Banking and Finance Law Report : Banking & Finance Lawyer & Attorney : Porter Wright Morris & Arthur Law Firm : Bankruptcy, Commercial Lending

Bankers and financial institution executives should note that the Securities and Exchange Commission has released guidance and other information regarding the Jumpstart Our Business Startups Act of 2012, or JOBS Act, that became law a few weeks ago.

The JOBS makes significant changes to how banks and other businesses can raise capital. It does this by:

·         Easing the IPO process and reporting requirements for emerging growth companies;

·         Reducing general solicitation and general advertising restrictions for certain private placements;

·         Creating a new $50 million small public offering exemption;

·         Creating a “crowdfunding” private placement exemption; and

·         Perhaps most importantly, for community banks and bank holding companies, increasing the number of shareholders a private company may have without having to publicly report under the Securities Exchange Act of 1934, including specific thresholds for banks and bank holding companies.

A summary of the JOBS Act is provided here.

The recent SEC guidance and other information is outlined below.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The U.S. House of Representatives, by a vote of 380 to 41, has passed the Jumpstart Our Business Startups Act, or JOBS Act [link to House Bill], in the form previously approved by the Senate last week [link to Senate Amendment]. The bill now goes to President Obama, who is expected to sign it into law. The JOBS Act could significantly impact community banks, among other businesses, regarding the categories summarized below.

SEC Registration

The JOBS Act increases the threshold for SEC registration from 500 shareholders of record to 2,000 shareholders of record for banks and bank holding companies. The increase allows some banks to raise capital by selling stock to new investors without having to register under Section 12(g) of the Securities Exchange Act of 1934.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

For good or for bad, interest rates are currently near all-time lows, including the “applicable federal rate” (“AFR”) which is used to set minimum interest rates for certain gift and estate tax planning techniques. While bankers and financial institution executives routinely consider the implications of such low rates for their institutions, they also should carefully consider the opportunities these low rates create for their estate planning and for that of their customers. Community bank owners and executives, in particular should not overlook these techniques that may help persevere years of wealth creation.

The October 2011 AFR is 0.16% for short-term obligations (up to 3 years), 1.19% for mid-term obligations (more than 3 years, up to 9 years), and 2.95% for long-term obligations (longer than 9 years). Such low interest rates could make this a good time to consider several estate and gift tax planning strategies that are generally more beneficial during periods of low interest rates. Here are some common techniques for bankers to consider: 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

In early July, the FDIC issued a report on an important subject to many community bankers: brokered deposits. The report to Congress, dated July 8, 2011, was required under Dodd-Frank and describes its view of the present role of brokered deposits in banking. Critical, of course, is the FDIC's observation that bank failures are frequently linked to brokered deposits.

Despite industry concerns that the present regulatory system for brokered deposits is outdated and poorly designed, the report concludes the present statutory scheme should not be amended or repealed.

Here is how the FDIC summarized the industry concerns it heard through the public comment process: (i) the brokered deposit statute creates liquidity problems if a bank becomes less than well capitalized; (ii) a combination of the statute and supervisory practices stigmatizes brokered deposits; and (iii) the brokered deposit statute is outdated and has not kept pace with technological change and innovation.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Publicly traded companies may need to act quickly to review, and, if necessary, amend their stock option and stock appreciation right ("SAR") plans in order to preserve tax deductions for compensation in excess of $1 million paid to certain executives. The reason for this review is that the Internal Revenue Service (the "IRS") and the United States Treasury Department recently issued proposed regulations that clarify a few items with respect to the application of Section 162(m) of the Internal Revenue Code (the "Code") to such plans. One item relates to requirements that stock options and SARs must meet to qualify as performance-based compensation. Another item relates to a transition rule for companies that initially are privately held but that later become publicly traded companies.

As background, Code Section 162(m) limits the deduction a publicly traded company may take with respect to remuneration paid to its "covered employees"--- its CEO and 3 most highly paid officers (other than the CEO and CFO)---to the extent that such compensation exceeds $1 million. The deduction limit does not apply, however, to qualified performance-based compensation. Publicly traded companies often structure their stock options and SARs in a manner to qualify as performance-based compensation.

• Email This
• Print
• Comments
• Trackbacks
• Share Link