KRS 304.7-360: Definitions -- Deposits allowed -- Commingling of certain securities --

Records -- Administrative regulations.

(1) As used in this section:

(a) "Clearing corporation" shall be defined as provided in KRS 355.8 -102 except

that, with res pect to securities issued by institutions organized or existing

under the laws of any foreign country or securities used to meet the deposit

requirements pursuant to the laws of a foreign country as a condition of doing

business therein, "clearing corporat ion" may include a corporation organized

or existing under the laws of any foreign country which is legally qualified

under such laws to effect transactions in securities by computerized book

entry;

(b) "Custodian bank" means a national bank, state bank, o r trust company which

is a member of the Federal Reserve System which acts as custodian of all or

any part of an insurance company's securities;

(c) "Direct participant" means a bank, trust company, or other institution which

maintains an account in its na me in a clearing corporation and through which

an insurance company participates in a clearing corporation;

(d) "Federal reserve book -entry system" means the computerized systems

sponsored by the United States Department of the Treasury and certain

agencies and instrumentalities of the United States for holding and

transferring securities of the United States government and such agencies and

instrumentalities, respectively, in federal reserve banks through banks which

are members of the Federal Reserve Syst em or which otherwise have access

to such computerized systems;

(e) "Member bank" means a national bank, state bank, or trust company which is

a member of the Federal Reserve System through which an insurance

company participates in the federal reserve book-entry system;

(f) "Security" means a certificated security or an uncertificated security;

(g) "Certificated security" means a share, participation, or other interest in

property or an enterprise of the issuer or an obligation of the issuer which is

represented by an instrument issued in bearer or registered form, of a type

commonly dealt in on securities exchanges or markets or commonly

recognized in any area in which it is issued or dealt in as a medium for

investment, and either one (1) of a class or se ries or by its terms divisible into

a class or series of shares, participations, interests, or obligations; and

(h) "Uncertificated security" means a share, participation, or other interest in

property or an enterprise of the issuer or an obligation of the issuer which is

not represented by an instrument and the transfer of which is registered upon

books maintained for that purpose by or on behalf of the issuer, of a type

commonly dealt in on securities exchanges or markets; and either one (1) of a

class or series or by its terms divisible into a class or series of shares,

participations, interests, or obligations.

(2) Notwithstanding any other provision of law, an insurance company or its custodian

bank may deposit or arrange for the deposit of securities h eld in or purchased for

the general account and the separate accounts of such insurance company in a

clearing corporation or the federal reserve book -entry system. When securities are

deposited with a clearing corporation, certificates representing securit ies of the

same class of the same issuer may be merged and held in bulk in the name of the

nominee of such clearing corporation with any other securities deposited with such

clearing corporation by any person, regardless of the ownership of such securities ,

and certificates representing securities of small denominations may be merged into

one (1) or more certificates of larger denominations. The records of any member

bank through which an insurance company holds securities in the federal reserve

book-entry system, and the records of any direct participant through which an

insurance company holds securities in a clearing corporation, shall at all times show

that such securities are held for such insurance company or its custodian bank and

for which accounts t hereof. Ownership of, and other interests in, such securities

may be transferred by bookkeeping entry on the books of such clearing corporation

or in the federal reserve book-entry system without, in either case, physical delivery

of certificates representing such securities.

(3) Notwithstanding any other provision o f law, an insurance company may deposit

securities held in or purchased for its general account and its separate accounts in a

custodial account with a custodian bank approved by, and under a custodial

agreement approved by, the commissioner. When securiti es are deposited in such

custodial account, certificates representing securities of the same class of the same

issuer may be merged and held in bulk in the name of the custodian bank or its

nominee with any other securities held in the custody of the custo dian bank or its

nominee by any person, regardless of the ownership of such securities, and

certificates representing securities of small denominations may be merged into one

(1) or more certificates of larger denominations. The records of the custodian ba nk

which holds securities for an insurance company in a custodial account shall at all

times show that such securities are held for such insurance company and for which

accounts thereof. Ownership of, and other interests in, such securities may be

transferred by bookkeeping entry on the books of such custodian bank without

physical delivery of certificates representing such securities.

(4) The same bank or trust company may act as direct participant, member bank, and

custodian bank for an insurance company.

(5) The commissioner of insurance shall promulgate administrative regulations

governing the deposit by insurance companies of securities with clearing

corporations and in the federal reserve book-entry system and with custodian banks.