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§ 12.3 Filing of statements.

Initial statements of beneficial ownership required by § 12.1 shall be filed on Form OR-1. Statements of changes in such beneficial ownership required by that section shall be filled on Form OR-2. All such statements shall be prepared and filed in accordance with the instructions of the applicable form. All filed statements shall be available for public inspection at their place of filing during normal business hours.

§ 12.3a Filing by persons becoming prin

cipal stockholders after July 29, 1968. Any person who, after acquiring subsequent to July 29, 1968, directly or indirectly the beneficial ownership of any equity security of a bank of a class which is registered, or required to be registered pursuant to section 12 of the Securities Exchange Act of 1934, as amended, (the Act) is directly or indirectly the beneficial owner of more than 10 per centum of such class shall, within 10 days after such acquisition, send to the bank at its principle executive office, by registered or certified mail, send to each exchange where the security is traded, and file with the Comptroller a statement containing the information required by Schedule D of Part 11 of the regulations of the Comptroller of the Currency. [33 F.R. 11589, Aug. 15, 1968]

§ 12.3b Filing of amendments.

If any material change occurs in the facts set forth in the statement required by § 12.3a, the person who filed such statement shall promptly file with the Comptroller and send to the bank and the exchange an amendment disclosing such change.

[33 F.R. 11589, Aug. 15, 1968]

§ 12.4 Exemption of certain transactions.

(a) Any acquisition or disposition of options or shares of stock including stock acquired pursuant to such options, by a director or officer of the bank issuing such stock shall be exempt from the requirements of § 12.1 if the stock or option was acquired pursuant to a bonus,

profit-sharing, retirement, thrift, savings or similar plan which has been approved by the holders of at least a majority of ⚫ the outstanding common stock of the issuer, or employee stock option or stock purchase plan which has been approved by the holders of at least two-thirds of the outstanding common stock of the issuer and the Comptroller of the Currency.

(b) Any transaction which has been or shall be exempted by the Comptroller of the Currency from the requirements of § 12.1 shall, insofar as it is otherwise subject to the provisions of section 16(b) of the Securities Exchange Act of 1934, as amended, be likewise exempt from sections 16 (b) and (c) of said Act.

§ 12.5 Persons temporarily exempt from filing statements.

The following persons shall be exempt, for a period of 12 months following their appointment and qualification, from filing the ownership statements required by § 12.1:

(a) Executors or administrators of the estate of a decedent;

(b) Guardians or committees for an incompetent;

(c) Receivers, trustees in bankruptcy, conservators, liquidating agents, assignees for the benefit of creditors; and (d) Other similar persons.

§ 12.6

Exemption from section 16(b) of the Securities Exchange Act of certain transactions by registered investment companies.

Any transaction of purchase and sale, or sale and purchase, of any equity security of a bank shall be exempt from the operation of section 16(b), as not comprehended within the purpose of that section, if the transaction is effected by an investment company registered under the Investment Company Act of 1940 and both the purchase and sale of such security have been exempted from the provisions of section 17(a) of the Investment Company Act of 1940 by an order of the Securities and Exchange Commission entered pursuant to section 17(b) of that act.

§ 12.7

Exemption from section 16(b) of the Securities Exchange Act of certain transactions effected in connection with a distribution.

(a) Any transaction of purchase and sale, or sale and purchase, of an equity security of a bank that is effected in connection with the distribution of a substantial block of such securities shall be exempt from the provisions of section 16(b) to the extent specified in this section, as not comprehended within the purpose of section 16(b), upon the following conditions:

(1) The person effecting the transaction is engaged in the business of dis

any other party therein unless such other party also meets the conditions of this section.

§ 12.8 Exemption of certain securities from section 16(c) of the Securities Exchange Act.

Any equity security of a bank shall be exempt from the operation of section 16(c) to the extent necessary to render lawful under such section the execution by a broker of an order for an account in which he had no direct or indirect interest.

tributing securities and is participating § 12.9 Exemption from section 16(c) in good faith, in the ordinary course of such business, in the distribution of such block of securities;

(2) The security involved in the transactions is (i) a part of such block of securities and is acquired by the person effecting the transaction, with a view to the distribution thereof, from the bank or other person on whose behalf such securities are being distributed or from a person who is participating in good faith in the distribution of such block of securities, or (ii) a security purchased in good faith by or for the account of the person effecting the transaction for the purpose of stabilizing the market price of securities of the class being distributed or to cover an over-allotment or other short position created in connection with such distribution; and

(3) Other persons not within the purview of section 16(b) are participating in the distribution of such block of securities on terms at least as favorable as those on which such person is participating and to an extent at least equal to the aggregate participation of all persons exempted from the provisions of section 16(b) by this section. However, the performance of the functions of manager of a distributing group and the receipt of a bona fide payment for performing such functions shall not preclude an exemption that would otherwise be available under this paragraph.

(b) The exemption of a transaction pursuant to this section with respect to the participation therein of one party thereto shall not render such transaction exempt with respect to participation of

of the Securities Exchange Act of certain transactions effected in connection with a distribution.

Any equity security of a bank shall be exempt from the operation of section 16(c) to the extent necessary to render lawful under such section any sale made by or on behalf of a dealer in connection with a distribution of a substantial block of the bank's securities, upon the following conditions:

(a) The sale is made with respect to an over-allotment in which the dealer is participating as a member of an underwriting group, or the dealer or a person acting on his behalf intends in good faith to offset such sale with a security to be acquired by or on behalf of the dealer as a participant in an underwriting, selling, or soliciting-dealer group of which the dealer is a member at the time of the sale, whether or not the security to be so acquired is subject to a prior offering to existing security holders or some other class of persons; and

(b) Other persons not within the purview of section 16 (c) are participating in the distribution of such block of securities on terms at least as favorable as those on which such dealer is participating and to an extent at least equal to the aggregate participation of all persons exempted from the provisions of section 16(c) by this section. The performance of the functions of manager of a distributing group and the receipt of a bona fide payment for performing such functions shall not, however, preclude an exemption that would otherwise be 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 as 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.

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§ 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

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§ 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.

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§ 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;
(b) The liquidity of assets;

(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.

§ 14.2

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.

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(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.

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