July 23, 1971

Dear Mr. ____________:

This is in reply to your letter of July 12, 1971 and will confirm our telephone conversation of July 16, 1971.

Financial Code Section 691 provides that no bank organized under the laws of this State may offer or sell any security issued by it unless the Superintendent has issued a permit authorizing such sale. By virtue of Section 690(d), there is exempted from this provision any stock dividend payable with respect to common stock of a bank solely (except for any cash or script paid for fractional shares) in shares of such common stock, if the bank has no other class of voting stock outstanding.

According to the proposal set forth in your letter, ________ would declare and pay a stock dividend to its shareholders. To any shareholder who is entitled to receive a fractional share upon payment of the stock dividend, the bank would offer to sell the additional fractional share necessary to make a whole share.

In our view, the bank’s plan to offer to issue and sell additional fractional shares would not come within the exemption provided in Section 690(d). Therefore, if the bank were to proceed with this plan, it would be required to obtain a permit.

As you may know, shortly after our conversation on July 16, 1971, we receive a telephone call from _________ of ________, attorneys for the bank. We reviewed the bank’s proposal and discussed the interpretation of Section 690(d). _____ indicated that the bank might revise its proposal to bring it within the exemption provided for in Section 690(d).

It would be appreciated if you would let us know what the bank decides to do in this matter.

Very truly yours,

Superintendent of Banks


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Last updated: Jun 27, 2019 @ 3:32 pm