4000 - Advisory Opinions
Definition of "Representative or Nominee" under Depository Institutions Management Interlocks Act
February 24, 1981
Pamela E. F. LeCren, Attorney
The following opinion is in connection with your request to the Office of the Comptroller of the Currency for a determination as to whether or not you and *** may join the board of directors of *** without violating the Depository Institutions Management Interlocks Act (12 U.S.C. 3201 et seq., "Interlocks Act"). According to your letter to the Comptroller's office, you and *** are presently serving as vice presidents of ***. Assuming that *** has assets in excess of $20 million and that the two banks are not affiliated, we are in agreement with the Comptroller's response that neither you nor *** may join the board of directors of ***. This result is due to the fact that *** and *** are located in the same standard metropolitan statistical area ("SMSA"). Under section 3201(1) of the Interlocks Act, a person is prohibited from serving two nonaffiliated banks with offices located in the same SMSA if either bank has total assets in excess of $20 million.
As the Comptroller's letter goes on to point out, a prohibited management official interlock can arise where an individual who is a management official at one bank has a "representative or nominee" who is serving as a management official at another bank. Section 348.2(k) of FDIC's regulations implementing the Interlocks Act defines the term "representative or nominee" to mean
a person who serves as a management official and has an express or implied obligation to act on behalf of another person with respect to management responsibilities. Whether a person is a "representative or nominee" depends upon the facts in individual cases. The appropriate Federal supervisory agency or agencies will determine, after giving the affected persons the opportunity to respond whether a person is a "representative or nominee". Certain relationships (including family, employment, and agency relationships), or the ability and exercise of ability by a shareholder of a depository organization to elect a director, may be evidence of such an express or implied obligation. For the purposes of this subsection, person shall include only natural persons.
As you can see from this definition, a person may be determined to be another's "representative or nominee" as a result of the ability and exercise of ability to vote a director into office. Whether or not such ability and exercise thereof does create a representative relationship depends, however, upon the facts.
According to your letter to the Comptroller's office, you, members of your family, ***, and members of his family own a total of 2,817 shares of stock in *** or 28.17 percent of the total outstanding 10,000 shares. The individual breakdown of share ownership is as follows:
The entire 2,817 shares which were originally owned by *** (grandfather to you and ***) were distributed at his death as set out above.
We do not have any reason at this time to find that the members of the *** and *** families act in concert with each other in voting their stock or that each family votes as a family unit or to determine that you act in concert with your cousin, ***, to vote the stock you both individually own. We therefore will assess the possibility of whether your stock ownerships give rise to a management official interlock in view of the amounts individually owned (*** -12.11 percent and *** -.3 percent).
*** stock ownership does not, in our opinion, raise a question under the regulations due to the extremely small amount of stock involved. With reference to your stock ownership, the FDIC is not prepared at this time to say that an individual who votes 12.11 percent of the stock of a bank necessarily has a representative or nominee on the board merely by virtue of his or her stock ownership. We have had occasion to determine that ownership of a significantly larger percentage of stock in a bank will give rise to a representative relationship especially where the stockholder is an active officer or director of another bank. Suffice it to say that the amount of stock under consideration does not itself pose immediate concern. This is not to say that we would not find an individual placed in office by you, your family, or the *** and *** families acting together to be your representative or nominee, *** representative or nominee, or a representative or nominee of both of you depending upon the facts. Relevant facts would include the individual's relationship to you or ***, the circumstances surrounding the election (i.e., if the entire amount of stock is voted as a block at your direction or *** direction and no other person or group of persons controls a greater percentage of stock); practices subsequent to the election which would show the two banks to act in concert or in response to one another in setting policies; etc.
It is difficult to give you a more definite response at this time other than the one set forth. We can only say that your stock ownership should pose no problem under the Interlocks Act absent some additional facts of the sort referred to above. We hope that this information will be of some assistance to you and apologize for the delay in responding; we unfortunately have no record of having received the referral from the Comptroller's office.