Subject to the limitations of Sections 14402, 14403, and 14404, any credit union or credit unions may purchase, acquire and hold outstanding shares of a corporation engaged exclusively in holding property of the character described in Section 14402 and which property is or is to be used for the purposes set forth in Section 14402. The purchase or acquisition of stock of any such corporation shall be approved by two-thirds of all the directors of such credit union or credit unions.
Management and OperationsInvestments
Section § 14650
This law allows credit unions to invest in companies that hold specific types of property, as long as those properties are used for purposes outlined in the related sections. However, buying or acquiring stock in these companies needs the approval of two-thirds of the credit union's directors. This law has certain limitations based on other sections, which are not mentioned here.
credit union investment outstanding shares property holding corporation
Section § 14651
This law outlines the investment rights of credit unions in California. Credit unions can invest in corporations or limited liability companies that are specifically set up to offer services to credit unions. These organizations must be created by credit unions or a group of them. Alternatively, they can be formed by entities associated with credit unions, as long as they also service credit unions. If a credit union wants to invest in other types of service organizations, they must get approval from the commissioner. The term 'credit union service organization' refers to the companies that meet these specific criteria.
(a)CA Financial Code § 14651(a) Every credit union may invest in the shares of stock of a corporation, or in membership or economic interests of a limited liability company, organized solely for the purpose of providing services to credit unions, provided the corporation or limited liability company is formed by a credit union or group of credit unions.
(b)CA Financial Code § 14651(b) Every credit union may invest in the shares of stock of a corporation, or in membership or economic interests of a limited liability company, organized solely for the purpose of providing services to credit unions, provided the corporation or limited liability company is formed by one or more credit unions, one or more corporations or limited liability companies of the type described in subdivision
(a), or any combination thereof.
(c)CA Financial Code § 14651(c) Every credit union may invest in the securities of a corporation or in membership or economic interests of a limited liability company that is not a corporation or limited liability company of the type described in subdivision (a) and that provides services to credit unions, provided the investment is approved by the commissioner.
(d)CA Financial Code § 14651(d) “A credit union service organization” means a corporation or limited liability company described in subdivision (a) or (b).
credit union investments credit union service organization limited liability company services
Section § 14652
This law allows credit unions to invest in certain securities and assets that are deemed legal investments for nonbank entities. These investments are described in another section of the code, beginning with Section 800.
Every credit union may invest in securities and other assets described in Chapter 10 (commencing with Section 800) of Division 1 as legal investments for nonbank licensees.
credit union investments securities nonbank licensees
Section § 14652.5
This law allows credit unions to be involved with investment companies in various ways, such as organizing, sponsoring, or selling their securities, as long as the investment companies are permitted to operate in California. However, the officers and employees of the credit union who are selling these securities must meet specific training and experience standards set by the state’s Secretary of Business, Consumer Services, and Housing. The term 'investment company' is defined by the Investment Company Act of 1940.
A credit union may organize, sponsor, operate, control, or render investment advice to, an investment company, or underwrite, distribute, or sell securities of any investment company which has qualified to sell its securities in this state pursuant to Part 2 (commencing with Section 25100) of Division 1 of Title 4 of the Corporations Code, if the officers and employees of the credit union who sell these securities meet such standards with respect to training, experience, and sales practices as established by the Secretary of Business, Consumer Services, and Housing or the secretary’s designee. For the purpose of this section, “investment company” means an investment company as defined in the Investment Company Act of 1940 (15 U.S.C., Sec. 80a-1 et seq.).
credit unions investment companies securities sales
Section § 14653
This law permits credit unions to invest in a special type of trust. The trust must be created specifically to invest in U.S. government and government agency securities. Additionally, the trust needs to be established by an organization made up of credit unions or credit union associations.
Credit unions may invest in a trust organized solely for the purpose of investing in United States government securities and United States government agency securities, provided the trust is formed by an organization composed of credit unions or an organization of credit union associations.
credit union investment trust fund investments government securities
Section § 14653.5
This law allows credit unions to make investments as long as these are approved either by regulation or directly in writing by a commissioner. It means credit unions have a degree of flexibility in their investment choices, provided they adhere to these authorized guidelines.
Notwithstanding any other provision of law, a credit union may make any investment authorized by regulation or in writing by the commissioner.
credit union investments investment authorization commissioner approval
Section § 14654
This law allows credit unions to buy conditional sale contracts or vehicle lease agreements from vendors or lessors. These agreements are for the sale or lease of personal property, like cars, to the credit union's members. Credit unions can hold onto these contracts or leases as investment assets.
Credit unions may purchase from the vendor or lessor of any personal property, conditional sale contracts or vehicle lease agreements covering the sale or lease of that property or vehicle to its members. The credit union may hold and retain any such conditional sale contract or vehicle lease agreement as an investment.
credit unions purchase contracts conditional sale
Section § 14656
A credit union can buy notes, which are essentially IOUs or debts, from another credit union that's going out of business. This can only happen if they follow specific rules set by a commissioner, and both the purchasing and liquidating credit union's boards have to agree on the prices and terms.
A credit union may, in accordance with rules and regulations prescribed by the commissioner, purchase from any liquidating credit union notes made by individual members of such liquidating credit union, at such prices and under such terms as may be agreed upon by the board of directors of the purchasing credit union and the board of directors, or liquidating agent, of the liquidating credit union.
credit union notes purchase liquidating credit union
Section § 14657
This law allows credit unions to invest in charitable donation accounts (CDAs) to support qualified charities, provided they meet certain conditions. These conditions include limiting the investment to 5% of the credit union's net worth, ensuring the assets are held in a segregated account, and appointing a regulated trustee or manager if using a trust vehicle. The credit union must document account terms in a written agreement, adopt policies for managing the CDA, and make donations to qualified charities at least once every five years, distributing at least 51% of the account's total return on assets.
Upon CDA termination, the credit union can receive the remaining assets in cash or kind if they are permissible investments. The law also defines key terms such as affiliate, charitable contributions, and registered investment adviser to ensure clarity in executing these accounts.
(a)CA Financial Code § 14657(a) A credit union may invest in charitable donation accounts, or CDAs, in accordance with this section as a means of providing charitable contributions and donations to qualified charities. If a credit union invests in a CDA that satisfies all of the conditions in subdivision (b), then it may do so free from any other investment limitations of this article.
(b)Copy CA Financial Code § 14657(b)
(1)Copy CA Financial Code § 14657(b)(1) The book value of a credit union’s investments in all CDAs, in the aggregate, as carried on the credit union’s statement of financial condition prepared in accordance with generally accepted accounting principles, shall be limited to no more than 5 percent of the credit union’s net worth at all times for the duration of the accounts, as measured every quarterly
call report cycle. A credit union shall bring its aggregate accounts into compliance with the maximum aggregate funding limit within 30 days of any breach of this limit.
(2)CA Financial Code § 14657(b)(2) The assets of a CDA shall be held in a segregated custodial account or special purpose entity and shall be specifically identified as a CDA.
(3)CA Financial Code § 14657(b)(3) If a credit union chooses to establish a CDA using a trust vehicle, the trustee shall be regulated by a federal regulatory agency, or a state financial regulatory agency. A regulated trustee or other person or entity that is authorized to make investment decisions for a CDA (manager), other than the credit union itself, shall be either: (A) a registered investment adviser; or (B) regulated by a federal regulatory agency or a state financial regulatory agency.
(4)CA Financial Code § 14657(b)(4) The parties to the CDA, typically the
funding credit union and trustee or other manager of the account, shall document the terms and conditions controlling the account in a written agreement. The terms of the agreement shall be consistent with this section. The board of directors shall adopt written policies governing the creation, funding, and management of a CDA that are consistent with this section, shall review the policies annually, and may amend the policies from time to time. A credit union’s CDA agreement and policies, at a minimum, shall comply with all of the following:
(A)CA Financial Code § 14657(b)(4)(A) Provide that the CDA shall make charitable contributions and donations only to qualified charities.
(B)CA Financial Code § 14657(b)(4)(B) Document the investment strategies and risk tolerances the CDA trustee or other manager is required to follow in administering the account.
(C)CA Financial Code § 14657(b)(4)(C) Provide that the credit
union shall account for all aspects of the CDA, including, but not limited to, distributions to charities and liquidation of the account, in accordance with generally accepted accounting principles.
(D)CA Financial Code § 14657(b)(4)(D) Indicate the frequency with which the trustee or manager of the CDA shall make distributions to qualified charities, as provided in paragraph (5).
(5)CA Financial Code § 14657(b)(5) A credit union shall distribute to one or more qualified charities, at least once every five years, and upon termination of a CDA, regardless of the length of its term, a minimum of 51 percent of the account’s total return on assets over the period of up to five years. Other than upon termination, the credit union may choose how frequently CDA distributions to charity shall be made during each period of up to five years. The credit union may choose to make periodic distributions over a period of up to five years, or only a single
distribution as required at the end of that period. A credit union may choose to donate in excess of the minimum distribution frequency and amount.
(6)CA Financial Code § 14657(b)(6) Upon termination of the CDA, the credit union may receive a distribution of the remaining account assets in cash or a distribution in kind of the remaining account assets, but only if those assets are permissible investments for credit unions.
(c)CA Financial Code § 14657(c) For purposes of this section, the following definitions apply:
(1)CA Financial Code § 14657(c)(1) “Affiliate” means an entity in which the credit union has any ownership interest directly or indirectly. “Affiliate” does not apply to ownership due to the funding of employee benefits.
(2)CA Financial Code § 14657(c)(2) “Charitable contributions and donations” are gifts credit unions provide to assist qualified charities
through contributions of staff, equipment, money, or other resources.
(3)CA Financial Code § 14657(c)(3) “Charitable donation account” or “CDA” is a hybrid charitable and investment vehicle that satisfies the conditions set forth in subdivision (b).
(4)CA Financial Code § 14657(c)(4) “Distribution in kind” means the credit union’s acceptance of remaining CDA assets, upon termination of the account, in their original form instead of in cash resulting from the liquidation of the assets.
(5)CA Financial Code § 14657(c)(5) “Qualified charity” means a charitable organization or other nonprofit entity recognized as exempt from taxation under Section 501(c)(3) of the Internal Revenue Code.
(6)CA Financial Code § 14657(c)(6) “Registered investment adviser” means an investment adviser registered with the Securities Exchange Commission pursuant to the Investment Advisers Act of
1940.
(7)CA Financial Code § 14657(c)(7) “Total return” means the actual rate of return on all investments in a CDA over a given period of up to five years, including realized interest, capital gains, dividends, and distributions, but exclusive of account fees and expenses provided they were not paid to the credit union that established the CDA or to any of its affiliates.
credit union investment charitable donation account CDA
Section § 14659
This law allows a credit union to make investments that are usually not allowed if it's for funding an employee benefit plan. The investment must be directly linked to the credit union's current or future obligation to that plan. Additionally, the credit union can only keep the investment as long as it has such obligations. Interestingly, they don't need special permission usually required by another section for making these investments.
(a)CA Financial Code § 14659(a) A credit union that is investing to fund an employee benefit plan obligation may purchase an investment that would otherwise be impermissible if the investment is directly related to the credit union’s obligation or potential obligation under the employee benefit plan and the credit union holds the investment only for as long as it has an actual or potential obligation under the employee benefit plan.
(b)CA Financial Code § 14659(b) For purposes of this section, specific authorization pursuant to Section 14653.5 is not required.
credit union investments employee benefit plan investment exceptions
