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4000 - Advisory Opinions

Bank Management Official Serving as Member of Branch Advisory Board


November 7, 1979

Pamela E.F. LeCren, Attorney

The following is in response to your letter of August 28, 1979 requesting an opinion regarding the Depository Institutions Management Interlocks Act ("Title II" of the Financial Institutions Regulatory and Interest Rate Control Act of 1978) and its implementing regulations (12 C.F.R. Part 348). Specifically, you inquired as to whether or not *** would be in violation of Title II and Part 348 if (1) a corporator of *** was a management official of another financial institution, and (2) a member of one of the branch advisory boards was a management official of another financial institution.

Title II generally prohibits a financial institution from sharing management officials with another financial institution if the two institutions have offices located in the same local community or the same standard metropolitan statistical area ("SMSA"). The prohibitions do not apply if the person serving both institutions has done so since prior to November 10, 1978 and such service did not at that time violate section 8 of the Clayton Act (15 U.S.C. § 19). "Community'' is defined by 12 C.F.R. section 348.2(c) to mean city, town, or village or contiguous or adjacent (within ten miles of each other) cities, towns, or villages. A "management official" is an employee or officer who has management functions, a director (including an advisory or honorary director), a trustee of a savings bank, or any person who has a representative or nominee who is serving in any of the above positions.

1. Corporators.

According to the information in your letter and information given to me over the phone, *** has approximately forty-five corporators who meet at least once a year at which time the trustees and the officers of the bank are elected. The corporators also select the CPA audit firm used by the bank and vote on the bank's bylaws. Fifteen trustees are elected, all of whom are selected from the pool of corporators. A nominating committee consisting of several trustees and one corporator nominates the slate of trustees. The corporators have no other functions than those listed above. The corporators in effect serve the same function as the stockholders of a commercial bank or stock savings bank.

In our opinion, a corporator is neither a director, trustee, officer nor an employee. Therefore, *** would not be in violation of Title II if one of its corporators was serving as a director, trustee, etc. of another financial institution located in the same SMSA or same local community unless that corporator can be said to have a representative or nominee serving as a trustee, etc. of ***. If that were the case, corporator "X" would be a management official of both *** and the other financial institution and Title II would prohibit the corporator's continued service.

A proposed amendment1 to Part 348 (§ 348.2(k)) defines "representative or nominee'' to mean a person who serves as a management official and has an express or implied duty to act on behalf of another person with respect to management responsibilities. That express or implied duty can be found on the basis of a family, employment, agency or other relationship as well as on the basis of an agreement or understanding. We have not been presented sufficient information at this time to be able to determine whether or not any corporator who is currently serving as a management official at another financial institution has a "representative or nominee" (within the meaning of proposed § 348.2(k)) serving as a management official of ***.

2. Branch Advisory Board Members.

As pointed out above, a management official includes an officer or employee with management functions, advisory or honorary directors, and trustees.2 You have indicated to me that every branch bank of *** has an advisory board made up of persons from the community. The board meets twice a year, informs the branch management of the needs of the community, and has no relation to the board of trustees of the entire *** bank. Each member is paid thirty dollars a meeting. The members have no title other than that of advisory board member. Currently, there are members of the various branch advisory boards who serve as management officials of other financial institutions. It is our opinion based on the facts as presented to us that the advisory board members are neither employees nor officers with management functions. Nor will we consider them to be advisory directors or advisory trustees as they are not in a position to influence the policy-making decisions of the board of directors of ***. Title II does not therefore prohibit the service of these persons as advisory board members.

Should you have any questions regarding the substance of this opinion, Title II or Part 348, please contact me.

1 The comment period on the proposal ended on September 17, 1979. No official action has been taken with regard thereto as of the writing of this letter. Go back to Text

2 It is our opinion that advisory and honorary trustees are management officials as well. Go back to Text

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