Publicly traded bankDid you know that banks can go public and trade on Nasdaq and not have to file reports on the SEC’s EDGAR filing system?  Well, they can, but it may not be such a good thing.  You get this result when a bank goes public without a holding company.  These banks are instead required to register with their primary federal regulator (i.e., the FDIC, the Federal Reserve or the Office of the Comptroller of the Currency) and these regulators do not use the SEC’s EDGAR filing system.  So no EDGAR filings are required for these banks.

The problem is that EDGAR helps public companies satisfy SEC and other requirements.  For example, the national exchanges have listing requirements that are in addition to the reporting requirements of the SEC and the bank regulators. To comply, listed banks and bank holding companies must, on or before the applicable due date, file copies of all reports and other documents filed with the SEC or their appropriate regulatory authority. For listed bank holding companies, compliance with these requirements is easy because they file on EDGAR, which provides public access and download capabilities at no cost. Due to electronic links with the EDGAR system, most national exchanges generally provide that their filing requirements are considered fulfilled if the bank holding company files a required report or document with the SEC on EDGAR.  This is the result for the vast majority of publicly traded banks in the U.S.  According to the Federal Reserve, currently, about 84% of commercial banks in the U.S. are part of a bank holding company, and in addition, only a limited few publicly traded banks don’t have holding companies.

But what about banks that do not have holding companies? These banks can still go public by registering with their primary federal bank regulator, but they don’t get the benefit of the EDGAR system.  Instead, the bank regulatory authorities have their own filing requirements and the banks must comply with these rules to maintain their good standing as a public company. Where does this leave these publicly traded banks when it comes to their Nasdaq or national exchange filing requirements?  The answer is that these banks must still comply with the reporting requirements of Nasdaq or the national exchanges by undertaking an alternative filing process. For example, the Nasdaq requires these banks to provide it with three paper copies of the applicable filing. So there are more filings involved and more room for error.

Another problem with not using the EDGAR system is that public companies have disclosure requirements under Regulation FD to comply with. Regulation FD requires an issuer, or person acting on its behalf, to publicly disclose material nonpublic information when this information has been disclosed to certain parties, including securities market professionals and issuer shareholders that may trade on the basis of the information. To comply, publicly traded banks without holding companies must take additional steps to publicly disclose all their required disclosures and reports in a timely manner. One way to handle this is illustrated by Signature Bank, which looks to satisfy the disclosure rules by putting each report on its website.  In contrast, proper disclosures on EDGAR satisfy Regulation FD, which again highlights the benefits of this system.

Until the banking regulatory authorities establish electronic links with the EDGAR system or a comparably accepted system, it appears that publicly traded banks without holding companies must add additional filing requirements and the need for a timely disclosure plan to their already-long “to do” list as a public company. As for banks going public, they may want to consider these additional factors when determining whether to form a bank holding company before going public.