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Federal Register / Vol. 86, No. 22 / Thursday, February 4, 2021 / Proposed Rules
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specified in the regulation. 41 The FDIC
noted that sufficient disclosure to enable a purchaser to make an informed investment decision is a requirement of the antifraud provisions from which banks are not exempt.42 Furthermore, a State nonmember banks failure to comply with the securities antifraud provisions could result in a violation of the law and warrant an enforcement action by the FDIC.43
In proposing the regulation, the FDIC
referenced sections 5 and 6 of the FDI
Act,44 which require the FDIC Board to consider the adequacy of a banks capital structure.45 The FDIC explained that the review of an application by a State nonmember bank that has issued securities or proposes to issue securities should include a review of the associated disclosures of material facts to ensure such disclosures are sufficient.46 Additionally, the FDIC
noted that the OCC had already adopted similar disclosure requirements at 12
CFR part 16.47
The FDIC subsequently withdrew the proposed disclosure regulations on July 6, 1979.48 In explaining its decision to withdraw, the FDIC noted that proposal had been public without being acted upon for a long time, and that many State nonmember banks already were complying voluntarily.49 Additionally, the FDIC argued that the OCCs securities offering disclosure rules 50
and the SECs Regulation A 51 provided adequate direction that State nonmember banks could rely on in preparing offering materials with adequate content and proper format.52
In keeping with the FDICs policy favoring the shortening and simplification of its regulatory requirements wherever possible, the FDIC withdrew the proposed part 340
securities disclosure regulation.53
41 Id. at 27955 noting that securities issued by a bank are exempt from the registration and prospectus-delivery provisions of the Securities Act but they are subject to the general antifraud provisions of Section 17a of that Act 15 U.S.C.
77qa and Rule 10b5 of the Securities and Exchange Commission SEC 17 CFR 240.10b5
promulgated under Section 10b of the Exchange Act 15 U.S.C. 78j b. See Lehigh. Valley Trust Co.
v. Central National Bank of Jacksonville, 409 F.2d 989 5th Cir. 1969..
42 42 FR at 27995.
43 Id. at 27995 citing 12 U.S.C. 1818b.
44 12 U.S.C. 1815, 1816.
45 Id. at 27956.
46 Id.
47 Id. citing 12 CFR part 16, which remains in force.
48 44 FR 39469 July 6, 1979.
49 Id.
50 12 CFR part 16.
51 17 CFR 230.251 through 230.263.
52 44 FR 39469.
53 Id.

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In its stead, on the same day that the proposed part 340 was withdrawn, the FDIC published a statement of policy, the Statement of Policy Regarding the Use of Offering Circulars 1979
Statement of Policy.54 The 1979
Statement of Policy was applicable to the offering of securities by insured State nonmember banks and banks in organization which intend to apply for Federal deposit insurance. 55 The 1979
Statement of Policy recognized the FDICs statutory duty to determine capital adequacy and stated that its purpose was to protect insured State nonmember banks against possible serious capital losses or insolvency that could result if bank securities are sold in violation of the antifraud provisions of the Federal securities laws. 56 The 1979 Statement of Policy provided a list of information that offering circulars prepared by an insured State nonmember bank should include but noted that the FDIC would not impose the burden of filing and awaiting regulatory approval.57 The FDIC also suggested that State nonmember banks requiring additional guidance look to the OCCs regulations at 12 CFR part 16.58
In 1996, the FDIC published a new statement of policy, the Statement of Policy Regarding the Use of Offering Circulars in Connection with the Public Distribution of Bank Securities 1996
Statement of Policy, to address the changing laws and standards and needs of the industry.59 Among other things, 54 44

FR 39381 July 6, 1979.

55 Id.
56 Id.

at 39382.
The FDIC stated that it believed the following information, as applicable, should be included in the offering circular of a State nonmember bank: 1 The name, address, principal place of business and telephone number of the issuing bank; 2 the amount and title of the securities being offered; 3 the offering price and proceeds to the bank on a per share and aggregate basis; 4 the plan and cost of distribution; 5 the reason for the offering and the purposes for which the proceeds are to be used, and a brief description of the material risks, if any, involved in the purchase of the securities; 6 a description of the present and proposed business operations of the bank and its capital structure; 7 the principal officers, directors and principal security holders and the amount of securities owned by each; 8 the remuneration and interest in recent or proposed transactions of management and principal security holders and their associates; 9 the high and low sales prices of the securities within the past two years and the source of the quotations; 10 a brief description of any material pending legal proceedings; 11 a summary of any material terms and restrictions applicable to the securities; and 12 Financial Statements: a balance sheet as of the preceding fiscal year end; statements of income for the preceding two fiscal years and interim periods where necessary; notes to financial statements; and schedules of the allowance for possible loan losses.
Id.
58 Id.
59 See footnote 7.
57 Id.

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the 1996 Statement of Policy included enhanced disclosures for mutual-tostock conversions and sales of a banks securities on bank premises.60 In the 1996 update, the FDIC recognized that certain States are also involved in the regulation of securities offered by insured State nonmember banks.
III. The Proposal To Rescind and Remove the Transferred OTS Securities Offerings Regulations, To Rescind the FDICs Statement of Policy, To Propose a New Regulation, and To Make Other, Technical Amendments After careful review of part 390, subpart W, the FDIC has determined that the FDIC should rescind subpart W, which is applicable only to State savings associations, rescind the FDICs 1996 Statement of Policy, propose a new regulation governing securities offering disclosures, and make other, technical amendments to certain FDIC
regulations 61 to revise regulatory references.
A. Rescission of Part 390, Subpart W
The FDIC does not believe it is necessary to treat State savings associations differently than State nonmember banks with respect to public disclosure in connection with securities issuances. Replacing part 390, subpart W with a new regulation that applies to all FDIC-supervised institutions will ensure that the same regulations apply to both State savings associations and State nonmember banks with regard to registration statements, prospectuses, and other securities law matters, without creating excess burden on either type of insured financial institution The new requirements discussed below in section III.C. of this Supplementary Information section are consistent with both the requirements of part 390, subpart W and with the principles set forth in the 1996 Statement of Policy. A
regulation, rather than a statement of policy, is appropriate because the FDICs long-term experience has been that FDIC-supervised institutions are either required to follow SEC disclosure regulations by State law or voluntarily follow them and other applicable regulations as a means to comply with the Federal antifraud provisions. In the interests of regulatory transparency, the proposed regulation will make clear the FDICs expectations for disclosures to be made in connection with the issuance of securities by FDIC-supervised institutions.
60 Id.
61 12

E:FRFM04FEP1.SGM

at 4680708.
CFR 303.163, 333.4, part 335.

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