(7) Issue any form of certificate evidencing a fixed-rate, fixed-term account unless the institution has first (i) obtained a written opinion by its legal counsel that such form of certificate complies with the requirements of applicable law and regulations and the institution's charter, constitution, and bylaws, which opinion shall be retained by the institution so long as it continues to issue certificates in such form, and (ii) submitted a copy of such form of certificate, together with a copy of such legal opinion, to the Federal Savings and Loan Insurance Corporation: Provided, That such legal opinion need not be obtained if the institution uses a form of certificate which has already been approved by the Corporation for use by insured institutions in the State where such institution is located.

(c) Disclosure. Each certificate evidencing a fixed-rate, fixed-term account accepted pursuant to the approval contained in paragraph (a) of this section shall include in its provisions and display in easily read type:

(1) The rate of interest to be paid and the dates or frequency at which interest is payable;

(2) The amount of the fixed-rate, fixed-term account and the date on which it is issued;

(3) The term of the fixed-rate, fixedterm account;

(4) The penalty or penalties imposed for withdrawal prior to completion of the fixed term or renewal;

(5) The minimum balance requirement applicable to the fixed-rate, fixedterm account.

(6) Any provisions relating to renewal at the conclusion of the fixed term;

(7) Any provisions relating to the interest to be paid after the conclusion of a fixed term or renewal; and

(8) A provision converting the fixedrate, fixed-term account at the conclusion of a fixed term or renewal, or at any time that the applicable minimum balance requirement ceases to be met, to the status of an account accepted for an indefinite period of time.

(d) Withdrawal prior to expiration of term.

(1) Each certification issued by an insured institution, other than an insured institution whose principal office is located on Guam, for a fixed-rate, fixed-term account shall provide that, in the event of withdrawal of all or any

portion of such account prior to the expiration of its term

(i) The account holder shall receive interest from the beginning of the term of such account on the amount withdrawn at a rate not in excess of the rate then being paid on savings accounts accepted for an indefinite period of time.

(ii) The account holder shall also pay a penalty in an amount not less than the lesser of (a) the interest at such rate for 90 days (3 months) on the amount withdrawn or (b) all interest at such rate (since issuance or renewal of the account) on the amount withdrawn.

(2) In the case of early withdrawal of only a portion of such account, the certificate evidencing such account shall be canceled if the applicable minimum balance requirement ceases to be met. If such requirement continues to be met, (i) appropriate notation may be made on the certificate indicating the amount and date of such withdrawal and the remaining account balance, or (ii) the certificate may be canceled and a new certificate issued for the remaining portion of the account with the same term, rate, and dates as on the canceled certificate. (3) A certificate issued by an insured institution for a fixed-rate, fixed-term account may provide that the holder cannot withdraw any portion of such account prior to the expiration of its term except under such emergency circumstances as may be set forth therein. [35 FR. 3027, Feb. 24, 1970, as amended at 36 FR 6739, Apr. 8, 1971; 38 FR 18462, July 11, 1973; 38 FR 30867, Nov. 8, 1973; 39 FR 790, Jan. 3, 1974; 39 FR 42695, Dec. 6, 1974]

§ 563.3-2 Certificates evidencing other

accounts.

(a) General approval. A State-chartered insured institution which, in accordance with State law, may issue savings accounts, evidenced by certificates, which receive earnings at a rate higher than the rate on regular accounts if certain eligibility requirements as to time and minimum balance are met (hereinafter referred to as "certificate accounts") and whose board of directors has adopted a resolution providing for the issuance of any class of such certificate accounts may, subject to the limitations contained in paragraph (b) of this section and to the disclosure provisions contained in paragraph (c) of this section, issue certificates evidencing such accounts in such form as the board of directors may determine.

(b) Limitations. In issuing certificates pursuant to the approval contained in paragraph (a) of this section, no insured institution shall:

(1) Provide for the distribution of earnings on any certificate account at a rate in excess of the applicable maximum rate of return prescribed for certificate accounts in Part 526 of this chapter;

(2) Provide for any penalty for breach of condition on the part of any holder, other than loss of earnings, or partial loss thereof, for the term of the certificate account or other specified time period;

(3) Deny any member the opportunity to invest at the same rate offered to any other member at that time on the same classification of certificate account;

(4) (i) Issue any certificate account of less than $100,000 with a time eligibility period of less than 90 days (30 days for a public unit account as defined in § 526.1 (m) of this chapter) or more than 10 years; or (ii) Issue any certificate account of $100,000 or more with a time eligibility period of less than 30 days or more than 10 years; or

(5) Issue any form of certificate under this section unless the institution has first (i) obtained a written opinion by its legal counsel that such form of certificate complies with the requirements of applicable law and regulations and the institution's charter, constitution, and bylaws, which opinion shall be retained by the institution so long as it continues to issue certificates in such form, and (ii) submitted a copy of such form of certificate, together with a copy of such legal opinion, to the Federal Savings and Loan Insurance Corporation: Provided, That such legal opinion need not be obtained if the institution uses a form of certificate which has already been approved by the Corporation for use by insured institutions in the State where such institution is located.

(c) Disclosure. Each certificate issued pursuant to the approval contained in paragraph (a) of this section shall include in its provisions and display in easily read type:

(1) The anticipated or stated rate of earnings to be paid and the dates or frequency at which such earnings are distributable;

1

(2) The amount of the certificate account and the date on which it is issued; (3) The time and minimum balance eligibility requirements applicable to

such certificate account if it is to re ceive earnings at a rate higher than the regular rate;

(4) The penalty or penalties imposed for withdrawal prior to completion the time eligibility period, in accordance with the provisions of paragraph (d) this section;

(5) Any provisions limiting the righ of the holder to withdraw all or any pur tion of the certificate account prior completion of the time eligibility perioć.

(6) Any provisions relating to renew of such certificate account upon expir tion of the time eligibility period, whe renewal or renewals, for successive p riods not exceeding 10 years for eac renewal, shall be at the option of the association; and

(7) Any provisions relating to the earnings distributable on the certifics account after expiration of the time elgibility period or any renewal of such account.

(d) Provisions relating to early with. drawal. (1) Each certificate issued t an insured institution, other than an tsured institution whose principal of is located on Guam, for a certificate count shall provide that, in the event d withdrawal of all or any portion of su account prior to completion of its the eligibility period

(i) The account holder shall rece earnings from the date of issuanced such account on the amount withdra at a rate not in excess of the regul rate then being paid.

(ii) The account holder shall also per a penalty in an amount not less than the lesser of (a) the earnings at such rat for 90 days (3 months) on the amount withdrawn or (b) all earnings at s rate (since issuance or renewal of the certificate account) on the amount withdrawn.

(2) In the case of early withdrawal only a portion of a certificate account the certificate evidencing such account shall be canceled if the applicable minimum balance eligibility requirement ceases to be met. If such requirement continues to be met, (i) appropriate no tation may be made on the certificate indicating the amount and date of such withdrawal and the remaining accoun balance, or (ii) the certificate may be canceled and a new certificate issued for the remaining balance of the account with the same eligibility requirements

rate, and dates as in the canceled certificate.

35 F.R. 3028, Feb. 14, 1970, as amended at $8 FR 18462, July 11, 1973; 38 FR 30867, Nov. 8, 1973; 39 FR 791, Jan. 3, 1974; 39 FR 2695, Dec. 6, 1974]

563.3-3

Marketable fixed-rate, fixedterm accounts.

(a) General. Approval by the Corporation as hereinafter set forth in this section is hereby given to the acceptance by an insured institution (other than a Federal savings and loan association), notwithstanding and without regard to any provision of this part other than this section, of savings accounts for fixed terms and bearing fixed returns which are evidenced by certificates in conformity with this section. Such savings accounts and such certificates are hereby approved by the Corporation as to type (as referred to in subdivision (c) of section 401 of the National Housing Act) and form, return, and maturity (as referred to in those parts of the third sentence of subsection (b) of section 403 of said Act which refer to the form, return, and maturity of securities).

(b) Return. The return shall be fixed at the time of the issuance of the certificate and shall be in the form of interest or discount or both. Such return shall not be in excess of any applicable maximum limitation in Part 526 of this chapter.

(c) Terms. (1) A certificate shall have a single fixed maturity, with a fixed term which shall be not less than thirty days and not more than ten years. In the calculation of such minimum or maximum term, such term shall be deemed to begin with the date on which the certificate is actually issued, which date shall be excluded, and to expire on the date on which the certificate becomes payable, which date shall be included. A certificate shall not be deemed to be not in compliance with this paragraph (c) (1) or any other provision of this section because of any provision of statute, charter, or regulation for postponement of payment, for limitation of funds available for payment, or for any rotation or similar system or method of payment, and the first two sentences of this paragraph shall be applied as if any such provision of statute, charter, or regulation did not exist. No savings account shall be accepted pursuant to the approval granted by this section and no certificate shall be issued pursuant to

such approval if such acceptance or such issuance is accompanied by any contract or agreement for extension or renewal of such account or such certificate. Wherever used in this section, except in the second sentence of this paragraph, the term "issue" and variations thereof shall be deemed to include reissue unless the context otherwise requires.

(2) Certificates may be, but need not be, in one or more series. Interest may be, but need not be, evidenced in whole or in part by coupons.

(d) Limitations. In acting under the approval granted by this section, an insured institution shall not issue any certificate.

(1) with a face amount (inclusive of discount, whether or not arrived at in whole or part by add-on calculation) of less than $100,000;

(2) which by its terms or otherwise is subject to redemption, repurchase, or acceleration by the insured institution;

(3) as to which there is, by its terms or otherwise, any right or privilege to increase its amount by payment on or transfer to such certificate, or a savings account evidenced thereby, prior to the expiration of the fixed term, or which by its terms or otherwise is subject to withdrawal or transfer of principal of or from such certificate, or a savings account evidenced thereby, prior to such expiration, but nothing in this paragraph shall be deemed to be violated by compounding of interest or other return or the allowance of interest or other return upon interest or other return on such certificate;

(4) which by its terms or otherwise permits any extension or renewal of the term of such certificate or of a savings account evidenced by such certificate, but a certificate which is silent as to such extension and as to such renewal shall not be deemed to be in noncompliance with this paragraph (d) (4). A certificate shall not be deemed to be in noncompliance with this paragraph because of any reference therein to any provision of statute, charter, or regulation referred to in the third sentence of paragraph (c) (1) of this section.

(e) Required provisions. Each certificate under this section shall include in its provisions the following:

(1) The face amount of the certificate and the date borne by the certificate;

(2) The date on which the certificate is payable, which may be expressed as a date or by a provision that the certificate

is payable a specified period after a named or specified fixed date;

(3) To the extent that interest is not represented by discount or evidenced by a coupon or coupons, the rate of interest and the date or dates, or the frequency, of payment of interest;

(4) A statement that no interest shall accrue on or be credited to the certificate or any savings account evidenced by the certificate for any time after the expiration of the fixed term of the certificate; and

(5) If the holder of the certificate has membership and/or voting rights, a statement to such effect.

(f) Form. (1) A certificate under this section shall be a writing in (i) a form that would be a negotiable instrument (other than a draft or check) within the terms of Article 3 of the 1972 Official Text of the Uniform Commercial Code (which text is hereinafter in this section referred to as the Uniform Commercial Code) or (ii) a form that would be so except that such writing is not payable to order or to bearer within the meaning of the term "payable to order or to bearer" as used in section 3-104 of said Article 3 but is issued in registered form within the meaning of the term "registered form" as used in section 8-102 of the Uniform Commercial Code or in a form that would be such a registered form except that as to interest thereon or part of such interest it is not in such registered form. Certificates under this section shall not be incorporated in passbooks. If a certificate under this section is offered or described as a negotiable instrument it must be an instrument which, under the law of the State or other jurisdiction in which the principal office of the insured institution is located, is a negotiable instrument.

(2) A certificate shall not be deemed to be in noncompliance with paragraph (f) (1) of this section or any other provision of this section because it is, by its terms or otherwise, interchangeable as between denominations and/or between some or all of the order, bearer, registered, or partly registered forms permitted by said paragraph (f)(1) of this section or refers to any such interchangeability, or because of the inclusion in the certificate of anything which, by this part, is expressly permitted to be included therein or which, by this part or other applicable regulation or by applicable statute, is required to be included therein.

(g) Ancillary provisions. No savings account shall be accepted pursuant to the approval granted by this section and no certificate shall be issued pursuant to such approval if such acceptance or such issuance is with or accompanied by any contract or agreement for priority of such savings account or such certificate or for subordination of such savings account or such certificate, but a contract or agreement for or toward a priority equal to but not superior to the priority of general creditors of the insured institution not having priority (other than priority arising or resulting from consensual subordination) over other general creditors of the insured institution shall not be deemed to violate this sentence. No savings account shall be accepted pursuant to the approval granted by this section and no certificate shall be issued pursuant to such approval if such aceptance or such issuance is acompanied by the giving by the insured institution of security for such saving account or such certificate or by any contract or agreement for the giving of any such security by such institution.

(h) Filing. Prior to issuing a certificate under this section, an insured institution shall file with the Corporation a copy of the form of certificate which it proposes to issue, together with an opinion of its legal counsel that the form of the certificate complies with the requirements of applicable law and regulations and (if the insured institution has a charter) the insured instituton's charter. Such filing shall be made by delivering a copy of such form and opinion to a Supervisory Agent (the President or any other officer or employee of the Federal Home Loan Bank of the district in which the principal office of the insured institution is located who is designated as an agent of the Corporation by or under § 501.10 or § 507.11 of this chapter) and an additional copy to the Director, Office of Industry Development, 320 First Street, N.W., Washington, D.C. 20552. The insured institution shall refrain from issuing such certificate for the shorter period of 30 days from the date such form was filed with the Corporation in accordance with the provisions of this paragraph (h) or the date such insured institution receives appropriate written advice that the Corporation has no objection to the use of such form by such insured institution. An insured institution shall not issue, or continue to issue, under this section,

any form of certificate as to which form such Corporation has advised such institution in writing that such Corporation objects to the use of such form of certificate.

(i) Applicability of other provisions. (1) The provisions of §§ 563.2, 563.3, 563.3-1, 563.3-2, 563.4, and 563.8 and the provisions of subdivision (5) of paragraph (c) of § 563.17-1 shall not be applicable to or with respect to savings accounts or certificates which are in conformity with § 545.1-5 of this chapter or with this section, and such savings accounts and such certificates shall not be deemed to be borrowing within the meaning of the second sentence of § 563.8. The provisions of this section shall not be applicable to or with respect to savings accounts or certificates which are in conformity with § 545.1-4 of this chapter or with § 563.3-1 or § 563.3-2.

(2) Neither the accumulation or accrual nor the payment of any return referred to in paragraph (b) of § 545.1-5 of this chapter or paragraph (b) of this section shall be deemed to violate any provision of § 563.11 or of the first sentence of § 563.14 or to constitute a use of any Federal insurance reserve account contrary to any provision of § 563.11, and such return shall accumulate and accrue and be payable notwithstanding and without regard to any provision of § 563.13.

(3) The provisions of § 563.24, § 563.25, $563.26, § 563.27, § 563.31, and § 563.32 shall not, by reason of anything in § 545.1-5 of this chapter or in this section, be inapplicable to or with respect to said $545.1-5 or this section. Nothing in this section shall be deemed to grant approval for the issuance of any security which is a subordinated debt security as defined in § 561.24 of this subchapter. [39 FR 22138, June 20, 1974, as amended at 39 FR 29340, Aug. 15, 1974]

not of an insurable type and are not insured by the Federal Savings and Loan Insurance Corporation.

[33 FR. 17683, Nov. 27, 1968]

§ 563.6 Demand securities.

No insured institution may issue any demand securities or advertise or represent that it will pay holders of its securities on demand.

[23 F.R. 9913, Dec. 23, 1958]

§ 563.7 Definite maturity and rate; securities with definite maturity or rate outstanding at time of application for insurance.

No application for insurance will be rejected because, at the time of application, the applicant has outstanding savings accounts, certificates of deposit, or other securities upon which it has contracted for a definite rate of return, or a definite maturity: Provided, That it appears to the Corporation that the applicant will be able to meet its obligations.

[23 F.R. 9913, Dec. 23, 1958]

§ 563.7-1 Savings deposits or shares of Federal savings and loan associations. Savings deposits or shares of any Federal savings and loan association which are in compliance with the provisions of paragraph (1) of subsection (b) of section 5 of the Home Owners' Loan Act of 1933, the association's charter, and the rules and regulations for the Federal Savings and Loan System (Subchapter C of this chapter), all as now or hereafter in effect, relating to the type, form, return, and maturity thereof are, as to type (as referred to in subdivision (c) of section 401 of the National Housing Act) and form, return, and maturity (as referred to in those parts of the third sentence of subsection (b) of section 403 of said Act, which refer to the form, return, and maturity of securities), hereby approved by the Corporation.

[34 F.R. 8907, June 4, 1969]

§ 563.7-2 Form, return, and maturity of securities.

Securities of any insured institution which are (a) in conformity with § 563.3-1, § 563.3-2, or § 563.8-1 or with § 545.24 of this chapter, (b) issued in connection with any borrowing which is in conformity with § 563.8, (c) issued in connection with any transaction which is not a borrowing or the issuance of a savings account and is not in nonconformity with the terms of any provision