[Federal Register Volume 79, Number 206 (Friday, October 24, 2014)]
[Proposed Rules]
[Pages 63580-63585]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-25337]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 79, No. 206 / Friday, October 24, 2014 /
Proposed Rules
[[Page 63580]]
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 340
RIN 3064-AE26
Restrictions on Sale of Assets by the Federal Deposit Insurance
Corporation
AGENCY: Federal Deposit Insurance Corporation.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Federal Deposit Insurance Corporation (FDIC) is proposing
to amend our regulations. Part 340 implements section 11(p) of the
Federal Deposit Insurance Act. Under section 11(p), individuals or
entities whose acts or omissions have, or may have, contributed to the
failure of an insured depository institution cannot buy the assets of
that failed insured depository institution from the FDIC. The proposed
revisions to part 340 will help to clarify its purpose, scope and
applicability, and will make it more consistent in our regulations, the
parallel provision in the FDIC's Orderly Liquidation Authority
regulations that implements section 210(r) of the Dodd-Frank Wall
Street Reform and Consumer Protection Act by placing restrictions on
sales of assets of a covered financial company by the FDIC. Sections of
part 340 became effective on July 1, 2014.
DATES: Written comments must be received by the FDIC not later than
December 23, 2014.
ADDRESSES: You may submit comments by any of the following methods:
Agency Web site: http://www.fdic.gov/regulations/laws/federal/. Follow instructions for submitting comments on the Agency Web
site.
E-Mail: [email protected]. Include ``RIN 3064-AE26'' in
the subject line of the message.
Mail: Robert E. Feldman, Executive Secretary, Attention:
Comments, Federal Deposit Insurance Corporation, 550 17th Street NW.,
Washington, DC 20429.
Hand Delivery/Courier: Guard station at the rear of the
550 17th Street Building (located on F Street) on business days between
7 a.m. and 5 p.m. (EDT).
Federal eRulemaking Portal: http://www.regulations.gov/.
Follow the instructions for submitting comments.
Public Inspection: All comments received will be posted
without change to http://www.fdic.gov/regulations/laws/federal/
including any personal information provided. Paper copies of public
comments may be ordered from the Public Information Center by telephone
at 703-562-2200 or 1-877-275-3342.
FOR FURTHER INFORMATION CONTACT: James D. Sigler, Resolutions &
Receiverships Specialist, 202-898-3871; Craig Rice, Senior Capital
Markets Specialist, Division of Resolutions and Receiverships, 202-898-
3501; Elizabeth Falloon, Supervisory Counsel, Legal Division, 703-562-
6148; Shane Kiernan, Counsel, Legal Division, 703-562-2632; Federal
Deposit Insurance Corporation, 550 17th Street NW., Washington, DC
20429.
SUPPLEMENTARY INFORMATION:
I. Background
The FDIC promulgated part 340 in 2000 to implement section 11(p) of
the Federal Deposit Insurance Act, 12 U.S.C. 1821(p) (section 11(p)).
Under section 11(p), individuals or entities whose acts or omissions
have, or may have, contributed to the failure of an insured depository
institution (failed institution) cannot buy the assets of that failed
institution from the FDIC. The FDIC expanded the purchaser eligibility
restriction as permitted by statute when it promulgated part 340 by
precluding such individuals or entities from purchasing the assets of
any failed institution, not only the particular institution affected by
the actions of those individuals or entities. As provided in section
11(p), part 340 also prohibits the sale of assets involving FDIC
financing to certain persons who have defaulted on obligations of $1
million or more, in aggregate, owed to a failed insured depository
institution or the FDIC and who have made fraudulent misrepresentations
in connection with any of those obligations. Compliance with part 340
is established through a self-certification process by which a
prospective purchaser certifies that it is eligible to purchase an
asset from the FDIC and that the FDIC's sale of an asset to that
prospective purchaser would not be restricted under section 11(p) or
part 340.
In March of this year the FDIC promulgated section 380.13 to
implement section 210(r) of the Dodd-Frank Wall Street Reform and
Consumer Protection Act, 12 U.S.C. 5390(r) (section 210(r)). Section
210(r) prohibits certain sales of assets held by the FDIC in the course
of liquidating a covered financial company. Because section 210(r) and
section 11(p) share substantially similar statutory language, part 340
served as a model for the development of section 380.13. While many
aspects of part 340 were included in section 380.13, FDIC staff
identified new or different concepts to include in section 380.13 that
were not already in part 340. Several of these concepts, if
incorporated into part 340, would improve part 340 and make it more
consistent with section 380.13.
II. Proposal
The FDIC proposes to amend part 340 in a number of ways. Some of
the amendments are significant, substantive changes and others are non-
substantive, technical or conforming changes. This discussion in this
supplemental information section addresses the substantive changes
suggested by the FDIC in this proposed rulemaking.
Paragraph 340.1(b) sets forth the purpose of part 340. The FDIC
proposes to amend the purpose because it believes part 340 should
extend the restrictions on sales of assets of a failed institution to
individuals or entities who are also precluded from purchasing assets
of a covered financial company from the FDIC under section 210(r) and
section 380.13. This would ensure consistency among part 340 and
section 380.13. Under section 380.13, individuals or entities
prohibited from purchasing assets of a failed institution under part
340 are also prohibited from purchasing assets of a covered financial
company under section 380.13. Likewise, individuals or entities
prohibited from purchasing assets of a covered financial company under
section 380.13 should be prohibited from purchasing assets of a failed
institution under part 340.
The FDIC is proposing three changes to clarify part 340's scope of
coverage, which is set forth in paragraph 340.1(c). First, the FDIC
proposes to clarify the applicability of part 340 to sales of
[[Page 63581]]
assets by a subsidiary of a failed institution or by a bridge
depository institution. Sales of assets of a failed institution's
subsidiary or a bridge depository institution are not expressly subject
to section 11(p) because such assets are not ``assets of a failed
institution'' that are being sold ``by the Corporation,'' and thus
would fall outside the scope of the statutory restrictions on asset
sales. The FDIC believes, however, that if it has the right to control
the terms of a sale of assets of a failed institution's subsidiary or a
bridge depository institution, or has the ability to control selection
of the purchaser of those assets under an agency agreement or as
shareholder, the restrictions set forth in section 11(p) and part 340
should apply. The FDIC has discretionary authority to expand the scope
of coverage because section 11(p) sets the minimum requirements for
restrictions on sales of assets, and the FDIC may prescribe further
restrictions on its own accord. Under the FDIC's proposed revision of
part 340, the restrictions on asset sales would apply to sales of
assets of a failed institution's subsidiary or a bridge depository
institution if the FDIC controls the terms of the sale by agreement or
as shareholder.
Second, the FDIC proposes amending section 340.1 to explicitly
state that part 340 does not apply to certain types of transactions
involving marketable securities and other financial instruments. Under
proposed paragraph (e), a sale of a security or a group or index of
securities, a commodity, or any qualified financial contract that
customarily is traded through a financial intermediary and where the
seller cannot control selection of the purchaser and the sale is
consummated through that customary practice would not be covered by
part 340. For example, if the FDIC were to sell publicly-traded stocks
or bonds that the failed institution held, it might engage a broker or
custodian to conduct or facilitate the sale. The broker or custodian
would then tender the securities to the market and accept prevailing
market terms offered by another broker, a specialist, a central
counterparty or a similar financial intermediary who would then sell
the security to another purchaser. In this scenario, it is not possible
for the FDIC to control selection of the end purchaser at the time of
sale. Therefore, the transaction cannot be a sale covered by section
11(p) because the FDIC has no way to select the prospective purchaser
or determine whether that purchaser would or would not be prohibited
from purchasing the asset. Moreover, a prospective purchaser of such
assets will not be able to select the FDIC as the seller and therefore
could not determine whether section 11(p) and part 340 apply to the
transaction. The FDIC is proposing to define the term ``financial
intermediary,'' for the purposes of part 340, in section 340.2 as
discussed below. The FDIC anticipates that this express limitation on
the scope of part 340's coverage will provide greater certainty to
market participants and FDIC staff who conduct asset sales regarding
the applicability of section 11(p) and part 340.
Third, the FDIC proposes to clarify in section 340.1 that part 340
is not applicable to a judicial sale or a trustee's sale of property
securing an obligation to the FDIC where the sale is not conducted or
controlled by the FDIC. Although the FDIC could have a security
interest in property serving as collateral and therefore the authority
to initiate a foreclosure action, the selection of the purchaser and
terms of the sale are not necessarily within the FDIC's control.
Rather, a court or trustee would conduct the sale in accordance with
applicable state law and would select the purchaser. In this situation,
the sale is not a sale by the FDIC. While the plain language of part
340 does not suggest that such a sale would fall within its scope, the
FDIC is proposing this change for the sake of clarity. This exception
does not affect sales of collateral by the FDIC where the FDIC is in
possession of the property and conducts the sale itself, however. Where
the FDIC has control over the manner and terms of the sale, it will
require the prospective purchaser's certification that the prospective
purchaser is not prohibited from purchasing the asset.
Section 340.2 sets forth definitions for certain terms used in part
340. The FDIC is proposing to revise the definition of ``associated
person'' to include limited liability companies of which an individual
is a member (or was a member at the time of the occurrence of any event
that would result in a restriction on sale as set forth in section
340.4) if the prospective purchaser of assets is an individual and, if
the prospective purchaser is a limited liability company, to include
the manager of the limited liability company. The FDIC is proposing to
revise the definition of ``failed institution'' to remove reference to
entities ``owned and controlled'' by the failed institution because the
revision to paragraph 340.1(c), discussed above, explicitly states that
sales of subsidiary assets are covered under part 340 if the FDIC
controls the terms of the sale by agreement or in its role as
shareholder. Additionally, references to the Resolution Trust
Corporation and RTC are removed in favor of generically referencing the
FDIC's predecessor agencies.
The FDIC is also proposing to add a new term for use in part 340,
``financial intermediary,'' and define that term to mean any broker,
dealer, bank, underwriter, exchange, clearing agency registered with
the SEC under section 17A of the Securities Exchange Act of 1934,
transfer agent (as defined in section 3(a)(25) of the Securities
Exchange Act of 1934), central counterparty or any other entity whose
role is to facilitate a transaction by, as a riskless intermediary,
purchasing a security or qualified financial contract from one
counterparty and then selling it to another. This definition is used to
identify transactions of marketable financial instruments set forth in
section 340.1(c) that the FDIC believes should not be covered by
section 11(p) or part 340.
Section 340.4 sets forth the conditions under which a person
(whether an individual or entity) is prohibited from acquiring assets
of a failed institution from the FDIC. Those conditions are: (1) The
person, or its associated person, participated as an officer or
director of a failed institution or of an affiliate of a failed
institution, ``in a material way in a transaction that caused a
substantial loss to the failed institution'' (as defined in paragraph
(b) of section 340.4); (2) the person, or its associated person, has
been removed from a failed institution by order of a primary federal
regulatory agency; (3) the person, or its associated person, has
engaged in a ``pattern or practice of defalcation'' (as defined in
paragraph (c) of section 340.4) with respect to obligations owed to a
failed institution; or (4) the person, or its associated person, has
committed a certain criminal offense against a financial institution
and is in default on an obligation owed by that person or its
associated person. The FDIC proposes adding a fifth restriction: If the
person is prohibited from purchasing assets of a covered financial
company from the FDIC. As explained above, the FDIC believes part 340
should also restrict sales of assets of a failed institution to
individuals or entities who are also prohibited from purchasing assets
of a covered financial company from the FDIC under section 210(r) and
section 380.13. This would ensure consistent treatment of prospective
purchasers of assets from the FDIC, whether such assets are assets of a
covered financial company or of a failed institution.
[[Page 63582]]
The FDIC is proposing to amend paragraph (a) of section 340.7,
which sets forth the requirement that a prospective purchaser certify
that none of the restrictions set forth in part 340 apply to the sale,
by adding a sentence stating that the person must also certify that it
is not using a straw purchaser or other subterfuge to allow it to
purchase an asset of an insured depository institution from the FDIC or
benefit from such transaction if such person would otherwise be
ineligible to purchase assets from the FDIC under part 340. The FDIC's
form certification (the ``Purchaser Eligibility Certification,'' FDIC
Form 7300/06) already includes a statement under which a prospective
purchaser certifies that neither the identity nor form of the
prospective purchaser, nor any aspect of the contemplated transaction,
has been created or altered with the intent, in whole or in part, to
allow an individual or entity who otherwise would be ineligible to
purchase assets of a failed institution from the FDIC to benefit
directly or indirectly from the sale. The FDIC believes that part 340
would be strengthened by explicitly stating this requirement in the
regulatory text itself as well as in the Purchaser Eligibility
Certification.
The FDIC is proposing to amend paragraph (b) of section 340.7,
which excepts certain types of entities that are federal agencies or
instrumentalities and states or political subdivisions of states from
the self-certification requirement, by including bridge depository
institutions among the list of excepted entities. The FDIC believes it
is reasonable to presume a bridge depository institution will be in
compliance with part 340 because such entity is subject to control or
oversight by the FDIC.
Finally, the FDIC is proposing to amend section 340.8, which
provides that part 340 does not apply if the sale resolves or settles a
person's obligation to the FDIC, to also except a sale that resolves a
claim that the FDIC has asserted against a person. This is not intended
to be a substantive change but to more closely track section 11(p),
which excepts sales that resolve or settle either claims or
obligations. This proposed change would ensure that the regulation
cites both bases for exception set forth in the statute. It would also
ensure consistency with the equivalent provision in paragraph
(a)(2)(vi) of section 380.13.
The FDIC's proposed changes to part 340 will clarify the
restrictions on sales of assets of failed institutions by the FDIC and
will ensure consistency among part 340 and section 380.13, which will
allow the FDIC to more efficiently administer the two rules and will
help the public better understand the two rules. Because the proposed
substantive amendments and technical and conforming changes are
extensive, the FDIC proposes to revise and restate the text of part 340
in full rather than prepare fragmentary amendments.
III. Request for Comments
The FDIC requests comments on any of the changes that it is
proposing to make. All comments must be received by the FDIC not later
than December 23, 2014.
IV. Regulatory Analysis and Procedure
A. Paperwork Reduction Act
In accordance with the requirements of the Paperwork Reduction Act
of 1995 (44 U.S.C. 3501, et seq.) (PRA), the FDIC 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 FDIC has developed a
purchaser eligibility certification form for use in establishing
compliance with part 340 by a prospective purchaser of assets of a
failed institution from the FDIC. The certification is an OMB-approved
collection of information under the PRA, 3064-0135. The FDIC expects
that the net PRA burden estimates of this collection will not be
materially affected by this NPR. Any subsequent changes to the form
will be submitted by the FDIC to OMB for review and approval.
1. Information Collection
Title of Information Collection: Purchaser Eligibility
Certification.
OMB Control Number: 3064-0135.
Form Number: FDIC Form 7300/06.
Affected Public: Prospective purchasers of failed insured
depository institution assets.
Frequency of Response: Event generated.
Estimated Number of Respondents: 1500.
Time per Response: 30 minutes.
Total Estimated Annual Burden: 750 hours.
2. Comments are invited on:
Whether the collection of information is necessary for the
proper performance of the FDIC's functions, including whether the
information has practical utility;
The accuracy of the estimates of the burden of the
information collection, including the validity of the methodology and
assumptions used;
Ways to enhance the quality, utility, and clarity of the
information to be collected; and
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.
All comments will become a matter of public record. Commenters may
submit comments on the information collection and burden estimates at
the addresses listed under the ADDRESSES heading above; please put note
the OMB Control Number, 3064-0135, on the subject line. A copy of the
comments may also be submitted to the attention of the OMB desk officer
for the FDIC; by mail to U.S. Office of Management and Budget, 725 17th
Street NW., #10235, Washington, DC 20503; by facsimile to 202-395-6974;
or by email to: [email protected].
B. Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires an
agency that is issuing a proposed rulemaking to prepare and make
available an initial regulatory flexibility analysis of a proposed
regulation. The Regulatory Flexibility Act provides, however, that an
agency is not required to prepare and publish a regulatory flexibility
analysis if the agency certifies that the proposed rulemaking will not
have a significant economic impact on a substantial number of small
entities. The FDIC hereby certifies pursuant to 5 U.S.C. 605(b) that
the proposed rulemaking would not have a significant economic impact on
a substantial number of small entities within the meaning of the
Regulatory Flexibility Act.
Under regulations issued by the Small Business Administration (13
CFR 121.201), a ``small entity'' includes those firms in the ``Finance
and Insurance'' sector whose size varies from $7.5 million or less in
assets (mortgage and nonmortgage loan brokers) to $550 million or less
in assets (commercial banks, savings institutions, credit unions, and
others). This proposed rulemaking imposes no new burden on prospective
purchasers of assets sold by the FDIC. The requirement that a
prospective purchaser complete and submit the Purchaser Eligibility
Certification described above is a precondition to sale that is already
required. Completion of the Purchaser Eligibility Certification does
not require the use of professional skills or the preparation of
special reports or records and should continue to have minimal economic
impact on those individuals and entities that seek to purchase assets
from the FDIC. Thus, the FDIC believes that any impact on small
entities will not be substantial.
[[Page 63583]]
C. Plain Language
Section 722 of the Gramm-Leach-Bliley Act of 1999 (Pub. L. 106-102,
113 Stat. 1338, 1471) requires the Federal banking agencies to use
plain language in all proposed and final rules published after January
1, 2000. The FDIC has sought to present the proposed rulemaking in a
simple and straightforward manner. The FDIC invites comments on whether
the proposed rulemaking is clearly stated and effectively organized,
and how the FDIC might make the proposed rulemaking text easier to
understand.
Text of the Proposed Rule
Federal Deposit Insurance Corporation
12 CFR Chapter III
List of Subjects in 12 CFR Part 340
Asset disposition, Banks, Banking.
Authority and Issuance
For the reasons stated in the preamble, the Board of Directors of
the Federal Deposit Insurance Corporation proposes to amend part 340 of
title 12 of the Code of Federal Regulations as follows:
PART 340--RESTRICTIONS ON SALE OF ASSETS BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION
0
1. Revise the title to read PART 340--RESTRICTIONS ON SALE OF ASSETS OF
A FAILED INSTITUTION BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
0
2. The authority citation for part 340 continues to read as follows:
Authority: 12 U.S.C. 1819 (Tenth), 1821(p).
0
3. Revise part 340 to read as follows:
Sec.
340.1 What is the statutory authority for the regulation, what are
its purpose and scope, and can the FDIC have other policies on
related topics?
340.2 Definitions.
340.3 What are the restrictions on the sale of assets by the FDIC if
the buyer wants to finance the purchase with a loan from the FDIC?
340.4 What are the restrictions on the sale of assets by the FDIC
regardless of the method of financing?
340.5 Can the FDIC deny a loan to a buyer who is not disqualified
from purchasing assets using seller-financing under this regulation?
340.6 What is the effect of this part on transactions that were
entered into before its effective date?
340.7 When is a certification required, and who does not have to
provide a certification?
340.8 Does this part apply in the case of a workout, resolution, or
settlement of obligations?
Sec. 340.1 What is the statutory authority for the regulation, what
are its purpose and scope, and can the FDIC have other policies on
related topics?
(a) Authority. The statutory authority for adopting this part is
section 11(p) of the Federal Deposit Insurance Act (FDI Act), 12 U.S.C.
1821(p). Section 11(p) was added to the FDI Act by section 20 of the
Resolution Trust Corporation Completion Act (Pub. L. 103-204, 107 Stat.
2369 (1993)).
(b) Purpose. The purpose of this part is to prohibit individuals or
entities that improperly profited or engaged in wrongdoing at the
expense of a failed institution or covered financial company, or
seriously mismanaged a failed institution, from buying assets of a
failed institution from the FDIC.
(c) Scope.
(1) The restrictions of this part generally apply to sales of
assets of failed institutions owned or controlled by the FDIC in any
capacity.
(2) The restrictions in this section apply to the sale of assets of
a subsidiary of a failed institution or a bridge depository institution
if the FDIC controls the terms of the sale by agreement or in its role
as shareholder.
(3) Unless we determine otherwise, this part does not apply to the
sale of securities in connection with the investment of corporate and
receivership funds pursuant to the Investment Policy for Liquidation
Funds managed by the FDIC as it is in effect from time to time.
(4) In the case of a sale of securities backed by a pool of assets
that may include assets of failed institutions by a trust or other
entity, this part applies only to the sale of assets by the FDIC to an
underwriter in an initial offering, and not to any other purchaser of
the securities.
(5) The restrictions of this part do not apply to a sale of a
security or a group or index of securities, a commodity, or any
qualified financial contract that customarily is traded through a
financial intermediary, as defined in section 340.2, where the seller
cannot control selection of the purchaser and the sale is consummated
through that customary practice.
(6) The restrictions of this part do not apply to a judicial sale
or a trustee's sale of property that secures an obligation to the FDIC
where the sale is not conducted or controlled by the FDIC.
(d) The FDIC retains the authority to establish other policies
restricting asset sales. Neither 12 U.S.C. 1821(p) nor this part in any
way limits the authority of the FDIC to establish policies prohibiting
the sale of assets to prospective purchasers who have injured any
failed institution, or to other prospective purchasers, such as certain
employees or contractors of the FDIC, or individuals who are not in
compliance with the terms of any debt or duty owed to the FDIC. Any
such policies may be independent of, in conjunction with, or in
addition to the restrictions set forth in this part.
Sec. 340.2 Definitions.
Many of the terms used in this part are defined in the Federal
Deposit Insurance Act, 12 U.S.C. 1811, et seq. Additionally, for the
purposes of this part, the following terms are defined:
(a) Associated person of an individual or entity means:
(1) With respect to an individual:
(i) The individual's spouse or dependent child or any member of his
or her immediate household;
(ii) A partnership of which the individual is or was a general or
limited partner;
(iii) A limited liability company of which the individual is or was
a member; or
(iv) A corporation of which the individual is or was an officer or
director.
(2) With respect to a partnership, a managing or general partner of
the partnership or with respect to a limited liability company, a
manager; or
(3) With respect to any entity, an individual or entity who, acting
individually or in concert with one or more individuals or entities,
owns or controls 25 percent or more of the entity.
(b) Default means any failure to comply with the terms of an
obligation to such an extent that:
(1) A judgment has been rendered in favor of the FDIC or a failed
institution; or
(2) In the case of a secured obligation, the property securing such
obligation is foreclosed on.
(c) FDIC means the Federal Deposit Insurance Corporation.
(d) Failed institution means any insured depository institution (as
defined in 12 U.S.C. 1813(c)) that has been under the conservatorship
or receivership of the FDIC or any of its predecessors.
(e) Financial intermediary means any broker, dealer, bank,
underwriter, exchange, clearing agency registered with the SEC under
section 17A of the Securities Exchange Act of 1934, transfer agent (as
defined in section 3(a)(25) of the Securities Exchange Act of 1934),
central counterparty or any other entity whose role is to facilitate a
transaction by, as a riskless intermediary, purchasing a security or
[[Page 63584]]
qualified financial contract from one counterparty and then selling it
to another.
(f) Obligation means any debt or duty to pay money owed to the FDIC
or a failed institution, including any guarantee of any such debt or
duty.
(g) Person means an individual, or an entity with a legally
independent existence, including: A trustee; the beneficiary of at
least a 25 percent share of the proceeds of a trust; a partnership; a
corporation; an association; or other organization or society.
(h) Substantial loss means:
(1) An obligation that is delinquent for ninety (90) or more days
and on which there remains an outstanding balance of more than $50,000;
(2) An unpaid final judgment in excess of $50,000 regardless of
whether it becomes forgiven in whole or in part in a bankruptcy
proceeding;
(3) A deficiency balance following a foreclosure of collateral in
excess of $50,000, regardless of whether it becomes discharged in whole
or in part in a bankruptcy proceeding;
(4) Any loss in excess of $50,000 evidenced by an IRS Form 1099-C
(Information Reporting for Cancellation of Debt).
Sec. 340.3 What are the restrictions on the sale of assets by the
FDIC if the buyer wants to finance the purchase with a loan from the
FDIC?
A person may not borrow money or accept credit from the FDIC in
connection with the purchase of any assets of a failed institution from
the FDIC if:
(a) There has been a default with respect to one or more
obligations totaling in excess of $1,000,000 owed by that person or its
associated person; and
(b) The person or its associated person made any fraudulent
misrepresentations in connection with any such obligation(s).
Sec. 340.4 What are the restrictions on the sale of assets by the
FDIC regardless of the method of financing?
(a) A person may not acquire any assets of a failed institution
from the FDIC if the person or its associated person:
(1) Has participated, as an officer or director of a failed
institution or of an affiliate of a failed institution, in a material
way in one or more transaction(s) that caused a substantial loss to
that failed institution;
(2) Has been removed from, or prohibited from participating in the
affairs of, a failed institution pursuant to any final enforcement
action by the Office of the Comptroller of the Currency, the Board of
Governors of the Federal Reserve System, the FDIC, or any of their
predecessors or successors;
(3) Has demonstrated a pattern or practice of defalcation regarding
obligations to any failed institution;
(4) Has been convicted of committing or conspiring to commit any
offense under 18 U.S.C. 215, 656, 657, 1005, 1006, 1007, 1008, 1014,
1032, 1341, 1343 or 1344 affecting any failed institution and there has
been a default with respect to one or more obligations owed by that
person or its associated person; or
(5) Would be prohibited from purchasing the assets of a covered
financial company from the FDIC under 12 U.S.C. 5390(r) or its
implementing regulation at 12 CFR part 380.13.
(b) For purposes of paragraph (a) of this section, a person has
participated ``in a material way in a transaction that caused a
substantial loss to a failed institution'' if, in connection with a
substantial loss to a failed institution, the person has been found in
a final determination by a court or administrative tribunal, or is
alleged in a judicial or administrative action brought by the FDIC or
by any component of the government of the United States or of any
state:
(1) To have violated any law, regulation, or order issued by a
federal or state banking agency, or breached or defaulted on a written
agreement with a federal or state banking agency, or breached a written
agreement with a failed institution;
(2) To have engaged in an unsafe or unsound practice in conducting
the affairs of a failed institution; or
(3) To have breached a fiduciary duty owed to a failed institution.
(c) For purposes of paragraph (a) of this section, a person or its
associated person has demonstrated a ``pattern or practice of
defalcation'' regarding obligations to a failed institution if the
person or associated person has:
(1) Engaged in more than one transaction that created an obligation
on the part of such person or its associated person with intent to
cause a loss to any insured depository institution or with reckless
disregard for whether such transactions would cause a loss to any such
insured depository institution; and
(2) The transactions, in the aggregate, caused a substantial loss
to one or more failed institution(s).
Sec. 340.5 Can the FDIC deny a loan to a buyer who is not
disqualified from purchasing assets using seller-financing under this
regulation?
The FDIC still has the right to make an independent determination,
based upon all relevant facts of a person's financial condition and
history, of that person's eligibility to receive any loan or extension
of credit from the FDIC, even if the person is not in any way
disqualified from purchasing assets from the FDIC under the
restrictions set forth in this part.
Sec. 340.6 What is the effect of this part on transactions that were
entered into before its effective date?
This part does not affect the enforceability of a contract of sale
and/or agreement for seller financing in effect prior to July 1, 2000.
Sec. 340.7 When is a certification required, and who does not have to
provide a certification?
(a) Before any person may purchase any asset from the FDIC that
person must certify, under penalty of perjury, that none of the
restrictions contained in this part applies to the purchase. The person
must also certify that neither the identity nor form of the person, nor
any aspect of the contemplated transaction, has been created or altered
with the intent, in whole or in part, to allow an individual or entity
who otherwise would be ineligible to purchase assets from the FDIC to
benefit directly or indirectly from the proposed transaction. The FDIC
may establish the form of the certification and may change the form
from time to time.
(b) Notwithstanding paragraph (a) of this section, and unless the
Director of the FDIC's Division of Resolutions and Receiverships, or
designee, in his or her discretion so requires, a certification need
not be provided by:
(1) A state or political subdivision of a state;
(2) A federal agency or instrumentality such as the Government
National Mortgage Association;
(3) A federally-regulated, government-sponsored enterprise such as
the Federal National Mortgage Association or Federal Home Loan Mortgage
Corporation; or
(4) A bridge depository institution.
Sec. 340.8 Does this part apply in the case of a workout, resolution,
or settlement of obligations?
The restrictions of Sec. Sec. 340.3 and 340.4 do not apply if the
sale or transfer of an asset resolves or settles, or is part of the
resolution or settlement of, one or more obligations or claims that
have been, or could have been, asserted by the FDIC against the person
with whom the FDIC is settling, regardless of the amount of such
obligations or claims.
Dated at Washington, DC, this 21st day of October, 2014.
[[Page 63585]]
By Order of the Board of Directors, Federal Deposit Insurance
Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2014-25337 Filed 10-23-14; 8:45 am]
BILLING CODE 6714-01-P