Banks have generally issued 3(a)(2) securities in minimum denominations of $100,000 or greater. The Securities Act, however, contains no requirements regarding minimum denominations for such securities. A review of no-action letters reveals that the SEC has not directly conditioned the granting of any no-action letter on a bank security being issued in a denomination of $100,000 or greater. Both the SEC in granting no-action letters and issuers in requesting no-action letters have occasionally identified measures taken to ensure issuance of bank securities only to accredited investors, including issuance in large denominations, as factors supporting the granting of a no-action letter. The SEC has granted many no-action letters in connection with securities or other instruments, including depository instruments, trust certificates or promissory notes, issued or guaranteed by various domestic or foreign banks in minimum denominations of $1,000. None of these no-action letters indicates that the staff of the SEC has taken into consideration the minimum denominations of securities when granting relief.
Additionally, the SEC has not published any guidance or general statement indicating that the issuances of debt securities under Section 3(a)(2) are or should be conditioned on compliance with any sales restrictions or minimum denomination requirements. The no-action letters do not imply that any additional disclosure requirements or other requirements should be met because the securities are issued in small minimum denominations.
Section 16.6 of the Securities Offering Disclosure Rules
As discussed above, before the issuance of any security, national banks or federally licensed U.S. branches of foreign banks must file a registration statement with the OCC under Section 16.3 of the Securities Offering Disclosure Rules (the “OCC Rules”). Section 16.6(a)(3) exempts the sale of nonconvertible debt from registration with the OCC if, among other conditions, the debt is sold in minimum denominations of $250,000.
FDIC and OTS Regulations
Federally insured state banks and state licensed branches of foreign banks should comply with the Statement of Policy Regarding Use of Offering Circulars in Connection with Public Distribution of Bank Securities (the “FDIC Policy”), issued by the Federal Deposit Insurance Corporation (the “FDIC”) for state non-member banks. Under the FDIC Policy, if an offering circular satisfies the requirements of the Office of Thrift Supervision’s regulations regarding securities offering (the “OTS Regulations”), it does not need to include any statements which the FDIC otherwise requires. The OTS Regulations require a savings association to file an offering circular before the offer or sale of any security. Debt securities issued in denominations of $100,000 or more, however, are exempt from such registration.
The FINRA Rules do not impose any minimum denomination requirements on securities offerings. In summary, securities issued or guaranteed by federal or state banks or domestic branches or agencies of foreign banks are generally exempt from registration with the SEC and are not expressly required to be issued in large denominations under the Securities Act. Securities, however, must be sold in minimum denominations of $250,000 if issued by national banks or federally licensed U.S. branches of foreign banks and an exemption from filing requirements is sought, or $100,000 if issued by state banks or state licensed branches of foreign banks in order to be exempt from registration or disclosure requirements under the OCC Rules, the FDIC Policy, or the OTS Regulations, as applicable.