Homefor Investorsfor Industry
fillerComplaintsCorporate FinanceLicensingEnforcementSecurities Libraryfiller
Corporate Finance For more information
61-1-14(1)(c) – Depository Institution Exemption call the Division at (801) 530-6600

Exemption:

  1. The following securities are exempted from Sections 61-1-7 and 61-1-15:
    1. a security issued by and representing an interest in or a debt of, or guaranteed by, a depository institution organized under the laws of the United States, or a depository institution or trust company supervised under the laws of a state;

Division Interpretive Commentary:

This exemption not only covers the stock of a depository institution but also includes the issuance of securities directly related to the normal operations of the institution. This would include Demand Deposits (Checking accounts), Certificate of Deposit (CD) or Time Certificates and other Savings accounts. Issuers relying on this exemption must demonstrate that the institution conforms to the definition of “depository institution,” possesses commercial banking-type powers, and is regulated by the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and/or the Federal Home Loan Bank.

Also included among typical regulated depository institutions are credit unions.   Securities issued by credit unions are exempt because they are regulated by other agencies.  Federal credit unions are regulated by the National Credit Union Administration (NCUA).  State chartered credit unions are usually regulated by the NCUA and the state agency over banking.

Promoters seeking to raise funds for the formation of new financial institutions should note that an entity does not attain the status of a depository institution until it has been granted the appropriate federal or state charter as such. The conduct of a chartered depository institution is highly regulated by one or more regulators and the need for securities oversight is less critical. However, until an entity has been granted its charter, its conduct is not so regulated. Thus, this exemption does not apply to securities issued in transactions seeking to raise capital for an entity still in the pre-charter stage, regardless of the intentions of the promoters to subsequently obtain a charter or complete the charter application process.

Most of the securities which qualify under this exemption are also considered to be federal covered securities under section 18 of the Securities Act of 1933.  See Federal Covered Securities  Furthermore, federal case law has determined that certificates of deposits by banks are not securities.  The Utah Supreme Court has not specifically adopted this holding although they have referred to the case on several occasions.

Division Policy Positions:

  • Bank Holding Companies:  This exemption does not extend to the issuance of securities by bank holding companies.