§ 28-1-11-4 — Investments; deposit of funds

Indiana § 28-1-11-4

• Jurisdiction: Indiana
• Art. 1: DEPARTMENT OF FINANCIAL INSTITUTIONS
• Ch. 11: Powers of Banks and Trust Companies

Text

(a) Except as otherwise provided in this article,
the business of dealing in investment securities by any bank or trust
company is limited to purchasing and selling securities without
recourse, solely upon the order and for the account of customers and in
no event for its own account. A bank or trust company may not
underwrite or guarantee all or any part of any issue of securities other
than obligations issued or guaranteed by or on behalf of the state or any
political subdivision of the state or any agency or instrumentality of
either. A bank or trust company may purchase for its own account and
sell investment securities under such limitations and restrictions as the
department prescribes by regulation, rule, policy, or guidance, but in no
event may the total amount of the investment securities of any one (1)
obligor or maker, purchased or held by a bank or trust company for its
own account, exceed at any time ten percent (10%) of the amount of
the total equity capital of the bank or trust company. The limitations
imposed by this section do not apply to the direct or indirect obligations
of the United States or the direct obligations of a United States territory
or insular possession or of the state of Indiana or any municipal
corporation or taxing district in Indiana. A bank or trust company may
purchase for its own account and sell shares of stock in federal or state
chartered small business investment companies that have received a
permit or license to operate under the federal Small Business
Investment Act (15 U.S.C. 681). However, a bank or trust company
may not acquire shares in any small business investment company if,
upon the making of that acquisition, the aggregate amount of shares in
small business investment companies then held by the bank would
exceed five percent (5%) of its total equity capital.
(b) A bank or trust company may purchase for its own account and
sell:
(1) shares of open-end investment companies the portfolios of
which consist solely of securities that are eligible for purchase
and sale by national banking associations; and
(2) collateralized obligations that are eligible for purchase and
sale by national banking associations. However, a bank or trust
company may purchase for its own account and sell the
obligations only to the extent that a national banking association
can purchase and sell those obligations.
(c) A bank or trust company may deposit its funds in:
(1) a federally chartered savings association;
(2) a savings association or other entity organized and operated
according to federal law or the laws of any state or the District of
Columbia; or
(3) a bank organized and operated according to federal law or the
laws of any state or the District of Columbia;
the accounts of which are insured by the Federal Deposit Insurance
Corporation.
(d) A bank or trust company may not purchase for its own account
any bond, note, or other evidence of indebtedness that is commonly
designated as a security that is speculative in character or that has
speculative characteristics. For the purposes of this subsection, a
security is speculative or has speculative characteristics if at the time
of purchase the security:
(1) is rated below the first four (4) rating classes by a generally
recognized security rating service;
(2) is in default; or
(3) is otherwise considered speculative by the director.
(e) A bank or trust company may purchase for its own account a
security that is not rated by a generally recognized security rating
service if:
(1) the bank or trust company at the time of purchase obtains
financial information that is adequate to document the investment
quality of the security; and
(2) the security is not otherwise considered speculative by the
director.
(f) Except as otherwise authorized by this title, a bank or trust
company may not acquire for its own account, whether by purchase or
otherwise, any share of stock of a corporation that is not a subsidiary
of that bank or trust company unless the acquisition is considered
expedient to prevent loss from a debt previously contracted in good
faith. Any shares of stock or other ownership interest in a corporation
or another entity thus acquired by a bank or trust company and that
would not have been eligible for acquisition shall be sold and disposed
of within six (6) months from the date of acquisition unless the director
grants an extension of time for the sale and disposition.
(g) Notwithstanding any other provision of this article, a bank or
trust company may purchase for its own account shares of stock of a
banker's bank insured by the Federal Deposit Insurance Corporation or
a holding company that owns or controls a banker's bank insured by the
Federal Deposit Insurance Corporation. For the purposes of this
subsection, a "banker's bank" is a bank (as defined in IC 28-2-14-2):
(1) the stock of which is owned exclusively by other banks (as
defined in IC 28-2-14-2), or by a bank holding company the stock
of which is owned exclusively by other banks (as defined in IC 28-2-14-2); and
(2) that is engaged exclusively in providing services to other
banks (as defined in IC 28-2-14-2), and to their officers, directors,
and employees.
A bank's or trust company's holdings of the stock of an insured banker's
bank or of a holding company that owns or controls an insured banker's
bank may not exceed ten percent (10%) of the capital and surplus of
the bank or trust company. A bank or trust company may not purchase
the stock of an insured banker's bank or of a holding company that
owns or controls an insured banker's bank if, after the purchase, the
bank or trust company would own more than five percent (5%) of any
class of voting securities of the banker's bank or holding company.
(h) Notwithstanding any other provision of this article, a bank or
trust company may invest in a casualty insurance company organized
solely for the purpose of insuring banks, trust companies, and bank
holding companies and their officers and directors from and against
liabilities, including those covered by bankers' blanket bonds and
director and officer liability insurance and other public liability
insurance. The investment must take the form of:
(1) the purchase for the bank's or trust company's own account of
shares of stock of the casualty insurance company or shares of
stock of an association of banks organized for the purpose of
funding the casualty insurance company; or
(2) loans to such an association of banks.
The total investment of any bank or trust company under this
subsection may not exceed five percent (5%) of the capital and surplus
of the bank or trust company.
(i) Any bank or trust company may establish or acquire a subsidiary
that engages in:
(1) the sale, distribution, or underwriting of securities issued by
investment companies (as defined in Section 3 of the Investment
Company Act of 1940 (15 U.S.C. 80a-3); or
(2) the underwriting or distribution of securities backed by or
representing an interest in mortgages.
(j) As used in this section, "total equity capital" means unimpaired
capital stock, unimpaired surplus, unimpaired undivided profits,
subordinated debt that has been approved by the state or federal
regulatory agencies, and one hundred percent (100%) of loan reserves.
(k) The department may define an investment security by
department policy or by rule.
(l) A bank or trust company may establish a trading account for the
purchase and resale of securities that are otherwise eligible for
purchase or resale by the bank or trust company. The trading account
must comply with the requirements established by policy or rule of the
department.
(m) A bank or trust company that purchases a security for its own
account shall maintain sufficient records of the security to allow the
security to be properly identified by the department for examination
purposes.
Formerly: Acts 1933, c.40, s.173; Acts 1935, c.5, s.26; Acts
1937, c.33, s.18; Acts 1959, c.125, s.1; Acts 1965, c.356, s.10; Acts
1967, c.260, s.11; Acts 1971, P.L.394, SEC.28. As amended by
P.L.141-1984, SEC.7; P.L.265-1985, SEC.2; P.L.169-1986, SEC.1;
P.L.36-1987, SEC.8; P.L.165-1988, SEC.1; P.L.164-1988, SEC.3;
P.L.8-1991, SEC.11; P.L.42-1993, SEC.27; P.L.176-1996, SEC.12;
P.L.192-1997, SEC.4; P.L.79-1998, SEC.44; P.L.192-2003, SEC.3;
P.L.89-2011, SEC.34; P.L.27-2012, SEC.51; P.L.186-2015, SEC.29;
P.L.159-2017, SEC.31.