The Vermont Statutes Online

Title 8: Banking and Insurance

Chapter 202: Organization and Management of Investor-Owned Financial Institutions

• Subchapter 001: ORGANIZATION AND COMMENCING BUSINESS

• § 12101. Application

  (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 that set forth the proposed institution’s organizational structure and business plan, including:

  (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, 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 that 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. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001.)

• § 12102. 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 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 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. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001.)

• § 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 that 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 $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 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 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 to the activity shall be personally liable for all debts incurred before the certificate is issued and filed. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.), § 288, eff. July 1, 2022.)

• § 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. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001.)

• § 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. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001.)

• Subchapter 002: GOVERNING BODY

• § 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 that 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 that is duly recorded in the minutes of the institution.

  (d) 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. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001; amended 2001, No. 73 (Adj. Sess.), § 3, eff. Feb. 2, 2002.)

• Subchapter 003: BONDS AND INSURANCE

• § 12301. Bonds and insurance

  (a) The governing body of a Vermont financial institution shall direct and 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 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. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.), § 289, eff. July 1, 2022.)

• Subchapter 004: DIVIDENDS, DISTRIBUTIONS, AND WITHDRAWALS

• § 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. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001.)

• Subchapter 005: 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 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. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001.)

• Subchapter 006: 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 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. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001.)

• § 12602. Nondepository trust companies

  (a) A nondepository trust company has all the powers, duties, and obligations of a financial institution under this title, except as provided in this section. 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 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 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, section 12602 of this title, 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 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 in the case of a national trust company by its federal supervisory agency, the nondepository trust company may file a petition in the Probate Division of the Superior 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 Division of the Superior 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 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 Division of the Superior 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 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 Division of the Superior 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 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 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.

  (q) Notwithstanding subsection 12201(a) of this title, the governing body of a nondepository trust company shall meet at least four times a year, including once quarterly. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001; amended 2001, No. 73 (Adj. Sess.), § 4, eff. Feb. 2, 2002; 2009, No. 154 (Adj. Sess.), § 238a, eff. Feb. 1, 2011; 2017, No. 134 (Adj. Sess.), § 8.)

• § 12603. Merchant banks

  (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 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 outside 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.

  (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 $1,000,000.00, all of which shall be common stock or equity interest in the merchant bank. A merchant bank may use qualified subordinated debt or senior debt as part of its capital structure above $1,000,000.00, provided that the amount of subordinated debt or senior debt used as capital above $1,000,000.00 is not greater than the amount of common stock or equity interest used as capital above $1,000,000.00. The Commissioner, in his or her discretion, may increase the minimum capital required for a merchant bank.

  (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.

  (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 and 14110; subsection 14301(d); chapters 203 and 205; and chapter 204, subchapter 2.

  (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 10 percent or more of the common stock or 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 of chapter 201, subchapter 7 of this title.

  (n) The Commissioner shall examine the merchant bank and any person who controls it to the extent necessary to determine the soundness and viability of the merchant bank in the same manner as required by chapter 201, subchapter 5 of this title.

  (o) A merchant bank shall include on all its advertising a prominent disclosure that deposits are not accepted by a merchant bank.

  (p) For purposes of this section, “control” means that a person:

  (1) directly, indirectly, or acting through another person owns, controls, or has power to vote 10 percent or more of any class of equity interest of the merchant bank;

  (2) controls in any manner the election of a majority of the directors of the merchant bank; or

  (3) directly or indirectly exercises a controlling influence over the management or policies of the merchant bank.

  (q) A merchant bank formed and authorized under this chapter shall:

  (1) maintain its principal place of business in this State;

  (2) appoint a registered agent to accept service of process and to otherwise act on its behalf in this State, provided that whenever such registered agent cannot with reasonable diligence be found at the Vermont registered office of the merchant bank, the Secretary of State shall be an agent of such merchant bank upon whom any process, notice, or demand may be served;

  (3) hold at least one meeting of its governing body in this State each year; and

  (4) have at least one Vermont resident as a member of its governing body. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001; amended 2011, No. 21, § 11a; 2011, No. 78 (Adj. Sess.), § 12, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.), § 290, eff. July 1, 2022.)

• § 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 that, 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 and 12103 of this title and this section.

  (c) The organizational documents of an uninsured bank that are filed with 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 subsection 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 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.

  (k) An uninsured bank formed and authorized under this chapter shall:

  (1) maintain its principal place of business in this State;

  (2) appoint a registered agent to accept service of process and to otherwise act on its behalf in this State, provided that whenever such registered agent cannot with reasonable diligence be found at the Vermont registered office of the uninsured bank, the Secretary of State shall be an agent of such uninsured bank upon whom any process, notice, or demand may be served;

  (3) hold at least one meeting of its governing body in this State each year; and

  (4) have at least one Vermont resident as a member of its governing body. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001; amended 2011, No. 78 (Adj. Sess.), § 13, eff. April 2, 2012.)