Alert March 13, 2012

OCC Issues Interpretive Letter Concluding Federal Savings Association’s Operating Subsidiary May Repurchase Auction Rate Securities from Its Customers

The OCC issued an interpretive letter (“Letter No. 1135”) in which it concluded that a federal savings association (the “FSA”) may (under its investment authority) purchase and hold through a wholly owned operating subsidiary (the “Subsidiary”) shares of auction rate securities and (under the FSA’s general lending authority) auction rate preferred securities (collectively, “ARS”) purchased from current and former customers of the Subsidiary and hold the ARS for up to 120 days from the date of the applicable purchase.  The OCC’s conclusion is subject to various conditions, including that the FSA conducts the activity in a manner that complies with the applicable lending and investment limits and that it does not raise safety and soundness concerns.