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4000 - Advisory Opinions

Possible Management Interlock in Employment Agreement


July 9, 1985

Pamela E. F. LeCren, Senior Attorney

I have reviewed the materials forwarded by you to the Washington Office which were submitted by counsel for *** to Regional Counsel Glion Curtis requesting an opinion on whether or not the employment agreement described below creates a prohibited management official interlock. Based on the analysis set forth below, it is my opinion that the agreement does not result in a prohibited management official interlock.


According to the material submitted for our review, ***, a director of ***, is also president of *** Mortgage and Financial Services, Inc. *** Mortgage entered into an agency agreement with *** Savings and Loan Association, *** on May 17, 1984 designating *** Mortgage as agent for the following: (1) solicitation of savings deposits on forms and under conditions determined by *** Savings, (2) the solicitation of real estate loans to be submitted to *** Savings' home office, and (3) the rental of real estate owned by *** Savings on terms authorized thereby. A separate "agency compensation schedule" indicates that in addition to the agent's responsibilities as set forth in the general agency agreement, *** Mortgage shall collect certain loan and rental payments on behalf of *** Savings. According to the documents, the above listed powers and authorities comprise the entire scope of the agent's responsibilities.

Section 348.2(h) of the FDIC's regulations defines "management official" for the purposes of the interlocking management prohibitions to mean an employee or officer with management functions (including a branch manager), a director (including an advisory or honorary director), a trustee of a mutual savings bank, or any person who has a representative or nominee serving in any such capacity. The issue with respect to the instant agreement is therefore whether or not *** is a management official of *** Savings and Loan as a result of the agency agreement entered into by the company of which he is president.

Even if we were to assume that *** himself performs the duties described in the agency agreement, we would not conclude that those duties cause him to be a management official of *** Savings and Loan. The agency agreement appears to only cover ministerial, administrative type responsibilities and does not appear to confer any authority to set loan policies, interest rates, or make any other managerial decision let alone even accept or reject loan applications. Although it could be viewed as a conflict of interest for *** to be the president of a company that acts as agent for the solicitation of deposits and acceptance of loan applications for a savings and loan with which *** may compete, the relationship described above does not fall within the ambit of Part 348, nor do the two institutions appear to compete within the meaning of Part 348.1

1 Even if we were to determine that the agency agreement causes *** to be a management official of *** Savings and Loan, the resulting management official interlock between the savings and loan and *** *** would not appear to be prohibited under Part 348. We have no information that would indicate that the two institutions have offices located in the same or contiguous cities, towns or villages nor that they have offices located in the same relevant metropolitan statistical area. Even if one were to characterize *** Mortgage to be a loan production office of *** Savings and Loan as a result of the agency agreement, Part 348 does not recognize a loan production office as an office of a depository institution within the meaning of the regulation. Unless the institutions have total assets of $500 million and one billion dollars respectively, Part 348 would not prohibit the two from having a management official interlock. Go back to Text

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