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5000 - Statements of Policy
{{10-31-96 p.5061}}
STATEMENT OF POLICY REGARDING USE OF OFFERING CIRCULARS
IN CONNECTION WITH PUBLIC DISTRIBUTION OF BANK SECURITIES
This statement of policy concerns the use of offering
circulars in connection with the public distribution of bank securities
by insured state nonmember banks. The FDIC is issuing this statement in
view of its statutory duties relating to capital adequacy, the safety
and soundness of insured banks, and its review responsibilities with
respect to mutual-to-stock conversions of FDIC-regulated financial
institutions. The statement of policy also is intended to protect
insured state nonmember banks against the risk of serious capital loss
or litigation that could result if bank securities are sold in
violation of the antifraud provisions of the federal securities
laws. 1
The issuance of securities by banks is subject to the antifraud
provisions of the federal securities laws which require full and
adequate disclosure of material facts. 2
It is the FDIC's goal to have banks comply with the antifraud
provisions of the federal securities laws in a manner which meets the
needs of investors, depositors and issuers. It is the responsibility of
bank management and the promoters of a bank in organization to
understand these requirements and utilize an offering circular in
appropriate situations. 3
In view of the FDIC's statutory duty to determine capital adequacy
when passing upon an application for federal deposit insurance, the
FDIC reviews whether public investors have been provided sufficient
disclosure of material facts by an insured state nonmember bank in
organization. The FDIC also reviews any offering circular used by a
bank operating under an administrative order, or used in a
mutual-to-stock conversion as part of the application process.
The FDIC believes that every insured state nonmember bank or bank in
organization publicly offering its securities, including offerings
under preemptive rights, should use an offering circular.
(1) The offering circular should include the following statements
in capital letters printed in boldfaced type:
THESE SECURITIES ARE NOT DEPOSITS. THESE SECURITIES ARE NOT INSURED
BY THE FDIC OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION NOR HAS THE FEDERAL DEPOSIT
INSURANCE CORPORATION PASSED ON THE ADEQUACY OR ACCURACY OF THIS
OFFERING CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
(2) The offering circular should indicate in capital
letters and boldfaced type, if debt securities are offered:
{{10-31-96 p.5062}}
THESE OBLIGATIONS ARE SUBORDINATE TO THE CLAIMS OF
DEPOSITORS AND OTHER CREDITORS AS MORE FULLY DESCRIBED IN THE OFFERING
CIRCULAR.
(3) The offering circular should identify the offeror and
principal business address; state the title, number, aggregate dollar
amount and per unit price of securities offered; describe the
subscription rights and limitations, risk factors, business of the
offeror, use of proceeds and capital structure, management and
principal shareholders, compensation and business transactions,
material features of the securities offered, dividend policy, the plan
of distribution, and legal or administrative proceedings; provide
selected financial data for each of the last five fiscal years and
interim periods, and a management's discussion and analysis of the
results of operation for at least the past two years and the interim
periods; and present comparative financial statements, footnotes and
schedules of the bank.
The financial statements, footnotes and schedules for each fiscal
year and interim period presented should be at least as inclusive as
that required by the annual disclosure statement for insured state
nonmember banks (12 CFR part
350). Banks that have an annual audit of financial statements
by an independent public accountant, which the FDIC strongly
encourages, should include the audited financial statements in the
offering circular. Banks are encouraged to include an introductory
"plain English" summary of the essential information contained in
the offering circular, along with a profile of the terms of the offer
and the telephone number of the principal executive office of the bank.
Banks in organization should disclose the expected relationship that
the institution will have with each promoter, organizer, proposed
director and executive officer, including compensation, business
transactions and stock option or award plans. A balance sheet and
statement of organizational and pre-operating expenses, a pro forma
capitalization table and a business plan should be provided as of the
latest practicable date for the bank in organization.
(4) The offering circular should be accompanied by a subscription
order form that states the maximum subscription price per share of
capital stock, the maximum and minimum number of shares that may be
purchased pursuant to subscription rights, the time period within which
the subscription rights must be exercised, any withdrawal rights, any
required method of payment, and the escrow arrangements. The
subscription order form should provide specifically designated blank
spaces for dating and signing. The order form should contain an
acknowledgement by the subscriber that he or she received an offering
circular prior to signing.
Sales of securities issued by insured state nonmember banks should
be conducted in a segregated area of the depository institutions'
offices, whenever possible. Offers and sales should be conducted by
authorized personnel, excluding tellers, in places where deposits are
not ordinarily received. An insured depository institution should
obtain a signed and dated certification from the purchaser confirming
that the purchaser has read and understands the disclosures set out in
paragraphs (1) and (2) above. The certification should contain a
separate place where a purchaser should indicate, by initialing or by
comparable method, that the purchaser is aware of the absence of
deposit insurance covering the securities being
sold. 4
Any written advertisement, letter, announcement, film, radio, or
television broadcast which refers to a present or proposed public
offering of securities covered by this statement of policy should
contain: (a) A statement that the announcement is neither an offer to
sell nor a solicitation of an offer to buy any of the securities and
that the offer may be made only by an offering circular, (b) the names
and addresses of the bank and the lead underwriter, (c) the title of
the security, the dollar amount and the number of securities being
offered, and the per unit offering price to the public, (d)
instructions for obtaining an offering circular and (e) a statement
that the securities are neither insured nor approved by the
FDIC.
{{4-30-97 p.5062.01}}
The FDIC uses the Office of Thrift Supervision's conversion
regulations as a frame of reference in reviewing the form and content
of offering circulars used in connection with mutual-to-stock
conversions. Banks utilizing an offering circular in connection with a
mutual-to-stock conversion should consult 12 CFR 563b.102 (Form
OC--Offering Circular).
The disclosure goals of this statement of policy will be met if:
(A) The offer and sale satisfy the information and disclosure
requirements of SEC Regulation A--Conditional Small Issues Exemption
(17 CFR part 230), or Regulation S-B (Small Business Issuers) (17 CFR
part 228), or
(B) The securities are offered and sold in a transaction that
satisfies the requirements of SEC Regulation D (17 CFR
230.501--230.506), relating to private offers and/or sales to
accredited investors, or
(C) The securities are offered and sold in a transaction that
satisfies the informational requirements of SEC Rule 701 (17 CFR
230.701) for certain employee benefit plans, or
(D) The securities are offered and sold in a transaction that
satisfies the information and disclosure requirements of OTS's part
563g--Securities Offerings (12 CFR 563g).
Inasmuch as the statement of policy does not impose the burden of
filing and awaiting regulatory approval, and allows for certain
flexibility, the FDIC believes it will be beneficial to small banks.
Banks or their legal counsel may contact the FDIC's Registration
and Disclosure Section, Division of Supervision, for a copy of
Suggested Form and Content for Offering Circular (Existing Bank) or
Suggested Form and Content for Offering Circular (Bank in
Organization). The address is Registration and Disclosure Section,
Divison of Supervision, 550 17th Street N.W., Washington, D.C. 20429.
(202) 898-8902.
By order of the Board of Directors, dated at Washington, DC, this
13th day of August, 1996.
[Source: 44 Fed. Reg. 39381, July 6, 1979; 61 Fed. Reg. 46808,
September 5, 1996]
[The page following this is 5065.]
1 The FDIC recognizes the efforts of certain states in
regulating the offering of securities by insured state nonmember banks
and encourages the adoption of regulations and review procedures at the
state level; however, because of a lack of uniformity among all states,
FDIC considers the adoption of this statement of policy which will
apply to all insured State nonmember banks appropriate. Go Back to Text
2 Section 17(a) of the Securities Act of 1933
(15 U.S.C. § 77q(a)) and Rule
10b-5 (17 CFR
§ 240.10b-5) of the Securities and Exchange Commission
("SEC") promulgated under section 10(b) of the Securities
Exchange Act of 1934 (15 U.S.C.
§ 78j(b)). Go Back to Text
3 SEC Rule 10b-5 (17 CFR § 240.10b-5) makes it unlawful in
connection with the offer or sale of a security: * * *
(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit to
state a material fact necessary in order to make the statements made,
in the light of the circumstances under which they were made, not
misleading, or
(c) To engage in any act, practice, or course of business which
operates or would operate as a fraud of deceit upon any person, in
connection with the purchase or sale of any security. Go Back to Text
4Sales of securities on bank premises are also subject to the
guidance contained in the
"Interagency Statement on
Retail Sales of Nondeposit Investment Products" dated
February 15, 1994. Go Back to Text
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