Michigan Laws 487.14301 – Purchasing, selling, underwriting, and holding investment securities
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Terms Used In Michigan Laws 487.14301
- Association: means a federal savings association organized under section 5 of the home owners' loan act, 12 USC 1464, or a savings and loan association, building and loan association, or homestead association that is organized under the laws of a state, the District of Columbia, or a territory or protectorate of the United States, and whose deposits are insured by the Federal Deposit Insurance Corporation. See Michigan Laws 487.11201
- Bank: means a state banking corporation that is organized or reorganized under this act or organized under any law of this state enacted before March 1, 2000, including a state banking corporation that voluntarily limits its activities. See Michigan Laws 487.11201
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- department: means the department of insurance and financial services. See Michigan Laws 487.11201
- director: means the director of the department. See Michigan Laws 487.11201
- Foreclosure: A legal process in which property that is collateral or security for a loan may be sold to help repay the loan when the loan is in default. Source: OCC
- in writing: shall be construed to include printing, engraving, and lithographing; except that if the written signature of a person is required by law, the signature shall be the proper handwriting of the person or, if the person is unable to write, the person's proper mark, which may be, unless otherwise expressly prohibited by law, a clear and classifiable fingerprint of the person made with ink or another substance. See Michigan Laws 8.3q
- Investment security: means a marketable obligation in the form of a bond, note, or debenture, commonly regarded as an investment security and that is salable under ordinary circumstances with reasonable promptness at a fair value. See Michigan Laws 487.11202
- Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- state: when applied to the different parts of the United States, shall be construed to extend to and include the District of Columbia and the several territories belonging to the United States; and the words "United States" shall be construed to include the district and territories. See Michigan Laws 8.3o
- Surplus: means the amount paid for issued and outstanding common and preferred stock of a bank in excess of the stated par value, plus any amount of transferred undivided profits and any additional amounts paid in or contributed to increase total capital. See Michigan Laws 487.11203
- United States: shall be construed to include the district and territories. See Michigan Laws 8.3o
(1) A bank may purchase, sell, underwrite, and hold investment securities that are obligations in the form of bonds, notes, or debentures of a type and to the extent permitted by this act.
(2) A bank may hold, without limit, any of the following:
(a) Obligations of the United States, obligations that are guaranteed fully as to principal and interest by the United States, or any general obligations of any state or of any political subdivision of a state.
(b) Obligations issued by an entity of the federally chartered Farm Credit System.
(c) Obligations issued by banks for cooperatives.
(d) Obligations issued by the federal home loan banks.
(e) Obligations insured by the secretary under title IX of the national housing act, 12 USC 1750 to 1750g.
(f) Obligations insured by the secretary under section 207 of title II of the national housing act, 12 USC 1713, if the debentures to be issued in payment of the insured obligations are guaranteed as to principal and interest by the United States.
(g) Obligations, participations, or other instruments of or issued by the Federal National Mortgage Association or the Government National Mortgage Association.
(h) Mortgages, obligations, or other securities that are or ever have been sold by the Federal Home Loan Mortgage Corporation under 12 USC 1454 or 1455.
(i) Obligations of a public housing agency, as defined in section 1437a of the United States housing act of 1937, 42 USC 1437a.
(j) Obligations of a local public agency, as defined in former 42 USC 1460(h), secured by a loan agreement between the local public agency and the secretary of the United States Department of Housing and Urban Development.
(k) Any other investment security authorized by order or declaratory ruling of the director.
(3) Subject to the exercise of prudent banking judgment, a bank may engage in the underwriting of any of the following investment securities:
(a) Obligations of the United States or any political subdivision of the United States.
(b) Obligations of any state or a political subdivision of any state.
(c) Obligations of the International Bank for Reconstruction and Development.
(d) Obligations of the Inter-American Development Bank.
(e) Obligations of the Asian Development Bank.
(f) Obligations of the Tennessee Valley Authority.
(g) Obligations issued by any state or political subdivision or agency of a state or political subdivision for housing, university, or dormitory purposes.
(h) Obligations of the African Development Bank.
(i) Obligations of the International Finance Corporation.
(j) Other obligations listed in subsection (2).
(k) Other obligations authorized by order or declaratory ruling of the director.
(4) A bank may purchase for its own account other investment securities, but the total amount of investment securities of any 1 obligor or maker, held by a bank under this subsection, shall not exceed at any time 25% of its capital and surplus.
(5) The statutory limitation on the amount of investment securities of any 1 obligor or maker that may be held by a bank is determined on the basis of generally accepted accounting principles unless otherwise directed or permitted in writing by the director for safety and soundness reasons.
(6) A bank shall not purchase investment securities convertible into stock at the option of the issuer.
(7) The restrictions and limitations of this section with respect to a bank acquiring and holding securities for its own account do not apply to securities acquired through foreclosure on collateral, or acquired in good faith by way of compromise of a doubtful claim or to avoid a loss in connection with a debt previously contracted. This section does not limit the investment authority of a bank granted by any other section of this act.
(8) If a bank invests funds in a security, obligation, or other instrument that at the time is permitted under this part, the investment subsequently becomes impermissible because of a change in circumstances or law, and the director finds that continuing to hold the investment will have an adverse effect on the safety and soundness of the bank, the director may require that the bank develop a reasonable plan for the divestiture of the investment.