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DEPARTMENT OF FINANCIAL INSTITUTIONS RELATED

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AMENDMENTS

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2017 GENERAL SESSION

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STATE OF UTAH

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Chief Sponsor: Val L. Peterson

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Senate Sponsor: Curtis S. Bramble

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8     LONG TITLE
9     Committee Note:
10          The Business and Labor Interim Committee recommended this bill.
11     General Description:
12          This bill amends provisions related to financial institutions under the jurisdiction of the
13     department.
14     Highlighted Provisions:
15          This bill:
16          ▸     modifies definitions;
17          ▸     permits the delegation of powers and duties under certain circumstances;
18          ▸     changes the supervisor of trust to the supervisor of holding companies;
19          ▸     modifies restrictions on acquisition of institutions and holding companies; and
20          ▸     makes technical changes.
21     Money Appropriated in this Bill:
22          None
23     Other Special Clauses:
24          None
25     Utah Code Sections Affected:
26     AMENDS:
27          7-1-103, as last amended by Laws of Utah 2016, Chapter 288

28          7-1-201, as last amended by Laws of Utah 2013, Chapter 73
29          7-1-208.1, as enacted by Laws of Utah 1989, Chapter 267
30          7-1-209, as last amended by Laws of Utah 1994, Chapter 200
31          7-1-703, as last amended by Laws of Utah 2014, Chapter 189
32     

33     Be it enacted by the Legislature of the state of Utah:
34          Section 1. Section 7-1-103 is amended to read:
35          7-1-103. Definitions.
36          As used in this title:
37          (1) (a) "Bank" means a person authorized under the laws of this state, another state, or
38     the United States to accept deposits from the public.
39          (b) "Bank" does not include:
40          (i) a federal savings and loan association or federal savings bank;
41          (ii) an industrial bank subject to Chapter 8, Industrial Banks;
42          (iii) a federally chartered credit union; or
43          (iv) a credit union subject to Chapter 9, Utah Credit Union Act.
44          (2) "Banking business" means the offering of deposit accounts to the public and the
45     conduct of such other business activities as may be authorized by this title.
46          (3) (a) "Branch" means a place of business of a financial institution, other than its main
47     office, at which deposits are received and paid.
48          (b) "Branch" does not include:
49          (i) an automated teller machine, as defined in Section 7-16a-102;
50          (ii) a point-of-sale terminal, as defined in Section 7-16a-102; or
51          (iii) a loan production office under Section 7-1-715.
52          (4) "Commissioner" means the Commissioner of Financial Institutions.
53          (5) "Control" means the power, directly or indirectly, or through or in concert with one
54     or more persons, to:
55          (a) direct or exercise a controlling influence over:
56          (i) the management or policies of a financial institution; or
57          (ii) the election of a majority of the directors or trustees of an institution;
58          (b) vote 20% or more of any class of voting securities of a financial institution by an

59     individual; or
60          (c) vote more than 10% of any class of voting securities of a financial institution by a
61     person other than an individual.
62          (6) "Credit union" means a cooperative, nonprofit association incorporated under:
63          (a) Chapter 9, Utah Credit Union Act; or
64          (b) 12 U.S.C. Sec. 1751 et seq., Federal Credit Union Act, as amended.
65          (7) "Department" means the Department of Financial Institutions.
66          (8) "Depository institution" means a bank, savings and loan association, savings bank,
67     industrial bank, credit union, or other institution that:
68          (a) holds or receives deposits, savings, or share accounts;
69          (b) issues certificates of deposit; or
70          (c) provides to its customers other depository accounts that are subject to withdrawal
71     by checks, drafts, or other instruments or by electronic means to effect third party payments.
72          (9) (a) "Depository institution holding company" means:
73          (i) a person other than an individual that:
74          (A) has control over [any] a depository institution; or
75          (B) becomes a holding company of a depository institution under Section 7-1-703; or
76          (ii) a person other than an individual that the commissioner finds, after considering the
77     specific circumstances, is exercising or is capable of exercising a controlling influence over a
78     depository institution by means other than those specifically described in this section.
79          (b) Except as provided in Section 7-1-703, a person is not a depository institution
80     holding company solely because it owns or controls shares acquired in securing or collecting a
81     debt previously contracted in good faith.
82          (10) "Financial institution" means [any] an institution subject to the jurisdiction of the
83     department because of this title.
84          (11) (a) "Financial institution holding company" means a person, other than an
85     individual that has control over [any] a financial institution or [any] a person that becomes a
86     financial institution holding company under this chapter, including an out-of-state or foreign
87     depository institution holding company.
88          (b) Ownership of a service corporation or service organization by a depository
89     institution does not make that institution a financial institution holding company.

90          (c) A person holding 10% or less of the voting securities of a financial institution is
91     rebuttably presumed not to have control of the institution.
92          (d) A trust company is not a holding company solely because it owns or holds 20% or
93     more of the voting securities of a financial institution in a fiduciary capacity, unless the trust
94     company exercises a controlling influence over the management or policies of the financial
95     institution.
96          (12) "Foreign depository institution" means a depository institution chartered or
97     authorized to transact business by a foreign government.
98          (13) "Foreign depository institution holding company" means the holding company of a
99     foreign depository institution.
100          (14) "Home state" means:
101          (a) for a state chartered depository institution, the state that charters the institution;
102          (b) for a federally chartered depository institution, the state where the institution's main
103     office is located; and
104          (c) for a depository institution holding company, the state in which the total deposits of
105     all depository institution subsidiaries are the largest.
106          (15) "Host state" means:
107          (a) for a depository institution, a state, other than the institution's home state, where the
108     institution maintains or seeks to establish a branch; and
109          (b) for a depository institution holding company, a state, other than the depository
110     institution holding company's home state, where the depository institution holding company
111     controls or seeks to control a depository institution subsidiary.
112          (16) "Industrial bank" means a corporation or limited liability company conducting the
113     business of an industrial bank under Chapter 8, Industrial Banks.
114          (17) "Industrial loan company" means the same as that term is defined in Section
115     7-8-21.
116          (18) "Insolvent" means the status of a financial institution that is unable to meet its
117     obligations as they mature.
118          (19) "Institution" means:
119          (a) a corporation;
120          (b) a limited liability company;

121          (c) a partnership;
122          (d) a trust;
123          (e) an association;
124          (f) a joint venture;
125          (g) a pool;
126          (h) a syndicate;
127          (i) an unincorporated organization; or
128          (j) any form of business entity.
129          (20) "Institution subject to the jurisdiction of the department" means an institution or
130     other person described in Section 7-1-501.
131          (21) "Liquidation" means the act or process of winding up the affairs of an institution
132     subject to the jurisdiction of the department by realizing upon assets, paying liabilities, and
133     appropriating profit or loss, as provided in Chapter 2, Possession of Depository Institution by
134     Commissioner, and Chapter 19, Acquisition of Failing Depository Institutions or Holding
135     Companies.
136          (22) "Liquidator" means a person, agency, or instrumentality of this state or the United
137     States appointed to conduct a liquidation.
138          (23) (a) "Money services business" includes:
139          (i) a check casher;
140          (ii) a deferred deposit lender;
141          (iii) an issuer or seller of traveler's checks or money orders; and
142          (iv) a money transmitter.
143          (b) "Money services business" does not include:
144          (i) a bank;
145          (ii) a person registered with, and functionally regulated or examined by the Securities
146     Exchange Commission or the Commodity Futures Trading Commission, or a foreign financial
147     agency that engages in financial activities that, if conducted in the United States, would require
148     the foreign financial agency to be registered with the Securities Exchange Commission or the
149     Commodity Futures Trading Commission; or
150          (iii) an individual who engages in an activity described in Subsection (23)(a) on an
151     infrequent basis and not for gain or profit.

152          (24) "Negotiable order of withdrawal" means a draft drawn on a NOW account.
153          (25) (a) "NOW account" means a savings account from which the owner may make
154     withdrawals by negotiable or transferable instruments for the purpose of making transfers to
155     third parties.
156          (b) A "NOW account" is not a demand deposit.
157          (c) [Neither the] The owner of a NOW account [nor] or any third party holder of an
158     instrument requesting withdrawal from the account [has] does not have a legal right to make
159     withdrawal on demand.
160          (26) "Out-of-state" means, in reference to a depository institution or depository
161     institution holding company, an institution or company whose home state is not Utah.
162          (27) "Person" means:
163          (a) an individual;
164          (b) a corporation;
165          (c) a limited liability company;
166          (d) a partnership;
167          (e) a trust;
168          (f) an association;
169          (g) a joint venture;
170          (h) a pool;
171          (i) a syndicate;
172          (j) a sole proprietorship;
173          (k) an unincorporated organization; or
174          (l) any form of business entity.
175          (28) "Receiver" means a person, agency, or instrumentality of this state or the United
176     States appointed to administer and manage an institution subject to the jurisdiction of the
177     department in receivership, as provided in Chapter 2, Possession of Depository Institution by
178     Commissioner, and Chapter 19, Acquisition of Failing Depository Institutions or Holding
179     Companies.
180          (29) "Receivership" means the administration and management of the affairs of an
181     institution subject to the jurisdiction of the department to conserve, preserve, and properly
182     dispose of the assets, liabilities, and revenues of an institution in possession, as provided in

183     Chapter 2, Possession of Depository Institution by Commissioner, and Chapter 19, Acquisition
184     of Failing Depository Institutions or Holding Companies.
185          (30) "Savings account" means [any] a deposit or other account at a depository
186     institution that is not a transaction account.
187          (31) "Savings and loan association" means:
188          (a) a federal savings and loan association; and
189          (b) an out-of-state savings and loan association.
190          (32) "Service corporation" or "service organization" means a corporation or other
191     business entity owned or controlled by one or more financial institutions that is engaged or
192     proposes to engage in business activities related to the business of financial institutions.
193          (33) "State" means, unless the context demands otherwise:
194          (a) a state;
195          (b) the District of Columbia; or
196          (c) the territories of the United States.
197          (34) "Subsidiary" means a business entity under the control of an institution.
198          (35) "Technology service provider" means a person that provides a data processing
199     service or activity that supports the financial services or Internet related services of a depository
200     institution subject to the jurisdiction of the department, including supporting:
201          (a) lending;
202          (b) money transfers;
203          (c) fiduciary activities;
204          (d) trading activities;
205          (e) deposit taking;
206          (f) web services and electronic bill payments;
207          (g) mobile applications;
208          (h) system and software development and maintenance; and
209          (i) security monitoring.
210          (36) (a) "Transaction account" means a deposit, account, or other contractual
211     arrangement in which a depositor, account holder, or other customer is permitted, directly or
212     indirectly, to make withdrawals by:
213          (i) check or other negotiable or transferable instrument;

214          (ii) payment order of withdrawal;
215          (iii) telephone transfer;
216          (iv) other electronic means; or
217          (v) any other means or device for the purpose of making payments or transfers to third
218     persons.
219          (b) "Transaction account" includes:
220          (i) demand deposits;
221          (ii) NOW accounts;
222          (iii) savings deposits subject to automatic transfers; and
223          (iv) share draft accounts.
224          (37) "Trust company" means a person authorized to conduct a trust business, as
225     provided in Chapter 5, Trust Business.
226          (38) "Utah depository institution" means a depository institution whose home state is
227     Utah.
228          (39) "Utah depository institution holding company" means a depository institution
229     holding company whose home state is Utah.
230          Section 2. Section 7-1-201 is amended to read:
231          7-1-201. Creation of department -- Organization.
232          (1) There is created the Department of Financial Institutions that is responsible for the
233     execution of the laws of this state relating to [all] a financial [institutions and] institution or
234     other [persons] person subject to this title, and relating to the businesses [they conduct] that the
235     financial institution or other person conducts.
236          (2) The department organization includes:
237          (a) the commissioner of financial institutions, who shall be the chief executive officer
238     of the department;
239          (b) the Board of Financial Institutions;
240          (c) the chief examiner;
241          (d) the deputy commissioner;
242          (e) the supervisor of banks;
243          (f) the supervisor of industrial banks;
244          (g) the supervisor of credit unions;

245          (h) the supervisor of money services businesses; [and]
246          (i) the supervisor of holding companies; and
247          [(i)] (j) other supervisors, examiners, and personnel as may be required to carry out the
248     duties, powers, and responsibilities of the department.
249          (3) A power or duty of the commissioner under this title may be exercised by the
250     deputy commissioner or a supervisor described in Subsection (2) if the commissioner delegates
251     in writing the authority to exercise the power or duty to the deputy commissioner or supervisor.
252          Section 3. Section 7-1-208.1 is amended to read:
253          7-1-208.1. Supervisor of holding companies -- Qualifications -- Responsibilities.
254          (1) The commissioner may designate an examiner as supervisor of [trusts] holding
255     companies who shall be a citizen of the United States and shall have sufficient training and
256     experience with regard to [trusts] holding companies to demonstrate [his] the examiner's
257     qualifications and fitness to perform the duties of [his office] the supervisor of holding
258     companies.
259          (2) The supervisor of [trusts] holding companies is responsible, subject to the direction
260     and control of the commissioner, for the general supervision and examination of all [trusts]
261     holding companies subject to the jurisdiction of the department under this title. [He] The
262     supervisor of holding companies shall assist and advise the commissioner in the execution of
263     the laws of this state relating to [trusts] holding companies and shall perform other duties
264     prescribed in this title or assigned to [him] the supervisor of holding companies by the
265     commissioner.
266          Section 4. Section 7-1-209 is amended to read:
267          7-1-209. Additional supervisors, examiners, and other personnel -- Compensation
268     -- Travel expenses.
269          (1) In addition to the supervisors under Sections 7-1-205 through 7-1-208.1 and
270     7-1-208.3, the commissioner may appoint additional supervisors as necessary. The
271     commissioner may assign to any supervisor responsibility, subject to the direction and control
272     of the commissioner, for the general supervision and examination of any class of financial
273     institutions or other persons not specifically assigned to another supervisor.
274          (2) The commissioner may employ examiners required for the proper conduct of the
275     department. These examiners may not be interested, directly or indirectly, in any institution

276     under the jurisdiction and supervision of the department. They shall perform duties prescribed
277     by this title or assigned to them by the commissioner.
278          (3) The commissioner may delegate to the chief examiner or any supervisor the duty of
279     conducting hearings in carrying out the duties, powers, and functions of the department, or [he]
280     the commissioner may employ, on a regular or part-time basis, similarly qualified persons to
281     act as hearing officers for those purposes.
282          (4) The commissioner may appoint or employ, on a permanent or consulting basis,
283     other persons qualified by education, training, and experience for the needs of the department
284     as the commissioner considers necessary to carry out the duties, powers, and responsibilities of
285     the department.
286          (5) The commissioner may employ clerical help to properly carry on the work of the
287     department.
288          (6) The salaries of the employees of the department shall be fixed in accordance with
289     salary and merit standards adopted by the Division of Finance and are payable in the same
290     manner as the salaries of other state employees. All actual and necessary traveling expenses of
291     the commissioner, supervisors, examiners, and other employees of the department incurred in
292     the discharge of their duties shall be fully itemized upon proper vouchers and certified by the
293     commissioner to the director of the Division of Finance.
294          Section 5. Section 7-1-703 is amended to read:
295          7-1-703. Restrictions on acquisition of institutions and holding companies --
296     Enforcement.
297          (1) Unless the commissioner gives prior written approval under Section 7-1-705, [no] a
298     person may not:
299          (a) acquire, directly or indirectly, control of a depository institution or depository
300     institution holding company subject to the jurisdiction of the department;
301          (b) vote the stock of [any] a depository institution or depository institution holding
302     company subject to the jurisdiction of the department acquired in violation of Section 7-1-705;
303          (c) acquire all or [any] a material portion of the assets of a depository institution or a
304     depository institution holding company subject to the jurisdiction of the department;
305          (d) assume all or [any] a material portion of the deposit liabilities of a depository
306     institution subject to the jurisdiction of the department;

307          (e) take any action that causes a depository institution to become a subsidiary of a
308     depository institution holding company subject to the jurisdiction of the department;
309          (f) take any action that causes a person other than an individual to become a depository
310     institution holding company subject to the jurisdiction of the department;
311          (g) acquire, directly or indirectly, the voting or nonvoting securities of a depository
312     institution or a depository institution holding company subject to the jurisdiction of the
313     department if the acquisition would result in the person obtaining more than 20% of the
314     authorized voting securities of the institution if the nonvoting securities were converted into
315     voting securities; or
316          (h) merge or consolidate with a depository institution or depository institution holding
317     company subject to the jurisdiction of the department.
318          (2) [Any] A person who willfully violates [any provision of] this section or [any] a rule
319     or order issued by the department under this section is subject to a civil penalty of not more
320     than $1,000 per day during which the violation continues. The commissioner may assess the
321     civil penalty after giving notice and opportunity for hearing. The commissioner shall collect
322     the civil penalty by bringing an action in the district court of the county in which the office of
323     the commissioner is located. [Any] An applicant for approval of an acquisition is considered to
324     have consented to the jurisdiction and venue of the court by filing an application for approval.
325          (3) The commissioner may secure injunctive relief to prevent [any] a change in control
326     or impending violation of this section.
327          (4) The commissioner may lengthen or shorten any time period specified in Section
328     7-1-705 if the commissioner finds it necessary to protect the public interest.
329          (5) The commissioner may exempt [any] a class of financial institutions from this
330     section by rule if the commissioner finds the exception to be in the public interest.
331          (6) The prior approval of the commissioner under Section 7-1-705 is not required for
332     the acquisition by a person other than an individual of voting securities or assets of a depository
333     institution or a depository institution holding company that are acquired by foreclosure or
334     otherwise in the ordinary course of collecting a debt previously contracted in good faith if these
335     voting securities or assets are divested within two years of acquisition. The commissioner may,
336     upon application, extend the two-year period of divestiture for up to three additional one-year
337     periods if, in the commissioner's judgment, the extension would not be detrimental to the

338     public interest. The commissioner may adopt rules to implement the intent of this Subsection
339     (6).
340          (7) (a) An out-of-state depository institution without a branch in Utah, or an
341     out-of-state depository institution holding company without a depository institution in Utah,
342     may acquire:
343          (i) a Utah depository institution only if it has been in existence for at least five years; or
344          (ii) a Utah branch of a depository institution only if the branch has been in existence
345     for at least five years.
346          (b) For purposes of Subsection (7)(a), a depository institution chartered solely for the
347     purpose of acquiring another depository institution is considered to have been in existence for
348     the same period as the depository institution to be acquired, so long as it does not open for
349     business at any time before the acquisition.
350          (c) The commissioner may waive the restriction in Subsection (7)(a) in the case of a
351     depository institution that is subject to, or is in danger of becoming subject to, supervisory
352     action under Chapter 2, Possession of Depository Institution by Commissioner, or Chapter 19,
353     Acquisition of Failing Depository Institutions or Holding Companies, or, if applicable, the
354     equivalent provisions of federal law or the law of the institution's home state.
355          (d) The restriction in Subsection (7)(a) does not apply to an acquisition of, or merger
356     transaction between, affiliate depository institutions.






Legislative Review Note
Office of Legislative Research and General Counsel