ble capital note or preferred stock issue as required by this Part 14, or

(2) Where the resulting total amount of authorized but unissued stock, exclusive of that amount specifically reserved for issuance in connection with employee compensation programs and for satisfying requirements of the convertible securities of the banking association as referred to in the preceding subparagraph (1) of this paragraph, will be subject to preemptive rights of shareholders and will not exceed 50 percent of the currently issued and outstanding stock.

(b) Authorized but unissued stock may be issued from time to time as stock dividends or for such other purposes and considerations as may be approved by the board of directors of the bank, and by the Comptroller. Any request for approval of the Comptroller for such issuance should be in writing and submitted to the appropriate Regional Administrator of National Banks.

(c) Authorized but unissued stock may also be issued from time to time to employees of the bank pursuant to a stock option or stock purchase plan adopted in accordance with Part 13 of this chapter, or in exchange for convertible preferred stock or convertible capital notes or debentures in accordance with the terms and provisions of such securities.

(d) Nothing contained herein shall be construed as relieving any bank of the obligation to fille, with the Comptroller, pursuant to 12 U.S.C. 21a, a certified copy of every amendment to the Articles of Association adopted by the shareholders. The original certificate shall be forwarded to the Comptroller at the Washington office and a copy shall be sent to the appropriate Regional Administrator of National Banks. [36 FR. 0738, Apr. 8, 1971]

(a) It is the policy of the Comptroller of the Currency not to discourage the re tention of earnings by national banking associations in the form of stock dividends. However, recurring stock dividends will not be approved where the market or book value of the stock dividend being proposed, whichever is greater, exceeds 100 percent of the bank's retained profits since the declaration of the last stock dividend. For the purpose of this policy, the term "retained profits" shall mean the remainder of all earnings from current operations plus actual re

covery on loans and investments and other assets, after deducting from the total thereof, all current operating expenses, actual losses, cash dividends, accrued dividends on preferred stock, if any, and all Federal and State taxes.

(b) As a general policy, stock dividends which are considered a realignment of capital accounts will not be subject to the above restrictions.

(c) Subject to the provisions of 12 U.S.C. 57, any national banking association may increase its capital stock by the declaration of a stock dividend, with the approval of the Comptroller. For such approval, applications on Form 1904-C shall be filled with the appropriate Regional Administrator of National Banks. The Regional Administrator will communicate his written approval to the bank within 15 days after receipt of the Application. Upon receipt of such approval, the bank may proceed to obtain the required approval of stockholders owning two-thirds of the stock of the bank entitled to vote if such approval has not been obtained previously. In cases where the Regional Administrator of National Banks disapproves the proposed stock dividend, he shall forward the application to the Office of the Comptroller in Washington for final disposition and shall advise the bank of such referral. See Ruling 6040 relating to treatment of fractional shares created by stock dividends.

[34 F.R. 1437, Jan. 30, 1969]

§ 14.4 Preferred stock.

It is the policy of the Comptroller of the Currency to permit the issuance of preferred stock by national banking associations in accordance with normal business considerations. Subject to the provisions of 12 U.S.C. 51a, 51b, and 51b-1, the bank may, by vote of stockholders owning a majority of the stock of the bank, issue convertible or nonconvertible preferred stock of one or more classes, with such other provisions and in such amount and with such par value as shall be approved by the Comptroller, and make such amendments to its Articles of Association as may be necessary for this purpose.

tions in accordance with normal business considerations.

(b) Subject to the provisions of 12 U.S.C. 82, the bank may, with the approval of stockholders owning two-thirds of the stock of the bank, entitled to vote, or without such approval if authorized by its Articles of Association, issue convertible or nonconvertible capital debentures in such amounts and under such terms and condtions as shall be approved by the Comptroller: Provided, however, That the principal amount of capital debentures outstanding at any time, when added to all other outstanding indebtedness of the bank, except those forms of indebtedness exempt from the provisions of 12 U.S.C. 82, shall not exceed an amount equal to 100 percent of the bank's unimpaired paid-in capital stock plus 50 percent of the amount of its unimpaired surplus fund.

§ 14.6

Other increases of capital.

(a) Applications by a national banking association on Form 1904-B for the Comptroller's preliminary approval of proposed sales of additional common captal stock, other than under an employee stock option or employee stock purchase plan which has previously been approved by the stockholders of the bank and by the Comptroller pursuant to Part 13 of this chapter, and other than pursuant to the preceding sections of this part, shall be filed with the appropriate Regional Administrator of National Banks, whose approval shall be deemed to be the preliminary approval of the Comptroller. Upon such approval, the bank may proceed to obtain the approval of stockholders pursuant to the provsions of 12 U.S.C. 57, if such approval has not been obtained previously under the procedures set forth in § 14.2.

(b) The Regional Administrator will communicate his written approval to the bank within 30 days after his receipt of the application. In cases where the Regional Administrator disapproves the proposed increase of capital, he shall forward the application to the Office of the Comptroller in Washington for final disposition, and shall advise the bank of such referral.

§ 14.7 Applications for approval.

Applications by a national banking association for the Comptroller's preliminary approval of a change in capital structure shall be filed with the principal office of the Comptroller in Washington, except as provided in §§ 14.3 and 14.6.

§ 14.8 Effectiveness of increase.

Pursuant to the provisions of 12 U.S.C. 57, no increase in the capital of a national banking association shall be valid until the whole amount of such increase is paid in or in the case of an increase by way of a stock dividend until such stock dividend has been duly declared by the stockholder, and notice thereof, duly acknowledged before a notary public by the president, vice president or cashier of the bank has been transmitted to the Comptroller of the Currency and his certificate obtained specifying the amount of such increase in capital and his final approval thereof.

PART 15-REPORTS OF CHANGE IN CONTROLLING OWNERSHIP

Sec.

15.1 15.2

Scope and application.

Change in control-own bank. 15.3 Reports of loans secured by stock of other insured banks.

AUTHORITY: The provisions of this Part 15 issued under R.S. 324 et seq., as amended; 12 U.S.C. 1 et seq., 1817.

SOURCE: The provisions of this Part 15 appear at 31 F.R. 6955, May 12, 1966, unless otherwise noted.

§ 15.1 Scope and application.

(a) On and after October 1, 1964, each national bank shall promptly notify the Comptroller of the Currency whenever a change occurs in the ownership of its outstanding voting stock of sufficient magnitude to effect a change in control of the bank.

(b) Any loan or loans made by a national bank and secured or to be secured by 25 per centum or more of the outstanding voting stock of an insured bank or insured savings and loan association shall be reported as specified in § 15.3. [31 F.R. 6955, May 12, 1966, as amended at 35 F.R. 19982, Dec. 31, 1970]

§ 15.2

Change in control-own bank.

(a) It shall be the duty of the president or other chief executive officer of a national bank to submit a report to the Comptroller of the Currency whenever he believes that a change in controlling ownership of his bank has taken place. If there is any doubt concerning whether a particular change in ownership is sufficient to effect a change in control, such doubt shall be resolved in favor of submitting a report to the Comptroller. The report shall be in letter form and shall contain the following information to the extent that it is known to the person

making the report: (1) The number of shares involved; (2) the identity of the sellers (or transferors); (3) the names of the purchasers (or transferees); (4) the names of the beneficial owners if the shares are registered in another name; (5) the purchase price; (6) the total number of shares owned by the sellers (or transferors), the purchasers (or transferees); and (7) beneficial owners both immediately prior to and after the transaction.

(b) The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of the bank.

§ 15.3 Report of loans secured by stock of other insured banks.

(a) Whenever a national bank makes a loan or loans, secured, or to be secured, by 25 per centum or more of the outstanding voting stock of an insured bank or insured savings and loan association, the president or other chief executive officer of the lending bank shall promptly report such fact to the Board of Governors of the Federal Reserve System where the shares of a member bank are pledged or to the Federal Deposit Insurance Corporation where the shares of a nonmember insured bank are pledged or to the Federal Savings and Loan Insurance Corporation where the shares of an insured savings and loan association are pledged. No report need be made in those cases where the borrower has been the owner of record of the stock for a period of 1 year or more, or the stock is that of a newly organized bank or savings and loan association.

(b) The reports required under this section shall contain, to the extent that it is known by the person making the report, the same information called for in § 15.2.

[31 F.R. 6955, May 12, 1966, as amended at 85 F.R. 19982, Dec. 31, 1970]

AUTHORITY: The provisions of this Part 16 issued under R.S. 324 et seq., as amended, sec. 12, 48 Stat. 892, as amended; 12 U.S.C. 1 et seq., 15 U.S.C. 781.

SOURCE: The provisions of this Part 16 appear at 36 F.R. 15034, Aug. 12, 1971, unless otherwise noted.

§ 16.1 Authority and scope of applica tion.

(a) This part is issued under the general authority of the national banking laws, R.S. 324 et seq., as amended; 12 U.S.C. 1 et seq., and contains the rules applicable to national banks concerning the public offering of their capital debentures and the public offering of equity securities of new national banks.

(b) This part shall apply to any public offering of capital debentures of an existing national or District of Columbia bank, and to any public offering of a security of a new national bank (one which has not yet received its charter) by, for, or on behalf of such bank unless specified herein to the contrary.

§ 16.2 Requirement of offering circular.

No existing national bank shall pubHicly offer or sell any of its capital debentures and no new national bank shall publicly offer or sell any of its securities unless such securities shall have been made the subject of an offering circular filed in the Office of the Comptroller of the Currency and declared effective. § 16.3 Content of offering circular.

The offering circular filled pursuant to this part shall contain at a minimum the following information:

(a) Issuer. On the front page of the offering circular: (1) The exact name and address of the issuing national bank; (2) the following statements in capital letters printed in boldface Roman type at least as large as 10-point modern type and at least 2 points leaded:

(1) The debentures (or notes) shall not represent deposits and will not be insured by the Federal Deposit Insurance Corporation or any other Government agency.

(1) These Securities Have Not Been Approved Or Disapproved By The Comptroller Of The Currency Nor Has The Comptroller Passed Upon The Accuracy Or Adequacy Of This Offering Circular.

(b) Distribution. On the same page referred to in the preceding paragraph state: (1) The number of and dollar amount of securities being offered; (2) the per security and aggregate offering

price and the per security and aggregate proceeds to be received by the national bank; (3) the proposed means of distribution; and (4) the expenses to be incurred in connection with the offering.

(c) Use of proceeds. A brief statement of the intended uses of the proceeds of the offering.

(d) Business of the bank. A brief statement as to the history and nature of the bank's present or proposed operations including a description of its premises and facilities.

(e) Financial statements. (1) As to the offering of capital debentures of an existing national or District of Columbia bank, the information called for in Part 18 of this chapter, plus comparable information as of a date no more than 90 days prior to filing the offering circular.

(2) As to new national banks, a pro forma statement of capital, surplus and balance sheet as of the date it is contemplated business will be commenced.

(1) Management. (1) The full names and complete residence addresses of all present or proposed directors and principal officers and their principal occupations during the past 10 years.

(2) For such of the persons specified in the preceding paragraph who will receive in the current fiscal year of, who have received remuneration in the past fiscal year in excess of $25,000 per year from the national bank, the aggregate amount of remuneration received by all such persons.

(3) A brief description of any present or contemplated bonus, retirement, pension, stock option, or other similar plan or provisions and the class of persons covered.

(4) Any present or proposed material interest or transaction between the bank and any director, or officer thereof, other than in the ordinary course of banking business. Describe any such interest or transaction that occurred within the preceding 3 years; if none, so state.

(g) Principal security holders. To the extent known:

(1) The percentage of outstanding securities which will be held as a group, by directors and principal officers and the percentage of such securities which will be held by the public if all the securities offered are sold; and

(2) The name, address, and relationship to the national bank of any person who beneficially owns or will own 10 percent or more of the outstanding capital stock of the national bank.

(h) Capitalization and long-term debt. State in tabular form as of a date within 90 days of filing, the title of and amount in each category of capital and long-term debt account, the amount authorized or to be authorized, and the amount to be outstanding, assuming all the securities being registered are sold.

(1) Description of securities. (1) In the case of equity securities; briefly describe, if applicable, the dividend, voting, liquiconversion dation, preemptive, and

rights, redemptive and sinking fund provisions, and liability to further calls or assessment.

(2) In the case of debt securities; briefly describe, if applicable, the provisions with respect to interest, conversion, maturity, redemption, amortization, sinking fund, or retirement; the provisions with respect to the kind and priority of any lien securing the issue; the provisions restricting the declaration of dividends or requiring the maintenance of any ratio of assets, creation or maintenance of reserves or the maintenance of properties; the provisions permitting or restricting the issuance of additional securities, withdrawal of cash deposited against such issuance, incurring of additional debt, release or substitution of assets securing the issue, modification of the terms of the security, and any other similar provisions.

(j) Legal proceedings. Any material pending or threatened legal proceedings to which the national bank is a party or of which any of its property is the subject.

§ 16.4 Filing of and use of offering circular.

(a) No person on behalf of or for a new or existing national bank shall offer to sell or solicit any offer to buy any capital debenture or note or other securities of a national bank subject to this part being publicly offered by a national bank unless prior to, or at the time of such offer or solicitation, a copy of an offering circular which has been filed pursuant to this part is furnished to the potential purchaser by the person making the offer or solicitation.

(b) No securities of a new or existing national bank subject to this part shall be sold, or confirmation of sale relating thereto be delivered after sale, by, for, or on behalf of the bank unless at the time of sale or prior to such sale, the purchaser of such security has received an offering circular declared effective by the Comptroller of the Currency.

(c) The offering circular shall be used in accordance with this part until the completion of the distribution of the securities. If the distribution is not completed within 12 months from the effective date of the offering circular, an amended offering circular shall be filed and a revised offering circular shall be used in accordance with this part as for an original offering circular. In no event shall an offering circular be used which is false or misleading in light of the circumstances then existing.

(d) Filings shall be made in quadruplicate and may be printed, lithographed, typewritten, or prepared by similar process resulting in clearly legible permanent copies. One copy of all filings made pursuant to this part shall be manually subscribed by the national bank's Chief Executive Officer and Cashier. § 16.5

Advertisements.

Any written advertisement (or other written communication, if not accompanied by an offering circular) or any film, radio, or television broadcast, which refers to a present or proposed public offering of securities subject to this part may be published, distributed, or broadcast only after the filing of an offering circular covering such securities, and provided that it contains no more than the following information:

(a) The name and address of the issuer of the security;

(b) the title of the security, the dollar amount and number of securities being offered, and the per-unit offering price to the public; and

(c) where a copy of the offering circular may be obtained.

for a requirement that any shareholder who intends to nominate or to cause to have nominated any candidate for election to the board of directors (other than any candidate proposed by the bank's present management) shall notify the bank and the Comptroller of the Currency. Such bylaw or amendment may provide that the notification shall be made in writing and delivered or mailed to the President of the bank and to the Comptroller of the Currency not less than 14 days nor more than 50 days prior to any meeting of stockholders called for the election of directors: Provided however, That if less than 21 days' notice of the meeting is given to shareholders, such nomination shall be delivered or mailed to the President of the bank and to the Comptroller not later than the close of the seventh day following the day on which the notice of meeting was mailed. Such notification shall contain the following information to the extent known to the notifying shareholders:

(a) The names and addresses of the proposed nominee;

(b) The principal occupation of each proposed nominee;

(c) The total number of shares that to the knowledge of the notifying shareholders will be voted for each of the proposed nominees;

(d) The name and residence address of the notifying shareholder; and

(e) The number of shares owned by the notifying shareholder.

If a national bank duly adopts the foregoing notice requirements, any nomination for director not made in accordance therewith, may be disregarded by the chairman of the meeting and votes cast for each such nominee may be disregarded by the vote tellers. In the event the same person is nominated by more than one shareholder, the nomination shall be honored and all shares shall be counted if at least one nomination for that person complies with this part. (R.S. 324 et seq., as amended; 12 U.8.0. 1 et seq.) [30 FR. 7275, June 2, 1965]

Any national bank may provide in its articles of association or bylaws, or both,