IN GENERAL.—The Association shall be estab-
lished without NAIC oversight and the provisions set forth
in section 324, subsections (a), (b), (c), and (e) of section
328, and sections 329(b) and 330 of this subtitle shall
cease to be effective if, at the end of the 2-year period
beginning on the date on which the provisions of this sub-
title take effect pursuant to section 321—
(1) at least a majority of the States rep-
resenting at least 50 percent of the total United
States commercial-lines insurance premiums have
not satisfied the uniformity or reciprocity require-
ments of subsections (a), (b), and (c) of section 321;
and
381
(2) the NAIC has not approved the Associa-
tion’s bylaws as required by section 328 or is unable
to operate or supervise the Association, or the Asso-
ciation is not conducting its activities as required
under this Act.
(b) BOARD APPOINTMENTS.—If the repeals required
by subsection (a) are implemented, the following shall
apply:
(1) GENERAL
APPOINTMENT
POWER.—The
President, with the advice and consent of the Sen-
ate, shall appoint the members of the Association’s
Board established under section 326 from lists of
candidates recommended to the President by the
National Association of Insurance Commissioners.
(2) PROCEDURES
FOR
OBTAINING
NATIONAL
ASSOCIATION
OF
INSURANCE
COMMISSIONERS
AP-
POINTMENT RECOMMENDATIONS.—
(A) INITIAL
DETERMINATION
AND
REC-
OMMENDATIONS.—After the date on which the
provisions of subsection (a) take effect, the
NAIC shall, not later than 60 days thereafter,
provide a list of recommended candidates to the
President. If the NAIC fails to provide a list by
that date, or if any list that is provided does
not include at least 14 recommended candidates
382
or comply with the requirements of section
326(c), the President shall, with the advice and
consent of the Senate, make the requisite ap-
pointments without considering the views of the
NAIC.
(B) SUBSEQUENT APPOINTMENTS.—After
the initial appointments, the NAIC shall pro-
vide a list of at least six recommended can-
didates for the Board to the President by Janu-
ary 15 of each subsequent year. If the NAIC
fails to provide a list by that date, or if any list
that is provided does not include at least six
recommended candidates or comply with the re-
quirements of section 326(c), the President,
with the advice and consent of the Senate, shall
make the requisite appointments without con-
sidering the views of the NAIC.
(C) PRESIDENTIAL OVERSIGHT.—
(i) REMOVAL.—If the President deter-
mines that the Association is not acting in
the interests of the public, the President
may remove the entire existing Board for
the remainder of the term to which the
members of the Board were appointed and
appoint, with the advice and consent of the
383
Senate, new members to fill the vacancies
on the Board for the remainder of such
terms.
(ii) SUSPENSION
OF
RULES
OR
AC-
TIONS.—The President, or a person des-
ignated by the President for such purpose,
may suspend the effectiveness of any rule,
or prohibit any action, of the Association
which the President or the designee deter-
mines is contrary to the public interest.
(c) ANNUAL REPORT.—As soon as practicable after
the close of each fiscal year, the Association shall submit
to the President and to the Congress a written report rel-
ative to the conduct of its business, and the exercise of
the other rights and powers granted by this subtitle, dur-
ing such fiscal year. Such report shall include financial
statements setting forth the financial position of the Asso-
ciation at the end of such fiscal year and the results of
its operations (including the source and application of its
funds) for such fiscal year.
SEC. 333. RELATIONSHIP TO STATE LAW.
(a) PREEMPTION OF STATE LAWS.—State laws, reg-
ulations, provisions, or other actions purporting to regu-
late insurance producers shall be preempted as provided
in subsection (b).
384
(b) PROHIBITED ACTIONS.—No State shall—
(1) impede the activities of, take any action
against, or apply any provision of law or regulation
to, any insurance producer because that insurance
producer or any affiliate plans to become, has ap-
plied to become, or is a member of the Association;
(2) impose any requirement upon a member of
the Association that it pay different fees to be li-
censed or otherwise qualified to do business in that
State, including bonding requirements, based on its
residency;
(3) impose any licensing, appointment, integ-
rity, personal or corporate qualifications, education,
training, experience, residency, or continuing edu-
cation requirement upon a member of the Associa-
tion that is different from the criteria for member-
ship in the Association or renewal of such member-
ship, except that counter-signature requirements im-
posed on nonresident producers shall not be deemed
to have the effect of limiting or conditioning a pro-
ducer’s activities because of its residence or place of
operations under this section; or
(4) implement the procedures of such State’s
system of licensing or renewing the licenses of insur-
385
ance producers in a manner different from the au-
thority of the Association under section 325.
(c) SAVINGS PROVISION.—Except as provided in sub-
sections (a) and (b), no provision of this section shall be
construed as altering or affecting the continuing effective-
ness of any law, regulation, provision, or other action of
any State which purports to regulate insurance producers,
including any such law, regulation, provision, or action
which purports to regulate unfair trade practices or estab-
lish consumer protections, including countersignature
laws.
SEC. 334. COORDINATION WITH OTHER REGULATORS.
(a) COORDINATION WITH STATE INSURANCE REGU-
LATORS.—The Association shall have the authority to—
(1) issue uniform insurance producer applica-
tions and renewal applications that may be used to
apply for the issuance or removal of State licenses,
while preserving the ability of each State to impose
such conditions on the issuance or renewal of a li-
cense as are consistent with section 333;
(2) establish a central clearinghouse through
which members of the Association may apply for the
issuance or renewal of licenses in multiple States;
and
386
(3) establish or utilize a national database for
the collection of regulatory information concerning
the activities of insurance producers.
(b) COORDINATION WITH THE NATIONAL ASSOCIA-
TION OF SECURITIES DEALERS.—The Association shall
coordinate with the National Association of Securities
Dealers in order to ease any administrative burdens that
fall on persons that are members of both associations, con-
sistent with the purposes of this subtitle and the Federal
securities laws.
SEC. 335. JUDICIAL REVIEW.
(a) JURISDICTION.—The appropriate United States
district court shall have exclusive jurisdiction over litiga-
tion involving the Association, including disputes between
the Association and its members that arise under this sub-
title. Suits brought in State court involving the Associa-
tion shall be deemed to have arisen under Federal law and
therefore be subject to jurisdiction in the appropriate
United States district court.
(b) EXHAUSTION OF REMEDIES.—An aggrieved per-
son shall be required to exhaust all available administra-
tive remedies before the Association and the NAIC before
it may seek judicial review of an Association decision.
(c) STANDARDS
OF REVIEW.—The standards set
forth in section 553 of title 5, United States Code, shall
387
be applied whenever a rule or bylaw of the Association is
under judicial review, and the standards set forth in sec-
tion 554 of title 5, United States Code, shall be applied
whenever a disciplinary action of the Association is judi-
cially reviewed.
SEC. 336. DEFINITIONS.
For purposes of this subtitle, the following definitions
shall apply:
(1) HOME
STATE.—The term ‘‘home State’’
means the State in which the insurance producer
maintains its principal place of residence and is li-
censed to act as an insurance producer.
(2) INSURANCE.—The term ‘‘insurance’’ means
any product, other than title insurance, defined or
regulated as insurance by the appropriate State in-
surance regulatory authority.
(3) INSURANCE PRODUCER.—The term ‘‘insur-
ance producer’’ means any insurance agent or
broker, surplus lines broker, insurance consultant,
limited insurance representative, and any other per-
son that solicits, negotiates, effects, procures, deliv-
ers, renews, continues or binds policies of insurance
or offers advice, counsel, opinions or services related
to insurance.
388
(4) STATE.—The term ‘‘State’’ includes any
State, the District of Columbia, American Samoa,
Guam, Puerto Rico, and the United States Virgin
Islands.
(5) STATE
LAW.—The term ‘‘State law’’ in-
cludes all laws, decisions, rules, regulations, or other
State action having the effect of law, of any State.
A law of the United States applicable only to the
District of Columbia shall be treated as a State law
rather than a law of the United States.
Subtitle D—Rental Car Agency
Insurance Activities
SEC. 341. STANDARD OF REGULATION FOR MOTOR VEHI-
CLE RENTALS.
(a) PROTECTION AGAINST RETROACTIVE APPLICA-
TION OF REGULATORY AND LEGAL ACTION.—Except as
provided in subsection (b), during the 3-year period begin-
ning on the date of the enactment of this Act, it shall
be a presumption that no State law imposes any licensing,
appointment, or education requirements on any person
who solicits the purchase of or sells insurance connected
with, and incidental to, the lease or rental of a motor vehi-
cle.
389
(b) PREEMINENCE OF STATE INSURANCE LAW.—No
provision of this section shall be construed as altering the
validity, interpretation, construction, or effect of—
(1) any State statute;
(2) the prospective application of any court
judgment interpreting or applying any State statute;
or
(3) the prospective application of any final
State regulation, order, bulletin, or other statutorily
authorized interpretation or action,
which, by its specific terms, expressly regulates or exempts
from regulation any person who solicits the purchase of
or sells insurance connected with, and incidental to, the
short-term lease or rental of a motor vehicle.
(c) SCOPE
OF APPLICATION.—This section shall
apply with respect to—
(1) the lease or rental of a motor vehicle for a
total period of 90 consecutive days or less; and
(2) insurance which is provided in connection
with, and incidentally to, such lease or rental for a
period of consecutive days not exceeding the lease or
rental period.
(d) MOTOR VEHICLE DEFINED.—For purposes of
this section, the term ‘‘motor vehicle’’ has the meaning
390
given to such term in section 13102 of title 49, United
States Code.
Subtitle E—Confidentiality
SEC. 351. CONFIDENTIALITY OF HEALTH AND MEDICAL IN-
FORMATION.
(a) IN GENERAL.—A company which underwrites or
sells annuities contracts or contracts insuring, guaran-
teeing, or indemnifying against loss, harm, damage, ill-
ness, disability, or death (other than credit-related insur-
ance) and any subsidiary or affiliate thereof shall maintain
a practice of protecting the confidentiality of individually
identifiable customer health and medical and genetic infor-
mation and may disclose such information only—
(1) with the consent, or at the direction, of the
customer;
(2) for insurance underwriting and reinsuring
policies, account administration, reporting, inves-
tigating, or preventing fraud or material misrepre-
sentation, processing premium payments, processing
insurance claims, administering insurance benefits
(including utilization review activities), providing in-
formation to the customer’s physician or other
health care provider, participating in research
projects, enabling the purchase, transfer, merger, or
sale of any insurance-related business, or as other-
391
wise required or specifically permitted by Federal or
State law; or
(3) in connection with—
(A) the authorization, settlement, billing,
processing, clearing, transferring, reconciling,
or collection of amounts charged, debited, or
otherwise paid using a debit, credit, or other
payment card or account number, or by other
payment means;
(B) the transfer of receivables, accounts,
or interest therein;
(C) the audit of the debit, credit, or other
payment information;
(D) compliance with Federal, State, or
local law;
(E) compliance with a properly authorized
civil, criminal, or regulatory investigation by
Federal, State, or local authorities as governed
by the requirements of this section; or
(F) fraud protection, risk control, resolving
customer disputes or inquiries, communicating
with the person to whom the information re-
lates, or reporting to consumer reporting agen-
cies.
392
(b) STATE ACTIONS FOR VIOLATIONS.—In addition
to such other remedies as are provided under State law,
if the chief law enforcement officer of a State, State insur-
ance regulator, or an official or agency designated by a
State, has reason to believe that any person has violated
or is violating this title, the State may bring an action
to enjoin such violation in any appropriate United States
district court or in any other court of competent jurisdic-
tion.
(c) EFFECTIVE DATE; SUNSET.—
(1) EFFECTIVE DATE.—Except as provided in
paragraph (2), subsection (a) shall take effect on
February 1, 2000.
(2) SUNSET.—Subsection (a) shall not take ef-
fect if, or shall cease to be effective on and after the
date on which, legislation is enacted that satisfies
the requirements in section 264(c)(1) of the Health
Insurance Portability and Accountability Act of
1996 (Public Law 104–191; 110 Stat. 2033).
(d) CONSULTATION.—While subsection (a) is in ef-
fect, State insurance regulatory authorities, through the
National Association of Insurance Commissioners, shall
consult with the Secretary of Health and Human Services
in connection with the administration of such subsection.
393
TITLE 
IV—UNITARY 
SAVINGS
AND LOAN HOLDING COMPA-
NIES
SEC. 401. PROHIBITION ON NEW UNITARY SAVINGS AND
LOAN HOLDING COMPANIES.
(a) IN GENERAL.—Section 10(c) of the Home Own-
ers’ Loan Act (12 U.S.C. 1467a(c)) is amended by adding
at the end the following new paragraph:
‘‘(9) TERMINATION OF EXPANDED POWERS FOR
NEW UNITARY HOLDING COMPANY.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B) and notwithstanding paragraph (3),
no company may directly or indirectly, includ-
ing through any merger, consolidation, or other
type of business combination, acquire control of
a savings association after March 4, 1999, un-
less the company is engaged, directly or indi-
rectly (including through a subsidiary other
than a savings association), only in activities
that are permitted—
‘‘(i) under paragraph (1)(C) or (2); or
‘‘(ii) for financial holding companies
under section 6(c) of the Bank Holding
Company Act of 1956.
394
‘‘(B) EXISTING UNITARY HOLDING COMPA-
NIES AND THE SUCCESSORS TO SUCH COMPA-
NIES.—Subparagraph (A) shall not apply, and
paragraph (3) shall continue to apply, to a com-
pany (or any subsidiary of such company)
that—
‘‘(i) either—
‘‘(I) acquired one or more sav-
ings associations described in para-
graph (3) pursuant to applications at
least one of which was filed on or be-
fore March 4, 1999; or
‘‘(II) subject to subparagraph
(C), became a savings and loan hold-
ing company by acquiring control of
the company described in subclause
(I); and
‘‘(ii) continues to control the savings
association referred to in clause (i)(II) or
the successor to any such savings associa-
tion.
‘‘(C) NOTICE PROCESS FOR NONFINANCIAL
ACTIVITIES BY A SUCCESSOR UNITARY HOLDING
COMPANY.—
395
‘‘(i) NOTICE
REQUIRED.—Subpara-
graph (B) shall not apply to any company
described in subparagraph (B)(i)(II) which
engages, directly or indirectly, in any activ-
ity other than activities described in
clauses (i) and (ii) of subparagraph (A),
unless—
‘‘(I) in addition to an application
to the Director under this section to
become a savings and loan holding
company, the company submits a no-
tice to the Board of Governors of the
Federal Reserve System of such non-
financial activities in the same man-
ner as a notice of nonbanking activi-
ties is filed with the Board under sec-
tion 4(j) of the Bank Holding Com-
pany Act of 1956; and
‘‘(II) before the end of the appli-
cable period under such section 4(j),
the Board either approves or does not
disapprove of the continuation of such
activities by such company, directly or
indirectly, after becoming a savings
and loan holding company.
396
‘‘(ii) PROCEDURE.—Section 4(j) of
the Bank Holding Company Act of 1956,
including the standards for review, shall
apply to any notice filed with the Board
under this subparagraph in the same man-
ner as it applies to notices filed under such
section.’’.
(b) TECHNICAL AND CONFORMING AMENDMENT.—
Section 10(c)(3) of the Home Owners’ Loan Act (12
U.S.C. 1467a(c)(3)) is amended by striking ‘‘Notwith-
standing’’ and inserting ‘‘Except as provided in paragraph
(9) and notwithstanding’’.
(c) CONFORMING AMENDMENT.—Section 10(o)(5) of
the Home Owners’ Loan Act (12 U.S.C. 1467a(o)(5)) is
amended—
(1) in subparagraph (E), by striking ‘‘, except
subparagraph (B)’’; and
(2) by adding at the end the following new sub-
paragraph:
‘‘(F) In the case of a mutual holding com-
pany which is a savings and loan holding com-
pany described in subsection (c)(3), engaging in
the activities permitted for financial holding
companies under section 6(c) of the Bank Hold-
ing Company Act of 1956.’’.
397
SEC. 402. RETENTION OF ‘‘FEDERAL’’ IN NAME OF CON-
VERTED FEDERAL SAVINGS ASSOCIATION.
Section 2 of the Act entitled ‘‘An Act to enable na-
tional banking associations to increase their capital stock
and to change their names or locations’’, approved May
1, 1886 (12 U.S.C. 30), is amended by adding at the end
the following new subsection:
‘‘(d) RETENTION OF ‘FEDERAL’ IN NAME OF CON-
VERTED FEDERAL SAVINGS ASSOCIATION.—
‘‘(1) IN GENERAL.—Notwithstanding subsection
(a) or any other provision of law, any depository in-
stitution the charter of which is converted from that
of a Federal savings association to a national bank
or a State bank after the date of the enactment of
the Financial Services Act of 1999 may retain the
term ‘Federal’ in the name of such institution if
such depository institution remains an insured de-
pository institution.
‘‘(2) DEFINITIONS.—For purposes of this sub-
section, the terms ‘depository institution’, ‘insured
depository institution’, ‘national bank’, and ‘State
bank’ have the same meanings as in section 3 of the
Federal Deposit Insurance Act.’’.
398
TITLE V—PRIVACY
Subtitle A—Disclosure of
Nonpublic Personal Information
SEC. 501. PROTECTION OF NONPUBLIC PERSONAL INFOR-
MATION.
(a) PRIVACY OBLIGATION POLICY.—It is the policy
of the Congress that each financial institution has an af-
firmative and continuing obligation to respect the privacy
of its customers and to protect the security and confiden-
tiality of those customers’ nonpublic personal information.
(b) FINANCIAL INSTITUTIONS SAFEGUARDS.—In fur-
therance of the policy in subsection (a), each agency or
authority described in section 505(a) shall establish appro-
priate standards for the financial institutions subject to
their jurisdiction relating to administrative, technical, and
physical safeguards—
(1) to insure the security and confidentiality of
customer records and information;
(2) to protect against any anticipated threats or
hazards to the security or integrity of such records;
and
(3) to protect against unauthorized access to or
use of such records or information which could re-
sult in substantial harm or inconvenience to any cus-
tomer.
399
SEC. 502. OBLIGATIONS WITH RESPECT TO DISCLOSURES
OF PERSONAL INFORMATION.
(a) NOTICE REQUIREMENTS.—Except as otherwise
provided in this subtitle, a financial institution may not,
directly or through any affiliate, disclose to a nonaffiliated
third party any nonpublic personal information, unless
such financial institution provides or has provided to the
consumer a notice that complies with section 503(b).
(b) OPT OUT.—
(1) IN GENERAL.—A financial institution may
not disclose nonpublic personal information to non-
affiliated third parties unless—
(A) such financial institution clearly and
conspicuously discloses to the consumer, in
writing or in electronic form (or other form per-
mitted by the regulations prescribed under sec-
tion 504), that such information may be dis-
closed to such third parties;
(B) the consumer is given the opportunity,
before the time that such information is initially
disclosed, to direct that such information not be
disclosed to such third parties; and
(C) the consumer is given an explanation
of how the consumer can exercise that non-
disclosure option.
400
(2) EXCEPTION.—This subsection shall not pre-
vent a financial institution from providing nonpublic
personal information to a nonaffiliated third party to
perform services or functions on behalf of the finan-
cial institution, including marketing of the financial
institution’s own products or services or financial
products or services offered pursuant to joint agree-
ments between two or more financial institutions
that comply with the requirements imposed by the
regulations prescribed under section 504, if the fi-
nancial institution fully discloses the providing of
such information and enters into a contractual
agreement with the third party that requires the
third party to maintain the confidentiality of such
information.
(c) LIMITS ON REUSE OF INFORMATION.—Except as
otherwise provided in this subtitle, a nonaffiliated third
party that receives from a financial institution nonpublic
personal information under this section shall not, directly
or through an affiliate of such receiving third party, dis-
close such information to any other person that is a non-
affiliated third party of both the financial institution and
such receiving third party, unless such disclosure would
be lawful if made directly to such other person by the fi-
nancial institution.
401
(d) LIMITATIONS ON THE SHARING OF ACCOUNT
NUMBER INFORMATION FOR MARKETING PURPOSES.—A
financial institution shall not disclose an account number
or similar form of access number or access code for a cred-
it card account, deposit account, or transaction account
of a consumer to any nonaffiliated third party for use in
telemarketing, direct mail marketing, or other marketing
through electronic mail to the consumer.
(e) GENERAL EXCEPTIONS.—Subsections (a) and (b)
shall not prohibit the disclosure of nonpublic personal
information—
(1) as necessary to effect, administer, or en-
force a transaction requested or authorized by the
consumer, or in connection with—
(A) servicing or processing a financial
product or service requested or authorized by
the consumer;
(B) maintaining or servicing the con-
sumer’s account with the financial institution;
or
(C) a proposed or actual securitization,
secondary market sale (including sales of serv-
icing rights), or similar transaction related to a
transaction of the consumer;
402
(2) with the consent or at the direction of the
consumer;
(3) to protect the confidentiality or security of
its records pertaining to the consumer, the service or
product, or the transaction therein, or to protect
against or prevent actual or potential fraud, unau-
thorized transactions, claims, or other liability, for
required institutional risk control, or for resolving
customer disputes or inquiries, or to persons holding
a beneficial interest relating to the consumer, or to
persons acting in a fiduciary capacity on behalf of
the consumer;
(4) to provide information to insurance rate ad-
visory organizations, guaranty funds or agencies, ap-
plicable rating agencies of the financial institution,
persons assessing the institution’s compliance with
industry standards, and the institution’s attorneys,
accountants, and auditors;
(5) to the extent specifically permitted or re-
quired under other provisions of law and in accord-
ance with the Right to Financial Privacy Act of
1978, to law enforcement agencies (including a Fed-
eral functional regulator, a State insurance author-
ity, or the Federal Trade Commission), self-regu-
403
latory organizations, or for an investigation on a
matter related to public safety;
(6) to a consumer reporting agency in accord-
ance with the Fair Credit Reporting Act, or in ac-
cordance with interpretations of such Act by the
Board of Governors of the Federal Reserve System
or the Federal Trade Commission, including inter-
pretations published as commentary (16 CFR 601–
622);
(7) in connection with a proposed or actual
sale, merger, transfer, or exchange of all or a por-
tion of a business or operating unit if the disclosure
of nonpublic personal information concerns solely
consumers of such business or unit; or
(8) to comply with Federal, State, or local laws,
rules, and other applicable legal requirements; to
comply with a properly authorized civil, criminal, or
regulatory investigation or subpoena by Federal,
State, or local authorities; or to respond to judicial
process or government regulatory authorities having
jurisdiction over the financial institution for exam-
ination, compliance, or other purposes as authorized
by law.
404
SEC. 503. DISCLOSURE OF INSTITUTION PRIVACY POLICY.
(a) DISCLOSURE REQUIRED.—A financial institution
shall clearly and conspicuously disclose to each consumer,
at the time of establishing the customer relationship with
the consumer and not less than annually, in writing or
in electronic form (or other form permitted by the regula-
tions prescribed under section 504), its policies and prac-
tices with respect to protecting the nonpublic personal in-
formation of consumers in accordance with the rules pre-
scribed under section 504.
(b) INFORMATION TO BE INCLUDED.—The disclosure
required by subsection (a) shall include—
(1) the policy and practices of the institution
with respect to disclosing nonpublic personal infor-
mation to nonaffiliated third parties, other than
agents of the institution, consistent with section 502
of this subtitle, and including—
(A) the categories of persons to whom the
information is or may be disclosed, other than
the persons to whom the information may be
provided pursuant to section 502(e); and
(B) the practices and policies of the insti-
tution with respect to disclosing of nonpublic
personal information of persons who have
ceased to be customers of the financial institu-
tion;
405
(2) the categories of nonpublic personal infor-
mation that are collected by the financial institution;
(3) the policies that the institution maintains to
protect the confidentiality and security of nonpublic
personal information in accordance with section 501;
and
(4) the disclosures required, if any, under sec-
tion 603(d)(2)(A)(iii) of the Fair Credit Reporting
Act.
SEC. 504. RULEMAKING.
(a) REGULATORY AUTHORITY.—The Federal bank-
ing agencies, the National Credit Union Association, the
Secretary of the Treasury, and the Securities and Ex-
change Commission, shall jointly prescribe, after consulta-
tion with the Federal Trade Commission, and representa-
tives of State insurance authorities designated by the Na-
tional Association of Insurance Commissioners, such regu-
lations as may be necessary to carry out the purposes of
this subtitle. Such regulations shall be prescribed in ac-
cordance with applicable requirements of the title 5,
United States Code, and shall be issued in final form with-
in 6 months after the date of enactment of this Act.
(b) AUTHORITY TO GRANT EXCEPTIONS.—The regu-
lations prescribed under subsection (a) may include such
additional exceptions to subsections (a) and (b) of section
406
502 as are deemed consistent with the purposes of this
subtitle.
SEC. 505. ENFORCEMENT.
(a) IN GENERAL.—This subtitle and the rules pre-
scribed thereunder shall be enforced by the Federal func-
tional regulators, the State insurance authorities, and the
Federal Trade Commission with respect to financial insti-
tutions subject to their jurisdiction under applicable law,
as follows:
(1) Under section 8 of the Federal Deposit In-
surance Act, in the case of—
(A) national banks, Federal branches and
Federal agencies of foreign banks, and any sub-
sidiaries of such entities, by the Office of the
Comptroller of the Currency;
(B) member banks of the Federal Reserve
System (other than national banks), branches
and agencies of foreign banks (other than Fed-
eral branches, Federal agencies, and insured
State branches of foreign banks), commercial
lending companies owned or controlled by for-
eign banks, organizations operating under sec-
tion 25 or 25A of the Federal Reserve Act,
bank holding companies and their nonbank sub-
sidiaries or affiliates (except broker-dealers, af-
407
filiates providing insurance, investment compa-
nies, and investment advisers), by the Board of
Governors of the Federal Reserve System;
(C) banks insured by the Federal Deposit
Insurance Corporation (other than members of
the Federal Reserve System), insured State
branches of foreign banks, and any subsidiaries
of such entities, by the Board of Directors of
the Federal Deposit Insurance Corporation; and
(D) savings association the deposits of
which are insured by the Federal Deposit In-
surance Corporation, and any subsidiaries of
such a savings association, by the Director of
the Office of Thrift Supervision.
(2) Under the Federal Credit Union Act, by the
Administrator of the National Credit Union Admin-
istration with respect to any Federal or state char-
tered credit union, and any subsidiaries of such an
entity.
(3) Under the Farm Credit Act of 1971, by the
Farm Credit Administration with respect to the
Federal Agricultural Mortgage Corporation, any
Federal land bank, Federal land bank association,
Federal intermediate credit bank, or production
credit association.
408
(4) Under the Securities Exchange Act of 1934,
by the Securities and Exchange Commission with re-
spect to any broker-dealer.
(5) Under the Investment Company Act of
1940, by the Securities and Exchange Commission
with respect to investment companies.
(6) Under the Investment Advisers Act of 1940,
by the Securities and Exchange Commission with re-
spect to investment advisers registered with the
Commission under such Act.
(7) Under Federal Housing Enterprises Finan-
cial Safety and Soundness Act of 1992 (12 U. S. C.
4501 et seq.), by the Office of Federal Housing En-
terprise Oversight with respect to the Federal Na-
tional Mortgage Association and the Federal Home
Loan Mortgage Corporation.
(8) Under the Federal Home Loan Bank Act,
by the Federal Housing Finance Board with respect
to Federal home loan banks.
(9) Under State insurance law, in the case of
any person engaged in providing insurance, by the
State insurance authority of the State in which the
person is domiciled, subject to section 104 of this
Act.
409
(10) Under the Federal Trade Commission Act,
by the Federal Trade Commission for any other fi-
nancial institution that is not subject to the jurisdic-
tion of any agency or authority under paragraphs
(1) through (9) of this subsection.
(b) ENFORCEMENT OF SECTION 501.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the agencies and authorities described in
subsection (a) shall implement the standards pre-
scribed under section 501(b) in the same manner, to
the extent practicable, as standards prescribed pur-
suant to subsection (a) of section 39 of the Federal
Deposit Insurance Act are implemented pursuant to
such section.
(2) EXCEPTION.—The agencies and authorities
described in paragraphs (4), (5), (6), (9), and (10)
of subsection (a) shall implement the standards pre-
scribed under section 501(b) by rule with respect to
the financial institutions subject to their respective
jurisdictions under subsection (a).
(c) DEFINITIONS.—The terms used in subsection
(a)(1) that are not defined in this subtitle or otherwise
defined in section 3(s) of the Federal Deposit Insurance
Act shall have the meaning given to them in section 1(b)
of the International Banking Act of 1978.
410
SEC. 506. FAIR CREDIT REPORTING ACT AMENDMENT.
(a) AMENDMENT.—Section 621 of the Fair Credit
Reporting Act (15 U.S.C. 1681s) is amended—
(1) in subsection (d), by striking everything fol-
lowing the end of the second sentence; and
(2) by striking subsection ‘‘(e)’’ and inserting in
lieu thereof the following:
‘‘(e) REGULATORY AUTHORITY.—
‘‘(1) The Federal banking agencies referred to
in paragraphs (1) and (2) of subsection (b) shall
jointly prescribe such regulations as necessary to
carry out the purposes of this Act with respect to
any persons identified under paragraphs (1) and (2)
of subsection (b), or to the holding companies and
affiliates of such persons.
‘‘(2) The Administrator of the National Credit
Union Administration shall prescribe such regula-
tions as necessary to carry out the purposes of this
Act with respect to any persons identified under
paragraph (3) of subsection (b).’’.
(b) CONFORMING AMENDMENT.—Section 621(a) of
the Fair Credit Reporting Act (15 U.S.C. 1681s(a)) is
amended by striking paragraph (4).
SEC. 507. RELATION TO OTHER PROVISIONS.
This subtitle shall not apply to any information to
which subtitle D of title III applies.
411
SEC. 508. STUDY OF INFORMATION SHARING AMONG FI-
NANCIAL AFFILIATES.
(a) IN GENERAL.—The Secretary of the Treasury, in
conjunction with the Federal functional regulators and the
Federal Trade Commission, shall conduct a study of infor-
mation sharing practices among financial institutions and
their affiliates. Such study shall include—
(1) the purposes for the sharing of confidential
customer information with affiliates or with non-
affiliated third parties;
(2) the extent and adequacy of security protec-
tions for such information;
(3) the potential risks for customer privacy of
such sharing of information;
(4) the potential benefits for financial institu-
tions and affiliates of such sharing of information;
(5) the potential benefits for customers of such
sharing of information;
(6) the adequacy of existing laws to protect cus-
tomer privacy;
(7) the adequacy of financial institution privacy
policy and privacy rights disclosure under existing
law;
(8) the feasibility of different approaches, in-
cluding opt-out and opt-in, to permit customers to
412
direct that confidential information not be shared
with affiliates and nonaffiliated third parties; and
(9) the feasibility of restricting sharing of infor-
mation for specific uses or of permitting customers
to direct the uses for which information may be
shared.
(b) CONSULTATION.—The Secretary shall consult
with representatives of State insurance authorities des-
ignated by the National Association of Insurance Commis-
sioners, and also with financial services industry, con-
sumer organizations and privacy groups, and other rep-
resentatives of the general public, in formulating and con-
ducting the study required by subsection (a).
(c) REPORT.—Before the end of the 6-month period
beginning on the date of the enactment of this Act, the
Secretary shall submit a report to the Congress containing
the findings and conclusions of the study required under
subsection (a), together with such recommendations for
legislative or administrative action as may be appropriate.
SEC. 509. DEFINITIONS.
As used in this subtitle:
(1) FEDERAL
BANKING
AGENCY.—The term
‘‘Federal banking agency’’ has the meanings given
to such terms in section 3 of the Federal Deposit In-
surance Act.
413
(2) FEDERAL FUNCTIONAL REGULATOR.—The
term ‘‘Federal functional regulator’’ means—
(A) the Board of Governors of the Federal
Reserve System;
(B) the Office of the Comptroller of the
Currency;
(C) the Board of Directors of the Federal
Deposit Insurance Corporation;
(D) the Director of the Office of Thrift
Supervision;
(E) the National Credit Union Administra-
tion Board;
(F) the Farm Credit Administration; and
(G) the Securities and Exchange Commis-
sion.
(3) FINANCIAL
INSTITUTION.—The term ‘‘fi-
nancial institution’’ means any institution the busi-
ness of which is engaging in financial activities or
activities that are incidental to financial activities, as
described in section 6(c) of the Bank Holding Com-
pany Act of 1956.
(4) NONPUBLIC PERSONAL INFORMATION.—
(A) The term ‘‘nonpublic personal informa-
tion’’ means personally identifiable financial
information—
414
(i) provided by a consumer to a finan-
cial institution;
(ii) resulting from any transaction
with the consumer or the service performed
for the consumer; or
(iii) otherwise obtained by the finan-
cial institution.
(B) Such term does not include publicly
available information, as such term is defined
by the regulations prescribed under section 504.
(C) Notwithstanding subparagraph (B),
such term shall include any list, description, or
other grouping of consumers (and publicly
available information pertaining to them) that
is derived using any personally identifiable in-
formation other than publicly available informa-
tion.
(5) NONAFFILIATED
THIRD
PARTIES.—The
term ‘‘nonaffiliated third parties’’ means any entity
that is not an affiliate of, or related by common
ownership or affiliated by corporate control with, the
financial institution, but does not include a joint em-
ployee of such institution.
415
(6) AFFILIATE.—The term ‘‘affiliate’’ means
any company that controls, is controlled by, or is
under common control with another company.
(7) NECESSARY TO EFFECT, ADMINISTER, OR
ENFORCE.—The term ‘‘as necessary to effect, ad-
minister or enforce the transaction’’ means—
(A) the disclosure is required, or is a
usual, appropriate or acceptable method, to
carry out the transaction or the product or
service business of which the transaction is a
part, and record or service or maintain the con-
sumer’s account in the ordinary course of pro-
viding the financial service or financial product,
or to administer or service benefits or claims re-
lating to the transaction or the product or serv-
ice business of which it is a part, and
includes—
(i) providing the consumer or the con-
sumer’s agent or broker with a confirma-
tion, statement, or other record of the
transaction, or information on the status
or value of the financial service or financial
product; and
(ii) the accrual or recognition of in-
centives or bonuses associated with the
416
transaction that are provided by the finan-
cial institution or any other party;
(B) the disclosure is required, or is one of
the lawful or appropriate methods, to enforce
the rights of the financial institution or of other
persons engaged in carrying out the financial
transaction, or providing the product or service;
(C) the disclosure is required, or is a
usual, appropriate, or acceptable method, for
insurance underwriting at the consumer’s re-
quest or for reinsurance purposes, or for any of
the following purposes as they relate to a con-
sumer’s insurance: account administration, re-
porting, investigating, or preventing fraud or
material misrepresentation, processing premium
payments, processing insurance claims, admin-
istering insurance benefits (including utilization
review activities), participating in research
projects, or as otherwise required or specifically
permitted by Federal or State law; or
(D) the disclosure is required, or is a
usual, appropriate or acceptable method, in con-
nection with—
(i) the authorization, settlement, bill-
ing, processing, clearing, transferring, rec-
417
onciling, or collection of amounts charged,
debited, or otherwise paid using a debit,
credit or other payment card, check, or ac-
count number, or by other payment means;
(ii) the transfer of receivables, ac-
counts or interests therein; or
(iii) the audit of debit, credit or other
payment information.
(8) STATE INSURANCE AUTHORITY.—The term
‘‘State insurance authority’’ means, in the case of
any person engaged in providing insurance, the
State insurance authority of the State in which the
person is domiciled.
(9) CONSUMER.—The term ‘‘consumer’’ means
an individual who obtains, from a financial institu-
tion, financial products or services which are to be
used primarily for personal, family, or household
purposes, and also means the legal representative of
such an individual.
(10) JOINT
AGREEMENT.—The term ‘‘joint
agreement’’ means a formal written contract pursu-
ant to which two or more financial institutions joint-
ly offer, endorse, or sponsor a financial product or
service, and any payments between the parties are
based on business or profit generated.
418
SEC. 510. EFFECTIVE DATE.
This subtitle shall take effect 6 months after the date
on which the rules under section 503 are promulgated,
except—
(1) to the extent that a later date is specified
in such rules; and
(2) that section 506 shall be effective upon en-
actment.
Subtitle B—Fraudulent Access to
Financial Information
SEC. 521. PRIVACY PROTECTION FOR CUSTOMER INFORMA-
TION OF FINANCIAL INSTITUTIONS.
(a) PROHIBITION ON OBTAINING CUSTOMER INFOR-
MATION BY FALSE PRETENSES.—It shall be a violation
of this subtitle for any person to obtain or attempt to ob-
tain, or cause to be disclosed or attempt to cause to be
disclosed to any person, customer information of a finan-
cial institution relating to another person—
(1) by making a false, fictitious, or fraudulent
statement or representation to an officer, employee,
or agent of a financial institution;
(2) by making a false, fictitious, or fraudulent
statement or representation to a customer of a fi-
nancial institution; or
(3) by providing any document to an officer,
employee, or agent of a financial institution, know-
419
ing that the document is forged, counterfeit, lost, or
stolen, was fraudulently obtained, or contains a
false, fictitious, or fraudulent statement or represen-
tation.
(b) PROHIBITION ON SOLICITATION OF A PERSON TO
OBTAIN CUSTOMER INFORMATION FROM FINANCIAL IN-
STITUTION UNDER FALSE PRETENSES.—It shall be a vio-
lation of this subtitle to request a person to obtain cus-
tomer information of a financial institution, knowing that
the person will obtain, or attempt to obtain, the informa-
tion from the institution in any manner described in sub-
section (a).
(c) NONAPPLICABILITY
TO
LAW
ENFORCEMENT
AGENCIES.—No provision of this section shall be con-
strued so as to prevent any action by a law enforcement
agency, or any officer, employee, or agent of such agency,
to obtain customer information of a financial institution
in connection with the performance of the official duties
of the agency.
(d) NONAPPLICABILITY TO FINANCIAL INSTITUTIONS
IN CERTAIN CASES.—No provision of this section shall be
construed so as to prevent any financial institution, or any
officer, employee, or agent of a financial institution, from
obtaining customer information of such financial institu-
tion in the course of—
420
(1) testing the security procedures or systems
of such institution for maintaining the confiden-
tiality of customer information;
(2) investigating allegations of misconduct or
negligence on the part of any officer, employee, or
agent of the financial institution; or
(3) recovering customer information of the fi-
nancial institution which was obtained or received by
another person in any manner described in sub-
section (a) or (b).
(e) NONAPPLICABILITY
TO INSURANCE INSTITU-
TIONS FOR INVESTIGATION OF INSURANCE FRAUD.—No
provision of this section shall be construed so as to prevent
any insurance institution, or any officer, employee, or
agency of an insurance institution, from obtaining infor-
mation as part of an insurance investigation into criminal
activity, fraud, material misrepresentation, or material
nondisclosure that is authorized for such institution under
State law, regulation, interpretation, or order.
(f) NONAPPLICABILITY TO CERTAIN TYPES OF CUS-
TOMER INFORMATION OF FINANCIAL INSTITUTIONS.—No
provision of this section shall be construed so as to prevent
any person from obtaining customer information of a fi-
nancial institution that otherwise is available as a public
421
record filed pursuant to the securities laws (as defined in
section 3(a)(47) of the Securities Exchange Act of 1934).
(g) NONAPPLICABILITY TO COLLECTION OF CHILD
SUPPORT JUDGMENTS.—No provision of this section shall
be construed to prevent any State-licensed private investi-
gator, or any officer, employee, or agent of such private
investigator, from obtaining customer information of a fi-
nancial institution, to the extent reasonably necessary to
collect child support from a person adjudged to have been
delinquent in his or her obligations by a Federal or State
court, and to the extent that such action by a State-li-
censed private investigator is not unlawful under any other
Federal or State law or regulation, and has been author-
ized by an order or judgment of a court of competent juris-
diction.
SEC. 522. ADMINISTRATIVE ENFORCEMENT.
(a) ENFORCEMENT BY FEDERAL TRADE COMMIS-
SION.—Compliance with this subtitle shall be enforced by
the Federal Trade Commission in the same manner and
with the same power and authority as the Commission has
under the title VIII, the Fair Debt Collection Practices
Act, to enforce compliance with such title.
(b) NOTICE OF ACTIONS.—The Federal Trade Com-
mission shall—
422
(1) notify the Securities and Exchange Commis-
sion whenever the Federal Trade Commission initi-
ates an investigation with respect to a financial in-
stitution subject to regulation by the Securities and
Exchange Commission;
(2) notify the Federal banking agency (as de-
fined in section 3(z) of the Federal Deposit Insur-
ance Act) whenever the Commission initiates an in-
vestigation with respect to a financial institution
subject to regulation by such Federal banking agen-
cy; and
(3) notify the appropriate State insurance regu-
lator whenever the Commission initiates an inves-
tigation with respect to a financial institution sub-
ject to regulation by such regulator.
SEC. 523. CRIMINAL PENALTY.
(a) IN GENERAL.—Whoever knowingly and inten-
tionally violates, or knowingly and intentionally attempts
to violate, section 521 shall be fined in accordance with
title 18, United States Code, or imprisoned for not more
than 5 years, or both.
(b) 
ENHANCED
PENALTY
FOR
AGGRAVATED
CASES.—Whoever violates, or attempts to violate, section
521 while violating another law of the United States or
as part of a pattern of any illegal activity involving more
423
than $100,000 in a 12-month period shall be fined twice
the amount provided in subsection (b)(3) or (c)(3) (as the
case may be) of section 3571 of title 18, United States
Code, imprisoned for not more than 10 years, or both.
SEC. 524. RELATION TO STATE LAWS.
(a) IN GENERAL.—This subtitle shall not be con-
strued as superseding, altering, or affecting the statutes,
regulations, orders, or interpretations in effect in any
State, except to the extent that such statutes, regulations,
orders, or interpretations are inconsistent with the provi-
sions of this subtitle, and then only to the extent of the
inconsistency.
(b) GREATER PROTECTION UNDER STATE LAW.—
For purposes of this section, a State statute, regulation,
order, or interpretation is not inconsistent with the provi-
sions of this subtitle if the protection such statute, regula-
tion, order, or interpretation affords any person is greater
than the protection provided under this subtitle as deter-
mined by the Commission, on its own motion or upon the
petition of any interested party.
SEC. 525. AGENCY GUIDANCE.
In furtherance of the objectives of this subtitle, each
Federal banking agency (as defined in section 3(z) of the
Federal Deposit Insurance Act) and the Securities and
Exchange Commission or self-regulatory organizations, as
424
appropriate, shall review regulations and guidelines appli-
cable to financial institutions under their respective juris-
dictions and shall prescribe such revisions to such regula-
tions and guidelines as may be necessary to ensure that
such financial institutions have policies, procedures, and
controls in place to prevent the unauthorized disclosure
of customer financial information and to deter and detect
activities proscribed under section 521.
SEC. 526. REPORTS.
(a) REPORT TO THE CONGRESS.—Before the end of
the 18-month period beginning on the date of the enact-
ment of this Act, the Comptroller General, in consultation
with the Federal Trade Commission, Federal banking
agencies, the Securities and Exchange Commission, appro-
priate Federal law enforcement agencies, and appropriate
State insurance regulators, shall submit to the Congress
a report on the following:
(1) The efficacy and adequacy of the remedies
provided in this subtitle in addressing attempts to
obtain financial information by fraudulent means or
by false pretenses.
(2) Any recommendations for additional legisla-
tive or regulatory action to address threats to the
privacy of financial information created by attempts
425
to obtain information by fraudulent means or false
pretenses.
(b) ANNUAL REPORT
BY ADMINISTERING AGEN-
CIES.—The Federal Trade Commission and the Attorney
General shall submit to Congress an annual report on
number and disposition of all enforcement actions taken
pursuant to this subtitle.
SEC. 527. DEFINITIONS.
For purposes of this subtitle, the following definitions
shall apply:
(1) CUSTOMER.—The term ‘‘customer’’ means,
with respect to a financial institution, any person (or
authorized representative of a person) to whom the
financial institution provides a product or service,
including that of acting as a fiduciary.
(2) CUSTOMER INFORMATION OF A FINANCIAL
INSTITUTION.—The term ‘‘customer information of
a financial institution’’ means any information main-
tained by or for a financial institution which is de-
rived from the relationship between the financial in-
stitution and a customer of the financial institution
and is identified with the customer.
(3) DOCUMENT.—The term ‘‘document’’ means
any information in any form.
(4) FINANCIAL INSTITUTION.—