Bank holding company stock

[Guest janhubber]

We have a client who is a bank who only does business in the state of Montana. Their holding company stock is not traded on the open market. The market values are determined by D.A. Davidson, a regional brokerage, based on the last sales price of the stock. They will be issuing a special stock offering and want to make it available as an investment election for participants in their 401(k) plan. In addition, other employers we work with would like to purchase the stock for their pooled account and individual directed plans. Some of these local employers (the owners) sit on the Board of Directors for the bank.

Our questions are:

1. Can the bank offer the stock as an investment selection for all money types in their plan, i.e. deferral, match, employer contribution? Are their any limits to the amount of stock the plan or any one individual can hold?

2. Are there any restrictions on the purchase of this stock by other plans, either pooled account or individually directed account plans. Is that affected by any other banking arrangements the employers sponsoring the plan might have with the bank. Or that the owner of the employer sits on the bank's board?

3. Would any of these answers change if the bank did business in more than one state?

[alanm]

If the 401k plan is participant directed and they can trade freely among all the investment options, the bank stock can be offered to all sources. However, the plan will have to be registed with the SEC with an S8 filing under the 1933 act and with the various states. Also, a disclosure statement must be given to all participants; and employers who sit on the bank board must satisfy the objectivity requirements of DOL IB 94-2; particularly the liquidity problem of trading the stock. The bank plan probably will not get the protection of 404c because the stock is not publicly traded.

[QDROphile]

Why are you asking these questions? Are the bank and other clients relying on you to advise them concerning ERISA and securities law requirements? If so, you need some very sophisticated advice that you will not get in enough detail in this forum. Actually, they need the sophisticted advice directly, not through an intermediary.

[Kirk Maldonado]

I agree completely with the comments of QDROphile.

[Guest janhubber]

We are trying to get them to slow down and pay for some of that very sophisticated advice, so you're postings are helpful. We have encouraged them to seek opinions from attorneys specializing in both ERISA and securities issues.

[ljr]

What about pricing the stock? You say it's not traded on an open market.

Good luck in convincing your clients to spend the money for some qualified advice!