TO:
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CHIEF EXECUTIVE OFFICER
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SUBJECT:
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FDIC Board Approves Statement of Policy
on Section 19 of the Federal Deposit Insurance Act
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The FDIC Board of Directors has approved the
attached statement of policy (SOP) regarding applications filed pursuant to
Section 19 of the Federal Deposit Insurance Act. The policy statement is
effective December 1, 1998.
Section 19 prohibits, without the FDIC's prior written consent, any
person from participating in banking who has been convicted of a crime
of dishonesty or breach of trust or money laundering, or who has entered
a pretrial diversion program in connection with such an offense. Section
19 was significantly expanded by the Financial Institutions Reform,
Recovery and Enforcement Act of 1989 and the Comprehensive Thrift and
Bank Fraud Prosecution and Taxpayer Recovery Act of 1990. As a result,
the two outstanding policy statements for Section 19 had become
outdated. The new SOP is intended to replace them and supersede prior
guidelines.
While the SOP maintains the FDIC's previous requirement that an
application seeking the FDIC's consent must be filed by an
insured depository institution, it provides blanket approval for
certain de minimis crimes. The SOP provides that approval is
automatically granted and application will not be required where
the covered offense is considered de minimis because it meets
the following criteria:
- there is only one conviction or program entry of
record for a covered offense;
- the offense was punishable by imprisonment for a
term of less than one year and/or a fine of less
than $1,000, and the individual did not serve
jail time;
- the conviction or program was entered at least
five years before the application; and
- the offense did not involve an insured
depository institution or insured credit union.
Any person who meets these criteria will be
covered by a fidelity bond to the same extent as
others in similar positions, and will disclose
the presence of the conviction or program entry
to all insured depository institutions in the
affairs of which he or she wishes to
participate.
Other significant provisions of the SOP
include a waiver of the institution
filing requirement when an individual
can demonstrate substantial good cause,
and exclusion from Section 19's coverage
a conviction that has been completely
expunged, pretrial diversion and similar
programs entered before November 29,
1990, and youthful offender adjudgments.
The SOP also clarifies the scope
of Section 19's coverage.
Section 19 applies to employees
of an insured depository
institution as well as to other
persons who are in a position to
influence or control the
management or affairs of an
insured depository institution.
Absent the FDIC's written
approval, persons covered by
Section 19 are precluded from
owning or controlling 25 percent
or more of an institution's
voting securities, or ten
percent or more of the
institution's voting securities
if that person is the largest
shareholder.
For further information,
please contact James
Orlowsky, Review
Examiner in the Division
of Supervision, on (202)
898-6763 or Andrea
Winkler, Counsel in the
Legal Division, on (202)
898-3727.
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Nicholas
J.
Ketcha
Jr.
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Director
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Attachment:
Federal
Register,
Dec.
1,
pages
66177-66185.
Distribution:
FDIC-Supervised
Banks
(Commercial
and
Savings)
NOTE:
Paper
copies
of
FDIC
financial
institution
letters
may
be
obtained
through
the
FDIC's
Public
Information
Center,
801
17th
Street,
NW,
Room
100,
Washington,
DC
20434
(800-276-6003
or
(703)
562-2200).
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