Restrictions on Sale of Assets of a Failed Institution by the Federal Deposit Insurance Corporation, 22886-22891 [2015-09572]
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Executive Order 12988
§ 319.56–25
This final rule allows papayas to be
imported into the continental United
States from Peru. State and local laws
and regulations regarding papayas
imported under this rule will be
preempted while the fruit is in foreign
commerce. Fresh fruits are generally
imported for immediate distribution and
sale to the consuming public, and
remain in foreign commerce until sold
to the ultimate consumer. The question
of when foreign commerce ceases in
other cases must be addressed on a caseby-case basis. No retroactive effect will
be given to this rule, and this rule will
not require administrative proceedings
before parties may file suit in court
challenging this rule.
■
Paperwork Reduction Act
In accordance with section 3507(d) of
the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the information
collection or recordkeeping
requirements included in this final rule,
which were filed under 0579–0410,
have been submitted for approval to the
Office of Management and Budget
(OMB). When OMB notifies us of its
decision, if approval is denied, we will
publish a document in the Federal
Register providing notice of what action
we plan to take.
E-Government Act Compliance
The Animal and Plant Health
Inspection Service is committed to
compliance with the E-Government Act
to promote the use of the Internet and
other information technologies, to
provide increased opportunities for
citizen access to Government
information and services, and for other
purposes. For information pertinent to
E-Government Act compliance related
to this rule, please contact Ms. Kimberly
Hardy, APHIS’ Information Collection
Coordinator, at (301) 851–2727.
List of Subjects in 7 CFR Part 319
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Coffee, Cotton, Fruits, Imports, Logs,
Nursery stock, Plant diseases and pests,
Quarantine, Reporting and
recordkeeping requirements, Rice,
Vegetables.
Accordingly, we are amending 7 CFR
part 319 as follows:
PART 319–FOREIGN QUARANTINE
NOTICES
1. The authority citation for part 319
continues to read as follows:
■
Authority: 7 U.S.C. 450 and 7701–7772
and 7781–7786; 21 U.S.C. 136 and 136a; 7
CFR 2.22, 2.80, and 371.3.
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[Amended]
I. Background
2. Section 319.56–25 is amended as
follows:
■ a. In paragraph (b), by removing the
words ‘‘or Ecuador’’ and adding the
words ‘‘, Ecuador, or Peru’’ in their
place.
■ b. In paragraph (g)(2), by adding the
word ‘‘Peru,’’ after the word ‘‘Ecuador,’’.
■ c. In paragraph (h), by removing the
citation ‘‘(h)’’ and adding the citation
‘‘(g)’’ in its place.
■ d. In the OMB citation at the end of
the section, by removing the words
‘‘0579–0128 and 0579–0358’’ and
adding the words ‘‘0579–0128, 0579–
0358, and 0579–0410’’ in their place.
Done in Washington, DC, this 20th day of
April 2015.
Kevin Shea,
Administrator, Animal and Plant Health
Inspection Service.
[FR Doc. 2015–09576 Filed 4–23–15; 8:45 am]
BILLING CODE 3410–34–P
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 340
RIN 3064–AE26
Restrictions on Sale of Assets of a
Failed Institution by the Federal
Deposit Insurance Corporation
Federal Deposit Insurance
Corporation.
ACTION: Final rule.
AGENCY:
With this final rule, the
Federal Deposit Insurance Corporation
(FDIC) is revising its rule concerning
restrictions on the sale of assets of a
failed institution under the Federal
Deposit Insurance Act in order to clarify
the purpose, scope and applicability of
that rule and to make that rule more
consistent with the FDIC’s rule
concerning restrictions on the sale of
assets of a covered financial company
under the Dodd-Frank Wall Street
Reform and Consumer Protection Act.
DATES: This final rule is effective July 1,
2015.
FOR FURTHER INFORMATION CONTACT:
James D. Sigler, Senior Franchise and
Asset Marketing Specialist, 571–858–
8284; Elizabeth Falloon, Supervisory
Counsel, Legal Division, 703–562–6148;
Shane Kiernan, Counsel, Legal Division,
703–562–2632; Federal Deposit
Insurance Corporation, 550 17th Street
NW., Washington, DC 20429.
SUPPLEMENTARY INFORMATION:
SUMMARY:
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The FDIC promulgated part 340 in
2000 to implement section 11(p) of the
Federal Deposit Insurance Act, (12
U.S.C. 1821(p) (section 11(p)). Under
section 11(p), individuals or entities
whose acts or omissions have, or may
have, contributed to the failure of an
insured depository institution (failed
institution) cannot buy the assets of that
failed institution from the FDIC. The
FDIC expanded the purchaser eligibility
restriction as permitted by statute when
it promulgated part 340 by precluding
such individuals or entities from
purchasing the assets of any failed
institution, not only the particular
institution affected by the actions of the
respective individuals or entities. As
provided in section 11(p), part 340 also
prohibits the sale of assets involving
FDIC financing to certain persons who
have defaulted on obligations of $1
million or more, in aggregate, owed to
a failed insured depository institution or
the FDIC and who have made fraudulent
misrepresentations in connection with
any of those obligations. Compliance
with part 340 is established through a
self-certification process in which a
prospective purchaser certifies that it is
eligible to purchase an asset from the
FDIC and that the FDIC’s sale of an asset
to such prospective purchaser would
not be restricted under section 11(p) or
part 340.
In March of 2014, the FDIC
promulgated § 380.13 to implement
section 210(r) of the Dodd-Frank Wall
Street Reform and Consumer Protection
Act, (12 U.S.C. 5390(r) (section 210(r)).
Section 210(r) prohibits certain sales of
assets held by the FDIC in the course of
liquidating a covered financial
company. Because section 210(r) and
section 11(p) share substantially similar
statutory language, part 340 served as a
model for the development of § 380.13.
While many aspects of part 340 were
included in § 380.13, FDIC staff
identified new or different concepts to
include in § 380.13 that were not
already in part 340. The addition of
these concepts into part 340 will
improve part 340 and make it more
consistent with § 380.13.
II. Notice of Proposed Rulemaking
On October 21, 2014, the Board of
Directors approved a notice of proposed
rulemaking entitled ‘‘Restrictions on
Sale of Assets by the Federal Deposit
Insurance Corporation’’ (the proposed
rule), which was published in the
Federal Register on October 24, 2014
with a 60-day comment period that
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ended on December 23, 2014.1 One
comment letter addressing the proposed
rule was received by the FDIC
expressing general support for the
proposed rule. The final rule is
substantively the same as the proposed
rule.
III. The Final Rule
With this final rule, the FDIC is
adopting the revisions to part 340 in
substantially the same form as they were
presented in the proposed rule. Part 340
is revised in a number of ways. Some
revisions are significant, substantive
changes and others are non-substantive,
technical or conforming changes. This
supplemental information section
describes the substantive changes made
by the final rule.
The title of part 340 is revised to
clarify that part 340 applies to sales of
assets of a failed institution
(specifically, a failed insured depository
institution). This change is made to help
distinguish part 340 from § 380.13,
which applies to sales of assets of a
covered financial company by the FDIC.
While the two rules will preclude sales
to certain prospective purchasers in a
very similar manner, each pertains to a
separate set of asset sales by the FDIC.
The final rule amends § 340.1(b),
which sets forth the purpose of part 340,
to extend the restrictions on sales of
assets of a failed institution to
individuals or entities who are also
prohibited from purchasing assets of a
covered financial company from the
FDIC under section 210(r) and § 380.13.
This ensures consistency between part
340 and § 380.13. Under § 380.13,
individuals or entities prohibited from
purchasing assets of a failed institution
under part 340 are also prohibited from
purchasing assets of a covered financial
company under § 380.13. Likewise,
individuals or entities prohibited from
purchasing assets of a covered financial
company under § 380.13 are prohibited
from purchasing assets of a failed
institution under part 340.
The final rule makes three changes to
clarify part 340’s scope of coverage, set
forth in § 340.1(c). First, the final rule
clarifies the applicability of part 340 to
sales of assets by a subsidiary of a failed
institution or by a bridge depository
institution. Sales of assets of a failed
institution’s subsidiary or a bridge
depository institution are not expressly
subject to section 11(p). However, if the
FDIC has the right to control the terms
of a sale of assets of a failed institution’s
subsidiary or a bridge depository
institution, or has the ability to control
selection of the purchaser of those assets
1 79
FR 63580.
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under an agency agreement or as
shareholder, the restrictions set forth in
section 11(p) and part 340 should apply.
The FDIC has discretionary authority to
expand the scope of coverage because
section 11(p) sets the minimum
requirements for restrictions on sales of
assets, and the FDIC may prescribe
further restrictions on its own accord.
Under the final rule’s revision of part
340, the restrictions apply to sales of
assets of a failed institution’s subsidiary
or a bridge depository institution if the
FDIC controls the terms of the sale by
agreement or as shareholder.
Second, the final rule amends § 340.1
to explicitly state that part 340 does not
apply to certain types of transactions
involving marketable securities and
other financial instruments. Under
§ 340.1(c)(5), a sale of a security or a
group or index of securities, a
commodity, or any qualified financial
contract that, in each case, customarily
is traded through a financial
intermediary where the seller cannot
control selection of the purchaser would
not be covered by part 340 if the sale is
to be consummated through that
customary practice. For example, if the
FDIC were to sell publicly-traded stocks
or bonds that the failed institution held,
it might engage a broker or custodian to
conduct or facilitate the sale. The broker
or custodian would then tender the
securities to the market and accept
prevailing market terms offered by
another broker, a specialist, a central
counterparty or a similar financial
intermediary who would then sell the
security to another purchaser. In this
scenario, it is not possible for the FDIC
to control selection of the end purchaser
at the time of sale. Therefore, the
transaction cannot be a sale covered by
section 11(p) because the FDIC would
have no way to select the prospective
purchaser or determine whether that
purchaser would or would not be
prohibited from purchasing the asset.
Moreover, a prospective purchaser of
such assets will not be able to select the
FDIC as the seller and therefore could
not determine whether section 11(p)
and part 340 apply to the transaction.
The final rule defines the term
‘‘financial intermediary,’’ as discussed
below, for the purposes of part 340. This
express limitation on the scope of part
340’s coverage will provide greater
certainty regarding the applicability of
section 11(p) and part 340 to market
participants and FDIC staff who conduct
asset sales.
Third, the final rule clarifies in
§ 340.1(c)(6) that part 340 is not
applicable to a judicial sale or a trustee’s
sale of property securing an obligation
to the FDIC if the sale is not conducted
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or controlled by the FDIC. Although the
FDIC could have a security interest in
property serving as collateral and
therefore the authority to initiate a
foreclosure action, the selection of the
purchaser and terms of the sale are not
necessarily within the FDIC’s control.
Rather, a court or trustee would conduct
the sale in accordance with applicable
state law and would select the
purchaser. In this situation, the sale is
not a sale by the FDIC. While the plain
language of part 340 does not suggest
that such a sale would fall within its
scope, the FDIC makes this change for
the sake of clarity. This exception does
not affect sales if the FDIC is in
possession of the collateral property and
conducts the sale itself, however. Where
the FDIC has control over the manner
and terms of the sale, it will require the
prospective purchaser’s certification
that the prospective purchaser is not
prohibited under section 11(p) or part
340 from purchasing the asset.
Section 340.2 sets forth definitions for
certain terms used in part 340 and
several are revised by the final rule. The
definition of ‘‘associated person’’ is
revised to include limited liability
companies of which an individual is a
member (or was a member at the time
of the occurrence of any event that
would result in a restriction on sale as
set forth in § 340.4) if the prospective
purchaser of assets is an individual and,
if the prospective purchaser is a limited
liability company, to include the
manager of the limited liability
company. The definition of ‘‘failed
institution’’ is revised to remove
reference to entities ‘‘owned and
controlled’’ by the failed institution
because the revision to § 340.1(c),
discussed above, explicitly states that
sales of subsidiary assets are covered
under part 340 if the FDIC controls the
terms of the sale by agreement or in its
role as shareholder. Additionally,
references to the Resolution Trust
Corporation and RTC are removed in
favor of referencing the FDIC’s
‘‘predecessor’’ agencies.
The final rule also adds a new term
for use in part 340, ‘‘financial
intermediary,’’ which is defined to
mean any broker, dealer, bank,
underwriter, exchange, clearing agency
registered with the SEC under section
17A of the Securities Exchange Act of
1934, transfer agent (as defined in
section 3(a)(25) of the Securities
Exchange Act of 1934), central
counterparty or any other entity whose
role is to facilitate a transaction by, as
a riskless intermediary, purchasing a
security or qualified financial contract
from one counterparty and then selling
it to another. This definition is used to
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identify transactions of marketable
financial instruments described in
§ 340.1(c) that would not be covered by
section 11(p) or part 340. Although not
separately defined in the final rule, the
term ‘‘security’’ is intended to apply
broadly and include, without limitation,
all instruments which constitute
securities under Federal securities laws.
Section 340.4 sets forth the conditions
under which a person (whether an
individual or entity) is prohibited from
acquiring assets of a failed institution
from the FDIC. Those conditions are
that the person, or its associated person:
(1) Participated as an officer or director
of a failed institution or of an affiliate
of a failed institution, ‘‘in a material
way in a transaction that caused a
substantial loss to the failed institution’’
(as defined in paragraph (b) of § 340.4);
(2) has been removed from a failed
institution by order of a primary federal
regulatory agency; (3) engaged in a
‘‘pattern or practice of defalcation’’ (as
defined in paragraph (c) of § 340.4) with
respect to obligations owed to a failed
institution; or (4) committed a certain
criminal offense against a financial
institution and is in default on an
obligation owed by that person or its
associated person. The final rule adds a
fifth restriction: Prohibition from
purchasing assets of a covered financial
company from the FDIC. As explained
above, the FDIC believes part 340
should also restrict the sale of assets of
a failed institution to individuals or
entities who are also prohibited from
purchasing assets of a covered financial
company from the FDIC under section
210(r) and § 380.13. This ensures
consistent treatment of prospective
purchasers of assets from the FDIC,
whether such assets are assets of a
covered financial company or of a failed
institution.
The final rule amends paragraph (a) of
§ 340.7, which sets forth the
requirement that a prospective
purchaser certify that none of the
restrictions set forth in part 340 apply
to the sale, by adding a sentence stating
that the person must also certify that it
is not using a straw purchaser or other
subterfuge to allow it to purchase an
asset of an insured depository
institution from the FDIC or benefit
from such transaction if such person
would otherwise be ineligible to
purchase assets from the FDIC under
part 340. The FDIC’s form certification
(the Purchaser Eligibility Certification,
FDIC Form 7300/06) already includes a
statement under which a prospective
purchaser certifies that neither the
identity nor form of the prospective
purchaser, nor any aspect of the
contemplated transaction, has been
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created or altered to allow an individual
or entity who otherwise would be
ineligible to purchase assets of a failed
institution from the FDIC to benefit from
the sale. Explicitly stating this
requirement in the regulatory text itself
strengthens part 340.
Paragraph (b) of § 340.7, which
excepts from the self-certification
requirement certain federal agencies or
instrumentalities and states or political
subdivisions of states, is revised in the
final rule to include bridge depository
institutions as well. A bridge depository
institution is expected to be in
compliance with part 340 because such
entity is newly chartered and subject to
control or oversight by the FDIC.
Finally, the final rule revises § 340.8,
which provides that part 340 does not
apply if the sale resolves or settles a
person’s obligation to the FDIC, to also
except a sale that resolves a claim that
the FDIC has asserted against a person.
This is not intended to be a substantive
change but to more closely track section
11(p), which excepts sales that resolve
or settle claims as well as obligations.
This change ensures that the regulation
cites both bases for exception set forth
in the statute. It also ensures
consistency with the equivalent
provision in paragraph (a)(2)(vi) of
§ 380.13.
The final rule’s changes to part 340
ensure consistency among part 340 and
§ 380.13. This will facilitate efficient
administration of the two rules and will
help the public better understand how
and when each applies. One comment
submitted in response to the proposed
rule noted that the revisions to part 340
will help to clarify the purpose, scope
and applicability, and will make part
340 more consistent with the parallel
provision in the FDIC’s Orderly
Liquidation Authority regulations that
implements section 210(r) (§ 380.13).
The comment goes on to state that the
proposed revisions will improve
regulatory consistency and
understandability, align better with
market practices, and promote the
regulatory objectives and intentions
under the Federal Deposit Insurance
Act.
The substantive amendments and
technical and conforming changes to
part 340 that are made in the final rule
are extensive. Therefore, the FDIC is
revising and restating the text of part
340 in full rather than through
fragmentary amendments.
III. Regulatory Analysis and Procedure
A. Paperwork Reduction Act
In accordance with the requirements
of the Paperwork Reduction Act (PRA),
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the FDIC may not conduct or sponsor,
and the respondent is not required to
respond to, an information collection
unless it displays a currently valid
Office of Management and Budget
(OMB) control number.2 The FDIC has
developed a purchaser eligibility
certification form for use by prospective
purchasers of assets of a failed
institution to establish compliance with
part 340. The certification is an OMBapproved collection of information
under the PRA.3 The FDIC expects that
the net PRA burden estimates of this
collection will not be affected by the
changes made in the final rule. Any
subsequent changes to the form will be
submitted by the FDIC to OMB for
review and approval.
Title of Information Collection:
Purchaser Eligibility Certification.
OMB Control Number: 3064–0135.
Form Number: FDIC Form 7300/06.
Affected Public: Prospective
purchasers of failed insured depository
institution assets.
Frequency of Response: Event
generated.
Estimated Number of Respondents:
1,500.
Time per Response: 30 minutes.
Total Estimated Annual Burden: 750
hours.
The FDIC has a continuing interest in
comments on paperwork burden.
Comments are invited on (a) whether
the collection of information is
necessary for the proper performance of
the FDIC’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; and (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.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA)
requires that an agency either certify
that a final rule will not have a
significant economic impact on a
substantial number of small entities or
prepare an initial regulatory flexibility
analysis of the rule and publish the
analysis for comment.4 The RFA
provides that an agency is not required
to prepare and publish a regulatory
flexibility analysis if the agency certifies
that the final rule will not have a
2 44
U.S.C. 3501, et seq.
Number: 3064–0135.
4 5 U.S.C. 601, et seq.
3 OMB
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significant economic impact on a
substantial number of small entities.
The FDIC hereby certifies pursuant to 5
U.S.C. 605(b) that the final rule would
not have a significant economic impact
on a substantial number of small entities
within the meaning of the RFA.
Under regulations issued by the Small
Business Administration, a ‘‘small
entity’’ includes those firms in the
‘‘Finance and Insurance’’ sector whose
size varies from $7.5 million or less in
assets (mortgage and nonmortgage loan
brokers) to $550 million or less in assets
(commercial banks, savings institutions,
credit unions, and others).5 The final
rule imposes no new burden on
prospective purchasers of assets sold by
the FDIC. The requirement that a
prospective purchaser complete and
submit the Purchaser Eligibility
Certification described above is a
precondition to sale that is already
required. Completion of the Purchaser
Eligibility Certification does not require
the use of professional skills or the
preparation of special reports or records
and should continue to have minimal
economic impact on those individuals
and entities that seek to purchase assets
from the FDIC. Thus, any impact on
small entities will not be substantial.
C. Small Business Regulatory
Enforcement Fairness Act
The Office of Management and Budget
has determined that the final rule is not
a major rule within the meaning of the
Small Business Regulatory Enforcement
Fairness Act of 1996 (SBREFA), which
provides for agencies to report rules to
Congress and for Congress to review
such rules.6 The reporting requirement
is triggered in instances where the FDIC
issues a final rule as defined by the
Administrative Procedure Act (APA).7
Because the FDIC is issuing a final rule
as defined by the APA, the FDIC will
file the reports required by the SBREFA.
D. Plain Language
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Section 722 of the Gramm-LeachBliley Act of 1999 requires the Federal
banking agencies to use plain language
in all proposed and final rules
published after January 1, 2000.8 The
FDIC has sought to present the final rule
in a simple and straightforward manner.
5 13
CFR 121.201.
Law 104–121, 110 Stat. 857.
7 5 U.S.C. 551 et seq.
8 Public Law 106–102, 113 Stat. 1338, 1471.
6 Public
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Text of the Final Rule
Federal Deposit Insurance Corporation
12 CFR Chapter III
List of Subjects in 12 CFR Part 340
Asset disposition, Banks, banking.
Authority and Issuance
For the reasons stated in the
the
Federal Deposit Insurance Corporation
revises part 340 of title 12 of the Code
of Federal Regulations to read as
follows:
SUPPLEMENTARY INFORMATION,
PART 340—RESTRICTIONS ON SALE
OF ASSETS OF A FAILED
INSTITUTION BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION
Sec.
340.1 What is the statutory authority for the
regulation, what are its purpose and
scope, and can the FDIC have other
policies on related topics?
340.2 Definitions.
340.3 What are the restrictions on the sale
of assets by the FDIC if the buyer wants
to finance the purchase with a loan from
the FDIC?
340.4 What are the restrictions on the sale
of assets by the FDIC regardless of the
method of financing?
340.5 Can the FDIC deny a loan to a buyer
who is not disqualified from purchasing
assets using seller-financing under this
regulation?
340.6 What is the effect of this part on
transactions that were entered into
before its effective date?
340.7 When is a certification required, and
who does not have to provide a
certification?
340.8 Does this part apply in the case of a
workout, resolution, or settlement of
obligations?
Authority: 12 U.S.C. 1819 (Tenth), 1821(p).
§ 340.1 What is the statutory authority for
the regulation, what are its purpose and
scope, and can the FDIC have other policies
on related topics?
(a) Authority. The statutory authority
for adopting this part is section 11(p) of
the Federal Deposit Insurance Act (FDI
Act), 12 U.S.C. 1821(p). Section 11(p)
was added to the FDI Act by section 20
of the Resolution Trust Corporation
Completion Act (Pub. L. 103–204, 107
Stat. 2369 (1993)).
(b) Purpose. The purpose of this part
is to prohibit individuals or entities that
improperly profited or engaged in
wrongdoing at the expense of a failed
institution or covered financial
company, or seriously mismanaged a
failed institution, from buying assets of
a failed institution from the Federal
Deposit Insurance Corporation (FDIC).
(c) Scope. (1) The restrictions of this
part generally apply to sales of assets of
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failed institutions owned or controlled
by the FDIC in any capacity.
(2) The restrictions in this section
apply to the sale of assets of a subsidiary
of a failed institution or a bridge
depository institution if the FDIC
controls the terms of the sale by
agreement or in its role as shareholder.
(3) Unless we determine otherwise,
this part does not apply to the sale of
securities in connection with the
investment of corporate and
receivership funds pursuant to the
Investment Policy for Liquidation Funds
managed by the FDIC as it is in effect
from time to time.
(4) In the case of a sale of securities
backed by a pool of assets that may
include assets of failed institutions by a
trust or other entity, this part applies
only to the sale of assets by the FDIC to
an underwriter in an initial offering, and
not to any other purchaser of the
securities.
(5) The restrictions of this part do not
apply to a sale of a security or a group
or index of securities, a commodity, or
any qualified financial contract that, in
each case, customarily is traded through
a financial intermediary, as defined in
§ 340.2, where the seller cannot control
selection of the purchaser and the sale
is consummated through that customary
practice.
(6) The restrictions of this part do not
apply to a judicial sale or a trustee’s sale
of property that secures an obligation to
the FDIC where the sale is not
conducted or controlled by the FDIC.
(d) The FDIC retains the authority to
establish other policies restricting asset
sales. Neither 12 U.S.C. 1821(p) nor this
part in any way limits the authority of
the FDIC to establish policies
prohibiting the sale of assets to
prospective purchasers who have
injured any failed institution, or to other
prospective purchasers, such as certain
employees or contractors of the FDIC, or
individuals who are not in compliance
with the terms of any debt or duty owed
to the FDIC. Any such policies may be
independent of, in conjunction with, or
in addition to the restrictions set forth
in this part.
§ 340.2
Definitions.
Many of the terms used in this part
are defined in the Federal Deposit
Insurance Act, 12 U.S.C. 1811, et seq.
Additionally, for the purposes of this
part, the following terms are defined:
(a) Associated person of an individual
or entity means:
(1) With respect to an individual:
(i) The individual’s spouse or
dependent child or any member of his
or her immediate household;
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(ii) A partnership of which the
individual is or was a general or limited
partner;
(iii) A limited liability company of
which the individual is or was a
member; or
(iv) A corporation of which the
individual is or was an officer or
director.
(2) With respect to a partnership, a
managing or general partner of the
partnership or with respect to a limited
liability company, a manager; or
(3) With respect to any entity, an
individual or entity who, acting
individually or in concert with one or
more individuals or entities, owns or
controls 25 percent or more of the
entity.
(b) Default means any failure to
comply with the terms of an obligation
to such an extent that:
(1) A judgment has been rendered in
favor of the FDIC or a failed institution;
or
(2) In the case of a secured obligation,
the property securing such obligation is
foreclosed on.
(c) FDIC means the Federal Deposit
Insurance Corporation.
(d) Failed institution means any
insured depository institution (as
defined in 12 U.S.C. 1813(c)) that has
been under the conservatorship or
receivership of the FDIC or any of its
predecessors.
(e) Financial intermediary means any
broker, dealer, bank, underwriter,
exchange, clearing agency registered
with the Securities and Exchange
Commission (SEC) under section 17A of
the Securities Exchange Act of 1934,
transfer agent (as defined in section
3(a)(25) of the Securities Exchange Act
of 1934), central counterparty or any
other entity whose role is to facilitate a
transaction by, as a riskless
intermediary, purchasing a security or
qualified financial contract from one
counterparty and then selling it to
another.
(f) Obligation means any debt or duty
to pay money owed to the FDIC or a
failed institution, including any
guarantee of any such debt or duty.
(g) Person means an individual, or an
entity with a legally independent
existence, including: A trustee; the
beneficiary of at least a 25 percent share
of the proceeds of a trust; a partnership;
a corporation; an association; or other
organization or society.
(h) Substantial loss means:
(1) An obligation that is delinquent
for ninety (90) or more days and on
which there remains an outstanding
balance of more than $50,000;
(2) An unpaid final judgment in
excess of $50,000 regardless of whether
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it becomes forgiven in whole or in part
in a bankruptcy proceeding;
(3) A deficiency balance following a
foreclosure of collateral in excess of
$50,000, regardless of whether it
becomes discharged in whole or in part
in a bankruptcy proceeding;
(4) Any loss in excess of $50,000
evidenced by an IRS Form 1099–C
(Information Reporting for Cancellation
of Debt).
§ 340.3 What are the restrictions on the
sale of assets by the FDIC if the buyer
wants to finance the purchase with a loan
from the FDIC?
A person may not borrow money or
accept credit from the FDIC in
connection with the purchase of any
assets of a failed institution from the
FDIC if:
(a) There has been a default with
respect to one or more obligations
totaling in excess of $1,000,000 owed by
that person or its associated person; and
(b) The person or its associated person
made any fraudulent misrepresentations
in connection with any such
obligation(s).
§ 340.4 What are the restrictions on the
sale of assets by the FDIC regardless of the
method of financing?
(a) A person may not acquire any
assets of a failed institution from the
FDIC if the person or its associated
person:
(1) Has participated, as an officer or
director of a failed institution or of an
affiliate of a failed institution, in a
material way in one or more
transaction(s) that caused a substantial
loss to that failed institution;
(2) Has been removed from, or
prohibited from participating in the
affairs of, a failed institution pursuant to
any final enforcement action by the
Office of the Comptroller of the
Currency, the Board of Governors of the
Federal Reserve System, the FDIC, or
any of their predecessors or successors;
(3) Has demonstrated a pattern or
practice of defalcation regarding
obligations to any failed institution;
(4) Has been convicted of committing
or conspiring to commit any offense
under 18 U.S.C. 215, 656, 657, 1005,
1006, 1007, 1008, 1014, 1032, 1341,
1343 or 1344 affecting any failed
institution and there has been a default
with respect to one or more obligations
owed by that person or its associated
person; or
(5) Would be prohibited from
purchasing the assets of a covered
financial company from the FDIC under
12 U.S.C. 5390(r) or its implementing
regulation at 12 CFR part 380.13.
(b) For purposes of paragraph (a) of
this section, a person has participated
PO 00000
Frm 00018
Fmt 4700
Sfmt 4700
‘‘in a material way in a transaction that
caused a substantial loss to a failed
institution’’ if, in connection with a
substantial loss to a failed institution,
the person has been found in a final
determination by a court or
administrative tribunal, or is alleged in
a judicial or administrative action
brought by the FDIC or by any
component of the government of the
United States or of any state:
(1) To have violated any law,
regulation, or order issued by a federal
or state banking agency, or breached or
defaulted on a written agreement with a
federal or state banking agency, or
breached a written agreement with a
failed institution;
(2) To have engaged in an unsafe or
unsound practice in conducting the
affairs of a failed institution; or
(3) To have breached a fiduciary duty
owed to a failed institution.
(c) For purposes of paragraph (a) of
this section, a person or its associated
person has demonstrated a ‘‘pattern or
practice of defalcation’’ regarding
obligations to a failed institution if the
person or associated person has:
(1) Engaged in more than one
transaction that created an obligation on
the part of such person or its associated
person with intent to cause a loss to any
insured depository institution or with
reckless disregard for whether such
transactions would cause a loss to any
such insured depository institution; and
(2) The transactions, in the aggregate,
caused a substantial loss to one or more
failed institution(s).
§ 340.5 Can the FDIC deny a loan to a
buyer who is not disqualified from
purchasing assets using seller-financing
under this regulation?
The FDIC still has the right to make
an independent determination, based
upon all relevant facts of a person’s
financial condition and history, of that
person’s eligibility to receive any loan
or extension of credit from the FDIC,
even if the person is not in any way
disqualified from purchasing assets
from the FDIC under the restrictions set
forth in this part.
§ 340.6 What is the effect of this part on
transactions that were entered into before
its effective date?
This part does not affect the
enforceability of a contract of sale and/
or agreement for seller financing in
effect prior to July 1, 2000.
§ 340.7 When is a certification required,
and who does not have to provide a
certification?
(a) Before any person may purchase
any asset from the FDIC that person
must certify, under penalty of perjury,
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that none of the restrictions contained
in this part applies to the purchase. The
person must also certify that neither the
identity nor form of the person, nor any
aspect of the contemplated transaction,
has been created or altered with the
intent, in whole or in part, to allow an
individual or entity who otherwise
would be ineligible to purchase assets
from the FDIC to benefit directly or
indirectly from the proposed
transaction. The FDIC may establish the
form of the certification and may change
the form from time to time.
(b) Notwithstanding paragraph (a) of
this section, and unless the Director of
the FDIC’s Division of Resolutions and
Receiverships or designee in his or her
discretion so requires, a certification
need not be provided by:
(1) A state or political subdivision of
a state;
(2) A federal agency or
instrumentality such as the Government
National Mortgage Association;
(3) A federally-regulated, governmentsponsored enterprise such as the
Federal National Mortgage Association
or Federal Home Loan Mortgage
Corporation; or
(4) A bridge depository institution.
§ 340.8 Does this part apply in the case of
a workout, resolution, or settlement of
obligations?
The restrictions of §§ 340.3 and 340.4
do not apply if the sale or transfer of an
asset resolves or settles, or is part of the
resolution or settlement of, one or more
obligations or claims that have been, or
could have been, asserted by the FDIC
against the person with whom the FDIC
is settling regardless of the amount of
such obligations or claims.
Dated at Washington, DC, this 21st day of
April 2015.
By Order of the Board of Directors, Federal
Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2015–09572 Filed 4–23–15; 8:45 am]
BILLING CODE 6714–01–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 71
tkelley on DSK3SPTVN1PROD with RULES
[Docket No. FAA–2014–0746; Airspace
Docket No. 14–AGL–2]
Establishment of Class E Airspace;
Cando, ND
Federal Aviation
Administration (FAA), DOT.
ACTION: Final rule.
AGENCY:
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Jkt 235001
This action establishes Class
E airspace at Cando, ND. Controlled
airspace is necessary to accommodate
new Standard Instrument Approach
Procedures (SIAP) at Cando Municipal
Airport. The FAA is taking this action
to enhance the safety and management
of Instrument Flight Rules (IFR)
operations for SIAPs at the airport.
DATES: Effective date: 0901 UTC, June
25, 2015. The Director of the Federal
Register approves this incorporation by
reference action under 1 Code of Federal
Regulations, Part 51, subject to the
annual revision of FAA Order 7400.9
and publication of conforming
amendments.
ADDRESSES: FAA Order 7400.9Y,
Airspace Designations and Reporting
Points, and subsequent amendments can
be viewed on line at https://
www.faa.gov/airtraffic/publications/.
The Order is also available for
inspection at the National Archives and
Records Administration (NARA). For
information on the availability of this
material at NARA, call 202–741–6030,
or go to https://www.archives.gov/
federal_register/code_of_federalregulations/ibr_locations.html.
FAA Order 7400.9, Airspace
Designations and Reporting Points, is
published yearly and effective on
September 15. For further information,
you can contact the Airspace Policy and
ATC Regulations Group, Federal
Aviation Administration, 800
Independence Avenue SW.,
Washington, DC, 29591; telephone: 202–
267–8783.
FOR FURTHER INFORMATION CONTACT:
Rebecca Shelby, Central Service Center,
Operations Support Group, Federal
Aviation Administration, Southwest
Region, 2601 Meacham Blvd., Fort
Worth, TX 76137; telephone: 817–321–
7740.
SUPPLEMENTARY INFORMATION:
SUMMARY:
History
On October 28, 2014, the FAA
published in the Federal Register a
notice of proposed rulemaking (NPRM)
to establish Class E airspace for IFR
operations at Cando Municipal Airport,
Cando, ND, creating additional
controlled airspace at Cando Municipal
Airport (79 FR 64151) Docket No. FAA–
2014–0746. Interested parties were
invited to participate in this rulemaking
effort by submitting written comments
on the proposal to the FAA. No
comments were received. Class E
airspace designations are published in
paragraph 6005 of FAA Order 7400.9Y
dated August 6, 2014, and effective
September 15, 2014, which is
incorporated by reference in 14 CFR
PO 00000
Frm 00019
Fmt 4700
Sfmt 4700
22891
part 71.1. The Class E airspace
designations listed in this document
will be published subsequently in the
Order.
Availability and Summary of
Documents for Incorporation by
Reference
This document amends FAA Order
7400.9Y, airspace Designations and
Reporting Points, dated August 6, 2014,
and effective September 15, 2014. FAA
Order 7400.9Y is publicly available as
listed in the ADDRESSES section of this
final rule. FAA Order 7400.9Y lists
Class A,B,C,D, and E airspace areas, air
traffic service routes, and reporting
points.
The Rule
This action amends Title 14 Code of
Federal Regulations (14 CFR) Part 71 by
establishing Class E airspace designated
as a surface area within a 6.5-mile
radius of Cando Municipal Airport,
Cando, ND. Controlled airspace is
necessary to accommodate new
Standard Instrument Approach
Procedures at Cando Municipal Airport.
The FAA is taking this action to
enhance the safety and management of
IFR operations for SIAPs at the airport.
The FAA has determined that this
regulation only involves an established
body of technical regulations for which
frequent and routine amendments are
necessary to keep them operationally
current. Therefore, this regulation: (1) Is
not a ‘‘significant regulatory action’’
under Executive Order 12866; (2) is not
a ‘‘significant rule’’ under DOT
Regulatory Policies and Procedures (44
FR 11034; February 26, 1979); and (3)
does not warrant preparation of a
regulatory evaluation as the anticipated
impact is so minimal. Since this is a
routine matter that only affects air traffic
procedures and air navigation, it is
certified that this rule, when
promulgated, does not have a significant
economic impact on a substantial
number of small entities under the
criteria of the Regulatory Flexibility Act.
The FAA’s authority to issue rules
regarding aviation safety is found in
Title 49 of the U.S. Code. Subtitle 1,
Section 106, describes the authority of
the FAA Administrator. Subtitle VII,
Aviation Programs, describes in more
detail the scope of the agency’s
authority. This rulemaking is
promulgated under the authority
described in Subtitle VII, Part A,
Subpart I, Section 40103. Under that
section, the FAA is charged with
prescribing regulations to assign the use
of airspace necessary to ensure the
safety of aircraft and the efficient use of
airspace. This regulation is within the
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]]>Agencies
[Federal Register Volume 80, Number 79 (Friday, April 24, 2015)]
[Rules and Regulations]
[Pages 22886-22891]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-09572]
=======================================================================
-----------------------------------------------------------------------
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 340
RIN 3064-AE26
Restrictions on Sale of Assets of a Failed Institution by the
Federal Deposit Insurance Corporation
AGENCY: Federal Deposit Insurance Corporation.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: With this final rule, the Federal Deposit Insurance
Corporation (FDIC) is revising its rule concerning restrictions on the
sale of assets of a failed institution under the Federal Deposit
Insurance Act in order to clarify the purpose, scope and applicability
of that rule and to make that rule more consistent with the FDIC's rule
concerning restrictions on the sale of assets of a covered financial
company under the Dodd-Frank Wall Street Reform and Consumer Protection
Act.
DATES: This final rule is effective July 1, 2015.
FOR FURTHER INFORMATION CONTACT: James D. Sigler, Senior Franchise and
Asset Marketing Specialist, 571-858-8284; Elizabeth Falloon,
Supervisory Counsel, Legal Division, 703-562-6148; Shane Kiernan,
Counsel, Legal Division, 703-562-2632; Federal Deposit Insurance
Corporation, 550 17th Street NW., Washington, DC 20429.
SUPPLEMENTARY INFORMATION:
I. Background
The FDIC promulgated part 340 in 2000 to implement section 11(p) of
the Federal Deposit Insurance Act, (12 U.S.C. 1821(p) (section 11(p)).
Under section 11(p), individuals or entities whose acts or omissions
have, or may have, contributed to the failure of an insured depository
institution (failed institution) cannot buy the assets of that failed
institution from the FDIC. The FDIC expanded the purchaser eligibility
restriction as permitted by statute when it promulgated part 340 by
precluding such individuals or entities from purchasing the assets of
any failed institution, not only the particular institution affected by
the actions of the respective individuals or entities. As provided in
section 11(p), part 340 also prohibits the sale of assets involving
FDIC financing to certain persons who have defaulted on obligations of
$1 million or more, in aggregate, owed to a failed insured depository
institution or the FDIC and who have made fraudulent misrepresentations
in connection with any of those obligations. Compliance with part 340
is established through a self-certification process in which a
prospective purchaser certifies that it is eligible to purchase an
asset from the FDIC and that the FDIC's sale of an asset to such
prospective purchaser would not be restricted under section 11(p) or
part 340.
In March of 2014, the FDIC promulgated Sec. 380.13 to implement
section 210(r) of the Dodd-Frank Wall Street Reform and Consumer
Protection Act, (12 U.S.C. 5390(r) (section 210(r)). Section 210(r)
prohibits certain sales of assets held by the FDIC in the course of
liquidating a covered financial company. Because section 210(r) and
section 11(p) share substantially similar statutory language, part 340
served as a model for the development of Sec. 380.13. While many
aspects of part 340 were included in Sec. 380.13, FDIC staff
identified new or different concepts to include in Sec. 380.13 that
were not already in part 340. The addition of these concepts into part
340 will improve part 340 and make it more consistent with Sec.
380.13.
II. Notice of Proposed Rulemaking
On October 21, 2014, the Board of Directors approved a notice of
proposed rulemaking entitled ``Restrictions on Sale of Assets by the
Federal Deposit Insurance Corporation'' (the proposed rule), which was
published in the Federal Register on October 24, 2014 with a 60-day
comment period that
[[Page 22887]]
ended on December 23, 2014.\1\ One comment letter addressing the
proposed rule was received by the FDIC expressing general support for
the proposed rule. The final rule is substantively the same as the
proposed rule.
---------------------------------------------------------------------------
\1\ 79 FR 63580.
---------------------------------------------------------------------------
III. The Final Rule
With this final rule, the FDIC is adopting the revisions to part
340 in substantially the same form as they were presented in the
proposed rule. Part 340 is revised in a number of ways. Some revisions
are significant, substantive changes and others are non-substantive,
technical or conforming changes. This supplemental information section
describes the substantive changes made by the final rule.
The title of part 340 is revised to clarify that part 340 applies
to sales of assets of a failed institution (specifically, a failed
insured depository institution). This change is made to help
distinguish part 340 from Sec. 380.13, which applies to sales of
assets of a covered financial company by the FDIC. While the two rules
will preclude sales to certain prospective purchasers in a very similar
manner, each pertains to a separate set of asset sales by the FDIC.
The final rule amends Sec. 340.1(b), which sets forth the purpose
of part 340, to extend the restrictions on sales of assets of a failed
institution to individuals or entities who are also prohibited from
purchasing assets of a covered financial company from the FDIC under
section 210(r) and Sec. 380.13. This ensures consistency between part
340 and Sec. 380.13. Under Sec. 380.13, individuals or entities
prohibited from purchasing assets of a failed institution under part
340 are also prohibited from purchasing assets of a covered financial
company under Sec. 380.13. Likewise, individuals or entities
prohibited from purchasing assets of a covered financial company under
Sec. 380.13 are prohibited from purchasing assets of a failed
institution under part 340.
The final rule makes three changes to clarify part 340's scope of
coverage, set forth in Sec. 340.1(c). First, the final rule clarifies
the applicability of part 340 to sales of assets by a subsidiary of a
failed institution or by a bridge depository institution. Sales of
assets of a failed institution's subsidiary or a bridge depository
institution are not expressly subject to section 11(p). However, if the
FDIC has the right to control the terms of a sale of assets of a failed
institution's subsidiary or a bridge depository institution, or has the
ability to control selection of the purchaser of those assets under an
agency agreement or as shareholder, the restrictions set forth in
section 11(p) and part 340 should apply. The FDIC has discretionary
authority to expand the scope of coverage because section 11(p) sets
the minimum requirements for restrictions on sales of assets, and the
FDIC may prescribe further restrictions on its own accord. Under the
final rule's revision of part 340, the restrictions apply to sales of
assets of a failed institution's subsidiary or a bridge depository
institution if the FDIC controls the terms of the sale by agreement or
as shareholder.
Second, the final rule amends Sec. 340.1 to explicitly state that
part 340 does not apply to certain types of transactions involving
marketable securities and other financial instruments. Under Sec.
340.1(c)(5), a sale of a security or a group or index of securities, a
commodity, or any qualified financial contract that, in each case,
customarily is traded through a financial intermediary where the seller
cannot control selection of the purchaser would not be covered by part
340 if the sale is to be consummated through that customary practice.
For example, if the FDIC were to sell publicly-traded stocks or bonds
that the failed institution held, it might engage a broker or custodian
to conduct or facilitate the sale. The broker or custodian would then
tender the securities to the market and accept prevailing market terms
offered by another broker, a specialist, a central counterparty or a
similar financial intermediary who would then sell the security to
another purchaser. In this scenario, it is not possible for the FDIC to
control selection of the end purchaser at the time of sale. Therefore,
the transaction cannot be a sale covered by section 11(p) because the
FDIC would have no way to select the prospective purchaser or determine
whether that purchaser would or would not be prohibited from purchasing
the asset. Moreover, a prospective purchaser of such assets will not be
able to select the FDIC as the seller and therefore could not determine
whether section 11(p) and part 340 apply to the transaction. The final
rule defines the term ``financial intermediary,'' as discussed below,
for the purposes of part 340. This express limitation on the scope of
part 340's coverage will provide greater certainty regarding the
applicability of section 11(p) and part 340 to market participants and
FDIC staff who conduct asset sales.
Third, the final rule clarifies in Sec. 340.1(c)(6) that part 340
is not applicable to a judicial sale or a trustee's sale of property
securing an obligation to the FDIC if the sale is not conducted or
controlled by the FDIC. Although the FDIC could have a security
interest in property serving as collateral and therefore the authority
to initiate a foreclosure action, the selection of the purchaser and
terms of the sale are not necessarily within the FDIC's control.
Rather, a court or trustee would conduct the sale in accordance with
applicable state law and would select the purchaser. In this situation,
the sale is not a sale by the FDIC. While the plain language of part
340 does not suggest that such a sale would fall within its scope, the
FDIC makes this change for the sake of clarity. This exception does not
affect sales if the FDIC is in possession of the collateral property
and conducts the sale itself, however. Where the FDIC has control over
the manner and terms of the sale, it will require the prospective
purchaser's certification that the prospective purchaser is not
prohibited under section 11(p) or part 340 from purchasing the asset.
Section 340.2 sets forth definitions for certain terms used in part
340 and several are revised by the final rule. The definition of
``associated person'' is revised to include limited liability companies
of which an individual is a member (or was a member at the time of the
occurrence of any event that would result in a restriction on sale as
set forth in Sec. 340.4) if the prospective purchaser of assets is an
individual and, if the prospective purchaser is a limited liability
company, to include the manager of the limited liability company. The
definition of ``failed institution'' is revised to remove reference to
entities ``owned and controlled'' by the failed institution because the
revision to Sec. 340.1(c), discussed above, explicitly states that
sales of subsidiary assets are covered under part 340 if the FDIC
controls the terms of the sale by agreement or in its role as
shareholder. Additionally, references to the Resolution Trust
Corporation and RTC are removed in favor of referencing the FDIC's
``predecessor'' agencies.
The final rule also adds a new term for use in part 340,
``financial intermediary,'' which is defined to mean any broker,
dealer, bank, underwriter, exchange, clearing agency registered with
the SEC under section 17A of the Securities Exchange Act of 1934,
transfer agent (as defined in section 3(a)(25) of the Securities
Exchange Act of 1934), central counterparty or any other entity whose
role is to facilitate a transaction by, as a riskless intermediary,
purchasing a security or qualified financial contract from one
counterparty and then selling it to another. This definition is used to
[[Page 22888]]
identify transactions of marketable financial instruments described in
Sec. 340.1(c) that would not be covered by section 11(p) or part 340.
Although not separately defined in the final rule, the term
``security'' is intended to apply broadly and include, without
limitation, all instruments which constitute securities under Federal
securities laws.
Section 340.4 sets forth the conditions under which a person
(whether an individual or entity) is prohibited from acquiring assets
of a failed institution from the FDIC. Those conditions are that the
person, or its associated person: (1) Participated as an officer or
director of a failed institution or of an affiliate of a failed
institution, ``in a material way in a transaction that caused a
substantial loss to the failed institution'' (as defined in paragraph
(b) of Sec. 340.4); (2) has been removed from a failed institution by
order of a primary federal regulatory agency; (3) engaged in a
``pattern or practice of defalcation'' (as defined in paragraph (c) of
Sec. 340.4) with respect to obligations owed to a failed institution;
or (4) committed a certain criminal offense against a financial
institution and is in default on an obligation owed by that person or
its associated person. The final rule adds a fifth restriction:
Prohibition from purchasing assets of a covered financial company from
the FDIC. As explained above, the FDIC believes part 340 should also
restrict the sale of assets of a failed institution to individuals or
entities who are also prohibited from purchasing assets of a covered
financial company from the FDIC under section 210(r) and Sec. 380.13.
This ensures consistent treatment of prospective purchasers of assets
from the FDIC, whether such assets are assets of a covered financial
company or of a failed institution.
The final rule amends paragraph (a) of Sec. 340.7, which sets
forth the requirement that a prospective purchaser certify that none of
the restrictions set forth in part 340 apply to the sale, by adding a
sentence stating that the person must also certify that it is not using
a straw purchaser or other subterfuge to allow it to purchase an asset
of an insured depository institution from the FDIC or benefit from such
transaction if such person would otherwise be ineligible to purchase
assets from the FDIC under part 340. The FDIC's form certification (the
Purchaser Eligibility Certification, FDIC Form 7300/06) already
includes a statement under which a prospective purchaser certifies that
neither the identity nor form of the prospective purchaser, nor any
aspect of the contemplated transaction, has been created or altered to
allow an individual or entity who otherwise would be ineligible to
purchase assets of a failed institution from the FDIC to benefit from
the sale. Explicitly stating this requirement in the regulatory text
itself strengthens part 340.
Paragraph (b) of Sec. 340.7, which excepts from the self-
certification requirement certain federal agencies or instrumentalities
and states or political subdivisions of states, is revised in the final
rule to include bridge depository institutions as well. A bridge
depository institution is expected to be in compliance with part 340
because such entity is newly chartered and subject to control or
oversight by the FDIC.
Finally, the final rule revises Sec. 340.8, which provides that
part 340 does not apply if the sale resolves or settles a person's
obligation to the FDIC, to also except a sale that resolves a claim
that the FDIC has asserted against a person. This is not intended to be
a substantive change but to more closely track section 11(p), which
excepts sales that resolve or settle claims as well as obligations.
This change ensures that the regulation cites both bases for exception
set forth in the statute. It also ensures consistency with the
equivalent provision in paragraph (a)(2)(vi) of Sec. 380.13.
The final rule's changes to part 340 ensure consistency among part
340 and Sec. 380.13. This will facilitate efficient administration of
the two rules and will help the public better understand how and when
each applies. One comment submitted in response to the proposed rule
noted that the revisions to part 340 will help to clarify the purpose,
scope and applicability, and will make part 340 more consistent with
the parallel provision in the FDIC's Orderly Liquidation Authority
regulations that implements section 210(r) (Sec. 380.13). The comment
goes on to state that the proposed revisions will improve regulatory
consistency and understandability, align better with market practices,
and promote the regulatory objectives and intentions under the Federal
Deposit Insurance Act.
The substantive amendments and technical and conforming changes to
part 340 that are made in the final rule are extensive. Therefore, the
FDIC is revising and restating the text of part 340 in full rather than
through fragmentary amendments.
III. Regulatory Analysis and Procedure
A. Paperwork Reduction Act
In accordance with the requirements of the Paperwork Reduction Act
(PRA), the FDIC may not conduct or sponsor, and the respondent is not
required to respond to, an information collection unless it displays a
currently valid Office of Management and Budget (OMB) control
number.\2\ The FDIC has developed a purchaser eligibility certification
form for use by prospective purchasers of assets of a failed
institution to establish compliance with part 340. The certification is
an OMB-approved collection of information under the PRA.\3\ The FDIC
expects that the net PRA burden estimates of this collection will not
be affected by the changes made in the final rule. Any subsequent
changes to the form will be submitted by the FDIC to OMB for review and
approval.
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\2\ 44 U.S.C. 3501, et seq.
\3\ OMB Number: 3064-0135.
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Title of Information Collection: Purchaser Eligibility
Certification.
OMB Control Number: 3064-0135.
Form Number: FDIC Form 7300/06.
Affected Public: Prospective purchasers of failed insured
depository institution assets.
Frequency of Response: Event generated.
Estimated Number of Respondents: 1,500.
Time per Response: 30 minutes.
Total Estimated Annual Burden: 750 hours.
The FDIC has a continuing interest in comments on paperwork burden.
Comments are invited on (a) whether the collection of information is
necessary for the proper performance of the FDIC'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;
and (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.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) requires that an agency either
certify that a final rule will not have a significant economic impact
on a substantial number of small entities or prepare an initial
regulatory flexibility analysis of the rule and publish the analysis
for comment.\4\ The RFA provides that an agency is not required to
prepare and publish a regulatory flexibility analysis if the agency
certifies that the final rule will not have a
[[Page 22889]]
significant economic impact on a substantial number of small entities.
The FDIC hereby certifies pursuant to 5 U.S.C. 605(b) that the final
rule would not have a significant economic impact on a substantial
number of small entities within the meaning of the RFA.
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\4\ 5 U.S.C. 601, et seq.
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Under regulations issued by the Small Business Administration, a
``small entity'' includes those firms in the ``Finance and Insurance''
sector whose size varies from $7.5 million or less in assets (mortgage
and nonmortgage loan brokers) to $550 million or less in assets
(commercial banks, savings institutions, credit unions, and others).\5\
The final rule imposes no new burden on prospective purchasers of
assets sold by the FDIC. The requirement that a prospective purchaser
complete and submit the Purchaser Eligibility Certification described
above is a precondition to sale that is already required. Completion of
the Purchaser Eligibility Certification does not require the use of
professional skills or the preparation of special reports or records
and should continue to have minimal economic impact on those
individuals and entities that seek to purchase assets from the FDIC.
Thus, any impact on small entities will not be substantial.
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\5\ 13 CFR 121.201.
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C. Small Business Regulatory Enforcement Fairness Act
The Office of Management and Budget has determined that the final
rule is not a major rule within the meaning of the Small Business
Regulatory Enforcement Fairness Act of 1996 (SBREFA), which provides
for agencies to report rules to Congress and for Congress to review
such rules.\6\ The reporting requirement is triggered in instances
where the FDIC issues a final rule as defined by the Administrative
Procedure Act (APA).\7\ Because the FDIC is issuing a final rule as
defined by the APA, the FDIC will file the reports required by the
SBREFA.
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\6\ Public Law 104-121, 110 Stat. 857.
\7\ 5 U.S.C. 551 et seq.
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D. Plain Language
Section 722 of the Gramm-Leach-Bliley Act of 1999 requires the
Federal banking agencies to use plain language in all proposed and
final rules published after January 1, 2000.\8\ The FDIC has sought to
present the final rule in a simple and straightforward manner.
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\8\ Public Law 106-102, 113 Stat. 1338, 1471.
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Text of the Final Rule
Federal Deposit Insurance Corporation
12 CFR Chapter III
List of Subjects in 12 CFR Part 340
Asset disposition, Banks, banking.
Authority and Issuance
For the reasons stated in the SUPPLEMENTARY INFORMATION, the
Federal Deposit Insurance Corporation revises part 340 of title 12 of
the Code of Federal Regulations to read as follows:
PART 340--RESTRICTIONS ON SALE OF ASSETS OF A FAILED INSTITUTION BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION
Sec.
340.1 What is the statutory authority for the regulation, what are
its purpose and scope, and can the FDIC have other policies on
related topics?
340.2 Definitions.
340.3 What are the restrictions on the sale of assets by the FDIC if
the buyer wants to finance the purchase with a loan from the FDIC?
340.4 What are the restrictions on the sale of assets by the FDIC
regardless of the method of financing?
340.5 Can the FDIC deny a loan to a buyer who is not disqualified
from purchasing assets using seller-financing under this regulation?
340.6 What is the effect of this part on transactions that were
entered into before its effective date?
340.7 When is a certification required, and who does not have to
provide a certification?
340.8 Does this part apply in the case of a workout, resolution, or
settlement of obligations?
Authority: 12 U.S.C. 1819 (Tenth), 1821(p).
Sec. 340.1 What is the statutory authority for the regulation, what
are its purpose and scope, and can the FDIC have other policies on
related topics?
(a) Authority. The statutory authority for adopting this part is
section 11(p) of the Federal Deposit Insurance Act (FDI Act), 12 U.S.C.
1821(p). Section 11(p) was added to the FDI Act by section 20 of the
Resolution Trust Corporation Completion Act (Pub. L. 103-204, 107 Stat.
2369 (1993)).
(b) Purpose. The purpose of this part is to prohibit individuals or
entities that improperly profited or engaged in wrongdoing at the
expense of a failed institution or covered financial company, or
seriously mismanaged a failed institution, from buying assets of a
failed institution from the Federal Deposit Insurance Corporation
(FDIC).
(c) Scope. (1) The restrictions of this part generally apply to
sales of assets of failed institutions owned or controlled by the FDIC
in any capacity.
(2) The restrictions in this section apply to the sale of assets of
a subsidiary of a failed institution or a bridge depository institution
if the FDIC controls the terms of the sale by agreement or in its role
as shareholder.
(3) Unless we determine otherwise, this part does not apply to the
sale of securities in connection with the investment of corporate and
receivership funds pursuant to the Investment Policy for Liquidation
Funds managed by the FDIC as it is in effect from time to time.
(4) In the case of a sale of securities backed by a pool of assets
that may include assets of failed institutions by a trust or other
entity, this part applies only to the sale of assets by the FDIC to an
underwriter in an initial offering, and not to any other purchaser of
the securities.
(5) The restrictions of this part do not apply to a sale of a
security or a group or index of securities, a commodity, or any
qualified financial contract that, in each case, customarily is traded
through a financial intermediary, as defined in Sec. 340.2, where the
seller cannot control selection of the purchaser and the sale is
consummated through that customary practice.
(6) The restrictions of this part do not apply to a judicial sale
or a trustee's sale of property that secures an obligation to the FDIC
where the sale is not conducted or controlled by the FDIC.
(d) The FDIC retains the authority to establish other policies
restricting asset sales. Neither 12 U.S.C. 1821(p) nor this part in any
way limits the authority of the FDIC to establish policies prohibiting
the sale of assets to prospective purchasers who have injured any
failed institution, or to other prospective purchasers, such as certain
employees or contractors of the FDIC, or individuals who are not in
compliance with the terms of any debt or duty owed to the FDIC. Any
such policies may be independent of, in conjunction with, or in
addition to the restrictions set forth in this part.
Sec. 340.2 Definitions.
Many of the terms used in this part are defined in the Federal
Deposit Insurance Act, 12 U.S.C. 1811, et seq. Additionally, for the
purposes of this part, the following terms are defined:
(a) Associated person of an individual or entity means:
(1) With respect to an individual:
(i) The individual's spouse or dependent child or any member of his
or her immediate household;
[[Page 22890]]
(ii) A partnership of which the individual is or was a general or
limited partner;
(iii) A limited liability company of which the individual is or was
a member; or
(iv) A corporation of which the individual is or was an officer or
director.
(2) With respect to a partnership, a managing or general partner of
the partnership or with respect to a limited liability company, a
manager; or
(3) With respect to any entity, an individual or entity who, acting
individually or in concert with one or more individuals or entities,
owns or controls 25 percent or more of the entity.
(b) Default means any failure to comply with the terms of an
obligation to such an extent that:
(1) A judgment has been rendered in favor of the FDIC or a failed
institution; or
(2) In the case of a secured obligation, the property securing such
obligation is foreclosed on.
(c) FDIC means the Federal Deposit Insurance Corporation.
(d) Failed institution means any insured depository institution (as
defined in 12 U.S.C. 1813(c)) that has been under the conservatorship
or receivership of the FDIC or any of its predecessors.
(e) Financial intermediary means any broker, dealer, bank,
underwriter, exchange, clearing agency registered with the Securities
and Exchange Commission (SEC) under section 17A of the Securities
Exchange Act of 1934, transfer agent (as defined in section 3(a)(25) of
the Securities Exchange Act of 1934), central counterparty or any other
entity whose role is to facilitate a transaction by, as a riskless
intermediary, purchasing a security or qualified financial contract
from one counterparty and then selling it to another.
(f) Obligation means any debt or duty to pay money owed to the FDIC
or a failed institution, including any guarantee of any such debt or
duty.
(g) Person means an individual, or an entity with a legally
independent existence, including: A trustee; the beneficiary of at
least a 25 percent share of the proceeds of a trust; a partnership; a
corporation; an association; or other organization or society.
(h) Substantial loss means:
(1) An obligation that is delinquent for ninety (90) or more days
and on which there remains an outstanding balance of more than $50,000;
(2) An unpaid final judgment in excess of $50,000 regardless of
whether it becomes forgiven in whole or in part in a bankruptcy
proceeding;
(3) A deficiency balance following a foreclosure of collateral in
excess of $50,000, regardless of whether it becomes discharged in whole
or in part in a bankruptcy proceeding;
(4) Any loss in excess of $50,000 evidenced by an IRS Form 1099-C
(Information Reporting for Cancellation of Debt).
Sec. 340.3 What are the restrictions on the sale of assets by the
FDIC if the buyer wants to finance the purchase with a loan from the
FDIC?
A person may not borrow money or accept credit from the FDIC in
connection with the purchase of any assets of a failed institution from
the FDIC if:
(a) There has been a default with respect to one or more
obligations totaling in excess of $1,000,000 owed by that person or its
associated person; and
(b) The person or its associated person made any fraudulent
misrepresentations in connection with any such obligation(s).
Sec. 340.4 What are the restrictions on the sale of assets by the
FDIC regardless of the method of financing?
(a) A person may not acquire any assets of a failed institution
from the FDIC if the person or its associated person:
(1) Has participated, as an officer or director of a failed
institution or of an affiliate of a failed institution, in a material
way in one or more transaction(s) that caused a substantial loss to
that failed institution;
(2) Has been removed from, or prohibited from participating in the
affairs of, a failed institution pursuant to any final enforcement
action by the Office of the Comptroller of the Currency, the Board of
Governors of the Federal Reserve System, the FDIC, or any of their
predecessors or successors;
(3) Has demonstrated a pattern or practice of defalcation regarding
obligations to any failed institution;
(4) Has been convicted of committing or conspiring to commit any
offense under 18 U.S.C. 215, 656, 657, 1005, 1006, 1007, 1008, 1014,
1032, 1341, 1343 or 1344 affecting any failed institution and there has
been a default with respect to one or more obligations owed by that
person or its associated person; or
(5) Would be prohibited from purchasing the assets of a covered
financial company from the FDIC under 12 U.S.C. 5390(r) or its
implementing regulation at 12 CFR part 380.13.
(b) For purposes of paragraph (a) of this section, a person has
participated ``in a material way in a transaction that caused a
substantial loss to a failed institution'' if, in connection with a
substantial loss to a failed institution, the person has been found in
a final determination by a court or administrative tribunal, or is
alleged in a judicial or administrative action brought by the FDIC or
by any component of the government of the United States or of any
state:
(1) To have violated any law, regulation, or order issued by a
federal or state banking agency, or breached or defaulted on a written
agreement with a federal or state banking agency, or breached a written
agreement with a failed institution;
(2) To have engaged in an unsafe or unsound practice in conducting
the affairs of a failed institution; or
(3) To have breached a fiduciary duty owed to a failed institution.
(c) For purposes of paragraph (a) of this section, a person or its
associated person has demonstrated a ``pattern or practice of
defalcation'' regarding obligations to a failed institution if the
person or associated person has:
(1) Engaged in more than one transaction that created an obligation
on the part of such person or its associated person with intent to
cause a loss to any insured depository institution or with reckless
disregard for whether such transactions would cause a loss to any such
insured depository institution; and
(2) The transactions, in the aggregate, caused a substantial loss
to one or more failed institution(s).
Sec. 340.5 Can the FDIC deny a loan to a buyer who is not
disqualified from purchasing assets using seller-financing under this
regulation?
The FDIC still has the right to make an independent determination,
based upon all relevant facts of a person's financial condition and
history, of that person's eligibility to receive any loan or extension
of credit from the FDIC, even if the person is not in any way
disqualified from purchasing assets from the FDIC under the
restrictions set forth in this part.
Sec. 340.6 What is the effect of this part on transactions that were
entered into before its effective date?
This part does not affect the enforceability of a contract of sale
and/or agreement for seller financing in effect prior to July 1, 2000.
Sec. 340.7 When is a certification required, and who does not have to
provide a certification?
(a) Before any person may purchase any asset from the FDIC that
person must certify, under penalty of perjury,
[[Page 22891]]
that none of the restrictions contained in this part applies to the
purchase. The person must also certify that neither the identity nor
form of the person, nor any aspect of the contemplated transaction, has
been created or altered with the intent, in whole or in part, to allow
an individual or entity who otherwise would be ineligible to purchase
assets from the FDIC to benefit directly or indirectly from the
proposed transaction. The FDIC may establish the form of the
certification and may change the form from time to time.
(b) Notwithstanding paragraph (a) of this section, and unless the
Director of the FDIC's Division of Resolutions and Receiverships or
designee in his or her discretion so requires, a certification need not
be provided by:
(1) A state or political subdivision of a state;
(2) A federal agency or instrumentality such as the Government
National Mortgage Association;
(3) A federally-regulated, government-sponsored enterprise such as
the Federal National Mortgage Association or Federal Home Loan Mortgage
Corporation; or
(4) A bridge depository institution.
Sec. 340.8 Does this part apply in the case of a workout, resolution,
or settlement of obligations?
The restrictions of Sec. Sec. 340.3 and 340.4 do not apply if the
sale or transfer of an asset resolves or settles, or is part of the
resolution or settlement of, one or more obligations or claims that
have been, or could have been, asserted by the FDIC against the person
with whom the FDIC is settling regardless of the amount of such
obligations or claims.
Dated at Washington, DC, this 21st day of April 2015.
By Order of the Board of Directors, Federal Deposit Insurance
Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2015-09572 Filed 4-23-15; 8:45 am]
BILLING CODE 6714-01-P
