<html> <head> <title>Rule 20:07:18:03 Limitations on purchase of life insurance on key person.</title> <META NAME="Keywords" Content="Administrative Rules 20:07:18:03"> <META NAME="Description" Content="Administrative Rules 20:07:18:03 Limitations on purchase of life insurance on key person."> <meta name=Generator content="Microsoft Office HTML Filter 2.0"> <meta http-equiv=Content-Type content="text/html; charset=windows-1252"> <meta name=Originator content="Microsoft Word 10"> <style> <!-- --> </style> </head> <body lang=EN-US> <div> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>20:07:18:03.&nbsp;&nbsp;Limitations on purchase of life insurance on key person.</b> The purchase of cash value life insurance on a key person by a bank is subject to the following limitations:</p> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (1)&nbsp;&nbsp;A bank may not purchase life insurance policies for the bank's own account as an investment;</p> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (2)&nbsp;&nbsp;A bank's purchase of a life insurance policy underwritten by one company on a key person may not exceed 25 percent of the bank's capital stock and surplus as measured by the policy's cash surrender value at the time of purchase;</p> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (3)&nbsp;&nbsp;A bank may not commit an amount toward the purchase of life insurance policies, as measured by the cash surrender value at the time of purchase, that is more than 25 percent of the bank's capital stock, surplus, and undivided profits;</p> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (4)&nbsp;&nbsp;A bank may not purchase life insurance policies for estate planning purposes except in connection with a compensation package;</p> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (5)&nbsp;&nbsp;A bank's authority to hold life insurance on a key person ceases when the key person is no longer employed by the bank or no longer meets the definition of a key person.</p> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Source:</b> 20 SDR 33, effective September 5, 1993.</p> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>General Authority:</b>SDCL <A HREF="/statutes/DisplayStatute.aspx?Type=Statute&Statute=51A-2-13">51A-2-13</A>, <A HREF="/statutes/DisplayStatute.aspx?Type=Statute&Statute=51A-4-42">51A-4-42.</A></p> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Law Implemented:</b>SDCL <A HREF="/statutes/DisplayStatute.aspx?Type=Statute&Statute=51A-4-42">51A-4-42.</A></p> </div> </body> </html>