Missouri Code of State Regulations
Title 20 - DEPARTMENT OF COMMERCE AND INSURANCE
Division 1140 - Division of Finance
Chapter 6 - Interpretive Rulings
Section 20 CSR 1140-6.055 - Bank Investment in Mutual Funds
Current through Register Vol. 49, No. 18, September 16, 2024
PURPOSE: This rule announces a change in division policy concerning mutual funds Since 1976, this office has held that banks, which are prohibited by law from investing in equity securities, may not invest in mutual funds. A change in that policy is justified by events since that time. The modification of Regulation Q has increased bank dependence upon rate sensitive liabilities necessitating investments which increase liquidity in the bank's asset portfolio without jeopardizing the diversification of risk and return on investments which would enable banks to compete with unregulated financial intermediaries. Investor demand has led to the establishment of investment companies investing entirely in bank-eligible securities, such as United States Government and municipal obligations. Finally, the comptroller of the currency has authorized national banks to invest in money market mutual funds and certain privately-sponsored funds, placing state-chartered banks at a competitive disadvantage. This ruling authorizes state-chartered banks to make the same investments. Since this rule is issued under the so-called "wild card" provisions of section 362.105.3, RSMo, the powers authorized in this rule cannot be significantly more liberal than those granted to national banks..
(1) A bank subject to the limitations set forth in this rule may invest in the shares of mutual funds which have been registered with the Securities and Exchange Commission; provided, those investments have been approved by the bank's board of directors and approval is noted in the minutes of the board's meetings.
(2) A bank may invest only in the shares of a company or fund (the fund) whose portfolio consists of assets which the bank could purchase directly. The bank's investment in shares of any such funds shall not exceed the amount which could be loaned to one (1) borrower under section 362.170, RSMo.
(3) Banks, at all times, shall maintain sufficient records to enable state and federal regulatory authorities to make a determination of the quality and carrying value of this investment. The regulatory reporting of holdings in funds must be consistent with standards for marketable equity securities as established by the federal Financial Institutions Examination Council Instructions for Filing Consolidated Reports of Condition and Income.
*Original authority: 361.105, RSMo 1967; 362.105, RSMo 1939, amended 1949, 1963, 1965, 1967, 1977, 1983, 1986; and 362.106, RSMo 1981, amended 1985.
