Federal regulators are rejecting incomplete applications for thrift charters that nonbanking companies rushed to file before Dec. 31.

The Office of Thrift Supervision has branded at least three of the 11 applications filed in December as "materially deficient" and has classified them as "withdrawn." However, the companies involved insist they have not withdrawn their applications and still want to charter thrifts.

The issue is important because Congress could bar nonbanks from owning thrifts if it approves financial reform this year. If enacted, however, the legislation is likely to grandfather, or protect, applications for thrifts filed before a certain date, possibly Dec. 31, 1998.

"What's happening here is that people are out there chasing a grandfather date," OTS Chief Counsel Carolyn J. Buck said Wednesday. Applicants "are hurriedly putting together something and throwing it over the transom and hoping it sticks to something."

"We're not going to play that game," she said. "We need to focus on our applications that are well thought out."

The three companies affected are Morgan Keegan Inc., a mutual fund company in Memphis; Unified Financial Services Inc., a broker-dealer based in Indianapolis; and Conseco Inc., a diversified firm in Carmel, Ind. Representatives from all three said Wednesday that they had not withdrawn their applications and plan to send the OTS more detailed information.

Ms. Buck said the agency labeled the applications "withdrawn," rather than rejected, as a courtesy to the companies. But the companies said it was anything but a courtesy.

"'Withdrawn' sounds like we requested that our application be sent back," said Steven J. Eisen, a Nashville attorney representing Morgan Keegan, "but that is very far from the situation." The fund company filed its application Dec. 31. "We are making every attempt to maintain our yearend filing date," Mr. Eisen said.

It is "absolutely not true," he said, that Morgan Keegan filed an incomplete application and that it did so simply to beat a yearend deadline.

Representatives of Unified and Conseco declined to comment.

The application process typically involves rounds of questions and answers during which companies submit additional details ranging from Community Reinvestment Act provisions to business plans to revenue projections. However, in these three cases, the OTS has taken the rare step of returning the applications because there are "so many holes," Ms. Buck said.

The agency sent letters to each company in late January telling them that their applications were "materially deficient" and would not be processed further. American Banker obtained partial copies of the letters under the Freedom of Information Act.

The letter to Morgan Keegan, which is seeking a thrift to expand its trust business, included a list of questions such as whether Morgan Keegan products would be bought for trust accounts.

"The OTS is unable to determine from reading the business plan the manner, and extent to which, Morgan Trust Co. FSB will interact with its affiliates," the letter stated. "Absent this material, we are unable to begin our review."

The OTS rejected an application Fidelity Investments filed in January. Last Thursday, however, the mutual fund giant agreed to withdraw it. A Fidelity spokesman said the company will revise the application and resubmit it.

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