FDIC Federal Register Citations

[Federal Register: November 28, 2007 (Volume 72, Number 228)]

[Rules and Regulations]

[Page 67233-67236]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr28no07-2]

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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 308

RIN 3064-AD22

Rules of Practice and Procedure

AGENCY: Federal Deposit Insurance Corporation.

ACTION: Final rule.

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SUMMARY: The Federal Deposit Insurance Corporation (FDIC) is amending

its procedural regulations implementing sections 8(g) and 8(b) of the

Federal Deposit Insurance Act. The amendments are generally technical

in nature, and are necessary to ensure that the rules are consistent

with statutory changes effected by sections 708 and 702 of the

Financial Services Regulatory Relief Act of 2006.

DATES: Effective Date: November 28, 2007.

FOR FURTHER INFORMATION CONTACT: Brett A. McCallister, Review Examiner,

FDIC, 1101 Club Village Drive, Suite 101, Columbia, MO 65203;

telephone: (816) 234-8099 x 4223; or electronic mail:

bmccallister@fdic.gov; or Richard Bogue, Counsel, FDIC, 550 17th

Street, NW., Washington, DC 20429; telephone: (202) 898-3726;

facsimile: (202) 898-3658; or electronic mail: rbogue@fdic.gov.

SUPPLEMENTARY INFORMATION:

I. Background

On October 13, 2006, the President signed into law Public Law 109-

351, the Financial Services Regulatory Relief Act of 2006 (FSRRA).

Section 708 of the FSRRA modified section 8(g) of the Federal Deposit

Insurance Act (FDI Act), in a number of ways.

On August 9, 1991, the FDIC issued a final rule entitled ``Rules of

Practice and Procedure.'' 56 FR 37975, August 9, 1991. This rule

contained a Subpart N, entitled ``Rules and Procedures Applicable to

Proceedings Relating to Suspension, Removal, and Prohibition Where a

Felony is Charged,'' which included sections 308.161-308.164. Section

708 of FSRRA made various modifications to section 8(g) of the FDI Act

to clarify the extent of the suspension, removal and prohibition

authority of the Federal banking agencies in cases of certain crimes by

institution-affiliated parties (IAPs). Minor modifications were made to

the predicate and findings requirements of section 8(g)(1), as well as

conforming amendments to sections 8(g)(2) and (3). Significantly,

section 8(g)(1) was modified to clarify that the appropriate Federal

banking agency may suspend or prohibit individuals who are the subject

of criminal proceedings involving certain crimes from participation in

the affairs of any depository institution, not only the depository

institution with which the IAP is or was associated.

In addition, because the previous suspension language of section

8(g) had required findings specific to the depositors of the depository

institution or to the depository institution itself, it was unclear

whether a covered individual could be suspended if the institution had

ceased to exist. This problem was addressed by directing the required

findings to ``any relevant depository institution,'' which is defined

in a new subsection (E) to mean any depository institution of which the

party is or was an IAP at the time the information, indictment,

complaint, suspension notice or order of prohibition is issued.

Since much of the language of section 8(g) is repeated in the

FDIC's implementing regulations at Part 308, Subpart N--Rules and

Procedures Applicable to Proceedings Relating to Suspension, Removal,

and Prohibition Where a Felony is Charged, 12 CFR 308.161-164, numerous

conforming amendments of the regulations are required. Finally, a few

changes are made in order to standardize references contained in the

various sections and to make the hearing procedures easier to

understand and to conform with current practice and procedure.

Section 702 of FSRRA enacted a new section 50 of the FDI Act,

codified at 12 U.S.C. 1831aa, entitled ``Enforcement of Agreements.''

Subsection (a) of the new section 50 provides that:

``Notwithstanding clause (i) or (ii) of section 8(b)(6)(A) or

section 38(e)(2)(E)(i), the appropriate Federal banking agency for a

depository institution may enforce, under section 8, the terms of--

(1) Any condition imposed in writing by the agency on the

depository institution or an institution-affiliated party in connection

with any action on

[[Page 67234]]

any application, notice, or other request concerning the depository

institution; or

(2) Any written agreement entered into between the agency and the

depository institution or an institution-affiliated party.''

On August 9, 1991, the FDIC issued a final rule entitled ``Rules of

Practice and Procedure.'' 56 FR 37975, August 9, 1991. This rule

contained a Subpart G, entitled ``Rules and Procedures Applicable to

Proceedings Relating to Cease-and-Desist Orders'' which included

section 308.127, entitled ``Scope.'' Section 308.127(a) described the

scope of rules applicable to cease-and-desist proceedings under section

8(b) of the FDI Act. Because the new section 50 modifies the

requirements for pursuit of affirmative action under section 8(b)(6),

it is appropriate that the procedural regulations respecting pursuit of

cease-and-desist actions be amended to reflect the applicability of the

new section 50. Accordingly, the final rule modifies the procedural

regulations with the addition of a cross-reference to the new section

50.

II. The Final Rule

The following is a section-by-section discussion of the final rule

revisions to the FDIC's regulations.

Section 308.161--Scope

The proposed rule: (1) Revises the scope of the prohibition from

``the bank'' to ``any depository institution;'' and (2) revises the

description of the predicate offenses and the required findings to

reflect statutory changes to section 8(g). The predicate offense

description changed from ``is charged in any state or federal

information, indictment, or complaint, with the commission of or

participation in'' to ``is the subject of any state or federal

information, indictment, or complaint, involving the commission of or

participation in.'' The required findings changed from ``if continued

service or participation by such party poses a threat to the interests

of the bank's depositors or threatens to impair public confidence in

the depository institution'' to ``if continued service or participation

by such party posed, poses, or may pose a threat to the interests of

the depositors of, or threatened, threatens, or may threaten to impair

public confidence in, any relevant depository institution.''

Section 308.162--Relevant Considerations

The proposed rule: (1) clarifies that the considerations apply to a

notice of suspension or prohibition, or a removal or prohibition order;

and (2) revises the required findings recited in subsection (a)(1)(iii)

to reflect the statutory changes to section 8(g).

Section 308.163--Notice of Suspension, and Orders of Removal and

Prohibition

The proposed rule: (1) Revises the title of the section to read

``Notice of suspension or prohibition, and orders of removal or

prohibition;'' (2) revises the scope of the prohibition from ``the

bank'' to ``any depository institution'' in subsections (a)(1) and

(b)(1); revises the required findings in subsection (b)(1); (3)

corrects the cross reference in subsection (b)(2) from 308.161(a)(ii)

to 308.161(a)(2); and moves subsection (a)(2) respecting the filing and

content of requests for hearing to a new subsection (c) to make clear

that there is a right to a hearing regarding both notices of suspension

and prohibition and orders of removal and prohibition.

Section 308.164--Hearings

The proposed rule: (1) Eliminates confusion by changing references

to the party filing the request for hearing from the ``applicant'' to

the ``institution-affiliated party;'' (2) eliminates confusion in

subsection (c) caused by the apparent ability of the bank to waive a

hearing even if the affected individual were to request a hearing; (3)

in subsections (d) and (e) makes it clear that there is a right to a

hearing regarding both notices of suspension and prohibition and orders

of removal and prohibition.

Section 308.127--Scope Subpart G

The final rule: (1) Revises the heading for section 308.127(a) from

``Cease-and-desist proceedings under section 8 of the FDIA ``Cease-and-

desist proceeding under sections 8 and 50 of the FDIA;'' and (2) at the

end of section 308.127(a), replaces the period with a comma and adds

``and section 50 of the FDIA, 12 U.S.C. 1831aa.''

III. Exemption From Public Notice and Comment

The revisions to part 308 do not constitute a ``rule'' for which

the FDIC is required to publish a general notice of proposed rulemaking

under section 553(b) of Title 5 of the United States Code. This is

because the final rule contains only clarifications and technical

changes intended to bring the agency's rules of practice and procedure

into conformity with statutory changes and current agency practices and

procedures. Thus, the changes to be implemented will have no adverse

effect on the public. In addition, the FSRRA changes to the FDI Act

took effect on October 13, 2006. It is, therefore, desirable to

implement the necessary technical and conforming regulatory amendments

as soon as possible. Thus, the FDIC has determined for good cause that

public notice and comment are unnecessary, and that the rule should be

published in final form.

IV. Paperwork Reduction Act

The proposed rule will not create or modify any collections of

information pursuant to the Paperwork Reduction Act (44 U.S.C. 3501 et

seq.). Consequently, no information has been submitted to the Office of

Management and Budget for review.

V. Regulatory Flexibility Act

The Regulatory Flexibility Act (5 U.S.C. 601-612) requires an

agency to publish an initial regulatory flexibility analysis, except to

the extent provided in 5 U.S.C. 605(b), whenever the agency is required

to publish a general notice of proposed rulemaking for a proposed rule.

For the reasons discussed above, the FDIC is publishing this rule as a

final rule, for which no publication of a general notice of proposed

rulemaking is necessary. No regulatory flexibility analysis is

required.

VI. The Treasury and General Government Appropriations Act, 1999--

Assessment of Federal Regulations and Policies on Families

The FDIC has determined that the proposed rule will not affect

family well-being within the meaning of section 654 of the Treasury and

General Government Appropriations Act, enacted as part of the Omnibus

Consolidated and Emergency Supplemental Appropriations Act of 1999

(Pub. L. 105-277, 112 Stat. 2681).

VII. Small Business Regulatory Enforcement Fairness Act

The Small Business Regulatory Enforcement Fairness Act of 1996

(SBREFA) (Title II, Pub. L. 104-121) provides generally for agencies to

report rules to Congress and the General Accounting Office (GAO) for

review. The reporting requirement is triggered when a federal agency

issues a final rule. The FDIC will file the appropriate reports with

Congress and the GAO as required by SBREFA. The Office of Management

and Budget has determined that the proposed rule does not constitute a

``major rule'' as defined by SBREFA.

VIII. Effective Date

The Administrative Procedure Act (5 U.S.C. 551 et seq.) provides

that regulations shall become effective thirty (30) days after their

publication in the

[[Page 67235]]

Federal Register (5 U.S.C. 553). One exception to this requirement is

for a finding of ``good cause'' (Id. At 553(d)). For the final rule,

the Board finds ``good cause'' to make the amendments effective

immediately upon publication in the Federal Register because the

amendments are technical and conforming to pre-existing statutory and

regulatory requirements.

Lists of Subjects in 12 CFR Part 308

Administrative practice and procedure, Bank deposit insurance,

Banks, banking, Claims, Crime, Equal access to justice, Fraud,

Investigations, Lawyers, Penalties.

0

Accordingly, 12 CFR part 308 is amended as follows:

PART 308--RULES OF PRACTICE AND PROCEDURE

0

1. The authority citation for part 308 is revised 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, and 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; and Pub. L. 109-351.

0

2. Revise Sec. 308.127(a) to read as follows:

Sec. 308.127 Scope.

(a) Cease-and-desist proceedings under sections 8 and 50 of the

FDIA. The rules and procedures of this subpart, subpart B of the Local

Rules and the Uniform Rules shall apply to proceedings to order an

insured nonmember bank or an institution-affiliated party to cease and

desist from practices and violations described in section 8(b) of the

FDIA, 12 U.S.C. 1818(b), and section 50 of the FDIA, 12 U.S.C. 1831aa.

* * * * *

0

3. Revise Subpart N to read as follows:

Subpart N--Rules and Procedures Applicable to Proceedings Relating to

Suspension, Removal, and Prohibition Where a Felony Is Charged

Sec.

308.161 Scope.

308.162 Relevant considerations.

308.163 Notice of suspension or prohibition, and orders of removal

or prohibition.

308.164 Hearings.

Subpart N--Rules and Procedures Applicable to Proceedings Relating

to Suspension, Removal, and Prohibition Where a Felony Is Charged

Sec. 308.161 Scope.

The rules and procedures set forth in this subpart shall apply to

the following:

(a) Proceedings to suspend an institution-affiliated party of an

insured state nonmember bank, or to prohibit such party from further

participation in the conduct of the affairs of any depository

institution, if continued service or participation by such party posed,

poses, or may pose a threat to the interests of the depositors of, or

threatened, threatens, or may threaten to impair public confidence in,

any relevant depository institution (as defined at section

1818(g)(1)(E) of Title 12), where the individual is the subject of any

state or federal information, indictment, or complaint, involving the

commission of, or participation in:

(1) A crime involving dishonesty or breach of trust punishable by

imprisonment exceeding one year under state or federal law; or

(2) A criminal violation of section 1956, 1957, or 1960 of Title 18

or section 5322 or 5324 of Title 31.

(b) Proceedings to remove from office or to prohibit an

institution-affiliated party from further participation in the conduct

of the affairs of any depository institution without the consent of the

Board of Directors or its designee where:

(1) A judgment of conviction or an agreement to enter a pre-trial

diversion or other similar program has been entered against such party

in connection with a crime described in paragraph (a)(1) of this

section that is not subject to further appellate review, if continued

service or participation by such party posed, poses, or may pose a

threat to the interests of the depositors of, or threatened, threatens,

or may threaten to impair public confidence in, any relevant depository

institution (as defined at section 1818(g)(1)(E) of Title 12); or

(2) A judgment of conviction or an agreement to enter a pre-trial

diversion or other similar program has been entered against such party

in connection with a crime described in paragraph (a)(2) of this

section.

Sec. 308.162 Relevant considerations.

(a)(1) In proceedings under Sec. 308.161(a) and (b) for a notice

of suspension or prohibition, or a removal or prohibition order, the

following shall be considered:

(i) Whether the alleged offense is a crime which is punishable by

imprisonment for a term exceeding one year under state or federal law

and which involves dishonesty or breach of trust; and

(ii) Whether the alleged offense is a criminal violation of section

1956, 1957, or 1960 of Title 18 or section 5322 or 5324 of Title 31;

and

(iii) Whether continued service or participation by the

institution-affiliated party posed, poses, or may pose a threat to the

interests of the depositors of, or threatened, threatens, or may

threaten to impair public confidence in, any relevant depository

institution (as defined at section 1818(g)(1)(E) of Title 12).

(b) The question of whether an institution-affiliated party is

guilty of the subject crime shall not be tried or considered in a

proceeding under this subpart.

Sec. 308.163 Notice of suspension or prohibition, and orders of

removal or prohibition.

(a) Notice of suspension or prohibition.

(1) The Board of Directors or its designee may suspend or prohibit

from further participation in the conduct of the affairs of any

depository institution an institution-affiliated party by written

notice of suspension or prohibition upon a determination by the Board

of Directors or its designee that the grounds for such suspension or

prohibition exist. The written notice of suspension or prohibition

shall be served upon the institution-affiliated party and any

depository institution that the subject of the action is affiliated

with at the time the notice is issued.

(2) The suspension or prohibition shall be effective immediately

upon service on the institution-affiliated party, and shall remain in

effect until final disposition of the information, indictment,

complaint, or until it is terminated by the Board of Directors or its

designee under the provisions of Sec. 308.164 or otherwise.

(b) Order of removal or prohibition.

(1) The Board of Directors or its designee may issue an order

removing or prohibiting from further participation in the conduct of

the affairs of any depository institution an institution-affiliated

party, when a final judgment of conviction not subject to further

appellate review is entered against the institution-affiliated party

for a crime referred to in Sec. 308.161(a)(1) and continued service or

participation by such party posed, poses, or may pose a threat to the

interests of the depositors of, or threatened, threatens, or may

threaten to impair public confidence in, any relevant depository

institution (as

[[Page 67236]]

defined at section 1818(g)(1)(E) of Title 12).

(2) An order of removal or prohibition shall be entered if a

judgment of conviction is entered against the institution-affiliated

party for a crime described in Sec. 308.161(a)(2).

(c) The notice of suspension or prohibition or the order of removal

or prohibition shall:

(1) Inform the institution-affiliated party that a written request

for a hearing, stating the relief desired and grounds therefore, and

any supporting evidence, may be filed with the Executive Secretary

within 30 days after receipt of the written notice or order; and

(2) Summarize or cite to the relevant considerations specified in

Sec. 308.162 of this subpart.

Sec. 308.164 Hearings.

(a) Hearing dates. The Executive Secretary shall order a hearing to

be commenced within 30 days after receipt of a request for hearing

filed pursuant to Sec. 308.163. Upon the request of the institution-

affiliated party, the presiding officer or the Executive Secretary may

order a later hearing date.

(b) Hearing procedure. (1) The hearing shall be held in Washington,

DC, or at another designated place, before a presiding officer

designated by the Executive Secretary.

(2) The provisions of Sec. Sec. 308.6 through 308.12, 308.16, and

308.21 of the Uniform Rules and Sec. Sec. 308.101 through 308.102 and

308.104 through 308.106 of subpart B of the Local Rules shall apply to

hearings held pursuant to this subpart.

(3) The institution-affiliated party may appear at the hearing and

shall have the right to introduce relevant and material documents and

oral argument. Members of the FDIC enforcement staff may attend the

hearing and participate as representatives of the FDIC enforcement

staff.

(4) There shall be no discovery in proceedings under this subpart.

(5) At the discretion of the presiding officer, witnesses may be

presented within specified time limits, provided that a list of

witnesses is furnished to the presiding officer and to all other

parties prior to the hearing. Witnesses shall be sworn, unless

otherwise directed by the presiding officer. The presiding officer may

ask questions of any witness. Each party shall have the opportunity to

cross-examine any witness presented by an opposing party. The

transcript of the proceedings shall be furnished, upon request and

payment of the cost thereof, to the institution-affiliated party

afforded the hearing.

(6) In the course of or in connection with any hearing under

paragraph (b) of this section, the presiding officer shall have the

power to administer oaths and affirmations, to take or cause to be

taken depositions of unavailable witnesses, and to issue, revoke,

quash, or modify subpoenas and subpoenas duces tecum. Where the

presentation of witnesses is permitted, the presiding officer may

require the attendance of witnesses from any state, territory, or other

place subject to the jurisdiction of the United States at any location

where the proceeding is being conducted. Witness fees shall be paid in

accordance with Sec. 308.14 of the Uniform Rules.

(7) Upon the request of the institution-affiliated party afforded

the hearing, or the members of the FDIC enforcement staff, the record

shall remain open for five business days following the hearing for the

parties to make additional submissions to the record.

(8) The presiding officer shall make recommendations to the Board

of Directors, where possible, within 10 days after the last day for the

parties to submit additions to the record.

(9) The presiding officer shall forward his or her recommendation

to the Executive Secretary who shall promptly certify the entire

record, including the recommendation to the Board of Directors. The

Executive Secretary's certification shall close the record.

(c) Written submissions in lieu of hearing. The institution-

affiliated party may in writing waive a hearing and elect to have the

matter determined on the basis of written submissions.

(d) Failure to request or appear at hearing. Failure to request a

hearing shall constitute a waiver of the opportunity for a hearing.

Failure to appear at a hearing in person or through an authorized

representative shall constitute a waiver of hearing. If a hearing is

waived, the order shall be final and unappealable, and shall remain in

full force and effect pursuant to Sec. 308.163.

(e) Decision by Board of Directors or its designee. Within 60 days

following the Executive Secretary's certification of the record to the

Board of Directors or its designee, the Board of Directors or its

designee shall notify the institution-affiliated party whether the

notice of suspension or prohibition or the order of removal or

prohibition will be continued, terminated, or otherwise modified. The

notification shall state the basis for any decision of the Board of

Directors or its designee that is adverse to the institution-affiliated

party. The Board of Directors or its designee shall promptly rescind or

modify a notice of suspension or prohibition or an order of removal or

prohibition where the decision is favorable to the institution-

affiliated party.

Dated this 5th day of November, 2007.

Robert E. Feldman,

Executive Secretary.

[FR Doc. E7-22969 Filed 11-27-07; 8:45 am]

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