[Federal Register Volume 76, Number 177 (Tuesday, September 13, 2011)]
[Rules and Regulations]
[Pages 56507-56606]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-22854]
[[Page 56507]]
Vol. 76
Tuesday,
No. 177
September 13, 2011
Part II
Federal Reserve System
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12 CFR Parts 207, 215, 223, et al.
Availability of Information, Public Observation of Meetings, Procedure,
Practice for Hearings, and Post-Employment Restrictions for Senior
Examiners; Savings and Loan Holding Companies; Interim Final Rule
Federal Register / Vol. 76, No. 177 / Tuesday, September 13, 2011 /
Rules and Regulations
[[Page 56508]]
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FEDERAL RESERVE SYSTEM
12 CFR Parts 207, 215, 223, 228, 238, 239, 261, 261b, 262, 263, and
264a
[Regulations G, O, W, BB, LL, MM; Docket No. R- 1429]
RIN 7100 AD-80
Availability of Information, Public Observation of Meetings,
Procedure, Practice for Hearings, and Post-Employment Restrictions for
Senior Examiners; Savings and Loan Holding Companies
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Interim final rule; request for comment.
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SUMMARY: The Board of Governors of the Federal Reserve System
(``Board'') is publishing an interim final rule with a request for
public comment that sets forth regulations for savings and loan holding
companies (``SLHCs''). On July 21, 2011, the responsibility for
supervision and regulation of SLHCs transferred from the Office of
Thrift Supervision (``OTS'') to the Board pursuant to section 312 of
the Dodd-Frank Wall Street Reform and Consumer Protection Act (``Dodd-
Frank Act''). This interim final rule provides for the corresponding
transfer from the OTS to the Board of the regulations necessary for the
Board to administer the statutes governing SLHCs. Technical changes to
other regulations have also been made to account for the transfer of
authority over SLHCs to the Board.
DATES: This interim final rule is effective September 13, 2011.
Comments must be received by November 1, 2011.
ADDRESSES: You may submit comments, identified by Docket No. R-1429 and
RIN No. 7100 AD 80, by using any of the methods below. Please submit
your comments using only one method.
Agency Web Site: http://www.federalreserve.gov. Follow the
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
E-mail: regs.comments@federalreserve.gov. Include docket
number in the subject line of the message.
Facsimile: (202) 452-3819 or (202) 452-3102.
Mail: Jennifer J. Johnson, Secretary, Board of Governors
of the Federal Reserve System, 20th Street and Constitution Avenue,
NW., Washington, DC 20551.
All public comments are available from the Board's Web site at
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as
submitted, unless modified for technical reasons. Accordingly, your
comments will not be edited to remove any identifying or contact
information. Public comments may also be viewed electronically or in
paper form in Room MP-500 of the Board's Martin Building (20th and C
Street, NW.) between 9 a.m. and 5 p.m. on weekdays.
FOR FURTHER INFORMATION CONTACT: Regulation LL: Amanda K. Allexon,
Senior Counsel, (202) 452-3818, or Paul F. Hannah, Counsel, (202) 452-
2810, Legal Division; Regulation MM: C. Tate Wilson, Attorney, (202)
452-3696, Christine E. Graham, Senior Attorney, (202) 452-3005, Legal
Division; Both Regulations: Kevin Bertsch, Associate Director, (202)
452-5265, Kirk Odegard, Assistant Director, (202) 530-6225, or Mike
Sexton, Assistant Director, (202) 452-3009, Division of Banking
Supervision and Regulation; Board of Governors of the Federal Reserve
System, 20th Street and Constitution Ave., NW., Washington, DC 20551.
All other regulatory amendments: Amanda K. Allexon, Senior Counsel,
(202) 452-3818, or Paul F. Hannah, Counsel, (202) 452-2810, Legal
Division. For the hearing impaired only, Telecommunication Device for
the Deaf (TDD), (202) 263-4869.
SUPPLEMENTARY INFORMATION:
I. Background
Title III of the Dodd-Frank Act transferred from OTS to the Board
the responsibility for supervision of SLHCs and their non-depository
subsidiaries. The Dodd-Frank Act also transferred supervisory functions
related to Federal savings associations and state savings associations
to the Office of the Comptroller of the Currency (``OCC'') and the
Federal Deposit Insurance Corporation (``FDIC''), respectively.
Specifically, section 312 of the Dodd-Frank Act provides that all
functions of the OTS and the Director of the OTS (including rulemaking
authority and authority to issue orders) with respect to the
supervision of SLHCs and their non-depository subsidiaries transfer to
the Board on July 21, 2011.\1\ Section 316 of the Dodd-Frank Act
provides that all orders, resolutions, determinations, agreements, and
regulations, interpretive rules, other interpretations, guidelines, and
other advisory materials issued, made, prescribed, or allowed to become
effective by the OTS on or before the transfer date with respect to
SLHCs and their non-depository subsidiaries will remain in effect and
shall be enforceable until modified, terminated, set aside, or
superseded in accordance with applicable law by the Board, by any court
of competent jurisdiction, or by operation of law. The Dodd-Frank Act
includes parallel provisions applicable to the OCC and the FDIC with
respect to Federal savings associations and state savings associations,
respectively.
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\1\ 12 U.S.C. 5412. Section 312 also transfers to the Board all
rulemaking authority under section 11 of the Home Owners' Loan Act
relating to transactions with affiliates and extensions of credit to
insiders and section 5(q) relating to tying arrangements. 12 U.S.C.
1461 et seq.
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Given the extensive transfer of authority to multiple agencies,
section 316 of the Dodd-Frank Act required the Board, OCC, and FDIC to
identify and publish in the Federal Register separate lists of the
current OTS regulations that each agency will continue to enforce after
the transfer date.\2\ On July 21, 2011, the Board issued a notice of
intent pursuant to this requirement. The notice of intent outlines all
OTS regulations applicable to SLHCs and their non-depository
subsidiaries that the Board has currently identified that it intends to
enforce after the transfer date. The notice of intent also advised that
the Board would issue an interim final rule to effectuate the
transition of OTS regulations to the Board.
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\2\ 12 U.S.C. 5414(c).
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II. Overview of Interim Final Rule
The interim final rule has three components: (1) New Regulation LL
(Part 238), which sets forth regulations generally governing SLHCs; (2)
new Regulation MM (Part 239), which sets forth regulations governing
SLHCs in mutual form; and (3) technical amendments to current Board
regulations necessary to accommodate the transfer of supervisory
authority for SLHCs from the OTS to the Board.
The Board is seeking comment on all aspects of this interim final
rule. The Board requests specific comment with respect to whether all
regulations relating to the supervision of SLHCs are included in this
rulemaking. Alternatively, does this rulemaking carry over regulatory
provisions that currently do not apply to SLHCs or their non-depository
subsidiaries?
Regulation LL. In drafting new Regulation LL, the Board has sought
to collect all current OTS regulations applicable to SLHCs (other than
regulations pertaining uniquely to SLHCs in mutual form) and transfer
them into a single part of Chapter 2 of Title 12 for ease of locating.
Generally,
[[Page 56509]]
the structure of the new Regulation LL closely follows that of the
Board's Regulation Y, which houses regulations directly related to bank
holding companies (``BHCs''), in order to provide an overall structure
to rules that were previously found in disparate locations.\3\ In many
instances, this process has involved copying the current OTS
regulations into the new Regulation LL with only technical
modifications to account for the shift in supervisory responsibility
from the OTS to the Board. In other situations, where the requirements
or criteria found in the OTS rules were the same as those found in the
Board's rules, Regulation LL attempts to conform the language and
format used in the rule to that used by the Board.
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\3\ 12 CFR part 225 (Regulation Y).
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The Board also made several substantive changes to the OTS
regulations as they were incorporated into Regulation LL. Additionally,
the Board added or modified regulations to reflect substantive changes
introduced by the Dodd-Frank Act. These modifications are discussed
separately below.
Application Processing
Throughout the new regulations, the Board has replaced the OTS
procedures with respect to the processing of applications and filings
for those of the Board to the extent possible. These changes do not
alter the thresholds for filing an application or notice, or the
standards for the Board's review of an application, but are intended to
promote uniformity and consistency in the Board's processing of
applications across the range of institutions. The Board will carryover
the OTS applications forms, with technical changes, for the time being.
SLHCs can find all application and notice forms on the Board's public
Web site. This Web site also contains general information about the
most common filings, publication requirements, and the Board's
electronic application submission system.\4\
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\4\ See Application Filing Information at http://www.federalreserve.gov/generalinfo/applications/afi/.
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Among other things, migration to the Board's procedures for
applications processing includes elimination of requirements in OTS
rules for prefiling meetings and submission of draft business plans,
and formal procedures for determining an application to be complete.
The Board's application processing procedures contemplate both the
collection and review of submitted information within specified time
periods. Because an application to the Board in most instances is acted
on within the standard 30 to 60 day processing periods, the Board
expects that following the Board's applications procedures will result
in applications processing that is at least as expeditious as
processing under the OTS procedures.
Control Determinations
Regulation LL modifies the regulations previously used by the OTS
for purposes of determining when a company or natural person acquires
control of a savings association or SLHC under the Home Owner's Loan
Act (``HOLA'') \5\ or the Change in Bank Control Act (``CBCA'').\6\ In
light of the similarity between the statutes governing BHCs and SLHCs,
the Board has decided to use its established rules and processes with
respect to control determinations under HOLA and the CBCA to ensure
consistency between equivalent statutes administered by the same
agency.
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\5\ 12 U.S.C. 1461 et seq.
\6\ 12 U.S.C. 1817(j).
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The definition of control found in HOLA is virtually identical to
that found in the Bank Holding Company Act (``BHC Act'').\7\
Specifically, both statutes have a similar three-prong test for
determining when a company controls a bank or savings association. A
company \8\ has control over either a bank or savings association if
the company:
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\7\ 12 U.S.C. 1841(a) and 1467a(a)(2).
\8\ Unlike the BHC Act, HOLA's definition of control applies to
persons, not just companies. Additionally, an acquirer will be
deemed to control a company under HOLA if they have contributed more
than 25 percent of the capital of the company. 12 U.S.C.
1467a(a)(2)(B).
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(1) Directly or indirectly or acting in concert with one or more
persons, owns, controls, or has the power to vote 25 percent or more of
the voting securities of a company;
(2) Controls in any manner the election of a majority of the board;
(3) Directly or indirectly exercises a controlling influence over
management or policies, after reasonable notice and opportunity for
hearing.
Because of this similarity, Regulation LL includes provisions
interpreting the definition of control under HOLA in the same manner as
that term is interpreted under the BHC Act, adopts procedures for
reviewing control determination that are identical for SLHCs and BHCs,
and conforms the filing requirements under the CBCA for SLHCs to those
for BHCs. As a result, OTS regulations relating to control
determinations and rebuttals under HOLA, including the rebuttable
control factors and process in section 574.4, the certification of
ownership in section 574.5, and the rebuttal agreement in section
574.100, are not included in the proposed regulation.
Beginning on the date of approval of this interim final rule, the
Board will review investments and relationships with SLHCs by companies
using the current practices and policies applicable to BHCs to the
extent possible. Overall, the indicia of control used by the Board
under the BHC Act to determine whether a company has a controlling
influence over the management or policies of a banking organization
(which for Board purposes, will now include savings associations and
SLHCs) are similar to the control factors found in OTS regulations.\9\
However, the OTS rules weigh these factors somewhat differently and use
a different review process designed to be more mechanical.
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\9\ The Board discussed these indicia in a 2008 policy statement
on noncontrolling equity investments. See http://www.federalreserve.gov/newsevents/press/bcreg/2020080922c.htm. The
policy statement outlines in greater detail the Board's views on
certain indicia of control, such as the size of the voting and total
equity investment, director and officer interlocks, business
relationships, and actions (whether or not they are based in
contract) that may influence or interfere with the major policies
and operations of the banking organization.
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First, the Board does not limit its review of companies with the
potential to have a controlling influence to the two largest
shareholders. The Board reviews all investors based on all of the facts
and circumstances to determine if a controlling influence is present.
Second, the Board does not have a separate application process for
rebutting control under the BHC Act and Regulation LL does not include
such a process. Under OTS rules, investors that triggered a control
factor in section 574.4 could submit an application to the OTS
requesting a determination that they have successfully rebutted control
under HOLA. This application resulted in a rebuttal agreement between
the investor and the OTS in the form found in section 574.100.
Board practice is to consider potential control relationships for
all investors in connection with applications submitted under section 3
of the BHC Act.\10\ Accordingly, the Board intends to review potential
control relationships for all investors in connection with applications
submitted to the Board under section 10(e) or 10(o) of HOLA.\11\ In
situations where investors believe no application is required, the
Board
[[Page 56510]]
encourages investors to consult with staff at the appropriate Reserve
Bank or the Board to determine what type of review is appropriate to
confirm that the Board concurs that no BHC Act or HOLA filing is
necessary. As with OTS practice, the Board often obtains a series of
commitments from investors seeking non-control determinations.
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\10\ 12 U.S.C. 1842.
\11\ 12 U.S.C. 1467a(e) and 1467a(o).
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The CBCA applies a somewhat different definition of control to the
acquisition of both banks and savings associations and their holding
companies by individuals or companies. The CBCA applies only to
acquisitions of control of a holding company through the purchase or
other disposition of the company's voting stock, and an acquiror is
deemed to control the company if the acquiror would have the power,
directly or indirectly, to direct the management or policies of an
insured bank or to vote 25 percent or more of any class of voting
securities of an insured bank.\12\
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\12\ 12 U.S.C. 1817(j)(1) and (j)(8)(B).
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A significant difference between OTS and Board regulations relating
to the CBCA is the ability to use passivity commitments or rebuttal
agreements to avoid filing a CBCA notice. Unlike the OTS, the Board
does not allow investors to avoid required filings under the CBCA. The
CBCA requires only a notice and background review by the Board and,
unlike the BHC Act or HOLA, does not impose any ongoing activity
restrictions or other requirements on the filer. For example, the Board
may determine that a company does not have control for purposes of the
BHC Act (or in the future, for purposes of HOLA) and rely on passivity
commitments to support its determination, but that company would
continue to be required to file a notice under the CBCA if the size of
the investment triggers a filing under that Act.
The Board does not anticipate revisiting ownership structures
previously approved by the OTS. The Board would apply its rules only to
new investments and would only reconsider the particular structures of
past investments approved by the OTS if the company proposes a material
transaction, such as an additional expansionary investment, significant
recapitalization, or significant modification of business plan.
Financial Holding Company Activities
Section 606(b) of the Dodd-Frank Act amends HOLA by inserting a new
requirement that conditions the ability of SLHCs that are not exempt
from HOLA's restrictions on activities (``Covered SLHCs'') to engage in
certain activities.\13\ Pursuant to this new requirement, a Covered
SLHC may engage in activities that are permissible only for a financial
holding company under section 4(k) of the BHC Act (``4(k) Activities'')
if the Covered SLHC meets all of the criteria to qualify as a financial
holding company, and complies with all of the requirements applicable
to a financial holding company as if the Covered SLHC was a bank
holding company.\14\
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\13\ 12 U.S.C. 1467a(c)(2)(H). HOLA provides an exemption from
activities restrictions for certain SLHCs that only controlled, or
were in the process of acquiring, one savings association at the
time the Gramm-Leach-Bliley Act of 1999 was passed and that meet
certain other criteria. Subsections 10(c)(3) and 10(c)(9)(C) of HOLA
operate together to establish this exemption. Section 606(b) does
not modify the operative provisions of either of these subsections
and therefore should not be interpreted to modify the exemption. See
12 U.S.C. 1467a(c)(3); 12 U.S.C. 1467a(c)(9).
\14\ Id.
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Section 4(l) of the BHC Act, as amended by section 606(a) of the
Dodd-Frank Act, provides for the following requirements for an
institution to qualify as a financial holding company: (1) All
depository institution subsidiaries and the holding company itself must
be well-managed and well-capitalized; (2) the holding company must file
an election to engage in activities available only to financial holding
companies and certify that it meets the above requirements; and (3) all
depository institution subsidiaries must have a CRA rating of
``satisfactory'' or better.\15\ Under section 606(b), these new
conditions on the ability of Covered SLHCs to engage in 4(k) Activities
took effect on the transfer date.
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\15\ 12 U.S.C. 1843(l).
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Prior to the Dodd-Frank Act, the authority for SLHCs to engage in
4(k) Activities was based on subparagraphs 10(c)(9)(A) and (B) of HOLA,
which were added to the statute by the Gramm-Leach-Bliley Act of
1999.\16\ These provisions provide that, after May 4, 1999, no new or
existing SLHC could conduct activities except for (i) those listed in
subsection 10(c)(1)(C) or 10(c)(2) of HOLA \17\ or (ii) 4(k)
Activities. The OTS interpreted this reference to 4(k) Activities to be
an affirmative grant of authority to all Covered SLHCs to engage in
4(k) Activities. Because there was no specific statutory requirement to
do otherwise, the OTS permitted Covered SLHCs to engage in 4(k)
Activities without having to satisfy any of the financial holding
company-related criteria in the BHC Act.\18\ As a result, the OTS
imposed only limited filing requirements on Covered SLHCs with respect
to 4(k) Activities.\19\
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\16\ 12 U.S.C. 1467a(c)(9)(A)-(B).
\17\ 12 U.S.C. 1467(a)(c)(1)(C)-(2).
\18\ See Notice of Proposed Rulemaking, Authority for Certain
Savings and Loan Holding Companies to Engage in Financial
Activities, 66 Federal Register 56488 (November 8, 2001).
\19\ Prior to the transfer date, in order to engage in 4(k)
Activities, SLHCs generally were not required to make any pre- or
post-notice filings with the OTS. See Id.
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In light of Section 606(b) of the Dodd-Frank Act, the Board
believes that subsection 10(c)(2)(H) is the only grant of authority in
HOLA for Covered SLHCs to engage in 4(k) Activities.\20\ Specifically,
subparagraphs 10(c)(9)(A) and (B) do not grant separate authority to
engage in 4(k) Activities without having to comply with the standards
applicable to financial holding companies. As a result, the Board has
concluded that the statute requires Covered SLHCs that wish to engage
in 4(k) Activities after the transfer date to file a declaration with
the Board to elect to be treated as a financial holding company and a
certification that the financial holding company criteria are satisfied
for the purpose of engaging in 4(k) Activities.
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\20\ In this context, subparagraphs 10(c)(9)(A) and (B) of HOLA
now should be read to act as limitations on the activities that an
entity that acquires and holds savings associations may engage in.
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Accordingly, in subpart G of Regulation LL, the Board has adopted
regulations outlining the processes under which a Covered SLHC may
elect to be treated as a financial holding company. These regulations
are similar to those found in the Board's Regulation Y for BHCs.
Subpart G also establishes a process under which Covered SLHCs
currently engaged in 4(k) Activities may come into conformance with
these new requirements.
After the transfer date, HOLA will continue to permit SLHCs to
engage in activities other than those implicated by section 606(b) of
the Dodd-Frank Act. In particular, Covered SLHCs conducting certain
4(k) Activities may not be subject to financial holding company
requirements if the activities are permissible pursuant to HOLA
provisions other than those impacted by section 606(b).
Section 4(c)(8) and 4(k)(4)(F) Activities
Sections 4(c)(8) and 4(k)(4)(F) of the BHC Act permit BHCs and
financial holding companies, respectively, to conduct activities the
Board has determined by rule or order to be ``closely related to
banking'' (``section 4(c)(8) Activities'').\21\ HOLA also
[[Page 56511]]
permits all SLHCs to conduct these activities.\22\ Under OTS practice,
the OTS has not required a filing to engage in section 4(c)(8)
Activities.\23\ After the transfer date, Covered SLHCs that only
conduct section 4(c)(8) Activities will not need to submit the
declaration described above. However, any SLHC that begins a new
section 4(c)(8) Activity after the transfer date and has not made a
declaration and submitted the appropriate post-notice will need to
comply with relevant filing requirements in subpart F of this rule.
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\21\ 12 U.S.C. 1843(c)(8) and 4(k)(4)(F).
\22\ 12 U.S.C. 1467a(c)(2)(F)(i) (permitting activities listed
in Section 4(c) of the BHC Act); 12 U.S.C. 1467a(c)(9) (permitting
activities listed in Section 4(k) of the BHC Act).
\23\ OTS has taken this view because Section 4(c)(8) Activities
are a subset of 4(k) Activities, for which no OTS filing has been
required.
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Insurance Agency Activities
HOLA also allows SLHCs to engage in insurance and escrow activities
(``insurance agency activities'').\24\ These activities fall within the
scope of 4(k) Activities. However, because HOLA provides an explicit
grant of authority to conduct insurance agency activities, the
restrictions on 4(k) Activities will not apply to Covered SLHCs with
respect to insurance agency activities. Accordingly, after the transfer
date, Covered SLHCs do not have to submit a declaration and adhere to
the financial holding company limitations in order to engage
exclusively in this set of activities.
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\24\ 12 U.S.C. 1467a(c)(2)(B).
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``1987 List'' Activities
Additionally, HOLA permits SLHCs to engage in activities that
multiple SLHCs were authorized, by regulation, to directly engage in on
March 5, 1987.\25\ The OTS identified the activities that satisfy this
section of HOLA in their regulations (``1987 List'').\26\ Some of the
activities on the 1987 List, such as real estate development, are not
permissible for BHCs or financial holding companies. The Dodd-Frank Act
does not modify or condition the ability of SLHCs to engage in these
activities. Therefore, the activities identified by the OTS on the 1987
List remain permissible for Covered SLHCs, subject to the requirements
in subpart F of Regulation LL. After the transfer date, Covered SLHCs
do not have to submit a declaration and adhere to the financial holding
company limitations in order to engage exclusively in this set of
activities.
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\25\ 12 U.S.C. 1467a(c)(2)(F)(2).
\26\ 12 CFR 584.2-1, which can now be found in section 238.53 of
the Board's rules.
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Dividends by Subsidiary Savings Associations
Section 10(f) of HOLA provides that a subsidiary savings
association of an SLHC must file a notice at least 30 days prior to
declaring a dividend.\27\ Prior to July 21, 2011, these notices were
filed with the OTS. However, section 369(8)(K) of the Dodd-Frank Act
provides that such notices are to be filed with the Board after the
transfer date.
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\27\ 12 U.S.C. 1467a(f).
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Subpart K of the interim final rule implements section 10(f) of
HOLA. This subpart is substantially similar to portions of the OTS
capital distribution regulation, which governed dividends by subsidiary
savings associations of SLHCs as well as other savings association
capital distributions. Subpart K of the interim final rule includes
only the portions of the OTS capital distribution regulation that
implement section 10(f) of HOLA.
In processing notices pursuant to subpart K, the Board will work
closely with the regulator(s) of a savings association that submits a
dividend notice. The Board expects for example that on receiving a
dividend notice pursuant to subpart K, a copy of the notice will
immediately be sent to the savings association's regulator(s) with a
request for comment.
Regulation MM. Regulation MM organizes the current OTS regulations
specific to SLHCs in mutual form (``MHCs'') and their subsidiary
holding companies into a single part of the Board's regulations.\28\
Previously, regulations governing MHCs were largely found in parts 575
and 563b of the OTS rules. In many cases, Regulation MM mirrors the
current OTS rules with only technical modifications to account for the
shift in supervisory responsibility from the OTS to the Board.\29\
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\28\ The definition of ``mutual holding company'' in section
10(o)(10)(A) of HOLA defines an MHC to be ``a corporation organized
as a holding company under [section 10(o)].'' Thus, the provisions
of Regulation MM do not apply to an MHC that is not organized under
section 10(o) of HOLA. MHCs that own a bank (that have not elected
to be treated as a saving association pursuant to section 10(l) of
HOLA) remain subject to the BHC Act and related regulations.
\29\ The Board notes that, in many cases, the former OTS
regulations applied directly to savings associations and were
indirectly applied to MHCs and their subsidiary holding companies by
cross reference. After the transfer date, the Board is the primary
federal regulator of SLHCs (including MHCs and their subsidiary
holding companies) and the FDIC and OCC are the primary federal
regulators of savings associations. As a result, the Board has
transferred the provisions that applied indirectly to MHCs through
cross references into Regulation MM and revised them as necessary to
apply directly to MHCs and their subsidiary holding companies.
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Regulation MM also reflects several substantive changes to OTS
regulations. Some of the changes are necessary to take into account
statutory changes made by the Dodd-Frank Act, and others are intended
to promote consistent treatment of BHCs and SLHCs. The substantive
changes are discussed below.
Application Processing
As discussed above, throughout the new regulations, the Board has
replaced the OTS procedures with respect to the processing of
applications and filings with those of the Board to the extent
possible. In general, the Board has conformed the processing period for
applications and forms filed by MHCs, subsidiary holding companies of
MHCs, and any other entities that are required to make a filing
pursuant to Regulation MM with the standard processing periods
currently applicable to BHCs. The Board's changes do not alter the
thresholds for filing an application or notice or the regulatory
standards of review of any filing. The changes are intended to promote
uniformity and consistency in the Board's processing of applications
across the range of filings to the Board.
The Board is aware that certain conversion applications filed by
MHCs with the OTS pursuant to part 563b were processed by the OTS
according to a special six-to-eight week review period, notwithstanding
the application of the processing periods previously found in subpart E
of part 516. The Board understands this special review period was
developed because the review period in part 516 made it highly unlikely
an applicant would receive approval of a conversion application prior
to the relevant financial statements' stale date under applicable
federal securities law.
The Board will process applications filed by MHCs to convert to
stock form under the procedures set forth in section 238.14 in
Regulation LL. The Board's standard 30- or 60-day processing periods
are generally consistent with past OTS practice of processing
conversion applications within six-to-eight weeks.\30\ However, section
238.14 allows the Board to extend the processing period for a specified
period, and the Board may determine to extend the review period of a
conversion application beyond 60 calendar days.
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\30\ Section 239.55 applies the processing period from section
238.14 in Regulation LL to conversion applications. This processing
period is consistent with the processing period that has been
applied to past conversion applications submitted by BHCs in mutual
form applying to convert to stock form.
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[[Page 56512]]
Waiver of Dividends
Section 625 of the Dodd-Frank Act amended section 10(o) of HOLA to
set forth the conditions under which an MHC may waive its right to
receive dividends declared by a subsidiary of the MHC. Dividend waivers
are permissible if:
(1) No insider of the MHC, associate of an insider, or tax-
qualified or non-tax-qualified employee stock benefit plan of the MHC
holds any share of the stock in the class of stock to which the waiver
would apply, or
(2) The MHC gives written notice to the Board of its intent to
waive its right to receive dividends (``Dividend Waiver Notice'') not
later than 30 days before the date of the proposed date of payment of
the dividend, and the Board does not object to the waiver.\31\
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\31\ 12 U.S.C. 1467a(o)(11)(B).
---------------------------------------------------------------------------
With respect to dividend waivers under (2) above, the Dodd-Frank
Act's amendment to section 10(o) of HOLA distinguishes between those
MHCs that waived dividends prior to December 1, 2009 (``Grandfathered
MHCs'') and those that did not (``non-Grandfathered MHCs'').
For Grandfathered MHCs, new section 10(o)(11) of HOLA provides that
the Board may not object to a waiver of dividends if: (1) The waiver
would not be detrimental to the safe and sound operation of the savings
association; and (2) the MHC's board of directors expressly determines
that a waiver of dividends by the MHC is consistent with the fiduciary
duties of the board of directors to the MHC's mutual members. The
Grandfathered MHC must provide the Dividend Waiver Notice to the Board
and include a copy of the resolution of the MHC's board of directors,
in such form and substance as the Board may determine, which concludes
that the proposed dividend waiver is consistent with the fiduciary
duties of the board of directors to the mutual members of the MHC.\32\
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\32\ 12 U.S.C. 1467a(o)(11)(C).
---------------------------------------------------------------------------
Section 239.8(d) of Regulation MM implements the statutory
framework for dividend waivers. To address the concern with respect to
the inherent conflict of interest created by the waiver of dividends,
section 239.8(d)(3) requires that the resolution of the MHC's board of
directors contain certain elements designed to disclose and mitigate
this conflict of interest. First, the board resolution must describe
the conflict of interest that exists because of an MHC director's
ownership of stock in the subsidiary declaring dividends and any
actions the MHC and board of directors have taken to eliminate the
conflict of interest, such as the directors waiving their right to
receive dividends. Second, the resolution must contain an affirmation
that a majority of the mutual members eligible to vote have, within the
12 months prior to the declaration date of the dividend, voted to
approve the waiver of dividends. Any proxy statement used in connection
with the member vote must include disclosure of any MHC director's
ownership of stock in the subsidiary. The Board requests comment
concerning the substance of the board resolution and whether any
additional provisions should be required to ensure that the fiduciary
duties of the directors have been satisfied.
HOLA is silent with respect to the standards the Board should
consider when reviewing a Dividend Waiver Notice filed by non-
Grandfathered MHCs, and does not limit the Board's ability to deny such
waivers. Consistent with the view that dividend waiver requests raise
inherent conflict of interest issues, section 239.8(d)(4) would apply
to non-Grandfathered MHCs all requirements applicable to Grandfathered
MHCs' requests to waive dividends and would impose additional
conditions that must be satisfied by non-Grandfathered MHCs before the
Board will approve a request to waive dividends. These conditions are
designed to highlight for the mutual members the conflict of interest
inherent in dividend waivers where MHC directors own shares of the
subsidiary issuing dividends. The conditions also are designed to
employ certain accounting practices to ensure that the mutual members'
financial interests in the MHC are protected in the event the MHC
converts to stock form or is forced to liquidate.
Specifically, non-Grandfathered MHCs must submit a copy of the non-
Grandfathered MHC's board resolution pursuant to paragraph 239.8(d)(2)
and must also satisfy each of the conditions provided in paragraph
239.8(d)(4).
Non-Grandfathered MHCs need only satisfy one of the two conditions
provided in paragraph 239.8(d)(4)(v). Paragraph 239.8(d)(4)(v)(A)
requires a majority of the board of directors of the non-Grandfathered
MHC to approve the waiver of dividends. Any director with direct or
indirect ownership, control, or the power to vote shares of the
subsidiary declaring the dividend, or who otherwise directly or
indirectly benefits through an associate from the waiver of dividends,
must abstain from the board vote. Regardless of the number of director
abstentions, a majority of the entire board of directors must approve
the waiver of dividends-not just a majority of the directors who vote.
For example, if a non-Grandfathered MHC's board of directors has a
total of nine members and four directors must abstain from the vote,
all five voting directors must approve the waiver of dividends.
If unable to comply with the procedures described above, Non-
Grandfathered MHCs may instead comply with subparagraph
239.8(d)(4)(v)(B) under which each officer or director of the MHC or
its affiliates, associate of such officer or director, and any tax-
qualified or non-tax-qualified employee stock benefit plan in which
such officer or director participates that holds any share of the stock
in the class of stock to which the waiver would apply waives their
rights to dividends. The Board notes that for the purpose of
subparagraph 239.8(d)(4)(v)(B) the tax-qualified or non-tax-qualified
employee stock benefit plans in which an officer or director of the MHC
or its affiliates may participate that hold any share of the stock in
the class of stock to which the waiver would apply may include plans
other than those offered or sponsored by the MHC or its affiliates.
Non-Grandfathered MHCs should include in the Dividend Waiver Notice
submitted to the Board pursuant to paragraph 239.8(d)(1)(ii) a
description of the non-Grandfathered MHC's compliance with each of the
requirements listed in paragraph 239.8(d)(4). Each of the requirements
in paragraph 239.8(d)(4) should be addressed individually in the
Dividend Waiver Notice.
The Board requests comment on whether the conditions sufficiently
address concerns regarding the inherent conflict of interest with
dividend waivers. The Board also requests comment with respect to the
conditions that require specific accounting of waived dividends.
Offering Circulars, Forms of Proxy, and Proxy Statements
The Board has revised the process for review of offering circulars,
forms of proxy, and proxy statements used in connection with MHC
transactions. Under part 563b of the OTS regulations, the OTS declared
effective offering circulars and approved forms of proxy and proxy
statements. MHCs and their subsidiary holding companies were not
permitted to conduct a securities offering or solicit proxies until the
OTS declared effective or approved these documents, as relevant.
The Board will continue to require MHCs and their subsidiary
holding
[[Page 56513]]
companies to file offering circulars on Form OC and proxy statements on
Form PS in the context of an application to the Board. The Board will
closely review these documents in its review of an application as a
whole and may comment on the adequacy, completeness, or accuracy of
information in any of these documents. However, consistent with the
Board's current practice with respect to bank holding companies and
state member banks, the Board will not declare offering circulars
effective and will not approve proxies or proxy statements. The Board
may require an applicant make certain changes to any offering circular,
form of proxy, or proxy statement.
MHCs and subsidiary holding companies of MHCs must continue to
abide by all applicable federal and state securities laws, rules, and
regulations. For instance, the Board expects that all securities
offering documents and proxy materials provided in the context of a
securities offering will be governed by regulations and policies of the
Securities and Exchange Commission (``SEC''), a state securities
regulator as relevant, and the Board. For forms of proxy and proxy
statements provided to mutual members and not filed with the SEC, the
Board requires that all documents comply with all applicable Board
regulations and policies.
The Board requests comment regarding its review of offering
circulars, forms of proxy, and proxy statements. The Board requests
specific comment on whether there are circumstances in which an MHC or
subsidiary holding company's offering circular would not be reviewed or
declared effective by the SEC or approved by a state securities
regulator. The Board also requests comment on whether it should
continue to require MHCs and subsidiary holding companies of MHCs to
file proxy statements on Form PS for proxies sent to shareholders, or
if the Board should require only that MHCs and their subsidiary holding
companies file proxy statements that conform to state and federal
securities laws, rules, and regulations.
The Board also requests specific comment on whether MHCs or
subsidiary holding companies should be allowed to submit securities
materials on the appropriate SEC forms, as opposed to on Form PS or
Form OC, if the securities materials are subject to SEC review.
Stock Repurchases
The Board has extended the prior notice period for stock
repurchases by a resulting stock holding company within the first year
of conversion from mutual to stock form. Under the interim final rule,
a resulting stock holding company will be required to provide 30 days
prior notice to the Board before engaging in a stock repurchase, which
can be extended by the Board for an additional 60 days. Under section
563b.515 of the OTS regulations, resulting stock holding companies were
required to provide a 10-day prior notice.
In addition, the Board expects that stock repurchases within a
short period of time after conversion would generally constitute a
material change from the business plan considered in connection with
the conversion. In this case, the resulting stock holding company would
be required to obtain prior approval from the Board before the material
change to the business plan could be considered effective.
Technical Amendments. The Board has made technical amendments to
Board rules to facilitate supervision of SLHCs. These amendments
include revisions to the interagency rules implementing requirements
relating to the Community Reinvestment Act, as well as the procedural
and administrative rules of the Board including those relating to the
Freedom of Information Act. In general, the amendments add SLHCs to the
institutions covered by the rule and create mirrored provisions to
accommodate transactions under HOLA.
In addition, the Board made technical amendments to implement
section 312(b)(2)(A) of the Dodd Frank Act,\33\ which transfers to the
Board all rulemaking authority under section 11 of HOLA relating to
transactions with affiliates and extensions of credit to executive
officers, directors, and principal shareholders.\34\ These amendments
include revisions to parts 215 (Insider Transactions) \35\ and part 223
(Transactions with Affiliates) \36\ of Board regulations.
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\33\ 12 U.S.C. 5412.
\34\ 12 U.S.C. 1468.
\35\ 12 CFR part 215 (Regulation O).
\36\ 12 CFR part 223 (Regulation W).
---------------------------------------------------------------------------
III. Section-by-Section Analysis.
Regulation LL
1. Subpart A General Provisions
A. 238.1 Authority, Purpose and Scope
This section sets forth the authority, purpose, and scope for the
interim final rule.
B. 238.2 Definitions
This section combines definitions from parts 574 and 583 of the OTS
regulations in one location. Several definitions that were not used in
the text of the rules were eliminated or moved to locations that
correspond with placement in Regulation Y. Other definitions were
modified or changed to those used in Regulation Y.
Specifically, the definition of ``bank holding company,''
``person,'' ``shareholder,'' ``stock,'' ``voting securities''
(including voting and nonvoting shares) were modified to reflect the
definitions in Regulation Y. The definition of ``savings association''
was modified to eliminate the inclusion of SLHCs within the definition.
The definition of ``savings and loan holding company'' was modified to
reflect two new exceptions to HOLA included in the Dodd-Frank Act.
Section 10(a)(1)(D) of HOLA, as amended by section 604 of the Dodd-
Frank Act, now excludes from the definition of ``savings and loan
holding company'' a company that controls a savings association that
functions solely in a trust or fiduciary capacity as provided in
section 2(c)(2)(D) of the BHC Act, as well as a company, described in
section 10(c)(9)(C) of HOLA that would be a SLHC solely by virtue of
such company's control of an intermediate holding company established
under section 10A of HOLA.
This section also includes definitions of ``well managed'' and
``well capitalized'' for SLHCs. ``Well managed'' takes the meaning
provided in section 225.2(s) of Regulation Y for BHCs, except that it
clarifies that a ``satisfactory rating for management'' may mean either
a management or risk-management rating, whichever rating is given. The
definition of well-capitalized for SLHCs differs from the similar
standard for BHCs because SLHCs are not currently subject to regulatory
capital requirements. Instead, a SLHC will be considered well-
capitalized if (i) all of its subsidiary savings associations and other
subsidiary depository institutions are well capitalized, and (iii) the
SLHC is not subject to any outstanding formal administrative order or
enforcement actions relating to capital.
As discussed in the Board's Notice of Intent issued on April 15,
2011, the Board, together with the other Federal banking agencies, is
reviewing consolidated capital requirements for all depository
institutions and their holding companies pursuant to section 171 of the
Dodd-Frank Act and the Basel Committee on Banking Supervision's ``Basel
III: A global regulatory framework for more resilient banks and banking
systems'' report (``Basel III''). It is expected that the Basel III
notice of proposed rulemaking also would
[[Page 56514]]
address any proposed application of Basel III-based requirements to
SLHCs. When the rule-making process is complete, this definition will
be changed to be more closely aligned to the definition of well-
capitalized for BHCs.
C. 238.3 Administration
Section 238.3 includes two paragraphs that clarify some
administrative processes of the Board that are specifically relevant to
the provisions in these regulations. Paragraph (a) specifies that the
Board has delegated certain functions to designated Board members and
officers as well as the Federal Reserve Banks. These delegations can be
found in parts 262 and 265 of the Board's rules, and in Board orders.
In connection with the issuance of this interim final rule, the Board
has approved an order extending to SLHCs many of the delegations in
part 265 and in previous Board orders that are currently applicable to
BHCs.
In administering this regulation, the Board often relies on
appropriate Reserve Banks to take certain actions, including on
applications. Paragraph (b) clarifies the factors used in determining
the appropriate Reserve Bank for a particular SLHC or for companies and
individuals filing under the CBCA. If the standard delegation could
impede the ability of the Federal Reserve to perform its functions
under law, would not result in an efficient allocation of supervisory
resources, or would not otherwise be appropriate, the Board may
designate another appropriate Reserve Bank.
D. 238.4 Records, Reports, and Inspections
This section combines provisions that apply to SLHCs from sections
562.1, 562.2, and 584.1 of the OTS rules which establish basic records
and reporting requirements. Minor changes have been made to these
provisions to reflect similar provisions in Regulation Y.
All reports required by the Board can be found on the Board's
public Web site.\37\ As discussed in the Board's Notice of Intent
issued on February 3, 2011, the Board anticipates transitioning SLHCs
to the Board's reporting forms. The Board has considered the comments
received on that Notice and will be issuing a revised proposal for
comment shortly. Until such time as that proposal is finalized, SLHCs
must still submit all current reports on the schedule prescribed by the
OTS. As noted above, the Board will carryover the OTS applications
forms, with technical changes, for the time being.
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\37\ See Reporting Forms at: http://www.federalreserve.gov/reportforms/default.cfm.
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This section also includes the registration and deregistration
process provided for in HOLA. This interim final rule expands the
deregistration process to include situations where a company no longer
qualifies as a SLHC, in addition to when a company no longer controls a
savings association. This change is to accommodate exemptions added to
the definition of ``savings and loan holding company'' by the Dodd-
Frank Act that are discussed in detail above.
E. 238.5 Audit of Savings Association Holding Companies
This section contains the provisions of section 562.4 of the OTS
rules. These provisions require an independent audit for safety and
soundness purposes for SLHCs that control a savings association(s) with
aggregate consolidated assets of $500 million or more.
F. 238.6 Penalties for Violations
Section 238.6 of Regulation LL puts SLHCs on notice that section 10
of HOLA provides for criminal and civil penalties for violations by any
company or individual of HOLA or any regulation or order issued under
it, as well as for making a false entry in any book, report, or
statement of an SLHC. This section also specifies that the Board may
institute a cease-and-desist order for any violation of HOLA, the CBCA
or this regulation. The Board has provisions for BHCs in section 225.6
of Regulation Y.
G. 238.7 Tying Restriction Exception
Section 312(b)(2) of the Dodd-Frank Act \38\ gives the Board rule-
writing authority with respect to section 5(q) of HOLA, which contains
tying restrictions for savings associations.\39\ This section of the
interim final rule contains the provisions previously found in section
563.36 of the OTS rules. Although the requirements for savings
associations are comparable to those applicable to banks under the
Board's Regulation Y, this section also applies these restrictions
reciprocally to SLHCs. BHCs are not subject to equivalent restrictions
under current Board rules. In the future, the Board will evaluate if
these rules should be conformed. Additionally, following the transfer
date, the Board has authority under section 5(q) to grant exceptions to
these restrictions, after consultation with the OCC and the FDIC, so
long as any exception conforms to section 106 of the Bank Holding
Company Amendments of 1970.\40\
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\38\ 12 U.S.C. 5412.
\39\ 12 U.S.C. 1464.
\40\ 12 U.S.C. 1972(1).
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H. 238.8 Safe and Sound Operations
This section of the interim final rule states that a SLHC must
serve as a source of financial and managerial strength to its
subsidiary savings associations and may not conduct its operations in
an unsafe and unsound manner. Although these are long standing
prudential standards applied by the Board, section 38A of the Federal
Deposit Insurance Act (``FDI Act''), as amended by section 616(d) of
the Dodd-Frank Act, now requires all SLHCs to serve as a source of
strength to their subsidiary depository institutions.\41\
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\41\ 12 U.S.C. 1831o-1.
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Additionally, this section of the interim final rule specifies that
if the Board believes that an activity of the SLHC or a nonbank
subsidiary constitutes a serious risk to the financial safety,
soundness, or stability of a subsidiary savings association and is
inconsistent with the principles of sound banking, the purposes of HOLA
or other applicable statutes, the Board may require the SLHC to
terminate the activity or divest control of the nonbanking subsidiary.
This obligation is established in section 10(g)(5) of HOLA \42\ and
BHCs are subject to equivalent obligations under the BHC Act and
Regulation Y.
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\42\ 12 U.S.C. 1467a(g)(5).
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2. Subpart B Acquisitions of Savings Association Securities or Assets
A. 238.11 Transactions Requiring Board Approval
This section specifies certain acquisition transactions involving
savings associations and SLHCs that require the prior approval of the
Board under section 10(e) of HOLA.\43\ These prior approval
requirements were previously found in section 574.3(a) and section
584.4 of the OTS regulations. As discussed above, although OTS
regulations integrated the concepts of prior approval under HOLA and
the CBCA with respect to companies, the prior approval requirements
found in subpart B only relate to the requirements of HOLA.
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\43\ 12 U.S.C. 1467a(e).
---------------------------------------------------------------------------
B. 238.12 Transactions Not Requiring Board Approval
Section 238.12 of Regulation LL outlines certain acquisition
transactions involving savings associations or SLHCs that do not
require the prior approval of the Board. These exclusions from prior
notice requirements were previously
[[Page 56515]]
found at sections 574.4(c) and 584.4(c) of the OTS rules and only
include minor modifications. Because there is a separate regulatory
provision relating to CBCA, this section does not include the
exceptions from prior notice for CBCA filings that were also included
in section 574.4(c). Those provisions can now be found in subpart D.
Section 10(e) of HOLA requires SLHCs to request prior approval to
acquire a savings association through merger. The Bank Merger Act \44\
also requires savings associations to seek prior approval to acquire
another savings association by merger. As a result, when a savings
association owned by a SLHC acquired another savings association by
merger, the OTS required both the SLHC and the savings association to
submit requests for prior approval under the appropriate statute. This
requirement did not lead to unnecessary duplication because the same
agency and staff processed both requests concurrently. However, now
that SLHCs and savings associations will be regulated and supervised by
separate agencies, the Board has considered whether SLHCs should be
required to submit an application under HOLA for certain merger and
reorganization transactions. The Board has determined that SLHCs should
be provided exceptions similar to those provided to BHCs in Regulation
Y. As a result, paragraph (d) sets forth regulations governing the
conditions under which certain transactions subject to the Bank Merger
Act and internal corporate reorganizations would not require the
Board's approval under section 238.11 of subpart B.
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\44\ 12 U.S.C. 1828.
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Paragraph (d) of this section is intended to reduce regulatory
burden in certain circumstances by eliminating the requirement to file
an application if the core of the proposal is a merger subject to the
Bank Merger Act. The Board recognizes that, in such circumstances, no
regulatory purpose would be served by requiring an application to
provide essentially the same information for a minor part of the
proposal. The Board retains jurisdiction over these transactions,
however, because it recognizes that a proposal may have an effect on
financial, managerial, and other resources of the parent holding
company, which would not be reviewed by the primary regulator of the
transaction under the Bank Merger Act. Alternatively, a proposal may
raise other issues regarding factors over which the Board has primary
or exclusive jurisdiction under HOLA. Accordingly, paragraph (d)
provides that the Board or Reserve Bank may inform the holding company
that an application is required if the proposal presents issues unique
to the Board's jurisdiction. Paragraph (d) also makes clear that
transactions involving holding companies organized in mutual form,
subsidiary holding companies of SLHCs organized in mutual form, or
depository institutions organized in mutual form do not qualify for
waivers of the Board's approval requirements under section 238.11 of
subpart B.
Additionally, paragraph (d) of this section provides an exemption
for certain transactions performed in the United States that constitute
an internal corporate reorganization by an SLHC. The transaction must
be solely a reorganization involving holding companies and insured
depository institutions that both, preceding and following the
transaction, are lawfully controlled by the same top-tier holding
company. In addition, the companies and insured depository institutions
must not have acquired additional voting securities, and they must have
complied with the other requirements in paragraph (d) of this section.
Paragraph (d) of this section is substantially similar to section
225.12 of subpart B of the Board's Regulation Y. References to SLHCs
have generally been substituted for references to BHCs, and references
to savings associations have generally been substituted for references
to banks. In addition, consistent with the overall approach taken in
this interim final rule, the Board has substituted its procedures for
those of the OTS with respect to filing and informational requirements.
The Board also will process requests submitted pursuant to this section
in the same manner as it processes requests submitted under section
225.12 of Regulation Y.
C. 238.13 Prohibited Acquisitions
This section of the interim final rule contains provisions from
sections 584.8(d) and 584.9 of the OTS rules, which prohibit certain
types of transactions by an SLHC related to uninsured savings
associations and mutual savings associations. The remaining provisions
of section 584.9 have been integrated into Regulation LL at other
locations.
D. 238.14 Procedural Requirements
As discussed above, the Board has replaced OTS processing
requirements for applications and notices with those currently used by
the Board for similar transactions. As a result, section 238.13 of the
interim final rule replaces part 516 and section 574.6 of the OTS
rules. The requirements in this section are similar to those found in
sections 225.15 and 225.16 of the Board's Regulation Y with respect to
applications submitted by BHCs.
Paragraph (a) of this section indicates that applications required
under section 238.11 must be filed with the appropriate Reserve Bank on
the designated form. As noted above, investors can find all application
and notice forms on the Board's public Web site, as well as additional
information about the applications process and the Board's electronic
application submission system.\45\
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\45\ See Application Filing Information at http://www.federalreserve.gov/generalinfo/applications/afi/.
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Paragraph (b) of this section notes that applicants may request
confidential treatment for portions of their application under the
Board's Freedom of Information Act regulations found at part 261.
Paragraph (c) specifies the public notice requirements for
applications required under this subpart. Generally, the newspaper
publication requirement is the same as that previously found in the OTS
rules. However, the Board also publishes notices of proposed
acquisitions in the Federal Register and provides interested persons
the opportunity to comment on the proposal for a period no longer than
30 days. This paragraph also permits advance publication as well as
waiver or shortening of these notice requirements in the case of a
failure or if the Board determines that an emergency exists that
requires expeditious action.
Paragraph (d) outlines the Board's rules with regard to public
comment, including determining when a comment is timely, when a comment
is of substance, and when the comment period may be extended.
Paragraph (e) specifies that the Board may order a formal or
informal hearing or other proceeding on an application and that any
requests for a hearing must comply with the requirements of part 262 of
the Board's rules.
Paragraph (f) of this section requires the Reserve Bank to accept
applications submitted under this subpart for processing within 7
calendar days of filing. Substantially incomplete applications will be
returned. The paragraph also indicates that a copy of each application
will be sent to the Board and the primary bank supervisor for the
savings association to be acquired.
Paragraph (g) outlines the processing timeline for applications
submitted under this subpart. Except as otherwise
[[Page 56516]]
provided, Reserve Banks may act on applications under delegated
authority not earlier than the third business day following the close
of the public comment period, and not later than the fifth business day
following the close of the public comment period or the 30th day after
the acceptance of the application. The Board must act on an application
within 60 calendar days after the acceptance of the application unless
the Board extends the processing time for a specified period and states
the reasons for the extension. Both the Board and the Reserve Bank may
request additional information throughout the processing period if
necessary. An application will be deemed approved if the Board fails to
act on an application within 91 calendar days after the submission to
the Board of the complete record. This paragraph defines when the Board
considers a record on an application to be complete. Finally, this
paragraph creates an expedited process for certain reorganizations.
E. 238.15 Factors Considered in Acting on Applications
This section includes the factors that the Board will use to review
applications submitted under this subpart. To the extent that the
factors for review under section 10(e) of HOLA are the same as those
found in section 3 of the BHC Act, the language in this section has
been conformed to that found in Regulation Y. This section does
preserve the presumptive disqualifier related to the integrity and
financial factors that were found in section 574.7 of the OTS rules.
3. Subpart C Control Proceedings
As discussed in detail above, Regulation LL modifies the
regulations previously used by the OTS for purposes of determining when
a company or natural person acquires control of a savings association
or SLHC under HOLA. The OTS regulations relating to control
determinations and rebuttals under HOLA, including the rebuttable
control factors and process in section 574.4, the certification of
ownership in section 574.5, and the rebuttal agreement in 574.100, will
not be enforced by the Board. In its place, Regulation LL adopts
provisions equivalent to those found in subpart D of Regulation Y.
These provisions establish the process under which the Board may issue
a preliminary determination of control and the presumptions the Board
will use in any such proceeding.
4. Subpart D Change in Bank Control
Consistent with its views expressed above, the Board has concluded
that it is appropriate to use its own rules and processes with respect
to application of the CBCA to ensure consistency between equivalent
statutes administered by the same agency. As a result, Regulation LL
conforms OTS regulations relating to control determinations and
rebuttals under the CBCA with those currently found in Regulation Y and
that are applicable to BHCs and state member banks.
Accordingly, subpart D of the interim final rule is substantially
similar to the current subpart B of Regulation Y with technical and
conforming changes. For example, references to BHCs and state member
banks have been replaced where appropriate with references to SLHCs. In
addition, section 238.32(a)(4) and (5), the exemptions have been
modified to refer to the appropriate provisions of HOLA.
5. Subpart E Qualified Stock Issuances
Sections 10(a)(4) and (o) of HOLA pertain to certain issuances of
new voting shares to an unaffiliated SLHC by an undercapitalized
savings association or by its parent SLHC.\46\ The statute provides
that the acquiring SLHC will not be deemed to control the issuer so
long as the acquirer will not after the acquisition own or control more
than 15 percent of the issuer, certain other conditions are met, and
the appropriate federal banking agency for the acquiring SLHC approves
the acquisition.
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\46\ 12 U.S.C. 1467a(a)(4) and 1467a(o).
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The OTS implementing regulation with respect to qualified stock
issuances is located at part 574.8. Subpart E of the Regulation LL
interim final rule is substantially similar to 574.8, with appropriate
adjustments to reflect the transfer of supervisory authority for SLHCs
from OTS to the Board, and the use of Board applications processing
procedures instead of OTS applications processing procedures.
6. Subpart F Savings and Loan Holding Company Activities and
Acquisitions
This subpart of this interim final rule contains provisions that
were previously found at section 584.2 through 584.2-2 of the OTS
regulation, which outline the nonbanking activities permissible for
SLHCs and require prior approval in order to engage in these activities
in certain situations. Regulation LL makes appropriate adjustments to
reflect the transfer of supervisory authority for SLHCs from OTS to the
Board as well as the use of Board applications processing procedures.
Additionally, the Board will note that, in the near future, the Board
may propose modifying these application and notice processes in order
to better align them with those required by BHCs in order to engage in
identical nonbanking activities.
7. Subpart G Financial Holding Company Activities
As discussed separately above, section 606(b) of the Dodd-Frank Act
amends HOLA to require SLHCs that wish to engage in financial holding
company activities to be well-capitalized and well-managed at both the
holding company and savings association level.\47\ Additionally, HOLA,
as amended, requires SLHCs seeking to engage in financial holding
company activities to otherwise comply with other financial holding
company obligations, such as providing a notice to the Board after
commencing a financial holding company activity or consummating an
acquisition of a company engaged in 4(k) Activities. Subpart G of the
interim final rule implements these requirements. Subpart G does not
apply to SLHCs described in section 10(c)(9)(C) of HOLA.\48\
---------------------------------------------------------------------------
\47\ 12 U.S.C. 1467a(c)(2).
\48\ 12 U.S.C. 1467a(c)(9)(C). These SLHCs are referred to as
``grandfathered unitary savings and loan holding companies.''
---------------------------------------------------------------------------
A. 238.64 Election Required
This section of the interim rule specifies that SLHCs seeking to
engage in 4(k) Activities must file an election to be treated as a
financial holding company and have that election be deemed effective by
the Federal Reserve. No Covered SLHC may commence a 4(k) Activity or
consummate the acquisition of shares of a company engaged in 4(k)
Activities unless it has filed an effective election to be treated as a
financial holding company. This section also explains that if a Covered
SLHC engages only in activities otherwise permissible under HOLA, no
election is required.
B. 238.65 Election Procedures
This section outlines the process that an SLHC should follow to
make an effective election, including the content of the declaration.
This section rule specifies that the declaration should contain the
following:
A statement that the Covered SLHC elects to be treated as
a financial holding company in order to engage in activities
permissible for a financial holding company;
The name and head office address of the Covered SLHC and
of each
[[Page 56517]]
depository institution controlled by the Covered SLHC;
A certification that the Covered SLHC and each depository
institution controlled by the Covered SLHC is well capitalized as of
the date the Covered SLHC submits its declaration;
A certification that the Covered SLHC and each depository
institution controlled by the Covered SLHC are well managed as of the
date the Covered SLHC submits its declaration.
An election filed by a Covered SLHC to be treated as a financial
holding company is effective on the 31st calendar day after the date
that a complete declaration is filed with the appropriate Reserve Bank,
unless the Board notifies the SLHC prior to that time that the election
is ineffective. The Board or the appropriate Reserve Bank may notify an
SLHC that its election is effective prior to the 31st day after the
date that a complete declaration is filed with the appropriate Reserve
Bank. Such notification must be in writing. An election by a SLHC shall
not be effective if, during the 31 day period, the Board finds that, as
of the date the declaration was filed with the appropriate Reserve
Bank: (i) any insured depository institution controlled by the SLHC
(except institutions excluded under paragraph (d) of section 238.65,
including under certain circumstances savings associations acquired
during the 12-month period preceding the filing of the election) has
not achieved at least a rating of ``satisfactory record of meeting
community credit needs'' under the Community Reinvestment Act at the
savings association's most recent examination; or (ii) the SLHC or any
depository institution controlled by the SLHC is not both well
capitalized and well managed.
Special Rules for the OTS Transfer Date
This section also contains special rules applicable to SLHCs that
are engaged in 4(k) Activities on the transfer date. Prior to the Dodd-
Frank Act, Covered SLHCs were not required to file with the OTS to
engage in 4(k) Activities. However, given that the amendment to HOLA
establishing these additional requirements was effective on the
transfer date, the Board expects all Covered SLHCs wishing to continue
4(k) Activities to provide a declaration as described above, along with
a description of the 4(k) Activities conducted by the SLHC, to the
Board by December 31, 2011. These elections will be effective on the
61st day after the date a complete declaration and description of 4(k)
Activities is filed with the appropriate Reserve Bank, unless the Board
notifies the SLHC prior to that time that the election is ineffective.
This section also creates a special process for those Covered SLHCs
engaged in 4(k) Activities on the transfer date that are not able to
file a declaration that can be declared effective. These Covered SLHCs
are required to file an alternate declaration with the Board by
December 31, 2011 that includes (i) a list of the 4(k) Activities they
engage in, (ii) a description of why the SLHC cannot file a declaration
that can be declared effective, and (iii) a description of how the
Covered SLHC will achieve compliance prior to June 30, 2012.
Covered SLHCs that are not able to file a declaration that can be
declared effective are subject to the same notice, remediation
agreement, divestiture and other provisions that apply to financial
holding companies that fail to meet the requirements of section 4(l) of
the BHC Act. These rules are stated in section 4(m) of the BHC Act and
the Board's implementing regulations, and are referred to below.
However, in exercising its discretion under these processes, the Board
will take into account the fact that previously Covered SLHCs were not
subject to the new requirements implemented pursuant to section 606(b)
of the Dodd-Frank Act and this rule. The Board intends to review the
individual circumstances of Covered SLHCs and apply reasonable
deadlines in light of those circumstances.
C. 238.66 Ongoing Requirements
This section outlines the ongoing obligations of a Covered SLHC
that has made an effective election and the consequences of failing to
meet the applicable requirements. In general, a Covered SLHC that has
made an effective election to be treated as a financial holding company
is subject to the requirements applicable to a financial holding
company under sections 4(l) and 4(m) of the BHC Act and the regulations
thereunder and section 804(c) of the Community Reinvestment Act of 1977
\49\ as if the Covered SLHC was a BHC. The language in this section
imposes the notice, approval and other requirements of Regulation Y to
these Covered SLHCs, specifically the provisions of sections 225.83
through 225.89. Certain provisions, as discussed below, will also be
applied to Covered SLHCs themselves as a result of section 606(a) of
the Dodd-Frank Act.
---------------------------------------------------------------------------
\49\ 12 U.S.C. 2903(c).
---------------------------------------------------------------------------
Notification Requirements
In general, a SLHC that has made an effective election to be
treated as a financial holding company may conduct the activities
listed in section 225.86 of Regulation Y subject to the notice,
approval, and any other requirements described in sections 225.85
through 225.89 of Regulation Y. Section 225.83(a) of the Board's
existing regulations provides that the Board will notify a financial
holding company if the Board finds that the company controls any
depository institution that is not well capitalized or well managed.
After the transfer date, consistent with section 606(a) of the Dodd-
Frank Act, the Board intends to also notify a financial holding company
if the Board finds that the company itself is not well capitalized or
well managed. Similarly, after the transfer date, the Board intends to
notify Covered SLHCs if their depository institutions or the Covered
SLHC itself is not well capitalized or well managed.
In addition, in recognition of the fact that a company may know
that one of its depository institution subsidiaries has ceased to be
well capitalized or well managed before its regulators will have access
to such data, the Board's current regulations provide that a financial
holding company must notify the Board in writing within 15 calendar
days of becoming aware that any depository institution controlled by
the company has ceased to be well capitalized or well managed.\50\
Consistent with section 606(a) of the Dodd-Frank Act, the Board intends
to require that a Covered SLHC must also provide such notification when
the company has ceased to be well capitalized or well managed.
Accordingly, for Covered SLHCs that file the declaration described
above and thereafter cease to meet the well-capitalized and well-
managed requirements of section 4(l), the Board intends to apply a
similar 15-day notice requirement in a rule.
---------------------------------------------------------------------------
\50\ 12 CFR 225.83(b)(1).
---------------------------------------------------------------------------
Remediation Requirements
Pursuant to section 4(m) of the BHC Act and the Board's existing
regulations for BHCs, within 45 days (plus any additional time that the
Board may grant) after receiving a notice of noncompliance from the
Board, a company must execute an agreement with the Board to comply
with applicable capital and management requirements.\51\ Until the
Board determines that all deficiencies have been corrected, a company
may not engage in any additional activity or
[[Page 56518]]
acquire control or shares of any company under section 4(k) of the BHC
Act without prior approval from the Board.\52\ If the conditions giving
rise to a notice of noncompliance are not corrected within 180 days (or
such longer period permitted by the Board), the Board may order the
company to divest its subsidiary depository institutions.\53\ A company
may comply by instead ceasing to engage in activities that are
permissible only for financial holding companies.\54\
---------------------------------------------------------------------------
\51\ 12 U.S.C. 1843(m)(2); 12 CFR 225.83(c).
\52\ 12 CFR 225.83(d).
\53\ 12 CFR 225.83(e)(1).
\54\ 12 CFR 225.83(e)(2)
---------------------------------------------------------------------------
As required by section 606(b) of the Dodd-Frank Act, the Board
intends to apply these processes analogously to Covered SLHCs. After
the transfer date, consistent with section 606(a) of the Dodd-Frank
Act, the Board further intends that a financial holding company or a
Covered SLHC that itself fails to remain well capitalized or well
managed will also be subject to these analogous remedial measures.
8. Subpart H Notice of Change of Director or Senior Executive Officer
Subpart H sets forth regulations governing the filing of notices
with respect to the service of individuals as directors or senior
executive officers of SLHCs in troubled condition. These regulations
implement section 32 of the FDI Act.\55\
---------------------------------------------------------------------------
\55\ 12 U.S.C. 1831i.
---------------------------------------------------------------------------
Subpart H of the interim final rule is substantially similar to
subpart H of part 563, the OTS regulation implementing section 32.
References to the Board or Reserve Bank have been substituted for
references in the OTS regulations to OTS. In addition, consistent with
the overall approach taken in this interim final rule, the Board has
substituted its procedures for those of the OTS with respect to the
filing and informational requirements.
Subpart H of the interim final rule also provides for appeals and
for informal hearings to be requested in the event of disapproval of a
notice. These provisions are modeled on the appeals and hearing
provisions of the Board's regulations implementing the section 32
requirements with respect to BHCs and state member banks.\56\ The OTS
regulation does not provide for hearings or appeals.
---------------------------------------------------------------------------
\56\ 12 CFR 225.73(d) and (e).
---------------------------------------------------------------------------
9. Subpart I Prohibited Service at Savings and Loan Holding Companies
Subpart I of the interim final rule sets forth regulations to
implement section 19 of the FDI Act \57\ with respect to SLHCs. Section
19 prohibits persons who have been convicted of certain criminal
offenses or who have agreed to enter into a pre-trial diversion or
similar program in connection with a prosecution for such criminal
offenses from occupying various positions with an SLHC. Section 19 also
permits the Board to provide exemptions, by regulation or order, from
the application of the prohibition. Subpart I is substantially similar
to the existing OTS prohibited service regulations \58\ except that
references to the Board or Reserve Bank have been substituted for
references in the OTS.
---------------------------------------------------------------------------
\57\ 12 U.S.C. 1829.
\58\ 12 CFR part 585.
---------------------------------------------------------------------------
10. Subpart J Management Official Interlocks
Subpart J sets forth regulations restricting management officials
from serving simultaneously with two nonaffiliated depository
organizations where the management interlock would likely have an anti-
competitive effect unless the service is permitted by statute or an
exemption applies. These regulations implement the Depository
Institution Management Interlocks Act (``Interlocks Act'').\59\
---------------------------------------------------------------------------
\59\ 12 U.S.C. 3201 et seq.
---------------------------------------------------------------------------
Subpart J of the interim final rule is substantially similar to
subpart F of part 563, the OTS regulation implementing the Interlocks
Act but makes appropriate adjustments to reflect the transfer of
supervisory authority for SLHCs from OTS to the Board.
11. Subpart K Dividends by Subsidiary Savings Associations
Section 10(f) of HOLA provides that a subsidiary savings
association of an SLHC must file a notice at least 30 days prior to
declaring a dividend.\60\ Prior to July 21, 2011, these notices were
filed with the OTS. However, section 369(8)(K) of the Dodd-Frank Act
provides that such notices are to be filed with the Board after the
transfer date.
---------------------------------------------------------------------------
\60\ 12 U.S.C. 1467(f).
---------------------------------------------------------------------------
Subpart K of the interim final rule implements section 10(f) of
HOLA. This subpart is substantially similar to portions of the OTS
capital distribution regulation, which governed dividends by subsidiary
savings associations of SLHCs as well as other savings association
capital distributions. Subpart K of the interim final rule includes
only the portions of the OTS capital distribution regulation that
implement section 10(f) of HOLA. Consistent with the general approach
of the interim final rule, subpart K substitutes references to OTS with
references to the Board, and Board procedures for OTS procedures.
12. Subpart L Investigative Proceedings and Formal Examination
Proceedings
This section contains the provisions previously found in part 512
of the OTS regulations relating to investigative and formal examination
proceedings. The Board does not have similar rules but has followed
similar practices for some time. In the future, the Board will consider
extending these rules to BHCs and other supervised entities.
The following chart summarizes where particular parts and sections
of the OTS rules have been placed within Regulation LL.
Comparison Chart
------------------------------------------------------------------------
Regulation LL Previous location in OTS regulations
------------------------------------------------------------------------
Subpart A--General Provisions
------------------------------------------------------------------------
238.1--Authority, purpose and .........................................
scope.
238.2--Definitions........... Sec. 574.2, part 583.
238.3--Administration........ .........................................
238.4--Records, reports, and Sec. Sec. 562.1, 562.2, 584.1.
inspections.
238.5--Audit of savings Sec. 562.4.
association holding
companies.
238.6--Penalties for .........................................
violations.
238.7--Tying restriction Sec. 563.36.
exception.
238.8--Safe and sound .........................................
operations.
------------------------------------------------------------------------
[[Page 56519]]
Subpart B--Acquisitions of Savings Association Securities or Assets
------------------------------------------------------------------------
238.11--Transactions Sec. Sec. 574.3(a), 584.4.
requiring Board approval.
238.12--Transactions not Sec. Sec. 574.3(c), 584.4(c).
requiring Board approval.
238.13--Prohibited Sec. Sec. 584.8(d), 584.9.
acquisitions.
238.14--Procedural Sec. Sec. 516, 574.6.
requirements.
238.15--Factors considered in Sec. 547.7.
acting on acquisition
proposals.
------------------------------------------------------------------------
Subpart C--Control Proceedings
------------------------------------------------------------------------
238.21--Control proceedings.. Sec. 574.4.
------------------------------------------------------------------------
Subpart D--Change in Bank Control
------------------------------------------------------------------------
238.31--Transactions Sec. 574.3(a)-(b).
requiring prior notice.
238.32--Transactions not Sec. 574.3(c)-(d).
requiring prior notice.
238.33--Procedures for Sec. Sec. 516, 574.6.
filing, processing,
publishing, and acting on
notices.
------------------------------------------------------------------------
Subpart E--Qualified Stock Issuances
------------------------------------------------------------------------
238.41--Qualified stock Sec. 547.8.
issuances by
undercapitalized savings
associations or holding
companies.
------------------------------------------------------------------------
Subpart F--Savings and Loan Holding Company Activities and Acquisitions
------------------------------------------------------------------------
238.51--Prohibited activities Sec. 584.2.
238.52--Exempt savings and Sec. 584.2a.
loan holding companies and
grandfathered activities.
238.53--Prescribed services Sec. 584.2-1.
and activities of savings
and loan holding companies.
238.54--Permissible bank Sec. 584.2-2.
holding company activities
of savings and loan holding
companies.
------------------------------------------------------------------------
Subpart G--Financial Holding Company Activities
------------------------------------------------------------------------
238.61--Scope................ .........................................
238.62--Definitions.......... .........................................
238.63--Requirements to .........................................
engage in financial holding
company activities.
238.64--Election required.... .........................................
238.65--Election procedures.. .........................................
238.66--Ongoing requirements. .........................................
------------------------------------------------------------------------
Subpart H--Notice of Change of Director or Senior Executive Officer
------------------------------------------------------------------------
238.71--Purpose.............. Sec. 563.550.
238.72--Definitions.......... Sec. 563.555.
238.73--Prior notice Sec. 563.560.
requirements.
238.74--Filing and processing Sec. Sec. 563.565, 563.570, 563.575.
procedures.
238.75--Standards for review. Sec. 563.580.
238.76--Waiting period....... Sec. 563.585.
238.77--Waiver of prior Sec. 563.590.
notice requirement.
------------------------------------------------------------------------
Subpart I--Prohibited Service at Savings and Loan Holding Companies
------------------------------------------------------------------------
238.81--Purpose.............. Sec. 585.10.
238.82--Definitions.......... Sec. 585.20.
238.83--Prohibited actions... Sec. 585.30.
238.84--Covered convictions Sec. 585.40.
or agreements to enter into
pre-trial diversions or
similar programs.
238.85--Adjudications and Sec. 585.50.
offenses not covered.
238.86--Exemptions........... Sec. 585.100.
238.87--Filing procedures.... Sec. 585.110.
238.88--Factors for review... Sec. 585.120.
238.89--Board action......... Sec. 585.130.
------------------------------------------------------------------------
Subpart J--Management Official Interlocks
------------------------------------------------------------------------
238.91--Authority, purpose, Sec. 563f.1.
and scope.
238.92--Definitions.......... Sec. 563f.2.
238.93--Prohibitions......... Sec. 563f.3.
238.94--Interlocking Sec. 563f.4.
relationships permitted by
statute.
238.95--Small market share Sec. 563f.5.
exemption.
238.96--General exemption.... Sec. 563f.6.
238.97--Change in Sec. 563f.7.
circumstances.
238.98--Enforcement.......... Sec. 563f.8.
238.99--Interlocking Sec. 563f.9.
relationships permitted
pursuant to Federal Deposit
Insurance Act.
------------------------------------------------------------------------
[[Page 56520]]
Subpart K--Dividends by Subsidiary Savings Associations
------------------------------------------------------------------------
238.101--Purpose............. Sec. 563.140.
238.102--Definitions......... Sec. 563.141.
238.103--Filing requirement.. Sec. Sec. 563.143, 563.144, 563.145.
238.104--Board action and Sec. 563.146.
criteria for review.
------------------------------------------------------------------------
Subpart L--Investigative Proceedings and Formal Examination Proceedings
------------------------------------------------------------------------
238.111--Scope of part....... Sec. 512.1.
238.112--Definitions......... Sec. 512.2.
238.113--Confidentiality of Sec. 512.3.
proceedings.
238.114--Transcripts......... Sec. 512.4.
238.115--Rights of Witnesses. Sec. 512.5.
238.116--Obstruction of Sec. 512.6.
proceedings.
238.117--Subpoenas........... Sec. 512.7.
------------------------------------------------------------------------
Regulation MM Mutual Holding Companies
1. Subpart A General Provisions
A. 239.1 Authority, Purpose and Scope
This section sets forth the authority, purpose and scope of the
interim final rule.
B. 239.2 Definitions
This section combines needed definitions from parts 563b, 574, 575,
and 583 of OTS regulations in one location. The Board has modified
certain definitions to cross reference like definitions in Regulation
LL and has revised the style and format of section 239.2 to conform to
the Board's Regulation Y.\61\
---------------------------------------------------------------------------
\61\ 12 CFR part 225.
---------------------------------------------------------------------------
For instance, in Regulation LL, the Board has conformed the rules
relating to control determinations and rebuttals in the CBCA and the
rules relating to control determinations and rebuttals under HOLA to
the rules found in Regulation Y for the CBCA and the BHC Act,
respectively. As a result, for purposes of Regulation MM the Board has
defined ``acting in concert'' and ``control'' by reference to those
terms in Regulation LL. In addition, in Regulation LL the Board
modified the definition of ``savings and loan holding company'' to
reflect two new exceptions to HOLA added by the Dodd-Frank Act; in
Regulation MM, the Board defined that term by cross reference to the
definition in Regulation LL.
As in Regulation LL, the definition of ``person'' was modified to
reflect the definition in Regulation Y, and the definition of ``savings
association'' was modified to eliminate the inclusion of SLHCs within
the definition.
2. Subpart B Mutual Holding Companies
Subpart B contains many of the regulatory requirements specific to
MHCs, including provisions concerning a mutual savings association
reorganizing to mutual holding company form, mutual member membership
rights, operating restrictions, procedural requirements, charters,
bylaws, and voluntary dissolution.\62\ Many of the sections in this
subpart were taken directly from the OTS regulations in 12 CFR Part 575
and modified as necessary to reflect changes in nomenclature and other
non-substantive changes. Substantive changes are described below.
---------------------------------------------------------------------------
\62\ 12 CFR part 239, subpart B. As noted elsewhere, Regulation
MM does not apply to bank holding companies in mutual form.
---------------------------------------------------------------------------
A. 239.3 Mutual Holding Company Reorganizations
This section sets forth the process by which a mutual savings
association may reorganize to become a holding company. These
provisions were previously contained in section 575.3 of the OTS
regulations and have been modified to delete unnecessary provisions
specific to savings associations and to reflect the change in
supervisory authority.
As discussed above, the Board has generally replaced OTS processing
requirements for applications and notices with those currently used by
the Board for similar transactions. These revised processing
requirements are found in section 238.14 of Regulation LL. In order to
align the processing of reorganization notices with other notices filed
by SLHCs, section 239.3 provides that reorganization notices will be
processed in accordance with the procedural requirements set forth in
section 238.14. As noted above, the Board will carryover the OTS
applications forms, with technical changes, for the time being. All
application and notice forms can be found on the Board's public Web
site.
In addition, in light of the fact that the Board is not the primary
federal supervisor of savings associations, paragraph (b) of section
239.3 provides that the appropriate Reserve Bank will furnish notice
and a copy of the reorganization notice to the primary federal
supervisor of the mutual savings association. The primary supervisor
will have 30 calendar days from the date of the letter giving notice in
which to submit its views and recommendations to the Board.
B. 239.4 Grounds for Disapproval of Reorganizations
This section sets forth the grounds under which the Board will
disapprove of reorganizations. These provisions were previously found
at section 575.4 of the OTS regulations and have been revised to delete
unnecessary provisions specific to savings associations and to reflect
the change in supervisory authority.
Similar to section 575.4 of the OTS regulations, section 239.4
provides that the Board will disapprove a reorganization to capitalize
an MHC in an amount in excess of a nominal amount if the relevant
savings association would fail to be ``adequately capitalized.''
Section 239.4 clarifies that, for the purpose of considering an
application to reorganize to holding company form, ``adequately
capitalized'' will be calculated under the regulatory capital
requirements applicable to the savings association.
[[Page 56521]]
C. 239.5 Membership Rights
This section sets forth the minimum rights of members of MHCs that
were previously found in section 575.5 of OTS regulations.
D. 239.6 Contents of Reorganization Plan
This section sets forth the required contents of a mutual savings
association's plan to reorganize to an MHC structure. These provisions
were contained in section 575.6 of the OTS regulations and have been
revised to delete unnecessary provisions specific to savings
associations.
E. 239.7 Acquisition and Disposition of Savings Associations, Savings
and Loan Holding Companies, and Other Corporations by Mutual Holding
Companies
This section governs the acquisition and disposal of savings
associations, SLHCs, and other corporations by MHCs. It contains the
provisions of section 575.10 of the OTS regulations and has been
revised to delete unnecessary provisions specific to savings
associations and to reflect the change in supervisory authority.
F. 239.8 Operating Restrictions
This section establishes limitations on activities and transactions
by MHCs. These provisions were found in section 575.11 of OTS
regulations and have been revised as discussed below.
Paragraph (a) sets forth the activities restrictions applicable to
MHCs and is updated to cross reference the procedural requirements of
subparts F and G of Regulation LL relating to activities restrictions
for SLHCs.
The Board revised the dividend waiver provision in paragraph (d) to
implement an amendment to HOLA made by the Dodd-Frank Act, new section
10(o)(11). Section 10(o)(11)(B) of HOLA states that an MHC may waive
the right to receive a dividend declared by a subsidiary of the MHC if
(1) no insider of the MHC, associate of an insider, or tax-qualified or
non-tax-qualified employee stock benefit plan of the MHC holds any
share of the stock in the class of stock to which the waiver would
apply, or (2) the MHC gives written notice to the Board of the MHC's
intent to waive the right to receive dividends, not later than 30 days
before the date of the proposed date of payment of the dividend, and
the Board does not object to the waiver.\63\ Section 10(o)(11)(D)
provides that the Board may not object to a waiver of dividends under
section 10(o)(11)(B) by an MHC if (1) the waiver would not be
detrimental to the safe and sound operation of the savings association,
(2) the MHC's board of directors expressly determines that a waiver of
the dividend by the MHC is consistent with the fiduciary duties of the
board of directors to the mutual members of the MHC, and (3) the MHC
has waived dividends from a subsidiary prior to December 1, 2009. MHCs
that meet all of these conditions may waive their right to receive
dividends from a subsidiary after providing the Dividend Waiver Notice
to the Board. The Dividend Waiver Notice must include a copy of the
resolution of the MHC's board of directors, in such form and substance
as the Board may determine, together with any supporting materials
relied upon by the MHC's board of directors, concluding that the
proposed dividend waiver is consistent with the fiduciary duties of the
board of directors to the mutual members of the MHC.\64\
---------------------------------------------------------------------------
\63\ 12 U.S.C. 1467a(o)(11)(B).
\64\ 12 U.S.C. 1467a(o)(11)(C).
---------------------------------------------------------------------------
Paragraph (d)(1) sets forth the statutory standard in section
10(o)(11)(B) of HOLA. It provides that an MHC may waive the right to
receive any dividend declared by a subsidiary of the MHC, if (i) no
insider of the MHC, associate of an insider, or tax-qualified or non-
tax-qualified employee stock benefit plan of the MHC holds any share of
the stock in the class of stock to which the waiver would apply; or
(ii) the MHC gives written notice to the Board of the intent of the MHC
to waive the right to receive dividends, not later than 30 days before
the date of the proposed date of payment of the dividend, and the Board
does not object to the waiver.
Paragraph (d)(2) sets forth the requirements for the form and
substance of notice of waiver and resolution of the MHC's board of
directors to be provided under paragraph (d)(1)(ii), above. Under
paragraph (d)(2), the notice of waiver must include a copy of the
resolution of the board of directors of the MHC together with any
supporting materials relied upon by the board of directors of the MHC,
concluding that the proposed dividend waiver is consistent with the
fiduciary duties of the board of directors to the mutual members of the
MHC. The resolution must include:
A description of the conflict of interest that exists
because of an MHC director's ownership of stock in the subsidiary
declaring dividends and any actions the MHC and board of directors have
taken to eliminate the conflict of interest, such as waiver by the
directors of their right to receive dividends;
A finding by the MHC's board of directors that the waiver
of dividends is consistent with the board of directors' fiduciary
duties despite any conflict of interest;
If the MHC has pledged the stock of a subsidiary holding
company or subsidiary savings association as collateral for a loan made
to the MHC, or is subject to any other loan agreement, an affirmation
that the MHC is able to meet the terms of the loan agreement; and
An affirmation that a majority of the mutual members of
the MHC eligible to vote have, within the 12 months prior to the
declaration date of the dividend by the subsidiary of the MHC, approved
a waiver of dividends by the MHC, and any proxy statement used in
connection with the member vote contained--
[cir] A detailed description of the proposed waiver of dividends
by the MHC and the reasons the board of directors requested the waiver
of dividends;
[cir] The disclosure of any MHC director's ownership of stock in
the subsidiary declaring dividends and any actions the MHC and board of
directors have taken to eliminate the conflict of interest, such as the
directors waiving their right to receive dividends; and
[cir] A provision providing that the proxy concerning the waiver
of dividends given by the mutual members may be used for no more than
12 months from the date it is given.
Paragraph (d)(3) implements the statutory conditions under which
the Board may not object to a dividend waiver filed by a Grandfathered
MHC. It provides that the Board may not object to a waiver of dividends
under paragraph (d)(1)(ii) if:
The waiver would not be detrimental to the safe and sound
operation of the savings association;
The board of directors of the MHC expressly determines
that a waiver of the dividend by the MHC is consistent with the
fiduciary duties of the board of directors to the mutual members of the
MHC; and
The MHC has, prior to December 1, 2009--
[cir] Reorganized into an MHC under section 10(o) of HOLA;
[cir] Issued minority stock either from its subsidiary stock
holding company or its subsidiary stock savings association; and
[cir] Waived dividends it had a right to receive from the
subsidiary stock savings association.
In addition to the Dividend Waiver Notice, Grandfathered MHCs must
file a copy of the board resolution concluding that the proposed
dividend waiver is consistent with the MHC board's fiduciary duties to
the mutual members.
[[Page 56522]]
The required form and substance of the board resolution is discussed in
more detail above.
Paragraph (d)(4) sets forth the conditions the Board will consider
when it reviews a dividend waiver notice filed under paragraph
(d)(1)(ii) by a non-Grandfathered MHC. An MHC must satisfy each
condition provided in paragraph (d)(4). The conditions are:
The savings association currently operates in a manner
consistent with the safe and sound operation of a savings association,
and the waiver is not detrimental to the safe and sound operation of
the savings association;
If the MHC has pledged the stock of a subsidiary holding
company or subsidiary savings association as collateral for a loan made
to the MHC, or is subject to any other loan agreement, an affirmation
that the MHC is able to meet the terms of the loan agreement;
Within the 12 months prior to the declaration date of the
dividend by the subsidiary of the MHC, a majority of the mutual members
of the MHC has approved the waiver of dividends by the MHC. Any proxy
statement used in connection with the member vote must contain--
[cir] A detailed description of the proposed waiver of dividends
by the MHC and the reasons the board of directors requested the waiver
of dividends;
[cir] The disclosure of any MHC director's ownership of stock in
the subsidiary declaring dividends and any actions the MHC and board of
directors have taken to eliminate the conflict of interest, such as the
directors waiving their right to receive dividends; and
[cir] A provision providing that the proxy concerning the waiver
of dividends given by the mutual members may be used for no more than
12 months from the date it is given;
The board of directors of the MHC expressly determines
that the waiver of dividends is consistent with the board of directors'
fiduciary duties despite any conflict of interest;
A majority of the entire board of directors of the MHC
approves the waiver of dividends and any director with direct or
indirect ownership, control, or the power to vote shares of the
subsidiary declaring the dividend, or who otherwise directly or
indirectly benefits through an associate from the waiver of dividends,
has abstained from the board vote; or each officer or director of the
MHC or its affiliates, associate of such officer or director, and any
tax-qualified or non-tax-qualified employee stock benefit plan in which
such officer or director participates that holds any share of the stock
in the class of stock to which the waiver would apply waives the right
to receive any dividend declared by a subsidiary of the MHC;
The Board does not object to the amount of dividends
declared by a subsidiary of the MHC. In reviewing whether a declaration
by a subsidiary of the MHC is appropriate, the Board may consider,
among other factors, the reasonableness of the entire dividend
distribution declared if the waiver is not approved;
The waived dividends are excluded from the capital
accounts of the subsidiary holding company or savings association, as
applicable, for purposes of calculating any future dividend payments;
The MHC appropriately accounts for all waived dividends in
a manner that permits the Board to consider the waived dividends in
evaluating the proposed exchange ratio in the event of a full
conversion of the MHC to stock form; and
The MHC complies with such other conditions as the Board
may require to prevent conflicts of interest or actions detrimental to
the safe and sound operation of the savings association.
Paragraph (d)(5) provides that the Board will consider waived
dividends in determining an appropriate exchange ratio in the event of
a full conversion to stock form pursuant to subpart E of Regulation MM.
However, consistent with section 10(o)(11)(E)(ii) of HOLA, paragraph
(d)(5) clarifies that in the case of a savings association that has
reorganized into an MHC, has issued minority stock from a subsidiary
stock holding company or a subsidiary stock savings association of the
MHC, and has waived dividends it had a right to receive from a
subsidiary savings association before December 1, 2009, the Board will
not consider waived dividends in determining an appropriate exchange
ratio in the event of a full conversion to stock form.
Paragraph (f), which concerns compliance with community
reinvestment requirements, has been revised to cross reference the
Board's Regulation BB. The interim final rule revises Regulation BB to
apply to SLHCs.
The Board has stricken the OTS requirement that MHCs provide 10-day
after-the-fact notice of pledges of stock of subsidiary savings
association or subsidiary holding companies. While the Board recognizes
that stock pledges may pose safety and soundness concerns, the Board
believes these concerns are adequately addressed through the regular
supervisory process.
G. 239.9 Conversion or Liquidation of Mutual Holding Companies
This section governs the conversion or liquidation of MHCs. These
procedures were previously contained in section 575.12 of the OTS
regulations and have been revised to delete unnecessary provisions
specific to savings associations and to reflect the change in
supervisory authority.
H. 239.10 Procedural Requirements
This section provides certain procedural requirements applicable to
MHCs. It contains provisions previously found in section 575.13 and has
been revised to reflect the Board's revised procedures for reviewing
forms of proxy and proxy statements and to applications procedures.
As discussed above, whereas the OTS previously reviewed and
approved forms of proxy and proxy statements before they could be used,
the Board will review these materials in connection with transactions
but will not authorize or approve them.
Paragraph (a) provides that sections 239.56 and 239.57(a)-(d) and
(f)-(h) will apply to all solicitations of proxies by any person in
connection with any membership vote required by this part. In addition,
proxy materials required by Regulation MM must be in the form specified
by the Board and contain information specified in section 239.57(b) and
(d) (sections setting forth the requirements for proxy materials with
respect to conversions of MHCs to stock form), to the extent such
information is relevant to the action that members are being asked to
approve, with any additions, deletions, and other modifications as are
required under Regulation MM with respect to that action.
In order to align the processing of notices and applications filed
by MHCs and subsidiary holding companies under part 239 with other
notices filed by SLHCs, paragraph (f) provides that the rules of
section 238.14 governing disclosure of any notice, application
submitted under this section, or public comment submitted under
paragraph (c), will be the same as set forth in section 238.14.
The provisions of this section have also been revised to delete
unnecessary provisions specific to savings associations and to reflect
the change in supervisory authority.
I. 239.11 Subsidiary Holding Companies
This section provides for the formation of and requirements for
stock issuances by subsidiary holding
[[Page 56523]]
companies of MHCs. It contains certain provisions from section 575.14,
as revised to delete unnecessary provisions specific to savings
associations and to reflect the change in supervisory authority. The
provisions of section 575.14 concerning the model charter, charter
amendments, bylaws, and annual reports and books and records are found
in sections 239.21, 239.22, 239.23, and 239.30, respectively.
J. 239.12 Communication Between Members of a Mutual Holding Company
This section sets forth the rights of mutual members to communicate
with one another and sets forth the procedures for communication. These
provisions were contained in section 544.8 (previously incorporated by
reference by section 575.9) and have been revised to delete unnecessary
provisions specific to savings associations and to reflect the change
in supervisory authority.
K. 239.13 Charters
This section sets forth the requirements for MHC charters. It
contains the provisions from section 575.9 concerning charters, as
revised to delete unnecessary provisions specific to savings
associations and to reflect the change in supervisory authority. The
model charter previously set forth in section 575.9(a)(1) is now in
Appendix A.
L. 239.14 Charter Amendments
This section contains provisions governing amendments to MHC
charters. It contains the provisions from section 544.2 governing MHC
charter amendments (previously incorporated by reference by section
575.9(a)(2)), as revised to delete unnecessary provisions specific to
savings associations and to reflect the change in supervisory
authority.
M. 239.15 Bylaws
This section sets forth the requirements for MHC bylaws. It
contains the provisions of section 544.5 governing MHC bylaws
(previously incorporated by reference by section 575.9(a)(4)), as
revised to delete unnecessary provisions specific to savings
associations. The Board deleted the prior reference in the OTS
regulations to the model bylaws for mutual savings associations in the
OTS Applications Processing Handbook and instead inserted the model MHC
bylaws in Appendix C. The model MHC bylaws have been revised to delete
unnecessary provisions specific to savings associations and to reflect
the change in supervisory authority.
N. 239.16 Voluntary Dissolution
This section sets forth the processes for the dissolution of an MHC
or a subsidiary holding company. It contains the provisions of section
546.4 providing for voluntary dissolution, previously incorporated by
reference by section 575.12(c), and has been revised to delete
unnecessary provisions specific to savings associations and to reflect
the change in supervisory authority. Specifically, the section does not
incorporate the provisions of paragraph (a) of section 546.4 of the OTS
regulations, providing that the plan of dissolution may provide for
appointment of the FDIC as receiver, because this provision was
specific to savings associations.
3. Subpart C Subsidiary Holding Companies
In organizing Regulation MM, the Board placed most of the
regulatory requirements applicable to subsidiary holding companies of
MHCs in one subpart, subpart C.\65\ Except as noted below, these
provisions are substantively the same as those that applied to
subsidiary holding companies of MHCs under OTS regulations. The
provisions have been revised to delete unnecessary provisions specific
to savings associations and to reflect the change in supervisory
authority.
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\65\ Certain requirements are found in section 239.11, described
above.
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A. 239.20 Scope
The Board added this section in order to clarify that this subpart
applies only to subsidiary holding companies of MHCs.
B. 239.21 Charters
This section sets forth the required elements of a subsidiary
holding company's charter. These provisions were contained in section
575.14(c)(1) and (3) of the OTS regulations, as revised to delete
unnecessary provisions specific to savings associations and to reflect
the change in supervisory authority. In order to streamline the
regulatory text, the Board moved the model charter previously set forth
in section 575.14(c)(1) to Appendix B.
C. 239.22 Charter Amendments
This section contains the provisions governing amendments to
subsidiary holding company charters that were contained in section
552.4 (previously incorporated by reference by section 575.14(c)(2)).
D. 239.23 Bylaws
This section sets forth requirements for a subsidiary holding
company's bylaws that were contained in section 552.5 (previously
incorporated by reference by section 575.14(c)(4)). In addition, to
streamline the rule text, the Board deleted the prior reference in the
OTS regulations to the model bylaws for federal savings associations
contained in the OTS Applications Processing Handbook and instead
inserted the model subsidiary holding company bylaws in Appendix D, as
revised to delete unnecessary provisions specific to savings
associations.
E. 239.24 Issuances of Stock by Subsidiary Holding Companies of Mutual
Holding Companies
This section contains requirements for the issuances of stock by
subsidiary holding companies. These provisions were previously
contained in section 575.7.
F. 239.25 Contents of Stock Issuance Plans
This section sets forth the required contents of stock issuance
plans. These provisions were previously contained in section 575.8.
G. 239.26 Shareholders
This section governs the procedures for shareholder meetings. It
contains provisions of section 552.6 (section 575.14(c)(4) incorporated
by reference the requirements of section 552.5, which in turn required
that the bylaws comply with section 552.6, among others).
H. 239.27 Board of Directors
This section sets forth the requirements for the constitution and
meetings of a subsidiary holding company's board of directors. These
provisions were contained in section 552.6-1 (section 575.14(c)(4)
incorporated by reference the requirements of section 552.5, which in
turn required that the bylaws comply with section 552.6-1, among
others).
I. 239.28 Officers
This section sets forth the requirements for a subsidiary holding
company's officers. These provisions were contained in section 552.6-2
(section 575.14(c)(4) incorporated by reference the requirements of
section 552.5, which in turn required that the bylaws comply with
section 552.6-2, among others).
[[Page 56524]]
J. 239.29 Certificates for Shares and Their Transfer
This section sets forth the requirements for share certificates and
transfer procedures. These provisions were contained in section 552.6-3
(section 575.14(c)(4) incorporated by reference the requirements of
section 552.5, which in turn required that the bylaws comply with
section 552.6-3, among others).
K. 239.30 Annual Reports; Books And Records
This section contains the requirements for annual reports and books
and records of a subsidiary holding company. These provisions were
contained in section 552.10 and 552.11 (previously incorporated by
reference by section 575.14(c)(5)).
L. 239.31 Indemnification; Employment Contracts
This section clarifies that regulations governing indemnification
of directors, officers, and employees, and restrictions on employment
contracts set forth in sections 239.40 and 239.41 (discussed below)
apply to subsidiary holding companies of MHCs.
4. Subpart D Indemnification; Employment Contracts
Subpart D contains provisions concerning indemnification of
directors, officers, and employees of MHCs and their subsidiary holding
companies, and restrictions on employment contracts.\66\
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\66\ 12 CFR part 239, subpart D.
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A. 239.40 Indemnification of Directors, Officers and Employees
Section 239.40 contains provisions of section 545.121, which
previously applied to MHCs and their subsidiary holding companies
through a cross reference in section 575.11(f). These provisions have
been revised to reflect nomenclature changes and the change in
supervisory authority.
B. 239.41 Employment Contracts
Section 239.41 contains provisions of section 563.39, which
previously applied to MHCs and their subsidiary holding companies
through a cross reference in section 575.11(g). Paragraph (b)(5)
provides a specific requirement for employment contracts. Under this
section, unless prior written approval is secured from the Board, each
employment contract between an MHC or subsidiary holding company and
its officers or other employees must provide that all obligations of
the MHC or subsidiary holding company under the contract shall
terminate if the MHC or subsidiary holding company is subject to
bankruptcy proceedings under title 11 of the United States Code but
vested rights of the contracting parties shall not be affected.
5. Subpart E Conversions From Mutual to Stock Form
Subpart E contains provisions concerning the conversion of an MHC
to stock form.\67\ The Board based subpart E on part 563b of OTS
regulations. Part 563b governed the conversion of mutual savings
associations to stock form. By cross reference, section 575.12 of the
OTS regulations applied part 563b to MHC conversions to stock form.
Subpart E revises the provisions of part 563b such that they now apply
to MHCs directly. The Board also revised the general format of subpart
E to be consistent with the format of other Board regulations.
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\67\ 12 CFR part 239, subpart E.
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A. 239.50 Purpose and Scope
This section sets forth the purpose and scope of subpart E of the
interim final rule.
B. 239.51 Acquiring Another Insured Stock Depository Institution as
Part of a Conversion
This section provides that an MHC may acquire another insured
depository institution as part of a conversion, as previously provided
in section 563b.25. The acquisition must also comply with the rules
governing acquisitions of savings association securities set forth in
subpart B of Regulation LL.
C. 239.52 Definitions
This section contains many of the definitions previously found in
section 563b.25 of the OTS regulations. The Board defined several terms
in section 239.2 that were previously defined in section 563b.25 and
has therefore included fewer definitions in subpart E as a result. In
addition, the Board added the term ``resulting stock holding company''
to describe the stock holding company that is issuing stock in
connection with the conversion of an MHC.
D. 239.53 Prior to Conversion
This section imposes certain pre-filing requirements on MHCs.
Paragraph (a), previously section 563b.100, concerns pre-filing
meetings between an MHC's board of directors and the Reserve Bank or
Board. The Board revised this provision to make these pre-filing
meetings voluntary, instead of mandatory. The Board does, however,
encourage pre-filing communication--which may include a pre-filing
meeting--between an MHC, its board of directors, and the appropriate
Reserve Bank to discuss the contemplated conversion, including the MHC
board of directors' overall strategic plan and plans for the use of the
offering proceeds.
Paragraphs (b) through (e) of this section contain the provisions
of sections 563b.105, 563b.110, 563b.115, and 563b.120 of the OTS
regulations, as revised to reflect the change in supervisory authority.
E. 239.54 Plan of Conversion
This section sets forth the necessary requirements and procedure
for a plan of conversion. It contains the provisions of sections
563b.125, 563b.130, 563b.135, and 563b.140 of the OTS regulations.
F. 239.55 Filing Requirements
This section contains the filing requirements previously set forth
in sections 563b.150, 563b.155, 563b.160, 563b.165, 563b.180, 563b.185,
563b.200, and 563b.205 of the OTS regulations.
As noted above, the Board has replaced OTS processing requirements
for applications and notices with those currently used by the Board for
similar transactions. Thus, paragraph (f) provides the applicant must
publish public notice of the application in accordance with section
238.14. Commenters must submit comments on the application in
accordance with the procedures in that section.
In addition, paragraph (c) provides that the appropriate Reserve
Bank will furnish notice and a copy of the application to the primary
federal supervisor of any subsidiary savings association. The primary
supervisor will have 30 calendar days from the date of the letter
giving notice in which to submit its views and recommendations to the
Board.
G. 239.56 Vote by Members
This section contains the provisions governing the member vote on a
plan of conversion. These provisions were contained in sections
563b.225, 563b.230, 563b.235, and 563b.240 of the OTS regulations and
have been revised to reflect nomenclature changes and the change in
supervisory authority. As noted below, section 239.57 provides that the
Board will review forms of proxy and proxy statements in its review of
the conversion application, but it will not approve these materials.
Section 239.56 reflects this change.
[[Page 56525]]
H. 239.57 Proxy Solicitation
This section contains provisions governing the content and
solicitation of proxies. These provisions were previously found in
sections 563.250, 563.255, 563b.260, 563b.265, 563b.270, 563b.275,
563b.280, 563b.285, 563b.290, and 563b.295 of the OTS regulations.
Consistent with the Board's current practice with respect to bank
holding company and state member bank filings, section 239.57 provides
that the Board will review proxy materials in its review of a
conversion application as a whole and may require changes to ensure
that the disclosure is adequate, complete, and accurate. However,
section 239.57 does not continue past OTS practice of approving forms
of proxy and proxy statements. As a result, in paragraph (d) the Board
revised the requirement from section 563b.270 that the MHC mail proxy
solicitation material to its members within ten days after OTS
authorizes the solicitation to require distribution no later than ten
days after the Board approves the conversion.
I. 239.58 Offering Circular
This section contains the offering circular requirements related to
an MHC's conversion to stock form. These provisions were contained in
563b.300, 563b.305, and 563b.310 of the OTS regulations and have been
revised to reflect nomenclature changes and the change in supervisory
authority.
As discussed above, the Board will continue to require MHCs and
their subsidiary holding companies to file offering circulars with the
Board on Form OC in connection with applications, and will require that
MHCs and their subsidiary holding companies continue to abide by all
applicable federal and state securities laws, rules, and regulations.
The Board will not, however, declare effective offering circulars used
by MHCs in conversions to stock form or by subsidiary holding companies
of MHCs in initial or subsequent issuances of stock, or in any other
context. As a result, in paragraph (b) the Board has revised the
requirement from section 563b.305 that the MHC distribute the offering
circular within ten days after OTS declared it effective to require
distribution no later than ten days after the Board approves the
conversion.
J. 239.59 Offers and Sales of Stock
This section contains provisions governing the offering, pricing,
purchase limitations, and timing restrictions of an offering of stock
in connection with a conversion. These provisions were contained in
sections 563b.320, 563b.325, 563b.330, 563b.335, 563b.340, 563b.345,
563b.350, 563b.360, 563b.365, 563b.370, 563b.375, 563b.380, 563b.385,
563b.390, and 563b.395 of the OTS regulations and have been revised to
reflect nomenclature changes and the change in supervisory authority.
Because the Board is not declaring offering circulars effective, the
section provides that the offer may commence after the Board approves
the conversion, subject to compliance with SEC requirements.
K. 239.60 Completion of the Offering
This section governs the time period for an offering under a
conversion. It contains provisions of sections 563b.400 and 563b.405 of
the OTS regulations.
L. 239.61 Completion of the Conversion
This section sets forth requirements for the execution of the
conversion and the voting and liquidation rights following conversion.
It contains provisions of sections 563b.420, 563b.425, 563b.435,
563b.440, and 563b.445 of the OTS regulations.
M. 239.62 Liquidation Accounts
This section governs the creation and maintenance of a liquidation
account by a resulting stock company. It contains provisions of
sections 563b.450, 563b.455, 563b.460, 563b.465, 563b.470, 563b.475,
and 563b.480 of the OTS regulations.
N. 239.63 Post-conversion
This section contains provisions of sections 563b.420, 563b.425,
563b.435, 563b.440, and 563b.445 of the OTS regulations. As discussed
above, the Board has extended the prior notice period for stock
repurchases by the resulting stock holding company within the first
year of conversion from requiring 10 days prior notice to requiring 30
days prior notice, which can be extended by the Board for an additional
60 days. The Board believes that particular scrutiny of stock
repurchases is warranted because of the potential for conflicts of
interest that could arise when directors, management, and other
insiders of the resulting stock holding company also are or may become
shareholders of that resulting stock holding company.
O. 239.64 Contributions to Charitable Organizations
This section governs the formation of and donation to charitable
organizations in connection with a conversion. It contains provisions
of sections 563.15, 563b.550, 563b.555, 563b.560, 563b.565, 563b.570,
and 563b.575 of the OTS regulations, as revised to reflect nomenclature
changes and the change in supervisory authority.
P. 239.65 Voluntary Supervisory Conversions
This section governs supervisory conversions by MHCs. It contains
provisions of sections 563b.600, 563b.605, 563b.610, 563b.625,
563b.650, 563b.660, 563b.680, and 563b.690 of the OTS regulations.
Paragraph (d) clarifies that an MHC may be eligible for a voluntary
supervisory conversion based on either the MHC or subsidiary savings
association's capital levels. These capital levels are measured based
on the regulatory capital requirements applicable to the relevant
institution.
Q. 239.66 Board Review of the Voluntary Supervisory Conversion
Application
This section governs review by the Board of a voluntary supervisory
conversion application. These provisions were contained in sections
563b.670 and 563b.675 of the OTS regulations and have been revised to
reflect nomenclature changes and the change in supervisory authority.
Paragraph (b) clarifies that the Board may condition approval of a
voluntary supervisory conversion on actions to be taken by either the
MHC or the resulting stock holding company.
Comparison Chart
The following chart summarizes where particular parts and sections
of the OTS rules have been placed within Regulation MM.
----------------------------------------------------------------------------------------------------------------
Regulation MM Previous location in OTS regulations
----------------------------------------------------------------------------------------------------------------
SUBPART A--General Provisions
----------------------------------------------------------------------------------------------------------------
239.1--Authority, Purpose and Scope............... Sec. 575.1
239.2--Definitions................................ Sec. Sec. 563b, 574, 575, and 583
----------------------------------------------------------------------------------------------------------------
[[Page 56526]]
SUBPART B--Mutual Holding Companies
----------------------------------------------------------------------------------------------------------------
239.3--Mutual holding company reorganizations..... Sec. 575.3
239.4--Grounds for disapproval of reorganizations. Sec. 575.4
239.5--Membership rights.......................... Sec. 575.5
239.6--Contents of Reorganization Plan............ Sec. 575.6
239.7--Acquisition and disposition of savings Sec. 575.10
associations, savings and loan holding companies,
and other corporations by mutual holding
companies.
239.8--Operating restrictions..................... Sec. 575.11
239.9--Conversion or liquidation of mutual holding Sec. 575.12
companies.
239.10--Procedural requirements................... Sec. 575.13
239.11--Subsidiary holding companies.............. Sec. 575.14
239.12--Communication between members of a mutual Sec. 575.9
holding company.
239.13--Charters.................................. Sec. 575.9
239.14--Charter amendments........................ Sec. 575.9
239.15--Bylaws.................................... Sec. 575.9
239.16--Voluntary dissolution..................... Sec. 575.12(c)
----------------------------------------------------------------------------------------------------------------
SUBPART C--Subsidiary Holding Companies
----------------------------------------------------------------------------------------------------------------
239.20--Scope..................................... ............................................................
239.21--Charters.................................. Sec. 575.14(c)(1), (3)
239.22--Charter amendments........................ Sec. 575.14(c)(2)
239.23--Bylaws.................................... Sec. 575.14(c)(4)
239.24--Issuances of stock by subsidiary holding Sec. 575.7
companies of mutual holding companies.
239.25--Contents of Stock Issuance Plans.......... Sec. 575.8
239.26--Shareholders.............................. Sec. 575.14(c)(4)
239.27--Board of directors........................ Sec. 575.14(c)(4)
239.28--Officers.................................. Sec. 575.14(c)(4)
239.29--Certificates for shares and their transfer Sec. 575.14(c)(4)
239.30--Annual reports; books and records......... Sec. 575.14(c)(5)
239.31--Indemnification; employment contracts.....
----------------------------------------------------------------------------------------------------------------
SUBPART D--Indemnification; Employment Contracts
----------------------------------------------------------------------------------------------------------------
239.40--Indemnification of directors, officers and Sec. 575.11(f)
employees.
239.41--Employment contracts...................... Sec. 575.11(g)
----------------------------------------------------------------------------------------------------------------
SUBPART E--Conversions from Mutual to Stock Form--Sec. 575.12
----------------------------------------------------------------------------------------------------------------
239.50--Purpose and scope......................... Sec. 575.12 (Sec. 563b.5)
239.51--Acquiring another insured stock depository Sec. 575.12 (Sec. 563b.20)
institution as part of a conversion.
239.52--Definitions............................... Sec. 575.12 (Sec. 563b.25)
239.53--Prior to conversion.......................
239.54--Plan of conversion........................ Sec. 575.12 (Sec. Sec. 563b.125, 563b.130, 563b.135,
563b.140)
239.55--Filing requirements....................... Sec. 575.12 (Sec. Sec. 563b.150, 563b.155, 563b.160,
563b.165, 563b.180, 563b.185, 563b.200, 563b.205)
239.56--Vote by members........................... Sec. 575.12 (Sec. Sec. 563b.225, 563b.230, 563b.235,
563b.240)
239.57--Proxy solicitation........................ Sec. 575.12 (Sec. Sec. 563.250, 563.255, 563b.260,
563b.265, 563b.270, 563b.275, 563b.280, 563b.285, 563b.290,
563b.295)
239.58--Offering circular......................... Sec. 575.12 (Sec. Sec. 563b.300, 563b.305, 563b.310)
239.59--Offers and sales of stock................. Sec. 575.12 (Sec. Sec. 563b.320, 563b.325, 563b.330,
563b.335, 563b.340, 563b.345, 563b.350, 563b.360, 563b.365,
563b.370, 563b.375, 563b.380, 563b.385, 563b.390, 563b.395)
239.60--Completion of the offering................ Sec. 575.12 (Sec. Sec. 563b.400, 563b.405)
239.61--Completion of the conversion.............. Sec. 575.12 (Sec. Sec. 563b.420, 563b.425, 563b.435,
563b.440, 563b.445)
239.62--Liquidation account....................... Sec. 575.12 (Sec. Sec. 563b.450, 563b.455, 563b.460,
563b.465, 563b.470, 563b.475, 563b.480)
239.63--Post-conversion........................... Sec. 575.12 (Sec. Sec. 563b.500, 563b.505, 563b.510,
563b.515, 563b.520, 563b.525, 563b.530)
[[Page 56527]]
239.64--Contributions to charitable organizations. Sec. 575.12 (Sec. Sec. 563.15, 563b.550, 563b.555,
563b.560, 563b.565, 563b.570, 563b.575)
239.65--Voluntary supervisory conversions......... Sec. 575.12 (Sec. Sec. 563b.600, 563b.605, 563b.610,
563b.625, 563b.650, 563b.660, 563b.680, 563b.690)
239.66--Board review of the voluntary supervisory Sec. 575.12 (Sec. Sec. 563b.670, 563b.675)
conversion application.
----------------------------------------------------------------------------------------------------------------
Technical Amendments
The Board has made a number of technical amendments to Board rules
to facilitate supervision of SLHCs. These amendments include revisions
to the interagency rules implementing the Community Reinvestment Act,
including Regulation G \68\ and Regulation BB.\69\ Previously, these
requirements were located in parts 533 and 563e of the OTS regulations.
These technical changes also include revisions to the Board procedural
rules, including part 261 (Availability of Information), 261B (Public
Observation of Meetings), part 262 (Rules of Procedure), part 263
(Rules of Practice for Hearings), and part 264A (Post-Employment
Restrictions for Senior Examiners). In general, these amendments add
SLHCs to the types of institutions covered by the rule and create
mirrored provisions to accommodate transactions under HOLA.
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\68\ 12 CFR part 207 (Disclosure and Reporting of CRA-Related
Amendments).
\69\ 12 CFR part 228 (Community Reinvestment).
---------------------------------------------------------------------------
In addition, the Board made technical amendments to implement
section 312(b)(2)(A) of the Dodd-Frank Act,\70\ which transfers to the
Board all rulemaking authority under section 11 of HOLA relating to
transactions with affiliates and extensions of credit to executive
officers, directors, and principal shareholders.\71\ These amendments
include revisions to parts 215 (Insider Transactions) and part 223
(Transactions with Affiliates) of Board regulations.
---------------------------------------------------------------------------
\70\ 12 U.S.C. 5412.
\71\ 12 U.S.C. 1468.
---------------------------------------------------------------------------
With respect to transactions with affiliates, the Board has added a
new subpart I to the Board's Regulation W.\72\ Savings associations
have been subject to most of the provisions of Regulation W pursuant to
section 563.41 of OTS regulations. New subpart I contains the
provisions of section 563.41, other than paragraphs (c)(3) and (4), and
is revised to reflect nomenclature changes. The Board has decided not
to adopt the recordkeeping and notice requirements previously set forth
in section 563.41(c)(3) and (4). When adopting amendments to Regulation
W, the Board considered, and decided against, imposing recordkeeping
requirements on institutions subject to Regulation W. At that time, the
Board concluded, and continues to believe, that the primary supervisors
of the insured depository institutions are the appropriate authorities
to determine the recordkeeping requirements of their institutions. The
Board also believes that the requirement for a savings association
under section 563.41(b)(4) to provide notice to its primary supervisory
in certain circumstances does not need to be incorporated into
Regulation W because the OCC may require such notice in its general
capacity as the primary supervisor of the institution.
---------------------------------------------------------------------------
\72\ 12 CFR part 223 (Transactions Between Member Banks and
Their Affiliates).
---------------------------------------------------------------------------
With respect to extensions of credit to executive officers,
directors, and principal shareholders, the Board has revised Regulation
O to extend to savings associations all provisions applicable to state
member banks.\73\ Section 563.43 of the OTS regulations previously
extended all of the provisions of Regulation O to savings associations.
---------------------------------------------------------------------------
\73\ 12 CFR part 215 (Loans to Executive Officers, Directors,
and Principal Shareholders of Member Banks).
---------------------------------------------------------------------------
IV. Request for Comments
The Board is seeking comment on all aspects of this interim final
rule. The Board requests specific comment with respect to whether all
regulations relating to the supervision of SLHCs are included in this
rulemaking. Alternatively, does this rulemaking carry over regulatory
provisions that currently do not apply to SLHCs or their non-depository
subsidiaries?
V. Legal Authority
Rulemaking Authority
As noted, the Dodd-Frank Act explicitly provides for transfer of
rulemaking authority for SLHCs from OTS to the Board effective July
21.\74\ The Dodd-Frank Act also amends other statutes effective July
21, so as to provide the Board with rulemaking authority over SLHCs
pursuant to HOLA,\75\ the CBCA,\76\ section 32 of the FDI Act
(requiring notices by troubled institutions prior to appointment of a
director or senior executive officer),\77\ the Interlocks Act \78\ and
section 19 of the FDI Act (preventing service at SLHCs of individuals
convicted of crimes of dishonesty).\79\ The Board is issuing this
interim final rule pursuant to this authority.
---------------------------------------------------------------------------
\74\ 12 U.S.C. 5412(b)(1)(A)(ii).
\75\ 12 U.S.C. 1461 et seq.
\76\ 12 U.S.C. 1817(j)(13).
\77\ 12 U.S.C. 1831i.
\78\ 12 U.S.C. 3207.
\79\ 12 U.S.C. 1829(a).
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Authority To Issue Interim Final Rule Without Notice and Comment
The Administrative Procedures Act (``APA''), 5 U.S.C. 551 et seq.,
generally requires public notice before promulgation of
regulations.\80\ The APA provides an exception for this requirement,
however, when there is good cause because notice and public procedure
is impracticable.\81\ The Board finds that for this interim rule there
is ``good cause'' to conclude that providing notice and an opportunity
to comment would be impracticable and, therefore, is not required.
---------------------------------------------------------------------------
\80\ 5 U.S.C. 553(b).
\81\ 5 U.S.C. 553(b)(B).
---------------------------------------------------------------------------
Because the authority to supervise SLHCs was transferred by
operation of law effective on July 21, 2011, the Board has concluded
that adopting this rule on an interim basis effective immediately, and
subject to change as a result of comments received, would allow
efficient and effective supervision and regulation of SLHCs immediately
while also allowing the public an opportunity to comment.
Specifically, the OTS regulations often integrate requirements for
savings associations with those of SLHCs. The Board does not believe
that SLHCs should be obligated to independently determine which
regulations remain applicable after transfer. The OTS regulations also
contain references to the OTS as recipient of and decision maker with
respect to SLHC applications. Absent immediate modification of these
rules, the Board
[[Page 56528]]
would lack procedures to receive and process applications and therefore
would be unable to fully carry out this important portion of its
supervisory responsibilities. Additionally, the Board must take
immediate action to amend a number of its own administrative
regulations to ensure the SLHCs and transactions under HOLA are
appropriately accommodated.
In order to effectuate the Dodd-Frank Act, prevent a disruption of
agency business, and ensure that SLHCs are aware of their obligations,
and the expectations of the Board as the new supervisory authority, the
Board is issuing this interim final rule. The Board is seeking comment
from interested parties before final rules are issued.
VI. Regulatory Flexibility Act
In accordance with section 4 of the Regulatory Flexibility Act
(``RFA''), 5 U.S.C. 601 et seq., the Board is publishing an initial
regulatory flexibility analysis for the interim final rule. The RFA
generally requires an agency to assess the impact a rule is expected to
have on small entities.\82\ The RFA requires an agency either to
provide a regulatory flexibility analysis or to certify that the final
rule will not have a significant economic impact on a substantial
number of small entities. Based on this analysis and for the reasons
stated below, the Board believes that this final rule will not have a
significant economic impact on a substantial number of small entities.
The Board recognizes that the final rule will affect some small
business entities; however the Board does not expect that the final
rule will have a significant economic impact on them, particularly in
light of the information already required to be collected or disclosed
under HOLA. Nevertheless, the Board is publishing an initial regulatory
flexibility analysis and requesting public comment on the effect of the
interim final rule on small entities. A final regulatory flexibility
analysis will be conducted after consideration of comments received
during the public comment period.
---------------------------------------------------------------------------
\82\ Under standards the U.S. Small Business Administration
sets, an entity is considered ``small'' if it has $175 million or
less in assets for banks and other depository institutions. U.S.
Small Business Administration, Table of Small Business Size
Standards Matched to North American Industry Classification System
Codes, available at http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf.
---------------------------------------------------------------------------
A. Reasons for the Interim Final Rule
Title III of the Dodd-Frank Act transfers from OTS to the Board the
responsibility for supervision of SLHCs and their non-depository
subsidiaries. Specifically, section 312 of the Dodd-Frank Act provides
that all functions of the OTS and the Director of the OTS (including
rulemaking authority and authority to issue orders) with respect to the
supervision of SLHCs and their non-depository subsidiaries transferred
to the Board on July 21, 2011.\83\ The interim final rule is the
mechanism for the corresponding transfer from OTS to the Board of the
regulations necessary for the Board to administer the statutes
governing SLHCs.
---------------------------------------------------------------------------
\83\ 12 U.S.C. 5412.
---------------------------------------------------------------------------
B. Statement of Objectives and Legal Basis
The SUPPLEMENTARY INFORMATION sets forth the objectives and the
legal basis for the interim final rule. In summary, this interim final
rule is the mechanism for the transfer from the OTS to the Board of the
regulations necessary for the Board to administer the statutes
governing SLHCs.
C. Description of Small Entities to Which the Final Rule Applies
The interim final rule would apply to any SLHC and its non-
depository subsidiaries. The Board can identify through data from the
National Information Center the approximate numbers of small SLHCs that
would be subject to the interim final rule. Based on March 2011 data,
approximately 124 small SLHCs would be subject to the interim final
rule.
D. Projected Reporting, Recordkeeping and Other Compliance Requirements
The reporting and recordkeeping requirements of the interim final
rule are described in the SUPPLEMENTARY INFORMATION.
The interim final rule is composed of new Regulation LL and new
Regulation MM, into which the Board has sought to collect all current
OTS regulations applicable to, respectively, SLHCs and SLHCs in mutual
form and transfer them into a single part of Chapter 2 of Title 12 for
ease of locating. The interim final rule also makes technical
amendments to current Board regulations necessary to accommodate the
transfer of supervisory authority for SLHCs from OTS to the Board. In
light of the information already required to be collected or disclosed
under HOLA, the Board does not expect that the costs associated with
this interim final rule will place a significant burden on small
entities.
E. Identification of Duplicative, Overlapping, or Conflicting Federal
Regulations
The Board has not identified any federal statutes or regulations
that would duplicate, overlap, or conflict with the interim final rule.
F. Significant Alternatives to the Interim Final Rule
As noted above, the interim final rule implements the statutory
requirements of the Dodd-Frank Act. The Board has implemented these
requirements to minimize burden while retaining benefits and
protections to the banking system. The Board welcomes comment on any
significant alternatives that would minimize the impact of the interim
final rule on small entities.
The Board also welcomes further information and comment on any
costs, compliance requirements, or changes in operating procedures
arising from the application of the interim final rule to small
business. The Board will carefully review any comments received on
these issues during the public comment period.
VII. Paperwork Reduction Act
In accordance with the requirements of the Paperwork Reduction Act
(``PRA'') of 1995 (44 U.S.C. 3501-3521), the Board may not conduct or
sponsor, and the respondent is not required to respond to, an
information collection unless it displays a currently valid Office of
Management and Budget (``OMB'') control number. The Board reviewed the
interim final rule under the authority delegated to the Board by OMB.
In addition, as permitted by the PRA, the Board also proposes to extend
for three years the current information collections listed below.
Regulation LL
Title of Information Collections
Savings and Loan Holding Company Registration Statement
(H(b)(10)),
Savings Association Holding Company Report (H-(e) series),
Interagency Bank Merger Act Application (FR 2070),
Interagency Notice of Change in Control (FR 2081a),
Notification by a Bank Holding Company to Acquire a
Nonbank Company and/or Engage in Nonbanking Activities (FR Y-4),
Filings Related to the Gramm-Leach-Bliley Act (FR 4010),
Application to Become a Bank Holding Company and/or
Acquire an Additional Bank or Bank Holding Company (FR Y-3),
[[Page 56529]]
Notice for Prior Approval to Become a Bank Holding Company
(FR Y-3N),
Interagency Notice of Change in Director or Senior
Executive Officer (FR 2081b),
Prohibited Service at Savings and Loan Holding Companies,
Interagency Biographical or Financial Report (FR 2081c),
and
Notice or Application for Capital Distribution (OTS 1583).
Frequency of Response: Event-generated.
Affected Public: Savings and loan holding companies (``SLHCs'') and
individuals
Abstract: The information collection requirements are found in
sections 238.4, 238.11, 238.12, 238.14, 238.31, 238.33, 238.53, 238.54,
238.65, 238.73, 238.74, 238.86, 238.96, and 238.103 of the interim
final rule. These requirements would implement regulations related to
Section 312 of the Dodd-Frank Act, which transfered supervision of
SLHCs from the OTS to the Board on July 21, 2011.
Section 238.4 sets forth the requirements for SLHCs to register
with the Federal Reserve. The Federal Reserve will collect these data
using the former OTS reporting form H(b)(10) (former OMB No. 1550-0020,
current OMB No. 7100-0337). Sections 238.11 and 238.14 set forth the
requirements for SLHCs to seek prior approval to form a holding
company, acquire a subsidiary savings association, acquire control of a
savings association or savings and loan holding company securities,
acquire bank assets, merge SLHCs, and acquire control of an SLHC by
certain individuals. The Federal Reserve will collect these data using
former OTS reporting form H-(e) series (former OMB No. 1550-0015,
current OMB No. 7100-0336) and Federal Reserve reporting form FR 2081a
(OMB No. 7100-0134). Section 238.12 sets forth requirements for SLHCs
involved in savings association mergers and internal corporate
reorganizations to file information under the Bank Merger Act. The
Federal Reserve will collect these data using Federal Reserve reporting
form FR 2070 (OMB No. 7100-0171). Sections 238.31 and 238.33 set forth
requirements for SLHCs to provide prior notice for changes in control
of an SLHC. The Federal Reserve will collect these data using Federal
Reserve reporting form FR 2081a (OMB No. 7100-0134). Sections 238.53
and 238.54 set forth requirements for SLHCs to engage in or acquire a
company engaged in certain services or activities. The Federal Reserve
will collect these data using Federal Reserve reporting form FR Y-4
(OMB No. 7100-0121). Section 238.65 sets forth requirements for SLHCs
electing to be treated as a financial holding company, SLHCs that do
not meet the requirements to be financial holding company engaging in
financial holding company activities, and companies requesting to be
treated as a financial holding company as part of an application to
become an SLHC. The Federal Reserve will collect these data under the
Federal Reserve's FR 4010 information collection, which is filed in a
letter format (OMB No. 7100-0292), and the Federal Reserve's FR Y-3/3N
reporting form (OMB No. 7100-0121). Sections 238.73 and 238.74 set
forth requirements for SLHCs to provide prior notice to the Federal
Reserve before adding or replacing any member of its board of
directors, employing any person as a senior executive officer, or
changing the responsibilities of any senior executive officer. The
Federal Reserve will collect these data under the Federal Reserve's
reporting form FR 2081b (OMB No. 7100-0134). Section 238.86 sets forth
requirements for exemptions from prohibited services by individuals at
SLHCs. The Federal Reserve will collect these data under a former OTS
information collection that is filed in a letter format (former OMB No.
1550-0117, current OMB No. 7100-0338). Section 238.96 sets forth
requirements for an SLHC to apply for an exemption to a management
interlock. The Federal Reserve will collect these data under Federal
Reserve reporting forms FR 2070, FR 2081c, FR Y-3/3N (OMB Nos. 7100-
0171, 7100-0134, and 7100-0121). Section 238.103 sets forth filing
requirements for subsidiary savings associations of SLHCs regarding
dividend declarations. The Federal Reserve will collect these data
under former OTS reporting form 1583 (former OMB No. 1550-0059, current
OMB No. 7100-0339).
Estimated Burden
The hourly burden estimates associated with each information
collection described above are not expected to change materially as the
information to be collected is substantively similar to that which is
currently being collected from SLHCs and those managing these entities.
There are approximately 427 SLHCs as of June 30, 2011. For the existing
Federal Reserve information collections mentioned above, the Federal
Reserve will increase the respondent counts as appropriate to include
SLHCs. For additional information on the current burden associated with
any of these information collections, please see OMB's public Web site
at: http://www.reginfo.gov/public/do/PRAMain. For copies of the current
reporting forms, please see the Federal Reserve's public Web site at
http://www.federalreserve.gov/reportforms/default.cfm.
Regulation MM
Title of Information Collections
Mutual Holding Company Reorganization (MHC-1; OTS 1522),
Minority Stock Issuance by a Savings Association
Subsidiary of a Mutual Holding Company (MHC-2; OTS 1523),
Mutual to Stock Applications (OTS Forms 1680, 1681, 1682,
1683),
Holding Company Applications/Information Filing (H-(e)
series),
Interagency Notice of Change in Director or Senior
Executive Officer (FR 2081b), and
Interagency Biographical or Financial Report (FR 2081c).
Frequency of Response: Event-generated.
Affected Public: Mutual holding companies (MHCs) and individuals
Abstract: The information collection requirements are found in
sections 239.1, 239.3, 239.4, 239.6 through 239.8, 239.10, 239.11,
239.15, 239.16, 239.22 through 239.25, 239.40, 239.50, 239.53 through
239.55, 239.57 through 239.60, and 239.63 through 239.65 of the interim
final rule. These requirements would implement regulations related to
section 312 of the Dodd-Frank Act, which transfers supervision of MHCs
from the OTS to the Board on July 21, 2011.
Sections 239.1, 239.3, 239.4, 239.6 through 239.8, 239.10, 239.24,
239.25, and 239.63 sets forth the requirements for MHCs to reorganize
and for subsidiary holding companies of MHCs to issue minority stock.
The Federal Reserve will collect these data using former OTS reporting
forms 1522 and 1523 (former OMB No. 1550-0072; current OMB No. 7100-
0340). Sections 239.8, 239.10, 239.15, 239.57 through 239.60, and
239.63 through 239.65 set forth the requirements for materials related
to proxy statements, meetings, bylaws, offering circulars, selling
conversion shares of MHCs, conflicts of interest of directors, and
voluntary supervision conversions. The Federal Reserve will collect
these data using former OTS reporting forms 1680 through 1683 (formerly
OMB No. 1550-0014, current OMB No. 7100-0335). Section 239.11 sets
forth requirements for MHCs with respect to communicating with members.
MHCs would provide this information using a letter. Section 239.16 sets
forth
[[Page 56530]]
requirements for MHCs to propose dissolution. MHCs would provide this
information in a letter format. Section 239.22 and 239.23 sets forth
requirements for MHC charter and bylaw amendments.
This information would be submitted in a letter format. Section
239.40 sets forth requirements for MHCs to notify the Board about their
intent to indemnify directors, officers, and employees. The Federal
Reserve will collect these data using Federal Reserve reporting form FR
2081b (OMB No. 7100-0134). Section 239.50 sets forth requirements for
MHCs to convert from the mutual to the stock form of ownership. The
Federal Reserve will collect these data using former OTS reporting form
H-(e) series (formerly OMB No. 1550-0015, current OMB No. 7100-0336)
and Federal Reserve reporting form FR 2081c (OMB No. 7100-0134).
Sections 239.53 through 239.55 set forth requirements for MHCs to
provide a business plan prior to conversion from mutual to stock form,
make certain certifications regarding the business plan, and notify its
members and the public of the plan. The Federal Reserve will collect
these data under Federal Reserve reporting form FR 2081c (OMB No. 7100-
0134). Section 239.65 requires a plan of voluntary supervisory
conversion and related application. The Federal Reserve will use former
OTS reporting forms H-(e)1-S (formerly OMB No. 1550-0015, current OMB
No. 7100-0336) to collect these data.
Estimated Burden
The hourly burden estimates associated with each information
collection described above is not expected to change materially as the
information to be collected is substantively similar to that which is
currently being collected from MHCs and those managing these entities.
There are approximately 100 MHCs as of June 30, 2011. For the existing
Federal Reserve information collections mentioned above, the Federal
Reserve will increase the respondent counts as appropriate to include
MHCs. For additional information on the current burden associated with
any of these information collections, please see OMB's public Web site
at: http://www.reginfo.gov/public/do/PRAMain. For copies of the current
reporting forms, please see the Federal Reserve's public Web site at
http://www.federalreserve.gov/reportforms/default.cfm.
Comments are invited on:
(a) Whether the collection of information is necessary for the
proper performance of the Board's functions, including whether the
information has practical utility;
(b) The accuracy of the estimates of the burden of the information
collection, including the validity of the methodology and assumptions
used;
(c) Ways to enhance the quality, utility, and clarity of the
information to be collected;
(d) Ways to minimize the burden of the information collection on
respondents, including through the use of automated collection
techniques or other forms of information technology; and
(e) Estimates of capital or start up costs and costs of operation,
maintenance, and purchase of services to provide information.
Solicitation of Comments on Use of Plain Language
Section 722 of the Gramm-Leach Bliley Act of 1999 requires the
Federal banking agencies to use plain language in all proposed and
final rules published after January 1, 2000.\84\ The Board invites
comment on whether the interim final rule is clearly stated and
effectively organized, and how the Board might make the text of the
rule easier to understand.
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\84\ 12 U.S.C. 4809.
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List of Subjects
12 CFR Part 207
Banks, Banking, Community development, Federal Reserve System,
Holding companies, Reporting and recordkeeping requirements.
12 CFR Part 215
Credit, Penalties, Reporting and recordkeeping requirements.
12 CFR Part 223
Banks, Banking, Federal Reserve System.
12 CFR Part 228
Banks, banking, Community development, Credit, Investments,
Reporting and recordkeeping requirements.
12 CFR Part 238
Administrative practice and procedure, Banks, Banking, Federal
Reserve System, Holding companies, Reporting and recordkeeping
requirements, Holding companies, Securities.
12 CFR Part 239
Administrative practice and procedure, Banks, Banking, Federal
Reserve System, Holding companies, Reporting and recordkeeping
requirements, Securities.
12 CFR Part 261
Confidential business information, Federal Reserve System, Freedom
of information.
12 CFR Part 261b
Sunshine Act.
12 CFR Part 262
Administrative practice and procedure, Banks, banking, Federal
Reserve System.
12 CFR Part 263
Administrative practice and procedure, Claims, Crime, Equal Access
to Justice, Lawyers, Penalties.
12 CFR Part 264a
Conflicts of interest.
For the reasons stated in the preamble, the Board amends 12 CFR
chapter II as follows:
PART 207--DISCLOSURE AND REPORTING OF CRA-RELATED AGREEMENTS
(REGULATION G)
0
1. The authority citation for part 207 continues to read as follows:
Authority: 12 U.S.C. 1831y.
0
2. In Sec. 207.1:
0
A. Redesignate paragraphs (b)(3) and (b)(4) as paragraphs (b)(4) and
(b)(5) respectively;
0
B. Add new paragraph (b)(3); and
0
C. Revise newly redesignated paragraphs (b)(4) and (b)(5). The
additions and revisions read as follows:
Sec. 207.1 Purpose and scope of this part.
(b)* * *
(3) Savings and loan holding companies;
(4) Affiliates of bank holding companies and savings and loan
holding companies, other than banks, savings associations and
subsidiaries of banks and savings associations; and
(5) Nongovernmental entities or persons that enter into covered
agreements with any company listed in paragraph (b)(1) through (4) of
this section.
* * * * *
PART 215--LOANS TO EXECUTIVE OFFICERS, DIRECTORS, AND PRINCIPAL
SHAREHOLDERS OF MEMBER BANKS (REGULATION O)
0
3. The authority citation for part 215 is revised to read as follows:
Authority: 12 U.S.C. 248(a), 375a(10), 375b(9) and (10), 1468,
1817(k), 5412; and Pub. L. 102-242, 105 Stat. 2236 (1991).
[[Page 56531]]
0
4. In Sec. 215.1, revise paragraph (a) to read as follows:
Sec. 215.1 Authority, purpose and scope.
(a) Authority. This part is issued pursuant to sections 11(a),
22(g), and 22(h) of the Federal Reserve Act (12 U.S.C. 248(a), 375a,
and 375b), 12 U.S.C. 1817(k), section 306 of the Federal Deposit
Insurance Corporation Improvement Act of 1991 (Pub. L. 102-242, 105
Stat. 2236 (1991)), section 11 of the Home Owners' Loan Act (12 U.S.C.
1468), and section 312(b)(2)(A) of the Dodd-Frank Wall Street Reform
and Consumer Protection Act (12 U.S.C. 5412).
* * * * *
0
5. In Sec. 215.9, revise paragraph (a)(1) to read as follows:
Sec. 215.9 Disclosure of credit from member banks to executive
officers and principal shareholders.
(a) * * *
(1) Principal shareholder of a member bank means any person other
than an insured bank, or a foreign bank as defined in 12 U.S.C.
3101(7), that, directly or indirectly, owns, controls, or has power to
vote more than 10 percent of any class of voting securities of the
member bank. The term includes a person that controls a principal
shareholder (e.g., a person that controls a bank holding company).
Shares of a bank (including a foreign bank), bank holding company,
savings and loan holding company or other company owned or controlled
by a member of an individual's immediate family are presumed to be
owned or controlled by the individual for the purposes of determining
principal shareholder status.
* * * * *
0
6. Section 215.12 is added to read as follows:
Sec. 215.12 Application to savings associations.
The requirements of this part apply to savings associations, as
defined in 12 CFR 238.2(l) (including any subsidiary of a savings
association), in the same manner and to the same extent as if the
savings association were a member bank; provided that a savings
association's unimpaired capital and unimpaired surplus will be
determined under regulatory capital rules applicable to that savings
association.
PART 223--TRANSACTIONS BETWEEN MEMBER BANKS AND THEIR AFFILIATES
(REGULATION W)
0
7. The authority citation for part 223 is revised to read as follows:
Authority: 12 U.S.C. 371c(b)(1)(E), (b)(2)(A), and (f), 371c-
1(e), 1828(j), 1468(a), and section 312(b)(2)(A) of the Dodd-Frank
Wall Street Reform and Consumer Protection Act (12 U.S.C. 5412).
0
8. In Sec. 223.1, revise paragraph (a) to read as follows:
Sec. 223.1 Authority, purpose and scope.
(a) Authority. The Board of Governors of the Federal Reserve System
(Board) has issued this part (Regulation W) under the authority of
sections 23A(f) and 23B(e) of the Federal Reserve Act (FRA) (12 U.S.C.
371c(f), 371c-1(e)) section 11 of the Home Owners' Loan Act (12 U.S.C.
1468), and section 312(b)(2)(A) of the Dodd-Frank Wall Street Reform
and Consumer Protection Act (12 U.S.C. 5412).
* * * * *
0
9. Add Subpart I to read as follows:
Subpart I--Savings Associations--Transactions with Affiliates
Sec. 223.72 Transactions with affiliates.
(a) Scope. (1) This subpart implements section 11(a) of the Home
Owners' Loan Act (12 U.S.C. 1468(a)). Section 11(a) applies sections
23A and 23B of the FRA (12 U.S.C. 371c and 371c1) to every savings
association in the same manner and to the same extent as if the
association were a member bank; prohibits certain types of transactions
with affiliates; and authorizes the Board to impose additional
restrictions on a savings association's transactions with affiliates.
(2) For the purposes of this subpart, ``savings association'' is
defined at section 3 of the Federal Deposit Insurance Act (12 U.S.C.
1813), and also includes any savings bank or any cooperative bank that
is a savings association under 12 U.S.C. 1467a(l). A non-affiliate
subsidiary of a savings association is treated as part of the savings
association. For purposes of this subpart, a ``non-affiliate
subsidiary'' is a subsidiary of a savings association other than a
subsidiary described at 12 CFR 223.2(b)(1)(i), and (b)(1)(iii) through
(v).
(b) Sections 23A and 23B of the FRA. A savings association must
comply with sections 23A and 23B of the Federal Reserve Act and this
part as if it were a member bank, except as described in the following
chart.
----------------------------------------------------------------------------------------------------------------
Provision of Regulation W Application
----------------------------------------------------------------------------------------------------------------
(1) 12 CFR 223.2(a)(8)--``Affiliate'' Does not apply. Savings association subsidiaries do not meet the
includes a financial subsidiary. statutory definition of financial subsidiary.
(2) 12 CFR 223.2(a)(12)--Determination that Read to include the following statement: ``Affiliate also
``affiliate'' includes other types of includes any company that the Board determines, by order or
companies. regulation, to present a risk to the safety and soundness of the
savings association.''
(3) 12 CFR 223.2(b)(1)(ii)--``Affiliate'' Does not apply. Savings association subsidiaries do not meet the
includes a subsidiary that is a financial statutory definition of financial subsidiary.
subsidiary.
(4) 12 CFR 223.3(d)--Definition of ``capital ``Capital stock and surplus'' for a savings association has the
stock and surplus.'' same meaning as under the regulatory capital requirements
applicable to that savings association.
(5) 12 CFR 223.3(h)(1)--Section 23A covered Read to incorporate paragraph (c)(1) of this section, which
transactions include an extension of credit prohibits loans or extensions of credit to an affiliate, unless
to the affiliate. the affiliate is engaged only in the activities described at 12
U.S.C. 1467a(c)(2)(F)(i), as defined in Regulation LL at 12 CFR
238.54.
(6) 12 CFR 223.3(h)(2)--Section 23A covered Read to incorporate paragraph (c)(2) of this section, which
transactions include a purchase of or prohibits purchases and investments in securities issued by an
investment in securities issued by an affiliate, other than with respect to shares of a subsidiary.
affiliate.
(7) 12 CFR 223.3(k)--Definition of Read to include the following statement: ``For the purposes of
``depository institution.'' this definition, a non-affiliate subsidiary of a savings
association is treated as part of the depository institution.''
(8) 12 CFR 223.3(p)--Definition of Does not apply. Savings association subsidiaries do not meet the
``financial subsidiary.'' statutory definition of financial subsidiary.
(9) 12 CFR 223.3(w)--Definition of ``member Read to include the following statement: ``Member bank also
bank.'' includes a savings association. For purposes of this definition,
a non-affiliate subsidiary of a savings association is treated
as part of the savings association.''
(10) 12 CFR 223.3(aa)--Definition of Does not apply.
``operating subsidiary.''
[[Page 56532]]
(11) 12 CFR 223.31--Application of section Read to refer to ``a non-affiliate subsidiary'' instead of
23A to an acquisition of an affiliate that ``operating subsidiary.''
becomes an operating subsidiary.
(12) 12 CFR 223.32--Rules that apply to Does not apply. Savings association subsidiaries do not meet the
financial subsidiaries of a bank. statutory definition of financial subsidiary.
(13) 12 CFR 223.42(f)(2)--Exemption for Read to refer to ``Thrift Financial Report'' instead of ``Call
purchasing certain marketable securities. Report.'' References to ``state member bank'' are unchanged.
(14) 12 CFR 223.42(g)(2)--Exemption for Read to refer to ``Thrift Financial Report'' instead of ``Call
purchasing municipal securities. Report.'' References to ``state member bank'' are unchanged.
(15) 12 CFR 223.61--Application of sections Does not apply to savings associations or their subsidiaries.
23A and 23B to U.S. branches and agencies of
foreign banks.
----------------------------------------------------------------------------------------------------------------
(c) Additional prohibitions and restrictions. A savings association
must comply with the additional prohibitions and restrictions in this
paragraph (c). Except as described in paragraph (b) of this section,
the definitions in this part apply to these additional prohibitions and
restrictions.
(1) Loans and extensions of credit. (i) A savings association may
not make a loan or other extension of credit to an affiliate, unless
the affiliate is solely engaged in the activities described at 12
U.S.C. 1467a(c)(2)(F)(i), as defined in Sec. 238.54 of Regulation LL
(12 CFR 238.54). A loan or extension of credit to a third party is not
prohibited merely because proceeds of the transaction are used for the
benefit of, or are transferred to, an affiliate.
(ii) If the Board determines that a particular transaction is, in
substance, a loan or extension of credit to an affiliate that is
engaged in activities other than those described at 12 U.S.C.
1467a(c)(2)(F)(i), as defined in Sec. 238.54 of Regulation LL (12 CFR
238.54), or the Board has other supervisory concerns concerning the
transaction, the Board may inform the savings association that the
transaction is prohibited under this paragraph (c)(1), and require the
savings association to divest the loan, unwind the transaction, or take
other appropriate action.
(2) Purchases or investments in securities. A savings association
may not purchase or invest in securities issued by any affiliate other
than with respect to shares of a subsidiary. For the purposes of this
paragraph (c)(2), subsidiary includes a bank and a savings association.
PART 228--COMMUNITY REINVESTMENT (REGULATION BB)
0
10. The authority citation for part 228 continues to read as follows:
Authority: 12 U.S.C. 24, 36, 92a, 93a, 248(a), 248(c), 321-338a,
371d, 461, 481-486, 601, 611, 1814, 1816, 1820(d)(9), 1823(j),
1828(o), 1831, 1831o, 1831p-1, 1831r-1, 1831w, 1831x, 1835a, 1882,
2901-2907, 3105, 3106a(1), 3108(a), 3310, 3331-3351, and 3906-3909,
5101 et seq., 15 U.S.C. 78b, 78l(b), 78l(g), 78l(i), 78o-4(c)(5),
78q, 78q-1, 78w, 1681s, 1681w, 6801 and 6805; 31 U.S.C. 5318, 42
U.S.C. 4012a, 4104a, 4104b, 4106, and 4128.
0
11. In Sec. 228.11:
0
A. Revise paragraphs (a)(2), (a)(3)(iii), and (a)(3)(iv); and
0
B. Add paragraph (a)(3)(v) to read as follows:
Sec. 228.11 Authority, purposes, and scope.
(a) * * *
(2) To conduct examinations of bank holding companies and their
subsidiaries (12 U.S.C. 1844) and savings and loan holding companies
and their subsidiaries (12 U.S.C. 1467a); and
(3) * * *
(iii) Formations of, acquisitions of banks by, and mergers of, bank
holding companies (12 U.S.C. 1842);
(iv) The acquisition of savings associations by bank holding
companies (12 U.S.C. 1843); and
(v) Formations of, acquisitions of savings associations by,
conversions of, and mergers of, savings and loan holding companies (12
U.S.C. 1467a).
* * * * *
0
12. In Sec. 228.29:
0
A. Revise paragraphs (a)(2)(ii) and (a)(2)(iii);
0
B. Add paragraphs (a)(2)(iv) and (a)(2)(v); and
0
C. Revise paragraphs (c) and (d).
The additions and revisions read as follows:
Sec. 228.29 Effect of CRA performance on applications.
(a) * * *
(2) * * *
(ii) To acquire ownership or control of shares or all or
substantially all of the assets of a bank, to cause a bank to become a
subsidiary of a bank holding company, or to merge or consolidate a bank
holding company with any other bank holding company in a transaction
that requires approval under section 3 of the Bank Holding Company Act
(12 U.S.C. 1842);
(iii) To own, control or operate a savings association in a
transaction that requires approval under section 4 of the Bank Holding
Company Act (12 U.S.C. 1843);
(iv) To become a savings and loan holding company in a transaction
that requires approval under section 10 of the Home Owners' Loan Act
(12 U.S.C. 1467a); and
(v) To acquire ownership or control of shares or all or
substantially all of the assets of a savings association, to cause a
savings association to become a subsidiary of a savings and loan
holding company, or to merge or consolidate a savings and loan holding
company with any other savings and loan holding company in a
transaction that requires approval under section 10 of the Home Owners'
Loan Act (12 U.S.C. 1467a).
* * * * *
(c) Denial or conditional approval of application. A bank or
savings association's record of performance may be the basis for
denying or conditioning approval of an application listed in paragraph
(a) of this section.
(d) Definitions. For purposes of paragraphs (a)(2)(i), (ii), and
(iii) of this section, ``bank,'' ``bank holding company,''
``subsidiary,'' and ``savings association'' have the meanings given to
those terms in section 2 of the Bank Holding Company Act (12 U.S.C.
1841). For purposes of paragraphs (a)(2)(iv) and (v) of this section,
``savings and loan holding company'' and ``subsidiary'' has the meaning
given to that term in section 10 of the Home Owners' Loan Act (12
U.S.C. 1467a).
0
13. Add new part 238 to read as follows:
PART 238--SAVINGS AND LOAN HOLDING COMPANIES (REGULATION LL)
Subpart A--General Provisions
Sec.
238.1 Authority, purpose and scope.
238.2 Definitions.
[[Page 56533]]
238.3 Administration.
238.4 Records, reports, and inspections.
238.5 Audit of savings association holding companies.
238.6 Penalties for violations.
238.7 Tying restriction exception.
238.8 Safe and sound operations.
Subpart B--Acquisitions of Savings Association Securities or Assets
Sec.
238.11 Transactions requiring Board approval.
238.12 Transactions not requiring Board approval.
238.13 Prohibited acquisitions.
238.14 Procedural requirements.
238.15 Factors considered in acting on applications.
Subpart C--Control Proceedings
Sec.
238.21 Control proceedings.
Subpart D--Change in Bank Control
Sec.
238.31 Transactions requiring prior notice.
238.32 Transactions not requiring prior notice.
238.33 Procedures for filing, processing, publishing, and acting on
notices.
Subpart E--Qualified Stock Issuances
Sec.
238.41 Qualified stock issuances by undercapitalized savings
associations or holding companies.
Subpart F--Savings and Loan Holding Company Activities and Acquisitions
Sec.
238.51 Prohibited activities.
238.52 Exempt savings and loan holding companies and grandfathered
activities.
238.53 Prescribed services and activities of savings and loan
holding companies.
238.54 Permissible bank holding company activities of savings and
loan holding companies.
Subpart G--Financial Holding Company Activities
Sec.
238.61 Scope.
238.62 Definitions.
238.63 Requirements to engage in financial holding company
activities.
238.64 Election required.
238.65 Election procedures.
238.66 Ongoing requirements.
Subpart H--Notice of Change of Director or Senior Executive Officer
Sec.
238.71 Purpose.
238.72 Definitions.
238.73 Prior notice requirement.
238.74 Filing and processing procedures.
238.75 Standards for review.
238.76 Waiting period.
238.77 Waiver of prior notice requirement.
Subpart I--Prohibited Service at Savings and Loan Holding Companies
Sec.
238.81 Purpose.
238.82 Definitions.
238.83 Prohibited actions.
238.84 Covered convictions or agreements to enter into pre-trial
diversions or similar programs.
238.85 Adjudications and offenses not covered.
238.86 Exemptions.
238.87 Filing procedures.
238.88 Factors for review.
238.89 Board action.
239.90 Hearings.
Subpart J--Management Official Interlocks
Sec.
238.91 Authority, purpose, and scope.
238.92 Definitions.
238.93 Prohibitions.
238.94 Interlocking relationships permitted by statute.
238.95 Small market share exemption.
238.96 General exemption.
238.97 Change in circumstances.
238.98 Enforcement.
238.99 Interlocking relationships permitted pursuant to Federal
Deposit Insurance Act.
Subpart K--Dividends by Subsidiary Savings Associations
Sec.
238.101 Authority and purpose.
238.102 Definitions.
238.103 Filing requirement.
238.104 Board action and criteria for review.
Subpart L--Investigative Proceedings and Formal Examination Proceedings
Sec.
238.111 Scope.
238.112 Definitions.
238.113 Confidentiality of proceedings.
238.114 Transcripts.
238.115 Rights of witnesses.
238.116 Obstruction of the proceedings.
238.117 Subpoenas.
Authority: 5 U.S.C. 552, 559; 12 U.S.C. 1462, 1462a, 1463, 1464,
1467, 1467a, 1468, 1813, 1817, 1829e, 1831i, 1972; 15 U.S.C. 78 l.
Subpart A--General Provisions
Sec. 238.1 Authority, purpose and scope.
(a) Authority. This part is issued by the Board of Governors of the
Federal Reserve System (Board) under section 10(g) of the Home Owners'
Loan Act (HOLA); section 7(j)(13) of the Federal Deposit Insurance Act,
as amended by the Change in Bank Control Act of 1978 (12 U.S.C.
1817(j)(13)) (Bank Control Act ); sections 8(b), 19 and 32 of the
Federal Deposit Insurance Act (12 U.S.C. 1818(b), 1829, and 1831i); and
section 914 of the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 (12 U.S.C. 1831i) and the Depository
Institution Management Interlocks Act (12 U.S.C. 3201 et seq.).
(b) Purpose. The principal purposes of this part are to:
(1) Regulate the acquisition of control of savings associations by
companies and individuals;
(2) Define and regulate the activities in which savings and loan
holding companies may engage;
(3) Set forth the procedures for securing approval for these
transactions and activities; and
(4) Set forth the procedures under which directors and executive
officers may be appointed or employed by savings and loan holding
companies in certain circumstances.
Sec. 238.2 Definitions.
As used in this part and in the forms under this part, the
following definitions apply, unless the context otherwise requires:
(a) Affiliate means any person or company which controls, is
controlled by or is under common control with a person, savings
association or company.
(b) Bank means any national bank, state bank, state-chartered
savings bank, cooperative bank, or industrial bank, the deposits of
which are insured by the Deposit Insurance Fund.
(c) Bank holding company has the meaning found in the Board's
Regulation Y (12 CFR 225.2(c)).
(d) Company means any corporation, partnership, trust, association,
joint venture, pool, syndicate, unincorporated organization, joint-
stock company or similar organization, as defined in paragraph (o) of
this section; but a company does not include:
(1) The Federal Deposit Insurance Corporation, the Resolution Trust
Corporation, or any Federal Home Loan Bank, or
(2) Any company the majority of shares of which is owned by:
(i) The United States or any State,
(ii) An officer of the United States or any State in his or her
official capacity, or
(iii) An instrumentality of the United States or any State.
(e) A person shall be deemed to have control of:
(1) A savings association if the person directly or indirectly or
acting in concert with one or more other persons, or through one or
more subsidiaries, owns, controls, or holds with power to vote, or
holds proxies representing, more than 25 percent of the voting shares
of such savings association, or controls in any manner the election of
a majority of the directors of such association;
(2) Any other company if the person directly or indirectly or
acting in concert with one or more other persons, or through one or
more subsidiaries, owns, controls, or holds with power to
[[Page 56534]]
vote, or holds proxies representing, more than 25 percent of the voting
shares or rights of such other company, or controls in any manner the
election or appointment of a majority of the directors or trustees of
such other company, or is a general partner in or has contributed more
than 25 percent of the capital of such other company;
(3) A trust if the person is a trustee thereof; or
(4) A savings association or any other company if the Board
determines, after reasonable notice and opportunity for hearing, that
such person directly or indirectly exercises a controlling influence
over the management or policies of such association or other company.
(f) Director means any director of a corporation or any individual
who performs similar functions in respect of any company, including a
trustee under a trust.
(g) Management official means any president, chief executive
officer, chief operating officer, vice president, director, partner, or
trustee, or any other person who performs or has a representative or
nominee performing similar policymaking functions, including executive
officers of principal business units or divisions or subsidiaries who
perform policymaking functions, for a savings association or a company,
whether or not incorporated.
(h) Multiple savings and loan holding company means any savings and
loan holding company which directly or indirectly controls two or more
savings associations.
(i) Officer means the chairman of the board, president, vice
president, treasurer, secretary, or comptroller of any company, or any
other person who participates in its major policy decisions.
(j) Person includes an individual, bank, corporation, partnership,
trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization, or any other form of
entity.
(k) Qualified thrift lender means a financial institution that
meets the appropriate qualified thrift lender test set forth in 12
U.S.C. 1467a(m).
(l) Savings Association means a Federal savings and loan
association or a Federal savings bank chartered under section 5 of the
Home Owners' Loan Act, a building and loan, savings and loan or
homestead association or a cooperative bank (other than a cooperative
bank described in 12 U.S.C. 1813(a)(2)) the deposits of which are
insured by the Federal Deposit Insurance Corporation, and any
corporation (other than a bank) the deposits of which are insured by
the Federal Deposit Insurance Corporation that the Office of the
Comptroller of the Currency and the Federal Deposit Insurance
Corporation jointly determine to be operating in substantially the same
manner as a savings association, and shall include any savings bank or
any cooperative bank which is deemed by the Office of the Comptroller
of the Currency to be a savings association under 12 U.S.C. 1467a(1).
(m) Savings and loan holding company means any company (including a
savings association) that directly or indirectly controls a savings
association, but does not include:
(1) Any company by virtue of its ownership or control of voting
stock of a savings association acquired in connection with the
underwriting of securities if such stock is held only for such period
of time (not exceeding 120 days unless extended by the Board) as will
permit the sale thereof on a reasonable basis;
(2) Any trust (other than a pension, profit-sharing, stockholders',
voting, or business trust) which controls a savings association if such
trust by its terms must terminate within 25 years or not later than 21
years and 10 months after the death of individuals living on the
effective date of the trust, and:
(i) Was in existence and in control of a savings association on
June 26, 1967, or
(ii) Is a testamentary trust;
(3) A bank holding company that is registered under, and subject
to, the Bank Holding Company Act of 1956, or any company directly or
indirectly controlled by such company (other than a savings
association);
(4) A company that controls a savings association that functions
solely in a trust or fiduciary capacity as provided in section
2(c)(2)(D) of the Bank Holding Company Act; or
(5) A company described in section 10(c)(9)(C) of HOLA solely by
virtue of such company's control of an intermediate holding company
established under section 10A of the Home Owners' Loan Act.
(n) Shareholder--(1) Controlling shareholder means a person that
owns or control, directly or indirectly, more than 25 percent of any
class of voting securities of a savings association or other company.
(2) Principal shareholder means a person that owns or controls,
directly or indirectly, 10 percent or more of any class of voting
securities of a savings association or other company, or any person
that the Board determines has the power, directly or indirectly, to
exercise a controlling influence over the management or policies of a
savings association or other company.
(o) Stock means common or preferred stock, general or limited
partnership shares or interests, or similar interests.
(p) Subsidiary means any company which is owned or controlled
directly or indirectly by a person, and includes any service
corporation owned in whole or in part by a savings association, or a
subsidiary of such service corporation.
(q) Uninsured institution means any financial institution the
deposits of which are not insured by the Federal Deposit Insurance
Corporation.
(r)(1) Voting securities means shares of common or preferred stock,
general or limited partnership shares or interests, or similar
interests if the shares or interest, by statute, charter, or in any
manner, entitle the holder:
(i) To vote for or to select directors, trustees, or partners (or
persons exercising similar functions of the issuing company); or
(ii) To vote on or to direct the conduct of the operations or other
significant policies of the issuing company.
(2) Nonvoting shares. Preferred shares, limited partnership shares
or interests, or similar interests are not voting securities if:
(i) Any voting rights associated with the shares or interest are
limited solely to the type customarily provided by statute with regard
to matters that would significantly and adversely affect the rights or
preference of the security or other interest, such as the issuance of
additional amounts or classes of senior securities, the modification of
the terms of the security or interest, the dissolution of the issuing
company, or the payment of dividends by the issuing company when
preferred dividends are in arrears;
(ii) The shares or interest represent an essentially passive
investment or financing device and do not otherwise provide the holder
with control over the issuing company; and
(iii) The shares or interest do not entitle the holder, by statute,
charter, or in any manner, to select or to vote for the selection of
directors, trustees, or partners (or persons exercising similar
functions) of the issuing company.
(3) Class of voting shares. Shares of stock issued by a single
issuer are deemed to be the same class of voting shares, regardless of
differences in dividend rights or liquidation preference, if the shares
are voted together as a single class on all matters for which the
shares have voting rights other than matters described in paragraph
(r)(2)(i) of this section that affect solely the rights or preferences
of the shares.
[[Page 56535]]
(s) Well capitalized.
(1) A savings and loan holding company is well capitalized if:
(i) Each of the savings and loan holding company's depository
institutions is well capitalized; and
(ii) The savings and loan holding company is not subject to any
written agreement, order, capital directive, or prompt corrective
action directive issued by the Board to meet and maintain a specific
capital level for any capital measure.
(2) In the case of a savings association, ``well capitalized''
takes the meaning provided in Sec. 225.2(r)(2) of this chapter.
(t) Well managed. The term ``well managed'' takes the meaning
provided in Sec. 225.2(s) of this chapter except that a ``satisfactory
rating for management'' refers to a management rating, if such rating
is given, or otherwise a risk-management rating, if such rating is
given.
(u) Depository institution. For purposes of this part, the term
``depository institution'' has the same meaning as in section 3(c) of
Federal Deposit Insurance Act (12 U.S.C. 1813(c)).
Sec. 238.3 Administration.
(a) Delegation of authority. Designated Board members and officers
and the Federal Reserve Banks are authorized by the Board to exercise
various functions prescribed in this regulation, in the Board's Rules
Regarding Delegation of Authority (12 CFR part 265), the Board's Rules
of Procedure (12 CFR part 262), and in Board orders.
(b) Appropriate Federal Reserve Bank. In administering this
regulation, unless a different Federal Reserve Bank is designated by
the Board, the appropriate Federal Reserve Bank is as follows:
(1) For a savings and loan holding company (or a company applying
to become a savings and loan holding company): the Reserve Bank of the
Federal Reserve district in which the company's banking operations are
principally conducted, as measured by total domestic deposits in its
subsidiary savings association on the date it became (or will become) a
savings and loan holding company;
(2) For an individual or company submitting a notice under subpart
D of this part: The Reserve Bank of the Federal Reserve district in
which the banking operations of the savings and loan holding company to
be acquired are principally conducted, as measured by total domestic
deposits on the date the notice is filed.
Sec. 238.4 Records, reports, and inspections.
(a) Records. Each savings and loan holding company shall maintain
such books and records as may be prescribed by the Board. Each savings
and loan holding company and its non-depository affiliates shall
maintain accurate and complete records of all business transactions.
Such records shall support and be readily reconcilable to any
regulatory reports submitted to the Board and financial reports
prepared in accordance with GAAP.
The records shall be maintained in the United States and be readily
accessible for examination and other supervisory purposes within 5
business days upon request by the Board, at a location acceptable to
the Board.
(b) Reports. Each savings and loan holding company and each
subsidiary thereof, other than a savings association, shall file with
the Board such reports as may be required by the Board. Such reports
shall be made under oath or otherwise, and shall be in such form and
for such periods, as the Board may prescribe. Each report shall contain
information concerning the operations of such savings and loan holding
company and its subsidiaries as the Board may require.
(c) Registration statement--(1) Filing of registration statement.
Not later than 90 days after becoming a savings and loan holding
company, each savings and loan holding company shall register with the
Board by furnishing information in the manner and form prescribed by
the Board.
(2) Date of registration. The date of registration of a savings and
loan holding company shall be the date on which its registration
statement is received by the Board.
(3) Extension of time for registration. For timely and good cause
shown, the Board may extend the time within which a savings and loan
holding company shall register.
(d) Release from registration. The Board may at any time, upon its
own motion or upon application, release a registered savings and loan
holding company from any registration theretofore made by such company,
if the Board shall determine that such company no longer has control of
any savings association or no longer qualifies as a savings and loan
holding company.
(e) Examinations. Each savings and loan holding company and each
subsidiary thereof shall be subject to such examinations as the Board
may prescribe. The Board shall, to the extent deemed feasible, use for
the purposes of this section reports filed with or examinations made by
other Federal agencies or the appropriate State supervisory authority.
(f) Appointment of agent. The Board may require any savings and
loan holding company, or persons connected therewith if it is not a
corporation, to execute and file a prescribed form of irrevocable
appointment of agent for service of process.
Sec. 238.5 Audit of savings association holding companies.
(a) General. The Board may require, at any time, an independent
audit of the financial statements of, or the application of procedures
agreed upon by the Board to a savings and loan holding company, or
nondepository affiliate by qualified independent public accountants
when needed for any safety and soundness reason identified by the
Board.
(b) Audits required for safety and soundness purposes. The Board
requires an independent audit for safety and soundness purposes if, as
of the beginning of its fiscal year, a savings and loan holding company
controls savings association subsidiary(ies) with aggregate
consolidated assets of $500 million or more.
(c) Procedures. (1) When the Board requires an independent audit
because such an audit is needed for safety and soundness purposes, the
Board shall determine whether the audit was conducted and filed in a
manner satisfactory to the Board.
(2) When the Board requires the application of procedures agreed
upon by the Board for safety and soundness purposes, the Board shall
identify the procedures to be performed. The Board shall also determine
whether the agreed upon procedures were conducted and filed in a manner
satisfactory to the Board.
(d) Qualifications for independent public accountants. The audit
shall be conducted by an independent public accountant who:
(1) Is registered or licensed to practice as a public accountant,
and is in good standing, under the laws of the state or other political
subdivision of the United States in which the savings association's or
holding company's principal office is located;
(2) Agrees in the engagement letter to provide the Board with
access to and copies of any work papers, policies, and procedures
relating to the services performed;
(3)(i) Is in compliance with the American Institute of Certified
Public Accountants' (AICPA) Code of Professional Conduct; and
(ii) Meets the independence requirements and interpretations of the
Securities and Exchange Commission and its staff; and
[[Page 56536]]
(4) Has received, or is enrolled in, a peer review program that
meets guidelines acceptable to the Board.
(e) Voluntary audits. When a savings and loan holding company or
nondepository affiliate obtains an independent audit voluntarily, it
must be performed by an independent public accountant who satisfies the
requirements of paragraphs (d)(1), (d)(2), and (d)(3)(i) of this
section.
Sec. 238.6 Penalties for violations.
(a) Criminal and civil penalties. (1) Section 10 of the HOLA
provides criminal penalties for willful violation, and civil penalties
for violation, by any company or individual, of HOLA or any regulation
or order issued under it, or for making a false entry in any book,
report, or statement of a savings and loan holding company.
(2) Civil money penalty assessments for violations of HOLA shall be
made in accordance with subpart C of the Board's Rules of Practice for
Hearings (12 CFR part 263, subpart C). For any willful violation of the
Bank Control Act or any regulation or order issued under it, the Board
may assess a civil penalty as provided in 12 U.S.C. 1817(j)(15).
(b) Cease-and-desist proceedings. For any violation of HOLA, the
Bank Control Act, this regulation, or any order or notice issued
thereunder, the Board may institute a cease-and-desist proceeding in
accordance with the Financial Institutions Supervisory Act of 1966, as
amended (12 U.S.C. 1818(b) et seq.).
Sec. 238.7 Tying restriction exception.
(a) Safe harbor for combined-balance discounts. A savings and loan
holding company or any savings association or any affiliate of either
may vary the consideration for any product or package of products based
on a customer's maintaining a combined minimum balance in certain
products specified by the company varying the consideration (eligible
products), if:
(1) That company (if it is a savings association) or a savings
association affiliate of that company (if it is not a savings
association) offers deposits, and all such deposits are eligible
products; and
(2) Balances in deposits count at least as much as non-deposit
products toward the minimum balance.
(b) Limitations on exception. This exception shall terminate upon a
finding by the Board that the arrangement is resulting in anti-
competitive practices. The eligibility of a savings and loan holding
company or savings association or affiliate of either to operate under
this exception shall terminate upon a finding by the Board that its
exercise of this authority is resulting in anti-competitive practices.
Sec. 238.8 Safe and sound operations.
(a) Savings and loan holding company policy and operations. (1) A
savings and loan holding company shall serve as a source of financial
and managerial strength to its subsidiary savings associations and
shall not conduct its operations in an unsafe or unsound manner.
(2) Whenever the Board believes an activity of a savings and loan
holding company or control of a nonbank subsidiary (other than a
nonbank subsidiary of a savings association) constitutes a serious risk
to the financial safety, soundness, or stability of a subsidiary
savings association of the savings and loan holding company and is
inconsistent with sound banking principles or the purposes of HOLA or
the Financial Institutions Supervisory Act of 1966, as amended (12
U.S.C. 1818(b) et seq.), the Board may require the savings and loan
holding company to terminate the activity or to terminate control of
the subsidiary, as provided in section 10(g)(5) of the HOLA.
Subpart B--Acquisitions of Saving Association Securities or Assets
Sec. 238.11 Transactions requiring Board approval.
The following transactions require the Board's prior approval under
section 10 of HOLA except as exempted under Sec. 238.12:
(a) Formation of savings and loan holding company. Any action that
causes a savings association or other company to become a savings and
loan holding company.
(b) Acquisition of subsidiary savings association. Any action that
causes a savings association to become a subsidiary of a savings and
loan holding company.
(c) Acquisition of control of savings association or savings and
loan holding company securities. (1) The acquisition by a savings and
loan holding company of direct or indirect ownership or control of any
voting securities of a savings association or savings and loan holding
company, that is not a subsidiary, if the acquisition results in the
company's control of more than 5 percent of the outstanding shares of
any class of voting securities of the savings association or savings
and loan holding company.
(2) An acquisition includes the purchase of additional securities
through the exercise of preemptive rights, but does not include
securities received in a stock dividend or stock split that does not
alter the savings and loan holding company's proportional share of any
class of voting securities.
(3) In the case of a multiple savings and loan holding company,
acquisition of direct or indirect ownership or control of any voting
securities of a savings association or savings and loan holding
company, that is not a subsidiary, if the acquisition results in the
company's control of more than 5 percent of the outstanding shares of
any class of voting securities of the savings association or savings
and loan holding company that is engaged in any business activity other
than those specified in Sec. 238.51 of this part.
(d) Acquisition of savings association or savings and loan holding
company assets. The acquisition by a savings and loan holding company
or by a subsidiary thereof (other than a savings association) of all or
substantially all of the assets of a savings association, or savings
and loan holding company.
(e) Merger of savings and loan holding companies. The merger or
consolidation of savings and loan holding companies, and the
acquisition of a savings association through a merger or consolidation.
(f) Acquisition of control by certain individuals. The acquisition,
by a director or officer of a savings and loan holding company, or by
any individual who owns, controls, or holds the power to vote (or holds
proxies representing) more than 25 percent of the voting shares of such
savings and loan holding company, of control of any savings association
that is not a subsidiary of such savings and loan holding company.
Sec. 238.12 Transactions not requiring Board approval.
(a) The requirements of Sec. 238.11(a), (b), (d), (e) and (f) do
not apply to:
(1) Control of a savings association acquired by devise under the
terms of a will creating a trust which is excluded from the definition
of savings and loan holding company;
(2) Control of a savings association acquired in connection with a
reorganization that involves solely the acquisition of control of that
association by a newly formed company that is controlled by the same
acquirors that controlled the savings association for the immediately
preceding three years, and entails no other transactions, such as an
assumption of the acquirors' debt by the newly formed company:
Provided, that the acquirors have filed the designated form with the
appropriate Reserve Bank and have provided all additional information
[[Page 56537]]
requested by the Board or Reserve Bank, and the Board nor the
appropriate Reserve Bank object to the acquisition within 30 days of
the filing date;
(3) Control of a savings association acquired by a bank holding
company that is registered under and subject to, the Bank Holding
Company Act of 1956, or any company controlled by such bank holding
company;
(4) Control of a savings association acquired solely as a result of
a pledge or hypothecation of stock to secure a loan contracted for in
good faith or the liquidation of a loan contracted for in good faith,
in either case where such loan was made in the ordinary course of the
business of the lender: Provided, further, That acquisition of control
pursuant to such pledge, hypothecation or liquidation is reported to
the Board within 30 days, and Provided, further, That the acquiror
shall not retain such control for more than one year from the date on
which such control was acquired; however, the Board may, upon
application by an acquiror, extend such one-year period from year to
year, for an additional period of time not exceeding three years, if
the Board finds such extension is warranted and would not be
detrimental to the public interest;
(5) Control of a savings association acquired through a percentage
increase in stock ownership following a pro rata stock dividend or
stock split, if the proportional interests of the recipients remain
substantially the same;
(6) Acquisitions of up to twenty-five percent (25%) of a class of
stock by a tax-qualified employee stock benefit plan; and
(7) Acquisitions of up to 15 percent of the voting stock of any
savings association by a savings and loan holding company (other than a
bank holding company) in connection with a qualified stock issuance if
such acquisition is approved by the Board pursuant to subpart E.
(b) The requirements of Sec. 238.11(c) do not apply to voting
shares of a savings association or of a savings and loan holding
company--
(1) Held as a bona fide fiduciary (whether with or without the sole
discretion to vote such shares);
(2) Held temporarily pursuant to an underwriting commitment in the
normal course of an underwriting business;
(3) Held in an account solely for trading purposes or over which no
control is held other than control of voting rights acquired in the
normal course of a proxy solicitation;
(4) Acquired in securing or collecting a debt previously contracted
in good faith, for two years after the date of acquisition or for such
additional time (not exceeding three years) as the Board may permit if,
in the Board's judgment, such an extension would not be detrimental to
the public interest;
(5) Acquired under section 13(k)(1)(A)(i) of the Federal Deposit
Insurance Act (or section 408(m) of the National Housing Act as in
effect immediately prior to the enactment of the Financial Institutions
Reform, Recovery and Enforcement Act of 1989);
(6) Held by any insurance companies as defined in section 2(a)(17)
of the Investment Company Act of 1940: Provided, That all shares held
by all insurance company affiliates of such savings association or
savings and loan holding company may not, in the aggregate, exceed five
percent of all outstanding shares or of the voting power of the savings
association or savings and loan holding company, and such shares are
not acquired or retained with a view to acquiring, exercising, or
transferring control of the savings association or savings and loan
holding company; and
(7) Acquired pursuant to a qualified stock issuance if such a
purchase is approved pursuant to subpart E of this part.
(c) The aggregate amount of shares held under paragraph (b) of this
section (other than pursuant to paragraphs (b)(1) through (4) and
(b)(6)) may not exceed 15 percent of all outstanding shares or the
voting power of a savings association or savings and loan holding
company.
(d) Acquisitions involving savings association mergers and internal
corporate reorganizations--The requirements of Sec. 238.11 do not
apply to:
(1) Certain transactions subject to the Bank Merger Act. The
acquisition by a savings and loan holding company of shares of a
savings association or company controlling a savings association or the
merger of a company controlling a savings association with the savings
and loan holding company, if the transaction is part of the merger or
consolidation of the savings association with a subsidiary savings
association (other than a nonoperating subsidiary savings association)
of the acquiring savings and loan holding company, or is part of the
purchase of substantially all of the assets of the savings association
by a subsidiary savings association (other than a nonoperating
subsidiary savings association) of the acquiring savings and loan
holding company, and if:
(i) The savings association merger, consolidation, or asset
purchase occurs simultaneously with the acquisition of the shares of
the savings association or savings and loan holding company or the
merger of holding companies, and the savings association is not
operated by the acquiring savings and loan holding company as a
separate entity other than as the survivor of the merger,
consolidation, or asset purchase;
(ii) The transaction requires the prior approval of a federal
supervisory agency under the Bank Merger Act (12 U.S.C. 1828(c));
(iii) The transaction does not involve the acquisition of any
company that would require prior notice or approval under section 10(c)
of the HOLA;
(iv) The transaction does not involve a depository institution
organized in mutual form, a savings and loan holding company organized
in mutual form, a subsidiary holding company of a savings and loan
holding company organized in mutual form, or a bank holding company
organized in mutual form;
(v) The transaction will not have a material adverse impact on the
financial condition of the acquiring savings and loan holding company;
(vi) At least 10 days prior to the transaction, the acquiring
savings and loan holding company has provided to the Reserve Bank
written notice of the transaction that contains:
(A) A copy of the filing made to the appropriate federal banking
agency under the Bank Merger Act; and
(B) A description of the holding company's involvement in the
transaction, the purchase price, and the source of funding for the
purchase price; and
(vii) Prior to expiration of the period provided in paragraph
(d)(1)(vi) of this section, neither the Board nor the Reserve Bank has
informed the savings and loan holding company that an application under
Sec. 238.11 is required.
(2) Internal corporate reorganizations. (i) Subject to paragraph
(d)(2)(ii) of this section, any of the following transactions performed
in the United States by a savings and loan holding company:
(A) The merger of holding companies that are subsidiaries of the
savings and loan holding company;
(B) The formation of a subsidiary holding company; \1\
---------------------------------------------------------------------------
\1\ In the case of a transaction that results in the formation
or designation of a new savings and loan holding company, the new
savings and loan holding company must complete the registration
requirements described in section 238.11.
---------------------------------------------------------------------------
(C) The transfer of control or ownership of a subsidiary savings
association or a subsidiary holding company between one subsidiary
holding company and another
[[Page 56538]]
subsidiary holding company or the savings and loan holding company.
(ii) A transaction described in paragraph (d)(2)(i) of this section
qualifies for this exception if--
(A) The transaction represents solely a corporate reorganization
involving companies and insured depository institutions that, both
preceding and following the transaction, are lawfully controlled and
operated by the savings and loan holding company;
(B) The transaction does not involve the acquisition of additional
voting shares of an insured depository institution that, prior to the
transaction, was less than majority owned by the savings and loan
holding company;
(C) The transaction does not involve a savings and loan holding
company organized in mutual form, a subsidiary holding company of a
savings and loan holding company organized in mutual form, or a bank
holding company organized in mutual form; and
(D) The transaction will not have a material adverse impact on the
financial condition of the holding company.
Sec. 238.13 Prohibited acquisitions.
(a) No savings and loan holding company may, directly or
indirectly, or through one or more subsidiaries or through one or more
transactions, acquire control of an uninsured institution or retain,
for more than one year after the date any savings association
subsidiary becomes uninsured, control of such association.
(b) Control of mutual savings association. No savings and loan
holding company or any subsidiary thereof, or any director, officer, or
employee of a savings and loan holding company or subsidiary thereof,
or person owning, controlling, or holding with power to vote, or
holding proxies representing, more than 25 percent of the voting shares
of such holding company or subsidiary, may hold, solicit, or exercise
any proxies in respect of any voting rights in a mutual savings
association.
Sec. 238.14 Procedural requirements.
(a) Filing application. An application for the Board's prior
approval under Sec. 238.11 shall be governed by the provisions of this
section and shall be filed with the appropriate Reserve Bank on the
designated form.
(b) Request for confidential treatment. An applicant may request
confidential treatment for portions of its application pursuant to 12
CFR 261.15.
(c) Public notice.--(1) Newspaper publication--(i) Location of
publication. In the case of each application, the applicant shall
publish a notice in a newspaper of general circulation, in the form and
at the locations specified in Sec. 262.3 of the Rules of Procedure (12
CFR 262.3) in this chapter;
(ii) Contents of notice. A newspaper notice under this paragraph
shall provide an opportunity for interested persons to comment on the
proposal for a period of at least 30 calendar days;
(iii) Timing of publication. Each newspaper notice published in
connection with a proposal under this paragraph shall be published no
more than 15 calendar days before and no later than 7 calendar days
following the date that an application is filed with the appropriate
Reserve Bank.
(2) Federal Register Notice. (i) Publication by Board. Upon receipt
of an application, the Board shall promptly publish notice of the
proposal in the Federal Register and shall provide an opportunity for
interested persons to comment on the proposal for a period of no more
than 30 days;
(ii) Request for advance publication. An applicant may request
that, during the 15-day period prior to filing an application, the
Board publish notice of a proposal in the Federal Register. A request
for advance Federal Register Notice publication shall be made in
writing to the appropriate Reserve Bank and shall contain the
identifying information prescribed by the Board for Federal Register
Notice publication.
(3) Waiver or shortening of notice. The Board may waive or shorten
the required notice periods under this section if the Board determines
that an emergency exists requiring expeditious action on the proposal,
or if the Board finds that immediate action is necessary to prevent the
probable failure of an insured depository institution.
(d) Public comment--
(1) Timely comments. Interested persons may submit information and
comments regarding a proposal filed under this subpart. A comment shall
be considered timely for purposes of this subpart if the comment,
together with all supplemental information, is submitted in writing in
accordance with the Board's Rules of Procedure and received by the
Board or the appropriate Reserve Bank prior to the expiration of the
latest public comment period provided in paragraph (c) of this section.
(2) Extension of comment period--
(i) In general. The Board may, in its discretion, extend the public
comment period regarding any proposal submitted under this subpart.
(ii) Requests in connection with obtaining application or notice.
In the event that an interested person has requested a copy of a notice
or application submitted under this subpart, the Board may, in its
discretion and based on the facts and circumstances, grant such person
an extension of the comment period for up to 15 calendar days.
(iii) Joint requests by interested person and applicant. The Board
will grant a joint request by an interested person and the applicant
for an extension of the comment period for a reasonable period for a
purpose related to the statutory factors the Board must consider under
this subpart.
(3) Substantive comment. A comment will be considered substantive
for purposes of this subpart unless it involves individual complaints,
or raises frivolous, previously-considered or wholly unsubstantiated
claims or irrelevant issues.
(e) Hearings. The Board may order a formal or informal hearing or
other proceeding on the application, as provided in Sec. 262.3(i)(2)
of this chapter. Any request for a hearing (other than from the primary
supervisor) shall comply with Sec. 262.3(e) in this chapter.
(f) Accepting application for processing. Within 7 calendar days
after the Reserve Bank receives an application under this section, the
Reserve Bank shall accept it for processing as of the date the
application was filed or return the application if it is substantially
incomplete. Upon accepting an application, the Reserve Bank shall
immediately send copies to the Board and to the primary banking
supervisor of the savings association to be acquired and to the
Attorney General, and shall request from the Attorney General a report
on the competitive factors involved. The Reserve Bank or the Board may
request additional information necessary to complete the record of an
application at any time after accepting the application for processing.
(g) Action on applications--(1) Action under delegated authority.
Except as provided in paragraph (g)(4) of this section, unless the
Reserve Bank, upon notice to the applicant, refers the application to
the Board for decision because action under delegated authority is not
appropriate, the Reserve Bank shall approve an application under this
section:
(i) Not earlier than the third business day following the close of
the public comment period; and
(ii) Not later than the later of the fifth business day following
the close of the public comment period or the 30th calendar day after
the acceptance date for the application.
(2) Board action. The Board shall act on an application under this
section that
[[Page 56539]]
is referred to it for decision within 60 calendar days after the
acceptance date for the application, unless the Board notifies the
applicant that the 60-day period is being extended for a specified
period and states the reasons for the extension. The Board may, at any
time, request additional information that it believes is necessary for
its decision.
(3) Approval through failure to act--(i) Ninety-one day rule. An
application shall be deemed approved if the Board fails to act on the
application within 91 calendar days after the date of submission to the
Board of the complete record on the application. For this purpose, the
Board acts when it issues an order stating that the Board has approved
or denied the application or notice, reflecting the votes of the
members of the Board, and indicating that a statement of the reasons
for the decision will follow promptly.
(ii) Complete record. For the purpose of computing the commencement
of the 91-day period, the record is complete on the latest of:
(A) The date of receipt by the Board of an application that has
been accepted by the Reserve Bank;
(B) The last day provided in any notice for receipt of comments and
hearing requests on the application or notice;
(C) The date of receipt by the Board of the last relevant material
regarding the application that is needed for the Board's decision, if
the material is received from a source outside of the Federal Reserve
System; or
(D) The date of completion of any hearing or other proceeding.
(4) Expedited reorganization.--(i) In general. The Board or the
appropriate Reserve Bank shall act on an application of a
reorganization that meets the requirements of Sec. 238.15(f):
(A) Not earlier than the third business day following the close of
the public comment period; and
(B) Not later than the fifth business day following the close of
the public comment period, except that the Board may extend the period
for action under this paragraph (g)(4) for up to 5 business days.
(ii) Acceptance of notice in event expedited procedure not
available. In the event that the Board or the Reserve Bank determines
that an application filed pursuant to 238.15(f) does not meet one or
more of the requirements of Sec. 238.15(f), paragraph (g)(4) of this
section shall not apply and the Board or Reserve Bank will act on the
application according to the other provisions of paragraph (g) of this
section.
Sec. 238.15 Factors considered in acting on applications.
(a) Generally. The Board may not approve any application under this
subpart if:
(1) The transaction would result in a monopoly or would further any
combination or conspiracy to monopolize, or to attempt to monopolize,
the savings and loan business in any part of the United States;
(2) The effect of the transaction may be substantially to lessen
competition in any section of the country, tend to create a monopoly,
or in any other manner be in restraint of trade, unless the Board finds
that the transaction's anti-competitive effects are clearly outweighed
by its probable effect in meeting the convenience and needs of the
community;
(3) The applicant has failed to provide the Board with adequate
assurances that it will make available such information on its
operations or activities, and the operations or activities of any
affiliate of the applicant, that the Board deems appropriate to
determine and enforce compliance with HOLA and other applicable federal
banking statutes, and any regulations thereunder; or
(4) In the case of an application involving a foreign banking
organization, the foreign banking organization is not subject to
comprehensive supervision or regulation on a consolidated basis by the
appropriate authorities in its home country, as provided in Sec.
211.24(c)(1)(ii) of the Board's Regulation K (12 CFR 211.24(c)(1)(ii)).
(5) In the case of an application by a savings and loan holding
company to acquire an insured depository institution, section
10(e)(2)(E) of HOLA prohibits the Board from approving the transaction.
(b) Other factors. In deciding applications under this subpart, the
Board also considers the following factors with respect to the
acquiror, its subsidiaries, any savings associations or banks related
to the acquiror through common ownership or management, and the savings
association or associations to be acquired:
(1) Financial condition. Their financial condition and future
prospects, including whether current and projected capital positions
and levels of indebtedness conform to standards and policies
established by the Board.
(2) Managerial resources. The competence, experience, and integrity
of the officers, directors, and principal shareholders of the acquiror,
its subsidiaries, and the savings association and savings and loan
holding companies concerned; their record of compliance with laws and
regulations; and the record of the applicant and its affiliates of
fulfilling any commitments to, and any conditions imposed by, the Board
in connection with prior applications.
(3) Convenience and needs of community. In the case of an
application required under Sec. 238.11(c), (d), or (e), (or an
application by a savings and loan holding company under Sec.
238.11(b)), the convenience and needs of the communities to be served,
including the record of performance under the Community Reinvestment
Act of 1977 (12 U.S.C. 2901 et seq.) and regulations issued thereunder,
including the Board's Regulation BB (12 CFR part 228).
(c) Presumptive disqualifiers --(1) Integrity factors. The
following factors shall give rise to a rebuttable presumption that an
acquiror may fail to satisfy the managerial resources and future
prospects tests of paragraph (b) of this section:
(i) During the 10-year period immediately preceding filing of the
application or notice, criminal, civil or administrative judgments,
consents or orders, and any indictments, formal investigations,
examinations, or civil or administrative proceedings (excluding routine
or customary audits, inspections and investigations) that terminated in
any agreements, undertakings, consents or orders, issued against,
entered into by, or involving the acquiror or affiliates of the
acquiror by any federal or state court, any department, agency, or
commission of the U.S. Government, any state or municipality, any
Federal Home Loan Bank, any self-regulatory trade or professional
organization, or any foreign government or governmental entity, which
involve:
(A) Fraud, moral turpitude, dishonesty, breach of trust or
fiduciary duties, organized crime or racketeering;
(B) Violation of securities or commodities laws or regulations;
(C) Violation of depository institution laws or regulations;
(D) Violation of housing authority laws or regulations; or
(E) Violation of the rules, regulations, codes of conduct or ethics
of a self-regulatory trade or professional organization;
(ii) Denial, or withdrawal after receipt of formal or informal
notice of an intent to deny, by the acquiror or affiliates of the
acquiror, of
(A) Any application relating to the organization of a financial
institution,
(B) An application to acquire any financial institution or holding
[[Page 56540]]
company thereof under HOLA or the Bank Holding Company Act or
otherwise,
(C) A notice relating to a change in control of any of the
foregoing under the CIC Act; or
(D) An application or notice under a state holding company or
change in control statute;
(iii) The acquiror or affiliates of the acquiror were placed in
receivership or conservatorship during the preceding 10 years, or any
management official of the acquiror was a management official or
director (other than an official or director serving at the request of
the Board, the Federal Deposit Insurance Corporation, the Resolution
Trust Corporation, the former Federal Savings and Loan Insurance
Corporation, or their predecessors) or principal shareholder of a
company or savings association that was placed into receivership,
conservatorship, or a management consignment program, or was liquidated
during his or her tenure or control or within two years thereafter;
(iv) Felony conviction of the acquiror, an affiliate of the
acquiror or a management official of the acquiror or an affiliate of
the acquiror;
(v) Knowingly making any written or oral statement to the Board or
any predecessor agency (or its delegate) in connection with an
application, notice or other filing under this part that is false or
misleading with respect to a material fact or omits to state a material
fact with respect to information furnished or requested in connection
with such an application, notice or other filing;
(vi) Acquisition and retention at the time of submission of an
application or notice, of stock in the savings association by the
acquiror in violation of this part or its predecessor regulations.
(2) Financial factors. The following shall give rise to a
rebuttable presumption that an acquiror may fail to satisfy the
financial-resources and future-prospects tests of paragraph (c) of this
section:
(i) Liability for amounts of debt which, in the opinion of the
Board, create excessive risks of default and pressure on the savings
association to be acquired; or
(ii) Failure to furnish a business plan or furnishing a business
plan projecting activities which are inconsistent with economical home
financing.
(d) Competitive factor. Before approving any such acquisition,
except a transaction under section 13(k) of the Federal Deposit
Insurance Act, the Board shall consider any report rendered by the
Attorney General within 30 days of such request under Sec. 238.14(f)
on the competitive factors involved.
(e) Expedited reorganizations. An application by a savings
association solely for the purpose of obtaining approval for the
creation of a savings and loan holding company by such savings
association shall be eligible for expedited processing under Sec.
238.14(g)(4) if it satisfies the following criteria:
(1) The holding company shall not be capitalized initially in an
amount exceeding the amount the savings association is permitted to pay
in dividends to its holding company as of the date of the
reorganization pursuant to applicable regulations or, in the absence
thereof, pursuant to the then current policy guidelines;
(2) The creation of the savings and loan holding company by the
association is the sole transaction contained in the application, and
there are no other transactions requiring approval incident to the
creation of the holding company (other than the creation of an interim
association that will disappear upon consummation of the reorganization
and the merger of the savings association with such interim association
to effect the reorganization), and the holding company is not also
seeking any regulatory waivers, regulatory forbearances, or resolution
of legal or supervisory issues;
(3) The board of directors and executive officers of the holding
company are composed of persons who, at the time of acquisition, are
executive officers and directors of the association;
(4) The acquisition raises no significant issues of law or policy;
(5) Prior to consummation of the reorganization transaction, the
holding company shall enter into any dividend limitation, regulatory
capital maintenance, or prenuptial agreement required by Board
regulations, or in the absence thereof, required pursuant to policy
guidelines issued by the Board; and
(f) Conditional approvals. The Board may impose conditions on any
approval, including conditions to address competitive, financial,
managerial, safety and soundness, convenience and needs, compliance or
other concerns, to ensure that approval is consistent with the relevant
statutory factors and other provisions of HOLA.
(g) No acquisition shall be approved by the Board pursuant to Sec.
238.11 which would result in the formation by any company, through one
or more subsidiaries or through one or more transactions, of a multiple
savings and loan holding company controlling savings associations in
more than one state where the acquisition causes a savings association
to become an affiliate of another savings association with which it was
not previously affiliated unless:
(1) Such company, or a savings association subsidiary of such
company, is authorized to acquire control of a savings association
subsidiary, or to operate a home or branch office, in the additional
state or states pursuant to section 13(k) of the Federal Deposit
Insurance Act, 12 U.S.C. 1823(k) (or section 408(m) of the National
Housing Act as in effect immediately prior to enactment of the
Financial Institutions Reform, Recovery and Enforcement Act of 1989);
(2) Such company controls a savings association subsidiary which
operated a home or branch office in the additional state or states as
of March 5, 1987; or
(3) The statute laws of the state in which the savings association,
control of which is to be acquired, is located are such that a savings
association chartered by such state could be acquired by a savings
association chartered by the state where the acquiring savings
association or savings and loan holding company is located (or by a
holding company that controls such a state chartered savings
association), and such statute laws specifically authorize such an
acquisition by language to that effect and not merely by implication.
Subpart C--Control Proceedings
Sec. 238.21 Control proceedings.
(a) Preliminary determination of control. (1) The Board may issue a
preliminary determination of control under the procedures set forth in
this section in any case in which:
(i) Any of the presumptions of control set forth in paragraph (d)
of this section is present; or
(ii) It otherwise appears that a company has the power to exercise
a controlling influence over the management or policies of a savings
association or other company.
(2) If the Board makes a preliminary determination of control under
this section, the Board shall send notice to the controlling company
containing a statement of the facts upon which the preliminary
determination is based.
(b) Response to preliminary determination of control. Within 30
calendar days of issuance by the Board of a preliminary determination
of control or such longer period permitted by the Board, the company
against whom the determination has been made shall:
[[Page 56541]]
(1) Submit for the Board's approval a specific plan for the prompt
termination of the control relationship;
(2) File an application under this regulation to retain the control
relationship; or
(3) Contest the preliminary determination by filing a response,
setting forth the facts and circumstances in support of its position
that no control exists, and, if desired, requesting a hearing or other
proceeding.
(c) Hearing and final determination. (1) The Board shall order a
formal hearing or other appropriate proceeding upon the request of a
company that contests a preliminary determination that the company has
the power to exercise a controlling influence over the management or
policies of a savings association or other company, if the Board finds
that material facts are in dispute. The Board may also in its
discretion order a formal hearing or other proceeding with respect to a
preliminary determination that the company controls voting securities
of the savings association or other company under the presumptions in
paragraph (d)(1) of this section.
(2) At a hearing or other proceeding, any applicable presumptions
established by paragraph (d) of this section shall be considered in
accordance with the Federal Rules of Evidence and the Board's Rules of
Practice for Formal Hearings (12 CFR part 263).
(3) After considering the submissions of the company and other
evidence, including the record of any hearing or other proceeding, the
Board shall issue a final order determining whether the company
controls voting securities, or has the power to exercise a controlling
influence over the management or policies, of the savings association
or other company. If a control relationship is found, the Board may
direct the company to terminate the control relationship or to file an
application for the Board's approval to retain the control relationship
under subpart B of this part.
(d) Rebuttable presumptions of control. The following rebuttable
presumptions shall be used in any proceeding under this section:
(1) Control of voting securities-- (i) Securities convertible into
voting securities. A company that owns, controls, or holds securities
that are immediately convertible, at the option of the holder or owner,
into voting securities of a bank or other company, controls the voting
securities.
(ii) Option or restriction on voting securities. A company that
enters into an agreement or understanding under which the rights of a
holder of voting securities of a savings association or other company
are restricted in any manner controls the securities. This presumption
does not apply where the agreement or understanding:
(A) Is a mutual agreement among shareholders granting to each other
a right of first refusal with respect to their shares;
(B) Is incident to a bona fide loan transaction; or
(C) Relates to restrictions on transferability and continues only
for the time necessary to obtain approval from the appropriate Federal
supervisory authority with respect to acquisition by the company of the
securities.
(2) Control over company -- (i) Management agreement. A company
that enters into any agreement or understanding with a savings
association or other company (other than an investment advisory
agreement), such as a management contract, under which the first
company or any of its subsidiaries directs or exercises significant
influence over the general management or overall operations of the
savings association or other company controls the savings association
or other company.
(ii) Shares controlled by company and associated individuals. A
company that, together with its management officials or principal
shareholders (including members of the immediate families of either),
owns, controls, or holds with power to vote 25 percent or more of the
outstanding shares of any class of voting securities of a savings
association or other company controls the savings association or other
company, if the first company owns, controls, or holds with power to
vote more than 5 percent of the outstanding shares of any class of
voting securities of the savings association or other company.
(iii) Common management officials. A company that has one or more
management officials in common with a savings association or other
company controls the savings association or other company, if the first
company owns, controls or holds with power to vote more than 5 percent
of the outstanding shares of any class of voting securities of the
savings association or other company, and no other person controls as
much as 5 percent of the outstanding shares of any class of voting
securities of the savings association or other company.
(e) Presumption of non-control-- (1) In any proceeding under this
section, there is a presumption that any company that directly or
indirectly owns, controls, or has power to vote less than 5 percent of
the outstanding shares of any class of voting securities of a savings
association or other company does not have control over that savings
association or other company.
(2) In any proceeding under this section, or judicial proceeding
under the Home Owners' Loan Act, other than a proceeding in which the
Board has made a preliminary determination that a company has the power
to exercise a controlling influence over the management or policies of
the savings association or other company, a company may not be held to
have had control over the savings association or other company at any
given time, unless that company, at the time in question, directly or
indirectly owned, controlled, or had power to vote 5 percent or more of
the outstanding shares of any class of voting securities of the savings
association or other company, or had already been found to have control
on the basis of the existence of a controlling influence relationship.
Subpart D--Change in Bank Control
Sec. 238.31 Transactions requiring prior notice.
(a) Prior notice requirement. Any person acting directly or
indirectly, or through or in concert with one or more persons, shall
give the Board 60 days' written notice, as specified in Sec. 238.33 of
this subpart, before acquiring control of a savings and loan holding
company, unless the acquisition is exempt under Sec. 238.32.
(b) Definitions. For purposes of this subpart:
(1) Acquisition includes a purchase, assignment, transfer, or
pledge of voting securities, or an increase in percentage ownership of
a savings and loan holding company resulting from a redemption of
voting securities.
(2) Acting in concert includes knowing participation in a joint
activity or parallel action towards a common goal of acquiring control
of a savings and loan holding company whether or not pursuant to an
express agreement.
(3) Immediate family includes a person's father, mother,
stepfather, stepmother, brother, sister, stepbrother, stepsister, son,
daughter, stepson, stepdaughter, grandparent, grandson, granddaughter,
father-in-law, mother-in-law, brother-in-law, sister-in-law, son-in-
law, daughter-in-law, the spouse of any of the foregoing, and the
person's spouse.
(c) Acquisitions requiring prior notice --(1) Acquisition of
control. The acquisition of voting securities of a savings and loan
holding company constitutes the acquisition of control
[[Page 56542]]
under the Bank Control Act, requiring prior notice to the Board, if,
immediately after the transaction, the acquiring person (or persons
acting in concert) will own, control, or hold with power to vote 25
percent or more of any class of voting securities of the institution.
(2) Rebuttable presumption of control. The Board presumes that an
acquisition of voting securities of a savings and loan holding company
constitutes the acquisition of control under the Bank Control Act,
requiring prior notice to the Board, if, immediately after the
transaction, the acquiring person (or persons acting in concert) will
own, control, or hold with power to vote 10 percent or more of any
class of voting securities of the institution, and if:
(i) The institution has registered securities under section 12 of
the Securities Exchange Act of 1934 (15 U.S.C. 78l); or
(ii) No other person will own, control, or hold the power to vote a
greater percentage of that class of voting securities immediately after
the transaction.\2\
---------------------------------------------------------------------------
\2\ If two or more persons, not acting in concert, each propose
to acquire simultaneously equal percentages of 10 percent or more of
a class of voting securities of the savings and loan holding
company, each person must file prior notice to the Board.
---------------------------------------------------------------------------
(d) Rebuttable presumption of concerted action. The following
persons shall be presumed to be acting in concert for purposes of this
subpart:
(1) A company and any principal shareholder, partner, trustee, or
management official of the company, if both the company and the person
own voting securities of the savings and loan holding company;
(2) An individual and the individual's immediate family;
(3) Companies under common control;
(4) Persons that are parties to any agreement, contract,
understanding, relationship, or other arrangement, whether written or
otherwise, regarding the acquisition, voting, or transfer of control of
voting securities of a savings and loan holding company, other than
through a revocable proxy as described in Sec. 238.32(a)(5) of this
subpart;
(5) Persons that have made, or propose to make, a joint filing
under sections 13 or 14 of the Securities Exchange Act of 1934 (15
U.S.C. 78m or 78n), and the rules promulgated thereunder by the
Securities and Exchange Commission; and
(6) A person and any trust for which the person serves as trustee.
(e) Acquisitions of loans in default. The Board presumes an
acquisition of a loan in default that is secured by voting securities
of a savings and loan holding company to be an acquisition of the
underlying securities for purposes of this section.
(f) Other transactions. Transactions other than those set forth in
paragraph (c) of this section resulting in a person's control of less
than 25 percent of a class of voting securities of a savings and loan
holding company are not deemed by the Board to constitute control for
purposes of the Bank Control Act.
(g) Rebuttal of presumptions. Prior notice to the Board is not
required for any acquisition of voting securities under the presumption
of control set forth in this section, if the Board finds that the
acquisition will not result in control. The Board shall afford any
person seeking to rebut a presumption in this section an opportunity to
present views in writing or, if appropriate, orally before its
designated representatives at an informal conference.
Sec. 238.32 Transactions not requiring prior notice.
(a) Exempt transactions. The following transactions do not require
notice to the Board under this subpart:
(1) Existing control relationships. The acquisition of additional
voting securities of a savings and loan holding company by a person
who:
(i) Continuously since March 9, 1979 (or since the institution
commenced business, if later), held power to vote 25 percent or more of
any class of voting securities of the institution; or
(ii) Is presumed, under Sec. 238.31(c)(2), to have controlled the
institution continuously since March 9, 1979, if the aggregate amount
of voting securities held does not exceed 25 percent or more of any
class of voting securities of the institution or, in other cases, where
the Board determines that the person has controlled the institution
continuously since March 9, 1979;
(2) Increase of previously authorized acquisitions. Unless the
Board or the Reserve Bank otherwise provides in writing, the
acquisition of additional shares of a class of voting securities of a
savings and loan holding company by any person (or persons acting in
concert) who has lawfully acquired and maintained control of the
institution (for purposes of Sec. 238.31(c)), after complying with the
procedures and receiving approval to acquire voting securities of the
institution under this subpart, or in connection with an application
approved under section 10(e) of HOLA (12 U.S.C. 1467a(e) and Sec.
238.11 or section 18(c) of the Federal Deposit Insurance Act (Bank
Merger Act, 12 U.S.C. 1828(c));
(3) Acquisitions subject to approval under HOLA or Bank Merger Act.
Any acquisition of voting securities subject to approval under section
10(e) of HOLA (12 U.S.C. 1467a(e) and Sec. 238.11), or section 18(c)
of the Federal Deposit Insurance Act (Bank Merger Act, 12 U.S.C.
1828(c));
(4) Transactions exempt under HOLA. Any transaction described in
sections 10(a)(3)(A) or 10(e)(1)(B)(ii) of HOLA by a person described
in those provisions;
(5) Proxy solicitation. The acquisition of the power to vote
securities of a savings and loan holding company through receipt of a
revocable proxy in connection with a proxy solicitation for the
purposes of conducting business at a regular or special meeting of the
institution, if the proxy terminates within a reasonable period after
the meeting;
(6) Stock dividends. The receipt of voting securities of a savings
and loan holding company through a stock dividend or stock split if the
proportional interest of the recipient in the institution remains
substantially the same; and
(7) Acquisition of foreign banking organization. The acquisition of
voting securities of a qualifying foreign banking organization. (This
exemption does not extend to the reports and information required under
paragraphs 9, 10, and 12 of the Bank Control Act (12 U.S.C. 1817(j)
(9), (10), and (12)) and Sec. 238.34.)
(b) Prior notice exemption. (1) The following acquisitions of
voting securities of a savings and loan holding company, which would
otherwise require prior notice under this subpart, are not subject to
the prior notice requirements if the acquiring person notifies the
appropriate Reserve Bank within 90 calendar days after the acquisition
and provides any relevant information requested by the Reserve Bank:
(i) Acquisition of voting securities through inheritance;
(ii) Acquisition of voting securities as a bona fide gift; and
(iii) Acquisition of voting securities in satisfaction of a debt
previously contracted (DPC) in good faith.
(2) The following acquisitions of voting securities of a savings
and loan holding company, which would otherwise require prior notice
under this subpart, are not subject to the prior notice requirements if
the acquiring person does not reasonably have advance knowledge of the
transaction, and provides the written notice required under Sec.
238.33 to the appropriate
[[Page 56543]]
Reserve Bank within 90 calendar days after the transaction occurs:
(i) Acquisition of voting securities resulting from a redemption of
voting securities by the issuing savings and loan holding company; and
(ii) Acquisition of voting securities as a result of actions
(including the sale of securities) by any third party that is not
within the control of the acquiror.
(3) Nothing in paragraphs (b)(1) or (b)(2) of this section limits
the authority of the Board to disapprove a notice pursuant to Sec.
238.33(h).
Sec. 238.33 Procedures for filing, processing, publishing, and acting
on notices.
(a) Filing notice. (1) A notice required under this subpart shall
be filed with the appropriate Reserve Bank and shall contain all the
information required by paragraph 6 of the Bank Control Act (12 U.S.C.
1817(j)(6)), or prescribed in the designated Board form.
(2) The Board may waive any of the informational requirements of
the notice if the Board determines that it is in the public interest.
(3) A notificant shall notify the appropriate Reserve Bank or the
Board immediately of any material changes in a notice submitted to the
Reserve Bank, including changes in financial or other conditions.
(4) When the acquiring person is an individual, or group of
individuals acting in concert, the requirement to provide personal
financial data may be satisfied by a current statement of assets and
liabilities and an income summary, as required in the designated Board
form, together with a statement of any material changes since the date
of the statement or summary. The Reserve Bank or the Board,
nevertheless, may request additional information, if appropriate.
(b) Acceptance of notice. The 60-day notice period specified in
Sec. 238.31 of this subpart begins on the date of receipt of a
complete notice. The Reserve Bank shall notify the person or persons
submitting a notice under this subpart in writing of the date the
notice is or was complete and thereby accepted for processing. The
Reserve Bank or the Board may request additional relevant information
at any time after the date of acceptance.
(c) Publication--(1) Newspaper Announcement. Any person(s) filing a
notice under this subpart shall publish, in a form prescribed by the
Board, an announcement soliciting public comment on the proposed
acquisition. The announcement shall be published in a newspaper of
general circulation in the community in which the head office of the
savings and loan holding company is located and in the community in
which the head office of each of its subsidiary savings associations is
located. The announcement shall be published no earlier than 15
calendar days before the filing of the notice with the appropriate
Reserve Bank and no later than 10 calendar days after the filing date;
and the publisher's affidavit of a publication shall be provided to the
appropriate Reserve Bank.
(2) Contents of newspaper announcement. The newspaper announcement
shall state:
(i) The name of each person identified in the notice as a proposed
acquiror of the savings and loan holding company;
(ii) The name of the savings and loan holding company to be
acquired, including the name of each of the savings and loan holding
company's subsidiary savings association; and
(iii) A statement that interested persons may submit comments on
the notice to the Board or the appropriate Reserve Bank for a period of
20 days, or such shorter period as may be provided, pursuant to
paragraph (c)(5) of this section.
(3) Federal Register Announcement. The Board shall, upon filing of
a notice under this subpart, publish announcement in the Federal
Register of receipt of the notice. The Federal Register announcement
shall contain the information required under paragraphs (c)(2)(i) and
(c)(2)(ii) of this section and a statement that interested persons may
submit comments on the proposed acquisition for a period of 15 calendar
days, or such shorter period as may be provided, pursuant to paragraph
(c)(5) of this section. The Board may waive publication in the Federal
Register if the Board determines that such action is appropriate.
(4) Delay of publication. The Board may permit delay in the
publication required under paragraphs (c)(1) and (c)(3) of this section
if the Board determines, for good cause shown, that it is in the public
interest to grant such delay. Requests for delay of publication may be
submitted to the appropriate Reserve Bank.
(5) Shortening or waiving notice. The Board may shorten or waive
the public comment or newspaper publication requirements of this
paragraph, or act on a notice before the expiration of a public comment
period, if it determines in writing that an emergency exists, or that
disclosure of the notice, solicitation of public comment, or delay
until expiration of the public comment period would seriously threaten
the safety or soundness of the savings and loan holding company to be
acquired.
(6) Consideration of public comments. In acting upon a notice filed
under this subpart, the Board shall consider all public comments
received in writing within the period specified in the newspaper or
Federal Register announcement, whichever is later. At the Board's
option, comments received after this period may, but need not, be
considered.
(7) Standing. No person (other than the acquiring person) who
submits comments or information on a notice filed under this subpart
shall thereby become a party to the proceeding or acquire any standing
or right to participate in the Board's consideration of the notice or
to appeal or otherwise contest the notice or the Board's action
regarding the notice.
(d) Time period for Board action-- (1) Consummation of
acquisition-- (i) The notificant(s) may consummate the proposed
acquisition 60 days after submission to the Reserve Bank of a complete
notice under paragraph (a) of this section, unless within that period
the Board disapproves the proposed acquisition or extends the 60-day
period, as provided under paragraph (d)(2) of this section.
(ii) The notificant(s) may consummate the proposed transaction
before the expiration of the 60-day period if the Board notifies the
notificant(s) in writing of the Board's intention not to disapprove the
acquisition.
(2) Extensions of time period. (i) The Board may extend the 60-day
period in paragraph (d)(1) of this section for an additional 30 days by
notifying the acquiring person(s).
(ii) The Board may further extend the period during which it may
disapprove a notice for two additional periods of not more than 45 days
each, if the Board determines that:
(A) Any acquiring person has not furnished all the information
required under paragraph (a) of this section;
(B) Any material information submitted is substantially inaccurate;
(C) The Board is unable to complete the investigation of an
acquiring person because of inadequate cooperation or delay by that
person; or
(D) Additional time is needed to investigate and determine that no
acquiring person has a record of failing to comply with the
requirements of the Bank Secrecy Act, subchapter II of Chapter 53 of
Title 31, United States Code.
(iii) If the Board extends the time period under this paragraph, it
shall notify the acquiring person(s) of the reasons therefor and shall
include a statement of the information, if any, deemed incomplete or
inaccurate.
[[Page 56544]]
(e) Advice to bank supervisory agencies. The Reserve Bank shall
send a copy of any notice to the Comptroller of the Currency and the
Federal Deposit Insurance Corporation.
(f) Investigation and report. (1) After receiving a notice under
this subpart, the Board or the appropriate Reserve Bank shall conduct
an investigation of the competence, experience, integrity, and
financial ability of each person by and for whom an acquisition is to
be made. The Board shall also make an independent determination of the
accuracy and completeness of any information required to be contained
in a notice under paragraph (a) of this section. In investigating any
notice accepted under this subpart, the Board or Reserve Bank may
solicit information or views from any person, including any savings and
loan holding company involved in the notice, and any appropriate state,
federal, or foreign governmental authority.
(2) The Board or the appropriate Reserve Bank shall prepare a
written report of its investigation, which shall contain, at a minimum,
a summary of the results of the investigation.
(g) Factors considered in acting on notices. In reviewing a notice
filed under this subpart, the Board shall consider the information in
the record, the views and recommendations of the appropriate bank
supervisor, and any other relevant information obtained during any
investigation of the notice.
(h) Disapproval and hearing-- (1) Disapproval of notice. The Board
may disapprove an acquisition if it finds adverse effects with respect
to any of the factors set forth in paragraph 7 of the Bank Control Act
(12 U.S.C. 1817(j)(7)) (i.e., competitive, financial, managerial,
banking, or incompleteness of information).
(2) Disapproval notification. Within three days after its decision
to issue a notice of intent to disapprove any proposed acquisition, the
Board shall notify the acquiring person in writing of the reasons for
the action.
(3) Hearing. Within 10 calendar days of receipt of the notice of
the Board's intent to disapprove, the acquiring person may submit a
written request for a hearing. Any hearing conducted under this
paragraph shall be in accordance with the Rules of Practice for Formal
Hearings (12 CFR part 263). At the conclusion of the hearing, the Board
shall, by order, approve or disapprove the proposed acquisition on the
basis of the record of the hearing. If the acquiring person does not
request a hearing, the notice of intent to disapprove becomes final and
unappealable.
Subpart E--Qualified Stock Issuances
Sec. 238.41 Qualified stock issuances by undercapitalized savings
associations or holding companies.
(a) Acquisitions by savings and loan holding companies. No savings
and loan holding company shall be deemed to control a savings
association solely by reason of the purchase by such savings and loan
holding company of shares issued by such savings association, or issued
by any savings and loan holding company (other than a bank holding
company) which controls such savings association, in connection with a
qualified stock issuance if prior approval of such acquisition is
granted by the Board under this subpart, unless the acquiring savings
and loan holding company, directly or indirectly, or acting in concert
with 1 or more other persons, or through one or more subsidiaries,
owns, controls, or holds with power to vote, or holds proxies
representing, more than 15 percent of the voting shares of such savings
association or holding company.
(b) Qualification. For purposes of this section, any issuance of
shares of stock shall be treated as a qualified stock issuance if the
following conditions are met:
(1) The shares of stock are issued by--
(i) An undercapitalized savings association, which for purposes of
this paragraph (b)(1)(i) shall mean any savings association--
(A) The assets of which exceed the liabilities of such association;
and
(B) Which does not comply with one or more of the capital standards
in effect under section 5(t) of HOLA; or
(ii) A savings and loan holding company which is not a bank holding
company but which controls an undercapitalized savings association if,
at the time of issuance, the savings and loan holding company is
legally obligated to contribute the net proceeds from the issuance of
such stock to the capital of an undercapitalized savings association
subsidiary of such holding company.
(2) All shares of stock issued consist of previously unissued stock
or treasury shares.
(3) All shares of stock issued are purchased by a savings and loan
holding company that is registered, as of the date of purchase, with
the Board in accordance with the provisions of section 10(b) of the
HOLA and the Board's regulations promulgated thereunder.
(4) Subject to paragraph (c) of this section, the Board approves
the purchase of the shares of stock by the acquiring savings and loan
holding company.
(5) The entire consideration for the stock issued is paid in cash
by the acquiring savings and loan holding company.
(6) At the time of the stock issuance, each savings association
subsidiary of the acquiring savings and loan holding company (other
than an association acquired in a transaction pursuant to section 13(c)
or 13(k) of the Federal Deposit Insurance Act, or section 408(m) of the
National Housing Act, as in effect immediately prior to enactment of
the Financial Institutions Reform, Recovery and Enforcement Act of
1989) has capital (after deducting any subordinated debt, intangible
assets, and deferred, unamortized gains or losses) of not less than
6\1/2\ percent of the total assets of such savings association.
(7) Immediately after the stock issuance, the acquiring savings and
loan holding company holds not more than 15 percent of the outstanding
voting stock of the issuing undercapitalized savings association or
savings and loan holding company.
(8) Not more than one of the directors of the issuing association
or company is an officer, director, employee, or other representative
of the acquiring company or any of its affiliates.
(9) Transactions between the savings association or savings and
loan holding company that issues the shares pursuant to this section
and the acquiring company and any of its affiliates shall be subject to
the provisions of section 11 of HOLA and the Board's regulations
promulgated thereunder.
(c) Approval of acquisitions--(1) Criteria. The Board, in deciding
whether to approve or deny an application filed on the basis that it is
a qualified stock issuance, shall apply the application criteria set
forth in Sec. 238.15(a), (b), and (c).
(2) Additional capital commitments not required. The Board shall
not disapprove any application for the purchase of stock in connection
with a qualified stock issuance on the grounds that the acquiring
savings and loan holding company has failed to undertake to make
subsequent additional capital contributions to maintain the capital of
the undercapitalized savings association at or above the minimum level
required by the Board or any other Federal agency having jurisdiction.
(3) Other conditions. The Board shall impose such conditions on any
approval of an application for the purchase of stock in connection with
a qualified
[[Page 56545]]
stock issuance as the Board determines to be appropriate, including--
(i) A requirement that any savings association subsidiary of the
acquiring savings and loan holding company limit dividends paid to such
holding company for such period of time as the Board may require; and
(ii) Such other conditions as the Board deems necessary or
appropriate to prevent evasions of this section.
(4) Application deemed approved if not disapproved within 90 days.
(i) An application for approval of a purchase of stock in connection
with a qualified stock issuance shall be deemed to have been approved
by the Board if such application has not been disapproved by the Board
before the end of the 90-day period beginning on the date of submission
to the Board of the complete record on the application as defined in
Sec. 238.14(g)(3)(ii).
(d) No limitation on class of stock issued. The shares of stock
issued in connection with a qualified stock issuance may be shares of
any class.
(e) Application form. A savings and loan holding company making
application to acquire a qualified stock issuance pursuant to this
subpart shall submit the appropriate form to the appropriate Reserve
Bank.
Subpart F--Savings and Loan Holding Company Activities and
Acquisitions
Sec. 238.51 Prohibited activities.
(a) Evasion of law or regulation. No savings and loan holding
company or subsidiary thereof which is not a savings association shall,
for or on behalf of a subsidiary savings association, engage in any
activity or render any services for the purpose or with the effect of
evading any law or regulation applicable to such savings association.
(b) Unrelated business activity. No savings and loan holding
company or subsidiary thereof that is not a savings association shall
commence any business activity at any time, or continue any business
activity after the end of the two-year period beginning on the date on
which such company received approval to become a savings and loan
holding company that is subject to the limitations of this paragraph
(b), except (in either case) the following:
(1) Furnishing or performing management services for a savings
association subsidiary of such company;
(2) Conducting an insurance agency or an escrow business;
(3) Holding, managing, or liquidating assets owned by or acquired
from a subsidiary savings association of such company;
(4) Holding or managing properties used or occupied by a subsidiary
savings association of such company;
(5) Acting as trustee under deed of trust;
(6) Any other activity:
(i) That the Board of Governors of the Federal Reserve System has
permitted for bank holding companies pursuant to regulations
promulgated under section 4(c) of the Bank Holding Company Act; or
(ii) Is set forth in Sec. 238.53, subject to the limitations
therein; or
(7) (i) In the case of a savings and loan holding company,
purchasing, holding, or disposing of stock acquired in connection with
a qualified stock issuance if prior approval for the acquisition of
such stock by such savings and loan holding company is granted by the
Board pursuant to Sec. 238.41.
(ii) Notwithstanding the provisions of this paragraph (b), any
savings and loan holding company that, between March 5, 1987 and August
10, 1987, received approval pursuant to 12 U.S.C. 1730a(e), as then in
effect, to acquire control of a savings association shall not continue
any business activity other than those activities set forth in this
paragraph (b) after August 10, 1987.
(c) Treatment of certain holding companies. If a director or
officer of a savings and loan holding company, or an individual who
owns, controls, or holds with the power to vote (or proxies
representing) more than 25 percent of the voting shares of a savings
and loan holding company, directly or indirectly controls more than one
savings association, any savings and loan holding company controlled by
such individual shall be subject to the activities limitations
contained in paragraph (b) of this section, to the same extent such
limitations apply to multiple savings and loan holding companies
pursuant to Sec. Sec. 238.51, 238.52, 238.53, and 238.54.
Sec. 238.52 Exempt savings and loan holding companies and
grandfathered activities.
(a) Exempt savings and loan holding companies. (1) The following
savings and loan holding companies are exempt from the limitations of
Sec. 238.51(b):
(i) Any savings and loan holding company (or subsidiary of such
company) that controls only one savings association, if the savings
association subsidiary of such company is a qualified thrift lender as
defined in Sec. 238.2(k).
(ii) Any savings and loan holding company (or subsidiary thereof)
that controls more than one savings association if all, or all but one
of the savings association subsidiaries of such company were acquired
pursuant to an acquisition under section 13(c) or 13(k) of the Federal
Deposit Insurance Act, or section 408(m) of the National Housing Act,
as in effect immediately prior to the date of enactment of the
Financial Institutions Reform, Recovery and Enforcement Act of 1989,
and all of the savings association subsidiaries of such company are
qualified thrift lenders as defined in Sec. 238.2(k).
(2) Any savings and loan holding company whose subsidiary savings
association(s) fails to qualify as a qualified thrift lender pursuant
to 12 U.S.C. 1467a(m) may not commence, or continue, any service or
activity other than those permitted under Sec. 238.51(b) of this part,
except that, the Board may allow, for good cause shown, such company
(or subsidiary of such company which is not a savings association) up
to 3 years to comply with the limitations set forth in Sec. 238.51(b)
of this part: Provided, That effective August 9, 1990, any company that
controls a savings association that should have become or ceases to be
a qualified thrift lender, except a savings association that
requalified as a qualified thrift lender pursuant to section
10(m)(3)(D) of the Home Owners' Loan Act, shall within one year after
the date on which the savings association fails to qualify as a
qualified thrift lender, register as and be deemed to be a bank holding
company, subject to all of the provisions of the Bank Holding Company
Act, section 8 of the Federal Deposit Insurance Act, and other statutes
applicable to bank holding companies in the same manner and to the same
extent as if the company were a bank holding company and the savings
association were a bank, as those terms are defined in the Bank Holding
Company Act.
(b) Grandfathered activities for certain savings and loan holding
companies. Notwithstanding Sec. 238.51(b) and subject to paragraph (c)
of this section, any savings and loan holding company that received
approval prior to March 5, 1987 to acquire control of a savings
association may engage, directly or indirectly or through any
subsidiary (other than a subsidiary savings association of such
company) in any activity in which it was lawfully engaged on March 5,
1987, provided, that:
(1) The holding company does not, after August 10, 1987, acquire
control of a bank or an additional savings association, other than a
savings association acquired pursuant to section
[[Page 56546]]
13(c) or 13(k) of the Federal Deposit Insurance Act, or section 406(f)
or 408(m) of the National Housing Act, as in effect immediately prior
to the date of enactment of the Financial Institutions Reform, Recovery
and Enforcement Act of 1989;
(2) Any savings association subsidiary of the holding company
continues to qualify as a domestic building and loan association under
section 7701(a)(19) of the Internal Revenue Code of 1986 after August
10, 1987;
(3) The holding company does not engage in any business activity
other than those permitted under Sec. 238.51(b) or in which it was
engaged on March 5, 1987;
(4) Any savings association subsidiary of the holding company does
not increase the number of locations from which such savings
association conducts business after March 5, 1987, other than an
increase due to a transaction under section 13(c) or 13(k) of the
Federal Deposit Insurance Act, or under section 408(m) of the National
Housing Act, as in effect immediately prior to the date of enactment of
the Financial Institutions Reform, Recovery and Enforcement Act of
1989; and
(5) Any savings association subsidiary of the holding company does
not permit any overdraft (including an intra-day overdraft) or incur
any such overdraft in its account at a Federal Reserve bank, on behalf
of an affiliate, unless such overdraft results from an inadvertent
computer or accounting error that is beyond the control of both the
savings association subsidiary and the affiliate.
(c) Termination by the Board of grandfathered activities.
Notwithstanding the provisions of paragraph (b) of this section, the
Board may, after opportunity for hearing, terminate any activity
engaged in under paragraph (b) of this section upon determination that
such action is necessary:
(1) To prevent conflicts of interest;
(2) To prevent unsafe or unsound practices; or
(3) To protect the public interest.
(d) Foreign holding company. Any savings and loan holding company
organized under the laws of a foreign country as of June 1, 1984
(including any subsidiary thereof that is not a savings association)
that controlled a single savings association on August 10, 1987, shall
not be subject to the restrictions set forth in Sec. 238.51(b) with
respect to any activities of such holding company that are conducted
exclusively in a foreign country.
Sec. 238.53 Prescribed services and activities of savings and loan
holding companies.
(a) General. For the purpose of Sec. 238.51(b)(6)(ii), the
activities set forth in paragraph (b) of this section are, and were as
of March 5, 1987, permissible services and activities for savings and
loan holding companies or subsidiaries thereof that are neither savings
associations nor service corporation subsidiaries of subsidiary savings
associations. Services and activities of service corporation
subsidiaries of savings and loan holding company subsidiary savings
associations are prescribed by paragraph (d) of this section.
(b) Prescribed services and activities. Subject to the provisions
of paragraph (c) of this section, a savings and loan holding company
subject to restrictions on its activities pursuant to Sec. 238.51(b),
or a subsidiary thereof which is neither a savings association nor a
service corporation of a subsidiary savings association, may furnish or
perform the following services and engage in the following activities
to the extent that it has legal power to do so:
(1) Originating, purchasing, selling and servicing any of the
following:
(i) Loans, and participation interests in loans, on a prudent basis
and secured by real estate, including brokerage and warehousing of such
real estate loans, except that such a company or subsidiary shall not
invest in a loan secured by real estate as to which a subsidiary
savings association of such company has a security interest;
(ii) Manufactured home chattel paper (written evidence of both a
monetary obligation and a security interest of first priority in one or
more manufactured homes, and any equipment installed or to be installed
therein), including brokerage and warehousing of such chattel paper;
(iii) Loans, with or without security, for the altering, repairing,
improving, equipping or furnishing of any residential real estate;
(iv) Educational loans; and
(v) Consumer loans, as defined in Sec. 160.3 of this title,
Provided, That, no subsidiary savings association of such holding
company or service corporation of such savings association shall engage
directly or indirectly, in any transaction with any affiliate involving
the purchase or sale, in whole or in part, of any consumer loan.
(2) Subject to the provisions of 12 U.S.C. 1468, furnishing or
performing clerical accounting and internal audit services primarily
for its affiliates;
(3) Subject to the provisions of 12 U.S.C. 1468, furnishing or
performing the following services primarily for its affiliates, and for
any savings association and service corporation subsidiary thereof, and
for other multiple holding companies and affiliates thereof:
(i) Data processing;
(ii) Credit information, appraisals, construction loan inspections,
and abstracting;
(iii) Development and administration of personnel benefit programs,
including life insurance, health insurance, and pension or retirement
plans;
(iv) Research, studies, and surveys;
(v) Purchase of office supplies, furniture and equipment;
(vi) Development and operation of storage facilities for microfilm
or other duplicate records; and
(vii) Advertising and other services to procure and retain both
savings accounts and loans;
(4) Acquisition of unimproved real estate lots, and acquisition of
other unimproved real estate for the purpose of prompt development and
subdivision, for:
(i) Construction of improvements,
(ii) Resale to others for such construction, or
(iii) Use as mobile home sites;
(5) Development, subdivision and construction of improvements on
real estate acquired pursuant to paragraph (b)(4) of this section, for
sale or rental;
(6) Acquisition of improved real estate and mobile homes to be held
for rental;
(7) Acquisition of improved real estate for remodeling,
rehabilitation, modernization, renovation, or demolition and rebuilding
for sale or for rental;
(8) Maintenance and management of improved real estate;
(9) Underwriting or reinsuring contract of credit life or credit
health and accident insurance in connection with extensions of credit
by the savings and loan holding company or any of its subsidiaries, or
extensions of credit by any savings association or service corporation
subsidiary thereof, or any other savings and loan holding company or
subsidiary thereof;
(10) Preparation of State and Federal tax returns for
accountholders of or borrowers from (including immediate family members
of such accountholders or borrowers but not including an accountholder
or borrower which is a corporation operated for profit) an affiliated
savings association;
(11) Purchase and sale of gold coins minted and issued by the
United States Treasury pursuant to Public Law 99-185, 99 Stat. 1177
(1985), and activities reasonably incident thereto; and
(12) Any services or activities approved by order of the former
Federal
[[Page 56547]]
Savings and Loan Insurance Corporation prior to March 5, 1987, pursuant
to its authority under section 408(c)(2)(F) of the National Housing
Act, as in effect at the time.
(c) Procedures for commencing services or activities. A notice to
engage in or acquire a company engaged in a service or activity
prescribed by paragraph (b) of this section (other than purchase or
sale of a government debt security) shall be filed by a savings and
loan holding company (including a company seeking to become a savings
and loan holding company) with the appropriate Reserve Bank in
accordance with this paragraph and the Board's Rules of Procedure (12
CFR 262.3).
(1) Engaging de novo in services or activities. A savings and loan
holding company seeking to commence or to engage de novo in a service
or activity pursuant to this section, either directly or through a
subsidiary, shall file a notice containing a description of the
activities to be conducted and the identity of the company that will
conduct the activity.
(2) Acquiring company engaged in services or activities. A savings
and loan holding company seeking to acquire or control voting
securities or assets of a company engaged in a service or activity
pursuant to this section, shall file a notice containing the following:
(i) A description of the proposal, including a description of each
proposed service or activity;
(ii) The identity of any entity involved in the proposal, and, if
the notificant proposes to conduct the service or activity through an
existing subsidiary, a description of the existing activities of the
subsidiary;
(iii) If the savings and loan holding company has consolidated
assets of $150 million or more:
(A) Parent company and consolidated pro forma balance sheets for
the acquiring savings and loan holding company as of the most recent
quarter showing credit and debit adjustments that reflect the proposed
transaction;
(B) Consolidated pro forma risk-based capital and leverage ratio
calculations for the acquiring savings and loan holding company as of
the most recent quarter; and
(C) A description of the purchase price and the terms and sources
of funding for the transaction;
(iv) If the savings and loan holding company has consolidated
assets of less than $150 million:
(A) A pro forma parent-only balance sheet as of the most recent
quarter showing credit and debit adjustments that reflect the proposed
transaction; and
(B) A description of the purchase price and the terms and sources
of funding for the transaction and, if the transaction is debt funded,
one-year income statement and cash flow projections for the parent
company, and the sources and schedule for retiring any debt incurred in
the transaction;
(v) For each insured depository institution whose Tier 1 capital,
total capital, total assets or risk-weighted assets change as a result
of the transaction, the total risk-weighted assets, total assets, Tier
1 capital and total capital of the institution on a pro forma basis;
and
(vi) A description of the management expertise, internal controls
and risk management systems that will be utilized in the conduct of the
proposed service or activity; and
(vii) A copy of the purchase agreements, and balance sheet and
income statements for the most recent quarter and year-end for any
company to be acquired.
(d) Notice provided to Board. The Reserve Bank shall immediately
send to the Board a copy of any notice received under paragraphs (c)(1)
or (c)(2) of this section.
(e) Notice to public--(1) the Reserve Bank shall notify the Board
for publication in the Federal Register immediately upon receipt by the
Reserve Bank of:
(i) A notice under paragraph (c) of this section or
(ii) A written request that notice of a proposal under paragraph
(c) of this section be published in the Federal Register. Such a
request may request that Federal Register publication occur up to 15
calendar days prior to submission of a notice under this subpart.
(2) The Federal Register notice published under this paragraph (e)
shall invite public comment on the proposal, generally for a period of
15 days.
(f) Action on notices--(1) Reserve Bank action--(i) In general.
Within 30 calendar days after receipt by the Reserve Bank of a notice
filed pursuant to paragraphs (c)(1) or (c)(2) of this section, the
Reserve Banks shall:
(A) Approve the notice; or
(B) Refer the notice to the Board for decision because action under
delegated authority is not appropriate.
(ii) Return of incomplete notice. Within 7 calendar days of
receipt, the Reserve Bank may return any notice as informationally
incomplete that does not contain all of the information required by
this section. The return of such a notice shall be deemed action on the
notice.
(iii) Notice of action. The Reserve Bank shall promptly notify the
savings and loan holding company of any action or referral under this
paragraph.
(iv) Close of public comment period. The Reserve Bank shall not
approve any notice under this paragraph (e)(1) of this section prior to
the third business day after the close of the public comment period,
unless an emergency exists that requires expedited or immediate action.
(2) Board action; internal schedule. The Board seeks to act on
every notice referred to it for decision within 60 days of the date
that the notice is filed with the Reserve Bank. If the Board is unable
to act within this period, the Board shall notify the notificant and
explain the reasons and the date by which the Board expects to act.
(3)(i) Required time limit for System action. The Board or the
Reserve Bank shall act on any notice under this section within 60 days
after the submission of a complete notice.
(ii) Extension of required period for action. The Board may extend
the 60-day period required for Board action under paragraph (e)(3)(i)
of this section for an additional 30 days upon notice to the
notificant.
(4) Requests for additional information. The Board or the Reserve
Bank may modify the information requirements under this section or at
any time request any additional information that either believes is
needed for a decision on any notice under this section.
(5) Tolling of period. The Board or the Reserve Bank may at any
time extend or toll the time period for action on a notice for any
period with the consent of the notificant.
(g) Modification or termination of service or activity. The Board
may require a savings and loan holding company or subsidiary thereof
which has commenced a service or activity pursuant to this section to
modify or terminate, in whole or in part, such service or activity as
the Board finds necessary in order to ensure compliance with the
provisions and purposes of this part and of section 10 of the Home
Owners' Loan Act, as amended, or to prevent evasions thereof.
(h) Alterations. Except as may be otherwise provided in a
resolution by or on behalf of the Board in a particular case, a service
or activity commenced pursuant to this section shall not be altered in
any material respect from that described in the notice filed under
paragraph (c)(1) of this section, unless before making such alteration
notice of intent to do so is filed in compliance with the appropriate
procedures of said paragraph (c)(1) of this section.
[[Page 56548]]
(i) Service corporation subsidiaries of savings associations. The
Board hereby approves without application the furnishing or performing
of such services or engaging in such activities as permitted by the OTS
pursuant to Sec. 545.74 of this title, as in effect on March 5, 1987,
if such service or activity is conducted by a service corporation
subsidiary of a subsidiary savings association of a savings and loan
holding company and if such service corporation has legal power to do
so.
Sec. 238.54 Permissible bank holding company activities of savings
and loan holding companies.
(a) General. For purposes of Sec. 238.51(b)(6)(i), the services
and activities permissible for bank holding companies pursuant to
regulations that the Board has promulgated pursuant to section 4(c) of
the Bank Holding Company Act are permissible for savings and loan
holding companies, or subsidiaries thereof that are neither savings
associations nor service corporation subsidiaries of subsidiary savings
associations: Provided, That no savings and loan holding company shall
commence any activity described in this paragraph (a) without the prior
approval of this Board pursuant to paragraph (b) of this section,
unless--
(1) The holding company received a rating of satisfactory or above
prior to January 1, 2008, or a composite rating of ``1'' or ``2''
thereafter, in its most recent examination, and is not in a troubled
condition as defined in Sec. 238.72, and the holding company does not
propose to commence the activity by an acquisition (in whole or in
part) of a going concern; or
(2) The activity is permissible under authority other than section
10(c)(2)(F)(i) of the HOLA without prior notice or approval. Where an
activity is within the scope of both Sec. 238.53 and this section, the
procedures of Sec. 238.53 shall govern.
(b) Procedures for applications. Applications to commence any
activity prescribed under paragraph (a) of this section shall be filed
with the appropriate Reserve Bank on the designated form. The Board
must act upon such application according to the procedures of Sec.
238.53(d), (e), and (f).
(c) Factors considered in acting on applications. In evaluating an
application filed under paragraph (b) of this section, the Board shall
consider whether the performance by the applicant of the activity can
reasonably be expected to produce benefits to the public (such as
greater convenience, increased competition, or gains in efficiency)
that outweigh possible adverse effects (such as undue concentration of
resources, decreased or unfair competition, conflicts of interest, or
unsound financial practices). This consideration includes an evaluation
of the financial and managerial resources of the applicant, including
its subsidiaries, and of any company to be acquired, and the effect of
the proposed transaction on those resources.
Subpart G--Financial Holding Company Activities
Sec. 238.61 Scope.
Section 10(c)(2)(H) of the HOLA (12 U.S.C. 1467a(c)(2)(H)) permits
a savings and loan holding company to engage in activities that are
permissible for a financial holding company if the savings and holding
company meets the criteria to qualify as a financial holding company
and complies with all of the requirements applicable to a financial
holding company under sections 4(l) and 4(m) of the BHC Act as if the
savings and loan holding company was a bank holding company. This
subpart provides the requirements and restrictions for a savings and
holding company to be treated as a financial holding company for the
purpose of engaging in financial holding company activities. This
subpart does not apply to savings and loan holding companies described
in section 10(c)(9)(C) of the HOLA (12 U.S.C. 1467a(c)(9)(C)).
Sec. 238.62 Definitions.
For the purposes of this subpart:
(a) Financial holding company activities refers to activities
permissible under section 4(k) of the Bank Holding Company Act of 1956
(12 U.S.C. 1843(k)) and Sec. 225.86 of this chapter.
(b) [Reserved]
Sec. 238.63 Requirements to engage in financial holding company
activities.
(a) In general. In order for a savings and loan holding company to
engage in financial holding company activities:
(1) The savings and loan holding company and all depository
institutions controlled by the savings and loan holding company must be
and remain well capitalized;
(2) The savings and loan holding company and all depository
institutions controlled by the savings and loan company must be and
remain well managed; and
(3) The savings and loan holding company must have made an
effective election to be treated as a financial holding company.
Sec. 238.64 Election required.
(a) In general. Except as provided below, a savings and loan
holding company that wishes to engage in financial holding company
activities must have an effective election to be treated as a financial
holding company.
(b) Activities performed under separate HOLA authority. A savings
and loan holding company that conducts only the following activities is
not required to elect to be treated as a financial holding company:
(1) BHC Act section 4(c)(8) activities. Activities permissible
under section 10(c)(2)(F)(i) of the HOLA (12 U.S.C. 1467a(c)(2)(F)(i)).
(2) Insurance agency or escrow business activities. Activities
permissible under section 10(c)(2)(B) of the HOLA (12 U.S.C.
1467a(c)(2)(B)).
(3) ``1987 List'' activities. Activities permissible under section
10(c)(2)(F)(ii) of the HOLA (12 U.S.C. 1467a(c)(2)(F)(ii)).
(c) Existing requirements apply. A savings and loan holding company
that has not made an effective election to be treated as a financial
holding company and that conducts the activities described in
paragraphs (b)(1) through (3) of this section remains subject to any
rules and requirements applicable to the conduct of such activities.
Sec. 238.65 Election procedures.
(a) Filing requirement. A savings and loan holding company may
elect to be treated as a financial holding company by filing a written
declaration with the appropriate Reserve Bank. A declaration by a
savings and loan holding company is considered to be filed on the date
that all information required by paragraph (b) of this section is
received by the appropriate Reserve Bank.
(b) Contents of declaration. To be deemed complete, a declaration
must:
(1) State that the savings and loan holding company elects to be
treated as a financial holding company in order to engage in financial
holding company activities;
(2) Provide the name and head office address of the savings and
loan holding company and of each depository institution controlled by
the savings and loan holding company;
(3) Certify that the savings and loan holding company and each
depository institution controlled by the savings and loan holding
company is well capitalized as of the date the savings and loan holding
company submits its declaration;
(4) Certify that the savings and loan holding company and each
savings association controlled by the savings and loan holding company
is well managed as of the date the savings and loan holding company
submits its declaration;
[[Page 56549]]
(c) Effectiveness of election. An election by a savings and loan
holding company to be treated as a financial holding company shall not
be effective if, during the period provided in paragraph (d) of this
section, the Board finds that, as of the date the declaration was filed
with the appropriate Reserve Bank:
(1) Any insured depository institution controlled by the savings
and loan holding company (except an institution excluded under
paragraph (d) of this section) has not achieved at least a rating of
``satisfactory record of meeting community credit needs'' under the
Community Reinvestment Act at the savings association's most recent
examination; or
(2) Any depository institution controlled by the bank holding
company is not both well capitalized and well managed.
(d) Consideration of the CRA performance of a recently acquired
savings association. Except as provided in paragraph (f) of this
section, a savings association will be excluded for purposes of the
review of the Community Reinvestment Act rating provisions of paragraph
(c)(1) of this section if:
(1) The savings and loan holding company acquired the savings
association during the 12-month period preceding the filing of an
election under paragraph (a) of this section;
(2) The savings and loan holding company has submitted an
affirmative plan to the appropriate Federal banking agency for the
savings association to take actions necessary for the institution to
achieve at least a rating of ``satisfactory record of meeting community
credit needs'' under the Community Reinvestment Act at the next
examination of the savings association; and
(3) The appropriate Federal banking agency for the savings
association has accepted the plan described in paragraph (d)(2) of this
section.
(e) Effective date of election.
(1) In general. An election filed by a savings and loan holding
company under paragraph (a) of this section is effective on the 31st
calendar day after the date that a complete declaration was filed with
the appropriate Reserve Bank, unless the Board notifies the savings and
loan holding company prior to that time that the election is
ineffective.
(2) Earlier notification that an election is effective. The Board
or the appropriate Reserve Bank may notify a savings and loan holding
company that its election to be treated as a financial holding company
is effective prior to the 31st day after the date that a complete
declaration was filed with the appropriate Reserve Bank. Such a
notification must be in writing.
(3) Special effective date rules for the OTS transfer date.
(i) Deadline for filing declaration. For savings and loan holding
companies that meet the requirements of Sec. 238.63 and that are
engaged in financial holding company activities pursuant to existing
authority as of July 21, 2011, an election under paragraph (a) must be
filed with the appropriate Reserve Bank by December 31, 2011. The
election must be accompanied by a description of the financial holding
company activities conducted by the savings and loan holding company.
(ii) Effective date of election. An election filed under paragraph
(e)(3)(i) of this section is effective on the 61st calendar day after
the date that a complete declaration was filed with the appropriate
Reserve Bank, unless the Board notifies the savings and loan holding
company prior to that time that the election is ineffective.
(iii) Earlier notification that an election is effective. The Board
or the appropriate Reserve Bank may notify a savings and loan holding
company that its election under paragraph (e)(3)(i) of this section to
be treated as a financial holding company is effective prior to the
61st day after the date that a complete declaration was filed with the
appropriate Reserve Bank. Such notification must be in writing.
(iv) Filings by savings and loan holding companies that do not meet
requirements. (A) For savings and loan holding companies that are
engaged in financial holding company activities as of July 21, 2011 but
do not meet the requirements of Sec. 238.63, a declaration must be
filed with the appropriate Reserve Bank by December 31, 2011,
specifying:
(1) The name and head office address of the savings and loan
holding company and of each despoitory institution controlled by the
savings and loan holding company;
(2) The financial holding company activities that the savings and
loan holding company is engaged in;
(3) The requirements of Sec. 238.63 that the savings and loan
holding company does not meet; and
(4) A description of how the savings and loan holding company will
achieve compliance with Sec. 238.63 prior to June 30, 2012.
(B) A savings and loan holding company covered by this subparagraph
will be subject to:
(1) The notice, remediation agreement, divestiture, and any other
requirements described in Sec. 225.83 of this chapter; or
(2) The activities limitations and any other requirements described
in Sec. 225.84 of this chapter, depending on which requirements of
Sec. 238.63 the savings and loan holding company does not meet.
(f) Requests to be treated as a financial holding company submitted
as part of an application to become a savings and loan holding company.
A company that is not a savings and loan holding company and has
applied for the Board's approval to become a savings and loan holding
company under section 10(e) of the HOLA (12 U.S.C. 1467a(e)) may as
part of that application submit a request to be treated as a financial
holding company. Such requests shall be made and reviewed by the Board
as described in Sec. 225.82(f) of this chapter.
(g) Board's authority to exercise supervisory authority over a
savings and loan holding company treated as a financial holding
company. An effective election to be treated as a financial holding
company does not in any way limit the Board's statutory authority under
the HOLA, the Federal Deposit Insurance Act, or any other relevant
Federal statute to take appropriate action, including imposing
supervisory limitations, restrictions, or prohibitions on the
activities and acquisitions of a savings and loan holding company that
has elected to be treated as a financial holding company, or enforcing
compliance with applicable law.
Sec. 238.66 Ongoing requirements.
(a) In general. A savings and loan holding company with an
effective election to be treated as a financial holding company is
subject to the same requirements applicable to a financial holding
company, under sections 4(l) and 4(m) of the Bank Holding Company Act
and section 804(c) of the Community Reinvestment Act of 1977 (12 U.S.C.
2903(c)) as if the savings and loan holding company was a bank holding
company.
(b) Consequences of failing to continue to meet applicable capital
and management requirements. A savings and loan holding company with an
effective election to be treated as a financial holding company that
fails to meet applicable capital and management requirements at Sec.
238.63 is subject to the notice, remediation agreement, divestiture,
and any other requirements described in Sec. 225.83 of this chapter.
(c) Consequences of failing to continue to maintain a satisfactory
or better rating under the Community
[[Page 56550]]
Reinvestment Act at all insured depository institution subsidiaries. A
savings and loan holding company with an effective election to be
treated as a financial holding company that fails to maintain a
satisfactory or better rating under the Community Reinvestment Act at
all insured deposit institution subsidiaries is subject to the
activities limitations and any other requirements described in Sec.
225.84 of this chapter.
(d) Notice and approval requirements for conducting financial
holding company activities; permissible activities. A savings and loan
holding company with an effective election to be treated as a financial
holding company may conduct the activities listed in Sec. 225.86 of
this chapter subject to the notice, approval, and any other
requirements described in Sec. Sec. 225.85 through 225.89 of this
chapter.
Subpart H--Notice of Change of Director or Senior Executive Officer
Sec. 238.71 Purpose.
This subpart implements 12 U.S.C. 1831i, which requires certain
savings and loan holding companies to notify the Board before
appointing or employing directors and senior executive officers.
Sec. 238.72 Definitions.
The following definitions apply to this subpart:
(a) Director means an individual who serves on the board of
directors of a savings and loan holding company. This term does not
include an advisory director who:
(1) Is not elected by the shareholders;
(2) Is not authorized to vote on any matters before the board of
directors or any committee of the board of directors;
(3) Provides only general policy advice to the board of directors
or any committee of the board of directors; and
(4) Has not been identified by the Board or Reserve Bank in writing
as an individual who performs the functions of a director, or who
exercises significant influence over, or participates in, major
policymaking decisions of the board of directors.
(b) Senior executive officer means an individual who holds the
title or performs the function of one or more of the following
positions (without regard to title, salary, or compensation):
president, chief executive officer, chief operating officer, chief
financial officer, chief lending officer, or chief investment officer.
Senior executive officer also includes any other person identified by
the Board or Reserve Bank in writing as an individual who exercises
significant influence over, or participates in, major policymaking
decisions, whether or not hired as an employee.
(c) Troubled condition means:
(1) A savings and loan holding company that has an unsatisfactory
rating under the applicable holding company rating system, or that is
informed in writing by the Board or Reserve Bank that it has an adverse
effect on its subsidiary savings association.
(2) A savings and loan holding company that is subject to a capital
directive, a cease-and-desist order, a consent order, a formal written
agreement, or a prompt corrective action directive relating to the
safety and soundness or financial viability of the savings association,
unless otherwise informed in writing by the Board or Reserve Bank; or
(3) A savings and loan holding company that is informed in writing
by the Board or Reserve Bank that it is in troubled condition based on
information available to the Board or Reserve Bank.
Sec. 238.73 Prior notice requirements.
(a) Savings and loan holding company. Except as provided under
Sec. 238.78, a savings and loan holding company must give the Board 30
days' written notice, as specified in Sec. 238.74, before adding or
replacing any member of its board of directors, employing any person as
a senior executive officer, or changing the responsibilities of any
senior executive officer so that the person would assume a different
senior executive position if the savings and loan holding company is in
troubled condition.
(b) Notice by individual. An individual seeking election to the
board of directors of a savings and loan holding company described in
paragraph (a) of this section that has not been nominated by
management, must either provide the prior notice required under
paragraph (a) of this section or follow the process under Sec.
238.78(b).
Sec. 238.74 Filing and processing procedures.
(a) Filing notice--(1) Content. The notice required in Sec. 238.73
shall be filed with the appropriate Reserve Bank and shall contain:
(i) The information required by paragraph 6(A) of the Change in
Bank Control Act (12 U.S.C. 1817(j)(6)(A)) as may be prescribed in the
designated Board form;
(ii) Additional information consistent with the Federal Financial
Institutions Examination Council's Joint Statement of Guidelines on
Conducting Background Checks and Change in Control Investigations, as
set forth in the designated Board form; and
(iii) Such other information as may be required by the Board or
Reserve Bank.
(2) Modification. The Reserve Bank may modify or accept other
information in place of the requirements of this section for a notice
filed under this subpart.
(3) Acceptance and processing of notice. The 30-day notice period
specified in section 238.73 shall begin on the date all information
required to be submitted by the notificant pursuant to this section is
received by the appropriate Reserve Bank. The Reserve Bank shall notify
the savings and loan holding company or individual submitting the
notice of the date on which all required information is received and
the notice is accepted for processing, and of the date on which the 30-
day notice period will expire. The Board or Reserve Bank may extend the
30-day notice period for an additional period of not more than 60 days
by notifying the savings and loan holding company or individual filing
the notice that the period has been extended and stating the reason for
not processing the notice within the 30-day notice period.
(b) [Reserved]
Sec. 238.75 Standards for review.
(a) Notice of disapproval. The Board or Reserve Bank will
disapprove a notice if, pursuant to the standard set forth in 12 U.S.C.
1831i(e), the Board or Reserve Bank finds that the competence,
experience, character, or integrity of the proposed individual
indicates that it would not be in the best interests of the depositors
of the savings and loan holding company or of the public to permit the
individual to be employed by, or associated with, the savings and loan
holding company. If the Board or Reserve Bank disapproves a notice, it
will issue a written notice that explains why the Board or Reserve Bank
disapproved the notice. The Board or Reserve Bank will send the notice
to the savings and loan holding company and the individual.
(b) Appeal of a notice of disapproval. (1) A disapproved individual
or a regulated institution that has submitted a notice that is
disapproved under this section may appeal the disapproval to the Board
within 15 days of the effective date of the notice of disapproval. An
appeal shall be in writing and explain the reasons for the appeal and
include all facts, documents, and arguments that the appealing party
wishes to be considered in the appeal, and state whether the appealing
party is requesting an informal hearing.
[[Page 56551]]
(2) Written notice of the final decision of the Board shall be sent
to the appealing party within 60 days of the receipt of an appeal,
unless the appealing party's request for an informal hearing is
granted.
(3) The disapproved individual may not serve as a director or
senior executive officer of the state member bank or bank holding
company while the appeal is pending.
(c) Informal hearing. (1) An individual or regulated institution
whose notice under this section has been disapproved may request an
informal hearing on the notice. A request for an informal hearing shall
be in writing and shall be submitted within 15 days of a notice of
disapproval. The Board may, in its sole discretion, order an informal
hearing if the Board finds that oral argument is appropriate or
necessary to resolve disputes regarding material issues of fact.
(2) An informal hearing shall be held within 30 days of a request,
if granted, unless the requesting party agrees to a later date.
(3) Written notice of the final decision of the Board shall be
given to the individual and the regulated institution within 60 days of
the conclusion of any informal hearing ordered by the Board, unless the
requesting party agrees to a later date.
Sec. 238.76 Waiting period.
(a) At expiration of period. A proposed director or senior
executive officer may begin service at the end of the 30-day period and
any extension as provided under Sec. 238.74 unless the Board or
Reserve Bank notifies you that it has disapproved the notice before the
end of the period.
(b) Prior to expiration of period. A proposed director or senior
executive officer may begin service before the end of the 30-day period
and any extension as provided under section 238.74 of this section, if
the Board or the Reserve Bank notifies in writing the savings and loan
holding company or individual submitting the notice of the Board's or
Reserve Bank's intention not to disapprove the notice.
Sec. 238.77 Waiver of prior notice requirement.
(a) Waiver request. An individual may serve as a director or senior
executive officer before filing a notice under this subpart if the
Board or Reserve Bank finds that:
(1) Delay would threaten the safety or soundness of the savings and
loan holding company;
(2) Delay would not be in the public interest; or
(3) Other extraordinary circumstances exist that justify waiver of
prior notice.
(b) Automatic waiver. An individual may serve as a director upon
election to the board of directors before filing a notice under this
subpart, if the individual:
(1) Is not proposed by the management of the savings and loan
holding company;
(2) Is elected as a new member of the board of directors at a
meeting of the savings and loan holding company; and
(3) Provides to the appropriate Reserve Bank all the information
required in Sec. 238.74 within two (2) business days after the
individual's election.
(c) Subsequent Board or Reserve Bank action. The Board or Reserve
Bank may disapprove a notice within 30 days after the Board or Reserve
Bank issues a waiver under paragraph (a) of this section or within 30
days after the election of an individual who has filed a notice and is
serving pursuant to an automatic waiver under paragraph (b) of this
section.
Subpart I--Prohibited Service at Savings and Loan Holding Companies
Sec. 238.81 Purpose.
This subpart implements section 19(e)(1) of the Federal Deposit
Insurance Act (FDIA), which prohibits persons who have been convicted
of certain criminal offenses or who have agreed to enter into a pre-
trial diversion or similar program in connection with a prosecution for
such criminal offenses from occupying various positions with a savings
and loan holding company. This part also implements section 19(e)(2) of
the FDIA, which permits the Board to provide exemptions, by regulation
or order, from the application of the prohibition. This subpart
provides an exemption for savings and loan holding company employees
whose activities and responsibilities are limited solely to
agriculture, forestry, retail merchandising, manufacturing, or public
utilities operations, and a temporary exemption for certain persons who
held positions with respect to a savings and loan holding company as of
October 13, 2006. The subpart also describes procedures for applying to
the Board for an exemption.
Sec. 238.82 Definitions.
The following definitions apply to this subpart:
(a) Institution-affiliated party is defined at 12 U.S.C. 1813(u),
except that the phrase ``savings and loan holding company'' is
substituted for ``insured depository institution'' each place that it
appears in that definition.
(b) Enforcement Counsel means any individual who files a notice of
appearance to serve as counsel on behalf of the Board in the
proceeding.
(c) Person means an individual and does not include a corporation,
firm or other business entity.
(d) Savings and loan holding company is defined at Sec. 238.2(m),
but excludes a subsidiary of a savings and loan holding company that is
not itself a savings and loan holding company.
Sec. 238.83 Prohibited actions.
(a) Person. If a person was convicted of a criminal offense
described in Sec. 238.84, or agreed to enter into a pretrial diversion
or similar program in connection with a prosecution for such a criminal
offense, he or she may not:
(1) Become, or continue as, an institution-affiliated party with
respect to any savings and loan holding company.
(2) Own or control, directly or indirectly, any savings and loan
holding company. A person will own or control a savings and loan
holding company if he or she owns or controls that company under
subpart D of this part.
(3) Otherwise participate, directly or indirectly, in the conduct
of the affairs of any savings and loan holding company.
(b) Savings and loan holding company. A savings and loan holding
company may not permit any person described in paragraph (a) of this
section to engage in any conduct or to continue any relationship
prohibited under that paragraph.
Sec. 238.84 Covered convictions or agreements to enter into pre-trial
diversions or similar programs.
(a) Covered convictions and agreements. Except as described in
Sec. 238.85, this subpart covers:
(1) Any conviction of a criminal offense involving dishonesty,
breach of trust, or money laundering. Convictions do not cover arrests,
pending cases not brought to trial, acquittals, convictions reversed on
appeal, pardoned convictions, or expunged convictions.
(2) Any agreement to enter into a pretrial diversion or similar
program in connection with a prosecution for a criminal offense
involving dishonesty, breach of trust or money laundering. A pretrial
diversion or similar program is a program involving a suspension or
eventual dismissal of charges or of a criminal prosecution based upon
an agreement for treatment, rehabilitation, restitution, or other non-
criminal or non-punitive alternative.
(b) Dishonesty or breach of trust. A determination whether a
criminal
[[Page 56552]]
offense involves dishonesty or breach of trust is based on the
statutory elements of the crime.
(1) ``Dishonesty'' means directly or indirectly to cheat or
defraud, to cheat or defraud for monetary gain or its equivalent, or to
wrongfully take property belonging to another in violation of any
criminal statute. Dishonesty includes acts involving a want of
integrity, lack of probity, or a disposition to distort, cheat, or act
deceitfully or fraudulently, and may include crimes which federal,
state or local laws define as dishonest.
(2) ``Breach of trust'' means a wrongful act, use,
misappropriation, or omission with respect to any property or fund
which has been committed to a person in a fiduciary or official
capacity, or the misuse of one's official or fiduciary position to
engage in a wrongful act, use, misappropriation, or omission.
Sec. 238.85 Adjudications and offenses not covered.
(a) Youthful offender or juvenile delinquent. This subpart does not
cover any adjudication by a court against a person as:
(1) A youthful offender under any youthful offender law; or
(2) A juvenile delinquent by a court with jurisdiction over minors
as defined by state law.
(b) De minimis criminal offense. This subpart does not cover de
minimis criminal offenses. A criminal offense is de minimis if:
(1) The person has only one conviction or pretrial diversion or
similar program of record;
(2) The offense was punishable by imprisonment for a term of less
than one year, a fine of less than $1,000, or both, and the person did
not serve time in jail.
(3) The conviction or program was entered at least five years
before the date the person first held a position described in Sec.
238.83(a); and
(4) The offense did not involve an insured depository institution,
insured credit union, or other banking organization (including a
savings and loan holding company, bank holding company, or financial
holding company).
(5) The person must disclose the conviction or pretrial diversion
or similar program to all insured depository institutions and other
banking organizations the affairs of which he or she participates.
(6) The person must be covered by a fidelity bond to the same
extent as others in similar positions with the savings and loan holding
company.
Sec. 238.86 Exemptions.
(a) Employees. An employee of a savings and loan holding company is
exempt from the prohibition in Sec. 238.83, if all of the following
conditions are met:
(1) The employee's responsibilities and activities are limited
solely to agriculture, forestry, retail merchandising, manufacturing,
or public utilities operations.
(2) The savings and loan holding company maintains a list of all
policymaking positions and reviews this list annually.
(3) The employee's position does not appear on the savings and loan
holding company's list of policymaking positions, and the employee does
not, in fact, exercise any policymaking function with the savings and
loan holding company.
(4) The employee:
(i) Is not an institution-affiliated party of the savings and loan
holding company other than by virtue of the employment described in
paragraph (a) of this section.
(ii) Does not own or control, directly or indirectly, the savings
and loan holding company; and
(iii) Does not participate, directly or indirectly, in the conduct
of the affairs of the savings and loan holding company.
(b) Temporary exemption. (1) Any prohibited person who was an
institution affiliated party with respect to a savings and loan holding
company, who owned or controlled, directly or indirectly a savings and
loan holding company, or who otherwise participated directly or
indirectly in the conduct of the affairs of a savings and loan holding
company on October 13, 2006, may continue to hold the position with the
savings and loan holding company.
(2) This exemption expires on December 31, 2012, unless the savings
and loan holding company or the person files an application seeking a
case-by-case exemption for the person under Sec. 238.87 by that date.
If the savings and loan holding company or the person files such an
application, the temporary exemption expires on:
(i) The date of issuance of a Board approval of the application
under Sec. 238.89(a);
(ii) The expiration of the 20-day period for filing a request for
hearing under Sec. 238.90(a) provided there is no timely request for
hearing following the issuance by the Board of a denial of the
application under that section;
(iii) The date that the Board denies a timely request for hearing
under Sec. 238.90(b) following the issuance of a Board denial of the
application under Sec. 238.89(b);
(iv) The date that the Board issues a decision under Sec.
238.90(d); or
(v) The date an applicant withdraws the application.
Sec. 238.87 Filing procedures.
(a) Who may file. (1) A savings and loan holding company or a
person who was convicted of a criminal offense described in Sec.
238.84 or who has agreed to enter into a pre-trial diversion or similar
program in connection with a prosecution for such a criminal offense
may file an application with the Board seeking an exemption from the
prohibitions in this subpart.
(2) A savings and loan holding company or a person may seek an
exemption only for a designated position (or positions) with respect to
a named savings and loan holding company.
(3) A savings and loan holding company or a person may not file an
application less than one year after the latter of the date of a denial
of the same exemption under Sec. 238.89(b), Sec. 238.90(a) or Sec.
238.90(d).
(b) Prohibition pending Board action. Unless a savings and loan
holding company or a person is exempt under Sec. 238.86(b), the
prohibitions in Sec. 238.83 continue to apply pending Board action on
the application.
Sec. 238.88 Factors for review.
(a) Board review. (1) In determining whether to approve an
exemption application filed under Sec. 238.87, the Board will consider
the extent to which the position that is the subject of the application
enables a person to:
(i) Participate in the major policymaking functions of the savings
and loan holding company; or
(ii) Threaten the safety and soundness of any insured depository
institution that is controlled by the savings and loan holding company,
the interests of its depositors, or the public confidence in the
insured depository institution.
(2) The Board will also consider whether the applicant has
demonstrated the person's fitness to hold the described position. Some
positions may be approved without an extensive review of a person's
fitness because the position does not enable a person to take the
actions described in paragraph (a)(1) of this section.
(b) Factors. In making the determinations under paragraph (a) of
this section, the Board will consider the following factors:
(1) The position;
(2) The amount of influence and control a person holding the
position
[[Page 56553]]
will be able to exercise over the affairs and operations of the savings
and loan holding company and the insured depository institution;
(3) The ability of the management of the savings and loan holding
company to supervise and control the activities of a person holding the
position;
(4) The level of ownership that the person will have at the savings
and loan holding company;
(5) The specific nature and circumstances of the criminal offense.
The question whether a person who was convicted of a crime or who
agreed to enter into a pretrial diversion or similar program for a
crime was guilty of that crime is not relevant;
(6) Evidence of rehabilitation; and
(7) Any other relevant factor.
Sec. 238.89 Board action.
(a) Approval. The Board will notify an applicant if an application
under this subpart is approved. An approval by the Board may include
such conditions as the Board determines to be appropriate.
(b) Denial. If Board denies an application, the Board will notify
an applicant promptly.
Sec. 238.90 Hearings.
(a) Hearing requests. Within 20 days of the date of issuance of a
denial of an application filed under this subpart, a savings and loan
holding company or a person whose application the Board has denied may
file a written request demonstrating good cause for a hearing on the
denial.
(b) Board review of hearing request. The Board will review the
hearing request to determine if the savings and loan holding company or
person has demonstrated good cause for a hearing on the application.
Within 30 days after the filing of a timely request for a hearing, the
Board will notify the savings and loan holding company or person in
writing of its decision to grant or deny the hearing request. If the
Board grants the request for a hearing, it will order a hearing to be
commenced within 60 days of the issuance of the notification. Upon the
request of a party, the Board may at its discretion order a later
hearing date.
(c) Hearing procedures. The following procedures apply to hearings
under this subpart.
(1) The hearing shall be held in Washington, DC, or at another
designated place, before a presiding officer designated by the Board.
(2) An applicant may elect in writing to have the matter determined
on the basis of written submissions, rather than an oral hearing.
(3) The parties to the hearing are Enforcement Counsel and the
applicant.
(4) The provisions of Sec. Sec. 263.2, 263.4, 263.6 through
263.12, and 263.16 of this chapter apply to the hearing.
(5) Discovery is not permitted.
(6) A party may introduce relevant and material documents and make
oral argument at the hearing.
(7) At the discretion of the presiding officer, witnesses may be
presented within specified time limits, provided that a list of
witnesses is furnished to the presiding officer and to all other
parties prior to the hearing. Witnesses must be sworn, unless otherwise
directed by the presiding officer. The presiding officer may ask
questions of any witness. Each party may cross-examine any witness
presented by the opposing party. The Board will furnish a transcript of
the proceedings upon an applicant's request and upon the payment of the
costs of the transcript.
(8) The presiding officer has the power to administer oaths and
affirmations, to take or cause to be taken depositions of unavailable
witnesses, and to issue, revoke, quash, or modify subpoenas and
subpoenas duces tecum. If the presentation of witnesses is permitted,
the presiding officer may require the attendance of witnesses from any
state, territory, or other place subject to the jurisdiction of the
United States at any location where the proceeding is being conducted.
Witness fees are paid in accordance with section 263.14 of this
chapter.
(9) Upon the request of a party, the record will remain open for
five business days following the hearing for additional submissions to
the record.
(10) Enforcement Counsel has the burden of proving a prima facie
case that a person is prohibited from a position under section 19(e) of
the FDIA. The applicant has the burden of proof on all other matters.
(11) The presiding officer must make recommendations to the Board,
where possible, within 20 days after the last day for the parties to
submit additions to the record.
(12) The presiding officer must forward his or her recommendation
to the Board who shall promptly certify the entire record, including
the presiding officer's recommendations. The Board's certification will
close the record.
(d) Decision. After the certification of the record, the Board will
notify the parties of its decision by issuing an order approving or
denying the application.
(1) An approval order will require fidelity bond coverage for the
position to the same extent as similar positions with the savings and
loan holding company. The approval order may include such other
conditions as may be appropriate.
(2) A denial order will include a summary of the relevant factors
under Sec. 238.88(b).
Subpart J--Management Official Interlocks
Sec. 238.91 Authority, purpose, and scope.
(a) Authority. This subpart is issued under the provisions of the
Depository Institution Management Interlocks Act (Interlocks Act) (12
U.S.C. 3201 et seq.), as amended.
(b) Purpose. The purpose of the Interlocks Act and this subpart is
to foster competition by generally prohibiting a management official
from serving two nonaffiliated depository organizations in situations
where the management interlock likely would have an anticompetitive
effect.
(c) Scope. This subpart applies to management officials of savings
and loan holding companies, and their affiliates.
Sec. 238.92 Definitions.
For purposes of this subpart, the following definitions apply:
(a) Affiliate. (1) The term affiliate has the meaning given in
section 202 of the Interlocks Act (12 U.S.C. 3201). For purposes of
that section 202, shares held by an individual include shares held by
members of his or her immediate family. ``Immediate family'' means
spouse, mother, father, child, grandchild, sister, brother, or any of
their spouses, whether or not any of their shares are held in trust.
(2) For purposes of section 202(3)(B) of the Interlocks Act (12
U.S.C. 3201(3)(B)), an affiliate relationship involving a savings and
loan holding company based on common ownership does not exist if the
Board determines, after giving the affected persons the opportunity to
respond, that the asserted affiliation was established in order to
avoid the prohibitions of the Interlocks Act and does not represent a
true commonality of interest between the depository organizations. In
making this determination, the Board considers, among other things,
whether a person, including members of his or her immediate family,
whose shares are necessary to constitute the group owns a nominal
percentage of the shares of one of the organizations and the percentage
is substantially disproportionate to that person's ownership of shares
in the other organization.
(b) Area median income means:
(1) The median family income for the metropolitan statistical area
(MSA), if a
[[Page 56554]]
depository organization is located in an MSA; or
(2) The statewide nonmetropolitan median family income, if a
depository organization is located outside an MSA.
(c) Community means a city, town, or village, and contiguous or
adjacent cities, towns, or villages.
(d) Contiguous or adjacent cities, towns, or villages means cities,
towns, or villages whose borders touch each other or whose borders are
within 10 road miles of each other at their closest points. The
property line of an office located in an unincorporated city, town, or
village is the boundary line of that city, town, or village for the
purpose of this definition.
(e) Depository holding company means a bank holding company or a
savings and loan holding company (as more fully defined in section 202
of the Interlocks Act (12 U.S.C. 3201)) having its principal office
located in the United States.
(f) Depository institution means a commercial bank (including a
private bank), a savings bank, a trust company, a savings and loan
association, a building and loan association, a homestead association,
a cooperative bank, an industrial bank, or a credit union, chartered
under the laws of the United States and having a principal office
located in the United States. Additionally, a United States office,
including a branch or agency, of a foreign commercial bank is a
depository institution.
(g) Depository institution affiliate means a depository institution
that is an affiliate of a depository organization.
(h) Depository organization means a depository institution or a
depository holding company.
(i) Low- and moderate-income areas means census tracts (or, if an
area is not in a census tract, block numbering areas delineated by the
United States Bureau of the Census) where the median family income is
less than 100 percent of the area median income.
(j) Management official. (1) The term management official means:
(i) A director;
(ii) An advisory or honorary director of a depository institution
with total assets of $100 million or more;
(iii) A senior executive officer as that term is defined in Sec.
225.71(c) of this chapter;
(iv) A branch manager;
(v) A trustee of a depository organization under the control of
trustees; and
(vi) Any person who has a representative or nominee serving in any
of the capacities in this paragraph (j)(1).
(2) The term management official does not include:
(i) A person whose management functions relate exclusively to the
business of retail merchandising or manufacturing;
(ii) A person whose management functions relate principally to the
business outside the United States of a foreign commercial bank; or
(iii) A person described in the provisos of section 202(4) of the
Interlocks Act (12 U.S.C. 3201(4)) (referring to an officer of a State-
chartered savings bank, cooperative bank, or trust company that neither
makes real estate mortgage loans nor accepts savings).
(k) Office means a principal or branch office of a depository
institution located in the United States. Office does not include a
representative office of a foreign commercial bank, an electronic
terminal, or a loan production office.
(l) Person means a natural person, corporation, or other business
entity.
(m) Relevant metropolitan statistical area (RMSA) means an MSA, a
primary MSA, or a consolidated MSA that is not comprised of designated
Primary MSAs to the extent that these terms are defined and applied by
the Office of Management and Budget.
(n) Representative or nominee means a natural person who serves as
a management official and has an obligation to act on behalf of another
person with respect to management responsibilities. The Board will find
that a person has an obligation to act on behalf of another person only
if the first person has an agreement, express or implied, to act on
behalf of the second person with respect to management
responsibilities. The Board will determine, after giving the affected
persons an opportunity to respond, whether a person is a representative
or nominee.
(o) Savings association means:
(1) Any Federal savings association (as defined in section 3(b)(2)
of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(2)));
(2) Any state savings association (as defined in section 3(b)(3) of
the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(3))) the deposits
of which are insured by the Federal Deposit Insurance Corporation; and
(3) Any corporation (other than a bank as defined in section
3(a)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1813(a)(1)))
the deposits of which are insured by the Federal Deposit Insurance
Corporation, that the Board of Directors of the Federal Deposit
Insurance Corporation and the Comptroller of the Currency jointly
determine to be operating in substantially the same manner as a savings
association.
(p) Total assets. (1) The term total assets means assets measured
on a consolidated basis and reported in the most recent fiscal year-end
Consolidated Report of Condition and Income.
(2) The term total assets does not include:
(i) Assets of a diversified savings and loan holding company as
defined by section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C.
1467a(a)(1)(F)) other than the assets of its depository institution
affiliate;
(ii) Assets of a bank holding company that is exempt from the
prohibitions of section 4 of the Bank Holding Company Act of 1956
pursuant to an order issued under section 4(d) of that Act (12 U.S.C.
1843(d)) other than the assets of its depository institution affiliate;
or
(iii) Assets of offices of a foreign commercial bank other than the
assets of its United States branch or agency.
(q) United States means the United States of America, any State or
territory of the United States of America, the District of Columbia,
Puerto Rico, Guam, American Samoa, and the Virgin Islands.
Sec. 238.93 Prohibitions.
(a) Community. A management official of a depository organization
may not serve at the same time as a management official of an
unaffiliated depository organization if the depository organizations in
question (or a depository institution affiliate thereof) have offices
in the same community.
(b) RMSA. A management official of a depository organization may
not serve at the same time as a management official of an unaffiliated
depository organization if the depository organizations in question (or
a depository institution affiliate thereof) have offices in the same
RMSA and each depository organization has total assets of $50 million
or more.
(c) Major assets. A management official of a depository
organization with total assets exceeding $2.5 billion (or any affiliate
of such an organization) may not serve at the same time as a management
official of an unaffiliated depository organization with total assets
exceeding $1.5 billion (or any affiliate of such an organization),
regardless of the location of the two depository organizations. The
Board will adjust these thresholds, as necessary, based on the year-to-
year change in the average of the Consumer Price Index for the Urban
Wage Earners and Clerical Workers, not seasonally adjusted, with
rounding to the nearest $100 million. The Board will
[[Page 56555]]
announce the revised thresholds by publishing a final rule without
notice and comment in the Federal Register.
Sec. 238.94 Interlocking relationships permitted by statute.
The prohibitions of Sec. 238.93 do not apply in the case of any
one or more of the following organizations or to a subsidiary thereof:
(a) A depository organization that has been placed formally in
liquidation, or which is in the hands of a receiver, conservator, or
other official exercising a similar function;
(b) A corporation operating under section 25 or section 25A of the
Federal Reserve Act (12 U.S.C. 601 et seq. and 12 U.S.C. 611 et seq.,
respectively) (Edge Corporations and Agreement Corporations);
(c) A credit union being served by a management official of another
credit union;
(d) A depository organization that does not do business within the
United States except as an incident to its activities outside the
United States;
(e) A State-chartered savings and loan guaranty corporation;
(f) A Federal Home Loan Bank or any other bank organized solely to
serve depository institutions (a bankers' bank) or solely for the
purpose of providing securities clearing services and services related
thereto for depository institutions and securities companies;
(g) A depository organization that is closed or is in danger of
closing as determined by the appropriate Federal depository
institutions regulatory agency and is acquired by another depository
organization. This exemption lasts for five years, beginning on the
date the depository organization is acquired;
(h)(1) A diversified savings and loan holding company (as defined
in section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C.
1467a(a)(1)(F)) with respect to the service of a director of such
company who also is a director of an unaffiliated depository
organization if:
(i) Both the diversified savings and loan holding company and the
unaffiliated depository organization notify their appropriate Federal
depository institutions regulatory agency at least 60 days before the
dual service is proposed to begin; and
(ii) The appropriate regulatory agency does not disapprove the dual
service before the end of the 60-day period.
(2) The Board may disapprove a notice of proposed service if it
finds that:
(i) The service cannot be structured or limited so as to preclude
an anticompetitive effect in financial services in any part of the
United States;
(ii) The service would lead to substantial conflicts of interest or
unsafe or unsound practices; or
(iii) The notificant failed to furnish all the information required
by the Board.
(3) The Board may require that any interlock permitted under this
paragraph (h) be terminated if a change in circumstances occurs with
respect to one of the interlocked depository organizations that would
have provided a basis for disapproval of the interlock during the
notice period; and
(i) Any savings association or any savings and loan holding company
(as defined in section 10(a)(1)(D) of the Home Owners' Loan Act) which
has issued stock in connection with a qualified stock issuance pursuant
to section 10(q) of such Act, except that this paragraph (i) shall
apply only with regard to service by a single management official of
such savings association or holding company, or any subsidiary of such
savings association or holding company, by a single management official
of the savings and loan holding company which purchased the stock
issued in connection with such qualified stock issuance, and shall
apply only when the Board has determined that such service is
consistent with the purposes of the Interlocks Act and the Home Owners'
Loan Act.
Sec. 238.95 Small market share exemption.
(a) Exemption. A management interlock that is prohibited by Sec.
238.93 is permissible, if:
(1) The interlock is not prohibited by Sec. 238.93(c); and
(2) The depository organizations (and their depository institution
affiliates) hold, in the aggregate, no more than 20 percent of the
deposits in each RMSA or community in which both depository
organizations (or their depository institution affiliates) have
offices. The amount of deposits shall be determined by reference to the
most recent annual Summary of Deposits published by the FDIC for the
RMSA or community.
(b) Confirmation and records. Each depository organization must
maintain records sufficient to support its determination of eligibility
for the exemption under paragraph (a) of this section, and must
reconfirm that determination on an annual basis.
Sec. 238.96 General exemption.
(a) Exemption. The Board may by agency order exempt an interlock
from the prohibitions in Sec. 238.93 if the Board finds that the
interlock would not result in a monopoly or substantial lessening of
competition and would not present safety and soundness concerns. A
depository organization may apply to the Board for an exemption.
(b) Presumptions. In reviewing an application for an exemption
under this section, the Board will apply a rebuttable presumption that
an interlock will not result in a monopoly or substantial lessening of
competition if the depository organization seeking to add a management
official:
(1) Primarily serves low- and moderate-income areas;
(2) Is controlled or managed by persons who are members of a
minority group, or women;
(3) Is a depository institution that has been chartered for less
than two years; or
(4) Is deemed to be in ``troubled condition'' as defined in Sec.
238.72.
(c) Duration. Unless a shorter expiration period is provided in the
Board approval, an exemption permitted by paragraph (a) of this section
may continue so long as it does not result in a monopoly or substantial
lessening of competition, or is unsafe or unsound. If the Board grants
an interlock exemption in reliance upon a presumption under paragraph
(b) of this section, the interlock may continue for three years, unless
otherwise provided by the Board in writing.
Sec. 238.97 Change in circumstances.
(a) Termination. A management official shall terminate his or her
service or apply for an exemption if a change in circumstances causes
the service to become prohibited. A change in circumstances may include
an increase in asset size of an organization, a change in the
delineation of the RMSA or community, the establishment of an office,
an increase in the aggregate deposits of the depository organization,
or an acquisition, merger, consolidation, or reorganization of the
ownership structure of a depository organization that causes a
previously permissible interlock to become prohibited.
(b) Transition period. A management official described in paragraph
(a) of this section may continue to serve the depository organization
involved in the interlock for 15 months following the date of the
change in circumstances. The Board may shorten this period under
appropriate circumstances.
Sec. 238.98 Enforcement.
Except as provided in this section, the Board administers and
enforces the Interlocks Act with respect to savings and loan holding
companies and its affiliates, and may refer any case of a prohibited
interlocking relationship
[[Page 56556]]
involving these entities to the Attorney General of the United States
to enforce compliance with the Interlocks Act and this part. If an
affiliate of a savings and loan holding company is subject to the
primary regulation of another Federal depository organization
supervisory agency, then the Board does not administer and enforce the
Interlocks Act with respect to that affiliate.
Sec. 238.99 Interlocking relationships permitted pursuant to Federal
Deposit Insurance Act.
A management official or prospective management official of a
depository organization may enter into an otherwise prohibited
interlocking relationship with another depository organization for a
period of up to 10 years if such relationship is approved by the
Federal Deposit Insurance Corporation pursuant to section
13(k)(1)(A)(v) of the Federal Deposit Insurance Act, as amended (12
U.S.C. 1823(k)(1)(A)(v)).
Subpart K--Dividends by Subsidiary Savings Associations
Sec. 238.101 Authority and purpose.
This subpart implements section 10(f) of HOLA which requires
savings associations with holding companies to provide the Board not
less than 30 days' notice of a proposed declaration of a dividend. This
subpart applies to all declarations of dividends by a subsidiary
savings association of a savings and loan holding company.
Sec. 238.102 Definitions.
The following definitions apply to this subpart:
(a) Appropriate Federal banking agency has the same meaning as in
12 U.S.C. 1813(q) and includes, with respect to agreements entered into
and conditions imposed prior to July 21, 2011, the Office of Thrift
Supervision.
(b) Dividend means:
(1) A distribution of cash or other property to owners of a savings
association made on account of their ownership, but not any dividend
consisting only of shares or rights to purchase shares; or
(2) Any transaction that the Board determines, by order or
regulation, to be in substance a dividend.
(c) Shares means common and preferred stock, and any options,
warrants, or other rights for the acquisition of such stock. The term
``share'' also includes convertible securities upon their conversion
into common or preferred stock. The term does not include convertible
debt securities prior to their conversion into common or preferred
stock or other securities that are not equity securities at the time of
a dividend.
Sec. 238.103 Filing requirement.
(a) Filing. A subsidiary savings association of a savings and loan
holding company must file a notice with the appropriate Reserve Bank on
the designated form at least 30 days before the proposed declaration of
a dividend by its board of directors.
(b) Schedules. A notice may include a schedule proposing dividends
over a specified period, not to exceed 12 months.
Sec. 238.104 Board action and criteria for review.
(a) Board action. (1) A subsidiary savings association of a savings
and loan holding company may declare a proposed dividend after the end
of a 30-day review period commencing on the date of submission to the
Federal Reserve System of the complete record on the notice, unless the
Board or Reserve Bank disapproves the notice before the end of the
period.
(2) A subsidiary savings association of a savings and loan holding
company may declare a proposed dividend before the end of the 30-day
period if the Board or Reserve Bank notifies the applicant in writing
of the Board's or Reserve Bank's intention not to disapprove the
notice.
(b) Criteria. The Board or Reserve Bank may disapprove a notice, in
whole or in part, if the Board or Reserve Bank makes any of the
following determinations.
(1) Following the dividend the subsidiary savings association will
be undercapitalized, significantly undercapitalized, or critically
undercapitalized as set forth in applicable regulations under 12 U.S.C.
1831o.
(2) The proposed dividend raises safety or soundness concerns.
(3) The proposed dividend violates a prohibition contained in any
statute, regulation, enforcement action, or agreement between the
subsidiary savings association or any savings and loan holding company
of which it is a subsidiary and an appropriate Federal banking agency,
a condition imposed on the subsidiary savings association or any
savings and loan holding company of which it is a subsidiary in an
application or notice approved by an appropriate Federal banking
agency, or any formal or informal enforcement action involving the
subsidiary savings association or any savings and loan holding company
of which it is a subsidiary. If so, the Board will determine whether it
may permit the dividend notwithstanding the prohibition, condition, or
enforcement action.
Subpart L--Investigative Proceedings and Formal Examination
Proceedings
Sec. 238.111 Scope.
This part prescribes rules of practice and procedure applicable to
the conduct of investigative proceedings under section 10(g)(2) of the
Home Owners' Loan Act, as amended, 12 U.S.C. 1467a(g)(2) (``HOLA'') and
to the conduct of formal examination proceedings with respect to
savings and loan holding companies and their affiliates under section
5(d)(1)(B) of the HOLA, as amended, 12 U.S.C. 1464(d)(1)(B) or section
7(j)(15) of the Federal Deposit Insurance Act, as amended, 12 U.S.C.
1817(j)(15) (``FDIA''), section 8(n) of the FDIA, 12 U.S.C. 1818(n), or
section 10(c) of the FDIA, 12 U.S.C. 1820(c). This part does not apply
to adjudicatory proceedings as to which hearings are required by
statute, the rules for which are contained in part 262 of this chapter.
Sec. 238.112 Definitions.
As used in this part:
(a) Investigative proceeding means an investigation conducted under
section 10(g)(2) of the HOLA;
(b) Formal examination proceeding means the administration of oaths
and affirmations, taking and preserving of testimony, requiring the
production of books, papers, correspondence, memoranda, and all other
records, the issuance of subpoenas, and all related activities in
connection with examination of savings and loan holding companies and
their affiliates conducted pursuant to section 5(d)(1)(B) of the HOLA,
section 7(j)(15) of the FDIA, section 8(n) of the FDIA or section 10(c)
of the FDIA; and
(c) Designated representative means the person or persons empowered
by the Board to conduct an investigative proceeding or a formal
examination proceeding.
Sec. 238.113 Confidentiality of proceedings.
All formal examination proceedings shall be private and, unless
otherwise ordered by the Board, all investigative proceedings shall
also be private. Unless otherwise ordered or permitted by the Board, or
required by law, and except as provided in Sec. Sec. 238.114 and
238.115, the entire record of any investigative proceeding or formal
examination proceeding, including the resolution of the Board or its
delegate(s) authorizing the proceeding, the transcript of such
proceeding, and all documents and information obtained by the
designated
[[Page 56557]]
representative(s) during the course of said proceedings shall be
confidential.
Sec. 238.114 Transcripts.
Transcripts or other recordings, if any, of investigative
proceedings or formal examination proceedings shall be prepared solely
by an official reporter or by any other person or means authorized by
the designated representative. A person who has submitted documentary
evidence or given testimony in an investigative proceeding or formal
examination proceeding may procure a copy of his own documentary
evidence or transcript of his own testimony upon payment of the cost
thereof; provided, that a person seeking a transcript of his own
testimony must file a written request with the Board stating the reason
he desires to procure such transcript, and the Board may for good cause
deny such request. In any event, any witness (or his counsel) shall
have the right to inspect the transcript of the witness' own testimony.
Sec. 238.115 Rights of witnesses.
(a) Any person who is compelled or requested to furnish documentary
evidence or give testimony at an investigative proceeding or formal
examination proceeding shall have the right to examine, upon request,
the Board resolution authorizing such proceeding. Copies of such
resolution shall be furnished, for their retention, to such persons
only with the written approval of the Board.
(b) Any witness at an investigative proceeding or formal
examination proceeding may be accompanied and advised by an attorney
personally representing that witness.
(1) Such attorney shall be a member in good standing of the bar of
the highest court of any state, Commonwealth, possession, territory, or
the District of Columbia, who has not been suspended or debarred from
practice by the bar of any such political entity or before the Board in
accordance with the provisions of part 263 of this chapter and has not
been excluded from the particular investigative proceeding or formal
examination proceeding in accordance with paragraph (b)(3) of this
section.
(2) Such attorney may advise the witness before, during, and after
the taking of his testimony and may briefly question the witness, on
the record, at the conclusion of his testimony, for the sole purpose of
clarifying any of the answers the witness has given. During the taking
of the testimony of a witness, such attorney may make summary notes
solely for his use in representing his client. All witnesses shall be
sequestered, and, unless permitted in the discretion of the designated
representative, no witness or accompanying attorney may be permitted to
be present during the taking of testimony of any other witness called
in such proceeding. Neither attorney(s) for the association(s) that are
the subjects of the investigative proceedings or formal examination
proceedings, nor attorneys for any other interested persons, shall have
any right to be present during the testimony of any witness not
personally being represented by such attorney.
(3) The Board, for good cause, may exclude a particular attorney
from further participation in any investigation in which the Board has
found the attorney to have engaged in dilatory, obstructionist,
egregious, contemptuous or contumacious conduct. The person conducting
an investigation may report to the Board instances of apparently
dilatory, obstructionist, egregious, contemptuous or contumacious
conduct on the part of an attorney. After due notice to the attorney,
the Board may take such action as the circumstances warrant based upon
a written record evidencing the conduct of the attorney in that
investigation or such other or additional written or oral presentation
as the Board may permit or direct.
Sec. 238.116 Obstruction of proceedings.
The designated representative shall report to the Board any
instances where any witness or counsel has engaged in dilatory,
obstructionist, or contumacious conduct or has otherwise violated any
provision of this part during the course of an investigative proceeding
or formal examination proceeding; and the Board may take such action as
the circumstances warrant, including the exclusion of counsel from
further participation in such proceeding.
Sec. 238.117 Subpoenas.
(a) Service. Service of a subpoena in connection with any
investigative proceeding or formal examination proceeding shall be
effected in the following manner:
(1) Service upon a natural person. Service of a subpoena upon a
natural person may be effected by handing it to such person; by leaving
it at his office with the person in charge thereof, or, if there is no
one in charge, by leaving it in a conspicuous place therein; by leaving
it at his dwelling place or usual place of abode with some person of
suitable age and discretion then residing therein; by mailing it to him
by registered or certified mail or by an express delivery service at
his last known address; or by any method whereby actual notice is given
to him.
(2) Service upon other persons. When the person to be served is not
a natural person, service of the subpoena may be effected by handing
the subpoena to a registered agent for service, or to any officer,
director, or agent in charge of any office of such person; by mailing
it to any such representative by registered or certified mail or by an
express delivery service at his last known address; or by any method
whereby actual notice is given to such person.
(b) Motions to quash. Any person to whom a subpoena is directed
may, prior to the time specified therein for compliance, but in no
event more than 10 days after the date of service of such subpoena,
apply to the Board or its designee to quash or modify such subpoena,
accompanying such application with a statement of the reasons
therefore. The Board or its designee, as appropriate, may:
(1) Deny the application;
(2) Quash or revoke the subpoena;
(3) Modify the subpoena; or
(4) Condition the granting of the application on such terms as the
Board or its designee determines to be just, reasonable, and proper.
(c) Attendance of witnesses. Subpoenas issued in connection with an
investigative proceeding or formal examination proceeding may require
the attendance and/or testimony of witnesses from any State or
territory of the United States and the production by such witnesses of
documentary or other tangible evidence at any designated place where
the proceeding is being (or is to be) conducted. Foreign nationals are
subject to such subpoenas if such service is made upon a duly
authorized agent located in the United States.
(d) Witness fees and mileage. Witnesses summoned in any proceeding
under this part shall be paid the same fees and mileage that are paid
witnesses in the district courts of the United States. Such fees and
mileage need not be tendered when the subpoena is issued on behalf of
the Board by any of its designated representatives.
0
14. Add new part 239 to read as follows:
PART 239--MUTUAL HOLDING COMPANIES (REGULATION MM)
Subpart A--General Provisions
Sec.
239.1 Authority, purpose, and scope.
239.2 Definitions.
Subpart B--Mutual Holding Companies
Sec.
[[Page 56558]]
239.3 Mutual holding company reorganizations.
239.4 Grounds for disapproval of reorganizations.
239.5 Membership rights.
239.6 Contents of Reorganization Plans.
239.7 Acquisition and disposition of savings associations, savings
and loan holding companies, and other corporations by mutual holding
companies.
239.8 Operating restrictions.
239.9 Conversion or liquidation of mutual holding companies.
239.10 Procedural requirements.
239.11 Subsidiary holding companies.
239.12 Communication between members of a mutual holding company.
239.13 Charters.
239.14 Charter amendments.
239.15 Bylaws.
239.16 Voluntary dissolution.
Subpart C--Subsidiary Holding Companies
Sec.
239.20 Scope.
239.21 Charters.
239.22 Charter amendments.
239.23 Bylaws.
239.24 Issuances of stock by subsidiary holding companies of mutual
holding companies.
239.25 Contents of Stock Issuance Plans.
239.26 Shareholders.
239.27 Board of directors.
239.28 Officers.
239.29 Certificates for shares and their transfer.
239.30 Annual reports; books and records.
239.31 Indemnification; employment contracts.
Subpart D--Indemnification; Employment Contracts
Sec.
239.40 Indemnification of directors, officers and employees.
239.41 Employment contracts.
Subpart E--Conversions from Mutual to Stock Form
Sec.
239.50 Purpose and scope.
239.51 Acquiring another insured stock depository institution as
part of a conversion.
239.52 Definitions.
239.53 Prior to conversion.
239.54 Plan of conversion.
239.55 Filing requirements.
239.56 Vote by members.
239.57 Proxy solicitation.
239.58 Offering circular.
239.59 Offers and sales of stock.
239.60 Completion of the offering.
239.61 Completion of the conversion.
239.62 Liquidation account.
239.63 Post-conversion.
239.64 Contributions to charitable organizations.
239.65 Voluntary supervisory conversions.
239.66 Board review of the voluntary supervisory conversion
application.
Appendix A to Part 239--Mutual Holding Company Model Charter
Appendix B to Part 239--Subsidiary Holding Company of a Mutual
Holding Company Model Charter
Appendix C to Part 239--Mutual Holding Company Model Bylaws
Appendix D to Part 239--Subsidiary Holding Company of a Mutual
Holding Company Model Bylaws
Authority: 12 U.S.C. 1462, 1462a, 1464, 1467a, 1828, and 2901.
Subpart A--General Provisions
Sec. 239.1 Authority, purpose, and scope.
(a) Authority. This part is issued by the Board of Governors of the
Federal Reserve System (``Board'') under section 10(g) and (o) of the
Home Owners' Loan Act (``HOLA'').
(b) Purpose. The principal purposes of this part are to:
(1) Regulate the reorganization of mutual savings associations to
mutual holding companies and the creation of subsidiary holding
companies of mutual holding companies;
(2) Define and regulate the operations of mutual holding companies
and subsidiary holding companies of mutual holding companies; and
(3) Set forth the procedures for securing approval for these
transactions.
(c) Scope. Except as the Board may otherwise determine, the
reorganization of mutual savings associations into mutual holding
companies, any related stock issuances by subsidiary holding companies,
and the conversion of mutual holding companies into stock form are
exclusively governed by the provisions of this part, and no mutual
savings association shall reorganize to a mutual holding company, no
subsidiary holding company of a mutual holding company shall issue
minority stock, and no mutual holding company shall convert into stock
form without the prior written approval of the Board. The Board may
grant a waiver in writing from any requirement of this part for good
cause shown.
Sec. 239.2 Definitions.
As used in this part and in the forms under this part, the
following definitions apply, unless the context otherwise requires:
(a) Acquiree association means any savings association, other than
a resulting association, that:
(1) Is acquired by a mutual holding company as part of, and
concurrently with, a mutual holding company reorganization; and
(2) Is in the mutual form immediately prior to such acquisition.
(b) Acting in concert has the same meaning as in Sec. 238.31(b) of
this chapter.
(c) Affiliate has the same meaning as in Sec. 238.2(a) of this
chapter.
(d) Associate of a person is:
(1) A corporation or organization (other than the mutual holding
company, subsidiary holding company, or any majority-owned subsidiaries
of such holding companies), if the person is a senior officer or
partner, or beneficially owns, directly or indirectly, 10 percent or
more of any class of equity securities of the corporation or
organization.
(2) A trust or other estate, if the person has a substantial
beneficial interest in the trust or estate or is a trustee or fiduciary
of the trust or estate. For purposes of Sec. Sec. 239.59(k),
239.59(m), 239.59(n), 239.59(o), 239.59(p), 239.63(b), a person who has
a substantial beneficial interest in the mutual holding company or
subsidiary holding company's tax-qualified or non-tax-qualified
employee stock benefit plan, or who is a trustee or a fiduciary of the
plan, is not an associate of the plan. For the purposes of Sec.
239.59(k), the mutual holding company or subsidiary holding company's
tax-qualified employee stock benefit plan is not an associate of a
person.
(3) Any natural person who is related by blood or marriage to such
person and:
(i) Who lives in the same home as the person; or
(ii) Who is a director or senior officer of the mutual holding
company, subsidiary holding company, or other subsidiary.
(e) Company means any corporation, partnership, trust, association,
joint venture, pool, syndicate, unincorporated organization, joint-
stock company or similar organization, as defined in paragraph (u) of
this section; but a company does not include:
(1) The Federal Deposit Insurance Corporation, the Resolution Trust
Corporation, or any Federal Home Loan Bank, or
(2) Any company the majority of shares of which is owned by:
(i) The United States or any State,
(ii) An officer of the United States or any State in his or her
official capacity, or
(iii) An instrumentality of the United States or any State.
(f) Control has the same meaning as in Sec. 238.2(e) of this
chapter.
(g) Default means any adjudication or other official determination
of a court of competent jurisdiction or other public authority pursuant
to which a conservator, receiver, or other legal custodian is appointed
for a mutual holding company or subsidiary savings association of a
mutual holding company.
[[Page 56559]]
(h) Demand accounts mean non-interest-bearing demand deposits that
are subject to check or to withdrawal or transfer on negotiable or
transferable order to the savings association and that are permitted to
be issued by statute, regulation, or otherwise and are payable on
demand.
(i) Insider means any officer or director of a company or of any
affiliate of such company, and any person acting in concert with any
such officer or director.
(j) Member means any depositor or borrower of a mutual savings
association that is entitled, under the charter of the savings
association, to vote on matters affecting the association, and any
depositor or borrower of a subsidiary savings association of a mutual
holding company that is entitled, under the charter of the mutual
holding company, to vote on matters affecting the mutual holding
company.
(k) Mutual holding company means a holding company organized in
mutual form under this part, and unless otherwise indicated, a
subsidiary holding company controlled by a mutual holding company,
organized under this part.
(l) Parent means any company which directly or indirectly controls
any other company or companies.
(m) Person includes an individual, bank, corporation, partnership,
trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization, or any other form of
entity.
(n) Reorganization Notice means a notice of a proposed mutual
holding company reorganization that is in the form and contains the
information required by the Board.
(o) Reorganization Plan means a plan to reorganize into the mutual
holding company format containing the information required by Sec.
239.6.
(p) Reorganizing association means a mutual savings association
that proposes to reorganize to become a mutual holding company pursuant
to this part.
(q) Resulting association means a savings association in the stock
form that is organized as a subsidiary of a reorganizing association to
receive the substantial part of the assets and liabilities (including
all deposit accounts) of the reorganizing association upon consummation
of the reorganization.
(r) Savings account means any withdrawable account, except a demand
account, a tax and loan account, a note account, a United States
Treasury general account, or a United States Treasury time deposit-open
account.
(s) Savings Association has the same meaning as in Sec. 238.2(l)
of this chapter.
(t) Savings and loan holding company has the same meaning as
specified in section 10(a)(1) of the HOLA and Sec. 238.2(m) of this
chapter.
(u) Similar organization for purposes of paragraph (e) of this
section means a combination of parties with the potential for or
practical likelihood of continuing rather than temporary existence,
where the parties thereto have knowingly and voluntarily associated for
a common purpose pursuant to identifiable and binding relationships
which govern the parties with respect to either:
(1) The transferability and voting of any stock or other indicia of
participation in another entity, or
(2) Achievement of a common or shared objective, such as to
collectively manage or control another entity.
(v) Stock means common or preferred stock, or any other type of
equity security, including (without limitation) warrants or options to
acquire common or preferred stock, or other securities that are
convertible into common or preferred stock.
(w) Stock Issuance Plan means a plan, submitted pursuant to Sec.
239.24 and containing the information required by Sec. 239.25,
providing for the issuance of stock by a subsidiary holding company.
(x) Subsidiary means any company which is owned or controlled
directly or indirectly by a person, and includes any service
corporation owned in whole or in part by a savings association, or a
subsidiary of such service corporation.
(y) Subsidiary holding company means a federally chartered stock
holding company controlled by a mutual holding company that owns the
stock of a savings association whose depositors have membership rights
in the parent mutual holding company.
(z) Tax and loan account means an account, the balance of which is
subject to the right of immediate withdrawal, established for receipt
of payments of Federal taxes and certain United States obligations.
Such accounts are not savings accounts or savings deposits.
(aa) Tax-qualified employee stock benefit plan means any defined
benefit plan or defined contribution plan, such as an employee stock
ownership plan, stock bonus plan, profit-sharing plan, or other plan,
and a related trust, that is qualified under sec. 401 of the Internal
Revenue Code (26 U.S.C. 401).
(bb) United States Treasury General Account means an account
maintained in the name of the United States Treasury the balance of
which is subject to the right of immediate withdrawal, except in the
case of the closure of the member, and in which a zero balance may be
maintained. Such accounts are not savings accounts or savings deposits.
(cc) United States Treasury Time Deposit Open Account means a non-
interest-bearing account maintained in the name of the United States
Treasury which may not be withdrawn prior to the expiration of 30 days'
written notice from the United States Treasury, or such other period of
notice as the Treasury may require. Such accounts are not savings
accounts or savings deposits.
Subpart B--Mutual Holding Companies
Sec. 239.3 Mutual holding company reorganizations.
(a) A mutual savings association may not reorganize to become a
mutual holding company, or join in a mutual holding company
reorganization as an acquiree association, unless it satisfies the
following conditions:
(1) A Reorganization Plan is approved by a majority of the board of
directors of the reorganizing association and any acquiree association;
(2) A Reorganization Notice is filed with the Board pursuant to
Sec. 238.14 of this chapter;
(3) The Reorganization Plan is submitted to the members of the
reorganizing association and any acquiree association pursuant and is
approved by a majority of the total votes of the members of each
association eligible to be cast at a meeting held at the call of each
association's directors in accordance with the procedures prescribed by
each association's charter and bylaws; and
(4) All necessary regulatory approvals have been obtained and all
conditions imposed by the Board have been satisfied.
(b) Upon receipt of an application under this section, the Reserve
Bank will promptly furnish notice and a copy of the Reorganization Plan
to the primary federal supervisor of any savings association involved
in the transaction. The primary supervisor will have 30 calendar days
from the date of the letter giving notice in which to submit its views
and recommendations to the Board.
Sec. 239.4 Grounds for disapproval of reorganizations.
(a) Basic standards. The Board may disapprove a proposed mutual
holding company reorganization filed pursuant to Sec. 239.3(a) if:
(1) Disapproval is necessary to prevent unsafe or unsound
practices;
(2) The financial or managerial resources of the reorganizing
association
[[Page 56560]]
or any acquiree association warrant disapproval;
(3) The proposed capitalization of the mutual holding company fails
to meet the requirements of paragraph (b) of this section;
(4) A stock issuance is proposed in connection with the
reorganization pursuant to Sec. 239.24 that fails to meet the
standards established by that section;
(5) The reorganizing association or any acquiree association fails
to furnish the information required to be included in the
Reorganization Notice or any other information requested by the Board
in connection with the proposed reorganization; or
(6) The proposed reorganization would violate any provision of law,
including (without limitation) Sec. 239.3(a) and (c) (regarding board
of directors and membership approval) or Sec. 239.5(a) (regarding
continuity of membership rights).
(b) Capitalization. (1) The Board shall disapprove a proposal by a
reorganizing association or any acquiree association to capitalize a
mutual holding company in an amount in excess of a nominal amount if
immediately following the reorganization, the resulting association or
the acquiree association would fail to be ``adequately capitalized''
under the regulatory capital requirements applicable to the savings
association.
(2) Proposals by reorganizing associations and acquiree
associations to capitalize mutual holding companies shall also comply
with any applicable statutes, and with regulations or written policies
of the Comptroller of the Currency or the Federal Deposit Insurance
Corporation, as applicable, governing capital distributions by savings
associations in effect at the time of the reorganization.
(c) Presumptive disqualifiers --
(1) Managerial resources. The factors specified in Sec.
238.15(d)(1)(i) through (vi) of this chapter shall give rise to a
rebuttable presumption that the managerial resources test of paragraph
(a)(2) of this section is not met. For this purpose, each place the
term acquiror appears in Sec. 238.15(d)(1)(i) through (vi) of this
chapter, it shall be read to mean the reorganizing association or any
acquiree association, and the reference in Sec. 238.15(d)(1)(v) of
this chapter to filings under this part shall be deemed to include
filings under either part 238 of this chapter or this part.
(2) Safety and soundness and financial resources. Failure by a
reorganizing association and any acquiree association to submit a
business plan in connection with a Reorganization Notice, or submission
of a business plan that projects activities that are inconsistent with
the credit and lending needs of the reorganizing association or
acquiree association's proposed market area or that fails to
demonstrate that the capital of the mutual holding company will be
deployed in a safe and sound manner, shall give rise to a rebuttable
presumption that the safety and soundness and financial resources tests
of paragraphs (a)(1) and (a)(2) of this section are not met.
(d) Failure of the Board to act on a Reorganization Notice within
the prescribed time period. A proposed reorganization that obtains
regulatory clearance from the Board due to the operation of Sec.
238.14 of this chapter may take place in the manner proposed, subject
to the following conditions:
(1) The reorganization shall be consummated within one year of the
date of the expiration of the Board's review period under Sec. 238.14
of this chapter;
(2) The mutual holding company shall not be capitalized in an
amount in excess of what is permissible under Sec. 239.4(b);
(3) No request for regulatory waivers or forbearances shall be
deemed granted;
(4) The following information shall be submitted within the
specified time frames:
(i) On the business day prior to the date of the reorganization,
the chief financial officers of the reorganizing association and any
acquiree association shall certify to the Board in writing that no
material adverse events or material adverse changes have occurred with
respect to the financial condition or operations of their respective
associations since the date of the financial statements submitted with
the Reorganization Notice;
(ii) No later than thirty days after the reorganization, the mutual
holding company shall file with the Board a certification by legal
counsel stating the effective date of the reorganization, the exact
number of shares of stock of the resulting association and any acquiree
association acquired by the mutual holding company and by any other
persons, and that the reorganization has been consummated in accordance
with Sec. 239.3 and all other applicable laws and regulations and the
Reorganization Notice;
(iii) No later than thirty days after the reorganization, the
mutual holding company shall file with the Board an opinion from its
independent auditors certifying that the reorganization was consummated
in accordance with generally accepted accounting principles; and
(iv) No later than thirty days after the reorganization, the mutual
holding company shall file with the Board a certification stating that
the mutual holding company will not deviate materially, or cause its
subsidiary savings associations to deviate materially, from the
business plan submitted in connection with the Reorganization Notice,
unless prior written approval from the Board is obtained.
Sec. 239.5 Membership rights.
(a) Depositors and borrowers of resulting associations, acquiree
associations, and associations in mutual form when acquired. The
charter of a mutual holding company must:
(1) Confer upon existing and future depositors of the resulting
association the same membership rights in the mutual holding company as
were conferred upon depositors by the charter of the reorganizing
association as in effect immediately prior to the reorganization;
(2) Confer upon existing and future depositors of any acquiree
association or any association that is in the mutual form when acquired
by the mutual holding company the same membership rights in the mutual
holding company as were conferred upon depositors by the charter of the
acquired association immediately prior to acquisition, provided that if
the acquired association is merged into another association from which
the mutual holding company draws members, the depositors of the
acquired association shall receive the same membership rights as the
depositors of the association into which the acquired association is
merged;
(3) Confer upon the borrowers of the resulting association who are
borrowers at the time of reorganization the same membership rights in
the mutual holding company as were conferred upon them by the charter
of the reorganizing association immediately prior to reorganization,
but shall not confer any membership rights in connection with any
borrowings made after the reorganization; and
(4) Confer upon the borrowers of any acquiree association or any
association that is in the mutual form when acquired by the mutual
holding company who are borrowers at the time of the acquisition the
same membership rights in the mutual holding company as were conferred
upon them by the charter of the acquired association immediately prior
to acquisition, but shall not confer any membership rights in
connection with any borrowings
[[Page 56561]]
made after the acquisition, provided that if the acquired association
is merged into another association from which the mutual holding
company draws members, the borrowers of the acquired association shall
instead receive the same grandfathered membership rights as the
borrowers of the association into which the acquired association is
merged received at the time that association became a subsidiary of the
mutual holding company.
(b) Depositors and borrowers of associations in the stock form when
acquired. A mutual holding company that acquires a savings association
in the stock form, other than a resulting association or an acquiree
association, shall not confer any membership rights upon the depositors
and borrowers of such association, unless such association is merged
into an association from which the mutual holding company draws
members, in which case the depositors of the stock association shall
receive the same membership rights as other depositors of the
association into which the stock association is merged.
Sec. 239.6 Contents of Reorganization Plans.
Each Reorganization Plan shall contain a complete description of
all significant terms of the proposed reorganization, shall attach and
incorporate any Stock Issuance Plan proposed in connection with the
Reorganization Plan, and shall:
(a) Provide for amendment of the charter and bylaws of the
reorganizing association to read in the form of the charter and bylaws
of a mutual holding company, and attach and incorporate such charter
and bylaws;
(b) Provide for the organization of the resulting association,
which shall be an interim federal or state subsidiary savings
association of the reorganizing association, and attach and incorporate
the proposed charter and bylaws of such association;
(c) If the reorganizing association proposes to form a subsidiary
holding company, provide for the organization of a subsidiary holding
company and attach and incorporate the proposed charter and bylaws of
such subsidiary holding company.
(d) Provide for amendment of the charter and bylaws of any acquiree
association to read in the form of the charter and bylaws of a state or
federal savings association in the stock form, and attach and
incorporate such charter and bylaws;
(e) Provide that, upon consummation of the reorganization,
substantially all of the assets and liabilities (including all savings
accounts, demand accounts, tax and loan accounts, United States
Treasury General Accounts, or United States Treasury Time Deposit Open
Accounts, as those terms are defined in this part) of the reorganizing
association shall be transferred to the resulting association, which
shall thereupon become an operating subsidiary savings association of
the mutual holding company;
(f) Provide that all assets, rights, obligations, and liabilities
of whatever nature of the reorganizing association that are not
expressly retained by the mutual holding company shall be deemed
transferred to the resulting association;
(g) Provide that each depositor in the reorganizing association or
any acquiree association immediately prior to the reorganization shall
upon consummation of the reorganization receive, without payment, an
identical account in the resulting association or the acquiree
association, as the case may be (Appropriate modifications should be
made to this provision if savings associations are being merged as a
part of the reorganization);
(h) Provide that the Reorganization Plan as adopted by the boards
of directors of the reorganizing association and any acquiree
association may be substantively amended by those boards of directors
as a result of comments from regulatory authorities or otherwise prior
to the solicitation of proxies from the members of the reorganizing
association and any acquiree association to vote on the Reorganization
Plan and at any time thereafter with the concurrence of the Board; and
that the reorganization may be terminated by the board of directors of
the reorganizing association or any acquiree association at any time
prior to the meeting of the members of the association called to
consider the Reorganization Plan and at any time thereafter with the
concurrence of the Board;
(i) Provide that the Reorganization Plan shall be terminated if not
completed within a specified period of time (The time period shall not
be more than 24 months from the date upon which the members of the
reorganizing association or the date upon which the members of any
acquiree association, whichever is earlier, approve the Reorganization
Plan and may not be extended by the reorganizing or acquiree
association); and
(j) Provide that the expenses incurred in connection with the
reorganization shall be reasonable.
Sec. 239.7 Acquisition and disposition of savings associations,
savings and loan holding companies, and other corporations by mutual
holding companies.
(a) Acquisitions-- (1) Stock savings associations. A mutual holding
company may not acquire control of a savings association that is in the
stock form unless the necessary approvals are obtained from the Board,
including approval pursuant to Sec. 238.11 of this chapter.
(2) Mutual savings associations. A mutual holding company may not
acquire a savings association in the mutual form by merger of such
association into any subsidiary savings association of such holding
company from which the parent mutual holding company draws members or
into an interim subsidiary savings association of the mutual holding
company, unless:
(i) The proposed acquisition is approved by a majority of the board
of directors of the mutual association;
(ii) The proposed acquisition is submitted to the mutual
association's members and is approved by a majority of the total votes
of the association's members eligible to be cast at a meeting held at
the call of the association's directors in accordance with the
procedures prescribed by the association's charter and bylaws;
(iii) The necessary approvals are obtained from the Board,
including approval pursuant to Sec. 238.11 of this chapter, and any
other approvals required to form an interim association, to amend the
charter and bylaws of the association being acquired, and/or to amend
the charter and bylaws of the mutual holding company consistent with
Sec. 239.6(a); and
(iv) The approval of the members of the mutual holding company is
obtained, if the Board advises the mutual holding company in writing
that such approval will be required.
(3) Mutual holding companies. A mutual holding company that is not
a subsidiary holding company may not acquire control of another mutual
holding company, including a subsidiary holding company, by merging
with or into such company, unless the necessary approvals are obtained
from the Board, including approval pursuant to Sec. 238.11 of this
chapter. The approval of the members of the mutual holding companies
shall also be obtained if the Board advises the mutual holding
companies in writing that such approval will be required.
(4) Stock holding companies. A mutual holding company may not
acquire control of a savings and loan holding company in the stock form
that is not a subsidiary holding company,
[[Page 56562]]
unless the necessary approvals are obtained from the Board, including
approval pursuant to Sec. 238.11 of this chapter. The acquired holding
company may be held as a subsidiary of the mutual holding company or
merged into the mutual holding company.
(5) Non-controlling acquisitions of savings association stock. A
mutual holding company may acquire non-controlling amounts of the stock
of savings associations and savings and loan holding companies subject
to the restrictions imposed by 12 U.S.C. 1467a(e) and (q) and
Sec. Sec. 238.41 and 238.11 of this chapter.
(6) Other corporations. A mutual holding company may not acquire
control of, or make non-controlling investments in the stock of, any
corporation other than a savings association or savings and loan
holding company unless:
(i)(A) Such corporation is engaged exclusively in activities that
are permissible for mutual holding companies pursuant to Sec.
239.8(a); or
(B) It is lawful for the stock of such corporation to be purchased
by a federal savings association under the applicable regulations of
the Comptroller of the Currency or by a state savings association under
the applicable regulations of the Federal Deposit Insurance Corporation
and the laws of any state where any subsidiary savings association of
the mutual holding company has its home office; and
(ii) Such corporation is not controlled, directly or indirectly, by
a subsidiary savings association of the mutual holding company.
(b) Dispositions. (1) A mutual holding company shall provide
written notice to the appropriate Reserve Bank at least 30 days prior
to the effective date of any direct or indirect transfer of any of the
stock that it holds in a subsidiary holding company, a resulting
association, an acquiree association, or any subsidiary savings
association that was in the mutual form when acquired by the mutual
holding company, including stock transferred in connection with a
pledge pursuant to Sec. 239.8(b) or any transfer of all or a
substantial portion of the assets or liabilities of any such subsidiary
holding company or association. Any such disposition shall comply with
the requirements of this part, as appropriate, and with any other
applicable statute or regulation.
(2) A mutual holding company may, subject to applicable laws and
regulations, transfer any or all of the stock or cause or permit the
transfer of any or all of the assets and liabilities of:
(i) Any subsidiary savings association that was in the stock form
when acquired, provided such association is not a resulting association
or an acquiree association;
(ii) Any subsidiary holding company acquired pursuant to paragraph
(a)(4) of this section; or
(iii) Any corporation other than a savings association or savings
and loan holding company.
(3) A mutual holding company may, subject to applicable laws and
regulations, transfer any stock acquired pursuant to paragraph (a)(5)
of this section.
(4) No transfer authorized by this section may be made to any
insider of the mutual holding company, any associate of an insider of
the mutual holding company, or any tax-qualified or non-tax-qualified
employee stock benefit plan of the mutual holding company unless the
mutual holding company provides notice to the appropriate Reserve Bank
at least 30 days prior to the effective date of the proposed transfer.
This notice shall be in addition to any other application or notice
required under applicable laws or regulations, including those imposed
by this part or Regulation LL.
Sec. 239.8 Operating restrictions.
(a) Activities restrictions. A mutual holding company may engage in
any business activity specified in 12 U.S.C. 1467a(c)(2) or
(c)(9)(A)(ii). In addition, the business activities of subsidiaries of
mutual holding companies may include the activities specified in Sec.
239.7(a)(6). A mutual holding company or its subsidiaries may engage in
the foregoing activities only upon compliance with the procedures
specified in Sec. Sec. 238.53(c) or 238.54(b) of this chapter.
(b) Pledging stock. (1) No mutual holding company may pledge the
stock of its resulting association, an acquiree association, or any
subsidiary savings association that was in the mutual form when
acquired by the mutual holding company (or its parent mutual holding
company), unless the proceeds of the loan secured by the pledge are
infused into the association whose stock is pledged. No mutual holding
company may pledge the stock of its subsidiary holding company unless
the proceeds of the loan secured by the pledge are infused into any
subsidiary savings association of the subsidiary holding company that
is a resulting association, an acquiree association, or a subsidiary
savings association that was in the mutual form when acquired by the
subsidiary holding company (or its parent mutual holding company). In
the event the subsidiary holding company has more than one subsidiary
savings association, the loan proceeds shall, unless otherwise approved
by the Board, be infused in equal amounts to each subsidiary savings
association. Any amount of the stock of such association or subsidiary
holding company may be pledged for these purposes. Nothing in this
paragraph shall be deemed to prohibit:
(i) The payment of dividends from a subsidiary savings association
to its mutual holding company parent to the extent otherwise
permissible; or
(ii) The payment of dividends from a subsidiary holding company to
its mutual holding company parent to the extent otherwise permissible;
or
(iii) A mutual holding company from pledging the stock of more than
one subsidiary savings association provided that the stock pledged of
each such subsidiary association is proportionate to the proceeds of
the loan infused into each subsidiary association.
(2) Any mutual holding company that fails to make any payment on a
loan secured by the pledge of stock pursuant to paragraph (b)(1) of
this section on or before the date on which such payment is due shall,
on the first day after such payment is due, provide written notice of
nonpayment to the appropriate Reserve Bank.
(c) Restrictions on stock repurchases. (1) No subsidiary holding
company that has any stockholders other than its parent mutual holding
company may repurchase any share of stock within one year of its date
of issuance (which may include the time period the shares issued by the
savings association were outstanding if the subsidiary holding company
was formed after the initial issuance by the savings association),
unless the repurchase:
(i) Is in compliance with the requirements set forth in Sec.
239.63;
(ii) Is part of a general repurchase made on a pro rata basis
pursuant to an offer approved by the Board and made to all stockholders
of the association or subsidiary holding company (except that the
parent mutual holding company may be excluded from the repurchase with
the Board's approval);
(iii) Is limited to the repurchase of qualifying shares of a
director; or
(iv) Is purchased in the open market by a tax-qualified or non-tax-
qualified employee stock benefit plan of the savings association (or of
a subsidiary holding company) in an amount reasonable and appropriate
to fund such plan.
(2) No mutual holding company may purchase shares of its subsidiary
savings association or subsidiary holding company within one year after
a stock
[[Page 56563]]
issuance, except if the purchase complies with Sec. 239.63. For
purposes of this section, the reference in Sec. 239.63 to five percent
refers to minority shareholders.
(d) Restrictions on waiver of dividends. (1) A mutual holding
company may waive the right to receive any dividend declared by a
subsidiary of the mutual holding company, if--
(i) No insider of the mutual holding company, associate of an
insider, or tax-qualified or non-tax-qualified employee stock benefit
plan of the mutual holding company holds any share of the stock in the
class of stock to which the waiver would apply; or
(ii) The mutual holding company gives written notice to the Board
of the intent of the mutual holding company to waive the right to
receive dividends, not later than 30 days before the date of the
proposed date of payment of the dividend, and the Board does not object
to the waiver.
(2) A notice of a waiver under paragraph (d)(1)(ii) of this section
shall include a copy of the resolution of the board of directors of the
mutual holding company together with any supporting materials relied
upon by the board of directors of the mutual holding company,
concluding that the proposed dividend waiver is consistent with the
fiduciary duties of the board of directors to the mutual members of the
mutual holding company.
The resolution shall include:
(i) A description of the conflict of interest that exists because
of a mutual holding company director's ownership of stock in the
subsidiary declaring dividends and any actions the mutual holding
company and board of directors have taken to eliminate the conflict of
interest, such as waiver by the directors of their right to receive
dividends;
(ii) A finding by the mutual holding company's board of directors
that the waiver of dividends is consistent with the board of directors'
fiduciary duties despite any conflict of interest;
(iii) If the mutual holding company has pledged the stock of a
subsidiary holding company or subsidiary savings association as
collateral for a loan made to the mutual holding company, or is subject
to any other loan agreement, an affirmation that the mutual holding
company is able to meet the terms of the loan agreement; and
(iv) An affirmation that a majority of the mutual members of the
mutual holding company eligible to vote have, within the 12 months
prior to the declaration date of the dividend by the subsidiary of the
mutual holding company, approved a waiver of dividends by the mutual
holding company, and any proxy statement used in connection with the
member vote contained--
(A) A detailed description of the proposed waiver of dividends by
the mutual holding company and the reasons the board of directors
requested the waiver of dividends;
(B) The disclosure of any mutual holding company director's
ownership of stock in the subsidiary declaring dividends and any
actions the mutual holding company and board of directors have taken to
eliminate the conflict of interest, such as the directors waiving their
right to receive dividends; and
(C) A provision providing that the proxy concerning the waiver of
dividends given by the mutual members may be used for no more than 12
months from the date it is given.
(3) The Board may not object to a waiver of dividends under
paragraph (d)(1)(ii) of this section if:
(i) The waiver would not be detrimental to the safe and sound
operation of the savings association;
(ii) The board of directors of the mutual holding company expressly
determines that a waiver of the dividend by the mutual holding company
is consistent with the fiduciary duties of the board of directors to
the mutual members of the mutual holding company; and
(iii) The mutual holding company has, prior to December 1, 2009--
(A) Reorganized into a mutual holding company under section 10(o)
of HOLA;
(B) Issued minority stock either from its mid-tier stock holding
company or its subsidiary stock savings association; and
(C) Waived dividends it had a right to receive from the subsidiary
stock savings association.
(4) For a mutual holding company that does not meet each of the
conditions in paragraph (d)(3) of this section, the Board will not
object to a waiver of dividends under paragraph (d)(1)(ii) of this
section if--:
(i) The savings association currently operates in a manner
consistent with the safe and sound operation of a savings association,
and the waiver is not detrimental to the safe and sound operation of
the savings association;
(ii) If the mutual holding company has pledged the stock of a
subsidiary holding company or subsidiary savings association as
collateral for a loan made to the mutual holding company, or is subject
to any other loan agreement, an affirmation that the mutual holding
company is able to meet the terms of the loan agreement;
(iii) Within the 12 months prior to the declaration date of the
dividend by the subsidiary of the mutual holding company, a majority of
the mutual members of the mutual holding company has approved the
waiver of dividends by the mutual holding company. Any proxy statement
used in connection with the member vote must contain--
(A) A detailed description of the proposed waiver of dividends by
the mutual holding company and the reasons the board of directors
requested the waiver of dividends;
(B) The disclosure of any mutual holding company director's
ownership of stock in the subsidiary declaring dividends and any
actions the mutual holding company and board of directors have taken to
eliminate the conflict of interest, such as the directors waiving their
right to receive dividends; and
(C) A provision providing that the proxy concerning the waiver of
dividends given by the mutual members may be used for no more than 12
months from the date it is given;
(iv) The board of directors of the mutual holding company expressly
determines that the waiver of dividends is consistent with the board of
directors' fiduciary duties despite any conflict of interest;
(v)(A) A majority of the entire board of directors of the mutual
holding company approves the waiver of dividends and any director with
direct or indirect ownership, control, or the power to vote shares of
the subsidiary declaring the dividend, or who otherwise directly or
indirectly benefits through an associate from the waiver of dividends,
has abstained from the board vote; or
(B) Each officer or director of the mutual holding company or its
affiliates, associate of such officer or director, and any tax-
qualified or non-tax-qualified employee stock benefit plan in which
such officer or director participates that holds any share of the stock
in the class of stock to which the waiver would apply waives the right
to receive any dividend declared by a subsidiary of the mutual holding
company;
(vi) The Board does not object to the amount of dividends declared
by a subsidiary of the mutual holding company. In reviewing whether a
declaration by a subsidiary of the mutual holding company is
appropriate, the Board may consider, among other factors, the
reasonableness of the entire dividend distribution declared if the
waiver is not approved;
(vii) The waived dividends are excluded from the capital accounts
of the subsidiary holding company or savings association, as
applicable, for
[[Page 56564]]
purposes of calculating any future dividend payments;
(viii) The mutual holding company appropriately accounts for all
waived dividends in a manner that permits the Board to consider the
waived dividends in evaluating the proposed exchange ratio in the event
of a full conversion of the mutual holding company to stock form; and
(ix) The mutual holding company complies with such other conditions
as the Board may require to prevent conflicts of interest or actions
detrimental to the safe and sound operation of the savings association.
(5) Valuation. (i) The Board will consider waived dividends in
determining an appropriate exchange ratio in the event of a full
conversion to stock form.
(ii) In the case of a savings association that has reorganized into
a mutual holding company, has issued minority stock from a mid-tier
stock holding company or a subsidiary stock savings association of the
mutual holding company, and has waived dividends it had a right to
receive from a subsidiary savings association before December 1, 2009,
the Board shall not consider waived dividends in determining an
appropriate exchange ratio in the event of a full conversion to stock
form.
(e) Restrictions on issuance of stock to insiders. A subsidiary of
a mutual holding company that is not a savings association or
subsidiary holding company may issue stock to any insider, associate of
an insider or tax-qualified or non-tax-qualified employee stock benefit
plan of the mutual holding company or any subsidiary of the mutual
holding company, provided that such persons or plans provide written
notice to the appropriate Reserve Bank at least 30 days prior to the
stock issuance, and the Reserve Bank or the Board does not object to
the subsequent stock issuance. Subsidiary holding companies may issue
stock to such persons only in accordance with Sec. 239.24.
(f) Applicability of rules governing savings and loan holding
companies. Except as expressly provided in this part, mutual holding
companies shall be subject to the provisions of 12 U.S.C. 1467a and
3201 et seq. and the provisions of parts 207, 228, and 238 of this
chapter.
(g) Separate vote for charitable organization contribution. In a
mutual holding company stock issuance, a separate vote of a majority of
the outstanding shares of common stock held by stockholders other than
the mutual holding company or subsidiary holding company must approve
any charitable organization contribution.
Sec. 239.9 Conversion or liquidation of mutual holding companies.
(a) Conversion--(1) Generally. A mutual holding company may convert
to the stock form in accordance with the rules and regulations set
forth in subpart E of this part.
(2) Exchange of subsidiary savings association or subsidiary
holding company stock. Any stock issued by a subsidiary savings
association, or by a subsidiary holding company pursuant to Sec.
239.24, of a mutual holding company to persons other than the parent
mutual holding company may be exchanged for the stock issued by the
successor to parent mutual holding company in connection with the
conversion of the parent mutual holding company to stock form. The
parent mutual holding company and the subsidiary holding company must
demonstrate to the satisfaction of the Board that the basis for the
exchange is fair and reasonable.
(3) If a subsidiary holding company or subsidiary savings
association has issued shares to an entity other than the mutual
holding company, the conversion of the mutual holding company to stock
form may not be consummated unless a majority of the shares issued to
entities other than the mutual holding company vote in favor of the
conversion. This requirement applies in addition to any otherwise
required account holder or shareholder votes.
(b) Involuntary liquidation. (1) The Board may file a petition with
the federal bankruptcy courts requesting the liquidation of a mutual
holding company pursuant to 12 U.S.C. 1467a(o)(9) and title 11, United
States Code, upon the occurrence of any of the following events:
(i) The default of the resulting association, any acquiree
association, or any subsidiary savings association of the mutual
holding company that was in the mutual form when acquired by the mutual
holding company;
(ii) The default of the parent mutual holding company or its
subsidiary holding company; or
(iii) Foreclosure on any pledge by the mutual holding company of
subsidiary savings association stock or subsidiary holding company
stock.
(2) Except as provided in paragraph (b)(3) of this section, the net
proceeds of any liquidation of any mutual holding company shall be
transferred to the members of the mutual holding company and, if
applicable, the stock holders of the subsidiary holding company in
accordance with the charter of the mutual holding company and, if
applicable, the charter of the subsidiary holding company.
(3) If the FDIC incurs a loss as a result of the default of any
subsidiary savings association of a mutual holding company and that
mutual holding company is liquidated pursuant to paragraph (b)(1) of
this section, the FDIC shall succeed to the membership interests of the
depositors of such savings association in the mutual holding company to
the extent of the FDIC's loss.
(c) Voluntary liquidation. The provisions of Sec. 239.16 shall
apply to mutual holding companies.
Sec. 239.10 Procedural requirements.
(a) Proxies and proxy statements--(1) Solicitation of proxies. The
provisions of Sec. Sec. 239.56 and 239.57(a) through (d) and (f)
through (h) shall apply to all solicitations of proxies by any person
in connection with any membership vote required by this part. Proxy
materials must be in the form specified by the Board and contain the
information specified in Sec. Sec. 239.57(b) and 239.57(d), to the
extent such information is relevant to the action that members are
being asked to approve, with such additions, deletions, and other
modifications as are required under this part, or as are necessary or
appropriate under the disclosure standard set forth in Sec. 239.57(f).
File proxies and proxy statements in accordance with Sec. 239.55(c)
and address them to the appropriate Reserve Bank. For purposes of this
paragraph, the term conversion, as it appears in the provisions of part
subpart E of this part, refers to the reorganization, the stock
issuance, or other corporate action, as appropriate.
(2) Additional proxy disclosure requirements. In addition to the
requirements in paragraph (a) of this section, all proxies requesting
accountholder approval of a mutual holding company reorganization shall
address in detail:
(i) The reasons for the reorganization, including the relative
advantages and disadvantages of undertaking the transaction proposed
instead of a standard conversion;
(ii) Whether management believes the reorganization is in the best
interests of the association and its accountholders and the basis of
that belief;
(iii) The fiduciary duties owed to accountholders by the
association's officers and directors and why the reorganization is in
accord with those duties and is otherwise equitable to the
accountholders and the association;
(iv) Any compensation agreements that will be entered into by
management
[[Page 56565]]
in connection with the reorganization; and
(v) Whether the mutual holding company intends to waive dividends,
the implications to accountholders, and the reasons such waivers are
consistent with the fiduciary duties of the directors of the mutual
holding company.
(3) Nonconforming minority stock issuances. Subsidiary holding
companies proposing non-conforming minority stock issuances pursuant to
Sec. 239.24(c)(6)(ii) must include in the proxy materials to
accountholders seeking approval of a proposed reorganization an
additional disclosure statement that serves as a cover sheet that
clearly addresses:
(i) The consequences to accountholders of voting to approve a
reorganization in which their subscription rights are prioritized
differently and potentially eliminated; and
(ii) Any intent by the mutual holding company to waive dividends,
and the implications to accountholders.
(4) Use of ``running'' proxies. Unless otherwise prohibited, a
mutual holding company may make use of any proxy conferring general
authority to vote on any and all matters at any meeting of members,
provided that the member granting such proxy has been furnished a proxy
statement regarding the matters and the member does not grant a later-
dated proxy to vote at the meeting at which the matter will be
considered or attend such meeting and vote in person, and further
provided that ``running'' proxies or similar proxies may not be used to
vote for a mutual holding company reorganization, mutual-to-stock
conversion undertaken by a mutual holding company, dividend waiver, or
any other material transaction. Subject to the limitations set forth in
this paragraph, any proxy conferring on the board of directors or
officers of a mutual savings association general authority to cast a
member's votes on any and all matters presented to the members shall be
deemed to cover the member's votes as a member of the mutual holding
company and such authority shall be conferred on the board of directors
or officers of a mutual holding company.
(b) Applications under this part. Except as provided in paragraph
(c) of this section, any application, notice or certification required
to be filed with the Board under this part must be filed in accordance
with Sec. 238.14 of this chapter. The Board will review any filing
made under this part in accordance with Sec. 238.14 of this chapter.
(c) Reorganization Notices and stock issuance applications--(1)
Contents. Each Reorganization Notice submitted to the appropriate
Reserve Bank pursuant to Sec. 239.3(a) and each application for
approval of the issuance of stock submitted to the appropriate Reserve
Bank pursuant to Sec. 239.24(a) shall be in the form and contain the
information specified by the Board.
(2) Filing instructions. Any Reorganization Notice submitted under
Sec. 239.3(a) must be filed in accordance with Sec. 238.14 of this
chapter. Any stock issuance application submitted pursuant to Sec.
239.24(a) shall be filed in accordance with Sec. 239.55.
(3) Public notice, public comment, and meetings. Mutual holding
company reorganizations are subject to applicable public notice, public
comment, and meeting requirements under the Bank Merger Act regulations
at Sec. 238.11(e) of this chapter and the Savings and Loan Holding
Company Act regulations at Sec. 238.14 of this chapter.
(d) Amendments. Any mutual holding company may amend any notice or
application submitted pursuant to this part or file additional
information with respect thereto upon request of the Board or upon the
mutual holding company's own initiative.
(e) Time-frames. All Reorganization Notices and applications filed
pursuant to this part must be processed in accordance with the
processing procedures at Sec. 238.14 of this chapter. Any related
approvals requested in connection with Reorganization Notices or
applications for approval of stock issuances (including, without
limitation, requests for approval to transfer assets to resulting
associations, to acquire acquiree associations, and to organize
resulting associations or interim associations, and requests for
approval of charters, bylaws, and stock forms) shall be processed
pursuant to the procedures specified in this section in conjunction
with the Reorganization Notice or stock issuance application to which
they pertain, rather than pursuant to any inconsistent procedures
specified elsewhere in this chapter. The approval standards for all
such related applications, however, shall remain unchanged. The review
by the Board of any materials used in connection with the issuance of
stock under Sec. 239.24 must not be subject to the applications
processing time-frames set forth in Sec. Sec. 238.14(f) and (g) of
this chapter.
(f) Disclosure. The rules governing disclosure of any notice or
application submitted pursuant to this part, or any public comment
submitted pursuant to paragraph (c) of this section, shall be the same
as set forth in Sec. 238.14(b) of this chapter for notices,
applications, and public comments filed under Sec. 238.14 of this
chapter.
(g) Appeals. Any party aggrieved by a final action by the Board
which approves or disapproves any application or notice pursuant to
this part may obtain review of such action in accordance with 12 U.S.C.
1467a(j).
(h) Federal preemption. This part preempts state law with regard to
the creation and regulation of mutual holding companies.
Sec. 239.11 Subsidiary holding companies.
(a) Subsidiary holding companies. A mutual holding company may
establish a subsidiary holding company as a direct subsidiary to hold
100 percent of the stock of its subsidiary savings association. The
formation and operation of the subsidiary holding company may not be
utilized as a means to evade or frustrate the purposes of this part.
The subsidiary holding company may be established either at the time of
the initial mutual holding company reorganization or at a subsequent
date, subject to the approval of the Board.
(b) Stock issuances. Sec. Sec. 239.24 and 239.25 apply to issuance
of stock by a subsidiary holding company. In the case of a stock
issuance by a subsidiary holding company, the aggregate amount of
outstanding common stock of the association owned or controlled by
persons other than the subsidiary holding company's mutual holding
company parent at the close of the proposed issuance shall be less than
50 percent of the subsidiary holding company's total outstanding common
stock.
(c) Charters and bylaws for subsidiary holding companies. The
charter and bylaws of a subsidiary holding company shall be in the form
set forth in Appendices B and D, respectively.
Sec. 239.12 Communication between members of a mutual holding
company.
(a) Right of communication with other members. A member of a mutual
holding company has the right to communicate, as prescribed in
paragraph (b) of this section, with other members of the mutual holding
company regarding any matter related to the mutual holding company's
affairs, except for ``improper'' communications, as defined in
paragraph (c) of this section. The mutual holding company may not
defeat that right by redeeming a savings member's savings account in
the subsidiary savings association.
(b) Member communication procedures. If a member of a mutual
holding company desires to
[[Page 56566]]
communicate with other members, the following procedures shall be
followed:
(1) The member shall give the mutual holding company a written
request to communicate;
(2) If the proposed communication is in connection with a meeting
of the mutual holding company's members, the request shall be given at
least thirty days before the annual meeting or 10 days before a special
meeting;
(3) The request shall contain--
(i) The member's full name and address;
(ii) The nature and extent of the member's interest in the mutual
holding company at the time the information is given;
(iii) A copy of the proposed communication; and
(iv) If the communication is in connection with a meeting of the
members, the date of the meeting;
(4) The mutual holding company shall reply to the request within
either--
(i) Fourteen days;
(ii) Ten days, if the communication is in connection with the
annual meeting; or
(iii) Three days, if the communication is in connection with a
special meeting;
(5) The reply shall provide either--
(i) The number of the mutual holding company's members and the
estimated reasonable cost to the mutual holding company of mailing to
them the proposed communication; or
(ii) Notification that the mutual holding company has determined
not to mail the communication because it is ``improper'', as defined in
paragraph (c) of this section;
(6) After receiving the amount of the estimated costs of mailing
and sufficient copies of the communication, the mutual holding company
shall mail the communication to all members, by a class of mail
specified by the requesting member, either--
(i) Within fourteen days;
(ii) Within seven days, if the communication is in connection with
the annual meeting;
(iii) As soon as practicable before the meeting, if the
communication is in connection with a special meeting; or
(iv) On a later date specified by the member;
(7) If the mutual holding company refuses to mail the proposed
communication, it shall return the requesting member's materials
together with a written statement of the specific reasons for refusal,
and shall simultaneously send to the appropriate Reserve Bank a copy of
each of the requesting member's materials, the mutual holding company's
written statement, and any other relevant material. The materials shall
be sent within:
(i) Fourteen days,
(ii) Ten days if the communication is in connection with the annual
meeting, or
(iii) Three days, if the communication is in connection with a
special meeting, after the mutual holding company receives the request
for communication.
(c) Improper communication. A communication is an ``improper
communication'' if it contains material which:
(1) At the time and in the light of the circumstances under which
it is made:
(i) Is false or misleading with respect to any material fact; or
(ii) Omits a material fact necessary to make the statements therein
not false or misleading, or necessary to correct a statement in an
earlier communication on the same subject which has become false or
misleading;
(2) Relates to a personal claim or a personal grievance, or is
solicitous of personal gain or business advantage by or on behalf of
any party;
(3) Relates to any matter, including a general economic, political,
racial, religious, social, or similar cause, that is not significantly
related to the business of the mutual holding company or is not within
the control of the mutual holding company; or
(4) Directly or indirectly and without expressed factual
foundation:
(i) Impugns character, integrity, or personal reputation,
(ii) Makes charges concerning improper, illegal, or immoral
conduct, or
(iii) Makes statements impugning the stability and soundness of the
mutual holding company.
Sec. 239.13 Charters.
(a) Charters. The charter of a mutual holding company shall be in
the form set forth in Appendix A of this part and may be amended
pursuant to this paragraph. The Board may amend the form of charter set
forth in Appendix A to this part.
(b) Corporate title. The corporate title of each mutual holding
company shall include the term ``mutual'' or the abbreviation
``M.H.C.''
(c) Availability of charter. A mutual holding company shall make
available to its members at all times in the offices of each subsidiary
savings association from which the mutual holding company draws members
a true copy of its charter, including any amendments, and shall deliver
such a copy to any member upon request.
Sec. 239.14 Charter amendments.
(a) General. In order to adopt a charter amendment, a mutual
holding company must comply with the following requirements:
(1) Board of directors approval. The board of directors of the
mutual holding company must adopt a resolution proposing the charter
amendment that states the text of such amendment;
(2) Form of filing--
(i) Application requirement. If the proposed charter amendment
would render more difficult or discourage a merger, proxy contest, the
assumption of control by a mutual account holder of the mutual holding
company, or the removal of incumbent management; or involve a
significant issue of law or policy; then, the mutual holding shall
submit the charter amendment to the appropriate Reserve Bank for
approval. Applications submitted under this paragraph are subject to
the processing procedures at Sec. 238.14 of this chapter.
(ii) Notice requirement. If the proposed charter amendment does not
implicate paragraph (a)(2)(i) of this section and is permissible under
all applicable laws, rules and regulations, the mutual holding company
shall submit the proposed amendment to the appropriate Reserve Bank at
least 30 days prior to the effective date of the proposed charter
amendment.
(b) Approval--Any charter amendment filed pursuant to paragraph
(a)(2)(ii) of this section shall automatically be approved 30 days from
the date of filing of such amendment with the appropriate Reserve Bank,
provided that the mutual holding company follows the requirements of
its charter in adopting such amendment, unless the Reserve Bank or the
Board notifies the mutual holding company prior to the expiration of
such 30-day period that such amendment is rejected or is deemed to be
filed under the provisions of paragraph (a)(2)(i) of this section.
Notwithstanding anything in paragraph (a) of this section to the
contrary, the following charter amendments, including the adoption of
the Federal mutual holding company charter as set forth in Appendix A,
shall be effective and deemed approved at the time of adoption, if
adopted without change and filed with Board, within 30 days after
adoption, provided the mutual holding company follows the requirements
of its charter in adopting such amendments.
(1) Title change. (i) Subject to Sec. 239.13 and this paragraph
(b), a mutual holding company may amend its charter by substituting a
new corporate title in section 1 of its charter.
[[Page 56567]]
(ii) Prior to changing its corporate title, a mutual holding
company must file with the Board a written notice indicating the
intended change. The Board shall provide to the mutual holding company
a timely written acknowledgment stating when the notice was received.
If, within 30 days of receipt of notice, the Board does not notify the
mutual holding company of its objection to the corporate title change
on the grounds that the title misrepresents the nature of the
institution or the services it offers, the mutual holding company may
change its title by amending its charter in accordance with Sec.
239.14(b) or Sec. 239.22 and the amendment provisions of its charter.
(2) Maximum number of votes. A mutual holding company may amend
section 5 of its charter by substituting the maximum number of votes
per member to any number from 1 to 1000.
(c) Reissuance of charter. A mutual holding company that has
amended its charter may apply to have its charter, including the
amendments, reissued by the Board. Such request for reissuance should
be filed with the appropriate Reserve Bank.
Sec. 239.15 Bylaws.
(a) General. A mutual holding company shall operate under bylaws
that contain provisions that comply with all requirements specified by
the Board, the provisions of this section, the mutual holding company's
charter, and all other applicable laws, rules, and regulations provided
that, a bylaw provision inconsistent with the provisions of this
section may be adopted with the approval of the Board. Bylaws may be
adopted, amended or repealed by a majority of the votes cast by the
members at a legal meeting or a majority of the mutual holding
company's board of directors. Throughout this section, the term
``trustee'' may be substituted for the term ``director'' as relevant.
(b) The following requirements are applicable to mutual holding
companies:
(1) Annual meetings of members. A mutual holding company shall
provide for and conduct an annual meeting of its members for the
election of directors and at which any other business of the mutual
holding company may be conducted. Such meeting shall be held, as
designated by its board of directors, at a location within the state
that constitutes the principal place of business of the subsidiary
savings association, or at any other convenient place the board of
directors may designate, and at a date and time within 150 days after
the end of the mutual holding company's fiscal year. At each annual
meeting, the officers shall make a full report of the financial
condition of the mutual holding company and of its progress for the
preceding year and shall outline a program for the succeeding year.
(2) Special meetings of members. Procedures for calling any special
meeting of the members and for conducting such a meeting shall be set
forth in the bylaws. The subject matter of such special meeting must be
established in the notice for such meeting. The board of directors of
the mutual holding company or the holders of 10 percent or more of the
voting capital shall be entitled to call a special meeting. For
purposes of this section, ``voting capital'' means FDIC-insured
deposits as of the voting record date.
(3) Notice of meeting of members. Notice specifying the date, time,
and place of the annual or any special meeting and adequately
describing any business to be conducted shall be published for two
successive weeks immediately prior to the week in which such meeting
shall convene in a newspaper of general circulation in the city or
county in which the principal place of business of the subsidiary
savings association is located, or mailed postage prepaid at least 15
days and not more than 45 days prior to the date on which such meeting
shall convene to each of its members of record at the last address
appearing on the books of the mutual holding company. A similar notice
shall be posted in a conspicuous place in each of the offices of the
subsidiary savings association during the 14 days immediately preceding
the date on which such meeting shall convene. The bylaws may permit a
member to waive in writing any right to receive personal delivery of
the notice. When any meeting is adjourned for 30 days or more, notice
of the adjournment and reconvening of the meeting shall be given as in
the case of the original meeting.
(4) Fixing of record date. For the purpose of determining members
entitled to notice of or to vote at any meeting of members or any
adjournment thereof, or in order to make a determination of members for
any other proper purpose, the bylaws shall provide for the fixing of a
record date and a method for determining from the books of the
subsidiary savings association the members entitled to vote. Such date
shall be not more than 60 days or fewer than 10 days prior to the date
on which the action, requiring such determination of members, is to be
taken. The same determination shall apply to any adjourned meeting.
(5) Member quorum. Any number of members present and voting,
represented in person or by proxy, at a regular or special meeting of
the members shall constitute a quorum. A majority of all votes cast at
any meeting of the members shall determine any question, unless
otherwise required by regulation. At any adjourned meeting, any
business may be transacted that might have been transacted at the
meeting as originally called. Members present at a duly constituted
meeting may continue to transact business until adjournment.
(6) Voting by proxy. Procedures shall be established for voting at
any annual or special meeting of the members by proxy pursuant to the
rules and regulations of the Board, including the placing of such
proxies on file with the secretary of the mutual holding company, for
verification, prior to the convening of such meeting. Proxies may be
given telephonically or electronically as long as the holder uses a
procedure for verifying the identity of the member. All proxies with a
term greater than eleven months or solicited at the expense of the
subsidiary savings association must run to the board of directors as a
whole, or to a committee appointed by a majority of such board.
(7) Communications between members. Provisions relating to
communications between members shall be consistent with Sec. 239.12.
No member, however, shall have the right to inspect or copy any portion
of any books or records of a mutual holding company containing:
(i) A list of depositors in or borrowers from the subsidiary
savings association;
(ii) Their addresses;
(iii) Individual deposit or loan balances or records; or
(iv) Any data from which such information could be reasonably
constructed.
(8) Number of directors, membership. The bylaws shall set forth a
specific number of directors, not a range. The number of directors
shall be not fewer than five nor more than fifteen, unless a higher or
lower number has been authorized by the Board. Each director of the
mutual holding company shall be a member of the mutual holding company.
Directors may be elected for periods of one to three years and until
their successors are elected and qualified, but if a staggered board is
chosen, provision shall be made for the election of approximately one-
third or one-half of the board each year, as appropriate.
[[Page 56568]]
(9) Meetings of the board. The board of directors shall determine
the place, frequency, time, procedure for notice, which shall be at
least 24 hours unless waived by the directors, and waiver of notice for
all regular and special meetings. The meetings shall be under the
direction of a chairman, appointed annually by the board; or in the
absence of the chairman, the meetings shall be under the direction of
the president. The board also may permit telephonic participation at
meetings. The bylaws may provide for action to be taken without a
meeting if unanimous written consent is obtained for such action. A
majority of the authorized directors shall constitute a quorum for the
transaction of business. The act of a majority of the directors present
at any meeting at which there is a quorum shall be the act of the
board.
(10) Officers, employees, and agents. (i) The bylaws shall contain
provisions regarding the officers of the mutual holding company, their
functions, duties, and powers. The officers of the mutual holding
company shall consist of a president, one or more vice presidents, a
secretary, and a treasurer or comptroller, each of whom shall be
elected annually by the board of directors. Such other officers and
assistant officers and agents as may be deemed necessary may be elected
or appointed by the board of directors or chosen in such other manner
as may be prescribed in the bylaws. Any two or more offices may be held
by the same person, except the offices of president and secretary.
(ii) All officers and agents of the mutual holding company, as
between themselves and the mutual holding company, shall have such
authority and perform such duties in the management of the mutual
holding company as may be provided in the bylaws, or as may be
determined by resolution of the board of directors not inconsistent
with the bylaws. In the absence of any such provision, officers shall
have such powers and duties as generally pertain to their respective
offices. Any officer may be removed by the board of directors with or
without cause, but such removal, other than for cause, shall be without
prejudice to the contractual rights, if any, of the officer so removed.
(iii) Any indemnification provision must provide that any
indemnification is subject to applicable Federal law, rules, and
regulations.
(11) Vacancies, resignation or removal of directors. Members of the
mutual holding company shall elect directors by ballot: Provided, that
in the event of a vacancy on the board, the board of directors may, by
their affirmative vote, fill such vacancy, even if the remaining
directors constitute less than a quorum. A director elected to fill a
vacancy shall be elected to serve only until the next election of
directors by the members. The bylaws shall set out the procedure for
the resignation of a director, which shall be by written notice or by
any other procedure established in the bylaws. Directors may be removed
only for cause as defined in Sec. 239.41, by a vote of the holders of
a majority of the shares then entitled to vote at an election of
directors.
(12) Powers of the board. The board of directors shall have the
power:
(i) By resolution, to appoint from among its members and remove an
executive committee and one or more other committees, which
committee[s] shall have and may exercise all the powers of the board
between the meetings or the board; but no such committee shall have the
authority of the board to amend the charter or bylaws, adopt a plan of
merger, consolidation, dissolution, or provide for the disposition of
all or substantially all the property and assets of the mutual holding
company. Such committee shall not operate to relieve the board, or any
member thereof, of any responsibility imposed by law;
(ii) To fix the compensation of directors, officers, and employees;
and to remove any officer or employee at any time with or without
cause;
(iii) To exercise any and all of the powers of the mutual holding
company not expressly reserved by the charter to the members.
(13) Nominations for directors. The bylaws shall provide that
nominations for directors may be made at the annual meeting by any
member and shall be voted upon, except, however, the bylaws may require
that nominations by a member must be submitted to the secretary and
then prominently posted in the principal place of business, at least 10
days prior to the date of the annual meeting. However, if such
provision is made for prior submission of nominations by a member, then
the bylaws must provide for a nominating committee, which, except in
the case of a nominee substituted as a result of death or other
incapacity, must submit nominations to the secretary and have such
nominations similarly posted at least 15 days prior to the date of the
annual meeting.
(14) New business. The bylaws shall provide procedures for the
introduction of new business at the annual meeting. Those provisions
may require that such new business be stated in writing and filed with
the secretary prior to the annual meeting at least 30 days prior to the
date of the annual meeting.
(15) Amendment. Bylaws may include any provision for their
amendment that would be consistent with applicable law, rules, and
regulations and adequately addresses its subject and purpose.
(i) Amendments shall be effective:
(A) After approval by a majority vote of the authorized board, or
by a majority of the vote cast by the members of the mutual holding
company at a legal meeting; and
(B) After receipt of any applicable regulatory approval.
(ii) When a mutual holding company fails to meet its quorum
requirement, solely due to vacancies on the board, the bylaws may be
amended by an affirmative vote of a majority of the sitting board.
(16) Miscellaneous. The bylaws may also address the subject of age
limitations for directors or officers as long as they are consistent
with applicable Federal law, rules or regulations, and any other
subjects necessary or appropriate for effective operation of the mutual
holding company.
(c) Form of filing--(1) Application requirement. (i) Any bylaw
amendment shall be submitted to the appropriate Reserve Bank for
approval if it would:
(A) Render more difficult or discourage a merger, proxy contest,
the assumption of control by a mutual account holder of the mutual
holding company, or the removal of incumbent management;
(B) Involve a significant issue of law or policy, including
indemnification, conflicts of interest, and limitations on director or
officer liability; or
(C) Be inconsistent with the requirements of this section or with
applicable laws, rules, regulations, or the mutual holding company's
charter.
(ii) Applications submitted under paragraph (c)(1)(i) of this
section are subject to the processing procedures at Sec. 238.14 of
this chapter.
(iii) For purposes of this paragraph (c), bylaw provisions that
adopt the language of the model bylaws contained in Appendix C to this
part, if adopted without change, and filed with Board within 30 days
after adoption, are effective upon adoption. The Board may amend the
model bylaws provided in Appendix C to this part.
(2) Filing requirement. If the proposed bylaw amendment does not
implicate paragraph (c)(1) or (c)(3) of this section, then the mutual
holding company shall submit the amendment to the appropriate Reserve
Bank at least 30 days prior to the date the bylaw
[[Page 56569]]
amendment is to be adopted by the mutual holding company.
(3) Corporate governance procedures. A mutual holding company may
elect to follow the corporate governance procedures of the laws of the
state where the main office of the institution is located, provided
that such procedures may be elected only to the extent not inconsistent
with applicable Federal statutes, regulations, and safety and
soundness, and such procedures are not of the type described in
paragraph (c)(1)(i) of this section. If this election is selected, a
mutual holding company shall designate in its bylaws the provision or
provisions from the body of law selected for its corporate governance
procedures, and shall file a copy of such bylaws, which are effective
upon adoption, within 30 days after adoption. The submission shall
indicate, where not obvious, why the bylaw provisions do not require an
application under paragraph (c)(1)(i) of this section.
(d) Effectiveness. Any bylaw amendment filed pursuant to paragraph
(c)(2) of this section shall automatically be effective 30 days from
the date of filing of such amendment, provided that the mutual holding
company follows the requirements of its charter and bylaws in adopting
such amendment, unless the Board notifies the mutual holding company
prior to the expiration of the 30-day period that such amendment is
rejected or that such amendment requires an application to be filed
pursuant to paragraph (c)(1) of this section.
(e) Availability of bylaws. A mutual holding company shall make
available to its members at all times in the offices of each subsidiary
savings association from which the mutual holding company draws members
a true copy of its bylaws, including any amendments, and shall deliver
such a copy to any member upon request.
Sec. 239.16 Voluntary dissolution.
(a) A mutual holding company's board of directors may propose a
plan for dissolution of the mutual holding company. All references in
this section to mutual holding company shall also apply to a subsidiary
holding company organized under this part. The plan may provide for
either:
(1) Transfer of all the mutual holding company's assets to another
mutual holding company or home-financing institutions under Federal
charter either for cash sufficient to pay all obligations of the mutual
holding company and retire all outstanding accounts or in exchange for
that mutual holding company's payment of all the mutual holding
company's outstanding obligations and issuance of share accounts or
other evidence of interest to the mutual holding company's members on a
pro rata basis; or
(2) Dissolution in a manner proposed by the directors which they
consider best for all concerned.
(b) The plan, and a statement of reasons for proposing dissolution
and for proposing the plan, shall be submitted to the appropriate
Reserve Bank for approval. The Board will approve the plan if the Board
believes dissolution is advisable and the plan is best for all
concerned. If the Board considers the plan inadvisable, the Board may
either make recommendations to the mutual holding company concerning
the plan or disapprove it. When the plan is approved by the mutual
holding company's board of directors and by the Board, it shall be
submitted to the mutual holding company's members at a duly called
meeting and, when approved by a majority of votes cast at that meeting,
shall become effective. After dissolution in accordance with the plan,
a certificate evidencing dissolution, supported by such evidence as the
Board may require, shall immediately be filed with the Board. When the
Board receives such evidence satisfactory to the Board, it will
terminate the corporate existence of the dissolved mutual holding
company and the mutual holding company's charter shall thereby be
canceled.
Subpart C--Subsidiary Holding Companies
Sec. 239.20 Scope.
This subpart applies only to a subsidiary holding company of a
mutual holding company.
Sec. 239.21 Charters.
(a) Charters. The charter of a subsidiary holding company of a
mutual holding company shall be in the form set forth in Appendix B of
this part and may be amended pursuant to Sec. 239.22. The Board may
amend the form of charter provided in Appendix B.
(b) Optional charter provision limiting minority stock ownership.
(1) A subsidiary holding company that engages in its initial
minority stock issuance after October 1, 2008 may, before it conducts
its initial minority stock issuance, at the time it conducts its
initial minority stock issuance, or, subject to the condition below, at
any time during the five years following a minority stock issuance that
such subsidiary holding company conducts in accordance with the
purchase priorities set forth in subpart E of this part, include in its
charter the provision set forth in paragraph (b)(2) of this section.
For purposes of the charter provision set forth in paragraph (b)(2),
the definitions set forth at Sec. 239.22(b)(8) apply. This charter
provision expires a maximum of five years from the date of the minority
stock issuance. The subsidiary holding company may adopt the charter
provision set forth in paragraph (b)(2) of this section after a
minority stock issuance only if it provided, in the offering materials
related to its previous minority stock issuance or issuances, full
disclosure of the possibility that the subsidiary holding company might
adopt such a charter provision.
(2) Beneficial ownership limitation. No person may directly or
indirectly offer to acquire or acquire the beneficial ownership of more
than 10 percent of the outstanding stock of any class of voting stock
of the subsidiary holding company held by persons other than the
subsidiary holding company's mutual holding company parent. This
limitation expires on [insert date within five years of minority stock
issuance] and does not apply to a transaction in which an underwriter
purchases stock in connection with a public offering, or the purchase
of stock by an employee stock ownership plan or other tax-qualified
employee stock benefit plan which is exempt from the approval
requirements under Sec. 238.12(a)(7) of this chapter.
(c) In the event a person acquires stock in violation of this
section, all stock beneficially owned in excess of 10 percent shall be
considered ``excess stock'' and shall not be counted as stock entitled
to vote and shall not be voted by any person or counted as voting stock
in connection with any matters submitted to the stockholders for a
vote.
Sec. 239.22 Charter amendments.
(a) General. In order to adopt a charter amendment, a subsidiary
holding company must comply with the following requirements:
(1) Board of directors approval. The board of directors of the
subsidiary holding company must adopt a resolution proposing the
charter amendment that states the text of such amendment.
(2) Form of filing.
(i) Application requirement. If the proposed charter amendment
would render more difficult or discourage a merger, tender offer, or
proxy contest, the assumption of control by a holder of a block of the
subsidiary holding company's stock, the removal of incumbent
management, or involve a
[[Page 56570]]
significant issue of law or policy, the subsidiary holding company
shall file the proposed amendment with and shall obtain the prior
approval of the Board pursuant to Sec. 238.14 of this chapter; and
(ii) Notice requirement. If the proposed charter amendment does not
implicate paragraph (a)(2)(i) of this section and such amendment is
permissible under all applicable laws, rules or regulations, the
subsidiary holding company shall submit the proposed amendments to the
appropriate Reserve Bank, at least 30 days prior to the date the
proposed charter amendment is to be mailed for consideration by the
subsidiary holding company's shareholders.
(b) Approval. Any charter amendment filed pursuant to paragraph
(a)(2)(ii) of this section shall automatically be approved 30 days from
the date of filing of such amendment, provided that the subsidiary
holding company follows the requirements of its charter in adopting
such amendment, unless the Board notifies the mutual holding company
prior to the expiration of such 30-day period that such amendment is
rejected or is deemed to be filed under the provisions of paragraph
(a)(2)(i) of this section. In addition, the following charter
amendments, including the adoption of the charter as set forth in
Appendix B of this part, shall be approved at the time of adoption, if
adopted without change and filed with the Board within 30 days after
adoption, provided the subsidiary holding company follows the
requirements of its charter in adopting such amendments.
(1) Title change. Prior to changing its corporate title, a
subsidiary holding company must file with the appropriate Reserve Bank
a written notice indicating the intended change. The Reserve Bank shall
provide to the subsidiary holding company a timely written
acknowledgment stating when the notice was received. If, within 30 days
of receipt of notice, the Reserve Bank or the Board does not notify the
subsidiary holding company of its objection on the grounds that the
title misrepresents the nature of the institution or the services it
offers, the subsidiary holding company may change its title by amending
section 1 of its charter in accordance with this section and the
amendment provisions of its charter.
(2) Home office. A subsidiary holding company may amend its charter
by substituting a new domicile in section 2 of its charter.
(3) Number of shares of stock and par value. A subsidiary holding
company may amend Section 5 of its charter to change the number of
authorized shares of stock, the number of shares within each class of
stock, and the par or stated value of such shares.
(4) Capital stock. A subsidiary holding company may amend its
charter by revising Section 5 to read as follows:
Section 5. Capital stock. The total number of shares of all
classes of capital stock that the subsidiary holding company has the
authority to issue is ------, of which ------ shall be common stock
of par [or if no par value is specified the stated] value of ------
per share and of which [list the number of each class of preferred
and the par or if no par value is specified the stated value per
share of each such class]. The shares may be issued from time to
time as authorized by the board of directors without further
approval of shareholders, except as otherwise provided in this
Section 5 or to the extent that such approval is required by
governing law, rule, or regulation. The consideration for the
issuance of the shares shall be paid in full before their issuance
and shall not be less than the par [or stated] value. Neither
promissory notes nor future services shall constitute payment or
part payment for the issuance of shares of the subsidiary holding
company. The consideration for the shares shall be cash, tangible or
intangible property (to the extent direct investment in such
property would be permitted), labor, or services actually performed
for the subsidiary holding company, or any combination of the
foregoing. In the absence of actual fraud in the transaction, the
value of such property, labor, or services, as determined by the
board of directors of the subsidiary holding company, shall be
conclusive. Upon payment of such consideration, such shares shall be
deemed to be fully paid and nonassessable. In the case of a stock
dividend, that part of the retained earnings of the subsidiary
holding company that is transferred to common stock or paid-in
capital accounts upon the issuance of shares as a stock dividend
shall be deemed to be the consideration for their issuance.
Except for shares issued in the initial organization of the
subsidiary holding company, no shares of capital stock (including
shares issuable upon conversion, exchange, or exercise of other
securities) shall be issued, directly or indirectly, to officers,
directors, or controlling persons of the association or subsidiary
holding company other than as part of a general public offering or
as qualifying shares to a director, unless their issuance or the
plan under which they would be issued has been approved by a
majority of the total votes eligible to be cast at a legal meeting.
Nothing contained in this Section 5 (or in any supplementary
sections hereto) shall entitle the holders of any class of a series
of capital stock to vote as a separate class or series or to more
than one vote per share, except as to the cumulation of votes for
the election of directors, unless the charter otherwise provides
that there shall be no such cumulative voting: Provided, That this
restriction on voting separately by class or series shall not apply:
(i) To any provision which would authorize the holders of
preferred stock, voting as a class or series, to elect some members
of the board of directors, less than a majority thereof, in the
event of default in the payment of dividends on any class or series
of preferred stock;
(ii) To any provision that would require the holders of
preferred stock, voting as a class or series, to approve the merger
or consolidation of the subsidiary holding company with another
corporation or the sale, lease, or conveyance (other than by
mortgage or pledge) of properties or business in exchange for
securities of a corporation other than the subsidiary holding
company if the preferred stock is exchanged for securities of such
other corporation: Provided, That no provision may require such
approval for transactions undertaken with the assistance or pursuant
to the direction of the Board or the Federal Deposit Insurance
Corporation;
(iii) To any amendment which would adversely change the specific
terms of any class or series of capital stock as set forth in this
Section 5 (or in any supplementary sections hereto), including any
amendment which would create or enlarge any class or series ranking
prior thereto in rights and preferences. An amendment which
increases the number of authorized shares of any class or series of
capital stock, or substitutes the surviving subsidiary holding
company in a merger or consolidation for the subsidiary holding
company, shall not be considered to be such an adverse change.
A description of the different classes and series (if any) of
the subsidiary holding company's capital stock and a statement of
the designations, and the relative rights, preferences, and
limitations of the shares of each class of and series (if any) of
capital stock are as follows:
A. Common stock. Except as provided in this Section 5 (or in any
supplementary sections thereto) the holders of the common stock
shall exclusively possess all voting power. Each holder of shares of
the common stock shall be entitled to one vote for each share held
by each holder, except as to the cumulation of votes for the
election of directors, unless the charter otherwise provides that
there shall be no such cumulative voting.
Whenever there shall have been paid, or declared and set aside
for payment, to the holders of the outstanding shares of any class
of stock having preference over the common stock as to the payment
of dividends, the full amount of dividends and of sinking fund,
retirement fund, or other retirement payments, if any, to which such
holders are respectively entitled in preference to the common stock,
then dividends may be paid on the common stock and on any class or
series of stock entitled to participate therewith as to dividends
out of any assets legally available for the payment of dividends.
In the event of any liquidation, dissolution, or winding up of
the subsidiary holding company, the holders of the common stock (and
the holders of any class or series of stock entitled to participate
with the common stock in the distribution of assets) shall be
entitled to receive, in cash or in kind, the assets of the
subsidiary holding company available for distribution remaining
after: (i)
[[Page 56571]]
Payment or provision for payment of the subsidiary holding company's
debts and liabilities; (ii) distributions or provision for
distributions in settlement of its liquidation account; and (iii)
distributions or provision for distributions to holders of any class
or series of stock having preference over the common stock in the
liquidation, dissolution, or winding up of the subsidiary holding
company. Each share of common stock shall have the same relative
rights as and be identical in all respects with all the other shares
of common stock.
B. Preferred stock. The subsidiary holding company may provide
in supplementary sections to its charter for one or more classes of
preferred stock, which shall be separately identified. The shares of
any class may be divided into and issued in series, with each series
separately designated so as to distinguish the shares thereof from
the shares of all other series and classes. The terms of each series
shall be set forth in a supplementary section to the charter. All
shares of the same class shall be identical except as to the
following relative rights and preferences, as to which there may be
variations between different series:
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rate or the amount of dividends to be paid on
the shares of such series, whether dividends shall be cumulative
and, if so, from which date(s), the payment date(s) for dividends,
and the participating or other special rights, if any, with respect
to dividends;
(c) The voting powers, full or limited, if any, of shares of
such series;
(d) Whether the shares of such series shall be redeemable and,
if so, the price(s) at which, and the terms and conditions on which,
such shares may be redeemed;
(e) The amount(s) payable upon the shares of such series in the
event of voluntary or involuntary liquidation, dissolution, or
winding up of the subsidiary holding company;
(f) Whether the shares of such series shall be entitled to the
benefit of a sinking or retirement fund to be applied to the
purchase or redemption of such shares, and if so entitled, the
amount of such fund and the manner of its application, including the
price(s) at which such shares may be redeemed or purchased through
the application of such fund;
(g) Whether the shares of such series shall be convertible into,
or exchangeable for, shares of any other class or classes of stock
of the subsidiary holding company and, if so, the conversion
price(s) or the rate(s) of exchange, and the adjustments thereof, if
any, at which such conversion or exchange may be made, and any other
terms and conditions of such conversion or exchange.
(h) The price or other consideration for which the shares of
such series shall be issued; and
(i) Whether the shares of such series which are redeemed or
converted shall have the status of authorized but unissued shares of
serial preferred stock and whether such shares may be reissued as
shares of the same or any other series of serial preferred stock.
Each share of each series of serial preferred stock shall have
the same relative rights as and be identical in all respects with
all the other shares of the same series.
The board of directors shall have authority to divide, by the
adoption of supplementary charter sections, any authorized class of
preferred stock into series, and, within the limitations set forth
in this section and the remainder of this charter, fix and determine
the relative rights and preferences of the shares of any series so
established.
Prior to the issuance of any preferred shares of a series
established by a supplementary charter section adopted by the board
of directors, the subsidiary holding company shall file with the
appropriate Reserve Bank a dated copy of that supplementary section
of this charter established and designating the series and fixing
and determining the relative rights and preferences thereof.
(5) Limitations on subsequent issuances. A subsidiary holding
company may amend its charter to require shareholder approval of the
issuance or reservation of common stock or securities convertible into
common stock under circumstances which would require shareholder
approval under the rules of the New York or American Stock Exchange if
the shares were then listed on the New York or American Stock Exchange.
(6) Cumulative voting. A subsidiary holding company may amend its
charter by substituting the following sentence for the second sentence
in the third paragraph of Section 5: ``Each holder of shares of common
stock shall be entitled to one vote for each share held by such holder
and there shall be no right to cumulate votes in an election of
directors.''
(7) [Reserved]
(8) Anti-takeover provisions following mutual to stock conversion.
Notwithstanding the law of the state in which the subsidiary holding
company is located, a subsidiary holding company may amend its charter
by renumbering existing sections as appropriate and adding a new
section 8 as follows:
Section 8. Certain Provisions Applicable for Five Years.
Notwithstanding anything contained in the subsidiary holding
company's charter or bylaws to the contrary, for a period of
[specify number of years up to five] years from the date of
completion of the conversion of the subsidiary holding company from
mutual to stock form, the following provisions shall apply:
A. Beneficial Ownership Limitation. No person shall directly or
indirectly offer to acquire or acquire the beneficial ownership of
more than 10 percent of any class of an equity security of the
subsidiary holding company. This limitation shall not apply to a
transaction in which the subsidiary holding company forms a holding
company without change in the respective beneficial ownership
interests of its stockholders other than pursuant to the exercise of
any dissenter and appraisal rights, the purchase of shares by
underwriters in connection with a public offering, or the purchase
of shares by a tax-qualified employee stock benefit plan which is
exempt from the approval requirements under Sec. 238.12(a) of this
chapter.
In the event shares are acquired in violation of this section 8,
all shares beneficially owned by any person in excess of 10 percent
shall be considered ``excess shares'' and shall not be counted as
shares entitled to vote and shall not be voted by any person or
counted as voting shares in connection with any matters submitted to
the stockholders for a vote.
For purposes of this section 8, the following definitions apply:
(1) The term ``person'' includes an individual, a group acting
in concert, a corporation, a partnership, an association, a joint
stock company, a trust, an unincorporated organization or similar
company, a syndicate or any other group formed for the purpose of
acquiring, holding or disposing of the equity securities of the
subsidiary holding company.
(2) The term ``offer'' includes every offer to buy or otherwise
acquire, solicitation of an offer to sell, tender offer for, or
request or invitation for tenders of, a security or interest in a
security for value.
(3) The term ``acquire'' includes every type of acquisition,
whether effected by purchase, exchange, operation of law or
otherwise.
(4) The term ``acting in concert'' means (a) knowing
participation in a joint activity or conscious parallel action
towards a common goal whether or not pursuant to an express
agreement, or (b) a combination or pooling of voting or other
interests in the securities of an issuer for a common purpose
pursuant to any contract, understanding, relationship, agreement or
other arrangements, whether written or otherwise.
B. Cumulative Voting Limitation. Stockholders shall not be
permitted to cumulate their votes for election of directors.
C. Call for Special Meetings. Special meetings of stockholders
relating to changes in control of the subsidiary holding company or
amendments to its charter shall be called only upon direction of the
board of directors.
(c) Anti-takeover provisions. The Board may grant approval to a
charter amendment not listed in paragraph (b) of this section regarding
the acquisition by any person or persons of its equity securities
provided that the subsidiary holding company shall file as part of its
application for approval an opinion, acceptable to the Board, of
counsel independent from the subsidiary holding company that the
proposed charter provision would be permitted to be adopted by a
corporation chartered by the state in which the principal office of the
subsidiary holding company is located. Any such provision must be
consistent with applicable statutes, regulations, and Board policies.
Further, any such provision that would have the effect of rendering
more difficult a change in control of the subsidiary
[[Page 56572]]
holding company and would require for any corporate action (other than
the removal of directors) the affirmative vote of a larger percentage
of shareholders than is required by this part, shall not be effective
unless adopted by a percentage of shareholder vote at least equal to
the highest percentage that would be required to take any action under
such provision.
(d) Reissuance of charter. A subsidiary holding company that has
amended its charter may apply to have its charter, including the
amendments, reissued by the Board. Such requests for reissuance should
be filed with the appropriate Reserve Bank, and contain signatures
required by the charter in Appendix B to this part, together with such
supporting documents as needed to demonstrate that the amendments were
properly adopted.
Sec. 239.23 Bylaws.
(a) General. At its first organizational meeting, the board of
directors of a subsidiary holding company shall adopt a set of bylaws
for the administration and regulation of its affairs. Bylaws may be
adopted, amended or repealed by either a majority of the votes cast by
the shareholders at a legal meeting or a majority of the board of
directors. The bylaws shall contain sufficient provisions to govern the
subsidiary holding company in accordance with the requirements of
Sec. Sec. 239.26, 239.27, 239.28, and 239.29 and shall not contain any
provision that is inconsistent with those sections or with applicable
laws, rules, regulations or the subsidiary holding company's charter,
except that a bylaw provision inconsistent with Sec. Sec. 239.26,
239.27, 239.28, and 239.29 may be adopted with the approval of the
Board.
(b) Form of filing --(1) Application requirement.
(i) Any bylaw amendment shall be submitted to the appropriate
Reserve Bank for approval if it would:
(A) Render more difficult or discourage a merger, tender offer, or
proxy contest, the assumption of control by a holder of a large block
of the subsidiary holding company's stock, or the removal of incumbent
management; or
(B) Be inconsistent with Sec. Sec. 239.26, 239.27, 239.28, and
239.29, with applicable laws, rules, regulations or the subsidiary
holding company's charter or involve a significant issue of law or
policy, including indemnification, conflicts of interest, and
limitations on director or officer liability.
(ii) Applications submitted under paragraph (b)(1)(i) of this
section are subject to the processing procedures under Sec. 238.14 of
this chapter;
(iii) For purposes of this paragraph (b), bylaw provisions that
adopt the language of the model bylaws contained in Appendix D to this
part, if adopted without change and filed with Board within 30 days
after adoption, are effective upon adoption. The Board may amend the
model bylaws provided in Appendix D.
(2) Filing requirement. If the proposed bylaw amendment does not
implicate paragraph (b)(1) or (b)(3) of this section and is permissible
under all applicable laws, rules, or regulations, the subsidiary
holding company shall submit the amendment to the appropriate Reserve
Bank at least 30 days prior to the date the bylaw amendment is to be
adopted by the subsidiary holding company.
(3) Corporate governance procedures. A subsidiary holding company
may elect to follow the corporate governance procedures of: The laws of
the state where the main office of the subsidiary holding company is
located; Delaware General Corporation law; or The Model Business
Corporation Act, provided that such procedures may be elected to the
extent not inconsistent with applicable Federal statutes and
regulations and safety and soundness, and such procedures are not of
the type described in paragraph (b)(1)(i) of this section. If this
election is selected, a subsidiary holding company shall designate in
its bylaws the provision or provisions from the body or bodies of law
selected for its corporate governance procedures, and shall file a copy
of such bylaws, which are effective upon adoption, within 30 days after
adoption. The submission shall indicate, where not obvious, why the
bylaw provisions do not require an application under paragraph
(b)(1)(i) of this section.
(c) Effectiveness. Any bylaw amendment filed pursuant to paragraph
(b)(2) of this section shall automatically be effective 30 days from
the date of filing of such amendment, provided that the subsidiary
holding company follows the requirements of its charter and bylaws in
adopting such amendment, unless the Board notifies the subsidiary
holding company prior to the expiration of such 30-day period that such
amendment is rejected or requires an application to be filed pursuant
to paragraph (b)(1) of this section.
(d) Effect of subsequent charter or bylaw change. Notwithstanding
any subsequent change to its charter or bylaws, the authority of a
subsidiary holding company to engage in any transaction shall be
determined only by the subsidiary holding company's charter or bylaws
then in effect, unless otherwise provided by Federal law or regulation.
Sec. 239.24 Issuances of stock by subsidiary holding companies of
mutual holding companies.
(a) Requirements. No subsidiary holding company of a mutual holding
company may issue stock to persons other than its mutual holding
company parent in connection with a mutual holding company
reorganization, or at any time subsequent to the subsidiary holding
company's acquisition by the mutual holding company, unless the
subsidiary holding company obtains advance approval of each such
issuance from the Board. Approval of a mutual holding company
reorganization filed pursuant to Sec. 239.3(a) shall be deemed to
constitute approval of any stock issuance specifically applied for
pursuant to this section in connection with the reorganization, unless
otherwise specified by the Board. The Board shall approve any proposed
issuance that meets each of the criteria set forth below in paragraphs
(a)(1) through (a)(7) of this section.
(1) The proposed issuance is to be made pursuant to a Stock
Issuance Plan that contains all the provisions required by Sec.
239.25.
(2) The Stock Issuance Plan is consistent with the terms of the
subsidiary holding company's charter (or any proposed amendments
thereto), including terms governing the type and amount of stock that
may be issued.
(3) The Stock Issuance Plan would provide the subsidiary holding
company, its mutual holding company parent, and any subsidiary savings
associations of the subsidiary holding company with fully sufficient
capital and would not be inequitable or detrimental to the subsidiary
holding company or its mutual holding company parent or to members of
the mutual holding company parent.
(4) The proposed price or price range of the stock to be issued is
reasonable. The Board shall review the reasonableness of the proposed
price or price range.
(5) The aggregate amount of outstanding common stock of the
subsidiary holding company owned or controlled by persons other than
the subsidiary holding company's mutual holding company parent at the
close of the proposed issuance shall be less than 50 percent of the
subsidiary holding company's total outstanding common stock, unless the
subsidiary holding company was a stock holding company when acquired by
the mutual holding company, in which case the foregoing
[[Page 56573]]
restriction shall not apply. Any amount of preferred stock may be
issued by any subsidiary holding company of a mutual holding company to
persons other than the subsidiary holding company's mutual holding
company, consistent with any other applicable laws and regulations.
(6) The subsidiary holding company furnishes the information
required by the Board in connection with the proposed issuance.
(7) The proposed stock issuance meets the convenience and needs
standard of Sec. 239.55(g).
(8) The proposed issuance complies with all other applicable laws
and regulations.
(9) Unless otherwise determined by the Board, the limitations on
the minimum and maximum amounts of the estimated price range required
by Sec. 239.59(c) shall apply.
(b) Related approvals. Approval by the Board of any stock issuance
pursuant to this section shall also be deemed to constitute:
(1) Approval of the form of stock certificate proposed to be
utilized in connection with the stock issuance, provided such form was
included in the application materials filed pursuant to this section;
and
(2) Approval of any charter or bylaw amendment required to
authorize issuance of the stock, provided such amendment was proposed
in the application materials filed pursuant to this section.
(c) Offering restrictions. (1) No representations may be made in
any manner in connection with the offer or sale of any stock issued
pursuant to this section that the price, price range or any other
pricing information related to such stock issuance has been approved by
the Board or that the stock has been approved or disapproved by the
Board or that the Board has endorsed the accuracy or adequacy of any
securities offering documents disseminated in connection with such
stock.
(2) The sale of minority stock of the subsidiary holding company to
be made under the minority stock issuance plan, including any sale in a
public offering or direct community marketing, shall be completed as
promptly as possible and within 45 calendar days after the last day of
the subscription period, unless extended by the Board.
(3) In the offer, sale, or purchase of stock issued pursuant to
this section, no person shall:
(i) Employ any device, scheme, or artifice to defraud;
(ii) Make any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements made, in the
light of the circumstances under which they were made, not misleading;
or
(iii) Engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon a purchaser or
seller.
(4) Prior to the completion of a stock issuance pursuant to this
section, no person shall transfer, or enter into any agreement or
understanding to transfer, the legal or beneficial ownership of the
stock to be issued to any other person.
(5) Prior to the completion of a stock issuance pursuant to this
section, no person shall make any offer, or any announcement of any
offer, to purchase any stock to be issued, or knowingly acquire any
stock in the issuance, in excess of the maximum purchase limitations
established in the Stock Issuance Plan.
(6) All stock issuances pursuant to this section must:
(i) Comply with Sec. 239.59 and, to the extent applicable, the
form or forms specified by the Board; and
(ii) Provide that the offering be structured in a manner similar to
a standard conversion under subpart E of this part, including the stock
purchase priorities accorded members of the issuing subsidiary holding
company's mutual holding company, unless the subsidiary holding company
would qualify for a supervisory conversion if it were to undertake a
conversion under subpart E of this part; or demonstrates to the
satisfaction of the Board that a non-conforming issuance would be more
beneficial to the savings association and subsidiary holding company
compared to a conforming offering, considering, in the aggregate, the
effect of each on the savings association and subsidiary holding
company's financial and managerial resources and future prospects, the
effect of the issuance upon the savings association and subsidiary
holding company, the insurance risk to the Deposit Insurance Fund, and
the convenience and needs of the community to be served.
(7) Notwithstanding the restrictions in paragraph (c)(6)(ii) of
this section, a subsidiary holding company of a mutual holding company
may issue stock as part of a stock benefit plan to any insider,
associate of an insider, or tax qualified or non-tax qualified employee
stock benefit plan of the mutual holding company or subsidiary of the
mutual holding company without including the purchase priorities of
subpart E of this part.
(8) As part of a reorganization, a reasonable amount of shares or
proceeds may be contributed to a charitable organization that complies
with Sec. Sec. 239.64(b) to 239.64(f), provided such contribution does
not result in any taxes on excess business holdings under section 4943
of the Internal Revenue Code (26 U.S.C. 4943).
(d) Procedural and substantive requirements. The procedural and
substantive requirements of subpart E of this part shall apply to all
mutual holding company stock issuances and subsidiary holding company
stock issuances under this section, unless clearly inapplicable, as
determined by the Board. For purposes of this paragraph, the term
conversion as it appears in the provisions of subpart E of this part
shall refer to the stock issuance, and the term mutual holding company
shall refer to the subsidiary holding company undertaking the stock
issuance.
Sec. 239.25 Contents of Stock Issuance Plans.
(a) Mandatory provisions. Each of the provisions mandatory for all
stock issuance plans under this paragraph (a) shall be deemed
regulatory requirements. Each Stock Issuance Plan shall contain a
complete description of all significant terms of the proposed stock
issuance (including the information specified in Sec. 239.65(f) to the
extent known), shall attach and incorporate the proposed form of stock
certificate, the proposed stock order form, and any agreements or other
documents defining the rights of the stockholders, and shall:
(1) Provide that the stock shall be sold at a total price equal to
the estimated pro forma market value of such stock, based upon an
independent valuation;
(2) Provide that the aggregate amount of outstanding common stock
of the subsidiary holding company owned or controlled by persons other
than the subsidiary holding company's mutual holding company parent at
the close of the proposed issuance shall be less than fifty percent of
the subsidiary holding company's total outstanding common stock (This
provision may be omitted if the proposed issuance will be conducted by
a subsidiary holding company that was in the stock form when acquired
by its mutual holding company parent);
(3) Provide that all employee stock ownership plans or other tax-
qualified employee stock benefit plans (collectively, ESOPs) must not
encompass, in the aggregate, more than either 4.9 percent of the
outstanding shares of the subsidiary holding company's common stock or
4.9 percent of the subsidiary holding company's
[[Page 56574]]
stockholders' equity at the close of the proposed issuance;
(4) Provide that all ESOPs and management recognition plans (MRPs)
must not encompass, in the aggregate, more than either 4.9 percent of
the outstanding shares of the subsidiary holding company's common stock
or 4.9 percent of the subsidiary holding company's stockholders' equity
at the close of the proposed issuance. However, if the subsidiary
holding company's tangible capital equals at least ten percent at the
time of implementation of the plan, the Board may permit such ESOPs and
MRPs to encompass, in the aggregate, up to 5.88 percent of the
outstanding common stock or stockholders' equity at the close of the
proposed issuance;
(5) Provide that all MRPs must not encompass, in the aggregate,
more than either 1.47 percent of the common stock of the subsidiary
holding company or 1.47 percent of the subsidiary holding company's
stockholders' equity at the close of the proposed issuance. However, if
the subsidiary holding company's tangible capital is at least ten
percent at the time of implementation of the plan, the Board may permit
MRPs to encompass, in the aggregate, up to 1.96 percent of the
outstanding shares of the subsidiary holding company's common stock or
1.96 percent of the savings subsidiary holding company's stockholders'
equity at the close of the proposed issuance;
(6) Provide that all stock option plans (Option Plans) must not
encompass, in the aggregate, more than either 4.9 percent of the
subsidiary holding company's outstanding common stock at the close of
the proposed issuance or 4.9 percent of the subsidiary holding
company's stockholders' equity at the close of the proposed issuance;
(7) Provide that an ESOP, a MRP or an Option Plan modified or
adopted no earlier than one year after the close of: the proposed
issuance, or any subsequent issuance that is made in substantial
conformity with the purchase priorities Sec. 239.59(a) set forth in
subpart E of this part, may exceed the percentage limitations contained
in paragraphs (a)(3) through (6) of this section (plan expansion),
subject to the following two requirements. First, all common stock
awarded in connection with any plan expansion must be acquired for such
awards in the secondary market. Second, such acquisitions must begin no
earlier than when such plan expansion is permitted to be made;
(8)(i) Provide that the aggregate amount of common stock that may
be encompassed under all Option Plans and MRPs, or acquired by all
insiders of the subsidiary holding company and subsidiary savings
association and associates of insiders of the subsidiary holding
company and subsidiary savings association, must not exceed the
following percentages of common stock or stockholders' equity of the
subsidiary holding company, held by persons other than the subsidiary
holding company's mutual holding company parent at the close of the
proposed issuance:
------------------------------------------------------------------------
Officer and
director
Institution size purchases
(percent)
------------------------------------------------------------------------
$ 50,000,000 or less.................................... 35
$ 50,000,001-100,000,000................................ 34
$100,000,001-150,000,000................................ 33
$150,000,001-200,000,000................................ 32
$200,000,001-250,000,000................................ 31
$250,000,001-300,000,000................................ 30
$300,000,001-350,000,000................................ 29
$350,000,001-400,000,000................................ 28
$400,000,001-450,000,000................................ 27
$450,000,001-500,000,000................................ 26
Over $500,000,000....................................... 25
------------------------------------------------------------------------
(ii) The percentage limitations contained in paragraph 8(i) of
this section may be exceeded provided that all stock acquired by
insiders and associates of insiders or awarded under all MRPs and
Option Plans in excess of those limitations is acquired in the
secondary market. If acquired for such awards on the secondary market,
such acquisitions must begin no earlier than one year after the close
of the proposed issuance or any subsequent issuance that is made in
substantial conformity with the purchase priorities set forth in
subpart E of this part.
(iii) In calculating the number of shares held by insiders and
their associates under this provision, shares awarded but not delivered
under an ESOP, MRP, or Option Plan that are attributable to such
persons shall not be counted as being acquired by such persons.
(9) Provide that the amount of common stock that may be encompassed
under all Option Plans and MRPs must not exceed, in the aggregate, 25
percent of the outstanding common stock held by persons other than the
subsidiary holding company's mutual holding company parent at the close
of the proposed issuance;
(10) Provide that the issuance shall be conducted in compliance
with, to the extent applicable, the forms required by the Board;
(11) Provide that the sales price of the shares of stock to be sold
in the issuance shall be a uniform price determined in accordance with
Sec. 239.24;
(12) Provide that, if at the close of the stock issuance the
subsidiary holding company has more than thirty-five shareholders of
any class of stock, the subsidiary holding company shall promptly
register that class of stock pursuant to the Securities Exchange Act of
1934, as amended (15 U.S.C. 78a-78jj), and undertake not to deregister
such stock for a period of three years thereafter;
(13) Provide that, if at the close of the stock issuance the
subsidiary holding company has more than one hundred shareholders of
any class of stock, the subsidiary holding company shall use its best
efforts to:
(i) Encourage and assist a market maker to establish and maintain a
market for that class of stock; and
(ii) List that class of stock on a national or regional securities
exchange or on the NASDAQ quotation system;
(14) Provide that, for a period of three years following the
proposed issuance, no insider of the subsidiary holding company or his
or her associates shall purchase, without the prior written approval of
the Board, any stock of the subsidiary holding company except from a
broker dealer registered with the Securities and Exchange Commission,
except that the foregoing restriction shall not apply to:
(i) Negotiated transactions involving more than one percent of the
outstanding stock in the class of stock; or
(ii) Purchases of stock made by and held by any tax-qualified or
non-tax-qualified employee stock benefit plan of the subsidiary holding
company even if such stock is attributable to insiders of the
subsidiary holding company and subsidiary savings association or their
associates;
(15) Provide that stock purchased by insiders of the subsidiary
holding company and subsidiary savings association and their associates
in the proposed issuance shall not be sold for a period of at least one
year following the date of purchase, except in the case of death of the
insider or associate;
(16) Provide that, in connection with stock subject to restriction
on sale for a period of time:
(i) Each certificate for such stock shall bear a legend giving
appropriate notice of such restriction;
(ii) Appropriate instructions shall be issued to the subsidiary
holding company's transfer agent with respect to applicable
restrictions on transfer of such stock; and
(iii) Any shares issued as a stock dividend, stock split, or
otherwise with respect to any such restricted stock shall
[[Page 56575]]
be subject to the same restrictions as apply to the restricted stock;
(17) Provide that the subsidiary holding company will not offer or
sell any of the stock proposed to be issued to any person whose
purchase would be financed by funds loaned, directly or indirectly, to
the person by the subsidiary holding company;
(18) Provide that, if necessary, the subsidiary holding company's
charter will be amended to authorize issuance of the stock and attach
and incorporate by reference the text of any such amendment;
(19) Provide that the expenses incurred in connection with the
issuance shall be reasonable;
(20) Provide that the Stock Issuance Plan, if proposed as part of a
Reorganization Plan, may be amended or terminated in the same manner as
the Reorganization Plan. Otherwise, the Stock Issuance Plan shall
provide that it may be substantively amended by the board of directors
of the issuing subsidiary holding company as a result of comments from
regulatory authorities or otherwise prior to approval of the Plan by
the Board, and at any time thereafter with the concurrence of the
Board; and that the Stock Issuance Plan may be terminated by the board
of directors at any time prior to approval of the Plan by the Board,
and at any time thereafter with the concurrence of the Board;
(21) Provide that, unless an extension is granted by the Board, the
Stock Issuance Plan shall be terminated if not completed within 90 days
of the date of such approval; or
(22) Provide that the subsidiary holding company may make scheduled
discretionary contributions to a tax-qualified employee stock benefit
plan provided such contributions do not cause the subsidiary holding
company to fail to meet any of its regulatory capital requirements.
(b) Optional provisions. A Stock Issuance Plan may:
(1) Provide that, in the event the proposed stock issuance is part
of a Reorganization Plan, the stock offering may be commenced
concurrently with or at any time after the mailing to the members of
the reorganizing association and any acquiree association of any proxy
statement(s). The offering may be closed before the required membership
vote(s), provided the offer and sale of the stock shall be conditioned
upon the approval of the Reorganization Plan and Stock Issuance Plan by
the members of the reorganizing association and any acquiree
association;
(2) Provide that any insignificant residue of stock of the
subsidiary holding company not sold in the offering may be sold in such
other manner as provided in the Stock Issuance Plan, with the Board's
approval;
(3) Provide that the subsidiary holding company may issue and sell,
in lieu of shares of its stock, units of securities consisting of stock
and long-term warrants or other equity securities, in which event any
reference in the provisions of this section and in Sec. 239.24 to
stock shall apply to such units of equity securities unless the context
otherwise requires; or
(4) Provide that the subsidiary holding company may reserve shares
representing up to ten percent of the proposed offering for issuance in
connection with an employee stock benefit plan.
(c) Applicability of provisions of Sec. 239.63(a)(1) to minority
stock issuances. Notwithstanding Sec. 239.24(d), Sec.
239.63(a)(1)(ii) do not apply to minority stock issuances, because the
permissible sizes of ESOPs, MRPs, and Option Plans in minority stock
issuances are subject to each of the requirements set forth at
paragraphs (a)(3) through (a)(9) of this section. Section 239.63(a)(4)
through (a)(14), apply for one year after the subsidiary holding
company engages in a minority stock issuance that is conducted in
accordance with the purchase priorities set forth in subpart E of this
part. In addition to the shareholder vote requirement for Option Plans
and MRPs set forth at Sec. 239.63(a)(1)(vi), any Option Plans and MRPs
put to a shareholder vote after a minority stock issuance that is
conducted in accordance with the purchase priorities set forth in
subpart E of this part must be approved by a majority of the votes cast
by stockholders other than the mutual holding company.
Sec. 239.26 Shareholders.
(a) Shareholder meetings. An annual meeting of the shareholders of
the subsidiary holding company for the election of directors and for
the transaction of any other business of the subsidiary holding company
shall be held annually within 150 days after the end of the subsidiary
holding company's fiscal year. Unless otherwise provided in the
subsidiary holding company's charter, special meetings of the
shareholders may be called by the board of directors or on the request
of the holders of 10 percent or more of the shares entitled to vote at
the meeting, or by such other persons as may be specified in the bylaws
of the subsidiary holding company. All annual and special meetings of
shareholders shall be held at such place as the board of directors may
determine in the state in which the subsidiary savings association has
its principal place of business, or at any other convenient place the
board of directors may designate.
(b) Notice of shareholder meetings. Written notice stating the
place, day, and hour of the meeting and the purpose or purposes for
which the meeting is called shall be delivered not fewer than 20 nor
more than 50 days before the date of the meeting, either personally or
by mail, by or at the direction of the chairman of the board, the
president, the secretary, or the directors, or other natural persons
calling the meeting, to each shareholder of record entitled to vote at
such meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the mail, addressed to the shareholder at the address
appearing on the stock transfer books or records of the subsidiary
holding company as of the record date prescribed in paragraph (c) of
this section, with postage thereon prepaid. When any shareholders'
meeting, either annual or special, is adjourned for 30 days or more,
notice of the adjourned meeting shall be given as in the case of an
original meeting. Notwithstanding anything in this section, however, a
subsidiary holding company that is wholly owned shall not be subject to
the shareholder notice requirement.
(c) Fixing of record date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the board of directors shall
fix in advance a date as the record date for any such determination of
shareholders. Such date in any case shall be not more than 60 days and,
in case of a meeting of shareholders, not less than 10 days prior to
the date on which the particular action, requiring such determination
of shareholders, is to be taken. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any
adjournment thereof.
(d) Voting lists. (1) At least 20 days before each meeting of the
shareholders, the officer or agent having charge of the stock transfer
books for the shares of the subsidiary holding company shall make a
complete list of the stockholders of record entitled to vote at such
meeting, or any adjournments thereof, arranged
[[Page 56576]]
in alphabetical order, with the address and the number of shares held
by each. This list of shareholders shall be kept on file at the home
office of the subsidiary holding company and shall be subject to
inspection by any shareholder of record or the stockholder's agent
during the entire time of the meeting. The original stock transfer book
shall constitute prima facie evidence of the stockholders entitled to
examine such list or transfer books or to vote at any meeting of
stockholders. Notwithstanding anything in this section, however, a
subsidiary holding company that is wholly owned shall not be subject to
the voting list requirements.
(2) In lieu of making the shareholders list available for
inspection by any shareholders as provided in paragraph (d)(1) of this
section, the board of directors may perform such acts as required by
paragraphs (a) and (b) of Rule 14a-7 of the General Rules and
Regulations under the Securities and Exchange Act of 1934 (17 CFR
240.14a-7) as may be duly requested in writing, with respect to any
matter which may be properly considered at a meeting of shareholders,
by any shareholder who is entitled to vote on such matter and who shall
defray the reasonable expenses to be incurred by the subsidiary holding
company in performance of the act or acts required.
(e) Shareholder quorum. A majority of the outstanding shares of the
subsidiary holding company entitled to vote, represented in person or
by proxy, shall constitute a quorum at a meeting of shareholders. The
shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum. If a quorum is
present, the affirmative vote of the majority of the shares represented
at the meeting and entitled to vote on the subject matter shall be the
act of the stockholders, unless the vote of a greater number of
stockholders voting together or voting by classes is required by law or
the charter. Directors, however, are elected by a plurality of the
votes cast at an election of directors.
(f) Shareholder voting-- (1) Proxies. Unless otherwise provided in
the subsidiary holding company's charter, at all meetings of
shareholders, a shareholder may vote in person or by proxy executed in
writing by the shareholder or by a duly authorized attorney in fact.
Proxies may be given telephonically or electronically as long as the
holder uses a procedure for verifying the identity of the shareholder.
A proxy may designate as holder a corporation, partnership or company,
or other person. Proxies solicited on behalf of the management shall be
voted as directed by the shareholder or, in the absence of such
direction, as determined by a majority of the board of directors. No
proxy shall be valid more than eleven months from the date of its
execution except for a proxy coupled with an interest.
(2) Shares controlled by subsidiary holding company. Neither
treasury shares of its own stock held by the subsidiary holding company
nor shares held by another corporation, if a majority of the shares
entitled to vote for the election of directors of such other
corporation are held by the subsidiary holding company, shall be voted
at any meeting or counted in determining the total number of
outstanding shares at any given time for purposes of any meeting.
(g) Nominations and new business submitted by shareholders.
Nominations for directors and new business submitted by shareholders
shall be voted upon at the annual meeting if such nominations or new
business are submitted in writing and delivered to the secretary of the
subsidiary holding company at least five days prior to the date of the
annual meeting. Ballots bearing the names of all the natural persons
nominated shall be provided for use at the annual meeting.
(h) Informal action by stockholders. If the bylaws of the
subsidiary holding company so provide, any action required to be taken
at a meeting of the stockholders, or any other action that may be taken
at a meeting of the stockholders, may be taken without a meeting if
consent in writing has been given by all the stockholders entitled to
vote with respect to the subject matter.
Sec. 239.27 Board of directors.
(a) General powers and duties. The business and affairs of the
subsidiary holding company shall be under the direction of its board of
directors. The board of directors shall annually elect a chairman of
the board from among its members and shall designate the chairman of
the board, when present, to preside at its meeting. Directors need not
be stockholders unless the bylaws so require.
(b) Number and term. The bylaws shall set forth a specific number
of directors, not a range. The number of directors shall be not fewer
than five nor more than fifteen, unless a higher or lower number has
been authorized by the Board. Directors shall be elected for a term of
one to three years and until their successors are elected and
qualified. If a staggered board is chosen, the directors shall be
divided into two or three classes as nearly equal in number as possible
and one class shall be elected by ballot annually. In the case of a
converting or newly chartered subsidiary holding company where all
directors shall be elected at the first election of directors, if a
staggered board is chosen, the terms shall be staggered in length from
one to three years.
(c) Regular meetings. A regular meeting of the board of directors
shall be held immediately after, and at the same place as, the annual
meeting of shareholders. The board of directors shall determine the
place, frequency, time and procedure for notice of regular meetings.
(d) Quorum. A majority of the number of directors shall constitute
a quorum for the transaction of business at any meeting of the board of
directors. The act of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the board of
directors, unless a greater number is prescribed by regulation of the
Board.
(e) Vacancies. Any vacancy occurring in the board of directors may
be filled by the affirmative vote of a majority of the remaining
directors although less than a quorum of the board of directors. A
director elected to fill a vacancy shall be elected to serve only until
the next election of directors by the shareholders. Any directorship to
be filled by reason of an increase in the number of directors may be
filled by election by the board of directors for a term of office
continuing only until the next election of directors by the
shareholders.
(f) Removal or resignation of directors. (1) At a meeting of
shareholders called expressly for that purpose, any director may be
removed only for cause, as defined in Sec. 239.41, by a vote of the
holders of a majority of the shares then entitled to vote at an
election of directors. Subsidiary holding companies may provide for
procedures regarding resignations in the bylaws.
(2) If less than the entire board is to be removed, no one of the
directors may be removed if the votes cast against the removal would be
sufficient to elect a director if then cumulatively voted at an
election of the class of directors of which such director is a part.
(3) Whenever the holders of the shares of any class are entitled to
elect one or more directors by the provisions of the charter or
supplemental sections thereto, the provisions of this section shall
apply, in respect to the removal of a director or directors so elected,
to the vote of the holders of the outstanding shares of that class and
not to the vote of the outstanding shares as a whole.
[[Page 56577]]
(g) Executive and other committees. The board of directors, by
resolution adopted by a majority of the full board, may designate from
among its members an executive committee and one or more other
committees each of which, to the extent provided in the resolution or
bylaws of the subsidiary holding company, shall have and may exercise
all of the authority of the board of directors, except no committee
shall have the authority of the board of directors with reference to:
the declaration of dividends; the amendment of the charter or bylaws of
the subsidiary holding company; recommending to the stockholders a plan
of merger, consolidation, or conversion; the sale, lease, or other
disposition of all, or substantially all, of the property and assets of
the subsidiary holding company otherwise than in the usual and regular
course of its business; a voluntary dissolution of the subsidiary
holding company; a revocation of any of the foregoing; or the approval
of a transaction in which any member of the executive committee,
directly or indirectly, has any material beneficial interest. The
designation of any committee and the delegation of authority thereto
shall not operate to relieve the board of directors, or any director,
of any responsibility imposed by law or regulation.
(h) Notice of special meetings. Written notice of at least 24 hours
regarding any special meeting of the board of directors or of any
committee designated thereby shall be given to each director in
accordance with the bylaws, although such notice may be waived by the
director. The attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened.
Neither the business to be transacted at, nor the purpose of, any
meeting need be specified in the notice or waiver of notice of such
meeting. The bylaws may provide for telephonic participation at a
meeting.
(i) Action without a meeting. Any action required or permitted to
be taken by the board of directors at a meeting may be taken without a
meeting if a consent in writing, setting forth the actions so taken,
shall be signed by all of the directors.
(j) Presumption of assent. A director of the subsidiary holding
company who is present at a meeting of the board of directors at which
action on any subsidiary holding company matter is taken shall be
presumed to have assented to the action taken unless his or her dissent
or abstention shall be entered in the minutes of the meeting or unless
a written dissent to such action shall be filed with the individual
acting as the secretary of the meeting before the adjournment thereof
or shall be forwarded by registered mail to the secretary of the
subsidiary holding company within five days after the date on which a
copy of the minutes of the meeting is received. Such right to dissent
shall not apply to a director who voted in favor of such action.
(k) Age limitation on directors. A subsidiary holding company may
provide a bylaw on age limitation for directors. Bylaws on age
limitations must comply with all Federal laws, rules and regulations.
Sec. 239.28 Officers.
(a) Positions. The officers of the subsidiary holding company shall
be a president, one or more vice presidents, a secretary, and a
treasurer or comptroller, each of whom shall be elected by the board of
directors. The board of directors may also designate the chairman of
the board as an officer. The offices of the secretary and treasurer or
comptroller may be held by the same individual and the vice president
may also be either the secretary or the treasurer or comptroller. The
board of directors may designate one or more vice presidents as
executive vice president or senior vice president. The board of
directors may also elect or authorize the appointment of such other
officers as the business of the subsidiary holding company may require.
The officers shall have such authority and perform such duties as the
board of directors may from time to time authorize or determine. In the
absence of action by the board of directors, the officers shall have
such powers and duties as generally pertain to their respective
offices.
(b) Removal. Any officer may be removed by the board of directors
whenever in its judgment the best interests of the subsidiary holding
company will be served thereby; but such removal, other than for cause,
shall be without prejudice to the contractual rights, if any, of the
individual so removed. Employment contracts shall conform with Sec.
239.41.
(c) Age limitation on officers. A subsidiary holding company may
provide a bylaw on age limitation for officers. Bylaws on age
limitations must comply with all Federal laws, rules, and regulations.
Sec. 239.29 Certificates for shares and their transfer.
(a) Certificates for shares. Certificates representing shares of
capital stock of the subsidiary holding company shall be in such form
as shall be determined by the board of directors and approved by the
Board. The certificates shall be signed by the chief executive officer
or by any other officer of the subsidiary holding company authorized by
the board of directors, attested by the secretary or an assistant
secretary, and sealed with the corporate seal or a facsimile thereof.
The signatures of such officers upon a certificate may be facsimiles if
the certificate is manually signed on behalf of a transfer agent or a
registrar other than the subsidiary holding company itself or one of
its employees. Each certificate for shares of capital stock shall be
consecutively numbered or otherwise identified. The name and address of
the person to whom the shares are issued, with the number of shares and
date of issue, shall be entered on the stock transfer books of the
subsidiary holding company. All certificates surrendered to the
subsidiary holding company for transfer shall be cancelled and no new
certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and cancelled, except that
in the case of a lost or destroyed certificate a new certificate may be
issued upon such terms and indemnity to the subsidiary holding company
as the board of directors may prescribe.
(b) Transfer of shares. Transfer of shares of capital stock of the
subsidiary holding company shall be made only on its stock transfer
books. Authority for such transfer shall be given only by the holder of
record or by a legal representative, who shall furnish proper evidence
of such authority, or by an attorney authorized by a duly executed
power of attorney and filed with the subsidiary holding company. The
transfer shall be made only on surrender for cancellation of the
certificate for the shares. The person in whose name shares of capital
stock stand on the books of the subsidiary holding company shall be
deemed by the subsidiary holding company to be the owner for all
purposes.
Sec. 239.30 Annual reports; books and records.
(a) Annual reports to stockholders. A subsidiary holding company
not wholly-owned by a holding company shall, within 130 days after the
end of its fiscal year, mail to each of its stockholders entitled to
vote at its annual meeting an annual report
[[Page 56578]]
containing financial statements that satisfy the requirements of rule
14a-3 under the Securities Exchange Act of 1934. (17 CFR 240.14a-3).
Concurrently with such mailing a certification of such mailing signed
by the chairman of the board, the president or a vice president of the
subsidiary holding company, together with a copy of the report, shall
be transmitted by the subsidiary holding company to the appropriate
Reserve Bank.
(b) Books and records. (1) Each subsidiary holding company shall
keep correct and complete books and records of account; shall keep
minutes of the proceedings of its stockholders, board of directors, and
committees of directors; and shall keep at its home office or at the
office of its transfer agent or registrar, a record of its
stockholders, giving the names and addresses of all stockholders, and
the number, class and series, if any, of the shares held by each.
(2) Any stockholder or group of stockholders of a subsidiary
holding company, holding of record the number of voting shares of such
subsidiary holding company specified below, upon making written demand
stating a proper purpose, shall have the right to examine, in person or
by agent or attorney, at any reasonable time or times, nonconfidential
portions of its books and records of account, minutes and record of
stockholders and to make extracts therefrom. Such right of examination
is limited to a stockholder or group of stockholders holding of record:
(i) Voting shares having a cost of not less than $100,000 or
constituting not less than one percent of the total outstanding voting
shares, provided in either case such stockholder or group of
stockholders have held of record such voting shares for a period of at
least six months before making such written demand, or
(ii) Not less than five percent of the total outstanding voting
shares.
No stockholder or group of stockholders of a subsidiary holding
company shall have any other right under this section or common law to
examine its books and records of account, minutes and record of
stockholders, except as provided in its bylaws with respect to
inspection of a list of stockholders.
(3) The right to examination authorized by paragraph (b)(2) of this
section and the right to inspect the list of stockholders provided by a
subsidiary holding company's bylaws may be denied to any stockholder or
group of stockholders upon the refusal of any such stockholder or group
of stockholders to furnish such subsidiary holding company, its
transfer agent or registrar an affidavit that such examination or
inspection is not desired for any purpose which is in the interest of a
business or object other than the business of the subsidiary holding
company, that such stockholder has not within the five years preceding
the date of the affidavit sold or offered for sale, and does not now
intend to sell or offer for sale, any list of stockholders of the
subsidiary holding company or of any other corporation, and that such
stockholder has not within said five-year period aided or abetted any
other person in procuring any list of stockholders for purposes of
selling or offering for sale such list.
(4) Notwithstanding any provision of this section or common law, no
stockholder or group of stockholders shall have the right to obtain,
inspect or copy any portion of any books or records of a subsidiary
holding company containing:
(i) A list of depositors in or borrowers from such subsidiary
holding company;
(ii) Their addresses;
(iii) Individual deposit or loan balances or records; or
(iv) Any data from which such information could be reasonably
constructed.
Sec. 239.31 Indemnification; employment contracts.
(a) Restrictions on indemnification. The provisions of Sec. 239.40
shall apply to subsidiary holding companies.
(b) Restrictions on employment contracts. The provisions of Sec.
239.41 and any policies of the Board thereunder shall apply to
subsidiary holding companies.
Subpart D--Indemnification; Employment Contracts
Sec. 239.40 Indemnification of directors, officers and employees.
A mutual holding company shall indemnify its directors, officers,
and employees in accordance with the following requirements:
(a) Definitions and rules of construction. (1) Definitions for
purposes of this section.
(i) Action means any judicial or administrative proceeding, or
threatened proceeding, whether civil, criminal, or otherwise, including
any appeal or other proceeding for review;
(ii) Court includes, without limitation, any court to which or in
which any appeal or any proceeding for review is brought.
(iii) Final judgment means a judgment, decree, or order which is
not appealable or as to which the period for appeal has expired with no
appeal taken.
(iv) Settlement includes entry of a judgment by consent or
confession or a plea of guilty or nolo contendere.
(2) References in this section to any individual or other person,
including any mutual holding company, shall include legal
representatives, successors, and assigns thereof.
(b) General. Subject to paragraphs (c) and (g) of this section, a
mutual holding company shall indemnify any person against whom an
action is brought or threatened because that person is or was a
director, officer, or employee of the mutual holding company, for:
(1) Any amount for which that person becomes liable under a
judgment if such action; and
(2) Reasonable costs and expenses, including reasonable attorney's
fees, actually paid or incurred by that person in defending or settling
such action, or in enforcing his or her rights under this section if he
or she attains a favorable judgment in such enforcement action.
(c) Requirements. Indemnification shall be made to such period
under paragraph (b) of this section only if:
(1) Final judgment on the merits is in his or her favor; or
(2) In case of:
(i) Settlement,
(ii) Final judgment against him or her, or
(iii) Final judgment in his or her favor, other than on the merits,
if a majority of the disinterested directors of the mutual holding
company determine that he or she was acting in good faith within the
scope of his or her employment or authority as he or she could
reasonably have perceived it under the circumstances and for a purpose
he or she could reasonably have believed under the circumstances was in
the best interests of the mutual holding company or its members.
However, no indemnification shall be made unless the mutual holding
company gives the Board at least 60 days' notice of its intention to
make such indemnification. Such notice shall state the facts on which
the action arose, the terms of any settlement, and any disposition of
the action by a court. Such notice, a copy thereof, and a certified
copy of the resolution containing the required determination by the
board of directors shall be sent to the appropriate Reserve Bank, who
shall promptly acknowledge receipt thereof. The notice period shall run
from the date of such receipt. No such indemnification shall be made if
the Board advises the mutual holding company in writing, within such
notice
[[Page 56579]]
period, of its objection to the indemnification.
(d) Insurance. A mutual holding company may obtain insurance to
protect it and its directors, officers, and employees from potential
losses arising from claims against any of them for alleged wrongful
acts, or wrongful acts, committed in their capacity as directors,
officers, or employees. However, no mutual holding company may obtain
insurance which provides for payment of losses of any individual
incurred as a consequence of his or her willful or criminal misconduct.
(e) Payment of expenses. If a majority of the directors of a mutual
holding company concludes that, in connection with an action, any
person ultimately may become entitled to indemnification under this
section, the directors may authorize payment of reasonable costs and
expenses, including reasonable attorneys' fees, arising from the
defense or settlement of such action. Nothing in this paragraph shall
prevent the directors of a mutual holding company from imposing such
conditions on a payment of expenses as they deem warranted and in the
interests of the mutual holding company. Before making advance payment
of expenses under this paragraph, the mutual holding company shall
obtain an agreement that the mutual holding company will be repaid if
the person on whose behalf payment is made is later determined not to
be entitled to such indemnification.
(f) Exclusiveness of provisions. No mutual holding company shall
indemnify any person referred to in paragraph (b) of this section or
obtain insurance referred to in paragraph (d) of the section other than
in accordance with this section. However, a mutual holding company
which has a bylaw in effect relating to indemnification of its
personnel shall be governed solely by that bylaw, except that its
authority to obtain insurance shall be governed by paragraph (d) of
this section.
(g) The indemnification provided for in paragraph (b) of this
section is subject to and qualified by 12 U.S.C. 1821(k).
Sec. 239.41 Employment contracts.
(a) General. A mutual holding company may enter into an employment
contract with its officers and other employees only in accordance with
the requirements of this section. All employment contracts shall be in
writing and shall be approved specifically by the respective mutual
holding company's board of directors. A mutual holding company shall
not enter into an employment contract with any of its officers or other
employees if such contract would constitute an unsafe or unsound
practice. The making of such an employment contract would be an unsafe
or unsound practice if such contract could lead to material financial
loss or damage to the mutual holding company or could interfere
materially with the exercise by the members of its board of directors
of their duty or discretion provided by law, charter, bylaw or
regulation as to the employment or termination of employment of an
officer or employee of the mutual holding company. This may occur,
depending upon the circumstances of the case, where an employment
contract provides for an excessive term.
(b) Required provisions. Each employment contract shall provide
that:
(1) The mutual holding company's board of directors may terminate
the officer or employee's employment at any time, but any termination
by the mutual holding company's board of directors other than
termination for cause, shall not prejudice the officer or employee's
right to compensation or other benefits under the contract. The officer
or employee shall have no right to receive compensation or other
benefits for any period after termination for cause. Termination for
cause shall include termination because of the officer or employee's
personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to
perform stated duties, willful violation of any law, rule, or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order, or material breach of any provision of the
contract.
(2) If the officer or employee is suspended and/or temporarily
prohibited from participating in the conduct of the mutual holding
company's affairs by a notice served under section 8 (e)(3) or (g)(1)
of Federal Deposit Insurance Act (12 U.S.C. 1818 (e)(3) and (g)(1)) the
mutual holding company's obligations under the contract shall be
suspended as of the date of service unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the mutual
holding company may in its discretion:
(i) Pay the officer or employee all or part of the compensation
withheld while its contract obligations were suspended, and
(ii) Reinstate (in whole or in part) any of its obligations which
were suspended.
(3) If the officer or employee is removed and/or permanently
prohibited from participating in the conduct of the mutual holding
company's affairs by an order issued under section 8 (e)(4) or (g)(1)
of the Federal Deposit Insurance Act (12 U.S.C. 1818 (e)(4) or (g)(1)),
all obligations of the mutual holding company under the contract shall
terminate as of the effective date of the order, but vested rights of
the contracting parties shall not be affected.
(4) If the subsidiary savings association is in default (as defined
in section 3(x)(1) of the Federal Deposit Insurance Act), all
obligations under the contract shall terminate as of the date of
default, but this paragraph (b) shall not affect any vested rights of
the contracting parties: Provided, that this paragraph (b) need not be
included in an employment contract if prior written approval is secured
from the Board.
(5) If the mutual holding company is subject to bankruptcy
proceedings under title 11 of the United States Code, all obligations
of the mutual holding company under the contract shall terminate as of
the date that the petition is filed, but vested rights of the
contracting parties shall not be affected: Provided, that this
paragraph (b) need not be included in an employment contract if prior
written approval is secured from the Board.
(6) All obligations under the contract shall be terminated, except
to the extent determined that continuation of the contract is necessary
to the continued operation of the mutual holding company--
(i) By the Board, at the time the Federal Deposit Insurance
Corporation enters into an agreement to provide assistance to or on
behalf of the subsidiary savings association under the authority
contained in 13(c) of the Federal Deposit Insurance Act; or
(ii) By the Board, at the time the Board approves a supervisory
merger to resolve problems related to operation of the mutual holding
company or when the mutual holding company is determined by the Board
to be in an unsafe or unsound condition.
Subpart E--Conversions From Mutual to Stock Form
Sec. 239.50 Purpose and scope.
(a) General. This subpart governs how a mutual holding company may
convert from the mutual to the stock form of ownership. This subpart
supersedes all inconsistent charter and bylaw provisions of mutual
holding companies converting to stock form.
(b) Prescribed forms. A mutual holding company must use the forms
prescribed under this subpart and provide such information as the Board
may require under the forms by regulation or otherwise. The forms
[[Page 56580]]
required under this subpart include: Form AC (Application for
Conversion); Form PS (Proxy Statement); Form OC (Offering Circular);
and Form OF (Order Form).
(c) Waivers. The Board may waive any requirement of this subpart or
a provision in any prescribed form. To obtain a waiver, a mutual
holding company must file a written request with the Board that:
(1) Specifies the requirement(s) or provision(s) that the mutual
holding company wants the Board to waive;
(2) Demonstrates that the waiver is equitable; is not detrimental
to the mutual holding company, mutual members, or other mutual holding
companies or savings associations; and is not contrary to the public
interest; and
(3) Includes an opinion of counsel demonstrating that applicable
law does not conflict with the waiver of the requirement or provision.
Sec. 239.51 Acquiring another insured stock depository institution as
part of a conversion.
When a mutual holding company converts to stock form, the
subsidiary savings association may acquire for cash or stock another
insured depository institution that is already in the stock form of
ownership.
Sec. 239.52 Definitions.
The following definitions apply to this subpart and the forms
prescribed under this subpart:
(a) Association members or members are persons who, under
applicable law, are eligible to vote at the meeting on conversion.
(b) Eligibility record date is the date for determining eligible
account holders. The eligibility record date must be at least one year
before the date that the board of directors adopts the plan of
conversion.
(c) Eligible account holders are any persons holding qualifying
deposits on the eligibility record date.
(d) IRS is the United States Internal Revenue Service.
(e) Local community includes:
(1) Every county, parish, or similar governmental subdivision in
which the mutual holding company has a home or branch office;
(2) Each county's, parish's, or subdivision's metropolitan
statistical area;
(3) All zip code areas in the mutual holding company's Community
Reinvestment Act assessment area; and
(4) Any other area or category the mutual holding company sets out
in its plan of conversion, as approved by the Board.
(f) Mutual holding company has the same meaning in this subpart as
that term is given in subpart A. For purposes of this subpart,
references to mutual holding company shall also include a resulting
stock holding company, where applicable.
(g) Offer, offer to sell, or offer for sale is an attempt or offer
to dispose of, or a solicitation of an offer to buy, a security or
interest in a security for value. Preliminary negotiations or
agreements with an underwriter, or among underwriters who are or will
be in privity of contract with the mutual holding company or resulting
stock holding company, are not offers, offers to sell, or offers for
sale.
(h) Proxy soliciting material includes a proxy statement, form of
proxy, or other written or oral communication regarding the conversion.
(i) Purchase or buy includes every contract to acquire a security
or interest in a security for value.
(j) Qualifying deposit is the total balance in an account holder's
savings accounts at the close of business on the eligibility or
supplemental eligibility record date. The mutual holding company's plan
of conversion may provide that only savings accounts with total deposit
balances of $50 or more will qualify.
(k) Resulting stock holding company means the stock savings and
loan holding company that is issuing stock in connection with
conversion of a mutual holding company pursuant to this subpart.
(l) Sale or sell includes every contract to dispose of a security
or interest in a security for value. An exchange of securities in a
merger or acquisition approved by the Board is not a sale.
(m) Solicitation and solicit is a request for a proxy, whether or
not accompanied by or included in a form of proxy; a request to
execute, not execute, or revoke a proxy; or the furnishing of a form of
proxy or other communication reasonably calculated to cause the members
to procure, withhold, or revoke a proxy. Solicitation or solicit does
not include providing a form of proxy at the unsolicited request of a
member, the acts required to mail communications for members, or
ministerial acts performed on behalf of a person soliciting a proxy.
(n) Subscription offering is the offering of shares through
nontransferable subscription rights to:
(1) Eligible account holders under Sec. 239.59(h);
(2) Tax-qualified employee stock ownership plans under Sec.
239.59(m);
(3) Supplemental eligible account holders under Sec. 239.59(h);
and
(4) Other voting members under Sec. 239.59(j).
(o) Supplemental eligibility record date is the date for
determining supplemental eligible account holders. The supplemental
eligibility record date is the last day of the calendar quarter before
the Board approves the conversion and will occur only if the Board has
not approved the conversion within 15 months of the eligibility record
date.
(p) Supplemental eligible account holders are any persons, except
officers, directors, and their associates of the mutual holding company
or subsidiary savings association, holding qualifying deposits on the
supplemental eligibility record date.
(q) Underwriter is any person who purchases any securities from the
mutual holding company or resulting stock holding company with a view
to distributing the securities, offers or sells securities for the
mutual stock holding company or resulting stock holding company in
connection with the securities' distribution, or participates or has a
direct or indirect participation in the direct or indirect underwriting
of any such undertaking. Underwriter does not include a person whose
interest is limited to a usual and customary distributor's or seller's
commission from an underwriter or dealer.
Sec. 239.53 Prior to conversion.
(a) Pre-filing meeting and consultation. (1) The mutual holding
company's board, or a subcommittee of the board, may meet with the
staff of the appropriate Reserve Bank or Board staff before the mutual
holding company's board of directors votes on the plan of conversion.
At that meeting the mutual holding company may provide the Reserve Bank
or Board staff with a written strategic plan that outlines the
objectives of the proposed conversion and the intended use of the
conversion proceeds.
(2) The mutual holding company should also consult with the Board
or appropriate Reserve Bank before it files its application for
conversion. The Reserve Bank or Board will discuss the information that
the mutual holding company must include in the application for
conversion, general issues that the mutual holding company may confront
in the conversion process, and any other pertinent issues.
(b) Business plan.
(1) Prior to filing an application for conversion, the mutual
holding company must adopt a business plan reflecting the mutual
holding company's intended plans for deployment of the proposed
conversion proceeds. The
[[Page 56581]]
business plan is required, under Sec. 239.55(b), to be included in the
mutual holding company's conversion application. At a minimum, the
business plan must address:
(i) The subsidiary savings association's projected operations and
activities for three years following the conversion. The business plan
must describe how the conversion proceeds will be deployed at the
savings association (and holding company, if applicable), what
opportunities are available to reasonably achieve the planned
deployment of conversion proceeds in the relevant proposed market
areas, and how its deployment will provide a reasonable return on
investment commensurate with investment risk, investor expectations,
and industry norms, by the final year of the business plan. The
business plan must include three years of projected financial
statements. The business plan must provide that the subsidiary savings
associations receive at least 50 percent of the net conversion
proceeds. The Board may require that a larger percentage of proceeds be
contributed to the subsidiary savings associations.
(ii) The mutual holding company's plan for deploying conversion
proceeds to meet credit and lending needs in the proposed market areas.
The Board strongly discourages business plans that provide for a
substantial investment in mortgage securities or other securities,
except as an interim measure to facilitate orderly, prudent deployment
of proceeds during the three years following the conversion, or as part
of a properly managed leverage strategy.
(iii) The risks associated with the plan for deployment of
conversion proceeds, and the effect of this plan on management
resources, staffing, and facilities.
(iv) The expertise of the mutual holding company and saving
association subsidiary's management and board of directors, or that the
mutual holding company has planned for adequate staffing and controls
to prudently manage the growth, expansion, new investment, and other
operations and activities proposed in its business plan.
(2) The mutual holding company may not project returns of capital
or special dividends in any part of the business plan. A newly
converted company may not plan on stock repurchases in the first year
of the business plan.
(c) Management and board review of business plan.
(1) The chief executive officer and members of the board of
directors of the mutual holding company must review, and at least two-
thirds of the board of directors must approve, the business plan.
(2) The chief executive officer and at least two-thirds of the
board of directors of the mutual holding company must certify that the
business plan accurately reflects the intended plans for deployment of
conversion proceeds, and that any new initiatives reflected in the
business plan are reasonably achievable. The mutual holding company
must submit these certifications with its business plan, as part of the
conversion application under paragraph (b) of this section.
(d) Board review of the business plan.
(1) The Board will review the business plan to determine whether it
demonstrates a safe and sound deployment of conversion proceeds, as
part of its review of the conversion application. In making its
determination, the Board will consider how the mutual holding company
has addressed the applicable factors of paragraph (b) of this section.
No single factor will be determinative. The Board will review every
case on its merits.
(2) The mutual holding company must file its business plan with the
appropriate Reserve Bank. The Board or appropriate Reserve Bank may
request additional information, if necessary, to support its
determination under paragraph (d)(1) of this section. The mutual
holding company must file its business plan as a confidential exhibit
to the Form AC.
(3) If the Board approves the application for conversion and the
mutual holding company completes the conversion, the resulting stock
holding company must operate within the parameters of the business
plan. The Board must approve any material deviation from the business
plan in writing prior to such material deviation.
(e) Disclosure of business plan.
(1) The mutual holding company may discuss information about the
conversion with individuals that it authorizes to prepare documents for
the conversion.
(2) Except as permitted under paragraph (e)(1) of this section, the
mutual holding company must keep all information about the conversion
confidential until the board of directors adopts the plan of
conversion.
(3) If the mutual holding company violates this section, the Board
may require it to take remedial action. For example, the Board may
require the mutual holding company to take any or all of the following
actions:
(i) Publicly announce that the mutual holding company is
considering a conversion;
(ii) Set an eligibility record date acceptable to the Board;
(iii) Limit the subscription rights of any person who violates or
aids in a violation of this section; or
(iv) Take any other action to ensure that the conversion is fair
and equitable.
Sec. 239.54 Plan of conversion.
(a) Adoption by the board of directors. Prior to filing an
application for conversion, the board of directors of the mutual
holding company must adopt a plan of conversion that conforms to
Sec. Sec. 239.59 through 239.62 and 239.63(b). The board of directors
must adopt the plan by at least a two-thirds vote. The plan of
conversion is required, under Sec. 239.55(b), to be included in the
conversion application.
(b) Contents of the plan of conversion. The mutual holding company
must include the information included in Sec. Sec. 239.59 through
239.62 and 239.63(b) in the plan of conversion. The Board may require
the mutual holding company to delete or revise any provision in the
plan of conversion if the Board determines the provision is
inequitable; is detrimental to the mutual holding company, the account
holders, other mutual holding companies, or other savings associations;
or is contrary to public interest.
(c) Notice of board of directors' approval of the plan of
conversion.
(1) Notice. The mutual holding company must promptly notify its
members that the board of directors adopted a plan of conversion and
that a copy of the plan is available for the members' inspection in the
mutual holding company's home office and in each of the subsidiary
savings association's branch offices. The mutual holding company must
mail a letter to each member or publish a notice in the local newspaper
in every local community where the savings association has an office.
The mutual holding company may also issue a press release. The Board
may require broader publication, if necessary, to ensure adequate
notice to the members.
(2) Contents of notice. The mutual holding company may include any
of the following statements and descriptions in the letter, notice, or
press release.
(i) The board of directors adopted a proposed plan to convert from
mutual to stock form.
(ii) The mutual holding company will send its members a proxy
statement with detailed information on the proposed conversion before
the mutual holding company convenes a members' meeting to vote on the
conversion.
[[Page 56582]]
(iii) The members will have an opportunity to approve or disapprove
the proposed conversion at a meeting. At least a majority of the
eligible votes must approve the conversion.
(iv) The mutual holding company will not vote existing proxies to
approve or disapprove the conversion. The mutual holding company will
solicit new proxies for voting on the proposed conversion.
(v) The Board must approve the conversion before the conversion
will be effective. The members will have an opportunity to file written
comments, including objections and materials supporting the objections,
with the Board.
(vi) The IRS must issue a favorable tax ruling, or a tax expert
must issue an appropriate tax opinion, on the tax consequences of the
conversion before the Board will approve the conversion. The ruling or
opinion must indicate the conversion will be a tax-free reorganization.
(vii) The Board might not approve the conversion, and the IRS or a
tax expert might not issue a favorable tax ruling or tax opinion.
(viii) Savings account holders will continue to hold accounts in
the savings association with the same dollar amounts, rates of return,
and general terms as existing deposits. The FDIC will continue to
insure the accounts.
(ix) The mutual holding company's conversion will not affect
borrowers' loans, including the amount, rate, maturity, security, and
other contractual terms.
(x) The savings association's business of accepting deposits and
making loans will continue without interruption.
(xi) The current management and staff will continue to conduct
current services for depositors and borrowers under current policies
and in existing offices.
(xii) The subsidiary savings association may continue to be a
member of the Federal Home Loan Bank System.
(xiii) The mutual holding company may substantively amend the
proposed plan of conversion before the members' meeting.
(xiv) The mutual holding company may terminate the proposed
conversion.
(xv) After the Board approves the proposed conversion, the mutual
holding company will send proxy materials providing additional
information. After the mutual holding company sends proxy materials,
members may telephone or write to the mutual holding company with
additional questions.
(xvi) The proposed record date for determining the eligible account
holders who are entitled to receive subscription rights to purchase the
shares.
(xvii) A brief description of the circumstances under which
supplemental eligible account holders will receive subscription rights
to purchase the shares.
(xviii) A brief description of how voting members may participate
in the conversion.
(xix) A brief description of how directors, officers, and employees
will participate in the conversion.
(xx) A brief description of the proposed plan of conversion.
(xxi) The par value (if any) and approximate number of shares that
will be issued and sold in the conversion.
(3) Other requirements.
(i) The mutual holding company may not solicit proxies, provide
financial statements, describe the benefits of conversion, or estimate
the value of the shares upon conversion in the letter, notice, or press
release.
(ii) If the mutual holding company responds to inquiries about the
conversion, it may address only the matters listed in paragraph (c)(2)
of this section.
(d) Amending a plan of conversion. The mutual holding company may
amend its plan of conversion before it solicits proxies. After the
mutual holding company solicits proxies, it may amend the plan of
conversion only if the Board concurs.
Sec. 239.55 Filing requirements.
(a) Applications under this subpart. Any filing with the Board
required under this subpart must be filed in accordance with Sec.
238.14 of this chapter. The Board will review any filing made under
this subpart in accordance with Sec. 238.14 of this chapter.
(b) Requirements.
(1) The application for conversion must include all of the
following information.
(i) A plan of conversion meeting the requirements of Sec.
239.54(b).
(ii) Pricing materials meeting the requirements paragraph (g)(2) of
this section.
(iii) Proxy soliciting materials under Sec. 239.57(d), including:
(A) A preliminary proxy statement with signed financial statements;
(B) A form of proxy meeting the requirements of Sec. 239.57(b);
and
(C) Any additional proxy soliciting materials, including press
releases, personal solicitation instructions, radio or television
scripts that the mutual holding company plans to use or furnish to the
members, and a legal opinion indicating that any marketing materials
comply with all applicable securities laws.
(iv) An offering circular described in Sec. 239.58(a).
(v) The documents and information required by Form AC. The mutual
holding company may obtain Form AC from the appropriate Reserve Bank
and the Board's Web site (http://www.federalreserve.gov).
(vi) Where indicated, written consents, signed and dated, of any
accountant, attorney, investment banker, appraiser, or other
professional who prepared, reviewed, passed upon, or certified any
statement, report, or valuation for use. See Form AC, instruction B(7).
(vii) The business plan, submitted as a separately bound,
confidential exhibit. See paragraph (c) of this section.
(viii) Any additional information the Board requests.
(2) The Board will not accept for filing, and will return, any
application for conversion that is improperly executed, materially
deficient, substantially incomplete, or that provides for unreasonable
conversion expenses.
(c) Filing an application for conversion.
(1) The mutual holding company must file the application for
conversion on Form AC with the appropriate Reserve Bank.
(2) Upon receipt of an application under this subpart, the Reserve
Bank will promptly furnish notice and a copy of the application to the
primary federal supervisor of any subsidiary savings association. The
primary supervisor will have 30 calendar days from the date of the
letter giving notice in which to submit its views and recommendations
to the Board.
(d) Confidential treatment of portions of an application for
conversion.
(1) The Board makes all filings under this subpart available to the
public, but may keep portions of the application for conversion
confidential under paragraph (d)(2) of this section.
(2) The mutual holding company may request the Board keep portions
of the application confidential. To do so, the mutual holding company
must separately bind and clearly designate as ``confidential'' any
portion of the application for conversion that the mutual holding
company deems confidential. The mutual holding company must provide a
written statement specifying the grounds supporting the request for
confidentiality. The Board will not treat as confidential the portion
of the
[[Page 56583]]
application describing how the mutual holding company plans to meet the
Community Reinvestment Act (CRA) objectives. The CRA portion of the
application may not incorporate by reference information contained in
the confidential portion of the application.
(3) The Board will determine whether confidential information must
be made available to the public under 5 U.S.C. 552 and part 261 of this
chapter. The Board will advise the mutual holding company before it
makes information the mutual holding company designated as
``confidential'' available to the public.
(e) Amending an application for conversion. To amend an application
for conversion, the mutual holding company must:
(1) File an amendment with an appropriate facing sheet;
(2) Number each amendment consecutively;
(3) Respond to all issues raised by the Board; and
(4) Demonstrate that the amendment conforms to all applicable
regulations.
(f) Notice of filing of application and comment process.
(1) Public notice of an application for conversion.
(i) The mutual holding company must publish a public notice of the
application for conversion in accordance with the procedures in Sec.
238.14 of this chapter. The mutual holding company must simultaneously
prominently post the notice in its home office and in all of the branch
offices of its subsidiary savings associations.
(ii) Promptly after publication, the mutual holding company must
file a copy of any public notice and an affidavit of publication from
each publisher with the appropriate Reserve Bank.
(iii) If the Board does not accept the application for conversion
under Sec. 239.55(g) and requires the mutual holding company to file a
new application, the mutual holding company must publish and post a new
notice and allow an additional 30 days for comment.
(2) Public comments. Commenters may submit comments on the
application in accordance with the procedures in Sec. 238.14 of this
chapter. A commenter must file any comments with the appropriate
Reserve Bank.
(g) Board review of the application for conversion.
(1) Board action on a conversion application. The Board may approve
an application for conversion only if:
(i) The conversion complies with this subpart;
(ii) The mutual holding company will meet all applicable regulatory
capital requirements after the conversion; and
(iii) The conversion will not result in a taxable reorganization
under the Internal Revenue Code of 1986, as amended.
(2) Board review of appraisal. The Board will review the appraisal
required by paragraph (b)(1)(ii) of this section in determining whether
to approve the application. The Board will review the appraisal under
the following requirements.
(i) Independent persons experienced and expert in corporate
appraisal, and acceptable to the Board, must prepare the appraisal
report.
(ii) An affiliate of the appraiser may serve as an underwriter or
selling agent, if the mutual holding company ensures that the appraiser
is separate from the underwriter or selling agent affiliate and the
underwriter or selling agent affiliate does not make recommendations or
affect the appraisal.
(iii) The appraiser may not receive any fee in connection with the
conversion other than for appraisal services.
(iv) The appraisal report must include a complete and detailed
description of the elements of the appraisal, a justification for the
appraisal methodology, and sufficient support for the conclusions.
(v) If the appraisal is based on a capitalization of the pro forma
income, it must indicate the basis for determining the income to be
derived from the sale of shares, and demonstrate that the earnings
multiple used is appropriate, including future earnings growth
assumptions.
(vi) If the appraisal is based on a comparison of the shares with
outstanding shares of existing stock associations, the existing stock
associations must be reasonably comparable in size, market area,
competitive conditions, risk profile, profit history, and expected
future earnings.
(vii) The Board may decline to process the application for
conversion and deem it materially deficient or substantially incomplete
if the initial appraisal report is materially deficient or
substantially incomplete.
(viii) The mutual holding company may not represent or imply that
the Board has approved the appraisal.
(3) Board review of compliance record. The Board will review the
compliance record of the subsidiary savings association under the
regulations applicable to the savings association and the business plan
to determine how the conversion will affect the convenience and needs
of its communities.
(i) Based on this review, the Board may approve the application,
deny the application, or approve the application on the condition that
the resulting stock holding company will improve the CRA performance or
will address the particular credit or lending needs of the communities
that it will serve.
(ii) The Board may deny the application if the business plan does
not demonstrate that the proposed use of conversion proceeds will help
the resulting stock holding company to meet the credit and lending
needs of the communities that the resulting stock holding company will
serve.
(4) The Board may request that the mutual holding company amend the
application if further explanation is necessary, material is missing,
or material must be corrected.
(5) The Board will deny the application if the application does not
meet the requirements of this subpart, unless the Board waives the
requirement under Sec. 239.50(c).
(h) Judicial review.
(1) Any person aggrieved by the Board's final action on the
application for conversion may ask the court of appeals of the United
States for the circuit in which the principal office or residence of
such person is located, or the U.S. Court of Appeals for the District
of Columbia Circuit, to review the action under 12 U.S.C. 1467a(j),
which provisions shall apply in all respects as if such final action
were an order, subject to paragraph (h)(2) of this section.
(2) To obtain court review of the action, the aggrieved person must
file a written petition requesting that the court modify, terminate, or
set aside the final Board action. The aggrieved person must file the
petition with the court within the later of 30 days after the Board
publishes notice of its final action in the Federal Register or 30 days
after the mutual holding company mails the proxy statement to its
members under Sec. 239.56(c).
Sec. 239.56 Vote by members.
(a) Mutual member approval of the plan of conversion
(1) After the Board approves the plan of conversion, the mutual
holding company must submit the plan of conversion to its members for
approval. The mutual holding company must obtain this approval at a
meeting of its members.
(2) The members must approve the plan of conversion by a majority
of the total outstanding votes.
(3) The members may vote in person or by proxy.
[[Page 56584]]
(4) The mutual holding company may notify eligible account holders
or supplemental eligible account holders who are not voting members of
the proposed conversion. The mutual holding company may include only
the information in Sec. 239.54(c) in the notice.
(b) Eligibility to vote for the plan of conversion. The mutual
holding company determines members' eligibility to vote by setting a
voting record date. The mutual holding company must set a voting record
date that is not more than 60 days nor less than 20 days before the
meeting.
(c) Notifying members of the meeting.
(1) The mutual holding company must notify the members of the
meeting to consider the conversion by sending the members a proxy
statement.
(2) The mutual holding company must notify its members 20 to 45
days before the meeting.
(3) The mutual holding company must also notify each beneficial
holder of an account at any subsidiary savings association held in a
fiduciary capacity:
(i) If the subsidiary savings association is a federal association
and the name of the beneficial holder is disclosed on the records of
the subsidiary savings association; or
(ii) If the subsidiary savings association is a state-chartered
association and the beneficial holder possesses voting rights under
state law.
(d) Submissions to the Board after the members' meeting.
(1) Promptly after the members' meeting, the mutual holding company
must file all of the following information with the appropriate Reserve
Bank:
(i) A certified copy of each adopted resolution on the conversion.
(ii) The total votes eligible to be cast.
(iii) The total votes represented in person or by proxy.
(iv) The total votes cast in favor of and against each matter.
(v) The percentage of votes necessary to approve each matter.
(vi) An opinion of counsel that the mutual holding company
conducted the members' meeting in compliance with all applicable state
or federal laws and regulations.
(2) Promptly after completion of the conversion, the mutual holding
company must submit to the appropriate Reserve Bank an opinion of
counsel that the mutual holding company has complied with all laws
applicable to the conversion.
Sec. 239.57 Proxy solicitation.
(a) Applicability of proxy solicitation provisions.
(1) The mutual holding company must comply with these proxy
solicitation provisions when the mutual holding company provides proxy
solicitation material to members for the meeting to vote on the plan of
conversion.
(2) Members of the mutual holding company must comply with these
proxy solicitation provisions when they provide proxy solicitation
materials to members for the meeting to vote on the conversion,
pursuant to paragraph (f) of this section except where:
(i) The member solicits 50 people or fewer and does not solicit
proxies on behalf of the mutual holding company; or
(ii) The member solicits proxies through newspaper advertisements
after the board of directors adopts the plan of conversion. Any
newspaper advertisements may include only the following information:
(A) The name of the mutual holding company;
(B) The reason for the advertisement;
(C) The proposal or proposals to be voted upon;
(D) Where a member may obtain a copy of the proxy solicitation
material; and
(E) A request for the members of the mutual holding company to vote
at the meeting.
(b) Form of proxy. The form of proxy must include all of the
following:
(1) A statement in bold face type stating that management is
soliciting the proxy.
(2) Blank spaces where the member must date and sign the proxy.
(3) Clear and impartial identification of each matter or group of
related matters that members will vote upon. It must include any
proposed charitable contribution as an item to be voted on separately.
(4) The phrase ``Revocable Proxy'' in bold face type (at least 18
point).
(5) A description of any charter or state law requirement that
restricts or conditions votes by proxy.
(6) An acknowledgment that the member received a proxy statement
before he or she signed the form of proxy.
(7) The date, time, and the place of the meeting, when available.
(8) A way for the member to specify by ballot whether he or she
approves or disapproves of each matter that members will vote upon.
(9) A statement that management will vote the proxy in accordance
with the member's specifications.
(10) A statement in bold face type indicating how management will
vote the proxy if the member does not specify a choice for a matter.
(c) Permissible use of proxies.
(1) The mutual holding company may not use previously executed
proxies for the plan of conversion vote. If members consider the plan
of conversion at an annual meeting, the mutual holding company may vote
proxies obtained through other proxy solicitations only on matters not
related to the plan of conversion.
(2) The mutual holding company may vote a proxy obtained under this
subpart on matters that are incidental to the conduct of the meeting.
The mutual holding company or its management may not vote a proxy
obtained under this subpart at any meeting other than the meeting (or
any adjournment of the meeting) to vote on the plan of conversion.
(d) Proxy statement requirements.
(1) Content requirements. The mutual holding company must prepare
the proxy statement in compliance with this subpart and Form PS. The
mutual holding company may obtain Form PS from the appropriate Reserve
Bank and the Board's Web site (http://www.federalreserve.gov).
(2) Other requirements.
(i) The Board will review the proxy solicitation material in its
review of the application for conversion.
(ii) The mutual holding company must provide a written proxy
statement to the members before or at the same time the mutual holding
company provides any other soliciting material. The mutual holding
company must mail proxy solicitation material to the members no later
than ten days after the Board approves the conversion.
(e) Filing revised proxy materials.
(1) The mutual holding company must file revised proxy materials as
an amendment to the application for conversion.
(2) To revise the proxy solicitation materials, the mutual holding
company must file:
(i) Revised proxy materials as required by Form PS;
(ii) Revised form of proxy, if applicable; and
(iii) Any additional proxy solicitation material subject to
paragraph (d) of this section.
(3) The mutual holding company must clearly indicate changes from
the prior filing.
(4) The mutual holding company must file a definitive copy of all
proxy solicitation material, in the form in which the mutual holding
company furnishes the material to the members. The mutual holding
company must file no later than the date that it sends or gives the
proxy solicitation material to the members. The mutual holding
[[Page 56585]]
company must indicate the date that it plans to release the materials.
(5) Unless the Board requests the mutual holding company to do so,
the mutual holding company does not have to file copies of replies to
inquiries from the members or copies of communications that merely
request members to sign and return proxy forms.
(f) Mailing proxy solicitation material.
(1) The mutual holding company must mail the member's proxy
solicitation material if:
(i) The board of directors adopted a plan of conversion;
(ii) A member requests in writing that the mutual holding company
mail the proxy solicitation material; and
(iii) The member agrees to defray reasonable expenses of the mutual
holding company.
(2) As soon as practicable after the mutual holding company
receives a request under paragraph (f)(1) of this section, the mutual
holding company must mail or otherwise furnish the following
information to the member:
(i) The approximate number of members that the mutual holding
company solicited or will solicit, or the approximate number of members
of any group of account holders that the member designates; and
(ii) The estimated cost of mailing the proxy solicitation material
for the member.
(3) The mutual holding company must mail proxy solicitation
material to the designated members promptly after the member furnishes
the materials, envelopes (or other containers), and postage (or payment
for postage) to the mutual holding company.
(4) The mutual holding company is not responsible for the content
of a member's proxy solicitation material.
(5) A member may furnish other members its own proxy solicitation
material, subject to the rules in this section.
(g) Prohibited solicitations.
(1) False or misleading statements.
(i) No one may use proxy solicitation material for the members'
meeting if the material contains any statement which, considering the
time and the circumstances of the statement:
(A) Is false or misleading with respect to any material fact;
(B) Omits any material fact that is necessary to make the
statements not false or misleading; or
(C) Omits any material fact that is necessary to correct a
statement in an earlier communication that has become false or
misleading.
(ii) No one may represent or imply that the Board determined that
the proxy solicitation material is accurate, complete, not false or not
misleading, or passed upon the merits of or approved any proposal.
(2) Other prohibited solicitations. No person may solicit:
(i) An undated or post-dated proxy;
(ii) A proxy that states it will be dated after the date it is
signed by a member;
(iii) A proxy that is not revocable at will by the member; or
(iv) A proxy that is part of another document or instrument.
(3) If a solicitation violates this section, the Board may require
remedial measures, including:
(i) Correction of the violation by a retraction and a new
solicitation;
(ii) Rescheduling the members' meeting; or
(iii) Any other actions necessary to ensure a fair vote.
(4) The Board may also bring an enforcement action against the
violator for violations of this section.
(h) Re-soliciting proxies. If the mutual holding company amends its
application for conversion, the Board may require it to re-solicit
proxies for the members' meeting as a condition of approval of the
amendment.
Sec. 239.58 Offering circular.
(a) Filing requirements.
(1) The mutual holding company must prepare and file the offering
circular with the appropriate Reserve Bank in compliance with this
subpart and Form OC. The mutual holding company may obtain Form OC from
the Reserve Bank and the Board's Web site (http://www.federalreserve.gov).
(2) The mutual holding company must condition the stock offering
upon member approval of the plan of conversion.
(3) The Board will review the Form OC and may comment on the
included disclosures and financial statements.
(4) The mutual holding company must file a revised offering
circular, final offering circular, and any post-effective amendment to
the final offering circular.
(5) The Board will not approve the adequacy or accuracy of the
offering circular or the disclosures.
(b) Distribution of the offering circular.
(1) The mutual holding company may distribute a preliminary
offering circular at the same time as or after the mutual holding
company mails the proxy statement to its members.
(2) The mutual holding company must distribute the offering
circular in accordance with this subpart and with all applicable
securities laws.
(3) The mutual holding company must distribute the offering
circular to persons listed in the plan of conversion no later than ten
days after the Board approves the conversion.
(c) Post-effective amendments to the offering circular.
(1) The mutual holding company must file a post-effective amendment
to the offering circular with the Board when a material event or change
of circumstance occurs.
(2) After the Securities and Exchange Commission declares the post-
effective amendment effective, the mutual holding company must
immediately deliver the amendment to each person who subscribed for or
ordered shares in the offering.
(3) The post-effective amendment must indicate that each person may
increase, decrease, or rescind their subscription or order.
(4) The post-effective offering period must remain open no less
than 10 days nor more than 20 days, unless the Board approves a longer
rescission period.
Sec. 239.59 Offers and sales of stock.
(a) Purchase priorities. The mutual holding company must offer to
sell the conversion shares in the following order:
(1) Eligible account holders.
(2) Tax-qualified employee stock ownership plans.
(3) Supplemental eligible account holders.
(4) Other voting members who have subscription rights.
(5) The community, the community and the general public, or the
general public.
(b) Offering conversion shares.
(1) The mutual holding company may offer to sell the conversion
shares if the Board approves the conversion, subject to compliance with
requirements of the Securities and Exchange Commission.
(2) The offer may commence at the same time as the proxy
solicitation of the members begins.
(c) Pricing conversion shares.
(1) The conversion shares must be sold at a uniform price per share
and at a total price that is equal to the estimated pro forma market
value of the shares after conversion.
(2) The maximum price must be no more than 15 percent above the
midpoint of the estimated price range in the offering circular.
(3) The minimum price must be no more than 15 percent below the
midpoint of the estimated price range in the offering circular.
(4) If the Board permits, the maximum price of conversion shares
sold may be increased. The maximum price, as adjusted, must be no more
than 15 percent above the maximum price
[[Page 56586]]
computed under paragraph (c)(2) of this section.
(5) The maximum price must be between $5 and $50 per share.
(6) The mutual holding company must include the estimated price in
any preliminary offering circular.
(d) Selling conversion shares.
(1) The mutual holding company must distribute order forms to all
eligible account holders, supplemental eligible account holders, and
other voting members to enable them to subscribe for the conversion
shares they are permitted under the plan of conversion. The mutual
holding company may either send the order forms with the offering
circular or after it distributes the offering circular.
(2) The mutual holding company may sell the conversion shares in a
community offering, a public offering, or both. The mutual holding
company may begin the community offering, the public offering, or both
at any time during the subscription offering or upon conclusion of the
subscription offering.
(3) The mutual holding company may pay underwriting commissions
(including underwriting discounts). The Board may object to the payment
of unreasonable commissions. The mutual holding company may reimburse
an underwriter for accountable expenses in a subscription offering if
the public offering is limited. If no public offering occurs, the
mutual holding company may pay an underwriter a consulting fee. The
Board may object to the payment of unreasonable consulting fees.
(4) If the mutual holding company conducts the community offering,
the public offering, or both at the same time as the subscription
offering, it must fill all subscription orders first.
(5) The mutual holding company must prepare the order form in
compliance with this subpart and Form OF. The mutual holding company
may obtain Form OF from the Reserve Bank and from the Board's Web site
(www.federalreserve.gov).
(e) Prohibited sales practices.
(1) In connection with offers, sales, or purchases of conversion
shares under this subpart, the mutual holding company and its
directors, officers, agents, or employees may not:
(i) Employ any device, scheme, or artifice to defraud;
(ii) Obtain money or property by means of any untrue statement of a
material fact or any omission of a material fact necessary to make the
statements, in light of the circumstances under which they were made,
not misleading; or
(iii) Engage in any act, transaction, practice, or course of
business that operates or would operate as a fraud or deceit upon a
purchaser or seller.
(2) During the conversion, no person may:
(i) Transfer, or enter into any agreement or understanding to
transfer, the legal or beneficial ownership of subscription rights for
the conversion shares or the underlying securities to the account of
another;
(ii) Make any offer, or any announcement of an offer, to purchase
any of the conversion shares from anyone but the mutual holding
company; or
(iii) Knowingly acquire more than the maximum purchase allowable
under the plan of conversion.
(3) The restrictions in paragraphs (e)(2)(i) and (e)(2)(ii) of this
section do not apply to offers for more than 10 percent of any class of
conversion shares by:
(i) An underwriter or a selling group, acting on behalf of the
mutual holding company or resulting stock holding company, that makes
the offer with a view toward public resale; or
(ii) One or more of the tax-qualified employee stock ownership
plans so long as the plan or plans do not beneficially own more than 25
percent of any class of the equity securities in the aggregate.
(4) Any person that violates the restrictions in paragraphs
(e)(2)(i) and (e)(2)(ii) of this section may face prosecution or other
legal action.
(f) Payment for conversion shares.
(1) A subscriber may purchase conversion shares with cash, by a
withdrawal from a savings account, or a withdrawal from a certificate
of deposit. If a subscriber purchases conversion shares by a withdrawal
from a certificate of deposit, the mutual holding company or its
subsidiary savings association may not assess a penalty for the
withdrawal.
(2) The mutual holding company may not extend credit to any person
to purchase the conversion shares.
(g) Interest on payments for conversion shares.
(1) The mutual holding company or its subsidiary savings
association must pay interest from the date it receives a payment for
conversion shares until the date it completes or terminates the
conversion. The mutual holding company or its subsidiary savings
association must pay interest at no less than the passbook rate for
amounts paid in cash, check, or money order.
(2) If a subscriber withdraws money from a savings account to
purchase conversion shares, the mutual holding company or its
subsidiary savings association must pay interest on the payment until
the mutual holding company completes or terminates the conversion as if
the withdrawn amount remained in the account.
(3) If a depositor fails to maintain the applicable minimum balance
requirement because he or she withdraws money from a certificate of
deposit to purchase conversion shares, the mutual holding company or
its subsidiary savings association may cancel the certificate and pay
interest at no less than the passbook rate on any remaining balance.
(h) Subscription rights for each eligible account holder and each
supplemental eligible account holder.
(1) The mutual holding company must give each eligible account
holder subscription rights to purchase conversion shares in an amount
equal to the greater of:
(i) The maximum purchase limitation established for the community
offering or the public offering under paragraph (p) of this section;
(ii) One-tenth of one percent of the total stock offering; or
(iii) Fifteen times the following number: The total number of
conversion shares that the mutual holding company will issue,
multiplied by the following fraction: the numerator is the total
qualifying deposit of the eligible account holder, and the denominator
is the total qualifying deposits of all eligible account holders. The
mutual holding company must round down the product of this multiplied
fraction to the next whole number.
(2) The mutual holding company must give subscription rights to
purchase shares to each supplemental eligible account holder in the
same amount as described in paragraph (h)(1) of this section, except
that the mutual holding company must compute the fraction described in
paragraph (h)(1)(iii) of this section as follows: the numerator is the
total qualifying deposit of the supplemental eligible account holder,
and the denominator is the total qualifying deposits of all
supplemental eligible account holders.
(i) Officers, directors, and their associates as eligible account
holders. The officers, directors, and their associates of the mutual
holding company and subsidiary savings association may be eligible
account holders. However, if an officer, director, or his or her
associate receives subscription rights based on increased deposits in
the year before the eligibility record date, the mutual holding company
must subordinate subscription rights for these deposits to subscription
rights exercised by other eligible account holders.
[[Page 56587]]
(j) Other voting members eligible to purchase conversion shares.
(1) The mutual holding company must give rights to purchase the
conversion shares in the conversion to voting members who are neither
eligible account holders nor supplemental eligible account holders. The
mutual holding company must allocate rights to each voting member that
are equal to the greater of:
(i) The maximum purchase limitation established for the community
offering and the public offering under paragraph (p) of this section;
or
(ii) One-tenth of one percent of the total stock offering.
(2) The mutual holding company must subordinate the voting members'
rights to the rights of eligible account holders, tax-qualified
employee stock ownership plans, and supplemental eligible account
holders.
(k) Purchase limitations for officers, directors, and their
associates.
(1) When the mutual holding company converts, the officers,
directors, and their associates of the mutual holding company and
subsidiary savings association may not purchase, in the aggregate, more
than the following percentage of the total stock offering:
------------------------------------------------------------------------
Officer and
director
Institution size purchases
(percent)
------------------------------------------------------------------------
$50,000,000 or less..................................... 35
$50,000,001-100,000,000................................. 34
$100,000,001-150,000,000................................ 33
$150,000,001-200,000,000................................ 32
$200,000,001-250,000,000................................ 31
$250,000,001-300,000,000................................ 30
$300,000,001-350,000,000................................ 29
$350,000,001-400,000,000................................ 28
$400,000,001-450,000,000................................ 27
$450,000,001-500,000,000................................ 26
Over $500,000,000....................................... 25
------------------------------------------------------------------------
(2) The purchase limitations in this section do not apply to shares
held in tax-qualified employee stock benefit plans that are
attributable to the officers, directors, and their associates.
(l) Allocating conversion shares in the event of oversubscription.
(1) If the conversion shares are oversubscribed by the eligible
account holders, the mutual holding company must allocate shares among
the eligible account holders so that each, to the extent possible, may
purchase 100 shares.
(2) If the conversion shares are oversubscribed by the supplemental
eligible account holders, the mutual holding company must allocate
shares among the supplemental eligible account holders so that each, to
the extent possible, may purchase 100 shares.
(3) If a person is an eligible account holder and a supplemental
eligible account holder, the mutual holding company must include the
eligible account holder's allocation in determining the number of
conversion shares that the mutual holding company may allocate to the
person as a supplemental eligible account holder.
(4) For conversion shares that the mutual holding company does not
allocate under paragraphs (l)(1) and (l)(2) of this section, the mutual
holding company must allocate the shares among the eligible or
supplemental eligible account holders equitably, based on the amounts
of qualifying deposits. The mutual holding company must describe this
method of allocation in its plan of conversion.
(5) If shares remain after the mutual holding company has allocated
shares as provided in paragraphs (l)(1) and (l)(2) of this section, and
if the voting members oversubscribe, the mutual holding company must
allocate the conversion shares among those members equitably. The
mutual holding company must describe the method of allocation in its
plan of conversion.
(m) Employee stock ownership plan purchase of conversion shares.
(1) The tax-qualified employee stock ownership plan of the mutual
holding company may purchase up to 10 percent of the total offering of
the conversion shares.
(2) If the Board approves a revised stock valuation range as
described in paragraph (c)(5) of this section, and the final conversion
stock valuation range exceeds the former maximum stock offering range,
the mutual holding company may allocate conversion shares to the tax-
qualified employee stock ownership plan, up to the 10 percent limit in
paragraph (m)(1) of this section.
(3) If the tax-qualified employee stock ownership plan is not able
to or chooses not to purchase stock in the offering, it may, with prior
Board approval and appropriate disclosure in the offering circular,
purchase stock in the open market, or purchase authorized but unissued
conversion shares.
(4) The mutual holding company may include stock contributed to a
charitable organization in the conversion in the calculation of the
total offering of conversion shares under paragraphs (m)(1) and (m)(2)
of this section, unless the Board objects on supervisory grounds.
(n) Purchase limitations.
(1) The mutual holding company may limit the number of shares that
any person, group of associated persons, or persons otherwise acting in
concert, may subscribe to up to five percent of the total stock sold.
(2) If the mutual holding company sets a limit of five percent
under paragraph (n)(1) of this section, it may modify that limit with
Board approval to provide that any person, group of associated persons,
or persons otherwise acting in concert subscribing for five percent,
may purchase between five and ten percent as long as the aggregate
amount that the subscribers purchase does not exceed 10 percent of the
total stock offering.
(3) The mutual holding company may require persons exercising
subscription rights to purchase a minimum number of conversion shares.
The minimum number of shares must equal the lesser of the number of
shares obtained by a $500 subscription or 25 shares.
(4) In setting purchase limitations under this section, the mutual
holding company may not aggregate conversion shares attributed to a
person in the tax-qualified employee stock ownership plan with shares
purchased directly by, or otherwise attributable to, that person.
(o) Purchase preference for persons in the local community.
(1) In the subscription offering, subject to the purchase
priorities set forth in paragraph (a) of this section, the mutual
holding company may give a purchase preference to eligible account
holders, supplemental eligible account holders, and voting members
residing in the local community.
(2) In the community offering, the mutual holding company must give
a purchase preference to natural persons residing in the local
community.
(p) Conditions on community offerings and public offerings.
(1) If the mutual holding company offers conversion shares in a
community offering, a public offering, or both, it must offer and sell
the stock to achieve a widespread distribution of the stock.
(2) If the mutual holding company offers shares in a community
offering, a public offering, or both, it must first fill orders for the
stock up to a maximum of two percent of the conversion stock on a basis
that will promote a widespread distribution of stock. The mutual
holding company must allocate any remaining shares on an equal number
of shares per order basis until it fills all orders.
Sec. 239.60 Completion of the offering.
(a) Deadline for completing the sale of stock. The mutual holding
company must complete all sales of the stock within 45 calendar days
after the last day of the subscription period, unless
[[Page 56588]]
the offering is extended under paragraph (b) of this section.
(b) Offering period extension.
(1) The mutual holding company must request, in writing, an
extension of any offering period.
(2) The Board may grant extensions of time to sell the shares. The
Board will not grant any single extension of more than 90 days.
(3) If the Board grants the request for an extension of time, the
mutual holding company must provide a post-effective amendment to the
offering circular under Sec. 239.58(c) to each person who subscribed
for or ordered stock. The amendment must indicate that the Board
extended the offering period and that each person who subscribed for or
ordered stock may increase, decrease, or rescind their subscription or
order within the time remaining in the extension period.
Sec. 239.61 Completion of the conversion.
(a) Completion of the conversion.
(1) In the plan of conversion, the mutual holding company must set
a date by which the conversion must be completed. This date must not be
more than 24 months from the date that the members approve the plan of
conversion. The date, once set, may not be extended by the mutual
holding company or by the Board. The mutual holding company must
terminate the conversion if it is not completed by that date.
(2) The conversion is complete on the date that the mutual holding
company accepts the offers for stock of the resulting stock holding
company.
(b) Termination of the conversion.
(1) The members may terminate the conversion by failing to approve
the conversion at the members' meeting.
(2) The mutual holding company may terminate the conversion before
the members' meeting.
(3) The mutual holding company may terminate the conversion after
the members' meeting only if the Board concurs.
(c) Voting rights for stockholders following conversion. The
resulting stock holding company must provide the stockholders with
exclusive voting rights.
(d) Rights of savings account holders. The resulting stock holding
company must provide a liquidation account for each eligible and
supplemental eligible account holder under Sec. 239.62(a)(1)-(3).
Sec. 239.62 Liquidation accounts.
(a) Liquidation account.
(1) A liquidation account represents the potential interest of
eligible account holders and supplemental eligible account holders in
the mutual holding company's net worth at the time of conversion. The
resulting stock holding company must maintain a sub-account to reflect
the interest of each account holder.
(2) Before the resulting stock holding company may provide a
liquidation distribution to common stockholders, the resulting stock
holding company must give a liquidation distribution to those eligible
account holders and supplemental eligible account holders who hold
savings accounts from the time of conversion until liquidation.
(3) The resulting stock holding company may not record the
liquidation account in the financial statements. The resulting stock
holding company must disclose the liquidation account in the footnotes
to the financial statements.
(4) The initial balance of the liquidation account is the net worth
in the statement of financial condition included in the final offering
circular.
(b) Liquidation sub-accounts.
(1)(i) The resulting stock holding company determines the initial
sub-account balance for a savings account held by an eligible account
holder by multiplying the initial balance of the liquidation account by
the following fraction: The numerator is the qualifying deposit in the
savings account on the eligibility record date. The denominator is
total qualifying deposits of all eligible account holders on that date.
(ii) The resulting stock holding company determines the initial
sub-account balance for a savings account held by a supplemental
eligible account holder by multiplying the initial balance of the
liquidation account by the following fraction: The numerator is the
qualifying deposit in the savings account on the supplemental
eligibility record date. The denominator is total qualifying deposits
of all supplemental eligible account holders on that date.
(iii) If an account holder holds a savings account on the
eligibility record date and a separate savings account on the
supplemental eligibility record date, the resulting stock holding
company must compute separate sub-accounts for the qualifying deposits
in the savings account on each record date.
(2) The resulting stock holding company may not increase the
initial sub-account balances. The resulting stock holding company must
decrease the initial balance under Sec. 239.62(d) as depositors reduce
or close their accounts.
(c) Retention of voting rights based on liquidation sub-accounts.
Eligible account holders or supplemental eligible account holders do
not retain any voting rights based on their liquidation sub-accounts.
(d) Adjusting liquidation sub-accounts.
(1)(i) The resulting stock holding company must reduce the balance
of an eligible account holder's or supplemental eligible account
holder's sub-account if the deposit balance in the account holder's
savings account at the close of business on any annual closing date,
which for purposes of this section is the fiscal year end, after the
relevant eligibility record dates is less than:
(A) The deposit balance in the account holder's savings account at
the close of business on any other annual closing date after the
relevant eligibility record date; or
(B) The qualifying deposits in the account holder's savings account
on the relevant eligibility record date.
(ii) The reduction must be proportionate to the reduction in the
deposit balance.
(2) If the resulting stock holding company reduces the balance of a
liquidation sub-account, the resulting stock holding company may not
subsequently increase it if the deposit balance increases.
(3) The resulting stock holding company is not required to adjust
the liquidation account and sub-account balances at each annual closing
date if it maintains sufficient records to make the computations if a
liquidation subsequently occurs.
(4) The resulting stock holding company must maintain the
liquidation sub-account for each account holder as long as the account
holder maintains an account with the same social security number or tax
identification number, as applicable.
(5) If there is a complete liquidation, the resulting stock holding
company must provide each account holder with a liquidation
distribution in the amount of the sub-account balance.
(e) Liquidation defined.
(1) For purposes of this subpart, a liquidation is a sale of the
assets and settlement of the liabilities with the intent to cease
operations and close. Upon liquidation, the resulting stock holding
company must return the charter to the governmental agency that issued
it. The government agency must cancel the charter.
(2) A merger, consolidation, or similar combination or transaction
with another depository institution, is not a liquidation. If the
resulting stock holding company is involved in such a transaction, the
surviving institution must assume the liquidation account.
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(f) Effect of liquidation on net worth. The liquidation account
does not affect the net worth.
Sec. 239.63 Post-conversion.
(a) Management stock benefit plans.
(1) During the 12 months after the conversion, the resulting stock
holding company may implement a stock option plan (Option Plan), an
employee stock ownership plan or other tax-qualified employee stock
benefit plan (collectively, ESOP), and a management recognition plan
(MRP), provided the resulting stock holding company meets all of the
following requirements.
(i) The resulting stock holding company discloses the plans in the
proxy statement and offering circular and indicates in the offering
circular that there will be a separate shareholder vote on the Option
Plan and the MRP at least six months after the conversion. No
shareholder vote is required to implement the ESOP. The ESOP must be
tax-qualified.
(ii) The Option Plan does not exceed more than ten percent of the
number of shares that the resulting stock holding company issued in the
conversion.
(iii)(A) The ESOP and MRP do not exceed, in the aggregate, more
than ten percent of the number of shares that the resulting stock
holding company issued in the conversion. If the resulting stock
holding company has tangible capital of ten percent or more following
the conversion, the Board may permit the ESOP and MRP to represent, in
the aggregate, up to 12 percent of the number of shares issued in the
conversion; and
(B) The MRP does not exceed more than three percent of the number
of shares that the resulting stock holding company issued in the
conversion. If the resulting stock holding company has tangible capital
of ten percent or more after the conversion, the Board may permit the
MRP to represent up to four percent of the number of shares that the
resulting stock holding company issued in the conversion.
(iv) No individual receives more than 25 percent of the shares
under any plan.
(v) The directors who are not the officers do not receive more than
five percent of the shares of the MRP or Option Plan individually, or
30 percent of any such plan in the aggregate.
(vi) The shareholders approve each of the Option Plan and the MRP
by a majority of the total votes eligible to be cast at a duly called
meeting before the resulting stock holding company establishes or
implements the plan. The resulting stock holding company may not hold
this meeting until six months after the conversion.
(vii) When the resulting stock holding company distributes proxies
or related material to shareholders in connection with the vote on a
plan, the resulting stock holding company states that the plan complies
with Board regulations and that the Board does not endorse or approve
the plan in any way. The resulting stock holding company may not make
any written or oral representations to the contrary.
(viii) The resulting stock holding company does not grant stock
options at less than the market price at the time of grant.
(ix) The resulting stock holding company does not fund the Option
Plan or the MRP at the time of the conversion.
(x) The plan does not begin to vest earlier than one year after
shareholders approve the plan, and does not vest at a rate exceeding 20
percent per year.
(xi) The plan permits accelerated vesting only for disability or
death, or if the resulting stock holding company undergoes a change of
control.
(xii) The plan provides that the executive officers or directors
must exercise or forfeit their options in the event the institution
becomes critically undercapitalized under the applicable regulatory
capital requirements, is subject to Board enforcement action, or
receives a capital directive under Sec. 263.83 of this chapter.
(xiii) The resulting stock holding company files a copy of the
proposed Option Plan or MRP with the Board and certifies to the Board
that the plan approved by the shareholders is the same plan that the
resulting stock holding company filed with, and disclosed in, the proxy
materials distributed to shareholders in connection with the vote on
the plan.
(xiv) The resulting stock holding company files the plan and the
certification with the Board within five calendar days after the
shareholders approve the plan.
(2) The resulting stock holding company may provide dividend
equivalent rights or dividend adjustment rights to allow for stock
splits or other adjustments to the stock in the ESOP, MRP, and Option
Plan.
(3) The restrictions in paragraph (a)(1) of this section do not
apply to plans implemented more than 12 months after the conversion,
provided that materials pertaining to any shareholder vote regarding
such plans are not distributed within the 12 months after the
conversion. If a plan adopted in conformity with paragraph (a)(1) of
this section is amended more than 12 months following the conversion,
the shareholders must ratify any material deviations to the
requirements in paragraph (a)(1) of this section.
(b) Restrictions on the sale of conversion shares by directors,
officers, and their associates.
(1) Directors and officers who purchase conversion shares may not
sell the shares for one year after the date of purchase, except that in
the event of the death of the officer or director, the successor in
interest may sell the shares.
(2) The resulting stock holding company must include notice of the
restriction described in paragraph (b)(1) of this section on each
certificate of stock that a director or officer purchases during the
conversion or receives in connection with a stock dividend, stock
split, or otherwise with respect to such restricted shares.
(3) The resulting stock holding company must instruct the stock
transfer agent about the transfer restrictions in this section.
(4) For three years after the resulting stock holding company
converts, the officers, directors, and their associates may purchase
stock of the resulting stock holding company only from a broker or
dealer registered with the Securities and Exchange Commission. However,
the officers, directors, and their associates may engage in a
negotiated transaction involving more than one percent of the
outstanding stock, and may purchase stock through any of the management
or employee stock benefit plans.
(c) Repurchase of conversion shares.
(1) The resulting stock holding company may not repurchase its
shares in the first year after the conversion except:
(i) In extraordinary circumstances, the resulting stock holding
company may make open market repurchases of up to five percent of the
outstanding stock in the first year after the conversion if the
resulting stock holding company files a notice under paragraph (d)(1)
of this section and the Board does not disapprove the repurchase. The
Board will not approve such repurchases unless the repurchase meets the
standards in paragraph (d)(3) of this section, and the repurchase is
consistent with paragraph (c)(3) of this section.
(ii) The resulting stock holding company may repurchase qualifying
shares of a director or conduct a Board approved repurchase pursuant to
an offer made to all shareholders of the stock holding company.
(iii) Repurchases to fund management recognition plans that have
been ratified by shareholders do not count toward the repurchase
limitations in this section. Repurchases in the first year to fund
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such plans require prior written notification to the Board.
(iv) Purchases to fund tax qualified employee stock benefit plans
do not count toward the repurchase limitations in this section.
(2) After the first year, the resulting stock holding company may
repurchase the shares, subject to all other applicable regulatory and
supervisory restrictions and paragraph (c)(3) of this section.
(3) All stock repurchases are subject to the following
restrictions.
(i) The resulting stock holding company may not repurchase the
shares if the repurchase will reduce its applicable capital levels
below the amount required for the liquidation account under Sec.
239.62(a). The resulting stock holding company must comply with the
capital distribution requirements of this subpart.
(ii) The restrictions on share repurchases apply to a charitable
organization under Sec. 239.64(b). The resulting stock holding company
must aggregate purchases of shares by the charitable organization with
the repurchases.
(d) Board review of repurchase of conversion shares.
(1) To repurchase stock in the first year following conversion,
other than repurchases under paragraphs (c)(1)(iii) or (c)(1)(iv) of
this section, the resulting stock holding company must file a written
notice with the appropriate Reserve Bank. The resulting stock holding
company must provide the following information:
(i) The proposed repurchase program;
(ii) The effect of the repurchases on the regulatory capital and
other capital levels; and
(iii) The purpose of the repurchases and, if applicable, an
explanation of the extraordinary circumstances necessitating the
repurchases.
(2) The resulting stock holding company must file the notice with
the appropriate Reserve Bank at least thirty days before the resulting
stock holding company begins the repurchase program. The Board may
extend its review of the notice for an additional sixty days.
(3) The resulting stock holding company may not repurchase the
shares if the Board objects to the repurchase program. The Board will
not object to the repurchase program if:
(i) The repurchase program will not adversely affect the financial
condition of the resulting savings association;
(ii) The resulting stock holding company submits sufficient
information to evaluate the proposed repurchases;
(iii) The resulting stock holding company demonstrate extraordinary
circumstances and a compelling and valid business purpose for the share
repurchases; and
(iv) The repurchase program would not be contrary to other
applicable regulations.
(e) Declaring and paying dividends following conversion. The
resulting stock holding company may declare or pay a dividend on its
shares after it converts if:
(1) The dividend will not reduce the regulatory capital below the
amount required for the liquidation account under Sec. 239.62(a);
(2) The resulting stock holding company complies with all
applicable regulatory capital requirements after it declares or pays
dividends;
(3) The resulting stock holding company complies with the capital
distribution requirements under this subpart; and
(4) The resulting stock holding company does not return any
capital, other than ordinary dividends, to purchasers during the term
of the business plan submitted with the conversion.
(f) Eligibility to acquire shares after conversion.
(1) For three years after the resulting stock holding company
converts, no person may, directly or indirectly, acquire or offer to
acquire the beneficial ownership of more than ten percent of any class
of the equity securities without the Board's prior written approval. If
a person violates this prohibition, the resulting stock holding company
may not permit the person to vote shares in excess of ten percent, and
may not count the shares in excess of ten percent in any shareholder
vote.
(2) A person acquires beneficial ownership of more than ten percent
of a class of shares when he or she holds any combination of the stock
or revocable or irrevocable proxies under circumstances that give rise
to a conclusive control determination or rebuttable control
determination under Sec. Sec. 238.21(a) and (d) of this chapter. The
Board will presume that a person has acquired shares if the acquiror
entered into a binding written agreement for the transfer of shares.
For purposes of this section, an offer is made when it is communicated.
An offer does not include non-binding expressions of understanding or
letters of intent regarding the terms of a potential acquisition.
(3) Notwithstanding the restrictions in this section:
(i) Paragraphs (f)(1) and (f)(2) of this section do not apply to
any offer with a view toward public resale made exclusively to the
resulting stock holding company, to the underwriters, or to a selling
group acting on behalf of the resulting savings association.
(ii) Unless the Board objects in writing, any person may offer or
announce an offer to acquire up to one percent of any class of shares.
In computing the one percent limit, the person must include all of his
or her acquisitions of the same class of shares during the prior 12
months.
(iii) A corporation whose ownership is, or will be, substantially
the same as the ownership may acquire or offer to acquire more than ten
percent of the common stock, if it makes the offer or acquisition more
than one year after the resulting stock holding company converts.
(iv) One or more of the tax-qualified employee stock benefit plans
may acquire the shares, if the plan or plans do not beneficially own
more than 25 percent of any class of shares of the resulting savings
association in the aggregate.
(v) An acquiror does not have to file a separate application to
obtain Board approval under paragraph (f)(1) of this section, if the
acquiror files an application under part 238 of this chapter that
specifically addresses the criteria listed under paragraph (f)(4) of
this section and the resulting stock holding company does not oppose
the proposed acquisition.
(4) The Board may deny an application under paragraph (f)(1) of
this section if the proposed acquisition:
(i) Is contrary to the purposes of this subpart;
(ii) Is manipulative or deceptive;
(iii) Subverts the fairness of the conversion;
(iv) Is likely to injure the resulting stock holding company;
(v) Is inconsistent with the plan to meet the credit and lending
needs of the proposed market area;
(vi) Otherwise violates laws or regulations; or
(vii) Does not prudently deploy the conversion proceeds.
(g) Additional requirements that apply following conversion. After
conversion, the resulting stock holding company must:
(1) Promptly register the shares under the Securities Exchange Act
of 1934 (15 U.S.C. 78a-78jj, as amended). The resulting stock holding
company may not deregister the shares for three years.
(2) Encourage and assist a market maker to establish and to
maintain a market for the shares. A market maker for a security is a
dealer who:
(i) Regularly publishes bona fide competitive bid and offer
quotations for
[[Page 56591]]
the security in a recognized inter-dealer quotation system;
(ii) Furnishes bona fide competitive bid and offer quotations for
the security on request; or
(iii) May effect transactions for the security in reasonable
quantities at quoted prices with other brokers or dealers.
(3) Use the best efforts to list the shares on a national or
regional securities exchange or on the National Association of
Securities Dealers Automated Quotation system.
(4) File all post-conversion reports that the Board requires.
Sec. 239.64 Contributions to charitable organizations.
(a) Forming a charitable organization as part of a conversion. When
a mutual holding company converts to the stock form, it may form a
charitable organization. Its contributions to the charitable
organization are governed by the requirements of paragraphs (b) through
(f) of this section.
(b) Donating conversion shares or conversion proceeds to a
charitable organization. Some of the conversion shares or proceeds may
be contributed to a charitable organization if:
(1) The plan of conversion provides for the proposed contribution;
(2) The members approve the proposed contribution; and
(3) The IRS either has approved, or approves within two years after
formation, the charitable organization as a tax-exempt charitable
organization under the Internal Revenue Code.
(c) Member approval of charitable contributions. At the meeting to
consider conversion of the mutual holding company, the members must
separately approve by at least a majority of the total eligible votes,
a contribution of conversion shares or proceeds. If the mutual holding
company has a subsidiary holding company with minority shareholders, or
if the subsidiary savings association has minority shareholders, and
the mutual holding company is adding a charitable contribution as part
of a second step stock conversion, it must also have the minority
shareholders separately approve the charitable contribution by a
majority of their total eligible votes.
(d) Charitable organization contribution limits. A reasonable
amount of conversion shares or proceeds may be contributed to a
charitable organization, if the contribution will not exceed limits for
charitable deductions under the Internal Revenue Code and the Board
does not object on supervisory grounds. If the mutual holding company
or resulting stock holding company is well-capitalized pursuant to
Sec. 238.62 of this chapter, the Board generally will not object if it
contributes an aggregate amount of eight percent or less of the
conversion shares or proceeds.
(e) Charitable organization requirements. The charitable
organization's charter (or trust agreement) and gift instrument must
provide that:
(1) The charitable organization's primary purpose is to serve and
make grants in the local community;
(2) As long as the charitable organization controls shares, it must
vote those shares in the same ratio as all other shares voted on each
proposal considered by the shareholders;
(3) For at least five years after its organization, one seat on the
charitable organization's board of directors (or board of trustees) is
reserved for an independent director (or trustee) from the local
community. This director may not be the officer, director, or employee,
or the affiliate's officer, director, or employee, and should have
experience with local community charitable organizations and grant
making; and
(4) For at least five years after its organization, one seat on the
charitable organization's board of directors (or board of trustees) is
reserved for a director from the board of directors or the board of
directors of an acquiror or resulting institution in the event of a
merger or acquisition of the organization.
(5) The Board may examine the charitable organization at the
charitable organization's expense;
(6) The charitable organization must comply with all supervisory
directives that the Board imposes;
(7) The charitable organization must annually provide the Board
with a copy of the annual report that the charitable organization
submitted to the IRS;
(8) The charitable organization must operate according to written
policies adopted by its board of directors (or board of trustees),
including a conflict of interest policy; and
(9) The charitable organization may not engage in self-dealing, and
must comply with all laws necessary to maintain its tax-exempt status
under the Internal Revenue Code.
(f) Conflicts of interest involving the directors of the mutual
holding company or resulting stock holding company.
(1) An individual who is the director, officer, or employee, or a
person who has the power to direct the management or policies, or
otherwise owes a fiduciary duty to the mutual holding company or
resulting stock holding company and who will serve as an officer,
director, or employee of the charitable organization, is subject to the
following obligations:
(i) The individual must not advance their own personal or business
interests, or those of others with whom the individual has a personal
or business relationship, at the expense of the mutual holding company
or resulting stock holding company;
(ii) If the individual has an interest in a matter or transaction
before the board of directors, the individual must:
(A) Disclose to the board all material nonprivileged information
relevant to the board's decision on the matter or transaction,
including the existence, nature and extent of the individual's
interests, and the facts known to the individual as to the matter or
transaction under consideration;
(B) Refrain from participating in the board's discussion of the
matter or transaction; and
(C) Recuse themselves from voting on the matter or transaction (if
the individual is a director). See Form AC, which provides further
information or operating plans and conflict of interest plans. The
mutual holding company may obtain Form AC from the appropriate Reserve
Bank and the Board's Web site at http://www.federalreserve.gov.
(2) Before the board of directors may adopt a plan of conversion
that includes a charitable organization, the mutual holding company
must identify the directors that will serve on the charitable
organization's board. These directors may not participate in the
board's discussions concerning contributions to the charitable
organization, and may not vote on the matter.
(3) The stock certificates of shares contributed to the charitable
organization or that the charitable organization otherwise acquires
must bear the following legend: ``The board of directors must consider
the shares that this stock certificate represents as voted in the same
ratio as all other shares voted on each proposal considered by the
shareholders, as long as the shares are controlled by the charitable
organization.''
(4) As long as the charitable organization controls shares, the
resulting stock holding company must consider those shares as voted in
the same ratio as all of the shares voted on each proposal considered
by the shareholders.
(5) After the stock offering is complete, the resulting stock
holding company must submit an executed copy of the following documents
to the
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appropriate Reserve Bank: the charitable organization's charter and
bylaws (or trust agreement), operating plan (within six months after
the stock offering), conflict of interest policy, and the gift
instrument for the contributions of either stock or cash to the
charitable organization.
Sec. 239.65 Voluntary supervisory conversions.
(a) Voluntary supervisory conversion.
(1) The mutual holding company must comply with this section and
Sec. 239.66 to engage in a voluntary supervisory conversion. This
subpart applies to all voluntary supervisory conversions under sections
10(o)(7) and 10(p) of the Home Owners' Loan Act (12 U.S.C. 1467a(o) and
(p)).
(2) Sections 239.50 through 239.64 also apply to a voluntary
supervisory conversion, unless a requirement is clearly inapplicable.
(b) Conducting a voluntary supervisory conversion. In conducting a
voluntary supervisory conversion, the mutual holding company may:
(1) Sell its shares to the public;
(2) Convert into stock form by merging into a state-chartered
corporation; or
(3) Sell its shares directly to an acquiror, who may be an
individual, company, depository institution, or depository institution
holding company.
(c) Member rights in a voluntary supervisory conversion. Members of
the mutual holding company do not have the right to approve or
participate in a voluntary supervisory conversion, and will not have
any legal or beneficial ownership interests in the converted
association, unless the Board provides otherwise. The members may have
interests in a liquidation account, if one is established.
(d) Eligibility for a voluntary supervisory conversion. A mutual
holding company may be eligible to engage in a voluntary supervisory
conversion if:
(1) Either the mutual holding company or its subsidiary savings
association is significantly undercapitalized under applicable
regulatory capital requirements (or the mutual holding company or its
subsidiary savings association is undercapitalized under applicable
regulatory capital requirements and a standard conversion that would
make it adequately capitalized is not feasible) and will be a viable
entity following the conversion;
(2) Severe financial conditions threaten stability of the mutual
holding company, and a conversion is likely to improve its financial
condition.
(e) A mutual holding company or its subsidiary savings association
will be a viable entity following the conversion if it satisfies all of
the following:
(1) It will be adequately capitalized as a result of the
conversion;
(2) It, the proposed conversion, and its acquiror(s) comply with
applicable supervisory policies;
(3) The transaction is in the best interest of the mutual holding
company and its subsidiary savings associations, and the best interest
of the Deposit Insurance Fund and the public; and
(4) The transaction will not injure or be detrimental to the mutual
holding company and its subsidiary savings associations, the Deposit
Insurance Fund, or the public interest.
(f) Plan of voluntary supervisory conversion. A majority of the
board of directors of the mutual holding company must approve a plan of
voluntary supervisory conversion. The mutual holding company must
include all of the following information in the plan of voluntary
supervisory conversion.
(1) The name and address of the mutual holding company.
(2) The name, address, date and place of birth, and social security
number or tax identification number, as applicable, of each proposed
purchaser of conversion shares and a description of that purchaser's
relationship to the mutual holding company.
(3) The title, per-unit par value, number, and per-unit and
aggregate offering price of shares that the mutual holding company will
issue.
(4) The number and percentage of shares that each investor will
purchase.
(5) The aggregate number and percentage of shares that each
director, officer, and any affiliates or associates of the director or
officer will purchase.
(6) A description of any liquidation account.
(7) Certified copies of all resolutions of the board of directors
relating to the conversion.
(g) Voluntary supervisory conversion application. The mutual
holding company must include all of the following information and
documents in a voluntary supervisory conversion application to the
Board under this subpart:
(1) Eligibility.
(i) Evidence establishing that the mutual holding company meets the
eligibility requirements under paragraph (d) of this section.
(ii) An opinion of qualified, independent counsel or an
independent, certified public accountant regarding the tax consequences
of the conversion, or an IRS ruling indicating that the transaction
qualifies as a tax-free reorganization.
(2) Plan of conversion. A plan of voluntary supervisory conversion
that complies with paragraph (e) of this section.
(3) Business plan. A business plan that complies with Sec.
239.53(b), when required by the Board.
(4) Financial data. (i) The most recent audited financial
statements and Thrift Financial Report. The mutual holding company must
explain how its current capital levels or the capital levels of its
subsidiary savings associations make it eligible to engage in a
voluntary supervisory conversion under paragraph (d) of this section.
(ii) A description of the estimated conversion expenses.
(iii) Evidence supporting the value of any non-cash asset
contributions. Appraisals must be acceptable to the Board and the non-
cash asset must meet all other Board policy guidelines.
(iv) Pro forma financial statements that reflect the effects of the
transaction. The mutual holding company must identify the tangible,
core, and risk-based capital levels and show the adjustments necessary
to compute the capital levels. The mutual holding company must prepare
the pro forma statements in conformance with Board regulations and
policy.
(5) Proposed documents. (i) The proposed charter and bylaws.
(ii) The proposed stock certificate form.
(6) Agreements. (i) A copy of any agreements between the mutual
holding company and proposed purchasers.
(ii) A copy and description of all existing and proposed employment
contracts. The mutual holding company must describe the term, salary,
and severance provisions of the contract, the identity and background
of the officer or employee to be employed, and the amount of any
conversion shares to be purchased by the officer or employee or his or
her affiliates or associates.
(7) Related applications. (i) All filings required under the
securities offering rules of subpart E of this part.
(ii) Any required Holding Company Act application or Control Act
notice under part 238 of this chapter.
(iii) A subordinated debt application, if applicable.
(iv) Applications for permission to organize a stock savings and
loan holding company and for approval of a merger.
(v) A statement describing any other applications required under
federal or state banking laws for all transactions related to the
conversion, copies of all dispositive documents issued by
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regulatory authorities relating to the applications, and, if requested
by the Board, copies of the applications and related documents.
(8) Waiver request. A description of any of the features of the
application that do not conform to the requirements of this subpart,
including any request for waiver of any of these requirements.
(h) Offers and sales of stock. If the mutual holding company
converts under this subpart, the conversion shares must be offered and
sold in compliance with Sec. 239.59.
(i) Post-conversion acquisition of shares. For three years after
the completion of a voluntary supervisory conversion, neither the
resulting stock holding company nor the principal shareholder(s) may
acquire shares from minority shareholders without the Board's prior
approval.
Sec. 239.66 Board review of the voluntary supervisory conversion
application.
(a) Board review of a voluntary supervisory conversion application.
The Board will generally approve the application to engage in a
voluntary supervisory conversion unless it determines:
(1) The mutual holding company does not meet the eligibility
requirements for a voluntary supervisory conversion under Sec. Sec.
239.65(d) or because the proceeds from the sale of the conversion
stock, less the expenses of the conversion, would be insufficient to
satisfy any applicable viability requirement;
(2) The transaction is detrimental to or would cause potential
injury to the mutual holding company, its subsidiary savings
association, or the Deposit Insurance Fund or is contrary to the public
interest;
(3) The mutual holding company or the acquiror, or the controlling
parties or directors and officers of the mutual holding company or the
acquiror, have engaged in unsafe or unsound practices in connection
with the voluntary supervisory conversion; or
(4) The mutual holding company fails to justify an employment
contract incidental to the conversion, or the employment contract will
be an unsafe or unsound practice or represent a sale of control. In a
voluntary supervisory conversion, the Board generally will not approve
employment contracts of more than one year for the existing management.
(b) Conditions the Board may impose on an approval.
(1) The Board will condition approval of a voluntary supervisory
conversion application on all of the following.
(i) The conversion stock sale must be complete within three months
after the Board approves the application. The Board may grant an
extension for good cause.
(ii) The mutual holding company and the resulting stock holding
company must comply with all filing requirements of subpart E of this
part.
(iii) The mutual holding company must submit an opinion of
independent legal counsel indicating that the sale of the shares
complies with all applicable state securities law requirements.
(iv) The mutual holding company and the resulting stock holding
company must comply with all applicable laws, rules, and regulations.
(v) The mutual holding company and the resulting stock holding
company must satisfy any other requirements or conditions the Board may
impose.
(2) The Board may condition approval of a voluntary supervisory
conversion application on either of the following:
(i) The mutual holding company and the resulting stock holding
company must satisfy any conditions and restrictions the Board imposes
to prevent unsafe or unsound practices, to protect the Deposit
Insurance Fund and the public interest, and to prevent potential injury
or detriment to the mutual holding company before and after the
conversion. The Board may impose these conditions and restrictions on
the mutual holding company and the resulting stock holding company
(before and after the conversion), the acquiror, controlling parties,
or directors and officers of the mutual holding company or the
acquiror; or
(ii) The mutual holding company or the resulting stock holding
company must infuse a larger amount of capital, if necessary, for
safety and soundness reasons.
Appendix A to Part 239--Mutual Holding Company Model Charter
FEDERAL MUTUAL HOLDING COMPANY CHARTER
Section 1: Corporate title. The name of the mutual holding
company is ----(the ``Mutual Holding Company'').
Section 2: Duration. The duration of the Mutual Holding Company
is perpetual.
Section 3: Purpose and powers. The purpose of the Mutual Holding
Company is to pursue any or all of the lawful objectives of a
federal mutual savings and loan holding company chartered under
section 10(o) of the Home Owners' Loan Act, 12 U.S.C. 1467a(o), and
to exercise all of the express, implied, and incidental powers
conferred thereby and all acts amendatory thereof and supplemental
thereto, subject to the Constitution and the laws of the United
States as they are now in effect, or as they may hereafter be
amended, and subject to all lawful and applicable rules,
regulations, and orders of the Federal Reserve Board (``Board'').
Section 4: Capital. The Mutual Holding Company shall have no
capital stock.
Section 5: Members. [The content of this section 5 shall be
identical to the content of the parallel section in the charter of
the reorganizing association, with the following exceptions: (A) Any
provisions conferring membership rights upon borrowers of the
reorganizing association shall be eliminated and replaced with
provisions grandfathering those rights in accordance with 12 CFR
239.5; and (B) appropriate changes shall be made to indicate that
membership rights in the mutual holding company derive from deposit
accounts in and, to the extent of any grandfather provisions,
borrowings from the resulting association. Set forth below is an
example of how section 5 should appear in the charter of a mutual
holding company formed by a reorganizing association whose charter
conforms to the model charter prescribed for federal mutual savings
associations for calendar year 1989. Additional changes to this
section 5 may be required whenever a mutual holding company
reorganization involves an acquiree association, or a mutual holding
company makes a post-reorganization acquisition of a mutual savings
association, so as to preserve the membership rights of the members
of the acquired association consistent with 12 CFR 239.5.]
All holders of the savings, demand, or other authorized accounts
of ----[insert the name of the resulting association] (the
``Association'') are members of the Mutual Holding Company. With
respect to all questions requiring action by the members of the
Mutual Holding Company, each holder of an account in the Association
shall be permitted to cast one vote for each $100, or fraction
thereof, of the withdrawal value of the member's account. In
addition, borrowers from the Association as of ----[insert the date
of the reorganization or any earlier date as of which new borrowings
ceased to result in membership rights] shall be entitled to one vote
for the period of time during which such borrowings are in
existence. [The foregoing sentence should be included only if the
charter of the reorganizing association confers voting rights on any
borrowers.] No member, however, shall cast more than one thousand
votes. All accounts shall be nonassessable.
Section 6. Directors. The Mutual Holding Company shall be under
the direction of a board of directors. The authorized number of
directors shall not be fewer than five nor more than fifteen, as
fixed in the Mutual Holding Company's bylaws, except that the number
of directors may be decreased to a number less than five or
increased to a number greater than fifteen with the prior approval
of the Board.
Section 7: Capital, surplus, and distribution of earnings. [The
content of this section 7 shall be identical to the content of the
parallel section in the charter of the reorganizing association,
except for changes made to indicate that distribution rights in the
mutual holding company derive from deposit accounts in the resulting
association, any changes required to provide that the
[[Page 56594]]
Board shall be the approving authority in instances where the
charter requires regulatory approval of distributions, and any other
changes necessary to accommodate the mutual holding company format.
Set forth below is an example of how section 7 should appear in the
charter of a mutual holding company formed by a reorganizing
association whose charter conforms to the model charter prescribed
for federal mutual savings associations for calendar year 1989.
Additional changes to this section 7 may be required whenever a
mutual holding company reorganization involves an acquiree
association, or a mutual holding company makes a post-reorganization
acquisition of a mutual savings association, so as to preserve the
membership rights of the members of the acquired association
consistent with 12 CFR 239.5].
The Mutual Holding Company shall distribute net earnings to
account holders of the Association on such basis and in accordance
with such terms and conditions as may from time to time be
authorized by the Board, provided that the Mutual Holding Company
may establish minimum account balance requirements for account
holders to be eligible for distributions of earnings.
All holders of accounts of the Association shall be entitled to
equal distribution of the assets of the Mutual Holding Company, pro
rata to the value of their accounts in the Association, in the event
of voluntary or involuntary liquidation, dissolution, or winding up
of the Mutual Holding Company.
Section 8. Amendment. Adoption of any preapproved charter
amendment shall be effective after such preapproved amendment has
been approved by the members at a legal meeting. Any other
amendment, addition, change, or repeal of this charter must be
approved by the Board prior to approval by the members at a legal
meeting and shall be effective upon filing with the Board in
accordance with regulatory procedures.
Attest:----------------------------------------------------------------
Secretary of the Association
By:--------------------------------------------------------------------
President or Chief Executive Officer of the Association
By:--------------------------------------------------------------------
Secretary of the Board of Governors of the Federal Reserve System
Effective Date:--------------------------------------------------------
Appendix B to Part 239--Subsidiary Holding Company of a Mutual Holding
Company Model Charter
FEDERAL MHC SUBSIDIARY HOLDING COMPANY CHARTER
Section 1. Corporate title. The full corporate title of the
mutual holding company (``MHC'') subsidiary holding company is XXX.
Section 2. Domicile. The domicile of the MHC subsidiary holding
company shall be in the city of --, in the State of --.
Section 3. Duration. The duration of the MHC subsidiary holding
company is perpetual.
Section 4. Purpose and powers. The purpose of the MHC subsidiary
holding company is to pursue any or all of the lawful objectives of
a federal mutual holding company chartered under section 10(o) of
the Home Owners' Loan Act, 12 U.S.C. 1467a(o), and to exercise all
of the express, implied, and incidental powers conferred thereby and
by all acts amendatory thereof and supplemental thereto, subject to
the Constitution and laws of the United States as they are now in
effect, or as they may hereafter be amended, and subject to all
lawful and applicable rules, regulations, and orders of the Board of
Governors of the Federal Reserve System (``Board'').
Section 5. Capital stock. The total number of shares of all
classes of the capital stock that the MHC subsidiary holding company
has the authority to issue is --, all of which shall be common stock
of par [or if no par is specified then shares shall have a stated]
value of -- per share. The shares may be issued from time to time as
authorized by the board of directors without the approval of its
shareholders, except as otherwise provided in this section 5 or to
the extent that such approval is required by governing law, rule, or
regulation. The consideration for the issuance of the shares shall
be paid in full before their issuance and shall not be less than the
par [or stated] value. Neither promissory notes nor future services
shall constitute payment or part payment for the issuance of shares
of the MHC subsidiary holding company. The consideration for the
shares shall be cash, tangible or intangible property (to the extent
direct investment in such property would be permitted to the MHC
subsidiary holding company), labor, or services actually performed
for the MHC subsidiary holding company, or any combination of the
foregoing. In the absence of actual fraud in the transaction, the
value of such property, labor, or services, as determined by the
board of directors of the MHC subsidiary holding company, shall be
conclusive. Upon payment of such consideration, such shares shall be
deemed to be fully paid and nonassessable. In the case of a stock
dividend, that part of the retained earnings of the MHC subsidiary
holding company that is transferred to common stock or paid-in
capital accounts upon the issuance of shares as a stock dividend
shall be deemed to be the consideration for their issuance.
Except for shares issued in the initial organization of the MHC
subsidiary holding company, no shares of capital stock (including
shares issuable upon conversion, exchange, or exercise of other
securities) shall be issued, directly or indirectly, to officers,
directors, or controlling persons (except for shares issued to the
parent mutual holding company) of the MHC subsidiary holding company
other than as part of a general public offering or as qualifying
shares to a director, unless the issuance or the plan under which
they would be issued has been approved by a majority of the total
votes eligible to be cast at a legal meeting.
The holders of the common stock shall exclusively possess all
voting power. Each holder of shares of common stock shall be
entitled to one vote for each share held by such holder, except as
to the cumulation of votes for the election of directors, unless the
charter provides that there shall be no such cumulative voting.
Subject to any provision for a liquidation account, in the event of
any liquidation, dissolution, or winding up of the MHC subsidiary
holding company, the holders of the common stock shall be entitled,
after payment or provision for payment of all debts and liabilities
of the MHC subsidiary holding company, to receive the remaining
assets of the MHC subsidiary holding company available for
distribution, in cash or in kind. Each share of common stock shall
have the same relative rights as and be identical in all respects
with all the other shares of common stock.
Section 6. Preemptive rights. Holders of the capital stock of
the MHC subsidiary holding company shall not be entitled to
preemptive rights with respect to any shares of the MHC subsidiary
holding company which may be issued.
Section 7. Directors. The MHC subsidiary holding company shall
be under the direction of a board of directors. The authorized
number of directors, as stated in the MHC subsidiary holding
company's bylaws, shall not be fewer than five nor more than fifteen
except when a greater or lesser number is approved by the Board, or
his or her delegate.
Section 8. Amendment of charter. Except as provided in Section
5, no amendment, addition, alteration, change or repeal of this
charter shall be made, unless such is proposed by the board of
directors of the MHC subsidiary holding company, approved by the
shareholders by a majority of the votes eligible to be cast at a
legal meeting, unless a higher vote is otherwise required, and
approved or preapproved by the Board.
Attest:----------------------------------------------------------------
Secretary of the Subsidiary Holding Company
By:--------------------------------------------------------------------
President or Chief Executive Officer of the Subsidiary Holding
Company
By:--------------------------------------------------------------------
Secretary of the Board of Governors of the Federal Reserve System
Effective Date:--------------------------------------------------------
Appendix C to Part 239--Mutual Holding Company Model Bylaws
MODEL BYLAWS FOR MUTUAL HOLDING COMPANIES
The term ``trustees'' may be substituted for the term
``directors.''
1. Annual meeting of members. The annual meeting of the members
of the mutual holding company for the election of directors and for
the transaction of any other business of the mutual holding company
shall be held, as designated by the board of directors, at a
location within the state that constitutes the principal place of
business of the mutual holding company, or at any other convenient
place the board of directors may designate, at (insert date and time
within 150 days after the end of the mutual holding company's fiscal
year, if not a legal holiday, or if a legal holiday then on the next
succeeding day not a legal holiday). At each annual meeting, the
officers shall make a full report of the financial condition of the
mutual holding company and of its progress for the preceding year
and shall outline a program for the succeeding year.
[[Page 56595]]
2. Special meetings of members. Special meetings of the members
of the mutual holding company may be called at any time by the
president or the board of directors and shall be called by the
president, a vice president, or the secretary upon the written
request of members of record, holding in the aggregate at least one-
tenth of the voting capital of the mutual holding company. Such
written request shall state the purpose of the meeting and shall be
delivered at the principal place of business of the mutual holding
company addressed to the president. For purposes of this section,
``voting capital'' means FDIC-insured deposits as of the voting
record date. Annual and special meetings shall be conducted in
accordance with the most current edition of Robert's Rules of Order
or any other set of written procedures agreed to by the board of
directors.
3. Notice of meeting of members. Notice of each meeting shall be
either published once a week for the two successive calendar weeks
(in each instance on any day of the week) immediately prior to the
week in which such meeting shall convene, in a newspaper printed in
the English language and of general circulation in the city or
county in which the principal place of business of the mutual
holding company is located, or mailed postage prepaid at least
(insert number no less than 15) days and not more than (insert
number not more than 45) days prior to the date on which such
meeting shall convene, to each of its members of record at the last
address appearing on the books of the mutual holding company. Such
notice shall state the name of the mutual holding company, the place
of the meeting, the date and time when it shall convene, and the
matters to be considered. A similar notice shall be posted in a
conspicuous place in each of the offices of the mutual holding
company during the 14 days immediately preceding the date on which
such meeting shall convene. If any member, in person or by
authorized attorney, shall waive in writing notice of any meeting of
members, notice thereof need not be given to such member. When any
meeting is adjourned for 30 days or more, notice of the adjournment
and reconvening of the meeting shall be given as in the case of the
original meeting.
4. Fixing of record date. For the purpose of determining members
entitled to notice of or to vote at any meeting of members or any
adjournment thereof, or in order to make a determination of members
for any other proper purpose, the board of directors shall fix in
advance a record date for any such determination of members. Such
date shall be not more than 60 days nor fewer than 10 days prior to
the date on which the action, requiring such determination of
members, is to be taken. The member entitled to participate in any
such action shall be the member of record on the books of the mutual
holding company on such record date. The number of votes which each
member shall be entitled to cast at any meeting of the members shall
be determined from the books of the mutual holding company as of
such record date. Any member of such record date who ceases to be a
member prior to such meeting shall not be entitled to vote at that
meeting. The same determination shall apply to any adjourned
meeting.
5. Member quorum. Any number of members present and voting,
represented in person or by proxy, at a regular or special meeting
of the members shall constitute a quorum. A majority of all votes
cast at any meeting of the members shall determine any question,
unless otherwise required by regulation. Directors, however, are
elected by a plurality of the votes cast at an election of
directors. At any adjourned meeting any business may be transacted
which might have been transacted at the meeting as originally
called. Members present at a duly constituted meeting may continue
to transact business until adjournment.
6. Voting by proxy. Voting at any annual or special meeting of
the members may be by proxy pursuant to the rules and regulations of
the Board of Governors of the Federal Reserve System (Board),
provided, that no proxies shall be voted at any meeting unless such
proxies shall have been placed on file with the secretary of the
mutual holding company, for verification, prior to the convening of
such meeting. Proxies may be given telephonically or electronically
as long as the holder uses a procedure for verifying the identity of
the member. All proxies with a term greater than eleven months or
solicited at the expense of the mutual holding company must run to
the board of directors as a whole, or to a committee appointed by a
majority of such board. Accounts held by an administrator, executor,
guardian, conservator or receiver may be voted in person or by proxy
by such person. Accounts held by a trustee may be voted by such
trustee either in person or by proxy, in accordance with the terms
of the trust agreement, but no trustee shall be entitled to vote
accounts without a transfer of such accounts into the trustee name.
Accounts held in trust in an IRA or Keogh Account, however, may be
voted by the mutual holding company if no other instructions are
received. Joint accounts shall be entitled to no more than 1000
votes, and any owner may cast all the votes unless the mutual
holding company has otherwise been notified in writing.
7. Communication between members. Communication between members
shall be subject to any applicable rules or regulations of the
Board. No member, however, shall have the right to inspect or copy
any portion of any books or records of a mutual holding company
containing: (i) a list of depositors in or borrowers from such
mutual holding company; (ii) their addresses; (iii) individual
deposit or loan balances or records; or (iv) any data from which
such information could reasonably be constructed.
8. Number of directors, membership. The number of directors
shall be ----[not fewer than five nor more than fifteen], except
where authorized by the Board. Each director shall be a member of
the mutual holding company. Directors shall be elected for periods
of one to three years and until their successors are elected and
qualified, but if a staggered board is chosen, provision shall be
made for the election of approximately one-third or one-half of the
board each year, as appropriate.
9. Meetings of the board. The board of directors shall meet
regularly without notice at the principal place of business of the
mutual holding company at least once each month at an hour and date
fixed by resolution of the board, provided that the place of meeting
may be changed by the directors. Special meetings of the board may
be held at any place specified in a notice of such meeting and shall
be called by the secretary upon the written request of the chairman
or of three directors. All special meetings shall be held upon at
least 24 hours written notice to each director unless notice is
waived in writing before or after such meeting. Such notice shall
state the place, date, time, and purposes of such meeting. A
majority of the authorized directors shall constitute a quorum for
the transaction of business. The act of a majority of the directors
present at any meeting at which there is a quorum shall be the act
of the board. Action may be taken without a meeting if unanimous
written consent is obtained for such action. The board may also
permit telephonic participation at meetings. The meetings shall be
under the direction of a chairman, appointed annually by the board,
or in the absence of the chairman, the meetings shall be under the
direction of the president.
10. Officers, employees, and agents. Annually at the meeting of
the board of directors of the mutual holding company following the
annual meeting of the members of the mutual holding company, the
board shall elect a president, one or more vice presidents, a
secretary, and a treasurer or comptroller: Provided, that the
offices of president and secretary may not be held by the same
person and a vice president may also be the treasurer or
comptroller. The board may appoint such additional officers,
employees, and agents as it may from time to time determine. The
term of office of all officers shall be one year or until their
respective successors are elected and qualified. Any officer may be
removed at any time by the board with or without cause, but such
removal, other than for cause, shall be without prejudice to the
contractual rights, if any, of the person so removed. In the absence
of designation from time to time of powers and duties by the board,
the officers shall have such powers and duties as generally pertain
to their respective offices. Any indemnification by the mutual
holding company of the mutual holding company's personnel is subject
to any applicable rules or regulations of the Board.
11. Vacancies, resignation or removal of directors. Members of
the mutual holding company shall elect directors by ballot:
Provided, that in the event of a vacancy on the board between
meetings of members, the board of directors may, by their
affirmative vote, fill such vacancy, even if the remaining directors
constitute less than a quorum. A director elected to fill a vacancy
shall be elected to serve only until the next election of directors
by the members. Any director may resign at any time by sending a
written notice of such resignation to the mutual holding company
delivered to the secretary. Unless otherwise specified therein such
resignation shall take effect upon receipt by the secretary. More
than three consecutive absences from regular meetings of the board,
[[Page 56596]]
unless excused by resolution of the board, shall automatically
constitute a resignation, effective when such resignation is
accepted by the board. At a meeting of members called expressly for
that purpose, directors or the entire board may be removed, only
with cause, by a vote of the holders of a majority of the shares
then entitled to vote at an election of directors.
12. Powers of the board. The board of directors shall have the
power: (a) By resolution, to appoint from among its members and
remove an executive committee, which committee shall have and may
exercise the powers of the board between the meetings of the board,
but no such committee shall have the authority of the board to amend
the charter or bylaws, adopt a plan of merger, consolidation,
dissolution, or provide for the disposition of all or substantially
all the property and assets of the mutual holding company. Such
committee shall not operate to relieve the board, or any member
thereof, of any responsibility imposed by law; (b) To appoint and
remove by resolution the members of such other committees as may be
deemed necessary and prescribe the duties thereof; (c) To fix the
compensation of directors, officers, and employees; and to remove
any officer or employee at any time with or without cause; (d) To
limit payments on capital which may be accepted; and (e) To exercise
any and all of the powers of the mutual holding company not
expressly reserved by the charter to the members.
13. Execution of instruments, generally. All documents and
instruments or writings of any nature shall be signed, executed,
verified, acknowledged, and delivered by such officers, agents, or
employees of the mutual holding company or any one of them and in
such manner as from time to time may be determined by resolution of
the board. All notes, drafts, acceptances, checks, endorsements, and
all evidences of indebtedness of the mutual holding company
whatsoever shall be signed by such officer or officers or such agent
or agents of the mutual holding company and in such manner as the
board may from time to time determine. Endorsements for deposit to
the credit of the mutual holding company in any of its duly
authorized depositories shall be made in such manner as the board
may from time to time determine. Proxies to vote with respect to
shares or accounts of other mutual holding companies or stock of
other corporations owned by, or standing in the name of, the mutual
holding company may be executed and delivered from time to time on
behalf of the mutual holding company by the president or a vice
president and the secretary or an assistant secretary of the mutual
holding company or by any other persons so authorized by the board.
14. Nominating committee. The chairman, at least 30 days prior
to the date of each annual meeting, shall appoint a nominating
committee of three individuals who are members of the mutual holding
company. Such committee shall make nominations for directors in
writing and deliver to the secretary such written nominations at
least 15 days prior to the date of the annual meeting, which
nominations shall then be posted in a prominent place in the
principal place of business for the 15-day period prior to the date
of the annual meeting, except in the case of a nominee substituted
as a result of death or other incapacity. Provided such committee is
appointed and makes such nominations, no nominations for directors
except those made by the nominating committee shall be voted upon at
the annual meeting unless other nominations by members are made in
writing and delivered to the secretary of the mutual holding company
at least 10 days prior to the date of the annual meeting, which
nominations shall then be posted in a prominent place in the
principal place of business for the 10-day period prior to the date
of the annual meeting, except in the case of a nominee substituted
as a result of death or other incapacity. Ballots bearing the names
of all individuals nominated by the nominating committee and by
other members prior to the annual meeting shall be provided for use
by the members at the annual meeting. If at any time the chairman
shall fail to appoint such nominating committee, or the nominating
committee shall fail or refuse to act at least 15 days prior to the
annual meeting, nominations for directors may be made at the annual
meeting by any member and shall be voted upon.
15. New business. Any new business to be taken up at the annual
meeting, including any proposal to increase or decrease the number
of directors of the mutual holding company, shall be stated in
writing and filed with the secretary of the mutual holding company
at least 30 days before the date of the annual meeting, and all
business so stated, proposed, and filed shall be considered at the
annual meeting; but no other proposal shall be acted upon at the
annual meeting. Any member may make any other proposal at the annual
meeting and the same may be discussed and considered; but unless
stated in writing and filed with the secretary 30 days before the
meeting, such proposal shall be laid over for action at an
adjourned, special, or regular meeting of the members taking place
at least 30 days thereafter. This provision shall not prevent the
consideration and approval or disapproval at the annual meeting of
the reports of officers and committees, but in connection with such
reports no new business shall be acted upon at such annual meeting
unless stated and filed as herein provided.
16. Seal. The seal shall be two concentric circles between which
shall be the name of the mutual holding company. The year of
incorporation, the word ``Incorporated'' or an emblem may appear in
the center.
17. Amendment. Adoption of any bylaw amendment pursuant to Sec.
239.15 of the Board's regulations, as long as consistent with
applicable law, rules and regulations, and which adequately
addresses the subject and purpose of the stated by law section,
shall be effective after (i) approval of the amendment by a majority
vote of the authorized board, or by a vote of the members of the
mutual holding company at a legal meeting; and (ii) receipt of any
applicable regulatory approval. When a mutual holding company fails
to meet its quorum requirement solely due to vacancies on the board,
the bylaws may be amended by an affirmative vote of a majority of
the sitting board.
18. Age limitations. [Bylaws on age limitations must comply with
all Federal laws, such as the Age Discrimination in Employment Act
and the Employee Retirement Income Security Act.]
(a) Directors. No individual ---- years of age shall be eligible
for election, reelection, appointment, or reappointment to the board
of the mutual holding company. No director shall serve as such
beyond the annual meeting of the mutual holding company immediately
following the director becoming ----(fill in age used above), except
that a director serving on ----(fill in bylaw adoption date) may
complete the term as director. This age limitation does not apply to
an advisory director.
(b) Officers. No individual ---- years of age shall be eligible
for election, reelection, appointment, or reappointment as an
officer of the mutual holding company. No officer shall serve beyond
the annual meeting of the mutual holding company immediately
following the officer becoming ----(fill in age used above), except
that an officer serving on ----(fill in bylaw adoption date) may
complete the term. However, an officer shall, at the option of the
board, retire at age ---- if the officer has served in an executive
or high policy-making post for at least two years immediately prior
to retirement and is immediately entitled to nonforfeitable annual
retirement benefits of at least ----.
Appendix D to Part 239--Subsidiary Holding Company of a Mutual Holding
Company Model Bylaws
MHC Subsidiary Holding Company Bylaws
Article I--Home Office
The home office of the Subsidiary Holding Company shall be at --
-------------- . [set forth the full address] in the County of ----
------------ , in the State of ---------------- .
Article II--Shareholders
Section 1. Place of Meetings. All annual and special meetings of
shareholders shall be held at the home office of the Subsidiary
Holding Company or at such other convenient place as the board of
directors may determine.
Section 2. Annual Meeting. A meeting of the shareholders of the
Subsidiary Holding Company for the election of directors and for the
transaction of any other business of the Subsidiary Holding Company
shall be held annually within 150 days after the end of the
Subsidiary Holding Company's fiscal year on the ----of ---- if not a
legal holiday, and if a legal holiday, then on the next day
following which is not a legal holiday, at ----, or at such other
date and time within such 150-day period as the board of directors
may determine.
Section 3. Special Meetings. Special meetings of the
shareholders for any purpose or purposes, unless otherwise
prescribed by the regulations of the Board of Governors of the
Federal Reserve System (``Board''), may be called at any time by the
chairman of the
[[Page 56597]]
board, the president, or a majority of the board of directors, and
shall be called by the chairman of the board, the president, or the
secretary upon the written request of the holders of not less than
one-tenth of all of the outstanding capital stock of the Subsidiary
Holding Company entitled to vote at the meeting. Such written
request shall state the purpose or purposes of the meeting and shall
be delivered to the home office of the Subsidiary Holding Company
addressed to the chairman of the board, the president, or the
secretary.
Section 4. Conduct of Meetings. Annual and special meetings
shall be conducted in accordance with the most current edition of
Robert's Rules of Order unless otherwise prescribed by regulations
of the Board or these bylaws or the board of directors adopts
another written procedure for the conduct of meetings. The board of
directors shall designate, when present, either the chairman of the
board or president to preside at such meetings.
Section 5. Notice of Meetings. Written notice stating the place,
day, and hour of the meeting and the purpose(s) for which the
meeting is called shall be delivered not fewer than 20 nor more than
50 days before the date of the meeting, either personally or by
mail, by or at the direction of the chairman of the board, the
president, or the secretary, or the directors calling the meeting,
to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited
in the mail, addressed to the shareholder at the address as it
appears on the stock transfer books or records of the Subsidiary
Holding Company as of the record date prescribed in section 6 of
this article II with postage prepaid. When any shareholders'
meeting, either annual or special, is adjourned for 30 days or more,
notice of the adjourned meeting shall be given as in the case of an
original meeting. It shall not be necessary to give any notice of
the time and place of any meeting adjourned for less than 30 days or
of the business to be transacted at the meeting, other than an
announcement at the meeting at which such adjournment is taken.
Section 6. Fixing of Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment, or shareholders entitled to receive
payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the board of directors
shall fix in advance a date as the record date for any such
determination of shareholders. Such date in any case shall be not
more than 60 days and, in case of a meeting of shareholders, not
fewer than 10 days prior to the date on which the particular action,
requiring such determination of shareholders, is to be taken. When a
determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such
determination shall apply to any adjournment.
Section 7. Voting Lists. At least 20 days before each meeting of
the shareholders, the officer or agent having charge of the stock
transfer books for shares of the Subsidiary Holding Company shall
make a complete list of the shareholders of record entitled to vote
at such meeting, or any adjournment thereof, arranged in
alphabetical order, with the address and the number of shares held
by each. This list of shareholders shall be kept on file at the home
office of the Subsidiary Holding Company and shall be subject to
inspection by any shareholder of record or the shareholder's agent
at any time during usual business hours for a period of 20 days
prior to such meeting. Such list shall also be produced and kept
open at the time and place of the meeting and shall be subject to
inspection by any shareholder of record or any shareholder's agent
during the entire time of the meeting. The original stock transfer
book shall constitute prima facie evidence of the shareholders
entitled to examine such list or transfer books or to vote at any
meeting of shareholders. In lieu of making the shareholder list
available for inspection by shareholders as provided in the
preceding paragraph, the board of directors may elect to follow the
procedures prescribed in Sec. 239.26(d) of the Board's regulations
as now or hereafter in effect.
Section 8. Quorum. A majority of the outstanding shares of the
Subsidiary Holding Company entitled to vote, represented in person
or by proxy, shall constitute a quorum at a meeting of shareholders.
If less than a majority of the outstanding shares is represented at
a meeting, a majority of the shares so represented may adjourn the
meeting from time to time without further notice. At such adjourned
meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the
meeting as originally notified. The shareholders present at a duly
organized meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough shareholders
to constitute less than a quorum. If a quorum is present, the
affirmative vote of the majority of the shares represented at the
meeting and entitled to vote on the subject matter shall be the act
of the shareholders, unless the vote of a greater number of
shareholders voting together or voting by classes is required by law
or the charter. Directors, however, are elected by a plurality of
the votes cast at an election of directors.
Section 9. Proxies. At all meetings of shareholders, a
shareholder may vote by proxy executed in writing by the shareholder
or by his or her duly authorized attorney in fact. Proxies may be
given telephonically or electronically as long as the holder uses a
procedure for verifying the identity of the shareholder. Proxies
solicited on behalf of the management shall be voted as directed by
the shareholder or, in the absence of such direction, as determined
by a majority of the board of directors. No proxy shall be valid
more than eleven months from the date of its execution except for a
proxy coupled with an interest.
Section 10. Voting of Shares in the Name of Two or More Persons.
When ownership stands in the name of two or more persons, in the
absence of written directions to the Subsidiary Holding Company to
the contrary, at any meeting of the shareholders of the Subsidiary
Holding Company any one or more of such shareholders may cast, in
person or by proxy, all votes to which such ownership is entitled.
In the event an attempt is made to cast conflicting votes, in person
or by proxy, by the several persons in whose names shares of stock
stand, the vote or votes to which those persons are entitled shall
be cast as directed by a majority of those holding such and present
in person or by proxy at such meeting, but no votes shall be cast
for such stock if a majority cannot agree.
Section 11. Voting of Shares by Certain Holders. Shares standing
in the name of another corporation may be voted by any officer,
agent, or proxy as the bylaws of such corporation may prescribe, or,
in the absence of such provision, as the board of directors of such
corporation may determine. Shares held by an administrator,
executor, guardian, or conservator may be voted by him or her,
either in person or by proxy, without a transfer of such shares into
his or her name. Shares standing in the name of a trustee may be
voted by him or her, either in person or by proxy, but no trustee
shall be entitled to vote shares held by him or her without a
transfer of such shares into his or her name. Shares held in trust
in an IRA or Keogh Account, however, may by voted by the Subsidiary
Holding Company if no other instructions are received. Shares
standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted
by such receiver without the transfer into his or her name if
authority to do so is contained in an appropriate order of the court
or other public authority by which such receiver was appointed. A
shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the
pledgee, and thereafter the pledgee shall be entitled to vote the
shares so transferred. Neither treasury shares of its own stock held
by the Subsidiary Holding Company nor shares held by another
corporation, if a majority of the shares entitled to vote for the
election of directors of such other corporation are held by the
Subsidiary Holding Company, shall be voted at any meeting or counted
in determining the total number of outstanding shares at any given
time for purposes of any meeting. [If charter authorizes cumulative
voting, the following Section 12 shall apply, otherwise renumber
Sections 13-16 as Sections 12-15.]
Section 12. Cumulative Voting. Every shareholder entitled to
vote at an election for directors shall have the right to vote, in
person or by proxy, the number of shares owned by the shareholder
for as many persons as there are directors to be elected and for
whose election the shareholder has a right to vote, or to cumulate
the votes by giving one candidate as many votes as the number of
such directors to be elected multiplied by the number of shares
shall equal or by distributing such votes on the same principle
among any number of candidates.
Section 13. Inspectors of Election. In advance of any meeting of
shareholders, the board of directors may appoint any individual
other than nominees for office as inspectors of election to act at
such meeting
[[Page 56598]]
or any adjournment. The number of inspectors shall be either one or
three. Any such appointment shall not be altered at the meeting. If
inspectors of election are not so appointed, the chairman of the
board or the president may, or on the request of not fewer than 10
percent of the votes represented at the meeting shall, make such
appointment at the meeting. If appointed at the meeting, the
majority of the votes present shall determine whether one or three
inspectors are to be appointed. In case any individual appointed as
inspector fails to appear or fails or refuses to act, the vacancy
may be filled by appointment by the board of directors in advance of
the meeting or at the meeting by the chairman of the board or the
president. Unless otherwise prescribed by regulations of the Board,
the duties of such inspectors shall include: determining the number
of shares and the voting power of each share, the shares represented
at the meeting, the existence of a quorum, and the authenticity,
validity and effect of proxies; receiving votes, ballots, or
consents; hearing and determining all challenges and questions in
any way arising in connection with the rights to vote; counting and
tabulating all votes or consents; determining the result; and such
acts as may be proper to conduct the election or vote with fairness
to all shareholders.
Section 14. Nominating Committee. The board of directors shall
act as a nominating committee for selecting the management nominees
for election as directors. Except in the case of a nominee
substituted as a result of the death or other incapacity of a
management nominee, the nominating committee shall deliver written
nominations to the secretary at least 20 days prior to the date of
the annual meeting. Upon delivery, such nominations shall be posted
in a conspicuous place in each office of the Subsidiary Holding
Company. No nominations for directors except those made by the
nominating committee shall be voted upon at the annual meeting
unless other nominations by shareholders are made in writing and
delivered to the secretary of the Subsidiary Holding Company at
least five days prior to the date of the annual meeting. Upon
delivery, such nominations shall be posted in a conspicuous place in
each office of the Subsidiary Holding Company. Ballots bearing the
names of all persons nominated by the nominating committee and by
shareholders shall be provided for use at the annual meeting.
However, if the nominating committee shall fail or refuse to act at
least 20 days prior to the annual meeting, nominations for directors
may be made at the annual meeting by any shareholder entitled to
vote and shall be voted upon.
Section 15. New Business. Any new business to be taken up at the
annual meeting shall be stated in writing and filed with the
secretary of the Subsidiary Holding Company at least five days
before the date of the annual meeting, and all business so stated,
proposed, and filed shall be considered at the annual meeting; but
no other proposal shall be acted upon at the annual meeting. Any
shareholder may make any other proposal at the annual meeting and
the same may be discussed and considered, but unless stated in
writing and filed with the secretary at least five days before the
meeting, such proposal shall be laid over for action at an
adjourned, special, or annual meeting of the shareholders taking
place 30 days or more thereafter. This provision shall not prevent
the consideration and approval or disapproval at the annual meeting
of reports of officers, directors, and committees; but in connection
with such reports, no new business shall be acted upon at such
annual meeting unless stated and filed as herein provided.
Section 16. Informal Action by Shareholders. Any action required
to be taken at a meeting of the shareholders, or any other action
which may be taken at a meeting of shareholders, may be taken
without a meeting if consent in writing, setting forth the action so
taken, shall be given by all of the shareholders entitled to vote
with respect to the subject matter.
Article III--Board of Directors
Section 1. General Powers. The business and affairs of the
Subsidiary Holding Company shall be under the direction of its board
of directors. The board of directors shall annually elect a chairman
of the board and a president from among its members and shall
designate, when present, either the chairman of the board or the
president to preside at its meetings.
Section 2. Number and Term. The board of directors shall consist
of ---- [not fewer than five nor more than fifteen] members, and
shall be divided into three classes as nearly equal in number as
possible. The members of each class shall be elected for a term of
three years and until their successors are elected and qualified.
One class shall be elected by ballot annually.
Section 3. Regular Meetings. A regular meeting of the board of
directors shall be held without other notice than this bylaw
following the annual meeting of shareholders. The board of directors
may provide, by resolution, the time and place, for the holding of
additional regular meetings without other notice than such
resolution. Directors may participate in a meeting by means of a
conference telephone or similar communications device through which
all individuals participating can hear each other at the same time.
Participation by such means shall constitute presence in person for
all purposes.
Section 4. Qualification. Each director shall at all times be
the beneficial owner of not less than 100 shares of capital stock of
the Subsidiary Holding Company unless the Subsidiary Holding Company
is a wholly owned subsidiary of a holding company.
Section 5. Special Meetings. Special meetings of the board of
directors may be called by or at the request of the chairman of the
board, the president, or one-third of the directors. The persons
authorized to call special meetings of the board of directors may
fix any place, within the Subsidiary Holding Company's normal
lending territory, as the place for holding any special meeting of
the board of directors called by such persons. Members of the board
of directors may participate in special meetings by means of
conference telephone or similar communications equipment by which
all persons participating in the meeting can hear each other. Such
participation shall constitute presence in person for all purposes.
Section 6. Notice. Written notice of any special meeting shall
be given to each director at least 24 hours prior thereto when
delivered personally or by telegram or at least five days prior
thereto when delivered by mail at the address at which the director
is most likely to be reached. Such notice shall be deemed to be
delivered when deposited in the mail so addressed, with postage
prepaid if mailed, when delivered to the telegraph company if sent
by telegram, or when the Subsidiary Holding Company receives notice
of delivery if electronically transmitted. Any director may waive
notice of any meeting by a writing filed with the secretary. The
attendance of a director at a meeting shall constitute a waiver of
notice of such meeting, except where a director attends a meeting
for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened.
Neither the business to be transacted at, nor the purpose of, any
meeting of the board of directors need be specified in the notice of
waiver of notice of such meeting.
Section 7. Quorum. A majority of the number of directors fixed
by section 2 of this article III shall constitute a quorum for the
transaction of business at any meeting of the board of directors;
but if less than such majority is present at a meeting, a majority
of the directors present may adjourn the meeting from time to time.
Notice of any adjourned meeting shall be given in the same manner as
prescribed by section 5 of this article III.
Section 8. Manner of Acting. The act of the majority of the
directors present at a meeting at which a quorum is present shall be
the act of the board of directors, unless a greater number is
prescribed by regulation of the Board or by these bylaws.
Section 9. Action Without a Meeting. Any action required or
permitted to be taken by the board of directors at a meeting may be
taken without a meeting if a consent in writing, setting forth the
action so taken, shall be signed by all of the directors.
Section 10. Resignation. Any director may resign at any time by
sending a written notice of such resignation to the home office of
the Subsidiary Holding Company addressed to the chairman of the
board or the president. Unless otherwise specified, such resignation
shall take effect upon receipt by the chairman of the board or the
president. More than three consecutive absences from regular
meetings of the board of directors, unless excused by resolution of
the board of directors, shall automatically constitute a
resignation, effective when such resignation is accepted by the
board of directors.
Section 11. Vacancies. Any vacancy occurring on the board of
directors may be filled by the affirmative vote of a majority of the
remaining directors although less than a quorum of the board of
directors. A director elected to fill a vacancy shall be elected to
serve only until the next election of directors by the shareholders.
Any directorship to be filled by reason of an increase in the number
of directors may be filled by election by the board of directors for
a term of office
[[Page 56599]]
continuing only until the next election of directors by the
shareholders.
Section 12. Compensation. Directors, as such, may receive a
stated salary for their services. By resolution of the board of
directors, a reasonable fixed sum, and reasonable expenses of
attendance, if any, may be allowed for attendance at each regular or
special meeting of the board of directors. Members of either
standing or special committees may be allowed such compensation for
attendance at committee meetings as the board of directors may
determine.
Section 13. Presumption of Assent. A director of the Subsidiary
Holding Company who is present at a meeting of the board of
directors at which action on any Subsidiary Holding Company matter
is taken shall be presumed to have assented to the action taken
unless his or her dissent or abstention shall be entered in the
minutes of the meeting or unless he or she shall file a written
dissent to such action with the individual acting as the secretary
of the meeting before the adjournment thereof or shall forward such
dissent by registered mail to the secretary of the Subsidiary
Holding Company within five days after the date a copy of the
minutes of the meeting is received. Such right to dissent shall not
apply to a director who voted in favor of such action.
Section 14. Removal of Directors. At a meeting of shareholders
called expressly for that purpose, any director may be removed only
for cause by a vote of the holders of a majority of the shares then
entitled to vote at an election of directors. If less than the
entire board is to be removed, no one of the directors may be
removed if the votes cast against the removal would be sufficient to
elect a director if then cumulatively voted at an election of the
class of directors of which such director is a part. [If cumulative
voting has been deleted, the preceding sentence should be deleted.]
Whenever the holders of the shares of any class are entitled to
elect one or more directors by the provisions of the charter or
supplemental sections thereto, the provisions of this section shall
apply, in respect to the removal of a director or directors so
elected, to the vote of the holders of the outstanding shares of
that class and not to the vote of the outstanding shares as a whole.
Article IV--Executive and Other Committees
Section 1. Appointment. The board of directors, by resolution
adopted by a majority of the full board, may designate the chief
executive officer and two or more of the other directors to
constitute an executive committee. The designation of any committee
pursuant to this Article IV and the delegation of authority shall
not operate to relieve the board of directors, or any director, of
any responsibility imposed by law or regulation.
Section 2. Authority. The executive committee, when the board of
directors is not in session, shall have and may exercise all of the
authority of the board of directors except to the extent, if any,
that such authority shall be limited by the resolution appointing
the executive committee; and except also that the executive
committee shall not have the authority of the board of directors
with reference to: the declaration of dividends; the amendment of
the charter or bylaws of the Subsidiary Holding Company, or
recommending to the shareholders a plan of merger, consolidation, or
conversion; the sale, lease, or other disposition of all or
substantially all of the property and assets of the Subsidiary
Holding Company otherwise than in the usual and regular course of
its business; a voluntary dissolution of the Subsidiary Holding
Company; a revocation of any of the foregoing; or the approval of a
transaction in which any member of the executive committee, directly
or indirectly, has any material beneficial interest.
Section 3. Tenure. Subject to the provisions of section 8 of
this article IV, each member of the executive committee shall hold
office until the next regular annual meeting of the board of
directors following his or her designation and until a successor is
designated as a member of the executive committee.
Section 4. Meetings. Regular meetings of the executive committee
may be held without notice at such times and places as the executive
committee may fix from time to time by resolution. Special meetings
of the executive committee may be called by any member thereof upon
not less than one day's notice stating the place, date, and hour of
the meeting, which notice may be written or oral. Any member of the
executive committee may waive notice of any meeting and no notice of
any meeting need be given to any member thereof who attends in
person. The notice of a meeting of the executive committee need not
state the business proposed to be transacted at the meeting.
Section 5. Quorum. A majority of the members of the executive
committee shall constitute a quorum for the transaction of business
at any meeting thereof, and action of the executive committee must
be authorized by the affirmative vote of a majority of the members
present at a meeting at which a quorum is present.
Section 6. Action Without a Meeting. Any action required or
permitted to be taken by the executive committee at a meeting may be
taken without a meeting if a consent in writing, setting forth the
action so taken, shall be signed by all of the members of the
executive committee.
Section 7. Vacancies. Any vacancy in the executive committee may
be filled by a resolution adopted by a majority of the full board of
directors.
Section 8. Resignations and Removal. Any member of the executive
committee may be removed at any time with or without cause by
resolution adopted by a majority of the full board of directors. Any
member of the executive committee may resign from the executive
committee at any time by giving written notice to the president or
secretary of the Subsidiary Holding Company. Unless otherwise
specified, such resignation shall take effect upon its receipt; the
acceptance of such resignation shall not be necessary to make it
effective. No notice of any meeting need be given to any member
thereof who attends in person. The notice of a meeting of the
executive committee need not state the business proposed to be
transacted at the meeting.
Section 9. Procedure. The executive committee shall elect a
presiding officer from its members and may fix its own rules of
procedure, which shall not be inconsistent with these bylaws. It
shall keep regular minutes of its proceedings and report the same to
the board of directors for its information at the meeting held next
after the proceedings shall have occurred.
Section 10. Other Committees. The board of directors may by
resolution establish an audit, loan, or other committee composed of
directors as they may determine to be necessary or appropriate for
the conduct of the business of the Subsidiary Holding Company and
may prescribe the duties, constitution, and procedures thereof.
Article V--Officers
Section 1. Positions. The officers of the Subsidiary Holding
Company shall be a president, one or more vice presidents, a
secretary, and a treasurer or comptroller, each of whom shall be
elected by the board of directors. The board of directors may also
designate the chairman of the board as an officer. The offices of
the secretary and treasurer or comptroller may be held by the same
individual and a vice president may also be either the secretary or
the treasurer or comptroller. The board of directors may designate
one or more vice presidents as executive vice president or senior
vice president. The board of directors may also elect or authorize
the appointment of such other officers as the business of the
Subsidiary Holding Company may require. The officers shall have such
authority and perform such duties as the board of directors may from
time to time authorize or determine. In the absence of action by the
board of directors, the officers shall have such powers and duties
as generally pertain to their respective offices.
Section 2. Election and Term of Office. The officers of the
Subsidiary Holding Company shall be elected annually at the first
meeting of the board of directors held after each annual meeting of
the shareholders. If the election of officers is not held at such
meeting, such election shall be held as soon thereafter as possible.
Each officer shall hold office until a successor has been duly
elected and qualified or until the officer's death, resignation, or
removal in the manner hereinafter provided. Election or appointment
of an officer, employee, or agent shall not of itself create
contractual rights. The board of directors may authorize the
Subsidiary Holding Company to enter into an employment contract with
any officer in accordance with regulations of the Board; but no such
contract shall impair the right of the board of directors to remove
any officer at any time in accordance with section 3 of this article
V.
Section 3. Removal. Any officer may be removed by the board of
directors whenever in its judgment the best interests of the
Subsidiary Holding Company will be served thereby, but such removal,
other than for cause, shall be without prejudice to the contractual
rights, if any, of the officer so removed.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal,
[[Page 56600]]
disqualification, or otherwise may be filled by the board of
directors for the unexpired portion of the term.
Section 5. Remuneration. The remuneration of the officers shall
be fixed from time to time by the board of directors.
Article VI--Contracts, Loans, Checks, and Deposits
Section 1. Contracts. To the extent permitted by regulations of
the Board, and except as otherwise prescribed by these bylaws with
respect to certificates for shares, the board of directors may
authorize any officer, employee, or agent of the Subsidiary Holding
Company to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Subsidiary Holding
Company. Such authority may be general or confined to specific
instances.
Section 2. Loans. No loans shall be contracted on behalf of the
Subsidiary Holding Company and no evidence of indebtedness shall be
issued in its name unless authorized by the board of directors. Such
authority may be general or confined to specific instances.
Section 3. Checks; Drafts. etc. All checks, drafts, or other
orders for the payment of money, notes, or other evidences of
indebtedness issued in the name of the Subsidiary Holding Company
shall be signed by one or more officers, employees or agents of the
Subsidiary Holding Company in such manner as shall from time to time
be determined by the board of directors.
Section 4. Deposits. All funds of the Subsidiary Holding Company
not otherwise employed shall be deposited from time to time to the
credit of the Subsidiary Holding Company in any duly authorized
depositories as the board of directors may select.
Article VII--Certificates for Shares and Their Transfer
Section 1. Certificates for Shares. Certificates representing
shares of capital stock of the Subsidiary Holding Company shall be
in such form as shall be determined by the board of directors and
approved by the Board. Such certificates shall be signed by the
chief executive officer or by any other officer of the Subsidiary
Holding Company authorized by the board of directors, attested by
the secretary or an assistant secretary, and sealed with the
corporate seal or a facsimile thereof. The signatures of such
officers upon a certificate may be facsimiles if the certificate is
manually signed on behalf of a transfer agent or a registrar other
than the Subsidiary Holding Company itself or one of its employees.
Each certificate for shares of capital stock shall be consecutively
numbered or otherwise identified. The name and address of the person
to whom the shares are issued, with the number of shares and date of
issue, shall be entered on the stock transfer books of the
Subsidiary Holding Company. All certificates surrendered to the
Subsidiary Holding Company for transfer shall be canceled and no new
certificate shall be issued until the former certificate for a like
number of shares has been surrendered and canceled, except that in
the case of a lost or destroyed certificate, a new certificate may
be issued upon such terms and indemnity to the Subsidiary Holding
Company as the board of directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of capital
stock of the Subsidiary Holding Company shall be made only on its
stock transfer books. Authority for such transfer shall be given
only by the holder of record or by his or her legal representative,
who shall furnish proper evidence of such authority, or by his or
her attorney authorized by a duly executed power of attorney and
filed with the Subsidiary Holding Company. Such transfer shall be
made only on surrender for cancellation of the certificate for such
shares. The person in whose name shares of capital stock stand on
the books of the Subsidiary Holding Company shall be deemed by the
Subsidiary Holding Company to be the owner for all purposes.
Article VIII--Fiscal Year
The fiscal year of the Subsidiary Holding Company shall end on
the ----------------of----------------each year. The appointment of
accountants shall be subject to annual ratification by the
shareholders.
Article IX--Dividends
Subject to the terms of the Subsidiary Holding Company's charter
and the regulations and orders of the Board, the board of directors
may, from time to time, declare, and the Subsidiary Holding Company
may pay, dividends on its outstanding shares of capital stock.
Article X--Corporate Seal
The board of directors shall provide a Subsidiary Holding
Company seal, which shall be two concentric circles between which
shall be the name of the Subsidiary Holding Company. The year of
incorporation or an emblem may appear in the center.
Article XI--Amendments
These bylaws may be amended in a manner consistent with
regulations of the Board and shall be effective after: (i) approval
of the amendment by a majority vote of the authorized board of
directors, or by a majority vote of the votes cast by the
shareholders of the Subsidiary Holding Company at any legal meeting,
and (ii) receipt of any applicable regulatory approval. When a
Subsidiary Holding Company fails to meet its quorum requirements,
solely due to vacancies on the board, then the affirmative vote of a
majority of the sitting board will be required to amend the bylaws.
PART 261--RULES REGARDING AVAILABILITY OF INFORMATION
0
15. The authority citation for part 261 is revised to read as follows:
Authority: 5 U.S.C. 552; 12 U.S.C. 248(i) and (k), 321 et seq.,
611 et seq., 1442, 1467a, 1817(a)(2)(A), 1817(a)(8), 1818(u) and
(v), 1821(o), 1821(t), 1830, 1844, 1951 et seq., 2601, 2801 et seq.,
2901 et seq., 3101 et seq., 3401 et seq.; 15 U.S.C. 77uuu(b),
78q(c)(3); 29 U.S.C. 1204; 31 U.S.C. 5301 et seq.; 42 U.S.C. 3601;
44 U.S.C. 3510.
Subpart A--General Provisions
0
16. Revise Sec. 261.1(a)(1) and (a)(2) to read as follows:
Sec. 261.1 Authority, purpose, and scope.
* * * * *
(a) Authority. (1) This part is issued by the Board of Governors of
the Federal Reserve System (the Board) pursuant to the Freedom of
Information Act, 5 U.S.C. 552; Sections 9, 11, and 25A of the Federal
Reserve Act, 12 U.S.C. 248(i) and (k), 321 et seq., (including 326),
611 et seq.; Section 22 of the Federal Home Loan Bank Act, 12 U.S.C
1442; section 10 of the Home Owners' Loan Act, 12 U.S.C. 1467a; the
Federal Deposit Insurance Act, 12 U.S.C. 1817(a)(2)(A), 1817(a)(8),
1818(u) and (v), 1821(o); section 5 of the Bank Holding Company Act, 12
U.S.C. 1844; the Bank Secrecy Act, 12 U.S.C. 1951 et seq., and Chapter
53 of Title 31; the Home Mortgage Disclosure Act, 12 U.S.C. 2801 et
seq.; the Community Reinvestment Act, 12 U.S.C. 2901 et seq.; the
International Banking Act, 12 U.S.C. 3101 et seq.; the Right to
Financial Privacy Act, 12 U.S.C. 3401 et seq.; the Securities and
Exchange Commission Authorization Act, 15 U.S.C. 77uuu(b), 78q(c)(3);
the Employee Retirement Income Security Act, 29 U.S.C. 1204; the Money
Laundering Suppression Act, 31 U.S.C. 5301, the Fair Housing Act, 42
U.S.C. 3601; the Paperwork Reduction Act, 44 U.S.C. 3510; and any other
applicable law that establishes a basis for the exercise of
governmental authority by the Board.
(2) This part establishes mechanisms for carrying out the Board's
statutory responsibilities under statutes in paragraph (a)(1) of this
section to the extent those responsibilities require the disclosure,
production, or withholding of information. In this regard, the Board
has determined that the Board, or its delegees, may disclose exempt
information of the Board, in accordance with the procedures set forth
in this part, whenever it is necessary or appropriate to do so in the
exercise of any of the Board's supervisory or regulatory authorities,
including but not limited to, authority granted to the Board in the
Federal Reserve Act, 12 U.S.C. 221 et seq., the Bank Holding Company
Act, 12 U.S.C. 1841 et seq., the Home Owners' Loan Act, 12 U.S.C. 1461
et seq., and the International Banking Act, 12 U.S.C. 3101 et seq. The
Board has determined that all such disclosures, made in accordance with
the rules and procedures specified in this part, are authorized by law.
* * * * *
[[Page 56601]]
0
17. In Sec. 261.2, revise paragraphs (c)(1)(ii), paragraphs (k) and
(o) to read as follows:
Sec. 261.2 Definitions.
* * * * *
(c)(1) * * *
(ii) Information gathered by the Board in the course of any
investigation, suspicious activity report, cease-and-desist orders,
civil money penalty enforcement orders, suspension, removal or
prohibition orders, or other orders or actions under the Financial
Institutions Supervisory Act of 1966, Public Law 89-695, 80 Stat. 1028
(codified as amended in scattered sections of 12 U.S.C.), the Bank
Holding Company Act of 1956, 12 U.S.C. 1841 et seq., the Home Owners'
Loan Act, 12 U.S.C. 1461 et seq., the Federal Reserve Act, 12 U.S.C.
221 et seq., the International Banking Act of 1978, Public Law 95-369,
92 Stat. 607 (codified as amended in scattered sections of 12 U.S.C.),
and the International Lending Supervision Act of 1983, 12 U.S.C. 3901
et seq.; except--
* * * * *
(k) Report of inspection means a report prepared by the Board
concerning its inspection of a bank holding company and its bank and
nonbank subsidiaries or other supervised financial institution.
* * * * *
(o) Supervised financial institution includes a bank, bank holding
company (including subsidiaries), savings and loan holding company
(including non-depository subsidiaries), U.S. branch or agency of a
foreign bank, or any other institution that is supervised by the Board.
Subpart B--Published Information and Records Available to Public;
Procedures for Requests
0
18. Revise Sec. 261.10(a)(7) to read as follows:
Sec. 261.10 Published information.
(a) * * *
(7) Notices of applications received under the Bank Holding Company
Act of 1956 (12 U.S.C. 1841 et seq.), the Home Owners' Loan Act (12
U.S.C. 1461 et seq.), and the Change in Bank Control Act (12 U.S.C.
1817);
* * * * *
0
19. Revise Sec. 261.14(a)(5)(iii) to read as follows:
Sec. 261.14 Exemptions from disclosure.
(a) * * *
(5) * * *
(iii) Other documents prepared by the staffs of the Board, Federal
Reserve Banks, or the Office of Thrift Supervision (including documents
transferred to the Board pursuant to section 323(b)(2) of the Dodd-
Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 5433));
and
* * * * *
Subpart C--Confidential Information Made Available to Institutions,
Financial Institution Supervisory Agencies, Law Enforcement
Agencies, and Others in Certain Circumstances
0
20. In Sec. 261.20, revise paragraphs (a), (b)(1), (c) and (d) to read
as follows:
Sec. 261.20 Confidential supervisory information made available to
supervised financial institutions and financial institution supervisory
agencies.
(a) Disclosure of confidential supervisory information to
supervised financial institutions. Confidential supervisory information
concerning a supervised bank, bank holding company (including
subsidiaries), U.S. branch or agency of a foreign bank, savings and
loan holding company (including subsidiaries), or other institution
examined by the Federal Reserve System (``supervised financial
institution'') may be made available by the Board or the appropriate
Federal Reserve Bank to the supervised financial institution.
(b) * * *
(1) Parent bank holding company, parent savings and loan holding
company, directors, officers, and employees. Any supervised financial
institution lawfully in possession of confidential supervisory
information of the Board pursuant to this section may disclose such
information, or portions thereof, to its directors, officers, and
employees, and to its parent bank holding company or parent savings and
loan holding company and its directors, officers, and employees.
* * * * *
(c) Disclosure upon request to Federal financial institution
supervisory agencies. Upon requests, the Director of the Division of
Banking Supervision and Regulation or the appropriate Federal Reserve
Bank, may make available to the Comptroller of the Currency, the
Federal Deposit Insurance Corporation, and the Federal Home Loan Bank
Board and their regional offices and representatives, confidential
supervisory information and other appropriate information (such as
confidential operating and condition reports) relating to a bank, bank
holding company (including subsidiaries), savings and loan holding
company (including subsidiaries), U.S. branch or agency of a foreign
bank, or other supervised financial institution.
(d) Disclosure upon request to state financial institution
supervisory agencies. Upon requests, the Director of the Division of
Banking Supervision and Regulation or the appropriate Federal Reserve
Bank may make available confidential supervisory information and other
appropriate information (such as confidential operating and condition
reports) relating to a bank, bank holding company (including
subsidiaries), savings and loan holding company (including
subsidiaries), U.S. branch or agency of a foreign bank, or other
supervised financial institution to:
* * * * *
0
21. Revise Sec. 261.21(a) to read as follows:
Sec. 261.21 Confidential information made available to law
enforcement agencies and other nonfinancial institution supervisory
agencies.
(a) Disclosure upon request. Upon written request, the Board may
make available to appropriate law enforcement agencies and to other
nonfinancial institution supervisory agencies for use where necessary
in the performance of official duties, reports of examination and
inspection, confidential supervisory information, and other
confidential documents and information of the Board concerning banks,
bank holding companies and their subsidiaries, U.S. branches and
agencies of foreign banks, savings and loan holding companies and their
subsidiaries, and other examined institutions.
* * * * *
PART 261b--RULE REGARDING PUBLIC OBSERVATION OF MEETINGS
0
22a. The authority citation for part 261b continues to read as follows:
Authority: 5 U.S.C. 552b.
0
22b. Revise Sec. 261b.7(a) to read as follows:
Sec. 261b.7 Meetings closed to public observation under expedited
procedures.
(a) Since the Board and the Committee qualifies for the use of
expedited procedures under subsection (d)(4) of the Act, meetings or
portions thereof exempt under paragraph (a)(4), (a)(8), (a)(9)(i) or
(a)(10) of Sec. 261b.5 of this part, will be closed to public
observation under the expedited procedures of this section. Following
are examples of types of items that, absent compelling contrary
circumstances, will qualify for these exemptions: Matters relating to a
[[Page 56602]]
specific bank or bank holding company, such as bank branches or
mergers, bank holding company formations, or acquisition of an
additional bank or acquisition or de novo undertaking of a permissible
nonbanking activity; matters relating to a specific savings and loan
holding company or its subsidiaries, such as acquisitions,
reorganizations, savings and loan holding company formations,
conversions, or acquisition or de novo undertaking of a permissible
activity; bank regulatory matters, such as applications for membership,
issuance of capital notes and investment in bank premises; foreign
banking matters; bank supervisory and enforcement matters, such as
cease-and-desist and officer removal proceedings; monetary policy
matters, such as discount rates, use of the discount window, changes in
the limitations on payment of interest on time and savings accounts,
and changes in reserve requirements or margin regulations.
* * * * *
PART 262--RULES OF PROCEDURE
0
23. The authority citation for part 262 is revised to read as follows:
Authority: 5 U.S.C. 552, 12 U.S.C. 321, 1467a, 1828(c), and
1842.
0
24. In Sec. 262.3:
0
A. Revise paragraphs (b)(1)(i)(B) and (b)(1)(i)(C);
0
B. Remove the undesignated paragraph following paragraph (b)(1)(i)(C);
0
C. Add paragraphs (b)(1)(i)(D) and (b)(1)(i)(E);
0
D. Revise paragraphs (b)(1)(ii)(D) and (b)(1)(ii)(E), and add
paragraphs (b)(1)(ii)(F);
0
E. Revise paragraphs (i) introductory text, (i)(1), and (i)(5); and
0
F. Add paragraph (j)(3).
The revisions and additions read as follows:
Sec. 262.3 Applications.
* * * * *
(b) * * *
(1)(i) * * *
(B) To become a bank holding company (except as provided in Sec.
225.15 of this chapter),
(C) By a bank holding company to acquire ownership or control of
shares or assets of a bank, or to merge or consolidate with any other
bank holding company,
(D) To become a savings and loan holding company (except as
provided in Sec. 238.14 of this chapter), and
(E) By a savings and loan holding company to acquire ownership or
control of shares or assets of a savings association, or to merge or
consolidate with any other savings and loan holding company, the
applicant shall cause to be published a notice in the form prescribed
by the Board.
(ii) * * *
(D) The community or communities in which the head office of each
of the banks to be party to the merger, consolidation, or acquisition
of assets or assumption of liabilities are located in the case of an
application by a bank for merger, consolidation, or acquisition of
assets or assumption of liabilities,
(E) The community or communities in which the head offices of the
largest subsidiary bank, if any, or an applicant and of each bank,
shares of which are to be directly or indirectly acquired, are located
in the case of applications under section 3 of the Bank Holding Company
Act, or
(F) The community or communities in which the head offices of the
largest subsidiary savings association, if any, or an applicant and of
each savings association, shares of which are to be directly or
indirectly acquired, are located in the case of applications under
section 10 of the Home Owners' Loan Act.
* * * * *
(i) General procedures for bank holding company, savings and loan
holding company, and merger applications. In addition to procedures
applicable under other provisions of this part, the following
procedures are applicable in connection with the Board's consideration
of applications under sections 3 and 4 of the Bank Holding Company Act
of 1956 (12 U.S.C. 1842 and 1843), hereafter referred to as ``section 3
applications'' or ``section 4 applications,'' applications under
section 10(c), (e), and (o) of the Home Owners' Loan Act (12 U.S.C.
1467a), hereafter referred to as ``section 10 applications,'' and of
applications under section 18(c) of the Federal Deposit Insurance Act
(12 U.S.C. 1823), hereafter called ``merger applications.'' Except as
otherwise indicated, the following procedures apply to all such
applications.
(1) The Board issues each week a list that identifies section 3,
section 4, section 10, and merger applications received and acted upon
during the preceding week by the Board or the Reserve Banks pursuant to
delegated authority. Notice of receipt of all section 3 section
4(c)(8), and section 10 applications acted on by the Board is published
in the Federal Register.
* * * * *
(5) Unless the Board shall otherwise direct, each section 3,
section 4, section 10, and merger application is made available for
inspection by the public except for portions thereof as to which the
Board determines that nondisclosure is warranted under section 552(b)
of title 5 of the United States Code.
(j) * * *
(3) Special rules pertaining to applications filed pursuant to
section 10(e) and (o) of HOLA follow:
(i) Each order or each letter of notification approving an
application also includes, as a condition of approval, a requirement
that the transaction approved shall be consummated within 3 months and,
in the case of acquisition by a holding company of stock of a newly
organized savings association, a requirement that such savings
association shall be opened for business within 6 months, but such
periods may be extended for good cause by the Board (or by the
appropriate Federal Reserve Bank where authority to grant such
extensions is delegated to the Reserve Bank).
(ii) [Reserved]
* * * * *
0
25. In Sec. 262.25 revise paragraphs (a) introductory text, (a)(2),
(a)(3), and (a)(4) to read as follows:
Sec. 262.25 Policy statement regarding notice of applications;
timeliness of comments; informal meetings.
(a) Notice of applications. A bank or company applying to the Board
for a deposit-taking facility must first publish notice of its
application in local newspapers. This requirement, found in Sec.
262.3(b)(1) of the Board's Rules of Procedure covers applications under
the Bank Holding Company Act, Bank Merger Act, and Home Owners' Loan
Act, as well as applications for membership in the Federal Reserve
System and for new branches of State member banks. Notices of these
applications are published in newspapers of general circulation in the
communities where the applicant intends to do business as well as in
the community where the applicant's head office is located. These
notices are important in calling the public's attention to an
applicant's plans and giving the public a chance to comment on these
plans. To improve the effectiveness of the notices, the Board has
supplemented its notice procedures as follows.
* * * * *
(2) The Board also publishes notice of bank holding company
applications for bank acquisitions (but not for bank mergers or
branches) and savings and
[[Page 56603]]
loan holding company applications for savings association acquisitions
(but not for savings association mergers or branches) in the Federal
Register after the application is received and the Community Affairs
Officer can provide the exact date on which this comment period ends.
(The Federal Register comment period will generally end after the date
specified in the newspaper notice.)
(3) In addition to the formal newspaper and Federal Register
notices discussed above, each Reserve Bank publishes a weekly list of
applications submitted to the Reserve Bank for which newspaper notices
have been published. Any person or organization may arrange to have the
list mailed to them regularly, or may request particular lists, by
contacting the Reserve Bank's Community Affairs Officer. Each Reserve
Bank's list includes only applications submitted to that particular
Reserve Bank, and persons or groups should request lists from each
Reserve Bank having jurisdiction over applications in which they may be
interested. Since the lists are prepared as a courtesy by the Reserve
Bank, and are not intended to replace any formal notice required by
statute or regulation, the Reserve Banks and the Board do not assume
responsibility for errors or omissions. In addition, the weekly lists
prepared by Reserve Banks include certain applications by bank holding
companies and savings and loan holding companies for nonbank and non-
depository institution acquisitions, respectively, filed with the
Reserve Bank.
(4) With respect to applications by bank holding companies and
savings and loan holding companies to engage de novo in nonbank
activities or make acquisitions of nonbank firms, the Board publishes
notice of most of these applications in the Federal Register when the
applications are filed. Notice of certain small acquisitions may be
published in a newspaper of general circulation in the area(s) to be
served. While applications for nonbanking activities are not covered by
the provisions of the Community Reinvestment Act or the notice
provisions of Sec. 262.3 of the Board's Rules of Procedure, the
provisions of this Statement apply to such applications.
* * * * *
PART 263--RULES OF PRACTICE FOR HEARINGS
0
26. The authority citation for Part 263 is revised to read as follows:
Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 248, 324, 504, 505,
1464, 1467, 1467a, 1468, 1817(j), 1818, 1820(k), 1828(c), 1829(e),
1831o, 1831p-1, 1847(b), 1847(d), 1884(b), 1972(2)(F), 3105, 3107,
3108, 3349, 3907, 3909, 4717; 15 U.S.C. 21, 78(l), 78o-4, 78o-5,
78u-2; and 28 U.S.C. 2461 note.; 31 U.S.C. 5321; 42 U.S.C. 4012a.
Subpart A--Uniform Rules of Practice and Procedure
0
27. In Sec. 263.1:
0
A. Revise paragraph (c); paragraphs (e)(2), (e)(11); and
0
B. Add paragraphs (e)(13) through (e)(15).
The additions and revisions read as follows:
Sec. 263.1 Scope.
* * * * *
(c) Change-in-control proceedings under section 7(j)(4) of the FDIA
(12 U.S.C. 1817(j)(4)) to determine whether the Board of Governors of
the Federal Reserve System (``Board'') should issue an order to approve
or disapprove a person's proposed acquisition of a state member bank,
bank holding company, or savings and loan holding company;
* * * * *
(e) * * *
(2) Sections 19, 22, 23, 23A and 23B of the Federal Reserve Act
(``FRA''), or any regulation or order issued thereunder and certain
unsafe or unsound practices or breaches of fiduciary duty, pursuant to
12 U.S.C. 504 and 505;
* * * * *
(11) Any provision of law referenced in section 102(f) of the Flood
Disaster Protection Act of 1973 (42 U.S.C. 4012a(f)) or any order or
regulation issued thereunder;
* * * * *
(13) Section 5 of the Home Owners' Loan Act (``HOLA'') or any
regulation or order issued thereunder, pursuant to 12 U.S.C. 1464 (d),
(s) and (v);
(14) Section 9 of the HOLA or any regulation or order issued
thereunder, pursuant to 12 U.S.C. 1467(d); and
(15) Section 10 of the HOLA, pursuant to 12 U.S.C. 1467a (i) and
(r);
* * * * *
0
28. In Sec. 263.3:
0
A. Revise paragraphs (f)(4), (f)(5);
0
B. Add paragraph (f)(6);
0
C. Revise paragraphs (i) and (m).
The additions and revisions read as follows:
Sec. 263.3 Definitions.
* * * * *
(f) * * *
(4) Any foreign bank or company to which section 8 of the IBA (12
U.S.C. 3106), applies or any subsidiary (other than a bank) thereof;
(5) Any Federal agency as that term is defined in section 1(b) of
the IBA (12 U.S.C. 3101(5)); and
(6) Any savings and loan holding company or any subsidiary (other
than a savings association) of a savings and loan holding company as
those terms are defined in the HOLA (12 U.S.C. 1461 et seq.).
* * * * *
(i) OFIA means the Office of Financial Institution Adjudication,
the executive body charged with overseeing the administration of
administrative enforcement proceedings for the Board, the Office of
Comptroller of the Currency (the OCC), the Federal Deposit Insurance
Corporation (the FDIC), and the National Credit Union Administration
(the NCUA).
* * * * *
(m) Uniform Rules means those rules in subpart A of this part that
are common to the Board, the OCC, the FDIC, and the NCUA.
* * * * *
Subpart B--Board Local Rules Supplementing the Uniform Rules
0
29. Section 263.50(b)(13) and (b)(14) are revised and paragraph (b)(15)
is added to read as follows:
Sec. 263.50 Purpose and scope.
* * * * *
(b) * * *
(13) Reclassification of a member bank on grounds of unsafe and
unsound practice under section 38(g)(1) of the FDI Act (12 U.S.C.
1831o(g)(1));
(14) Issuance of an order requiring a member bank to dismiss a
director or senior executive officer under section 38 (e)(5) and
38(f)(2) (F)(ii) of the FDI Act (12 U.S.C. 1831o(e)(5) and 1831o(f)(2)
(F)(ii));
(15) Adjudications under section 10 of the HOLA (12 U.S.C. 1467a).
0
30. Revise Sec. 263.56 to read as follows:
Sec. 263.56 Initial licensing proceedings.
Proceedings with respect to applications for initial licenses shall
include, but not be limited to, applications for Board approval under
section 3 of the BHC Act and section 10 of HOLA and such proceedings as
may be ordered by the Board with respect to applications under section
18(c) of the FDIA. In such initial licensing proceedings, the
procedures set forth in subpart A of this part shall apply, except that
the Board may designate a Board Counsel to represent the Board in a
nonadversary capacity for the purpose of developing for the record
information
[[Page 56604]]
relevant to the issues to be determined by the Presiding Officer and
the Board. In such proceedings, Board Counsel shall be considered to be
a decisional employee for purposes of Sec. Sec. 263.9 and 263.40 of
subpart A.
Subpart C--Rules and Procedures for Assessment and Collection of
Civil Money Penalties
0
31. In Sec. 263.65, revise paragraph (a) and add new paragraphs (b)
(11) and (b)(12) to read as follows:
Sec. 263.65 Civil penalty inflation adjustments.
(a) Inflation adjustments. In accordance with the Federal Civil
Penalties Inflation Adjustment Act of 1990 (28 U.S.C. 2461 note), the
Board has set forth in paragraph (b) of this section adjusted maximum
penalty amounts for each civil money penalty provided by law within its
jurisdiction. The adjusted civil penalty amounts provided in paragraphs
(b)(1) through (10) of this section replace only the amounts published
in the statutes authorizing the assessment of penalties and the
previously-adjusted amounts adopted as of October 12, 2004, October 12,
2000, and October 24, 1996.The adjusted civil penalty amounts provided
in paragraphs (b)(11) and (12) of this section replace only the amounts
published in the statutes authorizing the assessment of penalties and
were adjusted by the Office of Thrift Supervision as of October 27,
2008. The authorizing statutes contain the complete provisions under
which the Board may seek a civil money penalty. The increased penalty
amounts apply only to violations occurring after September 13, 2011.
* * * * *
(b) * * *
(11) 12 U.S.C. 1467a(i):
(i) 12 U.S.C. 1467a(i)(2)-$32,500.
(ii) 12 U.S.C. 1467a(i)(3)-$32,500.
(12) 12 U.S.C. 1467a(r):
(i) 12 U.S.C. 1467a(r)(1)-$ 2,200.
(ii) 12 U.S.C. 1467a(r)(2)-$32,500.
(iii) 12 U.S.C. 1467a(r)(3)-$1,375,000.
Subpart E--Procedures for Issuance and Enforcement of Directives To
Maintain Adequate Capital
0
32. Revise Sec. 263.80 to read as follows:
Sec. 263.80 Purpose and scope.
This subpart establishes procedures under which the Board may issue
a directive or take other action to require a state member bank, bank
holding company, or a savings and loan holding company to achieve and
maintain adequate capital.
0
33. In Sec. 263.81, revise paragraph (c) and add new paragraph (e) to
read as follows:
Sec. 263.81 Definitions.
* * * * *
(c) Directive means a final order issued by the Board:
(1) Pursuant to ILSA (12 U.S.C. 3907(b)(2)) requiring a state
member bank or bank holding company to increase capital to or maintain
capital at the minimum level set forth in the Board's Capital Adequacy
Guidelines or as otherwise established under procedures described in
Sec. 263.85; or
(2) Pursuant to HOLA (12 U.S.C. 1467a(g)(1)) requiring a savings
and loan holding company to increase capital to or maintain capital at
a certain level.
* * * * *
(e) Savings and loan holding company means any company that
controls a savings association as defined in section 10 of the HOLA, 12
U.S.C. 1467a, and in the Board's Regulation LL (12 CFR 238.2) or any
direct or indirect subsidiary thereof other than a savings association
subsidiary as defined in section 10 of the HOLA, 12 U.S.C. 1467a, and
in the Board's Regulation LL (12 CFR 238.2).
0
34. In Sec. 263.83 revise paragraph (a) to read as follows:
Sec. 263.83 Issuance of capital directives.
(a) Notice of intent to issue directive. If a state member bank or
bank holding company is operating with less than the minimum level of
capital established in the Board's Capital Adequacy Guidelines, or as
otherwise established under the procedures described in Sec. 263.85,
or if the Board has determined that the current capital level of a
savings and loan holding company is not adequate, the Board may issue
and serve upon such state member bank, bank holding company, or savings
and loan holding company written notice of the Board's intent to issue
a directive to require the bank, bank holding company, or savings and
loan holding company to achieve and maintain adequate capital within a
specified time period.
* * * * *
0
35. In Sec. 263.84, revise paragraphs (a) and (c) to read as follows:
Sec. 263.84 Enforcement of directive.
(a) Judicial and administrative remedies. (1) Whenever a bank or
bank holding company fails to follow a directive issued under this
subpart, or to submit or adhere to a capital adequacy plan as required
by such directive, the Board may seek enforcement of the directive,
including the capital adequacy plan, in the appropriate United States
district court, pursuant to section 908 (b)(2)(B)(ii) of ILSA (12
U.S.C. 3907(b)(2)(B)(ii)) and to section 8(i) of the FDIA (12 U.S.C.
1818(i)), in the same manner and to the same extent as if the directive
were a final cease-and-desist order. Whenever a savings and loan
holding company fails to follow a directive issued under this subpart,
or to submit or adhere to a capital adequacy plan as required by such
directive, the Board may seek enforcement of the directive, including
the capital adequacy plan, in the proper United States district court,
or the United States court of any territory or other place subject to
the jurisdiction of the United States, pursuant to section 10(g)(4) of
HOLA (12 U.S.C. 1567a(g)(4)).
(2) The Board, pursuant to section 910(d) of ILSA (12 U.S.C.
3909(d)), may also assess civil money penalties for violation of the
directive against any bank or bank holding company and any institution-
affiliated party of the bank or bank holding company, in the same
manner and to the same extent as if the directive were a final cease-
and-desist order. The Board, pursuant to section 10(i) (12 U.S.C.
1467a(i)), may also assess civil money penalties for violation of the
directive against any savings and loan holding company and any
institution-affiliated party of the savings and loan holding company,
in the same manner and to the same extent as if the directive were a
final cease-and-desist order.
* * * * *
(c) Consideration in application proceedings. In acting upon any
application or notice submitted to the Board pursuant to any statute
administered by the Board, the Board may consider the progress of a
state member bank, bank holding company, or savings and loan holding
company or any subsidiary thereof in adhering to any directive or
capital adequacy plan required by the Board pursuant to this subpart,
or by any other appropriate banking supervisory agency pursuant to
ILSA. The Board shall consider whether approval or a notice of intent
not to disapprove would divert earnings, diminish capital, or otherwise
impede the bank, bank holding company, or savings and loan holding
company in achieving its required minimum capital level or complying
with its capital adequacy plan.
0
36. In Sec. 263.85, revise paragraphs (b)(1), (b)(2), and (b)(3) to
read as follows:
[[Page 56605]]
Sec. 263.85 Establishment of increased capital level for specific
institutions.
* * * * *
(b) Procedure to establish higher capital requirement --(1) Notice.
When the Board determines that capital levels above those in the
Board's Capital Adequacy Guidelines may be necessary and appropriate
for a particular bank or bank holding company under the circumstances,
or when the Board determines that the current capital level of a
savings and loan holding company is not adequate, the Board shall give
the bank or bank holding company notice of the proposed higher capital
requirement and shall permit the bank, bank holding company, or savings
and loan holding company an opportunity to comment upon the proposed
capital level, whether it should be required and, if so, under what
time schedule. The notice shall contain the Board's reasons for
proposing a higher level of capital.
(2) Response. The bank, bank holding company, or savings and loan
holding company shall be allowed at least 14 days to respond, unless
the Board determines that a shorter period is necessary because of the
financial condition of the bank, bank holding company, or savings and
loan holding company. Failure by the bank, bank holding company, or
savings and loan holding company to file a written response to the
notice within the time set by the Board shall constitute a waiver of
the opportunity to respond and shall constitute consent to issuance of
a directive containing the required minimum capital level.
(3) Board decision. After considering the response of the
institution, the Board may issue a written directive to the bank, bank
holding company, or savings and loan holding company setting an
appropriate capital level and the date on which this capital level will
become effective. The Board may require the bank, bank holding company,
or savings and loan holding company to submit and adhere to a plan for
achieving such higher capital level as the Board may set.
* * * * *
Subpart F--Practice Before the Board
0
37. Revise Sec. 263.94(g) to read as follows:
Sec. 263.94 Conduct warranting sanctions.
* * * * *
(g) Suspension or debarment from practice before the OCC, the FDIC,
the Office of Thrift Supervision, the Securities and Exchange
Commission, the NCUA, or any other Federal agency based on matters
relating to the supervisory responsibilities of the Board;
* * * * *
Subpart G--Rules Regarding Claims Under the Equal Access to Justice
Act
0
38. Revise Sec. 263.103(c)(3) to read as follows:
Sec. 263.103 Eligibility of applicants.
* * * * *
(c) * * *
(3) The net worth of a financial institution shall be established
by the net worth information reported in conformity with applicable
instructions and guidelines on the financial institution's financial
report to its supervisory agency for the last reporting date before the
initiation of the adversary proceeding. A bank holding company's and a
savings and loan holding company's net worth will be considered on a
consolidated basis even if the bank holding company or the savings and
loan holding company is not required to file its regulatory reports to
the Board on a consolidated basis.
* * * * *
0
39. Revise Sec. 263.105(b)(2) and (b)(3) to read as follows:
Sec. 263.105 Statement of net worth.
* * * * *
(b) * * *
(2) In the case of applicants or affiliates that are not banks, net
worth shall be considered for the purposes of this subpart to be the
excess of total assets over total liabilities, as of the date the
underlying proceeding was initiated, except as adjusted under Sec.
263.103(c)(5). The net worth of a bank holding company or a savings and
loan holding company shall be considered on a consolidated basis.
Assets and liabilities of individuals shall include those beneficially
owned.
(3) If the applicant or any of its affiliates is a bank or a
savings association, the portion of the statement of net worth which
relates to the bank or the savings association shall consist of a copy
of the bank's or a savings association's last Consolidated Report of
Condition and Income filed before the initiation of the adversary
adjudication. Net worth shall be considered for the purposes of this
subpart to be the total equity capital (or, in the case of mutual
savings banks or mutual savings associations, the total surplus
accounts) as reported, in conformity with applicable instructions and
guidelines, on the bank's or the savings association's Consolidated
Report of Condition and Income filed for the last reporting date before
the initiation of the proceeding.
* * * * *
Subpart J--Removal, Suspension, and Debarment of Accountants From
Performing Audit Services
0
40. Revise Sec. 263.400 to read as follows:
Sec. 263.400 Scope.
This subpart, which implements section 36(g)(4) of the Federal
Deposit Insurance Act (FDIA)(12 U.S.C. 1831m(g)(4)), provides rules and
procedures for the removal, suspension, or debarment of independent
public accountants and their accounting firms from performing
independent audit and attestation services for insured state member
banks, bank holding companies, and savings and loan holding companies
required by section 36 of the FDIA (12 U.S.C. 1831m).
0
41. Revise Sec. 263.401(c) to read as follows:
Sec. 263.401 Definitions.
* * * * *
(c) Banking organization means an insured state member bank, bank
holding company, or savings and loan holding company that obtains audit
services that are used to satisfy requirements imposed by section 36 or
part 363 on an insured subsidiary bank or insured savings association
of that holding company.
* * * * *
PART 264a--POST-EMPLOYMENT RESTRICTIONS FOR SENIOR EXAMINERS
0
42. The authority citation for Part 264a continues to read as follows:
Authority: 12 U.S.C. 1820(k).
0
43 Revise Sec. 264a.2 to read as follows:
Sec. 264a.2 Who is considered a senior examiner of the Federal
Reserve?
For purposes of this part, an officer or employee of the Federal
Reserve is considered to be the ``senior examiner'' for a particular
state member bank, bank holding company, savings and loan holding
company, or foreign bank if--
(a) The officer or employee has been authorized by the Board to
conduct examinations or inspections on behalf of the Board;
(b) The officer or employee has been assigned continuing, broad and
lead responsibility for examining or inspecting the state member bank,
bank holding company, savings and loan holding company, or foreign
bank; and
[[Page 56606]]
(c) The officer's or employee's responsibilities for examining,
inspecting and supervising the state member bank, bank holding company,
savings and loan holding company, or foreign bank--
(1) Represent a substantial portion of the officer's or employee's
assigned responsibilities; and
(2) Require the officer or employee to interact routinely with
officers or employees of the state member bank, bank holding company,
savings and loan holding company, or foreign bank or its affiliates.
0
44. In Sec. 264a.3, add paragraph (d) to read as follows:
Sec. 264a.3 What special post-employment restrictions apply to senior
examiners?
* * * * *
(d) Senior Examiners of Savings and Loan Holding Companies. An
officer or employee of the Federal Reserve who serves as the senior
examiner of a savings and loan holding company for two or more months
during the last twelve months of such individual's employment with the
Federal Reserve may not, within one year of leaving the employment of
the Federal Reserve, knowingly accept compensation as an employee,
officer, director or consultant from--
(1) The savings and loan holding company; or
(2) Any depository institution that is controlled by the savings
and loan holding company.
0
45. Revise Sec. 264a.5(a)(1)(i) to read as follows:
Sec. 264a.5 What are the penalties for violating these special post-
employment restrictions?
(a) * * *
(1) * * *
(i) Removing the individual from office or prohibiting the
individual from further participation in the affairs of the relevant
state member bank, bank holding company, savings and loan holding
company, foreign bank or other depository institution or company for a
period of up to five years; and
* * * * *
0
46. Section 264a.6(c) is revised and paragraph (h) is added to read as
follows:
Sec. 264a.6 What other definitions and rules of construction apply
for purposes of this part?
* * * * *
(c) Control has the meaning given in section 2 of the Bank Holding
Company Act, with respect to banking holding companies, and has the
meaning given in section 10 of the Home Owners' Loan Act, with respect
to savings and loan holding companies.
* * * * *
(h) Savings and loan holding company means any company that
controls a savings association (as provided in section 10 of the Home
Owners' Loan Act (12 U.S.C. 1461 et seq.)).
By order of the Board of Governors of the Federal Reserve
System, September 1, 2011.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 2011-22854 Filed 9-12-11; 8:45 am]
BILLING CODE 6210-01-P