Section DFI-Bkg 3.06 - Purchase of shares of investment companies(1) AUTHORITY. A bank may purchase for its own account shares of investment companies registered with the securities and exchange commission or a privately offered fund sponsored by an affiliated commercial bank if the investment company shares meet all of the following requirements: (a) The bank has an equitable and equal proportionate undivided interest in the underlying assets of the investment company.(b) The bank is shielded from personal liability for acts or obligations of the investment company.(c) The portfolio of each fund consists solely of investment securities which are eligible for purchase by banks pursuant to ch. 219, Stats., ss. 220.04 (6) (d), 221.0301 (5), 221.0320 (3), (6), and (8) (b), Stats.(2) GOVERNMENT SECURITIES. Banks may purchase and hold investment company shares without limitation if the portfolio of the fund consists entirely of investments in government securities in which a bank could invest directly without limitation.(3) MUNICIPAL SECURITIES. Shares of investment companies whose portfolios contain investments which are subject to limitation under s. 221.0320 (3), Stats., may be held in an amount not to exceed 25% of the capital and surplus of the bank. In addition, a bank's pro rata share of any security held in the portfolio of one or more investment companies whose shares are held by the bank may not, in aggregate or in combination with the bank's direct holdings of the security, exceed the limitations of s. 221.0320 (3), Stats.(4) OTHER SECURITIES. Shares of investment companies whose portfolios contain investments other than government securities or municipal securities, may be held in an amount not to exceed 20% of the capital stock and surplus of the bank. In addition, a bank's pro rata share of any security held in the portfolio of one or more investment company whose shares are held by the bank may not, in aggregate or in combination with the bank's direct holdings of the security, exceed the investment limitations for the security as provided for in s. 221.0320 (4) to (6), Stats., and other relevant statutes and regulations.(5) FUTURES, FORWARDS, OPTIONS, REPURCHASE AGREEMENTS AND SECURITIES LENDING. Certain investment companies use futures, forward placement and options contracts as well as repurchase agreements and securities lending arrangements as part of their portfolio management strategy. A bank may purchase and hold the shares of such investment companies if these instruments are used in a manner that would be considered acceptable for use in a bank's own investment portfolio.(6) REVIEW OF INVESTMENT PORTFOLIOS. The bank shall review the investment portfolio of each investment company in which it holds shares on a quarterly basis to make certain that the composition of each portfolio meets the requirements of this section.(7) ACCOUNTING. The bank shall follow the instructions approved by the administrator of the division of banking for use by the banks for the preparation of reports of condition and income to account for investments made in shares of investment companies.(8) APPROVAL OF BOARD OF DIRECTORS. The bank's investment policy, as formally approved by its board of directors, shall specifically provide for investments made under this section. Prior approval of the board must be obtained for initial investments in specific investment companies and recorded in the board's minutes. Procedures, standards and controls for implementation of such investments must be established.Wis. Admin. Code Department of Financial Institutions DFI-Bkg 3.06
CR Register, March, 1985, No. 351, eff. 4-1-85; r. and reCR Register, January, 1988, No. 385, eff. 2-1-88; corrections in (1) (c), (3) and (4) made under s. 13.93(2m) (b) 7, Stats., Register October 2001 No. 550.Amended by, CR 23-039: am. (1) (intro.), (a), (b) Register February 2024 No. 819, eff. 4/1/2024