Bank-Issued and Savings Institution-Issued Securities

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

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 s. 18(b)(4)(C) of the Securities Act of 1933 which cross-references s. 3(a)(2) thereof.

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

Frequently asked questions:

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 below December 22, 1995 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 Wis. Stat. s. 551.102(5)(b)3.

Important interpretive letters [citations are to predecessor statute]:

December 22, 1995 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 Wis. Stat. s. 551.22(3). 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.

December 28, 1994 materially identical opinions re: Smith Barney CD program and Dean Witter Reynolds CD program. Certificates of deposit issued by industrial loan companies (ILC) not domiciled in Wisconsin qualify for the use of the exemption under Wis. Stat. s. 551.22(3) 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."

December 28, 1988 letter re: State Bank of India. Exemption set forth in Wis. Stat. s. 551.22(3) 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.

November 8, 1985 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 Wis. Stat. s. 551.22(3).

April 3, 1981 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 Wis. Stat. s. 551.22(3).

December 17, 1980 letter re: First National Bank of Neenah. Mortgage pool participations of bank-originated mortgages are not exempt under Wis. Stat. s. 551.22(3) because loan participations do not constitute securities "representing an interest in or a debt of, or guarantee by, any bank . . . , " as is required by Wis. Stat. s. 551.22(3).

History: Predecessor statute Wis. Stat. s. 551.22(3)​, adopted on January 1, 1970. Differed from the Uniform Securities Act of 1956 s. 402(a)(3) in that Wis. Stat. s. 551.22(3) 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 Wis. Stat. s. 551.201(3) and the definitions in Wis. Stats. s. 551.102(3) and (5).

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