Sen. Alfonse M. D'Amato unveiled legislation Tuesday that would dramatically alter the way bank securities and insurance sales are regulated.

The Senate Banking Committee chairman's bill would shift supervision of bank securities operations to the Securities and Exchange Commission. The measure also would give state regulators control over bank insurance sales and bar the Office of the Comptroller of the Currency from preempting state laws.

The bill, which might be introduced as early as today, is designed to counter recent initiatives at the Federal Reserve Board and the OCC.

The Fed in March more than doubled the amount of securities underwriting banks may conduct in a holding company subsidiary. The comptroller, in addition to giving national banks wide latitude to sell insurance, has agreed to let direct subsidiaries enter new lines of business.

Sen. D'Amato is frustrated with the banking industry's lack of support for broader financial reform legislation, according to several sources. Banks, the logic goes, may be more willing to endorse a larger bill if faced with the threat of additional regulation. Sen. D'Amato refused to comment on his plans Tuesday.

But he can be sure the industry will fight the legislation.

"From what we are hearing, this is a bill that would be strongly opposed by the banking industry," said Edward L. Yingling, chief lobbyist for the American Bankers Association.

Sen. D'Amato's bill would hand oversight of bank securities activities to the SEC, including the sale and underwriting of municipal general obligation bonds. Currently, almost all the nations' banks sell these bonds and escape SEC customer protection rules, disciplinary proceedings, and broker training requirements.

Sen. D'Amato's measure also would require:

Securities sales be conducted in a nonbank subsidiary or affiliate registered with the SEC.

SEC registration when banks advise other investment companies.

Filing of disclosure documents with the SEC instead of bank regulators.

Compliance with all state insurance laws.

His bill is aimed at the sale of securities and insurance directly by banks. Banks could continue to sell U.S. government securities without SEC oversight. Corporate securities underwriting being done through holding company section 20 units is already under SEC oversight.

Sen. D'Amato was scheduled to meet with Banking Committee Republicans late Tuesday to drum up support. Several members asked to him to back off plans to shift municipal securities sales to SEC supervision, said an aide to Sen. Lauch Faircloth, R-N.C.

Sen. D'Amato has expressed growing frustration with Comptroller Eugene A. Ludwig's efforts to expand bank insurance and securities powers. At a hearing last week, the New York Republican complained that the comptroller's actions have thwarted congressional efforts to restructure the financial services industry.

Many committee Republicans share that frustration, said Sen. Faircloth's aide. "Republicans want to send a signal," he said. "They want a financial modernization bill, and they don't want all decisions made at the regulatory level."

Sen. Christopher Dodd, D-Conn., has pledged to co-sponsor Sen. D'Amato's legislation. Sen. Dodd is one of the few Democrats who supports sweeping financial reform that would allow mergers between banks and nonfinancial firms.

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