Related Organizations

Step Transactions

Regulation W exempts "step transactions" from the provisions of section 23A (except for the safety and soundness requirement), though not from section 23B. A step transaction occurs when a bank acquires the securities of a company within one business day (this time limit may be extended by the OCC) after the company first becomes an affiliate as a result of its acquisition by an affiliate of the bank. The acquiring bank must acquire all of the shares that were acquired by the transferring affiliate. For example, a step transaction exists when a bank’s holding company acquires 100 percent of the shares of an unaffiliated company and then immediately transfers all of the shares of that company to its subsidiary bank. Certain conditions must be satisfied in order to qualify for the step transaction exemption, including notice by the bank to both the OCC and the FRB (at or before the time when the transferred company first becomes an affiliate) that the bank intends to acquire the company.

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