Gramm–Leach–Bliley Act Text
Text of the Gramm-Leach Bliley Act
S. 900
One Hundred Sixth Congress
of the
United States of America
AT T H E F I R S T S E S S I O N
Begun and held at the City of Washington on Wednesday,
the sixth day of January, one thousand nine hundred and ninety-nine
An Act
To enhance competition in the financial services industry by providing a prudential
framework for the affiliation of banks, securities firms, insurance companies,
and other financial service providers, and for other purposes.
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the ‘‘Gramm-LeachBliley Act’’.
(b) TABLE OF CONTENTS.—The table of contents for this Act
is as follows:
Sec. 1. Short title; table of contents.
TITLE I—FACILITATING AFFILIATION AMONG BANKS, SECURITIES FIRMS,
AND INSURANCE COMPANIES
Subtitle A—Affiliations
Sec. 101. Glass-Steagall Act repeals.
Sec. 102. Activity restrictions applicable to bank holding companies that are not financial holding companies.
Sec. 103. Financial activities.
Sec. 104. Operation of State law.
Sec. 105. Mutual bank holding companies authorized.
Sec. 106. Prohibition on deposit production offices.
Sec. 107. Cross marketing restriction; limited purpose bank relief; divestiture.
Sec. 108. Use of subordinated debt to protect financial system and deposit funds
from ‘‘too big to fail’’ institutions.
Sec. 109. Study of financial modernization’s effect on the accessibility of small business and farm loans.
Subtitle B—Streamlining Supervision of Bank Holding Companies
Sec. 111. Streamlining bank holding company supervision.
Sec. 112. Authority of State insurance regulator and Securities and Exchange Commission.
Sec. 113. Role of the Board of Governors of the Federal Reserve System.
Sec. 114. Prudential safeguards.
Sec. 115. Examination of investment companies.
Sec. 116. Elimination of application requirement for financial holding companies.
Sec. 117. Preserving the integrity of FDIC resources.
Sec. 118. Repeal of savings bank provisions in the Bank Holding Company Act of
1956.
Sec. 119. Technical amendment.
Subtitle C—Subsidiaries of National Banks
Sec. 121. Subsidiaries of national banks.
Sec. 122. Consideration of merchant banking activities by financial subsidiaries.
Subtitle D—Preservation of FTC Authority
Sec. 131. Amendment to the Bank Holding Company Act of 1956 to modify notification and post-approval waiting period for section 3 transactions.
Sec. 132. Interagency data sharing.S. 900—2
Sec. 133. Clarification of status of subsidiaries and affiliates.
Subtitle E—National Treatment
Sec. 141. Foreign banks that are financial holding companies.
Sec. 142. Representative offices.
Subtitle F—Direct Activities of Banks
Sec. 151. Authority of national banks to underwrite certain municipal bonds.
Subtitle G—Effective Date
Sec. 161. Effective date.
TITLE II—FUNCTIONAL REGULATION
Subtitle A—Brokers and Dealers
Sec. 201. Definition of broker.
Sec. 202. Definition of dealer.
Sec. 203. Registration for sales of private securities offerings.
Sec. 204. Information sharing.
Sec. 205. Treatment of new hybrid products.
Sec. 206. Definition of identified banking product.
Sec. 207. Additional definitions.
Sec. 208. Government securities defined.
Sec. 209. Effective date.
Sec. 210. Rule of construction.
Subtitle B—Bank Investment Company Activities
Sec. 211. Custody of investment company assets by affiliated bank.
Sec. 212. Lending to an affiliated investment company.
Sec. 213. Independent directors.
Sec. 214. Additional SEC disclosure authority.
Sec. 215. Definition of broker under the Investment Company Act of 1940.
Sec. 216. Definition of dealer under the Investment Company Act of 1940.
Sec. 217. Removal of the exclusion from the definition of investment adviser for
banks that advise investment companies.
Sec. 218. Definition of broker under the Investment Advisers Act of 1940.
Sec. 219. Definition of dealer under the Investment Advisers Act of 1940.
Sec. 220. Interagency consultation.
Sec. 221. Treatment of bank common trust funds.
Sec. 222. Statutory disqualification for bank wrongdoing.
Sec. 223. Conforming change in definition.
Sec. 224. Conforming amendment.
Sec. 225. Effective date.
Subtitle C—Securities and Exchange Commission Supervision of Investment Bank
Holding Companies
Sec. 231. Supervision of investment bank holding companies by the Securities and
Exchange Commission.
Subtitle D—Banks and Bank Holding Companies
Sec. 241. Consultation.
TITLE III—INSURANCE
Subtitle A—State Regulation of Insurance
Sec. 301. Functional regulation of insurance.
Sec. 302. Insurance underwriting in national banks.
Sec. 303. Title insurance activities of national banks and their affiliates.
Sec. 304. Expedited and equalized dispute resolution for Federal regulators.
Sec. 305. Insurance customer protections.
Sec. 306. Certain State affiliation laws preempted for insurance companies and affiliates.
Sec. 307. Interagency consultation.
Sec. 308. Definition of State.
Subtitle B—Redomestication of Mutual Insurers
Sec. 311. General application.
Sec. 312. Redomestication of mutual insurers.
Sec. 313. Effect on State laws restricting redomestication.
Sec. 314. Other provisions.S. 900—3
Sec. 315. Definitions.
Sec. 316. Effective date.
Subtitle C—National Association of Registered Agents and Brokers
Sec. 321. State flexibility in multistate licensing reforms.
Sec. 322. National Association of Registered Agents and Brokers.
Sec. 323. Purpose.
Sec. 324. Relationship to the Federal Government.
Sec. 325. Membership.
Sec. 326. Board of directors.
Sec. 327. Officers.
Sec. 328. Bylaws, rules, and disciplinary action.
Sec. 329. Assessments.
Sec. 330. Functions of the NAIC.
Sec. 331. Liability of the association and the directors, officers, and employees of
the association.
Sec. 332. Elimination of NAIC oversight.
Sec. 333. Relationship to State law.
Sec. 334. Coordination with other regulators.
Sec. 335. Judicial review.
Sec. 336. Definitions.
Subtitle D—Rental Car Agency Insurance Activities
Sec. 341. Standard of regulation for motor vehicle rentals.
TITLE IV—UNITARY SAVINGS AND LOAN HOLDING COMPANIES
Sec. 401. Prevention of creation of new S&L holding companies with commercial affiliates.
TITLE V—PRIVACY
Subtitle A—Disclosure of Nonpublic Personal Information
Sec. 501. Protection of nonpublic personal information.
Sec. 502. Obligations with respect to disclosures of personal information.
Sec. 503. Disclosure of institution privacy policy.
Sec. 504. Rulemaking.
Sec. 505. Enforcement.
Sec. 506. Protection of Fair Credit Reporting Act.
Sec. 507. Relation to State laws.
Sec. 508. Study of information sharing among financial affiliates.
Sec. 509. Definitions.
Sec. 510. Effective date.
Subtitle B—Fraudulent Access to Financial Information
Sec. 521. Privacy protection for customer information of financial institutions.
Sec. 522. Administrative enforcement.
Sec. 523. Criminal penalty.
Sec. 524. Relation to State laws.
Sec. 525. Agency guidance.
Sec. 526. Reports.
Sec. 527. Definitions.
TITLE VI—FEDERAL HOME LOAN BANK SYSTEM MODERNIZATION
Sec. 601. Short title.
Sec. 602. Definitions.
Sec. 603. Savings association membership.
Sec. 604. Advances to members; collateral.
Sec. 605. Eligibility criteria.
Sec. 606. Management of banks.
Sec. 607. Resolution Funding Corporation.
Sec. 608. Capital structure of Federal home loan banks.
TITLE VII—OTHER PROVISIONS
Subtitle A—ATM Fee Reform
Sec. 701. Short title.
Sec. 702. Electronic fund transfer fee disclosures at any host ATM.
Sec. 703. Disclosure of possible fees to consumers when ATM card is issued.
Sec. 704. Feasibility study.
Sec. 705. No liability if posted notices are damaged.S. 900—4
Subtitle B—Community Reinvestment
Sec. 711. CRA sunshine requirements.
Sec. 712. Small bank regulatory relief.
Sec. 713. Federal Reserve Board study of CRA lending.
Sec. 714. Preserving the Community Reinvestment Act of 1977.
Sec. 715. Responsiveness to community needs for financial services.
Subtitle C—Other Regulatory Improvements
Sec. 721. Expanded small bank access to S corporation treatment.
Sec. 722. ‘‘Plain language’’ requirement for Federal banking agency rules.
Sec. 723. Retention of ‘‘Federal’’ in name of converted Federal savings association.
Sec. 724. Control of bankers’ banks.
Sec. 725. Provision of technical assistance to microenterprises.
Sec. 726. Federal Reserve audits.
Sec. 727. Authorization to release reports.
Sec. 728. General Accounting Office study of conflicts of interest.
Sec. 729. Study and report on adapting existing legislative requirements to online
banking and lending.
Sec. 730. Clarification of source of strength doctrine.
Sec. 731. Interest rates and other charges at interstate branches.
Sec. 732. Interstate branches and agencies of foreign banks.
Sec. 733. Fair treatment of women by financial advisers.
Sec. 734. Membership of loan guarantee boards.
Sec. 735. Repeal of stock loan limit in Federal Reserve Act.
Sec. 736. Elimination of SAIF and DIF special reserves.
Sec. 737. Bank officers and directors as officers and directors of public utilities.
Sec. 738. Approval for purchases of securities.
Sec. 739. Optional conversion of Federal savings associations.
Sec. 740. Grand jury proceedings.
TITLE I—FACILITATING AFFILIATION
AMONG BANKS, SECURITIES FIRMS,
AND INSURANCE COMPANIES
Subtitle A—Affiliations
SEC. 101. GLASS-STEAGALL ACT REPEALS.
(a) SECTION 20 REPEALED.—Section 20 of the Banking Act
of 1933 (12 U.S.C. 377) (commonly referred to as the ‘‘Glass-Steagall
Act’’) is repealed.
(b) SECTION 32 REPEALED.—Section 32 of the Banking Act
of 1933 (12 U.S.C. 78) is repealed.
SEC. 102. ACTIVITY RESTRICTIONS APPLICABLE TO BANK HOLDING
COMPANIES THAT ARE NOT FINANCIAL HOLDING COMPANIES.
(a) IN GENERAL.—Section 4(c)(8) of the Bank Holding Company
Act of 1956 (12 U.S.C. 1843(c)(8)) is amended to read as follows:
‘‘(8) shares of any company the activities of which had
been determined by the Board by regulation or order under
this paragraph as of the day before the date of the enactment
of the Gramm-Leach-Bliley Act, to be so closely related to
banking as to be a proper incident thereto (subject to such
terms and conditions contained in such regulation or order,
unless modified by the Board);’’.
(b) CONFORMING CHANGES TO OTHER STATUTES.—
(1) AMENDMENT TO THE BANK HOLDING COMPANY ACT
AMENDMENTS OF 1970.—Section 105 of the Bank Holding Company Act Amendments of 1970 (12 U.S.C. 1850) is amended
by striking ‘‘, to engage directly or indirectly in a nonbanking
activity pursuant to section 4 of such Act,’’.S. 900—5
(2) AMENDMENT TO THE BANK SERVICE COMPANY ACT.—
Section 4(f) of the Bank Service Company Act (12 U.S.C.
1864(f)) is amended by inserting before the period at the end
the following: ‘‘as of the day before the date of the enactment
of the Gramm-Leach-Bliley Act’’.
SEC. 103. FINANCIAL ACTIVITIES.
(a) IN GENERAL.—Section 4 of the Bank Holding Company
Act of 1956 (12 U.S.C. 1843) is amended by adding at the end
the following new subsections:
‘‘(k) ENGAGING IN ACTIVITIES THAT ARE FINANCIAL IN
NATURE.—
‘‘(1) IN GENERAL.—Notwithstanding subsection (a), a financial holding company may engage in any activity, and may
acquire and retain the shares of any company engaged in
any activity, that the Board, in accordance with paragraph
(2), determines (by regulation or order)—
‘‘(A) to be financial in nature or incidental to such
financial activity; or
‘‘(B) is complementary to a financial activity and does
not pose a substantial risk to the safety or soundness
of depository institutions or the financial system generally.
‘‘(2) COORDINATION BETWEEN THE BOARD AND THE SECRETARY OF THE TREASURY.—
‘‘(A) PROPOSALS RAISED BEFORE THE BOARD.—
‘‘(i) CONSULTATION.—The Board shall notify the
Secretary of the Treasury of, and consult with the
Secretary of the Treasury concerning, any request, proposal, or application under this subsection for a determination of whether an activity is financial in nature
or incidental to a financial activity.
‘‘(ii) TREASURY VIEW.—The Board shall not determine that any activity is financial in nature or incidental to a financial activity under this subsection
if the Secretary of the Treasury notifies the Board
in writing, not later than 30 days after the date of
receipt of the notice described in clause (i) (or such
longer period as the Board determines to be appropriate under the circumstances) that the Secretary of
the Treasury believes that the activity is not financial
in nature or incidental to a financial activity or is
not otherwise permissible under this section.
‘‘(B) PROPOSALS RAISED BY THE TREASURY.—
‘‘(i) TREASURY RECOMMENDATION.—The Secretary
of the Treasury may, at any time, recommend in
writing that the Board find an activity to be financial
in nature or incidental to a financial activity.
‘‘(ii) TIME PERIOD FOR BOARD ACTION.—Not later
than 30 days after the date of receipt of a written
recommendation from the Secretary of the Treasury
under clause (i) (or such longer period as the Secretary
of the Treasury and the Board determine to be appropriate under the circumstances), the Board shall determine whether to initiate a public rulemaking proposing
that the recommended activity be found to be financial
in nature or incidental to a financial activity under
this subsection, and shall notify the Secretary of theS. 900—6
Treasury in writing of the determination of the Board
and, if the Board determines not to seek public comment on the proposal, the reasons for that determination.
‘‘(3) FACTORS TO BE CONSIDERED.—In determining whether
an activity is financial in nature or incidental to a financial
activity, the Board shall take into account—
‘‘(A) the purposes of this Act and the Gramm-LeachBliley Act;
‘‘(B) changes or reasonably expected changes in the
marketplace in which financial holding companies compete;
‘‘(C) changes or reasonably expected changes in the
technology for delivering financial services; and
‘‘(D) whether such activity is necessary or appropriate
to allow a financial holding company and the affiliates
of a financial holding company to—
‘‘(i) compete effectively with any company seeking
to provide financial services in the United States;
‘‘(ii) efficiently deliver information and services
that are financial in nature through the use of technological means, including any application necessary to
protect the security or efficacy of systems for the transmission of data or financial transactions; and
‘‘(iii) offer customers any available or emerging
technological means for using financial services or for
the document imaging of data.
‘‘(4) ACTIVITIES THAT ARE FINANCIAL IN NATURE.—For purposes of this subsection, the following activities shall be considered to be financial in nature:
‘‘(A) Lending, exchanging, transferring, investing for
others, or safeguarding money or securities.
‘‘(B) Insuring, guaranteeing, or indemnifying against
loss, harm, damage, illness, disability, or death, or providing and issuing annuities, and acting as principal, agent,
or broker for purposes of the foregoing, in any State.
‘‘(C) Providing financial, investment, or economic
advisory services, including advising an investment company (as defined in section 3 of the Investment Company
Act of 1940).
‘‘(D) Issuing or selling instruments representing
interests in pools of assets permissible for a bank to hold
directly.
‘‘(E) Underwriting, dealing in, or making a market
in securities.
‘‘(F) Engaging in any activity that the Board has determined, by order or regulation that is in effect on the date
of the enactment of the Gramm-Leach-Bliley Act, to be
so closely related to banking or managing or controlling
banks as to be a proper incident thereto (subject to the
same terms and conditions contained in such order or regulation, unless modified by the Board).
‘‘(G) Engaging, in the United States, in any activity
that—
‘‘(i) a bank holding company may engage in outside
of the United States; andS. 900—7
‘‘(ii) the Board has determined, under regulations
prescribed or interpretations issued pursuant to subsection (c)(13) (as in effect on the day before the date
of the enactment of the Gramm-Leach-Bliley Act) to
be usual in connection with the transaction of banking
or other financial operations abroad.
‘‘(H) Directly or indirectly acquiring or controlling,
whether as principal, on behalf of 1 or more entities
(including entities, other than a depository institution or
subsidiary of a depository institution, that the bank holding
company controls), or otherwise, shares, assets, or ownership interests (including debt or equity securities, partnership interests, trust certificates, or other instruments representing ownership) of a company or other entity, whether
or not constituting control of such company or entity,
engaged in any activity not authorized pursuant to this
section if—
‘‘(i) the shares, assets, or ownership interests are
not acquired or held by a depository institution or
subsidiary of a depository institution;
‘‘(ii) such shares, assets, or ownership interests
are acquired and held by—
‘‘(I) a securities affiliate or an affiliate thereof;
or
‘‘(II) an affiliate of an insurance company
described in subparagraph (I)(ii) that provides
investment advice to an insurance company and
is registered pursuant to the Investment Advisers
Act of 1940, or an affiliate of such investment
adviser;
as part of a bona fide underwriting or merchant or
investment banking activity, including investment
activities engaged in for the purpose of appreciation
and ultimate resale or disposition of the investment;
‘‘(iii) such shares, assets, or ownership interests
are held for a period of time to enable the sale or
disposition thereof on a reasonable basis consistent
with the financial viability of the activities described
in clause (ii); and
‘‘(iv) during the period such shares, assets, or
ownership interests are held, the bank holding company does not routinely manage or operate such company or entity except as may be necessary or required
to obtain a reasonable return on investment upon
resale or disposition.
‘‘(I) Directly or indirectly acquiring or controlling,
whether as principal, on behalf of 1 or more entities
(including entities, other than a depository institution or
subsidiary of a depository institution, that the bank holding
company controls) or otherwise, shares, assets, or ownership interests (including debt or equity securities, partnership interests, trust certificates or other instruments representing ownership) of a company or other entity, whether
or not constituting control of such company or entity,
engaged in any activity not authorized pursuant to this
section if—S. 900—8
‘‘(i) the shares, assets, or ownership interests are
not acquired or held by a depository institution or
a subsidiary of a depository institution;
‘‘(ii) such shares, assets, or ownership interests
are acquired and held by an insurance company that
is predominantly engaged in underwriting life, accident
and health, or property and casualty insurance (other
than credit-related insurance) or providing and issuing
annuities;
‘‘(iii) such shares, assets, or ownership interests
represent an investment made in the ordinary course
of business of such insurance company in accordance
with relevant State law governing such investments;
and
‘‘(iv) during the period such shares, assets, or
ownership interests are held, the bank holding company does not routinely manage or operate such company except as may be necessary or required to obtain
a reasonable return on investment.
‘‘(5) ACTIONS REQUIRED.—
‘‘(A) IN GENERAL.—The Board shall, by regulation or
order, define, consistent with the purposes of this Act,
the activities described in subparagraph (B) as financial
in nature, and the extent to which such activities are
financial in nature or incidental to a financial activity.
‘‘(B) ACTIVITIES.—The activities described in this
subparagraph are as follows:
‘‘(i) Lending, exchanging, transferring, investing
for others, or safeguarding financial assets other than
money or securities.
‘‘(ii) Providing any device or other instrumentality
for transferring money or other financial assets.
‘‘(iii) Arranging, effecting, or facilitating financial
transactions for the account of third parties.
‘‘(6) REQUIRED NOTIFICATION.—
‘‘(A) IN GENERAL.—A financial holding company that
acquires any company or commences any activity pursuant
to this subsection shall provide written notice to the Board
describing the activity commenced or conducted by the
company acquired not later than 30 calendar days after
commencing the activity or consummating the acquisition,
as the case may be.
‘‘(B) APPROVAL NOT REQUIRED FOR CERTAIN FINANCIAL
ACTIVITIES.—Except as provided in subsection (j) with
regard to the acquisition of a savings association, a financial holding company may commence any activity, or
acquire any company, pursuant to paragraph (4) or any
regulation prescribed or order issued under paragraph (5),
without prior approval of the Board.
‘‘(7) MERCHANT BANKING ACTIVITIES.—
‘‘(A) JOINT REGULATIONS.—The Board and the Secretary of the Treasury may issue such regulations implementing paragraph (4)(H), including limitations on transactions between depository institutions and companies
controlled pursuant to such paragraph, as the Board and
the Secretary jointly deem appropriate to assure compliance
with the purposes and prevent evasions of this Act andS. 900—9
the Gramm-Leach-Bliley Act and to protect depository
institutions.
‘‘(B) SUNSET OF RESTRICTIONS ON MERCHANT BANKING
ACTIVITIES OF FINANCIAL SUBSIDIARIES.—The restrictions
contained in paragraph (4)(H) on the ownership and control
of shares, assets, or ownership interests by or on behalf
of a subsidiary of a depository institution shall not apply
to a financial subsidiary (as defined in section 5136A of
the Revised Statutes of the United States) of a bank, if
the Board and the Secretary of the Treasury jointly
authorize financial subsidiaries of banks to engage in merchant banking activities pursuant to section 122 of the
Gramm-Leach-Bliley Act.
‘‘(l) CONDITIONS FOR ENGAGING IN EXPANDED FINANCIAL ACTIVITIES.—
‘‘(1) IN GENERAL.—Notwithstanding subsection (k), (n), or
(o), a bank holding company may not engage in any activity,
or directly or indirectly acquire or retain shares of any company
engaged in any activity, under subsection (k), (n), or (o), other
than activities permissible for any bank holding company under
subsection (c)(8), unless—
‘‘(A) all of the depository institution subsidiaries of
the bank holding company are well capitalized;
‘‘(B) all of the depository institution subsidiaries of
the bank holding company are well managed; and
‘‘(C) the bank holding company has filed with the
Board—
‘‘(i) a declaration that the company elects to be
a financial holding company to engage in activities
or acquire and retain shares of a company that were
not permissible for a bank holding company to engage
in or acquire before the enactment of the GrammLeach-Bliley Act; and
‘‘(ii) a certification that the company meets the
requirements of subparagraphs (A) and (B).
‘‘(2) CRA REQUIREMENT.—Notwithstanding subsection (k)
or (n) of this section, section 5136A(a) of the Revised Statutes
of the United States, or section 46(a) of the Federal Deposit
Insurance Act, the appropriate Federal banking agency shall
prohibit a financial holding company or any insured depository
institution from—
‘‘(A) commencing any new activity under subsection
(k) or (n) of this section, section 5136A(a) of the Revised
Statutes of the United States, or section 46(a) of the Federal
Deposit Insurance Act; or
‘‘(B) directly or indirectly acquiring control of a company engaged in any activity under subsection (k) or (n)
of this section, section 5136A(a) of the Revised Statutes
of the United States, or section 46(a) of the Federal Deposit
Insurance Act (other than an investment made pursuant
to subparagraph (H) or (I) of subsection (k)(4), or section
122 of the Gramm-Leach-Bliley Act, or under section 46(a)
of the Federal Deposit Insurance Act by reason of such
section 122, by an affiliate already engaged in activities
under any such provision);
if any insured depository institution subsidiary of such financial
holding company, or the insured depository institution or anyS. 900—10
of its insured depository institution affiliates, has received in
its most recent examination under the Community Reinvestment Act of 1977, a rating of less than ‘satisfactory record
of meeting community credit needs’.
‘‘(3) FOREIGN BANKS.—For purposes of paragraph (1), the
Board shall apply comparable capital and management standards to a foreign bank that operates a branch or agency or
owns or controls a commercial lending company in the United
States, giving due regard to the principle of national treatment
and equality of competitive opportunity.
‘‘(m) PROVISIONS APPLICABLE TO FINANCIAL HOLDING COMPANIES THAT FAIL TO MEET CERTAIN REQUIREMENTS.—
‘‘(1) IN GENERAL.—If the Board finds that—
‘‘(A) a financial holding company is engaged, directly
or indirectly, in any activity under subsection (k), (n), or
(o), other than activities that are permissible for a bank
holding company under subsection (c)(8); and
‘‘(B) such financial holding company is not in compliance with the requirements of subsection (l)(1);
the Board shall give notice to the financial holding company
to that effect, describing the conditions giving rise to the notice.
‘‘(2) AGREEMENT TO CORRECT CONDITIONS REQUIRED.—Not
later than 45 days after the date of receipt by a financial
holding company of a notice given under paragraph (1) (or
such additional period as the Board may permit), the financial
holding company shall execute an agreement with the Board
to comply with the requirements applicable to a financial
holding company under subsection (l)(1).
‘‘(3) BOARD MAY IMPOSE LIMITATIONS.—Until the conditions
described in a notice to a financial holding company under
paragraph (1) are corrected, the Board may impose such limitations on the conduct or activities of that financial holding
company or any affiliate of that company as the Board determines to be appropriate under the circumstances and consistent
with the purposes of this Act.
‘‘(4) FAILURE TO CORRECT.—If the conditions described in
a notice to a financial holding company under paragraph (1)
are not corrected within 180 days after the date of receipt
by the financial holding company of a notice under paragraph
(1), the Board may require such financial holding company,
under such terms and conditions as may be imposed by the
Board and subject to such extension of time as may be granted
in the discretion of the Board, either—
‘‘(A) to divest control of any subsidiary depository
institution; or
‘‘(B) at the election of the financial holding company
instead to cease to engage in any activity conducted by
such financial holding company or its subsidiaries (other
than a depository institution or a subsidiary of a depository
institution) that is not an activity that is permissible for
a bank holding company under subsection (c)(8).
‘‘(5) CONSULTATION.—In taking any action under this subsection, the Board shall consult with all relevant Federal and
State regulatory agencies and authorities.
‘‘(n) AUTHORITY TO RETAIN LIMITED NONFINANCIAL ACTIVITIES
AND AFFILIATIONS.—S. 900—11
‘‘(1) IN GENERAL.—Notwithstanding subsection (a), a company that is not a bank holding company or a foreign bank
(as defined in section 1(b)(7) of the International Banking Act
of 1978) and becomes a financial holding company after the
date of the enactment of the Gramm-Leach-Bliley Act may
continue to engage in any activity and retain direct or indirect
ownership or control of shares of a company engaged in any
activity if—
‘‘(A) the holding company lawfully was engaged in the
activity or held the shares of such company on September
30, 1999;
‘‘(B) the holding company is predominantly engaged
in financial activities as defined in paragraph (2); and
‘‘(C) the company engaged in such activity continues
to engage only in the same activities that such company
conducted on September 30, 1999, and other activities
permissible under this Act.
‘‘(2) PREDOMINANTLY FINANCIAL.—For purposes of this subsection, a company is predominantly engaged in financial activities if the annual gross revenues derived by the holding company and all subsidiaries of the holding company (excluding
revenues derived from subsidiary depository institutions), on
a consolidated basis, from engaging in activities that are financial in nature or are incidental to a financial activity under
subsection (k) represent at least 85 percent of the consolidated
annual gross revenues of the company.
‘‘(3) NO EXPANSION OF GRANDFATHERED COMMERCIAL ACTIVITIES THROUGH MERGER OR CONSOLIDATION.—A financial holding
company that engages in activities or holds shares pursuant
to this subsection, or a subsidiary of such financial holding
company, may not acquire, in any merger, consolidation, or
other type of business combination, assets of any other company
that is engaged in any activity that the Board has not determined to be financial in nature or incidental to a financial
activity under subsection (k), except this paragraph shall not
apply with respect to a company that owns a broadcasting
station licensed under title III of the Communications Act of
1934 and the shares of which are under common control with
an insurance company since January 1, 1998, unless such company is acquired by, or otherwise becomes an affiliate of, a
bank holding company that, at the time such acquisition or
affiliation is consummated, is 1 of the 5 largest domestic bank
holding companies (as determined on the basis of the consolidated total assets of such companies).
‘‘(4) CONTINUING REVENUE LIMITATION ON GRANDFATHERED
COMMERCIAL ACTIVITIES.—Notwithstanding any other provision
of this subsection, a financial holding company may continue
to engage in activities or hold shares in companies pursuant
to this subsection only to the extent that the aggregate annual
gross revenues derived from all such activities and all such
companies does not exceed 15 percent of the consolidated
annual gross revenues of the financial holding company
(excluding revenues derived from subsidiary depository institutions).
‘‘(5) CROSS MARKETING RESTRICTIONS APPLICABLE TO
COMMERCIAL ACTIVITIES.—S. 900—12
‘‘(A) IN GENERAL.—A depository institution controlled
by a financial holding company shall not—
‘‘(i) offer or market, directly or through any
arrangement, any product or service of a company
whose activities are conducted or whose shares are
owned or controlled by the financial holding company
pursuant to this subsection or subparagraph (H) or
(I) of subsection (k)(4); or
‘‘(ii) permit any of its products or services to be
offered or marketed, directly or through any arrangement, by or through any company described in clause
(i).
‘‘(B) RULE OF CONSTRUCTION.—Subparagraph (A) shall
not be construed as prohibiting an arrangement between
a depository institution and a company owned or controlled
pursuant to subsection (k)(4)(I) for the marketing of products or services through statement inserts or Internet
websites if—
‘‘(i) such arrangement does not violate section 106
of the Bank Holding Company Act Amendments of
1970; and
‘‘(ii) the Board determines that the arrangement
is in the public interest, does not undermine the separation of banking and commerce, and is consistent
with the safety and soundness of depository institutions.
‘‘(6) TRANSACTIONS WITH NONFINANCIAL AFFILIATES.—A
depository institution controlled by a financial holding company
may not engage in a covered transaction (as defined in section
23A(b)(7) of the Federal Reserve Act) with any affiliate controlled by the company pursuant to this subsection.
‘‘(7) SUNSET OF GRANDFATHER.—A financial holding company engaged in any activity, or retaining direct or indirect
ownership or control of shares of a company, pursuant to this
subsection, shall terminate such activity and divest ownership
or control of the shares of such company before the end of
the 10-year period beginning on the date of the enactment
of the Gramm-Leach-Bliley Act. The Board may, upon application by a financial holding company, extend such 10-year period
by a period not to exceed an additional 5 years if such extension
would not be detrimental to the public interest.
‘‘(o) REGULATION OF CERTAIN FINANCIAL HOLDING COMPANIES.—Notwithstanding subsection (a), a company that is not a
bank holding company or a foreign bank (as defined in section
1(b)(7) of the International Banking Act of 1978) and becomes
a financial holding company after the date of enactment of the
Gramm-Leach-Bliley Act, may continue to engage in, or directly
or indirectly own or control shares of a company engaged in, activities related to the trading, sale, or investment in commodities
and underlying physical properties that were not permissible for
bank holding companies to conduct in the United States as of
September 30, 1997, if—
‘‘(1) the holding company, or any subsidiary of the holding
company, lawfully was engaged, directly or indirectly, in any
of such activities as of September 30, 1997, in the United
States;S. 900—13
‘‘(2) the attributed aggregate consolidated assets of the
company held by the holding company pursuant to this subsection, and not otherwise permitted to be held by a financial
holding company, are equal to not more than 5 percent of
the total consolidated assets of the bank holding company,
except that the Board may increase that percentage by such
amounts and under such circumstances as the Board considers
appropriate, consistent with the purposes of this Act; and
‘‘(3) the holding company does not permit—
‘‘(A) any company, the shares of which it owns or
controls pursuant to this subsection, to offer or market
any product or service of an affiliated depository institution;
or
‘‘(B) any affiliated depository institution to offer or
market any product or service of any company, the shares
of which are owned or controlled by such holding company
pursuant to this subsection.’’.
(b) COMMUNITY REINVESTMENT REQUIREMENT.—Section 804 of
the Community Reinvestment Act of 1977 (12 U.S.C. 2903) is
amended by adding at the end the following new subsection:
‘‘(c) FINANCIAL HOLDING COMPANY REQUIREMENT.—
‘‘(1) IN GENERAL.—An election by a bank holding company
to become a financial holding company under section 4 of the
Bank Holding Company Act of 1956 shall not be effective if—
‘‘(A) the Board finds that, as of the date the declaration
of such election and the certification is filed by such holding
company under section 4(l)(1)(C) of the Bank Holding Company Act of 1956, not all of the subsidiary insured depository institutions of the bank holding company had achieved
a rating of ‘satisfactory record of meeting community credit
needs’, or better, at the most recent examination of each
such institution; and
‘‘(B) the Board notifies the company of such finding
before the end of the 30-day period beginning on such
date.
‘‘(2) LIMITED EXCLUSIONS FOR NEWLY ACQUIRED INSURED
DEPOSITORY INSTITUTIONS.—Any insured depository institution
acquired by a bank holding company during the 12-month
period preceding the date of the submission to the Board of
the declaration and certification under section 4(l)(1)(C) of the
Bank Holding Company Act of 1956 may be excluded for purposes of paragraph (1) during the 12-month period beginning
on the date of such acquisition if—
‘‘(A) the bank holding company has submitted an
affirmative plan to the appropriate Federal financial supervisory agency to take such action as may be necessary
in order for such institution to achieve a rating of ‘satisfactory record of meeting community credit needs’, or better,
at the next examination of the institution; and
‘‘(B) the plan has been accepted by such agency.
‘‘(3) DEFINITIONS.—For purposes of this subsection, the following definitions shall apply:
‘‘(A) BANK HOLDING COMPANY; FINANCIAL HOLDING COMPANY.—The terms ‘bank holding company’ and ‘financial
holding company’ have the meanings given those terms
in section 2 of the Bank Holding Company Act of 1956.S. 900—14
‘‘(B) BOARD.—The term ‘Board’ means the Board of
Governors of the Federal Reserve System.
‘‘(C) INSURED DEPOSITORY INSTITUTION.—The term
‘insured depository institution’ has the meaning given the
term in section 3(c) of the Federal Deposit Insurance Act.’’.
(c) TECHNICAL AND CONFORMING AMENDMENTS.—
(1) DEFINITIONS.—Section 2 of the Bank Holding Company
Act of 1956 (12 U.S.C. 1841) is amended—
(A) in subsection (n), by inserting ‘‘ ‘depository institution’,’’ after ‘‘the terms’’; and
(B) by adding at the end the following new subsections:
‘‘(p) FINANCIAL HOLDING COMPANY.—For purposes of this Act,
the term ‘financial holding company’ means a bank holding company
that meets the requirements of section 4(l)(1).
‘‘(q) INSURANCE COMPANY.—For purposes of sections 4 and 5,
the term ‘insurance company’ includes any person engaged in the
business of insurance to the extent of such activities.’’.
(2) NOTICE PROCEDURES.—Section 4(j) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1843(j)) is amended—
(A) in each of subparagraphs (A) and (E) of paragraph
(1), by inserting ‘‘or in any complementary activity under
subsection (k)(1)(B)’’ after ‘‘subsection (c)(8) or (a)(2)’’; and
(B) in paragraph (3)—
(i) by inserting ‘‘, other than any complementary
activity under subsection (k)(1)(B),’’ after ‘‘to engage
in any activity’’; and
(ii) by inserting ‘‘or a company engaged in any
complementary activity under subsection (k)(1)(B)’’
after ‘‘insured depository institution’’.
(d) REPORT.—
(1) IN GENERAL.—By the end of the 4-year period beginning
on the date of the enactment of this Act, the Board of Governors
of the Federal Reserve System and the Secretary of the
Treasury shall submit a joint report to the Congress containing
a summary of new activities, including grandfathered commercial activities, in which any financial holding company is
engaged pursuant to subsection (k)(1) or (n) of section 4 of
the Bank Holding Company Act of 1956 (as added by subsection
(a)).
(2) OTHER CONTENTS.—The report submitted to the Congress pursuant to paragraph (1) shall also contain the following:
(A) A discussion of actions by the Board of Governors
of the Federal Reserve System and the Secretary of the
Treasury, whether by regulation, order, interpretation, or
guideline or by approval or disapproval of an application,
with regard to activities of financial holding companies
that are incidental to activities that are financial in nature
or complementary to such financial activities.
(B) An analysis and discussion of the risks posed by
commercial activities of financial holding companies to the
safety and soundness of affiliate depository institutions.
(C) An analysis and discussion of the effect of mergers
and acquisitions under section 4(k) of the Bank Holding
Company Act of 1956 on market concentration in the financial services industry.S. 900—15
SEC. 104. OPERATION OF STATE LAW.
(a) STATE REGULATION OF THE BUSINESS OF INSURANCE.—The
Act entitled ‘‘An Act to express the intent of Congress with reference
to the regulation of the business of insurance’’ and approved March
9, 1945 (15 U.S.C. 1011 et seq.) (commonly referred to as the
‘‘McCarran-Ferguson Act’’) remains the law of the United States.
(b) MANDATORY INSURANCE LICENSING REQUIREMENTS.—No
person shall engage in the business of insurance in a State as
principal or agent unless such person is licensed as required by
the appropriate insurance regulator of such State in accordance
with the relevant State insurance law, subject to subsections (c),
(d), and (e).
(c) AFFILIATIONS.—
(1) IN GENERAL.—Except as provided in paragraph (2), no
State may, by statute, regulation, order, interpretation, or other
action, prevent or restrict a depository institution, or an affiliate
thereof, from being affiliated directly or indirectly or associated
with any person, as authorized or permitted by this Act or
any other provision of Federal law.
(2) INSURANCE.—With respect to affiliations between
depository institutions, or any affiliate thereof, and any insurer,
paragraph (1) does not prohibit—
(A) any State from—
(i) collecting, reviewing, and taking actions
(including approval and disapproval) on applications
and other documents or reports concerning any proposed acquisition of, or a change or continuation of
control of, an insurer domiciled in that State; and
(ii) exercising authority granted under applicable
State law to collect information concerning any proposed acquisition of, or a change or continuation of
control of, an insurer engaged in the business of insurance in, and regulated as an insurer by, such State;
during the 60-day period preceding the effective date of
the acquisition or change or continuation of control, so
long as the collecting, reviewing, taking actions, or exercising authority by the State does not have the effect of
discriminating, intentionally or unintentionally, against a
depository institution or an affiliate thereof, or against
any other person based upon an association of such person
with a depository institution;
(B) any State from requiring any person that is
acquiring control of an insurer domiciled in that State
to maintain or restore the capital requirements of that
insurer to the level required under the capital regulations
of general applicability in that State to avoid the requirement of preparing and filing with the insurance regulatory
authority of that State a plan to increase the capital of
the insurer, except that any determination by the State
insurance regulatory authority with respect to such requirement shall be made not later than 60 days after the date
of notification under subparagraph (A); or
(C) any State from restricting a change in the ownership of stock in an insurer, or a company formed for the
purpose of controlling such insurer, after the conversion
of the insurer from mutual to stock form so long as suchS. 900—16
restriction does not have the effect of discriminating, intentionally or unintentionally, against a depository institution
or an affiliate thereof, or against any other person based
upon an association of such person with a depository
institution.
(d) ACTIVITIES.—
(1) IN GENERAL.—Except as provided in paragraph (3), and
except with respect to insurance sales, solicitation, and cross
marketing activities, which shall be governed by paragraph
(2), no State may, by statute, regulation, order, interpretation,
or other action, prevent or restrict a depository institution
or an affiliate thereof from engaging directly or indirectly,
either by itself or in con
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