[Federal Register Volume 72, Number 201 (Thursday, October 18, 2007)]
[Proposed Rules]
[Pages 59039-59041]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-20600]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 16

[Docket ID OCC-2007-0016]
RIN 1557-AD04


Securities Offering Disclosure Rules

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

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Office of the Comptroller of the Currency (OCC) is 
proposing to amend its securities offering disclosure rules at part 16 
so that the organizing group of a national bank in organization will, 
in most cases, not need to provide audited financial statements as part 
of a public offering of securities.

DATES: Comments must be received by December 17, 2007.

ADDRESSES: You may submit comments by any of the following methods:
     Federal eRulemaking Portal--``Regulations.gov'': Go to 
http://www.regulations.gov, select ``Comptroller of the Currency'' from 
the agency drop-down menu, then click ``Submit.'' In the ``Docket ID'' 
column, click on ``OCC-2007-0016'' to submit or view public comments 
and to view supporting and related materials for this notice of 
proposed rulemaking. The ``User Tips'' link at the top of the 
Regulations.gov home page provides information on using 
Regulations.gov, including instructions for submitting or viewing 
public comments, viewing other supporting and related materials, and 
viewing the docket after the close of the comment period.
     E-mail: [email protected].
     Fax: (202) 874-4448.
     Mail: Office of the Comptroller of the Currency, 250 E 
Street, SW., Mail Stop 1-5, Washington, DC 20219.
     Hand Delivery/Courier: 250 E Street, SW., Attn: Public 
Information Room, Mail Stop 1-5, Washington, DC 20219.
    Instructions: You must include ``OCC'' as the agency name and 
``Docket ID OCC-2007-0016'' in your comment. In general, OCC will enter 
all comments received into the docket and publish them on 
Regulations.gov without change, including any business or personal 
information that you provide such as name and address information, e-
mail addresses, or phone numbers. Comments, including attachments and 
other supporting materials, received are part of the public record and 
subject to public disclosure. Do not enclose any information in your 
comment or supporting materials that you consider confidential or 
inappropriate for public disclosure.
    You may review comments and other related materials by any of the 
following methods:
     Viewing Comments Electronically: Go to http://www.regulations.gov, select ``Comptroller of the Currency'' from the 
agency drop-down menu, then click ``Submit.'' In the ``Docket ID'' 
column, click on ``OCC-2007-0016'' to view public comments for this 
notice of proposed rulemaking.
     Viewing Comments Personally: You may personally inspect 
and photocopy comments at the OCC's Public Information Room, 250 E 
Street, SW., Washington, DC. For security reasons, the OCC requires 
that visitors make an appointment to inspect comments. You may do so by 
calling (202) 874-5043. Upon arrival, visitors will be required to 
present valid government-issued photo identification and submit to 
security screening in order to inspect and photocopy comments.
     Docket: You may also view or request available background 
documents and project summaries using the methods described above.

FOR FURTHER INFORMATION CONTACT: Lee Walzer, Counsel, Legislative and 
Regulatory Activities Division, (202) 874-4487; Stuart Feldstein, 
Assistant Director, Legislative and Regulatory Activities Division, 
(202) 874-5090; Ted Dowd, Senior Attorney, Securities and Corporate 
Practices, Division, (202) 874-5210; Beverly Evans, Director, Licensing 
Activities, (202) 874-5060.

SUPPLEMENTARY INFORMATION:

[[Page 59040]]

I. Background

    12 CFR part 16 generally requires national bank securities 
offerings to conform to Securities and Exchange Commission (SEC) 
offering rules and procedures set forth in the Securities Act of 1933 
(33 Act).\1\ Part 16 cross-references SEC requirements for securities 
registration statements, including the requirement that companies 
provide audited financial statements.\2\ This requirement applies to 
``developmental stage'' companies, which includes entities that are 
analogous to national bank charter applicants.\3\ Thus, through the 
OCC's incorporation of these SEC requirements, national bank charter 
applicants are required to provide audited financial statements in 
connection with their registration statements filed with the OCC for an 
offer and sale of securities.
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    \1\ See Securities Offering Disclosure Rules, 59 FR 54789, 90 
(Nov. 2, 1994) (Final Rule).
    \2\ Regulation S-X, 17 CFR 210.3-01(a); Regulation S-B, 17 CFR 
228.310(a).
    \3\ See Rule 1-02(h), Regulation S-X, 17 CFR 210.1-02(h).
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    This notice of proposed rulemaking (NPRM) is part of an ongoing OCC 
effort to reduce unnecessary regulatory burden on national banks, 
including applicants for national bank charters. For example, the OCC 
is working with the other federal banking agencies to produce a report 
required by section 2222 of the Economic Growth and Regulatory 
Paperwork Reduction Act of 1996 (EGRPRA), which directs the federal 
banking agencies to identify regulations that are outdated, 
unnecessary, or unduly burdensome, and to eliminate them if 
appropriate. The OCC also recently proposed comprehensive regulatory 
revisions aimed at reducing regulatory burden by, among other things, 
removing obsolete provisions, streamlining procedures required in 
connection with particular types of changes in structure and the 
conduct of certain activities, and incorporating into our rules 
interpretive opinions that the OCC has previously published.\4\
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    \4\ 74 FR 36550 (July 3, 2007).
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    As a complement to these burden reducing measures, the OCC also has 
sought to identify the considerations most relevant to organizing 
groups for new community banks. This review encompasses both the 
standards and the processes that the OCC applies to such applicants.
    The requirement for an organizing group of a national bank charter 
applicant to have audited financial statements may not be warranted in 
many cases. The process can be time-consuming and expensive. Applicants 
for a national bank charter have often found it difficult to schedule 
timely audits. This has resulted in costly delays for their securities 
offerings. Even after an auditing firm has been hired and the audit has 
been completed, there is a risk that an audit will become stale and 
need to be updated before the OCC can declare the registration 
statement effective.\5\
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    \5\ Regulations S-X and S-B require that audited financial 
statements that are 135 days older than the effective date of the 
registration statement be updated with interim financial statements. 
17 CFR 210.3-12 and 228.310.
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    Moreover, an audited financial statement adds little that benefits 
potential investors, since there is no national bank business being 
transacted during the organizational phase, and the bank's financial 
statements typically are rudimentary, reflecting little more than the 
bank account of the organizing group and organizational expenses 
incurred.
    Finally, the OCC typically does not need to rely on audited 
financial statements in deciding applications for de novo national bank 
charters. In the case of national banks in organization before the OCC, 
unlike the establishment of most businesses whose registration 
statements are regulated by the SEC, the chartering of de novo national 
banks is a lengthy and comprehensive process that includes extensive 
ongoing review of the proposed bank's management, financial resources, 
and business plan. This process provides the OCC the opportunity to 
carefully consider, on the basis of detailed information, whether the 
organizing group has the expertise and resources to operate a viable 
national bank.

II. The Proposal

    For the reasons stated above, the OCC is proposing to amend part 16 
to provide a general waiver of the requirement for an organizing group 
seeking to establish a national bank charter to use audited financial 
statements as part of a registration statement for the public offering 
of securities. The term ``organizing group'' would have the meaning set 
forth in 12 CFR 5.20(d)(6) of this chapter.
    Under this proposed revision, however, the OCC would retain the 
authority to require an organizing group to furnish audited financial 
statements if the OCC concludes that to do so would be in the interest 
of investors or would further the safe and sound operation of a 
national bank. Examples of when the OCC may require audited financial 
statements include situations where review of the registration 
statement, or any other aspect of the organizing group's application to 
charter a national bank, uncovers incomplete or inaccurate information 
about the organizing group's finances or capital, or other material 
inaccuracies or misstatements.

III. Regulatory Analysis

Regulatory Flexibility Act

    Pursuant to Section 605(b) of the Regulatory Flexibility Act, 5 
U.S.C. 605(b) (RFA), the regulatory flexibility analysis otherwise 
required under Section 604 of the RFA is not required if the agency 
certifies that the rule will not have a significant economic impact on 
a substantial number of small entities and publishes its certification 
and a short, explanatory statement in the Federal Register along with 
its rule.
    This change would reduce the costs and expenses associated with the 
formation of a national bank and will not have a significant economic 
impact. Therefore, pursuant to Section 605(b) of the RFA, the OCC 
hereby certifies that this proposal will not have a significant 
economic impact on a substantial number of small entities. Accordingly, 
a regulatory flexibility analysis is not needed.

Executive Order 12866

    The OCC has determined that this proposal is not a significant 
regulatory action under Executive Order 12866. We have concluded that 
the changes made by this rule will not have an annual effect on the 
economy of $100 million or more. The OCC further concludes that this 
proposal does not meet any of the other standards for a significant 
regulatory action set forth in Executive Order 12866.

Paperwork Reduction Act

    In accordance with the requirements of the Paperwork Reduction Act 
of 1995 (PRA), the Agencies may not conduct or sponsor, and the 
respondent is not required to respond to, an information collection 
unless it displays a currently valid Office of Management and Budget 
(OMB) control number.
    The information collection requirements contained in this notice of 
proposed rulemaking have been submitted to OMB for review and approval 
under existing OMB control number 1557-0120 (Securities Offering 
Disclosure Rules).
    The OCC is proposing to revise part 16 to add a waiver of audited 
financial statements for the organizing group of a national bank 
charter applicant for any

[[Page 59041]]

registration statement for bank securities submitted by such group. The 
PRA burden in part 16 is currently approved under OMB Control No. 1557-
0120. Therefore, we submitted the entire information collection for 
review. The numbers below reflect the entire burden for part 16 
following adoption of the rule and the review of the entire information 
collection to ensure accuracy of the estimates.
    Title of Information Collection: Securities Offering Disclosure 
Rules--12 CFR Part 16.
    OMB Number: 1557-0120.
    Estimated Number of Respondents: 48.
    Estimated Number of Responses: 48.
    Average Hours per Response: 9.375.
    Total Estimated Annual Burden: 450.
    Affected Public: National bank charter applicants.
    Estimated Net Burden Change: -60 hours.

Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law 
104-4 (2 U.S.C. 1532) (Unfunded Mandates Act), requires that an agency 
prepare a budgetary impact statement before promulgating any rule 
likely to result in a Federal mandate that may result in the 
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 OCC has determined that this proposed rule will not result in 
expenditures by State, local, and tribal governments, or by the private 
sector, of $100 million or more in any one year. Accordingly, this 
proposal is not subject to Section 202 of the Unfunded Mandates Act.

List of Subjects in 12 CFR Part 16

    National banks, Reporting and recordkeeping requirements, 
Securities.

Authority and Issuance

    For the reasons set forth in the preamble, chapter I of title 12 of 
the Code of Federal Regulations is proposed to be amended as follows:

PART 16--SECURITIES OFFERING DISCLOSURE RULES

    1. The authority citation for part 16 continues to read as follows:

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

    2. Add Sec.  16.15(e) to read as follows:


Sec.  16.15  Form and content.

* * * * *
    (e) Notwithstanding paragraph (a) of this section, an organizing 
group seeking to establish a national bank charter pursuant to Sec.  
5.20 of this chapter shall not be required to include audited financial 
statements as part of its registration statement, unless the OCC 
determines that factors particular to the proposal indicate that 
inclusion of such statements would be in the interest of investors or 
would further the safe and sound operation of a national bank. The term 
``organizing group'' shall have the meaning set forth in Sec.  
5.20(d)(6) of this chapter.

    Dated: October 12, 2007.
John C. Dugan,
Comptroller of the Currency.
[FR Doc. E7-20600 Filed 10-17-07; 8:45 am]
BILLING CODE 4810-33-P