[Federal Register Volume 70, Number 40 (Wednesday, March 2, 2005)]
[Rules and Regulations]
[Pages 10021-10023]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-4017]



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  Federal Register / Vol. 70, No. 40 / Wednesday, March 2, 2005 / Rules 
and Regulations  

[[Page 10021]]



DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 509

[No. 2005-08]
RIN 1550-AB96


Special Rules for Adjudicatory Proceedings for Certain Holding 
Companies

AGENCY: Office of Thrift Supervision, Treasury.

ACTION: Interim final rule.

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SUMMARY: The Office of Thrift Supervision (OTS) is adding a new subpart 
to its Rules of Practice and Procedure in Adjudicatory Proceedings to 
provide for expedited processing of certain actions to determine if a 
company is exercising a controlling influence over the management or 
policies of a savings association or savings and loan holding company 
(collectively, savings association) for certain purposes under section 
10 of the Home Owners' Loan Act, 12 U.S.C. 1467a (HOLA). The new 
proceedings will be used only to determine if a company has acquired a 
controlling influence over the management or policies of a savings 
association for purposes of those subsections of section 10 other than 
subsections (c), (d), (f), (h)(2), (m), (n), (q) and (s). Under the new 
procedure, a company that holds no more than ten percent of the stock 
of a savings association may be found to control that savings 
association, thereby becoming an OTS-regulated entity.

DATES: This rule is effective on April 1, 2005. Comments must be 
received by May 2, 2005.

ADDRESSES: You may submit comments, identified by No. 2005-08, by any 
of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     E-mail address: [email protected]. Please 
include No. 2005-08 in the subject line of the message and include your 
name and telephone number in the message.
     Fax: (202) 906-6518.
     Mail: Regulation Comments, Chief Counsel's Office, Office 
of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552, 
Attention: No. 2005-08.
     Hand Delivery/Courier: Guard's Desk, East Lobby Entrance, 
1700 G Street, NW., from 9 a.m. to 4 p.m. on business days, Attention: 
Regulation Comments, Chief Counsel's Office, Attention: No. 2005-08.
    Instructions: All submissions received must include the agency name 
and docket number or Regulatory Information Number (RIN) for this 
rulemaking. All comments received will be posted without change to the 
OTS Internet Site at http://www.ots.treas.gov/pagehtml.cfm?catNumber=67&an=1, including any personal information 
provided.
    Docket: For access to the docket to read background documents or 
comments received, go to http://www.ots.treas.gov/pagehtml.cfm?catNumber=67&an=1. In addition, you may inspect comments 
at the Public Reading Room, 1700 G Street, NW., Washington, DC 20552, 
by appointment. To make an appointment for access, call (202) 906-5922, 
send an e-mail to public.info@ots.treas.gov">public.info@ots.treas.gov, or send a facsimile 
transmission to (202) 906-7755. (Prior notice identifying the materials 
you will be requesting will assist us in serving you.) We schedule 
appointments on business days between 10 a.m. and 4 p.m. In most cases, 
appointments will be available the next business day following the date 
we receive a request.

FOR FURTHER INFORMATION CONTACT: Donna M. Deale, Assistant Managing 
Director, Examinations and Supervision Policy, (202) 906-7488; and 
Aaron B. Kahn, Special Counsel, Business Transactions Division, (202) 
906-6263, Office of Thrift Supervision, 1700 G Street, NW., Washington, 
DC 20552.

SUPPLEMENTARY INFORMATION: 

I. Interim Final Rule

    OTS is adding a new subpart to its Rules of Practice and Procedure 
in Adjudicatory Proceedings to provide for expedited processing of 
certain actions to determine if a company is exercising a controlling 
influence over the management or policies of a savings association. OTS 
may commence an adjudicatory proceeding under its existing rules to 
determine if a company has obtained a controlling influence over the 
management or policies of a savings association. However, the present 
regulation does not differentiate between proceedings that may lead to 
a finding that an acquiror has obtained control for all purposes under 
section 10 of the Home Owners' Loan Act (HOLA), 12 U.S.C. 1467a, and 
proceedings that may lead to a conclusion that a company has obtained 
control for only certain provisions of section 10. The new proceedings 
will be used only to determine if a company has acquired a controlling 
influence over the management or policies of a savings association for 
purposes of those subsections of section 10 other than subsections (c), 
(d), (f), (h)(2), (m), (n), (q) and (s).\1\
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    \1\ The procedure would not be applicable to bank holding 
companies that are subject to the Bank Holding Company Act of 1956. 
See 12 U.S.C. 1467a(t). However, companies that are not bank holding 
companies but own or control foreign banks could be subject to the 
proceedings. Thus, for example, a domestic company with European 
financial activities could be subject to the proceedings.
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    Under the new procedure, a company that holds no more than ten 
percent of the stock of a savings association may be found to control 
that savings association, thereby becoming an OTS-regulated entity. 
However, the company found to be in control generally would not become 
subject to certain provisions of HOLA section 10 that are more 
appropriately applied when the company controls a greater percentage of 
a savings association's stock, such as transactions with affiliates 
provisions or activities limitations.\2\ The OTS Holding Company 
Handbook describes OTS's regulatory approach regarding a company found 
to exercise a controlling influence over the management or

[[Page 10022]]

policies of a savings association under this provision.\3\
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    \2\ Once a company becomes regulated by OTS the agency could, if 
warranted, issue such orders to the company as necessary or 
appropriate to carry out the purposes of HOLA section 10. See 12 
U.S.C. 1467a(g).
    \3\ See e.g., OTS Holding Company Handbook, section 940.
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    The new procedure will be applied only where OTS has reason to 
believe that a company has acquired control of a savings association 
through ownership of at least one percent but not more than ten percent 
of the voting stock of such savings association.\4\ OTS believes that 
some large companies that engage, directly or indirectly, in insurance, 
securities, or banking activities may acquire small stakes (10 percent 
or less of the voting shares) in individual savings associations. While 
such ownership does not necessarily mean that the acquiring company has 
obtained control of the savings association, the relative size of the 
companies involved and the fact that they operate in related industries 
may result in the acquiring company obtaining a controlling influence 
over the management or policies of the savings association.
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    \4\ OTS anticipates that, in most cases, its initial belief will 
be engendered by the company informing OTS of its stock holdings. 
However, OTS recognizes the possibility that other circumstances may 
give rise to OTS's preliminary view that a company has obtained a 
controlling influence over the management or policies of a savings 
association.
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    The new procedure is designed to provide an opportunity to 
determine whether the type of company identified above has obtained a 
controlling influence over the management or policies of a savings 
association in an expedited fashion where, if the facts are not in 
dispute or all the evidence is documentary, the agency will commence 
proceedings, preside at the hearing, and enter the final decision.\5\ 
Thus, the new procedure reduces regulatory burdens by dispensing with 
unnecessary extended proceedings requiring an Administrative Law Judge 
and a recommended decision.
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    \5\ OTS anticipates that either the Director of OTS or a senior 
OTS official, acting with delegated authority, will constitute the 
``agency'' for purposes of such proceedings.
---------------------------------------------------------------------------

    The proceedings will be commenced by OTS exercising its discretion 
to issue a notice to the company. The notice will contain a statement 
setting forth why OTS believes the company is exercising a controlling 
influence over the management or policies of the savings association. 
Thereafter, the company may consent to the allegations in the notice 
either by written consent or by choosing not to respond to the notice. 
If the company answers the notice and denies the allegations, an 
evidentiary hearing will be held unless OTS determines to withdraw the 
notice. If either party seeks discovery or to present oral testimony 
the expedited procedure contained in this new subpart will be 
terminated and the procedures presently in the regulations will be 
employed until a final decision is reached.
    Because the new procedures do not affect any substantive rights, 
impose any new burdens, or require any new action by any regulated 
entity, OTS is issuing these regulations as interim final regulations. 
However, OTS is seeking comments on all aspects of these regulations.

II. Regulatory Analysis

A. Administrative Procedure Act

    Section 553 of the Administrative Procedure Act exempts rules of 
agency organization, procedure, and practice from notice and comment 
procedures. 5 U.S.C. 553. OTS finds that prior notice and public 
comment are not required to the extent that this rule modifies current 
OTS rules and procedures for adjudicatory proceedings under section 
10(a)(2)(D) of the HOLA, 12 U.S.C. 1467a(a)(2)(D), to determine control 
of savings associations. The rule revises OTS rules for adjudicatory 
proceedings to provide more streamlined procedures for OTS to find a 
company in control of a savings association under certain limited 
circumstances. OTS finds good cause for issuing these rule changes as 
an interim final rule. Accordingly, OTS finds that prior notice and 
public comment on these rule changes are impractical, unnecessary, and 
contrary to the public interest.

B. Plain Language Requirement

    Section 722 of the Gramm-Leach-Bliley Act of 1999 requires federal 
banking agencies to use ``plain language'' in all proposed and final 
rules published after January 1, 2000. We invite your comments on how 
to make this rule easier to understand. For example:
    (1) Have we organized the material to suit your needs?
    (2) Are the requirements in the rule clearly stated?
    (3) Does the rule contain technical language or jargon that isn't 
clear?
    (4) Would a different format (grouping and order of sections, use 
of headings, paragraphing) make the rule easier to understand?
    (5) Would more (but shorter) sections be better?
    (6) What else could we do to make the rule easier to understand?

C. Paperwork Reduction Act

    OTS has determined that this interim final rule does not involve a 
collection of information pursuant to the provisions of the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3501 et seq.).

D. Regulatory Flexibility Act

    Pursuant to section 605(b) of the Regulatory Flexibility Act, OTS 
certifies that this interim final rule will not have a significant 
economic impact on a substantial number of small entities. The rule 
amends OTS regulations regarding adjudicatory proceedings to provide 
more streamlined procedures for OTS to find a company in control of a 
savings association under certain limited circumstances. These changes 
should not have a significant impact on small institutions. 
Accordingly, OTS has determined that regulatory flexibility analysis is 
not required.

E. Executive Order 12866

    The Director of OTS has determined that this interim final rule 
does not constitute a ``significant regulatory action'' for purposes of 
Executive Order 12866.

F. Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L. 
104-4 (Unfunded Mandates Act) requires an agency to prepare a budgetary 
impact statement before promulgating a rule that includes a federal 
mandate that may result in expenditure by State, local, and tribal 
governments, in the aggregate, or by the private sector, of $100 
million or more in any one year. If a budgetary impact statement is 
required, section 205 of the Unfunded Mandates Act also requires an 
agency to identify and consider a reasonable number of regulatory 
alternatives before promulgating a rule. The interim final rule revises 
OTS rules for adjudicatory proceedings to provide more streamlined 
procedures for OTS to find a company in control of a savings 
association under certain limited circumstances. Accordingly, OTS has 
determined that this rule will not result in expenditures by State, 
local, and tribal governments, or by the private sector, of $100 
million or more and that a budgetary impact statement is not required.

List of Subjects in 12 CFR Part 509

    Administrative practice and procedure, Penalties.

Authority and Issuance

0
For the reasons outlined in the preamble, the Office of Thrift 
Supervision amends chapter V of title 12 of the Code of Federal 
Regulations, as set forth below:

[[Page 10023]]

PART 509--RULES OF PRACTICE AND PROCEDURE IN ADJUDICATORY 
PROCEEDINGS

0
1. The authority citation for part 509 continues to read as follows:

    Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 1464, 1467, 1467a, 
1468, 1817(j), 1818, 3349, 4717; 15 U.S.C. 78(l), 78o-5, 78u-2; 28 
U.S.C. 2461 note; 31 U.S.C. 5321; 42 U.S.C. 4012a.


0
2. Revise Sec.  509.100(a) of subpart B to read as follows:

Subpart B--Local Rules


Sec.  509.100  Scope.

* * * * *
    (a) Proceedings under section 10(a)(2)(D) of the HOLA (12 U.S.C. 
1467a(a)(2)(D)) to determine whether any person directly or indirectly 
exercises a controlling influence over the management or policies of a 
savings association or any other company, except to the extent the 
Director exercises his or her discretion to commence a proceeding of 
the kind identified in subpart C of this part;
* * * * *

0
3. Amend part 509 by adding a new Subpart C to read as follows:

Subpart C--Special Rules

Sec.
509.200 Scope.
509.201 Definitions.
509.202 Commencement of proceedings and contents of notice.
509.203 Answer, consequences of failure to answer, and consent.
509.204 Hearing Procedure.


Sec.  509.200  Scope.

    The rules and procedures in subpart C of this part and those rules 
and procedures in subparts A and B of this part that are identified in 
subpart C of this part shall apply to any proceedings under section 
10(a)(2)(D) of the HOLA (12 U.S.C. 1467a(a)(2)(D)) to determine for 
purposes of section 10 of the HOLA, other than subsections (c), (d), 
(f), (h)(2), (m), (n), (q) and (s), whether any company that owns at 
least one percent but no more than 10 percent of the outstanding shares 
of a savings association or savings and loan holding company directly 
or indirectly exercises a controlling influence over the management or 
policies of such savings association or savings and loan holding 
company.


Sec.  509.201  Definitions.

    The definitions contained in Sec.  509.3 of this part shall apply 
to this subpart.


Sec.  509.202  Commencement of proceedings and contents of notice.

    (a) Commencement of proceedings. The Director commences a 
proceeding by issuing a notice and having it served on the respondent 
in the manner provided for service by the Director in Sec.  509.11 of 
this part;
    (b) Contents of notice. The notice must set forth: (1) The legal 
authority for the proceeding and for the Office's jurisdiction over the 
proceeding;
    (2) A statement of the matters of fact or law showing the Office is 
entitled to issue an Order finding, for purposes of section 10 of the 
HOLA, other than subsections (c), (d), (f), (h)(2), (m), (n), (q) and 
(s), the respondent to be directly or indirectly exercising a 
controlling influence over the management or policies of a savings 
association or savings and loan holding company;
    (3) A proposed Order;
    (4) A statement that the respondent must file an answer and, if it 
so desires, request a hearing within 20 days of service of the notice; 
and
    (5) The time and place of the hearing if one is properly requested 
by the respondent.


Sec.  509.203  Answer, consequences of failure to answer, and consent.

    (a) Content of answer. (1) An answer must specifically respond to 
each paragraph or allegation of fact contained in the notice and must 
admit, deny, or state that the party lacks sufficient information to 
admit or deny each allegation of fact. A statement of lack of 
information has the effect of a denial. Denials must fairly meet the 
substance of each allegation of fact denied; general denials are not 
permitted. When a respondent denies part of an allegation, that part 
must be denied and the remainder specifically admitted. Any allegation 
of fact in the notice which is not denied in the answer must be deemed 
admitted for purposes of the proceeding. A respondent is not required 
to respond to the portion of a notice that constitutes a prayer for 
relief or proposed Order.
    (2) If a respondent does not contest the allegations in a notice, 
the respondent may file an answer that contains only a statement that 
the respondent consents to the entry of the proposed Order. At any time 
thereafter, the proposed Order may be issued as a final Order.
    (b) Default. Failure of a respondent to file an answer within the 
time provided constitutes a waiver of its right to appear and contest 
the allegations in the notice. If a timely answer is not filed, a 
default Order may be entered. A respondent that believes that there was 
good cause for it to not file an answer within the time allowed may 
request that the Office exercise its discretion to vacate such a 
default Order. A default Order based upon a respondent's failure to 
answer is deemed to be a final Order issued upon consent.


Sec.  509.204  Hearing Procedure.

    (a) (1) The Director shall preside at the hearing and enter the 
final decision of the agency, provided that no party seeks discovery or 
proffers any oral testimony;
    (2) Respondents shall provide two copies of any pleadings and other 
filings to the Office of the Chief Counsel, Business Transactions 
Division. The Office of the Chief Counsel, Business Transactions 
Division shall serve in the manner provided in Sec.  509.11 of this 
part, each respondent separately represented with a copy of any 
pleading or other filing made by the Office.
    (b) If any party seeks discovery or proffers any oral testimony, 
the procedures in subparts A and B of this part shall apply from that 
time until the conclusion of the proceeding.

    Dated: February 24, 2005.

    By the Office of Thrift Supervision.
James E. Gilleran,
Director.
[FR Doc. 05-4017 Filed 3-1-05; 8:45 am]
BILLING CODE 6720-01-P