Federal Reserve Proposes Significant Changes to Control Rules
On April 23, 2019, the Federal Reserve issued a proposed rulemaking that would clarify and, in some respects, revise its existing framework for determining whether a company has the ability to exercise a “controlling influence” over another company for purposes of the Bank Holding Company Act and the Home Owners’ Loan Act. The proposal includes a tiered framework of major factors and thresholds generally structured so that, as an investor’s ownership percentage in a target company increases, the investor’s additional relationships and other controlling influence factors with the target company must decrease in order to avoid a presumption of control. The proposal also would include several other presumptions of control, new rules for how a company can terminate an existing control relationship, and additional provisions to clarify how the presumptions would apply in particular circumstances.