Bank Settles Action under Regulation FD


On November 22, 2011, the SEC announced a settlement with Fifth Third Bancorp over allegations that, in violation of Regulation FD, it selectively disclosed its decision to redeem a class of trust preferred securities. Based in part on the bank’s cooperation, the SEC obtained only a cease-and-desist order and did not impose a civil penalty.

As a result of changes in the capital treatment of trust preferred securities, the bank elected to redeem the securities in advance of what otherwise would have been the first optional call date. After receiving the necessary approval from the Federal Reserve Bank of Cleveland, the bank was required to instruct the trustee to provide notice to the holders at least 30 days in advance of the redemption date. The governing trust instrument required only that notice be provided to the Depository Trust Company (DTC) as the sole registered holder of the securities. At the time the bank made its decision to redeem, the securities were trading at a premium to the redemption price ($26.50 vs. $25.18).

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