[Federal Register Volume 59, Number 211 (Wednesday, November 2, 1994)]
[Rules and Regulations]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-27082]


[[Page Unknown]]

[Federal Register: November 2, 1994]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Parts 5 and 16

[Docket No. 94-17]
RIN 1557-AA65

 

Securities Offering Disclosure Rules

AGENCY: Office of the Comptroller of the Currency, Treasury.

ACTION: Final rule.

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SUMMARY: The Office of the Comptroller of the Currency (OCC) is 
amending its regulations governing the disclosure requirements for 
offers and sales of national bank securities. This final rule replaces 
regulations detailing the contents of offering documents covering 
national bank securities and requires that offering documents conform 
to the information requirements set forth in the appropriate Securities 
and Exchange Commission (SEC) registration form. The final rule also 
cross-references certain provisions of the Securities Act of 1933 and 
SEC rules.
    The purpose of the final rule is to reduce unnecessary regulatory 
burdens on national banks and enhance their ability to raise capital, 
while maintaining the quality of disclosures provided to investors. The 
final rule generally treats national bank securities comparably to 
those of other corporations and eliminates a duplicative and 
potentially confusing system of regulations and forms.

EFFECTIVE DATE: April 3, 1995.

FOR FURTHER INFORMATION CONTACT: Elizabeth Malone, Senior Attorney, 
Securities, Investments, and Fiduciary Practices Division, (202) 874-
5210, Office of the Comptroller of the Currency, 250 E Street SW., 
Washington, DC 20219.

SUPPLEMENTARY INFORMATION:

Background

    The OCC's securities offering regulations protect the purchasers of 
national bank securities by ensuring that investors receive full 
disclosure of all material facts when purchasing such securities, and 
also protect the integrity of national bank capital. The OCC 
determined, however, that revisions to these regulations were needed to 
reduce unnecessary burdens that the requirements imposed on national 
banks.
    The OCC published a notice of proposed rulemaking (proposal), on 
October 15, 1992, seeking public comment on proposed revisions to the 
OCC's regulations governing the offer and sale of national bank 
securities (57 FR 47,280). The proposal replaced the OCC's former 
regulations with a series of regulations based, to the extent 
appropriate for national banks, on the Securities Act of 1933 
(Securities Act) (15 U.S.C. 77a through 77aa) and the SEC's rules (17 
CFR part 230). The deadline for submitting comments on the proposal 
originally was December 14, 1992. The OCC extended that deadline to 
February 1, 1993 (58 FR 4600), after several potential commenters 
requested additional time to prepare and submit comments.

Overview of Final Rule

    The OCC is issuing this final rule pursuant to 12 U.S.C. 1 et seq 
and 93a. The final rule generally requires national bank securities 
offering documents to conform to the form for registration that the 
bank would use if it had to register the securities under the 
Securities Act. Accordingly, the final rule cross-references a number 
of provisions of the Securities Act and a number of SEC rules. The 
OCC's former regulations generally required the disclosure of similar 
information but in a different format than used by the SEC. And, unlike 
the SEC, the OCC did not provide for incorporation by reference of 
filings made under the Securities Exchange Act of 1934 (Exchange Act) 
(15 U.S.C. 78a through 78jj).
    By conforming its securities disclosure rules to those of the SEC, 
the OCC believes it can reduce significantly unnecessary regulatory 
burden. Banks, bank counsel, and investors are familiar with SEC 
disclosure requirements. In addition to being well-known in the 
marketplace, the interpretation of SEC disclosure requirements is well 
established and benefits from a significant body of precedent. 
Moreover, because the OCC rules will now actually reference the SEC 
rules, rather than parallel or copy them, the OCC rules will 
automatically remain current. Thus, the OCC's adoption of the SEC 
registration requirements, while reducing regulatory burden through the 
elimination of a duplicate (yet sometimes slightly dissimilar) set of 
disclosure rules, will maintain the quality of disclosure received by 
investors.
    Similar to the OCC's former regulations, the final rule generally 
prohibits the offer or sale of bank-issued securities unless: (1) A 
registration statement for those securities has been filed with and 
declared effective by the OCC and the securities are sold through a 
prospectus that was filed as a part of that registration statement, or 
(2) the transaction is subject to an exemption. The final rule 
incorporates various SEC exemptions from registration requirements and 
adds an exemption for offers and sales of certain large denomination 
high-grade debt securities to accredited investors.
    For example, the final rule incorporates through cross-reference 
the SEC's Regulation A (17 CFR 230.251 through 230.263), which sets 
forth the small issues exemption from registration requirements. 
Regulation A provides a simplified disclosure system for offerings of 
up to $5 million in any 12-month period. The OCC's former regulations 
included a similar exemption, but it was limited to offerings of up to 
$2 million in a 12-month period.
    The final rule also includes an abbreviated registration system for 
offers and sales of large denominations of nonconvertible debt to 
accredited investors (defined in 17 CFR 230.501). This abbreviated 
registration system reduces unnecessary regulatory burden on offers and 
sales of such debt in situations where purchasers do not need the more 
extensive disclosures provided by the full part 16 registration 
process.
    The OCC originally developed the abbreviated registration system 
through a series of interpretive and no-objection letters issued under 
the former part 16. While the SEC rules do not provide for this 
abbreviated approach, the OCC believes it is appropriate for several 
reasons. The market for such debt is well-developed and has not 
presented particular disclosure concerns. The requirements that the 
securities have a specified large denomination, be highly- rated, and 
that purchasers must meet the accredited investor criteria further 
ensure that the debt will only be offered and sold by a bank in 
situations when an abbreviated disclosure system is appropriate. 
Inclusion of this abbreviated approach in the final rule clarifies its 
criteria and provides better notice that such a system is available.
    The final rule also cross-references the SEC's Rule 415 (17 CFR 
230.415) on shelf registration. This enables banks to register 
securities for future sale and then to sell those securities when 
market conditions are favorable. Under the OCC's former regulations, 
shelf registration was not permitted. This imposed additional and 
unnecessary costs on national banks and put them at a disadvantage with 
respect to other issuers seeking to raise capital.
    The final rule provides that nonpublic offerings of securities 
generally may be made in accordance with the SEC's Regulation D (17 CFR 
230.501 through 230.508). The final rule permits sales to an unlimited 
number of investors who meet certain requirements (accredited 
investors), and up to 35 other sophisticated purchasers, or to any 
number of sophisticated purchasers subject to a limitation on the 
aggregate offering price.
    Cross-reference of the SEC's Regulation D increases the number of 
allowable purchasers in a nonpublic offering. The former regulation 
allowed banks to make nonpublic offerings to only 15 sophisticated 
purchasers (and an unlimited number of accredited investors) in a 12-
month period, unless the bank received OCC permission to increase the 
number of purchasers.
    The revised rule makes certain conforming changes to Secs. 5.46 and 
5.47 to enable banks to use the SEC's Rule 415 (17 CFR 230.415) on 
shelf registration. The final rule further provides that a bank need 
not obtain prior OCC approval for a cash sale of preferred stock or an 
issuance of subordinated debt unless the OCC has notified the bank that 
prior approval is necessary. The OCC's former regulations required 
prior OCC approval for all cash sales of preferred stock and issuances 
of subordinated debt.
    The Interagency Statement on Retail Sales of Nondeposit Investment 
Products (February 15, 1994) applies to retail sales of nondeposit 
investment products including bank securities. Thus, if bank securities 
are sold to retail customers, banks must ensure that such customers are 
fully informed that the securities are not insured by the FDIC, are not 
deposits or other obligations of the bank and are not guaranteed by the 
bank, and are subject to investment risks including possible loss of 
the principal invested.

Section-By-Section Discussion

    The OCC received 13 comments on the proposal. The commenters 
generally supported the OCC's plan to incorporate through cross-
reference certain sections of the Securities Act and the SEC's rules 
thereunder, and to adopt the SEC's forms. The commenters focused on 
specific aspects of the revisions that they believed needed 
modification. The OCC has carefully considered each of the comment 
letters and has made a number of changes in response to them.
Definitions (Section 16.2)

    The proposal cross-referenced a number of definitions in the 
Securities Act. One such definition was the Securities Act definition 
of ``underwriter.'' The proposal's cross-reference to the 
``underwriter'' definition brought sales of stock by control persons 
and affiliates within the coverage of part 16. The former version of 
part 16 had covered those sales as indirect sales by a bank. By 
adopting the Securities Act underwriter definition, the proposal 
clarified the coverage of part 16. The final rule adopts the cross-
reference to the definition of ``underwriter'' as proposed.
    The proposal also defined ``security'' to conform with the 
definition in the Securities Act. The proposed definition was more 
detailed than the definition in the former part 16, specifying that all 
bank debt, not just debt subordinated to the claims of general 
creditors was considered a security. The definition in the former part 
16 was unclear as to what debt instruments were covered.
    The OCC received six comments on this issue. One commenter favored 
specifically covering senior debt in the definition while five 
commenters were opposed. Several commenters also stated that the 
definition of ``security'' should exclude specific traditional bank 
products and deposits.
    The final rule includes a cross-reference to the Securities Act 
definition of ``security.'' That definition clearly includes senior 
debt. While a number of banks interpreted the definition of 
``security'' in the former part 16 as excluding senior debt and opposed 
a change in the definition that they viewed as expanding the coverage 
of part 16, the OCC believes there is no reason to treat senior debt 
differently from subordinated debt for purposes of this definition. 
Purchasers of both types of debt should receive the information 
necessary to make informed investment decisions.
    In fact, the passage of the depositor preference provisions of the 
Omnibus Reconciliation Act of 1993 (12 U.S.C. 1821(d)(11)) has 
strengthened the need for purchasers of senior debt to receive 
disclosure materials. The depositor preference provisions require the 
FDIC to pay the claims of uninsured depositors prior to paying the 
claims of any other general creditors of a bank. Senior debt, 
therefore, is not equivalent to uninsured deposits. Purchasers of 
senior debt now are less likely than they were prior to the passage of 
the Omnibus Reconciliation Act to receive full payment in the event of 
a bank's insolvency.
    The definition of ``security'' in the final rule does not 
specifically exclude traditional bank products. Nevertheless, the OCC 
does not intend that the definition cover insured or uninsured deposits 
or other traditional bank products, including letters of credit, 
banker's acceptances, or repurchase agreements. Judicial precedents 
have generally found these instruments not to be securities. Providing 
an exhaustive list of exceptions in the definition of ``security'' 
would be unwieldy and detract from the benefits of cross-referencing 
the SEC definition.

Registration Statement and Prospectus Requirements (Section 16.3)

    Section 16.3 of the proposal set forth the general prohibitions on 
offers and sales of bank securities. Under the proposal, no person 
could offer or sell bank securities unless a registration statement for 
the securities had been filed with and declared effective by the OCC 
and the offer or sale was accompanied or preceded by a prospectus filed 
as a part of that registration statement, or an exemption was available 
under part 16. The OCC would keep on file and make available for public 
inspection the information that was included in the registration 
statement but not included in the prospectus provided to shareholders.
    The OCC's proposed requirements on the use of a preliminary 
prospectus and the delivery of a final prospectus differed from the 
comparable SEC requirements. The OCC proposal simply incorporated the 
former part 16 requirements. The proposal required prior OCC 
authorization to use a preliminary prospectus. The proposal also 
required that, except in a situation where the OCC has authorized the 
use of a preliminary prospectus, offers must be made through the use 
and delivery of a prospectus that has been declared effective by the 
OCC. Unlike the SEC rules, the proposal did not generally permit a bank 
to provide the final prospectus to purchasers with the confirmation.
    Five commenters addressed the OCC's proposed requirements on the 
use of a preliminary prospectus and the delivery of a final prospectus. 
All five commenters agreed that the OCC should follow the Securities 
Act requirements and SEC rules. Upon further consideration, the OCC 
agrees and has revised Sec. 16.3 of the final rule to more clearly 
follow the requirements in the Securities Act and the SEC rules. The 
final rule provides that a preliminary prospectus may be used if (1) a 
registration statement including the preliminary prospectus has been 
filed with the OCC; (2) the preliminary prospectus includes the 
information required in a final prospectus (except for omission of 
certain information dependent on the offering price); and (3) a copy of 
the final prospectus is furnished to each purchaser prior to or 
simultaneously with the sale of the security.

Communications Not Deemed an Offer (Section 16.4)

    The proposal listed a number of communications that the OCC did not 
deem to be offers and which therefore did not violate the prohibitions 
on making offers in Sec. 16.3. The list included communications that 
comply with SEC Rule 134 or 135 (17 CFR 230.134 or 230.135). SEC Rules 
134 and 135 govern advertisements used prior and subsequent to the 
filing of a registration statement. The proposal also provided that 
supplemental sales literature could be used after a registration 
statement has been declared effective if the sales literature was 
accompanied or preceded by a prospectus. In addition, the proposal 
provided that advertisements only had to be filed with the OCC upon the 
OCC's request.
    The proposal also eliminated certain restrictions on advertisements 
that were in the former part 16. Former part 16 permitted the use of 
only extremely limited information in advertisements, such as the name 
of the bank and the amount of securities being offered, did not provide 
for the use of sales literature, and required all advertisements to be 
cleared by the OCC prior to use.
    The OCC received no comments on this section of the proposal. 
However, the final rule adds to the list of permissible communications 
four types of communications that were not in the proposal, but which 
are permissible under SEC rules. Those communications include an oral 
offer of securities covered by a registration statement that has been 
filed with the OCC, a summary prospectus that satisfies the 
requirements of SEC Rule 431 (17 CFR 230.431), a notice of a proposed 
unregistered offering that satisfies the requirements of SEC Rule 135c 
(17 CFR 230.135c), and a communication that satisfies the requirements 
of SEC Rules 138 or 139 (17 CFR 230.138 or 230.139--Definition of 
``offer for sale'' and ``offer to sell'' in sections 2(10) and 5(c) of 
the Securities Act in relation to certain publications).

Exemptions (Section 16.5)

    Under the proposal, the registration and prospectus requirements 
did not apply to an offer or sale of securities exempt under certain 
sections of the Securities Act or the rules promulgated thereunder. The 
registration and prospectus requirements did not apply if the 
securities were exempt from registration under section 3 of the 
Securities Act (15 U.S.C. 77c) by reason of an exemption other than 
those contained in section 3(a)(2) (for securities issued by banks) or 
section 3(a)(11) (for intrastate offerings). The proposed registration 
and prospectus requirements also did not apply to transactions exempt 
from registration under section 4 of the Securities Act (15 U.S.C. 
77d). Section 4 of the Securities Act exempts transactions by any 
person other than an issuer, underwriter or dealer, transactions by an 
issuer not involving a public offering, transactions involving offers 
or sales by an issuer solely to accredited investors, and other 
transactions that meet certain specified requirements.
    The proposal generally exempted from the Sec. 16.3 registration 
statement and prospectus requirements offers and sales of bank 
securities to sophisticated purchasers that satisfy the requirements of 
SEC Regulation D (17 CFR 230.501 through 230.508). SEC Regulation D 
sets forth rules governing the limited offer and sale of securities 
without registration under the Securities Act, providing a safe harbor 
for compliance with sections 3(b) and 4(2) of the Securities Act (15 
U.S.C. 77c(b) and 77d(2)).
    The proposal also exempted from the Sec. 16.3 registration 
statement and prospectus requirements offers and sales of bank issued 
securities in transactions that satisfy the abbreviated disclosure 
requirements of certain SEC rules. Those rules require only limited 
disclosure to purchasers because of the particular circumstances of the 
types of transactions. The rules include Rules 144 (17 CFR 230.144--
Persons deemed not to be engaged in a distribution and therefore not 
underwriters), 144A (17 CFR 230.144A--Private resales of securities to 
institutions), 236 (17 CFR 230.236--Exemption of shares offered in 
connection with certain transactions), and Regulation S (17 CFR 230.901 
through 230.904--Rules governing offers and sales made outside the 
United States without registration under the Securities Act of 1933). 
In addition, the proposal exempted transactions that complied with the 
requirements of SEC Rules 701, 702T, and 703T (17 CFR 230.701, 
230.702T, and 230.703T), which cover offers and sales of securities 
pursuant to certain compensatory benefit plans and contracts relating 
to compensation.
    The commenters largely agreed with the OCC's approach. Two 
commenters recommended that the OCC also exempt transactions that 
comply with the SEC's Regulation A (17 CFR 230.251 through 230.263). 
Regulation A permits unregistered, public offerings of up to $5 million 
in securities under certain specified conditions.
    The final rule adopts the exemptions from the registration and 
prospectus requirements included in the proposal, and also includes an 
exemption for transactions that comply with Regulation A. (This 
exemption is discussed further under ``Small Issues (16.8)'' of this 
preamble). This approach treats banks comparably to other corporations 
when issuing small quantities of securities.

Sales of Nonconvertible Debt (Section 16.6)

    The proposal provided an optional abbreviated registration system 
for offers and sales of nonconvertible debt if those transactions met 
certain requirements. Offers and sales that met those requirements were 
deemed to be in compliance with the Registration statement and 
prospectus (16.3), Form and content (16.15), and Periodic and current 
reports (16.20) provisions of part 16.
    In particular, the proposal specified that: (1) The bank issuing 
the nonconvertible debt must have securities registered under the 
Exchange Act or must be a subsidiary of a bank holding company that has 
securities registered under the Exchange Act; (2) The insured 
depository institution subsidiaries of the registered bank holding 
company must constitute at least 80% of the bank holding company's 
assets; (3) The debt must be offered and sold only to accredited 
investors (defined in 17 CFR 230.501(a)); (4) The debt must be offered 
and sold by a reputable and experienced underwriter, not affiliated 
with the bank; (5) The debt must be sold in minimum denominations of 
more than $100,000 and the notes cannot be exchanged for notes in 
smaller denominations; (6) The debt must be rated investment quality; 
(7) Each purchaser must receive an offering document describing the 
terms of the debt and incorporating the bank's latest Call Reports and 
the bank or holding company's Exchange Act filings; (8) The offering 
document and any amendments must be filed with the OCC within five days 
after first use; and (9) Any required filing fees must be submitted.
    The OCC designed the requirements of the abbreviated registration 
system to ensure that potential purchasers of debt subject to the 
abbreviated registration system had access to necessary information on 
the issuing bank and commonly controlled depository institutions, as 
well as the appropriate knowledge and experience to evaluate that 
information.
    The OCC requested comment on whether this abbreviated registration 
system was necessary or appropriate. The OCC received 11 comments on 
this issue. Although the commenters generally favored the abbreviated 
registration system, they expressed different perspectives about the 
specific requirements of the system. A number stated that the OCC 
should eliminate the requirement that nonconvertible debt be sold by an 
underwriter unaffiliated with the bank. Several commenters agreed that 
the OCC needed to revise the abbreviated registration system to address 
the special circumstances of federal branches and agencies of foreign 
banks.
    The OCC agrees with the commenters that the underwriter requirement 
is unnecessary. The underwriter requirement imposes additional costs on 
banks and limits their flexibility without necessarily improving the 
quality of the disclosure materials provided to investors. The final 
rule therefore does not require that the debt be offered and sold by an 
underwriter, not affiliated with the bank, as part of an underwritten 
offering.
    In addition, the OCC has determined that it is unnecessary to 
require that the insured depository subsidiaries of a registered bank 
holding company constitute at least 80% of the bank holding company's 
assets. This asset-based requirement does not ensure that the holding 
company's Exchange Act filings would be more meaningful to investors 
than the filings would be without the requirement. Accordingly, it has 
been eliminated from the final rule.
    Further, the final rule requires that the debt be sold in minimum 
denominations of $250,000, rather than more than $100,000, in order to 
provide additional protections to purchasers of debt. Requiring larger 
denomination notes, and preventing them from being broken into smaller 
denominations, helps ensure that the purchasers of the notes are 
sophisticated, high net worth individuals or entities, for whom 
abbreviated disclosure is appropriate.
    The final rule also takes into account the special circumstances of 
federal branches of foreign banks. Because foreign banks and their 
holding companies generally are not reporting companies under the 
Exchange Act, federal branches and agencies often would be unable to 
comply fully with the requirements on Exchange Act filings in the 
abbreviated registration system. Federal branches and agencies usually 
do not have securities registered under the Exchange Act and are not 
subsidiaries of holding companies registered under the Exchange Act. 
Therefore, federal branches and agencies also cannot incorporate 
Exchange Act filings into offering documents.
    Accordingly, the final rule provides that federal branches and 
agencies of foreign banks need not have securities registered under the 
Exchange Act or be subsidiaries of holding companies that have 
securities registered under the Exchange Act to take advantage of the 
abbreviated registration system. Instead, these entities may make 
information about themselves available to purchasers by filing with the 
OCC the information specified in SEC Rule 12g3-2(b) (17 CFR 240.12g3-
2(b)) and providing purchasers with the information specified in SEC 
Rule 144A(d)(4)(i) (17 CFR 230.144A(d)(4)(i)). The OCC believes that 
this information is adequate for the sophisticated purchasers who are 
eligible investors under the abbreviated disclosure system. Such 
purchasers also are able to determine whether they have sufficient 
information to make informed investment decisions, and if they do not, 
can request additional information.

Nonpublic Offerings (Section 16.7)

    The proposal permitted offers and sales without compliance with the 
registration statement and prospectus requirements of Sec. 16.3 if the 
offers and sales were made in accordance with SEC Regulation D (17 CFR 
230.501 through 230.508) and the purchasers were either accredited 
investors or ``sophisticated'' investors. SEC Regulation D sets forth 
rules governing the limited offer and sale of securities without 
registration under the Securities Act and provides a safe harbor for 
compliance with sections 3(b) and 4(2) of the Securities Act (15 U.S.C. 
77c(b) and 77d(2)). SEC Regulation D does not require that in all 
circumstances purchasers be sophisticated.
    The proposal's cross-reference of Regulation D increased the number 
of purchasers permitted in a nonpublic offering over the number allowed 
under the former part 16. Former part 16, as interpreted by the OCC, 
permitted sales to only 15 sophisticated purchasers (and an unlimited 
number of accredited investors), unless the seller received OCC 
permission to increase the number of purchasers. The proposal permitted 
sales to 35 sophisticated purchasers and an unlimited number of 
accredited investors, or to any number of sophisticated purchasers 
subject to a limitation on the aggregate offering price.
    The proposal required the filing of a notice of sales no later than 
15 days after the first sale of securities in accordance with SEC Rule 
503 of Regulation D. Under the former part 16, nonpublic offering 
notices had to be filed 20 days prior to the time any security was 
offered or sold. This proposed change gave banks added flexibility in 
the timing of sales of securities.
    Under the proposal, securities subject to the limitations on resale 
of Regulation D must be sold pursuant to SEC Rule 144 or 144A, another 
exemption from registration under the Securities Act, or in accordance 
with the part 16 registration and prospectus requirements. The former 
part 16 did not permit any securities sold in a nonpublic offering to 
be resold for two years. The proposed change in resale limitations 
would improve the marketability of bank securities.
    The OCC received two comments on this section of the proposal. One 
commenter supported the cross-reference of Regulation D. The other 
commenter believed that by including the notice requirement in the 
nonpublic offering section, the OCC was making the filing of a notice a 
condition to the availability of the nonpublic offering exemption. The 
commenter stated that while the SEC does provide for the filing of a 
notice, it is not a condition of any of the exemptions in Regulation D.
    The final rule adopts this section as proposed with certain 
clarifying changes. The final rule indicates more clearly that although 
the filing of a notice is required, failure to file a notice does not 
result in the loss of the nonpublic offering exemption. Thus, the 
notice is not a condition of any of the exemptions in Regulation D. The 
final rule also clarifies that offers and sales made in reliance on 
Regulation D must only be made to sophisticated purchasers.

Small Issues (Section 16.8)

    The proposal did not cross-reference the SEC's Regulation A (17 CFR 
230.251 through 230.264), which permits the unregistered, public 
offering of securities under specified conditions. The OCC requested 
comment as to whether it should cross-reference Regulation A and 
received two comments in response. Both commenters believed that the 
OCC should cross-reference Regulation A.
    In light of these comments, the OCC has decided to cross-reference 
Regulation A in the final rule. Given the criteria for use of the rule, 
the OCC does not believe its use reduces purchaser safeguards. 
Moreover, the OCC believes that the Regulation A small issues exemption 
from registration should be available to banks, as it is to other 
issuers, to prevent imposing unnecessary burdens on banks in connection 
with small securities issuances.
    In order to use the Regulation A exemption, an issuer's offering 
documents must be filed with and reviewed by the OCC. The final rule 
states that filers should consult the SEC's Securities Act Industry 
Guide 3--Statistical Disclosure by Bank Holding Companies (17 CFR 
229.801(c) and 231) for guidance on the appropriate disclosures to be 
included in the offering document. The Guide 3 disclosures consist of 
information that potential purchasers of bank securities need in order 
to evaluate their investments.

Form and Content (Section 16.15)

    The proposal required all registration statements filed with the 
OCC to be on the form for registration that the bank would use were it 
required to register the securities under the Securities Act. Which 
form a bank uses depends, among other things, on whether the bank is 
subject to the registration and reporting requirements of section 12 or 
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78l and 78o(d)) 
and on the amount of the offering.
    Several commenters suggested that the OCC clarify whether a 
national bank may use the SEC's Form S-3 (Form for registration under 
the Securities Act of securities of certain issuers offered pursuant to 
certain types of transactions) in connection with the offer and sale of 
its securities if its parent company meets the requirements set forth 
in Instruction I.C. to Form S-3 and the other requirements set forth in 
Instruction I.C. are met.
    The final rule permits national banks to use Form S-3 in such 
situations. Pursuant to Instruction I.C. to the SEC's Form S-3, if the 
parent of a registrant meets the registration requirements for the use 
of Form S-3, the registrant may use Form S-3 for offers and sales of 
nonconvertible debt or nonconvertible preferred stock provided the 
registrant is a wholly-owned subsidiary of the parent and the 
securities being issued by the registrant are investment grade 
securities (or are fully guaranteed by the qualifying parent as to 
principal and interest).
    A national bank may establish an Exchange Act disclosure base for 
the Form S-3 by registering its common stock on Form 10 (General form 
for registration of securities pursuant to section 12(b) or 12(g) of 
the Exchange Act) prior to the effectiveness of its offering document 
and incorporating by reference the form pursuant to Item 12(a)(1) of 
Form S-3 in lieu of a Form 10-K (General form of annual report).
    The proposal also required that the registration statement must 
meet the requirements of the SEC regulations referred to in the 
registration form. Those regulations include Regulation S-X (17 CFR 
part 210), which applies to financial statements, and Regulation S-K 
(17 CFR part 229), which applies to the nonfinancial statement portion 
of the registration statement. The OCC expects that, consistent with 
SEC requirements and practice, filers will prepare registration 
statements for bank securities in accordance with Securities Act 
Industry Guide 3--Statistical Disclosure by Bank Holding Companies (17 
CFR 229.801(c) and 231).
    Because the proposal required registration statements to satisfy 
the requirements of the SEC regulations referred to in the applicable 
registration form, the financial statements in the registration 
statements must be audited. The OCC sought comment on whether it should 
limit the requirement for audited financial statements to banks of a 
certain size and whether that size should be the cut-off for the 
requirement for annual independent audits that was established pursuant 
to section 112 of the Federal Deposit Insurance Corporation Improvement 
Act of 1991 (FDICIA) (12 U.S.C. 1831m). Several commenters stated that 
the OCC should limit the audited financial statements requirement to 
banks of a certain size, although they disagreed as to what that size 
should be.
    After considering the comments, the OCC has decided not to limit 
the audited financial statements requirement to banks of a certain 
size. The final rule requires audited financial statements from 
national banks to the same extent that the SEC requires audited 
financial statements of other corporations. Requiring banks to provide 
audited financial statements in their registration statements helps 
ensure that purchasers of bank stock receive the same quality of 
disclosure and the same protections as do purchasers of stock of other 
types of issuers.
    Because the proposal required registration statements to comply 
with the SEC regulations referenced in the applicable registration 
form, banks that were subsidiaries of holding companies had to include 
audited bank financial statements, rather than bank holding company 
statements, in their registration statements. However, a number of 
commenters felt that banks that are subsidiaries of holding companies 
that have securities registered under the Exchange Act should not have 
to include audited bank financial statements in their registration 
statements. The commenters stated that these banks should instead be 
allowed to include in their registration statements the audited 
financial statements contained in the holding companies' Exchange Act 
filings and the banks' Call Reports.
    The OCC disagrees, and the final rule requires banks that are 
subsidiaries of holding companies to include audited bank financial 
statements in registration statements for bank securities. The OCC 
believes that purchasers of bank securities that are not subject to any 
sophistication requirements should be provided with bank, not merely 
holding company, financial statements. Those purchasers need bank level 
financial statements in order to make informed investment decisions 
about bank securities.
    The proposal cross-referenced the requirements of Rule 400 and 
Articles 1-3 of the SEC's general rules on registration in SEC 
Regulation C (17 CFR 230.400 through 230.439). Regulation C includes 
the SEC rule on shelf registration in Rule 415 (17 CFR 230.415--Delayed 
or continuous offering and sale of securities). Shelf registration 
enables banks to register securities that are to be sold in the future 
and then to sell those securities when the market conditions are most 
favorable. Regulation C also includes SEC Rule 430A (17 CFR 230.430A--
Prospectus in a registration statement at the time of effectiveness). 
Rule 430A allows an issuer to file a prospectus that omits certain 
information dependent on the offering price. The former part 16 did not 
contain any provisions comparable to Rule 415 or Rule 430A, so price 
and other information had to be set at the time an offering document 
was filed.
    The final rule, like the proposal, cross-references the 
requirements of Rule 400 and Articles 1-3 of the SEC's general rules on 
registration in SEC Regulation C (17 CFR 230.400 through 230.439). 
However, the final rule also cross-references the other articles of 
Regulation C (17 CFR 230.445 through 230.497). The OCC is cross-
referencing the remaining articles of Regulation C in order to adopt 
the SEC's rules and procedures governing when registration statements 
and amendments become effective. (For a discussion of this matter see 
``Effectiveness (Sec. 16.16)'' in this preamble). These remaining 
articles include rules on delaying amendments and acceleration of the 
effective date that are integral to the procedures under which 
registration statements and amendments become effective.
Effectiveness (Section 16.16)

    The proposal did not provide for the adoption of the Securities Act 
provisions or the SEC's rules pertaining to when registration 
statements become effective. The proposal retained the requirement in 
former part 16 that no registration statement, prospectus, or amendment 
was effective until declared effective by the OCC.
    Only one commenter discussed this issue. That commenter urged that 
the OCC follow the SEC's procedures in this area. The OCC agrees and 
the final rule adopts the Securities Act provisions and the SEC's rules 
on effectiveness. (See discussion under ``Form and Content 
(Sec. 16.15)'' in this preamble.)
    Under the cross-referenced provisions of the Securities Act, 
registration statements automatically become effective 20 days after 
they are filed unless a delaying amendment is filed with the OCC. 
However, consistent with SEC practice, the OCC expects all filers to 
file delaying amendments with their registration statements to prevent 
the registration statements from becoming automatically effective. The 
delaying amendments will ensure that the OCC has adequate time to 
review and comment upon filings.

Filing Requirements and Inspection of Documents (Section 16.17)

    This section of the proposal specified that issuers must file four 
copies of all documents with the OCC and required the OCC to make those 
documents available for public inspection. The former part 16 required 
issuers to submit six copies of most documents. The proposal also 
specified that all notices or other documents required to be filed by 
any section of the Securities Act, the Exchange Act, or a rule of the 
SEC cross-referenced in part 16, be filed with the OCC. The final rule 
adopts this section generally as proposed, with a few technical 
clarifying changes.

Use of Prospectus (Section 16.18)

    Under the proposal, a prospectus or amendment declared effective by 
the OCC may not be used more than nine months after its effective date 
unless the information contained therein is as of a date not more than 
16 months prior to the date of use. This section of the proposal was 
based on the requirement in section 10(a)(3) of the Securities Act (15 
U.S.C. 77j(a)(3)) pertaining to the age of information in a prospectus. 
The proposal provided more time for an offering to be completed than 
did former part 16. Former part 16 allowed an offering circular to be 
effective for a period of only six months, although the OCC could 
extend the six month period for two consecutive 90 day periods upon 
request. In the event there was a material change after a prospectus 
has been declared effective, the proposal prohibited use of the 
prospectus until an amendment reflecting the change had been filed with 
and declared effective by the OCC.
    The final rule adopts this section generally as proposed, with 
minor clarifying changes.

Withdrawal or Abandonment (Section 16.19)

    The proposed rule allowed filers to withdraw a registration 
statement and amendments prior to the effective date. It also stated 
that the OCC could determine that a registration statement and 
amendments had been abandoned if they had been on file for nine months 
and not become effective. Documents withdrawn or declared abandoned 
would be so marked but would remain in the OCC files. The final rule 
adopts this section as proposed, with minor clarifying changes.
Current and Periodic Reports (Section 16.20)

    The proposal required banks that had filed registration statements 
declared effective pursuant to part 16 to file with the OCC periodic 
and current reports until the banks were eligible to suspend the filing 
of those reports. This requirement was based on that imposed by section 
15(d) of the Exchange Act (15 U.S.C. 78o(d)) on corporations filing 
Securities Act registration statements with the SEC. The filing of 
periodic and current reports ensures that current information about an 
issuer is available for a period after an offering of securities is 
made. The periodic and current reporting requirements cease the year 
after the registration statement becomes effective, if the issuer is 
not otherwise required to register its securities under the Exchange 
Act.
    The proposal further provided that a bank need not comply with the 
periodic and current reports requirements if the bank was a subsidiary 
of a one-bank holding company and the bank's parent bank holding 
company filed current and periodic reports pursuant to section 13 of 
the Exchange Act.
    Five commenters stated that all banks that are subsidiaries of 
holding companies that have securities registered under the Exchange 
Act should be able to rely on holding company Exchange Act filings and 
bank Call Reports to fulfill the current and periodic report 
requirements.
    The final rule permits banks that are subsidiaries of holding 
companies that have securities registered under the Exchange Act to 
rely on holding company Exchange Act filings and bank Call Reports to 
fulfill the current and periodic reports requirements in specified 
circumstances. A bank need not file current and periodic reports if the 
bank is a subsidiary of a one-bank holding company, the financial 
statements of the bank and the parent bank holding company are 
substantially the same, and the bank's parent bank holding company 
files periodic and current reports pursuant to section 13 of the 
Exchange Act.
    The OCC believes that when these conditions are met, the holding 
company's current and periodic reports will provide the marketplace 
with information equivalent to what would be provided if the holding 
company's subsidiary bank made separate reports. The OCC concluded that 
any broader exception would not be appropriate because the information 
provided is used in markets including both sophisticated and 
unsophisticated investors. In the case of the latter, they may not have 
sufficient financial expertise to evaluate information that differs 
substantially from the type and scope of disclosure that would have 
been contained in current and periodic reports filed by the bank 
itself.
Request for Interpretive Advice or No Objection Letter (Section 16.30)

    The proposal set forth the requirements that a person must meet to 
obtain interpretive advice or a no-objection letter under part 16. 
Although these requirements are not detailed in former part 16, the OCC 
based them on Banking Circular 205, OCC Staff No-Objection Positions, 
which has been in effect since July 26, 1985. The final rule adopts 
this section as proposed, with minor clarifying changes.

Escrow Requirement (Section 16.31)

    The proposal required the use of an independent escrow account if 
the funds received in an offering were to be certified as capital or if 
there was a minimum amount to be sold in an offering. One commenter 
opposed this requirement.
    The final rule modifies the escrow requirements. Section 16.31 of 
the final rule allows the OCC to require any funds received through an 
offer or sale of securities to be held in an independent escrow account 
at an unrelated insured depository institution when the OCC determines 
it is in the best interest of the shareholders. A bank does not have to 
use an independent escrow account unless the OCC has notified the bank 
that an escrow account is necessary. However, the OCC generally expects 
banks to use independent escrow accounts.

Fraudulent Transactions and Unsafe and Unsound Practices (Section 
16.32)

    The proposal prohibited untrue statements of material fact, 
omissions of material fact, and acts or practices that operate as a 
fraud in the offer or sale of a bank security. The language in this 
section of the proposal was substantially similar to the language in 
section 17(a) of the Securities Act (15 U.S.C. 77q). The section 17(a) 
prohibitions apply to offers and sales of bank securities regardless of 
whether the prohibitions are restated in part 16. The OCC believed that 
restating the prohibitions in part 16 furnished warning that the 
prohibitions apply. The proposal further provided that violations of 
the fraudulent transactions section also constitute unsafe or unsound 
practices under 12 U.S.C. 1818. This section of the final rule is 
adopted as proposed.
Conforming Amendments to Part 5

Merger, Consolidation, Purchase and Assumption (Section 5.33(b)(6))

    The proposal included a conforming amendment to 12 CFR 
5.33(b)(6)(ii) which requires that all shareholders in a merger or 
consolidation transaction be adequately informed of all aspects of the 
transaction. The proposal amended Sec. 5.33(b)(6)(ii) to add that a 
bank required to file a registration statement with the OCC may use 
that registration statement to comply with the proxy statement 
requirements set forth in Sec. 5.33(b)(6)(ii). In addition, a bank 
subsidiary of a holding company required to file a registration 
statement with the SEC may use that registration statement to comply 
with OCC proxy statement requirements. The final rule adopts the 
conforming amendment to Sec. 5.33(b)(6)(ii) as proposed, with minor 
technical clarifying changes.

Changes in Equity Capital (Section 5.46) and Subordinated Debt as 
Capital (Section 5.47)

    The proposal did not include any changes to 12 CFR 5.46 and 5.47. 
Former Sec. 5.46 required OCC preliminary approval for a change in 
capital due to a sale of preferred stock. Former Sec. 5.46 further 
specified that changes in equity capital must occur within 12 months of 
seeking preliminary approval. Former Sec. 5.47 required OCC approval 
for subordinated debt that is to be considered part of a bank's capital 
structure; a bank must receive preliminary approval prior to the 
issuance of subordinated debt and the subordinated debt must be issued 
within 12 months of the preliminary approval.
    The OCC requested comment on whether Secs. 5.46 and 5.47 needed to 
be modified in order to enable banks to use the SEC rule on shelf 
registration in Rule 415 (17 CFR 230.415--Delayed or continuous 
offering and sale of securities). Shelf registration permits banks to 
register securities that are to be sold in the future and then to sell 
those securities when the market conditions are most favorable.
    The OCC received four comments on this issue. All of the commenters 
stated that because of the delays caused by the preliminary approval 
requirements in Secs. 5.46 and 5.47, the OCC needed to amend those 
requirements in order for banks to take advantage of SEC Rule 415. The 
OCC agrees and has adopted a final rule that includes changes to 
Secs. 5.46 and 5.47. The changes will enable most banks to use the 
SEC's rule on shelf registration and thereby reduce unnecessary 
regulatory burden.
    As adopted in the final rule, Sec. 5.46 no longer requires a bank 
to obtain preliminary approval of cash sales of preferred stock unless 
the OCC has notified the bank that preliminary approval is necessary. 
After selling preferred stock, a bank still must obtain final approval 
and certification.
    The final rule also changes the approval procedures in Sec. 5.47 
for the issuance of subordinated debt. Under the new procedures, a bank 
need not obtain prior approval to issue subordinated debt unless the 
OCC has notified the bank that prior approval is necessary. A bank that 
has not been notified that it must obtain prior approval to issue 
subordinated debt must notify the OCC after issuing debt that is to be 
counted as tier 2 capital. Subordinated debt will qualify as tier 2 
capital if it meets the requirements set forth in 12 CFR part 3, 
Appendix A section 2(b)(4) and complies with the OCC Guidelines for 
Subordinated Debt Instruments in the Comptroller's Manual for Corporate 
Activities.
    The OCC may solicit comments on Sec. 5.46 and Sec. 5.47 in 
connection with its proposed comprehensive revisions to Part 5 of the 
OCC's regulations.
Regulatory Flexibility Act

    Pursuant to section 605(b) of the Regulatory Flexibility Act, the 
Comptroller of the Currency certifies that this final rule will not 
have a significant economic impact on a substantial number of small 
entities.

Executive Order 12866

    The OCC has determined that this document is not a significant 
regulatory action as defined in Executive Order 12866.

Paperwork Reduction Act

    The collections of information contained in this final regulation 
have been reviewed and approved by the Office of Management and Budget 
in accordance with the requirements of the Paperwork Reduction Act (44 
U.S.C. 3504(h)) under control number 1557-0120. The estimated annual 
burden per respondent varies from two to 100 hours, depending on 
individual circumstances, with an estimated average of 19 hours.
    Comments concerning the accuracy of this burden estimate and 
suggestions for reducing this burden should be directed to the Office 
of the Comptroller of the Currency, Legislative, Regulatory, and 
International Activities Division, 250 E Street, SW, Washington, DC 
20219 and to the Office of Management and Budget, Paperwork Reduction 
Project (1557-0120), Washington, DC 20503.

List of Subjects

12 CFR Part 5

    Administrative practice and procedure, National banks, Reporting 
and recordkeeping requirements, Securities.

12 CFR Part 16

    National banks, Reporting and recordkeeping requirements, 
Securities.

Authority and Issuance

    For the reasons set out in the preamble, chapter I of title 12 of 
the Code of Federal Regulations, part 5 is amended and part 16 is 
revised to read as follows:

PART 5--RULES, POLICIES, AND PROCEDURES FOR CORPORATE ACTIVITIES

    1. The authority citation for part 5 continues to read as follows:

    Authority: 12 U.S.C. 1 et seq.; 12 U.S.C. 93a.

    2. In Sec. 5.33, paragraph (b)(6)(ii) is amended by adding a new 
sentence at the end of the paragraph:


Sec. 5.33  Merger, consolidation, purchase and assumption.

* * * * *
    (b) * * *
    (6) * * *
    (ii) * * * In any transaction where securities are required to be 
registered with the Office under part 16 of this chapter or with the 
Securities and Exchange Commission under the Securities Act of 1933, a 
depository institution may file the registration statement with the 
Office to meet the requirements of this paragraph;
* * * * *
    3. In Sec. 5.46, paragraphs (f)(4) and (g)(1) are revised to read 
as follows:
Sec. 5.46  Changes in equity capital.

* * * * *
    (f) * * *
    (4) Preferred stock. A bank need not submit a letter of intent and 
obtain preliminary approval prior to selling preferred stock for cash 
unless the Office has notified the bank that preliminary approval is 
necessary. Any bank selling preferred stock must submit a letter of 
notification pursuant to paragraph (g)(2) of this section to obtain 
final approval and certification. The Office must review and may 
approve provisions in articles of association concerning preferred 
stock dividends, voting and conversion rights, retirement, and rights 
to exercise control over management. A bank may submit those provisions 
for review and approval with the letter of notification.
* * * * *
    (g) Procedures. (1) A bank must submit to the appropriate District 
office by hand or by mail, return receipt requested, a letter of intent 
to change capital. The bank must receive preliminary approval for any 
change in capital except for a stock dividend, a cash sale of common 
stock, a cash sale of preferred stock where the bank has not been 
notified by the Office that preliminary approval is required, or a 
reduction in par value of common stock that does not change the sum of 
capital and capital surplus. Stock dividends, cash sales of common 
stock, cash sales of preferred stock where the bank has not been 
notified by the Office that preliminary approval is required, or 
reductions in par value of common stock that do not change the sum of 
capital and capital surplus are subject only to the notification 
process described in paragraphs (g)(2) and (g)(3) of this section. For 
other changes in equity capital, the bank must submit a letter of 
intent describing the type and amount of the proposed change, and state 
if the bank is subject to a capital plan with the Office. If the bank 
is subject to a capital plan or if a capital plan is required in 
connection with the proposed change in equity capital, the bank must 
state how the proposed change conforms to the plan. The bank may 
consider its proposed change preliminarily approved 30 days after the 
day on which the Office receives the letter of intent, unless the bank 
is notified that preliminary approval is delayed, conditioned, or 
denied. The bank should submit the letter of intent and receive 
preliminary approval prior to seeking shareholder approval. The bank 
may proceed with an increase in capital after preliminary approval is 
received; however, it may not reduce its capital or make a distribution 
until it has received final Office approval as specified in paragraphs 
(g)(2) and (g)(3) of this section.
* * * * *
    4. Section 5.47 is revised to read as follows:
Sec. 5.47  Subordinated debt as capital.

    (a) Authority. 12 U.S.C. 93a.
    (b) Licensing requirements. Unless the OCC has previously notified 
a national bank that prior approval is required, or unless prior 
approval is required by law, a national bank does not need prior OCC 
approval to issue or prepay subordinated debt, regardless of whether 
the bank intends to count the debt as Tier 2 capital. A national bank 
that is not required to obtain prior approval must notify the OCC after 
issuing subordinated debt that is to be counted as Tier 2 capital.
    (c) Scope. This section sets forth the procedures for OCC review 
and approval of applications to issue or prepay subordinated debt.
    (d) Definitions. (1) Capital plan means a plan describing the means 
and schedule by which a national bank will attain specified capital 
levels or ratios, including a plan to achieve minimum capital ratios 
filed with the appropriate district office under Sec. 3.7 of this 
chapter and a capital restoration plan filed with the OCC under 12 
U.S.C. 1831o and Sec. 6.5 of this chapter.
    (2) Tier 2 capital has the same meaning as set forth in Sec. 3.2(d) 
of this chapter.
    (e) Qualification as regulatory capital. (1) A national bank's 
subordinated debt qualifies as Tier 2 capital if the subordinated debt 
meets the requirements in part 3 of this chapter, appendix A to part 3, 
section 2(b)(4), and complies with the ``OCC Guidelines for 
Subordinated Debt Instruments'' in the Comptroller's Manual for 
Corporate Activities (Manual).
    (2) If the OCC notifies a national bank that it must obtain OCC 
approval before issuing subordinated debt, the subordinated debt will 
not qualify as Tier 2 capital until the bank obtains OCC approval for 
its inclusion in capital.
    (f) Prior approval procedure. (1) Application. A national bank 
required to obtain OCC approval before issuing or prepaying 
subordinated debt must submit an application to the appropriate 
district office. The application must include:
    (i) A description of the terms and amount of the proposed issuance 
or prepayment;
    (ii) A statement of whether the bank is subject to a capital plan 
or required to file a capital plan with the OCC and, if so, how the 
proposed change conforms to the capital plan;
    (iii) A copy of the proposed subordinated note format and note 
agreement; and
    (iv) A statement of whether the debt issue complies with all laws, 
regulations, and the ``OCC Guidelines for Subordinated Debt 
Instruments'' in the Manual.
    (2) Approval. (i) General. The OCC approves, conditionally 
approves, or denies an application to issue or prepay subordinated debt 
on or before the 30th day after the complete application is received by 
the OCC. The application is deemed approved by the OCC as of the 30th 
day after the filing is received by the OCC unless the OCC notifies the 
bank prior to that date that the filing presents significant 
supervisory or compliance concerns, or raises significant legal or 
policy issues.
    (ii) Notification. When the OCC notifies the bank that the OCC 
approves the bank's application to issue or prepay the subordinated 
debt, it also notifies the bank whether the debt qualifies as Tier 2 
capital.
    (iii) Expiration of approval. Approval expires if a national bank 
does not complete the sale of the subordinated debt within one year of 
approval.
    (g) Notice procedure. If a national bank is not required to obtain 
approval before issuing subordinated debt, the bank must notify the 
appropriate district office in writing within ten days after issuing 
subordinated debt that is to be counted as Tier 2 capital. The notice 
must include:
    (1) The terms of the issuance;
    (2) The amount and date of receipt of funds;
    (3) A copy of the final subordinated note format and note 
agreement; and
    (4) A statement that the issue complies with all laws, regulations, 
and the ``OCC Guidelines for Subordinated Debt Instruments'' in the 
Manual.
    (h) Exceptions to rules of general applicability. Sections 5.8, 
5.10 and 5.11 do not apply to the issuance of subordinated debt.
    (i) Issuance of subordinated debt. A national bank must comply with 
the Securities Offering Disclosure Rules in part 16 of this chapter 
when issuing subordinated debt even if the bank is not required to 
obtain prior approval to issue subordinated debt.

PART 16--SECURITIES OFFERING DISCLOSURE RULES

    5. Part 16 is revised to read as follows:

PART 16--SECURITIES OFFERING DISCLOSURE RULES

Sec.
16.1  Authority, purpose, and scope.
16.2  Definitions.
16.3  Registration statement and prospectus requirements.
16.4  Communications not deemed an offer.
16.5  Exemptions.
16.6  Sales of nonconvertible debt.
16.7  Nonpublic offerings.
16.8  Small issues.
16.15  Form and content.
16.16  Effectiveness.
16.17  Filing requirements and inspection of documents.
16.18  Use of prospectus.
16.19  Withdrawal or abandonment.
16.20  Current and periodic reports.
16.30  Request for interpretive advice or no-objection letter.
16.31  Escrow requirement.
16.32  Fraudulent transactions and unsafe and unsound practices.
16.33  Filing fees.

    Authority: 12 U.S.C. 1 et seq. and 93a.


Sec. 16.1  Authority, purpose, and scope.

    (a) Authority. This part is issued under the general authority of 
the national banking laws, 12 U.S.C. 1 et seq., and the OCC's general 
rulemaking authority in 12 U.S.C. 93a.
    (b) Purpose. This part sets forth rules governing the offer and 
sale of securities issued by a bank.
    (c) Scope. This part applies to offers and sales of bank securities 
by issuers, underwriters, and dealers.


Sec. 16.2  Definitions.

    For purposes of this part, the following definitions apply:
    (a) Accredited investor means the same as in Commission Rule 501(a) 
(17 CFR 230.501(a)).
    (b) Bank means an existing national bank, a national bank in 
organization, a bank operating under the Code of Law of the District of 
Columbia, or a federal branch or agency of a foreign bank.
    (c) Commission means the Securities and Exchange Commission. When 
used in the rules, regulations, or forms of the Commission referred to 
in this part, the term ``Commission'' shall be deemed to refer to the 
OCC.
    (d) Dealer means the same as in section 2(12) of the Securities Act 
(15 U.S.C. 77b(12)).
    (e) Exchange Act means the Securities Exchange Act of 1934 (15 
U.S.C. 78a through 78jj).
    (f) Insured depository institution means the same as in section 
3(c)(2) of the Federal Deposit Insurance Act (12 U.S.C. 1813(c)(2)).
    (g) Investment grade means that a security is rated investment 
grade (i.e., in one of the top four rating categories) by each 
nationally recognized statistical rating organization that has rated 
the security.
    (h) Issuer means a bank that issues or proposes to issue any 
security.
    (i) Nonconvertible debt means a general obligation of the bank, 
whether senior or subordinated, that is not convertible into any class 
of common or preferred stock or any derivative thereof.
    (j) OCC means the Office of the Comptroller of the Currency.
    (k) Person means the same as in section 2(2) of the Securities Act 
(15 U.S.C. 77b(2)) and includes a bank.
    (l) Prospectus means an offering document that includes the 
information required by section 10(a) of the Securities Act (15 U.S.C. 
77j(a)).
    (m) Registration statement means a filing that includes the 
prospectus and other information required by section 7 of the 
Securities Act (15 U.S.C. 77g).
    (n) Sale, sell, offer to sell, offer for sale, and offer mean the 
same as in section 2(3) of the Securities Act (15 U.S.C. 77b(3)).
    (o) Securities Act means the Securities Act of 1933 (15 U.S.C. 77a 
through 77aa).
    (p) Security means the same as in section 2(1) of the Securities 
Act (15 U.S.C. 77b(1)).
    (q) Underwriter means the same as in section 2(11) of the 
Securities Act (15 U.S.C. 77b(11)). Commission Rules 137, 140, 141, 
142, and 144 (17 CFR 230.137, 230.140, 230.141, 230.142, and 230.144) 
(which apply to section 2(11) of the Securities Act) apply to this 
part.


Sec. 16.3  Registration statement and prospectus requirements.

    (a) No person shall offer or sell, directly or indirectly, any bank 
issued security unless:
    (1) A registration statement for the security meeting the 
requirements of Sec. 16.15 of this part has been filed with and 
declared effective by the OCC pursuant to this part, and the offer or 
sale is accompanied or preceded by a prospectus that has been filed 
with and declared effective by the OCC as a part of that registration 
statement; or
    (2) An exemption is available under Sec. 16.5 of this part.
    (b) Notwithstanding paragraph (a) of this section, securities of a 
bank may be offered through the use of a preliminary prospectus before 
a registration statement and prospectus for the securities have been 
declared effective by the OCC if:
    (1) A registration statement including the preliminary prospectus 
has been filed with the OCC;
    (2) The preliminary prospectus contains the information required by 
Sec. 16.15 of this part except for the omission of information with 
respect to the offering price, underwriting discounts or commissions, 
discounts or commissions to dealers, amount of proceeds, conversion 
rates, call prices, or other matters dependent upon the offering price; 
and
    (3) A copy of the prospectus as declared effective containing the 
information specified in paragraph (b)(2) of this section is furnished 
to each purchaser prior to or simultaneously with the sale of the 
security.
    (c) Commission Rule 174 (17 CFR 230.174--Delivery of prospectus by 
dealers; Exemptions under section 4(3) of the Act) applies to 
transactions by dealers in bank issued securities.


Sec. 16.4  Communications not deemed an offer.

    (a) The OCC will not deem the following communications to be an 
offer under Sec. 16.3 of this part:
    (1) Prior to the filing of a registration statement, any notice of 
a proposed offering that satisfies the requirements of Commission Rule 
135 (17 CFR 230.135);
    (2) Subsequent to the filing of a registration statement, any 
notice, circular, advertisement, letter, or other communication 
published or transmitted to any person that satisfies the requirements 
of Commission Rule 134 (17 CFR 230.134);
    (3) Subsequent to the filing of a registration statement, any oral 
offer of securities covered by that registration statement;
    (4) Subsequent to the filing of a registration statement, any 
summary prospectus that is filed as a part of that registration 
statement and satisfies the requirements of Commission Rule 431 (17 CFR 
230.431);
    (5) Subsequent to the effective date of a registration statement, 
any written communication if it is proved that each recipient of the 
communication simultaneously or previously received a written 
prospectus meeting the requirements of section 10(a) of the Securities 
Act (15 U.S.C. 77j(a)) and Sec. 16.15 of this part that was filed with 
and declared effective by the OCC;
    (6) A notice of a proposed unregistered offering that satisfies the 
requirements of Commission Rule 135c (17 CFR 230.135c); and
    (7) A communication that satisfies the requirements of Commission 
Rule 138 or 139 (17 CFR 230.138 or 230.139).
    (b) The OCC may request that communications not deemed an offer 
under paragraph (a) of this section be submitted to the OCC.
    (c) The OCC may prohibit the publication or distribution of any 
communication not deemed an offer under paragraph (a) of this section 
if necessary to protect the investing public.


Sec. 16.5  Exemptions.

    The registration statement and prospectus requirements of Sec. 16.3 
of this part do not apply to an offer or sale of bank securities:
    (a) If the securities are exempt from registration under section 3 
of the Securities Act (15 U.S.C. 77c), but only by reason of an 
exemption other than section 3(a)(2) (exemption for bank securities) 
and section 3(a)(11) (exemption for intrastate offerings) of the 
Securities Act. Commission Rules 149 and 150 (17 CFR 230.149 and 
230.150) (which apply to section 3(a)(9) of the Securities Act) apply 
to this part;
    (b) In a transaction exempt from registration under section 4 of 
the Securities Act (15 U.S.C. 77d). Commission Rules 152 and 152a (17 
CFR 230.152 and 230.152a) (which apply to sections 4(2) and 4(1) of the 
Securities Act) apply to this part;
    (c) In a transaction that satisfies the requirements of Sec. 16.7 
of this part;
    (d) In a transaction that satisfies the requirements of Sec. 16.8 
of this part;
    (e) In a transaction that satisfies the requirements of Commission 
Rule 144, 144A, 145, or 236 (17 CFR 230.144, 230.144A, 230.145, or 
230.236);
    (f) In a transaction that satisfies the requirements of Commission 
Rules 701, 702T, and 703T (17 CFR 230.701, 230.702T, and 230.703T); or
    (g) In a transaction that is an offer or sale occurring outside the 
United States under Commission Regulation S (17 CFR part 230, 
Regulation S--Rules Governing Offers and Sales Made Outside the United 
States Without Registration Under the Securities Act of 1933).


Sec. 16.6  Sales of nonconvertible debt.

    (a) The OCC will deem offers or sales of bank issued nonconvertible 
debt to be in compliance with Secs. 16.3, 16.15 (a) and (b), and 16.20 
of this part if all of the following requirements are met:
    (1) The bank issuing the debt has securities registered under the 
Exchange Act or is a subsidiary of a bank holding company that has 
securities registered under the Exchange Act;
    (2) The debt is offered and sold only to accredited investors;
    (3) The debt is sold in minimum denominations of $250,000 and each 
note or debenture is legended to provide that it cannot be exchanged 
for notes or debentures of the bank in smaller denominations;
    (4) The debt is rated investment grade;
    (5) Prior to or simultaneously with the sale of the debt, each 
purchaser receives an offering document that contains a description of 
the terms of the debt, the use of proceeds, and method of distribution, 
and incorporates the bank's latest Consolidated Reports of Condition 
and Income (Call Report) and the bank's or its bank holding company's 
Forms 10-K, 10-Q (or 10-KSB, 10-QSB), and 8-K (17 CFR part 249) filed 
under the Exchange Act; and
    (6) The offering document and any amendments are filed with the OCC 
no later than the fifth business day after they are first used.
    (b) Offers or sales of nonconvertible debt issued by a federal 
branch or agency of a foreign bank need not need comply with the 
requirements of paragraph (a)(1) of this section, if the federal branch 
or agency provides the OCC the information specified in Commission Rule 
12g3-2(b) (17 CFR 240.12g3-2(b)) and provides purchasers the 
information specified in Commission Rule 144A(d)(4)(i) (17 CFR 
230.144A(d)(4)(i)). A federal branch or agency that provides the OCC 
the information specified in Commission Rule 12g3-2(b) need not 
incorporate that information by reference into the offering document 
provided to purchasers pursuant to paragraph (a)(5) of this section. 
However, the federal branch or agency must make that information 
available to the potential purchasers upon request. The OCC will make 
the information available for public inspection.


Sec. 16.7  Nonpublic offerings.

    (a) The OCC will deem offers and sales of bank issued securities 
that meet all of the following requirements to be exempt from the 
registration and prospectus requirements of Sec. 16.3 pursuant to 
Sec. 16.5(c) of this part:
    (1) All the securities are offered and sold in a transaction that 
satisfies the requirements of Commission Regulation D (17 CFR part 230, 
Regulation D--Rules Governing the Limited Offer and Sale of Securities 
Without Registration Under the Securities Act of 1933);
    (2) Each purchaser who is not an accredited investor either alone 
or with its purchaser representative(s) has the knowledge and 
experience in financial and business matters that it is capable of 
evaluating the merits and risks of the prospective investment, or the 
issuer reasonably believes immediately prior to making any sale that 
the purchaser comes within this description; and
    (3) A notice that meets the requirements of Commission Rule 503 (17 
CFR 230.503) is filed with the OCC.
    (b) All subsequent sales of bank issued securities subject to the 
limitations on resale of Commission Regulation D (17 CFR part 230, 
Regulation D--Rules Governing the Limited Offer and Sale of Securities 
Without Registration Under the Securities Act of 1933) must be made 
pursuant to Commission Rule 144 (17 CFR 230.144), Commission Rule 144A 
(17 CFR 230.144A), another exemption from registration under the 
Securities Act referenced in Sec. 16.5 of this part, or in accordance 
with the registration and prospectus requirements of Sec. 16.3 of this 
part.
    (c) No offer or sale of bank issued securities shall be made in 
reliance on Commission Regulation D (17 CFR part 230, Regulation D--
Rules Governing the Limited Offer and Sale of Securities Without 
Registration Under the Securities Act of 1933) without compliance with 
paragraphs (a)(1) and (a)(2) of this section.


Sec. 16.8  Small issues.

    (a) The OCC will deem offers and sales of bank issued securities 
that satisfy the requirements of Commission Regulation A (17 CFR part 
230, Regulation A--Conditional Small Issues Exemption) to be exempt 
from the registration and prospectus requirements of Sec. 16.3 pursuant 
to Sec. 16.5(d) of this part.
    (b) A filer should consult the Commission's Securities Act Industry 
Guide 3--Statistical Disclosure by Bank Holding Companies (17 CFR 
229.801(c) and 231) and requirement 7 (Loans) of Rule 9-03 of 
Commission Regulation S-X (17 CFR 230.9-03) for guidance on appropriate 
disclosures when preparing offering documents to be filed with the OCC 
pursuant to Regulation A.


Sec. 16.15  Form and content.

    (a) Any registration statement filed pursuant to this part must be 
on the form for registration (17 CFR part 239) that the bank would be 
eligible to use were it required to register the securities under the 
Securities Act and must meet the requirements of the Commission 
regulations referred to in the applicable form for registration. A 
filer should consult the Commission's Securities Act Industry Guide 3--
Statistical Disclosure by Bank Holding Companies (17 CFR 229.801(c) and 
231) for guidance on appropriate disclosures when preparing 
registration statements.
    (b) Any registration statement or amendment filed pursuant to this 
part must comply with the requirements of Commission Regulation C (17 
CFR part 230, Regulation C--Registration), except to the extent those 
requirements conflict with specific requirements of this part.
    (c) In addition to the information expressly required to be 
included in the registration statement by paragraphs (a) and (b) of 
this section, the registration statement must include any additional 
material information that is necessary to make the required statements, 
in light of the circumstances under which they are made, not 
misleading.
    (d) Notwithstanding paragraph (a) of this section, the registration 
statement for securities issued by a bank that is not in compliance 
with the regulatory capital requirements set forth in part 3 of this 
chapter must be on the Form S-1 (17 CFR part 239) registration 
statement under the Securities Act.


Sec. 16.16  Effectiveness.

    (a) Registration statements and amendments filed with the OCC 
pursuant to this part will become effective in accordance with sections 
8(a) and (c) of the Securities Act (15 U.S.C. 77h(a) and (c)) and 
Commission Regulation C (17 CFR part 230, Regulation C--Registration).
    (b) The OCC will deem registration statements and amendments that 
become effective pursuant to paragraph (a) of this section to be 
declared effective. If the OCC deems a registration statement to be 
declared effective, the OCC will also deem the prospectus that was 
filed as a part of that registration statement to be declared 
effective.


Sec. 16.17  Filing requirements and inspection of documents.

    (a) Except as provided in paragraph (b) of this section, all 
registration statements, offering documents, amendments, notices, or 
other documents must be filed with the Securities, Investments, and 
Fiduciary Practices Division, Office of the Comptroller of the 
Currency, 250 E Street, SW, Washington, DC 20219.
    (b) All registration statements, offering documents, amendments, 
notices, or other documents relating to a bank in organization must be 
filed with the appropriate District office of the OCC.
    (c) Where this part refers to a section of the Securities Act or 
the Exchange Act or a Commission rule that requires the filing of a 
notice or other document with the Commission, that notice or other 
document must be filed with the OCC.
    (d) Unless otherwise requested by the OCC, any filing under this 
part must include four copies of any document filed. Material may be 
filed by delivery to the OCC through use of the mails or otherwise. The 
date on which documents are actually received by the OCC will be the 
date of filing of those documents, if the person filing the documents 
has complied with all requirements regarding the filing, including the 
submission of any fee required under Sec. 16.33 of this part.
    (e) Any filing of amendments or revisions must include at least 
four copies, two of which are marked to indicate clearly and precisely, 
by underlining or in some other appropriate manner, the changes made.
    (f) The OCC will make available for public inspection copies of the 
registration statements, offering documents, amendments, exhibits, 
notices or reports filed pursuant to this part at the address 
identified in Sec. 4.17(b) of this chapter.


Sec. 16.18  Use of prospectus.

    (a) No person shall use a prospectus or amendment declared 
effective by the OCC more than nine months after the effective date 
unless the information contained in the prospectus or amendment is as 
of a date not more than 16 months prior to the date of use.
    (b) If any event arises, or change in fact occurs, after the 
effective date and that event or change in fact, individually or in the 
aggregate, results in the prospectus containing any untrue statement of 
material fact, or omitting to state a material fact necessary in order 
to make statements made in the prospectus not misleading under the 
circumstances, then no person shall use the prospectus that has been 
declared effective under this part until an amendment reflecting the 
event or change has been filed with and declared effective by the OCC.
Sec. 16.19  Withdrawal or abandonment.

    (a) Any registration statement, amendment, or exhibit may be 
withdrawn prior to the effective date. A withdrawal must be signed and 
state the grounds upon which it is made. The OCC will not remove any 
withdrawn document from its files, but will mark the document Withdrawn 
upon the request of the registrant on (date).
    (b) When a registration statement or amendment has been on file 
with the OCC for a period of nine months and has not become effective, 
the OCC may, in its discretion, determine whether the filing has been 
abandoned. Before determining that a filing has been abandoned, the OCC 
will notify the filer that the filing is out of date and must either be 
amended to comply with the applicable requirements of this part or be 
withdrawn within 30 days after the date of notice. When a filing is 
abandoned, the OCC will not remove the filing from its files but will 
mark the filing Declared abandoned by the OCC on (date).


Sec. 16.20  Current and periodic reports.

    (a) Each bank that files a registration statement that has been 
declared effective pursuant to this part must file with the OCC, after 
the effective date, the periodic and current reports required by 
section 13 of the Exchange Act (15 U.S.C. 78m), as if the securities 
covered by the registration statement were securities registered 
pursuant to section 12 of the Exchange Act (15 U.S.C. 78l). Banks must 
file periodic and current reports in accordance with Commission 
Regulation 15D (17 CFR 240.15d-1 up to but not including 240.15Aa-1).
    (b) Suspension of the duty to file periodic and current reports 
under this section will be in accordance with section 15(d) of the 
Exchange Act (15 U.S.C. 78o(d)), Commission Regulation 15D (17 CFR 
240.15d-1 up to but not including 240.15Aa-1), and Commission Rule 12h-
3 (17 CFR 240.12h-3).
    (c) Paragraph (a) of this section does not apply if the bank is a 
subsidiary of a one-bank holding company, the financial statements of 
the bank and the parent bank holding company are substantially the 
same, and the bank's parent bank holding company files current and 
periodic reports pursuant to section 13 of the Exchange Act (15 U.S.C. 
78m).
    (d) Paragraph (a) of this section does not apply if the bank files 
the registration statement in connection with a merger, consolidation, 
or acquisition of assets subject to Sec. 5.33(b)(6)(ii) of this 
chapter.
Sec. 16.30  Request for interpretive advice or no-objection letter.

    Any person requesting interpretive advice or a no-objection letter 
from the OCC with respect to any provision of this part shall:
    (a) File a copy of the request, including any supporting 
attachments with the Securities, Investments, and Fiduciary Practices 
Division at the address listed in Sec. 16.17;
    (b) Identify or describe the provisions of this part to which the 
request relates, the participants in the proposed transaction, and the 
reasons for the request; and
    (c) Include with the request a legal opinion as to each legal issue 
raised and an accounting opinion as to each accounting issue raised.


Sec. 16.31  Escrow requirement.

    The OCC may require that any funds received in connection with an 
offer or sale of securities be held in an independent escrow account at 
an unrelated insured depository institution when the use of an escrow 
account is in the best interests of shareholders.


Sec. 16.32  Fraudulent transactions and unsafe and unsound practices.

    (a) No person in the offer or sale of bank securities shall 
directly or indirectly:
    (1) Employ any device, scheme or artifice to defraud;
    (2) Make any untrue statement of a material fact or omit to state a 
material fact necessary in order to make the statements made, in light 
of the circumstances under which they were made, not misleading; or
    (3) Engage in any act, practice, or course of business which 
operates as a fraud or deceit upon any person, in connection with the 
purchase or sale of any security of a bank.
    (b) Nothing in this section limits the applicability of section 17 
of the Securities Act (15 U.S.C. 77q) or section 10(b) of the Exchange 
Act (15 U.S.C. 78j) or Rule 10b-5 promulgated thereunder (17 CFR 
240.10b-5).
    (c) Any violation of this section also constitutes an unsafe or 
unsound practice under 12 U.S.C. 1818.
    (d) Commission Rule 175 (17 CFR 230.175--Liability for certain 
statements by issuers) applies to this part.


Sec. 16.33  Filing fees.

    (a) Filing fees must accompany certain filings made under the 
provisions of this part before the OCC will accept those filings. The 
applicable fee schedule is provided in the Notice of Comptroller of the 
Currency Fees published pursuant to Sec. 8.8 of this chapter.
    (b) Filing fees must be paid by check payable to the Comptroller of 
the Currency.

    Dated: October 27, 1994.
Eugene A. Ludwig,
Comptroller of the Currency.
[FR Doc. 94-27082 Filed 11-1-94; 8:45 am]
BILLING CODE 4810-33-P