02-029-134 Me. Code R. § IV

Current through 2024-51, December 18, 2024

Section 029-134-IV - GENERAL PROVISIONS

A.Authorization

1. Subject to prior written notification to the Superintendent pursuant to Section IV(D)(1), a state-chartered credit union may organize a service corporation and invest in a service corporation that provides services and activities authorized for service corporations in which federally-chartered credit unions may invest under the Federal Credit Union Act, 12 U.S.C.§§ 1757(5)(D) and 1757(7)(I),and National Credit Union Administration Regulations, 12 C.F.R. § 712.5.

2. Subject to the prior written approval of the Superintendent, pursuant to Section IV(D)(4), a state-chartered credit union may increase its investment in a state credit union service corporation in excess of the prescribed limits of Section IV(B)(2).

B.General Rules and Restrictions

1. A state credit union service corporation must be structured as either a corporation, a limited partnership, or a limited liability company in order to limit the state-chartered credit union's exposure to loss.If the state credit union service corporation is a limited partnership, the investing state-chartered credit union may participate only as a limited partner; if the state credit union service corporation is a limited liability company, the investing state-chartered credit union may participate only as a member. The state-chartered credit union must not engage in any activities which, under state law, would cause the credit union to lose its status as a limited partner or a member, and correspondingly its limited liability, and be treated as a general partner. The state-chartered credit union must obtain a written legal opinion affirming its position as a limited partner or a member.

2. The aggregate investment in an individual state credit union service corporation by a state-chartered credit union may not exceed 20% of the state-chartered credit union's net worth, unless a higher amount is approved in writing by the Superintendent, as provided for in Section IV(D)(4).

3. The aggregate investment in all state credit union service corporations by an individual state-chartered credit union may not exceed 50% of the state-chartered credit union's net worth.

4. A state credit union service corporation must primarily serve credit unions and the membership of affiliated credit unions. State credit union service corporations formed from July 31, 1994 through October 1, 2017 primarily serve credit unions and the membership of affiliated credit unions within the meaning of this paragraph if at least 75% of the services provided in Maine are to credit unions and members of credit unions.

5. For credit unions formed after October 1, 2017, when determining whether a service corporation primarily serves credit unions and the membership of affiliated credit unions, the Superintendent shall consider the relevant federal laws and regulations in effect at the time of formation of the service corporation.

6. Notwithstanding the provisions of Section IV(A)(1), no state credit union service corporation may engage in any activity that is specifically prohibited under state law.

C.Supervisory Requirements

1. A state-chartered credit union must record its investment in a state credit union service corporation according to generally accepted accounting principles (GAAP).

2. Prior to making an investment in a service corporation, a state- chartered credit union must obtain a written agreement that the service corporation will account for all transactions in accordance with GAAP and provide financial statements and other reports in accordance with National Credit Union Administration requirements for federally-insured credit unions found in d). 12 C.F.R.§ 712.3(d).

3. A state credit union service corporation shall be subject to the provisions of Parts 1 and 2 and Chapters 46, but not including Section 462, and Chapter 88 of the Maine Banking Code.The enumeration of the foregoing provisions of the Maine Banking Code shall not be held to make other sections of theMaine Banking Code inapplicable if those sections would otherwise be applicable to a state credit union service corporation pursuant to the activities in which it is engaged.

4. Each state credit union service corporation shall be subject to examination by the Bureau of Financial Institutions in the same manner and to the same extent as the investing state-chartered credit union.

D.Notifications

1. A state-chartered credit union seeking to organize a service corporation, invest in a service corporation, or increase its investment in a service corporation, must notify the Superintendent at least 30 days prior to the planned activity and provide the following information:

(a) The nature of the proposed activity;

(b) The scope or extent to which the activity will be provided;

(c) How that activity will benefit the members of the state-chartered credit union;

(d) How that activity is associated with routine credit union operations;

(e) The State or federal law under which the proposed activity is to be engaged;

(f) Evidence that the investment is within the prescribed limits of Section IV(B)(2) and (3) or, if the investment exceeds the limit of Section IV(B)(2), a request to exceed that limit pursuant to Section IV(D)(4);

(g) How the service corporation activity primarily serves credit unions and the membership of affiliated credit unions pursuant to Section IV(B)(4);

(h) Evidence that the service corporation is or will be structured to limit the state-chartered credit union's exposure to loss as required by Section IV(B)(1); and

(i) Any other information requested by the Superintendent.

2. The Bureau shall review the notification of the proposal to organize a service corporation, invest in a service corporation, or increase investment in a service corporation by a state-chartered credit union to ensure compliance with Section IV(D)(1)(a) -(i). If the proposal would negatively impact the safety and soundness of the investing state-chartered credit union, the Superintendent reserves the right to utilize authority provided under Chapter 23 of the Maine Banking Code to limit the state-chartered credit union's investment in the service corporation. The Superintendent also may exclude as an affiliated credit union for purposes of Section IV(B)(4) a credit union whose direct or indirect investment is considered de minimis.

3. A state-chartered credit union may not continue its investment in a state credit union service corporation if the Superintendent finds that the state credit union service corporation is engaging in activities which are not legally permissible. It is the responsibility of the investing state-chartered credit union to monitor the activities of the state credit union service corporation to ensure that they are legally permissible.

4. A state-chartered credit union that proposes to increase its investment in a state credit union service corporation above the limitation of Section IV(B)(2) must submit a written request to the Superintendent. The request shall include the basis for the increased investment and how the increased investment will benefit the members of the state-chartered credit union, as well as such additional information the Superintendent considers necessary.

02-029 C.M.R. ch. 134, § IV