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41179
Proposed Rules Federal Register
Vol. 71, No. 139
Thursday, July 20, 2006
This section of the FEDERAL REGISTER Instructions: All submissions received Conversion Regulations and the MHC
contains notices to the public of the proposed must include the agency name and Regulations, including the provisions
issuance of rules and regulations. The docket number or Regulatory therein pertaining to stock benefit
purpose of these notices is to give interested Information Number (RIN) for this plans.2
persons an opportunity to participate in the rulemaking. All comments received will OTS last changed the provisions of
rule making prior to the adoption of the final
rules.
be posted without change to the OTS the Conversion Regulations addressing
Internet site at: http:// stock benefit plans in mutual-to-stock
www.ots.treas.gov/ conversions or MHC structures in 2002
DEPARTMENT OF THE TREASURY pagehtml.cfm?catNumber=67&an=1, (2002 amendments).3 The 2002
including any personal information amendments revised the MHC
Office of Thrift Supervision provided. Regulations to, among other things,
Docket: For access to the docket to permit the amount of stock includable
12 CFR Parts 563b and 575 read background documents or in stock benefit plans established in
comments received go to http:// MHC structures to be set as if 49.0
[No. 2006–29]
www.ots.treas.gov/ percent of the stock was issued to
RIN 1550–AC07 pagehtml.cfm?catNumber=67&an=1. In minority shareholders, and added a
addition, you may inspect comments at requirement that certain plans not
Stock Benefit Plans in Mutual-to-Stock the Public Reading Room, 1700 G Street, exceed 25 percent of the stock actually
Conversions and Mutual Holding NW., by appointment. To make an offered in the Minority Stock Issuance.
Company Structures appointment for access, call (202) 906– The 25 percent limitation was intended
AGENCY: Office of Thrift Supervision, 5922, send an e-mail to to ensure that insiders did not receive
Treasury. public.info@ots.treas.gov, or send a a disproportionate share of small
ACTION: Notice of proposed rulemaking. facsimile transmission to (202) 906– Minority Stock Issuances.
7755. (Prior notice identifying the OTS believes that confusion exists
SUMMARY: The Office of Thrift materials you will be requesting will regarding the application of the stock
Supervision (OTS) is proposing to assist us in serving you.) We schedule benefit plan provisions in the
clarify its regulations regarding stock appointments on business days between Conversion Regulations and the MHC
benefit plans established after mutual- 10 a.m. and 4 p.m. In most cases, Regulations. OTS therefore proposes to
to-stock conversions or in mutual appointments will be available the next clarify its regulations on stock benefit
holding company structures. In business day following the date we plans currently found at 12 CFR
addition, OTS proposes to reduce the receive a request. 563b.500 and 575.8. These clarifications
voting requirements for the adoption of are not intended to change existing OTS
FOR FURTHER INFORMATION CONTACT:
stock benefit plans in mutual holding policies regarding stock benefit plans. In
Donald W. Dwyer, (202) 906–6414,
company structures and to make several addition, OTS proposes to reduce
Director, Applications, Examinations
other minor changes to the regulations regulatory burden by adjusting the
and Supervision—Operations; Aaron B.
governing mutual-to-stock conversions voting requirements for the adoption of
Kahn, (202) 906–6263, Assistant Chief
and minority stock issuances. stock benefit plans in MHC structures.
Counsel, Business Transactions Division
DATES: Comments must be received on Also, OTS proposes to allow lower
or David A. Permut, (202) 906–7505,
or before September 18, 2006. maximum purchase limitations in
Senior Attorney, Business Transactions
ADDRESSES: You may submit comments, mutual-to-stock conversion offerings
Division, Office of Chief Counsel, Office
identified by No. 2006–29, by any of the (Conversion Offerings) and in Minority
of Thrift Supervision, 1700 G Street,
following methods: Stock Issuances.
NW., Washington, DC 20552.
• Federal eRulemaking Portal: http:// I. Stock Benefit Plans
SUPPLEMENTARY INFORMATION: Savings
www.regulations.gov. Follow the
associations that propose to convert to OTS has permitted the establishment
instructions for submitting comments.
stock form are subject to the OTS of three types of stock benefit plans in
• E-mail:
mutual-to-stock conversion regulations, connection with mutual-to-stock
regs.comments@ots.treas.gov. Please
12 CFR part 563b (Conversion conversions and Minority Stock
include No. 2006–29 in the subject line
Regulations). Mutual holding companies Issuances. These stock benefit plans
of the message, and include your name
(MHCs) are subject to OTS regulations at include: (i) Employee Stock Ownership
and telephone number in the message.
• Fax: (202) 906–6518. 12 CFR part 575 (MHC Regulations). Plans and similar plans (ESOPs), which
• Mail: Regulation Comments, Chief Subsidiary mutual holding companies must be tax-qualified; 4 (ii) Stock Option
Counsel’s Office, Office of Thrift (Subsidiary MHCs) and savings
Supervision, 1700 G Street, NW., associations (collectively, Subsidiary MHC after the Minority Stock Issuance. See 12
Companies) in MHC structures that U.S.C. 1467a(o)(8)(B) and 12 CFR 575.7(a)(5).
Washington, DC 20552, Attention: No. 2 The MHC Regulations currently include four
2006–29. propose to issue common stock in a
separate provisions stating that the Conversion
minority stock issuance (Minority Stock
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• Hand Delivery/Courier: Guard’s Regulations apply in the context of stock issuances
Desk, East Lobby Entrance, 1700 G Issuance) 1 are subject to both the by subsidiaries of MHCs. See, 12 CFR 575.7(a),
575.7(b)(1), 575.7(d)(6)(ii), and 575.7(e)(2006).
Street, NW., from 9 a.m. to 4 p.m. on 1 In a Minority Stock Issuance, the Subsidiary 3 See 67 FR 52010, at 52014 (August 9, 2002).
business days, Attention: Regulation Company issues stock to entities other than the 4 These plans include 401(k) plans and plans
Comments, Chief Counsel’s Office, parent MHC. The parent MHC must hold more than defined at 12 CFR 563b.25 as tax-qualified
Attention: No. 2006–29. 50 percent of the common stock of the Subsidiary Continued
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41180 Federal Register / Vol. 71, No. 139 / Thursday, July 20, 2006 / Proposed Rules
Plans (Option Plans), which are percent of the total shares outstanding In addition, as discussed in more
typically non-tax-qualified; and (iii) (or 3.6 percent, if the association’s detail below, OTS believes that it is
Management Recognition Plans (MRPs) tangible capital exceeded ten percent). appropriate to adjust the shareholder
(sometimes referred to as Retention and In the 2002 amendment, OTS set the vote requirements for the adoption of
Recognition Plans), which are also maximum size for stock benefit plans as benefit plans in MHC structures.
typically non-tax-qualified. if the Minority Stock Issuance had been
Section 563b.500 of the Conversion 49.0 percent of the Subsidiary A. Proposed Rule Changes at § 563b.500
Regulations sets forth certain limitations Company’s stock, regardless of the Regarding Stock Benefit Plans
for stock benefit plans during the year actual percentage of shares issued in the OTS proposes to clarify 12 CFR
following a Conversion Offering. For Minority Stock Issuance.6 563b.500 by referring to the specific
example, ESOPs and MRPs are generally The 2002 amendment also added an type of plan addressed (that is, an ESOP,
limited to holding, in the aggregate, no overall limitation, to prevent issuing an Option Plan, or MRP), rather than
more than ten percent of the number of excessive amount of stock to referring to plans in terms of their tax-
shares issued in a mutual-to-stock management, particularly in small qualified or non-tax-qualified nature.
conversion (§ 563b.500(a)(4)). However, offerings. That restriction limited the OTS proposes to revise § 563b.500(a)(1)
if the converting institution has at least aggregate amount of stock issued to all to clarify that a shareholder vote is not
ten percent tangible capital following Option Plans and MRPs (but excluding required to establish an ESOP. OTS also
the completion of the conversion, then ESOPs) in connection with any Minority proposes to move the provision
ESOPs and MRPs are permitted to hold Stock Issuance and all prior Minority addressing votes on Option Plans and
up to an aggregate of 12 percent of the Stock Issuances, to 25 percent of the MRPs in the context of MHCs from
number of shares issued in the outstanding stock of the association § 563b.500(a)(7) to the MHC
conversion (§ 563b.500(a)(4)). In held by persons other than the parent Regulations, because it is more
addition, the Conversion Regulations MHC.7 OTS has discovered that some appropriate to locate provisions dealing
(§ 563b.500(a)(3)) restrict MRPs to three persons incorrectly believed that the 25 exclusively with MHC structures in the
percent of the number of shares issued percent limit was the only limit on the MHC Regulations.
in the conversion. If the institution has aggregate size of all Option Plans and
at least ten percent tangible capital MRPs, rather than one of several distinct B. Proposed Rule Changes at § 575.7
following the completion of the limitations. Regarding Minority Stock Issuances
conversion, however, MRPs may OTS believes that some confusion Section 575.7 sets forth the general
encompass four percent of the number exists as to how the various limitations requirements for Minority Stock
of shares issued in the conversion. It has in the Conversion and MHC Regulations Issuances by Subsidiary Companies.
been OTS’s experience that most interact with each other. Therefore, OTS Section 575.7 provides, in four separate
converting associations implement an proposes to clarify several of the places, that some or all of the
eight percent ESOP and a four percent existing regulations at sections requirements of the Conversion
MRP when they have at least ten 563b.500, 575.7, and 575.8 to eliminate Regulations are applicable to Minority
percent tangible capital after the any confusion. Stock Issuances. OTS proposes to
conversion. streamline the MHC Regulations by
In addition, converting associations 6 Where a Subsidiary Company sets the size of a
removing two of those references.
may offer a separate Option Plan of up stock benefit plan as if it engaged in a 49 percent OTS proposes to retain the general
to ten percent of the number of shares Minority Stock Issuance, a plan of the same type
established in any second-step mutual-to-stock provision at § 575.7(e), which would be
issued in the conversion conversion of the relevant MHC must be based on redesignated as § 575.7(d), stating that
(§ 563b.500(a)(2)). not more than 51 percent of the resulting publicly the procedural and substantive
In MHC structures, Subsidiary held association’s or holding company’s issued and requirements of the Conversion
Companies offer less than 50 percent of outstanding stock, following the consummation of
the second-step conversion. See 12 CFR Regulations apply to Minority Stock
their stock to the public. This 563b.500(a). The stock issued and outstanding upon Issuances unless clearly inapplicable.
arrangement creates smaller stock consummation of the second-step conversion However, OTS proposes to add language
benefit plans for companies in the MHC includes both the stock issued in accordance with to this section similar to the language in
form. In order to make the MHC form of the mutual-to-stock conversion priorities for the
current § 575.7(b)(1) clarifying that OTS
organization more reasonable, OTS second-step conversion and the shares issued in
exchange for the shares held by the Subsidiary makes the determination whether a
expanded the permissible size of stock Company’s minority stockholders. section is clearly inapplicable. OTS also
benefit plans in the 2002 amendments.5 If the Subsidiary Company sets the size of the proposes to relocate certain language
Prior to the 2002 amendments, the stock benefit plan based on a percentage less than
from § 575.7(b)(1) to proposed
maximum size of plans was set in 49 percent (such as the actual percentage issued in
the Minority Stock Issuance), then the same § 575.7(d). The language in question
relation to the percentage of stock principle applies. For example, if a Subsidiary states that for purposes of the provision
actually offered in the Minority Stock Company established plans based on an actual 40 the term ‘‘conversion’’ as it appears in
Issuance. For example, if the Subsidiary percent Minority Stock Issuance, then the plans
the Conversion Regulations, refers to the
Company issued only 30 percent of its established in connection with the second-step
conversion must be based on not more than 60 Minority Stock Issuance, and the term
stock in the Minority Stock Issuance, it
percent of the shares to be issued in the second-step ‘‘converted or converting savings
would have been restricted to an Option conversion. This is the case regardless of whether, association’’ as it appears in the
Plan encompassing three percent of total after the Minority Stock Issuance, the Subsidiary
Conversion Regulations, refers to the
shares outstanding (ten percent of 30 Company repurchased shares of its stock (and
therefore more than 60 percent of the shares that Subsidiary Company making the
percent) and a combined ESOP and
will be issued and outstanding upon consummation Minority Stock Issuance.
MRP encompassing an aggregate of three of the second-step conversion would be issued in In light of these proposed changes,
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accordance with the mutual-to-stock conversion
employee stock benefit plans. Because the only priorities).
OTS proposes to eliminate the cross-
types of tax-qualified plans established in mutual- 7 For example, the overall limitation for a 28 references at §§ 575.7(a) 8 and
to-stock conversions in the recent past have been percent Minority Stock Issuance would be no more
ESOPs, OTS proposes to define the tax-qualified than seven percent for the Option Plan and MRP (25 8 Eliminating the cross-reference in § 575.7(a)
plans as ESOPs, in order to simplify the regulations. percent of 28 percent equals seven percent) for the does not remove the requirement that MHCs must
5 67 FR 52010, at 52014. proposed issuance, plus all prior issuances. file business plans in connection with Minority
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Federal Register / Vol. 71, No. 139 / Thursday, July 20, 2006 / Proposed Rules 41181
575.7(b)(1). OTS proposes to keep the provide clarity and to reduce existing tangible capital exceeding ten percent.
reference at § 575.7(d)(6)(ii), however, regulatory burdens, OTS proposes to Again, OTS consistently has applied
because the cross-reference permits an amend § 575.8 to state that the this provision of the Conversion
applicant to engage in a Minority Stock restrictions set forth in proposed Regulations to Minority Stock Issuances.
Issuance that does not meet the mutual- sections 563b.500(a)(4) through The MHC Regulations do not include a
to-stock conversion priorities if the 563b.500(a)(14) apply in the context of corresponding provision, and OTS
applicant demonstrates that a non- a Minority Stock Issuance for only one proposes to amend the MHC
conforming issuance is appropriate. year after the Subsidiary Company Regulations to eliminate this disparity.
OTS proposes to revise and relocate engages in a Minority Stock Issuance Furthermore, OTS believes that the
§ 575.7(b)(2). This section provides that, that is conducted in accordance with presence of language addressing
unless OTS determines otherwise, the the purchase priorities set forth in the individual purchase limitations (and
limitations on the minimum and Conversion Regulations. Each such those involving individuals and their
maximum amounts of the estimated Minority Stock Issuance would start a associates) in sections 575.8(a)(3) and
price range required by 12 CFR new one-year period. (a)(4) is confusing. These provisions, to
563b.330 do not apply. OTS has applied In order to further clarify the MHC the extent they pertain to individuals
the limitations in 12 CFR 563b.330 in all Regulations and to eliminate certain and their associates, are unnecessary
Minority Stock Issuances, except in unintended inconsistencies between the because the Conversion Regulations
cases where the issuance involved only Conversion Regulations and the MHC provide the necessary limitations.10 In
stock benefit plans or an acquisition. Regulations, OTS is making three addition, the usefulness of such
Accordingly, OTS proposes to revise additional changes. First, the provisions in the MHC regulations is
this section to state that § 563b.330 will Conversion Regulations (at current limited, because the limitations in
apply to Minority Stock Issuances, § 563b.500(a)(3) and proposed §§ 575.8(a)(3) and (a)(4) do not include
unless OTS determines otherwise, and § 563b.500(a)(3)(ii)) include a separate shares acquired in the secondary
to recodify this provision, as modified, limitation regarding the size of MRPs. market. Accordingly, OTS proposes to
at § 575.7(a)(9). Notwithstanding the lack of a specific eliminate the reference to purchases by
OTS proposes to eliminate 12 CFR provision in the MHC Regulations individuals and their associates
575.7(b)(3), which requires stock addressing MRPs, OTS has consistently presently set forth in sections
offering materials to disclose the applied such a requirement in the 575.8(a)(3) and (a)(4) from the MHC
amount of any discount on minority context of Minority Stock Issuances, by Regulations.
stock, and how the amount of the applying the plan limits in the In addition, OTS is clarifying sections
discount was determined. The general Conversion Regulations to Minority 575.8(a)(3) through (a)(9) to make it
securities offering disclosure Stock Issuances.9 Therefore, OTS clear that the limitations on benefit
proposes to include a corresponding plans will be set in relation to the stock
requirements, which require disclosure
limitation on the size of MRPs in or equity outstanding at the close of the
of material information, are sufficient to
§ 575.8. most recent Minority Stock Issuance
address the issue of disclosure of the
Second, the Conversion Regulations made in conjunction with the
amount and reasons for any discount on
(at current § 563b.500(a)(4), and promulgation of a benefit plan. Also, in
minority stock.
proposed § 563b.500(a)(3)(i)) include a sections 575.8(a)(7), OTS is clarifying
C. Proposed Rule Changes at § 575.8 limitation on the combined size of the that, when a plan is adopted or
Regarding Stock Benefit Plans ESOP and MRP. The current MHC modified more than one year after a
Section 575.8 contains the current Regulations do not include an aggregate Minority Stock Issuance, the limitations
limitations for stock benefit plans in limitation on ESOPs and MRPs. in sections 575.8(a)(3) through (a)(6)
However, OTS has consistently applied may be exceeded to the extent that: (i)
MHC structures. OTS proposes to clarify
such a restriction to Minority Stock Awards in excess of those limitations
the § 575.8 provisions pertaining to
Issuances, based on the cross-reference are made with stock purchased in the
stock benefit plans in several respects.
to the Conversion Regulations. In order secondary market; and (ii) such
First, as with § 563b.500, OTS proposes
to conform the MHC Regulations to the purchases take place at least one year
to replace the references to tax-qualified
Conversion Regulations, OTS proposes after the most recent Minority Stock
and non-tax-qualified benefit plans in
to revise the MHC Regulations to Issuance that is made in substantial
§ 575.8(a) with references to a specific
explicitly include an aggregate conformity with the purchase priorities
type of plan (that is, the ESOP, Option
limitation on ESOPs and MRPs. In set out in part 563b.
Plan, or MRP). Second, OTS proposes to Similarly, in § 575.8(a)(8)(ii), OTS
include language in § 575.8 stating that addition to aggregate limitations on
ESOPs and MRPs, OTS proposes to proposes to clarify that when a plan is
the quantitative limitations regarding adopted or modified more than one year
the size of ESOPs, Option Plans, and retain the existing aggregate limitation
on the size of the Option Plans and after a Minority Stock Issuance, the
MRPs set forth in § 575.8 supersede the limitations in § 575.8(a)(8)(i) may be
related quantitative limits in proposed MRPs set forth at § 575.8(a)(9) of the
MHC Regulations. exceeded to the extent that: (i) Awards
sections 563b.500(a)(2) through in excess of those limitations are made
563b.500(a)(4). This change should Third, the Conversion Regulations
impose a higher limitation on the size with stock purchased in the secondary
reduce regulatory burden by eliminating market; and (ii) such purchases take
the need for Subsidiary Companies to of MRPs and a higher aggregate
limitation on the size of ESOPs and place at least one year after the most
consider both the MHC Regulations and recent Minority Stock Issuance that is
the Conversion Regulations to MRPs if the association in question has
made in substantial conformity with the
determine the permissible size of certain
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9 Because OTS proposes to simplify the MHC purchase priorities set out in part 563b.
stock benefit plans. Third, in order to Regulations to provide that institutions proposing In addition, in § 575.8(a)(9), OTS
Minority Stock Issuances would need to look only proposes to clarify that the limitation
Stock Issuances. Under proposed § 575.7(d), all at § 575.8 to determine the permissible size of their
procedural and substantive requirements in the stock benefit plans, repeating this restriction, and therein presents a separate limitation on
Conversion Regulations apply to Minority Stock the restrictions described below, in the MHC
Issuances, unless clearly inapplicable. Regulations is necessary. 10 See 12 CFR 563b.370 (2006).
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41182 Federal Register / Vol. 71, No. 139 / Thursday, July 20, 2006 / Proposed Rules
Option Plans and MRPs that applies to III. Solicitation of Comments institutions. First, the proposed rule
each Minority Stock Issuance. However, addresses the confusion surrounding
A. Solicitation of Comments on the
that limitation does not require compliance with OTS regulations
Proposed Amendments
reductions in otherwise permissible regarding stock benefit plans in
awards under an existing plan when OTS is requesting comment on all connection with mutual-to-stock
there is a subsequent Minority Stock aspects of the proposed regulation. conversions and Minority Stock
Issuance where the excess results from Specifically OTS seeks comment on: Issuances. These clarifications will
(1) Does the proposed regulation reduce the burden of complying with
intervening purchases by individuals in
accomplish its stated purposes? the OTS regulations on stock benefit
the secondary market. (2) Does the proposed regulation plans. Second, OTS has reduced the
As mentioned previously, OTS eliminate ambiguities regarding stock voting requirement to adopt stock
proposes to move the last sentence in benefit plans in mutual-to-stock benefit plans in MHC structures, which
current § 563b.500(a)(7), pertaining to conversions? reduces burden on institutions
mutual holding companies, to new (3) Does the proposed regulation establishing stock benefit plans. Finally,
§ 575.8(c). This sentence currently create any ambiguities that were not the proposed rule will reduce burden by
requires that a majority of the present in the current regulation? broadening the purchase limitations,
outstanding minority shares approve (4) Does the proposed regulation thereby promoting a wider distribution
any Option Plan and any MRP (in impose unnecessary regulatory burdens? of stock in a Conversion Offering or
addition to the requirement that a B. Solicitation of Comments Regarding Minority Stock Issuance. All of the
majority of all shares approve any the Use of Plain Language proposed changes are minor and should
Option Plan and any MRP). Because Section 722 of GLBA requires Federal not have a significant impact on small
OTS believes the current provisions are banking agencies to use ‘‘plain institutions. Accordingly, OTS has
unduly restrictive, OTS proposes two language’’ in all proposed and final determined that a Regulatory Flexibility
changes to the minority vote rules published after January 1, 2000. Analysis is not required.
requirement proposed at § 575.8(c). OTS invites comments on how to make D. Unfunded Mandates Reform Act of
First, OTS proposes to revise the this proposed rule easier to understand. 1995
provision to require a vote of the For example:
minority shareholders only during the (1) Have we organized the material to OTS has determined that the
first year after a Minority Stock Issuance suit your needs? If not, how could we proposed rule will not result in
that was conducted in accordance with better organize it? expenditures by state, local, or tribal
the mutual-to-stock conversion (2) Do we clearly state the governments or by the private sector of
subscription priorities. Second, OTS requirements in the rule? If not, how $100 million or more and that a
proposes to revise the provision to could we state the rule more clearly? budgetary impact statement is not
require approval (during the first year (3) Does the rule contain technical required under section 202 of the
after a Minority Stock Issuance) by a language or jargon that is not clear? If Unfunded Mandates Reform Act of
majority of the minority shares voting so, what language requires clarification? 1995, Public Law 104–4 (Unfunded
(4) Would a different format (grouping Mandates Act). The proposed rule
on the issue of adoption of the plan,
and order of sections, use of headings, would make certain changes that should
rather than a majority of the outstanding
paragraphing) make the rule easier to reduce burdens on savings associations.
minority shares. understand? If so, what changes to the First, the proposed rule clarifies OTS
II. Maximum Purchase Limitation format would make the rule easier to regulations regarding stock benefit plans
understand? in connection with mutual-to-stock
OTS proposes to increase an conversions and Minority Stock
institution’s choices regarding V. Regulatory Findings
Issuances, which should reduce the
maximum purchase limitations. Section A. Paperwork Reduction Act burden of complying with the OTS
563b.385 addresses maximum purchase OTS has determined that this regulations on stock benefit plans.
limitations for subscriptions in mutual- proposed rule does not involve a change Second, OTS has reduced the voting
to-stock conversions. Currently, to collections of information previously requirement to adopt stock benefit plans
converting savings associations are approved under the Paperwork in MHC structures, which reduces
permitted to set a maximum purchase Reduction Act (44 U.S.C. 3501 et seq.). burden on institutions establishing
limitation between one and five percent stock benefit plans. Finally, the
of the stock sold. OTS has received B. Executive Order 12866 proposed rule will reduce burden by
many requests to waive the purchase The Director of OTS has determined broadening the purchase limitations, to
limitations. This is particularly that this proposed rule does not promote a wider distribution of stock in
appropriate in the case of larger constitute a ‘‘significant regulatory a Conversion Offering or Minority Stock
offerings, where a one percent limit action’’ for purposes of Executive Order Issuance. All of the proposed changes
would constitute a very large 12866. are minor and should not have a
investment. Because OTS’s policy is to significant impact on small institutions.
C. Regulatory Flexibility Act
achieve as widespread a distribution of Accordingly, a budgetary impact
Pursuant to section 605(b) of the statement is not required under section
stock as possible (see § 563b.395), the
Regulatory Flexibility Act (RFA) (5 202 of the Unfunded Mandates Act.
request for a waiver to set a smaller U.S.C. 601), the Director certifies that
maximum purchase limitation is often List of Subjects
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this proposed rule will not have a
granted. OTS proposes to amend this significant economic impact on a
section to permit smaller purchase 12 CFR Part 563b
substantial number of small entities.
limitations. The proposed rule would make certain Reporting and recordkeeping
changes that should reduce burdens on requirements, Savings associations,
all savings associations, including small Securities.
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Federal Register / Vol. 71, No. 139 / Thursday, July 20, 2006 / Proposed Rules 41183
12 CFR Part 575 number of shares that you issued in the months after the conversion. If a plan
Administrative practice and conversion. adopted in conformity with paragraph
(4) No individual receives more than (a) is amended more than 12 months
procedure, Capital, Holding companies,
25 percent of the shares under your following your conversion, your
Reporting and recordkeeping
ESOP, MRP, or Option Plan. shareholders must ratify any material
requirements, Savings associations, (5) Your directors who are not your
Securities. deviations to the requirements in
officers do not receive more than five paragraph (a) of this section.
Accordingly, the Office of Thrift percent of the shares of your MRP or
Supervision proposes to amend Chapter Option Plan individually, or 30 percent PART 575—MUTUAL HOLDING
V of title 12 of the Code of Federal of any such plan in the aggregate. COMPANIES
Regulations, as set forth below. (6) Your shareholders approve each of
4. The authority citation for part 575
the Option Plan and the MRP by a
PART 563b—CONVERSIONS FROM continues to read as follows:
majority of the total votes eligible to be
MUTUAL TO STOCK FORM cast at a duly called meeting before you Authority: 12 U.S.C. 1462, 1462a, 1463,
establish or implement the plan. You 1464, 1467a, 1828, 2901.
1. The authority citation for part 563b
continues to read as follows: may not hold this meeting until six § 575.7 [Amended]
months after your conversion.
Authority: 12 U.S.C. 1462, 1462a, 1463, (7) When you distribute proxies or 5. Amend § 575.7(a) by removing the
1464, 1467a, 2901; 15 U.S.C. 78c, 78l, 78m, first sentence.
78n, 78w.
related material to shareholders in
connection with the vote on a plan, you 6. In § 575.7(b), redesignate paragraph
§ 563b.385 [Amended] state that the plan complies with OTS (b)(2) as (a)(9) and remove the word
regulations and that OTS does not ‘‘not’’ in that paragraph, remove the
2. Amend § 563b.385(a) by removing endorse or approve the plan in any way. remaining text in paragraph (b),
the phrase ‘‘between one percent and’’ You may not make any written or oral redesignate paragraphs (c), (d), and (e)
and adding the words ‘‘up to’’ in place representations to the contrary. as paragraphs (b), (c), and (d), and revise
thereof. (8) You do not grant stock options at newly designated paragraph (d) to read
3. Revise § 563b.500 to read as less than the market price at the time of as follows:
follows: grant. (d) Procedural and substantive
(9) You do not fund the Option Plan requirements. The procedural and
§ 563b.500. What management stock
benefit plans may I implement? or the MRP at the time of the substantive requirements of 12 CFR part
conversion. 563b shall apply to all mutual holding
(a) During the 12 months after your (10) Your plan does not begin to vest company stock issuances under this
conversion, you may implement a stock earlier than one year after shareholders section, unless clearly inapplicable, as
option plan (Option Plan), an employee approve the plan, and does not vest at determined by OTS. For purposes of
stock ownership plan or other tax- a rate exceeding 20 percent per year. this paragraph (d), the term conversion
qualified employee stock benefit plan (11) Your plan permits accelerated as it appears in the provisions of part
(collectively, ESOP), and a management vesting only for disability or death, or if 563b of this chapter shall refer to the
recognition plan (MRP), provided you you undergo a change of control. stock issuance, and the term converted
meet all of the following requirements. (12) Your plan provides that your or converting savings association shall
(1) You disclose the plans in your executive officers or directors must refer to the savings association
proxy statement and offering circular exercise or forfeit their options in the undertaking the stock issuance.
and indicate in your offering circular event the institution becomes critically 7. Revise paragraphs (a)(3) through
that there will be a separate shareholder undercapitalized (as defined in § 565.4 (a)(9) of § 575.8 to read as follows:
vote on the Option Plan and the MRP at of this chapter), is subject to OTS
least six months after the conversion. § 575.8 Contents of stock issuance plans.
enforcement action, or receives a capital
No shareholder vote is required to directive under § 565.7 of this chapter. (a) Mandatory provisions. * * *
implement the ESOP. Your ESOP must (13) You file a copy of the proposed * * * * *
be tax-qualified. Option Plan or MRP with OTS and (3) Provide that all employee stock
(2) Your Option Plan does not certify to OTS that the plan approved by ownership plans (ESOPs) must not
encompass more than ten percent of the the shareholders is the same plan that encompass, in the aggregate, more than
number of shares that you issued in the you filed with, and disclosed in, the either 4.9 percent of the outstanding
conversion. proxy materials distributed to shares of the savings association’s
(3)(i) Your ESOP and MRP do not shareholders in connection with the common stock or 4.9 percent of the
encompass, in the aggregate, more than vote on the plan. savings association’s stockholders’
ten percent of the number of shares that (14) You file the plan and the equity at the close the proposed
you issued in the conversion. If you certification with OTS within five issuance.
have tangible capital of ten percent or calendar days after your shareholders (4) Provide that all ESOPs and
more following the conversion, OTS approve the plan. management recognition plans (MRPs)
may permit your ESOP and MRP to (b) You may provide dividend must not encompass, in the aggregate,
encompass, in the aggregate, up to 12 equivalent rights or dividend more than either 4.9 percent of the
percent of the number of shares issued adjustment rights to allow for stock outstanding shares of the savings
in the conversion; and splits or other adjustments to your stock association’s common stock or 4.9
(ii) Your MRP does not encompass in your ESOP, MRP, and Option Plan. percent of the savings association’s
rwilkins on PROD1PC63 with PROPOSAL
more than three percent of the number (c) The restrictions in paragraph (a) do stockholders’ equity at the close of the
of shares that you issued in the not apply to plans implemented more proposed issuance. However, if the
conversion. If you have tangible capital than 12 months after the conversion, savings association’s tangible capital
of ten percent or more after the provided that materials pertaining to equals at least ten percent at the time of
conversion, OTS may permit your MRP any shareholder vote regarding such implementation of the plan, OTS may
to encompass up to four percent of the plans are not distributed within the 12 permit such ESOPs and MRPs to
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41184 Federal Register / Vol. 71, No. 139 / Thursday, July 20, 2006 / Proposed Rules
encompass, in the aggregate, up to 5.88 Officer and the votes cast by stockholders other than
percent of the outstanding common Institution size director the mutual holding company.
stock or stockholders’ equity at the close purchases
(percent) Dated: July 11, 2006.
of the proposed issuance. By the Office of Thrift Supervision.
(5) Provide that all MRPs must not $250,000,001–300,000,000 ...... 30 John M. Reich,
encompass, in the aggregate, more than $300,000,001–350,000,000 ...... 29
either 1.47 percent of the common stock Director.
$350,000,001–400,000,000 ...... 28
of the savings association or 1.47 $400,000,001–450,000,000 ...... 27 [FR Doc. E6–11278 Filed 7–19–06; 8:45 am]
percent of the savings association’s $450,000,001–500,000,000 ...... 26 BILLING CODE 6720–01–P
stockholders’ equity at the close of the Over $500,000,000 ................... 25
proposed issuance. However, if the
savings association’s tangible capital is (ii) The percentage limitations DEPARTMENT OF TRANSPORTATION
at least ten percent at the time of contained in paragraph 8(i) may be
implementation of the plan, OTS may exceeded provided that all stock Federal Aviation Administration
permit MRPs to encompass, in the acquired by insiders and associates of
aggregate, up to 1.96 percent of the insiders or awarded under all MRPs and 14 CFR Part 33
outstanding shares of the savings Option Plans in excess of those [Docket No. FAA–2006–25375; Notice No.
association’s common stock or 1.96 limitations is acquired in the secondary 06–09]
percent of the savings association’s market. If acquired for such awards on
the secondary market, such acquisitions RIN 2120–AI73
stockholders’ equity at the close of the
proposed issuance. must begin no earlier than one year after
the close of the proposed issuance or Airworthiness Standards; Engine Bird
(6) Provide that all stock option plans Ingestion
(Option Plans) must not encompass, in any subsequent issuance that is made in
the aggregate, more than either 4.9 substantial conformity with the AGENCY: Federal Aviation
percent of the savings association’s purchase priorities set forth in part Administration (FAA), DOT.
outstanding common stock at the close 563b. ACTION: Notice of proposed rulemaking
of the proposed issuance or 4.9 percent (iii) In calculating the number of (NPRM).
of the savings association’s shares held by insiders and their
associates under this provision, shares SUMMARY: The FAA is proposing to
stockholders’ equity at the close of the
awarded but not delivered under an amend the aircraft turbine engine type
proposed issuance.
(7) A plan modified or adopted no ESOP, MRP, or Option Plan that are certification standards to reflect recent
earlier than one year after the close of attributable to such persons shall not be analysis of the threat flocking birds
the proposed issuance, or any counted as being acquired by such present to turbine engine aircraft. These
subsequent issuance that is made in persons. proposed changes would also
substantial conformity with the (9) Provide that the amount of harmonize FAA, Joint Aviation
purchase priorities set forth in Part common stock that may be Authority (JAA), and European Aviation
563b, may exceed the percentage encompassed under all Option Plans Safety Agency (EASA) bird ingestion
limitations contained in paragraphs 3 and MRPs must not exceed, in the standards for aircraft turbine engines
through 6 (plan expansion), subject to aggregate, 25 percent of the outstanding type certificated by the United States
the following two requirements. First, common stock held by persons other and the JAA/EASA countries, and
all common stock awarded in than the savings association’s mutual simplify airworthiness approvals for
connection with any plan expansion holding company parent at the close of import and export. These proposed
must be acquired for such awards in the the proposed issuance. changes are necessary to establish
8. Add a new paragraph (c) to § 575.8, uniform international standards that
secondary market. Second, such
to read as follows. provide an adequate level of safety for
acquisitions must begin no earlier than (c) Applicability of provisions of
when such plan expansion is permitted aircraft turbine engines with respect to
§ 563b.500(a) to minority stock the current large flocking bird threat.
to be made. issuances. Notwithstanding § 575.7(d) of
(8)(i) Provide that the aggregate DATES: Send your comments on or
this part, §§ 563b.500(a)(2) and (3) do before September 18, 2006.
amount of common stock that may be
not apply to minority stock issuances, ADDRESSES: You may send comments
encompassed under all Option Plans
because the permissible sizes of ESOPs, [identified by Docket Number FAA–
and MRPs, or acquired by all insiders of
MRPs, and Option Plans in minority 2006–25375] using any of the following
the association and associates of
stock issuances are subject to each of the methods:
insiders of the association, must not
requirements set forth at paragraphs • DOT Docket Web site: Go to http://
exceed the following percentages of
(a)(3) through (a)(9) of this section. dms.dot.gov and follow the instructions
common stock or stockholders’ equity of
Sections 563b.500(a)(4) though (a)(14) for sending your comments
the savings association, held by persons
apply for one year after the savings electronically.
other than the savings association’s
association engages in a minority stock • Government-wide rulemaking Web
mutual holding company parent at the
issuance that is conducted in site: Go to http://www.regulations.gov
close of the proposed issuance:
accordance with the purchase priorities and follow the instructions for sending
Officer and set forth in part 563b. In addition to the your comments electronically.
director shareholder vote requirement for Option • Mail: Docket Management Facility;
Institution size purchases Plans and MRPs set forth at U.S. Department of Transportation, 400
rwilkins on PROD1PC63 with PROPOSAL
(percent) § 563b.500(a)(6), any Option Plans and Seventh Street, SW., Nassif Building,
MRPs put to a shareholder vote during Room PL–401, Washington, DC 20590–
$50,000,000 or less .................. 35
$50,000,001–100,000,000 ........ 34 the year after a minority stock issuance 0001.
$100,000,001–150,000,000 ...... 33 that is conducted in accordance with • Fax: 1–202–493–2251.
$150,000,001–200,000,000 ...... 32 the purchase priorities set forth in part • Hand Delivery: Room PL–401 on
$200,000,001–250,000,000 ...... 31 563b must be approved by a majority of the plaza level of the Nassif Building,
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