Mo. Code Regs. tit. 20 § 1140-2.130

Current through Register Vol. 49, No. 24, December 16, 2024

Section 20 CSR 1140-2.130 - Securities Activities

PURPOSE: This rule establishes the limits within which banks may offer securities services for their customers with particular emphasis on the rules which must be followed in the interest of safety and soundness. Certain of these powers are granted to assure that state-chartered banks will remain competitive with national banks. Other powers are derived from express powers contained in the statutes.

(1) Definitions.

(A) Bank means a state-chartered bank and trust company.

(B) Commissioner means the commissioner of finance of Missouri, who is the director of the Division of Finance under section 361.010, RSMo.

(C) Discount brokerage service means those activities through which a bank facilitates the execution of securities transactions for its customers by arranging for the transmission of customer orders to a broker.

(D) Issuer means every person who issues or proposes to issue any security except that, with respect to an issue of industrial revenue bonds, the term shall include the person for whose benefit the bonds were issued.

(E) Securities services means the purchase and sale of investment securities without recourse solely upon order and for the account of customers, the underwriting of mutual funds, revenue bonds and other debt securities issued by any public or private corporation, association or partnership, offering investment advice to customers other than through a properly organized trust department and discount brokerage services.

(F) Securities subsidiary means a wholly-owned corporate subsidiary of a bank organized to engage in securities activities pursuant to this rule.

(G) Underwriting means the direct or indirect purchase of part or all of an issue of securities with a view to subsequent resale of those securities.

(2) A bank may offer securities services in accordance with the provisions of this rule only if-

(A) These securities services are offered by and through a securities subsidiary of the bank;

(B) The bank meets Division of Finance guidelines for capital adequacy; and

(C) The bank and any securities subsidiary comply with all applicable laws and regulations administered by the commissioner of finance, the Missouri commissioner of securities, the Federal Securities Exchange Commission and the Federal Deposit Insurance Corporation (FDIC).

(3) No bank may establish or own a securities subsidiary unless-

(A) The bank has first obtained the approval of the commissioner; and

(B) The securities subsidiary is-

1. Operated as a separate corporate entity with its own meetings, records and books;

2. Reasonably capitalized in view of the needs of the corporation; and

3. Operated through procedures and forms which clearly disclose that it is separate from the bank and not insured by the FDIC.

(4) No subsidiary may underwrite securities if the total amount of securities underwritten and held on behalf of an issuer, when aggregated with credit extended by the bank to or for the benefit of the issuer, would exceed the amount which the bank could lend to the issue under section 362.170, RSMo.

(5) Each securities subsidiary shall adopt and submit to the commissioner its dealing and underwriting standards setting forth the minimum standards which securities under-written, purchased and sold by the subsidiary must meet.

(6) No bank which offers securities services through a securities subsidiary may extend credit to any-

(A) Person for the purpose of enabling the person to acquire any security which is either underwritten, distributed or issued by the subsidiary or issued by any investment company advised by the subsidiary; and

(B) Issuer whose securities, at the time of the extension, are underwritten or distributed by the securities subsidiary unless the bank's board of directors gives its prior approval and states, in writing, its determination that the extension is not made to facilitate the underwriting, distribution or sale of the securities or unless the extension is made pursuant to a binding commitment entered into prior to the underwriting, distribution or sale.

(7) Notwithstanding the provisions of this rule, any bank may directly purchase and sell investment securities without recourse, solely on order and for the account of customers, offer discount brokerage services or underwrite or deal in obligations of the United States or general obligations of any state or of any political subdivision.

20 CSR 1140-2.130

AUTHORITY: sections 361.105, RSMo 1986, 362.105, RSMo Supp. 1992 and 362.170, RSMo Supp. 1989.* This rule originally filed as 4 CSR 140-2.130. Original rule filed Aug. 18, 1987, effective Nov. 12, 1987. Moved to 20 CSR 1140-2.130, effective Aug. 28, 2006.

*Original authority: 361.105, RSMo 1967; 362.105 RSMo, 1939, amended 1949, 1963, 1965, 1967, 1977, 1983, 1986, 1990, 1991, 1992; and 362.170, RSMo 1939, amended 1941, 1943, 1945, 1959, 1963, 1967, 1977, 1983, 1985, 1986, 1989.