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Bank-Issued Securities
Savings Institution-Issued Securities

Statute: § 551.201(3), Wis. Stats. (and see definitions in § 551.102(3) and (5), Wis. Stats)

Used for: Securities issued by and representing an interest in or a debt of federal or state-chartered banks or state-chartered savings institutions or trust companies.

Note: The need for obtaining a registration exemption under state securities law for offers or sales of securities issued by a national or state-chartered and supervised bank or banking institution is eliminated by preemption language in the National Securities Market Improvement Act of 1996 (effective October 11, 1996) ("NSMIA"). See § 18(b)(4)(C) of the Securities Act of 1933 which cross-references §3(a)(2) thereof.

Filing requirement: Self-Executing. No filing or Consent to Service of Process is necessary in order to claim this exemption.

Frequently asked questions:

Q: Is the exemption self-executing?

A: Yes. No filing or Consent to Service of Process is required.

Q: Is an irrevocable letter of credit from a national or state bank considered a "guarantee" for the purposes of this exemption?

    A. No. See 12/22/95 letter re: Robert W. Baird & Co., Inc.

Q: Do industrial loan companies (ILCs) qualify for the exemption?

    A. Yes, an ILC is specified as a type of "depository institution" in 551.102(5)(b)3.

Important interpretive letters [citations are to predecessor statute]:

12/22/95 letter re: Robert W. Baird & Co., Inc. "Bank Security" registration exemption is not applicable to private-entity issuers covered by an irrevocable letter of credit from a national or state bank. A bank letter of credit is not a "guarantee" for purposes of the registration exemption of § 551.22(3), Wis. Stats. It is a basic canon of statutory construction that exemption provisions are to be narrowly construed. The difference between a letter of credit and a guarantee is that, with a guarantee, the obligation of the guarantor derives from the initial obligation, and the guarantor has all the defenses which the maker of the debt obligation has--neither of which elements is present under a letter of credit arrangement.

12/28/94 materially identical opinions re: Smith Barney CD program and Dean Witter Reynolds CD program. Certificates of deposit issued by industrial loan companies not domiciled in Wisconsin qualify for the use of the exemption under § 551.22(3), Wis. Stats. , since the ILCs engage in the business of banking as defined under the law of their home states, and the FDIC considers them "state banks."

12/28/88 letter re: State Bank of India. Exemption set forth in § 551.22(3), Wis. Stats. , is not applicable to certificates of deposit issued by the Bank of India, which is regulated by the Federal Government of India. The bank is neither "organized under the laws of the United States" or "organized under the laws of any state," as required under the exemption.

11/8/85 letter re: The Derby Savings Bank. Common stock offering pursuant to a conversion plan (from mutual to stock form of organization) is exempt from registration under § 551.22(3), Wis. Stats.

4/3/81 letter re: Continental Industrial Bank. The certificates of deposit and savings accounts of Continental Industrial Bank, a banking corporation incorporated under Colorado Law, which engages in business substantially confined to banking, are securities exempt from registration under § 551.22(3), Wis. Stats.

12/17/80 letter re: First National Bank of Neenah. Mortgage pool participations of bank-originated mortgages are not exempt under § 551.22(3), Wis. Stats. , because loan participations do not constitute securities "representing an interest in or a debt of, or guarantee by, any bank . . . , " as is required by § 551.22(3), Wis. Stats.

History: Predecessor statute 551.22(3), Wis. Stats., adopted on January 1, 1970. Differed from the Uniform Securities Act of 1956 § 402(a)(3) in that § 551.22(3), Wis. Stats. , expressly stated that the institution must be subject to regulation in respect of the issuance of guarantee of its securities by a governmental authority of the state under which laws it is organized, if it is a state rather than federal institution. Repealed and recreated effective January 1, 2009 as 551.201(3), Wis, Stats., and the definitions in 551.102(3) and (5) Wis, Stats.


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