257 
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(including as a registrar of stocks), in 
the securities of an issuer as part of 
that issuer’s dividend reinvestment 
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 
‘‘(cc) the bank’s compensa-
tion for such plan or program 
consists chiefly of administration 
fees, or flat or capped per order 
processing fees, or both. 
‘‘(III) ISSUER PLANS.—The bank 
effects transactions, as a registered 
transfer agent (including as a reg-
istrar of stocks), in the securities of 
an issuer as part of that issuer’s plan 
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HR 10 PCS 
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; 
‘‘(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 chiefly of administration 
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 sub-
clauses (I), (II), and (III) will not be 
affected by a bank’s delivery of writ-
ten or electronic plan materials to em-
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HR 10 PCS 
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 1999; 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 de-
posit 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 (as defined in section 
2 of the Bank Holding Company Act of 
1956) of the bank other than— 
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HR 10 PCS 
‘‘(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 the date 
that is 1 year after the date of the en-
actment 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, mar-
ket making, or underwriting activities, 
other than with respect to exempted 
securities; and 
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‘‘(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 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 
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‘‘(dd) 
holds 
securities 
pledged by a customer to another 
person or securities subject to 
purchase or resale agreements in-
volving a customer, or facilitates 
the pledging or transfer of such 
securities by book entry or as 
otherwise provided under applica-
ble law, if the bank maintains 
records separately identifying the 
securities and the customer. 
‘‘(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) of this title 
and the rules and regulations there-
under) for any broker or dealer, un-
less such carrying broker activities are 
engaged in with respect to government 
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HR 10 PCS 
securities (as defined in paragraph 
(42) of this subsection). 
‘‘(ix) 
EXCEPTED
BANKING
PROD-
UCTS.—The bank effects transactions in 
excepted banking products, as defined in 
section 206 of the Financial Services Act 
of 1999. 
‘‘(x) MUNICIPAL
SECURITIES.—The 
bank effects transactions in municipal se-
curities. 
‘‘(xi) DE
MINIMIS
EXCEPTION.—The 
bank effects, other than in transactions re-
ferred to in clauses (i) through (x), 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 
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HR 10 PCS 
of any security that is a publicly traded security 
in the United States, unless— 
‘‘(i) the bank directs such trade to a 
registered broker or dealer for execution; 
‘‘(ii) the trade is a cross trade or 
other substantially similar trade of a secu-
rity that— 
‘‘(I) is made by the bank or be-
tween the bank and an affiliated fidu-
ciary; and 
‘‘(II) is not in contravention of 
fiduciary principles established under 
applicable Federal or State law; or 
‘‘(iii) the trade is conducted in some 
other manner permitted under rules, regu-
lations, or orders as the Commission may 
prescribe or issue. 
‘‘(D) FIDUCIARY CAPACITY.—For purposes 
of subparagraph (B)(ii), the term ‘fiduciary ca-
pacity’ means— 
‘‘(i) in the capacity as trustee, execu-
tor, administrator, registrar of stocks and 
bonds, transfer agent, guardian, assignee, 
receiver, or custodian under a uniform gift 
to minor act, or as an investment adviser 
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HR 10 PCS 
if the bank receives a fee for its investment 
advice; 
‘‘(ii) in any capacity in which the 
bank possesses investment discretion on 
behalf of another; or 
‘‘(iii) in any other similar capacity. 
‘‘(F) EXCEPTION FOR ENTITIES SUBJECT 
TO SECTION 15(e).—The term ‘broker’ does not 
include a bank that— 
‘‘(i) was, immediately prior to the en-
actment of the Financial Services Act of 
1999, subject to section 15(e) of this title; 
and 
‘‘(ii) is subject to such restrictions 
and requirements as the Commission con-
siders appropriate.’’. 
SEC. 202. DEFINITION OF DEALER. 
Section 3(a)(5) of the Securities Exchange Act of 
1934 (15 U.S.C. 78c(a)(5)) is amended to read as follows: 
‘‘(5) DEALER.— 
‘‘(A) IN
GENERAL.—The term ‘dealer’ 
means any person engaged in the business of 
buying and selling securities for such person’s 
own account through a broker or otherwise. 
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HR 10 PCS 
‘‘(B) EXCEPTION
FOR
PERSON
NOT
EN-
GAGED IN THE BUSINESS OF DEALING.—The 
term ‘dealer’ does not include a person that 
buys or sells securities for such person’s own 
account, either individually or in a fiduciary ca-
pacity, but not as a part of a regular business. 
‘‘(C) EXCEPTION FOR CERTAIN BANK AC-
TIVITIES.—A bank shall not be considered to be 
a dealer because the bank engages in any of the 
following activities under the conditions de-
scribed: 
‘‘(i) PERMISSIBLE SECURITIES TRANS-
ACTIONS.—The bank buys or sells— 
‘‘(I) commercial paper, bankers 
acceptances, or commercial bills; 
‘‘(II) exempted securities; 
‘‘(III) qualified Canadian govern-
ment obligations as defined in section 
5136 of the Revised Statutes of the 
United States, in conformity with sec-
tion 15C of this title and the rules 
and regulations thereunder, or obliga-
tions of the North American Develop-
ment Bank; or 
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‘‘(IV) any standardized, credit 
enhanced debt security issued by a 
foreign government pursuant to the 
March 1989 plan of then Secretary of 
the Treasury Brady, used by such for-
eign government to retire outstanding 
commercial bank loans. 
‘‘(ii) INVESTMENT, TRUSTEE, AND FI-
DUCIARY TRANSACTIONS.—The bank buys 
or sells securities for investment 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 other separate 
entity, of securities backed by or rep-
resenting an interest in notes, drafts, ac-
ceptances, loans, leases, receivables, other 
obligations (other than securities of which 
the bank is not the issuer), or pools of any 
such obligations predominantly originated 
by— 
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HR 10 PCS 
‘‘(I) the bank; 
‘‘(II) an affiliate of any such 
bank other than a broker or dealer; or 
‘‘(III) a syndicate of banks of 
which the bank is a member, if the 
obligations or pool of obligations con-
sists of mortgage obligations or con-
sumer-related receivables. 
‘‘(iv) 
EXCEPTED
BANKING
PROD-
UCTS.—The bank buys or sells excepted 
banking products, as defined in section 
206 of the Financial Services Act of 1999. 
‘‘(v) DERIVATIVE
INSTRUMENTS.— 
The bank issues, buys, or sells any deriva-
tive instrument to which the bank is a 
party— 
‘‘(I) to or from a qualified inves-
tor, except that if the instrument pro-
vides for the delivery of one or more 
securities (other than a derivative in-
strument or government security), the 
transaction shall be effected with or 
through a registered broker or dealer; 
or 
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HR 10 PCS 
‘‘(II) to or from other persons, 
except that if the derivative instru-
ment provides for the delivery of one 
or more securities (other than a deriv-
ative instrument or government secu-
rity), or is a security (other than a 
government security), the transaction 
shall be effected with or through a 
registered broker or dealer; or 
‘‘(III) to or from any person if 
the instrument is neither a security 
nor provides for the delivery of one or 
more securities (other than a deriva-
tive instrument).’’. 
SEC. 203. REGISTRATION FOR SALES OF PRIVATE SECURI-
TIES OFFERINGS. 
Section 15A of the Securities Exchange Act of 1934 
(15 U.S.C. 78o–3) is amended by inserting after sub-
section (i) the following new subsection: 
‘‘(j) REGISTRATION FOR SALES OF PRIVATE SECURI-
TIES OFFERINGS.—A registered securities association 
shall create a limited qualification category for any associ-
ated person of a member who effects sales as part of a 
primary offering of securities not involving a public offer-
ing, pursuant to section 3(b), 4(2), or 4(6) of the Securi-
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HR 10 PCS 
ties Act of 1933 and the rules and regulations thereunder, 
and shall deem qualified in such limited qualification cat-
egory, without testing, any bank employee who, in the six 
month period preceding the date of the enactment of this 
Act, engaged in effecting such sales.’’. 
SEC. 204. INFORMATION SHARING. 
Section 18 of the Federal Deposit Insurance Act is 
amended by adding at the end the following new sub-
section: 
‘‘(t) RECORDKEEPING REQUIREMENTS.— 
‘‘(1) REQUIREMENTS.—Each appropriate Fed-
eral banking agency, after consultation with and 
consideration of the views of the Commission, shall 
establish recordkeeping requirements for banks rely-
ing on exceptions contained in paragraphs (4) and 
(5) of section 3(a) of the Securities Exchange Act of 
1934. Such recordkeeping requirements shall be suf-
ficient to demonstrate compliance with the terms of 
such exceptions and be designed to facilitate compli-
ance with such exceptions. Each appropriate Federal 
banking agency shall make any such information 
available to the Commission upon request. 
‘‘(2) DEFINITIONS.—As used in this subsection 
the term ‘Commission’ means the Securities and Ex-
change Commission.’’. 
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HR 10 PCS 
SEC. 205. TREATMENT OF NEW HYBRID PRODUCTS. 
Section 15 of the Securities Exchange Act of 1934 
(15 U.S.C. 78o) is amended by adding at the end the fol-
lowing new subsection: 
‘‘(i) RULEMAKING TO EXTEND REQUIREMENTS TO 
NEW HYBRID PRODUCTS.— 
‘‘(1) 
LIMITATION.—The 
Commission 
shall 
not— 
‘‘(A) require a bank to register as a broker 
or dealer under this section because the bank 
engages in any transaction in, or buys or sells, 
a new hybrid product; or 
‘‘(B) bring an action against a bank for a 
failure to comply with a requirement described 
in subparagraph (A), 
unless the Commission has imposed such require-
ment by rule or regulation issued in accordance with 
this section. 
‘‘(2) CRITERIA FOR RULEMAKING.—The Com-
mission shall not impose a requirement under para-
graph (1) of this subsection with respect to any new 
hybrid product unless the Commission determines 
that— 
‘‘(A) the new hybrid product is a security; 
and 
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HR 10 PCS 
‘‘(B) imposing such requirement is nec-
essary or appropriate in the public interest and 
for the protection of investors, consistent with 
the requirements of section 3(f). 
‘‘(3) CONSIDERATIONS.—In making a deter-
mination under paragraph (2), the Commission shall 
consider— 
‘‘(A) the nature of the new hybrid product; 
and 
‘‘(B) the history, purpose, extent, and ap-
propriateness of the regulation of the new hy-
brid product under the Federal securities laws 
and under the Federal banking laws. 
‘‘(4) CONSULTATION.—In promulgating rules 
under this subsection, the Commission shall consult 
with and consider the views of the Board of Gov-
ernors of the Federal Reserve System regarding the 
nature of the new hybrid product, the history, pur-
pose, extent, and appropriateness of the regulation 
of the new product under the Federal banking laws, 
and the impact of the proposed rule on the banking 
industry. 
‘‘(5) NEW HYBRID PRODUCT.—For purposes of 
this subsection, the term ‘new hybrid product’ means 
a product that— 
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‘‘(A) was not subjected to regulation by 
the Commission as a security prior to the date 
of the enactment of this subsection; and 
‘‘(B) is not an excepted banking product, 
as such term is defined in section 206 of the 
Financial Services Act of 1999.’’. 
SEC. 206. DEFINITION OF EXCEPTED BANKING PRODUCT. 
(a) DEFINITION
OF EXCEPTED BANKING PROD-
UCT.—For purposes of paragraphs (4) and (5) of section 
3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a) (4), (5)), the term ‘‘excepted banking product’’ 
means— 
(1) a deposit account, savings account, certifi-
cate of deposit, or other deposit instrument issued 
by a bank; 
(2) a banker’s acceptance; 
(3) a letter of credit issued or loan made by a 
bank; 
(4) a debit account at a bank arising from a 
credit card or similar arrangement; 
(5) a participation in a loan which the bank or 
an affiliate of the bank (other than a broker or deal-
er) funds, participates in, or owns that is sold— 
(A) to qualified investors; or 
(B) to other persons that— 
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(i) have the opportunity to review and 
assess any material information, including 
information regarding the borrower’s cred-
itworthiness; and 
(ii) based on such factors as financial 
sophistication, net worth, and knowledge 
and experience in financial matters, have 
the capability to evaluate the information 
available, as determined under generally 
applicable banking standards or guidelines; 
or 
(6) a derivative instrument that involves or re-
lates to— 
(A) currencies, except options on cur-
rencies that trade on a national securities ex-
change; 
(B) interest rates, except interest rate de-
rivative instruments that— 
(i) are based on a security or a group 
or index of securities (other than govern-
ment securities or a group or index of gov-
ernment securities); 
(ii) provide for the delivery of one or 
more securities (other than government se-
curities); or 
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(iii) trade on a national securities ex-
change; or 
(C) commodities, other rates, indices, or 
other assets, except derivative instruments 
that— 
(i) are securities or that are based on 
a group or index of securities (other than 
government securities or a group or index 
of government securities); 
(ii) provide for the delivery of one or 
more securities (other than government se-
curities); or 
(iii) trade on a national securities ex-
change. 
(b) CLASSIFICATION LIMITED.—Classification of a 
particular product as an excepted banking product pursu-
ant to this section shall not be construed as finding or 
implying that such product is or is not a security for any 
purpose under the securities laws, or is or is not an ac-
count, agreement, contract, or transaction for any purpose 
under the Commodity Exchange Act. 
(c) INCORPORATED DEFINITIONS.—For purposes of 
this section— 
(1) the terms ‘‘bank’’, ‘‘qualified investor’’, and 
‘‘securities laws’’ have the same meanings given in 
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section 3(a) of the Securities Exchange Act of 1934, 
as amended by this Act; and 
(2) the term ‘‘government securities’’ has the 
meaning given in section 3(a)(42) of such Act (as 
amended by this Act), and, for purposes of this sec-
tion, commercial paper, bankers acceptances, and 
commercial bills shall be treated in the same manner 
as government securities. 
SEC. 207. ADDITIONAL DEFINITIONS. 
Section 3(a) of the Securities Exchange Act of 1934 
is amended by adding at the end the following new para-
graphs: 
‘‘(54) DERIVATIVE INSTRUMENT.— 
‘‘(A) DEFINITION.—The term ‘derivative 
instrument’ means any individually negotiated 
contract, agreement, warrant, note, or option 
that is based, in whole or in part, on the value 
of, any interest in, or any quantitative measure 
or the occurrence of any event relating to, one 
or more commodities, securities, currencies, in-
terest or other rates, indices, or other assets, 
but does not include an excepted banking prod-
uct, as defined in paragraphs (1) through (5) of 
section 206(a) of the Financial Services Act of 
1999. 
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‘‘(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, the term ‘qualified investor’ 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-
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 asso-
ciation (as defined in section 3(b) of the 
Federal Deposit Insurance Act), broker, 
dealer, insurance company (as defined in 
section 2(a)(13) of the Securities Act of 
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1933), or business development company 
(as defined in section 2(a)(48) of the In-
vestment Company Act of 1940); 
‘‘(iv) any small business investment 
company licensed by the United States 
Small Business Administration under sec-
tion 301 (c) or (d) of the Small Business 
Investment Act of 1958; 
‘‘(v) any State sponsored employee 
benefit plan, or any other employee benefit 
plan, within the meaning of the Employee 
Retirement Income Security Act of 1974, 
other than an individual retirement ac-
count, if the investment decisions are made 
by a plan fiduciary, as defined in section 
3(21) of that Act, which is either a bank, 
savings and loan association, insurance 
company, or registered investment adviser; 
‘‘(vi) any trust whose purchases of se-
curities are directed by a person described 
in clauses (i) through (v) of this subpara-
graph; 
‘‘(vii) any market intermediary ex-
empt under section 3(c)(2) of the Invest-
ment Company Act of 1940; 
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‘‘(viii) any associated person of a 
broker or dealer other than a natural per-
son; 
‘‘(ix) any foreign bank (as defined in 
section 1(b)(7) of the International Bank-
ing Act of 1978); 
‘‘(x) the government of any foreign 
country; 
‘‘(xi) any corporation, company, or 
partnership that owns and invests on a dis-
cretionary basis, not less than $10,000,000 
in investments; 
‘‘(xii) any natural person who owns 
and invests on a discretionary basis, not 
less than $10,000,000 in investments; 
‘‘(xiii) any government or political 
subdivision, agency, or instrumentality of a 
government who owns and invests on a dis-
cretionary basis not less than $50,000,000 
in investments; or 
‘‘(xiv) any multinational or supra-
national entity or any agency or instru-
mentality thereof. 
‘‘(B) ADDITIONAL AUTHORITY.—The Com-
mission may, by rule or order, define a ‘quali-
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HR 10 PCS 
fied investor’ as any other person, taking into 
consideration such factors as the financial so-
phistication of the person, net worth, and 
knowledge and experience in financial mat-
ters.’’. 
SEC. 208. GOVERNMENT SECURITIES DEFINED. 
Section 3(a)(42) of the Securities Exchange Act of 
1934 (15 U.S.C. 78c(a)(42)) is amended— 
(1) by striking ‘‘or’’ at the end of subparagraph 
(C); 
(2) by striking the period at the end of sub-
paragraph (D) and inserting ‘‘; or’’; and 
(3) by adding at the end the following new sub-
paragraph: 
‘‘(E) for purposes of sections 15, 15C, and 
17A as applied to a bank, a qualified Canadian 
government obligation as defined in section 
5136 of the Revised Statutes of the United 
States.’’. 
SEC. 209. EFFECTIVE DATE. 
This subtitle shall take effect at the end of the 270- 
day period beginning on the date of the enactment of this 
Act. 
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SEC. 210. RULE OF CONSTRUCTION. 
Nothing in this Act shall supersede, affect, or other-
wise limit the scope and applicability of the Commodity 
Exchange Act (7 U.S.C. 1 et seq.). 
Subtitle B—Bank Investment 
Company Activities 
SEC. 211. CUSTODY OF INVESTMENT COMPANY ASSETS BY 
AFFILIATED BANK. 
(a) MANAGEMENT COMPANIES.—Section 17(f) of the 
Investment Company Act of 1940 (15 U.S.C. 80a–17(f)) 
is amended— 
(1) by redesignating paragraphs (1), (2), and 
(3) as subparagraphs (A), (B), and (C), respectively; 
(2) by striking ‘‘(f) Every registered’’ and in-
serting the following: 
‘‘(f) CUSTODY OF SECURITIES.— 
‘‘(1) Every registered’’; 
(3) by redesignating the second, third, fourth, 
and fifth sentences of such subsection as paragraphs 
(2) through (5), respectively, and indenting the left 
margin of such paragraphs appropriately; and 
(4) by adding at the end the following new 
paragraph: 
‘‘(6) The Commission may adopt rules and reg-
ulations, and issue orders, consistent with the pro-
tection of investors, prescribing the conditions under 
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which a bank, or an affiliated person of a bank, ei-
ther of which is an affiliated person, promoter, orga-
nizer, or sponsor of, or principal underwriter for, a 
registered management company may serve as custo-
dian of that registered management company.’’. 
(b) UNIT INVESTMENT TRUSTS.—Section 26 of the 
Investment Company Act of 1940 (15 U.S.C. 80a–26) is 
amended— 
(1) by redesignating subsections (b) through (e) 
as subsections (c) through (f), respectively; and 
(2) by inserting after subsection (a) the fol-
lowing new subsection: 
‘‘(b) The Commission may adopt rules and regula-
tions, and issue orders, consistent with the protection of 
investors, prescribing the conditions under which a bank, 
or an affiliated person of a bank, either of which is an 
affiliated person of a principal underwriter for, or deposi-
tor of, a registered unit investment trust, may serve as 
trustee or custodian under subsection (a)(1).’’. 
(c) FIDUCIARY DUTY OF CUSTODIAN.—Section 36(a) 
of the Investment Company Act of 1940 (15 U.S.C. 80a– 
35(a)) is amended— 
(1) in paragraph (1), by striking ‘‘or’’ at the 
end; 
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(2) in paragraph (2), by striking the period at 
the end and inserting ‘‘; or’’; and 
(3) by inserting after paragraph (2) the fol-
lowing: 
‘‘(3) as custodian.’’. 
SEC. 212. LENDING TO AN AFFILIATED INVESTMENT COM-
PANY. 
Section 17(a) of the Investment Company Act of 
1940 (15 U.S.C. 80a–17(a)) is amended— 
(1) by striking ‘‘or’’ at the end of paragraph 
(2); 
(2) by striking the period at the end of para-
graph (3) and inserting ‘‘; or’’; and 
(3) by adding at the end the following new 
paragraph: 
‘‘(4) to loan money or other property to such 
registered company, or to any company controlled by 
such registered company, in contravention of such 
rules, regulations, or orders as the Commission may 
prescribe or issue consistent with the protection of 
investors.’’. 
SEC. 213. INDEPENDENT DIRECTORS. 
(a) IN GENERAL.—Section 2(a)(19)(A) of the Invest-
ment Company Act of 1940 (15 U.S.C. 80a–2(a)(19)(A)) 
is amended— 
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(1) by striking clause (v) and inserting the fol-
lowing new clause: 
‘‘(v) any person or any affiliated per-
son of a person (other than a registered in-
vestment company) that, at any time dur-
ing the 6-month period preceding the date 
of the determination of whether that per-
son or affiliated person is an interested 
person, has executed any portfolio trans-
actions for, engaged in any principal trans-
actions with, or distributed shares for— 
‘‘(I) the investment company; 
‘‘(II) any other investment com-
pany having the same investment ad-
viser as such investment company or 
holding itself out to investors as a re-
lated company for purposes of invest-
ment or investor services; or 
‘‘(III) any account over which the 
investment company’s investment ad-
viser has brokerage placement discre-
tion,’’; 
(2) by redesignating clause (vi) as clause (vii); 
and 
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(3) by inserting after clause (v) the following 
new clause: 
‘‘(vi) any person or any affiliated per-
son of a person (other than a registered in-
vestment company) that, at any time dur-
ing the 6-month period preceding the date 
of the determination of whether that per-
son or affiliated person is an interested 
person, has loaned money or other prop-
erty to— 
‘‘(I) the investment company; 
‘‘(II) any other investment com-
pany having the same investment ad-
viser as such investment company or 
holding itself out to investors as a re-
lated company for purposes of invest-
ment or investor services; or 
‘‘(III) any account for which the 
investment company’s investment ad-
viser has borrowing authority,’’. 
(b) 
CONFORMING
AMENDMENT.—Section 
2(a)(19)(B) of the Investment Company Act of 1940 (15 
U.S.C. 80a–2(a)(19)(B)) is amended— 
(1) by striking clause (v) and inserting the fol-
lowing new clause: 
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‘‘(v) any person or any affiliated per-
son of a person (other than a registered in-
vestment company) that, at any time dur-
ing the 6-month period preceding the date 
of the determination of whether that per-
son or affiliated person is an interested 
person, has executed any portfolio trans-
actions for, engaged in any principal trans-
actions with, or distributed shares for— 
‘‘(I) any investment company for 
which the investment adviser or prin-
cipal underwriter serves as such; 
‘‘(II) any investment company 
holding itself out to investors, for pur-
poses of investment or investor serv-
ices, as a company related to any in-
vestment company for which the in-
vestment adviser or principal under-
writer serves as such; or 
‘‘(III) any account over which the 
investment 
adviser 
has 
brokerage 
placement discretion,’’; 
(2) by redesignating clause (vi) as clause (vii); 
and 
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(3) by inserting after clause (v) the following 
new clause: 
‘‘(vi) any person or any affiliated per-
son of a person (other than a registered in-
vestment company) that, at any time dur-
ing the 6-month period preceding the date 
of the determination of whether that per-
son or affiliated person is an interested 
person, has loaned money or other prop-
erty to— 
‘‘(I) any investment company for 
which the investment adviser or prin-
cipal underwriter serves as such; 
‘‘(II) any investment company 
holding itself out to investors, for pur-
poses of investment or investor serv-
ices, as a company related to any in-
vestment company for which the in-
vestment adviser or principal under-
writer serves as such; or 
‘‘(III) any account for which the 
investment adviser has borrowing au-
thority,’’. 
(c) AFFILIATION OF DIRECTORS.—Section 10(c) of 
the Investment Company Act of 1940 (15 U.S.C. 80a– 
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10(c)) is amended by striking ‘‘bank, except’’ and insert-
ing ‘‘bank (together with its affiliates and subsidiaries) or 
any one bank holding company (together with its affiliates 
and subsidiaries) (as such terms are defined in section 2 
of the Bank Holding Company Act of 1956), except’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall take effect at the end of the 1-year period 
beginning on the date of the enactment of this subtitle. 
SEC. 214. ADDITIONAL SEC DISCLOSURE AUTHORITY. 
Section 35(a) of the Investment Company Act of 
1940 (15 U.S.C. 80a–34(a)) is amended to read as fol-
lows: 
‘‘(a) MISREPRESENTATION OF GUARANTEES.— 
‘‘(1) IN GENERAL.—It shall be unlawful for any 
person, issuing or selling any security of which a 
registered investment company is the issuer, to rep-
resent or imply in any manner whatsoever that such 
security or company— 
‘‘(A) has been guaranteed, sponsored, rec-
ommended, or approved by the United States, 
or any agency, instrumentality or officer of the 
United States; 
‘‘(B) has been insured by the Federal De-
posit Insurance Corporation; or 
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‘‘(C) is guaranteed by or is otherwise an 
obligation of any bank or insured depository in-
stitution. 
‘‘(2) DISCLOSURES.—Any person issuing or 
selling the securities of a registered investment com-
pany that is advised by, or sold through, a bank 
shall prominently disclose that an investment in the 
company is not insured by the Federal Deposit In-
surance Corporation or any other government agen-
cy. The Commission may adopt rules and regula-
tions, and issue orders, consistent with the protec-
tion of investors, prescribing the manner in which 
the disclosure under this paragraph shall be pro-
vided. 
‘‘(3) DEFINITIONS.—The terms ‘insured deposi-
tory institution’ and ‘appropriate Federal banking 
agency’ have the same meanings given in section 3 
of the Federal Deposit Insurance Act.’’. 
SEC. 215. DEFINITION OF BROKER UNDER THE INVEST-
MENT COMPANY ACT OF 1940. 
Section 2(a)(6) of the Investment Company Act of 
1940 (15 U.S.C. 80a–2(a)(6)) is amended to read as fol-
lows: 
‘‘(6) The term ‘broker’ has the same meaning 
given in section 3 of the Securities Exchange Act of 
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1934, except that such term does not include any 
person solely by reason of the fact that such person 
is an underwriter for one or more investment compa-
nies.’’. 
SEC. 216. DEFINITION OF DEALER UNDER THE INVEST-
MENT COMPANY ACT OF 1940. 
Section 2(a)(11) of the Investment Company Act of 
1940 (15 U.S.C. 80a–2(a)(11)) is amended to read as fol-
lows: 
‘‘(11) The term ‘dealer’ has the same meaning 
given in the Securities Exchange Act of 1934, but 
does not include an insurance company or invest-
ment company.’’. 
SEC. 217. REMOVAL OF THE EXCLUSION FROM THE DEFINI-
TION OF INVESTMENT ADVISER FOR BANKS 
THAT ADVISE INVESTMENT COMPANIES. 
(a) INVESTMENT ADVISER.—Section 202(a)(11)(A) 
of the Investment Advisers Act of 1940 (15 U.S.C. 80b– 
2(a)(11)(A)) is amended by striking ‘‘investment com-
pany’’ and inserting ‘‘investment company, except that the 
term ‘investment adviser’ includes any bank or bank hold-
ing company to the extent that such bank or bank holding 
company serves or acts as an investment adviser to a reg-
istered investment company, but if, in the case of a bank, 
such services or actions are performed through a sepa-
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HR 10 PCS 
rately identifiable department or division, the department 
or division, and not the bank itself, shall be deemed to 
be the investment adviser’’. 
(b) SEPARATELY IDENTIFIABLE DEPARTMENT
OR 
DIVISION.—Section 202(a) of the Investment Advisers Act 
of 1940 (15 U.S.C. 80b–2(a)) is amended by adding at 
the end the following: 
‘‘(26) The term ‘separately identifiable depart-
ment or division’ of a bank means a unit— 
‘‘(A) that is under the direct supervision of 
an officer or officers designated by the board of 
directors of the bank as responsible for the day- 
to-day conduct of the bank’s investment adviser 
activities for one or more investment companies, 
including the supervision of all bank employees 
engaged in the performance of such activities; 
and 
‘‘(B) for which all of the records relating 
to its investment adviser activities are sepa-
rately maintained in or extractable from such 
unit’s own facilities or the facilities of the bank, 
and such records are so maintained or other-
wise accessible as to permit independent exam-
ination and enforcement by the Commission of 
this Act or the Investment Company Act of 
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1940 and rules and regulations promulgated 
under this Act or the Investment Company Act 
of 1940.’’. 
SEC. 218. DEFINITION OF BROKER UNDER THE INVEST-
MENT ADVISERS ACT OF 1940. 
Section 202(a)(3) of the Investment Advisers Act of 
1940 (15 U.S.C. 80b–2(a)(3)) is amended to read as fol-
lows: 
‘‘(3) The term ‘broker’ has the same meaning 
given in section 3 of the Securities Exchange Act of 
1934.’’. 
SEC. 219. DEFINITION OF DEALER UNDER THE INVEST-
MENT ADVISERS ACT OF 1940. 
Section 202(a)(7) of the Investment Advisers Act of 
1940 (15 U.S.C. 80b–2(a)(7)) is amended to read as fol-
lows: 
‘‘(7) The term ‘dealer’ has the same meaning 
given in section 3 of the Securities Exchange Act of 
1934, but does not include an insurance company or 
investment company.’’. 
SEC. 220. INTERAGENCY CONSULTATION. 
The Investment Advisers Act of 1940 (15 U.S.C. 
80b–1 et seq.) is amended by inserting after section 210 
the following new section: 
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‘‘SEC. 210A. CONSULTATION. 
‘‘(a) EXAMINATION RESULTS AND OTHER INFORMA-
TION.— 
‘‘(1) The appropriate Federal banking agency 
shall provide the Commission upon request the re-
sults of any examination, reports, records, or other 
information to which such agency may have access 
with respect to the investment advisory activities— 
‘‘(A) of any— 
‘‘(i) bank holding company; 
‘‘(ii) bank; or 
‘‘(iii) separately identifiable depart-
ment or division of a bank, 
that is registered under section 203 of this title; 
and 
‘‘(B) in the case of a bank holding com-
pany or bank that has a subsidiary or a sepa-
rately identifiable department or division reg-
istered under that section, of such bank or bank 
holding company. 
‘‘(2) The Commission shall provide to the ap-
propriate Federal banking agency upon request the 
results of any examination, reports, records, or other 
information with respect to the investment advisory 
activities of any bank holding company, bank, or 
separately identifiable department or division of a 
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bank, which is registered under section 203 of this 
title. 
‘‘(b) EFFECT ON OTHER AUTHORITY.—Nothing in 
this section shall limit in any respect the authority of the 
appropriate Federal banking agency with respect to such 
bank holding company, bank, or department or division 
under any other provision of law. 
‘‘(c) DEFINITION.—For purposes of this section, the 
term ‘appropriate Federal banking agency’ shall have the 
same meaning given in section 3 of the Federal Deposit 
Insurance Act.’’. 
SEC. 221. TREATMENT OF BANK COMMON TRUST FUNDS. 
(a) SECURITIES ACT OF 1933.—Section 3(a)(2) of 
the Securities Act of 1933 (15 U.S.C. 77c(a)(2)) is 
amended by striking ‘‘or any interest or participation in 
any common trust fund or similar fund maintained by a 
bank exclusively for the collective investment and reinvest-
ment of assets contributed thereto by such bank in its ca-
pacity as trustee, executor, administrator, or guardian’’ 
and inserting ‘‘or any interest or participation in any com-
mon trust fund or similar fund that is excluded from the 
definition of the term ‘investment company’ under section 
3(c)(3) of the Investment Company Act of 1940’’. 
(b) SECURITIES EXCHANGE ACT OF 1934.—Section 
3(a)(12)(A)(iii) of the Securities Exchange Act of 1934 
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(15 U.S.C. 78c(a)(12)(A)(iii)) is amended to read as fol-
lows: 
‘‘(iii) any interest or participation in any 
common trust fund or similar fund that is ex-
cluded from the definition of the term ‘invest-
ment company’ under section 3(c)(3) of the In-
vestment Company Act of 1940;’’. 
(c) INVESTMENT COMPANY ACT OF 1940.—Section 
3(c)(3) of the Investment Company Act of 1940 (15 
U.S.C. 80a–3(c)(3)) is amended by inserting before the 
period the following: ‘‘, if— 
‘‘(A) such fund is employed by the bank 
solely as an aid to the administration of trusts, 
estates, or other accounts created and main-
tained for a fiduciary purpose; 
‘‘(B) except in connection with the ordi-
nary advertising of the bank’s fiduciary serv-
ices, interests in such fund are not— 
‘‘(i) advertised; or 
‘‘(ii) offered for sale to the general 
public; and 
‘‘(C) fees and expenses charged by such 
fund are not in contravention of fiduciary prin-
ciples established under applicable Federal or 
State law’’. 
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SEC. 222. INVESTMENT ADVISERS PROHIBITED FROM HAV-
ING 
CONTROLLING 
INTEREST 
IN 
REG-
ISTERED INVESTMENT COMPANY. 
Section 15 of the Investment Company Act of 1940 
(15 U.S.C. 80a–15) is amended by adding at the end the 
following new subsection: 
‘‘(g) CONTROLLING INTEREST IN INVESTMENT COM-
PANY PROHIBITED.— 
‘‘(1) IN GENERAL.—If an investment adviser to 
a registered investment company, or an affiliated 
person of that investment adviser, holds a control-
ling interest in that registered investment company 
in a trustee or fiduciary capacity, such person 
shall— 
‘‘(A) if it holds the shares in a trustee or 
fiduciary capacity with respect to any employee 
benefit plan subject to the Employee Retire-
ment Income Security Act of 1974, transfer the 
power to vote the shares of the investment com-
pany through to another person acting in a fi-
duciary capacity with respect to the plan who is 
not an affiliated person of that investment ad-
viser or any affiliated person thereof; or 
‘‘(B) if it holds the shares in a trustee or 
fiduciary capacity with respect to any person or 
entity other than an employee benefit plan sub-
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ject to the Employee Retirement Income Secu-
rity Act of 1974— 
‘‘(i) transfer the power to vote the 
shares of the investment company through 
to— 
‘‘(I) the beneficial owners of the 
shares; 
‘‘(II) another person acting in a 
fiduciary capacity who is not an affili-
ated person of that investment adviser 
or any affiliated person thereof; or 
‘‘(III) any person authorized to 
receive statements and information 
with respect to the trust who is not an 
affiliated person of that investment 
adviser or any affiliated person there-
of; 
‘‘(ii) vote the shares of the investment 
company held by it in the same proportion 
as shares held by all other shareholders of 
the investment company; or 
‘‘(iii) vote the shares of the invest-
ment company as otherwise permitted 
under such rules, regulations, or orders as 
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the Commission may prescribe or issue 
consistent with the protection of investors. 
‘‘(2) EXEMPTION.—Paragraph (1) shall not 
apply to any investment adviser to a registered in-
vestment company, or any affiliated person of that 
investment adviser, that holds shares of the invest-
ment company in a trustee or fiduciary capacity if 
that registered investment company consists solely of 
assets held in such capacities. 
‘‘(3) SAFE HARBOR.—No investment adviser to 
a registered investment company or any affiliated 
person of such investment adviser shall be deemed to 
have acted unlawfully or to have breached a fidu-
ciary duty under State or Federal law solely by rea-
son of acting in accordance with clause (i), (ii), or 
(iii) of paragraph (1)(B).’’. 
SEC. 
223. 
STATUTORY 
DISQUALIFICATION 
FOR 
BANK 
WRONGDOING. 
Section 9(a) of the Investment Company Act of 1940 
(15 U.S.C. 80a-9(a)) is amended in paragraphs (1) and 
(2) by striking ‘‘securities dealer, transfer agent,’’ and in-
serting ‘‘securities dealer, bank, transfer agent,’’. 
SEC. 224. CONFORMING CHANGE IN DEFINITION. 
Section 2(a)(5) of the Investment Company Act of 
1940 (15 U.S.C. 80a–2(a)(5)) is amended by striking 
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‘‘(A) a banking institution organized under the laws of the 
United States’’ and inserting ‘‘(A) a depository institution 
(as defined in section 3 of the Federal Deposit Insurance 
Act) or a branch or agency of a foreign bank (as such 
terms are defined in section 1(b) of the International 
Banking Act of 1978)’’. 
SEC. 225. CONFORMING AMENDMENT. 
Section 202 of the Investment Advisers Act of 1940 
(15 U.S.C. 80b–2) is amended by adding at the end the 
following new subsection: 
‘‘(c) CONSIDERATION
OF
PROMOTION
OF
EFFI-
CIENCY, COMPETITION, AND
CAPITAL
FORMATION.— 
Whenever pursuant to this title the Commission is en-
gaged in rulemaking and is required to consider or deter-
mine whether an action is necessary or appropriate in the 
public interest, the Commission shall also consider, in ad-
dition to the protection of investors, whether the action 
will promote efficiency, competition, and capital forma-
tion.’’. 
SEC. 226. CHURCH PLAN EXCLUSION. 
Section 3(c)(14) of the Investment Company Act of 
1940 (15 U.S.C. 80a-3(c)(14)) is amended— 
(1) by redesignating clauses (i) and (ii) of sub-
paragraph (B) as subclauses (I) and (II), respec-
tively; 
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(2) by redesignating subparagraphs (A) and 
(B) as clauses (i) and (ii), respectively; 
(3) by inserting ‘‘(A)’’ after ‘‘(14)’’; and 
(4) by adding at the end the following new sub-
paragraph: 
‘‘(B) If a registered investment company would 
be excluded from the definition of investment com-
pany under this subsection but for the fact that 
some of the company’s assets do not satisfy the con-
dition of subparagraph (A)(ii) of this paragraph, 
then any investment adviser to the company or affili-
ated person of such investment adviser shall not be 
subject to the requirements of section 15(g)(1)(B) 
with respect to shares of the investment company.’’. 
SEC. 227. EFFECTIVE DATE. 
This subtitle shall take effect 90 days after the date 
of the enactment of this Act. 
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Subtitle 
C—Securities 
and 
Ex-
change Commission Supervision 
of 
Investment 
Bank 
Holding 
Companies 
SEC. 231. SUPERVISION OF INVESTMENT BANK HOLDING 
COMPANIES BY THE SECURITIES AND EX-
CHANGE COMMISSION. 
(a) AMENDMENT.—Section 17 of the Securities Ex-
change Act of 1934 (15 U.S.C. 78q) is amended— 
(1) by redesignating subsection (i) as subsection 
(k); and 
(2) by inserting after subsection (h) the fol-
lowing new subsection: 
‘‘(i) INVESTMENT BANK HOLDING COMPANIES.— 
‘‘(1) ELECTIVE SUPERVISION OF AN INVEST-
MENT
BANK
HOLDING
COMPANY
NOT
HAVING
A 
BANK OR SAVINGS ASSOCIATION AFFILIATE.— 
‘‘(A) IN GENERAL.—An investment bank 
holding company that is not— 
‘‘(i) an affiliate of a wholesale finan-
cial institution, an insured bank (other 
than an institution described in subpara-
graph (D), (F), or (G) of section 2(c)(2), 
or held under section 4(f), of the Bank 
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Holding Company Act of 1956), or a sav-
ings association; 
‘‘(ii) a foreign bank, foreign company, 
or company that is described in section 
8(a) of the International Banking Act of 
1978; or 
‘‘(iii) a foreign bank that controls, di-
rectly or indirectly, a corporation chartered 
under section 25A of the Federal Reserve 
Act, 
may elect to become supervised by filing with 
the Commission a notice of intention to become 
supervised, pursuant to subparagraph (B) of 
this paragraph. Any investment bank holding 
company filing such a notice shall be supervised 
in accordance with this section and comply with 
the rules promulgated by the Commission appli-
cable to supervised investment bank holding 
companies. 
‘‘(B) NOTIFICATION OF STATUS AS A SU-
PERVISED
INVESTMENT
BANK
HOLDING
COM-
PANY.—An investment bank holding company 
that elects under subparagraph (A) to become 
supervised by the Commission shall file with the 
Commission a written notice of intention to be-
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come supervised by the Commission in such 
form and containing such information and doc-
uments concerning such investment bank hold-
ing company as the Commission, by rule, may 
prescribe as necessary or appropriate in fur-
therance of the purposes of this section. Unless 
the Commission finds that such supervision is 
not necessary or appropriate in furtherance of 
the purposes of this section, such supervision 
shall become effective 45 days after the date of 
receipt of such written notice by the Commis-
sion or within such shorter time period as the 
Commission, by rule or order, may determine. 
‘‘(2) ELECTION
NOT
TO
BE
SUPERVISED
BY 
THE COMMISSION AS AN INVESTMENT BANK HOLD-
ING COMPANY.— 
‘‘(A) VOLUNTARY
WITHDRAWAL.—A su-
pervised investment bank holding company that 
is supervised pursuant to paragraph (1) may, 
upon such terms and conditions as the Commis-
sion deems necessary or appropriate, elect not 
to be supervised by the Commission by filing a 
written notice of withdrawal from Commission 
supervision. Such notice shall not become effec-
tive until 1 year after receipt by the Commis-
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sion, or such shorter or longer period as the 
Commission deems necessary or appropriate to 
ensure effective supervision of the material 
risks to the supervised investment bank holding 
company and to the affiliated broker or dealer, 
or to prevent evasion of the purposes of this 
section. 
‘‘(B) DISCONTINUATION
OF
COMMISSION 
SUPERVISION.—If the Commission finds that 
any supervised investment bank holding com-
pany that is supervised pursuant to paragraph 
(1) is no longer in existence or has ceased to be 
an investment bank holding company, or if the 
Commission finds that continued supervision of 
such a supervised investment bank holding com-
pany is not consistent with the purposes of this 
section, the Commission may discontinue the 
supervision pursuant to a rule or order, if any, 
promulgated by the Commission under this sec-
tion. 
‘‘(3) SUPERVISION
OF
INVESTMENT
BANK 
HOLDING COMPANIES.— 
‘‘(A) RECORDKEEPING AND REPORTING.— 
‘‘(i) IN GENERAL.—Every supervised 
investment bank holding company and 
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each affiliate thereof shall make and keep 
for prescribed periods such records, furnish 
copies thereof, and make such reports, as 
the Commission may require by rule, in 
order to keep the Commission informed as 
to— 
‘‘(I) the company’s or affiliate’s 
activities, financial condition, policies, 
systems for monitoring and control-
ling financial and operational risks, 
and transactions and relationships be-
tween any broker or dealer affiliate of 
the supervised investment bank hold-
ing company; and 
‘‘(II) the extent to which the 
company or affiliate has complied with 
the provisions of this Act and regula-
tions prescribed and orders issued 
under this Act. 
‘‘(ii) FORM
AND
CONTENTS.—Such 
records and reports shall be prepared in 
such form and according to such specifica-
tions (including certification by an inde-
pendent public accountant), as the Com-
mission may require and shall be provided 
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promptly at any time upon request by the 
Commission. Such records and reports may 
include— 
‘‘(I) a balance sheet and income 
statement; 
‘‘(II) an assessment of the con-
solidated capital of the supervised in-
vestment bank holding company; 
‘‘(III) an independent auditor’s 
report attesting to the supervised in-
vestment bank holding company’s 
compliance with its internal risk man-
agement and internal control objec-
tives; and 
‘‘(IV) reports concerning the ex-
tent to which the company or affiliate 
has complied with the provisions of 
this title and any regulations pre-
scribed and orders issued under this 
title. 
‘‘(B) USE OF EXISTING REPORTS.— 
‘‘(i) IN GENERAL.—The Commission 
shall, to the fullest extent possible, accept 
reports in fulfillment of the requirements 
under this paragraph that the supervised 
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investment bank holding company or its af-
filiates have been required to provide to 
another appropriate regulatory agency or 
self-regulatory organization. 
‘‘(ii) AVAILABILITY.—A supervised in-
vestment bank holding company or an af-
filiate of such company shall provide to the 
Commission, at the request of the Commis-
sion, any report referred to in clause (i). 
‘‘(C) EXAMINATION AUTHORITY.— 
‘‘(i) FOCUS
OF
EXAMINATION
AU-
THORITY.—The Commission may make ex-
aminations of any supervised investment 
bank holding company and any affiliate of 
such company in order to— 
‘‘(I) inform the Commission 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 
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company that may affect any 
broker or dealer controlled by 
such supervised investment bank 
holding company; and 
‘‘(cc) the systems of the su-
pervised investment bank holding 
company and its affiliates for 
monitoring and controlling those 
risks; and 
‘‘(II) monitor compliance with 
the provisions of this subsection, pro-
visions governing transactions and re-
lationships between any broker or 
dealer affiliated with the supervised 
investment bank holding company and 
any of the company’s other affiliates, 
and applicable provisions of sub-
chapter II of chapter 53, title 31, 
United States Code (commonly re-
ferred to as the ‘Bank Secrecy Act’) 
and regulations thereunder. 
‘‘(ii) RESTRICTED FOCUS OF EXAMI-
NATIONS.—The Commission shall limit the 
focus and scope of any examination of a 
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supervised investment bank holding com-
pany to— 
‘‘(I) the company; and 
‘‘(II) any affiliate of the company 
that, because of its size, condition, or 
activities, the nature or size of the 
transactions between such affiliate 
and any affiliated broker or dealer, or 
the centralization of functions within 
the holding company system, could, in 
the discretion of the Commission, 
have a materially adverse effect on the 
operational or financial condition of 
the broker or dealer. 
‘‘(iii) DEFERENCE TO OTHER EXAMI-
NATIONS.—For purposes of this subpara-
graph, the Commission shall, to the fullest 
extent possible, use the reports of examina-
tion of an institution described in subpara-
graph (D), (F), or (G) of section 2(c)(2), 
or held under section 4(f), of the Bank 
Holding Company Act of 1956 made by 
the appropriate regulatory agency, or of a 
licensed insurance company made by the 
appropriate State insurance regulator. 
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‘‘(4) HOLDING COMPANY CAPITAL.— 
‘‘(A) AUTHORITY.—If the Commission 
finds that it is necessary to adequately super-
vise investment bank holding companies and 
their broker or dealer affiliates consistent with 
the purposes of this subsection, the Commission 
may adopt capital adequacy rules for supervised 
investment bank holding companies. 
‘‘(B) METHOD OF CALCULATION.—In de-
veloping rules under this paragraph: 
‘‘(i) DOUBLE LEVERAGE.—The Com-
mission shall consider the use by the su-
pervised investment bank holding company 
of debt and other liabilities to fund capital 
investments in affiliates. 
‘‘(ii) 
NO
UNWEIGHTED
CAPITAL 
RATIO.—The Commission shall not impose 
under this section a capital ratio that is 
not based on appropriate risk-weighting 
considerations. 
‘‘(iii) NO CAPITAL REQUIREMENT ON 
REGULATED
ENTITIES.—The Commission 
shall not, by rule, regulation, guideline, 
order or otherwise, impose any capital ade-
quacy provision on a nonbanking affiliate 
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(other than a broker or dealer) that is in 
compliance with applicable capital require-
ments of another Federal regulatory au-
thority or State insurance authority. 
‘‘(iv) APPROPRIATE
EXCLUSIONS.— 
The Commission shall take full account of 
the applicable capital requirements of an-
other Federal regulatory authority or State 
insurance regulator. 
‘‘(C) INTERNAL RISK MANAGEMENT MOD-
ELS.—The Commission may incorporate inter-
nal risk management models into its capital 
adequacy rules for supervised investment bank 
holding companies. 
‘‘(5) FUNCTIONAL
REGULATION
OF
BANKING 
AND
INSURANCE
ACTIVITIES
OF
SUPERVISED
IN-
VESTMENT BANK HOLDING COMPANIES.—The Com-
mission shall defer to— 
‘‘(A) the appropriate regulatory agency 
with regard to all interpretations of, and the 
enforcement of, applicable banking laws relating 
to the activities, conduct, ownership, and oper-
ations of banks, and institutions described in 
subparagraph (D), (F), and (G) of section 
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2(c)(2), or held under section 4(f), of the Bank 
Holding Company Act of 1956; and 
‘‘(B) the appropriate State insurance regu-
lators with regard to all interpretations of, and 
the enforcement of, applicable State insurance 
laws relating to the activities, conduct, and op-
erations of insurance companies and insurance 
agents. 
‘‘(6) DEFINITIONS.—For purposes of this sub-
section: 
‘‘(A) The term ‘investment bank holding 
company’ means— 
‘‘(i) any person other than a natural 
person that owns or controls one or more 
brokers or dealers; and 
‘‘(ii) the associated persons of the in-
vestment bank holding company. 
‘‘(B) The term ‘supervised investment 
bank holding company’ means any investment 
bank holding company that is supervised by the 
Commission pursuant to this subsection. 
‘‘(C) The terms ‘affiliate’, ‘bank’, ‘bank 
holding company’, ‘company’, ‘control’, ‘savings 
association’, and ‘wholesale financial institution’ 
have the same meanings given in section 2 of 
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the Bank Holding Company Act of 1956 (12 
U.S.C. 1841). 
‘‘(D) The term ‘insured bank’ has the 
same meaning given in section 3 of the Federal 
Deposit Insurance Act. 
‘‘(E) The term ‘foreign bank’ has the same 
meaning given in section 1(b)(7) of the Inter-
national Banking Act of 1978. 
‘‘(F) The terms ‘person associated with an 
investment bank holding company’ and ‘associ-
ated person of an investment bank holding com-
pany’ mean any person directly or indirectly 
controlling, controlled by, or under common 
control with, an investment bank holding com-
pany.’’. 
‘‘(j) AUTHORITY TO LIMIT DISCLOSURE OF INFOR-
MATION.—Notwithstanding any other provision of law, the 
Commission shall not be compelled to disclose any infor-
mation required to be reported under subsection (h) or 
(i) or any information supplied to the Commission by any 
domestic or foreign regulatory agency that relates to the 
financial or operational condition of any associated person 
of a broker or dealer, investment bank holding company, 
or any affiliate of an investment bank holding company. 
Nothing in this subsection shall authorize the Commission 
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to withhold information from Congress, or prevent the 
Commission from complying with a request for informa-
tion from any other Federal department or agency or any 
self-regulatory organization requesting the information for 
purposes within the scope of its jurisdiction, or complying 
with an order of a court of the United States in an action 
brought by the United States or the Commission. For pur-
poses of section 552 of title 5, United States Code, this 
subsection shall be considered a statute described in sub-
section (b)(3)(B) of such section 552. In prescribing regu-
lations to carry out the requirements of this subsection, 
the Commission shall designate information described in 
or obtained pursuant to subparagraphs (A), (B), and (C) 
of subsection (i)(5) as confidential information for pur-
poses of section 24(b)(2) of this title.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 3(a)(34) of the Securities Exchange 
Act of 1934 (15 U.S.C. 78c(a)(34)) is amended by 
adding at the end the following new subparagraph: 
‘‘(H) When used with respect to an institu-
tion described in subparagraph (D), (F), or (G) 
of section 2(c)(2), or held under section 4(f), of 
the Bank Holding Company Act of 1956— 
‘‘(i) the Comptroller of the Currency, 
in the case of a national bank or a bank 
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in the District of Columbia examined by 
the Comptroller of the Currency; 
‘‘(ii) the Board of Governors of the 
Federal Reserve System, in the case of a 
State member bank of the Federal Reserve 
System or any corporation chartered under 
section 25A of the Federal Reserve Act; 
‘‘(iii) the Federal Deposit Insurance 
Corporation, in the case of any other bank 
the deposits of which are insured in ac-
cordance with the Federal Deposit Insur-
ance Act; or 
‘‘(iv) the Commission in the case of all 
other such institutions.’’. 
(2) Section 1112(e) of the Right to Financial 
Privacy Act of 1978 (12 U.S.C. 3412(e)) is amend-
ed— 
(A) by striking ‘‘this title’’ and inserting 
‘‘law’’; and 
(B) by inserting ‘‘, examination reports’’ 
after ‘‘financial records’’. 
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Subtitle D—Disclosure of Customer 
Costs of Acquiring Financial 
Products 
SEC. 241. IMPROVED AND CONSISTENT DISCLOSURE. 
(a) REVISED REGULATIONS REQUIRED.—Within 1 
year after the date of the enactment of this Act, each Fed-
eral financial regulatory authority shall prescribe rules, or 
revisions to its rules, to improve the accuracy, simplicity, 
and completeness, and to make more consistent, the dis-
closure of information by persons subject to the jurisdic-
tion of such regulatory authority concerning any commis-
sions, fees, or other costs incurred by customers in the 
acquisition of financial products. 
(b) CONSULTATION.—In prescribing rules and revi-
sions under subsection (a), the Federal financial regu-
latory authorities shall consult with each other and with 
appropriate State financial regulatory authorities. 
(c) CONSIDERATION OF EXISTING DISCLOSURES.— 
In prescribing rules and revisions under subsection (a), 
the Federal financial regulatory authorities shall consider 
the sufficiency and appropriateness of then existing laws 
and rules applicable to persons subject to their jurisdic-
tion, and may prescribe exemptions from the rules and re-
visions required by subsection (a) to the extent appro-
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priate in light of the objective of this section to increase 
the consistency of disclosure practices. 
(d) ENFORCEMENT.—Any rule prescribed by a Fed-
eral financial regulatory authority pursuant to this section 
shall, for purposes of enforcement, be treated as a rule 
prescribed by such regulatory authority pursuant to the 
statute establishing such regulatory authority’s jurisdic-
tion over the persons to whom such rule applies. 
(e) DEFINITION.—As used in this section, the term 
‘‘Federal financial regulatory authority’’ means the Board 
of Governors of the Federal Reserve System, the Securi-
ties and Exchange Commission, the Comptroller of the 
Currency, the Federal Deposit Insurance Corporation, the 
Commodity Futures Trading Commission, and any self- 
regulatory organization under the supervision of any of 
the foregoing. 
Subtitle E—Banks and Bank 
Holding Companies 
SEC. 251. CONSULTATION. 
(a) IN GENERAL.—The Securities and Exchange 
Commission shall consult and coordinate comments with 
the appropriate Federal banking agency before taking any 
action or rendering any opinion with respect to the man-
ner in which any insured depository institution or deposi-
tory institution holding company reports loan loss reserves 
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in its financial statement, including the amount of any 
such loan loss reserve. 
(b) DEFINITIONS.—For purposes of subsection (a), 
the terms ‘‘insured depository institution’’, ‘‘depository in-
stitution holding company’’, and ‘‘appropriate Federal 
banking agency’’ have the same meaning as in section 3 
of the Federal Deposit Insurance Act. 
TITLE III—INSURANCE 
Subtitle A—State Regulation of 
Insurance 
SEC. 301. STATE REGULATION OF THE BUSINESS OF INSUR-
ANCE. 
The Act entitled ‘‘An Act to express the intent of the 
Congress with reference to the regulation of the business 
of insurance’’ and approved March 9, 1945 (15 U.S.C. 
1011 et seq.), commonly referred to as the ‘‘McCarran- 
Ferguson Act’’ remains the law of the United States. 
SEC. 302. MANDATORY INSURANCE LICENSING REQUIRE-
MENTS. 
No person shall engage in the business of insurance 
in a State as principal or agent unless such person is li-
censed as required by the appropriate insurance regulator 
of such State in accordance with the relevant State insur-
ance law, subject to section 104. 
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SEC. 303. FUNCTIONAL REGULATION OF INSURANCE. 
The insurance activities of any person (including a 
national bank exercising its power to act as agent under 
the eleventh undesignated paragraph of section 13 of the 
Federal Reserve Act) shall be functionally regulated by the 
States, subject to section 104. 
SEC. 
304. 
INSURANCE 
UNDERWRITING 
IN 
NATIONAL 
BANKS. 
(a) IN GENERAL.—Except as provided in section 305, 
a national bank and the subsidiaries of a national bank 
may not provide insurance in a State as principal except 
that this prohibition shall not apply to authorized prod-
ucts. 
(b) AUTHORIZED PRODUCTS.—For the purposes of 
this section, a product is authorized if— 
(1) as of January 1, 1999, the Comptroller of 
the Currency had determined in writing that na-
tional banks may provide such product as principal, 
or national banks were in fact lawfully providing 
such product as principal; 
(2) no court of relevant jurisdiction had, by 
final judgment, overturned a determination of the 
Comptroller of the Currency that national banks 
may provide such product as principal; and 
(3) the product is not title insurance, or an an-
nuity contract the income of which is subject to tax 
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treatment under section 72 of the Internal Revenue 
Code of 1986. 
(c) DEFINITION.—For purposes of this section, the 
term ‘‘insurance’’ means— 
(1) any product regulated as insurance as of 
January 1, 1999, in accordance with the relevant 
State insurance law, in the State in which the prod-
uct is provided; 
(2) any product first offered after January 1, 
1999, which— 
(A) a State insurance regulator determines 
shall be regulated as insurance in the State in 
which the product is provided because the prod-
uct insures, guarantees, or indemnifies against 
liability, loss of life, loss of health, or loss 
through damage to or destruction of property, 
including, but not limited to, surety bonds, life 
insurance, health insurance, title insurance, and 
property and casualty insurance (such as pri-
vate passenger or commercial automobile, 
homeowners, mortgage, commercial multiperil, 
general liability, professional liability, workers’ 
compensation, fire and allied lines, farm owners 
multiperil, aircraft, fidelity, surety, medical 
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malpractice, ocean marine, inland marine, and 
boiler and machinery insurance); and 
(B) is not a product or service of a bank 
that is— 
(i) a deposit product; 
(ii) a loan, discount, letter of credit, 
or other extension of credit; 
(iii) a trust or other fiduciary service; 
(iv) a qualified financial contract (as 
defined in or determined pursuant to sec-
tion 11(e)(8)(D)(i) of the Federal Deposit 
Insurance Act); or 
(v) a financial guaranty, except that 
this subparagraph (B) shall not apply to a 
product that includes an insurance compo-
nent such that if the product is offered or 
proposed to be offered by the bank as prin-
cipal— 
(I) it would be treated as a life 
insurance contract under section 7702 
of the Internal Revenue Code of 1986; 
or 
(II) in the event that the product 
is not a letter of credit or other simi-
lar extension of credit, a qualified fi-
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nancial contract, or a financial guar-
anty, it would qualify for treatment 
for losses incurred with respect to 
such product under section 832(b)(5) 
of the Internal Revenue Code of 1986, 
if the bank were subject to tax as an 
insurance company under section 831 
of that Code; or 
(3) any annuity contract, the income on which 
is subject to tax treatment under section 72 of the 
Internal Revenue Code of 1986. 
SEC. 305. TITLE INSURANCE ACTIVITIES OF NATIONAL 
BANKS AND THEIR AFFILIATES. 
(a) GENERAL PROHIBITION.—No national bank, and 
no subsidiary of a national bank, may engage in any activ-
ity involving the underwriting or sale of title insurance. 
(b) NONDISCRIMINATION PARITY EXCEPTION.— 
(1) IN GENERAL.—Notwithstanding any other 
provision of law (including section 104 of this Act), 
in the case of any State in which banks organized 
under the laws of such State are authorized to sell 
title insurance as agency, a national bank and a sub-
sidiary of a national bank may sell title insurance as 
agent in such State, but only in the same manner, 
to the same extent, and under the same restrictions 
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as such State banks are authorized to sell title in-
surance as agent in such State. 
(2) COORDINATION WITH ‘‘WILDCARD’’ PROVI-
SION.—A State law which authorizes State banks to 
engage in any activities in such State in which a na-
tional bank may engage shall not be treated as a 
statute which authorizes State banks to sell title in-
surance as agent, for purposes of paragraph (1). 
(c) GRANDFATHERING WITH CONSISTENT REGULA-
TION.— 
(1) IN GENERAL.—Except as provided in para-
graphs (2) and (3) and notwithstanding subsections 
(a) and (b), a national bank, and a subsidiary of a 
national bank, may conduct title insurance activities 
which such national bank or subsidiary was actively 
and lawfully conducting before the date of the enact-
ment of this Act. 
(2) INSURANCE AFFILIATE.—In the case of a 
national bank which has an affiliate which provides 
insurance as principal and is not a subsidiary of the 
bank, the national bank and any subsidiary of the 
national bank may not engage in the underwriting of 
title insurance pursuant to paragraph (1). 
(3) INSURANCE SUBSIDIARY.—In the case of a 
national bank which has a subsidiary which provides 
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insurance as principal and has no affiliate other 
than a subsidiary which provides insurance as prin-
cipal, the national bank may not directly engage in 
any activity involving the underwriting of title insur-
ance. 
(d) ‘‘AFFILIATE’’ AND ‘‘SUBSIDIARY’’ DEFINED.— 
For purposes of this section, the terms ‘‘affiliate’’ and 
‘‘subsidiary’’ have the same meanings as in section 2 of 
the Bank Holding Company Act of 1956. 
(e) RULE OF CONSTRUCTION.—No provision of this 
Act or any other Federal law shall be construed as super-
seding or affecting a State law which was in effect before 
the date of the enactment of this Act and which prohibits 
title insurance from being offered, provided, or sold in 
such State, or from being underwritten with respect to 
real property in such State, by any person whatsoever. 
SEC. 306. EXPEDITED AND EQUALIZED DISPUTE RESOLU-
TION FOR FEDERAL REGULATORS. 
(a) FILING IN COURT OF APPEALS.—In the case of 
a regulatory conflict between a State insurance regulator 
and a Federal regulator as to whether any product is or 
is not insurance, as defined in section 304(c) of this Act, 
or whether a State statute, regulation, order, or interpre-
tation regarding any insurance sales or solicitation activity 
is properly treated as preempted under Federal law, either 
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regulator may seek expedited judicial review of such deter-
mination by the United States Court of Appeals for the 
circuit in which the State is located or in the United 
States Court of Appeals for the District of Columbia Cir-
cuit by filing a petition for review in such court. 
(b) EXPEDITED REVIEW.—The United States Court 
of Appeals in which a petition for review is filed in accord-
ance with subsection (a) shall complete all action on such 
petition, including rendering a judgment, before the end 
of the 60-day period beginning on the date on which such 
petition is filed, unless all parties to such proceeding agree 
to any extension of such period. 
(c) SUPREME COURT REVIEW.—Any request for cer-
tiorari to the Supreme Court of the United States of any 
judgment of a United States Court of Appeals with respect 
to a petition for review under this section shall be filed 
with the Supreme Court of the United States as soon as 
practicable after such judgment is issued. 
(d) STATUTE OF LIMITATION.—No petition may be 
filed under this section challenging an order, ruling, deter-
mination, or other action of a Federal regulator or State 
insurance regulator after the later of— 
(1) the end of the 12-month period beginning 
on the date on which the first public notice is made 
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of such order, ruling, determination or other action 
in its final form; or 
(2) the end of the 6-month period beginning on 
the date on which such order, ruling, determination, 
or other action takes effect. 
(e) STANDARD OF REVIEW.—The court shall decide 
a petition filed under this section based on its review on 
the merits of all questions presented under State and Fed-
eral law, including the nature of the product or activity 
and the history and purpose of its regulation under State 
and Federal law, without unequal deference. 
SEC. 307. CONSUMER PROTECTION REGULATIONS. 
The Federal Deposit Insurance Act (12 U.S.C. 1811 
et seq.) is amended by inserting after section 46 (as added 
by section 122(b) of this Act) the following new section: 
‘‘SEC. 47. CONSUMER PROTECTION REGULATIONS. 
‘‘(a) REGULATIONS REQUIRED.— 
‘‘(1) IN GENERAL.—The Federal banking agen-
cies shall prescribe and publish in final form, before 
the end of the 1-year period beginning on the date 
of the enactment of the Financial Services Act of 
1999, consumer protection regulations (which the 
agencies jointly determine to be appropriate) that— 
‘‘(A) apply to retail sales practices, solici-
tations, advertising, or offers of any insurance 
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product by any insured depository institution or 
wholesale financial institution or any person 
who is engaged in such activities at an office of 
the institution or on behalf of the institution; 
and 
‘‘(B) are consistent with the requirements 
of this Act and provide such additional protec-
tions for consumers to whom such sales, solici-
tations, advertising, or offers are directed as 
the agency determines to be appropriate. 
‘‘(2) APPLICABILITY
TO
SUBSIDIARIES.—The 
regulations prescribed pursuant to paragraph (1) 
shall extend such protections to any subsidiaries of 
an insured depository institution, as deemed appro-
priate by the regulators referred to in paragraph (3), 
where such extension is determined to be necessary 
to ensure the consumer protections provided by this 
section. 
‘‘(3) CONSULTATION
AND
JOINT
REGULA-
TIONS.—The Federal banking agencies shall consult 
with each other and prescribe joint regulations pur-
suant to paragraph (1), after consultation with the 
State insurance regulators, as appropriate. 
‘‘(b) SALES PRACTICES.—The regulations prescribed 
pursuant to subsection (a) shall include anticoercion rules 
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applicable to the sale of insurance products which prohibit 
an insured depository institution from engaging in any 
practice that would lead a consumer to believe an exten-
sion of credit, in violation of section 106(b) of the Bank 
Holding Company Act Amendments of 1970, is condi-
tional upon— 
‘‘(1) the purchase of an insurance product from 
the institution or any of its affiliates; or 
‘‘(2) an agreement by the consumer not to ob-
tain, or a prohibition on the consumer from obtain-
ing, an insurance product from an unaffiliated enti-
ty. 
‘‘(c) DISCLOSURES AND ADVERTISING.—The regula-
tions prescribed pursuant to subsection (a) shall include 
the following provisions relating to disclosures and adver-
tising in connection with the initial purchase of an insur-
ance product: 
‘‘(1) DISCLOSURES.— 
‘‘(A) IN GENERAL.—Requirements that the 
following disclosures be made orally and in writ-
ing before the completion of the initial sale and, 
in the case of clause (iii), at the time of applica-
tion for an extension of credit: 
‘‘(i) UNINSURED STATUS.—As appro-
priate, the product is not insured by the 
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Federal Deposit Insurance Corporation, 
the United States Government, or the in-
sured depository institution. 
‘‘(ii) INVESTMENT RISK.—In the case 
of a variable annuity or other insurance 
product which involves an investment risk, 
that there is an investment risk associated 
with the product, including possible loss of 
value. 
‘‘(iii) COERCION.—The approval of an 
extension of credit may not be conditioned 
on— 
‘‘(I) the purchase of an insurance 
product from the institution in which 
the application for credit is pending or 
any of its affiliates or subsidiaries; or 
‘‘(II) an agreement by the con-
sumer not to obtain, or a prohibition 
on the consumer from obtaining, an 
insurance product from an unaffili-
ated entity. 
‘‘(B) MAKING DISCLOSURE READILY UN-
DERSTANDABLE.—Regulations prescribed under 
subparagraph (A) shall encourage the use of 
disclosure that is conspicuous, simple, direct, 
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and readily understandable, such as the fol-
lowing: 
‘‘(i) ‘NOT FDIC—INSURED’. 
‘‘(ii) ‘NOT GUARANTEED BY THE 
BANK’. 
‘‘(iii) ‘MAY GO DOWN IN VALUE’. 
‘‘(iv) ‘NOT INSURED BY ANY 
GOVERNMENT AGENCY’. 
‘‘(C) ADJUSTMENTS
FOR
ALTERNATIVE 
METHODS
OF
PURCHASE.—In prescribing the 
requirements under subparagraphs (A) and 
(D), necessary adjustments shall be made for 
purchase in person, by telephone, or by elec-
tronic media to provide for the most appro-
priate and complete form of disclosure and ac-
knowledgments. 
‘‘(D) CONSUMER
ACKNOWLEDGMENT.—A 
requirement that an insured depository institu-
tion shall require any person selling an insur-
ance product at any office of, or on behalf of, 
the institution to obtain, at the time a con-
sumer receives the disclosures required under 
this paragraph or at the time of the initial pur-
chase by the consumer of such product, an ac-
knowledgment by such consumer of the receipt 
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of the disclosure required under this subsection 
with respect to such product. 
‘‘(2) 
PROHIBITION
ON
MISREPRESENTA-
TIONS.—A prohibition on any practice, or any adver-
tising, at any office of, or on behalf of, the insured 
depository institution, or any subsidiary as appro-
priate, which could mislead any person or otherwise 
cause a reasonable person to reach an erroneous be-
lief with respect to— 
‘‘(A) the uninsured nature of any insur-
ance product sold, or offered for sale, by the in-
stitution or any subsidiary of the institution; 
‘‘(B) in the case of a variable annuity or 
other insurance product that involves an invest-
ment risk, the investment risk associated with 
any such product; or 
‘‘(C) in the case of an institution or sub-
sidiary at which insurance products are sold or 
offered for sale, the fact that— 
‘‘(i) the approval of an extension of 
credit to a customer by the institution or 
subsidiary may not be conditioned on the 
purchase of an insurance product by such 
customer from the institution or sub-
sidiary; and 
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‘‘(ii) the customer is free to purchase 
the 
insurance 
product 
from 
another 
source.’’. 
‘‘(d) SEPARATION OF BANKING AND NONBANKING 
ACTIVITIES.— 
‘‘(1) REGULATIONS
REQUIRED.—The regula-
tions prescribed pursuant to subsection (a) shall in-
clude such provisions as the Federal banking agen-
cies consider appropriate to ensure that the routine 
acceptance of deposits is kept, to the extent prac-
ticable, physically segregated from insurance product 
activity. 
‘‘(2) REQUIREMENTS.—Regulations prescribed 
pursuant to paragraph (1) shall include the fol-
lowing: 
‘‘(A) SEPARATE SETTING.—A clear delin-
eation of the setting in which, and the cir-
cumstances under which, transactions involving 
insurance products should be conducted in a lo-
cation physically segregated from an area where 
retail deposits are routinely accepted. 
‘‘(B) REFERRALS.—Standards which per-
mit any person accepting deposits from the 
public in an area where such transactions are 
routinely conducted in an insured depository in-
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stitution to refer a customer who seeks to pur-
chase any insurance product to a qualified per-
son who sells such product, only if the person 
making the referral receives no more than a 
one-time nominal fee of a fixed dollar amount 
for each referral that does not depend on 
whether the referral results in a transaction. 
‘‘(C) QUALIFICATION AND LICENSING RE-
QUIREMENTS.—Standards prohibiting any in-
sured depository institution from permitting 
any person to sell or offer for sale any insur-
ance product in any part of any office of the in-
stitution, or on behalf of the institution, unless 
such person is appropriately qualified and li-
censed. 
‘‘(e) DOMESTIC VIOLENCE DISCRIMINATION PROHI-
BITION.— 
‘‘(1) IN GENERAL.—In the case of an applicant 
for, or an insured under, any insurance product de-
scribed in paragraph (2), the status of the applicant 
or insured as a victim of domestic violence, or as a 
provider of services to victims of domestic violence, 
shall not be considered as a criterion in any decision 
with regard to insurance underwriting, pricing, re-
newal, or scope of coverage of insurance policies, or 
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payment of insurance claims, except as required or 
expressly permitted under State law. 
‘‘(2) SCOPE OF APPLICATION.—The prohibition 
contained in paragraph (1) shall apply to any insur-
ance product which is sold or offered for sale, as 
principal, agent, or broker, by any insured deposi-
tory institution or wholesale financial institution or 
any person who is engaged in such activities at an 
office of the institution or on behalf of the institu-
tion. 
‘‘(3) SENSE OF THE CONGRESS.—It is the sense 
of the Congress that, by the end of the 30-month pe-
riod beginning on the date of the enactment of this 
Act, the States should enact prohibitions against dis-
crimination with respect to insurance products that 
are at least as strict as the prohibitions contained in 
paragraph (1). 
‘‘(4) DOMESTIC VIOLENCE DEFINED.—For pur-
poses of this subsection, the term ‘domestic violence’ 
means the occurrence of one or more of the following 
acts by a current or former family member, house-
hold member, intimate partner, or caretaker: 
‘‘(A) Attempting to cause or causing or 
threatening another person physical harm, se-
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vere emotional distress, psychological trauma, 
rape, or sexual assault. 
‘‘(B) Engaging in a course of conduct or 
repeatedly committing acts toward another per-
son, including following the person without 
proper authority, under circumstances that 
place the person in reasonable fear of bodily in-
jury or physical harm. 
‘‘(C) Subjecting another person to false 
imprisonment. 
‘‘(D) Attempting to cause or cause damage 
to property so as to intimidate or attempt to 
control the behavior of another person. 
‘‘(f) CONSUMER GRIEVANCE PROCESS.—The Federal 
banking agencies shall jointly establish a consumer com-
plaint mechanism, for receiving and expeditiously address-
ing consumer complaints alleging a violation of regulations 
issued under the section, which shall— 
‘‘(1) establish a group within each regulatory 
agency to receive such complaints; 
‘‘(2) develop procedures for investigating such 
complaints; 
‘‘(3) develop procedures for informing con-
sumers of rights they may have in connection with 
such complaints; and 
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‘‘(4) develop procedures for addressing concerns 
raised by such complaints, as appropriate, including 
procedures for the recovery of losses to the extent 
appropriate. 
‘‘(g) EFFECT ON OTHER AUTHORITY.— 
‘‘(1) IN GENERAL.—No provision of this section 
shall be construed as granting, limiting, or otherwise 
affecting— 
‘‘(A) any authority of the Securities and 
Exchange Commission, any self-regulatory or-
ganization, the Municipal Securities Rule-
making Board, or the Secretary of the Treasury 
under any Federal securities law; or 
‘‘(B) except as provided in paragraph (2), 
any authority of any State insurance commis-
sioner or other State authority under any State 
law. 
‘‘(2) COORDINATION WITH STATE LAW.— 
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), regulations prescribed by a 
Federal banking agency under this section shall 
not apply to retail sales, solicitations, adver-
tising, or offers of any insurance product by 
any insured depository institution or wholesale 
financial institution or to any person who is en-
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gaged in such activities at an office of such in-
stitution or on behalf of the institution, in a 
State where the State has in effect statutes, 
regulations, orders, or interpretations, that are 
inconsistent with or contrary to the regulations 
prescribed by the Federal banking agencies. 
‘‘(B) PREEMPTION.—If, with respect to 
any provision of the regulations prescribed 
under this section, the Board of Governors of 
the Federal Reserve System, the Comptroller of 
the Currency, and the Board of Directors of the 
Federal Deposit Insurance Corporation deter-
mine jointly that the protection afforded by 
such provision for consumers is greater than 
the protection provided by a comparable provi-
sion of the statutes, regulations, orders, or in-
terpretations referred to in subparagraph (A) of 
any State, such provision of the regulations pre-
scribed under this section shall supersede the 
comparable provision of such State statute, reg-
ulation, order, or interpretation. 
‘‘(h) INSURANCE PRODUCT DEFINED.—For purposes 
of this section, the term ‘insurance product’ includes an 
annuity contract the income of which is subject to tax 
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treatment under section 72 of the Internal Revenue Code 
of 1986.’’. 
SEC. 308. CERTAIN STATE AFFILIATION LAWS PREEMPTED 
FOR INSURANCE COMPANIES AND AFFILI-
ATES. 
Except as provided in section 104(a)(2), no State 
may, by law, regulation, order, interpretation, or other-
wise— 
(1) prevent or significantly interfere with the 
ability of any insurer, or any affiliate of an insurer 
(whether such affiliate is organized as a stock com-
pany, mutual holding company, or otherwise), to be-
come a financial holding company or to acquire con-
trol of an insured depository institution; 
(2) limit the amount of an insurer’s assets that 
may be invested in the voting securities of an in-
sured depository institution (or any company which 
controls such institution), except that the laws of an 
insurer’s State of domicile may limit the amount of 
such investment to an amount that is not less than 
5 percent of the insurer’s admitted assets; or 
(3) prevent, significantly interfere with, or have 
the authority to review, approve, or disapprove a 
plan of reorganization by which an insurer proposes 
to reorganize from mutual form to become a stock 
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insurer (whether as a direct or indirect subsidiary of 
a mutual holding company or otherwise) unless such 
State is the State of domicile of the insurer. 
SEC. 309. INTERAGENCY CONSULTATION. 
(a) PURPOSE.—It is the intention of the Congress 
that the Board of Governors of the Federal Reserve Sys-
tem, as the umbrella supervisor for financial holding com-
panies, and the State insurance regulators, as the func-
tional regulators of companies engaged in insurance activi-
ties, coordinate efforts to supervise companies that control 
both a depository institution and a company engaged in 
insurance activities regulated under State law. In par-
ticular, Congress believes that the Board and the State 
insurance regulators should share, on a confidential basis, 
information relevant to the supervision of companies that 
control both a depository institution and a company en-
gaged in insurance activities, including information re-
garding the financial health of the consolidated organiza-
tion and information regarding transactions and relation-
ships between insurance companies and affiliated deposi-
tory institutions. The appropriate Federal banking agen-
cies for depository institutions should also share, on a con-
fidential basis, information with the relevant State insur-
ance regulators regarding transactions and relationships 
between depository institutions and affiliated companies 
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engaged in insurance activities. The purpose of this sec-
tion is to encourage this coordination and confidential 
sharing of information, and to thereby improve both the 
efficiency and the quality of the supervision of financial 
holding companies and their affiliated depository institu-
tions and companies engaged in insurance activities. 
(b) EXAMINATION RESULTS AND OTHER INFORMA-
TION.— 
(1) INFORMATION OF THE BOARD.—Upon the 
request of the appropriate insurance regulator of 
any State, the Board may provide any information 
of the Board regarding the financial condition, risk 
management policies, and operations of any financial 
holding company that controls a company that is en-
gaged in insurance activities and is regulated by 
such State insurance regulator, and regarding any 
transaction or relationship between such an insur-
ance company and any affiliated depository institu-
tion. The Board may provide any other information 
to the appropriate State insurance regulator that the 
Board believes is necessary or appropriate to permit 
the State insurance regulator to administer and en-
force applicable State insurance laws. 
(2) BANKING
AGENCY
INFORMATION.—Upon 
the request of the appropriate insurance regulator of 
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any State, the appropriate Federal banking agency 
may provide any information of the agency regard-
ing any transaction or relationship between a deposi-
tory institution supervised by such Federal banking 
agency and any affiliated company that is engaged 
in insurance activities regulated by such State insur-
ance regulator. The appropriate Federal banking 
agency may provide any other information to the ap-
propriate State insurance regulator that the agency 
believes is necessary or appropriate to permit the 
State insurance regulator to administer and enforce 
applicable State insurance laws. 
(3) STATE INSURANCE REGULATOR INFORMA-
TION.—Upon the request of the Board or the appro-
priate Federal banking agency, a State insurance 
regulator may provide any examination or other re-
ports, records, or other information to which such 
insurance regulator may have access with respect to 
a company which— 
(A) is engaged in insurance activities and 
regulated by such insurance regulator; and 
(B) is an affiliate of an insured depository 
institution, wholesale financial institution, or fi-
nancial holding company. 
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(c) CONSULTATION.—Before making any determina-
tion relating to the initial affiliation of, or the continuing 
affiliation of, an insured depository institution, wholesale 
financial institution, or financial holding company with a 
company engaged in insurance activities, the appropriate 
Federal banking agency shall consult with the appropriate 
State insurance regulator of such company and take the 
views of such insurance regulator into account in making 
such determination. 
(d) EFFECT ON OTHER AUTHORITY.—Nothing in 
this section shall limit in any respect the authority of the 
appropriate Federal banking agency with respect to an in-
sured depository institution, wholesale financial institu-
tion, or bank holding company or any affiliate thereof 
under any provision of law. 
(e) CONFIDENTIALITY AND PRIVILEGE.— 
(1) CONFIDENTIALITY.—The appropriate Fed-
eral banking agency shall not provide any informa-
tion or material that is entitled to confidential treat-
ment under applicable Federal banking agency regu-
lations, or other applicable law, to a State insurance 
regulator unless such regulator agrees to maintain 
the information or material in confidence and to 
take all reasonable steps to oppose any effort to se-
cure disclosure of the information or material by the 
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HR 10 PCS 
regulator. The appropriate Federal banking agency 
shall treat as confidential any information or mate-
rial obtained from a State insurance regulator that 
is entitled to confidential treatment under applicable 
State regulations, or other applicable law, and take 
all reasonable steps to oppose any effort to secure 
disclosure of the information or material by the Fed-
eral banking agency. 
(2) PRIVILEGE.—The provision pursuant to this 
section of information or material by a Federal 
banking agency or State insurance regulator shall 
not constitute a waiver of, or otherwise affect, any 
privilege to which the information or material is oth-
erwise subject. 
(f) DEFINITIONS.—For purposes of this section, the 
following definitions shall apply: 
(1) APPROPRIATE FEDERAL BANKING AGENCY; 
INSURED
DEPOSITORY
INSTITUTION.—The terms 
‘‘appropriate Federal banking agency’’ and ‘‘insured 
depository institution’’ have the same meanings as 
in section 3 of the Federal Deposit Insurance Act. 
(2) BOARD; FINANCIAL
HOLDING
COMPANY; 
AND
WHOLESALE
FINANCIAL
INSTITUTION.—The 
terms ‘‘Board’’, ‘‘financial holding company’’, and 
‘‘wholesale financial institution’’ have the same 
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HR 10 PCS 
meanings as in section 2 of the Bank Holding Com-
pany Act of 1956. 
SEC. 310. DEFINITION OF STATE. 
For purposes of this subtitle, the term ‘‘State’’ means 
any State of the United States, the District of Columbia, 
any territory of the United States, Puerto Rico, Guam, 
American Samoa, the Trust Territory of the Pacific Is-
lands, the Virgin Islands, and the Northern Mariana Is-
lands. 
Subtitle B—Redomestication of 
Mutual Insurers 
SEC. 311. GENERAL APPLICATION. 
This subtitle shall only apply to a mutual insurance 
company in a State which has not enacted a law which 
expressly establishes reasonable terms and conditions for 
a mutual insurance company domiciled in such State to 
reorganize into a mutual holding company. 
SEC. 312. REDOMESTICATION OF MUTUAL INSURERS. 
(a) REDOMESTICATION.—A mutual insurer organized 
under the laws of any State may transfer its domicile to 
a transferee domicile as a step in a reorganization in 
which, pursuant to the laws of the transferee domicile and 
consistent with the standards in subsection (f), the mutual 
insurer becomes a stock insurer that is a direct or indirect 
subsidiary of a mutual holding company. 
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(b) RESULTING DOMICILE.—Upon complying with 
the applicable law of the transferee domicile governing 
transfers of domicile and completion of a transfer pursu-
ant to this section, the mutual insurer shall cease to be 
a domestic insurer in the transferor domicile and, as a 
continuation of its corporate existence, shall be a domestic 
insurer of the transferee domicile. 
(c) LICENSES PRESERVED.—The certificate of au-
thority, agents’ appointments and licenses, rates, approv-
als and other items that a licensed State allows and that 
are in existence immediately prior to the date that a re-
domesticating insurer transfers its domicile pursuant to 
this subtitle shall continue in full force and effect upon 
transfer, if the insurer remains duly qualified to transact 
the business of insurance in such licensed State. 
(d) EFFECTIVENESS
OF OUTSTANDING POLICIES 
AND CONTRACTS.— 
(1) IN
GENERAL.—All outstanding insurance 
policies and annuities contracts of a redomesticating 
insurer shall remain in full force and effect and need 
not be endorsed as to the new domicile of the in-
surer, unless so ordered by the State insurance regu-
lator of a licensed State, and then only in the case 
of outstanding policies and contracts whose owners 
reside in such licensed State. 
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(2) FORMS.— 
(A) Applicable State law may require a re-
domesticating insurer to file new policy forms 
with the State insurance regulator of a licensed 
State on or before the effective date of the 
transfer. 
(B) Notwithstanding subparagraph (A), a 
redomesticating insurer may use existing policy 
forms with appropriate endorsements to reflect 
the new domicile of the redomesticating insurer 
until the new policy forms are approved for use 
by the State insurance regulator of such li-
censed State. 
(e) NOTICE.—A redomesticating insurer shall give 
notice of the proposed transfer to the State insurance reg-
ulator of each licensed State and shall file promptly any 
resulting amendments to corporate documents required to 
be filed by a foreign licensed mutual insurer with the in-
surance regulator of each such licensed State. 
(f) PROCEDURAL REQUIREMENTS.—No mutual in-
surer may redomesticate to another State and reorganize 
into a mutual holding company pursuant to this section 
unless the State insurance regulator of the transferee 
domicile determines that the plan of reorganization of the 
insurer includes the following requirements: 
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(1) APPROVAL BY BOARD OF DIRECTORS AND 
POLICYHOLDERS.—The reorganization is approved 
by at least a majority of the board of directors of 
the mutual insurer and at least a majority of the 
policyholders who vote after notice, disclosure of the 
reorganization and the effects of the transaction on 
policyholder contractual rights, and reasonable op-
portunity to vote, in accordance with such notice, 
disclosure, and voting procedures as are approved by 
the State insurance regulator of the transferee domi-
cile. 
(2) CONTINUED VOTING CONTROL BY POLICY-
HOLDERS; REVIEW OF PUBLIC STOCK OFFERING.— 
After the consummation of a reorganization, the pol-
icyholders of the reorganized insurer shall have the 
same voting rights with respect to the mutual hold-
ing company as they had before the reorganization 
with respect to the mutual insurer. With respect to 
an initial public offering of stock, the offering shall 
be conducted in compliance with applicable securities 
laws and in a manner approved by the State insur-
ance regulator of the transferee domicile. 
(3) AWARD OF STOCK OR GRANT OF OPTIONS 
TO OFFICERS AND DIRECTORS.—For a period of 6 
months after completion of an initial public offering, 
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neither a stock holding company nor the converted 
insurer shall award any stock options or stock 
grants to persons who are elected officers or direc-
tors of the mutual holding company, the stock hold-
ing company, or the converted insurer, except with 
respect to any such awards or options to which a 
person is entitled as a policyholder and as approved 
by the State insurance regulator of the transferee 
domicile. 
(4) CONTRACTUAL RIGHTS.—Upon reorganiza-
tion into a mutual holding company, the contractual 
rights of the policyholders are preserved. 
(5) FAIR AND EQUITABLE TREATMENT OF POL-
ICYHOLDERS.—The reorganization is approved as 
fair and equitable to the policyholders by the insur-
ance regulator of the transferee domicile. 
SEC. 313. EFFECT ON STATE LAWS RESTRICTING REDOMES-
TICATION. 
(a) IN GENERAL.—Unless otherwise permitted by 
this subtitle, State laws of any transferor domicile that 
conflict with the purposes and intent of this subtitle are 
preempted, including but not limited to— 
(1) any law that has the purpose or effect of 
impeding the activities of, taking any action against, 
or applying any provision of law or regulation to, 
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(b) DIFFERENTIAL TREATMENT PROHIBITED.—No 
State law, regulation, interpretation, or functional equiva-
lent thereof, of a State other than a transferee domicile 
may treat a redomesticating or redomesticated insurer or 
any affiliate thereof any differently than an insurer oper-
ating in that State that is not a redomesticating or re-
domesticated insurer. 
(c) LAWS PROHIBITING OPERATIONS.—If any li-
censed State fails to issue, delays the issuance of, or seeks 
to revoke an original or renewal certificate of authority 
of a redomesticated insurer immediately following re-
domestication, except on grounds and in a manner con-
sistent with its past practices regarding the issuance of 
certificates of authority to foreign insurers that are not 
redomesticating, then the redomesticating insurer shall be 
exempt from any State law of the licensed State to the 
extent that such State law or the operation of such State 
law would make unlawful, or regulate, directly or indi-
rectly, the operation of the redomesticated insurer, except 
that such licensed State may require the redomesticated 
insurer to— 
(1) comply with the unfair claim settlement 
practices law of the licensed State; 
(2) pay, on a nondiscriminatory basis, applica-
ble premium and other taxes which are levied on li-
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HR 10 PCS 
censed insurers or policyholders under the laws of 
the licensed State; 
(3) register with and designate the State insur-
ance regulator as its agent solely for the purpose of 
receiving service of legal documents or process; 
(4) submit to an examination by the State in-
surance regulator in any licensed state in which the 
redomesticated insurer is doing business to deter-
mine the insurer’s financial condition, if— 
(A) the State insurance regulator of the 
transferee domicile has not begun an examina-
tion of the redomesticated insurer and has not 
scheduled such an examination to begin before 
the end of the 1-year period beginning on the 
date of the redomestication; and 
(B) any such examination is coordinated to 
avoid unjustified duplication and repetition; 
(5) comply with a lawful order issued in— 
(A) a delinquency proceeding commenced 
by the State insurance regulator of any licensed 
State if there has been a judicial finding of fi-
nancial impairment under paragraph (7); or 
(B) a voluntary dissolution proceeding; 
(6) comply with any State law regarding decep-
tive, false, or fraudulent acts or practices, except 
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that if the licensed State seeks an injunction regard-
ing the conduct described in this paragraph, such in-
junction must be obtained from a court of competent 
jurisdiction as provided in section 314(a); 
(7) comply with an injunction issued by a court 
of competent jurisdiction, upon a petition by the 
State insurance regulator alleging that the redomes-
ticating insurer is in hazardous financial condition 
or is financially impaired; 
(8) participate in any insurance insolvency 
guaranty association on the same basis as any other 
insurer licensed in the licensed State; and 
(9) require a person acting, or offering to act, 
as an insurance licensee for a redomesticated insurer 
in the licensed State to obtain a license from that 
State, except that such State may not impose any 
qualification or requirement that discriminates 
against a nonresident insurance licensee. 
SEC. 314. OTHER PROVISIONS. 
(a) JUDICIAL REVIEW.—The appropriate United 
States district court shall have exclusive jurisdiction over 
litigation arising under this section involving any redomes-
ticating or redomesticated insurer. 
(b) SEVERABILITY.—If any provision of this section, 
or the application thereof to any person or circumstances, 
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is held invalid, the remainder of the section, and the appli-
cation of such provision to other persons or circumstances, 
shall not be affected thereby. 
SEC. 315. DEFINITIONS. 
For purposes of this subtitle, the following definitions 
shall apply: 
(1) COURT
OF
COMPETENT
JURISDICTION.— 
The term ‘‘court of competent jurisdiction’’ means a 
court authorized pursuant to section 314(a) to adju-
dicate litigation arising under this subtitle. 
(2) DOMICILE.—The term ‘‘domicile’’ means 
the State in which an insurer is incorporated, char-
tered, or organized. 
(3) INSURANCE LICENSEE.—The term ‘‘insur-
ance licensee’’ means any person holding a license 
under State law to act as insurance agent, subagent, 
broker, or consultant. 
(4) 
INSTITUTION.—The 
term 
‘‘institution’’ 
means a corporation, joint stock company, limited li-
ability company, limited liability partnership, asso-
ciation, trust, partnership, or any similar entity. 
(5) LICENSED
STATE.—The term ‘‘licensed 
State’’ means any State, the District of Columbia, 
American Samoa, Guam, Puerto Rico, or the United 
States Virgin Islands in which the redomesticating 
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insurer has a certificate of authority in effect imme-
diately prior to the redomestication. 
(6) MUTUAL INSURER.—The term ‘‘mutual in-
surer’’ means a mutual insurer organized under the 
laws of any State. 
(7) PERSON.—The term ‘‘person’’ means an in-
dividual, institution, government or governmental 
agency, State or political subdivision of a State, pub-
lic corporation, board, association, estate, trustee, or 
fiduciary, or other similar entity. 
(8) POLICYHOLDER.—The term ‘‘policyholder’’ 
means the owner of a policy issued by a mutual in-
surer, except that, with respect to voting rights, the 
term means a member of a mutual insurer or mu-
tual holding company granted the right to vote, as 
determined under applicable State law. 
(9) REDOMESTICATED
INSURER.—The term 
‘‘redomesticated insurer’’ means a mutual insurer 
that has redomesticated pursuant to this subtitle. 
(10) REDOMESTICATING
INSURER.—The term 
‘‘redomesticating insurer’’ means a mutual insurer 
that is redomesticating pursuant to this subtitle. 
(11) REDOMESTICATION
OR
TRANSFER.—The 
terms ‘‘redomestication’’ and ‘‘transfer’’ mean the 
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transfer of the domicile of a mutual insurer from 
one State to another State pursuant to this subtitle. 
(12) STATE
INSURANCE
REGULATOR.—The 
term ‘‘State insurance regulator’’ means the prin-
cipal insurance regulatory authority of a State, the 
District of Columbia, American Samoa, Guam, 
Puerto Rico, or the United States Virgin Islands. 
(13) STATE
LAW.—The term ‘‘State law’’ 
means the statutes of any State, the District of Co-
lumbia, American Samoa, Guam, Puerto Rico, or the 
United States Virgin Islands and any regulation, 
order, or requirement prescribed pursuant to any 
such statute. 
(14) 
TRANSFEREE
DOMICILE.—The 
term 
‘‘transferee domicile’’ means the State to which a 
mutual insurer is redomesticating pursuant to this 
subtitle. 
(15) 
TRANSFEROR
DOMICILE.—The 
term 
‘‘transferor domicile’’ means the State from which a 
mutual insurer is redomesticating pursuant to this 
subtitle. 
SEC. 316. EFFECTIVE DATE. 
This subtitle shall take effect on the date of the en-
actment of this Act. 
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Subtitle C—National Association of 
Registered Agents and Brokers 
SEC. 321. STATE FLEXIBILITY IN MULTISTATE LICENSING 
REFORMS. 
(a) IN GENERAL.—The provisions of this subtitle 
shall take effect unless, not later than 3 years after the 
date of the enactment of this Act, at least a majority of 
the States— 
(1) have enacted uniform laws and regulations 
governing the licensure of individuals and entities 
authorized to sell and solicit the purchase of insur-
ance within the State; or 
(2) have enacted reciprocity laws and regula-
tions governing the licensure of nonresident individ-
uals and entities authorized to sell and solicit insur-
ance within those States. 
(b) UNIFORMITY REQUIRED.—States shall be deemed 
to have established the uniformity necessary to satisfy 
subsection (a)(1) if the States— 
(1) establish uniform criteria regarding the in-
tegrity, personal qualifications, education, training, 
and experience of licensed insurance producers, in-
cluding the qualification and training of sales per-
sonnel in ascertaining the appropriateness of a par-
ticular insurance product for a prospective customer; 
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(2) establish uniform continuing education re-
quirements for licensed insurance producers; 
(3) establish uniform ethics course require-
ments for licensed insurance producers in conjunc-
tion with the continuing education requirements 
under paragraph (2); 
(4) establish uniform criteria to ensure that an 
insurance product, including any annuity contract, 
sold to a consumer is suitable and appropriate for 
the consumer based on financial information dis-
closed by the consumer; and 
(5) do not impose any requirement upon any in-
surance producer to be licensed or otherwise quali-
fied to do business as a nonresident that has the ef-
fect of limiting or conditioning that producer’s ac-
tivities because of its residence or place of oper-
ations, except that counter-signature requirements 
imposed on nonresident producers shall not be 
deemed to have the effect of limiting or conditioning 
a producer’s activities because of its residence or 
place of operations under this section. 
(c) 
RECIPROCITY
REQUIRED.—States 
shall 
be 
deemed to have established the reciprocity required to sat-
isfy subsection (a)(2) if the following conditions are met: 
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(1) 
ADMINISTRATIVE
LICENSING
PROCE-
DURES.—At least a majority of the States permit a 
producer that has a resident license for selling or so-
liciting the purchase of insurance in its home State 
to receive a license to sell or solicit the purchase of 
insurance in such majority of States as a non-
resident to the same extent that such producer is 
permitted to sell or solicit the purchase of insurance 
in its State, if the producer’s home State also 
awards such licenses on such a reciprocal basis, 
without satisfying any additional requirements other 
than submitting— 
(A) a request for licensure; 
(B) the application for licensure that the 
producer submitted to its home State; 
(C) proof that the producer is licensed and 
in good standing in its home State; and 
(D) the payment of any requisite fee to the 
appropriate authority. 
(2) 
CONTINUING
EDUCATION
REQUIRE-
MENTS.—A majority of the States accept an insur-
ance producer’s satisfaction of its home State’s con-
tinuing education requirements for licensed insur-
ance producers to satisfy the States’ own continuing 
education requirements if the producer’s home State 
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also recognizes the satisfaction of continuing edu-
cation requirements on such a reciprocal basis. 
(3) NO
LIMITING
NONRESIDENT
REQUIRE-
MENTS.—A majority of the States do not impose 
any requirement upon any insurance producer to be 
licensed or otherwise qualified to do business as a 
nonresident that has the effect of limiting or condi-
tioning that producer’s activities because of its resi-
dence or place of operations, except that countersig-
nature requirements imposed on nonresident pro-
ducers shall not be deemed to have the effect of lim-
iting or conditioning a producer’s activities because 
of its residence or place of operations under this sec-
tion. 
(4) RECIPROCAL
RECIPROCITY.—Each of the 
States that satisfies paragraphs (1), (2), and (3) 
grants reciprocity to residents of all of the other 
States that satisfy such paragraphs. 
(d) DETERMINATION.— 
(1) NAIC DETERMINATION.—At the end of the 
3-year period beginning on the date of the enact-
ment of this Act, the National Association of Insur-
ance Commissioners shall determine, in consultation 
with the insurance commissioners or chief insurance 
regulatory officials of the States, whether the uni-
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formity or reciprocity required by subsections (b) 
and (c) has been achieved. 
(2) 
JUDICIAL
REVIEW.—The 
appropriate 
United States district court shall have exclusive ju-
risdiction over any challenge to the National Asso-
ciation of Insurance Commissioners’ determination 
under this section and such court shall apply the 
standards set forth in section 706 of title 5, United 
States Code, when reviewing any such challenge. 
(e) CONTINUED APPLICATION.—If, at any time, the 
uniformity or reciprocity required by subsections (b) and 
(c) no longer exists, the provisions of this subtitle shall 
take effect 2 years after the date on which such uniformity 
or reciprocity ceases to exist, unless the uniformity or reci-
procity required by those provisions is satisfied before the 
expiration of that 2-year period. 
(f) SAVINGS PROVISION.—No provision of this sec-
tion shall be construed as requiring that any law, regula-
tion, provision, or action of any State which purports to 
regulate insurance producers, including any such law, reg-
ulation, provision, or action which purports to regulate un-
fair trade practices or establish consumer protections, in-
cluding countersignature laws, be altered or amended in 
order to satisfy the uniformity or reciprocity required by 
subsections (b) and (c), unless any such law, regulation, 
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provision, or action is inconsistent with a specific require-
ment of any such subsection and then only to the extent 
of such inconsistency. 
(g) UNIFORM LICENSING.—Nothing in this section 
shall be construed to require any State to adopt new or 
additional licensing requirements to achieve the uniformity 
necessary to satisfy subsection (a)(1). 
SEC. 
322. 
NATIONAL 
ASSOCIATION 
OF 
REGISTERED 
AGENTS AND BROKERS. 
(a) ESTABLISHMENT.—There is established the Na-
tional Association of Registered Agents and Brokers 
(hereafter in this subtitle referred to as the ‘‘Associa-
tion’’). 
(b) STATUS.—The Association shall— 
(1) be a nonprofit corporation; 
(2) have succession until dissolved by an Act of 
Congress; 
(3) not be an agent or instrumentality of the 
United States Government; and 
(4) except as otherwise provided in this Act, be 
subject to, and have all the powers conferred upon 
a nonprofit corporation by the District of Columbia 
Nonprofit Corporation Act (D.C. Code, sec. 29y– 
1001 et seq.). 
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SEC. 323. PURPOSE. 
The purpose of the Association shall be to provide 
a mechanism through which uniform licensing, appoint-
ment, continuing education, and other insurance producer 
sales qualification requirements and conditions can be 
adopted and applied on a multistate basis, while pre-
serving the right of States to license, supervise, and dis-
cipline insurance producers and to prescribe and enforce 
laws and regulations with regard to insurance-related con-
sumer protection and unfair trade practices. 
SEC. 324. RELATIONSHIP TO THE FEDERAL GOVERNMENT. 
The Association shall be subject to the supervision 
and oversight of the National Association of Insurance 
Commissioners (hereafter in this subtitle referred to as the 
‘‘NAIC’’). 
SEC. 325. MEMBERSHIP. 
(a) ELIGIBILITY.— 
(1) IN GENERAL.—Any State-licensed insurance 
producer shall be eligible to become a member in the 
Association. 
(2) INELIGIBILITY FOR SUSPENSION OR REV-
OCATION OF LICENSE.—Notwithstanding paragraph 
(1), a State-licensed insurance producer shall not be 
eligible to become a member if a State insurance 
regulator has suspended or revoked such producer’s 
license in that State during the 3-year period pre-
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HR 10 PCS 
ceding the date on which such producer applies for 
membership. 
(3) RESUMPTION OF ELIGIBILITY.—Paragraph 
(2) shall cease to apply to any insurance producer 
if— 
(A) the State insurance regulator renews 
the license of such producer in the State in 
which the license was suspended or revoked; or 
(B) the suspension or revocation is subse-
quently overturned. 
(b) AUTHORITY TO ESTABLISH MEMBERSHIP CRI-
TERIA.—The Association shall have the authority to estab-
lish membership criteria that— 
(1) bear a reasonable relationship to the pur-
poses for which the Association was established; and 
(2) do not unfairly limit the access of smaller 
agencies to the Association membership. 
(c) 
ESTABLISHMENT
OF
CLASSES
AND
CAT-
EGORIES.— 
(1) CLASSES OF MEMBERSHIP.—The Associa-
tion may establish separate classes of membership, 
with separate criteria, if the Association reasonably 
determines that performance of different duties re-
quires different levels of education, training, or expe-
rience. 
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(2) CATEGORIES.—The Association may estab-
lish separate categories of membership for individ-
uals and for other persons. The establishment of any 
such categories of membership shall be based either 
on the types of licensing categories that exist under 
State laws or on the aggregate amount of business 
handled by an insurance producer. No special cat-
egories of membership, and no distinct membership 
criteria, shall be established for members which are 
insured depository institutions or wholesale financial 
institutions or for their employees, agents, or affili-
ates. 
(d) MEMBERSHIP CRITERIA.— 
(1) IN GENERAL.—The Association may estab-
lish criteria for membership which shall include 
standards for integrity, personal qualifications, edu-
cation, training, and experience. 
(2) MINIMUM STANDARD.—In establishing cri-
teria under paragraph (1), the Association shall con-
sider the highest levels of insurance producer quali-
fications established under the licensing laws of the 
States. 
(e) EFFECT OF MEMBERSHIP.—Membership in the 
Association shall entitle the member to licensure in each 
State for which the member pays the requisite fees, includ-
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ing licensing fees and, where applicable, bonding require-
ments, set by such State. 
(f) ANNUAL RENEWAL.—Membership in the Associa-
tion shall be renewed on an annual basis. 
(g) CONTINUING EDUCATION.—The Association shall 
establish, as a condition of membership, continuing edu-
cation requirements which shall be comparable to or great-
er than the continuing education requirements under the 
licensing laws of a majority of the States. 
(h) SUSPENSION AND REVOCATION.—The Associa-
tion may— 
(1) inspect and examine the records and offices 
of the members of the Association to determine com-
pliance with the criteria for membership established 
by the Association; and 
(2) suspend or revoke the membership of an in-
surance producer if— 
(A) the producer fails to meet the applica-
ble membership criteria of the Association; or 
(B) the producer has been subject to dis-
ciplinary action pursuant to a final adjudicatory 
proceeding under the jurisdiction of a State in-
surance regulator, and the Association con-
cludes that retention of membership in the As-
sociation would not be in the public interest. 
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(i) OFFICE OF CONSUMER COMPLAINTS.— 
(1) IN GENERAL.—The Association shall estab-
lish an office of consumer complaints that shall— 
(A) receive and investigate complaints 
from both consumers and State insurance regu-
lators related to members of the Association; 
and 
(B) recommend to the Association any dis-
ciplinary actions that the office considers appro-
priate, to the extent that any such rec-
ommendation is not inconsistent with State law. 
(2) RECORDS AND REFERRALS.—The office of 
consumer complaints of the Association shall— 
(A) maintain records of all complaints re-
ceived in accordance with paragraph (1) and 
make such records available to the NAIC and 
to each State insurance regulator for the State 
of residence of the consumer who filed the com-
plaint; and 
(B) refer, when appropriate, any such com-
plaint to any appropriate State insurance regu-
lator. 
(3) TELEPHONE AND OTHER ACCESS.—The of-
fice of consumer complaints shall maintain a toll-free 
telephone number for the purpose of this subsection 
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and, as practicable, other alternative means of com-
munication with consumers, such as an Internet 
home page. 
SEC. 326. BOARD OF DIRECTORS. 
(a) ESTABLISHMENT.—There is established the 
board of directors of the Association (hereafter in this sub-
title referred to as the ‘‘Board’’) for the purpose of gov-
erning and supervising the activities of the Association 
and the members of the Association. 
(b) POWERS.—The Board shall have such powers and 
authority as may be specified in the bylaws of the Associa-
tion. 
(c) COMPOSITION.— 
(1) MEMBERS.—The Board shall be composed 
of seven members appointed by the NAIC. 
(2) REQUIREMENT.—At least four of the mem-
bers of the Board shall have significant experience 
with the regulation of commercial lines of insurance 
in at least 1 of the 20 States in which the greatest 
total dollar amount of commercial-lines insurance is 
placed in the United States. 
(3) INITIAL BOARD MEMBERSHIP.— 
(A) IN GENERAL.—If, by the end of the 2- 
year period beginning on the date of the enact-
ment of this Act, the NAIC has not appointed 
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the initial seven members of the Board of the 
Association, the initial Board shall consist of 
the seven State insurance regulators of the 
seven States with the greatest total dollar 
amount of commercial-lines insurance in place 
as of the end of such period. 
(B) ALTERNATE COMPOSITION.—If any of 
the State insurance regulators described in sub-
paragraph (A) declines to serve on the Board, 
the State insurance regulator with the next 
greatest total dollar amount of commercial-lines 
insurance in place, as determined by the NAIC 
as of the end of such period, shall serve as a 
member of the Board. 
(C) INOPERABILITY.—If fewer than seven 
State insurance regulators accept appointment 
to the Board, the Association shall be estab-
lished without NAIC oversight pursuant to sec-
tion 332. 
(d) TERMS.—The term of each director shall, after 
the initial appointment of the members of the Board, be 
for 3 years, with one-third of the directors to be appointed 
each year. 
(e) BOARD VACANCIES.—A vacancy on the Board 
shall be filled in the same manner as the original appoint-
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ment of the initial Board for the remainder of the term 
of the vacating member. 
(f) MEETINGS.—The Board shall meet at the call of 
the chairperson, or as otherwise provided by the bylaws 
of the Association. 
SEC. 327. OFFICERS. 
(a) IN GENERAL.— 
(1) POSITIONS.—The officers of the Association 
shall consist of a chairperson and a vice chairperson 
of the Board, a president, secretary, and treasurer 
of the Association, and such other officers and as-
sistant officers as may be deemed necessary. 
(2) MANNER OF SELECTION.—Each officer of 
the Board and the Association shall be elected or ap-
pointed at such time and in such manner and for 
such terms not exceeding 3 years as may be pre-
scribed in the bylaws of the Association. 
(b) CRITERIA FOR CHAIRPERSON.—Only individuals 
who are members of the NAIC shall be eligible to serve 
as the chairperson of the board of directors. 
SEC. 328. BYLAWS, RULES, AND DISCIPLINARY ACTION. 
(a) ADOPTION AND AMENDMENT OF BYLAWS.— 
(1) COPY REQUIRED TO BE FILED WITH THE 
NAIC.—The board of directors of the Association 
shall file with the NAIC a copy of the proposed by-
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laws or any proposed amendment to the bylaws, ac-
companied by a concise general statement of the 
basis and purpose of such proposal. 
(2) EFFECTIVE DATE.—Except as provided in 
paragraph (3), any proposed bylaw or proposed 
amendment shall take effect— 
(A) thirty days after the date of the filing 
of a copy with the NAIC; 
(B) upon such later date as the Associa-
tion may designate; or 
(C) upon such earlier date as the NAIC 
may determine. 
(3) DISAPPROVAL
BY
THE
NAIC.—Notwith-
standing paragraph (2), a proposed bylaw or amend-
ment shall not take effect if, after public notice and 
opportunity to participate in a public hearing— 
(A) the NAIC disapproves such proposal as 
being contrary to the public interest or contrary 
to the purposes of this subtitle and provides no-
tice to the Association setting forth the reasons 
for such disapproval; or 
(B) the NAIC finds that such proposal in-
volves a matter of such significant public inter-
est that public comment should be obtained, in 
which case it may, after notifying the Associa-
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tion in writing of such finding, require that the 
procedures set forth in subsection (b) be fol-
lowed with respect to such proposal, in the 
same manner as if such proposed bylaw change 
were a proposed rule change within the mean-
ing of such subsection. 
(b) ADOPTION AND AMENDMENT OF RULES.— 
(1) FILING PROPOSED REGULATIONS WITH THE 
NAIC.— 
(A) IN GENERAL.—The board of directors 
of the Association shall file with the NAIC a 
copy of any proposed rule or any proposed 
amendment to a rule of the Association which 
shall be accompanied by a concise general state-
ment of the basis and purpose of such proposal. 
(B) OTHER RULES AND AMENDMENTS IN-
EFFECTIVE.—No proposed rule or amendment 
shall take effect unless approved by the NAIC 
or otherwise permitted in accordance with this 
paragraph. 
(2) INITIAL CONSIDERATION BY THE NAIC.— 
Not later than 35 days after the date of publication 
of notice of filing of a proposal, or before the end 
of such longer period not to exceed 90 days as the 
NAIC may designate after such date, if the NAIC 
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finds such longer period to be appropriate and sets 
forth its reasons for so finding, or as to which the 
Association consents, the NAIC shall— 
(A) by order approve such proposed rule or 
amendment; or 
(B) institute proceedings to determine 
whether such proposed rule or amendment 
should be modified or disapproved. 
(3) NAIC PROCEEDINGS.— 
(A) IN GENERAL.—Proceedings instituted 
by the NAIC with respect to a proposed rule or 
amendment pursuant to paragraph (2) shall— 
(i) include notice of the grounds for 
disapproval under consideration; 
(ii) provide opportunity for hearing; 
and 
(iii) be concluded not later than 180 
days after the date of the Association’s fil-
ing of such proposed rule or amendment. 
(B) DISPOSITION OF PROPOSAL.—At the 
conclusion of any proceeding under subpara-
graph (A), the NAIC shall, by order, approve or 
disapprove the proposed rule or amendment. 
(C) EXTENSION OF TIME FOR CONSIDER-
ATION.—The NAIC may extend the time for 
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concluding any proceeding under subparagraph 
(A) for— 
(i) not more than 60 days if the 
NAIC finds good cause for such extension 
and sets forth its reasons for so finding; or 
(ii) for such longer period as to which 
the Association consents. 
(4) STANDARDS FOR REVIEW.— 
(A) GROUNDS FOR APPROVAL.—The NAIC 
shall approve a proposed rule or amendment if 
the NAIC finds that the rule or amendment is 
in the public interest and is consistent with the 
purposes of this Act. 
(B) APPROVAL BEFORE END OF NOTICE 
PERIOD.—The NAIC shall not approve any pro-
posed rule before the end of the 30-day period 
beginning on the date on which the Association 
files proposed rules or amendments in accord-
ance with paragraph (1), unless the NAIC finds 
good cause for so doing and sets forth the rea-
sons for so finding. 
(5) ALTERNATE PROCEDURE.— 
(A) IN
GENERAL.—Notwithstanding any 
provision of this subsection other than subpara-
graph (B), a proposed rule or amendment relat-
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ing to the administration or organization of the 
Association shall take effect— 
(i) upon the date of filing with the 
NAIC, if such proposed rule or amendment 
is designated by the Association as relating 
solely to matters which the NAIC, con-
sistent with the public interest and the 
purposes of this subsection, determines by 
rule do not require the procedures set forth 
in this paragraph; or 
(ii) upon such date as the NAIC shall 
for good cause determine. 
(B) ABROGATION BY THE NAIC.— 
(i) IN GENERAL.—At any time within 
60 days after the date of filing of any pro-
posed rule or amendment under subpara-
graph (A)(i) or clause (ii) of this subpara-
graph, the NAIC may repeal such rule or 
amendment and require that the rule or 
amendment be refiled and reviewed in ac-
cordance with this paragraph, if the NAIC 
finds that such action is necessary or ap-
propriate in the public interest, for the 
protection of insurance producers or policy-
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holders, or otherwise in furtherance of the 
purposes of this subtitle. 
(ii) EFFECT OF RECONSIDERATION BY 
THE NAIC.—Any action of the NAIC pur-
suant to clause (i) shall— 
(I) not affect the validity or force 
of a rule change during the period 
such rule or amendment was in effect; 
and 
(II) not be considered to be a 
final action. 
(c) ACTION REQUIRED BY THE NAIC.—The NAIC 
may, in accordance with such rules as the NAIC deter-
mines to be necessary or appropriate to the public interest 
or to carry out the purposes of this subtitle, require the 
Association to adopt, amend, or repeal any bylaw, rule or 
amendment of the Association, whenever adopted. 
(d) DISCIPLINARY ACTION BY THE ASSOCIATION.— 
(1) SPECIFICATION OF CHARGES.—In any pro-
ceeding to determine whether membership shall be 
denied, suspended, revoked, or not renewed (here-
after in this section referred to as a ‘‘disciplinary ac-
tion’’), the Association shall bring specific charges, 
notify such member of such charges, give the mem-
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ber an opportunity to defend against the charges, 
and keep a record. 
(2) SUPPORTING
STATEMENT.—A determina-
tion to take disciplinary action shall be supported by 
a statement setting forth— 
(A) any act or practice in which such 
member has been found to have been engaged; 
(B) the specific provision of this subtitle, 
the rules or regulations under this subtitle, or 
the rules of the Association which any such act 
or practice is deemed to violate; and 
(C) the sanction imposed and the reason 
for such sanction. 
(e) NAIC REVIEW OF DISCIPLINARY ACTION.— 
(1) NOTICE TO THE NAIC.—If the Association 
orders any disciplinary action, the Association shall 
promptly notify the NAIC of such action. 
(2) REVIEW BY THE NAIC.—Any disciplinary 
action taken by the Association shall be subject to 
review by the NAIC— 
(A) on the NAIC’s own motion; or 
(B) upon application by any person ag-
grieved by such action if such application is 
filed with the NAIC not more than 30 days 
after the later of— 
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(i) the date the notice was filed with 
the NAIC pursuant to paragraph (1); or 
(ii) the date the notice of the discipli-
nary action was received by such aggrieved 
person. 
(f) EFFECT OF REVIEW.—The filing of an applica-
tion to the NAIC for review of a disciplinary action, or 
the institution of review by the NAIC on the NAIC’s own 
motion, shall not operate as a stay of disciplinary action 
unless the NAIC otherwise orders. 
(g) SCOPE OF REVIEW.— 
(1) IN GENERAL.—In any proceeding to review 
such action, after notice and the opportunity for 
hearing, the NAIC shall— 
(A) determine whether the action should be 
taken; 
(B) affirm, modify, or rescind the discipli-
nary sanction; or 
(C) remand to the Association for further 
proceedings. 
(2) DISMISSAL OF REVIEW.—The NAIC may 
dismiss a proceeding to review disciplinary action if 
the NAIC finds that— 
(A) the specific grounds on which the ac-
tion is based exist in fact; 
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(B) the action is in accordance with appli-
cable rules and regulations; and 
(C) such rules and regulations are, and 
were, applied in a manner consistent with the 
purposes of this subtitle. 
SEC. 329. ASSESSMENTS. 
(a) INSURANCE PRODUCERS SUBJECT TO ASSESS-
MENT.—The Association may establish such application 
and membership fees as the Association finds necessary 
to cover the costs of its operations, including fees made 
reimbursable to the NAIC under subsection (b), except 
that, in setting such fees, the Association may not dis-
criminate against smaller insurance producers. 
(b) NAIC ASSESSMENTS.—The NAIC may assess the 
Association for any costs that the NAIC incurs under this 
subtitle. 
SEC. 330. FUNCTIONS OF THE NAIC. 
(a) ADMINISTRATIVE PROCEDURE.—Determinations 
of the NAIC, for purposes of making rules pursuant to 
section 328, shall be made after appropriate notice and 
opportunity for a hearing and for submission of views of 
interested persons. 
(b) EXAMINATIONS AND REPORTS.— 
(1) EXAMINATIONS.—The NAIC may make 
such examinations and inspections of the Association 
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and require the Association to furnish to the NAIC 
such reports and records or copies thereof as the 
NAIC may consider necessary or appropriate in the 
public interest or to effectuate the purposes of this 
subtitle. 
(2) REPORT
BY
ASSOCIATION.—As soon as 
practicable after the close of each fiscal year, the As-
sociation shall submit to the NAIC a written report 
regarding the conduct of its business, and the exer-
cise of the other rights and powers granted by this 
subtitle, during such fiscal year. Such report shall 
include financial statements setting forth the finan-
cial position of the Association at the end of such 
fiscal year and the results of its operations (includ-
ing the source and application of its funds) for such 
fiscal year. The NAIC shall transmit such report to 
the President and the Congress with such comment 
thereon as the NAIC determines to be appropriate. 
SEC. 331. LIABILITY OF THE ASSOCIATION AND THE DIREC-
TORS, OFFICERS, AND EMPLOYEES OF THE 
ASSOCIATION. 
(a) IN GENERAL.—The Association shall not be 
deemed to be an insurer or insurance producer within the 
meaning of any State law, rule, regulation, or order regu-
lating or taxing insurers, insurance producers, or other en-
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tities engaged in the business of insurance, including pro-
visions imposing premium taxes, regulating insurer sol-
vency or financial condition, establishing guaranty funds 
and levying assessments, or requiring claims settlement 
practices. 
(b) LIABILITY OF THE ASSOCIATION, ITS DIREC-
TORS, OFFICERS, AND EMPLOYEES.—Neither the Associa-
tion nor any of its directors, officers, or employees shall 
have any liability to any person for any action taken or 
omitted in good faith under or in connection with any mat-
ter subject to this subtitle. 
SEC. 332. ELIMINATION OF NAIC OVERSIGHT. 
(a) IN GENERAL.—The Association shall be estab-
lished without NAIC oversight and the provisions set forth 
in section 324, subsections (a), (b), (c), and (e) of section 
328, and sections 329(b) and 330 of this subtitle shall 
cease to be effective if, at the end of the 2-year period 
beginning on the date on which the provisions of this sub-
title take effect pursuant to section 321— 
(1) at least a majority of the States rep-
resenting at least 50 percent of the total United 
States commercial-lines insurance premiums have 
not satisfied the uniformity or reciprocity require-
ments of subsections (a), (b), and (c) of section 321; 
and 
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(2) the NAIC has not approved the Associa-
tion’s bylaws as required by section 328 or is unable 
to operate or supervise the Association, or the Asso-
ciation is not conducting its activities as required 
under this Act. 
(b) BOARD APPOINTMENTS.—If the repeals required 
by subsection (a) are implemented, the following shall 
apply: 
(1) GENERAL
APPOINTMENT
POWER.—The 
President, with the advice and consent of the Sen-
ate, shall appoint the members of the Association’s 
Board established under section 326 from lists of 
candidates recommended to the President by the 
National Association of Insurance Commissioners. 
(2) PROCEDURES
FOR
OBTAINING
NATIONAL 
ASSOCIATION
OF
INSURANCE
COMMISSIONERS
AP-
POINTMENT RECOMMENDATIONS.— 
(A) INITIAL
DETERMINATION
AND
REC-
OMMENDATIONS.—After the date on which the 
provisions of subsection (a) take effect, the 
NAIC shall, not later than 60 days thereafter, 
provide a list of recommended candidates to the 
President. If the NAIC fails to provide a list by 
that date, or if any list that is provided does 
not include at least 14 recommended candidates 
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or comply with the requirements of section 
326(c), the President shall, with the advice and 
consent of the Senate, make the requisite ap-
pointments without considering the views of the 
NAIC. 
(B) SUBSEQUENT APPOINTMENTS.—After 
the initial appointments, the NAIC shall pro-
vide a list of at least six recommended can-
didates for the Board to the President by Janu-
ary 15 of each subsequent year. If the NAIC 
fails to provide a list by that date, or if any list 
that is provided does not include at least six 
recommended candidates or comply with the re-
quirements of section 326(c), the President, 
with the advice and consent of the Senate, shall 
make the requisite appointments without con-
sidering the views of the NAIC. 
(C) PRESIDENTIAL OVERSIGHT.— 
(i) REMOVAL.—If the President deter-
mines that the Association is not acting in 
the interests of the public, the President 
may remove the entire existing Board for 
the remainder of the term to which the 
members of the Board were appointed and 
appoint, with the advice and consent of the 
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Senate, new members to fill the vacancies 
on the Board for the remainder of such 
terms. 
(ii) SUSPENSION
OF
RULES
OR
AC-
TIONS.—The President, or a person des-
ignated by the President for such purpose, 
may suspend the effectiveness of any rule, 
or prohibit any action, of the Association 
which the President or the designee deter-
mines is contrary to the public interest. 
(c) ANNUAL REPORT.—As soon as practicable after 
the close of each fiscal year, the Association shall submit 
to the President and to the Congress a written report rel-
ative to the conduct of its business, and the exercise of 
the other rights and powers granted by this subtitle, dur-
ing such fiscal year. Such report shall include financial 
statements setting forth the financial position of the Asso-
ciation at the end of such fiscal year and the results of 
its operations (including the source and application of its 
funds) for such fiscal year. 
SEC. 333. RELATIONSHIP TO STATE LAW. 
(a) PREEMPTION OF STATE LAWS.—State laws, reg-
ulations, provisions, or other actions purporting to regu-
late insurance producers shall be preempted as provided 
in subsection (b). 
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394 
HR 10 PCS 
‘‘(B) EXISTING UNITARY HOLDING COMPA-
NIES AND THE SUCCESSORS TO SUCH COMPA-
NIES.—Subparagraph (A) shall not apply, and 
paragraph (3) shall continue to apply, to a com-
pany (or any subsidiary of such company) 
that— 
‘‘(i) either— 
‘‘(I) acquired one or more sav-
ings associations described in para-
graph (3) pursuant to applications at 
least one of which was filed on or be-
fore March 4, 1999; or 
‘‘(II) subject to subparagraph 
(C), became a savings and loan hold-
ing company by acquiring control of 
the company described in subclause 
(I); and 
‘‘(ii) continues to control the savings 
association referred to in clause (i)(II) or 
the successor to any such savings associa-
tion. 
‘‘(C) NOTICE PROCESS FOR NONFINANCIAL 
ACTIVITIES BY A SUCCESSOR UNITARY HOLDING 
COMPANY.— 
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