[Federal Register: August 2, 2005 (Volume 70, Number 147)]
[Rules and Regulations]
[Page 44270-44273]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02au05-8]
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FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 335
RIN 3064-AC88
Securities of Nonmember Insured Banks
AGENCY: Federal Deposit Insurance Corporation (FDIC).
ACTION: Final rule.
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SUMMARY: The FDIC is adopting a final rule amending part 335 of its
regulations with one nonsubstantive change from the interim final rule
published on March 31, 2005, in the Federal Register (see 70 FR 16398).
The final rule adopts amendments to the FDIC's securities disclosure
regulations applicable to state nonmember banks with securities
required to be registered under section 12 of the Securities Exchange
Act of 1934 (Exchange Act). The final rule reflects amendments to the
Securities Exchange Act of 1934 made by the Sarbanes-Oxley Act of 2002
(Sarbanes-Oxley Act), and accommodates certain operational changes
within the FDIC. The rule also incorporates through cross reference
changes in regulations adopted by the Securities Exchange and
Commission (SEC) into the provisions of the FDIC's securities
regulations. Incorporation by reference will assure that the FDIC's
regulations remain substantially similar to the SEC's regulations, as
required by law.
DATES: These amendments are effective on August 2, 2005.
FOR FURTHER INFORMATION CONTACT: Dennis Chapman, Senior Staff
Accountant, Division of Supervision and Consumer Protection, (202) 898-
8922; Mary Frank, Senior Financial Analyst, Division of Supervision and
[[Page 44271]]
Consumer Protection, (202) 898-8903; or Mark G. Flanigan, Counsel,
Legal Division, (202) 898-7426, Federal Deposit Insurance Corporation,
550 17th Street, NW., Washington, DC 20429.
SUPPLEMENTARY INFORMATION:
I. Background
Section 12(i) of the Exchange Act, as amended (15 U.S.C. 78l(i)),
authorizes the FDIC to issue regulations applicable to the securities
of state nonmember banks that are substantially similar to those of the
SEC with respect to its powers, functions, and duties to administer and
enforce sections 10A(m) (standards relating to audit committees), 12
(securities registration), 13 (periodic reporting), 14(a) (proxies and
proxy solicitation), 14(c) (information statements), 14(d) (tender
offers), 14(f) (arrangements for changes in directors), and 16
(beneficial ownership and reporting) of the Exchange Act, and sections
302 (corporate responsibility for financial reports), 303 (improper
influence on conduct of audits), 304 (forfeiture of certain bonuses and
profits), 306 (insider trades during blackout periods), 401(b)
(disclosure of pro forma financial information), 404 (management
assessment of internal controls), 406 (code of ethics for senior
financial officers), and 407 (disclosure of audit committee financial
expert) of the Sarbanes-Oxley Act (codified at 15 U.S.C. 7241, 7242,
7243, 7244, 7261, 7262, 7264, and 7265), in regard to the depository
institutions for which it is the primary Federal regulator. These
regulations must be substantially similar to the regulations of the SEC
under the listed sections of the Exchange Act and the Sarbanes-Oxley
Act, unless the FDIC publishes its reasons for deviating from the SEC's
rules. The amendments to this part incorporate amendments to the
Exchange Act, and changes to the SEC regulations that the FDIC is
required to administer and enforce with respect to registered state
nonmember banks, including the adoption of Regulation FD (Fair
Disclosure).
In addition, certain changes to delegations of authority in part
335 result from FDIC's internal merger of the former Division of
Supervision and the former Division of Compliance and Consumer Affairs
into the Division of Supervision and Consumer Protection. The
reorganization also created area offices in Memphis, Tennessee, and
Boston, Massachusetts, in place of regional offices in those cities,
and title changes for officials in the FDIC headquarters and other
offices.
II. Interim Final Rule and Request for Comments
On March 31, 2005, the FDIC published in the Federal Register (70
FR 16398) an interim final rule which reflected amendments to the
Exchange Act made by the Sarbanes-Oxley Act, and incorporated by cross
reference changes in regulations adopted by the SEC into the provisions
of the FDIC's securities regulations. The interim final rule also made
certain technical amendments to part 335. The FDIC requested comments
on all aspects of the rule changes, with comments due by May 31, 2005,
the date the interim final rule took effect. Commenters were asked to
support any suggestions that the FDIC modify the requirements of the
SEC rules, regulations and forms for state nonmember banks by
demonstrating how such modification would satisfy the requirements of
section 12(i) of the Exchange Act. The FDIC also welcomed comments on
the general organization of part 335.
One comment letter was filed on the interim final rule. The
commenter, a banker, raised two separate comments regarding provisions
of the interim final rule. The FDIC considered each point.
The first comment is that the FDIC's cross reference in section
335.121 (Listing standards related to audit committees) incorporating
the SEC's regulation under section 10(A)(m) of the Exchange Act,
codified at 17 CFR 240.10A-3, is duplicative. Section 12(i) of the
Exchange Act specifically gives the appropriate bank regulatory
agencies the powers, functions, and duties to administer and enforce
section 10A(m) of the Exchange Act with respect to the institutions
under their supervision. While the FDIC has the ability under section
12(i) of the Exchange Act to issue additional or different regulations
compared to those of the SEC, the FDIC generally believes that cross
referencing the regulations of the SEC simplifies the administration
and enforcement of the Exchange Act. It also helps promote uniformity
and consistency of administration. Therefore, the FDIC is retaining the
direct cross reference to 17 CFR 240.10A-3 in 12 CFR 335.121.
The second comment is that the FDIC's incorporation of SEC
Regulation FD (Fair Disclosure) in section 335.221(d) under the heading
``Forms for registration of securities and similar matters'' may not be
the most appropriate placement for this cross reference. The commenter
suggested that the FDIC give the item its own section within part 335
to make it more prominent and easily recognizable to bankers and their
counsel. The FDIC recognizes the concern for making the cross reference
to Regulation FD more prominent, and is changing the heading of section
335.221 from its current title to ``Forms for registration of
securities; optional forms for small business issuers; and
incorporation of Regulation FD (Fair Disclosure).'' The FDIC considers
this change in section heading to be a nonsubstantive technical change.
III. Section by Section Analysis
Part 335 is being amended throughout to reflect the addition of
section 10A(m) of the Exchange Act and sections 302, 303, 304, 306,
401(b), 404, 406, and 407 of the Sarbanes-Oxley Act to those sections
that the FDIC is currently required to administer and enforce under
section 12(i) of the Exchange Act.
Section 335.101(b) is amended to clarify that part 335 generally
incorporates through cross reference the regulations of the SEC as
these regulations are routinely issued, revised, or updated from time
to time by the SEC under sections 10A(m), 12, 13, 14, and 16 of the
Exchange Act and sections 302, 303, 304, 306, 401(b), 404, 406, and 407
of the Sarbanes-Oxley Act, except as provided at section 335.801 of
this part.
New section 335.121 (Listing standards relating to audit
committees) specifically incorporates by reference the SEC rule 10A-3
(17 CFR 240.10A-3), adopted pursuant to section 10(A)(m) of the
Exchange Act and section 301 of the Sarbanes-Oxley Act, which prohibits
any national securities exchange and national securities association
from listing the securities of an issuer that fails to comply with
specific audit committee requirements including member independence,
oversight, complaint procedures, engagement of counsel and other
advisors, and funding.
Section 335.201 (Securities exempted from registration) and section
335.261 (Exemptions; terminations and definitions) add SEC Rule 12h-5
(Exemption for subsidiary issuers of guaranteed securities and
subsidiary guarantors) (17 CFR 240.12h-5)
Section 335.211 (Registration and reporting) adds SEC Rule 17 CFR
240.12b-37 (Satisfaction of filing requirements).
Section 335.221 (Forms for registration of securities; optional
forms for small business issuers; and incorporation of Regulation FD
(Fair Disclosure)) adds new paragraph (d) to adopt the requirements of
SEC Regulation FD (Fair Disclosure) (17 CFR 243.100 through 243.103),
which is designed to address problems of selective disclosure of
material information by reporting entities. The
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section heading is also being revised to explicitly reference
Regulation FD.
Section 335.331 (Acquisition statements, acquisition of securities
by issuers, and other matters) is amended to add SEC Rule 13k-1
(Foreign bank exemption from the insider lending prohibition under
section 13(k) of the Exchange Act) (17 CFR 240.13k-1) and to change the
title.
Section 335.801 (Inapplicable SEC regulations; FDIC substituted
regulations; additional information) is amended to add section 10A(m)
of the Exchange Act and sections 302, 303, 304, 306, 401(b), 404, 406,
and 407 of the Sarbanes-Oxley Act.
Section 335.901 (Delegation of authority to act on matters with
respect to disclosure laws and regulations) is amended to reflect
certain changes in the organizational structure of the FDIC and to
shorten the section heading.
IV. Regulatory Analysis and Procedure
a. Administrative Procedure Act
Public Comment Waiver and Effective Date: Pursuant to the
Administrative Procedure Act, 5 U.S.C. 553(b) (APA), the FDIC found
good cause to issue the interim final rule without first seeking public
comment. Section 553(b) of the APA does not apply to rules of agency
organization, procedure, or practice, or when the agency for good cause
finds that notice and public comment on the rules being promulgated are
impractical or unnecessary. The Exchange Act requires that the FDIC
issue regulations substantially similar to those of the SEC or publish
its reasons for not doing so. Certain portions of 12 CFR 335 that are
being amended are organizational; other portions result from amendments
to section 12(i) of the Exchange Act or the adoption of regulations by
the SEC that were published in proposed form by the SEC. For these
reasons, the FDIC confirms its finding that providing notice and an
opportunity for public comment on these rules is unnecessary.
Nonetheless, the FDIC solicited public comment on the interim final
rule and has fully considered the comments that were filed.
As authorized by section 553(d) of the APA, the FDIC finds that
there is good cause for this final rule to take effect immediately upon
publication in the Federal Register. With the exception of the change
in the section heading of section 335.221, the final rule is identical
to the interim final rule which became effective on May 31, 2005. No
purpose would be served by delaying the rule's effective date.
b. Paperwork Reduction Act
This rule contains no new collections of information as defined by
the Paperwork Reduction Act.
c. Regulatory Flexibility Act
A regulatory flexibility analysis is required only when the agency
must publish a notice of proposed rulemaking (5 U.S.C. 603, 604).
Because the revisions to part 335 were published as an interim final
rule without a notice of proposed rulemaking, no regulatory flexibility
analysis is required.
d. Small Business Regulatory Enforcement Fairness Act
The Small Business Regulatory Enforcement Fairness Act (5 U.S.C.
801 et seq.) (SBREFA) provides generally for agencies to report rules
to Congress and for Congress to review these rules. The reporting
requirement is triggered in instances where the FDIC issues a final
rule as defined by the Administrative Procedure Act (APA). Because the
FDIC is issuing a final rule as defined by the APA, the FDIC will file
the reports required by SBREFA.
List of Subjects in 12 CFR Part 335
Accounting, Banks, Banking, Confidential business information,
Reporting and recordkeeping requirements, Securities.
0
The Board of Directors of the Federal Deposit Insurance Corporation
hereby amends part 335 to Title 12 of the Code of Federal Regulations
as follows:
PART 335--SECURITIES OF NONMEMBER INSURED BANKS
0
1. The authority citation for part 335 continues to read as follows:
Authority: 12 U.S.C. 1819; 15 U.S.C. 78l(i), 78m, 78n, 78p, 78w,
7241, 7242, 7243, 7244, 7261, 7262, 7264, and 7265.
0
2. Section 335.101 is amended by revising paragraph (b) to read as
follows:
Sec. 335.101 Scope of part, authority, and OMB control number.
* * * * *
(b) Part 335 generally incorporates through cross reference the
regulations of the SEC as these regulations are issued, revised, or
updated from time to time under sections 10A(m), 12, 13, 14(a), 14(c),
14(d), 14(f), and 16 of the Exchange Act and sections 302, 303, 304,
306, 401(b), 404, 406, and 407 of the Sarbanes-Oxley Act of 2002
(Sarbanes-Oxley Act), except as provided at Sec. 335.801 of this part.
References to the Commission in the regulations of the SEC are deemed
to refer to the FDIC unless the context otherwise requires.
0
3. Section 335.121 is revised to read as follows:
Sec. 335.121 Listing standards related to audit committees.
The provisions of the applicable SEC regulation under section
10(A)(m) of the Exchange Act shall be followed as codified at 17 CFR
240.10A-3.
0
4. Section 335.201 is revised to read as follows:
Sec. 335.201 Securities exempted from registration.
Persons generally subject to registration requirements under
Exchange Act section 12 and subject to this part shall follow the
applicable and currently effective SEC regulations relative to
exemptions from registration issued under sections 3 and 12 of the
Exchange Act as codified at 17 CFR 240.3a12-1 through 240.3a12-11,
240.12a-4 through 240.12a-9, and 240.12g-1 through 240.12h-5.
0
5. Section 335.211 is revised to read as follows:
Sec. 335.211 Registration and reporting.
Persons with securities subject to registration under Exchange Act
sections 12(b) and 12(g), required to report under Exchange Act section
13, and subject to this part shall follow the applicable and currently
effective SEC regulations issued under section 12(b) of the Exchange
Act as codified at 17 CFR 240.12b-1 through 240.12b-37.
0
6. Section 335.221 is amended by revising the section heading and by
revising paragraph (d) to read as follows:
Sec. 335.221 Forms for registration of securities; optional forms for
small business issuers; and incorporation of Regulation FD (Fair
Disclosure).
* * * * *
(d) The provisions of the applicable and currently effective SEC
regulation FD shall be followed as codified at 17 CFR 243.100 through
243.103.
0
7. Section 335.261 is revised to read as follows:
Sec. 335.261 Exemptions; terminations; and definitions.
The provisions of the applicable and currently effective SEC
regulations under sections 12(g) and 12(h) of the Exchange Act shall be
followed as codified at 17 CFR 240.12g-1 through 240.12h-5.
0
8. Section 335.331 is revised to read as follows:
Sec. 335.331 Acquisition statements, acquisition of securities by
issuers, and other matters.
The provisions of the applicable and currently effective SEC
regulations
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under sections 13(d) and 13(e) of the Exchange Act shall be followed as
codified at 17 CFR 240.13d-1 through 240.13e-102 and 240.13k-1.
0
9. Section 335.801 is amended by revising paragraph (a) to read as
follows:
Sec. 335.801 Inapplicable SEC regulations; FDIC substituted
regulations; additional information.
(a) Filing fees. Filing fees will not be charged relative to any
filings or submissions of materials made with the FDIC pursuant to the
cross reference to regulations of the SEC issued under sections 10A(m),
12, 13, 14, and 16 of the Securities Exchange Act of 1934 (15 U.S.C.
78), sections 302, 303, 304, 306, 401(b), 404, 406, and 407 of the
Sarbanes-Oxley Act of 2002 (15 U.S.C. 7241, 7242, 7243, 7244, 7261,
7262, 7264, and 7265), and this part.
* * * * *
0
10. Section 335.901 is amended by revising the section heading and
paragraph (a) as follows:
Sec. 335.901 Delegation of authority to act on matters with respect
to disclosure laws and regulations.
(a) Except as provided in paragraph (b) of this section, authority
is delegated to the Director, Division of Supervision and Consumer
Protection (DSC), and where confirmed in writing by the director, to a
deputy director or an associate director, or to the appropriate
regional director or deputy regional director or area director, to act
on disclosure matters under and pursuant to sections 10A(m), 12, 13,
14(a), 14(c), 14(d), 14(f) and 16 of the Securities Exchange Act of
1934 (15 U.S.C. 78), sections 302, 303, 304, 306, 401(b), 404, 406, and
407 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7241, 7242, 7243,
7244, 7261, 7262, 7264, and 7265), and this part.
* * * * *
Dated at Washington, DC, this 19th day of July, 2005.
By order of the Board of Directors.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 05-15107 Filed 8-1-05; 8:45 am]
BILLING CODE 6714-01-P