--S.900--
S.900
One Hundred Sixth Congress
of the
United States of America
AT THE FIRST SESSION
Begun and held at the City of Washington on Wednesday,
the sixth day of January, one thousand nine hundred and ninety-nine
An Act
To enhance competition in the financial services industry by
providing a prudential framework for the affiliation of banks, securities firms,
insurance companies, and other financial service providers, and for other
purposes.
Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE- This Act may be cited as the `Gramm-Leach-Bliley Act'.
(b) TABLE OF CONTENTS- The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
TITLE I--FACILITATING AFFILIATION AMONG BANKS, SECURITIES FIRMS, AND
INSURANCE COMPANIES
Subtitle A--Affiliations
Sec. 101. Glass-Steagall Act repeals.
Sec. 102. Activity restrictions applicable to bank holding companies
that are not financial holding companies.
Sec. 103. Financial activities.
Sec. 104. Operation of State law.
Sec. 105. Mutual bank holding companies authorized.
Sec. 106. Prohibition on deposit production offices.
Sec. 107. Cross marketing restriction; limited purpose bank relief;
divestiture.
Sec. 108. Use of subordinated debt to protect financial system and
deposit funds from `too big to fail' institutions.
Sec. 109. Study of financial modernization's effect on the accessibility
of small business and farm loans.
Subtitle B--Streamlining Supervision of Bank Holding Companies
Sec. 111. Streamlining bank holding company supervision.
Sec. 112. Authority of State insurance regulator and Securities and
Exchange Commission.
Sec. 113. Role of the Board of Governors of the Federal Reserve
System.
Sec. 114. Prudential safeguards.
Sec. 115. Examination of investment companies.
Sec. 116. Elimination of application requirement for financial holding
companies.
Sec. 117. Preserving the integrity of FDIC resources.
Sec. 118. Repeal of savings bank provisions in the Bank Holding Company
Act of 1956.
Sec. 119. Technical amendment.
Subtitle C--Subsidiaries of National Banks
Sec. 121. Subsidiaries of national banks.
Sec. 122. Consideration of merchant banking activities by financial
subsidiaries.
Subtitle D--Preservation of FTC Authority
Sec. 131. Amendment to the Bank Holding Company Act of 1956 to modify
notification and post-approval waiting period for section 3
transactions.
Sec. 132. Interagency data sharing.
Sec. 133. Clarification of status of subsidiaries and affiliates.
Subtitle E--National Treatment
Sec. 141. Foreign banks that are financial holding companies.
Sec. 142. Representative offices.
Subtitle F--Direct Activities of Banks
Sec. 151. Authority of national banks to underwrite certain municipal
bonds.
Subtitle G--Effective Date
Sec. 161. Effective date.
TITLE II--FUNCTIONAL REGULATION
Subtitle A--Brokers and Dealers
Sec. 201. Definition of broker.
Sec. 202. Definition of dealer.
Sec. 203. Registration for sales of private securities offerings.
Sec. 204. Information sharing.
Sec. 205. Treatment of new hybrid products.
Sec. 206. Definition of identified banking product.
Sec. 207. Additional definitions.
Sec. 208. Government securities defined.
Sec. 209. Effective date.
Sec. 210. Rule of construction.
Subtitle B--Bank Investment Company Activities
Sec. 211. Custody of investment company assets by affiliated bank.
Sec. 212. Lending to an affiliated investment company.
Sec. 213. Independent directors.
Sec. 214. Additional SEC disclosure authority.
Sec. 215. Definition of broker under the Investment Company Act of
1940.
Sec. 216. Definition of dealer under the Investment Company Act of
1940.
Sec. 217. Removal of the exclusion from the definition of investment
adviser for banks that advise investment companies.
Sec. 218. Definition of broker under the Investment Advisers Act of
1940.
Sec. 219. Definition of dealer under the Investment Advisers Act of
1940.
Sec. 220. Interagency consultation.
Sec. 221. Treatment of bank common trust funds.
Sec. 222. Statutory disqualification for bank wrongdoing.
Sec. 223. Conforming change in definition.
Sec. 224. Conforming amendment.
Sec. 225. Effective date.
Subtitle C--Securities and Exchange Commission Supervision of Investment
Bank Holding Companies
Sec. 231. Supervision of investment bank holding companies by the
Securities and Exchange Commission.
Subtitle D--Banks and Bank Holding Companies
TITLE III--INSURANCE
Subtitle A--State Regulation of Insurance
Sec. 301. Functional regulation of insurance.
Sec. 302. Insurance underwriting in national banks.
Sec. 303. Title insurance activities of national banks and their
affiliates.
Sec. 304. Expedited and equalized dispute resolution for Federal
regulators.
Sec. 305. Insurance customer protections.
Sec. 306. Certain State affiliation laws preempted for insurance
companies and affiliates.
Sec. 307. Interagency consultation.
Sec. 308. Definition of State.
Subtitle B--Redomestication of Mutual Insurers
Sec. 311. General application.
Sec. 312. Redomestication of mutual insurers.
Sec. 313. Effect on State laws restricting redomestication.
Sec. 314. Other provisions.
Sec. 316. Effective date.
Subtitle C--National Association of Registered Agents and Brokers
Sec. 321. State flexibility in multistate licensing reforms.
Sec. 322. National Association of Registered Agents and Brokers.
Sec. 324. Relationship to the Federal Government.
Sec. 326. Board of directors.
Sec. 328. Bylaws, rules, and disciplinary action.
Sec. 330. Functions of the NAIC.
Sec. 331. Liability of the association and the directors, officers, and
employees of the association.
Sec. 332. Elimination of NAIC oversight.
Sec. 333. Relationship to State law.
Sec. 334. Coordination with other regulators.
Sec. 335. Judicial review.
Subtitle D--Rental Car Agency Insurance Activities
Sec. 341. Standard of regulation for motor vehicle rentals.
TITLE IV--UNITARY SAVINGS AND LOAN HOLDING COMPANIES
Sec. 401. Prevention of creation of new S&L holding companies with
commercial affiliates.
TITLE V--PRIVACY
Subtitle A--Disclosure of Nonpublic Personal Information
Sec. 501. Protection of nonpublic personal information.
Sec. 502. Obligations with respect to disclosures of personal
information.
Sec. 503. Disclosure of institution privacy policy.
Sec. 506. Protection of Fair Credit Reporting Act.
Sec. 507. Relation to State laws.
Sec. 508. Study of information sharing among financial affiliates.
Sec. 510. Effective date.
Subtitle B--Fraudulent Access to Financial Information
Sec. 521. Privacy protection for customer information of financial
institutions.
Sec. 522. Administrative enforcement.
Sec. 523. Criminal penalty.
Sec. 524. Relation to State laws.
Sec. 525. Agency guidance.
TITLE VI--FEDERAL HOME LOAN BANK SYSTEM MODERNIZATION
Sec. 603. Savings association membership.
Sec. 604. Advances to members; collateral.
Sec. 605. Eligibility criteria.
Sec. 606. Management of banks.
Sec. 607. Resolution Funding Corporation.
Sec. 608. Capital structure of Federal home loan banks.
TITLE VII--OTHER PROVISIONS
Subtitle A--ATM Fee Reform
Sec. 702. Electronic fund transfer fee disclosures at any host
ATM.
Sec. 703. Disclosure of possible fees to consumers when ATM card is
issued.
Sec. 704. Feasibility study.
Sec. 705. No liability if posted notices are damaged.
Subtitle B--Community Reinvestment
Sec. 711. CRA sunshine requirements.
Sec. 712. Small bank regulatory relief.
Sec. 713. Federal Reserve Board study of CRA lending.
Sec. 714. Preserving the Community Reinvestment Act of 1977.
Sec. 715. Responsiveness to community needs for financial
services.
Subtitle C--Other Regulatory Improvements
Sec. 721. Expanded small bank access to S corporation treatment.
Sec. 722. `Plain language' requirement for Federal banking agency
rules.
Sec. 723. Retention of `Federal' in name of converted Federal savings
association.
Sec. 724. Control of bankers' banks.
Sec. 725. Provision of technical assistance to microenterprises.
Sec. 726. Federal Reserve audits.
Sec. 727. Authorization to release reports.
Sec. 728. General Accounting Office study of conflicts of
interest.
Sec. 729. Study and report on adapting existing legislative requirements
to online banking and lending.
Sec. 730. Clarification of source of strength doctrine.
Sec. 731. Interest rates and other charges at interstate branches.
Sec. 732. Interstate branches and agencies of foreign banks.
Sec. 733. Fair treatment of women by financial advisers.
Sec. 734. Membership of loan guarantee boards.
Sec. 735. Repeal of stock loan limit in Federal Reserve Act.
Sec. 736. Elimination of SAIF and DIF special reserves.
Sec. 737. Bank officers and directors as officers and directors of
public utilities.
Sec. 738. Approval for purchases of securities.
Sec. 739. Optional conversion of Federal savings associations.
Sec. 740. Grand jury proceedings.
TITLE I--FACILITATING AFFILIATION AMONG BANKS, SECURITIES FIRMS, AND
INSURANCE COMPANIES
Subtitle A--Affiliations
SEC. 101. GLASS-STEAGALL ACT REPEALS.
(a) SECTION 20 REPEALED- Section 20 of the Banking Act of 1933 (12 U.S.C.
377) (commonly referred to as the `Glass-Steagall Act') is repealed.
(b) SECTION 32 REPEALED- Section 32 of the Banking Act of 1933 (12 U.S.C.
78) is repealed.
SEC. 102. ACTIVITY RESTRICTIONS APPLICABLE TO BANK HOLDING COMPANIES
THAT ARE NOT FINANCIAL HOLDING COMPANIES.
(a) IN GENERAL- Section 4(c)(8) of the Bank Holding Company Act of 1956
(12 U.S.C. 1843(c)(8)) is amended to read as follows:
`(8) shares of any company the activities of which had been determined
by the Board by regulation or order under this paragraph as of the day
before the date of the enactment of the Gramm-Leach-Bliley Act, to be so
closely related to banking as to be a proper incident thereto (subject to
such terms and conditions contained in such regulation or order, unless
modified by the Board);'.
(b) CONFORMING CHANGES TO OTHER STATUTES-
(1) AMENDMENT TO THE BANK HOLDING COMPANY ACT AMENDMENTS OF 1970-
Section 105 of the Bank Holding Company Act Amendments of 1970 (12 U.S.C.
1850) is amended by striking `, to engage directly or indirectly in a
nonbanking activity pursuant to section 4 of such Act,'.
(2) AMENDMENT TO THE BANK SERVICE COMPANY ACT- Section 4(f) of the Bank
Service Company Act (12 U.S.C. 1864(f)) is amended by inserting before the
period at the end the following: `as of the day before the date of the
enactment of the Gramm-Leach-Bliley Act'.
SEC. 103. FINANCIAL ACTIVITIES.
(a) IN GENERAL- Section 4 of the Bank Holding Company Act of 1956 (12
U.S.C. 1843) is amended by adding at the end the following new subsections:
`(k) ENGAGING IN ACTIVITIES THAT ARE FINANCIAL IN NATURE-
`(1) IN GENERAL- Notwithstanding subsection (a), a financial holding
company may engage in any activity, and may acquire and retain the shares of
any company engaged in any activity, that the Board, in accordance with
paragraph (2), determines (by regulation or order)--
`(A) to be financial in nature or incidental to such financial
activity; or
`(B) is complementary to a financial activity and does not pose a
substantial risk to the safety or soundness of depository institutions or
the financial system generally.
`(2) COORDINATION BETWEEN THE BOARD AND THE SECRETARY OF THE
TREASURY-
`(A) PROPOSALS RAISED BEFORE THE BOARD-
`(i) CONSULTATION- The Board shall notify the Secretary of the
Treasury of, and consult with the Secretary of the Treasury concerning,
any request, proposal, or application under this subsection for a
determination of whether an activity is financial in nature or
incidental to a financial activity.
`(ii) TREASURY VIEW- The Board shall not determine that any activity
is financial in nature or incidental to a financial activity under this
subsection if the Secretary of the Treasury notifies the Board in
writing, not later than 30 days after the date of receipt of the notice
described in clause (i) (or such longer period as the Board determines
to be appropriate under the circumstances) that the Secretary of the
Treasury believes that the activity is not financial in nature or
incidental to a financial activity or is not otherwise permissible under
this section.
`(B) PROPOSALS RAISED BY THE TREASURY-
`(i) TREASURY RECOMMENDATION- The Secretary of the Treasury may, at
any time, recommend in writing that the Board find an activity to be
financial in nature or incidental to a financial activity.
`(ii) TIME PERIOD FOR BOARD ACTION- Not later than 30 days after the
date of receipt of a written recommendation from the Secretary of the
Treasury under clause (i) (or such longer period as the Secretary of the
Treasury and the Board determine to be appropriate under the
circumstances), the Board shall determine whether to initiate a public
rulemaking proposing that the recommended activity be found to be
financial in nature or incidental to a financial activity under this
subsection, and shall notify the Secretary of the Treasury in writing of
the determination of the Board and, if the Board determines not to seek
public comment on the proposal, the reasons for that
determination.
`(3) FACTORS TO BE CONSIDERED- In determining whether an activity is
financial in nature or incidental to a financial activity, the Board shall
take into account--
`(A) the purposes of this Act and the Gramm-Leach-Bliley Act;
`(B) changes or reasonably expected changes in the marketplace in
which financial holding companies compete;
`(C) changes or reasonably expected changes in the technology for
delivering financial services; and
`(D) whether such activity is necessary or appropriate to allow a
financial holding company and the affiliates of a financial holding
company to--
`(i) compete effectively with any company seeking to provide
financial services in the United States;
`(ii) efficiently deliver information and services that are
financial in nature through the use of technological means, including
any application necessary to protect the security or efficacy of systems
for the transmission of data or financial transactions; and
`(iii) offer customers any available or emerging technological means
for using financial services or for the document imaging of
data.
`(4) ACTIVITIES THAT ARE FINANCIAL IN NATURE- For purposes of this
subsection, the following activities shall be considered to be financial in
nature:
`(A) Lending, exchanging, transferring, investing for others, or
safeguarding money or securities.
`(B) Insuring, guaranteeing, or indemnifying against loss, harm,
damage, illness, disability, or death, or providing and issuing annuities,
and acting as principal, agent, or broker for purposes of the foregoing,
in any State.
`(C) Providing financial, investment, or economic advisory services,
including advising an investment company (as defined in section 3 of the
Investment Company Act of 1940).
`(D) Issuing or selling instruments representing interests in pools of
assets permissible for a bank to hold directly.
`(E) Underwriting, dealing in, or making a market in
securities.
`(F) Engaging in any activity that the Board has determined, by order
or regulation that is in effect on the date of the enactment of the
Gramm-Leach-Bliley Act, to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto (subject to the same
terms and conditions contained in such order or regulation, unless
modified by the Board).
`(G) Engaging, in the United States, in any activity that--
`(i) a bank holding company may engage in outside of the United
States; and
`(ii) the Board has determined, under regulations prescribed or
interpretations issued pursuant to subsection (c)(13) (as in effect on
the day before the date of the enactment of the Gramm-Leach-Bliley Act)
to be usual in connection with the transaction of banking or other
financial operations abroad.
`(H) Directly or indirectly acquiring or controlling, whether as
principal, on behalf of 1 or more entities (including entities, other than
a depository institution or subsidiary of a depository institution, that
the bank holding company controls), or otherwise, shares, assets, or
ownership interests (including debt or equity securities, partnership
interests, trust certificates, or other instruments representing
ownership) of a company or other entity, whether or not constituting
control of such company or entity, engaged in any activity not authorized
pursuant to this section if--
`(i) the shares, assets, or ownership interests are not acquired or
held by a depository institution or subsidiary of a depository
institution;
`(ii) such shares, assets, or ownership interests are acquired and
held by--
`(I) a securities affiliate or an affiliate thereof;
or
`(II) an affiliate of an insurance company described in
subparagraph (I)(ii) that provides investment advice to an insurance
company and is registered pursuant to the Investment Advisers Act of
1940, or an affiliate of such investment adviser;
as part of a bona fide underwriting or merchant or investment
banking activity, including investment activities engaged in for the
purpose of appreciation and ultimate resale or disposition of the
investment;
`(iii) such shares, assets, or ownership interests are held for a
period of time to enable the sale or disposition thereof on a reasonable
basis consistent with the financial viability of the activities
described in clause (ii); and
`(iv) during the period such shares, assets, or ownership interests
are held, the bank holding company does not routinely manage or operate
such company or entity except as may be necessary or required to obtain
a reasonable return on investment upon resale or
disposition.
`(I) Directly or indirectly acquiring or controlling, whether as
principal, on behalf of 1 or more entities (including entities, other than
a depository institution or subsidiary of a depository institution, that
the bank holding company controls) or otherwise, shares, assets, or
ownership interests (including debt or equity securities, partnership
interests, trust certificates or other instruments representing ownership)
of a company or other entity, whether or not constituting control of such
company or entity, engaged in any activity not authorized pursuant to this
section if--
`(i) the shares, assets, or ownership interests are not acquired or
held by a depository institution or a subsidiary of a depository
institution;
`(ii) such shares, assets, or ownership interests are acquired and
held by an insurance company that is predominantly engaged in
underwriting life, accident and health, or property and casualty
insurance (other than credit-related insurance) or providing and issuing
annuities;
`(iii) such shares, assets, or ownership interests represent an
investment made in the ordinary course of business of such insurance
company in accordance with relevant State law governing such
investments; and
`(iv) during the period such shares, assets, or ownership interests
are held, the bank holding company does not routinely manage or operate
such company except as may be necessary or required to obtain a
reasonable return on investment.
`(A) IN GENERAL- The Board shall, by regulation or order, define,
consistent with the purposes of this Act, the activities described in
subparagraph (B) as financial in nature, and the extent to which such
activities are financial in nature or incidental to a financial
activity.
`(B) ACTIVITIES- The activities described in this subparagraph are as
follows:
`(i) Lending, exchanging, transferring, investing for others, or
safeguarding financial assets other than money or
securities.
`(ii) Providing any device or other instrumentality for transferring
money or other financial assets.
`(iii) Arranging, effecting, or facilitating financial transactions
for the account of third parties.
`(6) REQUIRED NOTIFICATION-
`(A) IN GENERAL- A financial holding company that acquires any company
or commences any activity pursuant to this subsection shall provide
written notice to the Board describing the activity commenced or conducted
by the company acquired not later than 30 calendar days after commencing
the activity or consummating the acquisition, as the case may be.
`(B) APPROVAL NOT REQUIRED FOR CERTAIN FINANCIAL ACTIVITIES- Except as
provided in subsection (j) with regard to the acquisition of a savings
association, a financial holding company may commence any activity, or
acquire any company, pursuant to paragraph (4) or any regulation
prescribed or order issued under paragraph (5), without prior approval of
the Board.
`(7) MERCHANT BANKING ACTIVITIES-
`(A) JOINT REGULATIONS- The Board and the Secretary of the Treasury
may issue such regulations implementing paragraph (4)(H), including
limitations on transactions between depository institutions and companies
controlled pursuant to such paragraph, as the Board and the Secretary
jointly deem appropriate to assure compliance with the purposes and
prevent evasions of this Act and the Gramm-Leach-Bliley Act and to protect
depository institutions.
`(B) SUNSET OF RESTRICTIONS ON MERCHANT BANKING ACTIVITIES OF
FINANCIAL SUBSIDIARIES- The restrictions contained in paragraph (4)(H) on
the ownership and control of shares, assets, or ownership interests by or
on behalf of a subsidiary of a depository institution shall not apply to a
financial subsidiary (as defined in section 5136A of the Revised Statutes
of the United States) of a bank, if the Board and the Secretary of the
Treasury jointly authorize financial subsidiaries of banks to engage in
merchant banking activities pursuant to section 122 of the
Gramm-Leach-Bliley Act.
`(l) CONDITIONS FOR ENGAGING IN EXPANDED FINANCIAL ACTIVITIES-
`(1) IN GENERAL- Notwithstanding subsection (k), (n), or (o), a bank
holding company may not engage in any activity, or directly or indirectly
acquire or retain shares of any company engaged in any activity, under
subsection (k), (n), or (o), other than activities permissible for any bank
holding company under subsection (c)(8), unless--
`(A) all of the depository institution subsidiaries of the bank
holding company are well capitalized;
`(B) all of the depository institution subsidiaries of the bank
holding company are well managed; and
`(C) the bank holding company has filed with the Board--
`(i) a declaration that the company elects to be a financial holding
company to engage in activities or acquire and retain shares of a
company that were not permissible for a bank holding company to engage
in or acquire before the enactment of the Gramm-Leach-Bliley Act;
and
`(ii) a certification that the company meets the requirements of
subparagraphs (A) and (B).
`(2) CRA REQUIREMENT- Notwithstanding subsection (k) or (n) of this
section, section 5136A(a) of the Revised Statutes of the United States, or
section 46(a) of the Federal Deposit Insurance Act, the appropriate Federal
banking agency shall prohibit a financial holding company or any insured
depository institution from--
`(A) commencing any new activity under subsection (k) or (n) of this
section, section 5136A(a) of the Revised Statutes of the United States, or
section 46(a) of the Federal Deposit Insurance Act; or
`(B) directly or indirectly acquiring control of a company engaged in
any activity under subsection (k) or (n) of this section, section 5136A(a)
of the Revised Statutes of the United States, or section 46(a) of the
Federal Deposit Insurance Act (other than an investment made pursuant to
subparagraph (H) or (I) of subsection (k)(4), or section 122 of the
Gramm-Leach-Bliley Act, or under section 46(a) of the Federal Deposit
Insurance Act by reason of such section 122, by an affiliate already
engaged in activities under any such provision);
if any insured depository institution subsidiary of such financial
holding company, or the insured depository institution or any of its insured
depository institution affiliates, has received in its most recent
examination under the Community Reinvestment Act of 1977, a rating of less
than `satisfactory record of meeting community credit needs'.
`(3) FOREIGN BANKS- For purposes of paragraph (1), the Board shall apply
comparable capital and management standards to a foreign bank that operates
a branch or agency or owns or controls a commercial lending company in the
United States, giving due regard to the principle of national treatment and
equality of competitive opportunity.
`(m) PROVISIONS APPLICABLE TO FINANCIAL HOLDING COMPANIES THAT FAIL TO
MEET CERTAIN REQUIREMENTS-
`(1) IN GENERAL- If the Board finds that--
`(A) a financial holding company is engaged, directly or indirectly,
in any activity under subsection (k), (n), or (o), other than activities
that are permissible for a bank holding company under subsection (c)(8);
and
`(B) such financial holding company is not in compliance with the
requirements of subsection (l)(1);
the Board shall give notice to the financial holding company to that
effect, describing the conditions giving rise to the notice.
`(2) AGREEMENT TO CORRECT CONDITIONS REQUIRED- Not later than 45 days
after the date of receipt by a financial holding company of a notice given
under paragraph (1) (or such additional period as the Board may permit), the
financial holding company shall execute an agreement with the Board to
comply with the requirements applicable to a financial holding company under
subsection (l)(1).
`(3) BOARD MAY IMPOSE LIMITATIONS- Until the conditions described in a
notice to a financial holding company under paragraph (1) are corrected, the
Board may impose such limitations on the conduct or activities of that
financial holding company or any affiliate of that company as the Board
determines to be appropriate under the circumstances and consistent with the
purposes of this Act.
`(4) FAILURE TO CORRECT- If the conditions described in a notice to a
financial holding company under paragraph (1) are not corrected within 180
days after the date of receipt by the financial holding company of a notice
under paragraph (1), the Board may require such financial holding company,
under such terms and conditions as may be imposed by the Board and subject
to such extension of time as may be granted in the discretion of the Board,
either--
`(A) to divest control of any subsidiary depository institution;
or
`(B) at the election of the financial holding company instead to cease
to engage in any activity conducted by such financial holding company or
its subsidiaries (other than a depository institution or a subsidiary of a
depository institution) that is not an activity that is permissible for a
bank holding company under subsection (c)(8).
`(5) CONSULTATION- In taking any action under this subsection, the Board
shall consult with all relevant Federal and State regulatory agencies and
authorities.
`(n) AUTHORITY TO RETAIN LIMITED NONFINANCIAL ACTIVITIES AND
AFFILIATIONS-
`(1) IN GENERAL- Notwithstanding subsection (a), a company that is not a
bank holding company or a foreign bank (as defined in section 1(b)(7) of the
International Banking Act of 1978) and becomes a financial holding company
after the date of the enactment of the Gramm-Leach-Bliley Act may continue
to engage in any activity and retain direct or indirect ownership or control
of shares of a company engaged in any activity if--
`(A) the holding company lawfully was engaged in the activity or held
the shares of such company on September 30, 1999;
`(B) the holding company is predominantly engaged in financial
activities as defined in paragraph (2); and
`(C) the company engaged in such activity continues to engage only in
the same activities that such company conducted on September 30, 1999, and
other activities permissible under this Act.
`(2) PREDOMINANTLY FINANCIAL- For purposes of this subsection, a company
is predominantly engaged in financial activities if the annual gross
revenues derived by the holding company and all subsidiaries of the holding
company (excluding revenues derived from subsidiary depository
institutions), on a consolidated basis, from engaging in activities that are
financial in nature or are incidental to a financial activity under
subsection (k) represent at least 85 percent of the consolidated annual
gross revenues of the company.
`(3) NO EXPANSION OF GRANDFATHERED COMMERCIAL ACTIVITIES THROUGH MERGER
OR CONSOLIDATION- A financial holding company that engages in activities or
holds shares pursuant to this subsection, or a subsidiary of such financial
holding company, may not acquire, in any merger, consolidation, or other
type of business combination, assets of any other company that is engaged in
any activity that the Board has not determined to be financial in nature or
incidental to a financial activity under subsection (k), except this
paragraph shall not apply with respect to a company that owns a broadcasting
station licensed under title III of the Communications Act of 1934 and the
shares of which are under common control with an insurance company since
January 1, 1998, unless such company is acquired by, or otherwise becomes an
affiliate of, a bank holding company that, at the time such acquisition or
affiliation is consummated, is 1 of the 5 largest domestic bank holding
companies (as determined on the basis of the consolidated total assets of
such companies).
`(4) CONTINUING REVENUE LIMITATION ON GRANDFATHERED COMMERCIAL
ACTIVITIES- Notwithstanding any other provision of this subsection, a
financial holding company may continue to engage in activities or hold
shares in companies pursuant to this subsection only to the extent that the
aggregate annual gross revenues derived from all such activities and all
such companies does not exceed 15 percent of the consolidated annual gross
revenues of the financial holding company (excluding revenues derived from
subsidiary depository institutions).
`(5) CROSS MARKETING RESTRICTIONS APPLICABLE TO COMMERCIAL
ACTIVITIES-
`(A) IN GENERAL- A depository institution controlled by a financial
holding company shall not--
`(i) offer or market, directly or through any arrangement, any
product or service of a company whose activities are conducted or whose
shares are owned or controlled by the financial holding company pursuant
to this subsection or subparagraph (H) or (I) of subsection (k)(4);
or
`(ii) permit any of its products or services to be offered or
marketed, directly or through any arrangement, by or through any company
described in clause (i).
`(B) RULE OF CONSTRUCTION- Subparagraph (A) shall not be construed as
prohibiting an arrangement between a depository institution and a company
owned or controlled pursuant to subsection (k)(4)(I) for the marketing of
products or services through statement inserts or Internet websites
if--
`(i) such arrangement does not violate section 106 of the Bank
Holding Company Act Amendments of 1970; and
`(ii) the Board determines that the arrangement is in the public
interest, does not undermine the separation of banking and commerce, and
is consistent with the safety and soundness of depository
institutions.
`(6) TRANSACTIONS WITH NONFINANCIAL AFFILIATES- A depository institution
controlled by a financial holding company may not engage in a covered
transaction (as defined in section 23A(b)(7) of the Federal Reserve Act)
with any affiliate controlled by the company pursuant to this
subsection.
`(7) SUNSET OF GRANDFATHER- A financial holding company engaged in any
activity, or retaining direct or indirect ownership or control of shares of
a company, pursuant to this subsection, shall terminate such activity and
divest ownership or control of the shares of such company before the end of
the 10-year period beginning on the date of the enactment of the
Gramm-Leach-Bliley Act. The Board may, upon application by a financial
holding company, extend such 10-year period by a period not to exceed an
additional 5 years if such extension would not be detrimental to the public
interest.
`(o) REGULATION OF CERTAIN FINANCIAL HOLDING COMPANIES- Notwithstanding
subsection (a), a company that is not a bank holding company or a foreign bank
(as defined in section 1(b)(7) of the International Banking Act of 1978) and
becomes a financial holding company after the date of enactment of the
Gramm-Leach-Bliley Act, may continue to engage in, or directly or indirectly
own or control shares of a company engaged in, activities related to the
trading, sale, or investment in commodities and underlying physical properties
that were not permissible for bank holding companies to conduct in the United
States as of September 30, 1997, if--
`(1) the holding company, or any subsidiary of the holding company,
lawfully was engaged, directly or indirectly, in any of such activities as
of September 30, 1997, in the United States;
`(2) the attributed aggregate consolidated assets of the company held by
the holding company pursuant to this subsection, and not otherwise permitted
to be held by a financial holding company, are equal to not more than 5
percent of the total consolidated assets of the bank holding company, except
that the Board may increase that percentage by such amounts and under such
circumstances as the Board considers appropriate, consistent with the
purposes of this Act; and
`(3) the holding company does not permit--
`(A) any company, the shares of which it owns or controls pursuant to
this subsection, to offer or market any product or service of an
affiliated depository institution; or
`(B) any affiliated depository institution to offer or market any
product or service of any company, the shares of which are owned or
controlled by such holding company pursuant to this subsection.'.
(b) COMMUNITY REINVESTMENT REQUIREMENT- Section 804 of the Community
Reinvestment Act of 1977 (12 U.S.C. 2903) is amended by adding at the end the
following new subsection:
`(c) FINANCIAL HOLDING COMPANY REQUIREMENT-
`(1) IN GENERAL- An election by a bank holding company to become a
financial holding company under section 4 of the Bank Holding Company Act of
1956 shall not be effective if--
`(A) the Board finds that, as of the date the declaration of such
election and the certification is filed by such holding company under
section 4(l)(1)(C) of the Bank Holding Company Act of 1956, not all of the
subsidiary insured depository institutions of the bank holding company had
achieved a rating of `satisfactory record of meeting community credit
needs', or better, at the most recent examination of each such
institution; and
`(B) the Board notifies the company of such finding before the end of
the 30-day period beginning on such date.
`(2) LIMITED EXCLUSIONS FOR NEWLY ACQUIRED INSURED DEPOSITORY
INSTITUTIONS- Any insured depository institution acquired by a bank holding
company during the 12-month period preceding the date of the submission to
the Board of the declaration and certification under section 4(l)(1)(C) of
the Bank Holding Company Act of 1956 may be excluded for purposes of
paragraph (1) during the 12-month period beginning on the date of such
acquisition if--
`(A) the bank holding company has submitted an affirmative plan to the
appropriate Federal financial supervisory agency to take such action as
may be necessary in order for such institution to achieve a rating of
`satisfactory record of meeting community credit needs', or better, at the
next examination of the institution; and
`(B) the plan has been accepted by such agency.
`(3) DEFINITIONS- For purposes of this subsection, the following
definitions shall apply:
`(A) BANK HOLDING COMPANY; FINANCIAL HOLDING COMPANY- The terms `bank
holding company' and `financial holding company' have the meanings given
those terms in section 2 of the Bank Holding Company Act of 1956.
`(B) BOARD- The term `Board' means the Board of Governors of the
Federal Reserve System.
`(C) INSURED DEPOSITORY INSTITUTION- The term `insured depository
institution' has the meaning given the term in section 3(c) of the Federal
Deposit Insurance Act.'.
(c) TECHNICAL AND CONFORMING AMENDMENTS-
(1) DEFINITIONS- Section 2 of the Bank Holding Company Act of 1956 (12
U.S.C. 1841) is amended--
(A) in subsection (n), by inserting `depository institution',' after
`the terms'; and
(B) by adding at the end the following new subsections:
`(p) FINANCIAL HOLDING COMPANY- For purposes of this Act, the term
`financial holding company' means a bank holding company that meets the
requirements of section 4(l)(1).
`(q) INSURANCE COMPANY- For purposes of sections 4 and 5, the term
`insurance company' includes any person engaged in the business of insurance
to the extent of such activities.'.
(2) NOTICE PROCEDURES- Section 4(j) of the Bank Holding Company Act of
1956 (12 U.S.C. 1843(j)) is amended--
(A) in each of subparagraphs (A) and (E) of paragraph (1), by
inserting `or in any complementary activity under subsection (k)(1)(B)'
after `subsection (c)(8) or (a)(2)'; and
(i) by inserting `, other than any complementary activity under
subsection (k)(1)(B),' after `to engage in any activity';
and
(ii) by inserting `or a company engaged in any complementary
activity under subsection (k)(1)(B)' after `insured depository
institution'.
(1) IN GENERAL- By the end of the 4-year period beginning on the date of
the enactment of this Act, the Board of Governors of the Federal Reserve
System and the Secretary of the Treasury shall submit a joint report to the
Congress containing a summary of new activities, including grandfathered
commercial activities, in which any financial holding company is engaged
pursuant to subsection (k)(1) or (n) of section 4 of the Bank Holding
Company Act of 1956 (as added by subsection (a)).
(2) OTHER CONTENTS- The report submitted to the Congress pursuant to
paragraph (1) shall also contain the following:
(A) A discussion of actions by the Board of Governors of the Federal
Reserve System and the Secretary of the Treasury, whether by regulation,
order, interpretation, or guideline or by approval or disapproval of an
application, with regard to activities of financial holding companies that
are incidental to activities that are financial in nature or complementary
to such financial activities.
(B) An analysis and discussion of the risks posed by commercial
activities of financial holding companies to the safety and soundness of
affiliate depository institutions.
(C) An analysis and discussion of the effect of mergers and
acquisitions under section 4(k) of the Bank Holding Company Act of 1956 on
market concentration in the financial services industry.
SEC. 104. OPERATION OF STATE LAW.
(a) STATE REGULATION OF THE BUSINESS OF INSURANCE- The Act entitled `An
Act to express the intent of 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.
(b) MANDATORY INSURANCE LICENSING REQUIREMENTS- No person shall engage in
the business of insurance in a State as principal or agent unless such person
is licensed as required by the appropriate insurance regulator of such State
in accordance with the relevant State insurance law, subject to subsections
(c), (d), and (e).
(1) IN GENERAL- Except as provided in paragraph (2), no State may, by
statute, regulation, order, interpretation, or other action, prevent or
restrict a depository institution, or an affiliate thereof, from being
affiliated directly or indirectly or associated with any person, as
authorized or permitted by this Act or any other provision of Federal
law.
(2) INSURANCE- With respect to affiliations between depository
institutions, or any affiliate thereof, and any insurer, paragraph (1) does
not prohibit--
(i) collecting, reviewing, and taking actions (including approval
and disapproval) on applications and other documents or reports
concerning any proposed acquisition of, or a change or continuation of
control of, an insurer domiciled in that State; and
(ii) exercising authority granted under applicable State law to
collect information concerning any proposed acquisition of, or a change
or continuation of control of, an insurer engaged in the business of
insurance in, and regulated as an insurer by, such State;
during the 60-day period preceding the effective date of the
acquisition or change or continuation of control, so long as the
collecting, reviewing, taking actions, or exercising authority by the
State does not have the effect of discriminating, intentionally or
unintentionally, against a depository institution or an affiliate thereof,
or against any other person based upon an association of such person with
a depository institution;
(B) any State from requiring any person that is acquiring control of
an insurer domiciled in that State to maintain or restore the capital
requirements of that insurer to the level required under the capital
regulations of general applicability in that State to avoid the
requirement of preparing and filing with the insurance regulatory
authority of that State a plan to increase the capital of the insurer,
except that any determination by the State insurance regulatory authority
with respect to such requirement shall be made not later than 60 days
after the date of notification under subparagraph (A); or
(C) any State from restricting a change in the ownership of stock in
an insurer, or a company formed for the purpose of controlling such
insurer, after the conversion of the insurer from mutual to stock form so
long as such restriction does not have the effect of discriminating,
intentionally or unintentionally, against a depository institution or an
affiliate thereof, or against any other person based upon an association
of such person with a depository institution.
(1) IN GENERAL- Except as provided in paragraph (3), and except with
respect to insurance sales, solicitation, and cross marketing activities,
which shall be governed by paragraph (2), no State may, by statute,
regulation, order, interpretation, or other action, prevent or restrict a
depository institution or an affiliate thereof from engaging directly or
indirectly, either by itself or in conjunction with an affiliate, or any
other person, in any activity authorized or permitted under this Act and the
amendments made by this Act.
(A) IN GENERAL- In accordance with the legal standards for preemption
set forth in the decision of the Supreme Court of the United States in
Barnett Bank of Marion County N.A. v. Nelson, 517 U.S. 25 (1996), no State
may, by statute, regulation, order, interpretation, or other action,
prevent or significantly interfere with the ability of a depository
institution, or an affiliate thereof, to engage, directly or indirectly,
either by itself or in conjunction with an affiliate or any other person,
in any insurance sales, solicitation, or crossmarketing activity.
(B) CERTAIN STATE LAWS PRESERVED- Notwithstanding subparagraph (A), a
State may impose any of the following restrictions, or restrictions that
are substantially the same as but no more burdensome or restrictive than
those in each of the following clauses:
(i) Restrictions prohibiting the rejection of an insurance policy by
a depository institution or an affiliate of a depository institution,
solely because the policy has been issued or underwritten by any person
who is not associated with such depository institution or affiliate when
the insurance is required in connection with a loan or extension of
credit.
(ii) Restrictions prohibiting a requirement for any debtor, insurer,
or insurance agent or broker to pay a separate charge in connection with
the handling of insurance that is required in connection with a loan or
other extension of credit or the provision of another traditional
banking product by a depository institution, or any affiliate of a
depository institution, unless such charge would be required when the
depository institution or affiliate is the licensed insurance agent or
broker providing the insurance.
(iii) Restrictions prohibiting the use of any advertisement or other
insurance promotional material by a depository institution or any
affiliate of a depository institution that would cause a reasonable
person to believe mistakenly that--
(I) the Federal Government or a State is responsible for the
insurance sales activities of, or stands behind the credit of, the
institution or affiliate; or
(II) a State, or the Federal Government guarantees any returns on
insurance products, or is a source of payment on any insurance
obligation of or sold by the institution or affiliate;
(iv) Restrictions prohibiting the payment or receipt of any
commission or brokerage fee or other valuable consideration for services
as an insurance agent or broker to or by any person, unless such person
holds a valid State license regarding the applicable class of insurance
at the time at which the services are performed, except that, in this
clause, the term `services as an insurance agent or broker' does not
include a referral by an unlicensed person of a customer or potential
customer to a licensed insurance agent or broker that does not include a
discussion of specific insurance policy terms and
conditions.
(v) Restrictions prohibiting any compensation paid to or received by
any individual who is not licensed to sell insurance, for the referral
of a customer that seeks to purchase, or seeks an opinion or advice on,
any insurance product to a person that sells or provides opinions or
advice on such product, based on the purchase of insurance by the
customer.
(vi) Restrictions prohibiting the release of the insurance
information of a customer (defined as information concerning the
premiums, terms, and conditions of insurance coverage, including
expiration dates and rates, and insurance claims of a customer contained
in the records of the depository institution or an affiliate thereof) to
any person other than an officer, director, employee, agent, or
affiliate of a depository institution, for the purpose of soliciting or
selling insurance, without the express consent of the customer, other
than a provision that prohibits--
(I) a transfer of insurance information to an unaffiliated insurer
in connection with transferring insurance in force on existing
insureds of the depository institution or an affiliate thereof, or in
connection with a merger with or acquisition of an unaffiliated
insurer; or
(II) the release of information as otherwise authorized by State
or Federal law.
(vii) Restrictions prohibiting the use of health information
obtained from the insurance records of a customer for any purpose, other
than for its activities as a licensed agent or broker, without the
express consent of the customer.
(viii) Restrictions prohibiting the extension of credit or any
product or service that is equivalent to an extension of credit, lease
or sale of property of any kind, or furnishing of any services or fixing
or varying the consideration for any of the foregoing, on the condition
or requirement that the customer obtain insurance from a depository
institution or an affiliate of a depository institution, or a particular
insurer, agent, or broker, other than a prohibition that would prevent
any such depository institution or affiliate--
(I) from engaging in any activity described in this clause that
would not violate section 106 of the Bank Holding Company Act
Amendments of 1970, as interpreted by the Board of Governors of the
Federal Reserve System; or
(II) from informing a customer or prospective customer that
insurance is required in order to obtain a loan or credit, that loan
or credit approval is contingent upon the procurement by the customer
of acceptable insurance, or that insurance is available from the
depository institution or an affiliate of the depository
institution.
(ix) Restrictions requiring, when an application by a consumer for a
loan or other extension of credit from a depository institution is
pending, and insurance is offered or sold to the consumer or is required
in connection with the loan or extension of credit by the depository
institution or any affiliate thereof, that a written disclosure be
provided to the consumer or prospective customer indicating that the
customer's choice of an insurance provider will not affect the credit
decision or credit terms in any way, except that the depository
institution may impose reasonable requirements concerning the
creditworthiness of the insurer and scope of coverage
chosen.
(x) Restrictions requiring clear and conspicuous disclosure, in
writing, where practicable, to the customer prior to the sale of any
insurance policy that such policy--
(II) is not insured by the Federal Deposit Insurance
Corporation;
(III) is not guaranteed by any depository institution or, if
appropriate, an affiliate of any such institution or any person
soliciting the purchase of or selling insurance on the premises
thereof; and
(IV) where appropriate, involves investment risk, including
potential loss of principal.
(xi) Restrictions requiring that, when a customer obtains insurance
(other than credit insurance or flood insurance) and credit from a
depository institution, or any affiliate of such institution, or any
person soliciting the purchase of or selling insurance on the premises
thereof, the credit and insurance transactions be completed through
separate documents.
(xii) Restrictions prohibiting, when a customer obtains insurance
(other than credit insurance or flood insurance) and credit from a
depository institution or an affiliate of such institution, or any
person soliciting the purchase of or selling insurance on the premises
thereof, inclusion of the expense of insurance premiums in the primary
credit transaction without the express written consent of the
customer.
(xiii) Restrictions requiring maintenance of separate and distinct
books and records relating to insurance transactions, including all
files relating to and reflecting consumer complaints, and requiring that
such insurance books and records be made available to the appropriate
State insurance regulator for inspection upon reasonable
notice.
(i) OCC DEFERENCE- Section 304(e) does not apply with respect to any
State statute, regulation, order, interpretation, or other action
regarding insurance sales, solicitation, or cross marketing activities
described in subparagraph (A) that was issued, adopted, or enacted
before September 3, 1998, and that is not described in subparagraph
(B).
(ii) NONDISCRIMINATION- Subsection (e) does not apply with respect
to any State statute, regulation, order, interpretation, or other action
regarding insurance sales, solicitation, or cross marketing activities
described in subparagraph (A) that was issued, adopted, or enacted
before September 3, 1998, and that is not described in subparagraph
(B).
(iii) CONSTRUCTION- Nothing in this paragraph shall be
construed--
(I) to limit the applicability of the decision of the Supreme
Court in Barnett Bank of Marion County N.A. v. Nelson, 517 U.S. 25
(1996) with respect to any State statute, regulation, order,
interpretation, or other action that is not referred to or described
in subparagraph (B); or
(II) to create any inference with respect to any State statute,
regulation, order, interpretation, or other action that is not
described in this paragraph.
(3) INSURANCE ACTIVITIES OTHER THAN SALES- State statutes, regulations,
interpretations, orders, and other actions shall not be preempted under
paragraph (1) to the extent that they--
(A) relate to, or are issued, adopted, or enacted for the purpose of
regulating the business of insurance in accordance with the Act entitled
`An Act to express the intent of 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');
(B) apply only to persons that are not depository institutions, but
that are directly engaged in the business of insurance (except that they
may apply to depository institutions engaged in providing savings bank
life insurance as principal to the extent of regulating such
insurance);
(C) do not relate to or directly or indirectly regulate insurance
sales, solicitations, or cross marketing activities; and
(D) are not prohibited under subsection (e).
(4) FINANCIAL ACTIVITIES OTHER THAN INSURANCE- No State statute,
regulation, order, interpretation, or other action shall be preempted under
paragraph (1) to the extent that--
(A) it does not relate to, and is not issued and adopted, or enacted
for the purpose of regulating, directly or indirectly, insurance sales,
solicitations, or cross marketing activities covered under paragraph
(2);
(B) it does not relate to, and is not issued and adopted, or enacted
for the purpose of regulating, directly or indirectly, the business of
insurance activities other than sales, solicitations, or cross marketing
activities, covered under paragraph (3);
(C) it does not relate to securities investigations or enforcement
actions referred to in subsection (f); and
(i) does not distinguish by its terms between depository
institutions, and affiliates thereof, engaged in the activity at issue
and other persons engaged in the same activity in a manner that is in
any way adverse with respect to the conduct of the activity by any such
depository institution or affiliate engaged in the activity at
issue;
(ii) as interpreted or applied, does not have, and will not have, an
impact on depository institutions, or affiliates thereof, engaged in the
activity at issue, or any person who has an association with any such
depository institution or affiliate, that is substantially more adverse
than its impact on other persons engaged in the same activity that are
not depository institutions or affiliates thereof, or persons who do not
have an association with any such depository institution or
affiliate;
(iii) does not effectively prevent a depository institution or
affiliate thereof from engaging in activities authorized or permitted by
this Act or any other provision of Federal law; and
(iv) does not conflict with the intent of this Act generally to
permit affiliations that are authorized or permitted by Federal
law.
(e) NONDISCRIMINATION- Except as provided in any restrictions described in
subsection (d)(2)(B), no State may, by statute, regulation, order,
interpretation, or other action, regulate the insurance activities authorized
or permitted under this Act or any other provision of Federal law of a
depository institution, or affiliate thereof, to the extent that such statute,
regulation, order, interpretation, or other action--
(1) distinguishes by its terms between depository institutions, or
affiliates thereof, and other persons engaged in such activities, in a
manner that is in any way adverse to any such depository institution, or
affiliate thereof;
(2) as interpreted or applied, has or will have an impact on depository
institutions, or affiliates thereof, that is substantially more adverse than
its impact on other persons providing the same products or services or
engaged in the same activities that are not depository institutions, or
affiliates thereof, or persons or entities affiliated therewith;
(3) effectively prevents a depository institution, or affiliate thereof,
from engaging in insurance activities authorized or permitted by this Act or
any other provision of Federal law; or
(4) conflicts with the intent of this Act generally to permit
affiliations that are authorized or permitted by Federal law between
depository institutions, or affiliates thereof, and persons engaged in the
business of insurance.
(f) LIMITATION- Subsections (c) and (d) shall not be construed to
affect--
(1) the jurisdiction of the securities commission (or any agency or
office performing like functions) of any State, under the laws of such
State--
(A) to investigate and bring enforcement actions, consistent with
section 18(c) of the Securities Act of 1933, with respect to fraud or
deceit or unlawful conduct by any person, in connection with securities or
securities transactions; or
(B) to require the registration of securities or the licensure or
registration of brokers, dealers, or investment advisers (consistent with
section 203A of the Investment Advisers Act of 1940), or the associated
persons of a broker, dealer, or investment adviser (consistent with such
section 203A); or
(2) State laws, regulations, orders, interpretations, or other actions
of general applicability relating to the governance of corporations,
partnerships, limited liability companies, or other business associations
incorporated or formed under the laws of that State or domiciled in that
State, or the applicability of the antitrust laws of any State or any State
law that is similar to the antitrust laws if such laws, regulations, orders,
interpretations, or other actions are not inconsistent with the purposes of
this Act to authorize or permit certain affiliations and to remove barriers
to such affiliations.
(g) DEFINITIONS- For purposes of this section, the following definitions
shall apply:
(1) AFFILIATE- The term `affiliate' means any company that controls, is
controlled by, or is under common control with another company.
(2) ANTITRUST LAWS- The term `antitrust laws' has the meaning given the
term in subsection (a) of the first section of the Clayton Act, and includes
section 5 of the Federal Trade Commission Act (to the extent that such
section 5 relates to unfair methods of competition).
(3) DEPOSITORY INSTITUTION- The term `depository institution'--
(A) has the meaning given the term in section 3 of the Federal Deposit
Insurance Act; and
(B) includes any foreign bank that maintains a branch, agency, or
commercial lending company in the United States.
(4) INSURER- The term `insurer' means any person engaged in the business
of insurance.
(5) STATE- 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 Islands, the Virgin
Islands, and the Northern Mariana Islands.
SEC. 105. MUTUAL BANK HOLDING COMPANIES AUTHORIZED.
Section 3(g)(2) of the Bank Holding Company Act of 1956 (12 U.S.C.
1842(g)(2)) is amended to read as follows:
`(2) REGULATIONS- A bank holding company organized as a mutual holding
company shall be regulated on terms, and shall be subject to limitations,
comparable to those applicable to any other bank holding company.'.
SEC. 106. PROHIBITION ON DEPOSIT PRODUCTION OFFICES.
Section 109(e)(4) of the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (12 U.S.C. 1835a(e)(4)) is amended by inserting `and
any branch of a bank controlled by an out-of-State bank holding company (as
defined in section 2(o)(7) of the Bank Holding Company Act of 1956)' before
the period.
SEC. 107. CROSS MARKETING RESTRICTION; LIMITED PURPOSE BANK RELIEF;
DIVESTITURE.
(a) CROSS MARKETING RESTRICTION- Section 4(f) of the Bank Holding Company
Act of 1956 (12 U.S.C. 1843(f)) is amended by striking paragraph (3).
(b) DAYLIGHT OVERDRAFTS- Section 4(f) of the Bank Holding Company Act of
1956 (12 U.S.C. 1843(f)) is amended by inserting after paragraph (2) the
following new paragraph:
`(3) PERMISSIBLE OVERDRAFTS DESCRIBED- For purposes of paragraph (2)(C),
an overdraft is described in this paragraph if--
`(A) such overdraft results from an inadvertent computer or accounting
error that is beyond the control of both the bank and the
affiliate;
`(i) is permitted or incurred on behalf of an affiliate that is
monitored by, reports to, and is recognized as a primary dealer by the
Federal Reserve Bank of New York; and
`(ii) is fully secured, as required by the Board, by bonds, notes,
or other obligations that are direct obligations of the United States or
on which the principal and interest are fully guaranteed by the United
States or by securities and obligations eligible for settlement on the
Federal Reserve book entry system; or
`(i) is permitted or incurred by, or on behalf of, an affiliate in
connection with an activity that is financial in nature or incidental to
a financial activity; and
`(ii) does not cause the bank to violate any provision of section
23A or 23B of the Federal Reserve Act, either directly, in the case of a
bank that is a member of the Federal Reserve System, or by virtue of
section 18(j) of the Federal Deposit Insurance Act, in the case of a
bank that is not a member of the Federal Reserve System.'.
(c) INDUSTRIAL LOAN COMPANIES; AFFILIATE OVERDRAFTS- Section 2(c)(2)(H) of
the Bank Holding Company Act of 1956 (12 U.S.C. 1841(c)(2)(H)) is amended by
inserting `, or that is otherwise permissible for a bank controlled by a
company described in section 4(f)(1)' before the period at the end.
(d) ACTIVITIES LIMITATIONS- Section 4(f)(2) of the Bank Holding Company
Act of 1956 (12 U.S.C. 1843(f)(2)) is amended--
(1) by striking `Paragraph (1) shall cease to apply to any company
described in such paragraph if--' and inserting `Subject to paragraph (3), a
company described in paragraph (1) shall no longer qualify for the exemption
provided under that paragraph if--';
(2) in subparagraph (A)--
(A) in clause (ii)(IX), by striking `and' at the end;
(B) in clause (ii)(X), by inserting `and' after the
semicolon;
(C) in clause (ii), by inserting after subclause (X) the following new
subclause:
`(XI) assets that are derived from, or incidental to, activities
in which institutions described in subparagraph (F) or (H) of section
2(c)(2) are permitted to engage;'; and
(D) by striking `or' at the end; and
(3) by striking subparagraph (B) and inserting the following:
`(B) any bank subsidiary of such company--
`(i) accepts demand deposits or deposits that the depositor may
withdraw by check or similar means for payment to third parties;
and
`(ii) engages in the business of making commercial loans (except
that, for purposes of this clause, loans made in the ordinary course of
a credit card operation shall not be treated as commercial loans);
or
`(C) after the date of the enactment of the Competitive Equality
Amendments of 1987, any bank subsidiary of such company permits any
overdraft (including any intraday overdraft), or incurs any such overdraft
in the account of the bank at a Federal reserve bank, on behalf of an
affiliate, other than an overdraft described in paragraph (3).'.
(e) DIVESTITURE REQUIREMENT- Section 4(f)(4) of the Bank Holding Company
Act of 1956 (12 U.S.C. 1843(f)(4)) is amended to read as follows:
`(4) DIVESTITURE IN CASE OF LOSS OF EXEMPTION- If any company described
in paragraph (1) fails to qualify for the exemption provided under paragraph
(1) by operation of paragraph (2), such exemption shall cease to apply to
such company and such company shall divest control of each bank it controls
before the end of the 180-day period beginning on the date on which the
company receives notice from the Board that the company has failed to
continue to qualify for such exemption, unless, before the end of such
180-day period, the company has--
`(i) corrected the condition or ceased the activity that caused the
company to fail to continue to qualify for the exemption; or
`(ii) submitted a plan to the Board for approval to cease the
activity or correct the condition in a timely manner (which shall not
exceed 1 year); and
`(B) implemented procedures that are reasonably adapted to avoid the
reoccurrence of such condition or activity.'.
(f) FOREIGN BANK SUBSIDIARIES OF LIMITED PURPOSE CREDIT CARD BANKS-
Section 4(f) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(f)) is
amended by adding at the end the following new paragraph:
`(14) FOREIGN BANK SUBSIDIARIES OF LIMITED PURPOSE CREDIT CARD
BANKS-
`(A) IN GENERAL- An institution described in section 2(c)(2)(F) may
control a foreign bank if--
`(i) the investment of the institution in the foreign bank meets the
requirements of section 25 or 25A of the Federal Reserve Act and the
foreign bank qualifies under such sections;
`(ii) the foreign bank does not offer any products or services in
the United States; and
`(iii) the activities of the foreign bank are permissible under
otherwise applicable law.
`(B) OTHER LIMITATIONS INAPPLICABLE- The limitations contained in any
clause of section 2(c)(2)(F) shall not apply to a foreign bank described
in subparagraph (A) that is controlled by an institution described in such
section.'.
SEC. 108. USE OF SUBORDINATED DEBT TO PROTECT FINANCIAL SYSTEM AND
DEPOSIT FUNDS FROM `TOO BIG TO FAIL' INSTITUTIONS.
(a) STUDY REQUIRED- The Board of Governors of the Federal Reserve System
and the Secretary of the Treasury shall conduct a study of--
(1) the feasibility and appropriateness of establishing a requirement
that, with respect to large insured depository institutions and depository
institution holding companies the failure of which could have serious
adverse effects on economic conditions or financial stability, such
institutions and holding companies maintain some portion of their capital in
the form of subordinated debt in order to bring market forces and market
discipline to bear on the operation of, and the assessment of the viability
of, such institutions and companies and reduce the risk to economic
conditions, financial stability, and any deposit insurance fund;
(2) if such requirement is feasible and appropriate, the appropriate
amount or percentage of capital that should be subordinated debt consistent
with such purposes; and
(3) the manner in which any such requirement could be incorporated into
existing capital standards and other issues relating to the transition to
such a requirement.
(b) REPORT- Before the end of the 18-month period beginning on the date of
the enactment of this Act, the Board of Governors of the Federal Reserve
System and the Secretary of the Treasury shall submit a report to the Congress
containing the findings and conclusions of the Board and the Secretary in
connection with the study required under subsection (a), together with such
legislative and administrative proposals as the Board and the Secretary may
determine to be appropriate.
(c) DEFINITIONS- For purposes of subsection (a), the following definitions
shall apply:
(1) BANK HOLDING COMPANY- The term `bank holding company' has the
meaning given the term in section 2 of the Bank Holding Company Act of
1956.
(2) INSURED DEPOSITORY INSTITUTION- The term `insured depository
institution' has the meaning given the term in section 3(c) of the Federal
Deposit Insurance Act.
(3) SUBORDINATED DEBT- The term `subordinated debt' means unsecured debt
that--
(A) has an original weighted average maturity of not less than 5
years;
(B) is subordinated as to payment of principal and interest to all
other indebtedness of the bank, including deposits;
(C) is not supported by any form of credit enhancement, including a
guarantee or standby letter of credit; and
(D) is not held in whole or in part by any affiliate or
institution-affiliated party of the insured depository institution or bank
holding company.
SEC. 109. STUDY OF FINANCIAL MODERNIZATION'S EFFECT ON THE ACCESSIBILITY
OF SMALL BUSINESS AND FARM LOANS.
(a) STUDY- The Secretary of the Treasury, in consultation with the Federal
banking agencies (as defined in section 3(z) of the Federal Deposit Insurance
Act), shall conduct a study of the extent to which credit is being provided to
and for small businesses and farms, as a result of this Act and the amendments
made by this Act.
(b) REPORT- Before the end of the 5-year period beginning on the date of
the enactment of this Act, the Secretary, in consultation with the Federal
banking agencies, shall submit a report to the Congress on the study conducted
pursuant to subsection (a) and shall include such recommendations as the
Secretary determines to be appropriate for administrative and legislative
action.
Subtitle B--Streamlining Supervision of Bank Holding
Companies
SEC. 111. STREAMLINING BANK HOLDING COMPANY SUPERVISION.
Section 5(c) of the Bank Holding Company Act of 1956 (12 U.S.C. 1844(c))
is amended to read as follows:
`(c) REPORTS AND EXAMINATIONS-
`(A) IN GENERAL- The Board, from time to time, may require a bank
holding company and any subsidiary of such company to submit reports under
oath to keep the Board informed as to--
`(i) its financial condition, systems for monitoring and controlling
financial and operating risks, and transactions with depository
institution subsidiaries of the bank holding company; and
`(ii) compliance by the company or subsidiary with applicable
provisions of this Act or any other Federal law that the Board has
specific jurisdiction to enforce against such company or
subsidiary.
`(B) USE OF EXISTING REPORTS-
`(i) IN GENERAL- For purposes of compliance with this paragraph, the
Board shall, to the fullest extent possible, accept--
`(I) reports that a bank holding company or any subsidiary of such
company has provided or been required to provide to other Federal or
State supervisors or to appropriate self-regulatory
organizations;
`(II) information that is otherwise required to be reported
publicly; and
`(III) externally audited financial statements.
`(ii) AVAILABILITY- A bank holding company or a subsidiary of such
company shall provide to the Board, at the request of the Board, a
report referred to in clause (i).
`(iii) REPORTS FILED WITH OTHER AGENCIES-
`(I) IN GENERAL- In the event that the Board requires a report
under this subsection from a functionally regulated subsidiary of a
bank holding company of a kind that is not required by another Federal
or State regulatory authority or an appropriate self-regulatory
organization, the Board shall first request that the appropriate
regulatory authority or self-regulatory organization obtain such
report.
`(II) AVAILABILITY FROM OTHER SUBSIDIARY- If the report is not
made available to the Board, and the report is necessary to assess a
material risk to the bank holding company or any of its depository
institution subsidiaries or compliance with this Act or any other
Federal law that the Board has specific jurisdiction to enforce
against such company or subsidiary or the systems described in
paragraph (2)(A)(ii)(II), the Board may require such functionally
regulated subsidiary to provide such a report to the
Board.
`(A) EXAMINATION AUTHORITY FOR BANK HOLDING COMPANIES AND
SUBSIDIARIES- Subject to subparagraph (B), the Board may make examinations
of each bank holding company and each subsidiary of such holding company
in order--
`(i) to inform the Board of the nature of the operations and
financial condition of the holding company and such
subsidiaries;
`(ii) to inform the Board of--
`(I) the financial and operational risks within the holding
company system that may pose a threat to the safety and soundness of
any depository institution subsidiary of such holding company;
and
`(II) the systems for monitoring and controlling such risks;
and
`(iii) to monitor compliance with the provisions of this Act or any
other Federal law that the Board has specific jurisdiction to enforce
against such company or subsidiary and those governing transactions and
relationships between any depository institution subsidiary and its
affiliates.
`(B) FUNCTIONALLY REGULATED SUBSIDIARIES- Notwithstanding subparagraph
(A), the Board may make examinations of a functionally regulated
subsidiary of a bank holding company only if--
`(i) the Board has reasonable cause to believe that such subsidiary
is engaged in activities that pose a material risk to an affiliated
depository institution;
`(ii) the Board reasonably determines, after reviewing relevant
reports, that examination of the subsidiary is necessary to adequately
inform the Board of the systems described in subparagraph (A)(ii)(II);
or
`(iii) based on reports and other available information, the Board
has reasonable cause to believe that a subsidiary is not in compliance
with this Act or any other Federal law that the Board has specific
jurisdiction to enforce against such subsidiary, including provisions
relating to transactions with an affiliated depository institution, and
the Board cannot make such determination through examination of the
affiliated depository institution or the bank holding
company.
`(C) RESTRICTED FOCUS OF EXAMINATIONS- The Board shall, to the fullest
extent possible, limit the focus and scope of any examination of a bank
holding company to--
`(i) the bank holding company; and
`(ii) any subsidiary of the bank holding company that could have a
materially adverse effect on the safety and soundness of any depository
institution subsidiary of the holding company due to--
`(I) the size, condition, or activities of the subsidiary;
or
`(II) the nature or size of transactions between the subsidiary
and any depository institution that is also a subsidiary of the bank
holding company.
`(D) DEFERENCE TO BANK EXAMINATIONS- The Board shall, to the fullest
extent possible, for the purposes of this paragraph, use the reports of
examinations of depository institutions made by the appropriate Federal
and State depository institution supervisory authority.
`(E) DEFERENCE TO OTHER EXAMINATIONS- The Board shall, to the fullest
extent possible, forego an examination by the Board under this paragraph
and instead review the reports of examination made of--
`(i) any registered broker or dealer by or on behalf of the
Securities and Exchange Commission;
`(ii) any registered investment adviser properly registered by or on
behalf of either the Securities and Exchange Commission or any
State;
`(iii) any licensed insurance company by or on behalf of any State
regulatory authority responsible for the supervision of insurance
companies; and
`(iv) any other subsidiary that the Board finds to be
comprehensively supervised by a Federal or State authority.
`(A) IN GENERAL- The Board may not, by regulation, guideline, order,
or otherwise, prescribe or impose any capital or capital adequacy rules,
guidelines, standards, or requirements on any functionally regulated
subsidiary of a bank holding company that--
`(i) is not a depository institution; and
`(I) in compliance with the applicable capital requirements of its
Federal regulatory authority (including the Securities and Exchange
Commission) or State insurance authority;
`(II) properly registered as an investment adviser under the
Investment Advisers Act of 1940, or with any State; or
`(III) is licensed as an insurance agent with the appropriate
State insurance authority.
`(B) RULE OF CONSTRUCTION- Subparagraph (A) shall not be construed as
preventing the Board from imposing capital or capital adequacy rules,
guidelines, standards, or requirements with respect to--
`(i) activities of a registered investment adviser other than with
respect to investment advisory activities or activities incidental to
investment advisory activities; or
`(ii) activities of a licensed insurance agent other than insurance
agency activities or activities incidental to insurance agency
activities.
`(C) LIMITATIONS ON INDIRECT ACTION- In developing, establishing, or
assessing bank holding company capital or capital adequacy rules,
guidelines, standards, or requirements for purposes of this paragraph, the
Board may not take into account the activities, operations, or investments
of an affiliated investment company registered under the Investment
Company Act of 1940, unless the investment company is--
`(i) a bank holding company; or
`(ii) controlled by a bank holding company by reason of ownership by
the bank holding company (including through all of its affiliates) of 25
percent or more of the shares of the investment company, and the shares
owned by the bank holding company have a market value equal to more than
$1,000,000.
`(4) FUNCTIONAL REGULATION OF SECURITIES AND INSURANCE ACTIVITIES-
`(A) SECURITIES ACTIVITIES- Securities activities conducted in a
functionally regulated subsidiary of a depository institution shall be
subject to regulation by the Securities and Exchange Commission, and by
relevant State securities authorities, as appropriate, subject to section
104 of the Gramm-Leach-Bliley Act, to the same extent as if they were
conducted in a nondepository institution subsidiary of a bank holding
company.
`(B) INSURANCE ACTIVITIES- Subject to section 104 of the
Gramm-Leach-Bliley Act, insurance agency and brokerage activities and
activities as principal conducted in a functionally regulated subsidiary
of a depository institution shall be subject to regulation by a State
insurance authority to the same extent as if they were conducted in a
nondepository institution subsidiary of a bank holding company.
`(5) DEFINITION- For purposes of this subsection, the term `functionally
regulated subsidiary' means any company--
`(A) that is not a bank holding company or a depository institution;
and
`(i) a broker or dealer that is registered under the Securities
Exchange Act of 1934;
`(ii) a registered investment adviser, properly registered by or on
behalf of either the Securities and Exchange Commission or any State,
with respect to the investment advisory activities of such investment
adviser and activities incidental to such investment advisory
activities;
`(iii) an investment company that is registered under the Investment
Company Act of 1940;
`(iv) an insurance company, with respect to insurance activities of
the insurance company and activities incidental to such insurance
activities, that is subject to supervision by a State insurance
regulator; or
`(v) an entity that is subject to regulation by the Commodity
Futures Trading Commission, with respect to the commodities activities
of such entity and activities incidental to such commodities
activities.'.
SEC. 112. AUTHORITY OF STATE INSURANCE REGULATOR AND SECURITIES AND
EXCHANGE COMMISSION.
(a) BANK HOLDING COMPANIES- Section 5 of the Bank Holding Company Act of
1956 (12 U.S.C. 1844) is amended by adding at the end the following new
subsection:
`(g) AUTHORITY OF STATE INSURANCE REGULATOR AND THE SECURITIES AND
EXCHANGE COMMISSION-
`(1) IN GENERAL- Notwithstanding any other provision of law, any
regulation, order, or other action of the Board that requires a bank holding
company to provide funds or other assets to a subsidiary depository
institution shall not be effective nor enforceable with respect to an entity
described in subparagraph (A) if--
`(A) such funds or assets are to be provided by--
`(i) a bank holding company that is an insurance company, a broker
or dealer registered under the Securities Exchange Act of 1934, an
investment company registered under the Investment Company Act of 1940,
or an investment adviser registered by or on behalf of either the
Securities and Exchange Commission or any State; or
`(ii) an affiliate of the depository institution that is an
insurance company or a broker or dealer registered under the Securities
Exchange Act of 1934, an investment company registered under the
Investment Company Act of 1940, or an investment adviser registered by
or on behalf of either the Securities and Exchange Commission or any
State; and
`(B) the State insurance authority for the insurance company or the
Securities and Exchange Commission for the registered broker, dealer,
investment adviser (solely with respect to investment advisory activities
or activities incidental thereto), or investment company, as the case may
be, determines in writing sent to the holding company and the Board that
the holding company shall not provide such funds or assets because such
action would have a material adverse effect on the financial condition of
the insurance company or the broker, dealer, investment company, or
investment adviser, as the case may be.
`(2) NOTICE TO STATE INSURANCE AUTHORITY OR SEC REQUIRED- If the Board
requires a bank holding company, or an affiliate of a bank holding company,
that is an insurance company or a broker, dealer, investment company, or
investment adviser described in paragraph (1)(A) to provide funds or assets
to a depository institution subsidiary of the holding company pursuant to
any regulation, order, or other action of the Board referred to in paragraph
(1), the Board shall promptly notify the State insurance authority for the
insurance company, the Securities and Exchange Commission, or State
securities regulator, as the case may be, of such requirement.
`(3) DIVESTITURE IN LIEU OF OTHER ACTION- If the Board receives a notice
described in paragraph (1)(B) from a State insurance authority or the
Securities and Exchange Commission with regard to a bank holding company or
affiliate referred to in that paragraph, the Board may order the bank
holding company to divest the depository institution not later than 180 days
after receiving the notice, or such longer period as the Board determines
consistent with the safe and sound operation of the depository
institution.
`(4) CONDITIONS BEFORE DIVESTITURE- During the period beginning on the
date an order to divest is issued by the Board under paragraph (3) to a bank
holding company and ending on the date the divestiture is completed, the
Board may impose any conditions or restrictions on the holding company's
ownership or operation of the depository institution, including restricting
or prohibiting transactions between the depository institution and any
affiliate of the institution, as are appropriate under the
circumstances.
`(5) RULE OF CONSTRUCTION- No provision of this subsection may be
construed as limiting or otherwise affecting, except to the extent
specifically provided in this subsection, the regulatory authority,
including the scope of the authority, of any Federal agency or department
with regard to any entity that is within the jurisdiction of such agency or
department.'.
(b) SUBSIDIARIES OF DEPOSITORY INSTITUTIONS- The Federal Deposit Insurance
Act (12 U.S.C. 1811 et seq.) is amended by adding at the end the following new
section:
`SEC. 45. AUTHORITY OF STATE INSURANCE REGULATOR AND SECURITIES AND
EXCHANGE COMMISSION.
`(a) IN GENERAL- Notwithstanding any other provision of law, the
provisions of--
`(1) section 5(c) of the Bank Holding Company Act of 1956 that limit the
authority of the Board of Governors of the Federal Reserve System to require
reports from, to make examinations of, or to impose capital requirements on
holding companies and their functionally regulated subsidiaries or that
require deference to other regulators;
`(2) section 5(g) of the Bank Holding Company Act of 1956 that limit the
authority of the Board to require a functionally regulated subsidiary of a
holding company to provide capital or other funds or assets to a depository
institution subsidiary of the holding company and to take certain actions
including requiring divestiture of the depository institution; and
`(3) section 10A of the Bank Holding Company Act of 1956 that limit
whatever authority the Board might otherwise have to take direct or indirect
action with respect to holding companies and their functionally regulated
subsidiaries;
shall also limit whatever authority that a Federal banking agency might
otherwise have under any statute or regulation to require reports, make
examinations, impose capital requirements, or take any other direct or
indirect action with respect to any functionally regulated affiliate of a
depository institution, subject to the same standards and requirements as are
applicable to the Board under those provisions.
`(b) CERTAIN EXEMPTION AUTHORIZED- No provision of this section shall be
construed as preventing the Corporation, if the Corporation finds it necessary
to determine the condition of a depository institution for insurance purposes,
from examining an affiliate of any depository institution, pursuant to section
10(b)(4), as may be necessary to disclose fully the relationship between the
depository institution and the affiliate, and the effect of such relationship
on the depository institution.
`(c) DEFINITIONS- For purposes of this section, the following definitions
shall apply:
`(1) FUNCTIONALLY REGULATED SUBSIDIARY- The term `functionally regulated
subsidiary' has the meaning given the term in section 5(c)(5) of the Bank
Holding Company Act of 1956.
`(2) FUNCTIONALLY REGULATED AFFILIATE- The term `functionally regulated
affiliate' means, with respect to any depository institution, any affiliate
of such depository institution that is--
`(A) not a depository institution holding company; and
`(B) a company described in any clause of section 5(c)(5)(B) of the
Bank Holding Company Act of 1956.'.
SEC. 113. ROLE OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE
SYSTEM.
The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is amended
by inserting after section 10 the following new section:
`SEC. 10A. LIMITATION ON RULEMAKING, PRUDENTIAL, SUPERVISORY, AND ENFORCEMENT
AUTHORITY OF THE BOARD.
`(a) LIMITATION ON DIRECT ACTION- The Board may not prescribe regulations,
issue or seek entry of orders, impose restraints, restrictions, guidelines,
requirements, safeguards, or standards, or otherwise take any action under or
pursuant to any provision of this Act or section 8 of the Federal Deposit
Insurance Act against or with respect to a functionally regulated subsidiary
of a bank holding company unless--
`(1) the action is necessary to prevent or redress an unsafe or unsound
practice or breach of fiduciary duty by such subsidiary that poses a
material risk to--
`(A) the financial safety, soundness, or stability of an affiliated
depository institution; or
`(B) the domestic or international payment system; and
`(2) the Board finds that it is not reasonably possible to protect
effectively against the material risk at issue through action directed at or
against the affiliated depository institution or against depository
institutions generally.
`(b) LIMITATION ON INDIRECT ACTION- The Board may not prescribe
regulations, issue or seek entry of orders, impose restraints, restrictions,
guidelines, requirements, safeguards, or standards, or otherwise take any
action under or pursuant to any provision of this Act or section 8 of the
Federal Deposit Insurance Act against or with respect to a bank holding
company that requires the bank holding company to require a functionally
regulated subsidiary of the holding company to engage, or to refrain from
engaging, in any conduct or activities unless the Board could take such action
directly against or with respect to the functionally regulated subsidiary in
accordance with subsection (a).
`(c) ACTIONS SPECIFICALLY AUTHORIZED- Notwithstanding subsection (a) or
(b), the Board may take action under this Act or section 8 of the Federal
Deposit Insurance Act to enforce compliance by a functionally regulated
subsidiary of a bank holding company with any Federal law that the Board has
specific jurisdiction to enforce against such subsidiary.
`(d) FUNCTIONALLY REGULATED SUBSIDIARY DEFINED- For purposes of this
section, the term `functionally regulated subsidiary' has the meaning given
the term in section 5(c)(5).'.
SEC. 114. PRUDENTIAL SAFEGUARDS.
(a) COMPTROLLER OF THE CURRENCY-
(1) IN GENERAL- The Comptroller of the Currency may, by regulation or
order, impose restrictions or requirements on relationships or transactions
between a national bank and a subsidiary of the national bank that the
Comptroller finds are--
(A) consistent with the purposes of this Act, title LXII of the
Revised Statutes of the United States, and other Federal law applicable to
national banks; and
(B) appropriate to avoid any significant risk to the safety and
soundness of insured depository institutions or any Federal deposit
insurance fund or other adverse effects, such as undue concentration of
resources, decreased or unfair competition, conflicts of interests, or
unsound banking practices.
(2) REVIEW- The Comptroller of the Currency shall regularly--
(A) review all restrictions or requirements established pursuant to
paragraph (1) to determine whether there is a continuing need for any such
restriction or requirement to carry out the purposes of the Act, including
the avoidance of any adverse effect referred to in paragraph (1)(B);
and
(B) modify or eliminate any such restriction or requirement the
Comptroller finds is no longer required for such purposes.
(b) BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM-
(1) IN GENERAL- The Board of Governors of the Federal Reserve System
may, by regulation or order, impose restrictions or requirements on
relationships or transactions--
(A) between a depository institution subsidiary of a bank holding
company and any affiliate of such depository institution (other than a
subsidiary of such institution); or
(B) between a State member bank and a subsidiary of such
bank;
if the Board makes a finding described in paragraph (2) with respect to
such restriction or requirement.
(2) FINDING- The Board of Governors of the Federal Reserve System may
exercise authority under paragraph (1) if the Board finds that the exercise
of such authority is--
(A) consistent with the purposes of this Act, the Bank Holding Company
Act of 1956, the Federal Reserve Act, and other Federal law applicable to
depository institution subsidiaries of bank holding companies or State
member banks, as the case may be; and
(B) appropriate to prevent an evasion of any provision of law referred
to in subparagraph (A) or to avoid any significant risk to the safety and
soundness of depository institutions or any Federal deposit insurance fund
or other adverse effects, such as undue concentration of resources,
decreased or unfair competition, conflicts of interests, or unsound
banking practices.
(3) REVIEW- The Board of Governors of the Federal Reserve System shall
regularly--
(A) review all restrictions or requirements established pursuant to
paragraph (1) or (4) to determine whether there is a continuing need for
any such restriction or requirement to carry out the purposes of the Act,
including the avoidance of any adverse effect referred to in paragraph
(2)(B) or (4)(B); and
(B) modify or eliminate any such restriction or requirement the Board
finds is no longer required for such purposes.
(4) FOREIGN BANKS- The Board may, by regulation or order, impose
restrictions or requirements on relationships or transactions between a
branch, agency, or commercial lending company of a foreign bank in the
United States and any affiliate in the United States of such foreign bank
that the Board finds are--
(A) consistent with the purposes of this Act, the Bank Holding Company
Act of 1956, the Federal Reserve Act, and other Federal law applicable to
foreign banks and their affiliates in the United States; and
(B) appropriate to prevent an evasion of any provision of law referred
to in subparagraph (A) or to avoid any significant risk to the safety and
soundness of depository institutions or any Federal deposit insurance fund
or other adverse effects, such as undue concentration of resources,
decreased or unfair competition, conflicts of interests, or unsound
banking practices.
(c) FEDERAL DEPOSIT INSURANCE CORPORATION-
(1) IN GENERAL- The Federal Deposit Insurance Corporation may, by
regulation or order, impose restrictions or requirements on relationships or
transactions between a State nonmember bank (as defined in section 3 of the
Federal Deposit Insurance Act) and a subsidiary of the State nonmember bank
that the Corporation finds are--
(A) consistent with the purposes of this Act, the Federal Deposit
Insurance Act, or other Federal law applicable to State nonmember banks;
and
(B) appropriate to avoid any significant risk to the safety and
soundness of depository institutions or any Federal deposit insurance fund
or other adverse effects, such as undue concentration of resources,
decreased or unfair competition, conflicts of interests, or unsound
banking practices.
(2) REVIEW- The Federal Deposit Insurance Corporation shall
regularly--
(A) review all restrictions or requirements established pursuant to
paragraph (1) to determine whether there is a continuing need for any such
restriction or requirement to carry out the purposes of the Act, including
the avoidance of any adverse effect referred to in paragraph (1)(B);
and
(B) modify or eliminate any such restriction or requirement the
Corporation finds is no longer required for such purposes.
SEC. 115. EXAMINATION OF INVESTMENT COMPANIES.
(a) EXCLUSIVE COMMISSION AUTHORITY- Except as provided in subsection (c),
a Federal banking agency may not inspect or examine any registered investment
company that is not a bank holding company or a savings and loan holding
company.
(b) EXAMINATION RESULTS AND OTHER INFORMATION- The Commission shall
provide to any Federal banking agency, upon request, the results of any
examination, reports, records, or other information with respect to any
registered investment company to the extent necessary for the agency to carry
out its statutory responsibilities.
(c) CERTAIN EXAMINATIONS AUTHORIZED- Nothing in this section shall prevent
the Corporation, if the Corporation finds it necessary to determine the
condition of an insured depository institution for insurance purposes, from
examining an affiliate of any insured depository institution, pursuant to its
authority under section 10(b)(4) of the Federal Deposit Insurance Act, as may
be necessary to disclose fully the relationship between the insured depository
institution and the affiliate, and the effect of such relationship on the
insured depository institution.
(d) DEFINITIONS- For purposes of this section, the following definitions
shall apply:
(1) BANK HOLDING COMPANY- The term `bank holding company' has the
meaning given the term in section 2 of the Bank Holding Company Act of
1956.
(2) COMMISSION- The term `Commission' means the Securities and Exchange
Commission.
(3) CORPORATION- The term `Corporation' means the Federal Deposit
Insurance Corporation.
(4) FEDERAL BANKING AGENCY- The term `Federal banking agency' has the
meaning given the term in section 3(z) of the Federal Deposit Insurance
Act.
(5) INSURED DEPOSITORY INSTITUTION- The term `insured depository
institution' has the meaning given the term in section 3(c) of the Federal
Deposit Insurance Act.
(6) REGISTERED INVESTMENT COMPANY- The term `registered investment
company' means an investment company that is registered with the Commission
under the Investment Company Act of 1940.
(7) SAVINGS AND LOAN HOLDING COMPANY- The term `savings and loan holding
company' has the meaning given the term in section 10(a)(1)(D) of the Home
Owners' Loan Act.
SEC. 116. ELIMINATION OF APPLICATION REQUIREMENT FOR FINANCIAL HOLDING
COMPANIES.
(a) PREVENTION OF DUPLICATIVE FILINGS- Section 5(a) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1844(a)) is amended by adding at the end the
following new sentence: `A declaration filed in accordance with section
4(l)(1)(C) shall satisfy the requirements of this subsection with regard to
the registration of a bank holding company but not any requirement to file an
application to acquire a bank pursuant to section 3.'.
(b) DIVESTITURE PROCEDURES- Section 5(e)(1) of the Bank Holding Company
Act of 1956 (12 U.S.C. 1844(e)(1)) is amended--
(1) by striking `Financial Institutions Supervisory Act of 1966, order'
and inserting `Financial Institutions Supervisory Act of 1966, at the
election of the bank holding company--
(2) by striking `shareholders of the bank holding company. Such
distribution' and inserting `shareholders of the bank holding company;
or
`(B) order the bank holding company, after due notice and opportunity
for hearing, and after consultation with the primary supervisor for the
bank, which shall be the Comptroller of the Currency in the case of a
national bank, and the Federal Deposit Insurance Corporation and the
appropriate State supervisor in the case of an insured nonmember bank, to
terminate (within 120 days or such longer period as the Board may direct)
the ownership or control of any such bank by such company.
The distribution referred to in subparagraph (A)'.
SEC. 117. PRESERVING THE INTEGRITY OF FDIC RESOURCES.
Section 11(a)(4)(B) of the Federal Deposit Insurance Act (12 U.S.C.
1821(a)(4)(B)) is amended by striking `to benefit any shareholder of' and
inserting `to benefit any shareholder or affiliate (other than an insured
depository institution that receives assistance in accordance with the
provisions of this Act) of'.
SEC. 118. REPEAL OF SAVINGS BANK PROVISIONS IN THE BANK HOLDING COMPANY
ACT OF 1956.
Section 3(f) of the Bank Holding Company Act of 1956 (12 U.S.C. 1842(f))
is amended to read as follows:
SEC. 119. TECHNICAL AMENDMENT.
Section 2(o)(1)(A) of the Bank Holding Company Act of 1956 (12 U.S.C.
1841(o)(1)(A)) is amended by striking `section 38(b)' and inserting `section
38'.
Subtitle C--Subsidiaries of National Banks
SEC. 121. SUBSIDIARIES OF NATIONAL BANKS.
(a) IN GENERAL- Chapter one of title LXII of the Revised Statutes of the
United States (12 U.S.C. 21 et seq.) is amended--
(1) by redesignating section 5136A as section 5136B; and
(2) by inserting after section 5136 (12 U.S.C. 24) the following new
section:
`SEC. 5136A. FINANCIAL SUBSIDIARIES OF NATIONAL BANKS.
`(a) AUTHORIZATION TO CONDUCT IN SUBSIDIARIES CERTAIN ACTIVITIES THAT ARE
FINANCIAL IN NATURE-
`(1) IN GENERAL- Subject to paragraph (2), a national bank may control a
financial subsidiary, or hold an interest in a financial subsidiary.
`(2) CONDITIONS AND REQUIREMENTS- A national bank may control a
financial subsidiary, or hold an interest in a financial subsidiary, only
if--
`(A) the financial subsidiary engages only in--
`(i) activities that are financial in nature or incidental to a
financial activity pursuant to subsection (b); and
`(ii) activities that are permitted for national banks to engage in
directly (subject to the same terms and conditions that govern the
conduct of the activities by a national bank);
`(B) the activities engaged in by the financial subsidiary as a
principal do not include--
`(i) insuring, guaranteeing, or indemnifying against loss, harm,
damage, illness, disability, or death (except to the extent permitted
under section 302 or 303(c) of the Gramm-Leach-Bliley Act) or providing
or issuing annuities the income of which is subject to tax treatment
under section 72 of the Internal Revenue Code of 1986;
`(ii) real estate development or real estate investment activities,
unless otherwise expressly authorized by law; or
`(iii) any activity permitted in subparagraph (H) or (I) of section
4(k)(4) of the Bank Holding Company Act of 1956, except activities
described in section 4(k)(4)(H) that may be permitted in accordance with
section 122 of the Gramm-Leach-Bliley Act;
`(C) the national bank and each depository institution affiliate of
the national bank are well capitalized and well managed;
`(D) the aggregate consolidated total assets of all financial
subsidiaries of the national bank do not exceed the lesser of--
`(i) 45 percent of the consolidated total assets of the parent bank;
or
`(E) except as provided in paragraph (4), the national bank meets any
applicable rating or other requirement set forth in paragraph (3);
and
`(F) the national bank has received the approval of the Comptroller of
the Currency for the financial subsidiary to engage in such activities,
which approval shall be based solely upon the factors set forth in this
section.
`(3) RATING OR COMPARABLE REQUIREMENT-
`(A) IN GENERAL- A national bank meets the requirements of this
paragraph if--
`(i) the bank is 1 of the 50 largest insured banks and has not fewer
than 1 issue of outstanding eligible debt that is currently rated within
the 3 highest investment grade rating categories by a nationally
recognized statistical rating organization; or
`(ii) the bank is 1 of the second 50 largest insured banks and meets
the criteria set forth in clause (i) or such other criteria as the
Secretary of the Treasury and the Board of Governors of the Federal
Reserve System may jointly establish by regulation and determine to be
comparable to and consistent with the purposes of the rating required in
clause (i).
`(B) CONSOLIDATED TOTAL ASSETS- For purposes of this paragraph, the
size of an insured bank shall be determined on the basis of the
consolidated total assets of the bank as of the end of each calendar
year.
`(4) FINANCIAL AGENCY SUBSIDIARY- The requirement in paragraph (2)(E)
shall not apply with respect to the ownership or control of a financial
subsidiary that engages in activities described in subsection (b)(1) solely
as agent and not directly or indirectly as principal.
`(5) REGULATIONS REQUIRED- Before the end of the 270-day period
beginning on the date of the enactment of the Gramm-Leach-Bliley Act, the
Comptroller of the Currency shall, by regulation, prescribe procedures to
implement this section.
`(6) INDEXED ASSET LIMIT- The dollar amount contained in paragraph
(2)(D) shall be adjusted according to an indexing mechanism jointly
established by regulation by the Secretary of the Treasury and the Board of
Governors of the Federal Reserve System.
`(7) COORDINATION WITH SECTION 4(l)(2) OF THE BANK HOLDING COMPANY ACT
OF 1956- Section 4(l)(2) of the Bank Holding Company Act of 1956 applies to
a national bank that controls a financial subsidiary in the manner provided
in that section.
`(b) ACTIVITIES THAT ARE FINANCIAL IN NATURE-
`(1) FINANCIAL ACTIVITIES-
`(A) IN GENERAL- An activity shall be financial in nature or
incidental to such financial activity only if--
`(i) such activity has been defined to be financial in nature or
incidental to a financial activity for bank holding companies pursuant
to section 4(k)(4) of the Bank Holding Company Act of 1956;
or
`(ii) the Secretary of the Treasury determines the activity is
financial in nature or incidental to a financial activity in accordance
with subparagraph (B).
`(B) COORDINATION BETWEEN THE BOARD AND THE SECRETARY OF THE
TREASURY-
`(i) PROPOSALS RAISED BEFORE THE SECRETARY OF THE
TREASURY-
`(I) CONSULTATION- The Secretary of the Treasury shall notify the
Board of, and consult with the Board concerning, any request,
proposal, or application under this section for a determination of
whether an activity is financial in nature or incidental to a
financial activity.
`(II) BOARD VIEW- The Secretary of the Treasury shall not
determine that any activity is financial in nature or incidental to a
financial activity under this section if the Board notifies the
Secretary in writing, not later than 30 days after the date of receipt
of the notice described in subclause (I) (or such longer period as the
Secretary determines to be appropriate under the circumstances) that
the Board believes that the activity is not financial in nature or
incidental to a financial activity or is not otherwise permissible
under this section.
`(ii) PROPOSALS RAISED BY THE BOARD-
`(I) BOARD RECOMMENDATION- The Board may, at any time, recommend
in writing that the Secretary of the Treasury find an activity to be
financial in nature or incidental to a financial activity for purposes
of this section.
`(II) TIME PERIOD FOR SECRETARIAL ACTION- Not later than 30 days
after the date of receipt of a written recommendation from the Board
under subclause (I) (or such longer period as the Secretary of the
Treasury and the Board determine to be appropriate under the
circumstances), the Secretary shall determine whether to initiate a
public rulemaking proposing that the subject recommended activity be
found to be financial in nature or incidental to a financial activity
under this section, and shall notify the Board in writing of the
determination of the Secretary and, in the event that the Secretary
determines not to seek public comment on the proposal, the reasons for
that determination.
`(2) FACTORS TO BE CONSIDERED- In determining whether an activity is
financial in nature or incidental to a financial activity, the Secretary
shall take into account--
`(A) the purposes of this Act and the Gramm-Leach-Bliley Act;
`(B) changes or reasonably expected changes in the marketplace in
which banks compete;
`(C) changes or reasonably expected changes in the technology for
delivering financial services; and
`(D) whether such activity is necessary or appropriate to allow a bank
and the subsidiaries of a bank to--
`(i) compete effectively with any company seeking to provide
financial services in the United States;
`(ii) efficiently deliver information and services that are
financial in nature through the use of technological means, including
any application necessary to protect the security or efficacy of systems
for the transmission of data or financial transactions; and
`(iii) offer customers any available or emerging technological means
for using financial services or for the document imaging of
data.
`(3) AUTHORIZATION OF NEW FINANCIAL ACTIVITIES- The Secretary of the
Treasury shall, by regulation or order and in accordance with paragraph
(1)(B), define, consistent with the purposes of this Act and the
Gramm-Leach-Bliley Act, the following activities as, and the extent to which
such activities are, financial in nature or incidental to a financial
activity:
`(A) Lending, exchanging, transferring, investing for others, or
safeguarding financial assets other than money or securities.
`(B) Providing any device or other instrumentality for transferring
money or other financial assets.
`(C) Arranging, effecting, or facilitating financial transactions for
the account of third parties.
`(1) CAPITAL DEDUCTION REQUIRED- In determining compliance with
applicable capital standards--
`(A) the aggregate amount of the outstanding equity investment,
including retained earnings, of a national bank in all financial
subsidiaries shall be deducted from the assets and tangible equity of the
national bank; and
`(B) the assets and liabilities of the financial subsidiaries shall
not be consolidated with those of the national bank.
`(2) FINANCIAL STATEMENT DISCLOSURE OF CAPITAL DEDUCTION- Any published
financial statement of a national bank that controls a financial subsidiary
shall, in addition to providing information prepared in accordance with
generally accepted accounting principles, separately present financial
information for the bank in the manner provided in paragraph (1).
`(d) SAFEGUARDS FOR THE BANK- A national bank that establishes or
maintains a financial subsidiary shall assure that--
`(1) the procedures of the national bank for identifying and managing
financial and operational risks within the national bank and the financial
subsidiary adequately protect the national bank from such risks;
`(2) the national bank has, for the protection of the bank, reasonable
policies and procedures to preserve the separate corporate identity and
limited liability of the national bank and the financial subsidiaries of the
national bank; and
`(3) the national bank is in compliance with this section.
`(e) PROVISIONS APPLICABLE TO NATIONAL BANKS THAT FAIL TO CONTINUE TO MEET
CERTAIN REQUIREMENTS-
`(1) IN GENERAL- If a national bank or insured depository institution
affiliate does not continue to meet the requirements of subsection (a)(2)(C)
or subsection (d), the Comptroller of the Currency shall promptly give
notice to the national bank to that effect describing the conditions giving
rise to the notice.
`(2) AGREEMENT TO CORRECT CONDITIONS- Not later than 45 days after the
date of receipt by a national bank of a notice given under paragraph (1) (or
such additional period as the Comptroller of the Currency may permit), the
national bank shall execute an agreement with the Comptroller of the
Currency and any relevant insured depository institution affiliate shall
execute an agreement with its appropriate Federal banking agency to comply
with the requirements of subsection (a)(2)(C) and subsection (d).
`(3) IMPOSITION OF CONDITIONS- Until the conditions described in a
notice under paragraph (1) are corrected--
`(A) the Comptroller of the Currency may impose such limitations on
the conduct or activities of the national bank or any subsidiary of the
national bank as the Comptroller of the Currency determines to be
appropriate under the circumstances and consistent with the purposes of
this section; and
`(B) the appropriate Federal banking agency may impose such
limitations on the conduct or activities of any relevant insured
depository institution affiliate or any subsidiary of the institution as
such agency determines to be appropriate under the circumstances and
consistent with the purposes of this section.
`(4) FAILURE TO CORRECT- If the conditions described in a notice to a
national bank under paragraph (1) are not corrected within 180 days after
the date of receipt by the national bank of the notice, the Comptroller of
the Currency may require the national bank, under such terms and conditions
as may be imposed by the Comptroller and subject to such extension of time
as may be granted in the discretion of the Comptroller, to divest control of
any financial subsidiary.
`(5) CONSULTATION- In taking any action under this subsection, the
Comptroller shall consult with all relevant Federal and State regulatory
agencies and authorities.
`(f) FAILURE TO MAINTAIN PUBLIC RATING OR MEET APPLICABLE CRITERIA-
`(1) IN GENERAL- A national bank that does not continue to meet any
applicable rating or other requirement of subsection (a)(2)(E) after
acquiring or establishing a financial subsidiary shall not, directly or
through a subsidiary, purchase or acquire any additional equity capital of
any financial subsidiary until the bank meets such requirements.
`(2) EQUITY CAPITAL- For purposes of this subsection, the term `equity
capital' includes, in addition to any equity instrument, any debt instrument
issued by a financial subsidiary, if the instrument qualifies as capital of
the subsidiary under any Federal or State law, regulation, or interpretation
applicable to the subsidiary.
`(g) DEFINITIONS- For purposes of this section, the following definitions
shall apply:
`(1) AFFILIATE, COMPANY, CONTROL, AND SUBSIDIARY- The terms `affiliate',
`company', `control', and `subsidiary' have the meanings given those terms
in section 2 of the Bank Holding Company Act of 1956.
`(2) APPROPRIATE FEDERAL BANKING AGENCY, DEPOSITORY INSTITUTION, INSURED
BANK, AND INSURED DEPOSITORY INSTITUTION- The terms `appropriate Federal
banking agency', `depository institution', `insured bank', and `insured
depository institution' have the meanings given those terms in section 3 of
the Federal Deposit Insurance Act.
`(3) FINANCIAL SUBSIDIARY- The term `financial subsidiary' means any
company that is controlled by 1 or more insured depository institutions
other than a subsidiary that--
`(A) engages solely in activities that national banks are permitted to
engage in directly and are conducted subject to the same terms and
conditions that govern the conduct of such activities by national banks;
or
`(B) a national bank is specifically authorized by the express terms
of a Federal statute (other than this section), and not by implication or
interpretation, to control, such as by section 25 or 25A of the Federal
Reserve Act or the Bank Service Company Act.
`(4) ELIGIBLE DEBT- The term `eligible debt' means unsecured long-term
debt that--
`(A) is not supported by any form of credit enhancement, including a
guarantee or standby letter of credit; and
`(B) is not held in whole or in any significant part by any affiliate,
officer, director, principal shareholder, or employee of the bank or any
other person acting on behalf of or with funds from the bank or an
affiliate of the bank.
`(5) WELL CAPITALIZED- The term `well capitalized' has the meaning given
the term in section 38 of the Federal Deposit Insurance Act.
`(6) WELL MANAGED- The term `well managed' means--
`(A) in the case of a depository institution that has been examined,
unless otherwise determined in writing by the appropriate Federal banking
agency--
`(i) the achievement of a composite rating of 1 or 2 under the
Uniform Financial Institutions Rating System (or an equivalent rating
under an equivalent rating system) in connection with the most recent
examination or subsequent review of the depository institution;
and
`(ii) at least a rating of 2 for management, if such rating is
given; or
`(B) in the case of any depository institution that has not been
examined, the existence and use of managerial resources that the
appropriate Federal banking agency determines are satisfactory.'.
(b) SECTIONS 23A AND 23B OF THE FEDERAL RESERVE ACT-
(1) LIMITING THE EXPOSURE OF A BANK TO A FINANCIAL SUBSIDIARY TO THE
AMOUNT OF PERMISSIBLE EXPOSURE TO AN AFFILIATE- Section 23A of the Federal
Reserve Act (12 U.S.C. 371c) is amended--
(A) by redesignating subsection (e) as subsection (f); and
(B) by inserting after subsection (d), the following new
subsection:
`(e) RULES RELATING TO BANKS WITH FINANCIAL SUBSIDIARIES-
`(1) FINANCIAL SUBSIDIARY DEFINED- For purposes of this section and
section 23B, the term `financial subsidiary' means any company that is a
subsidiary of a bank that would be a financial subsidiary of a national bank
under section 5136A of the Revised Statutes of the United States.
`(2) FINANCIAL SUBSIDIARY TREATED AS AN AFFILIATE- For purposes of
applying this section and section 23B, and notwithstanding subsection (b)(2)
of this section or section 23B(d)(1), a financial subsidiary of a
bank--
`(A) shall be deemed to be an affiliate of the bank; and
`(B) shall not be deemed to be a subsidiary of the bank.
`(3) EXCEPTIONS FOR TRANSACTIONS WITH FINANCIAL SUBSIDIARIES-
`(A) EXCEPTION FROM LIMIT ON COVERED TRANSACTIONS WITH ANY INDIVIDUAL
FINANCIAL SUBSIDIARY- Notwithstanding paragraph (2), the restriction
contained in subsection (a)(1)(A) shall not apply with respect to covered
transactions between a bank and any individual financial subsidiary of the
bank.
`(B) EXCEPTION FOR EARNINGS RETAINED BY FINANCIAL SUBSIDIARIES-
Notwithstanding paragraph (2) or subsection (b)(7), a bank's investment in
a financial subsidiary of the bank shall not include retained earnings of
the financial subsidiary.
`(4) ANTI-EVASION PROVISION- For purposes of this section and section
23B--
`(A) any purchase of, or investment in, the securities of a financial
subsidiary of a bank by an affiliate of the bank shall be considered to be
a purchase of or investment in such securities by the bank; and
`(B) any extension of credit by an affiliate of a bank to a financial
subsidiary of the bank shall be considered to be an extension of credit by
the bank to the financial subsidiary if the Board determines that such
treatment is necessary or appropriate to prevent evasions of this Act and
the Gramm-Leach-Bliley Act.'.
(2) REBUTTABLE PRESUMPTION OF CONTROL OF PORTFOLIO COMPANY- Section
23A(b) of the Federal Reserve Act (12 U.S.C. 371c(b)) is amended by adding
at the end the following new paragraph--
`(11) REBUTTABLE PRESUMPTION OF CONTROL OF PORTFOLIO COMPANIES- In
addition to paragraph (3), a company or shareholder shall be presumed to
control any other company if the company or shareholder, directly or
indirectly, or acting through 1 or more other persons, owns or controls 15
percent or more of the equity capital of the other company pursuant to
subparagraph (H) or (I) of section 4(k)(4) of the Bank Holding Company Act
of 1956 or rules adopted under section 122 of the Gramm-Leach-Bliley Act, if
any, unless the company or shareholder provides information acceptable to
the Board to rebut this presumption of control.'.
(3) RULEMAKING REQUIRED CONCERNING DERIVATIVE TRANSACTIONS AND INTRADAY
CREDIT- Section 23A(f) of the Federal Reserve Act (12 U.S.C. 371c(f)) (as so
redesignated by paragraph (1)(A) of this subsection) is amended by inserting
at the end the following new paragraph:
`(3) RULEMAKING REQUIRED CONCERNING DERIVATIVE TRANSACTIONS AND INTRADAY
CREDIT-
`(A) IN GENERAL- Not later than 18 months after the date of the
enactment of the Gramm-Leach-Bliley Act, the Board shall adopt final rules
under this section to address as covered transactions credit exposure
arising out of derivative transactions between member banks and their
affiliates and intraday extensions of credit by member banks to their
affiliates.
`(B) EFFECTIVE DATE- The effective date of any final rule adopted by
the Board pursuant to subparagraph (A) shall be delayed for such period as
the Board deems necessary or appropriate to permit banks to conform their
activities to the requirements of the final rule without undue
hardship.'.
(c) ANTITYING- Section 106(a) of the Bank Holding Company Act Amendments
of 1970 (12 U.S.C. 1971) is amended by adding at the end the following: `For
purposes of this section, a financial subsidiary of a national bank engaging
in activities pursuant to section 5136A(a) of the Revised Statutes of the
United States shall be deemed to be a subsidiary of a bank holding company,
and not a subsidiary of a bank.'.
(d) SAFETY AND SOUNDNESS FIREWALLS FOR STATE BANKS WITH FINANCIAL
SUBSIDIARIES-
(1) FEDERAL DEPOSIT INSURANCE ACT- The Federal Deposit Insurance Act (12
U.S.C. 1811 et seq.) is amended by inserting after section 45 (as added by
section 112(b) of this title) the following new section:
`SEC. 46. SAFETY AND SOUNDNESS FIREWALLS APPLICABLE TO FINANCIAL
SUBSIDIARIES OF BANKS.
`(a) IN GENERAL- An insured State bank may control or hold an interest in
a subsidiary that engages in activities as principal that would only be
permissible for a national bank to conduct through a financial subsidiary
if--
`(1) the State bank and each insured depository institution affiliate of
the State bank are well capitalized (after the capital deduction required by
paragraph (2));
`(2) the State bank complies with the capital deduction and financial
statement disclosure requirements in section 5136A(c) of the Revised
Statutes of the United States;
`(3) the State bank complies with the financial and operational
safeguards required by section 5136A(d) of the Revised Statutes of the
United States; and
`(4) the State bank complies with the amendments to sections 23A and 23B
of the Federal Reserve Act made by section 121(b) of the Gramm-Leach-Bliley
Act.
`(b) PRESERVATION OF EXISTING SUBSIDIARIES- Notwithstanding subsection
(a), an insured State bank may retain control of a subsidiary, or retain an
interest in a subsidiary, that the State bank lawfully controlled or acquired
before the date of the enactment of the Gramm-Leach-Bliley Act, and conduct
through such subsidiary any activities lawfully conducted in such subsidiary
as of such date.
`(c) DEFINITIONS- For purposes of this section, the following definitions
shall apply:
`(1) SUBSIDIARY- The term `subsidiary' means any company that is a
subsidiary (as defined in section 3(w)(4)) of 1 or more insured banks.
`(2) FINANCIAL SUBSIDIARY- The term `financial subsidiary' has the
meaning given the term in section 5136A(g) of the Revised Statutes of the
United States.
`(d) PRESERVATION OF AUTHORITY-
`(1) FEDERAL DEPOSIT INSURANCE ACT- No provision of this section shall
be construed as superseding the authority of the Federal Deposit Insurance
Corporation to review subsidiary activities under section 24.
`(2) FEDERAL RESERVE ACT- No provision of this section shall be
construed as affecting the applicability of the 20th undesignated paragraph
of section 9 of the Federal Reserve Act.'.
(2) FEDERAL RESERVE ACT- The 20th undesignated paragraph of section 9 of
the Federal Reserve Act (12 U.S.C. 335) is amended by adding at the end the
following: `This paragraph shall not apply to any interest held by a State
member bank in accordance with section 5136A of the Revised Statutes of the
United States and subject to the same conditions and limitations provided in
such section.'.
(e) CLERICAL AMENDMENT- The table of sections for chapter one of title
LXII of the Revised Statutes of the United States is amended--
(1) by redesignating the item relating to section 5136A as section
5136B; and
(2) by inserting after the item relating to section 5136 the following
new item:
`5136A. Financial subsidiaries of national banks.'.
SEC. 122. CONSIDERATION OF MERCHANT BANKING ACTIVITIES BY FINANCIAL
SUBSIDIARIES.
After the end of the 5-year period beginning on the date of the enactment
of the Gramm-Leach-Bliley Act, the Board of Governors of the Federal Reserve
System and the Secretary of the Treasury may, if appropriate, after
considering--
(1) the experience with the effects of financial modernization under
this Act and merchant banking activities of financial holding
companies;
(2) the potential effects on depository institutions and the financial
system of allowing merchant banking activities in financial subsidiaries;
and
(3) other relevant facts;
jointly adopt rules that permit financial subsidiaries to engage in
merchant banking activities described in section 4(k)(4)(H) of the Bank
Holding Company Act of 1956, under such terms and conditions as the Board of
Governors of the Federal Reserve System and the Secretary of the Treasury
jointly determine to be appropriate.
Subtitle D--Preservation of FTC Authority
SEC. 131. AMENDMENT TO THE BANK HOLDING COMPANY ACT OF 1956 TO MODIFY
NOTIFICATION AND POST-APPROVAL WAITING PERIOD FOR SECTION 3
TRANSACTIONS.
Section 11(b)(1) of the Bank Holding Company Act of 1956 (12 U.S.C.
1849(b)(1)) is amended by inserting `and, if the transaction also involves an
acquisition under section 4, the Board shall also notify the Federal Trade
Commission of such approval' before the period at the end of the first
sentence.
SEC. 132. INTERAGENCY DATA SHARING.
(a) IN GENERAL- To the extent not prohibited by other law, the Comptroller
of the Currency, the Director of the Office of Thrift Supervision, the Federal
Deposit Insurance Corporation, and the Board of Governors of the Federal
Reserve System shall make available to the Attorney General and the Federal
Trade Commission any data in the possession of any such banking agency that
the antitrust agency deems necessary for antitrust review of any transaction
requiring notice to any such antitrust agency or the approval of such agency
under section 3 or 4 of the Bank Holding Company Act of 1956, section 18(c) of
the Federal Deposit Insurance Act, the National Bank Consolidation and Merger
Act, section 10 of the Home Owners' Loan Act, or the antitrust laws.
(b) CONFIDENTIALITY REQUIREMENTS-
(1) IN GENERAL- Any information or material obtained by any agency
pursuant to subsection (a) shall be treated as confidential.
(2) PROCEDURES FOR DISCLOSURE- If any information or material obtained
by any agency pursuant to subsection (a) is proposed to be disclosed to a
third party, written notice of such disclosure shall first be provided to
the agency from which such information or material was obtained and an
opportunity shall be given to such agency to oppose or limit the proposed
disclosure.
(3) OTHER PRIVILEGES NOT WAIVED BY DISCLOSURE UNDER THIS SECTION- The
provision by any Federal agency of any information or material pursuant to
subsection (a) to another agency shall not constitute a waiver, or otherwise
affect, any privilege any agency or person may claim with respect to such
information under Federal or State law.
(4) EXCEPTION- No provision of this section shall be construed as
preventing or limiting access to any information by any duly authorized
committee of the Congress or the Comptroller General of the United
States.
(c) BANKING AGENCY INFORMATION SHARING- The provisions of subsection (b)
shall apply to--
(1) any information or material obtained by any Federal banking agency
(as defined in section 3(z) of the Federal Deposit Insurance Act) from any
other Federal banking agency; and
(2) any report of examination or other confidential supervisory
information obtained by any State agency or authority, or any other person,
from a Federal banking agency.
SEC. 133. CLARIFICATION OF STATUS OF SUBSIDIARIES AND
AFFILIATES.
(a) CLARIFICATION OF FEDERAL TRADE COMMISSION JURISDICTION- Any person
that directly or indirectly controls, is controlled directly or indirectly by,
or is directly or indirectly under common control with, any bank or savings
association (as such terms are defined in section 3 of the Federal Deposit
Insurance Act) and is not itself a bank or savings association shall not be
deemed to be a bank or savings association for purposes of any provisions
applied by the Federal Trade Commission under the Federal Trade Commission
Act.
(b) SAVINGS PROVISION- No provision of this section shall be construed as
restricting the authority of any Federal banking agency (as defined in section
3 of the Federal Deposit Insurance Act) under any Federal banking law,
including section 8 of the Federal Deposit Insurance Act.
(c) HART-SCOTT-RODINO AMENDMENTS-
(1) BANKS- Section 7A(c)(7) of the Clayton Act (15 U.S.C. 18a(c)(7)) is
amended by inserting before the semicolon at the end the following: `,
except that a portion of a transaction is not exempt under this paragraph if
such portion of the transaction (A) is subject to section 4(k) of the Bank
Holding Company Act of 1956; and (B) does not require agency approval under
section 3 of the Bank Holding Company Act of 1956'.
(2) BANK HOLDING COMPANIES- Section 7A(c)(8) of the Clayton Act (15
U.S.C. 18a(c)(8)) is amended by inserting before the semicolon at the end
the following: `, except that a portion of a transaction is not exempt under
this paragraph if such portion of the transaction (A) is subject to section
4(k) of the Bank Holding Company Act of 1956; and (B) does not require
agency approval under section 4 of the Bank Holding Company Act of
1956'.
Subtitle E--National Treatment
SEC. 141. FOREIGN BANKS THAT ARE FINANCIAL HOLDING
COMPANIES.
Section 8(c) of the International Banking Act of 1978 (12 U.S.C. 3106(c))
is amended by adding at the end the following new paragraph:
`(3) TERMINATION OF GRANDFATHERED RIGHTS-
`(A) IN GENERAL- If any foreign bank or foreign company files a
declaration under section 4(l)(1)(C) of the Bank Holding Company Act of
1956, any authority conferred by this subsection on any foreign bank or
company to engage in any activity that the Board has determined to be
permissible for financial holding companies under section 4(k) of such Act
shall terminate immediately.
`(B) RESTRICTIONS AND REQUIREMENTS AUTHORIZED- If a foreign bank or
company that engages, directly or through an affiliate pursuant to
paragraph (1), in an activity that the Board has determined to be
permissible for financial holding companies under section 4(k) of the Bank
Holding Company Act of 1956 has not filed a declaration with the Board of
its status as a financial holding company under such section by the end of
the 2-year period beginning on the date of the enactment of the
Gramm-Leach-Bliley Act, the Board, giving due regard to the principle of
national treatment and equality of competitive opportunity, may impose
such restrictions and requirements on the conduct of such activities by
such foreign bank or company as are comparable to those imposed on a
financial holding company organized under the laws of the United States,
including a requirement to conduct such activities in compliance with any
prudential safeguards established under section 114 of the
Gramm-Leach-Bliley Act.'.
SEC. 142. REPRESENTATIVE OFFICES.
(a) DEFINITION- Section 1(b)(15) of the International Banking Act of 1978
(12 U.S.C. 3101(15)) is amended by striking `State agency, or subsidiary of a
foreign bank' and inserting `or State agency'.
(b) EXAMINATIONS- Section 10(c) of the International Banking Act of 1978
(12 U.S.C. 3107(c)) is amended by adding at the end the following new
sentence: `The Board may also make examinations of any affiliate of a foreign
bank conducting business in any State if the Board deems it necessary to
determine and enforce compliance with this Act, the Bank Holding Company Act
of 1956, or other applicable Federal banking law.'.
Subtitle F--Direct Activities of Banks
SEC. 151. AUTHORITY OF NATIONAL BANKS TO UNDERWRITE CERTAIN MUNICIPAL
BONDS.
The paragraph designated the Seventh of section 5136 of the Revised
Statutes of the United States (12 U.S.C. 24(7)) is amended by adding at the
end the following new sentence: `In addition to the provisions in this
paragraph for dealing in, underwriting, or purchasing securities, the
limitations and restrictions contained in this paragraph as to dealing in,
underwriting, and purchasing investment securities for the national bank's own
account shall not apply to obligations (including limited obligation bonds,
revenue bonds, and obligations that satisfy the requirements of section
142(b)(1) of the Internal Revenue Code of 1986) issued by or on behalf of any
State or political subdivision of a State, including any municipal corporate
instrumentality of 1 or more States, or any public agency or authority of any
State or political subdivision of a State, if the national bank is well
capitalized (as defined in section 38 of the Federal Deposit Insurance
Act).'.
Subtitle G--Effective Date
SEC. 161. EFFECTIVE DATE.
This title (other than section 104) and the amendments made by this title
shall take effect 120 days after the date of the enactment of this Act.
TITLE II--FUNCTIONAL REGULATION
Subtitle A--Brokers and Dealers
SEC. 201. DEFINITION OF BROKER.
Section 3(a)(4) of the Securities Exchange Act of 1934 (15 U.S.C.
78c(a)(4)) is amended to read as follows:
`(A) IN GENERAL- The term `broker' means any person engaged in the
business of effecting transactions in securities for the account of
others.
`(B) EXCEPTION FOR CERTAIN BANK ACTIVITIES- A bank shall not be
considered to be a broker because the bank engages in any one or more of
the following activities under the conditions described:
`(i) THIRD PARTY BROKERAGE ARRANGEMENTS- The bank enters into a
contractual or other written arrangement with a broker or dealer
registered under this title under which the broker or dealer offers
brokerage services on or off the premises of the bank if--
`(I) such broker or dealer is clearly identified as the person
performing the brokerage services;
`(II) the broker or dealer performs brokerage services in an area
that is clearly marked and, to the extent practicable, physically
separate from the routine deposit-taking activities of the
bank;
`(III) any materials used by the bank to advertise or promote
generally the availability of brokerage services under the arrangement
clearly indicate that the brokerage services are being provided by the
broker or dealer and not by the bank;
`(IV) any materials used by the bank to advertise or promote
generally the availability of brokerage services under the arrangement
are in compliance with the Federal securities laws before
distribution;
`(V) bank employees (other than associated persons of a broker or
dealer who are qualified pursuant to the rules of a self-regulatory
organization) perform only clerical or ministerial functions in
connection with brokerage transactions including scheduling
appointments with the associated persons of a broker or dealer, except
that bank employees may forward customer funds or securities and may
describe in general terms the types of investment vehicles available
from the bank and the broker or dealer under the
arrangement;
`(VI) bank employees do not receive incentive compensation for any
brokerage transaction unless such employees are associated persons of
a broker or dealer and are qualified pursuant to the rules of a
self-regulatory organization, except that the bank employees may
receive compensation for the referral of any customer if the
compensation is a nominal one-time cash fee of a fixed dollar amount
and the payment of the fee is not contingent on whether the referral
results in a transaction;
`(VII) such services are provided by the broker or dealer on a
basis in which all customers that receive any services are fully
disclosed to the broker or dealer;
`(VIII) the bank does not carry a securities account of the
customer except as permitted under clause (ii) or (viii) of this
subparagraph; and
`(IX) the bank, broker, or dealer informs each customer that the
brokerage services are provided by the broker or dealer and not by the
bank and that the securities are not deposits or other obligations of
the bank, are not guaranteed by the bank, and are not insured by the
Federal Deposit Insurance Corporation.
`(ii) TRUST ACTIVITIES- The bank effects transactions in a trustee
capacity, or effects transactions in a fiduciary capacity in its trust
department or other department that is regularly examined by bank
examiners for compliance with fiduciary principles and standards,
and--
`(I) is chiefly compensated for such transactions, consistent with
fiduciary principles and standards, on the basis of an administration
or annual fee (payable on a monthly, quarterly, or other basis), a
percentage of assets under management, or a flat or capped per order
processing fee equal to not more than the cost incurred by the bank in
connection with executing securities transactions for trustee and
fiduciary customers, or any combination of such fees;
and
`(II) does not publicly solicit brokerage business, other than by
advertising that it effects transactions in securities in conjunction
with advertising its other trust activities.
`(iii) PERMISSIBLE SECURITIES TRANSACTIONS- The bank effects
transactions in--
`(I) commercial paper, bankers acceptances, or commercial
bills;
`(II) exempted securities;
`(III) qualified Canadian government obligations as defined in
section 5136 of the Revised Statutes, in conformity with section 15C
of this title and the rules and regulations thereunder, or obligations
of the North American Development Bank; or
`(IV) any standardized, credit enhanced debt security issued by a
foreign government pursuant to the March 1989 plan of then Secretary
of the Treasury Brady, used by such foreign government to retire
outstanding commercial bank loans.
`(iv) CERTAIN STOCK PURCHASE PLANS-
`(I) EMPLOYEE BENEFIT PLANS- The bank effects transactions, as
part of its transfer agency activities, in the securities of an issuer
as part of any pension, retirement, profit-sharing, bonus, thrift,
savings, incentive, or other similar benefit plan for the employees of
that issuer or its affiliates (as defined in section 2 of the Bank
Holding Company Act of 1956), if the bank does not solicit
transactions or provide investment advice with respect to the purchase
or sale of securities in connection with the plan.
`(II) DIVIDEND REINVESTMENT PLANS- The bank effects transactions,
as part of its transfer agency activities, in the securities of an
issuer as part of that issuer's dividend reinvestment plan,
if--
`(aa) the bank does not solicit transactions or provide investment
advice with respect to the purchase or sale of securities in connection with the
plan; and
`(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.
`(III) ISSUER PLANS- The bank effects transactions, as part of its
transfer agency activities, in the securities of an issuer as part of
a plan or program for the purchase or sale of that issuer's shares,
if--
`(aa) the bank does not solicit transactions or provide investment
advice with respect to the purchase or sale of securities in connection with the
plan or program; and
`(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.
`(IV) PERMISSIBLE DELIVERY OF MATERIALS- The exception to being
considered a broker for a bank engaged in activities described in
subclauses (I), (II), and (III) will not be affected by delivery of
written or electronic plan materials by a bank to employees of the
issuer, shareholders of the issuer, or members of affinity groups of
the issuer, so long as such materials are--
`(aa) comparable in scope or nature to that permitted by the
Commission as of the date of the enactment of the Gramm-Leach-Bliley Act;
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 deposit funds into any
no-load, open-end management investment company registered under the
Investment Company Act of 1940 that holds itself out as a money market
fund.
`(vi) AFFILIATE TRANSACTIONS- The bank effects transactions for the
account of any affiliate of the bank (as defined in section 2 of the
Bank Holding Company Act of 1956) other than--
`(I) a registered broker or dealer; or
`(II) an affiliate that is engaged in merchant banking, as
described in section 4(k)(4)(H) of the Bank Holding Company Act of
1956.
`(vii) PRIVATE SECURITIES OFFERINGS- The bank--
`(I) effects sales as part of a primary offering of securities not
involving a public offering, pursuant to section 3(b), 4(2), or 4(6)
of the Securities Act of 1933 or the rules and regulations issued
thereunder;
`(II) at any time after the date that is 1 year after the date of
the enactment of the Gramm-Leach-Bliley Act, is not affiliated with a
broker or dealer that has been registered for more than 1 year in
accordance with this Act, and engages in dealing, market making, or
underwriting activities, other than with respect to exempted
securities; and
`(III) if the bank is not affiliated with a broker or dealer, does
not effect any primary offering described in subclause (I) the
aggregate amount of which exceeds 25 percent of the capital of the
bank, except that the limitation of this subclause shall not apply
with respect to any sale of government securities or municipal
securities.
`(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 exercise of warrants and other rights on behalf of
customers;
`(bb) facilitates the transfer of funds or securities, as a custodian
or a clearing agency, in connection with the clearance and settlement of its
customers' transactions in securities;
`(cc) effects securities lending or borrowing transactions with or on
behalf of customers as part of services provided to customers pursuant to
division (aa) or (bb) or invests cash collateral pledged in connection with such
transactions;
`(dd) holds securities pledged by a customer to another person or
securities subject to purchase or resale agreements involving a customer, or
facilitates the pledging or transfer of such securities by book entry or as
otherwise provided under applicable law, if the bank maintains records
separately identifying the securities and the customer; or
`(ee) serves as a custodian or provider of other related
administrative services to any individual retirement account, pension,
retirement, profit sharing, bonus, thrift savings, incentive, or other similar
benefit plan.
`(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
activities, 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 thereunder) for any broker
or dealer, unless such carrying broker activities are engaged in with
respect to government securities (as defined in paragraph (42) of this
subsection).
`(ix) IDENTIFIED BANKING PRODUCTS- The bank effects transactions in
identified banking products as defined in section 206 of the
Gramm-Leach-Bliley Act.
`(x) MUNICIPAL SECURITIES- The bank effects transactions in
municipal securities.
`(xi) DE MINIMIS EXCEPTION- The bank effects, other than in
transactions referred 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) EXECUTION BY BROKER OR DEALER- 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 provisions result in the trade in the United States of any
security that is a publicly traded security in the United States,
unless--
`(i) the bank directs such trade to a registered broker or dealer
for execution;
`(ii) the trade is a cross trade or other substantially similar
trade of a security that--
`(I) is made by the bank or between the bank and an affiliated
fiduciary; 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, regulations, or orders as the Commission may prescribe or
issue.
`(D) FIDUCIARY CAPACITY- For purposes of subparagraph (B)(ii), the
term `fiduciary capacity' means--
`(i) in the capacity as trustee, executor, administrator, registrar
of stocks and bonds, transfer agent, guardian, assignee, receiver, or
custodian under a uniform gift to minor act, or as an investment adviser
if the bank receives a fee for its investment advice;
`(ii) in any capacity in which the bank possesses investment
discretion on behalf of another; or
`(iii) in any other similar capacity.
`(E) EXCEPTION FOR ENTITIES SUBJECT TO SECTION 15(e)- The term
`broker' does not include a bank that--
`(i) was, on the day before the date of enactment of the
Gramm-Leach-Bliley Act, subject to section 15(e); and
`(ii) is subject to such restrictions and requirements as the
Commission considers appropriate.'.
SEC. 202. DEFINITION OF DEALER.
Section 3(a)(5) of the Securities Exchange Act of 1934 (15 U.S.C.
78c(a)(5)) is amended to read as follows:
`(A) IN GENERAL- The term `dealer' means any person engaged in the
business of buying and selling securities for such person's own account
through a broker or otherwise.
`(B) EXCEPTION FOR PERSON NOT ENGAGED IN THE BUSINESS OF DEALING- The
term `dealer' does not include a person that buys or sells securities for
such person's own account, either individually or in a fiduciary capacity,
but not as a part of a regular business.
`(C) EXCEPTION FOR CERTAIN BANK ACTIVITIES- A bank shall not be
considered to be a dealer because the bank engages in any of the following
activities under the conditions described:
`(i) PERMISSIBLE SECURITIES TRANSACTIONS- The bank buys or
sells--
`(I) commercial paper, bankers acceptances, or commercial
bills;
`(II) exempted securities;
`(III) qualified Canadian government obligations as defined in
section 5136 of the Revised Statutes of the United States, in
conformity with section 15C of this title and the rules and
regulations thereunder, or obligations of the North American
Development Bank; or
`(IV) any standardized, credit enhanced debt security issued by a
foreign government pursuant to the March 1989 plan of then Secretary
of the Treasury Brady, used by such foreign government to retire
outstanding commercial bank loans.
`(ii) INVESTMENT, TRUSTEE, AND FIDUCIARY TRANSACTIONS- The bank buys
or sells securities for investment purposes--
`(II) for accounts for which the bank acts as a trustee or
fiduciary.
`(iii) ASSET-BACKED TRANSACTIONS- The bank engages in the issuance
or sale to qualified investors, through a grantor trust or other
separate entity, of securities backed by or representing an interest in
notes, drafts, acceptances, 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--
`(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 consists of mortgage obligations or
consumer-related receivables.
`(iv) IDENTIFIED BANKING PRODUCTS- The bank buys or sells identified
banking products, as defined in section 206 of the Gramm-Leach-Bliley
Act.'.
SEC. 203. REGISTRATION FOR SALES OF PRIVATE SECURITIES
OFFERINGS.
Section 15A of the Securities Exchange Act of 1934 (15 U.S.C. 78o-3) is
amended by inserting after subsection (i) the following new subsection:
`(j) REGISTRATION FOR SALES OF PRIVATE SECURITIES OFFERINGS- A registered
securities association shall create a limited qualification category for any
associated person of a member who effects sales as part of a primary offering
of securities not involving a public offering, pursuant to section 3(b), 4(2),
or 4(6) of the Securities Act of 1933 and the rules and regulations
thereunder, and shall deem qualified in such limited qualification category,
without testing, any bank employee who, in the six month period preceding the
date of the enactment of the Gramm-Leach-Bliley 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 subsection:
`(t) RECORDKEEPING REQUIREMENTS-
`(1) REQUIREMENTS- Each appropriate Federal banking agency, after
consultation with and consideration of the views of the Commission, shall
establish recordkeeping requirements for banks relying on exceptions
contained in paragraphs (4) and (5) of section 3(a) of the Securities
Exchange Act of 1934. Such recordkeeping requirements shall be sufficient to
demonstrate compliance with the terms of such exceptions and be designed to
facilitate compliance with such exceptions.
`(2) AVAILABILITY TO COMMISSION; CONFIDENTIALITY- Each appropriate
Federal banking agency shall make any information required under paragraph
(1) available to the Commission upon request. Notwithstanding any other
provision of law, the Commission shall not be compelled to disclose any such
information. Nothing in this paragraph shall authorize the Commission to
withhold information from Congress, or prevent the Commission from complying
with a request for information 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 purposes of section 552 of title 5, United States Code, this
paragraph shall be considered a statute described in subsection (b)(3)(B) of
such section 552.
`(3) DEFINITION- As used in this subsection the term `Commission' means
the Securities and Exchange Commission.'.
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 following new subsection:
`(i) RULEMAKING TO EXTEND REQUIREMENTS TO NEW HYBRID PRODUCTS-
`(1) CONSULTATION- Prior to commencing a rulemaking under this
subsection, the Commission shall consult with and seek the concurrence of
the Board concerning the imposition of broker or dealer registration
requirements with respect to any new hybrid product. In developing and
promulgating rules under this subsection, the Commission shall consider the
views of the Board, including views with respect to the nature of the new
hybrid product; the history, purpose, 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.
`(2) 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 requirement by rule or regulation
issued in accordance with this section.
`(3) CRITERIA FOR RULEMAKING- The Commission shall not impose a
requirement under paragraph (2) of this subsection with respect to any new
hybrid product unless the Commission determines that--
`(A) the new hybrid product is a security; and
`(B) imposing such requirement is necessary and appropriate in the
public interest and for the protection of investors.
`(4) CONSIDERATIONS- In making a determination under paragraph (3), the
Commission shall consider--
`(A) the nature of the new hybrid product; and
`(B) the history, purpose, extent, and appropriateness of the
regulation of the new hybrid product under the Federal securities laws and
under the Federal banking laws.
`(5) OBJECTION TO COMMISSION REGULATION-
`(A) FILING OF PETITION FOR REVIEW- The Board may obtain review of any
final regulation described in paragraph (2) in the United States Court of
Appeals for the District of Columbia Circuit by filing in such court, not
later than 60 days after the date of publication of the final regulation,
a written petition requesting that the regulation be set aside. Any
proceeding to challenge any such rule shall be expedited by the Court of
Appeals.
`(B) TRANSMITTAL OF PETITION AND RECORD- A copy of a petition
described in subparagraph (A) shall be transmitted as soon as possible by
the Clerk of the Court to an officer or employee of the Commission
designated for that purpose. Upon receipt of the petition, the Commission
shall file with the court the regulation under review and any documents
referred to therein, and any other relevant materials prescribed by the
court.
`(C) EXCLUSIVE JURISDICTION- On the date of the filing of the petition
under subparagraph (A), the court has jurisdiction, which becomes
exclusive on the filing of the materials set forth in subparagraph (B), to
affirm and enforce or to set aside the regulation at issue.
`(D) STANDARD OF REVIEW- The court shall determine to affirm and
enforce or set aside a regulation of the Commission under this subsection,
based on the determination of the court as to whether--
`(i) the subject product is a new hybrid product, as defined in this
subsection;
`(ii) the subject product is a security; and
`(iii) imposing a requirement to register as a broker or dealer for
banks engaging in transactions in such product is appropriate in light
of the history, purpose, and extent of regulation under the Federal
securities laws and under the Federal banking laws, giving deference
neither to the views of the Commission nor the Board.
`(E) JUDICIAL STAY- The filing of a petition by the Board pursuant to
subparagraph (A) shall operate as a judicial stay, until the date on which
the determination of the court is final (including any appeal of such
determination).
`(F) OTHER AUTHORITY TO CHALLENGE- Any aggrieved party may seek
judicial review of the Commission's rulemaking under this subsection
pursuant to section 25 of this title.
`(6) DEFINITIONS- For purposes of this subsection:
`(A) NEW HYBRID PRODUCT- The term `new hybrid product' means a product
that--
`(i) was not subjected to regulation by the Commission as a security
prior to the date of the enactment of the Gramm-Leach-Bliley
Act;
`(ii) is not an identified banking product as such term is defined
in section 206 of such Act; and
`(iii) is not an equity swap within the meaning of section 206(a)(6)
of such Act.
`(B) BOARD- The term `Board' means the Board of Governors of the
Federal Reserve System.'.
SEC. 206. DEFINITION OF IDENTIFIED BANKING PRODUCT.
(a) DEFINITION OF IDENTIFIED BANKING PRODUCT- 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 `identified banking product' means--
(1) a deposit account, savings account, certificate of deposit, or other
deposit instrument issued by a bank;
(2) a banker's acceptance;
(3) a letter of credit issued or loan made by a bank;
(4) a debit account at a bank arising from a credit card or similar
arrangement;
(5) a participation in a loan which the bank or an affiliate of the bank
(other than a broker or dealer) funds, participates in, or owns that is
sold--
(A) to qualified investors; or
(B) to other persons that--
(i) have the opportunity to review and assess any material
information, including information regarding the borrower's
creditworthiness; 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) any swap agreement, including credit and equity swaps, except that
an equity swap that is sold directly to any person other than a qualified
investor (as defined in section 3(a)(54) of the Securities Act of 1934)
shall not be treated as an identified banking product.
(b) DEFINITION OF SWAP AGREEMENT- For purposes of subsection (a)(6), the
term `swap agreement' 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, interest or
other rates, indices, or other assets, but does not include any other
identified banking product, as defined in paragraphs (1) through (5) of
subsection (a).
(c) CLASSIFICATION LIMITED- Classification of a particular product as an
identified banking product pursuant 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 account, agreement, contract, or
transaction for any purpose under the Commodity Exchange Act.
(d) INCORPORATED DEFINITIONS- For purposes of this section, the terms
`bank' and `qualified investor' have the same meanings as given in section
3(a) of the Securities Exchange Act of 1934, as amended by this Act.
SEC. 207. ADDITIONAL DEFINITIONS.
Section 3(a) of the Securities Exchange Act of 1934 is amended by adding
at the end the following new paragraph:
`(54) QUALIFIED INVESTOR-
`(A) DEFINITION- Except as provided in subparagraph (B), for purposes
of this title, the term `qualified investor' means--
`(i) any investment company registered with the Commission under
section 8 of the Investment Company Act of 1940;
`(ii) any issuer eligible for an exclusion from the definition of
investment company pursuant to section 3(c)(7) of the Investment Company
Act of 1940;
`(iii) any bank (as defined in paragraph (6) of this subsection),
savings association (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 1933), or business development company
(as defined in section 2(a)(48) of the Investment Company Act of
1940);
`(iv) any small business investment company licensed by the United
States Small Business Administration under section 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
account, 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 securities are directed by a
person described in clauses (i) through (v) of this
subparagraph;
`(vii) any market intermediary exempt under section 3(c)(2) of the
Investment Company Act of 1940;
`(viii) any associated person of a broker or dealer other than a
natural person;
`(ix) any foreign bank (as defined in section 1(b)(7) of the
International Banking Act of 1978);
`(x) the government of any foreign country;
`(xi) any corporation, company, or partnership that owns and invests
on a discretionary basis, not less than $25,000,000 in
investments;
`(xii) any natural person who owns and invests on a discretionary
basis, not less than $25,000,000 in investments;
`(xiii) any government or political subdivision, agency, or
instrumentality of a government who owns and invests on a discretionary
basis not less than $50,000,000 in investments; or
`(xiv) any multinational or supranational entity or any agency or
instrumentality thereof.
`(B) ALTERED THRESHOLDS FOR ASSET-BACKED SECURITIES AND LOAN
PARTICIPATIONS- For purposes of section 3(a)(5)(C)(iii) of this title and
section 206(a)(5) of the Gramm-Leach-Bliley Act, the term `qualified
investor' has the meaning given such term by subparagraph (A) of this
paragraph except that clauses (xi) and (xii) shall be applied by
substituting `$10,000,000' for `$25,000,000'.
`(C) ADDITIONAL AUTHORITY- The Commission may, by rule or order,
define a `qualified investor' as any other person, taking into
consideration such factors as the financial sophistication of the person,
net worth, and knowledge and experience in financial matters.'.
SEC. 208. GOVERNMENT SECURITIES DEFINED.
Section 3(a)(42) of the Securities Exchange Act of 1934 (15 U.S.C.
78c(a)(42)) is amended--
(1) by striking `or' at the end of subparagraph (C);
(2) by striking the period at the end of subparagraph (D) and inserting
`; or'; and
(3) by adding at the end the following new subparagraph:
`(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 18-month period
beginning on the date of the enactment of this Act.
SEC. 210. RULE OF CONSTRUCTION.
Nothing in this Act shall supersede, affect, or otherwise 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 inserting the
following:
`(f) CUSTODY OF SECURITIES-
(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, after consultation with and taking into
consideration the views of the Federal banking agencies (as defined in
section 3 of the Federal Deposit Insurance Act), adopt rules and
regulations, 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, promoter, organizer, or
sponsor of, or principal underwriter for, a registered management company
may serve as custodian 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 following new
subsection:
`(b) The Commission may, after consultation with and taking into
consideration the views of the Federal banking agencies (as defined in section
3 of the Federal Deposit Insurance Act), adopt rules and regulations, 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 depositor of,
a registered unit investment trust, may serve as trustee or custodian under
subsection (a)(1).'.
SEC. 212. LENDING TO AN AFFILIATED INVESTMENT COMPANY.
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 paragraph (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, after consultation with
and taking into consideration the views of the Federal banking agencies (as
defined in section 3 of the Federal Deposit Insurance Act), prescribe or
issue consistent with the protection of investors.'.
SEC. 213. INDEPENDENT DIRECTORS.
(a) IN GENERAL- Section 2(a)(19)(A) of the Investment Company Act of 1940
(15 U.S.C. 80a-2(a)(19)(A)) is amended--
(1) by striking clause (v) and inserting the following new clause:
`(v) any person or any affiliated person of a person (other than a
registered investment company) that, at any time during the 6-month
period preceding the date of the determination of whether that person or
affiliated person is an interested person, has executed any portfolio
transactions for, engaged in any principal transactions with, or
distributed shares for--
`(I) the investment company;
`(II) any other investment company having the same investment
adviser as such investment company or holding itself out to investors
as a related company for purposes of investment or investor services;
or
`(III) any account over which the investment company's investment
adviser has brokerage placement discretion,';
(2) by redesignating clause (vi) as clause (vii); and
(3) by inserting after clause (v) the following new clause:
`(vi) any person or any affiliated person of a person (other than a
registered investment company) that, at any time during the 6-month
period preceding the date of the determination of whether that person or
affiliated person is an interested person, has loaned money or other
property to--
`(I) the investment company;
`(II) any other investment company having the same investment
adviser as such investment company or holding itself out to investors
as a related company for purposes of investment or investor services;
or
`(III) any account for which the investment company's investment
adviser 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 following new clause:
`(v) any person or any affiliated person of a person (other than a
registered investment company) that, at any time during the 6-month
period preceding the date of the determination of whether that person or
affiliated person is an interested person, has executed any portfolio
transactions for, engaged in any principal transactions with, or
distributed shares for--
`(I) any investment company for which the investment adviser or
principal underwriter serves as such;
`(II) any investment company holding itself out to investors, for
purposes of investment or investor services, as a company related to
any investment company for which the investment adviser or principal
underwriter serves as such; or
`(III) any account over which the investment adviser has brokerage
placement discretion,';
(2) by redesignating clause (vi) as clause (vii); and
(3) by inserting after clause (v) the following new clause:
`(vi) any person or any affiliated person of a person (other than a
registered investment company) that, at any time during the 6-month
period preceding the date of the determination of whether that person or
affiliated person is an interested person, has loaned money or other
property to--
`(I) any investment company for which the investment adviser or
principal underwriter serves as such;
`(II) any investment company holding itself out to investors, for
purposes of investment or investor services, as a company related to
any investment company for which the investment adviser or principal
underwriter serves as such; or
`(III) any account for which the investment adviser has borrowing
authority,'.
(c) AFFILIATION OF DIRECTORS- Section 10(c) of the Investment Company Act
of 1940 (15 U.S.C. 80a-10(c)) is amended by striking `bank, except' and
inserting `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'.
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 follows:
`(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
represent or imply in any manner whatsoever that such security or
company--
`(A) has been guaranteed, sponsored, recommended, or approved by the
United States, or any agency, instrumentality or officer of the United
States;
`(B) has been insured by the Federal Deposit Insurance Corporation;
or
`(C) is guaranteed by or is otherwise an obligation of any bank or
insured depository institution.
`(2) DISCLOSURES- Any person issuing or selling the securities of a
registered investment company 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 Insurance Corporation or any other government agency.
The Commission may, after consultation with and taking into consideration
the views of the Federal banking agencies (as defined in section 3 of the
Federal Deposit Insurance Act), adopt rules and regulations, and issue
orders, consistent with the protection of investors, prescribing the manner
in which the disclosure under this paragraph shall be provided.
`(3) DEFINITIONS- The terms `insured depository institution' and
`appropriate Federal banking agency' have the same meanings as given in
section 3 of the Federal Deposit Insurance Act.'.
SEC. 215. DEFINITION OF BROKER UNDER THE INVESTMENT 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 follows:
`(6) The term `broker' has the same meaning as given in section 3 of the
Securities Exchange Act of 1934, except that such term does not include any
person solely by reason of the fact that such person is an underwriter for
one or more investment companies.'.
SEC. 216. DEFINITION OF DEALER UNDER THE INVESTMENT 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 follows:
`(11) The term `dealer' has the same meaning as given in the Securities
Exchange Act of 1934, but does not include an insurance company or
investment company.'.
SEC. 217. REMOVAL OF THE EXCLUSION FROM THE DEFINITION 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
company' and inserting `investment company, except that the term `investment
adviser' includes any bank or bank holding company to the extent that such
bank or bank holding company serves or acts as an investment adviser to a
registered investment company, but if, in the case of a bank, such services or
actions are performed through a separately 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 department 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 separately maintained in or extractable from such unit's
own facilities or the facilities of the bank, and such records are so
maintained or otherwise accessible as to permit independent examination
and enforcement by the Commission of this Act or the Investment Company
Act of 1940 and rules and regulations promulgated under this Act or the
Investment Company Act of 1940.'.
SEC. 218. DEFINITION OF BROKER UNDER THE INVESTMENT 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 follows:
`(3) The term `broker' has the same meaning as given in section 3 of the
Securities Exchange Act of 1934.'.
SEC. 219. DEFINITION OF DEALER UNDER THE INVESTMENT 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 follows:
`(7) The term `dealer' has the same meaning as 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:
`SEC. 210A. CONSULTATION.
`(a) EXAMINATION RESULTS AND OTHER INFORMATION-
`(1) The appropriate Federal banking agency shall provide the Commission
upon request the results of any examination, reports, records, or other
information to which such agency may have access--
`(A) with respect to the investment advisory activities of
any--
`(i) bank holding company;
`(iii) separately identifiable department or division of a
bank,
that is registered under section 203 of this title; and
`(B) in the case of a bank holding company or bank that has a
subsidiary or a separately identifiable department or division registered
under that section, with respect to the investment advisory activities of
such bank or bank holding company.
`(2) The Commission shall provide to the appropriate Federal banking
agency upon request the results of any examination, reports, records, or
other information with respect to the investment advisory activities of any
bank holding company, bank, or separately identifiable department or
division of a bank, which is registered under section 203 of this
title.
`(3) Notwithstanding any other provision of law, the Commission and the
appropriate Federal banking agencies shall not be compelled to disclose any
information provided under paragraph (1) or (2). Nothing in this paragraph
shall authorize the Commission or such agencies to withhold information from
Congress, or prevent the Commission or such agencies from complying with a
request for information 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, the Commission, or
such agencies. For purposes of section 552 of title 5, United States Code,
this paragraph shall be considered a statute described in subsection
(b)(3)(B) of such section 552.
`(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 (or affiliates or subsidiaries thereof), bank, or
subsidiary, department, or division or a bank under any other provision of
law.
`(c) DEFINITION- For purposes of this section, the term `appropriate
Federal banking agency' shall have the same meaning as 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 reinvestment of assets contributed thereto by
such bank in its capacity as trustee, executor, administrator, or guardian'
and inserting `or any interest or participation in any common trust fund or
similar fund that is excluded from the definition of the term `investment
company' under section 3(c)(3) of the Investment Company Act of 1940'.
(b) SECURITIES EXCHANGE ACT OF 1934- Section 3(a)(12)(A)(iii) of the
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(12)(A)(iii)) is amended to
read as follows:
`(iii) any interest or participation in any common 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;'.
(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
maintained for a fiduciary purpose;
`(B) except in connection with the ordinary advertising of the bank's
fiduciary services, interests in such fund are not--
`(ii) offered for sale to the general public; and
`(C) fees and expenses charged by such fund are not in contravention
of fiduciary principles established under applicable Federal or State
law'.
SEC. 222. 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 inserting `securities dealer, bank, transfer agent,'.
SEC. 223. CONFORMING CHANGE IN DEFINITION.
Section 2(a)(5) of the Investment Company Act of 1940 (15 U.S.C.
80a-2(a)(5)) is amended by striking `(A) a banking institution organized under
the laws of the United States' and inserting `(A) a depository institution (as
defined in section 3 of the Federal Deposit Insurance Act) or a branch or
agency of a foreign bank (as such terms are defined in section 1(b) of the
International Banking Act of 1978)'.
SEC. 224. CONFORMING AMENDMENT.
Section 202 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2) is
amended by adding at the end the following new subsection:
`(c) CONSIDERATION OF PROMOTION OF EFFICIENCY, COMPETITION, AND CAPITAL
FORMATION- Whenever pursuant to this title the Commission is engaged in
rulemaking and is required to consider or determine whether an action is
necessary or appropriate in the public interest, the Commission shall also
consider, in addition to the protection of investors, whether the action will
promote efficiency, competition, and capital formation.'.
SEC. 225. EFFECTIVE DATE.
This subtitle shall take effect 18 months after the date of the enactment
of this Act.
Subtitle C--Securities and Exchange Commission Supervision of Investment
Bank Holding Companies
SEC. 231. SUPERVISION OF INVESTMENT BANK HOLDING COMPANIES BY THE
SECURITIES AND EXCHANGE COMMISSION.
(a) AMENDMENT- Section 17 of the Securities Exchange 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 following new
subsections:
`(i) INVESTMENT BANK HOLDING COMPANIES-
`(1) ELECTIVE SUPERVISION OF AN INVESTMENT 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 an insured bank (other than an institution
described in subparagraph (D), (F), or (G) of section 2(c)(2), or held
under section 4(f), of the Bank Holding Company Act of 1956), or a
savings 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, directly 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 applicable to supervised investment bank
holding companies.
`(B) NOTIFICATION OF STATUS AS A SUPERVISED INVESTMENT BANK HOLDING
COMPANY- 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 become supervised by the Commission in
such form and containing such information and documents concerning such
investment bank holding company as the Commission, by rule, may prescribe
as necessary or appropriate in furtherance 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 Commission 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 HOLDING COMPANY-
`(A) VOLUNTARY WITHDRAWAL- A supervised investment bank holding
company that is supervised pursuant to paragraph (1) may, upon such terms
and conditions as the Commission 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
effective until 1 year after receipt by the Commission, 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 company 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 company 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 section.
`(3) SUPERVISION OF INVESTMENT BANK HOLDING COMPANIES-
`(A) RECORDKEEPING AND REPORTING-
`(i) IN GENERAL- Every supervised investment bank holding company
and each affiliate thereof shall make and keep for prescribed periods
such records, furnish copies thereof, and make such reports, as the
Commission may require by rule, in order to keep the Commission informed
as to--
`(I) the company's or affiliate's activities, financial condition,
policies, systems for monitoring and controlling financial and
operational risks, and transactions and relationships between any
broker or dealer affiliate of the supervised investment bank holding
company; and
`(II) the extent to which the company or affiliate has complied
with the provisions of this Act and regulations 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 specifications (including
certification by an independent public accountant), as the Commission
may require and shall be provided promptly at any time upon request by
the Commission. Such records and reports may include--
`(I) a balance sheet and income statement;
`(II) an assessment of the consolidated capital of the supervised
investment bank holding company;
`(III) an independent auditor's report attesting to the supervised
investment bank holding company's compliance with its internal risk
management and internal control objectives; and
`(IV) reports concerning the extent to which the company or
affiliate has complied with the provisions of this title and any
regulations prescribed and orders issued under this
title.
`(B) USE OF EXISTING REPORTS-
`(i) IN GENERAL- The Commission shall, to the fullest extent
possible, accept reports in fulfillment of the requirements under this
paragraph that the supervised investment bank holding company or its
affiliates have been required to provide to another appropriate
regulatory agency or self-regulatory organization.
`(ii) AVAILABILITY- A supervised investment bank holding company or
an affiliate of such company shall provide to the Commission, at the
request of the Commission, any report referred to in clause
(i).
`(C) EXAMINATION AUTHORITY-
`(i) FOCUS OF EXAMINATION AUTHORITY- The Commission may make
examinations of any supervised investment bank holding company and any
affiliate of such company in order to--
`(I) inform the Commission regarding--
`(aa) the nature of the operations and financial condition of the
supervised investment bank holding company and its affiliates;
`(bb) the financial and operational risks within the supervised
investment bank holding company that may affect any broker or dealer controlled
by such supervised investment bank holding company; and
`(cc) the systems of the supervised investment bank holding company
and its affiliates for monitoring and controlling those risks; and
`(II) monitor compliance with the provisions of this subsection,
provisions governing transactions and relationships 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 subchapter II of chapter 53, title 31, United States
Code (commonly referred to as the `Bank Secrecy Act') and regulations
thereunder.
`(ii) RESTRICTED FOCUS OF EXAMINATIONS- The Commission shall limit
the focus and scope of any examination of a supervised investment bank
holding company to--
`(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 EXAMINATIONS- For purposes of this
subparagraph, the Commission shall, to the fullest extent possible, use
the reports of examination of an institution described in subparagraph
(D), (F), or (G) of section 2(c)(2), or held under section 4(f), of the
Bank Holding Company Act of 1956 made by the appropriate regulatory
agency, or of a licensed insurance company made by the appropriate State
insurance regulator.
`(4) FUNCTIONAL REGULATION OF BANKING AND INSURANCE ACTIVITIES OF
SUPERVISED INVESTMENT BANK HOLDING COMPANIES- The Commission 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 operations of banks,
and institutions described in subparagraph (D), (F), and (G) of section
2(c)(2), or held under section 4(f), of the Bank Holding Company Act of
1956; and
`(B) the appropriate State insurance regulators with regard to all
interpretations of, and the enforcement of, applicable State insurance
laws relating to the activities, conduct, and operations of insurance
companies and insurance agents.
`(5) DEFINITIONS- For purposes of this subsection:
`(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 investment bank holding
company.
`(B) The term `supervised investment bank holding company' means any
investment bank holding company that is supervised by the Commission
pursuant to this subsection.
`(C) The terms `affiliate', `bank', `bank holding company', `company',
`control', and `savings association' have the same meanings as given in
section 2 of the Bank Holding Company Act of 1956 (12 U.S.C.
1841).
`(D) The term `insured bank' has the same meaning as given in section
3 of the Federal Deposit Insurance Act.
`(E) The term `foreign bank' has the same meaning as given in section
1(b)(7) of the International Banking Act of 1978.
`(F) The terms `person associated with an investment bank holding
company' and `associated person of an investment bank holding company'
mean any person directly or indirectly controlling, controlled by, or
under common control with, an investment bank holding company.
`(j) AUTHORITY TO LIMIT DISCLOSURE OF INFORMATION- Notwithstanding any
other provision of law, the Commission shall not be compelled to disclose any
information required to be reported under subsection (h) or (i) or any
information supplied to the Commission by any domestic or foreign regulatory
agency that relates to the financial or operational condition of any
associated person of a broker or dealer, investment bank holding company, or
any affiliate of an investment bank holding company. Nothing in this
subsection shall authorize the Commission to withhold information from
Congress, or prevent the Commission from complying with a request for
information 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 purposes of section
552 of title 5, United States Code, this subsection shall be considered a
statute described in subsection (b)(3)(B) of such section 552. In prescribing
regulations 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
purposes 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 institution described in
subparagraph (D), (F), or (G) of section 2(c)(2), or held under section
4(f), of the Bank Holding Company Act of 1956--
`(i) the Comptroller of the Currency, in the case of a national bank
or a bank in the District of Columbia examined by the Comptroller of the
Currency;
`(ii) the Board of Governors of the Federal Reserve System, in the
case of a State member bank of the Federal Reserve System or any
corporation chartered under section 25A of the Federal Reserve
Act;
`(iii) the Federal Deposit Insurance Corporation, in the case of any
other bank the deposits of which are insured in accordance with the
Federal Deposit Insurance Act; or
`(iv) the Commission in the case of all other such
institutions.'.
(2) Section 1112(e) of the Right to Financial Privacy Act of 1978 (12
U.S.C. 3412(e)) is amended--
(A) by striking `this title' and inserting `law'; and
(B) by inserting `, examination reports' after `financial
records'.
Subtitle D--Banks and Bank Holding Companies
SEC. 241. 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 manner in which any
insured depository institution or depository institution holding company
reports loan loss reserves 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 institution holding company', and
`appropriate Federal banking agency' have the same meaning as given in section
3 of the Federal Deposit Insurance Act.
TITLE III--INSURANCE
Subtitle A--State Regulation of Insurance
SEC. 301. 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. 302. INSURANCE UNDERWRITING IN NATIONAL BANKS.
(a) IN GENERAL- Except as provided in section 303, 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
products.
(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 national 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 annuity contract the
income of which is subject to tax treatment under section 72 of the Internal
Revenue Code of 1986.
(c) DEFINITION- For purposes of this section, the term `insurance'
means--
(1) any product regulated as insurance as of January 1, 1999, in
accordance with the relevant State insurance law, in the State in which the
product 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
product 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 private passenger or commercial automobile, homeowners, mortgage,
commercial multiperil, general liability, professional liability, workers'
compensation, fire and allied lines, farm owners multiperil, aircraft,
fidelity, surety, medical malpractice, ocean marine, inland marine, and
boiler and machinery insurance); and
(B) is not a product or service of a bank that is--
(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 section 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 component such that if
the product is offered or proposed to be offered by the bank as
principal--
(I) it would be treated as a life insurance contract under section
7702 of the Internal Revenue Code of 1986; or
(II) in the event that the product is not a letter of credit or
other similar extension of credit, a qualified financial contract, or
a financial guaranty, 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.
(d) RULE OF CONSTRUCTION- For purposes of this section, providing
insurance (including reinsurance) outside the United States that insures,
guarantees, or indemnifies insurance products provided in a State, or that
indemnifies an insurance company with regard to insurance products provided in
a State, shall be considered to be providing insurance as principal in that
State.
SEC. 303. TITLE INSURANCE ACTIVITIES OF NATIONAL BANKS AND THEIR
AFFILIATES.
(a) GENERAL PROHIBITION- No national bank may engage in any activity
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
agent, 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
as such State banks are authorized to sell title insurance as agent in such
State.
(2) COORDINATION WITH `WILDCARD' PROVISION- A State law which authorizes
State banks to engage in any activities in such State in which a national
bank may engage shall not be treated as a statute which authorizes State
banks to sell title insurance as agent, for purposes of paragraph (1).
(c) GRANDFATHERING WITH CONSISTENT REGULATION-
(1) IN GENERAL- Except as provided in paragraphs (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 enactment of this Act.
(2) INSURANCE AFFILIATE- In the case of a national bank which has an
affiliate which provides insurance as principal and is not a subsidiary of
the bank, the national bank and any subsidiary of the national bank may not
engage in 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 insurance as principal and has no affiliate other
than a subsidiary which provides insurance as principal, the national bank
may not directly engage in any activity involving the underwriting of title
insurance.
(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 superseding 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. 304. EXPEDITED AND EQUALIZED DISPUTE RESOLUTION 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 regarding
insurance issues, including whether a State law, rule, regulation, order, or
interpretation regarding any insurance sales or solicitation activity is
properly treated as preempted under Federal law, the Federal or State
regulator may seek expedited judicial review of such determination 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 Circuit
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 accordance 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 certiorari 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, determination, 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 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 Federal 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. 305. INSURANCE CUSTOMER PROTECTIONS.
The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended by
inserting after section 46, as added by section 121(d) of this Act, the
following new section:
`SEC. 47. INSURANCE CUSTOMER PROTECTIONS.
`(a) REGULATIONS REQUIRED-
`(1) IN GENERAL- The Federal banking agencies shall prescribe and
publish in final form, before the end of the 1-year period beginning on the
date of the enactment of the Gramm-Leach-Bliley Act, customer protection
regulations (which the agencies jointly determine to be appropriate)
that--
`(A) apply to retail sales practices, solicitations, advertising, or
offers of any insurance product by any depository institution or any
person that 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 protections for customers to whom such sales, solicitations,
advertising, or offers are directed.
`(2) APPLICABILITY TO SUBSIDIARIES- The regulations prescribed pursuant
to paragraph (1) shall extend such protections to any subsidiary of a
depository institution, as deemed appropriate 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 REGULATIONS- The Federal banking agencies
shall consult with each other and prescribe joint regulations pursuant to
paragraph (1), after consultation with the State insurance regulators, as
appropriate.
`(b) SALES PRACTICES- The regulations prescribed pursuant to subsection
(a) shall include antitying and anticoercion rules applicable to the sale of
insurance products that prohibit a depository institution from engaging in any
practice that would lead a customer to believe an extension of credit, in
violation of section 106(b) of the Bank Holding Company Act Amendments of
1970, is conditional 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 obtain, or a prohibition on the
consumer from obtaining, an insurance product from an unaffiliated
entity.
`(c) DISCLOSURES AND ADVERTISING- The regulations prescribed pursuant to
subsection (a) shall include the following provisions relating to disclosures
and advertising in connection with the initial purchase of an insurance
product:
`(A) IN GENERAL- Requirements that the following disclosures be made
orally and in writing before the completion of the initial sale and, in
the case of clause (iii), at the time of application for an extension of
credit:
`(i) UNINSURED STATUS- As appropriate, the product is not insured by
the Federal Deposit Insurance Corporation, the United States Government,
or the 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 of any affiliate of the
institution; or
`(II) an agreement by the consumer not to obtain, or a prohibition
on the consumer from obtaining, an insurance product from an
unaffiliated entity.
`(B) MAKING DISCLOSURE READILY UNDERSTANDABLE- Regulations prescribed
under subparagraph (A) shall encourage the use of disclosure that is
conspicuous, simple, direct, and readily understandable, such as the
following:
`(i) `NOT FDIC--INSURED'.
`(ii) `NOT GUARANTEED BY THE BANK'.
`(iii) `MAY GO DOWN IN VALUE'.
`(iv) `NOT INSURED BY ANY GOVERNMENT AGENCY'.
`(C) LIMITATION- Nothing in this paragraph requires the inclusion of
the foregoing disclosures in advertisements of a general nature describing
or listing the services or products offered by an institution.
`(D) MEANINGFUL DISCLOSURES- Disclosures shall not be considered to be
meaningfully provided under this paragraph if the institution or its
representative states that disclosures required by this subsection were
available to the customer in printed material available for distribution,
where such printed material is not provided and such information is not
orally disclosed to the customer.
`(E) ADJUSTMENTS FOR ALTERNATIVE METHODS OF PURCHASE- In prescribing
the requirements under subparagraphs (A) and (F), necessary adjustments
shall be made for purchase in person, by telephone, or by electronic media
to provide for the most appropriate and complete form of disclosure and
acknowledgments.
`(F) CONSUMER ACKNOWLEDGMENT- A requirement that a depository
institution shall require any person selling an insurance product at any
office of, or on behalf of, the institution to obtain, at the time a
consumer receives the disclosures required under this paragraph or at the
time of the initial purchase by the consumer of such product, an
acknowledgment by such consumer of the receipt of the disclosure required
under this subsection with respect to such product.
`(2) PROHIBITION ON MISREPRESENTATIONS- A prohibition on any practice,
or any advertising, at any office of, or on behalf of, the depository
institution, or any subsidiary, as appropriate, that could mislead any
person or otherwise cause a reasonable person to reach an erroneous belief
with respect to--
`(A) the uninsured nature of any insurance product sold, or offered
for sale, by the institution or any subsidiary of the
institution;
`(B) in the case of a variable annuity or insurance product that
involves an investment risk, the investment risk associated with any such
product; or
`(C) in the case of an institution or subsidiary 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 subsidiary;
and
`(ii) the customer is free to purchase the insurance product from
another source.
`(d) SEPARATION OF BANKING AND NONBANKING ACTIVITIES-
`(1) REGULATIONS REQUIRED- The regulations prescribed pursuant to
subsection (a) shall include such provisions as the Federal banking agencies
consider appropriate to ensure that the routine acceptance of deposits is
kept, to the extent practicable, physically segregated from insurance
product activity.
`(2) REQUIREMENTS- Regulations prescribed pursuant to paragraph (1)
shall include the following requirements:
`(A) SEPARATE SETTING- A clear delineation of the setting in which,
and the circumstances under which, transactions involving insurance
products should be conducted in a location physically segregated from an
area where retail deposits are routinely accepted.
`(B) REFERRALS- Standards that permit any person accepting deposits
from the public in an area where such transactions are routinely conducted
in a depository institution to refer a customer who seeks to purchase any
insurance product to a qualified person 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 REQUIREMENTS- Standards prohibiting
any depository institution from permitting any person to sell or offer for
sale any insurance product in any part of any office of the institution,
or on behalf of the institution, unless such person is appropriately
qualified and licensed.
`(e) DOMESTIC VIOLENCE DISCRIMINATION PROHIBITION-
`(1) IN GENERAL- In the case of an applicant for, or an insured under,
any insurance product described 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,
renewal, or scope of coverage of insurance policies, or 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 life or health insurance product which is sold or offered
for sale, as principal, agent, or broker, by any depository institution or
any person who is engaged in such activities at an office of the institution
or on behalf of the institution.
`(3) DOMESTIC VIOLENCE DEFINED- For purposes 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, household member,
intimate partner, or caretaker:
`(A) Attempting to cause or causing or threatening another person
physical harm, severe emotional distress, psychological trauma, rape, or
sexual assault.
`(B) Engaging in a course of conduct or repeatedly committing acts
toward another person, including following the person without proper
authority, under circumstances that place the person in reasonable fear of
bodily injury 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 complaint mechanism, for receiving and
expeditiously addressing 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 consumers of rights they may have
in connection with such complaints; and
`(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 organization, the Municipal Securities Rulemaking 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 commission (or any agency or office performing like functions),
or of any State securities commission (or any agency or office performing
like functions), or other State authority under any State law.
`(2) COORDINATION WITH STATE LAW-
`(A) IN GENERAL- Except as provided in subparagraph (B), insurance
customer protection regulations prescribed by a Federal banking agency
under this section shall not apply to retail sales, solicitations,
advertising, or offers of any insurance product by any depository
institution or to any person who is engaged in such activities at an
office of such institution 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.
`(i) IN GENERAL- 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 Corporation determine jointly that the protection
afforded by such provision for customers is greater than the protection
provided by a comparable provision of the statutes, regulations, orders,
or interpretations referred to in subparagraph (A) of any State, the
appropriate State regulatory authority shall be notified of such
determination in writing.
`(ii) CONSIDERATIONS- Before making a final determination under
clause (i), the Federal agencies referred to in clause (i) shall give
appropriate consideration to comments submitted by the appropriate State
regulatory authorities relating to the level of protection afforded to
consumers under State law.
`(iii) FEDERAL PREEMPTION AND ABILITY OF STATES TO OVERRIDE FEDERAL
PREEMPTION- If the Federal agencies referred to in clause (i) jointly
determine that any provision of the regulations prescribed under this
section affords greater protections than a comparable State law, rule,
regulation, order, or interpretation, those agencies shall send a
written preemption notice to the appropriate State regulatory authority
to notify the State that the Federal provision will preempt the State
provision and will become applicable unless, not later than 3 years
after the date of such notice, the State adopts legislation to override
such preemption.
`(h) NON-DISCRIMINATION AGAINST NON-AFFILIATED AGENTS- The Federal banking
agencies shall ensure that the regulations prescribed pursuant to subsection
(a) shall not have the effect of discriminating, either intentionally or
unintentionally, against any person engaged in insurance sales or
solicitations that is not affiliated with a depository institution.'.
SEC. 306. CERTAIN STATE AFFILIATION LAWS PREEMPTED FOR INSURANCE
COMPANIES AND AFFILIATES.
Except as provided in section 104(c)(2), no State may, by law, regulation,
order, interpretation, or otherwise--
(1) prevent or significantly interfere with the ability of any insurer,
or any affiliate of an insurer (whether such affiliate is organized as a
stock company, mutual holding company, or otherwise), to become a financial
holding company or to acquire control of a depository institution;
(2) limit the amount of an insurer's assets that may be invested in the
voting securities of a 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 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. 307. INTERAGENCY CONSULTATION.
(a) PURPOSE- It is the intention of the Congress that the Board of
Governors of the Federal Reserve System, as the umbrella supervisor for
financial holding companies, and the State insurance regulators, as the
functional regulators of companies engaged in insurance activities, coordinate
efforts to supervise companies that control both a depository institution and
a company engaged in insurance activities regulated under State law. In
particular, 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 engaged in insurance activities, including information regarding the
financial health of the consolidated organization and information regarding
transactions and relationships between insurance companies and affiliated
depository institutions. The appropriate Federal banking agencies for
depository institutions should also share, on a confidential basis,
information with the relevant State insurance regulators regarding
transactions and relationships between depository institutions and affiliated
companies engaged in insurance activities. The purpose of this section 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 institutions and
companies engaged in insurance activities.
(b) EXAMINATION RESULTS AND OTHER INFORMATION-
(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
engaged in insurance activities and is regulated by such State insurance
regulator, and regarding any transaction or relationship between such an
insurance company and any affiliated depository institution. 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 enforce applicable State insurance
laws.
(2) BANKING AGENCY INFORMATION- Upon the request of the appropriate
insurance regulator of any State, the appropriate Federal banking agency may
provide any information of the agency regarding any transaction or
relationship between a depository institution supervised by such Federal
banking agency and any affiliated company that is engaged in insurance
activities regulated by such State insurance regulator. The appropriate
Federal banking agency may provide any other information to the appropriate
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 INFORMATION- Upon the request of the Board
or the appropriate Federal banking agency, a State insurance regulator may
provide any examination or other reports, 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 a depository institution or financial holding
company.
(c) CONSULTATION- Before making any determination relating to the initial
affiliation of, or the continuing affiliation of, a depository 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 a depository institution or bank holding company or any affiliate thereof
under any provision of law.
(e) CONFIDENTIALITY AND PRIVILEGE-
(1) CONFIDENTIALITY- The appropriate Federal banking agency shall not
provide any information or material that is entitled to confidential
treatment under applicable Federal banking agency regulations, 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 secure disclosure of the
information or material by the regulator. The appropriate Federal banking
agency shall treat as confidential any information or material 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 Federal 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 otherwise subject.
(f) DEFINITIONS- For purposes of this section, the following definitions
shall apply:
(1) APPROPRIATE FEDERAL BANKING AGENCY; DEPOSITORY INSTITUTION- The
terms `appropriate Federal banking agency' and `depository institution' have
the same meanings as in section 3 of the Federal Deposit Insurance
Act.
(2) BOARD AND FINANCIAL HOLDING COMPANY- The terms `Board' and
`financial holding company' have the same meanings as in section 2 of the
Bank Holding Company Act of 1956.
SEC. 308. 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 Islands,
the Virgin Islands, and the Northern Mariana Islands.
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.
(b) RESULTING DOMICILE- Upon complying with the applicable law of the
transferee domicile governing transfers of domicile and completion of a
transfer pursuant 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 authority, agents' appointments
and licenses, rates, approvals and other items that a licensed State allows
and that are in existence immediately prior to the date that a redomesticating
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 insurer, unless so
ordered by the State insurance regulator of a licensed State, and then only
in the case of outstanding policies and contracts whose owners reside in
such licensed State.
(A) Applicable State law may require a redomesticating insurer to file
new policy forms with the State insurance regulator of a licensed State on
or before the effective date of the transfer.
(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 licensed
State.
(e) NOTICE- A redomesticating insurer shall give notice of the proposed
transfer to the State insurance regulator 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 insurance regulator of
each such licensed State.
(f) PROCEDURAL REQUIREMENTS- No mutual insurer 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:
(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 opportunity to vote, in
accordance with such notice, disclosure, and voting procedures as are
approved by the State insurance regulator of the transferee domicile.
(2) CONTINUED VOTING CONTROL BY POLICYHOLDERS; REVIEW OF PUBLIC STOCK
OFFERING- After the consummation of a reorganization, the policyholders of
the reorganized insurer shall have the same voting rights with respect to
the mutual holding 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 insurance regulator of
the transferee domicile.
(3) AWARD OF STOCK OR GRANT OF OPTIONS TO OFFICERS AND DIRECTORS- During
the applicable period provided for under the State law of the transferee
domicile following completion of an initial public offering, or for a period
of six months if no such applicable period is provided, neither a stock
holding company nor the converted insurer shall award any stock options or
stock grants to persons who are elected officers or directors of the mutual
holding company, the stock holding 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) POLICYHOLDER RIGHTS- Upon reorganization into a mutual holding
company, the contractual rights of the policyholders are preserved.
(5) FAIR AND EQUITABLE TREATMENT OF POLICYHOLDERS- The reorganization is
approved as fair and equitable to the policyholders by the insurance
regulator of the transferee domicile.
SEC. 313. EFFECT ON STATE LAWS RESTRICTING REDOMESTICATION.
(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, any insurer or an affiliate of such insurer because that
insurer or any affiliate plans to redomesticate, or has redomesticated,
pursuant to this subtitle;
(2) any law that has the purpose or effect of impeding the activities
of, taking action against, or applying any provision of law or regulation
to, any insured or any insurance licensee or other intermediary because such
person has procured insurance from or placed insurance with any insurer or
affiliate of such insurer that plans to redomesticate, or has
redomesticated, pursuant to this subtitle, but only to the extent that such
law would treat such insured licensee or other intermediary differently than
if the person procured insurance from, or placed insurance with, an insured
licensee or other intermediary which had not redomesticated; and
(3) any law that has the purpose or effect of terminating, because of
the redomestication of a mutual insurer pursuant to this subtitle, any
certificate of authority, agent appointment or license, rate approval, or
other approval, of any State insurance regulator or other State authority in
existence immediately prior to the redomestication in any State other than
the transferee domicile.
(b) DIFFERENTIAL TREATMENT PROHIBITED- No State law, regulation,
interpretation, or functional equivalent 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 operating in that State
that is not a redomesticating or redomesticated insurer.
(c) LAWS PROHIBITING OPERATIONS- If any licensed State fails to issue,
delays the issuance of, or seeks to revoke an original or renewal certificate
of authority of a redomesticated insurer promptly following redomestication,
except on grounds and in a manner consistent with its past practices regarding
the issuance of certificates of authority to foreign insurers that are not
redomesticating, then the redomesticating 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
indirectly, 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, applicable premium and other
taxes which are levied on licensed insurers or policyholders under the laws
of the licensed State;
(3) register with and designate the State insurance regulator as its
agent solely for the purpose of receiving service of legal documents or
process;
(4) submit to an examination by the State insurance regulator in any
licensed State in which the redomesticated insurer is doing business to
determine the insurer's financial condition, if--
(A) the State insurance regulator of the transferee domicile has not
begun an examination 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
financial impairment under paragraph (7); or
(B) a voluntary dissolution proceeding;
(6) comply with any State law regarding deceptive, false, or fraudulent
acts or practices, except that if the licensed State seeks an injunction
regarding the conduct described in this paragraph, such injunction 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 redomesticating 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 redomesticating or redomesticated insurer.
(b) SEVERABILITY- If any provision of this section, or the application
thereof to any person or circumstances, is held invalid, the remainder of the
section, and the application 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
adjudicate litigation arising under this subtitle.
(2) DOMICILE- The term `domicile' means the State in which an insurer is
incorporated, chartered, or organized.
(3) INSURANCE LICENSEE- The term `insurance 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 liability company, limited liability partnership,
association, trust, partnership, or any similar entity.
(5) LICENSED STATE- The term `licensed State' means any State, the
District of Columbia, any territory of the United States, Puerto Rico, Guam,
American Samoa, the Trust Territory of the Pacific Islands, the Virgin
Islands, and the Northern Mariana Islands in which the redomesticating
insurer has a certificate of authority in effect immediately prior to the
redomestication.
(6) MUTUAL INSURER- The term `mutual insurer' means a mutual insurer
organized under the laws of any State.
(7) PERSON- The term `person' means an individual, institution,
government or governmental agency, State or political subdivision of a
State, public 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 insurer, except that, with respect to voting rights, the
term means a member of a mutual insurer or mutual 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 term `redomestication' or
`transfer' means the 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 principal insurance regulatory authority of a State, the District
of Columbia, any territory of the United States, Puerto Rico, Guam, American
Samoa, the Trust Territory of the Pacific Islands, the Virgin Islands, and
the Northern Mariana Islands.
(13) STATE LAW- The term `State law' means the statutes of any State,
the District of Columbia, any territory of the United States, Puerto Rico,
Guam, American Samoa, the Trust Territory of the Pacific Islands, the Virgin
Islands, and the Northern Mariana 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 enactment of this
Act.
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
insurance within the State; or
(2) have enacted reciprocity laws and regulations governing the
licensure of nonresident individuals and entities authorized to sell and
solicit insurance 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 integrity, personal
qualifications, education, training, and experience of licensed insurance
producers, including the qualification and training of sales personnel in
ascertaining the appropriateness of a particular insurance product for a
prospective customer;
(2) establish uniform continuing education requirements for licensed
insurance producers;
(3) establish uniform ethics course requirements for licensed insurance
producers in conjunction 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 disclosed by the
consumer; and
(5) 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 conditioning that producer's activities because of its
residence or place of operations, except that countersignature 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 satisfy subsection (a)(2) if the following conditions
are met:
(1) ADMINISTRATIVE LICENSING PROCEDURES- At least a majority of the
States permit a producer that has a resident license for selling or
soliciting 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
nonresident 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 REQUIREMENTS- A majority of the States accept
an insurance producer's satisfaction of its home State's continuing
education requirements for licensed insurance producers to satisfy the
States' own continuing education requirements if the producer's home State
also recognizes the satisfaction of continuing education requirements on
such a reciprocal basis.
(3) NO LIMITING NONRESIDENT REQUIREMENTS- 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 conditioning that producer's activities because of its residence
or place of operations, except that countersignature 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.
(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.
(1) NAIC DETERMINATION- At the end of the 3-year period beginning on the
date of the enactment of this Act, the National Association of Insurance
Commissioners (hereafter in this subtitle referred to as the `NAIC') shall
determine, in consultation with the insurance commissioners or chief
insurance regulatory officials of the States, whether the uniformity or
reciprocity required by subsections (b) and (c) has been achieved.
(2) JUDICIAL REVIEW- The appropriate United States district court shall
have exclusive jurisdiction over any challenge to the NAIC's 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 reciprocity required by
those provisions is satisfied before the expiration of that 2-year period.
(f) SAVINGS PROVISION- No provision of this section shall be construed as
requiring that any law, regulation, provision, or action of any State which
purports to regulate insurance producers, including any such law, regulation,
provision, or action which purports to regulate unfair trade practices or
establish consumer protections, including 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, provision, or action
is inconsistent with a specific requirement 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 National Association of
Registered Agents and Brokers (hereafter in this subtitle referred to as the
`Association').
(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.).
SEC. 323. PURPOSE.
The purpose of the Association shall be to provide a mechanism through
which uniform licensing, appointment, continuing education, and other
insurance producer sales qualification requirements and conditions can be
adopted and applied on a multistate basis, while preserving the right of
States to license, supervise, and discipline insurance producers and to
prescribe and enforce laws and regulations with regard to insurance-related
consumer protection and unfair trade practices.
SEC. 324. RELATIONSHIP TO THE FEDERAL GOVERNMENT.
The Association shall be subject to the supervision and oversight of the
NAIC.
SEC. 325. MEMBERSHIP.
(1) IN GENERAL- Any State-licensed insurance producer shall be eligible
to become a member in the Association.
(2) INELIGIBILITY FOR SUSPENSION OR REVOCATION 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
preceding 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 subsequently overturned.
(b) AUTHORITY TO ESTABLISH MEMBERSHIP CRITERIA- The Association shall have
the authority to establish membership criteria that--
(1) bear a reasonable relationship to the purposes 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 CATEGORIES-
(1) CLASSES OF MEMBERSHIP- The Association may establish separate
classes of membership, with separate criteria, if the Association reasonably
determines that performance of different duties requires different levels of
education, training, or experience.
(2) CATEGORIES- The Association may establish separate categories of
membership for individuals 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 categories of
membership, and no distinct membership criteria, shall be established for
members which are depository institutions or for their employees, agents, or
affiliates.
(1) IN GENERAL- The Association may establish criteria for membership
which shall include standards for integrity, personal qualifications,
education, training, and experience.
(2) MINIMUM STANDARD- In establishing criteria under paragraph (1), the
Association shall consider the highest levels of insurance producer
qualifications 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, including licensing fees and, where applicable, bonding requirements,
set by such State.
(f) ANNUAL RENEWAL- Membership in the Association shall be renewed on an
annual basis.
(g) CONTINUING EDUCATION- The Association shall establish, as a condition
of membership, continuing education requirements which shall be comparable to
or greater than the continuing education requirements under the licensing laws
of a majority of the States.
(h) SUSPENSION AND REVOCATION- The Association may--
(1) inspect and examine the records and offices of the members of the
Association to determine compliance with the criteria for membership
established by the Association; and
(2) suspend or revoke the membership of an insurance producer if--
(A) the producer fails to meet the applicable membership criteria of
the Association; or
(B) the producer has been subject to disciplinary action pursuant to a
final adjudicatory proceeding under the jurisdiction of a State insurance
regulator, and the Association concludes that retention of membership in
the Association would not be in the public interest.
(i) OFFICE OF CONSUMER COMPLAINTS-
(1) IN GENERAL- The Association shall establish an office of consumer
complaints that shall--
(A) receive and investigate complaints from both consumers and State
insurance regulators related to members of the Association; and
(B) recommend to the Association any disciplinary actions that the
office considers appropriate, to the extent that any such recommendation
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 received 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 complaint; and
(B) refer, when appropriate, any such complaint to any appropriate
State insurance regulator.
(3) TELEPHONE AND OTHER ACCESS- The office of consumer complaints shall
maintain a toll-free telephone number for the purpose of this subsection
and, as practicable, other alternative means of communication 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 subtitle referred to as the `Board') for the
purpose of governing 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 Association.
(1) MEMBERS- The Board shall be composed of 7 members appointed by the
NAIC.
(2) REQUIREMENT- At least 4 of the members of the Board shall each 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 enactment of this Act, the NAIC has not appointed the initial
7 members of the Board of the Association, the initial Board shall consist
of the 7 State insurance regulators of the 7 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 subparagraph (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 7 State insurance regulators accept
appointment to the Board, the Association shall be established without
NAIC oversight pursuant to section 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 appointment 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.
(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 assistant officers
as may be deemed necessary.
(2) MANNER OF SELECTION- Each officer of the Board and the Association
shall be elected or appointed at such time and in such manner and for such
terms not exceeding 3 years as may be prescribed 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 bylaws or
any proposed amendment to the bylaws, accompanied 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) 30 days after the date of the filing of a copy with the
NAIC;
(B) upon such later date as the Association may designate; or
(C) upon such earlier date as the NAIC may determine.
(3) DISAPPROVAL BY THE NAIC- Notwithstanding paragraph (2), a proposed
bylaw or amendment 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 notice
to the Association setting forth the reasons for such disapproval;
or
(B) the NAIC finds that such proposal involves a matter of such
significant public interest that public comment should be obtained, in
which case it may, after notifying the Association in writing of such
finding, require that the procedures set forth in subsection (b) be
followed with respect to such proposal, in the same manner as if such
proposed bylaw change were a proposed rule change within the meaning 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
statement of the basis and purpose of such proposal.
(B) OTHER RULES AND AMENDMENTS INEFFECTIVE- 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 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.
(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 filing of such proposed rule or amendment.
(B) DISPOSITION OF PROPOSAL- At the conclusion of any proceeding under
subparagraph (A), the NAIC shall, by order, approve or disapprove the
proposed rule or amendment.
(C) EXTENSION OF TIME FOR CONSIDERATION- The NAIC may extend the time
for 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) 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 proposed rule before the end of the 30-day period beginning on the
date on which the Association files proposed rules or amendments in
accordance with paragraph (1), unless the NAIC finds good cause for so
doing and sets forth the reasons for so finding.
(A) IN GENERAL- Notwithstanding any provision of this subsection other
than subparagraph (B), a proposed rule or amendment relating 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, consistent 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 proposed rule or amendment under subparagraph (A)(i) or clause
(ii) of this subparagraph, the NAIC may repeal such rule or amendment
and require that the rule or amendment be refiled and reviewed in
accordance with this paragraph, if the NAIC finds that such action is
necessary or appropriate in the public interest, for the protection of
insurance producers or policyholders, or otherwise in furtherance of the
purposes of this subtitle.
(ii) EFFECT OF RECONSIDERATION BY THE NAIC- Any action of the NAIC
pursuant 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 determines 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 proceeding to determine whether
membership shall be denied, suspended, revoked, or not renewed (hereafter in
this section referred to as a `disciplinary action'), the Association shall
bring specific charges, notify such member of such charges, give the member
an opportunity to defend against the charges, and keep a record.
(2) SUPPORTING STATEMENT- A determination 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 aggrieved by such action if such
application is filed with the NAIC not more than 30 days after the later
of--
(i) the date the notice was filed with the NAIC pursuant to
paragraph (1); or
(ii) the date the notice of the disciplinary action was received by
such aggrieved person.
(f) EFFECT OF REVIEW- The filing of an application 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.
(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 disciplinary 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 action is based exist in
fact;
(B) the action is in accordance with applicable 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 ASSESSMENT- 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 discriminate 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 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 Association shall submit to the NAIC a written report
regarding the conduct of its business, and the exercise of the other rights
and powers granted by this subtitle, during such fiscal year. Such report
shall include financial statements setting forth the financial position of
the Association 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. 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 DIRECTORS, 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 regulating or taxing insurers, insurance producers, or other entities
engaged in the business of insurance, including provisions imposing premium
taxes, regulating insurer solvency or financial condition, establishing
guaranty funds and levying assessments, or requiring claims settlement
practices.
(b) LIABILITY OF THE ASSOCIATION, ITS DIRECTORS, OFFICERS, AND EMPLOYEES-
Neither the Association 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 matter subject to this subtitle.
SEC. 332. ELIMINATION OF NAIC OVERSIGHT.
(a) IN GENERAL- The Association shall be established 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 subtitle take effect pursuant to
section 321--
(1) at least a majority of the States representing at least 50 percent
of the total United States commercial-lines insurance premiums have not
satisfied the uniformity or reciprocity requirements of subsections (a),
(b), and (c) of section 321; and
(2) the NAIC has not approved the Association's bylaws as required by
section 328 or is unable to operate or supervise the Association, or the
Association 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 Senate, shall appoint the members of the Association's Board
established under section 326 from lists of candidates recommended to the
President by the NAIC.
(2) PROCEDURES FOR OBTAINING NAIC APPOINTMENT RECOMMENDATIONS-
(A) INITIAL DETERMINATION AND RECOMMENDATIONS- 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
or comply with the requirements of section 326(c), the President shall,
with the advice and consent of the Senate, make the requisite appointments
without considering the views of the NAIC.
(B) SUBSEQUENT APPOINTMENTS- After the initial appointments, the NAIC
shall provide a list of at least six recommended candidates for the Board
to the President by January 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
requirements of section 326(c), the President, with the advice and consent
of the Senate, shall make the requisite appointments without considering
the views of the NAIC.
(C) PRESIDENTIAL OVERSIGHT-
(i) REMOVAL- If the President determines 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 Senate, new members to fill the vacancies on the Board for the
remainder of such terms.
(ii) SUSPENSION OF RULES OR ACTIONS- The President, or a person
designated 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 determines 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 relative to the conduct of its business, and the exercise of
the other rights and powers granted by this subtitle, during such fiscal year.
Such report shall include financial statements setting forth the financial
position of the Association 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, regulations, provisions, or
other actions purporting to regulate insurance producers shall be preempted as
provided in subsection (b).
(b) PROHIBITED ACTIONS- No State shall--
(1) impede the activities of, take any action against, or apply any
provision of law or regulation to, any insurance producer because that
insurance producer or any affiliate plans to become, has applied to become,
or is a member of the Association;
(2) impose any requirement upon a member of the Association that it pay
different fees to be licensed or otherwise qualified to do business in that
State, including bonding requirements, based on its residency;
(3) impose any licensing, appointment, integrity, personal or corporate
qualifications, education, training, experience, residency, or continuing
education requirement upon a member of the Association that is different
from the criteria for membership in the Association or renewal of such
membership, except that countersignature 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; or
(4) implement the procedures of such State's system of licensing or
renewing the licenses of insurance producers in a manner different from the
authority of the Association under section 325.
(c) SAVINGS PROVISION- Except as provided in subsections (a) and (b), no
provision of this section shall be construed as altering or affecting the
continuing effectiveness of any law, regulation, provision, or other action of
any State which purports to regulate insurance producers, including any such
law, regulation, provision, or action which purports to regulate unfair trade
practices or establish consumer protections, including countersignature
laws.
SEC. 334. COORDINATION WITH OTHER REGULATORS.
(a) COORDINATION WITH STATE INSURANCE REGULATORS- The Association shall
have the authority to--
(1) issue uniform insurance producer applications and renewal
applications that may be used to apply for the issuance or removal of State
licenses, while preserving the ability of each State to impose such
conditions on the issuance or renewal of a license as are consistent with
section 333;
(2) establish a central clearinghouse through which members of the
Association may apply for the issuance or renewal of licenses in multiple
States; and
(3) establish or utilize a national database for the collection of
regulatory information concerning the activities of insurance
producers.
(b) COORDINATION WITH THE NATIONAL ASSOCIATION OF SECURITIES DEALERS- The
Association shall coordinate with the National Association of Securities
Dealers in order to ease any administrative burdens that fall on persons that
are members of both associations, consistent with the purposes of this
subtitle and the Federal securities laws.
SEC. 335. JUDICIAL REVIEW.
(a) JURISDICTION- The appropriate United States district court shall have
exclusive jurisdiction over litigation involving the Association, including
disputes between the Association and its members that arise under this
subtitle. Suits brought in State court involving the Association shall be
deemed to have arisen under Federal law and therefore be subject to
jurisdiction in the appropriate United States district court.
(b) EXHAUSTION OF REMEDIES- An aggrieved person shall be required to
exhaust all available administrative remedies before the Association and the
NAIC before it may seek judicial review of an Association decision.
(c) STANDARDS OF REVIEW- The standards set forth in section 553 of title
5, United States Code, shall be applied whenever a rule or bylaw of the
Association is under judicial review, and the standards set forth in section
554 of title 5, United States Code, shall be applied whenever a disciplinary
action of the Association is judicially reviewed.
SEC. 336. DEFINITIONS.
For purposes of this subtitle, the following definitions shall apply:
(1) HOME STATE- The term `home State' means the State in which the
insurance producer maintains its principal place of residence and is
licensed to act as an insurance producer.
(2) INSURANCE- The term `insurance' means any product, other than title
insurance, defined or regulated as insurance by the appropriate State
insurance regulatory authority.
(3) INSURANCE PRODUCER- The term `insurance producer' means any
insurance agent or broker, surplus lines broker, insurance consultant,
limited insurance representative, and any other person that solicits,
negotiates, effects, procures, delivers, renews, continues or binds policies
of insurance or offers advice, counsel, opinions or services related to
insurance.
(4) STATE- The term `State' includes any State, the District of
Columbia, any territory of the United States, Puerto Rico, Guam, American
Samoa, the Trust Territory of the Pacific Islands, the Virgin Islands, and
the Northern Mariana Islands.
(5) STATE LAW- The term `State law' includes all laws, decisions, rules,
regulations, or other State action having the effect of law, of any State. A
law of the United States applicable only to the District of Columbia shall
be treated as a State law rather than a law of the United States.
Subtitle D--Rental Car Agency Insurance Activities
SEC. 341. STANDARD OF REGULATION FOR MOTOR VEHICLE RENTALS.
(a) PROTECTION AGAINST RETROACTIVE APPLICATION OF REGULATORY AND LEGAL
ACTION- Except as provided in subsection (b), during the 3-year period
beginning on the date of the enactment of this Act, it shall be a presumption
that no State law imposes any licensing, appointment, or education
requirements on any person who solicits the purchase of or sells insurance
connected with, and incidental to, the lease or rental of a motor vehicle.
(b) PREEMINENCE OF STATE INSURANCE LAW- No provision of this section shall
be construed as altering the validity, interpretation, construction, or effect
of--
(2) the prospective application of any court judgment interpreting or
applying any State statute; or
(3) the prospective application of any final State regulation, order,
bulletin, or other statutorily authorized interpretation or action,
which, by its specific terms, expressly regulates or exempts from
regulation any person who solicits the purchase of or sells insurance
connected with, and incidental to, the short-term lease or rental of a motor
vehicle.
(c) SCOPE OF APPLICATION- This section shall apply with respect to--
(1) the lease or rental of a motor vehicle for a total period of 90
consecutive days or less; and
(2) insurance which is provided in connection with, and incidentally to,
such lease or rental for a period of consecutive days not exceeding the
lease or rental period.
(d) MOTOR VEHICLE DEFINED- For purposes of this section, the term `motor
vehicle' has the same meaning as in section 13102 of title 49, United States
Code.
TITLE IV--UNITARY SAVINGS AND LOAN HOLDING COMPANIES
SEC. 401. PREVENTION OF CREATION OF NEW S&L HOLDING COMPANIES WITH
COMMERCIAL AFFILIATES.
(a) IN GENERAL- Section 10(c) of the Home Owners' Loan Act (12 U.S.C.
1467a(c)) is amended by adding at the end the following new paragraph:
`(9) PREVENTION OF NEW AFFILIATIONS BETWEEN S&L HOLDING COMPANIES
AND COMMERCIAL FIRMS-
`(A) IN GENERAL- Notwithstanding paragraph (3), no company may
directly or indirectly, including through any merger, consolidation, or
other type of business combination, acquire control of a savings
association after May 4, 1999, unless the company is engaged, directly or
indirectly (including through a subsidiary other than a savings
association), only in activities that are permitted--
`(i) under paragraph (1)(C) or (2) of this subsection;
or
`(ii) for financial holding companies under section 4(k) of the Bank
Holding Company Act of 1956.
`(B) PREVENTION OF NEW COMMERCIAL AFFILIATIONS- Notwithstanding
paragraph (3), no savings and loan holding company may engage directly or
indirectly (including through a subsidiary other than a savings
association) in any activity other than as described in clauses (i) and
(ii) of subparagraph (A).
`(C) PRESERVATION OF AUTHORITY OF EXISTING UNITARY S&L HOLDING
COMPANIES- Subparagraphs (A) and (B) do not apply with respect to any
company that was a savings and loan holding company on May 4, 1999, or
that becomes a savings and loan holding company pursuant to an application
pending before the Office on or before that date, and that--
`(i) meets and continues to meet the requirements of paragraph (3);
and
`(ii) continues to control not fewer than 1 savings association that
it controlled on May 4, 1999, or that it acquired pursuant to an
application pending before the Office on or before that date, or the
successor to such savings association.
`(D) CORPORATE REORGANIZATIONS PERMITTED- This paragraph does not
prevent a transaction that--
`(i) involves solely a company under common control with a savings
and loan holding company from acquiring, directly or indirectly, control
of the savings and loan holding company or any savings association that
is already a subsidiary of the savings and loan holding company;
or
`(ii) involves solely a merger, consolidation, or other type of
business combination as a result of which a company under common control
with the savings and loan holding company acquires, directly or
indirectly, control of the savings and loan holding company or any
savings association that is already a subsidiary of the savings and loan
holding company.
`(E) AUTHORITY TO PREVENT EVASIONS- The Director may issue
interpretations, regulations, or orders that the Director determines
necessary to administer and carry out the purpose and prevent evasions of
this paragraph, including a determination that, notwithstanding the form
of a transaction, the transaction would in substance result in a company
acquiring control of a savings association.
`(F) PRESERVATION OF AUTHORITY FOR FAMILY TRUSTS- Subparagraphs (A)
and (B) do not apply with respect to any trust that becomes a savings and
loan holding company with respect to a savings association, if--
`(i) not less than 85 percent of the beneficial ownership interests
in the trust are continuously owned, directly or indirectly, by or for
the benefit of members of the same family, or their spouses, who are
lineal descendants of common ancestors who controlled, directly or
indirectly, such savings association on May 4, 1999, or a subsequent
date, pursuant to an application pending before the Office on or before
May 4, 1999; and
`(ii) at the time at which such trust becomes a savings and loan
holding company, such ancestors or lineal descendants, or spouses of
such descendants, have directly or indirectly controlled the savings
association continuously since May 4, 1999, or a subsequent date,
pursuant to an application pending before the Office on or before May 4,
1999.'.
(b) CONFORMING AMENDMENT- Section 10(o)(5)(E) of the Home Owners' Loan Act
(12 U.S.C. 1467a(o)(5)(E)) is amended by striking `, except subparagraph (B)'
and inserting `or (c)(9)(A)(ii)'.
(c) RULE OF CONSTRUCTION FOR CERTAIN APPLICATIONS-
(1) IN GENERAL- In the case of a company that--
(A) submits an application with the Director of the Office of Thrift
Supervision before the date of the enactment of this Act to convert a
State-chartered trust company controlled by such company on May 4, 1999,
to a savings association; and
(B) controlled a subsidiary on May 4, 1999, that had submitted an
application to the Director on September 2, 1998;
the company (including any subsidiary controlled by such company as of
such date of enactment) shall be treated as having filed such conversion
application with the Director before May 4, 1999, for purposes of section
10(c)(9)(C) of the Home Owners' Loan Act (as added by subsection (a)).
(2) DEFINITIONS- For purposes of paragraph (1), the terms `company',
`control', `savings association', and `subsidiary' have the meanings given
those terms in section 10 of the Home Owners' Loan Act.
TITLE V--PRIVACY
Subtitle A--Disclosure of Nonpublic Personal Information
SEC. 501. PROTECTION OF NONPUBLIC PERSONAL INFORMATION.
(a) PRIVACY OBLIGATION POLICY- It is the policy of the Congress that each
financial institution has an affirmative and continuing obligation to respect
the privacy of its customers and to protect the security and confidentiality
of those customers' nonpublic personal information.
(b) FINANCIAL INSTITUTIONS SAFEGUARDS- In furtherance of the policy in
subsection (a), each agency or authority described in section 505(a) shall
establish appropriate standards for the financial institutions subject to
their jurisdiction relating to administrative, technical, and physical
safeguards--
(1) to insure the security and confidentiality of customer records and
information;
(2) to protect against any anticipated threats or hazards to the
security or integrity of such records; and
(3) to protect against unauthorized access to or use of such records or
information which could result in substantial harm or inconvenience to any
customer.
SEC. 502. OBLIGATIONS WITH RESPECT TO DISCLOSURES OF PERSONAL
INFORMATION.
(a) NOTICE REQUIREMENTS- Except as otherwise provided in this subtitle, a
financial institution may not, directly or through any affiliate, disclose to
a nonaffiliated third party any nonpublic personal information, unless such
financial institution provides or has provided to the consumer a notice that
complies with section 503.
(1) IN GENERAL- A financial institution may not disclose nonpublic
personal information to a nonaffiliated third party unless--
(A) such financial institution clearly and conspicuously discloses to
the consumer, in writing or in electronic form or other form permitted by
the regulations prescribed under section 504, that such information may be
disclosed to such third party;
(B) the consumer is given the opportunity, before the time that such
information is initially disclosed, to direct that such information not be
disclosed to such third party; and
(C) the consumer is given an explanation of how the consumer can
exercise that nondisclosure option.
(2) EXCEPTION- This subsection shall not prevent a financial institution
from providing nonpublic personal information to a nonaffiliated third party
to perform services for or functions on behalf of the financial institution,
including marketing of the financial institution's own products or services,
or financial products or services offered pursuant to joint agreements
between two or more financial institutions that comply with the requirements
imposed by the regulations prescribed under section 504, if the financial
institution fully discloses the providing of such information and enters
into a contractual agreement with the third party that requires the third
party to maintain the confidentiality of such information.
(c) LIMITS ON REUSE OF INFORMATION- Except as otherwise provided in this
subtitle, a nonaffiliated third party that receives from a financial
institution nonpublic personal information under this section shall not,
directly or through an affiliate of such receiving third party, disclose such
information to any other person that is a nonaffiliated third party of both
the financial institution and such receiving third party, unless such
disclosure would be lawful if made directly to such other person by the
financial institution.
(d) LIMITATIONS ON THE SHARING OF ACCOUNT NUMBER INFORMATION FOR MARKETING
PURPOSES- A financial institution shall not disclose, other than to a consumer
reporting agency, an account number or similar form of access number or access
code for a credit card account, deposit account, or transaction account of a
consumer to any nonaffiliated third party for use in telemarketing, direct
mail marketing, or other marketing through electronic mail to the consumer.
(e) GENERAL EXCEPTIONS- Subsections (a) and (b) shall not prohibit the
disclosure of nonpublic personal information--
(1) as necessary to effect, administer, or enforce a transaction
requested or authorized by the consumer, or in connection with--
(A) servicing or processing a financial product or service requested
or authorized by the consumer;
(B) maintaining or servicing the consumer's account with the financial
institution, or with another entity as part of a private label credit card
program or other extension of credit on behalf of such entity; or
(C) a proposed or actual securitization, secondary market sale
(including sales of servicing rights), or similar transaction related to a
transaction of the consumer;
(2) with the consent or at the direction of the consumer;
(3)(A) to protect the confidentiality or security of the financial
institution's records pertaining to the consumer, the service or product, or
the transaction therein; (B) to protect against or prevent actual or
potential fraud, unauthorized transactions, claims, or other liability; (C)
for required institutional risk control, or for resolving customer disputes
or inquiries; (D) to persons holding a legal or beneficial interest relating
to the consumer; or (E) to persons acting in a fiduciary or representative
capacity on behalf of the consumer;
(4) to provide information to insurance rate advisory organizations,
guaranty funds or agencies, applicable rating agencies of the financial
institution, persons assessing the institution's compliance with industry
standards, and the institution's attorneys, accountants, and auditors;
(5) to the extent specifically permitted or required under other
provisions of law and in accordance with the Right to Financial Privacy Act
of 1978, to law enforcement agencies (including a Federal functional
regulator, the Secretary of the Treasury with respect to subchapter II of
chapter 53 of title 31, United States Code, and chapter 2 of title I of
Public Law 91-508 (12 U.S.C. 1951-1959), a State insurance authority, or the
Federal Trade Commission), self-regulatory organizations, or for an
investigation on a matter related to public safety;
(6)(A) to a consumer reporting agency in accordance with the Fair Credit
Reporting Act, or (B) from a consumer report reported by a consumer
reporting agency;
(7) in connection with a proposed or actual sale, merger, transfer, or
exchange of all or a portion of a business or operating unit if the
disclosure of nonpublic personal information concerns solely consumers of
such business or unit; or
(8) to comply with Federal, State, or local laws, rules, and other
applicable legal requirements; to comply with a properly authorized civil,
criminal, or regulatory investigation or subpoena or summons by Federal,
State, or local authorities; or to respond to judicial process or government
regulatory authorities having jurisdiction over the financial institution
for examination, compliance, or other purposes as authorized by law.
SEC. 503. DISCLOSURE OF INSTITUTION PRIVACY POLICY.
(a) DISCLOSURE REQUIRED- At the time of establishing a customer
relationship with a consumer and not less than annually during the
continuation of such relationship, a financial institution shall provide a
clear and conspicuous disclosure to such consumer, in writing or in electronic
form or other form permitted by the regulations prescribed under section 504,
of such financial institution's policies and practices with respect to--
(1) disclosing nonpublic personal information to affiliates and
nonaffiliated third parties, consistent with section 502, including the
categories of information that may be disclosed;
(2) disclosing nonpublic personal information of persons who have ceased
to be customers of the financial institution; and
(3) protecting the nonpublic personal information of consumers.
Such disclosures shall be made in accordance with the regulations
prescribed under section 504.
(b) INFORMATION TO BE INCLUDED- The disclosure required by subsection (a)
shall include--
(1) the policies and practices of the institution with respect to
disclosing nonpublic personal information to nonaffiliated third parties,
other than agents of the institution, consistent with section 502 of this
subtitle, and including--
(A) the categories of persons to whom the information is or may be
disclosed, other than the persons to whom the information may be provided
pursuant to section 502(e); and
(B) the policies and practices of the institution with respect to
disclosing of nonpublic personal information of persons who have ceased to
be customers of the financial institution;
(2) the categories of nonpublic personal information that are collected
by the financial institution;
(3) the policies that the institution maintains to protect the
confidentiality and security of nonpublic personal information in accordance
with section 501; and
(4) the disclosures required, if any, under section 603(d)(2)(A)(iii) of
the Fair Credit Reporting Act.
SEC. 504. RULEMAKING.
(a) REGULATORY AUTHORITY-
(1) RULEMAKING- The Federal banking agencies, the National Credit Union
Administration, the Secretary of the Treasury, the Securities and Exchange
Commission, and the Federal Trade Commission shall each prescribe, after
consultation as appropriate with representatives of State insurance
authorities designated by the National Association of Insurance
Commissioners, such regulations as may be necessary to carry out the
purposes of this subtitle with respect to the financial institutions subject
to their jurisdiction under section 505.
(2) COORDINATION, CONSISTENCY, AND COMPARABILITY- Each of the agencies
and authorities required under paragraph (1) to prescribe regulations shall
consult and coordinate with the other such agencies and authorities for the
purposes of assuring, to the extent possible, that the regulations
prescribed by each such agency and authority are consistent and comparable
with the regulations prescribed by the other such agencies and
authorities.
(3) PROCEDURES AND DEADLINE- Such regulations shall be prescribed in
accordance with applicable requirements of title 5, United States Code, and
shall be issued in final form not later than 6 months after the date of the
enactment of this Act.
(b) AUTHORITY TO GRANT EXCEPTIONS- The regulations prescribed under
subsection (a) may include such additional exceptions to subsections (a)
through (d) of section 502 as are deemed consistent with the purposes of this
subtitle.
SEC. 505. ENFORCEMENT.
(a) IN GENERAL- This subtitle and the regulations prescribed thereunder
shall be enforced by the Federal functional regulators, the State insurance
authorities, and the Federal Trade Commission with respect to financial
institutions and other persons subject to their jurisdiction under applicable
law, as follows:
(1) Under section 8 of the Federal Deposit Insurance Act, in the case
of--
(A) national banks, Federal branches and Federal agencies of foreign
banks, and any subsidiaries of such entities (except brokers, dealers,
persons providing insurance, investment companies, and investment
advisers), by the Office of the Comptroller of the Currency;
(B) member banks of the Federal Reserve System (other than national
banks), branches and agencies of foreign banks (other than Federal
branches, Federal agencies, and insured State branches of foreign banks),
commercial lending companies owned or controlled by foreign banks,
organizations operating under section 25 or 25A of the Federal Reserve
Act, and bank holding companies and their nonbank subsidiaries or
affiliates (except brokers, dealers, persons providing insurance,
investment companies, and investment advisers), by the Board of Governors
of the Federal Reserve System;
(C) banks insured by the Federal Deposit Insurance Corporation (other
than members of the Federal Reserve System), insured State branches of
foreign banks, and any subsidiaries of such entities (except brokers,
dealers, persons providing insurance, investment companies, and investment
advisers), by the Board of Directors of the Federal Deposit Insurance
Corporation; and
(D) savings associations the deposits of which are insured by the
Federal Deposit Insurance Corporation, and any subsidiaries of such
savings associations (except brokers, dealers, persons providing
insurance, investment companies, and investment advisers), by the Director
of the Office of Thrift Supervision.
(2) Under the Federal Credit Union Act, by the Board of the National
Credit Union Administration with respect to any federally insured credit
union, and any subsidiaries of such an entity.
(3) Under the Securities Exchange Act of 1934, by the Securities and
Exchange Commission with respect to any broker or dealer.
(4) Under the Investment Company Act of 1940, by the Securities and
Exchange Commission with respect to investment companies.
(5) Under the Investment Advisers Act of 1940, by the Securities and
Exchange Commission with respect to investment advisers registered with the
Commission under such Act.
(6) Under State insurance law, in the case of any person engaged in
providing insurance, by the applicable State insurance authority of the
State in which the person is domiciled, subject to section 104 of this
Act.
(7) Under the Federal Trade Commission Act, by the Federal Trade
Commission for any other financial institution or other person that is not
subject to the jurisdiction of any agency or authority under paragraphs (1)
through (6) of this subsection.
(b) ENFORCEMENT OF SECTION 501-
(1) IN GENERAL- Except as provided in paragraph (2), the agencies and
authorities described in subsection (a) shall implement the standards
prescribed under section 501(b) in the same manner, to the extent
practicable, as standards prescribed pursuant to section 39(a) of the
Federal Deposit Insurance Act are implemented pursuant to such
section.
(2) EXCEPTION- The agencies and authorities described in paragraphs (3),
(4), (5), (6), and (7) of subsection (a) shall implement the standards
prescribed under section 501(b) by rule with respect to the financial
institutions and other persons subject to their respective jurisdictions
under subsection (a).
(c) ABSENCE OF STATE ACTION- If a State insurance authority fails to adopt
regulations to carry out this subtitle, such State shall not be eligible to
override, pursuant to section 47(g)(2)(B)(iii) of the Federal Deposit
Insurance Act, the insurance customer protection regulations prescribed by a
Federal banking agency under section 47(a) of such Act.
(d) DEFINITIONS- The terms used in subsection (a)(1) that are not defined
in this subtitle or otherwise defined in section 3(s) of the Federal Deposit
Insurance Act shall have the same meaning as given in section 1(b) of the
International Banking Act of 1978.
SEC. 506. PROTECTION OF FAIR CREDIT REPORTING ACT.
(a) AMENDMENT- Section 621 of the Fair Credit Reporting Act (15 U.S.C.
1681s) is amended--
(1) in subsection (d), by striking everything following the end of the
second sentence; and
(2) by striking subsection (e) and inserting the following:
`(e) REGULATORY AUTHORITY-
`(1) The Federal banking agencies referred to in paragraphs (1) and (2)
of subsection (b) shall jointly prescribe such regulations as necessary to
carry out the purposes of this Act with respect to any persons identified
under paragraphs (1) and (2) of subsection (b), and the Board of Governors
of the Federal Reserve System shall have authority to prescribe regulations
consistent with such joint regulations with respect to bank holding
companies and affiliates (other than depository institutions and consumer
reporting agencies) of such holding companies.
`(2) The Board of the National Credit Union Administration shall
prescribe such regulations as necessary to carry out the purposes of this
Act with respect to any persons identified under paragraph (3) of subsection
(b).'.
(b) CONFORMING AMENDMENT- Section 621(a) of the Fair Credit Reporting Act
(15 U.S.C. 1681s(a)) is amended by striking paragraph (4).
(c) RELATION TO OTHER PROVISIONS- Except for the amendments made by
subsections (a) and (b), nothing in this title shall be construed to modify,
limit, or supersede the operation of the Fair Credit Reporting Act, and no
inference shall be drawn on the basis of the provisions of this title
regarding whether information is transaction or experience information under
section 603 of such Act.
SEC. 507. RELATION TO STATE LAWS.
(a) IN GENERAL- This subtitle and the amendments made by this subtitle
shall not be construed as superseding, altering, or affecting any statute,
regulation, order, or interpretation in effect in any State, except to the
extent that such statute, regulation, order, or interpretation is inconsistent
with the provisions of this subtitle, and then only to the extent of the
inconsistency.
(b) GREATER PROTECTION UNDER STATE LAW- For purposes of this section, a
State statute, regulation, order, or interpretation is not inconsistent with
the provisions of this subtitle if the protection such statute, regulation,
order, or interpretation affords any person is greater than the protection
provided under this subtitle and the amendments made by this subtitle, as
determined by the Federal Trade Commission, after consultation with the agency
or authority with jurisdiction under section 505(a) of either the person that
initiated the complaint or that is the subject of the complaint, on its own
motion or upon the petition of any interested party.
SEC. 508. STUDY OF INFORMATION SHARING AMONG FINANCIAL
AFFILIATES.
(a) IN GENERAL- The Secretary of the Treasury, in conjunction with the
Federal functional regulators and the Federal Trade Commission, shall conduct
a study of information sharing practices among financial institutions and
their affiliates. Such study shall include--
(1) the purposes for the sharing of confidential customer information
with affiliates or with nonaffiliated third parties;
(2) the extent and adequacy of security protections for such
information;
(3) the potential risks for customer privacy of such sharing of
information;
(4) the potential benefits for financial institutions and affiliates of
such sharing of information;
(5) the potential benefits for customers of such sharing of
information;
(6) the adequacy of existing laws to protect customer privacy;
(7) the adequacy of financial institution privacy policy and privacy
rights disclosure under existing law;
(8) the feasibility of different approaches, including opt-out and
opt-in, to permit customers to direct that confidential information not be
shared with affiliates and nonaffiliated third parties; and
(9) the feasibility of restricting sharing of information for specific
uses or of permitting customers to direct the uses for which information may
be shared.
(b) CONSULTATION- The Secretary shall consult with representatives of
State insurance authorities designated by the National Association of
Insurance Commissioners, and also with financial services industry, consumer
organizations and privacy groups, and other representatives of the general
public, in formulating and conducting the study required by subsection (a).
(c) REPORT- On or before January 1, 2002, the Secretary shall submit a
report to the Congress containing the findings and conclusions of the study
required under subsection (a), together with such recommendations for
legislative or administrative action as may be appropriate.
SEC. 509. DEFINITIONS.
As used in this subtitle:
(1) FEDERAL BANKING AGENCY- The term `Federal banking agency' has the
same meaning as given in section 3 of the Federal Deposit Insurance
Act.
(2) FEDERAL FUNCTIONAL REGULATOR- The term `Federal functional
regulator' means--
(A) the Board of Governors of the Federal Reserve System;
(B) the Office of the Comptroller of the Currency;
(C) the Board of Directors of the Federal Deposit Insurance
Corporation;
(D) the Director of the Office of Thrift Supervision;
(E) the National Credit Union Administration Board; and
(F) the Securities and Exchange Commission.
(3) FINANCIAL INSTITUTION-
(A) IN GENERAL- The term `financial institution' means any institution
the business of which is engaging in financial activities as described in
section 4(k) of the Bank Holding Company Act of 1956.
(B) PERSONS SUBJECT TO CFTC REGULATION- Notwithstanding subparagraph
(A), the term `financial institution' does not include any person or
entity with respect to any financial activity that is subject to the
jurisdiction of the Commodity Futures Trading Commission under the
Commodity Exchange Act.
(C) FARM CREDIT INSTITUTIONS- Notwithstanding subparagraph (A), the
term `financial institution' does not include the Federal Agricultural
Mortgage Corporation or any entity chartered and operating under the Farm
Credit Act of 1971.
(D) OTHER SECONDARY MARKET INSTITUTIONS- Notwithstanding subparagraph
(A), the term `financial institution' does not include institutions
chartered by Congress specifically to engage in transactions described in
section 502(e)(1)(C), as long as such institutions do not sell or transfer
nonpublic personal information to a nonaffiliated third party.
(4) NONPUBLIC PERSONAL INFORMATION-
(A) The term `nonpublic personal information' means personally
identifiable financial information--
(i) provided by a consumer to a financial institution;
(ii) resulting from any transaction with the consumer or any service
performed for the consumer; or
(iii) otherwise obtained by the financial institution.
(B) Such term does not include publicly available information, as such
term is defined by the regulations prescribed under section 504.
(C) Notwithstanding subparagraph (B), such term--
(i) shall include any list, description, or other grouping of
consumers (and publicly available information pertaining to them) that
is derived using any nonpublic personal information other than publicly
available information; but
(ii) shall not include any list, description, or other grouping of
consumers (and publicly available information pertaining to them) that
is derived without using any nonpublic personal information.
(5) NONAFFILIATED THIRD PARTY- The term `nonaffiliated third party'
means any entity that is not an affiliate of, or related by common ownership
or affiliated by corporate control with, the financial institution, but does
not include a joint employee of such institution.
(6) AFFILIATE- The term `affiliate' means any company that controls, is
controlled by, or is under common control with another company.
(7) NECESSARY TO EFFECT, ADMINISTER, OR ENFORCE- The term `as necessary
to effect, administer, or enforce the transaction' means--
(A) the disclosure is required, or is a usual, appropriate, or
acceptable method, to carry out the transaction or the product or service
business of which the transaction is a part, and record or service or
maintain the consumer's account in the ordinary course of providing the
financial service or financial product, or to administer or service
benefits or claims relating to the transaction or the product or service
business of which it is a part, and includes--
(i) providing the consumer or the consumer's agent or broker with a
confirmation, statement, or other record of the transaction, or
information on the status or value of the financial service or financial
product; and
(ii) the accrual or recognition of incentives or bonuses associated
with the transaction that are provided by the financial institution or
any other party;
(B) the disclosure is required, or is one of the lawful or appropriate
methods, to enforce the rights of the financial institution or of other
persons engaged in carrying out the financial transaction, or providing
the product or service;
(C) the disclosure is required, or is a usual, appropriate, or
acceptable method, for insurance underwriting at the consumer's request or
for reinsurance purposes, or for any of the following purposes as they
relate to a consumer's insurance: Account administration, reporting,
investigating, or preventing fraud or material misrepresentation,
processing premium payments, processing insurance claims, administering
insurance benefits (including utilization review activities),
participating in research projects, or as otherwise required or
specifically permitted by Federal or State law; or
(D) the disclosure is required, or is a usual, appropriate or
acceptable method, in connection with--
(i) the authorization, settlement, billing, processing, clearing,
transferring, reconciling, or collection of amounts charged, debited, or
otherwise paid using a debit, credit or other payment card, check, or
account number, or by other payment means;
(ii) the transfer of receivables, accounts or interests therein;
or
(iii) the audit of debit, credit or other payment
information.
(8) STATE INSURANCE AUTHORITY- The term `State insurance authority'
means, in the case of any person engaged in providing insurance, the State
insurance authority of the State in which the person is domiciled.
(9) CONSUMER- The term `consumer' means an individual who obtains, from
a financial institution, financial products or services which are to be used
primarily for personal, family, or household purposes, and also means the
legal representative of such an individual.
(10) JOINT AGREEMENT- The term `joint agreement' means a formal written
contract pursuant to which two or more financial institutions jointly offer,
endorse, or sponsor a financial product or service, and as may be further
defined in the regulations prescribed under section 504.
(11) CUSTOMER RELATIONSHIP- The term `time of establishing a customer
relationship' shall be defined by the regulations prescribed under section
504, and shall, in the case of a financial institution engaged in extending
credit directly to consumers to finance purchases of goods or services, mean
the time of establishing the credit relationship with the consumer.
SEC. 510. EFFECTIVE DATE.
This subtitle shall take effect 6 months after the date on which rules are
required to be prescribed under section 504(a)(3), except--
(1) to the extent that a later date is specified in the rules prescribed
under section 504; and
(2) that sections 504 and 506 shall be effective upon enactment.
Subtitle B--Fraudulent Access to Financial Information
SEC. 521. PRIVACY PROTECTION FOR CUSTOMER INFORMATION OF FINANCIAL
INSTITUTIONS.
(a) PROHIBITION ON OBTAINING CUSTOMER INFORMATION BY FALSE PRETENSES- It
shall be a violation of this subtitle for any person to obtain or attempt to
obtain, or cause to be disclosed or attempt to cause to be disclosed to any
person, customer information of a financial institution relating to another
person--
(1) by making a false, fictitious, or fraudulent statement or
representation to an officer, employee, or agent of a financial
institution;
(2) by making a false, fictitious, or fraudulent statement or
representation to a customer of a financial institution; or
(3) by providing any document to an officer, employee, or agent of a
financial institution, knowing that the document is forged, counterfeit,
lost, or stolen, was fraudulently obtained, or contains a false, fictitious,
or fraudulent statement or representation.
(b) PROHIBITION ON SOLICITATION OF A PERSON TO OBTAIN CUSTOMER INFORMATION
FROM FINANCIAL INSTITUTION UNDER FALSE PRETENSES- It shall be a violation of
this subtitle to request a person to obtain customer information of a
financial institution, knowing that the person will obtain, or attempt to
obtain, the information from the institution in any manner described in
subsection (a).
(c) NONAPPLICABILITY TO LAW ENFORCEMENT AGENCIES- No provision of this
section shall be construed so as to prevent any action by a law enforcement
agency, or any officer, employee, or agent of such agency, to obtain customer
information of a financial institution in connection with the performance of
the official duties of the agency.
(d) NONAPPLICABILITY TO FINANCIAL INSTITUTIONS IN CERTAIN CASES- No
provision of this section shall be construed so as to prevent any financial
institution, or any officer, employee, or agent of a financial institution,
from obtaining customer information of such financial institution in the
course of--
(1) testing the security procedures or systems of such institution for
maintaining the confidentiality of customer information;
(2) investigating allegations of misconduct or negligence on the part of
any officer, employee, or agent of the financial institution; or
(3) recovering customer information of the financial institution which
was obtained or received by another person in any manner described in
subsection (a) or (b).
(e) NONAPPLICABILITY TO INSURANCE INSTITUTIONS FOR INVESTIGATION OF
INSURANCE FRAUD- No provision of this section shall be construed so as to
prevent any insurance institution, or any officer, employee, or agency of an
insurance institution, from obtaining information as part of an insurance
investigation into criminal activity, fraud, material misrepresentation, or
material nondisclosure that is authorized for such institution under State
law, regulation, interpretation, or order.
(f) NONAPPLICABILITY TO CERTAIN TYPES OF CUSTOMER INFORMATION OF FINANCIAL
INSTITUTIONS- No provision of this section shall be construed so as to prevent
any person from obtaining customer information of a financial institution that
otherwise is available as a public record filed pursuant to the securities
laws (as defined in section 3(a)(47) of the Securities Exchange Act of
1934).
(g) NONAPPLICABILITY TO COLLECTION OF CHILD SUPPORT JUDGMENTS- No
provision of this section shall be construed to prevent any State-licensed
private investigator, or any officer, employee, or agent of such private
investigator, from obtaining customer information of a financial institution,
to the extent reasonably necessary to collect child support from a person
adjudged to have been delinquent in his or her obligations by a Federal or
State court, and to the extent that such action by a State-licensed private
investigator is not unlawful under any other Federal or State law or
regulation, and has been authorized by an order or judgment of a court of
competent jurisdiction.
SEC. 522. ADMINISTRATIVE ENFORCEMENT.
(a) ENFORCEMENT BY FEDERAL TRADE COMMISSION- Except as provided in
subsection (b), compliance with this subtitle shall be enforced by the Federal
Trade Commission in the same manner and with the same power and authority as
the Commission has under the Fair Debt Collection Practices Act to enforce
compliance with such Act.
(b) ENFORCEMENT BY OTHER AGENCIES IN CERTAIN CASES-
(1) IN GENERAL- Compliance with this subtitle shall be enforced
under--
(A) section 8 of the Federal Deposit Insurance Act, in the case
of--
(i) national banks, and Federal branches and Federal agencies of
foreign banks, by the Office of the Comptroller of the
Currency;
(ii) member banks of the Federal Reserve System (other than national
banks), branches and agencies of foreign banks (other than Federal
branches, Federal agencies, and insured State branches of foreign
banks), commercial lending companies owned or controlled by foreign
banks, and organizations operating under section 25 or 25A of the
Federal Reserve Act, by the Board;
(iii) banks insured by the Federal Deposit Insurance Corporation
(other than members of the Federal Reserve System and national nonmember
banks) and insured State branches of foreign banks, by the Board of
Directors of the Federal Deposit Insurance Corporation; and
(iv) savings associations the deposits of which are insured by the
Federal Deposit Insurance Corporation, by the Director of the Office of
Thrift Supervision; and
(B) the Federal Credit Union Act, by the Administrator of the National
Credit Union Administration with respect to any Federal credit
union.
(2) VIOLATIONS OF THIS SUBTITLE TREATED AS VIOLATIONS OF OTHER LAWS- For
the purpose of the exercise by any agency referred to in paragraph (1) of
its powers under any Act referred to in that paragraph, a violation of this
subtitle shall be deemed to be a violation of a requirement imposed under
that Act. In addition to its powers under any provision of law specifically
referred to in paragraph (1), each of the agencies referred to in that
paragraph may exercise, for the purpose of enforcing compliance with this
subtitle, any other authority conferred on such agency by law.
SEC. 523. CRIMINAL PENALTY.
(a) IN GENERAL- Whoever knowingly and intentionally violates, or knowingly
and intentionally attempts to violate, section 521 shall be fined in
accordance with title 18, United States Code, or imprisoned for not more than
5 years, or both.
(b) ENHANCED PENALTY FOR AGGRAVATED CASES- Whoever violates, or attempts
to violate, section 521 while violating another law of the United States or as
part of a pattern of any illegal activity involving more than $100,000 in a
12-month period shall be fined twice the amount provided in subsection (b)(3)
or (c)(3) (as the case may be) of section 3571 of title 18, United States
Code, imprisoned for not more than 10 years, or both.
SEC. 524. RELATION TO STATE LAWS.
(a) IN GENERAL- This subtitle shall not be construed as superseding,
altering, or affecting the statutes, regulations, orders, or interpretations
in effect in any State, except to the extent that such statutes, regulations,
orders, or interpretations are inconsistent with the provisions of this
subtitle, and then only to the extent of the inconsistency.
(b) GREATER PROTECTION UNDER STATE LAW- For purposes of this section, a
State statute, regulation, order, or interpretation is not inconsistent with
the provisions of this subtitle if the protection such statute, regulation,
order, or interpretation affords any person is greater than the protection
provided under this subtitle as determined by the Federal Trade Commission,
after consultation with the agency or authority with jurisdiction under
section 522 of either the person that initiated the complaint or that is the
subject of the complaint, on its own motion or upon the petition of any
interested party.
SEC. 525. AGENCY GUIDANCE.
In furtherance of the objectives of this subtitle, each Federal banking
agency (as defined in section 3(z) of the Federal Deposit Insurance Act), the
National Credit Union Administration, and the Securities and Exchange
Commission or self-regulatory organizations, as appropriate, shall review
regulations and guidelines applicable to financial institutions under their
respective jurisdictions and shall prescribe such revisions to such
regulations and guidelines as may be necessary to ensure that such financial
institutions have policies, procedures, and controls in place to prevent the
unauthorized disclosure of customer financial information and to deter and
detect activities proscribed under section 521.
SEC. 526. REPORTS.
(a) REPORT TO THE CONGRESS- Before the end of the 18-month period
beginning on the date of the enactment of this Act, the Comptroller General,
in consultation with the Federal Trade Commission, Federal banking agencies,
the National Credit Union Administration, the Securities and Exchange
Commission, appropriate Federal law enforcement agencies, and appropriate
State insurance regulators, shall submit to the Congress a report on the
following:
(1) The efficacy and adequacy of the remedies provided in this subtitle
in addressing attempts to obtain financial information by fraudulent means
or by false pretenses.
(2) Any recommendations for additional legislative or regulatory action
to address threats to the privacy of financial information created by
attempts to obtain information by fraudulent means or false pretenses.
(b) ANNUAL REPORT BY ADMINISTERING AGENCIES- The Federal Trade Commission
and the Attorney General shall submit to Congress an annual report on number
and disposition of all enforcement actions taken pursuant to this subtitle.
SEC. 527. DEFINITIONS.
For purposes of this subtitle, the following definitions shall apply:
(1) CUSTOMER- The term `customer' means, with respect to a financial
institution, any person (or authorized representative of a person) to whom
the financial institution provides a product or service, including that of
acting as a fiduciary.
(2) CUSTOMER INFORMATION OF A FINANCIAL INSTITUTION- The term `customer
information of a financial institution' means any information maintained by
or for a financial institution which is derived from the relationship
between the financial institution and a customer of the financial
institution and is identified with the customer.
(3) DOCUMENT- The term `document' means any information in any
form.
(4) FINANCIAL INSTITUTION-
(A) IN GENERAL- The term `financial institution' means any institution
engaged in the business of providing financial services to customers who
maintain a credit, deposit, trust, or other financial account or
relationship with the institution.
(B) CERTAIN FINANCIAL INSTITUTIONS SPECIFICALLY INCLUDED- The term
`financial institution' includes any depository institution (as defined in
section 19(b)(1)(A) of the Federal Reserve Act), any broker or dealer, any
investment adviser or investment company, any insurance company, any loan
or finance company, any credit card issuer or operator of a credit card
system, and any consumer reporting agency that compiles and maintains
files on consumers on a nationwide basis (as defined in section 603(p) of
the Consumer Credit Protection Act).
(C) SECURITIES INSTITUTIONS- For purposes of subparagraph
(B)--
(i) the terms `broker' and `dealer' have the same meanings as given
in section 3 of the Securities Exchange Act of 1934 (15 U.S.C.
78c);
(ii) the term `investment adviser' has the same meaning as given in
section 202(a)(11) of the Investment Advisers Act of 1940 (15 U.S.C.
80b-2(a)); and
(iii) the term `investment company' has the same meaning as given in
section 3 of the Investment Company Act of 1940 (15 U.S.C.
80a-3).
(D) CERTAIN PERSONS AND ENTITIES SPECIFICALLY EXCLUDED- The term
`financial institution' does not include any person or entity with respect
to any financial activity that is subject to the jurisdiction of the
Commodity Futures Trading Commission under the Commodity Exchange Act and
does not include the Federal Agricultural Mortgage Corporation or any
entity chartered and operating under the Farm Credit Act of 1971.
(E) FURTHER DEFINITION BY REGULATION- The Federal Trade Commission,
after consultation with Federal banking agencies and the Securities and
Exchange Commission, may prescribe regulations clarifying or describing
the types of institutions which shall be treated as financial institutions
for purposes of this subtitle.
TITLE VI--FEDERAL HOME LOAN BANK SYSTEM MODERNIZATION
SEC. 601. SHORT TITLE.
This title may be cited as the `Federal Home Loan Bank System
Modernization Act of 1999'.
SEC. 602. DEFINITIONS.
Section 2 of the Federal Home Loan Bank Act (12 U.S.C. 1422) is
amended--
(1) in paragraph (1), by striking `term `Board' means' and inserting
`terms `Finance Board' and `Board' mean';
(2) by striking paragraph (3) and inserting the following:
`(3) STATE- The term `State', in addition to the States of the United
States, includes the District of Columbia, Guam, Puerto Rico, the United
States Virgin Islands, American Samoa, and the Commonwealth of the Northern
Mariana Islands.'; and
(3) by adding at the end the following new paragraph:
`(13) COMMUNITY FINANCIAL INSTITUTION-
`(A) IN GENERAL- The term `community financial institution' means a
member--
`(i) the deposits of which are insured under the Federal Deposit
Insurance Act; and
`(ii) that has, as of the date of the transaction at issue, less
than $500,000,000 in average total assets, based on an average of total
assets over the 3 years preceding that date.
`(B) ADJUSTMENTS- The $500,000,000 limit referred to in subparagraph
(A)(ii) shall be adjusted annually by the Finance Board, based on the
annual percentage increase, if any, in the Consumer Price Index for all
urban consumers, as published by the Department of Labor.'.
SEC. 603. SAVINGS ASSOCIATION MEMBERSHIP.
Section 5(f) of the Home Owners' Loan Act (12 U.S.C. 1464(f)) is amended
to read as follows:
`(f) FEDERAL HOME LOAN BANK MEMBERSHIP- After the end of the 6-month
period beginning on the date of the enactment of the Federal Home Loan Bank
System Modernization Act of 1999, a Federal savings association may become a
member of the Federal Home Loan Bank System, and shall qualify for such
membership in the manner provided by the Federal Home Loan Bank Act.'.
SEC. 604. ADVANCES TO MEMBERS; COLLATERAL.
(a) IN GENERAL- Section 10(a) of the Federal Home Loan Bank Act (12 U.S.C.
1430(a)) is amended--
(1) by redesignating paragraphs (1) through (4) as subparagraphs (A)
through (D), respectively, and indenting appropriately;
(2) by striking `(a) Each' and inserting the following:
`(1) ALL ADVANCES- Each';
(3) by striking the second sentence and inserting the following:
`(2) PURPOSES OF ADVANCES- A long-term advance may only be made for the
purposes of--
`(A) providing funds to any member for residential housing finance;
and
`(B) providing funds to any community financial institution for small
businesses, small farms, and small agri-businesses.';
(4) by striking `A Bank' and inserting the following:
`(3) COLLATERAL- A Bank';
(5) in paragraph (3) (as so designated by paragraph (4) of this
subsection)--
(A) in subparagraph (C) (as so redesignated by paragraph (1) of this
subsection) by striking `Deposits' and inserting `Cash or
deposits';
(B) in subparagraph (D) (as so redesignated by paragraph (1) of this
subsection), by striking the second sentence; and
(C) by inserting after subparagraph (D) (as so redesignated by
paragraph (1) of this subsection) the following new subparagraph:
`(E) Secured loans for small business, agriculture, or securities
representing a whole interest in such secured loans, in the case of any
community financial institution.';
(A) in the second sentence, by striking `and the Board';
(B) in the third sentence, by striking `Board' and inserting `Federal
home loan bank'; and
(C) by striking `(5) Paragraphs (1) through (4)' and inserting the
following:
`(4) ADDITIONAL BANK AUTHORITY- Subparagraphs (A) through (E) of
paragraph (3)'; and
(7) by adding at the end the following:
`(5) REVIEW OF CERTAIN COLLATERAL STANDARDS- The Board may review the
collateral standards applicable to each Federal home loan bank for the
classes of collateral described in subparagraphs (D) and (E) of paragraph
(3), and may, if necessary for safety and soundness purposes, require an
increase in the collateral standards for any or all of those classes of
collateral.
`(6) DEFINITIONS- For purposes of this subsection, the terms `small
business', `agriculture', `small farm', and `small agri-business' shall have
the meanings given those terms by regulation of the Finance Board.'.
(b) CLERICAL AMENDMENT- The section heading for section 10 of the Federal
Home Loan Bank Act (12 U.S.C. 1430) is amended to read as follows:
`SEC. 10. ADVANCES TO MEMBERS.'.
(c) QUALIFIED THRIFT LENDER STATUS- Section 10 of the Federal Home Loan
Bank Act (12 U.S.C. 1430) is amended by striking the first of the 2
subsections designated as subsection (e).
(d) FEDERAL HOME LOAN BANK ACCESS- Section 10(m)(3)(B) of the Home Owners'
Loan Act (12 U.S.C. 1467a(m)(3)(B)) is amended--
(1) in clause (i), by striking subclause (III) and redesignating
subclause (IV) as subclause (III); and
(2) by striking clause (ii) and inserting the following:
`(ii) ADDITIONAL RESTRICTIONS EFFECTIVE AFTER 3 YEARS- Beginning 3
years after the date on which a savings association should have become a
qualified thrift lender, or the date on which the savings association
ceases to be a qualified thrift lender, as applicable, the savings
association shall not retain any investment (including an investment in
any subsidiary) or engage, directly or indirectly, in any activity,
unless that investment or activity--
`(I) would be permissible for the savings association if it were a
national bank; and
`(II) is permissible for the savings association as a savings
association.'.
SEC. 605. ELIGIBILITY CRITERIA.
Section 4(a) of the Federal Home Loan Bank Act (12 U.S.C. 1424(a)) is
amended--
(1) in paragraph (2)(A), by inserting `(other than a community financial
institution)' after `institution';
(2) in the matter immediately following paragraph (2)(C)--
(A) by striking `An insured' and inserting the following:
`(3) CERTAIN INSTITUTIONS- An insured'; and
(B) by striking `preceding sentence' and inserting `paragraph (2)';
and
(3) by adding at the end the following new paragraph:
`(4) LIMITED EXEMPTION FOR COMMUNITY FINANCIAL INSTITUTIONS- A community
financial institution that otherwise meets the requirements of paragraph (2)
may become a member without regard to the percentage of its total assets
that is represented by residential mortgage loans, as described in
subparagraph (A) of paragraph (2).'.
SEC. 606. MANAGEMENT OF BANKS.
(a) BOARD OF DIRECTORS- Section 7 of the Federal Home Loan Bank Act (12
U.S.C. 1427(d)) is amended--
(1) in subsection (a), by striking `and bona fide residents of the
district in which such bank is located' and inserting `, and each of whom
shall be either a bona fide resident of the district in which such bank is
located or an officer or director of a member of such bank located in that
district';
(2) in subsection (d), by striking the first sentence and inserting the
following: `The term of each director, whether elected or appointed, shall
be 3 years. The board of directors of each Federal home loan bank and the
Finance Board shall adjust the terms of members first elected or appointed
after the date of the enactment of the Federal Home Loan Bank System
Modernization Act of 1999 to ensure that the terms of the members of the
board of directors are staggered with approximately 1/3 of the terms
expiring each year.'; and
(3) by striking subsection (g) and inserting the following:
`(g) CHAIRPERSON AND VICE CHAIRPERSON-
`(1) ELECTION- The Chairperson and Vice Chairperson of the board of
directors of each Federal home loan bank shall be elected by a majority of
all the directors of such bank from among the directors of the bank.
`(2) TERMS- The term of office of the Chairperson and the Vice
Chairperson of the board of directors of a Federal home loan bank shall be 2
years.
`(3) ACTING CHAIRPERSON- In the event of a vacancy in the position of
Chairperson of the board of directors or during the absence or disability of
the Chairperson, the Vice Chairperson shall act as Chairperson.
`(4) PROCEDURES- The board of directors of each Federal home loan bank
shall establish procedures, in the bylaws of such board, for designating an
acting chairperson for any period during which the Chairperson and the Vice
Chairperson are not available to carry out the requirements of that position
for any reason and removing any person from any such position for good
cause.'.
(b) COMPENSATION- Section 7(i) of the Federal Home Loan Bank Act (12
U.S.C. 1427(i)) is amended--
(1) by striking `(i) Each bank may pay its directors' and inserting `(i)
DIRECTORS' COMPENSATION-
`(1) IN GENERAL- Subject to paragraph (2), each bank may pay its
directors'; and
(2) by adding at the end the following new paragraph:
`(A) IN GENERAL- The annual salary of each of the following members of
the board of directors of a Federal home loan bank may not exceed the
amount specified:
`In the case of the--
The annual compensation
may not exceed--
Chairperson
$25,000
Vice Chairperson
$20,000
All other members
$15,000.
`(B) ADJUSTMENT- Beginning January 1, 2001, each dollar amount
referred to in the table in subparagraph (A) shall be adjusted annually by
the Finance Board, based on the annual percentage increase, if any, in the
Consumer Price Index for all urban consumers, as published by the
Department of Labor.
`(C) EXPENSES- Subparagraph (A) shall not be construed as prohibiting
the reimbursement of expenses incurred by members of the board of
directors of any Federal home loan bank in connection with service on the
board of directors.'.
(c) REPEAL OF SECTIONS 22A AND 27- The Federal Home Loan Bank Act (12
U.S.C. 1421 et seq.) is amended by striking sections 22A (12 U.S.C. 1442a) and
27 (12 U.S.C. 1447).
(d) SECTION 12- Section 12 of the Federal Home Loan Bank Act (12 U.S.C.
1432) is amended--
(A) by striking `, but, except' and all that follows through `ten
years';
(B) by striking `subject to the approval of the Board' the first place
that term appears;
(C) by striking `and, by its Board of directors,' and all that follows
through `agent of such bank,' and inserting `and, by the board of
directors of the bank, to prescribe, amend, and repeal by-laws governing
the manner in which its affairs may be administered, consistent with
applicable laws and regulations, as administered by the Finance Board. No
officer, employee, attorney, or agent of a Federal home loan bank';
and
(D) by striking `Board of directors' where such term appears in the
penultimate sentence and inserting `board of directors'; and
(2) in subsection (b), by striking `loans banks' and inserting `loan
banks'.
(e) POWERS AND DUTIES OF FEDERAL HOUSING FINANCE BOARD-
(1) ISSUANCE OF NOTICES OF VIOLATIONS- Section 2B(a) of the Federal Home
Loan Bank Act (12 U.S.C. 1422b(a)) is amended by adding at the end the
following new paragraphs:
`(5) To issue and serve a notice of charges upon a Federal home loan
bank or upon any executive officer or director of a Federal home loan bank
if, in the determination of the Finance Board, the Bank, executive officer,
or director is engaging or has engaged in, or the Finance Board has
reasonable cause to believe that the Bank, executive officer, or director is
about to engage in an unsafe or unsound practice in conducting the business
of the bank, or any conduct that violates any provision of this Act or any
law, order, rule, or regulation or any condition imposed in writing by the
Finance Board in connection with the granting of any application or other
request by the Bank, or any written agreement entered into by the Bank with
the agency, in accordance with the procedures provided in subsection (c) or
(f) of section 1371 of the Federal Housing Enterprises Financial Safety and
Soundness Act of 1992. Such authority includes the same authority to issue
an order requiring a party to take affirmative action to correct conditions
resulting from violations or practices or to limit activities of a Bank or
any executive officer or director of a Bank as appropriate Federal banking
agencies have to take with respect to insured depository institutions under
paragraphs (6) and (7) of section 8(b) of the Federal Deposit Insurance Act,
and to have all other powers, rights, and duties to enforce this Act with
respect to the Federal home loan banks and their executive officers and
directors as the Office of Federal Housing Enterprise Oversight has to
enforce the Federal Housing Enterprises Financial Safety and Soundness Act
of 1992, the Federal National Mortgage Association Charter Act, or the
Federal Home Loan Mortgage Corporation Act with respect to the Federal
housing enterprises under subtitle C (other than section 1371) of the
Federal Housing Enterprises Financial Safety and Soundness Act of
1992.
`(6) To address any insufficiencies in capital levels resulting from the
application of section 5(f) of the Home Owners' Loan Act.
`(7) To act in its own name and through its own attorneys--
`(A) in enforcing any provision of this Act or any regulation
promulgated under this Act; or
`(B) in any action, suit, or proceeding to which the Finance Board is
a party that involves the Board's regulation or supervision of any Federal
home loan bank.'.
(2) TECHNICAL AMENDMENT- Section 111 of Public Law 93-495 (12 U.S.C.
250) is amended by striking `Federal Home Loan Bank Board,' and inserting
`Director of the Office of Thrift Supervision, the Federal Housing Finance
Board,'.
(f) ELIGIBILITY TO SECURE ADVANCES-
(1) SECTION 9- Section 9 of the Federal Home Loan Bank Act (12 U.S.C.
1429) is amended--
(A) in the second sentence, by striking `with the approval of the
Board'; and
(B) in the third sentence, by striking `, subject to the approval of
the Board,'.
(2) SECTION 10- Section 10 of the Federal Home Loan Bank Act (12 U.S.C.
1430) is amended--
(i) in the first sentence, by striking `Board' and inserting
`Federal home loan bank'; and
(ii) by striking the second sentence; and
(i) in the first sentence, by striking `and the approval of the
Board'; and
(ii) by striking `Subject to the approval of the Board, any' and
inserting `Any'.
(g) SECTION 16- Section 16(a) of the Federal Home Loan Bank Act (12 U.S.C.
1436(a)) is amended--
(1) in the third sentence--
(A) by striking `net earnings' and inserting `previously retained
earnings or current net earnings'; and
(B) by striking `, and then only with the approval of the Federal
Housing Finance Board'; and
(2) by striking the fourth sentence.
(h) SECTION 18- Section 18(b) of the Federal Home Loan Bank Act (12 U.S.C.
1438(b)) is amended by striking paragraph (4).
SEC. 607. RESOLUTION FUNDING CORPORATION.
(a) IN GENERAL- Section 21B(f)(2)(C) of the Federal Home Loan Bank Act (12
U.S.C. 1441b(f)(2)(C)) is amended to read as follows:
`(C) PAYMENTS BY FEDERAL HOME LOAN BANKS-
`(i) IN GENERAL- To the extent that the amounts available pursuant
to subparagraphs (A) and (B) are insufficient to cover the amount of
interest payments, each Federal home loan bank shall pay to the Funding
Corporation in each calendar year, 20.0 percent of the net earnings of
that Bank (after deducting expenses relating to section 10(j) and
operating expenses).
`(ii) ANNUAL DETERMINATION- The Board annually shall determine the
extent to which the value of the aggregate amounts paid by the Federal
home loan banks exceeds or falls short of the value of an annuity of
$300,000,000 per year that commences on the issuance date and ends on
the final scheduled maturity date of the obligations, and shall select
appropriate present value factors for making such determinations, in
consultation with the Secretary of the Treasury.
`(iii) PAYMENT TERM ALTERATIONS- The Board shall extend or shorten
the term of the payment obligations of a Federal home loan bank under
this subparagraph as necessary to ensure that the value of all payments
made by the Banks is equivalent to the value of an annuity referred to
in clause (ii).
`(iv) TERM BEYOND MATURITY- If the Board extends the term of payment
obligations beyond the final scheduled maturity date for the
obligations, each Federal home loan bank shall continue to pay 20.0
percent of its net earnings (after deducting expenses relating to
section 10(j) and operating expenses) to the Treasury of the United
States until the value of all such payments by the Federal home loan
banks is equivalent to the value of an annuity referred to in clause
(ii). In the final year in which the Federal home loan banks are
required to make any payment to the Treasury under this subparagraph, if
the dollar amount represented by 20.0 percent of the net earnings of the
Federal home loan banks exceeds the remaining obligation of the Banks to
the Treasury, the Finance Board shall reduce the percentage pro rata to
a level sufficient to pay the remaining obligation.'.
(b) EFFECTIVE DATE- The amendment made by subsection (a) shall become
effective on January 1, 2000. Payments made by a Federal home loan bank before
that effective date shall be counted toward the total obligation of that Bank
under section 21B(f)(2)(C) of the Federal Home Loan Bank Act, as amended by
this section.
SEC. 608. CAPITAL STRUCTURE OF FEDERAL HOME LOAN BANKS.
Section 6 of the Federal Home Loan Bank Act (12 U.S.C. 1426) is amended to
read as follows:
`SEC. 6. CAPITAL STRUCTURE OF FEDERAL HOME LOAN BANKS.
`(1) CAPITAL STANDARDS- Not later than 1 year after the date of the
enactment of the Federal Home Loan Bank System Modernization Act of 1999,
the Finance Board shall issue regulations prescribing uniform capital
standards applicable to each Federal home loan bank, which shall require
each such bank to meet--
`(A) the leverage requirement specified in paragraph (2); and
`(B) the risk-based capital requirements, in accordance with paragraph
(3).
`(2) LEVERAGE REQUIREMENT-
`(A) IN GENERAL- The leverage requirement shall require each Federal
home loan bank to maintain a minimum amount of total capital based on the
total assets of the bank and shall be 5 percent.
`(B) TREATMENT OF STOCK AND RETAINED EARNINGS- In determining
compliance with the minimum leverage ratio established under subparagraph
(A), the paid-in value of the outstanding Class B stock and the amount of
retained earnings shall be multiplied by 1.5, and such higher amounts
shall be deemed to be capital for purposes of meeting the 5 percent
minimum leverage ratio, except that a Federal home loan bank's total
capital (determined without taking into account any such multiplier) shall
not be less than 4 percent of the total assets of the bank.
`(3) RISK-BASED CAPITAL STANDARDS-
`(A) IN GENERAL- Each Federal home loan bank shall maintain permanent
capital in an amount that is sufficient, as determined in accordance with
the regulations of the Finance Board, to meet--
`(i) the credit risk to which the Federal home loan bank is subject;
and
`(ii) the market risk, including interest rate risk, to which the
Federal home loan bank is subject, based on a stress test established by
the Finance Board that rigorously tests for changes in market variables,
including changes in interest rates, rate volatility, and changes in the
shape of the yield curve.
`(B) CONSIDERATION OF OTHER RISK-BASED STANDARDS- In establishing the
risk-based standard under subparagraph (A)(ii), the Finance Board shall
take due consideration of any risk-based capital test established pursuant
to section 1361 of the Federal Housing Enterprises Financial Safety and
Soundness Act of 1992 (12 U.S.C. 4611) for the enterprises (as defined in
that Act), with such modifications as the Finance Board determines to be
appropriate to reflect differences in operations between the Federal home
loan banks and those enterprises.
`(4) OTHER REGULATORY REQUIREMENTS- The regulations issued by the
Finance Board under paragraph (1) shall--
`(A) permit each Federal home loan bank to issue, with such rights,
terms, and preferences, not inconsistent with this Act and the regulations
issued hereunder, as the board of directors of that bank may approve, any
1 or more of--
`(i) Class A stock, which shall be redeemable in cash and at par 6
months following submission by a member of a written notice of its
intent to redeem such shares; and
`(ii) Class B stock, which shall be redeemable in cash and at par 5
years following submission by a member of a written notice of its intent
to redeem such shares;
`(B) provide that the stock of a Federal home loan bank may be issued
to and held by only members of the bank, and that a bank may not issue any
stock other than as provided in this section;
`(C) prescribe the manner in which stock of a Federal home loan bank
may be sold, transferred, redeemed, or repurchased; and
`(D) provide the manner of disposition of outstanding stock held by,
and the liquidation of any claims of the Federal home loan bank against,
an institution that ceases to be a member of the bank, through merger or
otherwise, or that provides notice of intention to withdraw from
membership in the bank.
`(5) DEFINITIONS OF CAPITAL- For purposes of determining compliance with
the capital standards established under this subsection--
`(A) permanent capital of a Federal home loan bank shall
include--
`(i) the amounts paid for the Class B stock; and
`(ii) the retained earnings of the bank (as determined in accordance
with generally accepted accounting principles); and
`(B) total capital of a Federal home loan bank shall
include--
`(ii) the amounts paid for the Class A stock;
`(iii) consistent with generally accepted accounting principles, and
subject to the regulation of the Finance Board, a general allowance for
losses, which may not include any reserves or allowances made or held
against specific assets; and
`(iv) any other amounts from sources available to absorb losses
incurred by the bank that the Finance Board determines by regulation to
be appropriate to include in determining total capital.
`(6) TRANSITION PERIOD- Notwithstanding any other provision of this Act,
the requirements relating to purchase and retention of capital stock of a
Federal home loan bank by any member thereof in effect on the day before the
date of the enactment of the Federal Home Loan Bank System Modernization Act
of 1999, shall continue in effect with respect to each Federal home loan
bank until the regulations required by this subsection have taken effect and
the capital structure plan required by subsection (b) has been approved by
the Finance Board and implemented by such bank.
`(b) CAPITAL STRUCTURE PLAN-
`(1) APPROVAL OF PLANS- Not later than 270 days after the date of
publication by the Finance Board of final regulations in accordance with
subsection (a), the board of directors of each Federal home loan bank shall
submit for Finance Board approval a plan establishing and implementing a
capital structure for such bank that--
`(A) the board of directors determines is best suited for the
condition and operation of the bank and the interests of the members of
the bank;
`(B) meets the requirements of subsection (c); and
`(C) meets the minimum capital standards and requirements established
under subsection (a) and other regulations prescribed by the Finance
Board.
`(2) APPROVAL OF MODIFICATIONS- The board of directors of a Federal home
loan bank shall submit to the Finance Board for approval any modifications
that the bank proposes to make to an approved capital structure plan.
`(c) CONTENTS OF PLAN- The capital structure plan of each Federal home
loan bank shall contain provisions addressing each of the following:
`(A) IN GENERAL- Each capital structure plan of a Federal home loan
bank shall require each member of the bank to maintain a minimum
investment in the stock of the bank, the amount of which shall be
determined in a manner to be prescribed by the board of directors of each
bank and to be included as part of the plan.
`(B) INVESTMENT ALTERNATIVES-
`(i) IN GENERAL- In establishing the minimum investment required for
each member under subparagraph (A), a Federal home loan bank may, in its
discretion, include any 1 or more of the requirements referred to in
clause (ii), or any other provisions approved by the Finance
Board.
`(ii) AUTHORIZED REQUIREMENTS- A requirement is referred to in this
clause if it is a requirement for--
`(I) a stock purchase based on a percentage of the total assets of
a member; or
`(II) a stock purchase based on a percentage of the outstanding
advances from the bank to the member.
`(C) MINIMUM AMOUNT- Each capital structure plan of a Federal home
loan bank shall require that the minimum stock investment established for
members shall be set at a level that is sufficient for the bank to meet
the minimum capital requirements established by the Finance Board under
subsection (a).
`(D) ADJUSTMENTS TO MINIMUM REQUIRED INVESTMENT- The capital structure
plan of each Federal home loan bank shall impose a continuing obligation
on the board of directors of the bank to review and adjust the minimum
investment required of each member of that bank, as necessary to ensure
that the bank remains in compliance with applicable minimum capital levels
established by the Finance Board, and shall require each member to comply
promptly with any adjustments to the required minimum investment.
`(A) IN GENERAL- The capital structure plan of each Federal home loan
bank shall specify the date on which it shall take effect, and may provide
for a transition period of not longer than 3 years to allow the bank to
come into compliance with the capital requirements prescribed under
subsection (a), and to allow any institution that was a member of the bank
on the date of the enactment of the Federal Home Loan Bank System
Modernization Act of 1999, to come into compliance with the minimum
investment required pursuant to the plan.
`(B) INTERIM PURCHASE REQUIREMENTS- The capital structure plan of a
Federal home loan bank may allow any member referred to in subparagraph
(A) that would be required by the terms of the capital structure plan to
increase its investment in the stock of the bank to do so in periodic
installments during the transition period.
`(3) DISPOSITION OF SHARES- The capital structure plan of a Federal home
loan bank shall provide for the manner of disposition of any stock held by a
member of that bank that terminates its membership or that provides notice
of its intention to withdraw from membership in that bank.
`(A) IN GENERAL- The capital structure plan of a Federal home loan
bank shall afford each member of that bank the option of maintaining its
required investment in the bank through the purchase of any combination of
classes of stock authorized by the board of directors of the bank and
approved by the Finance Board in accordance with its regulations.
`(B) RIGHTS REQUIREMENT- A Federal home loan bank shall include in its
capital structure plan provisions establishing terms, rights, and
preferences, including minimum investment, dividends, voting, and
liquidation preferences of each class of stock issued by the bank,
consistent with Finance Board regulations and market
requirements.
`(C) REDUCED MINIMUM INVESTMENT- The capital structure plan of a
Federal home loan bank may provide for a reduced minimum stock investment
for any member of that bank that elects to purchase Class B in a manner
that is consistent with meeting the minimum capital requirements of the
bank, as established by the Finance Board.
`(D) LIQUIDATION OF CLAIMS- The capital structure plan of a Federal
home loan bank shall provide for the liquidation in an orderly manner, as
determined by the bank, of any claim of that bank against a member,
including claims for any applicable prepayment fees or penalties resulting
from prepayment of advances prior to stated maturity.
`(5) LIMITED TRANSFERABILITY OF STOCK- The capital structure plan of a
Federal home loan bank shall--
`(A) provide that any stock issued by that bank shall be available
only to and held only by members of that bank and tradable only between
that bank and its members; and
`(B) establish standards, criteria, and requirements for the issuance,
purchase, transfer, retirement, and redemption of stock issued by that
bank.
`(6) BANK REVIEW OF PLAN- Before filing a capital structure plan with
the Finance Board, each Federal home loan bank shall conduct a review of the
plan by--
`(A) an independent certified public accountant, to ensure, to the
extent possible, that implementation of the plan would not result in any
write-down of the redeemable bank stock investment of its members;
and
`(B) at least one major credit rating agency, to determine, to the
extent possible, whether implementation of the plan would have any
material effect on the credit ratings of the bank.
`(d) TERMINATION OF MEMBERSHIP-
`(1) VOLUNTARY WITHDRAWAL- Any member may withdraw from a Federal home
loan bank if the member provides written notice to the bank of its intent to
do so and if, on the date of withdrawal, there is in effect a certification
by the Finance Board that the withdrawal will not cause the Federal Home
Loan Bank System to fail to meet its obligation under section 21B(f)(2)(C)
to contribute to the debt service for the obligations issued by the
Resolution Funding Corporation. The applicable stock redemption notice
periods shall commence upon receipt of the notice by the bank. Upon the
expiration of the applicable notice period for each class of redeemable
stock, the member may surrender such stock to the bank, and shall be
entitled to receive in cash the par value of the stock. During the
applicable notice periods, the member shall be entitled to dividends and
other membership rights commensurate with continuing stock ownership.
`(2) INVOLUNTARY WITHDRAWAL-
`(A) IN GENERAL- The board of directors of a Federal home loan bank
may terminate the membership of any institution if, subject to Finance
Board regulations, it determines that--
`(i) the member has failed to comply with a provision of this Act or
any regulation prescribed under this Act; or
`(ii) the member has been determined to be insolvent, or otherwise
subject to the appointment of a conservator, receiver, or other legal
custodian, by a Federal or State authority with regulatory and
supervisory responsibility for the member.
`(B) STOCK DISPOSITION- An institution, the membership of which is
terminated in accordance with subparagraph (A)--
`(i) shall surrender redeemable stock to the Federal home loan bank,
and shall receive in cash the par value of the stock, upon the
expiration of the applicable notice period under subsection
(a)(4)(A);
`(ii) shall receive any dividends declared on its redeemable stock,
during the applicable notice period under subsection (a)(4)(A);
and
`(iii) shall not be entitled to any other rights or privileges
accorded to members after the date of the termination.
`(C) COMMENCEMENT OF NOTICE PERIOD- With respect to an institution,
the membership of which is terminated in accordance with subparagraph (A),
the applicable notice period under subsection (a)(4) for each class of
redeemable stock shall commence on the earlier of--
`(i) the date of such termination; or
`(ii) the date on which the member has provided notice of its intent
to redeem such stock.
`(3) LIQUIDATION OF INDEBTEDNESS- Upon the termination of the membership
of an institution for any reason, the outstanding indebtedness of the member
to the bank shall be liquidated in an orderly manner, as determined by the
bank and, upon the extinguishment of all such indebtedness, the bank shall
return to the member all collateral pledged to secure the
indebtedness.
`(e) REDEMPTION OF EXCESS STOCK-
`(1) IN GENERAL- A Federal home loan bank, in its sole discretion, may
redeem or repurchase, as appropriate, any shares of Class A or Class B stock
issued by the bank and held by a member that are in excess of the minimum
stock investment required of that member.
`(2) EXCESS STOCK- Shares of stock held by a member shall not be deemed
to be `excess stock' for purposes of this subsection by virtue of a member's
submission of a notice of intent to withdraw from membership or termination
of its membership in any other manner.
`(3) PRIORITY- A Federal home loan bank may not redeem any excess Class
B stock prior to the end of the 5-year notice period, unless the member has
no Class A stock outstanding that could be redeemed as excess.
`(f) IMPAIRMENT OF CAPITAL- If the Finance Board or the board of directors
of a Federal home loan bank determines that the bank has incurred or is likely
to incur losses that result in or are expected to result in charges against
the capital of the bank, the bank shall not redeem or repurchase any stock of
the bank without the prior approval of the Finance Board while such charges
are continuing or are expected to continue. In no case may a bank redeem or
repurchase any applicable capital stock if, following the redemption, the bank
would fail to satisfy any minimum capital requirement.
`(g) REJOINING AFTER DIVESTITURE OF ALL SHARES-
`(1) IN GENERAL- Except as provided in paragraph (2), and
notwithstanding any other provision of this Act, an institution that divests
all shares of stock in a Federal home loan bank may not, after such
divestiture, acquire shares of any Federal home loan bank before the end of
the 5-year period beginning on the date of the completion of such
divestiture, unless the divestiture is a consequence of a transfer of
membership on an uninterrupted basis between banks.
`(2) EXCEPTION FOR WITHDRAWALS FROM MEMBERSHIP BEFORE 1998- Any
institution that withdrew from membership in any Federal home loan bank
before December 31, 1997, may acquire shares of a Federal home loan bank at
any time after that date, subject to the approval of the Finance Board and
the requirements of this Act.
`(h) TREATMENT OF RETAINED EARNINGS-
`(1) IN GENERAL- The holders of the Class B stock of a Federal home loan
bank shall own the retained earnings, surplus, undivided profits, and equity
reserves, if any, of the bank.
`(2) EXCEPTION- Except as specifically provided in this section or
through the declaration of a dividend or a capital distribution by a Federal
home loan bank, or in the event of liquidation of the bank, a member shall
have no right to withdraw or otherwise receive distribution of any portion
of the retained earnings of the bank.
`(3) LIMITATION- A Federal home loan bank may not make any distribution
of its retained earnings unless, following such distribution, the bank would
continue to meet all applicable capital requirements.'.
TITLE VII--OTHER PROVISIONS
Subtitle A--ATM Fee Reform
SEC. 701. SHORT TITLE.
This subtitle may be cited as the `ATM Fee Reform Act of 1999'.
SEC. 702. ELECTRONIC FUND TRANSFER FEE DISCLOSURES AT ANY HOST
ATM.
Section 904(d) of the Electronic Fund Transfer Act (15 U.S.C. 1693b(d)) is
amended by adding at the end the following new paragraph:
`(3) FEE DISCLOSURES AT AUTOMATED TELLER MACHINES-
`(A) IN GENERAL- The regulations prescribed under paragraph (1) shall
require any automated teller machine operator who imposes a fee on any
consumer for providing host transfer services to such consumer to provide
notice in accordance with subparagraph (B) to the consumer (at the time
the service is provided) of--
`(i) the fact that a fee is imposed by such operator for providing
the service; and
`(ii) the amount of any such fee.
`(B) NOTICE REQUIREMENTS-
`(i) ON THE MACHINE- The notice required under clause (i) of
subparagraph (A) with respect to any fee described in such subparagraph
shall be posted in a prominent and conspicuous location on or at the
automated teller machine at which the electronic fund transfer is
initiated by the consumer.
`(ii) ON THE SCREEN- The notice required under clauses (i) and (ii)
of subparagraph (A) with respect to any fee described in such
subparagraph shall appear on the screen of the automated teller machine,
or on a paper notice issued from such machine, after the transaction is
initiated and before the consumer is irrevocably committed to completing
the transaction, except that during the period beginning on the date of
the enactment of the Gramm-Leach-Bliley Act and ending on December 31,
2004, this clause shall not apply to any automated teller machine that
lacks the technical capability to disclose the notice on the screen or
to issue a paper notice after the transaction is initiated and before
the consumer is irrevocably committed to completing the
transaction.
`(C) PROHIBITION ON FEES NOT PROPERLY DISCLOSED AND EXPLICITLY ASSUMED
BY CONSUMER- No fee may be imposed by any automated teller machine
operator in connection with any electronic fund transfer initiated by a
consumer for which a notice is required under subparagraph (A),
unless--
`(i) the consumer receives such notice in accordance with
subparagraph (B); and
`(ii) the consumer elects to continue in the manner necessary to
effect the transaction after receiving such notice.
`(D) DEFINITIONS- For purposes of this paragraph, the following
definitions shall apply:
`(i) AUTOMATED TELLER MACHINE OPERATOR- The term `automated teller
machine operator' means any person who--
`(I) operates an automated teller machine at which consumers
initiate electronic fund transfers; and
`(II) is not the financial institution that holds the account of
such consumer from which the transfer is made.
`(ii) ELECTRONIC FUND TRANSFER- The term `electronic fund transfer'
includes a transaction that involves a balance inquiry initiated by a
consumer in the same manner as an electronic fund transfer, whether or
not the consumer initiates a transfer of funds in the course of the
transaction.
`(iii) HOST TRANSFER SERVICES- The term `host transfer services'
means any electronic fund transfer made by an automated teller machine
operator in connection with a transaction initiated by a consumer at an
automated teller machine operated by such operator.'.
SEC. 703. DISCLOSURE OF POSSIBLE FEES TO CONSUMERS WHEN ATM CARD IS
ISSUED.
Section 905(a) of the Electronic Fund Transfer Act (15 U.S.C. 1693c(a)) is
amended--
(1) by striking `and' at the end of paragraph (8);
(2) by striking the period at the end of paragraph (9) and inserting `;
and'; and
(3) by inserting after paragraph (9) the following new paragraph:
`(10) a notice to the consumer that a fee may be imposed by--
`(A) an automated teller machine operator (as defined in section
904(d)(3)(D)(i)) if the consumer initiates a transfer from an automated
teller machine that is not operated by the person issuing the card or
other means of access; and
`(B) any national, regional, or local network utilized to effect the
transaction.'.
SEC. 704. FEASIBILITY STUDY.
(a) IN GENERAL- The Comptroller General of the United States shall conduct
a study of the feasibility of requiring, in connection with any electronic
fund transfer initiated by a consumer through the use of an automated teller
machine--
(1) a notice to be provided to the consumer before the consumer is
irrevocably committed to completing the transaction, which clearly states
the amount of any fee that will be imposed upon the consummation of the
transaction by--
(A) any automated teller machine operator (as defined in section
904(d)(3)(D)(i) of the Electronic Fund Transfer Act) involved in the
transaction;
(B) the financial institution holding the account of the
consumer;
(C) any national, regional, or local network utilized to effect the
transaction; and
(D) any other party involved in the transfer; and
(2) the consumer to elect to consummate the transaction after receiving
the notice described in paragraph (1).
(b) FACTORS TO BE CONSIDERED- In conducting the study required under
subsection (a) with regard to the notice requirement described in such
subsection, the Comptroller General shall consider the following factors:
(1) The availability of appropriate technology.
(2) Implementation and operating costs.
(3) The competitive impact any such notice requirement would have on
various sizes and types of institutions, if implemented.
(4) The period of time that would be reasonable for implementing any
such notice requirement.
(5) The extent to which consumers would benefit from any such notice
requirement.
(6) Any other factor the Comptroller General determines to be
appropriate in analyzing the feasibility of imposing any such notice
requirement.
(c) REPORT TO THE CONGRESS- Before the end of the 6-month period beginning
on the date of the enactment of this Act, the Comptroller General shall submit
a report to the Congress containing--
(1) the findings and conclusions of the Comptroller General in
connection with the study required under subsection (a); and
(2) the recommendation of the Comptroller General with regard to the
question of whether a notice requirement described in subsection (a) should
be implemented and, if so, the manner in which such requirement should be
implemented.
SEC. 705. NO LIABILITY IF POSTED NOTICES ARE DAMAGED.
Section 910 of the Electronic Fund Transfer Act (15 U.S.C. 1693h) is
amended by adding at the end the following new subsection:
`(d) EXCEPTION FOR DAMAGED NOTICES- If the notice required to be posted
pursuant to section 904(d)(3)(B)(i) by an automated teller machine operator
has been posted by such operator in compliance with such section and the
notice is subsequently removed, damaged, or altered by any person other than
the operator of the automated teller machine, the operator shall have no
liability under this section for failure to comply with section
904(d)(3)(B)(i).'.
Subtitle B--Community Reinvestment
SEC. 711. CRA SUNSHINE REQUIREMENTS.
The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended by
inserting after section 47, as added by section 305 of this Act, the following
new section:
`SEC. 48. CRA SUNSHINE REQUIREMENTS.
`(a) PUBLIC DISCLOSURE OF AGREEMENTS- Any agreement (as defined in
subsection (e)) entered into after the date of the enactment of the
Gramm-Leach-Bliley Act by an insured depository institution or affiliate with
a nongovernmental entity or person made pursuant to or in connection with the
Community Reinvestment Act of 1977 involving funds or other resources of such
insured depository institution or affiliate--
`(1) shall be in its entirety fully disclosed, and the full text thereof
made available to the appropriate Federal banking agency with supervisory
responsibility over the insured depository institution and to the public by
each party to the agreement; and
`(2) shall obligate each party to comply with this section.
`(b) ANNUAL REPORT OF ACTIVITY BY INSURED DEPOSITORY INSTITUTION- Each
insured depository institution or affiliate that is a party to an agreement
described in subsection (a) shall report to the appropriate Federal banking
agency with supervisory responsibility over the insured depository
institution, not less frequently than once each year, such information as the
Federal banking agency may by rule require relating to the following actions
taken by the party pursuant to the agreement during the preceding 12-month
period:
`(1) Payments, fees, or loans made to any party to the agreement or
received from any party to the agreement and the terms and conditions of the
same.
`(2) Aggregate data on loans, investments, and services provided by each
party in its community or communities pursuant to the agreement.
`(3) Such other pertinent matters as determined by regulation by the
appropriate Federal banking agency with supervisory responsibility over the
insured depository institution.
`(c) ANNUAL REPORT OF ACTIVITY BY NONGOVERNMENTAL ENTITIES-
`(1) IN GENERAL- Each nongovernmental entity or person that is not an
affiliate of an insured depository institution and that is a party to an
agreement described in subsection (a) shall report to the appropriate
Federal banking agency with supervisory responsibility over the insured
depository institution that is a party to such agreement, not less
frequently than once each year, an accounting of the use of funds received
pursuant to each such agreement during the preceding 12-month period.
`(2) SUBMISSION TO INSURED DEPOSITORY INSTITUTION- A nongovernmental
entity or person referred to in paragraph (1) may comply with the reporting
requirement in such paragraph by transmitting the report to the insured
depository institution that is a party to the agreement, and such insured
depository institution shall promptly transmit such report to the
appropriate Federal banking agency with supervisory authority over the
insured depository institution.
`(3) INFORMATION TO BE INCLUDED- The accounting referred to in paragraph
(1) shall include a detailed, itemized list of the uses to which such funds
have been made, including compensation, administrative expenses, travel,
entertainment, consulting and professional fees paid, and such other
categories, as determined by regulation by the appropriate Federal banking
agency with supervisory responsibility over the insured depository
institution.
`(d) APPLICABILITY- Subsections (b) and (c) shall not apply with respect
to any agreement entered into before the end of the 6-month period beginning
on the date of the enactment of the Gramm-Leach-Bliley Act.
`(1) AGREEMENT- For purposes of this section, the term
`agreement'--
`(i) any written contract, written arrangement, or other written
understanding that provides for cash payments, grants, or other
consideration with a value in excess of $10,000, or for loans the
aggregate amount of principal of which exceeds $50,000, annually (or the
sum of all such agreements during a 12-month period with an aggregate
value of cash payments, grants, or other consideration in excess of
$10,000, or with an aggregate amount of loan principal in excess of
$50,000); or
`(ii) a group of substantively related contracts with an aggregate
value of cash payments, grants, or other consideration in excess of
$10,000, or with an aggregate amount of loan principal in excess of
$50,000, annually;
made pursuant to, or in connection with, the fulfillment of the
Community Reinvestment Act of 1977, at least 1 party to which is an
insured depository institution or affiliate thereof, whether organized on
a profit or not-for-profit basis; and
`(i) any individual mortgage loan;
`(ii) any specific contract or commitment for a loan or extension of
credit to individuals, businesses, farms, or other entities, if the
funds are loaned at rates not substantially below market rates and if
the purpose of the loan or extension of credit does not include any
re-lending of the borrowed funds to other parties; or
`(iii) any agreement entered into by an insured depository
institution or affiliate with a nongovernmental entity or person who has
not commented on, testified about, or discussed with the institution, or
otherwise contacted the institution, concerning the Community
Reinvestment Act of 1977.
`(2) FULFILLMENT OF CRA- For purposes of subparagraph (A), the term
`fulfillment' means a list of factors that the appropriate Federal banking
agency determines have a material impact on the agency's decision--
`(A) to approve or disapprove an application for a deposit facility
(as defined in section 803 of the Community Reinvestment Act of 1977);
or
`(B) to assign a rating to an insured depository institution under
section 807 of the Community Reinvestment Act of 1977.
`(1) VIOLATIONS BY PERSONS OTHER THAN INSURED DEPOSITORY INSTITUTIONS OR
THEIR AFFILIATES-
`(A) MATERIAL FAILURE TO COMPLY- If the party to an agreement
described in subsection (a) that is not an insured depository institution
or affiliate willfully fails to comply with this section in a material
way, as determined by the appropriate Federal banking agency, the
agreement shall be unenforceable after the offending party has been given
notice and a reasonable period of time to perform or comply.
`(B) DIVERSION OF FUNDS OR RESOURCES- If funds or resources received
under an agreement described in subsection (a) have been diverted contrary
to the purposes of the agreement for personal financial gain, the
appropriate Federal banking agency with supervisory responsibility over
the insured depository institution may impose either or both of the
following penalties:
`(i) Disgorgement by the offending individual of funds received
under the agreement.
`(ii) Prohibition of the offending individual from being a party to
any agreement described in subsection (a) for a period of not to exceed
10 years.
`(2) DESIGNATION OF SUCCESSOR NONGOVERNMENTAL PARTY- If an agreement
described in subsection (a) is found to be unenforceable under this
subsection, the appropriate Federal banking agency may assist the insured
depository institution in identifying a successor nongovernmental party to
assume the responsibilities of the agreement.
`(3) INADVERTENT OR DE MINIMIS REPORTING ERRORS- An error in a report
filed under subsection (c) that is inadvertent or de minimis shall not
subject the filing party to any penalty.
`(g) RULE OF CONSTRUCTION- No provision of this section shall be construed
as authorizing any appropriate Federal banking agency to enforce the
provisions of any agreement described in subsection (a).
`(1) IN GENERAL- Each appropriate Federal banking agency shall prescribe
regulations, in accordance with paragraph (4), requiring procedures
reasonably designed to ensure and monitor compliance with the requirements
of this section.
`(2) PROTECTION OF PARTIES- In carrying out paragraph (1), each
appropriate Federal banking agency shall--
`(A) ensure that the regulations prescribed by the agency do not
impose an undue burden on the parties and that proprietary and
confidential information is protected; and
`(B) establish procedures to allow any nongovernmental entity or
person who is a party to a large number of agreements described in
subsection (a) to make a single or consolidated filing of a report under
subsection (c) to an insured depository institution or an appropriate
Federal banking agency.
`(3) PARTIES NOT SUBJECT TO REPORTING REQUIREMENTS- The Board of
Governors of the Federal Reserve System may prescribe regulations--
`(A) to prevent evasions of subsection (e)(1)(B)(iii); and
`(B) to provide further exemptions under such subsection, consistent
with the purposes of this section.
`(4) COORDINATION, CONSISTENCY, AND COMPARABILITY- In carrying out
paragraph (1), each appropriate Federal banking agency shall consult and
coordinate with the other such agencies for the purposes of assuring, to the
extent possible, that the regulations prescribed by each such agency are
consistent and comparable with the regulations prescribed by the other such
agencies.'.
SEC. 712. SMALL BANK REGULATORY RELIEF.
The Community Reinvestment Act of 1977 (12 U.S.C. 2901 et seq.) is amended
by adding at the end the following new section:
`SEC. 809. SMALL BANK REGULATORY RELIEF.
`(a) IN GENERAL- Except as provided in subsections (b) and (c), any
regulated financial institution with aggregate assets of not more than
$250,000,000 shall be subject to routine examination under this title--
`(1) not more than once every 60 months for an institution that has
achieved a rating of `outstanding record of meeting community credit needs'
at its most recent examination under section 804;
`(2) not more than once every 48 months for an institution that has
received a rating of `satisfactory record of meeting community credit needs'
at its most recent examination under section 804; and
`(3) as deemed necessary by the appropriate Federal financial
supervisory agency, for an institution that has received a rating of less
than `satisfactory record of meeting community credit needs' at its most
recent examination under section 804.
`(b) NO EXCEPTION FROM CRA EXAMINATIONS IN CONNECTION WITH APPLICATIONS
FOR DEPOSIT FACILITIES- A regulated financial institution described in
subsection (a) shall remain subject to examination under this title in
connection with an application for a deposit facility.
`(c) DISCRETION- A regulated financial institution described in subsection
(a) may be subject to more frequent or less frequent examinations for
reasonable cause under such circumstances as may be determined by the
appropriate Federal financial supervisory agency.'.
SEC. 713. FEDERAL RESERVE BOARD STUDY OF CRA LENDING.
The Board of Governors of the Federal Reserve System shall conduct a
comprehensive study, in consultation with the Chairman and Ranking Member of
the Committee on Banking and Financial Services of the House of
Representatives and the Chairman and Ranking Member of the Committee on
Banking, Housing, and Urban Affairs of the Senate, of the Community
Reinvestment Act of 1977, which shall focus on--
(2) the delinquency rates; and
of loans made in conformity with such Act, and report on the study to such
Committees not later than March 15, 2000. Such report and supporting data
shall also be made available by the Board of Governors of the Federal Reserve
System to the public.
SEC. 714. PRESERVING THE COMMUNITY REINVESTMENT ACT OF 1977.
Nothing in this Act shall be construed to repeal any provision of the
Community Reinvestment Act of 1977.
SEC. 715. RESPONSIVENESS TO COMMUNITY NEEDS FOR FINANCIAL
SERVICES.
(a) STUDY- The Secretary of the Treasury, in consultation with the Federal
banking agencies (as defined in section 3(z) of the Federal Deposit Insurance
Act), shall conduct a study of the extent to which adequate services are being
provided as intended by the Community Reinvestment Act of 1977, including
services in low- and moderate-income neighborhoods and for persons of modest
means, as a result of the enactment of this Act.
(1) IN GENERAL- The Secretary of the Treasury shall--
(A) before March 15, 2000, submit a baseline report to the Congress on
the study conducted pursuant to subsection (a); and
(B) before the end of the 2-year period beginning on the date of the
enactment of this Act, in consultation with the Federal banking agencies,
submit a final report to the Congress on the study conducted pursuant to
subsection (a).
(2) RECOMMENDATIONS- The final report submitted under paragraph (1)(B)
shall include such recommendations as the Secretary determines to be
appropriate for administrative and legislative action with respect to
institutions covered under the Community Reinvestment Act of 1977.
Subtitle C--Other Regulatory Improvements
SEC. 721. EXPANDED SMALL BANK ACCESS TO S CORPORATION
TREATMENT.
(a) STUDY- The Comptroller General of the United States shall conduct a
study of--
(1) possible revisions to the rules governing S corporations,
including--
(A) increasing the permissible number of shareholders in such
corporations;
(B) permitting shares of such corporations to be held in individual
retirement accounts;
(C) clarifying that interest on investments held for safety,
soundness, and liquidity purposes should not be considered to be passive
income;
(D) discontinuation of the treatment of stock held by bank directors
as a disqualifying personal class of stock for such corporations;
and
(E) improving Federal tax treatment of bad debt and interest
deductions; and
(2) what impact such revisions might have on community banks.
(b) REPORT TO THE CONGRESS- Not later than 6 months after the date of the
enactment of this Act, the Comptroller General of the United States shall
submit a report to the Congress on the results of the study conducted under
subsection (a).
(c) DEFINITION- For purposes of this section, the term `S corporation' has
the meaning given the term in section 1361(a)(1) of the Internal Revenue Code
of 1986.
SEC. 722. `PLAIN LANGUAGE' REQUIREMENT FOR FEDERAL BANKING AGENCY
RULES.
(a) IN GENERAL- Each Federal banking agency shall use plain language in
all proposed and final rulemakings published by the agency in the Federal
Register after January 1, 2000.
(b) REPORT- Not later than March 1, 2001, each Federal banking agency
shall submit to the Congress a report that describes how the agency has
complied with subsection (a).
(c) DEFINITION- For purposes of this section, the term `Federal banking
agency' has the meaning given that term in section 3 of the Federal Deposit
Insurance Act.
SEC. 723. RETENTION OF `FEDERAL' IN NAME OF CONVERTED FEDERAL SAVINGS
ASSOCIATION.
Section 2 of the Act entitled `An Act to enable national banking
associations to increase their capital stock and to change their names or
locations', approved May 1, 1886 (12 U.S.C. 30), is amended by adding at the
end the following new subsection:
`(d) RETENTION OF `FEDERAL' IN NAME OF CONVERTED FEDERAL SAVINGS
ASSOCIATION-
`(1) IN GENERAL- Notwithstanding subsection (a) or any other provision
of law, any depository institution, the charter of which is converted from
that of a Federal savings association to a national bank or a State bank
after the date of the enactment of the Gramm-Leach-Bliley Act may retain the
term `Federal' in the name of such institution if such institution remains
an insured depository institution.
`(2) DEFINITIONS- For purposes of this subsection, the terms `depository
institution', `insured depository institution', `national bank', and `State
bank' have the meanings given those terms in section 3 of the Federal
Deposit Insurance Act.'.
SEC. 724. CONTROL OF BANKERS' BANKS.
Section 2(a)(5)(E)(i) of the Bank Holding Company Act of 1956 (12 U.S.C.
1841(a)(5)(E)(i)) is amended by inserting `1 or more' before `thrift
institutions'.
SEC. 725. PROVISION OF TECHNICAL ASSISTANCE TO
MICROENTERPRISES.
Title I of the Riegle Community Development and Regulatory Improvement Act
of 1994 (12 U.S.C. 4701 et seq.) is amended by adding at the end the following
new subtitle:
`Subtitle C--Microenterprise Technical Assistance and Capacity Building
Program
`SEC. 171. SHORT TITLE.
`This subtitle may be cited as the `Program for Investment in
Microentrepreneurs Act of 1999', also referred to as the `PRIME Act'.
`SEC. 172. DEFINITIONS.
`For purposes of this subtitle, the following definitions shall apply:
`(1) ADMINISTRATION- The term `Administration' means the Small Business
Administration.
`(2) ADMINISTRATOR- The term `Administrator' means the Administrator of
the Small Business Administration.
`(3) CAPACITY BUILDING SERVICES- The term `capacity building services'
means services provided to an organization that is, or that is in the
process of becoming, a microenterprise development organization or program,
for the purpose of enhancing its ability to provide training and services to
disadvantaged entrepreneurs.
`(4) COLLABORATIVE- The term `collaborative' means 2 or more nonprofit
entities that agree to act jointly as a qualified organization under this
subtitle.
`(5) DISADVANTAGED ENTREPRENEUR- The term `disadvantaged entrepreneur'
means a microentrepreneur that is--
`(A) a low-income person;
`(B) a very low-income person; or
`(C) an entrepreneur that lacks adequate access to capital or other
resources essential for business success, or is economically
disadvantaged, as determined by the Administrator.
`(6) INDIAN TRIBE- The term `Indian tribe' has the meaning given the
term in section 103.
`(7) INTERMEDIARY- The term `intermediary' means a private, nonprofit
entity that seeks to serve microenterprise development organizations and
programs as authorized under section 175.
`(8) LOW-INCOME PERSON- The term `low-income person' has the meaning
given the term in section 103.
`(9) MICROENTREPRENEUR- The term `microentrepreneur' means the owner or
developer of a microenterprise.
`(10) MICROENTERPRISE- The term `microenterprise' means a sole
proprietorship, partnership, or corporation that--
`(A) has fewer than 5 employees; and
`(B) generally lacks access to conventional loans, equity, or other
banking services.
`(11) MICROENTERPRISE DEVELOPMENT ORGANIZATION OR PROGRAM- The term
`microenterprise development organization or program' means a nonprofit
entity, or a program administered by such an entity, including community
development corporations or other nonprofit development organizations and
social service organizations, that provides services to disadvantaged
entrepreneurs.
`(12) TRAINING AND TECHNICAL ASSISTANCE- The term `training and
technical assistance' means services and support provided to disadvantaged
entrepreneurs, such as assistance for the purpose of enhancing business
planning, marketing, management, financial management skills, and assistance
for the purpose of accessing financial services.
`(13) VERY LOW-INCOME PERSON- The term `very low-income person' means
having an income, adjusted for family size, of not more than 150 percent of
the poverty line (as defined in section 673(2) of the Community Services
Block Grant Act (42 U.S.C. 9902(2)), including any revision required by that
section).
`SEC. 173. ESTABLISHMENT OF PROGRAM.
`The Administrator shall establish a microenterprise technical assistance
and capacity building grant program to provide assistance from the
Administration in the form of grants to qualified organizations in accordance
with this subtitle.
`SEC. 174. USES OF ASSISTANCE.
`A qualified organization shall use grants made under this subtitle--
`(1) to provide training and technical assistance to disadvantaged
entrepreneurs;
`(2) to provide training and capacity building services to
microenterprise development organizations and programs and groups of such
organizations to assist such organizations and programs in developing
microenterprise training and services;
`(3) to aid in researching and developing the best practices in the
field of microenterprise and technical assistance programs for disadvantaged
entrepreneurs; and
`(4) for such other activities as the Administrator determines are
consistent with the purposes of this subtitle.
`SEC. 175. QUALIFIED ORGANIZATIONS.
`For purposes of eligibility for assistance under this subtitle, a
qualified organization shall be--
`(1) a nonprofit microenterprise development organization or program (or
a group or collaborative thereof) that has a demonstrated record of
delivering microenterprise services to disadvantaged entrepreneurs;
`(3) a microenterprise development organization or program that is
accountable to a local community, working in conjunction with a State or
local government or Indian tribe; or
`(4) an Indian tribe acting on its own, if the Indian tribe can certify
that no private organization or program referred to in this paragraph exists
within its jurisdiction.
`SEC. 176. ALLOCATION OF ASSISTANCE; SUBGRANTS.
`(a) ALLOCATION OF ASSISTANCE-
`(1) IN GENERAL- The Administrator shall allocate assistance from the
Administration under this subtitle to ensure that--
`(A) activities described in section 174(1) are funded using not less
than 75 percent of amounts made available for such assistance;
and
`(B) activities described in section 174(2) are funded using not less
than 15 percent of amounts made available for such assistance.
`(2) LIMIT ON INDIVIDUAL ASSISTANCE- No single person may receive more
than 10 percent of the total funds appropriated under this subtitle in a
single fiscal year.
`(b) TARGETED ASSISTANCE- The Administrator shall ensure that not less
than 50 percent of the grants made under this subtitle are used to benefit
very low-income persons, including those residing on Indian reservations.
`(c) SUBGRANTS AUTHORIZED-
`(1) IN GENERAL- A qualified organization receiving assistance under
this subtitle may provide grants using that assistance to qualified small
and emerging microenterprise organizations and programs, subject to such
rules and regulations as the Administrator determines to be
appropriate.
`(2) LIMIT ON ADMINISTRATIVE EXPENSES- Not more than 7.5 percent of
assistance received by a qualified organization under this subtitle may be
used for administrative expenses in connection with the making of subgrants
under paragraph (1).
`(d) DIVERSITY- In making grants under this subtitle, the Administrator
shall ensure that grant recipients include both large and small
microenterprise organizations, serving urban, rural, and Indian tribal
communities serving diverse populations.
`(e) PROHIBITION ON PREFERENTIAL CONSIDERATION OF CERTAIN SBA PROGRAM
PARTICIPANTS- In making grants under this subtitle, the Administrator shall
ensure that any application made by a qualified organization that is a
participant in the program established under section 7(m) of the Small
Business Act does not receive preferential consideration over applications
from other qualified organizations that are not participants in such
program.
`SEC. 177. MATCHING REQUIREMENTS.
`(a) IN GENERAL- Financial assistance under this subtitle shall be matched
with funds from sources other than the Federal Government on the basis of not
less than 50 percent of each dollar provided by the Administration.
`(b) SOURCES OF MATCHING FUNDS- Fees, grants, gifts, funds from loan
sources, and in-kind resources of a grant recipient from public or private
sources may be used to comply with the matching requirement in subsection
(a).
`(1) IN GENERAL- In the case of an applicant for assistance under this
subtitle with severe constraints on available sources of matching funds, the
Administrator may reduce or eliminate the matching requirements of
subsection (a).
`(2) LIMITATION- Not more than 10 percent of the total funds made
available from the Administration in any fiscal year to carry out this
subtitle may be excepted from the matching requirements of subsection (a),
as authorized by paragraph (1) of this subsection.
`SEC. 178. APPLICATIONS FOR ASSISTANCE.
`An application for assistance under this subtitle shall be submitted in
such form and in accordance with such procedures as the Administrator shall
establish.
`SEC. 179. RECORDKEEPING.
`The requirements of section 115 shall apply to a qualified organization
receiving assistance from the Administration under this subtitle as if it were
a community development financial institution receiving assistance from the
Fund under subtitle A.
`SEC. 180. AUTHORIZATION.
`In addition to funds otherwise authorized to be appropriated to the Fund
to carry out this title, there are authorized to be appropriated to the
Administrator to carry out this subtitle--
`(1) $15,000,000 for fiscal year 2000;
`(2) $15,000,000 for fiscal year 2001;
`(3) $15,000,000 for fiscal year 2002; and
`(4) $15,000,000 for fiscal year 2003.
`SEC. 181. IMPLEMENTATION.
`The Administrator shall, by regulation, establish such requirements as
may be necessary to carry out this subtitle.'.
SEC. 726. FEDERAL RESERVE AUDITS.
The Federal Reserve Act (12 U.S.C. 221 et seq.) is amended by inserting
after section 11A the following new section:
`SEC. 11B. ANNUAL INDEPENDENT AUDITS OF FEDERAL RESERVE BANKS AND
BOARD.
`The Board shall order an annual independent audit of the financial
statements of each Federal reserve bank and the Board.'.
SEC. 727. AUTHORIZATION TO RELEASE REPORTS.
(a) FEDERAL RESERVE ACT- The eighth undesignated paragraph of section 9 of
the Federal Reserve Act (12 U.S.C. 326) is amended by striking the last
sentence and inserting the following: `The Board of Governors of the Federal
Reserve System, at its discretion, may furnish any report of examination or
other confidential supervisory information concerning any State member bank or
other entity examined under any other authority of the Board, to any Federal
or State agency or authority with supervisory or regulatory authority over the
examined entity, to any officer, director, or receiver of the examined entity,
and to any other person that the Board determines to be proper.'.
(b) COMMODITY FUTURES TRADING COMMISSION- The Right to Financial Privacy
Act of 1978 (12 U.S.C. 3401 et seq.) is amended--
(A) by redesignating subparagraphs (G) and (H) as subparagraphs (H)
and (I), respectively; and
(B) by inserting after subparagraph (F) the following new
subparagraph:
`(G) the Commodity Futures Trading Commission;'; and
(2) in section 1112(e), by striking `and the Securities and Exchange
Commission' and inserting `, the Securities and Exchange Commission, and the
Commodity Futures Trading Commission'.
SEC. 728. GENERAL ACCOUNTING OFFICE STUDY OF CONFLICTS OF
INTEREST.
(a) STUDY REQUIRED- The Comptroller General of the United States shall
conduct a study analyzing the conflict of interest faced by the Board of
Governors of the Federal Reserve System between its role as a primary
regulator of the banking industry and its role as a vendor of services to the
banking and financial services industry.
(b) SPECIFIC CONFLICT REQUIRED TO BE ADDRESSED- In the course of the study
required under subsection (a), the Comptroller General shall address the
conflict of interest faced by the Board of Governors of the Federal Reserve
System between the role of the Board as a regulator of the payment system,
generally, and its participation in the payment system as a competitor with
private entities who are providing payment services.
(c) REPORT TO THE CONGRESS- Before the end of the 1-year period beginning
on the date of the enactment of this Act, the Comptroller General shall submit
a report to the Congress containing the findings and conclusions of the
Comptroller General in connection with the study required under this section,
together with such recommendations for such legislative or administrative
actions as the Comptroller General may determine to be appropriate, including
recommendations for resolving any such conflict of interest.
SEC. 729. STUDY AND REPORT ON ADAPTING EXISTING LEGISLATIVE REQUIREMENTS
TO ONLINE BANKING AND LENDING.
(a) STUDY REQUIRED- The Federal banking agencies shall conduct a study of
banking regulations regarding the delivery of financial services, including
those regulations that may assume that there will be person-to-person contact
during the course of a financial services transaction, and report their
recommendations on adapting those existing requirements to online banking and
lending.
(b) REPORT REQUIRED- Before the end of the 2-year period beginning on the
date of the enactment of this Act, the Federal banking agencies shall submit a
report to the Congress on the findings and conclusions of the agencies with
respect to the study required under subsection (a), together with such
recommendations for legislative or regulatory action as the agencies may
determine to be appropriate.
(c) DEFINITION- For purposes of this section, the term `Federal banking
agencies' means each Federal banking agency (as defined in section 3(z) of the
Federal Deposit Insurance Act).
SEC. 730. CLARIFICATION OF SOURCE OF STRENGTH DOCTRINE.
Section 18 of the Federal Deposit Insurance Act (12 U.S.C. 1828) is
amended by adding at the end the following new subsection:
`(t) LIMITATION ON CLAIMS-
`(1) IN GENERAL- No person may bring a claim against any Federal banking
agency (including in its capacity as conservator or receiver) for the return
of assets of an affiliate or controlling shareholder of the insured
depository institution transferred to, or for the benefit of, an insured
depository institution by such affiliate or controlling shareholder of the
insured depository institution, or a claim against such Federal banking
agency for monetary damages or other legal or equitable relief in connection
with such transfer, if at the time of the transfer--
`(A) the insured depository institution is subject to any direction
issued in writing by a Federal banking agency to increase its
capital;
`(B) the insured depository institution is undercapitalized (as
defined in section 38 of this Act); and
`(C) for that portion of the transfer that is made by an entity
covered by section 5(g) of the Bank Holding Company Act of 1956 or section
45 of this Act, the Federal banking agency has followed the procedure set
forth in such section.
`(2) DEFINITION OF CLAIM- For purposes of paragraph (1), the term
`claim'--
`(A) means a cause of action based on Federal or State law
that--
`(i) provides for the avoidance of preferential or fraudulent
transfers or conveyances; or
`(ii) provides similar remedies for preferential or fraudulent
transfers or conveyances; and
`(B) does not include any claim based on actual intent to hinder,
delay, or defraud pursuant to such a fraudulent transfer or conveyance
law.'.
SEC. 731. INTEREST RATES AND OTHER CHARGES AT INTERSTATE
BRANCHES.
Section 44 of the Federal Deposit Insurance Act (12 U.S.C. 1831u) is
amended--
(1) by redesignating subsection (f) as subsection (g); and
(2) by inserting after subsection (e) the following new
subsection:
`(f) APPLICABLE RATE AND OTHER CHARGE LIMITATIONS-
`(1) IN GENERAL- In the case of any State that has a constitutional
provision that sets a maximum lawful annual percentage rate of interest on
any contract at not more than 5 percent above the discount rate for 90-day
commercial paper in effect at the Federal reserve bank for the Federal
reserve district in which such State is located, except as provided in
paragraph (2), upon the establishment in such State of a branch of any
out-of-State insured depository institution in such State under this
section, the maximum interest rate or amount of interest, discount points,
finance charges, or other similar charges that may be charged, taken,
received, or reserved from time to time in any loan or discount made or upon
any note, bill of exchange, financing transaction, or other evidence of debt
by any insured depository institution whose home State is such State shall
be equal to not more than the greater of--
`(A) the maximum interest rate or amount of interest, discount points,
finance charges, or other similar charges that may be charged, taken,
received, or reserved in a similar transaction under the constitution or
any statute or other law of the home State of the out-of-State insured
depository institution establishing any such branch, without reference to
this section, as such maximum interest rate or amount of interest may
change from time to time; or
`(B) the maximum rate or amount of interest, discount points, finance
charges, or other similar charges that may be charged, taken, received, or
reserved in a similar transaction by a State insured depository
institution chartered under the laws of such State or a national bank or
Federal savings association whose main office is located in such State
without reference to this section.
`(2) RULE OF CONSTRUCTION- No provision of this subsection shall be
construed as superseding or affecting--
`(A) the authority of any insured depository institution to take,
receive, reserve, and charge interest on any loan made in any State other
than the State referred to in paragraph (1); or
`(B) the applicability of section 501 of the Depository Institutions
Deregulation and Monetary Control Act of 1980, section 5197 of the Revised
Statutes of the United States, or section 27 of this Act.'.
SEC. 732. INTERSTATE BRANCHES AND AGENCIES OF FOREIGN
BANKS.
Section 5(a)(7) of the International Banking Act of 1978 (12 U.S.C.
3103(a)(7)) is amended to read as follows:
`(7) ADDITIONAL AUTHORITY FOR INTERSTATE BRANCHES AND AGENCIES OF
FOREIGN BANKS, UPGRADES OF CERTAIN FOREIGN BANK AGENCIES AND BRANCHES-
Notwithstanding paragraphs (1) and (2), a foreign bank may--
`(A) with the approval of the Board and the Comptroller of the
Currency, establish and operate a Federal branch or Federal agency or,
with the approval of the Board and the appropriate State bank supervisor,
a State branch or State agency in any State outside the foreign bank's
home State if--
`(i) the establishment and operation of such branch or agency is
permitted by the State in which the branch or agency is to be
established; and
`(ii) in the case of a Federal or State branch, the branch receives
only such deposits as would be permitted for a corporation organized
under section 25A of the Federal Reserve Act; or
`(B) with the approval of the Board and the relevant licensing
authority (the Comptroller in the case of a Federal branch or the
appropriate State supervisor in the case of a State branch), upgrade an
agency, or a branch of the type referred to in subparagraph (A)(ii),
located in a State outside the foreign bank's home State, into a Federal
or State branch if--
`(i) the establishment and operation of such branch is permitted by
such State; and
`(ii) such agency or branch--
`(I) was in operation in such State on the day before September
29, 1994; or
`(II) has been in operation in such State for a period of time
that meets the State's minimum age requirement permitted under section
44(a)(5) of the Federal Deposit Insurance Act.'.
SEC. 733. FAIR TREATMENT OF WOMEN BY FINANCIAL ADVISERS.
It is the sense of the Congress that individuals offering financial advice
and products should offer such services and products in a nondiscriminatory,
nongender-specific manner.
SEC. 734. MEMBERSHIP OF LOAN GUARANTEE BOARDS.
(a) EMERGENCY STEEL LOAN GUARANTEE BOARD- Section 101(e) of the Emergency
Steel Loan Guarantee Act of 1999 is amended--
(1) in paragraph (2), by inserting `, or a member of the Board of
Governors of the Federal Reserve System designated by the Chairman' after
`the Chairman of the Board of Governors of the Federal Reserve System';
and
(2) in paragraph (3), by inserting `, or a commissioner of the
Securities and Exchange Commission designated by the Chairman' before the
period.
(b) EMERGENCY OIL AND GAS LOAN GUARANTEE BOARD- Section 201(d)(2) of the
Emergency Oil and Gas Guarantee Loan Program Act is amended--
(1) in subparagraph (B), by inserting `, or a member of the Board of
Governors of the Federal Reserve System designated by the Chairman' after
`the Chairman of the Board of Governors of the Federal Reserve System';
and
(2) in subparagraph (C), by inserting `, or a commissioner of the
Securities and Exchange Commission designated by the Chairman' before the
period.
SEC. 735. REPEAL OF STOCK LOAN LIMIT IN FEDERAL RESERVE ACT.
Section 11 of the Federal Reserve Act (12 U.S.C. 248) is amended by
striking the paragraph designated as `(m)' and inserting `(m) [Repealed]'.
SEC. 736. ELIMINATION OF SAIF AND DIF SPECIAL RESERVES.
(a) SAIF SPECIAL RESERVE- Section 11(a)(6) of the Federal Deposit
Insurance Act (12 U.S.C. 1821(a)(6)) is amended by striking subparagraph
(L).
(b) DIF SPECIAL RESERVE- Section 2704 of the Deposit Insurance Funds Act
of 1996 (12 U.S.C. 1821 note) is amended--
(1) by striking subsection (b); and
(A) by striking paragraph (4);
(B) in paragraph (6)(C)(i), by striking `(6) and (7)' and inserting
`(5), (6), and (7)'; and
(C) in paragraph (6)(C), by striking clause (ii) and inserting the
following:
`(ii) by redesignating paragraph (8) as paragraph (5).'.
(c) EFFECTIVE DATE- This section and the amendments made by this section
shall become effective on the date of the enactment of this Act.
SEC. 737. BANK OFFICERS AND DIRECTORS AS OFFICERS AND DIRECTORS OF
PUBLIC UTILITIES.
Section 305(b) of the Federal Power Act (16 U.S.C. 825d(b)) is
amended--
(1) by striking `(b) After six' and inserting the following:
`(b) INTERLOCKING DIRECTORATES-
`(1) IN GENERAL- After 6'; and
(2) by adding at the end the following:
`(A) IN GENERAL- In the circumstances described in subparagraph (B),
paragraph (1) shall not apply to a person that holds or proposes to hold
the positions of--
`(i) officer or director of a public utility; and
`(ii) officer or director of a bank, trust company, banking
association, or firm authorized by law to underwrite or participate in
the marketing of securities of a public utility.
`(B) CIRCUMSTANCES- The circumstances described in this subparagraph
are that--
`(i) a person described in subparagraph (A) does not participate in
any deliberations or decisions of the public utility regarding the
selection of a bank, trust company, banking association, or firm to
underwrite or participate in the marketing of securities of the public
utility, if the person serves as an officer or director of a bank, trust
company, banking association, or firm that is under consideration in the
deliberation process;
`(ii) the bank, trust company, banking association, or firm of which
the person is an officer or director does not engage in the underwriting
of, or participate in the marketing of, securities of the public utility
of which the person holds the position of officer or
director;
`(iii) the public utility for which the person serves or proposes to
serve as an officer or director selects underwriters by competitive
procedures; or
`(iv) the issuance of securities of the public utility for which the
person serves or proposes to serve as an officer or director has been
approved by all Federal and State regulatory agencies having
jurisdiction over the issuance.'.
SEC. 738. APPROVAL FOR PURCHASES OF SECURITIES.
Section 23B(b)(2) of the Federal Reserve Act (12 U.S.C. 371c-1) is amended
to read as follows:
`Subparagraph (B) of paragraph (1) shall not apply if the purchase or
acquisition of such securities has been approved, before such securities are
initially offered for sale to the public, by a majority of the directors of
the bank based on a determination that the purchase is a sound investment for
the bank irrespective of the fact that an affiliate of the bank is a principal
underwriter of the securities.'.
SEC. 739. OPTIONAL CONVERSION OF FEDERAL SAVINGS
ASSOCIATIONS.
Section 5(i) of the Home Owners' Loan Act (12 U.S.C. 1464(i)) is amended
by adding at the end the following new paragraph:
`(5) CONVERSION TO NATIONAL OR STATE BANK-
`(A) IN GENERAL- Any Federal savings association chartered and in
operation before the date of the enactment of the Gramm-Leach-Bliley Act,
with branches in operation before such date of enactment in 1 or more
States, may convert, at its option, with the approval of the Comptroller
of the Currency or the appropriate State bank supervisor, into 1 or more
national or State banks, each of which may encompass 1 or more of the
branches of the Federal savings association in operation before such date
of enactment in 1 or more States, but only if each resulting national or
State bank will meet all financial, management, and capital requirements
applicable to the resulting national or State bank.
`(B) DEFINITIONS- For purposes of this paragraph, the terms `State
bank' and `State bank supervisor' have the meanings given those terms in
section 3 of the Federal Deposit Insurance Act.'.
SEC. 740. GRAND JURY PROCEEDINGS.
Section 3322(b) of title 18, United States Code, is amended--
(1) in paragraph (1), by inserting `Federal or State' before `financial
institution'; and
(2) in paragraph (2), by inserting `at any time during or after the
completion of the investigation of the grand jury,' before `upon'.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.
END