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Fund Aims to Assist Banks with CRA

A new mutual fund is being created to help banks satisfy Community Reinvestment Act requirements.

A Florida broker/dealer has created an investment adviser to manage what will be a new institutional fund, the Community Reinvestment Act Qualified Investment Fund, which has yet to be approved by the Securities and Exchange Commission.

The adviser is called CRAFund Advisors, and some of the principals are also principals of SunCoast Capital Group, a broker/dealer with offices in Ft. Lauderdale that is also the fund's distributor.

Officials at CRAFund Advisors declined to comment on the fund. But the registration statement filed with the SEC on Feb. 3 said the fund was designed to give banks an investment vehicle that will satisfy CRA rules.

The CRA was established in 1977 in order to ensure that banks lend and invest in their communities, especially the poorest areas. Banks receive a CRA rating based on their involvement in community development. Their record in this area is considered by federal institutions like the Treasury and Federal Reserve when they consider whether to approve mergers, acquisitions and other business moves.

The CRA rating covers three areas: lending, service and investments. Investments make up 25 percent of the rating for the largest banks. However, some banks can be rated entirely on their investment record.

Fund officials are hoping that federal officials will approve use of the fund to satisfy CRA requirements, but that approval has not yet been granted.

In order to generate both income and CRA credit, the fund will invest in CRA-qualifying securities such as taxable municipal bonds that raise money for community development and mortgage securities like those issued by the Federal National Mortgage Association (FNMA) and the Government National Mortgage Association (GNMA).

The fund will also invest in certificates of deposit issued by community development groups and minority or woman-owned financial institutions.

According to SEC documents, the fund will take into consideration the geographical area of each shareholder when buying up securities.

"The Fund must hold CRA-qualifying investments that relate to the financial institution's assessment (geographical) area or a broader statewide or regional area... although each shareholder of the Fund will indirectly own an undivided interest in all the Fund's investments, the Fund will designate specific securities to specific shareholders for CRA-qualifying purposes," the fund's SEC registration says.