subsidiary insured institution in the light of its financial condition and prospects.

(3) The Corporation will not approve any application for approval of any such act or transaction if a State authority or any other agency of the United States, having jurisdiction thereof, has informed the Corporation that any laws applicable thereto have not been complied with. In such case, approval will be withheld until the Corporation is satisfied that compliance has been effected.

(Sec. 402, 48 Stat. 1256, as amended; 12 U.S.C. 1725) [33 F.R. 3323, Feb. 22, 1968, as amended at 34 F.R. 7068, Apr. 30, 1969] § 584.7 Payment of dividends to a diversified savings and loan holding company.

(a) Prohibitions. Except as provided in paragraph (b) of this section, no diversified savings and loan holding company or any subsidiary thereof may accept, use, or receive the benefit of any dividend on stock from a subsidiary insured institution, and such insured institution may not declare or pay any dividend on its stock to such holding company or subsidiary if the Corporation, within the 30-day notice period specified in § 584.5, objects to such dividend as being injurious to the insured institution in the light of its financial condition and prospects.

(b) Nonapplicability. The prohibition of paragraph (a) of this section does not apply to a diversified savings and loan holding company or any subsidiary

thereof if the Corporation finds that, excluding such company's subsidiary insured institution, such company's consolidated net income available for interest for its preceding fiscal year was twice its consolidated debt service requirements for the 12-month period next succeeding such fiscal year. § 584.8

Claim of diversified savings and loan holding company status.

(a) Claim of diversified status. Any savings and loan holding company desiring to claim status as a diversified savings and loan holding company shall file with the Corporation a statement asserting such claim, supported by completed schedules in the form set forth below. Such claim shall be filed with the Corporation by transmitting the original and one copy of such statement, together with the supporting schedules, to the Director, Office of Examinations and Supervision, Federal Home Loan Bank

3. The data required by schedules A and B above and supporting exhibits are to be prepared in accordance with generally accepted accounting principles, except as otherwise required by the Corporation. All subsidiaries, however, shall be consolidated, and consolidating statements shall be furnished as exhibits.

(b) Determination by the Corporation. Any savings and loan holding company which files a bona fide statement of claim, supported by the required schedules, containing reasonable supporting information, pursuant to paragraph (a) of this section, will be presumed to have status as a diversified savings and loan holding company until such time as notice of a determination to the contrary is given by the Corporation. Any savings and loan holding company which does not file such a claim will be presumed not to have status as a diversified savings and loan holding company.

§ 584.9 Prohibited acts.

(a) Control of mutual insured institution. No savings and loan holding company or any subsidiary thereof, or any director, officer, or employee of a savings and loan holding company or subsidiary thereof, or person owning, controlling, or holding with power to vote, or holding proxies representing, more than 25 percent of the voting shares of such holding company or subsidiary, may hold, solicit, or exercise any proxies in respect of any voting rights in a mutual insured institution.

(b) Management interlocks. No director or officer of a savings and loan holding company, or any person owning, controlling, or holding with power to vote, or holding proxies representing, more than 25 percent of the voting shares of such holding company may:

(1) Continue, after May 15, 1968, to serve at the same time as a director, officer, or employee of an insured institution or another savings and loan holding company, not a subsidiary of such holding company, except with the prior written approval of the Corporation. The Corporation will grant such approval if, in its opinion, the continuance of such service would be in the public interest.

(2) Acquire control, or retain control for more than 2 years after February 14, 1968, of any insured institution not a subsidiary of such holding company.

(c) Convicted persons. No individual who has been convicted of any criminal offense involving dishonesty or breach

of trust may serve or act as a director, officer, or trustee of, or become a partner in, any savings and loan holding company, except with the prior written approval of the Corporation.

(d) Applications for approval. Applications for Corporation approval required by this section, shall contain a full statement of the reasons in support thereof. Such applications shall be filed with the Corporation by transmitting the original and one copy to the Director, Office of Examinations and Supervision, Federal Home Loan Bank Board, Washington, D.C. 20552, and one copy to the Supervisory Agent.

§ 584.10 Statements, reports, and notices to be filed.

This

(a) Registration statements and annual reports for savings and loan holding companies under § 584.1—(1) Registration statements—(i) H-(b) 10. statement shall be used for registration by every savings and loan holding company, including subsidiary savings and loan holding companies, except trusts (other than a business trust) and savings and loan holding companies which file H-(b) 3, H-(b) 4, or H-(b) 5 registration statements.

(ii) H-(b) 3. Corporation as trustee of a trust. This statement (rather than H(b) 10) shall be used for registration by any Corporation which is a savings and loan holding company by virtue of its control, in a trustee capacity, of an insured institution.

(iii) H-(b) 4; Creditor as savings and loan holding company. This statement (rather than H-(b)10) may be used for registration by any company which is a creditor and is a savings and loan holding company only by virtue of the acquisition of control of an insured institution or another savings and loan holding company pursuant to a pledge or hypothecation to secure a loan, or in connection with the liquidation of a loan, made in the ordinary course of business.

(iv) H-(b) 5. Voting trust as savings and loan holding company. This statement (rather than H-(b) 10) shall be used for registration by any voting trust which is a savings and loan holding company by virtue of its control of an insured institution or another savings and loan holding company.

(2) Annual report. H−(b) 11. This report shall be used by every registered savings and loan holding company, including subsidiary savings and loan hold

ing companies, except trusts (other than business trusts) and savings and loan holding companies filing H-(b)3, H-(b) 4, and H-(b) 5 registration statements.

(3) H-(b) 12. This report shall be used by every registered savings and loan holding company which is required to file an H-(b) 11.

NOTE: These reporting requirements have been approved by the Bureau of the Budget.

(b) H-(ƒ)—Notice of proposed dividend declaration under § 584.5. This notice shall be filed by a subsidiary insured institution for the purpose of giving the Corporation advance notice of the proposed declaration of any dividend on its guaranty, permanent, or other nonwithdrawable stock.

(c) General instructions-(1) Preparation of statements and notices. The statements and notices required by this section are intended to serve as outlines of information to be submitted hereunder and to be used for guidance in the preparation and organization of such information.

(2) Requirements as to paper and printing. (i) Material filed with the Corporation should be prepared, insofar as practicable, on good quality, unglazed, white paper 81⁄2 inches in width and not more than 13, nor less than 11, inches in length. However, financial statements may be on larger paper if folded to that size.

(ii) Insofar as practicable, such material, including all papers and documents filed with the Corporation, should be printed, lithographed, mimeographed, or typewritten. However, such material may be prepared or reproduced by any process which produces clear and easily readable copies suitable for a permanent record. Debits in credit categories and credits in debt categories shall be clearly designated as such.

(iii) The text of such material should be in roman type not smaller than 10point modern type. However, to the extent necessary for convenient presentation, financial statements and other statistical or tabular data and the notes thereto may be in type no smaller than 8-point modern type.

(3) Riders; inserts. Riders should not be used. If the material is typed on a printed form, and the space provided for the answer to any given item is insufficient, reference should be made in such space to a full insert page or pages

on which the item number, caption, and required information are furnished.

(4) Binding of material. Each copy of such material filed with the Corporation should be bound in one or more parts, without stiff covers. Each copy of such material should also be bound on the left side in such a manner as to leave the reading matter legible.

(5) Amendments. All amendments to any material submitted should be clearly identified as amendments, numbered consecutively, and should comply with all requirements applicable to the original material, including a signature page.

(6) Additional information. In addition to information expressly required, material submitted should include such qualifications or further information as may be necessary under the circumstances to prevent such required information from being misleading.

(7) Incorporation by reference. (i) Information contained in any part of a form, application, statement, notice, or report previously or concurrently filed with the Corporation or the Board (other than in exhibits) may be incorporated by reference in connection with any item of information required hereunder.

(ii) Information in corporated by reference shall be clearly identified by an express reference in the material submitted at the place where such information is required. Information should not be incorporated by reference in any case where such incorporation would render the material submitted incomplete, unclear, or confusing.

(Sec. 402, 48 Stat. 1256; 12 U.S.C. 1725, Reorg. Plan No. 3 of 1947; 3 CFR, 1943-1948 Comp., p. 1071) [33 F.R. 3323, Feb. 22, 1968, as amended at 34 F.R. 3796, Mar. 5, 1969; 34 F.R. 9209, June 11, 1969]

Any person who has made an application or petition to the Board pursuant to any provision of this subchapter may request a hearing thereon: Provided, That such application or petition has been denied or disapproved, in whole or part, by the Board. At any time after the filing of any such application or petition and before consideration thereof by the Board, any interested person may request a hearing upon such application or petition. The Board may order a hearing in connection with the consideration of any matter arising under any provision of the regulations in this subchapter and under section 408 of the National Housing Act, as amended, whether or not any request therefor has been made by any person. The Board may deny any request for, or dispense with, any hearing for which this section provides when, in its judgment, no need therefor exists.

NOTE: The reporting and recordkeeping requirements of the regulations in this document have been approved by the Bureau of the Budget in accordance with the Federal Reports Act of 1942.

PART 589-BOARD RULINGS

§ 589.1

Control of an insured institution by a savings and loan holding company through proxies.

(a) The question has been raised whether, in the Board's view, a bare revocable proxy obtained from the owner of an amount of stock in excess of the statutorily specified percentage constitutes "control" of an association within the meaning of either the prior or the present definitions of section 408 of the National Housing Act, as amended.

(b) Since the "control" definition provisions, like any statutory provisions, are to be interpreted in the light of the purposes toward which the whole enactment was directed, the Board rules that such a proxy does not constitute "control" of an association unless accompanied by some further indicia of independent power to determine the association's directors or officers or policies. A bare revocable proxy can be canceled at will and without adverse legal consequences by the stockowner who gave the proxy; the proxy holder is his agent and subject to his control and direction. Under such

circumstances, the proxy holder does not control the association.

however,

(c) Other circumstances, when added to mere possession of a proxy, may be enough to show that the holder is in control of the institution. If the proxy is irrevocable for a certain period, or has been already exercised to change the composition of the directors or officers or otherwise to affect the policies and decisions of the institution, or numerous proxies have been obtained from a large number of scattered and uncoordinated small owners, then there is a basis for finding control in the proxy holder.

(d) While the definition sections in the old and new statutes specify the amount of stock which will be deemed to confer control over the association, they do not undertake to define what constitutes control over stock. The latter remains primarily a matter for factual inquiry, if there is some question about it in a particular case.

(e) It might be argued that since the amended "control" definition expressly refers to the holding of proxies, it must be construed as requiring that even a bare revocable proxy from a single majority stockholder to his nominee has to be viewed as transferring control over the association to its possessor. Such a construction would, of course, be completely contrary to the facts of actual control and therefore inconsistent with the purposes of the statute. For example, the statute is intended to protect the insured institution from being required to enter into disadvantageous transactions with the company which exercises control over it, and subjects that company to various examination and reporting requirements as a precaution against its abusing its power. All of this is quite unnecessary if the proxyholder-company has no power to do anything except vote as the person running the insured institution instructs it.

(f) Hence the reference in section 408(a) (2) (A) of the Act, as now in force, to holding proxies, like the rest of the provision, is construed by the Board to require some showing of a reasonable possibility for the exercise of actual control over the requisite amount of stock. (Secs. 402, 403, 48 Stat. 1256, 1257, as amended; sec. 408, 73 Stat. 691, as amended, 82 Stat. 5; 12 U.S.C. 1725, 1726, 1730a, Reorg. Plan No. 3 of 1947; 3 CFR, 1943-1948 Comp., p. 1071) [33 F.R. 12822, Sept. 11, 1968]