text: SECTION 1. SHORT TITLE.
  
      This Act may be cited as the ``Derivatives and Hedge Fund 
  Regulatory Improvement Act of 2008''.
  
  SEC. 2. COORDINATED RULEMAKING.
  
      (a) Initiation of Proceedings.--Not later than 90 days after the 
  date of enactment of this Act, the appropriate Federal banking 
  agencies, in coordination with the Commission, after consultation with 
  the Secretary of the Treasury and the Commodity Futures Trading 
  Commission, shall initiate a coordinated rulemaking with respect to the 
  entities under their respective jurisdictions that engage in 
  transactions involving unregistered hedge funds or over-the-counter 
  derivatives--
              (1) to extend the requirements of regulations relating to 
          the safety and soundness of the financial system applicable to 
          mutual funds under the Investment Company Act of 1940 (15 
          U.S.C. 80a-1 et seq.) to unregistered hedge funds, including--
                      (A) requiring the fund to disclose its policies on 
                  borrowing money and requiring a shareholder vote to 
                  change such policy, as in section 5 of that Act (15 
                  U.S.C. 80a-5);
                      (B) strict record keeping and reporting rules, as 
                  in section 30 of that Act (15 U.S.C. 80a-29); and
                      (C) capital structure requirements, as in section 
                  18 of that Act (15 U.S.C. 80a-18);
              (2) to provide for the regulation of over-the-counter 
          derivatives, including credit default swaps, interest rate 
          swaps, currency swaps, mortgage-backed securities, asset-backed 
          securities, collateralized debt obligations, and other 
          derivatives that are not traded on a national securities 
          exchange or by a registered securities association, in the 
          public interest and for the protection of investors, the 
          stability of the financial markets, and the well-being of the 
          economy; and
              (3) to prohibit insured depository institutions from 
          trading derivatives for their own accounts.
      (b) Coordination, Consistency, and Comparability.--Each of the 
  agencies and authorities referred to in subsection (a) shall consult 
  and coordinate with the other such agencies and authorities for the 
  purpose of assuring, to the extent possible, that the regulations by 
  each such agency and authority are consistent and comparable with those 
  prescribed by the other such agencies and authorities.
  
  SEC. 3. SCOPE AND DEADLINE.
  
      The appropriate Federal banking agencies and the Commission shall, 
  not later than 12 months after the date of enactment of this Act, issue 
  the rules required by this Act in final form that are designed--
              (1) to avoid systemic risks to the financial markets;
              (2) to ensure safe and sound operation of banks, including 
          by requiring the maintenance of sufficient capital levels and 
          limits on aggregate leverage and establishing appropriate 
          restrictions on the buying, selling, or entering into 
          derivatives by an insured depository institution for its own 
          account; and
              (3) to provide means to prevent fraudulent, deceptive, or 
          manipulative practices.
  
  SEC. 4. AUTHORITY TO GRANT EXCEPTIONS.
  
      The regulations prescribed under this Act may allow an insured 
  depository institution to purchase, sell, or engage in traditional 
  hedging transactions or to purchase, sell, or engage in transactions 
  involving de minimus interests in derivatives for the account of that 
  institution, but only to the extent that such exceptions are consistent 
  with the safety and soundness of such institution.
  
  SEC. 5. AGENCY AUTHORITY.
  
      The rules issued under this Act shall be enforced by the 
  appropriate Federal banking agencies with respect to entities under 
  their respective jurisdictions, and by the Commission with respect to 
  any other entity that engages in transactions involving unregistered 
  hedge funds or over-the-counter derivatives.
  
  SEC. 6. DEFINITIONS.
  
      As used in this Act--
              (1) the terms ``appropriate Federal banking agency'', 
          ``Federal banking agencies'', and ``insured depository 
          institution'' have the same meanings as in section 3 of the 
          Federal Deposit Insurance Act (12 U.S.C. 1813);
              (2) the term ``Commission'' means the Securities and 
          Exchange Commission; and
              (3) the term ``derivative''--
                      (A) means any financial contract or other 
                  instrument that derives its value from the value or 
                  performance of any security or other financial 
                  instrument, or of any excluded commodity (as that term 
                  is defined in section 1a of the Commodity Exchange Act 
                  (7 U.S.C. 1a)); and
                      (B) does not include--
                              (i) any security that is traded on a 
                          national securities exchange or on an automated 
                          interdealer quotation system sponsored by a 
                          securities association registered under section 
                          15A of the Securities Exchange Act of 1934 (15 
                          U.S.C. 78o-3); or
                              (ii) any forward contract which has a 
                          maturity at a time of issuance of not longer 
                          than 270 days;
              (4) the term ``unregistered hedge fund''--
                      (A) means any pooled investment vehicle, or group 
                  or family of pooled investment vehicles, that--
                              (i) has total assets under management of 
                          not less than $1,000,000,000 or such other 
                          amount as is determined to be appropriate by 
                          the appropriate Federal banking agency and the 
                          Commission with respect to the entities under 
                          their respective jurisdictions; and
                              (ii) is excepted from the definition of an 
                          investment company by paragraph (1) or (7) of 
                          section 3(c) of the Investment Company Act of 
                          1940, or is a foreign company that would be 
                          required to obtain an order from the Commission 
                          under section 7(d) of that Act if it made a 
                          public offering of its securities by use of the 
                          mails and means or instrumentalities of 
                          interstate commerce; and
                      (B) does not include a commodity pool operator or 
                  futures commission merchant (as such terms are defined 
                  in section 1a of the Commodity Exchange Act (7 U.S.C. 
                  1a)).
target: Derivatives and Hedge Fund Regulatory Improvement Act of 2008 - Directs the appropriate federal banking agencies, with respect to the entities under their respective jurisdictions that engage in transactions involving unregistered hedge funds or over-the-counter derivatives, to initiate a coordinated rulemaking to: (1) extend to unregistered hedge funds the requirements governing the safety and soundness of the financial system applicable to mutual funds; (2) provide for the regulation of over-the-counter derivatives that are not traded on a national securities exchange or by a registered securities association (including credit default swaps, interest rate swaps, currency swaps, mortgage-backed securities, asset-backed securities, and collateralized debt obligations); and (3) prohibit insured depository institutions from trading derivatives for their own accounts.
  
  Requires the appropriate federal banking agencies and the Securities and Exchange Commission (SEC) to promulgate rules designed to: (1) avoid systemic risks to the financial markets; (2) ensure safe and sound operation of banks, including mandatory maintenance of sufficient capital levels and limits on aggregate leverage, and restrictions on buying, selling, or entering into derivatives by an insured depository institution for its own account; and (3) provide means to prevent fraudulent, deceptive, or manipulative practices.
feat_title: A bill to address the regulation of derivatives and unregistered hedge funds, and for other purposes.