II

103D CONGRESS

2D SESSION S. 1801

To apply certain minimum standards to the conversion of savings associations

and savings banks from the mutual form to the stock form, and for

other purposes.

IN THE SENATE OF THE UNITED STATES

JANUARY 26 (legislative day, JANUARY 25), 1994

Mr. RIEGLE (for himself and Mr. D’AMATO) introduced the following bill;

which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs

A BILL

To apply certain minimum standards to the conversion of

savings associations and savings banks from the mutual

form to the stock form, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Mutual Depository In5 stitution Conversion Protection Act of 1994’’.

6 SEC. 2. MUTUAL-TO-STOCK CONVERSIONS BY STATE INSTI7 TUTIONS.

8 Section 5(j) of the Home Owners’ Loan Act (12

9 U.S.C. 1464(j)) is amended to read as follows:
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1 ‘‘(j) STOCK CONVERSIONS BY STATE INSTITU2 TIONS.—

3 ‘‘(1) APPLICATION OF FEDERAL REGULA4 TIONS.—A converting institution shall be subject to

5 such regulations as the Director shall prescribe. The

6 appropriate State regulatory authority may impose

7 more restrictive rules or regulations on such conver8 sions if it deems such action to be appropriate.

9 ‘‘(2) LIMITATION ON INSIDER TRANS10 ACTIONS.—An officer, director, or employee of a

11 converting institution may purchase or receive, di12 rectly or indirectly, shares of or any other beneficial

13 interest in that institution only under the same

14 terms and conditions and only in the same amounts

15 as are available—

16 ‘‘(A) to any depositor of the institution

17 who is not otherwise affiliated with the institu18 tion, if such officer, director, or employee is a

19 bona fide depositor of the institution; or

20 ‘‘(B) generally to any other person who is

21 not affiliated with the institution, if such offi22 cer, director, or employee is not a bona fide de23 positor of the institution.

24 ‘‘(3) CONSIDERATION OF ADDITIONAL COM25 PENSATION.—No proposal may be made to the
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1 shareholders of a converted institution during the 1-

2 year period beginning on the date of conversion to

3 increase the direct or indirect compensation of an of4 ficer, director, or employee of the institution in ex5 cess of the compensation of such person prior to the

6 date of the conversion.

7 ‘‘(4) AGGREGATE LIMIT ON BENEFICIAL INTER8 ESTS OF INSIDERS.—The Director shall, by regula9 tion, establish an appropriate aggregate percentage

10 of and an aggregate dollar limitation on the bene11 ficial interests in a converting institution that may

12 be held, directly or indirectly, by any officer, direc13 tor, or employee of the institution.

14 ‘‘(5) DEFINITIONS.—For purposes of this sub15 section—

16 ‘‘(A) the terms ‘State savings association’

17 and ‘State savings bank’ have the same mean18 ings as in section 3 of the Federal Deposit In19 surance Act;

20 ‘‘(B) the term ‘converted institution’

21 means a State savings association or State sav22 ings bank that converted from the mutual form

23 to the stock form after January 26, 1994; and

24 ‘‘(C) the term ‘converting institution’

25 means a State savings association or a State
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1 savings bank that is converted from the mutual

2 form to the stock form after January 26,

3 1994.’’.

4 SEC. 3. CONVERSIONS BY FEDERAL INSTITUTIONS.

5 Section 5(i) of the Home Owners’ Loan Act (12

6 U.S.C. 1864(i)) is amended by adding at the end the fol7 lowing new paragraph:

8 ‘‘(5) INSIDER TRANSACTIONS AND COMPENSA9 TION.—

10 ‘‘(A) IN GENERAL.—In any conversion, on

11 or after January 26, 1994, of a Federal savings

12 association or a Federal savings bank from the

13 mutual form to the stock form—

14 ‘‘(i) an officer, director, or employee

15 of the institution that is the subject of the

16 conversion may purchase or receive, di17 rectly or indirectly, shares of or any other

18 beneficial interest in that institution only

19 under the same terms and conditions and

20 only in the same amounts as are avail21 able—

22 ‘‘(I) to any depositor of the insti23 tution who is not otherwise affiliated

24 with the institution, if such officer, di-
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1 rector, or employee is a bona fide de2 positor of the institution; or

3 ‘‘(II) generally to any other per4 son who is not affiliated with the in5 stitution, if such officer, director, or

6 employee is not a bona fide depositor

7 of the institution; and

8 ‘‘(ii) no proposal may be made to the

9 shareholders of the institution during the

10 1-year period beginning on the date of con11 version to increase the direct or indirect

12 compensation of an officer, director, or em13 ployee of the institution in excess of the

14 compensation of such person prior to the

15 date of the conversion.

16 ‘‘(B) AGGREGATE LIMIT ON BENEFICIAL

17 INTERESTS OF INSIDERS.—The Director shall,

18 by regulation, establish an appropriate aggre19 gate percentage of and an aggregate dollar limi20 tation on the beneficial interests in any institu21 tion that is the subject of a conversion de22 scribed in subparagraph (A) that may be held,

23 directly or indirectly, by any officer, director, or

24 employee of the institution.’’.
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1 SEC. 4. REGULATIONS.

2 Not later than 90 days after the date of enactment

3 of this Act, the Director of the Office of Thrift Supervision

4 shall promulgate final regulations to implement sub5 sections (i)(5) and (j) of section 5 of the Home Owners’

6 Loan Act, as amended by this Act.

7 SEC. 5. STUDY AND REPORT.

8 (a) STUDY.—The Secretary of the Treasury shall

9 conduct a study to determine—

10 (1) the adequacy of existing Federal law in en11 suring equity and fairness in the conversion of sav12 ings associations and savings banks from the mutual

13 form to the stock form;

14 (2) the accuracy of existing stock appraisal and

15 valuation techniques employed in such conversions;

16 and

17 (3) the adequacy of disclosures to depositors

18 and the public concerning such conversions.

19 (b) REPORT.—Not later than 1 year after the date

20 of enactment of this Act, the Secretary of the Treasury

21 shall submit to the Congress a report of the results of the

22 study conducted under subsection (a).

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