The FDIC released additional FAQs on April 23, 2010 regarding its Statement of Policy on Qualifications for Failed Bank Acquisitions (“Statement of Policy”). The additional FAQs were released to address questions received by the FDIC since its previous FAQ release on January 7, 2010. The additional FAQs provide additional guidance regarding the scope of the Statement of Policy.
By its terms, the Statement of Policy does not apply with respect to investors in partnerships or similar ventures with bank or thrift holding companies or in such holding companies where the holding company has a “strong majority interest in the resulting bank or thrift and an established record for successful operation of insured banks or thrifts.” The FAQs clarify that, in determining whether investors in an institution who made their investments prior to a failed bank acquisition are subject to the Statement of Policy, the FDIC will take into consideration whether a “significant portion” (a term the FDIC does not define) of the total equity or voting equity in the institution was “recently acquired” (a term the FDIC does not define) or was part of a “recapitalization” (a term the FDIC does not define) of the existing institution. If the FDIC determines that a pre-existing investment was part of a recapitalization, the FAQs state that the Statement of Policy will apply if one or more failed bank acquisitions occur that in combination exceed 100% of the recapitalized institution’s total assets within an eighteen-month period following the recapitalization.
In the January 7, 2010 FAQs, the FDIC stated that the Statement of Policy would not apply where private investors have one-third or less of the total equity shares and voting equity shares of the institution making the failed bank acquisition. The new FAQs clarify that if the Statement of Policy applies because the one-third ownership threshold has been crossed, investors holding a minimum of either (1) one-third of the total voting equity shares or (2) one-third of a combination of total voting equity shares and total equity shares as a proportion of total equity shares, must be bound by the terms of the Statement of Policy. This “anchor group” would consist of all holders of more than 5% of the voting equity shares and any holders of 5% or less of the voting equity shares that elect to be subject to the Statement of Policy.
The FAQs clarify that if an investor has a right to designate a board member, then the investor will be subject to the Statement of Policy, even if the investor owns 5% or less of the voting equity shares of the institution. Senior management is not automatically subject to the Statement of Policy, absent voting equity share ownership, a right to designate a board member, or evidence of concerted action.
The FAQs also clarify that holders of 5% or less of the voting equity shares are subject to being included on the “List of Investors” provided to the FDIC and are required to provide limited information to the FDIC, including the investor’s name; type of vehicle through which it is investing; domicile; and ownership of equity and equity equivalents by the investor and its affiliates or immediate family members both before and after the equity raise.Finally, the FAQs provide detail regarding compliance by a non-U.S. investor domiciled in a “bank secrecy jurisdiction” with the Statement of Policy, including the requirement that the non-U.S. investor make its investment through a U.S. subsidiary, maintain books and records in the United States, and make such books and records available to the FDIC upon request.