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Each depositor insured to at least $250,000 per insured bank

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4000 - Advisory Opinions


Whether One-Time Proxy Solicitation of Shareholders of Insured State Nonmember Savings Bank Requires Prior Approval by FDIC under the Change in Bank Control Act

FDIC-91-5

January 31, 1991

Gerald J. Gervino, Senior Attorney

You have written to request our confirmation that a one-time proxy solicitation of shareholders of an insured state nonmember savings bank ("bank") does not require prior approval by the FDIC under the Change in Bank Control Act of 1978, which is codified at §7(j) of the Federal Deposit Insurance Act, 12 U.S.C. §1817(j), ("§7j").

You represent an individual who is the beneficial owner of 11,400 shares, or approximately 0.99%, of the voting stock of an insured bank. Under §10 of the bank's bylaws, this shareholder has given the bank notice of his nomination of three directors for election at the bank's 1991 annual meeting.

The three nominees are not affiliated or associated with each other, except for the fact that they have all been nominated by the same shareholder. No binding agreement or arrangement regarding the voting of stock of the bank exists between or among any of the nominees and the nomination shareholder and no determinations have yet been made whether or not proxies of other shareholders of the bank will be solicited in favor of the election of these three nominees. Despite the absence of any such agreements, you believe it is prudent for the nominating shareholder and the nominees to receive confirmation that §7j does not apply in the event a decision is made to solicit proxies in connection with the bank's 1991 annual meeting.

You take the position that the nominees and the nominating shareholder should not be deemed to constitute a "group," "syndicate," or "persons acting in concert" for purposes of our regulation defining "acquisition of control" under §7j, which is 12 CFR §303.4(a). Even if they may be deemed a "group," you feel that the nominees and the nominating shareholder have not and will not acquire "control" of the bank because they beneficially own, in the aggregate, less than ten percent (10%) of the bank's voting stock and because there is no binding voting agreement or arrangement among them.

Finally, you believe that nomination and support of the nominees for election as directors of the bank would qualify as an exempt "customary one-time proxy solicitation" under 12 CFR §303.4(c)(6). You believe that this provision is intended to confirm that no prior approval is required in order for shareholders to exercise their right to nominate individuals for directorships, solicit proxies, etc.

You also indicate your belief that no regulatory issues would be raised by the election of a principal in a securities firm as a director of the bank.

While we have insufficient facts to make the first two determinations which you have requested, you have pointed out that Section 303.4(c)(6) of our regulations provides an exemption from the prior notice requirements of the Change in Bank Control Act of 1978 for one-time proxy solicitations. The factual situation you have provided us appears consistent with this exemption.

If a principal in a securities firm becomes a director of a state nonmember insured bank, the director should inquire of our regional office in order to determine if any special agreements are necessary with respect to the bank's future transactions with or relating to the securities firm.

If you have any further questions, please write or call me at (202) 898-3723.


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