N.Y. Banking Law § 97: Power to purchase securities and stocks

§ 97. Power to purchase securities and stocks. Subject to the

restrictions and limitations contained in this chapter, a bank or trust

company may invest in and have and exercise all rights of ownership with

respect to:

1. Bonds, notes, debentures and other obligations for payment of

money, which are not in default as to either principal or interest when

acquired.

2. Stocks of any city, county, town or village of this state which are

not in default as to either principal or interest when acquired.

3. Stock of a federal reserve bank in the amount necessary to qualify

for membership in such reserve bank.

4. Stock of each of the following to an amount not in excess of ten

per centum of the capital stock, surplus fund and undivided profits of

such bank or trust company:

(a) Any safe deposit company which does business on premises owned or

leased by the bank or trust company or the vaults of which are connected

with or adjacent to an office of such bank or trust company; provided

that the purchase and holding of such stock is first duly authorized by

resolution of the board of directors of the bank or trust company and by

written approval of the superintendent, stating the number and amount of

the shares which may be so purchased and held, excepting that the bank

or trust company may, without the written approval of the

superintendent, acquire the stock owned by a former director of the safe

deposit company at the time that he ceased to be a director. The bank or

trust company may not pay, without the prior written approval of the

superintendent, more for such stock than the cost thereof to the

director.

(b) Any investment company qualified to exercise the powers specified

in subdivision two of section five hundred eight of this chapter;

(c) The Bank for International Settlements.

4-a. Subject to such restrictions as the superintendent of financial

services may prescribe, stock or other equity investments in subsidiary

corporations, partnerships, unincorporated associations, limited

liability companies, or other entities engaged in, or to be organized to

engage in the following activities:

(a) To acquire and lease personal property under the same terms and

conditions as provided in subdivision twelve of section ninety-six of

this article;

(b) To purchase accounts receivable as provided in subdivision one of

section ninety-six of this article;

(c) To be a corporation organized pursuant to the provisions of

section twenty-five (a) of an act of congress entitled the "Federal

Reserve Act";

(d) To own or operate real or personal property acquired through

foreclosure or in settlement or reduction of debts due it;

(e) To own or operate real or personal property for use as bank

premises; or

(f) To transact any other business in which the bank or trust company

may engage directly.

4-b. Common or preferred stock of any corporation created or existing

under the laws of the United States or of any state, district or

territory thereof, or of the commonwealth of Puerto Rico, provided that:

(a) such common or preferred stock is registered on a national

securities exchange, as provided in an act of congress of the United

States entitled the "Securities Exchange Act of 1934", approved June

sixth, nineteen hundred thirty-four, as amended, or such other exchange

or market system as the superintendent shall approve by regulation; (b)

the aggregate amount of all investments in common and preferred stock as

permitted by this subdivision shall at no time exceed two percent of the

assets or twenty percent of the capital, surplus and undivided profits

of the bank or trust company, whichever is less, provided however that

the superintendent may, upon the request of a bank or trust company,

approve an increase in such aggregate amount to a maximum of five

percent of the assets or one hundred percent of the capital, surplus and

undivided profits of such bank or trust company, whichever is less,

subject to any limitations or conditions prescribed by the

superintendent; (c) the aggregate amount of all investments in the

common and preferred stock of any one issuer pursuant to this

subdivision, together with the aggregate amount of all investments in

the bonds, debentures, notes or other obligations of such issuer made

pursuant to paragraph (i) of subdivision one of section one hundred

three of this chapter, shall at no time exceed one percent of the assets

or fifteen percent of the capital, surplus and undivided profits of the

bank or trust company, whichever is less; and (d) no bank or trust

company shall at any time hold pursuant to this subdivision more than

two percent of the total issued and outstanding shares of stock of any

one issuer.

4-c. Subject to such restrictions as the superintendent of financial

services may prescribe, stock or other equity interest in one or more

small business investment companies, as authorized pursuant to the

provisions of an act of congress entitled "Small Business Investment Act

of 1958," as amended, or in any entity established to invest solely in

such small business investment companies, except that in no event shall

the total amount of such investments exceed five percent of the capital

stock, surplus fund and undivided profits of such bank or trust company.

5. So much of the capital stock of, or any other equity interest in,

any other corporations, partnerships, unincorporated associations,

limited liability companies, or other entities as may be specifically

authorized by the laws of this state or by the superintendent, or

regulations promulgated by the superintendent.

The superintendent is authorized to adopt such rules and regulations

as shall permit banks and trust companies to make a loan which provides

for receipt of shares of stock of or any other equity interest in, or a

share of the profits, income or earnings of, a borrower in consideration

for making the loan.

A bank or trust company may acquire stock or any other equity interest

in settlement or reduction of a loan, or advance of credit or in

exchange for an investment previously made in good faith and in the

ordinary course of business, where such acquisition of stock or any

other equity interest is necessary in order to minimize or avoid loss in

connection with any such loan, advance of credit or investment

previously made in good faith. A trust company may acquire stock or any

other equity interest from any estate, trust or fund with respect to

which such trust company is acting in a fiduciary capacity, if a claim

is asserted or may be asserted against it with respect to the purchase

or retention of such stock or equity interest for such estate, trust or

fund, (a) where such acquisition by the trust company has been

authorized or directed by a court, or (b) where such trust company has

been advised by its counsel in writing that it has incurred a contingent

or potential liability with respect to the purchase or retention of such

stock or equity interest and such trust company desires to relieve

itself from such liability. Stocks or any other equity interest acquired

pursuant to the provisions of this paragraph may be held for such period

as the board of directors deems advisable.

A bank or trust company may continue to hold any bonds or other

securities or stock which it holds in accordance with the provisions of

law at the time this act takes effect.

No bank or trust company shall purchase, acquire, or hold any stock

of, or any other equity interest in, any corporation or any other

entity, except as provided in this section.