Availability of Information, Public Observation of Meetings, Procedure, Practice for Hearings, and Post-Employment Restrictions for Senior Examiners; Savings and Loan Holding Companies, 56508-56606 [2011-22854]
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Federal Register / Vol. 76, No. 177 / Tuesday, September 13, 2011 / Rules and Regulations
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 PostEmployment Restrictions for Senior
Examiners; Savings and Loan Holding
Companies
Board of Governors of the
Federal Reserve System.
ACTION: Interim final rule; request for
comment.
AGENCY:
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 DoddFrank 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: https://
www.federalreserve.gov. Follow the
instructions for submitting comments at
https://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm.
• Federal eRulemaking Portal: https://
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.
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SUMMARY:
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All public comments are available
from the Board’s Web site at https://
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 DoddFrank 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 nondepository 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,
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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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.
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 nondepository 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.
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,
2 12
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U.S.C. 5414(c).
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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.
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
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
3 12
CFR part 225 (Regulation Y).
Application Filing Information at https://
www.federalreserve.gov/generalinfo/applications/
afi/.
4 See
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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.
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:
(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
5 12
U.S.C. 1461 et seq.
U.S.C. 1817(j).
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).
6 12
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56509
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.
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
9 The Board discussed these indicia in a 2008
policy statement on noncontrolling equity
investments. See https://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.
10 12 U.S.C. 1842.
11 12 U.S.C. 1467a(e) and 1467a(o).
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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.
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
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.
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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
12 12
U.S.C. 1817(j)(1) and (j)(8)(B).
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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
Section 4(l) of the BHC Act, as
amended by section 606(a) of the DoddFrank 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 wellcapitalized; (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.
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 GrammLeach-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
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.
15 12 U.S.C. 1843(l).
16 12 U.S.C. 1467a(c)(9)(A)–(B).
17 12 U.S.C. 1467(a)(c)(1)(C)–(2).
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Act.18 As a result, the OTS imposed
only limited filing requirements on
Covered SLHCs with respect to 4(k)
Activities.19
In light of Section 606(b) of the DoddFrank 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.
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
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.
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.
21 12 U.S.C. 1843(c)(8) and 4(k)(4)(F).
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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.
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.
‘‘1987 List’’ Activities
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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.
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.
24 12 U.S.C. 1467a(c)(2)(B).
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.
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
27 12
U.S.C. 1467a(f).
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.
28 The
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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-toeight 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.
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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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 nontax-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
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
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
31 12
32 12
U.S.C. 1467a(o)(11)(B).
U.S.C. 1467a(o)(11)(C).
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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 nonGrandfathered 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
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must approve the waiver of dividends–
not just a majority of the directors who
vote. For example, if a nonGrandfathered 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, NonGrandfathered 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 nontax-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
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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
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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.
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
33 12
U.S.C. 5412.
U.S.C. 1468.
35 12 CFR part 215 (Regulation O).
36 12 CFR part 223 (Regulation W).
34 12
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56513
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 riskmanagement 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
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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.
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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.
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
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 DoddFrank Act, now requires all SLHCs to
serve as a source of strength to their
subsidiary depository institutions.41
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.
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.
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
40 12
U.S.C. 1972(1).
U.S.C. 1831o–1.
42 12 U.S.C. 1467a(g)(5).
43 12 U.S.C. 1467a(e).
41 12
37 See Reporting Forms at: https://
www.federalreserve.gov/reportforms/default.cfm.
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38 12
39 12
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U.S.C. 1464.
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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.
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
44 12
U.S.C. 1828.
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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.
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56515
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
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
45 See Application Filing Information at https://
www.federalreserve.gov/generalinfo/applications/
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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.
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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.
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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.
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
46 12
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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 wellcapitalized 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
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
47 12
U.S.C. 1467a(c)(2).
U.S.C. 1467a(c)(9)(C). These SLHCs are
referred to as ‘‘grandfathered unitary savings and
loan holding companies.’’
48 12
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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
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17:17 Sep 12, 2011
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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.
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 wellcapitalized and well-managed
requirements of section 4(l), the Board
intends to apply a similar 15-day notice
requirement in a rule.
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
50 12
49 12
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51 12
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CFR 225.83(b)(1).
U.S.C. 1843(m)(2); 12 CFR 225.83(c).
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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
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
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.
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.
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
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.
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
Previous location in
OTS regulations
Regulation LL
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Subpart A—General Provisions
238.1—Authority, purpose and scope ...................................................................................................................
238.2—Definitions ..................................................................................................................................................
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 .......................................................................................................................
52 12
55 12
CFR 225.83(d).
CFR 225.83(e)(1).
54 12 CFR 225.83(e)(2)
56 12
§ 563.36.
59 12
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U.S.C. 1831i.
CFR 225.73(d) and (e).
57 12 U.S.C. 1829.
§§ 562.1, 562.2, 584.1.
§ 562.4.
58 12
53 12
§ 574.2, part 583.
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CFR part 585.
U.S.C. 3201 et seq.
60 12 U.S.C. 1467(f).
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56519
COMPARISON CHART—Continued
Previous location in
OTS regulations
Regulation LL
Subpart B—Acquisitions of Savings Association Securities or Assets
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 acquisition proposals ...........................................................................
§§ 574.3(a), 584.4.
§§ 574.3(c), 584.4(c).
§§ 584.8(d), 584.9.
§§ 516, 574.6.
§ 547.7.
Subpart C—Control Proceedings
238.21—Control proceedings ................................................................................................................................
§ 574.4.
Subpart D—Change in Bank Control
238.31—Transactions requiring prior notice .........................................................................................................
238.32—Transactions not requiring prior notice ...................................................................................................
238.33—Procedures for filing, processing, publishing, and acting on notices .....................................................
§ 574.3(a)–(b).
§ 574.3(c)–(d).
§§ 516, 574.6.
Subpart E—Qualified Stock Issuances
238.41—Qualified stock issuances by undercapitalized savings associations or holding companies .................
§ 547.8.
Subpart F—Savings and Loan Holding Company Activities and Acquisitions
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 .........................
§ 584.2.
§ 584.2a.
§ 584.2–1.
§ 584.2–2.
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 ...................................................................................................................................................
238.72—Definitions ................................................................................................................................................
238.73—Prior notice requirements ........................................................................................................................
238.74—Filing and processing procedures ...........................................................................................................
238.75—Standards for review ...............................................................................................................................
238.76—Waiting period .........................................................................................................................................
238.77—Waiver of prior notice requirement .........................................................................................................
§ 563.550.
§ 563.555.
§ 563.560.
§§ 563.565, 563.570, 563.575.
§ 563.580.
§ 563.585.
§ 563.590.
Subpart I—Prohibited Service at Savings and Loan Holding Companies
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 ............................................................................................................................................
§ 585.10.
§ 585.20.
§ 585.30.
§ 585.40.
§ 585.50.
§ 585.100.
§ 585.110.
§ 585.120.
§ 585.130.
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Subpart J—Management Official Interlocks
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 ...................................
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§ 563f.1.
§ 563f.2.
§ 563f.3.
§ 563f.4.
§ 563f.5.
§ 563f.6.
§ 563f.7.
§ 563f.8.
§ 563f.9.
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COMPARISON CHART—Continued
Previous location in
OTS regulations
Regulation LL
Subpart K—Dividends by Subsidiary Savings Associations
238.101—Purpose .................................................................................................................................................
238.102—Definitions ..............................................................................................................................................
238.103—Filing requirement .................................................................................................................................
238.104—Board action and criteria for review ......................................................................................................
§ 563.140.
§ 563.141.
§§ 563.143, 563.144, 563.145.
§ 563.146.
Subpart L—Investigative Proceedings and Formal Examination Proceedings
238.111—Scope of part .........................................................................................................................................
238.112—Definitions ..............................................................................................................................................
238.113—Confidentiality of proceedings ...............................................................................................................
238.114—Transcripts .............................................................................................................................................
238.115—Rights of Witnesses ..............................................................................................................................
238.116—Obstruction of proceedings ...................................................................................................................
238.117—Subpoenas ............................................................................................................................................
Regulation MM
Companies
1. Subpart A
A. 239.1
2. Subpart B
Companies
Mutual Holding
General Provisions
Authority, Purpose and Scope
This section sets forth the authority,
purpose and scope of the interim final
rule.
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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
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.
61 12
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Mutual Holding
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 nonsubstantive changes. Substantive
changes are described below.
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
62 12 CFR part 239, subpart B. As noted
elsewhere, Regulation MM does not apply to bank
holding companies in mutual form.
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§ 512.1.
§ 512.2.
§ 512.3.
§ 512.4.
§ 512.5.
§ 512.6.
§ 512.7.
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.
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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.
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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-taxqualified 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
63 12
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(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
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
64 12
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56521
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—
Æ A detailed description of the
proposed waiver of dividends by the
MHC and the reasons the board of
directors requested the waiver of
dividends;
Æ 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
Æ 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—
Æ Reorganized into an MHC under
section 10(o) of HOLA;
Æ Issued minority stock either from
its subsidiary stock holding company or
its subsidiary stock savings association;
and
Æ 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.
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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—
Æ A detailed description of the
proposed waiver of dividends by the
MHC and the reasons the board of
directors requested the waiver of
dividends;
Æ 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
Æ 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
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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.
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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
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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.
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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.
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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
Companies
Subsidiary Holding
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.
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
D. 239.23
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
Plans
G. 239.26
I. 239.28
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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).
C. 239.22
65 Certain requirements are found in section
239.11, described above.
Contents of Stock Issuance
This section sets forth the required
contents of stock issuance plans. These
provisions were previously contained in
section 575.8.
H. 239.27
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)).
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.
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.
Charter Amendments
56523
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).
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).
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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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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
66 12
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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.
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—
67 12
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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.
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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.
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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
56525
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.
Previous location in
OTS regulations
Regulation MM
SUBPART A—General Provisions
239.1—Authority, Purpose and Scope ................................................................................................................
239.2—Definitions ...............................................................................................................................................
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§ 575.1
§§ 563b, 574, 575, and 583
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Previous location in
OTS regulations
Regulation MM
SUBPART B—Mutual Holding Companies
239.3—Mutual holding company reorganizations ...............................................................................................
239.4—Grounds for disapproval of reorganizations ...........................................................................................
239.5—Membership rights ..................................................................................................................................
239.6—Contents of Reorganization Plan ............................................................................................................
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 .............................................................................................................................
§ 575.3
§ 575.4
§ 575.5
§ 575.6
§ 575.10
§ 575.11
§ 575.12
§ 575.13
§ 575.14
§ 575.9
§ 575.9
§ 575.9
§ 575.9
§ 575.12(c)
SUBPART C—Subsidiary Holding Companies
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 ................................................................................................
§ 575.14(c)(1), (3)
§ 575.14(c)(2)
§ 575.14(c)(4)
§ 575.7
§ 575.8
§ 575.14(c)(4)
§ 575.14(c)(4)
§ 575.14(c)(4)
§ 575.14(c)(4)
§ 575.14(c)(5)
SUBPART D—Indemnification; Employment Contracts
239.40—Indemnification of directors, officers and employees ...........................................................................
239.41—Employment contracts ..........................................................................................................................
§ 575.11(f)
§ 575.11(g)
SUBPART E—Conversions from Mutual to Stock Form—§ 575.12
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 .....................................................................................................................................
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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 ....................................................................................................................................
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§ 575.12 (§ 563b.5)
§ 575.12 (§ 563b.20)
§ 575.12 (§ 563b.25)
§ 575.12 (§§ 563b.125, 563b.130,
563b.135, 563b.140)
§ 575.12 (§§ 563b.150, 563b.155,
563b.160, 563b.165, 563b.180,
563b.185, 563b.200, 563b.205)
§ 575.12 (§§ 563b.225, 563b.230,
563b.235, 563b.240)
§ 575.12 (§§ 563.250, 563.255,
563b.260, 563b.265, 563b.270,
563b.275, 563b.280, 563b.285,
563b.290, 563b.295)
§ 575.12 (§§ 563b.300, 563b.305,
563b.310)
§ 575.12 (§§ 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)
§ 575.12 (§§ 563b.400, 563b.405)
§ 575.12 (§§ 563b.420, 563b.425,
563b.435, 563b.440, 563b.445)
§ 575.12 (§§ 563b.450, 563b.455,
563b.460, 563b.465, 563b.470,
563b.475, 563b.480)
§ 575.12 (§§ 563b.500, 563b.505,
563b.510, 563b.515, 563b.520,
563b.525, 563b.530)
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56527
Regulation MM
Previous location in
OTS regulations
239.64—Contributions to charitable organizations .............................................................................................
§ 575.12 (§§ 563.15, 563b.550,
563b.555, 563b.560, 563b.565,
563b.570, 563b.575)
§ 575.12 (§§ 563b.600, 563b.605,
563b.610, 563b.625, 563b.650,
563b.660, 563b.680, 563b.690)
§ 575.12 (§§ 563b.670, 563b.675)
239.65—Voluntary supervisory conversions .......................................................................................................
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239.66—Board review of the voluntary supervisory 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.
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.
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
68 12 CFR part 207 (Disclosure and Reporting of
CRA-Related Amendments).
69 12 CFR part 228 (Community Reinvestment).
70 12 U.S.C. 5412.
71 12 U.S.C. 1468.
72 12 CFR part 223 (Transactions Between
Member Banks and Their Affiliates).
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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.
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.
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
73 12 CFR part 215 (Loans to Executive Officers,
Directors, and Principal Shareholders of Member
Banks).
74 12 U.S.C. 5412(b)(1)(A)(ii).
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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.
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.
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
75 12
U.S.C. 1461 et seq.
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).
80 5 U.S.C. 553(b).
81 5 U.S.C. 553(b)(B).
76 12
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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.
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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
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 https://
www.sba.gov/idc/groups/public/documents/
sba_homepage/serv_sstd_tablepdf.pdf.
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and their non-depository subsidiaries.
Specifically, section 312 of the DoddFrank 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 nondepository 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.
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.
83 12
PO 00000
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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 GrammLeach-Bliley Act (FR 4010),
• Application to Become a Bank
Holding Company and/or Acquire an
Additional Bank or Bank Holding
Company (FR Y–3),
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• 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: Eventgenerated.
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
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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: https://
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56529
www.reginfo.gov/public/do/PRAMain.
For copies of the current reporting
forms, please see the Federal Reserve’s
public Web site at https://
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: Eventgenerated.
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
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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: https://
www.reginfo.gov/public/do/PRAMain.
For copies of the current reporting
forms, please see the Federal Reserve’s
public Web site at https://
www.federalreserve.gov/reportforms/
default.cfm.
Comments are invited on:
(a) Whether the collection of
information is necessary for the proper
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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.
Reporting and recordkeeping
requirements, Securities.
Solicitation of Comments on Use of
Plain Language
12 CFR Part 264a
Conflicts of interest.
For the reasons stated in the
preamble, the Board amends 12 CFR
chapter II as follows:
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.
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.
PART 207—DISCLOSURE AND
REPORTING OF CRA–RELATED
AGREEMENTS (REGULATION G)
1. The authority citation for part 207
continues to read as follows:
■
Authority: 12 U.S.C. 1831y.
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,
84 12
PO 00000
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2. In § 207.1:
A. Redesignate paragraphs (b)(3) and
(b)(4) as paragraphs (b)(4) and (b)(5)
respectively;
■ B. Add new paragraph (b)(3); and
■ C. Revise newly redesignated
paragraphs (b)(4) and (b)(5). The
additions and revisions read as follows:
§ 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)
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).
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4. In § 215.1, revise paragraph (a) to
read as follows:
■
§ 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).
*
*
*
*
*
■ 5. In § 215.9, revise paragraph (a)(1) to
read as follows:
§ 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.
*
*
*
*
*
■ 6. Section 215.12 is added to read as
follows:
312(b)(2)(A) of the Dodd-Frank Wall
Street Reform and Consumer Protection
Act (12 U.S.C. 5412).
*
*
*
*
*
■ 9. Add Subpart I to read as follows:
§ 215.12 Application to savings
associations.
Subpart I—Savings Associations—
Transactions with Affiliates
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)
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).
8. In § 223.1, revise paragraph (a) to
read as follows:
■
§ 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
Provision of Regulation W
§ 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.
Application
(1) 12 CFR 223.2(a)(8)—‘‘Affiliate’’ includes a financial subsidiary.
(2) 12 CFR 223.2(a)(12)—Determination that ‘‘affiliate’’ includes other types of companies.
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56531
Does not apply. Savings association subsidiaries do not meet the statutory definition of
financial subsidiary.
Read to include the following statement: ‘‘Affiliate also includes any company that the
Board determines, by order or regulation, to present a risk to the safety and soundness of the savings association.’’
(3) 12 CFR 223.2(b)(1)(ii)—‘‘Affiliate’’ includes a sub- Does not apply. Savings association subsidiaries do not meet the statutory definition of
sidiary that is a financial subsidiary.
financial subsidiary.
(4) 12 CFR 223.3(d)—Definition of ‘‘capital stock and ‘‘Capital stock and surplus’’ for a savings association has the same meaning as under
surplus.’’
the regulatory capital requirements applicable to that savings association.
(5) 12 CFR 223.3(h)(1)—Section 23A covered trans- Read to incorporate paragraph (c)(1) of this section, which prohibits loans or extensions
actions include an extension of credit to the affiliate.
of credit to an affiliate, unless 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 trans- Read to incorporate paragraph (c)(2) of this section, which prohibits purchases and inactions include a purchase of or investment in sevestments in securities issued by an affiliate, other than with respect to shares of a
curities issued by an affiliate.
subsidiary.
(7) 12 CFR 223.3(k)—Definition of ‘‘depository institu- Read to include the following statement: ‘‘For the purposes of this definition, a non-affiltion.’’
iate subsidiary of a savings association is treated as part of the depository institution.’’
(8) 12 CFR 223.3(p)—Definition of ‘‘financial sub- Does not apply. Savings association subsidiaries do not meet the statutory definition of
sidiary.’’
financial subsidiary.
(9) 12 CFR 223.3(w)—Definition of ‘‘member bank.’’
Read to include the following statement: ‘‘Member bank also 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 ‘‘operating sub- Does not apply.
sidiary.’’
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Provision of Regulation W
Application
(11) 12 CFR 223.31—Application of section 23A to
an acquisition of an affiliate that becomes an operating subsidiary.
(12) 12 CFR 223.32—Rules that apply to financial
subsidiaries of a bank.
(13) 12 CFR 223.42(f)(2)—Exemption for purchasing
certain marketable securities.
(14) 12 CFR 223.42(g)(2)—Exemption for purchasing
municipal securities.
(15) 12 CFR 223.61—Application of sections 23A
and 23B to U.S. branches and agencies of foreign
banks.
Read to refer to ‘‘a non-affiliate subsidiary’’ instead of ‘‘operating subsidiary.’’
Does not apply. Savings association subsidiaries do not meet the statutory definition of
financial subsidiary.
Read to refer to ‘‘Thrift Financial Report’’ instead of ‘‘Call Report.’’ References to ‘‘state
member bank’’ are unchanged.
Read to refer to ‘‘Thrift Financial Report’’ instead of ‘‘Call Report.’’ References to ‘‘state
member bank’’ are unchanged.
Does not apply to savings associations or their subsidiaries.
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(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
§ 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 § 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.
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.
PART 228—COMMUNITY
REINVESTMENT (REGULATION BB)
(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
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,
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11. In § 228.11:
A. Revise paragraphs (a)(2), (a)(3)(iii),
and (a)(3)(iv); and
■ B. Add paragraph (a)(3)(v) to read as
follows:
■
■
§ 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).
*
*
*
*
*
■ 12. In § 228.29:
■ A. Revise paragraphs (a)(2)(ii) and
(a)(2)(iii);
■ B. Add paragraphs (a)(2)(iv) and
(a)(2)(v); and
■ C. Revise paragraphs (c) and (d).
The additions and revisions read as
follows:
§ 228.29 Effect of CRA performance on
applications.
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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).
■ 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.
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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 J—Management Official Interlocks
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.
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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.
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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.
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
238.112
238.113
238.114
238.115
238.116
238.117
Scope.
Definitions.
Confidentiality of proceedings.
Transcripts.
Rights of witnesses.
Obstruction of the proceedings.
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
§ 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:
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(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.
§ 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
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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
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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
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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.
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(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 § 225.2(r)(2) of this chapter.
(t) Well managed. The term ‘‘well
managed’’ takes the meaning provided
in § 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 riskmanagement 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)).
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§ 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.
§ 238.4
Records, reports, and inspections.
(a) Records. Each savings and loan
holding company shall maintain such
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books and records as may be prescribed
by the Board. Each savings and loan
holding company and its nondepository 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.
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(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.
§ 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
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(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.
§ 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.).
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§ 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 anticompetitive practices. The eligibility of
a savings and loan holding company or
savings association or affiliate of either
to operate under this exception shall
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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.
§ 238.8 Safe and sound operations.
(3) In the case of a multiple savings
(a) Savings and loan holding company and loan holding company, acquisition
policy and operations. (1) A savings and of direct or indirect ownership or
loan holding company shall serve as a
control of any voting securities of a
source of financial and managerial
savings association or savings and loan
strength to its subsidiary savings
holding company, that is not a
associations and shall not conduct its
subsidiary, if the acquisition results in
operations in an unsafe or unsound
the company’s control of more than 5
manner.
percent of the outstanding shares of any
(2) Whenever the Board believes an
class of voting securities of the savings
activity of a savings and loan holding
association or savings and loan holding
company or control of a nonbank
company that is engaged in any
subsidiary (other than a nonbank
business activity other than those
subsidiary of a savings association)
specified in § 238.51 of this part.
constitutes a serious risk to the financial
(d) Acquisition of savings association
safety, soundness, or stability of a
or savings and loan holding company
subsidiary savings association of the
assets. The acquisition by a savings and
savings and loan holding company and
loan holding company or by a
is inconsistent with sound banking
subsidiary thereof (other than a savings
principles or the purposes of HOLA or
association) of all or substantially all of
the Financial Institutions Supervisory
the assets of a savings association, or
Act of 1966, as amended (12 U.S.C.
savings and loan holding company.
1818(b) et seq.), the Board may require
(e) Merger of savings and loan holding
the savings and loan holding company
companies. The merger or consolidation
to terminate the activity or to terminate
of savings and loan holding companies,
control of the subsidiary, as provided in and the acquisition of a savings
section 10(g)(5) of the HOLA.
association through a merger or
consolidation.
Subpart B—Acquisitions of Saving
(f) Acquisition of control by certain
Association Securities or Assets
individuals. The acquisition, by a
director or officer of a savings and loan
§ 238.11 Transactions requiring Board
holding company, or by any individual
approval.
who owns, controls, or holds the power
The following transactions require the
to vote (or holds proxies representing)
Board’s prior approval under section 10
more than 25 percent of the voting
of HOLA except as exempted under
shares of such savings and loan holding
§ 238.12:
company, of control of any savings
(a) Formation of savings and loan
association that is not a subsidiary of
holding company. Any action that
such savings and loan holding
causes a savings association or other
company.
company to become a savings and loan
holding company.
§ 238.12 Transactions not requiring Board
approval.
(b) Acquisition of subsidiary savings
association. Any action that causes a
(a) The requirements of § 238.11(a),
savings association to become a
(b), (d), (e) and (f) do not apply to:
subsidiary of a savings and loan holding
(1) Control of a savings association
company.
acquired by devise under the terms of a
(c) Acquisition of control of savings
will creating a trust which is excluded
association or savings and loan holding from the definition of savings and loan
company securities. (1) The acquisition
holding company;
(2) Control of a savings association
by a savings and loan holding company
acquired in connection with a
of direct or indirect ownership or
reorganization that involves solely the
control of any voting securities of a
acquisition of control of that association
savings association or savings and loan
by a newly formed company that is
holding company, that is not a
controlled by the same acquirors that
subsidiary, if the acquisition results in
controlled the savings association for
the company’s control of more than 5
percent of the outstanding shares of any the immediately preceding three years,
and entails no other transactions, such
class of voting securities of the savings
as an assumption of the acquirors’ debt
association or savings and loan holding
by the newly formed company:
company.
(2) An acquisition includes the
Provided, that the acquirors have filed
purchase of additional securities
the designated form with the
through the exercise of preemptive
appropriate Reserve Bank and have
rights, but does not include securities
provided all additional information
terminate upon a finding by the Board
that its exercise of this authority is
resulting in anti-competitive practices.
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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 § 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
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(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 § 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
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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 § 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
(C) The transfer of control or
ownership of a subsidiary savings
association or a subsidiary holding
company between one subsidiary
holding company and another
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.
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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.
§ 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.
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§ 238.14
Procedural requirements.
(a) Filing application. An application
for the Board’s prior approval under
§ 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
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newspaper of general circulation, in the application submitted under this
subpart, the Board may, in its discretion
form and at the locations specified in
and based on the facts and
§ 262.3 of the Rules of Procedure (12
circumstances, grant such person an
CFR 262.3) in this chapter;
(ii) Contents of notice. A newspaper
extension of the comment period for up
notice under this paragraph shall
to 15 calendar days.
(iii) Joint requests by interested
provide an opportunity for interested
persons to comment on the proposal for person and applicant. The Board will
grant a joint request by an interested
a period of at least 30 calendar days;
person and the applicant for an
(iii) Timing of publication. Each
extension of the comment period for a
newspaper notice published in
reasonable period for a purpose related
connection with a proposal under this
to the statutory factors the Board must
paragraph shall be published no more
consider under this subpart.
than 15 calendar days before and no
(3) Substantive comment. A comment
later than 7 calendar days following the
date that an application is filed with the will be considered substantive for
purposes of this subpart unless it
appropriate Reserve Bank.
involves individual complaints, or
(2) Federal Register Notice. (i)
raises frivolous, previously-considered
Publication by Board. Upon receipt of
an application, the Board shall promptly or wholly unsubstantiated claims or
irrelevant issues.
publish notice of the proposal in the
(e) Hearings. The Board may order a
Federal Register and shall provide an
formal or informal hearing or other
opportunity for interested persons to
comment on the proposal for a period of proceeding on the application, as
provided in § 262.3(i)(2) of this chapter.
no more than 30 days;
Any request for a hearing (other than
(ii) Request for advance publication.
from the primary supervisor) shall
An applicant may request that, during
comply with § 262.3(e) in this chapter.
the 15-day period prior to filing an
(f) Accepting application for
application, the Board publish notice of
processing. Within 7 calendar days after
a proposal in the Federal Register. A
the Reserve Bank receives an
request for advance Federal Register
application under this section, the
Notice publication shall be made in
writing to the appropriate Reserve Bank Reserve Bank shall accept it for
processing as of the date the application
and shall contain the identifying
information prescribed by the Board for was filed or return the application if it
is substantially incomplete. Upon
Federal Register Notice publication.
(3) Waiver or shortening of notice. The accepting an application, the Reserve
Bank shall immediately send copies to
Board may waive or shorten the
the Board and to the primary banking
required notice periods under this
supervisor of the savings association to
section if the Board determines that an
be acquired and to the Attorney General,
emergency exists requiring expeditious
and shall request from the Attorney
action on the proposal, or if the Board
finds that immediate action is necessary General a report on the competitive
factors involved. The Reserve Bank or
to prevent the probable failure of an
the Board may request additional
insured depository institution.
information necessary to complete the
(d) Public comment—
(1) Timely comments. Interested
record of an application at any time
persons may submit information and
after accepting the application for
comments regarding a proposal filed
processing.
(g) Action on applications—(1) Action
under this subpart. A comment shall be
under delegated authority. Except as
considered timely for purposes of this
provided in paragraph (g)(4) of this
subpart if the comment, together with
section, unless the Reserve Bank, upon
all supplemental information, is
submitted in writing in accordance with notice to the applicant, refers the
application to the Board for decision
the Board’s Rules of Procedure and
received by the Board or the appropriate because action under delegated
authority is not appropriate, the Reserve
Reserve Bank prior to the expiration of
Bank shall approve an application
the latest public comment period
under this section:
provided in paragraph (c) of this
(i) Not earlier than the third business
section.
day following the close of the public
(2) Extension of comment period—
(i) In general. The Board may, in its
comment period; and
(ii) Not later than the later of the fifth
discretion, extend the public comment
business day following the close of the
period regarding any proposal
public comment period or the 30th
submitted under this subpart.
(ii) Requests in connection with
calendar day after the acceptance date
obtaining application or notice. In the
for the application.
(2) Board action. The Board shall act
event that an interested person has
on an application under this section that
requested a copy of a notice or
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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 § 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
§ 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.
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§ 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 § 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
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56539
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 § 238.11(c),
(d), or (e), (or an application by a
savings and loan holding company
under § 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 selfregulatory 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
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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
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within 30 days of such request under
§ 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
§ 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 § 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
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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
§ 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:
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(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
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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
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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
§ 238.31
notice.
Transactions requiring prior
(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 § 238.33
of this subpart, before acquiring control
of a savings and loan holding company,
unless the acquisition is exempt under
§ 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-inlaw, brother-in-law, sister-in-law, sonin-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
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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
(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 § 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
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.
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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.
§ 238.32
notice.
Transactions not requiring prior
(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 § 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 § 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 § 238.11 or
section 18(c) of the Federal Deposit
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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 § 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
§ 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 § 238.33 to the appropriate
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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 § 238.33(h).
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§ 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 § 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
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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.
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(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.
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(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.
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Subpart E—Qualified Stock Issuances
§ 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
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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 61⁄2 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 § 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
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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
§ 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
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§ 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
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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 § 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
§ 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 §§ 238.51,
238.52, 238.53, and 238.54.
§ 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 § 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
§ 238.2(k).
(ii) Any savings and loan holding
company (or subsidiary thereof) that
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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 § 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 § 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
§ 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 § 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
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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 § 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 § 238.51(b) with
respect to any activities of such holding
company that are conducted exclusively
in a foreign country.
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§ 238.53 Prescribed services and activities
of savings and loan holding companies.
(a) General. For the purpose of
§ 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 § 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
§ 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
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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
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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
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(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.
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56547
(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 60day 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.
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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.
§ 238.54 Permissible bank holding
company activities of savings and loan
holding companies.
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(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
§ 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.
§ 238.61
(a) General. For purposes of
§ 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 § 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 § 238.53 and
this section, the procedures of § 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 § 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
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Subpart G—Financial Holding
Company Activities
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)).
§ 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 § 225.86 of this chapter.
(b) [Reserved]
§ 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.
§ 238.64
Election required.
(a) In general. Except as provided
below, a savings and loan holding
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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.
§ 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;
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(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
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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 § 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 § 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 § 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 § 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
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requirements described in § 225.83 of
this chapter; or
(2) The activities limitations and any
other requirements described in
§ 225.84 of this chapter, depending on
which requirements of § 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
§ 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.
§ 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 § 238.63 is
subject to the notice, remediation
agreement, divestiture, and any other
requirements described in § 225.83 of
this chapter.
(c) Consequences of failing to
continue to maintain a satisfactory or
better rating under the Community
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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 § 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
§ 225.86 of this chapter subject to the
notice, approval, and any other
requirements described in §§ 225.85
through 225.89 of this chapter.
Subpart H—Notice of Change of
Director or Senior Executive Officer
§ 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.
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§ 238.72
§ 238.73
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
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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.
Prior notice requirements.
(a) Savings and loan holding
company. Except as provided under
§ 238.78, a savings and loan holding
company must give the Board 30 days’
written notice, as specified in § 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 § 238.78(b).
§ 238.74 Filing and processing
procedures.
(a) Filing notice—(1) Content. The
notice required in § 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
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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]
§ 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.
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(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.
§ 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 § 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.
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§ 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
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(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 § 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
§ 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.
§ 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.
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56551
(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 § 238.2(m), but
excludes a subsidiary of a savings and
loan holding company that is not itself
a savings and loan holding company.
§ 238.83
Prohibited actions.
(a) Person. If a person was convicted
of a criminal offense described in
§ 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.
§ 238.84 Covered convictions or
agreements to enter into pre-trial diversions
or similar programs.
(a) Covered convictions and
agreements. Except as described in
§ 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
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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.
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§ 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 § 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.
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§ 238.86
Exemptions.
(a) Employees. An employee of a
savings and loan holding company is
exempt from the prohibition in § 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-bycase exemption for the person under
§ 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
§ 238.89(a);
(ii) The expiration of the 20-day
period for filing a request for hearing
under § 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
§ 238.90(b) following the issuance of a
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Board denial of the application under
§ 238.89(b);
(iv) The date that the Board issues a
decision under § 238.90(d); or
(v) The date an applicant withdraws
the application.
§ 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 § 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 § 238.89(b), § 238.90(a)
or § 238.90(d).
(b) Prohibition pending Board action.
Unless a savings and loan holding
company or a person is exempt under
§ 238.86(b), the prohibitions in § 238.83
continue to apply pending Board action
on the application.
§ 238.88
Factors for review.
(a) Board review. (1) In determining
whether to approve an exemption
application filed under § 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
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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.
§ 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.
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§ 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.
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(4) The provisions of §§ 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 crossexamine 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
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include such other conditions as may be
appropriate.
(2) A denial order will include a
summary of the relevant factors under
§ 238.88(b).
Subpart J—Management Official
Interlocks
§ 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.
§ 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
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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 § 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).
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(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 Statechartered 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
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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.
§ 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
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announce the revised thresholds by
publishing a final rule without notice
and comment in the Federal Register.
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§ 238.94 Interlocking relationships
permitted by statute.
The prohibitions of § 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
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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.
§ 238.95
Small market share exemption.
(a) Exemption. A management
interlock that is prohibited by § 238.93
is permissible, if:
(1) The interlock is not prohibited by
§ 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.
§ 238.96
General exemption.
(a) Exemption. The Board may by
agency order exempt an interlock from
the prohibitions in § 238.93 if the Board
finds that the interlock would not result
in a monopoly or substantial lessening
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56555
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 § 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.
§ 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.
§ 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
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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.
§ 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
§ 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.
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§ 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
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securities that are not equity securities
at the time of a dividend.
prohibition, condition, or enforcement
action.
§ 238.103
Subpart L—Investigative Proceedings
and Formal Examination Proceedings
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.
§ 238.104
review.
Board action and criteria for
(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 30day 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
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§ 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.
§ 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.
§ 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 §§ 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
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representative(s) during the course of
said proceedings shall be confidential.
§ 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.
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§ 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
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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.
§ 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.
§ 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
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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.
■ 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.
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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.
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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
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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
§ 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.
§ 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 § 238.31(b) of this
chapter.
(c) Affiliate has the same meaning as
in § 238.2(a) of this chapter.
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(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 §§ 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 nontax-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 § 239.59(k),
the mutual holding company or
subsidiary holding company’s taxqualified 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
§ 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.
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(h) Demand accounts mean noninterest-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 § 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.
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(s) Savings Association has the same
meaning as in § 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
§ 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 § 239.24 and
containing the information required by
§ 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
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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 noninterest-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
§ 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 § 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.
§ 239.4 Grounds for disapproval of
reorganizations.
(a) Basic standards. The Board may
disapprove a proposed mutual holding
company reorganization filed pursuant
to § 239.3(a) if:
(1) Disapproval is necessary to
prevent unsafe or unsound practices;
(2) The financial or managerial
resources of the reorganizing association
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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 § 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) § 239.3(a)
and (c) (regarding board of directors and
membership approval) or § 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 § 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 § 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 § 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
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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 § 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 § 238.14 of this
chapter;
(2) The mutual holding company shall
not be capitalized in an amount in
excess of what is permissible under
§ 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
§ 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
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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.
§ 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
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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.
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§ 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
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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.
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§ 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 § 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 § 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 § 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 § 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,
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unless the necessary approvals are
obtained from the Board, including
approval pursuant to § 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 noncontrolling 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 §§ 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 § 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
§ 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:
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(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.
§ 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 § 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 §§ 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
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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 § 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
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issuance, except if the purchase
complies with § 239.63. For purposes of
this section, the reference in § 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 taxqualified 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
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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
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56563
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 nontax-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
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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
§ 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
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holding company must approve any
charitable organization contribution.
§ 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
§ 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
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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 § 239.16 shall apply to
mutual holding companies.
§ 239.10
Procedural requirements.
(a) Proxies and proxy statements—(1)
Solicitation of proxies. The provisions
of §§ 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 §§ 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 § 239.57(f). File proxies and proxy
statements in accordance with
§ 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
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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
§ 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 laterdated 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-tostock 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 § 238.14 of this
chapter. The Board will review any
filing made under this part in
accordance with § 238.14 of this
chapter.
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(c) Reorganization Notices and stock
issuance applications—(1) Contents.
Each Reorganization Notice submitted
to the appropriate Reserve Bank
pursuant to § 239.3(a) and each
application for approval of the issuance
of stock submitted to the appropriate
Reserve Bank pursuant to § 239.24(a)
shall be in the form and contain the
information specified by the Board.
(2) Filing instructions. Any
Reorganization Notice submitted under
§ 239.3(a) must be filed in accordance
with § 238.14 of this chapter. Any stock
issuance application submitted
pursuant to § 239.24(a) shall be filed in
accordance with § 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 § 238.11(e) of
this chapter and the Savings and Loan
Holding Company Act regulations at
§ 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 § 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 § 239.24
must not be subject to the applications
processing time-frames set forth in
§§ 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 § 238.14(b) of this
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chapter for notices, applications, and
public comments filed under § 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.
§ 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. §§ 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.
§ 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
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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
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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.
§ 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.
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§ 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 § 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 § 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.
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(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 § 239.14(b) or § 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.
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§ 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
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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
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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 § 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.
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(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,
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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 § 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
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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
§ 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
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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.
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§ 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
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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
§ 239.20
Scope.
This subpart applies only to a
subsidiary holding company of a mutual
holding company.
§ 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 § 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
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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 § 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 taxqualified employee stock benefit plan
which is exempt from the approval
requirements under § 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.
§ 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
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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 § 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
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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
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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)
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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
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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
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and appraisal rights, the purchase of shares
by underwriters in connection with a public
offering, or the purchase of shares by a taxqualified employee stock benefit plan which
is exempt from the approval requirements
under § 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
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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.
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§ 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 §§ 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
§§ 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 §§ 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
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subject to the processing procedures
under § 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
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charter or bylaws then in effect, unless
otherwise provided by Federal law or
regulation.
§ 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 § 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 § 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
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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
§ 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
§ 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
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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 § 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
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organization that complies with
§§ 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.
§ 239.25
Plans.
Contents of Stock Issuance
(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 § 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
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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 § 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
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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
purchases
(percent)
Institution size
$ 50,000,000 or less .............
$ 50,000,001–100,000,000 ...
$100,000,001–150,000,000 ..
$150,000,001–200,000,000 ..
$200,000,001–250,000,000 ..
$250,000,001–300,000,000 ..
$300,000,001–350,000,000 ..
$350,000,001–400,000,000 ..
$400,000,001–450,000,000 ..
$450,000,001–500,000,000 ..
Over $500,000,000 ...............
35
34
33
32
31
30
29
28
27
26
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 § 239.24;
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(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-taxqualified 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
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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 taxqualified 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
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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 longterm warrants or other equity securities,
in which event any reference in the
provisions of this section and in
§ 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
§ 239.63(a)(1) to minority stock
issuances. Notwithstanding § 239.24(d),
§ 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 § 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.
§ 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
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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
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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
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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.
§ 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
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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 § 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.
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(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
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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.
§ 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 § 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.
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§ 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.
§ 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
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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
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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 fiveyear 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.
§ 239.31 Indemnification; employment
contracts.
(a) Restrictions on indemnification.
The provisions of § 239.40 shall apply to
subsidiary holding companies.
(b) Restrictions on employment
contracts. The provisions of § 239.41
and any policies of the Board
thereunder shall apply to subsidiary
holding companies.
Subpart D—Indemnification;
Employment Contracts
§ 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
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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
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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).
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§ 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
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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
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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
§ 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
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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.
§ 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.
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§ 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.
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(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
§ 239.59(h);
(2) Tax-qualified employee stock
ownership plans under § 239.59(m);
(3) Supplemental eligible account
holders under § 239.59(h); and
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(4) Other voting members under
§ 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.
§ 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
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business plan is required, under
§ 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
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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;
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(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.
§ 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
§§ 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
§ 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
§§ 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.
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(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.
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(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.
§ 239.55
Filing requirements.
(a) Applications under this subpart.
Any filing with the Board required
under this subpart must be filed in
accordance with § 238.14 of this
chapter. The Board will review any
filing made under this subpart in
accordance with § 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 § 239.54(b).
(ii) Pricing materials meeting the
requirements paragraph (g)(2) of this
section.
(iii) Proxy soliciting materials under
§ 239.57(d), including:
(A) A preliminary proxy statement
with signed financial statements;
(B) A form of proxy meeting the
requirements of § 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
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to the members, and a legal opinion
indicating that any marketing materials
comply with all applicable securities
laws.
(iv) An offering circular described in
§ 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 (https://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
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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
§ 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
§ 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 § 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
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(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.
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(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 § 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
§ 239.56(c).
§ 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.
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(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 § 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.
§ 239.57
Proxy solicitation.
(a) Applicability of proxy solicitation
provisions.
(1) The mutual holding company
must comply with these proxy
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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.
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(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 (https://
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
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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
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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.
§ 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
(https://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 posteffective 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
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56585
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.
§ 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
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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
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(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
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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.
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(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:
Institution size
Officer and
director
purchases
(percent)
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$50,000,000 or less ..............
$50,000,001–100,000,000 ....
$100,000,001–150,000,000 ..
$150,000,001–200,000,000 ..
$200,000,001–250,000,000 ..
$250,000,001–300,000,000 ..
$300,000,001–350,000,000 ..
$350,000,001–400,000,000 ..
$400,000,001–450,000,000 ..
$450,000,001–500,000,000 ..
Over $500,000,000 ...............
35
34
33
32
31
30
29
28
27
26
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
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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
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56587
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 taxqualified 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.
§ 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
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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 posteffective amendment to the offering
circular under § 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.
mstockstill on DSK4VPTVN1PROD with RULES2
§ 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 § 239.62(a)(1)–(3).
§ 239.62
Liquidation accounts.
(a) Liquidation account.
(1) A liquidation account represents
the potential interest of eligible account
holders and supplemental eligible
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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 subaccount 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 subaccount 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 § 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
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any voting rights based on their
liquidation sub-accounts.
(d) Adjusting liquidation subaccounts.
(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.
mstockstill on DSK4VPTVN1PROD with RULES2
§ 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.
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(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
§ 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
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56589
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 § 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 § 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;
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(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 § 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
§§ 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
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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
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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.
mstockstill on DSK4VPTVN1PROD with RULES2
§ 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
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stock holding company is wellcapitalized pursuant to § 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
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56591
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 https://
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.
mstockstill on DSK4VPTVN1PROD with RULES2
§ 239.65 Voluntary supervisory
conversions.
(a) Voluntary supervisory conversion.
(1) The mutual holding company
must comply with this section and
§ 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.
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(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
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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 § 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 riskbased 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 § 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.
mstockstill on DSK4VPTVN1PROD with RULES2
§ 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 §§ 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.
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(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 ll(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,
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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 ll[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 ll[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
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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: lllllllllllllllll
Secretary of the Association
By: lllllllllllllllllll
President or Chief Executive Officer of the
Association
By: lllllllllllllllllll
Secretary of the Board of Governors of the
Federal Reserve System
Effective Date: llllllllllllll
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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 l, in the State of l.
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
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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 l, all of which
shall be common stock of par [or if no par
is specified then shares shall have a stated]
value of l 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
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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: lllllllllllllllll
Secretary of the Subsidiary Holding
Company
By: lllllllllllllllllll
President or Chief Executive Officer of the
Subsidiary Holding Company
By: lllllllllllllllllll
Secretary of the Board of Governors of the
Federal Reserve System
Effective Date: llllllllllllll
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.
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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.
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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 ll[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 onethird or one-half of the board each year, as
appropriate.
9. Meetings of the board. The board of
directors shall meet regularly without notice
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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,
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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
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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 § 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
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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 ll 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
ll(fill in age used above), except that a
director serving on ll(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 ll 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 ll(fill in age
used above), except that an officer serving on
ll(fill in bylaw adoption date) may
complete the term. However, an officer shall,
at the option of the board, retire at age ll
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 ll.
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 llllllll . [set
forth the full address] in the County of
llllllll , in the State of
llllllll .
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 llof ll if not a legal holiday, and if
a legal holiday, then on the next day
following which is not a legal holiday, at
ll, 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
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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
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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 § 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
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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
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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
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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 ll [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
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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
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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
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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.
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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,
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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.
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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
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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
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.
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Subpart A—General Provisions
16. Revise § 261.1(a)(1) and (a)(2) to
read as follows:
■
§ 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.
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17. In § 261.2, revise paragraphs
(c)(1)(ii), paragraphs (k) and (o) to read
as follows:
■
§ 261.2
Definitions.
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*
*
*
*
(c)(1) * * *
(ii) Information gathered by the Board
in the course of any investigation,
suspicious activity report, cease-anddesist 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 nondepository 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
18. Revise § 261.10(a)(7) to read as
follows:
■
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§ 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);
*
*
*
*
*
■ 19. Revise § 261.14(a)(5)(iii) to read as
follows:
§ 261.14
Exemptions from disclosure.
(a) * * *
(5) * * *
(iii) Other documents prepared by the
staffs of the Board, Federal Reserve
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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
20. In § 261.20, revise paragraphs (a),
(b)(1), (c) and (d) to read as follows:
■
§ 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
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56601
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:
*
*
*
*
*
■ 21. Revise § 261.21(a) to read as
follows:
§ 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
22a. The authority citation for part
261b continues to read as follows:
■
Authority: 5 U.S.C. 552b.
22b. Revise § 261b.7(a) to read as
follows:
■
§ 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 § 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
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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
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.
24. In § 262.3:
A. Revise paragraphs (b)(1)(i)(B) and
(b)(1)(i)(C);
■ B. Remove the undesignated
paragraph following paragraph
(b)(1)(i)(C);
■ C. Add paragraphs (b)(1)(i)(D) and
(b)(1)(i)(E);
■ D. Revise paragraphs (b)(1)(ii)(D) and
(b)(1)(ii)(E), and add paragraphs
(b)(1)(ii)(F);
■ E. Revise paragraphs (i) introductory
text, (i)(1), and (i)(5); and
■ F. Add paragraph (j)(3).
The revisions and additions read as
follows:
■
■
§ 262.3
Applications.
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(b) * * *
(1)(i) * * *
(B) To become a bank holding
company (except as provided in
§ 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
§ 238.14 of this chapter), and
(E) By a savings and loan holding
company to acquire ownership or
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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.
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(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]
*
*
*
*
*
■ 25. In § 262.25 revise paragraphs (a)
introductory text, (a)(2), (a)(3), and (a)(4)
to read as follows:
§ 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
§ 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
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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 § 262.3 of the Board’s
Rules of Procedure, the provisions of
this Statement apply to such
applications.
*
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*
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.
PART 263—RULES OF PRACTICE FOR
HEARINGS
§ 263.3
26. The authority citation for Part 263
is revised to read as follows:
■
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Subpart A—Uniform Rules of Practice
and Procedure
27. In § 263.1:
A. Revise paragraph (c); paragraphs
(e)(2), (e)(11); and
■ B. Add paragraphs (e)(13) through
(e)(15).
The additions and revisions read as
follows:
■
■
§ 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);
*
*
*
*
*
■ 28. In § 263.3:
■ A. Revise paragraphs (f)(4), (f)(5);
■ B. Add paragraph (f)(6);
■ C. Revise paragraphs (i) and (m).
The additions and revisions read as
follows:
Definitions.
*
*
*
*
*
(f) * * *
(4) Any foreign bank or company to
which section 8 of the IBA (12 U.S.C.
PO 00000
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56603
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
29. Section 263.50(b)(13) and (b)(14)
are revised and paragraph (b)(15) is
added to read as follows:
■
§ 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).
■ 30. Revise § 263.56 to read as follows:
§ 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
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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 §§ 263.9 and
263.40 of subpart A.
Subpart C—Rules and Procedures for
Assessment and Collection of Civil
Money Penalties
31. In § 263.65, revise paragraph (a)
and add new paragraphs (b) (11) and
(b)(12) to read as follows:
■
§ 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
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■
32. Revise § 263.80 to read as follows:
§ 263.80
17:17 Sep 12, 2011
§ 263.81
Jkt 223001
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 § 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).
■ 34. In § 263.83 revise paragraph (a) to
read as follows:
§ 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
§ 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.
*
*
*
*
*
■ 35. In § 263.84, revise paragraphs (a)
and (c) to read as follows:
§ 263.84
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.
VerDate Mar<15>2010
33. In § 263.81, revise paragraph (c)
and add new paragraph (e) to read as
follows:
■
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
PO 00000
Frm 00098
Fmt 4701
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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 ceaseand-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 ceaseand-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.
36. In § 263.85, revise paragraphs
(b)(1), (b)(2), and (b)(3) to read as
follows:
■
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§ 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
37. Revise § 263.94(g) to read as
follows:
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■
§ 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
VerDate Mar<15>2010
17:17 Sep 12, 2011
Jkt 223001
56605
supervisory responsibilities of the
Board;
*
*
*
*
*
reporting date before the initiation of
the proceeding.
*
*
*
*
*
Subpart G—Rules Regarding Claims
Under the Equal Access to Justice Act
Subpart J—Removal, Suspension, and
Debarment of Accountants From
Performing Audit Services
38. Revise § 263.103(c)(3) to read as
follows:
■
§ 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.
*
*
*
*
*
■ 39. Revise § 263.105(b)(2) and (b)(3) to
read as follows:
§ 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 § 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
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40. Revise § 263.400 to read as
follows:
■
§ 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).
■ 41. Revise § 263.401(c) to read as
follows:
§ 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
42. The authority citation for Part
264a continues to read as follows:
■
Authority: 12 U.S.C. 1820(k).
■
43 Revise § 264a.2 to read as follows:
§ 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
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(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.
■ 44. In § 264a.3, add paragraph (d) to
read as follows:
§ 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
mstockstill on DSK4VPTVN1PROD with RULES2
*
VerDate Mar<15>2010
17:17 Sep 12, 2011
Jkt 223001
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.
45. Revise § 264a.5(a)(1)(i) to read as
follows:
■
§ 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
*
*
*
*
*
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46. Section 264a.6(c) is revised and
paragraph (h) is added to read as
follows:
■
§ 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
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]]>Agencies
[Federal Register Volume 76, Number 177 (Tuesday, September 13, 2011)]
[Rules and Regulations]
[Pages 56508-56606]
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
-----------------------------------------------------------------------
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]]
-----------------------------------------------------------------------
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.
-----------------------------------------------------------------------
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: https://www.federalreserve.gov. Follow the
instructions for submitting comments at https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
Federal eRulemaking Portal: https://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
https://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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\2\ 12 U.S.C. 5414(c).
---------------------------------------------------------------------------
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 https://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.
---------------------------------------------------------------------------
\5\ 12 U.S.C. 1461 et seq.
\6\ 12 U.S.C. 1817(j).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\9\ The Board discussed these indicia in a 2008 policy statement
on noncontrolling equity investments. See https://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.
---------------------------------------------------------------------------
\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).
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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).
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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).
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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: https://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).
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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 https://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 co
