This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

63580 

Vol. 79, No. 206 

Friday, October 24, 2014 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Part 340 

RIN 3064–AE26 

Restrictions on Sale of Assets by the 

Federal Deposit Insurance Corporation 

AGENCY: Federal Deposit Insurance 

Corporation. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Federal Deposit 

Insurance Corporation (FDIC) is 

proposing to amend our regulations. 

Part 340 implements section 11(p) of the 

Federal Deposit Insurance Act. Under 

section 11(p), individuals or entities 

whose acts or omissions have, or may 

have, contributed to the failure of an 

insured depository institution cannot 

buy the assets of that failed insured 

depository institution from the FDIC. 

The proposed revisions to part 340 will 

help to clarify its purpose, scope and 

applicability, and will make it more 

consistent in our regulations, the 

parallel provision in the FDIC’s Orderly 

Liquidation Authority regulations that 

implements section 210(r) of the DoddFrank Wall Street Reform and Consumer 

Protection Act by placing restrictions on 

sales of assets of a covered financial 

company by the FDIC. Sections of part 

340 became effective on July 1, 2014. 

DATES: Written comments must be 

received by the FDIC not later than 

December 23, 2014. 

ADDRESSES: You may submit comments 

by any of the following methods: 

• Agency Web site: http://

www.fdic.gov/regulations/laws/federal/. 

Follow instructions for submitting 

comments on the Agency Web site. 

• E-Mail: Comments@FDIC.gov. 

Include ‘‘RIN 3064–AE26’’ in the subject 

line of the message. 

• Mail: Robert E. Feldman, Executive 

Secretary, Attention: Comments, Federal 

Deposit Insurance Corporation, 550 17th 

Street NW., Washington, DC 20429. 

• Hand Delivery/Courier: Guard 

station at the rear of the 550 17th Street 

Building (located on F Street) on 

business days between 7 a.m. and 5 p.m. 

(EDT). 

• Federal eRulemaking Portal: http:// 

www.regulations.gov/. Follow the 

instructions for submitting comments. 

• Public Inspection: All comments 

received will be posted without change 

to http://www.fdic.gov/regulations/laws/ 

federal/ including any personal 

information provided. Paper copies of 

public comments may be ordered from 

the Public Information Center by 

telephone at 703–562–2200 or 1–877– 

275–3342. 

FOR FURTHER INFORMATION CONTACT: 

James D. Sigler, Resolutions & 

Receiverships Specialist, 202–898–3871; 

Craig Rice, Senior Capital Markets 

Specialist, Division of Resolutions and 

Receiverships, 202–898–3501; Elizabeth 

Falloon, Supervisory Counsel, Legal 

Division, 703–562–6148; Shane 

Kiernan, Counsel, Legal Division, 703– 

562–2632; Federal Deposit Insurance 

Corporation, 550 17th Street NW., 

Washington, DC 20429. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The FDIC promulgated part 340 in 

2000 to implement section 11(p) of the 

Federal Deposit Insurance Act, 12 

U.S.C. 1821(p) (section 11(p)). Under 

section 11(p), individuals or entities 

whose acts or omissions have, or may 

have, contributed to the failure of an 

insured depository institution (failed 

institution) cannot buy the assets of that 

failed institution from the FDIC. The 

FDIC expanded the purchaser eligibility 

restriction as permitted by statute when 

it promulgated part 340 by precluding 

such individuals or entities from 

purchasing the assets of any failed 

institution, not only the particular 

institution affected by the actions of 

those individuals or entities. As 

provided in section 11(p), part 340 also 

prohibits the sale of assets involving 

FDIC financing to certain persons who 

have defaulted on obligations of $1 

million or more, in aggregate, owed to 

a failed insured depository institution or 

the FDIC and who have made fraudulent 

misrepresentations in connection with 

any of those obligations. Compliance 

with part 340 is established through a 

self-certification process by which a 

prospective purchaser certifies that it is 

eligible to purchase an asset from the 

FDIC and that the FDIC’s sale of an asset 

to that prospective purchaser would not 

be restricted under section 11(p) or part 

340. 

In March of this year the FDIC 

promulgated section 380.13 to 

implement section 210(r) of the DoddFrank Wall Street Reform and Consumer 

Protection Act, 12 U.S.C. 5390(r) 

(section 210(r)). Section 210(r) prohibits 

certain sales of assets held by the FDIC 

in the course of liquidating a covered 

financial company. Because section 

210(r) and section 11(p) share 

substantially similar statutory language, 

part 340 served as a model for the 

development of section 380.13. While 

many aspects of part 340 were included 

in section 380.13, FDIC staff identified 

new or different concepts to include in 

section 380.13 that were not already in 

part 340. Several of these concepts, if 

incorporated into part 340, would 

improve part 340 and make it more 

consistent with section 380.13. 

II. Proposal 

The FDIC proposes to amend part 340 

in a number of ways. Some of the 

amendments are significant, substantive 

changes and others are non-substantive, 

technical or conforming changes. This 

discussion in this supplemental 

information section addresses the 

substantive changes suggested by the 

FDIC in this proposed rulemaking. 

Paragraph 340.1(b) sets forth the 

purpose of part 340. The FDIC proposes 

to amend the purpose because it 

believes part 340 should extend the 

restrictions on sales of assets of a failed 

institution to individuals or entities 

who are also precluded from purchasing 

assets of a covered financial company 

from the FDIC under section 210(r) and 

section 380.13. This would ensure 

consistency among part 340 and section 

380.13. Under section 380.13, 

individuals or entities prohibited from 

purchasing assets of a failed institution 

under part 340 are also prohibited from 

purchasing assets of a covered financial 

company under section 380.13. 

Likewise, individuals or entities 

prohibited from purchasing assets of a 

covered financial company under 

section 380.13 should be prohibited 

from purchasing assets of a failed 

institution under part 340. 

The FDIC is proposing three changes 

to clarify part 340’s scope of coverage, 

which is set forth in paragraph 340.1(c). 

First, the FDIC proposes to clarify the 

applicability of part 340 to sales of 


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assets by a subsidiary of a failed 

institution or by a bridge depository 

institution. Sales of assets of a failed 

institution’s subsidiary or a bridge 

depository institution are not expressly 

subject to section 11(p) because such 

assets are not ‘‘assets of a failed 

institution’’ that are being sold ‘‘by the 

Corporation,’’ and thus would fall 

outside the scope of the statutory 

restrictions on asset sales. The FDIC 

believes, however, that if it has the right 

to control the terms of a sale of assets 

of a failed institution’s subsidiary or a 

bridge depository institution, or has the 

ability to control selection of the 

purchaser of those assets under an 

agency agreement or as shareholder, the 

restrictions set forth in section 11(p) and 

part 340 should apply. The FDIC has 

discretionary authority to expand the 

scope of coverage because section 11(p) 

sets the minimum requirements for 

restrictions on sales of assets, and the 

FDIC may prescribe further restrictions 

on its own accord. Under the FDIC’s 

proposed revision of part 340, the 

restrictions on asset sales would apply 

to sales of assets of a failed institution’s 

subsidiary or a bridge depository 

institution if the FDIC controls the terms 

of the sale by agreement or as 

shareholder. 

Second, the FDIC proposes amending 

section 340.1 to explicitly state that part 

340 does not apply to certain types of 

transactions involving marketable 

securities and other financial 

instruments. Under proposed paragraph 

(e), a sale of a security or a group or 

index of securities, a commodity, or any 

qualified financial contract that 

customarily is traded through a 

financial intermediary and where the 

seller cannot control selection of the 

purchaser and the sale is consummated 

through that customary practice would 

not be covered by part 340. For 

example, if the FDIC were to sell 

publicly-traded stocks or bonds that the 

failed institution held, it might engage 

a broker or custodian to conduct or 

facilitate the sale. The broker or 

custodian would then tender the 

securities to the market and accept 

prevailing market terms offered by 

another broker, a specialist, a central 

counterparty or a similar financial 

intermediary who would then sell the 

security to another purchaser. In this 

scenario, it is not possible for the FDIC 

to control selection of the end purchaser 

at the time of sale. Therefore, the 

transaction cannot be a sale covered by 

section 11(p) because the FDIC has no 

way to select the prospective purchaser 

or determine whether that purchaser 

would or would not be prohibited from 

purchasing the asset. Moreover, a 

prospective purchaser of such assets 

will not be able to select the FDIC as the 

seller and therefore could not determine 

whether section 11(p) and part 340 

apply to the transaction. The FDIC is 

proposing to define the term ‘‘financial 

intermediary,’’ for the purposes of part 

340, in section 340.2 as discussed 

below. The FDIC anticipates that this 

express limitation on the scope of part 

340’s coverage will provide greater 

certainty to market participants and 

FDIC staff who conduct asset sales 

regarding the applicability of section 

11(p) and part 340. 

Third, the FDIC proposes to clarify in 

section 340.1 that part 340 is not 

applicable to a judicial sale or a trustee’s 

sale of property securing an obligation 

to the FDIC where the sale is not 

conducted or controlled by the FDIC. 

Although the FDIC could have a 

security interest in property serving as 

collateral and therefore the authority to 

initiate a foreclosure action, the 

selection of the purchaser and terms of 

the sale are not necessarily within the 

FDIC’s control. Rather, a court or trustee 

would conduct the sale in accordance 

with applicable state law and would 

select the purchaser. In this situation, 

the sale is not a sale by the FDIC. While 

the plain language of part 340 does not 

suggest that such a sale would fall 

within its scope, the FDIC is proposing 

this change for the sake of clarity. This 

exception does not affect sales of 

collateral by the FDIC where the FDIC 

is in possession of the property and 

conducts the sale itself, however. Where 

the FDIC has control over the manner 

and terms of the sale, it will require the 

prospective purchaser’s certification 

that the prospective purchaser is not 

prohibited from purchasing the asset. 

Section 340.2 sets forth definitions for 

certain terms used in part 340. The FDIC 

is proposing to revise the definition of 

‘‘associated person’’ to include limited 

liability companies of which an 

individual is a member (or was a 

member at the time of the occurrence of 

any event that would result in a 

restriction on sale as set forth in section 

340.4) if the prospective purchaser of 

assets is an individual and, if the 

prospective purchaser is a limited 

liability company, to include the 

manager of the limited liability 

company. The FDIC is proposing to 

revise the definition of ‘‘failed 

institution’’ to remove reference to 

entities ‘‘owned and controlled’’ by the 

failed institution because the revision to 

paragraph 340.1(c), discussed above, 

explicitly states that sales of subsidiary 

assets are covered under part 340 if the 

FDIC controls the terms of the sale by 

agreement or in its role as shareholder. 

Additionally, references to the 

Resolution Trust Corporation and RTC 

are removed in favor of generically 

referencing the FDIC’s predecessor 

agencies. 

The FDIC is also proposing to add a 

new term for use in part 340, ‘‘financial 

intermediary,’’ and define that term to 

mean any broker, dealer, bank, 

underwriter, exchange, clearing agency 

registered with the SEC under section 

17A of the Securities Exchange Act of 

1934, transfer agent (as defined in 

section 3(a)(25) of the Securities 

Exchange Act of 1934), central 

counterparty or any other entity whose 

role is to facilitate a transaction by, as 

a riskless intermediary, purchasing a 

security or qualified financial contract 

from one counterparty and then selling 

it to another. This definition is used to 

identify transactions of marketable 

financial instruments set forth in section 

340.1(c) that the FDIC believes should 

not be covered by section 11(p) or part 

340. 

Section 340.4 sets forth the conditions 

under which a person (whether an 

individual or entity) is prohibited from 

acquiring assets of a failed institution 

from the FDIC. Those conditions are: (1) 

The person, or its associated person, 

participated as an officer or director of 

a failed institution or of an affiliate of 

a failed institution, ‘‘in a material way 

in a transaction that caused a substantial 

loss to the failed institution’’ (as defined 

in paragraph (b) of section 340.4); (2) the 

person, or its associated person, has 

been removed from a failed institution 

by order of a primary federal regulatory 

agency; (3) the person, or its associated 

person, has engaged in a ‘‘pattern or 

practice of defalcation’’ (as defined in 

paragraph (c) of section 340.4) with 

respect to obligations owed to a failed 

institution; or (4) the person, or its 

associated person, has committed a 

certain criminal offense against a 

financial institution and is in default on 

an obligation owed by that person or its 

associated person. The FDIC proposes 

adding a fifth restriction: If the person 

is prohibited from purchasing assets of 

a covered financial company from the 

FDIC. As explained above, the FDIC 

believes part 340 should also restrict 

sales of assets of a failed institution to 

individuals or entities who are also 

prohibited from purchasing assets of a 

covered financial company from the 

FDIC under section 210(r) and section 

380.13. This would ensure consistent 

treatment of prospective purchasers of 

assets from the FDIC, whether such 

assets are assets of a covered financial 

company or of a failed institution. 


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The FDIC is proposing to amend 

paragraph (a) of section 340.7, which 

sets forth the requirement that a 

prospective purchaser certify that none 

of the restrictions set forth in part 340 

apply to the sale, by adding a sentence 

stating that the person must also certify 

that it is not using a straw purchaser or 

other subterfuge to allow it to purchase 

an asset of an insured depository 

institution from the FDIC or benefit 

from such transaction if such person 

would otherwise be ineligible to 

purchase assets from the FDIC under 

part 340. The FDIC’s form certification 

(the ‘‘Purchaser Eligibility 

Certification,’’ FDIC Form 7300/06) 

already includes a statement under 

which a prospective purchaser certifies 

that neither the identity nor form of the 

prospective purchaser, nor any aspect of 

the contemplated transaction, has been 

created or altered with the intent, in 

whole or in part, to allow an individual 

or entity who otherwise would be 

ineligible to purchase assets of a failed 

institution from the FDIC to benefit 

directly or indirectly from the sale. The 

FDIC believes that part 340 would be 

strengthened by explicitly stating this 

requirement in the regulatory text itself 

as well as in the Purchaser Eligibility 

Certification. 

The FDIC is proposing to amend 

paragraph (b) of section 340.7, which 

excepts certain types of entities that are 

federal agencies or instrumentalities and 

states or political subdivisions of states 

from the self-certification requirement, 

by including bridge depository 

institutions among the list of excepted 

entities. The FDIC believes it is 

reasonable to presume a bridge 

depository institution will be in 

compliance with part 340 because such 

entity is subject to control or oversight 

by the FDIC. 

Finally, the FDIC is proposing to 

amend section 340.8, which provides 

that part 340 does not apply if the sale 

resolves or settles a person’s obligation 

to the FDIC, to also except a sale that 

resolves a claim that the FDIC has 

asserted against a person. This is not 

intended to be a substantive change but 

to more closely track section 11(p), 

which excepts sales that resolve or settle 

either claims or obligations. This 

proposed change would ensure that the 

regulation cites both bases for exception 

set forth in the statute. It would also 

ensure consistency with the equivalent 

provision in paragraph (a)(2)(vi) of 

section 380.13. 

The FDIC’s proposed changes to part 

340 will clarify the restrictions on sales 

of assets of failed institutions by the 

FDIC and will ensure consistency 

among part 340 and section 380.13, 

which will allow the FDIC to more 

efficiently administer the two rules and 

will help the public better understand 

the two rules. Because the proposed 

substantive amendments and technical 

and conforming changes are extensive, 

the FDIC proposes to revise and restate 

the text of part 340 in full rather than 

prepare fragmentary amendments. 

III. Request for Comments 

The FDIC requests comments on any 

of the changes that it is proposing to 

make. All comments must be received 

by the FDIC not later than December 23, 

2014. 

IV. Regulatory Analysis and Procedure 

A. Paperwork Reduction Act 

In accordance with the requirements 

of the Paperwork Reduction Act of 1995 

(44 U.S.C. 3501, et seq.) (PRA), the FDIC 

may not conduct or sponsor, and the 

respondent is not required to respond 

to, an information collection unless it 

displays a currently valid Office of 

Management and Budget (OMB) control 

number. The FDIC has developed a 

purchaser eligibility certification form 

for use in establishing compliance with 

part 340 by a prospective purchaser of 

assets of a failed institution from the 

FDIC. The certification is an OMBapproved collection of information 

under the PRA, 3064–0135. The FDIC 

expects that the net PRA burden 

estimates of this collection will not be 

materially affected by this NPR. Any 

subsequent changes to the form will be 

submitted by the FDIC to OMB for 

review and approval. 

1. Information Collection 

Title of Information Collection: 

Purchaser Eligibility Certification. 

OMB Control Number: 3064–0135. 

Form Number: FDIC Form 7300/06. 

Affected Public: Prospective 

purchasers of failed insured depository 

institution assets. 

Frequency of Response: Event 

generated. 

Estimated Number of Respondents: 

1500. 

Time per Response: 30 minutes. 

Total Estimated Annual Burden: 750 

hours. 

2. Comments are invited on: 

• Whether the collection of 

information is necessary for the proper 

performance of the FDIC’s functions, 

including whether the information has 

practical utility; 

• The accuracy of the estimates of the 

burden of the information collection, 

including the validity of the 

methodology and assumptions used; 

• Ways to enhance the quality, utility, 

and clarity of the information to be 

collected; and 

• Ways to minimize the burden of the 

information collection on respondents, 

including through the use of automated 

collection techniques or other forms of 

information technology. 

All comments will become a matter of 

public record. Commenters may submit 

comments on the information collection 

and burden estimates at the addresses 

listed under the ADDRESSES heading 

above; please put note the OMB Control 

Number, 3064–0135, on the subject line. 

A copy of the comments may also be 

submitted to the attention of the OMB 

desk officer for the FDIC; by mail to U.S. 

Office of Management and Budget, 725 

17th Street NW., #10235, Washington, 

DC 20503; by facsimile to 202–395– 

6974; or by email to: oira_submission@

omb.eop.gov. 

B. Regulatory Flexibility Act 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) requires an agency 

that is issuing a proposed rulemaking to 

prepare and make available an initial 

regulatory flexibility analysis of a 

proposed regulation. The Regulatory 

Flexibility Act provides, however, that 

an agency is not required to prepare and 

publish a regulatory flexibility analysis 

if the agency certifies that the proposed 

rulemaking will not have a significant 

economic impact on a substantial 

number of small entities. The FDIC 

hereby certifies pursuant to 5 U.S.C. 

605(b) that the proposed rulemaking 

would not have a significant economic 

impact on a substantial number of small 

entities within the meaning of the 

Regulatory Flexibility Act. 

Under regulations issued by the Small 

Business Administration (13 CFR 

121.201), a ‘‘small entity’’ includes 

those firms in the ‘‘Finance and 

Insurance’’ sector whose size varies 

from $7.5 million or less in assets 

(mortgage and nonmortgage loan 

brokers) to $550 million or less in assets 

(commercial banks, savings institutions, 

credit unions, and others). This 

proposed rulemaking imposes no new 

burden on prospective purchasers of 

assets sold by the FDIC. The 

requirement that a prospective 

purchaser complete and submit the 

Purchaser Eligibility Certification 

described above is a precondition to sale 

that is already required. Completion of 

the Purchaser Eligibility Certification 

does not require the use of professional 

skills or the preparation of special 

reports or records and should continue 

to have minimal economic impact on 

those individuals and entities that seek 

to purchase assets from the FDIC. Thus, 

the FDIC believes that any impact on 

small entities will not be substantial. 


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C. Plain Language 

Section 722 of the Gramm-LeachBliley Act of 1999 (Pub. L. 106–102, 113 

Stat. 1338, 1471) requires the Federal 

banking agencies to use plain language 

in all proposed and final rules 

published after January 1, 2000. The 

FDIC has sought to present the proposed 

rulemaking in a simple and 

straightforward manner. The FDIC 

invites comments on whether the 

proposed rulemaking is clearly stated 

and effectively organized, and how the 

FDIC might make the proposed 

rulemaking text easier to understand. 

Text of the Proposed Rule 

Federal Deposit Insurance Corporation 

12 CFR Chapter III 

List of Subjects in 12 CFR Part 340 

Asset disposition, Banks, Banking. 

Authority and Issuance 

For the reasons stated in the 

preamble, the Board of Directors of the 

Federal Deposit Insurance Corporation 

proposes to amend part 340 of title 12 

of the Code of Federal Regulations as 

follows: 

PART 340—RESTRICTIONS ON SALE 

OF ASSETS BY THE FEDERAL 

DEPOSIT INSURANCE CORPORATION 

■ 1. Revise the title to read PART 340— 

RESTRICTIONS ON SALE OF ASSETS 

OF A FAILED INSTITUTION BY THE 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

■ 2. The authority citation for part 340 

continues to read as follows: 

Authority: 12 U.S.C. 1819 (Tenth), 

1821(p). 

■ 3. Revise part 340 to read as follows: 

Sec. 

340.1 What is the statutory authority for the 

regulation, what are its purpose and 

scope, and can the FDIC have other 

policies on related topics? 

340.2 Definitions. 

340.3 What are the restrictions on the sale 

of assets by the FDIC if the buyer wants 

to finance the purchase with a loan from 

the FDIC? 

340.4 What are the restrictions on the sale 

of assets by the FDIC regardless of the 

method of financing? 

340.5 Can the FDIC deny a loan to a buyer 

who is not disqualified from purchasing 

assets using seller-financing under this 

regulation? 

340.6 What is the effect of this part on 

transactions that were entered into 

before its effective date? 

340.7 When is a certification required, and 

who does not have to provide a 

certification? 

340.8 Does this part apply in the case of a 

workout, resolution, or settlement of 

obligations? 

§ 340.1 What is the statutory authority for 

the regulation, what are its purpose and 

scope, and can the FDIC have other policies 

on related topics? 

(a) Authority. The statutory authority 

for adopting this part is section 11(p) of 

the Federal Deposit Insurance Act (FDI 

Act), 12 U.S.C. 1821(p). Section 11(p) 

was added to the FDI Act by section 20 

of the Resolution Trust Corporation 

Completion Act (Pub. L. 103–204, 107 

Stat. 2369 (1993)). 

(b) Purpose. The purpose of this part 

is to prohibit individuals or entities that 

improperly profited or engaged in 

wrongdoing at the expense of a failed 

institution or covered financial 

company, or seriously mismanaged a 

failed institution, from buying assets of 

a failed institution from the FDIC. 

(c) Scope. 

(1) The restrictions of this part 

generally apply to sales of assets of 

failed institutions owned or controlled 

by the FDIC in any capacity. 

(2) The restrictions in this section 

apply to the sale of assets of a subsidiary 

of a failed institution or a bridge 

depository institution if the FDIC 

controls the terms of the sale by 

agreement or in its role as shareholder. 

(3) Unless we determine otherwise, 

this part does not apply to the sale of 

securities in connection with the 

investment of corporate and 

receivership funds pursuant to the 

Investment Policy for Liquidation Funds 

managed by the FDIC as it is in effect 

from time to time. 

(4) In the case of a sale of securities 

backed by a pool of assets that may 

include assets of failed institutions by a 

trust or other entity, this part applies 

only to the sale of assets by the FDIC to 

an underwriter in an initial offering, and 

not to any other purchaser of the 

securities. 

(5) The restrictions of this part do not 

apply to a sale of a security or a group 

or index of securities, a commodity, or 

any qualified financial contract that 

customarily is traded through a 

financial intermediary, as defined in 

section 340.2, where the seller cannot 

control selection of the purchaser and 

the sale is consummated through that 

customary practice. 

(6) The restrictions of this part do not 

apply to a judicial sale or a trustee’s sale 

of property that secures an obligation to 

the FDIC where the sale is not 

conducted or controlled by the FDIC. 

(d) The FDIC retains the authority to 

establish other policies restricting asset 

sales. Neither 12 U.S.C. 1821(p) nor this 

part in any way limits the authority of 

the FDIC to establish policies 

prohibiting the sale of assets to 

prospective purchasers who have 

injured any failed institution, or to other 

prospective purchasers, such as certain 

employees or contractors of the FDIC, or 

individuals who are not in compliance 

with the terms of any debt or duty owed 

to the FDIC. Any such policies may be 

independent of, in conjunction with, or 

in addition to the restrictions set forth 

in this part. 

§ 340.2 Definitions. 

Many of the terms used in this part 

are defined in the Federal Deposit 

Insurance Act, 12 U.S.C. 1811, et seq. 

Additionally, for the purposes of this 

part, the following terms are defined: 

(a) Associated person of an individual 

or entity means: 

(1) With respect to an individual: 

(i) The individual’s spouse or 

dependent child or any member of his 

or her immediate household; 

(ii) A partnership of which the 

individual is or was a general or limited 

partner; 

(iii) A limited liability company of 

which the individual is or was a 

member; or 

(iv) A corporation of which the 

individual is or was an officer or 

director. 

(2) With respect to a partnership, a 

managing or general partner of the 

partnership or with respect to a limited 

liability company, a manager; or 

(3) With respect to any entity, an 

individual or entity who, acting 

individually or in concert with one or 

more individuals or entities, owns or 

controls 25 percent or more of the 

entity. 

(b) Default means any failure to 

comply with the terms of an obligation 

to such an extent that: 

(1) A judgment has been rendered in 

favor of the FDIC or a failed institution; 

or 

(2) In the case of a secured obligation, 

the property securing such obligation is 

foreclosed on. 

(c) FDIC means the Federal Deposit 

Insurance Corporation. 

(d) Failed institution means any 

insured depository institution (as 

defined in 12 U.S.C. 1813(c)) that has 

been under the conservatorship or 

receivership of the FDIC or any of its 

predecessors. 

(e) Financial intermediary means any 

broker, dealer, bank, underwriter, 

exchange, clearing agency registered 

with the SEC under section 17A of the 

Securities Exchange Act of 1934, 

transfer agent (as defined in section 

3(a)(25) of the Securities Exchange Act 

of 1934), central counterparty or any 

other entity whose role is to facilitate a 

transaction by, as a riskless 

intermediary, purchasing a security or 


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qualified financial contract from one 

counterparty and then selling it to 

another. 

(f) Obligation means any debt or duty 

to pay money owed to the FDIC or a 

failed institution, including any 

guarantee of any such debt or duty. 

(g) Person means an individual, or an 

entity with a legally independent 

existence, including: A trustee; the 

beneficiary of at least a 25 percent share 

of the proceeds of a trust; a partnership; 

a corporation; an association; or other 

organization or society. 

(h) Substantial loss means: 

(1) An obligation that is delinquent 

for ninety (90) or more days and on 

which there remains an outstanding 

balance of more than $50,000; 

(2) An unpaid final judgment in 

excess of $50,000 regardless of whether 

it becomes forgiven in whole or in part 

in a bankruptcy proceeding; 

(3) A deficiency balance following a 

foreclosure of collateral in excess of 

$50,000, regardless of whether it 

becomes discharged in whole or in part 

in a bankruptcy proceeding; 

(4) Any loss in excess of $50,000 

evidenced by an IRS Form 1099–C 

(Information Reporting for Cancellation 

of Debt). 

§ 340.3 What are the restrictions on the 

sale of assets by the FDIC if the buyer 

wants to finance the purchase with a loan 

from the FDIC? 

A person may not borrow money or 

accept credit from the FDIC in 

connection with the purchase of any 

assets of a failed institution from the 

FDIC if: 

(a) There has been a default with 

respect to one or more obligations 

totaling in excess of $1,000,000 owed by 

that person or its associated person; and 

(b) The person or its associated person 

made any fraudulent misrepresentations 

in connection with any such 

obligation(s). 

§ 340.4 What are the restrictions on the 

sale of assets by the FDIC regardless of the 

method of financing? 

(a) A person may not acquire any 

assets of a failed institution from the 

FDIC if the person or its associated 

person: 

(1) Has participated, as an officer or 

director of a failed institution or of an 

affiliate of a failed institution, in a 

material way in one or more 

transaction(s) that caused a substantial 

loss to that failed institution; 

(2) Has been removed from, or 

prohibited from participating in the 

affairs of, a failed institution pursuant to 

any final enforcement action by the 

Office of the Comptroller of the 

Currency, the Board of Governors of the 

Federal Reserve System, the FDIC, or 

any of their predecessors or successors; 

(3) Has demonstrated a pattern or 

practice of defalcation regarding 

obligations to any failed institution; 

(4) Has been convicted of committing 

or conspiring to commit any offense 

under 18 U.S.C. 215, 656, 657, 1005, 

1006, 1007, 1008, 1014, 1032, 1341, 

1343 or 1344 affecting any failed 

institution and there has been a default 

with respect to one or more obligations 

owed by that person or its associated 

person; or 

(5) Would be prohibited from 

purchasing the assets of a covered 

financial company from the FDIC under 

12 U.S.C. 5390(r) or its implementing 

regulation at 12 CFR part 380.13. 

(b) For purposes of paragraph (a) of 

this section, a person has participated 

‘‘in a material way in a transaction that 

caused a substantial loss to a failed 

institution’’ if, in connection with a 

substantial loss to a failed institution, 

the person has been found in a final 

determination by a court or 

administrative tribunal, or is alleged in 

a judicial or administrative action 

brought by the FDIC or by any 

component of the government of the 

United States or of any state: 

(1) To have violated any law, 

regulation, or order issued by a federal 

or state banking agency, or breached or 

defaulted on a written agreement with a 

federal or state banking agency, or 

breached a written agreement with a 

failed institution; 

(2) To have engaged in an unsafe or 

unsound practice in conducting the 

affairs of a failed institution; or 

(3) To have breached a fiduciary duty 

owed to a failed institution. 

(c) For purposes of paragraph (a) of 

this section, a person or its associated 

person has demonstrated a ‘‘pattern or 

practice of defalcation’’ regarding 

obligations to a failed institution if the 

person or associated person has: 

(1) Engaged in more than one 

transaction that created an obligation on 

the part of such person or its associated 

person with intent to cause a loss to any 

insured depository institution or with 

reckless disregard for whether such 

transactions would cause a loss to any 

such insured depository institution; and 

(2) The transactions, in the aggregate, 

caused a substantial loss to one or more 

failed institution(s). 

§ 340.5 Can the FDIC deny a loan to a 

buyer who is not disqualified from 

purchasing assets using seller-financing 

under this regulation? 

The FDIC still has the right to make 

an independent determination, based 

upon all relevant facts of a person’s 

financial condition and history, of that 

person’s eligibility to receive any loan 

or extension of credit from the FDIC, 

even if the person is not in any way 

disqualified from purchasing assets 

from the FDIC under the restrictions set 

forth in this part. 

§ 340.6 What is the effect of this part on 

transactions that were entered into before 

its effective date? 

This part does not affect the 

enforceability of a contract of sale and/ 

or agreement for seller financing in 

effect prior to July 1, 2000. 

§ 340.7 When is a certification required, 

and who does not have to provide a 

certification? 

(a) Before any person may purchase 

any asset from the FDIC that person 

must certify, under penalty of perjury, 

that none of the restrictions contained 

in this part applies to the purchase. The 

person must also certify that neither the 

identity nor form of the person, nor any 

aspect of the contemplated transaction, 

has been created or altered with the 

intent, in whole or in part, to allow an 

individual or entity who otherwise 

would be ineligible to purchase assets 

from the FDIC to benefit directly or 

indirectly from the proposed 

transaction. The FDIC may establish the 

form of the certification and may change 

the form from time to time. 

(b) Notwithstanding paragraph (a) of 

this section, and unless the Director of 

the FDIC’s Division of Resolutions and 

Receiverships, or designee, in his or her 

discretion so requires, a certification 

need not be provided by: 

(1) A state or political subdivision of 

a state; 

(2) A federal agency or 

instrumentality such as the Government 

National Mortgage Association; 

(3) A federally-regulated, governmentsponsored enterprise such as the 

Federal National Mortgage Association 

or Federal Home Loan Mortgage 

Corporation; or 

(4) A bridge depository institution. 

§ 340.8 Does this part apply in the case of 

a workout, resolution, or settlement of 

obligations? 

The restrictions of §§ 340.3 and 340.4 

do not apply if the sale or transfer of an 

asset resolves or settles, or is part of the 

resolution or settlement of, one or more 

obligations or claims that have been, or 

could have been, asserted by the FDIC 

against the person with whom the FDIC 

is settling, regardless of the amount of 

such obligations or claims. 

Dated at Washington, DC, this 21st day of 

October, 2014. 


asabaliauskas on DSK5VPTVN1PROD with PROPOSALS
Federal Register / Vol. 79, No. 206 / Friday, October 24, 2014 / Proposed Rules 63585 

1 12 U.S.C. 5390(a)(1)(A). 

By Order of the Board of Directors, Federal 

Deposit Insurance Corporation. 

Robert E. Feldman, 

Executive Secretary. 

[FR Doc. 2014–25337 Filed 10–23–14; 8:45 am] 

BILLING CODE 6714–01–P 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Part 380 

RIN 3064–AE25 

Record Retention Requirements 

AGENCY: Federal Deposit Insurance 

Corporation (FDIC). 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Federal Deposit 

Insurance Corporation (‘‘FDIC’’) is 

proposing a rule with request for 

comments that would implement 

section 210(a)(16)(D) of the Dodd-Frank 

Wall Street Reform and Consumer 

Protection Act (Dodd-Frank Act). This 

statutory provision requires the 

promulgation of a regulation 

establishing schedules for the retention 

by the FDIC of the records of a covered 

financial company (i.e., a financial 

company for which the FDIC has been 

appointed receiver pursuant to title II of 

the Dodd-Frank Act) as well as the 

records generated by the FDIC in the 

exercise of its title II orderly liquidation 

authority (title II) with respect to such 

covered financial company. 

DATES: Written comments on the 

proposed rule must be received by the 

FDIC no later than December 23, 2014. 

ADDRESSES: You may submit comments 

by any of the following methods: 

• Agency Web site: http://

www.fdic.gov/regulations/laws/federal. 

Follow instructions for Submitting 

comments on the Agency Web site. 

• E-Mail: Comments@FDIC.gov. 

Include ‘‘RIN 3064–AE25 ’’ in the 

subject line of the message. 

• Mail: Robert E. Feldman, Executive 

Secretary, Attention: Comments, Federal 

Deposit Insurance Corporation, 550 17th 

Street NW., Washington, DC 20429 

• Hand Delivery/Courier: Guard 

station at the rear of the 550 17th Street 

Building (located on F Street) on 

business days between 7 a.m. and 5 p.m. 

(EST). 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

Public Inspection: All comments 

received will be posted without change 

to http://www.fdic.gov/regulations/laws/ 

federal including any personal 

information provided. Comments may 

be inspected and photocopied in the 

FDIC Public Information Center, 3501 

North Fairfax Drive, Room E–I002, 

Arlington, VA 22226, between 9 a.m. 

and 5 p.m. (EST) on business days. 

Paper copies of public comments may 

be ordered from the Public Information 

Center by telephone at (877) 275–3342 

or (703) 562–2200. 

FOR FURTHER INFORMATION CONTACT: 

Legal Division: Elizabeth Falloon, (703) 

562–6148; Jerilyn Rogin, (703) 562– 

2409. Division of Resolutions and 

Receiverships: Teresa J. Franks, (202) 

898–7007; Manuel Ramilo, (202) 898– 

3781. Federal Deposit Insurance 

Corporation, 550 17th Street NW., 

Washington, DC 20429. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Title II of the Dodd-Frank Act 

provides for the appointment of the 

FDIC as receiver for a financial company 

to conduct an orderly liquidation of the 

company if, among other things, 

resolution of the company under 

bankruptcy (or other applicable 

insolvency regime) would have serious 

adverse effects on U.S. financial 

stability. Once appointed, Title II 

confers upon the FDIC as receiver for 

the company (the ‘‘covered financial 

company’’) certain powers and 

authorities to effectuate an orderly 

liquidation of the covered financial 

company in a manner that is consistent 

with the statutory objectives. For 

example, upon appointment of the FDIC 

as receiver for a covered financial 

company, the FDIC succeeds to all 

rights, titles, powers and privileges of 

the covered financial company 

including title to the books and records 

of the covered financial company.1

In addition, the FDIC necessarily will 

generate its own records in exercising 

the authorities conferred upon it by 

Title II. Section 210(a)(16)(D) of the 

Dodd-Frank Act (12 U.S.C. 

5390(a)(16)(D), hereafter ‘‘section 

210(a)(16)(D)’’) sets forth the outlines of 

the FDIC’s responsibilities regarding the 

retention of both of these categories of 

records—the records of a financial 

company in existence at the time the 

FDIC is appointed receiver, as well as 

those generated by the FDIC in 

connection with its appointment as 

receiver and the exercise of its orderly 

liquidation authority as receiver. 

Section 210(a)(16)(D) provides guidance 

as to types of records that must be 

retained, and requires the FDIC to 

prescribe such regulations and establish 

such retention schedules as are 

necessary. Specifically, section 

210(a)(16)(D)(i) requires that the FDIC 

prescribe the regulations and establish 

schedules for retention of these records 

with due regard for the avoidance of 

duplicative record retention and for the 

evidentiary needs of the FDIC as 

receiver and for the public. Once such 

regulations and retention schedules are 

prescribed, section 210(a)(16)(D)(ii) 

prohibits the destruction of records to 

the extent that they must be retained in 

accordance with the promulgated 

regulations and retention schedules. 

The proposed rule provides separate 

rules and retention schedules for 

inherited records of the covered 

financial company and for the records 

generated or maintained by the FDIC in 

connection with its receivership 

function. ‘‘Generated or maintained’’ 

refers in this context to records the FDIC 

creates, as well as records the FDIC 

receives and retains in connection with 

its Title II responsibilities. 

Section 210(a)(16)(D)(iii), entitled 

‘‘Records Defined,’’ describes the forms 

of documentary material to be addressed 

in the regulations and schedules, 

specifying that any document, book, 

paper, map, photograph, microfiche, 

microfilm, computer or electronicallycreated record is included. In addition, 

that section specifies that the records 

inherited from the failed company are 

those that were generated or maintained 

by the covered financial company in the 

course of and necessary to its 

transaction of business. The proposed 

rule clarifies the definition of ‘‘records’’ 

by including factors to be considered in 

determining whether documentary 

material was generated by the company 

in the course of and necessary to its 

transaction of business, as well as by 

providing examples such as general 

ledger and financial reports and 

qualified financial contracts. 

In addressing records generated by the 

FDIC, the proposed rule uses the same 

broadly inclusive description of 

documentary material provided in the 

statute and includes those records that 

the FDIC created or received in 

exercising the authorities of title II as 

required by section 210(a)(16)(D). This 

definition is also clarified in the 

proposed rule by including factors to be 

considered in determining whether 

documentary material was generated or 

maintained by the FDIC in the exercise 

of its title II authorities as well as by 

providing examples such as 

documentary material relating to the 

appointment of the FDIC as receiver and 

documentary material relating to the 

administration, determination and 

payment of claims against the FDIC as 

receiver. 


asabaliauskas on DSK5VPTVN1PROD with PROPOSALS