[Federal Register Volume 59, Number 211 (Wednesday, November 2, 1994)]
[Rules and Regulations]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-27082]
[[Page Unknown]]
[Federal Register: November 2, 1994]
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Parts 5 and 16
[Docket No. 94-17]
RIN 1557-AA65
Securities Offering Disclosure Rules
AGENCY: Office of the Comptroller of the Currency, Treasury.
ACTION: Final rule.
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SUMMARY: The Office of the Comptroller of the Currency (OCC) is
amending its regulations governing the disclosure requirements for
offers and sales of national bank securities. This final rule replaces
regulations detailing the contents of offering documents covering
national bank securities and requires that offering documents conform
to the information requirements set forth in the appropriate Securities
and Exchange Commission (SEC) registration form. The final rule also
cross-references certain provisions of the Securities Act of 1933 and
SEC rules.
The purpose of the final rule is to reduce unnecessary regulatory
burdens on national banks and enhance their ability to raise capital,
while maintaining the quality of disclosures provided to investors. The
final rule generally treats national bank securities comparably to
those of other corporations and eliminates a duplicative and
potentially confusing system of regulations and forms.
EFFECTIVE DATE: April 3, 1995.
FOR FURTHER INFORMATION CONTACT: Elizabeth Malone, Senior Attorney,
Securities, Investments, and Fiduciary Practices Division, (202) 874-
5210, Office of the Comptroller of the Currency, 250 E Street SW.,
Washington, DC 20219.
SUPPLEMENTARY INFORMATION:
Background
The OCC's securities offering regulations protect the purchasers of
national bank securities by ensuring that investors receive full
disclosure of all material facts when purchasing such securities, and
also protect the integrity of national bank capital. The OCC
determined, however, that revisions to these regulations were needed to
reduce unnecessary burdens that the requirements imposed on national
banks.
The OCC published a notice of proposed rulemaking (proposal), on
October 15, 1992, seeking public comment on proposed revisions to the
OCC's regulations governing the offer and sale of national bank
securities (57 FR 47,280). The proposal replaced the OCC's former
regulations with a series of regulations based, to the extent
appropriate for national banks, on the Securities Act of 1933
(Securities Act) (15 U.S.C. 77a through 77aa) and the SEC's rules (17
CFR part 230). The deadline for submitting comments on the proposal
originally was December 14, 1992. The OCC extended that deadline to
February 1, 1993 (58 FR 4600), after several potential commenters
requested additional time to prepare and submit comments.
Overview of Final Rule
The OCC is issuing this final rule pursuant to 12 U.S.C. 1 et seq
and 93a. The final rule generally requires national bank securities
offering documents to conform to the form for registration that the
bank would use if it had to register the securities under the
Securities Act. Accordingly, the final rule cross-references a number
of provisions of the Securities Act and a number of SEC rules. The
OCC's former regulations generally required the disclosure of similar
information but in a different format than used by the SEC. And, unlike
the SEC, the OCC did not provide for incorporation by reference of
filings made under the Securities Exchange Act of 1934 (Exchange Act)
(15 U.S.C. 78a through 78jj).
By conforming its securities disclosure rules to those of the SEC,
the OCC believes it can reduce significantly unnecessary regulatory
burden. Banks, bank counsel, and investors are familiar with SEC
disclosure requirements. In addition to being well-known in the
marketplace, the interpretation of SEC disclosure requirements is well
established and benefits from a significant body of precedent.
Moreover, because the OCC rules will now actually reference the SEC
rules, rather than parallel or copy them, the OCC rules will
automatically remain current. Thus, the OCC's adoption of the SEC
registration requirements, while reducing regulatory burden through the
elimination of a duplicate (yet sometimes slightly dissimilar) set of
disclosure rules, will maintain the quality of disclosure received by
investors.
Similar to the OCC's former regulations, the final rule generally
prohibits the offer or sale of bank-issued securities unless: (1) A
registration statement for those securities has been filed with and
declared effective by the OCC and the securities are sold through a
prospectus that was filed as a part of that registration statement, or
(2) the transaction is subject to an exemption. The final rule
incorporates various SEC exemptions from registration requirements and
adds an exemption for offers and sales of certain large denomination
high-grade debt securities to accredited investors.
For example, the final rule incorporates through cross-reference
the SEC's Regulation A (17 CFR 230.251 through 230.263), which sets
forth the small issues exemption from registration requirements.
Regulation A provides a simplified disclosure system for offerings of
up to $5 million in any 12-month period. The OCC's former regulations
included a similar exemption, but it was limited to offerings of up to
$2 million in a 12-month period.
The final rule also includes an abbreviated registration system for
offers and sales of large denominations of nonconvertible debt to
accredited investors (defined in 17 CFR 230.501). This abbreviated
registration system reduces unnecessary regulatory burden on offers and
sales of such debt in situations where purchasers do not need the more
extensive disclosures provided by the full part 16 registration
process.
The OCC originally developed the abbreviated registration system
through a series of interpretive and no-objection letters issued under
the former part 16. While the SEC rules do not provide for this
abbreviated approach, the OCC believes it is appropriate for several
reasons. The market for such debt is well-developed and has not
presented particular disclosure concerns. The requirements that the
securities have a specified large denomination, be highly- rated, and
that purchasers must meet the accredited investor criteria further
ensure that the debt will only be offered and sold by a bank in
situations when an abbreviated disclosure system is appropriate.
Inclusion of this abbreviated approach in the final rule clarifies its
criteria and provides better notice that such a system is available.
The final rule also cross-references the SEC's Rule 415 (17 CFR
230.415) on shelf registration. This enables banks to register
securities for future sale and then to sell those securities when
market conditions are favorable. Under the OCC's former regulations,
shelf registration was not permitted. This imposed additional and
unnecessary costs on national banks and put them at a disadvantage with
respect to other issuers seeking to raise capital.
The final rule provides that nonpublic offerings of securities
generally may be made in accordance with the SEC's Regulation D (17 CFR
230.501 through 230.508). The final rule permits sales to an unlimited
number of investors who meet certain requirements (accredited
investors), and up to 35 other sophisticated purchasers, or to any
number of sophisticated purchasers subject to a limitation on the
aggregate offering price.
Cross-reference of the SEC's Regulation D increases the number of
allowable purchasers in a nonpublic offering. The former regulation
allowed banks to make nonpublic offerings to only 15 sophisticated
purchasers (and an unlimited number of accredited investors) in a 12-
month period, unless the bank received OCC permission to increase the
number of purchasers.
The revised rule makes certain conforming changes to Secs. 5.46 and
5.47 to enable banks to use the SEC's Rule 415 (17 CFR 230.415) on
shelf registration. The final rule further provides that a bank need
not obtain prior OCC approval for a cash sale of preferred stock or an
issuance of subordinated debt unless the OCC has notified the bank that
prior approval is necessary. The OCC's former regulations required
prior OCC approval for all cash sales of preferred stock and issuances
of subordinated debt.
The Interagency Statement on Retail Sales of Nondeposit Investment
Products (February 15, 1994) applies to retail sales of nondeposit
investment products including bank securities. Thus, if bank securities
are sold to retail customers, banks must ensure that such customers are
fully informed that the securities are not insured by the FDIC, are not
deposits or other obligations of the bank and are not guaranteed by the
bank, and are subject to investment risks including possible loss of
the principal invested.
Section-By-Section Discussion
The OCC received 13 comments on the proposal. The commenters
generally supported the OCC's plan to incorporate through cross-
reference certain sections of the Securities Act and the SEC's rules
thereunder, and to adopt the SEC's forms. The commenters focused on
specific aspects of the revisions that they believed needed
modification. The OCC has carefully considered each of the comment
letters and has made a number of changes in response to them.
Definitions (Section 16.2)
The proposal cross-referenced a number of definitions in the
Securities Act. One such definition was the Securities Act definition
of ``underwriter.'' The proposal's cross-reference to the
``underwriter'' definition brought sales of stock by control persons
and affiliates within the coverage of part 16. The former version of
part 16 had covered those sales as indirect sales by a bank. By
adopting the Securities Act underwriter definition, the proposal
clarified the coverage of part 16. The final rule adopts the cross-
reference to the definition of ``underwriter'' as proposed.
The proposal also defined ``security'' to conform with the
definition in the Securities Act. The proposed definition was more
detailed than the definition in the former part 16, specifying that all
bank debt, not just debt subordinated to the claims of general
creditors was considered a security. The definition in the former part
16 was unclear as to what debt instruments were covered.
The OCC received six comments on this issue. One commenter favored
specifically covering senior debt in the definition while five
commenters were opposed. Several commenters also stated that the
definition of ``security'' should exclude specific traditional bank
products and deposits.
The final rule includes a cross-reference to the Securities Act
definition of ``security.'' That definition clearly includes senior
debt. While a number of banks interpreted the definition of
``security'' in the former part 16 as excluding senior debt and opposed
a change in the definition that they viewed as expanding the coverage
of part 16, the OCC believes there is no reason to treat senior debt
differently from subordinated debt for purposes of this definition.
Purchasers of both types of debt should receive the information
necessary to make informed investment decisions.
In fact, the passage of the depositor preference provisions of the
Omnibus Reconciliation Act of 1993 (12 U.S.C. 1821(d)(11)) has
strengthened the need for purchasers of senior debt to receive
disclosure materials. The depositor preference provisions require the
FDIC to pay the claims of uninsured depositors prior to paying the
claims of any other general creditors of a bank. Senior debt,
therefore, is not equivalent to uninsured deposits. Purchasers of
senior debt now are less likely than they were prior to the passage of
the Omnibus Reconciliation Act to receive full payment in the event of
a bank's insolvency.
The definition of ``security'' in the final rule does not
specifically exclude traditional bank products. Nevertheless, the OCC
does not intend that the definition cover insured or uninsured deposits
or other traditional bank products, including letters of credit,
banker's acceptances, or repurchase agreements. Judicial precedents
have generally found these instruments not to be securities. Providing
an exhaustive list of exceptions in the definition of ``security''
would be unwieldy and detract from the benefits of cross-referencing
the SEC definition.
Registration Statement and Prospectus Requirements (Section 16.3)
Section 16.3 of the proposal set forth the general prohibitions on
offers and sales of bank securities. Under the proposal, no person
could offer or sell bank securities unless a registration statement for
the securities had been filed with and declared effective by the OCC
and the offer or sale was accompanied or preceded by a prospectus filed
as a part of that registration statement, or an exemption was available
under part 16. The OCC would keep on file and make available for public
inspection the information that was included in the registration
statement but not included in the prospectus provided to shareholders.
The OCC's proposed requirements on the use of a preliminary
prospectus and the delivery of a final prospectus differed from the
comparable SEC requirements. The OCC proposal simply incorporated the
former part 16 requirements. The proposal required prior OCC
authorization to use a preliminary prospectus. The proposal also
required that, except in a situation where the OCC has authorized the
use of a preliminary prospectus, offers must be made through the use
and delivery of a prospectus that has been declared effective by the
OCC. Unlike the SEC rules, the proposal did not generally permit a bank
to provide the final prospectus to purchasers with the confirmation.
Five commenters addressed the OCC's proposed requirements on the
use of a preliminary prospectus and the delivery of a final prospectus.
All five commenters agreed that the OCC should follow the Securities
Act requirements and SEC rules. Upon further consideration, the OCC
agrees and has revised Sec. 16.3 of the final rule to more clearly
follow the requirements in the Securities Act and the SEC rules. The
final rule provides that a preliminary prospectus may be used if (1) a
registration statement including the preliminary prospectus has been
filed with the OCC; (2) the preliminary prospectus includes the
information required in a final prospectus (except for omission of
certain information dependent on the offering price); and (3) a copy of
the final prospectus is furnished to each purchaser prior to or
simultaneously with the sale of the security.
Communications Not Deemed an Offer (Section 16.4)
The proposal listed a number of communications that the OCC did not
deem to be offers and which therefore did not violate the prohibitions
on making offers in Sec. 16.3. The list included communications that
comply with SEC Rule 134 or 135 (17 CFR 230.134 or 230.135). SEC Rules
134 and 135 govern advertisements used prior and subsequent to the
filing of a registration statement. The proposal also provided that
supplemental sales literature could be used after a registration
statement has been declared effective if the sales literature was
accompanied or preceded by a prospectus. In addition, the proposal
provided that advertisements only had to be filed with the OCC upon the
OCC's request.
The proposal also eliminated certain restrictions on advertisements
that were in the former part 16. Former part 16 permitted the use of
only extremely limited information in advertisements, such as the name
of the bank and the amount of securities being offered, did not provide
for the use of sales literature, and required all advertisements to be
cleared by the OCC prior to use.
The OCC received no comments on this section of the proposal.
However, the final rule adds to the list of permissible communications
four types of communications that were not in the proposal, but which
are permissible under SEC rules. Those communications include an oral
offer of securities covered by a registration statement that has been
filed with the OCC, a summary prospectus that satisfies the
requirements of SEC Rule 431 (17 CFR 230.431), a notice of a proposed
unregistered offering that satisfies the requirements of SEC Rule 135c
(17 CFR 230.135c), and a communication that satisfies the requirements
of SEC Rules 138 or 139 (17 CFR 230.138 or 230.139--Definition of
``offer for sale'' and ``offer to sell'' in sections 2(10) and 5(c) of
the Securities Act in relation to certain publications).
Exemptions (Section 16.5)
Under the proposal, the registration and prospectus requirements
did not apply to an offer or sale of securities exempt under certain
sections of the Securities Act or the rules promulgated thereunder. The
registration and prospectus requirements did not apply if the
securities were exempt from registration under section 3 of the
Securities Act (15 U.S.C. 77c) by reason of an exemption other than
those contained in section 3(a)(2) (for securities issued by banks) or
section 3(a)(11) (for intrastate offerings). The proposed registration
and prospectus requirements also did not apply to transactions exempt
from registration under section 4 of the Securities Act (15 U.S.C.
77d). Section 4 of the Securities Act exempts transactions by any
person other than an issuer, underwriter or dealer, transactions by an
issuer not involving a public offering, transactions involving offers
or sales by an issuer solely to accredited investors, and other
transactions that meet certain specified requirements.
The proposal generally exempted from the Sec. 16.3 registration
statement and prospectus requirements offers and sales of bank
securities to sophisticated purchasers that satisfy the requirements of
SEC Regulation D (17 CFR 230.501 through 230.508). SEC Regulation D
sets forth rules governing the limited offer and sale of securities
without registration under the Securities Act, providing a safe harbor
for compliance with sections 3(b) and 4(2) of the Securities Act (15
U.S.C. 77c(b) and 77d(2)).
The proposal also exempted from the Sec. 16.3 registration
statement and prospectus requirements offers and sales of bank issued
securities in transactions that satisfy the abbreviated disclosure
requirements of certain SEC rules. Those rules require only limited
disclosure to purchasers because of the particular circumstances of the
types of transactions. The rules include Rules 144 (17 CFR 230.144--
Persons deemed not to be engaged in a distribution and therefore not
underwriters), 144A (17 CFR 230.144A--Private resales of securities to
institutions), 236 (17 CFR 230.236--Exemption of shares offered in
connection with certain transactions), and Regulation S (17 CFR 230.901
through 230.904--Rules governing offers and sales made outside the
United States without registration under the Securities Act of 1933).
In addition, the proposal exempted transactions that complied with the
requirements of SEC Rules 701, 702T, and 703T (17 CFR 230.701,
230.702T, and 230.703T), which cover offers and sales of securities
pursuant to certain compensatory benefit plans and contracts relating
to compensation.
The commenters largely agreed with the OCC's approach. Two
commenters recommended that the OCC also exempt transactions that
comply with the SEC's Regulation A (17 CFR 230.251 through 230.263).
Regulation A permits unregistered, public offerings of up to $5 million
in securities under certain specified conditions.
The final rule adopts the exemptions from the registration and
prospectus requirements included in the proposal, and also includes an
exemption for transactions that comply with Regulation A. (This
exemption is discussed further under ``Small Issues (16.8)'' of this
preamble). This approach treats banks comparably to other corporations
when issuing small quantities of securities.
Sales of Nonconvertible Debt (Section 16.6)
The proposal provided an optional abbreviated registration system
for offers and sales of nonconvertible debt if those transactions met
certain requirements. Offers and sales that met those requirements were
deemed to be in compliance with the Registration statement and
prospectus (16.3), Form and content (16.15), and Periodic and current
reports (16.20) provisions of part 16.
In particular, the proposal specified that: (1) The bank issuing
the nonconvertible debt must have securities registered under the
Exchange Act or must be a subsidiary of a bank holding company that has
securities registered under the Exchange Act; (2) The insured
depository institution subsidiaries of the registered bank holding
company must constitute at least 80% of the bank holding company's
assets; (3) The debt must be offered and sold only to accredited
investors (defined in 17 CFR 230.501(a)); (4) The debt must be offered
and sold by a reputable and experienced underwriter, not affiliated
with the bank; (5) The debt must be sold in minimum denominations of
more than $100,000 and the notes cannot be exchanged for notes in
smaller denominations; (6) The debt must be rated investment quality;
(7) Each purchaser must receive an offering document describing the
terms of the debt and incorporating the bank's latest Call Reports and
the bank or holding company's Exchange Act filings; (8) The offering
document and any amendments must be filed with the OCC within five days
after first use; and (9) Any required filing fees must be submitted.
The OCC designed the requirements of the abbreviated registration
system to ensure that potential purchasers of debt subject to the
abbreviated registration system had access to necessary information on
the issuing bank and commonly controlled depository institutions, as
well as the appropriate knowledge and experience to evaluate that
information.
The OCC requested comment on whether this abbreviated registration
system was necessary or appropriate. The OCC received 11 comments on
this issue. Although the commenters generally favored the abbreviated
registration system, they expressed different perspectives about the
specific requirements of the system. A number stated that the OCC
should eliminate the requirement that nonconvertible debt be sold by an
underwriter unaffiliated with the bank. Several commenters agreed that
the OCC needed to revise the abbreviated registration system to address
the special circumstances of federal branches and agencies of foreign
banks.
The OCC agrees with the commenters that the underwriter requirement
is unnecessary. The underwriter requirement imposes additional costs on
banks and limits their flexibility without necessarily improving the
quality of the disclosure materials provided to investors. The final
rule therefore does not require that the debt be offered and sold by an
underwriter, not affiliated with the bank, as part of an underwritten
offering.
In addition, the OCC has determined that it is unnecessary to
require that the insured depository subsidiaries of a registered bank
holding company constitute at least 80% of the bank holding company's
assets. This asset-based requirement does not ensure that the holding
company's Exchange Act filings would be more meaningful to investors
than the filings would be without the requirement. Accordingly, it has
been eliminated from the final rule.
Further, the final rule requires that the debt be sold in minimum
denominations of $250,000, rather than more than $100,000, in order to
provide additional protections to purchasers of debt. Requiring larger
denomination notes, and preventing them from being broken into smaller
denominations, helps ensure that the purchasers of the notes are
sophisticated, high net worth individuals or entities, for whom
abbreviated disclosure is appropriate.
The final rule also takes into account the special circumstances of
federal branches of foreign banks. Because foreign banks and their
holding companies generally are not reporting companies under the
Exchange Act, federal branches and agencies often would be unable to
comply fully with the requirements on Exchange Act filings in the
abbreviated registration system. Federal branches and agencies usually
do not have securities registered under the Exchange Act and are not
subsidiaries of holding companies registered under the Exchange Act.
Therefore, federal branches and agencies also cannot incorporate
Exchange Act filings into offering documents.
Accordingly, the final rule provides that federal branches and
agencies of foreign banks need not have securities registered under the
Exchange Act or be subsidiaries of holding companies that have
securities registered under the Exchange Act to take advantage of the
abbreviated registration system. Instead, these entities may make
information about themselves available to purchasers by filing with the
OCC the information specified in SEC Rule 12g3-2(b) (17 CFR 240.12g3-
2(b)) and providing purchasers with the information specified in SEC
Rule 144A(d)(4)(i) (17 CFR 230.144A(d)(4)(i)). The OCC believes that
this information is adequate for the sophisticated purchasers who are
eligible investors under the abbreviated disclosure system. Such
purchasers also are able to determine whether they have sufficient
information to make informed investment decisions, and if they do not,
can request additional information.
Nonpublic Offerings (Section 16.7)
The proposal permitted offers and sales without compliance with the
registration statement and prospectus requirements of Sec. 16.3 if the
offers and sales were made in accordance with SEC Regulation D (17 CFR
230.501 through 230.508) and the purchasers were either accredited
investors or ``sophisticated'' investors. SEC Regulation D sets forth
rules governing the limited offer and sale of securities without
registration under the Securities Act and provides a safe harbor for
compliance with sections 3(b) and 4(2) of the Securities Act (15 U.S.C.
77c(b) and 77d(2)). SEC Regulation D does not require that in all
circumstances purchasers be sophisticated.
The proposal's cross-reference of Regulation D increased the number
of purchasers permitted in a nonpublic offering over the number allowed
under the former part 16. Former part 16, as interpreted by the OCC,
permitted sales to only 15 sophisticated purchasers (and an unlimited
number of accredited investors), unless the seller received OCC
permission to increase the number of purchasers. The proposal permitted
sales to 35 sophisticated purchasers and an unlimited number of
accredited investors, or to any number of sophisticated purchasers
subject to a limitation on the aggregate offering price.
The proposal required the filing of a notice of sales no later than
15 days after the first sale of securities in accordance with SEC Rule
503 of Regulation D. Under the former part 16, nonpublic offering
notices had to be filed 20 days prior to the time any security was
offered or sold. This proposed change gave banks added flexibility in
the timing of sales of securities.
Under the proposal, securities subject to the limitations on resale
of Regulation D must be sold pursuant to SEC Rule 144 or 144A, another
exemption from registration under the Securities Act, or in accordance
with the part 16 registration and prospectus requirements. The former
part 16 did not permit any securities sold in a nonpublic offering to
be resold for two years. The proposed change in resale limitations
would improve the marketability of bank securities.
The OCC received two comments on this section of the proposal. One
commenter supported the cross-reference of Regulation D. The other
commenter believed that by including the notice requirement in the
nonpublic offering section, the OCC was making the filing of a notice a
condition to the availability of the nonpublic offering exemption. The
commenter stated that while the SEC does provide for the filing of a
notice, it is not a condition of any of the exemptions in Regulation D.
The final rule adopts this section as proposed with certain
clarifying changes. The final rule indicates more clearly that although
the filing of a notice is required, failure to file a notice does not
result in the loss of the nonpublic offering exemption. Thus, the
notice is not a condition of any of the exemptions in Regulation D. The
final rule also clarifies that offers and sales made in reliance on
Regulation D must only be made to sophisticated purchasers.
Small Issues (Section 16.8)
The proposal did not cross-reference the SEC's Regulation A (17 CFR
230.251 through 230.264), which permits the unregistered, public
offering of securities under specified conditions. The OCC requested
comment as to whether it should cross-reference Regulation A and
received two comments in response. Both commenters believed that the
OCC should cross-reference Regulation A.
In light of these comments, the OCC has decided to cross-reference
Regulation A in the final rule. Given the criteria for use of the rule,
the OCC does not believe its use reduces purchaser safeguards.
Moreover, the OCC believes that the Regulation A small issues exemption
from registration should be available to banks, as it is to other
issuers, to prevent imposing unnecessary burdens on banks in connection
with small securities issuances.
In order to use the Regulation A exemption, an issuer's offering
documents must be filed with and reviewed by the OCC. The final rule
states that filers should consult the SEC's Securities Act Industry
Guide 3--Statistical Disclosure by Bank Holding Companies (17 CFR
229.801(c) and 231) for guidance on the appropriate disclosures to be
included in the offering document. The Guide 3 disclosures consist of
information that potential purchasers of bank securities need in order
to evaluate their investments.
Form and Content (Section 16.15)
The proposal required all registration statements filed with the
OCC to be on the form for registration that the bank would use were it
required to register the securities under the Securities Act. Which
form a bank uses depends, among other things, on whether the bank is
subject to the registration and reporting requirements of section 12 or
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78l and 78o(d))
and on the amount of the offering.
Several commenters suggested that the OCC clarify whether a
national bank may use the SEC's Form S-3 (Form for registration under
the Securities Act of securities of certain issuers offered pursuant to
certain types of transactions) in connection with the offer and sale of
its securities if its parent company meets the requirements set forth
in Instruction I.C. to Form S-3 and the other requirements set forth in
Instruction I.C. are met.
The final rule permits national banks to use Form S-3 in such
situations. Pursuant to Instruction I.C. to the SEC's Form S-3, if the
parent of a registrant meets the registration requirements for the use
of Form S-3, the registrant may use Form S-3 for offers and sales of
nonconvertible debt or nonconvertible preferred stock provided the
registrant is a wholly-owned subsidiary of the parent and the
securities being issued by the registrant are investment grade
securities (or are fully guaranteed by the qualifying parent as to
principal and interest).
A national bank may establish an Exchange Act disclosure base for
the Form S-3 by registering its common stock on Form 10 (General form
for registration of securities pursuant to section 12(b) or 12(g) of
the Exchange Act) prior to the effectiveness of its offering document
and incorporating by reference the form pursuant to Item 12(a)(1) of
Form S-3 in lieu of a Form 10-K (General form of annual report).
The proposal also required that the registration statement must
meet the requirements of the SEC regulations referred to in the
registration form. Those regulations include Regulation S-X (17 CFR
part 210), which applies to financial statements, and Regulation S-K
(17 CFR part 229), which applies to the nonfinancial statement portion
of the registration statement. The OCC expects that, consistent with
SEC requirements and practice, filers will prepare registration
statements for bank securities in accordance with Securities Act
Industry Guide 3--Statistical Disclosure by Bank Holding Companies (17
CFR 229.801(c) and 231).
Because the proposal required registration statements to satisfy
the requirements of the SEC regulations referred to in the applicable
registration form, the financial statements in the registration
statements must be audited. The OCC sought comment on whether it should
limit the requirement for audited financial statements to banks of a
certain size and whether that size should be the cut-off for the
requirement for annual independent audits that was established pursuant
to section 112 of the Federal Deposit Insurance Corporation Improvement
Act of 1991 (FDICIA) (12 U.S.C. 1831m). Several commenters stated that
the OCC should limit the audited financial statements requirement to
banks of a certain size, although they disagreed as to what that size
should be.
After considering the comments, the OCC has decided not to limit
the audited financial statements requirement to banks of a certain
size. The final rule requires audited financial statements from
national banks to the same extent that the SEC requires audited
financial statements of other corporations. Requiring banks to provide
audited financial statements in their registration statements helps
ensure that purchasers of bank stock receive the same quality of
disclosure and the same protections as do purchasers of stock of other
types of issuers.
Because the proposal required registration statements to comply
with the SEC regulations referenced in the applicable registration
form, banks that were subsidiaries of holding companies had to include
audited bank financial statements, rather than bank holding company
statements, in their registration statements. However, a number of
commenters felt that banks that are subsidiaries of holding companies
that have securities registered under the Exchange Act should not have
to include audited bank financial statements in their registration
statements. The commenters stated that these banks should instead be
allowed to include in their registration statements the audited
financial statements contained in the holding companies' Exchange Act
filings and the banks' Call Reports.
The OCC disagrees, and the final rule requires banks that are
subsidiaries of holding companies to include audited bank financial
statements in registration statements for bank securities. The OCC
believes that purchasers of bank securities that are not subject to any
sophistication requirements should be provided with bank, not merely
holding company, financial statements. Those purchasers need bank level
financial statements in order to make informed investment decisions
about bank securities.
The proposal cross-referenced the requirements of Rule 400 and
Articles 1-3 of the SEC's general rules on registration in SEC
Regulation C (17 CFR 230.400 through 230.439). Regulation C includes
the SEC rule on shelf registration in Rule 415 (17 CFR 230.415--Delayed
or continuous offering and sale of securities). Shelf registration
enables banks to register securities that are to be sold in the future
and then to sell those securities when the market conditions are most
favorable. Regulation C also includes SEC Rule 430A (17 CFR 230.430A--
Prospectus in a registration statement at the time of effectiveness).
Rule 430A allows an issuer to file a prospectus that omits certain
information dependent on the offering price. The former part 16 did not
contain any provisions comparable to Rule 415 or Rule 430A, so price
and other information had to be set at the time an offering document
was filed.
The final rule, like the proposal, cross-references the
requirements of Rule 400 and Articles 1-3 of the SEC's general rules on
registration in SEC Regulation C (17 CFR 230.400 through 230.439).
However, the final rule also cross-references the other articles of
Regulation C (17 CFR 230.445 through 230.497). The OCC is cross-
referencing the remaining articles of Regulation C in order to adopt
the SEC's rules and procedures governing when registration statements
and amendments become effective. (For a discussion of this matter see
``Effectiveness (Sec. 16.16)'' in this preamble). These remaining
articles include rules on delaying amendments and acceleration of the
effective date that are integral to the procedures under which
registration statements and amendments become effective.
Effectiveness (Section 16.16)
The proposal did not provide for the adoption of the Securities Act
provisions or the SEC's rules pertaining to when registration
statements become effective. The proposal retained the requirement in
former part 16 that no registration statement, prospectus, or amendment
was effective until declared effective by the OCC.
Only one commenter discussed this issue. That commenter urged that
the OCC follow the SEC's procedures in this area. The OCC agrees and
the final rule adopts the Securities Act provisions and the SEC's rules
on effectiveness. (See discussion under ``Form and Content
(Sec. 16.15)'' in this preamble.)
Under the cross-referenced provisions of the Securities Act,
registration statements automatically become effective 20 days after
they are filed unless a delaying amendment is filed with the OCC.
However, consistent with SEC practice, the OCC expects all filers to
file delaying amendments with their registration statements to prevent
the registration statements from becoming automatically effective. The
delaying amendments will ensure that the OCC has adequate time to
review and comment upon filings.
Filing Requirements and Inspection of Documents (Section 16.17)
This section of the proposal specified that issuers must file four
copies of all documents with the OCC and required the OCC to make those
documents available for public inspection. The former part 16 required
issuers to submit six copies of most documents. The proposal also
specified that all notices or other documents required to be filed by
any section of the Securities Act, the Exchange Act, or a rule of the
SEC cross-referenced in part 16, be filed with the OCC. The final rule
adopts this section generally as proposed, with a few technical
clarifying changes.
Use of Prospectus (Section 16.18)
Under the proposal, a prospectus or amendment declared effective by
the OCC may not be used more than nine months after its effective date
unless the information contained therein is as of a date not more than
16 months prior to the date of use. This section of the proposal was
based on the requirement in section 10(a)(3) of the Securities Act (15
U.S.C. 77j(a)(3)) pertaining to the age of information in a prospectus.
The proposal provided more time for an offering to be completed than
did former part 16. Former part 16 allowed an offering circular to be
effective for a period of only six months, although the OCC could
extend the six month period for two consecutive 90 day periods upon
request. In the event there was a material change after a prospectus
has been declared effective, the proposal prohibited use of the
prospectus until an amendment reflecting the change had been filed with
and declared effective by the OCC.
The final rule adopts this section generally as proposed, with
minor clarifying changes.
Withdrawal or Abandonment (Section 16.19)
The proposed rule allowed filers to withdraw a registration
statement and amendments prior to the effective date. It also stated
that the OCC could determine that a registration statement and
amendments had been abandoned if they had been on file for nine months
and not become effective. Documents withdrawn or declared abandoned
would be so marked but would remain in the OCC files. The final rule
adopts this section as proposed, with minor clarifying changes.
Current and Periodic Reports (Section 16.20)
The proposal required banks that had filed registration statements
declared effective pursuant to part 16 to file with the OCC periodic
and current reports until the banks were eligible to suspend the filing
of those reports. This requirement was based on that imposed by section
15(d) of the Exchange Act (15 U.S.C. 78o(d)) on corporations filing
Securities Act registration statements with the SEC. The filing of
periodic and current reports ensures that current information about an
issuer is available for a period after an offering of securities is
made. The periodic and current reporting requirements cease the year
after the registration statement becomes effective, if the issuer is
not otherwise required to register its securities under the Exchange
Act.
The proposal further provided that a bank need not comply with the
periodic and current reports requirements if the bank was a subsidiary
of a one-bank holding company and the bank's parent bank holding
company filed current and periodic reports pursuant to section 13 of
the Exchange Act.
Five commenters stated that all banks that are subsidiaries of
holding companies that have securities registered under the Exchange
Act should be able to rely on holding company Exchange Act filings and
bank Call Reports to fulfill the current and periodic report
requirements.
The final rule permits banks that are subsidiaries of holding
companies that have securities registered under the Exchange Act to
rely on holding company Exchange Act filings and bank Call Reports to
fulfill the current and periodic reports requirements in specified
circumstances. A bank need not file current and periodic reports if the
bank is a subsidiary of a one-bank holding company, the financial
statements of the bank and the parent bank holding company are
substantially the same, and the bank's parent bank holding company
files periodic and current reports pursuant to section 13 of the
Exchange Act.
The OCC believes that when these conditions are met, the holding
company's current and periodic reports will provide the marketplace
with information equivalent to what would be provided if the holding
company's subsidiary bank made separate reports. The OCC concluded that
any broader exception would not be appropriate because the information
provided is used in markets including both sophisticated and
unsophisticated investors. In the case of the latter, they may not have
sufficient financial expertise to evaluate information that differs
substantially from the type and scope of disclosure that would have
been contained in current and periodic reports filed by the bank
itself.
Request for Interpretive Advice or No Objection Letter (Section 16.30)
The proposal set forth the requirements that a person must meet to
obtain interpretive advice or a no-objection letter under part 16.
Although these requirements are not detailed in former part 16, the OCC
based them on Banking Circular 205, OCC Staff No-Objection Positions,
which has been in effect since July 26, 1985. The final rule adopts
this section as proposed, with minor clarifying changes.
Escrow Requirement (Section 16.31)
The proposal required the use of an independent escrow account if
the funds received in an offering were to be certified as capital or if
there was a minimum amount to be sold in an offering. One commenter
opposed this requirement.
The final rule modifies the escrow requirements. Section 16.31 of
the final rule allows the OCC to require any funds received through an
offer or sale of securities to be held in an independent escrow account
at an unrelated insured depository institution when the OCC determines
it is in the best interest of the shareholders. A bank does not have to
use an independent escrow account unless the OCC has notified the bank
that an escrow account is necessary. However, the OCC generally expects
banks to use independent escrow accounts.
Fraudulent Transactions and Unsafe and Unsound Practices (Section
16.32)
The proposal prohibited untrue statements of material fact,
omissions of material fact, and acts or practices that operate as a
fraud in the offer or sale of a bank security. The language in this
section of the proposal was substantially similar to the language in
section 17(a) of the Securities Act (15 U.S.C. 77q). The section 17(a)
prohibitions apply to offers and sales of bank securities regardless of
whether the prohibitions are restated in part 16. The OCC believed that
restating the prohibitions in part 16 furnished warning that the
prohibitions apply. The proposal further provided that violations of
the fraudulent transactions section also constitute unsafe or unsound
practices under 12 U.S.C. 1818. This section of the final rule is
adopted as proposed.
Conforming Amendments to Part 5
Merger, Consolidation, Purchase and Assumption (Section 5.33(b)(6))
The proposal included a conforming amendment to 12 CFR
5.33(b)(6)(ii) which requires that all shareholders in a merger or
consolidation transaction be adequately informed of all aspects of the
transaction. The proposal amended Sec. 5.33(b)(6)(ii) to add that a
bank required to file a registration statement with the OCC may use
that registration statement to comply with the proxy statement
requirements set forth in Sec. 5.33(b)(6)(ii). In addition, a bank
subsidiary of a holding company required to file a registration
statement with the SEC may use that registration statement to comply
with OCC proxy statement requirements. The final rule adopts the
conforming amendment to Sec. 5.33(b)(6)(ii) as proposed, with minor
technical clarifying changes.
Changes in Equity Capital (Section 5.46) and Subordinated Debt as
Capital (Section 5.47)
The proposal did not include any changes to 12 CFR 5.46 and 5.47.
Former Sec. 5.46 required OCC preliminary approval for a change in
capital due to a sale of preferred stock. Former Sec. 5.46 further
specified that changes in equity capital must occur within 12 months of
seeking preliminary approval. Former Sec. 5.47 required OCC approval
for subordinated debt that is to be considered part of a bank's capital
structure; a bank must receive preliminary approval prior to the
issuance of subordinated debt and the subordinated debt must be issued
within 12 months of the preliminary approval.
The OCC requested comment on whether Secs. 5.46 and 5.47 needed to
be modified in order to enable banks to use the SEC rule on shelf
registration in Rule 415 (17 CFR 230.415--Delayed or continuous
offering and sale of securities). Shelf registration permits banks to
register securities that are to be sold in the future and then to sell
those securities when the market conditions are most favorable.
The OCC received four comments on this issue. All of the commenters
stated that because of the delays caused by the preliminary approval
requirements in Secs. 5.46 and 5.47, the OCC needed to amend those
requirements in order for banks to take advantage of SEC Rule 415. The
OCC agrees and has adopted a final rule that includes changes to
Secs. 5.46 and 5.47. The changes will enable most banks to use the
SEC's rule on shelf registration and thereby reduce unnecessary
regulatory burden.
As adopted in the final rule, Sec. 5.46 no longer requires a bank
to obtain preliminary approval of cash sales of preferred stock unless
the OCC has notified the bank that preliminary approval is necessary.
After selling preferred stock, a bank still must obtain final approval
and certification.
The final rule also changes the approval procedures in Sec. 5.47
for the issuance of subordinated debt. Under the new procedures, a bank
need not obtain prior approval to issue subordinated debt unless the
OCC has notified the bank that prior approval is necessary. A bank that
has not been notified that it must obtain prior approval to issue
subordinated debt must notify the OCC after issuing debt that is to be
counted as tier 2 capital. Subordinated debt will qualify as tier 2
capital if it meets the requirements set forth in 12 CFR part 3,
Appendix A section 2(b)(4) and complies with the OCC Guidelines for
Subordinated Debt Instruments in the Comptroller's Manual for Corporate
Activities.
The OCC may solicit comments on Sec. 5.46 and Sec. 5.47 in
connection with its proposed comprehensive revisions to Part 5 of the
OCC's regulations.
Regulatory Flexibility Act
Pursuant to section 605(b) of the Regulatory Flexibility Act, the
Comptroller of the Currency certifies that this final rule will not
have a significant economic impact on a substantial number of small
entities.
Executive Order 12866
The OCC has determined that this document is not a significant
regulatory action as defined in Executive Order 12866.
Paperwork Reduction Act
The collections of information contained in this final regulation
have been reviewed and approved by the Office of Management and Budget
in accordance with the requirements of the Paperwork Reduction Act (44
U.S.C. 3504(h)) under control number 1557-0120. The estimated annual
burden per respondent varies from two to 100 hours, depending on
individual circumstances, with an estimated average of 19 hours.
Comments concerning the accuracy of this burden estimate and
suggestions for reducing this burden should be directed to the Office
of the Comptroller of the Currency, Legislative, Regulatory, and
International Activities Division, 250 E Street, SW, Washington, DC
20219 and to the Office of Management and Budget, Paperwork Reduction
Project (1557-0120), Washington, DC 20503.
List of Subjects
12 CFR Part 5
Administrative practice and procedure, National banks, Reporting
and recordkeeping requirements, Securities.
12 CFR Part 16
National banks, Reporting and recordkeeping requirements,
Securities.
Authority and Issuance
For the reasons set out in the preamble, chapter I of title 12 of
the Code of Federal Regulations, part 5 is amended and part 16 is
revised to read as follows:
PART 5--RULES, POLICIES, AND PROCEDURES FOR CORPORATE ACTIVITIES
1. The authority citation for part 5 continues to read as follows:
Authority: 12 U.S.C. 1 et seq.; 12 U.S.C. 93a.
2. In Sec. 5.33, paragraph (b)(6)(ii) is amended by adding a new
sentence at the end of the paragraph:
Sec. 5.33 Merger, consolidation, purchase and assumption.
* * * * *
(b) * * *
(6) * * *
(ii) * * * In any transaction where securities are required to be
registered with the Office under part 16 of this chapter or with the
Securities and Exchange Commission under the Securities Act of 1933, a
depository institution may file the registration statement with the
Office to meet the requirements of this paragraph;
* * * * *
3. In Sec. 5.46, paragraphs (f)(4) and (g)(1) are revised to read
as follows:
Sec. 5.46 Changes in equity capital.
* * * * *
(f) * * *
(4) Preferred stock. A bank need not submit a letter of intent and
obtain preliminary approval prior to selling preferred stock for cash
unless the Office has notified the bank that preliminary approval is
necessary. Any bank selling preferred stock must submit a letter of
notification pursuant to paragraph (g)(2) of this section to obtain
final approval and certification. The Office must review and may
approve provisions in articles of association concerning preferred
stock dividends, voting and conversion rights, retirement, and rights
to exercise control over management. A bank may submit those provisions
for review and approval with the letter of notification.
* * * * *
(g) Procedures. (1) A bank must submit to the appropriate District
office by hand or by mail, return receipt requested, a letter of intent
to change capital. The bank must receive preliminary approval for any
change in capital except for a stock dividend, a cash sale of common
stock, a cash sale of preferred stock where the bank has not been
notified by the Office that preliminary approval is required, or a
reduction in par value of common stock that does not change the sum of
capital and capital surplus. Stock dividends, cash sales of common
stock, cash sales of preferred stock where the bank has not been
notified by the Office that preliminary approval is required, or
reductions in par value of common stock that do not change the sum of
capital and capital surplus are subject only to the notification
process described in paragraphs (g)(2) and (g)(3) of this section. For
other changes in equity capital, the bank must submit a letter of
intent describing the type and amount of the proposed change, and state
if the bank is subject to a capital plan with the Office. If the bank
is subject to a capital plan or if a capital plan is required in
connection with the proposed change in equity capital, the bank must
state how the proposed change conforms to the plan. The bank may
consider its proposed change preliminarily approved 30 days after the
day on which the Office receives the letter of intent, unless the bank
is notified that preliminary approval is delayed, conditioned, or
denied. The bank should submit the letter of intent and receive
preliminary approval prior to seeking shareholder approval. The bank
may proceed with an increase in capital after preliminary approval is
received; however, it may not reduce its capital or make a distribution
until it has received final Office approval as specified in paragraphs
(g)(2) and (g)(3) of this section.
* * * * *
4. Section 5.47 is revised to read as follows:
Sec. 5.47 Subordinated debt as capital.
(a) Authority. 12 U.S.C. 93a.
(b) Licensing requirements. Unless the OCC has previously notified
a national bank that prior approval is required, or unless prior
approval is required by law, a national bank does not need prior OCC
approval to issue or prepay subordinated debt, regardless of whether
the bank intends to count the debt as Tier 2 capital. A national bank
that is not required to obtain prior approval must notify the OCC after
issuing subordinated debt that is to be counted as Tier 2 capital.
(c) Scope. This section sets forth the procedures for OCC review
and approval of applications to issue or prepay subordinated debt.
(d) Definitions. (1) Capital plan means a plan describing the means
and schedule by which a national bank will attain specified capital
levels or ratios, including a plan to achieve minimum capital ratios
filed with the appropriate district office under Sec. 3.7 of this
chapter and a capital restoration plan filed with the OCC under 12
U.S.C. 1831o and Sec. 6.5 of this chapter.
(2) Tier 2 capital has the same meaning as set forth in Sec. 3.2(d)
of this chapter.
(e) Qualification as regulatory capital. (1) A national bank's
subordinated debt qualifies as Tier 2 capital if the subordinated debt
meets the requirements in part 3 of this chapter, appendix A to part 3,
section 2(b)(4), and complies with the ``OCC Guidelines for
Subordinated Debt Instruments'' in the Comptroller's Manual for
Corporate Activities (Manual).
(2) If the OCC notifies a national bank that it must obtain OCC
approval before issuing subordinated debt, the subordinated debt will
not qualify as Tier 2 capital until the bank obtains OCC approval for
its inclusion in capital.
(f) Prior approval procedure. (1) Application. A national bank
required to obtain OCC approval before issuing or prepaying
subordinated debt must submit an application to the appropriate
district office. The application must include:
(i) A description of the terms and amount of the proposed issuance
or prepayment;
(ii) A statement of whether the bank is subject to a capital plan
or required to file a capital plan with the OCC and, if so, how the
proposed change conforms to the capital plan;
(iii) A copy of the proposed subordinated note format and note
agreement; and
(iv) A statement of whether the debt issue complies with all laws,
regulations, and the ``OCC Guidelines for Subordinated Debt
Instruments'' in the Manual.
(2) Approval. (i) General. The OCC approves, conditionally
approves, or denies an application to issue or prepay subordinated debt
on or before the 30th day after the complete application is received by
the OCC. The application is deemed approved by the OCC as of the 30th
day after the filing is received by the OCC unless the OCC notifies the
bank prior to that date that the filing presents significant
supervisory or compliance concerns, or raises significant legal or
policy issues.
(ii) Notification. When the OCC notifies the bank that the OCC
approves the bank's application to issue or prepay the subordinated
debt, it also notifies the bank whether the debt qualifies as Tier 2
capital.
(iii) Expiration of approval. Approval expires if a national bank
does not complete the sale of the subordinated debt within one year of
approval.
(g) Notice procedure. If a national bank is not required to obtain
approval before issuing subordinated debt, the bank must notify the
appropriate district office in writing within ten days after issuing
subordinated debt that is to be counted as Tier 2 capital. The notice
must include:
(1) The terms of the issuance;
(2) The amount and date of receipt of funds;
(3) A copy of the final subordinated note format and note
agreement; and
(4) A statement that the issue complies with all laws, regulations,
and the ``OCC Guidelines for Subordinated Debt Instruments'' in the
Manual.
(h) Exceptions to rules of general applicability. Sections 5.8,
5.10 and 5.11 do not apply to the issuance of subordinated debt.
(i) Issuance of subordinated debt. A national bank must comply with
the Securities Offering Disclosure Rules in part 16 of this chapter
when issuing subordinated debt even if the bank is not required to
obtain prior approval to issue subordinated debt.
PART 16--SECURITIES OFFERING DISCLOSURE RULES
5. Part 16 is revised to read as follows:
PART 16--SECURITIES OFFERING DISCLOSURE RULES
Sec.
16.1 Authority, purpose, and scope.
16.2 Definitions.
16.3 Registration statement and prospectus requirements.
16.4 Communications not deemed an offer.
16.5 Exemptions.
16.6 Sales of nonconvertible debt.
16.7 Nonpublic offerings.
16.8 Small issues.
16.15 Form and content.
16.16 Effectiveness.
16.17 Filing requirements and inspection of documents.
16.18 Use of prospectus.
16.19 Withdrawal or abandonment.
16.20 Current and periodic reports.
16.30 Request for interpretive advice or no-objection letter.
16.31 Escrow requirement.
16.32 Fraudulent transactions and unsafe and unsound practices.
16.33 Filing fees.
Authority: 12 U.S.C. 1 et seq. and 93a.
Sec. 16.1 Authority, purpose, and scope.
(a) Authority. This part is issued under the general authority of
the national banking laws, 12 U.S.C. 1 et seq., and the OCC's general
rulemaking authority in 12 U.S.C. 93a.
(b) Purpose. This part sets forth rules governing the offer and
sale of securities issued by a bank.
(c) Scope. This part applies to offers and sales of bank securities
by issuers, underwriters, and dealers.
Sec. 16.2 Definitions.
For purposes of this part, the following definitions apply:
(a) Accredited investor means the same as in Commission Rule 501(a)
(17 CFR 230.501(a)).
(b) Bank means an existing national bank, a national bank in
organization, a bank operating under the Code of Law of the District of
Columbia, or a federal branch or agency of a foreign bank.
(c) Commission means the Securities and Exchange Commission. When
used in the rules, regulations, or forms of the Commission referred to
in this part, the term ``Commission'' shall be deemed to refer to the
OCC.
(d) Dealer means the same as in section 2(12) of the Securities Act
(15 U.S.C. 77b(12)).
(e) Exchange Act means the Securities Exchange Act of 1934 (15
U.S.C. 78a through 78jj).
(f) Insured depository institution means the same as in section
3(c)(2) of the Federal Deposit Insurance Act (12 U.S.C. 1813(c)(2)).
(g) Investment grade means that a security is rated investment
grade (i.e., in one of the top four rating categories) by each
nationally recognized statistical rating organization that has rated
the security.
(h) Issuer means a bank that issues or proposes to issue any
security.
(i) Nonconvertible debt means a general obligation of the bank,
whether senior or subordinated, that is not convertible into any class
of common or preferred stock or any derivative thereof.
(j) OCC means the Office of the Comptroller of the Currency.
(k) Person means the same as in section 2(2) of the Securities Act
(15 U.S.C. 77b(2)) and includes a bank.
(l) Prospectus means an offering document that includes the
information required by section 10(a) of the Securities Act (15 U.S.C.
77j(a)).
(m) Registration statement means a filing that includes the
prospectus and other information required by section 7 of the
Securities Act (15 U.S.C. 77g).
(n) Sale, sell, offer to sell, offer for sale, and offer mean the
same as in section 2(3) of the Securities Act (15 U.S.C. 77b(3)).
(o) Securities Act means the Securities Act of 1933 (15 U.S.C. 77a
through 77aa).
(p) Security means the same as in section 2(1) of the Securities
Act (15 U.S.C. 77b(1)).
(q) Underwriter means the same as in section 2(11) of the
Securities Act (15 U.S.C. 77b(11)). Commission Rules 137, 140, 141,
142, and 144 (17 CFR 230.137, 230.140, 230.141, 230.142, and 230.144)
(which apply to section 2(11) of the Securities Act) apply to this
part.
Sec. 16.3 Registration statement and prospectus requirements.
(a) No person shall offer or sell, directly or indirectly, any bank
issued security unless:
(1) A registration statement for the security meeting the
requirements of Sec. 16.15 of this part has been filed with and
declared effective by the OCC pursuant to this part, and the offer or
sale is accompanied or preceded by a prospectus that has been filed
with and declared effective by the OCC as a part of that registration
statement; or
(2) An exemption is available under Sec. 16.5 of this part.
(b) Notwithstanding paragraph (a) of this section, securities of a
bank may be offered through the use of a preliminary prospectus before
a registration statement and prospectus for the securities have been
declared effective by the OCC if:
(1) A registration statement including the preliminary prospectus
has been filed with the OCC;
(2) The preliminary prospectus contains the information required by
Sec. 16.15 of this part except for the omission of information with
respect to the offering price, underwriting discounts or commissions,
discounts or commissions to dealers, amount of proceeds, conversion
rates, call prices, or other matters dependent upon the offering price;
and
(3) A copy of the prospectus as declared effective containing the
information specified in paragraph (b)(2) of this section is furnished
to each purchaser prior to or simultaneously with the sale of the
security.
(c) Commission Rule 174 (17 CFR 230.174--Delivery of prospectus by
dealers; Exemptions under section 4(3) of the Act) applies to
transactions by dealers in bank issued securities.
Sec. 16.4 Communications not deemed an offer.
(a) The OCC will not deem the following communications to be an
offer under Sec. 16.3 of this part:
(1) Prior to the filing of a registration statement, any notice of
a proposed offering that satisfies the requirements of Commission Rule
135 (17 CFR 230.135);
(2) Subsequent to the filing of a registration statement, any
notice, circular, advertisement, letter, or other communication
published or transmitted to any person that satisfies the requirements
of Commission Rule 134 (17 CFR 230.134);
(3) Subsequent to the filing of a registration statement, any oral
offer of securities covered by that registration statement;
(4) Subsequent to the filing of a registration statement, any
summary prospectus that is filed as a part of that registration
statement and satisfies the requirements of Commission Rule 431 (17 CFR
230.431);
(5) Subsequent to the effective date of a registration statement,
any written communication if it is proved that each recipient of the
communication simultaneously or previously received a written
prospectus meeting the requirements of section 10(a) of the Securities
Act (15 U.S.C. 77j(a)) and Sec. 16.15 of this part that was filed with
and declared effective by the OCC;
(6) A notice of a proposed unregistered offering that satisfies the
requirements of Commission Rule 135c (17 CFR 230.135c); and
(7) A communication that satisfies the requirements of Commission
Rule 138 or 139 (17 CFR 230.138 or 230.139).
(b) The OCC may request that communications not deemed an offer
under paragraph (a) of this section be submitted to the OCC.
(c) The OCC may prohibit the publication or distribution of any
communication not deemed an offer under paragraph (a) of this section
if necessary to protect the investing public.
Sec. 16.5 Exemptions.
The registration statement and prospectus requirements of Sec. 16.3
of this part do not apply to an offer or sale of bank securities:
(a) If the securities are exempt from registration under section 3
of the Securities Act (15 U.S.C. 77c), but only by reason of an
exemption other than section 3(a)(2) (exemption for bank securities)
and section 3(a)(11) (exemption for intrastate offerings) of the
Securities Act. Commission Rules 149 and 150 (17 CFR 230.149 and
230.150) (which apply to section 3(a)(9) of the Securities Act) apply
to this part;
(b) In a transaction exempt from registration under section 4 of
the Securities Act (15 U.S.C. 77d). Commission Rules 152 and 152a (17
CFR 230.152 and 230.152a) (which apply to sections 4(2) and 4(1) of the
Securities Act) apply to this part;
(c) In a transaction that satisfies the requirements of Sec. 16.7
of this part;
(d) In a transaction that satisfies the requirements of Sec. 16.8
of this part;
(e) In a transaction that satisfies the requirements of Commission
Rule 144, 144A, 145, or 236 (17 CFR 230.144, 230.144A, 230.145, or
230.236);
(f) In a transaction that satisfies the requirements of Commission
Rules 701, 702T, and 703T (17 CFR 230.701, 230.702T, and 230.703T); or
(g) In a transaction that is an offer or sale occurring outside the
United States under Commission Regulation S (17 CFR part 230,
Regulation S--Rules Governing Offers and Sales Made Outside the United
States Without Registration Under the Securities Act of 1933).
Sec. 16.6 Sales of nonconvertible debt.
(a) The OCC will deem offers or sales of bank issued nonconvertible
debt to be in compliance with Secs. 16.3, 16.15 (a) and (b), and 16.20
of this part if all of the following requirements are met:
(1) The bank issuing the debt has securities registered under the
Exchange Act or is a subsidiary of a bank holding company that has
securities registered under the Exchange Act;
(2) The debt is offered and sold only to accredited investors;
(3) The debt is sold in minimum denominations of $250,000 and each
note or debenture is legended to provide that it cannot be exchanged
for notes or debentures of the bank in smaller denominations;
(4) The debt is rated investment grade;
(5) Prior to or simultaneously with the sale of the debt, each
purchaser receives an offering document that contains a description of
the terms of the debt, the use of proceeds, and method of distribution,
and incorporates the bank's latest Consolidated Reports of Condition
and Income (Call Report) and the bank's or its bank holding company's
Forms 10-K, 10-Q (or 10-KSB, 10-QSB), and 8-K (17 CFR part 249) filed
under the Exchange Act; and
(6) The offering document and any amendments are filed with the OCC
no later than the fifth business day after they are first used.
(b) Offers or sales of nonconvertible debt issued by a federal
branch or agency of a foreign bank need not need comply with the
requirements of paragraph (a)(1) of this section, if the federal branch
or agency provides the OCC the information specified in Commission Rule
12g3-2(b) (17 CFR 240.12g3-2(b)) and provides purchasers the
information specified in Commission Rule 144A(d)(4)(i) (17 CFR
230.144A(d)(4)(i)). A federal branch or agency that provides the OCC
the information specified in Commission Rule 12g3-2(b) need not
incorporate that information by reference into the offering document
provided to purchasers pursuant to paragraph (a)(5) of this section.
However, the federal branch or agency must make that information
available to the potential purchasers upon request. The OCC will make
the information available for public inspection.
Sec. 16.7 Nonpublic offerings.
(a) The OCC will deem offers and sales of bank issued securities
that meet all of the following requirements to be exempt from the
registration and prospectus requirements of Sec. 16.3 pursuant to
Sec. 16.5(c) of this part:
(1) All the securities are offered and sold in a transaction that
satisfies the requirements of Commission Regulation D (17 CFR part 230,
Regulation D--Rules Governing the Limited Offer and Sale of Securities
Without Registration Under the Securities Act of 1933);
(2) Each purchaser who is not an accredited investor either alone
or with its purchaser representative(s) has the knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of the prospective investment, or the
issuer reasonably believes immediately prior to making any sale that
the purchaser comes within this description; and
(3) A notice that meets the requirements of Commission Rule 503 (17
CFR 230.503) is filed with the OCC.
(b) All subsequent sales of bank issued securities subject to the
limitations on resale of Commission Regulation D (17 CFR part 230,
Regulation D--Rules Governing the Limited Offer and Sale of Securities
Without Registration Under the Securities Act of 1933) must be made
pursuant to Commission Rule 144 (17 CFR 230.144), Commission Rule 144A
(17 CFR 230.144A), another exemption from registration under the
Securities Act referenced in Sec. 16.5 of this part, or in accordance
with the registration and prospectus requirements of Sec. 16.3 of this
part.
(c) No offer or sale of bank issued securities shall be made in
reliance on Commission Regulation D (17 CFR part 230, Regulation D--
Rules Governing the Limited Offer and Sale of Securities Without
Registration Under the Securities Act of 1933) without compliance with
paragraphs (a)(1) and (a)(2) of this section.
Sec. 16.8 Small issues.
(a) The OCC will deem offers and sales of bank issued securities
that satisfy the requirements of Commission Regulation A (17 CFR part
230, Regulation A--Conditional Small Issues Exemption) to be exempt
from the registration and prospectus requirements of Sec. 16.3 pursuant
to Sec. 16.5(d) of this part.
(b) A filer should consult the Commission's Securities Act Industry
Guide 3--Statistical Disclosure by Bank Holding Companies (17 CFR
229.801(c) and 231) and requirement 7 (Loans) of Rule 9-03 of
Commission Regulation S-X (17 CFR 230.9-03) for guidance on appropriate
disclosures when preparing offering documents to be filed with the OCC
pursuant to Regulation A.
Sec. 16.15 Form and content.
(a) Any registration statement filed pursuant to this part must be
on the form for registration (17 CFR part 239) that the bank would be
eligible to use were it required to register the securities under the
Securities Act and must meet the requirements of the Commission
regulations referred to in the applicable form for registration. A
filer should consult the Commission's Securities Act Industry Guide 3--
Statistical Disclosure by Bank Holding Companies (17 CFR 229.801(c) and
231) for guidance on appropriate disclosures when preparing
registration statements.
(b) Any registration statement or amendment filed pursuant to this
part must comply with the requirements of Commission Regulation C (17
CFR part 230, Regulation C--Registration), except to the extent those
requirements conflict with specific requirements of this part.
(c) In addition to the information expressly required to be
included in the registration statement by paragraphs (a) and (b) of
this section, the registration statement must include any additional
material information that is necessary to make the required statements,
in light of the circumstances under which they are made, not
misleading.
(d) Notwithstanding paragraph (a) of this section, the registration
statement for securities issued by a bank that is not in compliance
with the regulatory capital requirements set forth in part 3 of this
chapter must be on the Form S-1 (17 CFR part 239) registration
statement under the Securities Act.
Sec. 16.16 Effectiveness.
(a) Registration statements and amendments filed with the OCC
pursuant to this part will become effective in accordance with sections
8(a) and (c) of the Securities Act (15 U.S.C. 77h(a) and (c)) and
Commission Regulation C (17 CFR part 230, Regulation C--Registration).
(b) The OCC will deem registration statements and amendments that
become effective pursuant to paragraph (a) of this section to be
declared effective. If the OCC deems a registration statement to be
declared effective, the OCC will also deem the prospectus that was
filed as a part of that registration statement to be declared
effective.
Sec. 16.17 Filing requirements and inspection of documents.
(a) Except as provided in paragraph (b) of this section, all
registration statements, offering documents, amendments, notices, or
other documents must be filed with the Securities, Investments, and
Fiduciary Practices Division, Office of the Comptroller of the
Currency, 250 E Street, SW, Washington, DC 20219.
(b) All registration statements, offering documents, amendments,
notices, or other documents relating to a bank in organization must be
filed with the appropriate District office of the OCC.
(c) Where this part refers to a section of the Securities Act or
the Exchange Act or a Commission rule that requires the filing of a
notice or other document with the Commission, that notice or other
document must be filed with the OCC.
(d) Unless otherwise requested by the OCC, any filing under this
part must include four copies of any document filed. Material may be
filed by delivery to the OCC through use of the mails or otherwise. The
date on which documents are actually received by the OCC will be the
date of filing of those documents, if the person filing the documents
has complied with all requirements regarding the filing, including the
submission of any fee required under Sec. 16.33 of this part.
(e) Any filing of amendments or revisions must include at least
four copies, two of which are marked to indicate clearly and precisely,
by underlining or in some other appropriate manner, the changes made.
(f) The OCC will make available for public inspection copies of the
registration statements, offering documents, amendments, exhibits,
notices or reports filed pursuant to this part at the address
identified in Sec. 4.17(b) of this chapter.
Sec. 16.18 Use of prospectus.
(a) No person shall use a prospectus or amendment declared
effective by the OCC more than nine months after the effective date
unless the information contained in the prospectus or amendment is as
of a date not more than 16 months prior to the date of use.
(b) If any event arises, or change in fact occurs, after the
effective date and that event or change in fact, individually or in the
aggregate, results in the prospectus containing any untrue statement of
material fact, or omitting to state a material fact necessary in order
to make statements made in the prospectus not misleading under the
circumstances, then no person shall use the prospectus that has been
declared effective under this part until an amendment reflecting the
event or change has been filed with and declared effective by the OCC.
Sec. 16.19 Withdrawal or abandonment.
(a) Any registration statement, amendment, or exhibit may be
withdrawn prior to the effective date. A withdrawal must be signed and
state the grounds upon which it is made. The OCC will not remove any
withdrawn document from its files, but will mark the document Withdrawn
upon the request of the registrant on (date).
(b) When a registration statement or amendment has been on file
with the OCC for a period of nine months and has not become effective,
the OCC may, in its discretion, determine whether the filing has been
abandoned. Before determining that a filing has been abandoned, the OCC
will notify the filer that the filing is out of date and must either be
amended to comply with the applicable requirements of this part or be
withdrawn within 30 days after the date of notice. When a filing is
abandoned, the OCC will not remove the filing from its files but will
mark the filing Declared abandoned by the OCC on (date).
Sec. 16.20 Current and periodic reports.
(a) Each bank that files a registration statement that has been
declared effective pursuant to this part must file with the OCC, after
the effective date, the periodic and current reports required by
section 13 of the Exchange Act (15 U.S.C. 78m), as if the securities
covered by the registration statement were securities registered
pursuant to section 12 of the Exchange Act (15 U.S.C. 78l). Banks must
file periodic and current reports in accordance with Commission
Regulation 15D (17 CFR 240.15d-1 up to but not including 240.15Aa-1).
(b) Suspension of the duty to file periodic and current reports
under this section will be in accordance with section 15(d) of the
Exchange Act (15 U.S.C. 78o(d)), Commission Regulation 15D (17 CFR
240.15d-1 up to but not including 240.15Aa-1), and Commission Rule 12h-
3 (17 CFR 240.12h-3).
(c) Paragraph (a) of this section does not apply if the bank is a
subsidiary of a one-bank holding company, the financial statements of
the bank and the parent bank holding company are substantially the
same, and the bank's parent bank holding company files current and
periodic reports pursuant to section 13 of the Exchange Act (15 U.S.C.
78m).
(d) Paragraph (a) of this section does not apply if the bank files
the registration statement in connection with a merger, consolidation,
or acquisition of assets subject to Sec. 5.33(b)(6)(ii) of this
chapter.
Sec. 16.30 Request for interpretive advice or no-objection letter.
Any person requesting interpretive advice or a no-objection letter
from the OCC with respect to any provision of this part shall:
(a) File a copy of the request, including any supporting
attachments with the Securities, Investments, and Fiduciary Practices
Division at the address listed in Sec. 16.17;
(b) Identify or describe the provisions of this part to which the
request relates, the participants in the proposed transaction, and the
reasons for the request; and
(c) Include with the request a legal opinion as to each legal issue
raised and an accounting opinion as to each accounting issue raised.
Sec. 16.31 Escrow requirement.
The OCC may require that any funds received in connection with an
offer or sale of securities be held in an independent escrow account at
an unrelated insured depository institution when the use of an escrow
account is in the best interests of shareholders.
Sec. 16.32 Fraudulent transactions and unsafe and unsound practices.
(a) No person in the offer or sale of bank securities shall
directly or indirectly:
(1) Employ any device, scheme or artifice to defraud;
(2) Make any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made, in light
of the circumstances under which they were made, not misleading; or
(3) Engage in any act, practice, or course of business which
operates as a fraud or deceit upon any person, in connection with the
purchase or sale of any security of a bank.
(b) Nothing in this section limits the applicability of section 17
of the Securities Act (15 U.S.C. 77q) or section 10(b) of the Exchange
Act (15 U.S.C. 78j) or Rule 10b-5 promulgated thereunder (17 CFR
240.10b-5).
(c) Any violation of this section also constitutes an unsafe or
unsound practice under 12 U.S.C. 1818.
(d) Commission Rule 175 (17 CFR 230.175--Liability for certain
statements by issuers) applies to this part.
Sec. 16.33 Filing fees.
(a) Filing fees must accompany certain filings made under the
provisions of this part before the OCC will accept those filings. The
applicable fee schedule is provided in the Notice of Comptroller of the
Currency Fees published pursuant to Sec. 8.8 of this chapter.
(b) Filing fees must be paid by check payable to the Comptroller of
the Currency.
Dated: October 27, 1994.
Eugene A. Ludwig,
Comptroller of the Currency.
[FR Doc. 94-27082 Filed 11-1-94; 8:45 am]
BILLING CODE 4810-33-P
