Senate File 2376 - Introduced
SENATE FILE
BY COMMITTEE ON COMMERCE
(SUCCESSOR TO SSB 3239)
Passed Senate, Date Passed House, Date
Vote: Ayes Nays Vote: Ayes Nays
Approved
A BILL FOR
1 An Act relating to financial institutions including the
2 regulation of state banks, bank holding companies, and
3 industrial loan companies, and providing for penalties.
4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
5 TLSB 5323SV 81
6 kk/je/5
PAG LIN
1 1 Section 1. Section 12C.22, subsection 6, paragraph a, Code
1 2 2005, is amended to read as follows:
1 3 a. Investment securities and shares in which a bank is
1 4 permitted to invest under section 524.901, subsections 1, 2,
1 5 and 3, and 4.
1 6 Sec. 2. Section 524.217, subsection 2, Code 2005, is
1 7 amended to read as follows:
1 8 2. The superintendent may furnish to the federal deposit
1 9 insurance corporation, the federal reserve system, the office
1 10 of the comptroller of the currency, the office of thrift
1 11 supervision, national credit union administration, the federal
1 12 home loan bank, the financial crimes enforcement network of
1 13 the federal department of the treasury, the United States
1 14 internal revenue service, and financial institution regulatory
1 15 authorities of other states, or to any official or supervising
1 16 examiner of such regulatory authorities, a copy of the report
1 17 of any or all examinations made of any state bank and of any
1 18 affiliate of a state bank.
1 19 Sec. 3. Section 524.220, subsection 1, Code 2005, is
1 20 amended to read as follows:
1 21 1. A state bank shall render a full, clear, and accurate
1 22 statement of its condition to the superintendent, in a format
1 23 prescribed by the superintendent, verified by the oath of an
1 24 officer and attested by the signatures of at least three of
1 25 the directors, or verified by the oath of two of its officers,
1 26 and attested by at least two of the directors. The
1 27 superintendent may, in the superintendent's discretion, use
1 28 any form of statement of condition that is used by the federal
1 29 deposit insurance corporation or the federal reserve system.
1 30 Sec. 4. Section 524.220, subsection 3, Code 2005, is
1 31 amended by striking the subsection.
1 32 Sec. 5. Section 524.312, subsection 3, Code 2005, is
1 33 amended to read as follows:
1 34 3. If a change in the location of the principal place of
1 35 business of a state bank is proposed, application for approval
2 1 of the superintendent shall be made as required by the
2 2 superintendent pursuant to this section. A change in location
2 3 of the principal place of business of a state bank, including
2 4 a change from one municipal corporation to another municipal
2 5 corporation within an urban complex, requires an amendment to
2 6 the articles of incorporation pursuant to sections 524.1502,
2 7 524.1504, and 524.1506. A state bank seeking approval of a
2 8 change of location pursuant to this subsection shall publish
2 9 once each week for two consecutive weeks a notice of the
2 10 proposed change of location in a newspaper of general
2 11 circulation in the municipal corporation or unincorporated
2 12 area in which the state bank has its principal place of
2 13 business, or if there is none, in a newspaper of general
2 14 circulation in the county, or in a county adjoining the
2 15 county, in which the state bank has its principal place of
2 16 business, and in the municipal corporation in which it seeks
2 17 to establish its principal place of business, or if there is
2 18 none, in a newspaper of general circulation in the county, or
2 19 in a county adjoining the county, in which the municipal
2 20 corporation is located. The notices notice shall be published
2 21 within thirty days after the application to the superintendent
2 22 for approval of the change in location is accepted for
2 23 processing. The notice shall set forth the name of the state
2 24 bank, the present location of its principal place of business,
2 25 the location to which it proposes to move its principal place
2 26 of business, and the date upon which the application was
2 27 accepted for processing by the superintendent.
2 28 Sec. 6. Section 524.606, subsection 2, unnumbered
2 29 paragraph 1, Code 2005, is amended to read as follows:
2 30 If, in the opinion of the superintendent, any director of a
2 31 state bank or bank holding company has violated any law
2 32 relating to such state bank or bank holding company or has
2 33 engaged in unsafe or unsound practices in conducting the
2 34 business of such state bank or bank holding company, the
2 35 superintendent may cause notice to be served upon such
3 1 director, to appear before the superintendent to show cause
3 2 why the director should not be removed from office. A copy of
3 3 such notice shall be sent to each director of the state bank
3 4 or bank holding company affected, by registered or certified
3 5 mail. If, after granting the accused director a reasonable
3 6 opportunity to be heard, the superintendent finds that the
3 7 director violated any law relating to such state bank or bank
3 8 holding company or engaged in unsafe or unsound practices in
3 9 conducting the business of such state bank or bank holding
3 10 company, the superintendent, in the superintendent's
3 11 discretion, may order that such director be removed from
3 12 office, and that such director be prohibited from serving in
3 13 any capacity in any other bank, bank holding company, bank
3 14 affiliate, trust company, or an entity licensed under chapter
3 15 533A, 533C, 533D, 535B, 536, or 536A. A copy of the order
3 16 shall be served upon such director and upon the state bank or
3 17 bank holding company of which the person is a director at
3 18 which time the person shall cease to be a director of the
3 19 state bank or bank holding company. The resignation,
3 20 termination of employment, or separation of such director,
3 21 including a separation caused by the closing of the state bank
3 22 or bank holding company at which the person serves as a
3 23 director, does not affect the jurisdiction and authority of
3 24 the superintendent to cause notice to be served and proceed
3 25 under this subsection against the director, if the notice is
3 26 served before the end of the six=year period beginning on the
3 27 date the director ceases to be a director with the bank.
3 28 Sec. 7. Section 524.707, subsection 2, Code 2005, is
3 29 amended to read as follows:
3 30 2. Section 524.606, subsection 2, which provides for the
3 31 removal of directors by the superintendent, shall have equal
3 32 application to officers and employees of a bank, bank holding
3 33 company, bank affiliate, or trust company.
3 34 Sec. 8. Section 524.1201, Code Supplement 2005, is amended
3 35 by adding the following new subsection:
4 1 NEW SUBSECTION. 4. A bank shall not operate a loan
4 2 production office or deposit production office in this state
4 3 unless either the bank has received approval from the
4 4 superintendent or the bank operated the loan production office
4 5 or deposit production office before July 1, 2006.
4 6 Sec. 9. Section 524.1601, Code 2005, is amended to read as
4 7 follows:
4 8 524.1601 PENALTIES AND CRIMINAL PROVISIONS APPLICABLE TO
4 9 DIRECTORS, OFFICERS, AND EMPLOYEES OF STATE BANKS AND BANK
4 10 HOLDING COMPANIES.
4 11 1. A director, officer, or employee of a state bank or
4 12 bank holding company who willfully violates any of the
4 13 provisions of subsection 4 of section 524.612, section
4 14 524.613, subsection 2 of section 524.706, insofar as such
4 15 subsection incorporates subsection 4 of section 524.612, or
4 16 section 524.710, shall be guilty of a serious misdemeanor,
4 17 plus, in the following circumstances, an additional fine or
4 18 fines equal to:
4 19 a. The amount of money or the value of the property which
4 20 the director, officer, or employee received for procuring, or
4 21 attempting to procure, a loan, extension of credit, or
4 22 investment by the state bank or bank holding company, upon
4 23 conviction of a violation of subsection 1 of section 524.613,
4 24 or of subsection 1 of section 524.710.
4 25 b. The amount by which the director's, officer's, or
4 26 employee's deposit account in the state bank or bank holding
4 27 company is overdrawn, upon conviction of a violation of
4 28 subsection 2 of section 524.613, or of subsection 2 of section
4 29 524.710.
4 30 c. The amount of any profit which the director, officer,
4 31 or employee receives on the transaction, upon conviction of a
4 32 violation of subsection 4 of section 524.612, or of subsection
4 33 2 of section 524.706, insofar as each applies to purchases
4 34 from and sales to a state bank or bank holding company upon
4 35 terms more favorable to such director, or officer, or employee
5 1 than those offered to other persons.
5 2 d. The amount of profit, fees or other compensation
5 3 received, upon conviction of a violation of section 524.710,
5 4 subsection 1, paragraph "b".
5 5 2. A director or officer who willfully makes or receives a
5 6 loan in violation of subsection 1 of section 524.612, or
5 7 subsection 1 of section 524.706, shall be guilty of a serious
5 8 misdemeanor and shall be subject to an additional fine equal
5 9 to that amount of the loan in excess of the limitation imposed
5 10 by such subsections, and shall be forever disqualified from
5 11 acting as a director or officer of any state bank or bank
5 12 holding company. For the purpose of this subsection, amounts
5 13 which are treated as obligations of an officer or director
5 14 pursuant to subsection 5 of section 524.612, shall be
5 15 considered in determining whether the loan or extension of
5 16 credit is in violation of subsection 1 of section 524.612 and
5 17 subsection 1 of section 524.706.
5 18 3. A director, officer, or employee of a state bank or
5 19 bank holding company who willfully makes or receives a loan or
5 20 extension of credit of funds held by the state bank or bank
5 21 holding company as fiduciary, in violation of subsection 4 of
5 22 section 524.1002, shall be guilty of a serious misdemeanor and
5 23 shall be subject to a further fine equal to the amount of the
5 24 loan or extension of credit made in violation of subsection 4
5 25 of section 524.1002, and shall be forever disqualified from
5 26 acting as a director, officer, or employee of any state bank
5 27 or bank holding company.
5 28 4. A director, officer, or employee of a state bank or
5 29 bank holding company who willfully violates, or participates
5 30 in the violation of, section 524.814, or section 524.819,
5 31 shall be guilty of a serious misdemeanor.
5 32 Sec. 10. Section 524.1602, unnumbered paragraph 1, Code
5 33 2005, is amended to read as follows:
5 34 The superintendent may impose a penalty on a state bank of
5 35 up to one hundred thousand dollars for each day:
6 1 Sec. 11. Section 524.1603, subsection 2, Code 2005, is
6 2 amended to read as follows:
6 3 2. The superintendent may impose a penalty on a state bank
6 4 of up to one hundred thousand dollars for each day that it
6 5 violates the provisions of section 524.1201.
6 6 Sec. 12. Section 536A.2, Code 2005, is amended by adding
6 7 the following new subsections:
6 8 NEW SUBSECTION. 1A. "Affiliate" means the same as defined
6 9 in 12 U.S.C. } 1841(k).
6 10 NEW SUBSECTION. 1B. "Commercial activities" means
6 11 activities in which an industrial loan company is not
6 12 specifically authorized to engage under the provisions of this
6 13 chapter.
6 14 NEW SUBSECTION. 1C. "Control" means the same as provided
6 15 in 12 U.S.C. } 1841(a)(2).
6 16 Sec. 13. Section 536A.4, Code 2005, is amended to read as
6 17 follows:
6 18 536A.4 LIMITATIONS.
6 19 No A license shall not be issued to any individual,
6 20 partnership, nonprofit organization, or unincorporated
6 21 association. A license shall not be issued to an applicant
6 22 that engages in commercial activities directly or through an
6 23 affiliate. Not more than one place of business where loans
6 24 are made shall be maintained under the same license but the
6 25 superintendent may issue more than one license to the same
6 26 licensee upon compliance, for each such additional license,
6 27 with all the provisions of this chapter governing an original
6 28 issuance of a license.
6 29 Sec. 14. Section 536A.5, subsection 6, Code 2005, is
6 30 amended by striking the subsection.
6 31 Sec. 15. Section 536A.12, subsection 3, paragraph a, Code
6 32 2005, is amended to read as follows:
6 33 a. For purposes of this section, "control" means control
6 34 as defined in section 524.103. However, a change of control
6 35 does not occur when a majority shareholder of an industrial
7 1 loan company transfers the shareholder's shares of the
7 2 industrial loan company to a revocable trust, so long as the
7 3 transferor retains the power to revoke the trust and take
7 4 possession of such shares.
7 5 Sec. 16. Section 536A.21, Code 2005, is amended to read as
7 6 follows:
7 7 536A.21 OTHER BUSINESS IN SAME OFFICE.
7 8 A licensee engaged in the business of operating an
7 9 industrial loan company under the provisions of this chapter
7 10 may not conduct its business within any office, room, suite,
7 11 or place of business in which any other business is engaged in
7 12 or conducted, unless specifically authorized to do so in
7 13 writing by the superintendent upon the superintendent's
7 14 finding that the character of the other business is such that
7 15 its operation by the licensee would not facilitate evasions of
7 16 this chapter or any other statute of the state of Iowa
7 17 relating to the making of loans, or premises in which
7 18 commercial activities are conducted, unless the place where
7 19 its business is conducted by the industrial loan company is
7 20 physically separated from the location where commercial
7 21 activities are conducted and has a separate entrance. The
7 22 prohibition of this section shall not apply to the conduct of
7 23 business if, prior to January 1, 2006, the superintendent has
7 24 determined in writing that the character of the other business
7 25 is such that its operation by the licensee would not
7 26 facilitate evasions of the provisions of this chapter or any
7 27 other provision of the Code relating to the making of loans.
7 28 Sec. 17. Section 536A.22, unnumbered paragraph 3, Code
7 29 2005, is amended by striking the unnumbered paragraph.
7 30 Sec. 18. Section 536A.23, Code 2005, is amended by adding
7 31 the following new subsection:
7 32 NEW SUBSECTION. 6. Engage in commercial activities or
7 33 have an affiliate that engages in commercial activities. This
7 34 subsection shall not apply to an industrial loan company with
7 35 an affiliate that is engaged in commercial activities prior to
8 1 January 1, 2006, if control of the industrial loan company is
8 2 not thereafter transferred to an entity that engages in
8 3 commercial activities directly or through an affiliate.
8 4 Sec. 19. NEW SECTION. 536A.32 ACQUISITIONS.
8 5 Neither an out=of=state bank nor an out=of=state bank
8 6 holding company shall directly or indirectly acquire control
8 7 of, or directly or indirectly acquire all or substantially all
8 8 of the assets of, an industrial loan company located in this
8 9 state, unless the industrial loan company has been in
8 10 continuous existence and operation for at least five years.
8 11 Sec. 20. NEW SECTION. 536A.33 ACQUISITIONS AND BRANCHES
8 12 BY OUT=OF=STATE COMPANIES.
8 13 An out=of=state industrial loan company, industrial bank,
8 14 or similar institution as provided in 12 U.S.C. }
8 15 1841(c)(2)(H), shall not do any of the following:
8 16 1. Establish or operate a branch in this state.
8 17 2. Directly or indirectly acquire control of an industrial
8 18 loan company located in this state.
8 19 3. Directly or indirectly acquire all or substantially all
8 20 of the assets of an industrial loan company in this state.
8 21 Sec. 21. NEW SECTION. 536A.34 ACTIVITIES OF BRANCHES OF
8 22 OUT=OF=STATE COMPANIES.
8 23 A branch of an out=of=state industrial loan company,
8 24 industrial bank, or similar institution as provided in 12
8 25 U.S.C. } 1841(c)(2)(H), shall not engage in any activity in
8 26 this state in which an industrial loan company is not
8 27 specifically permitted to engage under the provisions of this
8 28 chapter, and shall not conduct operations at any location
8 29 where an industrial loan company is not permitted to conduct
8 30 operations under this chapter.
8 31 Sec. 22. Section 524.1803, Code 2005, is repealed.
8 32 EXPLANATION
8 33 This bill relates to financial institutions including the
8 34 regulation of state banks, bank holding companies, and
8 35 industrial loan companies. The bill provides that banks may
9 1 use as collateral to secure public deposits any investment
9 2 securities and shares registered under the Federal Investment
9 3 Company Act of 1940. The bill permits the superintendent to
9 4 provide copies of examinations or reports to the financial
9 5 crimes enforcement network of the U.S. department of the
9 6 treasury and the internal revenue service. The bill changes
9 7 the verification and attestation requirements for reports to
9 8 the superintendent by requiring two officers to verify and at
9 9 least two directors to attest to the report rather than
9 10 allowing an alternative verification by one officer and
9 11 attestation by at least three directors. The bill repeals the
9 12 requirement that a state bank publish the bank's statement of
9 13 condition in a local newspaper. The bill reduces the number
9 14 of times a state bank must publish a notice of a proposed
9 15 change of location of its principal place of business in a
9 16 local newspaper.
9 17 The bill provides the superintendent with authority to
9 18 remove a director, officer, or employee of a bank holding
9 19 company for engaging in unsafe or unsound practices in
9 20 conducting the business of the bank holding company and
9 21 prohibit the director from serving in any capacity for another
9 22 entity regulated by the superintendent. The bill provides
9 23 that a bank is prohibited from operating a loan production
9 24 office or deposit production office without approval from the
9 25 superintendent unless the bank operated the office before July
9 26 1, 2006. The bill makes the criminal provisions of Code
9 27 chapter 524 applicable to a director, officer, or employee of
9 28 a bank holding company.
9 29 The bill increases the penalty the superintendent may
9 30 impose on a state bank from $100 per day to $1,000 per day.
9 31 The bill provides for definitions of "affiliate",
9 32 "commercial activities", and "control" concerning regulation
9 33 of industrial loan companies. The bill restricts the ability
9 34 of an industrial loan company or an affiliate to engage in
9 35 commercial activities as defined by the bill. The bill
10 1 removes persons engaged in the mercantile business from the
10 2 exemption from regulation as an industrial loan lender. The
10 3 bill prohibits an out=of=state bank or bank holding company
10 4 from acquiring control of an industrial loan company unless
10 5 the industrial loan company has been in continuous existence
10 6 and operation for at least five years. The bill restricts the
10 7 ability of an out=of=state industrial loan company or
10 8 industrial bank from establishing, operating, controlling, or
10 9 acquiring an industrial loan company in this state.
10 10 The bill repeals the provision restricting the ability of a
10 11 bank holding company to purchase stock of a state or national
10 12 bank.
10 13 LSB 5323SV 81
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