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4000 - Advisory Opinions

Trustee's Notice of Change in Control Not Required Where Appointment of New Trustee Will Not Alter Trusts' Ownership; Effect a Change In Underlying Beneficial Interests; or the Power to Control the Bank


July 21, 1995

Sandra Comenetz, Counsel

This responds to your June 15, 1995 letter in which you seek the FDIC's concurrence that notice under the Change in Bank Control Act of 1978 ("CBCA"), 12 U.S.C. § 1817(j), is not required with respect to a change in trustee for Bank "A'', a state-chartered insured nonmember bank.

The facts, as we understand them, are as follows. All of the voting shares of Bank A are held in trust with an individual serving as trustee. The trust arrangement arose as part of the settlement of litigation between Bank "B", a Colombian banking organization in liquidation operating under the supervision of the Fondo de Garantias Financiera, a Colombian government agency having responsibilities similar to those of the FDIC, and a number of foreign persons, regarding the ownership of the outstanding shares of the capital stock of Bank A.

The trust arrangement reflects two separate settlements to the same litigation. One settlement agreement governs the trustee's power to vote 40% of Bank A's outstanding shares and provides that the trustee has full discretion to vote this block of shares. The second agreement governs the trustee's power to vote the other 60% of Bank A's outstanding shares. This agreement provides that the trustee shall vote these shares in accordance with instructions from the Fondo de Garantias Financiera, in the case of 37.8% of the shares (63% of the 60% block), and the receiver in bankruptcy, in the case of 22.2% of the shares (37% of the 60% block). This agreement further provides that the trustee shall vote based upon a simple majority. Thus the Colombian regulator, as the majority beneficial owner, effectively controls 60% of the total shares of Bank A.

The present trustee has announced his intention to resign under both settlement agreements, effective upon court approval of a replacement trustee. Bank "C" has agreed to succeed the present trustee under both agreements.1

You contend that notice under the CBCA is not required because appointment of a new trustee would not alter the trusts' ownership, or effect a change in underlying beneficial interests or the power to control Bank A. We concur.

In this case, the anticipated change in trustee does not appear to affect control as the Colombian regulator will continue to control the majority of voting shares of Bank A after the change in trustee. Under these circumstances our view is that there is no need to file a change in control notice.

This conclusion is based solely on the facts set forth in your June 15, 1995 letter. We reserve the right to amend our opinion should additional facts come to our attention. The determination should not be interpreted as an indication of our views on other issues pertaining to the change in trustee or any other issue.

Thank you for writing to the FDIC.

1 Your letter also discusses a proposed acquisition by Bank "D", of all of the shares held in trust. Recently, you informed the FDIC that the Federal Reserve Board denied Bank D's application to acquire the shares. Since it is expected that there will still be a change in trustee, you remain interested in the FDIC's opinion on that issue. Go back to Text

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