Internal Control Questionnaires and Verification Procedures

Policies

1. Has the board of directors adopted written policies for private placement activities that:

   1. Define objectives?

   2. Provide guidelines for fee determinations based on:

      • Size of transaction?

      • Anticipated degree of difficulty or time involved?

      • Payment of negotiated fees at various stages of the transaction?

      • and not solely on:

      • Successful completion of the transaction?

      • Deposit balances or the profitability of the client’s other banking relationships?

   3. Require that bank officers act in an advisory rather than agent capacity in all negotiations?

      Note: An advisor will advise and assist a client, an agent has the authority to commit a client.

   4. Recognize possible conflicts of interest, and establish appropriate procedures regarding:

      • The purchase of bank-advised private placements with funds managed by the bank or an advisory affiliate?

      • Loans to investors to purchase private placements?

      • Use of proceeds of an advised placement to repay the issuer’s debts to the bank?

      • Dealings with unsophisticated or non-institutional investors who have other business relationships with the bank?

   5. Require legal review of each placement prior to completion?

   6. Direct officers to obtain certified financial statements from the seller?

   7. Require distribution of certified financial statements to interested investors.

   8. Require officers to request a written statement of investment objectives or requirements from interested investors?

   9. Provide for a supervisory management review to determine if a placement is suitable for the investor?

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