Code of Maine Rules
02 - DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION
029 - BUREAU OF FINANCIAL INSTITUTIONS
Chapter 134 - CREDIT UNION SERVICE CORPORATIONS
Section 029-134-IV - GENERAL PROVISIONS
Universal Citation: 02 ME Code Rules ยง 029-134-IV
Current through 2024-13, March 27, 2024
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.
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