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FDIC Federal Register Citations


[Federal Register: August 5, 2005 (Volume 70, Number 150)]
[Proposed Rules]
[Page 45323-45334]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05au05-10]

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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Parts 4 and 19

[Docket No. 05-12]
RIN 1557-AC94

FEDERAL RESERVE SYSTEM

12 CFR Parts 263 and 264a

[Docket No. R-1230]

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 308 and 336

RIN 3064-AC92

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Parts 507 and 509

[No. 2005-27]
RIN 1550-AB99


One-Year Post-Employment Restrictions for Senior Examiners

AGENCIES: Office of the Comptroller of the Currency (OCC), Treasury;
Board of Governors of the Federal Reserve System (Board); Federal
Deposit Insurance Corporation (FDIC); and Office of Thrift Supervision
(OTS), Treasury.

ACTION: Joint notice of proposed rulemaking.

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SUMMARY: The OCC, Board, FDIC and OTS (the Agencies) propose to adopt
rules to implement section 6303(b) of the Intelligence Reform and
Terrorism Prevention Act of 2004 (Intelligence Reform Act), which added
a new section 10(k) to the Federal Deposit Insurance Act (FDI Act).
Section 10(k) imposes post-employment restrictions on senior examiners
of depository institutions and depository institution holding
companies. Under section 10(k), a senior examiner employed or
commissioned by an Agency may not knowingly accept compensation as an
employee, officer, director, or consultant from certain depository
institutions or depository institution holding companies he or she
examined, or from certain related entities, for one year after the
examiner leaves the employment or service of the Agency. If an examiner
violates the one-year restriction, the statute requires the appropriate
Federal banking agency to

[[Page 45324]]

seek penalties. Accordingly, the examiner may be subject to an order of
removal and prohibition or a civil money penalty of up to $250,000. The
Agencies have the discretion to seek both types of remedy. Section
10(k) will become effective on December 17, 2005.

DATES: Comments must be received on or before October 4, 2005.

ADDRESSES:
OCC: You should include OCC and Docket Number 05-12 in your
comment. You may submit comments by any of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.

Follow the instructions for submitting comments.
OCC Web Site: http://www.occ.treas.gov. Click on ``Contact
the OCC,'' scroll down and click on ``Comments on Proposed
Regulations.''
E-mail: regs.comments@occ.treas.gov.
Fax: (202) 874-4448.
Mail: Office of the Comptroller of the Currency, 250 E
Street, SW., Mail Stop 1-5, Washington, DC 20219.
Hand Delivery/Courier: 250 E Street, SW., Attn: Public
Information Room, Mail Stop 1-5, Washington, DC 20219.
Instructions: All submissions received must include the agency name
(OCC) and docket number or Regulatory Information Number (RIN) for this
notice of proposed rulemaking. In general, OCC will enter all comments
received into the docket without change, including any business or
personal information that you provide. You may review comments and
other related materials by any of the following methods:
Viewing Comments Personally: You may personally inspect
and photocopy comments at the OCC's Public Information Room, 250 E
Street, SW., Washington, DC. You can make an appointment to inspect
comments by calling (202) 874-5043.
Board: You may submit comments, identified by Docket No. R-1230, by
any of the following methods:
Agency Web Site: http://www.federalreserve.gov Follow the instructions for submitting comments at http://www.federalreserve.gov/.

Federal eRulemaking Portal: http://www.regulations.gov.

Follow the instructions for submitting comments.
E-mail: regs.comments@federalreserve.gov. Include docket
number in the subject line of the message.
FAX: 202/452-3819 or 202/452-3102.
Mail: Jennifer J. Johnson, Secretary, Board of Governors
of the Federal Reserve System, 20th Street and Constitution Avenue,
NW., Washington, DC 20551.
All public comments are available from the Board's Web site at
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as
submitted, except as necessary for technical reasons. Accordingly, your
comments will not be edited to remove any identifying or contact
information. Public comments may also be viewed electronically or in
paper form in Room MP-500 of the Board's Martin Building (20th and C
Streets, NW.) between 9 a.m. and 5 p.m. on weekdays.
FDIC: You may submit comments, identified by RIN number, by any of
the following methods:
Agency Web Site: http://www.fdic.gov/regulations/laws/federal/propose.html.
Follow instructions for submitting comments on the Agency Web Site.
E-mail: Comments@FDIC.gov. Include the RIN number in the
subject line of the message.
Mail: Robert E. Feldman, Executive Secretary, Attention:
Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW.,
Washington, DC 20429.
Hand Delivery/Courier: Guard station at the rear of the
550 17th Street Building (located on F Street) on business days between
7 a.m. and 5 p.m.
Instructions: All submissions received must include the agency name
and RIN for this rulemaking. All comments received will be posted
without change to http://www.fdic.gov/regulations/laws/federal/propose.html
including any personal information provided.

OTS: You may submit comments, identified by No. 2005-27, by any of
the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.

Follow the instructions for submitting comments.
E-mail: regs.comments@ots.treas.gov. Please include No.
2005-27 in the subject line of the message and include your name and
telephone number in the message.
Fax: (202) 906-6518.
Mail: Regulation Comments, Chief Counsel's Office, Office
of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552,
Attention: No. 2005-27.
Hand Delivery/Courier: Guard's Desk, East Lobby Entrance,
1700 G Street, NW., from 9 a.m. to 4 p.m. on business days, Attention:
Regulation Comments, Chief Counsel's Office, Attention: No. 2005-27.
Instructions: All submissions received must include the agency name
and docket number or Regulatory Information Number (RIN) for this
rulemaking. All comments received will be posted without change to the
OTS Internet Site at http://www.ots.treas.gov/pagehtml.cfm?catNumber=67&an=1,
including any personal information provided.
Docket: For access to the docket to read background documents or
comments received, go to http://www.ots.treas.gov/pagehtml.cfm?catNumber=67&an=1

In addition, you may inspect comments at the Public Reading Room,
1700 G Street, NW., by appointment. To make an appointment for access,
call (202) 906-5922, send an e-mail to public.info@ots.treas.gov, or
send a facsimile transmission to (202) 906-7755. (Prior notice
identifying the materials you will be requesting will assist us in
serving you.) We schedule appointments on business days between 10 a.m.
and 4 p.m. In most cases, appointments will be available the next
business day following the date we receive a request.

FOR FURTHER INFORMATION CONTACT:
OCC: Mitchell Plave, Counsel, Legislative and Regulatory Activities
Division, (202) 874-5090; Stuart Feldstein, Assistant Director,
Legislative and Regulatory Activities Division, (202) 874-5090; or
Barrett Aldemeyer, Senior Counsel, Administrative and Internal Law
Division, (202) 874-4460, Office of the Comptroller of the Currency,
250 E Street, SW., Washington, DC 20219.
Board: Cary K. Williams, Assistant General Counsel, (202) 452-3295,
Kieran J. Fallon, Assistant General Counsel, (202) 452-5270, Andrea
Tokheim, Attorney, (202) 452-2300, Legal Division; William Spaniel,
Deputy Associate Director, (202) 452-3469, or Jinai Holmes, Senior
Financial Analyst, (202) 452-2834, Division of Banking Supervision and
Regulation; for users of Telecommunication Devices for the Deaf (TDD)
only, contact (202) 263-4869.
FDIC: Robert J. Fagan, Ethics Program Manager, Legal Division,
(202) 898-6808; Stephen P. Gaddie, Special Assistant to the Deputy
Director, Division of Supervision and Consumer Protection, (202) 898-
6575; Richard Osterman, Senior Counsel, Legal Division, (202) 898-7028;
and Kymberly K. Copa, Counsel, Legal Division, (202) 898-8832.
OTS: Elizabeth Moore, Special Counsel, Litigation Division, (202)
906-7039; or Karen Osterloh, Special Counsel, Regulations and
Legislation Division, (202) 906-6639, Chief Counsel's Office, Office of
Thrift Supervision, 1700 G Street, NW., Washington, DC 20552.

[[Page 45325]]

SUPPLEMENTARY INFORMATION:

I. Background

Recently, Congress added a new Federal post-employment restriction
that applies in certain circumstances to ``senior examiners'' of
depository institutions and depository institution holding companies.
Under section 6303(b) of the Intelligence Reform Act,\1\ which added a
new section 10(k) to the FDI Act, an officer or employee of an Agency
or a Federal Reserve Bank (Reserve Bank) who acts as a ``senior
examiner'' for a particular depository institution may not, within one
year after terminating employment with the relevant Agency or Reserve
Bank, knowingly accept compensation as an officer, director, employee
or consultant from such depository institution or any company
(including a bank holding company or savings and loan holding company)
that controls the depository institution.\2\ Section 10(k) imposes a
similar post-employment restriction on an officer or employee who acts
as the ``senior examiner'' of a particular depository institution
holding company, but, in these circumstances, the post-employment
restrictions apply to relationships with the depository institution
holding company and any depository institution subsidiary of the
holding company.\3\ The post-employment restrictions in section 10(k)
are in addition to any other conflict of interest and ethics rules and
restrictions that may apply to examiners under applicable Federal law
or the internal codes of conduct established by an Agency or a Reserve
Bank.
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\1\ Pub. L. 108-458, 118 Stat. 3638, 3751-53 (Dec. 17, 2004).
\2\ For purposes of section 10(k), the term ``depository
institution'' includes an uninsured branch or agency of a foreign
bank, if such branch or agency is located in a state of the United
States. See 12 U.S.C. 1820(k)(2)(A).
\3\ For purposes of the post-employment restriction of section
10(k), the term ``depository institution holding company'' means a
bank holding company or a savings and loan holding company, and also
includes, among other things, a foreign bank that has a branch,
agency, or commercial lending company subsidiary in the United
States.
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As discussed further below, under section 10(k), an officer or
employee of an Agency or a Reserve Bank serves as the ``senior
examiner'' of a particular depository institution or depository
institution holding company only if the examiner has ``continuing,
broad responsibility'' for the examination or inspection of that
depository institution or depository institution holding company. In
addition, to be subject to the post-employment restrictions in section
10(k), an officer or employee must have served as the senior examiner
for the institution or holding company for two or more months during
the final twelve months of his or her employment with the Agency or
Reserve Bank. If a senior examiner violates the one-year post-
employment restrictions in section 10(k), the statute requires the
appropriate Federal banking agency to initiate proceedings to impose an
order of removal and prohibition or a civil money penalty on the former
senior examiner, and permits the Agency to seek both remedies. These
penalties are discussed more fully in Part II.C below.
Congress directed each Agency to prescribe rules or regulations to
administer and carry out section 10(k), including rules, regulations or
guidelines to define the scope of persons who are ``senior examiners.''
Congress required the Agencies to consult with each other to assure
that these rules are, to the extent possible, consistent, comparable,
and practicable, taking into account any differences in the supervisory
programs utilized by the Agencies for the supervision of depository
institutions and depository institution holding companies.
Accordingly, the Agencies today are jointly requesting comment on
proposed rules that would implement the post-employment restrictions in
section 10(k). The Agencies have consulted with each other in
developing the proposed rules, which are substantively similar. The
proposed rules of the Agencies, however, differ slightly to reflect
differences in the supervisory programs and jurisdictions of the
Agencies. In addition, there are slight, non-substantive differences in
the organization of the Agencies' proposed rules.

II. Description of the Proposal

A. Definition of ``Senior Examiner''

The post-employment restrictions in section 10(k) apply only to an
officer or employee of an Agency or Reserve Bank who serves as the
``senior examiner'' (or in a functionally equivalent position) of a
particular depository institution or depository institution holding
company and, in this capacity, has ``continuing, broad responsibility
for the examination (or inspection) of that depository institution or
depository institution holding company'' on behalf of the relevant
Agency or Reserve Bank.\4\ The legislative history of section 10(k)
indicates that the statute's post-employment restrictions were
``intended to apply only to senior examiners who have a meaningful
relationship with a financial institution, such as an examiner-in-
charge or a senior examiner with dedicated responsibility to oversee a
particular institution.'' \5\ Moreover, this legislative history
indicates that the statute was ``not intended to apply to less senior
examiners who may examine or inspect dozens of financial institutions
in a single year without developing a sustained relationship with any
one institution,'' or to ``persons holding supervisory positions that
do not involve routine interactions with an institution for purposes of
examining or inspecting the institution's books or operations.'' \6\
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\4\ See 12 U.S.C. 1820(k)(1)(B).
\5\ 150 Cong. Rec. S10356 (daily ed. Oct. 4, 2004) (statement of
Sen. Levin).
\6\ Id.
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Consistent with the statute and Congress's intent, the proposed
rules provide that an officer or employee of an Agency or a Reserve
Bank will be considered the ``senior examiner'' for a particular
depository institution or depository institution holding company if:
The individual has been designated or commissioned to
conduct examinations or inspections on behalf of the relevant Agency;
The relevant Agency or Reserve Bank has assigned the
individual continuing, broad, and lead responsibility for examining or
inspecting the depository institution or holding company; and
The individual's responsibilities for the depository
institution or holding company represent a substantial portion of the
individual's assigned responsibilities and require the individual to
routinely interact with officers or employees of the institution,
holding company, or its affiliates.
To be considered a ``senior examiner,'' an officer or employee must
meet each of the criteria listed above. Thus, an examiner who spends a
substantial portion of his or her time conducting or leading a targeted
examination (such as a review of an institution's credit risk
management, information systems or internal audit functions), but who
does not have broad and lead responsibility for the Agency's or Reserve
Bank's overall examination program with respect to the institution,
would not be considered a ``senior examiner'' with respect to the
institution. An examiner who may divide his or her time across a
portfolio of depository institutions or holding companies, each of
which does not represent a substantial portion of the examiner's
responsibilities, also would not be considered a ``senior examiner.''
Such an examiner is not likely to develop the type and degree of

[[Page 45326]]

relationship with any one institution that the post-employment
restriction was designed to address. In addition, for purposes of
section 10(k), the examiner must have ``continuing'' responsibility for
the relevant Agency's or Reserve Bank's supervisory program with
respect to the particular depository institution or depository
institution holding company. The Agencies believe that an examiner
would have ``continuing'' responsibility for an institution or holding
company only when the examiner's responsibilities for the institution
or company were expected to continue for a sufficient period of time,
for example, for at least two months, that would enable the examiner to
develop the type and degree of ``meaningful,'' ``dedicated'' and
``sustained'' relationship with the institution or company that the
statute was designed to address.\7\
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\7\ 150 Cong. Rec. S10356 (daily ed. Oct. 4, 2004) (statement of
Sen. Levin).
---------------------------------------------------------------------------

The Agencies believe that the proposed definition of ``senior
examiner'' properly applies the post-employment restrictions in section
10(k) to those examiners who, by reason of their position and assigned
responsibilities, have broad responsibility for a depository
institution or depository institution holding company and will devote a
substantial amount of their time to that institution or holding company
on a continuing basis. It is these senior examiners who may develop the
type and degree of meaningful and ongoing relationship with a
particular institution intended to be covered by the statute.
To help examiners comply with the one-year post-employment
restrictions, the Agencies will notify an examiner in writing if the
relevant Agency believes the examiner's assigned responsibilities would
cause the examiner to be considered a ``senior examiner'' with respect
to any depository institution or depository institution holding
company. Nonetheless, the post-employment restrictions in section 10(k)
and the proposed rules apply directly to senior examiners, and
examiners are responsible for becoming familiar with and ensuring their
own compliance with the statute. Accordingly, examiners who have
questions concerning whether they may be considered a ``senior
examiner'' for an institution or holding company should contact the
appropriate persons at their respective Agency or Reserve Bank.
Because the titles and roles of examiners vary among the Agencies,
the Agencies have set forth below a brief description of the types of
examiners that each Agency anticipates, in light of the structure and
nature of the Agency's supervisory program, would be subject to the
post-employment restrictions in section 10(k). We invite comment on
whether the proposed definition of ``senior examiner,'' combined with
notice to those examiners, is sufficient to identify those Agency or
Reserve Bank employees who are subject to section 10(k).
1. OCC
The OCC expects that the one-year post-employment restrictions
would apply to examiners-in-charge (EIC) of a bank in the OCC's Large
Bank or Mid-Size Bank programs. OCC employees who may examine multiple
depository institutions in a single year typically do not develop the
type and degree of relationship with any one institution that would
cause them to be considered ``senior examiners'' under the proposal.
For banks in the OCC's Large and Mid-Size Bank programs, the EIC
coordinates and oversees all of the examination and supervisory
activities for all of the affiliated national banks that may be part of
that banking organization's family of national banks (e.g., separately
chartered national trust company or credit card banks). In those cases,
the EIC is considered to be a ``senior examiner'' for purposes of this
regulation for each national bank within the family of national banks.
The proposal applies only to OCC employees who have overall
responsibility for a national bank on a sustained basis. While the
proposal would primarily cover large and mid-size bank program EICs,
there may be others who meet the ``senior examiner'' criteria, such as
individuals who serve as acting EICs for banks in the OCC's Large or
Mid-Size Bank program for the period of time described in the statute.
The OCC anticipates that approximately 50 examiners would be covered by
the one-year post-employment restrictions.
The proposal would not cover Portfolio Managers for national banks
supervised by a field office of the OCC, typically community banks.
Although Portfolio Managers serve as the designated point-of-contact
for national banks in their portfolios and lead the examination
activities for institutions in their portfolios, they may also perform
examinations of several institutions not in their portfolios, including
serving as EIC for some of those examinations. Accordingly, Portfolio
Managers typically do not develop the type and degree of relationship
with any one institution sought to be covered by the statute.
The OCC will develop policies and procedures to identify and notify
those examiners who will be subject to the post-employment
restrictions.
2. Board
The Board expects that the post-employment restrictions in section
10(k) would apply to those examiners who serve as central points of
contact, or in functionally equivalent positions (collectively, CPCs),
for a limited number of large and complex or larger regional state
member banks, bank holding companies, or foreign banks. CPCs are
assigned broad, lead and overall responsibility for the Federal
Reserve's supervisory and examination program for a particular
institution. In addition, given the nature of large and complex banking
organizations and a few larger regional banking organizations, CPCs
that are assigned to such organizations typically are expected to
devote a substantial portion, and in some cases all, of their time and
attention to the supervision, examination, or inspection of that
organization. The Board currently estimates that approximately 50
examiners that serve as CPCs for large and complex or larger regional
banking organizations would be considered the senior examiner for the
organization for purposes of section 10(k) and the proposed rules. The
Board expects to develop policies and procedures to notify those Board
examiners that are subject to the post-employment restrictions in
section 10(k).
3. FDIC
As the FDIC's supervisory program is currently structured, most
examiners-in-charge (EICs) at the FDIC would not be considered senior
examiners or satisfy the requirement that the senior examiner serve for
two or more months in that role during the last 12 months of employment
with the FDIC. FDIC employees who examine or inspect multiple financial
institutions in a single year (even as an EIC in some cases) typically
do not develop a sustained or meaningful relationship with any one
institution and, therefore, would not be considered ``senior
examiners'' under the proposal. The proposal is intended to apply only
to FDIC examiners who have overall responsibility for an insured
depository institution that involves ``routine interactions with the
institution for purposes of examining or inspecting the institution's
books or operations'' and that creates the opportunity for a

[[Page 45327]]

meaningful or sustained relationship with that institution.\8\
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\8\ See 150 Cong. Rec. s10356 (daily ed. Oct. 4, 2004)
(statement of Sen. Levin).
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Under the current organization of the FDIC's Division of
Supervision and Consumer Protection, certain FDIC examiners would,
however, clearly seem to be covered--examiners in the Large State
Nonmember Bank Onsite Supervision Program and examiners assigned to the
FDIC's Dedicated Examiner Program who are assigned to the largest
banking organizations.
The Large State Nonmember Bank Onsite Supervision Program provides
for visitations and targeted reviews of the institutions covered by the
Program throughout the year, instead of traditional, annual, point-in-
time examinations. Examiners assigned to the Program focus on all
aspects of ongoing supervision for institutions in the Program,
including:
Preparing and implementing, or assisting in preparing or
implementing, supervisory plans;
Risk-scoping supervisory activities and conducting ongoing
targeted reviews in accordance with the institution's supervisory plan;
Meeting with institution management to communicate
findings;
Preparing limited scope reports; and
Completing annual reports of examinations.
These Program examiners are the FDIC's primary source of
supervision and oversight of their assigned institutions, and they must
have an intimate knowledge of their institution's operations and
considerable access to institution management to perform their duties.
In addition, although the FDIC is not the primary Federal regulator
for the largest banking organizations currently in the Dedicated
Examiner Program, the FDIC examiners in this Program are dedicated to
the institution, have an intimate knowledge of their assigned
institutions, considerable access to, and potentially close working
relationships with, institution management, and are the FDIC's primary
source of supervisory information and oversight of these institutions.
These dedicated examiners, therefore, appear to meet the statutory
requirement of being a senior examiner (or a functionally equivalent
position) of a depository institution with continuing, broad
responsibility for examining that institution. Furthermore, absent the
``cooling off'' period, permitting a dedicated examiner to go to work
for his or her assigned institution could create a perceived conflict
of interest.
On the other hand, the proposal would not be expected typically to
cover Relationship Managers for institutions within a field or
territory office. Although Relationship Managers serve as the local
point-of-contact for FDIC-supervised institutions in their portfolios,
and they would normally be expected to lead the examination activities
in which they specialize for the banks in their portfolios, they are
also expected to perform examinations of banks that are not in their
portfolios, including acting as the EIC for some of those examinations.
In addition, Relationship Managers are not required to be the EIC
during safety and soundness examinations of institutions in their
portfolios, and, unlike dedicated and large State nonmember examiners,
Relationship Managers may be onsite at their assigned institutions
relatively infrequently. Moreover, the FDIC does not expect that a
Relationship Manager will typically spend a substantial portion of his
or her time on any particular institution to which he or she is
assigned. Rather, these are journeyman level field examiners assigned
to a particular institution as a local point of contact for the
convenience of the institution and the FDIC, but these examiners also
will be expected to examine a number of other institutions during the
course of a year, both as an EIC and as a staff examiner.
It is the FDIC's view that the duties of Relationship Managers do
not generally meet the requirements of being a ``senior examiner or a
functionally equivalent position of a depository institution with
continuing, broad responsibility for the examination of that
institution.'' However, it is possible that, based on individual
circumstances, a particular Relationship Manager could be considered a
senior examiner for purposes of the post-employment restrictions. Most
generalist examiners employed by the FDIC would not be covered by the
post-employment restrictions in section 10(k). While the proposal would
primarily cover FDIC examiners in the Large State Nonmember Bank Onsite
Supervision Program, examiners in its Dedicated Examiner Program, and
possibly a limited number of EICs, there may be others who have
``continuing, broad responsibility'' for examining or inspecting
insured depository institutions, such as individuals who conduct
certain special examinations or serve in an acting capacity in a
covered position.
4. OTS
As OTS's supervisory program is currently structured, the post-
employment restrictions in section 10(k) would primarily cover OTS
examiners-in-charge (EICs) at OTS's largest savings associations and
holding companies. Other EICs inspect multiple savings associations and
savings and loan holding companies in a single year and, as a result,
typically do not develop a meaningful and sustained relationship with
any one entity. Accordingly, OTS believes that these EICs would not
satisfy the definition of senior examiner either because they do not
have continuing responsibilities at the entity or because their
responsibilities with respect to the particular savings association or
savings and loan holding company would not represent a substantial
portion of their assigned responsibilities. Most of these EICs also
would not satisfy the two of twelve months service requirement.
Examiners who are not EICs typically would not be senior examiners
because they do not have ``broad and lead'' responsibilities for
examinations or inspections. As noted in the legislative history,
however, the definition of senior examiner may apply to more than one
examiner at the same entity. Under OTS's interpretation of this
criterion, an examiner would have ``broad and lead'' responsibility if
he or she has significant, major responsibilities regarding the conduct
of the overall examination program at an entity, whether or not that
examiner is designated as an EIC. Thus, non-EICs at OTS's largest
savings associations or holding companies could also satisfy the
definition of senior examiner.
Other OTS officers or employees typically would not be senior
examiners. For example, Washington headquarters employees, Regional
Directors, Deputy Regional Directors, Assistant Regional Directors for
Support or Operations, and Field Managers typically would not satisfy
one or more of the proposed criteria for senior examiner and would not
be subject to the post-employment restrictions.

B. One-Year Post-Employment Restrictions

If an officer or employee of an Agency or a Reserve Bank serves as
the senior examiner for a depository institution during two or more
months of the individual's final twelve months of employment with the
Agency or Reserve Bank, section 10(k) prohibits the individual from
knowingly accepting compensation as an employee, officer, director, or
consultant from the

[[Page 45328]]

depository institution or any company that controls the depository
institution (including a bank holding company or savings and loan
holding company) for one year after leaving the employment of the
Agency or Reserve Bank. With respect to holding companies, the one-year
prohibition extends only to companies that control the depository
institution and would not prohibit the senior examiner from accepting
employment with a subsidiary or affiliate of the bank holding company,
savings and loan holding company, or other company that controls the
bank (other than the depository institution subsidiary for which the
individual served as a senior examiner).\9\
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\9\ The Agencies note, however, that a former senior examiner
may not evade the post-employment restrictions in section 10(k) by
nominally accepting employment with a company not directly covered
by the post-employment restrictions, but then functionally serve as
an officer, employee, director, or consultant for a depository
institution or company that the former senior examiner would have
been prohibited from working for directly.
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If an officer or employee serves as the senior examiner for a
depository institution holding company for two or more months during
the last twelve months of his or her employment with an Agency or a
Reserve Bank, the statute prohibits the individual from becoming
employed by, or otherwise accepting compensation in the manner
described above, from that holding company or any depository
institution subsidiary of the holding company for one year after
leaving the employment of the Agency or Reserve Bank.
To assist examiners, the Agencies have tailored their rules to
identify how these restrictions would apply to senior examiners for the
different types of institutions and holding companies, including
foreign banks, under the Agencies' jurisdictions.
Under section 10(k), a person is deemed to be a consultant for
purposes of the one-year post-employment restrictions only if such
person ``directly works on matters for, or on behalf of,'' the relevant
depository institution, depository institution holding company or other
company.\10\ The Agencies have incorporated this rule of construction
into the proposed rules. We interpret this provision to mean that a
former senior examiner who joins a consulting or other firm may not,
during the twelve-month post-employment ``cooling-off'' period,
participate in any work that the firm is conducting for a depository
institution or company that the former senior examiner would be
prohibited from doing directly.\11\ The former senior examiner would
not, however, violate the post-employment restrictions in section 10(k)
by joining a firm that performs work for such an institution or company
as long as the former senior examiner does not personally participate
in any such work. The Agencies request comment on whether the meaning
of ``consultant'' is sufficiently clear.
---------------------------------------------------------------------------

\10\ See 12 U.S.C. 1820(k)(3).
\11\ Of course, a former senior examiner who is self-employed
similarly may not accept compensation for work performed as a
consultant in his or her individual capacity for the relevant
depository institution, depository institution holding company, or
other company.
---------------------------------------------------------------------------

Section 10(k) expressly authorizes the head of each Agency to waive
application of the statute's post-employment restrictions to a senior
examiner on a case-by-case basis if the head of the Agency determines
that ``granting the waiver would not affect the integrity of the
supervisory program of [such Agency].'' \12\ The Agencies have
incorporated this waiver provision into the proposed rules. The
Agencies expect to grant waivers only in special circumstances. If an
Agency grants a waiver to a senior examiner, the post-employment
restrictions in section 10(k), and the associated penalties, would not
apply to the senior examiner.
---------------------------------------------------------------------------

\12\ See 12 U.S.C. 1820(k)(5).
---------------------------------------------------------------------------

C. Penalties

If a senior examiner violates the post-employment restrictions in
section 10(k), the statute requires the appropriate Agency to seek one
of the following penalties:
An order (1) removing the individual from his or her
position at, or prohibiting the individual from further participation
in the affairs of, the relevant depository institution, depository
institution holding company, or other company for a period of up to
five years, and (2) prohibiting the individual from participating in
the conduct of the affairs of any insured depository institution for a
period of up to five years; or
A civil monetary penalty of not more than $250,000.\13\
---------------------------------------------------------------------------

\13\ See 12 U.S.C. 1820(k)(6)(A). If the appropriate Federal
banking agency does not assess a civil monetary penalty against a
senior examiner who violates the post-employment restrictions in
section 10(k), the Attorney General of the United States may bring a
civil action to impose such a penalty against the senior examiner.
Id.
---------------------------------------------------------------------------

An Agency also has the discretion to seek both of these penalties.
A former senior examiner who is subject to a removal and
prohibition order under section 10(k) also is subject to paragraphs (6)
and (7) of section 8(e) of the FDI Act.\14\ These provisions further
define the scope of the penalties specified in section 10(k). For
example, they would prohibit an individual, for the duration of the
prohibition order, from participating in the affairs of any bank
holding company or subsidiary of a bank holding company, savings and
loan holding company or subsidiary of a savings and loan holding
company, any foreign bank that operates a branch, agency or commercial
lending company subsidiary in the United States or any subsidiary of
such a foreign bank, or certain other entities, such as credit
unions.\15\ In addition, these provisions would prohibit the
individual, during the term of the prohibition order, from accepting
employment with any appropriate Federal financial institutions
regulatory agency (as defined in 12 U.S.C. 1818(e)(7)(D)), and certain
other Federal agencies. The penalties that may apply to a senior
examiner under section 10(k) are in addition to any other
administrative, civil, or criminal penalty that may apply.
---------------------------------------------------------------------------

\14\ See 12 U.S.C. 1820(k)(6)(B).
\15\ The appropriate agencies may waive for an individual the
application of this restriction as it applies to a particular
institution or other company, as provided in section 8(e)(7)(B) of
the FDI Act (12 U.S.C. 1818(e)(7)(B)).
---------------------------------------------------------------------------

Under section 10(k), to obtain an order of removal or prohibition,
an Agency must follow the rules and procedures that apply in similar
types of proceedings against depository institutions and institution-
affiliated parties. Specifically, section 10(k) states that removal and
prohibition proceedings must be conducted in accordance with section
8(e)(4) of the FDI Act, which provides the individual the right to an
administrative hearing prior to final Agency action. Section 10(k)
further provides that an Agency seeking to impose a civil monetary
penalty on a former senior examiner must do so either in accordance
with section 8(i) of the FDI Act, which also provides the individual
the right to an administrative hearing prior to final Agency action, or
through a civil action brought in an appropriate United States District
Court.\16\
---------------------------------------------------------------------------

\16\ See 12 U.S.C. 1820(k)(6).
---------------------------------------------------------------------------

The Agencies do not believe it is necessary to codify these
procedures, which are set forth in the statute, in their proposed
rules. Accordingly, the proposed rules merely cross-reference the
required statutory procedures. Under the proposal, proceedings against
examiners for violations of the post-employment restrictions would take
place in accordance with the Agencies' rules of practice and procedure.
Accordingly, the Agencies propose to amend the scope sections of their

[[Page 45329]]

respective Rules of Practice and Procedure to reflect the addition of
proceedings under section 10(k).
Section 10(k) assigns responsibility for seeking penalties to the
``appropriate Federal banking agency'' (as determined under section 3
of the FDI Act) for the institution or company that employs the former
senior examiner (or otherwise compensates the senior examiner) after
the examiner has left the service of an Agency or Reserve Bank.\17\ For
example, the OCC would be responsible for seeking penalties against a
former employee of a Reserve Bank who, after acting as a ``senior
examiner'' at a bank holding company, accepts compensation, in
violation of section 10(k), from a subsidiary national bank. As a
corollary, the Board would be responsible for seeking penalties against
a former OCC employee who accepts prohibited compensation from the
holding company of a national bank. When a senior examiner becomes
associated with an entity that is not a depository institution or a
depository institution holding company, the ``appropriate Federal
banking agency'' is the Agency that employed the senior examiner.
---------------------------------------------------------------------------

\17\ See 12 U.S.C. 1820(k)(6)(A).
---------------------------------------------------------------------------

As noted above, in some cases, the Agency responsible for enforcing
the post-employment restrictions in section 10(k) with respect to a
senior examiner may be a different Agency than the Agency that employed
or commissioned the examiner. The Agency that employed or commissioned
the examiner, however, would remain responsible for determining whether
the examiner was the ``senior examiner'' for a depository institution
or depository institution holding company while the examiner was
employed or commissioned by the Agency in accordance with the rules of
that Agency. For example, if an examiner commissioned by the Board and
employed by a Reserve Bank leaves the employment of the Reserve Bank
and immediately accepts employment with a national bank subsidiary of a
bank holding company, the Board would be responsible for determining,
under the Board's rules and guidance, whether the examiner served as
the ``senior examiner'' for the parent bank holding company for the
requisite period prior to his or her departure from the Reserve Bank.
If the Board determined that the examiner was the ``senior examiner''
for the parent bank holding company of the national bank subsidiary,
then the OCC would seek to impose appropriate penalties for violations
of the post-employment restrictions in section 10(k) with respect to
the former examiner.

D. Effective Date

The Intelligence Reform Act provides that the post-employment
restrictions imposed by section 10(k) shall become effective on
December 17, 2005.\18\ Accordingly, section 10(k) and the proposed
rules apply only to officers or employees of an Agency or Reserve Bank
who terminate their employment with the Agency or Reserve Bank on or
after December 17, 2005. The Agencies note, however, that, because of
the statute's twelve-month ``look-back'' provision, an officer or
employee who leaves an Agency or a Reserve Bank within one year of
December 17, 2005, may be subject to the post-employment restrictions
in section 10(k) based on the nature of their examination
responsibilities as far back as December 17, 2004.
---------------------------------------------------------------------------

\18\ See section 6303(d) of the Intelligence Reform Act.
---------------------------------------------------------------------------

For example, if an Agency examiner terminates his or her employment
with the relevant Agency on January 1, 2006, and the individual, while
employed by the Agency, served as the ``senior examiner'' for a
particular depository institution from May 1, 2005 to October 1, 2005,
the individual is subject to the post-employment restrictions. Although
the service that caused the individual to be considered a ``senior
examiner'' occurred prior to December 17, 2005, such service occurred
during the last twelve months of the individual's employment with the
Agency and, accordingly, the examiner may not become employed by the
relevant depository institution, or any company that controls the
depository institution, until January 2, 2007.
As noted above, section 10(k) does not apply to any Agency or
Reserve Bank employee who resigns before December 17, 2005. Thus, in
the foregoing example, if the examiner terminated his or her employment
with the Agency on November 1, 2005, the employee would not be subject
to the post-employment restrictions in section 10(k).
Solicitation of Comments on Use of Plain Language
Section 722 of the Gramm-Leach-Bliley Act, Pub. L. 106-102, 113
Stat. 1338, 1471 (Nov. 12, 1999), requires the Federal banking agencies
to use plain language in all proposed and final rules published after
January 1, 2000. We invite your comments on how to make this proposal
easier to understand. For example:
Have we organized the material to suit your needs? If not,
how could this material be better organized?
Are the requirements in the proposed regulation clearly
stated? If not, how could the regulation be more clearly stated?
Does the proposed regulation contain language or jargon
that is not clear? If so, which language requires clarification?
Would a different format (grouping and order of sections,
use of headings, paragraphing) make the regulation easier to
understand? If so, what changes to the format would make the regulation
easier to understand?
What else could we do to make the regulation easier to
understand?
Regulatory Flexibility Act Analysis
The Regulatory Flexibility Act (RFA) requires that each federal
Agency either certify that a proposed rule would not, if adopted in
final form, have a significant impact on a substantial number of small
entities or prepare an initial regulatory flexibility analysis (IRFA)
of the proposal and publish the analysis for comment. See 5 U.S.C. 603,
605. Section 10(k) and the proposed rules impose post-employment
restrictions on certain senior examiners employed by an Agency or a
Reserve Bank and do not impose any obligations or restrictions on
banking organizations, including small banking organizations. On this
basis, the Agencies certify that this proposal, if it is adopted in
final form, would not have a significant impact on a substantial number
of small entities, within the meaning of those terms as used in the
RFA. Commenters are invited to provide the Agencies with any
information they may have about the likely quantitative effects of the
proposal.
Executive Order 12866
The OCC and OTS have determined that this proposed rulemaking is
not a significant regulatory action under Executive Order 12866.
Executive Order 13132
The OCC has determined that this proposal does not have any
federalism implications as required by Executive Order 13132.
Unfunded Mandates Reform Act of 1995
Under section 202 of the Unfunded Mandates Reform Act of 1995, 2
U.S.C. 1532 (Unfunded Mandates Act), the OCC and OTS must prepare a
budgetary impact statement before promulgating any rule likely to
result in a Federal mandate that may result in the expenditure by
State, local, and tribal

[[Page 45330]]

governments, in the aggregate, or by the private sector, of $100
million or more in any one year. If a budgetary impact statement is
required, section 205 of the Unfunded Mandates Act also requires the
OCC and OTS to identify and consider a reasonable number of regulatory
alternatives before promulgating the rule. The OCC and OTS have
determined that their respective portions of the proposed rulemaking
will not result in expenditures by state, local, and tribal
governments, in the aggregate, or by the private sector, of $100
million or more in any one year. Accordingly, neither the OCC nor OTS
has prepared a budgetary impact statement or specifically addressed the
regulatory alternatives considered.
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
Ch. 3506; 5 CFR 1320 Appendix A.1), the Agencies reviewed the proposed
rule. No collections of information pursuant to the Paperwork Reduction
Act are contained in the proposed rule.

List of Subjects

12 CFR Part 4

Administrative practice and procedure, Availability and release of
information, Confidential business information, Contracting outreach
program, Freedom of information, National banks, Organization and
functions (government agencies), Reporting and recordkeeping
requirements, Women and minority businesses.

12 CFR Part 19

Administrative practice and procedure, Crime, Equal access to
justice, Investigation, National banks, Penalties, Securities.

12 CFR Part 263

Administrative practice and procedure, Claims, Crime, Equal access
to justice, Lawyers, Penalties.

12 CFR Part 264a

Conflicts of interest.

12 CFR Part 308

Administrative practice and procedure, Bank deposit insurance,
Claims, Crime, Equal access to justice, Investigations, Lawyers,
Penalties.

12 CFR Part 336

Conflict of interests.

12 CFR Part 507

Ethics, Governmental employees, OTS employees.

12 CFR Part 509

Administrative practice and procedure, Penalties.

Department of the Treasury

Office of the Comptroller of the Currency

12 CFR Chapter I

Authority and Issuance

For the reasons set forth in the preamble, the OCC proposes to
amend parts 4 and 19 of title 12 of the Code of Federal Regulations as
follows:
1. The title of part 4 is revised to read as follows:

PART 4--ORGANIZATION AND FUNCTIONS, AVAILABILITY AND RELEASE OF
INFORMATION, CONTRACTING OUTREACH PROGRAM, POST-EMPLOYMENT
RESTRICTIONS FOR SENIOR EXAMINERS

2. The authority citation for part 4 is revised to read as follows:

Authority: 12 U.S.C. 93a. Subpart A also issued under 5 U.S.C.
552; Subpart B also issued under 5 U.S.C. 552; E.O. 12600 (3 CFR
1987 Comp., p. 235). Subpart C also issued under 5 U.S.C. 301, 552;
12 U.S.C. 161, 481, 482, 484(a), 1442, 1817(a)(3), 1818(u) and (v),
1820(d)(6), 1820(k), 1821(c), 1821(o), 1821(t), 1831m, 1831p-1,
1831o, 1867, 1951 et seq., 2601 et seq., 2801 et seq., 2901 et seq.,
3101 et seq., 3401 et seq.; 15 U.S.C. 77uu(b), 78q(c)(3); 18 U.S.C.
641, 1905, 1906; 29 U.S.C. 1204; 31 U.S.C. 9701; 42 U.S.C. 3601; 44
U.S.C. 3506, 3510. Subpart D also issued under 12 U.S.C. 1833e.

3. A new subpart E is added to part 4 to read as follows:

Subpart E--One-Year Restrictions on Post-Employment Activities of
Senior Examiners

Sec.
4.72 Scope and purpose.
4.73 Definitions.
4.74 One-year post-employment restrictions.
4.75 Effective date; waivers.
4.76 Penalties.

Sec. 4.72 Scope and purpose.

This subpart describes those OCC examiners who are subject to the
post-employment restrictions set forth in section 10(k) of the Federal
Deposit Insurance Act (FDI Act) (12 U.S.C. 1820(k)) and implements
those restrictions for officers and employees of the OCC.

Sec. 4.73 Definitions.

For purposes of this subpart:
Bank holding company means any company that controls a bank (as
provided in section 2 of the Bank Holding Company Act of 1956 (12
U.S.C. 1841 et seq.)).
Consultant. For purposes of this subpart, a consultant for a
national bank, bank holding company, or other company shall include
only an individual who works directly on matters for, or on behalf of,
such bank, bank holding company, or other company.
Control has the meaning given in section 2 of the Bank Holding
Company Act (12 U.S.C. 1841(a)). For purposes of this subpart, a
foreign bank shall be deemed to control any branch or agency of the
foreign bank.
Depository institution has the meaning given in section 3 of the
FDI Act (12 U.S.C. 1813(c)). For purposes of this subpart, a depository
institution includes an uninsured branch or agency of a foreign bank,
if such branch or agency is located in any State.
Federal Reserve means the Board of Governors of the Federal Reserve
System and the Federal Reserve Banks.
Foreign bank means any foreign bank or company described in section
8(a) of the International Banking Act of 1978 (12 U.S.C. 3106(a)).
Insured depository institution has the meaning given in section 3
of the FDI Act (12 U.S.C. 1813(c)(2)).
National bank means a national banking association or a Federal
branch or agency of a foreign bank.
Senior examiner. For purposes of this subpart, an officer or
employee of the OCC is considered to be the ``senior examiner'' for a
particular national bank if'
(1) The officer or employee has been commissioned by the OCC to
conduct examinations on behalf of the OCC;
(2) The officer or employee has been assigned continuing, broad,
and lead responsibility for examining the national bank; and
(3) The officer's or employee's responsibilities for examining the
national bank--
(i) Represent a substantial portion of the officer's or employee's
assigned responsibilities; and
(ii) Require the officer or employee to interact routinely with
officers or employees of the national bank or its affiliates.

Sec. 4.74 One-year post-employment restrictions.

An officer or employee of the OCC who serves as the senior examiner
of a national bank for two or more months during the last twelve months
of such individual's employment with the OCC may not, within one year
after leaving the employment of the OCC, knowingly accept compensation
as an employee,

[[Page 45331]]

officer, director or consultant from the national bank, or any company
(including a bank holding company) that controls the national bank.

Sec. 4.75 Effective date; waivers.

The post-employment restrictions set forth in section 10(k) of the
FDI Act and Sec. 4.74 do not apply to any officer or employee of the
OCC, or any former officer or employee of the OCC, if--
(a) The individual ceased to be an officer or employee of the OCC
before December 17, 2005; or
(b) The Comptroller of the Currency certifies, in writing and on a
case-by-case basis, that granting the individual a waiver of the
restrictions would not affect the integrity of the OCC's supervisory
program.

Sec. 4.76 Penalties.

(a) Penalties under section 10(k) of FDI Act. If a senior examiner
of a national bank, after leaving the employment of the OCC, accepts
compensation as an employee, officer, director, or consultant from that
bank, or any company (including a bank holding company) that controls
that bank, then the examiner shall, in accordance with section 10(k)(6)
of the FDI Act, be subject to one of the following penalties--
(1) An order:
(i) Removing the individual from office or prohibiting the
individual from further participation in the affairs of the relevant
national bank, bank holding company, or other company that controls
such institution for a period of up to five years; and
(ii) Prohibiting the individual from participating in the affairs
of any insured depository institution for a period of up to five years;
or
(2) A civil monetary penalty of not more than $250,000.
(b) Enforcement by appropriate Federal banking agency. Violations
of Sec. 4.74 shall be administered or enforced by the appropriate
Federal banking agency for the depository institution or depository
institution holding company that provided compensation to the former
senior examiner. For purposes of this paragraph, the appropriate
Federal banking agency for a company that is not a depository
institution or depository institution holding company shall be the
Federal banking agency that formerly employed the senior examiner.
(c) Scope of prohibition orders. Any senior examiner who is subject
to an order issued under paragraph (a) of this section shall, as
required by 12 U.S.C. 1820(k)(6)(B), be subject to paragraphs (6) and
(7) of section 8(e) of the FDI Act (12 U.S.C. 1818(e)(6)-(7)) in the
same manner and to the same extent as a person subject to an order
issued under section 8(e).
(d) Procedures. The procedures applicable to actions under
paragraph (a) of this section are provided in section 10(k)(6) of the
FDI Act (12 U.S.C. 1820(k)(6)) and in 12 C.F.R. part 19.
(e) Remedies not exclusive. The OCC may seek both of the penalties
described in paragraph (a) of this section. In addition, a senior
examiner who accepts compensation as described in Sec. 4.74 may be
subject to other administrative, civil or criminal remedies or
penalties as provided in law.

PART 19--RULES OF PRACTICE AND PROCEDURE

4. The authority citation for part 19 continues to read as follows:

Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 93(b), 93a, 164,
505, 1817, 1818, 1820, 1831m, 1831o, 1972, 3102, 3108(a), 3909 and
4717; 15 U.S.C. 78(h) and (i), 78o-4(c), 78o-5, 78q-1, 78s, 78u,
78u-2, 78u-3, and 78w; 28 U.S.C. 2461 note; 31 U.S.C. 330, 5321; and
42 U.S.C. 4012a.

5. In section 19.1:
a. Redesignate paragraph (g) as paragraph (h);
b. Remove the word ``and'' at the end of the paragraph (f); and
c. Add a new paragraph (g) to read as follows:

Sec. 19.1 Scope.

* * * * *
(g) Removal, prohibition, and civil monetary penalty proceedings
under section 10(k) of the FDI Act (12 U.S.C. 1820(k)) for violations
of the post-employment restrictions imposed by that section; and
* * * * *

Dated: July 26, 2005.
Julie L. Williams,
Acting Comptroller of the Currency.

Board of Governors of the Federal Reserve System

12 CFR Chapter II

Authority and Issuance

For the reasons set forth in the preamble, the Board proposes to
amend part 263 and add a new part 264a to Title 12, Chapter II, of the
Code of Federal Regulations as follows:

PART 263--RULES OF PRACTICE FOR HEARINGS

1. The authority citation for part 263 continues to read as
follows:

Authority: 5 U.S.C. 504; 12 U.S.C. 248, 324, 504, 505, 1817(j),
1818, 1828(c), 1831o, 1831p-1, 1847(b), 1847(d), 1884(b),
1972(2)(F), 3105, 3107, 3108, 3907, 3909; 15 U.S.C. 21, 78o-4, 78o-
5, 78u-2; and 28 U.S.C. 2461 note.

2. Section 263.1 is amended by redesignating paragraph (g) as
paragraph (h), removing the word ``and'' at the end of the paragraph
(f), and adding new paragraph (g) to read as follows:

Sec. 263.1 Scope.

* * * * *
(g) Removal, prohibition, and civil monetary penalty proceedings
under section 10(k) of the FDI Act (12 U.S.C. 1820(k)) for violations
of the special post-employment restrictions imposed by that section;
and
* * * * *
3. New part 264a is added to read as follows:

PART 264a--POST-EMPLOYMENT RESTRICTIONS FOR SENIOR EXAMINERS

Sec.
264a.1 What is the purpose and scope of this part?
264a.2 Who is considered a senior examiner of the Federal Reserve?
264a.3 What special post-employment restrictions apply to senior
examiners?
264a.4 When do these special restrictions become effective and may
they be waived?
264a.5 What are the penalties for violating these special post-
employment restrictions?
264a.6 What other definitions and rules of construction apply for
purposes of this part?

Authority: 12 U.S.C. 1820(k).

Sec. 264a.1 What is the purpose and scope of this part?

This part identifies those officers and employees of the Federal
Reserve that are subject to the special post-employment restrictions
set forth in section 10(k) of the Federal Deposit Insurance Act (FDI
Act) and implements those restrictions as they apply to officers and
employees of the Federal Reserve.

Sec. 264a.2 Who is considered a senior examiner of the Federal
Reserve?

For purposes of this part, an officer or employee of the Federal
Reserve is considered to be the ``senior examiner'' for a particular
state member bank, bank holding company or foreign bank if--
(a) The officer or employee has been commissioned by the Board to
conduct examinations or inspections on behalf of the Board;
(b) The officer or employee has been assigned continuing, broad and
lead responsibility for examining or inspecting the state member bank,
bank holding company or foreign bank; and

[[Page 45332]]

(c) The officer's or employee's responsibilities for examining,
inspecting and supervising the state member bank, bank holding company
or foreign bank--
(1) Represent a substantial portion of the officer's or employee's
assigned responsibilities; and
(2) Require the officer or employee to interact routinely with
officers or employees of the state member bank, bank holding company or
foreign bank or its affiliates.

Sec. 264a.3 What special post-employment restrictions apply to senior
examiners?

(a) Senior Examiners of State Member Banks. An officer or employee
of the Federal Reserve who serves as the senior examiner of a state
member bank for two or more months during the last twelve months of
such individual's employment with the Federal Reserve may not, within
one year after leaving the employment of the Federal Reserve, knowingly
accept compensation as an employee, officer, director or consultant
from--
(1) The state member bank; or
(2) Any company (including a bank holding company) that controls
the state member bank.
(b) Senior Examiners of Bank Holding Companies. An officer or
employee of the Federal Reserve who serves as the senior examiner of a
bank holding company for two or more months during the last twelve
months of such individual's employment with the Federal Reserve may
not, within one year of leaving the employment of the Federal Reserve,
knowingly accept compensation as an employee, officer, director or
consultant from--
(1) The bank holding company; or
(2) Any depository institution that is controlled by the bank
holding company.
(c) Senior Examiners of Foreign Banks. An officer or employee of
the Federal Reserve who serves as the senior examiner of a foreign bank
for two or more months during the last twelve months of such
individual's employment with the Federal Reserve may not, within one
year of leaving the employment of the Federal Reserve, knowingly accept
compensation as an employee, officer, director or consultant from--
(1) The foreign bank; or
(2) Any branch or agency of the foreign bank located in the United
States; or
(3) Any other depository institution controlled by the foreign
bank.

Sec. 264a.4 When do these special restrictions become effective and
may they be waived?

The post-employment restrictions set forth in section 10(k) of the
FDI Act and Sec. 264a.3 do not apply to any officer or employee of the
Federal Reserve, or any former officer or employee of the Federal
Reserve, if--
(a) The individual ceased to be an officer or employee of the
Federal Reserve before December 17, 2005; or
(b) The Chairman of the Board of Governors certifies, in writing
and on a case-by-case basis, that granting the individual a waiver of
the restrictions would not affect the integrity of the Federal
Reserve's supervisory program.

Sec. 264a.5 What are the penalties for violating these special post-
employment restrictions?

(a) Penalties under section 10(k) of FDI Act.--A senior examiner of
the Federal Reserve who, after leaving the employment of the Federal
Reserve, violates the restrictions set forth in Sec. 264a.3 shall, in
accordance with section 10(k)(6) of the FDI Act, be subject to one or
both of the following penalties--
(1) An order:
(i) Removing the individual from office or prohibiting the
individual from further participation in the affairs of the relevant
state member bank, bank holding company, foreign bank or other
depository institution or company for a period of up to five years; and
(ii) Prohibiting the individual from participating in the affairs
of any insured depository institution for a period of up to five years;
and/or
(2) A civil monetary penalty of not more than $250,000.
(b) Imposition of penalties. The penalties described in paragraph
(a) of this section shall be imposed by the appropriate Federal banking
agency as determined under section 10(k)(6) of the FDI Act, which may
be an agency other than the Federal Reserve.
(c) Scope of prohibition orders. Any senior examiner who is subject
to an order issued under paragraph (a) of this section shall, as
required by section 10(k)(6)(B) of the FDI Act, be subject to
paragraphs (6) and (7) of section 8(e) of the FDI Act in the same
manner and to the same extent as a person subject to an order issued
under section 8(e).
(d) Procedures. The procedures applicable to actions under
paragraph (a) of this section are provided in section 10(k)(6) of the
FDI Act.
(e) Other penalties. The penalties set forth in paragraph (a) of
this section are not exclusive, and a senior examiner who violates the
restrictions in Sec. 264a.3 also may be subject to other
administrative, civil or criminal remedies or penalties as provided in
law.

Sec. 264a.6 What other definitions and rules of construction apply
for purposes of this part?

For purposes of this part--
(a) Bank holding company means any company that controls a bank (as
provided in section 2 of the Bank Holding Company Act of 1956 (12
U.S.C. 1841 et seq.)).
(b) A person shall be deemed to act as a consultant for a bank or
other company only if such person works directly on matters for, or on
behalf of, such bank or other company.
(c) Control has the meaning given in section 2 of the Bank Holding
Company Act.
(d) Depository institution has the meaning given in section 3 of
the FDI Act and includes an uninsured branch or agency of a foreign
bank, if such branch or agency is located in any State.
(e) Federal Reserve means the Board of Governors of the Federal
Reserve System and the Federal Reserve Banks.
(f) Foreign bank means any foreign bank or company described in
section 8(a) of the International Banking Act of 1978 (12 U.S.C.
3106(a)).
(g) Insured depository institution has the meaning given in section
3 of the FDI Act.

Dated: July 27, 2005.

By order of the Board of Governors of the Federal Reserve
System.
Jennifer J. Johnson,
Secretary of the Board.

Federal Deposit Insurance Corporation

12 CFR Chapter III

Authority and Issuance
For the reasons set forth in the preamble, the FDIC proposes to
amend chapter III of title 12 of the Code of Federal Regulations as
follows:

PART 336--FDIC EMPLOYEES

1. Subpart C is added to Part 336 to read as follows:

Subpart C--One-Year Restriction on Post-Employment Activities of
Senior Examiners

Sec.
336.10 Purpose and scope.
336.11 Definitions.
336.12 One-year post-employment restriction.
336.13 Penalties.

Authority: 12 U.S.C. 1819 and 1820(k).

[[Page 45333]]

Sec. 336.10 Purpose and scope.

This subpart applies to officers or employees of the FDIC who are
subject to the post-employment restrictions set forth in section 10(k)
of the Federal Deposit Insurance Act, 12 U.S.C. 1820(k), and implements
those restrictions as they apply to officers and employees of the FDIC.

Sec. 336.11 Definitions.

For purposes of this subpart:
(a) Bank holding company has the meaning given to such term in
section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(a)).
(b) A consultant for an insured depository institution or other
company shall include only individuals who work directly on matters
for, or on behalf of, such institution or other company.
(c) Control has the meaning given to such term in section 336.3(b),
and a foreign bank shall be deemed to control any insured branch of the
foreign bank.
(d) Depository institution means any bank or savings association,
including a branch of a foreign bank, if such branch is located in the
United States and is insured by the FDIC.
(e) Foreign bank means any bank or company described in section
8(a) of the International Banking Act of 1978 (12 U.S.C. 3106(a)).
(f) Savings and loan holding company has the meaning given to such
term in section 10(a)(1)(D) of the Home Owners' Loan Act (12 U.S.C.
1467a(a)(1)(D)).
(g) A senior examiner for an insured depository institution means
an officer or employee of the FDIC--
(1) Who has been commissioned by the FDIC to conduct examinations
or inspections of insured depository institutions on behalf of the
FDIC;
(2) Who has been assigned continuing, broad, and lead
responsibility for the examination or inspection of the institution;
(3) Who routinely interacts with officers or employees of the
institution or its affiliates; and
(4) Whose responsibilities with respect to the institution
represent a substantial portion of the FDIC officer or employee's
overall responsibilities.

Sec. 336.12 One-year post-employment restriction.

(a) Prohibition. An officer or employee of the FDIC who serves as a
senior examiner of an insured depository institution for at least 2
months during the last 12 months of that individual's employment with
the FDIC may not, within 1 year after the termination date of his or
her employment with the FDIC, knowingly accept compensation as an
employee, officer, director, or consultant from--
(1) The insured depository institution; or
(2) Any company (including a bank holding company or savings and
loan holding company) that controls such institution.
(b) Waivers. The post-employment restrictions in paragraph (a) of
this section will not apply to a senior examiner if the FDIC
Chairperson certifies in writing and on a case-by-case basis that a
waiver of the restrictions will not affect the integrity of the FDIC's
supervisory program.
(c) Effective Date. The post-employment restrictions in paragraph
(a) of this section will not apply to any officer or employee of the
FDIC, or any former officer or employee of the FDIC, who ceased to be
an officer or employee of the FDIC before December 17, 2005.

Sec. 336.13 Penalties.

(a) Penalties under section 10(k) of the FDI Act. A senior examiner
of the FDIC who violates the post-employment restrictions set forth in
Sec. 336.12 shall be subject to the following penalties--
(1) An order--
(i) Removing such person from office or prohibiting such person
from further participation in the affairs of the relevant insured
depository institution or company (including a bank holding company or
savings and loan holding company) that controls such institution for a
period of up to five years, and
(ii) Prohibiting any further participation by such person, in any
manner, in the affairs of any insured depository institution for a
period of up to five years; or
(2) A civil monetary penalty of not more than $250,000; or
(3) Both.
(b) Enforcement by appropriate Federal banking agency of hiring
entity. Violations of Sec. 336.12 shall be enforced by the appropriate
Federal banking agency of the depository institution, depository
institution holding company, or other company at which the violation
occurred, as determined under section 10(k)(6), which may be an agency
other than the FDIC.
(c) Scope of prohibition orders. Any senior examiner who is subject
to an order issued under paragraph (a)(1) of this section shall, as
required by 12 U.S.C. 1820(k)(6)(B), be subject to paragraphs (6) and
(7) of section 8(e) in the same manner and to the same extent as a
person subject to an order issued under section 8(e).
(d) Other penalties. The penalties set forth in paragraph (a) of
this section are not exclusive, and a senior examiner who violates the
restrictions in Sec. 336.12 may also be subject to other
administrative, civil, or criminal remedies or penalties as provided by
law.

PART 308--RULES OF PRACTICE AND PROCEDURES

1. The authority for part 308 continues to read as follows:

Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 93(b), 164, 505,
1815(e), 1817, 1818, 1820, 1828, 1829, 1829b, 1831i, 1831m(g)(4),
1831o, 1831p-1, 1832(c), 1884(b), 1972, 3102, 3108(a), 3349, 3909,
4717; 15 U.S.C. 78 (h) and (i), 78o-4(c), 78o-5, 78q-1, 78s, 78u,
78u-2, 78u-3, 78w, 6801(b), 6805(b)(1); 28 U.S.C. 2461 note; 31
U.S.C. 330, 5321; 42 U.S.C. 4012a; Sec. 3100(s) Pub. L. 104-134, 110
Stat. 1321-358.

2. In Sec. 308.1, redesignate paragraph (g) as paragraph (h),
remove the word ``and'' at the end of the paragraph (f), and add a new
paragraph (g) to read as follows:

Sec. 308.1 Scope.

* * * * *
(g) Proceedings under section 10(k) of the FDIA (12 U.S.C. 1820(k))
to impose penalties for violations of the post-employment restrictions
under that subsection; and
* * * * *

Dated at Washington, DC, this 19th day of July, 2005.

By order of the Board of Directors.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.

Department of the Treasury

Office of Thrift Supervision

12 CFR Chapter V

Authority and Issuance

For the reasons set forth in the preamble, OTS proposes to amend
chapter V of title 12 of the Code of Federal Regulations as follows:
1. Add a new part 507 to read as follows:

PART 507--RESTRICTIONS ON POST-EMPLOYMENT ACTIVITIES OF SENIOR
EXAMINERS

Sec.
507.1 What does this part do?
507.2 Who is a senior examiner?
507.3 What post-employment restrictions apply to senior examiners?
507.4 When will OTS waive the post-employment restrictions?
507.5 What are the penalties for violating the post-employment
restrictions?

Authority: 12 U.S.C. 1462a, 1463 and 1820(k).

[[Page 45334]]

Sec. 507.1 What does this part do?

This part implements section 10(k) of the Federal Deposit Insurance
Act (FDIA), which prohibits senior examiners from accepting
compensation from certain companies following the termination of their
employment. See 12 U.S.C. 1820(k). Except where otherwise provided, the
terms used in this part have the meanings given in section 3 of the
FDIA (12 U.S.C. 1813).

Sec. 507.2 Who is a senior examiner?

An individual is a senior examiner for a particular savings
association or savings and loan holding company if:
(a) The individual is an officer or employee of OTS (including a
special government employee) who has been designated by OTS to conduct
examinations or inspections of savings associations or savings and loan
holding companies;
(b) The individual has been assigned continuing, broad and lead
responsibility for the examination or inspection of that savings
association or savings and loan holding company; and
(c) The individual's responsibilities for examining, inspecting, or
supervising that savings association or savings and loan holding
company:
(1) Represent a substantial portion of the individual's assigned
responsibilities at OTS; and
(2) Require the individual to interact on a routine basis with
officers and employees of the savings association, savings and loan
holding company, or its affiliates.

Sec. 507.3 What post-employment restrictions apply to senior
examiners?

(a) Prohibition. (1) Senior examiner of savings association. An
individual who serves as a senior examiner of a savings association for
two or more of the last 12 months of his or her employment with OTS may
not, within one year after the termination date of his or her
employment with OTS, knowingly accept compensation as an employee,
officer, director, or consultant from:
(i) The savings association; or
(ii) A savings and loan holding company, bank holding company, or
any other company that controls the savings association.
(2) Senior examiner of a savings and loan holding company. An
individual who serves as a senior examiner of a savings and loan
holding company for two or more of the last 12 months of his or her
employment with OTS may not, within one year after the termination date
of his or her employment with OTS, knowingly accept compensation as an
employee, officer, director, or consultant from:
(i) The savings and loan holding company; or
(ii) Any depository institution that is controlled by the savings
and loan holding company.
(b) Effective date. The post-employment restrictions in paragraph
(a) of this section do not apply to any senior examiner who terminated
his employment at OTS before December 17, 2005.
(c) Definitions. For the purposes of this section:
(1) Consultant. An individual acts as a consultant for a savings
association or other company only if he or she directly works on
matters for, or on behalf of, the savings association or company.
(2) Control. Control has the same meaning given in part 574 of this
chapter.

Sec. 507.4 When will OTS waive the post-employment restrictions?

The post-employment restriction in Sec. 507.3 will not apply to a
senior examiner if the Director certifies in writing and on a case-by-
case basis that a waiver of the restriction will not affect the
integrity of OTS's supervisory program.

Sec. 507.5 What are the penalties for violating the post-employment
restrictions?

(a) Penalties. A senior examiner who violates Sec. 507.3 shall, in
accordance with 12 U.S.C. 1820(k)(6), be subject to one or both of the
following penalties:
(1) An order:
(i) Removing the person from office or prohibiting the person from
further participating in the conduct of the affairs of the relevant
depository institution, savings and loan holding company, bank holding
company or other company for up to five years; and
(ii) Prohibiting the person from participating in the affairs of
any insured depository institution for up to five years.
(2) A civil money penalty not to exceed $250,000.
(b) Scope of prohibition orders. Any senior examiner who is subject
to an order issued under paragraph (a)(1) of this section shall be
subject to 12 U.S.C. 1818(e)(6) and (7) in the same manner and to the
same extent as a person subject to an order issued under 12 U.S.C.
1818(e).
(c) Procedures. 12 U.S.C. 1820(k) describes the procedures that are
applicable to actions under paragraph (a) of this section and the
appropriate Federal banking agency authorized to take the action, which
may be an agency other than OTS. Where OTS is the appropriate Federal
banking agency, it will conduct administrative proceedings under 12 CFR
part 509.
(d) Other penalties. The penalties under this section are not
exclusive. A senior examiner who violates the restriction in Sec.
507.3 may also be subject to other administrative, civil, or criminal
remedy or penalty as provided by law.

PART 509--RULES OF PRACTICE AND PROCEDURES IN ADJUDICATORY
PROCEEDINGS

2. The authority citation for part 509 is amended to read as
follows:

Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 1464, 1467, 1467a,
1468, 1817(j), 1818, 1820(k), 3349, 4717; 15 U.S.C. 78(l); 78o-5,
78u-2; 28 U.S.C. 2461 note; 31 U.S.C. 5321; 42 U.S.C. 4012a.

3. In Sec. 509.1, redesignate paragraph (g) as paragraph (h) and
add a new paragraph (g) to read as follows:

Sec. 509.1 Scope.

* * * * *
(g) Proceedings under section 10(k) of the FDIA (12 U.S.C. 1820(k))
to impose penalties on senior examiners for violation of post-
employment prohibitions.
* * * * *

Dated: July 26, 2005.

Office of Thrift Supervision.
Richard M. Riccobono,
Acting Director.
[FR Doc. 05-15468 Filed 8-4-05; 8:45 am]



 

Last Updated 08/05/2005 Regs@fdic.gov