274
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
‘‘(cc) the bank’s compensa-
tion for such plan or program
consists primarily of administra-
tion fees, or flat or capped per
order processing fees, or both.
‘‘(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;
275
‘‘(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 primarily of administra-
tion fees, or flat or capped per
order processing fees, or both.
‘‘(IV) PERMISSIBLE DELIVERY OF
MATERIALS.—The exception to being
considered a broker for a bank engaged
in activities described in subclauses
(I), (II), and (III) will not be affected
by a bank’s delivery of written or elec-
tronic plan materials to employees 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 1999; or
276
‘‘(bb) otherwise permitted by
the Commission.
‘‘(v) SWEEP ACCOUNTS.—The bank ef-
fects transactions as part of a program for
the investment or reinvestment of bank de-
posit funds into any no-load, open-end
management investment company registered
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 account of
any affiliate of the bank (as defined in sec-
tion 2 of the Bank Holding Company Act
of 1956) other than—
‘‘(I) a registered broker or dealer;
or
‘‘(II) an affiliate that is engaged
in merchant banking, as described in
section 6(c)(3)(H) of the Bank Holding
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-
277
ing a public offering, pursuant to sec-
tion 3(b), 4(2), or 4(6) of the Securities
Act of 1933 or the rules and regula-
tions issued thereunder;
‘‘(II) at any time after the date
that is 1 year after the date of enact-
ment of the Financial Services Act of
1999, is not affiliated with a broker or
dealer that has been registered for more
than 1 year in accordance with this
Act, and engages in dealing, market
making, or underwriting activities,
other than with respect to exempted se-
curities; and
‘‘(III) effects transactions exclu-
sively with qualified investors.
‘‘(viii) SAFEKEEPING
AND
CUSTODY
ACTIVITIES.—
‘‘(I) IN GENERAL.—The bank, as
part of customary banking activities—
‘‘(aa) provides safekeeping or
custody services with respect to se-
curities, including the exercise of
warrants and other rights on be-
half of customers;
278
‘‘(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’ trans-
actions in securities;
‘‘(cc) effects securities lending
or borrowing transactions with or
on behalf of customers as part of
services provided to customers
pursuant to division (aa) or (bb)
or invests cash collateral pledged
in connection with such trans-
actions; or
‘‘(dd) holds securities pledged
by a customer to another person
or securities subject to purchase or
resale agreements involving a cus-
tomer, or facilitates the pledging
or transfer of such securities by
book entry or as otherwise pro-
vided under applicable law.
‘‘(II) EXCEPTION
FOR
CARRYING
BROKER ACTIVITIES.—The exception to
being considered a broker for a bank
279
engaged in activities described in sub-
clause (I) shall not apply if the bank,
in connection with such activities, acts
in the United States as a carrying
broker (as such term, and different for-
mulations 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 govern-
ment securities (as defined in para-
graph (42) of this subsection).
‘‘(ix) BANKING PRODUCTS.—The bank
effects transactions in traditional banking
products, as defined in section 205(a) of the
Financial Services Act of 1999.
‘‘(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 deal-
er.
280
‘‘(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 provi-
sions 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 broker or dealer for execution;
‘‘(ii) the trade is a cross trade or other
substantially similar trade of a security
that—
‘‘(I) is made by the bank or be-
tween the bank and an affiliated fidu-
ciary; and
‘‘(II) is not in contravention of fi-
duciary principles established under
applicable Federal or State law; or
‘‘(iii) the trade is conducted in some
other manner permitted under rules, regula-
tions, or orders as the Commission may
prescribe or issue.
‘‘(D) NO EFFECT OF BANK EXEMPTIONS ON
OTHER COMMISSION AUTHORITY.—The exception
281
to being considered a broker for a bank engaged
in activities described in subparagraphs (B) and
(C) shall not affect the authority of the Commis-
sion 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 ad-
vice;
‘‘(ii) in any capacity in which the
bank possesses investment discretion on be-
half of another; or
‘‘(iii) in any other similar capacity.
‘‘(F) EXCEPTION FOR ENTITIES SUBJECT TO
SECTION 15(e).—The term ‘broker’ does not in-
clude a bank that—
‘‘(i) was, immediately prior to the en-
actment of the Financial Services Act of
1999, subject to section 15(e); and
282
‘‘(ii) is subject to such restrictions and
requirements as the Commission considers
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 account,
either individually or in a fiduciary capacity,
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—
283
‘‘(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 obligations
of the North American Development
Bank; or
‘‘(IV) any standardized, credit en-
hanced debt security issued by a for-
eign 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.
284
‘‘(iii) 
ASSET-BACKED
TRANS-
ACTIONS.—The bank engages in the issuance
or sale to qualified investors, through a
grantor trust or otherwise, of securities
backed by or representing an interest in
notes, drafts, acceptances, loans, leases, re-
ceivables, other obligations, or pools of any
such obligations predominantly originated
by the bank, or a syndicate 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 205(a) of the Finan-
cial Services Act of 1999.’’.
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 subsection
(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 associated
person of a member who effects sales as part of a primary
285
offering of securities not involving a public offering, pursu-
ant to section 3(b), 4(2), or 4(6) of the Securities Act of
1933 and the rules and regulations thereunder, and shall
deem qualified in such limited qualification category, with-
out testing, any bank employee who, in the six month period
preceding the date of enactment of this Act, engaged in ef-
fecting such sales.’’.
SEC. 204. INFORMATION SHARING.
Section 18 of the Federal Deposit Insurance Act is
amended by adding at the end the following new subsection:
‘‘(u) RECORDKEEPING REQUIREMENTS.—
‘‘(1) REQUIREMENTS.—Each appropriate Fed-
eral banking agency, after consultation with and con-
sideration of the views of the Commission, shall estab-
lish recordkeeping requirements for banks relying on
exceptions contained in paragraphs (4) and (5) of
section 3(a) of the Securities Exchange Act of 1934.
Such recordkeeping requirements shall be sufficient to
demonstrate compliance with the terms of such excep-
tions and be designed to facilitate compliance with
such exceptions. Each appropriate Federal banking
agency shall make any such information available to
the Commission upon request.
286
‘‘(2) DEFINITIONS.—As used in this subsection
the term ‘Commission’ means the Securities and Ex-
change Commission.’’.
SEC. 205. DEFINITION AND TREATMENT OF BANKING PROD-
UCTS.
(a) DEFINITION
OF TRADITIONAL 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 ‘‘traditional banking product’’
means—
(1) a deposit account, savings account, certificate
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 dealer)
funds, participates in, or owns that is sold—
(A) to qualified investors; or
(B) to other persons that—
(i) have the opportunity to review and
assess any material information, including
287
information regarding the borrower’s credit-
worthiness; 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;
and
(6) any swap agreement (as defined in section
11(e)(8)(D)(vi) of the Federal Deposit Insurance Act)
including credit and equity swaps, unless the appro-
priate Federal banking agency determines that credit
and equity swaps shall not be included within the def-
inition of such term for purposes of paragraphs (4)
and (5) of section 3(a) of the Securities Exchange Act
of 1934, except that the appropriate Federal banking
agency shall presume, absent a finding to the con-
trary, that equity swaps shall not be sold to any per-
son other than a qualified investor (as defined in sec-
tion 3(a)(54) of the Securities Act of 1934).
(b) AMENDMENT TO THE SECURITIES EXCHANGE ACT
OF 1934.—Section 15 of the Securities Exchange Act of
1934 (15 U.S.C. 78o) is amended by adding at the end the
following new subsection:
288
‘‘(i) TRANSACTIONS INVOLVING HYBRID PRODUCTS.—
‘‘(1) COMMISSION AUTHORITY.—
‘‘(A) IN GENERAL.—The Commission may,
after consultation with the Board, determine, by
regulation published in the Federal Register, that
a bank that effects transactions in, or buys or
sells, a new product should be subject to the reg-
istration requirements of this section.
‘‘(B) LIMITATION.—The Commission may
not impose the registration requirements of this
section on any bank that effects transactions in,
or buys or sells, a product under this subsection
unless the Commission determines in the regula-
tions described in subparagraph (A) that—
‘‘(i) the subject product is a new prod-
uct;
‘‘(ii) the subject product is a security;
and
‘‘(iii) imposing the registration re-
quirements of this section is necessary or
appropriate in the public interest and for
the protection of investors.
‘‘(2) OBJECTION TO COMMISSION REGULATION.—
‘‘(A) FILING OF PETITION FOR REVIEW.—
The Board, or any aggrieved party, may obtain
289
review of any final regulation described in para-
graph (1) in the United States Court of Appeals
for the District of Columbia Circuit by filing in
such court, not later than 60 days after the date
of publication of the final regulation, a written
petition requesting that the regulation be set
aside.
‘‘(B) 
TRANSMITTAL
OF
PETITION
AND
RECORD.—A copy of a petition described in sub-
paragraph (A) shall be transmitted as soon as
possible by the Clerk of the Court to an officer
or employee of the Commission designated for
that purpose. Upon receipt of the petition, the
Commission shall file with the court the regula-
tion under review and any documents referred to
therein, and any other relevant materials pre-
scribed by the court.
‘‘(C) EXCLUSIVE
JURISDICTION.—On the
date of the filing of the petition under subpara-
graph (A), the court has jurisdiction, which be-
comes exclusive on the filing of the materials set
forth in subparagraph (B), to affirm and enforce
or to set aside the regulation at issue.
‘‘(D) STANDARD OF REVIEW.—
290
‘‘(i) IN GENERAL.—The court shall de-
termine to affirm and enforce or set aside a
regulation of the Commission under this
subsection, based on the determination of
the 
court 
as 
to 
whether 
the 
subject
product—
‘‘(I) is a new product, as defined
in this subsection;
‘‘(II) is a security; and
‘‘(III) would be more appro-
priately regulated under the Federal
securities laws or the Federal banking
laws, giving equal deference to the
views of the Commission and the
Board.
‘‘(ii) CONSIDERATIONS.—In making a
determination under clause (i)(III), the
court shall consider—
‘‘(I) the nature of the subject new
product;
‘‘(II) the history, purpose, extent,
and appropriateness of the regulation
of the new product under the Federal
securities laws; and
291
‘‘(III) the history, purpose, extent,
and appropriateness of the regulation
of the new product under the Federal
banking laws.
‘‘(E) JUDICIAL STAY.—The filing of a peti-
tion by the Board or an aggrieved party pursu-
ant to subparagraph (A) shall operate as a judi-
cial stay, until the date on which the court
makes a final determination under this para-
graph, of—
‘‘(i) any Commission requirement that
a bank register as a broker or dealer under
this section, because the bank engages in
any transaction in, or buys or sells, the new
product that is the subject of the petition;
and
‘‘(ii) any Commission action against a
bank for a failure to comply with a require-
ment described in clause (i).
‘‘(3) 
DEFINITIONS.—For 
purposes 
of 
this
subsection—
‘‘(A) the term ‘Board’ means the Board of
Governors of the Federal Reserve System; and
339
SEC. 307. CERTAIN STATE AFFILIATION LAWS PREEMPTED
FOR INSURANCE COMPANIES AND AFFILI-
ATES.
Except as provided in section 104(a)(2), no State may,
by law, regulation, order, interpretation, or otherwise—
(1) prevent or significantly interfere with the
ability of any insurer, or any affiliate of an insurer
(whether such affiliate is organized as a stock com-
pany, mutual holding company, or otherwise), to be-
come a 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 insured
depository institution (or any company which con-
trols such institution), except that the laws of an in-
surer’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 in-
surer (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.