Okla. Admin. Code § 85:10-11-2

Current through Vol. 42, No. 4, November 1, 2024

Section 85:10-11-2 - Investment securities

(a)Qualifications. In order to be classified as an "investment security," under Section 806(C) of the Code, one or more of the following characteristics must exist with respect to a particular security:

(1) A public distribution of the securities must have been provided for or made in a manner to protect or insure the marketability of the issue; or

(2) Other existing securities of the obligor must have such public distribution as to protect or insure the marketability of the issue under consideration; or

(3) In the case of investment securities for which a public distribution as set forth in (1) or (2) of this subsection cannot be so provided, or so made, and which are issued by established commercial or industrial business or enterprises, that can demonstrate the ability to service such securities, the debt evidenced thereby must mature not later than ten (10) years after the date of issuance of the security and must be of such sound value or so secured as reasonably to assure its payment. Such securities must, by their terms, provide for the amortization of the debt evidenced thereby so that at least seventy-five percent (75%) of the principal will be extinguished by the maturity date by substantially equal periodic payments. Provided that no amortization need be required for the period of the first year after the date of issuance of such securities. Provided, further, that if the investment securities are mortgage bonds or notes that the issuing corporation or the constituent companies comprising it for three (3) years immediately prior to the date of investment has earned, above all fixed charges other than interest on indebtedness, an amount equal to at least double the interest charges which it will be required to pay upon its outstanding obligations or when such mortgage bonds or notes plus all prior encumbrances outstanding are in an amount not in excess of fifty percent (50%) of the actual value of the property of the issuing corporation securing same.

(b)Trust. Where the security is issued under a trust agreement, the agreement must provide for a trustee independent of the obligor, which trustee must be a properly qualified trust company or banking trust business.

(c)Purchasing Restrictions. The purchase of "investment securities" in which the investment characteristics are distinctly and predominantly speculative or the purchase of securities which are in default, as to principal or interest, is prohibited. The purchase of any security convertible into stock at the option of the issuer is prohibited.

(d)Duty. Responsibility for the making of proper investments rests primarily with the bank's board of directors and there is no intention on the part of the Commissioner or Board, in the promulgation of regulations or otherwise, to delegate this responsibility to the rating services or others. Further, this duty should not in any way be considered as being fully performed by merely ascertaining that a particular security falls within a particular rating classification.

(e)Applicability. The requirements, conditions, restrictions and limitations of this regulation do not apply to loans and further, do not apply to securities:

(1) acquired through foreclosure on collateral, or

(2) acquired in good faith by way of compromise of a bad or doubtful claim to prevent loss to the bank in connection with a debt previously contracted.

Okla. Admin. Code § 85:10-11-2

Amended at 15 Ok Reg 2952, eff 7-15-98; Amended at 25 Ok Reg 1064, eff 5-25-08