Section 0180-19-.02 - DEFINITIONS(1) For purposes of this Chapter, unless the context otherwise provides:(a) "Active management" means the parent bank owns more than fifty percent (50%) of the voting shares (or similar type of ownership interest) of a subsidiary.(b) "Affiliate" means any company that directly or indirectly, through one or more intermediaries, controls or is under common control with a state-chartered bank.(c) "Bank" means a bank chartered under Title 45, Chapter 2 of the Tennessee Code.(d) "Bank securities department" means a separate department within a state-chartered bank where securities activities are conducted and at a minimum:1. Is physically separate from the deposit-taking and lending functions of the bank;2. Maintains segregated accounting; and3. Conducts business pursuant to independent policies and procedures designed to inform customers and prospective customers of the bank that investments recommended, offered, or sold by the bank securities department which are not securities or deposits of the bank are not insured by an agency of the federal government and are neither guaranteed by the bank nor are otherwise obligations of the bank.(e) "Bona fide subsidiary" means a subsidiary of a state-chartered bank that at a minimum: 1. Is adequately capitalized;2. Is physically separate and distinct in its operations from the operation of the bank;13. Maintains separate accounting and other corporate records;4. Observes separate formalities, including but not limited to, separate board of directors' meetings;5. Maintains separate employees who are compensated by the subsidiary; 26. Shares no common executive officers with the bank;7. A majority of its board of directors is comprised of persons who are neither directors nor executive officers of the bank; and8. 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 which are not securities or deposits of the bank, are not insured by an agency of the federal government and are neither guaranteed by the bank nor are otherwise obligations of the bank.(f) "Capital" shall mean capital stock, surplus and undivided profits less any intangible assets.(g) "Classified asset" means an asset which is designated "substandard," "doubtful" or "loss" in the most recent regulatory report of examination.(h) "Commissioner" means the Commissioner of the department of financial institutions.(i) "Company" means any corporation (other than a bank), any partnership, business trust, association, joint venture, pool syndicate, or other similar business organization.(j) "Control" means the power to directly or indirectly vote 25 percent or more of the voting stock of a bank or company, the ability to control in any manner the election of a majority of a bank's or company's directors or trustees, or the ability to exercise a controlling influence over the management and policies of a bank or company.(k) "Executive officer" means every officer of a state bank who participates or has authority to participate, otherwise than in the capacity of a director, in major policy-making functions of the bank, regardless of whether the officer has an official title or whether the title contains a designation of assistant and regardless of whether the officer is serving without salary or other compensation. The chairman of the board, the president, every vice president, the cashier, secretary, and treasurer of a state bank are assumed to be executive officers, unless by resolution of the board of directors or by the bank's bylaws, any such officer is excluded from participation in major policy-making functions, otherwise than in the capacity of a director of the bank, and the officer does not actually participate therein.(l) "Financial institution" means a bank; savings and loan association; industrial loan and thrift company; credit union; mortgage broker; mortgage banker; leasing company accepting deposits, making or arranging loans and making or arranging leases; or securities dealer.(m) "Invest" or "Investment" shall mean: 1. Any direct or indirect investment, including, but not limited to:(i) Contributions of capital by the bank;(ii) Loans/commitments from the bank;(iv) Debt obligations held by the bank;(v) Bank guarantees of debt obligations; and(vi) Extensions or commitments of credit to any third (3rd) party for the purpose of making a direct investment in: (I) A subsidiary or any business in which the bank has an ownership interest; or(II) Any investment held by a subsidiary or any business in which the bank has an ownership interest.2. "Investment" does not include:(i) any retained earnings on the value of any assets which a subsidiary may hold or any other business in which the bank has an ownership interest may hold; or(ii) loans made by the bank to finance bona fide sales of assets to third (3rd) parties consistent with safe and sound underwriting requirements.(n) "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, or which meets the requirements of T.C.A. § 48-2-103(a)(8).(o) "Investment quality equity security" means marketable common stock that is ranked or graded in the four top 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, or which meets the requirements of T.C.A. § 48-2-103(a)(8).(p) "Securities subsidiary" means a securities company that is a subsidiary of a state-chartered bank.(q) "Subsidiary" shall mean a corporation, limited liability company, or similar entity all or a part of the stock of which is owned by a bank principally for the purpose of participating in the active management of the business of such corporation as distinguished from the purpose of deriving profit from the appreciation in value of such stock or from dividends paid thereon.(r) "Unaffiliated securities company" means any company which is engaged in one of the activities listed in Rule 0180-19-.04(1) and is not directly or indirectly controlled by the state-chartered bank or any affiliate of the state-chartered bank. 1 If the subsidiary conducts business in the same location in which the bank conducts business, the subsidiary must utilize physically separate offices or office space from that used by the bank. Such offices or office space must be clearly and prominently identified so as to distinguish the subsidiary from the bank. The physically separate office or office space requirement only applies in areas to which the public has access.
2 This requirement shall not be construed to prohibit the use by the subsidiary of bank employees to perform functions which do not directly involve customer contact such as accounting, data processing and record keeping, so long as the bank and the subsidiary contract for such services on terms and conditions comparable to those agreed to by independent entities.
Tenn. Comp. R. & Regs. 0180-19-.02
Original rule filed June 25, 1990; effective September 26, 1990. Repeal and new rule filed August 31, 1998; effective December 29, 1998.Authority: Public Chapter 168, "Acts of 1989"; Section 1; T.C.A. §§ 45-2-107; 45-2-1601; 45-2-1602 and 45-2-601.