KRS 286.11-015: Permissible investments -- Power of commissioner to define permissible

investments -- All permissible investments deemed to be held in trust for

benefit of purchasers and holders.

(1) Every licensee shall, at all times, maintain permissible inves tments that have a

market value that is computed in accordance with generally accepted accounting

principles. These investments shall not be less than the aggregate amount of all

outstanding payment instruments.

(2) Except to the extent otherwise limited i n subsection (5) of this section, the

following investments are permissible for a licensee:

(a) Cash, time deposits, savings deposits, demand deposits, a certificate of

deposit, or senior debt obligation of an insured depository institution as

defined in 12 U.S.C. sec. 1813 or as defined under 12 U.S.C. sec. 1781;

(b) Banker's acceptance or bill of exchange that is eligible for purchase upon

endorsement by a member bank of the federal reserve system and is eligible

for purchase by a federal reserve bank;

(c) An investment bearing a rating of one (1) of the three (3) highest grades as

defined by a nationally recognized organization that rates securities;

(d) An investment security that is an obligation of the United States or a

department, agency, or instrumentality thereof; an investment in an obligation

that is guaranteed fully as to principal and interest by the United States; or an

investment in an obligation of a state or a governmental subdivision, agency,

or instrumentality thereof;

(e) Receivables that are payable to a licensee from its agents, in the ordinary

course of business, pursuant to contracts which are not past due or doubtful of

collection if the licensee does not hold, at one (1) time, receivables under this

paragraph from any one (1) person aggregating more than ten percent (10%)

of the licensee's total permissible investments. A receivable is deemed past

due or doubtful of collection if not remitted to the licensee in five (5) business

days or less; and

(f) A share or certificate issued by an open-end management investment company

that is registered with the United States Securities and Exchange Commission

pursuant to the Investment Companies Act of 1940, 15 U.S.C. secs. 80a -1 et

seq., and whose portfolio is restricted by the management compa ny's

investment policy to investments specified in paragraphs (a) to (d) of this

subsection.

(3) The following investments are permissible under this section, but only to the extent

specified as follows:

(a) An interest -bearing bill, note, bond, or debentu re of a person whose equity

shares are traded on a national securities exchange or on a national over -the-

counter market, if the aggregate of investments under this paragraph do not

exceed twenty percent (20%) of the total permissible investments of a licensee

and the licensee does not, at one (1) time, hold investments under this

paragraph in any one (1) person aggregating more than ten percent (10%) of

the licensee's total permissible investments;

(b) A share of a person traded on a national securities ex change or a national

over-the-counter market or a share or certificate issued by an open -end

management investment company that is registered with the United States

Securities and Exchange Commission pursuant to 15 U.S.C. secs. 80a -1 to

80a-64, and whose p ortfolios are restricted by the management company's

investment policy to shares of a person traded on a national securities

exchange or a national over-the-counter market, if:

1. The aggregate of investments under this paragraph does not exceed

twenty percent (20%) of the total permissible investments of a licensee;

and

2. The licensee does not, at one (1) time, hold investments under this

paragraph in any one (1) person aggregating more than ten percent

(10%) of the licensee's total permissible investments; and

(c) A demand -borrowing agreement made to a corporation or a sub sidiary of a

corporation whose securities are traded on a national securities exchange, if:

1. The aggregate amount of principal and interest outstanding under

demand-borrowing agreements under this paragraph does not exceed

twenty percent (20%) of the tot al permissible investments of a licensee;

and

2. The licensee does not, at one (1) time, hold principal and interest

outstanding under demand -borrowing agreements under this paragraph

with any one (1) person aggregating more than ten percent (10%) of the

licensee's total permissible investments.

(4) The aggregate of investments under subsection (3) of this section shall not exceed

fifty percent (50%) of the total permissible investments of a licensee.

(5) The commissioner may limit the extent to which a typ e of investment within a class

of permissible investments may be considered a permissible investment, except for

money, time deposits, savings deposits, demand deposits, and certificates of deposit

issued by a federally insured financial institution. The c ommissioner may by rule or

order allow other types of investments that the commissioner determines to be

substantially equivalent to other permissible investments in regards to safety and

soundness.

(6) Permissible investments, even if commingled with other assets of the licensee, shall

be deemed by operation of law to be held in trust for the benefit of the purchasers

and holders of the licensee's outstanding payment instruments in the event of

insolvency or bankruptcy of the licensee.