[Federal Register Volume 70, Number 147 (Tuesday, August 2, 2005)]
[Rules and Regulations]
[Pages 44270-44273]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-15107]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 335

RIN 3064-AC88


Securities of Nonmember Insured Banks

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Final rule.

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SUMMARY: The FDIC is adopting a final rule amending part 335 of its 
regulations with one nonsubstantive change from the interim final rule 
published on March 31, 2005, in the Federal Register (see 70 FR 16398). 
The final rule adopts amendments to the FDIC's securities disclosure 
regulations applicable to state nonmember banks with securities 
required to be registered under section 12 of the Securities Exchange 
Act of 1934 (Exchange Act). The final rule reflects amendments to the 
Securities Exchange Act of 1934 made by the Sarbanes-Oxley Act of 2002 
(Sarbanes-Oxley Act), and accommodates certain operational changes 
within the FDIC. The rule also incorporates through cross reference 
changes in regulations adopted by the Securities Exchange and 
Commission (SEC) into the provisions of the FDIC's securities 
regulations. Incorporation by reference will assure that the FDIC's 
regulations remain substantially similar to the SEC's regulations, as 
required by law.

DATES: These amendments are effective on August 2, 2005.

FOR FURTHER INFORMATION CONTACT: Dennis Chapman, Senior Staff 
Accountant, Division of Supervision and Consumer Protection, (202) 898-
8922; Mary Frank, Senior Financial Analyst, Division of Supervision and

[[Page 44271]]

Consumer Protection, (202) 898-8903; or Mark G. Flanigan, Counsel, 
Legal Division, (202) 898-7426, Federal Deposit Insurance Corporation, 
550 17th Street, NW., Washington, DC 20429.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 12(i) of the Exchange Act, as amended (15 U.S.C. 78l(i)), 
authorizes the FDIC to issue regulations applicable to the securities 
of state nonmember banks that are substantially similar to those of the 
SEC with respect to its powers, functions, and duties to administer and 
enforce sections 10A(m) (standards relating to audit committees), 12 
(securities registration), 13 (periodic reporting), 14(a) (proxies and 
proxy solicitation), 14(c) (information statements), 14(d) (tender 
offers), 14(f) (arrangements for changes in directors), and 16 
(beneficial ownership and reporting) of the Exchange Act, and sections 
302 (corporate responsibility for financial reports), 303 (improper 
influence on conduct of audits), 304 (forfeiture of certain bonuses and 
profits), 306 (insider trades during blackout periods), 401(b) 
(disclosure of pro forma financial information), 404 (management 
assessment of internal controls), 406 (code of ethics for senior 
financial officers), and 407 (disclosure of audit committee financial 
expert) of the Sarbanes-Oxley Act (codified at 15 U.S.C. 7241, 7242, 
7243, 7244, 7261, 7262, 7264, and 7265), in regard to the depository 
institutions for which it is the primary Federal regulator. These 
regulations must be substantially similar to the regulations of the SEC 
under the listed sections of the Exchange Act and the Sarbanes-Oxley 
Act, unless the FDIC publishes its reasons for deviating from the SEC's 
rules. The amendments to this part incorporate amendments to the 
Exchange Act, and changes to the SEC regulations that the FDIC is 
required to administer and enforce with respect to registered state 
nonmember banks, including the adoption of Regulation FD (Fair 
Disclosure).
    In addition, certain changes to delegations of authority in part 
335 result from FDIC's internal merger of the former Division of 
Supervision and the former Division of Compliance and Consumer Affairs 
into the Division of Supervision and Consumer Protection. The 
reorganization also created area offices in Memphis, Tennessee, and 
Boston, Massachusetts, in place of regional offices in those cities, 
and title changes for officials in the FDIC headquarters and other 
offices.

II. Interim Final Rule and Request for Comments

    On March 31, 2005, the FDIC published in the Federal Register (70 
FR 16398) an interim final rule which reflected amendments to the 
Exchange Act made by the Sarbanes-Oxley Act, and incorporated by cross 
reference changes in regulations adopted by the SEC into the provisions 
of the FDIC's securities regulations. The interim final rule also made 
certain technical amendments to part 335. The FDIC requested comments 
on all aspects of the rule changes, with comments due by May 31, 2005, 
the date the interim final rule took effect. Commenters were asked to 
support any suggestions that the FDIC modify the requirements of the 
SEC rules, regulations and forms for state nonmember banks by 
demonstrating how such modification would satisfy the requirements of 
section 12(i) of the Exchange Act. The FDIC also welcomed comments on 
the general organization of part 335.
    One comment letter was filed on the interim final rule. The 
commenter, a banker, raised two separate comments regarding provisions 
of the interim final rule. The FDIC considered each point.
    The first comment is that the FDIC's cross reference in section 
335.121 (Listing standards related to audit committees) incorporating 
the SEC's regulation under section 10(A)(m) of the Exchange Act, 
codified at 17 CFR 240.10A-3, is duplicative. Section 12(i) of the 
Exchange Act specifically gives the appropriate bank regulatory 
agencies the powers, functions, and duties to administer and enforce 
section 10A(m) of the Exchange Act with respect to the institutions 
under their supervision. While the FDIC has the ability under section 
12(i) of the Exchange Act to issue additional or different regulations 
compared to those of the SEC, the FDIC generally believes that cross 
referencing the regulations of the SEC simplifies the administration 
and enforcement of the Exchange Act. It also helps promote uniformity 
and consistency of administration. Therefore, the FDIC is retaining the 
direct cross reference to 17 CFR 240.10A-3 in 12 CFR 335.121.
    The second comment is that the FDIC's incorporation of SEC 
Regulation FD (Fair Disclosure) in section 335.221(d) under the heading 
``Forms for registration of securities and similar matters'' may not be 
the most appropriate placement for this cross reference. The commenter 
suggested that the FDIC give the item its own section within part 335 
to make it more prominent and easily recognizable to bankers and their 
counsel. The FDIC recognizes the concern for making the cross reference 
to Regulation FD more prominent, and is changing the heading of section 
335.221 from its current title to ``Forms for registration of 
securities; optional forms for small business issuers; and 
incorporation of Regulation FD (Fair Disclosure).'' The FDIC considers 
this change in section heading to be a nonsubstantive technical change.

III. Section by Section Analysis

    Part 335 is being amended throughout to reflect the addition of 
section 10A(m) of the Exchange Act and sections 302, 303, 304, 306, 
401(b), 404, 406, and 407 of the Sarbanes-Oxley Act to those sections 
that the FDIC is currently required to administer and enforce under 
section 12(i) of the Exchange Act.
    Section 335.101(b) is amended to clarify that part 335 generally 
incorporates through cross reference the regulations of the SEC as 
these regulations are routinely issued, revised, or updated from time 
to time by the SEC under sections 10A(m), 12, 13, 14, and 16 of the 
Exchange Act and sections 302, 303, 304, 306, 401(b), 404, 406, and 407 
of the Sarbanes-Oxley Act, except as provided at section 335.801 of 
this part.
    New section 335.121 (Listing standards relating to audit 
committees) specifically incorporates by reference the SEC rule 10A-3 
(17 CFR 240.10A-3), adopted pursuant to section 10(A)(m) of the 
Exchange Act and section 301 of the Sarbanes-Oxley Act, which prohibits 
any national securities exchange and national securities association 
from listing the securities of an issuer that fails to comply with 
specific audit committee requirements including member independence, 
oversight, complaint procedures, engagement of counsel and other 
advisors, and funding.
    Section 335.201 (Securities exempted from registration) and section 
335.261 (Exemptions; terminations and definitions) add SEC Rule 12h-5 
(Exemption for subsidiary issuers of guaranteed securities and 
subsidiary guarantors) (17 CFR 240.12h-5)
    Section 335.211 (Registration and reporting) adds SEC Rule 17 CFR 
240.12b-37 (Satisfaction of filing requirements).
    Section 335.221 (Forms for registration of securities; optional 
forms for small business issuers; and incorporation of Regulation FD 
(Fair Disclosure)) adds new paragraph (d) to adopt the requirements of 
SEC Regulation FD (Fair Disclosure) (17 CFR 243.100 through 243.103), 
which is designed to address problems of selective disclosure of 
material information by reporting entities. The

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section heading is also being revised to explicitly reference 
Regulation FD.
    Section 335.331 (Acquisition statements, acquisition of securities 
by issuers, and other matters) is amended to add SEC Rule 13k-1 
(Foreign bank exemption from the insider lending prohibition under 
section 13(k) of the Exchange Act) (17 CFR 240.13k-1) and to change the 
title.
    Section 335.801 (Inapplicable SEC regulations; FDIC substituted 
regulations; additional information) is amended to add section 10A(m) 
of the Exchange Act and sections 302, 303, 304, 306, 401(b), 404, 406, 
and 407 of the Sarbanes-Oxley Act.
    Section 335.901 (Delegation of authority to act on matters with 
respect to disclosure laws and regulations) is amended to reflect 
certain changes in the organizational structure of the FDIC and to 
shorten the section heading.

IV. Regulatory Analysis and Procedure

a. Administrative Procedure Act

    Public Comment Waiver and Effective Date: Pursuant to the 
Administrative Procedure Act, 5 U.S.C. 553(b) (APA), the FDIC found 
good cause to issue the interim final rule without first seeking public 
comment. Section 553(b) of the APA does not apply to rules of agency 
organization, procedure, or practice, or when the agency for good cause 
finds that notice and public comment on the rules being promulgated are 
impractical or unnecessary. The Exchange Act requires that the FDIC 
issue regulations substantially similar to those of the SEC or publish 
its reasons for not doing so. Certain portions of 12 CFR 335 that are 
being amended are organizational; other portions result from amendments 
to section 12(i) of the Exchange Act or the adoption of regulations by 
the SEC that were published in proposed form by the SEC. For these 
reasons, the FDIC confirms its finding that providing notice and an 
opportunity for public comment on these rules is unnecessary. 
Nonetheless, the FDIC solicited public comment on the interim final 
rule and has fully considered the comments that were filed.
    As authorized by section 553(d) of the APA, the FDIC finds that 
there is good cause for this final rule to take effect immediately upon 
publication in the Federal Register. With the exception of the change 
in the section heading of section 335.221, the final rule is identical 
to the interim final rule which became effective on May 31, 2005. No 
purpose would be served by delaying the rule's effective date.

b. Paperwork Reduction Act

    This rule contains no new collections of information as defined by 
the Paperwork Reduction Act.

c. Regulatory Flexibility Act

    A regulatory flexibility analysis is required only when the agency 
must publish a notice of proposed rulemaking (5 U.S.C. 603, 604). 
Because the revisions to part 335 were published as an interim final 
rule without a notice of proposed rulemaking, no regulatory flexibility 
analysis is required.

d. Small Business Regulatory Enforcement Fairness Act

    The Small Business Regulatory Enforcement Fairness Act (5 U.S.C. 
801 et seq.) (SBREFA) provides generally for agencies to report rules 
to Congress and for Congress to review these rules. The reporting 
requirement is triggered in instances where the FDIC issues a final 
rule as defined by the Administrative Procedure Act (APA). Because the 
FDIC is issuing a final rule as defined by the APA, the FDIC will file 
the reports required by SBREFA.

List of Subjects in 12 CFR Part 335

    Accounting, Banks, Banking, Confidential business information, 
Reporting and recordkeeping requirements, Securities.


0
The Board of Directors of the Federal Deposit Insurance Corporation 
hereby amends part 335 to Title 12 of the Code of Federal Regulations 
as follows:

PART 335--SECURITIES OF NONMEMBER INSURED BANKS

0
1. The authority citation for part 335 continues to read as follows:

    Authority: 12 U.S.C. 1819; 15 U.S.C. 78l(i), 78m, 78n, 78p, 78w, 
7241, 7242, 7243, 7244, 7261, 7262, 7264, and 7265.


0
2. Section 335.101 is amended by revising paragraph (b) to read as 
follows:


Sec.  335.101  Scope of part, authority, and OMB control number.

* * * * *
    (b) Part 335 generally incorporates through cross reference the 
regulations of the SEC as these regulations are issued, revised, or 
updated from time to time under sections 10A(m), 12, 13, 14(a), 14(c), 
14(d), 14(f), and 16 of the Exchange Act and sections 302, 303, 304, 
306, 401(b), 404, 406, and 407 of the Sarbanes-Oxley Act of 2002 
(Sarbanes-Oxley Act), except as provided at Sec.  335.801 of this part. 
References to the Commission in the regulations of the SEC are deemed 
to refer to the FDIC unless the context otherwise requires.

0
3. Section 335.121 is revised to read as follows:


Sec.  335.121  Listing standards related to audit committees.

    The provisions of the applicable SEC regulation under section 
10(A)(m) of the Exchange Act shall be followed as codified at 17 CFR 
240.10A-3.

0
4. Section 335.201 is revised to read as follows:


Sec.  335.201  Securities exempted from registration.

    Persons generally subject to registration requirements under 
Exchange Act section 12 and subject to this part shall follow the 
applicable and currently effective SEC regulations relative to 
exemptions from registration issued under sections 3 and 12 of the 
Exchange Act as codified at 17 CFR 240.3a12-1 through 240.3a12-11, 
240.12a-4 through 240.12a-9, and 240.12g-1 through 240.12h-5.

0
5. Section 335.211 is revised to read as follows:


Sec.  335.211  Registration and reporting.

    Persons with securities subject to registration under Exchange Act 
sections 12(b) and 12(g), required to report under Exchange Act section 
13, and subject to this part shall follow the applicable and currently 
effective SEC regulations issued under section 12(b) of the Exchange 
Act as codified at 17 CFR 240.12b-1 through 240.12b-37.

0
6. Section 335.221 is amended by revising the section heading and by 
revising paragraph (d) to read as follows:


Sec.  335.221  Forms for registration of securities; optional forms for 
small business issuers; and incorporation of Regulation FD (Fair 
Disclosure).

* * * * *
    (d) The provisions of the applicable and currently effective SEC 
regulation FD shall be followed as codified at 17 CFR 243.100 through 
243.103.

0
7. Section 335.261 is revised to read as follows:


Sec.  335.261  Exemptions; terminations; and definitions.

    The provisions of the applicable and currently effective SEC 
regulations under sections 12(g) and 12(h) of the Exchange Act shall be 
followed as codified at 17 CFR 240.12g-1 through 240.12h-5.

0
8. Section 335.331 is revised to read as follows:


Sec.  335.331  Acquisition statements, acquisition of securities by 
issuers, and other matters.

    The provisions of the applicable and currently effective SEC 
regulations

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under sections 13(d) and 13(e) of the Exchange Act shall be followed as 
codified at 17 CFR 240.13d-1 through 240.13e-102 and 240.13k-1.

0
9. Section 335.801 is amended by revising paragraph (a) to read as 
follows:


Sec.  335.801  Inapplicable SEC regulations; FDIC substituted 
regulations; additional information.

    (a) Filing fees. Filing fees will not be charged relative to any 
filings or submissions of materials made with the FDIC pursuant to the 
cross reference to regulations of the SEC issued under sections 10A(m), 
12, 13, 14, and 16 of the Securities Exchange Act of 1934 (15 U.S.C. 
78), sections 302, 303, 304, 306, 401(b), 404, 406, and 407 of the 
Sarbanes-Oxley Act of 2002 (15 U.S.C. 7241, 7242, 7243, 7244, 7261, 
7262, 7264, and 7265), and this part.
* * * * *

0
10. Section 335.901 is amended by revising the section heading and 
paragraph (a) as follows:


Sec.  335.901  Delegation of authority to act on matters with respect 
to disclosure laws and regulations.

    (a) Except as provided in paragraph (b) of this section, authority 
is delegated to the Director, Division of Supervision and Consumer 
Protection (DSC), and where confirmed in writing by the director, to a 
deputy director or an associate director, or to the appropriate 
regional director or deputy regional director or area director, to act 
on disclosure matters under and pursuant to sections 10A(m), 12, 13, 
14(a), 14(c), 14(d), 14(f) and 16 of the Securities Exchange Act of 
1934 (15 U.S.C. 78), sections 302, 303, 304, 306, 401(b), 404, 406, and 
407 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7241, 7242, 7243, 
7244, 7261, 7262, 7264, and 7265), and this part.
* * * * *

    Dated at Washington, DC, this 19th day of July, 2005.

    By order of the Board of Directors.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 05-15107 Filed 8-1-05; 8:45 am]
BILLING CODE 6714-01-P