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What’s Changed? Are you in

Viola�on of Change in Control?

BY KYLE SHADID and ASHLEY FLOYD

themselves, and we feel like we’re well on
You look different. Have you changed something? We’re our way to making sense of bank control
not talking about your hair color or those new wrinkles at the corners of regula�ons. There’s nothing we’d like more
your eyes. Those are laugh lines and nothing to be ashamed of. What on than to help our clients gain the same
earth are we hin�ng at? Well, we’re trying to help you look at yourself understanding.
through regulatory eyes.
Our par�cular focus here is to discuss
When it comes to changes, specifically in the realm of ownership interest circumstances in which an individual’s
(and the control exerted through that interest), regulators have an investment in a bank or bank holding
interest in knowing exactly where things stand with your bank or bank company (BHC) triggers a control analysis
holding company. It might seem like a pre�y cut and dried situa�on, but under the Change in Bank Control Act. The
it is ridiculously easy for ownership changes to occur without so much as term “individual” here includes natural
a flicker on your radar. These changes could have just taken place, or persons, companies, trusts, partnerships,
unwi�ngly taken place a decade ago. Here’s a sample of how such or any other en�ty.
changes occur in your shareholder group:
In contrast, investments in a bank or BHC
• Gi�ing of shares to a rela�ve
by a banking or non-banking organiza�on
may trigger a control analysis under the
• Transfer of shares through inheritance
Bank Holding Company Act, rather than
the Change in Bank Control Act.
• Crea�on of a trust or partnership to hold shares
When is a Change in Control filing required?
• Transfer of shares in sa�sfac�on of a debt previously contracted in
good faith Under the Change in Bank Control Act, prior no�ce to the Federal
Reserve is required when an individual, alone or ac�ng together with
If any of the above situa�ons have occurred within your shareholder others, acquires “control” of a state member bank, BHC, or savings and
group, then the next ques�on is this: Did you submit a Change in loan holding company.
Control filing? If not, your ins�tu�on could well be in viola�on of the
Change in Bank Control Act (CIBCA). If you’re not sure, it’s worth looking The standards of what cons�tutes “control” under U.S. banking laws are
into and confirming, one way or another. complex, and the complexity of a control determina�on is compounded
by the fact that there are several, o�en overlapping, defini�ons and
We bring this up, because at DD&F, we have observed a recent emphasis guidelines rela�ng to control, depending on the nature of the
by federal bank regulators on zeroing in on change in control. In fact, transac�on.
based on our experience, we es�mate anywhere from 25% – 35% of
banks/BHCs are in viola�on of the CIBCA simply because ownership (aka In general, control is when an individual or a group ac�ng in concert
“control”) of the ins�tu�on has not been properly reported to its owns, controls, or holds with power to vote (as in a trustee) 25% or more
regulators. of any class of a banking en�ty’s vo�ng securi�es, or when an individual
or group owns, controls, or holds with power to vote 10% or more of any
The control of an ins�tu�on, regularly involving family control groups, class of vo�ng securi�es, if no other individual or group controls a
greater percentage of any class of vo�ng securi�es.
o�en changes over �me and can trigger a change in control requiring a
No�ce of Change in Control to be filed with the ins�tu�on’s federal bank
regulators. What happens if you don’t bother with this step? Being in Who is Impacted?
viola�on of the CIBCA can have significant consequences, including DD&F has observed a recent up�ck in the instances where bank or BHC
disrup�on to M&A or other Change in Control transac�ons. shareholders, par�cularly those involved in a control group (family
members or persons who the regulators presume are ac�ng in concert) –
To shed more light on Change in Control and the poten�al impact this including trusts or partnerships within control groups – found
important regulatory ma�er could have on your ins�tu�on and its themselves needing to file a No�ce of Change in Control with their
shareholders, we have put together the following summary. regulators, be it the Federal Reserve, FDIC, OCC, or their respec�ve State
Bank Department. The Federal Reserve, which has authority over BHC’s
Understanding Change in Control and member banks, has more stringent control rules than other
As one regulator put it, “The rules and regula�ons regarding bank regulatory agencies, par�cularly when it comes to family control groups.
control take 10 minutes to read and a life�me to understand.” At DD&F,
we’ve spent the past 30 years working with all types of financial The general defini�ons of control, defined above, serve as guidelines for
ins�tu�ons and banking regulators, and studying the regula�ons when ownership interest changes trigger a filing requirement, but the

Arkansas Community Banker | 16 | SUMMER 2025