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4000 - Advisory Opinions
Definition of "Representative or Nominee"
under Depository Institutions Management Interlocks Act
FDIC-81-6
February 24, 1981
Pamela E. F. LeCren, Attorney
The following opinion is in connection with your request to the
Office of the Comptroller of the Currency for a determination as to
whether or not you and *** may join the board of directors of ***
without violating the Depository Institutions Management Interlocks Act
(12 U.S.C. 3201 et seq., "Interlocks Act"). According
to your letter to the Comptroller's office, you and *** are presently
serving as vice presidents of ***. Assuming that *** has assets in
excess of $20 million and that the two banks are not affiliated, we are
in agreement with the Comptroller's response that neither you nor ***
may join the board of directors of ***. This result is due to the fact
that *** and *** are located in the same standard metropolitan
statistical area ("SMSA"). Under section 3201(1) of the
Interlocks Act, a person is prohibited from serving two nonaffiliated
banks with offices located in the same SMSA if either bank has total
assets in excess of $20 million.
As the Comptroller's letter goes on to point out, a prohibited
management official interlock can arise where an individual who is a
management official at one bank has a "representative or nominee"
who is serving as a management official at another bank. Section
348.2(k) of FDIC's regulations implementing the Interlocks Act defines
the term "representative or nominee" to mean
a person who serves as a management official and has an express
or implied obligation to act on behalf of another person with respect
to management responsibilities. Whether a person is a
"representative or nominee" depends upon the facts in individual
cases. The
{{4-28-89 p.4068}}appropriate Federal supervisory agency
or agencies will determine, after giving the affected persons the
opportunity to respond whether a person is a "representative or
nominee". Certain relationships (including family, employment, and
agency relationships), or the ability and exercise of ability by a
shareholder of a depository organization to elect a director, may be
evidence of such an express or implied obligation. For the purposes of
this subsection, person shall include only natural persons.
As you can see from this definition, a person may be determined to
be another's "representative or nominee" as a result of the
ability and exercise of ability to vote a director into office. Whether
or not such ability and exercise thereof does create a representative
relationship depends, however, upon the facts.
According to your letter to the Comptroller's office, you, members
of your family, ***, and members of his family own a total of 2,817
shares of stock in *** or 28.17 percent of the total outstanding 10,000
shares. The individual breakdown of share ownership is as follows:
| *** |
1,211 |
|---|
| *** |
261 |
| *** |
495 |
|
1,967 |
–19.67%
of the total outstanding
shares |
| *** |
30 |
| *** |
75 |
| *** |
95 |
| *** |
650 |
|
850 |
–8.5%
of the total outstanding shares
|
The entire 2,817 shares which were originally owned by ***
(grandfather to you and ***) were distributed at his death as set out
above.
We do not have any reason at this time to find that the members of
the *** and *** families act in concert with each other in voting their
stock or that each family votes as a family unit or to determine that
you act in concert with your cousin, ***, to vote the stock you both
individually own. We therefore will assess the possibility of whether
your stock ownerships give rise to a management official interlock in
view of the amounts individually owned (*** -12.11 percent and *** -.3
percent).
*** stock ownership does not, in our opinion, raise a question under
the regulations due to the extremely small amount of stock involved.
With reference to your stock ownership, the FDIC is not prepared at
this time to say that an individual who votes 12.11 percent of the
stock of a bank necessarily has a representative or nominee
on the board merely by virtue of his or her stock ownership. We have
had occasion to determine that ownership of a significantly larger
percentage of stock in a bank will give rise to a representative
relationship especially where the stockholder is an active officer or
director of another bank. Suffice it to say that the amount of stock
under consideration does not itself pose immediate concern. This is not
to say that we would not find an individual placed in office by you,
your family, or the *** and *** families acting together to be your
representative or nominee, *** representative or nominee, or a
representative or nominee of both of you depending upon the facts.
Relevant facts would include the individual's relationship to you or
***, the circumstances surrounding the election (i.e., if the entire
amount of stock is voted as a block at your direction or *** direction
and no other person or group of persons controls a greater percentage
of stock); practices subsequent to the election which would show the
two banks to act in concert or in response to one another in setting
policies; etc.
It is difficult to give you a more definite response at this time
other than the one set forth. We can only say that your stock ownership
should pose no problem under the Interlocks Act absent some additional
facts of the sort referred to above. We hope that this
{{4-28-89 p.4069}}information will be of some assistance
to you and apologize for the delay in responding; we unfortunately have
no record of having received the referral from the Comptroller's
office.
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