WASHINGTON - Thrifts selling stock for the first time may not favor local depositors who subscribe to buy stock over out-of-town depositors, at least for now, a court has ruled.
The U.S. District Court for the District of Columbia ruled last week that the Office of Thrift Supervision had not followed proper procedures in adopting a provision of its new rule on mutual thrift conversions. That provision required mutual thrifts converting to stock ownership to sell shares first to depositors within a 100-mile radius of the institution.
The OTS could still adopt a local depositor preference mandate when it finalizes its pending rule on conversions. The suit was brought by ad hoc group called the Thrift Depositors of America, Inc.
But for now, the judge's ruling means that mutual thrifts must sell more stock to "professional depositors," who place deposits in mutual thrifts across the country while waiting for them to go public. That allows them to reap large gains because the stock price typically rises quickly as soon as it begins trading.
An Office of Thrift Supervision spokesman said, "We are disappointed and we are reviewing the ruling."