Expanded Consumer Choice In Financial Services Act


The Expanded Consumer Choice in Financial Services Act permits banks to fully compete in the financial services market by offering consumers a wide variety of investments and other financial services. This Act included safeguards to limit banks' involvements in high-risk investments.

Expanded Consumer Choice In Financial Services Act

Model Policy

{Title, enacting clause, etc.}

Section 1. This Act may be cited as the Expanded Consumer Choice Financial Services Act.

Section 2. {Investment powers.} A bank may invest its funds, and a trust company may invest its corporate funds, subject to the definitions, restrictions, and limitations listed in this Act.

Section 3. {Investments not subject to limitations.} A bank or trust company may invest without limitation in securities of, or other interests in, any open or closed-end management type investment company or investment trust registered under the Investment Company Act of 1940, 15 U.S.C. 80a-1 et seq., as amended from time to time, provided that the portfolio of such investment company or investment trust is limited to United States Government obligations, and further provided that any such investment company or investment trust shall take delivery of such collateral either directly or through an authorized custodian.

Section 4. {Investment in corporations.} Up to an aggregate of 20% of the total assets of a bank may be invested in the stock, obligations, or other securities of subsidiary corporations, or other corporations or entities, except that during the first three years of existence of a bank, such investments are limited to ten percent of the total assets. The [insert name of appropriate regulatory authority] may, by rule, limit any type of investment made pursuant to this Section if it finds that such investment would constitute an unsafe of unsound practice.

Section 5. {Investment quality.} None of the bonds or other obligations described in this Section shall be eligible for investment in any amount unless current as to all payments of principal and interest unless rated in one of the four highest classifications or, in the case of commercial paper, unless it is of prime quality and of the highest letter and numerical rating, as established by a nationally recognized rating service, or any comparable rating as determined by the [insert name of appropriate regulatory authority]. Bonds or other obligations that are not rated shall not be eligible for investment unless otherwise supported as to investment quality and marketability by a credit rating file compiled and maintained in current status by the purchasing bank or trust company.

Section 6. {Federally chartered banks.} This Act shall not apply to any state bank which holds membership in the Federal Reserve System or which is subject to, and that complies with, the requirement of Regulation D of the Board of Governors of the Federal Reserve System.

Section 7. {Severability clause.}

Section 8. {Repealer clause.}

Section 9. {Effective date.}


Approved by ALEC Board of Directors on January 1995.

Reapproved by ALEC Board of Directors on January 28, 2013.

Reapproved by ALEC Board of Directors on November 16, 2017.