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PUBLIC LAWS
First Special Session of the 122nd

CHAPTER 83
S.P. 324 - L.D. 949

An Act To Enhance the Supervisory Powers of the Department of Professional and Financial Regulation, Bureau of Financial Institutions

     Emergency preamble. Whereas, acts of the Legislature do not become effective until 90 days after adjournment unless enacted as emergencies; and

     Whereas, the Superintendent of Financial Institutions has identified certain enforcement powers essential to the regulation of Maine-chartered financial institutions that are not currently included in the banking laws; and

     Whereas, these powers should be made available to the superintendent as soon as possible so that, in the event a Maine-chartered financial institution encounters serious financial difficulties, the superintendent may use the new powers for the protection of depositors, beneficiaries of fiduciary accounts, creditors and the public; and

     Whereas, pressures of market forces in Maine and across the nation may adversely affect Maine-chartered financial institutions and may warrant responsive action by the superintendent including the use of these new enforcement powers; and

     Whereas, in the judgment of the Legislature, these facts create an emergency within the meaning of the Constitution of Maine and require the following legislation as immediately necessary for the preservation of the public peace, health and safety; now, therefore,

Be it enacted by the People of the State of Maine as follows:

     Sec. 1. 9-B MRSA §131, sub-§12-B, as enacted by PL 1995, c. 628, §5, is repealed and the following enacted in its place:

     12-B. Deposit production offices. "Deposit production offices" means the Maine offices operated by an individual financial institution authorized to do business in this State or individual credit union authorized to do business in this State that do not reasonably help meet the credit needs of Maine communities. For purposes of this subsection, "deposits" includes credit union share accounts.

     Sec. 2. 9-B MRSA §232, sub-§1, ¶¶B and C, as amended by PL 1997, c. 660, Pt. A, §3, are further amended to read:

     Sec. 3. 9-B MRSA §232, sub-§1, ¶D, as amended by PL 1997, c. 660, Pt. A, §3, is repealed.

     Sec. 4. 9-B MRSA §232, sub-§1, ¶E, as enacted by PL 1997, c. 660, Pt. A, §4, is repealed.

     Sec. 5. 9-B MRSA §232, sub-§1-A is enacted to read:

     1-A. Additional grounds for removal. The superintendent may serve written notice of intent to remove an officer or director from office or to prohibit further participation by the officer or director in any manner in the conduct of the affairs of a financial institution or financial institution holding company if:

     Sec. 6. 9-B MRSA §241, sub-§8, as enacted by PL 1995, c. 628, §18, is amended to read:

     8. Deposit production offices prohibited. A No financial institution authorized to do business in this State or credit union authorized to do business in this State is prohibited from operating may operate deposit production offices in this State. Each financial institution or credit union authorized to do business in this State shall submit an annual report to the superintendent providing deposit and loan information considered necessary by the superintendent to monitor compliance with this section. If the superintendent determines that a deposit production office is being operated, the superintendent may issue a cease and desist order pursuant to chapter 23. The superintendent shall annually review the level of lending in this State relative to the level of deposits in this State of each financial institution authorized to do business in this State and each credit union authorized to do business in this State to determine whether deposit production offices are being operated. If the superintendent determines that a financial institution authorized to do business in this State or credit union authorized to do business in this State is operating deposit production offices, the superintendent may issue a cease and desist order pursuant to chapter 23. The superintendent shall may adopt rules that set forth the factors that the bureau shall consider in determining whether a branch is being operated as a deposit production office to implement this subsection. Rules adopted pursuant to this subsection are routine technical rules as defined in Title 5, chapter 375, subchapter II-A 2-A. This subsection does not apply to limited purpose banks.

     Sec. 7. 9-B MRSA §363-A is enacted to read:

§363-A. Conservation of assets

     1. Appointment of conservator. Whenever, in the judgment of the superintendent, because of unsafe or unsound practice in conducting the business of a financial institution or other potentially hazardous condition, it is necessary to conserve or revalue the assets of the financial institution or to reorganize and put into sound condition the financial institution for the benefit of depositors, beneficiaries of fiduciary accounts, creditors or the public, the superintendent may issue an order describing the unsafe, unsound or other hazardous condition and appointing one or more conservators for the financial institution, who shall endeavor promptly to remedy the condition or conditions stated in the order.

     2. Segregation of assets. A conservator appointed under subsection 1 may order that there be segregated and set aside investments that in the conservator's judgment are of slow or doubtful value or that, on account of unusual conditions, cannot be converted into cash at their full fair value.

As used in this subsection, "investment" or "investments" includes all assets of the financial institution, whether real or personal.

     3. Deposit reductions. Simultaneously with the reductions taken pursuant to subsection 2, the following actions must be taken by the financial institution.

     4. Sale of segregated investments. Investments segregated under subsection 2 may be sold or exchanged for other securities or investments by a vote of the members of the governing body of the financial institution but must be sold when so ordered by the conservator or the superintendent. All money received from the sales of or as income from the securities or investments must be entered into a special account and held by the financial institution for the benefit of the depositors or members whose deposits were reduced under subsection 3, to be disposed of as provided in subsection 5.

     5. Repayment of reductions. The members of the governing body of a financial institution from time to time may, and when directed by the superintendent shall, declare pro rata dividends of money received as provided in subsection 4 to be distributed among the depositors or members whose deposits were reduced under subsection 3, payable to those who would then have been entitled to receive the sums deducted if the sums had continued to be included in the reduced deposits, and payable as other dividends are paid.

     6. Conservator continuing business. The conservator may continue to operate the financial institution in accordance with the following conditions and limitations.

     7. Replacement conservator. The superintendent may, without notice or hearing, replace a conservator with another conservator.

     8. Termination of conservatorship. The superintendent by order may terminate the conservatorship according to this subsection.

A certified copy of any order discharging the conservator and returning the financial institution to its governing body is sufficient evidence of termination of conservatorship.

     9. Immunity from civil liability. A person serving as a conservator is immune from any civil liability for acts performed within the scope of the conservator's duties in the same manner and to the same extent as employees of governmental entities are under the Maine Tort Claims Act.

     10. Judicial review. Any person affected adversely by any act or omission of the superintendent or conservator under this section or section 367-A may bring an action in the Superior Court of Kennebec County seeking an order annulling, altering or modifying the act or enjoining the performance of the act or requiring action to be taken under any provision of this section.

     Sec. 8. 9-B MRSA §365, sub-§1-A, as amended by PL 1997, c. 398, Pt. H, §4, is further amended to read:

     1-A. Appointment of receiver. If, upon examination of a financial institution, the superintendent is of the opinion that it is insolvent or that its condition renders its further proceedings hazardous to the public or to those having funds including trust assets in its custody, the superintendent may order the institution closed and appoint a receiver who shall proceed to close liquidate the financial institution.

     Sec. 9. 9-B MRSA §365, sub-§11 is enacted to read:

     11. Immunity from civil liability. A person serving as a receiver is immune from any civil liability, in the same manner as and to the same extent as employees of governmental entities are under the Maine Tort Claims Act, for acts performed within the scope of the receiver's duties.

     Sec. 10. 9-B MRSA §367-A is enacted to read:

§367-A.     Additional authority in conservation and liquidation

     1. Attachments and preferences. The superintendent or a conservator or receiver may bring an action:

     2. Injunctions. Whenever proceedings are instituted under this chapter, the Superior Court may issue an injunction restraining all persons from proceeding against the financial institution described in section 363-A or 365 until termination of conservatorship or final liquidation, including trustee processes.

     3. Other authority. The superintendent, conservator or receiver may disaffirm or repudiate any contract or lease to which the financial institution is a party, fix the rights of the claimants and adjudicate and fix the time and mode of payment of all claims, accounts and deposits having priority.

     4. Proceedings generally. The superintendent, conservator or receiver may bring an action described in this chapter, or any other action as determined appropriate, in the county in which the financial institution is located or has its principal place of business or in the Superior Court of Kennebec County. The proceedings must be given precedence over other pending court cases and must be expedited.

     5. Powers of superintendent. The superintendent has the following powers.

     6. Mergers. The conservator or receiver, with the approval of the superintendent, may order the merger or consolidation of any financial institution that is described in section 363-A or 365 with any other financial institution, state-chartered or federally chartered, with the consent of the other financial institution and may prescribe the mode or procedure for the merger or consolidation and the terms and conditions of the merger or consolidation.

     Sec. 11. 9-B MRSA §469 is enacted to read:

§469. Fundamental change in asset composition

     1. Requirement of prior approval. A financial institution, without the prior written approval of the superintendent, may not change the composition of all or substantially all of its assets through sales or other dispositions of assets, through purchases or other acquisitions of assets or through other expansions of its operations.

     2. Considerations. In determining whether to approve the change in the asset composition of a financial institution, the superintendent shall consider the purpose of the proposed transaction, its impact on the safety and soundness of the financial institution and any effect on the customers of the financial institution. If the superintendent concludes that a filing presents significant or novel policy, supervisory or legal issues, the superintendent may require an application to be filed in accordance with section 252.

     3. Exception. Prior written approval is not required for a change in the composition of assets that is part of the financial institution's ordinary and ongoing core banking activities.

     4. Rules. The superintendent may adopt rules defining a change in the composition of all or substantially all of a financial institution's assets and setting forth the factors to consider in determining what constitutes a fundamental change in assets. Rules adopted pursuant to this subsection are routine technical rules as defined in Title 5, chapter 375, subchapter 2-A.

     Sec. 12. 9-B MRSA §1213-A is enacted to read:

§1213-A. Asset pledge

     1. Pledge requirement. The superintendent may require a nondepository trust company to pledge readily marketable assets to the superintendent if the superintendent believes that circumstances warrant the action. The pledged assets must be United States dollar denominated, investment grade and subject to the prior written approval of the superintendent. The pledged assets must be held on deposit or in safekeeping by an FDIC-insured depository institution approved by the superintendent. The pledged assets may be released to the superintendent only upon certification that a receiver or conservator of the nondepository trust company has been appointed. The asset pledge requirement may be lifted by the superintendent if the superintendent determines that the condition of the nondepository trust company so warrants that action.

     2. Amount of pledge. The aggregate amount of pledged assets is determined by the superintendent but may not exceed the greater of $1,000,000 or 50% of the minimum required capital of the nondepository trust company at the time the asset pledge is imposed.

     3. Pledge agreement. The asset pledge must be maintained pursuant to an asset pledge agreement in the form and containing any limitations and conditions the superintendent requires. As long as the nondepository trust company continues business in the ordinary course, the nondepository trust company may be permitted to collect income on the pledged assets and examine and exchange those assets. The aggregate amount of assets pledged may not be less than required under subsection 2 without the superintendent's approval.

     4. Noncompliance. If a nondepository trust company fails to maintain the minimum required asset pledge, the superintendent may determine that the nondepository trust company does not meet the capital requirements under section 412-A and any rules adopted pursuant to section 412-A.

     5. Rulemaking. The superintendent may adopt rules to implement this section. Rules adopted pursuant to this subsection are routine technical rules as defined in Title 5, chapter 375, subchapter 2-A.

     Sec. 13. 9-B MRSA §1223-A is enacted to read:

§1223-A. Asset pledge

     1. Pledge requirement. The superintendent may require a merchant bank to pledge readily marketable assets to the superintendent if the superintendent believes that the action is necessary for the protection of the public. The pledged assets must be United States dollar denominated, investment grade and subject to the prior written approval of the superintendent. The pledged assets must be held on deposit or in safekeeping by an FDIC-insured depository institution approved by the superintendent. The pledged assets may be released to the superintendent only upon certification that a receiver or conservator of the merchant bank has been appointed. The asset pledge requirement may be lifted by the superintendent if the superintendent determines that the condition of the merchant bank so warrants that action.

     2. Amount of pledge. The aggregate amount of pledged assets is determined by the superintendent but may not exceed the greater of $1,000,000 or 50% of the minimum required capital of the merchant bank at the time the asset pledge is imposed.

     3. Pledge agreement. The asset pledge must be maintained pursuant to an asset pledge agreement in the form and containing any limitations and conditions the superintendent requires. As long as the merchant bank continues business in the ordinary course, the merchant bank may be permitted to collect income on the pledged assets and examine and exchange those assets. The aggregate amount of assets pledged may not be less than required under subsection 2 without the superintendent's approval.

     4. Noncompliance. If a merchant bank fails to maintain the minimum required asset pledge, the superintendent may determine that the merchant bank does not meet the capital requirements under section 412-A and any rules adopted pursuant to section 412-A.

     5. Rulemaking. The superintendent may adopt rules to implement this section. Rules adopted pursuant to this subsection are routine technical rules as defined in Title 5, chapter 375, subchapter 2-A.

     Sec. 14. 9-B MRSA §1233-A is enacted to read:

§1233-A. Asset pledge

     1. Pledge requirement. The superintendent may require an uninsured bank to pledge readily marketable assets to the superintendent if the superintendent believes that the action is necessary for the protection of the public. The pledged assets must be United States dollar denominated, investment grade and subject to the prior written approval of the superintendent. The pledged assets must be held on deposit or in safekeeping by an FDIC-insured depository institution approved by the superintendent. The pledged assets may be released to the superintendent only upon certification that a receiver or conservator of the uninsured bank has been appointed. The asset pledge requirement may be lifted by the superintendent if the superintendent determines that the condition of the uninsured bank so warrants that action.

     2. Amount of pledge. The aggregate amount of pledged assets is determined by the superintendent but may not exceed the greater of $1,000,000 or 50% of the minimum required capital of the uninsured bank at the time the asset pledge is imposed.

     3. Pledge agreement. The asset pledge must be maintained pursuant to an asset pledge agreement in the form and containing any limitations and conditions the superintendent requires. As long as the uninsured bank continues business in the ordinary course, the uninsured bank may be permitted to collect income on the pledged assets and examine and exchange those assets. The aggregate amount of assets pledged may not be less than required under subsection 2 without the superintendent's approval.

     4. Noncompliance. If an uninsured bank fails to maintain the minimum required asset pledge, the superintendent may determine that the uninsured bank does not meet the capital requirements under section 412-A and any rules adopted pursuant to section 412-A.

     5. Rulemaking. The superintendent may adopt rules to implement this section. Rules adopted pursuant to this subsection are routine technical rules as defined in Title 5, chapter 375, subchapter 2-A.

     Emergency clause. In view of the emergency cited in the preamble, this Act takes effect when approved.

Effective May 10, 2005.

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