This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives.
STORAGE NAME: h0431c.COM
DATE: 2/15/2022
HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: CS/HB 431 Financial Institutions
SPONSOR(S): Insurance & Banking Subcommittee, Barnaby, Snyder and others
TIED BILLS: IDEN./SIM. BILLS: CS/SB 1680
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Insurance & Banking Subcommittee 17 Y, 0 N, As CS Luczynski Hinshelwood
2) State Administration & Technology
Appropriations Subcommittee
14 Y, 0 N Lee Topp
3) Commerce Committee Hinshelwood Hamon
SUMMARY ANALYSIS
The Office of Financial Regulation (OFR) regulates banks, credit unions, other financial institutions, finance
companies, and the securities industry. The OFR’s Division of Financial Institutions charters, licenses, and
regulates various entities that engage in financial institution business in Florida, in accordance with the financial
institutions codes and the rules promulgated thereunder. The bill makes the following changes to the financial
institutions codes:
Permits a foreign national to appear through video conference, rather than in person, at a hearing
regarding the foreign national’s proposal to have a controlling interest in a current or proposed state
bank or trust company.
Provides the OFR an additional 90 days to comply with the examination requirement for financial
institutions if the federal regulator suspends or cancels a scheduled examination.
Requires each director of a financial institution to review and sign a report of examination.
Clarifies provisions relating to a financial institution’s acquisition of another financial institution’s assets
or liabilities.
Amends the definition of “financial institution” for purposes of the Florida Control of Money Laundering
and Terrorist Financing in Financial Institutions Act.
Relocates and clarifies a provision relating to a credit union’s reporting of names and addresses of
newly elected or appointed officers and directors.
Permits OFR to approve a bank or trust company based on the intended “target market” rather than just
the geographic area from which the bank or trust company intends to draw deposits and accounts.
Allows the OFR to waive the experience requirement for a proposed president or CEO of a new bank or
trust company pursuant to specified considerations about the person and the proposed institution.
Provides a process for persons to seek approval to own a controlling interest in a financial institution in
the event of inheritance of such controlling interest.
Defines “de novo branch” in the context of interstate bank branching by state-chartered banks.
Permits certain family trust companies to maintain a deposit account at an insured bank or credit union
located anywhere in the United States, regardless of whether the bank or credit union has a principal
office or branch in Florida.
Amends the deadline for a family trust company to file an annual renewal.
Permits certain international bank offices licensed by OFR to maintain required assets in an insured
bank located anywhere in the United States, not just those banks that are located in Florida.
Updates reference to the name of a list of international jurisdictions that have weak measures to combat
money laundering and terrorist financing, and requires a specified licensed entity to suspend its activities
relating to a jurisdiction on that list.
The bill has an indeterminate fiscal impact. See Fiscal Comments.
The bill provides an effective date of July 1, 2022. STORAGE NAME: h0431c.COM PAGE: 2
DATE: 2/15/2022
FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Background
The Office of Financial Regulation (OFR) regulates banks, credit unions, other financial institutions,
finance companies, and the securities industry.
1
The OFR’s Division of Financial Institutions charters,
licenses, and regulates various entities that engage in financial institution business in Florida, in
accordance with the financial institutions codes and the rules promulgated thereunder.
2
The specific
chapters under the financial institutions codes are:
Chapter 655, F.S. – Financial Institutions Generally
Chapter 657, F.S. – Credit Unions
Chapter 658, F.S. – Banks and Trust Companies
Chapter 660, F.S. – Trust Business
Chapter 662, F.S. – Family Trust Companies
Chapter 663, F.S. – International Banking
Chapter 665, F.S. – Capital Stock Associations
Chapter 667, F.S. – Savings Banks
As of June 30, 2020, the Division of Financial Institutions regulates 197 financial institutions:
3
69 banks
66 credit unions
21 international bank offices
15 trust companies
16 family trust companies
10 qualified limited service affiliates
Formation and Regulation of a Florida-Chartered Bank or Trust Company
Under the dual banking system in the United States, banks may be chartered under either state or
federal law:
State-chartered banks are chartered under the laws of the state in which the bank is
headquartered. State-chartered banks have both a state regulator, which for banks chartered by
the state of Florida is the OFR, and a federal regulator. The primary federal regulator for state
banks that are members of the Federal Reserve System is the Board of Governors of the
Federal Reserve System (FRB), and the primary federal regulator for non-member state banks
is the Federal Deposit Insurance Corporation (FDIC).
4
National banks are chartered by the Office of the Comptroller of the Currency (OCC) under the
National Bank Act.
5
As such, the OCC is the primary federal regulator for national banks.
6
A trust company is a business organization, other than a bank, which is authorized by lawful authority
to engage in the business of acting as a fiduciary.
7
Trust companies are chartered by states, and the
state regulator for trust companies chartered by the state of Florida is the OFR. Trust companies do not
have a federal regulator.
1
S. 20.121(3)(a)2., F.S.
2
Chs. 655, 657, 658, 660, 662, 663, 665, and 667, F.S.; chs. 69U-100 through 69U-162, F.A.C.
3
Office of Financial Regulation, Fast Facts (2021 ed.), https://flofr.gov/sitePages/documents/FastFacts.pdf.
4
12 U.S.C. § 1813(q).
5
12 U.S.C. § 38.
6
12 U.S.C. § 1813(q).
7
S. 658.12(20) and (21), F.S. STORAGE NAME: h0431c.COM PAGE: 3
DATE: 2/15/2022
In order to apply for authority to organize a new state-chartered bank or trust company, the proposed
directors must file a written application with the OFR.
8
The application includes such information as the
name, residence, and occupation of each proposed director; the name and residence of the proposed
president and chief executive officer, if known; the proposed corporate name; the community, including
the street and number, if available, where the principal office of the proposed bank is to be located; the
total initial capital; the proposed business plan; and pro forma financial statements.
9
The OFR utilizes the information contained in the application in order to make an investigation of:
10
1) The character, reputation, financial standing, business experience, and business qualifications
of the proposed officers and directors.
2) The need for bank or trust facilities or additional bank or trust facilities, as the case may be, in
the primary service area
11
where the proposed bank or trust company is to be located.
3) The ability of the primary service area to support the proposed bank or trust company and all
other existing bank or trust facilities in the primary service area.
The OFR evaluates the viability of the business plan in light of current conditions in the primary service
area and the metropolitan statistical area or county, as well as in the industry in general.
12
After making such investigation, the OFR must approve an application if it finds the following:
13
1) Local conditions indicate reasonable promise of successful operation for the proposed state
bank or trust company.
2) The proposed capitalization is adequate, but at least $8 million for a bank and at least $3 million
for a trust company.
3) The proposed capital structure is in such form as the OFR may require, subject to certain
minimum requirements.
4) Regarding officers and directors:
a. The proposed officers have sufficient financial institution experience, ability, standing,
and reputation and the proposed directors have sufficient business experience, ability,
standing, and reputation to indicate reasonable promise of successful operation.
b. None of the proposed officers or directors has been convicted of, or pled guilty or nolo
contendere to, any violation of s. 655.50, F.S., relating to the control of money
laundering and terrorist financing; ch. 896, F.S., relating to offenses related to financial
institutions; or similar state or federal law.
c. At least two of the proposed directors who are not also proposed officers have had at
least 1 year of direct experience as an executive officer, regulator, or director of a
financial institution within the 5 years before the date of the application. However, if the
applicant demonstrates that at least one of the proposed directors has very substantial
experience as an executive officer, director, or regulator of a financial institution more
than 5 years before the date of the application, the OFR may allow the applicant to have
only one director who has direct financial institution experience within the last 5 years.
d. The proposed president or chief executive officer must have had at least 1 year of direct
experience as an executive officer, director, or regulator of a financial institution within
the last 5 years.
5) The corporate name of the proposed state bank is approved by the OFR.
6) Provision has been made for suitable quarters at the location in the application.
8
S. 658.19(1), F.S.; R. 69U-105.202(1), F.A.C.
9
Id.
10
S. 658.20(1), F.S.
11
“Primary service area” is defined by agency rule as “the smallest geographical area from which the proposed state
bank, savings bank or association expects to draw approximately seventy-five percent of its deposits. Said term also
means the smallest geographical area from which a state trust company expects to draw approximately 75 percent of the
asset value of its fiduciary accounts. It should be drawn around a natural customer base and should not be unrealistically
delineated to exclude competing financial institutions or to include areas of concentrated population.” R. 69U-105.001(9),
F.A.C.
12
Office of Financial Regulation (OFR), Agency Analysis of 2022 Senate Bill 1680 (Jan. 12, 2022).
13
S. 658.21, F.S. STORAGE NAME: h0431c.COM PAGE: 4
DATE: 2/15/2022
Due to technological advancements, the banking industry has become increasingly interconnected and
more digitally driven; many customers no longer engage with their bank exclusively through brick and
mortar branches.
14
In order to remain competitive, many financial institutions have adopted online
banking platforms and apps.
15
Despite the advent of online banking, the financial institutions codes
remain premised on a brick and mortar centric business plan.
16
In recent years, the banking industry both in Florida and nationally has consolidated.
17
As mergers and
acquisitions occur in the banking industry, executives are commonly subjected to non-compete
agreements that may last several years.
18
Because a proposed president or chief executive officer
must have requisite experience within a 5-year time frame, the current statutory timeframe narrows the
pool of otherwise qualified potential executive officers who may serve in that capacity at a new Florida-
chartered bank.
19
Groups of individuals seeking to organize a new bank have found the 5-year
requirement an impediment to finding quality president or CEO candidates.
20
This timeframe is not
required for nationally chartered banks.
21
Further, for existing Florida-chartered banks, the OFR may
waive the timeframe after considering the overall experience and expertise of the proposed officer and
the condition of the bank or trust company.
22
Interstate Bank Branching by State-Chartered Banks
A Florida-chartered bank may establish and maintain a de novo branch (new branch) or acquire a
branch in a state other than Florida. To do so, the Florida-chartered bank must submit an application
and fee to the OFR and receive the OFR’s approval.
23
A bank chartered by a state other than Florida may establish and maintain a de novo branch or acquire
a branch in Florida upon compliance with Florida’s limited liability company or corporations laws
relating to doing business in Florida as a foreign business entity.
24
No application is filed with the OFR.
Currently, Florida law does not contain a definition for “de novo branch”. Under FDIC regulations, “de
novo branch” is defined
25
as a branch of a state bank which:
1) Is originally established by the State bank as a branch; and
2) Does not become a branch of such bank as a result of:
a. The acquisition by the bank of an insured depository institution or a branch of an insured
depository institution; or
b. The conversion, merger, or consolidation of any such institution or branch.
Acquisition of Control of a Florida-Chartered Bank or Trust Company
A person or group of persons is considered to have a controlling interest over a state bank or state trust
company if any of the following are true:
26
14
OFR, supra note 12.
15
Id.
16
Id.
17
Id.
18
Id.
19
Id.
20
Id.
21
Id.
22
“The president, chief executive officer, or any other person, regardless of title, who has equivalent rank or leads the
overall operations of [an existing] bank or trust company must have had at least 1 year of direct experience as an
executive officer, director, or regulator of a financial institution within the last 5 years. This requirement may be waived by
the office after considering the overall experience and expertise of the proposed officer and the condition of the bank or
trust company, as reflected in the most recent regulatory examination report and other available data.” S. 658.33(5), F.S.
(emphasis added).
23
S. 658.2953(11)(a) and (b), F.S.
24
S. 658.2953(11)(c), F.S.
25
12 U.S.C. § 1828(d)(4)(C).
26
Ss. 658.27(2) and 658.28(2), F.S. STORAGE NAME: h0431c.COM PAGE: 5
DATE: 2/15/2022
They directly or indirectly own, control, or have the power to vote 25 percent or more of any
class of voting securities of the institution.
They control, in any manner, the election of a majority of the directors, trustees, or other
governing body of the institution; they own, control, or have the power to vote 10 percent or
more of any class of voting securities and exercise a controlling influence over management or
policies of the institution.
The OFR determines, after notice and opportunity for a hearing, that the person or persons
directly or indirectly exercises a controlling influence.
A person or group of persons who proposes to purchase or acquire a controlling interest in a state bank
or trust company may not acquire such an interest until they have submitted an application to the OFR
and have been approved.
27
In order to be approved, an applicant must have the reputation, character,
experience, and financial responsibility to control and operate the bank or trust company in a legal and
proper manner and in such a way that would not jeopardize the interests of the stockholders,
depositors, and creditors of the institution, or the public.
28
Conviction for certain crimes, such as money
laundering, is a disqualifier.
29
If a foreign national proposes to own or control 10 percent or more of a class of voting securities of a
new state bank or trust company, or proposes to acquire a controlling interest in an existing state bank
or trust company, the OFR must conduct a public hearing at which the foreign national must appear in
person.
30
The failure of a foreign national to appear is grounds for denial.
31
In certain situations, the presumption of control may be rebutted. A person or group of persons who
proposes to own, control, or have the power to vote 10 percent or more of any class of voting securities
and exercise a controlling influence over management or policies of the institution may rebut the
presumption of control by notifying the OFR of the proposal and presenting information rebutting control
at an informal conference.
32
If, after the conference, the OFR determines that such person or group of
persons will exercise a controlling influence over the bank, such person or persons will be required to
file an application for change of control.
33
Florida law does not currently contemplate the acquisition of a controlling interest without prior
approval.
34
However, not every such acquisition is planned.
35
Shares may pass to an unapproved
owner by operation of law, such as by way of inheritance.
36
For example, if a controlling shareholder
dies and their shares pass to an unapproved beneficiary, the unapproved beneficiary commits an
unavoidable, technical violation of statute upon becoming the owner of the shares.
37
Formation and Regulation of Credit Unions
Like banks, credit unions accept deposits and make loans, and can be state-chartered or federally-
chartered:
State-chartered credit unions may be formed under the Florida Credit Union Act (FCUA), which
became law in 1980.
38
The FCUA provides that “[a] credit union is a cooperative, nonprofit
association, organized . . . for the purposes of encouraging thrift among its members, creating
sources of credit at fair and reasonable rates of interest, and providing an opportunity for its
members to use and control their resources on a democratic basis in order to improve their
27
S. 658.28(1), F.S.
28
S. 658.28(1)(b), F.S.
29
S. 658.28(1)(c), F.S.
30
S. 120.80(3)(a)4., F.S.
31
Id.
32
Ss. 658.27(2)(c) and 658.28(3), F.S.
33
S. 658.28(3), F.S.
34
OFR, supra note 12.
35
Id.
36
Id.
37
Id.
38
Ch. 80-258, Laws of Fla.; codified at ch. 657, F.S. STORAGE NAME: h0431c.COM PAGE: 6
DATE: 2/15/2022
economic and social condition.”
39
State-chartered credit unions have both a state regulator, the
OFR, and a federal regulator, the National Credit Union Association (NCUA).
Federally-chartered credit unions are chartered under the Federal Credit Union Act of 1934
40
and are regulated by the NCUA.
For Florida-chartered credit unions, the executive officers are elected by the board of directors at the
organizational meeting, and new officers may be elected at each annual meeting of the board of
directors.
41
The terms of executive officers are one year, or until their successors are chosen and have
been duly qualified.
42
Within 30 days after election or appointment, a record of the names and
addresses of the members of the board, members of committees, all officers of the credit union, and
the credit manager must be filed with the OFR on forms prescribed by the Financial Services
Commission (commission).
43
Formation and Regulation of Family Trust Companies
A family trust company is a corporation or limited liability company that is exclusively owned by family
members, acts as a fiduciary to serve family members, and generally may not serve as a fiduciary for a
person that is not a family.
44
Family trust companies are usually formed to manage the wealth of high
net-worth families in lieu of traditional individual or institutional trustee arrangements for a variety of
personal, investment, regulatory, and tax reasons.
There are three types of family trust companies authorized under Florida law:
Licensed family trust companies: A family trust company may elect to be a licensed family trust
company if the company desires to be subject to the regulatory oversight of the OFR, and it
must file an application for licensure with the OFR.
45
With respect to a licensed family trust
company, the OFR is responsible for regulating, supervising, and examining the company.
46
Foreign licensed family trust company: A foreign licensed family trust company is licensed by
and has its principal place of business in a state other than Florida, is operated in accordance
with applicable laws of its licensing state, is subject to supervision by the state in which the
principal place of business is located, and is not a subsidiary of a foreign country.
47
A foreign
licensed family trust company must register with the OFR before beginning operations in this
state.
48
The OFR’s oversight role is limited to ensuring that fiduciary services provided by the
foreign licensed family trust company are restricted to family members and authorized related
interests and not to the general public.
49
Registered family trust company: A family trust company that is not a foreign licensed family
trust company and does not apply to become a licensed family trust company must register with
the OFR before beginning operations in this state.
50
The OFR’s oversight role is limited to
ensuring that fiduciary services provided by the registered family trust company are restricted to
family members and authorized related interests and not to the general public.
51
39
S. 657.003, F.S.
40
Pub. L. No. 73-467, codified at 12 U.S.C. § 1751 et seq.
41
S. 657.022(1), F.S.
42
S. 657.022(2), F.S.
43
S. 657.028(6), F.S. The commission is composed of the Governor, Attorney General, Chief Financial Officer, and
Commissioner of Agriculture. S. 20.121(3), F.S. The commission members serve as OFR’s agency head for the purpose
of rulemaking. S. 20.121(3)(c), F.S.
44
S. 662.111(12), F.S.
45
Ss. 662.102(2) and 662.121, F.S.
46
S. 662.102(3)(a), F.S.
47
S. 662.111(15)(c), F.S.
48
S. 662.122(2), F.S.
49
S. 662.102(3)(b), F.S.
50
S. 662.122(1), F.S.
51
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DATE: 2/15/2022
All three types of family trust companies must maintain a deposit account with a state-chartered or
national financial institution that has a principal or branch office in this state.
52
Within 45 days after the end of each calendar year, all three types of family trust companies are
required to file an annual renewal application.
53
Currently, the timing of renewal does not account for
when the initial application was filed. Thus, a family trust company may have to submit a renewal
application shortly after becoming licensed or registered in this state.
Formation and Regulation of International Banking Offices
One type of financial institution regulated by the OFR is an international banking corporation (IBC) that
transacts business in Florida. An IBC is “a banking corporation organized and licensed under the laws
of a foreign country.”
54
The OFR does not regulate the IBC, i.e., the home-country depository institution,
itself but rather the offices that the IBC establishes in Florida. Florida’s regulation of IBC offices are
designed to provide for appropriate supervision and regulatory oversight to ensure that financial
services activities of IBCs in this state are conducted responsibly and in a safe and sound manner.
55
IBCs may operate in Florida through a variety of business models, which must be licensed by the
OFR
56
and include the following:
International representative offices - Permissible activities include:
57
o Promoting or assisting the deposit-taking, lending, or other financial or banking activities
of an IBC;
o Serving as a liaison in Florida between an IBC and its existing and potential customers;
o Soliciting business for the IBC and its subsidiaries and affiliates;
o Providing information to customers concerning their accounts;
o Answering questions;
o Receiving applications for extensions of credit and other banking services;
o Transmitting documents on behalf of customers; and
o Making arrangements for customers to transact business on their accounts.
However, a representative office may not conduct any banking or trust business in Florida.
58
International administrative offices - Permissible activities include:
59
o Administering personnel and operations;
o Engaging in data processing or recordkeeping activities; and
o Negotiating, approving, or servicing loans or extensions of credit and investments.
Additionally, this type of office may engage in any activities permissible for an international
representative office.
60
International bank agencies - Permissible activities include:
61
o Making loans, extensions of credit, or investments;
o Acting as custodian;
o Furnishing investment management and investment advisory services to nonresident
persons whose principal places of business or domicile are outside the United States
and to resident persons with respect to international, foreign, or domestic investments;
o Receiving specified types of deposits; and
o With prior authorization from the OFR, accepting appointments as trustee by nonresident
persons and exercising trust powers with respect to such fiduciary accounts.
Additionally, this type of office may engage in any activities permissible for an international
administrative office or international representative office.
62
52
S. 662.1225(1)(d) and (2)(d), F.S.
53
S. 662.128(1), F.S.
54
S. 663.01(6), F.S.
55
S. 663.001(2), F.S.
56
Ss. 663.04 and 663.05, F.S.
57
S. 663.062, F.S.
58
Id.
59
S. 663.063, F.S.
60
S. 663.063(2), F.S.
61
S. 663.061, F.S.; R. 69U-140.008, F.A.C. STORAGE NAME: h0431c.COM PAGE: 8
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International branches - An international branch has the same rights and privileges as a
federally licensed international branch.
63
Additionally, this type of office may engage in any
activities permissible for an international bank agency, international administrative office, or
international representative office.
64
If an IBC desires to maintain any of the above offices in this state, the IBC is required to meet minimum
licensure requirements, and its offices in Florida are subject to the examination and enforcement
authority of the OFR. The OFR may not issue a license to an IBC for one of the above offices unless
the IBC:
65
In the case of an international bank agency or branch, holds an unrestricted license to receive
deposits from the general public in the foreign country under the laws of which the IBC is
organized and chartered;
Has been authorized by the foreign country's bank regulatory authority to establish the
proposed international bank office;
Is adequately supervised by the central bank or bank regulatory agency in the foreign country in
which the IBC is organized and chartered; and
Meets minimum capital requirements.
International bank agencies and international branches are required to maintain dollar deposits or
investment securities with one or more banks in this state equal to the greater of:
66
$4 million; or
7 percent of the total liabilities of the international bank agency or international branch excluding
accrued expenses and amounts due and other liabilities to affiliated branches, offices, agencies,
or entities.
Formation and Regulation of Florida Offices Performing Services for an International Trust Entity
An international trust entity is an international trust company or organization, or any similar business
entity, or an affiliated or subsidiary entity that is licensed, chartered, or similarly permitted to conduct
trust business in a foreign country or countries under the laws where such entity is organized and
supervised.
67
A qualified limited service affiliate is a person or entity that is qualified to perform
specified permissible activities related to or for the benefit of one or more affiliated international trust
entities.
68
Such permissible activities include:
69
1) Marketing and liaison services related to or for the benefit of the affiliated international trust
entities, directed exclusively at professionals and current or prospective nonresident clients of
an affiliated international trust entity;
2) Advertising and marketing at trade, industry, or professional events;
3) Transmission of documents between the international trust entity and its current or prospective
clients or a designee of such clients; and
4) Transmission of information about the trust or trust holdings of current clients between current
clients or their designees and the international trust entity.
A qualified limited service affiliate is prohibited from engaging in the following activities:
70
1) Advertising and marketing related to or for the benefit of the international trust entity which are
directed to the general public;
2) Acting as a fiduciary, including, but not limited to, accepting the fiduciary appointment, executing
the fiduciary documents that create the fiduciary relationship, or making discretionary decisions
regarding the investment or distribution of fiduciary accounts;
62
S. 663.061(1), F.S.
63
S. 663.064(2), F.S.
64
S. 663.064(3), F.S.
65
Ss. 663.05(8) and 663.055(1)-(2), F.S.
66
S. 663.07, F.S.
67
S. 663.530(1)(c), F.S.
68
S. 663.530(1)(f), F.S.
69
S. 663.531(1), F.S.
70
S. 663.531(2), F.S. STORAGE NAME: h0431c.COM PAGE: 9
DATE: 2/15/2022
3) Accepting custody of any trust property or any other good, asset, or thing of value on behalf of
the affiliated international trust entity, its subsidiaries or affiliates, or subsidiaries and affiliates of
the qualified limited service affiliate;
4) Soliciting business within this state from the general public related to or for the benefit of an
affiliated international trust entity;
5) Adding a director, an executive officer, a principal shareholder, a manager, a managing
member, or an equivalent position to the qualified limited service affiliate without prior written
notification to the OFR;
6) Commencing services for an international trust entity without complying with applicable
requirements;
7) Providing services for any international trust entity that is in bankruptcy, conservatorship,
receivership, liquidation, or a similar status under the laws of any country; or
8) Otherwise conducting banking or trust business.
In order to qualify as a qualified limited service affiliate, a proposed qualified limited service affiliate
must file a written notice that includes the name under which the proposed qualified limited service
affiliate will conduct business in this state; a copy of the articles of incorporation or articles of
organization, or the equivalent, of the proposed qualified limited service affiliate; the physical address
where the proposed qualified limited service affiliate will conduct business; the mailing address of the
proposed qualified limited service affiliate; the name and biographical information of each director,
executive officer, manager, managing member, or equivalent position of the proposed qualified limited
service affiliate; the number of officers and employees of the proposed qualified limited service affiliate;
a detailed list and description of the activities to be conducted by the proposed qualified limited service
affiliate; background information for certain individuals; information related to each international trust
entity for which the proposed qualified limited service affiliate will provide services; and other
information as the office reasonably requires.
71
Additionally, the notice to the OFR must include:
72
A declaration under penalty of perjury signed by the executive officer, manager, or managing
member of the proposed qualified limited service affiliate that, to the best of his or her
knowledge the jurisdiction of the international trust entity or its offices, subsidiaries, or any
affiliates that are directly involved in or facilitate the financial services functions, banking, or
fiduciary activities of the international trust entity is not listed on the Financial Action Task Force
Public Statement or on its list of jurisdictions with deficiencies in anti-money laundering or
counterterrorism.
Proof that the jurisdictions where the international trust entity or its offices, subsidiaries, or any
affiliates that are directly involved in or that facilitate the financial services functions, banking, or
fiduciary activities of the international trust entity are not listed on the Financial Action Task
Force Public Statement or on its list of jurisdictions with deficiencies in anti-money laundering
or counterterrorism.
Under current law, the OFR does not have a means of prohibiting the qualified limited service affiliate
from providing services to an international trust entity in a jurisdiction that is included on the Financial
Action Task Force's list of international jurisdictions that have weak measures to combat money
laundering and terrorist financing.
Examination of Florida Financial Institutions
The OFR is required to conduct an examination of the condition of each state financial institution at
least every 18 months, though the OFR may conduct more frequent examinations based upon the risk
profile of the financial institution, prior examination results, or significant changes in the institution or its
operations.
73
For state financial institutions that have a federal regulator, the OFR is permitted to accept
an examination performed by the federal regulator or to conduct a joint or concurrent examination of
the state financial institution with the federal regulator.
74
The result is that the OFR may alternate with
71
S. 663.532(1), F.S.
72
Id.
73
S. 655.045(1), F.S.
74
S. 655.045(1)(a), F.S. STORAGE NAME: h0431c.COM PAGE: 10
DATE: 2/15/2022
the federal regulator such that, while the state financial institution is examined at least every 18 months,
the OFR itself performs the examination every 36 months.
Such alternating, joint, or concurrent examination reduces regulatory burden on the financial institutions
subject to dual regulation, and the OFR works in coordination with these federal agencies when
possible.
75
Many of these federal regulators have policies in place authorizing them to alter examination
schedules based on emergency conditions, for example following a major disaster or emergency.
76
Many of the documents which the OFR examiners must analyze are kept in paper files.
77
The lack of
digital copies and the confidential nature of these documents often necessitates that examiners be
physically present in the financial institution to perform the examination.
78
Most recently, the COVID-19
pandemic up-ended examination schedules; however, Florida examiners commonly face obstacles
when attempting to perform in-person examinations during hurricane season, where weather hazards
and property damage create an unsafe environment.
79
Unlike the federal regulators, the OFR does not
have a method by which it can delay an examination due to such hazards.
80
After the examination of the state financial institution is complete, a copy of the report of examination
must be furnished to the entity examined and must be presented to the board of directors at its next
meeting.
Acquisition of Assets or Liabilities of a Financial Institution
Current law requires the OFR’s approval for a financial entity to acquire all or substantially all of the
assets of, or assume all or any part of the liabilities of, any other financial institution.
81
A mutual
financial institution may not sell all or substantially all of its assets to a stock financial institution until it
has first converted into a capital stock financial institution.
82
These provisions of current law have
generated confusion for the industry, as the term “substantially all” is not defined.
83
The OFR regularly
receives questions from industry participants regarding the application of these provisions; financial
institutions have asked what percentage meets the threshold of “substantially all,” and how to calculate
that percentage.
84
Florida Control of Money Laundering and Terrorist Financing in Financial Institutions Act (Act)
The Act is found within the financial institutions codes in s. 655.50, F.S. The purpose of the Act is to
require the submission to the OFR of certain reports and the maintenance of certain records of
customers, accounts, and transactions involving currency or monetary instruments or suspicious
activities if such reports and records deter using financial institutions to conceal, move, or provide
proceeds obtained from or intended for criminal or terrorist activities and if such reports and records
have a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings.
85
The Act
applies to financial institutions as defined under the federal anti-money laundering laws.
86
The federal
definition of “financial institution” is very broad and encompasses entities beyond the scope of those
regulated under the financial institutions codes. For example, the federal definition includes entities not
regulated by the OFR at all, such as a travel agency, a casino, and the United States Postal Service.
87
The federal definition also includes entities which the OFR does regulate but does so under different
chapters of law, not the financial institutions codes, such as a broker or dealer in securities (regulated
75
OFR, supra note 12.
76
Id.
77
Id.
78
Id.
79
Id.
80
Id.
81
S. 655.414, F.S.
82
S. 655.414(6), F.S.
83
OFR, supra note 12.
84
Id.
85
S. 655.50(2), F.S.
86
S. 655.50(3)(c), F.S.; 31 U.S.C. § 5312.
87
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DATE: 2/15/2022
by the OFR under ch. 517, F.S.) and various money services businesses (regulated by the OFR under
ch. 560, F.S.).
88
Chapter 560, F.S., relating to money services businesses, contains a statute similar to
the Act.
89
Thus, both statutes may be read to apply to these entities, which may generate confusion for
the industry.
90
Effect of the Bill
Examinations of Florida Financial Institutions (Section 4)
The bill provides the OFR an additional 90 days to comply with the examination requirement for state
financial institutions if the federal regulator suspends or cancels a previously scheduled examination. In
such case, the requirement is deemed met by the federal agency conducting the examination or upon
the OFR conducting the examination instead.
The bill clarifies language within the requirement that the report of examination be furnished to the
entity examined by replacing the term “entity” with “state financial institution”. Additionally, the bill
requires that each director review the report and acknowledge receipt of the report and such review by
signing and dating the prescribed signature page of the report and returning a copy of the signed page
to the OFR.
Acquisition of Assets or Liabilities of a Financial Institution (Section 5)
The bill amends provisions relating to the acquisition of assets and liabilities such that OFR’s approval
is needed if a financial institution acquires 50 percent or more of the assets of, liabilities of, or a
combination of assets and liabilities of, another financial institution. The bill provides that a mutual
financial institution may not sell 50 percent or more of its assets to a stock financial institution until it
has first converted to a capital stock financial institution. These provisions will no longer include the
ambiguous phrase “substantially all”. The bill also provides that the percentages of assets or liabilities
must be calculated based on the most recent quarterly reporting date.
Florida Control of Money Laundering and Terrorist Financing in Financial Institutions Act (Section 6)
The bill amends the definition of “financial institution” for purposes of the Florida Control of Money
Laundering and Terrorist Financing in Financial Institutions Act by pointing to the definition of “financial
institution in s. 655.001, F.S., and removing OFR-regulated entities whose permissible activities do not
involve monetary transactions.
Credit Union Reporting of Elected or Appointed Officers, Directors, Etc. (Sections 7 and 8)
The bill relocates and clarifies a provision relating to a credit union’s reporting of names and addresses
of newly elected or appointed officers, directors, etc. Specifically, the bill provides that, within the 30
days following the annual meeting or any other meeting at which any director, officer, member of the
supervisory or audit committee, member of the credit committee, or credit manager is elected or
appointed, the credit union must submit to the OFR the names and residence addresses of the elected
or appointed person or persons on a form adopted by the commission and provided by the OFR.
Target Market (Sections 9, 10, and 11)
The bill introduces the concept of a “target market” for a proposed state bank or trust company and
defines “target market” as the group of clients or potential clients from whom:
(a) A bank or proposed bank expects to draw deposits and to whom the bank or proposed bank
focuses or intends to focus its marketing efforts; or
88
31 U.S.C. § 5312(a)(2)(H), (J), (K), (R).
89
S. 560.123, F.S.
90
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DATE: 2/15/2022
(b) A trust company, a trust department of a bank or association, a proposed trust company, or a
proposed trust department of a bank or association expects to draw its fiduciary accounts and
to whom the trust company, the trust department of a bank or association, the proposed trust
company, or the proposed trust department of a bank or association focuses or intends to
focus its marketing efforts.
In addition to the considerations under current law that are based largely on a geographic location, the
bill allows the OFR to evaluate the following considerations with regard to approving an application for a
new state bank or trust company:
The need for the target market that the proposed state bank or trust company intends to
engage with in business;
The ability of the target market to support the proposed state bank or trust company and all
other existing bank or trust facilities that serve the same target market; and
Whether the target market conditions indicate reasonable promise of successful operations for
the proposed state bank or trust company.
Proposed President or Chief Executive Officer of a New State-Chartered Bank or Trust
Company(Section 11)
The bill allows the OFR to waive the experience requirement for a proposed president or CEO of a new
state bank or trust company after considering:
1) The adequacy of the overall experience and expertise of the proposed president or chief
executive officer;
2) The likelihood of successful operation of the proposed state bank or trust company;
3) The adequacy of the proposed capitalization;
4) The proposed capital structure;
5) The experience of the other proposed officers and directors; and
6) Any other relevant data or information.
Amending this requirement will allow organizers of new state banks the ability to attract higher quality
president or CEO candidates and, therefore, make new bank formations more feasible in today’s
competitive business environment.
91
Acquisition of Control of a Florida-Chartered Bank or Trust Company (Sections 1 and 12)
When a hearing is required regarding a foreign national’s proposal to own or control 10 percent or more
of a class of voting securities of a new state bank or trust company, or on a foreign national’s proposal
to acquire a controlling interest in an existing state bank or trust company, the bill permits the foreign
national to participate through video conferencing in lieu of appearing in person.
The bill provides a process for seeking approval to own a controlling interest in a financial institution in
the event of inheritance of such controlling interest. If a person or a group of persons, directly or
indirectly, acquires a controlling interest in a state bank or state trust company, through probate or trust,
the person or group of persons must notify the OFR within 90 days after acquiring such an interest.
Such an interest does not give rise to a presumption of control until the person or group of persons
votes the shares or the OFR has issued a certificate of approval in response to an application for
change in control.
Interstate Bank Branching by State-Chartered Banks (Section 13)
The bill defines “de novo branch” for purposes of Florida law regarding interstate bank branching by
Florida-chartered banks and banks chartered by other states. The definition is based on the definition
for “de novo branch” within FDIC regulations.
91
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The bill amends the catchline of a subsection of the statute in order to clarify application of the
subsection. The subsection relates to interstate bank branching by both Florida-chartered banks and
banks chartered by other states. The catchline currently uses the term “state bank”, which is defined to
mean a Florida-chartered bank; the term does not capture banks chartered by other states.
Family Trust Companies (Sections 14 and 15)
The bill expands the banking options of a registered family trust company and a licensed family trust
company by allowing these entities to maintain a deposit account at an insured bank or credit union
located anywhere in the United States, regardless of whether the bank or credit union has a principal
office or branch in Florida.
The bill amends the deadline for a family trust company to file an annual renewal such that the renewal
application is due no later than 45 days after the anniversary of the filing of either the initial application
or the prior year’s renewal application.
Location of an International Bank Agency’s or International Branch’s Required Minimum Assets
(Section 16)
The bill expands the banking options for an international bank agency or an international branch
regarding the location of required minimum dollar deposits or investment securities. The bill permits
these entities to maintain the required assets in an insured bank located anywhere in the United States,
not just those banks that are located in Florida.
Qualified Limited Service Affiliates (Section 17)
The bill updates two references to the name of a list of international jurisdictions that have weak
measures to combat money laundering and terrorist financing. The bill also requires a qualified limited
service affiliate to suspend its activities relating to an international trust entity in a jurisdiction on that
list. Such a suspension must remain in effect until the jurisdiction is removed from the list.
Conforming Changes (Sections 2, 3, 18)
The bill conforms cross-references to reflect amendments to the definitions in s. 658.12, F.S.
Reenactment (Section 19)
The bill reenacts s. 658.165, F.S., for the purpose of incorporating the amendment made by the bill to
s. 658.20, F.S.
Effective Date (Section 20)
The bill provides an effective date of July 1, 2022.
B. SECTION DIRECTORY:
Section 1. Amends s. 120.80, F.S., relating to exceptions and special requirements; agencies.
Section 2. Amends s. 475.01, F.S., relating to definitions.
Section 3. Amends s. 518.117, F.S., relating to permissible investments of fiduciary funds.
Section 4. Amends s. 655.045, F.S., relating to examinations, reports, and internal audits; penalty.
Section 5. Amends s. 655.414, F.S., relating to acquisition of assets; assumption of liabilities.
Section 6. Amends s. 655.50, F.S., relating to Florida Control of Money Laundering and Terrorist
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Section 7. Amends s. 657.021, F.S., relating to board of directors; executive committee.
Section 8. Amends s. 657.028, F.S., relating to activities of directors, officers, committee members,
employees, and agents.
Section 9. Amends s. 658.12, F.S., relating to definitions.
Section 10. Amends s. 658.20, F.S., relating to investigation by office.
Section 11. Amends s. 658.21, F.S., relating to approval of application; findings required.
Section 12. Amends s. 658.28, F.S., relating to acquisition of control of a bank or trust company.
Section 13. Amends s. 658.2953, F.S., relating to interstate branching.
Section 14. Amends s. 662.1225, F.S., relating to Requirements for a family trust company, licensed
family trust company, or foreign licensed family trust company.
Section 15. Amends s. 662.128, F.S., relating to annual renewal.
Section 16. Amends s. 663.07, F.S., relating to asset maintenance or capital equivalency.
Section 17. Amends s. 663.532, F.S., relating to qualification.
Section 18. Amends s. 736.0802, F.S., relating to duty of loyalty.
Section 19. Reenacts s. 658.165, F.S., relating to banker's banks; formation; applicability of financial
institutions codes; exceptions.
Section 20. Provides an effective date of July 1, 2022.
II. FISCAL ANALYSIS & ECONOMIC IMPACT STATEMENT
A. FISCAL IMPACT ON STATE GOVERNMENT:
1. Revenues:
See Fiscal Comments.
2. Expenditures:
See Fiscal Comments.
B. FISCAL IMPACT ON LOCAL GOVERNMENTS:
1. Revenues:
None.
2. Expenditures:
None.
C. DIRECT ECONOMIC IMPACT ON PRIVATE SECTOR:
The bill may encourage and attract the formation of new financial institutions as Florida-chartered
institutions, in which case the bill would have a positive impact on investment, employment, economic STORAGE NAME: h0431c.COM PAGE: 15
DATE: 2/15/2022
growth, and consumer access to financial services. However, the impact to the private sector is
indeterminate.
D. FISCAL COMMENTS:
The bill may encourage and attract the formation of new financial institutions as Florida-chartered
institutions, in which case the OFR’s revenues would be positively affected through increased
application fees and annual assessments. OFR’s expenditures would also increase for the cost of
regulation and oversight of such new institutions. However, the overall fiscal impact is indeterminate.
III. COMMENTS
A. CONSTITUTIONAL ISSUES:
1. Applicability of Municipality/County Mandates Provision:
Not Applicable. This bill does not appear to affect county or municipal governments.
2. Other:
None.
B. RULE-MAKING AUTHORITY:
Section 7 requires the commission to adopt a form for a credit union to report to OFR the names and
residence addresses of persons elected or appointed at the credit union’s annual meeting.
C. DRAFTING ISSUES OR OTHER COMMENTS:
Section 14 of the bill expands the banking options of a registered family trust company and a licensed
family trust company but does not do so for a foreign licensed family trust company. The sponsor has
indicated an intent to address this issue.
IV. AMENDMENTS/COMMITTEE SUBSTITUTE CHANGES
On January 19, 2022, the Insurance & Banking Subcommittee considered a proposed committee substitute
and reported the bill favorably as a committee substitute. The committee substitute differs from HB 431 in
the following ways:
Aligns the House bill with the Senate bill by narrowing the scope of the bill to include only provisions
relating to financial institutions.
Amends the bill’s title to reflect the narrower scope of the bill.
Clarifies how the OFR’s examination requirement for a financial institution is met in the event that a
financial institution’s federal regulator suspends or cancels a previously scheduled examination of
the financial institution.
Requires a financial institution’s directors to acknowledge their review, not just receipt, of a report of
examination.
Clarifies provisions relating to a financial institution’s acquisition of another financial institution’s
assets or liabilities.
Allows the OFR to waive the experience requirement for a proposed president or CEO of a new
bank or trust company pursuant to specified considerations about the person and the proposed
institution.
Clarifies the definition of “de novo branch” in the context of interstate bank branching by state-
chartered banks.
Reenacts s. 658.165(1), F.S.
Changes the bill’s effective date from October 1, 2022, to July 1, 2022.
Removes the appropriation and makes other technical changes.
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DATE: 2/15/2022
The staff analysis has been updated to reflect the committee substitute.