152
(2) BIF
AND
SAIF
MEMBERS.—The terms
‘‘Bank Insurance Fund member’’ and ‘‘Savings As-
sociation Insurance Fund member’’ have the mean-
ing given to such terms in section 7(l) of the Federal
Deposit Insurance Act.
Subtitle J—Effective Date of Title
SEC. 191. EFFECTIVE DATE.
Except with regard to any subtitle or other provision
of this title for which a specific effective date is provided,
this title and the amendments made by this title shall take
effect at the end of the 270-day period beginning on the
date of the enactment of this Act.
TITLE II—FUNCTIONAL
REGULATION
Subtitle A—Brokers and Dealers
SEC. 201. DEFINITION OF BROKER.
Section 3(a)(4) of the Securities Exchange Act of
1934 (15 U.S.C. 78c(a)(4)) is amended to read as follows:
‘‘(4) BROKER.—
‘‘(A) IN
GENERAL.—The term ‘broker’
means any person engaged in the business of
effecting transactions in securities for the ac-
count of others.
‘‘(B) EXCEPTION FOR CERTAIN BANK AC-
TIVITIES.—A bank shall not be considered to be
153
a broker because the bank engages in any of
the following activities under the conditions de-
scribed:
‘‘(i) THIRD
PARTY
BROKERAGE
AR-
RANGEMENTS.—The bank enters into a
contractual or other arrangement with a
broker or dealer registered under this title
under which the broker or dealer offers
brokerage services on or off the premises
of the bank if—
‘‘(I) such broker or dealer is
clearly identified as the person per-
forming the brokerage services;
‘‘(II) the broker or dealer per-
forms brokerage services in an area
that is clearly marked and, to the ex-
tent practicable, physically separate
from the routine deposit-taking activi-
ties of the bank;
‘‘(III) any materials used by the
bank to advertise or promote generally
the availability of brokerage services
under the contractual or other ar-
rangement clearly indicate that the
brokerage services are being provided
154
by the broker or dealer and not by the
bank;
‘‘(IV) any materials used by the
bank to advertise or promote generally
the availability of brokerage services
under the contractual or other ar-
rangement are in compliance with the
Federal securities laws before dis-
tribution;
‘‘(V) bank employees (other than
associated persons of a broker or deal-
er who are qualified pursuant to the
rules of a self-regulatory organization)
perform only clerical or ministerial
functions in connection with broker-
age transactions including scheduling
appointments with the associated per-
sons of a broker or dealer, except that
bank employees may forward cus-
tomer funds or securities and may de-
scribe in general terms the range of
investment vehicles available from the
bank and the broker or dealer under
the contractual or other arrangement;
155
‘‘(VI) bank employees do not di-
rectly receive incentive compensation
for any brokerage transaction unless
such employees are associated persons
of a broker or dealer and are qualified
pursuant to the rules of a self-regu-
latory organization, except that the
bank employees may receive com-
pensation for the referral of any cus-
tomer if the compensation is a nomi-
nal one-time cash fee of a fixed dollar
amount and the payment of the fee is
not contingent on whether the referral
results in a transaction;
‘‘(VII) such services are provided
by the broker or dealer on a basis in
which all customers which receive any
services are fully disclosed to the
broker or dealer;
‘‘(VIII) the bank does not carry
a securities account of the customer
except in a customary custodian or
trustee capacity; and
‘‘(IX) the bank, broker, or dealer
informs each customer that the bro-
156
kerage services are provided by the
broker or dealer and not by the bank
and that the securities are not depos-
its or other obligations of the bank,
are not guaranteed by the bank, and
are not insured by the Federal De-
posit Insurance Corporation.
‘‘(ii) TRUST
ACTIVITIES.—The bank
effects transactions in a trustee capacity,
or effects transactions in a fiduciary capac-
ity in its trust department or other depart-
ment that is regularly examined by bank
examiners for compliance with fiduciary
principles and standards, and (in either
case)—
‘‘(I) is primarily compensated on
the basis of an administration or an-
nual fee (payable on a monthly, quar-
terly, or other basis), a percentage of
assets under management, or a flat or
capped per order processing fee, or
any combination of such fees, but
does not otherwise receive brokerage
commissions, or other similar remu-
neration based on effecting trans-
157
actions in securities, that exceed the
cost incurred by the bank in connec-
tion with executing securities trans-
actions for trustee or fiduciary cus-
tomers; and
‘‘(II) does not publicly solicit bro-
kerage business, other than by adver-
tising that it effects transactions in
securities in conjunction with advertis-
ing its other trust activities.
‘‘(iii) 
PERMISSIBLE
SECURITIES
TRANSACTIONS.—The bank effects trans-
actions in—
‘‘(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, in con-
formity with section 15C of this title
and the rules and regulations there-
under, or obligations of the North
American Development Bank; or
‘‘(IV) any standardized, credit
enhanced debt security issued by a
158
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.
‘‘(iv) 
CERTAIN
STOCK
PURCHASE
PLANS.—
‘‘(I) 
EMPLOYEE
BENEFIT
PLANS.—The 
bank 
effects 
trans-
actions, as part of its transfer agency
activities, in the securities of an issuer
as part of any pension, retirement,
profit-sharing, bonus, thrift, savings,
incentive, or other similar benefit plan
for the employees of that issuer or its
subsidiaries, if—
(aa) the bank does not so-
licit transactions or provide in-
vestment advice with respect to
the purchase or sale of securities
in connection with the plan; and
‘‘(bb) the bank’s compensa-
tion for such plan or program
consists of administration fees, or
flat or capped per order process-
159
ing fees, or both, but the bank
does not otherwise receive broker-
age commissions, or other similar
remuneration based on effecting
transactions in securities, that
exceed the cost incurred by the
bank in connection with execut-
ing securities transactions under
this subclause (I).
‘‘(II) DIVIDEND
REINVESTMENT
PLANS.—The 
bank 
effects 
trans-
actions, as part of its transfer agency
activities, in the securities of an issuer
as part of that issuer’s dividend rein-
vestment plan, if—
‘‘(aa) the bank does not so-
licit transactions or provide in-
vestment advice with respect to
the purchase or sale of securities
in connection with the plan;
‘‘(bb) the bank does not net
shareholders’ buy and sell orders,
other than for programs for odd-
lot holders or plans registered
with the Commission; and
160
‘‘(cc) the bank’s compensa-
tion for such plan or program
consists of administration fees, or
flat or capped per order process-
ing fees, or both, but the bank
does not otherwise receive broker-
age commissions, or other similar
remuneration based on effecting
transactions in securities, that
exceed the cost incurred by the
bank in connection with execut-
ing securities transactions under
this subclause (II).
‘‘(III) ISSUER PLANS.—The bank
effects transactions, as part of its
transfer agency activities, in the secu-
rities of an issuer as part of a plan or
program for the purchase or sale of
that issuer’s shares, if—
‘‘(aa) the bank does not so-
licit transactions or provide in-
vestment advice with respect to
the purchase or sale of securities
in connection with the plan or
program;
161
‘‘(bb) the bank does not net
shareholders’ buy and sell orders,
other than for programs for odd-
lot holders or plans registered
with the Commission; and
‘‘(cc) the bank’s compensa-
tion for such plan or program
consists of administration fees, or
flat or capped per order process-
ing fees, or both, but the bank
does not otherwise receive broker-
age commissions, or other similar
remuneration based on effecting
transactions in securities, that
exceed the cost incurred by the
bank in connection with execut-
ing securities transactions under
this subclause (III).
‘‘(IV) PERMISSIBLE
DELIVERY
OF
MATERIALS.—The exception to
being considered a broker for a bank
engaged in activities described in sub-
clauses (I), (II), and (III) will not be
affected by a bank’s delivery of writ-
ten or electronic plan materials to em-
162
ployees of the issuer, shareholders of
the issuer, or members of affinity
groups of the issuer, so long as such
materials are—
‘‘(aa) comparable in scope or
nature to that permitted by the
Commission as of the date of the
enactment of the Financial Serv-
ices Act of 1998; or
‘‘(bb) otherwise permitted by
the Commission.
‘‘(v) SWEEP
ACCOUNTS.—The bank
effects transactions as part of a program
for the investment or reinvestment of bank
deposit funds into any no-load, open-end
management investment company reg-
istered under the Investment Company Act
of 1940 that holds itself out as a money
market fund.
‘‘(vi) 
AFFILIATE
TRANSACTIONS.—
The bank effects transactions for the ac-
count of any affiliate of the bank (as de-
fined in section 2 of the Bank Holding
Company Act of 1956) other than—
163
‘‘(I) a registered broker or deal-
er; or
‘‘(II) an affiliate that is engaged
in merchant banking, as described in
section 6(c)(3)(H) of the Bank Hold-
ing company Act of 1956.
‘‘(vii) PRIVATE
SECURITIES
OFFER-
INGS.—The bank—
‘‘(I) effects sales as part of a pri-
mary offering of securities not involv-
ing a public offering, pursuant to sec-
tion 3(b), 4(2), or 4(6) of the Securi-
ties Act of 1933 or the rules and reg-
ulations issued thereunder;
‘‘(II) at any time after one year
after the date of enactment of the Fi-
nancial Services Act of 1998, is not
affiliated with a broker or dealer that
has been registered for more than one
year; and
‘‘(III) effects transactions exclu-
sively with qualified investors.
‘‘(viii) SAFEKEEPING
AND
CUSTODY
ACTIVITIES.—
164
‘‘(I) IN GENERAL.—The bank, as
part of customary banking activities—
‘‘(aa) provides safekeeping
or custody services with respect
to securities, including the exer-
cise of warrants and other rights
on behalf of customers;
‘‘(bb) facilitates the transfer
of funds or securities, as a custo-
dian or a clearing agency, in con-
nection with the clearance and
settlement 
of 
its 
customers’
transactions in securities;
‘‘(cc) effects securities lend-
ing or borrowing transactions
with or on behalf of customers as
part of services provided to cus-
tomers pursuant to division (aa)
or (bb) or invests cash collateral
pledged in connection with such
transactions; or
‘‘(dd) 
holds 
securities
pledged by a customer to another
person or securities subject to
purchase or resale agreements in-
165
volving a customer, or facilitates
the pledging or transfer of such
securities by book entry or as
otherwise provided under applica-
ble law.
‘‘(II) EXCEPTION FOR CARRYING
BROKER
ACTIVITIES.—The exception
to being considered a broker for a
bank engaged in activities described in
subclause (I) shall not apply if the
bank, in connection with such activi-
ties, acts in the United States as a
carrying broker (as such term, and
different formulations thereof, are
used in section 15(c)(3) and the rules
and regulations thereunder) for any
broker or dealer, unless such carrying
broker activities are engaged in with
respect to government securities (as
defined in paragraph (42) of this sub-
section).
‘‘(ix) BANKING PRODUCTS.—The bank
effects transactions in traditional banking
products, as defined in section 206(a) of
the Financial Services Act of 1998.
166
‘‘(x) DE
MINIMIS
EXCEPTION.—The
bank effects, other than in transactions re-
ferred to in clauses (i) through (ix), not
more than 500 transactions in securities in
any calendar year, and such transactions
are not effected by an employee of the
bank who is also an employee of a broker
or dealer.
‘‘(C) BROKER DEALER EXECUTION.—The
exception to being considered a broker for a
bank engaged in activities described in clauses
(ii), (iv), and (viii) of subparagraph (B) shall
not apply if the activities described in such pro-
visions result in the trade in the United States
of any security that is a publicly traded security
in the United States, unless—
‘‘(i) the bank directs such trade to a
registered or broker 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
167
‘‘(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) NO EFFECT OF BANK EXEMPTIONS
ON OTHER COMMISSION AUTHORITY.—The ex-
ception to being considered a broker for a bank
engaged in activities described in subpara-
graphs (B) and (C) shall not affect the commis-
sion’s authority under any other provision of
this Act or any other securities law.
‘‘(E) 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
if the bank receives a fee for its investment
advice;
168
‘‘(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
1998, subject to section 15(e); 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.
‘‘(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
169
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
‘‘(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-
170
eign government to retire outstanding
commercial bank loans.
‘‘(ii) INVESTMENT, TRUSTEE, AND FI-
DUCIARY TRANSACTIONS.—The bank buys
or sells securities for investment pur-
poses—
‘‘(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 otherwise, of se-
curities backed by or representing an inter-
est in notes, drafts, acceptances, loans,
leases, receivables, other obligations, or
pools of any such obligations predomi-
nantly originated by the bank, or a syn-
dicate of banks of which the bank is a
member, or an affiliate of any such bank
other than a broker or dealer.
‘‘(iv) BANKING PRODUCTS.—The bank
buys or sells traditional banking products,
as defined in section 206(a) of the Finan-
cial Services Act of 1998.
171
‘‘(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 corporation,
limited liability company, or partner-
ship that owns and invests on a dis-
cretionary 
basis, 
not 
less 
than
$10,000,000 in investments, or to or
from a qualified investor, except that
if the instrument provides for the de-
livery of one or more securities (other
than a derivative instrument or gov-
ernment security), the transaction
shall be effected with or through a
registered broker or dealer; or
‘‘(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
172
‘‘(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-
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 enactment of this Act,
engaged in effecting such sales.’’.
173
SEC. 204. SALES PRACTICES AND COMPLAINT PROCE-
DURES.
Section 18 of the Federal Deposit Insurance Act is
amended by adding at the end the following new sub-
section:
‘‘(s) SALES PRACTICES
AND COMPLAINT PROCE-
DURES WITH RESPECT TO BANK SECURITIES ACTIVI-
TIES.—
‘‘(1) REGULATIONS REQUIRED.—Each Federal
banking agency shall prescribe and publish in final
form, not later than 6 months after the date of en-
actment of the Financial Services Act of 1998, regu-
lations which apply to retail transactions, solicita-
tions, advertising, or offers of any security by any
insured depository institution or any affiliate thereof
other than a registered broker or dealer or an indi-
vidual acting on behalf of such a broker or dealer
who is an associated person of such broker or dealer.
Such regulations shall include—
‘‘(A) requirements that sales practices
comply with just and equitable principles of
trade that are substantially similar to the Rules
of Fair Practice of the National Association of
Securities Dealers; and
‘‘(B) requirements prohibiting (i) condi-
tioning an extension of credit on the purchase
174
or sale of a security; and (ii) any conduct lead-
ing a customer to believe that an extension of
credit is conditioned upon the purchase or sale
of a security.
‘‘(2) PROCEDURES
REQUIRED.—The appro-
priate Federal banking agencies shall jointly estab-
lish procedures and facilities for receiving and expe-
ditiously processing complaints against any bank or
employee of a bank arising in connection with the
purchase or sale of a security by a customer, includ-
ing a complaint alleging a violation of the regula-
tions prescribed under paragraph (1), but excluding
a complaint involving an individual acting on behalf
of such a broker or dealer who is an associated per-
son of such broker or dealer. The use of any such
procedures and facilities by such a customer shall be
at the election of the customer. Such procedures
shall include provisions to refer a complaint alleging
fraud to the Securities and Exchange Commission
and appropriate State securities commissions.
‘‘(3) REQUIRED
ACTIONS.—The actions re-
quired by the Federal banking agencies under para-
graph (2) shall include the following:
175
‘‘(A) establishing a group, unit, or bureau
within each such agency to receive such com-
plaints;
‘‘(B) developing and establishing proce-
dures for investigating, and permitting cus-
tomers to investigate, such complaints;
‘‘(C) developing and establishing proce-
dures for informing customers of the rights
they may have in connection with such com-
plaints;
‘‘(D) developing and establishing proce-
dures that allow customers a period of at least
6 years to make complaints and that do not re-
quire customers to pay the costs of the proceed-
ing; and
‘‘(E) developing and establishing proce-
dures for resolving such complaints, including
procedures for the recovery of losses to the ex-
tent appropriate.
‘‘(4) CONSULTATION
AND
JOINT
REGULA-
TIONS.—The Federal banking agencies shall consult
with each other and prescribe joint regulations pur-
suant to paragraphs (1) and (2), after consultation
with the Securities and Exchange Commission.
176
‘‘(5) PROCEDURES
IN
ADDITION
TO
OTHER
REMEDIES.—The procedures and remedies provided
under this subsection shall be in addition to, and not
in lieu of, any other remedies available under law.
‘‘(6) DEFINITION.—As used in this sub-
section—
‘‘(A) the term ‘security’ has the meaning
provided in section 3(a)(10) of the Securities
Exchange Act of 1934;
‘‘(B) the term ‘registered broker or dealer’
has the meaning provided in section 3(a)(48) of
such Act; and
‘‘(C) the term ‘associated person’ has the
meaning provided in section 3(a)(18) of such
Act.’’.
SEC. 205. 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
177
(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.’’.
SEC. 206. DEFINITION AND TREATMENT OF BANKING PROD-
UCTS.
(a) DEFINITION OF TRADITIONAL BANKING PROD-
UCT.—
(1) IN GENERAL.—For purposes of paragraphs
(4) and (5) of section 3(a) of the Securities Ex-
change Act of 1934 (15 U.S.C. 78c(a)(4), (5)), the
term ‘traditional banking product’ means—
(A) a deposit account, savings account,
certificate of deposit, or other deposit instru-
ment issued by a bank;
(B) a banker’s acceptance;
(C) a letter of credit issued or loan made
by a bank;
178
(D) a debit account at a bank arising from
a credit card or similar arrangement;
(E) a participation in a loan which the
bank or an affiliate of the bank (other than a
broker or dealer) funds, participates in, or owns
that is sold—
(i) to qualified investors; or
(ii) to other persons that—
‘‘(I) have the opportunity to re-
view and assess any material informa-
tion, including information regarding
the borrower’s creditworthiness; and
‘‘(II) based on such factors as fi-
nancial sophistication, net worth, and
knowledge and experience in financial
matters, have the capability to evalu-
ate the information available, as de-
termined under generally applicable
banking standards or guidelines; or
(F) any derivative instrument, whether or
not individually negotiated, involving or relating
to—
(i) foreign currencies, except options
on foreign currencies that trade on a na-
tional securities exchange;
179
(ii) interest rates, except interest rate
derivative instruments: (I) that are based
on a security or a group or index of securi-
ties (other than government securities or a
group or index of government securities);
(II) that provide for the delivery of one or
more securities (other than government se-
curities); or (III) that trade on a national
securities exchange; or
(iii) commodities, other rates, indices,
or other assets, except derivative instru-
ments: (I) that 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) that provide for the delivery of one or
more securities (other than government se-
curities); or (III) that trade on a national
securities exchange.
(2) CLASSIFICATION
LIMITED.—Classification
of a particular product as a traditional banking
product pursuant to this subsection shall not be con-
strued as finding or implying that such product is
or is not a security for any purpose under the secu-
rities laws, or is or is not an account, agreement,
180
contract, or transaction for any purpose under the
Commodity Exchange Act.
(3) DEFINITIONS.—For purposes of this sub-
section—
(A) the term ‘‘bank’’ has the meaning pro-
vided in section 3(a)(6) of the Securities Ex-
change Act of 1934 (15 U.S.C. 78c(a)(6);
(B) the term ‘‘qualified investor’’ has the
meaning provided in section 3(a)(55) of such
Act;
(C) the term ‘‘government securities’’ has
the meaning provided in section 3(a)(42) of
such Act, and, for purposes of this subsection,
commercial paper, bankers acceptances, and
commercial bills shall be treated in the same
manner as government securities; and
(D) the term ‘‘Federal banking agency’’
has the meaning provided in section 3(z) of the
Federal Deposit Insurance Act (12 U.S.C.
1813(z)).
(b) TREATMENT OF NEW BANKING PRODUCTS FOR
PURPOSES OF BROKER/DEALER REQUIREMENTS.—Sec-
tion 15 of the Securities Exchange Act of 1934 (15 U.S.C.
78o) is amended by adding at the end the following new
subsection:
181
‘‘(i) RULEMAKING TO EXTEND REQUIREMENTS TO
NEW BANKING 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 banking 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
banking product unless the Commission determines
that—
‘‘(A) the new banking product is a secu-
rity; and
‘‘(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).
182
‘‘(3) NEW BANKING PRODUCT.—For purposes
of this subsection, the term ‘new banking product’
means a product that—
‘‘(A) was not subjected to regulation by
the Commission as a security prior to the date
of enactment of this subsection; and
‘‘(B) is not a traditional banking product,
as such term is defined in section 206(a) of the
Financial Services Act of 1998.
‘‘(4) CONSULTATION.—In promulgating rules
under this subsection, the Commission shall consult
with and consider the views of the appropriate regu-
latory agencies concerning the proposed rule and the
impact on the banking industry.’’.
SEC. 207. DERIVATIVE INSTRUMENT AND QUALIFIED IN-
VESTOR DEFINED.
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
183
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 a traditional banking prod-
uct, as defined in section 206(a) of the Finan-
cial Services Act of 1998.
‘‘(B) CLASSIFICATION LIMITED.— Classi-
fication of a particular contract as a derivative
instrument pursuant to this paragraph shall not
be construed as finding or implying that such
instrument is or is not a security for any pur-
pose under the securities laws, or is or is not
an account, agreement, contract, or transaction
for any purpose under the Commodity Ex-
change Act.
‘‘(55) QUALIFIED INVESTOR.—
‘‘(A) DEFINITION.—For purposes of this
title and section 206(a)(1)(E) of the Financial
Services Act of 1998, the term ‘qualified inves-
tor’ means—
‘‘(i) any investment company reg-
istered with the Commission under section
8 of the Investment Company Act of 1940;
‘‘(ii) any issuer eligible for an exclu-
sion from the definition of investment com-
184
pany pursuant to section 3(c)(7) of the In-
vestment Company Act of 1940;
‘‘(iii) any bank (as defined in para-
graph (6) of this subsection), savings and
loan association (as defined in section 3(b)
of the Federal Deposit Insurance Act),
broker, dealer, insurance company (as de-
fined in section 2(a)(13) of the Securities
Act of 1933), or business development
company (as defined in section 2(a)(48) of
the Investment Company Act of 1940);
‘‘(iv) any small business investment
company licensed by the United States
Small Business Administration under sec-
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,
185
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;
‘‘(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); or
‘‘(x) the government of any foreign
country.
‘‘(B) ADDITIONAL
QUALIFICATIONS
DE-
FINED.—For 
purposes 
of 
paragraphs
(4)(B)(vii) and (5)(C)(iii) of this subsection,
and section 206(a)(1)(E) of the Financial Serv-
ices Act of 1998, the term ‘qualified investor’
also means—
‘‘(i) any corporation, company, or
partnership that owns and invests on a dis-
186
cretionary basis, not less than $10,000,000
in investments;
‘‘(ii) any natural person who owns
and invests on a discretionary basis, not
less than $10,000,000 in investments;
‘‘(iii) any government or political sub-
division, agency, or instrumentality of a
government who owns and invests on a dis-
cretionary basis not less than $50,000,000
in investments; or
‘‘(iv) any multinational or supra-
national entity or any agency or instru-
mentality thereof.
‘‘(C) ADDITIONAL AUTHORITY.—The Com-
mission may, by rule or order, define a ‘quali-
fied investor’ as any other person, other than a
natural person, taking into consideration such
factors as the person’s financial sophistication,
net worth, and knowledge and experience in fi-
nancial matters.’’.
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);
187
(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 section 15C as ap-
plied to a bank, a qualified Canadian govern-
ment obligation as defined in section 5136 of
the Revised Statutes.’’.
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.
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;
188
(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
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 follow-
ing new subsection:
189
‘‘(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;
(2) in paragraph (2), by striking the period at
the end and inserting ‘‘; or’’; and
(3) by inserting after paragraph (2) the follow-
ing:
‘‘(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
190
(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—
(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;
191
‘‘(II) any other investment com-
pany having the same investment ad-
viser as such investment company or
holding itself out to investors as a re-
lated company for purposes of invest-
ment or investor services; or
‘‘(III) any account over which the
investment company’s investment ad-
viser has brokerage placement discre-
tion,’’;
(2) by redesignating clause (vi) as clause (vii);
and
(3) by inserting after clause (v) the following
new clause:
‘‘(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-
192
viser as such investment company or
holding itself out to investors as a re-
lated company for purposes of invest-
ment or investor services; or
‘‘(III) any account for which the
investment company’s investment ad-
viser has borrowing authority,’’.
(b) 
CONFORMING
AMENDMENT.—Section
2(a)(19)(B) of the Investment Company Act of 1940 (15
U.S.C. 80a–2(a)(19)(B)) is amended—
(1) by striking clause (v) and inserting the fol-
lowing new clause:
‘‘(v) any person or any affiliated per-
son of a person (other than a registered in-
vestment company) that, at any time dur-
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;
193
‘‘(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
(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;
194
‘‘(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–
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 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.—
195
‘‘(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
‘‘(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.
196
‘‘(3) DEFINITIONS.—The terms ‘insured deposi-
tory institution’ and ‘appropriate Federal banking
agency’ have the meaning given to such terms 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
as in the Securities Exchange Act of 1934, except
that such term does not include any person solely by
reason of the fact that such person is an underwriter
for one or more investment companies.’’.
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
as in the Securities Exchange Act of 1934, but does
not include an insurance company or investment
company.’’.
197
SEC. 217. REMOVAL OF THE EXCLUSION FROM THE DEFINI-
TION OF INVESTMENT ADVISER FOR BANKS
THAT ADVISE INVESTMENT COMPANIES.
(a) INVESTMENT ADVISER.—Section 202(a)(11) of
the Investment Advisers Act of 1940 (15 U.S.C. 80b–
2(a)(11)) is amended in subparagraph (A), by striking
‘‘investment company’’ and inserting ‘‘investment com-
pany, except that the term ‘investment adviser’ includes
any bank or bank holding company to the extent that such
bank or bank holding company serves or acts as an invest-
ment adviser to a registered investment company, but if,
in the case of a bank, such services or actions are per-
formed through a separately identifiable department or di-
vision, 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,
198
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
1940 and rules and regulations promulgated
under this Act or the Investment Company Act
of 1940.’’.
SEC. 218. DEFINITION OF BROKER UNDER THE INVEST-
MENT ADVISERS ACT OF 1940.
Section 202(a)(3) of the Investment Advisers Act of
1940 (15 U.S.C. 80b–2(a)(3)) is amended to read as fol-
lows:
‘‘(3) The term ‘broker’ has the same meaning
as in the Securities Exchange Act of 1934.’’.
199
SEC. 219. DEFINITION OF DEALER UNDER THE INVEST-
MENT ADVISERS ACT OF 1940.
Section 202(a)(7) of the Investment Advisers Act of
1940 (15 U.S.C. 80b–2(a)(7)) is amended to read as fol-
lows:
‘‘(7) The term ‘dealer’ has the same meaning as
in 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:
‘‘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,
200
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
bank, any of which is registered under section 203
of this title.
‘‘(b) EFFECT ON OTHER AUTHORITY.—Nothing in
this section shall limit in any respect the authority of the
appropriate Federal banking agency with respect to such
bank holding company, bank, or department or division
under any provision of law.
‘‘(c) DEFINITION.—For purposes of this section, the
term ‘appropriate Federal banking agency’ shall have the
same meaning as in section 3 of the Federal Deposit In-
surance Act.’’.
201
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
(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—
202
‘‘(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’’.
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-
203
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-
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-
204
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
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.
205
‘‘(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. CONFORMING CHANGE IN DEFINITION.
Section 2(a)(5) of the Investment Company Act of
1940 (15 U.S.C. 80a–2(a)(5)) is amended by striking
‘‘(A) a banking institution organized under the laws of the
United States’’ and inserting ‘‘(A) a depository institution
(as defined in section 3 of the Federal Deposit Insurance
Act) or a branch or agency of a foreign bank (as such
terms are defined in section 1(b) of the International
Banking Act of 1978)’’.
SEC. 224. CONFORMING AMENDMENT.
Section 202 of the Investment Advisers Act of 1940
(15 U.S.C. 80b–2) is amended by adding at the end the
following new subsection:
‘‘(c) CONSIDERATION
OF
PROMOTION
OF
EFFI-
CIENCY, COMPETITION, AND
CAPITAL
FORMATION.—
Whenever pursuant to this title the Commission is en-
gaged in rulemaking and is required to consider or deter-
mine whether an action is necessary or appropriate in the
206
public interest, the Commission shall also consider, in ad-
dition to the protection of investors, whether the action
will promote efficiency, competition, and capital forma-
tion.’’.
SEC. 225. EFFECTIVE DATE.
This subtitle shall take effect 90 days after the date
of the enactment of this Act.
Subtitle 
C—Securities 
and 
Ex-
change Commission Supervision
of 
Investment 
Bank 
Holding
Companies
SEC. 231. SUPERVISION OF INVESTMENT BANK HOLDING
COMPANIES BY THE SECURITIES AND EX-
CHANGE COMMISSION.
(a) AMENDMENT.—Section 17 of the Securities Ex-
change Act of 1934 (15 U.S.C. 78q) is amended—
(1) by redesignating subsection (i) as subsection
(l); and
(2) by inserting after subsection (h) the follow-
ing new subsections:
‘‘(i) INVESTMENT BANK HOLDING COMPANIES.—
‘‘(1) ELECTIVE
SUPERVISION
OF
AN
INVEST-
MENT
BANK
HOLDING
COMPANY
NOT
HAVING
A
BANK OR SAVINGS ASSOCIATION AFFILIATE.—
207
‘‘(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
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-
208
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-
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 receipt of
such written notice by the Commission or with-
in 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.—
209
‘‘(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 one year after receipt by the Commis-
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
210
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
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
211
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
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
212
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
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—
213
‘‘(I) inform the Commission re-
garding—
‘‘(aa) the nature of the oper-
ations and financial condition of
the supervised investment bank
holding company and its affili-
ates;
‘‘(bb) the financial and oper-
ational risks within the super-
vised investment bank holding
company that may affect any
broker or dealer controlled by
such supervised investment bank
holding company; and
‘‘(cc) the systems of the su-
pervised investment bank holding
company and its affiliates for
monitoring and controlling those
risks; and
‘‘(II) monitor compliance with
the provisions of this subsection, pro-
visions governing transactions and re-
lationships between any broker or
dealer affiliated with the supervised
investment bank holding company and
214
any of the company’s other affiliates,
and applicable provisions of sub-
chapter II of chapter 53, title 31,
United States Code (commonly re-
ferred to as the ‘Bank Secrecy Act’)
and regulations thereunder.
‘‘(ii) RESTRICTED FOCUS OF EXAMI-
NATIONS.—The Commission shall limit the
focus and scope of any examination of a
supervised investment bank holding com-
pany to—
‘‘(I) the company; and
‘‘(II) any affiliate of the company
that, because of its size, condition, or
activities, the nature or size of the
transactions between such affiliate
and any affiliated broker or dealer, or
the centralization of functions within
the holding company system, could, in
the discretion of the Commission,
have a materially adverse effect on the
operational or financial condition of
the broker or dealer.
‘‘(iii) DEFERENCE TO OTHER EXAMI-
NATIONS.—For purposes of this subpara-
215
graph, the Commission shall, to the fullest
extent possible, use the reports of examina-
tion of an institution described in subpara-
graph (D), (F), or (G) of section 2(c)(2),
or held under section 4(f), of the Bank
Holding Company Act of 1956 made by
the appropriate regulatory agency, or of a
licensed insurance company made by the
appropriate State insurance regulator.
‘‘(4) HOLDING COMPANY CAPITAL.—
‘‘(A) AUTHORITY.—If the Commission
finds that it is necessary to adequately super-
vise investment bank holding companies and
their broker or dealer affiliates consistent with
the purposes of this subsection, the Commission
may adopt capital adequacy rules for supervised
investment bank holding companies.
‘‘(B) METHOD OF CALCULATION.—In de-
veloping rules under this paragraph:
‘‘(i) DOUBLE LEVERAGE.—The Com-
mission shall consider the use by the su-
pervised investment bank holding company
of debt and other liabilities to fund capital
investments in affiliates.
216
‘‘(ii) 
NO
UNWEIGHTED
CAPITAL
RATIO.—The Commission shall not impose
under this section a capital ratio that is
not based on appropriate risk-weighting
considerations.
‘‘(iii) NO CAPITAL REQUIREMENT ON
REGULATED
ENTITIES.—The Commission
shall not, by rule, regulation, guideline,
order or otherwise, impose any capital ade-
quacy provision on a nonbanking affiliate
(other than a broker or dealer) that is in
compliance with applicable capital require-
ments of another Federal regulatory au-
thority or State insurance authority.
‘‘(iv) APPROPRIATE
EXCLUSIONS.—
The Commission shall take full account of
the applicable capital requirements of an-
other Federal regulatory authority or State
insurance regulator.
‘‘(C) INTERNAL RISK MANAGEMENT MOD-
ELS.—The Commission may incorporate inter-
nal risk management models into its capital
adequacy rules for supervised investment bank
holding companies.
217
‘‘(5) FUNCTIONAL
REGULATION
OF
BANKING
AND
INSURANCE
ACTIVITIES
OF
SUPERVISED
IN-
VESTMENT BANK HOLDING COMPANIES.—The Com-
mission shall defer to—
‘‘(A) the appropriate regulatory agency
with regard to all interpretations of, and the
enforcement of, applicable banking laws relating
to the activities, conduct, ownership, and oper-
ations of banks, and institutions described in
subparagraph (D), (F), and (G) of section
2(c)(2), or held under section 4(f), of the Bank
Holding Company Act of 1956; and
‘‘(B) the appropriate State insurance regu-
lators with regard to all interpretations of, and
the enforcement of, applicable State insurance
laws relating to the activities, conduct, and op-
erations of insurance companies and insurance
agents.
‘‘(6) DEFINITIONS.—For purposes of this sub-
section and subsection (j)—
‘‘(A) The term ‘investment bank holding
company’ means—
‘‘(i) any person other than a natural
person that owns or controls one or more
brokers or dealers; and
218
‘‘(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’, and
‘savings association’ have the meanings given to
those terms in section 2 of the Bank Holding
Company Act of 1956 (12 U.S.C. 1841).
‘‘(D) The term ‘insured bank’ has the
meaning given to that term in section 3 of the
Federal Deposit Insurance Act.
‘‘(E) The term ‘foreign bank’ has the
meaning given to that term in section 1(b)(7)
of the International 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’ means any person directly or indirectly
controlling, controlled by, or under common
control with, an investment bank holding com-
pany.
‘‘(j) COMMISSION BACKUP AUTHORITY.—
219
‘‘(1) AUTHORITY.—The Commission may make
inspections of any wholesale financial holding com-
pany that—
‘‘(A) controls a wholesale financial institu-
tion;
‘‘(B) is not a foreign bank; and
‘‘(C) does not control an insured bank
(other than an institution permitted under sub-
paragraph (D), (F), or (G) of section 2(c)(2),
or held under section 4(f), of the Bank Holding
Company Act of 1956) or a savings association,
and any affiliate of such company, for the purpose
of monitoring and enforcing compliance by the
wholesale financial holding company with the Fed-
eral securities laws.
‘‘(2) LIMITATION.—The Commission shall limit
the focus and scope of any inspection under para-
graph (1) to those transactions, policies, procedures,
or records that are reasonably necessary to monitor
and enforce compliance by the wholesale financial
holding company or any affiliate with the Federal
securities laws.
‘‘(3) DEFERENCE TO EXAMINATIONS.—To the
fullest extent possible, the Commission shall use, for
220
the purposes of this subsection, the reports of exami-
nations—
‘‘(A) made by the Board of Governors of
the Federal Reserve System of any wholesale fi-
nancial holding company that is supervised by
the Board;
‘‘(B) made by or on behalf of any State
regulatory agency responsible for the super-
vision of an insurance company of any licensed
insurance company; and
‘‘(C) made by any Federal or State bank-
ing agency of any bank or institution described
in subparagraph (D), (F), or (G) of section
2(c)(2), or held under section 4(f), of the Bank
Holding Company Act of 1956.
‘‘(4) NOTICE.—To the fullest extent possible,
the Commission shall notify the appropriate regu-
latory agency prior to conducting an inspection of a
wholesale financial institution or institution de-
scribed in subparagraph (D), (F), or (G) of section
2(c)(2), or held under section 4(f), of the Bank
Holding Company Act of 1956.
‘‘(k) AUTHORITY TO LIMIT DISCLOSURE OF INFOR-
MATION.—Notwithstanding any other provision of law, the
Commission shall not be compelled to disclose any infor-
221
mation required to be reported under subsection (h) or
(i) or any information supplied to the Commission by any
domestic or foreign regulatory agency that relates to the
financial or operational condition of any associated person
of a broker or dealer, investment bank holding company,
or any affiliate of an investment bank holding company.
Nothing in this subsection shall authorize the Commission
to withhold information from Congress, or prevent the
Commission from complying with a request for informa-
tion from any other Federal department or agency or any
self-regulatory organization requesting the information for
purposes within the scope of its jurisdiction, or complying
with an order of a court of the United States in an action
brought by the United States or the Commission. For pur-
poses of section 552 of title 5, United States Code, this
subsection shall be considered a statute described in sub-
section (b)(3)(B) of such section 552. In prescribing regu-
lations to carry out the requirements of this subsection,
the Commission shall designate information described in
or obtained pursuant to subparagraphs (A), (B), and (C)
of subsection (i)(5) as confidential information for pur-
poses of section 24(b)(2) of this title.’’.
(b) CONFORMING AMENDMENTS.—
222
(1) Section 3(a)(34) of the Securities Exchange
Act of 1934 (15 U.S.C. 78c(a)(34)) is amended by
adding at the end the following new subparagraphs:
‘‘(H) When used with respect to an institu-
tion described in subparagraph (D), (F), or (G)
of section 2(c)(2), or held under section 4(f), of
the Bank Holding Company Act of 1956—
‘‘(i) the Comptroller of the Currency,
in the case of a national bank or a bank
in the District of Columbia examined by
the Comptroller of the Currency;
‘‘(ii) the Board of Governors of the
Federal Reserve System, in the case of a
State member bank of the Federal Reserve
System or any corporation chartered under
section 25A of the Federal Reserve Act;
‘‘(iii) the Federal Deposit Insurance
Corporation, in the case of any other bank
the deposits of which are insured in ac-
cordance with the Federal Deposit Insur-
ance Act; or
‘‘(iv) the Commission in the case of all
other such institutions.’’.
223
(2) Section 1112(e) of the Right to Financial
Privacy Act of 1978 (12 U.S.C. 3412(e)) is amend-
ed—
(A) by striking ‘‘this title’’ and inserting
‘‘law’’; and
(B) by inserting ‘‘, examination reports’’
after ‘‘financial records’’.
Subtitle D—Study
SEC. 241. STUDY OF METHODS TO INFORM INVESTORS AND
CONSUMERS OF UNINSURED PRODUCTS.
Within one year after the date of enactment of this
Act, the Comptroller General of the United States shall
submit a report to the Congress regarding the efficacy,
costs, and benefits of requiring that any depository insti-
tution that accepts federally insured deposits and that, di-
rectly or through a contractual or other arrangement with
a broker, dealer, or agent, buys from, sells to, or effects
transactions for retail investors in securities or consumers
of insurance to inform such investors and consumers
through the use of a logo or seal that the security or insur-
ance is not insured by the Federal Deposit Insurance Cor-
poration.
224
SEC. 242. STUDY OF LIMITATION ON FEES ASSOCIATED
WITH ACQUIRING FINANCIAL PRODUCTS.
Before the end of the 1-year period beginning on the
date of the enactment of this Act, the Comptroller General
of the United States shall submit a report to the Congress
regarding the efficacy and benefits of uniformly limiting
any commissions, fees, markups, or other costs incurred
by customers in the acquisition of financial products.
Subtitle E—Disclosure of Customer
Costs of Acquiring Financial
Products
SEC. 251. IMPROVED AND CONSISTENT DISCLOSURE.
(a) REVISED REGULATIONS REQUIRED.—Within one
year after the date of enactment of this Act, each Federal
financial regulatory authority shall prescribe rules, or revi-
sions to its rules, to improve the accuracy, simplicity, and
completeness, and to make more consistent, the disclosure
of information by persons subject to the jurisdiction of
such regulatory authority concerning any commissions,
fees, markups, 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.
225
(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-
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.
226
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 or entity shall provide insurance in a State
as principal or agent unless such person or entity is li-
censed as required by the appropriate insurance regulator
of such State in accordance with the relevant State insur-
ance law, subject to section 104 of this Act.
SEC. 303. FUNCTIONAL REGULATION OF INSURANCE.
The insurance sales activity of any person or entity
shall be functionally regulated by the States, subject to
section 104 of this Act.
SEC. 
304. 
INSURANCE 
UNDERWRITING 
IN 
NATIONAL
BANKS.
(a) IN GENERAL.—Except as provided in section 306,
a national bank and the subsidiaries of a national bank
227
may not provide insurance in a State as principal except
that this prohibition shall not apply to authorized prod-
ucts.
(b) AUTHORIZED PRODUCTS.—For the purposes of
this section, a product is authorized if—
(1) as of January 1, 1997, the Comptroller of
the Currency had determined in writing that na-
tional banks may provide such product as principal,
or national banks were in fact lawfully providing
such product as principal;
(2) no court of relevant jurisdiction had, by
final judgment, overturned a determination of the
Comptroller of the Currency that national banks
may provide such product as principal; and
(3) the product is not title insurance, or an an-
nuity contract the income of which is subject to tax
treatment under section 72 of the Internal Revenue
Code of 1986.
(c) DEFINITION.—For purposes of this section, the
term ‘‘insurance’’ means—
(1) any product regulated as insurance as of
January 1, 1997, in accordance with the relevant
State insurance law, in the State in which the prod-
uct is provided;
228
(2) any product first offered after January 1,
1997, which—
(A) a State insurance regulator determines
shall be regulated as insurance in the State in
which the product is provided because the prod-
uct insures, guarantees, or indemnifies against
liability, loss of life, loss of health, or loss
through damage to or destruction of property,
including, but not limited to, surety bonds, life
insurance, health insurance, title insurance, and
property and casualty insurance (such as pri-
vate passenger or commercial automobile,
homeowners, mortgage, commercial multiperil,
general liability, professional liability, workers’
compensation, fire and allied lines, farm owners
multiperil, aircraft, fidelity, surety, medical
malpractice, ocean marine, inland marine, and
boiler and machinery insurance); and
(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;
229
(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 prin-
cipal—
(I) it would be treated as a life
insurance contract under section 7702
of the Internal Revenue Code of 1986,
as amended; or
(II) in the event that the product
is not a letter of credit or other simi-
lar extension of credit, a qualified fi-
nancial contract, or a financial guar-
anty, it would qualify for treatment
for losses incurred with respect to
such product under section 832(b)(5)
of the Internal Revenue Code of 1986,
as amended, if the bank were subject
to tax as an insurance company under
section 831 of such Code; or
230
(3) any annuity contract the income on which
is subject to tax treatment under section 72 of the
Internal Revenue Code of 1986, as amended.
SEC. 305. NEW BANK AGENCY ACTIVITIES ONLY THROUGH
ACQUISITION 
OF 
EXISTING 
LICENSED
AGENTS.
If a national bank or a subsidiary of a national bank
is not providing insurance as agent in a State as of the
date of the enactment of this Act, the national bank and
the subsidiary of the national bank may provide insurance
(which such bank or subsidiary is otherwise authorized to
provide) as agent in such State after such date only by
acquiring a company which has been licensed by the ap-
propriate State regulator to provide insurance as agent in
such State for not less than 2 years before such acquisi-
tion. This section shall cease to have effect 5 years after
the date of the enactment of this Act.
SEC. 306. TITLE INSURANCE ACTIVITIES OF NATIONAL
BANKS AND THEIR AFFILIATES.
(a) AUTHORITY.—
(1) IN GENERAL.—Notwithstanding any other
provision of this Act or any other law, no national
bank, and no subsidiary of a national bank, may en-
gage in any activity involving the underwriting or
sale of title insurance other than title insurance ac-
231
tivities in which such national bank or subsidiary
was actively and lawfully engaged before the date of
the enactment 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 any activity involv-
ing the underwriting or sale of title insurance pursu-
ant to paragraph (1).
(3) INSURANCE SUBSIDIARY.—In the case of a
national bank which has a subsidiary which provides
insurance as principal and has no affiliate which
provides insurance as principal and is not a subsidi-
ary, the national bank may not engage in any activ-
ity involving the underwriting or sale of title insur-
ance pursuant to paragraph (1).
(4) AFFILIATE
AND
SUBSIDIARY
DEFINED.—
For purposes of this section, the terms ‘‘affiliate’’
and ‘‘subsidiary’’ have the meaning given such terms
in section 2 of the Bank Holding Company Act of
1956.
(b) PARITY
EXCEPTION.—Notwithstanding sub-
section (a), in the case of any State in which banks orga-
nized under the laws of such State were authorized to sell
244
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), regulations prescribed by a
Federal banking agency under this section shall
not apply to retail sales, solicitations, advertis-
ing, or offers of any insurance product by any
insured depository institution or wholesale fi-
nancial institution or to any person who is en-
gaged in such activities at an office of such in-
stitution or on behalf of the institution, in a
State where the State has in effect statutes,
regulations, orders, or interpretations, that are
inconsistent with or contrary to the regulations
prescribed by the Federal banking agencies.
‘‘(B) PREEMPTION.—If, with respect to
any provision of the regulations prescribed
under this section, the Board of Governors of
the Federal Reserve System, the Comptroller of
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-