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§ 311. Transactions with respect to shares of corporate stock and capital securities

Purdon's Pennsylvania Statutes and Consolidated StatutesTitle 7 P.S. Banks and BankingEffective: November 22, 2000

Purdon's Pennsylvania Statutes and Consolidated Statutes
Title 7 P.S. Banks and Banking (Refs & Annos)
Banking Code of 1965 (Refs & Annos)
Chapter 3. Banking Powers (Refs & Annos)
Effective: November 22, 2000
7 P.S. § 311
§ 311. Transactions with respect to shares of corporate stock and capital securities
(a) Authorized transactions--An institution may not engage in any transaction with respect to shares of the capital stock of any corporation unless specifically authorized by this section, by section 202,1 by section 2032 or with respect to shares of its own stock by the provisions of this act governing the institution in its corporate capacity.
(b) Transactions for customers--An institution may purchase and sell shares of stock upon the order of and for the account of a customer and without recourse.
(c) Collateral loans--An institution shall not take pledges of shares of stock or capital securities issued by the institution as collateral security for a loan, nor shall an institution take pledges of corporate stocks not dealt in on a recognized exchange if the amount of the loan secured by said pledge, together with the total amount of:
(i) all indebtedness of the corporation to the institution,
(ii) rentals payable to the institution under leases of personal property to the corporation, and
(iii) the book value of investment securities of the corporation which are owned by the institution would at any time exceed twenty-five percent of the aggregate of the capital, surplus and capital securities of the institution.
(c.1) Collateral loans with affiliates--An institution may engage in a covered transaction with an affiliate, including the acceptance of securities issued by an affiliate as collateral security for a loan or extension of credit, if the institution complies with the requirements of 12 U.S.C. § 371c. The department shall interpret the requirements of 12 U.S.C. § 371c in a manner consistent with regulations, orders and interpretations as issued by the Board of Governors of the Federal Reserve System.
(d) Ownership--An institution may acquire and hold:
(i) shares of stock of a Federal Reserve Bank, without limitation of amount;
(ii) shares of stock of:
(A) the Federal National Mortgage Association, the Government National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Student Loan Marketing Association, a corporation authorized to be created pursuant to Title IX of the Housing and Urban Development Act of 19683 or any other such corporations or agencies as may from time to time be approved by the department,
(B) a bank, a bank and trust company or a trust company subject to this act, a national bank located in Pennsylvania or a Pennsylvania bank holding company--to the extent of ten percent of the sum of the par value of the issued and outstanding shares of any such issuer, and, for purposes of this limitation, the shares owned by all the affiliates of a Pennsylvania bank holding company shall be aggregated to determine whether the ten percent limitation is reached,
(B.1) a subsidiary corporation engaged in the functions or activities that an institution is authorized to carry on, if the shares are acquired with the prior written approval of, and in accordance with the terms and conditions of transfer prescribed by, the department, or
(C) a corporation organized under the laws of the United States or of any state or any foreign country and principally engaged, directly or indirectly, in international or foreign banking or financial operations or in banking or financial operations in a dependency, or insular possession of the United States or in the Commonwealth of Puerto Rico, if the shares are acquired with the prior written approval of, and in accordance with the terms and conditions prescribed by, the department in an amount the cost of which to the institution for the shares of any such association or corporation so acquired or held is not in excess of ten percent of the aggregate of the capital, surplus and capital securities of the institution and in the case of shares covered by clause (B) of this subsection (d)(ii), in an amount the cost of which to the institution for the shares of all such issuers so acquired or held is not in excess of the lesser of ten percent of the total assets of the institution or one hundred percent of the aggregate of the capital, surplus and capital securities of the institution;
(iii) shares of stock of small business investment companies organized pursuant to the Small Business Investment Act,4 in an amount the cost of which is not in excess of one percent of the aggregate of the capital, surplus and capital securities of the institution;
(iv) in the case of a bank and trust company, shares of stock of a corporation organized under the laws of the Commonwealth for the purpose of conducting a title insurance business to which the institution has transferred the assets of its title insurance business, in an amount:
(A) the cost of which is not in excess of the lesser of (1) ten percent of the aggregate of the capital, surplus and capital securities of the institution or (2) double the minimum amount of capital and paid-in surplus required for the incorporation of such corporation, or
(B) with the prior approval of the department, the cost of which is not in excess of fifteen percent of the aggregate of the capital, surplus and capital securities of the institution;
(v) shares of stock of business development credit corporations to the extent provided by the Business Development Credit Corporation Law;5
(vi) shares of stock of a corporation organized to promote the public welfare and community development, expand the economy or provide for social reform, subject to regulation by the department;
(vii) shares of stock of a clearing corporation as defined in Article 8 of the Uniform Commercial Code;6
(viii) shares of stock of a stock savings bank located in Pennsylvania;
(ix) shares of stock of a corporation engaged exclusively in activities not prohibited by this act, which shares have been held continuously since November 30, 1965;
(x) shares of stock of a savings association, a Federal savings and loan association or a Federal savings bank, located in Pennsylvania, provided that an institution may hold no more than ten percent of the outstanding shares of the common stock of such savings association, Federal savings and loan association or Federal savings bank; and
(xi) shares of stock of a Federal Home Loan Bank, without limitation of amount.
(e) Loans for carrying shares and capital securities--An institution shall not extend credit, directly or indirectly, for the purpose of enabling a customer to acquire or hold shares of stock or capital securities issued by the institution unless all indebtedness incurred for that purpose is secured by other readily marketable collateral with a value not less than one hundred twenty percent of the indebtedness.
(e.1) Transactions with affiliates--An institution may engage in a transaction with an affiliate, including the extension of credit to acquire or hold shares of capital securities of an affiliate, if the institution complies with the requirements of 12 U.S.C. § 371c-1. The department shall interpret the requirements of 12 U.S.C. § 371c-1 in a manner consistent with regulations, orders and interpretations as issued by the Board of Governors of the Federal Reserve System.
(f) Determination of surplus--For the purposes of this section, an institution may determine its surplus in the same manner as calculated for purposes of satisfying limitations upon the ownership of shares of banks and holding companies as provided by 12 U.S.C. § 24.

Credits

1965, Nov. 30, P.L. 847, No. 356, § 311. Amended 1968, Nov. 27, P.L. 1104, No. 345, § 1; 1970, July 23, P.L. 597, No. 199, §§ 3.1, 4; 1973, Sept. 27, P.L. 252, No. 72, § 3, imd. effective; 1974, Oct. 10, P.L. 716, No. 240, § 1, imd. effective; 1982, April 8, P.L. 262, No. 79, § 5, imd. effective; 1984, July 6, P.L. 606, No. 125, § 1, imd. effective; 1984, July 6, P.L. 621, No. 128, § 5, imd. effective; 1988, Dec. 21, P.L. 1416, No. 173, § 2, effective in 30 days; 1990, Dec. 18, P.L. 766, No. 191, § 5, imd. effective; 2000, Nov. 22, P.L. 660, No. 89, § 7, imd. effective.

Footnotes

7 P.S. § 202.
7 P.S. § 203.
42 U.S.C.A. § 3931 et seq.
15 U.S.C.A. § 661 et seq.
7 P.S. § 6040-1 et seq.
13 Pa.C.S.A. § 8101 et seq.
7 P.S. § 311, PA ST 7 P.S. § 311
Current through the end of the 2023 Regular Session. Some statute sections may be more current, see credits for details.
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