| (3) Paragraphs (1) and (2) of this subsection do not
apply when a credit union purchases a certificate of deposit or share
certificate directly from a bank, credit union, or other financial
institution.
(g) Discretionary Control Over Investments and Investment
Advisers.
(1) Except as provided in paragraph (2) of this subsection,
a credit union must retain discretionary control over its purchase
and sale of investments. A credit union has not delegated discretionary
control to an investment adviser when the credit union reviews all
recommendations from the investment adviser and is required to authorize
a recommended purchase or sale transaction before its execution.
(2) A credit union may delegate discretionary control
over the purchase and sale of investments in an aggregate amount not
to exceed 100% of its net worth at the time of delegation to persons
other than the credit union's officials or employees, provided each
such person is an investment adviser registered with the Securities
and Exchange Commission under the Investment Advisers Act of 1940
(15 U.S.C. 80b).
(3) Before transacting business with an investment
adviser to which discretionary control has been granted, and annually
thereafter, a credit union must analyze the adviser's background and
information available from federal and state securities regulators
and securities industry self-regulatory organizations, including any
enforcement actions against the adviser, associated personnel, and
the firm for which the adviser works.
(4) A credit union may not compensate an investment
adviser with discretionary control over the purchase and sale of investments
on a per transaction basis or based on capital gains, capital appreciation,
net income, performance relative to an index, or any other incentive
basis.
(5) A credit union must obtain a report from its investment
adviser at least monthly that details the investments under the adviser's
control and their performance.
(h) Investment Practice Permitted to Federal Credit
Unions. If an applicant credit union proposes to make the same type
of investment which a federally chartered credit union has been granted
permission to make, the commissioner shall grant the application unless
the commissioner finds that due to the financial position or the state
of management of the applicant credit union, the proposed investments
or deposits would not be sound or prudent investment practices for
the applicant credit union. The commissioner may instead grant the
application conditionally, grant in modified form, or deny the application.
(i) Modification or Revocation of Investment Authority.
If the commissioner finds that due to the financial condition or management
of a credit union, an investment practice authorized by this section
has ceased to be a safe and prudent practice, the commissioner shall
inform the board of directors of the credit union, in writing, that
the authority to engage in the practice has been revoked or modified.
The credit union's directors and management shall immediately take
steps to begin liquidating the investments in question or make the
modification required by the commissioner. The commissioner for cause
shown may grant the credit union a definite period of time to comply
with the commissioner's orders. Credit unions which continue to engage
in investment practices after their authority to do so has been revoked
or modified will be treated as if the authority to engage in the practice
had never been granted, and their actions may be deemed an unsound
practice and a willful violation of an order of the commissioner and
may be grounds for appropriate supervisory action against the credit
union, its directors or officers.
(j) Waivers.
(1) The commissioner in the exercise of discretion
may grant a written waiver, consistent with safety and soundness principles,
of a requirement or limitation imposed by this subchapter. A decision
to deny a waiver is not subject to appeal. A waiver request must contain
the following:
(A) A copy of the credit union's investment policy;
(B) The higher limit or ratio sought;
(C) An explanation of the need to raise the limit or
ratio; and
(D) Documentation supporting the credit union's ability
to manage this activity;
(2) In determining action on a waiver request made
under this subsection, the commissioner will consider the:
(A) Credit union's financial condition and management,
including compliance with regulatory net worth requirements. If significant
weaknesses exist in these financial and managerial factors, the waiver
normally will be denied.
(B) Adequacy of the credit union's policies, practices,
and procedures. Correction of any deficiencies may be included as
conditions, as appropriate, if the waiver is approved.
(C) Credit union's record of investment performance.
If the credit union's record of performance is less than satisfactory
or otherwise problematic, the waiver normally will be denied.
(D) Credit union's level of risk. If the level of risk
poses safety and soundness problems or material risks to the insurance
fund, the waiver normally will be denied.
|
| Source Note: The provisions of this §91.802 adopted to be effective February 20, 1986, 11 TexReg 699; amended to be effective May 6, 1988, 13 TexReg 1979; amended to be effective May 9, 1989, 14 TexReg 2025; amended to be effective December 8, 1992, 17 TexReg 8233; amended to be effective July 8, 1994, 19 TexReg 4938; amended to be effective February 11, 2001, 26 TexReg 1134; amended to be effective August 11, 2002, 27 TexReg 6835; amended to be effective November 14, 2004, 29 TexReg 10254; amended to be effective November 11, 2007, 32 TexReg 7921; amended to be effective July 12, 2009, 34 TexReg 4512; amended to be effective November 13, 2011, 36 TexReg 7540;amended to be effective November 8, 2015, 40 TexReg 7663 |
