Utah Admin. Code R16 — Financial Institutions

R331 Administration

R331-5 Rule Governing Sale of Securities by Persons Issuing Securities, Who Are Under the Jurisdiction of the Department of Financial Institutions

Utah Admin. Code R331-5-1 Authority, Scope and Purpose

(1) This rule is issued pursuant to Sections 7-1-301(13) and 7-1-503.

(2) This rule governs the issuance, offer, offer to sell, offer for sale or sale of any security issued by a person or institution under the jurisdiction of the Department of Financial Institutions.

(3) The rule establishes uniform rules for securities offerings applicable to all persons and institutions subject to the jurisdiction of the department and minimum standards of disclosure to protect the public interest.

History

KEY: financial institutions, securities
Date of Last Change: 1995
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(13); 7-1-503; 61-1-21; 61-1-22

Utah Admin. Code R331-5-2 Definitions

(1) "Issuer" means any person under the jurisdiction of the department who issues or proposes to issue any security.

(2) "Offer, offer to sell, offer for sale or sale" means:

(a) every attempt or offer to dispose of, or solicitation of an offer to buy;

(b) every contract of sale of, contract to sell, or disposition of a security or interest in a security for value;

(c) every sale or offer of a warrant or right to purchase or subscribe to another security of the same issuer or an affiliate of the issuer, as well as every sale or offer of a security which gives the holder a present or future right or privilege to convert into another security of the same issuer or an affiliate of the issuer.

(3) "Restricted Securities" means:

(a) securities that are acquired directly or indirectly from the issuer, or from an affiliate of the issuer, in a transaction or chain of transactions not involving any public offering;

(b) securities acquired from the issuer that are subject to the resale limitations of SEC Regulation D, Rules Governing the Limited Offer and Sale of Securities Without Registration Under the Securities Act of 1933, 17 CFR 230.501-508 (1993), or securities issued pursuant to Utah Division of Securities Rule R164-14-2n, Uniform Limited Offering Exemption (1994);

(c) securities that are subject to the resale limitations of SEC Regulation D, Rules Governing the Limited Offer and Sale of Securities Without Registration Under the Securities Act of 1933, 17 CFR 230.501-508 (1993) or Utah Division of Securities Rule R164-14-2n (1994) and are acquired in a transaction or chain of transactions not involving any public offering.

(4) "SEC" means the United States Securities and Exchange Commission.

(5) "Security" means any note; stock; treasury stock; bond; debenture; evidence of indebtedness; certificate of interest or participation in any profit-sharing agreement; collateral-trust certificate; pre-organization certificate or subscription; transferable share; investment contract; voting-trust certificate; certificate of deposit for a security; or, in general, any interest or instrument commonly known as a "security," or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. The word "security" does not include:

(a) Certificates of deposit or similar instruments issued by a bank, savings and loan association, credit union, or industrial loan corporation authorized or approved by the commissioner;

(b) A loan participation, letter of credit, or other form of indebtedness incurred in the ordinary course of business by a bank, savings and loan association, credit union, or industrial loan corporation; or

(c) Promissory notes or other evidences of indebtedness, and the security therefor, leases of personal property, contracts to sell real or personal property, or other loans or investments sold by a depository institution in the secondary market.

History

KEY: financial institutions, securities
Date of Last Change: 1995
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(13); 7-1-503; 61-1-21; 61-1-22

Utah Admin. Code R331-5-3 Registration with the Department

(1) Any person under the jurisdiction of the department who issues, offers, offers to sell, offers for sale or sells any security, the issuer of which is also a person under the jurisdiction of the department, after the effective date of this rule, shall register with the department on forms as the department may require.

(2) No person may issue, offer, offer to sell, offer for sale or sell any security of which the issuer is also a person under the jurisdiction of the department, unless and until the department has provided notice to the issuer that the securities have been registered with the department and an offering circular containing, at a minimum, the information required in Rule R331-5- 4, has been approved by the department.

History

KEY: financial institutions, securities
Date of Last Change: 1995
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(13); 7-1-503; 61-1-21; 61-1-22

Utah Admin. Code R331-5-4 Offering Circular Requirements

(1) General

No person subject to the jurisdiction of the department shall issue, offer, offer to sell, offer for sale or sell, directly or indirectly, any security issued by it unless the offer or sale is made through the use of an offering circular which has been filed and declared effective pursuant to this rule.

(2) Communications not deemed an offer

The following communications shall not be deemed an offer:

(a) Prior to filing an offering circular, any notice of a proposed offering which satisfies the requirements of SEC Rule 135, Notice of Certain Proposed Offerings , 17 CFR 230.135 (1993); and

(b) Subsequent to filing an offering circular, any notice, circular, advertisement, letter, or other communication published or transmitted to any person which satisfies the requirements of SEC Rule 134, Communications Not Deemed a Prospectus , 17 CFR 230.134 (1993).

(3) Preliminary offering circular

A preliminary offering circular may be used prior to the effective date of the offering circular if:

(a) The preliminary offering circular has been filed pursuant to this rule;

(b) The preliminary offering circular includes the information required by this rule, except for the information relating to offering price, discounts or commissions, amount of proceeds, conversion rates, call prices, or other matters dependent on the offering price; and

(4) Form and Content

Any offering circular or amendment filed pursuant to this rule shall comply with the information requirements of Section (b) of the Securities and Exchange Commission Rule 502, General Conditions to be Met, 17 CFR 230.502 (1993).

(5) Number of Copies

Any filing shall include three copies of each document to be filed with the department. After the effective date of an offering circular, an offering circular which varies from the form previously filed shall not be used, unless it includes only non- material supplemental or additional information and until three copies have been filed with the department.

(6) Effective Date

An offering circular filed with the department is effective on the tenth day after filing. Upon request, the commissioner may declare an earlier effective date if he is satisfied that the offering circular is adequate and that the earlier effective date does not materially prejudice any party in interest. Exceptions include:

(a) If any amendment is filed prior to the effective date, the offering circular shall be deemed to have been filed when such amendment was filed;

(b) If a duly authorized amendment, telegram confirmed in writing, or letter states that the effective date is delayed until a further amendment is filed stating specifically that the offering circular will become effective in accordance with this paragraph; or

(c) If it appears to the department at any time that the offering circular is incomplete or inaccurate in any material respect, the department may determine to declare the offering circular not effective until a materially complete and accurate amendment is filed.

(7) Use of the offering circular

(a) An offering circular or amendment declared effective by the department shall not be used more than nine months after the effective date, unless the information contained therein is as of a date not more than sixteen months prior to such use.

(b) An offering circular filed under this rule shall not extend the period for which an effective offering circular or amendment may be used under Subsection (c).

(c) No offering circular shall be used and no offer or sale of securities subject to the offering circular requirements of this department shall be made subsequent to any material change in an issuer's business operations or financial condition, until the offering circular has been amended to include information as to the material changes and the amended offering circular has been filed with and declared effective by the department.

(8) Withdrawal or abandonment

(a) Any offering circular, amendment, or exhibit may be withdrawn prior to the effective date. A withdrawal shall be signed and state fully the grounds upon which it is made. Any documents withdrawn will not be removed from the files of the department, but will be marked "Withdrawn upon the request of the issuer on (date)."

(b) When an offering circular or amendment has been on file with the department for a period of nine months and has not become effective the department may, in its discretion, determine whether the filing has been abandoned, after notifying the issuer that the filing is out of date and must either be amended to comply with the applicable requirements of this rule or be withdrawn within 30 days after the date of such notice. Where a filing is abandoned, the documents will not be removed from the files of the department, but will be marked "Declared abandoned by the department on (date)."

History

KEY: financial institutions, securities
Date of Last Change: 1995
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(13); 7-1-503; 61-1-21; 61-1-22

Utah Admin. Code R331-5-5 Securities Sale Report

Within ten days after the termination of an offering pursuant to this rule, the issuer shall file a report with the department describing the sale of its securities which shall include:

(1) The name and address of the issuer;

(2) The title, number, aggregate and per-unit offering price of the securities sold;

(3) The aggregate and per-unit dollar amounts of actual itemized expenses, discounts or commissions, and other fees;

(4) The aggregate and per-share dollar amounts of the net proceeds raised; and

(5) The number of purchasers of each class of securities sold and the number of beneficial owners of each class of the issuer's equity securities at the termination of the offering.

History

KEY: financial institutions, securities
Date of Last Change: 1995
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(13); 7-1-503; 61-1-21; 61-1-22

Utah Admin. Code R331-5-6 Limitations on Resale of "Restricted Securities"

(1) "Restricted Securities" acquired in a transaction pursuant to this rule, shall not be resold or otherwise disposed of for a period of two years without the prior written consent of the department. The issuer shall exercise reasonable care to ensure that the purchasers of the securities are not purchasing for resale or distribution.

(2) Reasonable care shall include the following:

(a) Reasonable inquiry to determine if the purchaser is acquiring the securities for himself or for other persons;

(b) Written disclosure to each purchaser prior to sale that the securities cannot be resold or otherwise disposed of for a period of two years without the prior written consent of the department;

(c) Placement of a legend on the certificate or other document that evidences the securities which states that: "The securities evidenced by this certificate are restricted as to transfer for a period of two years from the date of this certificate pursuant to the rules of the Utah Department of Financial Institutions and may not be sold or otherwise disposed of without the prior written consent of the department";

(d) The determination of the period securities have been held after acquisition for the purposes of this Section shall be made as would be determined under the provisions of the SEC Rule 144(d), Holding Period for Restricted Securities, 17 CFR 230.144(d); and

(e) Where securities of the issuer are exchanged for other securities in any business combination, securities of the issuer which are restricted under this Section may be exchanged for other securities which are similarly restricted and have the legend required by Subsection (c), and the holding periods may run concurrently.

History

KEY: financial institutions, securities
Date of Last Change: 1995
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(13); 7-1-503; 61-1-21; 61-1-22

Utah Admin. Code R331-5-7 Remuneration Paid for Solicitation or for Sales

No commission or similar remuneration shall be paid or given directly or indirectly for soliciting any prospective investor or in connection with the offer or sale of the securities in reliance on this rule unless such commission or similar transaction-related remuneration is paid or given to a broker-dealer licensed pursuant to Section 61-1-4 or an issuer's agent licensed to sell as an agent of this issuer pursuant to Section 61-1-4.

History

KEY: financial institutions, securities
Date of Last Change: 1995
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(13); 7-1-503; 61-1-21; 61-1-22

Utah Admin. Code R331-5-8 Manipulative and Deceptive Devices

(1) In any offer, purchase, or sale in connection with an issuer's offering of its securities, under this rule, no person, directly or indirectly, shall:

(a) Employ any device, scheme, or artifice to defraud;

(b) Make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, or make any misleading statement; or

(c) Engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.

(2) All documents used in connection with an issuer's offering of securities including, but not necessarily limited to, written promotional materials, offering circulars, and reports of financial condition furnished to prospective purchasers must be accurate and contain no material misstatements or omit to state facts necessary in order to make the statement not misleading.

(3) No person is authorized to make any statement not contained in the disclosure statement.

History

KEY: financial institutions, securities
Date of Last Change: 1995
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(13); 7-1-503; 61-1-21; 61-1-22

Utah Admin. Code R331-5-9 Waiver

The department may waive any or all of the requirements of this rule or the filing of any required information if:

(1) the department determines the requirements or information is unnecessary; or

(2) the issuer is subject to supervisory actions of the commissioner.

History

KEY: financial institutions, securities
Date of Last Change: 1995
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(13); 7-1-503; 61-1-21; 61-1-22

Utah Admin. Code R331-5-10 Penalties for Violation

Penalties for the violation of this rule shall be the same as those imposed by the provisions of Sections 61-1-21 and 61- 1-22.

History

KEY: financial institutions, securities
Date of Last Change: 1995
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(13); 7-1-503; 61-1-21; 61-1-22

R331-7 Rule Governing Leasing Transactions by Depository Institutions Subject to the Jurisdiction of the Department of Financial Institutions

Utah Admin. Code R331-7-1 Authority, Scope and Purpose

(1) This rule is issued pursuant to Sections 7-1-301(15), and 7-1-501.

(2) This rule applies to all depository institutions and their subsidiaries subject to the jurisdiction of the Department of Financial Institutions.

(3) The purpose of this rule is to clarify acceptable employment of deposits and other funds involved in leasing or leasing related transactions.

History

KEY: financial institutions, leases
Date of Last Change: March 9, 2012
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(4); 7-1-301(8)(a); 7-1-501

Utah Admin. Code R331-7-2 Definitions

(1) "Affiliate" means any company under common control with the depository institution excluding any subsidiary.

(2) "Assigned lease" means a lease having all of the following characteristics:

(a) Residual dependence greater than 5% of original equipment cost;

(b) Originated by a lessor - assignor who subsequently assigned its rights or sold a participation in the lease, payments, or ownership rights to the depository institution - assignee;

(d) The depository institution may or may not have recourse to the assignor in addition to lessee recourse;

(e) The assigned lease is accounted for in accordance with R331-7-9.

(3) "Bargain call purchase option" means a written call purchase option which is a lessee option to purchase the asset as contrasted with a put purchase option which is a lessor right to force the lessee to purchase the asset. An option is considered a bargain if at the inception of the lease the purchase option exercise price is considered to be significantly less than the expected future fair market value of the property at the time the option becomes exercisable.

(4) "Capital lease vs. operating lease" means if at its inception a lease meets one or more of the (a) through (d) criteria and both of the (e) and (f) criteria, the lease shall be classified as a sales-type capital lease or a direct-financing capital lease, whichever is appropriate, by the lessor. Otherwise, it shall be classified as an operating lease.

(a) The lease automatically transfers ownership of the property to the lessee during or by the end of the lease term.

(b) The lease contains a bargain call purchase option.

(c) The lease term is equal to 75% or more of the estimated economic life of the leased property. However, if the beginning of the lease term falls within the last 25% of the total estimated economic life of the leased property, including earlier years of use, this criterion shall not be used for purposes of classifying the lease.

(d) The present value at the beginning of the lease term of the minimum lease payments, excluding that portion of the payments representing executory costs to be paid by the lessor, including any profit thereon, equals or exceeds 90% of the excess of the fair value of the leased property to the lessor at the inception of the lease over any related investment tax credit retained by the lessor and expected to be realized by him.

(i) However, if the beginning of the lease terms falls within the last 25% of the total estimated economic life of the leased property, including earlier years of use, this criterion shall not be used to classify the lease.

(ii) A lessor shall compute the present value of the minimum lease payments using the interest rate implicit in the lease.

(e) The collectability of the minimum lease payments shall be reasonably predictable. A lessor shall not be precluded from classifying a lease as a sales-type lease or as a direct financing lease simply because the receivable is subject to an estimate of uncollectability based on experience with groups of similar receivables.

(f) No important uncertainties surround the amount of unreimbursable costs yet to be incurred by the lessor under the lease. Important uncertainties might include commitments by the lessor to guarantee performance of the leased property in a manner more extensive than the typical product warranty or to effectively protect the lessee from obsolescence of the leased property. However, the necessity of estimating executory costs to be paid by the lessor shall not by itself constitute an important uncertainty as referred to herein.

(5) "Company" means a corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization or any form of business entity.

(6) "Control" means control as defined in Section 7-1-103.

(7) "Department" means the Department of Financial Institutions.

(8) "Depository institution" means depository institution as defined in Section 7-1-103, and any subsidiary.

(9) "Direct financing lease" means a capital lease other than a leveraged lease that does not give rise to a dealer's profit or loss to the lessor but that meets one or more of the first four criteria and both criteria (e) and (f) in Subsection (4) above. In a direct financing lease, the cost and fair market value of the leased property is the same at the inception of the lease.

(10) "FASB 13" means the Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No. 13, Accounting for Leases, as amended, which outlines the required accounting procedures for accounting for leases by a lessor and is incorporated by reference. Other statements by the FASB, which are incorporated by reference, concerning leasing shall similarly be referred to by number such as "FASB 17" which defines initial direct costs of a lessor.

(11) "Gross investment in the lease" means the aggregate of the total minimum lease payments receivable and the unguaranteed residual in the lease.

(12) "Implicit interest rate" means the discount interest rate in a lease which when applied to the minimum lease payments, excluding that portion of the payments representing executory costs to be paid by the lessor, together with any profit thereon, and the unguaranteed residual value accruing to the benefit of the lessor, causes the aggregate present value at the beginning of the lease term to be equal to the fair value of the leased property to the lessor at the inception of the lease, minus any investment tax credit retained by the lessor and expected to be realized by him. This definition does not necessarily purport to include all factors that a lessor might recognize in determining his rate of return.

(13) "Leveraged lease" means a lease having all of the following characteristics:

(a) The lease involves at least three parties: a lessee, a long-term non-recourse creditor, and a lessor, commonly called the equity participant. A depository institution could be either the long-term non-recourse creditor or the equity participant;

(b) The financing provided by the long-term non-recourse creditor is non-recourse as to the general credit of the lessor although the creditor may have recourse to the specific property leased and the unremitted rentals relating to it. The amount of the non-recourse financing is sufficient to provide the lessor with substantial "leverage" in the transaction;

(c) Except for the exclusion of leveraged leases from the definition of a direct financing lease as set forth in R331-7- 2(9), the lease otherwise meets the direct financing lease definition. A participation in a net, limited residual dependent lease purchased by a depository institution and a lease that meets the definition of a sales-type lease set forth in R331-7-2(4) shall not be considered a leveraged lease.

(14) "Limited residual dependent" means a lease from which the lessor can reasonably expect to realize a return of its investment in the leased property, plus the estimated cost of financing the property over the term of the lease, plus a reasonable profit, all of which are derived from:

(a) Lease rental payments;

(b) Estimated tax benefits; and

(c) The limited in amount estimated residual value of the property at the expiration of the initial non-cancelable term of the lease. The degree to which a depository institution may depend upon residual value to derive a profit from a lease transaction is subject to certain residual dependence restrictions set forth at Rule R331-7-4(1).

(15) "Minimum lease payments" means the minimum payments received on a lease which include any or all of the following:

(a) Guaranteed residual value by lessee or related party whether or not title transfers;

(b) Basic rentals during the non-cancelable lease term;

(d) Bargain call purchase options;

(e) Purchase option puts whether bargain or not;

(f) Third party residual guarantee, excluded by lessee as a criterion;

(g) Non-renewal penalties; and

(h) Unguaranteed residuals, including non-bargain purchase options, are excluded from minimum lease payments.

(16) "Net investment in the lease" means the gross investment less the unearned income.

(17) "Net lease" means a lease under which the depository institution will not directly provide or be obligated to provide for:

(a) The servicing, repair, or maintenance of the leased property during the lease term; however, the depository institution shall not be precluded from offering these same "full-service" benefits indirectly by subcontracting such service, repair, or maintenance to independent sub-contracting firms provided that such firms have the resources to meet the terms of the service contract;

(b) The purchasing of parts and accessories for the leased property, provided however, that improvements and additions to the leased property may be leased to the lessee upon its request in accordance with the net, limited residual dependence requirements;

(c) The loan of replacement or substitute property while the leased property is being serviced or repaired unless such loan or substitution of property is provided by an independent firm whose loan or replacement services have been subcontracted;

(d) The purchasing of insurance for the lessee, except where the lessee has failed in its contractual obligation to purchase or maintain the required insurance;

(e) The renewal of any license or registration for the property unless such action by the depository institution is necessary to protect its interest as an owner or financier of the property.

(18) "Non-tax lease" means a lease wherein the depository institution as a lessor does not receive the tax benefits of ownership of the leased property, and the residual dependence of the lessor is greater than 5% of the cost of the property.

(19) "Purchase option put" means a lessor right to force the lessee to purchase the asset.

(20) "Residual" means a residual payment or residual value in a lease which is represented by any of the following:

(a) A fixed purchase option fixed either as a dollar amount or as a percentage of cost of the leased property;

(b) A guaranteed residual where the residual value is guaranteed by the lessee, a third party, or the manufacturer or vendor;

(c) A fair market value purchase option where the option price is determined at the end of the lease based on the prevailing appraised market value;

(d) An unguaranteed residual such as in a closed end lease where the property reverts back to the lessor at the end of the lease term at which time the lessor has no guarantee as to the value of the property upon resale or release of the property. Fixed call purchase options that are not considered "bargain" will also be referred to as unguaranteed residuals.

(21) "Residual dependence" means depending upon residual value, including rentals and tax benefits, in a lease transaction in order to earn a required profit, recoup original capital investment, and cover financing costs. Full payout leases do not depend upon residual for profit whereas residual dependent leases do.

(22) "Sales-type lease" means a capital lease that gives rise to dealer's profit or loss to the lessor, in other words, the fair value of the leased property at the inception of the lease is greater or less than its cost, and that meets one or more of the criteria (a) through (d) and both criteria (e) and (f) in R331-7-2(4).

(a) Normally, a sales-type lease will arise when the depository institution acts as a dealer using leasing as a means of improving profit margins. Leases involving lessors that are primarily engaged in financing operations normally will not be sales-type leases if they qualify under R331-7-2(4), but will most often be direct financing leases, as described in R331-7-2(9).

(b) However, a lessor need not be a dealer to realize dealer's profit or loss on a transaction. For example, if a lessor, who is not a dealer, leases an asset that at the inception of the lease has a fair value that is greater or less than its cost or carrying amount, if different, such a transaction is a sales-type lease, assuming the criteria referred to are met.

(23) "Subsidiary" means subsidiary as defined in Section 7-1-103.

(24) "Tax lease" means a lease where the depository institution as a lessor is construed to be the tax owner of the property for income tax purposes and thereby receives the tax benefits of ownership including tax credits and depreciation, and the residual dependence of the lessor is greater than 5% of the cost of the property.

(25) "Total Capital" means the sum of capital stock, surplus, undivided profits, reserve for contingencies, reserves for loan losses, and subordinated notes and debentures with more than one year maturity.

(26) "Unearned income" means the difference between the gross investment in the lease and the cost or carrying amount, if different, of the leased property. Unearned income shall be increased by any deferral of the investment tax credit or any other tax credits and decreased by any initial direct costs incurred on direct financing leases.

(27) "Unguaranteed residual value" means the estimated residual value of the leased property exclusive of a portion guaranteed by the lessee, by any party related to the lessee or by a third party unrelated to the lessor. If the guarantor is related to the lessor, the residual value shall be considered as unguaranteed.

(28) "Used property" means property which has been in use for 90 days or more.

History

KEY: financial institutions, leases
Date of Last Change: March 9, 2012
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(4); 7-1-301(8)(a); 7-1-501

Utah Admin. Code R331-7-3 Acceptable Leases and Leasing Transactions for Depository Institutions

(1) A depository institution may enter into or purchase a participation in net, limited residual dependent leases wherein the depository institution:

(a) Becomes the legal or beneficial owner and lessor of specific real or personal property or otherwise acquires such property at the request of a lessee who wishes to lease it from the depository institution; or

(b) Becomes the owner and lessor of real or personal property by purchasing the property from another lessor in connection with its purchase of the related lease; and

(c) Incurs obligations incidental to its position as the legal or beneficial owner and lessor of the leased property, if the lease is a net, limited residual dependent lease representing a non-cancelable obligation of the lessee, notwithstanding the possible early termination of that lease; or

(d) Becomes the assignee of the lease payments from another lessor where the depository institution is not the legal owner or tax owner of such property.

(2) This rule shall apply to any tax lease, non-tax lease, or assigned lease irrespective of whether the depository institution funded such lease or assignment with deposits or private funds, debt or equity.

(3) The classification of whether this rule applies to any lease and the related terminology should not be confused with other accounting or tax terminology; but should be applied only for the purposes of this rule. Any depository institution and especially any savings and loan association should consult its tax accountant before entering into any lease transaction.

(4) A depository institution, when acting as a lessor of property, may assign leases to a third party funding source. A depository institution shall be considered an assignor of lease payments, residual of assigned leases, or both, if after entering into a lease as a lessor of property, it then borrows against the lease payments, residual, or both, by assigning them to another funding source. A depository institution shall be considered an assignee of lease payments, residual of assigned leases, or both, if another lessor assigns the lease payments, residual, or both, of its own lease to the depository institution in order to fund the lease.

History

KEY: financial institutions, leases
Date of Last Change: March 9, 2012
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(4); 7-1-301(8)(a); 7-1-501

Utah Admin. Code R331-7-4 Residual Dependence Restrictions for Depository Institutions

(1) The residual dependence by a depository institution as a lessor of property on leases other than leases with terms of 24 months or less or automobiles and small trucks of one ton or less shall not exceed 30% of the acquisition cost of the property to the lessor unless the estimated residual value is guaranteed by a manufacturer of such property, or by a third party which is not an affiliate of the depository institution and the depository institution makes the determination that the guarantor has the resources to meet the guarantee.

(a) Any such guarantee of residual value by a third party is to be considered in addition to the requirement that the unguaranteed residual value estimate shall not exceed 30% of the acquisition cost of the property.

(b) However, the combined total of the 30% unguaranteed residual value and the guaranteed residual value may not exceed 50% of the leased property's acquisition cost without the prior written approval of the commissioner.

(2) In all cases, however, both the estimated residual value of the property and that portion of the guaranteed residual value relied upon by the lessor to satisfy the requirements of a limited residual dependent lease must be reasonable in light of the nature of the leased property and all relevant circumstances so that realization of the lessor's full investment plus the cost of financing the property primarily depends on the credit worthiness of the lessee and any guarantor of the residual value, and only secondarily on the residual market value of the leased property.

History

KEY: financial institutions, leases
Date of Last Change: March 9, 2012
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(4); 7-1-301(8)(a); 7-1-501

Utah Admin. Code R331-7-5 Salvage Powers for Depository Institutions

(1) If, in good faith, a depository institution believes that there has been an unanticipated change in conditions which threatens its financial position by significantly increasing its exposure to loss, the provisions of this rule shall not prevent the depository institution:

(a) As the owner, lessor, or both, under a net, limited residual dependent lease from taking reasonable and appropriate action to salvage or protect the value of the property or its interest arising under the lease;

(b) As the assignee of a lessor's interest in a lease, from becoming the owner and lessor of the leased property pursuant to its contractual right, or from taking any reasonable and appropriate action to salvage or protect the value of the property or its interest arising under the lease;

(c) Upon return of the leased property by the lessee to the depository institution at the expiration of the lease term or at any other time that the depository institution has possession of the property upon default by the lessee; the depository institution in order to avoid the cost and inherent liability of maintaining the property and to recoup its investment in the lease plus financing costs shall:

(i) Sell the property;

(ii) Release the property by entering into a new and separate net, limited residual dependent lease with a lessee;

(iii) Rent the property in which case the depository institution may be required to maintain the property in suitable condition to be used by another party on a rental basis. Such maintenance must be performed by an independent firm on a sub- contract basis only;

(iv) Transfer the property to a separately identified holding or repossessed property account within the depository institution.

(2) The provisions of this section do not prohibit a depository institution from including any provisions in a lease, or from making any additional agreements to protect its financial position or investment in the circumstances.

History

KEY: financial institutions, leases
Date of Last Change: March 9, 2012
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(4); 7-1-301(8)(a); 7-1-501

Utah Admin. Code R331-7-6 Sales-Type Capital Lease Restrictions for Depository Institutions

(1) Within the limitations of this rule, a depository institution, as lessor, shall be permitted to enter into a sales-type capital lease. Although a depository institution shall be allowed to earn a gross profit in a lease transaction in addition to interest income from the rentals and residual, it shall be precluded from inventorying property except for sample or display purposes.

(2) Although many equipment manufacturers and vendors require their dealers to inventory products prior to sale in order for the depository institution to be allowed to receive a wholesale price or comparable discount, the inventory of equipment prior to leasing the equipment is not permitted.

(3) A depository institution may purchase or acquire property in a direct lease situation only in response to a lessee's request for that specific property and any gross profit derived from volume discounts shall be accounted for separately from the lease.

History

KEY: financial institutions, leases
Date of Last Change: March 9, 2012
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(4); 7-1-301(8)(a); 7-1-501

Utah Admin. Code R331-7-7 Sale-Leaseback Restrictions for Depository Institutions

A depository institution acting as a lessor may lease used property in a sale-leaseback transaction provided that:

(1) The aggregate of the total net investment in such sale-leaseback transactions, at any point, in time does not exceed 50% of the depository institution's total capital; and

(2) The sale-leaseback transactions are separately identified.

History

KEY: financial institutions, leases
Date of Last Change: March 9, 2012
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(4); 7-1-301(8)(a); 7-1-501

Utah Admin. Code R331-7-8 Leveraged Lease Restrictions for Depository Institutions

(1) Due to increased risk inherent in leveraged leasing, a depository institution may invest as a lessor in a leveraged lease provided that:

(a) The aggregate of such leveraged leases does not exceed 30% of the depository institution's total capital at any point in time; and

(b) The leveraged leases are separately identified.

(2) A depository institution shall not enter into a leveraged lease as a lessor, equity-participant unless the inherent tax benefits are useable by the depository institution.

(3) This rule does not preclude a depository institution from purchasing non-recourse interests in leveraged lease pools or joint ventures, provided that:

(a) The aggregate of such participations or interests does not exceed 30% of the depository institution's total capital; and

(b) The participations or interests are separately identified.

History

KEY: financial institutions, leases
Date of Last Change: March 9, 2012
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(4); 7-1-301(8)(a); 7-1-501

Utah Admin. Code R331-7-9 Accounting Requirements for Depository Institutions

(1) The following restrictions and procedures shall be adhered to by a depository institution in accounting and reporting for acceptable leases and leasing transactions whether the depository institution is the assignor or the assignee. All other accounting and reporting procedures concerning leasing not covered by this rule shall be in accordance with generally accepted accounting principles as promulgated by the FASB, as amended.

(a) As lease payment revenue is received by the depository institution under a direct financing or sales-type capital lease, the lease payments shall be amortized or allocated between principal and interest income actuarially using the effective interest method over the lease term. A depository institution shall be precluded from using other approximations to the effective interest method such as the "Rule of 78's" method of amortizing lease payments.

(b) In accounting for a capital lease whether a sales-type or direct financing lease, a depository institution shall record the gross investment in the lease on the balance sheet allocated into its two components:

(i) Total minimum lease payments receivable; and

(ii) Unguaranteed residuals.

(c) The difference between the gross investment in the lease and the cost or carrying amount, if different, of the leased property shall be recorded as unearned income. Such unearned income shall be increased by any deferral of the investment tax credit or any other tax credits if the lessor elects deferral or if deferral is required by generally accepted accounting principles and decreased by any initial direct costs incurred on direct financing leases.

(d) Initial direct costs are limited to those costs incurred by the lessor that are directly associated with negotiating and consummating completed leasing transactions. Those costs include commissions, legal fees, cost of credit investigations, and costs of preparing and processing documents for new leases acquired.

(i) In addition, that portion of salespersons' compensation, other than commissions, and the compensation of other employees that is applicable to the time spent in the activities described above with respect to completed leasing transactions shall also be included in initial direct costs. That portion of salespersons' compensation and the compensation of other employees that is applicable to the time spent in negotiating leases that are not consummated shall not be included in initial direct costs.

(ii) No portion of supervisory and administrative expenses or other indirect expenses, such as rent and facilities cost, shall be included in initial direct costs.

(iii) In order to prevent initial overstatement by a depository institution of reported earnings and subsequent understatement of reported earnings throughout the remainder of the lease term, the depository institution shall not recognize initial direct costs in excess of 8% of the unearned income for leases which cost less than $10,000 at their inception; or initial direct costs in excess of 6% of the unearned income for leases which cost $10,000 or more at the inception of the lease. Initial direct costs shall include all costs directly attributable to consummating a lease as defined above.

(e) In accounting for the amount of initial direct costs associated with consummated direct financing capital leases, a depository institution is not required to treat as an initial direct cost the estimate of bad debt expense pertaining to a lease subject to the limitations of R331-7-9(d)(iii) which limits the maximum amount of initial direct costs.

(f) At any time during the lease term when it has been determined by a depository institution that there has been an impairment of the estimated residual value as initially recorded then such impairment of value shall be recognized in the period that the impairment of value has been determined.

(i) Any such impairment of guaranteed or unguaranteed residual value shall be recognized by a debit charge to income and a corresponding credit reduction to the unearned residual component of the gross investment in the lease.

(ii) A new implicit rate is to be computed for the lease using the reduced residual value and any remaining unearned income is to be recognized actuarially over the remaining lease term using the newly computed implicit rate.

(g) Differences between reported accounting net income for book purposes of a depository institution and its taxable income for the same period caused by the application of different accounting principles such as depreciation methods; or differences in how revenue is recognized; or because of any other timing differences, shall be shown in the depository institution's financial statements as a deferred tax credit or charge as required by interperiod tax allocation procedures explained in Accounting Principles Board Opinion No. 11, Accounting for Income Taxes, as amended, which is incorporated by reference.

(2) The following restrictions and procedures shall be adhered to by a depository institution in accounting and reporting for assigned leases whether the depository institution is the assignor or the assignee.

(a) A depository institution, after having entered into a lease as a lessor, may assign the lease payment stream to a third party in order to fund the lease. To such an assignment, the depository institution becomes the assignor.

(i) If the assignment is non-recourse to the depository institution any profits or loss on the assignment shall be recognized at the time of the transaction except when the assignment is between related parties. The profit or loss is the difference between the net investment in the assigned lease and the loan funds received from the lender.

(ii) If the assignment is recourse to the depository institution or if it is non-recourse but between related parties, both the lease and the related loan should be shown separately in the financial statements of the depository institution.

(iii) The lease shall be shown on the balance sheet by recording the gross investment in the lease receivable and the unearned income account relating to the lease. The net of these two accounts represents the net investment in the lease. The gross investment in the lease receivable shall be further allocated and shown in the financial statements in its two separate components:

(A) Minimum lease payments, and

(B) Residual.

(b) A depository institution which has funded a lease originated by another lessor and taken an assignment of the lease may have funded the lease on either a recourse or a non-recourse basis to the lessor. In either case, the assignment shall be regulated by this rule only if the residual dependence is greater than 5% of the cost of the leased property, in which case the assignment shall be accounted for as described in R331-7-9(2)(a) above. If the residual dependence is equal to or less than 5% of the cost of the leased property then such assignment shall not be regulated by this rule and shall be accounted for as a loan.

(3) The following restrictions and procedures shall be adhered to by a depository institution in accounting and reporting for operating leases:

(a) Leases other than sales-type, direct financing, or leveraged capital leases are classified as operating leases.

(b) Revenue in an operating lease shall be recognized in conformity with FASB 13 paragraph 19.b.

(4) Accounting for leveraged leases, sale-leasebacks, and real estate sales shall be in conformity with FASB 13 procedures:

(a) Leveraged leases, FASB 13 paragraphs 41-47;

(b) Sale-leasebacks, FASB 13 paragraphs 32-34;

History

KEY: financial institutions, leases
Date of Last Change: March 9, 2012
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(4); 7-1-301(8)(a); 7-1-501

R331-9 Rule Prescribing Rules of Procedure for Hearings Before the Commissioner of Financial Institutions of the State of Utah

Utah Admin. Code R331-9-1 Authority, Scope, and Purpose

(1) This rule is adopted pursuant to Sections 7-1-301 and 7-1-309.

(2) This rule will apply to administrative hearings conducted before the Commissioner or his designee.

History

KEY: financial institutions, government hearings
Date of Last Change: 1995
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301; 7-1-309

Utah Admin. Code R331-9-2 Definitions

(1) "Commissioner" means the Commissioner of Financial Institutions.

(2) "Department" means the Department of Financial Institutions.

(3) "Interested party" means a party who may be affected by the outcome of any proceeding but who, in the case of a dispute or adjudicative hearing, is not named as a party or does not seek to participate as a named party.

(4) "Party" shall mean the same as a "person" as defined in Section 7-1-103, and shall also include any governmental subdivision or agency.

(5) "Proceeding" shall mean any hearing, whether formal or informal, before the Commissioner or his designee and any and all required and permitted actions precedent thereto.

(6) "U.R.C.P." means the Utah Rules of Civil Procedure.

History

KEY: financial institutions, government hearings
Date of Last Change: 1995
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301; 7-1-309

Utah Admin. Code R331-9-3 Commissioner's Discretion to Commence Hearings

(1) Except when required by statute, the commissioner shall have sole and complete discretion as to whether any kind of hearing procedure shall be employed in connection with any matter pending before the department.

(2) Nothing in this rule shall be construed as creating any right to a hearing on any matter apart from those rights separately conferred by statute or required by due process of law.

History

KEY: financial institutions, government hearings
Date of Last Change: 1995
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301; 7-1-309

Utah Admin. Code R331-9-4 Types of Hearing

All hearings conducted before the commissioner or his designee shall be classified in one of the following categories:

(1) Comment Hearing.

This type of hearing is generally characterized as one where:

(a) The primary purpose for the hearing is to receive information and comments from interested parties concerning a particular subject pending in the department.

(b) Witness statements are unsworn, voluntary and normally delivered in a narrative manner subject to no restriction on the content of the statement except that it be relevant to the matter being heard.

(d) The presentation of evidence may be subject to time restrictions both as to the length of individual statements and the number of statements that can be made.

(e) The hearing is always public.

(2) Dispute Hearing.

This type of hearing is generally characterized as one where:

(a) The primary purpose is to receive and examine evidence concerning a disputed application or other discretionary matter pending before the department.

(b) The burden of proof is upon the party requesting the approval of the matter at issue.

(c) All testimony is taken under oath and subject to cross-examination but the evidence itself is generally not restricted except as to relevancy.

(d) The hearing is usually public, but may be closed when special circumstances warrant.

(3) Adjudicative Hearing.

This type of hearing is generally characterized as one where:

(a) The primary purpose is to adjudicate specific charges directed against an individual party or parties.

(b) Evidence is received generally in accordance with rules patterned on those applicable to the admission of evidence and the conduct of trials in the judicial courts of this state.

(c) No time restriction is imposed which would deprive any party of an opportunity to present all proper evidence in the case.

(d) The hearing may be closed to the public and the record treated confidentially.

(4) The commissioner shall have complete discretion to designate a particular hearing as being for comment, dispute, or adjudicative purposes, and shall so indicate in the first notice of the hearing. Any party to the hearing or, in the case of a comment hearing, any interested party who disagrees with the commissioner's classification may file a motion to change the designation of the hearing from one type to the other within ten days after public notice of a comment hearing is first published, or notice of a dispute or adjudicative proceeding is first mailed to a party to the proceeding who objects to its designation, whichever applies.

History

KEY: financial institutions, government hearings
Date of Last Change: 1995
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301; 7-1-309

Utah Admin. Code R331-9-5 Commencement of Proceedings

(1) Comment Hearing.

Proceedings incident to a comment hearing shall be commenced by the department issuing public notice of the hearing. The notice shall specify:

(a) The subject matter of the hearing,

(b) That it is to be a comment hearing,

(d) The person or persons who will preside at the hearing, and

(e) Any special provisions or requirements concerning the hearing such as advance notice by any party wishing to speak at the hearing or limits on speaking time.

(2) Dispute Hearing.

(a) A dispute hearing shall be commenced by issuing Notice to the party which filed the application or request at issue and to any party or parties that may have protested or otherwise objected to the same prior to issuance of the Notice.

(b) The Notice shall specify the matters relating to the application or request which are in dispute and advise the party who filed the application or request that it will have the initial burden at the hearing of showing that the application or request should be granted.

(3) Adjudicative Hearing.

(a) An adjudicative hearing shall be commenced when the department issues Notice to the parties named in the proceeding.

(b) If a party to a hearing refuses to sign an acknowledgment of having received a copy of a Notice then such Notice shall be served upon the party in the manner prescribed for service of process in Rule 4 of the U.R.C.P. If personal service is not possible then the commissioner upon motion may authorize alternative forms of service similar to those specified in Rule 4 of the U.R.C.P. If a party resides out of state and cannot be served in this state, a copy of the Notice may be mailed to the party at the party's last known address by certified mail without having to obtain an order from the commissioner.

(i) The names of all individual parties to the proceeding.

(ii) A reasonably specific description of the department's allegations against each of the named parties.

(iii) A reasonably specific description of any and all actions the department intends to take against each named party with respect to the matters alleged.

(iv) A statement that within 30 days following service of the department's Notice each party must file an Answer specifically admitting or denying the department's allegations and separately describing in reasonable detail any affirmative defenses the party may claim with respect to the department's allegations.

(v) An express warning that failure to file an Answer within 30 days following service of the Notice will entitle the commissioner to accept the department's allegations as true in their entirety and immediately enter a final order with respect to the matters alleged in the Notice.

(d) If any party named in an adjudicative hearing files a timely and proper Answer then a hearing shall be scheduled before an independent hearing examiner and notice thereof stating the time, date, place of the hearing and identifying the hearing examiner shall be mailed to the answering party. Named parties to a proceeding who do not file a timely and proper Answer shall not be entitled to participate in any subsequent hearing as a party except by leave of the hearing examiner and the commissioner may immediately enter a final order as to such party with respect to the matters alleged in the department's Notice without further adjudicative proceedings.

(e) Proceeding Involving Temporary Cease and Desist Order.

(i) In a proceeding involving a Temporary Cease and Desist Order issued pursuant to Section 7-1-307, the Notice to be served on a party to the proceeding shall include notice that the party is entitled to a show cause hearing concerning the Temporary Cease and Desist Order but must request the same within ten days following service of receipt of the Temporary Cease and Desist Order, in which event the show cause hearing shall be scheduled within ten days after the party's request is received by the department unless the party and the department mutually agree on another time for the hearing.

(ii) In a proceeding involving a Temporary Cease and Desist Order issued pursuant to Section 7-1-307(2), the Order shall state a date, time and place for a hearing before the commissioner, or, if he is unable to preside, before, within ten days after the date the Temporary Cease and Desist Order is signed. The notice shall also advise any interested party that it shall be its burden at the hearing to show cause why the Temporary Cease and Desist Order should not remain in full force and effect for 30 days after it was signed, should not be extended for no more than two successive 15-day periods thereafter, or both.

(f) Upon motion and notice to all other parties to the proceeding, the commissioner or his designee may, for good cause shown, shorten or enlarge any time limits specified herein, including that for scheduling a show cause hearing on a Temporary Cease and Desist Order but excepting the time limits set forth in the foregoing subsection (e)(ii), permit amendments to the department's Notice or any Answer, reschedule a hearing, bifurcate a hearing, permit the joinder of a party, or enter such other preliminary or procedural Order as the commissioner or his designee considers proper and equitable to protect the rights and interests of the parties to the proceeding, expedite the hearing procedure, or both.

History

KEY: financial institutions, government hearings
Date of Last Change: 1995
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301; 7-1-309

Utah Admin. Code R331-9-6 Confidential Proceedings

(1) If the commissioner deems a proceeding confidential then all pleadings and documents filed in the matter, including the department's initial Notice of the proceedings, shall be conspicuously so designated, and thereafter all such documents shall be made available only to the parties to the proceeding, their legal representatives, and such other parties as may be specifically authorized to examine the documents by the commissioner or his designee.

(2) The only persons who may be present during a confidential hearing are named parties, parties determined by the commissioner or his designee to have a direct interest equivalent to judicial standing in the subject matter of the hearing, the legal representatives of the parties or persons, persons employed by or acting on behalf of the department, the commissioner or his designee, persons necessary to transcribe the proceedings, and any witness then testifying.

History

KEY: financial institutions, government hearings
Date of Last Change: 1995
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301; 7-1-309

Utah Admin. Code R331-9-7 Form of Pleadings

(1) All pleadings filed with the department shall comply with the requirements of Rule 10 of the U.R.C.P. except for the caption specified in subparagraph (a) thereof. The caption for all pleadings filed with the department shall indicate that the matter is before the Department of Financial Institutions of the State of Utah. In the case of a comment hearing, the documents shall identify the subject matter of the hearing and the subject matter of the particular pleading. In the case of a dispute or adjudicative hearing, the pleadings shall identify all parties to the proceeding, shall separately state that the proceeding is dispute or adjudicative, that it is confidential or not confidential, the subject matter of the pleading, and any case number which may have been assigned to that proceeding by the department. A document that substantially complies with Rule 10 of the U.R.C.P. will be acceptable.

(2) The provisions of Rule 11 of the U.R.C.P. shall apply to all pleadings filed with the department by any attorney representing a party.

History

KEY: financial institutions, government hearings
Date of Last Change: 1995
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301; 7-1-309

Utah Admin. Code R331-9-8 Discovery

(1) Discovery rights and procedures as specified below shall only be available to parties in a dispute or adjudicative proceeding.

(2) Parties may obtain discovery in any manner authorized by Rules 27, 28, 29, 30, 31, 33, 34, and 36 of the U.R.C.P. Depositions may be used in a hearing before the commissioner or his designee in the same manner as specified for judicial proceedings in Rule 32 of the U.R.C.P.

(3) The commissioner or his designee may impose sanctions for failure to comply with a proper discovery request similar to those specified in Rule 37 of the U.R.C.P.

History

KEY: financial institutions, government hearings
Date of Last Change: 1995
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301; 7-1-309

Utah Admin. Code R331-9-9 Subpoenas

The commissioner or his designee shall issue subpoenas as authorized by Section 7-1-310 for the purpose of facilitating a proper discovery request or to compel the attendance of a witness at a dispute or adjudicative hearing. Each subpoena shall be obtained by filing a written request with the commissioner or his designee describing the purpose for which the subpoena is sought. If the commissioner or his designee determines that any specific request is objectionable or possibly so then he may either deny the request without further proceedings or schedule a hearing to receive evidence concerning the objection prior to making a final decision on the request.

History

KEY: financial institutions, government hearings
Date of Last Change: 1995
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301; 7-1-309

Utah Admin. Code R331-9-10 Hearings

(1) Comment Hearings.

Comment hearings shall be held before the commissioner or his designee. A recording shall be made of such hearings capable of being transcribed verbatim. Persons entering statements into the record shall not be sworn on oath and the content of the statements made shall not be restricted except as to irrelevant, scandalous or inappropriate matters. The commissioner or his designee may limit the number of speakers or prescribe time limits for each speaker, or both. After each speaker has made his statement, the commissioner may ask questions of the speaker and permit other participants of the hearing to ask questions of the speaker.

(2) Dispute Hearings.

(a) Dispute hearings shall be heard before the commissioner or his designee.

(b) At the hearing it shall be the burden of the party named in the proceeding to show, by a preponderance of the evidence, that matters in dispute should be resolved in the named party's favor and the application or request at issue should be granted. Similarly, it shall be the burden of any interested party to support each claim made by it concerning the matter at issue by a preponderance of the evidence.

(c) The commissioner or his designee may receive any evidence he deems relevant and of probative value in understanding and deciding the matters at issue. However, all testimony shall be given under oath subject to cross-examination, and whenever possible the rules of evidence and trial procedure applicable to the courts of this state shall be generally complied with.

(d) No findings, conclusions, order or other decision shall be prepared concerning the hearing itself. If a designee of the commissioner presides then he shall prepare a report to the commissioner summarizing the evidence presented for the purpose of assisting the commissioner in reaching a final decision on the matter to which the hearing pertained.

(3) Adjudicative Hearings.

(a) Except for a show cause hearing concerning a Temporary Order or a Temporary Cease and Desist Order, all adjudicative hearings shall be held before an independent hearing officer selected by the commissioner.

(b) At the hearing it shall be the department's responsibility to establish by a preponderance of the evidence the allegations it has made against each party named in the proceeding. Similarly, any named party shall prove any affirmative defense it has claimed by a preponderance of the evidence. All evidence shall be presented, rebutted and received or excluded in accordance with the Rules of Evidence and the U.R.C.P. except the hearing officer may receive other evidence when, in the examiner's discretion, taking into account its lesser probative value, such other evidence would be of use in supplementing or tending to confirm any admitted evidence or proffered evidence subject to its admission.

(c) After the hearing has been concluded, the hearing officer shall prepare Findings, Conclusions and Recommendations for the commissioner. At the same time as the original is delivered to the commissioner, copies of the Findings, Conclusions and Recommendations shall be mailed to all attorneys and named parties who participated in the proceedings.

(d) After receiving the Findings, Conclusions and Recommendations, the commissioner shall enter an Order, or remand the matter back to the hearing officer to conduct further proceedings on the subjects as may be specified by the commissioner, or dismiss the proceedings in whole or in part.

(e)(i) Within 15 days after the hearing officer's Findings, Conclusions and Recommendations are mailed to a party, that party shall file a notice of any objections the party may have specifying each Finding, Conclusion or Recommendation objected to and describing in reasonable detail the basis for each objection.

(ii) A party may request reconsideration of any Order resulting from an adjudicative proceeding within 30 days after a copy of the Order is mailed to the party by the department. Each request shall specify in reasonable detail the party's reasons supporting the request and may, with leave from the commissioner, be accompanied by a memo of points and authorities to which all other parties may respond, all within deadlines to be specified in the commissioner's grant of leave.

(iii) The commissioner may enter an Order whether or not the deadline for filing objections to Findings, Conclusions and Recommendations has elapsed. The timely filing of objections shall not affect the implementation of any Order already entered, or bar the entry of an Order based in any degree on any Finding, Conclusion or Recommendation objected to before ruling on the objection, except the Order shall not be deemed final until the objections have been ruled on by the commissioner. The 30 days allowed for requesting reconsideration of any Order shall not be tolled by the filing of objections to precedent Findings, Conclusions and Recommendations.

(f) The commissioner may require the parties to the proceeding to pay any costs and expenses incident to the hearing as he deems proper including reporter or other transcription expenses, fees of the hearing officer, witness costs, fees for examiner time based on the normal rate charged for examinations, and attorney's fees.

(g) A show cause hearing on a Temporary Order or a Temporary Cease and Desist Order shall be held before the commissioner or his designee. If neither the commissioner nor the commissioner's designee is available to preside at the hearing within the required period then the Temporary Order shall be dissolved, without prejudice.

History

KEY: financial institutions, government hearings
Date of Last Change: 1995
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301; 7-1-309

R331-10 Schedule for Retention or Destruction of Records of Financial Institutions Under the Jurisdiction of the Department of Financial Institutions

Utah Admin. Code R331-10-1 Authority, Scope, and Purpose

(1) This rule is issued pursuant to Section 7-1-301(7).

(2) This rule establishes a schedule for the retention of records of financial institutions under the jurisdiction of the Department of Financial Institutions. Each financial institution may deem it prudent from a business, legal, or other regulatory reason to retain records not identified in this rule.

(3) It is the purpose of this rule to require the maintenance of appropriate types of records where such records have a high degree of usefulness and prescribe the period for which records of each class are retained.

(4) This rule does not prescribe the method of retention other than that the method selected by each financial institution must ensure the records be readily retrieved in an unaltered state.

History

KEY: financial institutions
Date of Last Change: July 10, 2017
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(7)

Utah Admin. Code R331-10-2 Definitions

Key to Abbreviations:

Figures - Years

History

KEY: financial institutions
Date of Last Change: July 10, 2017
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(7)

Utah Admin. Code R331-10-3 Retention of Records

(1) CORPORATE AND LEGAL

TABLE 1

Regulation S (domestic and international funds

transfer 5

Annual Disclosures Statements/Annual Reports 2

Minute books of directors, executive committee

an other records reflecting corporate governance

documentation, (e.g., minutes, articles, bylaws,

stock records) 10

Superceded policies and procedures 2

Business licenses 1

Service agreements with vendors 2

Litigation documents (after resolution) 2

Affidavits 2

Attachments, garnishments 6

(2) DEPOSITORY PRODUCTS

TABLE 2

Records of checks, drafts and other instruments

presented for payment or deposit 6

Deposit records showing relationship of insurance

claimants to insurance funds 1

Deposit records disclosing a relationship which

might provide the basis for additional insurance 1

Records evidencing compliance with Truth in Savings

Act 2

Records of purchases and purchasers of bank checks,

drafts, cashier's checks, money orders, and

traveler's checks 5

Tax identification numbers of deposit/share/

transaction accounts 5

Deposit account trial balance records 5

Each check, deposit, money order issued or payable

by bank in excess of $100 5

Records of debits to customers' account in excess

of $100 5

Records of purchaser of certificate of deposit 5

Records of tax identification number of any person

presenting certificate of deposit for payment 5

Deposit slips and credit tickets in excess of $100 5

Records of receipts of currency in excess of $10,000

received from persons outside United States 5

Cash letters 1

Account documentation, (e.g., signature card,

resolutions, power of attorney, guardianship) 6

Stop payment orders (after release) 1

(3) FIDUCIARY

TABLE 3

Safe deposit documentation, (e.g., access records,

contracts) 5

Records relating to municipal securities dealing:

copies of filings to any associated person

following termination of association 3

Record of all brokers/dealers selected by bank to

effect transactions and amount of commission

paid or allocated each year 3

Tax identification number of customers having

securities 5

Records of securities authority from customer 5

Records of amounts expended and adjustments made

to property acquired and held for investment

or to verify exercise of qualified stock option,

debts written off, amount of loans outstanding

with regard to reserves for losses on bad debts

of financial institutions for last five taxable

years 6

Fiduciary authority documentation, (e.g., trust

agreements, court orders, powers of attorney,

directives, authorizations) 6

Fiduciary account documentation, (e.g., cash and

asset records, tax returns) 6

Fiduciary management committee meeting records 5

Escrow records (after closing) 6

Safekeeping records and receipts 2

Fiduciary account documentation, (e.g., chronological

logs of itemized daily records, account records

for each customer, order ticket of each buy/sell,

record of all brokers used 3

(4) LENDING/LEASING

TABLE 4

Lending and leasing documents after closed, (e.g.,

credit application, appraisal, credit report,

signatory) 6

Card applications, documentation from date of

application 2

Open or closed-end credit document files excluding

card application documentation 6

(5) REGULATORY

TABLE 5

Credit record of transfers of credit more than

$10,000 to outside the United States 5

Credit record of transfers of funds more than

$10,000 to outside the United States 5

Checks or records of drafts in excess of $10,000

drawn on foreign banks 5

Checks, drafts in excess of $10,000 from bank,

broker or exchange dealer outside United

States 5

Utah Bureau of Criminal Identification report or

background check (after termination) 2

(6) FINANCIAL

TABLE 6

Escheatment documentation (abandoned deposit

accounts, unpaid cashier's checks, unpaid

expense checks) 7

Internal audit reports 5

Investment confirmations, statements, buy and

sell orders 6

Financial records, (e.g., journals, ledgers,

statements, source documents) 7

Reconcilements, (e.g., General ledger account and

supporting documentation) 2

Notes on contracts payable documentation (after

closing) 2

History

KEY: financial institutions
Date of Last Change: July 10, 2017
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(7)

Utah Admin. Code R331-10-4 Exemptions

The Commissioner of Financial Institutions may make exemptions from any requirement otherwise imposed under this rule and as are consistent with the purposes of this rule.

History

KEY: financial institutions
Date of Last Change: July 10, 2017
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(7)

Utah Admin. Code R331-10-5 Reproduction of Records

Any institution subject to this rule may cause records in its custody to be reproduced by the micro-photographic or other equivalent process. Any reproduction shall have the same force and effect as the original and shall be admissible into evidence as if it were the original.

History

KEY: financial institutions
Date of Last Change: July 10, 2017
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(7)

Utah Admin. Code R331-10-6 Relationship to other Laws

This rule will not pre-empt any other retention requirement longer than that specified herein imposed by any other state or federal statute or rule.

History

KEY: financial institutions
Date of Last Change: July 10, 2017
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(7)

R331-12 Guidelines Governing the Purchase and Sale of Loans and Participations in Loans by all State Chartered Financial Institutions

Utah Admin. Code R331-12-1 Authority, Scope, and Purpose

(1) This rule is issued pursuant to Section 7-1-301.

(2) This rule applies to all state chartered financial institutions.

(3) The purpose of this rule is to establish guidelines for the purchase and sale of loans and participations in loans by state chartered financial institutions.

History

KEY: financial institutions
Date of Last Change: 1987
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301

Utah Admin. Code R331-12-2 Definitions

(1) "Participation" means the purchase or sale by a lender of a loan or part of a loan under circumstances in which the acquiring institution

(a) has no formal or direct role in establishing the terms and conditions binding the borrower, or

(b) is not a signatory of the loan agreement binding the borrower.

(2) "Participation agreement" means an agreement between the lead financial institution and the participant financial institution spelling out in detail the terms, conditions, and understandings between the parties to a loan participation.

(3) "Recourse" means an oral or written agreement whereby a selling institution of a loan or participation in a loan agrees to repurchase in whole or in part upon request of the purchaser or the seller.

History

KEY: financial institutions
Date of Last Change: 1987
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301

Utah Admin. Code R331-12-3 General Rule

(1) A written participation agreement covering multiple or individual participations will be on record at each participating institution, and shall include, at a minimum, the following:

(a) The party to the agreement to be paid first from the loan repayment proceeds;

(b) Party responsible for collection of the note in the event of default;

(d) Recourse arrangements in writing outlining the rights and obligations of each party. Generally, loans will not be sold on a recourse basis except in cases where the sale is made for the purpose of obtaining temporary funds for operations.

(2) In addition, a financial institution which buys and sells loans or participations in loans shall establish written policies setting forth satisfactory controls over such sales and purchases. At a minimum, the following conditions shall be met:

(a) The loan must comply with applicable state and federal laws;

(b) The purchased loan must conform to the financial institution's lending and loan approval standards;

(d) The financial institution must maintain evidence of sufficient overall loan documentation including an analysis of the value and lien status of collateral;

(e) The status of principal and interest payments including accrual status must be available.

History

KEY: financial institutions
Date of Last Change: 1987
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301

R331-17 Publication and Disclosure of Acquisition of Control, Merger, or Consolidation Applications to the Department of Financial Institutions

Utah Admin. Code R331-17-1 Authority, Scope, and Purpose

(1) This rule is issued pursuant to Sections 7-1-301, 7-1-703, 7-1-704 and 7-1-705.

(2) This rule applies to all applicants to the department for change of control, acquisition of, merger, or consolidation with any financial institution chartered by the state.

(3) Public disclosure by newspaper publication of applications to the department for change of control is necessary to increase the amount of timely and useful information available to the public thereby increasing the department's sources of information in connection with these applications and enhancing its ability to prevent dishonest or unqualified persons from acquiring control of state chartered financial institutions.

History

KEY: financial institutions
Date of Last Change: 1995
Notice of Continuation: September 15, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-703; 7-1-704; 7-1-705; 7-1-301(5)

Utah Admin. Code R331-17-2 Definitions

(1) "Control" means "control" as defined in 7-1-103.

(2) "Commissioner" means the Commissioner of Financial Institutions.

(3) "Department" means the Department of Financial Institutions.

History

KEY: financial institutions
Date of Last Change: 1995
Notice of Continuation: September 15, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-703; 7-1-704; 7-1-705; 7-1-301(5)

Utah Admin. Code R331-17-3 Publication of Notice of Application

(1) Within ten days after the department has accepted an application for change of control, acquisition of, merger, or consolidation with a financial institution chartered by the state, the applicant shall publish an announcement of such acceptance in three successive issues of a newspaper of general circulation in the county where the principal place of business is established.

(2) The newspaper announcement shall contain:

(a) The name(s) of the proposed acquirer(s);

(b) The name of the financial institution whose stock is sought to be acquired;

(d) A statement that any person wishing to comment on the proposed changes may submit written comments to the commissioner within 20 days following the required newspaper publication.

History

KEY: financial institutions
Date of Last Change: 1995
Notice of Continuation: September 15, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-703; 7-1-704; 7-1-705; 7-1-301(5)

Utah Admin. Code R331-17-4 Waiver of Publication

(1) In circumstances requiring prompt action, the commissioner may, if it is in the public interest:

(a) Waive the publication requirement of Rule R331-17-3;

(b) Waive or shorten the public comment period; or

(2) The commissioner may determine it is in the public interest to grant confidential treatment to an application.

(3) The commissioner may waive publication of notice of an application if notice has been or will be published pursuant to a rule of another state or federal agency.

History

KEY: financial institutions
Date of Last Change: 1995
Notice of Continuation: September 15, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-703; 7-1-704; 7-1-705; 7-1-301(5)

R331-20 Designation of Adjudicative Proceedings as Informal

Utah Admin. Code R331-20-1 Authority, Scope, and Purpose

(1) This rule is issued pursuant to Section 63G-4-202 and Subsection 7-1-301(15).

(2) This rule applies to all proceedings before the department.

(3) This rule designates all proceedings before the Department of Financial Institutions as informal hearings.

History

KEY: financial institutions, government hearings
Date of Last Change: 1995
Notice of Continuation: August 16, 2023
Authorizing, and Implemented or Interpreted Law: 63G-4-202; 7-1-301(15)

Utah Admin. Code R331-20-2 Rule

In accordance with Section 63G-4-202 all proceedings before the Department of Financial Institutions which are subject to the requirements of the Utah Administrative Procedures Act are designated informal proceedings.

History

KEY: financial institutions, government hearings
Date of Last Change: 1995
Notice of Continuation: August 16, 2023
Authorizing, and Implemented or Interpreted Law: 63G-4-202; 7-1-301(15)

R331-21 Rule Governing Establishment of and Participation in Collective Investment Funds by Trust Companies

Utah Admin. Code R331-21-1 Authority, Scope, and Purpose

(1) This rule is issued pursuant to Sections 7-1-301 and 7-5-13.

(2) This rule applies to all trust companies conducting a trust business subject to the jurisdiction of the department.

(3) This rule authorizes the establishment of and participation in collective investment funds by trust companies subject to the jurisdiction of the department.

History

KEY: financial institutions, trusts
Date of Last Change: 1995
Notice of Continuation: August 16, 2023
Authorizing, and Implemented or Interpreted Law: 7-1-301; 7-5-13

Utah Admin. Code R331-21-2 Definitions for Purposes of this Rule

(1) "Affiliate" means any company which controls, is controlled by, or is under common control with a trust company, and that is authorized to conduct a trust business by its applicable state or federal regulator.

(2) "Collective investment fund" means a fund established and administered by a trust company or one of its affiliates, into which a trust company and one or more of its affiliates pool trust account funds for common investment.

(3) "Commissioner" means the Commissioner of Financial Institutions.

(4) "Control" means "control" as defined in Section 7-1-103.

(5) "Department" means the Department of Financial Institutions.

(6) "Trust business" means "trust business" as defined in Section 7-5-1(1)(b).

(7) "Trust company" means any company authorized to engage in a trust business in Utah pursuant to Sections 7-5 et seq., or by federal law.

History

KEY: financial institutions, trusts
Date of Last Change: 1995
Notice of Continuation: August 16, 2023
Authorizing, and Implemented or Interpreted Law: 7-1-301; 7-5-13

Utah Admin. Code R331-21-3 Establishment of Collective Investment Funds

(1) Any trust company authorized to engage in the trust business in Utah may:

(a) Establish collective investment funds that authorize participation by fiduciary or trust accounts of the trust company, its affiliates or both; and

(b) Participate in collective investment funds established by an affiliate of the trust company, if:

(i) The affiliate is authorized under the laws of its chartering authority to establish a collective investment fund in which its affiliates may participate; and

(ii) The plan establishing the collective investment funds specifically authorize a participation by the trust company.

(2) The common trust funds held by a trust company or its affiliate must be maintained exclusively for collective investment and reinvestment.

(3) The plan establishing the collective investment fund must be approved by the trust company's board of directors and filed with the commissioner. A copy of the plan shall be available at the principal office of the trust company for public inspection during business hours and upon request a copy of the plan shall be furnished to any person who has a direct or indirect legal interest in such plan.

(4) No trust company shall have any non-fiduciary interest in a collective investment fund. This limitation includes lending money to a fund, selling property to a fund, and purchasing property from a fund.

(5) The trust company shall maintain adequate accounting records of the collective investment fund for periodic review by the department and federal regulatory agencies.

History

KEY: financial institutions, trusts
Date of Last Change: 1995
Notice of Continuation: August 16, 2023
Authorizing, and Implemented or Interpreted Law: 7-1-301; 7-5-13

R331-22 Rule Governing Reimbursement of Costs of Financial Institutions for Production of Records

Utah Admin. Code R331-22-1 Authority, Scope, and Purpose

(1) This rule is issued pursuant to Sections 7-1-301(6) and 7-1-1004.

(2) This rule applies to both federal and state chartered financial institutions.

(3) The purpose of this rule is to set consistent and reasonable rates of reimbursement for costs to financial institutions for their production of records.

History

KEY: financial institutions, costs
Date of Last Change: November 17, 1998
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(6); 7-1-1004

Utah Admin. Code R331-22-2 Definitions

(1) "Financial institutions" means "financial institutions" as defined in Section 7-1-103(10).

(2) "Financial record" means an original of, a copy of, or information known to have been derived from, any record held by a financial institution pertaining to a customer's relationship with the financial institution.

(3) "Party" shall mean an individual, corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization or any form of business entity. Party also includes any authorized representative of that party who utilized or is utilizing any service of a financial institution, or for whom a financial institution is acting or has acted as a fiduciary, in relation to an account maintained in the party's name.

(4) "Direct incurred costs" means costs incurred solely and necessarily as a consequence of searching for, reproducing or transporting books, papers, records, or other data in order to comply with legal process or a formal written request or a party's authorization to produce a party's financial records. The term does not include any allocation of fixed costs including overhead, equipment, and depreciation. If a financial institution has financial records that are stored in an independent storage facility that charges a fee to search for, reproduce, or transport particular records requested, these costs are considered to be directly incurred by the financial institution.

History

KEY: financial institutions, costs
Date of Last Change: November 17, 1998
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(6); 7-1-1004

Utah Admin. Code R331-22-3 Costs Reimbursement

As hereinafter provided, a party requiring or requesting access to financial records pertaining to a party shall pay to the financial institution that assembles or provides the financial records a fee for reimbursement of reasonably necessary costs which have been directly incurred according to the following schedule:

(1) Search and processing costs.

(a) Manual Search and Processing Cost. Reimbursement of search and processing costs shall be the total amount of direct personnel time spent in locating and retrieving, reproducing, packaging and preparing financial records for shipment. The rate for search and processing costs is $11.00 per hour per clerical/technical person and $17.00 per hour per manager/supervisory person, computed per quarter hour and is limited to the total amount of actual time spent in locating and retrieving documents or information or reproducing or packaging and preparing documents for shipment which were required or requested by a party. If less than a quarter hour is spent, the minimum charge shall be for a quarter hour.

(b) Data Processing Search and Processing Cost. Search and processing costs reflecting the actual costs of extracting information stored by computer in the format in which it is normally produced, based on computer time and necessary supplies will be charged. Personnel time for computer search shall be paid for only at the rates specified in this section.

(2) Reproduction costs. Reimbursement for reproduction costs shall be the costs incurred in making the copies of documents required or requested. The rate for reproduction costs for making copies of required or requested documents is 25 cents for each page, including copies produced by reader/printer reproduction process, photographs and films. Duplicate microfiche is 50 cents per microfiche and computer diskette is $5.00 per diskette. Other materials are reimbursed at actual costs.

(3) Transportation costs. Reimbursement for transportation costs shall be for reasonably necessary costs directly incurred to transport personnel to locate and retrieve the information required or requested and necessary costs directly incurred solely by the need to convey the required or requested material to the place of examination.

History

KEY: financial institutions, costs
Date of Last Change: November 17, 1998
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(6); 7-1-1004

Utah Admin. Code R331-22-4 Conditions for Payment

(1) Limitations. Payment for reasonably necessary, directly incurred costs to financial institutions shall be limited to material required or requested.

(2) Separate consideration for component costs. Payment shall be made only for costs that are both directly incurred and reasonably necessary. In determining whether costs are reasonably necessary, search and processing, reproduction and transportation costs shall be considered separately.

(3) Compliance with legal process, requests, or authorization. No payment shall be made until the financial institution satisfactorily complies with the legal process or formal written request, or party authorization, except that in the case where the legal process or formal written request is withdrawn, or the party authorization is revoked, the financial institution shall be reimbursed for reasonably necessary costs directly incurred in the assembling of financial records required or requested to be produced prior to the time that the financial institution is notified that the legal process or request is withdrawn or defeated or that the party has revoked his or her authorization.

(4) Itemized bill or invoice. No payment shall be made unless the financial institution submits an itemized bill or invoice showing specific details concerning the search and processing, reproduction and transportation costs.

History

KEY: financial institutions, costs
Date of Last Change: November 17, 1998
Notice of Continuation: July 13, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(6); 7-1-1004

R331-23 Lending Limits for Banks, Industrial Loan Corporations

Utah Admin. Code R331-23-1 Authority, Scope, and Purpose

(1) The Department of Financial Institutions enacts this rule under authority granted by Sections 7-1-301, 7-3-19, and 7-8-20.

(2) The rule applies to all loans and extensions of credit, including credit exposure to a derivative transaction, made by banks and industrial loan corporations chartered in the state and their subsidiaries.

(3) The rule is intended to prevent one person from borrowing an unduly large amount of a given bank's or industrial loan corporation's funds, thereby exposing the bank's or industrial loan corporation's depositors, creditors and stockholders to excessive risk.

(4) The rule provides exceptions to the general lending limits set forth in Sections 7-3-19 and 7-8-20.

(5) The rule does not apply to loans, extensions of credit and the credit exposure to a derivative transaction made by a bank or an industrial loan corporation to a subsidiary. The rule does not apply to loans, extensions of credit and the credit exposure to a derivative transaction that are subject to, or expressly exempted from, a federal statute or regulation limiting the amount of total loans and credit that may be extended to any person or group of persons.

History

KEY: loans, banks, industrial loan corporations
Date of Last Change: December 24, 2012
Notice of Continuation: September 21, 2022
Authorizing, and Implemented or Interpreted Law: 7-3-19; 7-8-20

Utah Admin. Code R331-23-2 Definitions

(1) "Affiliate" means any institution that controls the bank or industrial loan corporation and any other institution that is controlled by the institution that controls the bank or industrial loan corporation. However, "affiliate" does not include a subsidiary of the bank or industrial loan corporation.

(2) "Commissioner" means the Commissioner of Financial Institutions.

(3) "Contractual commitment to advance funds" means:

(a) an obligation on the part of the bank or industrial loan corporation to make payments to a third party contingent upon default by the bank's or industrial loan corporation's customer in the performance of an obligation under the terms of that customer's contract with the third party or upon some other stated condition, or

(b) an obligation to guarantee or stand as surety for the benefit of a third party. The term includes standby letters of credit, guarantees, puts and other similar arrangements. A binding, written commitment to lend is a "contractual commitment to advance funds" if it and all other outstanding loans to the borrower are within the bank's or industrial loan corporation's lending limit on the date of the commitment.

(4) "Consumer" means the user of any products, commodities, goods, or services, whether leased or purchased, and does not include any person who purchases products or commodities for the purpose of resale or for fabrication into goods for sale.

(5) "Consumer paper" includes paper relating to automobiles, mobile homes, recreational vehicles, residences, office equipment, household items, tuition fees, insurance premium fees, and similar consumer items.

(6) For purposes of the rule, "Control" means the ownership or control of at least 50% of the voting stock.

(7) "Current market value" means the bid or closing price listed for financial instruments in a regularly published listing or an electronic reporting service.

(8) "Credit Exposure to a Derivative Transaction" means the risk to earnings or capital of an obligor's failure to meet the terms of any derivative with the institution or otherwise to perform as agreed. It arises any time institution funds are extended, committed, invested, or otherwise exposed through actual or implied contractual agreements, whether reflected on or off the balance sheet.

(9) "Derivative" means a contract, agreement, swap, warrant, note, or option that is based, in whole or in part, on the value of, any interest in, or any quantitative measure or the occurrence of any event relating to, one or more commodities, securities, currencies, interest or other rates, indices, or other assets .

(10) "Financial instruments" means stocks, notes, bonds, and debentures traded in a national securities exchange, OTC margin stocks, as defined by the Federal Reserve Board at 12 CFR 220.2, 1996, commercial paper, negotiable certificates of deposit, bankers acceptances, and shares in money market and mutual funds of the type which issue shares in which banks or industrial loan corporations may perfect a security interest.

(11) "Institution" means "institution" as defined in Section 7-1-103.

(12) "Investment grade securities" means marketable obligations in the form of a bond, note or debenture rated in one of the four highest ratings of a nationally recognized rating agency. "Investment grade securities" does not include investments which are predominantly speculative in nature.

(13) "Loans and extensions of credit" means any direct or indirect advance of funds in any manner whatsoever to a person. This is made on the basis of any obligation of that person to repay the funds, or repayable from specific property pledged by or on behalf of a person. "Loans and extensions of credit" includes:

(a) A purchase under repurchase agreement of securities, other assets or obligations other than investment grade securities in which the purchasing bank or industrial loan corporation has a perfected security interest, with regard to the seller but not as an obligation of the underlying obligor of the security;

(b) An advance by means of an overdraft, cash item, or otherwise;

(d) An acquisition by discount, purchase, exchange, or otherwise of any note, draft, or other evidence of indebtedness upon which a person may be liable as maker, drawer, endorser, guarantor, or surety;

(e) A participation without recourse, with regard to the participating bank or industrial loan corporation, but not the originating bank or industrial loan corporation;

(f) Existing loans, leases, or advances which have been charged off on the books of the bank or industrial loan corporation in whole or in part and which are legally enforceable, including statutory bad debt under Section 7-3-25 or Section 7- 8-15 respectively.

(14) "Loans and extensions of credit" does not include:

(a) A receipt by a bank or industrial loan corporation of a check deposited in or delivered to the bank or industrial loan corporation in the usual course of business unless it results in the carrying of a cash item for the granting of an overdraft other than an inadvertent overdraft in a limited amount that is promptly repaid;

(b) An acquisition of a note, draft, bill of exchange, or other evidence of indebtedness through a merger or consolidation of financial institutions or a similar transaction by which an institution acquires assets and assumes liabilities of another institution, or foreclosure on collateral or similar proceeding for the protection of the bank or industrial loan corporation, provided that the indebtedness is not held for a period of more than three years from the date of the acquisition, unless permission to extend the period is granted by the commissioner on the basis that holding the indebtedness beyond three years is not detrimental to the safety and soundness of the acquiring bank or industrial loan corporation ;

(c) An endorsement or guarantee for the protection of a bank or industrial loan corporation of any loan or other asset previously acquired by the bank or industrial loan corporation in good faith or any indebtedness to a bank or industrial loan corporation for the purpose of protecting the bank or industrial loan corporation against loss or of giving financial assistance to it;

(d) Non-interest bearing deposits to the credit of the bank or industrial loan corporation;

(e) The giving of immediate credit to a bank or industrial loan corporation upon uncollected items received in the ordinary course of business;

(f) The purchase of investment grade securities subject to repurchase agreement in which the purchasing bank or industrial loan corporation has a perfected security interest, or where the securities are purchased from the state or any political subdivision thereof;

(g) The sale of Federal funds;

(h) Loans or extensions of credit which have become unenforceable by reason of discharge in bankruptcy or are no longer legally enforceable for other reasons.

(15) "Person" means "person" as defined in Section 7-1-103.

(16) "Readily marketable collateral" means financial instruments which are salable under ordinary circumstances with reasonable promptness at a fair market value determined by quotations based on actual transactions on an auction or similarly available daily bid and ask price market.

(17) "Sale of Federal Funds" means any transaction among depository institutions involving the transfer of immediately available funds resulting from credits to deposit balances at Federal Reserve banks or from credits to new or existing deposit balances due from a correspondent depository institution.

(18) "Standby letter of credit" means any letter of credit, or similar arrangement however named or described which represents an obligation to the beneficiary on the part of the issuer:

(a) To repay money borrowed by or advanced to or for the account of the account party, or

(b) To make payment on account of any indebtedness undertaken by the account party, or

(19) "Subsidiary" means "subsidiary" as defined in Section 7-1-103.

(20) "Total capital" means the sum of capital stock, surplus, undivided profits, reserve for contingencies, reserves for loan losses, and the portion of subordinated notes and debentures with more than one year maturity remaining.

History

KEY: loans, banks, industrial loan corporations
Date of Last Change: December 24, 2012
Notice of Continuation: September 21, 2022
Authorizing, and Implemented or Interpreted Law: 7-3-19; 7-8-20

Utah Admin. Code R331-23-3 General Rule

(1) The total loans, extensions of credit and the credit exposure to a derivative transaction by a bank or industrial loan corporation to any person outstanding at one time and not fully secured, as determined in a manner consistent with this rule, by collateral having a market value at least equal to the amount of the loan or extension of credit may not exceed 15% of the amount of the bank's or industrial loan corporation's total capital.

(2) The total loans, extensions of credit and the credit exposure to a derivative transaction by a bank or industrial loan corporation to a person outstanding at one time and fully secured by readily marketable collateral having a market value, as determined by reliable and continuously available price quotations, at least equal to the amount of the funds and standing may not exceed 10% of the total capital of the bank or industrial loan corporation. This limitation is separate from and in addition to the 15% limitation described in Subsection (1), above.

(a) At all times, the total loans or extensions of credit to a person based on the limitation for banks in Section 7-3- 19(2) and for industrial loan corporations in Rule R331-23-3(2) shall be secured by readily marketable collateral having a current market value of at least 100% of the total amount of funds outstanding, excluding accrued or discounted interest.

(b) Each bank or industrial loan corporation shall institute adequate procedures to ensure that the collateral value fully secures the outstanding loan or extension of credit at all times. At a minimum, each bank or industrial loan corporation shall perfect its security interest in the collateral and shall calculate the market value of the collateral at least monthly, or more frequently, as may be deemed necessary to ensure compliance with Section 7-3-19(2) for banks and Rule R331-23-3(2) for industrial loan corporations.

(c) If collateral values fall below 100% of the outstanding loan, the bank or industrial loan corporation must, within 60 days, obtain additional collateral in an amount sufficient to provide 100% coverage, require reduction of the loan or extension of credit, or sell the collateral and liquidate the debt. During this period, the loan or extension of credit will be considered nonconforming.

History

KEY: loans, banks, industrial loan corporations
Date of Last Change: December 24, 2012
Notice of Continuation: September 21, 2022
Authorizing, and Implemented or Interpreted Law: 7-3-19; 7-8-20

Utah Admin. Code R331-23-4 Combining Loans to Separate Borrowers - General Rule

(1) Loans, extensions of credit and derivative transactions to one person will be combined where the proceeds of the loan, extension of credit and derivative transactions are to be used for the direct benefit of any other person or persons.

(2) Loans, extensions of credit and derivative transactions to a general partnership, joint venture or association shall, for purposes of this rule, be considered loans or extensions of credit jointly and severally to each member of such partnership, joint venture or association unless the agreement creating the general partnership, joint venture or association provides otherwise, in which case the loans or extensions of credit shall be allocated to each member only to the extent provided for by the terms of any such agreement.

(3) The sum of all loans, extensions of credit and the credit exposure to a derivative transaction by a bank or industrial loan corporation outstanding at any one time to a person and all of its affiliates may not exceed 50% of the bank's or industrial loan corporation's total capital.

History

KEY: loans, banks, industrial loan corporations
Date of Last Change: December 24, 2012
Notice of Continuation: September 21, 2022
Authorizing, and Implemented or Interpreted Law: 7-3-19; 7-8-20

Utah Admin. Code R331-23-5 Exceptions to the Lending Limits

(1) The lending limits do not apply to the portion of a loan or extension of credit that represents accrued or discounted interest.

(2) Loans Secured by U.S. Obligations and General Obligations of a state or political subdivision.

(a) Loans, extensions of credit and the portion of any credit exposure to a derivative transaction secured by bonds, notes, certificates of indebtedness or Treasury bills of the United States or by other similar obligations fully guaranteed as to the principal and interest by the United States or general obligations of a state or a political subdivision are not subject to any limitation based on total capital.

(b) This exception applies only to the extent that loans, extensions of credit and the portion of any credit exposure to derivative transactions are fully secured by the current market value of obligations of the United States or guaranteed by the United States or general obligations of a state or political subdivision.

(c) If the market value of the collateral declines to the extent that the loan or the credit exposure to a derivative transaction is no longer in conformance with this exception and exceeds the general 15% limitation, the loan or the credit exposure to a derivative transaction must be brought into conformance within 60 days.

(3) Loans to or Guaranteed by a Federal Agency

(a) Loans or extensions of credit to or secured by unconditional takeout commitments or guarantees of any department, agency, bureau, board, commission, or establishment of the United States or any corporation wholly owned directly or indirectly by the United States shall not be subject to any limitation based on total capital.

(b) This exception may apply to only that portion of a loan or extension of credit that is covered by a federal guarantee or commitment.

(c) For purposes of this exception, the commitment or guarantee must be payable in cash or its equivalent within 60 days after demand for payment is made.

(d) A guarantee or commitment is unconditional if the protection afforded the bank or industrial loan corporation is not substantially diminished or impaired in the case of loss resulting from factors beyond the bank's or industrial loan corporation's control. Protection against loss is not materially diminished or impaired by procedural requirements, such as an agreement to take over only in the event of default, including default over a specific period of time, a requirement that notification of default be given within a specific period after its occurrence, or a requirement of good faith on the part of the bank or industrial loan corporation.

(4) Loans Secured by Segregated Deposit Accounts

(a) Loans, extensions of credit and the portion of any credit exposure to a derivative transaction secured by a segregated deposit account in the lending bank or industrial loan corporation shall not be subject to any limitation based on total capital.

(b) The bank or industrial loan corporation must ensure that a security interest has been perfected in the deposit, including the assignment of a specifically identified deposit and any other actions required by state law.

(c) Deposit accounts which may qualify for this exception include deposits in any form generally recognized as deposits. In the case of a deposit eligible for withdrawal prior to the maturity of the secured loan or derivative transaction, the bank or industrial loan corporation must establish internal procedures which will prevent the release of the security.

(5) Loans to Financial Institutions with the Approval of the commissioner

(a) Loans or extensions of credit to any financial institution or to any receiver, conservator, or other agent in charge of the business and property of such financial institution, when such loans or extensions of credit are approved by the commissioner, shall not be subject to any limitation based on total capital.

(b) This exception is intended to apply only in emergency situations where a bank or industrial loan corporation is called upon to provide assistance to another financial institution.

(6) Discount of Consumer Paper

(a) This exception allows a bank or industrial loan corporation to discount negotiable or nonnegotiable installment consumer paper of one person in an amount equal to 10% of its total capital (in addition to the 15% permitted by Section 7-3- 19(1) and Section 7-8-20(1)) if the paper carries a full recourse endorsement or unconditional guarantee by the person transferring such paper. The unconditional guarantee may be in the form of a repurchase agreement or a separate guarantee agreement. A condition reasonably within the power of the bank or industrial loan corporation to perform, such as the repossession of collateral, will not be considered to make conditional an otherwise unconditional agreement.

(b) Under certain circumstances, consumer paper which otherwise meets the requirements of this exception will be considered a loan or extension of credit to the maker of the paper rather than the seller of the paper. Specifically, where (i) through the bank's or industrial loan corporation's files it has been determined that the financial condition of each maker is reasonably adequate to repay the loan or extension of credit, and (ii) any officer designated by the bank's or industrial loan corporation's Chairman or Chief Executive Officer pursuant to authorization by the Board of Directors certifies in writing that the bank or industrial loan corporation is relying primarily upon the maker to repay the loan or extension of credit, the loan or extension of credit is subject only to the lending limits of the maker of the paper. Where paper is purchased in substantial quantities, the records, evaluation, and certification may be in such form as is appropriate for the class and quantity of paper involved.

(7) Loans Secured by Livestock

(a) This exception allows a bank or industrial loan corporation to make loans or extensions of credit to one person in an amount equal to 10% of its total capital, in addition to the 15% permitted by Section 7-3-19(1) and Section 7-8-20(1), if the loans or extensions of credit are secured by livestock having a market value at least equal to 115% of the outstanding loan balance at all times. The loans or extensions of credit may be secured by shipping documents or other instruments which transfer title to, secure title to, or give a first lien on livestock. "Livestock" includes dairy and beef cattle, hogs, sheep, goats, horses, mules, poultry, and fish, whether or not held for resale. To support compliance with this exception, the bank or industrial loan corporation must maintain in its files an inspection and appraisal report on the livestock pledged.

(b) Under the laws of certain states, a person furnishing pasturage under a grazing contract may have a lien on the livestock for the amount due for pasturage. If the lien which is based on pasturage furnished by the lienor prior to the making of the loan (i) is assigned to the bank or industrial loan corporation by a recordable instrument and (ii) is protected against being defeated by some other lien or claim, by payment to a person other than the bank or industrial loan corporation, or otherwise, it would qualify under this exception provided the amount of such perfected lien is at least equal to the amount of the loan and the value of the livestock is at no time less than 115% of the loan. Where the amount due under the grazing contract is dependent upon future performance thereunder, the resulting lien has merely prospective value and does not meet the requirements of the exception.

(8) Loans to Student Loan Marketing Association, Utah Board of Regents or Utah Higher Education Assistance Authority

Loans or extensions of credit to the Student Loan Marketing Association, the Utah Board of Regents or the Utah Higher Education Assistance Authority are not subject to any limitation based on total capital.

(9) Loans to Industrial Development Authorities and Housing Authorities

A loan or extension of credit to an industrial development authority, housing authority or similar public entity in the state is not a loan or extension of credit to the authority provided that:

(a) The bank or industrial loan corporation relies on the credit of the lessee or owner of the facility to be financed by the loan or extension of credit;

(b) The authority's liability with respect to the loan is limited solely to whatever interest it has in the particular facility;

(c) The authority's interest is assigned to the bank or industrial loan corporation as security for the loan or a promissory note from the lessee or owner to the bank or industrial loan corporation provides a higher order of security than the assignment of a lease, trust deed or mortgage; and

(d) lessee's or tenant's rent or mortgage payment is assigned and paid directly to the bank or industrial loan corporation.

A loan or extension of credit meeting the above criteria will be deemed a loan or extension of credit to the lessee or owner and will be combined with other obligations of the lessee or owner for purposes of Section 7-3-19 and Section 7-8-20.

(10) Other Exemptions

With the written approval of the commissioner other exemptions to the provisions of Section 7-3-19 and Section 7-8-20 may be permitted.

History

KEY: loans, banks, industrial loan corporations
Date of Last Change: December 24, 2012
Notice of Continuation: September 21, 2022
Authorizing, and Implemented or Interpreted Law: 7-3-19; 7-8-20

Utah Admin. Code R331-23-6 Credit Exposure to Derivative Transactions

(1) Each bank or industrial loan corporation board of directors shall institute adequate policies and procedures to ensure that derivative positions are established for purposes of mitigating one or more risks inherent in an institution's normal business activities, and not for the purpose of increasing such exposure or for the purposes of speculation in price movement. The policies and procedures shall require the proper identification and prudent limitation of the risks associated with derivatives.

(2) Derivative transactions should be transacted subject to established market terms that provide for prudent counterparty risk mitigation techniques reflected in agreements developed by the International Swap Dealers Association ("ISDA").

(3) Valuation. Each bank or industrial loan corporation shall calculate the exposure to derivative transactions using a consistent method from one of the following:

(a) Internal Model Method.

(i) Credit exposure. The credit exposure of a derivative transaction under the Internal Model Method shall equal the sum of the current credit exposure of the derivative transaction and the potential future credit exposure of the derivative transaction.

(ii) Calculation of current credit exposure. A bank or industrial loan corporation shall determine its current credit exposure by the mark-to-market value of the derivative contract. If the mark-to-market value is positive, then the current credit exposure equals that mark-to-market value. If the mark-to-market value is zero or negative, then the current credit exposure is zero.

(iii) Calculation of potential future credit exposure. A bank or industrial loan corporation shall calculate its potential future credit exposure by using an internal model that has been, at least annually, validated by a qualified party independent from the valuation process.

(iv) Net credit exposure. A bank or industrial loan corporation that calculates its credit exposure by using the Internal Model Method pursuant to this paragraph may net credit exposures of derivative transactions arising under the same qualifying master netting agreement.

(b) Conversion Factor Matrix Method. The current credit exposure arising from a derivative transaction shall be equal to the product of the notional amount and conversion factor. The conversion factor is determined by asset class and by the maturity of assets: Interest rate, foreign exchange and gold derivatives are valued by multiplying the notional amount by the following multiples based on maturity of the contract: .015 for a maturity of 1 year or less, .03 for a maturity of 1-3 years, .06 for a maturity of 3-5 years, .12 for a maturity of 5-10 years, and .3 for a maturity of over 10 years. Equity derivatives, regardless of maturity will be multiplied by a factor of .2. Other derivatives, including commodities other than gold will be multiplied by: .06 for a maturity of a year or less, .18 for a maturity of 1-3 years, .3 for a maturity of 3-5 years, .6 for a maturity of 5-10 years and 1 for a maturity of over 10 years.

(c) Remaining Maturity Method. The current credit exposure arising from a derivative transaction under the Remaining Maturity Method shall be the greater of zero or the sum of the current mark-to-market value of the derivative transaction added to the product of the notional amount, the remaining maturity in years of the transaction and a fixed multiplicative factor. Like the conversion factor, the fixed multiplicative factor is determined by asset class, but instead of having a fixed value for purposes of the lending limit over the life of a contract, as the maturity diminishes so does the value for purposes of the lending limit. The fixed multiplicative factor for interest rate, foreign exchange and gold derivatives is 1.5%. For equity derivatives and any other derivatives including commodities the fixed multiplicative factor will be 6%.

History

KEY: loans, banks, industrial loan corporations
Date of Last Change: December 24, 2012
Notice of Continuation: September 21, 2022
Authorizing, and Implemented or Interpreted Law: 7-3-19; 7-8-20

Utah Admin. Code R331-23-7 Record Keeping

(1) The board of directors shall review at least annually the most recent financial statements on all loans and extensions of credit, including credit exposure to a derivative transaction, to one person exceeding 10% of total capital. Based upon this review, the board of directors shall approve a determination that the conditions outlined in Rule R331-23-4 do not exist for such loans and extensions of credit. A statement of the above approval shall be incorporated into the minutes of the board of directors meeting at which the review was accomplished.

(2) In the case of loans and extensions of credit subject to the limitations of Section 7-3-19(2) and Rule R331-23- 3(2), a record of the market value of the collateral securing such loans or extensions of credit shall be maintained as set forth in Rule R331-23-3.

History

KEY: loans, banks, industrial loan corporations
Date of Last Change: December 24, 2012
Notice of Continuation: September 21, 2022
Authorizing, and Implemented or Interpreted Law: 7-3-19; 7-8-20

R331-24 Accounting for Accrued Uncollected Income by Banks and Industrial Loan Corporations

Utah Admin. Code R331-24-1 Authority, Scope, and Purpose

(1) This rule is issued pursuant to Section 7-1-301(14).

(2) This rule applies to all state chartered banks and industrial loan corporations.

(3) The purpose of this rule is to establish accounting requirements for accrued uncollected income to help ensure accurate accounting of the income of banks and industrial loan corporations.

History

KEY: financial institutions
Date of Last Change: November 3, 1998
Notice of Continuation: August 16, 2023
Authorizing, and Implemented or Interpreted Law: 7-1-301(14)

Utah Admin. Code R331-24-2 Definitions

(1) "Accrual basis of accounting" means the accounting method in which expenses are recorded when incurred, whether paid or unpaid, and income is recorded when earned, whether or not received.

(2) "Business credit card" means a credit card extended to a person for business purposes with a sponsoring company directly or indirectly obligated for payment of any advances.

(3) "Commissioner" means the Commissioner of Financial Institutions.

(4) "Consumer loan" means credit extended for household, family, and personal expenditures, including credit cards, and loans secured by one to four-family residential properties.

(5)(a) "Contractual commitment to advance funds" means:

(i) an obligation on the part of the bank or industrial loan corporation to make payments to a third party contingent upon default by the bank's or industrial loan corporation's customer in the performance of an obligation under the terms of that customer's contract with the third party or upon some other stated condition, or

(ii) an obligation to guarantee or stand as surety for the benefit of a third party.

(b) The term includes standby letters of credit, guarantees, puts, and other similar arrangements. A binding, written commitment to lend is a "contractual commitment to advance funds" if it and all other outstanding loans to the borrower are within the bank's or industrial loan corporation's lending limit on the date of the commitment.

(6) "In process of collection" means collection of the debt is proceeding in due course either through legal action, including judgment enforcement procedures, or, in appropriate circumstances, through collection efforts not involving legal action which are reasonably expected to result in repayment of the debt or in its restoration to a current status in the near future.

(7) "Loans and extensions of credit" means any direct or indirect advance of funds in any manner whatsoever to a person. This is made on the basis of any obligation of that person to repay the funds, or repayable from specific property pledged by or on behalf of a person. Loans and extensions of credit includes:

(a) A purchase under repurchase agreement of securities, other assets, or obligations other than investment grade securities in which the purchasing bank or industrial loan corporation has a perfected security interest with regard to the seller but not as an obligation of the underlying obligor of the security;

(b) An advance by means of an overdraft, cash item, or otherwise;

(e) A participation without recourse with regard to the participating bank or industrial loan corporation, but not the originating bank or industrial loan corporation; and

(f) Existing loans, leases, or advances which have been charged off on the books of the bank or industrial loan corporation in whole or in part and which is legally enforceable, including statutory bad debt under Section 7-3-25 or 7-8-15 respectively.

(8) "Loans or extensions of credit" does not include:

(a) A receipt by a bank or an industrial loan corporation of a check deposited in or delivered to the bank or industrial loan corporation in the usual course of business, unless it results in the carrying of a cash item for the granting of an overdraft, other than an inadvertent overdraft in a limited amount that is promptly repaid;

(c) An endorsement or guarantee for the protection of a bank or industrial loan corporation of any loan or other asset previously acquired by the bank or industrial loan corporation in good faith, or any indebtedness to a bank or industrial loan corporation for the purpose of protecting the bank or industrial loan corporation against loss or of giving financial assistance to it;

(d) Non-interest bearing deposits to the credit of the bank or industrial loan corporation;

(e) The giving of immediate credit to a bank or industrial loan corporation upon uncollected items received in the ordinary course of business;

(g) The sale of federal funds; or

(h) Loans or extensions of credit which have become unenforceable by reason of discharge in bankruptcy or are no longer legally enforceable for other reasons.

(9) "Standby letter of credit" means any letter of credit, or similar arrangement however named or described, that represents an obligation to the beneficiary on the part of the issuer:

(a) To repay money borrowed by or advanced to or for the account of the account party; or

(b) To make payment on account of any indebtedness undertaken by the account party; or

(10) "Well-secured" means a debt that is secured by:

(a) Collateral in the form of liens on or pledges of real or personal property, including securities, that have a realizable value sufficient to discharge the debt in full, including accrued interest; or

(b) The guarantee of a financially responsible party.

History

KEY: financial institutions
Date of Last Change: November 3, 1998
Notice of Continuation: August 16, 2023
Authorizing, and Implemented or Interpreted Law: 7-1-301(14)

Utah Admin. Code R331-24-3 Accounting for Accrued Uncollected Income

(1) General Rule:

A bank or industrial loan corporation that uses the accrual basis of accounting to prepare its financial statements shall, at each regularly scheduled board meeting, review all earned but uncollected income and determine the portion of it that is uncollectible. This determination shall be in accordance with generally accepted accounting principles. At a minimum, the following events should stop the accrual of income:

(a) The accrual of interest income shall cease when any loan or extension of credit is contractually 90 days delinquent.

(i) For a monthly installment account, four payments delinquent is the equivalent of 90 days delinquent.

(ii) For a single-payment commercial account that calls for interest-only payments prior to maturity, the 90-day period commences with the interest-only due date.

(b) No further income may be recognized for a precomputed loan, lease, or discounted contract when it becomes 90 days delinquent.

(c) In restructuring a loan or extension of credit, a bank or industrial loan corporation may only capitalize or add to the new principal balance up to 90 days' interest, unless the board of directors specifically approves otherwise in writing at its next regularly scheduled meeting. If, at that meeting, the board fails to approve the capitalization of additional interest, the loan or extension of credit is considered to be more than 90 days delinquent, and the accrual of interest income shall cease.

(2) Exemptions:

Subsection (1) does not limit the accrual of interest income:

(a) for any consumer loan that is in the process of collection;

(b) for any business credit card balance that is in the process of collection;

(c) for loans or other debt instruments acquired at a discount (because there is uncertainty as to the amounts or timing of future cash flow) from an unaffiliated third party (such as another institution or the receiver of a failed institution), including those that the seller had maintained in nonaccrual status, and that met the amortization criteria specified in the AICPA Bulletin No. 6.

(d) for loans secured by a 1-to-4 family residential property. Nevertheless, such loans should be subject to other alternative methods of evaluation to assure the financial institution's net income is not materially overstated.

(e) for any other loan or lease that is both well-secured and in the process of collection;

(f) to the extent the commissioner provides an additional exemption from Subsection (1) by express, prior, written approval;

(3) Notwithstanding this rule, all extensions of credit are subject to Sections 7-3-25 and 7-8-15.

History

KEY: financial institutions
Date of Last Change: November 3, 1998
Notice of Continuation: August 16, 2023
Authorizing, and Implemented or Interpreted Law: 7-1-301(14)

Utah Admin. Code R331-24-4 Penalty for Violation

Failure of management and the board of directors to make the review and determinations required by this rule, in good faith and in accordance with generally accepted accounting principles, constitutes grounds for supervisory sanction under Sections 7-1-307 and 7-1-308.

History

KEY: financial institutions
Date of Last Change: November 3, 1998
Notice of Continuation: August 16, 2023
Authorizing, and Implemented or Interpreted Law: 7-1-301(14)

R331-25 Rule Governing Debt Cancellation and Debt Suspension Agreements Issued by Depository Institutions, Who Are Under the Jurisdiction of the Department of Financial Institutions

Utah Admin. Code R331-25-1 Authority, Scope and Purpose

(1) This rule is issued pursuant to Section 7-1-324(2).

(2) This rule governs the issuance of a debt cancellation agreement or debt suspension agreement by a depository institution under the jurisdiction of the Department of Financial Institutions.

(3) This rule establishes uniform rules for debt cancellation and debt suspension agreements by depository institutions subject to the jurisdiction of the department and minimum standards of disclosure to protect the public interest.

History

KEY: financial institutions, debt cancellation, debt suspension
Date of Last Change: October 15, 2003
Notice of Continuation: October 5, 2023
Authorizing, and Implemented or Interpreted Law: 7-1-324(2)

Utah Admin. Code R331-25-2 Definitions

(1) "Actuarial method" means the method of allocating payments made on a debt between the amount financed and the finance charge pursuant to which a payment is applied first to the accumulated finance charge and any remainder is subtracted from, or any deficiency is added to, the unpaid balance of the amount financed.

History

KEY: financial institutions, debt cancellation, debt suspension
Date of Last Change: October 15, 2003
Notice of Continuation: October 5, 2023
Authorizing, and Implemented or Interpreted Law: 7-1-324(2)

Utah Admin. Code R331-25-3 Refunds of Fees in the Event of Termination or Prepayment of the Covered Loan

(1) Refunds. If a debt cancellation agreement or debt suspension agreement is terminated (including, for example, when the customer prepays the covered loan), the depository institution shall refund to the customer any unearned fees paid for the agreement unless the agreement provides otherwise. A depository institution may offer a customer an agreement that does not provide for a refund only if the depository institution also offers that customer a bona fide option to purchase a comparable agreement that provides a refund.

(2) Method of calculating refund. The depository institution shall calculate the amount of a refund using a method at least as favorable to the customer as the actuarial method.

(3) Method of payment of fees. Except as provided in R331-25-6(3)(b), a depository institution may offer a customer the option of paying the fee for an agreement in a single payment, provided the depository institution also offers the customer a bona fide option of paying the fee for that agreement in monthly or other periodic payments. If the depository institution offers the customer the option to finance the single payment by adding it to the amount the customer is borrowing, the depository institution must also disclose to the customer, in accordance with R331-25-4, whether and, if so, the time period during which, the customer may cancel the agreement and receive a refund.

History

KEY: financial institutions, debt cancellation, debt suspension
Date of Last Change: October 15, 2003
Notice of Continuation: October 5, 2023
Authorizing, and Implemented or Interpreted Law: 7-1-324(2)

Utah Admin. Code R331-25-4 Disclosures

(1) Content of short form of disclosures. The short form of disclosures required by this rule must include:

(a) a statement that the purchase of the agreement is optional and whether or not the consumer purchases the agreement will have no effect on their application for credit or the terms of any existing credit agreement;

(b) a statement that the consumer may choose to pay the fee in a single lump sum or in monthly/quarterly payments and a disclosure that adding a lump sum of the fee to the amount borrowed will increase the cost of the agreement;

(c) a statement that the consumer may choose an agreement with or without a refund provision and that the prices are likely to differ;

(d) a statement that the depository institution will provide additional information before the consumer is required to pay for the agreement.

(2) Content of long form of disclosures. The long form of disclosures required by this rule must include:

(b) an explanation that a debt suspension agreement means that the duty to pay the loan principal and interest to the depository institution or industrial loan company is only suspended and does not cancel the obligation if the agreement is activated;

(c) a statement describing the total fee for the agreement and that the consumer may choose to pay the fee in a single lump sum or in monthly/quarterly payments and a disclosure that adding a lump sum of the fee to the amount borrowed will increase the cost of the agreement plus the formula used to compute any monthly or quarterly fee payment;

(d) a statement that the consumer may choose an agreement with or without a refund provision and that the prices are likely to differ;

(e) a statement explaining the circumstances under which the consumer or the depository institution can terminate the agreement if termination is permitted during the life of the loan.

(3) Disclosure requirements; timing and method of disclosures.

(a) Short form disclosures: The depository institution shall make the short form disclosures orally at the time the depository institution first solicits the purchase of an agreement.

(b) Long form disclosures: The depository institution shall make the long form disclosures in writing before the customer completes the purchase of the agreement. If the initial solicitation occurs in person, then the depository institution shall provide the long form disclosures in writing at that time.

(c) Transactions by telephone: If the agreement is solicited by telephone, the depository institution shall provide the short form disclosures orally and shall mail the long form disclosures, and, if appropriate, a copy of the agreement to the customer within 3 business days, beginning on the first business day after the telephone solicitation.

(d) Solicitations using written mail inserts or ''take one'' applications: If the agreement is solicited through written materials such as mail inserts or ''take one'' applications, the depository institution may provide only the short form disclosures in the written materials if the depository institution mails the long form disclosures to the customer within 3 business days, beginning on the first business day after the customer contacts the depository institution to respond to the solicitation, subject to the requirements of R331-25-5(3).

(e) Electronic transactions: The disclosures described in this section may be provided through electronic media in a manner consistent with the requirements of the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. 7001 et seq.

(4) Form of disclosures.

(a) Readily Understandable: The disclosures required by this section must be conspicuous, simple, direct, readily understandable, and designed to call attention to the nature and significance of the information provided.

(b) Meaningful: The disclosures required by this section must be in a meaningful form. Examples of methods that could call attention to the nature and significance of the information provided include:

(i) A plain-language heading to call attention to the disclosures;

(ii) A typeface and type size that are easy to read;

(iii) Wide margins and ample line spacing;

(iv) Boldface or italics for key words; and

(v) Distinctive type style, and graphic devices, such as shading or sidebars, when the disclosures are combined with other information.

(5) Advertisements and other promotional material for debt cancellation agreements and debt suspension agreements. The short form disclosures are required for advertisements and promotional material for agreements unless the advertisements and promotional materials are of a general nature describing or listing the services or products offered by the depository institution.

History

KEY: financial institutions, debt cancellation, debt suspension
Date of Last Change: October 15, 2003
Notice of Continuation: October 5, 2023
Authorizing, and Implemented or Interpreted Law: 7-1-324(2)

Utah Admin. Code R331-25-5 Affirmative Election to Purchase and Acknowledgment of Receipt of Disclosures

(1) Affirmative election and acknowledgment of receipt of disclosures. Before entering into an agreement the depository institution must obtain a customer's written affirmative election to purchase an agreement and written acknowledgment of receipt of the disclosures required by R331-25-4(2). The election and acknowledgment information must be conspicuous, simple, direct, readily understandable, and designed to call attention to their significance. The election and acknowledgment satisfy these standards if they conform with the requirements in R331-25-4(2) of this rule.

(2) Telephone solicitations: If the sale of an agreement occurs by telephone, the customer's affirmative election to purchase may be made orally, provided the depository institution:

(a) Maintains sufficient documentation to show that the customer received the short form disclosures and then affirmatively elected to purchase the agreement;

(b) Mails the affirmative written election and written acknowledgment, together with the long form disclosures required by this subsection, to the customer within 3 business days after the telephone solicitation, and maintains sufficient documentation to show it made reasonable efforts to obtain the documents from the customer; and

(c) Permits the customer to cancel the purchase of the agreement without penalty within 30 days after the depository institution has mailed the long form disclosures to the customer.

(3) Solicitations using written mail inserts or ''take one'' applications: If the agreement is solicited through written materials such as mail inserts or ''take one'' applications and the depository institution provides only the short form disclosures in the written materials, then the depository institution shall mail the acknowledgment of receipt of disclosures, together with the long form disclosures required by this subsection, to the customer within 3 business days, beginning on the first business day after the customer contacts the depository institution or otherwise responds to the solicitation. The depository institution may not obligate the customer to pay for the agreement until after the depository institution has received the customer's written acknowledgment of receipt of disclosures unless the depository institution:

(a) Maintains sufficient documentation to show that the depository institution provided the acknowledgment of receipt of disclosures to the customer as required by this subsection;

(b) Maintains sufficient documentation to show that the depository institution made reasonable efforts to obtain from the customer a written acknowledgment of receipt of the long form disclosures; and

(c) Permits the customer to cancel the purchase of the agreement without penalty within 30 days after the depository institution has mailed the long form disclosures to the customer.

(4) Electronic election: The affirmative election and acknowledgment may be made electronically in a manner consistent with the requirements of the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. 7001 et seq.

History

KEY: financial institutions, debt cancellation, debt suspension
Date of Last Change: October 15, 2003
Notice of Continuation: October 5, 2023
Authorizing, and Implemented or Interpreted Law: 7-1-324(2)

Utah Admin. Code R331-25-6 Prohibited Practices

(1) A depository institution may not extend credit nor alter the terms or conditions of an extension of credit conditioned upon the customer entering into a debt cancellation agreement or debt suspension agreement with the depository institution.

(2) A depository institution may not engage in any practice or use any advertisement that could mislead or otherwise cause a reasonable person to reach an erroneous expectation with respect to information that must be disclosed under this rule.

(3) Prohibited contract terms. A depository institution may not offer debt cancellation agreements or debt suspension agreements that contain contract terms:

(a) Giving the depository institution the right unilaterally to modify the agreement unless:

(i) The modification is favorable to the customer and is made without additional charge to the customer; or

(ii) The customer is notified of any proposed change and is provided a reasonable opportunity to cancel the agreement without penalty before the change goes into effect; or

(b) Requiring a lump sum, single payment for the agreement payable at the outset of the agreement, where the debt subject to the agreement is a residential mortgage loan.

History

KEY: financial institutions, debt cancellation, debt suspension
Date of Last Change: October 15, 2003
Notice of Continuation: October 5, 2023
Authorizing, and Implemented or Interpreted Law: 7-1-324(2)

Utah Admin. Code R331-25-7 Safety and Soundness Requirements

A depository institution must manage the risks associated with debt cancellation agreements and debt suspension agreements in accordance with safe and sound banking principles. Accordingly, a depository institution must establish and maintain effective risk management and control processes over its debt cancellation agreements and debt suspension agreements. Such processes include appropriate recognition and financial reporting of income, expenses, assets and liabilities, and appropriate treatment of all expected and unexpected losses associated with the agreements. A depository institution also should assess the adequacy of its internal control and risk mitigation activities in view of the nature and scope of its debt cancellation agreement and debt suspension agreement programs.

History

KEY: financial institutions, debt cancellation, debt suspension
Date of Last Change: October 15, 2003
Notice of Continuation: October 5, 2023
Authorizing, and Implemented or Interpreted Law: 7-1-324(2)

R331-26 Ownership of Real Estate Other Than Property Used for Institution Business or Held as an Investment by Depository Institutions Subject to the Jurisdiction of the Department of Financial Institutions

Utah Admin. Code R331-26-1 Authority, Scope, and Purpose

(1) This rule is issued pursuant to Sections 7-1-301, 7-3-18, 7-8-13, and 7-9-5.

(2) This rule applies to all depository institutions chartered by the State of Utah.

(3) The purpose of this rule is to protect the safety and soundness of state-chartered depository institutions by prescribing requirements and restrictions for the prudent management of real estate held for purposes other than conducting the depository institution's business.

History

KEY: financial institutions, real estate, real estate investing
Date of Last Change: February 1, 2011
Notice of Continuation: January 6, 2026
Authorizing, and Implemented or Interpreted Law: 7-1-301; 7-3-18; 7-8-13; 7-9-5

Utah Admin. Code R331-26-2 Definitions

For the purposes of this rule:

(1) A "covered transaction" is a sale of a parcel of other real estate held by a depository institution where less than 10% of the total sales price is in cash; where the depository institution finances all or a portion of the sales price on terms more favorable than those customarily offered by the depository institution at that point in time when acting solely as lender; or where the transaction does not transfer from the depository institution to the buyer substantially all of the usual risks and benefits of ownership. A transaction ceases to be covered when all of the aforementioned conditions no longer apply. It will be deemed that 10% of the sales price has been paid in cash when the cash received by the depository institution as a down payment together with that portion of the sales price guaranteed to the depository institution by private mortgage insurance or an equivalent guarantee equals or exceeds 10% of the total sales price, or when the unpaid principal balance of any debt to the depository institution resulting from a covered transaction, less the amount of any private mortgage insurance or equivalent guarantee, falls below 90% of the total sales price.

(2) "Depository institution" means depository institution as defined in Section 7-1-103.

(3) "Fair value" is the cash price that might reasonably be anticipated in a current sale under all conditions requisite to a fair sale. A fair sale means that buyer and seller are each acting prudently, knowledgeably and under no necessity to buy or sell. Any related appraisal should estimate the cash price that might be received upon exposure to the open market for a reasonable time, considering the property type and local market conditions. When it is unlikely that the sale can be completed within 12 months, the appraisal must discount all cash flows generated by the property to obtain the estimate of fair values. These cash flows include those arising from ownership, development, operation, and sale of the property. The discount applied shall reflect the appraiser's judgment of what a prudent, knowledgeable purchaser under no necessity to buy would be willing to pay to purchase the property in a current sale.

(4) "Other real estate" means all real property held by a depository institution except premises and real property acquired and held as a permitted investment.

(5) "Premises" means real property recorded as an asset on a depository institution's books or otherwise held by a depository institution which is used in the conduct of the depository institution's business, including leasehold improvements and capital leases of real property. It also includes real property acquired and held for future use where the minutes of the board of directors show the depository institution in good faith intends to utilize such property in the conduct of the depository institution's business within three years.

(6) The "recorded investment in the debt satisfied" is the unpaid balance of the debt, accrued and uncollected interest, any legal fees or direct costs of acquiring title to the property, unamortized premium and loan acquisition costs, if any, less any prior direct writedowns, unamortized discount, and finance charges.

(7) "Supervisor" means the appropriate supervisor within the Department of Financial Institutions.

History

KEY: financial institutions, real estate, real estate investing
Date of Last Change: February 1, 2011
Notice of Continuation: January 6, 2026
Authorizing, and Implemented or Interpreted Law: 7-1-301; 7-3-18; 7-8-13; 7-9-5

Utah Admin. Code R331-26-3 Purchasing, Holding, and Conveying Other Real Estate

A state chartered depository institution may purchase, hold, and convey other real estate which is:

(1) taken to satisfy, in whole or part, a debt previously contracted;

(2) purchased at a sale to foreclose a lien or other security interest claimed by the depository institution in the property;

(3) former premises or property originally acquired for use by the depository institution but no longer used or intended to be used as such within the next three years; or

(4) real property sold by a depository institution in a covered transaction after the effective date of this rule.

History

KEY: financial institutions, real estate, real estate investing
Date of Last Change: February 1, 2011
Notice of Continuation: January 6, 2026
Authorizing, and Implemented or Interpreted Law: 7-1-301; 7-3-18; 7-8-13; 7-9-5

Utah Admin. Code R331-26-4 Limitations on the Holding of Other Real Estate

(1) A depository institution may not hold any parcel of other real estate for a period longer than five years from the date title is transferred to the institution without the prior written approval of the appropriate supervisor.

(2) A depository institution may expend funds for the development and improvement of other real estate if the board of directors of the depository institution has determined there is a reasonable likelihood that the expenditure will increase the depository institution's recovery from sale or other disposition of the property in an amount greater than the total amounts to be expended, and the depository institution's interest in the property is otherwise sufficient to justify the expenditure. These requirements shall not apply to expenditures for routine repair and maintenance of the property nor to expenditures not exceeding $100,000 or 5% of the gross value of the property, whichever is less.

(3) A depository institution may assume or pay superior liens on other real estate if the depository institution's interest in the property is sufficient to justify such expenditure.

(4) A depository institution must diligently pursue all reasonable means to dispose of each parcel of other real estate and shall maintain a current record of all such efforts.

(5) Each parcel of other real estate will be accounted for at the lower of the recorded investment in the debt satisfied or its fair value on the date the property was transferred to other real estate. Any excess of the recorded investment in the debt satisfied over the fair value of the property must be charged against the reserve for loan losses.

(6) Real estate no longer used for depository institution business will be accounted for at the lower of its net book value or its fair value at the date of transfer to other real estate owned. Any excess of net book value over fair value shall be charged to expense for the current period.

(7) For each parcel of other real estate where the recorded investment in the loan satisfied is in excess of 5% of the equity capital or net worth of the depository institution or $250,000, whichever is less:

(a) prior to transfer to other real estate, fair value must be established by an appraisal prepared by an independent, qualified appraiser, and

(b) the depository institution must obtain annually from an independent qualified appraiser an appraisal, an updated appraisal, or an evaluation of the current fair value of each parcel of other real estate.

History

KEY: financial institutions, real estate, real estate investing
Date of Last Change: February 1, 2011
Notice of Continuation: January 6, 2026
Authorizing, and Implemented or Interpreted Law: 7-1-301; 7-3-18; 7-8-13; 7-9-5

Utah Admin. Code R331-26-5 Covered Transactions Authorized by Commissioner

The commissioner authorizes any covered transaction to be booked as a receivable in accordance with Financial Accounting Standards Board Accounting Standards Codification 360.20, Real Estate Sales, which is incorporated by reference.

History

KEY: financial institutions, real estate, real estate investing
Date of Last Change: February 1, 2011
Notice of Continuation: January 6, 2026
Authorizing, and Implemented or Interpreted Law: 7-1-301; 7-3-18; 7-8-13; 7-9-5

R333 Banks

R333-5 Discount Securities Brokerage Service by Banks

Utah Admin. Code R333-5-1 Authority, Scope, and Purpose

(1) This rule is issued pursuant to Subsection 7-1-301(3)(a) and Section 7-3-3.2.

(2) This rule governs the type of securities brokerage service state chartered banks may offer.

(3) The purpose of this rule is to limit securities activities to "discount brokerage" services and to give state chartered banks competitive equality with national banks which have their principal office in this state by granting the same rights and privileges to state chartered banks as are enjoyed by Utah's national banks.

History

KEY: banks and banking, securities
Date of Last Change: December 2, 1997
Notice of Continuation: September 8, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(3); 7-3-3.2

Utah Admin. Code R333-5-2 Definitions

"Discount brokerage" means the practice of executing securities transactions solely at the direction of a bank customer but not providing that customer with any investment advice.

History

KEY: banks and banking, securities
Date of Last Change: December 2, 1997
Notice of Continuation: September 8, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(3); 7-3-3.2

Utah Admin. Code R333-5-3 Discount Brokerage Services

A state chartered bank may enter into a contractual arrangement with unrelated discount brokers where the broker executes securities transactions for bank customers and the bank shares the commissions generated by the transaction. This service is restricted as outlined below:

(1) The bank clearly acts solely at the customer's direction;

(2) The transactions are for the account of the customer and not the account of the bank;

(3) The transactions are without recourse;

(4) The bank makes no warranty as to the performance or quality of any security;

(5) The bank does not advise customers to make any particular investment;

(6) The bank's promotional material clearly explains the bank's limited role in the service; and

(7) The bank's promotional material clearly explains that the transactions are not federally insured.

History

KEY: banks and banking, securities
Date of Last Change: December 2, 1997
Notice of Continuation: September 8, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(3); 7-3-3.2

R333-7 Investment by a State-Chartered Bank in Shares of Open-End Investment Companies

Utah Admin. Code R333-7-1 Authority, Scope, and Purpose

(1) This rule is issued pursuant to Subsection 7-1-301(8)(b)(i) and Section 7-3-3.2.

(2) This rule permits a state-chartered bank to purchase for its own account shares of open-end investment companies subject to certain restrictions.

(3) This rule expands the eligible classes and types of investments for state-chartered banks and gives them rights, privileges and powers granted to national banks.

History

KEY: banks and banking, investments
Date of Last Change: 1995
Notice of Continuation: August 29, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(8)(a); 7-3-3.2

Utah Admin. Code R333-7-2 Definitions

(1) "Open-end investment company" is one in which the shares are purchased or sold at par. The fund must be an open-ended investment company registered with the Securities and Exchange Commission under the Investment Company Act of 1940 and Securities Act of 1933 or a privately offered fund sponsored by an affiliated commercial bank.

(2) "Total capital" means the sum of capital stock, surplus, undivided profits, reserves for loan losses, reserve for contingencies, and subordinated notes and debentures with more than one year maturity.

History

KEY: banks and banking, investments
Date of Last Change: 1995
Notice of Continuation: August 29, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(8)(a); 7-3-3.2

Utah Admin. Code R333-7-3 Investment by a State-Chartered Bank in Shares of Open-End Investment Companies

(1) A state chartered bank may purchase and hold shares of an open-end investment company which are purchased or sold at par without limitation if the portfolio of the company consists wholly of obligations of, or obligations which are fully guaranteed as to principal and interest by the United States or this state.

(2) A state-chartered bank may invest an amount not to exceed 15% of the bank's total capital in any one money market fund with a Standard and Poor's Money Market Fund Rating of AAAm.

History

KEY: banks and banking, investments
Date of Last Change: 1995
Notice of Continuation: August 29, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(8)(a); 7-3-3.2

R333-8 Authority for Banks to Issue Subordinated Capital Notes or Debentures

Utah Admin. Code R333-8-1 Authority, Scope, and Purpose

(1) This rule is issued pursuant to Subsection 7-1-301(8) and Section 7-3-28.

(2) This rule applies to all commercial banks chartered by the State of Utah which issue convertible or non- convertible subordinated capital notes or debentures.

(3) The purpose of this rule is to establish the criteria and procedures for issuance of subordinated capital notes or debentures and limitations on the total amount of such instruments which may be outstanding in order to protect the bank's depositors and shareholders.

History

KEY: banks and banking
Date of Last Change: 1995
Notice of Continuation: September 8, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(8)(e); 7-3-28

Utah Admin. Code R333-8-2 Definitions

(1) "Capital Stock" means the total of:

(a) the par value of all shares of the bank having a par value that have been issued; plus

(b) the amount of the consideration received by the bank for all shares of the bank without par value that have been issued, except that part of the consideration which has been allocated to capital surplus in a manner permitted by law; plus

(c) the amounts not included in Subsections (a) and (b) as have been transferred to stated capital of the bank, whether upon the issue of shares as a share dividend or otherwise; minus

(d) all reductions from such sum as have been effected in a manner permitted by law.

(2) "Mandatory Convertible Securities" means any capital securities which require that at some future date the issuer must exchange common or perpetual preferred stock for the outstanding security.

(3) "Surplus" means the total of:

(a) the amount paid to the bank in excess of the par value of its capital stock, or, in the case of stock without par value, the amount designated as surplus of the total amount received for its capital stock,

(b) amounts received as capital contributions, and

History

KEY: banks and banking
Date of Last Change: 1995
Notice of Continuation: September 8, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(8)(e); 7-3-28

Utah Admin. Code R333-8-3 Authority to Issue Capital Notes and Debentures

(1) Any bank may, with the authorization by resolution of its board of directors, make application to the commissioner for permission to issue mandatory convertible, non-convertible, or optional convertible capital notes or debentures, subordinated to the claims of depositors and other creditors.

(2) The commissioner may grant approval for the issuance of mandatory convertible subordinated capital notes or debentures in such amounts and under such terms and conditions as he shall deem appropriate, provided that:

(a) All relevant provisions of Rule R331-5 have been complied with;

(b) The terms of any issue of mandatory convertible securities must require that all securities be converted to common stock or perpetual preferred stock within ten years of the date of issuance;

(c) The aggregate principal amount of all mandatory convertible securities outstanding at any time, together with the aggregate principal amount of all non-convertible or optional convertible securities outstanding shall not exceed 150% of the sum of the bank's capital stock and surplus accounts;

(d) Mandatory convertible securities may be redeemed prior to maturity only with the proceeds from the sale of common stock or perpetual preferred stock of the bank or bank holding company;

(e) The holder of the security cannot accelerate payment of principal except in the event of bankruptcy, insolvency, or reorganization;

(f) The security must be subordinate in right of payment to all senior indebtedness of the issuer. If the proceeds from the sale of such securities are to be loaned to an affiliate, that loan must be subordinated to the same extent as the original issue;

(g) The bank has a record of sound performance and management; and

(h) The securities shall not be used as collateral for loans or extensions of credit made by the bank.

(3) The commissioner may grant approval for the issuance of non-convertible or optional convertible subordinated capital notes or debentures in such amounts and under such terms and conditions as he shall deem appropriate, provided that:

(a) All relevant provisions and conditions of Department Rule R331-5 have been complied with;

(b) Each issue shall have a weighted average maturity at issuance of not less than seven years;

(c) The aggregate principal amount of all non-convertible and optional convertible securities outstanding at any time, together with the aggregate principal amount of all mandatory convertible securities outstanding shall not exceed 150% of the sum of the bank's capital stock and surplus accounts;

(d) The holder of the security cannot accelerate payment of principal except in the event of bankruptcy, insolvency, or reorganization;

(e) The security must be subordinate in right of payment to all senior indebtedness of the issuer. If the proceeds from the sale of such securities are to be loaned to an affiliate, that loan must be subordinated to the same extent as the original issue;

(f) The bank has a record of sound performance and management and can demonstrate that the bank will be able to generate earnings and cash flows adequate to service the subordinated notes or debentures; and

(g) The subordinated capital notes or debentures shall not be used as collateral for loans or extensions of credit made by the bank.

History

KEY: banks and banking
Date of Last Change: 1995
Notice of Continuation: September 8, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(8)(e); 7-3-28

Utah Admin. Code R333-8-4 Disclosure

All subordinated capital notes or debentures issued by a bank, whether convertible or not, shall have the following provisions made in the body of the note or debenture and these provisions shall be disclosed in either a bold face type or in a size of type which is larger than the type face used in the other provisions carried in the body of the note or debenture.

(1) This obligation is NOT insured by the Federal Deposit Insurance Corporation.

(2) This obligation is subordinated to the claims of all depositors and other creditors.

(3) Subordinated capital notes or debentures shall not be used as collateral for loans made by the bank.

(4) The disclosure required under subsections (1) and (2) of this section shall be prominently displayed in all advertising of capital notes or debentures.

History

KEY: banks and banking
Date of Last Change: 1995
Notice of Continuation: September 8, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(8)(e); 7-3-28

Utah Admin. Code R333-8-5 Use as Capital

The outstanding principal amount of all mandatory convertible securities and all subordinated capital notes or debentures not maturing within one year shall be added to the capital of the issuing bank for the purpose of determining the amount of "total capital" under the provisions of Section 7-3-19.

History

KEY: banks and banking
Date of Last Change: 1995
Notice of Continuation: September 8, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(8)(e); 7-3-28

Utah Admin. Code R333-8-6 Exceptions to the Limits on Amounts of Subordinated Capital Notes or Debentures Which May Be Issued

(1) Notwithstanding the limitation imposed by this rule, subordinated capital notes or debentures assumed under a supervisory action or plan or reorganization pursuant to Sections 7-2-1, 7-2-12 or 7-2-18 may, at the discretion of the commissioner, exceed the maximum limitation imposed by this rule.

(2) Notwithstanding the limitation imposed by this rule, subordinated capital notes or debentures issued to the Federal Deposit Insurance Corporation pursuant to Section 13(c) of the Federal Deposit Insurance Act, 12 U.S.C. 1823(c), may, at the discretion of the Commissioner, exceed the maximum limitation imposed by this rule.

History

KEY: banks and banking
Date of Last Change: 1995
Notice of Continuation: September 8, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(8)(e); 7-3-28

R333-9 Indemnification of Directors, Officers, and Employees

Utah Admin. Code R333-9-1 Authority, Scope, and Purpose

(1) This rule is issued pursuant to Sections 7-1-301(4) and 7-3-13.

(2) This rule defines, clarifies and limits the extent to which a state chartered bank may provide in its articles of incorporation or bylaws for the indemnification of directors, officers and employees under the general corporate powers provision of Sections 16-10a-901 through 16-10a-909.

(3) The purpose of this rule is to deter acts that could threaten the safety and soundness of all state chartered banks by specifically prohibiting the indemnification of directors, officers and employees when a supervisory action results in a final order assessing civil money penalties or requiring affirmative action in the form of payment by an individual to a state chartered bank; to specifically set forth the commissioner's authority to deny or modify an indemnification which appears to be inconsistent with the standards stated in the bank's indemnification article or which would jeopardize the safety and soundness of any state chartered bank; and to specifically prohibit any state chartered bank from insuring any of its directors or employees against a final supervisory order assessing civil money penalties.

History

KEY: banks and banking
Date of Last Change: 1995
Notice of Continuation: September 8, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(4); 7-3-13

Utah Admin. Code R333-9-2 Indemnification of Directors, Officers, and Employees

(1) A state chartered bank may provide in its articles of incorporation or bylaws for the indemnification of directors, officers and employees for expenses personally incurred in actions to which the directors, officers or employees are parties or potential parties by reason of the performance of their official duties. Indemnification articles which substantially reflect the general provisions of Sections 16-10a-901 through 16-10a-909 are presumed by the department to be within the corporate powers of state chartered banks.

(2) The indemnification provisions shall not allow the indemnification, directly or indirectly, of directors, officers, or employees of a state chartered bank against expenses, penalties or other payments incurred in an administrative proceeding or action instituted by an appropriate bank regulatory agency which proceeding or action results in a final order assessing civil money penalties or requiring affirmative action by an individual or individuals in the form of payments to the bank.

(3) In accordance with his supervisory responsibilities, the commissioner may, in his discretion, review the threat to bank safety and soundness posed by any indemnification or proposed indemnification of directors, officers, or employees of any state chartered bank, or for the consistency of any such indemnification with the standards adopted by that bank in its articles of incorporation or bylaws. Based upon this review, the commissioner may direct a modification of a specific indemnification by a bank through appropriate administrative action.

(4) A state chartered bank may provide in its articles of incorporation or bylaws for the payment of premiums for insurance covering the liability of its directors, officers or employees to the extent that the coverage is provided for in Sections 16-10a-901 through 16-10a-909, except that the provision shall explicitly exclude insurance coverage for a formal supervisory order assessing civil money penalties against a bank director, officer or employee.

History

KEY: banks and banking
Date of Last Change: 1995
Notice of Continuation: September 8, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(4); 7-3-13

R333-10 Securities Activities of Subsidiaries and Affiliates of State-Chartered Banks

Utah Admin. Code R333-10-1 Authority, Scope, and Purpose

(1) This rule is issued pursuant to Sections 7-3-3.2 and 7-3-21.

(2) This rule sets forth standards to govern securities activities of state chartered banks.

(3) The purpose of this rule is to establish safeguards to ensure that subsidiaries or affiliates engaged in securities activities do not endanger the safeness and soundness of state chartered banks.

History

KEY: banks and banking, securities, subsidiaries
Date of Last Change: 1995
Notice of Continuation: September 8, 2022
Authorizing, and Implemented or Interpreted Law: 7-3-21

Utah Admin. Code R333-10-2 Definitions

(1) "Affiliate" means any company that directly or indirectly, through one or more intermediaries, controls or is under common control with a state chartered bank.

(2) "Bona fide subsidiary" means a subsidiary of a bank that at a minimum:

(a) Is adequately capitalized;

(b) Is physically separate and distinct from the depository operations of the bank;

(d) Maintains separate accounting and other corporate records;

(e) Shares no common officers or employees with the bank or its holding company;

(f) A majority of its board of directors is composed of persons who are neither directors nor officers of the bank or its holding company;

(g) Conducts business pursuant to independent policies and procedures designed to inform customers and prospective customers of the subsidiary that the subsidiary is a separate organization from the bank and that investments recommended, offered or sold by the subsidiary are not bank deposits, are not insured by the FDIC, and are not guaranteed by the bank or its holding company nor are otherwise obligations of the bank or its holding company.

(3) "Company" means any corporation, other than a bank, any partnership, business trust, association, joint venture, pool syndicate, or other similar business organization.

(4) "Control" means "control" as defined in Section 7-1-103.

(5) "Extension of credit" means the making or renewal of any loan, a draw upon a line of credit, or an extending of credit in any manner whatsoever and includes:

(a) A purchase, whether or not under repurchase agreement, of securities, other assets, or obligations;

(b) An advance by means of an overdraft, cash item, or otherwise;

(d) An acquisition by discount, purchase, exchange, or otherwise of any note, draft, bill of exchange, or other evidence of indebtedness upon which a natural person or company may be liable as maker, drawer, endorser, guarantor, or surety;

(e) A discount of promissory notes, bills of exchange, conditional sales contracts, or similar paper, whether with or without recourse;

(f) An increase of an existing indebtedness, but not if the additional funds are advanced by the bank for its own protection for

(i) accrued interest or

(ii) taxes, insurance, or other expenses incidental to the existing indebtedness; or

(g) Any other transaction as a result of which a natural person or company becomes obligated to pay money, or its equivalent to a bank, whether the obligation arises directly or indirectly, or because of an endorsement on an obligation or otherwise, or by any means whatsoever.

(6) "Investment quality debt security" means a marketable obligation in the form of a bond, note, or debenture that is rated in the top four rating categories by a nationally recognized rating service or a marketable obligation in the form of a bond, note, or debenture, the investment characteristics of which are equivalent to the investment characteristics of such a top-rated obligation.

(7) "Investment quality equity security" means marketable common stock that is ranked or graded in the top four categories or equivalent categories by a nationally recognized rating service, marketable preferred corporate stock that is rated in the top four rating categories by a nationally recognized rating service, or marketable preferred corporate stock that has investment characteristics that are equivalent to the investment characteristics of top rated preferred corporate stock.

(8) "Subsidiary" means any company controlled by a bank.

(9) "Total capital" means the sum of capital stock, surplus, undivided profits, reserve for contingencies, reserve for loan losses, and subordinated notes and debentures with more than one year maturity.

History

KEY: banks and banking, securities, subsidiaries
Date of Last Change: 1995
Notice of Continuation: September 8, 2022
Authorizing, and Implemented or Interpreted Law: 7-3-21

Utah Admin. Code R333-10-3 Investment in Securities Activities

(1) No bank with total capital of less than 7% of its total assets may invest in a securities subsidiary.

(2) No bank may invest more than 10% of its capital in a securities subsidiary.

(3) A bank may not establish or acquire a subsidiary that engages in the sale, distribution, or underwriting of stocks, bonds, debentures, notes or other securities; conducts any activities for which the subsidiary is required to register with the Securities and Exchange Commission as a broker-dealer; acts as an investment adviser to any investment company; or engages in any other securities activity unless and except as otherwise provided by (4)(b) of this section, the subsidiary's underwriting activities that would not be authorized to the bank under Section 16 of the Glass-Steagall Act, 12 U.S.C. Sec. 24, Seventh, as made applicable to insured nonmember banks by Section 21 of the Glass-Steagall Act, 12 U.S.C. Sec. 378, are limited to, and therefore continue to be limited to, one or more of the following:

(a) underwriting of investment quality debt securities,

(b) underwriting of investment quality equity securities,

(c) underwriting of investment companies not more than 25% of whose investments consist of investments other than investment quality debt securities and/or investment quality equity securities, or

(d) underwriting of investment companies not more than 25% of whose investments consist of investments other than obligations of the United States or United States Government agencies, repurchase agreements involving such obligations, bank certificates of deposit, banker's acceptances and other bank money instruments, short-term corporate debt instruments, and other similar investments normally associated with a money market fund; and that subsidiary conducts securities activities not authorized to the bank under section 16 of the Glass-Steagall Act, 12 U.S.C. Sec. 24, Seventh, as made applicable to insured nonmember banks by section 21 of the Glass-Steagall Act, 12 U.S.C. Sec. 378.

(4) Subsection (3) of this section not withstanding, a subsidiary of a state-chartered bank may engage in underwriting activities other than as limited thereby provided that the following conditions are met:

(a) The subsidiary is a member in good standing of the National Association of Securities Dealers, "NASD";

(b) The subsidiary has been in continuous operation for the five year period preceding notice to the commissioner as required by this part;

(c) No director, officer, general partner, employee, or 10% shareholder of any class of voting securities of the subsidiary has been charged within five years of the notice required by this part of any felony or misdemeanor:

(i) involving the making of a false filing with the Securities and Exchange Commission or the Utah Securities Division or the securities agency of another state or

(ii) arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, or investment adviser;

(d) Neither the subsidiary nor any of its directors, officers, general partners, employees, or 10% shareholders of any class of voting securities of the subsidiary is or has been subject to any state or federal administrative order or court order, judgment, or decree entered within five years of the notice required by this part temporarily or preliminarily enjoining or restraining such person or the subsidiary from engaging in, or continuing, any conduct or practice in connection with the purchase or sale of any security involving the making of a false filing with the Securities and Exchange Commission or the Utah Securities Division or the securities agency of another state or arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, or investment adviser;

(e) None of the subsidiary's directors, officers, general partners, employees, or 10% shareholders of any class of voting securities of the subsidiary are or have been subject to an order entered within five years of the notice required by this part issued by:

(i) the Securities and Exchange Commission entered pursuant to Section 15(b) or 15B(c) of the Securities Exchange Act of 1934, 15 U.S.C. 780, 78o-4, or Section 230(c) or (f) of the Investment Advisors Act of 1940, 15 U.S.C. 80b-3(c), or (f);

(ii) the Utah Securities Division entered pursuant to Sections 61-1-1 or 61-1-2; or

(iii) the state securities agency of another state which are similar to Sections 61-1-1 and 61-1-2.

(f) All officers of the subsidiary who have supervisory responsibility for underwriting activities have at least five years experience in similar activities at NASD member securities firms.

History

KEY: banks and banking, securities, subsidiaries
Date of Last Change: 1995
Notice of Continuation: September 8, 2022
Authorizing, and Implemented or Interpreted Law: 7-3-21

Utah Admin. Code R333-10-4 Affiliation With a Securities Company

A state chartered bank is prohibited from becoming affiliated with any company that directly engages in the sale, distribution, or underwriting of stocks, bonds, debentures, notes, or other securities unless:

(1) The securities business of the affiliate is physically separate and distinct from the bank;

(2) The bank and affiliate share no common officers or employees;

(3) A majority of the board of directors of the bank is composed of persons who are neither directors nor officers of the affiliate;

(4) No employee of the bank conducts securities activities on behalf of the affiliate on the premises of the bank;

(5) The bank and affiliate do not share a common name or logo; and

(6) The affiliate conducts business pursuant to independent policies and procedures designed to inform customers and prospective customers of the affiliate that the affiliate is a separate organization from the bank and that investments recommended, offered or sold by the affiliate are not bank deposits, are not insured by the FDIC, and are not guaranteed by the bank or its holding company nor are otherwise obligations of the bank or its holding company.

History

KEY: banks and banking, securities, subsidiaries
Date of Last Change: 1995
Notice of Continuation: September 8, 2022
Authorizing, and Implemented or Interpreted Law: 7-3-21

Utah Admin. Code R333-10-5 Filing a Notice

(1) A bank or bank holding company shall notify the Commissioner of Financial Institutions of its intent to acquire or establish a subsidiary that:

(a) sells, distributes or underwrites stocks, bonds, debentures, notes, or other securities;

(b) acts as an investment advisor to any investment company;

(c) conducts any activity for which the subsidiary is required to register with the Securities and Exchange Commission as a broker-dealer; or

(d) engages in any other securities activity.

(2) Notice shall be in writing and must be received by the commissioner at least 60 days prior to the consummation of the acquisition or operation of the subsidiary, whichever is earlier.

(3) The 60-day notice requirement may be waived at the commissioner's discretion where such notice is unpracticable in the case of a purchase and assumption transaction or a supervisory merger.

History

KEY: banks and banking, securities, subsidiaries
Date of Last Change: 1995
Notice of Continuation: September 8, 2022
Authorizing, and Implemented or Interpreted Law: 7-3-21

Utah Admin. Code R333-10-6 Restrictions

A bank which has a subsidiary or affiliate that engages in the sale, distribution or underwriting of stocks, bonds, debentures, notes, or other securities, or acts as an investment company shall not:

(1) Purchase in its discretion as fiduciary, co-fiduciary, or managing agent any security currently distributed, currently underwritten, or issued by such subsidiary or affiliate or purchase as fiduciary, co-fiduciary, or managing agent any security currently issued by an investment company advised by such subsidiary or affiliate, unless:

(a) The purchase is expressly authorized by the trust instrument, court order, or local law, or specific authority for the purchase is obtained from all interested parties after full disclosure;

(b) The purchase, although not expressly authorized under Subsection (1)(a), is otherwise consistent with the insured nonmember bank's fiduciary obligation, or the purchase is permissible under applicable federal or state statute or rule, or both;

(2) Transact business through its trust department with such subsidiary or affiliate unless the transactions are at least comparable to transactions with an unaffiliated securities company or a securities company that is not a subsidiary of the bank;

(3) Extend credit or make any loan directly or indirectly to any company the stock, bonds, debentures, notes or other securities of which are currently underwritten or distributed by such subsidiary or affiliate of the bank unless the company's stocks, bonds, debentures, notes or other securities that are underwritten or undistributed qualify as investment quality debt securities, or qualify as investment quality equity securities.

(4) Extend credit or make any loan directly or indirectly to any investment company whose shares are currently underwritten or distributed by such subsidiary or affiliate of the bank;

(5) Extend credit or make any loan where the purpose of the extension of credit or loan is to acquire:

(a) Any stock, bond, debenture, note, or other security currently underwritten or distributed by the subsidiary or affiliate;

(b) Any security currently issued by an investment company advised by the subsidiary or affiliate; or

(c) Any stock, bond, debenture, note or other security issued by the subsidiary or affiliate, except that a bank may extend credit or make a loan to employees of the subsidiary or affiliate for the purpose of acquiring securities of the subsidiary or affiliate through an employee stock bonus or stock purchase plan adopted by the board of directors or board of trustees of the subsidiary or affiliate.

(6) Make any loan or extension of credit to a subsidiary or affiliate of the bank that:

(a) Distributes or underwrites stocks, bonds, debentures, notes, or other securities, or

(b) Advises any investment company if the loans or extensions of credit would be in excess of the limit as to amount, and not in accordance with the restrictions imposed on "covered transactions" by Section 23A of the Federal Reserve Act, 12 U.S.C. 371c, and that are not within any exemptions established thereby.

(7) Make any loan or extension of credit to any investment company for which the bank's subsidiary or affiliate acts as an investment adviser if the loan or extension of credit would be in excess of the limit as to amount, and not in accordance with the restrictions imposed on "covered transactions" by Section 23A of the Federal Reserve Act, 12 U.S.C. 371c, and that are not within any exemptions established thereby; and

(8) Directly or indirectly condition any loan or extension of credit to any company on the requirement that the company contract with, or agree to contract with, the bank's subsidiary or affiliate to underwrite or distribute the company's securities or directly or indirectly condition any loan or extension of credit to any person on the requirement that the person purchase any security currently underwritten or distributed by the bank's subsidiary or affiliate.

History

KEY: banks and banking, securities, subsidiaries
Date of Last Change: 1995
Notice of Continuation: September 8, 2022
Authorizing, and Implemented or Interpreted Law: 7-3-21

Utah Admin. Code R333-10-7 Nonmember Banks Not Authorized to Participate in Securities Activities

Nothing in this section authorizes an insured nonmember bank to directly engage in any securities activity not authorized to it under Sections 16 and 21 of the Glass-Steagall Act, 12 U.S.C. 24, Seventh and 378.

History

KEY: banks and banking, securities, subsidiaries
Date of Last Change: 1995
Notice of Continuation: September 8, 2022
Authorizing, and Implemented or Interpreted Law: 7-3-21

R333-12 Investment by State-Chartered Banks in Real Property Other Than Bank Premises

Utah Admin. Code R333-12-1 Authority, Scope, and Purpose

(1) This rule is issued pursuant to Sections 7-1-301 and 7-3-18.

(2) This rule applies to all banks chartered by the State of Utah.

(3) The purpose of this rule is to authorize state-chartered banks with sufficient capital to invest in real property other than bank premises and prescribe requirements and restrictions to govern such activities.

History

KEY: banks and banking, real estate investment
Date of Last Change: 1995
Notice of Continuation: September 15, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301; 7-3-18

Utah Admin. Code R333-12-2 Definitions

(1) An "Affiliate" of a bank means any corporation, business trust, association, or other similar organization:

(a) of which the bank, directly or indirectly, owns or controls either a majority of the voting shares or more than 50% of the number of shares voted for the election of its directors, trustees, or other persons exercising similar functions at the preceding election, or controls in any manner the election of a majority of its directors, trustees, or other persons exercising similar functions; or

(b) of which control is held, directly or indirectly, through stock ownership or in any other manner, by the shareholders of the bank who own or control either a majority of the shares of the bank or more than 50% of the number of shares voted for the election of directors of the bank at the preceding election, or by trustees for the benefit of the shareholders of the bank; or

(c) of which a majority of its directors, trustees, or other persons exercising similar functions are directors of the bank; or

(d) which owns or controls, directly or indirectly, either a majority of the shares of capital stock of the bank or more than 50% of the number of shares voted for the election of directors of the bank at the preceding election, or controls in any manner the election of a majority of the directors of the bank, or for the benefit of whose shareholders or members all or substantially all of the capital stock of the bank is held by trustees.

(2) "Bank premises" means real property recorded as an asset on a bank's books or otherwise held by a bank which is used in the conduct of the bank's business, including leasehold improvements and capital leases of real property. It also includes real property acquired and held for future banking use where the minutes of the board of directors show the bank in good faith intends to utilize such property in the conduct of the bank's business within three years.

(3) "Capital stock" means the sum of

(a) the par value of all shares of the bank having a par value that have been issued,

(b) the amount of the consideration received by the bank for all shares of the bank without par value that have been issued, except such part of the consideration therefor as may have been allocated to capital surplus in a manner permitted by law, and

(c) such amounts not included in Subsections (a) and (b) as have been transferred to stated capital of the bank, whether upon the issue of shares as a share dividend or otherwise, minus all reductions from such sums as have been effected in a manner permitted by law.

(4) "Principal stockholder" means a person who owns 5% or more of any class of stock of a bank, any parent, or any affiliate thereof.

(5) "Surplus" means the total of

(b) amounts received as capital contributions, and

(6) "Total capital" means the sum of capital stock, surplus, undivided profits, reserve for contingencies, reserve for loan losses, and subordinated notes and debentures with more than one year maturity.

History

KEY: banks and banking, real estate investment
Date of Last Change: 1995
Notice of Continuation: September 15, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301; 7-3-18

Utah Admin. Code R333-12-3 Investment in Real Estate

(1) A bank, directly or through a subsidiary, may invest an amount not exceeding 10 percent of the bank's capital stock and surplus in real property or in an entity organized to acquire interests in real property, for the purpose of producing income, for inventory and sale, or other development thereof, and may hold, sell, lease, operate, and otherwise exercise the rights it acquires in any such property if:

(a) the bank has total capital equal to at least 8% of its total assets as of the date the investment is made;

(b) no officer, director, employee, principal stockholder or affiliate has any interest in any property or entity in which the bank invests; and

(c) no officer, director, employee, principal stockholder or affiliate receives any compensation for arranging or effecting the investment by the bank.

(2) The limitations established in Subsection (1) do not apply to real property which the bank may acquire and hold:

(a) in satisfaction of debts previously contracted;

(b) at sales to foreclose liens or other security interests claimed by the bank in the properties acquired; and

History

KEY: banks and banking, real estate investment
Date of Last Change: 1995
Notice of Continuation: September 15, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301; 7-3-18

R333-13 Rule Designating Applicable Federal Law for Banks Subject to the Jurisdiction of the Department of Financial Institutions

Utah Admin. Code R333-13-1 Authority, Scope and Purpose

(1) This rule is issued pursuant to Section 7-1-325.

(2) Violations of federal law designated by this rule may only be enforced by the department by taking action permitted under Title 7 and the applicable chapters set forth in Section 7-1-325.

(3) This rule designates which one or more federal laws the department may enforce and are applicable to banks subject to the jurisdiction of the department.

History

KEY: financial institutions, federal law
Date of Last Change: December 22, 2006
Notice of Continuation: December 6, 2021
Authorizing, and Implemented or Interpreted Law: 7-1-325(2)

Utah Admin. Code R333-13-2 Definitions

(1) "Department" means the Department of Financial Institutions.

(2) "Federal Law" means:

(a) a statute passed by the Congress of the United States; or

(b) a final regulation:

(i) adopted by an administrative agency of the United States government; and

(ii) published in the code of federal regulations or the federal register.

History

KEY: financial institutions, federal law
Date of Last Change: December 22, 2006
Notice of Continuation: December 6, 2021
Authorizing, and Implemented or Interpreted Law: 7-1-325(2)

Utah Admin. Code R333-13-3 Applicable Federal Law

In accordance with Section 7-1-325, the following federal laws are applicable to banks subject to the jurisdiction of the department:

(1) Truth in Lending Act, 15 U.S.C. Sec. 1601 et seq., and its implementing federal regulations;

(2) Equal Credit Opportunity Act, 15 U.S.C. Sec. 1691, and its implementing federal regulations;

(3) Truth in Savings Act, 12 U.S.C. Sec. 4301 et seq., and its implementing federal regulations;

(4) Bank Secrecy Act, 12 U.S.C. Sec. 1829b, 12 U.S.C. Sec. 1951 through 1959, and 31 U.S.C. Sec. 5311 through 5332, and its implementing federal regulations;

(5) Federal Deposit Insurance Corporation Improvement Act ("Prompt Corrective Action"), 12 U.S.C. Sec. 1831o, and its implementing federal regulations;

(6) Federal Reserve Act, 12 U.S.C. Sec. 371c through 371c-1 ("Banking affiliates"), made applicable to state nonmember insured institutions through 12 U.S.C. Sec. 1828(j)(i), and its implementi ng federal regulations;

(7) Federal Reserve Act, 12 U.S.C. Sec. 375a ("Loans to executive officers of banks"), made applicable to state nonmember institutions through 12 U.S.C. Sec. 1828(j)(2), and its implementing federal regulations ;

(8) Federal Deposit Insurance Corporation Improvement Act, ("Standards for safety and soundness"), 12 U.S.C. Sec. 1831p- 1, and its implementing federal regulations;

(9) Federal Deposit Insurance Corporation Improvement Act, ("Real estate lending standards"), 12 U.S.C. Sec. 1828(o), and its implementing federal regulations;

(10) Real Estate Settlement Procedures Act, 12 U.S.C. Sec. 2601 et seq., and its implementing federal regulations;

(11) Fair Credit Reporting Act, 15 U.S.C. Sec. 1681 et seq., and its implementing federal regulations;

(12) Expedited Funds Availability Act, 12 U.S.C. Sec. 4001 et seq., and its implementing federal regulations;

(13) Electronic Fund Transfers Act, 15 U.S.C. Sec. 1693 et seq., and its implementing federal regulations;

(14) Community Reinvestment Act, 12 U.S.C. Sec. 2901 et seq., and its implementing federal regulations.

History

KEY: financial institutions, federal law
Date of Last Change: December 22, 2006
Notice of Continuation: December 6, 2021
Authorizing, and Implemented or Interpreted Law: 7-1-325(2)

R335 Consumer Credit

R335-1 Rule Prohibiting Negative Amortizing Wrap Loans

Utah Admin. Code R335-1-1 Authority, Scope and Purpose

(1) This amended rule is adopted pursuant to Section 70C-8-102(1)(e).

(2) This rule shall apply to all extensions of credit subject to Title 70C, Utah Consumer Credit Code.

(3) The purpose for this rule is to prohibit wrap loans that will not fully service all obligations wrapped by the loan.

History

KEY: financial institutions
Date of Last Change: 1995
Notice of Continuation: September 13, 2022
Authorizing, and Implemented or Interpreted Law: 70C-8-102(1)(e)

Utah Admin. Code R335-1-2 Definitions

"Wrap loan" means an extension of credit that includes an agreement by the lender to service all or part of the balance due on other debts owed by the borrower out of payments made on the wrap loan.

History

KEY: financial institutions
Date of Last Change: 1995
Notice of Continuation: September 13, 2022
Authorizing, and Implemented or Interpreted Law: 70C-8-102(1)(e)

Utah Admin. Code R335-1-3 Rule Prohibiting Negative Wrap Loans

All wrap loans subject to Title 70C shall provide for a minimum monthly payment sufficient to pay at least the monthly interest on the wrap loan and the total monthly payment, including interest, principal, escrow or reserve payments, or both, on all obligations wrapped by the loan.

History

KEY: financial institutions
Date of Last Change: 1995
Notice of Continuation: September 13, 2022
Authorizing, and Implemented or Interpreted Law: 70C-8-102(1)(e)

R335-2 Rule Prescribing Allowable Terms and Disclosure Requirements for Variable and Adjustable Interest Rates in Consumer Credit Contracts

Utah Admin. Code R335-2-1 Authority, Scope, and Purpose

(1) This rule is adopted pursuant to Section 70C-8-102(1)(e).

(2) This rule shall apply to all credit transactions subject to the provisions of Title 70C, Utah Consumer Credit Code.

(3) The purpose for this rule is

(a) to distinguish variable or adjustable interest rates from other kinds of rate formulas or provisions, such as a demand note or a unilateral right to change terms,

(b) to specify what must be included in rate formulas represented to be variable or adjustable, and

(c) to specify certain disclosure requirements under state and federal law applicable to variable or adjustable rate and other formulas.

History

KEY: financial institutions
Date of Last Change: 1995
Notice of Continuation: September 13, 2022
Authorizing, and Implemented or Interpreted Law: 70C-8-102(1)(e)

Utah Admin. Code R335-2-2 Definition

For purposes of this rule, "variable or adjustable rate" shall refer to any interest rate or finance charge in a consumer credit agreement which varies or fluctuates in accordance with a specified index, whether or not any variation is subject to a minimum or maximum change, or both, or a floor or ceiling rate, or both.

History

KEY: financial institutions
Date of Last Change: 1995
Notice of Continuation: September 13, 2022
Authorizing, and Implemented or Interpreted Law: 70C-8-102(1)(e)

Utah Admin. Code R335-2-3 Permissible Indexes

(1) Any index may be used in a variable or adjustable rate formula if:

(a) it references a rate or value completely beyond the lender's control, or

(b) it is based entirely on the lender's weighted cost of funds, or

(c) it is a rate used by the lender as a basis for setting the rate on most of its non-consumer loans, provided that at least half the lender's total credit outstanding is not consumer credit during the entire period the rate is an index for any variable or adjustable rate consumer loan; and

(2) All information pertinent to setting or calculating the rate is readily available to the borrower during the entire term of the credit agreement.

History

KEY: financial institutions
Date of Last Change: 1995
Notice of Continuation: September 13, 2022
Authorizing, and Implemented or Interpreted Law: 70C-8-102(1)(e)

Utah Admin. Code R335-2-4 Initial Disclosure Requirements

Except for an internal index as described in Rule R335-2-3 above, if any index is derived or calculated from two or more rates or values, or both, each rate or value, or both, must be specifically disclosed in the original credit agreement, together with the method to be used for calculating the index, and thereafter each calculation of the index must be made in the manner disclosed utilizing each rate or value, or both, described. This section shall not prevent a change of any term of a variable or adjustable rate formula in an open-end consumer credit contract in accordance with Section 70C-4-102.

History

KEY: financial institutions
Date of Last Change: 1995
Notice of Continuation: September 13, 2022
Authorizing, and Implemented or Interpreted Law: 70C-8-102(1)(e)

Utah Admin. Code R335-2-5 Subsequent Disclosure Requirements

(1) Any change in the applicable rate resulting from a change in the numerical value of an index need not be disclosed in advance of the change.

(2) Each regular statement of account shall state the rate or weighted average of rates applicable to the account during the period covered by the statement; otherwise, it will not be necessary to give notice of any change in the applicable rate or describe the amount of any change.

History

KEY: financial institutions
Date of Last Change: 1995
Notice of Continuation: September 13, 2022
Authorizing, and Implemented or Interpreted Law: 70C-8-102(1)(e)

Utah Admin. Code R335-2-6 Specific Adjustment Schedule Required

Any credit agreement containing a variable or adjustable rate must include a schedule stating when the rate will be adjusted and must require adjustment of the rate in accordance with that schedule.

History

KEY: financial institutions
Date of Last Change: 1995
Notice of Continuation: September 13, 2022
Authorizing, and Implemented or Interpreted Law: 70C-8-102(1)(e)

R335-4 Notice Concerning Refund of Unearned Credit Insurance Premiums Upon Prepayment of a Consumer Debt

Utah Admin. Code R335-4-1 Authority, Scope and Purpose

(1) This rule is adopted pursuant to Section 70C-8-102(1)(e).

(2) This rule shall apply to all credit transactions subject to Title 70C, Utah Consumer Credit Code.

(3) The purpose for this rule is to require all consumer creditors, including assignees or other successors in interest, to notify a borrower when a debtor may be entitled to a separate refund of unearned credit insurance premiums.

History

KEY: financial institutions
Date of Last Change: 1995
Notice of Continuation: September 13, 2022
Authorizing, and Implemented or Interpreted Law: 70C-8-102(1)(e)

Utah Admin. Code R335-4-2 Notice Concerning Separate Refund of Unearned Credit Insurance Premiums Required

If a debtor becomes entitled to a refund of premiums paid for credit insurance, as defined in Section 70C-6-102, that terminates prior to the end of the term for which it was written, and if the debtor does not receive a refund or credit of the unearned insurance premiums at the time of prepayment or termination, the party receiving the final payment or to whom the obligation was last owed shall promptly notify the debtor of the right to a separate refund of the unearned insurance premiums. The notice shall also state the name and address of each party who should be contacted about obtaining the refund if known to the party providing the notice.

History

KEY: financial institutions
Date of Last Change: 1995
Notice of Continuation: September 13, 2022
Authorizing, and Implemented or Interpreted Law: 70C-8-102(1)(e)

R337 Credit Unions

R337-2 Conversion from a Federal to a State-Chartered Credit Union

Utah Admin. Code R337-2-1 Authority, Scope and Purpose

(1) This rule is issued pursuant to Sections 7-1-301 and 7-1-706, and Subsection 7-1-713(4).

(2) This rule applies to federally chartered credit union converting to a state chartered credit union.

(3) This rule establishes the requirements and procedures for converting from a federally chartered credit union to a state chartered credit union.

History

KEY: credit unions
Date of Last Change: November 3, 1997
Notice of Continuation: August 29, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-713(4)

Utah Admin. Code R337-2-2 Definitions

(1) "Applicant" means the federally chartered credit union converting to a credit union charter issued by the state.

(2) "Commissioner" means the Commissioner of Financial Institutions.

(3) "Federally chartered credit union" means a credit union organized under the laws of the United States.

(4) "State chartered credit union" means a credit union chartered by the state of Utah.

History

KEY: credit unions
Date of Last Change: November 3, 1997
Notice of Continuation: August 29, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-713(4)

Utah Admin. Code R337-2-3 Conversion Application

(1) The applicant must file an application on a form acceptable to the department.

(2) As part of the application the following documents or information must be provided:

(a) Year to date financial statements for the most recent month end:

(b) Delinquent loan schedule annotated to reflect collection problems as of the most recent month end;

(d) Resolution of the board of directors approving the proposed conversion;

(e) Sample of the Notice of Special Meeting of the Members;

(f) Sample of the ballot to be sent to members; and

(g) Approval of the conversion from the National Credit Union Administration.

History

KEY: credit unions
Date of Last Change: November 3, 1997
Notice of Continuation: August 29, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-713(4)

Utah Admin. Code R337-2-4 Conversion Procedure

(1) The procedure set forth in Section 7-1-706 shall be followed.

(2) The effective date of the conversion will be the date on which the commissioner issued an order approving the conversion. If a later effective date is desired, the credit union board of directors must request that effective date as part of the application.

History

KEY: credit unions
Date of Last Change: November 3, 1997
Notice of Continuation: August 29, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-713(4)

R337-4 Establishment of "Credit Union Service Organizations"

Utah Admin. Code R337-4-1 Authority, Scope, and Purpose

(1) This rule is issued pursuant to Sections 7-1-301(15) and 7-1-505 and construes and applies to Sections 7-9-5(21) and 7-9-5(34).

(2) This rule applies to all state-chartered credit unions.

(3) The purpose of this rule is to define "credit union service organizations", outline the procedures and requirements for establishing these organizations, and establish rules governing the affairs of the organizations.

History

KEY: credit unions
Date of Last Change: October 4, 2002
Notice of Continuation: December 5, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(3)(a); 7-9-5(34)

Utah Admin. Code R337-4-2 Definitions

(1) "Capital and surplus" means shares, deposits, reserves, and undivided earnings.

(2) "Commissioner" means the Commissioner of Financial Institutions.

(3) "Credit union service organization" means an organization owned by one or more credit unions which provides any of the following services:

(a) Checking and currency services:

(i) Check cashing;

(ii) Coin and currency services, and

(iii)Money order, savings bonds, travelers checks, and purchase and sale of U.S. Mint commemorative coins services;

(b) Clerical, professional and management services:

(i) Accounting services;

(ii) Courier services;

(iii)Credit analysis;

(iv) Facsimile transmissions and copying services;

(v) Internal audits for credit unions;

(vi) Locator services;

(vii)Management and personnel training and support;

(viii)Marketing services;

(ix)Research services; and

(X) Supervisory committee audits;

(d) Electronic transaction services;

(i) Automated teller machines (ATM) services;

(ii) Credit card and debit card services;

(iii)Data processing;

(iv) Electronic fund transfer (EFT) services;

(v) Electronic income tax filing;

(vi) Payment item processing;

(vii)Wire transfer services; and

(viii)Cyber financial services;

(e) Financial counseling services:

(i) Developing and administering Individual Retirement Accounts (IRA), Keogh, deferred compensation, and other personnel benefit plans;

(ii) Estate planning;

(iii)Financial planning and counseling;

(iv) Income tax preparation;

(v) Investment counseling; and

(vi) Retirement counseling;

(f) Fixed asset services:

(i) Management, development, sale, or lease of fixed assets; and

(ii) Sale, lease, or servicing of computer hardware or software;

(g) Insurance brokerage or agency:

(i) Agency for sale of insurance;

(ii) Provision of vehicle warranty programs; and

(iii) Provision of group purchasing programs;

(h) Leasing:

(i) Personal property; and

(ii) Real estate leasing of excess credit union service organization property;

(i) Loan support services:

(i) Debt collection services;

(ii) Loan processing, servicing, and sales; and

(iii)Sale of repossessed collateral;

(j) Loans and extensions of credit;

(k) Member business loans;

(l) Record retention, security and disaster recovery services:

(i) Alarm-monitoring and other security services;

(ii) Disaster recovery services;

(iii)Microfilm, microfiche, optical and electronic imaging, CD-ROM data storage and retrieval services;

(iv) Provision of forms and supplies; and

(v) Record retention and storage;

(m) Securities brokerage services;

(n) Shared credit union branch (service center) operations;

(o) Student loan origination;

(p) Travel agency services;

(q) Trust and trust-related services:

(i) Acting as administrator for prepaid legal service plans;

(ii) Acting as trustee, guardian, conservator, estate administrator, or in any other fiduciary capacity;

(iii)Trust services; and

(r) credit union service organization investments in non-credit union service organization service providers: In connection with providing a permissible service, a credit union service organization may invest in a non-credit union service organization service provider. The amount of the credit union service organization's investment is limited to the amount necessary to participate in the service provider, or a greater amount if necessary to receive a reduced price for goods or services.

(4) "Loans and extensions of credit" means any direct or indirect advance of funds in any manner whatsoever to a member, that is made on the basis of any obligation of that member to repay the funds, or repayable from specific property pledged by or on behalf of a member. "Loans and extensions of credit" includes:

(a) A contractual commitment to advance funds;

(b) An acquisition by discount, purchase, exchange, or otherwise of any note, draft, or other evidence of indebtedness upon which a member may be liable as maker, drawer, endorser, guarantor, or surety;

(5) "Loans and extensions of credit" does not include:

(a) An endorsement or guarantee for the protection of a credit union and credit union service organization of any loan or other asset previously acquired by the credit union service organization in good faith or any indebtedness to a credit union and the credit union service organization for the purpose of protecting the credit union and the credit union service organization against loss or of giving financial assistance to it;

(b) The purchase of investment grade securities subject to a repurchase agreement in which the purchasing credit union has a perfected security interest, or where the securities are purchased from the state or any political subdivision thereof;

(c) Loans or extensions of credit which have become unenforceable by reason of discharge in bankruptcy or are no longer legally enforceable for other reasons.

(6) "Member" means a member of a stockholder credit union.

(7) "Participation" means the purchase or sale by a lender of a loan or part of a loan under circumstances in which the acquiring institution;

(a) Has no formal or direct role in establishing the terms and conditions binding the borrower; or

(b) is not a signatory of the loan agreement binding the borrower.

(8) "Participation agreement" means an agreement between the lead financial institution and the participant financial institution spelling out in detail the terms, conditions, and understandings between the parties to a loan participation.

(9) "Recourse" means an oral or written agreement whereby a selling institution of a loan or participation in a loan agrees to repurchase in whole or in part upon request of the purchaser or the seller.

(10) "Well capitalized" means "well capitalized" as defined in 12 U.S.C. Sec. 1790d(c)(1).

History

KEY: credit unions
Date of Last Change: October 4, 2002
Notice of Continuation: December 5, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(3)(a); 7-9-5(34)

Utah Admin. Code R337-4-3 Establishment and Approval of a Credit Union Service Organization

(1) A credit union by action of its board of directors may establish or invest in, or both, a credit union service organization authorized to engage in the services specified in this rule if:

(a) The credit union has capital and surplus of $500,000 or more and;

(b) The credit union meets the net worth classification of "well capitalized".

(2) The total investments in, or loans to all service organizations shall not exceed 5% of the capital and surplus of the credit union.

(3) The services performed by the credit union service organization are limited primarily to stockholder credit unions and their members or members of credit unions contracting with the credit union service organization. However, for member business loans and loans and extensions of credit, the credit union service organization shall only serve members.

(4) To establish a credit union service organization, a credit union shall file an application with the commissioner identifying the services the credit union service organization will provide.

The application shall contain pro forma statements or other information sufficient to determine:

(a) The benefits the credit union service organization will create for the credit union or its members; and

(b) That the investment will not represent an unreasonable risk to the safety and soundness of the credit union.

(5) The commissioner shall approve or disapprove the application within 30 days after accepting it as complete. If the commissioner does not approve or disapprove an application within this time, it is considered approved. A credit union service organization approved prior to the effective date of the 2002 rule change need not reapply for authorization.

(6) A credit union may not change the type of services engaged in by the credit union service organization or engage in new services without providing 30 days written notice to the commissioner.

(7) The commissioner may at any time, based upon supervisory, legal, or safety and soundness reasons, limit the services engaged in by the credit union service organization.

(8) The credit union service organization shall comply with all relevant and applicable state and local laws and ordinances for the specific services offered.

(9) A credit union may establish or invest in, or both, a credit union service organization to provide services not set forth in this rule upon approval of the commissioner obtained pursuant to R337-4-3(4) and (5).

(10) A credit union service organization may provide services not set forth in this rule upon approval of the commissioner obtained pursuant to R337-4-3(4) and (5).

History

KEY: credit unions
Date of Last Change: October 4, 2002
Notice of Continuation: December 5, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(3)(a); 7-9-5(34)

Utah Admin. Code R337-4-4 Examination of Credit Union Service Organizations by Commissioner or Supervisor

(1) The commissioner or the supervisor of credit unions shall visit and examine, or cause to be visited and examined, every credit union service organization as the commissioner considers necessary or advisable.

(2) At every examination of a credit union service organization, careful inquiry shall be made as to:

(a) the condition and resources of the credit union service organization examined;

(b) the mode of conducting and managing its affairs;

(d) the investment and disposition of its funds;

(e) whether or not it is violating any provision of law relating to the credit union service organization or the business of the credit union service organization examined;

(f) whether or not it is complying with its articles of incorporation and bylaws; and

(g) such other matters as the commissioner may prescribe.

(3) The commissioner may, in the commissioner's discretion, accept examinations of any credit union service organization which are made by federal examiners or examiners from other states having jurisdiction over that credit union service organization in lieu of any examination required under the laws of this state.

History

KEY: credit unions
Date of Last Change: October 4, 2002
Notice of Continuation: December 5, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(3)(a); 7-9-5(34)

Utah Admin. Code R337-4-5 Prohibited Member Business Loans

A credit union service organization may not extend a member business loan to the following individuals of the credit union service organization or credit unions which invest in or lend to the credit union service organization; or in entities in which these persons have control:

(1) board members;

(2) executive officers; and

(3) appointed committee members.

History

KEY: credit unions
Date of Last Change: October 4, 2002
Notice of Continuation: December 5, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(3)(a); 7-9-5(34)

Utah Admin. Code R337-4-6 Written Member Business Loan Policies

A credit union service organization offering member business loans shall adopt specific written loan policies and review them at least annually. The credit union service organization shall establish written credit policies, loan security requirements, loan investment, personnel, and collection policies. At a minimum, the policies shall address the following:

(1) the types of member business loans to be made;

(2) the qualification and experience of personnel (minimum of two (2) years) involved in making and administering member business loans;

(3) a requirement to analyze and document the ability of a borrower to repay the loan;

(4) receipt and periodic updating of financial statements and other documentation, including tax returns;

(5) a requirement for sufficient documentation supporting each request to extend credit, or increase an existing loan or line of credit (except where the credit union service organization finds that the documentation requirements are not generally available for a particular type of member business loan and states the reasons for those findings in the credit union's written policies). At a minimum, the documentation shall include the following:

(a) balance sheet;

(b) cash flow analysis;

(d) tax data;

(e) analysis of leveraging; and

(f) comparison with industry average or similar analysis;

(6) the collateral requirements shall include:

(a) loan-to-value ratios;

(b) determination of value;

(d) steps to secure various types of collateral; and

(e) how often the credit union service organization will reevaluate the value and marketability of collateral;

(7) the interest rates and maturities of member business loans; and

(8) general loan procedures which include:

(a) loan monitoring;

(b) servicing and follow-up; and

History

KEY: credit unions
Date of Last Change: October 4, 2002
Notice of Continuation: December 5, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(3)(a); 7-9-5(34)

Utah Admin. Code R337-4-7 Allowance Account for Loan Losses

A credit union service organization that makes member business loans is required to establish and maintain an allowance account for loan losses as set forth in Rule R337-5-3.

History

KEY: credit unions
Date of Last Change: October 4, 2002
Notice of Continuation: December 5, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(3)(a); 7-9-5(34)

Utah Admin. Code R337-4-8 Purchase and Sale of Loans and Participations in Loans

(1) A credit union service organization shall have authority to make loan participation arrangements with other credit unions, credit union service organizations, or financial organizations in accordance with its written policies, if the credit union service organization that originates a loan for which participation arrangements are made retains an interest of at least 10% of the loan.

(2) A credit union service organization shall comply with Rule R331-12.

(3) The limitations set forth in Section 7-9-20(7)(f) apply to loan participations purchased or sold by a credit union service organization.

History

KEY: credit unions
Date of Last Change: October 4, 2002
Notice of Continuation: December 5, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(3)(a); 7-9-5(34)

Utah Admin. Code R337-4-9 Loan Limitations

(1) The individual and aggregate loan limitations set forth in Section 7-9-20 shall apply to all loans and extensions of credit and member business loans made by a credit union and its wholly owned credit union service organization as if they were one entity.

(a) A credit union service organization may extend a member business loan to a person if the person is a business entity, and at least one individual having a controlling interest in that business entity has been a member of the credit union for at least six months prior to the date of the extension of the member business loan; or

(b) A credit union service organization may extend a member business loan to a person if the person is an individual, and the individual is a member of the credit union for at least six months prior to the date of the extension of the member business loan.

(2) The individual and aggregate loan limitations for a credit union service organization that is a non wholly owned subsidiary of a credit union shall be the same as set forth in Section 7-9-20. The limitation shall be determined by allocating loans made by the non wholly owned credit union service organization to its member credit unions on a pro-rata ownership basis.

(a) A credit union service organization that is a non wholly owned subsidiary of a credit union may extend a member business loan to a person if the person is a business entity, and at least one or more of the individuals having a controlling interest in that business entity has been a member of each of the credit unions participating in the credit union service organization for at least six months prior to the date of the extension of the member business loan; or

(b) A credit union service organization that is a non wholly owned subsidiary of a credit union may extend a member business loan to a person if the person is an individual, and the individual is a member of each of the credit unions participating in the credit union service organization for at least six months prior to the date of the extension of the member business loan.

(3) Loan limitations shall be determined using the last quarterly report of condition filed with the Department.

History

KEY: credit unions
Date of Last Change: October 4, 2002
Notice of Continuation: December 5, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(3)(a); 7-9-5(34)

Utah Admin. Code R337-4-10 Trust Business

(1) Only a credit union service organization that is a wholly owned subsidiary of a single credit union may seek authorization to become a trust company and engage in trust business in this state. A wholly owned credit union service organization seeking to become a trust company shall file an application as provided in Section 7-5-3 with the commissioner in the manner provided in Section 7-1-704, and shall pay the fee prescribed in Section 7-1-401(6).

(2) In addition to the criteria set forth in Section 7-5-3(2) the wholly owned credit union service organization shall have and maintain a minimum capital level of two million dollars ($2,000,000). Capital shall be determined in accordance with Generally Accepted Accounting Principles (GAAP).

(3) Wholly owned credit union service organizations authorized to engage in trust business in this state shall comply with the requirements of Section 7-5-1 et. al.

(4) The safety and soundness examination of a wholly owned credit union service organization engaged in trust business may be performed in conjunction with the safety and soundness examination of the credit union. A trust examination fee shall be assessed in accordance with Section 7-1-401(2).

(5) Any loss, liability or contingent liability of a wholly owned credit union service organization operating as a trust company shall be offset first against the capital of the wholly owned credit union service organization and then against the capital of the credit union.

(6) A wholly owned credit union service organization that engages in trust business shall maintain its books according to GAAP. A wholly owned credit union service organization that engages in trust business shall annually make or cause to be made an audit of the credit union service organization's books by a licensed certified public accountant.

History

KEY: credit unions
Date of Last Change: October 4, 2002
Notice of Continuation: December 5, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(3)(a); 7-9-5(34)

R337-5 Allowance for Loan and Lease Losses - Credit Unions

Utah Admin. Code R337-5-1 Authority, Scope and Purpose

(1) This rule is issued pursuant to Section 7-9-29.

(2) This rule applies to all state-chartered credit unions with assets less than $10,000,000.

(3) This rule requires the allowance account for loan and lease losses (ALLL) be maintained.

History

KEY: credit unions, loans
Date of Last Change: April 9, 2024
Notice of Continuation: August 29, 2022
Authorizing, and Implemented or Interpreted Law: 7-9-29

Utah Admin. Code R337-5-2 Definitions

(1) "Adjusted Loss" means the historical loss adjusted for economic or other factors.

(2) "Historical Loss" means the ratio of loan losses (actual losses less recoveries) to the average total loans outstanding for the period.

(3) "Homogeneous Loan Pools" means groups of loans sharing common risk factors.

(4) "In process of collection" means collection of the debt is proceeding in due course either through legal action, including judgment enforcement procedures, or, in appropriate circumstances, through collection efforts not involving legal action which are reasonably expected to result in repayment of the debt or in its restoration to a current status in the near future.

(5) "Well secured" means a debt that is secured by:

(a) collateral with sufficient realizable value to discharge the debt in full, including accrued interest; or

(b) the guarantee of a financially responsible party.

History

KEY: credit unions, loans
Date of Last Change: April 9, 2024
Notice of Continuation: August 29, 2022
Authorizing, and Implemented or Interpreted Law: 7-9-29

Utah Admin. Code R337-5-3 Allowance Account for Loan and Lease Losses

(1) Each credit union is required to establish and maintain a methodology to determine the amount needed in an allowance account for loan and lease losses. The account should be shown on the books as a contra-asset account, not an equity account. In determining the appropriate allowance account balance, each credit union shall:

(a) Separate the loan portfolio into homogeneous loan pools based upon common risk factors;

(b) Calculate the net loss percentage of each pool, using the historical loss or adjusted loss method, and apply that percentage to all loans in that pool;

(d) Add the resulting amounts to determine the amount needed in the ALLL.

(2) At least annually, the method used by the credit union to determine the ALLL must be validated by a qualified party independent from the estimation process.

(3) Sufficient documentation must be maintained to support the methodology and allow the ALLL to be validated.

(4) In conjunction with this rule, the credit union's Board of Directors must adopt a policy ensuring that loans are written off in a timely manner. The policy should include as a minimum a requirement that loans be charged off at 180 days past due unless well secured and in the process of collection.

(5) Whenever the allowance account for loan and lease losses is materially less than or greater than collection problem loans or does not fairly represent the estimated losses in the portfolio, an immediate adjustment shall be made for the amount of the deficiency or surplus. Adjustments to the account will be accomplished by debit or credit entries to a "Provision for Loan Losses" expense account in accordance with generally accepted accounting principles.

(6) At the close of each accounting period and prior to the payment of a dividend, a credit union shall make a placement to the regular reserve as required by Section 7-9-30. After the required placement has been made, unless the credit union is under prompt corrective action, a credit union may transfer from the regular reserve to undivided earnings, the amount that has been expended to the provision for loan and lease losses during the same period.

(7) The regular reserve and allowance for loan and lease losses shall not be combined for purposes of calculating the placement to the regular reserve as required by Section 7-9-30.

History

KEY: credit unions, loans
Date of Last Change: April 9, 2024
Notice of Continuation: August 29, 2022
Authorizing, and Implemented or Interpreted Law: 7-9-29

R337-7 Discount Securities Brokerage Service by State-Chartered Credit Unions

Utah Admin. Code R337-7-1 Authority, Scope, and Purpose

(1) This rule is issued pursuant to Subsection 7-1-301(3).

(2) This rule governs the type of securities brokerage service state chartered credit unions may offer.

(3) The purpose of this rule is to allow securities activities limited to "discount brokerage" services by state chartered credit unions, similar to the discount brokerage services allowed state chartered banks and industrial loan corporations.

History

KEY: credit unions
Date of Last Change: December 2, 1997
Notice of Continuation: September 21, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(3)

Utah Admin. Code R337-7-2 Definitions

(1) "Discount brokerage" means the practice of executing securities transactions solely at the direction of a credit union member but not providing that member with any investment advice.

History

KEY: credit unions
Date of Last Change: December 2, 1997
Notice of Continuation: September 21, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(3)

Utah Admin. Code R337-7-3 Discount Brokerage Services

A credit union may enter into a contractual arrangement with unrelated discount brokers where the broker executes securities transactions for credit union members and the credit union shares the commissions generated by the transaction. This service is restricted as outlined below:

(1) The credit union clearly acts solely at the member's direction;

(2) The transactions are for the account of the member and not the account of the credit union;

(3) The transactions are without recourse;

(4) The credit union makes no warranty as to the performance or quality of any security;

(5) The credit union does not advise members to make any particular investment;

(6) The credit union's promotional material clearly explains the credit union's limited role in the service; and

(7) The credit union's promotional material clearly explains that the transactions are not federally insured.

History

KEY: credit unions
Date of Last Change: December 2, 1997
Notice of Continuation: September 21, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(3)

R337-8 Accounts for Parties Other Than Individual Members in State-Chartered Credit Unions

Utah Admin. Code R337-8-1 Authority, Scope, and Purpose

(1) This rule is issued pursuant to Subsection 7-1-301(3).

(2) This rule governs accounts and loans to parties other than individuals in state chartered credit unions.

(3) The purpose of the rule is to allow state chartered credit unions to maintain accounts in the name of businesses or entities other than individual members to the same extent as credit unions chartered under the laws of the United States.

History

KEY: credit unions
Date of Last Change: 1995
Notice of Continuation: September 21, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(3)

Utah Admin. Code R337-8-2 Business and Other Accounts

A state chartered credit union may open a share, draft, certificate or loan account in the name of a party other than an individual member if all equity owners or, in the case of an association or cooperative, all members of the entity are within the credit union's field of membership as defined in the credit union's bylaws if the bylaws have been approved by the Commissioner of Financial Institutions. Loans to an entity other than an individual member may not exceed the entity's unencumbered shares or deposits, or both.

History

KEY: credit unions
Date of Last Change: 1995
Notice of Continuation: September 21, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(3)

R337-9 Schedule for Retention or Destruction of Records of Credit Unions Under the Jurisdiction of the Department of Financial Institutions

Utah Admin. Code R337-9-1 Authority, Scope, and Purpose

(1) This rule is issued pursuant to Section 7-1-301(7).

(2) This rule establishes a schedule for the retention of records of credit unions.

(3) It is the purpose of this rule to require the maintenance of appropriate types of records, which have a high degree of usefulness and to prescribe the period for which records of each class are retained.

(4) This rule specifically exempts credit unions from the requirements of Rule R331-10.

History

KEY: financial institutions, credit unions
Date of Last Change: 1995
Notice of Continuation: September 21, 2022
Authorizing, and Implemented or Interpreted Law: 7-1 -301(7)

Utah Admin. Code R337-9-2 Definitions

Key to abbreviations:

Figures - years

P - permanently

History

KEY: financial institutions, credit unions
Date of Last Change: 1995
Notice of Continuation: September 21, 2022
Authorizing, and Implemented or Interpreted Law: 7-1 -301(7)

Utah Admin. Code R337-9-3 General Rule

All credit unions under the jurisdiction of the Department of Financial Institutions shall retain and preserve all records listed in the following schedule for the period indicated for specific type:

TABLE

(1) Accounting and Auditing

(a) Financial statement . . . . . . . . . . 10

(b) Cash received vouchers . . . . . . . . 7

(d) General journal/cash records . . . . . P

(e) Cash accounts reconciliation

journals . . . . . . . . . . . . . . 7

(2) Administrative

(a) Bylaws and amendments . . . . . . . . . P

(b) Certificates/licenses . . . . . . . . . P

(d) Examination reports . . . . . . . . . . 10

(e) Supervisory and outside audits . . . . 10

(f) Minutes . . . . . . . . . . . . . . . . 10

(3) Surety and Fidelity Bond Time Period

After Expiration . . . . . . . . . . . . 10

(4) Member Certificate of Deposits Time Period

After Payment . . . . . . . . . . . . . 7

(5) Collections (Past Due Accounts)

(a) Collection files (closed) . . . . . . . 7

(b) Schedule of delinquent loans . . . . . . 2

(6) Currency Transactions and Related Material

(a) Copies of drafts, checks or money

orders drawn on the credit union or

issued and payable to it . . . . . . 7

(b) Copies of checks, drafts or money

orders drawn on the credit union or

issued and payable by it . . . . . . 7

transfer of funds, checks, investment

securities or other money instruments

of $10,000 or more outside the United

States . . . . . . . . . . . . . . . 7

(d) Copies of records of each item of

$10,000 or more received from outside

the United States . . . . . . . . . . 7

(e) Currency Transaction Reports (Form

. . . . . . . . . . . . . . . . 7

(f) Deposit slips or credit tickets of

all debits over $100,000 . . . . . . 7

(g) Exemption statements . . . . . . . . . 7

(h) Exemptions Master List . . . . . . . . 7

(i) Records of all extensions of credit

over $10,000 unless the credit

involves mortgage, home equity

loans or refinancing . . . . . . . . 7

(j) Reports of international

transportation of monetary

instruments (Form 4790) . . . . . . 7

(k) Statements or ledgers showing all

account activity . . . . . . . . . . 7

(7) Checking/Draft Accounts: Members

(a) Checks/drafts paid . . . . . . . . . . 7

(b) Daily reports of overdrafts time period

after overdraft is cleared . . . . . 1

(d) Individual members' account history

ledgers . . . . . . . . . . . . . . . P

(e) Signature cards . . . . . . . . . . . . P

(f) Stop-payment orders time period

after issued . . . . . . . . . . . . 1

(g) Undelivered statements/dormant

accounts log time period after date

of last activity or contact with

credit union . . . . . . . . . . . . 7

(h) Disclosures/Notices of check-holds . . 2

(8) Draft/Checking Accounts Held by Credit Unions

(a) Certified checks/receipts . . . . . . . 7

(b) Checks/drafts (canceled) . . . . . . . 7

(d) Expense checks (canceled) . . . . . . . 7

(e) Expense check register . . . . . . . . 7

(f) Expense vouchers or invoices . . . . . 7

(g) Money orders and register . . . . . . . 7

(9) Personnel Information

(a) Disciplinary action records time

period after terminated . . . . . . . 7

(b) Earnings record . . . . . . . . . . . . P

(d) Employee information reports . . . . . 7

(e) Employee applications (not hired) . . . 3

(f) Employee applications (hired) time

period after terminated . . . . . . . 7

(g) Employment eligibility

verification . . . . . . . . . . . . 3

(h) Injury reports time period after

report date . . . . . . . . . . . . . 5

(i) Personnel files time period after

terminated . . . . . . . . . . . . . 7

(j) Unemployment compensation . . . . . . . 7

(k) Training manuals and records . . . . . . 7

(l) Withholding authorization time

period after terminated . . . . . . 8

(10) General Information

(a) Applications for traveler's checks . . 7

(b) Change-of-address orders . . . . . . . 2

(d) Vault records (except safe deposits). . 1

(e) Wire transfer debit and credit

entries . . . . . . . . . . . . . . . 7

(f) Safe deposit access/entry tickets

time period after entry date . . . . 7

(g) Safe keeping receipts . . . . . . . . P

(h) Lease and contract . . . . . . . . . . P

(11) Insurance Policy . . . . . . . . . . . . P

(12) Investments . . . . . . . . . . . . . . . P

(13) Merged Credit Union Articles and

Bylaws . . . . . . . . . . . . . . . . P

(14) Loans

(a) Loan documentation to directors . . . . 7

(b) Business loan documentation time

period after account closed . . . . . 7

period after payoff . . . . . . . . . 7

(d) Real estate loans documentation

time period after payoff . . . . . . 7

(e) Real estate related documents

(i) HMDA-1 . . . . . . . . . . . . . . . . 10

(ii) HUD-1 . . . . . . . . . . . . . . . . 10

(iii) Good faith estimates time period

after estimate . . . . . . . . . . 2

(15) Share Accounts

(a) Membership and signature cards . . . . P

(b) Individual share ledgers . . . . . . . P

History

KEY: financial institutions, credit unions
Date of Last Change: 1995
Notice of Continuation: September 21, 2022
Authorizing, and Implemented or Interpreted Law: 7-1 -301(7)

Utah Admin. Code R337-9-4 Reproductions

Any credit union subject to this rule may cause records in its custody to be reproduced by the micro-photographic or other equivalent process. Any reproduction shall have the same force and effect as the original and shall be admissible into evidence as if it were the original.

History

KEY: financial institutions, credit unions
Date of Last Change: 1995
Notice of Continuation: September 21, 2022
Authorizing, and Implemented or Interpreted Law: 7-1 -301(7)

Utah Admin. Code R337-9-5 Consistency With Requirements of Other State or Federal Statute or Rule

This rule will not preempt any other retention requirement longer than that specified herein imposed by any other state or federal statute or rule.

History

KEY: financial institutions, credit unions
Date of Last Change: 1995
Notice of Continuation: September 21, 2022
Authorizing, and Implemented or Interpreted Law: 7-1 -301(7)

R337-10 Rule Designating Applicable Federal Law for Credit Unions Subject to the Jurisdiction of the Department of Financial Institutions

Utah Admin. Code R337-10-1 Authority, Scope and Purpose

(1) This rule is issued pursuant to Section 7-1-325.

(2) Violations of federal law designated by this rule may only be enforced by the department by taking action permitted under Title 7 and the applicable chapters set forth in Section 7-1-325.

(3) This rule designates which one or more federal laws the department may enforce and are applicable to credit unions subject to the jurisdiction of the department.

History

KEY: financial institutions, federal law
Date of Last Change: January 22, 2007
Notice of Continuation: January 18, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-325(2)

Utah Admin. Code R337-10-2 Definitions

(1) "Department" means the Department of Financial Institutions.

(2) "Federal Law" means:

(a) a statute passed by the Congress of the United States; or

(b) a final regulation:

(i) adopted by an administrative agency of the United States government; and

(ii) published in the code of federal regulations or the federal register.

History

KEY: financial institutions, federal law
Date of Last Change: January 22, 2007
Notice of Continuation: January 18, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-325(2)

Utah Admin. Code R337-10-3 Applicable Federal Law

In accordance with Section 7-1-325, the following federal laws are applicable to credit unions subject to the jurisdiction of the department:

(1) Truth in Lending Act, 15 U.S.C. Sec. 1601 et seq., and its implementing federal regulations;

(2) Equal Credit Opportunity Act, 15 U.S.C. Sec. 1691, and its implementing federal regulations;

(3) Truth in Savings Act, 12 U.S.C. Sec. 4301 et seq., and its implementing federal regulations;

(4) Bank Secrecy Act, 12 U.S.C. Sec. 1829b, 12 U.S.C. Sec. 1951 through 1959, and 31 U.S.C. Sec. 5311 through 5332, and its implementing federal regulations;

(5) Federal Credit Union Act ("Prompt Corrective Action"), 12 U.S.C. Sec. 1790d, and its implementing federal regulations;

(6) Federal Credit Union Act, 12 U.S.C. Sec. 1757(5)("Loans and lines of credit to officials"), and its implementing federal regulations;

(7) Real Estate Settlement Procedures Act, 12 U.S.C. Sec. 2601 et seq., and its implementing federal regulations;

(8) Fair Credit Reporting Act, 15 U.S.C. Sec. 1681 et seq., and its implementing federal regulations;

(9) Expedited Funds Availability Act, 12 U.S.C. Sec. 4001 et seq., and its implementing federal regulations;

(10) Electronic Fund Transfers Act, 15 U.S.C. Sec. 1693 et seq., and its implementing federal regulations;

History

KEY: financial institutions, federal law
Date of Last Change: January 22, 2007
Notice of Continuation: January 18, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-325(2)

R339 Industrial Loan Corporations

R339-4 Authority for Industrial Loan Corporations to Issue Subordinated Capital Notes or Debentures

Utah Admin. Code R339-4-1 Authority, Scope and Purpose

(1) This rule is issued pursuant to Section 7-1-301(8) and 7-1-301(13).

(2) This rule applies to all industrial loan corporations.

(3) This rule construes, applies, and elaborates on Department of Financial Institutions Rule R331-5 as it applies to industrial loan corporations in the issuance of subordinated capital notes or debentures.

History

KEY: financial institutions
Date of Last Change: 1995
Notice of Continuation: September 15, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(8)(e); 7-1-301(13)

Utah Admin. Code R339-4-2 Definitions

(1) "Affiliate" means any company under common control with the industrial loan corporation excluding any subsidiary.

(a) The following shall not be considered to be an affiliate:

(i) Any company engaged solely in holding the premises of the industrial loan corporation with which it is affiliated, and

(ii) Any company where control results from the exercise of rights arising out of a bona fide debt previously contracted, but only for the period of time specifically authorized by Rule R339-6-3(1)(j).

(2) "Capital" means the excess of an industrial loan corporation's assets over its liabilities detailed in the following accounts: capital stock, surplus, and undivided profits. Unpaid stock subscriptions are not part of capital.

(3) "Capital Stock" means the total of:

(a) the par value of all shares of the bank having a par value that have been issued; plus

(c) the amounts not included in Subsections (a) and (b) as have been transferred to stated capital of the bank, whether upon the issue of shares as a share dividend or otherwise; minus

(d) all reductions from such sum as have been effected in a manner permitted by law.

(4) "Company" means a corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization or any form of business entity.

(5) "Control" means "control" as defined in Section 7-1-103.

(6) "Commissioner" means the Commissioner of Financial Institutions.

(7) "Department" means the Department of Financial Institutions.

(8) "Institution" means "institution" as defined by Section 7-1-103.

(9) "Parent" means any company which controls the industrial loan corporation.

(10) "Person" means "person" as defined in Section 7-1-103.

(11) "Other evidences of debt" means notes payable, bonds, subordinated capital notes or debentures, maturing within one year, mortgages payable, accrued interest payable, and all other debt obligations, but not including any evidences of debt which involve a full recourse commitment where the department can readily ascertain that the person making the commitment is fully able to honor the same.

(12) "Subsidiary" means "subsidiary" as defined in Section 7-1-103.

(13) "Surplus" is a capital account which includes the amount received by an industrial loan corporation for its capital stock in excess of the par value of the stock, or, in the case of stock without par value, the amount designated as surplus of the total amount received for its capital stock. Surplus may also include amounts received as capital contributions. Amounts may also be transferred to the industrial loan's surplus account by the board of directors from undivided profits.

(14) "Total Capital" means the sum of capital, reserve for contingencies, reserves for loan losses, and the principal outstanding amount of subordinated capital notes or debentures not maturing within one year.

(15) "Undivided Profits" is a capital account representing the industrial loan corporation's capital in excess of its capital stock and surplus accounts. The amount represented by the undivided profits account may arise from net earnings of the industrial loan corporation or out of capital funds paid into the industrial loan corporation in excess of the capital stock and surplus accounts. Undivided profits may be used to absorb losses of the industrial loan corporation, for payment of cash dividends to stockholders or for transfer into surplus, upon appropriate resolution of the industrial loan's board of directors.

History

KEY: financial institutions
Date of Last Change: 1995
Notice of Continuation: September 15, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(8)(e); 7-1-301(13)

Utah Admin. Code R339-4-3 Authority to Issue Capital Notes or Debentures

(1) Any industrial loan corporation may, with the approval of the stockholders owning two-thirds of the voting stock of the institution, or without the approval if it is authorized by its articles of incorporation, and if it has demonstrated sound performance and efficient management, apply to the commissioner for permission to issue convertible or non-convertible capital notes or debentures, subordinated to the claims of all certificates of deposit, deposits and savings accounts and all other creditors.

(2) The commissioner may grant approval for the issuance of subordinated capital notes or debentures in the amounts and under the terms and conditions as he shall deem appropriate, provided that:

(a) All relevant provisions and conditions of Rule R331-5 issued by the department have been complied with; and

(b) The principal amount of the subordinated capital notes or debentures outstanding at any time shall not exceed 50% of the capital of the industrial loan corporation; and

(c) The new issue of subordinated capital notes or debentures have a weighted average maturity of not less than seven years; and

(d) Subordinated capital notes or debentures shall not be used as collateral for loans or extensions of credit made by the industrial loan corporation.

History

KEY: financial institutions
Date of Last Change: 1995
Notice of Continuation: September 15, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(8)(e); 7-1-301(13)

Utah Admin. Code R339-4-4 Disclosure

All subordinated capital notes or debentures issued by an industrial loan corporation shall have the following provisions made in the body of the note or debenture and these provisions shall be disclosed in either a bold face type or in a size of type which is larger than the type face used in the other provisions carried in the body of the note or debenture.

(1) This obligation is NOT insured by any agency of the United States or the state.

(2) This obligation is subordinated to the claims of all certificates of deposit, deposits and savings accounts and all other creditors.

(3) Subordinated capital notes or debentures shall not be used as collateral for loans made by the industrial loan corporation.

(4) Items (1) and (2) listed above shall be prominently disclosed in all advertising of capital notes or debentures.

History

KEY: financial institutions
Date of Last Change: 1995
Notice of Continuation: September 15, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(8)(e); 7-1-301(13)

Utah Admin. Code R339-4-5 Use as Capital

(1) The outstanding principal amount of subordinated capital notes or debentures not maturing within one year shall be added to the capital of the issuing industrial loan corporation for the purpose of determining the amount of "total capital" under the provisions of Sections 7-8-5(1) and 7-8-14 and Rule R339-6.

History

KEY: financial institutions
Date of Last Change: 1995
Notice of Continuation: September 15, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(8)(e); 7-1-301(13)

Utah Admin. Code R339-4-6 Exception to the Limits on Amounts of Subordinated Capital Notes or Debentures which May be Issued

Notwithstanding the limitations of Sections 3 and 5 above, subordinated capital notes or debentures assumed under a supervisory action or plan of reorganization pursuant to Sections 7-2-1 or 7-2-12, may, at the discretion of the commissioner:

(1) Exceed the 50% of capital of the industrial loan corporation limitation imposed by Sections 3(2)(b) above; or

(2) Include the outstanding principal amount of subordinated capital notes or debentures maturing within one year in the capital of the industrial loan corporation for the purpose of determining the amount of "total capital" under the provisions of Section 7-8-14 and Rule R339-6.

History

KEY: financial institutions
Date of Last Change: 1995
Notice of Continuation: September 15, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(8)(e); 7-1-301(13)

R339-6 Rule Clarifying Industrial Loan Corporation Investments

Utah Admin. Code R339-6-1 Authority, Scope, and Purpose

(1) This rule is issued pursuant to Section 7-1-301(8), and construes and applies to Sections 7-8-13 and 7-8-14.

(2) This rule applies to industrial loan corporations and thrift institutions.

(3) This rule defines acceptable investments for the funds of an industrial loan corporation and defines and clarifies investments in real estate pursuant to Sections 7-8-13 and 7-8-14.

History

KEY: financial institutions
Date of Last Change: February 1, 2011
Notice of Continuation: September 15, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301; 7-8-13; 7-8-14

Utah Admin. Code R339-6-2 Definitions

(1) "Affiliate" means any company under common control with the industrial loan corporation excluding any subsidiary.

(a) The following shall not be considered to be an affiliate:

(i) Any company engaged solely in holding the premises of the industrial loan corporation with which it is affiliated, and

(3) "Capital Stock" means the total of:

(a) the par value of all shares of the bank having a par value that have been issued; plus

(c) the amounts not included in Subsections (a) and (b) as have been transferred to stated capital of the bank, whether upon the issue of shares as a share dividend or otherwise; minus

(d) all reductions from such sum as have been effected in a manner permitted by law.

(4) "Commissioner" means the Commissioner of Financial Institutions.

(5) "Contractual commitment to advance funds" means an obligation on the part of the industrial loan corporation to make payments, directly or indirectly, to a designated third party contingent upon a default by the industrial loan's customer in the performance of an obligation under the terms of that customer's contract with the third party or an obligation to guarantee or stand as surety for the benefit of a third party to the extent permitted by law. The term includes standby letters of credit, guarantees, puts and other similar arrangements. Undisbursed loan or lease funds and loan or lease commitments not yet drawn upon are not considered a contractual commitment to advance funds.

(6) "Company" means a corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization or any form of business entity.

(7) "Control" means "control" as defined in Section 7-1-103.

(8) "Depository institution" means "depository institution" as defined in Section 7-1-103.

(9) "Industrial loan corporation" means "industrial loan corporation" as defined in Section 7-1-103.

(10) "Institution" means institution as defined in Section 7-1-103.

(11) "Investment grade securities" means marketable obligations in the form of a bond, note, debenture or preferred stock rated in one of the four highest ratings of a nationally recognized rating agency; it does not include investments which are predominantly speculative in nature.

(12) "Loans and extensions of credit" means any direct or indirect advance of funds in any manner whatsoever to a person. This is made on the basis of any obligation of that person to repay the funds, or repayable from specific property pledged by or on behalf of a person. "Loans and extensions of credit" includes:

(a) A purchase under repurchase agreement of securities, other assets or obligations other than investment grade securities in which the purchasing industrial loan corporation has a perfected security interest, with regard to the seller but not as an obligation of the underlying obligor of the security;

(b) An advance by means of an overdraft, cash item, or otherwise;

(e) A participation without recourse, with regard to the participating industrial loan corporation, but not the originating industrial loan corporation;

(f) Existing loans, leases, or advances which have been charged off on the books of the industrial loan corporation in whole or in part and which are legally enforceable, including statutory bad debt under Section 7-3-25 or Section 7-8-15 respectively.

(13) "Loans and extensions of credit" does not include:

(a) A receipt by an industrial loan corporation of a check deposited in or delivered to the industrial loan corporation in the usual course of business unless it results in the carrying of a cash item for the granting of an overdraft other than an inadvertent overdraft in a limited amount that is promptly repaid;

(b) An acquisition of a note, draft, bill of exchange, or other evidence of indebtedness through a merger or consolidation of financial institutions or a similar transaction by which an institution acquires assets and assumes liabilities of another institution, or foreclosure on collateral or similar proceeding for the protection of the industrial loan corporation, provided that such indebtedness is not held for a period of more than three years from the date of the acquisition, unless permission to extend the period is granted by the commissioner on the basis that holding the indebtedness beyond three years is not detrimental to the safety and soundness of the acquiring industrial loan corporation;

(c) An endorsement or guarantee for the protection of an industrial loan corporation of any loan or other asset previously acquired by the industrial loan corporation in good faith or any indebtedness to an industrial loan corporation for the purpose of protecting the industrial loan corporation against loss or of giving financial assistance to it;

(d) Non-interest bearing deposits to the credit of the industrial loan corporation;

(e) The giving of immediate credit to an industrial loan corporation upon uncollected items received in the ordinary course of business;

(f) The purchase of investment grade securities subject to repurchase agreement in which the purchasing industrial loan corporation has a perfected security interest, or where the securities are purchased from the state or any political subdivision thereof;

(g) The sale of Federal funds;

(h) Loans or extensions of credit which have become unenforceable by reason of discharge in bankruptcy or are no longer legally enforceable for other reasons.

(14) "Parent" means any company which controls the industrial loan corporation.

(15) "Person" means "person" as defined in Section 7-1-103.

(16) "Prudent Investments" means any investment not expressly prohibited by law or rule and made in the exercise of judgment and care under the circumstances then prevailing which men of prudence, discretion, and intelligence exercise in the management of their own affairs not in regard to speculation but in regard to the permanent disposition of their funds, considering the probable income as well as the probable safety of their capital.

(17) "Readily marketable government securities" means obligations in the form of a bond, bill, note or debenture issued or offered by any governmental agency, municipality or board which is rated in one of the four highest ratings of a nationally recognized rating service.

(18) "Real estate" means improved or unimproved real property.

(19) "Standby letter of credit" means any letter of credit, or similar arrangement however named or described which represents an obligation to a designated third party on the part of the issuer:

(a) To repay money borrowed by or advanced to or for the account of the issuer's customer, or

(b) To make payment on account of any indebtedness undertaken by the issuer's customer, or

(20) "Subsidiary" means "subsidiary" as defined in Section 7-1-103.

(21) "Surplus" is a capital account which includes the amount received by an industrial loan corporation for its capital stock in excess of the par value of the stock, or, in the case of stock without par value, the amount designated as surplus of the total amount received for its capital stock. Surplus may also include amounts received as capital contributions. Amounts may also be transferred to the industrial loan's surplus account by the board of directors from undivided profits.

(22) "Total Capital" means the sum of capital, reserve for contingencies, reserves for loan losses, and the principal outstanding amount of subordinated capital notes or debentures not maturing within one year.

(23) "Undivided Profits" is a capital account representing the industrial loan corporation's capital in excess of its capital stock and surplus accounts. The amount represented by the undivided profits account may arise from net earnings of the industrial loan corporation or out of capital funds paid into the industrial loan corporation in excess of the capital stock and surplus accounts. Undivided profits may be used to absorb losses of the industrial loan corporation, for payment of cash dividends to stockholders or for transfer into surplus, upon appropriate resolution of the industrial loan corporation's board of directors.

History

KEY: financial institutions
Date of Last Change: February 1, 2011
Notice of Continuation: September 15, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301; 7-8-13; 7-8-14

Utah Admin. Code R339-6-3 Acceptable Investments for the Deposits and Other Funds of Industrial Loan Corporations

(1) In the absence of a statute or rule to the contrary, an industrial loan corporation is unrestricted as to a percentage of its total capital being invested in the following:

(a) Cash, demand, or time deposits in a federally insured depository institution, or in deposits maintained directly with a federal reserve bank;

(b) Obligations of, or obligations which are fully guaranteed as to principal and interest by, the United States or this state or any of its political subdivisions;

(d) Any securities purchased under agreements to resell;

(e) Leases, loans, or extensions of credit, whether unsecured or secured;

(f) Real estate contracts;

(g) Consumer and commercial installment sales contracts and security agreements;

(h) A subsidiary with the prior written approval of the commissioner upon finding that the subsidiary is primarily engaged in activities closely related to banking; or

(i) Such real estate as the industrial loan corporation may purchase at any sale, public or private, or which may be conveyed to the industrial loan corporation in satisfaction of or on account of a debt previously contracted in the conduct of its business upon which it had a mortgage, trust deed, judgment, assignment, lien or other claim as set forth in Rule R331-26.

(j) Any other investment with the prior written approval of the commissioner.

(2) An industrial loan corporation is restricted to 50% of its total capital at any one time being invested in the following:

Premises used in the conduct of the business which include real property and any interest therein, property such as furniture, fixtures, and equipment for use in carrying on its own business and the stock, bonds, debentures, or other obligations of any subsidiary or affiliate having as its exclusive activity the ownership and management of the property or interests.

(a) The amount invested in premises may exceed 50% of total capital upon application and finding by the commissioner that the additional investment is necessary to promote the viability and stability of the industrial loan corporation;

(b) If the use of any of the premises for the conduct of business of the thrift institution is discontinued, the industrial loan corporation shall consider the real property as an investment under the 10% of total capital limitation cited in Section (3) below.

(3) An industrial loan corporation is restricted to 10% of its total capital at any one time being invested in real estate other than real estate used in the premises in the conduct of the business or real estate purchased or conveyed on account of a debt previously contracted. Such limited investment by an industrial loan corporation may include real estate or participation interests in real estate whether in partnership, joint venture or participation interest in the real estate for the purpose of producing income or for inventory and sale or for improvement, including the erection of buildings on the real estate for sale or rental purposes, and the industrial loan corporation may hold, sell, lease, operate or otherwise exercise the rights of any owner of any property.

(4) An industrial loan corporation is restricted to an aggregate of 20% of its total capital at any time being invested in any other "prudent investments" not specifically mentioned above, in Rule R339-6-3(1) through (3); provided however, that the aggregate of investments in any form in any one person made pursuant to this section shall not exceed 10% of total capital.

History

KEY: financial institutions
Date of Last Change: February 1, 2011
Notice of Continuation: September 15, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301; 7-8-13; 7-8-14

R339-11 Discount Securities Brokerage Service by Industrial Loan Corporations

Utah Admin. Code R339-11-1 Authority, Scope, and Purpose

(1) This rule is issued pursuant to Subsection 7-1-301(3).

(2) This rule governs the type of securities brokerage service industrial loan corporations may offer.

(3) The purpose of this rule is to allow securities activities limited to "discount brokerage" services by industrial loan corporations, similar to the discount brokerage services allowed state chartered banks.

History

KEY: financial institutions
Date of Last Change: December 2, 1997
Notice of Continuation: September 21, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(3)

Utah Admin. Code R339-11-2 Definitions

"Discount brokerage" is the practice of executing securities transactions solely at the direction of an industrial loan customer but not providing that customer with any investment advice.

History

KEY: financial institutions
Date of Last Change: December 2, 1997
Notice of Continuation: September 21, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(3)

Utah Admin. Code R339-11-3 Discount Brokerage Services

An industrial loan corporation may enter into a contractual arrangement with unrelated discount brokers where the broker executes securities transactions for industrial loan corporation customers and the industrial loan corporation shares the commissions generated by the transaction. This service is restricted as outlined below:

(1) The industrial loan corporation clearly acts solely at the customer's direction;

(2) The transactions are for the account of the customer and not the account of the industrial loan corporation;

(3) The transactions are without recourse;

(4) The industrial loan corporation makes no warranty as to the performance or quality of any security;

(5) The industrial loan corporation does not advise customers to make any particular investment;

(6) The industrial loan corporation's promotional material clearly explains the industrial loan corporation's limited role in the service; and

(7) The industrial loan corporation's promotional material clearly explains that the transactions are not federally insured.

History

KEY: financial institutions
Date of Last Change: December 2, 1997
Notice of Continuation: September 21, 2022
Authorizing, and Implemented or Interpreted Law: 7-1-301(3)

R339-12 Rule Designating Applicable Federal Law for Industrial Loan Corporations Subject to the Jurisdiction of the Department of Financial Institutions

Utah Admin. Code R339-12-1 Authority, Scope and Purpose

(1) This rule is issued pursuant to Section 7-1-325.

(2) Violations of federal law designated by this rule may only be enforced by the department by taking action permitted under Title 7 and the applicable chapters set forth in Section 7-1-325.

(3) This rule designates which one or more federal laws the department may enforce and are applicable to industrial loan corporations subject to the jurisdiction of the department.

History

KEY: financial institutions, federal law
Date of Last Change: December 22, 2006
Notice of Continuation: December 6, 2021
Authorizing, and Implemented or Interpreted Law: 7-1-325(2)

Utah Admin. Code R339-12-2 Definitions

(1) "Department" means the Department of Financial Institutions.

(2) "Federal Law" means:

(a) a statute passed by the Congress of the United States; or

(b) a final regulation:

(i) adopted by an administrative agency of the United States government; and

(ii) published in the code of federal regulations or the federal register.

History

KEY: financial institutions, federal law
Date of Last Change: December 22, 2006
Notice of Continuation: December 6, 2021
Authorizing, and Implemented or Interpreted Law: 7-1-325(2)

Utah Admin. Code R339-12-3 Applicable Federal Law

In accordance with Section 7-1-325, the following federal laws are applicable to industrial loan corporations subject to the jurisdiction of the department: