Text: S.900 — 106th Congress (1999-2000)All Information (Except Text)

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Public Law No: 106-102 (11/12/1999)

 
[106th Congress Public Law 102]
[From the U.S. Government Printing Office]


<DOC>
[DOCID: f:publ102.106]


[[Page 1338]]

                         GRAMM-LEACH-BLILEY ACT

[[Page 113 STAT. 1338]]

Public Law 106-102
106th Congress

                                 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. <<NOTE: Nov. 12, 1999 -  [S. 900]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress <<NOTE: Gramm-Leach- Bliley 
Act.>> assembled,

SECTION 1. SHORT <<NOTE: Inter- governmental relations. 12 USC 1811 
            note.>> TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Gramm-Leach-Bliley 
Act''.

    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.

  TITLE I--FACILITATING AFFILIATION AMONG BANKS, SECURITIES FIRMS, AND 
                           INSURANCE COMPANIES

                        Subtitle A--Affiliations

Sec. 101. Glass-Steagall Act repeals.
Sec. 102. Activity restrictions applicable to bank holding companies 
           that are not financial holding companies.
Sec. 103. Financial activities.
Sec. 104. Operation of State law.
Sec. 105. Mutual bank holding companies authorized.
Sec. 106. Prohibition on deposit production offices.
Sec. 107. Cross marketing restriction; limited purpose bank relief; 
           divestiture.
Sec. 108. Use of subordinated debt to protect financial system and 
           deposit funds from ``too big to fail'' institutions.
Sec. 109. Study of financial modernization's effect on the accessibility 
           of small business and farm loans.

     Subtitle B--Streamlining Supervision of Bank Holding Companies

Sec. 111. Streamlining bank holding company supervision.
Sec. 112. Authority of State insurance regulator and Securities and 
           Exchange Commission.
Sec. 113. Role of the Board of Governors of the Federal Reserve System.
Sec. 114. Prudential safeguards.
Sec. 115. Examination of investment companies.
Sec. 116. Elimination of application requirement for financial holding 
           companies.
Sec. 117. Preserving the integrity of FDIC resources.
Sec. 118. Repeal of savings bank provisions in the Bank Holding Company 
           Act of 1956.
Sec. 119. Technical amendment.

               Subtitle C--Subsidiaries of National Banks

Sec. 121. Subsidiaries of national banks.
Sec. 122. Consideration of merchant banking activities by financial 
           subsidiaries.

                Subtitle D--Preservation of FTC Authority

Sec. 131. Amendment to the Bank Holding Company Act of 1956 to modify 
           notification and post-approval waiting period for section 3 
           transactions.
Sec. 132. Interagency data sharing.

[[Page 113 STAT. 1339]]

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.

[[Page 113 STAT. 1340]]

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.

[[Page 113 STAT. 1341]]

                   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,''.

[[Page 113 STAT. 1342]]

            (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 <<NOTE: Notification.>> 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 <<NOTE: Deadline.>> 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 <<NOTE: Deadline. Notification.>> period for 
                      board action.--Not later than 30 days after the 
                      date of receipt of a written recommendation from 
                      the Secretary of the Treasury under clause (i) (or 
                      such longer period as the Secretary of the 
                      Treasury and the Board determine to be appropriate 
                      under the circumstances), the Board shall 
                      determine whether to initiate a public rulemaking 
                      proposing that the recommended activity be found 
                      to be financial in nature or incidental to a 
                      financial activity under this subsection, and 
                      shall notify the Secretary of the

[[Page 113 STAT. 1343]]

                      Treasury in writing of the determination of the 
                      Board and, if the Board determines not to seek 
                      public comment on the proposal, the reasons for 
                      that determination.
            ``(3) Factors to be considered.--In determining whether an 
        activity is financial in nature or incidental to a financial 
        activity, the Board shall take into account--
                    ``(A) the purposes of this Act and the Gramm-Leach-
                Bliley Act;
                    ``(B) changes or reasonably expected changes in the 
                marketplace in which financial holding companies 
                compete;
                    ``(C) changes or reasonably expected changes in the 
                technology for delivering financial services; and
                    ``(D) whether such activity is necessary or 
                appropriate to allow a financial holding company and the 
                affiliates of a financial holding company to--
                          ``(i) compete effectively with any company 
                      seeking to provide financial services in the 
                      United States;
                          ``(ii) efficiently deliver information and 
                      services that are financial in nature through the 
                      use of technological means, including any 
                      application necessary to protect the security or 
                      efficacy of systems for the transmission of data 
                      or financial transactions; and
                          ``(iii) offer customers any available or 
                      emerging technological means for using financial 
                      services or for the document imaging of data.
            ``(4) Activities that are financial in nature.--For purposes 
        of this subsection, the following activities shall be considered 
        to be financial in nature:
                    ``(A) Lending, exchanging, transferring, investing 
                for others, or safeguarding money or securities.
                    ``(B) Insuring, guaranteeing, or indemnifying 
                against loss, harm, damage, illness, disability, or 
                death, or providing and issuing annuities, and acting as 
                principal, agent, or broker for purposes of the 
                foregoing, in any State.
                    ``(C) Providing financial, investment, or economic 
                advisory services, including advising an investment 
                company (as defined in section 3 of the Investment 
                Company Act of 1940).
                    ``(D) Issuing or selling instruments representing 
                interests in pools of assets permissible for a bank to 
                hold directly.
                    ``(E) Underwriting, dealing in, or making a market 
                in securities.
                    ``(F) Engaging in any activity that the Board has 
                determined, by order or regulation that is in effect on 
                the date of the enactment of the Gramm-Leach-Bliley Act, 
                to be so closely related to banking or managing or 
                controlling banks as to be a proper incident thereto 
                (subject to the same terms and conditions contained in 
                such order or regulation, unless modified by the Board).
                    ``(G) Engaging, in the United States, in any 
                activity that--
                          ``(i) a bank holding company may engage in 
                      outside of the United States; and

[[Page 113 STAT. 1344]]

                          ``(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--

[[Page 113 STAT. 1345]]

                          ``(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 <<NOTE: Regulations.>> 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 <<NOTE: Deadline.>> general.--A financial 
                holding company that acquires any company or commences 
                any activity pursuant to this subsection shall provide 
                written notice to the Board describing the activity 
                commenced or conducted by the company acquired not later 
                than 30 calendar days after commencing the activity or 
                consummating the acquisition, as the case may be.
                    ``(B) Approval not required for certain financial 
                activities.--Except as provided in subsection (j) with 
                regard to the acquisition of a savings association, a 
                financial holding company may commence any activity, or 
                acquire any company, pursuant to paragraph (4) or any 
                regulation prescribed or order issued under paragraph 
                (5), without prior approval of the Board.
            ``(7) Merchant banking activities.--
                    ``(A) Joint regulations.--The Board and the 
                Secretary of the Treasury may issue such regulations 
                implementing paragraph (4)(H), including limitations on 
                transactions between depository institutions and 
                companies
                controlled pursuant to such paragraph, as the Board and 
                the Secretary jointly deem appropriate to assure 
                compliance with the purposes and prevent evasions of 
                this Act and

[[Page 113 STAT. 1346]]

                the Gramm-Leach-Bliley Act and to protect depository 
                institutions.
                    ``(B) Sunset of restrictions on merchant banking 
                activities of financial subsidiaries.--The restrictions 
                contained in paragraph (4)(H) on the ownership and 
                control of shares, assets, or ownership interests by or 
                on behalf of a subsidiary of a depository institution 
                shall not apply to a financial subsidiary (as defined in 
                section 5136A of the Revised Statutes of the United 
                States) of a bank, if the Board and the Secretary of the 
                Treasury jointly authorize financial subsidiaries of 
                banks to engage in merchant banking activities pursuant 
                to section 122 of the Gramm-Leach-Bliley Act.

    ``(l) Conditions for Engaging in Expanded Financial Activities.--
            ``(1) In general.--Notwithstanding subsection (k), (n), or 
        (o), a bank holding company may not engage in any activity, or 
        directly or indirectly acquire or retain shares of any company 
        engaged in any activity, under subsection (k), (n), or (o), 
        other than activities permissible for any bank holding company 
        under subsection (c)(8), unless--
                    ``(A) all of the depository institution subsidiaries 
                of the bank holding company are well capitalized;
                    ``(B) all of the depository institution subsidiaries 
                of the bank holding company are well managed; and
                    ``(C) the bank holding company has filed with the 
                Board--
                          ``(i) a declaration that the company elects to 
                      be a financial holding company to engage in 
                      activities or acquire and retain shares of a 
                      company that were not permissible for a bank 
                      holding company to engage in or acquire before the 
                      enactment of the Gramm-Leach-Bliley Act; and
                          ``(ii) a certification that the company meets 
                      the requirements of subparagraphs (A) and (B).
            ``(2) CRA requirement.--Notwithstanding subsection (k) or 
        (n) of this section, section 5136A(a) of the Revised Statutes of 
        the United States, or section 46(a) of the Federal Deposit 
        Insurance Act, the appropriate Federal banking agency shall 
        prohibit a financial holding company or any insured depository 
        institution from--
                    ``(A) commencing any new activity under subsection 
                (k) or (n) of this section, section 5136A(a) of the 
                Revised Statutes of the United States, or section 46(a) 
                of the Federal Deposit Insurance Act; or
                    ``(B) directly or indirectly acquiring control of a 
                company engaged in any activity under subsection (k) or 
                (n) of this section, section 5136A(a) of the Revised 
                Statutes of the United States, or section 46(a) of the 
                Federal Deposit Insurance Act (other than an investment 
                made pursuant to subparagraph (H) or (I) of subsection 
                (k)(4), or section 122 of the Gramm-Leach-Bliley Act, or 
                under section 46(a) of the Federal Deposit Insurance Act 
                by reason of such section 122, by an affiliate already 
                engaged in activities under any such provision);
        if any insured depository institution subsidiary of such 
        financial holding company, or the insured depository institution 
        or any

[[Page 113 STAT. 1347]]

        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 <<NOTE: Deadline.>> 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.--

[[Page 113 STAT. 1348]]

            ``(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.--

[[Page 113 STAT. 1349]]

                    ``(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;

[[Page 113 STAT. 1350]]

            ``(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.

[[Page 113 STAT. 1351]]

                    ``(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) <<NOTE: 12 USC 1843 note.>>  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.

[[Page 113 STAT. 1352]]

SEC. 104. <<NOTE: 15 USC 6701.>> 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 such

[[Page 113 STAT. 1353]]

                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; or

[[Page 113 STAT. 1354]]

                                    (II) a State, or the Federal 
                                Government guarantees any returns on 
                                insurance products, or is a source of 
                                payment on any insurance obligation of 
                                or sold by the institution or affiliate;
                          (iv) Restrictions prohibiting the payment or 
                      receipt of any commission or brokerage fee or 
                      other valuable consideration for services as an 
                      insurance agent or broker to or by any person, 
                      unless such person holds a valid State license 
                      regarding the applicable class of insurance at the 
                      time at which the services are performed, except 
                      that, in this clause, the term ``services as an 
                      insurance agent or broker'' does not include a 
                      referral by an unlicensed person of a customer or 
                      potential customer to a licensed insurance agent 
                      or broker that does not include a discussion of 
                      specific insurance policy terms and conditions.
                          (v) Restrictions prohibiting any compensation 
                      paid to or received by any individual who is not 
                      licensed to sell insurance, for the referral of a 
                      customer that seeks to purchase, or seeks an 
                      opinion or advice on, any insurance product to a 
                      person that sells or provides opinions or advice 
                      on such product, based on the purchase of 
                      insurance by the customer.
                          (vi) Restrictions prohibiting the release of 
                      the insurance information of a customer (defined 
                      as information concerning the premiums, terms, and 
                      conditions of insurance coverage, including 
                      expiration dates and rates, and insurance claims 
                      of a customer contained in the records of the 
                      depository institution or an affiliate thereof) to 
                      any person other than an officer, director, 
                      employee, agent, or affiliate of a depository 
                      institution, for the purpose of soliciting or 
                      selling insurance, without the express consent of 
                      the customer, other than a provision that 
                      prohibits--
                                    (I) a transfer of insurance 
                                information to an unaffiliated insurer 
                                in connection with transferring 
                                insurance in force on existing insureds 
                                of the depository institution or an 
                                affiliate thereof, or in connection with 
                                a merger with or acquisition of an 
                                unaffiliated insurer; or
                                    (II) the release of information as 
                                otherwise authorized by State or Federal 
                                law.
                          (vii) Restrictions prohibiting the use of 
                      health information obtained from the insurance 
                      records of a customer for any purpose, other than 
                      for its activities as a licensed agent or broker, 
                      without the express consent of the customer.
                          (viii) Restrictions prohibiting the extension 
                      of credit or any product or service that is 
                      equivalent to an extension of credit, lease or 
                      sale of property of any kind, or furnishing of any 
                      services or fixing or varying the consideration 
                      for any of the foregoing, on the condition or 
                      requirement that the customer obtain insurance 
                      from a depository institution or an affiliate of a 
                      depository institution, or a particular insurer, 
                      agent, or broker, other than a prohibition that

[[Page 113 STAT. 1355]]

                      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.

[[Page 113 STAT. 1356]]

                          (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).

[[Page 113 STAT. 1357]]

            (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;

[[Page 113 STAT. 1358]]

            (3) effectively prevents a depository institution, or 
        affiliate thereof, from engaging in insurance activities 
        authorized or permitted by this Act or any other provision of 
        Federal law; or
            (4) conflicts with the intent of this Act generally to 
        permit affiliations that are authorized or permitted by Federal 
        law between depository institutions, or affiliates thereof, and 
        persons engaged in the business of insurance.

    (f) Limitation.--Subsections (c) and (d) shall not be construed to 
affect--
            (1) the jurisdiction of the securities commission (or any 
        agency or office performing like functions) of any State, under 
        the laws of such State--
                    (A) to investigate and bring enforcement actions, 
                consistent with section 18(c) of the Securities Act of 
                1933, with respect to fraud or deceit or unlawful 
                conduct by any person, in connection with securities or 
                securities transactions; or
                    (B) to require the registration of securities or the 
                licensure or registration of brokers, dealers, or 
                investment advisers (consistent with section 203A of the 
                Investment Advisers Act of 1940), or the associated 
                persons of a broker, dealer, or investment adviser 
                (consistent with such section 203A); or
            (2) State laws, regulations, orders, interpretations, or 
        other actions of general applicability relating to the 
        governance of corporations, partnerships, limited liability 
        companies, or other business associations incorporated or formed 
        under the laws of that State or domiciled in that State, or the 
        applicability of the antitrust laws of any State or any State 
        law that is similar to the antitrust laws if such laws, 
        regulations, orders, interpretations, or other actions are not 
        inconsistent with the purposes of this Act to authorize or 
        permit certain affiliations and to remove barriers to such 
        affiliations.

    (g) Definitions.--For purposes of this section, the following 
definitions shall apply:
            (1) Affiliate.--The term ``affiliate'' means any company 
        that controls, is controlled by, or is under common control with 
        another company.
            (2) Antitrust laws.--The term ``antitrust laws'' has the 
        meaning given the term in subsection (a) of the first section of 
        the Clayton Act, and includes section 5 of the Federal Trade 
        Commission Act (to the extent that such section 5 relates to 
        unfair methods of competition).
            (3) Depository institution.--The term ``depository 
        institution''--
                    (A) has the meaning given the term in section 3 of 
                the Federal Deposit Insurance Act; and
                    (B) includes any foreign bank that maintains a 
                branch, agency, or commercial lending company in the 
                United States.
            (4) Insurer.--The term ``insurer'' means any person engaged 
        in the business of insurance.
            (5) State.--The term ``State'' means any State of the United 
        States, the District of Columbia, any territory of the United 
        States, Puerto Rico, Guam, American Samoa, the Trust

[[Page 113 STAT. 1359]]

        Territory of the Pacific Islands, the Virgin Islands, and the 
        Northern Mariana Islands.

SEC. 105. MUTUAL BANK HOLDING COMPANIES AUTHORIZED.

    Section 3(g)(2) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1842(g)(2)) is amended to read as follows:
            ``(2) Regulations.--A bank holding company organized as a 
        mutual holding company shall be regulated on terms, and shall be 
        subject to limitations, comparable to those applicable to any 
        other bank holding company.''.

SEC. 106. PROHIBITION ON DEPOSIT PRODUCTION OFFICES.

    Section 109(e)(4) of the Riegle-Neal Interstate Banking and 
Branching Efficiency Act of 1994 (12 U.S.C. 1835a(e)(4)) is amended by 
inserting ``and any branch of a bank controlled by an out-of-State bank 
holding company (as defined in section 2(o)(7) of the Bank Holding 
Company Act of 1956)'' before the period.
SEC. 107. CROSS MARKETING RESTRICTION; LIMITED PURPOSE BANK 
                        RELIEF; DIVESTITURE.

    (a) Cross Marketing Restriction.--Section 4(f) of the Bank Holding 
Company Act of 1956 (12 U.S.C. 1843(f)) is amended by striking paragraph 
(3).
    (b) Daylight Overdrafts.--Section 4(f) of the Bank Holding Company 
Act of 1956 (12 U.S.C. 1843(f)) is amended by inserting after paragraph 
(2) the following new paragraph:
            ``(3) Permissible overdrafts described.--For purposes of 
        paragraph (2)(C), an overdraft is described in this paragraph 
        if--
                    ``(A) such overdraft results from an inadvertent 
                computer or accounting error that is beyond the control 
                of both the bank and the affiliate;
                    ``(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.

[[Page 113 STAT. 1360]]

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; or

[[Page 113 STAT. 1361]]

                          ``(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 <<NOTE: 12 USC 4801 note.>> OF SUBORDINATED DEBT TO 
                        PROTECT FINANCIAL SYSTEM AND DEPOSIT FUNDS 
                        FROM ``TOO BIG TO FAIL'' INSTITUTIONS.

    (a) Study Required.--The Board of Governors of the Federal Reserve 
System and the Secretary of the Treasury shall conduct a study of--
            (1) the feasibility and appropriateness of establishing a 
        requirement that, with respect to large insured depository 
        institutions and depository institution holding companies the 
        failure of which could have serious adverse effects on economic 
        conditions or financial stability, such institutions and holding 
        companies maintain some portion of their capital in the form of 
        subordinated debt in order to bring market forces and market 
        discipline to bear on the operation of, and the assessment of 
        the viability of, such institutions and companies and reduce the 
        risk to economic conditions, financial stability, and any 
        deposit insurance fund;
            (2) if such requirement is feasible and appropriate, the 
        appropriate amount or percentage of capital that should be 
        subordinated debt consistent with such purposes; and
            (3) the manner in which any such requirement could be 
        incorporated into existing capital standards and other issues 
        relating to the transition to such a requirement.

    (b) Report.--Before the end of the 18-month period beginning on the 
date of the enactment of this Act, the Board of Governors of the Federal 
Reserve System and the Secretary of the Treasury shall submit a report 
to the Congress containing the findings and conclusions of the Board and 
the Secretary in connection with

[[Page 113 STAT. 1362]]

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 <<NOTE: 12 USC 252 note.>> 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; and

[[Page 113 STAT. 1363]]

                          ``(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; and

[[Page 113 STAT. 1364]]

                                    ``(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;

[[Page 113 STAT. 1365]]

                          ``(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 they

[[Page 113 STAT. 1366]]

                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,

[[Page 113 STAT. 1367]]

                      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:

[[Page 113 STAT. 1368]]

``SEC. 45. AUTHORITY <<NOTE: 12 USC 1831v.>> 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:

[[Page 113 STAT. 1369]]

``SEC. 10A. LIMITATION <<NOTE: 12 USC 1848a.>> 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. <<NOTE: 12 USC 1828a.>> 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.

[[Page 113 STAT. 1370]]

            (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,

[[Page 113 STAT. 1371]]

                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. <<NOTE: 12 USC 1820a.>> 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.

[[Page 113 STAT. 1372]]

    (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 affiliate

[[Page 113 STAT. 1373]]

(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 <<NOTE: 12 USC 25a.>> redesignating section 5136A as 
        section 5136B; and
            (2) by inserting after section 5136 (12 U.S.C. 24) the 
        following new section:

``SEC. 5136A. <<NOTE: 12 USC 24a.>> 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;

[[Page 113 STAT. 1374]]

                    ``(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 <<NOTE: Regulations.>> 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 <<NOTE: Applicability.>> 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.--

[[Page 113 STAT. 1375]]

                    ``(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 <<NOTE: Notification.>> Secretary of 
                                the Treasury shall notify the Board of, 
                                and consult with the Board concerning, 
                                any request, proposal, or application 
                                under this section for a determination 
                                of whether an activity is financial in 
                                nature or incidental to a financial 
                                activity.
                                    ``(II) Board view.--The Secretary of 
                                the Treasury shall not determine that 
                                any activity is financial in nature or 
                                incidental to a financial activity under 
                                this section if the Board notifies the 
                                Secretary in writing, not later than 30 
                                days after the date of receipt of the 
                                notice described in subclause (I) (or 
                                such longer period as the Secretary 
                                determines to be appropriate under the 
                                circumstances) that the Board believes 
                                that the activity is not financial in 
                                nature or incidental to a financial 
                                activity or is not otherwise permissible 
                                under this section.
                          ``(ii) Proposals raised by the board.--
                                    ``(I) Board recommendation.--The 
                                Board may, at any time, recommend in 
                                writing that the Secretary of the 
                                Treasury find an activity to be 
                                financial in nature or incidental to a 
                                financial activity for purposes of this 
                                section.
                                    ``(II) Time period for secretarial 
                                action.--Not later than 30 days after 
                                the date of receipt of a written 
                                recommendation from the Board under 
                                subclause (I) (or such longer period as 
                                the Secretary of the Treasury and the 
                                Board determine to be appropriate under 
                                the circumstances), the Secretary shall 
                                determine whether to initiate a public 
                                rulemaking proposing that the subject 
                                recommended activity be found to be 
                                financial in nature or incidental to a 
                                financial activity under this section, 
                                and shall notify the Board in writing of 
                                the determination of the Secretary and, 
                                in the event that the Secretary 
                                determines not to seek public comment on 
                                the proposal, the reasons for that 
                                determination.
            ``(2) Factors to be considered.--In determining whether an 
        activity is financial in nature or incidental to a financial 
        activity, the Secretary shall take into account--
                    ``(A) the purposes of this Act and the Gramm-Leach-
                Bliley Act;

[[Page 113 STAT. 1376]]

                    ``(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 <<NOTE: Regulations.>> 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.

[[Page 113 STAT. 1377]]

    ``(e) Provisions Applicable to National Banks That Fail To Continue 
To Meet Certain Requirements.--
            ``(1) In <<NOTE: Notice.>> 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 <<NOTE: Deadline.>> 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 <<NOTE: Deadline.>> 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:

[[Page 113 STAT. 1378]]

            ``(1) Affiliate, company, control, and subsidiary.--The 
        terms `affiliate', `company', `control', and `subsidiary' have 
        the meanings given those terms in section 2 of the Bank Holding 
        Company Act of 1956.
            ``(2) Appropriate federal banking agency, depository 
        institution, insured bank, and insured depository institution.--
        The terms `appropriate Federal banking agency', `depository 
        institution', `insured bank', and `insured depository 
        institution' have the meanings given those terms in section 3 of 
        the Federal Deposit Insurance Act.
            ``(3) Financial subsidiary.--The term `financial subsidiary' 
        means any company that is controlled by 1 or more insured 
        depository institutions other than a subsidiary that--
                    ``(A) engages solely in activities that national 
                banks are permitted to engage in directly and are 
                conducted subject to the same terms and conditions that 
                govern the conduct of such activities by national banks; 
                or
                    ``(B) a national bank is specifically authorized by 
                the express terms of a Federal statute (other than this 
                section), and not by implication or interpretation, to 
                control, such as by section 25 or 25A of the Federal 
                Reserve Act or the Bank Service Company Act.
            ``(4) Eligible debt.--The term `eligible debt' means 
        unsecured long-term debt that--
                    ``(A) is not supported by any form of credit 
                enhancement, including a guarantee or standby letter of 
                credit; and
                    ``(B) is not held in whole or in any significant 
                part by any affiliate, officer, director, principal 
                shareholder, or employee of the bank or any other person 
                acting on behalf of or with funds from the bank or an 
                affiliate of the bank.
            ``(5) Well capitalized.--The term `well capitalized' has the 
        meaning given the term in section 38 of the Federal Deposit 
        Insurance Act.
            ``(6) Well managed.--The term `well managed' means--
                    ``(A) in the case of a depository institution that 
                has been examined, unless otherwise determined in 
                writing by the appropriate Federal banking agency--
                          ``(i) the achievement of a composite rating of 
                      1 or 2 under the Uniform Financial Institutions 
                      Rating System (or an equivalent rating under an 
                      equivalent rating system) in connection with the 
                      most recent examination or subsequent review of 
                      the depository institution; and
                          ``(ii) at least a rating of 2 for management, 
                      if such rating is given; or
                    ``(B) in the case of any depository institution that 
                has not been examined, the existence and use of 
                managerial resources that the appropriate Federal 
                banking agency determines are satisfactory.''.

    (b) Sections 23A and 23B of the Federal Reserve Act.--
            (1) Limiting the exposure of a bank to a financial 
        subsidiary to the amount of permissible exposure to an 
        affiliate.--Section 23A of the Federal Reserve Act (12 U.S.C. 
        371c) is amended--
                    (A) by redesignating subsection (e) as subsection 
                (f); and

[[Page 113 STAT. 1379]]

                    (B) by inserting after subsection (d), the following 
                new subsection:

    ``(e) Rules Relating to Banks with Financial Subsidiaries.--
            ``(1) Financial subsidiary defined.--For purposes of this 
        section and section 23B, the term `financial subsidiary' means 
        any company that is a subsidiary of a bank that would be a 
        financial subsidiary of a national bank under section 5136A of 
        the Revised Statutes of the United States.
            ``(2) Financial subsidiary treated as an affiliate.--For 
        purposes of applying this section and section 23B, and 
        notwithstanding subsection (b)(2) of this section or section 
        23B(d)(1), a financial subsidiary of a bank--
                    ``(A) shall be deemed to be an affiliate of the 
                bank; and
                    ``(B) shall not be deemed to be a subsidiary of the 
                bank.
            ``(3) Exceptions for transactions with financial 
        subsidiaries.--
                    ``(A) Exception from limit on covered transactions 
                with any individual financial subsidiary.--
                Notwithstanding paragraph (2), the restriction contained 
                in subsection (a)(1)(A) shall not apply with respect to 
                covered transactions between a bank and any individual 
                financial subsidiary of the bank.
                    ``(B) Exception for earnings retained by financial 
                subsidiaries.--Notwithstanding paragraph (2) or 
                subsection (b)(7), a bank's investment in a financial 
                subsidiary of the bank shall not include retained 
                earnings of the financial subsidiary.
            ``(4) Anti-evasion provision.--For purposes of this section 
        and section 23B--
                    ``(A) any purchase of, or investment in, the 
                securities of a financial subsidiary of a bank by an 
                affiliate of the bank shall be considered to be a 
                purchase of or investment in such securities by the 
                bank; and
                    ``(B) any extension of credit by an affiliate of a 
                bank to a financial subsidiary of the bank shall be 
                considered to be an extension of credit by the bank to 
                the financial subsidiary if the Board determines that 
                such treatment is necessary or appropriate to prevent 
                evasions of this Act and the Gramm-Leach-Bliley Act.''.
            (2) Rebuttable presumption of control of portfolio 
        company.--Section 23A(b) of the Federal Reserve Act (12 U.S.C. 
        371c(b)) is amended by adding at the end the following new 
        paragraph--
            ``(11) Rebuttable presumption of control of portfolio 
        companies.--In addition to paragraph (3), a company or 
        shareholder shall be presumed to control any other company if 
        the company or shareholder, directly or indirectly, or acting 
        through 1 or more other persons, owns or controls 15 percent or 
        more of the equity capital of the other company pursuant to 
        subparagraph (H) or (I) of section 4(k)(4) of the Bank Holding 
        Company Act of 1956 or rules adopted under section 122 of the 
        Gramm-Leach-Bliley Act, if any, unless the company or 
        shareholder provides information acceptable to the Board to 
        rebut this presumption of control.''.

[[Page 113 STAT. 1380]]

            (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 <<NOTE: Deadline.>> 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 <<NOTE: 12 USC 1831w.>> AND SOUNDNESS FIREWALLS 
                        APPLICABLE TO FINANCIAL SUBSIDIARIES OF 
                        BANKS.

    ``(a) In General.--An insured State bank may control or hold an 
interest in a subsidiary that engages in activities as principal that 
would only be permissible for a national bank to conduct through a 
financial subsidiary if--
            ``(1) the State bank and each insured depository institution 
        affiliate of the State bank are well capitalized (after the 
        capital deduction required by paragraph (2));
            ``(2) the State bank complies with the capital deduction and 
        financial statement disclosure requirements in section 5136A(c) 
        of the Revised Statutes of the United States;
            ``(3) the State bank complies with the financial and 
        operational safeguards required by section 5136A(d) of the 
        Revised Statutes of the United States; and
            ``(4) the State bank complies with the amendments to 
        sections 23A and 23B of the Federal Reserve Act made by section 
        121(b) of the Gramm-Leach-Bliley Act.

    ``(b) Preservation of Existing Subsidiaries.--Notwithstanding 
subsection (a), an insured State bank may retain control of a 
subsidiary, or retain an interest in a subsidiary, that the State bank 
lawfully controlled or acquired before the date of the enactment of the 
Gramm-Leach-Bliley Act, and conduct through

[[Page 113 STAT. 1381]]

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 <<NOTE: 12 USC 1843 note.>> 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.

[[Page 113 STAT. 1382]]

                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. <<NOTE: 12 USC 1828b.>> 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 <<NOTE: Applicability.>> 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.

[[Page 113 STAT. 1383]]

SEC. 133. CLARIFICATION OF STATUS OF SUBSIDIARIES AND AFFILIATES.

    (a) Clarification <<NOTE: 15 USC 41 note.>> 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 <<NOTE: 15 USC 41 note.>> Provision.--No provision of 
this section shall be construed as restricting the authority of any 
Federal banking agency (as defined in section 3 of the Federal Deposit 
Insurance Act) under any Federal banking law, including section 8 of the 
Federal Deposit Insurance Act.

    (c) Hart-Scott-Rodino Amendments.--
            (1) Banks.--Section 7A(c)(7) of the Clayton Act (15 U.S.C. 
        18a(c)(7)) is amended by inserting before the semicolon at the 
        end the following: ``, except that a portion of a transaction is 
        not exempt under this paragraph if such portion of the 
        transaction (A) is subject to section 4(k) of the Bank Holding 
        Company Act of 1956; and (B) does not require agency approval 
        under section 3 of the Bank Holding Company Act of 1956''.
            (2) Bank holding companies.--Section 7A(c)(8) of the Clayton 
        Act (15 U.S.C. 18a(c)(8)) is amended by inserting before the 
        semicolon at the end the following: ``, except that a portion of 
        a transaction is not exempt under this paragraph if such portion 
        of the transaction (A) is subject to section 4(k) of the Bank 
        Holding Company Act of 1956; and (B) does not require agency 
        approval under section 4 of the Bank Holding Company Act of 
        1956''.

                     Subtitle E--National Treatment

SEC. 141. FOREIGN BANKS THAT ARE FINANCIAL HOLDING COMPANIES.

    Section 8(c) of the International Banking Act of 1978 (12 U.S.C. 
3106(c)) is amended by adding at the end the following new paragraph:
            ``(3) Termination of grandfathered rights.--
                    ``(A) In general.--If any foreign bank or foreign 
                company files a declaration under section 4(l)(1)(C) of 
                the Bank Holding Company Act of 1956, any authority 
                conferred by this subsection on any foreign bank or 
                company to engage in any activity that the Board has 
                determined to be permissible for financial holding 
                companies under section 4(k) of such Act shall terminate 
                immediately.
                    ``(B) Restrictions and requirements authorized.--If 
                a foreign bank or company that engages, directly or 
                through an affiliate pursuant to paragraph (1), in an 
                activity that the Board has determined to be permissible 
                for financial holding companies under section 4(k) of 
                the Bank Holding Company Act of 1956 has not filed a 
                declaration with the Board of its status as a financial 
                holding company under such section by the end of the 2-
                year period

[[Page 113 STAT. 1384]]

                beginning on the date of the enactment of the Gramm-
                Leach-Bliley Act, the Board, giving due regard to the 
                principle of national treatment and equality of 
                competitive opportunity, may impose such restrictions 
                and requirements on the conduct of such activities by 
                such foreign bank or company as are comparable to those 
                imposed on a financial holding company organized under 
                the laws of the United States, including a requirement 
                to conduct such activities in compliance with any 
                prudential safeguards established under section 114 of 
                the Gramm-Leach-Bliley Act.''.

SEC. 142. REPRESENTATIVE OFFICES.

    (a) Definition.--Section 1(b)(15) of the International Banking Act 
of 1978 (12 U.S.C. 3101(15)) is amended by striking ``State agency, or 
subsidiary of a foreign bank'' and inserting ``or State agency''.
    (b) Examinations.--Section 10(c) of the International Banking Act of 
1978 (12 U.S.C. 3107(c)) is amended by adding at the end the following 
new sentence: ``The Board may also make examinations of any affiliate of 
a foreign bank conducting business in any State if the Board deems it 
necessary to determine and enforce compliance with this Act, the Bank 
Holding Company Act of 1956, or other applicable Federal banking law.''.

                 Subtitle F--Direct Activities of Banks

SEC. 151. AUTHORITY OF NATIONAL BANKS TO UNDERWRITE CERTAIN 
                        MUNICIPAL BONDS.

    The paragraph designated the Seventh of section 5136 of the Revised 
Statutes of the United States (12 U.S.C. 24(7)) is amended by adding at 
the end the following new sentence: ``In addition to the provisions in 
this paragraph for dealing in, underwriting, or purchasing securities, 
the limitations and restrictions contained in this paragraph as to 
dealing in, underwriting, and purchasing investment securities for the 
national bank's own account shall not apply to obligations (including 
limited obligation bonds, revenue bonds, and obligations that satisfy 
the requirements of section 142(b)(1) of the Internal Revenue Code of 
1986) issued by or on behalf of any State or political subdivision of a 
State, including any municipal corporate instrumentality of 1 or more 
States, or any public agency or authority of any State or political 
subdivision of a State, if the national bank is well capitalized (as 
defined in section 38 of the Federal Deposit Insurance Act).''.

                       Subtitle G--Effective Date

SEC. 161. <<NOTE: 12 USC 24 note.>> 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.

[[Page 113 STAT. 1385]]

                     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 is

[[Page 113 STAT. 1386]]

                                a nominal one-time cash fee of a fixed 
                                dollar amount and the payment of the fee 
                                is not contingent on whether the 
                                referral results in a transaction;
                                    ``(VII) such services are provided 
                                by the broker or dealer on a basis in 
                                which all customers that receive any 
                                services are fully disclosed to the 
                                broker or dealer;
                                    ``(VIII) the bank does not carry a 
                                securities account of the customer 
                                except as permitted under clause (ii) or 
                                (viii) of this subparagraph; and
                                    ``(IX) the bank, broker, or dealer 
                                informs each customer that the brokerage 
                                services are provided by the broker or 
                                dealer and not by the bank and that the 
                                securities are not deposits or other 
                                obligations of the bank, are not 
                                guaranteed by the bank, and are not 
                                insured by the Federal Deposit Insurance 
                                Corporation.
                          ``(ii) Trust activities.--The bank effects 
                      transactions in a trustee capacity, or effects 
                      transactions in a fiduciary capacity in its trust 
                      department or other department that is regularly 
                      examined by bank examiners for compliance with 
                      fiduciary principles and standards, and--
                                    ``(I) is chiefly compensated for 
                                such transactions, consistent with 
                                fiduciary principles and standards, on 
                                the basis of an administration or annual 
                                fee (payable on a monthly, quarterly, or 
                                other basis), a percentage of assets 
                                under management, or a flat or capped 
                                per order processing fee equal to not 
                                more than the cost incurred by the bank 
                                in connection with executing securities 
                                transactions for trustee and fiduciary 
                                customers, or any combination of such 
                                fees; and
                                    ``(II) does not publicly solicit 
                                brokerage business, other than by 
                                advertising that it effects transactions 
                                in securities in conjunction with 
                                advertising its other trust activities.
                          ``(iii) Permissible securities transactions.--
                      The bank effects transactions in--
                                    ``(I) commercial paper, bankers 
                                acceptances, or commercial bills;
                                    ``(II) exempted securities;
                                    ``(III) qualified Canadian 
                                government obligations as defined in 
                                section 5136 of the Revised Statutes, in 
                                conformity with section 15C of this 
                                title and the rules and regulations 
                                thereunder, or obligations of the North 
                                American Development Bank; or
                                    ``(IV) any standardized, credit 
                                enhanced debt security issued by a 
                                foreign government pursuant to the March 
                                1989 plan of then Secretary of the 
                                Treasury Brady, used by such foreign 
                                government to retire outstanding 
                                commercial bank loans.
                          ``(iv) Certain stock purchase plans.--
                                    ``(I) Employee benefit plans.--The 
                                bank effects transactions, as part of 
                                its transfer agency

[[Page 113 STAT. 1387]]

                                activities, in the securities of an 
                                issuer as part of any pension, 
                                retirement, profit-sharing, bonus, 
                                thrift, savings, incentive, or other 
                                similar benefit plan for the employees 
                                of that issuer or its affiliates (as 
                                defined in section 2 of the Bank Holding 
                                Company Act of 1956), if the bank does 
                                not solicit transactions or provide 
                                investment advice with respect to the 
                                purchase or sale of securities in 
                                connection with the plan.
                                    ``(II) Dividend reinvestment 
                                plans.--The bank effects transactions, 
                                as part of its transfer agency 
                                activities, in the securities of an 
                                issuer as part of that issuer's dividend 
                                reinvestment plan, if--
                                            ``(aa) the bank does not 
                                        solicit transactions or provide 
                                        investment advice with respect 
                                        to the purchase or sale of 
                                        securities in connection with 
                                        the plan; and
                                            ``(bb) the bank does not net 
                                        shareholders' buy and sell 
                                        orders, other than for programs 
                                        for odd-lot holders or plans 
                                        registered with the Commission.
                                    ``(III) Issuer plans.--The bank 
                                effects transactions, as part of its 
                                transfer agency activities, in the 
                                securities of an issuer as part of a 
                                plan or program for the purchase or sale 
                                of that issuer's shares, if--
                                            ``(aa) the bank does not 
                                        solicit transactions or provide 
                                        investment advice with respect 
                                        to the purchase or sale of 
                                        securities in connection with 
                                        the plan or program; and
                                            ``(bb) the bank does not net 
                                        shareholders' buy and sell 
                                        orders, other than for programs 
                                        for odd-lot holders or plans 
                                        registered with the Commission.
                                    ``(IV) Permissible delivery of 
                                materials.--The exception to being 
                                considered a broker for a bank engaged 
                                in activities described in subclauses 
                                (I), (II), and (III) will not be 
                                affected by delivery of written or 
                                electronic plan materials by a bank to 
                                employees of the issuer, shareholders of 
                                the issuer, or members of affinity 
                                groups of the issuer, so long as such 
                                materials are--
                                            ``(aa) comparable in scope 
                                        or nature to that permitted by 
                                        the Commission as of the date of 
                                        the enactment of the Gramm-
                                        Leach-Bliley Act; or
                                            ``(bb) otherwise permitted 
                                        by the Commission.
                          ``(v) Sweep accounts.--The bank effects 
                      transactions as part of a program for the 
                      investment or reinvestment of deposit funds into 
                      any no-load, open-end management investment 
                      company registered under the Investment Company 
                      Act of 1940 that holds itself out as a money 
                      market fund.
                          ``(vi) Affiliate transactions.--The bank 
                      effects transactions for the account of any 
                      affiliate of the

[[Page 113 STAT. 1388]]

                      bank (as defined in section 2 of the Bank Holding 
                      Company Act of 1956) other than--
                                    ``(I) a registered broker or dealer; 
                                or
                                    ``(II) an affiliate that is engaged 
                                in merchant banking, as described in 
                                section 4(k)(4)(H) of the Bank Holding 
                                Company Act of 1956.
                          ``(vii) Private securities offerings.--The 
                      bank--
                                    ``(I) effects sales as part of a 
                                primary offering of securities not 
                                involving a public offering, pursuant to 
                                section 3(b), 4(2), or 4(6) of the 
                                Securities Act of 1933 or the rules and 
                                regulations issued thereunder;
                                    ``(II) at any time after the date 
                                that is 1 year after the date of the 
                                enactment of the Gramm-Leach-Bliley Act, 
                                is not affiliated with a broker or 
                                dealer that has been registered for more 
                                than 1 year in accordance with this Act, 
                                and engages in dealing, market making, 
                                or underwriting activities, other than 
                                with respect to exempted securities; and
                                    ``(III) if the bank is not 
                                affiliated with a broker or dealer, does 
                                not effect any primary offering 
                                described in subclause (I) the aggregate 
                                amount of which exceeds 25 percent of 
                                the capital of the bank, except that the 
                                limitation of this subclause shall not 
                                apply with respect to any sale of 
                                government securities or municipal 
                                securities.
                          ``(viii) Safekeeping and custody activities.--
                                    ``(I) In general.--The bank, as part 
                                of customary banking activities--
                                            ``(aa) provides safekeeping 
                                        or custody services with respect 
                                        to securities, including the 
                                        exercise of warrants and other 
                                        rights on behalf of customers;
                                            ``(bb) facilitates the 
                                        transfer of funds or securities, 
                                        as a custodian or a clearing 
                                        agency, in connection with the 
                                        clearance and settlement of its 
                                        customers' transactions in 
                                        securities;
                                            ``(cc) effects securities 
                                        lending or borrowing 
                                        transactions with or on behalf 
                                        of customers as part of services 
                                        provided to customers pursuant 
                                        to division (aa) or (bb) or 
                                        invests cash collateral pledged 
                                        in connection with such 
                                        transactions;
                                            ``(dd) holds securities 
                                        pledged by a customer to another 
                                        person or securities subject to 
                                        purchase or resale agreements 
                                        involving a customer, or 
                                        facilitates the pledging or 
                                        transfer of such securities by 
                                        book entry or as otherwise 
                                        provided under applicable law, 
                                        if the bank maintains records 
                                        separately identifying the 
                                        securities and the customer; or
                                            ``(ee) serves as a custodian 
                                        or provider of other related 
                                        administrative services to any

[[Page 113 STAT. 1389]]

                                        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--

[[Page 113 STAT. 1390]]

                          ``(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; or

[[Page 113 STAT. 1391]]

                                    ``(III) a syndicate of banks of 
                                which the bank is a member, if the 
                                obligations or pool of obligations 
                                consists of mortgage obligations or 
                                consumer-related receivables.
                          ``(iv) Identified banking products.--The bank 
                      buys or sells identified banking products, as 
                      defined in section 206 of the Gramm-Leach-Bliley 
                      Act.''.
SEC. 203. REGISTRATION FOR SALES OF PRIVATE SECURITIES OFFERINGS.

    Section 15A of the Securities Exchange Act of 1934 (15 U.S.C. 78o-3) 
is amended by inserting after subsection (i) the following new 
subsection:
    ``(j) Registration for Sales of Private Securities Offerings.--A 
registered securities association shall create a limited qualification 
category for any associated person of a member who effects sales as part 
of a primary offering of securities not involving a public offering, 
pursuant to section 3(b), 4(2), or 4(6) of the Securities Act of 1933 
and the rules and regulations thereunder, and shall deem qualified in 
such limited qualification category, without testing, any bank employee 
who, in the six month period preceding the date of the enactment of the 
Gramm-Leach-Bliley Act, engaged in effecting such sales.''.

SEC. 204. INFORMATION SHARING.

    Section <<NOTE: 12 USC 1828.>> 18 of the Federal Deposit Insurance 
Act is amended by adding at the end the following new subsection:

    ``(t) Recordkeeping Requirements.--
            ``(1) Requirements.--Each appropriate Federal banking 
        agency, after consultation with and consideration of the views 
        of the Commission, shall establish recordkeeping requirements 
        for banks relying on exceptions contained in paragraphs (4) and 
        (5) of section 3(a) of the Securities Exchange Act of 1934. Such 
        recordkeeping requirements shall be sufficient to demonstrate 
        compliance with the terms of such exceptions and be designed to 
        facilitate compliance with such exceptions.
            ``(2) Availability to commission; confidentiality.--Each 
        appropriate Federal banking agency shall make any information 
        required under paragraph (1) available to the Commission upon 
        request. Notwithstanding any other provision of law, the 
        Commission shall not be compelled to disclose any such 
        information. Nothing in this paragraph shall authorize the 
        Commission to withhold information from Congress, or prevent the 
        Commission from complying with a request for information from 
        any other Federal department or agency or any self-regulatory 
        organization requesting the information for purposes within the 
        scope of its jurisdiction, or complying with an order of a court 
        of the United States in an action brought by the United States 
        or the Commission. For purposes of section 552 of title 5, 
        United States Code, this paragraph shall be considered a statute 
        described in subsection (b)(3)(B) of such section 552.
            ``(3) Definition.--As used in this subsection the term 
        `Commission' means the Securities and Exchange Commission.''.

SEC. 205. TREATMENT OF NEW HYBRID PRODUCTS.

    Section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o) is 
amended by adding at the end the following new subsection:

[[Page 113 STAT. 1392]]

    ``(i) Rulemaking To Extend Requirements to New Hybrid Products.--
            ``(1) Consultation.--Prior to commencing a rulemaking under 
        this subsection, the Commission shall consult with and seek the 
        concurrence of the Board concerning the imposition of broker or 
        dealer registration requirements with respect to any new hybrid 
        product. In developing and promulgating rules under this 
        subsection, the Commission shall consider the views of the 
        Board, including views with respect to the nature of the new 
        hybrid product; the history, purpose, extent, and 
        appropriateness of the regulation of the new product under the 
        Federal banking laws; and the impact of the proposed rule on the 
        banking industry.
            ``(2) Limitation.--The Commission shall not--
                    ``(A) require a bank to register as a broker or 
                dealer under this section because the bank engages in 
                any transaction in, or buys or sells, a new hybrid 
                product; or
                    ``(B) bring an action against a bank for a failure 
                to comply with a requirement described in subparagraph 
                (A),
        unless the Commission has imposed such requirement by rule or 
        regulation issued in accordance with this section.
            ``(3) Criteria for rulemaking.--The Commission shall not 
        impose a requirement under paragraph (2) of this subsection with 
        respect to any new hybrid product unless the Commission 
        determines that--
                    ``(A) the new hybrid product is a security; and
                    ``(B) imposing such requirement is necessary and 
                appropriate in the public interest and for the 
                protection of investors.
            ``(4) Considerations.--In making a determination under 
        paragraph (3), the Commission shall consider--
                    ``(A) the nature of the new hybrid product; and
                    ``(B) the history, purpose, extent, and 
                appropriateness of the regulation of the new hybrid 
                product under the Federal securities laws and under the 
                Federal banking laws.
            ``(5) Objection to commission regulation.--
                    ``(A) Filing of petition for review.--The Board may 
                obtain review of any final regulation described in 
                paragraph (2) in the United States Court of Appeals for 
                the District of Columbia Circuit by filing in such 
                court, not later than 60 days after the date of 
                publication of the final regulation, a written petition 
                requesting that the regulation be set aside. Any 
                proceeding to challenge any such rule shall be expedited 
                by the Court of Appeals.
                    ``(B) Transmittal of petition and record.--A copy of 
                a petition described in subparagraph (A) shall be 
                transmitted as soon as possible by the Clerk of the 
                Court to an officer or employee of the Commission 
                designated for that purpose. Upon receipt of the 
                petition, the Commission shall file with the court the 
                regulation under review and any documents referred to 
                therein, and any other relevant materials prescribed by 
                the court.
                    ``(C) Exclusive jurisdiction.--On the date of the 
                filing of the petition under subparagraph (A), the court 
                has jurisdiction, which becomes exclusive on the filing 
                of

[[Page 113 STAT. 1393]]

                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. <<NOTE: 15 USC 78c note.>> DEFINITION OF IDENTIFIED BANKING 
            PRODUCT.

    (a) Definition of Identified Banking Product.--For purposes of 
paragraphs (4) and (5) of section 3(a) of the Securities Exchange Act of 
1934 (15 U.S.C. 78c(a) (4), (5)), the term ``identified banking 
product'' means--
            (1) a deposit account, savings account, certificate of 
        deposit, or other deposit instrument issued by a bank;
            (2) a banker's acceptance;
            (3) a letter of credit issued or loan made by a bank;
            (4) a debit account at a bank arising from a credit card or 
        similar arrangement;
            (5) a participation in a loan which the bank or an affiliate 
        of the bank (other than a broker or dealer) funds, participates 
        in, or owns that is sold--
                    (A) to qualified investors; or
                    (B) to other persons that--
                          (i) have the opportunity to review and assess 
                      any material information, including information 
                      regarding the borrower's creditworthiness; and

[[Page 113 STAT. 1394]]

                          (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 <<NOTE: 15 USC 78c.>> 3(a) of the Securities Exchange Act of 
1934 is amended by adding at the end the following new paragraph:
            ``(54) Qualified investor.--
                    ``(A) Definition.--Except as provided in 
                subparagraph (B), for purposes of this title, the term 
                `qualified investor' means--
                          ``(i) any investment company registered with 
                      the Commission under section 8 of the Investment 
                      Company Act of 1940;
                          ``(ii) any issuer eligible for an exclusion 
                      from the definition of investment company pursuant 
                      to section 3(c)(7) of the Investment Company Act 
                      of 1940;
                          ``(iii) any bank (as defined in paragraph (6) 
                      of this subsection), savings association (as 
                      defined in section 3(b) of the Federal Deposit 
                      Insurance Act), broker, dealer, insurance company 
                      (as defined in section 2(a)(13) of the Securities 
                      Act of 1933), or business development company (as 
                      defined in section 2(a)(48) of the Investment 
                      Company Act of 1940);
                          ``(iv) any small business investment company 
                      licensed by the United States Small Business 
                      Administration under section 301 (c) or (d) of the 
                      Small Business Investment Act of 1958;
                          ``(v) any State sponsored employee benefit 
                      plan, or any other employee benefit plan, within 
                      the meaning of the Employee Retirement Income 
                      Security Act of

[[Page 113 STAT. 1395]]

                      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. <<NOTE: 12 USC 1828 note.>> 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.

[[Page 113 STAT. 1396]]

SEC. 210. <<NOTE: 12 USC 1811 note.>> 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:

[[Page 113 STAT. 1397]]

            ``(4) to loan money or other property to such registered 
        company, or to any company controlled by such registered 
        company, in contravention of such rules, regulations, or orders 
        as the Commission may, after consultation with and taking into 
        consideration the views of the Federal banking agencies (as 
        defined in section 3 of the Federal Deposit Insurance Act), 
        prescribe or issue consistent with the protection of 
        investors.''.

SEC. 213. INDEPENDENT DIRECTORS.

    (a) In General.--Section 2(a)(19)(A) of the Investment Company Act 
of 1940 (15 U.S.C. 80a-2(a)(19)(A)) is amended--
            (1) by striking clause (v) and inserting the following new 
        clause:
                          ``(v) any person or any affiliated person of a 
                      person (other than a registered investment 
                      company) that, at any time during the 6-month 
                      period preceding the date of the determination of 
                      whether that person or affiliated person is an 
                      interested person, has executed any portfolio 
                      transactions for, engaged in any principal 
                      transactions with, or distributed shares for--
                                    ``(I) the investment company;
                                    ``(II) any other investment company 
                                having the same investment adviser as 
                                such investment company or holding 
                                itself out to investors as a related 
                                company for purposes of investment or 
                                investor services; or
                                    ``(III) any account over which the 
                                investment company's investment adviser 
                                has brokerage placement discretion,'';
            (2) by redesignating clause (vi) as clause (vii); and
            (3) by inserting after clause (v) the following new clause:
                          ``(vi) any person or any affiliated person of 
                      a person (other than a registered investment 
                      company) that, at any time during the 6-month 
                      period preceding the date of the determination of 
                      whether that person or affiliated person is an 
                      interested person, has loaned money or other 
                      property to--
                                    ``(I) the investment company;
                                    ``(II) any other investment company 
                                having the same investment adviser as 
                                such investment company or holding 
                                itself out to investors as a related 
                                company for purposes of investment or 
                                investor services; or
                                    ``(III) any account for which the 
                                investment company's investment adviser 
                                has borrowing authority,''.

    (b) Conforming Amendment.--Section 2(a)(19)(B) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-2(a)(19)(B)) is amended--
            (1) by striking clause (v) and inserting the following new 
        clause:
                          ``(v) any person or any affiliated person of a 
                      person (other than a registered investment 
                      company) that, at any time during the 6-month 
                      period preceding the date of the determination of 
                      whether that person or affiliated person is an 
                      interested person, has executed

[[Page 113 STAT. 1398]]

                      any portfolio transactions for, engaged in any 
                      principal transactions with, or distributed shares 
                      for--
                                    ``(I) any investment company for 
                                which the investment adviser or 
                                principal underwriter serves as such;
                                    ``(II) any investment company 
                                holding itself out to investors, for 
                                purposes of investment or investor 
                                services, as a company related to any 
                                investment company for which the 
                                investment adviser or principal 
                                underwriter serves as such; or
                                    ``(III) any account over which the 
                                investment adviser has brokerage 
                                placement discretion,'';
            (2) by redesignating clause (vi) as clause (vii); and
            (3) by inserting after clause (v) the following new clause:
                          ``(vi) any person or any affiliated person of 
                      a person (other than a registered investment 
                      company) that, at any time during the 6-month 
                      period preceding the date of the determination of 
                      whether that person or affiliated person is an 
                      interested person, has loaned money or other 
                      property to--
                                    ``(I) any investment company for 
                                which the investment adviser or 
                                principal underwriter serves as such;
                                    ``(II) any investment company 
                                holding itself out to investors, for 
                                purposes of investment or investor 
                                services, as a company related to any 
                                investment company for which the 
                                investment adviser or principal 
                                underwriter serves as such; or
                                    ``(III) any account for which the 
                                investment adviser has borrowing 
                                authority,''.

    (c) Affiliation of Directors.--Section 10(c) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-10(c)) is amended by striking ``bank, 
except'' and inserting ``bank (together with its affiliates and 
subsidiaries) or any one bank holding company (together with its 
affiliates and subsidiaries) (as such terms are defined in section 2 of 
the Bank Holding Company Act of 1956), except''.

SEC. 214. ADDITIONAL SEC DISCLOSURE AUTHORITY.

    Section 35(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-
34(a)) is amended to read as follows:
    ``(a) Misrepresentation of Guarantees.--
            ``(1) In general.--It shall be unlawful for any person, 
        issuing or selling any security of which a registered investment 
        company is the issuer, to represent or imply in any manner 
        whatsoever that such security or company--
                    ``(A) has been guaranteed, sponsored, recommended, 
                or approved by the United States, or any agency, 
                instrumentality or officer of the United States;
                    ``(B) has been insured by the Federal Deposit 
                Insurance Corporation; or
                    ``(C) is guaranteed by or is otherwise an obligation 
                of any bank or insured depository institution.
            ``(2) Disclosures.--Any person issuing or selling the 
        securities of a registered investment company that is advised 
        by, or sold through, a bank shall prominently disclose that an

[[Page 113 STAT. 1399]]

        investment in the company is not insured by the Federal Deposit 
        Insurance Corporation or any other government agency. The 
        Commission may, after consultation with and taking into 
        consideration the views of the Federal banking agencies (as 
        defined in section 3 of the Federal Deposit Insurance Act), 
        adopt rules and regulations, and issue orders, consistent with 
        the protection of investors, prescribing the manner in which the 
        disclosure under this paragraph shall be provided.
            ``(3) Definitions.--The terms `insured depository 
        institution' and `appropriate Federal banking agency' have the 
        same meanings as given in section 3 of the Federal Deposit 
        Insurance Act.''.
SEC. 215. DEFINITION OF BROKER UNDER THE INVESTMENT COMPANY ACT OF 
                        1940.

    Section 2(a)(6) of the Investment Company Act of 1940 (15 U.S.C. 
80a-2(a)(6)) is amended to read as follows:
            ``(6) The term `broker' has the same meaning as given in 
        section 3 of the Securities Exchange Act of 1934, except that 
        such term does not include any person solely by reason of the 
        fact that such person is an underwriter for one or more 
        investment companies.''.
SEC. 216. DEFINITION OF DEALER UNDER THE INVESTMENT COMPANY ACT OF 
                        1940.

    Section 2(a)(11) of the Investment Company Act of 1940 (15 U.S.C. 
80a-2(a)(11)) is amended to read as follows:
            ``(11) The term `dealer' has the same meaning as given in 
        the Securities Exchange Act of 1934, but does not include an 
        insurance company or investment company.''.
SEC. 217. REMOVAL OF THE EXCLUSION FROM THE DEFINITION OF 
                        INVESTMENT ADVISER FOR BANKS THAT ADVISE 
                        INVESTMENT COMPANIES.

    (a) Investment Adviser.--Section 202(a)(11)(A) of the Investment 
Advisers Act of 1940 (15 U.S.C. 80b-2(a)(11)(A)) is amended by striking 
``investment company'' and inserting ``investment company, except that 
the term `investment adviser' includes any bank or bank holding company 
to the extent that such bank or bank holding company serves or acts as 
an investment adviser to a registered investment company, but if, in the 
case of a bank, such services or actions are performed through a 
separately identifiable department or division, the department or 
division, and not the bank itself, shall be deemed to be the investment 
adviser''.
    (b) Separately Identifiable Department or Division.--Section 202(a) 
of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)) is amended 
by adding at the end the following:
            ``(26) The term `separately identifiable department or 
        division' of a bank means a unit--
                    ``(A) that is under the direct supervision of an 
                officer or officers designated by the board of directors 
                of the bank as responsible for the day-to-day conduct of 
                the bank's investment adviser activities for one or more 
                investment companies, including the supervision of all 
                bank employees engaged in the performance of such 
                activities; and
                    ``(B) for which all of the records relating to its 
                investment adviser activities are separately maintained 
                in or extractable from such unit's own facilities or the 
                facilities

[[Page 113 STAT. 1400]]

                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. <<NOTE: 15 USC 80b-10a.>> 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 organization

[[Page 113 STAT. 1401]]

        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 institution

[[Page 113 STAT. 1402]]

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. <<NOTE: 15 USC 77c note.>> EFFECTIVE DATE.

    This subtitle shall take effect 18 months after the date of the 
enactment of this Act.

Subtitle C--Securities and Exchange Commission Supervision of Investment 
                         Bank Holding Companies

SEC. 231. SUPERVISION OF INVESTMENT BANK HOLDING COMPANIES BY THE 
                        SECURITIES AND EXCHANGE COMMISSION.

    (a) Amendment.--Section 17 of the Securities Exchange Act of 1934 
(15 U.S.C. 78q) is amended--
            (1) by redesignating subsection (i) as subsection (k); and
            (2) by inserting after subsection (h) the following new 
        subsections:

    ``(i) Investment Bank Holding Companies.--
            ``(1) Elective supervision of an investment bank holding 
        company not having a bank or savings association affiliate.--
                    ``(A) In general.--An investment bank holding 
                company that is not--
                          ``(i) an affiliate of an insured bank (other 
                      than an institution described in subparagraph (D), 
                      (F), or (G) of section 2(c)(2), or held under 
                      section 4(f), of the Bank Holding Company Act of 
                      1956), or a savings association;
                          ``(ii) a foreign bank, foreign company, or 
                      company that is described in section 8(a) of the 
                      International Banking Act of 1978; or
                          ``(iii) a foreign bank that controls, directly 
                      or indirectly, a corporation chartered under 
                      section 25A of the Federal Reserve Act,
                may elect to become supervised by filing with the 
                Commission a notice of intention to become supervised, 
                pursuant to subparagraph (B) of this paragraph. Any 
                investment bank holding company filing such a notice 
                shall be supervised in accordance with this section and 
                comply with

[[Page 113 STAT. 1403]]

                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. <<NOTE: Effective date.>> Such notice shall 
                not become effective until 1 year after receipt by the 
                Commission, or such shorter or longer period as the 
                Commission deems necessary or appropriate to ensure 
                effective supervision of the material risks to the 
                supervised investment bank holding company and to the 
                affiliated broker or dealer, or to prevent evasion of 
                the purposes of this section.
                    ``(B) Discontinuation of commission supervision.--If 
                the Commission finds that any supervised investment bank 
                holding company that is supervised pursuant to paragraph 
                (1) is no longer in existence or has ceased to be an 
                investment bank holding company, or if the Commission 
                finds that continued supervision of such a supervised 
                investment bank holding company is not consistent with 
                the purposes of this section, the Commission may 
                discontinue the supervision pursuant to a rule or order, 
                if any, promulgated by the Commission under this 
                section.
            ``(3) Supervision of investment bank holding companies.--
                    ``(A) Recordkeeping and reporting.--
                          ``(i) In general.--Every supervised investment 
                      bank holding company and each affiliate thereof 
                      shall make and keep for prescribed periods such 
                      records, furnish copies thereof, and make such 
                      reports, as the Commission may require by rule, in 
                      order to keep the Commission informed as to--
                                    ``(I) the company's or affiliate's 
                                activities, financial condition, 
                                policies, systems for monitoring and 
                                controlling financial and operational 
                                risks, and transactions and 
                                relationships between any broker

[[Page 113 STAT. 1404]]

                                or dealer affiliate of the supervised 
                                investment bank holding company; and
                                    ``(II) the extent to which the 
                                company or affiliate has complied with 
                                the provisions of this Act and 
                                regulations prescribed and orders issued 
                                under this Act.
                          ``(ii) Form and contents.--Such records and 
                      reports shall be prepared in such form and 
                      according to such specifications (including 
                      certification by an independent public 
                      accountant), as the Commission may require and 
                      shall be provided promptly at any time upon 
                      request by the Commission. Such records and 
                      reports may include--
                                    ``(I) a balance sheet and income 
                                statement;
                                    ``(II) an assessment of the 
                                consolidated capital of the supervised 
                                investment bank holding company;
                                    ``(III) an independent auditor's 
                                report attesting to the supervised 
                                investment bank holding company's 
                                compliance with its internal risk 
                                management and internal control 
                                objectives; and
                                    ``(IV) reports concerning the extent 
                                to which the company or affiliate has 
                                complied with the provisions of this 
                                title and any regulations prescribed and 
                                orders issued under this title.
                    ``(B) Use of existing reports.--
                          ``(i) In general.--The Commission shall, to 
                      the fullest extent possible, accept reports in 
                      fulfillment of the requirements under this 
                      paragraph that the supervised investment bank 
                      holding company or its affiliates have been 
                      required to provide to another appropriate 
                      regulatory agency or self-regulatory organization.
                          ``(ii) Availability.--A supervised investment 
                      bank holding company or an affiliate of such 
                      company shall provide to the Commission, at the 
                      request of the Commission, any report referred to 
                      in clause (i).
                    ``(C) Examination authority.--
                          ``(i) Focus of examination authority.--The 
                      Commission may make examinations of any supervised 
                      investment bank holding company and any affiliate 
                      of such company in order to--
                                    ``(I) inform the Commission 
                                regarding--
                                            ``(aa) the nature of the 
                                        operations and financial 
                                        condition of the supervised 
                                        investment bank holding company 
                                        and its affiliates;
                                            ``(bb) the financial and 
                                        operational risks within the 
                                        supervised investment bank 
                                        holding company that may affect 
                                        any broker or dealer controlled 
                                        by such supervised investment 
                                        bank holding company; and
                                            ``(cc) the systems of the 
                                        supervised investment bank 
                                        holding company and its 
                                        affiliates for monitoring and 
                                        controlling those risks; and
                                    ``(II) monitor compliance with the 
                                provisions of this subsection, 
                                provisions governing transactions and 
                                relationships between any broker or

[[Page 113 STAT. 1405]]

                                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' have

[[Page 113 STAT. 1406]]

                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. <<NOTE: Regulations.>> 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.''.

[[Page 113 STAT. 1407]]

            (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. <<NOTE: 15 USC 78m note.>> 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. <<NOTE: 15 USC 6711.>> 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. <<NOTE: 15 USC 6712.>> 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--

[[Page 113 STAT. 1408]]

            (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 <<NOTE: 15 USC 6713.>> 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.--

[[Page 113 STAT. 1409]]

            (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 <<NOTE: 15 USC 6714.>> AND EQUALIZED DISPUTE 
                        RESOLUTION FOR FEDERAL REGULATORS.

    (a) Filing in Court of Appeals.--In the case of a regulatory 
conflict between a State insurance regulator and a Federal regulator 
regarding insurance issues, including whether a State law, rule, 
regulation, order, or interpretation regarding any insurance sales or 
solicitation activity is properly treated as preempted under Federal 
law, the Federal or State regulator may seek expedited judicial review 
of such determination by the United States Court of Appeals for the 
circuit in which the State is located or in the United States Court of 
Appeals for the District of Columbia Circuit by filing a petition for 
review in such court.
    (b) Expedited Review.--The United States Court of Appeals in which a 
petition for review is filed in accordance with subsection (a) shall 
complete all action on such petition, including rendering

[[Page 113 STAT. 1410]]

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. <<NOTE: 12 USC 1831x.>> INSURANCE CUSTOMER PROTECTIONS.

    ``(a) Regulations Required.--
            ``(1) In general.--The <<NOTE: Publication.>> Federal 
        banking agencies shall prescribe and publish in final form, 
        before the end of the 1-year period beginning on the date of the 
        enactment of the Gramm-Leach-Bliley Act, customer protection 
        regulations (which the agencies jointly determine to be 
        appropriate) that--
                    ``(A) apply to retail sales practices, 
                solicitations, advertising, or offers of any insurance 
                product by any depository institution or any person that 
                is engaged in such activities at an office of the 
                institution or on behalf of the institution; and
                    ``(B) are consistent with the requirements of this 
                Act and provide such additional protections for 
                customers to whom such sales, solicitations, 
                advertising, or offers are directed.
            ``(2) Applicability to subsidiaries.--The regulations 
        prescribed pursuant to paragraph (1) shall extend such 
        protections to any subsidiary of a depository institution, as 
        deemed appropriate by the regulators referred to in paragraph 
        (3), where such extension is determined to be necessary to 
        ensure the consumer protections provided by this section.
            ``(3) Consultation and joint regulations.--The Federal 
        banking agencies shall consult with each other and prescribe 
        joint regulations pursuant to paragraph (1), after consultation 
        with the State insurance regulators, as appropriate.

    ``(b) Sales Practices.--The regulations prescribed pursuant to 
subsection (a) shall include antitying and anticoercion rules

[[Page 113 STAT. 1411]]

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.

[[Page 113 STAT. 1412]]

                    ``(E) Adjustments for alternative methods of 
                purchase.--In prescribing the requirements under 
                subparagraphs (A) and (F), necessary adjustments shall 
                be made for purchase in person, by telephone, or by 
                electronic media to provide for the most appropriate and 
                complete form of disclosure and acknowledgments.
                    ``(F) Consumer acknowledgment.--A requirement that a 
                depository institution shall require any person selling 
                an insurance product at any office of, or on behalf of, 
                the institution to obtain, at the time a consumer 
                receives the disclosures required under this paragraph 
                or at the time of the initial purchase by the consumer 
                of such product, an acknowledgment by such consumer of 
                the receipt of the disclosure required under this 
                subsection with respect to such product.
            ``(2) Prohibition on misrepresentations.--A prohibition on 
        any practice, or any advertising, at any office of, or on behalf 
        of, the depository institution, or any subsidiary, as 
        appropriate, that could mislead any person or otherwise cause a 
        reasonable person to reach an erroneous belief with respect to--
                    ``(A) the uninsured nature of any insurance product 
                sold, or offered for sale, by the institution or any 
                subsidiary of the institution;
                    ``(B) in the case of a variable annuity or insurance 
                product that involves an investment risk, the investment 
                risk associated with any such product; or
                    ``(C) in the case of an institution or subsidiary at 
                which insurance products are sold or offered for sale, 
                the fact that--
                          ``(i) the approval of an extension of credit 
                      to a customer by the institution or subsidiary may 
                      not be conditioned on the purchase of an insurance 
                      product by such customer from the institution or 
                      subsidiary; and
                          ``(ii) the customer is free to purchase the 
                      insurance product from another source.

    ``(d) Separation of Banking and Nonbanking Activities.--
            ``(1) Regulations required.--The regulations prescribed 
        pursuant to subsection (a) shall include such provisions as the 
        Federal banking agencies consider appropriate to ensure that the 
        routine acceptance of deposits is kept, to the extent 
        practicable, physically segregated from insurance product 
        activity.
            ``(2) Requirements.--Regulations prescribed pursuant to 
        paragraph (1) shall include the following requirements:
                    ``(A) Separate setting.--A clear delineation of the 
                setting in which, and the circumstances under which, 
                transactions involving insurance products should be 
                conducted in a location physically segregated from an 
                area where retail deposits are routinely accepted.
                    ``(B) Referrals.--Standards that permit any person 
                accepting deposits from the public in an area where such 
                transactions are routinely conducted in a depository 
                institution to refer a customer who seeks to purchase 
                any insurance product to a qualified person who sells 
                such product, only if the person making the referral 
                receives no more

[[Page 113 STAT. 1413]]

                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 <<NOTE: Establishment.>> 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.--

[[Page 113 STAT. 1414]]

            ``(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 <<NOTE: Notification.>> 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 <<NOTE: Notice.>> preemption 
                      and ability of states to override federal 
                      preemption.--If the Federal agencies referred to 
                      in clause (i) jointly determine that any provision 
                      of the regulations prescribed under this section 
                      affords greater protections than a comparable 
                      State law, rule, regulation, order, or 
                      interpretation, those agencies shall send a 
                      written preemption notice to the appropriate State 
                      regulatory authority to notify the State that the 
                      Federal provision will preempt the State provision 
                      and will become applicable unless, not later than 
                      3 years after the date of such notice, the State 
                      adopts legislation to override such preemption.

    ``(h) Non-Discrimination Against Non-Affiliated Agents.--The Federal 
banking agencies shall ensure that the regulations prescribed pursuant 
to subsection (a) shall not have the effect of discriminating, either 
intentionally or unintentionally, against

[[Page 113 STAT. 1415]]

any person engaged in insurance sales or solicitations that is not 
affiliated with a depository institution.''.
SEC. 306. CERTAIN <<NOTE: 15 USC 6715.>> 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. <<NOTE: 15 USC 6716.>> INTERAGENCY CONSULTATION.

    (a) Purpose.--It is the intention of the Congress that the Board of 
Governors of the Federal Reserve System, as the umbrella supervisor for 
financial holding companies, and the State insurance regulators, as the 
functional regulators of companies engaged in insurance activities, 
coordinate efforts to supervise companies that control both a depository 
institution and a company engaged in insurance activities regulated 
under State law. In particular, Congress believes that the Board and the 
State insurance regulators should share, on a confidential basis, 
information relevant to the supervision of companies that control both a 
depository institution and a company engaged in insurance activities, 
including information regarding the financial health of the consolidated 
organization and information regarding transactions and relationships 
between insurance companies and affiliated depository institutions. The 
appropriate Federal banking agencies for depository institutions should 
also share, on a confidential basis, information with the relevant State 
insurance regulators regarding transactions and relationships between 
depository institutions and affiliated companies engaged in insurance 
activities. The purpose of this section is to encourage this 
coordination and confidential sharing of information, and to thereby 
improve both the efficiency and the quality of the supervision of 
financial holding companies and their affiliated depository institutions 
and companies engaged in insurance activities.
    (b) Examination Results and Other Information.--
            (1) Information of the board.--Upon the request of the 
        appropriate insurance regulator of any State, the Board may 
        provide any information of the Board regarding the financial 
        condition, risk management policies, and operations of any 
        financial holding company that controls a company that is 
        engaged in insurance activities and is regulated by such State

[[Page 113 STAT. 1416]]

        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.

[[Page 113 STAT. 1417]]

            (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. <<NOTE: 15 USC 6717.>> 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. <<NOTE: 15 USC 6731.>> 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. <<NOTE: 15 USC 6732.>> 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.--

[[Page 113 STAT. 1418]]

            (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 a

[[Page 113 STAT. 1419]]

        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. <<NOTE: 15 USC 6733.>> 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--

[[Page 113 STAT. 1420]]

            (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. <<NOTE: 15 USC 6734.>> 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. <<NOTE: 15 USC 6735.>> DEFINITIONS.

    For purposes of this subtitle, the following definitions shall 
apply:
            (1) Court of competent jurisdiction.--The term ``court of 
        competent jurisdiction'' means a court authorized pursuant

[[Page 113 STAT. 1421]]

        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.

[[Page 113 STAT. 1422]]

SEC. 316. <<NOTE: 15 USC 6731 note.>> 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. <<NOTE: 15 USC 6751.>> STATE FLEXIBILITY IN MULTISTATE 
            LICENSING REFORMS.

     (a) In <<NOTE: Effective date.>> 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--

[[Page 113 STAT. 1423]]

                    (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 licensing

[[Page 113 STAT. 1424]]

requirements to achieve the uniformity necessary to satisfy subsection 
(a)(1).
SEC. 322. NATIONAL <<NOTE: 15 USC 6752.>> 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. <<NOTE: 15 USC 6753.>> 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. <<NOTE: 15 USC 6754.>> RELATIONSHIP TO THE FEDERAL GOVERNMENT.

    The Association shall be subject to the supervision and oversight of 
the NAIC.

SEC. 325. <<NOTE: 15 USC 6755.>> 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.--

[[Page 113 STAT. 1425]]

            (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 <<NOTE: Establishment.>> 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.

[[Page 113 STAT. 1426]]

            (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. <<NOTE: 15 USC 6756.>> 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.

[[Page 113 STAT. 1427]]

SEC. 327. <<NOTE: 15 USC 6757.>> 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. <<NOTE: 15 USC 6758.>> 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.

[[Page 113 STAT. 1428]]

            (2) Initial <<NOTE: Deadline.>> 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) <<NOTE: Notice.>> include notice of the 
                      grounds for disapproval under consideration;
                          (ii) provide opportunity for hearing; and
                          (iii) <<NOTE: Deadline.>> 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; or

[[Page 113 STAT. 1429]]

                          (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 <<NOTE: Notification. Records.>> 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.

[[Page 113 STAT. 1430]]

    (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. <<NOTE: 15 USC 6759.>> 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. <<NOTE: 15 USC 6760.>> 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 <<NOTE: 15 USC 6761.>> OF THE ASSOCIATION AND 
                        THE DIRECTORS, OFFICERS, AND EMPLOYEES OF 
                        THE ASSOCIATION.

    (a) In General.--The Association shall not be deemed to be an 
insurer or insurance producer within the meaning of any State

[[Page 113 STAT. 1431]]

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. <<NOTE: 15 USC 6762.>> 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 <<NOTE: President. Congress.>> 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 <<NOTE: Deadline.>> 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 <<NOTE: Deadline.>> 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.--

[[Page 113 STAT. 1432]]

                          (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. <<NOTE: 15 USC 6763.>> 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,

[[Page 113 STAT. 1433]]

or action which purports to regulate unfair trade practices or establish 
consumer protections, including countersignature laws.

SEC. 334. <<NOTE: 15 USC 6764.>> 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. <<NOTE: 15 USC 6765.>> 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. <<NOTE: 15 USC 6766.>> 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.

[[Page 113 STAT. 1434]]

            (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. <<NOTE: 15 USC 6781.>> 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:

[[Page 113 STAT. 1435]]

            ``(9) Prevention of new affiliations between s&l holding 
        companies and commercial firms.--
                    ``(A) In general.--Notwithstanding paragraph (3), no 
                company may directly or indirectly, including through 
                any merger, consolidation, or other type of business 
                combination, acquire control of a savings association 
                after May 4, 1999, unless the company is engaged, 
                directly or indirectly (including through a subsidiary 
                other than a savings association), only in activities 
                that are permitted--
                          ``(i) under paragraph (1)(C) or (2) of this 
                      subsection; or
                          ``(ii) for financial holding companies under 
                      section 4(k) of the Bank Holding Company Act of 
                      1956.
                    ``(B) Prevention of new commercial affiliations.--
                Notwithstanding paragraph (3), no savings and loan 
                holding company may engage directly or indirectly 
                (including through a subsidiary other than a savings 
                association) in any activity other than as described in 
                clauses (i) and (ii) of subparagraph (A).
                    ``(C) Preservation of authority of existing unitary 
                s&l holding companies.--Subparagraphs (A) and (B) do not 
                apply with respect to any company that was a savings and 
                loan holding company on May 4, 1999, or that becomes a 
                savings and loan holding company pursuant to an 
                application pending before the Office on or before that 
                date, and that--
                          ``(i) meets and continues to meet the 
                      requirements of paragraph (3); and
                          ``(ii) continues to control not fewer than 1 
                      savings association that it controlled on May 4, 
                      1999, or that it acquired pursuant to an 
                      application pending before the Office on or before 
                      that date, or the successor to such savings 
                      association.
                    ``(D) Corporate reorganizations permitted.--This 
                paragraph does not prevent a transaction that--
                          ``(i) involves solely a company under common 
                      control with a savings and loan holding company 
                      from acquiring, directly or indirectly, control of 
                      the savings and loan holding company or any 
                      savings association that is already a subsidiary 
                      of the savings and loan holding company; or
                          ``(ii) involves solely a merger, 
                      consolidation, or other type of business 
                      combination as a result of which a company under 
                      common control with the savings and loan holding 
                      company acquires, directly or indirectly, control 
                      of the savings and loan holding company or any 
                      savings association that is already a subsidiary 
                      of the savings and loan holding company.
                    ``(E) Authority to prevent evasions.--The Director 
                may issue interpretations, regulations, or orders that 
                the Director determines necessary to administer and 
                carry out the purpose and prevent evasions of this 
                paragraph, including a determination that, 
                notwithstanding the form of a transaction, the 
                transaction would in substance result in a company 
                acquiring control of a savings association.
                    ``(F) Preservation of authority for family trusts.--
                Subparagraphs (A) and (B) do not apply with

[[Page 113 STAT. 1436]]

                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 <<NOTE: 12 USC 1467a note.>> 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. <<NOTE: 15 USC 6801.>> PROTECTION OF NONPUBLIC PERSONAL 
            INFORMATION.

    (a) Privacy Obligation Policy.--It is the policy of the Congress 
that each financial institution has an affirmative and continuing 
obligation to respect the privacy of its customers and to protect the 
security and confidentiality of those customers' nonpublic personal 
information.
    (b) Financial Institutions Safeguards.--In furtherance of the policy 
in subsection (a), each agency or authority described

[[Page 113 STAT. 1437]]

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 <<NOTE: 15 USC 6802.>> 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 institution

[[Page 113 STAT. 1438]]

shall not disclose, other than to a consumer reporting agency, an 
account number or similar form of access number or access code for a 
credit card account, deposit account, or transaction account of a 
consumer to any nonaffiliated third party for use in telemarketing, 
direct mail marketing, or other marketing through electronic mail to the 
consumer.
    (e) General Exceptions.--Subsections (a) and (b) shall not prohibit 
the disclosure of nonpublic personal information--
            (1) as necessary to effect, administer, or enforce a 
        transaction requested or authorized by the consumer, or in 
        connection with--
                    (A) servicing or processing a financial product or 
                service requested or authorized by the consumer;
                    (B) maintaining or servicing the consumer's account 
                with the financial institution, or with another entity 
                as part of a private label credit card program or other 
                extension of credit on behalf of such entity; or
                    (C) a proposed or actual securitization, secondary 
                market sale (including sales of servicing rights), or 
                similar transaction related to a transaction of the 
                consumer;
            (2) with the consent or at the direction of the consumer;
            (3)(A) to protect the confidentiality or security of the 
        financial institution's records pertaining to the consumer, the 
        service or product, or the transaction therein; (B) to protect 
        against or prevent actual or potential fraud, unauthorized 
        transactions, claims, or other liability; (C) for required 
        institutional risk control, or for resolving customer disputes 
        or inquiries; (D) to persons holding a legal or beneficial 
        interest relating to the consumer; or (E) to persons acting in a 
        fiduciary or representative capacity on behalf of the consumer;
            (4) to provide information to insurance rate advisory 
        organizations, guaranty funds or agencies, applicable rating 
        agencies of the financial institution, persons assessing the 
        institution's compliance with industry standards, and the 
        institution's attorneys, accountants, and auditors;
            (5) to the extent specifically permitted or required under 
        other provisions of law and in accordance with the Right to 
        Financial Privacy Act of 1978, to law enforcement agencies 
        (including a Federal functional regulator, the Secretary of the 
        Treasury with respect to subchapter II of chapter 53 of title 
        31, United States Code, and chapter 2 of title I of Public Law 
        91-508 (12 U.S.C. 1951-1959), a State insurance authority, or 
        the Federal Trade Commission), self-regulatory organizations, or 
        for an investigation on a matter related to public safety;
            (6)(A) to a consumer reporting agency in accordance with the 
        Fair Credit Reporting Act, or (B) from a consumer report 
        reported by a consumer reporting agency;
            (7) in connection with a proposed or actual sale, merger, 
        transfer, or exchange of all or a portion of a business or 
        operating unit if the disclosure of nonpublic personal 
        information concerns solely consumers of such business or unit; 
        or
            (8) to comply with Federal, State, or local laws, rules, and 
        other applicable legal requirements; to comply with a properly 
        authorized civil, criminal, or regulatory investigation or 
        subpoena or summons by Federal, State, or local authorities; or 
        to respond to judicial process or government regulatory

[[Page 113 STAT. 1439]]

        authorities having jurisdiction over the financial institution 
        for examination, compliance, or other purposes as authorized by 
        law.

SEC. 503. <<NOTE: 15 USC 6803.>> 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. <<NOTE: 15 USC 6804.>> RULEMAKING.

    (a) Regulatory Authority.--
            (1) Rulemaking.--The Federal banking agencies, the National 
        Credit Union Administration, the Secretary of the Treasury, the 
        Securities and Exchange Commission, and the Federal Trade 
        Commission shall each prescribe, after consultation as 
        appropriate with representatives of State insurance authorities 
        designated by the National Association of Insurance 
        Commissioners, such regulations as may be necessary to carry out 
        the purposes of this subtitle with respect to the financial 
        institutions subject to their jurisdiction under section 505.
            (2) Coordination, consistency, and comparability.--Each of 
        the agencies and authorities required under paragraph (1) to 
        prescribe regulations shall consult and coordinate with

[[Page 113 STAT. 1440]]

        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. <<NOTE: 15 USC 6805.>> 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.

[[Page 113 STAT. 1441]]

            (3) Under the Securities Exchange Act of 1934, by the 
        Securities and Exchange Commission with respect to any broker or 
        dealer.
            (4) Under the Investment Company Act of 1940, by the 
        Securities and Exchange Commission with respect to investment 
        companies.
            (5) Under the Investment Advisers Act of 1940, by the 
        Securities and Exchange Commission with respect to investment 
        advisers registered with the Commission under such Act.
            (6) Under State insurance law, in the case of any person 
        engaged in providing insurance, by the applicable State 
        insurance authority of the State in which the person is 
        domiciled, subject to section 104 of this Act.
            (7) Under the Federal Trade Commission Act, by the Federal 
        Trade Commission for any other financial institution or other 
        person that is not subject to the jurisdiction of any agency or 
        authority under paragraphs (1) through (6) of this subsection.

    (b) Enforcement of Section 501.--
            (1) In general.--Except as provided in paragraph (2), the 
        agencies and authorities described in subsection (a) shall 
        implement the standards prescribed under section 501(b) in the 
        same manner, to the extent practicable, as standards prescribed 
        pursuant to section 39(a) of the Federal Deposit Insurance Act 
        are implemented pursuant to such section.
            (2) Exception.--The agencies and authorities described in 
        paragraphs (3), (4), (5), (6), and (7) of subsection (a) shall 
        implement the standards prescribed under section 501(b) by rule 
        with respect to the financial institutions and other persons 
        subject to their respective jurisdictions under subsection (a).

    (c) Absence of State Action.--If a State insurance authority fails 
to adopt regulations to carry out this subtitle, such State shall not be 
eligible to override, pursuant to section 47(g)(2)(B)(iii) of the 
Federal Deposit Insurance Act, the insurance customer protection 
regulations prescribed by a Federal banking agency under section 47(a) 
of such Act.
    (d) Definitions.--The terms used in subsection (a)(1) that are not 
defined in this subtitle or otherwise defined in section 3(s) of the 
Federal Deposit Insurance Act shall have the same meaning as given in 
section 1(b) of the International Banking Act of 1978.

SEC. 506. PROTECTION OF FAIR CREDIT REPORTING ACT.

    (a) Amendment.--Section 621 of the Fair Credit Reporting Act (15 
U.S.C. 1681s) is amended--
            (1) in subsection (d), by striking everything following the 
        end of the second sentence; and
            (2) by striking subsection (e) and inserting the following:

    ``(e) Regulatory Authority.--
            ``(1) The Federal banking agencies referred to in paragraphs 
        (1) and (2) of subsection (b) shall jointly prescribe such 
        regulations as necessary to carry out the purposes of this Act 
        with respect to any persons identified under paragraphs (1) and 
        (2) of subsection (b), and the Board of Governors of the Federal 
        Reserve System shall have authority to prescribe regulations 
        consistent with such joint regulations with respect to bank

[[Page 113 STAT. 1442]]

        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 <<NOTE: 15 USC 6806.>> 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. <<NOTE: 15 USC 6807.>> 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 <<NOTE: 15 USC 6808.>> 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;

[[Page 113 STAT. 1443]]

            (8) the feasibility of different approaches, including opt-
        out and opt-in, to permit customers to direct that confidential 
        information not be shared with affiliates and nonaffiliated 
        third parties; and
            (9) the feasibility of restricting sharing of information 
        for specific uses or of permitting customers to direct the uses 
        for which information may be shared.

    (b) Consultation.--The Secretary shall consult with representatives 
of State insurance authorities designated by the National Association of 
Insurance Commissioners, and also with financial services industry, 
consumer organizations and privacy groups, and other representatives of 
the general public, in formulating and conducting the study required by 
subsection (a).
    (c) Report.--On <<NOTE: Deadline.>> 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. <<NOTE: 15 USC 6809.>> DEFINITIONS.

    As used in this subtitle:
            (1) Federal banking agency.--The term ``Federal banking 
        agency'' has the same meaning as given in section 3 of the 
        Federal Deposit Insurance Act.
            (2) Federal functional regulator.--The term ``Federal 
        functional regulator'' means--
                    (A) the Board of Governors of the Federal Reserve 
                System;
                    (B) the Office of the Comptroller of the Currency;
                    (C) the Board of Directors of the Federal Deposit 
                Insurance Corporation;
                    (D) the Director of the Office of Thrift 
                Supervision;
                    (E) the National Credit Union Administration Board; 
                and
                    (F) the Securities and Exchange Commission.
            (3) Financial institution.--
                    (A) In general.--The term ``financial institution'' 
                means any institution the business of which is engaging 
                in financial activities as described in section 4(k) of 
                the Bank Holding Company Act of 1956.
                    (B) Persons subject to cftc regulation.--
                Notwithstanding subparagraph (A), the term ``financial 
                institution'' does not include any person or entity with 
                respect to any financial activity that is subject to the 
                jurisdiction of the Commodity Futures Trading Commission 
                under the Commodity Exchange Act.
                    (C) Farm credit institutions.--Notwithstanding 
                subparagraph (A), the term ``financial institution'' 
                does not include the Federal Agricultural Mortgage 
                Corporation or any entity chartered and operating under 
                the Farm Credit Act of 1971.
                    (D) Other secondary market institutions.--
                Notwithstanding subparagraph (A), the term ``financial 
                institution'' does not include institutions chartered by 
                Congress specifically to engage in transactions 
                described in section 502(e)(1)(C), as long as such 
                institutions do not sell or

[[Page 113 STAT. 1444]]

                transfer nonpublic personal information to a 
                nonaffiliated third party.
            (4) Nonpublic personal information.--
                    (A) The term ``nonpublic personal information'' 
                means personally identifiable financial information--
                          (i) provided by a consumer to a financial 
                      institution;
                          (ii) resulting from any transaction with the 
                      consumer or any service performed for the 
                      consumer; or
                          (iii) otherwise obtained by the financial 
                      institution.
                    (B) Such term does not include publicly available 
                information, as such term is defined by the regulations 
                prescribed under section 504.
                    (C) Notwithstanding subparagraph (B), such term--
                          (i) shall include any list, description, or 
                      other grouping of consumers (and publicly 
                      available information pertaining to them) that is 
                      derived using any nonpublic personal information 
                      other than publicly available information; but
                          (ii) shall not include any list, description, 
                      or other grouping of consumers (and publicly 
                      available information pertaining to them) that is 
                      derived without using any nonpublic personal 
                      information.
            (5) Nonaffiliated third party.--The term ``nonaffiliated 
        third party'' means any entity that is not an affiliate of, or 
        related by common ownership or affiliated by corporate control 
        with, the financial institution, but does not include a joint 
        employee of such institution.
            (6) Affiliate.--The term ``affiliate'' means any company 
        that controls, is controlled by, or is under common control with 
        another company.
            (7) Necessary to effect, administer, or enforce.--The term 
        ``as necessary to effect, administer, or enforce the 
        transaction'' means--
                    (A) the disclosure is required, or is a usual, 
                appropriate, or acceptable method, to carry out the 
                transaction or the product or service business of which 
                the transaction is a part, and record or service or 
                maintain the consumer's account in the ordinary course 
                of providing the financial service or financial product, 
                or to administer or service benefits or claims relating 
                to the transaction or the product or service business of 
                which it is a part, and includes--
                          (i) providing the consumer or the consumer's 
                      agent or broker with a confirmation, statement, or 
                      other record of the transaction, or information on 
                      the status or value of the financial service or 
                      financial product; and
                          (ii) the accrual or recognition of incentives 
                      or bonuses associated with the transaction that 
                      are provided by the financial institution or any 
                      other party;
                    (B) the disclosure is required, or is one of the 
                lawful or appropriate methods, to enforce the rights of 
                the financial institution or of other persons engaged in 
                carrying out the financial transaction, or providing the 
                product or service;
                    (C) the disclosure is required, or is a usual, 
                appropriate, or acceptable method, for insurance 
                underwriting at the

[[Page 113 STAT. 1445]]

                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 <<NOTE: Regulations.>> 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. <<NOTE: 15 USC 6801 note.>> 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.

[[Page 113 STAT. 1446]]

         Subtitle B--Fraudulent Access to Financial Information

SEC. 521. PRIVACY <<NOTE: 15 USC 6821.>> 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.

[[Page 113 STAT. 1447]]

    (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. <<NOTE: 15 USC 6822.>> ADMINISTRATIVE ENFORCEMENT.

    (a) Enforcement by Federal Trade Commission.--Except as provided in 
subsection (b), compliance with this subtitle shall be enforced by the 
Federal Trade Commission in the same manner and with the same power and 
authority as the Commission has under the Fair Debt Collection Practices 
Act to enforce compliance with such Act.
    (b) Enforcement by Other Agencies in Certain Cases.--
            (1) In general.--Compliance with this subtitle shall be 
        enforced under--
                    (A) section 8 of the Federal Deposit Insurance Act, 
                in the case of--
                          (i) national banks, and Federal branches and 
                      Federal agencies of foreign banks, by the Office 
                      of the Comptroller of the Currency;
                          (ii) member banks of the Federal Reserve 
                      System (other than national banks), branches and 
                      agencies of foreign banks (other than Federal 
                      branches, Federal agencies, and insured State 
                      branches of foreign banks), commercial lending 
                      companies owned or controlled by foreign banks, 
                      and organizations operating under section 25 or 
                      25A of the Federal Reserve Act, by the Board;
                          (iii) banks insured by the Federal Deposit 
                      Insurance Corporation (other than members of the 
                      Federal Reserve System and national nonmember 
                      banks) and insured State branches of foreign 
                      banks, by the Board of Directors of the Federal 
                      Deposit Insurance Corporation; and
                          (iv) savings associations the deposits of 
                      which are insured by the Federal Deposit Insurance 
                      Corporation, by the Director of the Office of 
                      Thrift Supervision; and
                    (B) the Federal Credit Union Act, by the 
                Administrator of the National Credit Union 
                Administration with respect to any Federal credit union.
            (2) Violations of this subtitle treated as violations of 
        other laws.--For the purpose of the exercise by any agency

[[Page 113 STAT. 1448]]

        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. <<NOTE: 15 USC 6823.>> 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. <<NOTE: 15 USC 6824.>> 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. <<NOTE: 15 USC 6825.>> 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. <<NOTE: 15 USC 6826.>> REPORTS.

    (a) Report to the Congress.--Before the end of the 18-month period 
beginning on the date of the enactment of this Act, the Comptroller 
General, in consultation with the Federal Trade Commission, Federal 
banking agencies, the National Credit Union

[[Page 113 STAT. 1449]]

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. <<NOTE: 15 USC 6827.>> DEFINITIONS.

    For purposes of this subtitle, the following definitions shall 
apply:
            (1) Customer.--The term ``customer'' means, with respect to 
        a financial institution, any person (or authorized 
        representative of a person) to whom the financial institution 
        provides a product or service, including that of acting as a 
        fiduciary.
            (2) Customer information of a financial institution.--The 
        term ``customer information of a financial institution'' means 
        any information maintained by or for a financial institution 
        which is derived from the relationship between the financial 
        institution and a customer of the financial institution and is 
        identified with the customer.
            (3) Document.--The term ``document'' means any information 
        in any form.
            (4) Financial institution.--
                    (A) In general.--The term ``financial institution'' 
                means any institution engaged in the business of 
                providing financial services to customers who maintain a 
                credit, deposit, trust, or other financial account or 
                relationship with the institution.
                    (B) Certain financial institutions specifically 
                included.--The term ``financial institution'' includes 
                any depository institution (as defined in section 
                19(b)(1)(A) of the Federal Reserve Act), any broker or 
                dealer, any investment adviser or investment company, 
                any insurance company, any loan or finance company, any 
                credit card issuer or operator of a credit card system, 
                and any consumer reporting agency that compiles and 
                maintains files on consumers on a nationwide basis (as 
                defined in section 603(p) of the Consumer Credit 
                Protection Act).
                    (C) Securities institutions.--For purposes of 
                subparagraph (B)--
                          (i) the terms ``broker'' and ``dealer'' have 
                      the same meanings as given in section 3 of the 
                      Securities Exchange Act of 1934 (15 U.S.C. 78c);
                          (ii) the term ``investment adviser'' has the 
                      same meaning as given in section 202(a)(11) of the 
                      Investment Advisers Act of 1940 (15 U.S.C. 80b-
                      2(a)); and

[[Page 113 STAT. 1450]]

                          (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 <<NOTE: Federal Home Loan Bank System Modernization Act of 
1999.>> VI--FEDERAL HOME LOAN BANK SYSTEM MODERNIZATION

SEC. 601. <<NOTE: 12 USC 1421 note.>> 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:

[[Page 113 STAT. 1451]]

    ``(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 an

[[Page 113 STAT. 1452]]

        increase in the collateral standards for any or all of those 
        classes of collateral.
            ``(6) Definitions.--For purposes of this subsection, the 
        terms `small business', `agriculture', `small farm', and `small 
        agri-business' shall have the meanings given those terms by 
        regulation of the Finance Board.''.

    (b) Clerical Amendment.--The section heading for section 10 of the 
Federal Home Loan Bank Act (12 U.S.C. 1430) is amended to read as 
follows:

``SEC. 10. ADVANCES TO MEMBERS.''.

    (c) Qualified Thrift Lender Status.--Section 10 of the Federal Home 
Loan Bank Act (12 U.S.C. 1430) is amended by striking the first of the 2 
subsections designated as subsection (e).
    (d) Federal Home Loan Bank Access.--Section 10(m)(3)(B) of the Home 
Owners' Loan Act (12 U.S.C. 1467a(m)(3)(B)) is amended--
            (1) in clause (i), by striking subclause (III) and 
        redesignating subclause (IV) as subclause (III); and
            (2) by striking clause (ii) and inserting the following:
                          ``(ii) Additional restrictions effective after 
                      3 years.--Beginning 3 years after the date on 
                      which a savings association should have become a 
                      qualified thrift lender, or the date on which the 
                      savings association ceases to be a qualified 
                      thrift lender, as applicable, the savings 
                      association shall not retain any investment 
                      (including an investment in any subsidiary) or 
                      engage, directly or indirectly, in any activity, 
                      unless that investment or activity--
                                    ``(I) would be permissible for the 
                                savings association if it were a 
                                national bank; and
                                    ``(II) is permissible for the 
                                savings association as a savings 
                                association.''.

SEC. 605. ELIGIBILITY CRITERIA.

    Section 4(a) of the Federal Home Loan Bank Act (12 U.S.C. 1424(a)) 
is amended--
            (1) in paragraph (2)(A), by inserting ``(other than a 
        community financial institution)'' after ``institution'';
            (2) in the matter immediately following paragraph (2)(C)--
                    (A) by striking ``An insured'' and inserting the 
                following:
            ``(3) Certain institutions.--An insured''; and
                    (B) by striking ``preceding sentence'' and inserting 
                ``paragraph (2)''; and
            (3) by adding at the end the following new paragraph:
            ``(4) Limited exemption for community financial 
        institutions.--A community financial institution that otherwise 
        meets the requirements of paragraph (2) may become a member 
        without regard to the percentage of its total assets that is 
        represented by residential mortgage loans, as described in 
        subparagraph (A) of paragraph (2).''.

SEC. 606. MANAGEMENT OF BANKS.

    (a) Board of Directors.--Section 7 of the Federal Home Loan Bank Act 
(12 U.S.C. 1427(d)) is amended--
            (1) in subsection (a), by striking ``and bona fide residents 
        of the district in which such bank is located'' and inserting

[[Page 113 STAT. 1453]]

        ``, 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 <<NOTE: Effective 
                date.>> January 1, 2001, each dollar amount referred to 
                in the table in subparagraph (A) shall be adjusted 
                annually by the Finance Board, based on the annual 
                percentage increase, if any, in the Consumer Price Index 
                for all urban consumers, as published by the Department 
                of Labor.
                    ``(C) Expenses.--Subparagraph (A) shall not be 
                construed as prohibiting the reimbursement of expenses

[[Page 113 STAT. 1454]]

                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 the

[[Page 113 STAT. 1455]]

        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 Funding

[[Page 113 STAT. 1456]]

                      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 <<NOTE: 12 USC 1441b note.>> 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 <<NOTE: Deadline.>> 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).

[[Page 113 STAT. 1457]]

            ``(2) Leverage requirement.--
                    ``(A) In general.--The leverage requirement shall 
                require each Federal home loan bank to maintain a 
                minimum amount of total capital based on the total 
                assets of the bank and shall be 5 percent.
                    ``(B) Treatment of stock and retained earnings.--In 
                determining compliance with the minimum leverage ratio 
                established under subparagraph (A), the paid-in value of 
                the outstanding Class B stock and the amount of retained 
                earnings shall be multiplied by 1.5, and such higher 
                amounts shall be deemed to be capital for purposes of 
                meeting the 5 percent minimum leverage ratio, except 
                that a Federal home loan bank's total capital 
                (determined without taking into account any such 
                multiplier) shall not be less than 4 percent of the 
                total assets of the bank.
            ``(3) Risk-based capital standards.--
                    ``(A) In general.--Each Federal home loan bank shall 
                maintain permanent capital in an amount that is 
                sufficient, as determined in accordance with the 
                regulations of the Finance Board, to meet--
                          ``(i) the credit risk to which the Federal 
                      home loan bank is subject; and
                          ``(ii) the market risk, including interest 
                      rate risk, to which the Federal home loan bank is 
                      subject, based on a stress test established by the 
                      Finance Board that rigorously tests for changes in 
                      market variables, including changes in interest 
                      rates, rate volatility, and changes in the shape 
                      of the yield curve.
                    ``(B) Consideration of other risk-based standards.--
                In establishing the risk-based standard under 
                subparagraph (A)(ii), the Finance Board shall take due 
                consideration of any risk-based capital test established 
                pursuant to section 1361 of the Federal Housing 
                Enterprises Financial Safety and Soundness Act of 1992 
                (12 U.S.C. 4611) for the enterprises (as defined in that 
                Act), with such modifications as the Finance Board 
                determines to be appropriate to reflect differences in 
                operations between the Federal home loan banks and those 
                enterprises.
            ``(4) Other regulatory requirements.--The regulations issued 
        by the Finance Board under paragraph (1) shall--
                    ``(A) permit each Federal home loan bank to issue, 
                with such rights, terms, and preferences, not 
                inconsistent with this Act and the regulations issued 
                hereunder, as the board of directors of that bank may 
                approve, any 1 or more of--
                          ``(i) Class A stock, which shall be redeemable 
                      in cash and at par 6 months following submission 
                      by a member of a written notice of its intent to 
                      redeem such shares; and
                          ``(ii) Class B stock, which shall be 
                      redeemable in cash and at par 5 years following 
                      submission by a member of a written notice of its 
                      intent to redeem such shares;
                    ``(B) provide that the stock of a Federal home loan 
                bank may be issued to and held by only members of the

[[Page 113 STAT. 1458]]

                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 <<NOTE: Deadline.>> 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.

[[Page 113 STAT. 1459]]

            ``(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.

[[Page 113 STAT. 1460]]

                    ``(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 of

[[Page 113 STAT. 1461]]

                the plan would have any material effect on the credit 
                ratings of the bank.

    ``(d) Termination of Membership.--
            ``(1) Voluntary withdrawal.--Any member may withdraw from a 
        Federal home loan bank if the member provides written notice to 
        the bank of its intent to do so and if, on the date of 
        withdrawal, there is in effect a certification by the Finance 
        Board that the withdrawal will not cause the Federal Home Loan 
        Bank System to fail to meet its obligation under section 
        21B(f)(2)(C) to contribute to the debt service for the 
        obligations issued by the Resolution Funding Corporation. The 
        applicable stock redemption notice periods shall commence upon 
        receipt of the notice by the bank. Upon the expiration of the 
        applicable notice period for each class of redeemable stock, the 
        member may surrender such stock to the bank, and shall be 
        entitled to receive in cash the par value of the stock. During 
        the applicable notice periods, the member shall be entitled to 
        dividends and other membership rights commensurate with 
        continuing stock ownership.
            ``(2) Involuntary withdrawal.--
                    ``(A) In general.--The board of directors of a 
                Federal home loan bank may terminate the membership of 
                any institution if, subject to Finance Board 
                regulations, it determines that--
                          ``(i) the member has failed to comply with a 
                      provision of this Act or any regulation prescribed 
                      under this Act; or
                          ``(ii) the member has been determined to be 
                      insolvent, or otherwise subject to the appointment 
                      of a conservator, receiver, or other legal 
                      custodian, by a Federal or State authority with 
                      regulatory and supervisory responsibility for the 
                      member.
                    ``(B) Stock disposition.--An institution, the 
                membership of which is terminated in accordance with 
                subparagraph (A)--
                          ``(i) shall surrender redeemable stock to the 
                      Federal home loan bank, and shall receive in cash 
                      the par value of the stock, upon the expiration of 
                      the applicable notice period under subsection 
                      (a)(4)(A);
                          ``(ii) shall receive any dividends declared on 
                      its redeemable stock, during the applicable notice 
                      period under subsection (a)(4)(A); and
                          ``(iii) shall not be entitled to any other 
                      rights or privileges accorded to members after the 
                      date of the termination.
                    ``(C) Commencement of notice period.--With respect 
                to an institution, the membership of which is terminated 
                in accordance with subparagraph (A), the applicable 
                notice period under subsection (a)(4) for each class of 
                redeemable stock shall commence on the earlier of--
                          ``(i) the date of such termination; or
                          ``(ii) the date on which the member has 
                      provided notice of its intent to redeem such 
                      stock.
            ``(3) Liquidation of indebtedness.--Upon the termination of 
        the membership of an institution for any reason, the outstanding 
        indebtedness of the member to the bank shall be liquidated in an 
        orderly manner, as determined by the bank

[[Page 113 STAT. 1462]]

        and, upon the extinguishment of all such indebtedness, the bank 
        shall return to the member all collateral pledged to secure the 
        indebtedness.

    ``(e) Redemption of Excess Stock.--
            ``(1) In general.--A Federal home loan bank, in its sole 
        discretion, may redeem or repurchase, as appropriate, any shares 
        of Class A or Class B stock issued by the bank and held by a 
        member that are in excess of the minimum stock investment 
        required of that member.
            ``(2) Excess stock.--Shares of stock held by a member shall 
        not be deemed to be `excess stock' for purposes of this 
        subsection by virtue of a member's submission of a notice of 
        intent to withdraw from membership or termination of its 
        membership in any other manner.
            ``(3) Priority.--A Federal home loan bank may not redeem any 
        excess Class B stock prior to the end of the 5-year notice 
        period, unless the member has no Class A stock outstanding that 
        could be redeemed as excess.

    ``(f) Impairment of Capital.--If the Finance Board or the board of 
directors of a Federal home loan bank determines that the bank has 
incurred or is likely to incur losses that result in or are expected to 
result in charges against the capital of the bank, the bank shall not 
redeem or repurchase any stock of the bank without the prior approval of 
the Finance Board while such charges are continuing or are expected to 
continue. In no case may a bank redeem or repurchase any applicable 
capital stock if, following the redemption, the bank would fail to 
satisfy any minimum capital requirement.
    ``(g) Rejoining After Divestiture of All Shares.--
            ``(1) In general.--Except as provided in paragraph (2), and 
        notwithstanding any other provision of this Act, an institution 
        that divests all shares of stock in a Federal home loan bank may 
        not, after such divestiture, acquire shares of any Federal home 
        loan bank before the end of the 5-year period beginning on the 
        date of the completion of such divestiture, unless the 
        divestiture is a consequence of a transfer of membership on an 
        uninterrupted basis between banks.
            ``(2) Exception for withdrawals from membership before 
        1998.--Any institution that withdrew from membership in any 
        Federal home loan bank before December 31, 1997, may acquire 
        shares of a Federal home loan bank at any time after that date, 
        subject to the approval of the Finance Board and the 
        requirements of this Act.

    ``(h) Treatment of Retained Earnings.--
            ``(1) In general.--The holders of the Class B stock of a 
        Federal home loan bank shall own the retained earnings, surplus, 
        undivided profits, and equity reserves, if any, of the bank.
            ``(2) Exception.--Except as specifically provided in this 
        section or through the declaration of a dividend or a capital 
        distribution by a Federal home loan bank, or in the event of 
        liquidation of the bank, a member shall have no right to 
        withdraw or otherwise receive distribution of any portion of the 
        retained earnings of the bank.
            ``(3) Limitation.--A Federal home loan bank may not make any 
        distribution of its retained earnings unless, following such

[[Page 113 STAT. 1463]]

        distribution, the bank would continue to meet all applicable 
        capital requirements.''.

                       TITLE VII--OTHER PROVISIONS

Subtitle <<NOTE: ATM Fee Reform Act of 1999.>> A--ATM Fee Reform

SEC. 701. <<NOTE: 15 USC 1601 note.>> SHORT TITLE.

    This subtitle may be cited as the ``ATM Fee Reform Act of 1999''.
SEC. 702. ELECTRONIC FUND TRANSFER FEE DISCLOSURES AT ANY HOST 
                        ATM.

    Section 904(d) of the Electronic Fund Transfer Act (15 U.S.C. 
1693b(d)) is amended by adding at the end the following new paragraph:
            ``(3) Fee disclosures at automated teller machines.--
                    ``(A) In general.--The regulations prescribed under 
                paragraph (1) shall require any automated teller machine 
                operator who imposes a fee on any consumer for providing 
                host transfer services to such consumer to provide 
                notice in accordance with subparagraph (B) to the 
                consumer (at the time the service is provided) of--
                          ``(i) the fact that a fee is imposed by such 
                      operator for providing the service; and
                          ``(ii) the amount of any such fee.
                    ``(B) Notice requirements.--
                          ``(i) On the machine.--The notice required 
                      under clause (i) of subparagraph (A) with respect 
                      to any fee described in such subparagraph shall be 
                      posted in a prominent and conspicuous location on 
                      or at the automated teller machine at which the 
                      electronic fund transfer is initiated by the 
                      consumer.
                          ``(ii) On the screen.--The notice required 
                      under clauses (i) and (ii) of subparagraph (A) 
                      with respect to any fee described in such 
                      subparagraph shall appear on the screen of the 
                      automated teller machine, or on a paper notice 
                      issued from such machine, after the transaction is 
                      initiated and before the consumer is irrevocably 
                      committed to completing the transaction, except 
                      that during the period beginning on the date of 
                      the enactment of the Gramm-Leach-Bliley Act and 
                      ending on December 31, 2004, this clause shall not 
                      apply to any automated teller machine that lacks 
                      the technical capability to disclose the notice on 
                      the screen or to issue a paper notice after the 
                      transaction is initiated and before the consumer 
                      is irrevocably committed to completing the 
                      transaction.
                    ``(C) Prohibition on fees not properly disclosed and 
                explicitly assumed by consumer.--No fee may be imposed 
                by any automated teller machine operator in connection 
                with any electronic fund transfer initiated by a 
                consumer for which a notice is required under 
                subparagraph (A), unless--
                          ``(i) the consumer receives such notice in 
                      accordance with subparagraph (B); and

[[Page 113 STAT. 1464]]

                          ``(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;

[[Page 113 STAT. 1465]]

                    (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:

[[Page 113 STAT. 1466]]

``SEC. 48. <<NOTE: 12 USC 1831y.>> CRA SUNSHINE REQUIREMENTS.

    ``(a) Public Disclosure of Agreements.--Any agreement (as defined in 
subsection (e)) entered into after the date of the enactment of the 
Gramm-Leach-Bliley Act by an insured depository institution or affiliate 
with a nongovernmental entity or person made pursuant to or in 
connection with the Community Reinvestment Act of 1977 involving funds 
or other resources of such insured depository institution or affiliate--
            ``(1) shall be in its entirety fully disclosed, and the full 
        text thereof made available to the appropriate Federal banking 
        agency with supervisory responsibility over the insured 
        depository institution and to the public by each party to the 
        agreement; and
            ``(2) shall obligate each party to comply with this section.

    ``(b) Annual Report of Activity by Insured Depository Institution.--
Each insured depository institution or affiliate that is a party to an 
agreement described in subsection (a) shall report to the appropriate 
Federal banking agency with supervisory responsibility over the insured 
depository institution, not less frequently than once each year, such 
information as the Federal banking agency may by rule require relating 
to the following actions taken by the party pursuant to the agreement 
during the preceding 12-month period:
            ``(1) Payments, fees, or loans made to any party to the 
        agreement or received from any party to the agreement and the 
        terms and conditions of the same.
            ``(2) Aggregate data on loans, investments, and services 
        provided by each party in its community or communities pursuant 
        to the agreement.
            ``(3) Such other pertinent matters as determined by 
        regulation by the appropriate Federal banking agency with 
        supervisory responsibility over the insured depository 
        institution.

    ``(c) Annual Report of Activity by Nongovernmental Entities.--
            ``(1) In general.--Each nongovernmental entity or person 
        that is not an affiliate of an insured depository institution 
        and that is a party to an agreement described in subsection (a) 
        shall report to the appropriate Federal banking agency with 
        supervisory responsibility over the insured depository 
        institution that is a party to such agreement, not less 
        frequently than once each year, an accounting of the use of 
        funds received pursuant to each such agreement during the 
        preceding 12-month period.
            ``(2) Submission to insured depository institution.--A 
        nongovernmental entity or person referred to in paragraph (1) 
        may comply with the reporting requirement in such paragraph by 
        transmitting the report to the insured depository institution 
        that is a party to the agreement, and such insured depository 
        institution shall promptly transmit such report to the 
        appropriate Federal banking agency with supervisory authority 
        over the insured depository institution.
            ``(3) Information to be included.--The accounting referred 
        to in paragraph (1) shall include a detailed, itemized list of 
        the uses to which such funds have been made, including 
        compensation, administrative expenses, travel, entertainment, 
        consulting and professional fees paid, and such other 
        categories, as determined by regulation by the appropriate 
        Federal banking

[[Page 113 STAT. 1467]]

        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.--

[[Page 113 STAT. 1468]]

                    ``(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.

[[Page 113 STAT. 1469]]

            ``(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. <<NOTE: 12 USC 2908.>> 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 <<NOTE: Reports. Deadline.>> 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 <<NOTE: Public information.>> 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.

[[Page 113 STAT. 1470]]

SEC. 714. <<NOTE: 12 USC 1811 note.>> 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 <<NOTE: 12 USC 2901 note.>> 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 <<NOTE: Deadlines.>> 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 <<NOTE: Deadline.>> 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).

[[Page 113 STAT. 1471]]

    (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 <<NOTE: 12 USC 4809.>> 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 <<NOTE: Deadline.>> 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 <<NOTE: Program for Investment in Micro- 
entrepreneurs Act of 1999.>> Technical Assistance and Capacity Building 
Program

``SEC. 171. <<NOTE: 15 USC 6901 note.>> SHORT TITLE.

    ``This subtitle may be cited as the `Program for Investment in 
Microentrepreneurs Act of 1999', also referred to as the `PRIME Act'.

[[Page 113 STAT. 1472]]

``SEC. 172. <<NOTE: 15 USC 6901.>> DEFINITIONS.

    ``For purposes of this subtitle, the following definitions shall 
apply:
            ``(1) Administration.--The term `Administration' means the 
        Small Business Administration.
            ``(2) Administrator.--The term `Administrator' means the 
        Administrator of the Small Business Administration.
            ``(3) Capacity building services.--The term `capacity 
        building services' means services provided to an organization 
        that is, or that is in the process of becoming, a 
        microenterprise development organization or program, for the 
        purpose of enhancing its ability to provide training and 
        services to disadvantaged entrepreneurs.
            ``(4) Collaborative.--The term `collaborative' means 2 or 
        more nonprofit entities that agree to act jointly as a qualified 
        organization under this subtitle.
            ``(5) Disadvantaged entrepreneur.--The term `disadvantaged 
        entrepreneur' means a microentrepreneur that is--
                    ``(A) a low-income person;
                    ``(B) a very low-income person; or
                    ``(C) an entrepreneur that lacks adequate access to 
                capital or other resources essential for business 
                success, or is economically disadvantaged, as determined 
                by the Administrator.
            ``(6) Indian tribe.--The term `Indian tribe' has the meaning 
        given the term in section 103.
            ``(7) Intermediary.--The term `intermediary' means a 
        private, nonprofit entity that seeks to serve microenterprise 
        development organizations and programs as authorized under 
        section 175.
            ``(8) Low-income person.--The term `low-income person' has 
        the meaning given the term in section 103.
            ``(9) Microentrepreneur.--The term `microentrepreneur' means 
        the owner or developer of a microenterprise.
            ``(10) Microenterprise.--The term `microenterprise' means a 
        sole proprietorship, partnership, or corporation that--
                    ``(A) has fewer than 5 employees; and
                    ``(B) generally lacks access to conventional loans, 
                equity, or other banking services.
            ``(11) Microenterprise development organization or 
        program.--The term `microenterprise development organization or 
        program' means a nonprofit entity, or a program administered by 
        such an entity, including community development corporations or 
        other nonprofit development organizations and social service 
        organizations, that provides services to disadvantaged 
        entrepreneurs.
            ``(12) Training and technical assistance.--The term 
        `training and technical assistance' means services and support 
        provided to disadvantaged entrepreneurs, such as assistance for 
        the purpose of enhancing business planning, marketing, 
        management, financial management skills, and assistance for the 
        purpose of accessing financial services.
            ``(13) Very low-income person.--The term `very low-income 
        person' means having an income, adjusted for family size, of not 
        more than 150 percent of the poverty line (as defined in section 
        673(2) of the Community Services Block

[[Page 113 STAT. 1473]]

        Grant Act (42 U.S.C. 9902(2)), including any revision required 
        by that section).

``SEC. 173. <<NOTE: 15 USC 6902.>> 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. <<NOTE: 15 USC 6903.>> 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. <<NOTE: 15 USC 6904.>> 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. <<NOTE: 15 USC 6905.>> 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.--

[[Page 113 STAT. 1474]]

            ``(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. <<NOTE: 15 USC 6906.>> 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. <<NOTE: 15 USC 6907.>> 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. <<NOTE: 15 USC 6908.>> RECORDKEEPING.

    ``The <<NOTE: Applicability.>> 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. <<NOTE: 15 USC 6909.>> 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;

[[Page 113 STAT. 1475]]

            ``(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. <<NOTE: Regulations. 15 USC 6910.>> 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. <<NOTE: 12 USC 248b.>> 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) <<NOTE: 12 USC 3401.>> 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), <<NOTE: 12 USC 3412.>> by striking 
        ``and the Securities and Exchange Commission'' and inserting ``, 
        the Securities and Exchange Commission, and the Commodity 
        Futures Trading Commission''.
SEC. 728. GENERAL <<NOTE: 12 USC 241 note.>> 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.

[[Page 113 STAT. 1476]]

    (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 <<NOTE: 12 USC 4801 note.>> 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--

[[Page 113 STAT. 1477]]

                          ``(i) provides for the avoidance of 
                      preferential or fraudulent transfers or 
                      conveyances; or
                          ``(ii) provides similar remedies for 
                      preferential or fraudulent transfers or 
                      conveyances; and
                    ``(B) does not include any claim based on actual 
                intent to hinder, delay, or defraud pursuant to such a 
                fraudulent transfer or conveyance law.''.
SEC. 731. INTEREST RATES AND OTHER CHARGES AT INTERSTATE BRANCHES.

    Section 44 of the Federal Deposit Insurance Act (12 U.S.C. 1831u) is 
amended--
            (1) by redesignating subsection (f) as subsection (g); and
            (2) by inserting after subsection (e) the following new 
        subsection:

    ``(f) Applicable Rate and Other Charge Limitations.--
            ``(1) In general.--In the case of any State that has a 
        constitutional provision that sets a maximum lawful annual 
        percentage rate of interest on any contract at not more than 5 
        percent above the discount rate for 90-day commercial paper in 
        effect at the Federal reserve bank for the Federal reserve 
        district in which such State is located, except as provided in 
        paragraph (2), upon the establishment in such State of a branch 
        of any out-of-State insured depository institution in such State 
        under this section, the maximum interest rate or amount of 
        interest, discount points, finance charges, or other similar 
        charges that may be charged, taken, received, or reserved from 
        time to time in any loan or discount made or upon any note, bill 
        of exchange, financing transaction, or other evidence of debt by 
        any insured depository institution whose home State is such 
        State shall be equal to not more than the greater of--
                    ``(A) the maximum interest rate or amount of 
                interest, discount points, finance charges, or other 
                similar charges that may be charged, taken, received, or 
                reserved in a similar transaction under the constitution 
                or any statute or other law of the home State of the 
                out-of-State insured depository institution establishing 
                any such branch, without reference to this section, as 
                such maximum interest rate or amount of interest may 
                change from time to time; or
                    ``(B) the maximum rate or amount of interest, 
                discount points, finance charges, or other similar 
                charges that may be charged, taken, received, or 
                reserved in a similar transaction by a State insured 
                depository institution chartered under the laws of such 
                State or a national bank or Federal savings association 
                whose main office is located in such State without 
                reference to this section.
            ``(2) Rule of construction.--No provision of this subsection 
        shall be construed as superseding or affecting--
                    ``(A) the authority of any insured depository 
                institution to take, receive, reserve, and charge 
                interest on any loan made in any State other than the 
                State referred to in paragraph (1); or
                    ``(B) the applicability of section 501 of the 
                Depository Institutions Deregulation and Monetary 
                Control Act of

[[Page 113 STAT. 1478]]

                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 <<NOTE: Ante, p. 252.>> 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.

[[Page 113 STAT. 1479]]

    (b) Emergency Oil and Gas Loan Guarantee Board.--Section 201(d)(2) 
of the Emergency Oil and Gas Guarantee Loan Program Act <<NOTE: Ante, p. 
255.>> 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) <<NOTE: 12 USC 1821 note.>> by striking subsection (b); 
        and
            (2) <<NOTE: 12 USC 1821.>> 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 <<NOTE: 12 USC 1821 note.>> 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,

[[Page 113 STAT. 1480]]

                      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--

[[Page 113 STAT. 1481]]

            (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''.

    Approved November 12, 1999.

LEGISLATIVE HISTORY--S. 900 (H.R. 10):
---------------------------------------------------------------------------

HOUSE REPORTS: Nos. 106-74, Pts. 1 and 2 (Comm. on Banking and Financial 
Services) and Pt. 3 (Comm. on Commerce) accompanying     H.R. 10 and 
106-434 (Comm. of Conference).
SENATE REPORTS: No. 106-44 (Comm. on Banking, Housing, and Urban 
Affairs).
CONGRESSIONAL RECORD, Vol. 145 (1999):
            May 4-6, considered and passed Senate.
            July 20, considered and passed House, amended, in lieu of 
                H.R. 10.
            Nov. 3, Senate considered conference report.
            Nov. 4, Senate and House agreed to conference report.
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 35 (1999):
            Nov. 12, Presidential remarks and statement.

                                  <all>