[Federal Register Volume 61, Number 123 (Tuesday, June 25, 1996)]
[Proposed Rules]
[Pages 32713-32728]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14441]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 61, No. 123 / Tuesday, June 25, 1996 /
Proposed Rules
[[Page 32713]]
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Parts 543, 544, 545, 552, 556, 563, and 575
[No. 96-49]
RIN 1550-AA87
Corporate Governance
AGENCY: Office of Thrift Supervision, Treasury.
ACTION: Notice of proposed rulemaking; request for comment.
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SUMMARY: The Office of Thrift Supervision (OTS or Office) today is
proposing amendments to its corporate governance regulations and policy
statements to update, reorganize and substantially streamline them.
This proposal follows a detailed review of each pertinent regulation
and policy statement in the Code of Federal Regulations (CFR) to
determine whether it is necessary, imposes the least possible burden
consistent with safety and soundness and is written in a clear and
straightforward manner. Today's proposal is being made pursuant to the
Regulatory Reinvention Initiative of the Vice President's National
Performance Review and section 303 of the Riegle Community Development
and Regulatory Improvement Act of 1994.
DATES: Comments must be received on or before August 26, 1996.
ADDRESSES: Send comments to Manager, Dissemination Branch, Records
Management and Information Policy, Office of Thrift Supervision, 1700 G
Street, NW., Washington, D.C. 20552, Attention Docket No. 96-49. These
submissions may be hand-delivered to 1700 G Street, NW., from 9:00 A.M.
to 5:00 P.M. on business days; they may be sent by facsimile
transmission to FAX Number (202) 906-7755. Comments will be available
for inspection at 1700 G Street, NW., from 9:00 P.M. until 4:00 P.M. on
business days.
FOR FURTHER INFORMATION CONTACT: David Permut, Counsel (Banking and
Finance), Business Transactions Division, (202) 906-7505; or Mary Jo
Johnson, Project Manager, Supervision Policy (202) 906-5739; or Valerie
J. Lithotomos, Counsel (Banking and Finance), Regulations and
Legislation Division, (202) 906-6439, Chief Counsel's Office, 1700 G
Street NW., Washington, D.C. 20552.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background of the Proposal
II. Objectives
A. Reduce Compliance Costs by Removing Unnecessary Regulations
B. Provide Maximum Corporate Governance Flexibility for Savings
Associations
C. Provide Clear Regulatory Guidance for Frequently Recurring
Questions
D. Move the Charter and Model Bylaws Into Application Processing
Regulatory Handbook
III. Historical Overview of Current Corporate Governance Regulations
IV. Section-by-Section Analysis of the Proposal
V. Proposed Disposition of Corporate Governance Regulations
VI. Request for Comment
VII. Executive Order 12866
VIII. Regulatory Flexibility Act Analysis
IX. Unfunded Mandates Act of 1995
X. Paperwork Reduction Act
I. Background of the Proposal
In a comprehensive review of the agency's regulations in the spring
of 1995, OTS identified numerous obsolete or redundant regulations that
could quickly be repealed. On December 27, 1995, OTS published a final
rule in the Federal Register repealing eight percent of its
regulations.1 As part of its review, OTS also identified several
key areas in its regulations for a more intensive, systematic
regulatory burden review. Certain areas--lending and investment
authority, corporate governance, subsidiaries and equity investments,
and conflicts of interest, corporate opportunity and hazard insurance--
were chosen for intensive review because they are vital to the thrift
industry, had not been developed on an interagency basis,2 and had
not been substantially reviewed or amended in recent years.
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\1\ 60 FR 66866 (December 27, 1995).
\2\ Interagency regulations are being reviewed through the
Federal Financial Institutions Examination Counsel.
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Earlier this year, OTS proposed a comprehensive streamlining of its
lending and investment regulations.3 Proposals regarding
subsidiaries and equity investments and conflicts of interest,
corporate opportunity and hazard insurance will be issued in the near
future.
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\3\ 61 FR 1162 (January 17, 1996).
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Today's proposal presents the results of the review of the charter
and bylaw regulations (corporate governance). If adopted in final form,
today's proposal will reduce the number of charter and bylaw
regulations and policy statements from 33 to 24, a reduction of 27
percent. In addition, deletion of the charter and model bylaws from the
CFR will remove 13.5 pages of CFR text. This information will be moved
to the Application Processing Regulatory Handbook (Handbook).
This proposal was developed in consultation with those who use the
regulations on a daily basis: OTS regional staff and representatives of
the thrift industry. OTS sought specific comments from the thrift
industry through a focus group composed of representatives of seven
savings associations and an industry trade association.
II. Objectives
The overarching goal of OTS' reinvention initiative is to reduce
regulatory burden on savings associations to the greatest extent
possible consistent with statutory requirements and safety and
soundness. In the context of corporate governance, we believe maximum
burden reduction can be achieved by pursuing four specific objectives.
A. Reduce Compliance Costs by Removing Unnecessary Regulations
The first objective of the OTS proposal is to remove unnecessary,
duplicative or outdated regulations affecting the corporate governance
of Federal thrift institutions. As described in more detail in the
Background section below, the corporate governance regulations have not
been thoroughly updated for many years. By eliminating unnecessary
regulations, OTS hopes to reduce regulatory compliance costs.
Examples of regulations, or subsections thereof, proposed to be
removed are Sec. 544.2(b)(4) (Mutual capital certificates), Sec. 544.3
(Adoption of
[[Page 32714]]
a new Federal charter by a Federal savings association),
Sec. 544.5(b)(17) (Emergency preparedness), Sec. 544.8 (Old and new
charters), Sec. 544.9 (Charter B associations), Sec. 552.1
(Definitions), Sec. 552.2 (Corporate titles), Sec. 552.2-5 (Conversion
from Federal mutual to Federal stock), Sec. 552.4(b)(3) (Charter
amendments), Sec. 552.6-2(a) (Requirement that the President shall be a
director and CEO), and Sec. 552.8 (Savings deposits). All of the above
regulations, or portions thereof, are being removed because they are
redundant, outdated or unnecessary.
Several other sections will have changes made to certain sentences
or phrases within the section, such as the removal of the need for
preliminary OTS approval of proposed charter amendments in Secs. 544.1,
Section 9; 552.3, Section 8; and 575.9, Section 8; and elimination of
the need for certification by management of the legality of proposed
charter and bylaw amendments in Secs. 544.2(a)(2)(i), 544.5(c),
552.4(a)(2)(i), and 552.5(b)(1).
B. Provide Maximum Corporate Governance Flexibility for Savings
Associations
OTS is committed to ensuring that Federal savings associations
operate under state-of-the-art corporate governance procedures.
Wherever possible, consistent with safety and soundness and fairness to
shareholders and members, we are seeking to move toward greater
flexibility. Specific amendments proposed to provide greater
flexibility include:
Amending Secs. 544.5(b)(1) and 552.6(a) to provide more
flexibility for the site of shareholder meetings.
Modifying Secs. 544.5(b)(5) and 552.6(f)(1) to allow
proxies to be gathered telephonically or electronically.
Expanding the list of preapproved charter amendments in
Secs. 544.2 and 552.4 to enable institutions to adopt supermajority
voting provisions, to eliminate cumulative voting, and, for mutuals to
increase the maximum permissible number of votes per member to up to
1000.
Replacing the current requirement in Secs. 544.2,
544.5(c)(2), 552.4 and 552.5(b) that institutions give OTS advance
notice of their intent to adopt preapproved charter and bylaws
amendments with an after-the-fact notice.
Authorize associations to hold their annual shareholders
meeting 150 days after the close of their fiscal year, instead of the
current 120 days (Secs. 544.5(b)(1) and 552.6(a)).
Revising Sec. 544.5(b)(16) to recognize the ``sitting''
board of directors rather than the ``authorized'' board of directors
when determining voting requirements in certain instances.
Exempt wholly-owned stock associations from various
requirements such as staggered terms for members of their boards of
directors (Sec. 552.6-1(b)), notice of shareholder meetings
(Sec. 552.6(b)), and compilation of shareholder voting lists
(Sec. 552.6(d)).
Permit shareholder actions to be taken by unanimous
written consent in lieu of a formal shareholders meeting
(Sec. 552.6(h)).
OTS is continuing to review the laws of various states, and the
corporate governance approaches followed by the other federal agencies
that charter depository institutions, for additional innovative
corporate governance ideas. We welcome further suggestions from
commenters.
In particular, OTS requests comment on whether there are aspects of
the corporate governance structure applicable to national banks that
would be beneficial for Federal thrifts. The corporate governance
regulations applicable to Federal thrifts tend to be more detailed than
those applicable to national banks. To fill in the details, national
banks are permitted to elect to follow the corporate governance laws of
the state where the bank's home office is located, the laws of the
state where the bank's holding company is chartered, Delaware law, or
the Model Business Corporation Act. The body of law that a national
bank elects to follow applies only to the extent not inconsistent with
the corporate governance provisions of the National Bank Act and
implementing regulations.
Federal savings associations may benefit from the detail provided
in OTS's corporate governance regulations. Absence of detail in the
area of corporate governance can lead to confusion, delay, and
potential shareholder litigation. Accordingly, OTS's objective has been
to provide savings associations with a comprehensive set of clear,
modern, and flexible corporate governance rules. Institutions may apply
on a case-by-case basis for permission to adopt non-standard charter
and bylaw provisions.
Nevertheless, savings associations may benefit from the additional
option of following state law in lieu of OTS corporate governance
regulations--except for those regulations that OTS designated as vital
to safety and soundness or other fundamental policy objectives. OTS
requests comment on whether this type of state law election would offer
benefits to savings associations and, if so, a description of those
benefits.
C. Provide Clear Regulatory Guidance for Frequently Recurring Questions
A third objective is to clarify certain issues that frequently
arise regarding the corporate governance regulations. This will reduce
the number of instances when institutions incur delay or expense
seeking clarification of ambiguous or incomplete regulatory language.
Accordingly, OTS proposes to amend:
Section 544.5(b)(3) and (4) to indicate what rules govern
adjourned shareholder meetings;
Sections 544.5(b)(10) and 552.6-1(f) to add a cross
reference to a definition indicating what constitutes ``cause'' for
removal of a director;
Section 544.5(b)(6) to extend privacy rights for
confidential portions of an institution's books and records, now
provided for Federal stock institutions at Sec. 552.11(d), to Federal
mutual associations;
Section 544.5(b)(13) to give guidance on the procedures
governing when an institution substitutes a new director nominee for a
nominee that dies or becomes incapacitated; and
Section 552.6(d) to give guidance on how stock held in the
name of fiduciaries should be reflected on voting lists.
D. Move the Charters and Model Bylaws Into Application Processing
Regulation Handbook
OTS is proposing to move the charters for Federal stock and mutual
savings associations, found at Secs. 544.1, 552.3 and 575.9, to the
Handbook. We are also proposing to move the model bylaws, found in
appendices to Parts 544 and 552, to the Handbook. The Office of the
Comptroller of the Currency (OCC) and the National Credit Union
Administration (NCUA) follow a similar practice.
Placing the savings association charters and bylaws in the Handbook
may offer two advantages. First, by eliminating nonessential items from
the regulations, the regulations may become easier to use. Second, OTS
would have more flexibility to update and modernize the charters and
bylaws from time to time, because notice and comment rulemaking would
not be required to effect changes. We recognize, however, that making
changes without notice and comment rulemaking could also be viewed as a
disadvantage. Moreover, placing the charters and bylaws in the Handbook
may make them less accessible.
[[Page 32715]]
Accordingly, we request specific comment on this proposed change.
III. Historical Overview of Current Corporate Governance
Regulations
Before 1982, the corporate governance of Federal savings
associations was primarily concerned with Federal mutual savings and
loan associations, the only type of corporate charter available from
the chartering authority, the Federal Home Loan Bank Board (FHLBB),
predecessor to OTS. The Home Owners' Loan Act (HOLA) 4 only
permitted the chartering of Federal mutual savings and loan
associations.5
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\4\ 12 U.S.C. 1461-1470.
\5\ Section 5(a) of the HOLA, 12 U.S.C. 1464(a), contains the
statutory authority for the OTS to issue charters for Federal thrift
institutions.
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In 1982, Congress enacted the Garn-St Germain Depository
Institutions Act (DIA),6 which broadened the types of charters and
organizational options available to Federal savings associations. The
DIA authorized the creation of new Federally chartered stock
institutions, either as Federal savings banks or Federal savings and
loan associations, and permitted state-chartered savings banks to
convert to a Federal charter without requiring them to surrender their
FDIC insurance in favor of FSLIC insurance of accounts.
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\6\ Pub. L. 97-320, 96 Stat. 1469, October 15, 1982.
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In response to the DIA, the FHLBB amended its corporate governance
regulations (1983 Rulemaking) 7 to create a single Federal mutual
charter and a single Federal stock charter. The same basic charter was
available both to savings banks and to savings and loan associations,
with minor differences. Before the 1983 Rulemaking, Federally-chartered
thrifts had operated under a plethora of charters, including Charter S,
Charter T, Charter B, Charter B (Revised), Charter N, Charter N
(Revised), Charter L and Charter K (Revised). Some Federal associations
continue to operate under those charters. It is important to note that
today's proposed rulemaking does not require any institution to change
its current charter. After adoption of a final regulation, institutions
may retain their existing charters or amend their charters to conform
to the new provisions.
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\7\ 48 FR 44174 (September 28, 1983).
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In 1985, the FHLBB concluded that with the new structural options
available to Federal savings associations, a number of important
matters regarding the corporate governance of those associations were
either not adequately addressed, not covered in codified form or were
distributed in a piecemeal fashion throughout the regulations. The
FHLBB conducted an extensive review of the Model Business Corporation
Act, the corporate codes of Delaware, California, New York and Florida,
then presented a proposal for updating the corporate governance
regulations. Because the proposal was extensive, it was broken into
four parts,8 published over a two year period, with comments
sought on all sections before a final regulation was to be promulgated.
Only one section, however, the proposal on revisions to Receiverships
and Conservatorships, was enacted in final form before the priorities
of the FHLBB and external circumstances changed. The savings and loan
crisis had begun and the extensive revisions to corporate governance
were set aside for future consideration.
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\8\ Part I-50 FR 38832 (September 13, 1985); Part II-50 FR 52482
(December 24, 1985); and Part III and IV-52 FR 25870 (July 9, 1987).
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In 1989, the FHLBB's regulatory and chartering authority was
assumed by the newly established OTS. A number of the corporate
governance issues were ultimately addressed in the form of legal
opinions or approved amendments to charters and bylaws. These changes,
however, were confined to considerably more narrow subject areas than
the FHLBB proposal envisioned.
Thus, today's proposal, if adopted in final form, will be the first
major update of the corporate governance regulations in over a decade.
IV. Section-by-Section Analysis of the Proposal
A. Part 544--Charter and Bylaws
Section 544.1 Federal Mutual Charter
This section contains the required charter for Federal mutual
associations. As indicated above, OTS proposes to move this charter (as
well as the charter for stock associations and the model bylaws for
both) from the regulations to the Handbook. Thus, OTS proposes to amend
Sec. 544.1 to reference the Handbook. OTS also proposes to update the
charter.
So that the reader can understand what is being proposed, we have
set forth the changes proposed for the charter in the regulatory text,
and discuss them below.9
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\9\ For drafting purposes, the changes to the charter have been
designated as Alternative Two in the regulatory text.
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Section 1. Corporate Title. Section 1 establishes the corporate
title of the Federal association. The words ``hereby chartered'' will
be removed as unnecessary verbiage.
Section 6. Members. This section identifies the association's
members and describes their rights. OTS proposes to streamline this
section by moving the third and fourth sentences to introductory
instructions in the Handbook or, if the charter is retained in
Sec. 544.1, to the introductory paragraph of the regulation. These two
sentences instruct institutions that wish to adopt the charter, but are
currently operating under old charters conferring membership rights on
borrowers, to grandfather the membership rights of their existing
borrowers.
The sixth sentence of section 6, dealing with proxies, will be
removed because it already appears in the bylaws. The seventh and
eighth sentences, dealing with quorums, will be moved to the bylaws
because matters regarding member meetings are more fully addressed
there.
Section 7. Directors. This section provides that a Federal mutual
association may have from 5 to 15 directors. To further streamline the
charter, bracketed references to ``trustees'' will be removed, and a
single sentence will be added to the introductory instructions
indicating that institutions may substitute the term ``trustee'' for
the term ``director'' where appropriate. Similar changes will be made
throughout the charter and the model bylaws for mutual associations.
The third and fifth sentences (providing that directors shall be
members of the association and requiring staggered terms for directors)
will be moved to the bylaw section dealing with directors. The fourth
sentence (regarding vacancies on the board) will be moved to the bylaw
section on resignations, removals and (newly added) vacancies. The last
sentence, in brackets, will also be moved to the bylaw section on
directors. This sentence authorizes state savings banks that convert to
Federal mutual associations to grandfather their existing provisions
for electing directors for a limited period of time. OTS believes each
of these matters is more appropriately addressed in the bylaws, where
related issues are already addressed. Presenting related requirements
in a single place should make the charter and bylaws more user
friendly.
Section 9. Amendment of charter. Section 9 describes the procedures
for amending the association's charter. References to Secs. 544.2 or
544.3 will be removed as unnecessary verbiage. Section 9 will also be
revised to reflect the fact that ``preapproved'' charter amendments
(Sec. 544.2) will now be truly preapproved. Institutions will no longer
be required to submit these amendments to OTS for ``preliminary''
approval. (See discussion of Sec. 544.2 below.)
[[Page 32716]]
Finally, the signature blocks of the charter will be modified to
include a date to clarify when a charter is effective.
Section 544.2 Charter Amendments
Paragraphs (a) and (b) describe the filing requirements for
amending Federal mutual charters. OTS is proposing to remove, from
paragraphs (a)(2)(i) and (ii), the requirement that institutions
certify that amendments they propose are permissible under all
applicable laws. This certification is unnecessary because the legality
of a proposed amendment is reviewed by OTS staff as part of the
application process and its deletion will also reduce regulatory
burden. In addition, paragraph (b) will be revised to indicate that
preapproved charter amendments will no longer require advance
submissions to OTS. Instead, preapproved amendments will be deemed
approved when adopted by the institution and must simply be filed with
OTS within 30 days after adoption.
A new preapproved charter amendment will be added to Sec. 544.2
that authorizes Federal mutual associations to amend their charters to
raise the cap on the maximum number of votes any member can cast up to
1,000. Mutual charters generally authorize depositors to cast one vote
for every $100 of deposits, subject to a cap that has historically
tracked the limit on deposit insurance. Thus, 1,000 votes is the
standard cap under the current mutual charter (Sec. 544.1). However,
many institutions operate under charters adopted before the cap was
raised to 1,000. Making the 1,000 cap a preapproved amendment will
enable institutions to update their cap without filing an application
and paying an application fee. This is the most frequently requested
amendment for Federal mutual associations.
OTS also proposes to remove from Sec. 544.2 an obsolete preapproved
amendment authorizing institutions to issue Mutual Capital Certificates
(MCCs). Institutions generally no longer issue MCCs.10 Elimination
of outdated matter such as this should make the regulations less
confusing and easier to use.
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\10\ An institution could still choose to issue MCCs after
Sec. 544.2 is modified, provided the institution makes any necessary
amendments to its charter and bylaws (which would no longer be
preapproved) and follows the procedures specified at 12 CFR 563.74.
Paragraph (d) of Sec. 563.74 will be amended to reflect removal of
the preapproved amendment for MCCs.
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Paragraph 544.2(c) details the procedures an institution must
follow when it wants OTS to reissue its charter to reflect amendments
to the charter. The wording of this section will be conformed to the
wording of the corresponding stock charter section at Sec. 552.4(d). No
substantive change will result. Paragraph (c) is also being amended to
remove the delegation of authority to the Chief Counsel to execute
reissued charters. This change is being proposed as part of a
continuing effort to remove delegations from the regulations. Delegated
authority to execute reissued charters will be preserved via an
internal OTS document.
Section 544.3 Adoption of a New Federal Charter by a Federal Savings
Association
This section details the procedures that a Federal mutual savings
and loan association would use to amend its charter to read in the form
of a Federal mutual savings bank, or vice versa. This section has
become obsolete. Today, the charters for both types of institution are
identical, except for a possible difference in corporate title. A
simple corporate title change can be used to redesignate an institution
as a ``savings bank'' or ``savings and loan association.'' Thus,
Sec. 544.3 is being repealed. Corresponding changes will be made to
Secs. 543.1(b) and 543.14.
Section 544.5 Federal Mutual Savings Association Bylaws
This section describes the requirements for the bylaws of a Federal
mutual association. A nonsubstantive change will be made to paragraph
(a) to conform its language regarding procedures for bylaw amendments
to similar language that appears later in Sec. 544.5(b)(16).
Paragraph (b)(1) contains the annual meeting requirements for
Federal mutual associations. This paragraph will be amended to allow
meetings not only at the main office, but also at any other convenient
place the board of directors may designate, and to permit the
association to hold its annual meeting within 150 days of the end of
the association's fiscal year. The current requirement is 120 days.
Both changes will provide additional flexibility for Federal mutual
associations.
Paragraph (b)(2) addresses special meetings of members. It
provides, inter alia, that the holders of ten percent or more of a
mutual association's voting capital may call a special meeting.
Institutions frequently ask for clarification of the meaning of
``voting capital,'' since the term is no longer defined by the HOLA.
OTS proposes to clarify that voting capital means all FDIC-insured
deposits held by a savings association.
Paragraphs (b) (3) and (4), which discuss notice requirements for
meetings of members and the fixing of the record date for determining
what members are entitled to vote, respectively, will be amended to
indicate the circumstances under which adjournment of a meeting of
members will require the issuance of new notices and the fixing of a
new record date. These are also frequently asked questions.
OTS is also proposing a new paragraph (b)(5), to be titled ``Member
Quorum.'' 11 This paragraph will contain certain quorum provisions
currently found in the charter (as discussed above), as well as
clarification of what items of business may be considered at a meeting
held after adjournment. The agency believes that quorum issues are more
appropriately addressed in the bylaws, where other rules governing
member meetings already appear.
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\11\ All subsequent paragraphs will be renumbered accordingly.
However, only those paragraphs being substantively changed are
discussed below.
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Current paragraph (b)(5), on voting by proxy, will become (b)(6)
and will be amended to permit proxies to be given telephonically or
electronically as long as the holder uses a procedure for verifying the
identity of the member.12 Telephonic and electronic proxies enable
institutions to gather proxies and conduct corporate business more
rapidly and have become an accepted part of corporate democracy. In
addition, in response to frequent questions, OTS proposes to describe
voting procedures applicable to joint accounts and accounts held by
fiduciaries on behalf of others.
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\12\ One example of a verification procedure is for the
institution receiving the proxy by facsimile to compare the
signature on the proxy to a signature that the institution has on
file.
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Current paragraph (b)(6), which references Sec. 545.131 regarding
communication with other members, will become (b)(7). In addition, the
paragraph will be amended to reflect the relocation of Sec. 545.131 to
Part 544, and will extend the privacy rights now guaranteed to
depositors of Federal stock institutions (Sec. 552.11(d)) to the
depositors of Federal mutual institutions. The privacy rights of the
members of mutual institutions will not prevent the internal use of
member information by those institutions.
Current paragraph (b)(7), regarding the number of directors, will
become (b)(8). In addition, the paragraph will be amended to clarify
that the bylaws must specify the precise number of directors (rather
than a range). This number is
[[Page 32717]]
chosen by the institution within the range specified in the charter and
may be changed by the institution from time to time by amending its
bylaws. Paragraph (b)(8) will also contain three provisions being moved
from section seven of the charter. One provision requires that
directors be members of their association; a second provision requires
that directors serve staggered terms; and a third provision permits
state savings banks that convert to Federal mutual associations to
grandfather their method of electing directors for a limited time.
Current paragraph (b)(9), which addresses the duties of officers,
employees and agents and their indemnification, will become (b)(10). In
addition, a sentence on the removal of officers will be added to answer
a frequently asked question. The sentence will state: ``Any officer may
be removed by the board of directors with or without cause, but such
removal, other than for cause, shall be without prejudice to the
contractual rights, if any, of the person so removed.''
Current paragraph (b)(10), on the resignation or removal of
directors, will become (b)(11). A cross reference to the definition of
``cause,'' which appears elsewhere in the regulations, will be added in
response to a frequently asked question concerning the circumstances
under which shareholders can remove directors for ``cause''. Paragraph
(b)(11) will also be expanded to authorize boards of directors to fill
vacancies under the current flexible rules that now apply to stock
associations.
Current paragraph (b)(13), discussing procedures for nominating
directors, will become (b)(14) and will be expanded to clarify the
requirement that the names of nominees be posted at least 15 days
before an election, under certain circumstances. New language will
confirm that this requirement does not apply to a nominee substituted
as a result of death or other incapacity of another nominee. From time
to time, institutions have sought clarification on this issue.
Current paragraph (b)(16), which sets forth procedures for amending
the bylaws, will become (b)(17) and will be amended to make it easier
for a board that fails to meet its quorum requirement solely due to
vacancies on the board to amend its bylaws. The new language will
specify that, in the absence of a quorum due solely to vacancies, the
affirmative vote of a majority of the sitting board may amend the
bylaws.
Current paragraph (b)(17), on miscellaneous topics, will become
(b)(18) and will be amended to remove the reference to provisions
regarding ``emergency preparedness.'' Emergency preparedness provisions
are no longer part of the model bylaws.
Paragraphs (c)(1) and (c)(2) discuss the filing procedures for
bylaw amendments. OTS proposes to remove the requirement that
applications for bylaw amendments contain certifications that the
proposed amendments comport with all laws. As noted above when
discussing charter amendments, the certification requirement is
unnecessary because the legality of proposed amendments are reviewed by
OTS staff as part of the application process and its deletion will also
reduce regulatory burden. In addition, consistent with the proposal to
move the model bylaws out of the regulations, paragraph (c)(1) will be
revised to indicate that the model bylaws can be found in the Handbook
available from OTS. The current appendix to part 544, which contains
the model bylaws, will be removed.
Paragraph (c)(2) will also be revised to indicate that the model
bylaws, if adopted verbatim, are approved when adopted and must simply
be filed with OTS within 30 days after adoption. This change is
proposed because OTS has determined that over 90 percent of the bylaws
applications filed in recent years are for standard provisions that do
not require agency review.
Paragraph (d), which addresses the effective date of all other
bylaw amendments, will be amended to comport with a similar provision
for Federal stock associations. The provision is intended to clarify
the circumstances under which an amendment may be rejected by OTS, by
cross referencing the current standards which appear in paragraph
(c)(1).
Section 544.8 References to Old and New Charters; Rules Applicable to
Trustees of Federal Mutual Savings Banks
OTS proposes to remove this section, which indicates that trustees
will be treated as if they are directors for purposes of the
regulations. The same point will be made in the introductory
instructions to the charter and model bylaws. It does not need to be
repeated here.
Section 544.9 Obsolete Charter Provision for Charter B Associations.
This section provides that institutions that still operate under
the old Charter B are not bound by section 10 of that charter. Section
10 of Charter B purports to limit the authority of an institution to
invest in consumer loans and corporate debt securities. OTS proposes to
move Sec. 544.9, which affects very few institutions, from the
regulations into Handbook guidance.
Section 544.8 Communication Between Members of a Federal Mutual
Savings Association (Proposed)
OTS proposes to move the rules governing communications between
members of Federal mutual associations, which now appear in
Sec. 545.131, to part 544. This is where users of the regulations would
most likely look for guidance on such matters. Accordingly, current
Sec. 545.131 will become new Sec. 544.8.
Appendix to Part 544
As indicated above, OTS proposes to eliminate the appendix to part
544, which contains the model bylaws. Instead, these bylaws will be
moved to the Handbook, with changes being made to conform the model
bylaws to the amendments to the bylaws regulations described above.
B. Part 552--Incorporation, Organization, and Conversion of Federal
Stock Associations
Section 552.2 Corporate Title
OTS proposes to remove this section, which merely reminds
institutions that Sec. 543.1 regarding corporate titles for Federal
associations applies to Federal stock associations. There is no need
for this provision. Current Sec. 543.1, as currently written, clearly
governs corporate titles for all Federal associations.
Section 552.2-5 Conversion From Federal Mutual to Federal Stock
Charter
This section authorizes Federal mutual associations to convert to
Federal stock associations and provides for issuance of a stock charter
upon completion of the conversion. These matters are also covered, in
greater detail, by OTS conversion regulations. OTS, therefore, proposes
to remove this section.
Section 552.3 Charters for Federal Stock Associations
This section contains the required charter for Federal stock
associations. For the reasons indicated above in the discussion of
Sec. 544.1, OTS proposes to move the stock charter out of the
regulations and into the Handbook. Section 552.3 will thus be revised
to reference the charter as it appears in the Handbook. OTS proposes to
update the Federal stock charter with the following changes:
Section 2. Office. This section describes the location of the home
office of the Federal stock association. The
[[Page 32718]]
word ``in'' will be deleted and replaced by the word ``at.'' This is a
purely technical amendment.
Section 5. Capital stock. Section 5 describes the rules governing
the capital stock of a Federal stock association, including the types
of stock it may issue, the consideration to be paid, and voting rights.
Several changes are proposed. First, the charter will be amended to
permit the issuance of ``no par'' stock. The decision whether stock
should have a stated par value is a matter of internal corporate
governance that raises no supervisory or safety and soundness issues.
Second, the final sentence of the first paragraph will be revised
to reflect more current accounting terminology. The term ``retained
earnings'' will be substituted for ``surplus,'' and the phrase ``common
stock or paid-in capital accounts'' will be substituted for ``stated
capital.''
Third, the second paragraph will be revised to clarify that Federal
stock associations may issue stock to officers, directors, and
controlling persons in connection with its initial organization,
without a shareholder vote.
Fourth, the second sentence of the third paragraph will be revised
to clarify that a Federal stock charter may be amended to eliminate
cumulative voting.
Section 7. Directors. This section specifies that the number of
directors of a stock association shall be fixed in the bylaws and shall
not be fewer than five nor more than fifteen. However, provision is
made for the Director of OTS to approve a larger or smaller board of
directors. OTS proposes a technical amendment to this section that will
specify that approval of a larger or smaller board can be given either
by the Director ``or his or her delegate.''
Section 8. Amendment of charter. Section 8 describes the procedure
for amending an association's charter. This section is being revised to
indicate that preapproved charter amendments will be effective once
they have been approved by the association's board of directors and
shareholders, without any need for ``preliminary approval'' or any
other form of approval from OTS. (See discussion below of Sec. 552.4.)
In addition, OTS proposes to elaborate on the general rule that charter
amendments require approval by only a majority of the votes eligible to
be cast at a shareholders' meeting. Clarifying language will be added
indicating that this general rule does not apply in those instances
where an association's charter specifies that a supermajority vote is
required. (See discussion of Sec. 552.4 below.)
Finally, the signature blocks of the charter will be modified to
include a date to clarify when a charter is effective.
Section 552.4 Charter Amendments
Paragraphs (a) and (b) set forth the filing requirements for
amendments to Federal stock charters. In paragraph (a), OTS is
proposing to make the same changes regarding certification requirements
as discussed above in connection with the corresponding provisions for
mutual associations (Sec. 544.2(a)). Thus, stock associations will no
longer be required to certify that proposed amendments comport with all
applicable laws.
Paragraph (b) sets forth a list of preapproved charter amendments.
OTS proposes to add descriptive titles to each of the preapproved
amendments. The titles will correspond to the titles to similar
preapproved charter provisions for Federal mutual associations.
Paragraph (b) will also be revised to indicate that preapproved charter
amendments are approved when adopted and must simply be filed with OTS
within 30 days after adoption.
Paragraph (b)(3), which contains a preapproved amendment for
institutions that wish to change from a Federal stock savings and loan
association charter to a Federal stock savings bank charter, will be
removed for the same reasons described above with regard to
Sec. 544.3.13
---------------------------------------------------------------------------
\13\ Subsequent paragraphs will be renumbered accordingly.
However, only those paragraphs being substantively changed are
discussed below.
---------------------------------------------------------------------------
Current paragraph (b)(4), which permits changes to the authorized
number of shares and the par or stated value of such shares, will
become (b)(3). Additional nonsubstantive changes will be made to
clarify the language of this provision.
Current paragraph (b)(5), which permits institutions to modify
section 5 of the charter so as to authorize the issuance of preferred
stock, will become (b)(4) and will include the same changes to section
5 of the charter as were discussed above. In addition, the reference to
the Resolution Trust Corporation will be deleted, because that agency
no longer exists.
A new preapproved charter amendment will be added, as new paragraph
(b)(6), to authorize institutions to prohibit cumulative voting for
directors. The standard charter for Federal stock associations provides
for cumulative voting for directors. Federal associations frequently
apply to amend their charters to prohibit cumulative voting, and OTS
routinely approves these applications. Adding this provision to the
list of preapproved amendments will save associations that wish to make
this change the time and expense of an application.
Paragraph (c) states OTS policy on antitakeover provisions in
charter amendments. OTS proposes to expand this provision to state the
two basic standards OTS uses when reviewing proposed antitakeover
amendments. First, the proposed amendment must be consistent with
applicable statutes, regulations and OTS policies. Second, such
amendments must be adopted by a percentage of the shareholder vote at
least equal to the highest percentage that would be required to take
any action under the antitakeover provision. These are not new
standards; OTS already employs them when reviewing antitakeover
amendments. Stating these standards in the regulations will enable
institutions to present applications that conform to OTS requirements,
thereby saving them time and expense.
Section 552.5 Bylaws
This section presents the requirements for the bylaws of a Federal
stock association. A technical amendment will be made to paragraph (a)
to confirm that shareholder votes to approve bylaw amendments must
occur ``at a legal meeting'' of shareholders.
Paragraph (b) discusses the application and notice procedures
applicable to bylaw amendments. This paragraph will be amended to
remove the requirement that associations certify that bylaw amendments
comport with applicable law. Revisions will also be made to indicate
that the model bylaws, if adopted verbatim, are approved when adopted
and must simply be filed with OTS within 30 days after adoption.
Paragraph (b) will also indicate that the model bylaws are in the
Handbook and are available from any Regional Office.
OTS proposes to add a new paragraph (d) confirming that the
authority of a Federal stock association to engage in any transaction
is determined by the association's charter and bylaws in effect at the
time of the transaction. Subsequent amendments do not retroactively
affect this determination. A similar regulatory provision is already in
effect for Federal mutual associations (Sec. 544.6).
Section 552.6 Shareholders
This section contains certain corporate governance requirements
regarding shareholder meetings. Paragraph (a), which contains rules
regarding the time and place of shareholder meetings, will be amended
in two respects. First, the requirement
[[Page 32719]]
that shareholders meetings be held in the state of an association's
principal place of business is being removed. Instead, associations
will be able to hold shareholder meetings at any convenient place the
board of directors designates. Second, the time frame within which an
association must hold its annual shareholders meeting will be extended
from 120 to 150 days of the end of the association's fiscal year. These
are the same changes being proposed for Federal mutual associations
(Sec. 544.5(b)(1)).
Paragraph (b) states the notice requirements for shareholder
meetings. This paragraph will be amended to waive the shareholder
notice requirements for wholly-owned institutions.
Paragraph (d)(1), which addresses access to shareholder lists, will
be revised to clarify that shareholder lists are available only to
shareholders ``of record'' and their agents, and that the lists must
contain the names of beneficial owners that are furnished to the
association under the rules of the Securities and Exchange Commission.
In addition, the paragraph will be amended to waive its application to
wholly-owned institutions.
Paragraph (e), regarding shareholder quorum requirements, will be
amended to confirm that, whenever a quorum is present, the affirmative
vote of the majority of shares entitled to vote at a shareholders
meeting shall constitute an act of the shareholders, absent a
supermajority voting requirement.
Paragraph (f), which addresses proxies, will be amended in the same
manner as the Federal mutual bylaws at Sec. 544.5(b)(6) to allow
proxies to be gathered electronically or telephonically. In addition,
in response to frequent questions, paragraph (f) will be expanded to
describe voting procedures applicable to stock held by fiduciaries on
behalf of others and stock held jointly.
A new paragraph (h) will also be added confirming that, if an
association's bylaws so provide, shareholder action may be taken by
unanimous written consent in lieu of a shareholder meeting. At times,
this may allow associations to obtain shareholder approval more rapidly
and with less expense.
Section 552.6-1 Board of Directors
This section addresses corporate governance matters involving
directors. Paragraph (a) will be amended to provide that Directors need
not be stockholders unless the bylaws so require.
Paragraph (b) sets forth the number and term of directors. This
paragraph will be amended to clarify that the bylaws of a Federal stock
association must specify an exact number of positions on an
association's board of directors, not simply a range. The number is
selected by the institution within a range prescribed in the charter.
OTS also proposes to amend paragraph (b) to exempt wholly-owned stock
associations from the requirement that their directors be elected to
staggered terms.
Paragraph (c), regarding regular meetings of the board, will be
expanded to confirm that the board of directors has authority to
determine the place, frequency, time, and notice procedures for its
meetings. These matters need not be specified in the bylaws.
Paragraph (e), which covers director vacancies, will be amended to
clarify that a director appointed to fill a vacancy may serve ``only''
until the next election of directors. This is not a substantive change.
The word ``only'' is being added for emphasis and clarity.
Paragraph (f), concerning removal of directors, will be retitled
``Resignation or removal of directors'' to conform to the title for the
same provision for Federal mutual associations. In addition, the
paragraph will be amended to confirm, as is already the case, that
shareholders may remove a director in the midst of his or her term
``only'' for cause. A cross reference to the existing regulatory
definition of ``cause'' will also be added to answer a frequently asked
question.
Paragraph (k), on age limitations for directors, will be revised to
indicate that any age limitation provision must conform to applicable
Federal law, rules, or regulations, such as the Age Discrimination in
Employment Act.
Section 552.6-2 Officers
This section addresses corporate governance matters involving
officers. Paragraph (a) will be amended to remove the requirement that
the president always be a director and that either the president or the
chair of the board of directors always be the chief executive officer.
In paragraph (b), which addresses removal of officers, the cross
reference to OTS employment contract regulation will be updated.
Paragraph (c), on age limitations for officers, will be revised to
indicate that any age limitation on service by officers must conform to
applicable Federal law, rules, or regulations, such as the Age
Discrimination in Employment Act.
Section 552.8 Savings Deposits
This section contains instructions to Federal stock associations
regarding the types of savings deposits they may accept, preservation
of those accounts when a former mutual association adopts a stock
charter, rights of account holders in the event of liquidation, and
forms of certificates to use for accounts. OTS proposes to remove this
section from the regulations. The provisions of this section are either
self evident or covered by other statutes and regulations and general
contract law. Under the conversion regulations, all converting mutual
institutions are required to notify their accountholders that all the
rights they enjoyed as accountholders, except voting and ownership of
the institution, carry over to the converting association.
Section 552.11 Books and Records
This section describes a Federal stock association's obligations
with respect to books and records. Paragraph (b) will be amended to
make clear that shareholders' inspection rights extend only to
nonconfidential portions of an institution's books and records.
Appendix to Part 552
As indicated above, OTS proposes to move the model bylaws for
Federal stock associations, which currently appear in the appendix to
Part 552, into the Handbook. Changes will be made to conform the model
bylaws to the amendments to the bylaws regulations described above. In
addition, OTS proposes to modify the model bylaws to indicate that
procedures other than Robert's Rules of Order may be used for
shareholder meetings, as long as the board of directors adopts
alternative written procedures.
C. Part 575--Mutual Savings and Loan Holding Companies
Section 575.9 Charters and Bylaws for Mutual Holding Companies and
Their Savings Association Subsidiaries
This section describes the required charter and bylaws for Federal
mutual holding companies. Paragraph (a)(1) contains the prescribed
charter. This paragraph will be amended to indicate that the charter
will appear in the Handbook and will be available from any Regional
Office. In addition, the following changes will be made to the charter:
Section 1. Corporate Title. Section 1 contains the corporate title
of the Federal mutual holding company. The words ``hereby chartered''
will be deleted as unnecessary verbiage.
[[Page 32720]]
Section 5. Members. This section identifies the mutual holding
company's members and defines their rights. The sixth, seventh, and
eighth sentences of this section, addressing proxies and quorums, will
be removed because these matters either are covered or will be covered
(once today's amendments are made) by the bylaw requirements applicable
to mutual holding companies. As a result of this change, proxy and
quorum issues will be addressed in a single place in the corporate
documents of mutual holding companies.
Section 6. Directors. This section provides that a Federal mutual
holding company may have from 5 to 15 directors. In addition to
technical changes made to conform the wording of this section to the
corresponding section of the charter for Federal mutual associations,
OTS also proposes to remove the requirement that directors be members
of the association and the requirement that the terms of directors be
staggered.
Section 8. Amendment of charter. Section 8 describes the procedures
for amending the mutual holding company's charter. These procedures
will be streamlined to indicate that preapproved charter amendments are
effective once approved by members of the mutual holding company. Other
amendments will continue to require advance OTS approval.
Paragraph (a)(2) of Sec. 575.9 provides that mutual holding
companies may adopt the same preapproved charter amendments as are
specified for mutual savings associations, subject to certain specified
exclusions. Paragraph (a)(2) will be updated to conform to the changes
being proposed for the list of preapproved charter amendments for
mutual associations.
Paragraph (a)(4) specifies that Federal mutual holding companies
shall be subject to the same rules regarding bylaws as apply to Federal
mutual associations, with certain exceptions. This paragraph will be
amended to indicate that the model bylaws may be found in the Handbook,
available from OTS Regional Offices.
A technical amendment will be made to paragraph (a)(5), which
requires mutual holding companies to make their charter and bylaws
available to members. The cross reference to Sec. 545.131 will be
changed to reflect the proposed movement of this section to Part 544.
D. Miscellaneous Technical Changes
Section 543.1(b) Title Change
This section prescribes the rules for corporate titles for Federal
savings associations. This section will be amended to delete cross
references to sections being removed by this proposal.
Section 543.14 Continuity of Existence
This section, which confirms that the corporate existence of
converting associations continues, notwithstanding the conversion, will
be amended to delete a cross reference to a section being removed by
this proposal.
Section 556.1 Directors
This section, which describes OTS policy on the number of directors
necessary for a quorum and the directors' power to fill vacancies, will
be removed because both subjects are thoroughly covered by the bylaws
regulations.
Section 556.17 Effect of Loan Participation on Status of Borrowing
Members
This section provides guidance regarding various issues that arise
when determining the identity of the borrowing members of a Federal
mutual savings association. For example, this section indicates that
sale of a whole loan by a savings association to a third party
terminates the borrower's membership rights in the association. OTS
proposes to move this policy statement from the regulations into
Handbook guidance.
V. Proposed Disposition of Corporate Governance Regulations
The following chart displays the changes being proposed for OTS's
corporate governance regulations.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Original provision Comment
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec. 543.1(b)......................... Amended to delete references.
Sec. 543.14........................... Amended to delete references.
Sec. 544.1............................ Amended and moved to Handbook.
Sec. 544.1, Section 6................. Moved portion to Sec. 544.5 for clarification.
Sec. 544.1, Section 7................. Moved portion to Sec. 544.5 for clarification.
Sec. 544.1, Section 9................. Removed need for preliminary approval.
Sec. 544.2(a)(2)...................... Eliminated need for management certification.
Sec. 544.2(b)......................... Eliminated need for prior notice requirement.
Sec. 544.2(b)(4)...................... Removed existing paragraph and added new preapproved amendment.
Sec. 544.2(c)......................... Removed delegation.
Sec. 544.3............................ Removed.
Sec. 544.5(a)......................... Revised for clarification.
Sec. 544.5(b) (1) and (2)............. Amended for flexibility; changed annual meeting date.
Sec. 544.5(b) (3) and (4)............. Adjournment provisions added.
Sec. 544.5(b) (5) through (17)........ Redesignated (b) (6) to (18)
Sec. 544.5(b)(6)...................... Amended to add privacy rights.
Sec. 544.5(b)(10)..................... Amended to add guidance on vacancies.
Sec. 544.5(b)(13)..................... Amended to add guidance on nominee substitution.
Sec. 544.5(b)(16)..................... Revised for clarification.
Sec. 544.5(b)(17)..................... Removed.
Sec. 544.5(c)......................... Eliminated need for management certification.
Sec. 544.5(c)(1)...................... Eliminated need for prior notice requirement.
Sec. 544.5(d)......................... Reduced filing requirement.
Sec. 544.8............................ Removed.
Sec. 544.9............................ Removed.
Part 544 Appendix...................... Conformed to proposed changes and moved to Handbook.
Sec. 545.131.......................... Moved to Part 544.
Sec. 552.1............................ Removed.
Sec. 552.2............................ Removed.
Sec. 552.2-5.......................... Removed.
Sec. 552.3............................ Amended and moved to Handbook.
[[Page 32721]]
Sec. 552.3 Section 8.................. Removed need for preliminary approval.
Sec. 552.4(a)(2)...................... Eliminated need for management certification.
Sec. 552.4(b)......................... Eliminated need for prior notice requirement.
Sec. 552.4(b)(3)...................... Removed.
Sec. 552.4(b) (4) through (6)......... Redesignated (b) (3) to (5).
New Sec. 552.4(b)(6).................. Add new preapproved amendment.
Sec. 552.4(c)......................... Amended for clarification.
Sec. 552.5(b)......................... Eliminated need for management certification.
Sec. 552.5(b)(1)(ii).................. Eliminated need for prior notice requirement.
Sec. 552.5(c)......................... Reduced filing requirement.
Sec. 552.6(a)......................... Amended for flexibility; changed annual meeting date.
Sec. 552.6(b)......................... Amended shareholder meeting requirements.
Sec. 552.6(d)......................... Amended to add guidance on voting lists.
Sec. 552.6(e)......................... Amended to add guidance on certain voting requirements.
Sec. 552.6(f)(1)...................... Amended for flexibility.
New Sec. 552.6(f)(4).................. Added section on shares held by others.
New Sec. 552.6(h)..................... Added section on informal action.
Sec. 552.6-1(a)....................... Amended for flexibility.
Sec. 552.6-1(b)....................... Removed necessity for staggered board of directors if wholly owned. Also amended to specify number of
directors.
Sec. 552.6-1(f)....................... Amended to clarify where ``cause'' is defined.
Sec. 552.6-1(k)....................... Amended to add guidance.
Sec. 552.6-2(a)....................... Amended to remove provision requiring president to be a director.
Sec. 552.8............................ Removed.
Part 552 Appendix...................... Conformed to proposed changes and moved to Handbook.
Sec. 556.1............................ Removed.
Sec. 556.17........................... Moved to Handbook.
Sec. 563.74(d)........................ Amended to conform to earlier change.
Sec. 575.9............................ Amended and moved to Handbook.
Sec. 575.9 Section 8.................. Removed need for preliminary approval.
--------------------------------------------------------------------------------------------------------------------------------------------------------
VI. Request for Comment
OTS invites comment on all aspects of the proposal. Specific areas
that OTS requests for comments are as follows:
--Whether to move the charters and model bylaws from the regulations to
OTS's Handbook.
--Whether OTS should exempt associations that are wholly-owned from the
requirement that the board of directors be elected in staggered
elections; also whether a staggered board of directors should be
required if the association is not wholly owned.
--Whether OTS should adopt a practice similar to the OCC of permitting
institutions to elect to adopt, en bloc, the corporate governance
procedures authorized by any of the following: the laws of the state
where the main office of the bank is located, the laws of the state
where the bank's holding company, if any, is located, Delaware General
Corporation Law, or The Model Business Corporation Act. As indicated
above, any such election would likely be subject to certain exclusions,
as is the case for national banks, for Federal laws considered vital to
safety and soundness or other important policy objectives. Commenters
supporting the election option are asked to specify how the option
would benefit savings associations.
VII. Executive Order 12866
The Director of OTS has determined that this proposed rule does not
constitute a ``significant regulatory action'' for the purposes of
Executive Order 12866.
VIII. Regulatory Flexibility Act Analysis
Pursuant to section 605(b) of the Regulatory Flexibility Act, OTS
certifies that this proposal will not have a significant economic
impact on a substantial number of small entities. The proposal does not
impose any additional burdens or requirements upon small entities and
lowers several paperwork and other burdens on all savings associations.
IX. Unfunded Mandates Act of 1995
Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L.
104-4 (Unfunded Mandates Act), requires that an agency prepare a
budgetary impact statement before promulgating a rule that includes a
federal mandate that may result in expenditure by state, local, and
tribal governments, in the aggregate, or by the private sector, of $100
million or more in any one year. If a budgetary impact statement is
required, Section 205 of the Unfunded Mandates Act also requires an
agency to identify and consider a reasonable number of regulatory
alternatives before promulgating a rule. As discussed in the preamble,
this proposed rule reduces regulatory burden and updates, reorganizes
and substantially streamlines corporate governance regulations and
policy statements. OTS has determined that the proposed rule will not
result in expenditures by state, local, or tribal governments or by the
private sector of $100 million or more. Accordingly, this rulemaking is
not subject to section 202 of the Unfunded Mandates Act.
OTS has determined that the requirements of this proposed rule will
not result in expenditures by State, local, and tribal governments, or
by the private sector, of more than $100 million in any one year.
Accordingly, a budgetary impact statement is not required under section
202 of the Unfunded Mandates Act of 1995.
X. Paperwork Reduction Act
This proposed regulation changes the timing of the submission of a
notice to OTS when an institution proposes to amend its charter or
bylaws with OTS preapproved amendments. Currently, this notice is
required before the institution adopts the amendment. Under the
proposal, the institution will file the notice after adopting the
preapproved amendment. The reporting burden for this notice remains
unchanged.
Comments are invited on (i) whether the existing approved
collections of
[[Page 32722]]
information (OMB Control Nos. 1550-0017 and 1550-0018) are necessary
for the proper performance of the functions of the agency, including
whether the information shall have practical utility, (ii) the accuracy
of the estimate of the burden of the collection of information, (iii)
ways to enhance the quality of the information collected, (iv) ways to
minimize the burden of the collection of information on respondents,
including the use of automated collection techniques or other forms of
information technology.
List of Subjects
12 CFR Parts 543 and 544
Reporting and recordkeeping requirements, Savings associations.
12 CFR Part 545
Accounting, Consumer protection, Credit, Electronic Funds
transfers, Investments, Manufactured homes, Mortgages, Reporting and
recordkeeping requirements, Savings associations.
12 CFR Part 552
Reporting and recordkeeping requirements, Savings associations,
Securities.
12 CFR Part 556
Savings associations.
12 CFR Part 563
Accounting, Advertising, Crime, Currency, Flood insurance,
Investments, Mortgages, Reporting and recordkeeping requirements,
Savings associations, Securities, Surety bonds.
12 CFR Part 575
Administrative practice and procedure, Capital, Holding companies,
Reporting and recordkeeping requirements, Savings associations,
Securities.
Accordingly, the Office of Thrift Supervision proposes to amend
chapter V, title 12, Code of Federal Regulations, as set forth below.
PART 543--INCORPORATION, ORGANIZATION, AND CONVERSION OF FEDERAL
MUTUAL ASSOCIATIONS
1. The authority citation for part 543 continues to read as
follows:
Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 2901 et
seq.
Sec. 543.1 [Amended]
2. Section 543.1 is amended in paragraph (b) by removing the phrase
``, only pursuant to a charter change under Sec. 544.3 or Sec. 552.4 of
this chapter''.
Sec. 543.14 [Amended]
3. Section 543.14 is amended by removing the phrase ``or under
Sec. 544.3 of this chapter''.
PART 544--CHARTER AND BYLAWS
4. The authority citation for part 544 continues to read as
follows:
Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 2901 et
seq.
ALTERNATIVE ONE
5. Section 544.1 is revised to read as follows:
Sec. 544.1 Federal mutual charter.
The Federal mutual charter may be found in the Application
Processing Regulatory Handbook, available from any Regional Office of
OTS. (See Sec. 516.1(b) of this chapter.) Each Federal mutual
association's charter, including any amendments thereto, constitutes
conditions imposed in writing by the agency in connection with the
granting of an application and a written agreement entered into with
the agency within the meaning of 12 U.S.C. 1818(b).
ALTERNATIVE TWO
5a. Section 544.1 is amended by:
a. Revising the introductory text preceding the Federal Mutual
Charter;
b. Removing in section 1 of the Federal Mutual Charter the phrase
``hereby chartered'';
c. Transferring the third and fourth sentences of section 6 of the
charter, appearing in brackets, to the end of the introductory text of
Sec. 544.1 and by removing the brackets;
d. Removing the last three sentences of section 6 of the charter;
e. Removing the third, fourth, and fifth sentences of the first
paragraph, and all of the second paragraph of section 7 of the charter;
f. Removing the word ``[Trustees]'' in the heading and the words
``[trustee]'' and ``[trustees]'' where they appear in the text of
section 7 of the charter; and
g. Revising section 9 of the charter.
The revisions read as follows:
Sec. 544.1 Federal mutual charter.
A Federal mutual savings association shall have a charter in the
following form, which may include any of the additional provisions set
forth in Sec. 544.2, if such provisions are specifically requested. A
charter for a Federal mutual savings bank shall substitute the term
``savings bank'' for ``association.'' The term ``trustees'' may be
substituted for the term ``directors.''
* * * * *
Section 9. Amendment of charter. Adoption of any preapproved
charter amendment shall be effective after such preapproved
amendment has been approved by the members at a legal meeting. Any
other amendment, addition, change, or repeal of this charter must be
approved by the Office prior to approval by the members at a legal
meeting. Any amendment, addition, alteration, change, or repeal so
acted upon and approved shall be effective upon filing with the
Office in accordance with regulatory procedures.
Attest:----------------------------------------------------------------
Secretary of the Association
By:--------------------------------------------------------------------
President or Chief Executive Officer of the Association
Attest:----------------------------------------------------------------
Secretary of the Office of Thrift Supervision
By:--------------------------------------------------------------------
Director of the Office of Thrift Supervision
Effective Date:--------------------------------------------------------
6. Section 544.2 is amended by:
a. Removing in paragraphs (a)(2)(i) and (a)(2)(ii), the phrase
``along with a certification that the proposed'' and by adding in lieu
thereof the phrase, ``provided such'';
b. Removing the phrase ``filing with the OTS'' in the third
sentence of paragraph (b), and by adding in lieu thereof the phrase
``adoption, if adopted without change and filed with OTS, within 30
days after adoption'';
c. Revising paragraph (b)(4); and
d. Removing the word ``shall'' in the second sentence of paragraph
(c), and by adding in lieu thereof the phrase ``should be filed in
accordance with Sec. 516.1(c) of this chapter and'' and by removing the
last sentence of paragraph (c).
The revisions read as follows:
Sec. 544.2 Charter amendments.
* * * * *
(b) * * *
(4) Maximum number of votes. A Federal mutual savings association
may amend its charter by substituting (__________) votes per member in
section 6. [Fill in a number from 50 to 1000.]
* * * * *
Sec. 544.3 [Removed]
7. Section 544.3 is removed.
8. Section 544.5 is amended by:
a. Adding, between the words ``majority'' and ``of'' in the second
sentence of paragraph (a), the phrase ``of the votes cast by the
members at a legal meeting or a majority'', and by adding two new
sentences at the end of paragraph (a);
b. Removing the words ``[trustee]'' and ``[trustees]'' wherever
they appear in paragraph (b);
c. Revising the second sentence of paragraph (b)(1);
d. Adding a sentence at the end of paragraph (b)(2);
[[Page 32723]]
e. Adding a sentence at the end of paragraph (b)(3);
f. Adding a sentence at the end of paragraph (b)(4);
g. Redesignating paragraphs (b)(5) through (b)(17) as paragraphs
(b)(6) through (b)(18), respectively;
h. Adding a new paragraph (b)(5);
i. Adding to newly designated paragraph (b)(6), a sentence between
the first and second sentences, and three new sentences at the end;
j. Revising newly designated paragraph (b)(7);
k. Revising newly designated paragraph (b)(8);
l. Adding after the word ``treasurer'' in newly designated
paragraph (b)(10)(i), the words ``or comptroller'';
m. Adding a sentence at the end of newly designated paragraph
(b)(10)(ii);
n. Revising newly designated paragraph (b)(11);
o. Adding, between the words ``secretary'' and ``and'' in the
second sentence of newly designated paragraph (b)(14), the phrase ``,
except in the case of a nominee substituted as a result of death or
other incapacity,'';
p. Removing, in the first sentence of newly designated paragraph
(b)(17), the phrase ``pursuant to Sec. 544.5 of the Office's
regulations, as long as any such amendment'', and by adding in lieu
thereof the word ``that'', and by adding a sentence at the end of
paragraph (b)(17);
q. Removing, in newly designated paragraph (b)(18), the phrase
``emergency preparedness,'';
r. Removing in paragraph (c)(1) introductory text, the phrase
``along with a certification that the proposed'', and by adding in lieu
thereof the phrase ``, provided such'';
s. Removing, in the concluding text of paragraph (c)(1), the phrase
``shall be deemed to comply with the requirements of this section'',
and by adding in lieu thereof the phrase ``, if adopted without change,
and filed within 30 days after adoption, are effective upon adoption'';
t. Amending the heading of paragraph (c)(2) by removing the word
``Notice'', and by adding in lieu thereof the word ``Filing'', and by
removing, in paragraph (c)(2), the phrase ``together with a
certification'', and by adding in lieu thereof the word ``provided'';
and
u. Removing, in the second sentence of paragraph (d), the phrase
``raises a significant issue of law or policy'', and by adding in lieu
thereof the phrase ``requires an application to be filed pursuant to
paragraph (c)(1) of this section'',.
The additions and revisions read as follows:
Sec. 544.5 Federal mutual savings association bylaws.
(a) * * * The bylaws for a Federal mutual savings bank may
substitute the term ``savings bank'' for ``association.'' The term
``trustees'' may be substituted for the term ``directors.''
(b) * * *
(1) * * * Such meeting shall be held, as designated by its board of
directors, at a location within the state that constitutes the
principal place of business of the association, or at any other
convenient place the board of directors may designate, and at a date
and time within 150 days after the end of the association's fiscal
year. * * *
(2) * * * For purposes of this section, ``voting capital'' means
FDIC-insured deposits.
(3) * * * When any meeting is adjourned for 30 days or more, notice
of the adjournment and reconvening of the meeting shall be given as in
the case of the original meeting.
(4) * * * The same determination shall apply to any adjourned
meeting.
(5) Member quorum. Any number of members present and voting,
represented in person or by proxy, at a regular or special meeting of
the members shall constitute a quorum. A majority of all votes cast at
any meeting of the members shall determine any question. At any
adjourned meeting any business may be transacted which might have been
transacted at the meeting as originally called. Members present at a
duly constituted meeting may continue to transact business until
adjournment.
(6) * * * Proxies may be given telephonically or electronically as
long as the holder uses a procedure for verifying the identity of the
member. * * * Accounts held by an administrator, executor, guardian,
conservator or receiver may be voted in person or by proxy by such
person. Accounts held by a trustee may be voted by such trustee either
in person or by proxy, in accordance with the terms of the trust
agreement, but no trustee shall be entitled to vote accounts without a
transfer of such accounts into the trustee name. Joint accounts shall
be entitled to no more than 1,000 votes, split as the joint owners may
agree, in writing.
(7) Communications between members. Provisions relating to
communications between members shall be consistent with Sec. 544.8 of
the Office's regulations. No member, however, shall have the right to
inspect or copy any portion of any books or records of a Federal mutual
savings association containing:
(i) A list of depositors in or borrowers from such association;
(ii) Their addresses;
(iii) Individual deposit or loan balances or records; or
(iv) Any data from which such information could be reasonably
constructed.
(8) Number of directors, membership. The bylaws shall set forth a
specific number of directors, not a range. The number of directors
shall be not fewer than five nor more than fifteen, unless a higher or
lower number has been authorized by the Director of the Office or his
or her designee. Each director of the association shall be a member of
the association. Directors shall be elected for periods of three years
and until their successors are elected and qualified, but provision
shall be made for the election of approximately one-third of the board
each year. [State-chartered savings banks converting to Federal savings
banks may include alternative provisions for the election and term of
office of directors so long as such provisions are authorized by the
Office, and provide for compliance with the standard provisions of this
section no later than six years after the conversion to a Federal
savings association.]
* * * * *
(10) * * *
(ii) * * * Any officer may be removed by the board of directors
with or without cause, but such removal, other than for cause, shall be
without prejudice to the contractual rights, if any, of the person so
removed.
* * * * *
(11) Vacancies, resignation or removal of directors. Members of the
association shall elect directors by ballot: Provided, that in the
event of a vacancy on the board, the board of directors may, by their
affirmative vote, fill such vacancy, even if the remaining directors
constitute less than a quorum. A director elected to fill a vacancy
shall be elected to serve only until the next election of directors by
the members. The bylaws shall set out the procedure for the resignation
of a director, which shall be by written notice or by any other
procedure established in the bylaws. Directors may be removed only for
cause as defined in Sec. 563.39 of this chapter, by a vote of the
holders of a majority of the shares then entitled to vote at an
election of directors.
* * * * *
(17) * * * When an association fails to meet its quorum
requirement, solely due to vacancies on the board, the bylaws may be
amended by an affirmative vote of a majority of the sitting board.
* * * * *
[[Page 32724]]
Secs. 544.8 and 544.9 [Removed]
9. Sections 544.8 and 544.9 are removed.
ALTERNATIVE ONE
10. The Appendix to Part 544 is revised to read as follows:
Appendix to Part 544--Model Bylaws for Mutual Savings Associations
The Federal mutual bylaws may be found in the Application
Processing Regulatory Handbook, available from any Regional Office
of OTS (see Sec. 516.1(b) of this chapter). Each Federal mutual
association's bylaws, including any amendments thereto, constitutes
conditions imposed in writing by the agency in connection with the
granting of an application and a written agreement entered into with
the agency within the meaning of 12 U.S.C. 1818(b).
ALTERNATIVE TWO
10a. The Appendix to Part 544 is amended by:
a. Removing section 18;
b. Removing the words ``[trustee]'', ``[trustees]'', and
``[Trustees]'' wherever they appear in the appendix;
c. Adding introductory text between the heading of the appendix and
Section 1;
d. Amending the first sentence of Section 1 by removing the phrase
``at (insert date and time within 120 days'', and by adding in lieu
thereof the phrase ``or at any other convenient place the board of
directors may designate, at (insert date and time within 150 days'';
e. Amending Section 2 by adding a sentence between the second and
third sentences and by revising the last sentence;
f. Amending Section 3 by removing paragraph (b) and the paragraph
designation (a), by removing the word ``annual'' wherever it appears in
Section 3, and by adding a sentence at the end of Section 3;
g. Adding a sentence at the end of Section 4;
h. Redesignating Sections 5 through 17 as Sections 6 through 18,
respectively, and adding a new Section 5;
i. Adding to newly designated Section 6, a sentence between the
first and second sentences, and three new sentences at the end;
j. Adding new text at the end of newly designated Section 7;
k. Revising newly designated Section 8;
l. Amending newly designated Section 10 by adding the phrase ``or
comptroller'' in the first sentence of the first paragraph, between the
word ``treasurer'' and the colon and at the end of the sentence, and by
adding a sentence at the end of the first paragraph;
m. Amending newly designated Section 11 by revising the heading,
adding two sentences at the beginning of the first paragraph following
the heading, and adding the phrase ``as defined in the regulations in
Sec. 563.39 of this chapter'' after the word ``cause'' in the second
paragraph;
n. Amending newly designated Section 14 by adding the phrase ``,
except in the case of a nominee substituted as a result of death or
other incapacity'' at the end of the second and third sentences;
o. Amending newly designated Section 17 by adding a new sentence at
the end of the section; and
p. Amending newly designated Section 18 by adding one sentence of
introductory text preceding paragraph (a), and by removing the phrase
``of at least ____________________ (must be in accordance with ERISA)''
in paragraph (b).
The additions and revisions read as follows:
Appendix to Part 544--Model Bylaws for Mutual Savings Associations
The bylaws for a Federal mutual savings bank may substitute the
term ``savings bank'' for ``association.'' The term ``trustees'' may
be substituted for the term ``directors.''
* * * * *
2. * * * For purposes of this section, ``capital'' means FDIC-
insured deposits. Annual and special meetings shall be conducted in
accordance with the most current edition of Robert's Rules of Order
or any other set of procedures agreed to by the board of directors.
3. * * * When any meeting is adjourned for 30 days or more,
notice of the adjournment shall be given as in the case of the
original meeting.
4. * * * The same determination shall apply to any adjourned
meeting.
5. Member quorum. Any number of members present and voting,
represented in person or by proxy, at a regular or special meeting
of the members shall constitute a quorum. A majority of all votes
cast at any meeting of the members shall determine any question. At
any adjourned meeting any business may be transacted which might
have been transacted at the meeting as originally called. Members
present at a duly constituted meeting may continue to transact
business until adjournment.
6. * * * Proxies may be given telephonically or electronically
as long as the holder uses a procedure for verifying the identity of
the member. * * * Accounts held by an administrator, executor,
guardian, conservator or receiver may be voted in person or by proxy
by such person. Accounts held by a trustee may be voted by such
trustee either in person or by proxy, in accordance with the terms
of the trust agreement, but no trustee shall be entitled to vote
accounts without a transfer of such accounts into the trustee name.
Joint accounts shall be entitled to no more than 1,000 votes, split
as the joint owners may agree, in writing.
7. * * * No member, however, shall have the right to inspect or
copy any portion of any books or records of a Federal mutual savings
association containing:
(i) A list of depositors in or borrowers from such association;
(ii) Their addresses;
(iii) Individual deposit or loan balances or records; or
(iv) Any data from which such information could be reasonably
constructed.
8. Number of directors, membership. The number of directors
shall be ________ [not fewer than five nor more than fifteen],
except where authorized by the Director of the Office or his or her
designee. Each director of the association shall be a member of the
association. Directors shall be elected for periods of three years
and until their successors are elected and qualified, but provision
shall be made for the election of approximately one-third of the
board each year. [State-chartered savings banks converting to
Federal savings banks may include alternative provisions for the
election and term of office of directors so long as such provisions
are authorized by the Office, and provide for compliance with the
standard provisions of this section no later than six years after
the conversion to a Federal savings association.]
* * * * *
10. * * * Any officer may be removed by the board of directors
with or without cause, but such removal, other than for cause, shall
be without prejudice to the contractual rights, if any, of the
person so removed.
* * * * *
11. Vacancies, resignation, or removal of directors. Members of
the association shall elect directors by ballot: Provided, that in
the event of a vacancy on the board, the board of directors may, by
their affirmative vote, fill such vacancy, even if the remaining
directors constitute less than a quorum. A director elected to fill
a vacancy shall be elected to serve only until the next election of
directors by the members. * * *
* * * * *
17. * * * When an association fails to meet its quorum
requirement, solely due to vacancies on the board, the bylaws may be
amended by an affirmative vote of a majority of the sitting board.
18. Age limitations. [Bylaws on age limitations must comply with
all Federal laws, such as the Age Discrimination in Employment Act
and the Employee Retirement Income Security Act.] (a) * * *
* * * * *
PART 545--OPERATIONS
11. The authority citation for part 545 continues to read as
follows:
Authority: 12 U.S.C. 1462a, 1463, 1464, 1828.
Sec. 545.131 [Redesignated as Sec. 544.8]
12. Section 545.131 is redesignated as Sec. 544.8.
[[Page 32725]]
PART 552--INCORPORATION, ORGANIZATION, AND CONVERSION OF FEDERAL
STOCK ASSOCIATIONS
13. The authority citation for part 552 continues to read as
follows:
Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a.
Secs. 552.1 and 552.2 [Removed]
14. Sections 552.1 and 552.2 are removed.
Sec. 552.2-5 [Removed]
15. Section 552.2-5 is removed.
ALTERNATIVE ONE
16. Section 552.3 is revised to read as follows:
Sec. 552.3 Charters for Federal stock associations.
The Federal stock charter may be found in the Application
Processing Regulatory Handbook, available from any Regional Office of
OTS. (see Sec. 516.1(b) of this chapter.) Each Federal stock
association's charter, including any amendments thereto, constitutes
conditions imposed in writing by the agency in connection with the
granting of an application and a written agreement entered into with
the agency within the meaning of 12 U.S.C. 1818(b).
ALTERNATIVE TWO
16a. Section 552.3 is amended in the Federal Stock Charter by:
a. Removing, in Section 2, the word ``in'', and by adding in lieu
thereof the word ``at'';
b. Amending Section 5 by adding between the words ``or'' and
``stated'' appearing in brackets in the first sentence, the phrase ``if
no par is specified then shares shall have a'', by revising the last
sentence in the first paragraph;
c. Amending Section 5 by removing in the first sentence of the
second paragraph the phrases ``issuable in'' and ``common stock'', and
by adding in lieu thereof the phrases ``issued in the initial
organization of the association or'' and ``capital stock'',
respectively;
d. Amending Section 5 by adding the phrase ``, unless the charter
otherwise provides that there shall be no such cumulative voting'' at
the end of the second sentence in the third paragraph;
e. Amending Section 7 by adding the phrase ``, or his or her
delegate'' at the end of the last sentence; and
f. Revising Section 8.
The revisions read as follows:
Sec. 552.3 Charters for Federal stock associations.
* * * * *
Federal Stock Charter
* * * * *
Section 5. * * * In the case of a stock dividend, that part of
the retained earnings of the association that is transferred to
common stock or paid-in capital accounts upon the issuance of shares
as a stock dividend shall be deemed to be the consideration for
their issuance.
* * * * *
Section 8. Amendment of charter. Except as provided in Section
5, no amendment, addition, alteration, change or repeal of this
charter shall be made, unless such is first proposed by the board of
directors of the association, then approved by the Office, provided
that preapproved charter amendments shall be effective after such
preapproved amendment has been approved by the board of directors
and by the shareholders at a legal meeting. Amendments shall be
approved by the shareholders by a majority of the votes eligible to
be cast at a legal meeting, unless a higher vote is otherwise
required. Any amendment, addition, alteration, change, or repeal so
acted upon shall be effective upon filing with the Office in
accordance with regulatory procedures.
Attest:----------------------------------------------------------------
Secretary of the Association
By:--------------------------------------------------------------------
President or Chief Executive Officer of the Association
Attest:----------------------------------------------------------------
Secretary of the Office of Thrift Supervision
By:--------------------------------------------------------------------
Director of the Office of Thrift Supervision
Effective Date:--------------------------------------------------------
17. Section 552.4 is amended by:
a. Removing at the end of paragraph (a)(1) the semicolon and the
word ``and'', and by adding in lieu thereof a period;
b. Removing in paragraph (a)(2)(i) the phrase ``with a
certification that the proposed'' and in paragraph (a)(2)(ii) the
phrase ``, together with a certification that the'', and by adding in
both places the phrase ``, provided such'';
c. Removing the phrase ``filing with the OTS'' in the second
sentence of paragraph (b) introductory text, and by adding in lieu
thereof the phrase ``adoption, if adopted without change and filed with
OTS, within 30 days after adoption'';
d. Adding headings to paragraphs (b)(1) and (b)(2);
e. Removing paragraph (b)(3);
f. Redesignating paragraph (b)(4) as paragraph (b)(3) and revising
it;
g. Redesignating paragraph (b)(5) as paragraph (b)(4) and adding a
paragraph heading, and revising the introductory text;
h. Amending newly redesignated paragraph (b)(4) in Section 5 by
adding between the words ``or'' and ``stated'' appearing in brackets in
the first sentence, the phrase ``if no par value is specified the'',
and by revising the last sentence in the first paragraph;
i. Amending paragraph (b)(4) in Section 5 by removing in the first
sentence of the second paragraph the phrase ``issuable in'' and by
adding in lieu thereof the phrase ``issued in the initial organization
of the association or'';
j. Amending paragraph (b)(4) in Section 5 by adding the phrase ``,
unless the charter otherwise provides that there shall be no such
cumulative voting'' in the introductory text of the third paragraph
between the words ``directors:'' and ``Provided'';
k. Amending paragraph (b)(4) in paragraph (ii) of the third
paragraph of Section 5 by removing the phrase ``, the Federal Deposit
Insurance Corporation, or the Resolution Trust Corporation'', and by
adding in lieu thereof the phrase ``or the Federal Deposit Insurance
Corporation'';
l. Amending paragraph (b)(4) in paragraph A. of the fourth
paragraph by adding the phrase ``, unless the charter otherwise
provides that there shall be no such cumulative voting'' at the end of
the second sentence;
m. Redesignating paragraph (b)(6) as paragraph (b)(5), adding a
heading, and removing the phrase ``Amend the charter of a Federal stock
association'', and by adding in lieu thereof the phrase ``A Federal
stock association may amend its charter'';
n. Adding a new paragraph (b)(6);
o. Adding a heading to paragraph (b)(8); and
p. Amending paragraph (c) by removing the word ``preliminary''
wherever it appears, and by adding a second sentence.
The additions and revisions read as follows:
Sec. 552.4 Charter amendments.
* * * * *
(b) * * *
(1) Title change. * * *
(2) Home office. * * *
(3) Number of shares of stock and par value. A Federal stock
association may amend Section 5 of its charter to change the number of
authorized shares of stock, the number of shares within each class of
stock, and the par or stated value of such shares.
(4) Capital stock. A Federal stock association may amend its
charter by revising Section 5 to read as follows:
Section 5. * * * In the case of a stock dividend, that part of
the retained earnings of the association that is transferred to
common stock or paid-in capital accounts upon the issuance of shares
as a stock dividend shall be deemed to be the consideration for
their issuance.
* * * * *
[[Page 32726]]
(5) Limitations on subsequent issuances. * * *
(6) Cumulative voting. A Federal stock association may amend its
charter by substituting the following sentence for the second sentence
in the third paragraph of Section 5: ``Each holder of shares of common
stock shall be entitled to one vote for each share held by such holder
and there shall be no right to cumulate votes in an election of
directors.''
* * * * *
(8) Antitakeover provisions following conversion. * * *
(c) * * * Any such provision must be consistent with applicable
statutes, regulations, and OTS policies; and Provided Further, that any
such provision having the effect of rendering more difficult a change
in control of the association which requires for any corporate action
(other than the removal of directors) the affirmative vote of a larger
percentage of shareholders than is required by this part, shall not be
effective unless adopted by a percentage of shareholder vote at least
equal to the highest percentage that would be required to take any
action under such provision.
* * * * *
18. Section 552.5 is amended by:
a. Revising the second sentence of paragraph (a);
b. Removing, in paragraphs (b)(1) introductory text and (b)(2), the
phrase ``together with a certification'', and by adding in lieu thereof
the word ``provided'';
c. Removing, in the concluding text of paragraph (b)(1), the phrase
``shall be deemed to comply with the requirements of this section'',
and by adding in lieu thereof the phrase'', if adopted without change,
and filed within 30 days after adoption, are effective upon adoption'';
d. Amending the heading of paragraph (b)(2) by removing the word
``Notice'', and by adding in lieu thereof the word ``Filing''; and
e. Adding paragraph (d).
The additions and revisions read as follows:
Sec. 552.5 Bylaws.
(a) * * * Bylaws may be adopted, amended or repealed by either a
majority of the votes cast by the shareholders at a legal meeting or a
majority of the board of directors. * * *
* * * * *
(d) Effect of subsequent charter or bylaw change. Notwithstanding
any subsequent change to its charter or bylaws, the authority of a
Federal stock association to engage in any transaction shall be
determined only by the association's charter or bylaws then in effect,
unless otherwise provided by Federal law or regulation.
19. Section 552.6 is amended by:
a. Removing in paragraph (a) the number ``120'', and by adding in
lieu thereof the number ``150'', and by adding the phrase ``, or at any
other convenient place the board of directors may designate'' at the
end of the paragraph;
b. Adding a sentence at the end of paragraph (b);
c. Revising paragraph (d)(1);
d. Adding a sentence at the end of paragraph (e);
e. Adding two sentences after the first sentence in paragraph
(f)(1);
f. Adding paragraph (f)(4); and
g. Adding paragraph (h).
The additions and revisions read as follows:
Sec. 552.6 Shareholders.
* * * * *
(b) * * * Notwithstanding anything in this section, however, a
Federal stock association that is wholly owned shall not be subject to
the stockholder notice requirement.
* * * * *
(d) Voting lists. (1) At least 20 days before each meeting of the
shareholders, the officer or agent having charge of the stock transfer
books for the shares of the association shall make a complete list of
the stockholders of record entitled to vote at such meeting, or any
adjournments thereof, including the names of beneficial owners
furnished to the association pursuant to the rules of the Securities
Exchange Commission, arranged in alphabetical order, with the address
and the number of shares held by each. This list of shareholders shall
be kept on file at the home office of the association and shall be
subject to inspection by any stockholder of record or the stockholder's
agent during the entire time of the meeting. The original stock
transfer book shall constitute prima facie evidence of the shareholders
entitled to examine such list or transfer books or to vote at any
meeting of shareholders. Notwithstanding anything in this section,
however, a Federal stock association that is wholly owned shall not be
subject to the voting list requirements.
* * * * *
(e) * * * If a quorum is present, the affirmative vote of the
majority of the shares represented at the meeting and entitled to vote
on the subject matter shall be the act of the stockholders, unless the
vote of a greater number of stockholders voting together or voting by
classes is required by law or the charter.
(f) Shareholder voting (1) * * * Proxies may be given
telephonically or electronically as long as the holder uses a procedure
for verifying the identity of the stockholder. Notwithstanding part 569
of this chapter, a proxy may designate as holder a corporation,
partnership, company as defined in part 574 of this chapter, or other
person. * * *
* * * * *
(4) Shares held by others. Shares held by an administrator,
executor, guardian, conservator or receiver may be voted in person or
by proxy by such person. Stock standing in the name of a trustee may be
voted by such trustee either in person or by proxy, but only in
accordance with the terms of the trust agreement.
* * * * *
(h) Informal action by stockholders. If the bylaws of the
association so provide, any action required to be taken at a meeting of
the stockholders, or any other action that may be taken at a meeting of
the stockholders, may be taken without a meeting if consent in writing
has been given by all the stockholders entitled to vote with respect to
the subject matter.
20. Section 552.6-1 is amended by:
a. Adding a sentence at the end of paragraph (a);
b. Revising paragraph (b);
c. Adding a sentence at the end of paragraph (c);
d. Adding the word ``only'' in paragraph (e) between the words
``serve'' and ``until'' in the second sentence;
e. Revising the heading of paragraph (f), adding the word ``only''
between the words ``removed'' and ``for'' and the words ``as defined in
Sec. 563.39 of this chapter,'' after the word ``cause'' in the first
sentence of paragraph (f)(1), and adding a sentence at the end of
paragraph (f)(1); and
f. Adding a sentence at the end of paragraph (k).
The additions and revisions read as follows:
Sec. 552.6-1 Board of directors.
(a) * * * Directors need not be stockholders unless the bylaws so
require.
(b) Number and term. The bylaws shall set forth a specific number
of directors, not a range. The number of directors shall be not fewer
than five nor more than fifteen, unless a higher or lower number has
been authorized by the Director of the Office or his or her delegate.
The directors shall be divided
[[Page 32727]]
into three classes as nearly equal in number as possible. The members
of each class shall be elected for a term of three years and until
their successors are elected and qualified. One class shall be elected
by ballot annually, except in the case of a converting or newly
chartered association where all directors shall be elected at the first
election of directors for terms which shall be staggered in length from
one to three years. Notwithstanding anything in this section, however,
a Federal stock association that is wholly owned shall not be subject
to the staggered board requirement.
(c) * * * The board of directors shall determine the place,
frequency, time and procedure for notice of such meetings.
* * * * *
(f) Removal or resignation of directors. (1) * * * Associations may
provide for procedures regarding resignations in the bylaws.
* * * * *
(k) * * * [Bylaws on age limitations must comply with all Federal
laws, such as the Age Discrimination in Employment Act and the Employee
Retirement Income Security Act.]
21. Section 552.6-2 is amended by:
a. Adding in paragraph (a) the phrase ``or comptroller'' after the
word ``treasurer'' in the first and fifth sentences, and by removing
the third and fourth sentences; and
b. Adding a sentence at the end of paragraph (c).
The additions read as follows:
Sec. 552.6-2 Officers.
* * * * *
(c) * * * [Bylaws on age limitations must comply with all Federal
laws, such as the Age Discrimination in Employment Act and the Employee
Retirement Income Security Act.]
Sec. 552.8 [Removed]
22. Section 552.8 is removed.
Sec. 552.11 [Amended]
23. Section 552.11 is amended by adding the phrase
``nonconfidential portions of'' in paragraph (b) introductory text
between the words ``times,'' and ``its'' in the first sentence.
ALTERNATIVE ONE
24. The Appendix to part 552 is revised to read as follows:
Appendix to Part 552--Model Bylaws for Stock Associations
The Federal stock bylaws may be found in the Application
Processing Regulatory Handbook, available from any Regional Office
of OTS. (See Sec. 516.1(b) of this chapter.) Each Federal stock
association's bylaws, including any amendments thereto, constitutes
conditions imposed in writing by the agency in connection with the
granting of an application and a written agreement entered into with
the agency within the meaning of 12 U.S.C. 1818(b).
ALTERNATIVE TWO
24a. The Appendix to Part 552 is amended:
a. In Article II, Section 1, by removing the phrase ``place in the
State in which the principal place of business of the association is
located'', and by adding in lieu thereof the phrase ``convenient
place'';
b. In Article II, Section 2, by removing the number ``120''
wherever it appears, and by adding in lieu thereof the number ``150'';
c. In Article II, Section 4, by adding at the end of the first
sentence the phrase ``or the board of directors adopts another
procedure for the conduct of meetings'';
d. In Article II, Section 5, by removing the number ``10'' in the
first sentence, and by adding in lieu thereof the number ``20'';
e. In Article II, Section 7, by removing the word ``shareholders''
in the first sentence and adding the phrase ``stockholders of record''
in lieu thereof, adding at the end of the first sentence the phrase ``,
including the names of beneficial owners furnished pursuant to the
rules of the Securities and Exchange Commission'', removing in the
second and third sentences the words ``any shareholder'' and adding in
lieu thereof the phrase ``any stockholders of record or the
stockholder's agent'', and removing in the fourth sentence the phrase
``shareholders entitled'' and adding in lieu thereof the phrase
``stockholders of record entitled'';
f. In Article II, Section 8, by adding a sentence at the end;
g. In Article II, Section 9, by adding a sentence after the first
sentence;
h. In Article III, Section 3, by adding two sentences at the end;
i. In Article III, Section 11, by adding in the second sentence,
the word ``only'' between the words ``serve'' and ``until'';
j. In Article III, Section 14, by adding in the first sentence, the
word ``only'' between the words ``removed'' and ``for'' and the words
``as defined in the regulations in Sec. 563.39 of this chapter'' after
the word ``cause'';
k. In Article V, Section 1, by adding, in first, and fifth
sentences, the phrase ``or comptroller'' after the word ``treasurer''
each place it appears, and removing the third and fourth sentences; and
l. In Article XI, by adding a sentence at the end.
The additions read as follows:
Appendix to Part 552--Model Bylaws for Stock Associations
* * * * *
Article II--Shareholders
* * * * *
Section 8. Quorum. * * * If a quorum is present, the affirmative
vote of the majority of the shares represented at the meeting and
entitled to vote on the subject matter shall be the act of the
stockholders, unless the vote of a greater number of stockholders
voting together or voting by classes is required by law or the
charter.
Section 9. Proxies. * * * Proxies may be given telephonically or
electronically as long as the holder uses a procedure for verifying
the identity of the stockholder. * * *
* * * * *
Article III--Board of Directors
* * * * *
Section 3. Regular Meetings. * * * Directors may participate in
a meeting by means of a conference telephone or similar
communications device through which all persons participating can
hear each other at the same time. Participation by such means shall
constitute presence in person for all purposes.
* * * * *
Article XI--Amendments
* * * When an association fails to meet its quorum requirement,
solely due to vacancies on the board, then the affirmative vote of a
majority of the sitting board will be required to amend the bylaws.
PART 556--STATEMENTS OF POLICY
25. The authority citation for part 556 continues to read as
follows:
Authority: 5 U.S.C. 552, 559; 12 U.S.C. 1464, 1701j-3; 15 U.S.C.
1693-1693r.
Secs. 556.1, 556.17 [Removed]
26. Sections 556.1 and 556.17 are removed.
PART 563--OPERATIONS
27. The authority citation for part 563 continues to read as
follows:
Authority: 12 U.S.C. 375b, 1462, 1462a, 1463, 1464, 1467a, 1468,
1817, 1828, 3806; 42 U.S.C. 4106.
28. Section 563.74 is amended by revising paragraph (d) to read as
follows:
Sec. 563.74 Mutual capital certificates.
* * * * *
(d) Charter amendment. No application for approval of the issuance
of mutual capital certificates pursuant to this section may be filed
unless the mutual association amends its charter to authorize issuance,
or as may otherwise be required by applicable law.
* * * * *
[[Page 32728]]
PART 575--MUTUAL SAVINGS AND LOAN HOLDING COMPANIES
29. The authority citation for part 575 continues to read as
follows:
Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1828, 2901.
ALTERNATIVE ONE
30. Section 575.9(a)(1) is revised to read as follows:
Sec. 575.9 Charters and bylaws for mutual holding companies and their
savings association subsidiaries.
(a) * * * (1) Charter. The Federal mutual holding company charter
may be found in the Application Processing Regulatory Handbook,
available from any Regional Office of OTS. (See Sec. 516.1(b) of this
chapter). Each Federal mutual holding company's charter, including any
amendments thereto, constitutes conditions imposed in writing by the
agency in connection with the granting of an application and a written
agreement entered into with the agency within the meaning of 12 U.S.C.
1818(b).
* * * * *
ALTERNATIVE TWO
30a. Section 575.9 is amended by:
a. Removing, in Section 1 of the Charter in paragraph (a)(1), the
phrase ``hereby chartered'';
b. Removing, in Section 5 of the Charter in paragraph (a)(1), the
sixth, seventh, and eighth sentences in the last paragraph;
c. Removing, in Section 6 of the Charter in paragraph (a)(1), the
word ``OTS'' in the second sentence, and by adding in lieu thereof the
phrase ``the Director of the Office or his or her delegate'', and by
removing the third, fourth and fifth sentences;
d. Revising Section 8 of the Charter in paragraph (a)(1);
e. Removing in paragraph (a)(2) the phrase ``references to
`association' in the text of the mutual capital certificate charter
provision in Sec. 544.2(b)(4) shall be replaced with references to the
`Mutual Company','' and
f. Removing the number ``545.131'' in paragraph (a)(5), and by
adding in lieu thereof the number ``544.8''.
The revisions read as follows:
Sec. 575.9 Charters and bylaws for mutual holding companies and their
savings association subsidiaries.
(a) Charters and bylaws for mutual holding companies--(1) Charters.
* * *
CHARTER
* * * * *
Section 8. Amendment. Adoption of any preapproved charter
amendment shall be effective after such preapproved amendment has
been approved by the members at a legal meeting. Any other
amendment, addition, change, or repeal of this charter must be
approved by the Office prior to approval by the members at a legal
meeting. Any amendment, addition, alteration, change, or repeal so
acted upon and approved shall be effective upon filing with the
Office in accordance with regulatory procedures.
Attest:----------------------------------------------------------------
Secretary of the Association
By:--------------------------------------------------------------------
President or Chief Executive Officer of the Association
Attest:----------------------------------------------------------------
Secretary of the Office of Thrift Supervision
By:--------------------------------------------------------------------
Director of the Office of Thrift Supervision
Effective Date:--------------------------------------------------------
* * * * *
Dated: May 31, 1996.
By the Office of Thrift Supervision.
Jonathan L. Fiechter,
Acting Director.
[FR Doc. 96-14441 Filed 6-24-96; 8:45 am]
BILLING CODE 6720-01-P
