Subject: Banking; modernization · Web viewNo petition or application shall be considered by the commissioner until payment for the enumerated charge has been received. (b) Those

NO. 153. AN ACT RELATING TO THE MODERNIZATION OF THE LAWS RELATED TO BANKS AND BANKING.

(H.374)

It is hereby enacted by the General Assembly of the State of Vermont:

Sec. 1. Part 1 of Title 8 is amended to read:

PART 1. General Administrative Provisions Relating to

Banking and Insurance

CHAPTER 1. MISCELLANEOUS POLICY AND ADMINISTRATION

§ 10. DECLARATION OF POLICY

It is declared to be the policy of the state of Vermont that:

(1) the business of organizations that offer financial services and

products shall be supervised by the commissioner in a manner to assure the

solvency, liquidity, stability and efficiency of all such organizations, to assure

reasonable and orderly competition, thereby encouraging the development,

expansion and availability of financial services and products advantageous to

the public welfare and to maintain close cooperation with other supervisory

authorities;

(2) all such organizations shall be supervised in such a way as to protect

consumers against unfair and unconscionable practices and to provide

consumer education.

§ 11 . DEPARTMENT

(a) General. The department of banking, insurance, securities, and health

care administration created by section 212 of Title 3, shall have jurisdiction

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over and shall supervise:

(1) Financial institutions, credit unions, licensed lenders mortgage

brokers, insurance companies, insurance agents, broker-dealers, investment

advisors and other similar persons subject to the provisions of this title and

chapters 59, 61 and 131 of Title 9.

(2) The administration of health care, including oversight of the quality

and cost containment of health care provided in this state, by conducting and

supervising the process of health facility certificates of need, hospital budget

reviews, health care data system development and maintenance, and funding

and cost containment of health care as provided in chapter 221 of Title 18.

(b) Conflicts of Interest.

(1) Neither the commissioner nor any employee of the department shall,

during his or her term of office or while employed by the department, be an

officer, director, organizer, employee of or attorney for any institution subject

to supervision or regulation by the department.

(2) The commissioner and employees of the department shall not,

during their terms of office, receive directly or indirectly any payment or

gratuity from any institution subject to supervision or regulation by the

department or be engaged in the negotiation of loans for others with any such

institution. The prohibitions contained in this subdivision shall not be

construed as prohibiting a person from being a depositor, equity interest owner

or member in any financial institution, or an insurance policyholder or equity

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interest owner, on the same terms as are available to the public generally.

(3) If the commissioner, or any employee of the department or the

spouse of any of them or the son or daughter of any of them residing at their

respective homes obtains a loan from or holds an equity interest in any

financial institution subject to supervision or regulation by the department, the

fact of the loan or of the holding, together with the appropriate terms and

conditions, shall be disclosed immediately to the commissioner in writing by

the person obtaining the loan or holding.

(4) A record of the indebtedness or holding described in subdivision (3)

of this subsection shall be kept on file in the department and shall be open to

inspection by the public.

(5) The commissioner shall investigate the loan or equity interest to

insure that no preferential treatment has been given the department employee

in the process of granting the loan or issuing the interest and that the loan or

interest will not compromise the employee's effectiveness in carrying out his

or her departmental duties. Where the loan has been obtained by or where the

interest is held by the commissioner, the investigation shall be conducted by

the state treasurer.

(c) Retention of documents. The commissioner shall keep on file for a

reasonable period of time such instruments, papers and documents required by

law to be filed with the commissioner.

§ 12. COMMISSIONER

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The department shall be administered by a commissioner of banking,

insurance, securities, and health care administration who shall be appointed by

the governor biennially, in the month of February, with the advice and consent

of the senate. Commissioner, as used in this title, shall mean the commissioner

of banking, insurance, securities, and health care administration.

§ 13. POWERS AND PENALTIES

(a) In addition to any other penalties, and in order to enforce this title,

chapter 131 of Title 9, Title 9A and Title 18, chapter 221, the commissioner

may issue subpoenas, examine persons, administer oaths and require

production of papers and records. Any subpoena or notice to produce may be

served by registered or certified mail or in person by an agent of the

commissioner. Service by registered or certified mail shall be effective three

business days after mailing. Any subpoena or notice to produce shall provide

at least six business days’ time from service within which to comply, except

that the commissioner may shorten the time for compliance for good cause

shown. Any subpoena or notice to produce sent by registered or certified mail,

postage prepaid, shall constitute service on the person to whom it is addressed.

Each witness who appears before the commissioner under subpoena shall

receive a fee and mileage as provided for witnesses in civil cases in superior

courts; provided, however, any person subject to regulation under this title

shall not be eligible to receive fees or mileage under this section.

(b) A person who fails or refuses to appear, to testify or to produce papers

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or records for examination before the commissioner, upon properly being

ordered to do so, may be assessed an administrative penalty by the

commissioner of banking, insurance, securities, and health care administration

of not more than $2,000.00 for each day of noncompliance and proceeded

against as provided in the Administrative Procedure Act, and that person’s

authority to do business may be suspended for not more than six months.

§ 14. A NNUAL REPORT AND DISTRIBUTION OF ANNUAL

REPORT

(a) The commissioner shall report annually, on or before June 1, to the

governor as to the conditions of persons regulated by the banking division and

as to the conditions of all insurance companies chartered by or doing business

in this state. The reports may be separate and shall contain statements as to the

financial condition of each institution, and any other information or

recommendations which the commissioner deems appropriate. The report

shall also contain a review of the rules of the department, regardless of the

process for adopting such rules, at a frequency such that each rule is reviewed

at least every five years for efficiency and effectiveness in carrying out the

policies and goals of this state relating to financial institutions, insurance

mechanisms and the sale of investments.

(b) The annual report of the commissioner required by this section shall

contain a listing of subsidiary and affiliate organizations formed or owned by a

Vermont financial institution for the purpose of engaging in any of the powers

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authorized by section 14106 of this title. The report shall also contain a listing

of the amount of a Vermont financial institution's loans and assets invested in

such organizations.

(c) The commissioner shall cause the annual report to be published for

general distribution, and shall distribute them to each member of the house

commerce and senate finance committees of the general assembly, to other

members of the general assembly under section 20 of Title 2 and to others as

the commissioner deems appropriate. Such distribution may be effected

electronically or by other similar means.

§ 15. RULES, ORDERS AND ADMINISTRATIVE INTERPRETATIONS

(a) In addition to other powers conferred by this title and Title 18, chapter

221, the commissioner may adopt rules and issue orders as shall be authorized

by or necessary to the administration of this title and Title 18, chapter 221, and

to carry out the purposes of such titles.

(b) The commissioner may, whether or not requested by any person, issue

written advisory interpretations of Part 5 of this title and regulations issued

under it, including interpretations of the applicability of any provision of this

title and regulations issued under it. Such interpretations shall be presumed to

be correct unless found to be clearly erroneous by a court of competent

jurisdiction. The commissioner may make public all or a portion of an

advisory interpretation.

§ 16. JUDICIAL REVIEW

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Any person aggrieved and directly affected by an order of the

commissioner may appeal to the supreme court of Vermont, except as

otherwise expressly provided in this title. The filing of an appeal for review or

injunctive relief shall not stay enforcement of an order, but the court may

order a stay on such terms as it deems proper. The court may affirm the order

of the commissioner, may direct him or her to take the action withheld or may

reverse or modify the order if it:

(1) was issued pursuant to unconstitutional statutory provisions;

(2) was in excess of statutory authority;

(3) was issued on unlawful procedure; or

(4) is not supported by substantial evidence in the record.

§ 17. LIABILITY FOR ACTS

A person serving in any official capacity under this title, chapter 131 of

Title 9, or chapter 221 of Title 18, including the commissioner and any officer,

employee or agent of the department, shall not be liable in any civil action for

damages for any act done or omitted in good faith in performing the functions

of his or her office. No person may be subjected to any civil or criminal

liability for any act or omission to act done in good faith in reliance on a

subsisting order, regulation or rule of the commissioner, notwithstanding a

subsequent decision by a court invalidating the order, regulation or rule.

§ 18. CHARGES FOR EXAMINATIONS, APPLICATIONS, REVIEWS

AND INVESTIGATIONS

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Every person subject to regulation by the department shall pay the

department the reasonable costs of any examination, review or investigation

that is conducted or caused to be conducted by the department of such person,

or of any application or filing made by such person, at a rate to be determined

by the commissioner. The department may retain experts or other persons who

are independently practicing their professions to assist in such examination,

review or investigation. The department shall be reimbursed for all reasonable

costs and expenses, including the reasonable costs and expenses of such

persons retained by the department, by the person examined, submitting the

application or filing reviewed or investigated. A review subject to this section

shall include, but not be limited to, a review of any application, rate filing or

form filing submitted under this title. In unusual circumstances, the

commissioner may waive reimbursement for the costs and expenses of any

review in the interests of justice. Those institutions subject to assessment or

fees for services provided under subsection 19 of this title shall not be billed

for a regular examination performed under subsection 11501(a) of this title or

for services for which such fees under section 19(a) of this title have been

paid.

§ 19. FEES AND DEPARTMENTAL EXPENSES

(a) The commissioner shall charge each financial institution or financial

institution applicant for department services rendered. Charges for department

services shall be billed as follows:

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(1) New financial institution application, $5,000.00;

(2) Interim reorganization application, $1,000.00;

(3) Merger or other reorganization, $1,000.00;

(4) Conversion of a charter, $2,000.00;

(5) Establishment of a branch, $500.00;

(6) Establishment of a remote service unit, $250.00. Where more than

one remote service unit performing identical services on single premises are

petitioned at the same time, the total charge shall be $250.00;

(7) Relocation of main office, branch, or remote service unit, $150.00;

(8) For trust powers subsequent to the granting of the authority as

financial institution, $500.00;

(9) Sale of branch, $500.00;

(10) Sale, lease or exchange of all an institution’s assets, $1,500.00;

(11) Voluntary dissolution or liquidation of an institution, $5,000.00;

(12) Establishment of a special purpose financial institution, $5,000.00;

(13) Establishment of a temporary agency, $150.00;

(14) Activity at a school, $250.00;

(15) Establishment of a loan production office, $750.00;

(16) Permit a foreign exchange activity, $500.00;

(17) Purchase or establish a subsidiary or service corporation,

$2,500.00;

(18) Certificate (Good Standing), $50.00;

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(19) Establish a development credit corporation, $100.00;

(20) Any other corporate organizational changes not covered above,

$250.00 plus expenses. No petition or application shall be considered by the

commissioner until payment for the enumerated charge has been received.

(b) Those institutions subject to assessment under subsection (d) of this

section will not be billed for examinations performed under subsection

11501(a) of this title.

(c) Each person, except as otherwise provided in subsection (d) of this

section, within 30 days of notification, shall pay the department fees as

prescribed by section 18 of this title, which fees shall be billed when they are

incurred.

(d) Semiannually on or before February 15 and August 15, the

commissioner shall apportion the expenses allowed under the title "department

of banking" in the annual appropriation bill among the several financial

institutions directly regulated under this title, including the operations in

Vermont of any such entity organized in another jurisdiction and credit unions,

after first deducting all monies received by the banking division. The

commissioner shall notify each entity of the amount so apportioned to it,

which shall be paid into the state treasury within 30 days after receipt of that

notice.

(1) Financial institutions that accept deposits and credit unions will be

assessed in proportion to the amount of their average deposits held in this state

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for the preceding six - month period ending December 31 and June 30.

(2) In the case of merchant banks established under section 12603 of

this title, the assessment shall be based on assets in this state on the last day of

December and June preceding.

(3) In the case of special purpose financial institutions that are not

permitted to accept deposits, except merchant banks established under section

12603 of this title, and independent trust companies organized or operating

under chapter 77 of this title, the assessment will be based on assets under

management in this state on the last days of December and June preceding.

(e) If any entity fails to pay fees or expenses as provided in this section or

section 18 of this title, within 45 days after notice from the department of the

amount due, the commissioner may issue an execution against the property of

the delinquent for an amount equal to 150 percent of the amount of the

overdue payment. Such execution shall be enforced as an execution of a court.

(f) There is hereby created a fund to be known as the banking supervision

fund for the purpose of providing the financial means for the commissioner of

banking, insurance, securities, and health care administration to administer

chapters 71, 73, 77, 133 and 200-210 of this title, Part 1 and Part 3 of Title 9,

and Title 9A. All fees and assessments received by the department pursuant to

such administration shall be deposited in this fund.

(g) All payments from the banking supervision fund for the maintenance of

staff and associated expenses, including contractual services as necessary, shall

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be disbursed from the state treasury only upon warrants issued by the

commissioner of finance and management after receipt of proper

documentation regarding services rendered and expenses incurred.

(h) Any entity, subject to the assessment under subsection (d) of this

section, that converts or relinquishes its state charter or closes all of its

branches or offices in this state will be responsible for a pro rata share of the

assessment made under subsection (d) of this section for the final period it was

authorized to conduct business under this title.

§ 20. UNIFORM COMMERCIAL CODE

(a) All commercial transactions of financial institutions doing business in

this state shall be governed by and conducted in accordance with Title 9A.

(b) In any conflict between the provisions of Title 9A and any other

provisions of law, including organizational documents of financial institutions,

dealing with the same subject matter, Title 9A shall prevail unless otherwise

specifically provided by law.

§ 21. APPLICABILITY OF LAWS GOVERNING BUSINESS

ORGANIZATIONS

Depending on the permitted type of organizational form, the provisions of

Titles 11, 11A and 11B, relating to corporations, limited liability companies,

limited liability partnerships, limited partnerships, partnerships, mutual and

cooperative organizations and other organizations, shall apply to business

organizations regulated under this title. In the case of a conflict and to the

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extent that such provisions may be inconsistent with the provisions of Titles

11, 11A and 11B, the provisions of this title shall control.

Sec. 2. Part 5 of Title 8 is added to read:

PART 5. FINANCIAL AND RELATED INSTITUTIONS

CHAPTER 200. CONSUMER PROTECTION

Subchapter 1. General Provisions

§ 10101. APPLICATION OF CONSUMER PROTECTION CHAPTER

Except as otherwise provided in this chapter, the provisions of this chapter

shall apply to all financial institutions, as defined in subdivision 11101(32) of

this title, licensed lenders, mortgage brokers, sales finance companies and

credit unions doing or soliciting business in this state, in addition to any other

applicable consumer protection or remedy section not contained in this

chapter, unless such consumer protection or remedy section is expressly made

exclusive.

§ 10102. PENALTIES

The provisions of chapter 201, subchapter 6 of this title shall apply to any

violation of this chapter, unless the section or subchapter that is the subject of

the violation contains its own penalty. The procedures in chapter 201,

subchapter 6 of this title shall apply to any penalty imposed for a violation of

this chapter.

Subchapter 2. Financial Privacy

§ 10201. STATEMENT OF POLICY ON FINANCIAL PRIVACY

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It is the policy of this state to protect the privacy of customers of financial

institutions without unduly inhibiting the free flow of commerce or legitimate

law enforcement activities.

§ 10202. DEFINITIONS

As used in this subchapter:

(1) "Account verification service" means any person which, for

monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in

whole or in part in the practice of:

(A) assembling information on the frequency and location of

depository account openings or attempted openings by a consumer, or forced

closings by a depository institution of accounts of a consumer; or

(B) authenticating or validating Social Security numbers or addresses

for the purpose of reporting to third parties for use in fraud prevention.

Mailing such information to a customer to the address provided by such

customer shall not be prohibited by this subchapter.

(2) "Credit reporting agency" means any person who, for monetary fees,

dues, or on a cooperative nonprofit basis, regularly engages in whole or in part

in the practice of assembling or evaluating consumer credit information or

other information on consumers for the purpose of reporting to third parties on

the credit rating or creditworthiness of any consumer.

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(3) "Customer" means, for purposes of this subchapter, any person who

deposits, borrows or invests with a financial institution, including a surety or a

guarantor on a loan.

(4) "Financial information" means an original or copy of, or information

derived from:

(A) a document that grants signature authority over a deposit or share

account;

(B) a statement, ledger card or other record of a deposit or share

account that shows transactions in or with respect to that deposit or account;

(C) a check, clear draft or money order that is drawn on a financial

institution or issued and payable by or through a financial institution;

(D) any item, other than an institutional or periodic charge, that is

made under an agreement between a financial institution and another person's

deposit or share account;

(E) any information that relates to a loan account or an application for

a loan; or

(F) evidence of a transaction conducted by electronic or telephonic

means.

(5) “Financial institution” means a financial institution as defined in

subdivision 11101(32) of this title, and a credit union, financial institution

subsidiary, licensed lender, mortgage broker or sales finance company

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organized or regulated under the laws of this state, the United States or any

other state or territory.

(6) "Mercantile agency" means any person, which for monetary fees,

dues, or on a cooperative nonprofit basis, regularly engages in whole or in part

in the practice of assembling or evaluating business credit information or other

information on businesses for the purpose of reporting to third parties on the

credit rating or creditworthiness of any business.

§ 10203. DISCLOSURE OF FINANCIAL RECORDS PROHIBITED

Except as otherwise expressly provided in this subchapter, a financial

institution, its officers, employees, agents and directors shall not disclose to

any person any financial information relating to a customer. Financial

institutions shall adopt reasonable procedures to assure compliance with this

subchapter.

§ 10204. EXCEPTIONS

This subchapter does not prohibit any of the activities listed in this section.

This section shall not be construed to require any financial institution to make

any disclosure not otherwise required by law. This section shall not be

construed to require or encourage any financial institution to alter any

procedures or practices not inconsistent with this subchapter. This section

shall not be construed to expand or create any authority in any person or entity

other than a financial institution.

(1) Disclosure of information to the customer after proper identification.

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(2) Disclosure authorized by the customer, provided the disclosure is

limited to the scope and purpose that the customer authorizes.

(3) Disclosure of information sought by the office of child support

services pursuant to its authority and obligations under section 115 and chapter

41 of Title 33, or by an agency of similar function of another state, pursuant to

similar authority.

(4) Disclosure of information sought by the department of social

welfare pursuant to its authority and obligations under 33 V.S.A. § 112.

(5) Disclosure sought by the Vermont student assistance corporation

pursuant to its authority and obligations under 16 V.S.A. chapter 87.

(6) The preparation, examination, handling or maintenance of financial

records by any officer, employee, or agent of a financial institution that has

custody of the records.

(7) The examination of financial records by a certified public

accountant while engaged by the financial institution to perform an

independent audit.

(8) The disclosure of information to a collection agency, its employees

or agents, or to any person engaged by the financial institution to assist in

recovering an amount owed to the financial institution, if such disclosure is

made in the furtherance of recovering such amount.

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(9) The examination of financial records by, or the disclosure of

financial records to, any officer, employee or agent of a regulatory agency for

use only in the exercise of that person's duties as an officer, employee or agent.

(10) The publication of information derived from financial records if

the information cannot be identified to any particular customer, deposit or

account.

(11) The making of reports, disclosures or returns required by federal or

state law.

(12) The disclosure of any information permitted to be disclosed under

the laws governing dishonor of negotiable instruments.

(13) The exchange, in the regular course of business, of credit

information between a financial institution and a credit reporting agency,

provided such exchange is in compliance with the Vermont Fair Credit

Reporting Act, 9 V.S.A. chapter 63, subchapter 3, and the federal Fair Credit

Reporting Act, 15 U.S.C. § 1681 et seq.

(14) The exchange, in the regular course of business, of information

between a financial institution and an account verification service, provided

such exchange is in compliance with the Vermont Fair Credit Reporting Act, 9

V.S.A. chapter 63, subchapter 3, and the federal Fair Credit Reporting Act, 15

U.S.C. § 1681 et seq.

(15) The exchange, in the regular course of business, of information

between a financial institution and a mercantile agency, provided such

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exchange is solely for the purpose of reporting to third parties on the credit

rating or creditworthiness of any business, and is in compliance with the

Vermont Fair Credit Reporting Act, 9 V.S.A. chapter 63, subchapter 3, and the

federal Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq.

(16) The exchange of loan information that specifically affects a sale,

foreclosure or loan closing, provided such exchange is for the purpose of

accomplishing such sale, foreclosure or loan closing.

(17) The disclosure to civil or criminal law enforcement authorities for

use in the exercise of such authority's duties, or the sharing of information,

within an industry network, of suspected criminal activities.

(18) Disclosures requested pursuant to a summons for trustee process

under Rule 4.2 of the Vermont Rules of Civil Procedure.

(19) Disclosure requested pursuant to subpoena, provided that no

disclosure shall be made until ten days after the financial institution has

notified the customer that financial information has been requested by

subpoena. Such notice shall be served by first class mail to the customer at the

most recent address known to the financial institution. The provisions of this

subdivision shall not apply where the subpoena is issued by or on behalf of a

regulatory, criminal or civil law enforcement agency.

(20) Disclosure required by order of court.

(21) Disclosure of customer financial information among directors,

officers, employees or agents of affiliated financial institutions, provided that

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such disclosure is limited to information necessary or appropriate to the

fulfillment of any such persons' duties and responsibilities to the financial

institution or institutions, and provided further that such disclosure is made in

compliance with the Vermont Fair Credit Reporting Act, 9 V.S.A. chapter 63,

subchapter 3, and the federal Fair Credit Reporting Act, 15 U.S.C. § 1681 et

seq.

(22) Disclosure of customer financial information of one financial

institution to another financial institution in connection with a proposed

merger, consolidation, acquisition or other reorganization transaction

involving such institution, provided that no further disclosure is made except

in compliance with this subchapter, and provided further that such disclosure is

made in compliance with the Vermont Fair Credit Reporting Act, 9 V.S.A.

chapter 63, subchapter 3, and the federal Fair Credit Reporting Act, 15 U.S.C.

§ 1681 et seq.

(23) Disclosure in accordance with rules adopted by the commissioner,

provided that the commissioner may permit disclosure by temporary order,

until such time as rules under this subdivision are adopted.

(24) Disclosure sought by the department of taxes of this state pursuant

to its authority and obligations under Title 32.

§ 10205. PENALTIES

In addition to the authority provided under sections 11601, 11602 and

11603 of this title, the commissioner may impose an administrative penalty of

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not more than $1,000.00 for each violation of this subchapter resulting from

willful conduct, or from a failure by a financial institution to provide

reasonable supervision of its employees to prevent violations of this

subchapter.

Subchapter 3. Disclosures and Reports

§ 10301. COMMUNITY REINVESTMENT REPORTS

Every financial institution subject to the Federal Community Reinvestment

Act of 1977 (12 U.S.C. § 2901) as amended shall provide to the commissioner

a copy of any report issued with respect to such financial institution under that

act. If the financial institution is not a Vermont financial institution, then the

requirements of this section shall only apply to reports that relate to its

business in this state. The commissioner shall make such reports available for

public inspection and copying.

§ 10302. AUTOMATED TELLER MACHINES

(a) The owner of an automated teller machine or other remote service unit,

including a cash dispensing machine, located or employed in this state shall

disclose at the location of each such machine the identity, address and

telephone number of the owner and the availability of consumer assistance.

The owner shall also disclose to the consumer the amount of the fees or

charges which the owner will assess to the consumer for the use of that

machine. The commissioner shall approve the form, content, timing and

location of such disclosures and any amendments thereto prior to use. The

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commissioner shall act on any submission made under this section within 30

days of receipt. If the commissioner determines that any disclosures do not

provide adequate consumer protection, the commissioner may by order or by

rule specify minimum disclosure standards, including the form, content, timing

and location of such disclosures. The commissioner may impose on the owner

of an automated teller machine or other remote service unit an administrative

penalty of not more than $1,000.00 for each day's failure of the owner to apply

to the commissioner for approval of disclosures required under this section, for

each day's failure of the owner to use disclosures approved by the

commissioner or for each day's continuing violation of an order of the

commissioner relating to the disclosures required by this section.

(b) In addition to an automated teller machine or other remote service unit

owned by a financial institution or credit union, the provisions of this section

shall apply to any automated teller machine or other remote service unit not

owned by a financial institution or credit union, except it shall not include a

point - of - sale terminal owned or operated by a merchant who does not charge a

fee for the use of the point - of - sale terminal. The activities of an automated

teller machine or other remote service unit whose owner is not a financial

institution shall be limited to cash dispensing or the offer or sale of

nonbanking services and products.

Subchapter 4. Lending Reports, Disclosures and Standards

§ 10401. REPORTS AND PUBLICATION OF INTEREST RATES

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(a) Interest rates. On a periodic basis, the commissioner shall collect and

distribute to the news media information as to prevailing interest rates,

expressed in annual percentage rates, which are charged by a representative

sampling of Vermont financial institutions and licensed lenders.

(b) Report and publication of bank credit card rates and charges.

(1) The general assembly finds that competition among providers of

financial services is beneficial to the consumers of this state, but that such

competition is most likely to occur and be effective only if consumers have

accurate, timely and periodic comparisons of the prices and charges for the

cost of such services. It is therefore the purpose of this section to foster

competition and benefit Vermont consumers through disclosure and

publication of rates and charges for bank credit cards.

(2) Any financial institution which is authorized to do business in this

state may issue bank credit cards only if it reports quarterly to the

commissioner of banking, insurance, securities, and health care administration,

on a form prepared by the commissioner, the current rate of interest together

with all other charges imposed upon cardholders. Quarterly, the commissioner

shall publish the rates and charges of all financial institutions reporting under

this section.

§ 10402. LENDING REPORTS, DISCLOSURES AND STANDARDS

An entity subject to this chapter shall be subject to and comply with the

provisions of chapter 4 of Title 9.

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§ 10403. PROHIBITION ON DISCRIMINATION BASED ON SEX,

MARITAL STATUS, RACE, COLOR, RELIGION, NATIONAL

ORIGIN, AGE, SEXUAL ORIENTATION OR HANDICAPPING

CONDITION

(a) No financial institution shall discriminate against any applicant for

credit services on the basis of the sex, marital status, race, color, religion,

national origin, age, sexual orientation or handicapping condition of the

applicant, provided the applicant has the legal capacity to contract.

(b) The department of banking, insurance, securities, and health care

administration shall prescribe rules and regulations necessary to carry out the

provisions of this section.

(c) Definitions. As used in this section:

(1) "Adverse action" means denial, revocation, or termination of credit

services. The term does not include a change in the terms of an account

expressly agreed to by an applicant, nor any action or forbearance relating to

an account taken in connection with inactivity, default, or delinquency as to

that account.

(2) "Applicant" means any person who applies to a financial institution

directly for an extension, renewal, or continuation of credit, or applies to a

financial institution indirectly by use of an existing credit plan for an amount

exceeding a previously established credit limit.

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(3) "Application" means an oral or written request for an extension of

credit that is made in accordance with procedures established by a financial

institution for the type of credit requested. The term does not include the use

of an account or line of credit to obtain an amount of credit that is within a

previously established credit limit. A completed application means an

application in connection with which a financial institution has received all the

information that the financial institution regularly obtains and considers in

evaluating applications for the amount and type of credit requested (including,

but not limited to, credit reports, any additional information requested from the

applicant, and any approvals or reports by governmental agencies or other

persons that are necessary to guarantee, insure, or provide security for the

credit or collateral). The financial institution shall exercise reasonable

diligence in obtaining such information.

(4) "Credit services" means credit cards, personal loans, mortgage loans,

and commercial loans.

(5) "Financial institutions" means Vermont financial institutions, credit

unions, and licensed lenders.

(6) "Handicapping condition" applied to an applicant means a

handicapped individual as defined in section 495d(5) of Title 21. For the

purposes of this section, an applicant with a handicapping condition does not

include an alcoholic or drug abuser who, by reason of current alcohol or drug

use, constitutes an unacceptable credit risk.

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(7) "Person" means a natural person, a corporation, government or

governmental subdivision or agency, trust, estate, partnership, cooperative,

association, or other entity.

(d) Notification requirements:

(1) Within 30 days of reaching a decision on a completed application, a

financial institution shall notify the applicant of its decision on the application.

(2) Each applicant against whom adverse action is taken shall receive a

written statement of reasons for such action from the financial institution.

(3) For commercial credit only, a statement of reasons meets the

requirements of this section only if it contains the specific reasons for the

adverse action taken, and cites the specific documentation or business

judgment which supports the adverse decision on the application. Consumer

credit shall be governed by the Equal Credit Opportunity Act (15 U.S.C.

§ 1691 et seq.) and regulations adopted thereunder.

(4) Financial institutions shall be required to maintain a copy of all

"statements of reasons" and the documentation upon which the decision was

based for 24 months after the date of issuance.

(e) Civil enforcement. A financial institution that discriminates against an

applicant in violation of this section shall be liable to the applicant for punitive

damages, actual damages sustained by the applicant as a result of the

discrimination and for costs and a reasonable attorney's fee as determined by

the court.

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§ 10404. HOME LOAN ESCROW ACCOUNTS

(a) For purposes of this section:

(1) "Borrower" means one or more natural persons who are obligated to

make escrow account payments under the terms of a loan agreement secured

by residential real estate occupied by the borrower.

(2) "Escrow account" means an account into which a borrower is

required under the terms of a residential real estate loan agreement to make

periodic payments of property taxes, insurance premiums or other similar

charges.

(3) "Lender" means a person who services or holds the beneficial

interest in a loan secured by residential real estate located in this state and who

requires periodic payments by a borrower into an escrow account in

accordance with the provisions of a residential real estate loan agreement.

(b) A lender shall pay into an escrow account for the benefit of the

borrower interest on funds deposited into the account under the same

conditions as the lender's regular savings account, if offered, and otherwise at

a rate not less than the prevailing market rate of interest for regular savings

accounts offered by local financial institutions, calculated on the basis of the

average monthly balance in the account and credited on the first day of each

quarter. This subsection shall not apply when a lender requires payment into

an escrow account because a borrower has failed, within the past year, to make

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timely payments for property taxes and insurance in accordance with the

provisions of the loan agreement.

(c) A lender shall not require a borrower to deposit into an escrow account

any greater sum than is sufficient to pay taxes, insurance premiums and other

charges with respect to the residential real estate, subject to the following

additional charges:

(1) A lender may require aggregate annual deposits no greater than the

reasonably estimated total annual charges plus one - twelfth of such total; and

(2) A lender may require monthly deposits no greater than one - twelfth

of the reasonably estimated total annual charges plus an amount needed to

maintain an additional account balance no greater than one - twelfth of such

total.

(d) A lender shall make timely payments of all charges with respect to the

residential real estate payable from the escrow account.

(e) The lender shall maintain escrow account funds in a federally insured

depository institution.

(f) With respect to borrowers who have maintained escrow accounts in

accordance with the provisions of the loan agreement, the lender shall be

primarily obligated for the payment of any municipal or county taxes,

insurance premiums or other similar charges with respect to the residential real

estate, and any penalties attributable to the lender's late payment of such

charges.

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(g) The lender shall provide annually, or upon request of the borrower,

financial statements relating to the borrower's escrow account in a manner and

on a form approved by the commissioner. The lender shall not charge the

borrower for the preparation and transmittal of such statements.

(h) A borrower aggrieved by a violation of the provisions of this section, or

a rule adopted by the commissioner in connection with this section, may bring

an action for injunctive relief, three times the amount of any interest unpaid in

violation of this section, other damages, costs and reasonable attorneys' fees.

The commissioner may bring an action in the superior court of Washington

County for injunctive relief, restitution and any administrative costs and

attorneys' fees incurred as a result of a violation of this section.

Subchapter 5. Bank Products; Prohibitions

§ 10501. BASIC BANKING

It is the public policy of this state to promote the economic viability and

prosperity of its residents and to promote, attract and encourage savings. The

legislature finds and declares that access to basic banking services for basic

depository transactions is necessary for the payment of monthly expenses and

for the encouragement of thrift by Vermont consumers. The legislature further

finds and declares that reasonable cost basic banking services promote savings

on the part of young, elderly and low income consumers, and provides,

through means of payment by check, draft, negotiable order of withdrawal, or

similar instrument, a viable alternative for cash transactions which is essential

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to all Vermont consumers. Therefore, it is the purpose of this chapter to

ensure that basic banking services remain available to all Vermont consumers.

§ 10502. DEFINITIONS RELATING TO BASIC BANKING

For the purposes of sections 10501 through 10504 of this title, the

following terms shall have the following meanings:

(1) "Basic checking account" means a deposit account on which the

consumer is permitted to make payments or transfers by check, money order or

other negotiable instruments and which is maintained by such person for

personal, family or household purposes.

(2) "Basic savings account" means a savings account or statement

savings which is maintained by such person for personal, family or household

purposes.

(3) "Consumer" means a natural person.

§ 10503. QUARTERLY SURVEY ON BASIC BANKING

The commissioner, on a quarterly basis, shall survey all depository

institutions doing business in this state, to determine the cost and availability

of basic checking and savings account services in the results of any two

consecutive surveys. The basic checking account services survey shall include

an index of the annual cost of services typically used by a basic banking

customer. The survey shall also include each surveyed banking institution’s

returned check charge and charge for cashing noncustomer government

checks. The commissioner shall release the results of these quarterly surveys to

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the news media and may take other actions he or she deems appropriate to

make the survey information available to the general public. The

commissioner shall include an analysis regarding the cost and availability of

basic banking services in his or her annual report required by section 14 of this

title.

§ 10504. BASIC BANKING RULES

The commissioner may adopt rules to require financial institutions with

their principal place of business in this state to offer basic checking and

savings accounts if the commissioner finds a material deterioration in the

availability and cost of basic checking and savings account services in the

results of any two consecutive surveys. The rule promulgated by the

commissioner under this section shall assure that any required basic banking

will not impair the safety and soundness of any affected financial institution

and that any such rules shall not adversely affect other consumers of banking

services.

§ 10505. RETURNED CHECK CHARGES

No depository institution shall assess a returned check charge or similar

charge against a depositor for the costs of processing a check received by that

depositor and returned for nonsufficient funds by the institution upon which it

was drawn.

§ 10506. UNSOLICITED DISTRIBUTION OF CASH ADVANCE

CONTRACTS AND NOTES

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No person shall distribute by mail, or in any other manner, to a Vermont

resident, an unsolicited cash advance contract or note in furtherance of that

contract. A person who violates this section shall also be subject to the

provisions of subchapter 6 of chapter 201 of this title. This section does not

apply to (i) any communication by a lender with a borrower pursuant to a

preexisting credit relationship, including the furnishing on an unsolicited basis

of any check, card, plate or other means of accessing a preexisting loan or line

of credit; or (ii) any unsolicited firm offer of credit made in compliance with

the rules of the Federal Trade Commission relating to prescreening, as in effect

from time to time.

CHAPTER 201. SUPERVISION; DEFINITIONS

Subchapter 1. Definitions

§ 11101. DEFINITIONS

Except as otherwise specifically provided elsewhere in this title, and subject

to such definitions as the commissioner may promulgate pursuant to

regulations hereafter, the following terms have the following meanings for

purposes of Parts 1, 2 and 5 of this title, unless the context clearly indicates

otherwise.

(1) “Affiliate” means any company or person that, directly or indirectly,

controls, is controlled by or is under common control with another company.

(2) “Automated teller machine” or “ATM” means an electronic device

at which a natural person may make deposits to an account by cash or check

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and perform other account transactions. Point-of-sale terminals, machines that

only dispense cash, night depositories and lobby deposit boxes are not

automated teller machines.

(3) "Bank” or “bank and trust company" means any financial institution

organized under the prior laws of this state that is authorized to exercise the

powers and subject to the conditions and limitations on the exercise of those

powers as set forth in chapter 204 of this title.

(4) “Bank credit card” means a card, plate or other credit device issued

by a bank or financial institution to a cardholder for the purpose of obtaining

money, property, labor or services on credit. The term “bank credit card” shall

not be deemed to include a debit card; provided, however, that a credit card

may include features of a debit card.

(5) “Bank holding company” shall have the same meaning as in 12

U.S.C. § 1841(a) and shall include a financial holding company as defined in

12 U.S.C. § 1841(p).

(6) “Banking day” shall mean each day that a financial institution is

open to the public for the transaction of substantially all of its banking

functions and shall be deemed a banking day for the purposes of all

transactions with the financial institution under this title, Title 9A as it applies

to financial institutions, and all other provisions of law applicable to financial

institutions and the business of banking in this state.

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(7) "Billing date" means the cycle date on the financial institution books

and statements, which statements shall be mailed four days after the closing of

the cycle.

(8) "Billing period" means the time interval between periodic statement

dates. A billing period shall be considered a month or monthly if the last day

of each billing period is on the same day of each month or does not vary by

more than four days each month.

(9) “Borrower” means any person who is named as a borrower or debtor

in a loan or extension of credit, including a drawer, endorser or guarantor who

is deemed a borrower under section 14301(d) of this title.

(10) “Branch” means any office of a financial institution at which

deposits are received, checks paid, or money lent. A branch may include a

messenger service, mobile branch, temporary facility, night depository (drop

box), drive-in facility or a seasonal agency. A branch does not include:

(A) a remote service unit;

(B) an office which does not permit members of the public to have

physical access for purposes of making deposits, paying checks or borrowing

money;

(C) an office which is located at the site of, or is an extension of, an

approved main or branch office;

(D) a loan production office; or

(E) deposit production office.

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(11) “Business of banking”, “business of financial institutions” or

“banking business” means soliciting, receiving or accepting money or its

equivalent on deposit and the loaning of money as a regular business by any

person.

(12) “Capital”, for purposes of determining statutory limits that are

based on the amount of a bank’s or financial institution’s capital or surplus,

(A) means the sum of the amount of common stock outstanding and

unimpaired, the amount of perpetual preferred stock outstanding and

unimpaired, and the amount of capital surplus and undivided profits, for

financial institutions organized as corporations;

(B) means the sum of members' or partners' contributions and

undistributed earnings of the company or partnership, for financial institutions

organized as limited liability companies, limited partnerships or limited

liability partnerships; or

(C) means the sum of capital deposits, surplus and undivided

earnings for all other financial institutions.

For purposes of evaluating a Vermont depository institution's financial

condition and safety and soundness, "capital" shall be determined in

accordance with applicable federal regulations and interagency guidelines

issued jointly by the Federal Deposit Insurance Corporation, the Office of the

Comptroller of the Currency, the Board of Governors of the Federal Reserve

System, and the Office of Thrift Supervision.

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(13) “Charter” means the grant of authority to a financial institution

under state or federal law to operate as a financial institution.

(14) “Closely related activities” mean those activities that are part of the

business of banking, are closely related to the business of banking, are

convenient and useful to the business of banking, are reasonably related to the

operation of a financial institution or are financial in nature or incidental to

such financial activity. Closely related activities include, but are not limited

to, business and professional services, data processing, courier and messenger

services, credit-related activities, consumer services, real estate-related

services, insurance and related services, securities brokerage, investment

advice, securities underwriting, mutual fund activities, financial consulting, tax

planning and preparation, community development and charitable activities

and any activities reasonably related or incidental to these activities. A

"closely related activity" shall include:

(A) any activity that may be authorized from time to time for

financial institutions or their service corporations or subsidiaries, including

financial subsidiaries as defined in Section 5136A(g)(3) of Chapter One of

Title XLII of the Revised Statutes of the United States, to engage in pursuant

to statutes administered by the Board of Governors of the Federal Reserve

System, the Office of the Comptroller of the Currency, or the Office of Thrift

Supervision; and

(B) any additional activities that the commissioner by rule or order

VT LEG 127907.1

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determines to be a "closely related activity.”

(15) “Commercial bank” means a bank or bank and trust company

organized under prior law of this state or the laws of the United States, another

country or state, but does not include a special purpose financial institution or

similar entity.

(16) “Commissioner” means the commissioner of banking, insurance,

securities, and health care administration.

(17) “Control” means that a person, directly or indirectly or acting

through one or more other persons or through one or more subsidiaries, owns,

controls, or has power to vote 25 percent or more of any class of equity

interest of a financial institution; the person controls in any manner the

election of a majority of the directors of the financial institution; or that the

person directly or indirectly exercises a controlling influence over the

management or policies of the financial institution. For depository

institutions, control determinations may be made under the federal Bank

Holding Company Act of 1956, 12 U.S.C. §§ 1841 et seq., or the federal

Change in Bank Control Act, 12 U.S.C.

§ 1817(j), or the Home Owners Loan Act, 12 U.S.C. § 1467a, as applicable in

the circumstances. For institutions that are not depository institutions, control

may be determined by the commissioner.

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(18) "Cooperative financial institution" means any financial institution

organized pursuant to chapter 203 in which the earnings and net worth of the

institution inure to the ultimate benefit of the members.

(19) “Day” means a calendar day unless otherwise expressly provided.

(20) "Debit card" means a card, plate or other device issued by a bank

or financial institution to a depositor for the purpose of drawing funds from a

deposit account, and which does not include any credit features other than (i)

provisions to maintain a minimum deposit account balance, or (ii) protection

against deposit account overdrafts.

(21) “Department” means the Vermont department of banking,

insurance, securities, and health care administration.

(22) “Deposit production office” means any place of business of a

financial institution at which information is distributed or assistance provided

in connection with the opening of new deposit accounts, provided that any

initial deposit of funds is made at the main office or an authorized branch of

the financial institution and not at such office.

(23) "Depositors" of a financial institution, solely for the purposes of

chapter 210 of this title, include the holders of its regular savings accounts,

other savings accounts, NOW accounts, certificates of deposit and other

deposits having a fixed maturity, and all other accounts except noninterest

bearing demand deposits.

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(24) "Depository institution" shall mean an insured depository

institution within the meaning of 12 U.S.C. § 1813(c)(2).

(25) "Director" means a member of the governing body of a financial

institution.

(26) “Electronic banking” means conducting the business of banking

and any closely related activity electronically.

(27) "Equity interest" means common stock, preferred stock, members'

or partners' interests or any other type of capital instrument that entitles the

holder to vote pursuant to the financial institution's organizational documents;

provided, however, that this definition shall not be deemed to prohibit or

impair the creation of nonvoting classes of stock or other ownership interests

in a financial institution.

(28) “Executive officer” shall have the same meaning as in Regulation

O of the Federal Reserve Board, 12 C.F.R. Part 215.

(29) "Federal association" means a savings and loan association, savings

bank or other financial institution organized pursuant to the Act of Congress

entitled "Home Owners' Loan Act of 1933", as amended.

(30) “Federal Deposit Insurance Corporation” or “FDIC” shall have the

same meaning as in 12 U.S.C. § 1811.

(31) “Fiduciary capacity” means every capacity specified in section

14401 of this title and every other capacity in which a financial institution acts

or may act through its trust department pursuant to chapter 204, subchapter 4

VT LEG 127907.1

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of this title, including, without limitation, trusteeship with respect to common

trust funds.

(32) "Financial institution" means any Vermont financial institution,

state financial institution and national financial institution.

(33) “Financial institution holding company" means any company

which has control over any financial institution or has control over any

company which controls any financial institution and shall include bank

holding companies as defined in subdivision (5) of this section and savings and

loan holding companies as defined in 12 U.S.C. § 1467a.

(34) "Foreign bank" means any company organized under the laws of a

foreign country, a territory of the United States, Puerto Rico, Guam, American

Samoa or the Virgin Islands that engages directly in the banking business.

"Foreign bank" includes foreign commercial banks, foreign merchant banks

and other foreign institutions that engage in usual banking activities in

connection with the banking business in the countries where the foreign

institutions are organized or operating.

(35) "Governing body" means the body that oversees the affairs of a

financial institution. The governing body may also be referred to as the "board

of directors," "board of trustees," "board of managers," "partners' committee"

or "managing partners' committee," depending upon the ownership structure of

the financial institution.

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(36) "Home state" means, for a national financial institution, the state in

which the main office of the national financial institution is deemed to be

located; for a state financial institution, the state by which the financial

institution is chartered; and for a foreign bank, the state of the United States

that the foreign bank has designated as its home state as determined in

accordance with 12 U.S.C. § 3103(c).

(37) “Host state” means a state, other than the home state of a bank or

financial institution, in which the bank or financial institution maintains or

seeks to establish and maintain a branch.

(38) "Investor" means any person who has an equity interest in a

financial institution and is entitled to vote under the institution's organizational

documents; provided, however, that this definition shall not be deemed to

prohibit or impair the ownership rights of the holders of nonvoting classes of

stock or other ownership interests in a financial institution.

(39) "Investor-owned institution" means a financial institution organized

under chapter 202 of this title.

(40) “Loan production office” means any place of business of a

financial institution at which loans or loan contracts are originated, but not

approved.

(41) "Mutual financial institution" or "mutual institution" means any

financial institution organized pursuant to chapter 203 of this title, in which

VT LEG 127907.1

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the earnings and net worth of the institution inure to the ultimate benefit of the

depositors.

(42) "Mutual holding company" means, solely for the purposes of

chapter 210 of this title, the corporation that continues in the mutual form as

the corporate parent of a stock financial institution resulting from the

reorganization of a mutual financial institution pursuant to chapter 210 of this

title.

(43) "Mutual holding company subsidiary financial institution” means,

for purposes of chapter 210 of this title, an investor-owned financial institution

organized under chapter 202 of this title to receive the assets and liabilities of a

reorganizing mutual financial institution in accordance with the provisions of

chapter 210 of this title, and which will be a subsidiary of the mutual holding

company upon consummation of a reorganization under chapter 210 of this

title.

(44) "Mutual voter" means a corporator of a mutual financial institution

or member of a cooperative financial institution.

(45) "National bank" means a commercial banking association or

limited purpose banking association organized pursuant to the Act of Congress

entitled "The National Bank Act", as amended, or any subsequent Act of

Congress relating thereto.

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(46) “National financial institution” means national bank as defined in

subdivision (45) of this section or federal association as defined in subdivision

(29).

(47) "National trust company" means a national bank with powers

generally limited to trust or fiduciary matters.

(48) "Nondepository trust company" means any Vermont financial

institution with powers generally limited to trust or fiduciary matters or any

national trust company, organized for the purpose of consolidation or

reorganization of trust operations pursuant to section 12602 of this title or

organized as a trust company under prior law.

(49) “Officer” means a person who has been given managerial or other

high-level duties by the governing body or organizational documents of the

financial institution. Depending upon the ownership structure of the

institution, an officer may include, but is not limited to, a person with the title

of chair, president, secretary, vice-president, treasurer, manager, managing

partner or partner. For organizations that are not corporate in nature, the term

secretary shall refer to the person to whom the governing body has delegated

responsibility for the custody of the minutes of the meetings of the governing

body and the equity interest holders, and for authenticating records of the

organization.

(50) "Operating subsidiary" means an entity which is owned in whole

or in part by a Vermont financial institution and whose activities are limited to

VT LEG 127907.1

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the business of banking and closely related activities and in which a financial

institution or financial institution holding company directly or indirectly holds

more than 50 percent of the equity interests, but not including any equity

interest

(A) taken in satisfaction of a debt previously contracted; or

(B) held in a fiduciary capacity.

(51) "Organizational document" means the charter, certificate of

organization, articles of incorporation, articles of association, articles of

organization, certificate of limited liability partnership, bylaws or other

internal governance documents, operating agreement, partnership agreement or

any other similar document required to be filed with and approved by the

commissioner pursuant to section 12101 or 13101 of this title.

(52) “Principal” means, with respect to a trust account, the individual or

entity to whom the financial institution ordinarily furnishes statements of

account and other customer communications regarding such trust account.

(53) "Proprietary interests" of the depositors of a mutual or cooperative

financial institution refer to the proportionate inchoate interests that such

depositors have in the net worth of such financial institution, such interests

maturing and being realized upon the financial institution's liquidation and

after the claims of all creditors (including those of depositors as creditors)

have been satisfied. "Proprietary interests" of the depositors of a subsidiary

financial institution refer to the proportionate inchoate interests that such

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depositors have in the net worth of the mutual holding company of which such

financial institution is a subsidiary, such interests maturing and being realized

upon the mutual holding company's liquidation and after the claims of all

creditors have been satisfied.

(54) “Real estate-related services" means real estate investment and

development, including maintenance and management of improved real estate;

real estate appraising; real estate settlement services; real estate brokerage

activities with respect to properties owned by a financial institution authorized

to do business in this state, a bank holding company, or subsidiaries thereof,

regardless of how the property is acquired or for what purpose; or any real

estate-related service authorized by this title or by rule or order of the

commissioner or any real estate-related service authorized for any financial

institution chartered by or otherwise subject to the jurisdiction of the federal

government.

(55) “Remote Service Unit” or “RSU” means an automated, unstaffed

banking facility, such as an automated teller machine, cash dispensing

machine, point-of-sale terminal or other remote electronic facility, at which

deposits are received, cash disbursed or money lent.

(56) “Savings and loan association,” “association,” “cooperative savings

and loan association” or "foreign building and loan association" means a

financial institution organized under the prior laws of this state that is

authorized to exercise the powers and subject to the conditions and limitations

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on those powers set forth in chapter 204 of this title.

(57) "Savings bank" means a financial institution organized under the

prior laws of this state that is authorized to exercise the powers and subject to

the conditions and limitations on those powers set forth in chapter 204 of this

title.

(58) "Service corporation" means a corporation substantially all the

activities of which consist of originating, purchasing, selling and servicing

loans and participation interests therein; or clerical, bookkeeping, accounting

and statistical or similar functions related to a financial institution or real estate

activities; or management, personnel, marketing or investment counseling

related to a financial institution or real estate activities; or any activity

authorized by the commissioner by rule or order that has not been prohibited

by federal law for service corporations.

(59) "Special purpose financial institution" means an institution

authorized and operating pursuant to chapter 202, subchapter 6 of this title or

other entity with the same or similar functions by whatever name that was

established prior to the effective date of this section.

(60) “State financial institution” means a bank, bank and trust

company, commercial bank, industrial loan corporation that is a depository

institution with insurance by the Federal Deposit Insurance Corporation,

limited or special purpose bank, special purpose financial institution, savings

and loan association, savings bank, trust company, nondepository trust

VT LEG 127907.1

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company and universal financial institution or other entity with the same or

similar functions by whatever name that is organized under the laws of a state

other than Vermont or by special act of the legislature of a state other than

Vermont and is regulated by its home state in an equivalent manner to a

Vermont financial institution; however, trust company as used in this

subdivision shall not include an entity which is regulated by its home state in

an equivalent manner to an independent trust company as defined in chapter 77

of this title. Nothing in this definition shall be deemed to be a grant of

authority to any person to operate as a financial institution unless otherwise

authorized under law.

(61) “State trust company” means a special purpose financial institution

that is organized under the laws of a state other than Vermont and whose

business is limited to trust or fiduciary powers as those powers are set forth in

chapter 204, subchapter 4 of this title.

(62) "Subsidiary" means an organization owned or controlled by a

financial institution or financial institution holding company.

(63) "Supervisory agency" means:

(A) The banking department or equivalent agency of a state;

(B) The Federal Deposit Insurance Corporation;

(C) The National Credit Union Administration;

(D) The Federal Reserve Board;

(E) The Office of Thrift Supervision;

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(F) The Office of the Comptroller of the Currency;

(G) Any successor agency to any of the agencies enumerated in this

section.

(64) "Universal financial institution" means an investor-owned

institution or a mutual or cooperative financial institution authorized by its

organizational documents to exercise all the powers granted in chapter 204 of

this title and includes any bank, bank and trust company, commercial bank,

savings bank, savings and loan association established prior to the effective

date of this section, pursuant to this title or by special act of the legislature.

(65) “Vermont financial institution” means a special purpose institution

or universal financial institution organized under the laws of the state of

Vermont.

Subchapter 2. Business Days and Emergencies

§ 11201. BUSINESS DAYS

(a) For purposes of this title, unless otherwise provided under other state or

federal law applicable to a Vermont or state financial institution which is a

depository institution, a business day is a calendar day other than the

following:

(1) Saturday and Sunday;

January 1, New Year's Day;

The 3rd Monday in January, Martin Luther King, Jr. Day;

February 12, Lincoln’s birthday;

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The 3rd Monday in February, President’s Day;

The first Tuesday in March, Town Meeting Day;

The last Monday in May, Memorial Day, but if the United States

government designates May 30 as the date of observance of Memorial Day,

then May 30;

July 4, Independence Day;

August 16, Bennington Battle Day;

The first Monday in September, Labor Day;

The 2nd Monday in October, Columbus Day;

November 11, Veterans' Day;

The 4th Thursday in November, Thanksgiving Day; and

December 25, Christmas Day.

(2) A legal holiday which falls on a Saturday may be observed on the

preceding Friday and a legal holiday which falls on a Sunday may be observed

on the following Monday.

(b) A Vermont financial institution may choose to remain open or to close

any of its banking offices on any of the days enumerated in subsection (a) of

this section.

§ 11202. BANKING DAY

(a) Each Vermont and state depository institution shall be open not less

than five banking days each week, except for the days enumerated in

subsection 11201(a) of this title, or except as otherwise provided in this

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chapter.

(b) In addition to the hours of each banking day established by an

institution under subsection (a) of this section, a Vermont or state depository

institution may, at its discretion, establish days and hours for its offices,

including opening offices for business on days that are not defined as business

days in section 11201 of this title. The financial institution's governing body is

responsible for determining the scope of operations of each branch, including

the services to be provided and the days and hours of operation.

(c) A Vermont or state depository institution shall post the days and hours

of operation at or near the public entrances to its banking offices and shall

provide customers with reasonable advance notice of reduction in services or

hours of operation.

(d) Any act authorized, required or permitted to be performed at, by or

with respect to any Vermont or state depository institution on a day not

defined as a business day or on a day the institution is closed pursuant to

section 11204 or 11205 of this title, may be performed on the next succeeding

business day and liability or loss of rights of any kind to such financial

institution shall not result from this delay.

§ 11203. SPECIAL HOURS

In addition to the hours of each banking day under subsection 11202(a) of

this title, a Vermont or state depository institution may have special hours on

banking or other than banking days when it is open in a limited capacity for

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certain definite and stated transactions or purposes only, constituting

substantially less than all of its banking functions. A copy of such schedule of

special hours shall be filed with the commissioner. The payment, certification,

or acceptance of a check or other negotiable instrument, or any other

transaction by such financial institution shall be valid, notwithstanding it was

done or performed during such special hours on other than a banking day. A

Vermont or state depository institution with special hours on other than a

banking day shall not constitute such day a "banking day", for the purpose of

notice, presentment, protest, notice of protest or the time requirements for any

act or action or notice to perfect or preserve rights accorded under Article 4 of

Title 9A.

§ 11204. CLOSING FOR CAUSE

A Vermont or state depository institution may temporarily close any of its

offices for reasons that include but are not limited to good cause, extreme

weather conditions and community events. If a Vermont or state depository

institution temporarily closes any of its offices for all or any part of a banking

day, the institution shall post a conspicuous notice of the closing at all points

of public access to the closed offices. A closing may not become effective

until such notice is posted at the office to be closed. Posting this notice

relieves the institution from liability for failure to perform any of the business

of the financial institution at the closed offices. The commissioner may, by

adopting rules, establish standards governing the form and content of the

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notice required under this section, and may require dissemination of the notice

of closing by any other reasonable means.

§ 11205. EMERGENCY CLOSING BY FINANCIAL INSTITUTION

(a) If an emergency arises or is so imminent and immediate as to interfere

with or threaten the conduct of normal banking transactions or the safety and

welfare of a Vermont or state depository institution's plant, assets or personnel,

the financial institution officer or official in charge of any office open to the

public may determine not to open the office so threatened or close the same, if

open. The financial institution shall notify the commissioner of the emergency

closing, as soon as reasonably possible. In no case, however, shall the office

or offices closed under this section remain closed for more than two

consecutive business days commencing the day following closure, except as

otherwise provided by law, unless the governor or commissioner shall

expressly authorize and sanction the same.

(b) An emergency closing pursuant to this section including the hours of

any extension sanctioned by the governor or commissioner shall be lawful and

the time of such closing, including any partial day before a closing, shall be

considered a holiday and not a banking day. Nevertheless, the transaction of

any banking business shall be valid and have the same effect as if performed

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during special hours on other than a banking day in accordance with section

11203 of this title.

Subchapter 3. Records

§ 11301. PRESERVATION OF RECORDS

(a) A Vermont financial institution, and a state financial institution with a

branch in this state, shall keep those books, accounts and records relating to all

of its transactions that will enable the commissioner to ensure full compliance

with the laws of this state. Each such financial institution shall retain its

business records for such periods as prescribed by the commissioner by

regulation.

(b) Any such financial institution may dispose of any record which has

been retained for the period prescribed by or in accordance with the regulation

for retention of records of its class, and thereafter shall be under no duty to

produce the record in any action or proceeding.

(c) Records required to be preserved and retained by law or regulation may

be maintained in paper, photograph, microprocess, magnetic, digital,

mechanical or electronic media, or in or by any other information storage

device or process which forms a durable medium providing reasonable

assurances against tampering and degradation of any reproduction of the

original record, and which can be accurately transferred to paper in a legible

written form within a reasonable time. Records maintained in a computer-

based format shall be archival in nature only, so as to preclude the possibility

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of alteration of the content of the record by computer once the record has been

transferred to that format. Any record reproduced from a record maintained in

compliance with this subsection shall have the same force and effect as the

original thereof and may be admitted in evidence equally with the original.

Subchapter 4. Reports

§ 11401. FINANCIAL REPORTS

(a) The commissioner shall require each Vermont financial institution to

submit at least quarterly in each calendar year a report of its condition in such

manner and as of such dates as the commissioner may fix. Only summary

reports and examinations shall be required with respect to fiduciary activities

which are subject to court accountings. The commissioner may accept reports

filed with other regulators for purposes of the requirements of this section.

(b) The commissioner may require special reports to include special

information as the commissioner may direct.

§ 11402. INTERNAL AUDITS

(a) The governing body shall cause internal audits of the Vermont financial

institution to be performed. The internal audit shall be reported in writing to

the governing body at least once in six months if made by a committee of the

governing body and at least once a year if made by a certified or registered

public accountant. Any committee of the governing body shall consist of at

least three persons. At the request of the commissioner a copy of the report

shall be made available to the commissioner.

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(b) Prior to declaration of any dividend or other distribution, the governing

body of a Vermont financial institution shall determine that the institution will

continue to meet the capital requirements under section 14104 of this title as

established by the commissioner after payment of the proposed dividend or

other distribution.

§ 11403. PERIODIC REPORTS FROM STATE FINANCIAL

INSTITUTIONS WITH A BRANCH, OFFICE OR ACTIVITY IN

THIS STATE

(a) The commissioner may require periodic reports from any state financial

institution that has established and maintains a branch in this state pursuant to

section 15202 of this title.

(b) The commissioner may require periodic reports from any state financial

institution that has established and maintains an office or conducts an activity

pursuant to section 15204 of this title.

(c) Any reporting requirements prescribed by the commissioner under this

section shall be:

(1) consistent with the reporting requirements applicable to financial

institutions incorporated under the laws of this state; and

(2) appropriate for the purpose of enabling the commissioner to carry

out his or her responsibilities under the laws relating to branching, offices or

activities.

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§ 11404. REPORTS REQUIRED UNDER CONSUMER PROTECTION

CHAPTER

A financial institution shall file with the commissioner reports as required

by chapter 200 of this title on the following:

(1) interest rates;

(2) credit cards interest rates and charges;

(3) community reinvestment activities; and

(4) basic banking.

§ 11405. EXEMPTION FROM ANNUAL REPORT TO SECRETARY OF

STATE

Vermont financial institutions shall not be required to make any annual

report to the secretary of state.

Subchapter 5. Examinations

§ 11501. EXAMINATIONS

(a) The commissioner shall conduct a regular examination of the condition

of each Vermont financial institution at least once every three years or more

frequently as the commissioner determines it to be prudent.

(b) The commissioner may at any time conduct a special examination or

may expand the scope of any regular examination. An entity examined

pursuant to this subsection shall be responsible for examination fees and

expenses provided in section 18 of this title and collected as provided in

subsections (c) and (e) of section 19 of this title.

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(c) The commissioner shall be given access to all the files, books, accounts,

securities and assets of the financial institution and any person under contract

with it to perform services for the financial institution that the commissioner

deems material to the financial condition of the financial institution and shall

be afforded every reasonable facility for making an examination of the affairs

of the financial institution and such person under contract.

(d) Whenever the commissioner deems it necessary, the commissioner may

examine any company, the majority of the stock of which is owned by a

Vermont financial institution, or which is found by the commissioner to be

controlled by a Vermont financial institution. In addition, whenever the

commissioner deems it necessary in the conduct of the exercise of the

commissioner’s supervisory authority over a financial institution, the

commissioner may review the records of any person that controls a Vermont

financial institution. In furtherance of the conduct of the exercise of the

commissioner's supervisory authority over a Vermont financial institution, to

the extent not prohibited by federal law, and upon the request of the

commissioner, a person that controls a financial institution shall furnish to the

commissioner copies of reports filed with the Federal Reserve Board or the

Office of Thrift Supervision. Such person shall also consent to the request by

the commissioner to the Federal Reserve Board or the Office of Thrift

Supervision for any other information pertaining to such person. The

commissioner shall not disclose any information obtained pursuant to this

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section which is treated as confidential by the Federal Reserve Board or the

Office of Thrift Supervision. Nothing in this section shall be construed to

grant any additional examination, supervisory or regulatory authority over any

person that controls a Vermont financial institution.

§ 11502. CONFIDENTIALITY OF INVESTIGATION AND

EXAMINATION REPORTS

(a) Regardless of source, all records of investigations, including

information pertaining to a complaint by or for a consumer, and all records

and reports of examinations by the commissioner, whether in the possession of

a supervisory agency or another person, shall be confidential and privileged,

shall not be made public, and shall not be subject to discovery or introduction

into evidence in any private civil action. No person who participated on behalf

of the commissioner in an investigation or examination shall be permitted or

required to testify in any such civil action as to any findings,

recommendations, opinions, results or other actions relating to the

investigation or examination. The commissioner may, in his or her discretion,

disclose or publish or authorize the disclosure or publication of any such

record or report or any part thereof, to civil or criminal law enforcement

authorities for use in the exercise of such authority's duties, in such manner as

the commissioner may deem proper.

(b) For the purposes of this section, records of investigations and records

and reports of examinations shall include joint examinations by the

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commissioner and any other supervisory agency. Records of investigations

and reports of examinations shall also include records of examinations and

investigations conducted by:

(1) any supervisory agency; and

(2) the supervisory agency of any foreign government with jurisdiction

over any financial institution,

when such records are considered confidential by such agency or foreign

government and the records are in the possession of the commissioner.

§ 11503. EXAMINATIONS BY FEDERAL REGULATORY AGENCIES;

DEPARTMENTAL PARTICIPATION

Where an examination is normally conducted by the department jointly

with a federal regulatory authority, the commissioner, at such times as the

commissioner deems necessary or appropriate because of departmental fiscal

restraints, may reduce or eliminate the department's participation in such

examination. Where the commissioner determines such reductions are

necessary or appropriate, the commissioner is authorized to rely on the

examination report of the federal regulatory authority as the basis for

exercising his or her powers and discharging his or her responsibilities under

this title.

§ 11504. EXAMINATIONS; COOPERATIVE AGREEMENTS

(a) To the extent consistent with subsection 11505(a) of this title, the

commissioner may make such examinations of any branch established and

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maintained in this state pursuant to chapter 205 of this title by a state financial

institution as the commissioner may deem necessary to determine whether the

branch is being operated in compliance with the laws of this state and in

accordance with safe and sound banking practices. The provisions of sections

18, 19, 11501, 11502 and 11503 of this title shall apply to such examinations.

(b) The commissioner may enter into contracts with any financial

institution supervisory agency that has concurrent jurisdiction over a Vermont

financial institution or a state financial institution maintaining a branch,

agency, office or location in this state to engage the services of such

supervisory agency's examiners, or to provide the services of the

commissioner's examiners to such supervisory agency.

(c) The commissioner may enter into joint examinations or joint

enforcement actions with other supervisory agencies having concurrent

jurisdiction over any branch, agency, office, or location established and

maintained in this state by a state financial institution or any branch, agency,

office, or location located in any host state that is established and maintained

by a Vermont financial institution; provided, that the commissioner may at any

time take such actions independently if the commissioner deems such actions

to be necessary or appropriate to carry out his or her responsibilities under this

title or to ensure compliance with the laws of this state; but provided further,

that, in the case of a financial institution that has its principal place of business

in a state other than this state, the commissioner shall recognize the exclusive

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authority of the home state regulator over organizational governance matters

and the primary responsibility of the home state regulator with respect to

safety and soundness matters.

§ 11505. COOPERATIVE AND OTHER AGREEMENTS

(a) The commissioner may enter into cooperative, coordinating and

information - sharing agreements with any other governmental agency or any

organization affiliated with or representing one or more governmental agencies

with respect to the periodic examination or other supervision of any activity,

branch, agency, office or location in this state of a state financial institution, or

any activity or branch of a Vermont financial institution located in any host

state. Such agreements may be used to resolve conflicts arising from

inconsistent regulatory requirements and to specify the manner in which any

application process under section 15201 or 15202 of this title shall be

coordinated.

(b) Agreements under this section may also be entered with nonbank

regulatory agencies on matters affecting financial institutions organized or

doing business in this state.

Subchapter 6. Enforcement

§ 11601. ENFORCEMENT POWERS OF COMMISSIONER

(a) The commissioner may:

(1) Restrict the withdrawal of deposits from a Vermont financial

institution, a state financial institution or a branch of a foreign bank licensed

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under this title when the commissioner finds that extraordinary circumstances

make the restriction necessary for the proper protection of depositors in the

affected institution.

(2) Order the holders of equity interests in a Vermont financial

institution or financial institution regulated under this title to refrain from

voting on any matter if the commissioner finds that the order is necessary to

protect the institution against reckless, incompetent or careless management,

safeguard the funds of depositors, or prevent the willful violation of this act or

of any lawful order issued under it, and in such a case the equity interests of

such a holder shall not be counted in determining the existence of a quorum or

a percentage of the outstanding interests necessary to take any action by the

financial institution.

(3) Order any person to cease violating this title, a lawful regulation or

order of the commissioner issued under it or to cease engaging in any unsafe

or unsound practice.

(4) Except as provided in subdivision (5) of this subsection, impose an

administrative penalty of not more than $15,000.00 for each violation of this

title, a lawful regulation or order of the commissioner issued under it, upon

any person:

(A) who knowingly violates this title or a lawful regulation or order

issued under it;

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(B) who has knowingly engaged or participated in any materially

unsafe or unsound practice in connection with a financial institution; or

(C) who has knowingly committed or engaged in any act, omission,

or practice which constitutes a breach of fiduciary duty to the financial

institution, including, but not limited to violations of section 14110 of this

title.

(5) Impose an administrative penalty of not more than $1,000.00 per

day on any person who fails without good cause to file any report or other

filing under chapters 73, 77 and 200 through 210 of this title when due.

(6) Remove from a Vermont financial institution or state financial

institution regulated under this title any person:

(A) who knowingly violates this title or a lawful regulation or order

issued under it;

(B) who is convicted of a crime involving dishonesty;

(C) who has knowingly engaged or participated in any materially

unsafe or unsound practice in connection with the financial institution; or

(D) who has knowingly committed or engaged in any act, omission,

or practice which constitutes a breach of fiduciary duty to the financial

institution.

(b) In determining the amount of any administrative penalty assessed

pursuant to this section, the commissioner shall consider the following factors:

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(1) the appropriateness of the administrative penalty with respect to the

financial resources and good faith of the person or financial institution

charged;

(2) the gravity of the violation or practice;

(3) the history of previous violations or practices of a similar nature;

(4) the economic benefit, if any, derived by any person from the

violation or practice;

(5) whether the financial institution has suffered or probably will suffer

financial loss or other damage;

(6) whether the interest of depositors could be seriously prejudiced by

such violation, practice or breach of fiduciary duty; or

(7) other factors as justice may require.

(c) The commissioner shall provide notice of any enforcement order

proposed pursuant to this section and the grounds therefor by mail to the

financial institution and to any affected person. The financial institution or

any person so served may, within 30 days of service on the financial

institution, request that a hearing be held by the commissioner. If no hearing

is requested, the proposed order shall become final 30 days after service on the

financial institution. The provisions of chapter 25 of Title 3 shall govern any

hearing held by the commissioner under this section. An appeal under this

section shall be filed within 30 days of the date of the commissioner’s

decision, and shall be to the Washington superior court.

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(d) The hearing on a removal order shall be private unless the

commissioner determines that a public hearing is necessary to protect the

public interest. If it is deemed necessary to assure the continued safety and

soundness of the financial institution, the commissioner may order an

immediate suspension of any person pending completion of further

administrative proceedings on his or her removal.

(e) An executive officer, director or holder of principal equity interests

who fails to comply with a standard established by subsection 14110(a) of this

title shall be subject to the civil penalties established by 12 U.S.C. sections

504, 505 and 506, as amended, as if he or she had violated Regulation O

directly.

§ 11602. POWER OF COMMISSIONER TO IMPOSE CORRECTIVE

ACTION

(a) The commissioner may, in addition to any other power exercisable by

the commissioner under the provisions in this title, require a Vermont financial

institution or state financial institution with a branch in this state to:

(1) Maintain its accounts in accordance with such regulations as he or

she may prescribe having regard to the size of the organization;

(2) Observe methods and standards which he or she may prescribe for

determining the value of various types of assets;

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(3) Charge off or sell the whole or part of an asset which was acquired

in violation of the financial institutions’ investment policy or an order of the

commissioner;

(4) Write down an asset to its market value;

(5) Record liens and other interests in property;

(6) Obtain a financial statement from a borrower to the extent that the

financial institution can do so;

(7) Obtain insurance against damage to real estate taken as security;

(8) Search, or obtain insurance of, the title to real estate taken as

security; and

(9) Maintain adequate insurance against such other risks as the

commissioner may deem necessary and appropriate for the protection of

depositors and the public.

(b) Any order of the commissioner issued under this section shall be

subject to subsection 11601(c) of this title.

§ 11603. CRIMINAL PENALTIES

(a) It shall be a criminal offense, punishable by a fine of not more than

$1,000.00 or imprisonment of not more than one year, or both, for any person

to violate any existing order of the commissioner, or, after receipt of a removal

order, or an order assessing a penalty, to perform any duty or exercise any

power of or on behalf of any financial institution until the penalty has been

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satisfied, or otherwise satisfactorily resolved between the parties, or the

removal or penalty order is vacated by the commissioner or by a court of

competent jurisdiction.

(b) It shall be a criminal offense, punishable by a fine of not more than

$10,000.00 or imprisonment of not more than one year, or both, for any person

to willfully violate any existing order of the commissioner, or, after receipt of

a removal order, or an order assessing a penalty, to willfully perform any duty

or exercise any power of or on behalf of any financial institution until the

penalty has been satisfied, or otherwise satisfactorily resolved between the

parties, or the removal or penalty order is vacated by the commissioner or by a

court of competent jurisdiction.

(c) An executive officer, director or holder of a principal equity interest of

a financial institution subject to the laws of this state under this title who, in

violation of a standard established by section 14110 of this title, willfully

misapplies any of the moneys, funds or credits of such financial institution, or

any of the moneys, funds, assets or securities entrusted to the care or custody

of such financial institution, or to the care or custody of such executive officer,

director or holder of a principal equity interest, shall be fined not more than

$100,000.00 or imprisoned not more than five years, or both.

§ 11604. INDEMNIFICATION

A financial institution shall not indemnify any person for any penalty or

fine imposed under this title.

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§ 11605. COMMISSIONER’S COORDINATION OF ENFORCEMENT

AND CORRECTIVE ACTION WITH HOME STATE

The commissioner shall promptly give notice to the home state supervisory

agency of each enforcement or corrective action proposed to be undertaken

against a state financial institution and, to the extent practicable, shall consult

and cooperate with the home state regulator in pursuing and resolving such

enforcement action.

Subchapter 7. Application Process

§ 11701. APPLICATION OF SUBCHAPTER

(a) An application required to be filed under chapters 202, 203, 206, 207 or

210 of this title for the approval of the commissioner, including but not limited

to an application for a charter, merger, acquisition, conversion or other similar

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request, shall be submitted to and considered by the commissioner in

accordance with the provisions of this subchapter.

(b) An application required to be filed under chapter 204 or 205 of this title

for the approval of the commissioner shall be filed on a form prescribed by the

commissioner and considered in accordance with the standards in section

11703 of this title. If the commissioner finds that the application promotes the

general good, a certificate of general good may be issued in summary fashion.

No further approval shall be required.

(c) Nothing in this subchapter shall prevent the commissioner from issuing

a certificate of approval for any application that the commissioner finds may

be approved as filed without further process.

(d) Notwithstanding the provisions of subsections (a), (b) and (c) of this

section, a financial institution shall notify the commissioner of its intention to

amend its organizational documents and may proceed as provided in the notice

unless the commissioner objects in writing within 30 days; provided, however,

no advance notice for a bylaw amendment is required. If the commissioner

objects, the financial institution shall file an application in accordance with this

subchapter.

§ 11702. APPLICATIONS

(a) Upon receipt of an application subject to this section in the form

prescribed by the commissioner, the commissioner shall determine whether the

application is complete. The commissioner shall have the power to request

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modifications in, and additional information relating to, any application prior

to certifying its completeness.

(b) As soon as the application is deemed substantially complete, the

commissioner may order the applicant to provide notice of the application in

the manner and form as he or she may prescribe.

(c) Any person may submit written comments on the proposed application

to the commissioner. If the commissioner orders publication or other notice to

be given, he or she shall establish a deadline for receipt of written comments

on the application which shall be no less than five business days following the

completion of publication or other notice. The commissioner may, but shall

not be compelled to, consider written comments filed after the close of the

written comment period. All comments shall be maintained in the public files

of the department.

(d) Applications accepted by the commissioner shall be placed on public

file at the office of the department, and shall be made available for public

inspection or copying, at cost; provided that any information that is exempt

from public inspection under Title 1 chapter 5 shall be removed before public

inspection of the file is permitted.

§ 11703. HEARINGS ON APPLICATIONS; DECISIONS; GENERAL

GOOD STANDARD

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(a) The commissioner may conduct public hearings on any application

subject to this subchapter in his or her discretion.

(b) After consideration of all relevant matters presented in the application,

in any written comments, in a department investigation and at any hearing, the

commissioner shall issue a decision approving or disapproving the application.

(c) If the commissioner’s decision is favorable, a certificate of general

good, if required and one has not already been issued, and a certificate of

approval shall issue with the decision. If the commissioner’s decision is not

favorable, the commissioner shall provide the reasons for the disapproval.

(d) No financial institution shall commence operations, open a branch, or

effectuate a merger, share exchange, acquisition, conversion, reorganization,

dissolution or other similar request without first securing a certificate of

approval.

(e) The commissioner shall approve an application if he or she determines

that the proposed transaction promotes the general good of the state of

Vermont.

(f) Bases for meeting general good standards. In determining whether the

proposed transaction promotes the general good of the state of Vermont, the

commissioner may consider the following factors:

(1) The character, ability and overall sufficiency of the management,

including directors, or organizers, corporators and incorporators of a new

financial institution;

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(2) The adequacy of capital and financial resources of the institution or

institutions concerned;

(3) The competitive abilities and future prospects of the institution or

institutions concerned;

(4) The convenience and needs of the market area or areas to be served;

(5) The competitive effect of the proposed transaction on the price,

availability, and quality of services in the market area or areas to be served;

(6) The effect on the applicant’s customers;

(7) If an existing financial institution, whether the proposed transaction

contributes to the financial strength and success of the financial institution or

institutions concerned;

(8) The fairness and equities involved in any conversion, merger,

consolidation or acquisition; and

(9) Such other aspects of the proposed transaction as the commissioner

deems advisable.

CHAPTER 202. ORGANIZATION AND MANAGEMENT

OF INVESTOR-OWNED FINANCIAL INSTITUTIONS

Subchapter 1. Organization and Commencing Business

§ 12101. APPLICATION

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(a) Application. A corporation, limited liability company, limited

partnership, limited liability partnership or the organizers of the entity shall

file with the commissioner an application for permission to conduct business

as an investor-owned financial institution. The application shall contain the

following information:

(1) The name by which the financial institution is to be known;

(2) The purpose for which it is to be formed, including whether a

certificate of general good is sought to conduct business as a universal

financial institution or special purpose financial institution;

(3) The city or town within this state where the institution's principal

office is to be located;

(4) The proposed amount of its initial capital;

(5) The names, addresses and occupations of the organizers of the

institution, together with a statement as to the character, reputation and

financial responsibility and competence of such persons;

(6) Documents which set forth the proposed institution's organizational

structure and business plan, including but not limited to:

(A) A copy of the organizational documents of the applicant.

(B) The names, addresses and occupations of the organizers of the

institution and the names, addresses and occupations of the directors who will

be voted on at the initial meeting, together with a statement as to the character,

reputation, and financial responsibility of each. A list of the names, addresses

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and official positions of the persons who are to be responsible for the conduct

of the affairs of the applicant, including all members of the governing body,

any committees and the executive officers; a statement as to the character,

reputation, financial responsibility and competence and experience in banking

and business of such persons and such disclosure and conflict of interest

statements as required.

(C) A financial plan which includes a three - year projection of the

initial operating results anticipated and a description of the proposed method

of marketing the plan, and a statement as to the sources of initial capital as

well as any other sources of funding.

(7) The reasons that an institution of the type specified in subdivision

(2) of this subsection is needed in the proposed location.

(8) Copies of any application filed with any other supervisory agency.

(9) Any additional information the commissioner may require. The

commissioner may waive any requirements that do not apply.

(b) Publication of Notice. After determining that the application required

by subsection (a) of this section is complete, the commissioner shall advise the

organization or the organizers of the entity to publish or give any notice that

will be required by the commissioner under section 11702 of this title.

§ 12102. ISSUANCE OF CERTIFICATE OF GENERAL GOOD; REFUSAL

TO ISSUE CERTIFICATE OF GENERAL GOOD

(a) Certificate of general good. The commissioner shall determine whether

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or not a certificate of general good shall be granted to organize a financial

institution under this chapter and shall make the decision in accordance with

the requirements of chapter 201, subchapter 7 of this chapter.

(b) Conditions. A grant of a certificate of general good may be made

subject to such terms and conditions as the commissioner determines

necessary. The certificate of general good shall be submitted to the secretary

of state with the organizational documents that are required to be filed with the

secretary of state. The conditions may include, but are not limited to,

conditions regarding the organizational form of the financial institution under

this chapter.

(c) Effect of refusal to issue certificate of general good. If the

commissioner refuses to issue a certificate of general good, a new application

may be filed by the applicant after one year from the date of the refusal.

§ 12103. REQUIREMENTS TO COMMENCE BUSINESS; PAID-IN

MINIMUM CAPITAL; EXAMINATION; CERTIFICATE OF

AUTHORITY

(a) At the time the certificate of general good is issued, the commissioner

shall issue an order granting permission to organize which shall set forth the

minimum amount of paid-in capital that the financial institution will be

required to have to begin business, which in no event shall be less than

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$250,000.00.

(b) The commissioner may set different minimum paid-in capital

requirements for different types of financial institutions, and in determining

such amounts may consider such factors as the population of the area where

the proposed financial institution is to be located, competition among financial

institutions in that locale, the projected volume and type of business to be

conducted, the inherent risks in the business to be conducted and the need to

protect depositors and other creditors of the institution.

(c) All capital contributions shall be in the form of cash, unless otherwise

approved by the commissioner.

(d) An organization that has received a certificate of general good to

conduct business as a financial institution may not commence business until

the commissioner certifies in writing that the required minimum capital has

actually been paid in and that all other terms and conditions contained in the

certificate of general good have been satisfied.

(e) When the entire paid-in capital of a financial institution has been

received by the financial institution, a complete list of the investors with the

name and post office address of each and the portion of ownership interest

held by each shall be filed with the commissioner, who shall thereupon cause

an examination to be made. If, after the examination, it appears to the

commissioner that the required capital has been paid in, the commissioner

shall issue a certificate under seal authorizing the financial institution to

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commence business, and this certificate shall be filed with the secretary of

state. A financial institution shall not commence business until that certificate

is issued and filed. In the case of a violation of this provision, the officers and

directors assenting thereto shall be personally liable for all debts incurred

before the certificate is issued and filed.

§ 12104. FAILURE TO COMMENCE BUSINESS

(a) If a financial institution authorized to commence business under this

chapter does not commence business within two years from the filing of its

organizational documents in the office of the secretary of state, its right to do

business shall lapse.

(b) Notwithstanding the time limitation in subsection (a) of this section, the

commissioner may extend the period in which business shall be commenced

for a period not to exceed six months upon written application by the

institution setting forth the reasons for the extension filed before the expiration

of the time period established in subsection (a) of this section. If an extension

is granted by the commissioner, the commissioner shall notify the secretary of

state.

§ 12105. CONTINUANCE OF ORGANIZATION

The organizational documents shall provide for continuance of a financial

institution despite the death, dissolution, departure or incapacity of any

investor.

Subchapter 2. Governing Body

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§ 12201. MEETINGS

(a) The governing body of a Vermont financial institution shall meet at

least monthly, except as otherwise provided in this section. A governing body

that has appointed an executive committee which meets during the months in

which the governing body does not meet, shall meet at least six times a year,

including once each quarter. Minutes of executive committee meetings shall

be ratified by the governing body.

(b) At least once each month and at each regular meeting, the treasurer

shall prepare a financial statement showing the condition of the financial

institution, which shall be recorded in a book kept for that purpose, and at all

times shall be open to the inspection by the governing body and the

commissioner. A record shall be made at each meeting of the transactions of

the governing body and the names of the directors present.

(c) Conveyances, leases, assignments, releases, transfers of stock

certificates and registered bonds, and all other written instruments authorized

or required by law or vote of the directors, may be executed by an executive

officer or other official authorized and empowered by the internal governance

documents of the institution or by a vote of the governing body which is duly

recorded in the minutes of the institution.

Subchapter 3. Bonds and Insurance

§ 12301. BONDS AND INSURANCE

(a) The governing body of a Vermont financial institution shall direct and

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require good and sufficient fidelity bonds on all active officers, employees and

agents, whether or not they draw salary or compensation, which bonds shall

provide for indemnity to the financial institution on account of any losses

sustained by it as the result of any dishonest or fraudulent act committed or

any omission by them acting independently or in collusion or combination

with any person or persons. The bonds may be in individual, schedule or

blanket form, and the premiums therefor shall be paid by the financial

institution.

(b) The governing body shall also direct and require suitable insurance

protection to the financial institution against burglary, robbery, theft and other

similar insurable hazards to which the financial institution may be exposed in

the operation of its business on the premises or elsewhere.

(c) The governing body shall be responsible for prescribing at least once in

each year the amount or penal sum of those bonds or policies and the sureties

or underwriters thereon, after giving due and careful consideration to all

known elements and factors constituting the risk or hazards. That action shall

be recorded in the minutes of the governing body. The commissioner may

require a financial institution to furnish an attested duplicate of the bonds and

policies required by this section.

(d) The commissioner may require a Vermont financial institution to

secure additional bonds or insurance.

Subchapter 4. Dividends, Distributions and Withdrawals

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§ 12401. LIMITATION; FORM

(a) A Vermont financial institution may not authorize dividends,

distributions or withdrawals that reduce capital below the higher of the amount

required under the certificate of general good or section 14104 of this title

without the prior approval of the commissioner.

(b) Dividends, distributions, and withdrawals shall be in cash or as

otherwise authorized by the commissioner.

Subchapter 5. Voluntary Dissolution

§ 12501. VOLUNTARY DISSOLUTION; PROCEDURE; CRITERIA

(a) An investor-owned Vermont financial institution shall submit to the

commissioner for approval a plan of dissolution or wind-up prior to filing its

articles of dissolution under Title 11A or winding up its business under Title

11. The plan shall contain the following items:

(1) Pro forma financial statements that demonstrate that the financial

institution will, upon dissolution or during its wind-up, discharge or make

provision for discharging its liabilities;

(2) A method to distribute all remaining assets among its investors

according to their interests;

(3) The process of and resources dedicated to the oversight of the

dissolution or winding up of the financial institution;

(4) The plan to transfer to any of its affiliates or any other financial

institution its deposit, loan and trust accounts, including escheat of all

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remaining deposit accounts to the state of Vermont;

(5) The procurement or continuation of insurance or the provision of

other security as the commissioner deems necessary;

(6) An acknowledgment that, before the articles of dissolution are filed

or the wind-up begins, there will be no distributions or equity interest

repurchases without the commissioner's prior written approval; and

(7) Such other information or assurances as the commissioner may

require.

(b) Upon approval of the plan, the financial institution may file its articles

of dissolution under Title 11A and proceed with its dissolution or may proceed

with the wind-up and dissolution under Title 11, as provided by law.

(c) During its wind-up, a dissolved or dissolving entity shall not transact

any further banking business after its deposit insurance has terminated.

Subchapter 6. Special Purpose Financial Institutions

§ 12601. CERTAIN SPECIAL PURPOSE FINANCIAL INSTITUTIONS

AUTHORIZED

(a) In addition to universal financial institutions authorized under

subchapters 1-5 of this chapter and under chapter 203 of this title, special

purpose financial institutions may be established in this state, subject to the

conditions and limitations imposed under this subchapter.

(b) Any person who, directly or indirectly, controls a special purpose

financial institution established under this subchapter shall be subject to the

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supervision of the commissioner, unless that person is a bank holding company

regulated by the Federal Reserve Board or savings and loan holding company

regulated by the director of the Office of Thrift Supervision. In exercising the

supervisory powers under this subchapter, the commissioner may require such

examination and reports, including copies of reports filed with federal

regulatory agencies, of the special purpose financial institution and any person

that controls it as the commissioner deems necessary to protect the interests of

depositors, borrowers or other parties in interest.

(c) Any material change in a business plan by a special purpose financial

institution authorized to do business under this subchapter shall be submitted

to the commissioner for prior approval, unless the provisions of this title

require the financial institution to file an application with the commissioner.

§ 12602. NONDEPOSITORY TRUST COMPANIES

(a) Except as provided in this section or to the extent inconsistent with this

section or with the general purpose of a nondepository trust company, a

nondepository trust company has all the powers, duties and obligations of a

financial institution under this title. In the exercise of its powers and the

conduct of its business, the nondepository trust company shall be subject to all

the same fiduciary duties and obligations as a financial institution operating a

trust department under chapter 204, subchapter 4 of this title.

(b) A nondepository trust company shall not have the power to solicit,

receive or accept money or its equivalent on deposit as a regular business

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within the meaning of subdivision 11101(11) of this title; shall not be required

to obtain federal deposit insurance; shall not have the power to lend money,

except in transactions reasonably related to and deriving from its service as

fiduciary or its conduct of trust business; and shall not conduct any other

business except that which is incidental to its trust business and which is

otherwise consistent with the exercise of its fiduciary duties.

(c) No nondepository trust company, other than a national trust company

authorized to engage in a trust business in this state, shall engage in a trust

business in this state without first obtaining a certificate of authority from the

commissioner pursuant to this section and sections 11703, 12103 and 14403 of

this title.

(d) Notwithstanding section 15101 of this title, without the prior approval

of the commissioner, a nondepository trust company that is authorized to do

business in this state may open and occupy a trust office at any one or more

locations in this state at which its financial institution holding company parent

or any affiliate financial institution has an office, whether a main office or a

branch office.

(e) Any other trust office of a nondepository trust company organized as a

Vermont financial institution shall be established in this state only with the

prior approval of the commissioner as provided in subsection 11701(c) of this

title.

(f) The establishment of trust offices by a nondepository trust company

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organized as a national trust company shall be governed by applicable federal

law.

(g) The organizational documents of a nondepository trust company

organized as a Vermont financial institution that are filed with the secretary of

state shall contain the following statement: “This organization is subject to the

Vermont law on nondepository trust companies, 8 V.S.A. § 12602, and does

not have the power to solicit, receive or accept money or its equivalent on

deposit or to lend money except for lending reasonably related to and deriving

from its service as fiduciary or its conduct of trust business.” This statement in

the organizational documents of a nondepository trust company may not be

amended.

(h) All of the outstanding equity interests of a nondepository trust company

shall be owned directly, or indirectly through one or more subsidiaries, by a

financial institution holding company.

(i) A nondepository trust company organized as a Vermont financial

institution shall maintain minimum capital in accordance with this chapter and

section 14104 of this title, except the commissioner may by order or rule apply

standards for the minimum capital required for a nondepository trust company

that are different from those requirements for a universal financial institution

organized under this title, based on the nature of the business.

(j) Funds received or held by a nondepository trust company organized as a

Vermont financial institution while awaiting investment or distribution shall

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not be used by the nondepository trust company or any affiliate financial

institution in the conduct of its business or deposited in such financial

institution, except to the same extent, and subject to the same conditions and

limitations, as would be otherwise permitted under this title if the

nondepository trust company and affiliated financial institution were one and

the same corporate entity. The account shall be held either in the name of the

trust to which the cash belongs or in the name of the nondepository trust

company and shall be composed entirely of cash belonging to trust accounts,

the respective contributions of which are reflected in the books and records of

the nondepository trust company.

(k) A nondepository trust company organized as a Vermont financial

institution shall include as a part of its name the word "trust" unless otherwise

approved by the commissioner for good cause shown.

(l) A nondepository trust company organized as a Vermont financial

institution shall be subject to regular examination and supervision by the

commissioner to the same extent as any other financial institution chartered

under Vermont law.

(m) A nondepository trust company organized as a Vermont financial

institution may convert to any other type of investor - owned financial

institution pursuant to chapter 206 of this title.

(n)(1) At any time or times following the grant to a nondepository trust

company of permission to engage in the trust business by the commissioner, or

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in the case of a national trust company by its federal supervisory agency, the

nondepository trust company may file a petition in the probate court of the

probate district in which its main office is located requesting that it be

substituted, except as may be specifically excluded in such petition, in every

fiduciary capacity for any one or more of its affiliate financial institutions

specified in the petition. The petition may be made ex parte and need not list

the fiduciary capacities in which substitution is made. A copy of the petition

shall be furnished to the commissioner prior to filing with the probate court

and the commissioner shall have standing to appear and object to the petition.

Upon a finding that (A) the nondepository trust company has been granted

permission to engage in the trust business by the commissioner, or the federal

supervisory agency if the nondepository trust company is a national trust

company, and (B) each of the affiliate financial institutions for which the

nondepository trust company seeks to be substituted as fiduciary has complied

with the notification requirements in subdivision (2) of this subsection, the

court shall enter an order substituting the nondepository trust company in

every fiduciary capacity for each of its specified affiliate financial institutions,

except as otherwise specified in the nondepository trust company's petition. If

the court determines that the commissioner's objection has merit, the court

shall issue an appropriate order to address the commissioner's objection. The

petition made pursuant to this section shall be considered in a summary

fashion by the court, and the court shall act on the petition within 30 days of

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filing. Upon entry of the court's substitution order, the nondepository trust

company shall, without further act, be deemed substituted by operation of law

in every such fiduciary capacity, except as may be specifically excluded in

such petition. The substitution shall be evidenced by filing a copy of the order

with the clerk of the Vermont probate court in each probate district in which

the affiliate financial institutions served in a fiduciary capacity prior to the

entry of the order. The order shall be accompanied by written notification to

the court of each fiduciary appointment previously made by the court that is

affected by the substitution order, and evidence of compliance with

subdivision (5) of this subsection. The order of substitution shall be indexed

in the records of the courts in the manner in which substitutions of fiduciaries

are indexed.

(2) At least 30 days before the filing of the petition referred to in

subdivision (1) of this subsection, but after regulatory approval under

subsection (c) of this section has been granted, each of the affiliate financial

institutions for which the nondepository trust company seeks to be substituted

shall mail written notice of the proposed substitution to the principals of each

trust account affected. The form of notice required by this subdivision shall be

approved by the commissioner and shall include a statement that the

nondepository trust company is affiliated with its affiliate financial

institutions, but is not a part of them, and shall include the name, mailing

address and telephone number of one or more officers, employees or agents of

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the affiliate financial institution available during regular business hours to

answer customer questions regarding the proposed substitution. The affiliate

financial institution shall furnish an affidavit of the mailing of the notice to the

probate court in conjunction with the filing of the nondepository trust

company's petition referred to in subdivision (1) of this subsection, and the

affidavit shall constitute the affiliate financial institution's compliance with this

subdivision. Following the mailing of the notice and prior to the effective date

of the substitution order, each of the affiliate financial institutions shall furnish

a copy of the notice to each prospective trust customer of the financial

institution before the customer and the financial institution enter into a trust

account relationship.

(3) Within 30 days after the entry of the substitution order referred to in

subdivision (1) of this subsection, the nondepository trust company shall mail

written notice of the substitution to the principals of each trust account

affected. The notice shall specify that the nondepository trust company is

affiliated with its affiliate financial institutions, but is not a part of them, and

shall include the name, mailing address and telephone number of one or more

officers or employees of the nondepository trust company available during

regular business hours to answer customer questions regarding the substitution.

(4) Each designation in a will, trust or other instrument executed before

or after the entry of an order of substitution, naming an affiliate financial

institution as fiduciary, shall be deemed by operation of law to be a

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designation of the nondepository trust company, substituted pursuant to this

section, without further act or amendment of the will, trust or other instrument,

unless the will, trust or other instrument is executed after the date of entry of

the order of substitution and specifically negates application of this section.

(5) If any affiliate financial institution for which the nondepository trust

company has been substituted pursuant to this section has given bond in any

fiduciary capacity, the nondepository trust company shall be required to

furnish to the court or authority making the appointment a substitute bond in

like amount and terms before the affiliate financial institution shall be released

from liability on its bond.

(6) Any affiliate financial institution for which the nondepository trust

company has been substituted pursuant to this section shall account jointly

with the nondepository trust company for the accounting period during which

the effective date of the substitution occurs. Upon substitution pursuant to this

section, the affiliate financial institution shall deliver to the nondepository trust

company all assets addressed in the substitution order held by the affiliate

financial institution as fiduciary and upon the substitution all the assets shall

become the property of the nondepository trust company as fiduciary without

the necessity of any instrument of transfer or conveyance.

(7) Upon substitution of the nondepository trust company pursuant to

subdivision (1) of this subsection, the nondepository trust company shall pay

fair consideration to each affiliate financial institution for which it has been

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substituted as fiduciary for the trust business it has acquired from the affiliate

as a result of the substitution.

(o) To the extent not inconsistent with this section or with the limited

scope of the banking powers of a nondepository trust company as

contemplated in subsection (b) of this section, a nondepository trust company

organized as a Vermont financial institution shall be subject to the laws of this

state generally applicable to investor-owned financial institutions organized

pursuant to chapter 202 of this title; provided, however, that the provisions of

this chapter governing substitution of the nondepository trust company as

fiduciary shall be exclusive and chapters 206, 207 and 208 of this title shall not

apply to the substitution.

(p) A depository institution organized either as a Vermont financial

institution or a national financial institution if authorized by its supervisory

agency to exercise trust powers may be substituted as a fiduciary for any of its

affiliate financial institutions under the same procedures, and the substitution

shall be subject to the same conditions specified in this section, other than the

prohibition against deposit-taking and the provisions of subsection (k) of this

section, with respect to the substitution as fiduciary of a nondepository trust

company for any of its affiliate financial institutions. The substitution

procedures shall be exclusive and chapters 206, 207 and 208 of this title shall

not apply to the substitution.

§ 12603. MERCHANT BANKS

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(a) A merchant bank is a financial institution organized under the

provisions of this title whose activities are generally limited to lending and

investing. Deposit activity is prohibited. Unless otherwise indicated in this

chapter, a merchant bank has all the powers, duties and obligations of a

financial institution under this title. As one of the purposes of merchant banks

is to provide needed capital or investments to businesses that may be

impermissible or imprudent for depository financial institutions, its lending

and investment activities are less restricted. Except as provided in this section,

a merchant bank has all the powers of and is entitled to engage in the business

of a financial institution, including, without limitation, powers with respect to

investments, loans and transactions.

(b) A merchant bank may not solicit, receive or accept money or its

equivalent on deposit as a regular business within the meaning of subdivision

11101(11) of this title or engage in deposit - like activities as determined by the

commissioner. A merchant bank may deposit cash, whether constituting

principal or income, in any financial institution, whether within or without this

state, if the account is held either in the name of the customer to which the

cash belongs or in the name of the merchant bank and is composed entirely of

cash belonging to the customer, the respective contributions of which are

reflected in the books and records of the merchant bank.

(c) A merchant bank may issue drafts drawn on itself in the form of

treasurer's or cashier's checks.

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(d) No merchant bank shall engage in business as a merchant bank in this

state without first obtaining a certificate of authority from the commissioner

pursuant to this section and sections 11703 and 12103 of this title.

(e) The organizational documents of a merchant bank that are filed with the

secretary of state shall contain the following statement: "This organization is

subject to the Vermont law on merchant banks, 8 V.S.A. § 12603, and does

not have the power to solicit, receive or accept money or its equivalent on

deposit." This statement in the organizational documents of a merchant bank

may not be amended.

(f) The minimum amount of initial capital for a merchant bank is

$10,000,000.00, of which at least $5,000,000.00 shall be common stock or

equity interest. The balance may be composed of qualifying subordinated or

similar debt.

(g) A merchant bank shall maintain minimum capital in accordance with

section 14104 of this title. The commissioner may establish different

standards for merchant banks than for other financial institutions organized

under this title. The minimum capital standards for a merchant bank may not

be less than a level equal to 150 percent of the tier 1 risk - based capital and 150

percent of total risk - based capital established from time to time by the Board

of Governors of the Federal Reserve System for a well - capitalized bank.

(h) A merchant bank may convert to any other type of investor - owned

financial institution pursuant to chapter 206 of this title.

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(i) Notwithstanding section 14103 of this title, a merchant bank may use as

a part of its name the word or words "bank," "banker" or "banking" or the

plural of or any abbreviations of those words.

(j) At least 30 days prior to the establishment of any office for the

transaction of its business, a merchant bank shall notify the commissioner.

(k) The following provisions of this title are inapplicable to merchant

banks: sections 12201, 14110, 14301(d), chapters 203, 205, and subchapter 2

of chapter 204.

(l) Prior to making a loan, the terms of any loans by a merchant bank to or

investments by a merchant bank shall be disclosed to the governing body of

the merchant bank when the loan is to any of the following:

(1) A person who owns 25 percent or more of the merchant bank's

common stock or similar equity capital;

(2) A member of the governing body of the merchant bank;

(3) An executive officer or manager of the merchant bank; or

(4) A company, 25 percent of the voting shares or other similar voting

equity of which is owned by a person or entity listed in subdivisions (1)

through (3) of this subsection.

(m) Any acquisition or change in control of five percent or more of the

equity interests in a merchant bank shall be subject to the prior approval by the

commissioner. The acquiring person shall file an application with the

commissioner for approval. The application shall be subject to the provisions

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of subchapter 7 of chapter 201 of this title.

(n) The commissioner may examine the merchant bank and any person

who controls it to the extent necessary to determine the soundness and viability

of the merchant bank.

(o) A merchant bank shall include on all its advertising a prominent

disclosure that deposits are not accepted by a merchant bank.

§ 12604. UNINSURED BANKS

(a) An uninsured bank is a financial institution that only accepts deposits

for which insurance of deposits by the FDIC is not required. For purposes of

this section, uninsured banks may accept deposits from a depositor which,

when added to the deposits already held for the depositor, if any, exceed the

maximum insured amount then permitted to be insured by the Federal Deposit

Insurance Corporation for insured deposits. An uninsured bank may be

organized pursuant to this section and subchapters 1 through 5 of this chapter.

Unless otherwise indicated in this chapter, an uninsured bank has all the

powers, rights, duties and obligations as a financial institution under this title.

An uninsured bank is not a nondepository trust company nor is it a merchant

bank.

(b) No uninsured bank shall engage in business as an uninsured bank in

this state without first obtaining a certificate of authority from the

commissioner pursuant to sections 11703, 12103 and this section.

(c) The organizational documents of an uninsured bank that are filed with

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the secretary of state shall contain the following statement: "This organization

is subject to the Vermont law on uninsured banks, 8 V.S.A. § 12604, and does

not have the power to solicit, receive or accept retail deposits." This statement

in the organizational documents of an uninsured bank may not be amended.

(d) An uninsured bank shall maintain capital in accordance with section

14104 of this title, except that the commissioner may establish different capital

requirements for uninsured banks from those required for insured financial

institutions.

(e) An uninsured bank may convert to any other type of investor - owned

financial institution pursuant to chapter 206 of this title.

(f) The commissioner may establish by rule or order reserve requirements

for uninsured banks.

(g) An uninsured bank's lending limit is governed by section 14301(d) of

this title, except that loans or extensions of credit to a person are limited to 15

percent of total capital.

(h) An uninsured bank shall display conspicuously at each window or place

where deposits are usually accepted a sign stating that deposits are not insured

by the FDIC.

(i) An uninsured bank shall either include in boldface conspicuous type on

each signature card, or instrument evidencing a deposit the following

statement: "This deposit is not insured by the FDIC" or require each depositor

to execute a statement that acknowledges that the initial deposit and all future

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deposits at the bank are not insured by the FDIC. The bank shall retain this

acknowledgment as long as the depositor maintains any deposit with the bank.

(j) An uninsured bank shall include on all its deposit - related advertising a

prominent disclosure that deposits are not insured by the FDIC.

CHAPTER 203. ORGANIZATION AND MANAGEMENT OF MUTUAL

AND COOPERATIVE FINANCIAL INSTITUTIONS

Subchapter 1. Organization and Commencing Business

§ 13101. APPLICATION TO ORGANIZE

(a) Application. Two or more persons all of whom shall reside in or reside

proximate to the geographic area to be served by the institution, may agree in

writing to associate themselves for the purpose of forming a mutual or

cooperative financial institution pursuant to this chapter, and those persons

shall be considered as the organizers of the applicant. The organizers shall file

with the commissioner an application for permission to organize a mutual or

cooperative financial institution. The application shall contain the following:

(1) The name by which the financial institution will be known;

(2) The purpose for which it is to be formed, including whether a

certificate of general good is sought to conduct business as a mutual financial

institution or a cooperative financial institution;

(3) The city or town within this state where the financial institution's

principal office is to be located;

(4) The proposed minimum amount of initial capital contributions to be

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deposited and a statement by each organizer setting forth his or her name,

address and occupation, together with the amount of initial capital that such

organizer shall deposit, which statement shall be subscribed by the organizer.

(5) The names, addresses and occupations of the organizers of the

institution, together with a statement as to the character, reputation and

financial responsibility and competence of such persons.

(6) Documents which set forth the proposed institution's organizational

structure and business plan, including but not limited to:

(A) A copy of the organizational documents.

(B) The names of the organizers of the institution who are to serve

until the initial meeting of the members or corporators or until their successors

are elected and qualified, and the names, addresses and occupations of the

directors who will be voted on by the members or corporators at the initial

meeting, together with a statement as to the character, reputation, and financial

responsibility of each. A list of the names, addresses, and official positions of

the persons who are to be responsible for the conduct of the affairs of the

applicant, including all members of the governing body, any committees and

the executive officers; a statement as to the character, reputation, financial

responsibility and competence and experience in banking and business of such

persons, and such disclosure and conflict of interest statements as required.

(C) A financial plan which includes a three - year projection of the

initial operating results anticipated and a description of the proposed method

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of marketing the plan, and a statement as to the sources of initial capital as

well as any other sources of funding.

(7) The reasons that an institution of the type specified in subdivision

(2) of this subsection is needed in the proposed location.

(8) Copies of any application filed with any other supervisory agency.

(9) Any additional information as the commissioner may require.

(b) Publication of notice. After determining that the application required

by this section is complete, the commissioner shall advise the organization or

the organizers of the entity to publish any notice that will be required by the

commissioner under subsection 11702(c) of this title.

§ 13102. ISSUANCE OF CERTIFICATE OF GENERAL GOOD; REFUSAL

TO ISSUE CERTIFICATE OF GENERAL GOOD

(a) Certificate of general good. The commissioner shall determine whether

or not a certificate of general good shall be granted to organize a financial

institution and shall make the decision in accordance with the requirements of

chapter 201, subchapter 7 of this title.

(b) Conditions. A grant of a certificate of general good may include such

terms and conditions as the commissioner determines necessary. These may

include, but are not limited to, conditions regarding the organizational form of

the financial institution under this chapter.

(c) Effect of refusal to issue certificate of general good. If the

commissioner refuses to issue a certificate of general good, a new application

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may be filed by the organizers after one year from the date of the refusal.

§ 13103. REQUIREMENTS TO COMMENCE BUSINESS; MINIMUM

INITIAL CAPITAL CONTRIBUTION DEPOSITS;

EXAMINATION; CERTIFICATE OF AUTHORITY

(a) At the time the certificate of general good is issued, the commissioner

shall issue an order granting permission to organize which shall set forth the

minimum amount of capital deposits that the mutual or cooperative financial

institution will be required to have to commence business, which in no event

shall be less than $250,000.00.

(b) The commissioner may set different minimum capital deposit

requirements for different types of financial institutions, and in determining

the minimum amount of capital deposits for a financial institution, may

consider such factors as the population of the area where the proposed

institution is to be located, competition among financial institutions in that

locale, the projected volume and type of business to be conducted, the inherent

risks in the business to be conducted and the need to protect depositors and

other creditors of the institution.

(c) All capital deposits shall be in the form of cash, unless otherwise

approved by the commissioner.

(d) Upon receipt of a certificate of general good pursuant to section 13102

of this title, the organizers set forth in the application for permission to

organize shall hold the institution's franchise until such time as the

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requirements of this subchapter are met or the commissioner determines that

said requirements have not been met.

(e)(1) Within 30 days of receipt of a certificate of general good pursuant to

section 13102 of this title, the first meeting of the organizers of the financial

institution shall be called by a notice signed by that organizer who was

designated in the application for that purpose, or by a majority of the

organizers. Such notice shall state the time, place and purposes of the

meeting. A copy of the notice shall be given to each organizer at least three

days before the date appointed for the meeting, or left at each organizer's

residence or usual place of business, or deposited in the post office and

addressed to such an organizer at that organizer's residence or usual place of

business, and another copy thereof, together with an affidavit of one of the

organizers that the notice has been duly served, shall be recorded with the

records of the institution. If all the organizers, in writing indorsed upon the

application to organize, waive such notice and fix the time, place and purposes

of the meeting, no notice is required.

(2) At the first meeting and thereafter, the organizers of a mutual

financial institution shall be known as the "corporators" and the organizers of a

cooperative financial institution shall be known as the "incorporators."

(3) At such meeting or at any adjournment thereof, the corporators or

incorporators shall by ballot select a temporary secretary, adopt the

organizational documents of the institution and, in such manner as the internal

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governance document or the law provides, elect directors and officers. All

persons so elected shall qualify for their offices as provided in subchapters 4

and 5 of this chapter.

(4) The temporary secretary shall make and attest a record of the

proceedings until the secretary has been chosen and sworn, including a record

of such choice and qualification.

(5) The secretary shall file copies of the organizational documents with

the commissioner within 10 days of their adoption. Within 15 business days

of receipt, the commissioner shall, after examining such organizational

documents for conformance with the requirements of this title and other

applicable law, approve or disapprove of the filed documents.

§ 13104 . SUBMISSION TO SECRETARY OF STATE

Following the meeting required under subdivision 13103(e)(1) of this title

and approval by the commissioner under subdivision 13103(e)(5), the directors

so elected shall submit to the secretary of state an attested copy of each of the

institution's organizational documents required by Title 11 or 11A, as the case

may be. The secretary of state shall determine whether such organizational

documents satisfy the requirements of Title 11 or 11A. If such requirements

are met, the secretary of state shall file the organizational documents according

to the provisions of law. The filing of the organizational documents by the

secretary of state shall not authorize the transaction of business by the financial

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institution until all conditions of this subchapter are satisfied.

§ 13105. PAYMENT OF CAPITAL DEPOSITS

(a) A financial institution organized under this chapter shall not commence

business until the minimum capital deposits required in its permission to

organize have been deposited to the credit of the financial institution in a

depository designated by the governing body.

(b) At such time as the institution has received to its credit the minimum

capital deposits required in section 13103 of this title, a complete list of the

capital depositors, with the name, address, occupation and the amount of

capital deposited by each shall be filed with the commissioner, which list shall

be verified by an officer and the secretary of the institution. Such deposits

shall be handled by the institution in accordance with subchapter 2 of this

chapter.

§ 13106. CERTIFICATE TO COMMENCE BUSINESS

(a) Upon receipt of the statement required in section 13105 of this title, the

commissioner shall cause an examination to be made to determine if the

minimum capital deposits have been credited to the account of the institution

and that all requirements of this section and other provisions of law have been

met.

(b) Upon completion of the examination, and if it appears to the

commissioner that the whole of the required capital deposits has been paid in,

the commissioner shall issue a certificate under seal authorizing the financial

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institution to commence business, and this certificate shall be filed with the

secretary of state. In the case of a violation of this provision, the officers and

directors assenting thereto shall be personally liable for all debts incurred

before the certificate is issued and filed. Such certificate shall be conclusive of

the facts stated therein and it shall be unlawful for any such mutual or

cooperative financial institution to begin transacting business until such a

certificate has been granted.

§ 13107. FAILURE TO COMMENCE BUSINESS

(a) As to any mutual or cooperative financial institution that fails to

commence business as a financial institution within two years after receiving a

certificate of general good under section 13102 of this title, its certificate of

general good and its right to do business shall lapse.

(b) Notwithstanding the time limitation in subsection (a) of this section, the

commissioner may extend the period in which business shall be commenced

for a period not to exceed six months upon written application by the

institution setting forth the reasons for the extension, filed before the

expiration of the time period established by subsection (a) of this section. If

an extension is granted by the commissioner, the commissioner shall notify the

secretary of state.

(c) Upon the expiration of the time periods set forth in subsections (a) and

(b) of this section, the contributors of initial capital deposits of such institution

shall be entitled to the return of any amounts which they have paid to the

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institution and all expenses incurred in the organization shall be borne by the

original organizers who were named in the application for permission to

organize.

Subchapter 2. Organizational Finance

§ 13201. INITIAL CAPITAL DEPOSITS; CAPITAL RESERVES

(a) The initial capital deposits required under section 13105 of this title for

commencing business shall be paid into an account of the institution known as

the "capital reserve" account.

(b) The institution shall record on its books the amount which each capital

depositor has contributed to such capital reserve and such amounts shall be

evidenced by a certificate issued to the contributor thereof.

(c) Dividends or interest may be paid upon the amounts standing to the

credit of each owner of a proportionate interest in the capital reserve, in

accordance with the terms of the deposit agreement, but in no event shall such

dividends or interest be in excess of the maximum rate paid on shares or

accounts of the institution for the same period.

(d) The capital reserve established pursuant to this section shall be used as

a guarantee against losses, contingencies and impairments of capital, and all

losses and expenses not otherwise absorbed shall be charged against it until

such time as the conditions in section 13202 of this title are met; provided that

the amount credited to each contributor shall be reduced only by the

contributor’s proportionate share of such losses or expenses.

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(e) The capital reserve shall be subordinate to all other deposits or share

accounts of the institution.

(f) The capital contribution standing to the credit of each capital depositor

in the capital reserve of the institution shall be transferable, together with any

interest or dividends credited thereon, subject to the conditions and restrictions

of this subchapter.

§ 13202. RETURN OF INITIAL CAPITAL DEPOSIT

The initial capital deposits, together with any dividends or interest credited

thereon, may be returned, pro rata, to the contributors, or their heirs, executors,

administrators or assigns, subject to the following conditions and limitations:

(1) Prior to return of all or part of the initial capital reserve, the

institution shall obtain the commissioner's approval for such return;

(2) A return of all or part of the capital reserve may not reduce the

institution's capital below the greater of the total initial capital contributions or

the minimum amount prescribed by the commissioner in accordance with

section 14104 of this title;

(3) Upon release and return, the contributor's proportionate share of the

amount to be returned shall be credited in his or her name to a share account

or deposit in such institution, and the contributor shall then be entitled to all

rights and privileges, and shall be subject to all duties and liabilities, connected

with such share account or deposit;

(4) In the event of the liquidation of an institution before such

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contributions have been repaid in full, any portion of such contributions not

required for the repayment of the expenses and the payment of creditors and

other depositors in full, pursuant to subchapter 3 of chapter 209 of this title,

may be repaid pro rata to the capital depositors.

§ 13203. CAPITAL NOTES OR DEBENTURES AS CAPITAL

RESERVE

Subject to prior approval of the commissioner, a financial institution may

issue capital notes or debentures, the proceeds from the sale of which may be

used in lieu of capital deposits to establish part of the capital reserve required

in section 13201 of this title, provided that:

(1) Such capital notes or debentures are issued pursuant to the

organization’s borrowing powers;

(2) Such notes or debentures are subject to conditions governing the

repayment of principal and interest which are comparable to the requirements

governing return of initial capital deposits as set forth in section 13202 of this

title; and

(3) Repayment of the principal amount of such capital notes or

debentures issued pursuant to this section shall have priority over the return of

any capital deposits in the capital reserve.

Subchapter 3. Corporators and Members

§ 13301. CORPORATORS OF MUTUAL FINANCIAL INSTITUTIONS

(a) Persons named in the organizational documents constitute the original

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board of corporators of a mutual financial institution. Membership on this

board continues until terminated by death, resignation or disqualification as

provided in this section.

(b) All corporators shall be residents of the geographic area that the

financial institution serves or an area proximate to this geographic area. A

person may not continue as a corporator after ceasing to be a resident of the

financial institution's geographic area or an area proximate to this geographic

area.

(c) Any corporator failing to attend the annual meeting of the board of

corporators for two successive years ceases to be a member of the board unless

reelected by a vote of the remaining corporators.

(d) The number of corporators may be fixed or altered by the internal

governance documents of the financial institution, and vacancies may be filled

by election at any annual meeting.

§ 13302. MEMBERS OF A COOPERATIVE FINANCIAL INSTITUTION;

QUALIFICATIONS AND VOTING RIGHTS

(a) The members of a cooperative financial institution organized pursuant

to this chapter shall be those in whose names accounts are established and

persons borrowing from or assuming or obligated upon a loan held by such

institution or purchasing property and assuming the secured loan held by such

institution.

(b) A single membership in a cooperative financial institution may be held

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by two or more persons, and a joint and survivorship relationship and

successor relationship, whether investors or borrowers, constitutes a single

membership.

(c) Each member 18 years of age or over is entitled to one vote at any

meeting of the cooperative financial institution, regardless of the number of

accounts standing in that member's name, provided that only one vote is

allowed on an account held by two or more persons. The internal governance

documents may prohibit voting by persons who have become members within

six months of the date when the vote is cast. When accounts or shares are

pledged, the pledgor may vote the accounts or shares so pledged.

(d) Profits and losses shall be distributed at least annually among the

members. On each annual closing day after payment or provision for all

expenses and appropriate transfers to reserves, the remainder of net earnings

for the annual period shall be credited to an undivided profits account. At

each annual period, the governing body shall declare a distribution of earnings.

Dividends may also be declared monthly or quarterly. Interim dividends may

be paid at the rate most recently declared by the governing body. Payments of

net earnings to members may be referred to as dividends or interest.

(e) Membership terminates when the amount of a member's accounts has

been paid in full to that member, or when the transfer of membership to other

persons has been recorded on the books of the financial institution, or when

that member's status as a borrower from the institution terminates.

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§ 13303. POWERS AND DUTIES OF CORPORATORS AND MEMBERS

(a) Corporators or members shall hold regular annual meetings, at a time

fixed in the internal governance documents of the institution, for the purpose

of electing directors of the institution and for the transaction of any other

business which may properly be brought before such meeting.

(b) Special meetings of the corporators or members may be called at any

time by an executive officer of the institution, or in any other manner provided

for in the internal governance documents.

(c) Notice of the annual meeting or any special meeting shall be given by

public advertisement in a newspaper or newspapers of general circulation in

the county or counties where each office of the institution is located, or in such

other newspapers as the commissioner may designate; provided that

corporators shall also be sent notice by mail at their last known address. The

notice shall be published on at least two different days and in such manner as

to be reasonably conspicuous. The last publication of notice shall be at least

seven days prior to such annual or special meeting. Notice of any special

meeting shall state the purpose for which such meeting is called.

(d) The internal governance documents shall prescribe the number of

corporators or members that constitute a quorum at any annual or special

meeting. The internal governance documents may also provide for voting by

proxy.

(e) Meetings of the corporators or members shall be held at the institution's

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principal office, or at such other place in the area of this state served by the

institution as the notice shall designate.

Subchapter 4. Governing Body

§ 13401. DIRECTORS: NUMBER, ELECTION, QUALIFICATIONS AND

TERM

(a) The number of directors on the governing body of a mutual or

cooperative financial institution may not be less than five, all of whom shall be

residents of the financial institution's geographic area or an area proximate to

that geographic area.

(b) The initial governing body shall be elected at the first meeting of the

corporators or the organizers as provided for in section 13103 of this title, and

the governing body shall be elected by a vote of the corporators or members at

each annual meeting thereafter; provided that the organizational documents or

internal governance documents may provide for classification of directors in

accordance with Title 11 or 11A, depending on the form of organization.

(c) Vacancies on the governing body occurring during the year may be

filled by the governing body until the next annual meeting of the corporators

or members. A director so elected shall fill such position for the remainder of

the term. Any vacancy which causes the number of directors to fall below the

minimum required in subsection (a) of this section or in the institution's

internal governance documents shall be filled promptly.

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(d) The compensation of directors, which may include provision for

payment of medical, surgical and hospital expenses due to accident or illness

in the same manner as provided for officers and employees, may be fixed by

the corporators or members at any legal meeting thereof, or, subject to the

written approval of the commissioner, such may be fixed by the governing

body.

§ 13402. MEETINGS OF THE GOVERNING BODY

(a) The governing body shall hold at least six meetings each year at a time

fixed in the internal governance documents, which shall be held at least once

each quarter. In any month in which the governing body does not meet, the

executive committee permitted under subsection 13403(c) of this title shall

meet and a record of the meeting of the executive committee shall be ratified

at the next meeting of the governing body.

(b) A quorum at any meeting shall consist of not less than a majority of the

governing body, but less than a quorum shall have power to adjourn from time

to time until the next duly called meeting.

(c) At least once each month and at each regular meeting, the treasurer

shall prepare a financial statement, showing the condition of the financial

institution, which shall be recorded in a book kept for that purpose, and at all

times shall be open to the inspection of the governing body and the

commissioner. A record shall be made at each meeting of the transactions of

the governing body and the names of the directors present.

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(d) Full and complete records of all meetings of the governing body shall

be kept and maintained.

§ 13403. POWERS AND DUTIES OF THE GOVERNING BODY

(a) The governing body may exercise any and all powers of an institution

not expressly reserved to the corporators or members by this title or by the

institution's organizational documents or internal governance documents.

(b) The governing body shall see that all funds of the institution are

invested only in accordance with section 14107 of this title.

(c) The governing body may, in its discretion and so far as is consistent

with its duties, appoint an executive committee from its members, such

committee to conduct the business of the institution between meetings of the

governing body; provided that all transactions of such executive committee

shall be reported to the governing body at its next meeting and incorporated

into the records of such meetings.

(d) Bonds. The governing body shall require security for the fidelity and

faithful performance of duties by the officers, employees and agents of the

financial institution, in such amount as the governing body shall deem

necessary or as the commissioner may require. Such security shall consist of a

bond executed by one or more surety companies authorized to transact

business in this state. The commissioner may increase such amount from time

to time as circumstances may require. The expense of such bond shall be

assumed by the institution.

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(e) The governing body shall also direct and require suitable insurance

protection to the financial institution against burglary, robbery, theft and other

similar insurable hazards to which the financial institution may be exposed in

the operation of its business on the premises or elsewhere.

(f) The governing body shall be responsible for prescribing at least once in

each year the amount or penal sum of those bonds or policies and the sureties

or underwriters thereon, after giving due and careful consideration to all

known elements and factors constituting the risk or hazards. That action shall

be recorded in the minutes of the governing body. The commissioner may

require a financial institution to furnish an attested duplicate of the bonds and

policies required by this section.

(g) The commissioner may require a Vermont financial institution to

secure additional bonds or insurance.

Subchapter 5. Officers and Employees

§ 13501. OFFICERS

(a) Election. Unless another manner for election is provided in the internal

governance documents, the governing body shall elect annually from its

members a chair, and from its members or otherwise, an executive officer, a

secretary, a treasurer and such other officers as it may consider advisable. The

terms of officers so elected shall be for not more than one year, but such

officers may be reelected and shall continue in office until their successors are

elected and qualified. If any office becomes vacant during the year, the

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governing body may immediately fill the same for the period remaining until

the next annual meeting for election of officers.

(b) Compensation. The compensation of officers shall be fixed by the

governing body.

(c) Powers of Officers. Each officer shall have such powers as the internal

governance documents may provide or as may be delegated by the governing

body. In addition, an officer may exercise the powers set forth in this

subsection.

(1) The chair of the governing body shall preside at all meetings of the

corporators or members and the governing body, unless otherwise provided in

the internal governance documents.

(2) An executive officer shall preside, in the absence of a chair of the

governing body, at all meetings of the corporators or members and the

governing body unless otherwise provided in the internal governance

documents.

(3) The secretary shall exercise the following powers.

(A) The secretary shall record or cause to be recorded the

proceedings and actions of all meetings of the corporators, members or

governing body, and give or cause to be given all notices required by law or

action of the governing body for which no other provision is made. If no

person is elected to this office, the treasurer, or in his or her absence another

officer of the institution designated by the directors, shall be ex officio

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secretary of the institution and of the directors.

(B) Within 30 days after the annual meeting of the governing body

for election of officers, the secretary shall file a copy of a list of officers and

directors with the commissioner, which list shall be kept on file in the

commissioner's office for public inspection.

(C) The secretary, in the absence of a provision in the internal

governance documents to the contrary, shall perform the functions of secretary

in accordance with Title 11 or 11A.

(4) Conveyances, leases, assignments, releases, transfers of stock

certificates and registered bonds, and all other written instruments authorized

or required by law or vote of the directors, may be executed by an executive

officer or other official authorized and empowered by the internal governance

documents of the institution or by a vote of the governing body which is duly

recorded in the minutes of the institution.

Subchapter 6. Voluntary Dissolution

§ 13601 . VOLUNTARY DISSOLUTION; PROCEDURE; CRITERIA

(a) A mutual or cooperative financial institution shall submit to the

commissioner for approval a plan of dissolution prior to filing its articles of

dissolution under Title 11A. The plan shall contain the following items:

(1) Pro forma financial statements that demonstrate that the financial

institution will, upon dissolution, discharge or make provision for discharging

its liabilities;

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(2) A method to distribute all remaining assets among its depositors or

members according to their interests;

(3) The process of and resources dedicated to the oversight of the

dissolution of the financial institution;

(4) The plan to transfer to any other financial institution its deposit, loan

and trust accounts, including escheat of all remaining deposit accounts to the

state of Vermont;

(5) The procurement or continuation of insurance or the provision of

other security as the commissioner deems necessary;

(6) An acknowledgment that, before the articles of dissolution are filed,

there will be no distributions to depositors or members, without first providing

for the obligations of the dissolving entity; and

(7) Such other information or assurances as the commissioner may

require.

(b) Upon approval of the plan, the financial institution may file its articles

of dissolution with the secretary of state under Title 11A and proceed with the

dissolution as provided by law.

(c) During its wind-up, a dissolved entity shall not transact any further

banking business after its deposit insurance has terminated.

CHAPTER 204. POWERS OF FINANCIAL INSTITUTIONS

Subchapter 1. General Powers

§ 14101. APPLICABILITY OF CHAPTER

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The provisions of this chapter set forth the powers granted to all financial

institutions organized pursuant to chapters 202 and 203 of this title and

branches of any state or foreign financial institution authorized under section

15202 or 15203 of this title. The powers, privileges, duties and restrictions

conferred and imposed in the organizational documents or act of incorporation

of any commercial bank, savings bank, savings and loan association, bank and

trust company or trust subsidiaries, organized under the prior laws of this state

are abridged, enlarged or modified so that each such charter or act of

incorporation conforms to this title. Notwithstanding anything in a charter or

act of incorporation of such an institution, every such institution possesses the

powers, rights and privileges and is subject to the duties, restrictions and

liabilities conferred and imposed by this title.

§ 14102. GENERAL ORGANIZATIONAL POWERS

(a) A Vermont financial institution shall have all of the powers enumerated

in Title 11 or 11A, depending on the organizational form of the institution.

(b) Unless otherwise prohibited or limited by parts 1, 2 or 5 of this title, a

Vermont financial institution has and may exercise all powers necessary or

convenient to effect the purposes for which the financial institution is

organized or to further the businesses in which the financial institution is or

may be lawfully engaged. Such powers shall include:

(1) establishing, acquiring, investing or participating in or utilizing a

service corporation;

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(2) engaging, directly or indirectly through an operating subsidiary, in

closely related activities as defined in subdivision 11101(14) of this title; and

(3) investing or participating in an entity that engages in closely related

activities but is not an operating subsidiary, with the commissioner’s approval;

provided, however, the commissioner may require that closely related

activities be conducted through a subsidiary whenever the commissioner

determines that a limitation on the Vermont financial institution’s direct

financial risk is prudent. A Vermont financial institution shall keep such

records as may be required by the commissioner relative to the activities

permitted by this subsection. Service corporations and operating subsidiaries

shall be subject to regulation and supervision under this title.

(c) A Vermont financial institution may engage in electronic banking.

(d) Any Vermont financial institution may amend its organizational

documents to provide for the separation of its corporate franchises into

separate departments according to the nature of its business. In that event, it

shall equitably apportion its assets between those departments in such manner

as the commissioner shall approve and thereafter shall maintain a segregation

of the assets and obligations of those departments. Depositors shall be notified

of the segregation and of the department to which their deposits are assigned.

In case of liquidation or the imposition of restrictions upon the payment of

deposits, at any time more than six months after such notice, the depositors of

each of the departments shall be entitled to receive payment of deposits out of

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the assets of the department to which their deposits have been assigned in

priority to all depositors in the other department, and to creditors who become

such after the segregation, except as those obligations to creditors are properly

allocated to a department at the time the obligations are created. The assets of

the trust department shall be devoted first to meeting the obligations of the

financial institution to the beneficiaries of its trusts according to their

respective rights.

(e) A Vermont financial institution shall have the power to join the Federal

Reserve System or any cooperative league or other entity organized for the

purpose of protecting and promoting the welfare of financial institutions and

their depositors; and to comply with all conditions of membership therein. A

Vermont financial institution which is a member of the Federal Reserve Bank

is by this subsection vested with all powers conferred upon member banks of

the federal reserve system by the terms of the Federal Reserve Act as fully and

completely as if those powers were specifically enumerated and described in

this subsection, and all those powers shall be exercised subject to all

restrictions and limitations imposed by the Federal Reserve Act or by

regulations of the Federal Reserve Board made pursuant thereto. A member

financial institution under this subsection shall continue to be subject to the

supervision and examinations required by the laws of this state, except that the

Federal Reserve Board and the Federal Deposit Insurance Corporation shall

have the right, if deemed necessary, to make examinations. The authorities of

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this state having supervision over the financial institution may disclose to the

Federal Reserve Board or to the Federal Deposit Insurance Corporation or to

their duly appointed examiners, all information in reference to the affairs of

any financial institution which has become or desires to become a member.

(f) Subject to the approval of the commissioner, a Vermont financial

institution may contract with another financial institution or financial

institutions for branch or agency services or to provide those services to the

customers of that financial institution or financial institutions.

Notwithstanding the foregoing sentence, any Vermont financial institution

subsidiary of a bank holding company may receive deposits, renew time

deposits, close loans, service loans, and receive payments on loans and other

obligations as an agent for an affiliate depository institution or contract to

receive such services without such approval.

§ 14103. ADVERTISING; DOING BUSINESS OR USING NAME

UNLAWFULLY

No person shall advertise or put forth any sign as a bank, banking

association, or trust company, or in any way solicit or receive deposits or

transact business as a bank, banking association, financial institution or trust

company, or use the words "bank", "banking association", or "trust company"

or other similar sounding word or name unless it is a financial institution

reporting to and under the supervision of the commissioner or is authorized to

conduct such business in this state under federal law, or unless the

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commissioner approves the activity or word or name used in writing after

giving due consideration for whether the activity, word or name will confuse

or mislead the public as to the nature of the business of the entity. However,

this section shall not prevent an individual, as such, from acting in a trust

capacity.

§ 14104. CAPITAL OR SURPLUS REQUIREMENTS

(a) Every Vermont financial institution shall establish and maintain

adequate levels of capital or surplus pursuant to standards established by the

commissioner.

(b) Any issuance considered as capital under subsection (a) of this section

shall be submitted to the commissioner for review and approval at least 10

days prior to issuance and include such documentation as the commissioner

deems necessary.

(c) Notwithstanding the provisions of subsections (a) and (b) of this

section, the commissioner may permit the formation of a Vermont financial

institution without capital or surplus to be merged with or into or consolidated

with an existing financial institution for the purpose of facilitating a

reorganization or acquisition transaction, including a triangular merger

transaction, involving such existing financial institution.

§ 14105. PARTICIPATION IN PUBLIC AGENCIES

A financial institution has the power to participate in a public agency

created under the laws of this state or of the United States, the purpose of

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which is to afford advantages or safeguards to financial institutions, depositors

or investors and to comply with all requirements and conditions imposed upon

such participants except to the extent limited by rule or order of the

commissioner.

§ 14106. EXPANDED POWERS OF VERMONT FINANCIAL

INSTITUTIONS

In addition to all other powers permitted under these statutes, any Vermont

financial institution shall have the powers conferred under federal law

administered by the Federal Reserve Board, the Office of the Comptroller of

the Currency or the Office of Thrift Supervision upon national financial

institutions or their subsidiaries.

§ 1410 7. INVESTMENTS

(a) A Vermont financial institution may invest its assets prudently in

accordance with the best judgment of its governing body in a manner

consistent with this section.

(b) A Vermont financial institution may not acquire more than five percent

of the equity interest of any Vermont financial institution or of a Vermont

bank holding company without the prior approval of the commissioner.

(c) Notwithstanding any other provision of law to the contrary, a financial

institution may invest its funds, operate a business, manage or deal in property,

or take any other action over whatever period of time may reasonably be

necessary to avoid loss on an investment or loan previously made or an

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obligation created in good faith.

(d) A Vermont financial institution's governing body shall establish a

written investment policy, which it shall review and ratify at least annually,

that addresses, at a minimum, the following:

(1) Investment quality parameters;

(2) Investment mix and diversification;

(3) Investment maturities; and

(4) Delegation of authority to officers and committees responsible for

administering the portfolio.

(e) A Vermont financial institution shall not acquire a lien on its equity

interests as collateral for any extension of credit or other obligation nor acquire

title to such collateral except to prevent loss upon a loan or investment

previously made or an obligation created in good faith. If a Vermont financial

institution acquires such a lien upon its equity interest or acquires title to such

equity interest under the exception in this subsection, it shall not permit the

lien to continue for more than two years, nor shall it hold title to the equity

interest for more than one year, without the consent of the commissioner.

(f) Except as otherwise provided in subsection (e) of this section, and

subject to chapter 202, subchapter 4, and chapter 203, subchapter 2 of this

title, a Vermont financial institution may repurchase or redeem its own equity

interests.

§ 14108. PROHIBITED MERGERS AND ACQUISITIONS

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(a) No depository institution may by merger, consolidation or other form

of acquisition come to hold in excess of 30 percent of the total time and

demand deposits held in Vermont by depository institutions. For the purposes

of this section, the total deposits of a depository institution shall consist of all

time and demand deposits held in Vermont by such depository institution and

all of its affiliates.

(b) Notwithstanding subsection (a) of this section, the commissioner may

waive the deposit concentration limit set forth in subsection (a) of this section

if the commissioner determines that any financial institution to be merged,

consolidated or acquired is not adequately capitalized, or is subject to a

conservation, receivership or dissolution order under this title or applicable

federal law, and the waiver is otherwise in the best interest of depositors.

§ 14109. PROHIBITED MANAGEMENT INTERLOCKS

A director or officer of a Vermont financial institution shall not at the same

time be a director or officer of another financial institution engaged in the

business of banking in the state of Vermont or a state contiguous to Vermont.

The terms of this section shall not apply to:

(1) A financial institution which is in liquidation, receivership,

conservatorship or similar proceedings;

(2) The Federal Reserve Bank of Boston;

(3) A financial institution affiliated by reason of common ownership or

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control of at least 25 percent of the voting interests of such affiliated financial

institutions; or

(4) Any other relationship otherwise permitted under interagency

guidelines or regulations of federal supervisory authorities adopted from time

to time, relating to management interlocks.

§ 14110. DUTIES OF EXECUTIVE OFFICERS, DIRECTORS AND

PERSONS WHO CONTROL PRINCIPAL EQUITY INTERESTS

IN FINANCIAL INSTITUTIONS; OFFICERS MAY NOT

RECEIVE FEES

(a) All executive officers, directors and holders of principal equity interest

of a Vermont or state financial institution subject to the laws of this state under

this title, shall comply with the standards for member banks established by

Regulation O of the Federal Reserve Board, 12 C.F.R., Part 215, as amended.

(b) An officer, director or employee of a Vermont or state financial

institution shall not corruptly solicit or demand for the benefit of any person,

or corruptly accept or agree to accept (i) any fee, present, benefit or

commission, directly or indirectly, from a borrower or applicant for a loan or

from anyone negotiating securities at the financial institution of which he or

she is an officer, director or employee; (ii) any fee, present, benefit or

commission, directly or indirectly, for signing with another as accommodation

maker, surety or endorser, or for a loan made or securities bought or sold by

the financial institution, except for the benefit or profit he or she may derive in

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common with other depositors or stockbrokers, and the compensation allowed

by the financial institution, for services and expenses.

Subchapter 2. Deposits in General

§ 14201. DEPOSIT POWERS

(a) Applicability. This subchapter governs deposits or accounts in

financial institutions.

(b) General deposit powers.

(1) A financial institution may receive money on deposit and may

establish the terms and conditions of each deposit contract. A financial

institution may receive demand deposits subject to withdrawal or to payment

upon the depositor's check, order, or other authorization.

(2) At the time of opening a deposit account, a financial institution shall

provide the depositor a statement containing the existing terms and conditions

of the deposit contract. The statement may be set forth on the depositor's

signature card. Depositors and any other owners of interests in a deposit

account shall be bound by changes made by the financial institution in their

deposit contracts. Financial institutions shall provide advance notice of

changes in accordance with 12 U.S.C. § 4301 et seq.

(3) A financial institution, in its sole discretion, may refuse deposits and

at any time may return all or part of a deposit.

(4) For any period during which funds are on deposit, a financial

institution may pay interest.

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(c) Insurance of deposits or accounts. Except as permitted by subchapter 6

of chapter 202 of this title, a Vermont financial institution that accepts deposits

or a branch of a state financial institution authorized to do business in this state

shall not accept deposits in this state unless the financial institution is insured

by the Federal Deposit Insurance Corporation.

(d) Cash reserve on deposits and accounts. A financial institution shall

maintain reserves on deposits or accounts as required from time to time by the

Federal Reserve Act, as amended, and any regulations promulgated under it.

§ 14202. PAYMENT OF DEPOSITS TO ADMINISTRATORS FROM

ANOTHER STATE OR COUNTRY

(a) When a deposit is made in a financial institution by a person residing in

another state or country, the deposit, or any part thereof, with the interest

thereon, may be paid to the administrator or executor appointed in the state or

country where the depositor resided at the time of death, provided an

administrator or executor has not been appointed in this state at the time of

such payment.

(b) An action shall not be maintained against a financial institution for the

recovery of a deposit or any part thereof, with the dividend or interest thereon,

made by a person residing in another state or country who has died, payment

of which has been made to the executor or administrator appointed in the state

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or country where the depositor resided at the time of death, before the

appointment of an executor or administrator in this state.

§ 14203. TRUST DEPOSITS; PAYMENT ON DEATH OF TRUSTEE

When a deposit is made in a financial institution by one or more persons in

trust for another, the name and residence of the person for whom the deposit is

made shall be disclosed, and the deposit shall be credited to the depositor or

depositors as trustee for such person. When other notice of the existence and

terms of a legal trust is not given in writing to the financial institution, at the

death of the trustee, or if there is more than one trustee, at the death of the

surviving trustee, the deposit or any part thereof, with the interest thereon, may

be paid to the person for whom the deposit was made or to his or her estate.

§ 14204. JOINT DEPOSITS

(a) Payment. When a deposit has been made in a financial institution in

the names of two or more persons, payable to any one of them, or payable to

the survivors or any one of the survivors, such deposit or any part thereof, or

any interest or dividend thereon may be paid to any one of such persons,

whether the others are living or not, and the receipt or acquittance of the

person so paid shall be a valid and sufficient release and discharge of the

financial institution for any payment so made.

(b) Evidence of joint deposit. The recital of the words "payable to either or

to the survivor" or words of like effect in the order creating such account and

signed by the person or persons who furnish the funds for such deposit shall be

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conclusive evidence, as between the payees and their legal representatives, of

the creation of an absolute joint account. However, nothing herein shall

prevent the proof of fraud, undue influence, or incapacity, to defeat such joint

interests.

§ 14205. PAYABLE ON DEATH ACCOUNTS

(a) A "payable - on - death account" is created by a deposit in a financial

institution in the name of an account holder or several joint account holders

with a designation that the account is payable on death to one or more payees,

known as "P.O.D. payees". On the death of the sole account holder or the last

surviving joint account holder, any remaining balance in a payable - on - death

account, including interests or dividends, shall vest solely in the surviving

P.O.D. payee or equally and severally in the then surviving P.O.D. payees.

Ninety days later, unless prevented as provided in subsection (c) of this

section, the financial institution may pay the remaining balance to the new

owner or owners or their legal representatives without further liability for the

amount or amounts paid. If no P.O.D. payee is surviving 90 days after the last

surviving account holder dies, the balance of the account shall be payable to

the personal representative of that account holder.

(b) Recital of the words "payable - on - death," the abbreviation "P.O.D.," or

words of like effect in the order creating the account, signed by the person or

persons furnishing the funds for the deposit, shall be conclusive evidence, as

between the legal representatives of account holders and the payable - on - death

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payees or their legal representatives, of the creation of an absolute

payable - on - death account, except as provided in subsection (c) of this section.

However, nothing in this section shall prevent proof of fraud, undue influence,

or incapacity to defeat a payable - on - death interest.

(c) If other assets of the probate estate of the last surviving account holder

are insufficient to pay debts and expenses, including statutory allowances and

assignments to the surviving spouse, a payable - on - death account shall not

transfer to P.O.D. payees sums needed for that purpose. A P.O.D. payee who

receives payment from a payable - on - death account after the death of the last

surviving account holder shall be liable to the account holder's personal

representative for the amount of payment to the extent necessary to discharge

debts and expenses remaining unpaid after application of the decedent's estate.

No proceeding shall be commenced later than two years after the death of the

decedent. Sums recovered by the personal representative shall be administered

as part of the decedent's estate. This section shall not affect the right of a

financial institution to make payment from a payable - on - death account to a

P.O.D. payee 90 days after the death of the last surviving account holder or

make a financial institution liable to the personal representative of the estate of

a deceased account holder unless before making payment the financial

institution is served with process in a proceeding brought by the personal

representative or with an order from the probate court prohibiting payment.

§ 14206. DEPOSITS OF MINORS; EXEMPTION FROM TRUSTEE

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PROCESS

(a) Payment. The governing body of a financial institution, in its

discretion, may accept deposits from a minor and may pay to a minor such

sum as is deposited to the credit of such person, and is due, as if such minor

were of age. The check and receipt or acquittance of such minor shall be a full

discharge for the amount for which it is given.

(b) Minor’s deposits exempt from trustee process. A financial institution

shall not be chargeable as trustee on account of funds deposited to the credit of

a minor, provided such funds are earned by or belong to such minor.

§ 14207. PROVISIONS WHEN TITLE TO DEPOSIT IS LITIGATED

(a) Multiple claims. In actions against a financial institution by one spouse

to recover for moneys deposited by the other spouse in the latter's own name,

the depositing spouse may be a witness. In actions against such financial

institution to recover for money on deposit, if there is a person, whether

married or not, claiming the same fund, who is not a party to the action, the

court, on the petition of such financial institution and on such notice as it

considers proper to the plaintiff and such claimant, may order the proceedings

to be amended by making such claimant a party defendant. The court shall

thereupon hear and determine the rights and interests of the parties to such

action in and to such fund.

(b) Litigated deposits; payment into court; costs. The deposits which are

the subject of such action may remain with such financial institution upon the

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same interest as other deposits of like amount, until final judgment therein, and

the same shall be paid by such financial institution in accordance with the

order of the court; or the deposits may be paid into court to await the final

determination of the action. When so paid into court, the financial institution

shall no longer be a party to such action, and its liability for such deposit shall

cease. The costs in such action shall be in the discretion of the court and may

be charged upon the fund affected thereby.

§ 14208. SECURITY FOR DEPOSITS

No Vermont or state financial institution may pledge, hypothecate or

deliver any of its assets of any description whatsoever as security for a deposit

of private funds, or for the purpose of indemnifying any person, as surety for

the financial institution, or as surety for any other person. However, a

Vermont financial institution or state financial institution may so secure a

deposit to the credit of the United States, of the state of Vermont or of any

political subdivisions of the state, either directly or indirectly.

§ 14209. EXAMINATION OF ACCOUNTS

Each Vermont financial institution shall annually cause a sampling of its

loans and deposit accounts to be verified by the account holder. The

verification shall be under the direction of an outside auditor or the internal

auditor of the Vermont financial institution. The auditor shall report the

results directly to the governing body. The verification methodology and

results shall be available to the commissioner upon request.

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§ 14210. REAL ESTATE TRUST AND ESCROW

(a) In accordance with its schedule for similar remittances, any financial

institution in which a pooled real estate trust or escrow account has been

established under 26 V.S.A. § 2214(c) shall remit the interest accumulated on

the account to the Vermont housing finance agency established under chapter

25 of Title 10 to be used in the agency's single family home mortgage

programs.

(b) A financial institution may deduct a reasonable remittance fee for

transferring funds to the housing finance agency under this section.

§ 14211. CLAIMS NOT CLEARLY CONSISTENT

If any claim not clearly consistent with the terms of any applicable

authority on file with a financial institution is made to any deposit, safe deposit

box, property held in safekeeping, security, obligation, or other property in the

financial institution's possession or control, in whole or in part, by any person,

including any depositor, individual, or group of individuals, whether or not

authorized to draw on or exercise any right or control with respect to the

property, the financial institution is not required to recognize the claim without

one of the following:

(1) A court order, issued by a court of competent jurisdiction and served

on the financial institution, enjoining or restraining the financial institution

from taking any action with respect to the property or instructing the financial

institution to pay the balance of the account, provide access to the safe deposit

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box, or deliver the property as provided in the order; or

(2) A bond in the form and amount and with sureties satisfactory to the

financial institution, indemnifying the financial institution against any

liabilities, loss, and expenses it might incur because of its recognition of the

claim or because of its refusal, due to the claim, to honor or recognize any

right with respect to the property.

Subchapter 3. Loans

§ 14301. LOAN AUTHORITY

(a) General loan authority. Unless otherwise prohibited by state law, a

Vermont financial institution may make, sell, purchase, arrange, participate in,

invest in or otherwise deal in loans or extensions of credit for any lawful

purpose.

(b) Written loan policy.

(1) A financial institution's governing body shall establish a written loan

policy, which shall be reviewed and ratified at least annually, that addresses at

a minimum, the following:

(A) Loan portfolio mix and diversification standards;

(B) Prudent underwriting standards, including loan-to-value limits

that are clear and measurable;

(C) Loan administration procedures, including delegation and

individual lending officer authority; and

(D) Documentation and approval requirements to monitor

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compliance with lending policies.

(2) The lending policies adopted pursuant to this section shall be

consistent with safe and sound banking practices and appropriate to the size of

the institution and nature and scope of its operations.

(c) Interest on loans. Financial institutions may demand and receive

interest and charges on their loans in accordance with chapter 4 of Title 9 or as

otherwise provided by law.

(d) Limitations. A Vermont financial institution may not make loans or

extensions of credit outstanding at one time to a borrower in excess of 20

percent of its capital. Total loans or other extensions of credit in excess of 10

percent of capital shall be approved by a majority of the governing body or the

executive committee of that institution or organization.

(1) Loans or extensions of credit to one person will be attributed to

another person and each person shall be deemed a borrower as follows:

(A) In the case of obligations of one person, the proceeds of a loan or

extension of credit to a person will be deemed to be used for the direct benefit

of another person and will be attributed to the other person when the proceeds,

or assets purchased with the proceeds, are transferred to another person, other

than a bona fide arm’s length transaction where the proceeds are used to

acquire property, goods, or services.

(B) In the case of obligations of a partnership or association, the

obligations of each general partner and of each member of the association.

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(C) In the case of obligations of a general partner or a member of an

association, the obligations of the partnership or association.

(D) In the case of obligations of a corporation, the obligations of any

subsidiaries in which it holds, directly or indirectly, a controlling equity

interest.

(E) In the case of obligations of a limited liability company, the

obligations of any subsidiaries in which it holds, directly or indirectly, a

controlling equity interest.

(F) In the case of obligations of a corporation or limited liability

company, the amount of a loan made to any other person to the extent that the

proceeds of the loan directly or indirectly are to be:

(i) Loaned to the corporation or limited liability company;

(ii) Used for the acquisition from the corporation or limited

liability company of any equity interest therein; and

(iii) Transferred to the corporation or limited liability company

without fair and adequate consideration, provided, however, that the discharge

of an equivalent amount of debt previously incurred in good faith for value

shall be deemed fair and adequate consideration.

(2) The following shall not be counted as indebtedness subject to the

limitation of this subsection:

(A) Indebtedness evidenced by bills of exchange or drafts drawn

against existing values and secured by a lien upon goods in transit with

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shipper's order, bills of lading or comparable instruments attached.

(B) Indebtedness evidenced by notes or other paper secured by

readily marketable corporate stock having a fair market value of not less than

125 percent of the indebtedness.

(C) Indebtedness evidenced by notes or other paper secured by an

assignment of accounts receivable or of amounts due to become due on open

account or on a contract to the extent of not less than 125 percent of the

indebtedness.

(D) Indebtedness evidenced by notes or other paper secured by liens

upon agricultural products, manufactured goods, or other chattels in storage in

warehouses or elevators with warehouse or elevator receipts attached, or goods

released on trust receipts, when the value of the security is not less than 125

percent of the indebtedness and the financial institution's interest therein is

insured against loss by insurance policies or certificates of insurance attached.

(E) Indebtedness arising out of the daily transaction of the business

of any clearing house association.

(F) Indebtedness secured to the extent thereof by the cash surrender

value of life insurance evidenced by policies of insurance validity issued and

assigned.

(G) Indebtedness secured to the extent thereof by savings deposits or

certificates of deposit of solvent financial institutions up to the amount insured

by the Federal Deposit Insurance Corporation, and duly assigned.

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(H) Any portion of any indebtedness which the United States

government, or an agency or instrumentality of the United States

unconditionally agreed to purchase or has unconditionally guaranteed as to

payment of both principal and interest, including loans insured or guaranteed

under the National Housing Act or the Servicemen's Readjustment Act of

1944, as amended.

(I) Additional funds advanced for the benefit of a borrower by a

financial institution for payment of taxes, insurance, utilities, security, and

maintenance and operating expenses necessary to preserve the value of real

property securing the loan.

(J) Amounts paid against uncollected funds in the normal process of

collection.

(K) That portion of a loan or extension of credit sold as a

participation by a financial institution on a nonrecourse basis, provided that the

participation results in a pro rata sharing of credit risk proportionate to the

respective interests of the originating and participating lenders.

§ 14302. REAL ESTATE LOANS

(a) Clear title. All loans secured by mortgages on real estate shall be

supported by written evidence satisfactory to the financial institution that title

to the security is marketable and the lien is valid and enforceable. A mortgage

on lands subject to lease under which rents are reserved to the owner, with all

of the owner's rights and options under the lease collaterally assigned to the

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financial institution as security or a mortgage upon lands impressed with a

public use, sometimes known as lease, society or glebe lands, but held under a

durable lease, shall not be deemed to be subordinate to such lease or public

use.

(b) Appraised value. The appraisal of real estate securing a federally

related transaction entered into by a financial institution shall comply with the

regulations of the Federal Deposit Insurance Corporation, as amended and

codified at 12 C.F.R. Part 323. The appraisal of real estate securing a

nonfederally related transaction entered into by a financial institution shall

comply with the federal supervisory agencies’ interagency guidelines, as

amended.

(c) Servicing of loans. A financial institution may contract with another

financial institution, corporation or association whose transactions are in whole

or in part the handling and servicing of mortgage loans, to handle and service

loans in its behalf. Whenever such a contract is made, the financial institution

shall not lose or suffer any impairment of any right of deduction or offset it

might have against any one liable for the mortgage debt.

(d) Home loan escrow accounts. Any financial institution which requires a

home loan escrow account to be established and maintained by a borrower

shall follow the provisions of section 10404 of this title.

(e) Loans insured or guaranteed by federal law. Any mortgage on real

estate given to secure a loan insured or guaranteed by the federal housing

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commissioner, the administrator of Veterans Affair’s or the administrator of

the Small Business Administration, under the National Housing Act, the

Servicemen's Readjustment Act of 1944 or the Small Business Act,

respectively, as amended, shall not be subject to the provisions of any law of

this state prescribing the nature, amount or form of security, or manner of

repayment, or requiring security upon which loans or advances of credit may

be made, or prescribing or limiting the period or principal amount of which

loans may be made, or prescribing or limiting the interest which may be

charged or other charges which may be made or taken upon any loan or

advance of credit.

§ 14303. BANK CREDIT CARDS

(a) General authority. Any financial institution which is authorized to do a

lending business in this state may issue bank credit cards.

(b) No discrimination. No financial institution shall discriminate against

any applicant for a bank credit card on the bases set forth in section 10403 of

this title. Nothing in this section shall be taken to prohibit the establishment of

separate credit card accounts for husband and wife.

(c) Statements of account. Issuers of bank credit cards shall promptly

furnish a statement of each cardholder's account as of the end of each monthly

period (which need not be a calendar month) in which there is any unpaid

balance thereunder, which statement shall include the following information,

not necessarily in the order stated:

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(1) The unpaid balance of the account at the beginning of the period;

(2) The amount of cash advances, if any, during the period;

(3) Unless furnished by the seller or tax department to the cardholder by

sales slip, memorandum or otherwise, information in the statement of account

sufficient to allow the cardholder reasonably to identify the transaction or

delinquent taxes paid as permitted by 32 V.S.A. § 3109(c) during the period,

the cash price and the date of each purchase or tax payment;

(4) The payments and other credits applied to the cardholder's account

during the period;

(5) The balance at the billing date for cash advances, property, and

services subject to finance charge;

(6) The amount and rate of the finance charge imposed;

(7) The balance at the billing date for property, labor or services

purchased or delinquent taxes paid during the billing period, if any, and the

date by which it may be paid to avoid any finance charge.

(d) Finance charges; annual fees; ATM fee.

(1) As to that part of an account balance which shall result from cash

advances, if any, the finance charge shall be applied to the average daily

balance of the cash advances in the account for the billing period. An issuer of

a bank credit card account may provide for an annual fee. Except for cash

advances, no finance charge shall be imposed on items in the account for

property, labor and services purchased during the billing period to the extent

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that they are paid for not later than 25 days from the financial institution’s

billing date therefor. No change in the terms of a bank credit card agreement

which might require such credit cardholder to pay an annual fee shall take

effect unless:

(A) at least 60 days prior to the effective date of the change, a written

notice has been mailed or delivered to the cardholder that clearly and

conspicuously describes the annual fee, and contains a return stamped response

addressed to the issuer with instructions to the cardholder to return the

response to the issuer within 30 days, signed by the cardholder and indicating a

preference, expressed in the response, for either of the following options:

I accept the change as notified.

I do not accept, and hereby cancel my card.

The notice shall further state that the incurrence by the cardholder or

another authorized person of any further indebtedness under the plan to which

the agreement relates on or after the effective date of such change specified in

the notice shall constitute acceptance of such annual fee; and

(B) either the credit cardholder agrees in writing to such annual fee

or the credit cardholder or another authorized person incurs such further

indebtedness on or after the effective date of the change stated in such notice.

(2) A credit transaction effected by the use of an automated teller

machine (ATM) may be subject to a transaction fee in addition to any finance

charges permitted by this section.

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(e) Payments.

(1) Sections 45 and 47 of Title 9 shall apply with respect to prepayment

and application of payments to cardholder accounts. With respect to

transactions in Vermont charged to a bank credit card account established by a

Vermont financial institution, the defenses preserved by section 2455 of Title

9, shall be available to the cardholder as against the financial institution in any

action or proceeding to enforce collection of said account by a financial

institution.

(2) In the case of a bank credit card account, except for a loan or

extension of credit secured by a lien against real estate, the periodic billing

shall be no less than 1/48th of the balance as of the last advance.

(f) Quarterly Reports. Any financial institution which is authorized to do

business in this state, may issue bank credit cards only if it reports quarterly to

the commissioner pursuant to subsection 10401(b) of this title on its rates and

charges on its bank credit card products.

Subchapter 4. Trust Powers

§ 14401. TYPES OF TRUST FUNCTIONS

(a) With the prior approval of its governing board, a financial institution

may act alone or with others as (1) fiduciary; (2) custodian of property; (3)

agent or attorney in fact; (4) registrar or transfer agent of securities; (5)

trustees under corporate mortgages, trust deeds or similar indentures; or (6)

fiscal agent of the United States, a political subdivision thereof, a body politic,

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a corporation or an individual.

(b) With that approval, a financial institution may also be appointed and

act as executor or coexecutor of a will, codicil or writing testamentary, as

administrator or co-administrator with the will annexed, as administrator or

co-administrator of a person deceased, as receiver, assignee, trustee, alone or

with others, or as guardian or co-guardian of a person subject to guardianship,

and with that approval may relinquish the fiduciary office, under the same

circumstances, in the same manner and subject to the same control by a court

having jurisdiction, as a natural person legally qualified.

§ 14402. NATIONAL FINANCIAL INSTITUTIONS; STATE FINANCIAL

INSTITUTIONS

(a) To the same extent that the laws of the United States permit, a national

financial institution located and doing business in this state may act, alone or

with others, as specified in section 14401 this title.

(b) Subject to the provisions of chapter 15 of Title 11A and subchapter 10

of chapter 21 of Title 11, except that section 15.06 of Title 11A and section

3136 of Title 11 shall not apply to any financial institution, including a state

trust company, a financial institution with trust powers with its principal place

of business not in Vermont may act, alone or with others, as specified in

section 14401 of this title, and may establish one or more places of business in

this state for the conduct of such trust business, provided that:

(1) it is a direct or indirect subsidiary of a bank holding company that

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has a direct or indirect financial institution subsidiary that has an office in this

state at which deposits are accepted; or

(2) the law of the state in which it is located or domiciled would allow

either a Vermont financial institution or a national financial institution, with

its principal place of business located in Vermont to establish one or more

places of business in such state for the conduct of trust activities if authorized

by its supervisory agency to exercise trust powers.

(c) As a condition precedent to its right to act in the capacities specified in

this section, it shall file a stipulation with the commissioner of taxes, in which

it shall agree that any funds, securities or property held by it under any

appointment under this subchapter, shall be taxed in the same manner and to

the same extent as funds of the same character held by a Vermont financial

institution.

(d) A state financial institution with trust powers, including a state trust

company, shall obtain the commissioner's written approval before establishing

a place of business in this state pursuant to subsection 11701(b) of this title.

Before issuing such approval, the commissioner must find that it is adequately

staffed, equipped and able to furnish trust services in this state. The

commissioner may examine its activities in this state at any time deemed

necessary to ensure its continued safety and soundness, ability to furnish trust

services, and compliance with the laws of this state. It shall make its books

and records pertaining to its business in this state available to the

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commissioner for such examination. Each state financial institution shall pay

fees and assessments as prescribed by sections 18, 19 and 11501 of this title.

§ 14403. APPROVAL OF COMMISSIONER

No financial institution, not otherwise expressly authorized by its respective

supervisory agency under state or federal law, may exercise the powers

provided in this chapter until it has applied for and obtained approval of the

commissioner to do so under subsection 11701(b) of this title. The

commissioner shall conduct inquiry into the affairs of the financial institution

applying for those powers to determine if the financial institution is staffed,

equipped and able to furnish those services.

§ 14404. SECURITY

The capital of a financial institution exercising trust powers shall be held as

security for the faithful discharge of the duties undertaken thereby as well as

for the claims of other creditors. The financial institution shall furnish to the

authority making the appointment a good and sufficient bond for a sum not

less than 25 percent of the amount of the trust fund, conditioned for the

faithful discharge of the duties undertaken by virtue of section 14401 of this

title. However, when the bond would not exceed $2,000.00, a financial

institution shall be relieved of furnishing it.

§ 14405. POWERS AND DUTIES OF OFFICERS

In proceedings in the probate court or elsewhere, connected with authority

exercised as executor, administrator, receiver, assignee, trustee or guardian, all

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accounts, returns and other papers may be signed and sworn to in behalf of

such a financial institution exercising trust powers by any officer thereof duly

authorized by it. The answers and examinations of that officer, under oath,

shall be received as the answers and examinations of the financial institution.

The court may order and compel any and all officers of the financial institution

to answer and attend the examinations, in the same manner as if they,

personally, were parties to the proceeding or inquiry. Such a financial

institution shall not be required to receive or hold any property or money or to

execute any trust contrary to its own desire.

§ 14406. SEGREGATION OF TRUST FUNDS; EXCEPTION

All moneys, property or securities received or held by a financial institution

in the capacity of executor, administrator, receiver, assignee, trustee or

guardian shall be kept separate and distinct from its general business and shall

not be mingled with the investments of its assets or be liable for its debts or

obligations. However, a financial institution exercising trust powers, in good

faith, may deposit temporarily in its commercial or savings departments any

money so held in trust awaiting distribution or investment and may also

deposit in its savings department as an investment for any one trust an amount

insurable and insured by the Federal Deposit Insurance Corporation. All such

deposits in either department shall be in the name of the trust or in the name of

the financial institution as trustee of the trust. If the security afforded by virtue

of this section and section 14404 of this title is insufficient to satisfy in full

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any claim growing out of the holding or management of moneys, property and

securities so received and held, the unsatisfied balance shall then be satisfied

as are demands of the general creditors of the financial institution.

§ 14407. COLLECTIVE INVESTMENT FUNDS

(a) A Vermont financial institution may invest assets that it holds as a

fiduciary in the following collective investment funds:

(1) A fund maintained by the financial institution, or by one or more

affiliated financial institutions, exclusively for the collective investment and

reinvestment of money contributed to the fund by the financial institution, or

by one or more affiliated financial institutions, in its capacity as trustee,

executor, administrator, guardian, or custodian under the uniform gift to

minors act;

(2) A fund consisting solely of assets of retirement, pension, profit

sharing, stock bonus or other trusts that are exempt from federal income

taxation under the Internal Revenue Code; and

(3) A fund consisting of any other assets held as a fiduciary, to the

extent not prohibited by applicable law.

(b) In addition to any other rules which the commissioner finds necessary

or desirable for the administration of this section, the commissioner may

promulgate regulations on the following:

(1) The requirements for a written plan for the establishment,

maintenance and operation of collective investment funds;

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(2) The method and frequency of valuation of such fund’s assets;

(3) The admission and withdrawal of accounts;

(4) Standards on self-dealing and conflicts of interest;

(5) Permissible management fees;

(6) The requirements for audits and financial reports of collective

investment funds; and

(7) The requirements for the establishment, maintenance and operation

of other investments permitted by subdivision (a)(3) of this section, including

the treatment of exemptions from the provisions of this section.

(c) A Vermont financial institution administering a collective investment

fund shall have exclusive management thereof, except as a prudent person

might delegate responsibilities to others.

(d) Each participating account in a collective investment fund shall have a

proportionate interest in all the fund’s assets.

(e) A Vermont financial institution administering a collective investment

fund may charge reasonable expenses incurred in operating the fund, but not

expenses associated with establishing or reorganizing a collective investment

fund.

(f) A Vermont financial institution may not advertise any collective

investment fund except in connection with the advertisement of the general

fiduciary services of the institution.

(g) A Vermont financial institution shall not issue any certificate

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representing an interest in a collective investment fund, except to provide a

withdrawing account with an interest in a segregated investment.

§ 14408. REGISTRATION AND SALE OF SECURITIES

A Vermont or state financial institution owning or holding stocks or other

securities in any fiduciary capacity may cause the same to be registered in the

name of a nominee. The word "nominee" shall be construed to include one or

more natural persons, a partnership, a corporation or similar entity. Any such

securities jointly held in a fiduciary capacity by a financial institution and

another, individual or corporate, may be registered in the name of a nominee

mutually satisfactory to the co - fiduciaries. Any fiduciary acting jointly with a

financial institution may authorize and direct the financial institution in writing

to register securities provided herein. An individual or corporate fiduciary

may deliver any such securities to a financial institution as custodian and may

authorize and direct the financial institution in writing to register such

securities in the name of a nominee. A financial institution having caused

securities to be registered in the name of a nominee as provided herein and

wishing or being required by the terms of its fiduciary agreement to deliver

them to one legally entitled thereto shall first cause them to be transferred into

the name of the one to receive delivery. Sales of any such securities made by a

financial institution under its fiduciary authority may be completed by delivery

of the security, endorsed by the nominee without the necessity of transfer

through a joint fiduciary, the trust - creator or the beneficiary.

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§ 14409. DISPOSITION OF SECURITIES UPON COURT ORDER;

LIABILITY FOR ACTS OF NOMINEE

Any fiduciary financial institution may dispose of any security under an

order or decree of any court of competent jurisdiction by delivery of the

security endorsed by the nominee as provided in section 14408 of this title in

the case of sales. Any fiduciary financial institution shall be absolutely liable

for any loss occasioned by the acts of the nominee or the financial institution

with respect to any securities registered in the nominee’s name. Both legal and

equitable ownership of all securities in the financial nominee’s possession or

subject to the financial nominee’s control shall be fully revealed by the

financial institution's records.

§ 14410. FIDUCIARY INVESTMENTS

(a) In the absence of an express prohibition in the instrument, judgment,

decree, power, order or other writing creating a trust or other fiduciary

relationship, a financial institution acting as fiduciary may invest and reinvest

funds held by it in a fiduciary capacity in the securities of an open - end or

closed - end investment company or investment trust registered under 15 U.S.C.

§ 80a-l to 80a - 64 (Investment Company Act of 1940), as that act exists now or

as amended in the future.

(b) The investments authorized in subsection (a) of this section may be

made even if the financial institution, or an affiliate thereof, is providing

services to the investment company and is receiving reasonable compensation

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for such services as an advisor, manager, sponsor, administrator, broker,

distributor, custodian, shareholder servicing agent, transfer agent, registrar or

any related services. At least annually, the financial institution shall disclose

in a clear and conspicuous manner to the principal of each fiduciary account

the fees it has charged or received from the investment company, or an

affiliate thereof, for such services and the basis upon which compensation is

calculated, expressed either in a specific amount or as a percentage of asset

value.

Subchapter 5. Safe Deposit Boxes

§ 14501. FAILURE TO PAY RENT; REMOVAL OF CONTENTS

(a) If the amount due for the use of any safe or box in the vaults of a

financial institution is not paid for one year, or such other period as may be

fixed in the contract of renting of such safe or box, the financial institution, at

the expiration thereof, may cause to be sent to the person in whose name the

safe or box stands on its books, a notice in writing that if the amount then due

for the use of the safe or box is not paid within 60 days from the date of the

notice, the financial institution will then cause the safe or box to be opened in

the presence of an officer duly authorized by the governing body and of a

notary public not an officer or in the employ of the financial institution, and

the contents thereof, if any, will be sealed up by the notary in a package upon

which the notary will distinctly mark the name and address of the person in

whose name such safe or box stands upon the books of the financial institution

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and the estimated value thereof. The package so sealed and addressed, when

marked for identification by the notary, will be placed by the notary in one of

the general safes or boxes of such financial institution. The notice shall be

sent in a postage prepaid registered letter directed to that person at his or her

post office address as recorded upon the books of the financial institution, and

at his or her last known address.

(b) The proceedings of the notary shall be fully set forth in the notary’s

own handwriting and official seal in a book to be kept by the financial

institution for that purpose. After such contents have been so placed in general

safes or boxes, the financial institution shall be required to use only the degree

of care required of a bailee for the sole benefit of the bailor notwithstanding

the contract of renting requires a higher degree of care during the period of

renting.

CHAPTER 205. BRANCHES

Subchapter 1. Intrastate Branching

§ 15101 . ESTABLISHMENT OF VERMONT BRANCHES

A Vermont financial institution shall not establish or maintain any branch

in this state for the general transaction of its business without the approval of

the commissioner. The commissioner shall approve the application for a

branch under this section if the commissioner finds that, based on an

application filed under subsection 11701(b) of this title, the application meets

the general good of the state as determined under section 11703 of this title. A

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Vermont financial institution may establish and maintain offices or facilities

that do not constitute a branch, without the approval of the commissioner;

provided, however, that establishment of a remote service unit by a Vermont

financial institution shall be subject to payment of the fee provided in

subdivision 19(a)(6) of this title.

Subchapter 2. Interstate Branching and Activities

§ 15201. ESTABLISHMENT OF BRANCHES OUTSIDE VERMONT

(a) A Vermont financial institution may establish a branch in any state

other than this state by merger, consolidation, acquisition or as otherwise

permitted by and in accordance with the laws of such host state and applicable

federal financial institution laws.

(b) A merger or consolidation pursuant to this section shall be in

accordance with and subject to the provisions of chapter 207 of this title.

(c) Not later than the date on which the required application is filed with

the responsible federal supervisory agency, the applicant in the establishment

of a branch under this section shall file an application on a form prescribed by

the commissioner. If the commissioner finds that the proposed transaction will

not be detrimental to the safety or soundness of the applicant and the applicant

has obtained and provided the commissioner with copies of all other required

approvals, the commissioner shall approve the application and the operation of

the branch outside this state.

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(d) A branch of a Vermont financial institution which is located in another

state may conduct any activity that is permissible for a branch in that state of a

financial institution incorporated under the laws of such state. In order to

engage in trust activities in an out - of - state branch, a Vermont financial

institution shall have previously obtained the commissioner's approval to

engage in trust activities under section 14403 of this title.

§ 15202. ESTABLISHMENT OF BRANCHES IN VERMONT BY

FINANCIAL INSTITUTIONS

(a) A state financial institution, foreign bank or national bank may

establish a branch in this state pursuant to this section and in accordance with

applicable state and federal financial institution laws.

(b) The establishment of a branch in this state under this section shall be

accomplished by:

(1) a merger, or consolidation with, or the purchase of all or

substantially all of the assets of, a financial institution or acquisition of a

branch located in this state; or

(2) establishment of a branch; provided, however, that the law of the

home state of any state financial institution or national financial institution

proposing to establish one or more de novo branches in this state must

expressly authorize, under conditions no more restrictive than those imposed

by the laws of this state as determined by the commissioner, the financial

institution whose home state is this state to engage in interstate branch

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establishment of de novo branches in that state. A financial institution which

is not a Vermont financial institution and is establishing a branch in this state

shall file a copy of the branch application, with any amendments thereto, with

the commissioner at the time the application is filed with any supervisory

agency.

(c) A merger or consolidation pursuant to this section involving a Vermont

financial institution shall be in accordance with and subject to the provisions

of chapter 207 of this title, except that the application requirement shall be

treated as a notice requirement and the commissioner may file an objection

with the applicable supervisory agency with jurisdiction over the transaction if

the transaction fails to comply with law. Approval of the commissioner under

chapter 207 of this title shall not be required.

(d) Any merger, consolidation or acquisition pursuant to this section shall

be subject to the provisions of section 14108 of this title.

(e) A state financial institution that establishes a branch in this state shall

comply with the provisions of chapter 15 of Title 11A, subchapter 10 of

chapter 21 of Title 11, except that section 15.06 of Title 11A and section 3136

of Title 11 shall not apply to any financial institution. Notwithstanding section

14103 of this title, a branch in this state of a state financial institution may

engage in the activities permitted of a financial institution organized under the

laws of this state, and may use the words "bank", "banking association", or

"trust company" when engaged in such activities. The organizational name of

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such financial institution shall not be deceptively similar to any name in use by

a person authorized to do business in this state.

(f) A branch of a state financial institution located in this state shall comply

with the laws of this state, including laws regarding community reinvestment,

consumer protection, fair lending, and the establishment of intrastate branches,

to the same extent as such laws apply to a branch in this state of a Vermont

financial institution. A branch in this state of a state financial institution may

conduct any activity that is permissible for a branch in this state of a Vermont

financial institution, but may not conduct any activity that is not permissible

for a branch in this state of a Vermont financial institution. If Vermont law

requires a Vermont financial institution or any branch of such financial

institution to obtain the commissioner's approval to engage in an activity, then

a branch of a state financial institution shall obtain the commissioner's

approval in the same manner as a Vermont financial institution.

(g) A branch of a national financial institution located in this state shall

comply with the laws of this state, including laws regarding community

reinvestment, consumer protection, fair lending, and establishment of intrastate

branches, to the same extent as such laws apply to a national financial

institution whose principal place of business is in this state.

(h) A national or state financial institution that maintains a branch in this

state pursuant to this section may establish and operate one or more remote

service units in this state, without the approval of the commissioner. Any

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remote service unit established pursuant to this subsection shall be subject to

the provisions of section 10302 of this title. Nothing in this section shall be

deemed to authorize any other person or entity to establish or operate any

remote service unit in this state that accepts deposits or that transfers funds

between accounts.

§ 15203. FOREIGN BRANCHES

(a) A foreign bank not licensed by federal authorities to establish a federal

branch in this state may transact business in this state only at a branch which is

licensed by the commissioner. The commissioner may, upon receipt of an

application of the foreign bank to establish a branch, issue a license to a

foreign bank to conduct such business in compliance with the laws of this state

if the commissioner finds that:

(1) the foreign bank and its management are of good character and

sound financial standing;

(2) the management of the foreign bank and proposed management of

the branch are adequate;

(3) the convenience and needs of the persons to be served by the

proposed branch will be promoted; and

(4) the foreign bank satisfies such other standards as the commissioner

may establish.

(b) The application required under this section shall be on a form approved

by the commissioner and shall contain a copy of all applicable federal

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approvals. Except as otherwise provided in this section, subsections 15202(b)

and (d) of this title, the license, application and operations of a branch licensed

under this section shall be subject to the requirements imposed on the

establishment and operation of branches of financial institutions organized

under the laws of this state. Except as otherwise provided in federal law, this

title or by rule or order of the commissioner, the operations of a foreign bank

at a branch in this state shall be conducted with the same rights, privileges and

powers as a financial institution incorporated under the laws of this state at the

same location and shall be subject to all the same duties, restrictions, penalties,

liabilities and conditions, and limitations that would apply under the laws of

the state to a financial institution incorporated under the laws of this state. The

commissioner may impose conditions or restrictions on the operations of a

branch of a foreign bank in this state.

§ 15204. OTHER ACTIVITIES

(a) Subject to subsection (b) of this section, a financial institution having

its principal office in a jurisdiction other than Vermont may maintain or

conduct the following offices or activities in this state:

(1) a temporary agency;

(2) an office used solely for internal operations of the institution to

which the public is not admitted for the conduct of financial institution

business;

(3) an automated teller machine owned by other than a Vermont

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financial institution; provided, however, that it does not accept deposits or

transfer funds between accounts;

(4) a loan production office;

(5) foreign exchange services; or

(6) any other financial institution related office or activity which the

commissioner determines may be maintained or conducted in this state.

(b) A financial institution shall obtain the commissioner’s written approval

prior to maintaining any office or conducting any activity described in

subsection (a) of this section. The commissioner may condition approval on

the existing availability of the activity in the state.

(c) Nothing in this section shall be deemed to permit a financial institution

to solicit or accept deposits, pay checks or loan money within this state, unless

it is otherwise authorized to engage in such activity in this state.

(d) Notwithstanding section 14103 of this title, a financial institution

authorized to engage in the activities permitted under this section may use the

words “bank”, “banking association”, “national association”, “financial

institution” or “trust company” when engaged in the activities permitted under

this section. A financial institution that is authorized to engage in loan

production in this state, but not authorized to approve loans in this state, shall

disclose in any printed material and advertising that it is engaged in loan

production. The organizational name of such financial institution shall not be

deceptively similar to any name in use by an authorized financial institution

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doing business in this state.

Subchapter 3. Branch Sales, Closings and Change of Control

§ 15301. BRANCH SALES, CLOSINGS AND CHANGE OF CONTROL

(a) Sales. A Vermont financial institution that proposes to sell one or more

of its branches shall file an application for a certificate of approval on a form

prescribed by the commissioner. Notwithstanding sections 11701(b) and

11703 of this title, the commissioner shall approve the application upon

finding that the proposed sale will not be detrimental to the safety and

soundness of the applicant.

(b) Closings. Any state financial institution which intends to close a

branch located in this state shall provide the commissioner with the same

notice required to be provided to the appropriate federal financial institution

supervisory agency pursuant to 12 U.S.C. § 1831r - 1.

(c) Notice of subsequent change of control. Each state financial institution

that has established and maintains a branch in this state pursuant to this chapter

shall give at least 30 days' prior written notice (or, in the case of an emergency

transaction, such shorter notice as is consistent with applicable state or federal

law) to the commissioner of any merger, consolidation or other transaction that

would cause a change of control with respect to such state financial institution

or any bank holding company that controls such financial institution, with the

result that an application would be required to be filed pursuant to the federal

Change in Financial Institution Control Act of 1978, as amended, 12 U.S.C.

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§ 1817(j), or the federal Bank Holding Company Act of 1956, as amended, 12

U.S.C. § 1841 et seq., or the Home Owners Loan Act, 12 U.S.C. § 1467a or

any successor statutes thereto.

CHAPTER 206. CONVERSIONS

§ 16101. CONVERSIONS

(a) General. The provisions of this chapter shall apply whenever a

national financial institution seeks to convert to a Vermont financial institution

or whenever a Vermont financial institution seeks to convert or amend its

charter in order to change its chartering authority, the nature or scope of its

organizational authority or to a different form of ownership; provided,

however, that conversion from a Vermont financial institution into a national

financial institution shall be as permitted in federal law, shall not require the

commissioner’s approval and federal law shall be controlling to the extent the

laws of this state are inconsistent.

(b) Types of conversions. The types of conversions permitted under this

chapter are as follows:

(1) Conversion from a national financial institution to a Vermont

financial institution;

(2) Conversion from a Vermont financial institution to a national

financial institution;

(3) Conversion of a special purpose financial institution into a universal

financial institution or into another form of special purpose financial

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institution;

(4) Conversion of a universal financial institution into a special purpose

financial institution;

(5) Conversion of a mutual financial institution into an investor-owned

financial institution or into a credit union under chapter 71 of this title;

(6) Conversion of a credit union under chapter 71 of this title into a

mutual financial institution; or

(7) Conversion of an investor-owned financial institution into a

mutual financial institution.

(c) Manner of conversion. Any Vermont financial institution may convert

under this chapter in the following manner:

(1) The governing body of the financial institution shall approve the

plan of conversion by at least a majority vote, unless a higher percentage is

required by the institution’s organizational documents;

(2) The approved plan of conversion, together with a certified copy of

the authorizing resolution adopted by the governing body of the financial

institution shall be submitted to the commissioner for approval pursuant to the

requirements and procedures of subchapter 7 of chapter 201 of this title, except

as provided in subsection (a) of this section;

(3) The plan of conversion, as approved by the commissioner, shall be

submitted to the investors or mutual voters of the institution, as the case may

be, for their approval at an annual meeting or at a special meeting called for

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that purpose as provided in subsections (e), (f) and (g) of this section; and

(4) The approved plan shall be finalized as provided in subsection (h) of

this section.

(d) Contents of plan of conversion. The plan of conversion shall include:

(1) The name of the institution and its location;

(2) The type of the institution that the resulting institution is to be;

(3) A method and schedule for terminating any nonconforming

activities that would result from such conversion;

(4) A statement of the competitive impact resulting from such

conversion, including the loss of particular financial services in the market

area resulting from such conversion;

(5) A statement that the conversion is subject to approval of the

commissioner, except for conversions from a Vermont financial institution to a

national financial institution;

(6) A statement that the conversion is subject to approval of the

institution's investors or mutual voters, as the case may be;

(7) In the case of a conversion involving a mutual or cooperative

financial institution, the plan shall ensure that the interests of depositors and

account holders in the net worth of the institution are treated equitably; and

(8) Such additional information as the commissioner may require.

(e) Notice to investors or mutual voters. Notice of the meeting shall be

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published at least once a week for three successive weeks in at least one

newspaper of general circulation in the county where the institution’s principal

office is located or in other newspapers as the commissioner may designate.

The notice shall be mailed to each investor of record or mutual voter at the

address on the books of the institution at least 30 days prior to the date of the

meeting.

(f) Voting requirements. A majority of each class of equity interest, or a

majority of the mutual voters of the institution casting votes, unless a higher

percentage is required by the institution’s organizational documents, is

necessary to approve the plan of conversion at the meeting. An affirmative

vote constitutes approval of the adoption of any amendments to the

organizational documents of the institution that are necessary to effectuate the

transaction.

(g) Rights of dissenting investors. For investor-owned institutions that are

converting under this chapter, the rights of investors dissenting to the

conversion are those specified in Title 11 or 11A, depending upon the

organizational form of the institution; provided, however, the rights of

dissenting investors in a national financial institution shall be governed by

federal law. To the extent that dissenters’ rights are not addressed in Title 11

or 11A or the rights contained in those titles are less beneficial to the

dissenting investors than those rights listed in the institution’s organizational

documents, the organizational documents shall govern.

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(h) Finalizing the plan of conversion. Except as provided in subsection (i)

of this section, the financial institution shall effect its conversion as follows:

(1) Upon approval by the investors or mutual voters of the institution, as

the case may be, the institution shall submit the executed conversion plan to

the commissioner, together with all necessary amendments to the institution’s

organizational documents, each certified by an officer of the institution.

(2) The commissioner shall issue to the resulting institution a certificate

specifying the name of the converting institution and the name and

organizational structure of the resulting institution. The resulting institution

shall file one copy of the certificate issued by the commissioner with the

secretary of state for recording. The certificate shall be conclusive evidence of

the conversion and the correctness of all proceedings relating to the conversion

in all courts and places. The certificate may be filed in any land records office

to evidence the new name in which property of the converting institution is to

be held.

(3) Unless a later date is specified in the conversion plan, the conversion

becomes effective upon filing of the certificate as provided in subdivision (2)

of this subsection and the former charter of the converting institution shall

terminate automatically. The commissioner may file or order any financial

institution to file conforming documents with the secretary of state.

(i) Completion of conversion into national financial institution. Upon

completion of a conversion into a national financial institution, the national

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financial institution shall certify in writing to the commissioner and the

secretary of state that the conversion has been completed under applicable

federal law. The charter of the converting financial institution shall terminate

automatically upon issuance of the national financial institution charter.

(j) If the commissioner disapproves the conversion plan, the commissioner

shall state the reasons for the disapproval in writing and furnish them to the

institution. The institution shall be given a reasonable opportunity to amend

the plan to eliminate the reasons for disapproval.

(k) Authority for expedited conversion. Notwithstanding any other section

of law or any organizational document of the financial institution, the

commissioner may order that a charter conversion become effective

immediately when the commissioner finds it is necessary for the protection of

depositors, investors or the public.

CHAPTER 207. MERGER, SHARE EXCHANGE,

CONSOLIDATIONS AND ACQUISITIONS

Subchapter 1. Applicability of Chapter; Approval

§ 17101. GENERAL PROVISIONS ON MERGERS, SHARE

EXCHANGES, CONSOLIDATIONS AND ACQUISITIONS

(a) The provisions of this chapter and Titles 11 and 11A govern mergers,

consolidations, acquisition of assets or assumption of liabilities undertaken by

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financial institutions subject to the laws of this state. References in this

chapter to mergers shall be deemed to include share exchanges, as applicable

in the circumstances.

(b) Commissioner’s approval. Following approval by a majority vote of

the governing body of each participating institution, unless a higher percentage

is required by either institution’s organizational documents, the plan of

merger, consolidation, acquisition or assumption, together with certified copies

of the authorizing resolutions adopted by the governing body of each

participating institution, shall be forwarded to the commissioner for approval

pursuant to chapter 201, subchapter 7 of this title; provided, however, the

approval of the commissioner shall not be required for any transaction in

which the resulting institution will be a national financial institution. If the

commissioner disapproves the plan, the commissioner shall state the reasons

for the disapproval in writing and furnish them to the participating institutions.

The institutions shall be given an opportunity to amend the plan to eliminate

the reasons for disapproval.

(c) Vote of investors or mutual voters. The plan of merger or

consolidation, as approved by the commissioner, shall be submitted to the

investors or mutual voters of the participating institutions for their approval at

an annual meeting or at a special meeting called for that purpose in the

following manner:

(1) Unless a greater percentage is required by the organizational

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documents of either financial institution, the plan of merger, consolidation,

acquisition or assumption must be approved by the investors or mutual voters

by each voting group entitled to vote separately on the plan by a majority of all

votes entitled to be cast on the plan by that voting group at the meeting called

for this purpose. The vote constitutes the adoption of the organizational

documents of the resulting institution, including amendments, contained in the

merger, or consolidation agreement.

(2) The rights of investors dissenting to the merger, or consolidation are

those specified in Title 11 or 11A, depending upon the organizational form of

the institution. To the extent that dissenters' rights are not addressed in Title

11 or 11A or these rights are less beneficial to the dissenting investors than

those rights listed in the institution's organizational documents, the

organizational documents govern.

(3) The rights of dissenting investors in a national financial institution

shall be governed by federal law.

(d) Executed plan; certificate; effective date. The following provisions

apply to the executed plan, certificate and effective date.

(1) Upon approval by the investors or mutual voters of the participating

institutions, an executive officer and the secretary of each institution shall

submit the executed plan of merger or consolidation to the commissioner,

together with the certified record of the vote of the investors or mutual voters

approving it, each certified by these officers.

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(2) Upon receipt of the items in subdivision (1) of this subsection and

evidence that the participating institutions have complied with all applicable

federal law and regulations, the commissioner shall issue to the resulting

institution a certificate specifying the name of each participating institution

and the name of the resulting institution. The resulting institution shall file a

copy of the certificate with the secretary of state for record. This certificate is

conclusive evidence of the merger or consolidation and of the correctness of

all proceedings relating to the merger or consolidation in all courts and places.

The certificate may be filed in any land records office to evidence the new

name in which property of the participating institutions is to be held.

(3) Unless a later date is specified in the certificate, the merger or

consolidation is effective upon filing of the certificate as provided in

subdivision (2) of this subsection and the authority of all but the resulting

institution shall terminate automatically upon filing. The commissioner may

file or order any financial institution to file conforming documents with the

secretary of state.

(4) Any plan of merger or consolidation may contain a provision that,

notwithstanding approval of the investors, mutual voters or the commissioner,

the plan may be abandoned at any time prior to the effective date of the merger

or consolidation by the governing body of any participating institution either at

the absolute discretion of the governing body or upon the occurrence of any

stated condition.

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(e) Chapter 208 of this title applies to mergers, consolidations, and

acquisitions made pursuant to this chapter.

(f) Authority of expedited mergers and consolidations. Notwithstanding

any other provision of law, or any organizational document of any

participating institution, following approval of the plan of merger or

consolidation by a majority vote of the governing body of each participating

institution and receipt by the commissioner of certified copies of the

authorizing resolutions adopted by the governing body of each participating

institution, the commissioner may order that the merger of the consolidation

become effective immediately if the commissioner believes that the action is

necessary for the protection of depositors or the public.

Subchapter 2. Mergers and Consolidations; Investor - owned Institutions

§ 17201. MERGERS AND CONSOLIDATIONS; INVESTOR - OWNED

INSTITUTIONS

(a) General. Any two or more investor - owned institutions may merge, or

consolidate into one investor - owned Vermont financial institution in

accordance with the procedures, and subject to the conditions and limitations,

set forth in this subchapter.

(b) Adoption of plan. The governing body of each participating institution

shall adopt, by a majority vote or higher if required by its organizational

documents, a plan of merger, or consolidation on such terms as mutually

agreed upon. The plan shall include:

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(1) The names of the participating institutions and their locations;

(2) With respect to the resulting institution: the name and location of its

principal office, branch offices and facilities; the name, address and occupation

of each director who is to serve until the next annual meeting of the investors;

the name and address of each officer;

(3) The amount of capital, the number and the par value of each class of

equity interest and provisions governing the manner and basis of converting

the equity interests of the participating institutions into equity interests or other

securities of the resulting institution and, if any equity interests of any of the

participating institutions are not to be converted solely into equity interests or

other securities of the resulting institution, provisions governing the amount of

cash, property, rights or securities of any other institution or corporation that is

to be paid or delivered to the holders of the equity interests in exchange for or

upon surrender of the equity interests. The cash, property, rights or securities

of any other institution or corporation may be in addition to or in lieu of the

equity interests or securities of the resulting institution;

(4) The amendments required to be made to the resulting institution's

organizational documents;

(5) A statement that the agreement is subject to approval of the

commissioner and of the investors of each participating institution;

(6) Provisions, if applicable, governing the manner of disposing of

equity interests of the resulting institution not taken by dissenting investors of

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the participating institutions;

(7) The anticipated effective date of such merger or consolidation; and

(8) Such other provisions and details as may be necessary to perfect the

merger or consolidation or as may be required by the commissioner.

(c) Commissioner’s approval. The commissioner shall approve the plan of

merger, or consolidation in accordance with subsection 17101(b) of this title.

(d) Vote of investors. The plan of merger, or consolidation, as approved

by the commissioner, shall be submitted to the investors of the participating

institutions for their approval at an annual meeting, or at a special meeting

called for that purpose, in accordance with subsection 17101(c) of this title.

Notice of the proposed transaction and of dissenters' rights, if any, shall be

given in accordance with applicable provisions of the charter and bylaws of the

participating institutions and applicable provisions of Title 11 or 11A.

(e) Executed plan; certificate; effective date. The executed plan certificate

and effective date shall be in accordance with subsection 17101(d) of this title.

(f) National financial institution as participant. If one of the parties to a

merger, or consolidation with a Vermont financial institution is an

investor - owned national financial institution, the participants shall comply

with all requirements imposed by federal law for such merger, share exchange,

or consolidation in addition to the requirements contained in this title and shall

provide evidence of such compliance to the commissioner.

§ 17202. MERGER OF INVESTOR - OWNED INSTITUTION WITH

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NATIONAL FINANCIAL INSTITUTION

(a) Nothing contained in the law of this state restricts the right of a

financial institution organized under chapter 202 of this title to merge or

consolidate into a resulting national financial institution. The corporate action

to be taken by the investor - owned institution and its rights and liabilities and

those of its investors are the same as those prescribed in section 17201 of this

title, except that approval of the commissioner is not required.

(b) Upon the effective date of the merger or consolidation, the authority of

the participating investor - owned Vermont financial institution shall terminate

automatically. The resulting national financial institution shall notify the

secretary of state of the termination.

Subchapter 3. Mergers and Consolidations; Mutual or

Cooperative Financial Institutions

§ 17301. MERGERS AND CONSOLIDATIONS; MUTUAL OR

COOPERATIVE FINANCIAL INSTITUTIONS

(a) General. Two or more mutual or cooperative financial institutions may

merge or consolidate into one financial institution organized under chapter 203

of this title in accordance with the procedures and subject to the conditions and

limitations set forth in this subchapter.

(b) Adoption of plan. The governing body of each participating institution

shall adopt, by a majority vote or higher if required by its organizational

documents, a plan of merger or consolidation on such terms as are mutually

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agreed upon. The plan shall include:

(1) The names of the participating institutions and their locations;

(2) With respect to the resulting institution: the name and location of its

principal office, branch offices and facilities; the name, address and occupation

of each director who is to serve until the next annual meeting of the mutual

voters; the name and address of each officer;

(3) The amount of capital and the manner of converting deposits,

accounts or shares of such institution into deposits, accounts or shares of the

resulting institution;

(4) The amendments required to be made to the resulting institution's

organizational documents;

(5) A statement that the agreement is subject to approval of the

commissioner and of the eligible account holders of each participating

institution;

(6) The mode for carrying the plan into effect;

(7) The anticipated effective date of such merger or consolidation; and

(8) Such other provisions and details as may be necessary to perfect the

merger or consolidation or as may be required by the commissioner.

(c) Commissioner's approval. The commissioner shall approve the plan of

merger or consolidation in accordance with subsection 17101(b) of this title.

(d) Vote of mutual voters. The plan of merger or consolidation, as

approved by the commissioner, shall be submitted to the mutual voters of the

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participating institutions for their approval at an annual meeting, or at a special

meeting called for that purpose, in accordance with the organizational

documents of the institution and applicable law.

(e) Executed plan; certificate; effective date. The executed plan, certificate

and effective date shall be in accordance with subsection 17101(d) of this title.

Subchapter 4. Mergers and Consolidations; Investor-Owned

and Mutual Financial Institutions

§ 17401 . MERGERS AND CONSOLIDATIONS; INVESTOR-OWNED

AND MUTUAL OR COOPERATIVE FINANCIAL

INSTITUTIONS

(a) Resulting mutual or cooperative financial institution. An investor-

owned financial institution may be merged into or consolidated with a mutual

or cooperative financial institution organized under the laws of this state in

accordance with the procedures and subject to the conditions and limitations

set forth in this subchapter and provided:

(1) The resulting mutual or cooperative financial institution shall

comply with the requirements of subsections 17301(a), (b), (c) and (d) of this

title except that the plan of merger or consolidation shall state the amount the

institution will pay for the equity interests in the investor-owned institution to

be acquired and additional information the commissioner considers

appropriate.

(2) The investor-owned institution to be merged or consolidated shall

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comply with subsections 17201(b) through (f) of this title.

(b) Resulting investor-owned institution. Except as the commissioner may

authorize pursuant subsection 17101(f) of this title, a mutual or cooperative

financial institution may not merge into an investor-owned institution

organized under the laws of this state without first converting into an

investor-owned institution under section 16101 of this title.

Subchapter 5. Acquisition of Assets; Assumption of Liabilities

§ 17501 . ACQUISITION OF ASSETS

(a) General. A Vermont financial institution may acquire the assets of, or

assume the liabilities of, any other financial institution authorized to do

business in this state. When the value of an acquisition or assumption is worth

25 percent or more of the assets of the acquiring, assuming or transferring

entity, the transaction shall be subject to and in accordance with the

procedures, and subject to the conditions and limitations, set forth in this

subchapter.

(b) Adoption of plan. The governing body of the acquiring or assuming

institution and the governing body of the transferring institution shall adopt by

majority vote a plan for acquisition, assumption or sale on terms that are

mutually agreed upon. The plan shall include:

(1) The names and types of the institutions involved;

(2) A statement setting forth the material terms of the proposed

acquisition, assumption or sale, including, if applicable, the plan for

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disposition of all assets and liabilities not subject to the plan;

(3) A statement that the entire transaction is subject to written approval

of the commissioner and, if the transaction involves all or substantially all of

the assets or liabilities of the transferring institution, the approval of the

transferring institution's investors or mutual voters;

(4) If an investor-owned institution is the transferring institution and the

proposed sale is not for cash, a clear and concise statement that investors of the

institution voting against the proposed sale are entitled to rights set forth in

subdivision 17101(c)(2) of this title; and

(5) The proposed effective date of the acquisition, assumption or sale

and all other information and provisions that are necessary to execute the

transaction or that are required by the commissioner.

(c) Commissioner's approval. The commissioner shall approve the plan of

merger or consolidation in accordance with subsection 17101(b) of this title.

(d) Vote of investors or mutual voters. If the transaction involves all or

substantially all of the assets or liabilities of the transferring institution or if

the transferring institution's organizational documents require, the plan of

acquisition, assumption or sale shall be presented to the investors or mutual

voters of the transferring institution for their approval, and their approval shall

be obtained in accordance with subsection 17101(c) of this title. If the

approval of investors is required, then investors dissenting to the transaction

have the rights set forth in subdivision 17101(c)(2) of this title.

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(e) Executed plan; certificate; effective date.

(1) If the plan is approved by the investors or mutual voters of the

transferring institution, an executive officer and the secretary of such

institution shall submit the executed plan to the commissioner, together with a

copy of the resolution of the investors or mutual voters approving it, each

certified by these officers.

(2) Upon receipt of the items set forth in subdivision (1) of this

subsection and evidence that the participating institutions have complied with

all applicable federal law and regulations, the commissioner shall certify, in

writing, to the participants that the plan has been approved and is in

compliance with the provisions of this title.

(3) Notwithstanding approval of the investors or mutual voters or

certification by the commissioner, the transferring institution's governing body

may, in its discretion, abandon such a transaction without further action or

approval by the investors or mutual voters, subject to the rights of third parties

under any contracts relating to the transaction.

(f) National financial institution as participant. If one of the participants

in a transaction under this section is a national financial institution, all

participants shall comply with such requirements as may be imposed by

federal law for such an acquisition, assumption or sale and provide evidence of

such compliance to the commissioner; provided that if the purchasing or

assuming institution is a national financial institution, approval by the

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commissioner is not required.

(g) Investor-owned institution acquiring mutual or cooperative financial

institution. A mutual or cooperative financial institution may not sell all or

substantially all of its assets to an investor-owned institution without prior

approval by the commissioner of a plan that provides fair and equitable

treatment of the depositors or members in the sale of the assets and distribution

of the proceeds.

(h) Applicability to transactions in ordinary course of business. This

subchapter does not apply to a transfer of assets of a financial institution in the

ordinary course of business that does not include any assumption of deposit

liabilities.

(i) Authority for expedited acquisitions. Notwithstanding any other

provision of law, or any organizational document of any participating

institution, the commissioner may order that the acquisition of assets and

assumption of liabilities become effective immediately if the commissioner

determines that the action is necessary for the protection of depositors or the

public. This action may be taken upon receipt of the following:

(1) Certified copies of the authorizing resolutions adopted by the

respective governing bodies of the acquiring or assuming financial institution

or financial institution holding company, and a copy of the plan of acquisition

of assets and assumption of liabilities approved by a majority vote of the

governing bodies of the acquiring or assuming financial institution or financial

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institution holding company and the transferring institution; or

(2) Notice, containing information required by the commissioner, from

any other person of intent to acquire the assets and assume the liabilities of a

financial institution or financial institution holding company.

(j) The applicant in any acquisition application filed with another

supervisory agency by a financial institution holding company that controls a

Vermont financial institution, or by a person that intends to acquire a Vermont

financial institution or financial institution holding company shall file a copy

of the application with the commissioner at the time the application is filed

with the other supervisory agency. The applicant shall notify the

commissioner of any amendments to the application by filing with the

commissioner a copy of any amendments that are required to be filed with the

other supervisory agency. A copy of any acquisition approval issued by the

other supervisory agency shall be filed with the commissioner by the applicant

within 30 days of its issuance. The commissioner shall not disclose any

information obtained pursuant to this section which is treated as confidential

by the other supervisory agency.

§ 17502. ASSUMPTION OF LIABILITIES

(a) Assumption of liabilities. Subject to the approval of the commissioner,

any Vermont financial institution may, by contract, assume all or any part of

the deposit and other liability of any other financial institution or financial

institutions and may accept in payment or part payment for the obligations so

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assumed, all or any part of the assets of the other financial institution; or may

so accept in payment or part payment, the notes or other undertakings of the

other financial institution, secured by a pledge to the assuming financial

institution, or secured by any other lien or trust for its benefit, with respect to

all or any part of the assets of the other financial institution or financial

institutions, at least equal in value to the amount of the deposit liability

assumed. Such contracts of assumption, notes, undertakings, liens or trust

agreements may be in any form approved by the commissioner which provides

for equality of treatment of all depositors and for the full payment of all

assumed deposits on demand. All depositors whose deposits are so assumed

shall be notified by mail of the assumption and any depositor objecting thereto

within 60 days of that notice shall be paid the full amount of the assumed

deposit, with interest to the date of the objection, computed at the proportional

part of the interest rate to be paid for that period by the Vermont financial

institution on other deposits, or if no rate has been determined, at the rate for

the interest period next preceding the notice, not to exceed the rate prescribed

by the directors for the then current period, if a rate has been so prescribed for

the period.

(b) Contracts for assumption of deposit liability. Contracts for the

assumption of deposit liability may be entered into independently of merger of

financial institutions or as a part of any such merger, and the commissioner

may authorize under the provisions of chapter 205 of this title the assuming

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financial institution to establish a branch at any location at which the other

financial institution might have conducted its business. However, such a

contract shall not be valid unless the governing bodies of the signatory

financial institutions have been authorized in regard thereto by a vote of the

investors or mutual voters of the financial institutions. That authorization

requires the affirmative vote, in the case of a mutual or cooperative financial

institution, of a majority of the mutual voters, and in the case of an

investor-owned financial institution, requires the vote provided in its

organizational documents for amending the charter and in any event, at least

the affirmative vote of a majority of the equity interests, as well as the

affirmative vote of a majority of each class of equity interest present and

voting at the meeting. All classes of equity interests may vote on the question

whether or not the rights of any class to vote generally have been suspended

under the terms of the charter by reason of nonpayment of dividends.

Subchapter 6. Change in Control

§ 17601. CHANGE IN CONTROL

(a) The applicant in any acquisition application filed under the federal

Bank Change in Control Act, the federal Savings and Loan Holding Company

Act or the Bank Holding Company Act by a holding company that controls a

Vermont financial institution, or by a person that intends to acquire a Vermont

financial institution or financial institution holding company shall file a copy

of the application with the commissioner at the time the application is filed

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with the appropriate federal supervisory agency. The applicant shall notify the

commissioner of any amendments to the application by filing with the

commissioner a copy of any amendments that are required to be filed with the

appropriate federal supervisory agency. A copy of any acquisition approval

issued by the appropriate federal supervisory agency shall be filed with the

commissioner by the applicant within 30 days of its issuance. The

commissioner shall not disclose any information obtained pursuant to this

section which is treated as confidential under federal law.

(b) Any other acquisition of a Vermont financial institution, or acquisition

of 25 percent or more of the equity interests of a Vermont financial institution

or a holding company controlling a Vermont financial institution subsidiary

that is not included in subsection (a) of this section, shall be considered a

change in control and subject to subsections (c), (d) and (e) of this section.

(c) Any person seeking to obtain control of a Vermont financial institution

or financial institution holding company controlling a Vermont financial

institution subsidiary shall be required to file an application with the

commissioner on a form prescribed by the commissioner containing the

following information:

(1) The name and address of each person by whom or on whose behalf

the acquisition of control is to be effected (hereinafter called "acquiring

party"), and

(A) if such person is an individual, his or her principal occupation

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and all offices and positions held during the past five years, and any crime

conviction during the past ten years;

(B) if such person is not an individual, a report of the nature of its

business operations during the past five years or for such lesser period as such

person and any predecessors thereof shall have been in existence; an

informative description of the business intended to be done by such person and

such person's subsidiaries; and a list of all individuals who are or who have

been selected to become directors or executive officers of such person, or who

perform or will perform functions appropriate to such positions. Such list

shall include for each such individual the information required by subdivision

(1)(A) of this subsection.

(2) The source, nature and amount of the consideration used or to be

used in effecting the acquisition of control, a description of any transaction

wherein funds were or are to be obtained for any such purpose, and the

identity of persons furnishing such consideration, provided, however, that

where a source of such consideration is a loan made in the lender's ordinary

course of business, the identity of the lender shall remain confidential, if the

person filing such statement so requests.

(3) Fully audited financial information as to the earnings and financial

condition of each acquiring party for the preceding five fiscal years of each

such acquiring party (or for such lesser period as such acquiring party and any

predecessors thereof shall have been in existence), and similar unaudited

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information as of a date not earlier than 90 days prior to the filing of the

statement.

(4) Any plans or proposals which each acquiring party may have to

liquidate such financial institution, to sell its assets or merge or consolidate it

with any person, or to make any other material change in its business or

organizational structure or management.

(5) The number of shares of equity interests which each acquiring party

proposes to acquire, and the terms of the acquisition, and a statement as to the

method by which the fairness of the proposal was determined.

(6) The amount of each class of any equity interest which is beneficially

owned or concerning which there is a right to acquire beneficial ownership by

each acquiring party.

(7) A full description of any contracts, arrangements or understandings

with respect to any equity interest in which any acquiring party is involved.

Such description shall identify the persons with whom such contracts,

arrangements or understandings have been entered.

(8) A description of the purchase of any equity interest during the 12

calendar months preceding the filing of the statement, by any acquiring party,

including the dates of purchase, names of the purchasers, and consideration

paid or agreed to be paid therefor.

(9) Copies of all agreements to acquire or exchange any equity interests.

(10) The terms of any agreement made with any broker - dealer and the

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amount of any fees, commissions or other compensation to be paid to any

broker - dealer.

(11) Such additional information as the commissioner may prescribe.

(d) The commissioner, in his or her discretion, may accept all or part of a

copy of an application filed with another supervisory agency that contains the

information required by subsection (c) of this section.

(e) The application shall be subject to the provisions of chapter 201,

subchapter 7 of this title.

CHAPTER 208. EFFECT OF MERGER, SHARE EXCHANGE,

CONSOLIDATION, CONVERSION OR ACQUISITION;

NONCONFORMING ACTIVITIES

Subchapter 1. Effect of Merger, Share Exchange,

Consolidation, Conversion or Acquisition

§ 18 101. EFFECT OF MERGER, SHARE EXCHANGE,

CONSOLIDATION, CONVERSION OR ACQUISITION

(a) Applicability. From and after the effective date of a merger, including

a share exchange, consolidation, conversion or acquisition, under chapters 205,

206 or 207 of this title, the resulting institution may conduct business in

accordance with the terms of the plan as approved and in accordance with this

chapter.

(b) Continuing entity. Whenever the authority of any participating or

converting institution has been terminated, the resulting institution shall be

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deemed to be a continuation of the entity of the participating or converting

institution such that all property of the participating or converting institution,

including rights, titles and interests in and to all property of whatsoever kind,

whether real, personal or mixed, and things in action, and every right,

privilege, interest and asset of any conceivable value or benefit then existing,

or pertaining to it, or which would inure to it, including appointments,

designations and nominations, and all other rights and interests as trustee,

personal representative, guardian and conservator, and in every other fiduciary

capacity, shall immediately by act of law and without any conveyance or

transfer and without further act or deed be vested in and continue to be that

property of the resulting institution; and such institution shall have, hold and

enjoy the same in its own right as fully and to the same extent as the same was

possessed, held and enjoyed by the participating or converting institution and

such resulting institution as of the time of the taking effect of such merger,

consolidation, conversion or acquisition shall continue to have and succeed to

all the rights, obligations and relations of the participating or converting

institution.

(c) Effect on judicial proceedings. All pending actions and other judicial

proceedings to which the participating or converting institution is a party shall

not be deemed to have been abated or to have been discontinued by reason of

such merger, consolidation, conversion or acquisition, but may be prosecuted

to final judgment, order or decree in the same manner as if such merger,

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consolidation, conversion or acquisition had not been taken; and such

institution resulting from such merger, consolidation, conversion or acquisition

may continue such action in its new name, and any judgment, order or decree

may be rendered for or against it which might have been rendered for or

against the participating or converting institution theretofore involved in such

judicial proceedings.

(d) Creditor's rights. The resulting institution in a merger, consolidation,

conversion or acquisition shall be liable for all obligations of the participating

or converting institution which existed prior to such merger, consolidation,

conversion or acquisition, and the merger, consolidation, conversion or

acquisition taken shall not prejudice the right of a creditor of the participating

or converting institution to have his or her debts paid out of the assets thereof,

nor shall such creditor be deprived of, or prejudiced in, any action against the

officers, directors, corporators or members of a participating or converting

institution for any neglect or misconduct.

(e) Exception. In the event of an acquisition of assets pursuant to section

17501 of this title, the provisions of subsections (b), (c) and (d) of this section

shall apply only to the assets acquired and the liabilities assumed by the

resulting institution; provided that the transferring institution retains sufficient

assets to satisfy all liabilities not assumed by the resulting institution.

(f) Powers and attributes of resulting organization. Whenever financial

institutions merge or consolidate, the resulting organization, except as

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provided in this subchapter, shall have, possess and own, but separately and

distinguishably as provided by this subchapter, all property, rights, powers,

franchises, privileges and appointments whether existing, contingent or future,

corporeal or incorporeal, tangible or intangible of every nature whatsoever of

each of the merging organizations. If any of the merging organizations are

acting or have been acting or have been nominated, appointed, delegated or

designated by any court, person, or otherwise to act as trustee, attorney, agent,

executor, administrator, receiver, assignee, guardian, or in any like capacity,

the resulting organization shall have, possess and be vested with and succeed

to all of the property, rights, powers, privileges, duties and obligations

appertaining to each such fiduciary capacity, without further or additional

appointment, obligation or designation. The resulting financial institution

shall be a continuation of the entity of each and all of the organizations so

merged; each such entity, however, remaining separable and distinguishable to

the extent provided in this subchapter. It may exercise the franchise of each of

the organizations separably and distinguishably as well as the composite

franchises of all. Except as provided in this subchapter, it shall hold, exercise

and perform all rights, powers, privileges, duties and obligations appertaining

to any and all trust, representative or fiduciary relationships of each of the

merged financial institutions, and shall be liable for all of the debts, contracts

and obligations of each of the merged financial institutions. Any such debt,

undertaking or obligations of any merged financial institution may be enforced

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against it as fully and effectively as it could have been against the merged

financial institution.

(g) Disposal of property and assets. The resulting financial institution shall

have the right to use, control, sell or dispose of all real and personal estate,

rights or interests of the merged financial institutions and convey the same by

deed, assignment, endorsement, contract or other conveyance, either in its own

name, or in the name of any merged financial institutions as hereinafter

provided, or in the names of both, as fully and effectively as the merged

financial institutions could have done; and may maintain suit in its own name

or in the name of any such financial institution, as provided in this subchapter,

or in the names of both, to foreclose or recover any title, right, demand or

claim, appertaining to the merged financial institutions. To this end and

except as provided in the contract of merger, the corporate existence of each of

the merged financial institutions shall be deemed and treated as having

continued each separably and distinguishably, for all purposes necessary or

convenient to liquidate the assets of any merged financial institutions. Any

receipt, assignment, endorsement, transfer, option, contract to sell, convey or

exchange, compromise, acquittance and release may be executed in its name or

in the name of the resulting financial institutions, or both. Any other thing

may be done in either or both of these names which may be necessary or

proper for the reduction to cash of any assets of a foreclosure of any rights or

titles or the doing of any other acts or things appropriate to the winding up of

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the affairs of the merging organization as a separate entity. Those contracts

and agreements shall be executed and those acts shall be done under the

control of the directors of the resulting organization.

Subchapter 2. Nonconforming Activities; Cessation

§ 18201. NONCONFORMING ACTIVITIES; CESSATION

(a) Applicability. If, as a result of a merger, consolidation, conversion or

acquisition pursuant to this title, the resulting institution is to be of a different

type or of a different character than any one or all of the participating or

converting institutions, such resulting institution shall be subject to the

conditions and limitations as set forth in this subchapter.

(b) Plan for termination. The plan of merger, consolidation, conversion or

acquisition shall set forth the method and schedule for terminating those

activities not permitted by the laws of this state for the resulting institution, but

which were authorized for any of the participating or converting institutions.

(c) Effective date. The plan of merger, consolidation, conversion or

acquisition shall state that from the effective date of such action, the resulting

institution shall not engage in any nonconforming activities, except to the

extent necessary to fulfill obligations existing prior to merger, consolidation,

conversion or acquisition, pursuant to subsection (d) of this section.

(d) Compliance with limitations. If, as a result of such merger,

consolidation, conversion or acquisition, the resulting institution exceeds any

lending, investment or other limitations imposed by this title, it shall conform

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to such limitations within such period of time as shall be established by the

commissioner.

(e) Divestiture. The commissioner may, as a condition to such merger,

consolidation, conversion or acquisition, require a nonconforming activity to

be divested in accordance with such additional requirements as he or she may

deem appropriate under the circumstances.

CHAPTER 209. CONSERVATION, LIQUIDATION AND INSOLVENCY

Subchapter 1. Applicability of Chapter; Payments Restrained to Preserve

Assets or Protect Depositors

§ 19101. APPLICABILITY TO VERMONT FINANCIAL INSTITUTIONS;

INDEPENDENT TRUST COMPANIES; STATE FINANCIAL

INSTITUTIONS

(a) The provisions of subchapters 1 through 4 of this chapter apply to

Vermont financial institutions. The provisions of subchapters 2, 3, and 4 of

this chapter shall also apply to independent trust companies organized and

regulated under chapter 77 of this title as if they were financial institutions.

(b) The provisions of subchapter 5 of this chapter shall apply to state

financial institutions doing business in this state.

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§ 19102. GOVERNOR'S PROCLAMATION

Whenever it appears to the governor that the public welfare and the equal

protection of depositors in Vermont financial institutions doing business in this

state require it, he or she may proclaim such bank holidays as in his or her

judgment are necessary. Those holidays, except as otherwise provided in the

proclamation, shall not be considered as business days for the transaction of all

banking business, including the demand or payment of deposits, and shall have

the incidents of a legal holiday for the purposes specified in Title 9A, Article

3.

§ 19103. BUSINESS RESTRICTED

During holidays and subject to the provisions of the proclamation, the

commissioner, in addition to all other powers conferred by law, may order any

Vermont financial institution to restrict all or any part of its business, and to

limit or postpone for any length of time the payment of any amount or

proportion of the deposits in savings, commercial, or any other department

thereof, separate and distinct from the other, as the commissioner may deem

necessary or expedient and may regulate further payments therefrom as to time

and amount, as the interest of the public or the financial institution or the

depositors thereof may require.

§ 19104. RESTRICTIONS CONTINUED AFTER HOLIDAYS

After those holidays, the order may be continued in effect as to any

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particular financial institution if, in the opinion of the commissioner,

circumstances warrant or require the continuance and the governor approves.

§ 19105. ORDERS AS TO DEPOSITS AND DEBTS DUE FINANCIAL

INSTITUTION

During those holidays and so long thereafter as the governor approves, the

commissioner may issue such orders as to the receipt and payment of deposits

by, and the creation and discharge of debts and obligations to or from a

Vermont financial institution under the commissioner’s supervision, as the

commissioner may deem necessary for the protection and preservation of the

public safety and convenience or the equal protection of those Vermont

financial institution’s depositors in view of then existing banking, business, or

other pertinent conditions. Those orders may apply to any Vermont financial

institution, as may be necessary for those purposes; and the orders may restrict

or regulate all business or any part of the business of a financial institution

affected thereby, including the time or manner or medium of payment, or

limitations on the amount or percentages of payment of deposits or of debts or

obligations, or the investment or the loaning of money, or the approval and

acceptance of security for new loans. The orders may classify financial

institutions or departments thereof or deposits or assets and liabilities and may

vary with the different classes, as may be required for fulfilling the purposes of

this section and sections 19102 through 19104 of this title.

§ 19106. WITHDRAWALS, RATEABLE SHARE OF DEPOSITOR'S

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INTEREST

While restrictions are in force on the withdrawal of the deposits in a

Vermont mutual or cooperative financial institution, except those imposed by

the financial institution under the provisions of its internal governance

documents, withdrawals shall be counted as a part of the rateable share of the

withdrawing depositor's interest in the assets of a mutual or cooperative

financial institution to which he or she was entitled at the time the restrictions

were imposed if final liquidation of the financial institution takes place before

all those restrictions are removed.

§ 19107. PUBLICATION OF ORDERS

Orders under sections 19103 through 19106 of this title may be

promulgated and notice thereof given in such manner as the commissioner

determines and may be amended, modified, changed, expanded, or revoked in

whole or in part whenever in his or her judgment circumstances warrant or

require.

§ 19108. APPEAL; RECEIVER

The propriety and necessity of the orders issued by the commissioner under

sections 19103 through 19107 of this title shall be open to review upon action

brought in the usual form by an aggrieved party within ten days to the superior

court of Washington County. No injunction may be issued without prior

notice to the commissioner, and the court, on motion of the commissioner,

may appoint a temporary receiver of a financial institution involved in those

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proceedings.

§ 19109. NEW COMMERCIAL OR SAVINGS DEPOSITS AUTHORIZED;

WITHDRAWALS

The commissioner, by order, may authorize Vermont financial institutions

thereafter to receive new commercial deposits or new savings deposits, and the

new deposits shall be special deposits and designated as new commercial

deposits or new savings deposits, as the case may be, and shall be segregated

from all other deposits. New commercial deposits shall also be segregated

from new savings deposits. They may be invested only in assets approved by

the commissioner as being sufficiently liquid to be available when needed to

meet any demands on account of those new deposits, which assets shall not be

merged with other assets of the institution, but shall be held in trust for the

security and payment of those new deposits, except that income from those

assets, to the extent authorized by the commissioner, may be used by the

financial institution for other proper purposes of the institution. The

withdrawal of those new deposits shall not be subject in any respect to

restriction or limitation under this section and sections 19102 through 19108 of

this title.

§ 19110. COSTS AND EXPENSES

Costs and expenses incurred by the commissioner in the exercise of powers

given under sections 19101 through 19109 of this title may be assessed by the

commissioner against the Vermont financial institutions concerned and, when

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so assessed, shall be paid by those financial institutions.

Subchapter 2. Financial Institution Conservators

§ 19201. APPOINTMENT AND BONDING OF CONSERVATORS

Whenever the commissioner deems it necessary in order to conserve the

assets of a Vermont financial institution for the benefit of the depositors and

other creditors thereof, the commissioner may appoint a conservator for the

financial institution and require of the conservator such bond and security as

the commissioner deems proper.

§ 19202. CONSERVATION OF ASSETS

Under the direction of the commissioner, the conservator shall take

possession of the books, records and assets of every description of the

Vermont financial institution and take such action as may be necessary to

conserve the assets thereof pending further disposition of its business as

provided by law.

§ 19203. POWERS OF CONSERVATOR

The conservator shall have all the rights, powers and privileges possessed

by receivers consistent with this subchapter and shall be subject to the

obligations and penalties to which receivers are subject.

§ 19204. RIGHTS OF INTERESTED PARTIES

During the time the conservator remains in possession of the Vermont

financial institution, the rights of all parties with respect thereto, subject to the

provisions of law, shall be the same as if a receiver had been appointed

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therefor.

§ 19205. FIDUCIARY POWERS; APPOINTMENT OF NEW TRUSTEE

FOR TRUST ACCOUNTS

The conservator shall have the right to exercise all the fiduciary powers

which the Vermont financial institution had been exercising. However, if all

of the beneficiaries, named in any trust that the financial institution for which

the conservator is appointed was trustee, desire another trustee appointed to

administer and manage the trust, the probate court may appoint a new trustee

for the trust.

§ 19206. EXPENSES; SALARY

All expenses of any such conservatorship shall be paid out of the assets of

the financial institution and shall be a lien thereon which shall be prior to any

other lien provided by law. The conservator shall receive as salary an amount

to be fixed by the governor.

§ 19207. WITHDRAWALS

While the financial institution is in the hands of the conservator appointed

by the commissioner, the commissioner may require the conservator to set

aside and make available for withdrawal by depositors and payment to other

creditors, on a rateable basis, such amounts as in the opinion of the

commissioner may safely be used for this purpose. The conservator may

borrow money on the assets of the financial institution to provide funds

therefor.

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§ 19208. DEPOSITS

In the commissioner’s discretion, the commissioner may permit the

conservator to receive deposits, but deposits received while the financial

institution is in the hands of the conservator shall not be subject to any

limitation as to payment or withdrawal, and those deposits shall be segregated

and shall not be used to liquidate any indebtedness of the financial institution

existing at the time that a conservator was appointed to it, or any subsequent

indebtedness incurred for the purpose of liquidating any indebtedness of the

financial institution existing at the time the conservator was appointed.

Deposits so received while the financial institution is in the hands of the

conservator shall be kept on hand in cash, invested in the direct obligations of

the United States, or deposited in financial institutions approved by the

commissioner.

§ 19209 . TERMINATION OF CONSERVATORSHIP

If the commissioner becomes satisfied that it may safely be done and that it

would be in the public interest, in the commissioner’s discretion, the

commissioner may terminate the conservatorship and permit the financial

institution to resume the transaction of its business subject to such terms,

conditions, restrictions and limitations as the commissioner may prescribe.

§ 19210. NOTICE TO DEPOSITORS OF TERMINATION OF

CONSERVATORSHIP

In case the commissioner, in the exercise of the commissioner’s discretion,

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is satisfied that it would be in the public interest to terminate the

conservatorship either with or without reorganization, before the conservator

shall turn back the affairs of the Vermont financial institution to its governing

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body, the commissioner shall cause to be published in a newspaper in the city,

town, or county in which the financial institution is located, a notice in form

approved by the commissioner stating the date on which the affairs of the

financial institution will be returned to its governing body. On the date of the

publication of that notice, the conservator shall immediately send to every

person who is a depositor in the financial institution a copy of that notice by

mail, addressed to the last known address of that person as shown by the

records of the financial institution, and the conservator shall send similar

notice in like manner to every person making a deposit in that financial

institution under section 19208 of this title after the date of that newspaper

publication and before the time when the affairs of the financial institution are

returned to its governing body.

Subchapter 3. Receivership and Dissolution

§ 19301. APPLICATION FOR RECEIVER; PETITION TO DIVIDE

LOSSES

If the commissioner ascertains in any manner that a Vermont financial

institution is insolvent or that it is unsafe for it to continue to transact business,

the commissioner shall apply to the superior court of Washington County for

the appointment of a receiver, unless, in case of a mutual or cooperative

financial institution, the commissioner deems it advisable to join with the

governing body in a petition to divide the losses among the depositors as

hereinafter provided.

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§ 19302. APPOINTMENT OF RECEIVER; NOTICE AND HEARING

The court shall thereupon issue a notice to the treasurer and executive

officer of such Vermont financial institution to appear at a time and place

therein named and show cause why a receiver should not be appointed. If

sufficient cause is not shown, the court shall appoint a receiver to take charge

of the property and effects of the financial institution, who shall be subject to

the superior court.

§ 19303. BONDING OF RECEIVER

The receiver shall give bonds to the state with sufficient surety, in a sum

fixed by the court, for the faithful discharge of his or her duties and for the due

accounting of the moneys received by the receiver.

§ 19304. COMMISSIONER AS RECEIVER

The commissioner shall be appointed as such receiver unless the superior

judge is satisfied that it would be inadvisable for the commissioner to act in

that capacity. The commissioner and successors of the commissioner as

receiver shall serve without compensation other than his or her stated

compensation as commissioner, but the commissioner shall be allowed clerical

and other expense necessary in the conduct of the receivership. The court may

appoint the commissioner’s successor in office as receiver. However, if a

change in the receivership, in the judgment of the superior judge, would be

against the financial interest of those concerned, the court may continue the

receiver in office at such reasonable compensation as the court may determine.

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If the deposits of the insolvent financial institution are insured by the Federal

Deposit Insurance Corporation, the superior judge, in his or her discretion,

may appoint as receiver of the financial institution the Federal Deposit

Insurance Corporation to serve without bonds and without compensation.

§ 19305. DUTIES AND RIGHTS OF RECEIVER

The receiver shall collect, sue and receive the debts and demands due and

the property that belong to the Vermont financial institution and shall convert

into cash its real and personal estate and, upon the approval of the superior

judge, may borrow money and pledge any part or all of the assets of such

financial institution as security for such loan and shall make report to the court

of the condition of the trust at such times as the superior judge orders.

§ 19306. FEDERAL DEPOSIT INSURANCE CORPORATION

If the Federal Deposit Insurance Corporation shall have been appointed

receiver of a closed Vermont financial institution, it may advance, with the

consent and approval of the superior judge, moneys to pay insured deposits or

for other proper purposes and shall have a lien upon all or any part of the

assets of such financial institution as the court may direct for the repayment of

such advances, which shall be deemed to be in the nature of a loan, but

provision shall be made in such order to secure ultimately as large a

percentage payment on account of uninsured deposits as would be finally

available for such deposits if such assets were not so pledged. The Federal

Deposit Insurance Corporation, whether or not acting as receiver, may become

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the purchaser of any assets of such Vermont financial institution which have

been offered for public bids, under such terms and conditions as the superior

judge may direct, provided that the purchase be approved by the superior judge

after hearing held on such reasonable notice by publication or otherwise as the

superior judge may direct.

§ 19307 . SUBROGATION

Whenever any Vermont financial institution shall have been closed, and the

Federal Deposit Insurance Corporation shall pay the insured deposit liabilities

of such closed institution, such corporation, whether or not it shall have

become a receiver of such closed financial institution, shall be subrogated to

the extent of such payment to all rights of the owners of such deposits against

such closed financial institution. The superior judge shall by order define the

manner and extent of such subrogation.

§ 19308. ORDER

When on hearing and after such reasonable notice as the superior judge may

direct, any order as to a lien upon assets of a closed Vermont financial

institution or of subrogation to the rights of depositors therein shall have been

made by such superior judge under the authority of sections 19304 through

19307 of this title, and no objections thereto shall have been filed within ten

days after the making of the order, the same order shall be binding and

effective to the extent necessary to secure the repayment of moneys which

shall have been advanced thereon.

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§ 19309. LIMITATION ON TIME FOR PROVING CLAIMS

By order, the superior judge shall limit the time for creditors of the

Vermont financial institution to present and prove their claims before the

receiver.

Within 60 days from the date of such order, the receiver shall cause notice

thereof to be given by publication for three weeks successively in a newspaper

printed and circulated in the county where such Vermont financial institution

is located. The time allowed for creditors to present and prove their claims

shall not be less than six months and may be extended as circumstances

require. Claims not presented within the time limit shall not share in the assets

of the Vermont financial institution.

§ 19310. SUBMISSION OF DISALLOWED CLAIMS TO SUPERIOR

JUDGE

Claims presented to the receiver, upon his or her request or upon that of a

person interested in the financial institution, or upon request of a creditor

within 20 days after notice of the disallowance of his or her claim in whole or

in part, shall be submitted to the superior judge for the purpose of proving the

same at such time and in such manner as the superior judge orders.

§ 19311. ORDER TO DISCONTINUE UNAUTHORIZED PRACTICES

Whenever it appears to the commissioner from the examination made by

him or her, or from any report made to him or her, that a Vermont financial

institution has committed a violation of its charter or of law, or is conducting

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its business and affairs in an unsafe or unauthorized manner, or that it or any

of its officers have failed to comply with all the rules, restrictions and

conditions provided by law, including the rules and requirements of the

commissioner made in conformity to law, the commissioner shall, by a written

order delivered to the treasurer of such organization and the offending officer

or officers, direct such organization and such officer or officers to discontinue

such illegal, unsafe or unauthorized practices or conduct, and to proceed in

strict conformity with the requirements of law.

§ 19312. FAILURE TO COMPLY WITH COMMISSIONER'S ORDER

If such financial institution or any of its officers refuses or neglects to

comply with such order, the commissioner may apply to the superior court of

Washington County for such an injunction or order against such financial

institution and its officers as the circumstances require.

§ 19313. AUTHORITY OF COURT TO ENFORCE COMMISSIONER’S

ORDER

The court shall thereupon issue a notice to the treasurer and president of

such financial institution and to any officer who is alleged in such petition to

have failed to proceed in conformity with the requirements of law, to appear at

a time and place named therein and show cause why an injunction or proper

remedial order should not be issued. If sufficient cause is not shown, the court

shall have power:

(1) To allow such financial institution to continue to transact business in

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conformity with the requirements of law subject to such orders, conditions or

restrictions as the evidence in the case and the interests involved shall require;

or

(2) If it appears that it is unsafe or inexpedient for such financial

institution to continue to transact business, to appoint a receiver or receivers to

take charge of the property and effects of the financial institution; and such

receivership shall be subject to the provisions of this subchapter applicable in

case of a receiver appointed on petition of the commissioner on ascertainment

of a financial institution's insolvency.

§ 19314. ACCOUNTING AND REPORT OF RECEIVER

Annually, on or before January 31, and at such other time as may be

required by the commissioner, so long as the receivership is continued, the

receiver of a financial institution shall make and transmit to the commissioner

a full statement of the affairs of such institution showing the nature and

amount of the assets and liabilities, also a true account of the expenses

incurred and not previously reported, giving the items thereof. Such report

shall be printed with and as a part of the annual report of the commissioner.

§ 19315. APPEAL

A person dissatisfied with an order or decree of the superior judge in any

proceeding arising under this chapter may appeal therefrom as in other cases.

Subchapter 4. Reorganization or Establishment of New Financial Institution

§ 19 401. PLAN FOR REOPENING OR ESTABLISHMENT OF NEW

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FINANCIAL INSTITUTION

If any Vermont financial institution has been closed by action of the

commissioner or its governing body and a receiver, either temporary or

permanent, appointed or petitioned for, the depositors thereof, representing not

less than 75 percent of the deposit liability, and with the approval and consent

of the commissioner, may join in a plan for the reopening or reorganization of

the financial institution or the establishing of a new financial institution, and

may select a committee of not more than 12 depositors to represent them for

the purpose of carrying the plan into effect. However, a depositor who has

been notified and does not refuse to give his or her consent within 15 days of

that notification shall be included in reckoning that 75 percent.

§ 19402. PETITIONING COURT FOR HEARING; NOTICE; HEARING;

APPROVAL OF PLAN

(a) Upon receiving the approval of the plan by the commissioner, the

committee or the commissioner may petition the superior court of Washington

County, setting forth the details of the plan which has been agreed upon and

requesting the court to set a day for hearing thereon. Thereupon the court shall

make an order fixing a day for the hearing of the petition, notice of which shall

be given to the depositors and the holders of equity interests in the financial

institution by publication once in each week for not less than two successive

weeks immediately preceding the date of hearing in some newspaper printed in

the county where the financial institution’s principal place of business is

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located, or in such other newspaper, having a general circulation in the county,

as the court may direct and by posting a copy of the notice upon the front door

of the financial institution.

(b) The court may adjourn the hearing from time to time and no further

notice shall be required. At the date of hearing, or any adjournment thereof,

the court shall take testimony, and if it appears that it is for the best interests of

the depositors that the plan be approved, the court may make an order

approving the same and fixing the terms and conditions upon which the

receivership may be terminated.

§ 19403. DEPOSITOR’S OBJECTION TO PLAN; RECEIVERSHIP

CONTINUED

If any of the depositors of the Vermont financial institution file written

objections to the approval of the plan and refuse to consent thereto, the court at

the hearing may direct the receiver to set aside assets of each class of the

receivership, in such amounts and character as the court finds to be just and

equitable. Upon such terms as may be just and equitable, the court shall

continue the receivership as to those assets and those depositors, and direct the

receiver to turn over the remainder of the assets of the financial institution in

his or her hands to the new or reorganized financial institution when directed

so to do by the commissioner, and discharge the receiver from further liability

in relation thereto.

§ 19404. DEPOSITS OF PUBLIC MONEY

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If, in any financial institution referred to in section 19401 of this title, there

are deposits of public money belonging to the state or any political subdivision

thereof, the state treasurer, if the deposit belongs to the state, and the treasurer

of any political subdivision thereof, by and with the consent of the governing

body of the political subdivision to which any such deposit may belong, may

join with other depositors of the financial institution in a plan for the

reopening or reorganizing thereof or the establishment of a new financial

institution, or the restricting of the withdrawal of deposits and for that purpose

may bind the state or political subdivision thereof after being duly authorized

so to do as herein provided, to limit withdrawals from that deposit over a

period of time and in accordance with the plan as may have been agreed to by

the other depositors of the financial institution joining in the plan.

§ 19405. DEPOSITS NOT PAID OR RECEIVED; BUSINESS

CONTINUED

When a proceeding has been brought under section 19401 of this title, a

deposit shall not be paid or received by that financial institution after the filing

of the petition until the final decree of the superior judge or, unless the

commissioner, in his or her discretion, and under such orders as the

commissioner may prescribe and from time to time alter and amend, permits

the financial institution to continue in business pending final decree.

§ 19406. ORDERS UNDER WHICH FINANCIAL INSTITUTION MAY

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CONTINUE BUSINESS

Those orders shall provide that deposits received after the petition is filed

and before the final decree shall be kept in cash or invested in such liquid

securities as the commissioner shall approve and segregated from the prior

assets of the financial institution and shall constitute a fund for the repayment

in full of deposits made after the filing of the petition. Those orders shall

further provide that no withdrawal of prior deposits may be permitted except

on such notice and to such specified amounts and in such specified percentage

as the commissioner determines clearly will not result in a preference.

§ 19407. EXPENSES; DEPOSITS RECEIVED AFTER PETITION FILED

The expense of operation between filing of the petition and final decree

shall be apportioned between the original assets and the new assets in such

manner as the superior judge may deem just. The deposits received between

the filing of the petition and the final decree shall not be reduced by the decree

except only to meet those expenses of operation, if any, or losses incurred with

respect to those segregated assets.

§ 19408. PETITION DENIED; RECEIVER TO WIND UP AFFAIRS

If the petition is denied, the commissioner shall apply for a receiver to wind

up the affairs of the financial institution, as provided in sections 19301 through

19315 of this title. In that case the deposits, if any, received after petition filed

and the assets resulting therefrom shall be administered separately from the

other assets and liabilities, and those assets shall be distributed to the

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depositors by the receiver as soon as possible after his or her appointment and

without deduction on account of the expense of the receivership except as

provided in section 19407of this title.

Subchapter 5. State Financial Institutions

§ 19501. PETITION; POWERS; PROCEDURE

(a) The commissioner may apply to the superior court of Washington

County to be appointed ancillary receiver of a state financial institution or any

branch or subsidiary of a state financial institution in hazardous financial

condition, if the commissioner finds that:

(1) the protection of customers or depositors in this state so requires;

(2) there are sufficient assets of the state financial institution located in

this state to justify the appointment of an ancillary receiver; and

(3) the Federal Deposit Insurance Corporation has not been appointed

receiver of the entity.

(b) The court may issue an order appointing the commissioner on whatever

terms it shall deem appropriate. The commissioner, as receiver, shall

administer or liquidate the assets and deposits of such financial institution

found in this state under the provisions of this chapter as though the entity

were a Vermont financial institution.

(c) If a person in the home state of the entity or the Federal Deposit

Insurance Corporation is appointed receiver subsequent to the appointment of

the commissioner under subsections (a) and (b) of this section, the

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commissioner shall notify the superior court. The court may release the

commissioner as receiver if the court finds that the interests of Vermont

customers or depositors of the entity are adequately protected in the

proceedings in the home state of the entity. The court may impose conditions

on the entity to assure protection of its Vermont customers or depositors.

(d) The filing or recording of the order with the superior court of

Washington County or the town clerk of the town in which its principal office

or place of business is located; or, in the case of real estate, with the town clerk

of the town where the property is located, and such filing or recording shall

impart the same notice that a deed, bill of sale or other evidence of title duly

filed or recorded with that town clerk would have imparted.

CHAPTER 210. MUTUAL OR COOPERATIVE HOLDING COMPANY

§ 20101. REORGANIZATION OF A MUTUAL OR COOPERATIVE

FINANCIAL INSTITUTION AS A MUTUAL HOLDING

COMPANY

A Vermont mutual or cooperative financial institution may reorganize,

under a plan of reorganization adopted by the financial institution and

submitted to and approved by the commissioner as provided in this chapter, as

a mutual holding company owning an investor-owned mutual holding

company subsidiary financial institution in the following manner:

(1) By taking or causing to be taken the following actions:

(A) Organizing a mutual holding company subsidiary financial

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institution in accordance with the procedures in section 20102 and chapter 202

of this title, the voting common stock or other ownership interest of which will

be owned by the mutual holding company emerging from the reorganization,

except otherwise permitted in section 20106 of this title;

(B) Transferring to the mutual holding company subsidiary financial

institution the substantial part of its assets and liabilities, including all of its

insured liabilities, in exchange for voting common stock or other ownership

interest of the mutual holding company subsidiary financial institution; and

(C) Adopting amended and restated organizational documents

changing its name, and conforming its organization, governance and powers to

those prescribed for a mutual holding company by section 20104 of this title;

or

(2) Pursuant to any other form of restructuring approved by the

commissioner.

§ 20102. PROCEDURE FOR ADOPTING A PLAN OF

REORGANIZATION

(a) Plan of reorganization. The plan of reorganization pursuant to which

the reorganization is to be carried out, and the proposed amended

organizational documents, shall be approved by the governing body of the

mutual or cooperative financial institution by resolution adopted by two - thirds

of the whole number of the governing body. The plan of reorganization, along

with the proposed amended organizational documents, shall then be submitted

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for adoption to a regular or special meeting of the mutual voters of the

financial institution called in the manner provided by its internal governance

documents. Copies or summaries of the plan and amended organizational

documents shall be enclosed with the notice of the meeting. Adoption of the

plan of reorganization shall be by the affirmative vote of two - thirds of the

mutual voters casting votes. A mutual voter may vote at such regular or

special meeting either in person or by proxy executed in writing by the mutual

voter or by his or her duly authorized attorney - in - fact.

(b) Notice to commissioner. A mutual or cooperative financial institution,

having adopted a plan of reorganization in accordance with subsection (a) of

this section, shall provide the commissioner with 60 days prior written notice

of the proposed reorganization. The notice shall include the plan of

reorganization, accompanied by certified copies of the votes of its governing

body and mutual voters required by subsection (a) of this section, and such

other relevant information as the commissioner shall require. Unless the

commissioner, within such 60 - day notice period, disapproves the proposed

mutual holding company reorganization, or extends for another 30 days the

period during which such disapproval may issue, the proposed reorganization

shall be deemed approved and the mutual or cooperative financial institution

providing such notice may proceed with the proposed reorganization. The

commissioner may disapprove any proposed mutual holding company

formation only if:

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(1) Such disapproval is necessary to prevent unsafe or unsound banking

practices;

(2) The financial or management resources of the financial institution

warrant disapproval;

(3) The mutual or cooperative financial institution does not furnish the

information required by this section;

(4) The mutual or cooperative financial institution does not comply with

subsection (a) of this section;

(5) The proposed reorganization would be unfair to depositors.

(c) Notice to depositors. After a mutual or cooperative financial institution

has complied with the provisions of subsections (a) and (b) of this section, it

shall give its depositors at least 60 days prior written notice of the effective

date of the reorganization. Such notice shall include a brief description of the

plan of reorganization and a statement of the depositor's right to withdraw any

amount deposited to his or her account without penalty. The form of such

notice shall be approved by the commissioner and shall be sent to each

depositor by first class mail. Any depositor objecting to the reorganization

within 60 days of such notice may withdraw any amounts on deposit and shall

be paid the full amount of the deposit, with interest to the date of payment

computed at the rate established by the deposit agreement or, in the absence of

an agreement, at the rate paid by the financial institution on other similar

interest bearing accounts. Any depositor who does not withdraw the amount

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deposited to his or her credit prior to the effective date of the reorganization

shall be deemed to have assented to the reorganization.

§ 20103. RETENTION OF CAPITAL ASSETS AT HOLDING COMPANY

LEVEL

With the approval of the commissioner, the plan of reorganization of a

mutual or cooperative financial institution may provide for the retention of

capital assets at the mutual holding company level, provided such retention

will not cause the mutual holding company subsidiary financial institution to

fail to meet any applicable capital adequacy requirement prescribed by state or

federal laws or regulations.

§ 20104. EFFECT OF REORGANIZATION; OWNERSHIP AND

GOVERNANCE

(a)(1) The organizational existence of the reorganizing mutual or

cooperative financial institution shall not terminate, and the mutual holding

company resulting from the reorganization shall be deemed to be a

continuation of the entity of such financial institution, not as a depository

institution but as a financial institution holding company. The depositors of

the mutual or cooperative financial institution immediately prior to the

reorganization shall be entitled to deposits in the mutual holding company

subsidiary financial institution of like amounts, interest rate and other terms,

without interruption of interest and such deposits shall continue to be insured

by the Federal Deposit Insurance Corporation up to the maximum amount

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provided by law. The depositors of the mutual or cooperative financial

institution immediately before the reorganization, shall, by virtue of the

reorganization, have proprietary interests in the net worth of the mutual

holding company of the same nature, rights and proportions as the proprietary

interests which they had in the mutual or cooperative financial institution

immediately prior to the reorganization, in lieu of such former interests.

Except as otherwise set forth in this section with respect to the rights of

depositors, creditors of the reorganizing mutual or cooperative financial

institution immediately prior to the reorganization shall be deemed to have

such rights as creditors solely with respect to the mutual holding company

subsidiary financial institution upon consummation of the reorganization.

(2) Except as otherwise specifically provided in the plan of

reorganization adopted pursuant to section 20102 of this title, upon

consummation of the reorganization into mutual holding company form, the

mutual holding company subsidiary financial institution shall by operation of

law be deemed to have succeeded to all rights of or in all tangible or intangible

property, franchises and interests of the mutual or cooperative financial

institution, including without limitation appointments, designations,

nominations, and all other rights and interests as trustee, executor,

administrator, registrar of stocks and bonds, guardian of estates, assignee and

every other fiduciary capacity, in the same manner and to the same extent as

such rights, franchises and interests were held or enjoyed by the reorganizing

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mutual or cooperative financial institution immediately prior to the effective

date of the reorganization, and without further additional assignment,

appointment or designation.

(b)(1) A mutual holding company shall not issue capital stock. Its net

earnings and net worth shall inure to the benefit of the persons who are from

time to time the savings depositors of its mutual holding company subsidiary

financial institution and any other persons acquiring proprietary interests in the

earnings and net worth of the mutual holding company, whether by merger or

otherwise. Such net earnings may be distributed among such depositors and

other persons at such times and in such equitable manner as the governing

body of the mutual holding company, in its discretion, may determine. Apart

from any such distributions, the proportionate proprietary interests of such

depositors and other persons in the net earnings and net worth of the mutual

holding company shall be realized only upon liquidation of the mutual holding

company after the claims of all of its creditors have been satisfied. The

proprietary interest of any depositor of the mutual holding company subsidiary

financial institution in the net earnings and net worth of the mutual holding

company shall terminate upon the complete withdrawal by such depositor of

his or her accounts. Neither the depositors of the mutual holding company

subsidiary financial institution nor any other persons acquiring proprietary

interests in the mutual holding company shall have any voting rights in the

organization.

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(2) The powers of the mutual holding company shall vest in its

corporators or governing body, as the case may be. The initial corporators or

directors shall consist of such of the persons who were serving as corporators

or directors of the reorganizing mutual or cooperative financial institution

immediately prior to the reorganization and as are named in the plan of

reorganization. Thereafter, the corporators or directors shall be chosen from

time to time in the manner set forth in the internal governance documents of

the mutual holding company. The management of the mutual holding

company shall be vested in its governing body, who shall be elected by the

corporators in the case of a mutual financial institution. The initial governing

body shall consist of such of the persons who were serving as the directors of

the mutual or cooperative financial institution immediately prior to the

reorganization and as are named in the plan of reorganization. Such persons

shall hold office until the first annual meeting of the corporators and until their

successors have been chosen and qualified. The governing body shall hold an

organizational meeting immediately following consummation of the

reorganization for the adoption of internal governance documents and the

election of officers in such manner as the internal governance documents may

prescribe. Any action by a mutual holding company which, if taken by a

business corporation, would require the approval of its shareholders under

chapters 10, 11, 12 or 14 of Title 11A, shall require the vote of concurrence of

the corporators of the mutual holding company and in such proportion of the

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corporators as would be required for the approval of similar action by

shareholders of a business corporation.

(3) The general purpose of a mutual holding company shall be

conducting and carrying on the business and activities of a financial institution

holding company. A mutual holding company shall not take deposits. It shall

have the general powers of business corporations as set forth in section 3.02 of

Title 11A and shall have the powers of, and be subject to the limitations on,

bank holding companies under the federal Bank Holding Company Act of

1956, as amended or the Savings and Loan Holding Company Act, as

amended, as the case may be. Without limiting the generality of the foregoing

and subject to provisions of applicable state and federal law, a mutual holding

company may:

(A) Invest in the stocks and securities of any depository institution;

(B) Acquire control of any depository institution;

(C) Merge or consolidate with or otherwise acquire another mutual

holding company;

(D) Merge or consolidate any subsidiary of the mutual holding

company with another subsidiary thereof or transfer all or a portion of the

assets of one such subsidiary to another;

(E) Make capital contributions and loans to its subsidiaries and

affiliates and otherwise assist them financially;

(F) Engage in, directly or indirectly through a subsidiary, any non-

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banking activity authorized for a bank holding company under state or federal

law or regulation;

(G) Issue capital debentures;

(H) Pledge the common stock of its subsidiaries to secure the

indebtedness of the mutual holding company, provided that the proceeds of

such indebtedness are used to fund the business operations, or to effect other

business purposes, of the mutual holding company or its subsidiaries; and

(I) Sell or transfer the common stock of its mutual holding company

subsidiary financial institution, provided that the commissioner has approved

the transaction, and provided further that it does not result in the mutual

holding company holding less than 51 percent of the outstanding stock of the

mutual holding company subsidiary financial institution.

(4) A mutual holding company may convert from mutual to

investor-owned form subject to the same procedures and requirements as are

applicable to the conversion of a mutual or cooperative financial institution to

investor-owned form under chapter 206 of this title.

(5) The mutual holding company shall obtain the commissioner's

approval before entering into any transaction described in subdivisions (b)(3)

(B), (C), or (D) of this section. In addition to any other applicable law

governing the approval of the transaction, the commissioner shall disapprove

any transaction which is unfair to the holders of the proprietary interests in the

mutual holding company.

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§ 20105. CHARTERING OF MUTUAL HOLDING COMPANY

SUBSIDIARY FINANCIAL INSTITUTION

(a) Procedures. The procedures for the organization of a mutual holding

company subsidiary financial institution shall be as prescribed in chapter 202

of this title, except that:

(1) A majority of the governing body of the reorganizing mutual or

cooperative financial institution may serve as the incorporators of the mutual

holding company subsidiary financial institution being formed and as the

petitioners seeking approval of its incorporation.

(2) The initial capital requirement of section 12103 of this title shall

not apply prior to the effective date of the reorganization.

(3) If the commissioner grants the petition under 12102 of this title, he

or she shall condition such approval upon the transfer by the reorganizing

mutual or cooperative financial institution to the mutual holding company

subsidiary financial institution (in organization), before such transferee shall

commence business, of assets having a value in excess of the amount of the

transferred liabilities, as determined by the commissioner, such that the mutual

holding company subsidiary financial institution will at the time of such

transfer meet all applicable net worth and capital adequacy requirements

prescribed by state or federal statutes or regulations.

(b) Filing of amended charter. Contemporaneously with consummation of

the reorganization, duplicate originals of the amended and restated charter

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adopted by the mutual or cooperative financial institution under section 20102

of this title, governing the continuing entity as a mutual holding company,

shall be filed in the office of the secretary of state. The amended and restated

charter of the continuing entity as a mutual holding company shall take effect

as of the date of the filing of such duplicate originals in the office of the

secretary of state.

§ 20106. ISSUANCE OF CAPITAL STOCK AND DEBENTURES BY

REORGANIZED SAVINGS FINANCIAL INSTITUTION

A mutual holding company subsidiary financial institution may issue up to

49 percent of its voting common stock to persons other than the mutual

holding company. Depositors of a mutual holding company subsidiary

financial institution at the time of commencement of any public offering of

voting common stock shall be given the opportunity to participate in such

offering in accordance with terms reasonably established by the governing

body. A mutual holding company subsidiary financial institution may issue

nonvoting stock, preferred stock, or capital debentures to the mutual holding

company or to any person other than the mutual holding company. The

issuance of stock or debentures by a mutual holding company subsidiary

financial institution shall be subject to the procedures and requirements of

chapter 204 of this title; provided, however, that the liquidation rights of any

preferred shareholders shall be limited to repayment of their original

investment in such shares and any dividends earned but unpaid prior to such

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liquidation.

Sec. 2a. 8 V.S.A. § 1024(11) is amended to read:

(11) The making of reports, disclosures, or returns required or permitted

by federal or state law.

Sec. 3. 8 V.S.A. § 1801 is amended to read:

§ 1801. PURPOSES

The expression “development credit corporation” hereinafter called the

corporation, as used in this chapter and section 1153 of this title, shall mean a

corporation, incorporated under the general laws of the state, the purposes of

which shall be:

* * *

Sec. 4. 8 V.S.A. § 2051 is amended to read:

§ 2051. ORGANIZATION

(a) Any seven or more residents of the state of Vermont, of legal age, who

have a common bond referred to in section 2055 of this title may organize a

credit union and become charter members thereof by:

* * *

(5)(b) Charges for services rendered may be assessed by the

commissioner in accordance with section 78(b) 19(a) of this title for credit

unions with assets of $30 million or more. Credit unions with less than $30

million in assets shall be charged $100.00 per service.

Sec. 5. 8 V.S.A. § 2052 is amended to read:

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§ 2052. AMENDMENTS

The articles of association or the bylaws may be amended as provided in the

bylaws. Amendments to the articles of association or bylaws shall be

submitted to the commissioner of banking, insurance, securities, and health

care administration who shall act upon the amendments within thirty 30 days.

Amendments shall become effective upon approval in writing by the

commissioner of banking, insurance, securities, and health care administration

and no fee may be charged for his approval.

Sec. 5a. 8 V.S.A. § 2055(c) is amended to read:

(c) Societies, associations, co-partnerships and corporations composed for

the most part of individuals who are eligible to membership may be admitted

to membership in the same manner and under the same conditions as

individuals, but may not borrow in excess of their holdings, except in the case

of loans to small businesses or nonprofit organizations made by credit unions

designated as community development credit unions subject to rules

promulgated by the commissioner of banking, insurance, securities, and health

care administration. Any credit union organized under this chapter may

become a member of a corporate central credit union.

Sec. 6. 8 V.S.A. § 2066a is added to read:

§ 2066a. APPLICABILITY OF OTHER LAWS

The provisions of sections 11501(c), 14107, 14203, 14204, 14205, 14211,

14302(d) and 14303 of this title shall apply to credit unions as if they were

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financial institutions as defined in subdivision 11101(32) of this title.

Sec. 7. 8 V.S.A. § 2069(a) is amended to read:

(a) The department of banking, insurance, securities, and health care

administration at least once every three years shall examine or cause to be

examined each credit union, but the commissioner may, in his or her

discretion, order such other examination or examinations as he or she may

deem to be necessary. Each credit union and all of its officers and agents shall

be required to give to representatives of the department full access to all

books, papers, securities, records and other sources of information under their

control; and for the purpose of the examination those representatives may

subpoena witnesses, administer oaths, compel the giving of testimony, and

require the submission of documents. Each credit union shall pay to the

department of banking, insurance, securities, and health care administration

examination fees as prescribed by section 78 sections 18 and 19 of this title,

which fees shall be billed when they are incurred, but there shall be no charge

for the first examination.

Sec. 8. 8 V.S.A. § 2070(b) is amended to read:

(b) Each credit union shall pay their pro rata share of department expenses

as apportioned by section 504 19 of this title.

Sec. 9. 8 V.S.A. § 2079(7) is amended to read:

Funds not used in loans to members may be invested:

* * *

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(7) in any investment legal for savings banks or trust companies in

Vermont financial institutions as they are defined in subdivision 11101(32) of

this title, but in no event common stock; or

Sec. 10. 8 V.S.A. § 2200(1) is amended to read:

(1) “Bank,” “savings and loan association,” “credit union,” and

“insurance company” shall mean institutions organized and regulated as such

under the laws of the United States or any state or territory of the United States

and which are engaged in the business of banking, and shall also include any

Vermont financial institution as defined in subdivision 11101(65) of this title,

any insured depository institution as such term is defined by the Federal

Deposit Insurance Act, 12 U.S.C. § 1813(c)(2), and a bank not organized

within the United States, or a United States or state branch or agency thereof,

which is conducting business pursuant to the International banking Act of

1978, 12 U.S.C. § 3101 et seq. For purposes of this chapter, “bank” shall also

include credit unions organized and regulated as such under the laws of the

United States or any state or territory of the United States.

Sec. 11. 8 V.S.A. § 2200 is amended to read:

§ 2200. DEFINITIONS

As used in this chapter:

(1) "Bank," "savings and loan association," "credit union," and

"insurance company" shall mean institutions organized and regulated as such

under the laws of the United States or any state or territory of the United

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States, and shall include any insured depository institution as such term is

defined by the Federal Deposit Insurance Act, 12 U.S.C. § 1813(c)(2), and a

bank not organized within the United States, or a United States or state branch

or agency thereof, which is conducting business pursuant to the International

Banking Act of 1978, 12 U.S.C. § § 3101 et seq.

(2) "Commercial loan" means any loan or extension of credit that is

described in section 46(1), (2) or (4) of Title 9 and that is in excess of

$25,000.00. The term does not include a loan or extension of credit for the

purpose of farming, as defined in section 6001(22) of Title 10.

(3) "Commissioner" means the commissioner of banking, insurance,

securities, and health care administration.

(4) "Control" means the possession, direct or indirect, of the power to

direct or cause the direction of the management or policies of a person,

whether through the ownership of voting securities, by contract other than a

commercial contract for goods or nonmanagement services, or otherwise,

unless the power is the result of an official position with or corporate office

held by the person. Control shall be presumed to exist if any person, directly or

indirectly, owns, controls, holds with the power to vote, or holds proxies

representing, ten percent or more of the voting securities or other interest of

any other person.

(5) "Holder" shall have the meaning set forth in section 1-201(20) of

Title 9A.

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(6) “Insurance company” shall mean an institution organized and

regulated as such under the laws of the state of Vermont or any state or

territory of the United States.

(6)(7) "Licensee" means any person subject to the provisions of section

2201 of this title.

(7)(8) "Mortgage broker" means any person who for compensation or

gain, or in the expectation of compensation or gain, directly or indirectly

negotiates, places, assists in placement, finds or offers to negotiate, place,

assist in placement or find mortgage loans, other than commercial loans, on

real property for others. The term shall not include real estate brokers or

salespersons, as defined in section 2211 of Title 26, who in connection with

services performed in a prospective real estate transaction, provide mortgage

information or assistance to a buyer, if such real estate broker or real estate

salesperson is not compensated for providing such mortgage information or

assistance in addition to the compensation received from the seller or buyer for

such real estate services. The term shall not include attorneys licensed to

practice law in this state acting in their professional capacity. The term shall

not include persons engaged in the foregoing activities solely in connection

with the sale, assignment, or other transfer of one or more previously

originated loans.

(8)(9) "Mortgage loan" means a loan secured primarily by a lien against

real estate.

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(9)(10) "Person" shall have the meaning set forth in section 128 of

Title 1.

(10)(11) "Sales finance company" means any person who has purchased

one or more retail installment contracts, as defined in sections 2351(5) and

2401(7) of Title 9, from one or more retail sellers located in this state. Taking

one or more retail installment contracts as security for a loan or loans shall not

be construed as purchasing for purposes of this definition.

Sec. 12. 8 V.S.A. § 2201(c)(4) is amended to read:

(c) No license shall be required of:

* * *

(4) a bank, savings and loan association, or credit union;

Sec. 13. 8 V.S.A. § 2210(a)(2) is amended to read:

(2) The licensee has violated any provisions of this chapter, sections

1211, 1256, 1260 10403 and 10404 of this title or chapters 4, 59 or 61 of Title

9, where applicable, or any rule or regulation lawfully made thereunder; or

Sec. 14. 8 V.S.A. § 2215 is amended to read:

§ 2215. PENALTIES

(a) The commissioner may:

(1) Impose an administrative penalty of not more than $1,000.00 for

each violation upon any person who violates or participates in the violation of

this chapter, sections 1211, 1256, 1260 10403 and 10404 of this title or

chapters 4, 59 or 61 of Title 9, or any lawful regulation or order issued

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thereunder; and

(2) Order any person to make restitution to any person injured as a

result of a violation of this chapter, sections 1211, 1256, 1260 10403 and

10404 of this title, or chapters 4, 59 or 61 of Title 9.

* * *

Sec. 15. 8 V.S.A. § 2216 is amended to read:

§ 2216. MORTGAGE LENDING; SPECIFIC REQUIREMENTS;

EXCEPTIONS

Every licensee engaging in the making of loans secured by a lien against

real estate located in this state, whether conducting its affairs as an agent or

principal and whether operating from facilities within the state or by mail,

telephone or by electronic means, shall comply with the general provisions of

this chapter unless exempted herein. A licensee making such loans through a

third person, shall only make loans through a person licensed as a mortgage

broker under this chapter, unless such third person is exempt from such

licensing provisions. Any lender who makes such loans through a third person

required to be licensed and not so licensed, in addition to being subject to all

applicable penalties under Vermont law, shall be responsible for the acts or

omissions of the third person as a principal is responsible for the acts and

omissions of its agent. Every licensee making loans secured by a lien against

real estate shall comply with sections 1211, 1256, 1260 10403 and 10404, and

subchapter 6 of chapter 55 subchapter 2 of chapter 200 of this title, and shall

VT LEG 127907.1

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also be subject to the following specific limitations:

* * *

(6) Any loan secured by a lien on real estate, except a commercial loan,

which does not contain a fixed rate or substantially equal payments for full

amortization within the repayment period shall conform to the provisions of

the commissioner's rules promulgated under section 1256 of this title, or to

federal regulations on alternative mortgages where applicable by reason of

federal law or action of the commissioner.

Sec. 16. 8 V.S.A. § 2222(a) and (d) are amended to read:

(a) For the purpose of discovering violations of this chapter, subchapter 6

of chapter 55, sections 1211, 1256, and 1260 subchapter 2 of chapter 200 and

sections 10403 and 10404 of this title, or chapters 4, 59 or 61 of Title 9, or

securing information lawfully required thereunder, the commissioner may at

any time, either personally or by a person or persons duly designated by him

or her, investigate the loans and business and examine the books, accounts,

records and files used therein, of every licensee and of every person whom the

commissioner believes to be engaged in the business described in section 2201

of this title, whether such person shall act or claim to act as principal or agent,

or under or without the authority of this chapter.

(d) Each licensee shall pay to the department examination, review and

investigation fees as prescribed by section 78 18 of this title, which fees shall

be billed when they are incurred. In addition to the powers set forth in

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section2210 of this title, the commissioner may maintain an action for the

recovery of examination, review and investigation costs as prescribed in

section 78 18 of this title in any court of competent jurisdiction.

Sec. 17. 8 V.S.A. § 2224 is amended to read:

§ 2224. ANNUAL REPORT

Annually, on or before March 1 May 1, each licensee shall file a report with

the commissioner giving such relevant information as the commissioner

reasonably may require concerning the business and operations during the

preceding calendar year of each licensed place of business conducted by such

licensee within the state. Such report shall be made under oath and shall be in

the form prescribed by the commissioner, who shall make and publish

annually an analysis and recapitulation of such reports.

Sec. 18. 8 V.S.A. § 2402(b) is amended to read:

(b) An independent trust company formed and authorized under this

chapter shall have the same fiduciary powers, duties and obligation as a bank

financial institution operating a trust department under chapter 59 204,

subchapter 4 of this title. An independent trust company formed under this

title shall have the privileges and be subject to the provisions granted or

contained in the general law governing the company and in this chapter, except

where the general law governing the company is inconsistent with this chapter.

In case of conflict between the general law governing the company and this

chapter, this chapter shall control. Such companies shall not be required to

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make any annual report except as provided in this chapter. Except as provided

in this chapter, chapter 59 204, subchapter 4 and chapter 62 section 12602 of

this title, no person shall engage in a trust business in this state without first

obtaining a certificate of authority from the commissioner.

Sec. 19. 8 V.S.A. § 2403(e) is amended to read:

(e) Each application for a certificate of authority shall be accompanied by

an application fee as provided in section 78 19 of this title, for new financial

institutions.

Sec. 20. 8 V.S.A. § 2405(f) is amended to read:

(f) Any independent trust company that maintains one or more offices in

this state may be assessed and, if assessed, shall pay assessment and

examination fees at a rate determined by the commissioner pursuant to sections

78 and 504 18 and 19 of this title.

Sec. 21. 8 V.S.A. § 2406(b) is amended to read:

(b) For purposes of this section, an independent trust company organized

under the laws of a jurisdiction other than Vermont shall mean an entity that is

organized and regulated in a manner that is substantially similar to an

independent trust company formed under this chapter by whatever name, but

which is not a bank or special purpose bank financial institution within the

meaning of subdivision 11101(32) of this title.

Sec. 22. 8 V.S.A. § 2411 is amended to read:

§ 2411. UNSAFE CONDITION; RECEIVERSHIP

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If the commissioner finds a deficiency in capital or other unsafe or unsound

condition of an independent trust company has not been remedied within the

time prescribed under an order of the commissioner issued pursuant to this

chapter, the commissioner may apply to the superior court in Washington

County, to be appointed receiver for the liquidation or rehabilitation of the

company. The expense of the receivership shall be paid out of the assets of the

independent trust company. The provisions of chapter 63 209, subchapters 2,

3 and 4 of this title shall apply to an independent trust company formed or

regulated under this chapter as if the independent trust company were a bank

financial institution to the extent applicable.

Sec. 23. 11 V.S.A. § 3012(b) is amended to read:

(b) A limited liability company or a foreign limited liability company

engaging in a business subject to any other provisions of law of this state

governing or regulating business may be formed or authorized to transact

business under this chapter only if permitted by, and subject to all limitations

of, the other statute. The following shall not be formed or authorized to

transact business under this chapter:

(1) banks, savings and loan associations and credit unions regulated

under Title 8.

(2) insurance companies regulated under Title 8.

(3) railroad companies regulated under Title 19.

Sec. 24. 11 V.S.A. § 3291(a)(2)(A) is amended to read:

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(a)(1) Any lawful partnership may become a limited liability partnership

pursuant to this section.

(2) A limited liability partnership or a foreign limited liability

partnership engaging in a business subject to any other provisions of law of

this state governing or regulating business may be formed or authorized to

transact business under this chapter only if permitted by, and subject to all

limitations of, the other statute. The following shall not be formed or

authorized to transact business under this chapter:

(A) banks, savings and loan associations and credit unions regulated

under Title 8.

Sec. 25. 26 V.S.A. § 2214(c) is amended to read:

(c) If a deposit is not reasonably expected to earn a substantial amount of

interest, the broker shall place the deposit in a pooled interest-bearing trust or

escrow account and direct that the interest be remitted to the Vermont housing

finance agency in accordance with the provisions of 8 V.S.A. § 920 14210.

Sec. 26. 8 V.S.A. § 4871 is amended to read:

§ 4871. EXAMINATIONS BY COMMISSIONER

The commissioner shall examine without notice the condition and affairs of

each licensee at least once every two years. In connection with any

examination, the commissioner may examine on oath any licensee, and any

director, officer, employee, customer, creditor or stockholder of a licensee,

concerning the affairs and business of the licensee. The commissioner shall

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ascertain whether the licensee transacts its business in the manner prescribed

by law and the regulations issued hereunder. Failure to pay the examination

fee as prescribed in section 78 sections 18 and 11501 of this title within thirty

30 days of receipt of demand from the commissioner shall automatically

suspend the license until the fee is paid. In the investigation of alleged

violations of this chapter, the commissioner may compel the attendance of any

person or the production of any books, accounts, records and files used

therein; and may examine under oath all persons in attendance pursuant

thereto.

Sec. 27. SECTIONS REPEALED

Sections 1 through 5, 71 through 79, 501 through 1709, 1831 through 1917

and 2301 through 2304 of Title 8 are repealed.

Sec. 28. RULES OF THE DEPARTMENT OF BANKING, INSURANCE,

SECURITIES, AND HEALTH CARE ADMINISTRATION

The rules of the Department of Banking, Insurance, Securities, and Health

Care Administration adopted pursuant to the sections repealed in Sec. 27 of

this act shall continue in full force and effect until modified or repealed.

Sec. 29. TRANSITIONAL PROVISIONS

(a) This act which enacted chapters 200 through 210 of Title 8 and

repealed the sections referred to in Sec. 27 of this act applies to all bank

agencies, branches and offices, bank and trust companies, banks, commercial

banks, cooperative savings and loan, savings banks, both stock and mutual,

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and trust subsidiaries in existence on its effective date that were organized

under any general statute of this state relating to such entities or by special act

of the Vermont general assembly. Any bank agencies, branches and offices

and bank and trust companies, banks, commercial banks, cooperative savings

and loan, savings banks, both stock and mutual, and trust subsidiaries validly

in existence on the date of enactment are not required to obtain any additional

approval to continue their existence and activities under this act.

(b) Where any provision of a statute repealed by this act is substantially

reenacted in this act, the law shall be deemed to have continued in force from

the first enactment as if no enactment and repeal had taken place. The

provisions of this act, so far as they are the same as those of existing laws shall

be construed as a continuation of those laws and not as a new enactment. The

repeal by this act of any provisions of law shall not revive any law repealed or

superseded before this act takes effect; nor shall the repeal affect any act done,

liability incurred, or any right accrued or vested, or affect, abate or prevent any

suit or prosecution pending or to be instituted to enforce any right or penalty

or punish any offense under the authority of the repealed laws; nor shall the

repeal affect the validity of any contract to which the state, or any agency of

the state, is a party in interest.

Sec. 30. RECIPROCITY SECTION

In the event the provision on reciprocity of the establishment of de novo

interstate branches, 8 V.S.A. § 15202(b)(2), is declared void or any part of it

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declared invalid, then all Vermont financial institutions or national financial

institutions with their principal place of business in this state that are merged

or consolidated or whose branches are acquired to establish one or more

interstate branches in this state after the provision is declared void or the part

of it is declared invalid shall be required to be in existence for at least five

years before it or they may be merged, consolidated or acquired, and the de

novo establishment of interstate branches will no longer be permitted in this

state and the provisions that so provide shall be amended to conform to the

provisions of this section. The commissioner shall be authorized to

promulgate a rule that incorporates the provisions of this section, provided,

however, the provisions of this section shall be given full force and effect

whether or not such a rule is promulgated by the commissioner.

Sec. 31. 27 V.S.A. § 141(c) is added to read:

(c) If a mortgaged property includes a homestead, any amendment to the

mortgage which increases the amount of the indebtedness secured thereby or

extends the date of maturity thereof, shall be executed and acknowledged by

both spouses. The failure to obtain the written spousal consent shall not affect

the validity or priority of such amendment, but the lien created thereby shall be

inoperative so far only as relates to the rights of homestead of such spouse in

the mortgaged premises under chapter 3 of this title, provided the amendment

is challenged by such spouse before his or her homestead interest is otherwise

extinguished.

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Sec. 32. 27 V.S.A. § 410 is added to read:

§ 410. LIEN PRIORITIES

(a) Definitions. For purposes of this section, the following definitions shall

apply:

(1) “Debtor” means a person who owes payment or other performance

of an obligation secured, but if the debtor and the owner of real estate are not

the same person, the term means the owner of real estate in any provision of

this section dealing with collateral.

(2) "Future advances" means funds advanced to a debtor, or other

obligations incurred on behalf of a debtor, by a mortgagee after the debtor

executes a mortgage.

(3) "Future advances made to protect collateral" means future advances

made or incurred:

(A) for the reasonable protection of the mortgagee’s interest in the

collateral, such as payment of real property taxes, hazard insurance premiums,

or maintenance charges imposed under a common interest community

declaration or other restrictive covenant; or

(B) under a mortgage, created to enable completion of a

contemplated improvement, that secures an obligation which the debtor

incurred at the time of execution of the mortgage for the purpose of making an

improvement of the real estate in which the mortgage interest is given.

(4) A future advance is made “pursuant to commitment” if the

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mortgagee is bound at the time the mortgage is created to make it, whether or

not a default or other event not within its control has relieved or may relieve it

from its obligation. A future advance made “pursuant to commitment” shall

also include advances and readvances made pursuant to an agreement whereby

the debtor is entitled to borrow and reborrow sums advanced thereunder.

(b) Lien priorities; future advances.

(1) An obligation secured by a mortgage may include future advances,

whether or not future advances are made pursuant to commitment.

(2) A future advance made to protect collateral is secured by a mortgage

even though the mortgage does not provide for future advances.

(3) Except as expressly set forth in Title 9, chapter 51, subchapter 1, a

future advance made under a recorded mortgage takes priority as of the date of

the recording:

(A) if made pursuant to commitment, to the extent of the outstanding

future advances that do not exceed the maximum amount stated in the

mortgage;

(B) if not made pursuant to commitment, to the extent of future

advances that are outstanding before the mortgagee receives written notice of

the intervening interest.

(4) A future advance made to protect collateral takes priority as of the

date a mortgage is recorded, even though the mortgagee has received written

notice of an intervening interest at the time the future advance is made.

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(c) If a mortgaged property includes a homestead within the meaning of

chapter 3 of this title, any future advance made pursuant to commitment shall

not require spousal consent pursuant to section 141 of this title, provided that

such written spousal consent to the mortgage was previously obtained or was

not required at the time of the making of the mortgage.

(d) In the case of conflict between this section and any other provision of

law, except for the provisions of Title 9A, this section shall control.

Sec. 33. 32 V.S.A. § 5836 is amended to read:

§ 5836. FRANCHISE TAX ON BANKING CORPORATIONS AND LOAN

ASSOCIATIONS FINANCIAL INSTITUTIONS

(a) A tax is imposed for each calendar month or part thereof upon the

franchise or privilege of doing business in this state of every corporation

which is a bank, savings bank, savings institution, trust company, and every

savings and loan association, or building and loan association, financial

institution as defined in subdivision 11101(32) of Title 8 that has a business

location in this state; provided, however, that a merchant bank organized under

section 12603 of Title 8 and an uninsured bank organized under section 12604

of Title 8 shall not be considered to be financial institutions for purposes of the

tax imposed by this section.

* * *

(i) An independent trust company established pursuant to chapter 77 of

Title 8 is not a bank, or trust company financial institution within the meaning

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of this section.

* * *

Sec. 33a. STUDY AND LEGISLATIVE RECOMMENDATIONS

The Department of Banking, Insurance, Securities, and Health Care

Administration and the Office of the Attorney General shall study the impact

of The Gramm-Leach-Bliley Financial Modernization Act of 1999 (P.L. 106-

102), on consumer financial privacy issues and shall make recommendations to

the legislature by January 5, 2001 on the following issues:

(1) whether, and to what extent, entities engaged in financial activities

should be included within chapter 200, subchapter 2 of Title 8, relating to

financial privacy;

(2) under what circumstances a consumer’s consent should be required

before information can be shared with third parties; and

(3) how to protect the privacy of customers of financial institutions

without unduly inhibiting the free flow of commerce or legitimate law

enforcement activities.

Sec. 34. EFFECTIVE DATE

This act shall take effect January 1, 2001, except for Sec. 5a which shall

take effect on July 1, 2000, and Secs. 2a, 31, 32 and 33a which shall take

effect on passage. Secs. 31 and 32 are intended to clarify existing law.

Approved: May 24, 2000

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