Securities Offering Disclosure Rules

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