WASHINGTON -- To help protect the depositor/owners of mutual thrifts, the Office of Thrift Supervision has regulations for stock conversions -- and in contrast to initial public offerings in other industries -- decides who is allowed to buy stock and in what order.

Buying stock in an initial public offering can be very profitable, so people often want to buy more stock than is available.

OTS rules limit the amount of stock S&L officers and directors as a group are allowed to buy in the conversion to 25-35%, depending on the thrift's assets, and give account holders the right to buy stock before the insiders.

Under federal laws, "management takes a back seat to depositors," said Chris Lewis, director of banking and housing policy at the Consumer Federation of America. New rules governing the stock conversion of state-chartered savings banks "have reversed that order," he said.

Under OTS rules, tax-qualified employee stock ownership plans have first priority to buy up to 10% of the stock in the offering.

Established Depositors Second in Line

The second priority goes to thrift depositors who had accounts at least three months before the thrift adopted a stock conversion plan. Under OTS rules, individual depositors may not buy more than 5% of the total stock offered.

Then management and other account holders -- including borrowers as well as more recent depositors -- may buy stock, but are also limited to buying 5% each. If the offering has not sold out by then. the thrift may sell stock to the public.

Under OTS rules, so-called management recognition plans -- which typically are gifts of the new stock for up to two dozen thrift executives -- may not account for more than 3% to 4% of the stock offering. And unlike some new state laws, OTS rules do not give such plans, which vest over five years, priority in the stock sale.

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