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8 12.3 Filing of statements.
profit-sharing, retirement, thrift, savings Initial statements of beneficial owner
: or similar plan which has been approved ship required by $ 12.1 shall be filed on
by the holders of at least a majority of Form OR-1. Statements of changes in
the outstanding common stock of the such beneficial ownership required by
issuer, or employee stock option or stock that section shall be filed on Form OR-2.
purchase plan which has been approved All such statements shall be prepared
by the holders of at least two-thirds of and filed in accordance with the instruc
the outstanding common stock of the
issuer and the Comptroller of the Curtions of the applicable form. All filed statements shall be available for public
(b) Any transaction which has been inspection at their place of filing during
or shall be exempted by the Comptroller normal business hours.
of the Currency from the requirements $ 12.3a Filing by persons becoming prin
of g 12.1 shall, insofar as it is otherwise cipal stockholders after July 29, 1968.
subject to the provisions of section 16(b)
of the Securities Exchange Act of 1934, as Any person who, after acquiring subse
amended, be likewise exempt from secquent to July 29, 1968, directly or indi
tions 16 (b) and (c) of said Act. rectly the beneficial ownership of any equity security of a bank of a class which § 12.5 Persons temporarily exempt from is registered, or required to be registered filing statements. pursuant to section 12 of the Securities Exchange Act of 1934, as amended, (the
The following persons shall be exempt, Act) is directly or indirectly the benefi
for a period of 12 months following their cial owner of more than 10 per centum
appointment and qualification, from filof such class shall, within 10 days after
ing the ownership statements required such acquisition, send to the bank at its
by $ 12.1: principle executive office, by registered or
(a) Executors or administrators of the certified mail, send to each exchange
estate of a decedent; where the security is traded, and file with
(b) Guardians or committees for an the Comptroller a statement containing
incompetent; the information required by Schedule D
(c) Receivers, trustees in bankruptcy, of Part 11 of the regulations of the
conservators, liquidating agents, Comptroller of the Currency.
signees for the benefit of creditors; and [33 F.R. 11589, Aug. 15, 1968]
(d) Other similar persons. $ 12.3b Filing of amendments. If any material change occurs in the
§ 12.6 Exemption from section 16(b)
of the Securities Exchange Act of facts set forth in the statement required certain transactions by registered inby $ 12.3a, the person who filed such vestment companies. statement shall promptly file with the Comptroller and send to the bank and
Any transaction of purchase and sale, the exchange an amendment disclosing
or sale and purchase, of any equity secusuch change.
rity of a bank shall be exempt from the (33 F.R. 11589, Aug. 15, 1968]
operation of section 16(b), as not comprehended within the purpose of that
section, if the transaction is effected by $ 12.4 Exemption of certain transac- an investment company registered under tions.
the Investment Company Act of 1940 and (a) Any acquisition or disposition of both the purchase and sale of such secuoptions or shares of stock including stock rity have been exempted from the proviacquired pursuant to such options, by a sions of section 17(a) of the Investment director or officer of the bank issuing Company Act of 1940 by an order of the such stock shall be exempt from the Securities and Exchange Commission enrequirements of § 12.1 if the stock or tered pursuant to section 17(b) of that option was acquired pursuant to a bonus, act.
§ 12.7 Exemption from section 16(b)
any other party therein unless such other of the Securities Exchange Act of party also meets the conditions of this certain transactions effected in con- section.
nection with a distribution. (a) Any transaction of purchase and $ 12.8 Exemption of certain securities sale, or sale and purchase, of an equity
from section 16 (c) of the Securities security of a bank that is effected in con
Exchange Act. nection with the distribution of a sub- Any equity security of a bank shall be stantial block of such securities shall be exempt from the operation of section exempt from the provisions of section 16(c) to the extent necessary to render 16(b) to the extent specified in this sec- lawful under such section the execution tion, as not comprehended within the by a broker of an order for an account purpose of section 16(b), upon the fol- in which he had no direct or indirect lowing conditions:
interest. (1) The person effecting the transaction is engaged in the business of distributing securities and is participating $ 12.9 Exemption from section 16(c) in good faith, in the ordinary course of of the Securities Exchange Act of such business, in the distribution of such certain transactions effected in conblock of securities;
nection with a distribution. (2) The security involved in the trans
Any equity security of a bank shall be actions is (i) a part of such block of
exempt from the operation of section securities and is acquired by the person
16(c) to the extent necessary to render effecting the transaction, with a view to
lawful under such section any sale made the distribution thereof, from the bank
by or on behalf of a dealer in connection or other person on whose behalf such
with a distribution of a substantial block securities are being distributed or from
of the bank's securities, upon the fola person who is participating in good lowing conditions: faith in the distribution of such block of
(a) The sale is made with respect to securities, or (ii) a security purchased
an over-allotment in which the dealer is in good faith by or for the account of the
participating as a member of an underperson effecting the transaction for the
writing group, or the dealer or a person purpose of stabilizing the market price of
acting on his behalf intends in good faith securities of the class being distributed to offset such sale with a security to be or to cover an over-allotment or other
acquired by or on behalf of the dealer short position created in connection with
as a participant in an underwriting, sellsuch distribution; and
ing, or soliciting-dealer group of which (3) Other persons not within the pur
the dealer is a member at the time of the view of section 16(b) are participating sale, whether or not the security to be so in the distribution of such block of se
acquired is subject to a prior offering to curities on terms at least as favorable
existing security holders or some other as those on which such person is partici- class of persons; and pating and to an extent at least equal to
(b) Other persons not within the purthe aggregate participation of all per- view of section 16(c) are participating in sons exempted from the provisions of the distribution of such block of securisection 16(b) by this section. However, ties on terms at least as favorable as the performance of the functions of those on which such dealer is participatmanager of a distributing group and the ing and to an extent at least equal to the receipt of a bona fide payment for per- aggregate participation of all persons forming such functions shall not pre- exempted from the provisions of section clude an exemption that would otherwise 16(c) by this section. The performance be available under this paragraph.
of the functions of manager of a dis(b) The exemption of a transaction tributing group and the receipt of a pursuant to this section with respect to bona fide payment for performing such the participation therein of one party functions shall not, however, preclude thereto shall not render such transaction an exemption that would otherwise be exempt with respect to participation of available under this section.
§ 12.10 Exemption from section 16(c)
of the Securities Exchange Act of
sales of securities to be acquired. (a) Whenever any person is entitled, as an incident to his ownership of an issued equity security of a bank and without the payment of consideration, to receive another security of the bank "when issued” or, “when distributed,” the security to be acquired shall be exempt from the operation of section 16(c) if
(1) The sale is made subject to the same conditions as those attaching to the right of acquisition;
(2) Such person exercises reasonable diligence to deliver such security to the purchaser promptly after his right of acquisition matures; and
(3) Such person reports the sale on the appropriate form for reporting transactions by persons subject to section 16(a). (b) This section shall not be construed
exempting transactions involving both a sale of a security “when issued” or “when distributed” and a sale of the security by virtue of which the seller expects to receive the "when-issued” or “when-distributed” security, if the two transactions combined result in a sale of more units than the aggregate of those owned by the seller plus those to be received by him pursuant to his right of acquisition. $ 12.11 Arbitrage transactions under
section 16 of the Securities Exchange
Act. It shall be unlawful for any director or principal officer of a bank to effect any foreign or domestic arbitrage transaction in any equity security of the bank unless he shall include such transaction in the statements required by section 16(a) of the Securities Exchange Act and $ 12.1 and shall account to such bank for the profits arising from such transaction, as provided in section 16(b). The provisions of section 16(c) shall not apply to such arbitrage transactions. The provisions of $ 12.1 and of section 16 shall not apply to any bona fide foreign or domestic arbitrage transaction insofar as it is effected by any person other than such director or principal officer of the bank issuing such security.
PART 13-EMPLOYEE STOCK OPTION
AND STOCK PURCHASE PLANS
AUTHORITY: The provisions of this Part 13 issued under R.S. 324 et seq., as amended; 12 U.S.C. 1 et seq.
SOURCE: The provisions of this Part 13 appear at 31 F.R. 6953, May 12, 1966, unless otherwise noted. $ 13.1 Scope and application.
Any national bank may grant options to purchase, sell, or enter into agreements to sell, shares of its capital stock to its employees, whether or not such transactions qualify for special tax treatment under the Internal Revenue Code of 1954, as amended, and regulations promulgated thereunder, provided that the following conditions are met:
(a) Application for approval shall be made to the Comptroller of the Currency, Washington, D.C., 20220, in the form of a letter accompanied by the following information:
(1) Description of all material provisions of the plan.
(2) Proposed notice of shareholders' meeting, proxy and proxy statement.
(3) Number of shares of authorized but unissued stock to be allocated to the plan.
(4) Proposed amendments to articles of association creating authorized but unissued stock and eliminating preemptive rights as to the shares reserved under the plan;
(b) The plan is administered by a committee, none of whose members may participate in the plan;
(c) The number of shares allocable to any person under the plan is reasonable
in relation to the purpose of the plan and the needs of the bank; and
(d) In the case of a stock option plan, the number of shares subject to the plan is not unreasonable in relation to the bank's capital structure and anticipated growth. § 13.2 Source of shares.
Shares issued to employees pursuant to this part may be authorized but unissued stock which has been authorized by stockholders in accordance with the procedures outlined in Part 14 of this chapter. § 13.3 Terms and procedures.
(a) Employee stock option and stock purchase plans or agreements may provide that options may be exercisable or that shares may be purchased on any business day. Stock certificates representing the shares purchased pursuant to the exercise of options may be validly issued to such purchasers upon receipt of the purchase price.
(b) The increase in capital represented by stock certificates issued pursuant to this section will not be applicable, however, for the purposes of permitted investment in banking premises, 12 U.S.C. 371d, permitted indebtedness, 12 U.S.C. 82, lending limits, 12 U.S.C. 84, branches, 12 U.S.C. 36 and other like purposes, until a notarized notice specifying the amount paid into the bank therefor, shall be executed by the president, vice president or cashier of the bank and filed with the Regional Administrator of National Banks, and until the Comptroller's Certificate has been obtained specifying the amount of such increase of capital stock, and his approval thereof, and that it has been duly paid in as part of the capital of such association.
PART 14 CHANGES IN CAPITAL
STRUCTURE Sec. 14.1 Capital adequacy. 14.2 Authorized but unissued stock. 14.3 Stock dividends. 14.4 Preferred stock. 14.5 Capital debentures. 14.6 Other increases of capital. 14.7 Applications for approval. 14.8 Effectiveness of increase.
AUTHORITY: The provisions of this Part 14 issued under R.S. 324 et seq., as amended; 12 U.S.C. 1 et seq.
SOURCE: The provisions of this Part 14 appear at 31 F.R. 6954, May 12, 1966, unless otherwise noted.
§ 14.2 Authorized but unissued stock.
Any national banking association, with the approval of the Comptroller and by vote of stockholders owning two-thirds of the stock of the bank entitled to vote, may authorize an increase in the common stock of the bank in the category of authorized but unissued stock. Such authorized but unissued stock may be issued from time to time to employees of the bank pursuant to a stock option or stock purchase plan adopted in accordance with Part 13 of this chapter, or in exchange for convertible preferred stock or convertible capital debentures in accordance with the terms and provisions of such securities. Authorized but unissued stock may also be issued from time to time for such other purposes and considerations as may be approved by the board of directors of the bank, and by the Comptroller.
$ 14.1 Capital adequacy.
The Comptroller of the Currency will not hereafter rely on the ratios of capital to risk assets and to total deposits in assessing the adequacy of capital of national banking associations. These formulae, although of some value in assessing capital adequacy, do not take into account other factors of equal or greater importance. Henceforth, the capital position of the bank will be analyzed and appraised in relation to the character of its management and its asset and deposit position as a going institution under normal conditions, with due allowance for a reasonable margin of safety, and with due regard to the bank's capacity to furnish the broadest service to the public. These factors, which are necessarily imprecise, cannot be directly interpolated into any specific formula. The following factors will be considered by the Comptroller in assessing the adequacy of capital:
(a) The quality of management;
(c) The history of earnings and of the retention thereof;
(d) The quality and character of ownership;
(e) The burden of meeting occupancy expenses;
(f) The potential volatility of deposit structure;
(g) The quality of operating procedures; and
(h) The bank's capacity to meet present and future financial needs of its trade area, considering the competition it faces.
§ 14.3 Stock dividends.
(a) It is the policy of the Comptroller of the Currency not to discourage the retention of earnings by national banking associations in the form of stock dividends. Accordingly, stock dividends, whether on a recurring or nonrecurring basis, will not be subject to disapproval, except in rare or unusual circumstances.
(b) Subject to the provisions of 12 U.S.C. 57, any national banking association may increase its capital stock by the declaration of a stock dividend, with the approval of the Comptroller. For such approval, applications on Form 1904-C shall be filed with the appropriate Regional Administrator of National Banks. The Regional Administrator will communicate his written approval to the bank within 15 days after receipt of the application. Upon receipt of such approval, the bank may proceed to obtain the required approval of stockholders owning two-thirds of the stock of the bank entitled to vote if such approval has not been obtained previously. In cases where the Regional Administrator of National Banks disapproves the proposed stock dividend, he shall forward the application to the Office of the Comptroller in Washington for final disposition and shall advise the bank of such referral.