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Connecticut Public Acts 1996

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Substitute Senate Bill No. 317

PUBLIC ACT NO. 96-39

AN ACT CONCERNING THE SALE OF FIXED AND VARIABLE ANNUITIES BY CONNECTICUT AND OUT-OF-STATE BANKS.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Section 36a-250 of the general statutes, as amended by section 20 of public act 95-155, is repealed and the following is substituted in lieu thereof:

(a) Except as otherwise provided in subsections (b) and (c) of this section, a Connecticut bank may: (1) Transact a general banking business and exercise by its governing board or duly authorized officers or agents, subject to applicable law, all such incidental powers as are necessary thereto. The express powers authorized for a Connecticut bank under subdivisions (2) to [(37)] (38), inclusive, of this subsection do not preclude the existence of additional powers deemed to be incidental to the transaction of a general banking business pursuant to this subdivision; (2) (A) Receive deposits as authorized by and subject to the provisions of sections 36a-290 to 36a-305, inclusive, AS AMENDED section 36a-307, sections 36a-315 to 36a-323, inclusive, and sections 36a-330 to 36a-338, inclusive, AS AMENDED [4m, [0m including: (i) Savings deposits; (ii) time deposits; (iii) demand deposits; (iv) public funds or money held in a fiduciary capacity; (v) school savings funds; and (vi) club deposits; and (B) pay interest or dividends thereon; (3) Act as a depository of court and trust funds; (4) Receive for safekeeping or otherwise all kinds of personal property, including papers, documents and evidences of indebtedness; (5) Conduct a safe deposit business on its banking premises or invest not more than fifteen per cent of its equity capital and reserves for loan and lease losses to purchase the stock of a Connecticut corporation organized to conduct a safe deposit business on the banking premises; (6) Act (A) as guardian or conservator of the estate of any person, but not of the person, (B) as a trustee, receiver, executor or administrator, or (C) in any other fiduciary capacity, all without bond unless a bond is ordered by the court; (7) Act as agent or attorney in fact for the holders of securities or the owners of real estate; (8) Act as transfer agent or registrar of stocks and bonds; (9) Execute and deliver signature guaranties as may be incidental or usual in the transfer of investment securities; (10) Act as agent, fiscal agent or trustee for any corporation or for holders of bonds, notes or other securities, and pledge assets to secure deposits in its banking department when (A) made by it as trustee under a trust indenture for the holders of revenue bonds issued by this state, any municipality, district, municipal corporation or authority or political subdivision thereof, and the express provisions of the authority or its political subdivision, and the express provisions of the trust indenture require the deposit to be so secured, (B) made by it as fiscal agent for a housing authority in connection with a federally-assisted housing project and federal regulations or other requirements call for the deposits to be so secured or (C) made by it to secure deposits in individual retirement accounts and qualified retirement plan accounts, established in accordance with the applicable provisions of the Internal Revenue Code of 1986, or any prior or subsequent corresponding internal revenue code of the United States, as from time to time amended, where such deposits exceed the maximum of federal deposit insurance available for such accounts; (11) Act as fiscal agent for this state or any of its political subdivisions when authorized by the executive head of this state or of the political subdivision; (12) Act as agent (A) in the collection of taxes for any qualified treasurer of any taxing district or qualified collector of taxes or (B) for any electric, gas, water or telephone company operating within this state in receiving moneys due that company for utility services furnished by it; (13) Act as agent for the sale, issue and redemption of obligations of the United States and pledge assets to the United States or to the proper federal reserve bank for its obligations as that agent; (14) (A) Act as agent for an insured depository institution affiliate in receiving deposits, renewing time deposits, closing loans, servicing loans and receiving payments on loans and other obligations, and in so doing shall not be considered to be a branch of such affiliate;

(B) A Connecticut bank may not conduct any activity as an agent under subparagraph (A) of this subdivision which such bank is prohibited from conducting as a principal; (15) Act as treasurer of any organization exempt from federal income taxation under Section 501 of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended; (16) Establish a charitable fund, either in the form of a charitable trust or a nonprofit corporation to assist in making charitable contributions, provided (A) the trust or nonprofit corporation is exempt from federal income taxation and may accept charitable contributions under Section 501 of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended, (B) the trust or nonprofit corporation's operations shall be disclosed fully to the commissioner upon request, and (C) the trust department of the bank or one or more directors or officers of the bank act as trustees or directors of the fund; (17) In the discretion of a majority of its governing board, make contributions or gifts to or for the use of any corporation, trust or community chest, fund or foundation created or organized under the laws of the United States or of this state and organized and operated exclusively for charitable, educational or public welfare purposes, or of any hospital which is located in this state and which is exempt from federal income taxes and to which contributions are deductible under Section 501(c) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended; (18) Discount, purchase and sell accounts receivable, negotiable and nonnegotiable promissory notes, drafts, bills of exchange and other forms of indebtedness; (19) (A) Accept for payment at future dates drafts drawn upon it, and (B) except as provided in section 36a-299, AS AMENDED sell or issue without charge negotiable checks or drafts drawn by or on the bank. Negotiable checks or drafts drawn, sold or issued by a bank may be drawn on that bank or be payable by or through another bank or out-of-state bank; (20) Make secured and unsecured loans and issue letters of credit as authorized by and subject to section 36a-260; (21) (A) Issue credit cards and debit cards and enter into card agreements with the bank's card holders and with other card issuers, (B) lend money to individuals, honor drafts and similar orders drawn or accepted, whether by written instrument or electronic transmission, and pay and agree to pay obligations incurred in connection with those agreements, (C) become a shareholder or member of, or become otherwise affiliated with, any credit card corporation or association, and (D) subject to sections 36a-155 to 36a-159, inclusive, AS AMENDED where applicable, provide electronic fund transfer facilities and services and enter into agreements with customers and other persons regarding the provision of such facilities; (22) Provide home banking services to customers as provided in section 36a-170; (23) Contract for and pay the premiums upon life insurance in the amount of the unpaid balance due on loans; (24) Borrow money and pledge assets therefor, and pledge assets to secure trust funds on deposit awaiting investment; (25) Enter into leases of personal property acquired upon the specific request of and for the use of a prospective lessee; (26) Invest in bonds, notes, debentures, preferred stock, common stock and other investment securities as authorized; (27) Sell to any person, including any state or federal agency or instrumentality, any loan or group of loans legally owned by the bank, repurchase any such loan or group of loans, and act as collecting, remitting and servicing agent in connection with any such loans and charge for its acts as agent. Any such bank is authorized to purchase the minimum amount of capital stock of the applicable agency or instrumentality if required by that entity to be purchased in connection with the assignment of loans to that entity and to hold and dispose of that stock; (28) With the approval of the commissioner, deal in, underwrite and purchase for its own account, to the same extent as is permitted to a national banking association, obligations of: (A) The United States or any of its agencies; (B) any state or any political subdivision or instrumentality of the state or (C) Canada, any province of Canada or any political subdivision of Canada; (29) Issue and sell securities which (A) are guaranteed by the Federal National Mortgage Association or any other agency or instrumentality authorized by state or federal law to create a secondary market with respect to loans of the type originated by the bank, or (B) subject to the approval of the commissioner, relate to loans originated by the bank and are guaranteed or insured by a financial guaranty insurance company or comparable private entity; (30) Subject to the approval of the commissioner, authorize the issuance and sale of evidences of indebtedness, including debentures, debt instruments of all maturities and capital notes, at such times, in such amount and upon such terms as are determined by the governing board, provided the issuance of such evidences of indebtedness which are payable on demand or mature within five years of their issuance or which are effected in the ordinary course of business do not require the approval of the commissioner. The proceeds of such evidences of indebtedness which mature after five years of their issuance which are subordinate to the claims of depositors upon liquidation of the bank shall be considered part of its capital for the purpose of computing any loan, deposit or investment limitation under this title; (31) With the approval of and upon such conditions and under such regulations as may be prescribed or adopted by the commissioner, establish and maintain one or more mutual funds and offer to the public shares or participations therein; (32) With the written approval of the commissioner: (A) Acquire, alter or improve real estate for present or future use in the business of the bank, except that approval of the commissioner is not necessary in case of the alteration or improvement of real estate already owned by the bank or a corporation controlled by it as provided in section 36a-251, AS AMENDED if the expenditure for such purposes does not in any one calendar year exceed five per cent of the bank's equity capital and reserves for loan and lease losses or five hundred thousand dollars, whichever is less; (B) purchase real estate adjoining any parcel of real estate then owned by it and acquired in the usual course of business, provided the aggregate of all investments and loans authorized in subparagraphs (A) and (B) of this subdivision and in the equipment used by such bank in its operations, together with the amount of any indebtedness incurred by any corporation holding real estate of the bank and such bank's proportionate share, computed according to stock ownership, of any indebtedness incurred by any service corporation, does not exceed fifty per cent of the equity capital and reserves for loan and lease losses of the bank, unless the commissioner finds that the rental income from any part of the premises not occupied by the bank will be sufficient to warrant larger investment; (33) Convey any real estate owned by it at the price and upon such terms of payment as its governing board or an authorized committee thereof determines and sets forth in the bank's records. If any such sale is wholly or partly for credit, a note secured by a first mortgage on the real estate may evidence that credit. With the written approval of the commissioner, the bank may accept other real estate in whole or in part for any such conveyance; (34) Establish and maintain an international banking facility, as defined in regulations adopted by the Board of Governors of the Federal Reserve System, subject to such regulations as the commissioner may adopt, in accordance with chapter 54, to specify, and impose restrictions upon, the types of activities in which the international banking facility may engage; (35) Join the Federal Reserve System and subscribe to the stock of the federal reserve bank for the district in which the bank is situated; (36) With the approval of the commissioner, join the Federal Home Loan Bank System and purchase stock of the federal home loan bank established for the district in which this state is located and borrow funds as provided under federal law; (37) Even if not expressly authorized to exercise fiduciary powers, act as trustee or custodian of a plan which qualifies as part of a retirement plan for self-employed individuals or an individual retirement account under the provisions of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended, if the governing instrument limits the investment of the funds held pursuant to such plan to the following investments: (1) Savings deposits and time deposits; and (2) with respect to retirement plans for self-employed individuals, notes of members in such plans which evidence the indebtedness of such members for funds borrowed from the plans. Funds held pursuant to any plan which so qualifies may be deposited in any Connecticut bank without regard to any statutory limit on the amount which such bank may have on deposit from one depositor (38) SELL FIXED AND VARIABLE ANNUITIES DIRECTLY, OR SELL SUCH ANNUITIES INDIRECTLY THROUGH AN AFFILIATE OR SUBSIDIARY, PROVIDED (A) SUCH ANNUITIES ARE PURCHASED FROM AN INSURANCE COMPANY LICENSED IN ACCORDANCE WITH SECTION 38a-41, AND (B) THE CONNECTICUT BANK, AFFILIATE OR SUBSIDIARY, AND ANY OFFICER OR EMPLOYEE THEREOF, SHALL BE LICENSED IN ACCORDANCE WITH SECTION 38a-769 BEFORE ENGAGING IN ANY OF THE ACTIVITIES AUTHORIZED BY THIS SUBDIVISION. AS USED IN THIS SUBDIVISION, "ANNUITIES" HAS THE MEANING GIVEN TO THAT TERM IN SECTION 38a-1, AS AMENDED. THE PROVISIONS OF THIS SUBDIVISION DO NOT AUTHORIZE A CONNECTICUT BANK, AFFILIATE OR SUBSIDIARY TO UNDERWRITE ANNUITIES.

(b) Except as [is permitted to savings banks] OTHERWISE PROVIDED under THIS SECTION AND section 36a-285, no Connecticut bank shall engage in the business of marine, fire or life insurance, or fidelity, surety, accident, health, liability, credit, title or other form of casualty insurance. This subsection shall not apply to any corporation actually engaged on January 1, 1907, in the business of a title insurance and guarantee company, so far as the right of such company to continue the business of title insurance and guarantee is concerned.

(c) A Connecticut bank which is organized to function solely in a fiduciary capacity shall not be authorized to exercise any of the powers enumerated in this section to the extent that such exercise would cause it to function otherwise than in a fiduciary capacity, including, but not limited to, receiving or holding deposits of any kind, other than in a fiduciary capacity, or making loans or otherwise extending credit, other than in a fiduciary capacity.

(d) A Connecticut bank which is authorized to exercise fiduciary powers pursuant to subsection (a) of this section shall exercise such powers in compliance with the provisions of sections 36a-350 to 36a-353, inclusive, 36a-365 to 36a-372, inclusive, 36a-380 to 36a-386, inclusive, AS AMENDED and 36a-395 to 36a-399, inclusive.

Sec. 2. Section 38a-775 of the general statutes is repealed and the following is substituted in lieu thereof:

(a) As used in this section: (1) "Lending institution" means any institution that accepts deposits and lends money, including banks, savings and loan associations and credit unions, but not including insurance companies; (2) "affiliate", "subsidiary" and related terms shall be defined as in section 38a-1 AS AMENDED; (3) "bank holding company" means and includes the definition of such term in Section 2 of an Act of Congress entitled the "Bank Holding Company Act of 1956", as amended FROM TIME TO TIME; (4) "commissioner" means the Insurance Commissioner.

(b) No license authorizing the sale of fire and casualty insurance shall be issued pursuant to section 38a-769 to (1) a lending institution, or (2) a bank holding company, subsidiary or affiliate of a lending institution, or (3) an officer or employee of such lending institution, bank holding company, subsidiary or affiliate, provided this subsection shall not apply to any such person or organization which was lawfully licensed to sell fire and casualty insurance on October 1, 1973.

(c) No license authorizing the sale of life and health insurance shall be issued pursuant to section 38a-769 to (1) a lending institution, or (2) a bank holding company, subsidiary or affiliate of a lending institution, provided this subsection shall not apply to any such organization which was lawfully licensed to sell life and health insurance on October 1, 1980, to any savings bank with respect to the sale of life insurance policies or annuity contracts issued pursuant to section 36a-285, except that an affiliate of a bank which was a nonbank before the passage of the Competitive Equality Banking Act of 1987 and the new ownership of such nonbank was approved by the Commissioner of Banking under section 36a-181 AS AMENDED or 36a-185 AS AMENDED on or before May 8, 1984, may be issued a license authorizing the sale of life insurance. Life and health insurance shall not include credit life insurance as defined in section 38a-646 or group life and disability insurance sold in connection with real estate mortgage loans.

(d) NOTWITHSTANDING THE PROVISIONS OF SUBSECTION (c) OF THIS SECTION, A LICENSE AUTHORIZING THE SALE OF FIXED AND VARIABLE ANNUITIES MAY BE ISSUED BY THE COMMISSIONER PURSUANT TO SECTION 38a-769 TO (1) A BANK, AS DEFINED IN SECTION 36a-2, AS AMENDED, (2) AN OUT-OF-STATE BANK, AS DEFINED IN SECTION 36a-2, AS AMENDED, THAT MAINTAINS IN THIS STATE A BRANCH, AS DEFINED IN SECTION 36a-410, AS AMENDED, OR (3) A SUBSIDIARY, AFFILIATE, OFFICER OR EMPLOYEE OF SUCH BANK OR OUT-OF-STATE BANK. THE INSURANCE COMMISSIONER SHALL ADOPT REGULATIONS, IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER 54, TO CARRY OUT THE PURPOSES OF THIS SUBSECTION. SAID REGULATIONS SHALL INCLUDE, BUT NOT BE LIMITED TO THE FOLLOWING REQUIREMENTS: (A) ANY BANK, OUT-OF-STATE BANK OR SUBSIDIARY OR AFFILIATE OF SUCH BANK OR OUT-OF-STATE BANK SHALL DISCLOSE THAT AN ANNUITY IS NOT INSURED OR GUARANTEED BY ANY STATE OR FEDERAL AGENCY; (B) NO BANK, OUT-OF-STATE BANK OR SUBSIDIARY OR AFFILIATE OF SUCH BANK OR OUT-OF-STATE BANK MAY REQUIRE OR IMPLY THAT A CUSTOMER OR PROSPECTIVE CUSTOMER MUST PURCHASE AN ANNUITY AS A CONDITION TO RECEIVING ANY OTHER PRODUCT OR SERVICE OFFERED BY SUCH BANK, OUT-OF-STATE BANK OR SUBSIDIARY OR AFFILIATE OF SUCH BANK OR OUT-OF-STATE BANK; AND (C) ANY BANK, OUT-OF-STATE BANK OR SUBSIDIARY OR AFFILIATE OF SUCH BANK OR OUT-OF-STATE BANK SHALL BE PROHIBITED FROM PROVIDING ANY FINANCIAL RECORDS, AS DEFINED IN SECTION 36a-41, TO ANY PERSON FOR THE PURPOSE OF SELLING ANNUITIES WITHOUT THE PRIOR WRITTEN CONSENT OF THE CUSTOMER.

[(d)] (e) The Insurance Commissioner may adopt regulations, in accordance with the provisions of chapter 54, in order to effectuate the purposes of this section.

Sec. 3. This act shall take effect from its passage.

Approved May 2, 1996. Effective May 2, 1996.

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