Section 06.26.570. Transactions with management and affiliates; penalties.

   (a) Without the prior approval of a disinterested majority of the board recorded in the minutes, or, if a disinterested majority cannot be obtained, the prior written approval of the department, a trust company may not directly or indirectly
        (1) sell or lease an asset of the trust company to a director, an officer, a principal shareholder, or an affiliate of the trust company;
        (2) purchase or lease property in which a director, an officer, a principal shareholder, or an affiliate of the trust company has an interest; or
        (3) extend credit to a director, an officer, a principal shareholder, or an affiliate of the trust company.
   (b) In addition to the requirements of (a) of this section, a lease transaction described in (a)(2) of this section involving real property may not be consummated, renewed, or extended by the trust company without the prior written approval of the department.
   (c) A trust company may not extend credit to a director, an officer, an employee, a principal shareholder, or an affiliate of the trust company unless the extension of credit
        (1) is made on substantially the same terms, including interest rates and collateral requirements, as the terms prevailing at the time for comparable transactions by the trust company with persons who are not directors, officers, employees, principal shareholders, or affiliates of the trust company;
        (2) does not involve more than the normal risk of loss or present other unfavorable features; and
        (3) follows credit underwriting procedures that are as stringent as the underwriting procedures applicable to comparable transactions by the trust company with persons who are not directors, officers, employees, principal shareholders, or affiliates of the trust company.
   (d) The department may adopt regulations to implement this section, including regulations to establish limits, requirements, or exemptions other than those specified by this section for particular categories of transactions.
   (e) In this section, "affiliate" does not include a subsidiary of the trust company.

Notes

History

(Sec. 2 ch 77 SLA 2002)