Code may be invested in collective investment funds established under the provisions of paragraph (a) (1) or (2) of this section, subject to the provisions herein contained pertaining to such funds. Assets of retirement, pension, profit sharing, stock bonus or other trusts which are exempt from Federal income taxation under the Internal Revenue Code and held by the bank, in whatever capacity, may be invested in collective investment funds established under the provisions of paragraph (a) (2) of this section.

(3) All participations in the collective investment fund shall be on the basis of a proportionate interest in all of the assets In order to determine whether the investment of funds received or held by the bank as fiduciary in a participation in a collective investment fund is proper, the bank may consider the collective investment fund as a whole and shall not, for example, be prohibited from making such investment because any particular asset is non-income producing.

(4) Not less frequently than once during each period of three months a bank administering a collective investment fund shall determine the value of the assets in the fund as of the dates set for the valuation of assets. No participation shall be admitted to or withdrawn from the fund except (i) on the basis of such valuation and (ii) as of such valuation date. No participation shall be admitted to or withdrawn from the fund unless a written request for or notice of intention of taking such action shall have been entered on or before the valuation date in the fiduciary records of the bank and approved in such manner as the board of directors shall prescribe. No such request or notice may be cancelled or countermanded after the valuation date.

(5) (i) A bank administering a collective investment fund shall at least once during each period of 12 months cause an adequate audit to be made of the collective investment fund by auditors responsible only to the board of directors of the bank. In the event such audit is performed by independent public accountants, the reasonable expenses of such audit may be charged to the collective investment fund.

(ii) A bank administering a collective investment fund shall at least once dur

ing each period of 12 months prepare a financial report of the fund which shall be filed with the Comptroller of the Currency. This report, based upon the above audit, shall contain a list of investments in the fund showing the cost and the current market value of each investment; a statement for the period since the previous report showing purchases, with cost; sales, with profit or loss, and any other investment changes; income and disbursements; and an appropriate notation as to any investments in default.

(iii) The financial report may include a description of the fund's value on previous dates as well as its income and disbursements during previous accounting periods. The report shall make no reference to the performance of funds other than those administered by the bank, and no predictions or representations as to future results.

(iv) A copy of the financial report shall be furnished, or notice shall be given that a copy of such report is available and will be furnished without charge upon request, to each person to whom a regular periodic accounting would ordinarily be rendered with respect to each participating account. In addition, a full report shall be furnished upon request to any person, and the fact of the availability of such material may be given publicity solely in connection with the promotion of the fiduciary services of the bank. Except as herein provided, the bank shall not advertise or publicize its collective investment fund(s). The cost of printing and distribution of the report shall be borne by the bank.

(6) When participations are withdrawn from a collective investment fund, distributions may be made in cash or ratably in kind, or partly in cash and partly in kind, provided that all distributions as of any one valuation date shall be made on the same basis.

(7) If for any reason an investment is withdrawn in kind from a collective investment fund for the benefit of all participants in the fund at the time of such withdrawal and such investment is not distributed ratably in kind, it shall be segregated and administered or realized upon for the benefit ratably of all participants in the collective investment fund at the time of withdrawal.

(8) (i) A bank administering a collective investment fund shall not (a) have any interest in such fund other than in its fiduciary capacity (funds held by a bank as fiduciary as described under paragraph (a) (1) or (2) of this section for its own employees may be invested in such a fund) or (b) make any loans on the security of a participation in such fund. If because of a creditor relationship or otherwise the bank acquires an interest in a participation in such fund, the participation shall be withdrawn on the first date on which such withdrawal can be effected. However, in no case shall an unsecured advance to an account holding a participation until the time of the next withdrawal be deemed to constitute the acquisition of an interest by the bank.

(ii) The bank may purchase for its own account from a collective investment fund any defaulted mortgage held by such fund, if in the judgment of the board of directors the cost of segregation of such mortgage would be greater than the difference between its market value and its principal amount plus interest and penalty charges due. If the bank elects to so purchase the mortgage it must do so at its market value or at the sum of principal, interest and penalty charges, whichever is greater.

(9) Except in the case of collective investment funds described in paragraph (a) (2) of this section:

(i) No funds or other property shall be invested in a participation in a collective investment fund if as a result of such investment the participant would have an interest aggregating in excess of ten per cent of the then market value of the fund: Provided, That in applying this limitation if two or more accounts are created by the same person or persons and as much as one-half of the income or principal of each account is payable or applicable to the use of the same person or persons, such accounts shall be considered as one;

(ii) No investment for a collective investment fund shall be made in stocks, bonds or other obligations of any one person, firm or corporation if as a result of such investment the total amount invested in stocks, bonds or other obligations issued or guaranteed by such person, firm or corporation would aggregate in excess of ten percent of the then market value of the fund: Provided,

That this limitation shall not apply to investments in direct obligations of the United States or other obligations fully guaranteed by the United States as to principal and interest;

(ii) Any bank administering a collective investment fund shall have the responsibility of maintaining in cash and readily marketable investments such part of the assets of the fund as shall be deemed to be necessary to provide adequately for the needs of participants and to prevent inequities between such participants, and if prior to any admissions to or withdrawals from a fund the bank shall determine that after effecting the admissions and withdrawals which are to be made less than 40 percent of the value of the remaining assets of the collective investment fund would be composed of cash and readily marketable investments, no admissions to or withdrawals from the fund shall be permitted as of the valuation date upon which such determination is made: Provided, That ratable distribution upon all participations shall not be so prohibited in any case.

(10) The reasonable expenses incurred in servicing mortgages held by a collective investment fund may be charged against the income account of the fund and paid to servicing agents, including the bank administering the fund.

(11) (i) A bank may (but shall not be required to) transfer up to five percent of the net income derived by a collective investment fund from mortgages held by such fund during any regular accounting period to a reserve account: Provided, That no such transfers shall be made which would cause the amount in such account to exceed one percent of the outstanding principal amount of all mortgages held in the fund. The amount of such reserve account, if established, shall be deducted from the assets of the fund in determining the fair market value of the fund for the purposes of admissions and withdrawals.

(ii) At the end of each accounting period, all interest payments which are due but unpaid with respect to mortgages in the fund shall be charged against such reserve account to the extent available and credited to income distributed to participants. In the event of subsequent recovery of such interest payments by the fund, the reserve account shall be credited with that amount so recovered.

(12) A national bank administering a collective investment fund shall have the exclusive management thereof. The bank may charge a fee for the management of the collective investment fund provided that the fractional part of such fee proportionate to the interest of each participant shall not, when added to any other compensations charged by the bank to the participant, exceed the total amount of compensations which would have been charged to said participant if no assets of said participant had been invested in participations in the fund. The bank shall absorb the costs of establishing or reorganizing a collective investment fund.

(13) No bank administering a collective investment fund shall issue any certificate or other document evidencing a direct or indirect interest in such fund in any form.

(14) No mistake made in good faith and in the exercise of due care in connection with the administration of a collective investment fund shall be deemed to be a violation of this part if promptly after the discovery of the mistake the bank takes whatever action may be practicable in the circumstances to remedy the mistake.

(c) In addition to the investments permitted under paragraph (a) of this section, funds or other property received or held by a national bank as fiduciary may be invested collectively, to the extent not prohibited by local law, as follows:

(1) In shares of a mutual trust investment company, organized and operated pursuant to a statute that specifically authorizes the organization of such companies exclusively for the investment of funds held by corporate fiduciaries, commonly referred to as a "bank fiduciary fund".

(2) In a single real estate loan or a direct obligation of the United States, or an obligation fully guaranteed by the United States, if the bank owns no participation in the loan or obligation and has no interest therein except in its capacity as fiduciary.

(3) In a common trust fund maintained by the bank for the collective investment of cash balances received or held by a bank in its capacity as trustee, executor, administrator or guardian, which the bank considers to be individually too small to be invested separately to advantage, and the total investment in which on the part of any one account does not exceed $10,000: Provided, That in applying this limitation if two or more accounts are created by the same person or persons and as much as one-half of the income or principal of each account is payable or applicable to the use of the same person or persons, such account shall be considered as one: And provided, That no fund shall be established or operated under this subparagraph for the purpose of avoiding the provisions of paragraph (b) of this section.

(4) In any investment specifically authorized by court order or authorized by the instrument creating the fiduciary relationship: Provided, That such investment is not made under this paragraph for the purpose of avoiding the provisions of paragraph (b) of this section.

(5) In such other manner as shall be approved in writing by the Comptroller of the Currency.

[28 F.R. 3309, Apr. 5, 1963, as amended at 29 F.R. 1719, Feb. 5, 1964; 33 F.R. 9649, July 3, 1968]

§ 10.1

Scope and application.

(a) Every bank subject to the jurisdiction of the Comptroller of the Currency shall mail a written report containing, as a minimum, the financial and other information called for by this part, to each of its stockholders in time to be received by them prior to the bank's annual meeting, but in no event later than 60 days after the close of the fiscal year.

(b) On and after May 1, 1965, compliance with the requirements of § 10.4 shall be deemed a registration under section 12(g) of the Securities Exchange Act of 1934, as amended, of any class of equity securities heretofore issued by a national bank and held of record by 750 or more persons (after May 1, 1967, 500 or more persons).

(c) Notwithstanding the foregoing, any national bank prior to listing any class of its securities on a national securities exchange shall have filed a registration statement in accordance with the applicable provisions of Part 16 of this chapter, which has been declared effective by the Comptroller of the Currency.

INSTRUCTION: Sections 10.1 (b) and (c) apply to issues of equity securities that are now held, or may in the future become held, of record by 750 or more persons (after May 1, 1967, 500 or more persons). The registration requirements applicable to public offerings made hereafter are found in Part 16 of this chapter.

§ 10.2

No private right of action hereunder.

The enforcement of Parts 10, 11, 15, and 16 of this chapter shall be a function solely of the Office of the Comptroller of the Currency and no provision of the regulation in these parts (Parts 10, 11, 15, and 16 of this chapter) is intended to confer any private right of action on any stockholder or other person against a national bank.

§ 10.3 Information to be furnished stockholders.

The annual report shall bear the written, printed, or facsimile signature of the Chairman of the Board, President or other executive officer of the bank and shall include, as a minimum, the schedules and related information required by, and prepared in accordance with, Part 18 of this chapter.

Schedule D-Information to be included in statements.

Schedule E-Statement to be filed pursuant to § 11.4b.

AUTHORITY: The provisions of this Part 11 issued under R.S. 324 et seq., as amended; secs. 12, 14, 48 Stat. 892, 895, as amended; 12 U.S.C. 1 et seq., 15 U.S.C. 781, 78n.

§ 11.1 Scope and application.

This part shall apply to every solicitation of a proxy and to any tender offers with respect to stock of a national bank having a class of equity securities held of record by 500 or more persons. [33 F.R. 11587, Aug. 15, 1968]

§ 11.2 Definitions.

(a) The term "principal officer" as used in this part means Chairman of the Board, Vice Chairman of the Board, President, Senior Vice President, Cashier, Chairman of the Executive Committee, and any other person who performs functions corresponding to those performed by the foregoing officers.

(b) (1) The terms "solicit" and "solicitation" include:

(i) Any request for a proxy whether or not accompanied by or included in a form of proxy;

(ii) Any request to execute or not to execute, or to revoke, a proxy; or

133 F.R. 11587, Aug. 15, 1968.

(iii) The furnishing of a form of proxy or other communication to security holders under circumstances reasonably calculated to result in the procurement, withholding, or revocation of a proxy.

(2) The terms do not include:

(i) Any solicitation by a person in respect of stock of which he is the beneficial owner;

(ii) The action of a broker or other person in respect to stock carried in his name or in the name of his nominee, in forwarding to the beneficial owner of such stock, soliciting material received from the bank, or impartially instructing such beneficial owner to forward a proxy to the person, if any, to whom the beneficial owner desires to give a proxy, or impartially requesting from the beneficial owner instructions as to the authority to be conferred by the proxy and stating that a proxy will be given if the instructions are received by a certain date.

(c) The term “person” as used in this part is not limited to natural persons, but also includes corporations, partnerships, pension funds, profit-sharing funds, and any other organized group of persons of whatever nature.

[31 F.R. 6950, May 12, 1966]

(a) No solicitation subject to this part shall be made by or on behalf of a national bank unless each person solicited is concurrently furnished or has previously been furnished with a written proxy statement containing the applicable information specified in Schedules A and B.

(b) The form of proxy shall afford the person solicited an opportunity to specify his choice between approval or disapproval of each matter or group of related matters referred to therein as intended to be acted upon. The proxy may provide that if the signer does not indicate a choice, the proxy confers authority to vote the shares represented thereby in favor of, or against, matters set forth therein.

(c) A proxy may confer discretionary authority with respect to matters which may come before the meeting other than those matters listed in the notice of meeting and proxy statement: Provided, That, except in the case of a proposal omitted from the proxy statement, notice of meeting and form of proxy pursuant

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