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FEDERAL RESERVE BANK OF NEW YORK C i r c u la r N o . 8 5 1 8 F eb ru a ry 13, 1 9 7 9 ~[ J REGULATORY AMENDMENTS TO IMPLEMENT CHANGE IN BANK CONTROL ACT OF 1978 — Effective March 10, 1979 — Comment Invited by April 6, 1979 T o A l l S ta te M e m b e r B a n k s a n d B a n k H o l d i n g C o m p a n i e s in t h e S e c o n d F e d e r a l R e s e r v e D i s t r i c t : Following is the text of a statement issued February 5 by the Board of Governors of the Federal Reserve System: The Federal Reserve Board has adopted a p olicy statement and revised its Regulation Y (bank holding com panies) to implement the Change in Bank Control Act o f 1978 (T itle V I o f the Financial Institutions Regulatory and Interest Rate Control Act of 1978). The new A ct requires persons acquiring control of a State member bank or a bank holding com pany to file 60 days’ advance notice with the Board. The Board can disapprove such proposed changes in control. The A ct becom es effective March 10, 1979. Changes in control due to acquisitions b y bank holding companies and changes in control of insured banks resulting from mergers, consolidations or other similar transactions are not covered b y the Act, since they are already subject to regulatory approval under other laws. Certain other exemptions from the prior notice requirements o f the Act, including notice o f acquisition o f control o f foreign bank holding companies, are noted in the Board’s p olicy statement and regulation. In view of the early effective date of the Act, the Board issued its regulatory revision in final form, in order to avoid disruption of transactions that are in progress. H owever, the Board invited comment on the regulation (b y April 6, 1979) and said that it intends to adopt any needed amendments to its rules as soon as practicable. The Board’s p olicy statement on the Change in Bank Control A ct outlines general procedures for com pliance, summarizes the principal provisions o f the Act, the exemptions, and the procedures the Board will follow in carrying out the Act. The p olicy statement said that if the Board disapproves a proposed change in control, it w ill notify the party seeking control within three days after its decision, giving its reason for disapproval. Otherwise, unless the period is extended as provided for in the Act, the transaction may b e com pleted 61 days after a Federal Reserve Bank receives a substantially com plete notice. The Reserve Bank will notify acquiring parties of the date of receipt of such a notice. T o facilitate transactions, the Board may issue notice, after consultation with State banking authorities, that it does not intend to disapprove a proposed transaction. In deciding whether to disapprove a change in control, the Board is required b y the A ct to consider com petitive effects, the financial condition of the person proposing the acquisition and the com petence, experience and integrity of that person and of the proposed new management. The policy statement notes, further, that: — The A ct defines “ control” as the pow er — directly or indirectly — to vote 25 per cent or more o f any class o f voting securities, or to direct the management or policies of a bank holding com pany or bank. The Board has established the follow ing presumptions of control — subject to rebuttal: — W here an institution is subject to registration under Sec. 12 of the Securities Exchange A ct of 1934, and the transaction w ould result in a person or group acting in concert having voting control of 10 per cent or more o f any class of the institution’s voting stock. — W here a transaction w ould result in a person, or group acting in concert, having 10 per cent o f any class o f the voting stock of a State member bank or a bank holding com pany, and the acquiring person or group w ould be the largest shareholder in the institution. The regulation issued b y the Board formalizes the principal parts o f the p olicy statement. It permits individuals to file current financial statements as part of their notice (the A ct requires organizations to file financial data for five fiscal years). The regulation also delegates authority to the Federal Reserve Banks to permit proposed acquisitions where there has been no objection, to extend the time (norm ally 60 days) the Board may take to consider proposals, to determine whether notices provide all necessary information, and to settle disputes as to whether a person proposing to acquire less than 25 per cent o f a bank holding com pany or State member bank should file advance notice. The regulation does not exempt from notice requirements proposed acquisitions of control of foreignbased bank holding companies most o f whose assets and revenues are in the United States. The Board particularly requests com m ent on this aspect o f the regulation. The other Federal regulators o f financial institutions are preparing similar p olicy statements and rules under the new Act. Printed below is the text of the Board’s policy statement. In addition, enclosed is a copy of the amendment to Regulation Y, effective March 10, 1979. Comments thereon should be submitted by April 6, and may be sent to our Domestic Banking Applications Department. Paul A. V olcker, P resid en t. B O A R D OF G O V E R N O R S OF TH E FE D E R A L R E SER V E SYSTEM [D ocket No. R-0199] CH AN GE IN B A N K C O N TR O L A C T OF 1978 P olicy Statement The A ct describes the factors that the Federal Reserve and the other Federal banking agencies are to consider in determining whether a transaction covered by the A ct should be disapproved. These fac tors include the financial condition, com petence, experi ence, and integrity of the acquiring person (o r per sons acting in con cert) and the effect of the transac tion on competition. The Federal Reserve Board’s objectives in its administration of the A ct are to enhance and maintain public confidence in the bank ing system by preventing identifiable serious adverse effects resulting from anticompetitive combinations of interests, inadequate financial support, and unsuitable management in these institutions. The Board will review each notice to acquire control o f a State mem ber bank or bank holding com pany and will disap prove transactions that are likely to have serious harmful effects. It is the Board’s intention to adminis ter the A ct in a manner that will minimize delays and government regulation of private sector transactions. Introduction. The Change in Bank Control A ct of 1978, Title V I of the Financial Institutions Regulatory and Interest Rate Control A ct of 1978, gives the Federal bank supervisory agencies the authority to disapprove changes in control of insured banks and bank holding com panies.1 The Federal Reserve Board is the responsible Federal banking agency for changes in control of bank holding companies and State mem ber banks, and the Federal D eposit Insurance Corporation and the Com ptroller o f the Currency are responsible for insured State nonm em ber and national banks, respectively. The A ct requires any person (broad ly defined) seeking to acquire control o f any insured bank or bank holding com pany to provide 60 days’ prior written notice to the appropriate Federal banking agency. This requirement applies to all covered transactions that will be consummated after March 9, 1979. The Act specifically exempts transactions that are subject to section 3 of the Bank H olding C om pany A ct of 1956 or section 18 of the Federal D eposit Insurance Act, since these transactions are covered b y existing regula tory approval procedures. A ccordingly, changes in control due to acquisitions b y bank holding companies and changes in control of insured banks resulting from mergers, consolidations, or other similar transactions are not covered b y the Act. If the Board disapproves a change in control, the Board will notify the proposed acquiring party in writing within three days after its decision. The notice o f disapproval will contain a statement of the basis for disapproval. The A ct provides that the acquiring party may request a hearing b y the Board in the 1 The A ct retains with some m odification existing reporting requirem ents relating to loans by banks secured b y stock o f other banks and m anagem ent changes occurring after a change in control and extends these requirements to bank holding com panies and loans secured by bank holding com pany stock. 2 event o f a disapproval and provides a procedure for further review b y the courts. filing notice so long as they will not have voting con trol of 25 per cent or more of the institution. In con nection with transactions that w ould result in greater voting control, such persons may file the required notice or request that the Board make a determination that they already control the institution. Forms for filing notices of proposed transactions covered by the A ct will be available from the Federal Reserve Banks. W hen a substantially com plete notice is received b y the Federal Reserve Bank, a letter of acknowledgement will be sent to the acquiring person indicating the date o f receipt. The transaction may be com pleted 61 days or more after that date unless the acquiring person has been notified by the Board that the acquisition has been disapproved or that the 60-day period has been extended as provided for in the Act. T o avoid undue interference with normal business transactions, the Board may issue a notice of its intention not to disapprove a proposal, after con sulting the relevant State banking authorities as the Act requires. W ith respect to persons w ho have the pow er to vote less than 25 per cent o f an institution’s shares, the Board has established the follow ing rebuttable presumptions for purposes of the notice requirements under the Act: ( 1 ) W here an institution has issued any class of securities subject to registration under section 12 o f the Securities Exchange Act of 1934 (15 U.S.C. § 78 ( l ) ) , and a transaction w ould result in a person ( or group of persons acting in con cert) having vot ing control of 10 per cent or more of any class of voting securities of that institution, the transaction results in control. Information to be contained in notices. The Act requires a “person” proposing to acquire control o f a bank holding com pany or State member bank to file a notice with the Federal Reserve Board containing personal and biographical information, detailed finan cial information, details of the proposed acquisition, information on any structural or managerial changes contem plated for the institution, and other relevant information required b y the Board. The elements of a notice, as prescribed by paragraph 6 o f the Act, are set forth in the appendix to this statement, and pre scribed forms for filing notice will be available from the Federal Reserve Banks. ( 2 ) W here a transaction involving any class o f voting securities of a bank holding com pany or State mem ber bank w ould result in a person (o r group of persons acting in concert) having voting control o f 10 per cent or more, and after the transaction the acquiring person w ould be the largest share holder of that institution, the transaction results in control. Other transactions resulting in a person’s control of less than 25 per cent o f a class o f voting shares o f a bank holding com pany or State member bank w ould not result in control for purposes of the Act. In addi tion, customary one-tim e proxy solicitations and the receipt of pro-rata stock dividends are not subject to the A ct’s notice requirements. In order to be filed properly in accordance with the Act, a notice must be substantially com plete and responsive to every item specified in paragraph 6 of the Act. W hen the acquiring party is an individual, or a group o f individuals acting in concert, the requirement for five years’ personal financial data is deleted in favor of a current statement of assets and liabilities, a brief incom e summary, and a statement of any material changes since the date thereof, but the Board reserves the right to require up to five years of financial data from any acquiring person. In some cases corporations, partnerships, certain trusts, associations, and similar organizations that are not already bank holding companies may be uncertain whether to proceed under this A ct or under the Bank H olding Com pany Act with respect to a particular acquisition. These organizations should com ply with the notice requirements of this A ct if they are not re quired to secure prior Board approval under the Bank H olding Com pany Act. However, some transactions, particularly foreclosures by institutional lenders, fidu ciary acquisitions by banks, and increases of majority holdings by bank holding companies, described in sec tions 2 ( a ) ( 5 ) ( D ) and 3 ( a ) ( A ) and ( B ) o f the Bank H olding Com pany Act, do not require the Board’s prior approval, but they are considered subject to sec tion 3 o f the Bank H olding Com pany A ct and do not require notices under this Act. Transactions requiring submission of notice. The Act defines “control” as the pow er — directly or indi rectly — to vote 25 per cent or more of any class of voting securities, or to direct the management or policies, o f a bank holding com pany or insured bank. Therefore, any transaction, unless exempted b y the Act, that results in the acquiring party having voting control of 25 per cent or more o f any class of voting securities, or results in the pow er to direct the man agement or policies, o f such an institution would trigger the notice requirement. H owever, any person w ho on March 9, 1979, controls a bank holding com pany or State member bank shall not be required to file a notice to maintain or increase control positions in the same institution. In addition, the Board’s regu lations allow persons w ho on March 9, 1979, fall within a presumption described in the next paragraph to acquire additional shares o f an institution without Persons contem plating an acquisition that w ou ld result in a change in control o f a bank holding com pany or State member bank should request appropri ate forms and instructions from the Federal Reserve Bank in whose district the affected institution is located. If there is any doubt whether a proposed transaction requires a notice, the acquiring person 3 Under these regulations, acquisitions of control of foreign bank holding companies are also exempt from the prior notice requirements of the Act, but this ex emption does not extend to the reports and informa tion required under paragraphs 9, 10, and 12 o f the Act. should consult the Federal Reserve Bank for guidance. The A ct places the burden of providing notice on the prospective acquiring person and substantial civil penalties can be im posed for willful violations. Certain control transactions exempt from prior notice requirements. The Board’s regulations exempt the follow in g transactions from the prior notice re quirements of the A ct: Disapproval of changes in control. The A ct sets forth various factors to be considered in the evalua tion of a proposal. The Board is required to review the com petitive impact of the transaction, the financial condition of the acquiring person, and the com petence, experience, and integrity o f that person and the proosed management o f the institution. In assessing the nancial condition of the acquiring person, the Board will w eigh any debt servicing requirements in light of the acquiring person’s overall financial strength, the institution’s earnings performance, asset condition, capital adequacy, future prospects, and the likelihood o f an acquiring party making unreasonable demands on the resources o f the institution. ( 1 ) A foreclosure o f a debt previously contracted in good faith; ( 2 ) Testate or intestate succession; and ( 3 ) A bona fide gift. Under these regulations, a person acquiring control in the situations described above is required to furnish certain information to the Federal Reserve Bank promptly after the transaction, and the affected institu tion must report prom ptly any changes or replacement o f its chief executive officer or of any director, in ac cordance with paragraph 12 of the Act. A P P E N D IX C h a n g e in B a n k C o n tr o l A c t o f 197 8 I n fo r m a tio n R e q u ir e m e n ts Paragraph 6 of the A ct reads as follow s: ( D ) The identity, source and amount of the funds or other consideration used or to be used in making the acquisition, and if any part of these funds or other consideration has been or is to be borrow ed or otherwise obtained for the purpose of making the acquisition, a description o f the trans action, the names of parties, and any arrangements, agreements or understandings with such persons. Except as otherwise provided b y regulation of the appropriate Federal banking agency, a notice filed pursuant to this subsection shall contain the follow ing information: ( A ) The identity, personal history, business back ground and experience of each person by whom or on whose behalf the acquisition is to be made, in cluding his material business activities and affilia tions during the past five years, and a description of any material pending legal or administrative pro ceedings in which he is a party and any criminal indictment or conviction of such person b y a State or Federal court. ( E ) Any plans or proposals which any acquiring party making the acquisition may have to liquidate the bank, to sell its assets or merge it with any com pany or to make any other major change in its busi ness or corporate structure or management. ( F ) The identification of any person, em ployed, retained, or to be compensated by the acquiring party, or by any person on his behalf, to make solici tations or recommendations to stockholders for the purpose o f assisting in the acquisition, and a brief description of the terms of such employment, re tainer, or arrangement for compensation. ( B ) A statement of the assets and liabilities of each person b y whom or on whose behalf the acqui sition is to be made, as of the end o f the fiscal year for each of the five fiscal years immediately preced ing the date o f the notice, together with related statements o f incom e and source and application o f funds for each of the fiscal years then concluded, all prepared in accordance with generally accepted ac counting principles consistently applied, and an interim statement of the assets and liabilities for each such person, together with related statements o f incom e and source and application of funds, as of a date not more than ninety days prior to the date o f the filing o f the notice. ( G ) Copies o f all invitations or tenders or adver tisements making a tender offer to stockholders for purchase of their stock to be used in connection with the proposed acquisition. ( H ) Any additional relevant information in such form as the appropriate Federal banking agency may require b y regulation or b y specific request in connection with any particular notice. ( C ) The terms and conditions of the proposed acquisition and the manner in w hich the acquisition is to be made. Board of Governors o f the Federal Reserve System, January 31, 1979. 4 Board of Governors of the Federal Reserve System RULES REGARDING DELEGATION OF AUTHORITY AMENDMENT (e ffe c tiv e M a rch 10, 1 9 7 9 ) Effective M arch 10, 1979, section 265.2(f) o f the Board’s Rules Regarding Delegation of Authority (12 C.F.R. § 2 6 5 .2 (f)) is amended b y adding the follow ing new subparagraph (3 8 ): fc # (38) Under the provisions of the Change in Bank Control A ct o f 1978 (12 U.S.C. § 1817 ( j ) ) and section 225.7 o f this chapter (Regulation Y ), with respect to a bank holding com pany or State member bank, to determine the in formational sufficiency o f notices and reports filed under the Act, to extend periods for con sideration o f notices, to determine whether a person w ho is or will be subject to a presump tion described in section 225.7(a) o f this chapter should file a notice regarding a p ro posed transaction, and, if all the follow ing conditions are met, to issue a notice o f inten tion not to disapprove a proposed change in control: (i) no member o f the Board has indicated an objection prior to the Reserve Bank’s action. ( ii ) all relevant departments o f the Reserve Bank concur. (iii) if the proposal involves shares o f a State member bank or a bank holding com pany controlling a State member Bank, the appropriate bank supervisory authorities have indicated that they have no objection to the proposal, or no objection has been received from the appropriate bank supervisory au thorities within the time allowed b y the Act. (iv) no significant policy issue is raised by the proposal as to which the Board has not expressed its view. Board of Governors o f the Federal Reserve System, January 31, 1979. For these Rules to be complete, retain: 1) Pamphlet amended effective August 2, 1978. 2 ) Amendments effective October 19, 1978, and January 1, 1979. 3 ) This slip sheet. P R IN T E D [Enc. Cir. 8 5 1 8 ] IS NEW YORK Board of Governors of the Federal Reserve System BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL AMENDMENTS TO REGULATION Y ( effectiv e M a rch 1 0 , 1 9 7 9 ) Change in Bank Control § 1817 ( j ) ) to require advance notice to the Board by persons proposing to acquire con trol of bank holding companies or State mem ber banks on or after that date. The Board today issued a p olicy statement regarding that Act, describing the A ct’s requirements, p roce dures, and objectives, and clarifying certain aspects o f the Act. That statement is p ub lished in the notice section of this issue o f the Federal Register for the guidance o f persons subject to the Act. T o supplement that state ment the Board has amended its Regulation Y : AGENCY: Board of Governors of the Federal Reserve System. ACTION: Final rules. SUMMARY: The Change in Bank Control Act o f 1978 w ill require persons proposing to acquire control o f bank holding companies or State member banks beginning March 10, 1979, to file advance notice with the Board and to com ply with certain other procedures. T o implement the Act, the Board has issued final rules that specify transactions that com e within the A ct’s coverage, and establish cer tain exemptions and procedures. These rules supplement a policy statement on the same subject issued today by the Board in a sepa rate action. W hile it is necessary to issue final rules, effective March 10, 1979, the Board has invited public com ment on the rules, and intends to address those comments and adopt any needed amendments to the rules as soon as practicable. ( a ) to establish procedures for com pliance with the A ct’s notice requirements; ( b ) to define the A ct’s coverage to include generally transactions resulting in a person’s ownership or control of 10 per cent or more of any class o f voting securities of a bank holding com pany or State mem ber bank ( i ) if the institution has issued securities subject to registration under the Securities Exchange A ct of 1934 or (ii) if the acquiring person will be the institution’s largest shareholder; DATE: These rules are effective March 10, 1979. Comments must be received b y April 6, 1979. ( c ) to relieve individual acquirers o f the requirement that they supply personal finan cial statements for years earlier than the most recently com pleted calendar year when such statements w ould be unnecessary for an ade quate evaluation o f a proposed acquisition; and ADDRESS: Secretary, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. All material submitted must in clude the docket number R-0199. FOR FURTHER INFORMATION CON TACT: Robert E. Mannion, Associate General ( d ) to exempt the follow in g transactions from the A c t s prior notice requirements: Counsel (202-452-3274), or James M cA fee, Senior Attorney (202-452-3707), Legal D ivi sion, Board of Governors of the Federal Re serve System, Washington, D.C. 20551. ( i ) acquisitions o f additional shares in an institution b y a person already lawfully controlling that institution; SUPPLEMENTARY INFORMATION: (1 ) Effective March 10, 1979, the Change in Bank Control A ct o f 1978 amends section 7 ( j ) of the Federal D eposit Insurance A ct (12 U.S.C. (ii) testate or intestate succession, gifts, and foreclosures, on the condition that cer tain information be given prom ptly to the appropriate Federal Reserve Bank; For this Regulation to be complete, retain: 1) Regulation Y pamphlet, as amended effective April 5, 1978. 2) Amendment effective January 1, 1979. 3) This slip sheet. P R IN T E D [ E n c . C ir . 8 5 1 8 ] IN NEW YORK determinations regarding the need for notices from persons w ho ow n or will ow n less than 25 per cent of the voting stock o f an institu tion, to be taken b y Federal Reserve Banks. These amendments do not constitute substan tive rules subject to the procedural require ments of 5 U.S.C. § 553, and they have been adopted without follow ing those requirements. (iii) transactions requiring approval un der the Bank M erger A ct or the Bank H old ing Com pany A ct; ( i v ) certain other transactions covered by the Bank H olding Com pany Act; ( v ) normal proxy solicitations and pro rata stock dividends; and (4 ) The rules amending Regulation Y are adopted, effective March 10, 1979, under the authority of section 7 ( j ) ( 13) of the Federal D eposit Insurance A ct (12 U.S.C. § 1817(j ) ( 1 3 ) ) , as amended b y the Change in Bank Control A ct o f 1978 (Pub. L. No. 95-630, § 602, 92 Stat. 3683). Rules Regarding D ele gation of Authority, described in paragraph (3 ) above, are adopted under section l l ( k ) o f the Federal Reserve A ct (12 U.S.C. § 2 4 8 ( k ) ). ( v i ) changes in control of foreign bank holding companies. N o exemption has been provided in these regulations for changes in control o f foreignbased bank holding companies that do not qualify as foreign bank holding companies under section 2 2 5 .4 (g ) of Regulation Y, but the Board encourages com ment by interested persons on the propriety and scope of such an exemption. 1. Effective March 10, 1979, the title to the Board’s Regulation Y (12 C.F.R. Part 225) is revised to read “PART 225 — BANK H O L D IN G COM PANIES A N D CH A N G E IN BANK C O N T R O L ’’ and section 225.1 of that Part (12 C.F.R. §225.1) is revised to read as follow s: ( 2 ) It is necessary and in the public in terest for the efficient administration of the A ct that regulations be adopted by the A ct’s effective date, M arch 10, 1979, and that per sons subject to the Act know with reasonable certainty at the earliest time the scope of their rights and duties under the Act. For those reasons the Board finds that the notice and public procedure requirements of 5 U.S.C. § 553, as well as those of the Board’s policy statement of January 15, 1979, regarding ex panded rulemaking procedures, are impracti cal, and they have not been follow ed. The Board invites public com m ent on these rules, however, and intends to address them as soon as practicable after the close of the comment period, and may address them earlier if there is an evident and com pelling need to do so. Interested persons are invited to submit rele vant data, views, comments, or arguments. Any such material should be submitted in writing to the Secretary, Board o f Governors o f the Federal Reserve System, Washington, D .C . 20551, to b e received no later than April 6, 1979. All material should include the docket number R-0199. Such information will b e made available for inspection and copvin g upon request except as provided in section 261 .6(a ) of the Board’s Rules Regard ing Availability o f Information (12 C.F.R. § 2 6 1 . 6 ( a) ) . S E C T IO N D E F IN IT IO N S ( a ) Authority and scope. T h is P art is issued b y th e B o a rd o f G o vern o rs o f th e F e d eral R ese rv e S y stem u n d er section 5 ( b ) o f the B a n k H o ld in g C o m p a n y A c t o f 195 6 ( “ the A c t ” ) (1 2 U .S .C . § 1 8 4 4 ( b ) ) and section 7 ( j ) ( 1 3 ) o f th e F e d e ra l D e p o s it In su ran ce A c t, as a m e n d e d b y th e C h a n g e in B an k C o n tr o l A c t o f 1 9 7 8 ( “th e C o n tro l A c t” ), (1 2 U .S .C . § 1 8 1 7 ( j ) ( 1 3 ) . Sections 2 2 5 .2 th rou gh 2 2 5 .6 o f this Part im p le m e n t th e A c t, an d section 2 2 5 .7 o f this Part im p lem e n ts the C o n tro l A ct. ( b ) Terms used in the Act. A s u sed in this Part, th e term s “ b a n k h o ld in g c o m p a n y ,” “c o m p a n y ,” “b a n k ,” “ su b sid ia ry,” an d “B o a rd ” h a v e th e sa m e m e an in g s as th ose g iv en such term s in th e A c t. A s u se d in section 2 2 5 .7 o f this Part, th e term s “ b a n k h o ld in g c o m p a n y ,” g iv en it in th e C o n tr o l A c t. ( c ) Federal Reserve Bank. T h e term “F e d e ra l R e se rv e B a n k ” as u sed in this Part w ith resp ect to a ctio n b y , o n b e h a lf o f, or d ire cted to b e tak en b y a b a n k h o ld in g c o m p a n y or oth er org a n ization sh all m e a n either th e F e d e ra l R ese rv e B an k o f th e F e d e ra l R e serve district in w h ic h th e operation s o f the b a n k h o ld in g c o m p a n y or oth er organ ization are p rin cip a lly c o n d u c te d , as m e asu red b y ( 3 ) In connection with the implementation o f the Act, the Board has amended its Rules Regarding Delegation of Authority (12 C.F.R. Part 265) to permit certain actions under the Act, including the issuance of notices o f the Board’s intention not to disapprove a pro posed change in control, extensions of periods for consideration o f notices, determinations of the informational sufficiency o f notices, and 2 2 5 .1 — A U T H O R I T Y , S C O P E , AND to ta l d eposits h e ld or co n trolled b y it on the 2 ( b ) Notices. S e c tio n 2 6 5 .3 o f th e B o a r d ’s R u les o f P roc ed u re govern s th e su b m issio n o f n otices req u ired b y th e C o n tr o l A c t, ex cep t th at n otices sh o u ld b e sen t to th e F e d e ra l R e se rv e B a n k o f th e district in w h ich th e a ffe cted b a n k or b a n k h o ld in g c o m p a n y is lo c a te d . N o tic e sh all n ot b e co n sid ered giv en unless in fo rm a tio n p ro v id e d is responsive to ev ery ite m specified in p a rag rap h 6 o f th e C o n tro l A c t (1 2 U .S .C . § 1 8 1 7 ( j ) ( 6 ) ) , or ev ery item p rescrib ed in th e appropriate B o a rd fo rm s. W i t h resp ect to p erso n a l finan cial statem en ts req u ired b y p aragrap h 6 ( B ) o f th e C o n tro l A c t, an in d ivid u al acqu irer m a y in c lu d e a cu rren t statem en t o f assets and liab ilities, as o f a d a te w ith in 9 0 days o f the n otice, a b r ie f in c o m e su m m a ry , and a state m e n t o f m a teria l ch an ges since th e date th ereo f, su b ject to th e auth ority o f th e F e d eral R ese rv e B an k or th e B oa rd to require ad d ition a l in form ation . date o n w h ich it b e c a m e , or is to b e c o m e , a b a n k h o ld in g c o m p a n y , or su ch R e se rv e B an k as th e B o a rd m a y d esign a te. W i t h resp ect to n otices filed an d o th er actions tak en u n d er th e C o n tr o l A c t, th e term refers to th e F e d e ra l R ese rv e B a n k fo r th e institution to b e acq u ired , as d e te rm in e d b y th e p re c e d in g sen ten ce in th e case o f b a n k h o ld in g c o m p an ie s an d b y sectio n 9 o f th e F e d e r a l R e se rv e A c t in th e ca se o f State m e m b e r ban ks. 2. Effective M arch 10, 1979, the Board’s Regulation Y (12 C.F.R. Part 225) is amended b y adding a new section, § 225.7, as follows: S E C T IO N 2 2 5 .7 — C H A N G E IN BANK CONTROL (a ) Acquisitions of Control.15 U n d e r the C o n tr o l A c t , aqu isitions b y a p erso n or p e r sons a ctin g in co n cert o f th e p o w e r to v o te 2 5 p er ce n t or m o re o f a class o f v o tin g securi ties o f a b a n k h o ld in g c o m p a n y or State m e m b e r b a n k , un less e x e m p te d , requ ire prior n otice to th e B o a rd . In ad d ition , a p u rch ase, a ssig n m en t, tran sfer, p le d g e , or o th er d isp osi tion o f v o tin g stock th ro u gh w h ich an y p erson w ill a cq u ire o w n ersh ip , co n trol, or th e p o w e r to v o te ten per cen t or m o re o f a class o f v o tin g securities o f a b a n k h o ld in g co m p a n y or State m e m b e r b a n k w ill b e d e e m e d to b e an a cq u isition b y su ch p erson o f th e p o w er to direct that institution ’s m a n a g e m e n t or ( c ) Exempt transactions. T h e fo llo w in g transactions are n o t su b ject to th e prior n otice req u irem en ts o f th e C o n tro l A c t: ( 1 ) th e a cq u isition o f a d d ition al shares o f a b a n k h o ld in g c o m p a n y or State m e m b e r b a n k b y a p erson w h o co n tin u ou sly since M a r c h 9 , 1 9 7 9 , h e ld p o w e r to v o te 2 5 p er ce n t or m o re o f th e v o tin g shares o f that institu tion , or b y a p erso n w h o has acq u ire d and m a in ta in ed con trol o f that institution after co m p ly in g w ith th e C o n tr o l A c t ’s p ro ced u res; p o licies if: ( 2 ) th e acq u isitio n o f a d d ition al shares o f a b a n k h o ld in g c o m p a n y or State m e m b e r b a n k b y a p erso n w h o u n d er p a rag rap h (a ) o f this section w o u ld b e d e e m e d to h a v e c o n tro lled th at institution co n tin u ou sly since ( 1 ) th e institution h as issued a n y class o f securities su b ject to registration u n d er section 12 o f th e Securities E x c h a n g e A c t o f 193 4 (1 5 U .S .C . § 7 8 1 ) ; or M a r c h 9 , 1 9 7 9 , if: ( 2 ) im m e d ia te ly after th e tran saction no oth er p erso n w ill o w n a greater p rop ortion o f th at class o f v o tin g securities. ( i ) th e tran saction w ill n ot result in that p erso n ’s direct or indirect o w n ersh ip or p o w e r to v o te 2 5 p er cen t or m o re o f a n y class o f v o tin g securities o f th e in stitution ; or O th e r transactions resu ltin g in a p erson ’s co n trol o f less th an 2 5 p er cen t o f a class o f v o tin g shares o f a b a n k h o ld in g c o m p a n y or State m e m b e r b a n k w o u ld n ot result in c o n trol fo r pu rp oses o f th e C o n tro l A c t. A n acq u irin g person m a y req u est an o p p ortu n ity to co n test th e p resu m p tio n esta b lish ed b y this p a rag rap h w ith resp ect to a p ro p o sed tran sac tion. T h e B o a rd w ill afford th e p erson an o p p o rtu n ity to presen t v iew s in w ritin g or, w h ere a p p rop riate, o ra lly b e fo r e its d esign a ted re p resen tatives eith er at in form al co n feren ce discussions or at in fo rm a l presen tation s o f (ii) in o th er cases, th e B o a rd determ in es th at th e p erso n has co n trolled th e institution c o n tin u ou sly since M a r c h 9 , 1 9 7 9 ; ( 3 ) th e a cq u isition o f shares in satisfaction o f a d e b t p rev io u sly co n trac te d in g o o d faith or th ro u g h testate or intestate su ccession or b o n a fide g ift, p ro v id e d th e acqu irer advises th e F e d e ra l R ese rv e B a n k w ith in thirty days after th e a cq u isition an d p ro vid es any in for m a tio n sp ecified in p a rag rap h 6 o f th e C o n trol A c t th at th e R e se rv e B a n k r eq u ests; ev id en c e. ( 4 ) a tran saction su b ject to a p p rov al u n der section 3 o f th e B a n k H o ld in g C o m p a n y A c t or section 18 o f th e F e d e ra l D e p o s it In su ran ce (15) Control is defined in Ihe Control Act as the power, directly or indirectly, to direct the mana'iement or policies, or to vttte 25 per cent or more of any class of voting securi ties, of an institution. 12 U.S.C. 5 1817(j) (8) (B ). A c t; 3 (5 ) a 2 (a )(5 ) H o ld in g tran saction d e sc rib e d in (7 ) th e a cq u isition o f shares o f a fo re ig n b a n k h o ld in g c o m p a n y , as d efin ed in sectio n 2 2 5 .4 ( g ) o f this P art, p r o v id e d this ex em p tio n d o es n ot ex ten d to th e reports a n d in fo rm a tion req u ired u n d er p a ragrap h s 9 , 1 0 , an d 12 o f th e C o n tr o l A c t ( 1 2 U .S .C . § 1 8 1 7 ( j) ( 9 ) , sections or 3 ( a ) ( A ) o r ( B ) o f th e C o m p a n y A c t b y a p erso n B an k th ere d e sc rib e d ; ( 6 ) a cu sto m a ry o n e -tim e p ro xy solicitation a n d re ce ip t o f p ro -ra ta stock d iv id e n d s; and ( 1 0 ) , an d ( 1 2 ) ) . 4
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