Restrictions on Sale of Assets of a Failed Institution by the Federal Deposit Insurance Corporation, 22886-22891 [2015-09572]

Download as PDF 22886 Federal Register / Vol. 80, No. 79 / Friday, April 24, 2015 / Rules and Regulations 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 tkelley on DSK3SPTVN1PROD with RULES 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. VerDate Sep<11>2014 15:47 Apr 23, 2015 Jkt 235001 [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: PO 00000 Frm 00014 Fmt 4700 Sfmt 4700 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 E:\FR\FM\24APR1.SGM 24APR1 Federal Register / Vol. 80, No. 79 / Friday, April 24, 2015 / Rules and Regulations tkelley on DSK3SPTVN1PROD with RULES 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. VerDate Sep<11>2014 15:47 Apr 23, 2015 Jkt 235001 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 PO 00000 Frm 00015 Fmt 4700 Sfmt 4700 22887 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 E:\FR\FM\24APR1.SGM 24APR1 tkelley on DSK3SPTVN1PROD with RULES 22888 Federal Register / Vol. 80, No. 79 / Friday, April 24, 2015 / Rules and Regulations 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 VerDate Sep<11>2014 15:47 Apr 23, 2015 Jkt 235001 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), PO 00000 Frm 00016 Fmt 4700 Sfmt 4700 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 E:\FR\FM\24APR1.SGM 24APR1 Federal Register / Vol. 80, No. 79 / Friday, April 24, 2015 / Rules and Regulations 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 tkelley on DSK3SPTVN1PROD with RULES 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 VerDate Sep<11>2014 15:47 Apr 23, 2015 Jkt 235001 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 PO 00000 Frm 00017 Fmt 4700 Sfmt 4700 22889 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; E:\FR\FM\24APR1.SGM 24APR1 tkelley on DSK3SPTVN1PROD with RULES 22890 Federal Register / Vol. 80, No. 79 / Friday, April 24, 2015 / Rules and Regulations (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 VerDate Sep<11>2014 15:47 Apr 23, 2015 Jkt 235001 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, E:\FR\FM\24APR1.SGM 24APR1 Federal Register / Vol. 80, No. 79 / Friday, April 24, 2015 / Rules and Regulations 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: VerDate Sep<11>2014 15:47 Apr 23, 2015 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 http:// 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 http://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 E:\FR\FM\24APR1.SGM 24APR1

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]


=======================================================================
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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.
---------------------------------------------------------------------------

    \2\ 44 U.S.C. 3501, et seq.
    \3\ OMB Number: 3064-0135.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \4\ 5 U.S.C. 601, et seq.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \6\ Public Law 104-121, 110 Stat. 857.
    \7\ 5 U.S.C. 551 et seq.
---------------------------------------------------------------------------

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;

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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 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,

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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, 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