Gramm–Leach–Bliley Act Text
Text of the Gramm-Leach Bliley Act
S. 900
One Hundred Sixth Congress
of the
United States of America
AT T H E F I R S T S E S S I O N
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-LeachBliley 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.S. 900—2
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
Sec. 241. Consultation.
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.S. 900—3
Sec. 315. Definitions.
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. 323. Purpose.
Sec. 324. Relationship to the Federal Government.
Sec. 325. Membership.
Sec. 326. Board of directors.
Sec. 327. Officers.
Sec. 328. Bylaws, rules, and disciplinary action.
Sec. 329. Assessments.
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.
Sec. 336. Definitions.
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. 504. Rulemaking.
Sec. 505. Enforcement.
Sec. 506. Protection of Fair Credit Reporting Act.
Sec. 507. Relation to State laws.
Sec. 508. Study of information sharing among financial affiliates.
Sec. 509. Definitions.
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.
Sec. 526. Reports.
Sec. 527. Definitions.
TITLE VI—FEDERAL HOME LOAN BANK SYSTEM MODERNIZATION
Sec. 601. Short title.
Sec. 602. Definitions.
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. 701. Short title.
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.S. 900—4
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,’’.S. 900—5
(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 theS. 900—6
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-LeachBliley 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; andS. 900—7
‘‘(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—S. 900—8
‘‘(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.
‘‘(5) ACTIONS REQUIRED.—
‘‘(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 andS. 900—9
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 GrammLeach-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 anyS. 900—10
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.—S. 900—11
‘‘(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.—S. 900—12
‘‘(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;S. 900—13
‘‘(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.S. 900—14
‘‘(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
(B) in paragraph (3)—
(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’’.
(d) REPORT.—
(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.S. 900—15
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).
(c) AFFILIATIONS.—
(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—
(A) any State from—
(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 suchS. 900—16
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.
(d) ACTIVITIES.—
(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.
(2) INSURANCE SALES.—
(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; orS. 900—17
(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 thatS. 900—18
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—
(I) is not a deposit;
(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.S. 900—19
(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.
(C) LIMITATIONS.—
(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).S. 900—20
(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
(D) it—
(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;S. 900—21
(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 TrustS. 900—22
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 outof-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;
‘‘(B) such overdraft—
‘‘(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
‘‘(C) such overdraft—
‘‘(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.S. 900—23
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—
‘‘(A) either—
‘‘(i) corrected the condition or ceased the activity
that caused the company to fail to continue to qualify
for the exemption; orS. 900—24
‘‘(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 withS. 900—25
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.—
‘‘(1) REPORTS.—
‘‘(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; andS. 900—26
‘‘(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.
‘‘(2) EXAMINATIONS.—
‘‘(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; andS. 900—27
‘‘(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;S. 900—28
‘‘(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.
‘‘(3) CAPITAL.—
‘‘(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
‘‘(ii) is—
‘‘(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 theyS. 900—29
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
‘‘(B) that is—
‘‘(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,S. 900—30
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:S. 900—31
‘‘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:S. 900—32
‘‘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.S. 900—33
(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,S. 900—34
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.S. 900—35
(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—
‘‘(A) order’’; and
(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 affiliateS. 900—36
(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:
‘‘(f) [Repealed].’’.
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;S. 900—37
‘‘(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
‘‘(ii) $50,000,000,000;
‘‘(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.—S. 900—38
‘‘(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-LeachBliley Act;S. 900—39
‘‘(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.
‘‘(c) CAPITAL DEDUCTION.—
‘‘(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.S. 900—40
‘‘(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:S. 900—41
‘‘(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);
andS. 900—42
(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 GrammLeach-Bliley Act, if any, unless the company or shareholder
provides information acceptable to the Board to rebut this
presumption of control.’’.S. 900—43
(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 throughS. 900—44
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.S. 900—45
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.S. 900—46
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 periodS. 900—47
beginning on the date of the enactment of the GrammLeach-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.S. 900—48
TITLE II—FUNCTIONAL REGULATION
Subtitle A—Brokers and Dealers
SEC. 201. DEFINITION OF BROKER.
Section 3(a)(4) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)(4)) is amended to read as follows:
‘‘(4) BROKER.—
‘‘(A) IN GENERAL.—The term ‘broker’ means any person
engaged in the business of effecting transactions in securities for the 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 isS. 900—49
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 agencyS. 900—50
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-LeachBliley 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, openend 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 theS. 900—51
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 GrammLeach-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 anyS. 900—52
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—S. 900—53
‘‘(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:
‘‘(5) DEALER.—
‘‘(A) IN GENERAL.—The term ‘dealer’ means any person
engaged in the business of buying and selling securities
for such person’s own account through a broker or otherwise.
‘‘(B) EXCEPTION FOR PERSON NOT 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—
‘‘(I) for the bank; or
‘‘(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—
‘‘(I) the bank;
‘‘(II) an affiliate of any such bank other than
a broker or dealer; orS. 900—54
‘‘(III) a syndicate of banks of which the bank
is a member, if the obligations or pool of obligations
consists of mortgage obligations or consumerrelated 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-LeachBliley 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 selfregulatory 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:S. 900—55
‘‘(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 ofS. 900—56
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; andS. 900—57
(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 ofS. 900—58
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.S. 900—59
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.—
‘‘(1) Every registered’’;
(3) by redesignating the second, third, fourth, and fifth
sentences of such subsection as paragraphs (2) through (5),
respectively, and indenting the left margin of such paragraphs
appropriately; and
(4) by adding at the end the following new paragraph:
‘‘(6) The Commission may, 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:S. 900—60
‘‘(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 executedS. 900—61
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 anS. 900—62
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 facilitiesS. 900—63
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;
‘‘(ii) bank; or
‘‘(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 organizationS. 900—64
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—
‘‘(i) advertised; or
‘‘(ii) offered for sale to the general public; and
‘‘(C) fees and expenses charged by such fund are not
in contravention of fiduciary 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 institutionS. 900—65
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 withS. 900—66
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 brokerS. 900—67
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 orS. 900—68
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—
‘‘(I) the company; and
‘‘(II) any affiliate of the company that, because
of its size, condition, or activities, the nature or
size of the transactions between such affiliate and
any affiliated broker or dealer, or the centralization of functions within the holding company
system, could, in the discretion of the Commission,
have a materially adverse effect on the operational
or financial condition of the broker or dealer.
‘‘(iii) DEFERENCE TO OTHER 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’ haveS. 900—69
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.’’.S. 900—70
(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—S. 900—71
(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—
(i) a deposit product;
(ii) a loan, discount, letter of credit, or other extension of credit;
(iii) a trust or other fiduciary service;
(iv) a qualified financial contract (as defined in
or determined pursuant to 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.—S. 900—72
(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 renderingS. 900—73
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 rulesS. 900—74
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:
‘‘(1) DISCLOSURES.—
‘‘(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.S. 900—75
‘‘(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 moreS. 900—76
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.—S. 900—77
‘‘(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.
‘‘(B) PREEMPTION.—
‘‘(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, againstS. 900—78
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 StateS. 900—79
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.S. 900—80
(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.—S. 900—81
(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.
(2) FORMS.—
(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 aS. 900—82
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—S. 900—83
(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 pursuantS. 900—84
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.S. 900—85
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—S. 900—86
(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.
(d) DETERMINATION.—
(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 licensingS. 900—87
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.
(a) ELIGIBILITY.—
(1) IN GENERAL.—Any State-licensed insurance producer
shall be eligible to become a member in the Association.
(2) INELIGIBILITY FOR SUSPENSION OR 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.—S. 900—88
(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.
(d) MEMBERSHIP CRITERIA.—
(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.S. 900—89
(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.
(c) COMPOSITION.—
(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.S. 900—90
SEC. 327. OFFICERS.
(a) IN GENERAL.—
(1) POSITIONS.—The officers of the Association shall consist
of a chairperson and a vice chairperson of the Board, a president, secretary, and treasurer of the Association, and such
other officers and 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.S. 900—91
(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.
(3) NAIC PROCEEDINGS.—
(A) IN GENERAL.—Proceedings instituted by the NAIC
with respect to a proposed rule or amendment pursuant
to paragraph (2) shall—
(i) include notice of the grounds for disapproval
under consideration;
(ii) provide opportunity for hearing; and
(iii) be concluded not later than 180 days after
the date of the Association’s 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.
(5) ALTERNATE PROCEDURE.—
(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;
orS. 900—92
(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.S. 900—93
(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.
(g) SCOPE OF REVIEW.—
(1) IN GENERAL.—In any proceeding to review such action,
after notice and the opportunity for hearing, the NAIC shall—
(A) determine whether the action should be taken;
(B) affirm, modify, or rescind the 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 StateS. 900—94
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.—S. 900—95
(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,S. 900—96
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.S. 900—97
(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—
(1) any State statute;
(2) the prospective application of any court judgment interpreting or applying any State statute; or
(3) the prospective application of any final State regulation,
order, bulletin, or other statutorily authorized interpretation
or action,
which, by its specific terms, expressly regulates or exempts from
regulation any person who solicits the purchase of or sells insurance
connected with, and incidental to, the short-term lease or rental
of a motor vehicle.
(c) SCOPE OF APPLICATION.—This section shall apply with
respect to—
(1) the lease or rental of a motor vehicle for a total period
of 90 consecutive days or less; and
(2) insurance which is provided in connection with, and
incidentally to, such lease or rental for a period of consecutive
days not exceeding the lease or rental period.
(d) MOTOR VEHICLE DEFINED.—For purposes of this section,
the term ‘‘motor vehicle’’ has the 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:S. 900—98
‘‘(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 withS. 900—99
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 describedS. 900—100
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.
(b) OPT OUT.—
(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 institutionS. 900—101
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 regulatoryS. 900—102
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 withS. 900—103
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.S. 900—104
(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 bankS. 900—105
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;S. 900—106
(8) the feasibility of different approaches, including optout 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 orS. 900—107
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 theS. 900—108
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.S. 900—109
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.S. 900—110
(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 agencyS. 900—111
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 UnionS. 900—112
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)); andS. 900—113
(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:S. 900—114
‘‘(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:
‘‘(a) IN GENERAL.—
‘‘(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.’’;
(6) in paragraph (5)—
(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 anS. 900—115
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 insertingS. 900—116
‘‘, 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:
‘‘(2) LIMITATION.—
‘‘(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 expensesS. 900—117
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—
(1) in subsection (a)—
(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 theS. 900—118
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—
(A) in subsection (c)—
(i) in the first sentence, by striking ‘‘Board’’ and
inserting ‘‘Federal home loan bank’’; and
(ii) by striking the second sentence; and
(B) in subsection (d)—
(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 FundingS. 900—119
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.
‘‘(a) REGULATIONS.—
‘‘(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).S. 900—120
‘‘(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 theS. 900—121
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—
‘‘(i) permanent capital;
‘‘(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.S. 900—122
‘‘(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:
‘‘(1) MINIMUM INVESTMENT.—
‘‘(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.
‘‘(2) TRANSITION RULE.—
‘‘(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.S. 900—123
‘‘(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.
‘‘(4) CLASSES OF STOCK.—
‘‘(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 ofS. 900—124
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 bankS. 900—125
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 suchS. 900—126
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); andS. 900—127
‘‘(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;S. 900—128
(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:S. 900—129
‘‘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 bankingS. 900—130
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.
‘‘(e) DEFINITIONS.—
‘‘(1) AGREEMENT.—For purposes of this section, the term
‘agreement’—
‘‘(A) means—
‘‘(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
‘‘(B) does not include—
‘‘(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.
‘‘(f) VIOLATIONS.—
‘‘(1) VIOLATIONS BY PERSONS OTHER THAN INSURED DEPOSITORY INSTITUTIONS OR THEIR AFFILIATES.—S. 900—131
‘‘(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).
‘‘(h) REGULATIONS.—
‘‘(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.S. 900—132
‘‘(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—
(1) the default rates;
(2) the delinquency rates; and
(3) the profitability;
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.S. 900—133
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.
(b) REPORTS.—
(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).S. 900—134
(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’.S. 900—135
‘‘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 lowincome 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 BlockS. 900—136
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;
‘‘(2) an intermediary;
‘‘(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.—S. 900—137
‘‘(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).
‘‘(c) EXCEPTION.—
‘‘(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;S. 900—138
‘‘(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—
(1) in section 1101(7)—
(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.S. 900—139
(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—S. 900—140
‘‘(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 ofS. 900—141
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.S. 900—142
(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
(2) in subsection (d)—
(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:
‘‘(2) APPLICABILITY.—
‘‘(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,S. 900—143
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—S. 900—144
(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.