Investments in private securities; limitation.
1. As used in this section, “private security” means a marketable obligation in the form of a bond, note or debenture which is commonly regarded as an investment security. It does not include investments which are predominantly speculative in nature.
2. A bank may purchase a private security for its own account when in its prudent banking judgment, which may be based in part upon estimates which it believes to be reliable, it determines that:
(a) There is adequate evidence that the obligor will be able to perform all that it undertakes to perform in connection with the security, including all debt service requirements; and
(b) The security may be sold with reasonable promptness at a price which corresponds reasonably to its fair value.
3. A bank may purchase a private security for its own account, although its judgment with respect to the obligor’s ability to perform is based predominantly upon estimates which it believes to be reliable. Although the appraisal of the prospects of any obligor will generally be based in part upon estimates, it is the purpose of this subsection to permit a bank to exercise a broader range of judgment with respect to a more restricted portion of its investment portfolio. This authority may be exercised not only in the absence of a record of performance, but also when there are prospects for improved performance.
4. A bank may, as a factor in reaching its prudent banking judgment with respect to a private security, consider a ruling published by the Commissioner on the eligibility of the private security for purchase. Consideration must be given to the possibility that circumstances on which the ruling was based may have changed since the time of the ruling.
5. Subject to the limitations set forth in NRS 662.155, the investment in any private securities of any one obligor may at no time be more than 25 percent of the stockholders’ or members’ equity of the bank.
Last modified: February 26, 2006