Office of the Comptroller of the Currency, Treasury (OCC).
Interim final rule and request for comment.
The Office of the Comptroller of the Currency (OCC) is amending its regulations on activities and operations of national banks and corporate activities of Federal savings associations to provide that these institutions may permit telephonic and electronic participation at all board of directors, shareholder, and as applicable, member, meetings. This Interim Final Rule (IFR) will update the OCC's regulations to conform with modern technologies and enable national banks and Federal savings associations to hold these meetings without violating social distancing restrictions imposed in response to the coronavirus disease 2019 (COVID-19) emergency.
The effective date of this interim final rule is May 28, 2020. Comments on the interim final rule must be received no later than July 13, 2020.
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You may review comments and other related materials that pertain to this rulemaking action by any of the following methods:
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The docket may be viewed after the close of the comment period in the same manner as during the comment period.
Frances C. Augello, Special Counsel, or
The OCC recognizes the recent disruptions and significant challenges faced by national banks and Federal savings associations as a result of the coronavirus disease 2019 (COVID-19) emergency. Health and safety advisories declared in response to the COVID-19 emergency, including those relating to social distancing, are impeding the ability of national banks and Federal savings associations to hold in-person meetings, such as board of director, shareholder, and member meetings. However, neither the National Bank Act or the Home Owners' Loan Act, as applicable, nor OCC regulations require that director, shareholder, or member meetings take place in person.
The amendments made by this IFR will enable national banks and Federal savings associations to conduct necessary meetings remotely during the COVID-19 emergency as well as during any other future emergency when in-person meetings may not be feasible. Because these amendments will be permanent and will not expire after the COVID-19 emergency has ended, they also will provide national banks and Federal savings associations, on an ongoing basis, with more flexibility in planning and holding director, shareholder, and, as applicable, member meetings; could permit greater director, shareholder, and member participation at these meetings for those participants not able to attend in person; and may reduce the burden and costs of in-person meetings for national banks and Federal savings associations, as well as meeting participants. The OCC expects that national banks and Federal savings associations allowing remote participation will provide fair treatment and transparency for shareholders or members participating telephonically or electronically.
Section 5.22 governs the procedures and requirements for Federal stock savings association charters and bylaws and generally parallels § 5.21. Paragraph (k)(1) of § 5.22 provides that all annual and special meetings of shareholders must be held at any convenient place the board of directors may designate.
To clarify that both a Federal mutual savings association and a Federal stock savings association may use remote communication tools to conduct these meetings, the OCC is amending §§ 5.21(j)(2)(i) and (j)(2)(ii) and 5.22(k)(1) to permit an association's bylaws to provide for telephonic or electronic participation of members and shareholders, as applicable, at both annual and special meetings. This amendment also provides that members or shareholders participating telephonically or electronically in an annual or special meeting will be deemed present in person for purposes of the quorum requirement in §§ 5.21(j)(2)(v) or 5.22(k)(5), as applicable.
This IFR also requires Federal savings associations to have procedures in place for telephonic and electronic participation at member or shareholder meetings and provides associations with a choice of procedures to follow. The procedures available to Federal mutual savings associations and those available to Federal stock savings associations differ only with respect to the State law procedures they may choose. As explained below, this difference is
With respect to Federal mutual savings associations, the IFR amends § 5.21(j)(2)(i) (annual meetings of members) and § 5.21(j)(2)(ii) (special meetings of members) to require the association to follow the procedures for telephonic or electronic participation of: (1) The State corporate governance procedures it is permitted to elect pursuant to § 5.21(j)(3)(iii), if those State corporate governance procedures include telephonic or electronic participation procedures; (2) the Delaware General Corporation Law
With respect to Federal stock savings associations, § 5.22(k)(1) as amended by this IFR requires the association to elect to follow, pursuant to § 5.22(j)(2)(iii), corporate governance procedures for shareholder meetings that include procedures for telephonic or electronic participation. With certain exceptions, § 5.22(j)(2)(iii) provides that a Federal stock association may elect to follow the corporate governance procedures of: (1) The laws of the State where the home office of the association is located; (2) the laws of the State where the association's holding company, if any, is incorporated or chartered; (3) the Delaware General Corporation Law; or (4) the Model Business Corporation Act, provided that such procedures are not inconsistent with applicable Federal statutes and regulations and safety and soundness. This amendment, therefore, permits a Federal stock savings association to choose from any of the sources listed in § 5.22(j)(2)(iii) for its telephonic and electronic participation procedures. As with the amendments for Federal mutual savings associations, this IFR requires a Federal stock savings association to indicate in its bylaws which procedures it will use to inform its shareholders of these procedures.
As a result of these amendments, this IFR will ensure that if a Federal savings association's bylaws provide for telephonic or electronic participation at member or shareholder meetings, the Federal savings association must have procedures in place for this remote participation even if it has not elected to follow any particular corporate governance law pursuant to §§ 5.21(j)(3)(iii) or 5.22(j)(2)(iii), or if the corporate governance law it has elected to follow does not contain procedures for remote participation at meetings.
As indicated above, the IFR requires a Federal savings association to amend its bylaws if it wishes to utilize remote means of communication for its meetings. Current §§ 5.21(j)(3) and 5.22(j)(2) provide that, in general, a Federal savings association must submit an amendment to its bylaws to the OCC 30 days prior to adoption by its board of directors and that the amendment is effective 30 days after filing with the OCC. However, pursuant to §§ 5.21(j)(3)(i)(B) and 5.22(j)(2)(i)(B), if an association adopts a bylaw amendment that includes the language of the OCC's model or optional bylaws without change and files the bylaw with the OCC within 30 days after adoption, the bylaw is effective upon adoption. To permit Federal savings associations to utilize the remote communication provisions included in this IFR as quickly as possible during the COVID-19 emergency, the OCC is issuing concurrent with this IFR optional model bylaw provisions for telephonic and electronic participation at shareholder and member meetings.
The OCC also is considering updating the member and shareholder meeting notice requirements contained in §§ 5.21 and 5.22. Section 5.21(j)(2)(iii) requires a Federal mutual savings association to publish a notice of the annual or special meeting in a newspaper of general circulation in the city or county in which the principal place of business of the association is located or to mail the notice postage prepaid to each of its members of record. This provision also requires the Federal mutual savings association to post notice of the meeting in a conspicuous place in each of its offices during the 14 days immediately preceding the date on which the meeting convenes. The OCC requests comment on whether it should amend this provision to permit a Federal mutual savings association to deliver the meeting notice to a member electronically if the member receives electronic communications. In addition, the OCC requests comment on whether it should amend this provision to permit the Federal mutual savings association to post the notice of the meeting on its website instead of in its offices. Section 5.22(k)(2) requires a Federal savings association to deliver a written notice of a shareholder meeting either personally or by mail to each shareholder of record entitled to vote at the meeting. If mailed, the notice is deemed delivered when deposited in the mail, addressed to the shareholder at the address appearing on the stock transfer books or records of the association as of the record date, with postage thereon prepaid. As with § 5.21(j)(2)(iii), the OCC requests comment on whether it should amend § 5.22(k)(2) to permit the Federal stock savings association to deliver the meeting notice to the shareholder electronically if the shareholder receives electronic communications and that this electronic notice be deemed delivered when sent to the shareholder's electronic address appearing on the books or records of the association as of the record date. The OCC believes that
As with the amendments to §§ 5.21 and 5.22, the OCC is permitting national banks to provide for telephonic or electronic participation at shareholder and board of directors meetings. To accomplish this, the OCC is combining current 12 CFR 7.2001, which provides procedures for notifying shareholders of shareholder meetings, into current § 7.2003, which provides the rule for annual shareholder meetings that fall on a holiday; adding new telephonic and electronic participation language to 12 CFR 7.2003 as new paragraphs (c) and (d); and retitling § 7.2003 as “Shareholder meetings; Board of directors meetings.” The OCC is not making any substantive changes to current § 7.2001, which becomes § 7.2003(a), or current § 7.2003, which becomes § 7.2003(b). Combining §§ 7.2001 and 7.2003 puts all amendments related to shareholder meetings are held in one section.
New paragraph (c) to § 7.2003 permits a national bank to provide for telephonic or electronic participation at shareholder meetings. Further, new paragraph (c) requires a national bank to have procedures for telephonic or electronic participation in shareholder meetings. As with Federal savings associations, a national bank may choose these procedures from several sources: (1) The corporate governance procedures it has elected to follow pursuant to § 7.2000(b),
As with the amendments to §§ 5.21(j)(2)(i) and (j)(2)(ii) and 5.22(k)(1) for Federal savings associations, this provision will ensure that a national bank has procedures in place for remote participation at shareholder meetings even if the corporate governance law it has elected to follow does not contain procedures for remote participation at shareholder meetings or if it has not elected to follow any particular corporate governance law pursuant to § 7.2000(b).
New paragraph (d) of § 7.2003 provides that a national bank may provide for telephonic or electronic participation at a meeting of its board of directors. This provision codifies OCC Interpretive Letter No. 860
The OCC seeks comment on all aspects of the IFR in addition to those specific requests noted in the
• Should the OCC limit the ability of national banks and Federal savings associations to hold shareholder or member meetings exclusively by means of remote communication to emergency situations or when extenuating circumstances exist? If so, in what extenuating circumstances should national banks and Federal savings associations have authority to hold meetings exclusively by means of remote communication?
• Would holding shareholder or member meetings exclusively by means of remote communication limit participation by some shareholders or members, and if so, how?
• Should the OCC require national banks and Federal savings associations to provide in-person options for each shareholder or member meeting or require national banks or Federal savings associations to adopt procedures that permit shareholder participation at virtual meetings? If so, why?
• Should the OCC adopt regulatory procedures governing telephonic and electronic participation at shareholder meetings instead of requiring national banks and Federal savings associations to follow State corporate law, Delaware General Corporation Law, or Model Business Corporation Act procedures? If so, what specific procedures should the OCC adopt?
• Should the OCC provide risk management standards to mitigate any security risks arising from telephonic or electronic meetings? If so, what specific standards should the OCC adopt?
The OCC is issuing the IFR without prior notice and the opportunity for public comment and the delayed effective date ordinarily prescribed by the Administrative Procedure Act
The OCC believes that the public interest is best served by implementing the IFR immediately upon publication in the
The APA also requires a 30-day delayed effective date, except for: (1) Substantive rules which grant or recognize an exemption or relieve a restriction; (2) interpretative rules and statements of policy; or (3) as otherwise provided by the agency for good cause.
While the OCC believes that there is good cause to issue the rule without advance notice and comment and with an immediate effective date, the OCC is interested in the views of the public and requests comment on all aspects of the IFR.
For purposes of the Congressional Review Act, the Office of Management and Budget (OMB) makes a determination as to whether a final rule constitutes a “major rule.”
The Congressional Review Act defines a “major rule” as any rule that the Administrator of the Office of Information and Regulatory Affairs of the OMB finds has resulted in or is likely to result in: (1) An annual effect on the economy of $100,000,000 or more; (2) a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions; or (3) significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based enterprises to compete with foreign-based enterprises in domestic and export markets.
The delayed effective date required by the Congressional Review Act does not apply to any rule for which an agency for good cause finds (and incorporates the finding and a brief statement of reasons therefor in the rule issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.
As required by the Congressional Review Act, the OCC will submit the IFR and other appropriate reports to Congress and the Government Accountability Office for review.
Certain provisions of the proposed rulemaking contain “collection of information” requirements within the meaning of the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3521). In accordance with the requirements of the PRA, the OCC may not conduct or sponsor, and a respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number.
The OCC reviewed the IFR and determined that it revises certain information collection requirements previously cleared by OMB under OMB Control No. 1557-0014. The OCC has submitted the revised information collection to OMB for review under section 3507(d) of the PRA (44 U.S.C. 3507(d)) and section 1320.11 of the OMB's implementing regulations (5 CFR 1320).
The information collection requirements are as follows:
• National banks and FSAs must have procedures in place for holding remote meetings.
• FSAs will need to amend their bylaws if they wish to utilize remote means of communication for its meetings.
• Depending on which state or law the FSA elects to follow for procedures for remote means of communication, the FSA may have to amend its bylaws and file with the OCC.
• National banks must indicate the use of telephonic or electronic participation at shareholder meetings in their bylaws.
• The OCC is considering allowing alternative/electronic means of notifying members/shareholders of meetings.
The OCC estimates that there will be no change in burden as a result of these changes.
Comments are invited on:
a. Whether the collections of information are necessary for the proper performance of the agencies' functions, including whether the information has practical utility;
b. The accuracy or the estimate of the burden of the information collections, including the validity of the methodology and assumptions used;
c. Ways to enhance the quality, utility, and clarity of the information to be collected;
d. Ways to minimize the burden of the information collections on respondents, including through the use of automated collection techniques or other forms of information technology; and
e. Estimates of capital or startup costs and costs of operation, maintenance, and purchase of services to provide information.
All comments will become a matter of public record. Comments on aspects of this notice that may affect reporting, recordkeeping, or disclosure
Pursuant to section 302(a) of the Riegle Community Development and Regulatory Improvement Act (RCDRIA),
As such, the IFR will be effective immediately. Nevertheless, the OCC seeks comment on RCDRIA.
The Regulatory Flexibility Act (RFA)
Nevertheless, the OCC seeks comment on whether, and the extent to which, the IFR would affect a significant number of small entities.
As a general matter, the Unfunded Mandates Act of 1995 (UMRA)
Administrative practice and procedure, Federal savings associations, National banks, Reporting and recordkeeping requirements, Securities.
Computer technology, Credit, Derivatives, Federal savings associations, Insurance, Investments, Metals, National banks, Reporting and recordkeeping requirements, Securities, Security bonds.
For the reasons set out in the preamble, the OCC amends 12 CFR part 5 and part 7 as follows:
12 U.S.C. 1
The additions read as follows:
(j) * * *
(2) * * *
(i) * * *
(A) * * * The association's bylaws may provide for telephonic or electronic participation of members at an annual meeting. Members participating in an annual meeting telephonically or electronically will be deemed present in person for purposes of the quorum requirement in paragraph (j)(2)(v) of this section.
(C) If the association's bylaws provide for telephonic or electronic participation in member meetings, the association must follow the procedures for telephonic or electronic participation of the State corporate governance procedures it is permitted to elect pursuant to paragraph (j)(3)(iii) of this section, if those State corporate governance procedures include telephonic or electronic participation procedures; the Delaware General Corporation Law, Del. Code Ann. Tit. 8 (1991, as amended 1994, and as amended thereafter) (with “member” substituting for “stockholder”); or the Model Business Corporation Act (with “member” substituting for “shareholder”), provided, however, that such procedures are not inconsistent with applicable Federal statutes and regulations and safety and soundness. The association must indicate the use of these procedures in its bylaws.
(ii) * * * The association's bylaws may provide for telephonic or electronic participation of members at a special meeting pursuant to the procedures specified in paragraph (j)(2)(i)(C) of this section. Members participating in a special meeting telephonically or electronically will be deemed present in person for purposes of the quorum requirement in paragraph (j)(2)(v) of this section. * * *
The revisions and additions read as follows:
(k)
(ii)
(B)
(l) * * *
(3) * * * The bylaws may provide for telephonic or electronic participation at these meetings.
(8) * * * The bylaws may provide for telephonic or electronic participation at a special meeting.
12 U.S.C. 1
(a)
(b)
(c)
(2)
(d)